First Citizens Reverses First-Quarter Net Interest Income Drop

The Tip Desk · July 23, 2026 · 4 min read

Net interest income rose $35 million to $1.66 billion in the second quarter after an $101 million sequential decline in the first quarter.

First Citizens BancShares (FCNCA), a top-20 U.S. financial institution with more than $225 billion in assets, reversed a first-quarter contraction in net interest income in the second quarter of 2026, lifting the line $35 million to $1.66 billion after a $101 million sequential drop in the prior period.

Net interest income excluding purchase accounting accretion rose $26 million to $1.61 billion. The net interest margin was 3.10%, up 1 basis point from 3.09% in the first quarter after an 11-basis-point compression in that period. NIM excluding PAA held at 3.01% in both quarters.

The yield on average interest-earning assets rose 4 basis points to 5.34% after an 18-basis-point drop in the first quarter, mainly from higher yields and average balances on loans and investment securities. The rate paid on average interest-bearing liabilities rose 2 basis points to 2.95%. Interest income on loans increased $47 million, and interest income on investment securities rose $17 million. Interest expense on interest-bearing deposits increased $48 million on a higher average balance and a higher rate paid, reversing a $28 million decrease in the first quarter. Interest expense on borrowings decreased $18 million as the bank repaid another $2.5 billion of the Purchase Money Note.

Loans and leases were $151.03 billion at June 30, 2026, up $2.34 billion, or 1.6%, from March 31. Average loan growth was 0.7%. The increase was primarily due to $2.37 billion of Commercial Bank growth, mainly concentrated in Global Fund Banking. Deposits were $173.43 billion, up $2.59 billion, or 1.5%. Average deposit growth was 2.8%. Corporate deposits rose $4.28 billion, including Direct Bank and brokered deposits, offset by a $1.50 billion decline in Commercial Bank segment deposits. Noninterest-bearing deposits fell $1.13 billion and were 24.5% of total deposits, down from 25.5% three months earlier. The cost of average total deposits was 2.07%.

Borrowings declined $1.77 billion to $32.19 billion after the $2.50 billion Purchase Money Note prepayment, partially offset by $750 million of senior notes. The Purchase Money Note stood at $28.42 billion. Deposits represented 84.3% of total funding.

The credit-loss line flipped from a $72 million provision in the first quarter to a $10 million benefit in the second. The provision for loan and lease losses fell to $34 million from $103 million, driven by a $74 million reserve release versus an $8 million release in the first quarter. The release was largely due to lower specific reserves, credit-quality improvements including model updates, changes in macroeconomic scenarios, and growth concentrated in capital call lines. The benefit for off-balance-sheet credit exposure was $44 million. Net charge-offs were $108 million, or 0.29% of average loans. Nonaccrual loans were $1.45 billion, or 0.96% of loans. The allowance for loan and lease losses totaled $1.48 billion, or 0.98% of loans.

Noninterest income rose $84 million to $776 million. Adjusted noninterest income rose $66 million to $586 million, led by a $50 million increase in other noninterest income, including a $27 million derivatives fair-value gain and a $17 million gain on sale of tax-credit investments, plus $6 million in client investment fees, $4 million in lending-related fees and $4 million in deposit fees. Noninterest expense rose $15 million to $1.55 billion. Adjusted noninterest expense rose $16 million to $1.35 billion. Marketing expense increased $15 million for Direct Bank promotions; personnel cost declined $25 million on lower incentive compensation. The adjusted efficiency ratio improved to 60.05% from 62.13%.

Reported earnings available to common stockholders were $640 million, or $55.52 a share. Adjusted earnings available to common stockholders were $659 million, or $57.09 a share. Adjusted ROE was 12.94% and adjusted ROA 1.18%. Chairman and CEO Frank B. Holding, Jr. said return metrics surpassed both the company’s expectations and first-quarter results.

The bank repurchased 298,907 Class A shares for $600 million and paid a $2.10-a-share dividend. Remaining capacity under the 2025 Share Repurchase Plan was $1.31 billion. The preliminary CET1 ratio was 10.77%. First Citizens Bank expects to assume about $5.3 billion in deposits and acquire about $700 million in loans in the pending 138-branch BMO acquisition, which BancShares expects to complete in the third quarter of 2026.