First Citizens (FCNCA) Q3 2026: Deposit Costs Rise as Loan Growth Lifts NII

First Citizens BancShares (FCNCA) reported third-quarter 2026 results on October 23, 2026, through an 8-K earnings release and an earnings call covering the quarter ended September 30. Net interest income held up and the full-year outlook was raised, but the support came from a different source than expected [1]. Going into the quarter, three questions mattered: whether net interest income could hold while the bank repaid its FDIC purchase money note and absorbed the BMO branch deposits, whether loan growth could continue as fund banking slowed, and whether credit costs would rise after reserve releases. Net interest income was $1.699 billion, up $43 million from the second quarter, while the average cost of total deposits rose from 2.07% to 2.16% [1]. Loan growth beat guidance but stayed concentrated in fund banking, and credit costs stayed low, partly because of a reserve release [1]. Taken together, scale and revenue came in better than expected, yet earnings growth now depends on asset growth, and funding costs did not fall as the note was repaid.

First Citizens is a US bank with more than $225 billion in assets. It runs a branch network, the online savings platform Direct Bank, a fund banking business that lends to private equity and venture capital funds, and a railcar leasing business [1]. About 70% of its revenue is net interest income, the interest earned on assets minus the interest paid on deposits and borrowings. The bank is prepaying the purchase money note it issued to the FDIC when it took over Silicon Valley Bank [1].

Deposit costs rose, and asset growth carried net interest income

Deposit costs moved in the opposite direction from what the company had indicated. In July, the company said its spot total deposit cost had fallen to 1.99% [2]. In the third quarter, the average cost of total deposits rose to 2.16%, the rate on interest-bearing deposits was 2.82%, and noninterest-bearing deposits fell from 24.5% to 22.9% of total deposits [1][3]. The company attributed the increase to higher interest-bearing deposit balances and the higher interest rate environment [4].

The rise came from the way the bank funded the note repayments. First Citizens repaid $8.0 billion of the note in the third quarter, the top of its plan, and another $1.5 billion in October, leaving a quarter-end balance of $20.45 billion [1][4]. New deposits supplied most of the funding. Period-end deposits grew by $11.84 billion, including about $4.86 billion from BMO, $3.21 billion from Direct Bank and $1.32 billion of brokered deposits [1]. The average rate on time deposits was 3.54%, close to the cost of the note being repaid [3]. The BMO deposits carry a weighted average cost of about 1.05%, but they were on the books for only about four weeks [4].

Asset growth produced the increase in net interest income. Interest expense on deposits rose by $90 million, while interest expense on borrowings fell by only $19 million; interest income on loans and securities rose by $88 million and $26 million [1]. Based on roughly $178.7 billion of average deposits, the 9 basis point rise in deposit cost adds about $40 million of interest expense per quarter [3]. The bank's treasurer also acknowledged that the replacement funding channels cost more than the note and will weigh on the margin [5].

Revenue still came in ahead of the earlier baseline. Net interest income landed in the upper half of the company's $1.63 billion to $1.71 billion third-quarter guidance, and full-year guidance rose from $6.60 billion to $6.75 billion to $6.68 billion to $6.75 billion [4][6]. Period-end deposits of $185.26 billion exceeded the top of the $179 billion to $182 billion guidance range [1][6].

Loan growth beat guidance but came from one source

Loan growth was the main source of revenue growth this quarter. Period-end loans reached $157.19 billion, up $6.16 billion from the second quarter and already above the prior full-year guidance range of $152 billion to $155 billion [1][6]. Fund banking loans rose by $4.43 billion [4]. Management said utilization of capital call lines rose to about 40% and expects it to come down [5]. General Bank loans rose by $633 million, mostly from the BMO acquisition, which leaves organic balances roughly flat [1]. The loan yield was 6.07%, 2 basis points higher than in the second quarter [3].

Conclusion

The third quarter changes how the bank's growth and profit conversion should be read. The growth engine works but is concentrated in fund banking, and higher deposit costs offset about half of the increase in loan interest income, so profit conversion is weakening. Credit costs remain low: the net charge-off ratio was 0.27%, but the $55 million provision included a $48 million reserve release, the allowance ratio fell to 0.91%, and the nonaccrual rate for general office loans was not disclosed this quarter [1]. On capital, the CET1 ratio fell to 10.24%, and fourth-quarter share repurchases are expected to slow to about $300 million [1][5]. The company plans to repay $3.5 billion to $4 billion of the note each quarter and to retire it by year-end 2027 [4]. The next tests are whether net interest income reaches the company's fourth-quarter guidance of $1.70 billion to $1.77 billion as loan growth slows, whether deposit-cost increases slow once the BMO deposits are included for a full quarter, and whether net charge-offs stay within 30 to 35 basis points [4].

Sources

[1] FCNCA 8-K filed 2026-10-23 · 3Q26 earnings release (Exhibit 99.1), 2026-10-23, First Citizens BancShares Form 8-K earnings release, https://www.sec.gov/Archives/edgar/data/798941/000079894126000041/a3q26_erx991.htm [2] FCNCA earnings call 2026-07-23 · analyst Q&A, 2026-07-23, second-quarter 2026 earnings call, https://ir.firstcitizens.com/financial-information/quarterly-results/default.aspx [3] FCNCA 8-K filed 2026-10-23 · 3Q26 financial supplement (Exhibit 99.3), 2026-10-23, First Citizens BancShares Form 8-K financial supplement, https://www.sec.gov/Archives/edgar/data/798941/000079894126000041/a3q26_fsx993.htm [4] FCNCA 8-K filed 2026-10-23 · 3Q26 earnings presentation (Exhibit 99.2), 2026-10-23, First Citizens BancShares Form 8-K earnings presentation, https://www.sec.gov/Archives/edgar/data/798941/000079894126000041/a3q26investorpresentatio.htm [5] FCNCA earnings call 2026-10-23 · Drillr transcript, 2026-10-23, third-quarter 2026 earnings call transcript [6] FCNCA earnings call 2026-07-23 · 2026 outlook, 2026-07-23, second-quarter 2026 earnings call, https://ir.firstcitizens.com/financial-information/quarterly-results/default.aspx