A New Big Bank Is Born: First Citizens Buys CIT Group To Create A $100 Billion Institution – Forbes

Posted on October 16, 2020

Topline

Closing out a week of big bank earnings hits and misses, two mid-sized banks announced they’re merging in a deal–valued at about $2.2 billion–that will create the nation’s 19th-largest bank by assets upon close.

first citizens headquarters. — The headquarters of First Citizens Bancshares in the Midtown neighborhood of Raleigh, NC.

Courtesy of First Citizens

Key Facts

Raleigh, NC-based First Citizens Bancshares and New York City-based commercial lender CIT Group announced on Friday that they’ve entered into an agreement to merge in a $2.2 billion all-stock deal.

The deal more than doubles First Citizens’ assets to over $100 billion, and the bank says it will keep the First Citizens name as well as its Nasdaq stock ticker and Raleigh, NC headquarters.

Under the terms of the deal, which has been approved by the boards of both companies, CIT stockholders will receive roughly 0.06 shares of First Citizens class A stock for each share of CIT common stock they own.

According to the firms, First Citizens stockholders will own approximately 61% and CIT stockholders will own approximately 39% of the combined company.

Shares of First Citizens are surging 12% on Friday, pushing the firm’s market cap to roughly $3.8 billion, though they’re still down about 27% for the year; the S&P 500 Banks Industry Group Index is down 33% this year.

The merger is expected to close in the first half of 2021, pending receipt of regulatory and stockholder approvals.

Crucial Quote

“We were seeing so many [commercial banking] opportunities around us, but simply didn’t have the product and expertise to compete as effectively as we would like,” First Citizens’s longtime CEO and Chairman, Frank B. Holding Jr., who will retain his role after the deal is complete, said in an analyst call early Friday. “We believe CIT accelerates our efforts dramatically, arguably getting us where we want to be in one fell swoop,” he added, saying in a statement that the combination of CIT’s commercial banking operations and First Citizens’ retail banking make the combined company “well-positioned to compete across the United States.”

Key Background

Founded in a rural North Carolina town in 1898, First Citizens has operated under the leadership of the North Carolina-based Holding family since 1935, surpassing $1 billion in assets by 1974 and opening its first branches outside of North Carolina in 1994. Current CEO Holding Jr. was elected chairman in 2009 amid the Great Recession and, with the help of sister and Vice Chair Hope Holding Bryant, grew the bank through serial acquisition of failed banks. Shares have nearly tripled since, even despite the pandemic’s toll on the banking industry. As of the firm’s latest proxy filing, the Holding family retains a majority of voting power over First Citizens, and Christopher Marinac, director of research for Janney Montgomery Scott, reportedly estimates the family will have about 32% of the combined company’s shares.