This preferred stock is issued by a North Carolina bank that is expected to increase earnings by 65.5% next year.
First Citizens BancShares, Inc. (FCNCP)
From Income Securities Investor
First Citizens BancShares, Inc.; 5.375% Fixed Rate, Non-Cumulative Perpetual; Par $25.00; Annual Cash Dividend $1.34375; Current Indicated Yield 5.04%; Call Date 03/15/25 at $25.00; Yield to Call 3.65%; Pay Cycle 3m; Exchange NASDAQ; Ratings, Moody’s Baa3, S&P NR; CUSIP 319626305
First Citizens BancShares, Inc. (FCNCA) is a regional bank holding company, based in Raleigh, NC, offering retail and commercial banking services. FCNCA operates in 18 states and the District of Columbia. Banking operations are concentrated in the Southeast, Southwest including Southern California, Mid-West, and Washington.
The company announced in October 2020 that it had entered a definitive agreement to merge with CIT Group, Inc. (CIT), the parent company of CIT Bank, N.A., based in Pasadena, California. Although the terms of the transaction call for an all-stock merger of equals, FCNCA will be the legal surviving entity. The merger is expected to broaden the scope of the combined companies’ commercial lines of business, while creating the nation’s 19th largest bank, based on total assets of over $100 billion. The transaction is expected to close during the first half of 2021.
FCNCA reported 3Q 2020 net income of $142.7 million or $14.03 per share, in line with analysts’ estimates. Net income increased 14.3% from a year earlier. Loan and deposit growth were solid, but low interest rates contributed to margin pressure.
The banking company’s credit quality has been a key strength and its risk profile is conservative. FCNCA’s preferred issue is fixed at 5.375%, and callable on 03/15/25 or any dividend payment date thereafter. This investment is suitable for medium-risk taxable portfolios. Dividends are qualified and taxed at the 15%-20% rate.
Buy at $27.00 or below for a 4.98% current yield and 3.31% yield to call.
Martin Fridson, CFA, Income Securities Investor, isinewsletter.com, 800-472-2680, February 2021