First Citizens Bancshares slashing overdraft fee to $10

First Citizens Bancshares Raleigh, North Carolina, will join the ranks of banks that are lowering fees for customers who overdraw their accounts.

The $111 billion-asset company plans to completely eliminate nonsufficient-funds fees and reduce its overdraft fee from $36 to $10, Chairman and CEO Frank Holding said while discussing First Citizens’ fourth-quarter earnings results with analysts Wednesday. The new overdraft policy, set to take effect around mid-year, is expected to reduce the bank’s service charge revenue by about 35% to 40%, or $35 million to $40 million yearly.

Executives cited competitive pressure as a motive behind the overdraft change and said the company will aim to eventually offset the shortfall by growing its wealth management and payments businesses.

First Citizens’ changes mirror those made by in-state rival Bank of America, which earlier this month said it is slashing its overdraft fee from $35 to $10 and eliminating nonsufficient-funds fees. Capital One Financial, Regions Financial and a number of other large and regional banks have also adopted more customer-friendly overdraft policies in recent months.

“We believe these changes are necessary to remain competitive in the current marketplace,” Holding said.

First Citizens closed on its acquisition of CIT Group on Jan. 3. That deal, first announced in fall 2020, added around $53 billion of assets to the company’s balance sheet. Executives said they would provide a financial forecast for the combined company in early March.

First Citizens reported fourth-quarter net income of $123.3 million, or about 11% lower than the comparable quarter in 2020. Earnings per share totaled $12.09, or $1.20 higher than the mean estimate of analysts surveyed by FactSet Research Systems.

Net interest income ticked down slightly to $357.4 million, and the net interest margin contracted 44 basis points to 2.58%.

Noninterest income declined nearly 10% to $114.3 million due to a decline in mortgage banking revenue, a decrease in fair market value adjustments on marketable equity securities and a decline in realized gains on securities.

Credit quality was strong in the fourth quarter. First Citizens released $4.7 million from its provision for loan losses and recovered around $400,000, resulting in a net benefit of $5.1 million. Its net charge-off ratio fell from 0.06% from the fourth quarter of 2020 to 0.01% at the end of 2021.