First Citizens says its CIT acquisition is past the headache stage

First Citizens BancShares in Raleigh, North Carolina, said its long-awaited integration of CIT Group in New York is progressing smoothly after the deal was delayed for several months last year amid heightened regulatory scrutiny.

The two companies announced the $2.2 billion deal in October 2020 and had planned to complete it by Oct. 15 of last year. But the merger was put through a long regulatory review process and ultimately closed in January of this year. The combined company has $110 billion of assets.

“I'm pleased to say we are exactly where we expected to be at this point in time. All of us are focused on ensuring our teams are coordinated and meeting our integration timeline,” First Citizens CEO Frank Holding said on the company’s first-quarter earnings call Thursday.

He expects to complete the full conversion of CIT into First Citizens by the second half of 2023, as planned based on the January closing time frame. However, Holding added, this will be done in stages and much of CIT is projected to be integrated this year. This includes the conversion of CIT’s mortgage origination and treasury management operations, as well as its retail branches.  

“We are already shifting from [an] integration focus to execution in many areas throughout the bank, and we're working hard to capture the synergistic value from the CIT merger on the revenue and expense side, and that's already bearing fruit,” Holding said.

He cited each company’s long history of M&A. First Citizens has bought more than 25 banks over the past decade. CIT acquired the $23 billion-asset OneWest Bank in Pasadena, California, in 2015 and the $8.3 billion-asset Mutual of Omaha Bank in Nebraska in 2020.  

First Citizens said the CIT acquisition created accretion to tangible book value per share of over 40% in the first quarter. In its earnings release, the bank said it “remains confident in its ability to execute on its previously communicated $250 million in total cost savings by the end of 2023.”

First Citizens said its total loans were $65.5 billion, an increase of $33.2 billion during the quarter, due largely to the acquisition. Excluding CIT, loans grew $455 million, or about 3% on an annualized basis.

Holding said he expects solid loan growth through the year for the combined bank.

“We see strong markets really across the country. There are no weak spots that we see,” Holding said. “The larger metropolitan areas that we serve probably have a more robust growth in some of the more suburban or rural areas, but we don't see any weakness.”

First Citizens reported first-quarter net income of $264 million, or $16.70 per share, up from $142 million, or $14.53 per share, a year earlier. The outsized gain was driven by the acquisition.