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CIT Group, First Citizens BancShares Agree to Merger of Equals

October 16, 2020, 07:10 AM
Filed Under: Mergers & Acquisitions

First Citizens BancShares, Inc., the parent company of First-Citizens Bank & Trust Company, and CIT Group Inc., the parent company of CIT Bank, N.A., jointly announced they have entered into a definitive agreement under which the companies will combine in an all-stock merger of equals to create the 19th largest bank in the United States based on assets.

The transformational partnership will create greater scale to drive growth, improve profitability and enhance stockholder value. The transaction brings together the complementary strengths of First Citizens' low-cost retail deposit franchise and full suite of banking products with CIT's national commercial lending expertise and strong market positions.  In addition, it creates a more diversified deposit strategy with First Citizens' 550+ full-service retail banking locations in key growth MSAs, including across the Southeast, and CIT's rapidly growing homeowner association business, leading direct bank and complementary Southern California retail branch network.

Under the terms of the definitive merger agreement, which was unanimously approved by the Boards of Directors of both companies, CIT stockholders will receive 0.0620 shares of First Citizens class A common stock for each share of CIT common stock they own. First Citizens stockholders will own approximately 61 percent and CIT stockholders will own approximately 39 percent of the combined company.

The combined company will operate under the First Citizens name and will trade under the First Citizens ticker symbol FCNCA on the Nasdaq stock market.  The combined company will be headquartered in Raleigh, N.C., and will maintain significant operation centers in New York, Pasadena, Omaha, Phoenix, Jacksonville, Fla., New Jersey and Columbia, S.C., among other locations.

Frank Holding, Jr., Chairman and CEO of First Citizens, will retain the same roles at the combined company.  Ellen R. Alemany, Chairwoman and CEO of CIT, will assume the role of Vice Chairwoman and play a key role in the merger integration. In addition, she will serve on the Board of Directors of the combined company.

The Board of Directors of the combined company will consist of 14 directors, the current 11 First Citizens Board members and three CIT Board members, including Alemany.

"This is a transformational partnership for First Citizens and CIT designed to create long-term value for all of our constituents including our stockholders, our customers, our associates and our communities," said Holding. "We have long admired CIT's market-leading commercial business, including their strong market position across multiple asset classes.  Under Ellen's leadership, CIT has made tremendous progress in reducing its cost of funds, enhancing risk management processes and retaining key talent.  First Citizens has a long history of delivering strong returns to our stockholders, gathering low-cost deposits and driving strong earnings, which are all supported by an exceptional credit culture, strong capital and excellent risk management.  Together, First Citizens and CIT will be able to leverage both companies' unique attributes to create the 19th largest bank in the country, well-positioned to compete across the United States." 

Alemany said, "Frank and I have long respected each other's companies and believe this transaction will accelerate our strategic goals by bringing together the expertise of both banks to create scale, strength and value.  I'm proud of the work we have done to transform CIT in recent years to a leading, national commercial bank. This transaction will build on those efforts and more fully unlock the potential in our core franchises. In addition, the strength that is created as a larger U.S. bank will enable greater opportunities for our team, our customers and our communities." 

Strategically Compelling for Both Organizations

Enhanced Scale to Drive Growth, Improve Profitability and Enhance Stockholder Value: The pro forma organization, with over $100 billion in assets and over $80 billion in deposits, combines two high-quality companies focused on driving strong, consistent growth and profitability.  First Citizens stockholders have enjoyed stock price performance that has exceeded the Nasdaq Bank Index over the last 5-, 10- and 20-year periods. This transaction provides a platform for growth and profitability that is expected to drive stockholder returns for many years into the future.

Combines First Citizens' Lower Cost Deposit Franchises and CIT's Market-Leading Nationwide Commercial Franchise: The combined company expects to benefit from the combination of First Citizens' strong, low-cost deposit base and CIT's leading nationwide lending platform.  CIT's industry, asset class and capital markets expertise can deliver financing solutions to First Citizens' strong client base.  First Citizens brings a full suite of banking products and services to CIT commercial and retail customers, including deposit, mortgage, auto financing, merchant services, credit and debit cards, wealth management and trust solutions.  First Citizens' strong deposit suite and low-cost funding is targeted to enable the pro forma company to expand its business and compete more effectively with larger competitors.  CIT's HOA business is also expected to continue to be an important low-cost funding source. 

Experienced Management Teams with Significant Integration Experience: This merger combines two highly respected management teams operating complementary business lines.  Both companies have significant merger integration experience and proven track records of successfully integrating acquisitions to drive stockholder value.  First Citizens has been in a continuous merger and integration cycle for the last 10+ years acquiring over 25 companies resulting in superior business performance and stock price performance over this time period.  CIT's three acquisitions since 2014 represent over $30 billion in acquired and integrated assets.

Combined Company Poised for Long-Term Growth: Several of the combined companies' business lines will be enhanced through this combination.  The combined Southern Californian branch and deposit-gathering footprint will be substantially enhanced.  The mortgage business is targeted to double in size with attractive growth prospects.  Complementary SBA business lines are targeted to significantly increase in scale and present additional opportunities for growth. 

Significant Opportunity to Optimize the Balance Sheet and Earnings: Lower funding costs are targeted to enable CIT's commercial lines to compete more effectively, and a diversified funding mix should enable the combined company to reduce financing costs through improved credit ratings for CIT's businesses and additional scale and diversification.

Combined Company Laser-Focused on Credit Quality, Capital Adequacy and Risk Management: First Citizens has a long track record of significantly below peer Non-Performing Asset ratios and Net Charge-Off ratios.  Both companies have completed extensive due diligence.  This transaction provides immediate product and geographic diversification.

Strong Reputation, Robust Customer Relationships and Similar Cultures Reduce Integration Risk:  The combined company is designed to leverage the strong reputation of both companies with the goal of delivering strong performance and results for customers, colleagues and communities. 

Company Well-Positioned for Long-Term Value Creation Due to Stable Low-Cost Deposits, Strong Presence in High-Growth MSAs Nationwide and Online Platform, Providing Diverse Funding Mix: First Citizens' deposit costs are currently 0.13% and have historically been consistently below peer funding costs.  CIT's direct banking deposit platform offers a unique opportunity to scale online deposits in a cost-efficient manner and its leading homeowner association deposit channel offers additional growth and diversification.

Approval and Timing

The merger is expected to close in the first half of 2021, subject to satisfaction of customary closing conditions, including receipt of regulatory approvals and approval by the stockholders of each company.

 Transaction Advisors

Piper Sandler & Co. served as financial advisor to First Citizens, with Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan, L.L.P. serving as legal advisor.  Keefe, Bruyette & Woods, A Stifel Company, and Morgan Stanley & Co. LLC served as financial advisor to CIT, with Sullivan & Cromwell LLP serving as legal advisor.

 See the full release here.

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