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First Citizens Bancshares Launches 'Fixed-Rate Reset' Preferred Stock (FCNCN)

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  Published in Stocks and Investing on Saturday, February 21st 2026 at 3:46 GMT by Seeking Alpha
      Locales: North Carolina, Virginia, Pennsylvania, UNITED STATES

Charlotte, NC - February 21st, 2026 - First Citizens Bancshares (FCB) today announced the initial public offering (IPO) of its new preferred stock, trading under the ticker symbol FCNCN. This offering is particularly notable due to its 'fixed-rate reset' structure, a feature gaining traction in the preferred stock market as investors seek a balance between stable income and potential upside linked to prevailing interest rates.

Understanding the FCNCN Offering

The FCNCN preferred stock is a perpetual security, meaning it has no fixed maturity date. This contrasts with bonds, which have a defined end date. Instead, investors receive a fixed dividend payment, initially set at 6.625% annually. However, the 'reset' component is crucial. This means that after a specified period - details of which are contained within the full prospectus - the fixed rate will be adjusted based on a benchmark rate, most likely the Secured Overnight Financing Rate (SOFR). This linkage to SOFR provides a degree of responsiveness to the broader interest rate environment. Dividends will be paid monthly, offering investors a consistent income stream.

The Appeal of Fixed-Rate Reset Preferreds

Fixed-rate reset preferreds have become increasingly popular in recent years as a result of market volatility. They aim to address the limitations of traditional fixed-rate preferreds, which offer stability but no upside potential when interest rates rise. Conversely, floating-rate preferreds - those that reset frequently based on SOFR - offer that upside but are also subject to greater fluctuation. The fixed-rate reset structure seeks a compromise, providing an initial guaranteed rate while allowing for adjustments that could benefit investors if rates increase. The 6.625% initial rate is particularly attractive considering the current yield environment, offering a competitive return for income-focused investors.

Key Considerations for Potential Investors

While the FCNCN offering presents compelling features, prospective investors must carefully assess the associated risks. As with all preferred stocks, understanding the issuer's creditworthiness is paramount. First Citizens Bancshares is a well-established financial institution, which mitigates some of the inherent risk. However, no investment is without risk.

• Interest Rate Risk: The primary risk is the potential for the dividend rate to decrease upon reset. If SOFR falls, the new fixed rate will also be lower, resulting in reduced income for investors. It's crucial to model potential scenarios based on different SOFR projections.
• Call Provision Risk: FCB retains the right to 'call' or redeem the preferred stock at its par value of $1,000 after a designated period. This is a common feature in preferred stock offerings, and while it doesn't represent a loss of principal if the stock is called, it does eliminate the future income stream. Investors need to consider the likelihood of a call based on the prevailing interest rate environment at the time.
• Credit Risk: While preferred stock is generally senior to common stock in the capital structure, it is still subordinate to debt. This means that in the event of FCB's financial distress, debt holders would be paid before preferred stockholders. Thorough due diligence on FCB's financial health is essential.
• Liquidity Risk: Preferred stocks, especially newer issues like FCNCN, can experience lower trading volumes compared to more widely held securities. This can make it more difficult to buy or sell shares quickly without affecting the price, particularly in larger quantities.

How FCNCN Fits into a Portfolio

FCNCN could be a suitable addition to a diversified portfolio for investors seeking income. It offers a potentially attractive yield with some degree of protection against rising interest rates, although it also carries risks associated with fluctuating rates and issuer creditworthiness. It is important to note that preferred stock does not typically offer the same capital appreciation potential as common stock. The primary goal for most preferred stock investors is a stable income stream.

The listing on the NYSE provides a degree of liquidity and accessibility for investors. However, those unfamiliar with preferred stock investments should thoroughly research the asset class and consult with a qualified financial advisor before making any investment decisions. Investors should carefully review the full prospectus for detailed information on the terms, risks, and potential benefits of the FCNCN offering. A deeper understanding of the benchmark rate calculation and reset mechanism is vital to assessing the true potential of this security.