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First Citizens and Simpson show what buybacks do to per-share numbers, and what they cost

One bank has retired a quarter of its shares in two years and is now slowing down. A builder's hardware maker just lifted its authorisation fivefold. The arithmetic behind both deserves a closer look.

· · 6 min read
Photograph for: First Citizens and Simpson show what buybacks do to per-share numbers, and what they cost
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Two announcements in the space of four days, from companies with little else in common, capture both sides of the corporate buyback this earnings season. On October 23rd First Citizens BancShares, the North Carolina lender that absorbed Silicon Valley Bank in 2023, reported third-quarter results and unveiled a new plan to repurchase up to $1.2bn of its Class A shares during 2027. On October 26th Simpson Manufacturing, a maker of structural connectors for the building trade, said its board had approved a $1.0bn repurchase authorisation with no expiration date, replacing a $200m programme.

One company is easing off after shrinking its share count by about a quarter in two years. The other is signalling that it may be about to start. Read together, they illustrate what buybacks actually do to the per-share figures that individual investors watch, and why an authorisation is a statement of capacity rather than a promise.

A bank that bought a quarter of itself

First Citizens' investor presentation sets out the scale of what it has done since mid-2024. Through October 20th the bank had repurchased 3,452,144 shares for $6,854m, at an average price of $1,985.57. Its total common share count fell from 13,524,550 at the end of June 2024 to 10,072,406, a reduction of about 25.5%. In the third quarter alone it bought 278,828 Class A shares for $600m, equal to 2.68% of the Class A shares outstanding at the end of June.

The effect on reported earnings per share is visible. Diluted earnings per share were $51.23 in the third quarter, against $43.08 a year earlier, an increase of about 19%. On the bank's adjusted measure the rise was larger, from $44.62 to $55.37. Part of that improvement comes from the business itself, but a shrinking denominator does a good deal of the work: profits are divided among roughly a quarter fewer shares than two years ago.

The new plan, however, marks a change of pace. First Citizens spent $3,026m on its own shares in 2025 and $2,165m in 2026 up to October 20th. The 2027 authorisation is $1.2bn for the whole year. The bank still had $711m of capacity left under its existing plan at the end of September. It is also directing capital elsewhere: it prepaid $8.0bn of the purchase money note owed to the Federal Deposit Insurance Corporation from the SVB deal in the third quarter, and a further $1.5bn in October, and now expects to repay the note in full by the end of 2027. Its common equity tier 1 ratio has fallen from 11.65% a year ago to 10.24%. A buyback programme, in other words, competes with debt repayment and with the regulatory capital buffer, and the bank appears to have decided where the balance now lies.

The book value catch

Buybacks flatter earnings per share almost mechanically. Their effect on book value per share depends on price. When a company buys its own stock above book value, each repurchase removes more equity per share retired than the average share carries, and book value per share falls unless earnings make up the gap.

First Citizens paid an average of $2,152.92 a share in the third quarter. Its tangible book value per share at the end of September was $1,687.41, so it was buying at about 1.28 times tangible book. Tangible book value per share slipped from $1,722.35 at the end of June, a fall of about 2%, even though the bank earned $51.23 a share in the quarter. Other balance sheet movements also play a part in any single quarter, so the decline cannot be attributed to buybacks alone. But the direction is a reminder that for banks, where investors often anchor on book value, repurchases at a premium trade one per-share metric against another.

A fivefold authorisation at Simpson

Simpson's numbers are on a smaller scale but tell a similar story about the denominator. Net income in the third quarter rose 1.6% to $109.1m, while diluted earnings per share rose 3.9% to $2.68. The gap is explained by the share count: weighted average diluted shares fell from 41.704m to 40.738m, about 2.3% fewer. The company bought 352,346 shares in the quarter for $66.3m, at an average of $188.25, and about $165m in the year to September 30th.

The new $1.0bn authorisation is roughly six times what Simpson spent in the first nine months of the year. Against a market value of about $7.92bn, the figure cited by StockTitan alongside the release, it represents around 13% of the company. Chief executive Mike Olosky said the increase reflects "the Board's continued confidence". The balance sheet gives some room: Simpson held $491.3m in cash at the end of September, against $308.0m drawn on its credit facility.

The authorisation does not oblige the company to buy anything, and it carries no deadline. Simpson's sales grew 2.3% to $638.1m in the quarter, mostly on pricing, and its operating margin slipped from 22.6% to 22.1%. An authorisation of this size is best read as an option the board has granted itself, to be exercised if cash flow holds up and the share price looks attractive to management.

Where the wider market stands

Both announcements arrive against an uneven backdrop. According to EPFR's Winston Chua, cited in late September, American companies announced $973.7bn of buybacks in the first half of 2026, but only $196.4bn between July and September 23rd, against $368.5bn in the same stretch of 2025, a drop of almost half. He put the slowdown down to "a lack of large programs" and estimated that about $250bn of further announcements would carry 2026 past 2025's total of $1.39trn. Fourth-quarter announcements have averaged $271bn over the past five years. Earnings season matters here because many companies pause discretionary repurchases in the weeks before results and announce new plans alongside them.

For investors who want buybacks as a strategy rather than a headline, there are funds built around the idea. The Invesco BuyBack Achievers ETF tracks a Nasdaq index of American companies that have cut their shares outstanding by a net 5% or more over the trailing 12 months, reconstituted each January. The design matters: it selects on what companies have actually done to their share count, not on what their boards have authorised.

The academic record also argues for caution about announcements. The classic study by David Ikenberry, Josef Lakonishok and Theo Vermaelen found positive long-run returns after open-market repurchase announcements on average, but concentrated in cheaper "value" shares, with no comparable drift among highly rated "glamour" stocks. The price paid, in other words, is central to whether a buyback adds value for those who keep their shares.

Our view

Buybacks are neither a gift nor a trick. They are a way of returning cash that changes the per-share arithmetic, and investors should read that arithmetic on both sides. First Citizens has delivered a striking cut in its share count and strong growth in earnings per share, but it has done so at prices above tangible book, and its smaller 2027 plan suggests repayment of the FDIC note and capital ratios now take priority. Simpson's $1.0bn is large relative to its size and to its recent pace of buying, yet it is permission, not spending.

The figures worth watching are not the headline authorisations but the quarterly share counts, the average price paid against book value or earnings, and whether per-share growth outruns growth in the underlying business. Those numbers, published every quarter, show whether a repurchase programme is building value for remaining shareholders or simply tidying up the denominator.

This article is analysis, not investment advice.

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Filed under Investing. Written by Invest Times Editorial under our editorial standards. Commentary and analysis for information only, not investment advice.

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