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First Citizens BancShares Inc. will become much larger on the national stage with its acquisition of Silicon Valley Bank, but not large enough to trigger more layers of regulation and capital requirements, company officials said Monday.
Once First Citizens BancShares
FCNCA,
merged with CIT Group in 2022, it weilded more than $100 billion in assets to became a Category 4 bank under federal classifications. The deal also made it the largest family-controlled bank in the U.S.
With additional assets from its acquisition of the former Silicon Valley Bank, it’ll tip the scales at a projected $219 billion of total assets. That’s not far from the $250 million threshold to become a Category 3 bank and trigger more capital requirements.
Wall Street applauded the deal to find a buyer for Silicon Valley Bank, which had been renamed Silicon Valley Bridge Bank after the Federal Deposit Insurance Co. (FDIC) took over the former Silicon Valley Bank on March 10.
First Citizens Bancshares stock jumped more than 50% on Monday.
On a call about the deal with First Citizens CEO Frank B. Holding and CFO Craig Nix, UBS analyst Brody Preston said the acquisition, “puts you much closer to a Category 3 bank.”
Preston asked how analysts should think about “the increased regulatory factors that you might face going from Category 4 to Category 3, if and when that occurs?”
CFO Nix said the bank’s intent at this point is “obviously not to push through into the next threshold” and added it has “no current plans to…go up to the next level.”
Banks with assets of $100 billion to $250 billion fall into a Category 4 classification, which federal regulators use to set requirements for holding capital to cover their lending and other activities.
These banks have fewer capital requirements than Category 3 banks, which are defined as having $250 billion or more in assets. Category 2 banks are of global scale and have total assets of $700 billion or more, and Category 1 banks are designated global systemically important bank holding companies.
Whether it’s a Category 3 or a Category 4 bank, the acquisition of Silicon Valley Bank will help First Citizens become more of a coast-to-coast player, with a nationwide franchise operating across 23 states.
The acquisition of Silicon Valley Bank accelerates its presence in California, in addition to a “strong” wealth management business in the Northeast. The bank also gets the right to acquire Silicon Valley Bank’s 20 branches and private banking offices.
The move would grow First Citizens’ network to 570 branches and private banking offices.
The deal does not include Silicon Valley Bank Capital or Silicon Valley Bank Securities, or the bank’s U.K. unit, which it already sold.
“The selection of First Citizens through a competitive bid process reflects not just the attractiveness of our bid, but also the strength, stability and expertise we are bringing to the legacy SVB business,” CEO Holding told analysts, according to a transcript provided by FactSet. “We’re proud to be recognized in the banking sector for conservatism and strength evidenced by our exemplary liquidity and capital reserves.”
First Citizens has completed more FDIC transactions than almost any bank since 2009, he said.
According to the U.S. Federal Reserve’s latest ranking of banks, a regulated lender with $219 billion of assets would rank 14th, just below Citizens Financial Group Inc.’s
CFG,
$226 billion in assets, but above First Republic Bank’s
FRC,
reported total assets of $212 billion in assets, as of Dec. 31.
Also Read: First Republic’s stock rallies as First Citizens deal for Silicon Valley Bank lifts banks
First Citizens headquarters in Raleigh, N.C.
First Citizens BancShares
