Who Is First Citizens Bank -- SVB's Acquirer?

Monday was "a great first day" for employees of the former Silicon Valley Bank's Wine Division.  "This was probably one of the best outcomes possible," Rob McMillan, the founder and head of SVB's Wine Division, told us.  

He was talking about the acquisition of Silicon Valley Bridge Bank, the name given SVB when the FDIC took it over a couple of weeks ago, by First Citizens Bank & Trust Co. of Raleigh, N.C.

"We have a new owner who is large enough that we can continue to handle the same client sizes, not in the same geography so there aren't redundancies, and our main businesses are completely different," McMillan said.  But for the Wine Division, we look more like them than our former bank.  I'd say it's a great first day," McMillan said.

But who is First Citizens Bank & Trust?  Before acquiring SVB, it already was one of the top 20 banks in the U.S.  Since 2009, it has completed more FDIC-assisted acquisitions than any other bank.  It's a nationwide bank, with 121 branches in California before the SVB acquisition.  It operates in 21 states.

First Citizens' areas of focus until now have been real estate lending, consumer lending, manufacturing and distribution.

So who is First Citizens?   It's a family controlled bank; descendants of R.P. Holding control the bank, holding the top three executive offices and controlling about 50% of the stock.  It was founded in 1898, and has made more than 20 FDIC-assisted acquisitions of small failed banks since 2009.  First Citizens received  a $3.5 billion, five-year, fixed-rate loan from the FDIC  to finance the acquisition of SVB, which had more than 85% of its $175 billion in deposits uninsured.  First Citizens had 32% of its $91 billion in deposits uninsured at the end of 2022.

According to Hugh McColl Jr., 87, who turned North Carolina National Bank into a banking giant in the late 1980 and 1990s, ultimately acquiring Bank of America, “The Holdings have been very smart people for 100 years. They first made their very good investments during the Depression and right after the Depression, and they've always been smart about picking up things in hard times.”

First Citizens went out of its way to emphasize that the acquisition of the former Silicon Valley Bridge Bank was structured to avoid imperiling First Citizens.  What First Citizens did not note in its press release about the acquisition was that the SVB acquisition roughly doubles First Citizens and that before the acquisition First Citizens and SVB were roughly equal in terms of assets, loans and leases and deposits.  

For example, First Citizens total assets before the acquisition were $109 billion and SVB's total assets were roughly $110 billion; First Citizens total loans and leases were $71 billion vs. SVB's $72 billion. The one place where First Citizens clearly had the edge on SVB was in total deposits -- $89 billion vs. SVB's $56 billion.  But the run on SVB cost SVB $42 billion in deposits in just one day, when uninsured depositors panicked.

First Citizen is based in the Research Triangle (Raleigh-Durham-Chapel Hill) area of North Carolina.  Frank Holding, First Citizens's chairman, wants to make First Citizens the bank of choice for people in  tech startups.

“This transaction builds on our capabilities in the innovation and technology sectors,” Holding said on an investor call. “We believe there are long term secular tailwinds supporting technology and healthcare businesses that will continue to drive growth in the future.”

Investors plainly liked the deal.  First Citizens Bankshares, the parent company of First Citizens Bank & Trust, closed Monday at $895.61, up $313.06, or 53.74%.  Regional bank stocks in general surged and the Dow Jones Industrial Average closed at 32432, up 0.60%, while the S&P 500 closed at 3977, up 0.16%.