While the Wilmington area’s 13 First Citizens branches don’t look any bigger, the bank they represent is emerging from its acquisition of Silicon Valley Bank holdings with a lot more muscle and reach.
 
“We have ample liquidity and capital in this marketplace, and we are working with the FDIC and we both agree we have the strength and stability to handle this transaction,” said First Citizens Chairman and CEO Frank Holding Jr. on March 27 on CNBC’s Squawk Box. “We look forward to adding a lot of clients today, and we’re meeting a lot of new associates.”
 
Raleigh-based First Citizens – and the Holding family that founded and still controls it – has been on a mission to expand across the country through acquisitions, according to a Forbes article March 27. At the end of 2008, First Citizens had assets of $16.7 billion. 
 
Since then, it has become a trusted partner of the FDIC, providing a safe haven for the assets of 21 failed regional banks and extending its footprint. Thanks to those mergers or acquisitions, First Citizens has grown beyond its North Carolina foundations and now has a presence in 21 states, including South Carolina, California, Washington, Colorado, Florida, Wisconsin, Pennsylvania, Virginia and Georgia. At the end of 2022, its assets had grown to $109 billion.
 
Prior to its collapse, Silicon Valley Bank was the nation’s 16th-largest bank with assets of $209 billion. Now, First Citizens Bank is set to purchase $72 billion worth of assets from SVB for a bargain price of $16.5 billion, while also handling $56 billion of the failed bank’s deposits, the Forbes piece stated.
 
When First Citizen’s acquisition of many of its assets and deposits is done and dusted, First Citizen’s assets will jump from $109 billion to $219 billion, and it will be the nation’s 16th-largest bank, according to CNN Business.
 
Since the Great Recession, First Citizens has built a reputation of working effectively with the FDIC to incorporate troubled banks, said Scott Custer, executive chairman of Raleigh-based Dogwood State Bank.
 
“To Frank Holding and his team’s credit, they have real expertise in how to value those things, and they have grown in a sound way,” Custer said. “It seems to me, [with the acquisition of SVB assets and deposits] they are taking a page out of a playbook they have used before. And they came to a nice loss-sharing agreement with the FDIC.”
 
In the Squawk Box interview, Holding commented on his bank’s experience in this realm.
 
“We’ve been through this before,” he said. “We go through a competitive process, a bid process, and we like to think that our competitive bid was not just the function of the quality of bid we put and the competitiveness of it, but also the strength and stability and soundness and expertise that we bring to the transition, which we think adds stability to our industry.
 
“This is a remarkable transaction in partnership with the FDIC that should instill confidence in our deposit system,” he continued. “It’s also a great example of where regulators and banks come together to protect depositors.”
 
Custer, a veteran of several mergers and acquisitions involving healthy community banks, said he is a strong believer in the strength of the current banking system and the importance of small banks to a sound financial system. 
 
“Small banks sometimes get a bad rap, but they are safe places for your money,” he said, adding that the recent actions of the FDIC, Fed and Treasury Department to protect depositors of failed banks should confirm public confidence in the system. “Investors may lose out but depositors at banks seldom lose out. The FDIC almost always finds a home for a failed bank. [SVB customers] went from being depositors in a failed bank to being part of one of the safest banks in the country. Worry over uninsured deposits is unmerited.”
 
Unlike the banking crisis of 2008-09, when bad loan decisions drove the failure of many banks, Silicon Valley Bank’s problem was the opposite: unwise investment decisions, Custer noted. When depositors sniff trouble and begin to withdraw their funds, their panic can start a run on the bank.
 
“When you have an issue of liquidity and your deposits start running out, you don’t have time, you don’t have a chance to react. And mobile banking rushes things even more,” Custer said.
 
He feels good about Dogwood, which has about $1 billion in assets and a network of seven branches, all in North Carolina.
 
“We have an additional $20 million in capital [in a raise] that closed mid-February, so we’re as well capitalized as any bank out there: three times what’s required,” Custer said. “We’ve been able to grow the company in the old-fashioned way of lending money. Only 10% of our asset base is in a bond portfolio, so we have a more traditional balance sheet than some other banks. And a high percentage of our deposits is not over the FDIC insurance limit.”