First Citizens has a history of acquiring banks. Here’s how they should approach the SVB acquisition, according to experts

An exterior view of First Citizens Bank headquarters
An exterior view of First Citizens Bank headquarters.
Melissa Sue Gerrits—Getty Images

Good morning,

“SVB had the golden jewel of Silicon Valley tech community as clients, and that is an attractive customer case to go after,” Wedbush Securities analyst Dan Ives, who covers tech, told me. 

Raleigh, N.C.-based First Citizens BancShares Inc. apparently saw that opportunity. It announced on Monday an agreement to purchase Silicon Valley Bank’s deposits and loans from the U.S. Federal Deposit Insurance Corporation. Earlier this month, the FDIC took over SVB after a bank run resulted in its collapse

The FDIC said on Sunday it will retain about $90 billion of SVB’s $167 billion in total assets, as of March 10. The agency estimates SVB’s failure cost its deposit insurance fund (funded by FDIC member banks) about $20 billion. First Citizens agreed to purchase $72 billion of SVB’s assets at a discount of $16.5 billion and will assume $56.5 billion of deposits. In a loss-share agreement, First Citizens and the FDIC will divide the losses and potential recoveries on the loans. On Monday, 17 SVB branches began operating as a subsidiary of First Citizens.

‘Find the smart people’

First Citizens CFO Craig Nix said during a call on Monday with investors that the bank will “retain all employees in the acquired businesses.” Nix said the company would “embrace the talent of our legacy SVB employees, and embrace their business capability, and then reiterate to their clients that First Citizens has an unwavering focus on holistic client relationships.” He also said on the call, “We certainly will make sure we retain the talent responsible for driving revenue.”

That’s what First Citizens should prioritize in the early stages of the acquisition, says Jeff Schmid, president and CEO of the Southwestern Graduate School of Banking Foundation, headquartered at SMU’s Cox School of Business.

“We bought a large, failed bank in Phoenix back in 2008,” says Schmid, recalling his earlier career as a bank examiner at FDIC. “The number one thing you want to do is find the smart people in that place. You don’t build a bank without having some smart folks. And also communicate quickly to try and retain the best clients.” 

He continues, “First Citizens says they’re a good relationship bank. And so that means really understanding who was leading the bank on the client side.” The bank has to identify the best parts of a franchise that’s over 30 years old, he says. “So you really want to focus on the best pieces.”

Thomas Smale, CEO of FE International, a mid-market tech-focused M&A company, says keeping customers’ needs at the forefront should be a priority in the early stages of the acquisition. After the SVB crisis, Smale says a move that would make sense for First Citizens’ strategy is to have a keen focus on what’s going right and build upon that. 

“First Citizens is not widely known in the tech space, so leveraging what SVB has created in a positive way should be value accretive,” he says. “And given First Citizens have been successfully operating for 125 years, it is implied that they are intrinsically good at crisis risk management.” 

First Citizens is a top 20 U.S. financial institution (based on assets), with more than $100 billion in assets, and the largest family-controlled bank in the nation. Over the past decade, First Citizens has acquired more than 25 community banks. Last year, the bank acquired CIT Groups in a $2 billion deal.

“Given their location, expertise and heritage SVB has a deep history of serving some of the most innovative new companies in the world,” Frank B. Holding, Jr., chairman and CEO of First Citizens, said on the call with investors. 

The importance of preserving these strong relationships has to remain a top priority.

Sheryl Estrada

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Big deal

At the end of 2022, the median cash ratio of non-investment-grade-rated companies in the U.S. rose, "breaking a chain of nine consecutive quarter-on-quarter declines," a report by S&P Global Market Intelligence found. For those speculative-grade companies, in the fourth quarter, the median measure of cash and equivalents as a share of total liabilities rose to 30.8%, up from 28.4% in the prior quarter. "The improvement is a sign that companies rated below BBB- by S&P Global Ratings are looking to improve liquidity as interest rates move higher and economic growth slows," according to the report.

Courtesy of S&P Global Market Intelligence

Going deeper

A research paper published on the Social Science Research Network, "Monetary Tightening and U.S. Bank Fragility in 2023," analyzes U.S. banks’ asset exposure to a recent rise in interest rates with implications for financial stability. "Even if only half of uninsured depositors decide to withdraw, almost 190 banks are at a potential risk of impairment to insured depositors, with potentially $300 billion of insured deposits at risk," according to the economists. "If uninsured deposit withdrawals cause even small fire sales, substantially more banks are at risk."


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“SVB’s failure is a textbook case of mismanagement. The picture that has emerged thus far shows SVB had inadequate risk management and internal controls that struggled to keep pace with the growth of the bank.”

—Michael S. Barr, the U.S. central bank’s vice chair for supervision, will tell senators during his testimony to the U.S. Senate Committee on Banking, Housing, and Urban Affairs Tuesday, according to written testimony released by the Fed on Monday, Fortune reported.

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