NC’s First Citizens in the running to purchase SVB
One of Raleigh’s oldest banks is in the running to purchase the failed Silicon Valley Bank, also known as SVB.
According to Bloomberg, First Citizens Bank submitted a bid Sunday to buy all of SVB. A source also told Bloomberg that First Citizens might also participate in auctions this week for the two parts of the company.
SVB closed on March 10 after a run of withdrawals triggered the second-largest bank collapse in American history and the largest since 2008. On March 12, regulators took control of New York’s Signature Bank and then San Francisco’s First Republic Bank. First Republic was listed as having the highest percentage of uninsured deposits at 68% of its total.
In a press release Monday, the FDIC stated, “There has been substantial interest from multiple parties, and the FDIC and the bidders need more time to explore all options in order to maximize value and achieve an optimal outcome.”
As a result, they have extended the bidding process for Silicon Valley Private Bank by Wednesday at 8 p.m. and for Silicon Valley Bridge Bank, N.A. by 8 p.m. on Friday.
SVB was an integral part of the financial fabric in the tech startup community in northern California. Its closure sent shockwaves through the industry, and businesses tried to figure out how to make payroll. OpenAI CEO Sam Altman was among tech business leaders who started floating loans to small businesses to help them get through the crisis.
In an effort to head off panic, federal regulators made a joint announcement on March 10 that all SVB deposits would be protected, even though, by law, the Federal Deposit Insurance Fund would normally only protect deposits up to $250,000.
First Citizens was founded 125 years ago in 1898 as the Bank of Smithfield, the sole bank for Johnston County at that time. R.P. Holding was elected president and chairman of First Citizens Bank & Trust Company in 1935, which branched out to Raleigh and eastern North Carolina. By the 1970s, they were opening branches across the state and, in 1974, moved the headquarters from Smithfield to Raleigh.
In 1994, they purchased their first out-of-state bank in West Virginia. Today, they have over 500 branches in 22 states, making it one of the 20 largest commercial banks in the U.S., with $109 billion in total assets.
About 60% of the branches and offices are in either North Carolina or South Carolina.
Frank B. Holding, Jr., R.P. Holding’s grandson, was elected chairman in 2009 and continues today. He has overseen the acquisition of more than 20 FDIC-assisted banks since that time. The bank’s parent company, First Citizens BancShares, also acquired CIT Group Inc. last year for over $2 billion.
It is the fourth largest bank in the Carolinas and has more than 2,000 employees in the Triangle area. Its corporate headquarters is in the North Hills area of Raleigh.
How will banking be affected in North Carolina if First Citizens bid for one or both parts of SVB is successful?
“Given the failure to sell SVB at the original auction, the FDIC is poised to offer added incentives to buyers,” said Paige Terryberry, senior fiscal policy analyst at the John Locke Foundation. “First Citizens is already one of the top 20 largest banks in the United States. Buying SVB would make First Citizens even bigger and would expand the Raleigh-based bank’s portfolio to include more specialized tech startups.”
N.C. Bankers Association did not return comment before the publishing of this article.
Sally-Ann Gupta, public information officer for the North Carolina State Banking Commission, told Carolina Journal in an email that they had no comment.
State Treasurer Dale Folwell chairs North Carolina’s State Banking Commission and said in a March 13 statement that he and N.C. Commissioner of Banks Katherine Bosken have been closely watching the situation. Folwell said he felt confident.
“The banks we regulate in North Carolina do not have the same number of unsecured deposits and are more diversified than those troubled banks,” said Folwell. “At this time, the abbreviation ‘NC’ stands for ‘no crisis.’”
The North Carolina Banking Commission regulates 37 regional banks. None are on the list of the top five banks with the most uninsured deposits.
North Carolina’s state pension system was among the victims of the collapse of SVB and Signature Bank, with the loss of millions in stock at both banks.
“We have small exposures to both Silicon Valley Bank and Signature Bank as shareholders of their stock,” according to a March 16 emailed statement from State Treasurer Dale Folwell’s office. “As of 2/28, we had a total of approximately $10.1 million of Silicon Valley Bank stock as well as approximately $7.8 million of Signature Bank stock across the DB Plan, the DC Plan, and our AGPIP portfolios. This equates to less than 0.01% of the value of all three of these portfolios relative to the estimated value of the retirement plans of $110 billion.”
Frank Lester, who is deputy treasurer and spokesman in Folwell’s office, said it is unknown if the money, which he said is a sliver of the total retirement system value, will be recovered.