First Citizens buys SVB; Triangle economists laud decision

DeJuan Hoggard Image
Monday, March 27, 2023
What First Citizens' purchase of SVB might mean
Many are wondering what happens next -- and what this means for First Citizens customers.

RALEIGH, N.C. (WTVD) -- News of First Citizens Bank acquiring Silicon Valley Bank came less than three weeks after regulators shut down SVB following a collapse.

Shares of Raleigh-based First Citizens skyrocketed upon news of the announcement Monday.

And now, many are wondering what happens next -- and what this means for First Citizens customers.

In a loss-share agreement with the FDIC, First Citizens has agreed to take on losses assumed by Silicon Valley; a move seen as quite common.

"That's actually often the way that the FDIC wants things to work out," said Duke professor Connel Fullenkamp.

Fullenkamp said this gives customers of both financial institutions a perceived confidence that it will be business as usual moving forward.

"Because, No. 1, it's a signal that First Citizens is pretty healthy, and it's looking to grow more," he said. "And No. 2, it means that First Citizens is going to be, because it's going to get bigger, it's going to actually get more efficient."

NC State professor Michael Walden agreed,

"Whenever there is a problem with a bank, the best solution is for another bank to buy it," Walden said. "My opinion is this was a good purchase for First Citizens. The tech sector is only in a pause now. Being close to Silicon Valley and future tech investments is a big plus for First Citizens Bank."

The move means First Citizens will further expand its reach in California and position itself to gain access to SVB's clients in the technology sector.

The deal will not include Silicon Valley's famed private equity and venture capital business lines, which are likely to be sold to other buyers.

First Citizens will assume the assets and liabilities previously held by SVB, which includes loans the bank once held.

"I think there's a very low expectation of losses of any kind in that portfolio, right, or no excessive losses from that, right, because if you're the business of lending money, some of your customers are not going to pay you back, but banks, that's a normal part of banking business that they all plan for," Fullenkamp said.

Safety is what customers -- and First Citizens - want, Fullenkamp said.

"That seems to have been part of First Citizens' success over the years," he said. "And so that it's it seems like it's a strong move."

North Carolina State Treasurer Dale Folwell said this move cements North Carolina as the second-leading banking center in the United States, only behind New York.

"This is a positive reflection on the conservative regulatory environment that we have established in North Carolina," Folwell said.