First Citizens BancShares Inc (FCNCA)

A. Company Overview

First Citizens BancShares Inc. is a financial holding company incorporated in Delaware on August 7, 1986. It serves as the parent organization for First-Citizens Bank & Trust Company (FCB), which operates as its banking subsidiary. The bank opened its doors in 1898 under the name Bank of Smithfield in Smithfield, North Carolina, before rebranding as First-Citizens Bank & Trust Company. As of December 31, 2023, BancShares has grown into a significant presence in the United States with consolidated total assets amounting to approximately $213.76 billion and a network of over 600 branches across 30 states, primarily located in the Southeast, Mid-Atlantic, Midwest, and Western regions.

The history and governance of BancShares are closely intertwined with the Holding family, descendants of Robert P. Holding, who gained control over FCB in the 1920s. This long-standing familial connection is reflected in the boardroom, where multiple family members have held prominent positions, including Frank B. Holding, Jr. as Chairman and CEO, and Hope Holding Bryant as Vice Chairwoman.

B. Business Operations

First Citizens BancShares provides a diverse array of financial services tailored to both individual and business clients. Its offerings encompass:

• Retail Banking: The General Banking segment delivers a variety of deposit products, including checking and savings accounts, along with residential mortgage and consumer loans. The segment also includes a nationwide digital banking platform that allows consumers to manage their financial services online.
• Commercial Banking: This segment focuses on offering comprehensive financial solutions for small to middle-market businesses operating in various industries. The services include lending, leasing, and capital markets solutions. Specifically, loans are provided for working capital, acquisitions, and recaps, often secured by accounts receivable, inventory, or real estate.
• Wealth Management: BancShares supports investment needs through its subsidiaries, offering services that range from investment management to estate planning and trust services. The wealth management division leverages its investment advisers to address the financial needs of high-net-worth individuals and institutional clients.
• Rail Segment: Unique among its offerings, BancShares owns a fleet of railcars and locomotives that are leased to railroads and shippers throughout North America. This segment generates income primarily through rental revenue, further diversifying the company’s revenue streams.
• Factoring and Leasing Services: Specializing in receivables management and secured financing, BancShares primarily serves sectors such as manufacturing and retail, providing supply chain financing solutions.

C. Strategic Growth and Acquisitions

The growth strategy of First Citizens BancShares incorporates both organic development and strategic acquisitions. Recent acquisitions include:

• Silicon Valley Bridge Bank (SVBB): On March 27, 2023, FCB acquired SVBB following its closure by the FDIC. This acquisition expanded BancShares' client base and diversified its loan portfolio, particularly in technology, life sciences, and healthcare sectors. The SVBB brand continues to operate as a division of FCB.
• CIT Group Inc. Merger: Completed on January 3, 2022, this merger with CIT and its subsidiary CIT Bank added significant assets and services, especially in niche lending and international operations.

These acquisitions have not only grown the company’s asset base but have also integrated new technologies and enhanced digital capabilities into its existing business model.

D. Market Position and Competition

First Citizens BancShares finds itself in a highly competitive financial services landscape, facing competition from national, regional, and local banks, as well as non-bank financial entities that are increasingly encroaching on traditional banking services. Competitive strengths include a strong customer service orientation, an extensive product range, operational flexibility, and a solid reputation in the markets served. In North Carolina and South Carolina, as of June 30, 2023, FCB ranks as the third-largest bank based on deposit market share, holding approximately 11.0% and 9.3% of total deposits in these states, respectively.

E. Business Segments

As of December 31, 2022, BancShares categorizes its operations into four primary business segments:

1. General Banking: This segment engages in providing a full suite of banking services to consumers and businesses, including loan products and wealth management services through both physical branches and digital banking channels.
2. Commercial Banking: Focused on small and middle-market enterprises, this segment provides lending and leasing services, including secured loans and factoring services tailored to specific industries.
3. Silicon Valley Banking (SVB) Segment: Aimed at innovation markets, this segment provides specialized banking services to commercial clients, private equity firms, and venture capitalists with an emphasis on technology and life sciences.
4. Rail Segment: Responsible for leasing railcars and locomotives, this operational segment represents a distinctive aspect of BancShares' business portfolio.

F. Financial Performance and Capital Management

First Citizens BancShares manages its capital through a rigorous process that adheres to regulatory standards including those set by the Basel III framework. As of December 31, 2023, the company reported that its regulatory capital ratios exceeded required thresholds, reflecting a robust capital position. The company is required to submit annual capital plans to the Federal Reserve and participate in its Comprehensive Capital Analysis and Review (CCAR) process.

In 2023, factors such as the SVBB acquisition significantly improved the deposit base, while the CIT merger added substantial assets, collectively enhancing BancShares' overall financial stability.

G. Regulatory Environment

BancShares is subject to a complex regulatory framework, including oversight by federal and state banking regulators. The Parent Company, FCB, and other subsidiaries must comply with regulations that govern capital requirements, consumer protection laws, and anti-money laundering safeguards. Notably, the Dodd-Frank Act and subsequent regulations have imposed higher prudential standards tailored to institutions with significant total consolidated assets, including stress testing and liquidity requirements.

First Citizens BancShares continuously evaluates its compliance strategies in light of evolving regulations and industry practices, ensuring that it operates within the confines of local and national laws while protecting stakeholders' interests.