Initial reactions glowing as Raleigh’s First Citizens buys Silicon Valley Bank

The Triangle’s largest bank is making national headlines with its recent purchase of one of the most famous — or infamous — banks in the country.

Late Sunday, Raleigh-based First Citizens Bank entered an agreement with the federal government to buy all the deposits and loans of the former Silicon Valley Bank, a tech-focused financial institution which collapsed on March 10.

First Citizens is using company stock worth up to $500 million to complete the purchase, according to the Federal Deposit Insurance Corporation (FDIC), which has managed Silicon Valley since a bank run prompted the government to take over earlier this month.

Speaking to investors Monday morning, First Citizens Bank CEO Frank Holding Jr. said the acquisition would extend his bank’s reach in California and the Northeast. Holding also predicted benefits to the Triangle area.

“We are committed to continuing to help innovators, enterprises and investors move bold ideas forward,” Holding told investors. “This acquisition positions First Citizens to support that growth both for Silicon Valley’s markets and right here in our own backyard in the Research Triangle Park.”

New role lending to tech startups

Silicon Valley Bank (SVB) was a popular lender for tech-focused startups. The bank catered to these early-stage businesses with bespoke services and accessible loan options. The more traditional First Citizens has largely avoided tech startups, a fact Holding acknowledged Monday.

“I know First Citizens is not well known for expertise in the digital innovation economy,” he said.

But that is poised to change.

In the deal, First Citizens will acquire all remaining SVB depositors and its 17 branches nationwide. In a statement Monday, First Citizens said the Silicon Valley Bridge Bank had $56 billion in deposits and $72 billion in loans, according to the latest FDIC data. At the start of the year, First Citizens had total assets of around $109 billion.

“There are similarities between Silicon Valley Bank’s client-facing products and personal support of biotechnology and technology companies both in the greater Triangle area and nationwide,” Holding said.

Initial reactions to First Citizens’ purchase have been positive — both on Wall Street and in the Triangle. As of midday Monday, First Citizens stock was trading up 50% from its previous closing, making up the share price loses the bank had experienced in recent weeks.

“Their acquisition of Silicon Valley Bank will bring stability and a full range of services to the tech-heavy SVB customer base,” said Brooks Raiford, president of the industry group North Carolina Technology Association in an email to The News & Observer.

NC Chamber spokesperson Kate Payne said First Citizens’ purchase “will no doubt bolster our state’s position as a competitive place to start and grow a business.”

The acquisition could make North Carolina more attractive to tech firms eyeing expansion or relocation, the state’s top business recruiter, Christopher Chung, said in an email to The N&O. Chung heads the Economic Development Partnership of North Carolina (EDPNC), a public-private group that, among its goals, works to bring new companies to the state.

“To the extent they’re ever in position to advise former SVB client firms on the business advantages of this region and state, that would represent the potential for an economic development upside to this acquisition,” he said.

Acquiring a failed, but profitable, bank

It remains to be seen how many former SVB clients will continue banking with First Citizens or if the startup relationships forged at SVB will transfer to a new lender. Still, Triangle-area finance experts believe the acquisition will be a net positive for the region.

“Personally, I think this is a great opportunity for the local tech sector,” said Yunzhi Hu, an assistant professor of finance at UNC Kenan-Flagler Business School. “This acquisition may trigger talents to relocate from Silicon Valley to the Triangle area. It will help even more if First Citizens can help relocate some tech firms to the Triangle area due to the SVB connections.”

As Richard Warr of N.C. State University’s Poole College of Management pointed out, profitability was not the issue that doomed Silicon Valley Bank. Instead, it was the lenders’ substantial holdings of long-term bonds amid rising interest rates that spooked depositors and inspired the bank run.

“First Citizens gets this profitable business to add to its portfolio, but also gets the expertise and relationships that SVB has from working in the tech industry,” Poole said. “This should have quite a positive impact on First Citizens’ business in the Triangle, particularly with the growth in tech and biotech we continue to see.”

First Citizens was founded in 1898 in Johnston County. Since the 1930s, it has been steered by three generations of the Holding family At the end of 2022, First Citizens was the 30th largest bank in the country.

Last week, multiple news outlets reported that First Citizens had emerged as a potential buyer. The FDIC gave bidders until Friday night to make offers.

This story was produced with financial support from a coalition of partners led by Innovate Raleigh as part of an independent journalism fellowship program. The N&O maintains full editorial control of the work.

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