First Citizens Adds to Its Collection of Failed Banks With SVB Purchase

A fast-growing North Carolina lender with a history of buying failed banks is taking on its largest challenge yet with its purchase of Silicon Valley Bank.

First Citizens BancShares Inc.’s

FCNCB 45.45%

acquisition of the bulk of SVB’s assets will effectively double the size of the 125-year-old lender, which for most of its history was controlled by one family and operated mainly in North Carolina. The Raleigh-based bank, which had $42 billion in assets three years ago, will have $219 billion after the SVB deal.

It won an auction for SVB orchestrated by the Federal Deposit Insurance Corp., which seized the tech-focused bank on March 10 following a run that drained more than $40 billion in deposits.

First Citizens isn’t known for technology banking, the bread-and-butter business of SVB, but its headquarters are at the center of a regional tech hub.

The bank has expanded rapidly in recent years, particularly in commercial banking. The SVB purchase will give it a prominent banking presence in California and a wealth-management business in the Northeast.

“We see great promise in extending to the venture and tech spaces in Silicon Valley, building on the expertise and experience we developed through years of supporting North Carolina’s own innovative hub,” Chief Executive and Chairman

Frank Holding Jr.

said on a call with analysts Monday morning.

First Citizens was the winner among 18 bidders who put in 27 bids for all or part of SVB, according to FDIC Chairman

Martin Gruenberg’s

prepared testimony for a Tuesday congressional hearing. The auction process was extended to make time to evaluate the bids.

First Citizens took over SVB’s $56.5 billion in deposits, as well as $72 billion in loans at a discount of $16.5 billion. The FDIC agreed to share any of First Citizens’s losses or potential gains on SVB’s commercial loans.

“This is one of the best bank acquisitions of our time,” said Brady Gailey, an equity research analyst at Keefe, Bruyette & Woods. “They do a great job of being opportunistic when everyone else is hunkering down.”

First Citizens’s Class A shares rose 54% on Monday.

On top of the loss-sharing agreement, the FDIC will help finance the deal with a five-year, $35 billion loan. The agency also is providing a $70 billion line of credit to help cover potential deposit flight.

Overall, the FDIC estimated the failure of SVB will cost a federal insurance fund it oversees about $20 billion, or roughly 10% of the bank’s assets before its failure. The FDIC is likely to recoup some of that money through an agreement in which First Citizens will pay up to $500 million if its share price rises a certain amount, which it already has.

The bank has at least one thing going for it: It knows its way around troubled banks. During the financial crisis of 2008, when lenders were failing left and right, it took on the deposits of Temecula Valley Bank in California and Venture Bank in Washington. It did the same for

Sun American Bank

in Florida and United Western Bank in Colorado. The SVB deal is its 22nd with federal agencies, according to Janney Montgomery Scott LLC.

“They were a frequent bidder” during the financial crisis, said John Popeo, a lawyer who helped sell failed banks for the FDIC at the time and is now a partner at advisory firm the Gallatin Group. “I recall them having a pretty good reputation.”

As consolidation continued across the industry after the crisis, First Citizens kept buying up small banks. In 2014, it joined forces with another First Citizens bank in South Carolina—controlled by members of the same family.

The longer-term challenge for First Citizens will be running a bank that has dramatically transformed in a short period. The bank will need to stop more of SVB’s depositors from fleeing. It will also have to manage a book of loans to venture-capital firms and startups, and persuade those companies to continue to do new business with the bank.

Executives will have to do that while still digesting another big deal. First Citizens’s $2.2 billion purchase of commercial lender CIT Group Inc. closed in January 2022. CIT owned the remnants of IndyMac bank, one of the biggest banks to fail during the 2008 financial crisis.

When Mr. Holding became CEO in 2008, he was the third generation of his family to lead the bank. He became chairman in 2009. His sister, Hope Holding Bryant, became vice chairwoman in 2011.

The bank has a dual-class stock structure that is unusual among its new peer group of large regional banks. Family members have special shares with 16 times the voting power of ordinary shares.

People who know Mr. Holding say he is a pragmatic thinker who doesn’t mind sacrificing short-term earnings for the sake of long-term growth.

“It is a bank that

Warren Buffett

would appreciate,” said

Christopher Marinac,

director of research at Janney Montgomery Scott. “It is really a family-run bank that has continued to evolve and get better.”

—Andrew Ackerman contributed to this article.

Write to Ben Eisen at ben.eisen@wsj.com and Rachel Louise Ensign at Rachel.Ensign@wsj.com