First Citizens CEO: We'll Preserve Strong SVB Bond With VCsFirst Citizens Presence in Raleigh's Research Triangle Aligns With SVB's Tech Focus
Silicon Valley Bank's new owner plans to double down on business with the venture capital and private equity communities and the portfolio companies they serve.
Venture capitalists and private equity firms have been the top driver of Silicon Valley Bank's loan growth in recent years, and the VC and PE-dedicated Global Fund Banking business will account for the largest segment of the combined $143 billion loan portfolio of First Citizens and Silicon Valley Bank. The North Carolina-based bank bought all of Silicon Valley Bank's deposits and loans from the Federal Deposit Insurance Corp., which seized the bank March 10 during a run on deposits. It was the worst bank collapse since the failure of Washington Mutual in 2008 (see: First Citizens-SVB Deal Gives Startups, VCs More Certainty).
"Since its founding, legacy SVB has focused on cultivating strong relationships with the venture capital community, which over time has expanded to relationships across the private equity community as well," First Citizens CEO Frank Holding Jr. told investors early Monday. "We are committed to building on and investing in legacy SBV's Global Fund Banking business to preserve these strong relationships."
First Citizens investors were thrilled about the FDIC-assisted transaction that will double the size of the bank's asset base and loan portfolio, sending the company's stock up $280.94 - or 48.23% - to $863.50 per share in trading midday Monday. That's the highest First Citizen's stock has traded since Oct. 19. First Citizens acquired Silicon Valley Bank's $110.08 billion in assets with a discount bid of $16.45 billion.
Early-Stage Startups' Miniscule Piece of SVB Loan Portfolio
First Citizens CFO Craig Nix told investors that Silicon Valley Bank's lending to venture capitalists and private equity firms is diversified in both investment style and industry, and it is supported by strong sources of repayment. Silicon Valley Bank's highest risk area is loans to early-stage startups, but that accounted for only 3% of credit lines in 2022, down significantly from 11% in 2009 and 30% in 2000, according to Nix.
"We are committed to continuing to help innovators, enterprises and investors move bold ideas forward."
– Frank Holding Jr., CEO, First Citizens
In contrast, Nix said roughly 70% of Silicon Valley Bank's loans at the end of 2022 were in low-risk areas of the company's Global Fund Banking or private banking units. First Citizens' 550 branches and private banking offices are largely in North Carolina and South Carolina, while Silicon Valley Bank's 17 brick-and-mortar facilities are primarily in the Bay Area, with a couple in Metro Boston and Southern California.
"While we are still in initial stages of our assessment, we are encouraged by the strong underwriting practices of legacy SVB," Nix told investors early Monday. "We believe opportunities exist in these legacy SVB business lines, and we will continue to manage the portfolio prudently and effectively."
Holding said Silicon Valley Bank's bond with venture capitalists and private equity firms has fueled deal flow between the bank, financial sponsors and the portfolio companies they serve. First Citizens wants to invest in and build upon Silicon Valley's strong relationships with the venture capital and private equity communities to further meet the operating, investing and personal needs of their clients, Holding said.
"Given their location, expertise and heritage, SVB has a deep history of serving some of the most innovative new companies in the world," Holding said. "We are committed to continuing to help innovators, enterprises and investors move bold ideas forward."
Supporting VCs, PEs in Areas Other Than Lending
Unlike Silicon Valley Bank, Holding acknowledged that First Citizens isn't well known for having a strong presence in the innovation or technology sectors. But First Citizens' hometown of Raleigh ranks second behind only Silicon Valley in terms of commercial real estate growth in the innovation market over the past two years, beating out red-hot emerging technology clusters in Austin, Nashville and Vancouver.
"We believe there are long-term secular tailwinds supporting the technology and healthcare businesses that will continue to drive growth in the future," Holding said. "There are similarities between Silicon Valley Bank's client-based products and First Citizen's support of biotechnology and technology companies, both in the Greater Triangle (Raleigh) area and nationwide."
In addition to lending products, Holding said Silicon Valley Bank's Global Fund Banking business provides deposit products, treasury management products and foreign exchange products to facilitate the flow of capital across borders. Holding expects these offerings to also appeal to new and existing customers of First Citizens and strengthen the company's presence in California and the northeastern United States.
"Not only are we delivering better capabilities and solutions to our customers, we are reaching more customers and more types of customers," Holding said. "Legacy SVB's relationship specifically with venture-backed technology and life science companies complements our existing customer base. Combined, we are well positioned to grow and better serve all customers."