First Citizens (FCNCA) executives think they can make money with Silicon Valley Bank’s remains.
First Citizens BancShares Inc. (NASDAQ: FCNCA) has an agreement to assume ownership of Silicon Valley Bridge Bank N.A.’s assets, a press release states. Silicon Valley Bridge Bank is the entity the Federal Deposit Insurance Corporation (FDIC) organized to run Silicon Valley Bank after its collapse.
Under the agreement, First Citizens will assume ownership of $110 billion in assets, $72 billion in loans and $56 billion worth of deposits. Hence, First Citizens gets $238 billion in assets, loans, and deposits.
Did First Citizens get a bargain at Silicon Valley Bank?
Appealingly, the FDIC sold Silicon Valley Bank’s loans to First Citizens at a $16.5 billion discount, Yahoo!Finance’s David Hollerith claims. Hence, cynics will say First Citizens’ got a bargain at Silicon Valley Bank.
Additionally, First Citizens Bank will take over 17 Silicon Valley Bank branches and 55 US offices. Silicon Valley Bank has branches in two of America’s wealthiest regions, the San Francisco Bay Area and Massachusetts.
Other Silicon Valley Bank assets include investment banking operations in Toronto, the Cayman Islands, Beijing, Shanghai, Shenzhen, Hong Kong, Bangalore, Dublin Tel Aviv, Stockholm, Frankfurt, and other cities. There is also a commercial banking operation in the City of London.
Did the FDIC Give Silicon Valley Bank Away?
Silicon Valley Bank bought Boston Private Financial Holdings Inc., a wealth manager in 2021. Wealth Management estimates Boston Private’s value at $17 billion.
Boston Private serves over individual clients and 140 institutions. Around 2,000 of Boston Private’s clients are high-net worth individuals, Wealth Management estimates. Hence, First Citizens could make $17 billion by selling Boston Private.
Cynics will call the Silicon Valley Bank sale a giveaway to First Citizen’s. Leftists will ask why they did not nationalize Silicon Valley Bank, or fold it into the Federal Reserve? After all, nationalization could give the government more control of the banks.
Moreover, control of Silicon Valley Bank could give the federal government, and the Federal Reserve, enormous leverage over the tech industry and the wealthy. This could give Congress and the president (theoretically, the people’s elected representatives) more control of finance, banking, and tech.
What is First Citizens Bank (FCNCA)?
First Citizens (FCNCA) is a North Carolina bank holding company with a history of buying troubled financial institutions.
Today, First Citizens operates over 500 bank branches in 23 states. Conversely, First Citizens began as a local bank in Smithfield, North Carolina, in 1898. It grew into a regional bank with branches throughout North Carolina. Until 1994, First Citizens operated only in North Carolina.
First Citizens began expanding in 1994 by buying a bank in West Virginia. In 1997, First Citizens entered the booming Atlanta market by launching Atlantic States Bank, a federal thrift and buying IronState Bank.
The 2008 Financial Crisis and the COVID-19 Pandemic made First Citizens a major player in finance by allowing it buy weaker institutions. For example, First Citizens bought CIT Group for $2.2 billion in 2020.
That deal made First Citizens’ America’s 19th largest bank with $110 billion in assets and 550 branches in 19 states, American Banker estimates. CIT had $61.7 billion in assets and 92 branches in seven states, including California, in 2020. First Citizens also bought over 25 community banks between 2013 and 2023, Yahoo!Finance reports.
Does First Citizens Make Money?
Data shows First Citizens Bank (FCNCA) makes money. For example, First Citizens reported quarterly revenues of $1.469 billion and a quarterly gross profit of $1.231 billion on 31 December 2022.
First Citizens also reports dramatic growth. For example, First Citizens’ quarterly revenues grew from $485 million on 31 December 2021 to $1.1469 billion on 31 December 2022. Similarly, the quarterly gross profit grew from $471 million on 31 December 2021 to $1.231 billion on 31 December 2022.
Finally, First Citizens’ operating income grew from $178 million on 31 December 2021 to $447 million on 31 December 2022. Hence, First Citizens’ income almost tripled in a year.
First Citizens Spectacular Growth
First Citizens (NASDAQ: FCNCA) is experiencing dramatic growth. Spectacularly, First Citizens reported four quarters of revenue over 100% revenue growth in 2022, Stockrow reports.
For example, First Citizens’ revenues grew by 217.07% in the quarter ending on 31 March 2022, 138.59% in the quarter ending on 30 June 2022, 174.95% in the quarter ending on 30 September 2022, and 202.89% in the quarter ending on 31 December 2022.
Similarly, First Citizens’ Total Assets grew from $58.309 billion on 31 December 2021 to $109.298 billion on 31 December 2022. However, First Citizens’ cash and short-term investments fell from $9.453 billion on 31 December 2021 to $5.543 billion on 31 December 2022.
Frighteningly, First Citizens’ debts grew almost sixfold in 2022. First Citizens had $1.88 billion in total debt on 31 December 2021 and $7.64 billion in total debt on 31 December 2022.
How Much Cash is First Citizens’ Generating?
Disturbingly, First Citizens’ spectacular growth is not generating cash. For example, First Citizens reported a quarterly ending cash flow of $37 million on 31 December 2022.
The quarterly ending cash flow grew from $0 on 31 December 2021 and fell from $523 billion on 31 December 2022. In contrast, the quarterly operating cash flow grew from $127 million on 31 December 2021 to $1.02 billion on 31 December 2022.
Predictably, First Citizens borrows an enormous amount of money. For example, it reported quarterly financing cash flows of $1.232 billion on 31 December 2021 and $1.264 billion on 31 December 2022. First Citizens also pay enormous debts. It reported “quarterly financing cash flows” of -$2.597 billion on 31 March 2022 and -$1.081 billion on 30 June 2022.
Will Silicon Valley Bank add value to First Citizens?
On paper, Silicon Valley Bank could add $238 billion in value to First Citizens. However, I think Silicon Valley Bank brings enormous risk to Silicon Valley Bank.
In particular, Silicon Valley Bank made many questionable loans. For example, Bloomberg alleges Silicon Valley Bank made $219 million in loans to directors, shareholders, and executives in the third quarter of 2022. Additionally, Silicon Valley made loans to many questionable startups.
Moreover, Silicon Valley Bank depended heavily upon venture capital and the wealthy’s willingness to invest in shaky tech startups. In particular, many startups depend heavily upon endless injections. of venture capital cash. When venture capitalists got stingy in 2022, Silicon Valley Bank’s cash flow collapsed.
Other depositors depended on soaring tech stocks. When tech stock prices fell, they had less ability to borrow.
Why First Citizens BancShares could collapse
I consider First Citizens BancShares (FCNA) a terrible bank stock because the company has a small amount of cash. I don’t think First Citizens Bank has enough cash to cover its deposits so it could collapse.
For example, First Citizens had $144 billion in deposits on 27 March 2023. Yet it had $5.543 billion in cash and short-term investments on 31 December 2022. Thus, I think First Citizens’ growth is unsustainable.
Thus, I think Mr. Market overpriced First Citizens at $941.271 on 28 March 2023. I advise investors to avoid First Citizens because I think it will collapse and need an FDIC bailout.
Instead of halting a banking crisis by selling Silicon Valley Bank, the FDIC is delaying a collapse. I predict a worse banking crisis and nationalization of weaker banks, such as First Citizens, at some point.
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