First Citizens BancShares, Inc.
PILLAR 3 REGULATORY CAPITAL DISCLOSURES
For the period ended March 31, 2024
TABLE OF CONTENTS
REQUIRED RATIOS | 10 |
CREDIT RISK | 11 |
RISK MANAGEMENT | 11 |
CREDIT RISK EXPOSURES | 13 |
COUNTERPARTY CREDIT RISK | 18 |
COUNTERPARTY RISK MANAGEMENT | 18 |
CREDIT DERIVATIVES | 18 |
COLLATERAL | 18 |
CREDIT RISK MITIGATION | 20 |
CREDIT PHILOSOPHY | 20 |
SECURITIZATION | 21 |
SECURITIZATION EXPOSURES | 21 |
EQUITY EXPOSURES | 22 |
EVALUATION OF INVESTMENTS | 22 |
TYPE OF INVESTMENTS | 22 |
GAINS (LOSSES) | 22 |
INTEREST RATE RISK | 23 |
RISK MANAGEMENT | 23 |
1
DISCLOSURE MAP
PILLAR 3 | 2024 Q1 | 2023 | |
REQUIREMENT | DESCRIPTION | FORM 10-Q | FORM 10-K |
OVERVIEW | Organization / Overview | 10 / 60 | 4 |
Capital Requirements | 98 | 15, 173 | |
Business Combinations | 12 | 109 | |
SCOPE OF APPLICATION | Transfer of Funds or Capital Restrictions | 16 | |
Basis of Presentation | 10 | ||
CAPITAL STRUCTURE | Capital Instruments | 90 | 90 |
Regulatory Capital Tiers | 99 | 174 | |
CAPITAL ADEQUACY | Capital Management | 98 | 90 |
Risk-Based Capital Ratios | 63 / 99 | 91 | |
CAPITAL CONSERVATION BUFFER | Required Ratios | 99 | 15 |
Risk Management | 84 | 73 | |
CREDIT RISK | |||
Credit Risk | 85 | 74 | |
Credit Risk Exposures | 88 | 75 | |
COUNTERPARTY | Counterparty Risk Management | 92 | 83 |
CREDIT RISK | Credit Derivatives | 43 / 46 | 166, 83 |
CREDIT RISK MITIGATION | Credit Philosophy | 84 | 33 |
SECURITIZATION | Securitization Exposures | 40 | 189 |
Evaluation of Investments | 41 | 132 | |
EQUITY EXPOSURES | |||
Type of Investments | 18 | 133 | |
Investment Securities | 18 | 132 | |
INTEREST RATE RISK | Risk Management | 93 | 73 |
2
OVERVIEW
ORGANIZATION
First Citizens BancShares, Inc. (the "Parent Company" and when including all of its subsidiaries on a consolidated basis, "BancShares," "we," "us," or "our") was incorporated under the laws of Delaware on August 7, 1986, to become the holding company of First-Citizens Bank & Trust Company ("FCB," or the "Bank"), its banking subsidiary. FCB opened in 1898 as the Bank of Smithfield in Smithfield, North Carolina, and later changed its name to First-Citizens Bank & Trust Company.
On March 27, 2023 (the "SVBB Acquisition Date"), FCB acquired substantially all loans and certain other assets and assumed all customer deposits and certain other liabilities of Silicon Valley Bridge Bank, N.A. ("SVBB") from the Federal Deposit Insurance Corporation (the "FDIC") pursuant to the terms of a purchase and assumption agreement (the "SVBB Purchase Agreement") by and among FCB, the FDIC, and the FDIC, as receiver of SVBB (the "SVBB Acquisition"). The SVB Acquisition is further discussed in Note 2 - Business Combination to the Unaudited Consolidated Financial Statements in our Quarterly Report on Form 10-Q as of March 31, 2024.
On January 3, 2022 (the "CIT Merger Date"), BancShares completed its merger (the "CIT Merger") with CIT Group Inc. ("CIT"), pursuant to an Agreement and Plan of Merger, dated as of October 15, 2020, as amended by Amendment No. 1, dated as of September 30, 2021 (as amended, the "CIT Merger Agreement").
BancShares provides financial services for a wide range of consumer and commercial clients. This includes retail and mortgage banking, wealth management, small and middle market banking, factoring and leasing. BancShares provides commercial factoring, receivables management and secured financing services to businesses (generally manufacturers or importers of goods) that operate in various industries, including apparel, textile, furniture, home furnishings and consumer electronics. BancShares also provides deposit, cash management and lending to homeowner associations and property management companies. In addition, BancShares owns a fleet of railcars and locomotives that are leased to railroads and shippers. See Business Segments below for more information on markets we serve and products and services we offer.
In addition to our banking operations, we provide various investment products and services through FCB's wholly owned subsidiaries, including First Citizens Investor Services, Inc. ("FCIS") and First Citizens Asset Management, Inc. ("FCAM"), and a non-bank subsidiary First Citizens Capital Securities, LLC ("FCCS"). As a registered broker-dealer, FCIS provides a full range of investment products, including annuities, brokerage services and third-party mutual funds. As registered investment advisors, FCIS and FCAM provide investment management services and advice. FCCS is a broker dealer that also provides underwriting and private placement services.
The recently completed SVB Acquisition adds a global fund banking business to serve private equity and venture capital clients and compliments BancShares' existing wealth management business by adding enhanced digital capabilities. The SVB Acquisition further diversifies our loan portfolio and business mix, particularly across technology and life sciences and healthcare industries, and wealth clients.
CAPITAL REQUIREMENTS
BancShares and FCB are subject to various regulatory capital requirements administered by the fe deral banking agencies. Failure to meet capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on BancShares' Consolidated Financial Statements. Certain activities, such as the ability to undertake new business initiatives, including acquisitions, the access to and cost of funding for new business initiatives, the ability to pay dividends, the ability to repurchase shares or other capital instruments, the level of deposit insurance costs, and the level and nature of regulatory oversight, largely depend on a financial institution's capital strength.
The Federal Reserve imposes certain capital requirements on bank holding companies under the BHCA, including a minimum leverage ratio and minimum ratios of "qualifying" capital to risk -weighted assets. The
3
metrics utilized to measure regulatory capital include the Tier 1 leverage ratio and the total, Tier 1, and common equity Tier 1 risk-based capital ratios (collectively, the "Regulatory Capital Ratios"). Federal banking agencies approved regulatory capital guidelines ("Basel III") aimed at strengthening previous capital requirements for banking organizations. Basel III became effective for BancShares on January 1, 2015, and the associated capital conservation buffers of 2.5% were fully phased in by January 1, 2019. The capital conservation buffer is designed to absorb losses during periods of economic stress. Additionally, federal banking agencies have developed Prompt Corrective Action ("PCA") well-capitalized thresholds for Regulatory Capital Ratios. The following table includes the Basel III requirements and PCA well -capitalized thresholds for the Regulatory Capital Ratios.
For further information on capital requirements, refer to First Citizens BancShares, Inc.: Capital Requirements in Item 1. Business - section and Note 19 - "Regulatory Capital" in the Notes to the Consolidated Financial Statements in our Annual Report on Form 10-K as of December 31, 2023.
PILLAR 3 REPORTING
This document presents the Pillar 3 Disclosures in compliance with Basel III as described in Subpart D - Risk-weighted Assets - Standardized Approach of the Basel III Rule. These Pillar 3 Disclosures should be read in conjunction with our Quarterly Report on Form 10-Q as of March 31, 2024.
UPDATES TO SEGMENTATION OF THE SVB PORTFOLIO
During the first quarter of 2024, the private bank, CRE, and "other" loan classes described below, which were mapped to the SVB portfolio on December 31, 2023, were remapped to the applicable loan classes within the Commercial and Consumer portfolios.
- The private bank loan class included loans to clients who are primarily private equity or venture capital professionals and executives in the innovation companies, as well as high net worth clients. This loan class included mortgages, home equity lines of credit, restricted and private stock loans, personal capital call lines of credit, lines of credit against liquid assets, and other secured and unsecured lending products. In addition, this class included owner occupied commercial mortgages and real estate secured loans.
- The CRE loan class consisted generally of acquisition financing loans for commercial properties including office buildings, retail properties, apartment buildings and industrial/warehouse space.
- The "other" loan class included smaller acquired portfolios, such as commercial and industrial, premium wine, and other acquired portfolios.
- Certain loans secured by other nonfarm, nonresidential properties, which were mapped to the owner- occupied commercial mortgage loan class on December 31, 2023, were remapped to the non-owner- occupied commercial mortgage loan class during the first quarter of 2024.
Refer to Note 4-Loans and Leases and Note 5-Allowance for Loan and Lease Losses in the Notes to the Unaudited Consolidated Financial Statements in our Quarterly Report on Form 10-Qas of March 31, 2024.
4
SCOPE OF APPLICATION
BASIS OF CONSOLIDATION
The accounting and reporting policies of BancShares are in accordance with accounting principles generally accepted in the United States of America ("GAAP") and general practices within the banking industry.
The consolidated financial statements of BancShares include the accounts of BancShares and its subsidiaries, certain partnership interests and variable interest entities ("VIEs") where BancShares is the primary beneficiary ("PB"), if applicable. All significant intercompany accounts and transactions are eliminated upon consolidation. Assets held in agency or fiduciary capacity are not included in the consolidated financial statements.
VIEs are legal entities that either do not have sufficient equity to finance their activities without the support from other parties or whose equity investors lack a controlling financial interest. BancShares has investments in certain partnerships and limited liability entities that have been evaluated and determined to be VIEs. Consolidation of a VIE is appropriate if a reporting entity holds a controlling financial interest in the VIE and is the primary beneficiary. BancShares is not the primary beneficiary and does not hold a controlling interest in the VIEs as it does not have the power to direct the activities that most significantly impact the VIEs' economic performance. As such, assets and liabilities of these entities are not consolidated into the financial statements of BancShares. The recorded investment in these entities is reported within other assets.
See Note 8 - Variable Interest Entities and Note 9 - Other Assets in the Notes to the Unaudited Consolidated Financial Statements in our Quarterly Report on Form 10-Qas of March 31, 2024.
TRANSFER OF FUNDS OR CAPITAL RESTRICTIONS
The Parent Company is a legal entity, separate and distinct from its subsidiaries. Revenues of the Parent Company primarily result from dividends received from FCB. There are various legal limitations applicable to the payment of dividends by FCB to the Parent Company and to the payment of dividends by the Parent Company to its shareholders. The payment of dividends by FCB or the Parent Company may be limited by certain factors, such as requirements to maintain capital above regulatory guidelines. Bank regulatory agencies have the authority to prohibit FCB or the Parent Company from engaging in an unsafe or unsound practice in conducting their business. The payment of dividends, depending on the financial condition of FCB or the Parent Company, could be deemed to constitute such an unsafe or unsound practice. BancShares became a Category IV banking organization and is required to submit a capital plan annually to the Federal Reserve in accordance with the applicable transition provisions. The annual capital plan will include planned capital distributions over a specified forecasting horizon. BancShares is subject to biennial supervisory capital stress testing under the Federal Reserve's CCAR process. The SCB (stress capital buffer) would replace the static 2.5% component of the capital conservation buffer with a capital buffer that is based on supervisory stress test results and the Parent Company's planned capital distributions. As discussed above, BancShares' SCB would be calculated as the greater of (i) the difference between BancShares' starting and minimum projected CET1 capital ratios under the severely adverse scenario in the supervisory stress test plus four quarte rs of planned common stock dividends as a percentage of risk-weighted assets and (ii) 2.5 percent. BancShares' supervisory stress testing results under CCAR could impact the ability of the Parent Company to declare dividends or make other capital distributions, including common share repurchases.
Additionally, under the The Federal Deposit Insurance Act "FDI Act," insured depository institutions, such as FCB, are prohibited from making capital distributions, including the payment of dividends, if, after making such distributions, the institution would become "undercapitalized" as such term is used in the statute. Additionally, under Basel III capital guidelines, banking institutions with a Regulatory Capital Ratio above the Basel III minimum, but below the Basel III requirement will face constraints on dividends, equity repurchases, and compensation based on the amount of the shortfall. Based on FCB's current financial condition, the Parent Company currently does not expect these provisions to have any material impact on its ability to receive dividends from FCB. The Parent Company's non-bank subsidiaries pay dividends to the Parent Company periodically on a non-regulated basis.
FCB receives management fees from its subsidiaries and the Parent Company for expenses incurred for performing various functions on their behalf. These fees are charged to each company based upon the
5
estimated cost for usage of services by that company. The fees are eliminated from the consolidated financial statements.
For further information on Transfer of Funds or Capital Restrictions, please refer to the "First Citizens BancShares, Inc.: Limits on Dividends and Other Payments" in Part I: Item 1 - Business in our 2024 Unaudited Quarterly Report on Form 10-Q.
REGULATED SUBSIDIARIES' CAPITAL
The Company's regulated subsidiaries as of March 31, 2024, include the regulated banking subsidiary, the Edge and Agreement Corporation, a regulated insurance entity, two broker-dealer subsidiaries and two registered investment advisors. All these entities were in compliance with their respective minimum total capital requirements as of March 31, 2024.
6
CAPITAL STRUCTURE
CAPITAL INSTRUMENTS
The Company's qualifying common equity tier 1 capital instruments consists of common stock. The Parent Company has Class A Common Stock and Class B Common Stock.
For additional information regarding BancShares common stock, refer to Item 5. Market for Registrant's Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities in the Notes to the Unaudited Consolidated Financial Statements in our Quarterly Report on Form 10-Q as of March 31, 2024.
As of March 31, 2024, Bancshares's qualifying additional Tier 1 capital instrument is non-cumulative perpetual preferred stock of [$881 million], and its qualifying Tier 2 capital instrument is subordinated notes of [$721 million], including the regulatory capital rule phase-out provision [$181 million] (per 12 CFR 1240.20(d)(1)(iv)). For additional information on the Tier 1 and Tier 2 capital instruments refer to Note 11 - Borrowings and Note 15 - Stockholders' Equity, respectively, in the Notes to the Unaudited Consolidated Financial Statements in our Form 10-Q as of March 31, 2024.
REGULATORY CAPITAL TIERS
The components of capital including Common Equity Tier 1, Tier 1 and Total Capital are as follows:
Regulatory Capital Tiers (dollars in millions)
March 31, 2024 | |||
Common Equity Tier 1 ("CET1") Capital | |||
Common stock | $ | 15 | |
Paid in capital | 4,099 | ||
Retained earnings | 17,435 | ||
Accumulated other comprehensive loss ("AOCI") | (582) | ||
Treasury stock | - | ||
Total common stockholders' equity | 20,967 | ||
Effect of certain items in AOCI excluded from CET1 Capital | 582 | ||
Adjusted total equity | 21,548 | ||
Less: Goodwill, net of associated deferred tax liabilities ("DTLs") | (346) | ||
Less: Deferred tax assets arising from net operating loss and tax credit carryforwards | - | ||
Less: Intangible assets, net of associated DTLs | (218) | ||
Less: Other CET1 Deductions/Additions | (21) | ||
Total CET1 Capital | 20,964 | ||
Preferred stock | 881 | ||
Less: Other Additional Tier 1 Capital deductions | - | ||
Total Additional Tier 1 Capital | 881 | ||
Total Tier 1 Capital | 21,844 | ||
Qualifying Tier 2 Capital instruments | 722 | ||
Qualifying adjusted allowance for credit losses ("AACL") (1) | 1,873 | ||
Total Tier 2 Capital | 2,595 | ||
Total Capital | $ | 24,440 | |
- AACL includes credit loss allowances related to loans, except for allowances for purchased credit deteriorated ("PCD") assets . AACL also includes the allowance for off-balance sheet credit exposures (i.e., unfunded lending commitments and Deferred Purchase Agreements - DPAs) recorded in other liabilities.
7
CAPITAL ADEQUACY
CAPITAL MANAGEMENT
BancShares maintains a comprehensive capital adequacy process. BancShares establishes internal capital risk limits and warning thresholds, which utilize Risk-Based and Leverage-Based Capital calculations, internal and external early warning indicators, its capital planning process, and stress testing to evaluate BancShares' capital adequacy for multiple types of risk in both normal and stressed environments. The capital management framework requires contingency plans be defined and may be employed at management's discretion .
We are committed to effectively managing our capital to protect our depositors, creditors and stockholders. We continually monitor the capital levels and ratios for BancShares and FCB to ensure they exceed the minimum requirements imposed by regulatory authorities and to ensure they are appropriate given growth projections , risk profile and potential changes in the regulatory or external environment. Failure to meet certain capital requirements may result in actions by regulatory agencies that could have a material impact on our consolidated financial statements.
For additional information regarding capital management, refer to the Item 1. Business - Regulation: Regulatory Considerations in the Annual Report Form 10-K, and Note 15 - Stockholders' Equity in the Notes to the Unaudited Consolidated Financial Statements in our Form 10-Q as of March 31, 2024.
8
RISK-BASED CAPITAL RATIOS
The following tables present information on the Company's Standardized Approach RWA components included within the regulatory capital ratios at March 31, 2024. The regulatory capital rules applicable to the Company were the Basel III Rule and the Simplification Final Rule.
Standardized Approach Risk-Weighted Assets (dollars in millions)
March 31, 2024 | |||||||
Exposure Amount | Risk-Weighted Asset | ||||||
Amount | |||||||
Loans and Leases: | |||||||
Residential mortgages exposures | $ | 24,797 | $ | 14,025 | |||
HVCRE loans | 734 | 1,100 | |||||
Past due and non-accrual loans | 1,071 | 1,501 | |||||
All other loans and leases3 | 108,851 | 98,283 | |||||
Total loans and leases | 135,453 | 114,909 | |||||
Less: Allowance for credit losses | (1,737) | - | |||||
Operating lease equipment | 8,814 | 8,814 | |||||
Sovereign/Supranational exposures | 49,948 | - | |||||
Securitization exposures | 34 | 76 | |||||
Other assets | 25,343 | 10,987 | |||||
Total on-balance sheet assets | 217,855 | 134,786 | |||||
Rail purchase commitments | 551 | 551 | |||||
Loan commitments with original maturity within 1 year (1) | 8,458 | 1,371 | |||||
Loan commitments with original maturity over 1 year (1) | 37,517 | 15,612 | |||||
Unconditionally cancellable commitments | 17,559 | - | |||||
Letters of credit | 4,185 | 3,119 | |||||
Other off-balance sheet items (2) | 1,955 | 596 | |||||
Total off-balance sheet items | 70,225 | 21,249 | |||||
Less: Excess of AACL | - | - | |||||
Total | $ | 288,080 | $ | 156,035 | |||
- For regulatory reporting purpose, asset-based lending unused commitments should be measured as the contractual borrowing base less outstanding loans and letters of credit under the commitment.
- The exposure amount includes notional amount for reverse repos and other off-balance sheet items, as well as the credit equivalent amount for derivative transactions.
- For covered exposures and off-balance sheet commitments RWA includes the benefit from FDIC loss sharing agreement
Regulatory Capital Ratios (dollars in millions)
March 31, 2024 | |||||
BancShares | FCB | ||||
Common equity tier 1 capital | 13.44% | 13.93% | |||
Tier 1 capital | 14.00% | 13.93% | |||
Total capital | 15.66% | 15.37% | |||
Risk-Weighted Assets | $ | 156,035 | $ | 156,006 | |
9
Attachments
- Original Link
- Original Document
- Permalink
Disclaimer
First Citizens BancShares Inc. published this content on 13 May 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 13 May 2024 19:58:04 UTC.