First Citizens BancShares : Q1 2025 Pillar 3 Form

Published: 2025-05-13 20:02:04 ET FCNCA

Published on 05/13/2025 at 20:02

DISCLOSURE MAP 2

OVERVIEW 3

SCOPE OF APPLICATION 5

CAPITAL STRUCTURE 7

CAPITAL ADEQUACY 8

2025

2024

PILLAR 3 REQUIREMENT

DESCRIPTION

FORM 10-Q

FORM 10-K

OVERVIEW

Organization / Overview

10, 55

4, 107

Capital Requirements

9, 89,166

SCOPE OF APPLICATION

Business Combinations

5, 107

Transfer of Funds or Capital Restrictions

167

Basis of Presentation

107

CAPITAL STRUCTURE

Capital Instruments

166

Regulatory Capital Tiers

166

CAPITAL ADEQUACY

Capital Management

89, 166

Risk-Based Capital Ratios

90, 166

CAPITAL CONSERVATION BUFFER

Required Ratios

10, 166

CREDIT RISK

Risk Management

10, 43, 75

Credit Risk

Credit Risk Exposures

COUNTERPARTY CREDIT RISK

Counterparty Risk Management

Credit Derivatives

37, 41

154

CREDIT RISK MITIGATION

Credit Philosophy

SECURITIZATION

Securitization Exposures

EQUITY EXPOSURES

Evaluation of Investments

109

Type of Investments

109

Investment Securities

55, 69, 127

INTEREST RATE RISK

Risk Management

ORGANIZATION

First Citizens BancShares, Inc. (the "Parent Company" and, when including all its subsidiaries on a consolidated basis, "BancShares," "we," "us," or "our") is a financial holding company organized under the laws of Delaware that conducts operations through its banking subsidiary, First-Citizens Bank & Trust Company ("FCB"), which is headquartered in Raleigh, North Carolina. BancShares and its subsidiaries operate a network of branches and offices, predominantly located in the Southeast, Mid-Atlantic, Midwest and Western United States. BancShares provides various types of commercial and consumer banking services, including lending, leasing, and wealth management services. Deposit services include checking, savings, money market, and time deposit accounts.

Business Combinations

BancShares accounts for business combinations using the acquisition method of accounting. Under this method, acquired assets and assumed liabilities are included with the acquirer's accounts at their estimated fair value as of the date of acquisition, with any excess of purchase price over the fair values of the net assets acquired and any finite-lived intangible assets established in connection with the business combination recognized as goodwill. To the extent the fair value of identifiable net assets acq uired exceeds the purchase price, a gain on acquisition is recognized. Acquisition-related costs are recognized as period expenses as incurred.

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 Combinations of the Quarterly Report on Form 10-Q.

General Business

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.

BancShares delivers banking products and services to its customers through an extensive branch network and additionally operates a nationwide digital banking platform that delivers deposit products to consumers (the "Direct Bank"). Services offered at most branches include accepting deposits, cashing checks, and providing for consumer and commercial cash needs. Consumer and business customers may also conduct banking transactions through various digital channels.

In addition to our banking operations, we provide various investment products and services through FCB's wholly owned subsidiaries, 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. We also have other wholly owned subsidiaries, including SVB Wealth LLC, SVB Asset Management, and First Citizens Institutional Asset Management, LLC, which are active investment advisers.

CAPITAL REQUIREMENTS

The Federal Reserve imposes certain capital requirements on bank holding companies under the Bank Holding Company Act ("BHCA"), including a minimum leverage ratio and minimum ratios of "qualifying" capital to risk-weighted assets. The metrics utilized to measure regulatory capital include the Tier 1 leverage -based Capital ("Leverage Ratio"), the total risk-based capital ("Total Capital"), Tier 1 risk-based capital ("Tier 1 Capital Ratio"), and common equity Tier 1 capital ("CET1" or "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 Basel III framework requires enhancements for capital and liquidity, impacts to calculated risk-weighted assets ("RWA"), and risk-based capital using the standardized approach. Failure of a banking organization to meet regulatory capital guidelines may subject it to a variety of enforcement remedies, including constraints on capital distributions and discretionary executive compensation, restrictions on its operations and activities, termination of deposit insurance by the FDIC and, under certain conditions, the appointment of a conservator or receiver.

As a Category IV banking organization, the Parent Company is also subject to the stress capital buffer ("SCB") requirements for the Risk-Based Capital Ratios, subject to the applicable transition provisions. The SCB is calculated by the Federal Reserve for each large banking organization and reflects losses under the severely adverse scenario in the supervisory stress tests. The SCB is calculated as the greater of (i) the difference between the organization's starting and minimum projected Risk-Based Capital Ratios under the severely adverse scenario in the supervisory stress test, plus the sum of the dollar amount of the firm's planned common stock dividends for each of the fourth through seventh quarters of the planning horizon as a percentage of risk-weighted assets, or (ii) 2.5%, which is equal to the minimum capital conservation buffer under Basel III. The Parent Company will participate in the 2026 supervisory stress test which will determine the SCB applicable to the Parent Company. Additionally, federal banking agencies have developed PCA thresholds (described below) for Regulatory Capital Ratios to determine whether an institution is well capitalized. Failure of a banking organization to meet regulatory capital guidelines may subject it to a variety of enforcement remedies, including constraints on capital distributions and discretionary executive compensation, restrictions on its operations and activities, termination of deposit insurance by the FDIC and, under certain conditions, the appointment of a conservator or receiver.

For further information on capital requirements, refer to First Citizens BancShares, Inc.: Capital Requirements in Item 1. Business - Regulatory Considerations and Note 18 - "Regulatory Capital" in the Notes to the Consolidated Financial Statements in our Quarterly Report on Form 10-Q.

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 the Form 10Q of the Company's 2025 Quarterly Report as of March 31, 2025.

PRINCIPLES 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 f inancial statements of BancShares. The recorded investment in these entities is reported within other assets.

See Note 8 - Variable Interest Entities in the Notes to the Consolidated Financial Statements in our Quarterly Report on Form 10-Q as of March 31, 2025, and Note 9 - Other Assets in our Annual Report on Form 10-K as of December 31, 2024 for additional information.

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' supervisory stress testing results under CCAR ("Comprehensive capital analysis and review") could impact the ability of the Parent Company to declare dividends or make other capital distributions, including common share repurchases.

Additionally, under The Federal Deposit Insurance Act ("The 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 may be limited in its ability to accept deposits made to it with the assistance of a third-party deposit broker if it is not well capitalized. Section 29 of the FDI Act and the FDIC's implementing regulations limit the ability of an IDI to accept brokered deposits unless the institution is well capitalized, or the IDI is adequately capitalized and obtains a waiver from the FDIC. IDIs that are less than well capitalized generally cannot accept brokered deposits and are subject to restrictions on the interest rates paid on deposits. IDIs that are well capitalized or adequately capitalized and meet certain other criteria can exempt from treatment as "brokered" deposits up to $5 billion or 20% of the institution's total liabilities in reciprocal deposits (defined generally as deposits received by a depository institution through a deposit placement network with the same maturity and in the same aggregate amount as deposits placed by the depository institution in other network institutions).

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 estimated cost for usage of services by that company. The fees are eliminated from the consolidated financial statements.

For further information, see Note 1 - Business under Regulatory Considerations; Limitations on Dividends and Other Payments in the Notes to the Consolidated Financial Statements in our Annual Report on Form 10-K as of December 31, 2024, for additional information.

REGULATED SUBSIDIARIES' CAPITAL

The Company's regulated subsidiaries as of March 31, 2025, 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 met their respective minimum total capital requirements as of March 31, 2025.

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.

As of March 31, 2025, 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 $1.2 billion, net capital phase out of $334 million. For additional information on the Tier 1 and Tier 2 capital instruments refer to Note 9 - Borrowings and Note 12 - Stockholders' Equity, respectively, in the Notes to the Consolidated Financial Statements in our Quarterly Report on Form 10-Q as of March 31, 2025.

In Q4 2024 Bancshares repurchased stock which reduced paid in capital and common stock. For additional information on the Share Repurchase program, please refer to Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations and Part II - Other Information in our Quarterly Report Form 10-Q as of March 31, 2025

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, 2025

Common Equity Tier 1 ("CET1") Capital

Common stock

Paid in capital

1,798

Retained earnings

19,802

Accumulated other comprehensive loss ("AOCI")

(199)

Total common stockholders' equity

21,414

Effect of certain items in AOCI excluded from CET1 Capital

199

Adjusted total equity

21,614

Less: Goodwill, net of associated deferred tax liabilities ("DTLs")

(346)

Less: Intangible assets, net of associated DTLs

(173)

Less: Other CET1 Deductions/Additions

(5)

Total CET1 Capital

21,098

Preferred stock

881

Total Additional Tier 1 Capital

881

Total Tier 1 Capital

21,970

Qualifying Tier 2 Capital instruments

1,202

Qualifying adjusted allowance for credit losses ("AACL") (1)

1,899

Total Tier 2 Capital

3,101

Total Capital

25,071

(1)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) recorded in other liabilities.

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 that 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 - Regulatory Considerations: Capital Planning & Stress Testing, and Capital Requirements sections in our Annual Report on Form 10-K as of December 31, 2024 and Note 12 - Stockholders' Equity in the Notes to the Consolidated Financial Statements in our Quarterly Report on Form 10-Q as of March 31, 2025.

RISK-BASED CAPITAL RATIOS

The following tables present information on the Company's Standardized Approach for Risk Weighted Assets ("RWA") components included within the regulatory capital ratios on March 31, 2025. The regulatory capital rules applicable to the Company were the Basel III Rule and the Simplification Final Rule.

On April 7, 2025, FCB and the FDIC entered into an agreement (the "Shared-Loss Termination Agreement") to terminate the Shared-Loss Agreement. As a result of entering into the Shared-Loss Termination Agreement, all rights and obligations of the parties under the Shared-Loss Agreement terminated as of the date of the Shared-Loss Termination Agreement, including FCB's reporting covenants and obligations related to FDIC Loss Sharing and FCB reimbursement. There was no impact to our consolidated balance sheets or statements of income resulting from the Shared-Loss Termination Agreement because there was no loss indemnification asset or true-up liability associated with the Shared-Loss Agreement, primarily based on evaluation of historical loss experience and the credit quality of the Covered Assets.

Standardized Approach Risk-Weighted Assets (dollars in millions)

March 31, 2025

Exposure Amount Risk-Weighted Asset Amount

Loans and Leases:

Residential mortgages exposures

25,403

$ 14,591

HVCRE loans

1,253

1,880

Past due and non-accrual loans

1,168

1,739

All other loans and leases(3)

113,115

105,854

Total loans and leases

140,939

124,064

Less: Allowance for credit losses

(1,680)

Operating lease equipment

9,373

Sovereign/Supranational exposures

45,023

Securitization exposures

602

120

Other assets

34,565

13,393

Total on-balance sheet assets

228,822

146,950

Rail purchase commitments

Loan commitments with original maturity within 1 year(1) (3)

14,991

2,609

Loan commitments with original maturity over 1 year(1) (3)

25,137

11,160

Unconditionally cancellable commitments

15,605

Letters of credit

4,065

3,133

Other off-balance sheet items(2)

2,262

719

Total off-balance sheet items

62,060

17,621

Total

290,882

$ 164,571

(1)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.

(2)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.

(3)For covered exposures RWA includes benefit from FDIC loss sharing agreement.

Disclaimer

First Citizens BancShares Inc. published this content on May 14, 2025, and is solely responsible for the information contained herein. Distributed via Public Technologies (PUBT), unedited and unaltered, on May 14, 2025 at 00:01 UTC.