First Citizens BancShares is weighing strategic acquisitions, including a potential deal with KeyCorp, as it seeks to surpass the $250 billion asset threshold and navigate increasingly stringent regulatory requirements. The Raleigh, North Carolina-based bank currently holds approximately $230 billion in assets, according to reports, and a move above $250 billion would trigger a new layer of compliance costs and capital demands.
The pursuit of scale through mergers and acquisitions is a common strategy for banks approaching this regulatory inflection point. As banks grow larger, they face heightened scrutiny from regulators and are subject to more complex rules designed to ensure financial stability. These regulations often include stricter capital requirements, enhanced stress testing, and more intensive supervision.
First Citizens’ interest in expansion comes after a period of significant growth fueled by strategic acquisitions, most notably its 2023 takeover of assets from the failed Silicon Valley Bank (SVB). The bank acquired $72 billion of SVB’s assets for $16 billion, a deal that dramatically increased its asset base. Prior to that, First Citizens had already established itself as an active acquirer of distressed banks, having purchased 14 failed institutions in the preceding 20 years. Frank B. Holding, Jr., Chairman and CEO of First Citizens Bank, highlighted the bank’s expertise in navigating FDIC-assisted transactions, stating in a press release, “We have partnered with the FDIC to successfully complete more FDIC-assisted transactions since 2009 than any other bank, and we appreciate the confidence the FDIC has placed in us once again.”
The acquisition of SVB’s assets proved immediately beneficial to First Citizens’ bottom line. The bank reported a substantial increase in net income following the deal, with earnings jumping to $9.5 billion for the relevant quarter, a significant increase from the $243 million reported in the prior quarter. This demonstrates the potential for rapid profitability gains through strategic acquisitions, particularly in times of financial disruption.
More recently, in , First Citizens agreed to acquire 138 branches across 11 states from BMO Bank. Holding, Jr. Emphasized the value of this “solid deposit franchise,” noting that it would “enable us to further enhance our liquidity position and provide additional flexibility to support our strategic initiatives.” This branch acquisition signals a continued focus on expanding its retail banking presence and strengthening its balance sheet.
The bank’s history of growth through acquisition dates back to , when it merged with CIT Group, creating a bank with over $100 billion in assets and positioning it as the 19th largest in the United States at the time. The merger resulted in First Citizens stockholders holding approximately 61% ownership and CIT stockholders owning 39% of the combined entity.
The potential acquisition of KeyCorp, as reported by sources, would represent a significantly larger transaction than recent deals and would likely accelerate First Citizens’ progress toward the $250 billion asset mark. KeyCorp is a substantial regional bank with a significant presence in the Midwest and Northeast. Such a deal would not only increase First Citizens’ asset base but also expand its geographic footprint and customer base.
However, crossing the $250 billion threshold isn’t solely about size. It’s about the regulatory burden that comes with it. Banks exceeding this level are classified as Systemically Important Financial Institutions (SIFIs) by the Federal Reserve, subjecting them to stricter oversight and more demanding capital requirements. These requirements are designed to reduce the risk of financial instability and protect the broader economy, but they also increase operating costs for the banks themselves.
The current environment presents both opportunities and challenges for bank mergers. While distressed assets and regional bank vulnerabilities may create acquisition targets, regulatory scrutiny of large bank combinations is also increasing. The Department of Justice, for example, is reportedly examining potential antitrust concerns related to bank consolidation. The Federal Reserve’s approval of the Fifth Third-Comerica deal in suggests a willingness to approve mergers, but each transaction will be evaluated on its own merits.
First Citizens’ proactive approach to expansion reflects a broader trend in the banking sector, where institutions are increasingly focused on achieving scale to compete effectively and manage regulatory pressures. The bank’s track record of successfully integrating acquired assets and navigating complex transactions positions it well to pursue further growth opportunities, but the path forward will require careful consideration of both financial and regulatory factors.
