DEF 14A: First Citizens BancShares Faces Shareholder Vote on Executive Pay and 'Politicized De-banking' Risks

First Citizens BancShares' upcoming annual meeting will address director elections, executive compensation, auditor ratification, and a shareholder proposal concerning politicized de-banking risks.

Summary

• First Citizens BancShares, Inc. will hold its 2024 Annual Meeting of Stockholders virtually on May 1, 2024.
• Stockholders will vote on the election of 13 directors, an advisory vote on executive compensation, ratification of the appointment of KPMG LLP as independent accountants, and a stockholder proposal requesting a report on the risks of politicized de-banking.
• The Board of Directors recommends voting for the election of each director, for the advisory vote on executive compensation, for the ratification of KPMG LLP, and against the proposal regarding politicized de-banking.
• The company highlights its 2023 business achievements, including the acquisition of SVB, which added approximately $107.54 billion in assets and $56.01 billion in deposits.
• First Citizens BancShares reported net income available to common stockholders of $11.41 billion for 2023, a significant increase from $1.05 billion in the prior year, primarily due to the SVB acquisition.
• The company's net interest income increased by 128% to $6.71 billion, and total loans and leases grew by 88% to $133.30 billion.
• The company maintained a solid capital position with a total risk-based capital ratio of 15.75% and strong liquidity with $57.28 billion in liquid assets.
• The company's executive compensation program aims to reward long-term performance, align executive interests with stockholders, and attract and retain talented executives.
• The company's Board consists of 13 directors, nine of whom are independent.
• The company has a director retirement policy, but waivers have been granted for certain directors due to their expertise and experience.
• The company's Corporate Governance Guidelines and Codes of Ethics promote ethical conduct and compliance with applicable laws and regulations.
• The company's Risk Management Framework and Risk Appetite Framework are managed by the Board's joint Risk Committee.
• The company is focused on sustainability and making positive impacts on its communities.
• The company's Human Capital Management strategy focuses on attracting, retaining, and developing associates, as well as supporting diversity, equity, and inclusion initiatives.

Sentiment

Score: 8

Explanation: The document presents a positive outlook for First Citizens BancShares, highlighting strong financial performance, strategic acquisitions, and a commitment to ethical conduct and long-term value creation. The Board's recommendations on the proposals also suggest confidence in the company's direction.

Positives

• The company achieved significant financial growth in 2023, driven by the SVB acquisition and organic loan growth.
• The company maintains a strong capital and liquidity position.
• The company has a well-defined executive compensation program that aligns executive interests with those of stockholders.
• The company has a diverse and experienced Board of Directors, with a majority of independent members.
• The company is committed to ethical conduct, compliance, and risk management.
• The company is focused on sustainability and positive community impact.
• The company has a strong Human Capital Management strategy that supports talent development and diversity, equity, and inclusion.

Negatives

• The company's net charge-offs increased to 0.47% of average loans during 2023, up 35 basis points from 2022.

Risks

• The company faces risks related to the integration of SVB and the management of its increased size and complexity.
• The company is subject to extensive regulation and oversight by banking regulators.
• The company faces potential risks related to human capital management, including attracting, retaining, and developing associates.
• The company faces potential risks related to cyber security and business continuity.
• The company faces potential risks related to compensation practices and imprudent risk taking.

Future Outlook

The company will continue to evaluate its enterprise-wide approach to sustainability in a way that is aligned with regulatory requirements and its long-term business goals.

Management Comments

• We help personal, business, commercial, and wealth clients build financial strength that lasts.
• We continue to bring together some of the most talented bankers and associates to fulfill our Forever First brand promise to our clients.
• We are first and foremost a relationship bank, building long-term relationships with our clients and helping them reach their goals.
• Amidst change, we remain anchored in our longstanding values, including putting our clients first and building long-term value for our company and our stockholders.

Industry Context

The announcement reflects a trend in the financial services industry towards increased consolidation and a focus on long-term value creation. The acquisition of SVB positions First Citizens BancShares as a top-20 U.S. financial institution with an expanded national footprint and expertise in the innovation economy.

Comparison to Industry Standards

• The document mentions that the company strives to provide compensation to its executive officers that is competitive with comparable financial services companies.
• The document mentions that the company benchmarks its compensation and benefits against the PwC Saratoga Benchmark for Financial Services.
• The document mentions that the company compares its executives compensation against comparably-sized regional financial institutions with which it competes following its acquisition transactions with CIT and SVB.
• The document mentions that the company compares the compensation of each NEO in relation to the 50th percentile of a peer group for similar positions.
• The document mentions that the peer companies used in informing pay decisions for 2023 consisted of 14 publicly traded regional financial institutions that had assets between $50 billion and $225 billion including Citizens Financial Group, Inc, Comerica Incorporated, Fifth Third Bancorp, First Horizon Corporation, First Republic Bank, Huntington BancShares, KeyCorp, M&T Bank Corporation, Regions Financial Corporation, Signature Bank, SVB Financial Group, Synovus Financial Corp, Webster Financial Corporation, and Zions Bancorporation, National Association.

Related Party Transactions

• FCB has banking transactions in the ordinary course of its business with certain of its and our current directors, nominees for director, executive officers, principal stockholders, their affiliates, and our other related persons.
• FCB serves as trustee of the pension and Section 401(k) plans of The Fidelity Bank (Fidelity) and Southern Bank and Trust Company (Southern) under a service agreement with each bank.
• FCB issues credit cards to Southerns customers under which extensions of credit are made to customers by and repaid directly to FCB, and it provides Southern with a line of credit giving Southern limited discretionary credit override authority on credit card lines to its customers.
• FCB also issues business credit cards to Southerns employees with credit limits aggregating $2 million that may be used only for employee business-related expenses and on which the employees are responsible for payments of outstanding account balances in full monthly, no late charges or interest is imposed, and, as guarantor, Southern is responsible for any payments not made by employees.
• FCB sold to Fidelity, in a negotiated off-market transaction, a former branch facility located in Spartanburg, South Carolina, that was closed by FCB during 2017 and held as surplus property, but which it continued to use until 2023 as an ATM location.
• FCB leases excess space in one of its branch offices to Twin States Farming, Inc. on a month-to-month basis.
• During 2023, FCB listed four properties located in North Carolina through Lee & Associates, a national brokerage firm with an office in Raleigh, N.C., for prices ranging from $400,000 to $2,250,000.
• During 2023, Ellen R. Alemany, who serves as a member of our and FCBs Boards and who is a nominee for reelection at the Annual Meeting, was employed by FCB in a non-executive officer position.
• Certain family members of our and FCBs directors and executive officers also are employed by FCB in non-executive officer positions.

Stakeholder Impact

• The company's performance and strategic decisions impact shareholders, employees, customers, and communities.
• The company's commitment to ethical conduct and compliance is important for maintaining trust with stakeholders.
• The company's focus on sustainability and positive community impact benefits society as a whole.

Next Steps

• Stockholders will vote on the proposals at the Annual Meeting on May 1, 2024.
• The company will continue to integrate SVB and realize cost savings and synergies.
• The company will continue to evaluate its approach to sustainability and human capital management.
• The company will continue to monitor and manage risks related to its business operations.

Key Dates

Keywords

executive compensation, corporate governance, risk management, SVB acquisition, annual meeting, directors, financial performance, sustainability, human capital, de-banking, KPMG, proxy statement, First Citizens BancShares