Exploring First Carolina Bank's Safety and Soundness

Every morning around 7:00, First Carolina Bank Chief Risk Officer Stokes Suiter can be found analyzing past due loan reports, intent on tracking the Bank’s progress towards its goal of no five-day past dues each month.

It’s just one of the things that Suiter and Steven Deaton, the Bank’s Chief Credit Officer, study on a daily basis to ensure that the Bank is able to provide a safe and sound banking experience for our customers—safe meaning that money will not be lost, and sound meaning a good business decision, and according to Deaton, the most sound transactions “actually have defined benefits for the borrower as well as the Bank.”

With those concepts always front of mind, Suiter and Deaton set the parameters through which the Bank lends money, approve loans, and regularly assess vulnerabilities based on macroeconomic changes, compiling a quarterly and annual bank-wide portfolio review for the Board of Directors. The duo is able to offer localized decision making, with Suiter located in Rocky Mount, NC and Deaton in Atlanta, GA, paired with quick turnaround resulting from their range of experience in the industry.

Suiter believes that experience—both his and Deaton’s as well as that of the lending team as a whole—is what sets First Carolina apart in terms of safety and soundness. The experience also allows First Carolina to encourage “a more holistic approach,” in Deaton’s eyes, in which lenders “look at the overall dynamics of a company to determine where their pain parts are and where their strengths are. Then, we tailor our credit facilities based on the abilities of that company. In being married to safe and sound, we’re entrepreneurial.”

To illustrate the value of such an approach, metrics that demonstrate First Carolina’s safety and soundness are listed below:

• In order to be considered “well-capitalized” by FDIC standards, banks must achieve a minimum 5% Tier I capital ratio. First Carolina Bank’s Tier I capital ratio is 14%, nearly triple that threshold.
• The national average of uninsured deposits at US banks is upwards of 40%, and 95% of Silicon Valley Bank’s deposits fell into that category at the end of last year. At First Carolina, under 30% of our deposits are uninsured, and this percentage will drop to approximately 20% when the onboarding of deposits from our new BMTX partnership occurs (this partnership is subject to regulatory approval).
• Accumulated other comprehensive income (AOCI) denotes special gains and losses that are listed as special items in the equity section of the Bank’s balance sheet. For banks, this is where unrealized gains and losses in the investment portfolio are recognized. In today’s rising interest rate environment, many banks have significant losses here due to the portion of investments made in very low fixed rate municipal securities with the flood of government stimulus funds that moved into deposits during the pandemic. These losses represent, on average, 15-20% of a bank’s equity position in many banks today. Due to our effective risk management practices, our losses in this category are less than 2% today and are immaterial.
• First Carolina has not had a 30-day past due loan in our portfolio for over seven years.
• First Carolina has never charged off a loan originated since our acquisition of the previous institution in July 2012.

While the financial industry at large remains in a dynamic state, Suiter feels confident in the Bank’s team and practices, noting that in times like these, “you just have to keep doing what you’re good at. If we keep doing banking and lending like we’ve done in the past, we should be just fine. The main thing is documentation and making sure we document correctly, complete annual reviews, and ensure there’s no deterioration—just stay on top of things and keep doing what we’re doing.”