BancShares and FCB are required to meet minimum capital requirements set forth by regulatory authorities. 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 depend, in large part, on a financial institution’s capital strength.

Bank regulatory agencies approved regulatory capital guidelines (“Basel III”) aimed at strengthening existing capital requirements for banking organizations. Basel III became effective for BancShares on January 1, 2015. Under Basel III, requirements include a common equity Tier 1 ratio minimum of 4.50%, Tier 1 risk-based capital minimum of 6.00%, total risk-based capital ratio minimum of 8.00% and Tier 1 leverage capital ratio minimum of 4.00%. Failure to meet minimum capital requirements may result in certain actions by regulators that could have a direct, material effect on the consolidated financial statements.

Based on the most recent notifications from its regulators, BancShares and FCB is well-capitalized under the regulatory framework for prompt corrective action. As of December 31, 2020, BancShares and FCB met all capital adequacy requirements to which they are subject and were not aware of any conditions or events that would affect each entity’s well-capitalized status.


			December 31, 2020				December 31, 2019
(Dollars in thousands)	Requirements to be well-capitalized		Amount		Ratio		Amount		Ratio
BancShares
Total risk-based capital	10.00	%	$	4,577,212	13.81	%	$	3,731,501	12.12	%
Tier 1 risk-based capital	8.00		3,856,086		11.63		3,344,305		10.86
Common equity Tier 1	6.50		3,516,149		10.61		3,344,305		10.86
Leverage capital	5.00		3,856,086		7.86		3,344,305		8.81
FCB
Total risk-based capital	10.00		4,543,496		13.72		3,837,670		12.46
Tier 1 risk-based capital	8.00		4,276,870		12.92		3,554,974		11.54
Common equity Tier 1	6.50		4,276,870		12.92		3,554,974		11.54
Leverage capital	5.00		4,276,870		8.72		3,554,974		9.38

As of January 1, 2019, the capital conservation buffer was fully phased in at 2.50%. BancShares and FCB had capital conservation buffers of 5.63% and 5.72%, respectively, at December 31, 2020.

At December 31, 2020, Tier 2 capital of BancShares included $128.5 million of trust preferred capital securities and $377.5 million of qualifying subordinated debentures, compared to $128.5 million of trust preferred capital securities and $32.5 million of qualifying subordinated debentures included at December 31, 2019.

BancShares has two classes of common stock—Class A common and Class B common shares. Shares of Class A common have one vote per share, while shares of Class B common have 16 votes per share.

During 2020, BancShares repurchased a total of 813,090 shares of Class A common stock, or 8.4% of outstanding shares of as of December 31, 2019, for $333.8 million at an average cost per share of $410.48. During 2019, BancShares repurchased a total of 998,910 shares of Class A common stock, or 9.4% of outstanding shares of as of December 31, 2018, for $450.8 million at an average cost per share of $451.33. All share repurchases were executed under previously approved authorities.

Upon expiration of the most recent share repurchase authorization on July 31, 2020, share repurchase activity has ended and will be reevaluated in subsequent periods.

On March 12, 2020, BancShares issued and sold an aggregate of 13,800,000 depositary shares (the “Depositary Shares”), each representing a 1/40th interest in a share of 5.375% Non-Cumulative Perpetual Preferred Stock, Series A, par value $0.01 per share (the “Series A Preferred Stock”), with a liquidation preference of $25 per Depositary Share (equivalent to $1,000 per share of the Series A Preferred Stock) for a total of $345 million.

The capital raise provides liquidity for general corporate purposes, which may include, but is not limited to, providing capital to support our growth organically or through strategic acquisitions, financing investments and capital expenditures, for funding investments in First Citizens Bank as regulatory capital, and redeeming or repurchasing BancShares’ common stock.

The Board of Directors of FCB may approve distributions, including dividends, as it deems appropriate, subject to the requirements of the FDIC and the General Statutes of North Carolina, provided that the distributions do not reduce capital below applicable capital requirements. As of December 31, 2020, the maximum amount of distributions was limited to $1.70 billion to preserve well-capitalized status. Dividends declared by FCB and paid to BancShares amounted to $229.7 million in 2020, $149.8 million in 2019 and $242.9 million in 2018. Payment of dividends is made at the discretion of the Board of Directors and is contingent upon satisfactory earnings as well as projected future capital needs. BancShares’ principal source of liquidity for payment of shareholder dividends is the dividend it receives from FCB.

BancShares and FCB are subject to various requirements imposed by state and federal banking statutes and regulations, including regulations requiring the maintenance of reserve balances at the Federal Reserve Bank. Banks are allowed to reduce the required balances by the amount of vault cash. For 2020, the requirements averaged $115.2 million. Effective March 26, 2020, the Federal Reserve Board reduced the reserve requirement ratio to 0%, eliminating the reserve requirement for all depository institutions.