First Citizens Bank, a regional lender based in Raleigh, North Carolina, has agreed to acquire Silicon Valley Bank, the failed US tech lender, and assume control of all its deposits and loans. The deal comes weeks after the lender collapsed and the Federal Deposit Insurance Corporation (FDIC) failed to find a buyer in an earlier auction. First Citizens is acquiring $119bn in deposits and $72bn worth of SVB's loans at a $16.5bn discount, while the FDIC will hold onto about $90bn worth of securities and other assets. The FDIC and First Citizens have also entered into a “loss-share transaction” on all commercial loans purchased from SVB. This means the FDIC as receiver and First-Citizens Bank & Trust Company will share in the losses and potential recoveries on the loans covered by the loss-share agreement. The transaction is expected to minimise disruptions for loan customers.
After the California Department of Financial Protection and Innovation shut down Silicon Valley Bank, the FDIC established the National Association of Silicon Valley Bridge Bank. All of the deposits – both insured and uninsured – and substantially all assets and all Qualified Financial Contracts of Silicon Valley Bank were transferred to the bridge bank. The purpose of establishing Silicon Valley Bridge Bank was to allow time for the FDIC to stabilise the institution and market the franchise. Depositors of Silicon Valley Bridge Bank will automatically become depositors of First–Citizens Bank & Trust Company. The FDIC will continue to provide insurance for all deposits taken by First-Citizens Bank & Trust Company, up to the insurance limit.
The FDIC estimates the cost of the failure of Silicon Valley Bank to its Deposit Insurance Fund (DIF) to be approximately $20 billion, with the exact cost to be determined when the FDIC terminates the receivership. As part of the deal, the FDIC will receive equity appreciation rights in First Citizens BancShares, Inc., Raleigh, North Carolina, common stock with a potential value of up to $500 million. The acquisition gives the FDIC shares in First Citizens worth $500m. According to the FDIC, losses and potential recovery on loans covered by a loss-share agreement will be shared between both the FDIC and First Citizens. The regulator added that around $90bn of Silicon Valley Bank's assets will remain in receivership with the FDIC.
At the conclusion of last year, First Citizens was ranked 30th in the nation based on consolidated assets, as per data from the Federal Reserve database. With a total of 582 branches and offices throughout the country, a majority of 60% were located in either North or South Carolina. Wake County Economic Development reports that it employs over 2,000 individuals in the Triangle region, making it the fourth largest bank in the Carolinas after Bank of America, Truist, and Wells Fargo. Data from Bloomberg shows that First Citizens has acquired over 20 other banks since the financial crisis of 2008. Its latest purchase was financial services firm CIT Group, for which it paid $2 billion in January 2022. The acquisition gives First Citizens significant scale, geographic diversity, compelling digital capabilities, and meaningful solutions for customers throughout their lifecycle.
0. “First Citizens Bank to purchase assets of Silicon Valley Bank” CNN, 27 Mar. 2023, https://www.cnn.com/2023/03/27/business/fdic-announces-first-citizens-purchase-silicon-valley-bank/index.html
1. “Silicon Valley Bank Acquired By First Citizens After Failure” Forbes, 27 Mar. 2023, https://www.forbes.com/sites/siladityaray/2023/03/27/first-citizens-bank-inks-deal-to-acquire-silicon-valley-banks-loans-and-deposits/
2. “Most of Silicon Valley Bank bought by First Citizens, FDIC says” The Week, 27 Mar. 2023, https://theweek.com/finance/1022119/most-of-silicon-valley-bank-bought-by-first-citizens-in-latest-bid-to-contain
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