First Citizens Bank Purchase Silicon Valley Bank

The Silicon Valley Bank has brokered a buyout deal with the North Carolina-based First Citizens Bank.

• What- First Citizens bank to acquire Silicon Valley Bank
• Why- This comes after the FDIC announced the acquisition deal
• What Next- The 17 former Silicon Valley Bank National Association branches would open as First Citizens Bank & Trust Company today

The First Citizens Bank and Trust Company is set to acquire Silicon Valley Bank’s deposits and loans, per the statement from the Federal Deposit Insurance Corporation (FDIC) on Monday. The acquisition includes purchasing about $72 billion of SVB assets at a discount of $16.5 billion. However, about $90 billion in securities and other assets were not included, as they will stand in receivership for disposal by the FDIC.

Today, we entered into an agreement with First-Citizens Bank & Trust Company to purchase and assume all deposits and loans of Silicon Valley Bridge Bank, N.A.https://t.co/vjDsnQxhrr pic.twitter.com/MI5lXN5y6r

— FDIC (@FDICgov) March 27, 2023

Additionally, the FDIC received equity appreciation rights in First Citizens BancShares, Inc. common stock with a potential value of up to $500 million. This comes as the regulator transferred all SVB deposits and assets into a new bridge bank intending to protect the depositors of the failed lender.

Further, the statement noted that the 17 former Silicon Valley Bank National Association branches would open as First Citizens Bank & Trust Company on Monday, March 27. The FDIC release read:

The Customers of Silicon Valley Bridge Bank, National Association, should keep using their current branch until they receive notice from the First Citizens Bank that systems conversions have been completed to allow full-service banking at all its branch locations.

The loss-share transaction

Noteworthy, the First Citizens Bank and FDIC got into a “loss-share transaction.” The FDIC receives part of the losses in various assets and commercial loans purchased from the SVB bridge bank. The FDIC noted,” the loss-share transaction aims to maximize recoveries on the assets by keeping them in the private sector. Additionally, the transaction is projected to minimize disruption for loan customers.”

Further, the estimated cost of SVB’s failure to its Deposit Insurance Fund (DIF) is approximately $20 billion. However, the cost will be determined once the FDIC terminates the receivership. Conversely, the First Citizens Bank is the 30^th largest commercial bank in the United States. As of March 10, 2023, the bank had around $167 billion in total assets and approximately $119 billion in total deposits.

The Silicon Valley Bank Collapse

Recently, financial industry has experienced fear and concern after the abrupt closure of the famous crypto bank Silvergate. The fears grew intense after another United States bank, Silicon Valley Bank, collapsed on March 10 due to liquidity crisis rumors at the bank that prompted the bank run.

However, the FDIC will continue to protect the deposits up to the insurance limit after the First Citizens Bank acquisition. Nonetheless, the Silicon Valley Bank’s U.K. division was purchased by HSBC for 1 pound earlier this month. The subsidiary acquisition enabled the U.K. customers to secure over 8.1 billion in deposits.

More News:

• Silicon Valley Bank shares crash by 60% one day after crypto bank Silvergate shut down
• Former Coinbase CTO Warns US Government May Block Bitcoin Withdrawals
• HSBC To Acquire Silicon Valley Bank (SVB UK) For 1 Pound