First Citizens Bank to acquire Silicon Valley Bank in attempt to stem turmoil
First Citizens Bank announced on Monday that it will acquire large parts of the loans and deposits of collapsed Silicon Valley Bank (SVB) from the Federal Deposit Insurance Scheme (FDIC).
Under the deal, First Citizens will assume SVB assets of $110bn, deposits of $56bn and loans of $72bn.
The FDIC estimates the cost of SVB’s failure to be around $20bn. The exact cost will be determined when it terminates the receivership. Around $90bn in securities and other assets from SVB will remain in receivership.
It will receive an available line of credit from the FDIC for “contingent liquidity purposes”. First Citizens also entered into a loss share agreement with the FDIC to provide “further downside protection” against credit losses.
From today, SVB’s 17 former branches will begin operating as Silicon Valley Bank, a division of First Citizens Bank.
CEO Frank Holding said “First Citizens has a reputation for financial strength, exceptional customer service and prudent lending that spans 125 years.”
“We have partnered with the FDIC to successfully complete more FDIC-assisted transactions since 2009 than any other bank, and we appreciate the confidence the FDIC has placed in us once again.”
Holding highlighted the potential for the acquisition to accelerate First Citizens’ expansion in California as well as to offer strong relationships with private equity and venture capital funds.
The FDIC received equity appreciation rights in First Citizens with a potential value of up to $500m.
SVB collapsed earlier in March after spooked depositors pulled $42bn in funds, the largest bank run in history. The panic was sparked after the California-based bank sold a large portfolio of bonds at a significant loss.
It was taken over by the FDIC on 10 March. The FDIC said SVB had about $167bn in assets and $119bn in deposits at that point.