First Citizens acquires Silicon Valley Bank’s deposits and loans
Technically, First Citizens is acquiring Silicon Valley Bridge Bank, National Association, an entity created by the FDIC following the closure of Silicon Valley Bank by the California Department of Financial Protection and Innovation.
The Federal Deposit Insurance Corporation (FDIC) has announced it entered into a purchase and assumption agreement for all deposits and loans of Silicon Valley Bank by North Carolina-headquartered First Citizens.
Today, 17 former branches of SVB have opened as First Citizens and customers of the former should continue to use their current branch until they receive notice from the new ownership that systems conversions have been completed to allow full-service banking at all of its other branch locations, FDIC stated.
Depositors of Silicon Valley Bank will automatically become depositors of First Citizens and all deposits will continue to be insured by the FDIC up to the insurance limit of $250,000 per client.
First Citizens acquired $72b of SVB’s assets at a discount of $16.5b
According to FDIC, SVB had approximately $167 billion in total assets and about $119 billion in total deposits as of 10 March 2023. The acquisition included the purchase of about $72 billion of SVB’s assets at a discount of $16.5 billion.
Approximately $90 billion in securities and other assets will remain in the receivership for disposition by the FDIC, the regulator said, adding that it received equity appreciation rights in common stock with a potential value of up to $500 million.
The FDIC and First Citizens entered into a loss-share transaction on the commercial loans it purchased of SVB. The entities will share in the losses and potential recoveries on the loans covered by the loss-share agreement, which is projected to maximize recoveries on the assets by keeping them in the private sector.
Additionally, the acquisition is expected to minimize disruptions for loan customers as First Citizens will assume all loan-related Qualified Financial Contracts.
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.
Technically, First Citizens is acquiring Silicon Valley Bridge Bank, National Association, an entity created by the FDIC following the closure of Silicon Valley Bank by the California Department of Financial Protection and Innovation.
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, National Association, was to allow time for the FDIC to stabilize the institution and market the franchise.
