First Citizens BancShares Inc. has entered into an agreement to buy and assume all deposits and loans from SVB.
US Company to Acquire Silicon Valley Bank and Assume Its Liabilities and Deposits
First Citizens BancShares Inc. has agreed to purchase Silicon Valley Bank, which was seized by authorities due to a run on the bank.
According to a statement from the Federal Deposit Insurance Corporation, the bank situated in Raleigh, North Carolina entered into a buy and assumption agreement for all deposits and loans of SVB. This transaction comprises the acquisition of about $72 billion in SVB assets at a discount of $16.5 billion.
Around $90 billion in securities and other assets will stay in the receivership for sale by the FDIC, while the Federal institution received up to $500 million in equity appreciation rights in First Citizens. According to the statement, the estimated cost of the failure to the Deposit Insurance Fund is approximately $20 billion, though the exact amount will not be known until the receivership is terminated.
Frank Holding Jr., chief executive officer of First Citizens, said in a statement, “This has been a fantastic transaction in collaboration with the FDIC that should inspire trust in the financial system.”
Last month, Silicon Valley Bank became the largest US lender to collapse in over a decade, imploding in less than 48 hours after detailing a strategy to bolster capital. The bank suffered a massive loss on the sale of its securities as a result of rising interest rates, causing investors and depositors to rapidly withdraw their funds. On March 9 alone, investors and depositors attempted $42 billion in withdrawals.
Regulators scrambled to seek a transaction for all or part of the bank to protect startup clients’ uninsured savings.
In an effort to cover the uninsured deposits of the bank’s startup customers, regulators rushed to secure a deal for all or a portion of the bank, but an earlier auction attempt ended without a buyer.
After receiving “significant interest” from various possible acquirers, the FDIC then prolonged the bidding process. To simplify the process and increase the number of potential bidders, the FDIC permitted parties to submit separate proposals for the Silicon Valley Private Bank subsidiary and Silicon Valley Bridge Bank NA – the entity founded by the FDIC after SVB entered receivership.
After the bank’s failure, US authorities took unprecedented efforts to restore trust in the financial system, providing a new backstop for banks that Federal Reserve officials deemed sufficient to cover the whole nation’s deposits.
SVB’s stock price plunged after the Santa Clara, California-based company reported plans for an equity offering, a $1.8 billion loss on the sale of securities, and a slowdown in funding at venture capital-backed companies it supports. While investors including Founders Fund, Coatue Management, Union Square Ventures, and Founder Collective advised their portfolio businesses to shift money out of SVB, the bank was forced to abandon its intention to raise cash.
According to individuals with knowledge of the situation, First Citizens previously placed an offer for SVB soon after it failed.
Observers have questioned if First Citizens has the resources to acquire the second-largest FDIC-assisted bank failure in U.S. history due to its interest in a purchase. According to Federal Reserve data, Raleigh, North Carolina-based First Citizens was the 30th largest commercial bank in the United States by assets at the end of 2022.
Yet the bank has expertise purchasing failing competitors. It has bought more than 20 FDIC-assisted banks since 2009, concluding a string of acquisitions from Washington to Wisconsin to Pennsylvania after the financial crisis.
Last year, First Citizens also acquired CIT Group Inc. in a transaction valued at more than $2 billion.