First Citizens BancShares, Inc. (Nasdaq: FCNCA) has entered into an agreement with the Federal Deposit Insurance Corporation (FDIC) to purchase all of the assets and liabilities of Silicon Valley Bridge Bank, N.A.
SVB failed earlier this month and was taken over by regulators as its balance sheet went upside down and a bank run made things worse. SVB’s problem was its long-duration assets that had declined in value due to rising interest rates. This, combined with the fact that over 90% of the accounts were over the $250,000 insurance threshold, raised fears of contagion. In the following days, the federal government announced that all deposits would be covered in a dramatic move to stifle fear and uncertainty about the banking system.
According to First Citizens, which is based in North Carolina, the transaction has been structured as a whole bank purchase and assumption agreement with loss share coverage.
Share of First Citizens rose dramatically in early trading – by over 44% at the time of this report.
The FDIC states that the 17 former Silicon Valley Bridge Bank branches will open as First–Citizens Bank & Trust Company today (March 27, 2023). Silicon Valley Bridge Bank customers should continue to use their current branch until they receive notice from First Citizens Bank & Trust Company that systems conversions have been completed to allow full–service banking at all of its other branch locations.
Depositors of Silicon Valley Bridge Bank, National Association, will automatically become depositors of First–Citizens Bank & Trust Company. All deposits assumed by First–Citizens Bank & Trust Company will continue to be insured by the FDIC up to the insurance limit.
First Citizens is a “family-controlled” institution – said to be the largest family-owned bank in the nation.
As of March 10, 2023, Silicon Valley Bridge Bank had approximately $167 billion in total assets and about $119 billion in total deposits. The acquisition included the purchase of about $72 billion of Silicon Valley Bridge Bank 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. In addition, the FDIC received equity appreciation rights in First Citizens BancShares common stock with a potential value of up to $500 million.
The FDIC and First–Citizens Bank & Trust Company entered into a loss–share transaction on the commercial loans it purchased from the former Silicon Valley Bridge Bank. The FDIC as the 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 loss–share transaction is projected to maximize recoveries on the assets by keeping them in the private sector.