First Citizens Bank Agrees to Acquire Failed Silicon Valley Bank From FDIC

by Taylor Williams

RALEIGH, N.C. — First Citizens Bank has entered into an agreement with the Federal Deposit Insurance Corp. (FIDC) to acquire Silicon Valley Bank following the California-based regional lender’s collapse earlier this month.

Under the terms of the deal, First Citizens Bank will purchase all loans and certain other assets and assume all customer deposits and certain other liabilities out of receivership from the FDIC. This assumption includes approximately $110 billion in assets, $56 billion in consumer and business deposits and $72 billion in outstanding loans.

In addition, First Citizens Bank will receive a line of credit from the FDIC to ensure its own liquidity throughout the purchase process. First Citizens Bank has also entered into a loss-share agreement with the FDIC to provide further downside protection against potential credit losses.

First Citizens Bank will not acquire any assets, common stock, preferred stock or debt of SVB Financial Group, the former holding company of Silicon Valley Bank.

Frank Holding Jr., chairman and CEO of First Citizens Bank, said in a prepared statement that at the most fundamental level, the acquisition allows his company to scale its platform by adding new lines of business in new markets. He specifically cited the appeal of the private equity and joint venture capital lending programs, which are renown within the California tech hub.

“We are committed to building on and preserving the strong relationships that Silicon Valley Bank has with private equity and venture capital firms,” says Holding. “This transaction also will accelerate our expansion in California and introduce wealth capabilities in the Northeast.”

The collapse of Silicon Valley Bank, which had more than $200 billion in assets under management, in early March represents the second-largest bank failure in U.S. history following the demise of Washington Mutual in 2008. During a two-day run on Silicon Valley Bank, March 9-10, customers withdrew billions of dollars in deposits amid fears of major slowdowns in the tech industry.

Occurring against the backdrop of significantly higher interest rates, the withdrawals rendered the bank insolvent. Shortly thereafter, New York-based Signature Bank collapsed due to a similar panic. At that time, Signature Bank had some $110 billion in assets under management, including $36 billion in loans backed by commercial properties.

Raleigh-based First Citizens Bank operates more than 550 branches across 23 states. Following the announcement of this agreement on Monday, shares of the bank’s parent company First Citizens BancShares, Inc. (NASDAQ: FCNCA) rose nearly 50 percent in pre-market trading.

Specifically, the stock price opened at $868 per share this morning, up from a closing price of $582.55 per share on Friday, March 24. The stock price is also up more than 25 percent from a year ago, when it traded at $684.70 per share.

Taylor Williams

You may also like