First Citizens Bank and Trust Company has entered into a loss-share transaction with the US Federal Deposit Insurance Corporation (FDIC) to purchase the embattled Silicon Valley Bank (SVB). The FDIC seized the SVB, and under the agreement, First Citizens BancShares will take over all of SVB's deposits and loans. The transaction is aimed at maximizing recoveries on assets by keeping them in the private sector, while also minimizing disruptions for loan customers.
The purchase included approximately $72 billion of Silicon Valley Bridge Bank, National Association's assets at a discount of $16.5 billion.
However, approximately $90 billion in securities and other assets will remain in the receivership for disposition by the FDIC. The FDIC also received equity appreciation rights in First Citizens BancShares common stock with a potential value of up to $500 million.
As part of the agreement, the 17 former branches of Silicon Valley Bridge Bank, National Association, will open as First Citizens Bank & Trust Company on March 27, 2023. SVB customers have been advised to continue availing the bank's services from their current branch until they receive any notice from First Citizens BancShares regarding the completion of systems conversions.
All depositors of the embattled SVB will automatically become depositors of First Citizens BancShares, and all the deposits assumed by the bank will continue to be insured by the FDIC up to the insurance limit. At present, the estimated cost of Silicon Valley Bank's collapse to its deposit insurance fund (DIF) is around $20 billion. The SVB had approximately $167 billion in total assets and about $119 billion in total deposits.
The purchase of SVB by First Citizens BancShares marks a significant acquisition for the North Carolina-based lender. The move is expected to help the bank expand its footprint and bolster its position in the financial market. Additionally, the acquisition also provides an opportunity for First Citizens BancShares to diversify its business lines, including its digital offerings.
The financial industry has been witnessing a significant wave of consolidation in recent years, as banks look to increase their market share and expand their business lines. The acquisition of SVB by First Citizens BancShares is the latest example of this trend. It is likely that we will continue to see more consolidation in the financial industry in the coming years as banks look to stay competitive and meet the changing needs of their customers.