First Citizens to purchase assets of failed Silicon Valley Bank

The deal announced by the FDIC on Monday will see First Citizens Bank buy Silicon Valley Bank's deposits and loans worth about $72 billion at a discount of $16.5 billion.

Silicon Valley Bank on light background, art generated by Midjourney

First Citizens Bank & Trust Co will assume control of all Silicon Valley Bank’s deposits and loans, the U.S. Federal Deposit Insurance Corporation (FDIC) said in a Monday statement. A troubled California lender was abruptly shut down by regulators earlier this month following what was described as “the first Twitter-fueled bank run.”

As part of the deal, First Citizens Bank will take control of SVB assets of $110 billion, deposits of $56 billion and loans of $72 billion, the lender said in a statement. The purchase of loans was subject to a $16.5 billion discount.

“We have partnered with the FDIC to successfully complete more FDIC-assisted transactions since 2009 than any other bank, and we appreciate the confidence the FDIC has placed in us once again,” First Citizens chairman and CEO Frank B. Holding said in a Monday press release.

“We look forward to building relationships with our new customers and positioning our company for continued success as we affirm our commitment to support the integrity of our nation's banking system.”

Importantly, Holding also emphasized that his bank will continue to serve and support SVB’s diverse venture capital clientele. The tech-focused California lender was a bank of choice for Silicon Valley’s VC and startup community. Unlike its collapsed peers, Silvergate Bank and Signature Bank, SVB didn’t provide fiat on-ramps to exchanges, but banked a number of key crypto companies, including USDC stablecoin issuer Circle, remittance protocol Ripple, crypto-focused VC firm Pantera Capital, Avalanche Foundation, and Yuga Labs.

“Specifically, we are committed to building on and preserving the strong relationships that legacy SVB's Global Fund Banking business has with private equity and venture capital firms,” said First Citizens CEO.

As of March 10, SVB had approximately $167 billion in total assets and about $119 billion in total deposits. A large chunk of these assets now belongs to First Citizens Bank, but around $90 billion in securities and other assets will remain in the receivership for disposition by the FDIC, which also got equity appreciation rights in First Citizens worth up to $500 million.

The regulator estimates that the Silicon Valley Bank failure will cost its Deposit Insurance Fund (DIF) about $20 billion, but the exact cost will be determined once the receivership is terminated.

“The 17 former branches of Silicon Valley Bridge Bank, National Association, will open as First–Citizens Bank & Trust Company on Monday, March 27, 2023. Customers of Silicon Valley Bridge Bank, National Association, 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,” FDIC said in a statement.

Read also: FDIC denies reports that Signature buyer has to stop all crypto business

First Citizens purchased commercial loans of SVB under a loss-share agreement with the FDIC, which means that the regulator will share in the losses and potential recoveries on loans covered by the terms of the deal.

The collapse of Silicon Valley Bank, a big name in the banking sector for start-ups and VC firms, came after its panicked clients rapidly started pulling their funds. According to Bloomberg, spooked investors and depositors tried to withdraw about $42 billion on March 9 alone. The collapse of SVB marks the largest U.S. bank failure since Lehman Brothers went bankrupt in 2008.