First Citizens buys Silicon Valley Bank after collapse; takes over $119 billion in deposits and loans

First Citizens Bank and Trust Company, a North Carolina-based lender, has agreed to buy the embattledSilicon Valley Bank (SVB) which was seized by the US authorities.

FDIC and First Citizens to split losses

The US Federal Deposit Insurance Corporation (FDIC) and First Citizens BancShares will split losses and potential recoveries on the covered loans in accordance with this agreement.

First Citizens BancShares Inc. entered into a loss-share transaction for all deposits and loans of the SVB, a statement from FDIC said. 

By leaving the assets in the private sector, this transaction seeks to maximise asset recovery. Additionally, it should cause less obstacles for loan consumers.

What FDIC stated

The FDIC statement further said, “Today's transaction included the purchase of about $72 billion of Silicon Valley Bridge Bank, National Association's 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.”

Additionally, First Citizens BancShares common stock with an estimated value of up to $500 million was given to the FDIC as equity appreciation rights.

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It further mentioned, “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 SVB have been urged to continue using their local branch to access the bank's services until they hear from First Citizens BancShares regarding the conclusion of the system changes.

First Citizens BancShares' solution

First Citizens BancShares will convert all of the troubled SVB's depositors into shareholders. All deposits assumed by the First Citizens BancShares will be insured by the FDIC, according to the FDIC statement.

The statement read, “All deposits assumed by First Citizens BancShares and Trust Company will continue to be insured by the FDIC up to the insurance limit.”

The deposit insurance fund (DIF) of Silicon Valley Bank is currently believed to have lost roughly $20 billion as a result of the bank's bankruptcy. Around $119 billion in total deposits and $167 billion in total assets made up the SVB.

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