First Citizens BancShares has agreed to buy much of Silicon Valley Bank, the Federal Deposit Insurance Corp. announced shortly before midnight Monday.
First Citizens will assume $110 billion of SVB’s assets, $56.5 billion in deposits and $72 billion in loans, the Raleigh, North Carolina-based bank said Monday in a release.
About $90 billion in securities and other assets will remain in FDIC receivership, the regulator said.
The loans come at a discount of $16.5 billion, according to the FDIC, which estimates SVB’s failure will cost the Deposit Insurance Fund about $20 billion.
SVB’s 17 branches were set to open Monday as “Silicon Valley Bank, a division of First Citizens Bank,” the bank said.
“This has been a remarkable transaction in partnership with the FDIC that should instill confidence in the banking system,” Frank Holding Jr., First Citizens’ CEO, said in a statement seen by Bloomberg.
The FDIC agreed to share First Citizens’ losses or potential gains on SVB’s commercial loans. The regulator also will help finance the deal with a five-year, $35 billion loan. Additionally, the agency is providing a $70 billion line of credit to help cover potential deposit flight, The Wall Street Journal reported.
“Admittedly, there has been a strong amount of runoff from the legacy Silicon Valley Bank this quarter,” First Citizens CFO Craig Nix told investors Monday, according to The New York Times. “However, it is our intent to embrace the talents of our legacy SVB employees, embrace their business capabilities and then reiterate to their clients that First Citizens has an unwavering focus on holistic client relationships.”
First Citizens will not pay cash upfront as part of the deal. Rather, it gave the FDIC equity appreciation rights in its stock that could be worth up to $500 million. The FDIC will be able to exercise those rights until April 14, and the amount of cash it receives will depend on the value of First Citizens' stock, according to Reuters. First Citizens shares jumped nearly 50% in pre-market trading Monday.
The transaction will accelerate First Citizens’ expansion in California and introduce wealth capabilities in the Northeast, the bank said in its statement. The wealth boost presumably stems from SVB’s $900 million purchase of Boston Private in 2021.
The deal will also catapult First Citizens into the ranks of the 25 largest U.S. banks by asset size, according to The Wall Street Journal. It began the year as the 30th-largest, with $109 billion in assets, according to the Federal Reserve. Before buying into SVB, it counted more than 500 branches in 22 states. That footprint saw a boost after First Citizens bought New York City-based CIT Group in a $2.2 billion, all-stock deal in late 2020.
First Citizens is a relatively frequent acquirer, having bought more than 20 FDIC-assisted banks since 2009, according to Bloomberg.
"First Citizens has a proud history of growing organically and through strategic acquisitions that build our core capabilities in a careful and deliberate manner," Holding said Monday. "This transaction leverages our solid foundation to add significant scale, geographic diversity, compelling digital capabilities and most importantly, meaningful solutions for customers throughout their lifecycle.”
The winning bid for SVB was not First Citizens’ first. The Raleigh bank reportedly submitted a bid for SVB immediately after it collapsed, people familiar with the matter told Bloomberg.
Wayne, New Jersey-based Valley National Bank also was said to have submitted a bid last week, according to Bloomberg.
“We appreciate the confidence the FDIC has placed in us,” Holding said. “We are excited about layering on the expertise that SVB brings.”