First Citizens Bancshares will buy Silicon Valley Bank, the California lender whose collapse sent shock waves across the financial sector this month.
The Federal Deposit Insurance Corporation took control of the Silicon Valley bank on March 10 after the deposits went bankrupt. FDIC, which announced the agreement As of late Sunday, the bank is looking for a buyer in whole or in pieces.
When the government took over Silicon Valley Bank was the 16th largest bank in the country. Its collapse was the biggest bank failure in the US since the 2008 financial crisis.
The deal for the bank, which became Silicon Valley Bridge Bank after the FDIC took over, bought about $72 billion in assets at a $16.5 billion discount. Another $90 billion is not included in bonds and other assets.
On First Citizens shares worth up to $500 million, the bank regulator will receive equity appreciation rights. The FDIC estimates that the cost of a bank failure to the government’s deposit insurance fund would be about $20 billion.
The bank’s 17 former branches, in California and Massachusetts, will open under the Citizens umbrella starting Monday. Its depositors will automatically become customers of First Citizens.
SVB Financial, the former parent company of Silicon Valley Bank, filed for bankruptcy on March 17. Investment manager SVB Capital and brokerage firm SVB Securities also plan to conduct a separate process to sell the various units.
The collapse of the Silicon Valley bank sent shockwaves through the global financial sector.
On March 19, New York Community Bancorp acquired the defunct Signature Bank, a week after the FDIC took over its operations. The deal includes approximately $38 billion in assets, including $12.9 billion in debt purchased at a $2.7 billion discount.
At the same time, Switzerland’s biggest bank, UBS, agreed to buy its smaller rival Credit Suisse for about $3.2 billion in a deal hastily arranged by the Swiss government. Investors quickly lost faith in Credit Suisse, which has been plagued by scandals and mismanagement for years, as Silicon Valley banking spooked markets.
Banking regulators around the world have moved quickly to boost confidence in the system. The Federal Reserve, Bank of Canada, Bank of England, Bank of Japan, European Central Bank and Swiss National Bank have said they are working to make US dollar financing more readily available. The central bank has also set up an emergency lending program to provide additional support to banks.
First Citizens, based in Raleigh, NC, says it has more than $100 billion in assets and more than 500 branches in 22 states. It has grown significantly over the past several years by buying government-captured community banks. Such deals can be lucrative depending on how much aid the government provides as part of the transaction.
“First Citizens has a 125-year reputation for financial strength, exceptional customer service and prudent lending,” First Citizens Chief Executive Frank P. Holding, Jr. said in a statement. “We have partnered with the FDIC to successfully complete more FDIC-assisted transactions since 2009 than any other bank, and we appreciate the FDIC’s confidence in us once again.”