First Citizens enters agreement to buy Silicon Valley Bridge Bank, says FDIC

Customers of Silicon Valley Bridge Bank have been instructed to use their current branch until they are notifed that the systems conversion has been completed, and depositors will be automatically switched to First Citizens. “All deposits assumed by First Citizens Bank & Trust Company will continue to be insured by the FDIC up to the insurance limit,” said the regulator.

As of March 10, Silicon Valley Bridge Bank had approximately $167 billion in total assets and about $119 billion in total deposits, the FDIC said. The deal included the purchase of about $72 billion of Silicon Valley Bridge Bank’s assets at a discount of $16.5 billion.

Roughly $90 billion in securities and other assets will remain in FDIC receivership for disposition, and the regulator has received equity appreciation rights in First Citizens common stock worth up to $500 million.

The FDIC and the Raleigh, North Carolina-based bank entered into a loss–share transaction on the commercial loans it purchased of former Silicon Valley Bridge Bank.  The FDIC said it will share in the losses and potential recoveries on the loans covered by that agreement, which is “projected to maximize recoveries on the assets by keeping them in the private sector,” and minimize disruptions for loan customers.  First Citizens will also assume all loan–related qualified financial contracts.

The FDIC estimates the cost of the failure of Silicon Valley Bank to its Deposit Insurance Fund (DIF) at roughly $20 billion, the exact cost of which will be determined when receivership is terminated.

The FDIC created Silicon Valley Bridge Bank, National Association, following the closure of Silicon Valley Bank by the California Department of Financial Protection and Innovation. All of the deposits—both insured and uninsured—and substantially all assets and all Qualified Financial Contracts of Silicon Valley Bank were transferred to the bridge bank. The purpose of establishing Silicon Valley Bridge Bank, National Association, was to allow time for the FDIC to stabilize the institution and market the franchise. 

Speculation that First Citizens, which has bought 20 failed banks since 2009, was pursuing an acquisition of Silicon Valley National Bank emerged last week. Bloomberg, which first reported First Citizens would enter a deal for the bank on Sunday, also reported that Valley National Bancorp
VLY,
+2.87%
 was trying to purchase the failed bank. It said First Citizens had previously made an offer for the bank immediately after it collapsed.

First Citizens shares have sunk 23% year to date — mostly over the past month — and are down 15% over the past 12 months, compared to the S&P 500’s
SPX,
+0.56%
3.4% gain in 2023 and 13% decline over the past year.