Published - March 27, 2023 @ 11:53 PM (EET)
One of the US's largest regional banks, First Citizens Bancshares inc. (NASDAQ:FCNCA), has agreed to buy Silicon Valley Bank, more than two weeks after the lender's collapse sent shockwaves through the banking system.
According to a statement from the Federal Deposit Insurance Corp., the North Carolina-based bank entered into a purchase and assumption agreement for all loans and deposits of SVB.
The FDIC said the purchase includes $119 billion in deposits and about $72 billion of SVB's loans at a discount of $16.5 billion. In addition, some $90 billion of SVB's securities will remain in receivership while the institution also got equity appreciation rights in First Citizens worth as much as $500 million.
The announcement comes after the regulator transferred all SVB deposits and assets into a new "bridge bank" earlier this month to protect depositors of the failed lender.
WHY IT MATTERS
Though First Citizens previously submitted a bid for SVB immediately after it collapsed, its interest in buying the lender has stumped some observers, questioning whether First Citizens has the resources to take on the second-largest FDIC-assisted bank failure in US history.
However, First Citizens, the 30th largest commercial bank in the US by assets at the end of 2022, has a successful history of buying broken rivals. Since 2009, it has acquired more than 20 FDIC-assisted banks.
Meanwhile, the FIC agreed to share any of First Citizens' losses or potential gains on SVB's commercial loans, estimating the failure of SVB will cost its governing federal insurance fund about $20 billion, or roughly 10% of the bank's assets, before its dissolution.
In a news release, Chief Executive Frank Holding Jr. at First Citizens said,
"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."
He said the deal would accelerate the bank's expansion in California and introduce wealth management capabilities in the northeast.
