First Citizens Bank to buy Silicon Valley Bridge Bank

INFRA

First Citizens Bank, a major financial institution with more than $100 billion in assets under management, has agreed to acquire Silicon Valley Bridge Bank.

The transaction was announced this morning.

Silicon Valley Bridge Bank is the entity to which regulators moved the assets of Silicon Valley Bank following the latter company’s collapse this month. After the restructuring, regulators began searching for a buyer. Multiple investors reportedly made bids to purchase parts of Silicon Valley Bridge Bank, but officials sought a buyer that would buy the entire company rather than only certain assets.

First Citizens Bank’s winning bid is described as a “whole bank purchase.” The company will absorb all the deposits and loans previously managed by Silicon Valley Bridge Bank, along with $110 billion worth of other assets such as securities. About $90 billion worth of securities and other assets will for the time being remain with the Federal Deposit Insurance Corp..

The FDIC is a government agency that insures bank deposits against losses and performs certain other tasks. It became the receiver of SVB following its closure month. A receiver is an organization tasked with managing the assets of a collapsed company.

“First Citizens has a reputation for financial strength, exceptional customer service and prudent lending that spans 125 years,” said Chief Executive Frank Holding Jr. “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.”

First Citizens Bank will purchase $72 billion of the Silicon Valley Bridge Bank assets that it’s buying at a discount of $16.5 billion. The FDIC, meanwhile, is receiving equity appreciation rights in First Citizens Bancshares Inc., First Citizen Bank’s publicly traded parent company. The deal will give the agency an up to $500 million stake in the company. 

As part of the transaction, the FDIC and First Citizens Bank have also signed a loss share agreement. The agreement focuses on the commercial loans that the latter company is absorbing through its purchase of Silicon Valley Bridge Bank. The FDIC will share half of any losses above $5 billion that First Citizens Bank may incur on those loans.

The FDIC estimates that the collapse of Silicon Valley Bank will cost its Deposit Insurance Fund, or DIF, about $20 billion. It’s a fund financed by insurance payments from banks that the FDIC uses to protect bank deposits against losses. It had a balance of more than $128 billion at the end of 2022.

Silicon Valley Bridge Bank and its predecessor, Silicon Valley Bank, maintained 17 branches in California and Massachusetts. Those branches reopened today under the First Citizens Bank brand.

The acquisition of Silicon Valley Bridge Bank comes a few weeks after the collapsed financial institution’s U.K. unit, SVB UK Ltd., was sold to HSBC plc. The unit managed £6.7 billion worth of deposits for more than 3,500 local clients. It’s now part of HSBC’s U.K. subsidiary, which has 14 million customers in Britain.

Silicon Valley Bank’s former parent company, SVB Financial Group Corp., is also seeking a buyer in the wake of its recent bankruptcy filing. The company has two subsidiaries that it’s hoping to sell. The first invests in startups and venture capital funds, while the other provides investment banking services.

Photo: Silicon Valley Bank