First Citizens Bank in rescue deal for Silicon Valley Bank

North Carolina-based First Citizens Bank is taking over the US operations of collapsed Silicon Valley Bank (SVB), ending a saga that has been unfolding for more than two weeks since SVB was shut down by regulators on March 10.

First Citizens Bank is buying about $72 billion of SVB’s deposits and loans at a discount of $16.5 billion, leaving about $90 billion of assets in continued receivership by the Federal Deposit Insurance Corporation (FDIC).

Why did Silicon Valley Bank collapse?

SVB had total assets worth $167 billion, the FDIC says. It will continue to seek ways to dispose of the remaining assets.

The collapse of SVB, popular as a lender to US technology companies, was the biggest bank failure since the financial crash 15 years ago. That led to a crisis of confidence in the markets, prompting Credit Suisse to seek a bailout at the hands of rival Swiss bank UBS and sending share prices tumbling elsewhere – including at Deutsche Bank.

In the UK, SVB’s operations there have already been acquired by HSBC for a symbolic payment of £1.

SVB had created a “hole” in its finances by investing customer deposits in US government bonds, which would normally be considered safe investments. But rising interest rates had affected many of these bonds, and when customers began withdrawing their deposits, SVB was forced to sell them at a loss. Only 48 hours passed from SVB publicly revealing that they had sold the assets, and the bank collapsed. It was closed by the California Department of Financial Protection & Innovation with the FDIC appointed receiver, as is customary for banks that have been deemed insolvent.

What is First Citizens Bank?

In recent years, First Citizens Bank has been one of the largest acquirers of failed American banks. According to the FDIC, Silicon Valley Bank is the bank’s sixth bailout in the past decade. Other distressed banks that First Citizens has bought include Milwaukee’s Guaranty Bank and New Jersey’s Harvest Community Bank — both in 2017 — as well as First CornerStone Bank the year before. It has acquired 17 different failed banks since 2009.

First Citizens Bank is based in Raleigh, North Carolina. It has more than 8,000 employees and over $100 billion in assets, making it one of the top 20 financial institutions in the United States. The bank will reopen SVB’s 17 former bank branches under the First Citizens brand, adding its own network of 500+ branches in 22 different states.

Frank B. Holding Jr., Chairman and CEO of First Citizens Bank, said, “First Citizens has a reputation for financial strength, exceptional customer service and sound lending spanning more than 125 years. We have partnered with the FDIC to conduct several FDIC- assisted transactions. since 2009 than any other bank, and we appreciate the trust the FDIC has once again placed in us. We look forward to building relationships with our new customers and positioning our company for continued success while reaffirming our commitment to support the integrity of our nation’s banking system.

“First Citizens has a proud history of growing organically and through strategic acquisitions that build our core capabilities in a careful and deliberate manner. This transaction leverages our solid foundation to add significant scale, geographic diversity, compelling digital capabilities and most importantly, meaningful solutions for clients throughout the lifecycle. Specifically, we are committed to building on and preserving the strong relationships that SVB’s Global Fund Banking business has with private equity and venture capital firms. This transaction will also accelerate our expansion in California and introduce wealth capabilities in the Northeast. SVB’s Private Wealth business is a natural fit for our high-touch and sophisticated level of high-quality client service and approach.”

In a statement, the FDIC added that keeping more than $70 billion of bailed-out assets in the private sector would “maximize the recovery” of those assets, while the bailout deal advanced by First Citizens Bank “minimizes disruption to borrowers.”