First Citizens to acquire majority of SVB loans; FDIC predicts $20 billion impact on insurance fund

First Citizens Bank has reached an agreement with the Federal Deposit Insurance Corporation (FDIC) to purchase most of the loan book of Silicon Valley Bank (SVB), which recently collapsed. The deal will result in a substantial loss to the US Deposit Insurance Fund. Under the agreement, First Citizens will take ownership of approximately $72 billion in assets from the Silicon Valley Bridge Bank at a discount of $16.5 billion. It will also assume control of SVB’s remaining $119 billion in deposits. The FDIC will retain approximately $90 billion in securities and other assets for disposition. The move ends a two-week period of uncertainty for SVB’s commercial clients and will enable them to resume full banking services.

The purchase is expected to increase First Citizens’ total assets by two-thirds, further solidifying its position in the US banking sector. The deal includes a loss-sharing agreement and equity appreciation rights in First Citizens BancShares Inc common stock, which the FDIC may exercise to recoup some of the losses incurred while winding down SVB’s asset base. However, the FDIC estimates that it will still sustain losses of approximately $20 billion as it liquidates SVB’s remaining assets.

The deal will provide First Citizens with a significant exposure to the technology sector and expand its geographic diversity and digital capabilities. The bank’s chairman and CEO, Frank Holding, expressed a commitment to maintaining SVB’s relationships with private equity and venture capital firms. The acquisition will also facilitate the bank’s expansion in California and introduce wealth management capabilities in the north-east.