The Federal Deposit Insurance Corp. or FDIC announced an agreement, underwhich First-Citizens Bank & Trust Co., affiliated to First Citizens BancShares, Inc., will buy all deposits and loans of Silicon Valley Bridge Bank, N. A. out of FDIC receivership.
The FDIC has been Silicon Valley Bank’s receiver after it was collapsed and closed by the New York State Department of Financial Services or NYDFS in mid March following significant deposit outflows. Following this, the FDIC had transferred the bank’s all deposits, and substantially all assets to newly created, full-service FDIC-operated ‘bridge bank’, Silicon Valley Bridge Bank, N.A.
The FDIC now said it estimates the cost of the failure of Silicon Valley Bank to its Deposit Insurance Fund or DIF to be around $20 billion. The exact cost will be determined when the FDIC terminates the receivership.
First Citizens Bank said it has agreed with FDIC to purchase out of FDIC receivership substantially all loans and certain other assets, and assume all customer deposits and certain other liabilities of Silicon Valley Bridge Bank. The transaction is structured as a whole bank purchase with loss share coverage. First Citizens said it was selected to complete the deal through a competitive bidding process.
On Monday, March 27, the 17 legacy Silicon Valley Bridge Bank branches will begin operating as Silicon Valley Bank, a division of First Citizens Bank.
There will be no immediate change to customers’ current accounts, and they will be able to continue to access their accounts as they do at present.
The FDIC stated that customers of Silicon Valley Bridge Bank should continue to use their current branch until they receive notice from First Citizens Bank that systems conversions have been completed to allow full-service banking at all of its other branch locations.
Further, depositors of Silicon Valley Bridge Bank will automatically become depositors of First-Citizens Bank & Trust. All deposits assumed by First Citizens Bank will continue to be insured by the FDIC up to the insurance limit.
As of March 10, Silicon Valley Bridge Bank had around $167 billion in total assets and about $119 billion in total deposits.
The latest transaction included the purchase of about $72 billion of Silicon Valley Bridge Bank assets at a discount of $16.5 billion. Around $90 billion in securities and other assets will remain in the receivership for disposition by the FDIC.
In addition, the FDIC received equity appreciation rights in First Citizens BancShares common stock with a potential value of up to $500 million.
In its statement, First Citizens Bank said it will assume Silicon Valley Bridge Bank, N.A. assets of $110 billion, deposits of $56 billion and loans of $72 billion, based on latest information provided by the FDIC. First Citizens Bank will additionally receive an available line of credit from the FDIC for contingent liquidity purposes.
In addition, the FDIC and First Citizens Bank entered into a loss-share transaction on the commercial loans it purchased of the former Silicon Valley Bridge Bank. The FDIC as receiver and First Citizens Bank will share in the losses and potential recoveries on the loans covered by the loss-share agreement.
Meanwhile, First Citizens Bank will not acquire any of the assets, common stock, preferred stock, debt or assume any other obligations of SVB Financial Group, the former holding company of Silicon Valley Bank.
Frank Holding, Jr., chairman and CEO of First Citizens, said, “This transaction leverages our solid foundation to add significant scale, geographic diversity, compelling digital capabilities and most importantly, meaningful solutions for customers throughout their lifecycle…. This transaction also will accelerate our expansion in California and introduce wealth capabilities in the Northeast.”
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