First Citizens Bank has agreed to purchase the deposits and loans of bankrupt Silicon Valley Bank (SVB), the U.S. Federal Deposit Insurance Corporation (FDIC) announced Monday.
“The 17 former branches of Silicon Valley Bridge Bank, National Association, will open as First-Citizens Bank & Trust Company on Monday, March 27, 2023,” the FDIC said in a statement.
“Customers of Silicon Valley Bridge Bank, National Association, should continue to use their current branch until they receive notification from First-Citizens Bank & Trust Company that systems conversions have been completed to enable full service at all of its other branches.”
The FDIC has remarked that depositors of Silicon Valley Bridge Bank, National Association, will “automatically” become depositors of First Citizens Bank and that all deposits assumed by the Raleigh, North Carolina-based bank will continue to be insured by the FDIC up to the insurance limit.
As of March 10, 2023, Silicon Valley Bridge Bank, National Association, had approximately $167 billion in total assets and approximately $119 billion in total deposits. Today’s transaction includes the purchase of approximately $72 billion of Silicon Valley Bridge Bank, National Association’s assets at a discount of $16.5 billion.
Approximately $90 billion in securities and other assets will remain in receivership at the FDIC’s disposal. In addition, the FDIC has received First Citizens common stock appreciation rights with a potential value of up to $500 million.
The FDIC and First Citizens Bank have entered into a loss-share transaction on the commercial loans it acquired from the former Silicon Bridge Valley Bank, National Association. The FDIC, as receiver, and First Citizens will share in the losses and potential recoveries on the loans covered by the loss-share agreement.
The loss-sharing transaction is expected to maximize the recovery of the assets by keeping them in the private sector. The transaction is also expected to minimize disruption to loan customers. In addition, First Citizens Bank will assume all qualified financial contracts related to the loans.
The FDIC estimates that the cost of Silicon Valley Bank’s failure to its Deposit Insurance Fund (DIF) will be approximately $20 billion. The exact cost will be determined when the FDIC ends the receivership, it has said.
The FDIC created Silicon Valley Bridge Bank, National Association, following the closure of Silicon Valley Bank by the California Department of Financial Protection and Innovation.
All deposits – insured and uninsured – substantially all of Silicon Valley Bank’s assets and all of Silicon Valley Bank’s qualified financial contracts were transferred to the bridge bank. The purpose of creating Silicon Valley Bridge Bank, National Association was to give the FDIC time to stabilize the institution and market the franchise.
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