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North Carolina-based regional bank First Citizens has agreed to purchase Silicon Valley Bank, according to a March 26 statement from the Federal Deposit Insurance Corporation (FDIC). The FDCI confirmed that it had agreed to the deal, which will see the regulatory agency receive equity appreciation rights in First Citizens BankShares common stocks worth as much as $500 million.
The terms of the First Citizens deal
“As of March 10, 2023, Silicon Valley Bridge Bank, National Association, had approximately $167 billion in total assets and about $119 billion in total deposits. Today’s transaction included the purchase of about $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 the receivership for disposition by the FDIC. In addition, the FDIC received equity appreciation rights in First Citizens BancShares, Inc., Raleigh, North Carolina, common stock with a potential value of up to $500 million.”
The regulators have until April 14 to exercise those appreciation rights, with the exact value dependent upon how well First Citizens stock performs in the days to come. As of early Monday, the bank’s share price had jumped by almost 50%.
The FDIC is reportedly backstopping the deal, at an estimated Deposit Insurance Fund cost of about $20 billion. The statement noted that the final cost to the DIF will not be determined until the FDIC ends its receivership of the failed bank.
By entering into the agreement, the FDIC will now share in any potential losses or gains that First Citizens realizes from any purchased SVB commercial loans. The regulatory body will also provide First Citizens with a $35 billion loan and a $70 billion credit line, according to media reports.
The statement also notified depositors at Silicon Valley Bridge Bank, National Association, which was created by the FDIC in the wake of SVB’s collapse, that they will automatically become depositors at First Citizens Bank &Trust as of March 27, 2023. All 17 of Silicon Valley Bridge Bank, National Association’s branches opened as First Citizens Bank &Trust Company today.