First Citizens BancShares will acquire Silicon Valley Bank, the California lender whose collapse this month sent shock waves across the financial sector.
The Federal Deposit Insurance Corporation seized control of Silicon Valley Bank on March 10, after a run on deposits had left it insolvent. The F.D.I.C., which announced the deal late Sunday, has since been looking for a buyer for the bank, either in its entirety or in pieces.
Silicon Valley Bank was the country’s 16th-largest bank when the government took it over. Its collapse was the largest bank failure in the United States since the 2008 financial crisis.
The deal for the bank, which became Silicon Valley Bridge Bank after the F.D.I.C seized it, included the purchase of about $72 billion of assets, at a discount of $16.5 billion. Another $90 billion in securities and other assets were not included.
The bank regulator will receive equity appreciation rights in the stock of First Citizens, worth up to $500 million. The F.D.I.C. estimated that the cost of the bank failure to the government’s deposit insurance fund will be around $20 billion.
The bank’s 17 former branches, in California and Massachusetts, will open under the First Citizens umbrella on Monday. Its depositors will automatically become customers of First Citizens.
Silicon Valley Bank’s former parent company, SVB Financial, filed for bankruptcy on March 17. It plans to run a separate process to sell various units, including the investment manager SVB Capital and the brokerage firm SVB Securities.
The collapse of Silicon Valley Bank set off tremors across the global financial sector.
On March 19, New York Community Bancorp acquired the defunct Signature Bank a week after the F.D.I.C seized its operations. The deal included around $38 billion in assets, including $12.9 billion in loans, purchased at a discount of $2.7 billion.
Around the same time, Switzerland’s largest bank, UBS, agreed to buy its beleaguered smaller rival Credit Suisse for about $3.2 billion, in a deal hastily arranged by Swiss government. With Silicon Valley Bank spooking the markets, investors had quickly lost faith in Credit Suisse, which had been plagued for years by scandals and mismanagement.
Banking regulators around the world have moved swiftly to shore up confidence in the system. The Federal Reserve, the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank and the Swiss National Bank said they would work to make U.S. dollar financing more readily available. The Fed also set up an emergency lending program to help provide additional support to banks.
First Citizens, based in Raleigh, N.C., says it has more than $100 billion in assets and more than 500 branches across 22 states. It has grown significantly over the past several years, in part by buying government-seized community banks. Such deals can be lucrative depending on how much assistance the government offers as part of the transaction.
“First Citizens has a reputation for financial strength, exceptional customer service and prudent lending that spans 125 years,” Frank B. Holding, Jr., the chief executive of First Citizens, said in a statement. “We have partnered with the F.D.I.C. to successfully complete more F.D.I.C.-assisted transactions since 2009 than any other bank, and we appreciate the confidence the F.D.I.C. has placed in us once again.”
