Silicon Valley Bank (SVB), which was closed by regulators on March 10, has now been taken over by First Citizens Bank.
The North Carolina-based bank purchased approximately $72 billion of SVB’s deposits and loans at a $16.5 billion discount, while the Federal Deposit Insurance Corporation (FDIC) retains around $90 billion of the bank’s assets in receivership.
Why Did Silicon Valley Bank Collapse?
SVB, which had total assets worth $167 billion, was a popular lender among US tech businesses.
However, the bank created a hole in its finances by investing customer deposits in US government bonds, which were considered safe investments. Unfortunately, rising interest rates had impacted many of these bonds, and when customers started withdrawing their deposits, SVB was forced to sell them at a loss.
In just 48 hours, the bank collapsed, prompting a crisis of confidence in the markets, leading Credit Suisse to seek a bailout from UBS, and causing share prices to plummet elsewhere, including at Deutsche Bank.
What is First Citizens Bank?
First Citizens Bank has been one of the largest acquirers of failed US banks in recent years.
According to the FDIC, Silicon Valley Bank is the bank’s sixth bailout in the last decade. The bank has acquired 17 different failed banks since 2009, including Milwaukee’s Guaranty Bank, New Jersey’s Harvest Community Bank, and First CornerStone Bank.
First Citizens Bank is based in Raleigh, North Carolina, and has more than 8,000 employees and over $100 billion in assets, making it one of the top 20 financial institutions in the US.
The bank will reopen SVB’s 17 former bank branches under First Citizens’ branding, adding to its own network of 500+ branches in 22 different states.
What Does the Acquisition Mean?
The FDIC believes that keeping more than $70 billion of rescued assets in the private sector would “maximize recoveries” of those assets. The rescue deal put forward by First Citizens Bank “minimizes disruptions for loan customers,” according to a statement by the FDIC.
SVB’s acquisition will add significant scale, geographic diversity, compelling digital capabilities, and meaningful solutions for customers throughout their lifecycle to First Citizens Bank’s solid foundation.
The bank is committed to preserving the strong relationships that legacy SVB’s Global Fund Banking business has with private equity and venture capital firms.
The acquisition will also accelerate First Citizens Bank’s expansion in California and introduce wealth capabilities in the Northeast. SVB’s Private Wealth business is a natural fit for the bank’s high-touch and sophisticated level of high-net-worth customer service and approach.
Final Thoughts
First Citizens Bank’s acquisition of Silicon Valley Bank’s US business is another example of the bank’s successful track record in acquiring failed banks.
The acquisition will add significant scale and geographic diversity to First Citizens Bank’s operations while providing meaningful solutions for customers throughout their lifecycle.
With the acquisition of SVB’s US business, the bank’s solid foundation and commitment to prudent lending will continue to support the integrity of the US banking system.