The story of Silicon Valley Bank (SVB) takes another turn as First Citizens Bank acquires a significant portion of the failed bank’s loans and deposits. First Citizens has bought $72 billion, at a discount of $16.5 billion, of SVB’s loans and deposits.
Reported by CNBC on March 26, 2023, the U.S. Federal Deposit Insurance Corporation (FDIC) has announced that $72 billion of SVB loans and deposits were acquired by First Citizens Bank at a $16.5 billion discount. Another $90 billion in other securities and assets will remain in the FDIC’s control.
As previously reported, the U.S. Treasury had set aside $25 billion from its Exchange Stabilization Fund to aid in funding protection. The FDIC has released a statement noting the costs:
The regulator added that the estimated cost of SVB’s failure to its Deposit Insurance Fund (DIF) will be around $20 billion, with the exact cost determined once the receivership is terminated.
First Citizens Bank’s acquisition also comes with other changes for SVB. The once-SVB branches, of which there are 17, will open as First Citizens Banks on Monday.
Part of the purchase has seen the FDIC receive equity appreciation rights in First Citizens Bank common stock valued up to $500 million. According to the CNBC report, FDIC and First Citizens Bank have entered into a loss-share transaction. The FDIC will absorb part of the loss on the commercial loans purchased from the SVB bridge bank.