Raleigh-based First Citizens agrees to buy failed SVB

First Citizens Bank Corporate Tower, North Hills, Raleigh. Source, www.firstcitizens.com.

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  • The 17 former branches of SVB opened Monday morning as branches of First Citizens.

Raleigh-based First Citizens has agreed to buy the failed SVB (Silicon Valley Bank). The FDIC issued a statement late Sunday that they agreed on the sale of all deposits and loans of the troubled bank. 

First Citizens Bank submitted a bid on March 19 to buy all of SVB. 

The 17 former branches of SVB opened this morning as branches of First Citizens.

The transaction is expected to minimize disruptions for loan customers.

According to the FDIC, SVB had approximately $167 billion in total assets and about $119 billion in total deposits as of March 10. Sunday’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 shares of First Citizens stock worth $500 million.

The FDIC and First Citizens will share losses and the potential loan recovery in a loss-share agreement. 

The loss–share transaction is projected to maximize recoveries on the assets by keeping them in the private sector. In addition, First Citizens will assume all loan–related qualified financial contracts.

The FDIC estimates the cost of the failure of Silicon Valley Bank to its Deposit Insurance Fund (DIF) to be approximately $20 billion. The exact cost will be determined when the FDIC terminates the receivership.

“First Citizens has a reputation for financial strength, exceptional customer service and prudent lending that spans 125 years,” Frank B. Holding, Jr., chairman and CEO of First Citizens, said in a statement. “We have partnered with the FDIC to successfully complete more FDIC-assisted transactions since 2009 than any other bank, and we appreciate the confidence the FDIC has placed in us once again. We look forward to building relationships with our new customers and positioning our company for continued success as we affirm our commitment to support the integrity of our nation’s banking system.”

SVB closed on March 10 after a run of withdrawals triggered the second-largest bank collapse in American history and the largest since 2008. On March 12, regulators took control of New York’s Signature Bank and then San Francisco’s First Republic Bank. First Republic was listed as having the highest percentage of uninsured deposits at 68% of its total.

SVB was an integral part of the financial fabric in the tech startup community in northern California. Its closure sent shockwaves through the industry, and businesses tried to figure out how to make payroll. OpenAI CEO Sam Altman was among tech business leaders who started floating loans to small businesses to help them get through the crisis.
It was the second-largest bank collapse in U.S. history after the 2008 failure of Washington Mutual. 

First Citizens was founded 125 years ago in 1898 as the Bank of Smithfield, the sole bank for Johnston County at that time. R.P. Holding was elected president and chairman of First Citizens Bank & Trust Company in 1935, which branched out to Raleigh and eastern North Carolina. By the 1970s, they were opening branches across the state and, in 1974, moved the headquarters from Smithfield to Raleigh.

In 1994, they purchased their first out-of-state bank in West Virginia. Today, they have over 500 branches in 22 states, making it one of the 20 largest commercial banks in the U.S., with $109 billion in total assets. 

About 60% of the branches and offices are in either North Carolina or South Carolina.

Holding, R.P. Holding’s grandson, was elected chairman in 2009 and continues today. He has overseen the acquisition of more than 20 FDIC-assisted banks since that time. The bank’s parent company, First Citizens BancShares, also acquired CIT Group Inc. last year for over $2 billion.

It is the fourth largest bank in the Carolinas and has more than 2,000 employees in the Triangle area. Its corporate headquarters is in the North Hills area of Raleigh.