First Citizens Buys Silicon Valley Bank After Run on Lender

First Citizens BancShares Inc. agreed to buy Silicon Valley Bank, which was seized by regulators following a run on the lender.

The bank agreed to take on all deposits and loans, a deal that includes the purchase of about $72 billion SVB assets at a discount of $16.5 billion, according to a statement from the Federal Deposit Insurance Corp. The agency took control of the bank after SVB collapsed earlier this month.

About $90 billion in securities and other assets will remain in the receivership for disposition by the FDIC, while the Federal institution also got equity appreciation rights in First Citizens worth as much as $500 million.

The estimated cost of the failure to the Deposit Insurance Fund is about $20 billion, though the exact extent will be determined when receivership is terminated, according to the statement.

“This has been a remarkable transaction in partnership with the FDIC that should instill confidence in the banking system,” Frank Holding Jr., chief executive officer of Raleigh, North Carolina-based First Citizens, said in a statement. Bloomberg News reported earlier that First Citizens was nearing a deal.

The lender said it will assume $56 billion in deposits and 17 legacy branches will begin operating Silicon Valley Bank, a division of First Citizens. There will be no immediate change to customer accounts.

Details of SVB Failure

Silicon Valley Bank abruptly became the biggest U.S. lender to fail in more than a decade earlier this month, unraveling in less than 48 hours after outlining a plan to shore up capital.

The bank took a huge loss on sales of its securities amid rising interest rates, unnerving investors and depositors who rapidly began pulling their money. On March 9 alone, investors and depositors tried to withdraw about $42 billion.

Regulators had been racing to lock down a deal for all or parts of the bank in a bid to cover the uninsured deposits of its startup customers, but an earlier auction attempt passed without a buyer.

Then the FDIC extended the bidding process after receiving “substantial interest” from multiple potential acquirers. To simplify the process and expand the pool of bidders, the FDIC allowed parties to submit separate offers for the Silicon Valley Private Bank subsidiary and Silicon Valley Bridge Bank NA — the firm created by the FDIC after SVB went into receivership.

Valley National Bancorp also submitted a bid last week, people familiar with the matter have said.