First Citizens Bank & Trust Company came to the rescue of Silicon Valley Bank (SVB). The holding company signed an agreement, as reported by the Federal Deposit Insurance Corporation (FDIC) on Sunday, to purchase the assets of the Santa Clara, Calif.-based bank for $72 billion:
Today'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
The deal comes after the Treasury Department, the FDIC itself and the Federal Reserve bailed out 100% of the shares held by both Silicon Valley Bank and Signature two weeks ago to prevent a "systemic collapse."
FDIC to remain in control of part of SVB assets
The rescue is not total. As assured by the FDIC, $90 billion in securities and other assets will remain insolvent and only accessible by the FDIC. The corporation also received up to $500 million in "equity appreciation rights in First Citizens BancShares, Inc., Raleigh, North Carolina."
The FDIC and First Citizens Bank & Trust Company entered into a loss–share transaction on the commercial loans it purchased of the former Silicon Valley Bridge Bank, National Association. The FDIC as receiver and First Citizens Bank & Trust Company will share in the losses and potential recoveries on the loans covered by the loss–share agreement. The loss–share transaction is projected to maximize recoveries on the assets by keeping them in the private sector. The transaction is also expected to minimize disruptions for loan customers.
Through this agreement, the 17 former SVB branches will open as of Monday as new subsidiaries of First Citizens Bank & Trust Company. However, they warned, SVB's customers must still carry out their transactions at their former locations until further notice:
Customers of Silicon Valley Bridge Bank, National Association, should continue to use their current branch until they receive notice from First Citizens Bank & Trust Company that systems conversions have been completed to allow full–service banking at all of its other branch locations.
