In a significant move to expand its presence in the tech industry, First-Citizens Bank & Trust Company recently announced an agreement to acquire all deposits and loans of Silicon Valley Bridge Bank, N.A.
As per the reports, the deal involves the purchase of $72 billion in assets at a staggering $16.5 billion discount. As a result, the significant discount offered by the FDIC in the recent acquisition of Silicon Valley Bank by First Citizens Bank has caused many to take notice.
A Deep Dive into the SVB buyout Deal
As per the purchase and assumption agreement, First-Citizens Bank & Trust Company will be taking over 17 former branches of Silicon Valley Bridge Bank. These branches are set to open on March 27 under the First-Citizens Bank name. Further, as a part of the acquisition deal, all loans and deposits of Silicon Valley Bridge Bank will be transferred to First-Citizens Bank.
According to recent reports, the technology-oriented bank had an estimated $167 billion in assets and approximately $119 billion in total deposits as of March 10. Further, in a statement, the FDIC provided an estimate of around $20 billion as the cost to its Deposit Insurance Fund due to the failure of Silicon Valley Bank. However, the final amount will only be determined once the FDIC terminates the receivership.
FDIC Guarantees Protection for Silicon Valley Bank Customers
Following the acquisition of Silicon Valley Bank by First Citizens Bank, the FDIC has assured customers that their deposits will remain protected up to the insurance limit. This means that customers can continue to trust First Citizens Bank with their savings and have peace of mind knowing that their funds are secure.
In a separate deal earlier this month, HSBC purchased Silicon Valley Bank’s U.K. division for £1, granting U.K. customers access to more than $8.1 billion in deposits. By doing so, HSBC reinforced its position in the U.K. market and broadened its financial services offerings.
First Citizens Merger to Maintain Strong Finances
First Citizens has stated that the merged company will retain a robust financial position and a wide-ranging loan portfolio and deposit base following the acquisition.
The FDIC established the Silicon Valley Bridge Bank, National Association, following the failure of Silicon Valley Bank. As part of the agreement, the FDIC granted equity appreciation rights in First Citizens’ common shares to the bridge bank, which could potentially result in gains of up to $500 million, according to the FDIC.