First Citizens Assumes $72B in Silicon Valley Bank Loans Under Acquisition Plan
By Andrew Coen March 27, 2023 1:21 pm
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First Citizens Bank is acquiring the loans and deposits of Silicon Valley Bank (SIVBQ) (SVB), two weeks after the tech-focused SVB’s sudden collapse.
The Raleigh, N.C.-based First Citizens, which merged with CIT last year, will take over $72 billion of SVB’s loans for the discounted price of $16.5 billion, the Federal Deposit Insurance Corporation (FDIC) announced Monday. The deal also involves First Citizens assuming $56 billion of SVB’s deposits.
SVB, a major backer of tech and crypto startups in addition to some commercial real estate lending, collapsed in early March after it faced a run on its deposits after it failed to raise $2 billion in capital to cover losses. It was the biggest bank collapse in the country since the Global Financial Crisis of 2008.
SVB was hampered in a rising interest rate environment by the fact that 89 percent of its deposit base consisted of amortized held-to-maturity (HTM) securities, debt securities purchased to be held long-term but vulnerable to interest rate changes, according to the bank’s annual report. The Santa Clara, Calif.- based bank’s HTM securities dipped in value when the Federal Reserve aggressively hiked interest rates last year, forcing it to sell them at a loss of nearly $2 billion, Commercial Observer previously reported.
By comparison, only 9 percent of First Citizens’ $108.93 billion of assets are in HTM debt, according to the bank’s latest regulatory filing released Feb. 24. Its acquisition of CIT, which was completed in January 2022, added $53.78 billion of assets, including $32.71 billion in loans, to First Citizens, the report shows.
“We are committed to building on and preserving the strong relationships that legacy SVB’s global fund banking business has with private equity and venture capital firms,” Frank Holding Jr., chairman and CEO of First Citizens, said in a statement. “This transaction also will accelerate our expansion in California and introduce wealth capabilities in the Northeast.”
Under the First Citizens acquisition, roughly $90 billion in SVB’s securities and assets will remain with the FDIC while First Citizens will operate 17 former SVB branches.
Andrew Coen can be reached at acoen@commercialobserver.com
