Silicon Valley Bank Acquired, Offering An End To Banking Woes

An announcement was made that First Citizens will acquire Silicon Valley Bank (SVB), late Sunday, after the Federal Deposit Insurance Corp (FDIC) had to step in to avoid larger financial ‘contagion’ from the SVB collapse. 

The downfall of the start-up-centered bank resulted in the worst banking crisis since the 2008 global financial crisis. SVB’s long-dated bonds strategy left the bank vulnerable, and open to a bank run when customers rushed to withdraw funds. This deal signals the first weekend in several weeks that didn’t offer fresh banking woes, since the crisis began in March.

All deposits and loans of SVB will be sold to First Citizens, assets amounting to $110 billion, including $56 billion in deposits and $72 billion in loans. As part of the deal, FDIC will be given $500 million in equity rights of First Citizens’ stocks, and retain some $90 billion in securities.

First Citizens, self-described as the largest family-controlled bank in the United States, has grown in the past decade from assets of about $20 billion to more than $100 billion today, this is in part to previous government-seized acquisitions, which can be rather lucrative depending on the government assistance that gets offered. It will take this opportunity to further expand into California, in addition to its more than 500 branches. 

There is an agreement between First Citizens and the regulators that the losses will be shared, as additional protection against further losses. And the FDIC estimates that the cost to the federal insurance fund will be about $20 billion.