In a recent development, preferred bank for startups, investors and tech companies alike Silicon Valley Bank (SVB) has gotten a buyer weeks after its unfortunate collapse.
Regulators in the US financial sector made public their support for First Citizens BancShares’ acquisition of SVB. The acquisition could cost the government insurance fund an estimated $20 billion which the the Federal Deposit Insurance Corporation (FDIC) hopes is reduced because the deposit insurance fund is funded by the entire banking industry and not U.S. taxpayer money.
As part of the acquisition, First Citizens will acquire Silicon Valley Bank’s assets of $110 billion, deposits of $56 billion, and loans of $72 billion, bringing the total established figures of the acquisition to around $238billion. They will also get some protection against potential credit losses from the government where necessary.
According to the FDIC, First Citizen’s purchase of approximately $72 billion of SVB’s assets came at a discount of $16.5 billion. The FDIC had promised to help First Citizens pay for half of any losses more than $5 billion from SVB.
First Citizens will not pay for the deal in cash upfront, but instead, the FDIC has granted the bank equity appreciation rights in its stock, which could be worth up to $500 million. This is significantly less than what Silicon Valley Bank was worth before it failed.
First Citizen’s CEO, Frank Holding Junior said, “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.” As such, beginning today, Silicon Valley Bank’s 17 former branches will operate as Silicon Valley Bank (a division of First Citizens) and SVB customers will continue to access their accounts through websites, mobile apps, and branches.
Meanwhile, SVB Financial, the parent company of Silicon Valley Bank filed for bankruptcy on March 17. The company intends to sell its investment arm SVB Capital and SVB Securities through a separate process.
