Press Release

Silicon Valley Bank’s Name to Live on Following Costly Failure

Banking Organizations
March 27, 2023

Over the weekend, First Citizens BancShares, Inc. (First Citizens), through its subsidiary, First-Citizens Bank & Trust Company (both entities unrated by DBRS Morningstar) entered into an agreement with the FDIC to purchase all the assets and liabilities of Silicon Valley Bridge Bank, N.A., the entity created when Silicon Valley Bank was placed into receivership on March 10, 2023.

The FDIC has estimated the cost to the Deposit Insurance Fund to be approximately $20 billion, sharply higher than FDIC’s estimated cost to resolve Signature Bank of $2.5 billion. Given the large cost of the failure, the transaction may lead to additional scrutiny on the banking sector.

The transaction follows a competitive bidding process and is structured as a whole bank purchase and assumption agreement with loss share coverage. First Citizens has been an active acquirer of failed bank assets from the FDIC since the financial crisis. Indeed, First Citizens has completed more FDIC assisted transactions since 2009 than any other bank.

First Citizens will assume Silicon Valley Bridge Bank, N.A.’s approximately $110 billion of assets, including $72 billion of loans, and $56 billion of deposits. Additionally, the FDIC will provide a line of credit for contingent liquidity purposes as well as a loss share agreement to provide further downside protection against potential credit losses. The 17 branches will begin operating today as Silicon Valley Bank, a division of First Citizens Bank.

While the transaction doubles First Citizens assets and loan portfolio to $219 billion and $143 billion, respectively, it is structured to limit liquidity and credit risks to First Citizens. The acquisition includes over $35 billion in cash as well as a similarly sized $35 billion 5-year 3.50% fixed rate borrowing from the FDIC. First Citizens’ challenge will be to retain and build upon Silicon Valley Bank’s client base.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com

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