First Citizens Assumes All Deposits and Loans of Silicon Valley Bridge Bank from the FDIC
March 27, 2023
Late yesterday evening, the FDIC announced that First-Citizens Bank & Trust Company of Raleigh, NC (First Citizens), had entered into a purchase and assumption (P&A) agreement for all deposits and loans of Silicon Valley Bridge Bank (SVBB).
Key terms of the deal described in the FDIC’s announcement included:
- All seventeen former branches of SVBB would open as First Citizens branches the morning of March 27.
- Depositors of SVBB would automatically become depositors of First Citizens, with deposits insured by the FDIC up to the insurance limit.
- First Citizens purchased approximately $72 billion of SVBB assets at a discount of $16.5 billion.
- Approximately $90 billion in securities and other assets will remain in the receivership for disposition by the FDIC.
- FDIC received equity appreciation rights in the common stock of First Citizen’s holding company, First Citizens BancShares, Inc. (FCB), with a potential value of up to $500 million.
- FDIC and First Citizens entered a loss-share transaction on the commercial loans it purchased of the former SVBB.
- First Citizens will assume all loan-related qualified financial contracts.
- The FDIC estimated the cost of the failure of Silicon Valley Bank (SVB) to the Deposit Insurance Fund (DIF) would be approximately $20 billion.
This morning, FCB released an 8-K and held an investor call to describe the transaction and its effect on FCB and First Citizen. Other notable features described in the 8-K and call include the following:
- The FDIC will provide First Citizen with a five-year, $70 billion line of credit to support liquidity, including for deposit withdrawal or runoff, and to fund the unfunded commercial lending commitments acquired pursuant to the P&A.
- The FDIC loss share agreement covers approximately $60 billion in loans, and provides that the FDIC will reimburse First Citizen for 50% of losses on the covered portfolio in excess of $5 billion.
- The P&A expressly excluded any obligation for First Citizen to purchase (a) qualified financial contracts or any other derivative instructions to the extent First Citizen has not acquired the underlying assets or assumed the underlying liability, (b) cryptocurrency assets or any assets backed by cryptocurrency, (c) SPD Silicon Valley Bank Co., Ltd., SVB’s China joint venture, (d) SVB’s Cayman Islands branch, and (e) SVB’s German, Canadian, and Hong Kong branches (although First Citizen received an option to purchase these branches). SVBB retained some bank premises, with First Citizens receiving an option to purchase or option to lease.
- First Citizen is under no obligation to assume any deposits denominated in cryptocurrency or any liabilities of any acquired subsidiaries not in the ordinary course of business and not reflected, or reserved for, on the SVBB’s balance sheet as of March 17, 2023.
For additional information, please see:
- FDIC Press Release (link)
- First Citizens Bank SVB Page (link)
- First Citizens Form 8-K (link)
- First Citizens Investor Presentation (link)
Clients with questions should reach out to any of their regular contacts at Cleary Gottlieb or any of the partners or counsel listed on our website under Banking and Financial Institutions or Bankruptcy and Restructuring.
Additional Cleary Gottlieb content regarding SVB and related developments can be found here.
Cleary Gottlieb is a trusted resource in the financial sector for clear and up-to-the-minute guidance on the evolving regulatory landscape. Our preeminent banking and bankruptcy and restructuring practices have been intimately involved advising the private sector and governments in times of crisis, including the 2008 financial crisis and in the federal government’s actions to stabilize the economy during the COVID pandemic. We have extensive experience advising banking institutions and their depositors, creditors, and investors through the FDIC resolution process.