Will First Citizens’ Acquisition of SVB Calm Fears?

George Vail, Principal, Avison Young. Image courtesy of Avison Young

Following a competitive bid process, First Citizens Bank, of Raleigh, N.C., has agreed to purchase out of Federal Deposit Insurance Corp. receivership “substantially all loans and certain other assets” of the recently defunct Silicon Valley Bank.

“The purchase of SVB was a great purchase by First Citizens, as evidenced by their stock being up over 50 percent by the close of the stock market on Monday. This acquisition will enable First Citizens to expand its business with private equity and technology firms,” George Vail, principal in the Capital Markets Group, Debt & Equity, Avison Young, told Commercial Property Executive.

“Even though SVB was sold at a discount, this should be a step in the right direction in helping calm fears concerning regional and community banks, which account for 80 percent of all commercial real estate lending,” Vail added.

He cautioned, however: “All bets are off if the Fed continues raising interest rates that could lead to additional bank failures.”

Terms of the agreement

Under the agreement, First Citizens will assume the Silicon Valley Bridge Bank, N.A. assets of $110 billion, deposits of $56 billion and loans of $72 billion (all amounts based on FDIC figures).

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First Citizens will also receive an available line of credit from the FDIC for contingent liquidity purposes. Further, First Citizens Bank has entered into a loss-share agreement with the FDIC “to provide further downside protection against potential credit losses.”

Frank Holding Jr., Chairman & CEO, First Citizens Bank. Image courtesy of First Citizens Bank

First Citizens Bank noted that it will not acquire any of the assets, common stock, preferred stock or debt, nor assume any other obligations of SVB Financial Group, Silicon Valley Bank’s former holding company.

Frank Holding Jr., chairman & CEO of First Citizens, remarked in a prepared statement that First Citizens has “partnered with the FDIC to successfully complete more FDIC-assisted transactions since 2009 than any other bank….”

He added that First Citizens gains significant scale, geographic diversity and compelling digital capabilities from the transaction, including additional relationships with private equity and venture capital firms.