First Citizens Shares Soar After Announcing Deal to Buy Failed Silicon Valley Bank

An employee gets into his car after arriving to work to a shuttered Silicon Valley Bank (SVB) headquarters in Santa Clara, Calif., on March 10, 2023. Justin Sullivan/Getty Images

The share price of First Citizens Bank has soared this week following news that it would buy much of the failed Silicon Valley Bank (SVB) in the wake of its collapse.

The bank, one of the nation’s largest regional financial institutions, saw its shares reach a record high on March 28, rising by as much as 7.2 percent and briefly hitting an all-time peak of $959.99, before paring gains.

As of March 29, shares are up more than 20 percent, extending gains for a third day.

The Raleigh, North Carolina-based bank announced Monday that it is buying the loans and deposits of failed SVB after entering into a purchase and assumption agreement.

SVB was the sixteenth largest bank in the United States, with $209 billion in assets as of Dec. 31, 2022, according to the Federal Reserve. Its collapse subsequently put pressure on other small and regional banks in the United States, including Signature Bank and First Republic.

According to a statement issued by First Citizens Bank, the institution will assume SVB assets of $110 billion, deposits of $56 billion, and loans of $72 billion.

In addition, First Citizens Bank will receive a line of credit from the Federal Deposit Insurance Corporation (FDIC) for contingent liquidity purposes and will have an agreement with the regulator to share some losses on commercial loans to provide further downside protection against potential credit losses.

SVB’s Expensive Failure

First Citizens Bank will not acquire any of the assets, common stock, preferred stock, or debt, or assume any other obligations of SVB Financial Group, according to the statement.

According to a separate statement by the FDIC, around $90 billion in SVB assets will remain in receivership with the FDIC, which received around $500 million in First Citizens stock. The 17 former branches of SVB opened as First Citizens Bank & Trust Company on March 27.

The FDIC said the deal will cost the independent agency around $20 billion, although the exact cost will be determined once the FDIC terminates the receivership.

That amount would make SVB the most expensive failure in the history of the FDIC, which began in 1933 and oversees the banking industry while protecting the depositors of insured banks.

In a separate statement announcing the deal on Monday, Frank Holding, Jr., chairman and CEO of First Citizens, billed the company as having a reputation for “financial strength, exceptional customer service, and prudent lending that spans 125 years.”

First Citizens’ Acquisition Streak

“We have partnered with the FDIC to successfully complete more FDIC-assisted transactions since 2009 than any other bank, and we appreciate the confidence the FDIC has placed in us once again,” Holding said. “We look forward to building relationships with our new customers and positioning our company for continued success as we affirm our commitment to support the integrity of our nation’s banking system.”

Family-controlled First Citizens was founded in 1989 as the Bank of Smithfield with just $10,000 of capital, according to its official website.

Around 17 years later, Holding’s grandfather, R.P. Holding, was elected president and chairman, and the institution began expanding branches across North Carolina. Frank Holding took over as chief executive of First Citizens in 2009, and the bank now has more than 500 branches in 21 states,

He has since overseen multiple acquisitions in FDIC-assisted bank deals, including a 2022 merger with CIT Group under a $2 billion deal.

According to Holding, First Citizens is now a top 20 U.S. financial institution, based on assets, with more than $100 billion in assets, and is the largest family-controlled bank in the United States.

Holding said Monday that First Citizens is “specifically” 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.”