First Citizens, based in North Carolina, will buy Silicon Valley Bank, the tech industry-focused financial institution that collapsed earlier this month, shake up the banking sector and send shockwaves around the world.
The sale involves selling all of SVB’s deposits and loans to First-Citizens Bank and Trust Co., the FDIC said in a statement late Sunday. SVB customers will automatically become customers of Raleigh-headquartered First Citizens. The 17 former SVB branches will open as First Citizens branches on Monday.
The Santa Clara, Calif.-based bank filed for bankruptcy after depositors rushed to withdraw cash amid fears over the bank’s health. It is the second largest banking meltdown in US history after Washington Mutual collapsed in 2008.
March 12, based in New York Signature Bank was seized by regulators in the third largest bank failure in the United States
In both cases, the government agreed to cover the depositseven those who exceeded the federal insurance limit of $250,000, so depositors at Bank of Silicon Valley and Signature Bank were able to access their money.
Mid-size company based in San Francisco Bank of the First Republic, which serves a similar customer base to Silicon Valley Bank and appeared to be facing a similar crisis, was in turn battered by investors fearing it might also collapse. This led to 11 of the country’s biggest banks announcing a $30 billion bailout.
The acquisition of SVB by First Citizens gives the FDIC a stake in the latter worth $500 million. The FDIC and First Citizens will share losses and potential recovery of loans included in a loss-sharing agreement, the FDIC said.
First Citizens Bank was founded in 1898 and claims to have total assets of over $100 billion, with over 500 branches in 21 states as well as a national bank. It reported net income of $243 million last quarter.