Seventeen days after its collapse, Silicon Valley Bank has a new owner.
First Citizens Bank, a North Carolina lender with a long history of purchasing failed banks, announced Monday (Mar. 27) that it was assuming ownership of all of Silicon Valley Bank (SVB’s) loans and assets.
The deal marks the end of a two-week search by the Federal Deposit Insurance Corp. (FDIC) to find a new owner for SVB, which the government took control of March 10 following a run on deposits. The bank’s failure — one of the largest in U.S. history — triggered a worldwide banking crisis that legislators, regulators and the financial world continue to grapple with.
The sharply-discounted purchase will see First Citizens buy $72 billion worth of SVB’s assets for $16 billion, according to the FDIC.
“Approximately $90 billion in securities and other assets will remain in the receivership for disposition by the FDIC,” the agency said in a news release.
In addition, the FDIC and First Citizens agreed to a “loss–share transaction” on the commercial loans it purchased from the former Silicon Valley Bridge Bank, set up by the government after it took over SVB.
That arrangement means the FDIC and First Citizens “will share in the losses and potential recoveries on the loans covered by the loss–share agreement,” the FDIC said, adding that the agreement should “maximize recoveries on the assets by keeping them in the private sector.”
First Citizens has bought 14 failed banks in the past 20 years and with this purchase beat out reported competitors Valley National Bank and Customers Bank.
“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,” CEO Frank B. Holding Jr. said in a news release.
He added that the bank wants to preserve and expand “the strong relationships that legacy SVB’s Global Fund Banking business has with private equity and venture capital firms.”
PYMNTS looked at the question of why those firms didn’t come to SVB’s rescue in a recent conversation with Amias Gerety, partner at the investment group QED.
He speculated that in order to save SVB, the tech sector would have had to have had to approach the situation with a collaborative mindset.
But with bank accounts strapped and companies worried about what happens next, “there’s a ‘scarcity mindset’ that makes it hard to conduct forward-thinking, collaborative activity.” VCs don’t want to act as bank holding companies, and the focus through the past 18 months has been on simple survival as the cost of capital climbs.
“No one could summon the will for a collective action that was a big bet on the future,” Gerety told PYMNTS.