First Citizens to buy failed Silicon Valley Bank

First Citizens Bank will buy much of Silicon Valley Bank, US regulators said, as they estimated the lender’s collapse would lead to $20bn of losses for a deposit insurance fund paid for by banks.

The Raleigh, North Carolina-based lender will take on all $119bn of deposits at SVB, the once high-flying lender to tech start-ups and their investors that failed this month. First Citizens will also take over SVB’s loans and operate its 17 branches, the Federal Deposit Insurance Corporation said on Sunday evening.

First Citizens will buy about $72bn of SVB’s assets at a discount, leaving about $90bn of securities and other assets with the FDIC, which is acting as its receiver.

As it announced the deal, the FDIC said the failure of SVB could cost its Deposit Insurance Fund, paid for by member banks, about $20bn.

First Citizens, which calls itself the nation’s largest family-controlled bank, has been one of the biggest buyers of troubled banks in recent years.

Frank Holding Jr took over the job as chief executive of First Citizens, which was started by his grandfather in 1898, in 2008. He has since overseen nearly two dozen acquisitions in FDIC-assisted bank deals. Last year, First Citizens paid $2bn to acquire CIT, a lender to midsized corporations.

The addition of SVB’s business will significantly increase the size of First Citizens, which as of the end of last year had just over $100bn in assets and nearly $90bn in deposits, placing it as the US’s 36th largest bank, by assets. As of Friday, First Citizens bank had a market value of just over $8bn.

The deal follows a similar takeover announced a week ago for Signature Bank, the operations of which were sold to New York Community Bank-owned Flagstar.

As part of that deal, the FDIC was forced to retain $60bn worth of Signature’s loans. The federal agency has estimated that the failure and resolution of Signature bank could cost the FDIC’s insurance fund $2.5bn.

The plunge in SVB’s shares at the start of this month set off worries of brewing problems at regional lenders and the US financial system. On March 10, SVB was taken over by the FDIC after losses on its security portfolio and a failed equity raise spooked investors and depositors.

That kicked off an auction led by the FDIC for the failed lender. Along with a number of regional banks, private equity investors including Blackstone, Apollo, Carlyle, Sixth Street and HPS Investment Partners inspected SVB’s loans to consider possible offers, according to people with knowledge of the matter.