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Saturday, April 20, 2024

First Citizens takes over Silicon Valley, adds $119B in deposits

First Citizens Bancshares agreed last night to buy most of Silicon Valley Bank at a discount from the Federal Deposit Insurance Corp., marking a coup for North Carolina banking,

The Holding family’s bank will buy all of SVB’s deposits, loans and 17 branches, effective today. That involves $119 billion in deposits, and $72 billion of loans that come at a $16.5 billion discount. Meanwhile, about $90 billion of securities held by SVB and investment management business will remain in receivership.

First Citizens shares, which trade as FCNCA on Nasdaq, increased sharply in pre-market trading. It had a market cap of about $11.9 billion as of Friday.

The deal will cost the FDIC’s deposit insurance fund about $20 billion, while the regulator gets “equity appreciation rights” in First Citizens valued at as much as $500 million. That means if the bank’s shares increase, FDIC will benefit, also.

The FDIC took over SVB on March 10, sparking federal regulators to take dramatic steps to calm the markets. They have allowed all of the depositors of SVB to retain their money, even a majority of the bank’s deposits exceeded the historic $250,000 per account insurance maximum.

SVB had more than $200 billion in assets after growing rapidly in recent years. It was the second-biggest U.S. bank failure in history. Its broad clientele of wealthy tech investors in major U.S. cities clearly intrigues First Citizens, which will now be putting on full-court press to retain their business.

CEO Frank Holding Jr., Vice Chair Hope Holding Bryant and President Peter Bristow have shown aggressiveness in building First Citizens, which grew at a calmer pace during the previous generation of leadership by brothers Frank Holding and Lewis “Snow” Holdling. Holding is Bryant’s brother and Bristow’s brother-in-law.

First Citizens doubled in size to more than $100 billion when it bought CIT Group for $2 billion in early 2022. While publicly traded, the Holding family has strong majority ownership of the company.

The deal will make First Citizens one of the 25 biggest U.S. banks, after ranking 30th at the end of 2022. It has acquired more than 20 banks, mostly in rescues approved by federal regulators, since 2009.

David Mildenberg
David Mildenberg
David Mildenberg is editor of Business North Carolina. Reach him at dmildenberg@businessnc.com.

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