The deal with First Citizens may provide some market stability following a tumultuous past few weeks since Silicon Valley Bank went down. (GeekWire Photo / Nate Bek)
First Citizens Bank has agreed to purchase all deposits and loans of Silicon Valley Bank, the Federal Deposit Insurance Corporation announced late Sunday.
Depositors of Silicon Valley Bridge Bank, the newly established firm created by regulators to manage the failed bank, will become depositors of First Citizens Bank on Monday morning. Silicon Valley Bank’s 17 branches will open as First Citizens locations on Monday.
Raleigh, N.C.-based First Citizens purchased about $72 billion in assets at a discount of $16.5 billion.
Silicon Valley bank collapsed earlier this month, sending shockwaves through the tech industry and broader financial sector. Many tech companies and investors relied on the bank, which was popular among early-stage startups.
Against a backdrop of rising interest rates and scarce investment capital, Silicon Valley Bank’s shares plummeted earlier this month after the firm said it would book a $1.8 billion loss related to securities sales.
After liquidity concerns prompted some venture capital firms to advise founders to pull their money out of the bank, investors and depositors withdrew $42 billion in deposits on Thursday, leaving Silicon Valley Bank with a negative cash balance of $958 million, prompting regulators to step in and close the bank.
Some companies wondered if they would be able to access their cash and meet payroll. But the FDIC stepped in a few days later, protecting both insured and uninsured depositors.
The deal with First Citizens may provide some market stability following a tumultuous past few weeks since Silicon Valley Bank went down. It was the second-largest bank failure ever, behind Washington Mutual’s downfall in 2008.
Loan terms that companies had with Silicon Valley Bank will not change under First Citizens. That should be welcome news to startups that had existing venture debt lines.
The FDIC said it will receive up to $500 million in First Citizens stock as part of the deal and expects to book around $20 billion in losses from its Deposit Insurance Fund once it fully terminates the receivership. It still holds $90 billion in securities and other assets from Silicon Valley Bank.