US regulatory authorities to backstop Silicon Valley Bank sale to First Citizens BancShares

Regulatory authorities announced on Monday that they would backstop First Citizens BancShares' acquisition of Silicon Valley Bank. The announcement triggered a $20 billion hit to a government-run insurance fund.

According to the deal, First Citizens Bank will purchase approximately $72 billion of the SVB assets at a discount of $16.5 billion. However, around $90 billion in securities and other assets will remain in receivership for disposition by the FDIC. First Citizens has also acquired SVB Private.

Frank Holding, CEO of First Citizens, told investors on a conference call that the deal was "momentous". "We believe this transaction is a great outcome for depositors."

For the SVB deal, First Citizens said it will not pay in cash, rather it has granted equity appreciation rights in its stock to the FDIC. The authority will be able to exercise rights between March 27 and April 14. While the amount of cash FDIC receives depends on the value of the lender's stock, it could be worth up to $500 million.

The First Citizens Bank and the FDIC have also entered into a loss-share transaction. “The loss–share transaction is projected to maximize recoveries on the assets by keeping them in the private sector. The transaction is also expected to minimize disruptions for loan customers,” the agency said.

A note released by Piper Sandler stated that under Holding's chairmanship, since 2009, the Raleigh-based lender has completed 21 government-supported deals.

Silicon Valley Bank was taken over by the Federal Deposit Insurance Corporation (FDIC) on March 10, following a bank run that also brought down Signature Bank and wiped out more than half the market value of several other regional lenders in the US.

Wells Fargo analysts led by Mike Mayo wrote on Monday that the FDIC's sale of SVB shows business can continue as usual in the banking industry.

The Santa Clara-based SVB's collapse triggered the worst banking crisis since 2008.