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First Citizens (FCNCA) Jumps on Buying Part of SVB Post Failure

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First Citizens BancShares, Inc.’s (FCNCA - Free Report) subsidiary, First-Citizens Bank & Trust Company, has entered an agreement with the Federal Deposit Insurance Corporation (FDIC) to purchase all loans and certain other assets, and assume all customer deposits and certain other liabilities of Silicon Valley Bridge Bank, N.A. Following the announcement of the deal, shares of FCNCA gained 53.7% in the last day’s trading session.

The transaction has been structured as a whole bank purchase with loss share coverage.

First Citizens Bank will assume Silicon Valley Bank’s assets worth $110 billion, deposits worth $56 billion and loans worth $72 billion. First Citizens Bank will also receive an available line of credit from the FDIC for contingent liquidity purposes.

First Citizens Bank has entered a loss share agreement with the FDIC to provide further downside protection against potential credit losses. In addition to the loss-sharing agreement, the FDIC has offered to help finance the deal with a five-year $35-billion loan.

The FDIC had estimated the failure of SVB to cost a federal insurance fund $20 billion or 10% of the bank’s assets before its failure. The FDIC is likely to recover some of that money through an agreement, in which First Citizens Bank will pay up to $500 million if its share price goes up a certain amount, which already has.

Frank B. Holding, Jr., the chairman and CEO of FCNCA, stated, “First Citizens has a reputation for financial strength, exceptional customer service and prudent lending that spans 125 years. 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. We look forward to building relationships with our new customers and positioning our company for continued success as we affirm our commitment to support the integrity of our nation's banking system.”

Notably, First Citizens was selected for this transaction through a competitive bidding process. It won an auction coordinated by the FDIC among 18 bidders who had put in 27 bids for Silicon Valley Bank.

The purchase of Silicon Valley Bank is by far the biggest challenge for FCNCA, which has a history of buying failed banks.

The deal allows First Citizens Bank to build on its experience with innovation hubs by leveraging Silicon Valley Bank's strength in serving the private equity, venture capital and technology sectors.

Now, the 17 legacy SVB branches will begin operating as Silicon Valley Bank, a division of First Citizens Bank. There will be no immediate change to customers’ current accounts, and they will be able to continue to access their accounts through their current websites, mobile apps and branch locations.

Over the past six months, shares of FCNCA have gained 13.3% against the industry’s decline of 15.1%.


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Currently, FCNCA carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Acquisitions by Other Firms

Recently, JPMorgan (JPM - Free Report) entered an agreement to acquire Aumni. Founded in 2018, Aumni provides investment analytics software to venture capitalists. The financial terms of the deal, expected to close in the first half of 2023, were not disclosed.

The acquisition strengthens JPM’s commitment to building a leading private markets platform for companies, their employees and investors, as well as its confidence in the resilience of the venture-backed ecosystem.

New York Community Bancorp, Inc. (NYCB - Free Report) announced that its bank subsidiary, Flagstar Bank, acquired $38 billion in assets and assumed $36 billion of liabilities of Signature Bridge Bank, N.A., from the FDIC.

The deal comes after Signature Bank was closed by the regulators, following the collapse of Silicon Valley Bank. The FDIC took over the fallen bank and transferred all the deposits and substantially all the assets to Signature Bridge Bank, N.A.

NYCB received all the required regulatory approvals, including approval from the Office of the Comptroller of the Currency, and the deal has been closed.

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