First Citizens Buys Deposits and Loans of Failed Silicon Valley Bank — What Does it Mean for Customers?
First Citizens Bank & Trust Company is buying all Silicon Valley Bridge Bank’s deposits and loans just two weeks after its rapid collapse which was the second largest bank failure since Washington Mutual failed in 2008.
Discover: What Happens to Your Money If Your Bank Fails?
Learn: How To Guard Your Wealth From a Potential Banking Crisis With Gold
The Federal Deposit Insurance Corporation (FDIC) announced that the 17 former branches of Silicon Valley Bridge Bank, National Association, will open as First Citizens Bank & Trust Company on March 27, 2023, according to a March 26 announcement.
“Customers of Silicon Valley Bridge Bank, National Association, should continue to use their current branch until they receive notice from First Citizens Bank & Trust Company that systems conversions have been completed to allow full-service banking at all of its other branch locations,” according to the announcement.
The FDIC added that depositors of Silicon Valley Bridge Bank, National Association, will automatically become depositors of First Citizens Bank & Trust Company and that all deposits will continue to be insured by the FDIC up to the insurance limit. The FDIC insures deposits up to $250,000.
In addition, customers will be able to continue to use their checks and ATM/Debit card, and direct deposits such as paychecks and social security benefits will continue as usual.
On March 13, the FDIC created Silicon Valley Bridge Bank, “a full-service FDIC-operated ‘bridge bank’ in an action designed to protect all depositors of Silicon Valley Bank,” according to an earlier announcement.
The First Citizens deal includes the purchase of $72 billion of Silicon Valley Bridge Bank, National Association’s assets at a discount of $16.5 billion. In addition, approximately $90 billion in securities and other assets will remain in the receivership for disposition by the FDIC.
MarketWatch reported that First Citizens bought 20 failed banks since 2009.
“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,” Frank B. Holding, Jr., chairman and CEO of First Citizens, said in a press release. “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.”
The FDIC said it estimates the cost of the failure of Silicon Valley Bank to its Deposit Insurance Fund (DIF) to be approximately $20 billion.
The quick collapse of Silicon Valley Bank and the ensuing measures regulators took to avoid more damage on Sunday evening March 12, prompted contagion fears and created chaos in the markets. In addition, the FDIC and the Federal Reserve also announced on March 12 the closing of crypto-friendly bank Signature Bank, because of a “similar systemic risk.”
Shares of Raleigh, North Carolina-based First Citizens Bank were up 12% in pre-market trading on March 27.
More From GOBankingRates