First Citizens purchases a failing Silicon Valley bank

First Citizens Bank purchased the loans and deposits of Silicon Valley Bank, which was shut down in 2008, according to the Federal Deposit Insurance Corporation.

First Citizens Bank shares jumped over 40% during Monday morning trading.

On Monday, the 17 ex-SVB branches were reopened as First Citizens Bank & Trust Company. All Silicon Valley Bridge Bank depositors, which was created by the FDIC as a temporary bank in the wake SVB’s collapse and is now First Citizens customers, will be automatically converted to First Citizens.

According to the FDIC, SVB had $167 billion in total assets as well as $119 in total deposits at the time of its collapse on March 10. The FDIC stated in a press release that First Citizens Bank, Raleigh, NC, purchased $72 billion worth of assets from SVB at a discount price of $16.5 billion. The FDIC will retain approximately $90 billion worth of securities and assets. This will allow the FDIC to separate those assets. According to the FDIC, the FDIC received equity appreciation rights in First Citizens common stocks — which could have a value of up $500 million.

Silicon Valley Bank was once the bank of choice for venture capitalists, start-ups, and tech companies. It was the second-largest bank failure in 2008, after Washington Mutual. SVB collapsed as a result of a bank run in the which depositors withdrew $42 Billion of their money. The FDIC declared the bank bank’s bankruptcy and created the bridge bank.

In a press release, the FDIC stated that SVB’s collapse had cost its Deposit Insurance Fund an estimated $20Billion. This fund is funded through insurance premiums.

SVB’s British affiliate was purchased by HSBC on March 13.

Two other deals to purchase failed banks have followed the First Citizens deal. Flagstar Bank, a subsidiary New York Community Bancorp, purchased Signature Bank on March 20, which was two days after SVB. UBS announced on March 19 that it would buy Credit Suisse in Europe. The deal was $3.23 billion.

On March 16, First Republic Bank was granted a $30 billion reprieve by 11 of the country’s largest banks to stop further bank failures. The First Citizens deal saw First Republic Bank’s stock rise 24% Monday.

Banking committees from both houses of Congress will hold hearings this week to evaluate SVB’s collapse and identify regulatory lapses. The Federal Reserve will also be reviewing supervision and regulation related to SVB’s collapse. Jerome Powell, Fed Chair, stated that this review was his sole interest. He said that the Fed’s review would help to determine which policies should be implemented moving forward.