Buyer of Failed Silicon Valley Bank Reports $9.5 Billion Profit Following Acquisition

Silicon Valley Bank (SVB) headquarters in Santa Clara, Calif., on March 13, 2023. (Vivian Yin/The Epoch Times)

First Citizens Bank, which bought the failed lender Silicon Valley Bank (SVB) in March, has reported a profit of more than $9 billion due to the takeover.

First Citizens made a preliminary gain of $9.82 billion on the acquisition, according to the bank’s May 10 earnings release (pdf) detailing its first-quarter performance. As a result of the business takeover, First Citizens’ net income available for common stockholders for the first quarter of 2023 came in at $9.50 billion, or $653.64 per diluted common share. This is over 39 times higher than the $243 million in net income, or $16.67 per share, First Citizens had made in fourth quarter 2022.

At the end of March 31, 2023, First Citizens reported deposits of $140.05 billion, up by over $50 billion from $89.41 billion by December-end. The bank attributed the increase to the integration of SVB deposits. Meanwhile, loans rose by more than $67 billion, to $138.29 billion.

First Citizens acquired SVB in late March, assuming all customer deposits and liabilities of the failed institution. At the time, SVB assets were valued at around $106.60 billion, with loans estimated to be $68.50 billion.

SVB customer deposits amounted to $55.96 billion. First Citizens acquired the deposits without paying any premium while assets were taken over at a discount of $16.45 billion.

“Since the completion of our acquisition of certain assets and liabilities of Silicon Valley Bridge Bank, N.A. on March 27, 2023, we have made strides to integrate our two companies, including meaningful engagement with key Silicon Valley Bank leaders and clients,” said the bank’s chairman and CEO, Frank B. Holding, Jr.

“Building on the considerable strengths Silicon Valley Bank brings to the business, including exceptional talent and expertise, significant scale, geographic diversity, and meaningful solutions for customers, we are confident we will continue to deliver long-term value for our shareholders.”

Shares of First Citizens were up by over 41 percent as of May 10, year to date. Much of the surge is due to the SVB acquisition.

On March 24, First Citizens was trading at $582.55 per share. On March 27, news of the acquisition came out. Between March 24 and May 10, the share price has risen by over 101 percent to $1,175.35

First Citizens Acquisition, Regulatory Failure

Founded in 1989, family-controlled First Citizens began with only $100,000 in capital. Now, it has more than 500 branches spread over 21 states across the United States. First Citizens ranks among the top 20 U.S. financial institutions in terms of assets, which amounts to more than $100 billion. It is also the biggest family-controlled bank in America.

Under First Citizens CEO Frank Holding, the bank has overseen multiple acquisitions through bank deals, with the assistance of the Federal Deposit Insurance Corporation (FDIC). The takeover of SVB is the latest in such deals.

“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,” Holding said on March 27 while announcing First Citizens’ acquisition of SVB.

Meanwhile, the California Department of Financial Protection and Innovation (DFPI), the state’s bank regulator, admitted in a recent report that it was too slow in addressing the growing issues at SVB and failed to make the troubled lender fix its problems.

During the COVID-19 pandemic, SVB grew at a rapid pace. In 2020, the bank had deposits worth $57 billion, which jumped to $183 billion in 2022. According to the DFPI, they failed to understand the risks involved when banks grow too big in too little time.

“SVB was slow to remediate regulator-identified deficiencies and regulators did not take adequate steps to ensure the bank resolved problems as fast as possible,” the report stated. “SVB’s unusually rapid growth was not sufficiently accounted for in risk assessments.”