8-K/AAcquisitions & DispositionsMaterial AgreementsFinancial Events+3

FIRST CITIZENS BANCSHARES INC /DE/ 8-K/A Report, Material Agreement (Mar 31, 2023)

Filed March 31, 2023For Securities:FCNCAFCNCPFCNCBFCNCOFCNCN

Summary

First Citizens Bancshares Inc. /de/ (FCNCA), through its subsidiary First-Citizens Bank & Trust Company (FCB), has officially completed the acquisition of substantially all loans and certain other assets, along with assuming customer deposits and other liabilities, from Silicon Valley Bridge Bank, N.A. This transaction, facilitated by the FDIC as receiver, significantly expands FCB's balance sheet with approximately $110.1 billion in assets and $59.0 billion in liabilities, including $56.5 billion in deposits. The acquisition was structured with assets acquired at a discount and excluded certain specific assets like cryptocurrency and international branches. Crucially, FCB has entered into a Purchase Money Note with the FDIC for $35 billion and secured a $70 billion line of credit from the FDIC to manage liquidity and fund unfunded commitments. A commercial shared-loss agreement with the FDIC covers approximately $60 billion in loans, with the FDIC sharing in potential losses to mitigate risk for FCB. This strategic move represents a substantial growth opportunity for First Citizens, integrating a large deposit base and loan portfolio. However, investors should note the significant financial arrangements with the FDIC, including the large note and credit facility, and the shared-loss agreement, which provide risk mitigation but also create substantial financial commitments. The company has also issued a Value Appreciation Instrument to the FDIC, with a potential payment of up to $500 million, which has been exercised. The successful integration and management of these newly acquired assets and liabilities will be key to realizing the anticipated benefits of this transaction.

Key Highlights

  • 1Completion of the acquisition of substantially all assets and liabilities of Silicon Valley Bridge Bank, N.A. from the FDIC.
  • 2Acquisition includes approximately $110.1 billion in assets and assumption of $59.0 billion in liabilities, including $56.5 billion in customer deposits.
  • 3Assets were acquired at a discount of approximately $16.45 billion.
  • 4FCB issued a $35 billion, five-year Purchase Money Note to the FDIC.
  • 5FCB secured a $70 billion, five-year line of credit from the FDIC for liquidity support and to fund unfunded commitments.
  • 6A commercial shared-loss agreement with the FDIC covers approximately $60 billion of acquired loans, with loss-sharing provisions to mitigate risk.
  • 7FDIC exercised a Value Appreciation Instrument, entitling them to a $500 million payment from First Citizens.

Frequently Asked Questions

The acquisition significantly increases First Citizens' balance sheet. They acquired approximately $110.1 billion in assets, including $72.1 billion in loans, and assumed $59.0 billion in liabilities, primarily $56.5 billion in customer deposits. This represents a substantial growth in scale and market presence.

The acquisition is financed through a combination of the company's own capital, a $35 billion Purchase Money Note issued to the FDIC, and a $70 billion line of credit from the FDIC. While the FDIC provides significant support and risk mitigation through a shared-loss agreement on approximately $60 billion in loans, these financial arrangements represent substantial obligations for First Citizens.

Yes, several items were explicitly excluded. These include qualified financial contracts or derivatives where underlying assets/liabilities weren't acquired, cryptocurrency assets, the China joint venture (SPD Silicon Valley Bank Co., Ltd.), the Cayman Islands branch, and the German, Canadian, and Hong Kong branches (though FCB has an option to purchase these). FCB also did not assume liabilities of acquired subsidiaries not in the ordinary course of business or deposits denominated in cryptocurrency.

The Value Appreciation Instrument is a financial agreement where First Citizens could potentially pay the FDIC up to $500 million based on the appreciation of First Citizens' stock price above $582.55 before April 14, 2023. The FDIC exercised this instrument, entitling them to a payment of $500 million, which will be made within five business days of the exercise date (March 28, 2023).