The Federal Deposit Insurance Corp. is set to collect the instant windfall that it engineered as part of First Citizens BancShares' government-backed takeover of Silicon Valley Bank.
The FDIC told First Citizens on Tuesday it was claiming a $500 million profit linked to the increase in that company's stock, which soared after the acquisition was sealed. The FDIC was entitled to the payment within five business days, the Raleigh, North Carolina, company said in a regulatory filing Friday.
The FDIC's equity-appreciation rights went into the money Monday, Bloomberg News reported, as First Citizens shares surged 54% on optimism about how the takeover will boost the bank's finances. The swift benefit from the transaction echoes an arrangement the agency struck with New York Community Bancorp as part of its agreement to take over Signature Bank's deposits and some of its loans.
The fresh cash will help rebuild the FDIC's Deposit Insurance Fund, which took a hit from the failures of SVB and Signature Bank. By some estimates, the FDIC spent about $23 billion to cover depositors. Taking a share of First Citizens' stock gains helps authorities as they seek to avoid accusations of a bailout.
The FDIC declined to comment on the gains but confirmed that it had exercised its appreciation rights related to First Citizens.
The regulator added in a statement that it also exercised its option to buy shares of New York Community Bancorp following its deal to sell billions of dollars of Signature Bank's deposits to NYCB. Like SVB, Signature Bank failed and was taken over by the FDIC earlier this month.
"For the Signature deal, we did exercise our option to acquire shares of NYCB and intend to sell these shares at a future date to maximize recoveries," the FDIC said. The agency will sell the stock over a 40-day period beginning April 28, it said in a statement later Friday.
The regulator stands to make as much as $300 million in equity-appreciation rights that went deep into the money when NYCB's stock surged after the deal for Signature was announced.
First Citizens agreed to buy SVB Financial Group's Silicon Valley Bank after a run on deposits wiped out the company in the biggest U.S. bank failure in more than a decade. The acquisition helped tamp down some of the turmoil that had engulfed the banking industry, with shares of regional lenders paring some of their steep declines earlier this month.
Adding SVB transforms First Citizens into one of the top 15 U.S. banks. Under the terms of the
—With assistance from Ben Bain
