This is another good example that the initial potential exposure of the Deposit Insurance Fund in a bank failure is almost always far more than the actual exposure. What went from potentially $119 billion exposure is now estimated at $20 billion exposure.
The terms of the sale are a little complicated. First Citizens is getting an implicit discount on SVB's assets by taking on $110 billion in assets and $94 billion in liabilities. It is taking SVB's remaining deposits and a $35 billion promissory note to the FDIC. The FDIC will keep $90 billion in Treasuries in the receivership for disposition. The FDIC will get equity appreciation rights in First Citizens of up to $500 million and there is also a shared loss agreement on SVB's commercial loans.
First Citizens now is one of the largest banks in the US after this acquisition.
Going forward SVB's deposits will only be guaranteed up to the $250k FDIC limit now that First Citizens owns the bank.
Between SVB and Signature Bank, the FDIC's Deposit Insurance Fund has an estimated $22.5 billion exposure now after their sales. Far less than the $157 billion previously expected.