Item 1.01. Entry into a Material Definitive Agreement.
Effective March 27, 2023 (the “Acquisition Date”), First-Citizens Bank & Trust Company (“FCB”), a North Carolina chartered commercial bank and direct, wholly owned subsidiary of BancShares, assumed all customer deposits and certain other liabilities, and acquired substantially all loans and certain other assets, of Silicon Valley Bridge Bank, N.A. (“Silicon Valley Bridge Bank”), as successor to Silicon Valley Bank (the “Failed Bank”), from the Federal Deposit Insurance Corporation (the “FDIC”), as receiver for Silicon Valley Bridge Bank (the “Acquisition”), pursuant to the terms of a purchase and assumption agreement entered into by FCB and the FDIC on March 27, 2023 (the “Purchase Agreement”).
Under the terms of the Purchase Agreement, FCB acquired approximately $110.1 billion in assets, including approximately $72.1 billion in loans held by Silicon Valley Bridge Bank and approximately $2.7 billion of other assets. FCB also assumed approximately $59.0 billion in liabilities, including approximately $56.5 billion in customer deposits. The deposits were acquired without a premium and the assets were acquired at a discount of approximately $16.45 billion, subject to customary adjustments. The Purchase Agreement expressly excludes (i) any obligation for FCB to purchase (a) qualified financial contracts or any other derivative instruments to the extent FCB has not acquired the underlying assets or assumed the underlying liability, (b) cryptocurrency assets or any assets backed by cryptocurrency, (c) SPD Silicon Valley Bank Co., Ltd., the China joint venture, (d) the Cayman Islands branch, (e) the German, Canadian, and Hong Kong branches, for which FCB will receive an option to purchase, and (ii) any obligation for FCB to assume (a) liabilities of any acquired subsidiaries not in the ordinary course of business and not reflected, or reserved for, on the Failed Bank’s balance sheet as of March 17, 2023 or (b) deposits denominated in cryptocurrency. Silicon Valley Bridge Bank owns certain bank premises and leases certain bank premises, for which FCB will receive an option to purchase or an option to lease, respectively. No assets were acquired or liabilities assumed from the Failed Bank’s former parent company, SVB Financial Group. The terms of the Purchase Agreement provide for the FDIC to indemnify FCB against, among other things, claims based on the rights of any current or former stockholders, creditors, directors, officers, employees, or agents of the Failed Bank, and claims based on any action or inaction of the Failed Bank or its directors, officers, employees, or agents. The foregoing summary of the Purchase Agreement is not complete and is qualified in its entirety by reference to the full text of the agreement and certain exhibits attached thereto, a copy of which is attached as Exhibit 2.1 to this Current Report on Form 8-K (this “Report”) and incorporated by reference herein.
In connection with the Acquisition, as initial payment under the Purchase Agreement, FCB issued a five-year $35.0 billion note to the FDIC (the “Purchase Money Note”). It is anticipated that the Purchase Money Note will be secured by (i) all loans (other than certain consumer loans and related collateral) and certain real estate and bank premises acquired by FCB from the FDIC, (ii) certain other assets related to the foregoing, including specified rights under the Purchase Agreement and Shared-Loss Agreement (as defined below), and (iii) proceeds of the foregoing. Interest will accrue on the outstanding principal balance of the Purchase Money Note at a fixed rate of 3.50% per annum, and will be computed on the basis of a 360 day year for actual days elapsed and payable monthly in arrears. FCB may prepay the principal of the Purchase Money Note at any time, without premium or penalty, upon notice to the FDIC. FCB will be required to prepay the principal of the Purchase Money Note in an amount equal to all collections and other proceeds received in respect of the Purchase Money Note collateral. The foregoing summary of the Purchase Money Note is not complete and is qualified in its entirety by reference to the full text of the Purchase Money Note, a copy of which is attached as Exhibit 4.1 to this Report and incorporated by reference herein.
FCB and the FDIC also entered into a binding term sheet pursuant to which the FDIC is providing a five-year, $70 billion line of credit to FCB (the “Credit Facility”). During the two-year period following the Acquisition (the “Availability Period”), FCB may draw on the Credit Facility to support liquidity, including for deposit withdrawal or runoff and to fund the unfunded commercial lending commitments acquired pursuant to the Acquisition (the “Unfunded Commitments”). The Credit Facility is secured by the commercial loans and other extensions of commercial credit acquired pursuant to the Acquisition, including Unfunded Commitments subsequently funded by FCB (collectively, the “Assumed Commercial Loans”). FCB may prepay