(Bloomberg) -- The Federal Deposit Insurance Corp. stuck to its guns and didn’t offer bailouts to keep two lenders from collapsing. Instead, it struck deals that included millions of dollars of sweeteners for the acquiring banks that sent their stocks soaring.

In the case of Silicon Valley Bank, which collapsed earlier this month, the headline number showed the FDIC offering First Citizens BancShares Inc. a hefty discount to buy the lender. But the agency also tossed in a $70 billion credit line and agreed to cover First Citizens’ losses in excess of $5 billion on commercial loans for the next five years, and extended $35 billion of borrowings to the bank in the form of a note. 

When New York Community Bancorp Inc. took over Signature Bank’s deposits and some of its loans after the bank was seized by regulators, it scored a sweetheart deal, Wedbush analyst David Chiaverini said. The assets were “priced to move quickly,” he said, pointing to a 20% earning-per-share boost from the deal. What’s more, the FDIC excluded some of the more problematic deposits from the transaction. The stock gained 32% after the plan was announced.

The favorable terms underscore the urgency with which regulators sought to resolve two of the largest ever US bank failures, part of an effort to prevent the crisis spreading to other lenders. The deals also avoid the appearance of bailing out the failed lenders and their top managers, a sore point that drew heavy criticism after the 2008 financial crisis. 

“The main risks for a failed bank acquirer are being able to operate the failed bank’s assets profitably, and paying too much for the loan portfolio,” said Gregory Germain, a law professor at Syracuse University. “The loan portfolio was purchased at a substantial discount and with a government backstop, mitigating the risks to First Citizens. The stock market has recognized this as a very good deal for First Citizens.”

First Citizens didn’t immediately respond to a request for comment. The stock jumped 54% Monday and shares traded up 2.54% at 11:16 a.m. in New York Tuesday after touching an intraday record. 

The $70 billion credit line was aimed at providing First Citizens with liquidity as it integrates SVB over the next two years, according to a regulatory filing Monday. It’s unclear if any other bank has received such terms in previous transactions for failed lenders. New York Community Bancorp didn’t mention an FDIC line of credit as it took over Signature’s deposits.

“This is not a typical deal term for an acquirer in these transactions to buy a failed bank,” Jerry Comizio, an American University professor and former Treasury Department official, said in an email. “It really highlights the FDIC’s desire to resolve this situation by providing a potential liquidity hedge against SVB’s high level of uninsured deposits.”

The government has taken extraordinary measures to shore up confidence in the financial system following their collapse, introducing a new backstop for banks that Federal Reserve officials said was big enough to protect the entire nation’s deposits.

Authorities have sought to keep federal involvement in bank rescues to a minimum to avoid getting tagged with a bailout. A spokesman for the FDIC said the transaction for SVB was done at the least cost to the deposit insurance fund, which was set up to provide deposit insurance and resolve failed banks. SVB shareholders and bondholders haven’t received any money from the agreement, according to the spokesman.

“If First Citizens — or any bank for that matter — did not come forward, we would have had to liquidate the bank, which would have been more costly to the insurance fund than the agreement with First Citizens,” the FDIC spokesman said in a statement.

Deposit Insurance

Dealing with the collapse of SVB and Signature Bank earlier this month hasn’t been entirely without a cost. The deposit insurance fund will suffer an estimated $20 billion hit linked to SVB and a $2.5 billion blow from Signature, according to the agency. 

While selling a failed bank typically requires concessions to make it palatable to a buyer, the FDIC will get a piece of some gains attached to the deal. With each, it got equity appreciation rights. For First Citizens, they are worth as much as $500 million and were already in the money as of Monday morning after the bank soared 53%, the most in more than 30 years following news of the deal.

The FDIC reached a similar agreement with NYCB worth as much as $300 million that would likewise turn a profit if the regulator exercised those rights as of Monday.

First Citizens also issued a $35 billion note to the agency as payment for the transaction. The $70 billion credit line is for five years, with the agency set to accrue interest equal to the Secured Overnight Financing Rate plus 25 basis points. 

The transaction is a “101% boost” to First Citizens’ balance sheet, “with an immediate positive benefit to tangible capital and earnings in exchange for collecting the SVB loans and integrating new deposit customers for the FDIC,” Janney Montgomery Scott LLC analysts Christopher Marinac and Feddie Strickland said in a research note.

--With assistance from Katanga Johnson and Paige Smith.

(Updates with share price in sixth paragraph. An earlier version of the story corrected a company name in the final quote.)

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