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1/29/25, 2:00 PM

Regulators take over Silicon Valley Bank, citing poor 'liquidity and insolvency' | American Banker

As of the fourth quarter of 2022, deposits that were under $250,000 accounted for just 2.7% of the company's total deposits, Cassidy wrote.

Silicon Valley Bank had received a glut of deposits during the pandemic-era tech boom, when interest rates were still low, and had invested much of that money in low-yielding securities. When interest rates rose sharply, the value of the securities fell, and the bank accumulated unrealized losses on them.

Back in January, SVB Financial CEO Greg Becker suggested that the bank had turned a corner.

"Last quarter, there was more uncertainty," he said during the company's fourth-quarter earnings call . "Even if we're in this prolonged period of time for longer or even a little bit deeper, we know we're going to weather that ne."

But late on Wednesday, the bank said that it had sold $21 billion in securities that were marked as "available for sale" at a $1.8 billion loss, and that it was making downward revisions to its outlook for deposits, net interest income, net interest margin and expenses.

Simultaneously, the bank said it was embarking on a $2.25 billion capital raise. Though it did announce a $500 million commitment from the investment fund General Atlantic, the bank had not secured the full $2.25 billion by the time of its announcement on Wednesday.

Casey Haire, an analyst at Jefferies who covers SVB Financial, said the company made "a colossal mistake" by not raising capital Wednesday.

"They should have raised equity right then and there Wednesday afternoon. They didn't. They had already sold the securities. They waited until the next day and, worse yet, waited until the market opened to have an underwriter call at 10 a.m.," Haire said.

"I'm shocked. This did not have to happen. Had they raised equity on Wednesday night, this never would have happened," he added.

https://www.americanbanker.com/news/regulators-take-over-silicon-valley-bank-citing-poor-liquidity-and-insolvency

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