Realcent.org

The sudden collapse of Silicon Valley Bank has thousands of tech startups wondering what happens now to their millions of dollars in deposits, money market investments and outstanding loans.

Most importantly, they're trying to figure how to pay their employees.

"The number one question is, 'How do you make payroll in the next couple days,'" said Ryan Gilbert, founder of venture firm Launchpad Capital. "No one has the answer."
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However, unlike a typical brick-and-mortar bank — Chase, Bank of America or Wells Fargo — SVB is designed to serve businesses, with over half its loans to venture funds and private equity firms and 9% to early and growth-stage companies. Clients that turn to SVB for loans also tend to store their deposits with the bank.

The Federal Deposit Insurance Corporation, which became the receiver of SVB, insures $250,000 of deposits per client. Because SVB serves mostly businesses, those limits don't mean much. As of December, roughly 95% of SVB's deposits were uninsured, according to filings with the SEC.

But the process is much more convoluted for uninsured depositors. They'll receive a dividend within a week covering an undetermined amount of their money and a "receivership certificate for the remaining amount of their uninsured funds."

"As the FDIC sells the assets of Silicon Valley Bank, future dividend payments may be made to uninsured depositors," the regulator said. Typically, the FDIC would put the assets and liabilities in the hands of another bank, but in this case it created a separate institution, the Deposit Insurance National Bank of Santa Clara (DINB), to take care of insured deposits.

Clients with uninsured funds — anything over $250,000 — don't know what to do. Gilbert said he's advising portfolio companies individually, instead of sending out a mass email, because every situation is different. He said the universal concern is meeting payroll for March 15.

Gilbert is also a limited partner in over 50 venture funds. On Thursday, he received several messages from firms regarding capital calls, or the money that investors in the funds send in as transactions take place.
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One founder, who asked to remain anonymous, told CNBC that everyone is scrambling. He said he's spoken with more than 30 other founders, and talked to a finance chief from a billion-dollar startup who has tried to move more than $45 million out of SVB to no avail. Another company with 250 employees told him that SVB has "all our cash."
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Circle’s USDC, the second-largest stablecoin, with $43 billion market capitalization, held an undisclosed part of its $9.8 billion cash reserves at failed Silicon Valley Bank.
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thecrazyone wrote:Another reason to buy gold!

ScrapMetal wrote:... my understanding is that banking institutions are sitting on billions of dollars in debt (loans) at very low interest rates, while the Feds keep raising the prime, and making those loans unsalable and almost worthless. ...

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Below that is a screen of U.S. banks with at least $10 billion in total assets, showing those that appeared to have the greatest exposure to unrealized securities losses, as a percentage of total capital, as of Dec. 31.
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On the regulatory call reports, AOCI is added to regulatory capital. Since SVB’s AOCI was negative (because of its unrealized losses on AFS securities) as of Dec. 31, it lowered the company’s total equity capital. So a fair way to gauge the negative AOCI to the bank’s total equity capital would be to divide the negative AOCI by total equity capital less AOCI — effectively adding the unrealized losses back to total equity capital for the calculation.

Getting back to our list of 10 banks that raised similar red margin flags to those of SVB, here’s the same group, in the same order, showing negative AOCI as a percentage of total equity capital as of Dec. 31. We have added SVB to the bottom of the list. The data was provided by FactSet:

Bank Ticker City AOCI ($mil) Total equity capital ($mil) AOCI/ TEC – AOCI Total assets ($mil)
Customers Bancorp Inc. CUBI, -13.11% West Reading, Pa. -$163 $1,403 -10.4% $20,896
First Republic Bank FRC, -14.84% San Francisco -$331 $17,446 -1.9% $213,358
Sandy Spring Bancorp Inc. SASR, -2.91% Olney, Md. -$132 $1,484 -8.2% $13,833
New York Community Bancorp Inc. NYCB, -5.99% Hicksville, N.Y. -$620 $8,824 -6.6% $90,616
First Foundation Inc. FFWM, -9.11% Dallas -$12 $1,134 -1.0% $13,014
Ally Financial Inc. ALLY, -5.70% Detroit -$4,059 $12,859 -24.0% $191,826
Dime Community Bancshares Inc. DCOM, -2.81% Hauppauge, N.Y. -$94 $1,170 -7.5% $13,228
Pacific Premier Bancorp Inc. PPBI, -1.95% Irvine, Calif. -$265 $2,798 -8.7% $21,729
Prosperity Bancshare Inc. PB, -4.46% Houston -$3 $6,699 -0.1% $37,751
Columbia Financial, Inc. CLBK, -1.78% Fair Lawn, N.J. -$179 $1,054 -14.5% $10,408
SVB Financial Group SIVB, -60.41% Santa Clara, Calif. -$1,911 $16,295 -10.5% $211,793
Source: FactSet
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ScrapMetal wrote:Far from a financial guru, but my understanding is that banking institutions are sitting on billions of dollars in debt (loans) at very low interest rates, while the Feds keep raising the prime, and making those loans unsalable and almost worthless.
As a saver, my bank (NFCU) offered 5% APR on a CD maximum 1/4 million dollars. My interest went from a few dollars per month to close to $1,000 per month. That now pays my mortgage.
The Feds are going to send us into either a huge recession or a huge depression before they are done screwing around, and Biden spending like a drunken sailor on shore leave.

March 12, 2023

Joint Statement by Treasury, Federal Reserve, and FDIC

Department of the Treasury

Board of Governors of the Federal Reserve System

Federal Deposit Insurance Corporation


Washington, DC -- The following statement was released by Secretary of the Treasury Janet L. Yellen, Federal Reserve Board Chair Jerome H. Powell, and FDIC Chairman Martin J. Gruenberg:

Today we are taking decisive actions to protect the U.S. economy by strengthening public confidence in our banking system. This step will ensure that the U.S. banking system continues to perform its vital roles of protecting deposits and providing access to credit to households and businesses in a manner that promotes strong and sustainable economic growth.

After receiving a recommendation from the boards of the FDIC and the Federal Reserve, and consulting with the President, Secretary Yellen approved actions enabling the FDIC to complete its resolution of Silicon Valley Bank, Santa Clara, California, in a manner that fully protects all depositors. Depositors will have access to all of their money starting Monday, March 13. No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer.

We are also announcing a similar systemic risk exception for Signature Bank, New York, New York, which was closed today by its state chartering authority. All depositors of this institution will be made whole. As with the resolution of Silicon Valley Bank, no losses will be borne by the taxpayer.

Shareholders and certain unsecured debtholders will not be protected. Senior management has also been removed. Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law.

Finally, the Federal Reserve Board on Sunday announced it will make available additional funding to eligible depository institutions to help assure banks have the ability to meet the needs of all their depositors.

The U.S. banking system remains resilient and on a solid foundation, in large part due to reforms that were made after the financial crisis that ensured better safeguards for the banking industry. Those reforms combined with today's actions demonstrate our commitment to take the necessary steps to ensure that depositors' savings remain safe.

pmbug wrote:Bold emphasis is mine:

March 12, 2023

Joint Statement by Treasury, Federal Reserve, and FDIC

Department of the Treasury

Board of Governors of the Federal Reserve System

Federal Deposit Insurance Corporation


Washington, DC -- The following statement was released by Secretary of the Treasury Janet L. Yellen, Federal Reserve Board Chair Jerome H. Powell, and FDIC Chairman Martin J. Gruenberg:

Today we are taking decisive actions to protect the U.S. economy by strengthening public confidence in our banking system. This step will ensure that the U.S. banking system continues to perform its vital roles of protecting deposits and providing access to credit to households and businesses in a manner that promotes strong and sustainable economic growth.

After receiving a recommendation from the boards of the FDIC and the Federal Reserve, and consulting with the President, Secretary Yellen approved actions enabling the FDIC to complete its resolution of Silicon Valley Bank, Santa Clara, California, in a manner that fully protects all depositors. Depositors will have access to all of their money starting Monday, March 13. No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer.

We are also announcing a similar systemic risk exception for Signature Bank, New York, New York, which was closed today by its state chartering authority. All depositors of this institution will be made whole. As with the resolution of Silicon Valley Bank, no losses will be borne by the taxpayer.

Shareholders and certain unsecured debtholders will not be protected. Senior management has also been removed. Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law.

Finally, the Federal Reserve Board on Sunday announced it will make available additional funding to eligible depository institutions to help assure banks have the ability to meet the needs of all their depositors.

The U.S. banking system remains resilient and on a solid foundation, in large part due to reforms that were made after the financial crisis that ensured better safeguards for the banking industry. Those reforms combined with today's actions demonstrate our commitment to take the necessary steps to ensure that depositors' savings remain safe.

https://www.federalreserve.gov/newsevents/pressreleases/monetary20230312b.htm

The Fed has essentially announced that they are going to backstop 100% of depositors across the entire banking system. This is how fragile the banking confidence game has become.

ScrapMetal wrote:Far from a financial guru, but my understanding is that banking institutions are sitting on billions of dollars in debt (loans) at very low interest rates, while the Feds keep raising the prime, and making those loans unsalable and almost worthless.
As a saver, my bank (NFCU) offered 5% APR on a CD maximum 1/4 million dollars. My interest went from a few dollars per month to close to $1,000 per month. That now pays my mortgage.
The Feds are going to send us into either a huge recession or a huge depression before they are done screwing around, and Biden spending like a drunken sailor on shore leave.

Recyclersteve wrote:Does anyone want to talk about how to play this in the stock mkt? If not, I won’t waste a lot of time posting about it.