What happened to Silicon Valley Bank in March 2023?
On Mar 10, 2023, California's banking regulator closed Silicon Valley Bank. It appointed the Federal Deposit Insurance Corporation (FDIC), the US agency that insures bank deposits, as receiver.[S6]
A receiver takes control of a failed bank and deals with its assets and debts. The FDIC said the bank had about $209.0 billion in total assets at Dec 31, 2022.[S6]
Two days earlier, the bank's parent had announced a sale of securities and a plan to raise new capital.[S2] Seven days after the closure, the parent filed for Chapter 11 bankruptcy.[S11]
Who was the listed company, and who was the bank?
The company listed on Nasdaq was SVB Financial Group, a holding company. A holding company owns other companies. Silicon Valley Bank was its bank subsidiary.[S3]
The FDIC took over the bank, not the holding company. SVB Financial Group's 8-K of Mar 10 said it was "no longer the parent company of the Bank".[S5]
The holding company had its own funded debt, about $3 billion by its 8-K of Mar 13. Its subsidiaries did not guarantee it.[S9]
What did the 10-K for 2022 show?
SVB Financial Group filed its annual report, the 10-K, on Feb 24, 2023. Read how a 10-K is laid out.[S1]
It split its bond holdings into two groups. Available-for-sale (AFS) securities were carried at fair value, meaning their market value. Held-to-maturity (HTM) securities were carried at amortized cost, roughly what was paid for them.[S1]
The 10-K said HTM securities had "no adjustments for changes in fair value". The balance sheet still showed their fair value in parentheses.[S1]
SVB Financial Group's held-to-maturity securities, Dec 31, 2022
From the balance sheet in the 10-K filed Feb 24, 2023. The fair value is shown in parentheses on the same line.
$ billion
Sources
SVB Financial Group: Annual Report on Form 10-K for 2022 (balance sheet, Note on investment securities, "Uninsured Deposits in U.S. Offices"), filed Feb 24, 2023 [S1]
See the numbers
The investment securities note put the gross unrealized losses on HTM securities at $15.16 billion. An unrealized loss is a drop in value on paper, for securities not yet sold.[S1]
What could a reader have seen in the filings before Mar 10?
These items were on the record before the bank was closed. Each is stated as the filing put it.
- Bond values. The 10-K carried HTM securities at $91.3 billion. Their fair value, shown beside it, was $76.2 billion.[S1]
- Equity. The same balance sheet showed total equity of $16.3 billion at Dec 31, 2022.[S1]
- Uninsured deposits. The 10-K estimated uninsured deposits in US offices at $151.5 billion. Total deposits were $173.1 billion.[S1]
- Deposit trend. Deposits fell by $16.1 billion in 2022. The 10-K linked this mainly to slower fundraising and higher client cash burn.[S1]
- Mid-quarter update. The investor letter of Mar 8 said client cash burn rose further in February, "resulting in lower deposits than forecasted".[S4]
"Uninsured" deposits are deposits above the FDIC's standard insurance amount. A federal rule sets that amount at $250,000.[S18]
What was filed, and when?
Each step below is tied to the filing or order it comes from. Company filings are on the SEC's EDGAR system.
Annual report for 2022 filed[S1]
The 10-K showed $91.3 billion of HTM securities at amortized cost. Their fair value was $76.2 billion. It estimated uninsured deposits in US offices at $151.5 billion.
8-K: securities sold, new shares proposed[S2][S3]
The bank had sold about $21 billion of AFS securities, for an after-tax loss of about $1.8 billion. The parent proposed selling $1.25 billion of common stock and $500 million of convertible preferred shares.
Investor letter filed with the same 8-K[S4]
The letter said the investor General Atlantic had committed $500 million, for a total raise of $2.25 billion. It planned to raise term borrowings from $15 billion to $30 billion.
Bank closed, FDIC named receiver[S6]
The FDIC moved all insured deposits to a new Deposit Insurance National Bank of Santa Clara. It said the amount of uninsured deposits was not yet determined.
8-K: offerings terminated[S5]
The parent reported the closure under Item 1.03, "Bankruptcy or Receivership". It said it had terminated its equity offerings.
Joint statement on all depositors[S7]
The Treasury, Federal Reserve and FDIC announced a systemic risk exception, so that all depositors would be protected. They said shareholders and certain unsecured debtholders would not be protected.
Deposits moved to a bridge bank[S8]
The FDIC transferred all deposits, insured and uninsured, to Silicon Valley Bridge Bank, N.A. A bridge bank is a temporary national bank run by a board the FDIC appoints.
8-K: restructuring committee formed[S9]
The parent's board named five independent directors to a restructuring committee. It was to look at options for the remaining businesses and the holding company's debt.
8-K: details of the securities sale[S10]
The parent said the AFS securities sold on Mar 8 had a book value of about $23.97 billion. Net proceeds were about $21.45 billion. The buyer was Goldman Sachs & Co. LLC.
Chapter 11 petition and Nasdaq notice[S11]
The parent filed for Chapter 11 in the Southern District of New York, Case No. 23-10367. Nasdaq said trading, halted on Mar 10, would be suspended on Mar 28.
FDIC sells the bridge bank's deposits and loans[S12]
First-Citizens Bank & Trust Company agreed to take on all deposits and loans of the bridge bank. The FDIC estimated the failure's cost to its Deposit Insurance Fund at about $20 billion.
Federal Reserve publishes its review[S13]
The review said deposit outflows were over $40 billion on Mar 9. It said management expected more than $100 billion more on Mar 10.
Late-filing notice for the first-quarter 10-Q[S14]
The parent said it had lost access to the bank's records and finance staff. It said it would file 8-Ks with its bankruptcy court reports instead of 10-Qs.
Court confirms the Chapter 11 plan[S15]
The bankruptcy court confirmed the plan, as the parent's 8-K of Aug 23, 2024 reported. Remaining assets were to go to a liquidating trust or stay with a reorganized company.
Chapter 11 plan takes effect[S16]
The 8-K of Nov 8, 2024 said claims and interests were satisfied or canceled under the plan. Holders of common stock received no distributions.
Form 15 filed[S17]
SVB Financial Group filed Form 15. It is the notice that ends a company's SEC registration or suspends its duty to file reports.
Why did the parent say it sold the securities?
The investor letter of Mar 8 said the sale would let the bank reinvest in shorter-term assets. It expected interest rates to stay higher.[S4]
The letter put the gain at about $450 million a year in after-tax net interest income. Net interest income is what a bank earns on loans and securities, minus what it pays on deposits and borrowings.[S4]
These were the company's own statements and expectations at the time, not later results.[S4]
What did the Federal Reserve's review say?
The Federal Reserve's review was published on Apr 28, 2023. Its cover letter said senior leadership "failed to manage basic interest rate and liquidity risk".[S13]
The review said the March 8 announcements came during heightened uncertainty for the technology sector. It described a run by depositors on March 9.[S13]
It also put about 94% of the parent's total deposits as uninsured at the end of 2022. The cover letter said Federal Reserve supervisors did not take forceful enough action.[S13]
Where do these items appear in filings?
Each topic in this case sits in a standard place in a bank holding company's filings.
- HTM bonds at fair value. In parentheses on the balance sheet line, and in the 10-K's investment securities note.[S1]
- Uninsured deposits. In the deposits discussion of the 10-K, under its own heading.[S1]
- Major events. In an 8-K, by item number: 1.03 for bankruptcy or receivership, 2.01 for a completed asset sale.[S5][S10]
- A late report. In Form 12b-25, filed when a 10-Q or 10-K cannot be filed on time.[S14]
What does this case file leave out?
It tells what each filing and order said, and when. It does not judge the bank, its management, its regulators or the people named in the documents.
It does not cover court cases other than the parent's Chapter 11 case. It also does not cover First-Citizens Bank & Trust Company's business after it took over the deposits and loans.