The sudden collapse of Silicon Valley Bank and the subsequent failures of Signature and First Republic drew attention to the US regional banking sector as investors and policymakers looked to other lenders that might share the same vulnerabilities. The KBW Landesbank index has fallen by almost 30 percent since the beginning of March.
Federal Reserve Chairman Jay Powell said this week he believes Monday’s sale of First Republic’s loans and assets to JPMorgan Chase “was an important step in drawing a line under this period of severe stress.” adding that deposit outflows after SVB’s demise “have really stabilized now”. But some institutions’ share prices remain depressed.
The term regional bank encompasses a diffuse and diverse group of institutions. They sit in the middle to upper tier of a US banking sector that includes 5,000 lenders and ranges from $3.7 trillion in assets at JPMorgan to tiny, one-branch community banks.
An analysis by the Financial Times looked at publicly traded banks with assets ranging from $40 billion to $400 billion and highlighted those that experienced the largest decline in total returns to shareholders since March 8. We then collected data showing perceived strength, size and… illuminate the business model of each institution.
Although some banks have released updated figures, figures from March 31, the last reporting date, have been used in the chart to ensure consistency on certain issues identified as potential sources of financial stress.
Rapid outflows of deposits, particularly from accounts too large to be covered by the federal insurance system, were the primary reason the Federal Deposit Insurance Corporation closed SVB, Signature and First Republic.
The SVB’s problems were exacerbated by large unrealized losses on securities holdings, which suddenly surfaced when it needed cash to cover deposit outflows. Commercial real estate and lending to this sector are very vulnerable to rapidly rising interest rates.
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Price Change – The percentage drop in the bank’s share price from March 8th, two days before the collapse of SVB, to May 5th. (set of facts)
Price to Book – The ratio compares a bank’s overall market value to what all of its loans, investments and other assets are worth minus its debt. (set of facts)
Uninsured Deposits – The percentage of deposits at each bank above the insured level of $250,000 as of March 31. (FDIC and company reports)
Commercial Real Estate as a Percentage of Total Loans — The percentage of loans to owners of commercial real estate, such as office buildings or shopping malls, as of March 31. CRE is defined differently by different banks and we have for the most part used the figures presented by the banks in their most recent earnings reports. FNB, Old National, Pinnacle Financial Partners and SouthState provide figures for CRE and owner-occupied CRE, which we have summarized in the table. PacWest included CRE and multifamily CRE, most commonly understood as multifamily buildings, which we in turn combined. Cullen/Frost Bankers and First Republic didn’t report numbers, so we provided the latest numbers they filed with the FDIC.
Unrealized Losses – The value, in billions, of the paper losses banks have suffered on their bond portfolios as of March 31st. (FDIC)
Total deposits and change in quarterly deposits as of March 31st. (FDIC)
*First Republic was shut down by the FDIC in early May, with most of its assets and deposits sold to JPMorgan. Silicon Valley Bank and Signature Bank were excluded because they both failed before reporting the March 31 figures.