20 banks that are sitting on huge potential securities losses—as was SVB

SVB Financial Group faced a perfect storm, but there are plenty of other banks that would face big losses if they were forced to dump securities to raise cash

Silicon Valley Bank has failed following a run on deposits, after its parent company’s share price crashed a record 60% on Thursday. Trading of SVB Financial Group’s SIVB, -60.41% stock was halted early Friday, after the shares plunged again in premarket trading. Treasury Secretary Janet Yellen said SVB was one of a few banks she was “monitoring very carefully.” Reaction poured in from several analysts who discussed the bank’s liquidity risk. California regulators closed Silicon Valley Bank and handed the wreckage over to the Federal Deposit Insurance Administration later on Friday. Below is a  list of 10 banks  that showed similar red flags to those shown by SVB Financial through the fourth quarter. This time, we will show how much they reported in unrealized losses on securities — an item that played an important role in SVB’s crisis. 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. Some media reports have referred to SVB of Santa Clara, Calif., as a small bank, but it had $212 billion in total assets as of Dec. 31, making it the 17th largest bank in the Russell 3000 Index RUA, -1.70% as of Dec. 31. That makes it the largest U.S. bank failure since Washington Mutual in 2008. One unique aspect of SVB was its decades-long focus on the venture capital industry. The bank’s loan growth had been slowing as interest rates rose. Meanwhile, when announcing its $21 billion dollars in securities sales on Thursday, SVB said it had taken the action not only to lower its interest-rate risk, but because “client cash burn has remained elevated and increased further in February, resulting in lower deposits than forecasted.” SVB estimated it would book a $1.8 billion loss on the securities sale and said it would raise $2.25 billion in capital through two offerings of new shares and a convertible bond offering. That offering wasn’t completed. So this appears to be an example of what can go wrong with a bank focused on a particular industry. The combination of a balance sheet heavy with securities and relatively light on loans, in a rising-rate environment in which bond prices have declined and in which depositors specific to that industry are themselves suffering from a decline in cash, led to a liquidity problem. Banks leverage their capital by gathering deposits or borrowing money either to lend the money out or purchase securities. They earn the spread between their average yield on loans and investments and their average cost for funds.The securities investments are held in two buckets: