Spent the day discussing Silicon Valley Bank, Silvergate Bank, Signature Bank, among others with our customers, partners and friends.

Estimated reading time: 2 minutes

I don’t see the shutdown of SVB by regulators or the self-liquidation of Silvergate as indicators of widespread contagion but there are some characteristics of troubled banks that we ought to be aware of:

(1) Low loan-to-deposits (inefficient balance sheet management) (my friends at ModernFi can assist here)
(2) Large securities portfolios with % movements in 2022 from AFS to HTM
(3a) Declining profitability trends – especially if driven by mark-to-market impacts of securities
OR
(3b) Continuing steady profitability with LITTLE TO NO mark-to-market impacts running through the P&L
(4) Thin and declining capitalization (Tier 1 Capital Ratios – risk adjusted and otherwise) (capital is king)
(5) Squeezed cash/liquid balances (cash is also king!)

These last 2 are saved for last but are absolutely critical.

If you are running that and need some outside sets of eyes,

if you are on the board of directors of that and interested in an independent view,

if you have or are considering long or short positions on a bank,

if you are a customer of a bank and you are curious whether your bank is at risk,

Reach out this weekend. I have fielded multiple calls all day today and would be happy to give a quick and dirty view of your bank.

—
🔔 Follow Brian on Linkedin: Brian Pillmore

#bank

#svb

#fdic

#alco

#communitybank

#liquidity

#securities

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