Failed Silicon Valley Bank Had $2.6B In CRE Loans On Its Books

financial figures

The fallout around Friday morning's closure of Silicon Valley Bank — one of the largest bank failures in history — isn’t limited to the tech sector. The institution, a lender favored by startups that went under abruptly after a surprise wave of deposit outflows this week, has approximately $2.6B of CRE loans on its books, according to its latest 10-K filing with the Securities and Exchange Commission.

This includes an investment securities portfolio containing $1.3B in qualified affordable housing projects and $14.4B in agency-issued commercial mortgage-backed securities. SVB held nonmarketable and other equity securities worth $2.7B as of Dec. 31. In 2021, Silicon Valley Bank completed its $900M acquisition of Boston Private, a wealth management, trust and banking services provider with significant real estate investments, as part of its overarching mission to target innovation sectors including technology, life sciences and healthcare, and venture capital.

The bank’s downward spiral began when it filed a surprise announcement Wednesday of a $1.8B loss following a deposit outflow, and trading was paused for the bank’s stock after it fell 60% Thursday. Friday morning, SVB was closed by the California Department of Financial Protection and Innovation, which had been appointed to protect depositors by the Federal Deposit Insurance Corp. An FDIC release noted that “all insured depositors will have full access to their insured deposits no later than Monday.”

Earlier this week, the bank had tried to raise capital, announcing it had sold $21B in securities and looked to sell $1B in stock, which failed. SVB now seeks to sell itself.

Both of these moves shook confidence in the bank, and started a ripple effect across the banking and financial sectors.

Venture capitalists have been urged to avoid exposure to the bank, and institutions involved in tech and cryptocurrency, including Silvergate, Signature Bank and First Republic, have also seen their stock market value take a hit this week. Large financial institutions including JP Morgan Chase, Bank of America and Goldman Sachs saw their stock prices drop in early Friday morning trading.

Concerns of a bank run have been raised, though many analysts suggest banks are better capitalized and hold less risk than in 2008 and 2009.

“SVB’s institutional challenges reflect a larger and more widespread systemic issue: The banking industry is sitting on a ton of low-yielding assets that, thanks to the last year of rate increases, are now far underwater — and sinking,” Konrad Alt, co-founder of Klaros Group, told CNN. Alt estimated rate increases have “effectively wiped out approximately 28% of all the capital in the banking industry as of the end of 2022.”

SVB operates out of its headquarters in Santa Clara, California, at a 151K SF HQ, and operates 55 regional offices across the United States. In August, it expanded to South Florida with a 9K SF Miami office.

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