Banking regulators shut down Silicon Valley Bank on Friday morning in a stunningly swift collapse of a financial institution heavily entwined in startup ecosystems across the U.S., including Central Florida.
It's the second-biggest bank failure in U.S. history, just behind Washington Mutual's collapse in 2008. The dramatic seizure is expected to have serious repercussions in the tech sector , including whether companies who bank with SVB will be able to make upcoming payrolls.
Santa Clara-based SVB, owned by SVB Financial Group, which traded on Nasdaq exchange until Friday morning, had $209 billion in total assets and about $175 billion in total deposits at the end of the year. The bank was the 18th biggest bank based on total assets in the country.
The FDIC has created the Deposit Insurance National Bank of Santa Clara (DINB) as receiver. Insured depositors, holding deposits up to $250,000, will have access to their insured deposits no later than Monday morning, the FDIC said in a statement. Uninsured depositors will get receivership certificates for the remaining amount of their uninsured deposits. As the FDIC sells Silicon Valley Bank’s assets, future payments may be made to uninsured depositors.
After the company's stock continued to plunge Thursday and startups pulled more deposits from the bank, a potential deal arranged by Goldman Sachs to sell shares at $95 to raise $2.25 billion fell apart. That led SVB execs to frantically search for a buyer, a futile attempt that ended when the California Department of Financial Protection and Innovation stepped in and closed the bank. The FDIC then took over.
The bank's main office and all 17 branches in California and Massachusetts will reopen Monday as DINB, maintaining Silicon Valley Bank’s normal business hours. Banking activities, including online banking and other services, will resume no later than Monday as DINB.
Silicon Valley Bank official checks will continue to clear.
While Silicon Valley Bank did not operate branches in Central Florida, 12 local companies borrowed Paycheck Protection Program loans from the bank in 2020 and 2021. That included Orlando-based autonomous vehicle technology company Luminar Technologies Inc. (Nasdaq: LAZR), though the company paid back the $7.8 million loan in 2020, according to a U.S. Securities and Exchange Commission filing.
In addition, Cape Canaveral-based aerospace tourism startup Space Perspective Inc. in May announced it took on an undisclosed amount of debt financing from Silicon Valley Bank. Space Perspective executives could not be reached for comment by press time.
The bank was founded in 1983 and went public in 1988. CEO Greg Becker has led the institution, which reported 8,553 full time employees at the end of 2022, since 2011.
Shares of First Republic Corp., a Northern California-based bank that also serves the Bay Area startup ecosystem, were down 20% Friday to $76.05, well of its 52-week high of $174.21.
Treasury Secretary Janet Yellen, speaking at a congressional hearing Friday, acknowledged the collapse and said she was monitoring “a few” banks, according to Bloomberg.
“When banks experience financial losses, it is and should be a matter of concern,” she said.
SVB is the first FDIC-insured institution to fail since October 2020. See the FDIC's list of failures here.
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