March 2023 Bank Commentary

By: RYAN P. JOHNSON, CFA, CFP® - MANAGING DIRECTOR OF INVESTMENTS

Regional bank stocks continued to sell off today on concerns of weakness because of the banks that recently failed, Silicon Valley Bank and Signature Bank. On Sunday the FDIC announced it would make all customers of these two banks whole, even covering deposits in excess of the $250,000 of FDIC insurance. It was also significant, in our opinion, that a new “Bank Term Funding Program” was announced by the Fed that offers one-year loans to banks that values collateral at par. This will allow banks to get loans from the Fed as if the bonds the banks hold are worth more than the current market value. As interest rates rose, bond values declined. This was part of the problem for Silicon Valley Bank, as it had to sell bonds at a loss to raise cash to meet withdrawal demands. Now, instead of being forced into a sale of bonds at a loss, banks could borrow cash from the Fed to help meet withdrawal requests. This is a short-term positive move that should help prevent similar concerns at other financial institutions. As a reminder, FDIC’s standard insurance amount is $250,000 per depositor, per insured bank, for each account ownership category. More details can be found here: https://www.fdic.gov/resources/deposit-insurance/. If you have large bank balances, we suggest you review your positions to ensure you do not have any uninsured deposits. If you have any questions or concerns, we are always available via email at service@mybuckingham.com or by phone at (937) 435-2742 in the Dayton area or (614) 890-6620 in the Columbus area.

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RISKS AND IMPORTANT CONSIDERATIONS
Views and opinions expressed here are for informational and educational purposes only and may change at any time based on market or other conditions or may not come to pass.  This material is not a solicitation to buy or sell securities and should not be considered specific legal, investment, or tax advice. The information provided does not consider the objectives, financial situation, or needs of any specific individual.  All investments carry a degree of risk and there is no certainty that an investment will provide positive performance over any stated period.  Equity investments are subject to company specific and market risks.  Equities may decline in response to adverse company news, industry developments, or economic data.  Fixed income securities are subject to market, credit, and interest rate risks. As interest rates rise, bond prices may fall.  Past performance is no guarantee of future results.