Regional Bank Stock Reactions to Using Held-to-Maturity Securities
William J. Trainor et al.
What the paper says
On March 9, 2023, Silicon Valley Bank’s (SVB) stock fell 60% while customers withdrew $42 billion in deposits in the largest ever bank run. One of the underlying culprits was massive losses in SVB’s long-term treasury holdings, much of which was categorized as held-to-maturity (HTM), a designation that values securities at maturity value instead of market value. SVB was not alone in using HTM securities. The regional banking sector proceeded to drop by 36% while large national banks declined by 14% over the next three months. This study shows that regional and national banks that used HTM were not harmed during 2022 and likely benefited from the higher equity and earnings values they could report. However, after SVB’s collapse, HTM levels were significantly related to banks’ stock decline from March to May 2023 after controlling for market capitalization, price to earnings ratio, and earnings growth. Regional and national banks recovered, respectively, 38% and 25% over the remainder of 2023, but those with higher levels of HTM securities remain discounted relative to their peers.
Evidence weight
Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40
| F · citation impact | 0.50 × 0.4 = 0.20 |
| M · momentum | 0.50 × 0.15 = 0.07 |
| V · venue signal | 0.50 × 0.05 = 0.03 |
| R · text relevance † | 0.50 × 0.4 = 0.20 |
† Text relevance is estimated at 0.50 on the detail page — for your query’s actual relevance score, open this paper from a search result.