Shares of Wilmington-based Live Oak Bank have been on a roller-coaster ride in the past week due to the failure of Silicon Valley Bank and the market’s reaction.
Live Oak’s stock closed on Wednesday last week at $33.28. As news of Silicon Valley Bank’s troubles began impacting the markets late last week, Live Oak’s shares fell 8.3% Thursday and another 6.4% Friday, closing the week at $28.55.
On Monday morning, despite federal authorities’ efforts to reassure markets about the banking system's stability, the stocks of many regional and specialty banks began to dive. Live Oak shares at one point were down 39% for the day to $17.31 — a drop of 48% from their closing price five days earlier.
However, Live Oak’s shares recovered all their losses Monday to close up 2% for the day at $29.13. The stock price had swung back down by Tuesday afternoon, dropping by 15%.
Live Oak is continuing to conduct business as usual, spokeswoman Claire Parker said Tuesday afternoon in an email.
“Safety and soundness have always been our priority and because of that, we are in a good position to continue serving our customers as we always have,” she said. “In the last few days, we have been running business as usual, serving our customers and welcoming new ones. We know the news stories over the past few days have been a cause of concern for banking customers throughout the U.S., and our teams are standing by to answer any questions customers have to ensure them that their funds are safe, our capital ratios are healthy – as is our balance sheet – and that we have a healthy foundation to deliver on our mission to serve American small business owners.”
The action taken by Treasury, the Fed and the FDIC to protect depositors was necessary, according to Mouhcine Guettabi, a member of the University of North Carolina Wilmington’s economics faculty and regional economist.
“I think it is important to not just guarantee deposits but to communicate clearly and effectively that the banking system is in solid shape,” he said Monday. “It is clear that there is still a lot of uncertainty right now regarding the unique circumstances surrounding the SVB situation. I do, however, think the guaranteeing of bank deposits should quell the panic. Of course, we are in a fast-moving environment and panics are caused by rumors and fear.”
Both the announced total repayment of depositors’ funds and the fact those repayments will not come from taxpayers’ pockets are important to preventing further impact on the banking industry, said Peter Gwaltney, president and CEO of the N.C. Bankers Association.
“There is $124.5 billion in the FDIC insurance fund, which is why the FDIC can afford to pay the depositors,” Gwaltney said Monday. “This has nothing to do with taxpayers. It’s all funded through the insurance fund, which is funded by the deposit insurance premiums paid by banks. This will cost the industry but the cost of inaction was significant."
The federal agencies’ announcement Sunday “was important and well-timed,” Gwaltney continued. “I was concerned, going into the weekend. Had the government not done something . . . [Monday] would have been rocky.”
Monday, however, wasn’t exactly smooth. The continued ups and downs of Live Oak and other banks’ shares also affected financial technology firms like nCino, which saw its stock tumble from a high of $26.60 per share last Thursday morning to a low of just under $19.84 24 hours later. By mid-afternoon Tuesday the per-share price had risen slightly, to over $21, but still down 19.4% over the past five trading days. Other fintech companies are seeing similar stock turbulence.
Monday, nCino filed a statement with the U.S. Securities and Exchange Commission of its relationship with and holdings in both failed banks.
“The Company provides cloud-based SaaS services to both SVB and Signature Bank. SVB and Signature Bank collectively contributed less than two percent (2%) of the Company’s total revenues in the third quarter of fiscal year 2023,” the company reported.
nCino has paid close attention to the news of the banks’ failures, nCIno spokeswoman Kathryn Cook said Tuesday.
“nCino has a large and diverse customer base representing financial institutions of all types and sizes around the globe,” she said. “We remain well positioned and focused on serving the financial services industry. In short, it is business as usual over here.”
N.C. Treasurer Dale Folwell lent his voice to those of other government officials seeking to reassure the public. In a statement Monday afternoon, Folwell said, “Over the last few days, N.C. State Banking Commissioner Boskin and I, as chair of the State Banking Commission, have been closely monitoring the situation with Silicon Valley and Signature Banks as well as the 36 banks we regulate at the State Banking Commission.
“The banks we regulate in North Carolina do not have the same number of unsecured deposits and are more diversified than those troubled banks,” the statement continued. “At this time, the abbreviation ‘NC’ stands for ‘no crisis.’”
In his comments Monday, Gwaltney also emphasized the robust health of the banking industry in North Carolina as well as in the country as a whole
“(FDIC Chairman) Martin Gruenberg describes the banking industry as ‘highly capitalized and very liquid,’” Gwaltney said. “We have these outliers with high-velocity, high-volume deposit runoff, caused by rising interest rates that impact the banks’ bond portfolios. It was a perfect storm but has nothing to do with the rest of the industry."
He added, “Ninety-nine percent of the banks in America are rated as highly capitalized by their ratings agencies. We’re stronger than we’ve ever been as an industry. And the FDIC insurance fund is larger, stronger than it’s ever been.”
NOTE: This version of the story updates information on nCino's response to the bank failures.