Fifth Third, other Greater Cincinnati bank stocks tumble in wake of Silicon Valley Bank collapse

Stock prices of local banks Fifth Third, First Financial and LCNB Bank dropped Monday as the overall financial sector slipped in the wake of collapse of Silicon Valley Bank on Friday.

Fifth Third's shares were trading as low as $22.11, down more than 27% in early trading; Downtown-based First Financial Bank's stock dropped to $18.75, down more than 15%; and Lebanon-based LCNB stock shares dropped to $15.60, down nearly 10.1%. All three stocks rebounded by late morning, with Fifth Third investors paring losses in half and First Financial shares moving into positive territory.

While two recovered, all three closed Monday trading lower for the day: Fifth Third shares closed at $26.25, down 13.6%; First Financial at $21.56, down 2.7%; and LCNB at $15.60,

In a statement, Fifth Third said it wasn't vulnerable to the tech industry downturn like Silicon Valley Bank.

"Fifth Third has none of the issues that are impacting some of the technology-focused banks," Fifth Third said. "We are in a position of strength, with a strong balance sheet - capital, liquidity, securities positioning, and granular & stable deposits which have continued to grow."

President Joe Biden attempted to calm market and taxpayer jitters on Monday morning.

"Americans can have confidence that the banking system is safe," Biden said at the White House. "Your deposits will be there when you need them."

Regulators close Silicon Valley Bank after run on deposits

Regulators closed Silicon Valley Bank on Friday following a run on the institution by depositors. The Federal Deposit Insurance Corporation, the regulator that oversees bank deposits and thousands of banks, on Monday also announced it would cover all deposits of the failed bank, including those above $250,000 normally not covered by deposit insurance.

Silicon Valley Bank began its slide into insolvency when its customers, largely technology companies that needed cash as they struggled to get financing, started withdrawing their deposits. The bank had to sell bonds at a loss to cover the withdrawals, leading to the largest failure of a U.S. financial institution since the height of the financial crisis.

Among the bank’s customers are a range of companies from California’s wine industry, where many wineries rely on Silicon Valley Bank for loans, and technology startups devoted to combating climate change. Sunrun, which sells and leases solar energy systems, had less than $80 million of cash deposits with Silicon Valley. Stitchfix, the clothing retail website, disclosed recently that it had a credit line of up to $100 million with Silicon Valley Bank and other lenders.

Treasury Secretary Janet Yellen pointed to rising interest rates, which have been increased by the Federal Reserve to combat inflation, as the core problem for Silicon Valley Bank. Many of its assets, such as bonds or mortgage-backed securities, lost market value as rates climbed.

Fed announces emergency lending program after Silicon Valley Bank collapse

In a separate announcement, the Fed late Sunday announced an expansive emergency lending program that’s intended to prevent a wave of bank runs that would threaten the stability of the banking system and the economy as a whole. Fed officials characterized the program as akin to what central banks have done for decades: Lend freely to the banking system so that customers would be confident that they could access their accounts whenever needed.

The lending facility will allow banks that need to raise cash to pay depositors to borrow that money from the Fed, rather than having to sell Treasurys and other securities to raise the money.

Silicon Valley Bank had been forced to dump some of its Treasurys at at a loss to fund its customers’ withdrawals. Under the Fed’s new program, banks can post those securities as collateral and borrow from the emergency facility.

The Treasury has set aside $25 billion to offset any losses incurred under the Fed’s emergency lending facility. Fed officials said, however, that they do not expect to have to use any of that money, given that the securities posted as collateral have a very low risk of default.

Analysts said the Fed’s program should be enough to calm financial markets on Monday.

“Monday will surely be a stressful day for many in the regional banking sector, but today’s action dramatically reduces the risk of further contagion,” economists at Jefferies, an investment bank, said in a research note.

Regulators had to rush to close Silicon Valley Bank, a financial institution with more than $200 billion in assets, on Friday when it experienced a traditional run on the bank where depositors rushed to withdraw their funds all at once. It is the second-largest bank failure in U.S. history, behind only the 2008 failure of Washington Mutual.

Silicon Valley Bank had 17 branches in California and Massachusetts. The main office and all branches of Silicon Valley Bank were slated to reopen on Monday. Regulators also closed New York-based Signature Bank over the weekend. Signature Bank had 40 branches across the country in New York, California, Connecticut, North Carolina and Nevada.

The Associated Press and USA TODAY contributed to this report.

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