Insider Weekends: First Insider Purchase at Silicon Valley Bank in Over a Year

Just as we did last week, we decided to go beyond the top five insider purchases and chose to write about a company that we found interesting. Incorporated in March of 1999, SVB Financial Group (SIVB) is both a bank holding company as well as a diversified financial services company. The company’s primary subsidiary is Silicon Valley Bank, through which it offers commercial and private banking services. SVB Financial also has three other divisions: SVB Capital, SVB Private, and SVB Securities, and through these four different businesses, the company is able to offer a variety of services ranging from venture investing to fund management.

Unlike most investment banks, SVB Financial Group (and through it, Silicon Valley Bank) is focused on the “innovation economy” and given its location in the heart of Silicon Valley, primarily lends money to technology and life science companies. It caters its wealth management and private banking towards venture capital professionals, executive leaders, and other high net worth individuals in the area. However, as a downside of focusing on these growth and tech companies, the bursting of the technology bubble last year impacted SVB Financial, and the stock was down over 65% in 2022.

2021 was a strong year for SVB Financial, as they hit a record EPS of $31.25, a return on equity of 17%, and net income of nearly $1.8 billion. Net interest income in 2021 also increased by over 47% YoY and average total assets increased by over 93% YoY as well. On July 1, 2021, SVB Financial completed the acquisition of Boston Private, the parent company of Boston Private Bank & Trust Company (otherwise known as Boston Private Bank). Through this acquisition, SVB Financial was able to expand both its private banking and wealth management businesses, and Boston Private’s performance was also accounted for in SVB Financial’s 2021 financial reports.

Things definitely took a turn for the worse in 2022, although President and CEO Greg Becker still remains confident that despite current volatility, the innovation economy will still outpace other industries, eventually markets will stabilize and clients will resume activities in full force. We don’t like to take management’s words on these types of claims at face value but it was encouraging to see his optimism reflected in Q3 2022 earnings numbers.

SVB Financial delivered a 14% return on equity in Q3 2022 (ended on September 30, 2022) and net interest income grew from $859 million in Q3 2021 to $1.2 billion in Q3 2022, which was slightly higher than the net interest income in the prior quarter. Average total assets increased from $182.6 billion in Q3 2021 to $216 billion in Q3 2022, but did decrease on a sequential quarter basis given that average total assets in Q2 2022 were approximately $218 billion. Average total client funds also decreased QoQ by 4.8%, to $368.3 billion and average deposits decreased by 3.5% to $185.3 billion.

A possible good sign for the future is that SVB Financial chose to decrease their provision for credit losses QoQ by roughly 63% to just $72 million. Q3 2022 net loan charge-offs were just 8 basis points of average total loans and net losses on investment securities decreased from $157 million to $127 million QoQ. SVB Financial also has a price/tangible book value of 1.28, a reasonable valuation that suggests there is room for growth.

However, in their Q3 2022 investor presentation, SVB Financial did warn that average deposits in Q4 2022 would decline to anywhere from $168 billion to $172 billion, given typical year-end PE/VC distributions and the higher interest rate environment. The company also stated that net interest income and net interest margin have peaked in this rising rate cycle, and net interest income would drop to around $1 billion.

This week’s insider purchase came from Kay Matthews, Chairman of the Board of Directors of SVB Financial, and the former Vice Chair (among many other roles throughout his 25 years at the company) of EY Americas. Mr. Matthews was on the board of Coherent Laser, a laser and other electronics manufacturing company, and is currently on the board of VC firm Main Street Capital Corporation.

SVB Financial is a peculiar type of regional bank. Given current market conditions and the possibility of a recession, we’ll hold off on investing in the company at this time. As Mr. Becker said in his shareholder letter, markets will eventually stabilize, though it is unknown when this stabilization will occur. Once we see start to see signs of this stabilization, we may revisit the company to see how it has fared. Until then, we’ll keep an eye on SVB Financial from the sidelines.

Welcome to edition 654 of Insider Weekends. Insider buying increased last week with insiders purchasing $50.39 million of stock compared to $28.15 million in the week prior. Selling decreased to $372.18 million compared to $417.84 million in the week prior.

Sell/Buy Ratio: The insider Sell/Buy ratio is calculated by dividing the total insider sales in a given week by total insider purchases that week. The adjusted ratio for last week dropped to 7.38 . In other words, insiders sold over 7 times as much stock as they purchased. The Sell/Buy ratio this week was favorable compared to the prior week when the ratio stood at 14.84.

Notable Insider Buys:

1. CrowdStrike Holdings, Inc. (CRWD): $94.72

Director Roxanne S. Austin acquired 35,000 shares of this cloud-delivered protection provider, paying $96.19 per share for a total amount of $3.37 million. Ms. Austin increased her stake by 53.50% to 100,419 shares with this purchase.

You can view the list of recent insider transactions for CrowdStrike Holdings, Inc. here.

2. HighPeak Energy, Inc. (HPK): $23.4

Chief Executive Officer Jack Hightower acquired 131,539 shares of this independent oil and natural gas company, paying $22.00 per share for a total amount of $2.89 million. Mr. Hightower increased his stake by 4.74% to 2,906,011 shares with this purchase.

You can view the list of recent insider transactions for HighPeak Energy, Inc. here.

3. The Lovesac Company (LOVE): $26.47

Director Andrew R. Heyer acquired 38,000 shares of this home furnishings company, paying $22.28 per share for a total amount of $846,770. These shares were purchased indirectly through a trust.

You can view the list of recent insider transactions for The Lovesac Company here.

4. CarMax, Inc. (KMX): $65.78

President & CEO William D. Nash acquired 8,220 shares of this retailer of used vehicles, paying $60.98 per share for a total amount of $501,256. Mr. Nash increased his stake by 5.24% to 165,128 shares with this purchase.

You can view the list of recent insider transactions for CarMax, Inc. here.

5. Coinbase Global, Inc. (COIN): $33.26

Director Tobias Lutke acquired 11,012 shares of this cryptoeconomy focused broker, paying $34.62 per share for a total amount of $381,235. These shares were purchased indirectly by 7910240 Canada Inc.

You can view the list of recent insider transactions for Coinbase Global, Inc. here.

6. SVB Financial Group (SIVB): $245.79

Director Kay Matthews acquired 1,000 shares of this regional bank, paying $232.06 per share for a total amount of $232,061. Mr. Matthews increased his stake by 72.78% to 2,374 shares with this purchase.

You can view the list of recent insider transactions for SVB Financial Group here.

You can view the full list of purchases from this Insider Buying page.

Notable Insider Sales:

1. FirstCash Holdings, Inc (FCFS): $89.31

Director Douglas Richard Rippel sold 115,039 shares of this retail pawn stores operator for $88.17, generating $10.14 million from the sale. These shares were sold indirectly by a trust.

You can view the list of recent insider transactions for FirstCash Holdings, Inc here.

2. Commercial Metals Company (CMC): $50.61

Chairman, President & CEO Barbara Smith sold 150,000 shares of this scrap metal recycling company for $48.11, generating $7.22 million from the sale.

You can view the list of recent insider transactions for Commercial Metals Company here.

3. Iridium Communications Inc. (IRDM): $59.99

Shares of this mobile voice and data communications services provider were sold by 3 insiders:

• Chief Executive Officer Matthew J. Desch sold 63,459 shares for $55.06, generating $3.49 million from the sale.
• Director Parker William Rush sold 27,363 shares for $54.00, generating $1.48 million from the sale.
• CAO, Iridium Satellite LLC, Timothy Kapalka sold 3,852 shares for $54.63, generating $210,440 from the sale.

You can view the list of recent insider transactions for Iridium Communications Inc. here.

4. The Progressive Corporation (PGR): $134.61

Shares of this insurance holding company were sold by 4 insiders:

• President and CEO Susan Patricia Griffith sold 26,885 shares for $130.36, generating $3.5 million from the sale.
• Claims President John Jo Murphy sold 4,590 shares for $130.36, generating $598,352 from the sale.
• Personal Lines President Patrick K. Callahan sold 3,644 shares for $130.36, generating $475,032 from the sale.
• Chief Strategy Officer Andrew J. Quigg sold 1,821 shares for $130.36, generating $237,386 from the sale.

You can view the list of recent insider transactions for The Progressive Corporation here.

5. Krystal Biotech, Inc. (KRYS): $82.86

President and CEO Krish S. Krishnan sold 27,108 shares of this biotech company, for $80.27, generating $2.18 million from the sale. 13,650 of these shares were sold indirectly by Mr. Krishnan’s spouse.

You can view the list of recent insider transactions for Krystal Biotech, Inc. here.

You can view the full list of sales from this Insider Sales page.

The list of all insider purchases and sales by management people is only available to InsideArbitrage Premium and Plus members.

Disclaimer: Please do your own due diligence before buying or selling any securities mentioned in this article. We do not warrant the completeness or accuracy of the content or data provided in this article.