Does anyone have an opinion on what is going on between Industry Bancshares and the OCC?

Black Tooth Grin said:

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Does anyone have an opinion on what is going on between Industry Bancshares and the OCC?

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The OCC is trying to prove that they're not going to let another SVB type failure happen.
Industry is saying that their examiners never said anything about the bonds until SVB (implicit approval). Their depositors have not abandoned the bank and given the right amount of time/interest rate reduction they will be just fine.

Tons of banks have looked at buying them, but the loss in the bond portfolio would require $400 million or more in capital which doesn't make much sense. Banks want some sort of assistance to offset all or most of that…the government doesn't want to do that.

Sims said:

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cgh1999 said:

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Black Tooth Grin said:

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Does anyone have an opinion on what is going on between Industry Bancshares and the OCC?

---

The OCC is trying to prove that they're not going to let another SVB type failure.
Industry is saying that their examiners never said anything about the bonds until SVB (implicit approval). Their depositors have not abandoned the bank and given the right amount of time/interest rate reduction they will be just fine.

Tons have banks have looked at buying them, but the loss in the bond portfolio would require $400 million or more in capital which doesn't make much sense. Banks want some sort of assistance to offset all or most of that…the government doesn't want to do that.

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To be fair to the OCC (who for the most part doesn't deserve the benefit of the doubt), interest rates rose so quickly that those bonds could have easily gone from fine to crap in between exams.

When I used to run IRR scenarios, I'm not sure I ever looked at a +400bps scenario much less a 500.

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I agree. It was still a terrible investment decision, but I don't know anyone who saw this coming- or even thought it could happen

cgh1999 said:

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Sims said:

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cgh1999 said:

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Black Tooth Grin said:

---

Does anyone have an opinion on what is going on between Industry Bancshares and the OCC?

---

The OCC is trying to prove that they're not going to let another SVB type failure.
Industry is saying that their examiners never said anything about the bonds until SVB (implicit approval). Their depositors have not abandoned the bank and given the right amount of time/interest rate reduction they will be just fine.

Tons have banks have looked at buying them, but the loss in the bond portfolio would require $400 million or more in capital which doesn't make much sense. Banks want some sort of assistance to offset all or most of that…the government doesn't want to do that.

---

To be fair to the OCC (who for the most part doesn't deserve the benefit of the doubt), interest rates rose so quickly that those bonds could have easily gone from fine to crap in between exams.

When I used to run IRR scenarios, I'm not sure I ever looked at a +400bps scenario much less a 500.

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I agree. It was still a terrible investment decision, but I don't know anyone who saw this coming- or even thought it could happen

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Is Industry Bancshares the only entity that made this terrible investment?

Black Tooth Grin said:

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cgh1999 said:

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Sims said:

---

cgh1999 said:

---

Black Tooth Grin said:

---

Does anyone have an opinion on what is going on between Industry Bancshares and the OCC?

---

The OCC is trying to prove that they're not going to let another SVB type failure.
Industry is saying that their examiners never said anything about the bonds until SVB (implicit approval). Their depositors have not abandoned the bank and given the right amount of time/interest rate reduction they will be just fine.

Tons have banks have looked at buying them, but the loss in the bond portfolio would require $400 million or more in capital which doesn't make much sense. Banks want some sort of assistance to offset all or most of that…the government doesn't want to do that.

---

To be fair to the OCC (who for the most part doesn't deserve the benefit of the doubt), interest rates rose so quickly that those bonds could have easily gone from fine to crap in between exams.

When I used to run IRR scenarios, I'm not sure I ever looked at a +400bps scenario much less a 500.

---

I agree. It was still a terrible investment decision, but I don't know anyone who saw this coming- or even thought it could happen

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Is Industry Bancshares the only entity that made this terrible investment?

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I would bet it was a very common thing. Putting money in treasuries at face value appears to be the conservative investment and they probably thought they were doing the right thing. That investment has worked for 25+ years. This was an extraordinary circumstance and one of the fastest rising rate environments in US history. It's just a duration mismatch that got them. Lending long fixed rates, borrowing short variable (rising) rates.

Black Tooth Grin said:

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cgh1999 said:

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Sims said:

---

cgh1999 said:

---

Black Tooth Grin said:

---

Does anyone have an opinion on what is going on between Industry Bancshares and the OCC?

---

The OCC is trying to prove that they're not going to let another SVB type failure.
Industry is saying that their examiners never said anything about the bonds until SVB (implicit approval). Their depositors have not abandoned the bank and given the right amount of time/interest rate reduction they will be just fine.

Tons have banks have looked at buying them, but the loss in the bond portfolio would require $400 million or more in capital which doesn't make much sense. Banks want some sort of assistance to offset all or most of that…the government doesn't want to do that.

---

To be fair to the OCC (who for the most part doesn't deserve the benefit of the doubt), interest rates rose so quickly that those bonds could have easily gone from fine to crap in between exams.

When I used to run IRR scenarios, I'm not sure I ever looked at a +400bps scenario much less a 500.

---

I agree. It was still a terrible investment decision, but I don't know anyone who saw this coming- or even thought it could happen

---

Is Industry Bancshares the only entity that made this terrible investment?

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Lots of banks made outsized bets on treasuries trying to get yield. I don't know of any that are the size of Industry ($6B in assets) or that put substantially all of their investments in long dated bonds. Most banks have a more balanced/laddered investment strategy. The returns are better for the long date…but when cost of funds flew past the income from the bonds it becomes a significant liability.