SVB, other bank 401(k) plans taking big hit on company stock portfolios

The collapse of Silicon Valley Bank and fears of contagion that are causing stock prices at other midsized and smaller banks to tumble Monday are taking a toll on those companies' 401(k) plan participants.

For instance, the SVB Financial Group 401(k) and Employee Stock Ownership plan held nearly 19% of its $1.3 billion in assets in company stock as of Dec. 31, 2021, or about $245 million, according its most recently filed Form 5500. The company stock is essentially worthless now after the Federal Deposit Insurance Corp. took over the high-profile venture capital and startup lender on March 10.

SVB's 401(k) plan is not alone in holding company stock. Zions Bancorporation stock is down 36% since March 8. Its 401(k) plan held $415 million in company stock out of a $1.77 billion plan as of Dec. 31, 2021, more than 23% of plan assets.

Several banks have seen precipitous falls in their stock prices over fears of a bank run after SVB fell into receivership. Following a year of equity and bond markets falling in tandem, 401(k) plans are taking an even bigger hit from their company stock funds now.

Company stock allocations have steadily declined over the years, clocking in at 6.2% at the end of 2022, according to the Alight Solutions 401(k) index, down from 30.6% in 1997.

But several banks that have seen their stock plummet in the last week have 401(k) plans with higher exposure. The U.S. Bank 401(k) Savings Plan had about 10% of its $9.7 billion in assets in company stock as of Dec. 31, 2021. The company stock is down nearly 20% since March 8. First Horizon Bank's $1 billion 401(k) plan had over 12% of assets in company stock, according to its latest Form 5500 at year-end 2021. And Charles Schwab has seen its share price sink 30% since March 8, putting a dent in the company stock in its $7.5 billion 401(k) plan that made up 11.6% of plan assets at the end of 2021.