Local banks say no need to worry after historic collapse of Silicon Valley Bank

March 18, 2023 | 12:09 am

Updated March 17, 2023 | 11:38 pm

Local community banks are assuring their customers there’s nothing to worry about after the recent historic failures of Silicon Valley Bank and Signature Bank.

Silicon Valley’s was the second-largest bank collapse in the nation’s history, while Signature’s became the third just days later.

SVB’s deposits and assets had tripled between the end of 2019 and middle of 2022 thanks to tech growth, and assets peaked around $220 billion in March 2022. But interest rate inflation, poor risk management, and fallouts in the crypto sector led to a sudden and monumental collapse last week. Signature Bank suffered a similar fate.

Area bank officials said community banks operate on a different model and are unaffected by the issues that plagued SVB and Signature.

Suzell LeGrand, Executive Vice President/Chief Marketing Director at First United Bank and Trust Company, said First United has operated a “stable and secure banking model” since its inception. 

“While SVB and Signature grew rapidly over the last several years through focus primarily on venture capital, tech, and crypto-currency deposit relationships, First United Bank operates under a community bank model, founded on conservative growth,” LeGrand said. “First United Bank has no exposure to venture capital, tech or crypto-currency customers. … First United Bank has ample liquidity sources that would not require our bank to sell investments to raise liquidity.”

Jacob Reid, Independence Bank President, similarly addressed SVB’s heavy deposit concentration in the crypto/AI segment, saying community banks don’t operate in that way.

“Looking at community banks, specifically in the Midwest, there are no such deposit concentrations. Community bank deposits are very diverse across multiple markets and industries,” Reid said. “Therefore, there won’t be the same boom-or-bust cycle in the community bank sector that you saw with these two very unique banks.”

LeGrand said that the banking system as a whole is “very stable, conservative, and extremely well-capitalized.”

“There is nothing to indicate that failure at these banks, due primarily to their riskier business models, will replay at other banks,” she said, also reminding customers that each depositor is insured to at least $250,000 by the Federal Deposit Insurance Corporation (FDIC).

Any customers with questions or concerns should contact their bank for more information.

March 18, 2023 | 12:09 am

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