Silicon Valley Bank in Santa Clara, California failed on Friday. Over the weekend, New York City-based Signature Bank also failed. Both were banks with unique niches: venture capital and cryptocurrency. And they were both banks that depended upon hot money (e.g. brokered deposits, non-FDIC insured deposits, non-depository funding, etc. – 93% of Silicon Valley Bank’s deposits were over the $250,000 limit as of 12/31/22!), as opposed to core deposits, meaning they were more susceptible to liquidity concerns. One way to illustrate their lack of core deposit focus would be to compare branches to assets. Silicon Valley Bank had over $200 billion in assets with only 17 branches. (By comparison, Waukesha State Bank has about $1.5 billion in assets, and we have 14 branches.) Rapidly rising interest rates, after a decade of ZIRP (interest rates that were effectively at 0%), are putting stress on the liquidity of all banks, especially those that do not fund themselves with core deposits.
What does this mean for Waukesha State Bank?
- We focus on funding ourselves with core deposits.
- We are well capitalized and have good liquidity.
- The FDIC insurance fund is well funded.
- In the aftermath of the 2008 recession, the FDIC guaranteed all transaction accounts without limit for all banks. This program, called the Transaction Account Guarantee program, ran through 2012. According to the Wall Street Journal, the FDIC is now covering all the deposits of both Silicon Valley Bank and Signature Bank. Of course, that doesn’t mean uninsured depositors will always be ok. Keeping one’s funds at a strong bank, like Waukesha State Bank, is always a good idea.
- Waukesha State Bank has a long history of safety and soundness. We didn’t take bailout funds and were not subject to any regulatory orders during the 2008 Recession. We didn’t cut back on our charitable giving in 2008 or stop giving salary increases. There are not many banks that can say the same.
- We remain committed to doing what we have always done – serving our community as a community bank.
Not all bank failures are representative of the health of the banking industry as a whole. Rest assured that you bank with a very strong and stable financial institution.