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Trenton’s Banks Remain Secure During Failure of Two National Banks

News Editor

Amidst the fall-out of two large bank failures (one in New York and one in California), community banks overall are flourishing, as Bank of Dade and Citizens Bank and Trust presidents both explained. Throughout March, national media covered the closing of Silicon Valley Bank (SVB, headquartered in Santa Clara, Calif.) and Signature Bank in New York, N.Y.

Simultaneously, the research branch of S&P Global ranked Bank of Dade as the second best-performing community bank in the southeast. The March 22 article, titled “Georgia-based entities take top 2 spots in 2022 Southeast community bank ranking,” is encouraging for customers of community banks.

Looking at 732 banks in the southeast (with under $10 billion in assets in 2022), S&P Global ranked Douglas National Bank in Douglas, Ga. first and Winter Park National Bank in Winter Park, Fla. third. In the same article, S&P also released a national ranking of banks under $3 billion in assets in 2022. Bank of Dade placed 19th out of 3,782 banks across the nation.

Bank of Dade President and CEO Shannon Henry said, “As a community bank, Bank of Dade remains well capitalized and well positioned to continue to serve our customers and community…We take pride in our relationship-based business model focused on building long-term trust with our customers. After all, we live in your community too, and your success is our success.”

Regarding the issue of the bank failures, Citizens President and CEO Chris Powell explained, “You’ll find that your local community bank doesn’t have much in common with the banks that closed in California and New York. These were unconventional banks serving unconventional customers.”

As reported by numerous sources and mentioned on the banks’ websites, SVB catered to venture capitalists, cryptocurrency, and other risky investments. Signature Bank also had clients in the crypto and entrepreneurial world.

Henry added, “Those types of banks operate with a much higher tolerance than community banks. Bank of Dade is not considering digital currency now or in the foreseeable future. We have historically remained very conservative and only purchased ‘Investment Grade’ securities with a low default risk.”

Henry noted that, specifically with SVB, the assets were tied up in investments with longer maturity dates. “In order to make their depositors’ funds available, they had to liquidate those bonds and take a loss. SVB took huge losses and customers panicked, pulling out their money. Once that began, the rumor mills started and the circumstances became much worse. It was not like an average community bank customer pulling out all of their money. SVB had customers attempting to pull out millions of dollars totaling over $40 billion in one day. That is a big difference from Bank of Dade and other community banks in Georgia.”

Powell reported that a vast majority of the deposits at these banks were uninsured because the Federal Deposit Insurance Corporation (FDIC) only covers up to $250,000 per account. However, customers can open additional accounts to have far greater coverage within a single institution.

Henry said, “The FDIC allows for a significant amount of coverage at just one bank. If more coverage is needed, additional accounts would need to be opened at other banks. A lot of people may not understand they have that much insurance coverage available. There are many resources on the FDIC’s website, and there is a calculator that guides you through structuring your accounts.”

Henry explained that FDIC insurance is funded by banks rather than individuals. “FDIC is our main regulator. Banks fund FDIC with fees, based on our asset size.”

Bank of Dade shared several other stats about the FDIC, including:

  • The FDIC insurance fund stood at an all-time high of $124.5 billion as of June 2022.
  • The FDIC has a $100 billion line of credit with the U.S. Treasury, which would, by law, have to be repaid by the banking industry if ever used. The banking industry is well capitalized.
  • Nobody has ever lost a dime of FDIC-insured deposits, including during the Great Depression after the FDIC was formed and during the Great Recession this century.
  • The FDIC recently released fourth-quarter 2022 industry performance numbers, and the news was good for the 147 banks headquartered in Georgia. Loan growth and continued strong credit quality are particularly encouraging signs that Georgia’s economy is holding up in an uncertain environment, and bank performance reflects that.

Powell explained that the federal government decided to cover even the uninsured depositors at riskier banks, which has led to push-back from community banks who don’t anticipate the same treatment.

Bank of Dade shared information from Independent Community Bankers Association (ICBA), Community Bankers Association of Georgia, and Georgia Bankers Association that further explained this issue.

“ICBA and the nation’s community banks denounced statements from Treasury Secretary Janet Yellen that uninsured deposits will be protected only at systemically risky banks, which is a bailout for big banks that rewards mismanagement and risky behavior to the detriment of community banks and the communities they serve.

“Secretary Yellen’s statements that only the largest and riskiest institutions will be bailed out by regulators underscore what ICBA has long said: unlike too-big-to-fail institutions, community banks do not need government bailouts because they operate under a safe, sound, and relationship-based banking model that has withstood economic cycles. Depositors’ funds remain secure in community banks because these institutions are vested in their communities, promoting financial stability and prosperity on Main Street.”

According to Henry, “This is the ICBA saying, ‘Hey, if you (the government) are going to do this for these bigger banks and say it’s okay to operate at such a risky level, what are you going to do for these smaller community banks? Are you going to be there for them too if something happens?’ Historically, a well-managed bank does not need that type of intervention.”

Powell noted that while Citizens has fielded several questions about this issue, there hasn’t been a great deal of concern. He added, “We know our customers, and our customers know us. We’re not playing games with your money.”

Both banks encourage their customers to talk to their banker with any questions. Bank of Dade noted, “There are ways to structure accounts to maximize coverage. This is a good discussion to have at any time.”

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