The financial world was sent into shock last weekend after the failure of Silicon Valley Bank, but banks in Southwest Colorado say they are on firm financial footing.
The Federal Deposit Insurance Corp. announced Friday that it would take over Silicon Valley Bank, a 40-year-old institution based in Santa Clara, California. The bank’s failure is the second-largest in U.S. history, and the largest since the financial crisis of 2008.
At the end of 2022, SVB had $175.4 billion in deposits. It is not clear how much of those deposits remain with the bank and how much are insured and 100% safe.
Despite the national buzz, banks in Southwest Colorado have said the impact of SVB’s collapse has been nonexistent.
First Southwest Bank CEO Kent Curtis said the failure hasn’t created issues in Durango.
He said most of the bank’s depositors are below the $250,000 amount that is covered by the Federal Deposit Insurance Corp.
“The bigger banks are probably at greater risk,” he said.
TBK Bank sent an email alert Sunday night assuring its clients that the bank is stable.
“Our deposit base is stable and diverse, consisting primarily of traditional retail and commercial deposits spread across over 78,000 depositors served by branches in six states,” the email said.
Dolores State Bank President Doug Aiken said the two banks service different clientele. He said the bank is not concerned about what happened with Silicon Valley Bank because his customers are mostly under the insured $250,000 limit and that they conduct their business in the Four Corners.
Silicon Valley Bank was heavily involved in the tech industry all over the country with most of its accounts over the $250,000 amount covered by the FDIC.
“Their (SVB) downfall was that they had invested in long-term securities,” Aiken said. “And as the interest rates increased, the value of those securities decreased. There’s an inverse relationship between the market value of a security and the direction that interest rates are going. And so when they sold those securities, they had to recognize the loss in market value for those securities, and that loss basically wiped out their capital.”
Alpine Bank President Glen Jammaron shared similar sentiments about the SVB situation.
He said Alpine Bank has a diverse base of local customers from a wide range of industries. SVB wasn’t so fortunate.
“One of the things bank regulators are always nervous about is concentration of any kind,” Jammaron said.
SVB’s customer base was heavily focused in the tech industries, and anytime there’s an industry concentration like SVB had, there’s significant risk, he said.
This is because if something negatively impacts a specific industry it can cause banks to lose money on their investment.
“We, as bankers, like to make sure we’re diverse in our loan portfolio, and our deposits are from a broad part of the community. So if something happens to one area, it doesn’t impact the whole organization,” Jammaron said.
He said a few customers have contacted the bank concerned about FDIC coverage because of the SVB collapse, and the bank directed them to the FDIC website to show them that their money is safe.
He said the SVB collapse has made some customers uneasy and wanting to trust a smaller bank with their money.
“We’ve also seen some folks bring money to us,” Jammaron said.
La Plata County Treasurer Allison Aichele said the SVB failure has not affected county finances. The county is approved to use up to eight banks including Alpine Bank, Glacier Bank, Colotrust, Bank of Colorado, TBK Bank, Principal Bank, Wells Fargo and Zions Bancorporation.
However, the county uses only Bank of Colorado and Wells Fargo to manage its finances. It also uses Colotrust for a savings account.
Bank of Colorado is used primarily for the county’s payroll, payments to the IRS and the state of Colorado.
“I would say only a half dozen transactions are completed in that bank account every month,” Aichele said.
The county uses Wells Fargo as its primary bank, which is used to for accounts payable and is managed by the county finance department. Wells Fargo is also used for public funds, including collection of taxes.
Aichele said public funds are protected by the Public Deposit Protection Act which requires banks to keep 102% of deposits at all times. In short, this means if the county wanted to pull out all of the money in its Wells Fargo account, by law, the bank has to give it access to that money.
The Public Deposit Protection Act also protects public funding from being traded by banks, she said.
Furthermore, the county bank selection process is heavily regulated and audited by the state and federal government. Banks must be approved by written resolution by the Board of County Commissioners to provide depository and other banking services to the county. To be eligible for authorization, a bank must be a member of the FDIC, qualify as a depository of public funds under Colorado Revised Statute 24-75-603 and meet a minimum credit criteria, according to the county’s investment policy.
Aichele said public funds often do not sit in the Wells Fargo account for a prolonged period. Often, tax collections go into the account briefly and then are redistributed to the proper entities that receive public funding.
tbrown@durangoherald.com
