Considering all the recent news on the big bank failures, I want to assure you our bank is safe. While there are some commonalities in the decline in the values of bonds at virtually all banks, there are also key differences.
The following are a few significant differences between our bank and the banks in the news:
- The decline in value of our bond portfolio is very manageable at 14% capital. The failed banks had losses of up to 100% of their capital when they were required to cash in their securities. Our bond portfolio is stronger due to shorter maturities and proper management of interest rate risk. Even if we had to sell all securities, our capital strength would be twice the regulatory minimum Tier 1 requirement.
- We do not have a significant volume of uninsured deposits. Eighty-one percent (81%) of our deposits are either insured or secured by pledged assets. Our uninsured deposits are spread between 572 accounts which are generally long-term stable customers. The problem banks typically grew very rapidly, accepting unstable concentrations of deposits from a relatively small group of new depositors. One of the problem banks only had about ten percent (10%) of their deposits insured.
- The other key difference is our bank does not get involved with cryptocurrency or financing risky start-up tech businesses. The failed banks had concentrations of business in one or both categories. As a 103-year-old bank, we have established over 26,000 diverse deposit and loan relationships. Once the large concentration of uninsured depositors started moving their funds from the failed banks, they didn’t have sufficient liquidity to cover the withdrawals. We have ample available liquidity and two large borrowing lines to cover all uninsured depositors.
Aside from my support of our strength, there are several other rating companies that also reflect our bank as “5 Star” or “A” rated. Compare us to other banks, and I know am confident you will find SouthStar to be one of the strongest banks around. I encourage you to contact the Senior Officers at your local branch or me directly if you have any concerns. We want all our customers to feel comfortable with our bank as a safe place for any additional funds you, your friends, and your family have. Despite all the negative news on banks, we still believe our Star shines the brightest during these times.
David R. Kapavik