President's Blog; Spring 2023
April 01, 2023
We recognize that market uncertainty can be concerning and unsettling. With the recent closures of several large banks by the FDIC we want to remind you of the strength and stability of Silver Lake Bank.
Silver Lank Bank is a highly diversified community bank with the experience and knowledge that comes with serving customers through all economic cycles since 1909. We are well capitalized, have a stable deposit base and have historically performed well in challenging times. I am very proud of our long history of sound asset quality, prudent expense management and strong levels of capital and liquidity which position us well in times of economic stress.
We plan for the worst and successfully operate in whatever conditions arise. No Kansas bank is immune to market forces, but most have a diverse customer base enabling them to better weather economic difficulties.
The failed banks had unique balance sheets compared to the vast majority of the banking industry, particularly community banks. Silicon Valley Bank (SVB) had large amounts of uninsured deposits concentrated in specific industry (tech startups). Tech startups raise large amounts of capital leaving them with large amounts of cash on deposit. Funding for tech startups began drying up over a year ago leading to a steady reduction in deposits in the last year. SVB’s investment portfolio was large (60% of assets), long in duration, and low yielding (1.75% yield). The combination of large uninsured deposits with a decreasing deposit portfolio and a large investment portfolio of long, low yielding bonds in a rising rate environment led to the deposit run.
Silver Lake Bank is a proud and well-managed FDIC member. This means your deposits are protected up to $250,000.
Silver Lake Bank does not take unnecessary risks. Instead of seeking quick and enormous profits such as those sought by the big banks, such as SVB, we take a measured approach and adhere to the same principles that our bank was founded on more than 110 years ago.
The failed banks are not being bailed out; they no longer exist. The FDIC created two new banks. The “bailout” was for uninsured depositors, mainly tech startups and venture capitalists, and all insured banks – including Silver Lake Bank -- are funding the insurance fund required to pay for the “bailout.”
“These bank closures are an outlier and are not reflective of the norm or financial strength of banks across Kansas and across America,” Alex Orel, a lobbyist for the Kansas Bankers Association told the House Financial Institutions and Pensions Committee last month.
We agree the banking system is both healthy and safe -- especially so at Silver Lake Bank.