What You Need to Know About the Silicon Valley Bank Collapse
You may have heard that Silicon Valley Bank – the 16th largest bank in the U.S., collapsed a few days ago. This collapse does not affect any Farmers & Merchants Bank customers.
Silicon Valley Bank (SVB) failed because of deposit concentration from venture capital firms and technology startups. Eighty percent of deposits made by SVB depositors exceeded the FDIC insurance limit of $250,000.
A few depositors, most likely large Silicon Valley Companies, held 80% of the SVB’s deposits. When the rumor started that SVB was in trouble, its customers began withdrawing large amounts of their money. Because this small group started pulling deposits, enormous liquidity stress was placed on that bank, causing it to collapse.
Here’s Why This Does Not Affect You as Our Customer
- Factors that caused SVB to fail do not exist at Farmers & Merchants Bank or generally in Nebraska.
- SVB failed because of its exposure to the large IT companies in Silicon Valley. The slowing economy resulted in shrinking profit margins and large drops in stock values of IT companies. Farmers & Merchants Bank has no exposure to this industry.
- Farmers & Merchants Bank carries most of its liquid deposits at the Federal Reserve Bank. The Federal Reserve Bank pays less in interest but is the safest place for deposits.
- Farmers & Merchants Bank deposits are spread among many depositors. A few depositors demanding funds will not affect the stability of our Bank.
- Our depositors are disbursed among many Nebraska communities and do not have a concentration of deposits, giving the Bank more diversity.
- Farmers & Merchants Bank has high loan quality. We mainly loan to farmers who have recently had great and profitable years. All of the Bank’s farm customers have sufficient crops to repay operating loans and make required payments. We follow a conservative loan policy which requires collateral, and the Bank has not had a loss on a farm loan in years.
- Deposits are insured up to $250,000, so there is nothing safer than a bank deposit. Farmers & Merchants Bank is paying 4% for a 13-month deposit and that is a very good investment.
- Farmers & Merchants Bank is willing to pledge securities it owns against deposits that exceed the FDIC insurance level.
- As an FDIC-insured bank, deposits are automatically insured up to at least $250,000 per depositor, per FDIC-insured bank, per ownership category. The FDIC website provides information on insurance rules, limits, and coverage by account type.
Bottom line, your money is safe and sound with us. Please let us know if you have any questions or concerns and thank you for trusting your hometown bank to take care of you.