Community banks a great option

With the breakneck speed failure of Silicon Valley Bank and Signature Bank, many folks are wondering if their deposits are safe in Oklahoma banks. I can tell you that they are safe. I serve as chairman of the board of directors of one of our local banks where safety and soundness are key to the way we do business.

Ray Hibbard

First we need to understand what was at the heart of the failure of these two banks. Silicon Valley Bank and Signature Bank failed with enormous speed – so quickly that they could be textbook cases of classic bank runs, in which too many depositors withdraw their funds from a bank at the same time. The failures at SVB and Signature were two of the three biggest in U.S. banking history, following the collapse of Washington Mutual in 2008.

There are two ways banks can fail. One is if they have an abundance of bad loans. We saw this so much during the oil bust here in Oklahoma if any of you are old enough to remember those depressing days. The bust lasted 8 years and thank goodness we have seen nothing like it since in this state.

While the most common type of risk faced by a commercial bank is a jump in loan defaults or known as credit risk, that’s not what happened with these two banks.

The second way is through lack of liquidity or not enough cash to pay off demand from depositors. Liquidity risk is the risk that a bank won’t be able to meet its obligations when they come due without incurring losses. This is what got our out-ofstate friends in trouble. Customers of SVB were withdrawing their deposits beyond what it could pay using its cash reserves, and so to help meet its obligations the bank decided to sell $21 billion of its securities portfolio at a loss of $1.8 billion. The drain on equity capital led the lender to try to raise over $2 billion in new capital.

Normally a bank deals with such possibilities by pledging or selling some of the securities they own to raise the funds to pay depositors. If you just keep a bunch of cash at the bank and do not invest it there will be no earnings. The investments SVB made were not risky, they were just too long. The Federal Reserve has been aggressively raising rates, 4.5 percentage points so far, in a bid to tame soaring inflation. As a result, the yield on debt has jumped at a commensurate rate. Hence, the reason for the loss on selling of SVB securities was to raise cash to meet demand.

They had a fail safe and that was to sell more stock and raise more capital. The problem was that most of their loan customers were concentrated on one type of business. Word was spread to get your cash out today. Once the panic set in, there was no real option except to close the bank. The role federal bank regulators played in all this is a topic for another column.

Another issue is that customers of the bank and the staff at the bank did not take advantage of the insurance available. Many of SVB’s customers had deposits well above the $250,000 insured by the Federal Deposit Insurance Corp. — and so they knew their money might not be safe if the bank were to fail. Roughly 88 percent of deposits at SVB were uninsured.

This is an incredibly stupid percentage of uninsured deposit. I believe our community bank is at 11% uninsured deposit. Most of them have other arrangements to protect their money and the bank offers deposit options above the FDIC insurance of $250,000 per account. I asked Jill Castilla, CEO of Citizens Bank of Edmond to explain some of these options:

“We are proud that Citizens Bank of Edmond has been at the same location, serving our community for 120 years, and we are confident we will be here for another 100 years. Citizens Bank of Edmond is well capitalized with a healthy diversified portfolio of deposits and investments, and we have a strong liquidity position. The safety and soundness of our operations have been - and remain - our utmost priority.

We also offer robust tools for you to maximize deposit insurance and bring you peace of mind. Citizens Bank of Edmond has been using these tools for over a decade, and with our team expertise, you can benefit from them at any time.”

FDIC Insurance

• Protects depositors in insured banks (Member FDIC) to at least $250,000 o $250,000 per depositor, per account ownership type, per financial institution o Example – if you have a joint account the insurance is up to $500,000 can also add beneficiaries to expand coverage

• Covers all types of deposits o Checking accounts, savings accounts, CDs, money market accounts

• Does not cover money invested in stocks, bonds, life insurance policies, mutual funds, etc.

• FDIC Insurance protects depositors in the event an insured bank fails IntraFi

• Formerly known as Certificate of Deposit Account Registry Service (CDARS) and Insured Cash Sweep (ICS)

• Additional network that Member FDIC banks can participate in

• This network spreads funds across multiple accounts at different banks to maximize the FDIC insurance

• The funds are managed under a single umbrella with one bank

• You can elect to put your money in CDs, checking accounts or money market accounts depending on liquidity needs

• If the bank is a member of IntraFi (like Citizens Bank of Edmond) – your account would be opened and operated at one bank and deposits are managed at reciprocal banks in order to leverage the FDIC insurance of $250,000

• Citizens Bank of Edmond has been in the IntraFi network for more than 13 years

• Citizens Bank of Edmond can insure deposits up to $1.5 million

If you are like me and feel good with the $250,000 of FDIC insurance, you have nothing to worry about. If you are one of those individuals that are lucky enough to have excess cash over the limit, ask your local banker what you can do and how the bank can help you insure your funds.

You will hear the talking heads on television describe SVB as a regional bank. Many of the banks in this town are community banks and not regional. Community banks are the ones that support local events and organizations. They provide the lending needed for our residents. They are just as safe if not safer than any regional bank. Most likely no matter where you bank these days, there is no need to move your money.

Downtown Edmond leader passed last week

It is with the heaviest heart imaginable that we announce the passing of Becky Crow. She owns Broadway Antiques & Market and has been such an important part of the growth of Downtown Edmond. She has been a friend to all and we can't imagine Downtown without her loving spirit!

Our downtown Edmond area would not be where it is today without her leadership and energy. She was a giant organizer for the Edmond Arts Festival and many other projects in the area. Our thoughts and prayers to her family.

(Ray Hibbard may be reached by email at ray@edmondpaper.com) visit

“Four Seasons” in real life is located in front of the Center for Transformative Learning on the University of Central Oklahoma campus, but this week is hidden somewhere in our paper.

Please e-mail contest@edmondpaper.com with the correct location to be entered in the weekly drawing.

Commissioned as a partnership between UCO, the City of Edmond and the Edmond Visual Arts Commission, “Four Seasons” was created by sculptor Kevin Box of New Mexico and was dedicated on the campus on March 24, 2011.

Kevin is a member of the National Sculptor’s Guild. His Box Studio LLC is a strong supporter of the Reduce, Reuse and Recycle concept, using recycled metal as part of the casting process for his sculptures. All of his work is 100 percent recyclable.