Local bankers react to California's SVB failure

Three Cape Girardeau bank executives say the Friday, March 10, failure of Santa Clara, California-headquartered Silicon Valley Bank, the 16th-largest such institution in the U.S., could not happen here.

Steve Taylor,First Missouri State Bank

Steve Taylor,First Missouri State Bank

Steve Taylor, board chairman and president/CEO of First Missouri State Bank, has been in banking 40 years and said he has not seen a bank collapse the way SVB did.

"Banks typically fail and always have because of bad loans. That wasn't the case with (SVB). The bank went under because it had excess liquidity and bought government bonds with it," Taylor said. "One of the first things you learn in accounting class is bond prices move inversely with interest rates — and what have those rates done since last summer? They went up. The bonds correspondingly dropped in value, which is not a problem unless you need to sell and suffer a major loss. It appears SVB funded long-term assets with short-term liabilities — and you just don't do that. You've got to have a balance."

Silicon Valley Bank has the distinction of being the second-biggest failure of its kind in American history, behind the collapse of Washington Mutual in September 2008.

Regulators said 94% of SVB's deposits were uninsured by the Federal Deposit Insurance Corp. — an agency created by Congress in 1933 after multiple banks went belly up in the early days of President Franklin Roosevelt's administration — to "maintain stability and public confidence in the nation's financial system," according to www.fdic.com.

Clint Karnes,Wood & Huston

Clint Karnes,Wood & Huston

"We've had discussions with our customers, and a bank failure creates questions and concerns. We have FDIC for a reason, and it's to give people the comfort of knowing their deposits are protected," said Clint Karnes, community bank president for Wood & Huston. "Banks in Missouri operate differently than what we saw with Silicon Valley. Making agriculture loans, mortgage loans and investment property loans are not nearly as sexy as lending to startup tech companies or cryptocurrency-based depositors, but our loans create a stability and a base foundation. If I were depositor in Missouri, I'd take comfort in what we say and do here. I'd listen to what my local banker says about FDIC protection. The stability our bank and area banks have generally is very strong."

James Limbaugh,Montgomery Bank

James Limbaugh,Montgomery Bank

James P. Limbaugh, Montgomery Bank regional president and executive vice president, echoed Karnes' remarks.

"We can speak with a heavy degree of confidence that this kind of situation would not happen locally or in the state of Missouri. (SVB) had a heavy investment in tech, and a result of its narrow focus on a particular industry, when that industry has challenges, typically the bank will, too," he said. "Most banks in our area have a short duration in their bond portfolios but what SVB did is went 15 years on its bonds, and that can be a problem."

Limbaugh, who said social media, particularly Twitter, "exacerbated" a devastating run on deposits with Silicon Valley Bank, added it is simple what causes large numbers of customers to withdraw bank funds.

"Panic does it — panic based on a lack of information," he said.