This past week Silvergate Bank was put into liquidation, Silicon Valley Bank failed on Friday, and Signature Bank failed on Sunday. Silicon Valley Bank had $290 billion in assets and it is the second largest bank failure in U.S. history. Signature Bank is the third largest bank failure in U.S. history.
Why did they fail? A toxic combination of a massive multi-billion dollar losses on their bond portfolio combined with a large amount of uninsured deposits. When they learned of the large bond portfolio losses, many of the uninsured depositors pulled their money out of these banks and the banks had insufficient liquidity to pay all the withdrawal requests.
How is University Bank positioned heading into this severe financial crisis? We are in extremely strong shape and are probably among the strongest depositories in the U.S.:
- We have only $29.81 million (about 4.3% of our $695.93 million of deposits) controlled by the public. The rest are controlled by our management team under long term contracts.
- Our bond portfolio is $10.2 million, about 1.3% of total assets and while we have an unrealized loss of $700,000, that is less than 1% of our shareholders’ equity. We bought these residential mortgage bonds, which are secured by homes in Washtenaw County, to meet our compliance obligations under the Community Reinvestment Act.
- We have only $2.89 million of uninsured deposits, about 0.4% of our deposits, and of this amount 1/3rd come from our bank’s senior executive’s family members.
- We have a line of credit from the Federal Home Loan Bank of Indianapolis of over $100 million with zero drawn. We could pay out every single customer controlled deposit within a single day and still have $70 million available on our line.
- Currently we have $97.7 million of cash on deposit. We deposit nearly all of this cash at only the Federal Reserve Bank of Chicago and sometimes at the Federal Home Loan Bank of Indianapolis, the two strongest depositories in the Midwest. All other deposits we have at correspondent banks are at or below the FDIC insurance level.
We thank you for your continued trust during this time of uncertainty. To open a deposit account, or if you would like more information or have any questions, please contact us at firstname.lastname@example.org.