2024 Journal of Community Bank Case Studies

2024 COMMUNITY BANK CASE STUDY COMPETITION

According to the FDIC report on the collapse of SBNY, they also had a concentration of deposits from technology companies. At the end of 2021, digital asset-related deposits accounted for 27% of total deposits. While this was not nearly as heavy as SVB’s, SBNY’s association with technology became an issue of reputation risk in the aftermath of SVB’s failure. We spoke to INB about concentrations of depositors and were assured that, while they don’t have any concentrations, that is something that they track internally. While the UBPR does not break down deposits at a very granular level, we do notice one difference that makes INB stand out from its peers: INB has government deposits (U.S., state, and local) accounting for 17.9% of total deposits compared to only 11.3% for its peer group (UBPR). For most community banks, their communities are defined by their local markets. This is true for SVB as well, and its greater proportion of government deposits is due to being in the state capital—and county seat—Springfield.

branch in the county. While it does not receive payment for this service, INB sees it as a way of giving back to the community and ensuring continued good relations with one of its larger customers. While strong ties to the local community are certainly one of the strengths of community banks, the built-in geographic concentration can also be an inherent weakness of the community banking model. As a way of mitigating that risk, INB is diversifying its geographic markets by expanding into new areas. Five years ago, they expanded into St. Louis, Missouri and two years ago, into Tampa and Miami, Florida by opening loan production offices in those markets. Mark Donovan, INB’s COO, says that he sees INB as a “boutique business bank” and emphasizes that this growth was a natural extension of their current business practices and that they were following existing customers whose business expanded into new states. Newton points out that this will also help diversify their loan portfolio, as

One feature of INB that is unique for a bank of its size is that they operate a remittance and lockbox facility that processes payments for commercial and governmental customers. INB serves its community by using its facilities to process annual county property tax payments. Citizens can pay these taxes at any INB

Figure 9: Uninsured Deposits as % of Total Deposits as of 12-31-2022

94%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

90%

68%

34%

SVB

SBNY

FRB

INB

Sources: SVB 21, Signature 6, FRB 7, UBPR

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