2024 Journal of Community Bank Case Studies

SECOND PLACE: University of Illinois Springfield

Figure 10: Personal Savings vs. State & Local Government (in Billions)

$3,000

$2,500

$2,000

$1,500

$1,000

$500

$-

Personal

Govt

Sources: Statista, Board of Governors of the Federal Reserve System (US)

one of the reasons for the move into Florida was to seek more opportunities for C&I investment. Large and Uninsured Deposits One result of having so many business and government clients is having many clients whose deposits would likely be beyond FDIC insurance coverage limits. An over-reliance on uninsured deposits was a key component of the failure of all three banks, as depositors are going to pull uninsured deposits more quickly when there is a risk of bank failure. INB’s uninsured deposit levels were much lower than these banks, especially SVB and SBNY (See Figure 9). INB runs a quarterly large-liability dependency report to evaluate and track its largest deposits, then uses a multi pronged approach to dealing with the risk of large or uninsured deposits, depending on the client. For its government clients, INB is required to provide collateral for any deposits beyond the $250,000 FDIC limit. The fact that they are secured by collateral

makes them less subject to run off at the first sign of a bank’s distress. Also, historically, state and local government deposits have proven to be more steady than personal savings deposits. See Figure 10. INB’s largest individual depositors tend to be its owners—the founders and shareholders of INB. As such, these deposits are considered—and have proven to be—secure. Other clients whose deposits may exceed the FDIC insurance limit tend to be large and small businesses. It was

An overreliance on uninsured deposits was a key component of the failure of all three banks...

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