2024 Journal of Community Bank Case Studies

2024 COMMUNITY BANK CASE STUDY COMPETITION

these individual and commercial clients that INB reached out to in the days after SVB’s collapse. According to Cayla Keyes, VP, Retail Sales Manager, many had questions, both on the bank failures and on FDIC insurance, so there was a renewed focus on educating the customer about the limits of FDIC insurance for individuals or spouses but also on other ways the bank could protect the clients’ funds. IntraFi Government deposits may be backed by collateral, but business and large individual accounts require other methods of protection. To this end, INB uses IntraFi, an insured cash sweep, which sets up reciprocal deposits with other banks to spread depositors’ money among a number of banks while allowing the customer to interface with just one bank. Donovan notes that the large number of governmental as well as high-net-worth individual clients that

do business with INB made it a need that they addressed long before the crisis hit. Having this system in place allowed them to quickly get other clients signed up who had concerns in the wake of the bank failures. It is evident in the graph below that this system benefited INB. In the period immediately following the failures (highlighted), INB’s uninsured deposit levels drop while total deposits and assets rise on account of clients bringing in funds from other institutions that were uninsured there. Asset and Liability Management Deficiencies in asset and liability management were among the root causes of the bank failures. Specifically, the banks failed to plan for interest rate risk by holding long-maturity assets (SVB and FRB) and did not test their borrowing lines, so they could not borrow funds when they needed to (SVB and SBNY) (SVB 4, 21; Signature 12; FRB 10).

$2.5 Figure 11: INB’s Uninsured Deposits vs. Total Deposits and Assets (in Billions)

$2.0

$1.5

$1.0

$0.5

$0.0

Total Assets Total Dep UnIns Dep

Source: UBPR

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