2024 Journal of Community Bank Case Studies

2024 COMMUNITY BANK CASE STUDY COMPETITION

Q1, Q2, and Q3 of 2023 with numbers of clients and the exposures within the deposit base. Following the bank closures, b1Bank prioritized direct communication through banker engagement with clients. Melville highlighted the effort by saying “The primary means of communication with our client base tends to be our bankers reaching out. They’re going to have the same questions clients would have. So we make sure that they’re confident and comfortable explaining our position to the client base” (personal interview, 21 Mar 2024). b1Bank’s bankers took a hands-on approach to proactively contacting clients, especially those who were most concerned. Uninsured deposits and services offered to large depositors While the failing banks had more than 60% of their deposits uninsured and highly concentrated, b1Bank had 30-40% uninsured.

Moreover, SVB’s average deposit account was about $4 million, while b1Bank’s average deposit account is about $40,000. b1Bank manages the risk associated with uninsured depositors by maintaining relationships with the depositors. On average, depositors use multiple products offered by the bank. The relationship allows b1Bank to offer strategic solutions to back uninsured deposits with other assets or securities and provide a buffer against sudden withdrawals. b1Bank actively cultivates relationships with depositors that exceed the $250,000 FDIC insurance cover limit. The bank provides depositors with multiple banking products such as lines of credit, real estate loans, and treasury services. Robertson further explained, “ We always measure the top 25 clients of the uninsured group. Our top 25 client base is typically constructed of a lot of municipality accounts. In the state of Louisiana, those aren’t uninsured. We have to securitize those with either a letter of credit from the FHLB or actual pledging of investment for portfolio security” (personal interview, 21 Mar 2024). The added level of security for the depositors ensures the bank’s assets are back in the larger accounts and safeguards depositor funds. Before the bank failures of 2023, b1Bank offered the CDARS program to its customers. Through CDARS, b1Bank extends FDIC insurance coverage to larger deposits, effectively spreading these across multiple banks within the network. Using the CDARS network involves additional costs— approximately 12 basis points on top of any paid interest rate, according to Robertson.

This issue of public perception during a crisis taught INB to focus on preventive measures and careful yet honest communication during panic-causing situations.

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