Local bank leaders are telling their customers that the recent failures of two banks in the United States is not a sign of a larger crisis likely to affect the entire economy.

"Unfortunately, the whole industry gets painted with a pretty broad brush when these things happen," said Tom Moran, president and CEO of Community Bank.

Moran said clients should remain confident with the banking system. He said the bank has been talking with customers about the situation with both Silicon Valley Bank and Signature Bank.

California-based Silicon Valley Bank failed March 10, followed shortly by New York-based Signature Bank on March 12. They are the second and third largest banks in U.S. history to fail, according to reporting from the Associated Press.

On Monday, March 13, U.S. President Joe Biden also urged calmness and insisted the nation’s banking system was safe.

Moran is among the banking leaders in Walla Walla echoing that statement.

He said, "The message that we have been explaining to our folks — and a lot of our clients we talk to understand it — is that these are two banks that have very unique business models. They have business models that are really not reflective of the local banks or most banks in the banking industry."

Moran said the majority of the banking industry is still safe and secure and business will continue as usual.

When he heard the news about the closures of Silicon Valley Bank and Signature Bank, Moran said he was primarily surprised by the rapid growth and size of the banks when they were shut down. "At the time, understanding that these banks were unique, and they really appeared to be isolated events at these two institutions, and not a widespread issue throughout the banking industry."

To alleviate any concern about how Community Bank is doing, Moran said the capital ratio for the bank is 9%. Capital ratio measures the ability of a bank to protect its solvency. The regulatory threshold of a "well-capitalized" bank is 7%. "If banks drop well below these ratios, it oftentimes indicates a bank is struggling," he said.

In maintaining higher levels of capital, banks are considered much more secure as opposed to banks that do not meet the 7% standard.

"The banking industry as a whole has maintained very solid capital percentages even throughout this issue," Moran said. 

Community Bank is an FDIC — Federal Deposit Insurance Corporation — insured bank, meaning, in having FDIC insurance, a bank is guaranteed to not lose all money if the bank is to close.

The FDIC is an independent agency created by Congress to maintain stability and public confidence in the nation's financial system. The agency is responsible for insuring deposits, overseeing financial institutions to ensure their safety, soundness, and protection of consumers, resolving large and complex financial institutions, and managing receiverships, according to the FDIC.

Denise Hazlett, the Hollon Parker Professor of Economic and Business at Whitman College, said clients and depositors should not be worried, especially with many of the local banks in the area being FDIC-insured.

Hazlett, who earned her Ph.D. in economics at the University of Minnesota, has taught economics, specifically intermediate macroeconomics, at Whitman College since 2007.

“Federal deposit insurance guarantees the safety of bank and credit union deposits under $250,000 per person,” Hazlett said. “That guarantee exists so that depositors don’t have to be worried, and Walla Wallans shouldn’t be. They can absolutely count on it.”

Moran said customers who have questions about their deposits should not hesitate to reach out to their respective banks.

After Silicon Valley Bank’s failure, officials at Walla Wala-based Baker Boyer Bank reached out to its community members.

John Cunnison, the chief investing office of Baker Boyer Bank, wrote an article on the bank's website and produced a YouTube video saying risks to the bank's customers are minimal.

He said in the video that reforms after the financial crisis in 2007 and 2008 have increased the percentage of high-quality liquid assets banks are required to keep on hand.

He also said cash kept at the Federal Reserve is greatly increased as well.

“That cash was $50 billion back during the great financial crisis; it’s $3 trillion today,” Cunnison said. “For these reasons, I think it’s safe to say the potential for contagion into the real economy from what we saw with Silicon Valley Bank, that potential is limited.”

Further, Cunnison said Baker Boyer Bank had almost no connection to Silicon Valley Bank.

"When we look at the wealth management portfolios we manage … our exposure to Silicon Valley Bank is de minimis,” he said. “It’s effectively zero. It's in the one hundredths of a percent.”

Jeremy Burnham can be reached at jeremyburnham@wwub.com or 509-526-8321.

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