If you watched or read the news these past few weeks, you are no doubt aware of the recent failure of Silicon Valley Bank, a $209 Billion bank headquartered in California. This is the largest bank failure in the US since the financial crisis of 2008-09, and has sparked a lot of questions about the safety of your deposits, and the health of the banking industry. We wanted to take this opportunity to address your concerns and put to rest any questions you may have.
First, of course, just as all bank deposits are insured by the FDIC up to $250,000, your credit union accounts are insured by the NCUA through the National Credit Union Share Insurance Fund (NCUSIF). You are covered up to $250,000 per individual depositor, just like any other federally insured financial institution. As a matter of fact, credit union members have never lost a penny of insured savings at a federally-insured credit union. If you have specific questions about your coverage, you can visit MyCreditUnion.gov for more information about the National Credit Union Share Insurance Fund coverage for consumers.
For Silicon Valley Bank, there were some very unique circumstances that led to their failure. You may have seen that 93% of their deposits were over the insured limit. They also did very little lending, so most of their deposits were invested in treasury bills. And when faced with a run on those deposits ($42 billion was withdrawn within a few days!), they did not have the cash on hand to fund those withdrawals, and were forced to sell some of those investments, at a huge loss, which triggered their collapse.
So what about GECU? First, only around 8% of our total deposits are over the NCUA-insured limit. We don’t have nearly the concentration of large dollar deposits that SVB had. One of the reasons for this is we have very few commercial accounts, and focus on individual consumer accounts. We also have a healthy, diversified loan portfolio. In fact, about 70% of your deposits are lent back out to members, and only about 25% are held in investments. While our investments, just like every other institution in the country, have declined in value due to the rise in interest rates by the Fed, they are just a small portion of our balance sheet. We have plenty of cash on hand and in overnight accounts, and have adequate borrowing capacity beyond that.
Certainly, the rise in interest rates played a big part in SVB’s failure. Because their deposits were mostly in low-yielding treasuries, when rates increased, they couldn’t afford to pay higher deposit rates, or they would lose money. At a certain point, their depositors couldn’t afford to NOT pull their money and find a higher yield elsewhere, which is part of what triggered the run on the bank.
With our loan portfolio and diversified balance sheet, we have been able to pay competitive rates and still maintain profitability and a very healthy capital ratio. We also “stress test” our balance sheet on a regular basis, to ensure that we even in the most severe interest-rate environment, we are well-positioned.
We do all of these things because we know and value the trust you have placed in us for almost 88 years. It is your hard-earned money that we are safeguarding, and we take that obligation seriously. So please rest assured your money is safe and sound, and that we aren’t going anywhere. As always, if you have questions or concerns, don’t hesitate to reach out.