CBWY Blog

I am writing this article a week after Federal Regulators closed three large banks located on the east and west coast.  This news dominated the headlines given the circumstances surrounding these institutions.  I want to give some additional insight in to the reason for these failures and why they are not indicative of the health of community banks located in the mid-west. 

In the case of Silicon Valley Bank (SVB), their customer base was comprised primarily of start-up tech companies that generally do not perform well in periods of high interest rates.  Tech companies do not respond well to high interest rates because they generally trade at high Price/Earnings (P/E) ratios.  Higher interest rates reduce earnings which results in lower stock prices and lower investor demand.   Additionally, SVB Bank was growing at a very rapid pace.  Since 2018, the SVB grew from $56 Billion to $209 Billion in total assets when it failed.  Most of this growth was due to high deposit inflows in 2021.  Because their loans were not growing at the same pace, they invested their excess deposit growth into longer term bonds which were very low at the time.  When rates abruptly rose, the bond portfolio quickly generated high unrealized losses.  These losses were then realized once they were forced to sell these bonds to fund large deposit outflows as their large customers began to leave the Bank.  These deposit concentrations were so high that 97 % of their deposit accounts were greater than $250 Thousand.  This Bank was also heavily involved in crypto currency transactions.  The Bank was publicly traded as were many of their high tech customers.  Consequently, when the Bank started to see their asset quality begin to fall (higher level of non-performing loans) their public investors starting selling their stock and their sources of new capital disappeared.  Ultimately the FDIC was forced to step in.  At the end of the day, it was a combination of heavy depositor concentrations, growing asset quality problems (bad loans), rapid growth, and limited capital that created the ending result.

So what makes this bank unique?  Everything.  It begins with having all of your loans concentrated in one industry that generally has no hard collateral to back up their borrowings.  This is significantly different from Community Banks in Wyoming that make loans to an industries that have “hard” collateral securing their loans.  Additionally, this bank has exposure to crypto currency that has experienced significant volatility over this past year.  Again, a highly risky activity.  Third, the large bond portfolio that grew at the wrong time generated large losses as the Federal Reserve pushed interest rates significantly higher.  In the end, low capital reserves, highly risky loans, crypto trading, rising interest rates, and lack of risk officer on staff all lead to the ultimate failure.  The second bank failure was Signature Bank which is one of the largest crypto currency banks in the country that also shared many of the same concentration issues as SVB.    

So how is Commerce Bank of Wyoming different?  Simply put, everything is different.  Our capital levels are well above regulatory requirements and will remain that way.  Our loan portfolio is well diversified by loan type and by geography.  We do not hold concentrations in any industry and have hard collateral behind our loans.  Like every bank, we will see lower earnings in the short-term due to higher interest rates that will cause interest margins to be reduced until asset yields increase at the same pace as our cost of funds.  We are fortunate to have a broad base of depositors and a customer base that knows that our history of a strong conservative management team, strong, capital, and history of strong asset quality, will continue to keep their funds safe.

I also want to remind everyone that the FDIC Insurance Fund is backed by the full faith and credit of the U.S. Government and will always be there.  Additionally, there are various ways to get virtually all of your consumer deposits insured by structuring them properly.  If you have any concerns about your retail deposits, please reach out to one of our Personal Bankers to have them help you set up your accounts to maximize your coverage.  Meanwhile, I sleep very well at night knowing that our Bank is safe and sound and my investment in this company is the best place for me to have my retirement funds invested. 

As always, I want to thank you for trusting us to be your bank of choice.  If you have any questions or concerns, feel free to reach out to us at any time.

Turning Project [Blank] into project hope

This year our culture committee challenged us to complete a service project that benefits our community that is driven by our culture statement, Community Minded.  They called this challenge, Project [Blank], with our team filling in the blank as to what project to choose.  We accepted the challenge and got to work!  We filled in the blank and chose to call our plan, Project Hope. Read more about Project [Blank]

My Fair Share

Each year, the employees of CBWY nominate various organizations in our community to be the recipients of monetary donations contributed solely by the Bank employees. The My Fair Share program allows employees to donate a percentage of their pay to the nominated organization.

The recipients of the 2022 My Fair Share Program are the Red Desert Humane Society and Hospice of Sweetwater County. Pledges that will be awarded to these organizations total over $3,500.00.

Bank employees have donated approximately $12,500.00 to the My Fair Share Program since its inception in 2017.  Read more about My Fair Share

Mobile Banking Safety

Mobile banking has become a popular way for people to manage their finances on the go. With just a few taps on your smartphone, you can check your account balance, transfer money, and pay bills. However, with the convenience of mobile banking comes the risk of security threats. Here are some tips to help you stay safe while using mobile banking. Read about Mobile Banking Safety

Thinking about buying a home?

Whether you’ve just started researching or you’re ready to start house hunting, we’ve gathered a few tips to help you on your home buying journey.  Read home buying tips