Is my money safe? That question might be on the minds of banking customers after hearing about the collapse of Silicon Valley Bank and Signature Bank.

“A well-managed bank is a safe, strong and secure bank,”said Lakeside Bank’s Executive Vice President, CFO and COO Shively Verrette. “Lakeside is well-managed.”

She explained what happened recently to California-based Silicon Valley Bank and New York-based Signature Bank earlier this month and what sets Lakeside Bank, a community bank, apart.

Silicon Valley Bank’s deposits were primarily from the tech industry and venture capital investors. Signature Bank also had deposits tied to those volatile industries, she said.

Venture capital is capital invested in a project in which there is a substantial element of risk, typically a new or expanding business. Capital can include home, stocks, bonds. It also includes crypto currency, which had  suffered a downturn.

“68 percent of Signature Bank’s currency was crypto-related and crypto currency decreased rapidly. They (SVB and SB) were the banks to go to if your bank turned you down,” she added. “Lakeside Bank does not bank venture capital businesses. We do not deal in venture loans or tech start-up businesses.”  And with good reason: ninety percent of startup companies fail, according to an online Forbes article by Neil Patel.

Silicon Valley and Signature Bank runs represent the second and third largest bank failures in U.S. history. Deposits grew 2020 through 2022, but assets were not held to back those deposits.

“These banks had 10-year bonds which further contributed to their portfolio loss,” Verrette said. “Lakeside is different. We don’t take risks with other people’s money. Our bond portfolio has a 3.4-year bond duration. Keeping the bank bond portfolio relatively short gives the ability to keep up with rising interest rates.”

Another banking expert put it like this. “They had well over $100 billion of uninsured deposits that they turned around and bought 10-year Treasuries with. There aren’t many banks as vulnerable as Silicon was,” said Cornelius Hurley, a law professor quoted in an online business and finance article by Rich Barlow.

Poor management at the two banks was compounded by rapidly rising interest rates. The Feds raised rates seven times in 2022, plus another 25 basis point interest hike this month, and there could be one more hike.

Verrette said the Fed should have gradually raised rates.  “Both banks had to sell their bond portfolios at a loss due to the Fed increasing interest rates rapidly to curb inflation.”

Yes, deposits are still insured by the FDIC, Verrette said, and if structured properly, accounts can be insured up to $500,000.

Ninety-four percent of SVB’s deposits were above the FDIC’s $250,000 insurance limit, according to S&P Global Market Intelligence data from 2022, meaning the bank held one of the country’s highest shares of uninsured deposits when it collapsed.

On March 12, the Treasury, Federal Reserve Board Chair and FDIC Chairman released a statement that Silicon Valley Bank depositors will have access to all of their money starting Monday, March 13 and Signature Bank depositors will be made whole. Shareholders and certain unsecured debt holders will not be protected. Senior management has also been removed.

“The U.S. banking system remains resilient and on a solid foundation, in large part due to reforms that were made after the financial crisis that ensured better safeguards for the banking industry. Those reforms combined with today’s actions demonstrate our commitment to take the necessary steps to ensure that depositors’ savings remain safe,” according to the statement.