The failure of California-based Silicon Valley Bank on Friday and the decision by federal regulators to make sure depositors at the bank can access all of their funds has put heightened attention on the banking sector for the first time since the aftermath of the Great Recession.
While the Treasury Department’s actions have for now stemmed concerns about the health of the banking sector overall, the events of the past week do raise questions about the health of all banks.
Rose Oswald Poels, president and chief executive officer of the Wisconsin Bankers Association, issued a statement seeking to assure members of the public “that the banking system overall and Wisconsin banks are safe, sound, and resilient.”
“Wisconsin banks do not operate in the manner that caused the failure of Silicon Valley Bank in Santa Clara, California and Signature Bank in New York, New York. The customer base of Wisconsin banks is much more diversified and the overall balance sheet management of Wisconsin banks is significantly different,” Oswald Poels said in the statement.
To analyze local banks, BizTimes Milwaukee compiled a list of Wisconsin-based banks with offices in southeastern Wisconsin. By focusing only on those banks, the list is not a comprehensive accounting of the region’s banking sector. Three of the largest deposit holders in southeastern Wisconsin, U.S. Bank, BMO and JPMorgan Chase, are not included and Wells Fargo, PNC, Old National and Huntington also do not make the list.
Still, the analysis provides a glimpse into southeastern Wisconsin’s banking sector and some key differences between the banks serving southeastern Wisconsin and Silicon Valley Bank.
How do banks in the Milwaukee area compare?
For starters, many of the banks serving Milwaukee and southeastern Wisconsin are much smaller than SVB, which was the 16
th largest in the country with $209 billion in assets at the end of 2022. U.S. Bank is larger than SVB at $585 billion in assets and BMO Harris Bank, the U.S. subsidiary of Bank of Montreal, comes in with $176 billion in assets.
Green Bay-based Associated Bank has around $39 billion in assets, making it the largest included in the BizTimes analysis. Nicolet National Bank and Johnson Bank are the next largest Wisconsin banks serving the region at $8.7 billion and $6.1 billion respectively. There are another 14 banks with at least $1 billion in assets and another dozen with less than $1 billion.
Size is not the only differentiator between Milwaukee area banks and SVB. The balance sheets of the now failed bank and those in the region are markedly different.
Investments in U.S. government securities were among the items causing issues for SVB. Assets purchased at low interest rates and long-term maturity dates lost value as interest rates have risen over the past year.
U.S. government securities made up almost 52% of Silicon Valley Bank’s total assets as of the end of the year.
Fifteen of the Wisconsin-based banks serving the Milwaukee area have 10 to 20% of their assets in U.S. government securities. Another 10 have between zero and 10% of their money in those assets. The highest is Union Grove-based Community State Bank at 31.8%.
[caption id="attachment_566299" align="aligncenter" width="623"]
Source: FDIC data[/caption]
The Wisconsin-banks in the BizTimes analysis tend to have most of their assets in loans and leases. The lowest is Community State Bank at 52.7% and six other banks have 50% to 60% of their assets in loans and leases. Another seven are in the 60s, nine are in the 70s and six are in the 80s.
SVB had 35% of its assets in loans and leases.
Even within the loan portfolio, there are stark differences. Just 17.2% of SBV’s loans were for real estate. Town Bank was the lowest among the group BizTimes reviewed at 34.5%. Twenty-two of the banks had more than 70% of their loans in real estate, including eight in the 80s and another eight in the 90s.
[caption id="attachment_566298" align="aligncenter" width="721"]
Source: FDIC data[/caption]
Deposit differences
There are also stark differences in the deposits of Milwaukee area banks and SVB. Just 5.7% of the roughly $161.5 billion in deposits held in SBV’s domestic office were insured. There were nearly 37,500 deposit accounts with more than $250,000, the threshold for FDIC insurance. Those accounts held more than $157 billion.
There were 106,000 accounts with less than $250,000, but those accounted for around $4.8 billion in deposits.
In contrast, the lowest percentage of insured deposits among banks serving the Milwaukee area was 48.3% at National Exchange Bank and Trust. The Fond du Lac-based bank has around 1,000 accounts that exceed the $250,000 threshold and more than 80,400 accounts below the threshold.
Three banks – Associated Bank, First Business Bank and Johnson Bank – have a little more than 50% of deposits insured. Most banks in the region are in the 60 to 80% range. North Shore Bank, nearly reaches 90% and The Equitable Bank tops the list with an estimated 91.8% of deposits insured.
[caption id="attachment_566300" align="aligncenter" width="625"]
Source: FDIC data[/caption]
