Stable and Secure
March 13, 2023
Dear First Sate Customer:
On behalf of our Board of Directors, Officers, and Staff, we want to express our sincere appreciation for you doing business with First State Bank in Abilene and Menard. We greatly value your relationship with our bank, and take very seriously the financial trust you have placed with us.
In light of recent news as to the failures of Silicon Valley Bank and Signature Bank, we wanted to assure you that First State Bank remains well capitalized and financially strong. The current ownership group purchased the bank in November 2021 – at that time $3 million in additional equity was invested into the bank, making the bank safer. We are happy to report the bank is profitable and has been retaining those profits to further increase the bank’s capital to further protect our customer’s deposits. In regard to any potential market value loss in our investment portfolio, on December 31, 2022 we held only a single $1,000,000 US Treasury note that required book to market loss accounting entry. That US Treasury note matures on January 31, 2024. We recognized only a very minimal loss of $25,000 on that investment, which would only be incurred if the Board elected to sell its investment portfolio which is NOT the case.
We have been and remain very liquid, with a liquidity ratio exceeding 60% and the Board and Management have and will continue to monitor this on a monthly basis. As evidence of our soundness, please see the following charts in terms of capital strength and liquidity ratios from the Uniform Bank Performance Report on December 31, 2022.
Capital Strength
|
First State Bank |
Texas Banks Average |
U.S. Banks Average |
Leverage Ratio (Capital/Assets) |
17.49% |
10.56% |
10.96% |
First State Bank’s HIGHER ratio indicates a stronger capital base (allowing the bank to better weather challenging markets) in comparison to all Texas Banks and all US Banks |
Liquidity
|
First State Bank |
Texas Banks Average |
U.S. Banks Average |
Net Noncore Funding Dependence Ratio $250,000 |
-118.78% |
-6.13% |
0.09% |
First State Bank’s LOWER ratio signifies less dependency on high balance deposit accounts in comparison to all Texas Banks and all US Banks |
We hope that the information above provides you comfort about the safety of your money with us regardless of the size of your accounts, and helps you see how we differentiate ourselves from other banks in regard to our commitment to safeguarding your funds and maintaining your trust. We welcome you to reach out to us with any questions you have about First State Bank. We also invite you to see how we can serve and expand your depository and lending relationship to meet your financial needs. At the same time, we want to give you important information specific to the upcoming strategy of First State Bank:
- First, we are very happy to announce improvements in our technology giving you better account access planned to be launched before the end of August 2023. This will include new products and services for you, including mobile banking, bill pay, and a host of business treasury services the bank has not traditionally offered.
- Second, the standard amount of FDIC insurance is $250,000 per depositor, per insured bank, for each account ownership category. Depositors may qualify for coverage over $250,000 if they have funds in different ownership categories and all FDIC requirements are met.
With these upcoming enhancements, there will be nothing the large and impersonal banks can offer you that we can’t. We look forward to announcing more details in the very near future. We know some of our clients have accounts elsewhere so should you have concerns about your balances, we would be happy to assist you.
Lastly, we also felt it important to take this opportunity to provide you an assessment of the events related to the closure this past Friday of Silicon Valley Bank in Santa Clara, California, a very large bank that focused on the Technology and Venture Capital business segments.
- This closure was precipitated by mass withdrawals last Thursday, totaling $42 billion in deposits, in the wake of the bank announcing it would sell off more than $20 billion in lower yielding bonds. Those bonds were purchased during the period prior to when interest rates began to rise. Silicon Valley Bank then intended to reinvest those funds into higher yielding assets. However, by selling the bonds, the bank took a one-time $1.8 billion loss based on the bonds current market value. Had the bank held on to the bonds until maturity, there would have been no principal loss, but earnings would have continued to be depressed until maturity based on the low yield of the bonds.
- Over 93% of their total deposits were in accounts that exceeded the FDIC $250,000 insurance coverage limit. The $42 billion deposit run on Thursday exceeded the amount of liquidity the bank had available to meet deposit withdrawal demands, so the regulators had to step in. In other words, a lack of confidence by the depositors doomed the bank from being able to continue operating.
This above matter was recently addressed – Click (Joint Statement by Treasury, Federal Reserve and FDIC).
Again, we sincerely appreciate and thank you for your business, and we stand ready to help you further with any of your banking needs.
