Small banks are doing just fine. Thanks for asking.
The last time we were knee-deep in talk of bank collapses, almost two months ago now, there was a lot of justified concern about what all this would mean for smaller banks.
And sure enough, depositors pulled more than $100 billion out of small banks in the week after the Silicon Valley Bank failure, many opting for bigger banks they hoped were more stable. So what now, considering the First Republic news?
Many of what we call small banks aren’t really all that small. Even once you get below the nation’s top 25 banks, smaller ones can still have billions of dollars in deposits.
But among the truly small, local banks, the vibe today was “No big deal.”
“One of the phrases that I saw trending on Twitter for our community banks was another normal day on Main Street,” said Anne Balcer with the Independent Community Bankers of America.
Reaction at the local level — in most places – was pretty muted.
“I think the initial shock came seven weeks ago,” said Mark Mangano, president and CEO of the West Virginia Bankers Association, “and I don’t anticipate that this is going to create any great heartburn for the West Virginia banking industry.”
Part of the chill reaction is the result of banks spending much of the last month reassuring their customers.
“They were reaching out to those customers saying, ‘Look, we’re not an SVB, we’re not a Signature.’ And my guess today, they’re having those same types of calls of, ‘We’re not First Republic, and here’s why we’re different,'” said William Chittenden, who teaches finance at Texas State University.
Think messaging to customers that they are more diversified and risk-averse than the banks in the headlines.
Rose Oswald Poels, the president and CEO of the Wisconsin Bankers Association, said the industry group did see some deposit outflows when SVB collapsed, but only around 1% or 2%.
“And a lot of those deposits have actually come back to our member banks,” she said — banks that are out there again telling customers that despite the failures on Wall Street, the banks at home are fine.