The closures of California-based Silicon Valley Bank and New York’s Signature Bank earlier this month (March 2023), have South Dakota bankers vouching for the security of the state’s financial systems.
South Dakota News Watch reporter Stu Whitney says the bankers are mindful of the notion that when it comes to potential bank runs, perception is reality.
“The key thing is for people to remain calm,” South Dakota Bankers Association president Karl Adam said from Washington, D.C., where he met with Sens. Mike Rounds and John Thune as part of a previously scheduled banking summit. “This is no time to take out your money to bury in your backyard or put it under your mattress.”
That message gained urgency on March 13, the Monday after the banks failed. State treasurer Josh Haeder got a call from First Premier Bank in Sioux Falls, the state’s bank for more than two decades.
First Premier bankers assured Haeder that general fund deposits were safe and highlighted the differences between the portfolios of Silicon Valley and Signature and South Dakota’s 41 state-chartered banks.
Those institutions, with combined assets of nearly $23 billion, range in size from First Bank & Trust in Brookings, which has $4.2 billion in total assets, to Andes State Bank in Lake Andes with $23.3 million. The number of South Dakota-based banks grows to 57 when including nationally chartered institutions such as Sioux Falls-headquartered Citibank and Wells Fargo.
The call to Haeder was not the only one First Premier made. The state’s sixth-largest bank, with more than $3.5 billion in total assets, contacted all depositors with accounts of greater than $250,000, the ceiling set by the Federal Deposit Insurance Corporation (FDIC) to have deposits automatically insured.
“We have about 30,000 checking accounts, and of those we have 429 above the $250,000 limit,” said First Premier CEO Dana Dykhouse. “We wanted to assure them that the California bank (Silicon Valley) was an outlier and completely opposite of what we’re doing. None of them opted to pull out.”
A News Watch review of South Dakota’s largest state-chartered banks shows all of them are above the federal requirement for risk-based capital ratio, a measurement of whether an institution has enough liquid capital on hand to sustain operating losses.
Under the Dodd-Frank Act of 2010, on the heels of the Great Recession, the permanent floor requirement for Tier 1 risk-based capital ratio is 4.5%, while banks are considered “well-capitalized” with a ratio of 8% or higher. Tier 1 capital refers to a bank’s core capital, including equity and disclosed reserves.
Among South Dakota’s 20 largest banks, the average Tier 1 risk-based capital ratio is 14.84%, ranging from First National Bank in Fort Pierre (24.04%) to First National Bank in Yankton (9.85%), according to FDIC data.
For South Dakota News Watch, I’m Stu Whitney.”
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