Consumer Alert: How safe is your community bank? A local bank CEO weighs in

ROCHESTER, N.Y. – Did the collapse of the Silicon Valley Bank foreshadow more to come?  That’s what some investors fear and consumers as well.  It seems investors are really wary of small, regional banks.

There’s no doubt.  The collapse of SBV followed by Signature Bank here in New York has caused many to question the fiscal strength of your community bank or savings and loan. If our financial storm winds blow, can that little bank on the block withstand an economic nor’easter? That was my question for a guy whose family has led his community bank since the 1800’s. Frank Hamlin is president and CEO of Canandaigua National Bank and Trust.

Deanna Dewberry: “Is my money as safe in a small bank as it would be in one of the big four?”

Frank Hamlin: “Remember back in ‘08, It was those big banks that had to be backed up by the federal government through TARP. It was not the community banks.”

TARP, the Troubled Asset Relief Program was a taxpayer funded $700 billion big bank bailout. After that, congress required big banks to pass periodic stress tests.

Here’s an example.  Imagine a bank is facing a hypothetical worldwide recession that affects commercial real estate and corporate loan holders.  That leads to 10.8% unemployment, that results in a 55% loss in the stock market.  If the bank can withstand all those financial daggers, it passes.

But stress tests are only required of big banks with assets of more than $50 billion.

Dewberry: “Whereas smaller institutions, like yours, don’t have to do that. So is that a protection that the consumer doesn’t have?”

Hamlin: “From a very practical standpoint, those stress tests are just good business. So we’re doing them. We’ve always done them.”

The government also requires big banks to show that they have the money to weather a catastrophe.

Dewberry: “When you’re looking at, for example a Chase that has $3.67 trillion in assets versus Canandaigua National Bank that has $4.7 billion, when the consumer is looking at that, why shouldn’t he say ‘Gosh, I should go with the guy with more assets.’”

Hamlin: “In the smaller context where we are right here, we’re only here. Our money is here. You’re investing here.  We’re driving down these streets.”

And he says therein lies the key difference between him and the big guys.

Hamlin: “The money that you put here gets invested here.”

Hamlin stresses that unlike big banks, community banks make their money by lending locally, and that money is an investment in the local community.  He also reminds us that your money is protected by the FDIC, an insurance that banks fund which covers your money you if the bank fails.