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V O L . X X I X N O. V I I A P R I L 3 , 2 0 2 3 14 B A N K I N G / F I N A N C E / I N S U R A N C E F O C U S Where SVB went wrong Silicon Valley Bank, a 40-year old lender that grew into the country's 16th largest, was a prominent financier to venture capital-backed technology startups nationwide. It got into trouble by investing funds in long-term bonds when interest rates were near zero, then had to raise capital in a hurry when steeply rising rates — the Fed has hiked borrowing costs nine times over the past year, most recently by 25 basis points on March 22 — eroded the value of its investments. e crisis hit close to home for entrepreneurs including Noah King, a Weston, Mass.-based alumnus of the Roux Techstars accelerator program in Portland who opened an account with SVB in July 2020 as he prepared to launch Popsixle, a data processing startup. After hearing about SVB's straits from a startup- founder text thread and on Twitter, he was able to transfer 99% of his company's deposits to a new account at TD Bank. He has no regrets about banking with SVB, whose bankers he says were generous and committed to Popsixle's success. "ey knew the ins and outs of startups, and it felt great to work with a partner who understood our needs." His advice to fellow entrepreneurs: Work with a well-established bank, "but also find a banking partner who will give you personal attention." For SVB, the combination of a heavily concen- trated depositor base, more than 90% of deposits above the $250,000 limit covered by the Federal Deposit Insurance Co. and errant risk management made for a toxic mix that sealed its doom. It was the first FDIC- insured bank to fail in two years. "SVB had a plan to raise additional capital that may have worked but for the run on the bank," says Andrea Shaw, a Portland-based partner with Practus LLP, who boils down SVB's troubles to an "asset-liability mismatch." She notes that accounting practices have become stronger since both the S&L and 2008 crises, "which hopefully means that this is not the start of another financial crisis." Rising interest rates are, in fact, a headache for all banks, says Kennebec Savings Bank CEO Andrew Silsby. » C O N T I N U E D F RO M P R E V I O U S PA G E IT PAYS TO BE A CUSTOMER OWNER. This year we paid $117 million in patronage dividends. Farm Credit East is customer-owned, which means customers share in the association's financial success. This year, qualifying borrowers received $117 million from our 2022 earnings. That's equivalent to 1.25% of average eligible loan volume and adds up to $1.3 billion since our patronage program began . Discover the difference. No other lender works like Farm Credit East. Loans & Leases Financial Record-Keeping Payroll Services Profitability Consulting Tax Preparation & Planning Appraisals Estate Planning Beginning Farmer Programs Crop Insurance We remain healthy, well-capitalized, diversified and prepared to support your ongoing needs. Relax Mom, your money is safe. — Larry Barker Machias Savings Bank, on LinkedIn

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