Safe, Sound and Simply Service since 1949
A Message from Dion L. Williams, President & CEO
Dear Piedmont Advantage Credit Union Member,
I know that our members are aware that credit unions in general don’t speculate on start-up businesses or other business-related-risky ventures. However, after three large banks, Silicon Valley Bank, then Signature Bank and Silvergate Bank, collapsed and self-liquidated respectively, I wanted to remind you of this and offer personal reassurances that your Credit Union is safe and sound.
We have been serving our member-owners since 1949 for a reason. Our Simply Service culture takes precedence over fads and risky ventures. The stage has been set to continue to provide responsible financial opportunities well into the future. The sections below provide a deeper-dive into the facts behind our optimistic outlook.
PACU’s regulatory net worth ratio is 8.97% as of 2/28/2023. The net worth ratio is required to be above 7.00% to be considered well capitalized; thus, PACU has a nice cushion above that level. Or put another way, the net worth ratio can be looked at as a “rainy day” fund. PACU is in a strong position based on this metric.
Member deposits are insured by the NCUA Share Insurance Fund. Like the FDIC on the banking side, each member’s deposits are insured up to at least $250,000 and backed by the full faith and credit of the United States government.
Liquidity is another measure to evaluate the ability of a financial institution to weather a financial storm. Liquidity is the amount of money that is readily available to the credit union for spending and investment. PACU has more than ample liquidity sources available without the need to liquidate any investments.
One last noteworthy metric is the charge off and delinquency of PACU’s loan portfolio. PACU has a historically low level of past due loans and loan losses for the credit union, which bodes well in an uncertain economic period.
Contrasting Silicon Valley Bank, Signature Bank and Silvergate Bank
Once again, it’s a fair question to ask how PACU is different from Silicon Valley Bank, Signature Bank and Silvergate Bank. Let’s explore three primary differences.
SVB, Signature and Silvergate are banks whereas PACU is a credit union. As a member-owned financial cooperative, PACU’s members and owners are one in the same. Banks have stockholders and a customer base that are not one in the same. Stockholders want to maximize profits to receive a good return on investment, which could be at odds with the needs of the customer base. With credit unions, members and owners are one in the same so that conflict is not an issue. PACU’s sole focus is serving the needs of our member-owners.
Unlike SVB, Signature, and Silvergate’s customer bases, PACU’s membership base is diverse. SVB focused on providing banking services primarily to technology start-up businesses. Signature Bank and Silvergate Bank were both heavily tied to the cryptocurrency industry and digital asset deposits. In the regulatory world, they would each be referred to as having a higher “concentration risk” because they each had so much emphasis in one customer sector. Some things to note about technology start-ups is that tech businesses have a high cash utilization rate as they are getting a business off the ground, which can be even higher during periods of inflation, and large drops in tech stock values like we have seen the last few months can impact even well-established tech businesses’ ability to raise funds from new investors. That meant many of SVB’s customers needed to rely more on cash deposits and loans to fund operations in the last few months, significantly reducing SVB’s liquidity. Instability in the cryptocurrency industry over the last few months, most notably the collapse of FTX, contributed to significant volatility in deposits at Signature Bank and Silvergate Bank, again reducing their liquidity. Our employee groups, geographic diversity, and loan portfolio allocation are diverse and our members are at many different stages in their financial journeys, which lowers PACU’s concentration risk.
Unlike PACU, the three failed banks did not have sufficient liquidity available to handle daily cash needs of their customers without liquidating investments. SVB, Signature and Silvergate sustained large losses on the liquidation of investments. As noted in the liquidity section above, PACU has substantial liquidity sources available before any investments would need to be liquidated.
Concerns over the safety and soundness of deposits are a natural reaction to unsettling news in the broader banking sector. Your Credit Union has taken steps going back to before the pandemic to solidify the standing of this fine organization to weather economic storms, celebrate 75 years of serving members in 2024, and serving our member-owners well beyond that significant milestone!
Thank you for the honor of serving you. Please do not hesitate to reach out if you have any questions or concerns.
Dion L. Williams, President & CEO