CFO: Hospital bond money is safe
The $22.9 million in a hospital account at Sonoma Valley Bank, an amount far beyond any federal insurance protection, is “rock solid” despite the failure of the bank, a hospital official said Thursday.
The money was from the sale of voter-authorized general obligation bonds. It was deposited at SV Bank on August 10. Westamerica took over the institution on August 21 with the promise that all deposits were safe.
“The vast majority of the (bond money) is in a different, protected environment,” said the hospital’s Chief Financial Officer Robert Feldman.
Feldman said the bond money is in a local agency fund with the state. “It’s not earning much interest, but it’s pretty rock solid,” he told the hospital board.
Feldman said the hospital still has about $1.3 million at Westamerica. “We have assurances that is safe and accessible,” he said. “In fact, there are credit lines available to us.”
Members of the hospital board will meet with meet bank management to define the future relationship, Feldman said. “We want to work with this bank but we have to make sure our money is safe.”
2 thoughts on “CFO: Hospital bond money is safe”
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If the deposit would exceed $250,000 and the bank is a member that can access CDARS, which spreads the money across CDs at several banks at $250,000, the money is still covered by FDIC or just have the bank buy you a T-Bill.
CDARS is probably the easiest option (However Westamerica does not participate in the program according to their website) or whats called a “repurchase agreement” whereby the instrument is contractually collateralized by a Treasury or Government Agency Bond (bank sells a portion of a security to a “depositor” with an agreement to “repurchase” at some set date in the future and a yield usually below par of the security pledged) from the bank’s portfolio (not as common today as past decades). Westamerica is considered very strong financially though based on their financial condition (Earnings, Capital, Asset Quality, and Liquidity).
Most “public deposits” like the Hospital funded by public sources and Bonds require collateralizing and insuring any funds in banks in excess of the insured amounts as standard practice. Its the prudent thing to do.
I would also think that all public funds like the Hospital would be required to be kept within the service area certainly The Valley or perhaps Sonoma County. I would suggest considering another local Sonoma County relationship (such as Exchange Bank) since Westamerica is Marin/Solano.