SUFFOLK, Va. (WAVY) – TowneBank president and CEO William “Billy” Foster says a bank failure affects the entire industry, even when it happens 3,000 miles away.

Foster spoke with WAVY Thursday morning about the after effects of the failure of Silicon Valley Bank of Santa Clara, Calif.

“We don’t ever like to see this. It reverberates throughout the entire industry whenever any single bank gets in trouble,” Foster said.

SVB failed last week after it had been in business for nearly 40 years, catering to private equity firms and the people who invest in technology.

“Whereas TowneBank and most other banks in the country really are well-diversified, with broad bases of deposits, in many, many different industries,” he said.

And for that reason, Foster said people don’t need to worry about their money.

“I really believe strongly that the banking system as a whole is very strong,” Foster said.

In other words, stronger than it was the last time we heard about bank failures – the mortgage crisis of 2008-2009.

Ironically, Foster said SVB had invested heavily in what’s typically a safe investment: government securities. But those treasury bills are not nearly as safe when interest rates are rising, as they have been in the past year.

“As rates went up, they got caught with a $21 billion portfolio that was illiquid,” Foster said. “When they sold it, they recorded a multi-billion dollar loss and I think that’s what kicked off the run on the bank.”

The Federal Deposit Insurance Corporation has taken control of SVB. That agency normally puts a limit on bank deposits it will insure at $250,000 per customer. But FDIC sees this as a special case.

“In this case, FDIC came out and said we’re gonna insure all deposits,” he said.

So the biggest losers here are not SVB’s depositors, but the people who invested in the bank itself, who now have shares of stock that are worthless, and that would include any SVB employees who have company stock in their 401-K’s.

Foster said social media accelerated the run on the California bank. When customers sense something is wrong with a bank and spread the word, perception can become reality, and depositors rush to get their money out.