Erebor's larger equity cushion than SVB

The key point is that Erebor is built to survive the exact kind of confidence shock that killed SVB. Erebor reports a 12% Tier 1 leverage ratio, versus 7.96% for Silicon Valley Bank at December 31, 2022, and it also keeps 69% of assets in short duration bonds. That means more common equity relative to assets, and less risk of being forced to sell long dated securities at losses when deposits leave quickly.1 2 3

• SVB was still officially well capitalized before it failed. Its bank level Tier 1 leverage ratio was 7.96%, above the 5% well capitalized threshold, but below Erebor’s 12%. The lesson is that being above the minimum is not enough if depositors lose confidence faster than assets can be turned into cash.2 3
• The real problem at SVB was not bad credit, it was asset and liability mismatch. Federal Reserve and FDIC reviews found the run was triggered by losses on securities and doubts about capital adequacy after SVB sold available for sale securities at a substantial loss. Erebor’s shorter duration asset mix is designed to reduce that exact pressure point.3 4
• Erebor’s funding base is also more protected on paper. The company states that 77% of deposits are insured, which is the opposite of the classic venture bank setup where a few large uninsured accounts can run all at once. More insured deposits and more equity together make deposit flight less likely to become fatal.1 5

Going forward, the competitive edge for startup banks will come from pairing SVB style sector expertise with a balance sheet that can hold up under social media speed withdrawals. If Erebor keeps its capital buffer high while growing API fee revenue and insured deposits, it can turn post SVB caution into a structural advantage.1 3 5