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Updated May 5, 2023

Our independent, in-depth research approach brings confidence amidst stress in the banking sector.

Despite recent news about the collapse of First Republic, following Silicon Valley Bank and Signature Bank, we want to give you comfort about Fenimore’s bank holdings. A hallmark of our investment process is to personally know what we own and be guided by quality—the banks in which we invest are no different.

Given the current state of the banking industry, our research analysts responded as you would expect—they got on the phone and the road to talk with our banks. Sure, they read all the public materials available to investors, however, the value of our research philosophy is the relationships we have built with the management teams of the banks we invest in. In the past few weeks, we have confirmed our assumptions through a combination of phone calls, video meetings, and trips to visit our banks. This work has been reassuring, and we remain convinced that the banks we invested in on your behalf are sound.

Andrew Boord

Andrew Boord
Portfolio Manager, FAM Small Cap Fund

Background and what makes our bank holdings different:

While the circumstances that led to the demise of these three banks are somewhat complex, their foundations were built with “hot deposits” whereas Fenimore’s banks are standing on primarily “core deposits.”

A typical bank is primarily funded by deposits from individuals and small businesses with balances well under the $250,000 FDIC maximum. Most banks have a limited number of uninsured deposits. Additionally, while they may have some bonds and loans with unfortunately low interest rates, most of their assets have interest rates that adjust automatically or reprice within a few short years. Additionally, many banks have plenty of liquidity and therefore could pay out all their uninsured deposits quickly.

Here is a basic summary and what it means to you:

  • Transactional Business Model: The most recent failure, First Republic, specialized in providing fixed-rate jumbo mortgages to the elite at low interest rates. They also had a much higher level of uninsured deposits that far exceeded the $250,000 FDIC insurance limit. These “hot deposits” can leave quickly—and they did. When interest rates increased and Silicon Valley Bank and Signature Bank failed in March, First Republic depositors pulled their money causing another cascading effect and crash.
  • Relational Business Model: Fenimore’s regional banks are in the relationship business. They receive deposits from the community primarily for consumer checking accounts, business accounts, and savings accounts. These banks then loan most of that money back into the same community. They keep a modest amount of the deposits in bonds to earn some money, yet diversify their risk intelligently in our opinion.

    By design, our banks rely almost entirely on core deposits that tend to be a vast collection of depositors with modest balances, so they are not dependent on a few customers or one industry of customers 
  • Three Bank Holdings: While the banking industry has been facing various headwinds, we do not foresee a run on any of our banks. Additionally, across all portfolios and among our many holdings, Fenimore only owns stock in three  banks as of 5/3/2023 — our exposure is limited.

The federal government has stepped in and declared that all First Republic, Silicon Valley Bank, and Signature Bank depositors will have access to all of their money immediately. The Federal Reserve also created a new program that will lend money to banks for up to one year. It’s probable that the government could continue to intervene, as necessary, to calm any fears.

In April, most banks reported first quarter results that were impressive. Profits were generally solid with very few bad loans. Most banks saw only trivial amounts of deposits flow out during the tumultuous weeks of March. While there may still be a few outlier banks that are similar to the three major banks that have failed, it should be limited to a bank or two, not the whole system.

Finally, as we’ve stated in several recent communications, Fenimore believes that we have a collection of quality investments that are positioned well for the long term. We hope these insights are helpful.

As your trusted investment partner, we are here for you. Please do not hesitate to contact us at 800.721.5391 with any questions.

Securities offered through Fenimore Securities, Inc. Member FINRA/SIPC, and advisory services offered through Fenimore Asset Management, Inc.

Important Disclosures

This presentation was prepared exclusively for the benefit and use of Fenimore Asset Management, Inc. (“Fenimore”) and FAM Funds clients to whom it is directly addressed and delivered and does not carry any right of publication or disclosure, in whole or in part, to any other party. Neither this presentation nor any of its contents may be distributed or used for any other purpose without the prior written consent of Fenimore.

In part, the purpose of this presentation is to provide investors with an update on financial market conditions. The descriptionof certain aspects of the market herein is a condensed summary only. This summary does not purport to be complete and no obligation to update or otherwise revise such information is being assumed. These materials are provided for informational purposes only and are not otherwise intended as an offer to sell, or the solicitation of an offer to purchase, any security or other financial instrument. This summary is not advice, a recommendation or an offer to enter into any transaction with Fenimore or any of their affiliated funds.

These materials contain the views and opinions of Fenimore. Additionally, the information herein is subject to change and is not intended to be complete or to constitute all of the information necessary to evaluate adequately the consequences of investing in any securities or other financial instruments or strategies described herein. These materials also include information obtained from other sources believed to be reliable, but Fenimore does not warrant its completeness or accuracy. In no event shall Fenimore be liable for any use by any party of, for any decision made or action taken by any party in reliance upon, or for any inaccuracies or errors in, or omissions from, the information contained herein and such information may not be relied upon by you in evaluating the merits of participating in any transaction.

We undertake no duty or obligation to publicly update or revise the information contained in this presentation. In addition, information related to past performance, while helpful as an evaluative tool, is not necessarily indicative of future results, the achievement of which cannot be assured. You should not view the past performance of Fenimore funds, or information about the market, as indicative of future results.

All projections, forecasts and estimates of returns and other “forward-looking” information not purely historical in nature are based on assumptions, which are unlikely to be consistent with, and may differ materially from, actual events or conditions. Such forward-looking information only illustrates hypothetical results under certain assumptions and does not reflect actual investment results and is not a guarantee of future results. Actual results will vary with each use and over time, and the variations may be material. Nothing herein should be construed as an investment recommendation or as legal, tax, investment or accounting advice.

Clients or prospective clients should consider the investment objectives, risks, and charges and expenses carefully before investing. FAM Funds’ mutual funds are offered through Fenimore Securities Inc., member FINRA/SIPC. You may obtain a copy of the most recent mutual fund prospectus by calling 800-932-3271 and/or visiting

There is no guarantee that any of the estimates, targets or projections illustrated in this summary will be achieved. Any references herein to any of Fenimore’s past or present investments, portfolio characteristics, or performance, have been provided for illustrative purposes only. It should not be assumed that these investments were or will be profitable or that any future investments will be profitable or will equal the performance of these investments. There can be no guarantee that the investment objectives of Fenimore will be achieved. Any investment entails a risk of loss. An investor could lose all or substantially all of his or her investment. Unless otherwise noted, information included herein is presented as of the date indicated on the cover page and may change at any time without notice.