In the aftermath of Silicon Valley Bank’s abrupt collapse last week, California’s wine industry is in a state of uncertainty.
SVB was one of the primary banks for the industry and, since 1994, has loaned more than $4 billion for things like vineyard acquisitions and wine-making equipment. According to its most recent earnings report, SVB has approximately $1.2 billion in outstanding loans (PDF) to the wine industry.
Its collapse came as a shock to Bay Area vintners like Adam Lee.
“To me, Silicon Valley Bank was never on the list of banks that I was terribly concerned about,” he said. “Perhaps I was naive.”
Lee is the founder and winemaker at Clarice Wine Company, based in Santa Rosa. He’s been a customer with SVB since 1997, and in addition to his account, he has a line of credit open at the bank, on which he owes tens of thousands of dollars. Immediately after the bank’s closure last week, Lee was locked out of those accounts for nearly three days. His sole employee happened to receive her paycheck Friday morning — just a few hours before the bank’s collapse.
With less than $250,000 in his account, Lee was never concerned about financial loss, since the Federal Deposit Insurance Corporation (FDIC) immediately announced it would cover up to that amount (and has since agreed to cover all deposits).
But others weren’t so calm.
“Some couldn't make payroll, the apps didn't work, loans couldn't be made, some couldn't get advances. It's clearly frustrating, and I don't blame them for being angry,” said Rob McMillan, founder and former executive vice president of SVB’s wine division.
McMillan added that he was also shocked at the sudden downfall of the bank, where he has worked for more than 30 years.
“The wine industry is not part of this. We had nothing to do with it. Our clients are in fine shape. The portfolios are in fine shape,” he said.
Still, his clients are in a state of uncertainty. “It's fear of the unknown,” he said. The bank is currently operating under the auspices of the federal government, and McMillan said there are several buyers potentially interested in acquiring SVB’s wine division.
In the meantime, though, wineries are dealing with a financial disruption that likely rippled out to their most vulnerable workforce: farmworkers.
“If payday was during that period of time and they didn’t get their paycheck, they're going to be hurting,” said Rosaura Segura, an immigration services provider and farmworker advocate in St. Helena.
She’s also worried about the long-term impacts of the bank’s collapse, considering its financial support of the vineyard workforce. SVB was a major sponsor of an annual golf tournament in Napa Valley that raises money for migrant farmworker housing and other basic needs.
“Those funds are for bedding, for kitchen supplies, for food. So, yeah, we're going to feel their absence,” Segura said.
As will the wine industry as a whole. In addition to lending money, SVB’s McMillan compiled a yearly benchmark report for the wine industry, which provided a data-driven economic review and forecast for wineries and garnered worldwide readership. McMillan said he’s unsure he’ll be able to continue producing the report.
“Silicon Valley Bank has a truly unique understanding of the wine business,” said Clarice Wine Company’s Lee.
For now, Lee said, he’s sticking with SVB — or whatever becomes of it — especially now that he has the backing of the FDIC.
“In an ironic way, Silicon Valley Bank is the safest place right now to put your money,” he said.
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