Tampa Bay bankers weigh in: The sky is not falling

An executive at Goldman Sachs told a CNBC reporter that the collapse of Silicon Valley Bank was a “Lehman moment” for the technology industry.

A local banking industry source, who spoke with Tampa Bay Business and Wealth, and requested to remain unnamed, called it a “Wildfire.”

But no one that TBBW has spoken with on the topic has indicated that this is a repeat of the financial collapse in 2008, which led to the Great Recession. It’s not indicative of some larger economic trend or precursor to what is to come, across all financial institutions.

In 2008, there were several factors, all working together, that caused a financial meltdown. There was a steady deterioration of loans in bank portfolios, driven by broad weakness in the economy. Like ripples in a pond, the crisis eventually touched almost every industry and business segment.

In this case, sources are pointing to isolated incidents of poor management and lax oversight, with the greater issue being, why it happened at all.

“Forget sophisticated stress tests. A mistake of this magnitude should have been caught in a routine audit [of the bank’s books],” an unnamed source said.

For Tampa Bay banks, sources are saying, they are in good shape.

“Tampa Bay has outstanding strength in the banking community,” says Rita Lowman. “We also have great banks that have locations here that are ranked with 5 or 4 Stars including Bank OZK, Regions, Encore Bank, Cogent Bank, Seacoast, Wells Fargo, Regions, Truist, PNC and Bank of America.”

Lowman has served the banking industry for 45 years. Most recently, she was the president of Pilot Bank, which was acquired in December 2021. She currently is on the board of directors for Encore Bank and the Caldwell Trust Company.

“Yes, we will most likely see an increase in rates today, and the lending process may tighten a bit, however, this is to keep our [United States] economy strong and recession, at the end of the year, less impactful,” Lowman says. “As I always share, banking relationships are as important as selecting a doctor or attorney.  Know your banker and ask questions. Your banker should be pleased to engage in this conversation. Your banker is here to serve our community.”

The lessons that can be taken from what has happened in the past few weeks, in the banking world, is applicable to nearly all businesses. Diversification is often the first line of defense in terms of risk management, rapid growth is almost always a red flag and leaning on trusted resources, and those who will challenge your opinions can help you navigate challenges unique to your industry or situation.

“One thing is, as a bank, you want to have a diversified portfolio and spread risk across industries and geographies. If you get too heavy in any one sector, it’s a risk to the strength, and safety, of your bank,” says Derrick Cox, executive vice president of West Central Florida for Encore Bank.

Encore Bank is a private concierge commercial bank, based in Little Rock, Arkansas, with an office in Tampa.

“There are solutions out there that many banks offer that maybe people don’t know about,” Cox says. “One of those solutions is known as an insured cash sweep. Through the cash sweep, a deposit is divided into amounts under the standard FDIC insurance maximum of $250,000, but the amounts are then placed into deposit accounts at multiple FDIC-insured banks. As a result, you can access FDIC coverage from many institutions while working directly just with us.”

Many independent banks cater to primarily commercial clients, business owners and professionals.

A number of bankers we spoke to said that their customers should focus more on the strength of the bank – for example the amount of brokered deposits a bank has, efficiency ratio and untapped sources of liquidity such as available funding from the Federal Home Loan Bank.

The bottom line is that the sky is not falling. Have a conversation with your banker, if you have concerns, and if you don’t have a relationship with your bank, it’s highly recommended that you work on that.

The Bauer Financial Ratings, on 12 Tampa Bay banks, have ratings of 3 stars (adequate) or higher (5 stars are rated superior and 4 stars are rated excellent.)

The financial ratings are established by composing data on banks, from quarterly financial reports, which are reported to Federal regulators. Some of this data includes capital ratio, profitability, number of delinquent loans, investment portfolio, liquidity and more.

In Tampa Bay here are the top-rated banks:

5 stars

BayFirst National Bank

Central Bank

Century Bank of Fl

First National Bank of Pasco

Flagship Bank

ServisFirst Bank

SouthState Bank

 

4 stars

Bank of Tampa

Bank of Central Florida

Raymond James Bank

 

3 stars

Climate First Bank

Waterfall Bank

 

Banks with locations here that are ranked with 5, or 4, Stars include Bank OZK, Regions, Truist, Encore Bank, Cogent Bank, Seacoast, Wells Fargo, Regions, PNC and Bank of America.

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