Ingram's March 2023

High-profile failures in coastal markets only serve to highlight the stability of banks in Kansas and the region, executives say. Kansas Banking: Moderation in the Middle

I n banking, there is sexy, and there is stable. Rarely do the two travel together down the road of commerce. March 2023 provided yet another example of the stark differences be tween the former style of high flyers like Silicon Valley Bank in Califor nia and Signature Bank of New York and the “boking banking” practiced by community banks in Kansas. Federal regulators shut down those two large banks in the biggest fail ures since Washington Mutual, with more $300 billion in assets, went down in 2008 at the start of that year’s bank ing crisis. SVB catered to clients in the venture capital and tech space; Signa ture was known for its heavy involve ment in cryptocurrency. Sexy? For the moment, they were. Now, they’re gone. The wave of mild bank panic that pounded share prices of investor owned institutions didn’t bypass the Midwest entirely; Kansas City-based UMB was tagged by Moody’s for fur ther review of its uninsured accounts. So was INTRUST Bank out of Wichi ta, which is privately owned. But ex ecutives from each offered assurances that their overall financial positions remained strong. And so it was across Kansas, said Doug Wareham, CEO of the Kansas Bankers Association, whose members hold $93 billion in combined assets. “Kansas banks maintain very strong capital levels that are well above cur- rent regulatory standards,” Wareham said. “They also maintain record levels

of loan-loss reserves, which serve as an additional buffer for potential shocks to the economy.” Citing FDIC statistics, he noted that non-accruing loans, including non-performing ones, had plunged by more than 31 percent year-over- year as of early March. It was also important, he said, to note that in the 88-year history of the FDIC, “no one has ever lost a penny of an insured deposit and that Kansas bank- ers work closely with their custo- mers to insure levels above the $250,000 protection threshold set by the FDIC. Thus, he said, the recent bank closures “appear to be outliers and are not reflective of the norm or fin ancial strength of banks across Kansas and across America.”

tainly has created some challenges for bankers as they adjust to this eco nomic environment,” Herndon said. “An apparent cause of the two banks that recently failed is from a lack of diversification and a concentration on particular industries.” By contrast, he said, “Kansas banks are diversified and not overly reliant on singular volatile markets, certainly not underperforming ones. I believe Kansas banks will effectively manage through this economic period. Kansas banks are well-capitalized and have strong reserves .… The U.S. bank ing system is safe and sound, Kansas banks especially.” For the broader region surveyed monthly by Creighton University econ- omist Ernie Goss, the March loan vol- ume index turned in a strong per

“Increased operational costs relating to regula tory compliance and cybersecurity are also major factors contributing to bank consolidation in today’s market.” — Doug Wareham, Kansas Bankers Association

KC Street Car

His public-sector counterpart, state bank commissioner David Herndon, echoed that, but pointed to slow-mov ing economic trends that overwhelmed slower-moving leadership at SVB and Signature. “The rapid rise in interest rates, after being so low for so long, cer

formance, rising to 63.0 from 48.1 in February, and it was up slightly from 61.9 in March 2022. The checking deposit index increased to 40.9 from February’s 38.5, and the index for cer tificates of deposit and other savings instruments surged from 57.7 in Feb ruary to a record high of 75.0.

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