Ingram's March 2023

BANKING

Asked by Goss’ survey what in terest rate action the Federal Reserve should undertake at its March 21-22 meetings, 56.5 percent of bank CEOs recommended a 0.25 percent rate increase; 30.5 percent supported a half-point boost, and 13 percent ad- vocated no rate change. Those re sponses, he noted, were recorded before the big bank failures that came in the following weeks. “It’s too bad that the Fed waited so long to raise interest rates,” Jef frey Gerhart, former chairman of the Independent Community Bankers of America, said in Goss’ monthly up date. “They could have begun raising interest rates sooner than they did and would not have had to raise them as fast as they’ve done.” He did, however, applaud the Fed for raising interest rates and its willingness to stay the course to get a handle on infla tion. Banking authorities say SVB and Signature may portend a larger clean sing of poorly positioned banks on a national level. Perhaps, but it’s hard to envision changes at that level making much of an impact in Kan- sas. The U.S. went from nearly 24,000 banks in the mid-1960s to slightly fewer than 9,000 when the finan- cial crisis of 2008 set in, and since then, the ranks have been further thinned by one-third to fewer than 6,000 today. In a very real sense, Kansas bank ing has already been through a wash

out: Since 2008, it has seen the uni verse of banks fall from 340 down to 210, largely through consolidations as the leadership of family-owned banks hit retirement age. What remains, though, is a sounder statewide banking system, Wareham says. “Consolidation is not a dirty word,” he said. “It’s always been part of the natural evolution of business and in dustry, and banks are businesses, too. Banks are constantly striving to achieve a size and scale that keeps them competitive and capable of pro viding their customers with state-of the-art financial services.” There’s plenty of capital at re maining institutions to grease the gears of commerce, but Wareham points to a different cost, a social one, imposed by a shrinking pool of banks. “The unfortunate negative impact of fewer bank charters is the loss of the leadership, especially in rural communities, that comes from the loss of executive level banking po sitions and the loss of a local bank board of directors in a specific com- munity,” he said. “Bankers are lead- ers that drive economic development, they serve on municipal boards and committees, they spearhead commun- ity programs and projects, and they mentor and develop business entre- preneurs. Communities, large and small, need leaders, and when a bank charter is removed from a commu- nity, there is a leadership void created that is difficult to fill.”

For the banks that remain, a major barrier to continuing profitability and service to their communities is the ever-increasing cost of meeting regu latory burdens. The sad irony, bank ing executives say, is that many of those regulations have been imposed to address the bad behaviors of much larger banks, which are only increas ing in mass as compliance costs tank the small ones. “I would argue that increased op erational costs relating to regulatory compliance and cybersecurity are also major factors contributing to bank consolidation in today’s market,” Wareham said. “Other negative fac tors contributing to consolidation in- clude more government interference and restrictions on non-interest bank income and ever-increasing competit ion from non-bank competitors that often enjoy preferential tax treatment to traditional banks.” But what’s left today is a healthier banking climate, he says. “Yes, I be- lieve banks in Kansas are in a strong er financial position than they were in 2008, but I don’t believe a reduced number of bank charters is the lone or even major driver of that strength,” Wareham said. “Banks perform well when local and state economies per form well, and we’ve experienced an extended period of positive economic growth in numerous business sectors, including agriculture, energy produc- tion, and information technology in Kansas.”

Sunflower Strong FDIC figures for banking performance in 2022 reflected a solid year for institutions in Kansas. The bottom line: Loan growth and continued strong credit quality are particularly encouraging signs that the state’s economy was holding up in an uncertain environment.

For 2022, compared to 2021:

Defaults and other non-performing loans declined by: 31.54 %

Loans grew by: 11.16 %

Assets grew by: 1.71 %

Net income declined slightly by: 1.61 %

Deposits grew by: 1.58 %

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DestinationKansas.com

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2023