On Friday, March 10, Silicon Valley Bank of California failed.
The next business day, March 13, as banks opened across Southwest Florida, one local bank got ahead of the grim headlines by reassuring customers its capital was intact and there were no worries. Another local bank ignored the chaos across the country publicly but privately reassured concerned customers.
The apples of a bank that drowned in cryptocurrency and segments of the technology sector collapsing couldn’t compare to the oranges of diversified interests in Southwest Florida, said both William Blevins, president and CEO of Gulf Coast Business Bank in Fort Myers, and Patrick Philbin, chief financial officer of Edison National Bank in Fort Myers.
“Sanibel Captiva Community Bank and Edison National Bank have been around 20-plus years,” Blevins said. “They’ve been through a recession. They have earned their stripes. [Gulf Coast Business Bank has] been around nine months.”
Gulf Coast Business Bank released a two-page letter to customers explaining the situation.
“Silicon Valley Bank is the first bank closure in the country in almost three years, a testament to the resiliency of America’s banks and the collective ability to support our nation’s economy,” part of Blevins’ statement said. “Regulators are confident the Silicon Valley Bank failure is a unique event—there is no indication of systemic liquidity issues.”
Blevins said the California incident related to the national pandemic response.
“One of the problems with the Silicon bank, they had a ton of cash infused in 2021,” Blevins said. “Everybody did after the pandemic came. The government flooded the market with cash. When you have too much cash, you have inflationary pressure. Interest rates have gone up faster in the past six months than they have in the previous 20 years. They had a concentration of deposits with a lot of hedge funds. A lot of their money was concentrated in the tech sector.”
When they got spooked, it caused a mad run of withdrawals, dooming the bank, Blevins said.
That mad run didn’t carry over to Southwest Florida. Philbin didn’t expect it to, which was one of the reasons his bank held off on a public reaction to the national news.
“We chose not to,” Philbin said. “Because it looked like a tech and cryptocurrency-based panic. At some point, if you say something, you wonder whether you are throwing gasoline on the fire? We addressed customers who came in. We called certain people. But we didn’t make a broad statement.”
When the glut of pandemic-related cash entered the market, Philbin said his bank didn’t make any rash decisions with it.
“They [SVB] got caught in a liquidity bind so when their customers wanted their deposits back, and they didn’t have available liquidity to meet their customers’ withdrawal requests,” Philbin said. “That’s not the case down here. I don’t worry about our bank, and our customers haven’t either. Our loan-deposit ratio is about 30%. And that’s a reflection of the fact we didn’t take the glut of deposits over the last couple of years and try to immediately deploy them into new assets.
“We have more than an ample liquidity cushion if things were to slow down. We haven’t seen that. We’re a very cautious bank. We’ve been here 26 years. We survived the Great Recession of 15 years ago, while a number of local banks, they failed. We’re just a cautious, conservative group. We’re capital strong. We’re well-known in the community.”
On Wednesday, the Federal Reserve again raised interest rates by a quarter of a percent in its ongoing move to curb inflation. The rising rates are just another challenge for local banks, but Blevins and Philbin each said this region has a different scenario than much of the rest of the country because of the aftermath of Hurricane Ian.
“Those things take time to have an effect,” Philbin said of the rising rates and the overall economy. “These things just don’t happen instantaneously. For an individual, it makes things a little more expensive. It costs more to buy a home for a first-time home buyer. It tends to slow the economy down. We’re not seeing it here yet, because we’re still recovering from the hurricane. With the amount of insurance money that’s coming in, we’re a little bit different than the rest of the country now.
“I would suspect it’s going to impact first-time home buyers.”