Pub. 10 2020 Issue 4

5 PUB. 10 2020 ISSUE 4 Dale Brown — Research Director, Phoenix Business Journal First appeared in the Phoenix Business Journal on December 10, 2020 zero. It’s also worth noting that interest rates are currently tied almost exclusively to the pandemic’s economic fallout. It is entirely fair to assume that those rates will begin to rise once the vaccine starts to ameliorate current economic indicators. Personally, I don’t see that happening until the first quar - ter of 2022 at the earliest. How healthy are Arizona’s banks? Arizona’s banking system is healthy and resilient. It is well-positioned to weather the current storm. The regulatory reaction to the Great Recession of 2008 put the industry here in a much stronger position, particular - ly in terms of capital buffers and liquidity, than a decade ago. The $64,000 questions for the banking industry now are how long will the pandemic weigh down the broader economy? And how much more help will the federal government provide in what’s left of the current administration and into the new administration early next year? The answer to the first question depends on how fast the vaccines can penetrate our popula - tion, which turns on how many people will get immunized and how soon. We hope that there will be another round of stimulus in the near-term to bridge us until we have a significant portion of our population vacci - nated and, therefore, back at work and play. Does Arizona have the right mix of large, national scale banks and community banks with a better knowledge of the local scene? Is there room for more local banks, and how have recent deals impacted that? Yes. While it is not the largest banking sector of states of our size, it is diverse, measured by asset size. All three of the “money center” banks larger than $1 trillion operate here. We have a significant number of regionals and super-regionals. And we are holding our own with community banks, Community Development Financial Institutions and credit unions with assets below $1 billion. There is plenty of room for more local banks. We have two community bank de novos working their way toward opening sometime next year (Scottsdale Community Bank and Gainey Business Bank). That said, we are not exempt from the ac - celerating M&A trend sweeping the country for the last several years. This year we saw Arizona Bank & Trust take over the assets and liabilities of Johnson Bank, and the First Citizens merger with CIT impacted us. (Keeping in mind that CIT acquired Mutual of Omaha Bank last year, which had a significant footprint here.) It would appear that until the de novos come online, we will go into 2021 with two fewer banks than we started the year, which will take us from 65 to 63 banks stretching from Phoenix to Flagstaff, Tubac to Tuba City — and all points between. w How healthy are Arizona’s banks? Arizona’s banking system is healthy and resilient. It is well-positioned to weather the current storm. The regulatory reaction to the Great Recession of 2008 put the industry here in a much stronger position, particularly in terms of capital buffers and liquidity, than a decade ago.