Pub. 10 2020 Issue 4

8 www.azbankers.org Tactics for Navigating Tectonic Shifts in Liquidity By Scott Hildenbrand, Piper Sandler T HIS YEAR HAS PRESENTED BANK MANAGEMENT TEAMS with many issues to juggle, many of which seemingly pull in opposing directions, and most of which were not firmly on the radar to start the year. Such is life in 2020. Some banks’ primary concerns stem from the fact that the industry has seen a shift in liquid - ity. Balance sheets are flush with deposits relative to recent periods, while securities holdings have come down relative to assets. The build-in balance sheet liquidity has come in the form of cash, with an unusually high 7.6% of assets held in cash and equivalents as of June 30. This drastic change in the liquidity picture is best encapsu - lated by the Cash and Unencumbered Securities-to-Assets Ratio’s significant uptick. The ratio has surpassed the average over the past 14 years of 20.6%, steadily climbing toward the high of 24.7% last seen in 1Q13. Source: S&P Financial, Banks and thrifts with assets between $250 million and $25 billion