The scariest days in Johnny Allison’s 41 years of banking came last year after Silicon Valley Bank folded last March.
The liquidity crisis that followed “really hit the banks,” said Allison, who heads Home Bancshares of Conway and Centennial Bank. “The cost of funds shot up, and it was just a crazy, dangerous time. The key from my perspective was what happens if there’s a run on the bank.”
That’s what happened with Silicon Valley and another bank that swiftly failed, Signature Bank of New York (not to be confused with Fayetteville-based Signature Bank of Arkansas).
“It was frightening,” Allison said, recalling the crisis during a broader conversation about the current commercial lending environment. “Someone said, ‘Johnny, can we pay out?’ I said, ‘Hell, I don’t know. Nobody’s ever asked that question. Nobody asked if a bank can pay out its uninsured depositors.’”
But if any bank facing that crunch could do it, it would be his bank, Allison said. “That’s the strength of having amassed one of the best capital ratios in the country,” he said. “We protect our shareholders and depositors.”
He said Centennial never put money into long-term securities, as Silicon Valley Bank did. “We didn’t put our money into low-rate securities. We look like geniuses today, but it’s just a matter of operating properly.”
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