Regional bank CEO discusses recent industry woes

When Silicon Valley Bank (SVB) collapsed March 10 – the largest failure since the 2008 financial crisis – regional banks received a cascade of negative attention.

While experts agree SVB’s downfall was due to several factors related to risk management and a subsequent bank run, its focus on venture capital and technology startups also underwent intense scrutiny. Despite customers withdrawing billions from smaller institutions and depositing their money into those deemed “too big to fail” in the immediate aftermath, one regional bank CEO is not backing down from his commitment to the local innovation ecosystem.

While Cogent Bank welcomes all owners and companies, CEO Chirag Bhavsar said supporting innovative startups and founders is an inherent part of the institution’s DNA.

“That’s kind of how we see ourselves,” Bhavsar said. “Tech-enabled, and pushing the envelope where we can to bring technology to our clients. And that’s what we see these businesses doing. So, we want to do whatever we can to support them.”

The Orlando-based bank launched in May 2018 and has a significant presence in Tampa Bay. Two of its eight branches opened in Clearwater and Tampa in 2020, and Cogent officials hosted a November 2022 discussion on blockchain-enabled payments from their new Pinellas County Banking Center.

While Bhavsar said it is natural to fear the unknown, he stopped short of saying that last month’s banking crisis worried Cogent’s leadership team. They are well-prepared for those instances and lack certain “ingredients” that led to SVB and Signature Bank’s collapse.

“Everything from asset liability issues, concentration, low margins – all of that stuff,” Bhavsar added. “We didn’t have those.”

Chirag Bhavsar, CEO of Cogent bank, offered his thoughts on the recent banking crisis. Photo provided.

He said the bank’s board of directors sets parameters to guard against credit, liquidity and capital rate risks. They also account for potential cybersecurity and “reputational” incidents.

Bhavsar said Cogent did not experience mass withdrawals – unlike many regional banks nationwide. However, he noted officials did receive numerous questions regarding stability.

He said statistical data typically alleviates those fears and that Cogent could provide Federal Deposit Insurance Corporation (FDIC) protection to large depositors if needed. The congressionally created independent agency’s standard insurance amount is $250,000 per account.

“Small businesses, and frankly, innovative and tech businesses, need to be able to extract what they can out their balance sheets so they can continue to grow,” Bhavsar said. “And we believe we have the tools in our toolkit that can be really helpful to those businesses.”

Most founders launch startups with limited funding and struggle to scale without offering equity or ownership stakes. Bhavsar said Cogent’s Small Business Administration loans and specialty financing options could provide much-needed non-dilutive capital.

He added that the bank’s leadership believes in supporting innovative businesses “because we see them as the future.” Bhavsar believes many of those burgeoning founders have the technology and skill sets to become industry leaders.

“We want the ability to work with them while they’re on the ground floor,” he said. “You look back to how we did business 20 years ago, in differing industries – we don’t do it the same way anymore. And the technology will allow us to move forward.”

Bhavsar said that challenging times could create opportunities. While time will tell what those look like, he believes Cogent and other regional bank officials can capitalize if they remain disciplined.

However, he does expect to see additional mergers and acquisitions by the end of the year. Bhavsar said Florida was home to over 300 banks when he began his career in the industry nearly 30 years ago, and there are now around 90.

He said “it is reasonable to assume” that number will drop to less than 50 in the next three to five years, even though “Florida is a phenomenal state to do business.”

The industry continues evolving, and Bhavsar said regulatory changes are just one of many factors behind the precipitous decline. Either way, he believes competition is good for consumers.

“Banks provide capital to the communities that they serve,” Bhavsar said. “And the more of them that are out there, the ability for borrowers and others to access capital is greater.”