by Will Tuell

Despite lingering unease over the health and stability of the banking industry brought about by the collapse of two regional banks recently, officials from one of Maine’s largest banks said in an interview last week that the state’s banking industry is on much firmer ground. Machias Savings Bank Chief Financial Officer Matt Walsh and Senior Vice President for Downeast and Northern Maine Jonathan Alley said that while jitters were understandable, community banks like MSB employ conservative investment strategies, are relatively low risk, and are heavily insured by the Federal Deposit Insurance Corporation should conditions turn sour. 

Walsh explained that it is important to understand that banks like Silicon Valley Bank, which failed earlier this month, operate much differently from MSB and other Maine-based community banks, saying that SVB had a high concentration of investments in the tech sector.

“That’s probably one of the biggest causes of failure for SVB – they were so heavily concentrated in the tech sector, and that concentration risk really led to their demise in the end because what eventually happened was a classic run on the bank,” Walsh said, “All of this boils down to consumer confidence, the confidence of individuals in the institutions they bank with. In California, as well as New York [Signature Bank], which again was a very unique case with a lot of crypto-based depositors, [those are] very, very different institutions that exist here and headquartered in Maine.”

When asked what makes Maine in general, and MSB specifically, different from banks like SVB, Alley said that banks here tend to be more representative of the communities where they do business, acknowledging that it’s “understandable” that people would be concerned about their banking institutions based on what they see on TV, but that both his employer, and Maine bankers, in general, are on more solid ground. 

“Outside of customers double-checking their FDIC insurance, maybe asking general questions, I don’t see that it’s going to have much of an impact at all on Maine-based banks. [MSB President and CEO] Larry [Barker] has put it out a couple of times, but Maine’s got very boring banks if you will,” he said. “so we aren’t in the middle of these venture capitalists, and cryptos, and so forth. We [MSB] invest very conservatively. We’re well diversified. We have ample liquidity, so we’re in good shape financially. And through the reviews we have done by the FDIC and others, we’re considered well-capitalized…People ask questions, they want reassurance, and I think we [MSB] have done a good job of that to this point.” 

Walsh said that one good thing to come out of the increased focus on how banks operate is that people are becoming more aware of the banking system and keeping a closer eye on their money. 

“I think all of this leads to people stepping back and taking another viewpoint of where they do their banking. Do they know their bank? Do they know their banking? Larry got many calls a couple weekends ago, as well as others the senior leadership team,” he said. “Consumers, individuals, and businesses should feel comfortable with where they bank. They should be able to reach out and ask questions and determine that it’s safe and sound. I think all of this leads folks to reassess where they choose to do their banking and place their deposits. I think community banking is alive and well here in Maine, and things like this force folks to reexamine who they’re doing business with.” 

While national reports have people in other regions of the country seeking out “mega-banks,” as Walsh put it, the reverse is true in the Northeast, where he has seen an increased interest in banking locally. 

“What I can speak to is the Northeast and Maine,” he said. “in the past two weeks, we’ve had many of our customers reach out to bring things here that were elsewhere because of their confidence [in us]. I think we’ll see more of that. Speaking to other banks around the state, they’re seeing similar trends.” 

When asked if uncertainty in the state’s lobster fishery – which has led MSB and others to donate to a legal defense fund established by the Maine Lobstermen’s Association – could pose a threat to his bank, Walsh explained that while MSB has a lot of customers in the industry, senior management has worked hard to diversify the bank’s portfolio, so a similar event doesn’t happen here. 

“That is a good example of something that could be perceived as a concentration risk,” Walsh said. “Say, hypothetically, MSB had 80% of its loans against lobster boats, gear, fishermen, and businesses; that would be a concentration risk. MSB is heavily invested in the lobster industry. However, even as heavily invested as we are in that industry, it does not present a concentration risk even for us. That’s not to convey that we think there’s a risk in that industry at all. Rather, it’s to say that we do a lot of other banking activities, like commercial real estate and other commercial and industrial businesses. While we do have a lot in the lobster industry, it in and of itself doesn’t present a concentration risk to MSB.”

Alley added that while most customers fall well within the $250,000 FDIC insurance limit, MSB – and banks like it – have ways to ensure that customers with more than $250,000 in funds are protected and that people should not automatically assume that they need to spread their money amongst a wide array of institutions when their primary banker can work with them to make sure their money is adequately ensured. 

“I think it would be really good to make sure that consumers are aware that there are options beyond the FDIC coverage,” he said. “A lot of folks think that they need to spread their money out, but we have something that we can do in-house with all of their money to get it spread out where it needs to be to get full coverage, so all their money is insured.”

Walsh concluded by encouraging their own customers to reach out if they have any questions about 

“I think it’s important for consumers and businesses to know that they can reach out to their financial institution,” Walsh said. “They want to be confident where they do their banking, they want to ensure that their activities are safe and sound. And I would encourage anyone to reach out to those at their institution and talk about this.”