Message from local bank leaders

With a wave of high-profile banking failures sending shockwaves across the global financial system and stoking fears of an incoming recession, the Citizen reached out to two local bank CEO’s to see how they are faring amid the crisis and to determine whether local depositors have any reason to be alarmed.

Nick Maffeo, President & CEO of Canton Co-operative Bank

Nick Maffeo

Massachusetts has a very unique banking structure with the prevalence of small- to mid-size community banks operating under mutual charters as savings or co-operative banks, many with staying power — tracing their roots back to the 1800s. Rather than making decisions strictly to maximize stockholder returns in an immediate manner, mutual community banks focus on customer service and act as stewards of their depositors’ funds to make sure those funds are available when needed for lending or transactional needs. As a result, banks such as Canton Co-operative Bank generally maintain much higher capital and reserve levels and higher levels of liquidity than other types of banks.

Also unique to Massachusetts is the existence of a dual deposit insurance system. While all banks are members of the Federal Deposit Insurance Corporation (FDIC), most (but not all) co-operative and savings banks are members of the Depositors Insurance Fund (DIF), which insures any funds over and above the traditional FDIC limits of $250,000. As a result, DIF member banks carry 100 percent deposit insurance, and the DIF notes that no depositor has ever lost a penny in a bank insured by both the FDIC and the DIF. The DIF has a long history and was created by the Massachusetts legislature in 1932. The insurance fund itself has been operational since 1934, and this dual insurance system still remains very unique to DIF member banks in Massachusetts.

Banks in Massachusetts are subject to some pretty intense regulatory oversight by the state Division of Banks, the FDIC, and the Federal Reserve, and their relatively small size, compared to the mega-banks of the world, truly allow the regulators to very thoroughly and completely analyze their financial condition. Having served as an FDIC bank examiner for over a decade prior to joining Canton Co-operative Bank, I have seen firsthand how banks in Massachusetts have evolved their risk-management practices to maintain a very strong and relevant industry.

In addition, there is a general spirit of cooperation amongst the small and mid-sized banks that adds further strength to the banking landscape.

Stephen Costello, President & CEO of Bank of Canton

Stephen Costello

Two basic concepts separate Bank of Canton from the troubled banks making headlines: long-term-focused risk management, and 100 percent deposit insurance.

Bank of Canton is a mutual savings bank, not a stock bank. We’ve operated for the benefit of our clients and communities since 1835. We’re not owned or controlled by shareholders; we’re owned by our clients — people just like you. This corporate structure allows us to focus on long-term performance and stability, not quarterly returns.

Our leadership team, overseen by our board, develops strategies for both the short-term and long-term success of the bank, factoring in various possible economic shocks — things like recessions, interest rate shifts, and wildcard events like COVID-19. This preparation is part of our risk management program, which we monitor constantly. Occasionally, to preserve the bank’s health and flexibility in the long term, we make financial sacrifices in the short term (as we did by not overextending ourselves when interest rates were low). But that flexibility allows us to withstand sudden changes in market conditions, as we’ve done with the rapid rise in interest rates.

Today, our positioning of loans, deposits, cash reserves, and investments is well prepared for the current business environment. We’ve maintained a diverse loan portfolio, deposit base, and other funding sources, so we’re not overexposed to any one single industry or financial trend. Our liquidity ratios are in the top 20 percent of our national peer group, and our capital levels and profitability are strong.

In addition to having a solid balance sheet and strong earnings, we’re a member of the Depositors Insurance Fund (DIF) of Massachusetts, which insures 100 percent of all deposits above Federal Deposit Insurance Corporation (FDIC) insurance limits.

As you evaluate your banking relationships in light of current events, please consider the value of historical performance, mutual ownership, DIF insurance, and proven fundamentals that have stood the test of time.

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Posted by Guest on Mar 31 2023. Filed under Featured Content, Opinion. Both comments and pings are currently closed.