The Bank of Fall River is a small community bank. And for the time being, John Clifford, bank president and CEO, wouldn’t have it any other way. It is a four-branch bank with $134 million in assets that has been around since 1888. Institutions such as his largely avoided the subprime craze of recent years and thereby sidestepped a lot of the subsequent meltdown.
He recently answered questions about the financial crisis from the perspective of a community bank.
PBN: What is your opinion of the administration’s strategy of investing $250 billion in financial institutions?
CLIFFORD: The federal government and governments on a global scale are trying to stabilize the credit markets by infusing significant funds into many large national and international financial institutions in an attempt to strengthen these entities balance sheets. Bank of Fall River, like most community banks, will not require any capital infusion from the federal government. Most community banks are operated conservatively and therefore have been immune to the current market meltdown. However, it is in everyone’s best interests to have our credit markets operating in a stable fashion, and therefore at this time I support the government’s efforts.
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PBN: What kind of effect will the government raising the Federal Deposit Insurance Corporation limit from $100,000 to $250,000 have on banks of your institution’s size?
CLIFFORD: The increased FDIC deposit-insurance limits should reduce the level of anxiety in the markets and provide added comfort and security to all depositors. Massachusetts state-chartered co-operative banks, such as the Bank of Fall River, have always provided deposit insurance in excess of the FDIC limits. The additional insurance coverage offered through the Share Insurance Fund (SIF) protects all deposits in excess of the $250,000 FDIC insurance limit.
PBN: Massachusetts also has the Share Insurance Fund. Tell us a little bit about it – i.e. what it covers, who it covers and how much?
CLIFFORD: The Share Insurance Fund (SIF) is operated by the Co-operative Central Bank, which is located in Boston. The SIF was established by the Massachusetts Legislature in 1934 to provide protection for deposits in Massachusetts-chartered co-operative banks. As a state-chartered co-operative bank, Bank of Fall River is a member in good standing with the SIF and offers this excess insurance to all depositors. All deposits regardless of the amount are 100-percent insured. There are a number of controls in place that make the state-chartered co-operative bank system one of the safest and soundest in the country. These include:
• Legislative controls as provided by Massachusetts laws on banks and banking.
• Regulatory controls by appropriate supervision, examination, quarterly reporting and administrative rules and regulations of either the FDIC, the Federal Reserve Bank of Boston, or the Commissioner of Banks for the Commonwealth of Massachusetts.
• External audits by independent public accountants.
The Rhode Island financial institutions involved in the fiscal crisis in the early 1990s did not operate under the systems of controls described above. Additionally, these financial institutions were not members of and therefore did not provide deposit insurance through the FDIC or the National Credit Union Association.
PBN: Some people have at least partially blamed the Community Reinvestment Act (CRA) – a federal law intended to encourage banks to do business with low- and moderate-income customers – for the crisis we’re in now. What’s your view?
CLIFFORD: While CRA requirements may have contributed to the financial crisis, the bottom-line [cause] was aggressive lending to individuals who could not afford the loan. Bank of Fall River never participated in any subprime lending. Bank of Fall River has consistently received “outstanding” CRA ratings from both the federal and state banking regulatory bodies. Like most small banks, Bank of Fall River always took the high road when talking with potential customers, and over the past several years there have been many potential customers who we told were not financially ready to purchase a home. However, we did not abandon them; we helped them and coached them through the process, and now some of these individuals are proud homeowners.
PBN: As the crisis ripples outward from Wall Street, even banks that made prudent decisions in the past are feeling the effects. Can you outline some of those effects on your bank and how you’re handling them?
CLIFFORD: Bank of Fall River’s loan volume has increased substantially. We have seen a marked increase from business owners seeking financing for their business. The bank has plenty of funds to lend and assist new and existing borrowers. The bank is operating in full-service mode and will continue to do so. During the past few weeks we have received more than the usual number of questions about deposit-insurance coverage limits. All of the bank’s employees have been trained to assist each customer so that the customer understands how FDIC and SIF insurance coverage works.
