Almost six months into his job as president of Martha’s Vineyard Savings Bank, Paul Falvey said the bank is on solid financial footing and has restructured its staff to adapt to a tighter regulatory environment.
In the last two months, chief operating officer Richard Leonard has retired and the job of senior loan officer, held by Brad Egan, was eliminated and their duties divided among several employees, he said.
At the same time, Tom Sharkey has taken on additional responsibilities as chief financial officer, Mr. Falvey said.
“Functions have been split up and reshuffled across the organization,” he said, noting that the reorganization had been begun by the bank’s board before he arrived. The changes were spurred by a “comprehensive look of what’s the right structure today for this bank and this environment.”
In a wide-ranging interview this week with the Vineyard Gazette, Mr. Falvey talked in detail about the financial condition of the Island’s largest bank, heightened regulatory scrutiny facing all banks and how Martha’s Vineyard Savings Bank is responding.
Saying he was legally prohibited from doing so, he declined to talk about his predecessor, Christopher Wells or the circumstances under which Mr. Wells was permanently barred from banking by the Federal Deposit Insurance Corporation.
Mr. Wells left the bank abruptly last May with no explanation from bank trustees. The FDIC order against Mr. Wells was made public last week.
But Mr. Falvey stressed repeatedly that the bank’s financial condition is strong, with total assets of $505 million and an additional $182 million in assets in the trust division as of March 31. At the end of 2011, assets were $525 million plus $170 million in trust assets. With banks contracting all across the country, the decrease in assets is not unusual or a cause for concern, Falvey said.
Losses from loans that had to be written off also have been modest, he said. In 2011 the bank lost $88,000, with $68,000 in residential loans and $20,000 in commercial loan writeoffs. In 2012, the bank saw $248,000 in loan related charge-offs, including just $3,000 in residential loans and a $200,000 charge-off on a loan to an affordable housing development in Oak Bluffs. The bank was assisting in trying to produce affordable housing and “the project didn’t go well,” Mr. Falvey said.
In the first quarter of this year charge-offs are less than $20,000 he said. “For a bank this size these numbers are approaching zero in terms of losses,” he said. “We see modest losses going forward approaching, as a relative term, that zero level.”
In 2012, Martha’s Vineyard Savings Bank was 24 out of 152 Massachusetts banks in terms of capital, he said, and Massachusetts banks are among the strongest in the country.
At 12.94 per cent, the bank’s capital ratio, that is, the bank’s capital relative to its total assets, is higher than the national average of 11.4 per cent for banks between $300 million and $1 billion in assets, he added.
Return on assets, the earnings compared to the size of the bank, puts the bank at 40 out of 152 in the state.
Mr. Falvey said the need to restructure had its roots in the origin of the bank, which was created by the 2007 merger of the Duke’s County Savings Bank with Martha’s Vineyard Cooperative Bank: “Two relatively small community banks that came together right before the financial crisis in 2008.”
While the bank grew and commercial lending expanded, he said: “You have bank structure, talent, expertise, experience that’s consistent with two relatively small community banks doing fairly traditional things.”
At the same time, “You have scrutiny, the quantity of regulation, the intensity of it, going like this,” he said, gesturing upward. “It’s just the dynamic of the industry.”
The senior lender position, held by Mr. Egan, for example, “was structured in my opinion consistent with a much smaller, less complicated bank,” he said. Mr. Egan left in late February, and his job split into two: one focused on credit and administration and the other focused on lending, Mr. Falvey said.
“It is the typical and preferred structure for a bank of this size and complexity,” he said. A new role was created for an audit/risk manager within the bank who will manage internal audit functions, a position the bank did not have previously.
Mr. Leonard, who was president of Martha’s Vineyard Cooperative Bank before the 2007 mergerand had been in community banking on the Vineyard for 28 years, retired at the end of March. Mr. Falvey called his departure “just an unfortunate coincidence in timing, absolutely unrelated [to other events going on at the bank].”
He underscored the bank’s role as a community banking institution. “This is about long-term commitment to the community,” he said, citing charitable giving and a willingness to write local loans that might not meet national standards.
While he said he was barred by FDIC regulators from saying whether or not the bank experienced losses, Mr. Falvey said the period of transition, including hiring outside consultants, came with expenses.
“The bank has spent a lot of time, effort and some expense . . . doing this comprehensive review,” he said. “I’m certain the bank comes out of this in much better shape, but investment has been made.”