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President’s Letter Summer 2016

July 06, 2016

Where Have All The Banks Gone?

Six years ago, there were 8,000 banks in the US. Presently the number stands at 6,100. Where have they gone? Should we care?

Many banks disappeared amidst the tumult of the 2008 global financial crisis either by failure or merger. Burdened by poorly underwritten, over leveraged loans and a collapsing Real Estate market, many were absorbed by huge banking conglomerates.

Still others sought the merger route, combining assets to become regional entities, and attempting to satisfy skittish shareholders.

The bigger question is, does it make a difference?

If you are even slightly concerned about the economic viability of our communities, then it absolutely matters.

As recently as April of 2016, the Federal Reserve and the FDIC warned that they were not satisfied with the contingency plans of five of the nation’s eight largest banks.

The banks have until October 1 to correct those issues or face restrictions on their activities including an increase in their capital levels. In practice, this may require a curtailment in some of their business activities.

Eight years ago, these banks were deemed “Too big to fail”. Today, it may be more appropriate to call them “Too big to succeed”—at least in our local communities. Let me explain.

From a purest sense, a bank’s lifeblood is its ability to loan money at reasonably priced, market competitive and profitable rates and to secure Deposit Accounts (checking, savings, CDs, IRAs etc.) The amount of Deposit volume is a determinant in the bank’s capacity to lend.

National and regional banks are able to secure deposits through their vast geographic branch systems complemented by electronic banking capabilities. The problems often arise when local customers apply for small business loans or mortgages.

Because of sheer volume, most of the national and regional banks have centralized their loan processing. That means a mortgage application for a waterfront home may be reviewed and processed by someone in Kansas. The decision maker on a seasonal business loan application may be in Indiana.

Best case, loan decisions often take extraordinarily long. Worst case, the loan is not approved due to a lack of understanding or inflexible qualification standards. Consider too, these banks are under constant shareholder pressure to show profits and process huge loan portfolios. The fastest way to close that gap is to cater to larger volume loans in excess of $100 million.

The reality in banking is a large portion of the home and business owners’ credit needs in our area fall through the cracks. Enter the mutual bank. Closely held, there are no shareholders but only meaningful stakeholders (Depositors, Borrowers, Valued Employees and the Communities Served). While earnings are important to fund growth potential, mutual banks are not hostage to quarterly results. Our focus is long term with an emphasis on our local communities.

There are 500 mutual banks in the US. Manasquan Bank is the 50th largest mutual bank in the country and is among the best performing mutual bank in New Jersey. We are among the top 11% of all banks in the country in terms of total assets. We have recently surpassed $1 billion in assets.

From a borrower’s perspective all loans are processed right here in our Wall Township headquarters. Decisions are made in a matter of days not months. From a depositor’s perspective, the bank has eight, soon to be 10 branches.

Manasquan Bank is competitive in all aspects that matter to the consumer and small businesses alike. We use similarly capable banking platforms as the nation’s largest institutions and our free checking and rewards checking products are among the best in terms of options and interest rates.

While traditionally a residential lender, Manasquan Bank, began transitioning a number of years ago to a full service community banking institution. That transition has resulted in a better balanced loan portfolio that is almost evenly split between residential/consumer and commercial loans.

While this portfolio diversification helps to mitigate risk, it also provides us the opportunity to stimulate the local economy by offering businesses a local financing source.

Manasquan Bank is a significant financial institution that offers competitive terms and pricing based products and delivers them in a consumer friendly way. If you haven’t visited one of our branches or spoken to one of our residential or commercial loan officers I urge you to take that step.

You will be impressed by our service and reassured that local banking is alive and well in Monmouth and Ocean Counties.

James S. Vaccaro
President and Chief Executive Officer


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