Chesapeake Bank

“Now I’m serving time for mistakes made by another in another lifetime.”

“The banks need more regulation.  Look at the mess they got us into!” seems to be the mantra today.  I was home sick last week and made the mistake of watching the news.  The story opened with a graphic showing “Wall Street” and the red pitchfork of the devil.  The announcer immediately went into a diatribe about the arrogance and greed of banks.  Needless to say, there was no discernment between the handful of money center banks and the 8,200 other banks in the country.

If you sense I’m a tad bit sensitive about this topic, you’re right!  The community banks of this country did not precipitate this calamity.  The whole situation reminds me of a line from an Indigo Girls song – “Now I’m serving time for mistakes made by another in another lifetime.”  Community banks like Chesapeake Bank have continued to lend in this economic recession and be supportive of the economies of the communities they serve.

The clarion call from Washington for greater regulation will unduly penalize the community banks of America – the ones who have continued to “play ball” over the past year.  The disparate impact these proposed regulations will have on the industry is to drive smaller banks out of the market and further exacerbate “the big are getting bigger” (too big to fail) problem.

So, the next time you hear or read a report about the need to get the banks under control, think critically about your bank down the street and what they’ve done for your community.  If you think we need to be tarred with the same brush, so be it.  If not, please speak out!

FDIC Special Assessment

Unlike many of the other banks, we’re coming off the best year in the 109-year history of Chesapeake Financial Shares. Though the current economic environment is ripe with challenges, today, we have been successfully navigating the various curveballs thrown to us.  The largest of these curveballs is the FDIC special assessment to help replenish the Bank Insurance Fund.  The initial proposal that was floated approximately three months ago would have erased 1/5 of our projected net income for the entire year.  The final ruling that came down will be costing us approximately a quarter of a million dollars that was unknown at the beginning of the year. I fully anticipate another special assessment being levied against the banks before the end of the year. It is important to note that bank bailouts cost the taxpayers nothing. All the costs of bank failures are entirely borne by the premiums contributed by the banks supporting the FDIC system. In these recessionary times, the effect of additional FDIC assessments has a pro cyclical effect on banks already having difficulty with earnings. Using the old adage “hindsight is 20/20,” strengthening of the Bank Insurance Fund in more profitable times looks like the way to go.

With the turmoil the financial services industry is undergoing right now, I don't think I should have any shortage of topics on which to blog. I do think it's important to point out that Chesapeake Bank was voted among the top 200 community banks in the United States for the second year in a row! This year we came in at number 64.  This list is compiled by US Banker magazine and is reflective of the three-year average return on equity of each of the institutions. Out of the 7000+ community banks included in this population, we’re very proud of this fact.

I'd be interested in any comments you have on the above or topics or any that you would like to see me cover in the future.