🔒The new chairman of the Maine Bankers Association checks in

The global financial crisis of 2008 brought many changes in the banking industry, particularly in the area of mortgages. Notably, the 2-year-old Dodd-Frank Wall Street Reform and Consumer Protection Act introduced a number of new regulations to protect consumers. But, according to Chris Emmons, president of Gorham Savings Bank, it's also introduced complications into the lending process for banks and consumers alike.

The new chairman of the Maine Bankers Association believes banks — particularly local community banks, which he says have benefited from the "buy local" trend — will play a large part in the financial recovery. As an example, he cites the roughly $2 billion in lending "pushed through" by MBA's 30 member banks, all of which he will personally visit over the next 12 months.

Mainebiz recently sat down with Emmons to talk about the issues faced by Maine banks. The following is an edited transcript.

Mainebiz: How is Maine's banking industry doing?

Emmons: Maine banks are in great shape, particularly compared to the rest of the country. I would attribute that to the fact that we've always followed traditional business models. The underwriting of mortgages during the last 10 years or so at the national level — the robo-signings and all of those things — by and large, Maine banks don't operate in that mode, so we don't have the toxic assets that hit a lot of the larger banks in other parts of the country.

Have historically low interest rates affected bottom lines?

Banks are feeling the squeeze. What banks typically do is underwrite a 30-year mortgage and have the option to sell that loan. We get a fee and we don't have the interest risk on our books for 30 years. But if you make loans at today's rates and tie that money up for 30 years, when rates do move up, income from those loans is going to be very low. The only option banks have when they get squeezed is to either lower operating expenses or funding costs. As we look at operating costs, there are two big parts. The first is employee salary and compensation, and the second is regulatory costs — and that's an area where we've seen significant increases.

What impacts have new regulations had on banks?

Our residential business has changed a lot. The nature of what we do today to document mortgages — whether it's flood insurance, whether it's appropriate underwriting tests — all the components of compliance have added a lot of paperwork and are driving up costs. It's complex and there are still changes being made.

What effect have credit unions had on community banks?

They are competition for banks, and what has always been the challenge is that there are two areas that differ between credit unions and banks. First is the tax component. Credit unions are not paying taxes, so we get a handicap because we're offering essentially the same services, but we're paying taxes... We also have Community Reinvestment Act requirements, a very important part of our business. It's lending to minority businesses, it's investing and lending to low- to moderate-income housing — things we do to make sure all people are treated equally and fairly. We get regulated and scored on that, and if we don't score well in that area and we apply for a branch in a new region, the regulators can turn us down. Credit unions don't have that same kind of oversight. n