The financial sector has been under intense scrutiny after the failure of two large financial institutions that specialized in high-risk industries, such as the cryptocurrency sector. Some depositors in local communities might be wondering what this means for their hard-earned money. But consumers — and policymakers in Washington — must distinguish between community banks and these large banks with a much different business model and risk profile. Community banks like Merchants Commercial Bank, primarily focus on the needs of the communities that they serve versus larger institutions that tend to have a much different business model and risk profile.
Merchants Commercial Bank, which has been serving consumers and small businesses in the Virgin Islands of the United States (USVI) since 2006, was chartered locally in the USVI to provide state-of-the-art financial resources to consumers and small businesses in our community. Like other community banks, we continue to make decisions based on the community’s needs and continuously contribute to the USVI community through our loan products, charitable donations, and other beneficial programs.
The financial institutions recently closed by regulators were not like the local community banks that help the nation’s consumers, small businesses and their local communities thrive. Before its closure on March 10, Silicon Valley Bank (SVB) was the 16th largest bank in the nation with $213 billion in assets at the end of 2022. However, given SVB’s heavy concentration of customers in a single sector of the market (i.e., tech companies), these depositors quickly began withdrawing their funds amid concerns about the bank’s liquidity.
Signature Bank of New York, which failed just two days later, also suffered from a concentrated balance sheet. Fueled by the SVB panic, depositors quickly began to withdraw their funds. Regulators closed the bank to prevent additional bank runs and to ensure that the Federal Deposit Insurance Corporation (FDIC) would be able to make depositors whole. Unlike, SVB and Signature Bank, MCB focuses on different market sectors in the USVI, has a diverse balance sheet, and continues to reflect liquidity ratios that align with regulatory guidelines and typically exceed our peer group.
The Deposit Insurance Fund, which the FDIC uses to insure deposits, has a record-high balance. Americans do not have to worry about the safety of their deposits. That is especially true for customers of community banks.
Our unique and time-tested model, which is followed by community banks in communities all across the country, is best suited for USVI consumers and business owners. We stress one-on-one, face-to-face relationships with the small businesses and residents we serve. We know what small businesses need because we are one. Because Merchants Commercial Bank relies on relationships and our reputation, we are dedicated to looking out for our customers’ long-term interests.
That outlook means we focus on established banking practices that have served our community for generations. As the FDIC’s latest Quarterly Banking Profile attests, community banks’ asset quality is favorable, total deposits are stable, and capital ratios remain strong.
This isn’t the first-time community banks have weathered a financial crisis. We proved stable during the 2008 Wall Street meltdown and the COVID-19 pandemic. We are here for Merchants Commercial Bank customers through every stage of the economic cycle, and we have been for almost two decades.
These bank failures highlight the strengths, importance, and value of community banks like Merchants Commercial Bank. Our banking model remains the same — one business, one customer, one loan at a time. Community banks continue to be the backbone of the banking industry by providing both economic growth and stability to the communities they serve.
We’re ready to meet you anytime and anywhere to show members of our community that our responsibility is to you, not to Wall Street or Silicon Valley.
Jim Crites
Editor’s note: Jim Crites is CEO of Merchants Commercial Bank
