President's Message

Edward L. Hennessey, Jr.

Machias Savings Bank has seen several consecutive years of record growth and increased profits.  However,  all this came to an end in 2008.  Although our core banking earnings were very strong, the performance of the stock market caused our net income to be reduced by approximately $7,400,000 in security losses.  For those of you who have a 401(k) retirement account, compare your value as of the end of 2007 to that at the end of 2008, and you can better understand the situation we face.  Machias Savings Bank’s stock portfolio has made substantial contributions to our net income over past several years, but we have paid much of this back in 2008.

For many years, the success of our Bank has been built upon our natural resource based economy.  Our timber, lobster, blueberry and wreath industries have all seen a decline in 2008 and we do not expect much of an improvement in 2009.  Who would have believed that we would see lobster prices approaching $2.00 per pound for several weeks during the 2008 fall harvest?

Interest rates have decreased continually throughout the year with many of our older depositors no longer able to make ends meet from their interest earnings, requiring them to deplete principal from their savings accounts.  Conversely, these lower rates have allowed many home borrowers to rewrite their mortgages to lower rates.

During my many years at the Bank, we have seen tough times.  In 1981, we saw interest rates of over 20%.  In the late 1980’s, we saw a collapse in real estate values, with many of the country’s Savings and Loan Associations becoming insolvent.  In 2002, we saw the technology stock collapse, with many stock portfolios losing over 50% of their value.  The crisis we are experiencing today was caused primarily by Wall Street greed and the fact that millions of people received loans they had no ability to repay.

This past September, our new modern branch was completed on Cottage Street in Bar Harbor, and has been a huge contributor in attracting new accounts on Mt. Desert Island.  Our future plans to construct a branch facility in Brewer have been postponed until we see an improvement in the economy.

Our plans for 2009 are to slow our growth, control our expenses, put all major expansion projects on hold, and to concentrate on working with our existing borrowers, some of whom are working through very difficult times.  We are fortunate to have strong capital levels.  We are also fortunate that we did not participate in the sub-prime mortgage markets.

In closing, I would like to say, once again, that your Bank is very strong.  We pledge that we will always be known as the local Bank that knows, understands, and cares for its customers.  I would like to thank you, our valued customers, for your continued support.  We look forward to continuing to strengthen customer relationships by providing personalized banking in 2009 and beyond.

Edward L. Hennessey, Jr.
President, CEO
December 31, 2008