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V O L . X X X N O. V I I B A N K I N G / F I N A N C E / I N S U R A N C E I n March 2023, the sudden collapse of three U.S. banks in quick succes- sion — California's Silvergate and Silicon Valley banks and New York- based Signature Bank — roiled finan- cial markets and stoked fears over the durability of small, regional lenders. Today, troubles at New York Community Bank are sparking fresh concerns about regional banks nationwide. e worries are centered on lenders that are heavily exposed to chunks of the estimated $2.2 trillion in commercial real estate debt set to mature by 2028 — and needing to be refinanced at higher interest rates. Even in smaller, more conservative markets like Maine, whose community lenders pride themselves on their diver- sified portfolios, cautious approach and relationship banking, turbulence in com- mercial real estate "should be front and center for banks," says Mark Williams, a finance lecturer at Boston University's Questrom School of Business. Banks should consider "battening down the hatches" by, for example, reducing real estate lending and demanding extra col- lateral, he says. Like banks across the country, Maine banks are getting impatient for the Federal Reserve to cut interest rates after 11 increases starting in March 2022 pushed up the Fed's main rate to a range of 5.25% to 5.5%, up from a range of 0.25% to 0.5%. Central bankers tight- ened monetary policy to tame inflation, which was a byproduct of the growing economy and heightened consumer spending amid supply-chain bottle- necks following the worst days of the pandemic. "e Fed is really stressing the banking industry," says Andrew Silsby, president and CEO of Augusta-based Kennebec Savings Bank. "e economic environ- ment is really quite difficult, but I haven't quite figured out whether we're through the storm or in the eye of the storm." While central bankers on March 20 reaffirmed the likeli- hood of three rate reductions this year, the timing remains anyone's guess. Markets have dialed back expectations for rate cuts, now bet- ting that the Fed won't start trim- ming borrowing costs until July. For banks, higher interest rates can cut both ways. On the one hand, they can boost banks' earnings from lending to consumer and commercial borrow- ers. However, if rates are too high for too long, that can strain the financials of current borrowers and dissuade new ones, hurting banks' bottom line. P H O T O / T I M G R E E N WAY Dan Walsh, president and CEO of Norway Savings Bank, is bullish on banks' ability to weather the current turbulence. F O C U S A P R I L 1 , 2 0 2 4 14 RIDING OUT THE STORM Amid economic uncertainty and growing impatience with the Fed, Maine banks keep calm and carry on B y R e n e e C o r d e s

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