| Frustrated with poor bank service and few local options in the wake of several mass mergers, a group of Worcester businesspeople have until Sept. 1 to take matters into their own hands and create a commercial bank where the tellers know your name.
Falling just short of two self-imposed deadlines, a start-up bank in Worcester now has until Sept. 1 – this time the official deadline set by the federal Office of the Comptroller of the Currency – to raise $12 million in capital. If the extended deadline is met and the remaining regulatory approvals granted, Commonwealth National Bank would be able to open for business later this year. According to Commonwealth officials, while all the money has not yet been collected, the bank already has enough commitments to reach its goal.
If successful, Commonwealth would be the first de novo bank to open in the area in 10 years. Its competitive edge will be its local touch, according to bank executives.
“Our directors are from the community; they live next door to their customers. It’s a lot more difficult to make negative decisions when you live and work in the same community,” said bank President Charles R. Valade.
The bank will be a federally chartered, full-service institution for both individuals and businesses, with a focus on small- to medium-sized, closely held family-owned businesses in the Worcester market.
“In Worcester County, that’s about 95 to 98 percent of the market, which gives us a lot of room to grow,” Valade said.
The Commonwealth team originally gave itself until July 1 to raise the required capital through its stock offering, reserving the right to extend the deadline to Sept. 1. But a combination of poor timing (the prospectus appeared just before tax season and during a stock market decline) and unforeseen regulatory hurdles resulted in only about $9 million in the bank by July, with about 200 shareholders.
Optimistic that they would be able to raise the remaining capital quickly, Commonwealth extended the deadline to Aug. 15. While some checks are still in the mail, so to speak, a total of about $12.3 to $12.5 million has been raised, including about $2 million in commitments yet to be fulfilled. Commonwealth now has about $10.6 million actually in the bank, including $925,000 in seed money.
In the past month and a half, the number of shareholders has risen to more than 500, a significant increase, said Valade, who noted that many investors are using self-directed IRAs as an alternative to using liquidity.
The $12 million goal is much more aggressive than the minimum $6 million or $7 million in capital required to start a bank, according to Valade.
“We chose the more aggressive goal to give us the maximum amount of flexibility to grow the bank,” he said.
The most ambitious part of the endeavor has been raising the capital, the management team agreed, especially in the face of a sinking economy and declining stock market. But in that challenge has also been the pleasant surprise of people still willing and able to invest in the idea of a new bank. Even other community banks have come forward to offer their expertise to the start-up.
The bank is scheduled to open in early November, assuming Commonwealth receives the various regulatory approvals. The bank’s headquarters, which are being renovated, will be located at 33 Waldo St. in Worcester, with four branches on West Boylston and Grafton streets and in Auburn and Shrewsbury likely to open in the first half of next year, Valade said.
Commonwealth will offer commercial, real estate and consumer loans, as well as standard services.
“The range of products is basically identical from bank to bank. I can’t sit here and tell you that our products will be dramatically different. But I think it’s how you develop those products, how you stick with the customer and how you deliver those products that counts,” said Valade.
The bank plans to hire about 30 employees once open; already Valade has received 50 resumes.
“Our goal on the retail side will be to differentiate our service,” said Senior Retail Officer Andrea White, who worked at another de novo bank, Flagship Bank and Trust Co., which began in 1987. “We will hire intelligent people able to make decisions in each branch.”
A Nice Way
Three years down the road, the bank would like to have $250-280 million in assets, according to Chief Financial Officer William M. Mahoney. How big is too big? Rather than being determined by a particular size, too big is simply when a bank loses its local touch, Mahoney said.
“As long as our organizers are in charge, I don’t see that size makes a difference,” he said. “People’s attitudes, the philosophy of the organizers and directors, will be how we differentiate ourselves … It’s how you grow big.”
Senior Vice President and Chief Credit Officer Christine Trifari agreed.
“We have a fairly aggressive growth campaign and balance sheet. It’s very unusual for a bank as small as we’ll be to have a credit officer, which reflects the commitment of the organizers to grow the bank,” she said.
The bank’s original organizers all do business in the area. They are: Larry Glick, vice president and co-owner of Bancroft Motors in Worcester; Bryan Rich, senior vice president of Nations Rent in Shrewsbury; Gerald Cohen, founder, principal and president of SF Properties in Brookline; Normand Marois, retired chief executive officer of Marois Brothers Inc. in Sutton; and Henry Michie, treasurer of Mercantile/Image Press Inc. in Boylston.
According to Glick, the idea of starting a bank from scratch originated from conversations over the years with other businessmen concerned about the decline in service in the area, particularly in the wake of the mass mergers of Fleet and BankBoston, and the engulfing of Mechanics Bank, Peoples Bank, and Flagship by larger institutions.
“Often car dealerships get a bum rap for customer service. But I see the service I get [at banks], and it’s a disgrace: the long lines, tellers who don’t really care,” Glick said. “We thought, why can’t we open a local bank to serve the community and take care of people in a nice way? It’s not rocket science.”
Taking care of people also comes into play in the way the bank itself is run and the experience of its staff. Valade began his career working at Mechanics Bank, and stayed on after its acquisition by Bank of Boston in 1994, later moving to First Massachusetts Bank as senior loan officer. Mahoney has more than 23 years of broad experience in the field, having worked at FleetBoston Financial Corp. and served as chief financial officer of Mechanics Bank, where he met Valade.
Trifari has more than 17 years of commercial banking experience; she and Valade worked together at First Massachusetts in the late 1990s. White was branch administrator at Flagship; Valade and she met along the way. All stress a team approach.
“Our job descriptions are all-encompassing. There won’t be anything we won’t all be willing or able to do. We work as a team; there will no individual superstars,” Valade said.
The challenges ahead include competing for deposits; a strong marketing campaign is in the works to make people aware of the new bank. But the local support for a new bank is apparent to those involved.
“You can see a lot of excitement on the part of people and businesses. Even people on the street are excited about the idea of having a new bank,” said White.
