New Valley Bank and Trust President and CEO Jeffrey Sullivan. Photo courtesy of New Valley Bank and Trust
Banks and credit unions across Massachusetts have told similar stories in recent months about helping clients request loan deferrals, apply for the Paycheck Protection Program and take advantage of historically low mortgage rates.
But one Springfield bank entered the pandemic with a different perspective from the others. New Valley Bank & Trust, the state’s first de novo bank in more than a decade, had opened barely nine months before the economy shut down.
“Our staff has been remarkably resilient,” said Jeffrey Sullivan, New Valley’s president and CEO. “They’ve worked really well under pressure, considering we’re a brand–new team and had never done this before.”
Another difference for New Valley has been its approach to mortgage lending. Instead of setting up its own loan production office, the bank formed a unique partnership with another Western Massachusetts community bank for help with its mortgages.
Tight Margins Compel Growth
New Valley was opened in May 2019 by a group of long-time bankers, including Sullivan, who wanted to bring more small business lending options to Western Massachusetts. During the bank’s first nine months, the income statement and balance sheet tracked to expectations, Sullivan said. By the end of the first quarter, it had $85 million in total assets, $64 million in deposits and $36 million in outstanding loans.
The small loan portfolio meant that when the pandemic started, New Valley did not have to spend much time, unlike other banks, working on deferrals and other solutions for business customers, Sullivan said.
Instead, the last few months have given New Valley an opportunity to expand its loan portfolio. Even though it was an approved U.S. Small Business Administration lender and had previously processed an SBA loan, Sullivan said New Valley was initially left off the list of PPP lenders. This omission gave the bank time to build its own system for processing PPP loans, which he said worked to the bank’s advantage when applications did start arriving.
The program helped New Valley’s loan portfolio grow from 100 to 550 loans. But with low interest rates squeezing margins, New Valley needs to continue expanding its portfolio and increase its loan ratio, Sullivan said. He also wants to bring in more customers with full banking relationships, including those who turned to New Valley for PPP loans.
A partnership with Berkshire County lender Lee Bank helped Springfield’s New Valley Bank & Trust satisfy customer demand for mortgage lending, despite its small business focus.
What happens at other institutions could also help New Valley. The credit market could get tighter in the coming months, Sullivan said, giving New Valley more opportunities to find new customers. While he plans to take a sensible lending approach, Sullivan said small businesses will need help in the coming months.
“Not all of the businesses are highly capitalized, and we’re trying to be an advocate for the ones who need to look for ways to find additional capital, including SBA and other loans,” Sullivan said. “That’s a big part of what we’re doing, because we’re worried about mom–and–pop stores that don’t have deep pockets.”
A Unique Partnership
While it planned to focus on small businesses, New Valley also saw a demand for mortgages, especially as interest rates began to drop.
Rather than building its own mortgage office, New Valley turned to another Western Massachusetts lender, Lee Bank, for help.
Chuck Leach, Lee Bank’s president and CEO, said he knew some members of the team behind New Valley and had heard they were considering different options for mortgage processing. Lee Bank’s five branches are in Berkshire County, further west than New Valley’s market, but it has a loan processing office in West Springfield, managed by Senior Vice President of Retail Lending Paula Lewis.
New Valley refers customers to Lee Bank, which then process, underwrites, closes and services the loan. Lee could sell the loan to New Valley.
“It’s a really interesting partnership and it really works on both sides extremely well,” Leach said. “We’re not really direct competitors because we’re generally in different geographies, and we’re able to provide the factory, if you will, and they’re presenting us with the opportunities that, at least in this point in their trajectory, they’re unable to really handle.”
Tom O’Connor, a partner with GT Reilly and Co., a Milton-based firm offering audit and tax services to community banks and credit unions, said he as not seen many residential lenders form this type of partnership. Commercial lenders often participate in loans together, O’Connor said, and he has also seen larger institutions build relationships with smaller institutions by providing technical support.
This type of partnership made sense for a de novo bank, O’Connor said, adding that CEOs at community banks often share information.
Diane McLauglin
“We think of these banks as competing against one another, yet in reality, they have a lot in common, and they’re very friendly amongst each other,” O’Connor said. “I know the CEOs frequently and regularly get together in these same small groups for the purpose of sharing information on what’s successful, what’s working for them, and that willingness to share that information I always found was interesting.”
Leach said what has made the partnership work between New Valley and Lee Bank is their common approach to community banking.
“We’re just truly trying to be boots-on-the-ground community banks and exploit where other medium or large banks have moved up market and are pursuing a model of scale and massive build-out,” Leach said. “We’re focused on keeping it very hands on and not necessarily trying to just get bigger and bigger but make every interaction count.”
