Patriot Community Bank will open its doors for business today at 237 Lexington St. in Woburn.
Today, a small bank in Woburn will open its doors for the first time and enter the competitive arena of community banking in the Bay State.
John O’Donnell, founder of Patriot Community Bank, admits de novo banks such as his face a more challenging climate now than they did a few years back. He points to rising interest rates and the shrinking loan market as new hurdles for today’s community bankers.
But just because it might be a hard thing to pull off for some doesn’t mean the timing is not right for a new bank in his chosen area, he said.
“We are there. It’s been a long haul,” he said last week after receiving his certificate to conduct business at 237 Lexington St. in Woburn from the Massachusetts Division of Banks.
“Myself and my investors feel there is a need for a small community bank,” he said. “We decided to put one together to fill that void. It’s a personalized service.”
Peter Conrad, executive vice president and treasurer of The Co-operative Central Bank in Boston, said Patriot is the 69th cooperative bank in Massachusetts.
“We are thrilled. There hasn’t been one formed in such a long time,” said Conrad. “There used to be over 100 cooperative and savings banks, but over the years they have been gobbled up by larger institutions. There is going to be demand for locally based banks.”
According to Conrad, it has become increasingly difficult for smaller banks to remain profitable. But a wave of mergers and acquisitions has left some communities high and dry when it comes to local banking options.
“It’s a tough time for banks in general because of the yield curve and what the Fed is doing. It’s a hard time for banks to raise deposits,” said Conrad.
However, there is a great opportunity to attract business at a local level. Conrad said some people argue that “like politics, most banking should be local.”
“What the community bank offers is if you have a complaint, here I am. You are not going to get a number where someone says, ‘Your call is important to us,'” said Conrad.
O’Donnell said he really wants his bank to feel and act like a bank set up to serve the community. To make sure that happens, he has developed a strategic plan to encompass what he sees as better ways to serve customers with a personal touch.
For example, he has hired a staff of 14 people with a great deal of experience to help run his operation. Since the workforce is already equipped with a strong knowledge of the banking business, employees will be able to make decisions such as approving an overdraft on the spot for customers. He said the staff is also prepared to offer a quick response time on loans. O’Donnell noted it should take one to three days for most loan decisions.
‘A Big Difference’
But business aside, O’Donnell said the bank really will strive to capture what community banking is all about. He said the idea of his de novo began locally and has stayed true to those beginnings throughout the organizational stages.
O’Donnell added that when the idea first came to him there were a handful of local business people willing to put up a large portion of the funding he needed. Just over a year later, Patriot is opening.
“It’s a symbol of a healthy banking system. It’s also difficult to do,” said Bruce Spitzer, director of communications for the Massachusetts Bankers Association. The investors are local, he said, and there are not any venture capitalists helping to fund the bank.
So far, O’Donnell has raised $9.1 million, but it could take a few more investors to make it an even $10 million, he said. However, he was only required to raise $8 million to open the bank.
Conrad said raising the initial capital is the first hurdle a start-up bank needs to overcome. It is one thing to gather support for the concept of a local bank; it is another thing to get people to put their money where there mouth is since investors know they will not see a return until the institution begins to turn a profit, he said.
“The big issue [was] being able to raise the $8 million,” said Conrad. “There is a big difference between talking about it and doing it.”
O’Donnell said he is hoping to see the bank become profitable in three years. The goal is to have $100 million in assets by that time, he said. It is a goal that O’Donnell calls both “conservative and achievable.” However, he also admits sticking to the timeline will be a challenge.
“It’s hard now. We are in a different margin market right now. You have to be competitive,” he said, acknowledging competitive pricing and customer service are going to be essential to making his bank successful. “I am up for the challenge. We just need to be able to sell that to the public.”
O’Donnell has more than 20 years of banking experience, most of which has been with cooperative banks. He said part of the reason he opted for a state cooperative charter was because of the added insurance it provides. The Co-operative Central Bank provides addition deposit insurance to its banks beyond what is provided by the Federal Deposit Insurance Corp., which is typically $100,000 per account.
O’Donnell said being a start-up and being able to assure customers that their accounts are protected should help generate business for the local community. The bank is planning to host a grand opening on April 18. “I think we have crossed all the T’s and dotted all the I’s,” said O’Donnell.
The branch is 7,000 square feet spread across two floors. The main floor houses the teller stations. Stairs lead to a lower level where residential and commercial lending takes place. Until the bank does turn profitable, O’Donnell said, he will not be looking for other branch locations. However, he can imagine more local branches in the future, he said.
O’Donnell said community banking is all about going the extra mile to really know your customer base. He said it requires more than just providing the financial products to address their needs. It’s also about getting to know them as people, he said.
“Getting to know their first names when they walk through the door, that’s worth a million dollars,” he said.
