Commonwealth National Bank (CWEA)
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National Bank believes
people what they want - personalized, community-oriented banking, with local
decision-making that they can rely on
CEOCFOinterviews: Mr. Valade, what was your vision when you started the bank and where are you today?
Mr. Valade: Our vision was to create a locally owned and run bank similar to what the Worcester banks were like in the seventies. I think we saw many changes that took place back in the eighties and nineties with mergers and consolidations that affected the service levels being delivered to customers. The straw that broke the camels back was when Bank of Boston announced that Fleet was acquiring it and Banknorth announced that it was being acquired by Peoples Heritage. Several local businessmen announced that enough was enough and decided to create a locally owned and controlled bank headquartered here in Worcester. In terms of where we are right now, we have grown the bank to about $175 million in assets in roughly two and a half years. This growth has been achieved in spite of a very difficult economic environment and tremendous competition. I think it is a reflection on the service, responsiveness to customers, product offerings that we have and the success of our original vision of what the market wanted but were not getting.
CEOCFOinterviews: Will you tell us how the economy is faring in Worcester?
Mr. Valade: Worcester has always had a very stable economy. I have been in Worcester since 1974 and although we may have seen some downturns in the economy, other than the early nineties, the local economy has always been resilient. We do not rely upon high tech nor do we have a high reliance on the automotive industry. Worcester benefits from having about a dozen to fourteen colleges and universities in and around Worcester County. We benefit from a large number of insurance companies as well as medical facilities. We have UMass Medical, which is a teaching hospital, Tufts University which has its veterinary school in the Worcester area and the Mass College of Pharmacy has a satellite location in downtown Worcester. The Biotech initiative has been strong in Worcester for about fifteen years and generates a great deal of employment and growth. Worcester has a great transportation system that allows companies to locate here and service all areas of New England. That, along with an MBTA train station, has helped fuel the growth in residential development in and around the Worcester area. That has caused housing prices to rise but has drawn many people from the Boston area as a result of the value people can get here as compared to the Boston area. Boston is only fifty minutes away which has helped the migration to Worcester County.
CEOCFOinterviews: Commonwealth offers a no nonsense approach to banking needs; what does that mean?
Mr. Valade: We hired highly experienced employees right from the beginning. We do not have people who cannot make decisions. I have been in lending for thirty years and when someone comes in for a loan, it does not take me very long to make a decision in terms of whether or not we want to begin a relationship. In terms of the branches, they are empowered to make a decision. If they need flexibility on an account, CD rate or whatever, they have the authority to make the decision. It is not as if they have to go up two or three levels of command to try and figure out whether they can take care of a particular customers needs. I think what we have is a long-term commitment to grow and develop relationships. We are willing to be flexible in the short run, if we think that in the long term, it will benefit us and the customer.
CEOCFOinterviews: How do you get new customers?
Mr. Valade: Word of mouth! On the consumer side, we do a lot of marketing and advertising and that seems to work well. On the commercial side, it is not the advertising but the satisfied customers that are referring us to other people. My experience over the years is that you do not market necessarily for your commercial accounts. You have to rely upon the attorneys and accountants, but more importantly, satisfied customers that are saying give this bank a chance. Then there are the product offerings. We came to the market in a very aggressive manner and did not begin like a typical de novo bank. The first year, we had a bank that was fully staffed with more experienced people than banks that were larger. People are clearly our most valuable asset. Our growth is the result of our employees, our products, the service we give our customers and word of mouth referrals from these satisfied customers.
CEOCFOinterviews: What is your mix between consumer and commercial presently and would you like to see that change?
Mr. Valade: In terms of the lending side, it is probably 80-85% commercial and the balance is consumer. On the deposit side, it is probably 60% consumer and 40% commercial. I would like to see more of the consumer business coming in. As we continue to grow our branches, then we will see more consumer business coming in. We have internet products that allow people to bank with us from outside the marketplace. The reality is that in this market, you need to have more branch presence, which is why we are growing our branches the way we are. We would like to add one or two branches per year. Northbridge is our fourth branch in the Blackstone Valley. It is a great marketplace, which is exploding in growth for the consumer and the commercial accounts. We are now in the process of trying to find our next branch, and hope to have it open by the summer of next year, and then start to work on another one for later on next year.
CEOCFOinterviews: Are there products and services, which you are not offering now, that you feel you would like to or need to offer?
Mr. Valade: I think that we have the capabilities to offer just about anything that 90 to 95% of the public wants. On the commercial side, we have a great partner in Fiserv, which handles our backroom operation and is commercially oriented. We know that we are very competitive in terms of our internet products because as we pull in more and more accounts, we find that our products are perceived as better than the larger banks they are coming from. On the consumer side, we offer all of the various car loans, personal loans, mortgages and home equity loans. What we do not do is offer insurance or personal investment products. That might come in time, as our branch system and consumer business expands and demands these products.
CEOCFOinterviews: Are mortgages a big item for you?
Mr. Valade: We chose not to get into the mortgage business because we did not want to have to staff a mortgage department at the beginning given the fact that we only had one branch at the opening and felt we would not be competitive enough. We also had to focus our efforts where we thought it would bring the best return at the earliest time. For these reasons, we chose to focus on commercial products, which in hindsight was the right choice. I think as our branch system grows, we are finding that our home equity business is growing phenomenally with minimal advertising. I think what it is telling us is that our consumer business is picking up for us and we are at a point now where we are thinking about expanding the mortgage product offerings.
CEOCFOinterviews: Will you tell us about community involvement for the bank?
Mr. Valade: We are a good corporate citizen. We have made a commitment to give back to the community both in terms of dollars as well as peoples time. We have a budget for contributions and donations that will grow as we grow. It had to be realistic given the fact that we were in a start up mode. We probably help fifty to seventy-five different local agencies a year in some fashion monetarily. Beyond that, it is my belief that we need to give back to the community, so I make sure that most of our employees are involved both locally and in the communities where they live.
CEOCFOinterviews: What sets you apart from smaller community banks in your area?
Mr. Valade: I think we have the best people in the community in terms of what they bring to their job, their commitment, and what they do to go over and above to service their customers. Our commercial accounts will typically have a minimum of three and up to five people that have good familiarity with a particular account. In case there was a problem, there is a high likelihood that there is going to be someone here that you can physically talk to, to get a problem solved. Beyond that, I think that our products are state of the art. The nice thing about creating a new bank is that your technology is state of the art. We spent a lot of time on that technology and we introduced all the products that we needed to service the needs of the local marketplace right from the beginning. The other piece is that on the commercial side, there is no other bank in our market with five lenders that have the experience that ours do. The larger banks dont nor do the smaller ones. We do not waste peoples time. People look at us as a small bank but our capabilities resemble much larger banks. Our largest relationship now is about ten million dollars because we are able to participate loans in excess of our lending limit with other banks around the state. We have many friends in other parts of the state that are anxious to build their portfolios because demand for commercial loans may not be as strong in their markets as it is in the Worcester area. We are able to make much larger loans than a typical smaller bank can, because of those friendships and the relationships we have built over time.
CEOCFOinterviews: What are the qualities you look for in your people?
Mr. Valade: I need people that enjoy working as part of a team; they need to understand the word we and not just I. We need people that understand that their job description is not limited. We need people that are willing to do whatever it takes to get the job done. We need people that are going in the same direction. I think we have a common goal in growing the bank but I need to make sure everyone is on the same wave length. We need to communicate where we are, what our goals are and how we are growing. What I try to tell everyone that comes here is that I want two things out of everyone. I want to have fun during the day because if you are not having fun then you need to have a different job. Secondly, I do not want wallflowers; I need people that are not afraid to speak their mind and offer advice. We bring many years of experience to the marketplace and I need to hear that because that is how we, as a bank, become better and stronger. What we have tried to do is blend a couple of cultures within the bank. Our commercial lending team came from one particular organization, and our operations and branch people came from a different organization. What we have been able to do is take best practices from both areas and create Commonwealth National Bank.
CEOCFOinterviews: Why should investors be interested and what should they know that they might not realize when they first look at the company?
Mr. Valade: When we first raised the initial fourteen million dollars in capital, we told people from the start that there was going to be a five to seven year hold because of the nature of a de novo bank. If you need liquidity, it may not be the right bank to be in so we tried to be honest and up front with people. As we grow, our shareholders have grown. When we raised an additional seven million in capital last year, we expanded our shareholder base, which has now started to create some liquidity for the stock. I think the reality is that we are creating a niche for ourselves in the Worcester County marketplace. What people need to understand is that all of the larger banks have a presence in Worcester. Thinking longer term, we are looking at acquisitions or mergers to grow. If it ever comes to a point that we feel a sale is in the best interest of our shareholders, we feel having a strong presence in Worcester will add value to anyone interested in acquiring us. We do think there is an exit strategy at some future point; if that is the route we take. I think we will try not to be everything to all people, but to grow the commercial portfolio and create a demand for this particular institution in the marketplace. Realistically, we would like to start acquisitions probably in the next year or two. We would like to look for people and other banks around the state with the same philosophy and character as we have. They may want to share a backroom operation but maintain their autonomy in their own market. That is where we see this going.
CEOCFOinterviews: In closing, what is your focus on a day-to-day basis?
Mr. Valade: My day starts early and ends late. I spend much of my time developing loan volume. I have been a lender my whole career and it is one of the things that I enjoy the most. I spend the day interacting with people and meeting customers, as well as looking for branch locations. It is this enthusiasm that is contagious. I enjoy coming to work and dont mind the hours that it has taken to get our bank to the stage that we are at. I think it is beyond my wildest expectations in terms of where we have come in this short amount of time. I try to spread enthusiasm to everyone in the bank. That is what sets us apart. When customers come through the door and see our enthusiasm and the fact that we want them in our bank, they understand that we are the bank that they want to be with. We think they are seeing the difference
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