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Interchange Financial Services Corporation (IFCJ) |
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CEOCFO
Interview Index |
This is a printer friendly page! Interchange Financial Services
Corporation’s efforts to maintain efficient, friendly, courteous service is giving
them a competitive edge in Bergen County, which is experiencing economic and population
growth Interview conducted by: BIO: Anthony S. Abbate is President and Chief Executive Officer of Interchange Bank and Interchange Financial Services Corporation (Nasdaq: IFCJ), parent company of the Bank, which is headquartered in Saddle Brook, New Jersey. Since becoming President in 1981, he has led the Bank’s asset growth from $78 million to a $1.4 billion company and has expanded the Bank’s service area to include 29 branches in 26 Bergen County towns. At Interchange Bank, Mr. Abbate has developed a work atmosphere rarely found at other financial institutions. He believes in promoting from within, with many of his key executives being long-time employees with more than 15 years at the “Bank.” He empowers his employees to do whatever is necessary and proper to guarantee the highest level of customer satisfaction. Interchange Bank’s corporate philosophy has instilled each employee with the confidence and purpose to fulfill customers' needs and, consequently, the Bank remains at the forefront of community banking in Bergen County. Mr. Abbate has a widespread reputation as a champion
of community banking philosophies. He has provided testimony before the House Banking
Sub-Committee and the New Jersey Assembly and Senate Banking Committees. He has also
authored a number of articles on the vitality of community banking and has lectured
extensively on this topic. In addition, he has often been asked to address issues of
banking and finance on such radio stations as WABC,
WEVD and WOR,
and television networks CNN and CNBC. He has appeared on The Bloomberg Forum and Bloomberg Small Business programs, Cablevision’s
News 12 NJ, and was a frequent guest on the Bill Bresnan Show, a popular financial talk
program. A sought-after speaker, Mr. Abbate has addressed numerous national trade groups
and has conducted seminars throughout the country on a variety of banking topics. He is
often called upon by banking publications, particularly the American Banker, for quotes and commentary on various banking
issues. In 1993 and 1996, he received the Bronze CEO Award from Financial World Magazine, and was honored in 1998 as one of the recipients of the Ellis Island Medal of Honor. He currently serves as a director of the Independent Community Bankers Association for-profit subsidiary, ICBA Services Network and its subsidiary, ICBA Financial Services Corp. He is also a member of the Board of K-Sea Transportation Partners (KSP-NYSE). Mr. Abbate is married with four children and three
grandchildren, and is an avid musician, golfer and cyclist. CEOCFOinterviews: Mr. Abbate, you have been with Interchange over twenty years; what was your vision in the beginning and what is your vision now? Mr. Abbate: “I have seen a vast change from Interchange’s beginnings. Then, it was a question of just surviving - the bank was small, with 75 to 78 million dollars in assets and it had too many new branches that were weighing heavily on its profitability, which presented a challenge. Now, we are one of the largest community banks in the county, with 29 locations, and well over a billion dollars in assets. It’s clearly a big difference - $78 million to $1.4 billion.” CEOCFOinterviews: What are the basics, which remain the same for you in how you conduct business? Mr. Abbate: “The key to conducting our business is to bring the customer the Interchange experience, which I define as efficient, friendly, courteous service. We have practiced those principles since day one and I have drilled it into everyone. I continually reinforce our differentiators and that is what separates us from everybody else.” CEOCFOinterviews: How has Bergen County fared in the current economic times? Mr. Abbate: “I think Bergen County has done reasonably well and it is quite interesting that the largest employers are the hospital and healthcare industries. From years of slow growth, Bergen County has grown to 884,000 people, 33,000 businesses, and 331,000 households. The median household income is well over $65,000 and the medium house price has grown to $358,300. It is a good county economically, which makes it a desirable space for any financial institution to conduct business.” CEOCFOinterviews: How do you get new business? Mr. Abbate: “When people think of a Bank, we want them to think of Interchange. We do an extensive amount of marketing. I am a firm believer that marketing is what puts you in front of the customer and allows you to directly present your value propositions to them. Because people know us, we have a lot of business that is brought in through recommendation. We utilize a database system to manage customer relationships and track them. With our customer relationship management program and employee sales management program, we are able to mine existing relationships, while continuing to establish new ones.” CEOCFOinterviews: What is the mix of consumer and commercial relationships and would you like to see it change? Mr. Abbate: “Yes, I see it changing, I would like it to change and I am working on the change. A few years ago, our mix in terms of lending relationships was primarily consumer, such as residential, home equity loans and personal. It was roughly a 60/40 mix, about 60% consumer and 40% commercial. We are around 65% commercial today and we are trying to move to 70%. We feel there is a tremendous opportunity for a community bank, and we are a genuine community bank, not like the big ones who call themselves community banks. Our focus is being the bank on Main Street for the business on Main Street. And we feel that we can do a great job for small businesses.” CEOCFOinterviews: Does the small business come in primarily through the lending area? Mr. Abbate: “Well, yes and no; small business loans under $250,000 generally come in through the branches. Our Rapid Response Loan can deliver an answer to a customer within 48 hours on loan requests up to $100,000, which are low documentation loans. Above $100,000, we require three years of financial statements, tax returns and a personal financial statement. Being responsive to the needs of the small business person is an advantage and that is why people walk into our branches and request that particular product.” CEOCFOinterviews: You talk about innovative services, what is counted as an innovative service and what new things are coming up in that category? Mr. Abbate: “Rapid Response was certainly innovative. But we recently partnered with a travel remittance company called Travelex. Their technology helps to serve so many of the unbanked and underserved in our communities. What happens is, the individuals who do not have adequate means of transferring or sending money out of the country to their families, go to some of these remittance places and pay large sums of money to accomplish their objective. Our thinking is that if we can get people in the door, get them to know the bank, that they will eventually become banking customers and can go from being unbanked to banked. We also started an equipment leasing company.” CEOCFOinterviews: Will you tell us about community involvement for the bank because I know that is a strong point where you are concerned? Mr. Abbate: “Yes it is! We monitor all of the activities happening in our county as well as surrounding municipalities. Our sales director makes certain that there is a bank representative involved at numerous community functions. Most of our executives participate either on the board of directors or through other means with various charitable and non-profit organizations. For example, we were instrumental in helping the Bergen County Blood Bank get back on its feet. We also have other programs, such as the American Dream, which provides affordable loans for first time homebuyers. I, personally, have done fundraising for Saint Joseph’s Children’s Hospital in Paterson, New Jersey.” CEOCFOinterviews: Will you tell us about the fee-based services the bank has to offer? Mr. Abbate: “Bergen County is very competitive. Talk about fees and service charges, you can only charge what the competition allows you to charge. One can never get ahead of where everybody else is, so you have to be prudent about service charges. At one point in time, banks were charging for ATM cards, check or debit cards, as well as for accessing Internet banking. Suddenly the competition decided to undercut the market and now, there are no charges or fees in that market. Sooner or later, everybody follows everybody else.” CEOCFOinterviews: Do you see the need for any new branches? Mr. Abbate: “We are considering where we would like to go next and are seeking two locations this year. We are also evaluating the newest branches we acquired as a result of the Bridge View Bancorp acquisition as to overhead and profitability.” CEOCFOinterviews: Do you see the use of Internet banking leading to fewer branches in general? Mr. Abbate: “No, because the problem is that as long as banks continue to give customers access any way they want it, you are going to continue to have in-person banking. They put in ATM machines, Internet banking and voice response units because they thought that they were going to save money and less would be more. Turns out that the customer desires to do business several different ways and they don’t always use the same medium twice. I don’t think we are going to see Internet banking replace in-person banking. The proof of the pudding is the fact that everybody started to branch when branching was out. And now they want to branch because they think that branching will increase deposits. In our business, everybody follows one another; however, we believe that we are original thinkers.” CEOCFOinterviews: You mentioned the Bridge View acquisition; what else is still ongoing related to that? Mr. Abbate: “The market penetration of easterly Bergen County, where Bridge View Bank existed, is very much ongoing. Interchange is not well known in Eastern Bergen County, despite the fact we are Bergen County-based. We have the job of raising awareness in that community, getting the people to recognize who we are, that we are proven, have value and experience. They need to realize that we are a very good company to do business with. After all, our slogan is “The Bank For People Like You.” And we have to make people understand that we are indeed the bank for them. There are probably 450 to 500 million dollars in deposits that we could acquire, but first we have to introduce ourselves, which is why I say that marketing is everything.” CEOCFOinterviews: Do you do billboards or TV advertising? Mr. Abbate: “We do billboards and cable television ads when we are targeting certain markets. Right now, a NJTransit bus, en route in Bergen County, is wrapped in our name and logo. The bus runs north and south on the main road in Eastern Bergen County. We are trying to let people know we are here.” CEOCFOinterviews: What separates you from the other local banks? Mr. Abbate: “Our core values, our company messages and customer service. Our employees are dedicated to promoting the personality of the bank and the level of the excellence that we strive to offer each customer. We constantly communicate our core messages to the individual; not only in print advertising but also via point of purchase displays in the branch and the manner in which we conduct ourselves in the community. People constantly come up to me and tell me how wonderful my staff is and how well they are treated when they come into the bank. We need to communicate to everybody that they can have that same level of service if they do business with us.” CEOCFOinterviews: How do you know what the teller at any given branch is experiencing? Mr. Abbate: “We have a program in place where each quarter, flyers are sent to select audiences who are asked to rate the people in our branches. We can almost daily monitor the activity that is going on inside the branch through our sales management program. We know the kinds of products that are being sold at each desk. We call people up and ask them how their experience was. We also follow-up with a customer after they close a loan. We train and retrain. Our staff knows exactly what is expected of them.” CEOCFOinterviews: The interest rate scenario is one that people have not seen in a long time; how do you deal with the changes? Mr. Abbate: “We are probably at a 45-year low in interest rates. It has been a very difficult time because rates this low for this long erode customer loyalty. My competition is pricing irrationally to get business. People want to refinance their loans and they are going to the best and lowest offer, regardless of the relationship. We are competing against quite a number of savings-and-loans and savings banks that are not publicly traded. They have no bottom line responsibility to investors, so they can price products any way they want. When you deal with home equity loans and real estate mortgages there are embedded options within those products that allow the customer to leave anytime they want without a prepayment penalty. That has created a challenge for us. You have to manage and grow the size of your company. However, in a rising interest rate environment, I think a company that is asset sensitive in the short term as interest rates go up, will do a lot better than those that are liability sensitive.” CEOCFOinterviews: You are personally involved on a much larger scope in the banking industry. Tell about your activities and how they benefit Interchange? Mr. Abbate: “Over
time I have been very active with the Independent Community Bankers, which is a National
trade association. I have served on the for-profit subsidiary of the association, which
owns a credit card company, a credit card bank, as well as a securities firm. Through a
financial services subsidiary, we act as a broker dealer for mutual funds and annuities as
well as credit life insurance. That exposure brings a lot of recognition and people know
that we are capable. In terms of mutual funds and annuities, we have been, over the past
three or four years, the highest volume leader throughout the country in the ICBA
(Independent Community Bankers of America). As a result, people frequently contact us, and
want to know what we are doing and how we are doing it. I am active in a number of
charitable organizations and that brings recognition to the company and me, personally. I
served on the Federal Reserve Bank’s consumer advisory council for a time, which was
a very prestigious position to be involved in consumer regulation and discussions of
various consumer laws. Occasionally, I write op-ed pieces or authored articles for
publication in the American Banker and various trade and regional business
magazines. All of this outreach has raised awareness of who I am, the company and what I
stand for. My job is to put a face on the company, and that is how I go about being
involved inside out.” Mr.
Abbate: “We have outperformed major U.S. market indices over a five and ten
year period on a total return basis. Total return is calculated based upon a CEOCFOinterviews: What should investors know about Interchange that might not jump out at them when they first look at the company? Mr. Abbate: “We had continuing dividends over a period of twenty years. Our earnings are stable and have grown on a stable basis year after year. The dividend payout has increased year after year. While we may not be a high-tech stock, your return on investment over time will be satisfying to you.” disclaimers |
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