No mutual thrifts have opened in the U.S. since Richard Nixon was president, but a New England meat distributor aims to change that by chartering a depositor-owned bank that serves the food and agriculture industries.
Charley Cummings said his group expects to file a charter application for the planned bank, Walden Mutual, with the New Hampshire Banking Department by the end of August. Walden Mutual would have an office Concord but would primarily be a digital bank, Cummings said earlier this month in an interview.
“We hope to have a provisional charter back in the late fall and open our doors in January of next year,” Cummings said.
It makes sense that Cummings wants to start his own bank; after a multiyear lull following the financial crisis, de novo activity has been on the upswing in recent years and
But mutual thrifts, which held more than a quarter of the nation’s deposits in the late 19th and early 20th centuries, have been vanishing steadily since the 1950s, after Congress eliminated their tax exemption.
According to FDIC statistics, the most recent mutual savings bank charter was issued in January 1973 to Volunteer Federal Savings Bank in Madisonville, Tennessee. The last time New Hampshire chartered a mutual bank was “approximately 1901,” according to Emelia Galdieri, the Banking Department’s deputy commissioner.
Cummings, however, says mutual banks are ripe for reinvention.
The way he sees it, times are changing and people are increasingly attracted to companies that look to balance the needs of customers, employees and investors equally.
"I've been very interested in the original conception of a corporation, pre-1970, pre-Milton Friedman, where managers are administrators and they are tasked with balancing the needs of all the stakeholders in the business,” Cummings said. “In my view, the mutual governance model is particularly well suited to do that.”
Cummings also says that the growing ranks of investors focused on environmental, social and governance issues will find the idea of a community bank owned by its depositors and — in Walden’s case — focused on supporting sustainable agriculture, compelling.
Walden is seeking to raise $25 million in startup capital. Cummings is optimistic ESG investors will provide a significant portion.
“We do intend to raise money from family offices that are very engaged in the local-food movement and impact investment more generally, as well as from everyday investors that are investing as little as $5,000,” Cummings said. “If you have local tangible and specific impact, I think there’s a huge amount of investor dollars interested in supporting those types of activities.”
Mutual advocates like Tom Fraser, the CEO of First Mutual Holding Co. in Lakewood, Ohio, are also hopeful that ESG investors can be a source of support for new mutual banks.
“This concept around responsible investing, concepts around providing a direct and tangible benefit immediately back to the community — it's not surprising mutuality is being considered as an option,” Fraser said.
“It’s a phenomenal model which allows you to be very intentional about serving your community,” Julie Thurlow, president and CEO of the $659.3 million-asset Reading Cooperative Bank in Massachusetts, said of mutual banking.
Cummings founded Walden Local in 2014 to distribute what the company describes as “grass-fed beef and pasture-raised pork and chicken” produced by farmers in New England and New York. While Cummings remains chairman of Walden Local’s board, he stepped down as CEO in January to focus on organizing Walden Mutual.
“We’re looking to lend to entities across the entire supply chain, not just production farms but also distributors, processors, retailers, consumer trade brands, sort of up and down the entirety of that chain,” Cummings said.
Like Walden Local, Walden Mutual plans to confine its footprint to New England and New York. The two companies are unaffiliated, with Cummings’ involvement being the only common thread.
Local, sustainably raised food “is an incredibly large and growing sector in the region,” Cummings said. “The average age of farmers here is declining, the average size of farms is declining and the number of farms is increasing.”
Walden's business plan, which focuses on smaller producers, is particularly suited to New England, said John Blanchfield, principal at Agricultural Banking Consulting Services in Washington, D.C.
"New England farms, by the very nature of how they were founded, are smaller,” Blanchfield added. “They don't lend themselves to large-scale agriculture, but they have these enormous urban areas within an hour's drive. If you can figure out how to produce something urban consumers want, you're in good shape.”
Of course, Walden Mutual will face its share of challenges. Spreads between organic and conventionally raised foods are narrowing, pressuring the bottom lines of many sustainable producers. At the same time, a new bank with a food focus will likely face tough competition from Farm Credit East, the region’s biggest agricultural lender, according to Blanchfield.
“Even though they tend to finance large-scale agriculture, they've got people who understand organic — especially in that New England market,” Blanchfield said. “They're not going to let anyone move in without challenging them.”
For now, mutual banking advocates are delighted their number is poised to increase, even if it’s just by one.
Fraser termed Walden’s pending charter application “the most important mutual application in at least a generation.”
“I’m pretty excited about this,” Thurlow said. “I’ve been quoted as saying I don’t think a mutual could be chartered in the present day. I’m glad to be proved wrong.”
