Traditional bank on the rebound

Westchester County Business Journal, Jan 26, 2009 by Golden, John

At CMS Bancorp Inc. in White Plains, the calls for a return to traditional banking heard from U.S. Treasury officials and financial pundits might ring with golden opportunity.

With a history as one of Westchester's

oldest community banks and led by a banking veteran who took the then-stagnant company public two years ago, the parent of Community Mutual Savings Bank looks to grow its branches in step with 21st-century technology and design while rooted in the banking values and practices of a simpler, more conservative time in the battered industry. In Westchester County, where community banks are a vanishing kind, CMS officials see their institution occupying a unique niche at the right time.

"When times are really difficult and everybody has to be cautious, I really see this as an opportunity for our company," Community Mutual Savings Bank President and CEO John E. Ritacco said last week at corporate headquarters in the New York Power Authority's Clarence D. Rappleyea Building in downtown White Plains. "I really see this as an opportunity for us to become a greater part of the fabric of the community."

The bank has been a part of that fabric since 1887, when it opened its door as a mutual savings institution in Mount Vernon. "It's the same year Rawlings Sporting Goods started and we're both still around to talk about it," said Thomas G. Ferrara, CMS board chairman and president of Future Value Associates Ltd., a financial services firm in Pound Ridge.

The bank has kept generations of families as customers. Ferrara said his mother-in-law, a seamstress in Mount Vernon, deposited her weekly paycheck at the local Community Mutual office.

From Mount Vernon, the savings bank added branches in Eastchester, Greenburgh and West Harrison. But when Ritacco took over as CEO in 2005 after a 27-year career in retail and corporate banking in his native Rhode Island and in Westchester, "It was an antiquated mutual savings bank," he said. "Our technology was very old, was very dated...Our signs were old. Our logo was antiquated. Our branches were old, were dated. We were a seventies-style bank. The company hadn't invested in a lot of infrastructure. It hadn't grown very much either."

"We needed to grow. It had had very limited growth over a long period of time."

"Regulators wanted us to make the bank stronger," Ferrara said. "One of the ways to do that is to raise capital. At that point the markets were doing fairly well. We knew we had a great institution."

The company went public in April 2007, raising $20 million with its initial stock offering.

"I think the key to it was to rebuild the infrastructure," said Ferrara, who was named the bank's independent chairman in 2005. "We had to get it into the 20th century before we could take it into the 21st century."

The bank hired a Manhattan marketing firm to lead its rebranding with a new logo and branch office signs and the start of a company Web site. Expanding products for depositors, it has introduced online banking and bill paying, remote capture for business payroll deposits, commercial sweep accounts, interest on lawyer accounts and an enhanced line of certificate of deposit offerings.

The bank has relocated its modernized branch offices in Eastchester, Greenburgh and West Harrison to more heavily trafficked consumer locations. A fifth branch is scheduled to open April 1 in Mount Kisco in an office attached to a CVS pharmacy.

In its lending, Ritacco said the bank has moved from residential loans to a mix of residential and commercial. The company in its annual report to shareholders said its strategic plan focuses on growing its loan portfolio into higher-yield multi-family, non-residential, construction and commercial loan markets.

In commercial lending, "We're a community bank, so our focus really is in the small business area," serving companies with less than $10 million in revenue, Ritacco said. A typical business loan can range from $500,000 to $2 million.

Since diversifying, the bank's loan portfolio grew from $146.7 million in the fiscal year that ended Sept. 30, 2007 to $181.1 million in fiscal year 2008, a 23 percent increase. Net interest income rose from $4.5 million in 2007 to $5.7 million in 2008, a 27 percent increase.

Unlike many of the larger banks, "We're open for lending," Ritacco said, though the bank has seen "a dramatic downshift" in loan applications since last September. Although CMS Bancorp last fall applied for $3.2 million in federal funds through the Treasury Department's Troubled Assets Relief program, the CEO said the bank has the capital to continue lending. Although no public announcement has yet been made, he indicated the bank likely will not take any bailout money.

Despite the recession, Community Mutual had no nonperforming loans in 2008. Its allowance for loan losses was 0.28 percent of loans in 2008, compared with 0.18 percent at the end of 2007.

"Our credit quality has remained absolutely pristine," Ritacco said. "Our delinquencies have remained relatively modest through a 7.2 percent unemployment figure. If unemployment goes to 9 or 10 (percent), I think all bets are off for everybody."