LACONIA — Paul J. Falvey’s two-year tenure as president and chief executive officer of the Bank of New Hampshire has been a time of dramatic growth.
When he was hired in February 2017, he and the directors of the 188-year-old Laconia-based financial institution understood that its performance would have to improve in order for it to remain a viable, independent, mutual bank amid a climate of mergers and acquisitions.
Looking out his conference room window at a cold but sunny Laconia downtown, Falvey remembered when he was being recruited for the job. In his previous position, he led Martha’s Vineyard Savings Bank.
“One absolute when I interviewed, one item on which the board said we need to be in agreement, is that we would remain a mutual, independent organization,” he said. “They brought it up, but I would have.”
Mutual banks are owned not by stockholders, but by depositors and borrowers. State-chartered banks of all types have been in decline. Falvey said there were 102 state-chartered banks in New Hampshire in 1989 and today there are 15.
“You’d be hard-pressed to find, growing, solid-earning institutions that disappeared,” Falvey said, “It’s the opposite.”
Underperforming banks become a target for acquisition.
Falvey said when he was hired, the directors of the bank knew its financial performance was lagging that of its competitors.
Return on assets is a key measure of a bank’s success. By that yardstick, the bank was in the bottom 20 percent compared to competitors.
“There was relatively weak loan growth coupled with similarly weak earnings,” he said. “We had a lot of money available to lend that was not out there.
“The bank made $6.5 million in 2016. Those numbers were low for a bank this size.”
The bank has $1.6 billion in assets.
When Falvey was interviewing for his job, directors expressed concern that the bank was not growing, given a good overall economy.
“Effectively, customers were not really choosing to deal with us,” he said. “We looked at our processes and procedures and they were a bit cumbersome and needed to be updated and revised.”
Performance has now turned around with an emphasis on customer service and growth in commercial and residential loans.
According to the bank’s annual report, it saw a $224 million, or 22 percent increase in loans in the 2018 fiscal year and had a 9 percent increase in wealth management. This contributed to a 34 percent increase in net income of just over $10 million.
Falvey said the bank’s growth serves to ensure its continued viability and protect the jobs of its 300 employees.
“Ultimately, the goal is to be here and surviving,” he said. “When somebody is looking to acquire a bank, they are looking for somebody with a negative market share, lackluster growth relative to market, and weak earnings.
“A bank that is gaining market share, has good earnings and is winning business, you take yourself off the target list for acquisition. Why would that bank be interested in merging? Literally, it’s the exact opposite.”
Some of the bank’s growth in loans has been out of state, including a $48 million mortgage for the Jupiter Beach Resort in Florida, which was purchased last year by Ocean Properties of Delray Beach.
Falvey said directors approved the loan. Those associated with Ocean Properties have significant ties to Maine and are well known to the bank, he said. Other financial institutions are participating in the loan, while $20 million of it remains on Bank of NH's books.
He said that, historically, the bank would not write out-of-market loans for local customers, even though out-of-state banks have become very competitive in New Hampshire.
“Massachusetts and Maine banks have come in here significantly in the last five years, so we’re happy to compete and do business there,” Falvey said.
“If there was a manufacturing firm 10 miles down the road and they announced a million dollar order from Kansas City or Korea, everybody would be happy and excited.
“You build the equipment and you ship it there and guess what, they send all the money right back here to pay for all the jobs here. There is no difference for us. We underwrite the loans, we service the loans, we close the loans. Those are the things that support the overhead that is here.”
There have been staffing changes under Falvey.
“Probably six to eight senior people have left for various reasons,” he said.
The bank’s 2016 annual report shows a 10-member management committee led by K. Mark Primeau, Falvey’s predecessor. Three of those members have gone to other banks, a fourth has retired and a fifth still works for the organization but is not part of the management team.
The 2018 report shows a six-member team management team, including three people from the old team.
Under Falvey’s tenure, the bank has instituted a $15 minimum wage.
Chief Human Relations Officer Gayle D. Price said that over a three-year period a new hire can see that pay increase to $19 an hour.
“As we look at competitors, we feel that is an above-average rate of pay,” she said.
Under the previous pay scale, starting pay was $11 to $12 an hour.
“In general, the new pay has improved the retention as well as from an employee-relations standpoint, the individual feels more valued,” she said.
She also said two outings are held for the staff every year. There was a summer cruise on the Mount Washington and a celebration at the Marriott in Concord.
Every Tuesday, employees access an in-house site where corporate goals and progress toward those goals are discussed.
“They can contribute to those goals,” Price said. “It might be a lead that a customer might mention. We expect our employees to pick up on that. The staff is trained to listen for those things and to suggest, ‘We can serve you right here. You don’t need to go to a bigger bank.'"
Russ Thibeault, president of Applied Economic Research, who is one of the bank’s directors, backed up Falvey’s comments on plans for the bank’s future.
“I can tell you, the board is committed to remaining an independent bank,” he said.
He said the cost of regulation encourages banks to grow.
“Given the changes in the industry, it is harder to be a small, independent bank," he said. "The Bank of New Hampshire is not small, but generically there have been a lot of changes in the industry and small banks have a difficult time as increased regulation requires a staff to address the regulatory environment.”
Arthur Loomis, who founded Northeast Capital & Advisory, which assists in bank mergers and acquisitions, said some mutual banks convert to a shareholder-owned model.
“But it is unlikely that anything like that is percolating at the Bank of New Hampshire,” he said. “They do have enthusiasm to grow and dominate the state of New Hampshire.
“The CEO is a go-getter. He’s very much motivated to make the bank a vibrant one and help Laconia and the surrounding areas. He gets rave reviews from me.”
For his part, Falvey, 54, said he wants to see the bank maintain its independence beyond the end of his career and said there are no plans to move the bank's headquarters from Laconia.
“I may have 10 or 12 years here,” he said. “Say I do 12, and three years after I retire, this bank has merged with somebody. To me that’s a failure.”