It’s difficult to envision a more challenging environment to launch a startup community bank than the economic landscape of 2008. The financial crisis was unfolding, and phrases like “too big to fail,” “fiscal cliff,” and “asset bubble” quickly made their way into the lexicon of the average American.
The Federal Deposit Insurance Corp. (FDIC) began closing banks with dangerously low capital levels and unattainable debt obligations at an alarming rate, including Washington Mutual, which collapsed with more than $300 billion in failed assets—the largest bank failure to date in the nation’s history.
Yet it was that seemingly unnavigable economic climate that served as the launching pad for The Westchester Bank, which began humbly out of two double-wide trailers parked off Central Avenue in Yonkers. The bank opened for business in June 2008 with eight employees, nearly $23 million in seed money from a group of investors, and no depositors. The bank’s early survival depended on penetrating a crowded Westchester market that already housed more than 30 banking brands including global and national players such as Citibank, Chase, Bank of America, and HSBC.
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“People think that larger banks have resources that we don’t, and that’s just not true. Technology has leveled the playing field between the large and small players.”
—John M. Tolomer,
The bank’s founding board members, employees, and shareholders (more than half of whom reinvested in the bank during its second capital raise in 2011) all believed the Westchester market needed a local community bank to serve small and midsized businesses and were convinced there was a great opportunity to carve out a niche in that space. They made a grass-roots push to obtain their initial clients, making in-person calls to businesses and attending community events; early advertising efforts consisted of print ads and client testimonials.
John M. Tolomer, who has served as president and CEO of The Westchester Bank since November 2008 (the bank opened with George Dunkel as CEO; he retired four months later), recalls the early days. “When you focus on a problem instead of the solution, it only becomes larger,” Tolomer says. “It was tough, but there were some silver linings. Because of the [financial] crisis, there were a lot of layoffs from other banks, and we were able to hire, early on, some experienced people.” Tolomer has quite the experience as well, having began his career in banking in 1977—literally the day after he graduated from Iona College with a degree in sociology. His extensive pedigree includes senior management posts in both the commercial and retail lending divisions with Citibank, The Bank of New York, and TD Bank.
Despite it’s early hurdles, The Westchester Bank has evolved to become the county’s premier community lending institution catering to small and midsized businesses as well as consumers. It closed out 2014 with assets of more than $520 million and $437 million in total deposit balances within 5,200 accounts. Its 45 staff members are sprinkled among the bank’s four branches in Yonkers, Mount Kisco, White Plains, and Thornwood.
Loan growth in 2014 grew 27 percent in year-over-year comparisons, versus an industry average of 5 percent to 7 percent for mature banks, while depositor growth spiked at 29 percent from the year-ago period. In 2014, banking comparison site DepositAccounts judged The Westchester Bank one of the 200 healthiest banks in America. One of the site’s primary indicators of a bank’s solvency is the Texas Ratio, which measures available capital to at-risk loans; any grade at or near 100 percent indicates the institution is at risk. The Westchester Bank scored a Texas Ratio of 0 percent.
Tolomer credits the bank’s neighborhood grass-roots strategy of service for its rapid ascent amid the national financial malaise, a blueprint amplified by the bank’s marketing tagline: “Business Banking Made Personal.”
“Every time someone would give me a reason why they couldn’t bank with us, I would come back with four or five reasons why they should,” Tolomer says. “People think that larger banks have resources that we don’t, and that’s just not true. Technology has leveled the playing field between the large and small players, so that helped us overcome a lot of early objections.
“During the crisis, larger banks were focused on internal issues like legacy assets and, subsequently, small businesses began coming to us,” he adds. “We offered everything the bigger banks did like free online banking and scanning technology and had all the products that the small and midsized businesses needed. We carry the exact same amount of FDIC depositor insurance of $250,000 for every Social Security number as national banks. The only product we don’t offer is residential mortgages. But we have affiliations with other companies that do, and we don’t make anything off those referrals.”
The bank closed out its inaugural year with a modest 376 accounts and $45 million in assets. By the end of its second full year, the bank turned a small profit, and in 2011, a second round of capital raise generated $27 million from a cadre of 320 investors.
Last year, The Westchester Bank reported profits of $3.8 million. The bank also recently relocated its headquarters from Yonkers to Water Street in downtown White Plains.
But it’s the personalized attention that forges the competitive point of difference between The Westchester Bank and the larger institutions says Tolomer, a resident of Chappaqua. “Think about it: Why does someone call a bank? It’s usually because of a problem,” says Tolomer. “Our model was, ‘Hey, call us. We don’t have 1-800 numbers. You get a live, local person on the phone, not someone in a different state who plugs your information into a computer and says either yay or nay.’” Tolomer makes a minimum of at least one personal visit to a customer or client each day. “Our bank is kind of like the show Cheers, where everyone knows your name. Our job is not to sell a product, it’s to provide solutions to the customer’s banking needs. It’s not always formulaic.”
That personalized approach—in addition to a changing banking landscape—has worked out well for The Westchester Bank. Thanks to rival Hudson Valley Bank’s pending merger with Sterling Bancorp, The Westchester Bank, along with Apple Bank and Webster Bank, stands strong as one of the county’s few remaining community lenders.
“There have been very few, if any, new banks since the crisis—let alone one that has grown and flourished like The Westchester Bank,” says Mike Smith, president and CEO of the New York Bankers Association. “John and his team have done as fine a job there as we have seen in New York State.” In fact, The Westchester Bank was recently selected as a Top 100 Best Performing Community Banks in America according to SNL Financial; only one other community bank in New York State received this designation.
“The extraordinary growth of The Westchester Bank is an example of a true leader, John Tolomer, building on a keen understanding of the needs of the marketplace and creating a team that is successfully meeting the dynamic needs of our business community, even during complex financial times,” echoes Marsha Gordon, president and CEO of the Business Council of Westchester.
In February, Tolomer agreed to serve as one of 15 members of the FDIC’s Advisory Committee on Community Banking, which provides consultation and recommendations on a sweeping range of banking policies including compliance, credit and lending practices, and assessments of deposit insurance.
Going forward, Tolomer’s plan for expansion is one of controlled growth—one branch a year. “We’ll concentrate on building out Westchester first and then decide whether to go to Rockland or the Bronx. No customer should ever have more than a 10 to 15 minute drive to a branch,” he says.
Adds Tolomer, “If the meltdown taught us anything, it’s that it’s the quality that counts. We have terrific employees who have driven our business model, and we know that the quality of our assets and our earnings are far more important than the size of a bank. From two double-wide trailers to where we are today. That’s kind of a cool story don’t you think?”
The Westchester Bank
Headquarters: White Plains
Leadership: John M. Tolomer, president and CEO
Assets: $520 million (est.)
Deposit balances (2014): $437 million
Accounts: 5,200 (est.)
Loan Growth (2014): 27 percent
Depositor Growth (2014): 29 percent