We are excited to update you on our progress in opening Walden Mutual Bank. At opening, we will be the first new mutual bank here in New Hampshire in 100 years—49 years in any state—and we very much appreciate that many of you have been patiently waiting now for many months! Opening a new bank is no small feat, so we wanted to give you a sense of where we are.
Our application was officially accepted by the FDIC on March 18th. This was a significant milestone, as we’re the first mutual bank to reach this step in almost five decades. As you can imagine, the chartering process for a new bank is rigorous, and involves quite a bit of paperwork (as it probably should). But we have assembled a best-in-class team and board with well over 200 years of banking experience, plus several folks from outside the industry. This mix of experience is what I believe drives real innovation and creativity in our approach, but we also share the dogged determination to build a lasting institution.
A NEW MUTUAL IN A NEW TIME
The last new mutual bank in the US was formed in August of 1973 by seven local business leaders in Madisonville, Tennessee. Along with members of the community, these founders pledged $1.5m (just under $5m in today’s dollars) in savings deposits to open the new bank: Volunteer Federal. This would not be possible today, as FDIC rules now require substantially more starting capital for new banks, and also require this capital to fulfill their definition of “Tier 1.” In essence, this is capital that serves as collateral for FDIC coverage.
For most banks, this would be common stock—typically held by a small group of private investors. But like non-profit organizations, cooperatives and other structures, mutual banks do not have equity, as they do not have shareholders. Herein lies the challenge: what type of capital can be used to start a mutual bank? We wanted to create something that would allow a large portion of our community to invest alongside us, something that would provide an adequate return to investors, and something that aligned with our mission for the long term.
So we looked at the way others had solved this problem historically, including the Dutch Perpetual Bond: the oldest continuously held security in the history of finance (issued in 1624, still held by Yale University, and still paying interest!). Then there was Perpetual Preferred Stock, offered by Building Societies in the UK (their equivalent of mutual banks), which similarly had no maturity date and were not intended to appreciate, but paid a high dividend at a fixed rate from profits.
New Hampshire state law authorizes the provision of “Special Deposits,” in the formation of a mutual, so we designed our Special Deposits with these precedents in mind, but made sure they were consistent with all of the requirements of Tier 1 Capital. So our application and our proposed capital structure are currently under review with the FDIC and New Hampshire Banking Department. As soon as we have approval, look for the opportunity to review our Offering Circular, learn much more about our proposed structure, and participate in our public offering of these Special Deposits alongside our community.
MEETING THE MOMENT
As you may have gathered, organizing as a mutual is important to us. We believe that being owned by our community provides us with the right type of long-term mission alignment. Very rarely do you have the opportunity to work on decades-long time horizons. But, this type of thinking is what is required to address systemic challenges: from climate change to the sustainability of our food system, to the rural-urban divide, to inclusivity in lending.
We feel that the mutual model meets the moment. When many of us are questioning the wisdom and consequences of placing the stock price above all other considerations of a business (for example: the well being of customers, employees, the environment, community...), mutuals offer a clear alternative. And we are excited to reinvent the model for the modern era—with user-friendly digital services for depositors and a progressive approach to social and environmental impact in our work—yielding local, specific and tangible impact you'll be able to see in the region.
In the meantime, we have made some of our first loans with our seed capital: LMNOP Bakery, a Katonah, NY based wholesale bakery using all locally-milled grains and opening a retail location; Trow Heritage Farm / Julie’s Happy Hens, a pasture-based egg farm in Mont Vernon, NH; and Dharma Lea, a Cobleskill, NY organic grass-fed dairy farm. These are all owned and run by pioneers in the local food movement—all three women. We are also working on our first revolving loan fund to support new immigrant and refugee farmers with equipment and technical assistance, in partnership with a local non-profit here in New Hampshire. Look for more about these partnerships on our web log in the coming months!
We still have work to do to put the finishing touches on our processing systems and technology while we wait for the regulatory go ahead. We hope you share our excitement in building a mutual bank that truly works in your best interest, while driving real social and environmental impact in our community. In the meantime, we’d love to hear from you: What benefits would you like to see? What bothers you about your existing banking relationship? What can we do to make a real difference in your life and community? Shoot us a note at email@example.com anytime.
Thank you so much for your support.