Why Vermont's tiniest bank attracts national notice
Mark Young knows how to attract the positive attention of the nation’s biggest media outlets — do your job right. It’s a deceptively simple formula he’s followed for the past 31 years as president of the First National Bank of Orwell.
As a result, the big boys from the New York Times, the Wall Street Journal and “CBS Evening News” have come calling — to name a few of the bank’s admirers. They’re eager to tell their big-city readers and viewers about the tiny rural bank that, despite the economic downturn and failure of many larger financial institutions, is actually doing pretty well. The narrative is predictable: Old-fashioned bank in bucolic town weathers national storm with mixture of Yankee thrift, grit and old-timey values.
But as hackneyed as that coverage may seem — especially to locals accustomed to urbanites viewing Vermont as a precious curiosity — it’s dead on. Young’s bank, which his family has run for four generations, is tiny, the tiniest in the state. It has remained in business since 1832 largely because of its conservative lending practices and because its directors have always understood its niche. In these ways, the First National Bank of Orwell stands apart from its contemporaries.
The institution is unique for other reasons. Young, 56, actually lives in the bank — attached to it is the house in which he grew up and then raised his own family. His wife, Susan, is a teacher at the village school across the street. Young may be the only bank president who takes turns working at the teller counter, as well as shifts at the bank’s drive-through at its lone branch office.
A former state legislator, Young also serves as the bank’s head landscaper and handyman. Chris D’Elia, president of the Vermont Bankers Association, can’t help but be amused. “It is funny when you call in the summer and they say, ‘Mark can’t come to the phone now. He’s out mowing the lawn,’” D’Elia says.
It was this air of yesteryear that first attracted Randy and Kelly Stewart to the bank. The Rutland couple had been shopping around for a construction loan for a modular home when a friend recommended the Orwell bank. Immediately, Randy Stewart says, they felt comfortable there. Their bank officer explained the complicated loan process in simple terms, and the first-time homebuilders were grateful.
“It was so easy to work with them,” Randy Stewart says. “The small-town feel is something you can’t beat.” He has since recommended the bank to friends in search of home loans.
The physical bank is a throwback to a bygone time. White marble letters embedded in the brick façade above the front door read simply “BANK.” Inside the building, oil lamps hang from the ceiling, and tellers help customers from behind custom-made bronze bars. Young’s desk chair is a creaky wooden number that sits behind an antique roll-top, one of three original to the bank.
Ask Young, an affable man with thinning silver hair and a penchant for winking, when he began working here and you’ll get a quizzical look. Young grew up in the bank. His father, Robert, the previous bank president, was born there. Bank business was staple dinner-table conversation when Young was a child, and his father often entrusted him with important bank errands, he recalls.
One of those errands required a barely 16-year-old Young to pick up some money from another bank. With his new driver’s license and an $80,000 check in hand, Young hopped into his father’s 1967 Ford Fairlane and drove to a bank in Brandon to exchange the check for cash.
He handed over the check, stuffed the 80,000 in cash in a bag, shoved it under the seat and motored back to Orwell. “It wasn’t a big deal,” Young says.
Young knew he would probably end up taking over the bank when his father retired. After graduating from Champlain College, he returned to Orwell and worked as the bank’s vice president, the position his 32-year-old son Bryan holds now. Burlington was “just plain too far from home,” Young says.
While a town of 1200 might be a bit sleepy for the average college grad, Young was happy to work in Orwell, where he had institutional knowledge. That understanding of the town and its residents has had a lot to do with keeping the bank on solid ground all these years.
Currently, the First National Bank of Orwell holds $41 million in assets. That figure has grown by $5 million in the last two years. By comparison, the largest financial institution headquartered in Vermont, Merchants Bank, holds about $1.4 billion in assets.
The Orwell bank has issued $33 million in loans in the last year and boasts deposits of $37 million. It holds notes for roughly 300 individual mortgages; about 5000 people have accounts there. Across the board, Young says, numbers are up.
While other bankers might err on the side of analytics when making home or business loans, which account for the bulk of Orwell’s business, Young uses his gut to make decisions. He calls himself a “character lender.” Since he knows just about everyone in town, making those intuitive calls is easier than it would be for a banker who doesn’t know his customers by name.
“If you’ve got it right, if they have character, they’ll be working to pay off the loan,” Young says of his borrowers. “Character is a big component. And history proves me correct.”
Orwell doesn’t make loans to people who can’t afford them. As the Vermont Banking Association’s D’Elia points out, that’s typical in the state, where banks have historically been more conservative in their lending practices than the average American financial institution. “Our banks don’t put people into loans they know they can’t pay back,” he says. As a result, Vermont has one of the lowest foreclosure rates in the country.
Despite the Orwell bank’s apparent health, Young worries that Main Street institutions like his will be disproportionately affected by new federal banking regulations on the horizon. The regulations will apply what D’Elia calls a “one-size-fits-all” policy to banks, huge and small alike.
Young cites the recent increase in Orwell’s FDIC insurance as an example of deleterious changes in national banking policy. “We are not the ones to blame for the financial crisis,” Young says of small community banks. “It’s like locking the barn door after the horse has already been stolen.”
The increase in mandatory mortgage disclosures, as well as the expansion in reporting provisions required by the Bank Secrecy Act, are also causing problems for small banks like Young’s, says Tom Candon, Vermont’s deputy commissioner of banking and securities. They are costing banks more money, as well as creating mountains of paperwork. Candon points to the sweeping financial regulatory reform bill currently working its way through Congress as another potential burden. “When you have legislation like this, the ramifications for small banks can be substantial,” he notes.
D’Elia is even more concerned, calling the effects of the new regulation “chilling.” “Our local institutions who are doing right by customers will have to pay for the sins of the bad actors,” he says. “With the additional costs and compliance burdens, it’s only going to get worse.”
Still, Young is optimistic. He predicts business in the next couple of months could be brisk, assuming Vermonters believe that the worst of the economic crisis is over. When CBS News called him recently to follow up on its October 2008 story about “The Little Bank That Could,” the reporters were expecting bad news. “They wanted to know how things changed,” Young says. “I had to tell them that we’re actually doing better than last time they talked to us.”