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Originally Established In 1922, Since Its
Reorganization Into A Mutual Holding Company Structure In 2004, Naugatuck
Valley Financial Has Grown To $461 Million In Assets
Financial
Savings & Loans
(NVSL-NASDAQ)
Naugatuck Valley Financial Corp.
333 Church Street
Naugatuck, CT 06770
Phone: 203-702-5000
John C. Roman
President and CEO
Interview conducted by:
Lynn Fosse, Senior Editor
CEOCFOinterviews.com
Published - February 22, 2008
BIO:
John C. Roman, President and CEO of Naugatuck Valley Financial Corporation,
joined Naugatuck Valley Savings and Loan in 1998 as Senior Vice President
and Chief Lending Officer. He was elected President and CEO of Naugatuck
Valley Savings and Loan in September 1999 and has been President and CEO of
Naugatuck Valley Financial Corporation since it was established in September
2004. Prior to NVSL Mr. Roman was employed in various lending capacities by
Eagle Bank, MidConn Bank, Dime Savings Bank of Wallingford and American
National Bank. He is a 1990 graduate of the National School of Banking and
earned his MBA degree from the University of Connecticut in 1982. He earned
his undergraduate degree in Economics cum laude from Central Connecticut
State University in 1975.
Company Profile:
Naugatuck Valley Financial
Corporation was established in 2004 as the holding company for Naugatuck
Valley Savings and Loan a federally chartered savings and loan established
in 1922. Naugatuck Valley Savings and Loan (“NVSL”) operates 9 banking
offices in the Naugatuck River Valley in Southwestern Connecticut between
Waterbury and Bridgeport. The Bank is a community oriented financial
institution dedicated to serving the financial needs of consumers and
businesses within its market area.
Naugatuck Valley financial Corporation pursues
a strategy that is focused on long-term growth by providing superior
customer service and the profitable delivery of products our customers want.
The successful pursuit of this strategy involves growth of deposits and
loans, increases in non-interest income, maintenance of credit quality,
branch improvement and expansion of our market area.
CEOCFO: Mr. Roman:, Naugatuck Valley
Financial has been around for a long time; how has the company changed under
your leadership?
Mr. Roman: “I became CEO almost 10 years
ago in 1999. At the time, I joined the bank we were a mutual savings and
loan operating three branches. We had assets at that time of about $150
million. Between 2000 and 2004, we started a branch expansion strategy and
we opened branches in Shelton Connecticut in 2001, Derby in 2003, and
Seymour in 2004. In 2004, we reorganized Naugatuck Valley Savings and Loan,
which was originally established in 1922 as a mutual savings and loan
association into a stock bank with a mutual holding company structure then
we formed Naugatuck Valley Financial Corporation as the mid-tier holding
company. In 2006, we opened de novo branches in Southbury, Waterbury and
Cheshire, Connecticut. We have grown now to $461 million in assets as of the
end of 2007, and have become a more formidable competitor in our
marketplace.”
CEOCFO:
Will you describe the economy in the area you serve?
Mr. Roman: “We are in a comparatively
stable market. The Naugatuck River Valley is comprised of old mill towns
that have transitioned to become commuter towns. Naugatuck, which is our
hometown, is an old mill town just south of Waterbury. US Rubber was a
primary employer for a long time until the mid-1980’s, since then Naugatuck
has become a commuter town for Waterbury, Bridgeport and Hartford and New
York. The southern part of our market area lies on the boarder of Fairfield
and New Haven County primarily with our Shelton Branch which is an area,
which is growing, compared to the rest of the state and compared to the
economy in general, faster than average. The town of Oxford is the fastest
growing town in Connecticut. That is primarily the result of migration of
residents from lower Fairfield County and New York City, lower housing cost
and better quality of life being the attraction there. Our market area never
saw rapid up-tic in house prices; we are still in an affordable area, so we
don’t see even with the economic downturn and drastic reductions in house
values. We have always been a conservative lender, so we I think we will
weather the storm. On the residential side the area is stable.”
CEOCFO: Why
are customers coming to you?
Mr. Roman: “There has been some
in-migration so we see new customers that way. It is the same old story; we
are competing with primarily larger banks. We offer more personalized
service. Our employees have been with us for a long time. People come into
our offices and get to talk to somebody that is either making the decision
or very close to the decision maker. We make quick decisions, and we can be
flexible because of our size. We are also seeing along with the
in-migration, more service businesses popping up to serve the increased
population.”
CEOCFO: How
much of your business is in the commercial area and is that a growing area?
Mr. Roman: “We have been growing our
commercial loan portfolio over the past few years to the point where we
expect by the end of 2008 that our commercial loans will be about 45% of our
total loans. The other 55% being primarily residential mortgages with some
consumer lending in that mix also.”
CEOCFO: Are
you able to get your commercial customers to use your personal services as
well?
Mr. Roman: “Yes we are. We encourage
that. Our primary way of attracting commercial deposits is through
commercial loans. We do get small business owners to use our retail
services. We have nine offices in a compact market area and always have a
branch that is convenient. We have been successful at bringing in personal
accounts.”
CEOCFO: Do
you do much advertising?
Mr. Roman: “We got an advertising budget
of about $400,000 a year. We do primarily print ad, some billboards. Our
advertising primarily has been some image ads but primarily rte ads for
loans and deposits.”
CEOCFO:
Speaking of rates, how are you weathering the current situation?
Mr. Roman: “We are weathering it very
well; we are slightly liability sensitive so as rates fall, our net interest
income will improve. We went through a couple of years with a flat yield
curve, which made earnings difficult. At the same time, we opened up three
new branches in 2006, which were a drag on earnings as we went through 2007.
However, we actually ended up 2007 with earnings on an even keel to what
they were in 2006. We are looking for a more favorable yield curve for us
going forward. The interest rate environment I would actually say is
positive for us now.”
CEOCFO: You
had a growth strategy of expense control and increasing non-interest income;
how is that working?
Mr. Roman: “Very well. Growth in 2007
resulted in an increase in net interest income from $11.4 million in 2006 to
$11.9 million in 2007 in spite of declining margins. Non interest income
went from $1.9 million in 2006 to $2.4 million in 2007. The expense side has
been challenging due primarily to the costs of our branch expansion. Non
interest expense increased to $12.4 million in 2007 versus $11.5 million in
2006. The result was a bottom line of $1.42 million in 2007 as compared to
$1.45 million in 2006. The positive results of our strategies are seen more
clearly if you look at Q4 2007 versus Q4 2006. We earned $479,000 in Q4 2007
as compared to $150,000 in Q4 2006 due to increased net interest income,
increased non interest income combined with only a minor increase in
expenses.”
CEOCFO: Are
there products or services that you would like to add?
Mr. Roman: “The biggest piece that we
are adding is on the internet banking side. We have had internet banking on
the retail and small business side since 2002. One of our initiatives for
2008 is to enhance our internet banking product adding the ability to open
deposit accounts on line and also to apply for loans online. We are just
starting now with a few customers on our remote capture product and we
believe that is going to be an important product going forward. We have been
expanding and increasing our income from our investment advisory services
also that we run in conjunction with Infinex.”
CEOCFO: Is
that a reflection of the ageing population?
Mr. Roman: “There are a lot of little
things that work for us in our business, the increase in the investment
advisory services is as least partially related to the fact that we have had
the same advisor onboard for about four years now. We opened up our books to
him a bit more than we had in the past. When we think we are losing a CD
deposit to an investment house we make sure that we run a referral over to
him. The demographics of our market area really have not changed
drastically. We are seeing our savings account customers get older over time
and as new people move into our area we are getting the younger first-time
homebuyers.”
CEOCFO: Is
there much competition with other local banks?
Mr. Roman: “Yes, we do compete with a
very competitive area. TD Bank North has come into our area through
acquisitions, so they are an aggressive competitor. Webster Bank has always
been a strong competitor of ours, operating in our market. Peoples of
Bridgeport, with their new stock issuance have a lot of capital that they
are looking to utilize. Naugatuck Savings Bank, a mutual thrift that is
headquartered right down the street from us has been a bank we have been
competing with for many years. We are positioned geographically in the
middle of those. Our strategy is to offer better services and to acquire
market share.”
CEOCFO:
Please give us an example of service that would be outside of the norm.
Mr. Roman: "Especially with our
commercial lenders; we really take the loan requests from the first contact
all the way through closing ad servicing. Our commercial loan officers will
make the initial contact, go out make the visit, do the write-up, do the
negotiation, take the loan through the loan committee system, and be very
involved in the closing on the loan and the servicing of the loan. That is
different from other places where the customer might tend to get passed off
from person to person or department to department. We make sure that the
customer sees the same face and we have the same person following through
with them. It has been successful for us because we see a lot of second and
third requests from the same borrowers.”
CEOCFO: Why
should investors pick Naugatuck Valley out of the crowd?
Mr. Roman: “Our contacts with investors
started in 2004 when we converted to the mutual holding company structure
and if you look back since 2004 you can look at how we have acted as an MHC.
Some MHCs have acquired the capital and haven’t done much with it. However,
we have grown between 10% and 20% a year since 2004 and we understand what
it means to be an MHC and what we need to do to be successful as an MHC;
grow loans, deposits, increase non-interest income, and work on expense
control at the same time. We have been branching out so we are improving our
delivery systems for our customers and increasing our number and penetration
with customers. We have also been in the buyback market and we have been
paying a consistent dividend since early on in our life as an MHC. We
understand what we need to do and our focus is to grow organically. If we
could find an acquisition that makes sense to us, we always have our eyes
open, but at this point due to our size and due to what some of the banks
looking to be acquired might be asking for, we haven’t seen one that made
sense. Our strategy and what the investors should be interested in is the
fact that we have been growing. Our plan is to continue to utilize the
capital that we raised. We understand that we have the option to go a second
step, but we have no plans or timetable for that right now. However, looking
at the future, when the time comes either through organic growth when our
capital ratio gets to the point where it gets a bit tighter or if we see a
transaction by way of acquisition that makes sense, we have the ability to
look to the option of a second step.”
CEOCFO: You
are well prepared for the future!
Mr. Roman: “I
believe we are. We know how to grow; we need to continue to grow. We invest
where we need to in technology, and that is a big piece for us. We take very
seriously regulatory issues and compliance issues. We invested quite a bit
last year in making sure that we got the process down to be fully compliant
with Sarbanes-Oxley requirements through the end of 2007, and then into
2008. We actually have a full testing processing place for our
Sarbanes-Oxley process. At the end of 2007 my CFO and I will not only be
able to sign off saying that ther4e are controls in place that are sure that
our financials are in place, but also be able to show documentation that we
have done that. We have been a smaller filer, we have acted as if that at
the end of 2008 we are going to need our external auditors to step in and
attest to the fact that we have the proper controls in place. On the
Sarbanes-Oxley side that is again in question for the end of 2008 at this
point, but if it doesn’t get changed we are prepared in that area.”
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