New entity seeks to serve agriculture industry

Farming is undergoing something akin to a renaissance in New England.

All six states — Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island and Vermont — are among the 16 states where the number of farms has increased since 2007. In the Northeast as a whole, the number of first-time farmers is rising faster and the average age of full-time farmers is falling faster than in other regions.

And, according to the U.S. Department of Agriculture, the share of farm produce sold directly to consumers in the region is among the highest in the country.

For nearly a decade, Charley Cummings, an entrepreneur from Hopkinton, has played a part in this growth and is now raising his stake by chartering a bank — Walden Mutual — tailored to serve the financial needs of agricultural producers and processors throughout the region.

His application, which runs to more than 1,000 pages, is pending before the Federal Deposit Insurance Corp. and the New Hampshire Banking Department in anticipation of being approved before the year is out. “We hope to open the bank early next year,” Cummings said.

Born in Iowa and raised in Massachusetts, Cummings started a clean-energy nonprofit corporation, worked on an offshore wind farm and served as a management consultant, including a stint in California’s Imperial Valley, the mecca of industrial agriculture, where two-thirds of all vegetables eaten by Americans in the winter months are grown.

His ethics and experiences confirmed his embrace of “impact investing,” harnessing money to the pursuit of social, economic and ecological values.

Foremost among these values is the practice of sustainable agriculture that provides fresh, nutritional food produced and distributed in ways that enhance the ecological, social and cultural character of communities.

Taking the title of Thoreau’s classic book for his brand, Cummings opened Walden Local Meat Co., headquartered in Tewksbury, Mass., in 2013. The company delivers beef, pork, lamb and chicken raised naturally — without hormones or antibiotics — and humanely in pastures, pens and coops on about 75 small farms across the Northeast to some 20,000 households from New Jersey to Maine, making between 60 and 120 stops a day, five days a week. The company also sells to restaurants, colleges and independent grocers, and in 2017 opened a butcher shop in Boston’s South End.

In 2018, Walden Local Meat became a benefit corporation, which requires its directors and officers to consider and prioritize the effects of corporate decisions not only on the owners — either individuals or shareholders — but also on employees, partners and clients, as well as the local community and natural environment.

Cummings stepped down as CEO of Walden Local while remaining chair of the company. Walden Local and Walden Bank, he said, have no legal relationship or overlapping ownership, but investors in the former will be depositors in the latter.

‘We work for our depositors’

Cummings said he was moved to open a bank by his experience working with farmers to forge his supply chain.

He found that his suppliers, despite operating sound enterprises with healthy cash flow from operations and steadily growing demand for their produce, struggled to secure stable relationships with financial institutions. He said the company has often prepaid its suppliers to ease their financial binds.

Walden Mutual would be the first mutual bank chartered in the United States in half a century. Cummings chose the mutual form for its governance structure and ownership profile, which match the purposes of impact investing and principles of public benefit corporations.

Unlike stock banks owned by shareholders and more akin to credit unions, mutual banks are effectively, if not expressly, owned by their depositors. They are governed by a board of trustees elected by a larger body of incorporators representative of a variety of community talents and interests. Earnings are either added to the bank’s capital stock or shared among its depositors.

Since there are no shareholders, Cummings said, “we work for our depositors,” adding, “we can focus on nonfinancial metrics.” At the same time, without pressure to chase quarterly earnings and manage stock prices, mutual banks can pursue long-term strategies with less risk of being blown off course by volatile capital markets.

“We intend to build a 100-year institution focused not on the next quarter but on the next century,” Cummings said.

To capitalize the bank, Cummings has added a wrinkle to the mutual model. “You can’t start a bank with debt,” he remarked, explaining that Tier 1 or equity capital must meet the standards of federal and state regulators.

A major share of this capital would be provided by socalled “special depositors,” whose contribution — at once both a deposit and an investment — would carry rights to returns not as dividends but as interest. In addition, the bank intends to hold a public offering entitling individuals to contribute as little as $5,000.

Cummings said $3.5 million in seed capital is in hand, and he expects to raise between $25 million and $30 million altogether, which, with a required capital ratio of 8 to 10 percent, would support a loan portfolio of approximately $200 million to $300 million.

While the governance and structure of a mutual bank dates to the 19th century, operations will be squarely of the 21st. With just one office, at 66 N. State St. in Concord, and tied to an extensive ATM network, Cummings expects virtually all transactions to be handled online. The investment in technology, he said, is intended to optimize operating costs by squeezing non-interest expenses.

The bank will offer one deposit product, a blended savings and checking account, along with certificates of deposit. Cummings expects depositors to include those who patronize farmers’ markets and local farms. Loan products will include revolving credit lines as well as mortgage, commercial and equipment loans.

“We’ll offer the whole gamut of agricultural financial services,” Cummings said.

The bank will operate throughout the Northeast, reaching from the New England states to New York and New Jersey.

Board ‘firepower’

Farm Credit East, an arm of the Farm Credit System established by Congress in 1916, is the principal source of credit to farmers in the region. The cooperative, with its knowledge and experience of agriculture, lends for longer terms at lower rates than other banks. But its lending authority ends at the farm gate or cattle grid.

Walden Mutual, Cummings explained, is geared to serve as a financial partner not only to farming operations but also “across the entire value chain” to enterprises that process, package and distribute farm products.

“With a large market area, we will be geographically diverse while serving diverse segments of the agricultural sector,” he said. With the common goal of supporting regional agriculture, he viewed Walden Mutual and Farm Credit East less as competitors than partners.

Walden’s 13 directors reflect the values that underpin impact investing. Six are steeped in banking and finance, among them Vince Siciliano, past CEO and president of the New Resource Bank of San Francisco, a pioneer in environmentally sustainable and socially responsible lending.

Others include Sherry Young, an attorney who heads the Environment practice group at Rath, Young & Pignatelli of Concord and served as counsel to Centrix Bank of Nashua; Alexandra Lunt of Armonia LLC, which invests in numerous sustainable agricultural enterprises; Curt Welling, who joined the Tuck School of Business at Dartmouth College after spending 25 years in investment banking and serving as CEO and president of AmeriCares, which distributed medical supplies around the globe; and Mike Claflin, executive director of AHEAD Inc. of Littleton, an affordable housing agency with some 500 units in the North Country.

Several other directors bring experience in managing a farm or marketing agricultural products. Tim Joseph, who began Maple Hill Creamery of Kinderhook, N.Y., before he ever milked a cow, now partners with 150 small farms to market a range of grass-fed dairy products to 600 retailers, including Safeway, Stop & Shop and Walmart. Paul Nardone of Meredith, whose career in the “good-for-you” food industry has taken him from Annie’s Homegrown, where he was CEO, to CEO of Hippeas, maker of the widely distributed organic chickpea snacks. And Steve Taylor of Plainfield, celebrated journalist and raconteur, managed a dairy herd for half a century and served as New Hampshire’s agriculture commissioner for 25 years. “We’re a dirt farmers kind of group,” Taylor said, “with all kinds of firepower.”

“Startups are a good thing,” said Greg Tewksbury, CEO and president of New Hampshire Mutual Bancorp, a holding company for three mutual banks in the state: Merrimack County Savings Bank, Meredith Village Savings Bank and the Savings Bank of Walpole. “The consolidation of the industry limits choice,” said Tewksbury, saying competition is “healthy for banking. Walden Bank will be a competitor, but there is room.“ In fact, Tewksbury said, “we have a lot to learn from Charley,” pointing to his strict focus on serving a niche market by vertically integrating its major segments and applying technology to contain costs. “It’s fascinating. I’m tickled. Forming a mutual bank is something I never thought likely in my career. We’ve offered to help in any way we can.”