Carol Cone:
I'm Carol Cone and welcome to Purpose 360, the podcast that unlocks the power of purpose to ignite business and social impact. In today's podcast of Purpose 360, I explore the premise, where you bank really matters. Joining me in an intriguing conversation is Charley Cummings, CEO of Walden Mutual Bank, located in Concord, New Hampshire. Founded in 2022, Walden is the first FDIC-approved US mutual bank to become chartered in 50 years. The digital bank offers impact driven savings accounts, while supporting lending, to make a positive and lasting change to local food ecosystems in New England and surrounding states.
What makes Walden Bank different? As a mutual bank, they are governed by its community, funded by investors with a bias towards the long term and significant local impact. Simply put, you can grow your savings at a bank that directly supports local food production, from farms to manufacturers, value-added processors, distributors, and consumer brands. And you can feel really good how your money is working. Welcome to the show, Charley.
Charley Cummings:
Thanks so much for having me, Carol.
Carol Cone:
Oh, it's my pleasure. I always love to find innovative entrepreneurs that are very socially engaged and share them with our listeners who are all over the world. This is going to be a great conversation. Just a little bit about your background before you started Walden Mutual Bank.
Charley Cummings:
Sure. Well, let me go way back. I grew up on Cape Cod, in Brewster, a little town on Cape Cod Bay. And back in the early 2000s, there was a proposal to put a wind farm in Nantucket Sound, offshore wind farm. This was the first proposed offshore wind farm in the country. I helped to start, and for a long time served on the board of an organization called Teen Power Now, which was an advocacy group formed in favor of this project because some local opposition sprung up, the Kennedy family amongst them, basically saying, "Well, we're for wind energy, but just not here, not in our backyard."
Carol Cone:
That's a big NIMBY issue.
Charley Cummings:
Indeed. That's where I learned the definition of the acronym NIMBY. And I found that really hard to stomach because it felt like the alternative was a coal plant in someone else's backyard, and it really quite literally was. And that was really interesting work.
And I went back and I got a business degree and spent some time with a number of different venture-backed companies in the clean technology realm. And eventually started my own company called Walden Local, which is a brand of pasture-based meat here in the Northeast.
One of the original impetuses of that business was just the idea that there's this amazing set of farmers that seem to produce products that are demonstrably better from a taste health, nutrition, environmental standpoint. And there's a set of consumers that want access to those products, but it wasn't as if they could plug into the existing infrastructure. It was in building the supply chain of that business that it became clear, because we were lending to all of our partner farms, that there was a gap in the existing lending infrastructure that seemed to be missing these folks.
And at the same time, recognized that banking was a place that really lacked compelling consumer brands. You think of the bank brands out there, they don't have the same brand love and affinity that you see in other categories, like clothing and cosmetics and food. And even more so, there weren't a lot of bank brands that had anything interesting to say about social environmental impact.
Those sort of became the two sides of the bank balance sheet as we went to raise deposits from individuals and businesses that wanted to align their deposits with a set of impacts and values they wanted to see in the world. And on the other side of the balance sheet, lend to businesses across the entirety of the food value chain, from growers to distributors to brands, but also things on the periphery of that ecosystem that more broadly touch natural resources in important ways like energy waste, etc.
Very excited to say we got the banking charter over the finish line in late '22 and we opened to the public in the beginning of '23.
Carol Cone:
You're very young. Very young. On your website, you say that initially, you raised 24 million from 230 community, you call them investors. So were those investors? Were those depositors? Were they just general consumers? What was the makeup of the people that said, "I'm going to bet on this guy"?
Charley Cummings:
Well, they weren't just betting on me. At that point, they were betting on a pretty well-established team of folks from inside and outside of banking. And I think that's another important ingredient here is, I think that's true of a lot of new enterprises is where you can combine outside industry expertise with insider expertise. That's where real innovation comes from. We had that team put together before we went out and started asking people for money.
But the money came from a really wide spectrum. We had, there's probably the vast majority of that people, of the people on that list, I would say roughly 200 or so, were writing checks of less than 50,000, and the vast majority of that were less than 10,000. We had a couple of larger family offices or investment advisors that were pooling client money, that wrote checks of million, two million at a time. But a good, probably about a quarter of the dollars came from individual, small, everyday investors.
Carol Cone:
When you talked with them, what were you riffing on?
Charley Cummings:
You could tell we're a mutual because it's in the name, obviously, but not everyone knows what that means. And what a mutual is is effectively a credit union, except it's a bank with FDIC insurance. So ultimately, we are owned by our depositors. And to me, that creates this incredible alignment from a strategic perspective because we work in their best interests.
One level deeper, what the structure does is ownership is not one thing, ownership has component parts. We're going to get a little technical for a second, but the pieces of ownership, one piece is liquidation rights, who gets the excess if the thing is sold? One piece is economic rights on a daily basis, who gets access to the profits? And then the third is governance voting rights, who controls decision-making? And usually, that's in the form of who decides who's on the board.
The beauty of a mutual bank is that it separates those into component parts, whereas a share-owned company or a shareholder-owned bank, all of those rights are held by the same people, in shareholders. In a mutual structure, the voting rights are held by our corporators, which is essentially a board of trustees. The economic rights are shared between our, we call them special deposit investors, but our investors and our depositors. And then the liquidation rights are broadly shared across all general depositors, but investors don't have any exposure to that. In other words, investors don't benefit if the bank changes ownership. And that's the crux of it is if you remove the incentives for the investors and for the management team to sell the bank, that's the crux of the equation.
Carol Cone:
So what were people saying to you? Did you get, "Oh, that's a great idea." "Oh, I don't know if I want to invest in this bank, it's too risky"?
Charley Cummings:
Definitely, the full spectrum. I think it was helpful to have a pretty well-established history in the sector and a lot of relationships. I think whenever you're trying to build an early network around an idea like that, whether you're fundraising or not, it always helps to start with one degree of separation. And I've probably learned that lesson a number of times, but when you go out further, you can burn a ton of time trying to convince someone that is too far outside of the sphere. For example, we talked to a lot of traditional bank investors and those people definitely thought this was crazy.
Carol Cone:
They were like, "Who is this guy? No way is this going to work."
Charley Cummings:
Yeah, yeah. Whereas impact-oriented folks, I think understood the vision of, "Hey, there's a core insight here that a bank can be an incredibly powerful mechanism to create change." And that's because they have a license from the government to obtain the lowest cost of capital of any type of entity, lower than the government itself. So what the government pays on treasuries is typically much higher than what banks pay for deposits. The core idea to a lot of impact investors, I think was compelling, which is if we can lower the overall cost of capital to this ecosystem by using a bank, that could unlock a lot of growth towards a more sustainable, vibrant, inclusive local food ecosystem.
Carol Cone:
I would love for you to talk about the beneficiaries, the loans that you're giving to small businesses, to farmers. Talk about some of your favorite stories of where you've given loans and what's been the impact?
Charley Cummings:
I came to believe that when we make choices about agriculture, energy, waste, or things that affect natural resources more broadly, and they are out of sight, out of mind, the negative consequences associated with those choices are borne by someone else somewhere else.
And where this all comes together is, it's only fairly recently that I recognized that that is also true of banking. And for almost everyone, banking is out of sight, out of mind. We don't wear our bank brand on our shirt sleeve. if we can create an ecosystem in which people are much more aware of where their dollars are going and how they're being utilized, that, I think, has really profound consequences for change from an economic, environmental, and social perspective that are so, so important.
I'll give you immediate example of that. One of our early loans was to a shellfish hatchery called ARC Shellfish Hatchery also on Cape Cod, coincidentally. And this is a business that produces seed stock for area shell fishermen. And they probably, I think the number is they support 1,500 individual independent businesses. And these are typically sole proprietor, individual people out there seeding oysters, clams of all different types. There is something really beautiful about this business. Let me take 30 seconds to explain clam sex to you.
Carol Cone:
Okay, what's to learn?
Charley Cummings:
So they open an adult, not knowing if it's a male or a female because you can't tell from the outside. This woman explained to me how you tickle the tissue, she said, and assuming it's a male. The sperm comes out and then you put it into buckets with other adults, one per bucket. And if it's a male, they also release more sperm. And if it's a female, they release their eggs. You basically just combine these buckets and then voila, five days later, you have these tiny little grains of sand in the bucket, millions of shellfish. And it's crazy to me that this thought works in the open ocean, is just the eggs and sperm combining.
Anyway, this business is vitally important to that local ocean economy across the Cape and both directions, north and south from there. And I think they had struggled to find a lender that understood the nature of the business because there's nothing but risk there. Because if the water temperature changes, if their ability to produce algae, which is what these things eat, something goes wrong in that system, all the clams starve and everything is ruined. So they needed someone that would really understand the nature of those risks, how they were controlling for them. We were really able to dig into the business and get them a working capital loan to support further growth in the business.
And one of the most beautiful things about this business that struck me, and this is a little romantic, but I asked them, "Well, what do you use as breeding stock?" I think a lot of, that's the point at which a traditional bank might say, "Do you own intellectual property around the seed stock and/or do you have contracts to make sure you have that seed stock in place?" And instead, the answer was, "We rely on the goodwill of our customers, who are looking at shellfish, hundreds of thousands of these things every day. They recognize, when they see one that they really like, a real specimen, and they bring it in. And we don't pay them for it."
And it happens every single week. Someone comes to them and says, "You guys have got to breed this. Look at how beautiful this clam is." And there's something very organic and just very... There's a resilience that I take from that in the relationships they have created with this community. But I think other people would look at that and say, "Wow, there's risk, because if that person doesn't show up, what are you going to do?" But this business has been operating for 30 years.
Anyway, that's a good example of, I think, a really impactful business in the region that sort of struggled to find the right banking relationship just like I had in the past.
Carol Cone:
So you see risk differently, which is good. It's kind of an ethos of the bank. The other thing you talk about, and I see it in your materials, is you have a different view of relationships. You talk about your depositors as stewards. And you just told a story that was based not on contracts, but based on relationships. And that is, in a way, the newness of Walden reverts to the oldness of people having relationships and in commerce and ecosystems. Give us another story or two because you have all these amazing cases on your website and I want to share some more of them with our listeners.
Charley Cummings:
Another one that comes to mind, I think this one's probably on our website too. At some point, a guy by the name of Carl King approached us and he was a retired state police officer. He had grown up in Vermont and the property that he had grown up on had come up for sale. No farming experience, but although when he was a kid, he was around animals and obviously living on this property.
But he had already cobbled together all of these pieces and basically made a deal for this property, even though he didn't have enough money to get it done. And created, he got seller financing from the person selling the property. And this property had previously been in his family for multiple generations. And he, alongside it, was also buying this existing business called Vermont Natural Beef that was going to allow him to have a sales outlet. And he had a good vision for how to scale that business and putting marketing dollars behind it.
We gave him a loan to purchase the property, and there was something that was pretty palpable around Carl's passion for the project and the family history from the property. I wouldn't say these were things we considered from an underwriting perspective, literally in the credit memo. But I think when you've got a lender out there talking with someone that has that kind of history, there was clearly a character here that was going to do, no matter what, they had to do to make this work because it was their family farm and they were never going to have a shot to go back there again. That was, I think, in the back of everyone's mind of believing that Carl was going to go out and do what he said he was going to do because of that dynamic.
And of course, just to be clear, we're still looking for things that protect the bank and protect our depositors. So we had adequate collateral in place, we believed in the business plan and the cash flow's ability to support the debt. I don't mean to suggest that we're so relationship driven that we could just ignore that kind of stuff, but there was something really compelling about that story that I think we all believed in, and it's borne out. I think we made that loan almost a year ago and he's done really well with it, so that's been a really inspiring story to watch.
Carol Cone:
That's a beautiful story. And I love the fact that you are accounting for someone's passion and vision, in addition to being thoughtful about collateral and things like that. And I know that you're very proud that you have, in your team, you have bankers, but you also have people that know the local economy, they know agriculture, they know farming. So there's a connection that you've created in the structure of the bank so that you can appropriately assess risk and the people that you're investing in, so that's really wonderful.
How many loans to date have you made since you started? And also, what's the complexion of the individuals who you've made those loans to? Meaning men, women, types of businesses, things like that?
Charley Cummings:
I think we've probably made somewhere around 85 individual loans since we opened. And those range from $50,000 on the low side to, we've originated stuff well over four or 5 million dollars, in combination of, we'll bring other banks and partners to, it's called participate on a portion of the loan when it's larger than we're able to do ourselves.
I'm proud to say that actually the majority of our loans have gone to women-owned businesses. I think the percentage of loans going to small business, small farms, women owners, BIPOC owners, those numbers are multiples of what you would see at a traditional bank. I'd love to see us continue to serve more underrepresented borrowers.
One of the challenges there, at least on the ag side of the equation, is just in the Northeast, there just are not a lot of BIPOC farmers. And that's sort of part of the problem is we have this resurgence of young and beginning farmers in the region, but they're definitely disproportionately white. So we have work to do there.
Carol Cone:
Okay. How about with depositors? How much education are you sharing with them in terms of your communications about when you deposit? Again, where you bank matters. Is it a hard sell to your depositors? Do you have people just flocking to you?
Charley Cummings:
We've tried a few different variants of how to explain what we do to people, but one of the starting points is to sort of enlighten folks that actually where you bank really does matter, and you sort of started with that premise. But there's been some interesting research done that demonstrates $125,000 in a bank account with one of the top three banks in this country is equivalent to the carbon impact of the average American for an entire year. So driving, flying, eating, everything is just your money sitting there in an account.
And it's a bit of a non-comparison because that's obviously far above what most people have in a bank account, but that's sort of irrelevant to the point, which is that money sitting there is actually one of the most consequential choices you make from an impact perspective, far more so than food, clothing, cleaning products, all the things that people are generally very thoughtful about. But you cut that number in half, and that's still a multiple of the impact that a lot of those other choices have. So that helps to start the conversation.
Carol Cone:
It's amazing. I know, I've been in this field for decades and, oh my God, buy sustainably sourced food and recycle everything. And I drive an electric car and it's like, "OMG, this is a way I could really lower my impact."
Charley Cummings:
Totally. And it's what underlies everything else.
Carol Cone:
I love it. I want to ask, can you share with our listeners your long-term vision for the bank? Because first of all, you don't have really short-termism because you're investing in farming and regenerative agriculture and all sorts of things like that. But you do have a very discreet, and you say it on your website, your long-term vision.
Charley Cummings:
Well, what's in my head is that we're trying to develop a truly functional ecosystem, and we want to serve that ecosystem by connecting borrowers and depositors in increasingly interesting and impactful ways. The way that we are sort of piloting that in our early days here is through a really simple partner perks program, you get discounts when you use your debit card at our borrower businesses, as a way of reinforcing the impact that those businesses are having on the greater community. We have a summer farm dividend that allows our depositors to spend a dividend in a farmer's market or a local food vendor, and we'd love to continue to grow that program over time.
I think our longer term vision has to come with that caveat of we're doing this brick by brick. And my ethos is the business model is to do right by our community, and maybe you do end up changing the world, but you might do it by inspiring others to do right by their communities as much as growing the enterprise itself.
Carol Cone:
I just read that you have a 100-year CD. Is that part of the bringing that long-termism to life?
Charley Cummings:
Yes. That has several purposes. One is to communicate that yes, in fact, we do intend to be here in a hundred years. It also has a few other purposes. One is that to a small farm that has a increasingly small margin profile, the difference from an affordability perspective between a 20-year mortgage and a 40-year mortgage is the difference between making it work and not. And banks struggle to make really long-term mortgages, that's often what gets banks into trouble is because when interest rates swing one way or another, when you have these very long-term assets, that can create real problems and creates risk for the bank. However, if you have long-term capital to fund those loans, that solves the problem. That was part of the impetus of the 100-year CD.
Carol Cone:
Nice. That's very good. Just a question, do you take depositors outside of New England?
Charley Cummings:
Great question. Yes, we do. We have depositors from 44 states now. We are about to open, you can get an account in California, that was one we are just now adding. But we're focused on the Northeast just because that's the ecosystem we're really oriented around, but we do welcome deposits from anywhere in the country.
Carol Cone:
Okay. Well, I think you're going to get some deposits from Florida, which is where I live. We have to get this story out even more. Has anybody in the banking industry taken notice? Like, "Hm, maybe I want to do something..." Or another social entrepreneur that, "I want to do something like this"?
Charley Cummings:
There's this amazing thing in the banking industry. On one hand, as someone coming from the outside into the industry, it's a very odd place, that banking is very insular, and technologies that are commonplace and cultural practices that are commonplace outside of the industry tend to come slowly to banking. That's been a little bit of an adjustment.
On the other hand, I have found other banks' CEOs to be incredibly welcoming and supportive and collaborative and sort of have this attitude of we're all Davids amongst a couple of Goliaths. The market's plenty big for all of us. I've had many bank CEOs send us various policies as a template for what we were working on, even entire business plans. People were very welcoming from that perspective.
Even more so though, there's this group of bankers that are trying to plan the next generation of mutual banks. We very much, I think, started to get that group of legacy mutual banks to think a little bit differently because it's been in need of a redefinition in the modern era for a while now.
Carol Cone:
That is great. This has been a wonderful conversation. I always give the last comment to my guest. And what I'd love to do is, one, I'd love to have you back on this show in like a year.
Charley Cummings:
I'd love to come back.
Carol Cone:
To talk about your progress, which would be great.
Charley Cummings:
Sure. I'd love to come back and tell you where we're at.
Carol Cone:
Because you're going to be a new hero. How would you like to end this, at least this first conversation? We'll have another one in the future, but for our listeners who, gosh, there's so many people out there that, one, they'll be admired. Two, they might want a loan. Three, they might want to be a depositor or they just want to cheer you on. But what's your final word?
Charley Cummings:
Well, I hope people come away with the conclusion that where they bank really does matter. And relatedly, the reason I think that that is important is because banking is part of an ecosystem in the same way that agriculture, energy, and waste are. And I think we all would like to agree, we'd all like to avoid the Hunger Games scenario where the rural sectors toil on behalf of the urban elite and increasingly speak a different language and get their news in different places. There are really quite consequential implications of that.
This is not about food miles, though. That's not why a local food ecosystem is important. It's when it comes to issues of natural resources, it's not a system of inputs and outputs. These are cycles. It's the physics law of conservation of mass. You can't destroy these things and you can't create them, you can only transform them. And for a long, long time, we've thought about waste and energy and agriculture as systems of inputs and outputs, and that's not what they are, they're cycles.
Banking is the same thing. Banking can't be about inputs and outputs. It has to be about creating a functional ecosystem and cycle that reinforces rather than detracts from community. I hope that resonates with people and would love to have them open an account with us.
Carol Cone:
That would be great. I'm going to encourage all of our listeners to open an account with Walden Mutual Bank. I'm going to do it.
Charley Cummings:
I hope you do. I hope you do.
Carol Cone:
Oh, actually, I will absolutely do that. And we will have you back in about a year so you can tell us some more great stories about your depositors and about your borrowers and about your impact. It has been a delight to talk with you, Charley.
Charley Cummings:
Likewise, Carol. It was fun. Thank you so very much for having me.
Carol Cone:
This podcast was brought to you by some amazing people, and I'd love to thank them. Anne Hundertmark and Kristin Kenney and Carol Cone On Purpose, Pete Wright and Andy Nelson, our crack production team at TruStory FM, and you, our listener. Please rate and rank us because we really want to be as high as possible, as one of the top business podcasts available, so that we can continue exploring together the importance and the activation of authentic purpose. Thanks so much for listening.
This transcript was exported on May 17, 2024 - view latest version here.
p360_177 Walden Bank RAW (Completed 05/17/24)
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