Name: Kevin G. Champagne
Position: President and CEO of Compass Bank and Seacoast Financial Services Corporation Age: 52
Education: Bachelor’s degree in business administration from Stonehill College
Background: Started at the bank in the management training program 32 years ago. Served in various positions at the bank before being named the CEO in 1994.
Residence: New Bedford
New Bedford, Mass.-based Compass Bank was founded in 1855, as the New Bedford Five Cent Savings Bank. After the bank acquired Fall River Savings Bank in 1988, its name was changed to Compass. Compass bank acquired several other bank branches from smaller regional banks, including the acquisition of Sandwich Cooperative Bank in 1998.
Today, Compass is a $2.9 billion state chartered savings bank serving all of Southeastern Massachusetts. It has 39 full-service branches. Seacoast Financial Services Corporation, also based in New Bedford, is the holding company for Compass, as well as Nantucket Bank. Seacoast went public in 1998.
PBN: What are the strongest products for Compass?
CHAMPAGNE: We still do a lion’s share of lending in the one- to four-family residential mortgage area. What makes us a little different than a lot of banks our size is that we have a very large consumer loan portfolio. Those consumer loans are virtually all composed of automobile loans. We originate those loans on an indirect basis by having affiliations with automobile dealers. So if you go into a dealership, let’s say a General Motors dealer, you can get financing through GMAC – a captive finance company – or they have a non-captive financing option. Compass is a non-captive source of financing. We have affiliations with about 220 automobile dealers throughout the state of Rhode Island, Massachusetts and New Hampshire. In Rhode Island, we are one of the top one or two non-captive finance alternatives in the state for people who buy cars. We get about 35 percent of our entire business in that area from Rhode Island.
Is Rhode Island a target area for growth at Compass?
Our strategic, long-term plan is to grow the franchise and expand its footprint from the five counties in Massachusetts that we have locations in. We plan to move in a westerly direction. Right now we are right against the East Providence line. We also want to move northward toward the greater metropolitan Boston area. We are looking for suitable branch locations in the state of Rhode Island. Hopefully in the near future we will jump over the state line into Rhode Island. We have a number of customers who come over the border now to bank with us. Also, all of those customers who have automobile loans with us in Rhode Island would be natural customers.
Southeastern Massachusetts is not a major destination for young professionals, when compared to Boston, New York, and Providence, for that matter. Is it difficult getting good workers?
The biggest challenge we face today is getting quality people. It’s not a problem we face alone, it’s an industry-wide problem. It stems from this: If you think about all the big banks there were 20 years ago, 10 years ago…all of these big banks had training programs, extensive staffs, people who were working through the ranks in their organizations. That provided smaller companies a fertile territory from which to solicit people with bigger bank experience, and people who may have hit a plateau with their companies and were not going further. Those people might be willing to go to smaller banks and progress to higher levels of responsibility. Today, we have become such a regional player of size that there are only a couple of banks that are larger than us. We don’t have that territory to attract people from. So we have had to rely more on training and educating people. If you can’t hire them prepared, you need to grow them yourself.
Growing your commercial lending business has been a goal. How do you do that in a region where economic growth in general has been slow to happen?
(Commercial banking) has become more and more of a mainstay in the last ten years. Today, we have a significant lending presence in all of our markets in which we do business. Even though Southeastern Massachusetts, particular New Bedford and Fall River, is not as economically vibrant as some other markets in the Commonwealth there are still a great many very stable, sound, community businesses in these areas. In the other markets that we do business there are typically a lot of restaurants, bed and breakfasts, hotels, and a lot of things that cater to tourism businesses in the New Bedford area. There are still some small manufacturing businesses, service companies, a lot of physicians, medical offices…To avoid risk, we are diversified in who we do business with. There are still good business opportunities to lend to businesses in this area.
Your company saw a 7 percent increase in commercial lending in 2001. Is that a good number for you?
We would like to see it higher. At times, especially when there are a lot of dislocations due to mergers of big banks, I think a lot of our lenders have a lot of opportunities previewed for them. Sometimes they struggle to pay attention to all of them and need to screen some out and be selective. We would like to see it as a higher percentage of assets on the portfolio than it is today. However, we are not rewarded financially today doing a lot of the commercial business with the prime at 4.75. When you think about loans with a little more risk at prime plus one or prime plus two, I can make a mortgage loan at seven with no risk. So it is difficult to justify the allocation of capital sometimes to make more risky loans. By nature, commercial loans are more risky.
How do you think the proposed commuter rail to Fall River and New Bedford will impact the communities?
Any community that has seen mass transit has seen economic benefits. Those benefits could be the increased relocation of businesses. I think the most immediate impact might be viewed by many in the community as negative, because as New Bedford and Fall River become desirable commuting communities for Boston it will drive home prices up. For those individuals who have lived in these communities all of their lives they will find that they might no longer be able to afford to live in their homes. There will be some social challenges that will come with that for the community. There will be some good and bad to it. Overall, I think the economic benefits over the long term will be much more positive than the negative.
Banks are pushing their money-management services these days. What does Compass have to offer?
We have two money-management services in two distinct areas. One would be on the commercial lending side. We have money-management services for our commercial customers that’s probably functionally as good as what you would get at some of the larger companies. It’s an Internet-based solution, so customers can manage their money and coordinate their finances from multiple institutions over the Internet through our programs. On the personal side, we offer private banking for customers to help manage their wealth. We began that service last year, and it has taken off very nicely. We did a lot of research in the market to determine who our competitors would be, whether we could be competitive, whether we could make money doing it. We did a number of focus groups in the communities with…people who would refer people to private banking, like accountants and lawyers. We determined there was a niche market for managing portfolios of individuals between $500,000 and $5 million.
Are you doing this on your own or did you partner with a financial services company?
We partnered with a firm in Boston (EPG Inc.) that does the money management for us and we partnered with Fidelity, which has the best technical capabilities for trade execution, accounting, bookkeeping and record keeping. Fidelity stands behind us and is really transparent to the customer. We use Fidelity to give you Internet access to your accounts.
Did the bank take a hard hit in loan delinquencies because of the recession?
There was an uptick toward the end of the year in delinquency. There was a slight increase in non-performing assets, but it was basically attributable to a couple of large credits that had been struggling for a number of years. They were struggling because of circumstances that were not attributable to an economic slowdown or Sept. 11. Beyond that there hasn’t been anything out of the ordinary.
Low interest rates are good for homeowners looking to refinance, but what’s the impact on the banks?
The negative side of it is that you end up churning a lot of your own business. A lot of the resources you have, your lending people and loan processing people…the people you use for title searches, the lawyers, everybody gets consumed refinancing a lot of business you already had on the books. The bank is not putting any new money on the street. The refinancing business is not efficient business, it’s not new business and it’s not profitable business. It’s business you do to keep your customers.
What’s the biggest mistake Compass could make?
If we didn’t take advantage of the opportunity to grow that would be a mistake. With all the consolidations that have taken place there are a lot fewer financial institutions out there today. There is no secret that bigger banks make it difficult for customers to do business with them.
