Banking on Service

Slated to open this fall, Valley Green Bank is the Northwest's only community-based lending institution. Area residents are behind the effort and at the helm.

Algot F. Thorell and Jay Goldstein outside the future home of Valley Green Bank on Germantown Avenue in Mt. Airy. (Photo by James Sturdivant)

by MICHAEL J. MISHAK

Seeking to fill a void in the Northwest's commercial landscape, an enterprising group of area residents and business leaders have pooled their resources to establish Valley Green Bank, the region's only community-based lending institution.

Part of a growing national trend in the banking industry, Valley Green, scheduled to open this fall in Mt. Airy, is a bank by local people, for local people.

The de novo, or start-up, community bank fills a critical gap in the commercial corridor more than a decade old. In 1993, Chestnut Hill National Bank, one of the first community banks in the Delaware Valley, was sold to National Penn, solidifying a corporate banking block that has only grown in recent years.

With Commerce Bank set to open a branch on the Avenue, Chestnut Hill is a virtual banking mecca, claiming eight corporate banks in just three city blocks.

At the same time, Mt. Airy has suffered a banking deficit, with only two lending institutions, Sovereign Bank at 6740 Germantown Ave. and Philadelphia Federal Credit Union at 6701 Germantown Ave. Neither are community-based institutions.

Those trends have left local customers craving the kind of personal attention not often found in the big banks, said Algot F. Thorell, chairman of Valley Green. "At a community bank, you get access to a decision-maker that really understands the community," he said.

The cold, impersonal faces of the corporate giants have also alienated the small-business market, said Jay Goldstein, chief executive officer of Valley Green. While big boys like Bank of America may consider small-business lending chump change, smaller banks like Valley Green are making it their stock in trade. In fact, the community bank comeback has been fueled in large part by specialized service to niches, like small business and ethnic groups.

Continued consolidation in the banking industry has pushed the de novo bank movement into the 21st century. And the corporate layoffs — often resulting from bank mergers — expand the pool of knowledgeable professionals eager to fill the service gap.

According to the Federal Deposit Insurance Corporation, the number of community bank charters has been on the rise since recovering from the dot-com bust, with 112 issued last year, up from 79 in 2002.

A Valley Green feasibility study conducted last year confirmed the need for a community bank in the Northwest. As Thorell and Goldstein, among a group of the area's business-savvy residents, reached out to potential investors, they found an overwhelmingly positive response. The start-up's strong management team, anchored by seasoned professionals, earned the accolades of banking regulators, Goldstein said.

Now, with federal and state approval, organizers are engaged in a capital campaign, hoping to raise between $8 and $10 million, while renovations are underway at 7226-34 Germantown Ave., the former home of a supermarket and a tire retailer. In the heart of the Mt. Airy business district, the branch will have its own 30-space parking lot.

With Valley Green, Thorell has come full circle. In 1985, he joined scores of bankers nationwide when he founded Chestnut Hill National, the Northwest's first community bank. After negotiating its sale to National Penn in 1993, he played various roles in the senior management of the new parent company for a decade, most recently as chief executive officer and director of Panasia Bank, whose acquisition he also negotiated. He retired in 2003, but was back in business in less than a year, this time heading his own financial consulting firm.

Goldstein, on the other hand, is turning over a new leaf. He's leaving his law practice after 18 years to become Valley Green’s chief executive. "It was a difficult decision," Goldstein said, "but I felt as if the timing was right. It sounded like an exciting venture where I could use all my skills." As a hiring partner at Kleinbard, Bell & Brecker LLP, his work was focused in the areas of mergers and acquisitions, public and private finance, and real estate.

Both Thorell and Goldstein have strong ties to their respective communities. Thorell, a 40-year resident of Chestnut Hill, was the first paid executive director of the Chestnut Hill Business Association. He has also sat on the boards of various area organizations, including the Chestnut Hill Community Association.

Goldstein, who has lived in Mt. Airy for the last 15 years, served as president of Mt. Airy USA's board of directors from 2000 to 2004.

Those local connections give Valley Green a unique advantage.

Though smaller, community-based banks may have trouble competing in matters of pricing and product, they trump big rivals with customer service, said Frank Pinto, president and chief executive officer of the Pennsylvania Association of Community Bankers (PACB).

"A local community bank does well because it exists to serve that community," Pinto said. Because banking services hinge on the concept of "recycled" or "roundtrip" dollars, where loan portfolios are mostly invested in the immediate area, the local economy thrives, he said.

According to the PACB, nine community banks are based in Philadelphia, with a total of 24 branches.

Ultimately, it's the "personal touch" of community banks that will keep customers coming back, said Dick Arnold, PACB senior vice president and chief operating officer. "Communities will always have a place for those types of institutions," he said.