April 3, 2006
Long-term investor | In advance of his June retirement, Joel Stevens discusses Kennebunk Savings Bank's community investment program
By Whit Richardson
Kennebunk Savings Bank was struggling to make a profit when Joel Stevens took over as president in 1993. Like many Maine banks at the time, the small community bank was suffering from shrinking margins, the effect of bad loans and the fallout from an economic recession. In addition, Maine banks faced increased competition from large, out-of-state banks, which had been expanding into the state since the 1980s.
Stevens inherited the task of placing Kennebunk Savings Bank back on the path to profitability. After 13 years on the job, he feels he has succeeded and is preparing to retire in June, just shy of his 65th birthday. (For more on new faces at the top of Maine financial institutions, see "Moving in and moving up," page 41.) Under his leadership, Kennebunk Savings has established firm financial footing ˆ assets have grown from $227 million to $650 million ˆ and the bank's return on assets over the last several years consistently has placed in the top quartile of community banks in the state. Stevens credits that turnaround to a focus on what he sees as the core principles of a community bank: a healthy employee culture, good customer service and a commitment to serving the community.
Stevens came to Kennebunk Savings Bank with close to 30 years experience in the banking industry, most of which was spent working for banks owned by large corporations. He spent many years at KeyBank as CEO of its Maine division and at First New Hampshire Bank, which at the time was owned by the Bank of Ireland, before arriving at Kennebunk Savings. During those years at larger corporations, Stevens says he became frustrated with what he calls "the quarterly earnings factor," and upon arrival at Kennebunk Savings found the community-banking environment a breath of fresh air.
Stevens says he appreciated the small bank's hometown feel and community focus. Rather than lead the bank away from that focus, he decided to look for growth opportunities while staying close to the southern York County community, which the bank had served for more than 100 years. One result of that approach, Kennebunk Savings Bank's community investment program, will remain a legacy of Stevens' tenure. The program, which Stevens and his board established soon after he arrived at the bank, allocates 10% of the bank's annual earnings to area nonprofit organizations. By the end of 2006, the total amount donated will surpass $5 million.
Although he launched the program because he felt it was the right thing for a community bank to do, he also discovered the strategy could play a role in the bank's emergence as a profitable endeavor. Mainebiz recently talked with Stevens about the community investment program and where he sees Kennebunk Savings Bank heading. An edited transcript of the conversation follows.
Mainebiz: When you arrived at Kennebunk Savings Bank, had you already included a community investment program in your overall strategy to turn the bank around?
Stevens: I wish I could say that I did. But the community investment program really came to me as we were undergoing our first strategic planning session about six months after I arrived. At that time, Kennebunk Savings Bank, like many banks back in the early 90s, was experiencing some real earnings problems, and my first chore obviously was to get the bank back on a road to good profitability. But as we reviewed the various constituencies that we served, one of the things that jumped out at me was the community constituency. We're a mutual bank, so we don't have a stockholder constituency, and it just seemed to me that the community was ˆ maybe not literally, but figuratively ˆ the owners of the bank, and that's who we served.
It appeared to me that the right thing to do, to the degree that we were successful, was take 10% of our earnings and give them back to the community. Of course, at that time we were making so little money the first amount we had to give was something like $27,000. Now, we're giving close to $800,000 a year, so it has become a very major factor.
Besides demonstrating your commitment to the community, has the community investment program been a factor in the bank's growth over the years?
It originally was not intended as such. The focus of the program was really more what we felt was the right thing to do. But I guess the old saying "Doing well by doing good" certainly has come into play here. We have found that it has very much become the point of difference in our marketplace. I think the general public will identify our community investment program as a distinguishing feature of Kennebunk Savings Bank. So from a good-will standpoint it has been one of the core factors that has contributed to our growth.
Do other area banks have similar programs in place?
I think there are other banks who give substantial money to the community, but I'm not aware of any bank that has established a target such as we have of 10%, which is a real high amount. I've spoken at a couple of national conventions in regard to our program and I know as a result that other banks across the country have adopted the program. I often get feedback from other banks that have decided to adopt the program and that, of course, gives me a good feeling, that we've been able to foster this type of program.
But we're not the only business in the state that does this. Oakhurst Dairy, for example, gives back 10% of their earnings, and Tom's of Maine does the same thing ˆ so we're not alone.
I understand the customers and employees pick some of the organizations they want to see receive donations. Can you tell me about that aspect of the program?
That's right. We take 20% of our charitable budget every year and we have a community ballot where our customers vote on where they would like to have that money directed. With $800,000 to give out, that comes close to $200,000. The balance of it, of course, is given by grants that are applied for by various organizations in the community. And our branches have a lot of latitude in that area to fill local need, so that when someone comes into a branch they don't have to go through an awkward committee system in order to come up with their donations. Matter of fact, each branch develops their own community donations budget each year by looking at the needs in their community. We make sure that we don't have a lot of bureaucracy surrounding this, and that the decisions are made on absolutely as local a basis as possible.
Does the bank focus its donations toward a certain type of organization?
Well, we keep track of where the money goes, and we try to have a relative balance between basic human needs, education, environment, the arts, etc. So we do look at where the money is going. We also look at where the money is going relative to the size of our deposit base at each community. So if a branch has $100 million in their community, we may put more money in that community as opposed to one where the branch has $50 million. But that's a very loose standard. Again, we look very heavily on the need that is involved in any particular year and so one year we may be way off that goal.
Kennebunk Savings Bank now has 12 branches. How many branches were there when you took over in 1993 and what was your expansion strategy?
I think there were seven [branches]. We've been very careful to grow organically and branch out contiguously to our present organization. We've been very aware of what I call the bigness disease, and that's really people who set growth as a goal or end in itself. In doing so, they often lose sight of what really got them there in the first place. From our standpoint, as soon as you look at bigness for bigness sake you kind of lose sight of the things that got you there.
So we have been very conscious of being a community bank serving, really, southern York County. And we consider that our sandbox, if you will, and have resisted the temptation to do a lot of geographic expansion.
Besides the community investment program, what other changes did you make that you think helped get the bank to where it is today?
The first thing we looked at was employee culture, and you may wonder, "Why do you do that before customer service?" which is kind of a hallmark of everything the bank has to do. But we found out very early that you can't give truly extraordinary customer service unless you have highly motivated and happy employees. And that means having an employee culture where people treat each other with mutual respect, where they work as a team, where their employers support their professional and personal growth.
Every three years we have [Portland-based] Critical Insights do a survey of our market area to see how we stand. And time after time we come out from a customer service standpoint right on top. And I know it's the employee culture we have that makes that happen. Loyalty to the bank is a big factor of our success. We found that loyalty to our employees begets loyalty from our employees, not the other way around.
We've now reached the point where we are able to promote primarily from within. When we were smaller and building our organization we had to go outside to hire a number of employees. Now as I get ready to retire we have people moving up in the organization. My successor, Ken Reid, comes from inside. He's worked here at the bank with me for 11 years now and has been most of the time in charge of the retail division. In the last couple years he has also been our chief financial officer. So it's the old story: Hire good people, set a strategy for them to follow and leave them alone.
When did you make the decision to retire?
Well, I had originally planned on retiring at 62, then at that point I really wasn't ready and I decided to go to 65. I'm going to be 65 in July, and that seemed like a good thing. You know the other thing is, if you hire people smarter than you are all the time, you're going to end up as the dumbest guy in the bank ˆ that's the logical progression isn't it?
Seriously, I think I've gotten to the point where I feel that we have a management team assembled here that can take over and continue the track that we have been on. I told the trustees before I left that I would have a management team in place that would make a seamless transition, and I think I've accomplished that.
We've known [about my retirement plans] for over a year. That's part of having that seamless transition I'm talking about. The last thing you want to do is have a sudden change that's going to upset an organization. So it was a little bit over a year ago when my successor was announced and he has gradually been transitioning from his present role into the senior role. He's pretty much running the bank right now. When I walk out the door it'll be just as smooth as can be. I'll go from who's who to who's that.
So you feel you are leaving the bank in a good position?
Absolutely. You've got to keep things moving in an organization and people need to feel that there is movement from a career standpoint, from a professional growth standpoint. I think it's healthy to have these things go along like that. The last thing I want to be is the old curmudgeon who's sticking around and who everybody wants to get out the door as he goes downhill physically and mentally. The other way to say it is, it's fun to go out on top rather than when everybody wants to kick you out the door.
What's left to be done at the bank? Where do you see it heading in the future?
I think to a great degree that's going to be up to my successor and his team to really develop new visions as we go along. We just had a strategic planning session and in the short term our goal is to develop what we call the three-legged stool of banking, insurance and investment services. We acquired an insurance company five or six years ago and we recently acquired a financial services organization that provides financial consulting services and investment advisory services to our customers.
Our goal at this time is to grow from within and to develop those parts of the organization. So you may not see us growing as much on a deposit standpoint or on a footing standpoint, but we really have an objective of developing those parts to their maximum potential.
Is there an accomplishment you're most proud of during your time at Kennebunk Savings Bank?
I guess if I look back over my career I think one of the things I'm proudest of is that we have demonstrated that a bank can be highly successful by focusing on employee culture and customer service, rather than simply on profits. Not that profits aren't important ˆ they are. But it's a very subtle thing. If you put all your emphasis on profits first you can lose your focus on how you get there.
I've seen an awful lot of companies and banks, particularly the large ones with out-of-state owners, fall down because they fail to really support their employees and their customers.
They give lip service to it, but in order to make that quarterly earnings report they pinch pennies and they sacrifice long-term growth for the short-term dollar. And I've just seen that happen over and over again. We have, in recent years, consistently been one of the most profitable banks in the state. But we've done that by focusing first on things like the culture of our employees, customer service and our community investment program, as I've talked about.
After more than 40 years as a banker, what are your plans for retirement?
My plan for retirement is to go sailing. My wife and I have acquired our retirement boat, which is a 40-foot Island Packet, and we intend to do as much cruising as we possibly can.
Stevens inherited the task of placing Kennebunk Savings Bank back on the path to profitability. After 13 years on the job, he feels he has succeeded and is preparing to retire in June, just shy of his 65th birthday. (For more on new faces at the top of Maine financial institutions, see "Moving in and moving up," page 41.) Under his leadership, Kennebunk Savings has established firm financial footing ˆ assets have grown from $227 million to $650 million ˆ and the bank's return on assets over the last several years consistently has placed in the top quartile of community banks in the state. Stevens credits that turnaround to a focus on what he sees as the core principles of a community bank: a healthy employee culture, good customer service and a commitment to serving the community.
Stevens came to Kennebunk Savings Bank with close to 30 years experience in the banking industry, most of which was spent working for banks owned by large corporations. He spent many years at KeyBank as CEO of its Maine division and at First New Hampshire Bank, which at the time was owned by the Bank of Ireland, before arriving at Kennebunk Savings. During those years at larger corporations, Stevens says he became frustrated with what he calls "the quarterly earnings factor," and upon arrival at Kennebunk Savings found the community-banking environment a breath of fresh air.
Stevens says he appreciated the small bank's hometown feel and community focus. Rather than lead the bank away from that focus, he decided to look for growth opportunities while staying close to the southern York County community, which the bank had served for more than 100 years. One result of that approach, Kennebunk Savings Bank's community investment program, will remain a legacy of Stevens' tenure. The program, which Stevens and his board established soon after he arrived at the bank, allocates 10% of the bank's annual earnings to area nonprofit organizations. By the end of 2006, the total amount donated will surpass $5 million.
Although he launched the program because he felt it was the right thing for a community bank to do, he also discovered the strategy could play a role in the bank's emergence as a profitable endeavor. Mainebiz recently talked with Stevens about the community investment program and where he sees Kennebunk Savings Bank heading. An edited transcript of the conversation follows.
Mainebiz: When you arrived at Kennebunk Savings Bank, had you already included a community investment program in your overall strategy to turn the bank around?
Stevens: I wish I could say that I did. But the community investment program really came to me as we were undergoing our first strategic planning session about six months after I arrived. At that time, Kennebunk Savings Bank, like many banks back in the early 90s, was experiencing some real earnings problems, and my first chore obviously was to get the bank back on a road to good profitability. But as we reviewed the various constituencies that we served, one of the things that jumped out at me was the community constituency. We're a mutual bank, so we don't have a stockholder constituency, and it just seemed to me that the community was ˆ maybe not literally, but figuratively ˆ the owners of the bank, and that's who we served.
It appeared to me that the right thing to do, to the degree that we were successful, was take 10% of our earnings and give them back to the community. Of course, at that time we were making so little money the first amount we had to give was something like $27,000. Now, we're giving close to $800,000 a year, so it has become a very major factor.
Besides demonstrating your commitment to the community, has the community investment program been a factor in the bank's growth over the years?
It originally was not intended as such. The focus of the program was really more what we felt was the right thing to do. But I guess the old saying "Doing well by doing good" certainly has come into play here. We have found that it has very much become the point of difference in our marketplace. I think the general public will identify our community investment program as a distinguishing feature of Kennebunk Savings Bank. So from a good-will standpoint it has been one of the core factors that has contributed to our growth.
Do other area banks have similar programs in place?
I think there are other banks who give substantial money to the community, but I'm not aware of any bank that has established a target such as we have of 10%, which is a real high amount. I've spoken at a couple of national conventions in regard to our program and I know as a result that other banks across the country have adopted the program. I often get feedback from other banks that have decided to adopt the program and that, of course, gives me a good feeling, that we've been able to foster this type of program.
But we're not the only business in the state that does this. Oakhurst Dairy, for example, gives back 10% of their earnings, and Tom's of Maine does the same thing ˆ so we're not alone.
I understand the customers and employees pick some of the organizations they want to see receive donations. Can you tell me about that aspect of the program?
That's right. We take 20% of our charitable budget every year and we have a community ballot where our customers vote on where they would like to have that money directed. With $800,000 to give out, that comes close to $200,000. The balance of it, of course, is given by grants that are applied for by various organizations in the community. And our branches have a lot of latitude in that area to fill local need, so that when someone comes into a branch they don't have to go through an awkward committee system in order to come up with their donations. Matter of fact, each branch develops their own community donations budget each year by looking at the needs in their community. We make sure that we don't have a lot of bureaucracy surrounding this, and that the decisions are made on absolutely as local a basis as possible.
Does the bank focus its donations toward a certain type of organization?
Well, we keep track of where the money goes, and we try to have a relative balance between basic human needs, education, environment, the arts, etc. So we do look at where the money is going. We also look at where the money is going relative to the size of our deposit base at each community. So if a branch has $100 million in their community, we may put more money in that community as opposed to one where the branch has $50 million. But that's a very loose standard. Again, we look very heavily on the need that is involved in any particular year and so one year we may be way off that goal.
Kennebunk Savings Bank now has 12 branches. How many branches were there when you took over in 1993 and what was your expansion strategy?
I think there were seven [branches]. We've been very careful to grow organically and branch out contiguously to our present organization. We've been very aware of what I call the bigness disease, and that's really people who set growth as a goal or end in itself. In doing so, they often lose sight of what really got them there in the first place. From our standpoint, as soon as you look at bigness for bigness sake you kind of lose sight of the things that got you there.
So we have been very conscious of being a community bank serving, really, southern York County. And we consider that our sandbox, if you will, and have resisted the temptation to do a lot of geographic expansion.
Besides the community investment program, what other changes did you make that you think helped get the bank to where it is today?
The first thing we looked at was employee culture, and you may wonder, "Why do you do that before customer service?" which is kind of a hallmark of everything the bank has to do. But we found out very early that you can't give truly extraordinary customer service unless you have highly motivated and happy employees. And that means having an employee culture where people treat each other with mutual respect, where they work as a team, where their employers support their professional and personal growth.
Every three years we have [Portland-based] Critical Insights do a survey of our market area to see how we stand. And time after time we come out from a customer service standpoint right on top. And I know it's the employee culture we have that makes that happen. Loyalty to the bank is a big factor of our success. We found that loyalty to our employees begets loyalty from our employees, not the other way around.
We've now reached the point where we are able to promote primarily from within. When we were smaller and building our organization we had to go outside to hire a number of employees. Now as I get ready to retire we have people moving up in the organization. My successor, Ken Reid, comes from inside. He's worked here at the bank with me for 11 years now and has been most of the time in charge of the retail division. In the last couple years he has also been our chief financial officer. So it's the old story: Hire good people, set a strategy for them to follow and leave them alone.
When did you make the decision to retire?
Well, I had originally planned on retiring at 62, then at that point I really wasn't ready and I decided to go to 65. I'm going to be 65 in July, and that seemed like a good thing. You know the other thing is, if you hire people smarter than you are all the time, you're going to end up as the dumbest guy in the bank ˆ that's the logical progression isn't it?
Seriously, I think I've gotten to the point where I feel that we have a management team assembled here that can take over and continue the track that we have been on. I told the trustees before I left that I would have a management team in place that would make a seamless transition, and I think I've accomplished that.
We've known [about my retirement plans] for over a year. That's part of having that seamless transition I'm talking about. The last thing you want to do is have a sudden change that's going to upset an organization. So it was a little bit over a year ago when my successor was announced and he has gradually been transitioning from his present role into the senior role. He's pretty much running the bank right now. When I walk out the door it'll be just as smooth as can be. I'll go from who's who to who's that.
So you feel you are leaving the bank in a good position?
Absolutely. You've got to keep things moving in an organization and people need to feel that there is movement from a career standpoint, from a professional growth standpoint. I think it's healthy to have these things go along like that. The last thing I want to be is the old curmudgeon who's sticking around and who everybody wants to get out the door as he goes downhill physically and mentally. The other way to say it is, it's fun to go out on top rather than when everybody wants to kick you out the door.
What's left to be done at the bank? Where do you see it heading in the future?
I think to a great degree that's going to be up to my successor and his team to really develop new visions as we go along. We just had a strategic planning session and in the short term our goal is to develop what we call the three-legged stool of banking, insurance and investment services. We acquired an insurance company five or six years ago and we recently acquired a financial services organization that provides financial consulting services and investment advisory services to our customers.
Our goal at this time is to grow from within and to develop those parts of the organization. So you may not see us growing as much on a deposit standpoint or on a footing standpoint, but we really have an objective of developing those parts to their maximum potential.
Is there an accomplishment you're most proud of during your time at Kennebunk Savings Bank?
I guess if I look back over my career I think one of the things I'm proudest of is that we have demonstrated that a bank can be highly successful by focusing on employee culture and customer service, rather than simply on profits. Not that profits aren't important ˆ they are. But it's a very subtle thing. If you put all your emphasis on profits first you can lose your focus on how you get there.
I've seen an awful lot of companies and banks, particularly the large ones with out-of-state owners, fall down because they fail to really support their employees and their customers.
They give lip service to it, but in order to make that quarterly earnings report they pinch pennies and they sacrifice long-term growth for the short-term dollar. And I've just seen that happen over and over again. We have, in recent years, consistently been one of the most profitable banks in the state. But we've done that by focusing first on things like the culture of our employees, customer service and our community investment program, as I've talked about.
After more than 40 years as a banker, what are your plans for retirement?
My plan for retirement is to go sailing. My wife and I have acquired our retirement boat, which is a 40-foot Island Packet, and we intend to do as much cruising as we possibly can.
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