🔒Northwest Community Bank charts growth path following merger, upcoming leadership change

Retiring Northwest Community Bank CEO Stephen P. Reilly can look forward to spending more time with his wife, traveling, boating and working on his golf game knowing he’s leaving the bank on solid footing and in good hands.

Having led the 2021 merger with Collinsville Bank and Litchfield Bancorp, Reilly has helped significantly increase Winsted-based Northwest Community’s size, growing the mutual lender from $411.8 million in assets at the close of 2020 to nearly $1.1 billion today. 

The larger balance sheet has afforded the bank greater security, at a time when many community banks are being gobbled up by larger competitors. 

The deal also gave Northwest greater ability to invest in its digital offerings — key to any bank’s future as consumers increasingly prefer to manage their finances online. 

Northwest Community’s board of directors recently announced Maura Malo, currently executive vice president and chief operating officer, will step into Reilly’s shoes effective Sept. 1.

She’ll be the first woman to lead the bank since its founding the year prior to the Civil War’s outbreak.

“If the bank were in a different position financially and succession were more of an issue, clearly I would not have been as comfortable as I am retiring,” said the 60-year-old Reilly. “That is important. I’ve been here 26 years and 14 as CEO. I want to see continued success. I have an incredible comfort level with that.”

Achieving scale

Northwest Community Bank traces its roots to the founding of Winsted Savings Bank by community leaders in 1860. Fifteen years later, business leaders opened Mechanics Savings Bank of Winsted, later renamed Northwest Bank for Savings. 

The two merged as Northwest Community Bank in 1996.

Northwest Community Bank and Litchfield Bancorp came together as wholly owned subsidiaries of Connecticut Mutual Holding Co. in 2001, producing savings on shared back-office support. 

Each bank maintained its own management, board of directors, charter and identity. Collinsville joined in 2010.

The three banks took another big step two years ago, merging under the banner and charter of Northwest Community Bank.

While the banks merged, their 14 combined branches have retained their individual names: Northwest Community Bank, Collinsville Bank and Litchfield Bancorp. There are no immediate plans to change that, Reilly said.

“Those names are very familiar to the communities in which we provide banking services, where we give donations,” he said. “And they are highly recognizable names, so we felt it is important to maintain them.”  

Reilly said the pending retirements of the former CEOs of Collinsville Bank and Litchfield Bancorp were a key driver of the 2021 merger.

There was significant cost savings, too, including consolidation of redundant technology services, which added more than $1 million to the bank’s bottom line, Reilly said, adding there were no layoffs related to the deal.

Northwest Community has grown its assets by 10% since the deal was completed, which Reilly said has been “very solid growth.”

“Generally, you might see 5% or 6% but our growth in that period was really solid,” Reilly said. “That was us growing our commercial, our residential loan portfolio. The real estate market was just so hot in that period of time.”

Reilly and Malo said they are keeping close tabs on potential economic headwinds, but the bank hasn’t adjusted its already conservative lending standards. 

Reilly said he expects a slowdown in business, despite robust  commercial lending activity heading into 2023. 

“I think we have a certain customer base that is pausing and holding back a bit, but there is a lot going on in the state of Connecticut,” Reilly said. “While we are predominantly in Litchfield County and the Farmington Valley area, we spread our wings pretty broadly in Connecticut.”

Growth plans

The aim is to spread those wings further across the state. 

Those efforts are already underway. In 2020, Northwest Community opened a branch in Simsbury, while Collinsville Bank debuted a new Farmington location. Both branches are on track to meet revenue projections despite some road bumps caused by the pandemic. 

Northwest saw opportunity in the Farmington Valley following a spate of small-bank mergers, including People’s United Bank’s 2018 acquisition of Farmington Bank, and Liberty Bank’s 2019 purchase of Simsbury Bank & Trust.

Reilly said he sees more potential growth in the Farmington region as well as down Route 8 in the Waterbury area.

In a competitive banking landscape, Malo said Northwest Community’s value proposition is to be local, nimble and serve as an alternative to much larger regional banks that have acquired nearby competitors. 

“There is a lot of analysis that goes into determining the placement of a branch, given the commercial activity we are seeing in the market and what’s going on with mergers and acquisitions in the market,” Malo said. “We saw value in those communities. We saw opportunity, particularly with mergers and acquisitions.”

Northwest Community Board Chair William J. Shea II said the bank isn’t in the market for another acquisition, but wouldn't shy away from opportunities should they arise.

Northwest also isn't interested in entertaining buyout offers from another lender "because we are well capitalized," Shea said.

As a mutual bank, any sale would have to be endorsed by depositors, he noted. 

‘Peaks and valleys’

Beyond brick-and-mortar expansion, Malo said Northwest Community plans to invest heavily in modernizing its digital offerings.

The bank will add a new digital loan origination platform later this year that allows applicants to upload documents online, speeding up the process, she said.
Meantime, Reilly said he anticipates earnings will soften across the banking industry this year. Residential lending is a big part of the business and that is taking a hit with rapidly rising interest rates.

Northwest Community reported $2.76 million in profits through the first three quarters of 2022, down from $4.1 million in the year-ago period, according to Federal Deposit Insurance Corp. data.

The bank’s real estate loan portfolio has grown significantly over the past year to $764.6 million at the end of September 2022, compared to  $601.9 million a year earlier, Federal Deposit Insurance Corp. data shows. 

“You have the peaks and valleys,” Reilly said. “So, we are going to be in a deep valley for awhile and chances are earnings across the industry are going to subside because of that. But it’s going to recover at some point in time.”

Capable hands

Malo, 51, has deep banking experience. 

She worked as a Federal Deposit Insurance Corp. bank examiner for a decade before joining Litchfield Bancorp as an internal auditor in 2003. 

She rose through the ranks to become chief risk officer for the merged risk departments under Connecticut Mutual Holding Co. in 2010. She was elevated to chief operating officer of Northwest Community Bank following the 2021 merger.

Malo said she worked for the FDIC in the 1990s, when Connecticut played host to “a lot of problem banks” in the wake of the savings and loan crisis.  

She said she saw where banks went awry and tactics that led to failure.

“You need someone who has gone through different economic cycles,” Malo said. “We need to know how we can move this shop forward in a safe-and-sound manner. I’ve been here 20 years as well. I have been an internal auditor. I understood the inner workings of each department. So, that gives me a broad view across the whole organization.”

Malo was one of three strong internal candidates for the CEO job, according to Shea, the bank’s board chair. 

Shea said Reilly’s business savvy allowed the bank to smoothly negotiate the merger, and Malo’s talents, coupled with her capable leadership team, will ensure continued progress while maintaining its community focus.

“We were a growth-oriented, vibrant bank under Steve and we plan to continue that with Maura,” Shea said. “We are a growing bank, a billion-dollar bank, but we are also a community bank. We are the local banker who is very much invested in our communities and willing to work hard to make these communities the best they’re able to be.”