"I Want to be a Bank that Makes a Difference" - Kevin Cummings, CEO, Investors Savings Bank

At a time when many businesses are contracting because of the recession, Investors Savings Bank in New Jersey is continuing to grow its consumer and commercial banking operations - and without federal government investment. The goal, says Kevin Cummings, President and CEO, is to be a different kind of bank - one that makes a difference in its community.

"We have to be leaders who serve - not self-serving leaders," Cummings says.

In an exclusive interview, Cummings discusses:

His top banking/security agenda items for 2009;
The impact of the recession on his institution;
How he plans to grow his company base;
The future of regulatory reform.

Cummings was appointed President and CEO of Investors Savings Bank on Jan. 1, 2008. He was also appointed to the Board of Directors at that time. Prior to that, he was the bank's executive vice president and COO from July 2003. Before joining Investors Savings Bank, he had a 26-year career with KPMG LLP.

Investors Savings Bank is an Independent, full-service community bank with more than $6.4 billion in assets, operating over 50 branches across NJ.

TOM FIELD: Hi, this is Tom Field, Editorial Director with Information Security Media Group. We are talking today about business and banking, and we are talking with Kevin Cummings, President and CEO of Investors Savings Bank. Kevin, thank you so much for joining me today.

KEVIN CUMMINGS: Good morning, Tom. It is a pleasure to be here.

FIELD: Now again, I want to talk with you about business and banking today, but first how about you tell us a little bit about yourself, your institution and your role at the bank.

CUMMINGS: God Tom. Tom I had a former career with KPMG, when I started. I had a 26-year career there. I was a partner and I serviced the banking community here in New Jersey. I worked on most of the major banks in New Jersey, and then later in my career I moved into the New York City office and worked on clients such as Citibank, Deutsche Bank, Bankers Trust and others. I worked on Valley National Bank, Provident, Hudson City (I took them public in 1999), and I spent a lot of time on the old UJB/Summit Bank, so I got a good feel for the industry here in New Jersey. And just by a stroke of good luck, on March 17th six years ago I got a call from one of my former partners, who is in the executive search business, and Investors was looking for a COO. Terry Gallagher was the fellow's name, and he asked me 'Would you be interested in the job?' And I said, 'You know, I might be.' Because I was doing a lot of traveling and spending time in Europe, and it was change of career that I jumped after the opportunity and have never looked back, and it has been the most exciting six years of my life since then.

You know, Tom, I made partner in 1989, and that was the last financial crisis we had in the early 90's, and I became CEO of this company at the beginning of this year, January 1st, 2008. And if I go to any other industry, short that stock because my timing hasn't been so good as far as getting a big promotion.

FIELD: Kevin, as you look at the year in terms of banking and security priorities, information security, what would you say your top agenda items are to tackle in 2009?

CUMMINGS: Well, I mean it is not just this year, it is every year. You know security, customer assurances and security are one of our top issues. One, it is getting a lot more regulatory play, and it is getting a lot more press with the advancement of the internet. Security is a high priority at all banking institutions, not just Investors, and I think you need to partner with your vendors, get good people down in the technology area.

Just this past year, we always had a security officer, but now we have an information security officer, and we made that a vice president position, and that is separate from our technology group. It is a separate position with a separate staff, and they are working to maintain the high level of security for our customers. It is very important for our customers to know that this is a high priority at the bank.

FIELD: Now we have heard a lot over the last six or eight months about the differences between Wall Street and Main Street and how they have weathered the recession. What would you say have been the biggest impacts of the economy on your institution and your customers?

CUMMINGS: Well, one of the things, I just wanted to make this point. I was just down at the ABA Conference down in Washington, D.C. this week. And when you step back and you see all the troubles and the bad press that the bankers or the banking industry are getting, a very small percentage of the 8,500 banks have received TARP money (the government money), and I think it is actually just about 2%. And 98% of the banks in the country have not received the TARP money.

But having said that, at first, a year ago, starting with the Countrywide in 2007 and then translating through the Bear Stearns in March of 2008 and then the Lehman Brothers/AIG debacle in October, it has moved from a financial crisis, a Wall Street crisis, now to a old fashioned recession where unemployment is going to impact the performance of banks going forward.

If you look at one of the things I look at in the industry, which is how the credit card companies are doing ... Because the credit card companies have a ton of data and they have a ton of historical data through the recent recessions in 2001 and back in the early 90's, and they can see first hand -- I think they are a leading indicator of how this economy is going to go because they see all the retail sales, and they see how the general consumers are paying their bills month in and month out.

So what we are going to see over the next 18 months is high unemployment, an old fashioned recession. It hasn't really--it is going to hit the commercial real estate as the retail malls get hit with slowing sales or declining sales, and we are bracing ourselves for a tough 12 to 18 months, and hopefully it will bottom out in a year from now and we will start to improve over the course of next year, probably seeing a recovery in the latter part of 2010.

FIELD: So, Kevin, given what we have seen and what you just described very well, how is Investors Savings Bank different today, if at all, from say two years ago before all of this happened?

CUMMINGS: Well I'll tell you, Investors is on a journey, and we have changed this bank tremendously over the last six years. We use a term 'evolution, not revolution.'

In 2005, we did one of the largest IPO's in the history of the thrift industry, and we are on a journey to change our bank from almost a fixed income fund -- because the majority of our assets in 2003 were in securities -- to a thrift with a mortgage-based loan portfolio, to a commercial bank that will be a full service bank serving the New Jersey communities.

Over the past two or three years we have started a commercial bank, Commercial Real Estate Group, and today we have a Commercial Business Group, and we have created a $1 billion dollar bank over that period of time. We have grown over the last 15 months from $5.8 billion to almost $7.5 billion dollars at the end of March. It is a good growth story. It is a good change in direction, change in culture, and we have been working very hard to become more bank-like to become a full service bank serving the New Jersey communities.

FIELD: So, Kevin, tell me about your customer base. What is it like now, and what do you think it might look like in another five years?

CUMMINGS: Traditionally we were almost a "mom and pop" thrift serving only the consumer base. Three years ago we did not have business checking, so over the past three years we have gone out and hired commercial bankers. We have a commercial lending group of 12 to 15 lenders. We have hired business development officers that service the business communities that work with our branch managers going out on business call to the business community. We have created what we call a "Centers of Influence Group" who are individuals that just work with lawyers and attorneys.

So we have moved from strictly a consumer base to a more bank-like base, and in the future this will become more important to our business. Right now it might be 10% to 15% to maybe 20% of our business, and we would like our business group to be 30% or 40% of our business going forward. We want to be a full service bank.

We want to be the largest bank, headquartered in New Jersey, that serves the business community and serves the general New Jersey communities.

FIELD: Now how big a part of your operations right now would you say are internet or mobile banking?

CUMMINGS: Being a community bank right now we have not made that much of a significant investment in that mobile banking type of scenario. We do have telephone banking. We do have internet bill-pay and those products. We also have the offsite deposit, taking what we call remote deposits.

So we are offering all of the products, but moving into the mobile and doing some of the things on the internet, we are in a transition, because one could argue that we are catching up a little in our transition to a full-service community bank.

So we want to do the basic things first and do them very well before we move into the mobile banking arena. So we have got to walk before we run. We are a conservative group, and we are rolling out our products in a timely way.

For example, investment management -- a lot of people are in insurance sales. We are not moving into that area yet because our sales force is such that we are training them to sell basic banking products at this time, and we will get into those products whether through acquisition or through being mobile, as we move forward.

FIELD: Now tell me about the customer base that you envision. What do you think you need to do to be able to attract and serve that customer base as you grow?

CUMMINGS: It is three things. People, people, people. We have got to hire relationship management, managers and leaders in the community. One of the things I tell our branch managers and our sales force is that we have to be leaders that serve, not self-serving leaders. Like we have a foundation. If we get involved with a charity or a local group, we are not just going to cut a check, we are going to become involved in that organization and make a difference in the communities that we serve.

On the community banking side, on banking and everything on any scale, it is all about relationships, and we want to hire high quality people that want to live our core values. And the most important--we have got the four C's, our core values: Character, Commitment, Cooperation and Community, and the most important one is Character and we want to hire people who are strong leaders that want to work in their communities and go the extra mile for their customers.

FIELD: Kevin, one group I want to ask you about is the sort of younger, up and coming population. I hear a lot of banks talk about wanting to develop this customer base, but don't necessarily have a strategy for that and I am wondering how you folks are going to tackle it.

CUMMINGS: Well, I think it is certainly. The internet is going to be a greater force as you try to attack the younger group. I have my daughter who is 23 years old, and she does most of her banking through the internet, and I think, quite frankly, that is going to be a tool over time where you attract those types of demographics.

Now, having said that, it is the greater opportunity I think as you change or as we go through this change process, it is a great opportunity because we are not attached to any type of brand, and we are creating our brand as we move along. And I think, at least from the responses I get, as we open up new branches or we do acquisitions, we are bringing an energy level to the community that is new and fresh, and I think that will attract that younger demographic as time goes on.

I think having an energy level, showing good leadership, that doesn't--if you are 20, 30 or 60, I don't think that matters. People appreciate--I get the comment very often, we just did a grand opening in Morristown, New Jersey and two of the customers came up to me and said, 'You know you guys don't act like bankers.' And having spent 26 years as a CPA, I want to bring that energy level and be a different bank, a different bank that makes a difference in the communities that they serve.

FIELD: That is well said. Kevin, shift gears a little bit. I want to talk to you a little bit about the new administration. We hear an awful lot about the attention they are paying to the financial services industry, and we get rumblings that there is regulatory reform coming. From your perspective, looking at what the early signs in this administration, what kind of regulatory reform do you envision?

CUMMINGS: Well, I think certainly the regulators are going to get more power. But what is happening from the regulatory front is I think we are going to see a systemic regulator, maybe the Federal Reserve, and then that will monitor the top 25 banks and they will work closely in concert with its European counterpart, the UK counterpart, to control the systemic risk in these organizations, so that we don't have a Lehman Brothers or an AIG or a Fannie Mae or a Freddie Mac. I think what we have to do is get out of the blame game and get into the solution game. Some of the rhetoric coming out of the Congress is a little bit harsh, and I think we have got to start looking at solutions to manage the risk, and not just keep blaming the executives or the companies that got into this mess.

If you look at this mess, it was really started in the sub-prime market, and quite frankly Freddie and Fannie, two government sponsored entities, were the principle players in that business.

Now having said that, I don't think the government wants to nationalize the banks. I think it really wants to get out of this situation, get banks lending to improve the economy and get people back to work and just have a general recovery.

FIELD: Now I get the sense that--

CUMMINGS: Does that answer your question?

FIELD: It does and it just inspires a follow up.


FIELD: Because I get the sense that banking customers read about TARP, they read about the so-called "bail out", the read about nationalization, and I expect they are expressing their opinions to you quite a bit. What are you hearing from your customers on these topics?

CUMMINGS: Well, when we talk to a customer one of the first things I say, and I say it humbly, but we did not take the TARP money. We are a well-capitalized bank and your money is safe with us. We have one of the best--we have the real tangible common equity, which is a new term, because TARP money is considered equity, but it is not tangible common equity. We have one of the best tangible common equity ratios in the nation, and our ownership structure is such that we are only 40% public. We are still owned 60% by our mutual holding company, so we have the ability to raise additional monies if we so choose, and we don't need it, but we have a wealth of capital.

So the message to my customers is you are in a safe bank. We have money to lend. We have grown our portfolio over a $1.8 billion over the past 12 months, and we are a growing bank and, in fact, we are involved in an acquisition that we expect to close in June where we are picking up five branches of American Bank in Essex County; five beautiful branches that we are picking up in that area, and it fits our footprint very nicely, and we are looking to evaluate any other future acquisitions some time, if the pricing is right.

FIELD: So, Kevin, one last question for you. You talked about the rhetoric that we are hearing from Congress right now. Well let's say you have an opportunity to speak to Congress and you could give advice to this administration, what would you tell them? That we could have safe, sound banks and we could restore customer confidence by -- by what? What would do the trick?

CUMMINGS: Well one, ... acting like an adult, be responsible, don't spend more money than you have, and get people back to work. The stimulus program, I think, is necessary, but we can't bankrupt our future.

The whole problem here -- the whole economy is going through a de-leverage process. If you talk to consumers, talk to customers, basically people want to get out of debt. We have the aging of the baby boomers, and they are worried right now because their 401(k) plans are 201(k) plans.

We are in a period of de-leverage, and I don't think the government is doing the right thing by taking on too much debt. It has to balance the needs to put stimulus into the economy, but also they have to balance the fact of becoming debt ridden and bankrupting - well, not bankrupting the country, but putting too much of a burden on future generations.

So it is a delicate balance where I think it is going to take some real leadership to make some of those tough decisions. And I think some of it is playing to the populous movement that, you know, just spend money. But on the other hand I think we have to be more focused and try to do the right thing even though it might be unpopular.

FIELD: Kevin, that is well said. You've been a great spokesperson this morning.

CUMMINGS: Well, thank you, Tom. I appreciate the time and I hope you have a great day.

FIELD: We've been talking to Kevin Cummings, President and CEO of Investors Savings Bank. For Information Security Media Group, I'm Tom Field. Thank you very much.

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