"This Is Your Bank” with Hal Horvat of Centreville Bank (RI)

In this episode, Hal Horvat, President & CEO of Centreville Bank ($3B mutual savings bank in Rhode Island), joins Vin, Zach and DCG colleague Justin Bakst. The foursome delves into why Hal never intended to have a career in banking, relationship-focused loan and deposit growth, making a nearly 200-year-old bank an "employer of choice," and how Centerville successfully partnered with professional soccer team Rhode Island Football Club.

For more insights and ideas, visit DCG at DarlingConsulting.com or follow us on LinkedIn.

Transcript

On the Balance Sheet: S4 E7: This Is Your Bank with Hal Horvat – Centreville Bank

  Transcript

    [Vinny, 00:05]

Welcome to On the Balance Sheet, Season 4, Episode 7. Today, we have the Chief Executive Officer and Chairman of the Board of Centerville Bank from Rhode Island, Hal Horvat. 

[Zach, 00:24] 

We're super happy to have Hal on the show. We're going to be joined also by our colleague, Justin Bakst, who works directly with Hal and the Centerville team. And I tell you, I think the listeners are going to really enjoy the interview, a lot of discussion on what they've been up to, their growth, their culture, some professional sports in there, as well. So, I'm really looking forward to this interview. 

[Vinny, 00:42]

Yeah, absolutely. A lot of good things here. So, without further ado, Hal Horvath. 

[Zach, 00:50]

Welcome to On the Balance Sheet. We are very pleased to be joined today by Hal Horvath, President and CEO of Centerville Bank in West Warwick, Rhode Island. Hal, how are you doing today? 

[Hal, 01:01]

I'm doing very well. Thanks for having me on. 

[Zach, 01:05]

Absolutely. It's our pleasure. And Hal, we normally start off the interviews just with a quick level set of, could you walk us through your background in terms of how you started in the banking industry up to your role today as the CEO and President of Centerville Bank? 

[Hal, 01:20]

Well, I started out, I never really intended to have a career in banking, but my major in college was accounting. And I knew very quickly after I got out of school that accounting was probably not going to be my career. But the accounting background gave me a tremendous background in business. It really is the language of business. And it's helped me today to this point. It's helped me throughout my career in commercial lending. So, I made a switch very quickly after about a year of out of college and joined a credit training program at a regional bank in Providence called Old Stone Bank. And I was there for about 10 years, and I expected to be there probably to this day. But as you may be aware, there was a little bit of consolidation back in the 90s. That bank eventually got taken over by Citizens Bank. And that started a little bit of an odyssey from a number of banks through the 90s that wound up getting taken over by larger institutions. So, I went from Old Stone to Shawmut Bank in Boston and then spent some time at a smaller regional bank in Eastern Massachusetts that eventually became Webster Bank and then decided at some point I did not want to go through the mergers or the acquisitions anymore. I'd kind of had that and joined a community bank in Mansfield, Massachusetts, that was a mutual bank, and jump-started their commercial lending group there. So, my background almost exclusively has been on the commercial lending side until getting to Mansfield, where I had the opportunity to get involved in some other aspects of the bank, such as operations, marketing, even facilities. And with a small bank, you kind of become the jack of all trades, where you pick out colors in the conference room, as well as work on ALCO and work on the larger deals that take place. So, that's kind of a little bit of my background before coming to Centerville and then had the opportunity about 11 years ago to come to Centerville and the premise was to jumpstart their commercial lending group. And I had done that before at two previous institutions. So, I had some experience and was very much willing and able to sort of restart their commercial lending efforts here at Centerville. 

[Justin: 03:45]

And Hal, over the last few years, you've really grown that loan portfolio while others have somewhat pulled back. I mean, you've almost doubled that long portfolio. Why don't you walk us through some of the challenges you had during that journey and how those opportunities came to be? 

[Hal, 04:04]

Well, prior to the last couple of years, we were really on a roll. We developed a fairly strong commercial lending group, fairly strong credit group. And You know, that's not the easiest thing to do in this environment. There's a lot of competition for people and we really reached a critical mass where we had a very, very strong commercial group, very strong credit acumen, very strong culture with the board for growth. So, over the last couple of years, even though the environment changed, we kind of stuck to our fundamentals. And that is continuing to grow business, continuing to grow the commercial part of the balance sheet. And, you know, we did it with the idea that to focus on fundamentals, not stray from any credit issues or fundamentals. And we certainly focused on rate profitability and and we focused on deposits, certainly over the last couple of years, that's been a challenge for all banks is growing deposits. And we made sure that any commercial relationship that we brought over had significant deposits associated with it or we passed on it. So, the other thing that we did was we diversified our mix. We diversified our portfolio. We had grown the balance sheet or grown the commercial book by primarily commercial real estate, and we intentionally expanded that to far more C&I business. We hired a specialty lender who has a specialty in franchise lending, and we were able to grow that to the point where we're well over $200 million in franchise lending loans on our books. So, it's a combination of sticking to what we always have done, the fact that we had a lot of momentum as a group, and we diversified our portfolio and got into markets that we hadn't previously been involved with. 

[Justin, 06:04]

It does feel to me that your culture is a big part of the success you've had. You can see it in the attitude and the enthusiasm within your team. Talk to us a little bit about that culture and how you've curated it and maybe how it's helped build the bank to where it is today.

[Hal, 06:21]

 Yeah, I think that's our secret sauce. I'm very proud of the fact that we were able to grow the balance sheet, grow the bank, and we expanded our deposit making activities, we expanded our branch infrastructure. We went from seven branches to we're currently at 23. So, we expanded dramatically, but we've been able to do that with a really strong culture. And that's the thing that I am most proud of because it's one of those things that's elusive; it's not something you can put on a on a balance sheet and we knew, or I knew; that we could grow our balance sheet, we could grow our commercial portfolio, we could grow our footprint, but the culture piece of it is the hardest thing to continue to develop, and i guess it goes back to surrounding yourself with good people, and that's really been a mantra of mine from the early days. The people are so important. Hiring the right people, not only the quality of character, but also their competency and their ability to generate business as well. So, and it's kind of taken on a life of its own to the point where we really have... strong input from all of our employees. We asked for that input significantly. We changed our whole strategic planning initiatives to one of which was strictly financial in the past. We've engaged all of our employees. We have what we call listening tours, and we have the opportunity for every employee to give a little bit of an input about what the bank is doing well, what the bank could be doing better, et cetera, and what the next three years might look like. Our off-site strategic planning meetings don't look like any I've been to before because the ones I've been to before have included just a board or just a senior team or a combination thereof. Ours includes 60 people, which are key managers within the organization who get to have a say with what happens with the institution as we move forward. The other thing that we did to improve, I think, culture is communication. We communicate everything. So, for example, our strategic plan, we do quarterly updates with the whole organization, not just with the board, not just with the senior team, so that it's very transparent how we operate. And that's been one of the biggest things that we've done is transparency with the board, with our senior team, with all of our employees. And I think that's gone a long way towards improving the culture here and what we try to accomplish. 

[Vinnie, 09:00]

Al, Vinnie Clevenger here, and thank you so much for your time today. If you can, I just want to take you back to the expansion of your branch network. And at a time when you see community banks kind of going the other way in terms of branching, I'm curious kind of what you saw as an opportunity to kind of build out your footprint and so forth. And it clearly has been successful. So, I was wondering kind of if you could elaborate on that strategy and kind of what's occurred to date. 

[Hal, 09:26]

Well, it's two things. I mean, certainly it's a little bit of catch up. We were confined at least 10 years ago. We were confined to a very small geographic area in the state of Rhode Island. And as you know, Rhode Island is a small state. It's not a big footprint. And we were not in every corner of the state. We felt that in order to be a true community bank in the state of Rhode Island, to be relevant, we had to be in every corner of the state. Rhode Island is about as parochial as any place in the country. If you're not around the corner, you don't exist. And so that was part of our strategy. The rest of it was we saw an opportunity. The Rhode Island banking landscape has changed dramatically. where there are really only two community banks left in the state. There are banks that are publicly traded who call themselves community banks, but their stretch is longer than ours, and it's a different focus. Because of the fact that we're mutual, we can invest in the long term. And that was part of our strategy to invest in the long term, not be so concerned about the quarterly earnings report. Obviously, we're concerned about that, but it's not the primary focus. The primary focus was investing for the long term. And that's the reason why we branched out. The fact that we're there, it gets back to people. There are successes due to the people that we've hired in those communities. We've had a lot of success hiring people who are very involved in the communities that we serve. For example, we moved to Newport, Rhode Island, and Newport is, well, it's part of Aquidneck Island, and it very much is an Islander mentality. If you weren't born in Newport, you're not a Newporter. So, what we did was we hired a branch manager from Newport, and we have several people who are from the island, and that gave us an automatic in to the opportunities that were available to a market that's really growing. Newport has really taken off during the last five years. And so, we've had a lot of success in the Newport market. And that's just one example. We've done the same thing when we moved to Warren, Rhode Island, which is in Bristol County. Again, these branches aren't too far from each other, but the communities are very distinct. And we've hired folks who are very much ingrained in the community. And it's been successful for us. 

[Justin, 11:52]

Hal, over the 4th of July, I was at a packed restaurant right on the water. And I look at the bar, and I was expecting to see Joey Chestnut eating hot dogs on TV. But I looked up and I saw the Rhode Island FC soccer team with Centerville Bank's logo all over the place. And so, I know that's been a very interesting relationship with you and Rhode Island FC. Tell us a little bit about it, how that came to be and... how that's worked out for for you and centerville bank 

[Hal, 12:23]

Well, if you look closely, Justin, you would have saw that it was also hot dog night at the uh the stadium as well so we were eating hot dogs there just not as many as as Joey Chestnut, but um the partnership with RFC has been a very strong one and what we try to do within our organization is align ourselves with really strong people, really strong organizations. And we felt that their organization, we had the opportunity to get to know them over the last couple of years. And we're very impressed with the way they operate. They're a very professional group with a lot of experience in stadium operation, as well as soccer and sports in general. And we saw it as an opportunity for us to partner with them because they truly are partners with us also increased the visibility of the bank dramatically. As i mentioned we were kind of a sleepy bank in one portion of the state, but we're no longer that and this was kind of a bold move for us to do the stadium naming. It's a brand new stadium, it's the first stadium that's built in this area since the 1950s, and we felt like there was only going to be one opportunity and this was it. And it's truly been a partnership. The visibility that we've received has been tremendous. I cannot go anywhere without folks mentioning congratulations. And some of my brethren in the banking business have been very jealous, which is music to my ears. And it's really a very, very positive thing for the community. There's so much negativity right now with some, certainly with some of these cities that have maybe seen some downturns, and Pawtucket is where the stadium is located and that's been the case in Pawtucket. We're really part of the resurgence of that area and it really feels good to do that. It's a very positive environment. If you ever have the opportunity to go to a game, it's a great experience. It's a family environment and professional and very well done. 

[Zach, 14;30]

,Hal, it's obviously a pretty impressive feat to have the naming rights to the stadium and have that connection with them. Could you let us know as much as you can, like how does that process work? I'm just curious because every stadium, we're all big Hoops fans here Vinny's a hockey guy, every every stadium has a sponsor, like, how does that work, how does that come about just I know that's not a banking question but I'm just curious if there's anything you can you can let our listeners know but how some of that process actually works 

[Hal, 15:01]

Part of it is certainly financial. There is a financial aspect of it. And I think when you look at the larger stadiums and the larger professional sports team, it's pretty much, from my understanding, about the number, about the dollar amount of the gas. But this was a really unique case where this organization, it's a minor league team. It's not up to right now at the level of the Premier League in England or anything like that. So, it…Their focus was being on Rhode Island, a team for all Rhode Island, developing that community-based atmosphere with something similar to McCoy Stadium. So, you might be aware that McCoy Stadium was a baseball stadium in Pawtucket that was a AAA affiliate of the Boston Red Sox and was in existence since the 50s. Well, Pawtucket lost that franchise, moved up to some town to the north, which I can't pronounce the name of the city. So, what these folks did was recognize a void. There was such a tradition with the Paw Sox. I grew up going to the Paw Sox games. I eventually played at the stadium. I brought my kids. It was just something that was ingrained in this community, and they filled that void. So, they were looking for a partner to... be the same, be entrenched in the community and really develop that long-term investment. So. we had developed a really strong relationship with them. And I like to think that part of the reason they went with us was that strong relationship that we had built and the ability to partner with them and be creative. And it's worked. We've only been in the stadium since really we announced it in May. Excuse me, we announced it in April. The first game was in May. And it's been nothing but short of a really strong partnership. And we really are looking forward to what they can bring to the state and what we can bring as well. 

[Justin 17,05]

Hal, if we think about the banking industry and the bigger picture, what are some of the threats that are on your mind with some of these strategic planning sessions that you've had? 

[Hal, 17:18]

Well, obviously, there's a lot of uncertainty in the market right now, and that's a big concern, I think, for all of us. It's a concern for all our customers, you know, short term it's interest rates. We we'd like to see a drop in interest rates, and you promised us a couple of drops this year, Justin, I'm still waiting on that. So that will certainly improve our margin. Our margin has improved this year, but it, we were looking for a bigger bump on that regard. So that's one issue, but I think that's maybe more short-term. I think long-term is we've invested heavily in commercial loans. We want to make sure that we maintain strong credit quality. The overall economic conditions are certainly a concern there. We feel like we have a very good handle on our portfolio. However, there's obviously some things we can't control. So that's one of the concerns. And then technology. Technology, AI... and making sure that we're on top of the changes - we have to. I think our customers demand it. It doesn't matter whether you're a community bank or a money center bank, you have to have a certain level of technology. And then AI is something that we, whether we want to ignore it or not, we have to be focused on that and figure out how we can use that to our advantage and to our customer's benefit. 

[Vinnie, 18:40]

I guess the flip side of that, Hal, would be at these strategic planning meetings, what do you think the opportunities are for Centerville Bank moving forward? 

[Hal, 18:48]

Well, I think we can think differently. And that's one of the reasons we've, I think, done well as we've thought about things a little bit differently, but not changing our fundamentals. And that's something that we really, as a board, we focus on a lot, is that we continue to be who we are. And that's a community-based institution that's relationship-focused. That relationship can take on many different forms. It can be electronic relationship for some folks. And it's much more of a face-to-face for a lot of our customer base. It's about, I think, staying true to our values, staying true to our fundamentals, but also thinking a little bit differently and maybe taking advantage of some opportunities. I mean, I used a stadium as an example. That wasn't probably in the mindset of most banks in this area. It was on ours. Looking towards the future, we understand the value of soccer and the World Cup coming up, et cetera, and taking advantage of that opportunity that we think is really going to be there. That would be an example of maybe thinking a little bit differently, potentially getting involved in some new markets. And we believe that we have a pretty good story to tell as a community bank, and there's still a real niche out there for community banks. 

[Justin, 20:09]

One of the things I've noticed in working with you and the team, Hal, is you're just a team that takes action. And so, when you see an opportunity, when you see a strategy, the team rallies around and kind of takes action. And maybe that's part of the culture that you've built. My guess is that will play into your strategic success into the future. Any advice for maybe some institutions that are slower to take action? Maybe they really want to make sure they're managing every risk possible or there's other things that might get in the way. 

[Hal, 20:49}

We certainly manage every risk, and we are developing an enterprise risk management program, which we anticipate having in place in the next year. So, we are certainly managing those risks. I think it's also being willing to, again, do things differently, take some chances. Obviously, you don't want to take too many chances from a financial perspective, but take some chances where – If you have belief in what you do and the team that you have in place, it's maybe called a chance, but it's actually a well-thought-out opportunity. So, take advantage of opportunities, I guess, is a long-winded way of saying that. 

[Zach, 21:29]

It makes perfect sense. I don't have any questions from my side. Vin or Justin, you guys have anything else that you wanted to add? 

[Vinnie, 21:37]

Yeah, just one last thing. Hal is somebody who's an outsider looking in at your bank. I mean, I think there's some things that hopefully our listeners should be aware of. I listened to a recent radio spot that you were on, and you sort of talked about how you only have had 6% employee turnover. you know, in the last year or so. That's really quite impressive. I'm guessing that, you know, some of this stuff you've already elaborated on, but is there any secret sauce in retaining employees in the community banking space? 

[Hal, 22:07]

We have as part of our pillar in our strategic plan is to become an employer of choice. That was three years ago, and we feel like we've achieved that. Now folks are calling us up and saying, and we have a lot of people who would like to work here. So that whole culture has changed. You know, I don't think that 6% is probably sustainable because as you continue to grow and you have good people, there are going to be opportunities out there for them. Obviously, as you have more branches, more people, you also have some issues, you know, people changing their careers, things like that. So that's probably not a sustainable number. But it does allow you to plan for the long term. It does allow you to have a greater amount of your employees to be part of the strategic planning process with the knowledge they're going to be around. They want to be around. And so, I think it's a really big advantage for us as we go ahead and plan. One of my mantras is, this is your bank. And I used to have folks come to me and say, come to me with a problem. And they'd say, what do you want to do?  What does the bank want to do? And my answer was always, Who's the bank? You're the bank. What do you want to do? And I think that approach permeates throughout the organization with our management team. It's our bank. It's not my bank. And I think as long as we take that attitude, you know, I think it will have long lasting consequences. I'm not naive. I know there's a lot of economic conditions out there. There's a lot of other competition, et cetera. So, but I do think we have a really good and strong culture. 

[Vinnie, 23:53]

Yeah, no, that's a really, you know, I appreciate that answer. So much of what you said just reminds me of our experience collectively here at Darling Consulting Group in terms of openness and fostering a culture. Just the folks sitting around the table here in Newburyport, there's over 100 years of cumulative experience. So certainly we've felt the culture and the loyalty towards it. Just one last question I had. I'm curious, you know, looking at the state of Rhode Island, what is your outlook for that economy moving forward? Obviously, it's interesting because it's kind of so close to the Boston market and not that far from the New York markets, but it's different. So, I'm kind of curious what, you know, your views on the economy moving forward in the state of Rhode Island. 

[Hal, 24:41]

It's pretty unique. It's, as I mentioned, very parochial. And it's one of the reasons that we do about a third of our business in Massachusetts, about a third in Connecticut. And we've also, I mentioned about a third in Rhode Island. And then we also have... do franchise lending, we're as far away as North Carolina. So, we've had to, in order for us to grow, we knew we had to do it, not just in the state of Rhode Island. Having said that, you asked about the economy in Rhode Island. I am far more optimistic than maybe some folks you might talk to. I think there's a groundswell of folks who really do love this state and really do love being a part of it. And you're starting to see some real development in some cities. I mentioned Pawtucket earlier, but there are other cities like Providence and West Warwick where we're located in. You're starting to see some development of older mill buildings. The University of Rhode Island has become a much bigger partner in this area, much more visible. Sounds strange to say, but at one point that was not always the case. And the resources there are tremendous. So, I'm fairly optimistic. I know we're going to have some bumps in the road, but I'm very optimistic about the state of Rhode Island and the economy. 

[Zach, 26:01]

Hal, terrific. I think that's a good place to end. to wrap here too. We really appreciate, you know, the time today. And I know I learned, I learned something like I always do, but I, we really, once again, appreciate the time and, and, uh, and you joining us today on On the Balance Sheet. I just, I would be remiss in saying that, and Justin didn't pay me to say this, but I've enjoyed working with Justin. And the reason why we enjoy working with Justin is he provides us with real strategies. I mean, we get a lot of information from a lot of different sources. We all can read, we all do read. And I think what Justin brings to the table is sort of strategies and how we can improve where we are. And that's really what we're all about. And it's been a good partnership there as well. 

[Justin, 26:21]

 We appreciate you saying that, Hal, and you and your team are a great group of folks to work with. So, it's been our pleasure to help you and the institution continue to grow. 

[Vinnie, 26:56]

And we listened to you, Justin. 

[Zach, 26:58]

Hal, we're going to cut the last part. 

[Vinnie, 27:01]

That's not making it. Thanks again for your time, Hal. Awesome. Thank you, Hal. Appreciate it. 

{Hal, 27:14]

Thank you guys for having me. Appreciate it. 

[Vinnie, 27:19]

Welcome back. I'll tell you, what a great interview. Hal is sort of the quintessential community banker, and it's great to kind of get back to hearing from somebody in the community banking space. We've had economists on more recently. And so, Justin, what was your main takeaway from today? 

[Justin, 27:33]

You know, one of my favorite quotes in business is culture eats strategy. And Hal really talked about how his culture, his people-first culture, has really helped with his aggressive growth the last several years. And we just saw that at our balance sheet management conference in June. In fact, one of Hal's colleagues actually shared with our clients some case studies in Deposits360 of how Depository 60 and technology has helped kind of grow the institution. And so, we saw that culture firsthand. I think our clients saw that culture firsthand. And you can hear that throughout today's interview. And it's exciting to me and resonates. And working at DCG, where culture is so important to our organization, it really resonated. 

[Zach, 28:25]

Yeah, Justin, I'll piggyback off that. I think that was a huge theme, obviously, with the interview today. And they've had tremendous growth over the past, what, six, seven years since he took over in 2019. And they're an old bank, right? They're 190-plus year old bank. So, to see this growth, there's got to be something to it other than just luck in it. I had notes here talking about communication and transparency. Imagine the listening tours that they have. And I think the one quote, Justin had a tremendous quote he just put through, but Hal's was, this is your bank. It's not Hal's bank. He might be the president and CEO, but this is your bank. It's the employee's bank. It's a mutual savings bank. It's the customer's bank. So, I think that was very clear in the interview that that's what they believe and that's how they operate. 

[Vinnie, 29:15]

Yeah, Zach, and just kind of follow on that. It's almost like Hal considers himself a custodian of the organization. And to me, one thing that makes it obvious that's the way he feels about it is the branching strategy and the fact that they're determined to be in every corner of the state. And, you know, he said it is a very parochial state. For our listeners not that familiar with New England, it certainly is. And it is neighborhood to neighborhood. And so, they've done a heck of a job. If you have the time to take a look at how much they've grown, this is no accident. There's been significant growth there. And that's a piece of it. So, my takeaway is this is sort of the quintessential community bank. And when we started the idea of coming up with On the Balance Sheet, we talked about interviewing bankers just like Hal; he fits sort of the prototype. And I really enjoyed this. So hopefully our listeners did as well. And we thank you so much for listening to On the Balance Sheet. And stop by next time.

[Dana, 30:11]

On the Balance Sheet is a podcast produced by Darling Consulting Group (DCG). All views and opinions expressed by the hosts and guests are solely their own and may not represent   those at DCG. All third parties are independent entities and are not affiliated with DCG. This podcast is intended for informational and educational purposes only and is not considered as advice. All views and its opinions expressed are based on the information available at the time and may have changed based on the current market and other conditions. For more information about DCG, please visit  www.darlingconsulting.com or e-mail us at info@darlingconsulting.com. Today's background music is provided by John Sid, the Coma- media and can be found on pixabay.com.

The text of this transcript was generated by an artificial intelligence (AI) model, and its organization, grammar, and presentation enhanced by AI, and as such may contain errors or inaccuracies. DCG is not liable for any damages, however caused, that may result from any use of this content.