John J. Martocci is chairman and CEO of the Newtown Savings Bank, a $570 million mutual savings bank with nine locations. Martocci joined the bank in 1993 from the Hartford office of Ernst & Young where he was a partner in the firm specializing in financial institutions.
He contributes to his community in a range of activities including his recent election to the Danbury Hospital board of directors where he serves as chairman of the audit committee and is a member of the finance committee. He is a member of the board of directors and serves on the executive committee of the United Way of Northern Fairfield County. He serves as a board member on several other civic organizations including Ashlar of Newtown and Lockwood Lodge.
Martocci has received several awards for his active contributions to many community organizations. In 2003, he was awarded the Good Scout Award by the Boy Scouts of American – Connecticut Yankee Council. He also was awarded the Volunteer of the Year Award by the Connecticut Council for Family Service Agencies for his efforts in founding the Family Loan Program pilot program in Danbury. Martocci received the HD Bassett Award from the Family Counseling Center and the Peter T. White Award for his volunteer service to the community and the United Way.
His professional activities include being a member of the American Institute of CPA’s and the Connecticut Society of CPA’s; he was chairman of the CBA (1998-1999) and is currently a member of the CBA’s executive committee, legislative committee; chairman of both CBA BankPac and CBA Fed Pac and a board member of both the Center for Financial Training Atlantic States and Infinex Investments Inc.
Q: You are an accountant by training, how did you become a bank chairman and CEO?
A: I spent most of my career as an accountant providing services to the banking industry. I was actually consulting with my predecessor to assist him in finding a successor. The timing was right for both of us and the rest is history.
Q: You are chairman of the CBA’s BankPac and Fed Pac. How important are these PACs to the banking industry?
A: Obviously our industry is highly regulated and highly visible. As lawmakers contemplate laws and regulation that impact our business it is important that we have access to them. These PACs provide a means for us to pool our resources so that we can obtain access to them and properly explain our positions. Over the years this access and the ability of our fellow bankers has been very effective.
Q: You are a board member of Infinex. How is the company doing?
A: I am very proud of Infinex and the leadership of its management, particularly Steve Amarante. The company has rebounded from a small, struggling company 10 years ago, to a very strong, well-capitalized company operating in seven states. Sales were $16 million for the 10 months ended May 31, 2004. The company has also expanded its program so that it is no longer dependent upon a few large producing banks. In fact, the recent mergers that will result in the loss of two very large producing banks will have little impact upon the company. That, to me, demonstrates the maturity of the company and its programs. The programs success has been widely recognized in national circles resulting in Infinex being approached by other states to set up programs. The financial success has been supported by the development of good systems and a very good compliance program. As I said, the company has come a long way.
Q: Large bank consolidation within the financial services industry is said to be the community banks best friend. Do you agree?
A: In many respects I believe that to be true. There is often customer confusion and lapses in customer service that makes people leave those institutions seeking the smaller, more hands on approach to banking provided by the local community bankers. We have seen it several times during my tenure at the bank. I strongly believe for certain customers we are a better alternative to helping them get their banking needs provided.
The businesses and consumers being served by the community banks are very important to our local economies and we provide them with the resources that they need to grow and prosper. They provide us with an excellent source of business. I think they are becoming more attractive to the larger banks and that is clearly demonstrated by the size of the institutions that are now declaring themselves community banks.
I also believe that their size gives them a clear advantage, especially considering, for example, the escalating costs of compliance. Their size allows them to absorb those costs more easily and the rising cost of technology, etc. That allows them to compete for customers with a different impact of overhead and therefore they can afford to be more competitive. I guess that is a long winded way of saying that even though the large bank consolidations have been and most likely will continue to be helpful they are not completely the best thing since sliced bread. They definitely pose some threats to the way we have become accustomed to doing business. We will need to be aware of their abilities and we will need to be focused upon the needs of the people and businesses in the communities we serve.
Q: In 2002 Newtown Savings Bank opened its first branch in the competitive Danbury marketplace. How is it doing?
A: The Danbury location has been open two years and is doing very well. We have been accepted in the community and the growth of loans and deposits has been very good. We are rated the eighteenth largest mortgage lender, the deposit footings have reached $18 million, and our commercial business has grown better than we expected. We have become a real part of that community both in our support of its activities and the support by our personnel within the community.
We recently acquired the Sirianni Mortgage Company, which we have relocated to the Danbury location. This has been a great move for us. The production of our mortgage products has been expanded to include their product list and they have been selling our other loan products as well. Although the transition is only four months old we are very pleased with it and the ability of their representatives to reach out to our total market area.
Q: Internet banking has changed how banks deliver products and services to consumers. What is Newtown Savings Bank’s Internet strategy?
A: We view the Internet as an important tool for us to conduct business as well as provide our product and services to our customers.
Our Internet strategy is to take this delivery channel into account in delivering our products and service to our community. We view it as a means of providing high level service to our retail and commercial customers. At this point we offer a full range of Internet connectivity and have integrated it into the operating functions of our products.
Q: Recently the regulators have been advising banks to “shock” their balance sheets. How has Newtown Savings Bank positioned its balance sheet to minimize both the short- and long-term effect of rising interest rates?
A: We have changed our balance sheet to be asset sensitive. In our ALCO process we meet weekly to strategize rates and monthly to analyze the balance sheet and monitor the results of our planned activities. Rate shocking has been an important tool that we use to help us measure the impact of new activity. We use it, for example, when we are determining whether or not to offer a special deposit rate or loan product to measure the impact on our margin. However, rate shocking is only one tool in measuring interest rate risk. We also look at the mix of assets and liabilities and the risk we need to accept to maintain profitable operations.
Q: What will be the most pressing issues facing Newtown Savings Bank over the next three years?
A: I believe the most pressing issues we face are managing our interest rate margins and maintaining a reasonable level of efficiency in a highly regulated and competitive environment. Attracting and retaining good employees is a very significant challenge to us as a community bank.
Mortgages have become a commodity and the commercial business has become extremely competitive. These issues are not new; however, they continue to be important. We will have to continue to look for non-interest income and change with the business. At Newtown Savings we have developed the secondary market business to manage our interest rate risk, maintain our customer growth, and increase our non-interest income. The process has helped us deal with the changing mortgage market and maintain a good profit model.
Attracting and retaining good employees is always a challenge for a community bank. Fortunately at Newtown Savings Bank we have been able to attract and put together a terrific team of people who are dedicated to providing our customers with good service and the success of the bank. As we grow it is always a challenge to find the right people and to provide them with the training and support they need to be successful.
Questions posed by Lindsey R. Pinkham, senior vice president & secretary of the Connecticut Bankers Association.