Photo: Bank of Burlington COO Victoria Bronner and CEO Geoffrey Hesslink. VermontBiz photo.
by C.B. Hall
Only six state-chartered banks operate in Vermont. That’s down from 27 in 1989, the last time a new bank joined the list — the last time, that is, prior to the chartering of Bank of Burlington in August 2022.
The new financial institution was incorporated in June 2021. It then raised $2.85 million in seed capital from 19 individuals, including numerous prominent Burlington-area businesspeople, including the owners of Al's French Frys, SD Ireland Cos. and Larkin Realty.
The enterprise took its next major step in November 2021, when it applied for its state charter and FDIC insurance, Chief Operating Officer Victoria Bronner told VermontBiz.
The Vermont Department of Financial Regulation issued a preliminary charter in March 2022, clearing the way for a further capital raise with a total target of $24 million to $30 million, she said. That raise took less than a month, bumping the seed capital total to $33 million, including a 10% over-subscription allowed under the terms of the offering circular approved by DFR and FDIC.
“Since 1992, only one or two other de novo banks headquartered in the Northeast have been able to raise upwards of $30 million in start-up capital. None has done it as quickly as Bank of Burlington,” said Arthur Loomis II, president of the consumer banking consultants Loomis & Co. in Schenectady, New York.
Ninety-six percent of the 116 investors were either individuals who live locally in Vermont or are part of a Vermont-based business,” according to a release from the bank when its doors opened last August.
President and CEO Geoffrey Hesslink called the investors’ quick fulfillment of the capital needs “evidence of their belief in the business, but also their belief in the need for a local commercial bank.
“That’s meaningful,” he added. “It’s about local capital for local businesses — Vermonters investing in Vermont.”
In a joint interview with Bronner and Hesslink last month, Bronner said that, in addition to the start-up capital, the bank now had deposits of about $91 million; under the state’s banking rules, it would have roughly $100 million to lend. Lending targets would comprise small- to medium-sized Vermont businesses.
“We’re a little different from other banks in the area,” Bronner said. “We make commercial loans to local businesses and municipalities; we do not loan to individuals. On the deposit side, we collect deposits from both business and individual depositors.
“We’re not a venture capital firm,” she added.
In accordance with federal law, the institution also does not provide services to the cannabis industry, Hesslink noted.
For depositors, the bank aims at simplicity — minimizing the proliferation of fees other banks charge.
The bank conducts its business from a single office, on Kimball Avenue in South Burlington. Bronner and Hesslink said the bank’s ethos stresses having proximity to the customer.
“Bank of Burlington is at heart a service provider,” Bronner said. "The services we can provide to our customers are superior to what regional banks can provide.”
“We're going to be faster, more responsive and nimbler than banks from out of state," added Hesslink. “Regional banks get bureaucratic.”
Hesslink started his employment at Merchants Bank in 1995 as vice president and commercial banker, working on business development and problem-loan resolution. In 2006, he was promoted to senior vice president and senior lender, managing commercial banking, problem-loan resolution, government banking and mortgage banking. Hesslink was elevated to chief operating officer in 2013, to bank president and CEO in 2015 and to president and CEO of Merchants Bancshares in 2016.
Following the acquisition of Merchants Bancshares by Community Bank Systems in May 2017, Hesslink served as regional president of New England for Community Bank Systems, until his resignation in October 2018.
Bonner, meanwhile, previously served as director of connectivity at the Dudley Fund and as a financial analyst at Green Mountain Coffee Roasters in South Burlington and, for a brief time, was owner of Bumblebell, a children’s clothing store in Stowe.
Photo: Bank of Burlington location in South Burlington. VermontBiz photo.
‘A Strong Deposit Market’
Asked how the new financial institution was handling the deposit-to-lending interest margin, Hesslink said, “Banking, like all industries over the past decades, has seen a general trend of declining margin, going back to the 1980s. On top of that, as a bank we’re impacted by interest-rate cycles. Those are more temporary margin fluctuations.
“The current interest rate environment,” he added, “is challenging for banks, but it is short-term in nature, and it’s not at all a concern. All things considered, it’s been an excellent time for Bank of Burlington to open. It’s been a strong deposit market that’s allowed us to grow faster than expected.”
Many of the challenges of low-rate loans and investments, and of rapidly increasing deposit costs, he said, “don't relate to us, since we weren’t here two years ago.”
“We are growing our deposit base, while many banks are seeing their deposit base contract,” Bronner added.
Possession of a state charter, rather than a federal charter, does not prevent Bank of Burlington from operating outside Vermont. But that doesn’t seem to be on the horizon, at least for now.
“Our focus is providing growth capital to Vermont businesses,” Bronner said.
Still, Hesslink added, “We don’t know what the future might hold. If there was an opportunity to replicate our model in another market, we would certainly consider it.”
Asked to comment on the economic outlook generally, Hesslink said, “The Federal Reserve’s efforts to reduce inflation will likely result in a slowdown in the growth rate of the economy and, history suggests, ultimately some level of recession,” he said.
But that doesn’t dampen Hesslink and Bronner’s optimism about the future.
“We have recruited excellent talent for our company, and we are well-positioned for further growth,” Bronner said.
C.B. Hall is a freelance writer from southern Vermont.