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Walden Mutual: the small bank with a big impact on New England’s community and food system

E. Bader
May 23, 2023

In a time of negative headlines on banks and finance, we caught up with Charley Cummings, founder and Chief Executive Officer of Walden Mutual. His story highlights the positive power of change when a bank partners with farms and businesses to build ethical profits, community, and a more diverse and sustainable food system.

The Nest Family Office: How did Walden Mutual get started?

Charley Cummings: I started another business back in 2013 called Walden Local, which is a brand of sustainable, local meat here in the Northeast. We work with about 100 different partner farms to produce grass-fed beef, pork, chicken, lamb, all raised outside on pasture, totally regenerative without herbicides, pesticides, synthetic fertilizers, antibiotics, or anything like that. It's a direct-to-consumer, ecommerce-enabled share program.

The company now has about 200 employees and has grown to be a nice-sized business. I stepped down as CEO about two years ago to pursue the bank for a couple of reasons. One was that we were so often in a position of lending to our supply chain, often in the form of prepayments against our buying commitments. I couldn't figure out why there weren't banks willing to lend to some of these businesses, because in many cases they were profitable and had strong underlying collateral, a long operating history, and all the things that you would look for. But I think agriculture is a special enough thing that it requires a specialized set of expertise. The reality is, in this region of the country, there are no longer any commercial banks that do much agricultural lending or even have practice areas in food and ag.

We got our bank charter late last year. We got up and running and started accepting deposits in the last few months. The other element that was exciting was the opportunity to build a bank brand around a set of social and environmental impacts that I didn't really see in the world today.

When you look at what happens to your money when it's placed on deposit in the four largest banks in the country, there has been some interesting research that says, for example, having $125,000 sitting there is equivalent to an average American's carbon footprint for an entire year. That's because these big banks are the single largest funders of fossil fuel development in the world. We can instead say to a depositor, “We're investing in this specific ecosystem with this set of environmental and social outcomes that we're trying to see,” I think that has an appeal to folks that are engaged in the local and sustainable food movement.

The other thing I'll say by way of intro — and you can see it in the name of the bank — we're structured as a mutual, which is this legacy New England construct. It is effectively a cooperative in which the bank is owned by its depositors. The reason we chose this structure is several-fold. One, it communicates to our borrowers and depositors the right thing, which is, “We're working in your best interest and no one else’s.” That has some appeal in financial services these days. More importantly, the structure offered longevity. We didn't set up the bank to sell it. It’s exciting to try to build a 100-year institution. This is a structure that allows us from a governance perspective to build something permanent, that allows us to focus on the non-financial impact that we're trying to see in this ecosystem.

We lend to the entirety of the local food ecosystem. So, not just production farms, but value-added manufacturers, distribution, consumer, and trade brands, and then also things that are on the periphery of food, like composters and other sorts of natural resource businesses more broadly.

TNFO: So, if a farmer came to you and wanted to transition to regenerative practices, would you look at that risk differently than one of the big banks?

Charley Cummings: Definitely. We've looked at situations where those practices enhance the farm's ability to weather climate related changes in yields and view that as a really important element of underwriting.

Because we have folks that know these sectors, we can offer a customized solution to a particular farm. For example, we wrote a loan for a grass-fed organic dairy farm. It was a simple term note for the underlying farmland, except it had five months a year interest only payments written into the loan during the hot season. That period reflects changes in milk yields in a pasture-based setting, allowing the borrower flexibility to make a different payment during those times.

As someone new to the banking world, that seems incredibly simple to me and not particularly innovative. But it just was not something any other bank would offer these folks. They fully intend to make the same payment every single month. From the bank's perspective, we are fine either way, whether they make the full payment or not. That's the intended structure of the loan. Making it an interest only period for those five months a year allows the borrower more flexibility. If they had a dramatic change in yield due to a drought, or a particular hot summer or whatever, they wouldn't be in technical default on the loan. They have the flexibility to make a payment as they see fit. We've done a lot of stuff like that to tailor to a particular situation.

TNFO: How would you like to see access to capital and banking in general do more of the things that you're doing? How could the finance sector evolve?

Charley Cummings: What we're trying to build is an ecosystem across our borrowers and depositors. Banking in general has lost what a bank was originally, where a depositor could very readily see what their dollars were contributing to right there in their own community. In our case, we're looking for borrowers that are engaged in the local food movement and want to see that tangible, local, and specific impact of those dollars right here in that ecosystem.

What I think ultimately fixes the food system, what builds this alternative infrastructure to support a more local and resilient food system, are these connections. When your food is grown by someone else, somewhere else, it's completely opaque. And so are the environmental and social impacts of that food production.

TNFO: Can you share an example of how Walden Bank builds a community food system?

Charley Cummings: We recently financed this amazing wholesale bakery business called LMNOP in New York. It is a husband-and-wife team opening their first retail location. They were putting this place together and it’s just a beautiful brand. They've done well with the retail location and that loan. At some point in the process, we got connected with their flour producer, which is trying to create a local grain shed. We ended up making a loan to them and they connected us to this local grain mill that, again, is trying to build all these farmers into a supplier base. The mill, in turn, connected us to one of the growers. So, we've looked at loans to a specialty organic grain grower, a flour producer, the bakery, and now a pasta maker too. Seeing that whole value chain from end-to-end was pretty amazing. Now we're looking at how to develop local grain into a practice area so we can address all the elements of an end-to-end value chain, including local microbrewers as other buyers. Then, what happens to the spent grains and how do we make sure those are taken to their highest and best use?

TNFO: So, can you describe the role of finance in creating a better food system, whether it's for human, environmental, or soil health?

Charley Cummings: Our board chair likes to joke, “Do you know where your money spends the night?” Where you bank is amongst the most important purchasing decisions you make as a consumer. Yet that's often out of sight and out of mind. We don't wear our bank brands on our sleeves.

I hope that people begin to get more conscious about this as they think about their investment portfolios having an impact in the world. We went from “How do I exclude negative things in my portfolio?” For example, not investing in tobacco or fossil fuels, to proactively thinking, “Here are the positive and specific outcomes I want to see in the world and how do I invest in things that will drive these outcomes?”

That change writ large across all of finance could contribute meaningfully to outcomes we want to see. Not just in more sustainable food production, but across a lot of sectors.

TNFO: Thank you to Charley Cummings of Walden Mutual for sharing positive news on finance, agriculture, and our food system. You can learn more about Walden Mutual’s impact and banking model at their website.