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Helping Their Communities Achieve their Financial Goals One Customer at a Time

Robert “BJ” E. Goetz, Jr.

President & Chief Executive Officer

Middletown Valley Bank

Interview conducted by:

Bud Wayne, Editorial Executive

CEOCFO Magazine

Published – August 1, 2022

CEOCFO: Mr. Goetz, how long have you been with the Middletown Valley Bank, would you tell us about your role and how it developed to where you are today as President and CEO?

Mr. Goetz: I joined Middletown Valley Bank in September of 2012. I am coming up on ten years here in about a month. When I joined the institution, the bank was $145 million in assets. We were located mostly in rural communities in western Frederick County. We had one branch in a rural community in eastern Washington County.

I was hired to replace a retiring president and CEO who had been with the company for 50 years and for 30 years of his tenure the bank had not seen a significant amount of change. I was brought in to revamp the organization, take it in a different strategic direction and give it optionality toward its continued independence as a small community bank here in Maryland.

Today we are about $870 million in assets. We have done it for the most part all organically in both Frederick County and Washington County Maryland, so two adjacent counties here in the western part of the state. We have done it quite frankly, one customer at a time.

CEOCFO: Would you give us a little background and history of the bank and how it developed from its founding? Has the vision changed much from its founding vision?

Mr. Goetz: The bank was founded in 1908. On its founding it was really done to serve the rural community of Middletown, then expanded a little bit south into the community of Jefferson Maryland, which is another small rural community about ten minutes from Middletown. It then expanded a little bit north to the rural community of Meyersville, Maryland which is about ten minutes to the north. It was a small consumer based bank that did non-traditional residential mortgages and funded it with consumer checking accounts. It funded the community of Middletown. The heritage here, ownership in our founding, when I came here, we had four members of the board that could be traced directly to the founding director of the bank from a familial standpoint. All of the shares were pretty much 90% owned within the local community of the bank and it had just kind of existed for a long time.

Since 2008 when the financial pressures came in, the bank never took TARP, but it really did not do anything. It just sat there and made money off the investment portfolio and carried itself forward doing non-traditional mortgages that would not qualify for the secondary market. We saw a shrinking balance sheet, a shrinking loan portfolio and a shrinking income status. I was brought in to figure out how to choose our future versus being forced into a future. I brought about a strategic direction that moved the company into more of a commercial small business based bank. My background was certainly more in the small business world and we took to the forefront. We knew that we could move the needle both on loans and lending as well as the deposit side and ultimately on the income side to rejuvenate and reinvigorate the company.

At the time when I arrived here, we had 35 employees and today we are sitting at about 170 employees. We have continued to grow and bring in talent experience from outside of Middleton Valley Bank, coupled with the dedicated and willing people that were here in those 35 employees, that did not necessarily know how to move the company forward and make the change but had this tremendous desire to move the company forward. They got onboard with me right away, from the board all the way to the tellers. It became less of a job for them and became a family atmosphere that they wanted to see be the most successful thing that it could be. It was very challenging. We were outdated on our products and outdated on our infrastructure. We did not have the things that we needed to continue. Maintenance on the company had been deferred for a long time both physically, technology wise, infrastructure wise and all those things. We set about finding a way to drive better revenue and invest that into infrastructure of the company both from a physical standpoint, people standpoint and a technology standpoint, and turn the company forward. It became what I would like to consider the premiere community bank in western Maryland.

CEOCFO: Has there been any significant changes to your team over the past few years?

Mr. Goetz: The one person that I would like to mention and then carry from there is our Chief Risk Officer, Michael Hill. Michael Hill has been with Middletown Valley Bank for 28 years now I believe. He was here when I got here and when I got here Michael was the CFO of the company. He quickly became my confident, my right arm and strategically we moved this company forward together. From there, his roll expanded from CFO to COO and CFO. As we continued to grow, we built out a balanced strong executive management team. Michael moved into our Chief Risk Officer role because I believe in the independence and oversight that risk brings to the table. Michael’s knowledge and structure of every aspect of banking and the bank has been instrumental to that. He really is my partner in this whole thing.

Our executive management team is really built out of tremendous experience from a lot of different banks as well as strong youth mix throughout the entire executive management team. We have management experience from your largest banks out there including Wells Fargo, Citibank, and PNC, as well as regional and superregional banks come together to make a mix of community bankers, regional bankers and large bank experience that has made a tremendous difference for us.

The other difference for us, we had a gentleman by the name of Jim Pierne, join our board in 2013 and became our chairman in 2016. Jim was a 38-year executive level banker both in community, regional and superregional banks. He was president of various different banks including President and CEO of Susquehanna Bank, until his retirement in 2011. He ran the bank under Susquehanna Bancshares, which is a Mid-Atlantic superregional bank, at about $19 billion upon his retirement. He brought a wealth of experience, knowledge, institutional knowledge in the industry and credibility for both shareholders and examiners as we went about a path of organic growth that is somewhat outside of the traditional sense of how banks have been growing over the last 15 or 20 years. Our growth rate is well above the compound annual growth rate of 20% to 25% every year, can cause some nervousness with some examiners but we have a great relationship with our examiner’s, and we get a lot of credibility from the team that we built, including our Chairman, Jim Pierne.

CEOCFO: You are in Boonsboro, Hagerstown, Jefferson, Myersville and Middletown, Maryland. Would you tell us about the businesses in your community? Which industries would you say are the backbone of the community, providing jobs and community development?

Mr. Goetz: One of the things that is unique for a bank our size is we are 25% in commercial and industrial loans. What that means is we do more business loan and business banking than we do commercial real estate. Our portfolio is well diversified within the business community but that comes from the experience at the management level of different sized banks.

When you look at the communities that we are in, it is really a balanced mix of manufacturing, service, and logistic based businesses. Certainly, in the Hagerstown community there is a strong logistical front with the intersection of Interstate 70 and Interstate 81. We see a lot of trucking and transitory coming through there but that leads to a tremendous number of service based small businesses. There is also a strong medical community both in Frederick County and Washington County, of which we have a strong relationship base and foothold.

We started to become stronger and stronger in being suburban Baltimore and Washington D.C. communities, and traditional services-based businesses that you would see in those type communities. However, with the logistics opportunity with 70 and 81, we do see some relatively strong manufacturing type businesses in that community as well.

CEOCFO: With the rise of online banking and mobile apps, is the personal touch still important for you and your customers or do you find with the newer generations that are in the workforce these things don’t matter as much?

Mr. Goetz: Some of it depends on the demographic of given communities. For our communities you really have to have both. You have to have the capabilities of both. That personal touch is still extremely important to a certain demographic of our community, as well as the extreme importance to the business community. When you start to look at the next generation, the technology comfortable customers, they really want to have those capabilities. We have recognized that and have tried to keep a semblance of balance to our capabilities from a technology standpoint to be able to do that. We offer the remote deposit capture; we offer the Zell capabilities. We offer through our mobile app the online chat functions. We have monitored customer based email and chat functions that are monitored pretty much all day and all evening long. We find that the chat function is used regularly especially for our commuters that may commute into the Baltimore/DC area and need to do their banking later in the evenings or on the weekends.

With that being said, being a community bank, competitively the technology and research and development investment that the big banks have the capability to do, is why we focus more on the small business and the commercial. It is much more difficult for the larger banks to focus on suburban communities. The business customers that are within those communities and they still want and need the personal touch. We operate for our customers as financial advisors on the commercial side. Many of our customers will call us when they are thinking about projects or expansion or equipment purchases. We will provide advice that we see and we have a motto that says we are not going to give you legal advice and we are not going to give you tax advice, but we also do not bill by the hour like your attorney and your accountant do. If we can give you five pointed questions to ask your accountant or your attorney, and that saves you 30 minutes of time, then we just saved you money. That is the personal touch level, and we think that as a community bank that we maintain that personal touch and our focus needs to have that personal touch on the commercial side.

CEOCFO: How do you get the balance and what do you do with the consumer side?

Mr. Goetz: We work hard to bank the companies and we work hard to bank the owners and their employees, which means we have to have the balance of the technology capabilities and the ease of access. We saw a sea-change in COVID. The delivery channels for services really went a holistically different direction and we saw the growth of the online necessities. In a matter of not trying to direct customers to delivery channels that we want them to be in, but bringing both the personal touch, the branch location, and the technology delivery channels to the table so that our customers have options.

CEOCFO: Do you see a bounce back since COVID?

Mr. Goetz: Absolutely! When COVID hit, we actually began monitoring on a weekly basis, branch transactions in-person. We were comparing that to January and February of 2020 and carrying forward. We dropped as low in transactions because we kept our drive-thru open. Our transactions dropped probably about 40% to 45% during the heights of the pandemic. Within probably about six months of the beginning in 2020, we actually reopened our branch lobbies. We locked our lobbies down in March of 2020 but by July of 2020, our branch lobbies were open. At the low point it was about 45%. By the fall of 2020 we were back up into the 30% range of where we were in January. Today we are within about 15% of where we were but we have also seen growth in new customers over that time as well.

It is hard to say, particularly whether customers have changed or we have continued the growth of bringing new customers on that have impacted that. We have seen a significant increase in our technology based transactions. I think the sea-change is definitely there. Branches for a long time were a necessity to attend, but as technology has advanced, we worked hard to create an atmosphere in our branches that people want to come to. They do not have to come but through service through interaction and relationship building, we have created an atmosphere within our branches that customers want to come in and visit with our staff and interact and talk to them.

We are in small rural communities except for our Hagerstown branches. It is a place where they come to see and interact with people and it is a safe environment for them. I think that we solved the sea-change with technology, but we have seen a resurgence of people with the desire to get out and about. It is not like going to Walmart where the crowds are big and you have to be scared, it is a safe environment where you can still have personal interaction.

CEOCFO: How many branches do you have and are you looking to grow that number in the near future?

Mr. Goetz: When I originally came on ten years ago, we had five branches. They were in Jefferson, Myersville, Middletown, and Boonsboro, Maryland. In 2015 we expanded into the Hagerstown market with our first branch in the city of Hagerstown. We opened a second branch there in 2019. In 2021 we opened a branch in Waynesboro, Pennsylvania which is just across the Pennsylvania line just north of Washington County in the Pennsylvania market.

We are looking and constantly evaluating what markets are out there that makes sense to be in. I believe that the business community wants to see its community bank invest in the towns that it operates in. It is a different mindset than maybe what you see in the large banks that are closing branches and exiting because of their technology base, they have a desire for the delivery channel to be one thing and we are trying to provide options for the delivery channel.

As we evaluate new markets, we certainly will consider physical expansion into those markets, whether that could be a loan production office or a full-service branch. An example, in Garrett County, Maryland and the leisure community of Deep Creek Lake which is a tourist area community, we have a residential mortgage office that has been there for a number of years and in 2020 we opened a commercial loan production office in that community. It does not always have to be a full-service branch but I think you have to invest physically in the people, and the community appreciates that.

CEOCFO: When you add branches is it through acquisition, de novo or a mix? Do you have branding as far as the look of the bank? Can customers tell when the drive up to or go in that it a Middletown Valley Bank?

Mr. Goetz: Absolutely! First of all, all of our branches have been open de novo. We have not had many bank or branch acquisitions to date. We did do a residential mortgage company acquisition in 2019. As far as look and appeal, yes we have our own color scheme. We have our own design and look that identifies who we are and what we are. We have expanded and opened three branches. We have opened two loan production offices and we had to expand our operational area footprint in the new facilities.

We have opened probably five new facilities in the last ten years whether they be branches, operational centers or loan production offices. Every single one of those, and we are very proud of the fact that they have taken an existing building and redeveloped it, redeployed it, and reopened it. We believe that a community bank’s role is to give back to the community economically, socially and financially.

One of the ways and we are proud of it is that have not in the last ten years built new construction to open new expanded facilities that we need; we have repurposed existing buildings. The most negative thing on any community is an empty facility or building that could turn to blight. We believe where we can, to reinvigorate, remodel and reopen existing buildings.

CEOCFO: For the six months ended June 30, 2022 the Company earned net income of $3.89 million or $1.73 per share, an increase of $1.39 million or 55.6% compared to net income of $2.50 million or $1.11 per share for the six months ended June 30, 2021. What is your current funding position?

Mr. Goetz: On the funding position from a liquidity standpoint and funding standpoint, we are very strong. We have very little in brokered deposits and very little in any kind of FHLB borrowings or debt of that nature to fund our balance sheet. We have been able to fund our strong growth and our compound annual growth rates on the loan side and the investment portfolio through customer deposits, is always the best place to be.

Also, 38% of our deposits are in non-interest-bearing deposits which is very rare for a community bank of our size. Normally you see that more in the low 20s, and being 38% non-interest-bearing deposit certainly helps with our bottom-line net income but also our funding and stability going forward, especially in the rising rate environment that we are in.

CEOCFO: Is reaching out to investors an important part of your role as CEO?

Mr. Goetz: Reaching out to investors is probably the most important role that I have. I consider myself a steward of other peoples’ money. Our shareholders and investors have invested enough to create a successful organization that moves and carries forward, and I have been entrusted to be the steward of that investment. It is imperative for me to be open, upfront and very open-book with our investor, and to make sure that we communicate on a regular basis. While I do not do a traditional earnings call, we are not SEC registered at this point in time and we trade on the OTC: PINK markets.

I do have a significant list of our investors that I set up individual calls with every quarter when our press-release goes out and I make sure I review the quarter with them and answer any questions that they have and make sure that they continue to be comfortable with the investment in us and with the investment that they have made in the future of the organization. The most important thing for me and the thing that I understand the most is that I am a steward of their investment and I must do everything I can to make wise decisions for outcomes that are clearly beneficial to them.

CEOCFO: In closing, what sets Middletown Valley Bank apart from other local banks and why are you important to the fabric of the community?

Mr. Goetz: What sets us apart is our focus on improving the economic and social conditions within our community. We have 170 employees that service in the first six months of the year. Our volunteer time to local nonprofits from all of our staff was well over 1500 hours in the first six months of the year. We have employees that sit on give or take between 40 or 50 nonprofit organizations in the communities that we serve. Just as importantly, we are responsive to the customers that want to see the community improve as well.

Our commercial customers want to employ and see the economic conditions of the community continue to move forward so we are focused and responsive on those needs. We believe that if our client base is successful in achieving their financial goals, then the bank will be successful with them. We do that in an upfront partnership that makes sense. We focus on the overall relationship for the customer in the community to be successful, not on the transaction that is coming through the door that will make the bank earn a little bit more money.

Middletown Valley Bank | Robert “BJ” E. Goetz, Jr. | Maryland Banks | Helping Their Communities Achieve their Financial Goals One Customer at a Time | CEO Interviews 2022 | Financial Companies

“What sets us apart is our focus on improving the economic and social conditions within our community.”
Robert “BJ” E. Goetz, Jr.