Concord bank offers a 100-year CD

It sounds like some sort of gimmick or maybe a typo, but the CEO of Walden Mutual Bank says its new 100-year CD makes sense even if you don’t plan to live for a century.

“Alongside a portfolio of stocks and bonds and such, it is an economically rational investment,” said Charles Cummings of the certificate of deposit, which the Concord bank began offering this month. 

CDs are a federally insured way for investors to receive a fixed interest on their deposit for a fixed period, in return for not being able to withdraw the money early without a penalty. Banks rarely offer CDs for longer than a few years because they’re uncertain about future interest rates and don’t want to be stuck paying too much.

Walden Mutual already offers a 10-year CD, which is extremely unusual. So why a 100-year CD, which appears to be unique?

Cummings says it fits the bank’s purpose to serve the region’s agriculture community, which has different financial needs than other types of businesses.

“At its simplest, we’re sort of trying to match deposits with loans that have similar duration. By asking people to make longer-term commitments we are in turn able to make longer-term commitments to, say,  a farm that doesn’t have an income profile strong enough to support a 10- or 15-year loan but can supply the cash payments for a 30-year loan,” Cummings said.

“You rarely see commercial loans getting durations of 30 years because banks don’t have anything on the other side of their balance sheet to support that kind of duration,” he said. That’s in contrast to residential mortgages, which often last for 30 years because the bank can sell them to Fannie Mae or Freddie Mac in the Federal Housing Finance Agency.

Walden Mutual, which opened last year as the first new mutual bank in the country since 1973, was founded mainly to support farms in New England and New York. Mutual banks are similar in some ways to a credit union, with their depositors acting as owners.

Cummings is best known for founding Walden Local in Massachusetts in 2013 to deliver beef and other local farm products to tens of thousands of homes, a business that he says made him realize that the types of loans and financial help from banks didn’t always serve small farms. Being a mutual bank, he said, allows control by members in the agriculture industry who understand such things as adjusting loan payments to fit harvesting patterns.

“There’s a reason we chose the mutual structure, because it has enduring longevity,” he said. Offering a 100-CD sends that message: “It’s reinforcing that we’re trying to build a long-term institution.”

Although Walden Mutual has an office on North Main Street, that isn’t a traditional bank branch. There’s no ATM and no cash changes hands, and most business requires an appointment.

Like most CDs, this one, which has a 4.75% interest rate, can be cashed out early with a penalty: losing 10 years of interest. Cashing out before the first decade will reduce the principal.

It requires a minimum investment of $1,000 and a maximum of $150,000, as well as the unusual addition of a beneficiary statement, because there’s a very good chance the owner will be dead when the CD matures.

Walden also allows owners to collect the interest without touching the CD itself, allowing it to operate something like an annuity.

Cummings said Walden Mutual, which opened a year ago as the country’s first new mutual bank in 50 years, is limiting the total amount of CDs it will sell so that “from a balance-sheet management perspective … it doesn’t materially affect our cost of capital.”

For more information, check waldenmutual.com.


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