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Derek Fraley, president and CEO of Systematic Savings Bank, has captained a turn toward profitability and a change in charter for the century-old local institution.
Rebecca Green | SBJ
Derek Fraley, president and CEO of Systematic Savings Bank, has captained a turn toward profitability and a change in charter for the century-old local institution.

Business Spotlight: Righting the Ship

Systematic Savings Bank turns around in short span with new leadership

Posted online

When Derek Fraley came on board as president and CEO of Systematic Savings Bank in 2017, the bank had roughly $22 million in its loan portfolio, and its annual overhead was about $2.2 million.

He says quick math shows Systematic would have to be making 10% net on its loans to cover its noninterest expenses.

A few things needed to be done, and fast, Fraley realized: The bank had to increase its revenue and reduce its expenses.

Fraley began by cutting staff, moving from 17 full-time equivalent employees down to nine.

He followed up by changing employee benefits plans and renegotiating a lot of contracts. While personnel was a large line item, he also worked to eliminate other unneeded expenses wherever he saw them.

“We used to have cable,” he says. “I thought, why the hell are we paying $150 a month for cable?”

In 2018, Fraley was able to reduce noninterest expenses by $640,000, followed by another $207,000 reduction in 2019.

But saving on expenses was only one portion of the work needed to right the Systematic ship. Increasing revenue was the other.

“We were so sleepy,” he says. “We’ve got a lot of the same customers as when I started, but we’re twice as big now. We’ve added a lot of new customers.”

He also began to initiate certificates of deposit online and issued brokered deposits.

The bank was losing $68,000 per month in net income with only $6 million in capital when Fraley began.

The next year, the bank still wasn’t profitable, but Fraley’s efforts had cut the losses from $1.3 million in 2017 to $247,000 in 2018. In 2020, Systematic’s net income of $56,000 was the first year of positive profits since 2012, according to its year-end shareholder letter. Net income in 2021 was $187,000, and in 2022 year to date is $123,000, according to Fraley.

Today, Systematic holds over $53 million in assets.

Charter change
Under Fraley’s leadership, Systematic also changed its charter from a mutual savings bank to a stock savings bank, with an initial public offering in 2020. In 2022, Systematic had another charter change, from a savings bank to a commercial bank.

“It’s something that the board had tossed around for quite some time,” says bank board member Jeff Seifried. “In an ever-changing lending environment, it was just the right time for Systematic to make that change.”

Seifried, on the board since 2013, says he likes what he sees of the bank’s trajectory.

“I’m very confident in the management,” he says. “That’s obvious from the performance. I can’t speak highly enough about the board and their leadership.”

Fraley’s growth mindset has been infectious, according to Seifried.

“I think under Fraley’s leadership, everyone’s focused on growing the bank, as we should be,” he says.

Seifried adds that the successful charter change, almost a century into the bank’s operations, signals confidence.

“It’s recognition of a long-standing institution in Springfield that’s continuing to grow and grow alongside all our customers,” he says.

Local banking
Systematic Savings Bank is one of only six locally owned banks. That’s important to Fraley.

“It kills me, the number of people who say, ‘Shop local’ but don’t bank local,” he says. “What’s the point in shopping local if that business is going to send that money out of town through its banking relationship?”

Fraley says he’s not one to believe in protectionist economics, but it’s frustrating to see banks sending money out of the local community.

“Have some respect for your community and try to keep money here,” he says.

It comes with being in his line of work, Fraley acknowledges, but when he’s dining with a vendor, he notices the debit card they use to pay for it. When he’s in a business and sees the name of a bank stamped on its deposit bags, he pays attention.

Fraley says he loves the community, including Systematic Savings Bank and its distinguished history downtown.

“A lot of loan officers will talk about how big their portfolio is,” he says. “I used to try to keep track of how many jobs I created.”

Seifried, too, embraces the fact that Systematic is a local bank – something that is becoming more rare with mergers and acquisitions in the industry.

“We’re proud of the fact that we’re able to make decisions locally in a very efficient manner,” he says. “That sets us apart.”

Fraley credits the board with keeping an open mind and giving him space to do what he needed to do.

“They were reasonably hands-off about it,” he says. “I demonstrated for them and modeled out what things could look like. Like I do every time, I proved my math.”

He says the turnaround also was due in large part to his hiring of his mentor, Brad Weaver, as chief loan officer. Weaver’s four decades of experience in banking includes time spent in every position.

“He’s one of the few people in the area that is an actual banker, not just a loan producer,” Fraley says. “He understands the operations of the bank.”

Attaining dreams
Fraley says being a good banker means being good at the basics of being there for customers.

“It’s not about who can have the sexiest app or the slickest online presence; it’s about walking through dark times with your customers and helping them prepare – helping them come to terms with their real risk appetite versus what they think it is,” he says.

Banking happens one person at a time, according to Fraley.

“People have goals and dreams, and you want to help them reach those dreams, but sometimes there are a few intermediate steps they have to take,” he says.

Every customer is different, with different assets and desires and tolerances.

“Some people are all in on risk and want to dive right in,” he says. “Other people want to do it incrementally.”

Despite his success in putting Systematic back on stable footing, Fraley finds satisfaction in working one on one with customers, some of whose families have been with the bank from its beginning.

“We’ll always be local – that’s my goal,” he says. “We’re very proud of being a hundred-year-old community asset.”

And Fraley says he’s in it for the long haul.

“I’m gonna sit in this chair until six of my friends carry me out by the handles,” he says.


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