THE EMPIRE STATE MAGAZINE FOR FINANCIAL EXECUTIVES & PROFESSIONALS • ISSUE TWO 2020
Hiring The Disabled Keeping Pace With Millennials Don't End Up Backwards IBANYS Responds A PUBLICATION OF AMERICAN BUSINESS MEDIA
IMPACT OF COVID 19 CRISIS
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CONTENTS
ISSUE TWO 2020
>> Follow us on Twitter at @BankingNYmag
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PAGE
STAFF
CEO, PUBLISHER & EDITOR Vincent M. Valvo ASSOCIATE PUBLISHER Beverly Bolnick
COVER STORY: How SBA And Banks Are Dealing With The COVID-19 Pandemic
MANAGING EDITOR Keith Griffin GRAPHIC DESIGN MANAGER Stacy Murray INTERACTIVE DESIGN DIRECTOR Alison Valvo ONLINE CONTENT DIRECTOR Navindra Persaud MARKETING & EVENT ASSOCIATE Melissa Pianin
EDITORIAL
Eric C. Peck
CREATIVE SERVICES Joey Arendt
ENGAGEMENT AND OUTREACH Andrew Berman
CLIENT SUCCESS COORDINATOR Jaclyn Leitermann
ADVERTISING COORDINATOR Francine Miller
Submit your news to editorial@ambizmedia.com If you would like additional copies of Banking New York Call (860) 719-1991 or email info@ambizmedia.com
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IBANYS President's Update
How IBANYS is helping its members deal with the effects of the COVID-19 pandemic.
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IBANYS Public Affairs Update
Sorting out the federal and state mandates for community banks in the wake of the coronavirus crisis.
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IBANYS Member Profile www.ambizmedia.com © 2020 American Business Media LLC All rights reserved. Banking New York magazine is a trademark of American Business Media LLC. No part of this publication may be reproduced in any form or by any means, electronic or mechanical, including photocopying, recording, or by any information storage and retrieval system, without written permission from the publisher. Advertising, editorial and production inquiries should be directed to:
American Business Media LLC 345 North Main St., Suite 313 West Hartford, CT 06117
The steps banks need to take to hold digital annual meetings with limited attendance
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Personnel
How KeyBank focuses on hiring workers with special needs.
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Don’t get turned around and upside down on efficiency
Keep up with all the personnel news happening across the Empire State!
The Bottom Line
On the Move
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Portfolios
Banks are poised to help small business rebound once this is all over.
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Did You See?
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Marketing
The special skills needed to deal with millennial homebuyers
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Survey Says!
A collection of news stories published at the Banking New York website since our last issue.
A look at what bankers think is the best social media for attracting customers.
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In the News
A look at the potential volume issues facing SBA as it seeks to help business recover with loans.
The resources you need. The community you trust. bankingny.com Banking New York | Issue Two 2020 | 3
IB A N YS PRESIDE N T ’S ME SSAG E
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B Y JO H N W IT KO W S K I
T H E NEW NO RMAL :
New York Community Banks Coping With Impact Of Covid 19 Crisis
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ith the onset of the coronavirus covid-19 pandemic, New York community banks across the state have been dealing with a dramatically different world. Our state has been at the epicenter of the nation in terms of the number of confirmed cases, and in the aggressive response by state government to the myriad challenges the crisis has posed to society in general, and the banking industry in particular. With mandates that require, in different regions of the state, social distancing, a cap on public gatherings, sheltering in place, self-quarantines or isolation, working remotely, essential and nonessential businesses and a host of state and federal
IBANYS
ANNUAL CONVENTION POSTPONED
NEW DATE TBD visit ibanys.net
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regulatory and legislative actions, the world we live in looks and feels very different than it did a few short weeks ago. Governor Cuomo has designated banks as essential businesses, and our New York community banks remain open throughout the crisis. Operationally, many have closed lobbies and focused on drive-through and online/digital banking. Many have decided to rotate staff, separate out and relocate key functional activities – and personnel – to other locations, moved to holding meetings by appointment only and offering and encouraging increased remote working conditions for employees whose responsibilities allow for that.
IBANYS 2019-2020 BOARD OF DIRECTORS Chairman Michael Wimer Cattaraugus County Bank, Little Valley, NY Vice Chair Thomas Carr Elmira Savings Bank, Elmira, NY Treasurer Mario Martinez Catskill Hudson Bank, Kingston, NY Immediate Past Chairman Thomas Amell Pioneer Bank, Albany, NY ______________________________ R. Michael Briggs USNY Bank, Geneva, NY John Buhrmaster First National Bank of Scotia, Scotia, NY
"Community banks have always been at the forefront of their communities, and their role during this challenge has only increased." The Independent Bankers Association of New York State (IBANYS), representing community banks throughout New York, has been working hard to serve as a conduit of information: • reaching out to the key authorities; • bringing bankers’ questions and concerns to their attention; • assimilating and disseminating information and updates on issues ranging from mortgage and loan relief to sharing FAQs, guidance and guidelines from the regulator; • hosting conference calls for bankers to discuss issues and concerns with elected officials; and, • ensuring bankers are kept fully informed, up-to-date and in touch. IBANYS has hosted numerous conference calls for regional groups of New York community bankers to help accomplish that objective. Congress has acted to pass a $2 trillion economic relief package. The federal and state banking regulatory agencies have all issued an array of new guidelines for banks. Governor Cuomo has issued wide ranging executive orders. A great deal of work lies ahead of us.
Anthony Delmonte Bank of Akron, Akron, NY Ronald Denniston First National Bank of Dryden, Dryden, NY Director Emeritus
Yet, community banks have always been at the forefront of their communities, and their role during this challenge has only increased. We are working with customers, exploring how to provide relief to those who have suffered economic harm due to the covid-19 virus, protecting the health and safety of our employees and customers however we can. We continue to work with the New York State Department of Financial Services, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the Federal Reserve, the Small Business Administration, our local state and federal legislators and leadership, the Governor’s office and a full range of public and private sector partners to do everything possible to get through the two-pronged crisis that encompasses both a public health and the urgent need for economic revitalization. Working together, we will all get through these trying times. ■
JOHN WITKOWSKI
John Witkowski is president and CEO of the Independent Bankers Association of New York State. He may be reached at johnw@ ibanys.net or (518) 4364646.
Christopher Dowd Ballston Spa National Bank, Ballston Spa, NY John Eagleton Steuben Trust, Hornell, NY Gerald Klein Tompkins Mahopac Bank, Brewster, NY Douglas Manditch Empire National Bank, Islandia, NY Paul Mello Solvay Bank, Solvay, NY Theresa Phalon North Country Savings Bank, Canton, NY Phil Pecora Genesee Regional Bank, Rochester, NY Anders Tomson Chemung Canal Trust Company, Elmira, NY Kathleen Whelehan Upstate National Bank, Rochester, NY Steven Woodard Alden State Bank, Alden, NY IBANYS STAFF John J. Witkowski President and CEO Stephen W. Rice Vice President of Government Relations and Communications William Y. Crowell III Legislative Counsel Linda Gregware Director of Administration and Membership Services
Banking New York | Issue Two 2020 | 5
PUB LIC A FFA IR S U PDAT E
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B Y STE P HE N W. R I C E
T H E CO R O NAV I RUS RESPO NSE:
A Whirlwind Of Regulatory & Legislative Actions
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IBANYS WORKING OVERTIME TO KEEP NEW YORK COMMUNITY BANKS FULLY INFORMED
ew Yorkers have been hit especially hard by the coronavirus COVID-19 crisis, suffering by far the most confirmed cases and deaths of all the states. Citizens and businesses throughout the state have been called upon to do extraordinary things. The public health challenges have been tragic, enormous and costly, and all have had to adjust to a whole new “normal” and way of everyday life. The number of New Yorkers who have lost their jobs and have filed for unemployment is historic. New York community banks, like their peers across the nation, have also been called upon to step up and do extraordinary things. While taking steps to safeguard their employees, customers, clients and communities, they have been coping with a whirlwind of state and federal regulatory and legislative initiatives to address the financial and economic prong of the crisis. Community banks, like many other financial institutions, have had to stay current with a flurry of executive orders, emergency
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regulations, updated and new guidelines and stringent mandates. These include new policies on mortgage and other loan relief for those who demonstrate economic hardship from covid-19. They include new operational policies to protect employees and customers (some mandated, others self-determined). There are a multitude of updates on a daily basis. IBANYS has been working continuously with the New York State Department of Financial Services, the Governor’s office and the State Legislature at the state level, and with the OCC, FDIC, Federal Reserve, Small Business Administration (SBA), Congress and others at the federal level. IBANYS has helped coordinate conference calls to New York community banks with members of our congressional delegation and state legislature, and has issued daily updates with essential information at least once a day, and often more frequently. Our partners at the Independent Community Bankers Association (ICBA) have provided invaluable assistance,
In Albany, the state now anticipates a budget deficit/ revenue shortfall of up to $15 billion—in part because the tax filing deadline has been moved to July 15 and collections will be far lower than expected. as have the Federal Home Loan Bank of New York, Pursuit (formerly the NYBDC), and numerous private sector and legal allies and consultants. A major challenge is ascertaining whether relief and mandates required by our state and federal banking regulators is the same, so that state chartered and federally chartered banks are playing under the same rules during this crisis. The CARES Act, a legislative package of over $2 trillion to provide emergency relief to individuals businesses and those who are unemployed, contract workers or Gig workers, provided $349 billion in assistance to small businesses in the payroll protection program, operated under the SBA. The rollout timeframe was extremely aggressive to try to get the much-needed funding into the hands of small businesses as soon as possible. Despite some technological and operational glitches in the system, community banks worked virtually non-stop to do so. Meanwhile, in the midst of it all, in Albany, the State Legislature approved the state’s budget for Fiscal Year 2021, and it included unprecedented authorization for
the Governor to make adjustments throughout the year as circumstances require. (The state is looking at a deficit of up to $10-to-15 billion, due in part to the extension of the tax filing deadline from April 15 to July 15, so collections will be far lower than expected.) As New York, and our country, work toward overcoming this COVID-19 crisis, and the public health and economic crisis it has wrought, IBANYS will continue to monitor developments, represent the needs, interests and concerns of community banks -- and to provide the information and updates needed to help them remain safe, sound and competitive as they meet the needs of their customers and communities. â–
STEPHEN W. RICE
Stephen W. Rice is Director of Government Relations & Communications for the Independent Bankers Association of New York State.
Banking New York | Issue Two 2020 | 7
ME MBE R P R O FIL E
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B Y JE F F RE Y M. CA R DO N E, S P E C I AL TO B A N K I N G N E W YOR K
Virtual Annual Shareholder And Member Meetings In Response To Covid-19
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ue to the increasing restrictions placed by federal, state and local governments on the size of in-person gatherings and public movement to reduce the health risks associated with COVID-19, many companies are evaluating whether to change their upcoming annual shareholder meetings, which are traditionally held-in person, to either a meeting held exclusively online (a “virtual meeting”) or a meeting held at a physical location that would allow shareholder participation via the Internet or other forms of remote communication (a “hybrid meeting”). For companies contemplating holding a virtual or hybrid annual meeting, discussed below are legal and practical considerations. LAW OF THE APPLICABLE JURISDICTION AND ORGANIZATIONAL DOCUMENTS Law of the Applicable Jurisdiction. Companies must first confirm that a virtual or hybrid meeting is permitted under relevant law. For most banks, the corporate law of the state of incorporation of their stock holding companies would determine whether virtual or hybrid annual meetings are permitted. For all other banks, whether a virtual or hybrid meeting is permissible would be determined by: (1) state banking law if the bank is a state-chartered institution without a holding company; (2) applicable regulations of the Office of the Comptroller of the Currency (“OCC”) if the bank is either a federal savings association or national bank without a holding company; or (3) applicable regulations of the Board of Governors of the Federal Reserve System (the “Federal Reserve”) if the bank has a holding company (in mutual or stock form) chartered under federal law. Approximately 31 states, including Delaware, Maryland, Pennsylvania and New Jersey, allow virtual meetings. An additional 12 states, including New York, permit hybrid meetings but not virtual-only meetings, although New York State Governor Andrew Cuomo issued an Executive Order allowing virtual-only meetings until April 19, 2020. Eight states currently do not permit virtual or hybrid meetings. Generally, for virtual or hybrid meetings to be acceptable under a state’s corporate law, shareholders must have the opportunity to participate in the meeting, read or hear the proceedings, vote and pose questions. The Federal Reserve and OCC regulations do not explicitly contemplate virtual meetings. However, we have discussed this matter with Federal Reserve Board staff and have received confirmation that there would be no objection to virtual meetings under the circumstances as long as shareholders and members are provided sufficient notice and information on how they can participate. Organizational Documents. Companies must also confirm that their articles of incorporation/charters and bylaws permit a virtual or hybrid meeting. For most companies, their
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organizational documents provide the board with discretion to determine the appropriate venue and arrangement for annual meetings. SECUR IT IES A ND EXCH A NG E CO MMISSION ( “ SEC” ) R UL ES A ND G UIDA NCE Assuming that a virtual or hybrid meeting is permissible as described above, publicly traded companies holding such a meeting must also properly notify shareholders of their virtual or hybrid meeting. Below is a discussion of the guidance issued by the SEC on March 13, 2020 to assist companies affected by COVID-19 with satisfying such obligations. Changing the Date, Time or Location of an Annual Meeting. If a company has not filed or mailed its definitive proxy materials for its upcoming annual meeting and is considering changing to a virtual or hybrid meeting, then the company should disclose in its proxy materials the possibility of, and the reasons that may result in, such a change, and that the meeting may be delayed, postponed or adjourned due to COVID-19. If the company has already filed or mailed its definitive proxy materials for the upcoming meeting, the guidance provides that a company may change the date, time or location of the meeting without mailing additional solicitation materials or amending its proxy materials if the company: (1) issues a press release announcing such a change; (2) files the announcement as definitive additional soliciting materials on EDGAR; and (3) takes all reasonable steps necessary to inform other intermediaries in the proxy process (such as any proxy service provider) and other relevant market participants (such as the appropriate national securities exchanges) of such change. The SEC would expect these actions to be taken promptly after a decision to change to a virtual or hybrid meeting has been made and sufficiently in advance of the scheduled meeting to ensure that the market is timely alerted to the change. Notwithstanding the SEC’s guidance, the company must also ensure that it is satisfying all notice requirements under relevant state or federal law and its organizational documents in changing the date, time or location of the meeting.
Information about Virtual or Hybrid Meetings. To the extent that a company plans to have a virtual or hybrid meeting, the SEC expects the company to timely notify its shareholders and other intermediaries in the proxy process of such plans and to disclose clear directions as to the logistical details of the virtual or hybrid meeting, including how shareholders can remotely access, participate in and vote at the meeting. If the company has not yet filed or mailed its definitive proxy materials, the proxy materials should disclose the logistical details for the virtual or hybrid meeting. If the company has already filed or mailed its definitive proxy materials, the guidance notes that as long as the company follows the steps outlined above for changing the date, location or time of the annual meeting, the company would not need to mail additional soliciting materials (including new proxy cards) solely to switch to a virtual or hybrid meeting. Presenting Shareholder Proposals. Rule 14a-8(h) of the Securities Exchange Act of 1934 requires a shareholder or his or her qualified representative to appear and present a proposal at the annual meeting. In light of the difficulties of attending the annual meeting due to COVID-19, the guidance encourages companies, to the extent feasible under state law, to provide shareholders or their qualified representatives with ability to “present their proposals through alternative means, such as by phone, during the 2020 proxy season.” In addition, the SEC clarifies that to the extent that a shareholder or his or her qualified representative is unable to attend due to COVID-19, the SEC would consider this to be “good cause” under Rule 14a-8(h) if the company asserts Rule 14a-8(h) as the reason for excluding a proposal submitted by the shareholder for any meetings held in the following two calendar years. OTHER CO N SI D E RAT I O NS In addition to the legal considerations discussed above, companies should consider the following before moving to a virtual or hybrid meeting: Logistics. To the extent that companies do not have the
necessary infrastructure to conduct a virtual or hybrid meeting, they will need to work with their stock transfer agents or other vendors that have the technology to implement a virtual or hybrid meeting. Particular logistical discussion points should include: (1) costs; (2) the format of the meeting (i.e., video or audio); (3) authenticating attendees; (4) enabling shareholders or members to submit questions and vote at the meeting; (5) technical support for shareholders or members experiencing technological issues during the meeting; (6) ensuring that shareholders and members receive sufficient information about participating and voting at the meeting; and (7) cybersecurity safeguards to ensure the integrity of the meeting and voting process. Potential for More Questions and Comments at the Meeting. For many companies, their annual meetings are held in-person and attendance is typically low. By having a virtual or hybrid meeting, companies may see an increase in attendance, which may result in more questions and comments than usual. Timing and Ongoing Assessment of the Impact of COVID-19. Due to the evolving COVID-19 restrictions being imposed by federal, state and local governments on public gatherings, companies planning to have in-person annual meetings should have contingency plans in place to implement a virtual meeting (or if prohibited under applicable law to postpone or delay the in-person meeting) to the extent that having the in-person meeting is impractical or prohibited. Accordingly, companies should continuously be in contact with their transfer agents or other vendors so that they are ready to timely implement a virtual meeting to the extent such change is warranted based on the circumstances. ■ Jeff Cardone is a partner with Luse Gorman, PC, a law firm specializing in representing community banks in corporate, regulatory and transactional matters. Luse Gorman, PC is a preferred partner to IBANYS.
Banking New York | Issue Two 2020 | 9
PECH RS N ONNEL NCY CO HE S PK, E CSIAL N KBI A NN GKN WN YOR TE O LO GY| |NA BY GEO RG E N, YACI P E CTO I ALB A TO I NEG E WKYOR K
KeyBank Fosters An Inclusive Environment For Workers With Disabilities
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or the third consecutive year, KeyBank has been recognized by the National Organization on Disability (NOD) for its exemplary employment practices for people with disabilities. As one of only four banks nationwide named a 2019 NOD Leading Disability Employer, KeyBank is considered a leader in providing people with disabilities the opportunity to achieve economic mobility and career fulfilment. “These winning organizations understand that by harnessing the talents of people with disabilities, they reap the benefits of a more diverse and more productive workforce,” said NOD Chairman Tom Ridge, former Pennsylvania governor. “The preeminent challenge before us is to ensure that people with disabilities enjoy full opportunity for employment, enterprise and earnings, and that employers know how to put their talents to work.” Long seen as more traditional than other business sectors, the banking industry has been slower in its efforts to adopt programs that encourage society’s growing inclusion practices. Under the leadership of Keybank’s CEO Beth E. Mooney, the institution has worked in transforming
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that landscape. Her efforts changed the culture and positioned KeyBank to become one of the most diverse and inclusive workforces in America. Along with the non-financial benefits of hiring people with disabilities, the federal government offers tax credits to help employers capitalize on the value and talent that certain targeted groups bring to their companies. KeyBank, for example, applies for tax incentives under the Work Opportunity Tax Credit (WOTC) program offered by the IRS for hiring eligible individuals with disabilities. All Types Of Disabilities Much of the talk about inclusion focuses on the physically disabled, while mental disabilities still hold a stigma. KeyBank is taking this problem head-on positioning themselves for 2020 to be one of the first regional banks to build momentum in this space. In 2018 accelerated efforts by KeyBank brought about the appointment of Kim Manigault as chief diversity & inclusion officer. Her philosophy for hiring is: “Be open, be flexible and be inclusive when considering talent.”
Manigault further points out that according to the NOD, 57 million people with disabilities live in America – one in every six. “We must see people for their value, not their disability. It’s a missed opportunity for a potential employer and their clients to withhold opportunities for unique and diverse pools of talent. By hiring a limited group of people, companies are missing out on significant segments Kim Manigault of resources,” said Manigault. Bureau of Labor Statistics show just under 20 percent of Americans with disabilities are in the labor force, compared to 65 percent of the general population. As a result, more than twothirds of people with disabilities live in poverty—double the national average. Because of these staggering statistics, KeyBank encourages voluntary self-identification in the hiring of their workforce. “Voluntary self-identification creates a platform for people to openly share characteristics and qualities about themselves,” continued Manigault. “Through this process, we can better facilitate dialogue about diversity goals and provide the proper resources to support and find the right talent pool.” With KeyBank’s hiring rate of persons with disabilities consistently doubling from 2016 to the third quarter of 2018, selfidentification demonstrates a vital method of support for underrepresented groups at the institution. Corporate Goals Corporate goals for diversity and inclusion are further enhanced through the banks 12 Key Business Impact and Networking Groups (KBINGs) -- African Heritage, Asian, Champions of People with Disabilities, HispanicLatinx, Jewish Cultural, Key for Lifetime Contributors, Key Legal Exchange, Key Military Network, Key Women’s Network, Key Young Professionals, Parents are Key and PRIDE – providing members with career development and supportive resources to address their individual differences and goals. The Champions of People with Disabilities (CPD) KBING gives a voice and a platform to employees with disabilities and/or caregivers through ongoing collaboration, industry insight and best practices focusing on reasonable accommodations from recruitment to employment. Under the leadership of Michael O’Boyle, a senior vice president & procurement category manager, the CPD KBING has grown from 40 members at its inception in 2016 to just under 200 members. By telling the story about his young son, a wheelchair user due to a rare medical condition, employees and caregivers began to come forward to share their own personal journeys and common concerns.
O’Boyle said, “We’re working closely with the NOD to broaden industry insights and partnering with community organizations like The Precisionists to help companies employ 10,000 individuals with disabilities by 2025.” The Future Simply launching a diversity and inclusion program is not enough. For KeyBank, the sky is the limit when it comes Michael O’Boyle to their program’s direct impact on hiring and, ultimately, the bank’s productivity. Through employee development and training, grassroots initiatives and conversations to help reduce biases and increase cultural competence and acceptance, KeyBank has positioned itself as a force that ensures that all populations are well represented. “The desire to be diverse and inclusive and lift as you climb to break through ceilings and bring people along, is critical,” said Manigault. ■
“We’re working closely with the NOD to broaden industry insights and partnering with community organizations like to help companies employ 10,000 individuals with disabilities by 2025.” Michael O’Boyle
Banking New York | Issue Two 2020 | 11
TH E BOTTOM L IN E
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B Y DAV I D CA RL SO N , S P E C I AL TO B A N K I N G N E W YOR K
Upside Down Thinking On Efficiency Do You Have Your Priorities Backwards?
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any financial institution executives spend considerable time thinking about strategies to improve efficiency in order to improve overall profitability. The efficiency ratio is the ratio of non-interest expenses (less amortization of intangible assets) to net interest income and non-interest income, so it is effectively a measure of what you spend compared to what you make. The very name – “efficiency ratio” – makes us think about how efficient we are with those precious income dollars. If a financial institution has a high efficiency ratio, they are simply spending too much of what they make… right? That is exactly what the name implies (emphasis on the spending side of the equation). But this is just a ratio of two numbers, and as we all know, there are two ways to bring the ratio down – reduce costs or increase revenues. The focus across industry press and conference best practices is generally aimed at strategies to cut expenses – using technology, looking at staffing levels, increasing productivity, etc. Although this advice is sound, what happens when a financial institution has already cut what can be cut AND it is still struggling with efficiency? It is sometimes difficult to save your way to prosperity. For many financial institutions, the focus should also be on the bottom portion of the equation – increasing revenues. Let’s look at an institution that has $500 million in assets, a good return at 1 percent ROA, and a reasonable efficiency ratio of 60 percent. Their key metrics would look something like this. (See Exhibit 1.)
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Now let’s assume the FI can improve its efficiency ratio by 5 percent through revenue increase or expense reduction. (See Exhibit 2.) It shouldn’t be surprising that increasing revenues provides better performance even though this sometimes seems like a counterintuitive approach. Because many financial institutions need to increase investments for growth in order to significantly grow their revenues, thereby increasing the expense side of the equation, and because of their excess capacity, this will actually make them more efficient over time. Many financial institutions have cut expenses EXHIBIT 1:
EXHIBIT 2:
almost to the bone and can’t materially improve their efficiency ratio by further reducing costs. They need to take a step back and realize some fundamental business dynamics that are often ignored in our industry. Most community financial institutions still have tremendous excess capacity, meaning they could serve significantly more customers without significantly increasing expenses. The answer to improving the efficiency ratio is to fill excess capacity with brand new profitable customers. How do other businesses look at the issue of excess capacity – for example a manufacturing company?
· The facility is running at 50 percent of the capacity it was built to produce; · The factory has done everything it can to be as efficient as possible – evaluate staffing levels, implement technology solutions, etc.; and · Management’s major goals and objectives are still focused on improving profitability by further evaluating already efficient processes and selling more to current customers. Given the excess capacity at the manufacturing company, wouldn’t it also make sense to evaluate if more widgets can be run through the facility? Would the market support providing more products to more people in order to increase net income without substantially increasing expenses? The manufacturing company analogy is very similar to the situation being faced by community financial institutions. They have branches currently attracting 30 percent - 50 percent of the new customers they were
built to serve each year and it is getting worse as transaction volume continues to decline in branches. Most financial institutions have used technology and staff reductions to become more efficient; however, they still spend much of their time, effort and energy focusing on cost reductions and additional efficiency enhancement. When a community financial institution starts welcoming significantly more new customers per year, fixed costs do not substantially change – no new branches have been built, no additional employees have been hired. Actual data from hundreds of community financial institutions illustrates the impact on actual expenses is just the marginal costs – generally an additional $30 - $50 per account per year (even if we must mail a paper statement). Conversely, the same data base shows the average annual contribution of each new account per year is between $250 - $350. When comparing clients that have embraced this strategy to the overall industry over a three-year period of time (2014 to 2017), their improvement
in efficiency ratio was 63 percent better. This has been accomplished by significantly increasing the number of new customers coming in the front doors of existing branches. There is only so much blood in a turnip. Controlling costs, embracing technology to reduce process costs and evaluating staffing are all things financial institutions should be doing; however, if they have already become very efficient in these areas, the focus must shift to driving revenue. Most financial institutions have tremendous excess capacity in their existing branches today. The solution is to start filling them up. ■
David Carlson is a senior executive vice president at Haberfeld, a datadriven consulting firm. He can be reached at 402-3233600 or dcarlson@ haberfeld.com.
Banking New York | Issue Two 2020 | 13
PORTFO LI O S
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B Y JO E L P RU I S, S P E C IA L TO B A N K I N G N E W YOR K
How Financial Institutions Can Make A Long-Term Positive Impact On The U.S. Small Business Market
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e are facing events that will cause an immediate impact on the small businesses in our communities and in our portfolios, and now more than ever we need to show our stuff! Whether or not an institution has a formal small business credit portfolio, it likely has exposure to the small businesses in its market area. While the events that will produce this inevitable spike in credit issues are not the same events as those that produced the credit problems in the first half of 2009, the events of today are definitely going to lead to significant credit problems for small business clients over the next several months. One thing is certain: banks MUST act and act quickly. Starting immediately, small business leaders need to: · Triage the current credit portfolio · Create a response strategy for the current portfolio · Bring new loan application and deposit account opening online TRIAG I N G T HE C URRE NT P O RTF O LI O Overall, bankers’ triage efforts should result in each relationship falling into one of four categories: · Group 1 – Credits that were already bad/going bad and current events will just accelerate their move to failure/ credit loss · Group 2 – Credits that were teetering but the current events will only serve to force them down a path of failure · Group 3 – Credits that were operating just fine but the events of today will move them into Group 2 (at best) · Group 4 – Credits that were operating just fine and will continue without a problem. They will feel some pain but nothing they can’t handle. For larger commercial relationships, it may be acceptable/ appropriate to take a very manual approach to categorize each relationship, but for the small business relationship, such manual processes are slow, cumbersome and ineffective. Rather than just beefing up the reserves or spending an exorbitant amount of money that only serves to cost the financial institution more than the likely charge offs, a smarter triage approach can be taken. Specifically: · Perform a batch rescore of the entire small business portfolio with one of the business credit scorecards (e.g., D&B, Experian, PayNet, SBFE). If you haven’t segmented, just rescore the entire commercial portfolio. · Identify the commercial/small business relationships
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where you have both a loan and deposit relationship. · Banks that only have a credit relationship with the small business are at a severe disadvantage and will be flying blind. · Institutions with both credit and deposit relationships have a distinct advantage in completing the triage process. · Gather the data of the small business portfolio on the following behaviors: · Delinquencies for the past 12 months · Line utilization for the past six months (for those relationships with a line of credit) · Average monthly deposit balances over the past six months At this point, it is not critical for the information/data to be precise. The bank should do the best it can in collecting this information. Once it has grouped the relationships, the focus turns to developing the action plans for each segment. Segment 1 – Already gone While harsh, the reality is that not much can be done here. Refer to Special Assets and move on. Segment 2 – If only this hadn’t happened If the obstacle wasn’t COVID-19, it would probably have been some other type of unforeseeable event. Regardless of the obstacle, the odds were against this group and it has to either come up with its own remedy or be kept afloat by some government bailout for the next several months. Segment 3 – It’ll be OK with some short-term support This group will likely bounce back just fine as long as they can make it through the next “however many months it will take.” These businesses were building their net worth and their strength to withstand the typical economic cycles, but then COVID-19 hit, swiftly and suddenly, and it was nothing they could have anticipated. These are the businesses that will likely survive with just a little bit of help. More importantly, this is the group that doesn’t have to fail and cost the bank double-digit charge offs. They will be EXTREMELY loyal if the institution helps them through this time of crisis. Segment 4 – I’m sorry others are being negatively impacted but I’m OK These are the easy ones. These businesses have significant cash reserves or are in an industry on which the impact of COVID-19 will not be significant to their overall success or financial condition. Banks are fortunate to have them in their portfolios.
RES PON SE PL A N S It is the response of these financial institutions that will be the most difficult and beneficial to the FIs and obviously to the small businesses in their markets. Actions to be taken: · Facilitate use of the Government Relief Package (or whatever they end up calling it). · Be an expert on what is or will be available from the government. We know something will be passed, eventually. The lending and credit teams need to be on top of what is available and guide small business clients on how to take advantage of it. This communication must be consistent with a “paper trail.” · Be prepared to offer “bridge” financing until the monies arrive from the government – assuming guidance will be conducive to this structure. · Provide support by purchasing small business goods or services. Buy directly or buy gift cards, but just buy to put some money in their accounts to help the small business client survive. · Assess the likelihood of default and the subsequent likelihood of credit loss for the small business relationship. Given this potential loss, banks have to make a call on what would be an appropriate/acceptable short-term hit to revenue to avoid a larger, long-term hit in the form of a credit loss. · Provide access to professional advice. The institution has small business/commercial relationships with professionals that can provide guidance/advice to its small business clients in Groups 3 and 4 to help them get through the COVID-19 crisis, but they need to know who’s available. The FI may even go so far as to “buy” these professional services and make them available to its small business client base. As with the other actions, this will build goodwill as well as help a small business survive in the markets the institution serves. There are a number of other strategies and tactics that will evolve in the weeks and months ahead that may/will be the result of this COVID-19 crisis facing the country. One thing is
certain: if an institution does nothing, it will see a significant loss in the small business segment. A DJUST T H E UNDER WR IT ING CR IT ER IA FOR NEW A P P L ICAT IO NS Credit requests will continue to come and, unfortunately, there will be a lot of small businesses just trying to stay afloat, pay their employees and meet their obligations. They will be submitting requests for financing. Such requests will likely be a result of the institution’s current response to the COVID-19 economy. Rather than just shutting off any new loan applications to avoid taking on problem loans of other FIs, banks and credit unions will need to adjust their underwriting guidelines to adapt to new economic conditions. The best approach is to leverage what was discovered during the portfolio triage efforts. From the credit profiles defined in triage, each group can modify its underwriting criteria and potentially approve new loan requests. The probable candidates would be the categories 3 and 4 as defined above – those that will need some assistance through the COVID-19 crisis (Category 3) and those that are doing fine and will continue to do just fine (Category 4). The question on the table for all banks and credit unions is this: Will you just watch the credit challenges unfold, or will your organization be one of those that takes action to help important small businesses continue to operate and extend the credit along with opening new deposit accounts that will make an intentional, significant and long-term positive impact on U.S. markets? ■ Joel Pruis specializes in commercial lending, small business lending, and performance improvement at Cornerstone Advisors. He wrote this article originally for GonzoBanker.com.
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DID YOU SEE?
Banking New York publishes a weekly digital newsletter that rounds up the latest news and information affecting banks and credit unions in the Empire State. Here are some of the top stories from recent editions. To subscribe, share your news, or advertise in the Banking New York newsletter, contact us at info@ambizmedia.com.
M&T BANK POSTPONES TECHNOLOGY CENTER The planned technology center M&T Bank was planning for downtown Buffalo has been put on hiatus. The culprit is the COVID-19 pandemic. The delay of the construction of a planned technology hub puts on hiatus the facility that will eventually house 1,500 workers in the Seneca One Tower. The center was to be part of the major downtown skyscraper in the midst of a $120 million renovation by Douglas Development. The bank will lease 11 upper floors and a pair of western plaza wings, space that will house thousands of bank technologists as part of a plan to create more than 1,000 jobs, according to WGRZ-TV. “We’ll continue to push ahead once it is deemed safe and appropriate to do so, and we look forward to occupying the space later this year,” M&T spokesman David Lanzillo told American Banker.
headline business conditions index fell 34 points to -21.5, reaching its lowest level since 2009. Manufacturing firms in the region reported declines in new orders, shipments, and inventories. Similarly, the NY Fed says, the Business Leaders Survey’s headline index fell 23 points to -13.1, its lowest reading in more than three years. In both surveys, respondents became pessimistic about the outlook, no longer expecting business conditions to be better over the next six months. In a supplemental survey specifically on the fallout from coronavirus, 48% of manufacturers and 41% of service firms reported the outbreak had at least some adverse effects on the availability of supplies. The NY Fed has also created a resource hub with curated information for business owners, employees, nonprofit, and community organizations impacted by the coronavirus, or COVID-19.
NY FED SURVEY PAINTS BLEAK PICTURE; CORONAVIRUS HUB ESTABLISHED It’s not surprising but business and consumer confidence have reached lows not seen in over a decade in some cases. That’s based on new numbers from the Federal Reserve Bank of New York. An announcement from the NY Fed says both of its monthly business surveys showed sharp declines in business activity in New York State. The Empire State Manufacturing Survey’s
CUOMO ISSUES COVID-19 ORDERS TO STATE BANKS New York Gov. Andrew Cuomo has issued emergency orders mandating banks offer financial assistance to people and businesses dealing with hardships caused by COVID-19. The governor is mandating 90 days of relief. In his executive order, the governor said it would be “be an unsafe and unsound business practice” for banks not to grant forbearance to those with financial hardships. The superintendent
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of the New York Department of Financial Services will write emergency regulations to clarify the issue. Cuomo is also asking that state bank regulators look into the issue of ATM fees, overdraft fees, and credit card late fees. They’re charged with seeing how the fees impact the consumer, as well as the financial institutions. INVESTORS, GOLDSTAR RECEIVE FDIC MERGER APPROVAL Investors Bancorp and Gold Coast Bancorp Inc. have received approval for their planned merger. The deal has also received approval from the New Jersey Department of Banking and Insurance and the New York Department of Financial Services, and a waiver with respect to the merger from the board of governors of the Federal Reserve System. The mergers are expected to be completed on April 3. The deal is valued at $63.9 million, according to NJBiz. com. The combined entity will have over 150 branches in New York and New Jersey once the deal is completed. As previously announced, under the terms of the merger agreement, the shareholders of Gold Coast Bancorp can elect to receive, for each Gold Coast Bancorp common share held, either cash or shares of Investors Bancorp common stock in connection with the bank holding company merger. ■
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B Y K E N L I E B SK I ND, S P E C I AL TO B A N K I N G N E W YOR K
S B A, B AN K S F R ET OVER SMAL L BUSI NESS FUTURE
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Concerns About Lag In Response Due To Volume
s business shutdowns and unemployment “My fear is that the SBA disaster loan site may crash. It numbers skyrocket across the Northeast and Mid wasn’t built for the anticipated volume of applications from Atlantic regions, both the banking community businesses that were sailing along fine two weeks ago and and the U.S. Small Business Administration are now are in desperate need of cash,” Arora added. “The SBA trying to ride to the rescue. But the speed of the has a network of partner banks, but the agency will need problem, the historic spread of business closings, and a system the help of Fintech companies to handle the volume of that’s known for red tape are making it hard for lenders, and applications that will come. The longer this health crisis goes borrowers, to find their way. on, the worse it will be for small businesses, the economy, The fiscal stimulus bills in Congress would provide at least and the country overall.” $50 billion in cash and loan assistance for small businesses. In an interview with the Baltimore Business Journal, Steve But many bankers are worried that the support won’t come in Bulger, acting director for the SBA Mid-Atlantic region that time to help the commercial interests necessary to keep their includes Pennsylvania, Delaware, Maryland, Virginia, West regions alive. Virginia and Washington, D.C., said there were 11,000 loan “We’ve been inundated with calls and emails,” said SBA applications through his region as of March 18. That was regional deputy director Julio Casiano, from his Connecticut before states such as Pennsylvania and Maryland received office. “People want to approval for their disaster talk with someone and relief applications. “We’re we’re trying to let them gearing up for hundreds of know we’re here to help. thousands of applications “My fear is that the SBA disaster loan It adds a little sunshine to for these loans, if not more,” site may crash. It wasn’t built for the their day.” Casiano said Bulger said. he received a call from a The pickup in traffic has anticipated volume of applications Greenwich company he caused the SBA’s website from businesses that were sailing along wouldn’t name with a payroll to slow down. Bulger said fine two weeks ago and now are in of over $100,000 per week the agency is aware of the and is being contacted by problems, calling the amount desperate need of cash...” a variety of businesses. of traffic “unprecedented.” “Small restaurants are calling The agency has been because of a loss of business increasing capacity on a and entertainment companies. We’ve even gotten calls from consistent basis, but he admits it still needs more. limousine companies and a music store.” He said, “Applications are being processed as we’re speaking. CO MMUNITY BA NKER S TA KE ACT IO N Businesses are in need of working capital to stay in business Meanwhile, community bankers from New Jersey to and the U.S. Treasury will pass on money to the businesses Maine are looking for ways to be a lifeline to their business that need it.” communities. In Warsaw, N.Y., Five Star Bank announced measures to SP EED I S C R I T I CA L mitigate the impact of the COVID-19 virus on its customers, One industry expert, though, wonders if the SBA is up associates and communities. For consumer customers, to the task of quickly delivering aid. It’s due to the lengthy through April 30, 2020, the Bank will be waiving early CD process behind the loans and the agency’s infrastructure. penalty fees for withdrawals up to $20,000 (limited to one “Normally, SBA loans can take months to process and get penalty-free withdrawal per CD account); eliminating all cash to small business borrowers,” said Rohit Arora, CEO insufficient funds and returned item fees; eliminating all Pay of Biz2Credit, an online small business lending platform. by Phone fees; waiving all late fees; offering the opportunity “The SBA is doing all it can, but the online Disaster Loan for monthly mortgage, home equity loan or home equity line application form is 15 pages and then you have to attach payment relief; offering the opportunity to defer unsecured up to 20 documents. It will take hours to fill out the form consumer loans or lines of credit and secured consumer loans completely. Small business owners need cash quickly, and and lines of credit payments; and offering unsecured personal there is no guarantee of how long it will take for business loans up to $5,000, up to 60 months at 2.95% APR subject to owners to get this disaster funding. credit approval (additional terms and conditions may apply). Banking New York | Issue Two 2020 | 17
Some of the other banks that have offered small businesses help with loans during the coronavirus are Bank of America, which offers assistance to small business clients, including forbearance with certain fees and Citi, which agreed earlier in March to waive monthly service fees for retail banking customers for at least 30 days. The Greenfield Co-operative Bank in Northampton, Mass., was one of the first to step up, launching a “payment holiday” for loan holders to defer monthly payments in April and May for 60 days. Michael Tucker, Greenfield’s president and CEO, said, “The payments usually due for April and May would be added to the back end of the loan term. Customers would not have to make those payments until the end of the loan term.” The Adams Community Bank in Massachusetts has set aside a pool of money to offer small business grants to help businesses that do not have the ability to pay. SBA R E L A X E S PO L I CI E S The SBA has relaxed its loan policies during the coronavirus. SBA disaster assistance loans are typically only available to small businesses with counties identified as disaster areas by a governor. Under the revised criteria, they will be available statewide following an economic injury declaration. Working from a directive by the Trump administration to equip the SBA with $50 billion to provide low interest loans to small businesses impacted by the coronavirus, the agency has developed a plan to offer loans of up to $2 million to small businesses. The loans can be used to pay for working capital needs, such as payroll, accounts payable and fixed-payment debts such as bank loans. The details of each loan will be determined on a case-by-case basis. Connecticut was one of the first three states along with Maine and Rhode Island to make available Economic Injury Disaster Loans to state-headquartered companies that have been adversely impacted by the coronavirus. Companies can take up to 30 years to repay the loans at 3.75 percent interest. Loans under $25,000 are unsecured and above $25,000 are secured with business assets. 18 | Banking New York | Issue Two 2020
STAT ES ST EP P ING UP In New York, John Witkowski, president and CEO of the Independent Bankers Association of New York State, said, “Now it’s early. People are feeling the impact and businesses know what will happen. We’re getting set up to help small businesses that are impacted but they’re not at the point of taking out loans. There are a zillion things going on and the credit piece is the next ball to drop.” He said New York banks will begin handling business loan requests within a week or two. Pennsylvania banks are also assisting small business borrowers during the coronavirus. Kevin Shivers, president and CEO of Pennsylvania Community Banks, which represents 75 member banks, about half of the community banks in the Keystone state. He said member banks are waiving certain fees, modifying repayment plans, due dates or lengthening lines of credit to ease the pain of temporary layoffs for small business borrowers. Shivers said the organization is coordinating conference calls with member banks to assist them in resolving lending and other issues during the coronavirus pandemic. Last week, Massachusetts Gov. Charlie Baker announced a $10 million recovery loan fund that will provide emergency capital of up to $75,000 for small businesses impacted by the coronavirus. “Loans are available immediately with no payments due for the first six months,” he said. Credit unions are similarly assisting small business borrowers. Mike Wishnow, senior vice president of marketing for the CrossState Credit Union Association, which represents 520 institutions in Pennsylvania and New Jersey, noted, “Many credit unions do business lending and are working with borrowers and allowing them to skip payments and extending loan terms. Financial institutions are working with members and won’t criticize them for taking measures to help borrowers, which gives credit unions confidence they can get through this limited time phenomenon.” Wishnow also said most small businesses borrow money on a smaller scale, of about $120,000. “They are not multi-milliondollar borrowers and have reasonable credit needs.” ■
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TRY TO KEEP UP LOCAL PROFESSIONALS MAKING THEIR MARK IN NEW YORK BANKING
Fisher Named ICBA Chairman-Elect
Robert M. Fisher, president and CEO of Tioga State Bank in Spencer, N.Y., has been named chairman-elect of the Independent Community Bankers of America. His term began at this week’s ICBA convention in Orlando, Florida. Fisher serves in many leadership roles at ICBA. He is a member of the ICBA executive committee and board of directors and is chairman of the federal delegate board. He serves on the nominating committee and policy development committee, which he previously chaired. A fifth-generation community banker, Fisher served on the New York State Banking Board from 2007 to 2011. He also is a current member and past chairman of the Independent Bankers Association of New York State.
KeyBank Names Goyer Corporate Responsibility Officer
KeyBank announced Amanda Goyer has been named corporate responsibility officer for the Capital Region Market. She is responsible for the implementation of KeyBank’s Community Benefits Plan, specifically in the areas of mortgage lending, small business lending, community development lending and strategic philanthropy. She is based in KeyBank’s Capital Region headquarters office at
66 South Pearl Street in Albany. “Amanda is a strategic relationship builder who fosters partnerships that innovate and inspire excellence within the community,” said Ruth Mahoney, president, Capital Region, KeyBank. “She is respected and experienced, and we look forward to her helping KeyBank deliver on our commitment to help Capital Region communities thrive.” Since 2017, KeyBank has invested $7.1 billion to low- to moderateincome individuals and communities through its Community Benefits Plan. In the Capital Region, KeyBank has invested nearly $357 million. Previously, Goyer served as director, Community Engagement, for CAP COM Federal Credit Union. She also worked as community relations manager and foundation and public relations administrator for CAP COM. Goyer earned her bachelor’s degree in Stonehill College in Easton, Mass. Goyer is active in various community organizations. She is chair of the Capital Region Chamber Women’s Business Council, champion member of Northern Rivers Behavioral Health Center Campaign and committee member of Women’s Employment Resource Center (WERC) Workforce Development Committee.
Wait Named Adirondack Trust President
Charles V. Wait, The Adirondack Trust Company’s chairman of the board, announced a senior leadership appointment and an officer promotion within the bank’s management team. Charles V. Wait Jr. has become the organization’s new President and CEO, an appointment that was approved by the board. Charles Wait, Jr. succeeds Stephan R. von Schenk, who acted
as the Adirondack Trust Company President since 2014 and CEO since 2017. “Steve has gone above and beyond during his tenure as president and CEO,” said Charles V. Wait. “He has done much to transform the organization—both inside and out— with his steady leadership, and I thank him for his many years of service at the Adirondack Trust Company.” Another management promotion for the bank includes Brian Charbonneau, who has been promoted to vice president—deposit operations officer, for the bank’s deposit operation department. As chairman of the Board, Charles Wait will continue to focus on the long-term growth strategy for the bank. Charles Wait, Jr., who has served as executive vice president since 2014, will assume responsibilities for dayto-day management and will lead the overall operations of the Adirondack Trust Company. Charles Wait, Jr. is a graduate of Cornell University and the Stonier Graduate School of Banking. He also graduated magna cum laude from the New York University School of Law. He practiced law with Jones Day in New York City before joining Adirondack Trust in 2009 as vice president of legal and regulatory affairs. Active in his local community, Charles Wait, Jr. serves as a member of the board of directors of the Saratoga County Chamber of Commerce. He is also a member of the board of directors of the Saratoga Performing Arts Center (SPAC).
Paulson Named Chief Banking Officer at Bank Leumi
Bank Leumi USA announced the appointment of David Paulson as Chief Banking New York | Issue Two 2020 | 19
Banking Officer. Paulson will report directly to Avner Mendelson, Leumi president and CEO. He replaces Shawn McGowen, who will remain with Leumi in an advisory role. Paulson will be responsible for overseeing the U.S. commercial and U.S. private banking businesses at Leumi, where he will focus on the bank’s growth strategy and the overall client experience. He has more than three decades of industry experience as a corporate and commercial banker and was most recently executive vice president, head of wholesale banking at United Bank, where he led the bank’s commercial banking, commercial real estate, business banking and cash management lines of business, with a focus on identifying expansion opportunities, new product and technology solutions, and recruiting initiatives Prior to United Bank, Paulson was employed with Santander Bank N.A., serving as managing director and commercial banking executive vice president. Paulson earned his MBA from Cornell University and received a BA in Political Science and International Economics from the University of Connecticut.
Camacho Joins KeyBank As Work Relationship Manager
KeyBank announces that Sarah Camacho has joined the bank as Key@ Work Relationship Manager. In this role, she will help business banking and middle market clients in Rockland (NY), Westchester (NY) and Fairfield (CT) counties guide their employees toward achieving financial wellness through the Key@Work program. Key@Work is a comprehensive, no-cost employee financial wellness program that provides workplace-based educational sessions, one-on-one financial counseling, and discounted banking services customized to employees’ needs. Camacho joins KeyBank from Wells Fargo Bank where she spent 10 years in a similar role in the Wells Fargo 20 | Banking New York | Issue Two 2020
At Work program. She began her career in sales and management in the shipping industry with FedEx and UPS.
Hanover Community Bank Promotes Rouse To Executive Vice President
Hanover Community Bank, based in Mineola, N.Y., announced the promotion of Alice T. Rouse to executive vice president. Rouse will continue to maintain her role as Chief Risk Officer. Rouse joined Hanover Community Bank in 2017 and served in the role of senior vice president & chief risk officer. She has over 25 years of banking experience and oversees all enterprise risk management functions. Prior to joining Hanover, Rouse served in many financial and audit capacities at Astoria Bank for 24 years and was an integral part of Astoria Bank’s IPO and three acquisitions. Prior to joining Astoria Bank, Rouse was an audit manager in the financial services group of the public accounting firm of KPMG LLP, specializing in financial institutions. Rouse earned a Bachelor of Business Administration degree in Accounting from the University of Massachusetts at Amherst and is a Certified Public Accountant in New York State.
Daley Joins SB One Bank
SB One Bank announced that Paul J. Daley has joined the bank as senior vice president, new york metro team leader based in Astoria. Daley brings with him more than 30 years of experience in the areas of commercial real estate, commercial lending and residential mortgage. He will primarily be responsible for managing and developing the commercial business opportunities in the New York Metro marketplace. “Paul will be an excellent ambassador for the New York market which is a market of significant growth for the bank,” said Anthony DeSenzo, executive vice president and head of commercial lending, SB One Bank. “We are excited to have him on our team, and we are confident his range of experience and relationships in the region will be tremendous assets.” He joins SB One Bank from The
First National Bank of Long Island and prior to that held positions at National Westminster Bank and North Fork Bank. Daley is a graduate of St. John’s University and the Stonier Graduate School of Banking at Georgetown University. He also holds a Master of Business Administration from Adelphi University.
BankOnBuffalo Names Bellamy Board Member
BankOnBuffalo has appointed Herbert L. Bellamy, Jr., CEO of Bellamy Enterprises and Buffalo’s Black Achievers Inc., to its board of advisors. The local board provides leadership and guidance as BankOnBuffalo continues to expand in the Buffalo Niagara market by serving the financial needs of the region’s small to middle market businesses, commercial real estate and consumer banking customers.
Cologero Hired At Wilmington Trust Mary Ellen Cologero has been hired at Wilmington Trust as vice president, senior wealth advisor in the New York Region. Cologero has over 30 years’ experience providing comprehensive wealth management advice to highnet-worth individuals, foundations and endowments throughout the Hudson Valley, Albany and New York region. Her areas of expertise include wealth and investment management, asset preservation, multigenerational wealth transfer, business succession planning and retirement income planning. Prior to joining Wilmington Trust, she served as New York regional leader and senior wealth portfolio manager with Berkshire Bank Wealth Management. Previously, she served as marker leader & SVP senior portfolio manager Key Private Bank. She has a certificate from Wharton School of Business as an investment management analyst and certificate in financial planning from the College of Financial Planning. ■
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B Y MATT HO L ME S, S P E C I AL TO B A N K I N G N E W YOR K
A Loan Officer’s Guide To Millennial Homebuyers
ocial. Entitled. Tech-savvy. Creative. However, you might choose to describe them, there’s no doubt millennials are playing a more critical role in the housing market than ever. And for community banks and credit unions, understanding them can be the difference between winning their business and losing it to fintech challengers. Millennials account for more than a quarter of the U.S. population - that’s roughly 85 million people. It’s the portion of the population with the most first-time homebuyers, so it’s a segment you can’t afford to pass up in the lending market. To help you better understand this unique generation, we’ve put together some information about millennials, as well as some strategies you can use to capture a greater share of the millennial market. Of course, understanding millennials is a whole lot easier said than done. Before we jump in and discuss them, we need to clarify who we’re talking about. Who Qualifies as a Millennial? So, who are we referring to when we use the term? It’s important to understand the age demographic that defines millennials - that is, anyone born between 1981 and 1996. Although the term millennial has stuck, they’ve been known to go by other names. This includes ‘Gen Y’, the ‘Echo Boomers’ (often the children of baby boomers), and the ‘Peter Pan Generation’- the third was coined in recognition of their tendency to prolong rites of passage into adulthood.
Millennials are Diverse. The ethnic and racial buildup of today’s homebuyers is far more diverse than previous generations. According to a Zillow study, 77 percent of all American homeowners are white. However, when the focus is shifted to millennials in particular, only 66 percent of homebuyers are white, 17 percent are Hispanic, 10 percent are black, and 7 percent are Asian/Pacific-Islander. They haven’t been around for long, and it shows. With rates at only a fraction of historic levels, boomers and Gen Xers might suggest that it’s a great time to buy. Trying to convince a millennial of this may be tricky though, since low rates are all they’ve ever known, and are more likely to be swayed by subtle fluctuations. Half of millennials said they would look for a cheaper house if rates increased a point or more, and 5% say they would give up looking altogether. Millennial Homeownership is Plummeting Although these aren’t the words we want to hear, there’s no doubt millennials are becoming less interested in owning a home. In fact, the homeownership rate among adults under 30 has fallen almost 10 points in the past decade. During this time, the population has increased by roughly 5 million, while households in this age group have only increased a mere 200,000. If young homebuyers were forming new households at the rates we saw back in 2005, that would equate to 1.7 million new households. So, what’s holding millennials back?
The ethnic and racial buildup of today’s homebuyers is far more diverse than previous generations.
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Student Loan Debt: Of course, millennials are often saddled with student loan debt, and this setback is plaguing young homebuyers more than ever before. Last year, more than 50 percent of homebuyers under 36 said that student debt delayed their home purchases. A 2019 Bankrate down payment survey noted that nearly a quarter of millennials listed college loans as a barrier to their first home purchase. Marrying Later: Only 21 percent of millennials are married by the age of 28, which is staggeringly low in comparison to previous generations. In fact, this percentage is roughly half that of their boomer predecessors (42%). This phenomenon, along with older first-time moms (averaging age 26), is impacting the buying landscape for millennials. Overestimating Down-Payment Costs: 86% of millennials believe they would need to put at least a 10% down payment on their first home. But the reality is that many private insurers will offer loans to applicants with as little as a 620 credit score at only 3% down. [Editor’s note: that could change in the wake of the coronavirus.] So, the perception of what it takes to become a homeowner is far greater than the reality for millennials. Don’t lose hope. Here’s how to win them over. So how can your lending team capture a market segment that seems to be dismissing homeownership altogether? Here are a few weapons you’ll need to have in your arsenal if you want to capture and retain millennial clientele. Create Positive Buzz For high-involvement purchases like homes, millennials seek confirmation from as many sources as possible: whether through social media, websites, or word of mouth. Almost three-quarters of millennials report reading someone else’s opinion before purchasing. Ask for your client’s permission for a video review of their homebuying experience in front of their new house. A genuine testimonial can go a long way. Don’t hesitate to encourage your millennial buyers to publish content to their social platforms, and even suggest a post-closing selfie with them. Social sharing can create a positive impression among their peers, who are also likely to be millennials. Be Authentic Millennials are known for their ability to smell a phony sales pitch from a mile away. Your brand has to be believable, consistent and honest. On top of this, they prefer doing business with lenders who are ethical and give back to the community. Research shows that millennials aren’t as self-absorbed as they’re stereotyped to be. Over four-out22 | Banking New York | Issue Two 2020
of-five millennials expect companies to publicly pledge to be good corporate citizens. Diversify for Success One of the biggest challenges facing loan originators is appealing to the modern loan applicant. Remember, demographics are shifting, and it’s important to mirror the market so that your clients feel as comfortable as possible. Hire multilingual professionals, especially Spanish speaking ones. According to Housingwire, Hispanics accounted for nearly 40 percent of household formations since 2008, making it the largest increase of any demographic. Educate Them As we stressed before, millennials tend to have a distorted perception of the requirements for homeownership. Educate them about the reality of actual down payment costs. Again, many don’t realize they can own a home with just 3-5% down. Almost 60% of millennials say they have no one to turn to for financial guidance. Be the guide they need. Stress to them the benefits of homeownership, and the different approaches they can take to get there. But most importantly, put them in the driver’s seat. To get through to this demographic, you need to position yourself as an educator, without coming off as bossy. Remember, the last thing millennials want is to be ordered around. Don’t Lose Sight of the Human Element At the end of the day, millennials share a lot in common with the rest of us (albeit they’re younger and perhaps better looking). Remember, this generation has grown up in the households of boomers and Gen Xers and shares more characteristics with them than you might think. Yes, millennials love their technology, but that doesn’t mean you should lose sight of the human element we’ve always known. Although more millennials will start their mortgage journey online, they still prefer the same personal, face-to-face interactions when making these life-changing decisions- just as their elders did. There’s no amount of technological innovation that can replace your lending expertise, and this is the ‘wow factor’ that will continue to delight your millennial clients and prospects. ■ Matt Homes is a marketing specialist for the lending division at Data Facts, which offers a suite of lead generation solutions at datafacts.com.
FACEBOOK FIRST CHOICE for SOCIAL MEDIA In conjunction with our sister publications Banking Mid Atlantic and Banking New England, we conducted a poll of our readers to see what the best social media is for business to consumer communication. The choices were:
c c c c
21%
21%
13% TIK TOK
Facebook Twitter Instagram TikTok
The top choice among bankers and credit union employees at 45% is Facebook. Hail, hail, Mark Zuckerberg. There was a tie for second and third. Twitter and Instagram were considered best by 21%. Frankly, we were a little surprised that 13% of you believe Tik Tok is a good medium. We agree with you but less than 1 in 8 of those in the industry appear to believe in dance as an effective communications tool. â–
45% FACEBOOK!
Have an issue you would like to see addressed in a survey? Or want to subscribe to the Banking New York eNewsletter, contact us at editorial@ambizmedia.com.
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INNOVATIVE CONCEPTS
® Experience Experience the the diff diff eren eren ce ce ®
PROVEN RESULTS