Banking New York Issue 3 2020

THE EMPIRE STATE MAGAZINE FOR FINANCIAL EXECUTIVES & PROFESSIONALS • ISSUE THREE 2020

REACHING THE TOP

Prestigious Banking Choice Awards Announced

Best Banks In New York

A PUBLICATION OF AMERICAN BUSINESS MEDIA

CSI KNOWS EXPERIENCE COUNTS. In its recent core vendor report, Aite Group recognized CSI’s NuPoint® core platform for “providing the best user experience.”* Come meet the core that the industry—and our customers—can’t stop talking about. www.csiweb.com/experience * Source: Aite Group, “AIM Evaluation: The Leading Providers of U.S. Core Banking Systems”

CONTENTS

ISSUE THREE 2020

>> Follow us on Twitter at @BankingNYmag The resources you need.

The community you trust. bankingny.com STAFF

CEO, PUBLISHER & EDITOR Vincent M. Valvo

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GRAPHIC DESIGN MANAGER Stacy Murray INTERACTIVE DESIGN DIRECTOR Alison Valvo USER EXPERIENCE DESIGNER Billy Valvo ONLINE CONTENT DIRECTOR Navindra Persaud MARKETING & EVENT ASSOCIATE Melissa Pianin

ENGAGEMENT AND OUTREACH Andrew Berman

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 Cover photo credit: iStockphoto / a_Taiga

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

COVER STORY: A compendium of community banks that are the best in the state at what they do.

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IBANYS President's Update

Strong relationships helped IBANYS serve its members during the pandemic

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IBANYS Public Affairs Update

How IBANYS lobbied state officials to constraint the impact of forbearance regulations on statechartered banks

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IBANYS Member Profile

Bankers Healthcare Group prioritizes data for a better bank loan offering – and how that helps community banks

Photo credt: iStockphoto/ filadendron

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Analysts and Programmers need to learn each other’s jobs for your organization to advance

Understanding data will make your marketing much more effective

Education

Marketing

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Your core is becoming more attractive to these upstart companies

Learning machine learning’s nuances enhances customer service

Technology

Tech Trends

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On The Move

Keep up with all the personnel news happening across the Empire State!

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MANAGING EDITOR Keith Griffin

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ASSOCIATE PUBLISHER Beverly Bolnick

Tech Trends

Banking New York | Issue Three 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

A STATUS C HEC K :

Surviving The Change, Protecting Our Future – Together Faced With The Pandemic, Community Banks Showed Great Initiative

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he value of a trade association is in its commitment to its member banks and constituents. That’s true day-to-day, and manifests itself in our advocacy and government relations representation, communications, educational programs, meetings and conferences, products and services and all of the things we try to provide New York community banks.

But in times of crisis, we believe the value of a trade association increases exponentially – because that’s when our membership needs us to be the most proactive and innovative. The coronavirus pandemic and the enormous impact it has had on our industry illustrated the importance of having a community bank trade association working for and representing your interests.

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Photo credt: Getty Images / nensuria

During these times of disruption, community banks needed to focus on their day-to-day business operations, taking care of their customers and employees, and simultaneously immersing themselves in the huge new challenge of the Paycheck Protection Program (PPP) to help save local small businesses and jobs in their communities.

We’ve all had to change our business process because of COVID-19, and all too often dealing with those changes felt like we were drinking water from a firehose. Banks, small businesses, federal and state governments, regulatory agencies, and trade associations alike had to turn on a dime to meet the needs of their constituent communities and the economy.

Yet, business disruption doesn’t mean that

IBANYS 2019-2020 BOARD OF DIRECTORS

community banks can dismiss the many critical outside influences on their business, such as: · Federal and state legislation · Regulatory actions business partnerships · Exploring new ideas/innovation · The need for ongoing professional education · The overall support our member banks receive from their trade association.

IBANYS’ relationships with legislative and regulatory officials and other state community bank associations like the Independent Community Bankers of America (ICBA) helped provide New York community banks with the support, answers, liaison and education they required during the pandemic.

At IBANYS, part of the change we faced meant finding new ways to effectively communicate with our banks on a daily basis: researching, compiling and disseminating important data and information from numerous sources across the board, culling it into relevant updates, and disseminating it to CEOs and senior management of New York’s community banks when they needed it most.

It also meant switching gears in midstream, converting our 2020 educational meetings to virtual or remote presentations using platforms such as Zoom, Webex … or, the old standard conference call.

Faced with the pandemic, we all had to adjust our operations and priorities – to perform in different ways under

unprecedented conditions and pressures – in order to protect and preserve our banks, customers, communities … and, our future.

We believe that together, we have met the test. Nevertheless, like the pandemic itself the challenge continues. There’s much to be done, and while in New York State things have certainly improved since the spring, no one can be certain what lies ahead.

We can promise that IBANYS will continue to have the backs of New York’s community banks. As always, thanks for all that you do!

Many New York community bankers have begun reopening their lobbies and branches with safeguards in place to keep their staff and clients safe and healthy as we adjust to the “new normal” … Others are taking a more guarded approach, maintaining the operational practices and policies established when the pandemic hit.

IBANYS will continue to gather and provide banks information on reopening strategies and updates from the regulatory agencies and other resources. ■

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) 436-4646.

In times of crisis, we believe the value of a trade association increases exponentially – because that’s when our membership needs us to be the most proactive and innovative.

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 Anthony Delmonte Bank of Akron, Akron, NY Ronald Denniston First National Bank of Dryden, Dryden, NY Director Emeritus 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

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PUB LIC A FFA IR S U PDAT E

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B Y STE P HE N W. R I C E

Photo credt: iStockphotos / Squinch

IBANYS Fights To Constrain Wide-Reaching Forbearance Legislation

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Also Working On Reforms To COVID-19 Relief Before Congress

he 2020 New York State legislative session has been perhaps the most unusual since the New York State Constitution was adopted by the Convention of Representatives in April 1777.

During late March and early April, as the COVID-19 pandemic was peaking in New York State, the Legislature met to enact the 2020-21 state budget – and it was a very different type of plan, with great uncertainty as to how the state would address an enormous deficit including significant new gaps caused by the pandemic.

Governor Andrew Cuomo

It gave unprecedented authority to Governor Andrew Cuomo and his budget director to make adjustments as additional information (or funding) became available – including whether federal assistance to state and local governments might be provided by Congress in any of the emergency relief and recovery packages.

Once the budget was approved, the legislature left

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Albany and did not reconvene until the closing days of May. Subsequent legislative business took place during infrequent sessions, for the most part conducted remotely.

When the legislature did reconvene, it enacted (and the governor subsequently signed) residential mortgage foreclosure legislation – and, eventually, a Chapter Amendment that modified the bill (now Chapters 112 and 126 of the Laws of 2020.)

The initiative is targeted only at state-chartered banks; federally chartered banks are not impacted. IBANYS issued a strong “Memo in Opposition” to the original legislation, and continued to work with the legislature, governor’s office and NYS Department of Financial Services (DFS), led

by Superintent Linda Lacewell, throughout the process that eventually resulted in the Chapter Amendment. · Mortgages currently receiving forbearance under Linda Lacewell the Governor’s Executive Order 202.9, at the time of such forbearance, shall be considered as part of the requirement to provide forbearance under the new statute. · At the end of the 180 days of forbearance provided, the borrower has an option to extend the forbearance for a second 180-day period if still in financial distress, as provided in the Chapter Amendment.

While IBANYS opposed the original initiative, the Chapter Amendment is an improvement over the original legislation. If a bank determines that it unable to offer a mortgagor relief based on concerns regarding sufficient capital and liquidity, it must notify DFS within five business days of making the determination.

The bank must also notify the mortgagor, who may file a complaint with DFS. The Chapter Amendment clarified that forbearance applies to “monthly payments” due on the mortgage. It also prohibits the bank from charging additional interest or any late fees or penalties on the forborne payment.

IBANYS asked the DFS to develop a frequently asked questions (FAQ) document more fully explaining the ramifications of the new law, and it is expected to be finalized during the coming weeks.

There has also been discussion in the legislature about additional forbearance legislation related to commercial mortgages, and also investment properties.

The legislature also approved a statewide moratorium on evictions throughout the duration of the COVID-19 crisis, covering those who have been financially affected by the pandemic, although they will eventually have to pay the rent. The bill, which Governor Cuomo signed into law, covers rent that has been due or accrued since March 7 until the date on which business restrictions and non-essential gathering bans have ended, or phase 4 of the reopening. Tenants would still be obligated to pay the rent they owe, but it would not affect their ability to remain in their home. Some housing advocates

have pushed unsuccessfully for legislation to cancel rent without back payments accruing.

IBANYS WILL CLOSELY MONITOR FUTURE DEVELOPMENTS

As Congress prepares to debate additional relief and recovery packages, issues including additional help for to small businesses and financial assistance to state and local governments will be among the key components under consideration. IBANYS supports efforts by the Independent Community Bankers of America (ICBA) urging Congress to include a number of important reforms in the next COVID-19 relief bill. These include a more straightforward approach to PPP loan forgiveness as well as capital, accounting, and tax relief.

With the 2020 election drawing closer, the number of working days for Congress is dwindling. Congress will be out on its annual August recess, then will return for what will likely be an abbreviated fall session. IBANYS will continue to work closely with ICBA and will keep the members of our New York Congressional Delegation informed about the priorities of the New York community banking industry. ■

STEPHEN W. RICE

Stephen W. Rice is Director of Government Relations & Communications for the Independent Bankers Association of New York State.

Tenants will still be obligated to pay the rent they owe, but it would not affect their ability to remain in their home.

Photo credt: iStockphotos / BartekSzewczyk

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ME MBE R P R O FIL E

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B Y CHRI S PA NE B I A N CO, S P E C I AL TO B A N K I N G N E W YOR K

FinQuant, Not Fintech

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Why Bankers Healthcare Group Prioritizes Data For a Better Bank Loan Offering

n the three months since the COVID-19 outbreak erupted in the United States, the lending market has seen a significant amount of disruption. At a time when banks would have been focused on loan volume and building their income streams, many shifted their attention to the Paycheck Protection Program (PPP) to support local business owners.

Paired with the recent news that mortgage rates have reached a record low, many banks are considering new ways to build and diversify their loan portfolio.

Historically, community banks would consider alternative lenders or Fintechs competition, but now they’re looking at these partnerships as a way to strengthen their bottom line.

While partnering with nontraditional lenders has its benefits, it’s important to note that not all lenders who claim the “fintech” title have the same impact financially. These companies can originate loans with ease, but their true differentiator—and the return on investment for your bank—is in their historical data.

LOANS BACKED BY DATA AND INSIGHTS

One well-established alternative lender, Bankers Healthcare Group (BHG), sets itself apart from fintechs by carving its own niche as a financial quantitative service company, or FinQuant for short. The company has been originating loans for community banks for nearly two decades, targeting licensed healthcare practitioners and highly-skilled professionals—some of the highest-earning borrowers with top-tier credit scores in the country.

BHG also built proprietary quantitative analysis models that leverage 19 years’ worth of its own historical borrower data, to uncover variables that dictate the risk associated with each borrower. Utilizing some of the brightest minds in analytics from top universities and companies, as well as 30 data vendors, BHG has gained unmatched insight into its borrower characteristics and performance by industry and can quickly determine the performance potential and the price risk.

Not only does this data help inform future decisionmaking into who BHG lends to, it’s also leveraged

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by BHG’s full-service, in-house marketing agency to execute highly targeted campaigns to millions of professionals every day. Even within these industries, BHG is extremely selective: the company targets the top 20% of the strongest credit quality healthcare and other highly skilled professionals. This attention to detail originating on the front-side of their business gives BHG an unbelievable advantage to ensure they’re only lending to top-rated borrowers, which has resulted in over $6 billion in financial solutions to date.

Now more than ever, community banks are in a unique position to diversify their commercial loan portfolio and strengthen their bottom line. By choosing an established partner like Bankers Healthcare Group and joining the BHG Bank Network, they have the peace of mind and can quickly put a growth plan into action.

FINQUANT-DRIVEN RESULTS

Today, BHG works with more than 15,000 of these coveted borrowers each month, with a record $429 million funded in Q1 of 2020. That trend continues into Q2, with phenomenal loan volume sold through the BHG Loan Hub, a state-of-the-art loan delivery platform for community banks.

This secure, online system allows for daily sale and delivery of medical and professional loans while helping BHG service the growing loan demand from community banks. The platform includes various methods whereby a single loan or portfolio of loans can be purchased. It has been a highly effective distribution channel where a bank can approve the loan program and purchase loans according to their underwriting standards the very next day. New loans are posted each day and, as with all BHG loans, a consistent, complete credit file is available for review prior to purchase.

Across the country, a network of more than 1,100 community banks get access to high-quality medical and professional loans—earning a solid 3 to 6.5% return—and over the course of 19 years, no bank has ever taken a loss on the BHG Core Loan portfolio.

Now more than ever, community banks are in a unique position to diversify their commercial loan portfolio and strengthen their bottom line.

CHARACTERISTICS OF A CREDIBLE ALTERNATIVE LENDER

BHG prioritizes data, analytics, technology, sales, marketing, underwriting, compliance, speed, and customer service to originate quality loans and as a result, has become a top source for medical and professional loans. For community banks considering a partnership with an alternative lender, BHG emulates the characteristics to look for: TRACK RECORD OF SUCCESS BHG has built a network of more than 1,100 community banks, providing access to the number one source for medical and professional loans, which has resulted in over $600 million in interest earned since 2001.

ENDLESS BORROWER DATA With over $25 billion in underwritten loans, BHG can better predict through quantitative analysis the performance of borrowers, providing a stronger return on your portfolio.

ORIGINATION EXPERTISE BHG has established a name for itself among top-rated borrowers through innovative and comprehensive marketing tactics, resulting in thousands of new loans originated each month.

STREAMLINED PROCESS BHG offers consistent loan packages so you can quickly analyze complete credit files and make informed purchasing decisions with ease.

INNOVATIVE TECHNOLOGY, CONCIERGE SERVICE With a lending process driven by the right mix of technology and customer service, BHG offers an experience no other alternative lender can compare to.

Interested in learning more? BHG believes in the power of great relationships and encourages you to ask your partner banks if they have joined the BHG Bank Network, and if so, how much interest income they earned on their BHG loan portfolio. BHG is also happy to connect you directly with any of their partners in your specific state. â– To learn more about BHG contact: Meghan Crawford, SVP of Bank Sales at 315-407-4253 or MCrawford@ em.bhgbanks.com. Visit: bhgloanhub.com/Crawford

CHRIS PANEBIANCO

Chris Panebianco is chief marketing officer at Bankers Healthcare Group. More information can be found at bhgloanhub.com.

Photo credt: Getty Images / Neustockimages

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E DUCATIO NDE D HE EK, NA AN K I NKG N E W YOR K TE CH N O LON GY| |P RE B YMA G ENA O RG YACI S DAYALAN, P E C I AL TO SBPAENCKI AL I N GTO N EBW YOR

BREAKING DOWN THE SILOS:

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Training Analysts to Code and Programmers to Analyze

n spite of the COVID-19 environment, artificial intelligence and machine learning are rapidly spreading through the financial services section.

With this in mind, it is important for financial institutions to prioritize training for their people, or they will be left behind.

The days when programming could be left to the engineers in the IT department are already gone. Some of the best software applications in finance were developed by people outside of IT. They had a problem, and technology was the tool they used to solve it.

Take the story of a stock analyst who decided to learn Python—a skill that is becoming a minimum requirement for people at all levels of finance. As he developed his programming skills, he eventually created an artificial intelligence platform used today to buy and sell fixed-income instruments. He had a problem, saw a solution and used technology as a bridge to get him from Point A to Point B. Basic Understanding Of Programming A basic understanding of programming is crucial for analysts to effectively use the tools they have been given, even if they never create an application of their own. Over the past several years, programming literacy has become an increasingly common core requirement sought by job recruiters in the financial industry. Workers

who do not have this core literacy will soon be outpaced by those who do.

Knowing how to create and run a basic query can save time and energy spent on manual research and prevent human errors that work their way into manual processes. Think of it like driving a car. Drivers don’t need to be mechanical engineers, but if they have a basic understanding of how the engine, the transmission and the safety systems work, they will be faster, safer and better drivers.

Even the technologically fearful can learn Python, a language so simple it is often taught in elementary schools as an introduction to coding. Reassure employees that artificial intelligence is not some soulless robot coming to take away the vital human element of investment and trading decisions. It is instead the most efficient assistant you can imagine, handling time consuming manual tasks in an instant and providing the research and data points analysts and traders need to do their job.

Machine Learning: The Analyst’s Best Friend In markets where data is moving quickly, machine learning platforms are an analyst’s best friend. Machine learning algorithms automatically adjust as the data changes, providing accurate predictions of market behavior and eliminating human foibles like loss aversion

A basic understanding of programming is crucial for analysts to effectively use the tools they have been given, even if they never create an application of their own.

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and confirmation bias while still giving humans the space to interpret and act on the data. While the vision for many platforms is for trades to be possible computer to computer, today most machine-assisted trades still require human review of the data and the software’s recommended course of action.

Programming can be used in asset management, risk management and trade management. It can automate routine research queries, finding data in seconds that manual research would take hours to put together.

Analysts who thought they were doing just fine using Microsoft Excel will be amazed at how much more robust and efficient their financial models can become and how much valuable time they will get back using a more advanced platform.

calculated. If the error causes the program to project too low, the manager might miss an opportunity to invest.

If the program projects too high a number, the manager might overinvest and incur an overdraft fee. A large investment could result in overdraft fees up to $40,000. If the programmer understands these potential impacts from the outset, they can carefully design the system to avoid them.

Technology-Driven Environments Programmers who understand how their systems are being used and what could happen if something goes wrong are better equipped to create the kind of robust platforms that can compete in markets increasingly driven by technology. From a worker development standpoint, these professionals are also likely to become loyal employees Cross-Training Bandwagon willing to work hard for a company Big firms including Citi, JP Morgan that gives them opportunities to and Goldman Sachs have already expand their skills and advance their jumped on the cross-training careers.

The days when bandwagon, creating internal Imagine if the software developers programming could training curricula to teach computer who created the anti-stall software programming to employees in in the Boeing 737 Max had better be left to the departments outside of IT. This understood what would happen kind of corporate investment is after their software prevented a stall. engineers in the IT important, both to make training The software worked by repeatedly available to workers who want forcing the nose of the plane down, department are to deepen their skills and to a common maneuver to get out of a already gone. demonstrate to the entire company stall. However, investigators said, the that cross training and technical system did not stop quickly enough literacy are corporate priorities. to allow human pilots to recover the In addition to teaching its aircraft’s flight pattern. This error traders how to code, Goldman Sachs launched an initiative has been partially blamed for two deadly plane crashes. several years ago to teach IT gurus how to trade. After all, This year promises to be one of great upheaval in a programmer who understands the needs and goals of a financial markets. The companies who come out ahead will company’s trading system is better positioned to see its undoubtedly be those with the most agile, efficient and weaknesses and innovate new solutions. cross trained work force. ■ When consumers look up their bank balance, sometimes they see a notice that the number “may not reflect the Premanand Dheenadayalan is a highly skilled professional latest balance.” This technical delay is inconvenient to working as an Assistant Vice President with a leading investment individuals. For portfolio managers, however, it could management firm. He has 13+ years’ experience in providing be disastrous. Imagine a technical error occurs while software engineering solutions in the financial services industry. For data projecting the cash balance of a portfolio is being more information, please contact premthecoder@gmail.com

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AWA RDS

Best Banks In New York

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OUR ANNUAL SURVEY SHOWS CONSUMERS' PICKS FOR TOP BANKS

nnually, the prestigious Banking Choice Awards are presented

by American Business Media, publishers of “Banking New York,” and Rivel Banking Benchmarks.

Vincent M. Valvo, president and CEO of American Business Media, said, “Customers can choose to bank wherever they want. The Banking Choice Awards determine which banks do it best.”

The Banking Choice Awards are based upon the results of the Rivel Banking Benchmarks, the largest and most comprehensive measure of banking customer experience in the world. The benchmarks are conducted independent of any financial institution biannually by Rivel (www.rivel. com), the marketing and investment community research firm and pioneer

in the online measurement and tracking of customer experience for banking institutions.

Bruce Paul, Rivel’s managing director, said, “The Rivel Banking Benchmarks, part of our CXLign division, help banks increase revenue by giving them a clear, objective view of what their customers really think of them. We eliminate the bias of internal bank surveys in which happy customers are five times more likely to respond than unhappy or ambivalent ones, thus creating skewed (and unrealistic) results. We put your ratings in context, showing the banks exactly how their scores compare to those of their competitors within their local trade area – not to an irrelevant basket of similar-sized banks from other parts of the country.”

The Rivel Banking Benchmarks were developed by Paul, one of the most

‘We eliminate the bias of internal bank surveys in which happy customers are five times more likely to respond than unhappy or ambivalent ones, thus creating skewed (and unrealistic) results.’

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respected experts in banking research who developed the CX tracking and brand research programs for seven of the top 15 North American banks.

The Benchmarks use the same bestin-class approach used to build the CX programs for the world’s largest banks, now provided to community banks at a small fraction of the cost.

“We strongly believe that customer loyalty is a bank’s primary asset. To improve that loyalty, you must measure and track it. The Benchmarks therefore enable banks to understand exactly what their customers and prospects think of them, their people, their channels, and their products so banks can make customer-centric decisions to grow their business,” added Paul.

In New York, 17,147 interviews were conducted for a total of 195,552 reviews with 580 institutions represented.

Survey respondents are part of a statistically representative sample of households and businesses in each state. The total respondent pool is representative by geography, gender, income, ethnicity, and age profile of the state, based upon the most

2020

recent government census. Given the large sample size, the results are also representative of household penetration and business penetration of each banking institution within each state.

The survey is double blind: respondents are not told the subject of the interview beforehand, and we do not know which banks they use before initiating the interview. This approach minimizes bias and provides the most objective results possible.

Bank of Greene County Saratoga National Bank and Trust Ballston Spa National Bank The National Bank of Coxsackie

THE CUSTOMER EXPERIENCE

Hudson Valley New York Walden Savings Bank Jeff Bank Wallkill Valley Federal Savings and Loan Association Sawyer Savings Bank Wayne Bank

Benchmarks ask respondents to evaluate up to 53 different metrics about each institution they use for banking services. These include the following metrics used for the Banking Choice Awards: overall quality, customer service, tools & technology.

The Prospect Brand Benchmarks ask respondents about their impressions of banks they do not yet use. These marketing and brand metrics include community contribution, measured in the Banking Choice Awards.

OVERALL QUALITY

Western New York Steuben Trust Company Bank of Holland Cattaraugus County Bank Alden State Bank Evans Bank Central New York The Delaware National Bank of Delhi Evans Bank Generations Bank Tioga State Bank Tompkins Bank of Castile Capital Region New York Glens Falls National Bank and Trust Company

Mohawk Valley-North Country New York Watertown Savings Bank The North Country Savings Bank Adirondack Bank Community Bank Glens Falls National Bank and Trust Company

New York City Investors Bank Alma Bank Maspeth Federal Savings and Loan Association Ridgewood Savings Bank New York Community Bank Long Island BNB Bank The First National Bank of Long Island Apple Bank New York Community Bank Ridgewood Savings Bank

COMMUNITY CONTRIBUTION Western New York Cattaraugus County Bank Bank of Cattaraugus Lake Shore Savings Bank Alden State Bank Evans Bank Central New York Wayne Bank Solvay Bank

The Delaware National Bank of Delhi Tompkins Trust Company The Canandaigua National Bank and Trust Company Capital Region New York Glens Falls National Bank and Trust Company Adirondack Trust Company Bank of Greene County Saratoga National Bank and Trust Ballston Spa National Bank Mohawk Valley-North Country New York Watertown Savings Bank Carthage Savings and Loan Association Adirondack Bank The North Country Savings Bank Citizens Bank of Cape Vincent Hudson Valley New York Rondout Savings Bank Jeff Bank Rhinebeck Bank Sawyer Savings Bank The Westchester Bank New York City Country Bank Spring Bank Citibank Carver Federal Savings Bank Maspeth Federal Savings and Loan Association Long Island The First National Bank of Long Island New York Community Bank American Community Bank BNB Bank Gold Coast Bank â–

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PORTFO LI O S

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B Y G E O RG E YACI K , S P E C I AL TO B A N K I N G N E W YOR K

Upstarts Covet Your Core THEY CLAIM SWITCHING IS DIFFICULT, BUT NOT IMPOSSIBLE

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or years, community banks have complained that their core banking technology is being held hostage by the oligopoly held by the Big Four providers – FIS, Fiserv, Jack Henry and Finastra – which they say have failed to update their platforms despite charging high fees and exorbitant contract breakup fees. Now a group of financial technology startups is trying to gain what small market share is left to them by the Big Four, which many in the industry say hold a market share of well over 90% between them.

This small group of upstarts includes St. Louisbased Neocova, which has raised about $3 million in capital from community banks, including The Provident Bank in Amesbury, Mass., and Finxact, which last year raised $30 million in funding from the American Bankers Association and a group of banks.

But the leader of this small pack of fintechs may be five-year-old NYMBUS, which according to president David Mitchell has helped 12 banks go live with its core banking solution over the past two years – 10 of

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Photo credt: Getty Images

them in 2019 – with another 15 scheduled for this year.

According to its website, “financial institutions are having a hard time meeting customer demand due to their dependency on legacy technology solutions that were built to serve a brick and mortar banking model.”

David Mitchell NYMBUS’s SmartCore “is a digital-first technology platform that enables financial institutions to offer a customercentric banking experience. The platform unifies all the required banking functions into one system, enabling an omnichannel customer experience with automation and simplification of back-end processes and workflows.”

“The core is one of the biggest problems that this industry has,” Mitchell says, echoing comments from many others in the community banking industry.

“If a banking customer needs support, it will take

six months and cost $50,000 to get it, because it’s all legacy code and it touches everything else – it’s not cordoned off. With the old cores, if you download a new feature or function, you have to touch everything to make it all talk to each other. Consumers want an Amazon and Google experience when they go to a bank website but these older technologies don’t allow that.”

Aaron Silva, president and CEO of Paladin fs in Austin, Texas, which helps community banks find technology providers, says the big legacy Aaron Silva core providers, as they are known, “have stopped innovating because they don’t have to.” He says they only spend about 4% to 6% of their free cash flow on innovation each year, with most of that money being used to buy fintechs that are innovating.

Mitchell – who was executive vice president and chief product officer at Open Solutions, which was acquired

by Fiserv in 2013, before joining NYMBUS in 2016 – says his company’s core banking offering “was originally built for media companies for digital marketing. Most of the legacy cores were built for banking, and then they tried to put CRM and artificial intelligence, all the buzzwords for marketing and automation, on top of their banking platform.

“NYMBUS was built for marketing first, and then we put all the banking workflows on top of it. It’s a big differentiator, because our secret sauce is our push marketing capabilities and our robotic automation.”

“In addition,” he says, “all the legacy cores were built with middleware, while all the new cores, especially ours, include the API layer, which solves a lot of problems. API, which stands for application programming interface, acts as a bridge between the existing core and new ancillary fintech apps, such as mobile and internet banking.

“You can do new releases much faster” as a result, Mitchell says.

“Typically, when the legacy cores upgrade, it inevitably breaks something, because their underlying technology is old. We don’t have to touch our core code. Having an API layer that allows for seamless and quick upgrades of features and functions is unique. If you want to offer CRM or bill pay or remote deposit capture, it’s all in a portfolio of apps that you can turn on or turn off.”

While many banks would gladly switch to a more nimble core provider with newer technology, they often are locked into long-term contracts that are expensive to get out of unless there is a material breach of contract terms, both Mitchell and Silva said.

“The problem the new core fintechs have is three-fold,” Silva said. “One, they don’t have the resources to convert banks to their systems as fast as banks would sign up. Two, they lack ‘takeaway’ capital to help the banks pay off the multi-million-dollar termination fees from the legacy providers. The fintechs don’t have that kind of money.

Third, the banks are risk-averse. They’re reluctant to sign up with the fintechs.

They don’t want to be first.”

NYMBUS, which was financed with $400 million of startup capital, is willing to help banks painlessly switch.

“If they have two years left on their contract, we will help them buy out their contract,” Mitchell says. “Instead of signing a five-year contract, we’ll sign a seven-year deal and give them the first two years for free, so they are paying their existing vendor but not using them. We can’t buy out every agreement, but we are happy to do it if we can, but they have to understand it’s going to be a long-term partnership.”

“We think there is such an opportunity to help community banks,” he adds. “It’s a perfect storm of bad legacy technology, a shrinking number of financial institutions, and the additional threat of non-traditional challenger banks popping up every day and gaining market share. Banks are having a hard time fighting for deposits and getting new customers because their technology is so outdated.” ■

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Banking New York | Issue Three 2020 | 15

O N TH E MOV E

NEW YORK

TRY TO KEEP UP LOCAL PROFESSIONALS MAKING THEIR MARK IN NEW YORK BANKING

Suffolk Federal Names Dean New President & CEO; First Woman To Hold Role

Suffolk Federal Credit Union in Medford named Michele Dean of Smithtown president and CEO. She is the first woman to serve in this position in Suffolk Federal’s 52-year history.

Dean will provide strategic leadership, tactical oversight, and comprehensive direction of day-to-day operations. She will succeed Ralph D. Spencer Jr., who is retiring this month and will work in partnership with Spencer to shift management responsibilities beginning June 15 for a transition of leadership.

Suffolk Federal said in the announcement that Dean has built a reputation as a “visionary executive leader with a history of successful operational and management results as well as sustained profitability.”

Prior to joining Suffolk Federal, she was the chief strategy officer for Jovia Financial where she was a key member of the strategic team responsible for operations, lending and corporate strategy. In addition, she has 19 previous years of experience with Long Island’s largest credit union, Bethpage Federal Credit Union as a senior vice president of lending and investments.

A longtime resident of Suffolk County, Dean attended SUNY Oswego where she earned her Bachelor of Science in Business Administration followed by an MBA in Corporate Finance from Dowling College.

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AmeriCU Names Ronald Belle New CEO

AmeriCU’s board of directors has selected Ronald Belle, chief experience officer, to succeed CEO Mark Pfisterer, who last year announced his plans to retire in 2020.

“Since joining the credit union in 2017, Ron has made an impact.

His focus on member and employee experience is relentless and has been transformative to our organization.

He has been instrumental in making AmeriCU a better place to work, a better place to bank, and a stronger credit union overall,” said John Stevenson, chairman of the Board of Directors.

Belle holds an Accredited Asset Management Specialist (AAMS) certification from the College of Financial Planning, has attended the Graduate School of Banking at the University of Wisconsin, and is an alum of both Syracuse University and Utica College.

Mast Named NY Market President For People’s United

People’s United Bank appointed John T. Mast as senior vice president, market president for New York. In this role, Mast will be responsible for the bank’s New York market, including Long Island, where People’s United has 68 branch locations, focused on commercial sales efforts, in addition to oversight of retail banking, wealth management and insurance capabilities market-wide.

Mast since 1986 focused exclusively on the New York and Long Island markets. He has more than 30 years of banking experience with JP Morgan Chase & Company, holding various positions of increasing responsibility.

Most recently, he held the position of market executive, middle market & specialized industries – Long Island/ Queens Region. He was responsible for managing the middle market business, including a team and an extensive portfolio of clients and prospects with sales between $20 million and $1 billion.

Quontic Appoints Lantz To Chief People Officer

Quontic, the adaptive digital bank based in Manhattan, added Mike Lantz, as chief people officer, a newly created position to further accelerate Quontic’s reputation as a destination employer. Lantz is charged with fostering a culture where people can grow and develop professionally and be part of the team that sets the pace for innovation in banking.

As a 25-year veteran developing talent, he spent nearly eight years as the chief learning officer for Defenders, where he led various teams including recruiting, training, compensation/ benefits, and more. Lantz most recently served as the CEO and founder

of Indianapolis-based ML Talent Strategies. In 2016, his efforts earned a spot as the 17th top training company in the world by Training Magazine.

Hoffman New Head Of Treasury Management At BankUnited

BankUnited announced it hired Adam Hoffman of Woodcliff Lake, N.J. as executive vice president and head of treasury management, based in Melville, New York. In this role, Hoffman will oversee the company’s treasury management product, sales, and service strategy as well as its commercial card business.

Hoffman brings more than 20 years of experience in product development, product management and innovation, which he honed during his time at JPMorgan Chase, Citibank and Capital One. Most recently, he served as senior

vice president and head of product management for OSG Billing Services in Ridgefield Park, N.J., with companywide responsibility for digital strategy and product management. Prior to that, he served as senior vice president and senior product director for treasury management at Capital One in New York City.

Metropolitan Commercial Promotes Kaufman To Head Of Commercial Lending

Metropolitan Commercial Bank in Manhattan announced the promotion of Luke J. Kaufman as head of commercial lending. He will report to Scott Lublin, executive vice president and chief lending officer and will be responsible for the overall operations

of its commercial lending division.

Kaufman has more than 19 years of lending and banking experience across a range of major New York Metro financial institutions. Prior to joining MCB in 2015, he was a senior vice president at Astoria Bank. He managed the NYC Business Banking group, which was responsible for producing $200 million in committed facilities, in excess of $100 million in deposit balances and maintained a blended portfolio of 70% C&I business and 30% commercial real estate.

“Luke brings to Metropolitan Commercial Bank almost two decades of experience in banking and commercial lending. His broad experience, including five years with our Commercial Lending group, makes him the right choice to lead our Commercial Lending team,” said Mark DeFazio, president and CEO. ■

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B Y RI CK HA L L , S P E C IA L TO B A N K I N G N E W YOR K

Calling All Data-Driven Markets — Banking Needs You

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TAKE ACTION NOW TO BUILD SKILLS AROUND UNDERSTANDING DATA

alk to any banker these days, and the topic of customer acquisition challenges is bound to come up. Growing and differentiating is more difficult than ever — especially with the current rate environment for deposits. Thinking strategically about this conundrum is tedious but crucial.

Data-driven marketing is arguably one of the most critical functions banks need to be leveraging when it comes to new customer acquisition. According to the Boston Consultiong Group, a majority of new bank customers said that a datadriven personalized approach was a major factor in their decision to move to that bank.

In the past, banks could get away with using baseline demographic attributes for targeting prospects and relatively simple product analysis for cross-selling programs to existing customers. These demographics have also been used to measure the efficacy of those programs. But those days have passed, and bankers can no longer ignore the reality of the gig economy.

In today’s digital-first world, bank marketers need to use real-time tools to better understand detailed behaviors to form their acquisition strategies. In recent studies, many digital consumers view banks as simply a place to park money.

Therefore, the concept of straightforward segmentation — used for years by bankers — has evolved. It has moved from a lifestyle grouping model that includes age, income, and homeownership to a behavioral grouping model that looks at elements such as online subscriptions, affinity

$

affiliations, charitable interests, and virtual payment appetites.

So, is this a “close up shop” moment? Not yet, but it is a serious threat to the future of many institutions.

However, if you take a step back to understand what’s happening in financial culture, you would admit most of the future is out of your control. It’s time to figure out how you are going to catch the right part of the wave that banks can still own: data.

Big data was a buzzword years ago that got a lot of attention, but it only went away in the headlines. No one has solved the underlying issues. Many have just viewed the problem as too big or complex, and they pass it to another part of the organization or rely on a partner to figure it out.

But as marketers, we should know more about customers, markets, and prospects than anyone else in the bank. And that knowledge can drive growth because we have access to behavioral data. When data is structured properly — cleaned, normalized, and analyzed — it gives modern bank marketers more insights than ever.

How to Use Data

Getting data in shape can be done. You just need to know what steps to take to harness it so you can gain the insights buried within.

1. Identify data sources and make fixes as needed.

First, bank marketers need to figure out which data sources they need to analyze, identify the gaps in those

"It’s time to figure out how you are going to catch the right part of the wave that banks can still own: data."

18 | Banking New York | Issue Three 2020

Photo credt: Getty Images

data sources, and determine how to fill them. This is a key area where marketing and technology leaders need to build a working relationship. Marketing data progress cannot succeed without support from the technology side, which is charged with maintaining controls and mitigating fraud and risk.

Many companies are beginning to understand they are partners in bringing value to their organizations. They bring together data for a clearer vision of customers, which leads to more personal relationships and a better understanding of what customers will need.

2. Get help building data strategy.

Finding partners and tools will help you build your data strategy and gain buy-in from other parts of the institution.

This is often where data initiatives get derailed. Once one line of business, such as commercial lending, hears about what you’re trying to do, that group then has a full suite of needs, requirements, and restrictions for what you can do with “its data.”

3. Figure out the quality of your data.

In reality, most core data is flawed because, over decades, processes have allowed manual data entry that no one has cleaned up. Many banks just decided to deploy data standards once the technology for platform automation was available and then archive old signature cards and other records in storage.

4. Develop a data culture.

Help your organization develop a data culture and ensure the work done is scalable, iterative, and flexible. The first step is to define the customer segments you want to target. Then, determine their needs and what it will take to successfully address those markets. You need to understand the data that underlines the segment and why you’re focusing on it.

Bank marketers should take action now to build skills around understanding data, how it works, who you can partner with, and how it can be used for your initiatives in 2020 and beyond. This is not a trend that will reverse itself. As the consumer market decides how it wants to do business with you, banks will be better positioned to create real value.

We need to take this opportunity to reposition marketing in financial institutions as the center of fact-based initiatives that demonstrate what your customers want. Building strong banking relationships with customers means that you will still be serving them five to 10 years from now. ■

Rick Hall

Rick Hall is the managing director of the Banking and Financial Services practice at BKM Marketing.

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Banking New York | Issue Three 2020 | 19

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B Y A NK U R G A RG , S P E C I AL TO B A N K I N G N E W YOR K

Machine Learning Technology Stack for Banks

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WILLINGNESS TO APPRECIATE NUANCES WILL SERVE CUSTOMERS BEST

mplementation of machine learning (ML) is often misunderstood. Yet, knowledge of a ML stack—the collection of technological tools and processes that facilitate the generation of data-derived insights—is vital. There are four key components of the ML stack: 1) Sourcing data; 2) Establishing a trusted zone or “single source of truth” (SSOT); 3) Establishing modeling environments; and 4) Provisioning model outputs or insights to downstream applications.

“By understanding ML technology stack implementation, banks can leverage the benefits of data and generate programming that could transform their businesses, with early adopters more likely to see sustained success,” according to Raymond Chase, vice president for data analytics with Connecticut-based People’s United Bank. With experience in the industry spanning more than 30 years, Chase says he has seen many projects fail despite best intentions when the ML stack is not addressed.

SOURCING DATA

Data sourcing includes surveying accessible data types that are fed as inputs to the algorithm, as well as the processes and technologies needed to tap into sources. Examples of sources include core transactions, customer-provided information, the Internet, external databases, market research data, social media, and website traffic. Once sourced, data must be curated through an SSOT, a structuring of the data in a consistent place, and data lineage is established to ensure quality and trace impact downstream. Curated data from an SSOT can then be sourced by a modeling environment that is created to implement ML algorithms.

THE TRUSTED ZONE

It is important to prove data validity and quality throughout the chain of handling. Data must be aggregated, reconciled, and validated before being consumed for ML purposes. Key attributes of a trusted zone include: · A central repository of data, aggregated from multiple channels. · Clearly defined and documented data elements and data lineage. · Documentation of assumptions. For example, if a teller’s cash transaction is reported by the core system and reported by the teller transaction system, documentation must show which entry prevails and why it prevails.

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· Protocol for addressing unintended exceptions.

For example, if there’s a localized glitch at the branch level for an ATM that is not able to report transactions on a certain date, there should be a way to account for missing transactions and to capture them when they’re available. · Daily reporting that matches and reconciles counts across systems. · Architecture that expands vertically and horizontally. · The data store that houses the trusted zone should have high availability and be resilient to failure. Lately, more data warehouses are hosted on Cloud. Cloud benefits include high availability, cost-effectiveness, and horizontal and vertical scaling. Another trend is increasing adoption of NoSQL databases such as MongoDB. These provide greater flexibility and better performance to store unstructured data, vis-a-vis relational databases.

As with all things digital, regulation and security of data are intensive. Data is more intimate today, and privacy and security regulations are more complicated. The data governance team should be part of any ML implementation.

Having data lineage that tracks data sourcing is thus effective to ensure compliance.

Data collected and held must be protected. Security and risk management teams must be involved to initiate and monitor best practices, and to develop security breach response.

Investment in outsourced assistance is worthwhile for smaller institutions. If Cloud vendors are utilized, they must contractually agree that data security is their responsibility.

Transmission of data from the premises to Cloud and from Cloud to premises must be part of the scope and should be carefully designed to address security risk. Data encryption before transmittal to Cloud, even when transmission occurs over a secured virtual private network, is valuable.

ML MODELING ENVIRONMENT

The objective is to facilitate creation of models that generate meaningful insights and placing insights in a way that passes model validation and audit requirements. There are three components: modeling infrastructure, development tools, and DevOps. Different options for ML modeling environments include: · Ready-to-use services, such as Amazon’s Polly and IBM’s Watson.

Photo credt: iStockphoto / Eva-Katalin

for creating a credit-risk model, one must be able to explain the outcome of negative credit decisions, which is required by law. This is an especially sensitive issue during the global pandemic.

The selected model must have conceptual reasoning behind its development and construction. It is important to document why the model was selected, the math behind it, and the feature-selection process. Sourcing of features and data integrity are also essential and more easily accomplished with an SSOT. Special care should be taken when utilizing AutoML because it provides pre-cooked models that must pass for conceptual soundness. Model validation should be closely assessed when selecting any AutoML product.

PROVISIONING INSIGHTS

· Automated ML, such as DataRobot. · ML Workbench, such as Amazon’s SageMaker. · Custom-/in-house-built ML modeling environments: All components of a modeling environment, programming tools, and DevOps tools are gathered, created, configured, and maintained by the institution.

A current trend is the movement of modeling platforms to Cloud from in-house implementation of Apache Hadoop.

Hadoop-based stacks could have high upfront costs and be complicated to maintain. Moving to Cloud offers benefits including minimal upfront capital investment and flexibility.

As the needs for storage and computation change, it adapts seamlessly. Think of it as “pay as you go.” Most major Cloud providers also offer ML ready-to-use services and ML workbenches that could be utilized with minimal setup requirements.

ML modeling environments should facilitate model validation and account for associated challenges. Models must be validated for bias, must be explainable, and must document parameter and method selection. Documentation must be detailed so that a third party could recreate the model without being provided source code. It is therefore important to standardize model development and validation processes.

Assessing model risk is typically required before production. Regulatory guidelines require decision-makers to understand the intent for building these models, assumptions made, and limitations. Using a model outside the scope of its initial intent should be avoided. While ML is great at modeling complicated non-linear scenarios, it is less transparent than traditional models, making ML model validation challenging. For example, while using ML

Delivery of insights is categorized as real-time delivery or batch. Real-time insights are required to be processed, generated, and delivered within short timeframes or near real-time.

For example, detection of fraudulent transactions. Batch delivery is processed and generated in groups.

Considerations for designing and hosting the compute tier for real-time models include request frequency and load. If this is unpredictable or highly variable, hosting the compute tier in Cloud is advisable. Creating a web service-based API layer dedicated to this compute tier is also wise.

Real-time models should require registration to the API layer, which should enable applications to retrieve information on how to structure API requests and the expected structure of output. ML models differ from traditional models in that they can be continuously trained.

LEVERAGING DATA BENEFITS

With today’s increased volume of big data, it is more difficult to generate insights using traditional analytics. The ability of the ML stack to significantly automate this process complements the growth of big data, especially when ML infrastructure is understood. What’s more, insight into the nuances regarding implementation of the ML stack will positively impact the ultimate follow through that the actual machine learning produces and improve the customer’s relationship with the institution.

An unwillingness to appreciate these nuances and to be accountable to the ML stack, consequently, will compromise the machine learning’s intended impact on the end user, the customer.

Ankur Garg

Ankur Garg is a full stack data science expert working as Enterprise Data Analytics Architect at People’s United Bank.

Banking New York | Issue Three 2020 | 21

Ion Bank

Mutual Security Credit Union

Wakefield Co-operative Bank

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