Transactions--November 2012

November 2012

United States Congressman

Mike Fitzpatrick

Financial Services Committee Member Bank Boards

LESSONS FROM THE FREEH REPORT Page 10

Legislation

UPCOMING CHANGES IN HARRISBURG Page 14

That’s My Bank BUILDING EMPLOYEE MORALE Page 30

UPCOMING EDUCATION EVENTS

i Plan your training for this year with our variety of educational seminars and conferences. Registration is easy and just a click away at pacb.org.

JANUARY • 2013

CCBSP Q1 Session January 15, 2013 DoubleTree Monroeville - Monroeville, PA CCBSP Q1 Session January 16, 2013 PACB Headquarters - Harrisburg, PA

FEBRUARY • 2013

Commercial Lending School February 19-20, 2013 Crowne Plaza Harrisburg - Harrisburg, PA Credit Administration Seminar February 26, 2013 PACB Headquarters - Harrisburg, PA

APRIL • 2013

Security Seminar April 9, 2013 PACB Headquarters - Harrisburg, PA 2 | Transactions | www.pacb.org

APRIL • 2013 (CONT)

CCBSP Q2 Webinar April 15, 2013

JUNE • 2013

OCTOBER • 2013

CCBSP Q4 Session October 22, 2013 DoubleTree Monroeville - Monroeville, PA

Directors Conference June 4-5, 2013 Hershey Lodge - Hershey, PA

CCBSP Q4 Session October 23, 2013 PACB Headquarters - Harrisburg, PA

JULY • 2013

NOVEMBER • 2013

CCBSP Q3 Webinar July 15, 2013

SEPTEMBER • 2013

ALM Seminar September 10, 2013 PACB Headquarters - Harrisburg, PA 136th Annual Convention September 20-24, 2013 Boston Marriott Copley Place - Boston, MA

Security Seminar November 4, 2013 Monroeville, PA

ALM Seminar November 5, 2013 Pittsburgh, PA

k n a b r u ? o d e y r is a p e r p 0101011010100011110010101110100110101 0100100101001001010010010100101001010 1001010101010111111110100010001001010 0101010010000000111101010011111010101 1111010000010110101001110101000101111 1100111000101111110001010110010100010 0010101001010010010111100111000101111 11000101010100001000 FRAUD 001010001 0001010010001001100100100101010100000 010010 PHISHING 00111111110000010101 0101001110100111000011110010101001010 010010101000001 IDENTITY THEFT 111010 1001111101010111110100000101101010011 0000000111011111000111111110000010101 1000100010100100010011001001001010101 0010101001000000011110101001111101010 1010100010111111001110001011111101110 1011001010001010001000101001000100110 0100100101010100000001110111110001100 0100000010101010100111010011100001111 Q1 Sessions January 15, 2013 • DoubleTree Monroeville • 101 Mall Blvd., Monroeville, PA 15146 0010101001010010010100101010010000000 January 16, 2013 • PACB Headquarters • 2405 N. Front St., Harrisburg, PA 17110 1111010100111110101011111010000010110 In partnership with: INTERESTED? 1010011101010001011111100111000101111 Please contact Saundra Cunningham, 1100010101100101000101000100010100100 VP-Education Services, at 717-231-7447 or saundra@pacb.org about this important, 0100110010010010101010000000111011111 new certification. www.protectmybank.com

IN 2013, YOUR STAFF CAN BECOME CERTIFIED COMMUNITY BANK SECURITY PROFESSIONALS.

www.pacb.org | Transactions | 3

Contents November 2012

FEATURE STORIES 20 Pennsylvania Proud. Fiscally Focused.

An interview with Representative Mike Fitzpatrick, Pennsylvania’s sole member on the House Financial Services Committee, and his perspective on avoiding the fiscal cliff.

30 Giving Thanks for Employees C&G Savings Bank utilizes surveys, an intranet website, volunteer opportunities, and various activities throughout the year to motivate their employees. Read about how all of this, and more, is creating a positive environment for both employees and customers in this month’s member profile.

ARTICLES 10 Community Bank Boards: The Freeh Report’s Lessons for All Boards of Directors 12 Maximizing Energy Savings for Your Bank 14 2012 Legislative Casualty Report 18 An Immodest Proposal: How AOCI Affects Your Capital 34 May All the Chips Fall

ADVERTISERS 09 16 17 17 28 29 29 35

ICBA Pulse Signature Information Solutions Financial Outsourcing Solutions ICBA Bancard Shumaker Williams P.C. ParenteBeard Smith Elliott Kearns & Company, LLC 4 | Transactions | www.pacb.org

ON THE COVER

Congressman Mike Fitzpatrick sits down with PACB President/CEO Nick DiFrancesco to discuss his time in Congress, the issues facing his district, the Financial Services Committee, family life, and more in this exclusive interview.

www.pacb.org | Transactions | 5

THAT’S MY BANK!

6 | Transactions | www.pacb.org

THE PUBLICATION OF THE PENNSYLVANIA ASSOCIATION OF COMMUNITY BANKERS

Pennsylvania’s Community Banks. For people and their neighborhoods.

Transactions Magazine is published monthly by Pennsylvania Association of Community Bankers 2405 North Front Street, P.O. Box 5319 Harrisburg, PA 17110-5319 BUSINESS HOURS: 8:30 a.m. - 5:00 p.m. M-F Telephone: 717.231.7447 Fax: 717.231.7445 www.pacb.org

PACB STAFF: Dominic D. DiFrancesco, nick@pacb.org - President/CEO Tim G. Arthun, tim@pacb.org - Director of Government Relations Natalie S. Bombatch, natalie@pacb.org - Publications Manager Saundra J. Cunningham, saundra@pacb.org - VP–Education Services Eric A. Kovac, eric@pacb.org - Publications Manager Patricia Kuharic, patty@pacb.org - Administrative Assistant Shirley A. Regan, sar@pacb.org - Comptroller/Office Manager

2012-2013 PACB LEADERSHIP EXECUTIVE COMMITTEE Chairperson - Ronald B. Geib President/CEO, Harleysville Savings Bank Chairperson Elect - Dennis D. Cirucci President/CEO, Alliance Bank Vice Chairperson - Andrew W. Hasley President/CEO, Allegheny Valley Bank Secretary/Treasurer - Terry L. Foster EVP/CEO, MCS Bank President/CEO - Dominic D. DiFrancesco Pennsylvania Association of Community Bankers Immediate Past Chairperson - Chuck Leyh President/CEO, Enterprise Bank General Counsel - Keith A. Clark, Esq. President, Shumaker Williams, P.C.

STANDING COMMITTEES: CHAIRS & VICE CHAIRS EDUCATION Gary Bradley, Cresson Community Bank Wendy Nagle, C&G Savings Bank FINANCE & BUDGET Troy M. Campbell, Altoona First Savings Bank Roger A. Zacharia, Ambler Savings Bank FIRSTPAC George M. Evans, Indiana First Bank LEGISLATIVE Rory Ritrievi, Mid Penn Bank Todd R. Hurley, First Savings Bank of Perkasie MARKETING Pat Evans, Northwest Savings Bank Linda DeAngelis, C&G Savings Bank MEMBERSHIP Kevin J. Gallagher, Huntingdon Valley Bank Barron P. McCune, Community Bank STRATEGIC PLANNING Tim Zimmerman, Standard Bank, PaSB Terry Sager, William Penn Bank

A word from PACB’s Chairman Several events from the past few weeks have led me back to the word “community.”

First, it’s the time of year when I think a lot about giving thanks and giving back to the communities we serve. Although community banks give back yearround, it becomes especially mindful around the Thanksgiving holiday, a time when most everyone gives thanks for what they have in their lives. I give thanks for the communities we serve, because we could not exist without them.

Second, Nick and I have visited with bankers in their offices and at social events. From our conversations, a common theme formed - the importance of the relationships that community bank employees have with individuals who live and work in their communities.

The way that different banks across the state create value for their customers, whether rural, suburban, or urban all comes back to the way they interact with their communities.

Last, a few weeks ago, I attended a birthday party for one of our directors, Sandy. And at that party, someone said that Sandy reflects community. There it was again, the word community, though this time the word was used to describe a person. I couldn’t ignore the signs leading me to reflect on community and what brings value to community banks and individuals. It became obvious to me that the answer is relationships.

We, as community bankers, have built strong relationships with those who live and do business in our communities. We like to give what we can to help them.

Community bankers possess the giver’s mentality - not just seeing what they can get out of a situation, but rather how they can help, how they can give, and how they can make customers’ lives better. These relationships form the value that allows community banks to exist.

When I tell the community banking story, I say that the community is going to dictate whether we remain as a viable organization or not. This is why it’s critical that we take the time to build relationships with community members. Yes, while our pricing must be competitive, it is up to us to make sure that customers want to keep coming back to our banks.

Each year here at Harleysville Savings Bank, for review and strategic planning purposes, we ask ourselves the questions, “Do we deserve to exist? How is this community better off because we are in business?” So far, we keep saying yes, based on feedback we get from customers. They tell us that they appre-

PACB Chairman RON GEIB ciate what we do for local organizations and the relationships that employees have built with them, and they continue to bring their business to us. We rely on strong relationships to keep our customers happy.

It’s what keeps them coming back and allows us to be there for them day in and day out.

And in the spirit of giving, it’s beneficial for us to share our best practices with other PACB members. I don’t mind sharing because I have the mentality that if I help others to achieve their goals, I’ll achieve mine, too. In addition to collaborating with like-minded community bankers, it’s also important to remember that PACB is a resource in helping to accomplish your mission. PACB exists solely to help community bankers with education, legislation, and networking. Our strength lies in relying on each other. Individually we may not have economy of scale, but together we provide the best training, the greatest voice, and it’s the shared commitment that makes us special. We have a bright future if we all stick together.

The executive team and some other community bankers will be making a trip to Washington, DC in mid-November to represent our interests and be sure that nothing slips through the cracks. PACB is on watch for community banks in Pennsylvania to give them the chance to survive and be the financial institutions with good values and strong relationships in their communities.

Happy Thanksgiving!

www.pacb.org | Transactions | 7

FROM THE PRESIDENT/CEO’S DESK The winds of change are upon us! Fall is slowly giving way to winter; the Presidential Election of 2012 has FINALLY come to a conclusion; and each day more and more community bankers across the United States are coming together to unite forces and protect our industry. While the only thing certain is that change will continue, the reality is our efforts appear to be paying dividends.

I must applaud the thousands of bankers who submitted meaningful comment letters in response to the Basel III proposal. The regulatory agencies were flooded with unique opinions as to what the suggested capital standards would do to an already stressed industry. Your actions and the actions of your peers sent a strong message that we are mad as...well, we’re mad...and we’re not going to take it anymore.

Thought I can’t predict how each of the regulators will respond to the cry for relief, I do know that it is in the country’s best interest to scrap Basel III. The last thing America needs is a policy that tightens credit and restricts community investment. Likewise, America cannot afford policies that further consolidate assets into the hands of TBTF financial conglomerates. With more than 7,000 community banks unified by the ICBA and some 36 state trade associations, like PACB, we can determine the future health of the community banking system in America.

November is a time for thanksgiving. I am grateful for the opportunity to serve an industry of individuals who are committed to doing what is right and good for the communities they serve. I’m grateful because I never have to worry about being on the “wrong” side of an issue in Harrisburg or Washington, DC. The fact is that our entire legislative agenda is focused on strengthening communities and bringing the opportunity for economic prosperity to every citizen.

PACB is here to ensure that the citizens of Pennsylvania will always have a strong community banking system responding to their individual needs.

Advocacy is just one benefit of membership; this month’s Transactions magazine is filled with more examples. This month I urge you to read our in-depth interview with US Congressman Mike Fitzpatrick, Pennsylvania’s voice on the House Financial Services Committee. He is our primary contact for committee activities, and the conduit that keeps the other members of the Pennsylvania Delegation informed on important issues to community banks. Hopefully, you will join us throughout the year as we host several “Town Hall” conference calls with the Congressman.

8 | Transactions | www.pacb.org

PRESIDENT/CEO NICK DIFRANCESCO Fighting the fight in Washington is one way we support community banking, but another way is by introducing our members to contacts like Tom Gibson, President of Energy Management Advisors. This month Tom highlights the importance of managing your energy costs as a means of strengthening your bottom-line. A different article, written by Attorney Steven Koehler of the law firm Shumaker Williams, offers a reminder that bank board members, regardless if they serve a stock or mutual company, have very real fiduciary responsibilities that need to be acknowledged.

Bank directors also share the same responsibility of bank employees to stay up to date on the latest policy changes.

As always, you can find a wealth of information and education programs in the pages of this month’s edition.

Life can be overwhelming. As you navigate the seemingly constant changes, know that you have a support team in Harrisburg and Washington specifically focused on watching your back. Whether you look to Tim Arthun’s update on the November election, or Natalie Bombatch’s bank profile, Cam Fine’s outlook on TBTF institutions, or Jim Reber’s take on AOCI, Transactions is one example of the many ways we stand ready to assist community bankers in Pennsylvania.

Last month I stressed that PACB should be considered a subsidiary of, not a vendor to, our member banks.

This month, on behalf of our entire staff, I will say thank you for the privilege to serve this great organization. We share your spirit of commitment to community, and each of us takes great pride in your success. As you gather with family and friends to celebrate Thanksgiving, I hope you’ll give thanks for the privilege you have in serving your community.

Happy Thanksgiving!

12th Annual

Communities First NATIONAL COMMUNITY BANK SERVICE AWARDS

Volunteering, Rebuilding, Connecting, Coaching, Mentoring, Developing, Inspiring‌

How does your community bank give back?

Community Banks, Community Service Each year, we honor community banks that have gone above and beyond to improve their communities through their commitment of time and resources. If you are a community bank with an ongoing community service, volunteer, or financial literacy program, we want to hear from you.

Describe your bank’s program and how it positively impacts your community and the people involved.

Go to www.icba.org/awards and tell us your story.

Entries must be received by December 3, 2012. Winners will be recognized in April as part of Community Banking Month.

Sponsored by:

GO L CAL BANK SHOP DINE

sm

www.pacb.org | Transactions | 9

Community Bank Boards

The Freeh Report’s Lessons for All Boards of Directors

T

By: Steven J. Koehler Shumaker Williams, P.C. his past July the so-called “Freeh Report” was issued by former FBI Director Louis Freeh in the wake of the Jerry Sandusky sex abuse scandal at Penn State. The report was commissioned by the University’s Board of Trustees to investigate the alleged failures of Penn

10 | Transactions | www.pacb.org

State personnel in connection with the scandal and to “provide recommendations regarding University governance, oversight and administrative policies and procedures…”

Beyond its sometimes painful and controversial indictments of the conduct of specific individuals, the Report’s

critique of the actions—or inaction—of the Board of Trustees is a serious admonishment and a lesson to all of those serving in a fiduciary capacity. The Report concluded that the University’s Board of Trustees (i) failed to use its oversight and reasonable inquiry responsibilities; (ii) lacked regular reporting procedures or committee structures to alert them to risk and liability; (iii) failed to set a tone of accountability for everyone; and (iv) received filtered and manipulated information from senior staff, failing to competently question or follow-up with its own investigation independent of staff, taking a passive role preferring to be fed information.

Those acting in a fiduciary capacity, whether as a trustee of a university; a director of a non-profit board; or a member of the board of directors of a community bank must seriously consider this message of the Freeh Report and heed its lesson of vigilance in adopting and utilizing best practices in fulfilling the mission of a board in its oversight capacity.

The Comptroller of the Currency in its role as Administrator of the National Banks in Section 501 of the Comptroller ’s Handbook entitled “Duties and Responsibilities

CAREFUL CONSIDERATION SHOULD BE GIVEN TO THE GOVERNANCE FRAMEWORK OF THE BANK AND THE BOARD.

the board’s conflict of interest policies to insure compliance with applicable laws and regulations.

The governance structure of a bank and its board is determined by the charter, articles and/or by-laws. In considering the lessons of the Freeh Report and the best practices noted above, careful consideration should be given to the governance framework of the bank and the board. In order to implement institutional change, modifications and amendments to such documentation may be required.

Mr. Koehler routinely counsels clients ranging from start-up entities to multinational corporations on matters involving immigration law, entity selection, shareholder and operating agreements, intellectual property licensing and protection of confidential information, manufacturing sales and joint development agreements, and general business and real estate matters. In the immigration area, Mr. Koehler’s years of experience in representing business and institutional clients provides a complement to the legal needs of clients recruiting professionals and other workers to compete in the global marketplace.

of Directors” provides that, “Directors are placed in positions of trust by the bank’s shareholders, and both statute and common law place responsibility for the management of a bank firmly and squarely on the board of directors.” This position of trust is also shared by those serving in the capacity as a director of a Community Bank Board and the expectations regarding the conduct of same are also influenced by legislation and regulator and marketplace constraints.

Some basic best practice concepts applicable to community bank boards include board member qualifications; board independence; and policies regarding conflicts of interest and committee structures. These concepts are more fully explored below.

• Qualification of Directors – Board members should have the capacity to contribute to the mission of the Board and be eligible to serve in accordance with applicable regulatory restrictions.

• Board Independence – Banks should consider the composition of the board to insure some degree of independence in order to strengthen the management staff oversight role.

• Committee and Policy Structures – Banks should consider Board committee structures to insure that audit and credit committee functions reflect the obligations of the board regarding board oversight and independence. Particular attention should be paid to www.pacb.org | Transactions | 11

MAXIMIZING ENERGY SAVINGS FOR YOUR BANK By: Thomas M. Gibson, C.E.P., President Energy Management Advisors 12 | Transactions | www.pacb.org

D

oes your bank have an effective energy management program to reduce energy costs both now and into the future?

Monthly energy costs continue to add up and increase each year.

Energy deregulation has allowed businesses today the opportunity to reduce their energy costs.

However, the savings obtained through deregulation usually ends when the energy supply contract expires.

Unfortunately, energy contracting, or supply-side energy management, is only a short term solution for reducing energy costs. A long term solution to reducing energy costs is demand-side energy management. Demand-side energy management focuses on reducing energy costs by reducing energy consumption in a building and can be considered to be permanent energy savings! This is real “hard dollar” savings that continues for many years.

The biggest difference between supply-side and demandside energy management is that supply-side energy management does not involve an upfront capital expenditure.

As long as you can identify an energy supply contract that is lower in price than your local utility company’s tariff rate, or Price-To-Compare (PTC), you can save money. However, how long you actually save money is the real question. As mentioned above, savings only continue through the end of the energy supply contract or when your local utility company tariff rate, or PTC, falls below the contract rate and you actually start losing money, which unfortunately seems to be happening more and more today. Although educated energy contracting or supply-side energy management can save your company money in the short term, it should only be a part of your total energy cost management program.

Businesses today often avoid demand-side energy management strategies in their buildings because of the perception that savings can only be achieved through a large capital expenditure. For many buildings this is a misconception. There are many no cost, and low cost energy efficiency changes that can be implemented in a building that do not require a large upfront capital expenditure to achieve savings. Some of these changes may include simple things like replacing aging seals around windows and doors, eliminating ventilation ductwork leaks with duct tape, installing inexpensive paddle fans in high ceiling areas, and eliminating small space heaters that are present in all offices. It is usually very easy to spot these types of energy leaks in most buildings today.

With rebate programs now available through local utility companies, capital expenditures for larger demandside energy management projects, such as replacing aging lighting/fixtures and HVAC controls, can be minimized—which result in shorter project payback periods.

In evaluating the value of demand-side energy management projects, business executives usually begin with determining a simple payback period followed by the

expected return on investment, or ROI. For demand-side energy management projects, this type of information is usually easily obtained, allowing these projects to move forward quickly.

A great way for businesses to determine how energy efficient their buildings really are today—so that specific buildings can be targeted for possible demand-side energy management projects—is through EPA’s Energy Star Program. By using the Portfolio Manager Program available through the Energy Star Program, the actual Energy Star Performance Rating of a building can easily be determined. The Energy Star Performance Rating can be from 1 to 100 for a building, with a 75 or above rating pre-qualifying a building as Energy Star certified.

Buildings with low Energy Star Performance Ratings are usually excellent targets for demand-side energy management programs, with no cost and low cost energy efficiency changes a good starting point. Businesses that receive the Energy Star certification for one or more of their buildings receive acknowledgement of this achievement from the EPA, with this award prominently displayed on the front of their building. Significant positive public relations opportunities with the local community can be realized through this award.

A comprehensive Energy Management Program should include both supply-side and demand-side energy management solutions to maximize energy cost savings for your bank today and for the future.

Thomas M. Gibson is President of Energy Management Advisors, (www.emadivision.com) Division of Gibson Consulting Group, LLC, an independent consulting firm that specializes in energy consulting and management services for financial institutions.

Mr. Gibson has successfully provided energy and telecommunications consulting services to the banking, healthcare and other industries for over 19 years.

Energy Management Advisors’ premier service for financial institutions is a comprehensive energy management program that provides total energy cost control for Clients in both supply-side and demand-side energy management. EMA/Gibson Consulting Group, LLC is an Energy Star Partner and a Pennsylvania PUC approved Conservation Service Provider (CSP).

Mr. Gibson is certified as an Energy Procurement Professional (C.E.P.), he is a member of the Association of Energy Engineers (AEE) and the Institute of Management Consultants (IMC). Mr. Gibson can be reached at (724) 836-5554, or at tgibson@gibsonconsultants.com.

www.pacb.org | Transactions | 13

2012 LEGISLATIVE CASUALTY REPORT By: Tim Arthun

F

all is the season of leaves changing, football, baseball playoffs, and trying to get out on the course for one more game before the frost. In Harrisburg, it’s also the time that legislators wrap up their work for the year and head back to the campaign trails so that they can come back next year to take care of unfinished legislative business. Some members decide to retire on their terms and use the fall for goodbyes and to reflect on accomplishments. There are a few members that are defeated in the primary election and do the same, although not voluntarily. Still more will learn their fate come November 7 when the morning paper comes heralding the winners and losers of races.

Here is a look at some of the members who will be saying 14 | Transactions | www.pacb.org

sayonara at the end of the year, either voluntarily or involuntarily, regardless of the election results on November 6th.

Those running for different offices are listed as well.

OFFICE MOVERS Two candidates have opted to seek higher office and not run simultaneously for their current seat. Rep. Scott Hutchinson (R-Venango) is running for the State Senate District 21 seat and does not face opposition. This is the result of Sen. Mary Jo White (R-Venango) retiring at the end of this year.

Rep. Scott Perry (R-York) is looking to jump from state house to the national house in his bid for the open US House District 4 seat. Incumbent Todd Platts announced his retirement earlier this year citing his initial pledge

to serve a limited number of years. Although he faces a challenger in engineer Harry Perkinson, the district favors the Republican candidate based on the disposition of the demographics.

Three candidates are seeking higher office but will run simultaneously for their current seat.

HD 40 - Rep. John Maher (R-Allegheny), running for Auditor General HD 95 - Rep. Eugene DePasquale (D-York), running for Auditor General HD 42 - Rep. Matt Smith (D-Allegheny), running for State Senate (see below) SENATE The State Senate will have a different look to it as three more members of the upper chamber have opted for retirement, either earlier this year or as of December 31. In a move that surprised many, Sen. John Pippy (R-Allegheny) stepped down from his Senate District 37 seat earlier this year. A heated contest out west puts Rep. Matt Smith (D) against businessman D. Raja (R). The race is expected to be very close and is seen as one of the top pick-up opportunities for Senate Democrats.

Sen. Jane Earll (R-Erie) announced late last year that she would be leaving the Senate at the end of her term. Earll, a member of the Senate since 1996, was the Chair of the Senate Community, Economic, and Recreational Development Committee. In the 49th Senate District race (Earll), Sean Wiley (D) and Janet Anderson (R) are competing. Wiley holds a slight edge based on polling numbers prior to the election but it’s anybody’s guess.

Likewise, Sen. Jeff Piccola (R-Dauphin) announced his retirement last November citing various reasons in his decision to not run again. Piccola, a member of the Senate since 1995, was the Chair of the Senate Education Committee. In the 15th Senate District (Piccola), John McNally (R) and Rob Teplitz (D) have had a race filled with negative attack pieces from both camps accusing the other of being party insiders. The district has more democratic registered voters but has historically been an easy Republican seat.

Sen. Jane Orie resigned from her seat earlier this year due to a plethora of legal issues. A special election was held earlier this August that saw Rep. Randy Vulakovich (R) win over Sharon Brown (D). Vulakovich was sworn in as a State Senator following his special election win.

HD 5 - Rep. John Evans (R-Erie) retiring; Greg Lucas (R) and Charles Dumas (D) HD 24 - Rep. Joe Preston (D-Allegheny) lost primary; Ed Gainey (D) unopposed HD 37 - Rep. Tom Creighton (R-Lancaster) retiring; Mindy Fee (R) and Russell Stahley (D) HD 43 - Rep. Scott Boyd (R-Lancaster) retiring; Keith Greiner (R) and John Weigel (D) HD 64 - Rep. Scott Hutchinson (R-Venango) running for state Senate; R. Lee James (R) unopposed HD 74 - Rep. Bud George (D-Clearfield) retiring; Thomas Sankey III (R) and Mark McCracken (D) Too Close HD 79 - Rep. Richard Geist (R-Blair) lost primary; John McGinnis (R) and Richard Flarend (D) HD 92 - Rep. Scott Perry (R-York) running for US House; Mike Reagan (R) and Charles Comrey (D) HD 97 - Rep. John Bear (R-Lancaster) retired; Steven Mentzer (R) unopposed HD 103 - Rep. Ron Buxton (D-Dauphin) retiring; Patty Kim (D) unopposed HD 112 - Rep. Ken Smith (D-Lackawanna) lost primary; Ray Nearhood (R) and Kevin Haggerty (D) HD 113 - Rep. Kevin Murphy (D-Lackawanna) lost primary; Marty Flynn (D) unopposed HD 115 - Rep. Ed Staback (D-Lackawanna) retiring; Theresa Kane (R) and Frank Farina (D) HD 126 - Rep. Dante Santoni (D-Berks) retiring; James Billman (R) and Mark Rozzi (D) HD 132 - Rep. Jennifer Mann (D-Lehigh) retiring; Mike Schlossberg (D) unopposed HD 133 - Rep. Joe Brennan (D-Lehigh) retiring; David Molony (R) and Daniel McNeill (D) HD 148 - Rep. Mike Gerber (D-Montgomery) retiring; Mary Jo Daley (D) and Mike Ludwig (R) HD 154 - Rep. Lawrence Curry (D-Montgomery) retiring; Mark Sirindes (R) and Steve McCarter (D) HD 155 – Rep. Curt Schroder (R-Chester) retired; Becky Corbin (R) and Joshua Maxwell (D) HD 179 - Rep. Tony Payton (D-Philadelphia) retiring; James Clay, Jr. (D) unopposed HD 182 - Rep. Babette Josephs (D-Philadelphia) lost primary; Brian Sims (D) unopposed HD 201 - Rep. John Myers (D-Philadelphia) retiring; Stephen Kinsey (D) unopposed Rep. Joe Smith – Denotes current member Joe Smith – General election candidate not favored to win Joe Smith – General election candidate favored to win Too Close – Race too close to call

HOUSE Due to numerous retirements by State House Members, the following lists the retiring members who have retired earlier this year or have announced formally their retirement.

HD 3 - Rep. John Hornaman (D-Erie) retiring; Jason Owen (R) and Ryan Bizzarro (D) Too Close

If you want to know more about the comings and goings in the PA Legislature or Congress, please feel free to call or e-mail me at 717-231-7447 or tim@pacb.org.

www.pacb.org | Transactions | 15

We understand you’re cautious about what may be around the bend. But you can be confident that our singular focus on debit for more than 30 years can help you optimize a secure debit program. We deliver the insight, resources and guidance to retain customers and attract new ones.

Be prepared for what’s next by going to pulsenetwork.com.

©2012 PULSE

© 2011 RMAGENCY.COM | www.pacb.org 16 | Transactions

Navigating a complex regulatory environment?

INTERNAL AUDIT & COMPLIANCE CONSULTING FOS is a leading provider of internal audit and compliance services to more than 70 financial institutions located in Pennsylvania, New Jersey, Maryland, Delaware, and New York. Our professionals are dedicated solely to providing internal audit and compliance services to financial institutions. We offer a wide range of services including: • Internal Audit Outsourcing • Information Technology Examinations • BSA Compliance Examinations • Fraud Examinations • Internal Audit Co-sourcing • FDICIA Implementation & Training • Trust Department Examinations

• • • • • •

Regulatory Compliance Training Quality Assurance Reviews Asset Liability Management Audits Special Projects Sarbanes-Oxley Documentation & Testing

...Work with the best.

Financial Outsourcing Solutions • www.fosinternalaudit.com • 1.800.569.5199 Harrisburg • Lancaster • Lehigh Valley

www.pacb.org | Transactions | 17

AN IMMODEST PROPOSAL

HOW AOCI AFFECTS YOUR CAPITAL By: Jim Reber President/CEO ICBA Securities

T

here’s been lots of hand-wringing going on by community bankers over the set of proposals known collectively as Basel III. At current, the language contains several items of concern to the vast majority of banks in the country. This includes bewil-

18 | Transactions | www.pacb.org

dering matrices of risk weights and capital requirements.

Another source of anxiety is the proposed treatment of unrealized market gains and losses in the investment portfolio. At current, it is not an element of Tier 1 capital. Such has been the situation since 1994, when the banking regulators

determined that paper gains or losses on Available for Sale (AFS) securities would be relevant only for audited financial statement purposes. (Accounting standards require their inclusion in Accumulated Other Comprehensive Income, or AOCI.) Since this is a much-discussed issue among the ICBA and its members, I thought it would be timely to review recent hard data to help quantify the potential impact of this piece of the proposal. We will use as our data the bond accounting customers of Vining Sparks, which serves as ICBA Securities’ clearing broker. As of June 30, 2012 Vining Sparks had 591 community banks using its bond accounting service, containing $47 billion in securities.

HIGH WATER MARK? As you might expect, today capital ratios of virtually every bank in the country would be enhanced if this piece of Basel III were adopted as proposed. This is the residue of the record-low interest rate environment in which we reside.

The amount of the appreciation in value is probably close to as high as it is going to get.

At present the typical community bank investment portfolio has an unrealized gain of about 2.4 percent of princi-

and net interest margins were, for the most part, tolerable.

The only part of the balance sheet that was problematic was the investment portfolio.

Again using the Vining Sparks population as our data bank, the average portfolio then had a market loss of about 2.8 percent. We need to change one of our assumptions to account for the era: the average portfolio then accounted for only 25 percent of the balance sheet. Our math calculates that capital would have declined by about 40 basis points. So a bank with 8 percent Tier 1 would have dropped to 7.6 percent.

That may not seem dramatic, but what this means is that the fall from the highs of 8.5 percent to the lows of 7.6 represents a more than ten percent decline. What also must be stated is that market valuations present an asymmetrical risk, in that interest rates can always rise more than they can fall.

POTENTIAL REACTIONS If the Basel III proposals become regulation, it can be supposed that bankers will employ a range of strategies to address the issue of market valuation fluctuations. It has been suggested by more than one community banker that more investments will be designated as Held to Maturity (HTM).

I would proffer that this tact may not be effective, as the

It may be wise for you to review your own portfolio to estimate the

POTENTIAL IMPACT ON YOUR OWN BANK pal. For a security inventory of $100 million, this would be a gain of $2.4 million. To extrapolate this onto a community bank’s capital ratios, I have to make some assumptions.

First, I’ll assume that 92 percent of the bonds are in AFS, which coincides with the Vining Sparks population. Secondly, I’ll assume that securities make up 33 percent of total assets, which closely approximates FDIC data. Finally, I’ll assume that the financial institution has a marginal Federal tax rate of 35 percent.

With these factors accounted for, average capital ratios would increase about 50 basis points. In other words, if your Tier 1 capital ratio today is 8.0 percent, it would become 8.5 percent in an “after” scenario. This improvement, of course, will fluctuate with interest rates, which is the very source of the angst arising from the proposal.

IT’S HAPPENED BEFORE Which takes us to the examination of recent history. In the past decade the lowest bond valuations from a market perspective occurred in June 2006. Bankers will recall that business was pretty good at that point: the year of 2006 did not have a single bank failure. Loan demand and collateral values were both strong, Fed Funds were peaking at 5.25%,

accounting industry may be moving toward eventual elimination of the HTM designation.

More likely will be a range of strategies that include general shortening of average durations, use of derivative interest-rate contracts (i.e., swaps) to limit market exposure, or the election to value deposits at fair value. Other strategies can be employed that are beyond the scope of this column.

As Basel III continues to be debated on Main Street and in the corridors of the banking regulators, it may be wise for you to review your own portfolio to estimate the potential impact on your own bank. ICBA Securities and the fixed-income broker/dealer industry will be prepared to assist in your portfolio management, and to minimize the hand-wringing.

Jim Reber is President/CEO of ICBA Securities and can be reached at 800-422-6442 or jreber@icbasecurities.com.

www.pacb.org | Transactions | 19

CENTER

20 | Transactions | www.pacb.org

ERFOLD

www.pacb.org | Transactions | 21

I am conďŹ dent that our economy is ready to recover, we just need to get the federal government out of its way and provide it with the tools required to take off.

22 | Transactions | www.pacb.org

NICK DIFRANCESCO (ND): Prior to your election win in 2010, you had also served in the US House in the 109th Congress. How has the political landscape differed, if at all, since your previous time in Congress?

(ND): Your district includes portions of Bucks and Montgomery Counties. When you are out in the district, what is the number one issue for people you encounter?

(MF): Without a doubt, the number one issue on the minds of my constituents is jobs and the economy.

CONGRESSMAN MIKE FITZPATRICK (MF): Serving in Congress has been the highest honor of my life, and I did have the opportunity to represent the people of We are in the middle of the weakest economic recovery the 8th District during the 109th Congress from 2005 since the Great Depression with 23 million people out of work and struggling to make to 2006. After serving my ends meet. first term, I returned home to Levittown to continue WITHOUT A DOUBT, THE NUMBER ONE Across Bucks and Montgompracticing law.

ISSUE ON THE MINDS OF MY CONSTITUENTS ery Counties, the story has During the four years bebeen the same - people want IS JOBS AND THE ECONOMY. tween my terms, I watched to know if slow growth and as the government grew high unemployment is the larger and the economy struggled to recover. I knew that I new normal, or if they can expect a true economic recovery. could best serve my community by running for Congress in 2010, and I was honored to be sent back as part of the In addition to stagnant growth, we’ve seen rising gas pric112th Congress. es and healthcare costs that continue to grow, despite the promise of the Affordable Care Act to lower costs and inI would say that the most notable difference between my crease access. two terms is the focus of Congress. My first term in the House was focused on foreign policy issues and various When I’m asked about these issues, I remind people of other domestic policies because frankly, the economy was where we found ourselves economically in the late 1970s. doing well.

Interest rates and unemployment were high, there was a These last two years have focused primarily, approprigas riot in my hometown of Levittown, and it looked as ately, on addressing the economic challenges we face and if America was in decline and our economic reality had changed forever. the need to reduce our ever-expanding debt and deficits. www.pacb.org | Transactions | 23

Then in 1980, I voted in my first presidential election for Ronald Reagan and we saw one of the largest periods of economic growth and prosperity in our nation’s history.

I am confident that our economy is ready to recover, we just need to get the federal government out of its way and provide it with the tools required to take off.

(ND): In the 109th and in the current 112th Congress, you have been assigned to the Financial Services Committee.

How has your involvement on the committee affected your perception of community banks in the realm of financial services?

(MF): The most important thing I have learned about community banks during my time on the Financial Services Committee is the crucial role they play in their communities.

Small businesses in this country account for the vast majority of new job creation, and employ nearly 50% of the private sector workforce.

Community banks help provide these businesses with the access to capital they require to grow and create good, family-sustaining jobs. In addition, the community banks provide local entrepreneurs with the financial advice they need to sustain their businesses and their success.

under the weight of a complicated tax code, ineffective and onerous regulations, and rising healthcare costs.

As a result of these valuable meetings, I organized the themes and proposals I heard from local manufacturers into a comprehensive legislative plan entitled: “Made in America: A Plan to Promote American Manufacturing and Revitalize Our Economy.”

This plan is full of proposals that I have helped introduce or supported in the 112th Congress to grow our economy and create good, family-sustaining jobs and I look forward to sharing it with my colleagues in the House as we work to promote a lasting economic recovery.

(ND): What do you consider to be your biggest accomplishment while holding elected office? Either from your time as a County Commissioner or in Congress.

(MF): During my time as a Member of Congress, I have worked on important legislation which will allow small businesses and community banks to jumpstart our economy. I view this as my top priority in Congress.

However, my proudest achievement during my time in public service was during my previous term in Congress when I was able to bring the Washington Crossing National

It is also important to recognize the

“COMMUNITY” IN “COMMUNITY BANKS” It is also important to recognize the “community” in “community banks.” These institutions have become pillars of their communities. From sponsoring local sports teams, to hosting neighborhood fairs and festivals, community banks play a vital role beyond the technical dollars and cents of their daily operations.

I am proud to continue to support the success of community banks across Bucks and Montgomery Counties and I look forward to working with them to promote a real and lasting economic recovery.

Cemetery for our veterans to Bucks County.

Working extensively with friends in Congress and allies on the local level, I was able to persuade the Veterans Administration to move the planned site for the cemetery to the picturesque, rolling fields where Washington’s army may very well have made camp in the winter of 1777 before crossing the Delaware into Trenton, NJ. I am proud to have helped provide generations of veterans with a final resting place on these historic grounds.

(ND): This past year you successfully visited 100 businesses in 100 days, including a local community bank, which undoubtedly offered insight into the struggles small businesses face in a recovering economy. What was the most intriguing aspect of your experience?

(ND): There is an overwhelming feeling that a delay in resolving “fiscal cliff” issues will jeopardize the economy and put the country at risk for recession. Are Members beginning to feel the heat from constituents about the need to address these issues before it is too late?

(MF): I met with business men and women from a wide range of industries across Bucks County, representing a cross-section of our diverse local economy.

(MF): We are approaching what has been called the “fiscal cliff” - the expiration of the 2001 and 2003 tax rates, and the imposition of drastic spending cuts through a process known as sequestration; both scheduled for the beginning of 2013.

What intrigued me the most is that while the specific concerns may have varied from business to business, a clear and consistent message emerged: our economy is struggling 24 | Transactions | www.pacb.org

Allowing this double hit to our economy threatens to halt completely our already fragile recovery.

I am proud to continue to support the success of community banks across Bucks and Montgomery Counties and I look forward to working with them to promote a real and lasting economic recovery.

www.pacb.org | Transactions | 25

One report conducted concludes that as a result of the expiration of the 2001 and 2003 tax cuts and the new taxes being imposed through Administration policies, the average family in Pennsylvania’s 8th Congressional District can expect to pay nearly $4,500 more in taxes in 2013.

These tax hikes, left unchanged, will drain more than $20.5 billion from Pennsylvania’s economy at a time of anemic economic growth and discouraging jobs numbers.

The House has done its job in passing legislation to prevent these tax hikes and to deal with the pending sequestration, but the Senate has yet to act.

what I’ve heard called “Citizens Bank Park South” thanks to the crowds full of Philadelphia fans.

(ND): You keep an extraordinarily busy schedule as a Congressman, splitting your time between your district and the Capitol, but can you share a little bit with us about your personal life? What do you like to do in your spare time?

I REMAIN HOPEFUL THAT AFTER THE POLITICAL SEASON, CONGRESS WILL BE ABLE TO COME TOGETHER TO AVOID FALLING OFF THE FISCAL CLIFF.

(MF): Between my work in Washington and my meetings with constituents across Pennsylvania’s 8th Congressional District, a free minute is often difficult to find.

I remain hopeful that after the political season, Congress will be able to come together to avoid falling off the fiscal cliff.

However, my top priority beyond my work is spending quality time with my wife, Kathy and our six children.

(ND): Do you consider yourself to be a Phillies or Nationals fan when it comes to baseball?

Being with them for the basketball games, the school dances and the boy scout meetings is incredibly important to me, and I make it a point to drive them to school myself every morning that I am here in the District.

(MF): Growing up in Levittown, I have been a proud Phillies fan my entire life, through the good and the bad.

I know my friends in Washington might not like to hear it, but it’s always a sight when the Phillies play the Nationals in our nation’s capital and transforms their stadium into

26 | Transactions | www.pacb.org

Members of Congress, indeed anyone serving the public, are hard-pressed to effectively balance all aspects of their life, and I am grateful to have the opportunity to do just that.

Congressman Mike Fitzpatrick is a lifelong resident of Bucks County, where he has been an active member of his community for decades. In the 112th Congress, Mike’s number one priority is job creation. Mike recognizes that government does not create jobs, but fosters an environment in which the private sector can create permanent, family sustaining jobs.

Mike graduated from Bishop Egan High School in Fairless Hills and earned his bachelor’s degree while working his way through St. Thomas University in Miami, Florida. Upon graduation, Mike was awarded the university’s highest service award.

Following graduation, Mike returned to Pennsylvania and in 1988, he graduated from Penn State’s Dickinson School of Law. While attending law school Mike was the Business Manager of the Dickinson Journal of International Law. Mike is admitted to practice law in both Pennsylvania and New Jersey.

In 1995, Mike was appointed to the Bucks County Board of Commissioners where he served for ten years. As a Bucks County Commissioner Mike was a champion of responsible county social service programs, job creation, and efficient government administration. He fought to preserve more than 11,000 acres of beautiful farmland, parkland, and critical natural areas. His record on open space earned him recognition from a variety of environ-

mental organizations, including the Greenspace Alliance.

During his time as Commissioner, Mike led the fight to establish the county’s first Enterprise Zone, a project that eventually led to the creation of more than 4,000 private sector jobs in Bucks County.

As a Member of the 109th Congress Mike demonstrated himself to be an independently-minded advocate for his constituents. He fought for stronger borders, lower taxes, and smaller budget deficits. Locally he worked successfully to bring the National Veterans’ Cemetery to Bucks County. Mike was also instrumental in flood mitigation efforts along the Neshaminy Creek watershed, which had been plagued by persistent flooding.

Mike returned to Congress in 2011 after practicing law in Bucks County focusing on representing small businesses and local governments.

Mike and his wife Kathy have been married twenty-two years and have six children - three girls (Katie, Maggie, and Molly) and three boys (Jimmy, Mick, and Tommy). An Eagle Scout, Mike has remained active in Scouting and is a past-President of the Bucks County Council of the Boy Scouts of America.

www.pacb.org | Transactions | 27

Visa Means Business.

Around The World,

And Around The Block.

Your customers love your community bank! Imagine how delighted they’ll be when they don’t have to go to a big money center bank for their Visa card.

Grow your business and give your customers what they want with a Visa program that’s right for your bank through ICBA Bancard.

Join the ICBA Bancard community of Visa issuers. Become a Visa issuing community bank.

Hear from a community banker on how credit cards can increase fees and replace lost revenue

28 | Transactions | www.pacb.org

1-800-242-4770 | www.icbabancard.org/visacommunity

Shumaker Williams

is a premier, client-focused law firm assisting individuals and businesses throughout Pennsylvania, Maryland and New Jersey with a wide range of services, including: • Financial Services, Banking and Mortgage Regulation • Securities and Capital Enhancement • Corporate and Business Services • Employee Benefits and Labor Law • Residential and Commercial Real Estate Settlements • Real Estate, Land Development and Financing • General Business Law and Business Formation • Trademark Registration and Protection • Litigation, Arbitration and Mediation • Estate Planning, Taxation and Asset Preservation • International Law and Contracts • Immigration • Liquor Licenses and Hospitality Services Law

HARRISBURG, PA 3425 Simpson Ferry Rd. Camp Hill, PA 17011 (717) 763-1121

YORK, PA 1 East Market St. York, PA 17401

(717) 848-5134

TOWSON, MD 901 Dulaney Valley Road, Suite 610 Towson, MD 21204 (410) 825-5223

For more information about our confidential advice and services, visit:

www.shumakerwilliams.com

www.pacb.org | Transactions | 29

GIVING THANKS F

T

More recently, C&G Savings Bank implemented annual emhe goal of C&G Savings Bank, based in Altoona, is to create a positive, friendly, and ployee satisfaction surveys. The Bank values the opinions of their employees and relies on survey responses to improve energetic environment for both their emthe workplace practices and environment, including those to ployees and customers. Being dedicated increase employee morale. One question asks, “What about to identifying ways to achieve that goal, our company excites you?” Listed below are responses to this the Bank invested in a personnel position to facilitate collaborative efforts to create question, in addition to other related employee comments: and maintain this environment. In November 2009, Linda “The fun things we do, like the games, holidays, recipes, DeAngelis experienced a title change from Accounting etc. I really enjoy working and Employee Benefits Offor a hometown bank that ficer to Staff Services DirecIT’S A GREAT WAY TO SHARE really cares about its customtor, which expanded her role ers and employees!” at C&G Savings Bank to inRESULTS AND RECOGNIZE OUR clude some functions to foEMPLOYEES AND OFFICES. “The real sense of family. cus on the environment that Overall, I am very happy to the Bank creates for their be part of the C&G family employees and customers. and look forward to many years ahead with the Bank.”

The Bank established processes to provide personal and meaningful recognition to their employees for their positive “Dress down/fun days! The environment is upbeat, and the center for happy employees and happy customers is fabucontributions. C&G Savings Bank relies on surveying both lous! The Bank appreciates employees and their dedication.” their employees and customers to obtain feedback about the Bank’s environment and activities. When employees begin and end their jobs, they are given an interview. Though “I have been impressed with the way this company treats these surveys are not new, the Bank continually monitors their customers! Since I’ve been here, we always seem to be and analyzes the data in order to improve their practices. doing something special for the customers. Whether it’s of30 | Transactions | www.pacb.org

S FOR EMPLOYEES

By: Natalie Bombatch

fering coffee or flower seeds, the customers really seem to appreciate what we give out.”

“I also think what this company does for its employees is pretty impressive too! It’s the little things…they make me happy and I feel appreciated too! How awesome is that!!??”

employees for a job well done. We find that happens a lot and makes everyone feel good about working for C&G Savings Bank,” explained DeAngelis.

The Bank is careful to be sensitive to employees who don’t want to have their photo taken or don’t want to be congratulated publicly on E-Board. Some are shy and would rather not be in the spotlight. DeAngelis said, “Though the bank continTo Bill (President and CEO): “Thank you...I have never ues to remain sensitive to employee preferences, the more we worked anywhere else that I have felt so appreciated.” use E-Board to congratulate our staff, the more employ“Next to being a Mom, workTHEY’RE READING ABOUT EACH OTHER ees are open to sharing their ing at C&G is the most rewardcompliments with the entire ing job I’ve ever had. Everyone AND THEY REALLY FEEL LIKE THEY’RE company. Employees have befrom the Board Members PART OF C&G SAVINGS BANK AS A WHOLE. come more comfortable with down genuinely care.” the process.”

In addition to employee surBelow, you’ll find a sampling of customer comments that were veys, C&G Savings Bank surveys their customers, both onposted on E-Board under the title “Banking with the Stars.” line and in bank branches, to engage them and encourage them to be a part of the Bank’s environment. Supervisors “I noticed that each customer that came in while we were share the positive comments with their employees, and the comments are also shared companywide via E-Board, the waiting, the tellers knew each one by name! You don’t see that too much anymore. More of a ‘PERSONAL’ touch, rathBank’s intranet system, for all employees to see. “It’s a great way to share results and recognize our employees and ofer than a number.” fices that are providing excellent customer service. The Bank encourages employees to reach out and congratulate those “The Manager and staff near the courthouse facility are the www.pacb.org | Transactions | 31

“BANKING WITH THE STARS” When asked, “What did you like best about C&G Savings Bank?” customers responded:

“The coffee, cookies, lollipops, mints, and smiles!”

“Easy to work with. Seemed very honest and kind.”

“Excellent service, always willing to go the extra mile and always with smiles.”

“Atmosphere and the friendly, willing-to-please employees.”

“Connie and Kathie are very professional! And are very nice people to deal with.”

“The kindness that everyone shows to help you with your needs.”

“Always recognize holidays with treats and coffee. This is not found in any other bank.”

“Friendly, small town service.”

“Everything!”

“It is a local bank that cooperates with our local organization.”

“Treating me like a wanted and good customer.”

“Free coffee, longer hours, and closeness to home. Very convenient location.”

best caring people around. They are really people-first employees!! They are the best!”

contribute their positive comments. What a great compliment to our Manager and her employees, as well!”

“Many banks advertise their friendliness. You are not only friendly, but understanding and professional, as well.

Thanks to you and the rest of C&G Savings Bank for taking the time to appreciate our unique situation.”

The Bank also uses interactive documents on E-Board. For example, individual branches can post documents for activities like a potluck lunch where employees can sign up to bring a dish. Additionally, DeAngelis explained that the Bank has a Trade Store on E-Board, where employees can buy and sell C&G brand dress down apparel, as well as a Bargain Corner, where employees can buy and sell their personal items. “Both of these documents are completely generated and maintained by employees, and they’ve been quite popular,” said DeAngelis.

It is this kind of candid feedback, from both employees and customers, that lets the Bank know they are doing something right. And what is it they are doing to keep their employees so happy and appreciated? A lot! The Bank brings employees together by using E-Board, holding fun events throughout the year, offering career development opportunities, encouraging community volunteer involvement, and more!

C&G Savings Bank uses E-Board for more than sharing customer comments with employees: “E-Board is utilized as a communication and motivational tool and to keep the Bank’s offices and employees unified.” DeAngelis continued, “Given that we have six different branches and a total of 40 employees, E-Board really does keep everyone connected. They’re reading about each other, and they really feel like they’re part of C&G Savings Bank as a team.”

The Bank has created E-Board publications, for example the “C&G Insider,” where employees can share positive personal and professional news, like a wedding or birth announcement or earning an award. Another document is the “Employee Spotlight” used to highlight a Bank employee several times a year. The selected employee is asked a set of questions to answer and expand upon. DeAngelis commented, “The last person in the spotlight was a Branch Manager. When we interviewed her, her staff requested to 32 | Transactions | www.pacb.org

An employee committee frequently meets to identify ways to maintain interest, create fun, and optimize the utilization of the E-Board system. Employee feedback is encouraged and solicited. The committee reported to the Bank that employees wanted something fun published on E-Board each day, like a quote, joke, fun fact, or recipe. DeAngelis said, “We rotate the responsibility of these daily updates to offices and departments, so that everyone has a chance to be involved with the content that is shared on E-Board. We want to know what employees want to see and do - it keeps them more engaged.” President and CEO Bill Ritenour added, “I make it a point to wish everyone at the Bank a Happy Birthday. A lot of times I’ll post a birthday wish on E-Board, and I’ve had employees respond to me at 8:00 or 9:00 at night...that means they are getting on the Bank’s intranet in the evening, on their own time. How cool is that?!”

Not all employee activities happen online. C&G Savings Bank continually tries to identify ways to celebrate and create excitement in their workplace. Employee holiday

lunches, Halloween dress-up days, pumpkin carving contests, Steelers dress-down days, and employee weight loss contests are a few ways they have fun. (Yes, they actually have fun with weight-loss contests!) Employees contributed proceeds from a recent weight-loss contest to a local charity, and the Bank matched the donation.

Decorating offices for various holidays and events are always enjoyed by both employees and customers. DeAngelis admitted, “We’ve also developed other unique ways to celebrate, but we just don’t want to give away all of our secrets!”

The Bank also offers career development opportunities to employees to provide them with ways they can develop their skills to advance into positions in which they are interested. Their goal is to highlight employees’ strengths and let them know there are opportunities available within the Bank.

blood drive, where available employees throughout the Bank volunteered. Employees did such a great job promoting the event that the Red Cross was unprepared for the large donor turnout and was forced to turn away donors.

DeAngelis added, “The local Foodland donated drinks and some of our employees volunteered to bring in homemade soups and sandwiches for the donors. It was definitely an event that brought our employees together with individuals and businesses within the community.”

The Bank also holds an annual “Summer Days” cookout event at their branch locations. Hot dogs, hamburgers, and ice cream are available to everyone stopping by. “Our communities love Summer Days! Employees are welcome to help grill, serve, and have fun at the events,” said DeAngelis. Summer Days initially was held for one day at just one of our branch locations and, due to its popularity, has since expanded to two days each at five of their branch offices.

The goal is for employees to feel

APPRECIATED, CHALLENGED, AND ENGAGED Additionally, the community benefits from a positive environment. Each day, customers are greeted with smiles and offered coffee (in C&G logo cups) in all of C&G Savings Bank’s branches. Customers are treated with lunches or small gifts at different times throughout the year. In support of Breast Cancer Awareness Month, the Bank designated several days in October as “Pink-Out” days where employees had pink dress-down days and customers were given pink C&G chip clips and pink ribbon note pads. “We make a conscious effort to identify ways to support our communities and to engage our employees. We want C&G Savings Bank to be a place that they like to work and that it is a positive experience for them, and in turn a positive experience for our customers,” elaborated DeAngelis.

In addition, employees choose a charity to support through Blue Jean Fridays and other fundraisers. Most recently employees raised $2,504 for their charity, Make-A-Wish.

Employees are supported and encouraged to volunteer within their communities. Recently, the Bank’s Nanty Glo office sponsored a very successful American Red Cross

C&G Savings Bank has a definite focus on employee morale. The Bank is continually trying to identify activities that are new and unique to keep the environment creative. The goal is for employees to feel appreciated, challenged, and engaged. “Positive morale contributes to a positive and enthusiastic environment, which is a benefit enjoyed by the Bank and customers, too,” said DeAngelis. “And all of this is made possible with the support of our President and CEO, Bill Ritenour, and our Board of Directors.”

If you would like Transactions to feature your bank as our Community Bank Profile in an upcoming issue, please feel free to contact me at natalie@pacb.org or 717-231-7447.

www.pacb.org | Transactions | 33

MAY ALL THE CHIPS FA L L

By: Camden Fine President and CEO ICBA 34 | Transactions | www.pacb.org

I

t’s well understood and universally agreed that everyone inside and outside Washington wants to vanquish too-big-to-fail forever. No one wants to see anymore taxpayer bailouts for megabanks, or risk another financial system meltdown. Even a few former megabank chief executives echo ICBA in urging federal policymakers to break up Wall Street’s mega-financial institutions.

But, of course, we’re not there yet. Despite some of the law’s unfortunate detours, the foremost aim of Wall Street financial reform was ending too-big-to-fail, and hopefully policymakers will have the will to use their authority in that regard. Yet everyone recognizes that financial overconcentration has gotten worse since the financial crisis began. Establishing the next steps in reform by regulators and Congress is where the policy debate now stands, and there are diverse ideas and proposals under consideration.

ICBA has urged the new Financial Stability Oversight Council to use its full statutory authority to downsize the sprawling, dangerously structured Wall Street mega-financial institutions. However, the problem of too-big-to-fail is twofold. ICBA

EVERYONE RECOGNIZES THAT FINANCIAL OVERCONCENTRATION HAS GOTTEN WORSE SINCE THE FINANCIAL CRISIS BEGAN.

Hoenig says adopting his proposal would create a more simplified regulatory framework for less-risky financial institutions performing traditional banking functions.

This would allow for eliminating much of the regulatory overkill for community banks that is driven by the extreme complexity and free-for-all activities of today’s largest Wall Street conglomerates. Most important, it would establish a regulatory framework that, combined with other measures against industry overconcentration, would allow all financial institutions to prosper or fail equally based solely on their own decisions and performance— without any too-big-to-fail exceptions. For every player in the financial system, chips could then fall where they may, crisis or no crisis.

Let the investment-minded Wall Street firms make their windfall profits. But let them take their losses too—all of them, without taxpayer bailouts.

Ultimately, that would be the measure of what ICBA, community bankers, and everyone else wants—full and final liberation from too-big-to-fail.

Camden Fine is President and CEO of ICBA and can be reached at 202-659-8111 or cam.fine@icba.org.

and community bankers have long recognized that size and structure is only one dimension. The other is untangling the current chaotic, convoluted nest of both traditional and nontraditional financial operations of the Wall Street conglomerates.

Some of the most constructive too-big-to-fail proposals in Washington would have Congress enact a modernized version of the Glass-Steagall Act’s once longstanding separation of commercial banking and investment banking activities. FDIC Director Thomas Hoenig offered one leading proposal more than a year ago while he was president of the Kansas City Federal Reserve. Similar to other proposals, it outlines how financial institutions should be made to choose one of two distinct business models. One would be a traditional banking model that would allow for only FDIC-insured deposit-taking and lending and other core banking activities, such as payment and settlement, and trust and wealth management services.

This option would support the stable, relationship-based activities that community banks uphold—the essential functions of our financial system and economy.

Under a second, vastly different transaction-based model institutions would only engage in the highly structured Wall Street investment activities, such as securities dealing, market making, and proprietary trading. With inherently different risks than traditional banking, these investment activities would be restricted to funding not backed by FDIC insurance, establishing a visible bright line for all to see that would eliminate moral hazard ambiguities that persist today. www.pacb.org | Transactions | 35

THE PUBLICATION OF THE PENNSYLVANIA ASSOCIATION OF COMMUNITY BANKERS

Pennsylvania’s Community Banks. For people and their neighborhoods.

Beginning in December, in every issue of Transactions magazine, we would like to include updates from you, our member banks, regarding newsworthy happenings in your banking facilities.

LET US KNOW ABOUT: • Branch Openings • Awards or Recognition • Special Staff Training or Education • Individual Promotions or Hirings

• New Facilities • New Customer Services • Community Involvement • Anniversaries or Celebrations

For publication consideration, please email press releases to Eric Kovac, Publications Manager, at eric@pacb.org. To ensure timely delivery in each issue of Transactions magazine, all entries must be received by the 10th of the preceeding month.

News From You 36 | Transactions | www.pacb.org

L

u

THIS ROAD leads to SALES opportunities.

PACB HAS MANY WAYS FOR YOU TO PERSONALLY INTERACT WITH AND BUILD MEANINGFUL RELATIONSHIPS WITH OUR MEMBERS. LOOK FOR THE 2013 SPONSORSHIP OPPORTUNITIES BOOKLET TO HIT YOUR DESK SOON! Contact Saundra Cunningham for more information about convention and education sponsorships at 717-231-7447 or saundra@pacb.org. www.pacb.org | Transactions | 37

THE PUBLICATION OF THE PENNSYLVANIA ASSOCIATION OF COMMUNITY BANKERS

Pennsylvania’s Community Banks. For people and their neighborhoods.

LIKE WHAT YOU SEE? WANT MORE?

SUBSCRIBE TODAY! www.pacb.org/transactions

Each issue of Transactions is overflowing with timely news and information concerning all aspects of community banking, including:

• PACB Member Spotlights • Legislative Updates From the State and Federal Levels • Vendor News • Regulatory Issues Impacting Community Banks • Hot Topics • New Products and Services Announcements

PACB Members & Associate Members:

$60 PER SUBSCRIPTION

(Non-Members: $84 per subscription)

38 | Transactions | www.pacb.org

REGISTER TODAY! WEBINAR & TELEPHONE SEMINARS NOVEMBER

DECEMBER

NOVEMBER 6, 2012

DECEMBER 4, 2012

NOVEMBER 7, 2012 NOVEMBER 8, 2012 NOVEMBER 14, 2012 NOVEMBER 15, 2012 NOVEMBER 20, 2012

NOVEMBER 27, 2012 NOVEMBER 29, 2012 NOVEMBER 30, 2012

Top 10 IRA Issues: Compliance, Reporting, Death & Distributions Deborah L. Crawford, gettechnical inc Being Prepared For Regulatory Exams Kenneth Proctor, Abound Resources The Board’s Role With The Loan Committee Ann Brode, Brode Consulting Services, Inc. Advanced Collection Tools David L. Osburn, MBA, Osburn & Associates, LLC Wire Transfer Compliance Rhonda Hudson, Compliance +, Inc. Bank Protection Act Robbery Preparedness For All Staff Barry Thompson, CRCM, Thompson Consulting Group, LLC Legal Update - Loans: 2012 In Review Elizabeth Fast, JD & CPA, Bankers Choice Best Practices In IT Risk Assessment Programs Dr. Kevin Streff, Secure Banking Solutions Regulation E Alert: New Requirements For Consumer Foreign Remittance Transfers: Deadline February 7, 2013 Deborah L. Crawford, gettechnical inc

DECEMBER 5, 2012 DECEMBER 6, 2012 DECEMBER 11, 2012

DECEMBER 13, 2012

DECEMBER 14, 2012 DECEMBER 18, 2012

DECEMBER 19, 2012

Opening Trust Accounts: Documenting Authority & Liability Deborah L. Crawford, gettechnical inc Escrow Account Compliance Ann Brode, Brode Consulting Services, Inc. ALLL: Dissecting Loan Loss Reserves S. Wayne Linder, Young & Associates, Inc. Legal Update - Deposit Operations: 2012 In Review Elizabeth Fast, JD & CPA, Bankers Choice The Four Components of a Social Technology Strategy: Making Them Work at Your Bank Eric Cook, WSI Internet Consulting Completing the New CTR Report Line-By-Line Deborah L. Crawford, gettechnical inc Really Understanding the “Midnight Deadline” for Processing Returns Mary Gilmeister, Wacha & Ellen J. Heffner, ECCHO Commercial Property Appraisal Compliance Elizabeth Fast, JD & CPA, Bankers Choice

www.pacb.org | Transactions | 39

PRSRT STD U.S. POSTAGE PAID HARRISBURG PA PERMIT NO. 547 2405 N. FRONT STREET P.O. BOX 5319 HARRISBURG, PA 17110 RETURN SERVICE REQUESTED

PACB PREFERRED VENDORS JUST ANOTHER VALUE INCLUDED IN THE PRICE OF PACB MEMBERSHIP! PACB PREFERRED VENDORS OFTEN OFFER DISCOUNTS OR PROMOTIONS ON PRODUCTS AND SERVICES TO PACB MEMBERS.

CALL PACB AT 717-231-7447 TO FIND OUT HOW YOUR ORGANIZATION CAN BECOME PART OF THIS SELECT GROUP OF PROFESSIONAL FIRMS. WITH THE EXCEPTION OF OFFICIAL ANNOUNCEMENTS, THE PENNSYLVANIA ASSOCIATION OF COMMUNITY BANKERS AND STAFF DISCLAIM RESPONSIBILITY FOR OPINIONS EXPRESSED AND STATEMENTS MADE IN TRANSACTIONS. THIS PUBLICATION IS INTENDED AND DESIGNED TO PROVIDE ACCURATE AND AUTHORITATIVE INFORMATION, NOT TO PROVIDE LEGAL, ACCOUNTING, OR OTHER PROFESSIONAL SERVICES.