Banking New York 4Q 2017 by The Warren Group

THE INDUSTRY MAGAZINE FOR FINANCIAL EXECUTIVES & PROFESSIONALS • FOURTH QUARTER 2017 • VOLUME 46

Millennials Opt for Personal Loans at Higher Rates than Previous Generations

Produced in partnership with the Independent Bankers Association of New York State

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Millennials Opt for Personal Loans at Higher Rates than Previous Generations

04 PRESIDENT’S MESSAGE

Recap of the Annual Convention, IBANYS Progress

06 PUBLIC AFFAIRS UPDATE Governor Signs IBANYS’ Priority Legislation Into Law 08 MOBILE PAYMENTS Getting a Slice of the $86B P2P Pie 06

CONTRIBUTING WRITERS Linda Goodspeed, Christina O’Neil and Steve Viuker TWG STAFF CEO & PUBLISHER Timothy Warren Jr. PRESIDENT David Lovins ACCOUNTING MANAGER Mark DiSerio

09 SECURING ASSETS Advisen Conference

Covers Cyber Risks

10 TOP PRIORITIES

The Discipline of Growth

14 SOCIAL MEDIA IN YOUR COMPANY To Control or Not to Control –

Or What to Control, Why and How?

16 EFFECTIVE COLLABORATION

Cultivating a Well-Functioning Team

17 WHERE ARE ALL THE WOMEN?

In Finance, Girls are Worth the Investment

18 INDUSTRY EVOLUTION

Banking on Savings and Security

19 COMPLIANCE CORNER

New Compensation Model for HELOC Origination Would Benefit Banks

20 INDUSTRY NEWS 22 SMALL CHANGE

SALES DIRECTOR OF BUSINESS MEDIA George Chateauneuf PUBLISHING GROUP SALES MANAGER Claire Merritt SENIOR ADVERTISING ACCOUNT MANAGER Mike Lydon ADVERTISING ACCOUNT MANAGERS Jon Patsavos & Megan Kurtz EDITORIAL EDITORIAL DIRECTOR Cassidy Murphy EDITOR Malea Ritz ASSOCIATE EDITOR Mike Flaim CREATIVE/MARKETING DIRECTOR OF MARKETING & CREATIVE SERVICES John Bottini SENIOR BRAND DESIGN MANAGER Scott Ellison COMMUNICATIONS MANAGER Michael Breed GRAPHIC DESIGNERS Amanda Martocchio, Elizabeth Rennie & Tom Agostino ©2017 The Warren Group Inc. All rights reserved. The Warren Group is a trademark of The Warren Group Inc. 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: The Warren Group, 280 Summer Street, Boston, MA 02210 www.thewarrengroup.com

PRESIDENT’S MESSAGE | By John Witkowski

Recap of the Annual Convention, IBANYS Progress It has been a busy autumn for New York community banks and the Independent Bankers Association of New York State on a number of fronts. 2017 was a very good year for IBANYS: Our membership continued to grow, as the number of community banks, associate members and preferred providers all increased. We revamped and enhanced our internal telephone and computer systems and upgraded and improved our website. As we prepare for the new year, I thought I’d give a brief summary of the fourth quarter of 2017.

strong turnout of New York community bankers, IBANYS preferred providers, associate members and guests gathered in Niagara Falls in late September for the three days of business programs, a business trade show, recreational activities and unparalleled networking opportunities during IBANYS’ 2017 Annual Convention, “The Power of Community Banking.” Feedback has been extremely positive for this signature event of our associaJohn Witkowski tion year. Speakers and roundtables addressed a full menu of timely and important topics. The exhibitors conference showcased a wide array of key products and services to enhance New York community banks. Our silent auction to support our political action efforts raised important funds as we approach a critical statewide election year. We introduced new concepts such as our new innovation showcase and emerging leaders segments, and a culinary school experience for spouses and guests (sponsored by The Bonadio Group); the convention was a big hit. IBANYS has posted links to speaker presentations on our website (www.ibanys. net). Also at the convention, we elected new officers and directors for 2017-18. 201617 IBANYS Chairman Doug Manditch of Empire National Bank passed the IBANYS chairman’s gavel to 2017-18 Chairman Mike Briggs (USNY Bank). Chairman Briggs, Vice 4 | Banking New York

IBANYS Board of Directors Officers Chairman R. Michael Briggs US New York Bank, Geneva, NY Vice Chairman Thomas Amell Pioneer Bank, Albany,NY Secretary/Treasurer Michael Wimer Cattaraugus County Bank, Little Valley, NY Immediate Past Chairman Douglas Manditch Empire National Bank, Islandia, NY John Buhrmaster First National Bank of Scotia, Scotia, NY Thomas Carr Elmira Savings Bank, Elmira, NY Randy Crapser Bank of Richmondville, Cobleskill, NY Director Emeritus Ronald Denniston First National Bank of Dryden, Dryden, NY Christopher Dowd Ballston Spa National Bank, Ballston Spa, NY John Eagleton Steuben Trust, Hornell, NY

2017-18 Chair Mike Briggs & Immediate Past Chairman Doug Manditch

Chairman Tom Amell (Pioneer Bank) and Treasurer Mike Wimer (Cattaraugus County Bank) join Immediate Past Chairman Manditch to comprise IBANYS’ executive committee. We also now have three new directors on our board: Mario Martinez (Catskill/Hudson Bank), John Eagleton (Steuben Trust) and Tony Delmonte (Bank of Akron), and longtime board member Ron Denniston (First National Bank of Dryden) is now director emeritus. In addition to Denniston, we also recognized longtime and current IBANYS members and Directors Brenda Copeland (Steuben Trust), Steve Gobel (First National Bank of Groton), Bill Ryan (Cayuga Lake National Bank) and Peter Forrestel (Bank of Akron) for their many years of service and leadership to their banks, our association and the industry. In October in Rochester and Albany, we held our Regional Security Conferences. These one-day sessions are intended to bring educational meetings to our membership in continued on page 7 

Robert Fisher Tioga State Bank, Spencer, NY Anthony Delmonte Bank of Akron, Akron, NY Gerald Klein Tompkins Mahopac Bank, Brewster, NY Richard Koelbl Alden State Bank, Alden, NY Mario Martinez Catskill Hudson Bank, Kingston, NY Paul Mello Solvay Bank, Solvay, NY G. William Ryan Cayuga Lake National Bank, Union Springs, NY Anders Tomson Capital Bank/ a division of Chemung Canal Trust Company, Albany, NY Kathleen Whelehan Upstate National Bank, Rochester, 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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PUBLIC AFFAIRS UPDATE | By Stephen W. Rice

Governor Signs IBANYS’ Priority Legislation Into Law IBANYS and New York community banks realized a significant victory in late October when Gov. Andrew Cuomo signed into law S. 3758-A, Hamilton (same as A. 8129-A, Zebrowski). It is now Chapter 380 of the Laws of 2017. This initiative was a major component of IBANYS state legislative program. It permits the state superintendent of the Department of Financial Services (DFS) to extend the bank examination interval from 12 to 18 months for banks with assets of under $1 billion, up from the previous $250 million threshold.

he legislation was developed with strong input from IBANYS’ Government Relations Committee and Board, and we worked hard for more than two years with both the DFS and the state Senate and Assembly to bring our ideas to fruition. In the end, it was sponsored by the chairmen of the Senate and Assembly Banks Committees Sen. Jesse Hamilton and Assemblyman Kenneth Zebrowski, supported by DFS and signed by the governor. It marks a big step in our ongoing effort to ease the regulatory burden on community banks Stephen W. Rice at both the federal and state levels. Community banks are facing challenges from increased regulatory and technology demands. The thousands of pages of new federal regulations from Dodd-Frank apply to banks irrespective of size or their business model. Community banks have additional costs and staffing needs to respond to compliance requirements. This increased regulatory burden has been reflected in the continuing loss of community banks in New York State. From 1992 to 2011, the number of community banks in New York state was significantly reduced, from 299 to 169. There is continuing pressure to consolidate – in part to achieve scale to meet compliance requirements in a cost-effective manner. This new law was designed to provide community banks with under $1 billion in assets with regulatory relief by extending the it examination cycle from annually to 18 months. To be eligible for the extended cycle, a bank must demonstrate it is well capitalized, that the most recent exam determined it was well managed, that its composite condition was outstanding or good, and that there was no pending enforcement proceeding. This new approach will not only benefit community banks – it will also permit the Department of Financial Services to more effectively deploy examiners its bank examiners. Meanwhile, the 2018 NYS legislative session will not begin until January, but there is early preliminary activity in Albany in terms of legislative introductions. A.8705(Cusick)/S.6845 (Peralta) would require that a notice be posted on all ATMs 6 | Banking New York

IBANYS President Witkowski with NYS Senate Banks Committee Chairman Hamilton.

warning customers about the use of skimming devices, and informing them how to file claims if they believe they have been victimized. There have also been a few bills introduced pertaining to data breaches. One would prohibit certain fees for security freezes by consumer credit reporting agencies in the case of a breach of information. Another would require a preliminary notice that a breach has or may have occurred to be sent to the attorney general within 24 hours, and to all persons potentially effected within 48 hours. A third would expand the definition of “personal information” that, when leaked would constitute a data breach under state law, to include birthdates, home addresses and phone numbers. A different bill would enact the Credit Empowerment Act, requiring any person or business in New York to provide any consumer whose personal information they are in possession of with a credit freeze on a credit report, free of charge, upon request. Of course, we anticipate continuing efforts to broaden the scope, powers and authorities of tax-exempt credit unions, including their efforts to enter the municipal deposits business, which we will again vigorously oppose. And, we expect again pursue our effort to establish community bank service corporations. S.3755 (Savino) would enable community banks to invest in and own community bank service

PUBLIC AFFAIRS UPDATE continued from page 6

PRESIDENT’S MESSAGE | continued from page 4

corporations which would provide shared services to community banks. In Washington, tax reform and regulatory relief continue to be the major focus. The House Financial Services Committee has held markups of a number of reg relief proposals – many based on the ICBA’s “Plan for Prosperity” platform. IBANYS will be reviewing all of these state and federal proposals, and all the legislation to be introduced, as we continue to protect and advance the interests of New York’s community banks.

Steve Rice coordinates government relations and communications for the Independent Bankers Association of New York IBANYS Save Date Ad 11-17.qxp_Layout 1 11/27/17 State. He has worked in the New York banking industry and New York state government for more than three decades.

2018 CEO FORUMS

convenient settings, to reduce travel, cost and time away from the bank. We had an outstanding slate of speakers who shared their knowledge and expertise. Attendees, who also added continuing professional education (CPE) credits, heard about the latest attacks, how to reduce risk, participated in a “hands on” interactive session of a cyber breach...and much, much more. The conferences were both timely and important in-light of such recent occurrences as the Equifax and Yahoo data breaches. The program was designed for compliance officers, HR managers, IT security personnel, cashiers, training officers and branch managers of New York community banks, with presentations and discussions covering: • state of the threat landscape: update on latest attacks you need to know about • managing governance to reduce cybersecurity risk 10:22 AM Page 1 • incidence response tabletop exercise • putting fraud to the fire • sex, lies and mobile devices: the seedy

underworld of mobile [in]security • if you think cybersecurity is about compliance, you’re already on your way over the falls We also recently realized a significant victory on a key part of our IBANYS state legislative program, when Gov. Andrew Cuomo signed into law S. 3758-A (Hamilton), same as A. 8129-A (Zebrowski). It is now Chapter 380 of the Laws of 2017. Our Director of Government Relations andw Communications Steve Rice addresses this issue in his “Public Affairs” column elsewhere in this issue. Meeting membership needs and priorities, providing quality educational programming, advocating for community bank interests – all these and more will always be on our IBANYS agenda, both in 2018 and in the future. You can bank on it. ■ 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.

Independent Bankers Association of New York State

save the dates

Mar. 26-28 March 26 Albany/Utica LENDING March 27 Syracuse/Binghamton/Ithaca CONFERENCE March 28 Rochester/Buffalo

June 5-6

Meeting locations TBD

Woodcliff Hotel & Spa 199 Woodcliff Drive Fairport, NY 14450

COMPLIANCE CONFERENCE

March 20 March 21

Hilton Garden Inn Rochester/Pittsford* Hilton Garden Inn Troy*

SECURITY CONFERENCE

June 19 June 20

Hilton Garden Inn Rochester/Pittsford* Hilton Garden Inn Troy*

DIRECTORS CONFERENCE

April 10 April 11

Hilton Garden Inn Rochester/Pittsford* Hilton Garden Inn Troy*

CEO FORUMS

Aug. 8-10

HUMAN RESOURCES April 24 CONFERENCE April 25

Hilton Garden Inn Rochester/Pittsford* Hilton Garden Inn Troy*

Aug. 8 Albany/Utica Aug. 9 Syracuse/Binghamton/Ithaca Aug. 10 Rochester/Buffalo

BANK EXECUTIVE SYMPOSIUM

Watkins Glen Harbor Hotel 16 N. Franklin Street Watkins Glen, NY 14891

May 7-9

Formerly CFO/Sr. Management Conf.

Meeting locations TBD

ANNUAL CONVENTION & TRADE SHOW

Sept. 25-27 Hilton Albany 40 Lodge St. Albany, NY 12207

*Hilton Garden Inn Rochester/Pittsford, 800 Pittsford Victor, Pittsford, NY 14534 Hilton Garden Inn Troy, 235 Hoosick Street, Troy, NY 12180 19 Dove Street • Suite 101 • Albany, NY 12210 • (518) 436-4646 • (518) 436-4648 • www.ibanys.net

Fourth Quarter 2017 | 7

MOBILE PAYMENTS | By Tina Giorgio, president and CEO, ICBA Bancard

Getting a Slice of the $86B P2P Pie

Business Insider estimates that P2P mobile payments could represent $86 billion in 2018, but as I speak with community bankers from across the country, the common refrain I hear when I broach the topic of P2P is, “Why does my bank need a P2P solution when there is already an abundance of P2P solutions in the marketplace?”

hile it’s true that consumers have a number of P2P options, as I referenced in my last blog post, the majority of consumers prefer to use financial solutions offered by their bank and would gladly make the switch. There is a twofold reason for this: security and privacy. Consistent with federal and state laws and regulations, banks have trusted procedures for protecting, storing and accessing customer data and are routinely examined to ensure compliance. Many nonbank P2P apps are more social than secure. They can access social media sites and features on the device such as cameras and contacts, in addition to accessing bank account login information. Some even post customers’ payment activities on social media sites. Nonbanks offering financial services are subject to the same laws and regulations as banks, but not the same oversight and examination. Let’s take a look at what I consider some of the best-inclass P2P solutions in the marketplace today. 8 | Banking New York

Easiest enrollment – Square cash: While enrollment in Square cash is one of the quickest and easiest to complete, the service has limitations. Square cash holds your money in your Square cash wallet until you request the funds be transferred to your bank account. Transfers take one to two business days, unless you are willing to pay a 1 percent fee for immediate availability. Greatest flexibility – Paypal: Without a doubt, Paypal has the most flexibility and the most users. In recent months, Paypal’s partnerships with banks and the card networks allow it to offer the fastest availability without a fee (debit card). However, users do not have to transfer their money to their bank account (a process that can take at least a day). They can simply leave it in their Paypal account and use it for purchases. Speed – Venmo: Owned by Paypal and geared toward Millennials, who are adopting Venmo at double digit rates, Venmo is easy to navigate. Sending money is fast and it sends messages in social media about payments giving it appeal with Millennials. (This is why it is coined a “social money app.”) However, it still takes one to two business days for a Venmo transfer to be available, and it requires the user to immediately surrender the login credentials to their bank account. Biggest potential game changer – Zelle: According to Early Warning Systems, the bank owners of Zelle (short for Gazelle), their app will represent 60 to 70 percent of the U.S. DDA market. This could be the first P2P system with ubiquity thanks to the integration being built by FIS, Fiserv and Jack Henry, eliminating two of the biggest adoption hurdles – user fees (Zelle is free) and interoperability of existing apps. Couple that with near-time and eventually real-time payments, this one is sure to disintermediate the fintech solutions. Of course, there are many other P2P solutions on the market – Dwolla, Amazon, Snapcash, Google and Apple Pay, to name a few. P2P solutions are expanding into e-commerce, m-commerce and small business applications, which should further increase their popularity. Now is the time for community banks to embrace P2P. Even if your clients aren’t asking for it, they will use it, and they will thank you. Next issue we will dive into The Clearinghouse’s Real Time Payments system, the first new payments system “rail” in decades. ■ Tina M. Giorgio is president and CEO of ICBA Bancard, the largest national credit card program exclusively for the nation’s community banks. She joined the company in 2016 and focuses on developing strategies to leverage the brand among current and new customers.

SECURING ASSETS | By Steve Viuker

Advisen Conference Covers Cyber Risks

he cyber world, along with all of its potential complications and setbacks, was the focus at a recent Advisen conference held at the Hyatt in New York City.

For the first time in seven years, the results of an Advisen survey – released at the event by Zurich Insurance – showed a decline in how seriously C-suite staff views cyber risk. • Sixty percent of the risk professionals surveyed said executive management views cyber risk as a significant threat to their organization. This is down from 85 percent in 2016. • Only 53 percent of respondents knew of any changes to their companies’ cybersecurity systems in response to the high-profile attacks that took place in early 2017. • Growth in the pu rchase of cyber insurance has gone stagnant after a steady six-year increase from 35 to 65 percent.

2017 has seen several high profile cyber events, with data security losses impacting millions of consumers’ personal information, and malware and ransomware attacks that swept through businesses shutting down network systems, and in many cases, slowing or actually halting business operations. Last year the average cost of a cyber-related business interruption loss reached $3.7 million in the health care industry alone. Banking New York chatted with three very interested observers at the conference for their takes on cyber threats going forward. “There was a 20 percent dip in the perception of cyber risk as a significant threat by c-suites and executive leadership. That was a surprising result for us,” said Erica Davis, head of specialty E&O for Zurich North America. “The New York state financial institution regulation that recently passed is the strictest in the nation and I believe will set a new standard for other statutory requirements going forward.” Davis pointed out that heavily regulated and consumer classes of business such as banking and health care have become early adopters of cyber insurance products. “Much has been said about infighting between various agencies regarding cyber regulation,” said Molly McGinnis Stine, partner, Locke Lord. “I don’t know if I would call it infighting, but equally motivated parties trying to come up with good solutions. They all need to coordinate and talk to each other. State officials have encouraged the federal government to allow states to be more protective if a state so chose.”

“Businesses must realize that threats are evolving,” explained Davis. “They no longer are just centered on privacy data and integrity issues. Business continuity and interruption threats are at the forefront of the threat environment. The ransomware attacks during the summer have demonstrated that.” Ted Augustinos, who advises clients on privacy and data protection, cybersecurity compliance and breach response at Locke Lord emphasized the new reality for financial services and other sectors. “Firms will have to continue to up their game and invest in new technologies. It also means increased awareness of the threat environment and the training of employees because the human factor cannot be taken out of the equation.” As for whether top-level employees should be held accountable, McGinnis Stine said, “It needs to be an all entity endeavor. Whether it be the CEO or the newest employee, all are part of the solution and must protect what information they have and decide what information to retain in the first place.” Stine said the New York DFS regulations are clearly a significant change. “They have served as model for other stets to consider and for other industry sectors” Going forward, Stine advised firms not to tackle cyber issues in-house. “Even well-equipped companies are self-defeating if they try to do it all themselves. There is now a tendency to turn to lawyers and crisis communications experts.” ■ Fourth Quarter 2017 | 9

TOP PRIORITIES | By Tom Long, Principal, The Long Group

The Discipline of Growth

reating operating leverage or growing revenue faster than expenses is the essence of business. With compressed margins the new normal, lifting or accelerating the growth trajectory is an economic necessity. In a thin margin business, stimulating top line revenue growth is a priority for every financial institution.

The Law of Diminishing Returns An organizationâ&#x20AC;&#x2122;s ability to grow is impacted by two factors, sales volume and attrition. Consider that there is a sales and attrition dynamic within each product line determining not only the composition of the balance sheet but its growth rate as well. Furthermore, every product line and market that the bank competes for business can be plotted on a growth curve. Uncovering benchmark statistics will allow the financial institution to anticipate the challenge. Generally, as each product line portfolio grows, should the attrition rate remain unchanged, the absolute volume of business that is required to be replaced expands. This attrition volume will eventually approach or exceed annu-

10 | Banking New York

al sales volume, compromising growth. Stagnation arises when attrition equals sales volume while contraction occurs when attrition exceeds sales volume.

The Growth Paradigm The core activities to ensure growth include improving the stability of the account base, competing in new product lines, or entering new markets to leverage the existing product set. For the last 24 years, The Long Group has been surveying both consumers and businesses regarding financial service usage (ownership) and behavior (the access and maintenance of their relationship), capturing evolving trends. Here is what the proprietary database suggests as financial institution priorities.

The Advantage of Focus: Improving Retention At the typical financial institution, four months of the year are spent on growth. The sales volume acquired over the remaining eight months of the year is invested in replacing business lost through attrition. Reducing attrition is a quantifiable exercise. Specifically, customers

that maintain a one or two account relationship generate churn. Therefore, the average size of a client relationship determines longevity with client tenure expanding by 50 percent among those households that maintain three or more balance sheet account relationships with the institution. While automating sales production has strategic benefits, the typical financial institution remains in search of an executable plan to expand share of wallet.

Improving Market Penetration The branch is rapidly morphing from a transaction center to a sales center with many financial institutions unprepared for this opportunity. Often financial institutions operate within specific branch markets without the knowledge of focus. Knowing the product lines that will contribute to each branch’s growth is essential. Establishing feasible, realistic and appropriate product line sales volume frames expectations. In addition, creating a plan to capture the identified opportunity produces accountability. It starts with the knowledge necessary to generate the strategy and focus required to launch impactful business development activities on a branch-by-branch basis.

Entering New Markets Branching today represents a significant investment and as such requires a disciplined approach to making decisions. To sustain growth necessitates a thoughtful pro-

cess to evaluate potential new markets, each of which are competing for capital. Once de novo branch market priorities are established, discovering a specific site with the locational advantages to successfully penetrate the market reveals a means of entry. However, branching momentum is determined pragmatically by quantifying the profit and loss impact of the branching decision. New markets, successfully identified, accelerate top line revenue growth and drive financial performance. The benefits to branching are great. So are the consequences. Manage the risks with an analytical approach to branch expansion.

Think Strategically Growth requires discipline and discipline requires focus. Thinking strategically will allow the financial institution to behave tactically. Examine whether or not the institution has a solution to expand customer relationships. Create a mechanism to understand, evaluate and capture the incremental product line opportunities available within each existing branch market. Construct a profitable branch expansion blueprint. Plan for success by closing the knowledge gap to improve performance. Tom Long is the principal at The Long Group, a Merrimack, New Hampshire-based provider of tactical guidance and insights to financial institutions. He may be reached at tomlong@longgrouponline.com or at (603) 424-5664.

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Fourth Quarter 2017 | 11

Millennials Opt for Personal Loans at Higher Rates than Previous Generations

Low Homeownership Rates and High Student Loan Debt Combine for Lending Opportunity

12 | Banking New York

By Bram Berkowitz

he explosion of fintech has credit cards declining and personal loans trending. That’s according to a recent study published by the credit information company TransUnion that looked at credit origination trends between Millennials and Generation X. The study analyzed the borrowing trends of both generations when they were between the ages of 21 and 34 – Gen X credit trends were examined in 2001 and Millennials in 2015. The findings from the study show that Millennials on average carry two fewer bank cards and private label cards than Gen X, but take out higher interest rate, no-collateral personal loans at nearly double the rate of the preceding generation. “Personal loans are definitely becoming more common as a result of fintech companies like Lending Club and Prosper that are making it affordable to get an attractively priced personal loan for any purpose,” Ben Malka, a partner at F-Prime Capital who focuses on fintech investments, told Banking New York.

Increasingly Common

The origination rate of personal loans to Millennials in the study was still marginal at 4.33 percent in 2015, but the product is only expected to gain in popularity as the generation ages. “Younger borrowers offer lenders more growth opportunities in the future, as the largest volume of loan originations occur the decade after consumers turn 40 years of age – a time when many consumers are near their peak earnings,” Ezra Becker, senior vice president and head of TransUnion’s global research and consulting group, said in prepared remarks. Roughly 24 million consumers, or about 10 percent of American adults, were either very likely or somewhat likely to take out a personal loan, according to a 2016 Bankrate survey conducted by Princeton Survey Research Associates International of adults living in the U.S. Nearly one-fifth of that 10 percent of respondents were 18 to 29 years old. Personal loan growth has appeared other age groups and financial institutions as well. According to earlier TransUnion research, of the total 15.82 million consumers that had personal loans at the end of 2016 (the highest level

since at least 2009) totaling $102 billion in volume, Baby Boomers and Gen X made up 32.8 percent and 31.6 percent of that space respectively, compared to Millennials at 26.6 percent. Credit unions raked in 30 percent of those Millennials, compared to fintech at 26.3 percent and banks at 26.1 percent.

Growth Opportunity

Personal loan products made gains as Millennials shouldered more student debt and other forms of credit became harder to obtain. Student debt, which exceeds $1 trillion nationwide, is contributing to a reduced homeownership rate for the Millennial generation compared to earlier generations. According to the TransUnion study, only 5.16 percent of Millennials took out mortgages in 2015, compared to over 9 percent of Gen X in 2001. Reduced homeownership rates and the Great Recession’s impact on equity lending resulted in a growth opportunity. “This created an opportunity for a product to fill the gap,” Malka said. “HELOCs had more stringent standards and personal loans got easier.” Credit unions are well positioned to take advantage of this trend due to their strong relationship building, but fintech is poised to make the biggest move, according to according to PwC’s 2017 Global Fintech Report. In the survey of 1,308 financial services and fintech executives, 56 percent of respondents say customers are already obtaining personal loans via fintech companies. The report also found most bankers see personal loans as one of the riskiest reasons to move one’s financial accounts to a fintech company, but Millennials don’t agree. “Digitalization allows consumers of all ages to more easily ‘shop around’… making the process less onerous,” Nidhi Verma, co-author of the study and vice president in TransUnion’s innovative solutions group, said in prepared remarks. “This is the market Millennials have grown up in, and the one in which they most naturally operate.” ■ Bram Berkowitz is the banking reporter for The Warren Group, publisher of Banking New York.

Fourth Quarter 2017 | 13

SOCIAL MEDIA IN YOUR COMPANY | By Neil Berdiev

To Control or Not to Control – Or What to Control, Why and How?

magine your executive office gets a call from the New York Times for comment on a highly controversial social media post made by your employee. The reporter wants to know if this provocative view is representative of your organization and if it is consistent with how you do business. Soon after clients began calling, fuming over the comments. And finally a board member and a regulator call, looking for an explanation. This is probably one of your corporate PR nightmares, besides perhaps the president firing up or firing back at your colleague’s social media post in his midnight tweets. Neil Berdiev Like never before, it is critical to have a social media corporate policy. What’s even more critical is to have this policy develop into awareness and active thought process, a thoughtful part of your business culture that builds on your colleagues’ natural talents and interests while protecting your good name from tragic social media faux pas. A recent controversial opinion post by a New England commercial bank’s executive vice president and chief risk officer on LinkedIn on a social phenomenon publicized by the current administration made me revisit issues I faced a few years ago due to my interests in business writing – the risks and opportunities my employers had to evaluate and decide on. Here are some of the questions they were asking themselves: • What part of social media is truly personal and what part is professional? • How do we balance fostering visibility through our employees for our organization, as suggested in Wired.com and other resources, with risks of posting something we and our colleagues may live to regret? • If our employees are involved in writing, posting, or the gig economy on their time, how do we balance allowing them to develop their talents to be fulfilled and engaged employees with managing risks to our organization? • And my favorite and very blunt: What do we control, why and how, and how do we learn about a situation before it blows up on the front pages of Bloomberg or the Wall Street Journal?

As social media permeates everything, with that come opportunities, risks and numerous business, ethical and legal implications. Suppose an employee of a commercial bank makes an honest comment about a particular investment service and creates good visibility for your bank. There’s one slight problem – one of your largest clients holds an equity stake in the service, and they are now livid about this, in their view, disparaging assessment labeling the service to be in14 | Banking New York

ferior to its competition. In another instance, an executive of a commercial bank makes comments in a public discussion forum that were well-received – until an activist group picks up the post and boycotts the bank for the views of the executive. Even well-intended social media activities can have unintended mishaps. The stronger and the more controversial are the issues discussed, the greater may be the reaction of some on social media. The most fundamental questions for your executive team to answer are: • Do we have a social media policy? • Do our employees know it and, more importantly, do they understand it? • Even more important, do they agree and do you have their buy-in? • Even much more important, are employees prepared to and do they actually follow your social media program? One the side of social activity is an employee potentially doing something foolish, inappropriate and reckless that can get her or him disciplined or even fired. There are a number of examples of bankers being fired over the last few years for racist rants or otherwise inappropriate posts, possibly causing reputational damages for their employers (e.g. Bank of America, Regions Bank, Kennebunk Savings Bank, MTC Federal Credit Union and others). There is also another side that stems from opinions that are strong and controversial that can entangle your business in a quagmire of controversy because they may be misconstrued as your corporate opinions, especially if the individual is a senior or executive manager. That is also a dangerous side because it can lead to deep damages to your company’s reputation. What’s especially harmful in these situations is that whatever your reaction, or lack of thereof, you may be setting a precedent if you treat one employee differently from another. As one head of social media program noted, once you make an exception, others will use it against you. A 2011 social media survey by the Society of Corporate Compliance and Ethics revealed that 42 percent of respondents reported that their organizations had to discipline an employee for behavior on sites like Facebook, Twitter and LinkedIn. That’s up from 24 percent in 2008, and it is logical that those numbers are even higher now in 2017 and will continue to grow.

INTERNAL IMPLICATIONS Suppose a senior manager posts views that are not agreed with by all in your organization, and the statements were not formally approved by your company. What if some team members, possibly direct reports, think differently and

disagree? If colleagues speak out against these views and get into trouble, you’ve potentially created an HR situation. What if this online post gets out of control by non-employees with offensive or threatening content? Your employee was the one who started the thread and that person’s and your bank’s names are now passed around with highly damaging content. What if other, perhaps more junior, employees post something similar but now your senior management does not like it and squashes it? Now you’ve permitted something for a senior manager but went after a lower ranking employee under similar circumstances.

EXTERNAL IMPLICATIONS The realm of clients, prospects, business partners, referral sources, regulators and other parties is even broader and more complicated to manage. They may have a negative personal or corporate reaction to your employees’ social activity, which can spill over into the business and how individuals think about your organization. Senior managers and executives must be held to the highest standard; they are your torchbearers, setting examples for employees and external parties. Some marketing and PR teams want all social media comments by senior managers to go through them, as the “big egos that can come with high level jobs” is a risk they can’t afford.

As reminded by our corporate counsel and employment matters expert, generally speaking there is no First Amendment when it comes to social media and your place of employment. The First Amendment is for the matters of freedoms of speech and the state and matters of public concerns, not when it comes to saying what you want and when you want online, if it goes against your employer’s policies (contact your attorney on specific questions though, including on the protected activity under the NLRA). We live in the age of opinion activism with free access to the national audience microphone, 140-character comments, sound-bites rather than dialogue and rash and sometimes wellintended but ill-executed posts. Time and resources invested now will pay off handsomely by preventing costly situations in the future. A complete ban on social media does not make sense and likely won’t work. What your employees need is a well-defined written program, guiding principles and awareness, expectations, do’s and don’ts, rights and responsibilities, and resources to ask questions and get supportive guidance. Be fair to your employees and to your business! ■ Neil Berdiev is a commercial banker and co-founder of DNB Advisory LLC, a commercial credit advisory firm. He may be reached at neil@dnbadvisory.com.

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EFFECTIVE COLLABORATION | By Angie O’Donnell

Cultivating a Well-Functioning Team

s a financial executive, you probably find yourself pulled in multiple directions all day long. To achieve what needs to get done, you have to rely heavily on your team to execute on both the long and short-term objectives. Given this, it is vital that your team is strong and well-functioning, and agile enough to keep pace with constant organizational change. But highly functional teams don’t just “happen” – they require intentional focus and attention on a regular basis from the leader – and while this may seem like another daunting task to add to your list, the payback is worth it. In fact, some research indicates that well-functioning Angie O’Donnell teams are up to 30 percent more productive than average teams. In my work with teams over the years, one of the most common things I hear leaders say is: “My team is a group of highly qualified professionals and they can figure it out.” If this was as easy and obvious as it sounds, the team effectiveness industry wouldn’t still be growing! Evidence of this is the September issue of Harvard Business Review where the lead article is dedicated to avoiding team burnout. The reality is that cultivating a well-functioning team, whether it be a soccer team or a loan origination team, requires that the team act collectively, and not as just a group of individual subject matter experts. As the leader, it will force you to flex your style to become more facilitative, and less authoritative, so that the team can learn to function effectively without your constant guidance. When a team can achieve this kind of independence from the leader and greater peer-to-peer interdependence, the team hits its stride. We’ve developed a team effectiveness framework that guides teams through a day-long process of thinking collectively, with plenty of experiential learning, and can be done with or without the team leader. The framework is called PRIMED which stands for purpose, roles and responsibilities, information sharing, measurable goals, engagement rules and decision making. Intuitively, the PRIMED framework probably makes sense to you, but our experience is that common sense does not equal common practice when it comes to teams. They get it intellectually, but they’re not disciplined in the practice of team effectiveness behaviors, and the list of deliverables will dominate the team’s time and energy. 16 | Banking New York

As an experiment, ask everyone on your team to send you an email with a one-sentence summary of the purpose of the team. You may be surprised at the lack of alignment in what seems to be an easy request, and one that you believe should be obvious to everyone. Too often, we see that the purpose statement is overly simplistic like: Hit our revenue goals, and doesn’t reference any qualitative or behavioral aspects of teams that have great reputations internally. If you follow or play sports, you know that common purpose is a critical aspect of every successful sports team, yet we often make the mistake of assuming the purpose is understood and shared among team members. Once purpose is clear and agreed upon, the team can cascade that to the rest of the elements of the PRIMED framework by working through a set of guiding questions and quick team exercises. The most difficult part for many teams is defining their Engagement rules, which includes defining the behaviors that won’t be tolerated on the team and how the team will approach members who violate the engagement rules. Teams may also struggle with how they will resolve conflicts that arise among team members, but the struggle will be worth it when the team learns to defuse interpersonal tensions that make them uncomfortable without triangulating with the leader. These are aspects of healthy team dynamics that allow the team to focus their collective intellectual horsepower on the business goals, and not get mired down in toxic team behavior. Cultivating a well-functioning team is an on-going leadership imperative as team members change, team purpose shifts, and organizational change occurs. You may want to use a framework like PRIMED to refresh a team, launch a team, or take a team to a new level of greatness. All teams like to win, and to be perceived as the team that everyone else would like to be part of; this creates a positive team mood and the needed optimism when the team is struggling. As the leader, you don’t have to provide all the inspiration – the team can create its own environment if they have the right tools and some space to cultivate a positive team culture. Imagine the business impact of your team being 30 percent more productive, and having a reputation as the best team to be part of. ■ Angie O’Donnell is an executive coach and co-founder of 3D Leadership Group, a Boston-based leadership development firm. For more information, please visit www.3dleadershipgroup.com.

WHERE ARE ALL THE WOMEN? | By Bram Berkowitz

In Finance, Girls are Worth the Investment

hen she was chief investment officer for the New York City Retirement Systems, Seema Hingorani always had the same question for the many asset management companies she met with: “Where are all the women on your investment team?” The male executives all seemed to have the same response: “We never get any resumes from women.” Instead of waiting for the problem to correct itself, Hingorani, the founder of SevenStep Capital who has held numerous senior positions at various hedge funds, set out to be the solution. She founded Girls Who Invest in 2015; the nonprofit’s goal is to get more female fund managers into asset management and other realms of finance. Hingorani aims to have 30 percent of the world’s investable capital managed by women by 2030. “I don’t take no for an answer easily,” Hingorani told an audience at BNY Mellon Wealth Management’s “Game Changers” speaker series in Boston last week. “The industry is ready for this.” The daughter of Indian immigrants who came to America with $50 to their name and went on to start successful businesses, Hingorani took the entrepreneurial route to solve the imbalance she first noticed while interning on Wall Street. Before she even had a program, Hingorani began promising private equity firms that she would find them qualified female interns. But she soon discovered that awareness was not a one-way street. “Girls did not know they could make a positive impact in this industry,” she said, adding that the financial crisis had painted a tough image. But once women saw the positive impacts investing has and can make, they flocked to the program. What started as a 10-page business plan quickly turned into a program that has raised $3 million in two years, and now receives 450 applications from 80 different colleges, awarding 60 internships. Ninety percent of program participants lock down full time offers when they graduate. The program starts with a four-week, all expenses paid crash course at the University of Pennsylvania, where the women learn core investment and finance concepts from highly regarded business school professors and industry leading practitioners in the asset management business. The courses are capped off with a final presentation, where the women are split into teams and make recommendations – after weeks of research – on whether to buy or sell certain stocks. Participants are then placed into six

Seema Hingorani (left) and Vicary Graham at BNY Mellon Wealth Management’s Game Changers event in Boston on Nov. 2.

week paid summer internships at leading asset management firms around the world. The program is preparing to add additional college locations for the course, and would like to spin off a high school program long-term. Hingorani says there is still much to do. Today, diversity in asset management worldwide is at a surprising low, with women and minorities running just 1.1 percent of the industry’s $71.4 trillion of assets. She said the program is always in need of more capital, would like to create an endowment and would like to see more venture capital firms, who already have image problems, partner with Girls Who Invest. “Women are a big part of the consumer economy,” said Hingorani. “Companies are missing out on a lot by not having women at the table telling you where to invest your money.” ■ Bram Berkowitz is a staff writer for The Warren Group, publisher of Banking New York. Fourth Quarter 2017 | 17

INDUSTRY EVOLUTION | By Ray Belanger

Banking on Savings and Security

sk any bank branch manager to define “banker’s hours” in 2017, and you’ll most likely hear a description of branches which stay open until 6 p.m., are open on weekends and have a 24/7 component for ATM/online banking. What a world of difference between today and several decades ago when “bankers’ hours” defined a cushy job, where the branch rarely stayed open past 3 p.m. Just as the ways in which banks do business has changed (from the oldfashioned passbooks to today’s online Ray Belanger services), so too has the technology by which banks generate documents, as well as protect and store information. The old practices of throwing out paper documents with vital financial information have given way to intricate shredding systems which assure everyone from banking officials to customers that vital information remains secure. And, as banks evolve more and more toward “paperless,” there are other changes in the industry as well. Increasingly, directors and trustees are scrutinizing bottom lines for banking operations, while also looking over their shoulders to make certain that information is protected securely. One data breach becomes a public relations nightmare. Faced with the challenges of protecting information and lowering costs to produce paper documents, banks increasingly may seek to adopt the MPS (Managed Print Services) means of generating their paper documents. Banks and financial institutions spend up to 3 percent of annual revenue on document output, underscoring the need to track equipment usage, reduce costs and increase efficiencies. This has given rise to a major shift in how organizations generate documents and communicate internally and externally. Within that 3 percent, MPS can reduce the institution’s costs by 15-20 percent. So if an institution spends $200,000 annually to generate paper documents, the right program will save a bank up to $40,000. It looks at the per-page cost as the bottom line, in contrast to the final price point of office equipment – and all costs associated with leasing/owning and using printing and imaging equipment, including maintenance and ongoing support – an element that is of particular significance for lending institutions with multiple branches. Print management software tracks the number of prints each piece of equipment uses and produces reports, that help manage for increased efficiencies. While there is an abundance of fairly inexpensive desktop printers, copiers and multifunctional devices at vir18 | Banking New York

tually every “big box” store, when the cost of replacing cartridges is added to the mix, the $129 printer can end up costing 7 cents or more per page. And with many lending institutions now using color when copying, it becomes even more critical to have current technology that allows the control and management of usage. It begins with an initial in-depth analysis of an institution that evaluates the existing printer fleet, current costs, operational bottlenecks and IT department time spend. Then it’s an evaluation of at all phases of document generation, from the cost of the equipment and supplies through necessary service support. And it helps institutions take an objective look at the amount of internal IT resources it is using to support its users printing equipment. The right configuration could remove a lot of printing and document generating devices, and streamlining the flow of communication. Many institutions have multiple and different types of printers, toner, copiers and scanning units. Operating them independently can be very costly. With a plan in place for fewer machines, but which are used efficiently, there can be other saving initiatives. Simple strategies such as going from a single sheet of paper to duplexing can not only save costs but contribute to a greener culture. And, security is critical! With increasing concerns about data breaches, information must be secure and compliant. Many of the copying and printing devices have hard drives and can store information, which in turn must be overwritten or deleted before the machine is returned to the leasing company in favor of a newer piece of equipment. It’s critical to have a plan in place to be certain that information stored on a printer or copier hard drive is secure, through being over-written or in some cases through having the hard drives shredded. An increasingly important component of an MPS system is an in-place tracking software program that enables the provider to monitor clients’ systems remotely, alerting them to potential misfeeds or low toner, thereby averting work stoppage. MPS is an effective mechanism to reduce waste, recycle paper, ink and other resources. It is a “green” document solutions approach that is not only cost effective, but can also lower the carbon footprint of a healthcare facility. And in the banking industry in particular, where sensitivity and protection of equipment is essential, it makes sense to have the most efficient and secure means of generating documents – as well, of course, as a secure system. ■ Ray Belanger is president and CEO of Bay Copy, based in Rockland, Massachusetts.

COMPLIANCE CORNER | By Benjamin Giumarra

New Compensation Model for HELOC Origination Would Benefit Banks

different method of compensation for HELOC originations might give some banks a strong advantage over non-depository institutions. So why aren’t any institutions trying this? Let’s start with some observations: First, depository institutions are losing ground to specialized non-depository mortgage and consumer lending companies. Mortgage lenders are making greater strides in customer service, closing speeds, efficiencies, technologies and market shares than their depository peers. (Generally speaking, Benjamin Giumarra of course.) Why is this happening? Well, I suppose we could debate that forever. Maybe the increasingly complex mortgage/consumer lending industries just require more focused attention. Perhaps regulatory burdens are hitting depository institutions harder. Maybe conservative boards of directors are stifling innovation and limiting competitiveness. Second, the market for mortgage loan originators is tough. Many depository institutions are highly reliant on individual sales officers, having failed to develop healthy online or third-party origination channels. Yet avoiding turnover at this position is difficult given the willingness of non-depositories to aggressively pursue established sales representatives. Third, the ability to offer home equity lines of credit (HELOC) is an advantage that depositories have over most non-depositories, who rarely have the ability (or incentive) to offer these in large quantities. Fourth, the HELOC market presents a serious opportunity for growth for the foreseeable future; as home values rise (and equity grows), many consumers remain locked in to 30-year mortgages at super low rates. Also as my colleague Peter Milewski points out, HELOCs “can be a creative CRA tool that enables lending for home improvements in low- and moderate-income census tract. The home improvements made to properties with deferred maintenance can help stabilize a street or neighborhood. It can also be a lower cost alternative to refinance-rehab and reverse mortgage for elderly homeowners, who may house rich but cash poor.” Fifth, most depository institutions don’t incentivize originators to originate HELOCs, at least not very heavily. It’s difficult to assess the value to the institution of a HELOC at account opening, so it’s difficult to compensate originators very heavily up front. Between two borrowers, each with a $200,000 line of credit, one might borrower $10,000 over the life of the line and the other may draw on the full amount of the line repeatedly. How could you possibly know what to pay an originator upfront? HELOCs are also generally easier to originate the first mortgages. Sixth, HELOCs are relatively less burdened by regulatory standards than closed-end mortgages. TILA’s anti-steering regu

lation doesn’t apply to HELOCs, nor does TILA’s limits on loan originator compensation. Seventh, the new HMDA requirements are bound to expose some fair lending problems stemming from the incentive to sell closed-end first mortgages instead of HELOCs. Previously unreported, all lenders with 500 or more HELOCs per year will have to collect and report HMDA data for HELOCs. This will expose instances where it appears borrowers are over-sold into first mortgages instead of receiving less expensive and more convenient HELOCs. Imagine two borrowers with the same credit profile walk into a bank on the same day: They each have an existing mortgage at 3.25 percent interest with 60 percent CLTV, representing $160,000 in equity. They both have a child entering college, and while they’ve saved to help with tuition, they want to be financially prepared, especially for items they may be unable to predict or haven’t decided upon yet. Imagine borrower speaks with a branch personnel and gets a $50,000 HELOC with no closing costs. The second borrower is referred to a mortgage originator and decides to refinance his existing mortgage at a 4.25 percent to pull out $50,000 in equity, which he plans to store in a savings account. There might be a perfectly legitimate explanation for this, but you can see how there is a risk of potential disparate treatment, right?

STAY THE COURSE OR CASH OUT So my thesis is this. Depository institutions should structure originator compensation to incentivize HELOC lending by paying out as borrowers actually use (and reuse) their HELOC. While unusual in the financial industry, this is a familiar compensation structure in other industries, such as the insurance business. This would both incentivize HELOCs, capitalizing on an advantage over non-depositories, and help reduce turnover by mortgage originators, whose loyalty would be tied to an organization where it can build a portfolio of HELOCs. This could be done based on profitability, because HELOCs are not subject to TILA’s compensation limitations. I’m assuming that, at an institution that currently pays originators a $100 flat fee per HELOC, originators aren’t going to complain about getting paid years later. And I envision a clause where an originator leaving the institution would be able to “cash out” his or her HELOC portfolio, although at less favorable terms than if the originator stayed the course. But I haven’t heard of anyone doing this. My question is – why not? ■ Ben Giumarra is a risk management consultant with Braintree, Massachusetts-based Spillane Consulting. He may be reached at BenGiumarra@SCAPartnering.com or (781) 356-2772. Fourth Quarter 2017 | 19

INDUSTRY NEWS

CATSKILL HUDSON BANK’S BOD NAMES NEW PRESIDENT Catskill Hudson Bank announced Kevin S. McLaren has been appointed president of Catskill Hudson Bank by its board of directors. McLaren joined Catskill Hudson Bank in December 2010 as executive vice president and chief administrative officer and was subsequently promoted to COO. He has nearly 30 years of banking experience, having held numerous positions at banks throughout the Hudson Valley. Prior to joining Catskill Hudson Bank, he was president and COO and a board member of The Stissing National Bank of Pine Plains. Presently, he is the board chairman for Ulster County Habitat for Humanity and past president of both the Saugerties Boys and Girls Club and Saugerties Economic Development Committee.

KEYCORP ROLLS OUT DIGITAL TREASURY MANAGEMENT PLATFORM KeyCorp recently launched its KeyNavigator, a digital treasury management platform designed to enable businesses to manage all their commercial banking services, accounts and activities in one place. The platform is intended to streamline daily cash management activities and integrates with clients’ business systems, allowing treasury professionals to make financial decisions quickly, easily and securely. Additional KeyNavigator features include insights and analytics, notifications and alerts, information management and fraud prevention tools. “The launch of KeyNavigator is another example of our strategy to be digitally focused and drive real business value for our clients,” Ken Gavrity, group head of KeyBank enterprise commercial payments, said in a statement. “It was designed with next generation technology that provides a flexible platform as we continue to innovate and add capabilities in partnership with our clients.” “We wanted to ensure this platform was ideal for users of all roles and companies of all sizes. With engaging new features, KeyNavigator is designed to help clients run their business better every day by providing digital resources to pay, col20 | Banking New York

lect, protect and stay informed in new and innovative ways,” Jordan Olack, head of core treasury and commercial digital product and innovation, said in a statement. “Clients can personalize the layout and display, and reports can be tailored to help envision and evaluate the complete financial picture.”

FIVE STAR BANK ANNOUNCES PERSONNEL CHANGES TO NEWLY RESTRUCTURED DEPARTMENT

Warsaw, New York-based Five Star Bank, subsidiary of Financial Institutions Inc., announced the recent hiring of a director of internal audit and three officers to lead teams within its recently restructured compliance department, and the promotion of an existing bankemployee to a fourth compliance officer role. Sean M. Willett is senior vice president and director of internal audit. Willett has 20 years ofexperience instituting internal control frameworks, process efficiencies, project management and enterprise risk management functions. Most recently, he was executive director and global head of regulatory affairs strategy and implementation for Morgan Stanley in New York City. Bethany L. Bowers is named fair and responsible banking officer and community reinvestment act officer, providing compliance support in the areas of fair lending, CRA, HMDA and UDAAP. She has 15 years of banking experience, most recently as a compliance specialist and assistant vice president at M&T Bank. Previously, she was compliance manager for retail and digital banking and vice president at First Niagara Bank, N.A. Michelle M. Kline is senior compliance officer, leading the team responsible for implementation of the bank’s compliance management program and providing retail banking and governance related compliance support, including regulation O and privacy. She most recently served as financial intelligence unit team leader at Community Bank N.A. Christopher Nowak is director of the bank’s financial intelligence unit and the BSA/AML and OFAC Officer, leading the BSA/AML, fraud and legal processing teams. He most recently worked as assistant BSA/AML and assistant security officer – assistant vice president at Evans Bank, N.A. M. Jordan Wiemer was recently promoted to senior compliance lending officer, primarily dedicated to delivering full compliance support to the bank’s lending business. He joined Five Star Bank in November of 2015 after working in client entity management and legal entity management for Goldman Sachs in Salt Lake City. ■

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BERKSHIRE BANK CHOOSES BOSTON HEADQUARTERS By Bram Berkowitz Berkshire Bank is ready to make its presence known as the first Bostonheadquartered regional bank in decades. Berkshire Hills Bancorp, the bank’s holding company, announced in a statement today that it has chosen the glossy, 38-story building at 60 State St., right in the heart of the city’s financial district, as its new corporate headquarters. Closing in on $11.5 billion in assets when it completes the $209 million acquisition of Commerce Bank, which is expected to occur this month, Berkshire will be the largest state-chartered bank in Massachusetts and the third largest regional bank headquartered in New England. The bank’s footprint stretches from Boston to Syracuse, New York, north to Rutland, Vermont and south into Connecticut, New Jersey and Pennsylvania, with a total of 113 branches following the Commerce acquisition. Berkshire Bank has been headquartered in Pittsfield and did not open its first retail branch in Boston until earlier this year. But the acquisition of the roughly $1.9 billion asset Commerce Bank paved the path to Boston. With the acquisition, Berkshire added three more branches in Boston, which will convert to the Berkshire brand in the first quarter of 2018. It also gave Berkshire several new branches in the Worcester area, which will remain under the Commerce brand, giving the bank a solid presence throughout Massachusetts. The acquisition also pushed Berkshire past the $10 billion asset threshold, which will subject the bank to Dodd-Frank stress testing and therefore higher regulatory costs. The bank expects to recruit diverse and talented staff to fuel its growth in New England’s largest market, and to capitalize on its presence in all of Berkshire’s communities. The company expects to begin occupying its new headquarters space in December. At that time, 60 State St. will become the home base for Berkshire’s senior executive leadership, together with local bankers in commercial, retail and private banking, as well as wealth management. Berkshire’s CEO and president have already purchased homes in the Boston area in anticipation of the year-end move.

NY PROPOSES CYBERSECURITY RULES FOR CREDIT-REPORTING, WARNS BANKS AFTER EQUIFAX BREACH The New York Department of Financial Services responded to the Equifax cyber attack by proposing to extend its groundbreaking data protection rules to credit reporting firms, in an at22 | Banking New York

tempt to fill a perceived regulatory gap. The New York regulator also issued a warning to banks on potential risk from the massive data breach and issued guidelines on how to limit damage. The NYDFS in the new guideline told financial services firms that heightened due diligence will be required after Equifax’s breach because “the scope and scale of this cyber attack is unprecedented” and could undermine the reliability of personal identifiers used to issue credit for millions of credit applications. “Initial reports indicate that hackers may have exploited a website application vulnerability to gain unauthorized access to very sensitive consumer and commercial data, which highlights the fact that financial institutions can no longer just rely on personally identifiable information as a means of verifying a person’s identity,” NYDFS Superintendent Maria Vullo said. The data breach surfaced just a week after the state’s firstin-the-nation cyber rules required the major banks and insurers to comply with rules to create strong internal controls and alert the regulator of any material breaches. Governor Andrew Cuomo proposed rules that extend the agency’s oversight to credit reporting firms for the first time and will mean they must comply with the same cyber security rules that apply to banks and insurers. New York moved to include the credit reporting firms under its cybersecurity rules because of their impact on covered banks and insurers. There was uncertainty in the financial services industry about liability in the Equifax breach since the NYDFS cyber security rules required banks and insurers to affirm the integrity of third-party vendors.

SURVEY: US MOBILE BANKERS PLEASED WITH BANK APPS Banks may not be perfect, but one product they seemed to have nailed down is the mobile application. A new survey conducted by Morning Consult for the American Bankers Association shows 87 percent of U.S. mobile banking users say their bank’s mobile app is “excellent,” “very good” or “good.” According to the survey, 71 percent of Americans use a mobile device to manage their bank account at least monthly, and 50 percent do so more than three times per month. Nearly half of consumers said in the survey they used their mobile device to cash a check in the past year, and 62 percent of those who have used it report using their banking app at least once a month. “Convenience has always been the main draw of mobile banking, but recent events have highlighted its importance and reliability when physically-based systems become unavailable,” ABA Senior Vice President Nessa Feddis said in a statement. “When branches and ATMs were closed or damaged by Hurricanes Harvey and Irma, mobile technology helped with the early stages of recovery by enabling businesses to meet payrolls and consumers to pay their bills. Mobile banking has become an essential component of the banking mix, and it’s something we expect to continue growing and evolving in the years ahead.” ■

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