Banking New York 4Q 2015

THE INDUSTRY MAGAZINE FOR FINANCIAL EXECUTIVES & PROFESSIONALS • FOURTH QUARTER 2015 • VOLUME 38

COMMERCIAL LENDING PICKS UP UPSTATE

Community Banks Hustle for Limited Share of Business Loans

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

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BANKING NEW YORK Volume 38 | Fourth Quarter 2015

16

Commercial Lending Picks up Upstate

Community Banks Hustle for Limited Share of Business Loans

04 PRESIDENT’S MESSAGE

Working Together to

Move the Needle

06 PUBLIC AFFAIRS UPDATE

Working Toward a Better Environment

for Community Banks

08 EMPOWERING HEALTH CARE

Suite of Benefits Can Help

Bank Employees Control Health Care Costs

12

26

22 FED STUDY

Durbin Had No Impact on Prices for Consumers

26 FINDING THE FACTS

Online Accounts: Perception vs. Reality

08

12 A LOOK WITHIN

Inside the Business Valuation Process: A Primer for Commercial Lenders

28 RESULTS OF BASEL III

High Volatility Commercial Real Estate:

Its Definition and Impact

30 SMALL CHANGE

TWG STAFF CEO & PUBLISHER Timothy Warren Jr. PRESIDENT David Lovins ACCOUNTING MANAGER Mark DiSerio SALES DIRECTOR OF BUSINESS MEDIA George Chateauneuf PUBLISHING GROUP SALES MANAGER David Janoff ADVERTISING ACCOUNT MANAGERS Bob Holzhacker, Mike Lydon, Claire Merritt EDITORIAL EDITORIAL DIRECTOR Cassidy Murphy ASSOCIATE EDITORS Malea Ritz, Joe Kourieh CREATIVE/MARKETING DIRECTOR OF MARKETING & CREATIVE SERVICES John Bottini PUBLIC RELATIONS & SOCIAL MEDIA MANAGER Ian Murphy DESIGN PRODUCTION MANAGER Scott Ellison GRAPHIC DESIGNERS Amanda Martocchio, Tom Agostino & Tyler Grazio

14 INDUSTRY NEWS 20 FRESH PERSPECTIVE

CONTRIBUTING WRITERS Scott Van Voorhis

What Every Banker Should Know about IT

22

©2015 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

IBANYS Board of Directors

Working Together to Move the Needle

Officers Chairman John Buhrmaster First National Bank of Scotia, Scotia

At our recent Annual Convention at West Point, I provided an update on IBANYS’ year to date, and a brief preview of 2016. IBANYS continues on the path of a sound fiscal condition, a strong and growing membership and effective and productive performance.

C

ommunity banking is a critical part of local and state economies and our neighborhoods throughout New York. Our challenge is to continue to keep IBANYS relevant and important to every community banker in our state, and the many businesses so important to our industry. We must continue to grow and strengthen John Witkowski our membership; develop recurring revenue streams for the association; explore new ways to provide tangible value and enhance operating efficiencies – both for IBANYS, and to help banks examine their own.

Our common challenges, issues and opportunities unite us far more than any artificial differences in geography, size or charter could separate us.

During 2015 we have offered major educational programs for community banks – many on a regional basis, to make them more convenient – and provide CPE credits to participants. We hosted regional compliance and security programs; our first-ever lending conference; our CFO/Senior Management Conference; regional directors conferences and our Annual Convention.

4 | Banking New York

On the membership front, we continue to meet with current and prospective member banks, associate members and preferred providers throughout New York to develop new ways to provide real value to all our constituents. We have launched new initiatives such as our Health Wellness Card program to offer banks and partner firms an alternative way of providing health benefits to employees while controlling health care costs.

We launched a partnership with the Buffalo Bills Alumni Foundation to support its “Cure the Blue” program to raise funds and awareness regarding prostate cancer research.

Of course, we have also been extremely active on the government relations and advocacy front in both Albany and Washington, as has been described in our public policy updates. This has included major efforts involving tax reform, regulatory relief initiatives, opposition to proposals that would have allowed tax-exempt credit unions to expand their powers and authorities and make an already uneven playing field even more so.

So yes, we’ve done some great things together at IBANYS in 2015.

What’s next?

Each day, we strive to answer a simple question: How can we serve the needs and interests of our membership (and potential members), banks and partner firms alike? Two ways we’re working to do so are initiatives I call continued on page 10 

Vice Chairman Doug Manditch Empire National Bank, Islandia Treasurer/Secretary R. Michael Briggs USNY Bank, Geneva Immediate Past Chairman Christopher Dowd Ballston Spa National Bank, Ballston Spa Directors Thomas Amell Pioneer Bank, Troy Ronald Bentley Chemung Canal Trust Company, Elmira Thomas Carr Elmira Savings Bank, Elmira Brenda Copeland Steuben Trust, Hornell Randy Crapser Bank of Richmondville, Cobleskill Ronald Denniston First National Bank of Dryden, Dryden Robert Fisher Tioga State Bank, Spencer E. Peter Forrestel II Bank of Akron, Akron Stephen Gobel First National Bank of Groton, Groton Gerald Klein Tompkins Mahopac Bank, Brewster Richard Koelbl Alden State Bank, Alden Paul Mello Solvay Bank, Solvay G. William Ryan Cayuga Lake National Bank, Union Springs Kathleen Whelehan Upstate National Bank, Rochester Michael Wimer Cattaraugus County Bank, Little Valley IBANYS STAFF John J. Witkowski President & Chief Executive Officer Stephen W. Rice VP Government Relations & Communications William Y. Crowell, III Legislative Counsel Linda Gregware Director of Administration & Membership Services

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PUBLIC AFFAIRS UPDATE | By Stephen W. Rice

Working Toward a Better Environment for Community Banks 2015 was an eventful one for New York community banks on the government relations front, as we faced difficult legislative and regulatory challenges in Albany and Washington, D.C. We were engaged in a wide array of issues, including but not limited to tax reform, proposed expansion of credit union powers and authorities, compliance, regulatory and operational burdens and regulatory reform initiatives. In short, we were at the forefront in protecting and enhancing the interests of community banks, as well as their customers and communities they serve.

C

ommunity banks operate in a challenging business, banking and regulatory environment. The impact of the Dodd-Frank Act and other regulatory demands has forced many smaller, independent banks to redirect resources away from what they do best (reinvesting in their local communities by making local small business, consumer and residential loans) and to instead focus on the increasingly costly and burdensome compliance tasks required by our federal and state regulators and legislators.

Several recent studies have illustrated Stephen W. Rice the difficulties facing community banks.

The Federal Reserve and the Conference of State Bank Supervisors recently released the results of their second National Survey of Community Banks. The survey found compliance costs for community banks represented 22 percent of their net income. Respondents reported regulatory compliance accounted for 11 percent of personnel expenses, 16 percent of data processing expenses, 20 percent of legal expenses, 38 percent of accounting and auditing expenses and 48 percent of consulting expenses! The percentages “imply a hypothetical compliance cost to community banks, in these areas alone, of $4.5 billion annually,” the report stated.

The report also included anecdotal comments gathered through a series of town hall meetings nationwide. Among some of the themes consistently cited were “a lack of clear regulatory expectations and perceived aggressive examination tactics.” The result? Many banks have hired more compliance personnel and third-party auditors, and both “are in high demand and very expensive.” The report also noted that “compliance costs have also led banks to abandon certain financial products, forcing consumers to nonbank financial services providers.”

Another study earlier this year by Harvard’s Kennedy School of Government stated the decline in community banks has only accelerated since the Dodd-Frank law on financial reforms passed in 2010. Authors Marshall Lux and Robert Greene compiled FDIC data detailing 20 years of lending pat6 | Banking New York

Community banks represent a strong economic engine that drives growth in New York and their performance is remarkable. Small business is the engine of job growth and most small business loans come not from the big national banks, but from community banks.

— Gov. Andrew Cuomo

terns. Since the enactment of Dodd-Frank, the share of banking assets controlled by community banks has declined by 12 percent. That’s almost twice the rate of decline over the previous four years before the act. The authors wrote: “Community banks’ vitality has been challenged more in the years after Dodd-Frank than in the years during the crisis.”

Of course, Dodd-Frank is not the only cause for these market share problems. In a recent survey by the Independent Community Bankers of America, nearly three-fourths of community banks reported they had scaled back mortgage lending due to increased red tape. However, consumer and commercial loans may have suffered more from weak borrower demand.

Commenting on a NYS Department of Financial Services’ Community Banking Study, Gov. Andrew Cuomo noted: “Community banks represent a strong economic engine that drives growth in New York and their performance is remarkable. Small business is the engine of job growth and most small business loans come not from the big national banks, but from community banks.”

IBANYS is working hard to establish a regulatory environment that will allow community banks to continue their important contributions throughout New York.

■ Steve Rice coordinates government relations and communications for the Independent Bankers Association of New York State. He has worked in the New York banking industry and New York state government for more than three decades.

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EMPOWERING HEALTH CARE | By Alan Justin

Suite of Benefits Can Help Bank Employees Control Health Care Costs

Over the last few years we have seen many changes in health care, including higher premiums, higher deductibles and co-pays and higher out-of pocket costs.

F

ive days is the average wait to see your primary care physician for a sick visit. Five hours is the average amount of time lost from work for a doctor visit. The average cost of a sick visit is $115 (with a high-deductible plan). Another result of these changes is that employees are sicker longer, or avoiding going to the doctor at all! Employers have the loss of productivity and the expense of paying sick-time, and run the risk of having other employees getting sick.

The simple truth is no one wants to wait five days to see their doctor, no one wants to lose five hours of work, and no one wants to pay for a sick visit from their own pocket. There are other results of the changes in health care: coordination of 8 | Banking New York

care, the cost of second opinions and the billing maze that is called “explanation of benefits.” More cost, more confusion!

This is where you can Empower your health care. There are four components to the Empower card: Teladoc, Health Advocate, Doctors Online and Health Wealth Fitness.

Teladoc is a national network of U.S. board-certified, NCQA-certified and state licensed physicians who use electronic health records, telephone consultations and online video consultations to diagnose conditions, recommend treatment and write short-term, non-DEA controlled prescriptions when medically appropriate.

• Physicians are available 24 hours a day, 365 days a year, allowing you and your family convenient access to quality health care from home, at work or on the road. There is no co-pay or consultation fee.

• Non-emergency medical issues that can be addressed include cold/flu, bronchitis, sinus infection, allergies, pink eye, poison ivy and more.

• Your employees won’t waste time sitting in waiting rooms.

They can be more productive, promoting “presenteeism” at your workplace!

• Your employees will save money for basic medical care by not having to worry about deductibles or co-pays.

Health Advocate helps employees navigate the complex insurance and health care systems. Advocates are highly trained clinical and claims specialist who resolve claims, research treatments, provide medical explanations and negotiate medical bills for out-of-network specialists. Employees have experts on their side to help them make more informed decisions. Employees get help with virtually any health- or insurance-related issue!

Doctors Online puts a team of medical professionals in the hands of employees via email or a smart phone app with 24/7 access. Employees direct medical questions to physicians, pharmacists, psychologists, dentists, dieticians and fitness trainers through a secure online portal. The expert medical team responds within two to four hours with trusted, specific and personal advice.

Health – Wealth Fitness: Promoting healthy behaviors is critical to improving population health and positively impacting health care costs. It provides a wellness solution to address the complete spectrum of n employee’s physical, mental and financial health. Through online tools, videos, articles and more, employees are equipped to create healthier habits and reduce stress.

How do you implement Empower?

It’s an easy process. The employer pays a small monthly fee for each employee. For example IBANYS members pay a discounted rate of $8.35 per month, per employee. And that covers the employee, spouse and dependents up to age 26. Each family member has access to all of the services, and once the employee has Empower, there are no additional expenses! All costs of the services are covered by the monthly fee.

We help IBANYS members promote these benefits and educate their employees with Brain Shark videos, monthly flyers, worksite posters and regular utilization reports. Employees also have 24/7 access to a member portal that fully explains each component, and can utilize the 800 numbers for each component, or call the customer service center for assistance.

Empower is a cost-effective way to promote wellness, help employees stay healthy and recover quicker from illnesses.

■ Benefits consultant Alan Justin Jr. can be reached at 716-907-5500 or nbs.alanjustin@gmail.com. For more information about Empower, visit newbenefits.com.

TESTIMONIALS FROM EMPOWER MEMBERS

“My son was home from college and really needed to see a dermatologist for eczema. He was using over-the-counter cream at school but it was not doing the job. I tried to get an appointment with a dermatologist and they said he couldn’t get in for three months. I had him register with the plan that day and was on the phone with a doctor that afternoon. They were able to prescribe a stronger cream for his eczema and cream for his acne. This was all done by sending pictures to the doctor and talking to him on the phone. The creams that were prescribed are doing the job and it saved us from a doctor’s visit and was able to give him relief right away. I am very happy with this plan because most of the time I know what I need and do not have time or money to run to a doctor’s office for him to tell me the same thing I already know.”

Kim “My experience was enjoyable after the initial login process.

The phone call from the doctor was prompt, thorough and very professional. I would definitely call again instead of the usual route of a traditional doctor’s office visit. The time and money saved was a bonus on top of getting the medication and advice I needed.”

Fred “I was treated for an ear infection through the Teladoc System. I called around 11 am and didn’t have to wait more than five minutes when I receive a call from the physician for my consultation. No waiting rooms! I was able to get my prescription on lunch and felt mostly better by the end of the work day. Such a great service and I didn’t have to take any time off!”

Emily

Fourth Quarter 2015 | 9

PRESIDENT’S MESSAGE | continued from page 4

“Building the Bridge” and our three-pronged “Plan To Provide Value.”

IBANYS’ goal is to be the bridge connecting ALL New York community banks, regardless of location, size, charter or type of ownership. A strong, vital community banking industry is essential to the economy and social fabric of ALL New York’s communities, whether rural areas, suburbs or large city neighborhoods. Our common challenges, issues and opportunities unite us far more than any artificial differences in geography, size or charter could separate us.

Secondly, we must provide value to our member banks, and also to our partners and allies in the business community who provide important products, services and benefits to our banks. We must also assure value to the association itself through a recurring revenue stream to help ensure our financial viability. And, we also work to provide value to our partner firms and allies who provide important products, services and growth opportunities to our member banks and industry.

We’ve made a strong start. Years ago, after graduating from Columbia and before starting my career in banking, I had the unique opportunity to play quarterback in the National Football League. In my brief time there, I was never on a team that celebrated winning the first quarter or first half of a game. It was ALWAYS about moving forward and improving: every possession, every quarter, every game. That’s the approach our IBANYS team brings on behalf of New York community banks.

There is much more we need to accomplish together. As we look to the coming year, we’ll keep building on the strong foundation we have established. The work goes on, and we’re in it together with our membership, and our partners. Let’s keep moving forward together.

■ 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.

IBANYS 2015 ANNUAL CONVENTION • Sept. 16–18, 2015 • THE HOTEL THAYER AT WEST POINT

A thank you to our sponsors COLONEL

MAJOR

NYBDC

Federal Home Loan Bank of New York 101 Park Ave. New York, NY 10178 (212) 441-6700 www.fhlbny.com

Atlantic Community Bankers Bank 1400 Market Street Camp Hill, PA 17011 (717) 737-9335 www.acbb.com

New York Business Development Corp.

50 Beaver Street Albany, NY 12207 (518) 694-8458 www.nybdc.com

Strategic Resource Management 5100 Poplar Ave., Suite 2500 Memphis, TN 38317 (800) 748-2577 www.srmcorp.com

ICBA Services Network 1615 L Street NW, Suite 900 Washington, DC 20036 (800) 422-8439 www.icba.org

Wolf & Company, P.C. 99 High Street Boston, MA 02110 (617) 439-9700 www.wolfandco.com

Pentegra Retirement Services 108 Corporate Park Dr. White Plains, NY 10604 (609) 584-7400 www.pentegra.com

COMMUNITY BANKS – THE

of all communities 10 | Banking New York

ADDITIONAL SPONSORS CAPTAIN BBN Continuity Five Star Bank Roosevelt & Cross Smith & Wilkinson T.Gschwender & Associates, Inc. UHY, LLP CADET Main Street Checks Sandler O’Neill + Partners GENERAL SPONSORS Bowers & Company CPAs PLLC Finger Lakes Technologies Group, Inc. Jamesson Associates NBT Bank

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A LOOK WITHIN | By Dan Doran

Inside the Business Valuation Process: A Primer for Commercial Lenders

I

n the end, it all comes down to the bottom line. “Value,” like beauty, is subjective – what the business is worth to the owner may not be what it is worth to the market. But if a business is to be sold, its value must be objectively determined – a sticking point for the lenders involved in the transaction.

In all buy-sell transactions, valuDan Doran ation is the proximate issue: just how much is the business worth? From a seller’s perspective, one way to find out is to let the market speak by soliciting offers. From the 12 | Banking New York

buyer’s perspective, past experience might be one method to understand value, or perhaps quantifying what one can afford in terms of cash out of pocket and monthly loan payment is another.

Both of these methods tend to be imprecise. And while they may satisfy the parties – and lenders – in some smaller deals, when it comes to Small Business Administration lending, the SBA’s standard operating procedure requires that when goodwill exceeds $250,000, an independent, third-party valuation is required.

Typically lending teams within larger financial institutions are more accustomed to the valuation process and requirements. However, for a

large segment of community and midsize banks, the valuation process and related requirements may be more of an enigma where SBA loan volume is lower.

This short tutorial provides lenders with guidance on who should perform a valuation for their client, how the lender can help with selecting a valuation professional and an overview of the factors a valuation analyst will consider.

WHO CAN PERFORM THE VALUATION? The SBA requires that the valuation be performed by someone who routinely performs business valuations. While this makes sense at first blush, it also

WHAT WILL AN ANALYST CONSIDER?

segues into a recent change: CPAs are not qualified to perform business valuations in the absence of an accompanying valuation credential. Many jump to the conclusion that business valuation is a core component of CPA work. It’s not. While there are CPAs who also perform valuation work, the CPA credential on its own does not indicate that a practitioner routinely performs valuation work.

The SBA does recognize several credentials that are acceptable for thirdparty valuation firms. Those include: • CVA, a credential from the National Association of Certified Valuators and Analysts.

• ASA, from the American Society of Appraisers.

• ABV, Accredited in Business Valuation, awarded to CPAs by the American Institute of Certified Public Accountants.

• CBA, Certified Business Appraiser, from The Institute of Business Appraisers Inc.

Each valuation is slightly different, but the valuator will consider three approaches: the market approach, the income approach and the asset approach.

Each of these approaches considers the company in a different light, allowing the appraiser to take a deep look at the business.

For SBA loan valuations, the asset approach is usually considered, but not relied upon. The asset approach essentially looks at the book value of the company, perhaps making adjustments for assets and liabilities that may not transfer to the buyer. In most common applications of the asset approach there is no goodwill. Given that the SBA requirement is predicated on goodwill, it stands to reason that the asset approach is infrequently relied upon.

The market approach seeks to compare the subject company to other similar companies in the market. This approach – often comparing the subject company’s earnings, gross profit or revenues to other, similar companies – can provide great insights into how the market has priced similar businesses. The downside is the availability of data. Companies that fit within the SBA program are invariably not public, and data can be sparse and misleading. If the business type is common – such as day cares, gas stations or insurance agencies – market data may be robust. But finding data for less common businesses is more challenging.

The income approach seeks to develop a discount rate – essentially a risk profile – for the subject company. The advantage in doing so is that the appraiser can directly tune the calculation for the subject company. The analyst will look at the earnings stream of the company and apply the discount rate in order to develop the overall value.

While not required to rely on all of those approaches, by reviewing each

WHAT SHOULD LENDERS CONSIDER WHEN SELECTING A FIRM? When selecting a firm to perform a third-party business valuation it’s important to consider the experience of the appraiser or appraisal firm. Items to look for include: • Industry experience: Does the appraiser have experience working in the given industry?

• Valuation specialization: Does the appraiser routinely perform valuation work? Or merely hold a valid credential but rarely perform actual valuations?

• Capacity: How long will it take to complete the project? We all know the old saying, “time kills deals.” Ideally the appraiser has capacity to turn the project around in a reasonable time – typically one to three weeks.

the analyst is able to best triangulate fair market value. A good analyst will be able to select the best approach and model for the subject company to develop a fair market value.

ARE THERE COMMON PITFALLS TO AVOID? Perhaps the most common pitfall in valuing businesses in concert with SBA lending is understanding which assets and liabilities are conveying to the purchaser. (This also happens to be an area that can derail deals when buyers and sellers do not clearly convey expectations). For example: is the seller retaining accounts receivable and accounts payable? Or is the buyer purchasing?

How about real estate rental deposits?

Or prepaid expenses? Accrued vacation?

Identifying which assets and liabilities will be part of the “NewCo” balance sheet early will help both the analyst properly prepare a valuation, as well as ensure buyer and seller are on the same sheet of music at closing time.

WHERE CAN LENDERS GO FOR MORE INFORMATION ON VALUATIONS? The SBA SOP 50-10 5(b) recently added more extensive business valuation requirements to ensure that lenders are utilizing qualified and compliant valuation analysts. Lenders may also consult the websites of The National Association of Certified Valuators and Analysts and the American Society of Appraisers for more in-depth information on the valuation process, such as IRS Business Valuation Guidelines and an International Glossary of Business Valuation Terms.

■ Dan Doran, CVA, is principal of Quantive Business Valuations, a professional business valuation practice specializing in small to medium-sized closely held and family owned businesses.

Fourth Quarter 2015 | 13

INDUSTRY NEWS

NEW YORK REGULATORS APPROVE M&T/ HUDSON CITY DEAL

ALL NEW YORK BANKS REQUIRED TO KEEP COPIES OF SYMPHONY MESSAGES

M&T Bank Corp. received the final piece of approval to complete its longdelayed acquisition of Hudson City Bancorp Inc. The New York State Department of Financial Services approved the threeyear-old proposal, citing the “substantial steps” M&T has taken to improve its risk management and anti-moneylaundering compliance systems. The bank is expected to finalize the deal near Nov. 1.

The Federal Reserve board gave approval for M&T to move forward with the purchase of Hudson City Savings Bank on Sept. 30. The Fed had initially halted the deal in 2013 after finding problems with M&T’s Bank Secrecy Act/anti-money-laundering compliance programs, telling M&T to resolve the issues before the deal could be reviewed.

New York’s banking regulator reached an agreement with Société Générale to retain records from an online messaging service, issuing guidance for other banks on how to use it.

Société Générale is the fifth bank to agree to the New York State Department of Financial Services’ demands that banks store records from the Symphony Communication Services messaging technology for potential access by regulators and other officials. Bank of New York Mellon, Credit Suisse, Deutsche Bank and Goldman Sachs all reached an agreement last month.

The banks must keep copies of all electronic communications through Symphony for seven years, and each bank must retain copies of its decryption keys with independent custodians. Acting Superintendent Anthony Albanese noted that the agency’s guid-

“We’re relationship driven. We have many technical capabilities, but it’s really our people and personality that set us apart.”

BANK ATM AND OVERDRAFT FEES REACH NEW HIGHS ATM and ATM FEE IS NOW overdraft fees $4.52 ON AVERAGE are rising to new highs, according to a recent survey conducted by Bankrate.com.

C o n s u m ers who use an ATM outside of their network are faced with hefty fees. The out-ofnetwork ATM fee is now $4.52 on average, and the fee has risen rapidly by 21 percent over the past five years.

The average overdraft fee has reached $33.07.

The survey also found that only 37 percent of noninterest checking accounts that are completely free, down from 76 percent in 2009.

ABA: DELINQUENCIES DIP IN CLOSED-END LOANS

– Jamie Keiser, CPA Partner, Commercial Team

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ance will apply only to banks under its jurisdiction but urged other regulators to follow suit.

Delinquencies were down in closed-end loans in the second quarter, declining in seven of the 11 individual loan categories, according to results from the American Bankers Association’s Consumer Credit Delinquency Bulletin.

The composite ratio continued a three-year trend of remaining below the 15-year average of 2.27 percent, falling 17 basis points to 1.36 percent of all accounts. The ABA report defines a delinquency as a late payment that is 30 days or more overdue.

Bank card delinquencies increased slightly in the second quarter, up three basis points to 2.52 percent of all accounts, remaining below their 15-year average of 3.74 percent and only varying 14 basis points since the fourth quarter of 2012.

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COVER | By Scott Van Voorhis

COMMERCIAL LENDING PICKS UP UPSTATE Community Banks Hustle for Limited Share of Business Loans

16 | Banking New York

T

he economy’s slow but steady shift from recovery to expansion has been good for banks across the Empire State as they feast on profitable commercial loans after years of relative famine.

A boom in office and residential construction and businesses looking to expand and buy new equipment has kept loan officers busy at banks from Buffalo on down to New York City.

Still, some banks are starting to take a more cautious approach to real estate lending, worried about what might happen when the market turns and some new condominium or apartment tower management find itself scrambling to sell or fill units.

There are also concerns about hedge funds and other nonbank lenders jumping into the market, snagging loans by agreeing to riskier terms hometown banks may have passed on.

That said, banks are continuing to push ahead with plans to keep growing their commercial loan portfolios, filling in gaps in their coverage or focusing more intensely on particular industries with solid growth potential.

“The deal flow is picking up quite substantially,” said Charles “Chip” Russell, head of the commercial real estate group at Harris Beach in Rochester.

and state government offices of nearby Albany a major driver of demand.

“Our region, good or bad, has been somewhat stable,” Dowd said.

“We saw some decline in value after the financial crisis, but we did not experience the significant decline as some other parts.”

Along with a growing economy, the bank has also taken steps to strengthen its lending team.

In a key move, Balsam Spa last year hired Greg Anderson, a veteran Key Bank commercial loan officer, to boost its commercial lending operations. The bank also shifted some younger employees from its branches to business development.

The big growth driver right now is commercial real estate projects, with new offices, retail and especially apartments leading the way.

“We went out and obtained some experience in the marketplace,” Dowd said.

The bank is also seeing growth in its commercial and industrial loan portfolio, though at a more modest pace.

Competition is fierce for business loans in Saratoga County, with 21 different banks with a total of nearly 100 branches battling it out for a limited pool of business loans, he noted. Particularly sought-after are deals to provide lines of credit to businesses like mechanical contractors or field distributors.

“All the banks are fighting over that small pie,” Dowd said.

EXPANDING IN SARATOGA AND ALBANY Upstate New York typically doesn’t see the low lows and high highs of the market cycle, with the region managing to escape some of the worst excesses of the real estate bubble years. Now, after a slow but steady recovery, some banks upstate are starting to ink more commercial real estate and business loans than they have in several years.

Christopher Dowd, CEO of Balsam Spa National Bank, has boosted commercial lending at the Saratoga area bank by 18 percent so far this year. That compares to a more modest 5 percent gain in 2014 and a similar number in 2013.

The local economy has been fairly steady, with the universities, hospitals

BOOMING BUFFALO AND ROCHESTER Evans Bank in Buffalo has seen its $650 million commercial loan portfolio expand by 10 percent or 11 percent over the past few years. John Eagleton, the bank’s commercial lending chief, is hoping to push that number closer to 15 percent in 2016.

The bank is benefiting as Buffalo’s economy makes a comeback.

The city’s medical/research sector is growing, with a number of new buildings being put up, while the owner of the Buffalo Bills and Sabers is talking about putting up

a new stadium as part of a larger development.

“Buffalo is having a very nice resurgence right now, no question about it,” Eagleton said.

New apartment construction is also on fire, with a growing number of luxury units being marketed to empty-nesters. Evans Bank has seized the opportunity, financing multifamily projects and other commercial real estate deals.

“We are filling up our bucket on the commercial real estate side,” he said.

Evans has also increased its business lending, with the bank having ramped up its networking efforts with various “centers of influence” in the Greater Buffalo community.

The bank has also set out to double the amount of lending, especially small business loans, done through its branches, according to Eagleton.

Evans has hired a couple of new loan officers and simultaneously training branch managers to take a more active role in boosting loan volume.

The bank wants to increase the number of loans at or below $250,000 as it looks to provide financing to dentist and physician practices and small manufacturing firms, among others.

“I would say this is our second year of seeing rapid (loan) growth,” Eagleton said.

Meanwhile, Russell, head of the commercial real estate group at Harris Beach in Rochester, said banks in and around the city in Western New York are also beefing up their commercial loan portfolios.

Banks have inked new loan deals on plant expansions by local manufacturers and new apartment buildings as well as mixed-use projects, which are seen as prime financing opportunities given the mix of income streams. “‘Mixed-use’ is sort of the term of the day,” Russell said. “It seems to satisfy both planning boards and bankers.” continued on page 18  Fourth Quarter 2015 | 17

COVER | continued from page 17 Big hometown corporations like Xerox and Bausch & Lomb have gotten leaner over the years, but are still major employers.

Top lenders in the area include Canandaigua National Bank, M&T Bank, First Niagara, Five Star Bank and Tompkins Bank of Castile.

GOOD TIMES IN METRO NEW YORK Bolstered by the buoyant New York City area economy, a number of local lending institutions have bulked up on business loans.

Astoria Bank, which has dozens of branches spread across Queens, Brooklyn and Long Island, is building up its commercial loan portfolio, noted bank analyst Collyn Gilbert, a managing director at Keefe, Bruyette & Woods.

And Sterling National Bank has proven to be standout in the commercial lending arena, Gilbert said.

“senior-secured financing to middle market health care companies on a national scale.” The bank hired a trio of executives with deep health care lending experience to run the new team. Dan Chapa will oversee the group as senior managing director, while Steven Goldsmith and Carl Schmitt will serve as managing director and senior portfolio manager, respectively.

Sterling also recently hired two more veteran lenders to oversee its newly launched syndication banking team, which “will focus on arranging and syndicating bank loans for commercial banking and specialty lending clients,” according to a release put out by the bank.

Jim Gelwicks, senior managing director, was head of capital markets with Healthcare Finance Group, while Yan Cheng, senior vice president, was previously senior vice president of capital markets at the same firm, where

willing to accept minimal returns if there is potential to cross-sell other services, like insurance or retirement benefits, said Eagleton of Evans Bank.

He hasn’t seen signs yet that banks are lowering standards to get deals.

“We are not seeing a lot of stretching on the credit side,” Eagleton said.

Others say they see signs that the real estate market could be nearing a peak, or even that’s it’s already reached it.

Keefe, Bruyette & Woods’ Gilbert said some of her banks are casting nervous glances back to the peak before the last bust. She believes, though, that better banking practices this time will mean less damage if there is a slowdown.

“Some of my more disciplined banks have drawn a correlation similar to what they saw in ’06 and ’07,” said Keefe. “The difference is

The greater Albany area “has been somewhat stable. We saw some decline in value after the financial crisis, but we did not experience the significant decline as some other parts.” — Christopher Dowd, CEO, Balsam Spa National Bank “They have been doing a very good job of hiring teams and bringing on portfolios in the business lending area,” she said.

Sterling boosted its commercial loan portfolio by a whopping 24.7 percent through the first half of 2015 compared to the year before, an increase of $914 million.

“We continue to experience strong organic loan growth across multiple asset classes,” Jack Kopnisky, Sterling’s president and CEO, said in a press statement.

Based in Montebello and with offices in New York City, the bank has also launched a pair of new, commercial lending groups.

The bank recently launched a commercial lending team to provide 18 | Banking New York

he helped establish a syndication platform.

“We’re excited to continue building our syndication competency led by two seasoned professionals who have decades of success leading sell-side syndication transactions,” Thomas Geisel, Sterling’s president of specialty finance, said in a press statement.

NEARING PEAK? Still, even as they bolster their bottom lines with rising numbers of commercial loans, bank executives across the state are also looking cautiously ahead in knowledge that the good times won’t last forever.

Competition for business loans is also growing fiercer, with some banks

there is a lot more equity being put in these deals and not as much leverage as we had back then.”

One veteran commercial finance lawyer said lenders have been becoming much more cautious about backing speculative, high-end condo projects in and around New York City for some months now.

“There are a lot of yellow lights right now,” he said.

Another sign of concern is the emergence of non-bank lenders from out of town trying to snag deals in New York City.

“I am seeing more of that,” the real estate lawyer said. “Maybe the New Yorkers with their feet on the ground are saying these deals are too rich.” ■

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FRESH PERSPECTIVE | By Al Alper

What Every Banker Should Know about IT

N

ot that long ago, the risks a bank or other financial institution faced were much simpler than they face today. The biggest threat might have been the stereotypical bank robber, who would either quietly pass a note with demands to an unsuspecting teller, or who might come in wearing a ski mask, carrying a weapon and workAl Alper ing with partners.

While neither scenario was desirable, and certainly unsafe for bank employees and customers, the worst a bank would typically lose was cash – general cash that was not necessarily assigned to any specific accounts.

Now, the banking industry faces a myriad of new risks on top of this now old-fashioned approach. Data theft can not only allow hackers to get into the 20 | Banking New York

bank’s holdings, but could also connect them to the other holdings of each client, as well as other affiliated institutions. This type of theft, unlike the scenarios described in the first paragraph, could have profound negative impact on individual bank clients in addition to the bank as a whole.

Bankers, and others working within the banking industry, must understand certain facets of information technology in order to keep their institutions, and their clients, safeguarded. Specifically, IT compliance issues (both transactional and information) and potential security threats are two areas critical to be met and recognized.

“Transactional compliance” refers to the internal and external financial transactions of an institution. In order to be sure that transactional compliance needs are met, all discourse must be transparent to the chief compliance officer (CCO) and/or their delegates.

“Information compliance” refers to any kind of internal or external communication by the bank. Like transactional compliance, all discourse must be transparent to the CCO and/or their delegates.

With both transactional compliance and information compliance, those in the banking industry must remember that all of these transactions or communications must be fully documented, archived and accessible to fulfill both audit and compliance requirements.

Security threats are a constant concern in the IT arena, and although almost any business is at risk, some – especially those that collect valuable personal information, like Social Security numbers, bank account and credit card numbers – are at a much higher risk than others. Financial institutions face security threats directed at both systems and services.

Systems that capture and retain transactional compliance and information compliance must be checked and audited regularly for performance and adherence to standards and protocols.

Information systems that banking institutions put in place typically include intrusion detection and prevention, as well as endpoint protection from malware and viruses that steal data and/ or log keystrokes, which gives unauthorized individuals access, leaving the system vulnerable and information exposed as malicious thieves use that system as a launching pad for widespread internal access. In addition, third-party vendors that intersect with protected data and third-party applications that intersect with protected data offer potentially subtle access to would-be hackers. Ensuring secure, encrypted access systems for remote and extranet connectivity and encrypted systems that keep data encrypted both at rest and in transit are critical to keeping security threats in check.

provider (MSP). Selecting the best MSP for a bank is crucial; looking out for certain characteristics of the right MSP can help narrow the selection.

First and foremost, a bank or other financial institution must find an MSP that will work to be a true partner with the organization. This type of philosophy ensures that the MSP is always working in the best interest of the financial institution, understanding that the success of the bank is closely tied to the success of the MSP. In this vein, a bank should expect that its MSP will help keep the bank upto-date on compliance changes, and also help the financial institution understand how these changes might affect the technology in place.

In addition, a good MSP should offer its financial client full transparency. This includes easy access to inventories of the bank’s assets, daily tickets and warranties, as well as knowing what information is at risk and what is exposed. Information about how employees are using the technology (including what content is being trafficked on the network or on Wi-Fi), should also be readily available.

Finally, a partnership with an MSP should also encompass business con-

FINDING A TRUE PARTNER Given the high stakes involved in compliance issues and security threats within the banking industry, it makes sense that banks work with an information technology managed services

tinuity commitments. To achieve this, an MSP should offer an onboarding audit, going over all of the technology components of the financial institution (regardless of whether those components are being provided by the MSP). This audit should result in a disaster readiness profile, along with recommendations of what might be needed to strengthen the institution in the face of disaster, however the disaster manifests itself.

Technology has inarguably made banking easier, more efficient, and more user-friendly. To make the most out of what technological advances offer to banks, those in the banking industry must have a firm handle on both the compliance issues involved as well as the possible security threats lurking. Understanding this, and knowing how an information technology managed services provider can help meet these challenges, offers the best outcomes for everyone – except the robbers. ■Al Alper is the CEO and founder of Absolute Logic, a technical support and technology consulting provider to businesses of up to 250 employees.

He can be contacted at al.alper@ absolutelogic.com or (203) 936-6680.

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Fourth Quarter 2015 | 21

FED STUDY | By Laura Alix

Durbin Had No Impact on Prices for Consumers Promised Consumer Savings Fail to Materialize

I

t is sometimes said that the definition of a true compromise is one in which neither party is really happy about the end result. If you accept that definition, perhaps the Durbin Amendment represents the ultimate compromise.

The Durbin Amendment – that pesky, last-minute provision crammed into the Dodd-Frank Act at the eleventh hour – put a cap on the fees banks over $10 billion in assets could collect on debit card transactions. But the cap on interchange fees was supposed to make up for it, at least to consumers, by enabling merchants to lower their prices because they would save a bundle on swipe fees.

Not so much. According to a recent study out of the Federal Reserve Bank of Richmond, the Durbin Amendment resulted in neither cost savings to consumers, nor (interestingly enough) savings to merchants.

Durbin’s impact on the banking industry has been known for some time now. A Federal Reserve study released last year estimated that Durbin slashed yearly interchange fees to banks over $10 billion in assets by as much as $14 billion, or 5 percent of noninterest income.

22 | Banking New York

The impact to banks under that asset threshold has been less clear – many in the banking industry have argued that Durbin would ultimately apply to smaller banks anyway – but that particular Fed paper found that bigger banks coped with the loss of interchange revenue by hiking deposit fees, thereby recouping around 30 percent of the loss in swipe fees.

However, Durbin’s impact on merchants had gone largely unexamined, and that prompted the Richmond Fed to partner with Javelin Strategy & Research on a study of Regulation II’s effects on 420 merchants across 26 sectors.

Among the retailers surveyed, two-thirds reported either no change or they did not know whether their debit costs had changed as a result of Durbin. Less than 10 percent reported a decrease in swipe fees, and strikingly, a quarter of respondents said their debit fees had actually increased post-Durbin. continued on page 24 

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FED STUDY | continued from page 22

THE LAW OF UNINTENDED CONSEQUENCES

THE WORLD PRE-DURBIN The Durbin Amendment resulted in the Federal Reserve rolling out Regulation II, which set the interchange cap for banks over $10 billion in assets at $0.21, plus 0.05 percent, plus $0.01 to cover fraud prevention.

Prior to Durbin, card networks set different interchange fees for different types of retailers. For example, Visa charged $0.20, plus 0.95 percent (with a $0.35 cap) to supermarkets, $0.17+0.75 percent (with a $0.95 cap) to gas stations, $0.20 +0.95 percent to retail stores, $0.10+ 1.19 percent to restaurants, and $0.75 to utility firms.

The Richmond Fed surveyed 420 merchants across 26 sectors. Of the survey respondents: • 67 percent reported no change or did not know of any change • 25 percent reported an increase in debit costs • 8 percent reported a decrease in debit costs • 75 percent reported no price change as a result of Durbin • 23 percent reported a price hike in the wake of Durbin • 2 percent reported price cuts as a result of Durbin • 76 percent reported no increase or decrease in restrictions on debit card use • 12 percent reported an increase in restrictions • 12 percent reported a decrease in restrictions The top sectors that reported debit cost reductions were: • Home furnishings, 25.9 percent • Sporting goods, 25.9 percent • Maintenance, 16.6 percent • Entertainment, 16.3 percent • Services, 14 percent The top sectors that reported debit cost increases were: • Delivery services, 100 percent • Fast food, 65.7 percent • Office products, 56.1 percent • Grocery stores, 54.1 percent • Home improvement, 47.8 percent

24 | Banking New York

The Durbin Amendment was supposed to limit the fees that merchants paid for the privilege of accepting payment by debit card – so what happened?

Well, a few things. First, in a pre-Durbin world, different types of retailers paid different interchange fees, depending on the incidence of fraud and chargebacks across different sectors. When the debit interchange fee was standardized at 21 cents, plus 5 basis points, some sectors benefitted and others did not.

Second, while Durbin capped the interchange fee paid by a merchant to the cardholder’s issuing financial institution, it said nothing whatsoever about the merchant discount rate, the fee the merchant pays to his or her own financial institution in order to accept debit card payments.

Finally, pre-Durbin, card networks would offer merchants discounted fees on small-dollar transactions. In the Richmond Fed’s example, Visa and MasterCard set the debit interchange rate at 4 cents, plus 1.55 percent of the transaction value for transactions under $15, meaning a $2 sale would incur only a 7-cent interchange fee.

When Durbin was implemented by the Federal Reserve in the form of Regulation II, card networks standardized that swipe fee, meaning that smalldollar transactions got a whole lot more expensive.

Not discounting the impact of smaller banks, the Richmond Fed noted in its paper that small issuers – that is, those financial institutions under $10 billion in assets and exempt from Durbin – accounted for around 37 percent of debit transaction volumes in 2013, the year they conducted the study.

Durbin may not have resulted in quite so much downward pressure on interchange caps as was originally anticipated, but it may be the banks just over the $10 billion asset threshold hurting the most, as they compete with banks just under the asset threshold but without the benefit of that additional interchange fee.

And did that cap on swipe fees result in lower prices to consumers? Just about 2 percent of those merchants surveyed by Javelin and the Richmond Fed actually cut prices in response to the regulation, while 23 percent raised prices and 75 percent made no changes.

■ Laura Alix is a staff writer for The Warren Group, publisher of Banking New York.

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FINDING THE FACTS | By Achim Griesel

Online Accounts: Perception vs. Reality Core Relationship - Product Usage Debit Card (Users)

ACH Debit

Direct Deposit

Online Banking

eStatements

Bill Pay (Users)

Mobile Banking

79%

66%

60%

59%

38%

30%

20%

D

igital channels have become an integral part of the banking industry. In today’s environment, it would be hard to imagine a relationship with your primary financial institution without these channels.

Based on data shared through the Financial Brand earlier this year, and Achim Griesel at the Financial Brand Forum in May, 60 percent of global customers primarily utilize online channels. This is right in line with our research of several million U.S. checking households. Unlike most available benchmarks, this data is driven strictly by community banks and credit unions. Statistics at top performing community FIs look like this: Transitioning from transactional to digital channels can guide bankers down the wrong path for customer acquisition. We often hear financial industry marketers and executives say they want to attract younger customer segments and consumers who will be more driven by non-traditional channels, such as millennials, young professionals, etc.

Frequently, they are looking for the answer in using the online channel for customer acquisition.

26 | Banking New York

NEW PFI RELATIONSHIPS – ONLINE VS. TRADITIONAL For over two years, we have tracked traditional and online checking account openings at over 15 financial institutions ranging from $200 million in assets to over $5 billion in assets. All FIs consider customer acquisition a strategic priority. They invest marketing dollars

into traditional marketing in branches and through direct mail, as well as digital channels. Most of them are also active in social media. During the study participating FIs opened 340,384 core consumer relationships in the form of checking accounts, which equals approximately 350 per branch per year. 8,867 of these were opened online.

In another case study, in the first six months of 2015, FIs opened 50,188 new checking accounts of which 1,989, or 4.13 percent, were opened online. On average they opened 105 online accounts, which would results in a run-rate of 210 per year. On average 37.7 percent of online account openings were attracted though a traditional channel via direct mail.

Average Age

Opened In Branch

Annualized Overdraft Items/Account

Average Number of Swipes

Average Dollar Amount Spent

39

17.5

$39.90

7.73

39.3

13

$40.43

3.99

Accounts Opened Online

Monthly Debit Card Usage

QUALITY/TYPE OF CUSTOMER The average age of the new customer attracted from both channels is almost identical. The online acquired customer swipes their card 35 percent more often, but both segments spend $40 per average debit card swipe.

The online acquired customer has a significantly higher number of overdrafts per year – almost double! While there are definitely some positive trends on fee revenue opportunities, the outlook is not as good when it comes to balances, share-of-wallet and customer retention.

Average Balance (Checking) Accounts

Average Balance Total Deposits

Loans

Retention (6 months)

Opened Online

$2,200

$3,406

$5,210

77.3

Opened In Branch

$3,741

$7,897

$3,372

90.5

Customers that opened their account online have significantly lower balances – 41 percent lower checking deposits and 57 percent lower household deposits. On the flipside, they have higher loan balances, but still relatively small amounts. Lastly their retention is 16 percent lower than accounts opened the traditional way.

If you are considering online account opening or already have it, where does that leave you? Opening checking accounts online is not wrong, but it is not the answer to the industry’s desire to get more tech-savvy and younger customers. Be aware that you will likely get a more transitional and fee-based customer, and that it will almost certainly fail to materially drive new customer growth for your organization.

For the foreseeable future the branch, your people, your core products and your policies will have a lot more impact on your success in customer acquisition.

■ Achim Griesel is chief operating officer at Haberfeld Associates, a provider of marketing and training services based on consumer banking data analytics.

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Fourth Quarter 2015 | 27

RESULTS OF BASEL III | By Matt Weiland

High Volatility Commercial Real Estate: Its Definition and Impact

HVCRE L

ast December, James Nigro, senior vice president and credit risk manager of Provident Bank, attended what he thought was a fairly routine meeting.

“Someone from our finance department came to me and said, ‘By the way, Jim, in the next quarter, we’re going to start reporting something new on the call reMatt Weiland port called ‘high volatility commercial real estate,’” Nigro recalled. “When I read the call report definition, my first thought was ‘This is going to change the way we make loans.’”

The new high volatility commercial real estate (HVCRE) classification was passed as part of new Basel III capital rules last fall, but reporting requirements went into effect as of March 31 call reports of this year. The new rules state that acquisition, developmental and construction loans that meet certain criteria are classified as HVCRE, 28 | Banking New York

and carry a 150 percent capital risk weighting.

“What this required was a lot of education for our lenders and underwriters, coaching them about HVCRE, how it can affect their deal structures, how to potentially avoid this type of classification and the ramifications and cost to the bank if they make loans that are classified HVCRE,” Nigro said.

“We also created a resource guide that laid out definitions and key terms of the HVCRE rules, new reporting and tracking procedures, steps that had to be taken to implement them and a form that was used to qualify every potential HVCRE credit.”

Education of Provident’s staff took place almost immediately, with the bank’s commercial real estate lenders receiving the most rigorous training.

“The people in that group are the ones who originate the largest volume and dollar exposure of construction loans within the bank,” said Nigro.

“Keep in mind, HVCRE doesn’t just apply to construction; it can apply to interim acquisition loans and land

deals, but most of the transactions that might trigger an HVCRE classification would originate in our CRE group.”

More intensive training was also provided for the bank’s commercial underwriting staff. Provident’s other groups, such as middle market, business banking and asset-based lending received remote training on the new classifications so that they were aware of the new rules.

Nigro and his team noticed an immediate impact when they began to track the new HVCRE classification, most noticeably in the way regulators chose to calculate the equity requirements of loans.

“The method the regulators chose to assess project equity isn’t consistent with the way that most bankers structure deals,” said Nigro. “The regulations look at equity as a percentage of the ‘as complete’ appraised value of the project, which a lot of banks don’t use. Typically, we’ll look at LTV and the percentage of the project cost being contributed as upfront capital in the deal. Because of the different factors, some of our deal structures and the ways that we’ve approached underwriting and structuring loans have been tripped up.”

He went on to describe an issue that arose when one of the bank’s borrowers was in the process of acquiring a distressed property to be renovated, repositioned and re-leased. The project’s as-complete appraised value was higher than anticipated, which raised some unanticipated issues. “We had 25 percent cash equity and 55 percent LTV, but the loan still triggered

the HVCRE classification because the cash equity contribution was shy of the 15 percent of the as-complete value, as that valuation came in so high,” said Nigro. “We had a deal where we had strong cash equity and a low LTV, and under the new rules, it was being classified as high-risk.”

Provident went ahead with this transaction, despite the fact that it triggered the HVCRE classification.

“We felt very confident in the risk of the deal, so we decided that, rather than penalize the borrower with more equity or re-pricing it, we would bite the bullet,” said Nigro. “We didn’t want to risk renegotiating the deal with the borrower because of a regulatory requirement that’s going to require us to hold a little bit of additional capital.”

Provident’s supply of additional capital also played a part in the decision to green light the transaction.

“We have an advantage due to our excess capital,” said Nigro. “It doesn’t really hurt us as much because we don’t have to commit additional capital that costs us incrementally more money. We already have the capital on our books. Other banks that are not as well-capitalized are going to find it very costly to make HVCRE loans.”

One issue that seems to be taking place throughout the banking industry is that some bankers are unaware of either the new rules, or the impact that they have upon their lending practices.

“I was talking to other banks in mid-February about this, reaching out to them to ask them how they looked at certain types of situations,” said Nigro. “It was interesting that a lot of the banks under $10 billion (in assets) hadn’t even heard about it yet. When I shared with them what I had learned, they had the same reaction as me,

which was ‘Holy cow, this is a really big deal.’”

Nigro theorizes that the disconnect in attention might be a result of the new regulations being included in capital language.

“I think most people on the lending side weren’t focused on this because it was part of the capital rules,” he said.

“You normally don’t think about capital requirements in terms of how you structure your credits. Another problem that I see is that the definition is very atypical with the way banks lend money. It’s a change of habits, a change in the way you look at transactions and a change in the way you structure your deals.” ■ Matt Weiland is marketing coordinator for Ardmore Banking Advisors, specializing in risk management consulting for community banks. He can be reached at mweiland@ardmoreadvisors.com.

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Fourth Quarter 2015 | 29

SMALL CHANGE | News Roundup

STIROH NAMED VP, HEAD OF INSTITUTIONAL SUPERVISION AT NY FED

Kevin Stiroh

The Federal Reserve Bank of New York’s Kevin Stiroh has been promoted to executive vice president and head of the Bank’s Financial Institution Supervision Group (FISG), and will also serve on the bank’s management committee.

As head of FISG, Stiroh will oversee the teams and functions responsible for supervising financial institutions in the Second District subject to Federal Reserve supervision. He will also contribute to the Federal Reserve system’s implementation of supervisory policies and procedures.

He will serve alongside other Reserve District supervision heads on the Board of Governor’s Supervision Committee, and will serve on the board’s Large Institution Supervision Coordinating Committee, which oversees the largest financial institutions in the U.S. Stiroh was previously senior vice president in the New York Fed’s Integrated Policy Analysis Group.

Business Administration, which it will turn into small businesses loans, providing startups with cash for equipment, inventory, materials, marketing, licensing, business debt refinancing and working capital.

CCNY generally makes loans in the range of $1,000 to $50,000, but will now consider loans up to $250,000 and give clients a line of credit with the new state and federal funding.

SURVEY: RETAILERS ILL-PREPARED FOR EMV CARD SWITCH

FIRST NIAGARA PROVIDES $66M FOR SOLAR INSTALLATIONS ACROSS US First Niagara Financial Group has closed on a $66 million financing package with Connecticut-based solar tech company Greenskies Renewable Energy LLC. Greenskies plans to use this money (part of a total $165 million package) to finance 127 solar energy projects in Connecticut, Massachusetts, New York, Rhode Island, Maine, New Hampshire, Pennsylvania, Maryland, Arizona and California.

LOCAL LENDER UPS ITS GIVING VIA STATE, FED CONTRIBUTIONS Community Capital New York (CCNY) has won a $1 million grant from the state’s Regional Economic Development Council Initiative, matched by a similar award from the U.S. Small

Most retailers aren’t ready for the switchover to EMV chip-enabled credit cards, according to a September survey.

A mere 42 percent of retailers surveyed by Randstad Technologies said they either did not have plans to make the deadline or weren’t aware of plans to do so – leaving a meager 58 percent of retailers on the path to meeting the Oct. 1 deadline to be able to accept new chipenabled credit cards, or else face liability for data breaches.

Another survey from CreditCard.com found that only 40 percent of consumers, mostly in higher income brackets, have received the EMV cards thus far.

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