Banking New England May/June 2014 by The Warren Group

MAY/JUNE 2014

INSIDE: BANKER & TRADESMAN’S COMMUNITY BANK HEROES

NEW ENGLAND

THE RESOURCE FOR NEW ENGLAND’S FINANCIAL LEADERS

Patient Capital Provides Long-Term Results New Market Tax Credits Providing Long-Term Growth in Underserved Areas

PLUS: WHY IT’S SO HARD TO FIX THE BROKEN STUDENT LOAN INDUSTRY ARE CAR LOANS THE NEXT SUB-PRIME BUBBLE? ANALYSIS OF PROPRIETARY DATA YIELDS BETTER LENDING PRACTICES

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LETTER FROM THE EDITOR

Capital Plan Christina P. O’Neill Editor, Banking New England

he cover story in this issue deals with the New Markets Tax Credit (NMTC) program from the U.S. Treasury. Its funding ran out at the end of calendar year 2013 and there’s a press on in Congress to renew it and make it permanent. The case histories reported in the cover story show long-lasting benefits from the program, which requires investors and recipients to stay put for seven years in order to fulfill the program’s requirements – investment for the receiving parties, and tax credits for the investors. Contrast that with some state programs, which have made large up-front investments in enterprises that flamed out spectacularly within a year or two of their inception. In the examples in our story, the economic benefits are long-lasting and become a part of the host communities. And Congress has taken notice. In April, U.S. Reps. James Gerlach (R-PA) and Richard Neal (D-MA) introduced the New Markets Tax Credit Extension Act of 2014 (HR 4365). Almost a year earlier, in June 2013, U.S.

Sens. Jay Rockefeller (D-WV ) and Roy Blunt (RMO) introduced a nearly identical bill (S. 1133) with the same name. Both bills would extend the NMTC indefinitely and provide an increase in allocation authority in 2014 with an adjustment for inflation in the off years. Like previous NMTC extension proposals, they provide NMTC investors with AMT relief, and both are also nearly identical to the revenue recommendations included in the Obama Administration’s fiscal 2015 budget. The program’s benefits include job creation, leveraging of other capital, and a tax-positive status, meaning that NMTC investments have generated more in federal tax revenue than was foregone in tax credits, according to information from the New Market Tax Credits Coalition. For the banks that participate in the program, its rewards are a strengthening of the ties between themselves and the communities they benefit. A capital investment deed done well should not be punished with sunset. BNE

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A PUBL ICAT ION OF T HE WA RRE N G ROUP

CONTENTS

NEW ENGLAND

THE RESOURCE FOR NEW ENGLAND’S FINANCIAL LEADERS

COVER FEATURE 6 8

COMMERCIAL LENDING

Analyze That Data For Better Lending

FOSTERING LONG-TERM GROWTH IN UNDERSERVED AREAS

HITTING THE RESET BUTTON

Why it’s so Hard to Fix the Broken Student Loan Industry

10 THE GOOD, THE BAD AND THE PROFITABLE

The State of High Risk Processing Today

BANK PROFILE

BankNewport

IS THERE AN APP FOR THAT?

Fed Workgroup Panelists Hope Mobile Payments Can Help the Underbanked

AT THE MARGINS

The Best Defense is a Good Offense

RAISING THE BAR

Quality Service: You Get What You Pay for

COMMUNITY GOOD WORKS

COMMUNITY BANK HEROES

TWG STAFF CEO & PUBLISHER Timothy M. Warren Jr. PRESIDENT David B. Lovins

www.thewarrengroup.com ©2014 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,

PERSONNEL FILE

electronic or mechanical, including photocopying, recording, or by any information storage and

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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

Call 617-396-5307 or email custompubs@thewarrengroup.com

EDITORIAL EDITORIAL DIRECTOR Mike Warshaw EDITORIAL OPERATIONS MANAGER Cassidy Norton Murphy CUSTOM PUBLICATIONS EDITOR Christina P. O’Neill SALES DIRECTOR OF BUSINESS MEDIA George Chateauneuf PUBLISHING GROUP SALES MANAGER Rich Ofsthun ADVERTISING ACCOUNT MANAGERS Claire Merritt, Bob Holzhacker and Michael Lydon CREATIVE/MARKETING DIRECTOR OF MARKETING & CREATIVE SERVICES John Bottini MARKETING COMMUNICATIONS MANAGER Nicole Patti DESIGN PRODUCTION MANAGER Scott Ellison GRAPHIC DESIGNERS Amanda Martocchio, Tom Agostino and Tyler Grazio

BANKING NEW ENGLAND

COMMERCIAL LENDING

Analyze That Data For Better Lending Predictive Analytics Can Improve Results, Study Shows BY CHRISTINA P. O’NEILL Christina P. O’Neill is editor of Banking New England. She may be reached at coneill@thewarrengroup.com.

ommercial banks are good at gathering data points and performing due diligence on commercial loans, but may not be as adept at putting proprietary data to good use. And if commercial bankers analyzed their data like marketing specialists do, they might be able to realize significant improvements in their rates of loan losses. Those are the findings of “Reducing Commercial Loan Losses: If You’ve Got It, Analyze It,” a study released May 5 by David O’Connell, senior analyst in wholesale banking at Aite Group, an independent research and advisory firm. He polled 100 commercial bankers regarding their data-gathering methodologies. While they knew how to gather data points, perform due diligence and incorporate the findings of ratings agencies, they were less adept at evaluating the proprietary data sets that could be used to predict future loan performance. The result: When asked what

Bankers’ Estimates Of The Benefits From Better Commercial Loan Analytics In your estimation, what percentage of recent credit losses (last 12 months) at your bank could have been reduced or avoided if credit-related data had been better analyzed? Greater than 50% Greater than 90% 2% but less than 70% Greater than 70% but less than 90% 7%

Greather than 30% but less than 50%

percentage of loan losses in the previous 12 months could have been avoided if proprietary credit data had fully taken into account, 51 percent of the respondents said that between 10 and 30 percent of losses could have been reduced or avoided. Twenty-four percent said that up to 10 percent could have been reduced or avoided. Beyond the balance sheet, less high-profile data such as timely submission of financials and loan officer comments sometimes dropped below the radar; the bankers tended not to be incorporating that data. O’Connell’s study calls for more attention paid to credit upgrades and downgrades, and any dilution of assets. “I’m certain there are opportunities in [proprietary] data for banks to predict credit deterioration sooner,” he says.

An Ounce Of Prevention Definitions of even basic items such as nonperformance criteria can lead to disparities. The lack of uniform semantics is not something that regulation

Quantifying The Impact Of Reduced Loan Losses Citigroup* Fifth Third* Wells Fargo* Commercial losses charged off in 2013 Impact of a 10% reduction to charge offs Actual income before income taxes

16%

Pro-forma operating income

Greater than 10% but less than 30% Up to 10%

24% Source: February 2014 Aite Group survey of 100 bankers attending a GARP webinar entitled “Commercial Credit Analytics: Improving Productivity”

BANKING NEW ENGLAND

51%

would necessarily be able to fix, O’Connell says; financial institutions should come to an internal consensus on what uniform standard to adopt. The compartmentalization of knowledge, combined with fragmented data sets that may exist on several different platforms, can make it difficult to aggregate information into a meaningful evaluation tool. Large public banks have extremely granular footnotes, O’Connell says; based on what the bankers he polled told him, he was able to evaluate the amount of annual writeoffs of the commercial lending portfolios of three large banks to figure out how much lower their losses would have been – a 10 percent reduction on chargeoffs to net income. “Loan workouts provide a particularly rich data set to examine,” O’Connell says – “which go to workout, which succeed and which fail, [providing a way] to identify best and worst practices.” BNE

Percent impact on operating income Impact on operating income in basis points *Dollar amouts in U.S. millions

$369.0

$284.0

$206.0

$36.9

$28.4

$20.6

$19,497.0

$2,598.0

$32,629.0

$19,533.9

$2,626.4

$32,649.6

0.19%

1.09%

0.06%

109

6 Source: SEC Filings, Aite Group

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HITTING THE RESET BUTTON

Why it’s so Hard to Fix the Broken Student Loan Industry Refinancing ‘a Tremendously Underserved Market’

BY CHRISTINA P. O’NEILL Christina P. O’Neill is editor of Banking New England. She may be reached at coneill@thewarrengroup.com.

espite today’s low borrowing costs, many gainfully employed college graduates are finding that they cannot refinance student loans taken out under higher interest rates than they’d be eligible for today. The growth in the cost of a college education has outstripped inflation for decades and there’s no end in sight. Student loans are an investment in human capital. You can’t repossess an education. And with interest rates expected to rise, there’s little incentive to lower interest rates incurred when today’s graduates were college freshmen. The Department of Education hasn’t made it easier. Its disclosures on the performance of student loan servicing companies has been inconsistent, making it difficult for the public to evaluate their quality. And practices banned in other consumer-debt fields are still used by student-loan servicers. “My understanding is that there is nothing in the federal consumer financial laws which prevents principal reduction or other loan modifications,” said Rohit Chopra, student loan ombudsman for the Consumer Financial Protection Bureau (CFPB). “Banks may need to comply with accounting guidance prescribed by state and federal prudential regulators.” He said public comment suggests that refinance options on private student loans could offer relief for responsible borrowers – those with high-rate private student loans who have made their payments on time, with consequent improvement in their credit scores since their first borrowing. But borrowers who have graduated and joined the workforce may be unable to refinance at a lower rate that reflects their demonstrated ability to repay. He said comments suggest that policymakers can play a role to jumpstart a refinance market, allowing eligible borrowers to refinance their debt at lower interest rates, potentially saving thousands of dollars.

A Lack of Competition

Mark Kantrowitz, senior vice president and publisher at Las Vegas-based Edvisors.com, part of Edvisors Network Inc., noted that student borrowers’ credit score while they are still in school declines as they near graduation, so their interest rate gets higher. If students repay responsibly for two years they become a proven asset, with a better credit score than when they came in as freshmen. There should be a good market for them in income-based repayment, 8

BANKING NEW ENGLAND

but that hasn’t occurred on a widespread basis, though there has recently been talk at the federal level about doing so. Meanwhile, without market competition, there’s little incentive, in a low interest rate market, to lower a borrower’s interest rate from pre-graduation highs. “Unlike other asset classes, there are very few servicers in the student loan business,” said Perry O’Grady, principal of Silver Sword Capital Partners, a Boston-based business-tobusiness financial products marketing firm. Silver Sword partners with various firms in the private-loan arena, and represents Sallie Mae to financial institutions seeking to add a student loan product to offer their existing customers. Sallie Mae originates and services the loans in the partner institution’s name and the partner institution earns a fee at origination, providing a risk-free option to the bank or credit union that delivers incremental fee income. But the financial institution has no discretion in refinancing the loan, which is owned by Sallie Mae and is carried on Sallie’s balance sheet. The loan servicing environment is dominated mostly by big players, because without scale, loan servicing is a thin-margin business, O’Grady said. Salem Five Bank offers products through partnering with Sallie Mae. Its website offers both variable interest rates and fixed interest rates, rewards for paying on time, and a 0.25

percent interest rate reduction while in school for making scheduled payments by automatic debits. Students can borrow up to 100 percent of their school-certified costs, and can choose from deferred repayment, fixed repayment or interest repayment. Wells Fargo, one of the largest bank institutions in the student-loan business, offers a private product for parents of undergraduate students. Regions Bank, Commerce Bank and Fifth Third are also super-regionals in the student loan arena. Few lenders do refinancing of private loans, and if they do, it’s often only with their own loans. “There are some refinancing options available, but it is a tremendously underserved market,” O’Grady said.

The Next Bubble?

Loan securitization has historically been an efficient way to put risky financial obligations into a more liquid market, at a reduction of risk, but as was learned from the mortgage debacle, it’s easier to place a loan into securitization than to rework it when things go wrong. “Once a loan is securitized, the ability to refinance is limited,” said Kantrowitz. Investors don’t want to lose their expected profit through refinance; there’s more incentive to change the repayment terms of what’s already on the balance sheet, by extending the repayment period, for example. Modification of the principle balance on federal loans is not a possibility unless the borrower has been in default, which echoes the same moral hazard as did the recent

problems in the mortgage industry. Many consumer finance options are available through specialty lenders, e.g. nonbanks such as San Francisco-based Social Finance Inc. (SoFi). That peer-to-peer lender targets professionals with high education costs but also high earnings potential, and at yearend 2013 had funded $275 million in loans to students and graduates from more than 100 select universities. In December, SoFi announced the closing of its inaugural securitization of post-graduate student loans, the first such instrument from a peer-to-peer lender. Approximately $152 million in senior notes were sold to institutional investors. With interest rates set to rise, access to capital markets marks a watershed in the matter of such instruments. BNE

Get Introduced To Your Best Prospects. And start building stronger business relationships today. Banking New England magazine covers all the news, information and analysis vital to bankers across New England. Bankers, industry experts, legislators, government agencies, and service providers contribute to each issue to ensure that executives and managers across the region have what they need to serve their customers, run their institutions and grow in a challenging economy. Banking New England offers advertising and spwonsorship opportunities in three targeted marketing programs – digital, print and live events – reaching readers on multiple platforms.

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BANKING NEW ENGLAND

THE GOOD, THE BAD AND THE PROFITABLE

The State of High-Risk Processing Today With Caution, Banks Again Accepting Overseas Accounts BY LAURA KAISER Laura Kaiser is a professional freelance writer and creative consultant working with companies in the NY/NJ/PA Tristate area.

he lure of high risk processing and its potential for windfall profits is nothing new. Since becoming a legitimate and bankable income source some 15 years ago, more and more consulting firms and processors claim they can place categories not widely accepted. So when your organization decides it’s time to diversify its portfolio with some less traditional accounts, it’s important to know how to separate smart risks from just plain risky business. There are plenty of non-traditional accounts with excellent income potential, but the rules regarding which to consider accepting are constantly changing. To stay current, profitable and within the confines of the law, it helps to have strong connections to consultants or partner processing banks that know the laws and have experience managing risk appropriately. And as a bank executive, it’s always wise to network with experts who can provide sound advice on what types merchants to look for and which ones to avoid. Gene Lieb, consultant with Business Financial Resources, a consultancy in the high risk processing field since 1992, said, “In the beginning there were a few processors out there willing to take on furniture and flooring sales with maybe a few escort services thrown in. That’s how it all started. Today, future delivery status still factors into the equation, especially with Internet sales, but market globalization has made this business more complex.”

A Global Reach

Lieb is referring primarily to the thousands of online merchants operating all over the world with the ability to sell to nearly anyone with a computer or smartphone. With good reason, this has made many banks more cautious about the types of accounts they will accept. It’s important to proceed with caution when navigating international processors – many don’t recognize U.S. laws – and when dealing with varied rates and conditions between regions. This is especially true when choosing to work with gaming, replica, nutraceutical, cigarette, tobacco clients, etc. Unfortunately, it has become common practice to disguise these types of businesses for the purpose of securing accounts. Earnings from prohibited items such as sea salts, controlled pharmacy items, firearms and other objectionable goods has created a darker, greedier side of high risk processing. The allure of a large payday can be tempting, and less 10 BANKING NEW ENGLAND

reputable organizations will promise creative solutions to get around the laws governing these types of merchants. Lieb stressed the importance of avoiding this type of risk, saying that “these items are illegal and potentially dangerous – that’s obvious. Working with this type of business can also damage your reputation. You risk having your accounts turned off and becoming black-listed by processors at the very least. And it just gets worse from there.” Financial institutions that do their own processing, as well as those that don’t, can benefit from consulting services that specialize in understanding how to rate all types of accounts, including those with future delivery. Whether it’s an outside consulting firm or someone within your organization, an expert can help assess cancellation and chargeback risks and suggest emerging safe-bet categories. It’s important to keep in mind that just because online services come with future deliveries, doesn’t automatically make them high liability business types. All merchants should be judged on a case by case basis. Even traditional retail stores, though generally considered low risk, must be judged on their credit and performance because they too have been known to shut down with unfinished customer business. Lieb said that with proper sales and delivery monitoring, travel, multi-level marketing, foreign exchange, dating services, adult products, gaming, psychic services and others make excellent accounts. BNE

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BANK PROFILE

BankNewport Mutual Bank at Top of State’s SBA Lender List BY LINDA GOODSPEED

fter opening three branches in 30 days, BankNewport is looking ahead to celebrating a few other milestones this year. In June, the bank’s loan portfolio will top $1 billion for the first time. And with $34 million in SBA loans already on the books for 2014, and another $17 million in the pipeline, the bank is once again likely to be named Rhode Island’s top Small Business Administration (SBA) lender. And then, of course, there is the big 200th anniversary celebration on the horizon. Founded in 1819, BankNewport is one of the oldest mutual savings banks not only in Rhode Island, but in the entire United States. The bank has total assets of $1.2 billion and 15 branches located throughout southeastern Rhode Island. It is a subsidiary of OceanPoint Financial Partners, a mutual holding company, 12 BANKING NEW ENGLAND

which also owns OceanPoint Insurance Agency. Rhode Island, the smallest state in the union, was one of the hardest hit by the economic downturn. The state’s economy remains weak with high unemployment and slow job growth. Despite this environment, BankNewport has continued to grow. “We were not affected at all by the recession,” said Sandra J. Pattie, president and CEO. “We’ve always been a very conservative lender. We had no subprime products, and our customers weathered the recession. We had money to lend throughout the crisis. Customer demand was off, but when it was there, we were ready to respond.” The bank’s bottom line tells the story. In April 2014, the percentage of nonperforming loans in the bank’s loan portfolio of $970

million was 0.41. For 2013, BankNewport reported net income of $6.0 million, loan originations of $339 million and deposit growth of $26 million. New commercial loan SANDRA J PATTIE production exceeded $100 million for the first time in bank history. By June 2014, Pattie expected the total loan portfolio to exceed $1 billion. About 60 percent of the portfolio is residential.

Growth in Commercial Lending

“We look like a mutual bank on the loan side,” Pattie said. “But the real growth has been in the commercial business. We started to transition about 10 years ago, and over the last three years have seen significant growth there.” SBA lending has fueled the transition. BankNewport has been the numberone SBA 504 lender in Rhode Island and ranked among the top four in New England for the last four years, a remarkable achievement considering the “behemoth banks in that category,” said Michael Topalian, managing director of sales and marketing, BDC Capital/CDC New England, who has worked with BankNewport on many SBA loans. “BankNewport has a very solid understanding of the SBA program,” Topalian said. “They don’t look at the SBA loan as a loss leader as some banks do. Some banks steer customers in another direction to generate more loan volume. BankNewport puts the customer first, and works to get the customer in the right product. They are incredibly customer-focused.” In recent years, BankNewport has particularly focused on the hospitality industry. “Our headquarters is in the heart of the tourism industry, which has given us a good understanding of the hospitality industry, where we are now putting our focus,” Pattie said. The bank lends throughout New England and can finance projects up to $10 million, although a more typical loan is in the $4 million to $5 million range.

Residential Loans throughout

New England

BankNewport also has one of the largest residential lending operations of any Rhode Island-based community bank. Despite a slowdown in the residential refinance market, the bank’s residential loan production in 2013 totaled nearly $195 million. Also in 2013, BankNewport opened a residential loan production office in Chapel View in Cranston. The three new branch openings this year began in March when BankNewport acquired the Coventry and Cranston branches – and assumed the related deposit relationships – from Randolph Savings Bank, headquartered in Stoughton, Mass. A month later, BankNewport opened its 15th branch at the Shops at Quonset Point in North Kingstown. Pattie said no other expansions are planned in the near future, although “we are always open to opportunities.” “We eventually would like to serve

all of Rhode Island and some areas of Massachusetts,” she said. Currently, the bank is located in mid and south Rhode Island. It has about 300 employees, and has been named a Providence Business News “Best Place to Work” seven years in a row. “We value our employees,” Pattie said. “They are our competitive advantage.” The bank also values its communities, donating $250,000 to local nonprofits and charities in 2013, in addition to employee volunteer time. Looking ahead, BankNewport is already planning for its 200th anniversary in 2019. “We’ll do it up,” Pattie promised. “We are firmly committed to mutuality. We believe we can grow and thrive as a mutual. We believe we can provide the best digital options while providing extra personal service. We are very confident there is a place in the financial marketplace for mutual banking.” BNE

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IS THERE AN APP FOR THAT?

Fed Workgroup Panelists Hope Mobile Payments Can Help Bank the Underbanked Smaller Banks Still Reluctant to Invest in Technology

BY LAURA ALIX Laura Alix is a staff writer for The Warren Group, publisher of Banking New England.

ew mobile payments technologies could help bring underserved and nontraditional customers into the mainstream banking system – but achieving scale in this field poses a challenge, and many banks are still characteristically reticent to adopt those new technologies. In a paper released earlier this year, the Federal Reserve Banks of Boston and Atlanta outlined some of the challenges associated with achieving scale in mobile payment adoption, discussed last fall by the Fed’s Mobile Payments Industry Workgroup. “Our intended audience is a broad one,” said Marianne Crowe, vice president of payment strategies at the Federal Reserve Bank of Boston. “In order to succeed in reaching the underserved consumer, you can’t do it in a silo. We’re trying to reach banks of all sizes and types. We’re trying to reach the card networks and mobile carriers, and then the solution providers.” Of course, defining the underbanked is a problem in itself. “You have to look at the Millennials, who may be unbanked because they’re new to the working world. Then you have people who have lost their jobs in the past few years. Then you also have other people, from different ethnic or cultural backgrounds, who perhaps don’t feel comfortable using banks. They all have different needs and all have different behaviors,” she said. But panelists at the meeting last fall believed that mobile payments technologies could help underserved consumers improve access to their financial accounts and free up a little time, too. Ideally, Crowe said, that could come about from partnerships across industries, like banking, merchants, card processors and tech start-ups. She points to Bluebird, the prepaid debit and credit card offered by American Express and Wal-Mart, as one example.

Innovations in Boston

Closer to home, last summer First Trade Union Bank in Boston rolled out a new 14 BANKING NEW ENGLAND

payment application, F T Pay, the result of a collaboration with LevelUp, which also calls Boston home. The mobile phone application links up with a credit or debit card and essentially gives consumers the option of paying with their phone instead of a card at any merchant that accepts LevelUp. Chris Tremont, First Trade’s vice president of marketing and client services, said a great deal of marketing went into achieving some degree of scale with F T Pay. Print advertising, email, direct mail and

ads on public transit were part of the effort, but the $669 million bank also brainstormed out-of-the-box marketing techniques. For example, First Trade heavily promoted the app, which is free to download, during summer concerts and events it sponsored, and included a link to a coupon or another incentive to download the app. Today, Tremont estimates about 10 percent of the bank’s checking account customers have downloaded the payment app, but it’s available to anyone, not just First Trade’s customers, and he figures a good 60 to 70 percent of people who do have the app are prospects. In other words, those users don’t currently have an account with First Trade, but now that they’ve already engaged with the brand, they might be more likely to consider it. The app is not just a payment or a branding tool, but also an acquisition tool. Matt Kiernan, marketing director at LevelUp, said the challenge that mobile payments solutions tend to face is that they aren’t really solving a problem. “The key to scale is providing real, tangible value,” he said. “You see this across a variety of different players, where you have yet to see a big rollout of their mobile payment solution.” The incentive LevelUp offers merchants is a flat 2 percent fee per payment, as opposed to the 4 or 5 percent a credit or debit card would incur. LevelUp also offers merchants an easy venue for promoting campaigns among its customers, and in turn, merchants pay some of that money back to LevelUp. But for now, the First Trade-LevelUp partnership is still something of an anomaly. “There are a few banks doing this, but there aren’t enough of them,” Crowe said. “We know banks are very risk averse, and they have to be, but there are ways that they can collaborate to come up with solutions to manage the risk.” And while setting foot into new

“Our intended audience is a broad one. In order to succeed in reaching the underserved consumer, you can’t do it in a silo.” — Marianne Crowe, vice president of payment strategies, Federal Reserve Bank of Boston territory can be intimidating, especially for banks, Tremont said close contact with regulators at the Office of the Comptroller of the Currency helped. “We’re still working with them and

at the same time with LevelUp,” he said, adding that the app does require upkeep to keep security features up-to-date. “This is not a launch-it-and-you’re-done type of situation.” BNE

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Patient Capital

Provides Long-Term Results New Market Tax Credits Have Had Long-Lasting Effects

By Christina P. O’Neill In Maine, a decommissioned Navy base gets a new life as a commercial industrial zone and becomes home to a thriving medical-supply company. In Massachusetts, theater lights go up in a neighborhood that was fading to black. In New Hampshire, a health center springs up, and attracts other businesses. In Vermont, a small company teams up with an international dairy producer and supplies both a large market and a regional brand. All of these projects were begun in census tracts exhibiting either economic decline, a high poverty rate, or both, lacking allure for most private investors. They were aided by a federal program sponsored by the U.S. Treasury: The New Market Tax Credits (NMTC) program, which fosters patient capital for projects that otherwise might not be able to get off the ground. The program’s requirements set the bar high enough to attract other forms of investment – and subsequently, more economic activity as a result of their presence. The program is administered by, among others, Maine-based CEI Capital Management, a for-profit subsidiary of CEI, which helps gather the funding invested in projects nationwide, but focuses on rural areas in a core market in the Northeast. [Editor’s Note: In February of this year, The Treasury’s Community Development Financial Institutions Fund (CDFI Fund) announced 16 BANKING NEW ENGLAND

that it hadn’t received Congressional allocation authority for calendar year 2014. Both Houses of Congress are taking action to extend the program. Reps. Jim Gerlach (R-Pa.) and Richard Neal (D-Mass.) introduced a bipartisan bill to renew and make the NMTC permanent.] John Moore is senior vice president of community development lending for Bangor Savings Bank and an advocate of the benefits of the NMTC program. NMTC “does require a different way of looking at things,” he says; some bankers may regard it as too complex, and a hard sell to their underwriters or their board. But Bangor Savings Bank’s long experience with the program has yielded positive new business opportunities and better results than some other public sector business attraction programs, which didn’t require the same level of credit discipline.

NMTC in Maine

When the Naval Air Station Brunswick was decommissioned in 1995, the local economy stood to lose 5,000 jobs, $330 million in annual revenues and thousands of housing units. As part of comprehensive drive to repurpose the base when it closed in 2011, a Swedish-based health care company that acquired Wiscasset, Mainebased Rynel Corp. in early 2010, worked with the Midcoast Regional Redevelopment Authority (MRRA) to figure out how to expand its

U.S. footprint. It built an advanced wound dressing manufacturing facility on the former base. The state-of-the-art factory takes absorbent foam manufactured in Wiscasset and converts it into finished products in Brunswick. Mölnlycke Healthcare Corporation AB is a $1.5-billion Swedenbased wound dressing supplier with 7,400 employees worldwide. James Detert, former president and CEO of Rynel, joined Mölnlycke as site director for Maine and is now business development director in the Americas. Before establishing the factory in Brunswick at the former base, Mölnlycke imported foam from Wiscasset to its factory in Finland. The many-week, ocean-shipping process added considerably to the manufacturing lead-time and cost of products in a highly competitive market. The economic development professionals at MRRA, which had been created to acquire and manage the former base, put together a proposal. Bangor Savings Bank provided funding to MRRA to lend for the building construction. Detert praises MRRA for aggressively working to overcome a number of obstacles and taking the lead on arranging complicated financing to make the project happen. MRRA is now the landlord for Mölnlycke’s Brunswick facility, with a 20year lease. Mölnlycke has also invested $35 million with advanced machinery and equipment into the Brunswick facility, over and above the original loan-to-value amount. Partly as a result of success on this project, Mölnlycke recently invested even more in Maine – it is in the process of adding 34,000 square feet to its original 40,000 square foot facility in Wiscasset. John Moore cites Mölnlycke’s financial strength, track record in patents, existing customer base, and experienced management team as the hallmarks of a strong company, one that is a viable candidate for a successful NMTC loan.

MAINE

Project: Brunswick Landing MHC USA LLC, Brunswick, 79,000 square-foot facility.

Total project cost: $14.675 million NMTC Investment: $14.26 million (from CDE) New jobs created: 71 in Wiscasset, 41 in Brunswick Development Entity (CDE): CEI Capital Management Inc. LLC Community Development Organization (CDO): Midcoast Regional Redevelopment Authority

Participating banks: Bangor Savings Bank (senior debt), Wells

Fargo National Bank (equity investment). Company has made $35 million additional investment in the project.

MASSACHUSETTS

Project: Hanover Theater for the Performing Arts, Worcester, 2,300seat theater.

Total project cost: $33.1 million NMTC Investment: $30.15 million. Theater; $4.25 million to restore; NMTC tax credits of nearly $11.2 million in cash.

CDEs: Massachusetts Housing Investment Corp. ($14.3 million); CEI

Capital Management LLC. ($4.25 million); Citibank; and the Nonprofit Finance Fund ($5.6 million).

CDO: Worcester Business Development Corp. Participating bank: Citibank (equity investment of $4.755 million and $6 million in NMTC tax credit allocation).

NMTC in Massachusetts

The Hanover Theater for the Performing Arts in Worcester is the revival of an historic movie house, originally built in 1904. Redstone Theaters bought the building in 1967 and split up the interior space into a multi-screen movie theater, but closed it in 1998, when the neighborhood was waning. “When this transaction closed in August of 2007, the surrounding neighborhood had fallen into decline,” said Gina Nisbeth, director, Citi Community Capital. “The rehabilitation of this historic theatre served as a catalyst for further development and investment in the downtown area.” She observed that “while the transactions are highly structured and can be complex, the NMTC tool itself is also very flexible and provides patient capital in areas of the country with the greatest need of investment.” The investment package totaled $30.15 million of the $33.5 million in development costs. Nisbeth said this was comprised of multiple components, with two investment funds. In the first, Citibank made an equity investment of $4.755 million and also provided $6 million of NMTC tax credit allocation. The other NMTC tax credit allocatees in the investment fund included Nonprofit Finance Fund (NFF), with $5.6 million, and CEI Capital Management LLC with $4.25 million. In the second investment fund, Massachusetts Housing Investment Corp. (MHIC) was both an investor, through an upper tier fund they created, and allocatee, providing $14.3 of NMTC allocation. Citibank was also an investor in that upper tier fund. Other public funding included two loans from the Office of Housing and Urban Development, totaling $3.1 million. The Worcester Business Development Corporation subsequently took the initiative in 2011 to finalize a memorandum of understanding

Continued on next page

NEW HAMPSHIRE Project: Mid-State Health Center, Plymouth NMTC Investments: $3.4 million health center; in a separate project, medical office building, $9.4 million

CDE: CEI Capital Management LLC CDO: Capital Regional Development Council Participating banks: Health Center: Franklin Savings Bank; also

Woodville Guaranty and Community Guaranty, each as both lender and equity investors. Medical building: U.S. Bancorp, equity investor; Franklin Savings Bank, lender

VERMONT

Project: Commonwealth Dairy, Brattleboro NMTC investment: Total: $28.4 million CDEs: CEI Capital Management LLC, $10 million; Massachusetts Housing Investment Corp., $18.4 million

CDO: Massachusetts Housing Investment Corp. Private-sector participants: Ehrmann USA, a subsidiary of Germany-based, family-run Ehrmann AG

New jobs created: 28.6 plus permanent jobs added to existing head count of 110-120.

Participating bank: Wainwright Bank, since acquired by Eastern Bank in 2013, lender; U.S. Bancorp, equity investor

BANKING NEW ENGLAND

COVER STORY New Market Tax Credits Continued from page 17

with the city of Worcester to designate a 30-acre parcel around the theater as a “Theatre District,” and hired an urban design firm to develop a master plan. The WBDC’s ambitious second act for the theater includes a renovation of the former Telegram & Gazette newspaper headquarters as a satellite site for Quinsigamond Community College, which has signed a 10-year lease on 72,400 square feet of space at $1.6 million for the first five years and $1.7 million for the last five. A consortium of six community banks have come together to support the WBDC’s initiative.

NMTC in New Hampshire

The Mid-State Health Center began as a small physicians’ practice affiliated with a small community hospital, Speare Memorial Hospital in Plymouth. In 2003, Sharon Beaty, who would become Mid-State’s CEO, went hunting for funds and found no resources in terms of grants. The project lacked the opportunity to build and finance under conventional terms, but when the problem was recast in economicdevelopment terms, opportunity opened up. With help from CEI Capital Management LLC(CCML) to bring in the NMTC program, the White Mountain Gateway Economic Development Corp., USDA funding, and a patchwork of Community Development Block Grant funding – and a consortium of banks led by Franklin Savings Bank of New Hampshire – the project was underway. The project paid property taxes for the seven years of its NMTC commitment, and became exempt afterward. But to date, Mid-State, which reported almost $6.6 million in revenues and 80 jobs in its fiscal 2013 annual report, has attracted many other taxpaying businesses to cluster around its facilities, including a Montessori school and a strip mall full of small businesses. A consortium of four community banks led by Franklin Savings Bank teamed with CCML to do the complex legal work. David Savastano, Franklin’s vice president and commercial loan officer, said he saw an opportunity to work with a community health center whose service area closely matched its own, as well as a chance to team with the other community banks. The NMTC structure provided Mid-State with financing under more favorable terms, particularly the interest rate. Franklin Savings participated on both the loan and investment side of the transaction and was able to price the loan aggressively, yet still realize an attractive return. “The loan was, in many ways, a typical construction loan/CREM, but the NMTC structure was new,” he adds. Teaming with CCML, bank counsel and the head of CRDC, the bank made it happen.

NMTC in Vermont

When Thomas Moffitt went through the NMTC process to expand Commonwealth Dairy LLC, the work involved was intimidating. But once the pieces were in place, he says, he found that the return for investors made the project so attractive that it became easier to apply for and receive regional and rural grants. The company began in 2009 as a partnership with Ehrmann USA, a subsidiary of family-run Ehrmann AG, and construction of the Vermont plan began the next year. Commonwealth Dairy bought the Brattleboro property and expanded its plant there by 25,000 square feet, bringing the employee headcount to between 135 and 150; it also built a 100,000-square-foot facility in Casa Grande, Arizona, now in startup mode, which employs 40 to 50 people. Wainwright Bank, since acquired by Eastern Bank, teamed up with U.S. Bankcorp to lend $10 million to Commonwealth for construction 18 BANKING NEW ENGLAND

A New Market Tax Credit Primer The New Market Tax Credit program encourages private investment into operating businesses, whether they’re startups or expansions, and real estate projects in low-income communities, specifically in census tracts in which 20 percent of the population is below the poverty level, is low-income, or is experiencing other economic hardship. NMTC investors receive a tax writeoff of 39 percent of their original investment, but they must leave that investment in the project for seven years. The program’s financing and equity-like capital remains with the project at the end of the seven-year compliance period; at that time, equity investors will have fully recovered their funding through tax credits, while the borrower must seek conventional financing to refinance the senior debt. The program is provided through a pooling entity, and is available for loan only through a special purpose intermediary lender – a certified community development entity (CDE) that has received a competitively awarded NMTC allocation from the U.S. Treasury’s Community Development Financial Institution Fund. Loans are often interest-only until the seven year compliance period is up. The CDE syndicates the tax credits to private-sector investors and establishes a single-purpose intermediary lender for the project (a sub-CDE) to make a secured loan to a qualified business borrower in an eligible census tract. The CDE receiving the allocation acts as managing member of the intermediary lender group, enforcing the loan agreements with the borrower until the end of the seven-year compliance period. Maine-based Coastal Enterprises Inc. (CEI) and its for-profit subsidiary, CEI Capital Management LLC (CCML), have been awarded $858 million of investment capacity under the NMTC program. According to CEI, CCML has placed $783 million of this capacity in 80 projects, triggering total private capital investment in low-income communities of more than $2.06 billion. CCML has a national service area under the NMTC program with an emphasis on rural areas and a core market of Maine, New Hampshire, Vermont, Upstate New York and Western Massachusetts.

of the Brattleboro facility in 2010. The Vermont Economic Development Authority approved a $1.3 million loan as part of a $26.3 million financing package utilizing NMTC tax credits to provide a portion of the equity funding. The Vermont Economic Progress Council approved up to $1.2 million in Vermont Employment Growth Incentives, and the Vermont Community Development Program approved a $640,000 community development block grant to Brattleboro for fit-up costs. The NMTC program “opened doors to a whole variety of different funding sources,” Moffit said – including Department of Labor grants, as well as different public and quasi-public sources. NMTC gave us instant credibility.” BNE Christina P. O’Neill is editor of Banking New England. She may be reached at coneill@thewarrengroup.com.

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The Best Defense is a Good Offense With Interest Rates Rising, Banks Should Focus on Risk Management BY ROBERT B. SEGAL Robert B. Segal is president of Atlantic Capital Strategies Inc.

20 BANKING NEW ENGLAND

ver the past five years, financial institutions have operated in a setting of historically low interest rates. These conditions have influenced changes in asset mix while presenting challenges to maintaining profitability. As interest rates declined, the yield curve steepened, prompting many institutions to rely more heavily on longer-term loans and securities to support profitability. According to a recent report by the FDIC, these changes in balance sheet composition appear to ROBERT B. SEGAL have resulted in increased interest rate risk exposure. Asset expansion since 2008 has primarily been the result of growth in bank securities portfolios, according to the FDIC. Securities balances grew by a larger dollar volume and at a considerably faster pace than loans during the five years ending second quarter 2013. During this period, the annual growth rate of securities far exceeded the increase in loans. Securities as a percentage of assets increased from 14.7 percent to 20.2 percent for institutions with assets over $1 billion and from 18.5 percent to 23.1 percent for banks under $1 billion. Even as smaller banks increased securities holdings, they’ve also shifted to securities and loans with longer maturities. Since second quarter 2008, longer-term assets (loans and securities with maturities or repricing dates greater than five years) increased from 19.9 percent to 28.8 percent. Long-term securities represent 13.0 percent of assets and more than half of all securities held by smaller banks. Long-term loans represent 15.8 percent of assets. Meanwhile, larger banks have only slightly increased longer-term assets, from 19.3 percent to 20.7 percent. Although it is difficult to predict when interest rates will increase, the FDIC guidance urges banks to prepare for a period of rising interest rates. The report said the value of longer-maturity securities may decline as interest rates increase, putting banks’ earnings, liquidity and images in jeopardy. To reduce risk, the FDIC recommends that banks consider boosting their holdings of shorter-maturity or variable-rate securities and lock in profits by selling longer-term securities. Banks that have extended asset portfolio duration to capture higher yields may find that variablerate products are more effective in managing sensitivity and mitigating potential depreciation

in the portfolio. While a shift to floating-rate assets certainly helps to reduce interest rate sensitivity, this comes at a cost. At the December 2013 FOMC meeting, the Fed reaffirmed its view that highly accommodative monetary policy will remain appropriate for a considerable time after their bond purchase program ends and the recovery strengthens. The Fed anticipates the target range for federal funds will remain at 0 to 25 basis points until “well past the time” that the unemployment rate declines below 6.5 percent. A wide range of indicators implies that the first increase in the target federal funds rate will occur during the latter stages of 2015. Based on trading in short-term interest rate futures, the Fed will raise rates no earlier than the third quarter of 2015. A majority of Fed governors and district presidents see the first hike in 2015. Of this group of 17, only two look for an increase this year, while 12 expect it to happen in 2015 and three in 2016. Most policymakers say the rate will stay below 2 percent through the end of 2016. In this environment, floating-rate assets may provide 2 percent to 2.5 percent less yield relative to comparable fixed-rate assets for a period of two or three years. Most institutions still need to generate interest income, and a large allocation to floating-rate assets could impact earnings. If the Fed in fact does not raise rates for two years, then fixed-rate assets put on the books today will earn a positive carry relative to the federal funds rate. Four- to five-year average life assets would perform well on a relative basis, because these instruments should have “rolled down” the yield curve by the time the Fed acts. This feature provides some price protection in a rising rate environment, as the assets will be shorter-term when rates rise. As the Fed pares back on its bond purchases this year, longer-term interest rates may continue to climb. It is sometimes challenging to add assets in this kind of environment, because bankers could find these assets to be underwater in the near term. With regulator concern over mark-to-market pricing and balance sheet fair value testing, the goal is selecting those instruments that will not exhibit excessive price volatility. This means avoiding extension risk in the investment portfolio and making sure commercial loans are structured appropriately. As always, institutions should maintain robust risk management practices, keeping interest rate risk exposure at reasonable levels. BNE

COVER RAISING STORY THE BAR

Quality Service: You Get What You Pay for BY MIKE SOBBA Mike Sobba is president of Strunk LLC, an advisory service for the financial institution community.

anking services have become expensive over the past decade, and fee income to offset the high-quality services that banks provide has eroded in recent years. For most banks, checking account customers in the late 1980s and early ’90s received a checking account, a monthly statement and maybe a debit card if they qualified for one. One by one, financial institutions began adding services their customers wanted, including online banking, bill pay, free ATM transactions, mobile banking and now being able to make deposits by taking a picture of the check with your smartphone. We have enhanced the services we provide without charging fees to cover the cost. Years ago, the airline industry provided services like hot meals, snacks, beverages and more at no additional charge. Now they charge for bags, and convenience fees for extra legroom, sitting near the front of the plane and for getting on the plane first. For a fee, you can even skip the baggage claim area and have your luggage delivered directly to your home, office or the hotel where you’re staying. Airlines have struggled to increase airfare to cover costs, so they raised fees to make the industry profitable.

22 BANKING NEW ENGLAND

Now, getting a bag of peanuts on some flights is impossible. Service charge income in community banks has dropped dramatically since the peak in 2007, in part due to changes to overdraft payment programs and reduced interchange income due to changes associated with the Durbin Amendment to the Dodd-Frank Act. Tremendous overdraft fees and debit card interchange revenue masked the real problem that our industry is facing: Where are we going to get the money to pay for the technological and compliance changes our customers and the regulators are demanding? Increased costs associated with compliance have dramatically increased since 2010. Who has to pay for replacing debit cards and credit cards for the recent security breach at Target? Who will pay to update ATMs to allow them to read the EMV “chip” that is required by October 2015? Who will pay for replacing debit and credit cards that have the more secure chip embedded? What other expenses will the banking industry have to endure from a regulatory perspective that we aren’t aware of ? It is imperative that we quickly learn what our costs are associated with the services we

provide. Checking account costs and the services that are provided to consumers are not going to go down. What industry that serves consumers gives their services away for free? Would a bank loan money to a commercial business that didn’t know what their cost of goods sold were? Quality service comes at a cost. Quality products come with a cost. Our industry has prided itself on providing the best customer service and products that money can buy. The problem is no one “buys” them. If someone wants all of the expensive services, then they should pay for them. Free checking should only be provided to customers who want a basic checking account and don’t want to pay a fee. We all have customers like that. A bigger problem is that we have trained our customers that they should get all of these services for free. So should you just start charging a paper statement fee for those customers who don’t want to sign up for e-statements? No. Just charging fees for the same things that

Where are we going to get the money to pay for the technological and compliance changes our customers and the regulators are demanding?

customers previously received for free is not the way to go. The airline industry did this with baggage fees and the backlash was big at first. That is why the bins are always full when you get on the plane. Add value to the customer’s checking account with things they want and need. The Consumer Financial Protection Bureau recently said that all credit card companies should provide credit scores to their clients – for free. But what if a consumer’s credit score is too low? What is the credit card company going to do about it? Providing highly sought after services,

such as ID theft protection, credit score, credit bureau monitoring with alerts, and other resolution services is great, but who will buy them? You have to have a strategy to provide these value added services to all consumer accounts, rather than just selling them one by one. If you have the right products, the right strategy, and the right training of your employees, the end product will result in much happier customers and tremendous fee income for your bank. The right strategy will keep customers from closing their account and they will bring additional deposits to your bank. BNE

BANKING NEW ENGLAND

COMMUNITYGOOD GOODWORKS WORKS COMMUNITY

Financial institutions large and small have been making a difference in their communities for years. In this space, we acknowledge them, and welcome readers to submit news of their own banks’ efforts and endeavors.

Bay State Savings Bank

Featured Banks • Bay State Savings Bank • Bridgewater Savings Bank • Bristol County Savings Bank • Meredith Village Savings Bank • MutualOne Bank • RBS Citizens

Peter Alden (left), president and CEO of Bay State Savings Bank, and Cheri Carty (right), vice president and treasurer of Bay State Savings Bank, present Lisa Piehler, executive director of the American Red Cross of Central MA, with a check for $2,000 from the bank’s charitable foundation.

Bristol County Savings Bank

Bristol County Savings Bank, through its foundation, awarded grants totaling $40,000 to seven New Bedford area nonprofits. Pictured, from left: Mary Hodgson, CEO, Schwartz Center for Children; Joseph Nauman, board member, BCSCFSAB & BCSB and executive vice president, corporate and legal, Acushnet Company; Patrick Murray, president & CEO, BCSB and president, BCSCF; Tom Nee, director of project management, Caritas Communities; Devon Pires, eighth grader, Nativity Preparatory School; Armand Marchand, executive producer, New Bedford Festival Theatre; Dr. Jean MacCormack, chairperson, BCSCF-SAB, former UMass Dartmouth chancellor and board member, BCSB; Jon Mitchell, mayor, city of New Bedford; Audrey Brown, programs coordinator for the Southeast Region, Horizons for Homeless Children; Noelle Foye, executive director, New Bedford Art Museum/ArtWorks!; and Jim Reid, executive director, Veteran’s Transition House of Southeastern Massachusetts.

24 BANKING NEW ENGLAND

Bridgewater Savings Bank

Massachusetts-based Bridgewater Savings Bank and the Bridgewater Savings Bank Charitable Foundation donated $6,500 to the YMCA’s Annual Support Campaign. The YMCA’s annual campaign raises funds to ensure that the YMCA is available to those who need it most. By supporting the campaign, Bridgewater Savings is helping to ensure that children and families, regardless of circumstances, will be able to benefit from the YMCA’s programs.

Meredith Village Savings Bank

Meredith Village Savings Bank’s Cheryl Carter (second from left), and Denise Hubbard (second from right) present a $3795 check to Genesis Behavioral Health Executive Director Maggie Pritchard (right) and Board Member, Liz Merry (left). Meredith Village Savings Bank has made a $3,795 donation to Genesis Behavioral Health of Laconia and Plymouth, one of 10 donations of equal amount to local nonprofits chosen by MVSB employee vote. As part of the bank’s commitment to assisting nonprofit agencies in the communities it serves, MVSB matched all 2014 employee contributions, totaling $37,950, to the Lakes Region United Way dollar-for-dollar. The grant received by Genesis will allow it to convert its paper charts to an electronic medical record system.

MutualOne Bank

RBS Citizens

MutualOne Bank, through its MutualOne Charitable Foundation, has awarded $5,000 to St. Bridget’s Food Pantry in Framingham, Mass. The grant was among awards totaling $43,725 in the foundation’s most recent round of funding. The MutualOne Charitable Foundation is a continuation of the Framingham Co-operative Bank Charitable Foundation, following the 2012 merger of Framingham Co-operative Bank and Natick Federal Savings Bank.

Jerry Sargent, Citizens Bank president, Massachusetts, and Bruce Van Saun, RBSCFG chairman and CEO, present a $30,000 to Pine Street Inn for a 300-unit housing expansion and piloting of their innovative “Phases of Care” tool, which assesses clients using a broad spectrum of medical, mental health, legal and substance abuse indicators. From left: Jerry Sargent, president, Citizens Bank and RBS Citizens, Massachusetts; Lyndia Downie, president, Pine Street Inn; Bruce Van Saun; chairman and CEO, RBSCFG and head of RBS Americas; and Frank Van Overbeeke, executive chef, Pine Street Inn & iCater.

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BANKING NEW ENGLAND

COMMUNITY BANK HEROES

Banker & Tradesmanâ&#x20AC;&#x2122;s 2014

COMMUNITY BANK

RUTH BARNETT

Vice President, Branch Manager Cambridge Savings Bank

INTEGRITY, LEADERSHIP, COMMITMENT .

anker & Tradesman set out to find community bankers who stand out from their peers. These individuals not only excel in their careers, but also devote professional and personal time to making the local communities they serve better places for all. Dozens of outstanding nominations poured in. And, after an arduous review, a total of 14 winners were selected. All of our winners are respected industry professionals who have made a significant impact on their institutions, their employees and their communities. They consistently give back to the industry and the community, giving freely of their time, energy and resources. Many work quietly, steering charitable donations from their banks to local nonprofit organizations and individuals in need. Others join in community outreach efforts, working side-by-side with other volunteers, after work and on weekends, to better their communities. Their deep involvement in community affairs, their awareness of the needs of local families and businesses and their commitment to using local deposits to improve their communities makes them Community Bank Heroes. BNE

26 BANKING NEW ENGLAND

DOUG BOWEN

President, CEO PeoplesBank

BETTY CHAN

Vice President, Retail Banking Branch Manager Santander

DAVID CHASE

Vice President, Commercial Lending Hampden Bank

Community Bank Heroes TOM COOTS

EDWARD LOMASNEY

CHERYL Dâ&#x20AC;&#x2122;AMBRA

WILLITTS MENDONCA

DIANE GIAMPA

JOHN MERRILL

JOHN HALL

JIM NYE

BOB LAMPREY

BRUCE S. WEISBERG

Assistant Vice President, Branch Manager The Cooperative Bank

SVP Retail Banking Athol Savings Bank

Senior Vice President, HR & Marketing Bay State Savings Bank

Senior Vice President, Commercial Lending Salem Five

Chairman of the Board, Chief Financial Officer MutualOne Bank

Vice President Eastern Bank

Vice President, Commercial Lender BankFive

President, COO Fidelity Bank

President, CEO National Grand Bank

Senior Vice President, Real Property Manager Middlesex Savings Bank

BANKING NEW ENGLAND

PERSONNEL FILE

Career achievers in banks across New England are constantly on the move, with their professional journeys reflecting a combination of mobility and longstanding service. We acknowledge them, and welcome readers to submit news of their own staff.

Appointments and Elections Millbury Savings Bank

Featured Banks

Massachusetts-based Millbury Savings Bank has named Robert J. Morton to succeed previous president William J. Walsh, who will remain CEO until his planned retirement in January 2015. Morton was previously Robert J. Morton the bank’s executive vice president and senior loan officer.

• Bristol County Savings Bank

Rockland Trust

Needham Bank

Jack W. McGeorge

TD Bank Massachusetts-based Rockland Trust has appointed James J. O’Connor Jr. as vice president of its Rhode Island commercial lending center.

• Charles River Bank • Florence Savings Bank • Hampden Bank • Kennebunk Savings Bank • Machias Savings Bank

Sherry Albanese

James J. O’Connor Jr.

• Meredith Village Savings Bank • Merrimack County Savings Bank

Bristol County Savings Bank

• Needham Bank

• Optima Bank • Rockland Trust • StonehamBank • TD Bank • United Bank

Bristol County Savings Bank, in Taunton, Mass., has promoted three to the position of vice president and regional banking officer in their respective Jann M. Alden regions: Jann M. Alden, Greater New Bedford/Fall River region; David J. Medeiros, Greater Attleboro/Pawtucket region; and George J. Mendros, Greater Taunton/Raynham region.

The bank has also named Stephen A. Soubble, CFO, to the post of executive vice president.

Machias Savings Bank

Danielle Caricofe

Kennebunk Savings Bank

James Gehrke Jennifer Johnson

Stephen A. Soubble

Maine-based Kennebunk Savings Bank has promoted Jennifer Johnson to vice president. Johnson joined Kennebunk Savings Bank more than 10 years ago and has served as business sales and services officer. 28 BANKING NEW ENGLAND

TD Bank has appointed two to the positions of regional mortgage sales manager: Sherry Albanese Fonseca in the bank’s Southern New England region, and Frank Benedict in its Maine, New Hampshire and Vermont region.

Promotions

• Millbury Savings Bank

• New Hampshire Bankers Association

Massachusetts-based Needham Bank’s board of directors announced a succession plan that will see long-time Chair and CEO Jack W. McGeorge hand off the CEO role in April 2015 to President and COO Mark Whalen, while retaining the board chair role.

Amanda Look

Maine-based Machias Savings Bank announced the following promotions: Danielle Caricofe has been promoted from vice president to senior vice president of human services. Amanda Look has been promoted from assistant vice president to vice president of cash management solutions. Charity Dennison has been promoted from assistant vice president to vice president of marketing and project management. James Gehrke has been promoted from assistant vice president to vice president of team leader business banking. Wendy Schors has been promoted from assistant vice president to vice president of asset management.

Meredith Village Savings Bank

underwriting and operational support for the bank’s business lending functions. James ( Jay) R. Babcock was recently hired as vice president of commercial lending. John T. Downs is vice president of commercial lending.

New Hampshire-based Meredith Village Savings Bank has promoted Kristy Badger to business development, administration and support. Badger joined MVSB as an assistant branch manager in the Alton office in March 2006. John Downs

Kristy Badger

Meredith Village Savings Bank

New Hampshire Bankers Association

Sandy Tracy has been promoted to senior vice president and COO at the New Hampshire Bankers Association. She will administer NHBA’s for-profit and non-dues revenue endorsements and insurance trust activities. In addition, the NHBA tapped Dawn Beers as director of education and training, where she Sandy Tracy will manage the planning and implementation of training and education programs offered to NHBA members, membership development and outreach, and branding and marketing communication initiatives.

Jenifer Williams will serve as assistant vice president, branch and business development officer at the Moultonborough office of Meredith Village Savings Bank in New Hampshire. Jenifer Williams

Needham Bank

Savers Bank

Savers Bank has promoted Elaine Stone to the position of human resources manager. She has been with the bank for seven years.

New Arrivals

Optima Bank Charles River Bank

Cheryl A. Beauvais

Massachusetts-based Charles River Bank has hired Cheryl A. Beauvais to its senior management team as vice president and retail lending officer. Beauvais is responsible for all mortgage and consumer loan operations. She has three decades of extensive industry knowledge, and most recently served as vice president/senior loan officer at Bank of Easton in Easton, Mass.

Florence Savings Bank

Barbara-Jean DeLoria

Barbara-Jean DeLoria has joined Massachusetts-based Florence Savings Bank’s executive management team. Her primary responsibility will be to oversee the bank’s residential mortgage division. She will also function as a commercial lending officer, continuing an expertise she has developed over a 25 year banking career.

Hampden Bank

Denise Dukette

Jaclyn Biancuzzo

Massachusetts-based Needham Bank has selected Jaclyn Biancuzzo as assistant vice president and branch manager of the bank’s Westwood, Mass. office. Biancuzzo joins Needham Bank with 25 years of experience in management and team leadership.

James Babcock

Massachusetts-based Hampden Bank announced three new hires to its business banking/commercial lending group. Denise Dukette, vice president, commercial credit officer, joined the bank in June 2013 and oversees risk management, credit

Maine-based Optima Bank & Trust has announced several new hires. Michael J. Simoneau has joined the bank as a vice president and commercial loan officer in the Bedford loan office. Brenda M. Keene has been Brenda M. Keene Brenda M. Keene named an assistant branch manager. Stephen MacDonald has been hired as a private banker at Optima Bank’s North Hampton full-service branch.

StonehamBank

Nicholas Kefalas

Nicholas Kefalas has joined Massachusettsbased StonehamBank’s commercial lending team. He has spent a majority of his professional career in community banking with an emphasis on small business lending. Prior to joining StonehamBank, Kefalas was a vice president of commercial lending at Reading Co-Operative Bank and at MutualOne Bank.

United Bank

Nicholas J. Devanski has joined Massachusetts-based United Bank as a commercial lending officer. He has more than 13 years of financial services experience, most recently as commercial credit analyst and commercial credit team leader with TD Bank. BNE Nicholas J. Devanski

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