Banking New England May/June 2017 by The Warren Group

MAY/JUNE 2017

INSIDE: A RENEWED FOCUS ON WEB ACCESSIBILITY

NEW ENGLAND

THE RESOURCE FOR NEW ENGLANDâ&#x20AC;&#x2122;S FINANCIAL LEADERS

CLOSING THE WINDOW ON CYBERCRIME A PUB LICAT IO N O F TH E WA R RE N G R O U P

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CONTENTS

NEW ENGLAND

THE RESOURCE FOR NEW ENGLAND’S FINANCIAL LEADERS

04 06

BACK TO BASICS

The Mortician’s Guide to Retail Banking

CLOSING THE WINDOW ON CYBERCRIME

RESIDENTIAL LENDING

Turning Mortgage Originations into Fee Income While Passing on the Risk

BANK PROFILE

BankFive Celebrates 160 Years, Renews Commitment to Community

EASE OF ACCESS

A New Focus on Web Accessibility

BUSINESS BANKING

Survival of the Fittest: Buying into Treasury Management Talent and Technology

FOCUS ON THE DETAILS

Structuring the Deal: What Lenders Need to Know

PERSONNEL FILE

COMMUNITY GOOD WORKS

TWG STAFF CEO & PUBLISHER Timothy M. Warren Jr. PRESIDENT David B. Lovins EDITORIAL EDITORIAL DIRECTOR Cassidy Murphy ASSOCIATE EDITORS Malea Ritz, Mike Flaim

www.thewarrengroup.com

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BACK TO BASICS

The Mortician’s Guide to Retail Banking BY SEAN C. PAYANT

Sean C. Payant, Ph.D., is chief consulting officer at Haberfeld Holdings, a datadriven consulting firm specializing in core relationships, customer, and profitability growth for community-based financial institutions. He can be reached at (402) 323-3614 or Sean@haberfeld.com.

ommunity bankers face many challenges: intense deposit and credit competition, changing demographics, complicated technology and regulatory obligations, to name just a few. One of the most daunting challenges, however, is one that is often overlooked: conventional wisdom. Conventional wisdom is our adherence to accepted norms and common practices. On the surface, it appears to promise safe, dependable direction when we’re confronted with difficult questions and complicated options. However, a reliance on conventional wisdom often discourages critical thinking and diminishes creative energy. This is especially true for businesses, and particularly true for community banks. Today, bankers who seek to profitably grow their branch networks and successfully serve the broader community around them are critically evaluating and creatively employing new solutions. Unfortunately, part of life involves the loss of our loved ones. After recently experiencing the loss of my fatherin-law and grandmother, I was reminded that finding a competently staffed, conveniently located funeral home is crucial to the grieving process. In both cases, we were very fortunate; however, I have had friends and business associates in similar situations report that customer service was indifferent. Product knowledge was subpar. This being said, I was surprised to observe several striking similarities between a mortician’s business model and that of a community bank. Many morticians report that their businesses aren’t at capacity – a large, expensive funeral home can hold as few as 29 funeral services per year. The team and the facility have the capacity to hold more funeral services – perhaps twice as many annually – and doing so would not materially increase the fixed costs of the business. Moreover, holding more services per year would dramatically increase the revenue the funeral home generated each year, and would significantly improve the overall profitability of the business. The description of the mortician’s business model is straightforward and correct. Interestingly, the fundamentals directly apply to the basic structure of banking: 1. banking is a business of high fixed costs; 2. there are low marginal costs for the next customer, and high marginal revenue relative to the costs on average; 3. most banks have tremendous capacity to conduct more business; 4. attracting more customers is profitable.

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If the previous is true, why don’t all banks focus on attracting as many customers as possible? Could it be “conventional wisdom?” Because of conventional wisdom, many banks embrace a fully allocated cost model which estimates each customer costs the bank approximately $200 to $500 per year. Accepting this cost model requires that a cascade of flawed decisions follow: (1) marketing – the bank must seek the perfect customer; (2) products – only profitable customers are welcome at the bank; and (3) fees – an aggressive fee structure is required to offset costs. Sadly, this conventional wisdom is hindering the growth of community banks and limiting their capacity to fully serve customers. Critically evaluating and employing new solutions allows the majority of community banks to double new customer acquisition if we understand two important things: 1) The true value of each primary financial institution relationship is between $300 and $500 per year – including deposits, loans and non-interest income; and 2) the marginal (you aren’t building any new branches) costs of each customer is between $30 and $50 per year – issuing a debit card, mailing a statement, data processing and potential write-offs from overdrafts on some. Your bank has the capacity to serve many more customers – customers that look just like the customers you already serve. It’s time we throw out conventional wisdom and start using an omni-channel marketing approach to blend big data with new digital technology and proven fundamentals. The result is new customers who live near your branches and own businesses near your branches, in addition to those who work, shop, dine and drive by your network of locations. Caution! When you effectively deploy omni-channel marketing strategies, twice as many prospects will be walking in your doors – are your people, products, policies and procedures aligned to win them? If not, you might as well plan your own funeral. Our industry must bury its reliance on “conventional wisdom;” we must abandon our dependence on out-ofdate “banker think.” When banks begin executing an omni-channel approach to marketing – big data, digital solutions, geographic relevancy – and align people, products, policies and procedures – results follow: doubling customer acquisition and increasing profitability. Retail banking is not dead! While the mortician’s model bears similarities to our banking model, the primary point is this: Community banking is alive and well, but could be doing much better. BNE

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RESIDENTIAL LENDING

Turning Mortgage Originations into Fee Income While Passing on the Risk BY BRIAN POOL

Brian Pool, executive vice president, Residential Home Funding Corp., has over 25 years of experience in the mortgage industry. His current role is developing origination efficiencies and best practices for Residential Home Funding Corp., an East Coast-based mortgage lender.

Brian Pool

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esidential lending has certainly become a complex business. Way beyond normal competition, banks must spend enormous resources just to stay compliant with increasing regulations. There are ways to maintain the fee income that can be generated by residential lending without taking on the risk and expense of residential mortgages. Competition is tough enough! Many banks spend enormous sums to maintain a large staff of originators, processors, underwriters, closers, postclosers, final doc clerks, QC reviewers, secondary marketing staff, servicing departments … the list goes on and on … just to maintain a full product line to offer to their clients … and yours! Are you set up to originate FHA loans? How about VA? Do your clients ask for fixed rate loans? Originating 30-year fixed rate loans is not usually the best use of your lending portfolio. How are you dealing with QM/ATR? DoddFrank? What do you have to spend on origination systems? Do these systems keep you up-to-date on all the required disclosures? It can all become overwhelming. Some have chosen to exit the market rather than attempt to navigate the tricky waters that have become residential lending. But what happens to your customers who you can no longer serve? Generally people go to their bank first for a mortgage loan but they do have options. If turned away, borrowers can seek independent mortgage companies, mortgage brokers, or even another bank down the street. I’m sure readers know that financial institutions are eager to service prospective customers with their solutions. I myself have walked into my local branch many times and I am almost always greeted with a new product or service offering. Additional offers come each month with my statement and when I log on to their website, I often must view the newest offer before I can view my balance. Once your competition has your customer’s mortgage, it won’t be long before they try to acquire their deposit accounts, their car loans and their credit cards. You work hard to obtain and maintain new customers. You don’t want to lose them because your product line doesn’t fulfill their needs. Under Dodd-Frank, there were those who predicted that mortgage brokers would

become a thing of the past. Mortgage brokers took the blame for poor performing mortgages and many of these regulations impacted them the most. While many brokers did close up shop or merge with mortgage bankers, others saw an opportunity. New regulations shifted a lot of responsibility from the broker to the lender. For example, FHA eliminated what was commonly known as a “mini-eagle” approval. Now, organizations that wanted to offer FHA financing, a key product in today’s mortgage market, must go through a long, tough process to get approved. Additional staff must be hired including higher-priced DE underwriters. However FHA allows approved lenders to “sponsor” other originators. As a sponsored originator, brokers could once again offer FHA products, receive a fee from either the borrower or the lender for the origination, but have no performance risk, no audit risk, and outside of committing some type of fraud, virtually no responsibility for the transaction. The brokers that didn’t give in to the fear of the changing regulations have seen a resurgence and many are thriving. Perhaps it now makes sense for banks to emulate these successful mortgage brokers. Fee income can be a key to survival in the marketplace. As these brokers have found out, there can be substantial fee income generated from originating mortgage loans and there is already an infrastructure in place to handle the fulfillment of these products. The fulfillment removes a substantial amount of work from the bank. An FHA approved lender must maintain the necessary staff to meet all of the steps required in the origination process as also noted above. Brokers have discovered that there is no need to duplicate these steps. They can do what they are good at – selling. Then they can take their fee and be done. The performance risk then belongs to the lender. Partnering with a mortgage lender, a bank may have even more advantages than the mortgage broker. While a mortgage broker’s biggest challenge is finding new customers, banks have enjoy a customer base with built in relationships. Mortgage brokers don’t have clients walking in and asking for mortgages. Mortgage bankers

(lenders) also lack those customer relationships, but have all of the other components necessary to originate loans. And not just one type of loan either. Lenders must be able to offer a full product line of mortgages in order to be competitive. Financial institutions can also join up with a mortgage lender to increase existing mortgage originations. They are equipped with marketing materials they can share or co-brand to remind clients that you can help them with all their mortgage needs. Open up your product line! Lenders can help you offer FHA, VA, USDA, FNMA/FHLMC and many other options to which you may not have access. So, rather than eliminating a traditional bank offering or limiting the products you offer and risk losing valuable clients, consider partnering with a mortgage lender. Use their expertise to handle processing, underwriting, closing and even servicing. Get fee income from the origination of the loan and pass on the risk. BNE This article first appeared in the spring 2017 issue of NJBanker, the magazine of the New Jersey Bankers Association. Reprinted with permission.

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BANK PROFILE

BankFive Celebrates 160 Years, Renews Commitment to Community BY LINDA GOODSPEED

ld and new. Tradition and innovation. BankFive of Fall River, Massachusetts has been blending those themes, along with its commitment to community, for 162 years – and counting. The only bank headquartered in Fall River (population: 89,000), BankFive is an independent, mutually owned community bank. When it opened in 1855, most banks wanted a dollar or more to open an account; BankFive asked for only 5 cents. That same commitment to its customers and communities continues today. “We’ve been on the same corner since 1855,” said William R. Eccles Jr., president and CEO. Eccles is one of BankFive’s cornerstones; he started at the bank in 1969 as a teller, just out of high school. But if BankFive is committed to its history and tradition, it also knows that to succeed in banking requires constant innovation. Today, BankFive is the premiere independent community bank in southeastern Massachusetts and Rhode Island and one of the top regional banks in Massachusetts. It has $865 million in total assets and 13 branch locations and two loan production offices. Located 20 miles east of Providence, 25 miles north of Newport and 50 miles south of Boston, BankFive serves a mainly blue collar, multicultural population. The region is home to a large seafood fishing and processing industry in nearby New Bedford, some light manufacturing 8

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William R. Eccles Jr.

Catherine Dillon

and a predominantly service economy. Eccles, president and CEO since December 2010, knows the region well; he was born and raised in Fall River. When he started at BankFive 1969, the bank had about $25 million in assets, 20 employees, no ATMs and eight teller stations. “I wouldn’t consider myself a dean of Massachusetts banking; I’m more like a dinosaur,” Eccle sjoked. “People today just don’t stay at one institution their whole career. I’m lucky to work for a great community bank. We have a lot of legacy employees who have dedicated themselves to this bank. It’s a big part of our success. We’re considered a real economic engine for the community.” Since rising to the top spot, Eccles has continued to grease that engine with a number of new initiatives. One of his first acts was to establish the BankFive Foundation, which in 2016 donated more than $400,000 to some 150 local

organizations. Additionally, BankFive employees volunteered 2,800 hours to local nonprofits. Eccles also brought in Catherine Dillon, senior vice president and director of marketing, sales and business development, to refresh the bank’s brand and make it more digitally transferable. Dillon said what came through in all the interviews she conducted with employees and customers about the bank as part of the re-branding campaign was BankFive’s commitment to community. “We were founded as a service to the community, and 160 years later, we’re still doing that,” she said. BankFive rolled out its new refresh logo and tagline, “Let’s thrive together,” in conjunction with its 160th anniversary in 2015. The campaign was a big hit, highlighted in banking publications, and the TV ad, which starred bank employees, families and customers, received first place honors at the New England Financial Marketing Association. Recognition for the campaign continues to come in. “What I’m most proud of is that everyone in the ads were part of our community,” including the ads in Portuguese, Dillon said. “It really represents who we are.” In addition to the New Brand campaign, BankFive also rolled out new cloud-based software to better track sales and marketing efforts. Three years ago, it entered the Rhode Island market with a new branch in Bristol and loan production office in Cranston. “It’s not that Rhode Island customers weren’t aware of us,” Eccles said. “They just had to travel a little farther. We thought it was advantageous to open a brick-and-mortar, full-service branch there.” Further expansion in the Ocean State is likely, he said. BankFive is also expanding its residential and consumer loan portfolio, and soon will be able to originate VA, USDA and FHA first-time homebuyer mortgages. “A lot of our competitors are offering these loans, and we want to get back in the market,” Eccles said. BankFive’s total loan portfolio of about $625 million is a diverse mix of consumer loans, including solar and green energy loans, fishing vessel loans, commercial real estate, aviation loans, C&I, small business and residential mortgages. “It’s not by accident our loan portfolio is diverse,” Eccles explained. “The diversity of our portfolio helps spread out the risk.” Despite his long tenure at the bank, Eccles has no immediate plans to retire. He says the challenges facing BankFive are the same as those facing all banks: cybersecurity, keeping up with technology and new processes to enhance the customer experience, and regulation and compliance issues. “We’re a community bank,” Eccles said. “Our sole purpose is to serve the communities we’re in. We’re the only bank headquartered in Fall River. We’ve made a commitment to stay in the community and made a commitment to small community organizations. We’re here for the long haul.” BNE

BankFive’s 150th anniversary logo (left) and 160th anniversary and current logo (right).

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EASE OF ACCESS PROTECTING VULNERABLE CLIENTS

CONTINUED FROM PAGE 6

A New Focus on Web Accessibility BY LAURA ALIX

ou wouldn’t dream of building a bank branch that was inaccessible to a person with a disability, but can you say the same about your website? A recent spate of demand letters may be the push the banking and real estate industries need to make sure that their websites and mobile applications are up to snuff where the Americans with Disabilities Act is concerned, and advocates for disabled people say it’s high time. The world was a very different place in 1990, when the Americans with Disabilities Act was signed into law. We didn’t have virtually ubiquitous Internet access and we weren’t all walking around with tiny computers in our pockets. Web accessibility may not have been much of an issue then, but that’s been changing over the past decade or so. The Department of Justice has been crafting rules to outline precisely how the ADA applies to web accessibility, although those are not likely to come down until at least 2018. In the meantime, though, a number of law firms and advocacy groups have been sending demand letters to businesses whose websites they find to 10 BANKING NEW ENGLAND

be inaccessible to people with disabilities. Unless you live with a disability – or know somebody who does – this may not be an issue you’ve given much consideration, but web accessibility will only increase in relevance – and not simply because of the ADA. For one thing, Baby Boomers are aging and subsequently learning to navigate hearing and visual impairment. For another, consumers have been changing the way they bank. With foot traffic to bank branches continuing its year-overyear decline, banks that don’t have accessible websites are essentially sending a message to consumers with disabilities: We don’t really care about your business. It’s an area where multitrillion-dollar national banks have lead the way, said Lainey Feingold, a disability rights lawyer and author. Feingold began working with big banks, including Bank of America and Wells Fargo, in the ’90s beginning with talking ATMs and later in the early 2000s with web accessibility. They’ve achieved those changes without filing any lawsuits. Instead, Feingold has used a dispute resolution process called the structured

negotiation to achieve greater web accessibility. As far as the Massachusetts Bankers Association is aware, no Bay State banks have received any of those aforementioned demand letters, Senior Vice President Jon Skarin said. But he also said bankers could use some clarity from the Department of Justice as to what elements are necessary to make a website compliant with the ADA. “I think most banks generally want to provide this information,” he said. “[Disabled people are] potential customers, there’s no reason they wouldn’t want to provide it, but the lack of clarity sometimes can be a problem. You’re developing a website and you may think you’re meeting all the guidelines, but you may not hit everything on your first or second attempt.”

Access & Autonomy Feingold doesn’t buy that argument, though. “The Department of Justice has said for over a decade that the ADA applies to websites and yes, it would have been nice to have regulations, but those regulations, whenever we get them, they’re going to be based on the Web Content Accessibility Guidelines,” also known as WCAG 2.0, she said. “So there’s not really a gray area. The standards are just about making sure that however people access content, they’re going to be able to get the information on a website.” So what does web accessibility really mean anyway? For a visually impaired person, a website has to be compatible with a screen reader, said Jack McElaney, vice president of sales and marketing at Microassist, a Texas-based accessibility consulting firm. That means the site has to be coded in a way that a screen reader can process it for a visually impaired person. Videos need closed captioning and sites must be navigable without a mouse, too. By no means is that an exhaustive list, but it’s a start. Skarin said the Massachusetts Bankers Association encourages its members to

audit their websites to ensure they are accessible. Some banks may actually have accessible sites, but they may not even know it if they haven’t bothered to audit their digital assets. Moreover, since many smaller banks contract that work out to a third party, this also brings up the need for good vendor management and due diligence. “It’d be no different than an elevator,” McElaney said. “If I buy an elevator for my building and there’s no braille on the keys, then that vendor better fix that.” Feingold would go a step further. Don’t just audit your websites and apps. Bring in people who actually live with those disabilities every day and pay attention to how they use them. She adds that accessibility doesn’t stop with a financial institution’s digital assets. Many lawsuits and demand letters begin when a disabled person calls up the bank

for help navigating its website, only to be met with “Can’t you find somebody to help you with that?” “The front line is just as important as the coders,” Feingold said. “Accessibility means you don’t need somebody to help you with it.” Feingold and others say web accessibility isn’t really a new issue – or at least it shouldn’t be – but demand letters out of law firms and advocacy groups may be pushing the issue ahead of the actual deadline for the Department of Justice’s guidance. At the end of the day, recognizing disabled people’s right to autonomy may just make good business sense, too. “You wouldn’t ever want a person in a wheelchair not being able to get into your bank. It’s now the accepted norm,” McElaney said. “There’s this cultural tipping point that’s happening. The demand letters are forcing the issue and executives are realizing this is something we’ve got to do.” BNE

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BUSINESS BANKING

Survival of the Fittest: Buying into Treasury Management Talent and Technology BY LAUREL EGAN KENNY

Laurel Egan Kenny, MSCM, MBA, is founder and president of Turningpoint Communications, a national treasury management-focused marketing communications and business development firm. She may be reached at laurel@ turningpointcommunications.com.

usiness banking has become less about borrowing or depositing money and more about service around money. Delighting demanding customers and delivering extraordinary customer experience begins and ends with outstanding bankers who know their clients’ businesses, will advocate for their clients and solve their business challenges. Bank leaders interested in their bank’s survival should invest in their treasury management strategy. Hiring and training top treasury management talent and contracting with a relationship-focused, target marketspecific systems provider, can best position a bank for the high expectations and sophistication of its customer, secure its brand and protect its bottom line for the “new normal” in banking. Why treasury management, you ask? Every business customer who’s in business needs it! Treasury management: • Increases productivity and efficiency by eliminating bank trips and automating manual/repetitive processes. • Removes geographic barriers through remote access and allows for timely reconciliation and financial reporting. • Streamlines and expedites revenue collections and just-in-time outgoing payments for costs of goods sold, which increases liquidity and working capital. • Provides security for, transparency into, and better control of financial processes. • Mitigates operational risk and opportunities for payment fraud. • Allows business owners and leaders to concentrate on their business versus administrative tasks. Treasury management is an “easy sell” for trusted advisors who sell themselves and sell solutions to clients’ business challenges and value propositions. Clients often realize they cannot do business one more day without these solutions. TM may lead or save a client relationship. Volume-priced, systems-based solutions are customizable for each target business customer and afford economies of scale as volumes

12 BANKING NEW ENGLAND

increase. If done well, treasury management can bring about recurring non-interest ratebased revenue streams, long-term client loyalty, and overall bank brand satisfaction and differentiation. It also provide an opportunity for comprehensive, complimentary bank solutions, and ultimately deeper client relationships, stickiness and up to 30 percent greater profitability over lending relationships. As for growth and impact to the bank, I have seen TM revenues increase by 10 times over 10 years at one $2 billion community bank, dropping $2 million directly to the bank’s bottom line.

Buying into Service and Systems In today’s business climate, business leaders want to grow their business but often don’t know how or that help is available from the most unlikely of places – their bank! Whether they know it or will admit it, they need proactive advice and ideas, and suggestions for how to improve their experience and processes. Treasury management solutions (including business operations mapping, customer service, insight and consultation) are a best-kept secret. Experienced TM consultants value and honor client relationships, advocate for their clients and act as seamless extensions of their client’s team. Hiring or training trusted advisors to lead and support TM teams and represent CONTINUED ON PAGE 17

FOCUS ON THE DETAILS

Structuring the Deal: What Lenders Need to Know BY DAN DORAN

Dan Doran, CVA, CEPA, is founder and principal of Quantive Business Valuations, a certified valuation practice serving privately held businesses nationwide. Learn more at www.quantivevaluations.com.

hen business owners approach a lender about a deal, the initial conversation is often couched in generalities. The focus is on purchase price, and maybe to some extent a discussion on any contingent components of purchase price. These conversations are natural and start advancing a potential project. Unfortunately, as with many things, the devil is in the details. So what details should lenders focus on in order to help get the deal done?

Stock Versus Asset Sale Dan Doran

An acquisition can either be structured as a stock sale or an asset sale. In the former, the acquirer is purchasing the stock of the company, whereas in the latter the buyer is purchasing individual assets and liabilities of the company. This seemingly simple difference results in myriad different issues and deal economics. To begin with, the tax burden is almost always higher for a seller with an asset sale. The burden is especially high for C-corporation owners, who face double taxation issues. We’ve seen quite a number of deals fall apart once a seller starts to analyze post-tax proceeds on a C-corporation asset sale. Another issue wrapped up in the stock versus asset sale decision is liability. When a buyer acquires stock, they inherit both existing liabilities and any potential unknown liabilities (think environmental, for instance) that the company has. This is probably the largest reason that we see deals structured as asset sales. In any event – the decision of stock or asset alters deal economics. If the parties aren’t experienced the implications can derail a deal once the parties start to crunch the numbers.

Payments Structure There’s an old saw that investment bankers whisper: “You name the price, I’ll name the terms.” Cash? Stock? Earn-out? There’s plenty of options for how and when an acquisition is paid. Generally speaking, from a seller’s

perspective an all-cash deal is most desirable – there is no payment risk whatsoever. A smart buyer may reduce the overall purchase price in recognition of this risk dynamic, but the seller is trading future uncertainty for a known value at closing. At the same time, buyers often want to see sellers have some skin in the game. This happens for a number of reasons: the buyer might see some diligence risk, there may be speculation as to future performance, or perhaps the buyer wants the seller to help with a strong transition. Buyers will seek to structure deals with a combination of cash (or stock) at closing, and some combination of seller promissory note and contingent earnout payments.

A loan from you is better than a loan from their insurance policy. The economic difference between these structures can be significant to all parties involved. Will the company achieve targets and meet earn-out requirements? Can the business meet earn-out payment obligations out of cash flow? Will the seller subordinate their promissory note? Have the parties discussed these requirements?

Adding Value to your Client Working with your borrower to drill down on deal terms early helps both create a stronger working relationship as well as increase the odds of a closing. This dynamic is especially pronounced in the lower middle-market and below. Most buyers and sellers aren’t advised by an experienced investment banker, which means that parties can potentially come to an agreement on a deal without fully understanding the economic ramifications. Working with your buyer early – and understanding how structure impacts economic value – can be the difference between a deal that blows up and a deal that closes. BNE BANKING NEW ENGLAND

Closing the Window on Cybercrime

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Federal Reserve’s Cybersecurity Conference Provides Education, Resources By Christina P. O’Neill

he Federal Reserve Bank of Boston has provided the New England region’s banks a safe space to discuss cyber threats. The FRBB’s second annual Cybersecurity Conference, held this year on May 1, is the most recent event in its program to address and combat cyber threats. The Cyber-Threat Sharing Forum, of which the conference is one offering, is independent of its supervisory oversight of banks, Jasvinder Khera, FRBB’s lead security systems engineer, a conference presenter, told Banking New England. The forum, which runs throughout the year and assists small to midsized banks in all the New England states, meets once a month in person and every other week in a virtual format. With more than 60 participating organizations with 100 individual participants, the Cyber-Threat Sharing Forum has expanded to the point where it has become unwieldy to have them all at a face to face forum in Boston for their regular conferences. The FRBB intends to established satellite locations where participants can view simulcasts of guest presentations at a more regional level. No confidential participant information is conveyed during the simulcast.

Knowledge is Power “Our goal with our constituent banks is to share knowledge and expertise,” said Don Anderson, FRBB senior vice president and CIO. “What keeps us awake at night. … We have no problem sharing within this closed [conference] window.” That’s particularly important in light of multimillion-dollar cyberthefts in the global banking system that stole millions from central banks in several countries, leading to tightened security requirements for banks that do not comply with the security requirements of the world’s leading payment systems, one of which has indicated that it will report non-compliant members to regulators. FRBB program participants report faster reaction times during cyber incidents, more proactive risk management and improved resource management, and a trusted peer network. That’s critical, said FRBB’s Khera. A malicious actor uses the same tactic on more than one financial institution, and the sooner knowledge of that tactic is shared, the shorter the window of opportunity to strike multiple targets. In their conference presentation, Khera and his colleague Michael Rodehorst, FRBB assistant vice president and information security officer, revealed survey results showing that 84 percent of conference participants sent their data to third-party vendors for processing or storage. “I was expecting that [number] to be higher,” Khera said. With more companies gravitating toward cloud storage and away from physical servers, security risks are heightened. “It’s difficult to ensure that third-, CONTINUED ON PAGE 16

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fourth- or fifth-party vendors apply the same controls that you would,” he said.

Set It, But Don’t Forget It Rodehorst added that while IT customers have the most leverage before signing a vendor contract, they must constantly monitor security issues going forward to ensure that the vendor relationship hasn’t changed over time. Addressing vulnerabilities in products where support has ended, and usage of outdated operating systems or web browsers, is another weak spot. And even the most current vendor product doesn’t substitute for education of staff on the risks of social media and phishing tactics, he said in a video presentation. Boston Police Detective Steven Blair advised attendees to verify transfer requests with a phone call. If a CFO gets an email request purportedly from the CEO to transfer funds to a bank, a confirmatory phone call to the CEO is in order. Hackers use malware to remotely monitor routine activity at their target bank, and then post fake transfer orders, costing banks around the world hundreds of millions. That’s what happened this past year to banks subscribing to the Society for Worldwide Interbank Financial Telecommunication, or Swift, described by The Wall Street Journal as the dominant network banks use for cross-border transactions. The May 1 WSJ report noted that while Swift locked down the network’s core after the cyberattacks, customers were left responsible for their own security – and that’s where the hackers could come in.

The Human Element Thieves took about $90 million from Bangladesh’s central bank and a bank in Ecuador, the WSJ reported. They used malware to steal bank codes and place fake transfer orders. The Bangladesh bank had not changing its Swift passwords for a few month’s period between 2015 and 2016. Swift has since tightened its customer security requirements, including software updates and threatening to report non-compliant banks to regulators, WSJ reported. Two-factor authentication use has jumped among some Swift clients since the cyberattacks came to light. 16 BANKING NEW ENGLAND

Syntax and formatting errors can give away the presence of cyber-thieves, but only if the internal staffers viewing the requests pick up on them. “If we believe that cybersecurity is an IT challenge with only IT solutions, we’re neglecting the human element,” said Daniel Hoffman, a former U.S. intelligence officer, in a video presentation at the FRBB conference. Todd Aadland, senior vice president and payments security strategy leader for the

FRBB’s Don Anderson indicated in a BNE interview that Nigeria poses as much opportunity as threat. “They don’t have the stability and legacy of their banking system [as] we do,” he said. With so much financial activity occurring on mobile devices, Nigeria could “leapfrog” to create a more-developed structure. He called it “an explosive opportunity,” adding, “security built in from the ground up – that will be the talk for the next couple of years.” Domain-name squatters come in many

“If we believe that cybersecurity is an IT challenge with only IT solutions, we’re neglecting the human element.” — Daniel Hoffman, former U.S. intelligence officer Federal Reserve System, gave an update on the Faster and Secure Payments Task Forces. Any participant in the Faster Payments Task Force was welcome to provide a proposal for an end-to-end payments solution, Aadland said. As for the secure payments side, participants are working collaboratively to educate the industry about payment processes and related security considerations, challenge the industry to strengthen security controls, and promote information-sharing among key payment stakeholders to mitigate and reduce payment risk and fraud.

A Breeding Ground for Mischief John Ayoh, director of information technology at the Central Bank of Nigeria, provided a vivid look at the human cyberthreat factor. Nigeria is the largest economy in Africa, heavily oil-dependent. Diversification is proving to be difficult. Cash transactions have been largely supplanted by technology. A staggering 92 percent of money transactions were done via technology in 2016. The overwhelmingly young population – median age 18.2 years, half the U.S. median – and high unemployment have led to a ripe breeding ground for cyber mischief, Ayoh indicated in his presentation. “The propensity for young people to use technology for the wrong reasons is higher,” he said. He called for stakeholders from the Nigerian government and the legislature to come up with a plan to address cyberthreat risks.

shapes and sizes. A dead giveaway on consumer email streams is the sender name that includes the name of a customer’s bank, but with a few non-alpha and non-numeric characters sprinkled in – phishing scams seeking personal information. Customers can easily check out the actual address from which these messages are sent. Then, there are domain names, which come up on Google, which include the bank name and a verb, providing a platform for negative comments on the bank. Anderson typifies these domain names as “not polite.” But whether the intent is criminal or defamatory, the paramount concerns are, first, to protect customers from criminal activity and second, protecting the bank’s brand. Five years ago, the IT mantra in the Western banking world was internal applications, Anderson said. But upgrades could stall if one part of the organization didn’t have the capital funding to implement them. Today, he said, there is less tolerance for lags in any part of an organization. The subject now becomes a board of directors discussion of systems that are not up to date – and why. Vendors have made it easier to upgrade in response to customer requests, he told BNE. The FRBB Cybersecurity Conference aims to help its members fix IT gaps and strengthen end-to-end systems in a uniform way. “Our goal with our constituent banks is to share knowledge and expertise – and also [share] what keeps us awake at night,” Anderson said. BNE

Continued from page 12

your bank’s brand is imperative in a world where delighting a customer throughout his/her experience is the expectation. Trusted advisors bring solutions to their clients’ business challenges. They offer unique insight into a business that not even a business leader would have based on their banking history. They also anticipate need based on their experience with other like clients, and understand the interfaces with and impacts on industry-specific systems and mandates, including HIPAA, state laws, codes, regulations and the like. Many of these solutions are based on sophisticated systems. The best banks understand whom they serve well and target new customers just like those. Treasury management solutions are packaged and tiered for particular client segments. Moreover, treasury technology investment is on a subscription basis and is often volume-based. A bank may simply invest in an appropriate package and at a tier and volumes on an as-needed basis so banks can ramp up sales without overpaying for service. Furthermore, the fees are predictable and can be used to determine cost to the client. No matter how good the technology, though, banks want to differentiate based on their people. A bank’s brand is based on the customer experience and service model wrapped around the

technological solution by his/her trusted advisor! Transitioning a salesperson to a treasury management trusted advisor is possible! Experience and training may help: • Earn trusted advisor status by establishing credibility, trust and expertise among both internal and external clients. • Speak the clients’ language and be an expert on their business, allowing for deeper, honest conversations about need, cost and deficiencies. • Client champions fight for the client’s interest (within reason) and not just rely on the bank’s standard answer. • Sell value by helping clients to understand the true cost of doing business inefficiently and quantifies efficiencies, money/resource savings and productivity. The most successful businesses must be willing and open to change. Bank leaders, too, must be open to new ways of doing business and invest appropriately in their business to survive and thrive. Properly trained, trusted advisors offering operationally transforming solutions can drive change for their business customers, while bringing in non-interest based, annuity revenue streams, contributing to their bank’s profitability, leading sales efforts and engaging clients for the long-term. BNE

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BANKING NEW ENGLAND

PROTECTINGFILE VULNERABLE CLIENTS PERSONNEL

Career achievers in banks across New England are constantly on the move, with their professional journeys reflecting a combination of mobility and longstanding service. In this space, we acknowledge them, and welcome readers to submit news of their own banks’ efforts and endeavors to Editorial Director Cassidy Murphy at cmurphy@thewarrengroup.com.

Appointments and Elections BankNewport

• Bay State Savings Bank

Gary J. Leveillee was appointed to assistant vice president at mortgage loan officer BankNewport. He is responsible for originating residential mortgage loans, construction loans and Gary J. Leveillee refinancing in the Coventry and Cranston, Rhode Island geographic markets. With over 20 years of mortgage origination experience, Leveillee comes to BankNewport from Webster Bank in Warwick, Rhode Island, where he served as a mortgage banking officer in the Kent County market.

• Berkshire Bank

Bay State Savings Bank

Featured Banks • BankNewport

• Beverly Bank

• Lake Sunapee Bank

John Altomare, partner at Fusaro, Altomare & Ermilio Attorneys, and Christine Lucey, CFO at Sun Transportation Inc., both corporators at Bay State Savings Bank, were Paul Dubrey named directors. In addition, Paul Dubrey and Anthony Servidio were named corporators.

• Ledyard National Bank

Bristol County Savings Bank

• Blue Hills Bank • Bristol County Savings Bank • Eastern Bank • Franklin Savings Bank • Katahdin Trust

• Leader Bank

Jeffrey P. Pagliuca was appointed vice president of commercial lending at Bristol County Savings Bank (BCSB), headquartered in Taunton, Massachusetts.

• Meredith Village Savings Bank • New Hampshire Mutual Bancorp • Savings Bank of Walpole

Pagliuca is responsible for the development and management of commercial banking relationships in the Southcoast of Massachusetts and will work out of the bank’s Dartmouth, office. Prior to joining BCSB, Pagliuca held the positions of senior vice president of business banking for Webster Bank in New Bedford and vice president, commercial relationship manager at Santander’s New Bedford office.

Eastern Bank Eastern Bank appointed Gregory P. Buscone senior vice president and regional group head in commercial banking. Prior to joining Eastern, Buscone spent 17 years at Citizens Bank, as Gregory P. Buscone a senior vice president and market manager for Massachusetts middle market and specialized lending.

Lake Sunapee Bank John Mercier has joined Lake Sunapee Bank, a division of Bar Harbor Bank & Trust, as executive vice president of commercial banking, leading the New Hampshire and Vermont John Mercier markets. He is based out of the Concord, New Hampshire office of Lake Sunapee Bank. He is past chairman and trustee emeritus of Southern New Hampshire Health System and past chairman of the ManchesterBoston Regional Airport Authority.

Jeffrey P. Pagliuca

Retirements Bay State Savings Bank

Bay State Savings Bank announced F. Stephen Harvey Jr., and John R. Curran recently retired after years of service. Harvey retired after 35 years as a director and corporator, and Curran retired after 21 years, most of which was spent as a corporator.

Meredith Village Savings Bank Carrie Jordan, assistant vice president, branch and business development manager for the main 18 BANKING NEW ENGLAND

office of Meredith Village Savings Bank (MVSB) in Meredith, New Hampshire, retires on June 30, 2017. Jordan recently celebrated 31 years with the organization. Jordan began her career at MVSB in 1986 as a customer service Carrie Jordan representative at the bank’s Ashland office. Since then, she has held many of the bank’s in-branch roles. Jordan was

Retirements Cont. promoted to assistant vice president, branch and business development manager in 2009, and has been instrumental in the continued growth and success of MVSB’s main office.

New Hampshire Mutual Bancorp Deborah Flanders, assistant vice president and learning and development officer for New Hampshire Mutual Bancorp (NHMB), retired in May. Flanders had been with the organization for 25 years. “Debbie has been an integral member of the Human Resources department for more Deborah Flanders than 15 years,” David Cronin, senior vice president and human resources director for NHMB, said in a statment. “We can’t thank her enough for her remarkable service and dedication to the organization.”

New Arrivals Beverly Bank

Scott Myers joined Massachusetts-based Beverly Bank as vice president of commercial lending. Most recently, Myers was commercial banker and vice president at Enterprise Bank in Lowell, Massachusetts. Myers enjoys active involvement with the local community and is the past vice president of Habitat for Humanity of North Central Massachusetts; a member of the Scott Myers Sizer Charter School Finance Committee and Treasurer for MIHN, a five-family homeless shelter.

Ledyard National Bank

Monique Brown

Monique Brown joined Ledyard Financial Advisors, the wealth management division of Ledyard National Bank, as a senior financial advisor. Monique joined Ledyard Financial Advisors in April of 2017 and has 25 years of experience in trust administration, IRAs, charitable trusts, compliance and wealth management. Prior to joining Ledyard, she was vice president and trust advisor at TD Bank, N.A. – TD Wealth.

Leader Bank

Gerry McCarthy, formerly of Mortgage Master/Loan Depot, and Jason Ankers, formerly of Salem Five Bank, joined Leader Bank’s residential lending team as senior loan officers. McCarthy joins Leader with over 20 years of experience in the mortgage business, and Ankers has been in the mortgage business since 2002, bringing 15 years of experience as a senior loan officer.

Promotions Berkshire Bank

Mark Pedrotti was promoted to vice president and marketing officer of Berkshire Bank. In his new role, he manages the strategic initiatives of Berkshire Bank’s digital properties, in addition to assisting with the overall integrity of marketing assets.

Blue Hills Bank

Nancy Curry

Nancy Curry was promoted to senior vice president and leader of Blue Hills Bank’s commercial real estate team. Promoted from vice president and relationship manager, Curry has been with Blue Hills Bank since 2012, where she has contributed to the commercial real estate team. The team was previously led by Senior Vice President Bob McCarthy, who recently announced that he will be assuming a part-time role as he prepares to retire.

Franklin Savings Bank

Heather Jewell was promoted to assistant branch manager of Franklin Savings Bank’s Tilton, New Hampshire office, and Janet Haines was promoted to vice president and loan administration and operations officer. In her new role, Jewell focuses on coaching Heather Jewell Janet Haines and supporting sales, service and operational initiatives for her team. In her new position Haines oversees the bank’s loan operations to include administration, processing, servicing, underwriting, collections and loan-related systems.

Katahdin Trust

Jennifer Craig was promoted to branch manager and retail services officer at Katahdin Trust’s Fort Fairfield, Maine location. She is responsible for the day-to-day management of activities at the Fort Fairfield branch, sales and business development and retail lending.

Jennifer Craig

Lake Sunapee Bank

Kaitlyn Covel and Edward Nyette were each promoted to vice president regional and marketing manager of Lake Sunapee Bank, a division of Bar Harbor Bank & Trust. Additionally, Angie Lyman and Debbie Henderson were each promoted to senior vice president and regional market manager positions. BNE

Savings Bank of Walpole

Kevin Beauregard joined the wealth management division of the Savings Bank of Walpole (SBW) as vice president, SBW wealth management and investment executive, Infinex Investments Inc. He will serve as an additional financial planner for the division, joining Anthony Scola, vice president, SBW wealth management and investment executive, Infinex Investments Inc.

Kaitlyn Covel

Edward Nyette

Angie Lyman

Debbie Henderson

BANKING NEW ENGLAND

PROTECTING GOOD VULNERABLE COMMUNITY WORKS CLIENTS

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 to Editorial Director Cassidy Murphy at cmurphy@thewarrengroup.com.

East Boston Savings Bank

Featured Banks • Baystate Financial • Centreville Bank • Charles River Bank • East Boston Savings Bank • Jewett City Savings Bank • Katahdin Trust • Lake Sunapee Bank

East Boston Savings Bank participated in the Build-A-Bed Bankers challenge, hosted by the Massachusetts Coalition for the Homeless. The challenge raised awareness for the A Bed for Every Child program, which works to distribute new twin beds to children growing up in poverty throughout Massachusetts, who do not have a bed of their own. The bank participated in a competition against The Cooperative Credit Union Assoc., in a team effort to build the most beds within a two-hour timeframe. Between both teams, over 40 beds were built in total.

• Mechanics Cooperative Bank • SIS Bank

Charles River Bank

SIS Bank

• SpencerBANK

SIS Bank of Sanford, Maine announced the Animal Welfare Society, Sanford-Springvale YMCA and Maine Children’s Cancer Program will each receive a $1,000 donation. Each nonprofit recipient is chosen by three randomly-selected bank corporators every spring at the annual meeting.

Jewett City Savings Bank

Medway, Massachusetts-based Charles River Bank donated $1,000 to support the Blackstone Valley Regional Vocational Technical High School student van. Thevan is used to transport students to job sites within the 13-town district. Students use their technical skills to work in various public schools, municipal buildings and nonprofit locations. 20 BANKING NEW ENGLAND

Connecticut-based Jewett City Savings Bank announced its foundation has awarded 39 grants totaling $26,320 to providers of emergency services in communities served by the bank.

Baystate Financial

Baystate Financial raised $30,000 in the Fourth Annual Baystate Foundation All Stars versus the Boston Bruins Alumni charity hockey game.

Katahdin Trust

Mechanics Cooperative Bank

Mechanics Cooperative Bank announced a $10,000 donation in support of the Fall River United Way and their effort to improve our community and help local families in need.

Centreville Bank

West Warwick, Rhode Island-based Centreville Bank provided $800,000 in financing to the owners of Newportâ&#x20AC;&#x2122;s Stoneacre Pantry and La Vasca restaurants.

Lake Sunapee Bank

New Hampshire-based Lake Sunapee Bank, a division of Bar Harbor Bank & Trust, contributed $25,000 to the Regional Economic Development Council of Southern New Hampshire in support of the Greater Concord Microloan Program, a new program for local businesses in the Greater Concord Area.

SpencerBANK

Massachusetts-based SpencerBANK, soon to become Cornerstone Bank upon its merger with Southbridge Savings Bank, donated $1,000 to Becker College to support a summer STEM camp for girls from low-income households in Worcester and surrounding towns. BANKING NEW ENGLAND

PROTECTING VULNERABLE IN CASE YOU MISSED IT CLIENTS

Featured Banks • Cornerstone Bank • Franklin Savings Bank • Merrimack County Savings Bank

SpencerBANK and Southbridge Savings Bank to Merge

Masaschusetts-based SpencerBANK and Southbridge Savings Bank announced that the two banks will indeed merge and begin operations later this year as Cornerstone Bank, despite initially announcing a merger of the holding companies and independent banking operations in late 2015. The merger and rebranding is expected to occur in June, pending regulatory approval, and all locations will begin to operate under the new name at that time. “Although our name will be different, our customers will continue to experience outstanding service from the same familiar faces and relationships they have come to know,” K. Michael Robbins, president and CEO of SpencerBANK, said in a statement. “We have a strong brand loyalty with local roots that date back over a century. The name we chose best embodies our culture and promotes the values of integrity and trust that our banks were built on.” “While we look forward to integrating and creating greater value for our customers, employees and communities, we realize the name is secondary to delivering the outstanding service our customers have come to expect. We will remain a community bank that existing and prospective customers want to be a part of,” Todd M. Tallman, president and CEO of Southbridge Savings Bank, said in a statement. Robbins will become chairman and CEO of Cornerstone Bank while Tallman will be president and treasurer – the same titles both hold at the merged holding company, SSB Community Bancorp MHC.

FSB Breaks Ground on 8th Branch

Franklin Savings Bank broke ground in Merrimack, New Hampshire on its eighth full-service location. The new office, located at 1 Dobson Way, will be situated on a half-acre parcel adjacent to the Merrimack Village Shopping Center. The new 2,161-square-foot-office will feature a two-lane drive-up area, two ATMs, a technology bar, along with digital displays to enable staff to demonstrate the bank’s electronic services to its customers. “We are pleased to continue our expansion further south with a new location in this vibrant and thriving community,” Ron Magoon, president and CEO, said in a statement. “The success of our loan production office in Bedford encouraged us to pursue another location in this region. We are proud to be community bankers and look forward to bringing community banking to the area.” The bank is working with Paramount Partners to serve as owner’s representative, TF Moran for civil engineering needs, as well as with DeStefano Architects and Sullivan Construction for project management. The new branch is expected to open in September.

Merrimack County Savings Bank Opens New Branch in Hooksett

Merrimack County Savings Bank opened a new branch in Hooksett, New Hampshire. The new branch, located at 360 Londonderry Turnpike, is the bank’s second office in Hooksett and ninth overall. The new office offers a range of modern banking services to assist households, nonprofits, municipal organizations and businesses in the area. “This is a wonderful milestone for Merrimack County Savings Bank,” Linda Lorden, senior vice president of retail administration, said in a statement. “We’re excited to expand our footprint in Hooksett and meet the needs of our growing customer base.” BNE 22 BANKING NEW ENGLAND

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