Maine Community Banker 4Q 2011

MAINEBANKER COMMUNITY

SERVING ALL MAINE BANKS AND CREDIT UNIONS

SUPPORT YOUR LOCAL GROWER

LOCAL BANKS OFFER A CHRISTMAS CLUB FOR FOOD

FOURTH QUARTER 2011

INSIDE

A CHECK-UP FOR CUSTOMER SERVICE SKOWHEGAN SAVINGS GETS LEAN MAINE HOME SALES UP 7.5 PERCENT

09FHL016_7.5x10_commitment_to_NE_r0:Layout 1

8/3/09

2:43 PM

Page 1

A commitment to New England The Federal Home Loan Bank of Boston is a trusted partner committed to the success of your financial institution and the communities you serve. As a reliable provider of liquidity and business solutions to financial institutions across New England, we’re here for the long term—committed to the region’s housing and community development needs. Make the most of your opportunities. Call 1-888-595-8733.

Federal Home Loan Bank of Boston 111Huntington Avenue • Boston, MA 02199 • www.fhlbboston.com

12 C O V E R

STORY

Support Your Local Grower Local Banks Offer a Christmas Club for Food Local banks offer savings accounts for CSAs.

MAINEBANKER

CONTENTS

COMMUNITY

FEATURES

MAINE COMMUNITY BANKER MAGAZINE IS PUBLISHED BY

Liquidation Diligence and the Importance of Acting Quickly

6

Skowhegan Savings Goes on Energy Diet

8

Customer Service Brand Check-Up

10

Maine Appraiser's Commentary

16

STAFF Chairman CEO and Publisher President Group Publisher & Editor in Chief

Director of Operations/ Controller

4 Editor's Note Cultivating a Healthy

Timothy M. Warren Timothy M. Warren Jr. David B. Lovins Vincent Michael Valvo

Jeffrey E. Lewis

EDITORIAL Custom Publications Editor Associate Editor

Local Economy

Christina P. O’Neill Cassidy Norton Murphy

ADVERTISING & CIRCULATION

18 Small Change 20 Maine Bankers on the Move

WWW.THEWARRENGROUP.COM Maine Community Banker © 2011 The Warren Group Inc. All rights reserved. The Warren Group is a trademark of The Warren Group Inc. No part of this publication may be reproduced in any form or by any means, electronic or mechanical, including photocopying, recording, or by any information storage and retrieval system, without written permission from the publisher.

Subscription, editorial and production inquiries should be directed to: The Warren Group, 280 Summer Street, Boston, MA 02210.

For advertising call (800) 356-8805.

FINANCE & ADMINISTRATION

D EPARTM ENTS

22 Maine Housing Report

280 SUMMER STREET BOSTON, MA 02210 (617) 428-5100

Publishing Division Sales Manager Director of Events Account Managers

Advertising/Marketing/ Events Coordinator

George Chateauneuf Sarah Warren Richard Ofsthun Cara Inocencio Emily Torres

DESIGN & PRODUCTION Creative Director Senior Graphic Designer Graphic Designer

John Bottini Scott Ellison Ellie Aliabadi

FOURTH QUARTER 2011 | MAINE COMMUNITY BANKER

|

3

EDITOR'S NOTE

CULTIVATING A HEALTHY LOCAL ECONOMY This issue’s cover story highlights local banks’ offering of a simple initiative – savings clubs for members of Community Supported Agriculture cooperatives – that could have far-reaching benefits for Maine’s agricultural sector.

It won’t happen instantly; it will have to be cultivated over time, but it could expand the market for local farmers by making entry into a CSA program easier for low- and moderateincome consumers who would like to join a CSA program but who find the three-figure entry fees to be an obstacle. Members of CSA-oriented savings clubs make regular deposits into the savings accounts intended specifically for that purpose, essentially

4 |

MAINE COMMUNITY BANKER | FOURTH QUARTER 2011

a Christmas Club for food. One might ask why consumers don’t just open term savings account on their own, but the Belfast-area banks that support this program understand the importance of earmarking, and working toward a common goal. Kudos to them, and to their customers who value the local economy.

We want to hear from you on your financial institution’s endeavors that impact the unique economy that is Maine. Sometimes it’s the simple things that provide the most fertile ground for good things to take root. n CHRISTINA P. O’NEILL Editor of Maine Community Banker

NEFMA. It’s where you belong.

“I have been very impressed with the quality of speakers and relevancy of the topics at NEFMA conferences. I believe weaving in their positive energy with your passion to implement creative ideas and see them through will be critical to your bank’s success and career.

I greatly value what they offer marketing professionals.”

Gregory R. Shook President & CEO Essex Savings Bank

Join us at the Winter Conference, January 12-13, at MGM Grand at Foxwoods.

To learn more about NEFMA, become a member and register for the conference, please visit us at www.nefma.org or call 617.926.1370

www.nefma.org

FOURTH QUARTER 2011 | MAINE COMMUNITY BANKER

|

5

LIQUIDATION DILIGENCE AND THE IMPORTANCE OF ACTING QUICKLY

BY STEVE JONES

W

hen the economy is down, bankruptcies are up.

Consequently, as protection against the impending costs associated with this increased risk, lenders should be focusing their attention not only on the quality of collateral, but also on just how liquid the collateral offered by their debtors really is. With stagnant business growth, certain assets may be harder to sell, and what once took days to trade may now take weeks, incurring unexpected and sometimes devastating expenses along the way. As financial institutions evaluate collateral, one simple, important, yet often over-looked fact to keep in mind is how long it will take to liquidate.

Real estate – If the building and grounds have not been appraised within the last 12- to 18-month period, the value

6 |

MAINE COMMUNITY BANKER | FOURTH QUARTER 2011

attributed to it is most likely incorrect. In addition to the potential of an overvalued asset, possible roadblocks associated with real estate liquidation exist, especially in today’s market, where we are seeing property remaining on the market longer and longer. During this time, the lender incurs costs from numerous sources, such as real estate taxes, insurance and utilities costs as well as regular upkeep and maintenance – not to mention broker fees. These expenses can quickly erode any expected earnings from the sale.

Accounts receivable – What could be simpler? Someone owes the business money; all the lender has to do is collect it, right? In reality, accomplishing this takes time, and while these accounts remain open there are employees to compensate, computer systems to maintain and records to keep, all of which reduce the cash received on the accounts receivable collateral.

Company vehicles – Cars, trucks and vans lose value fairly quickly. Depreciation is a major concern with this type of asset, as sales prices can plummet even during the liquidation period. Consider whether the values attributed are up to date and how long it may take to move these assets should liquidation occur. In addition to additional depreciation on these vehicles during the liquidation process, there are other costs, such as insurance costs to consider. Be cognizant of the location of these vehicles as the more dispersed the company’s fleet is, the more it will cost to ship the vehicles to a centralized location for auction.

Machines and equipment – Although companies may have relatively new pieces of machinery on their books with reasonable net book values, the

costs associated with dismantling and relocating this equipment must also be considered. Another consideration sometimes overlooked is the fact that machinery is often specialized and may have been customized for the company’s unique needs. This factor may significantly reduce the target market and ultimately the liquidation value of the equipment.

Inventory – The key thing to consider here is simple: How quickly can the inventory be sold? Of course the primary sources are the company’s current customers; unfortunately most of the time these customers will only be able to purchase or acquire a portion of the product on hand. The total current supply in these cases exceeds the customers’ immediate demand, which makes selling inventory a time-consuming process.

Employees must be retained and paid, which calls for all applicable employer taxes, health care costs, etc. There are additional costs associated with storing and transporting the inventory. Also remember that the longer these items sit on the shelf, the higher the risk of their obsolescence.

THE TIP OF THE ICEBERG This is not meant to be an all inclusive list of assets and their associated risks during liquidation. This should, however, serve as a reminder to lenders that there are very real costs connected with the length of time it takes to liquidate collateral. Lenders vigilantly focus on the quality of the collateral, appraisals, obtaining third-party support and accounting documentation to verify a company’s asset value; many times, however, little to no consideration is

given to how long it will actually take to liquidate a company – and how costly a prolonged liquidation process can become.

Even with the most attentive and meticulous screening of loan applications in place, the risk of debtors going into default and, ultimately, bankruptcy is very high today. Carefully examining collateral values with an eye toward the

often unexpected expenses that may occur during liquidation can make a big difference to the security of your funds. If you do not have capabilities inhouse to conduct investigations of this depth, or if you feel your organization could benefit from an informed second opinion, consider reaching out to a knowledgeable auditing specialist with experience in this area. n

STEVE JONES is a senior audit manager at Moody, Famiglietti & Andronico, LLP.

It’s Time to Expect More from Currency Automation Solutions and Self-Service Coin Centers

Doing Things the Right Way

Currency Dispensers

Centers ice Coin Self-Serv

19

1

61-201 50 Y E AR S

Currency Recycle rs

Contact us: 800-347-1414 ext. 336 tconklin@mageecompany.com or visit www.magner.com

FOURTH QUARTER 2011 | MAINE COMMUNITY BANKER

|

7

SKOWHEGAN SAVINGS GOES ON ENERGY DIET

BY LINDA GOODSPEED as a bank, the benefits of VDI are many.

The thin clients use less energy, have to be replaced less often and applications can be upgraded from one central location instead of at every desktop. Security is also enhanced because all the data is stored in one central location instead of on individual PCs or laptops that could be stolen, lost, or otherwise compromised.

S

kowhegan Savings Bank is going green and saving money the virtual way: Through technology.

Earlier this year, Skowhegan ($450 million in assets and 10 branches) replaced 155 energy-gobbling desktop computers with much smaller machines called “thin clients.”

The thin clients look like PCs on a diet, and they are – an energy diet. The smaller, lighter and trimmer thin clients have all the components of a PC – monitor, keyboard, mouse – with one important difference: No hard drive.

The technology is called virtual desktop infrastructure (VDI). VDI is a fast-growing trend that removes the processing power from the end point, a desktop computer, and puts it in a centralized environment, such as a server closet or data center.

With no need for a hard drive, the big bulky PCs can be replaced with smaller,

lighter, more energy efficient thin clients that look and feel like a PC, but use a whole lot less energy.

“VDI makes it seem to the user like everything is happening locally,” said Fred Haberberger, chief information officer at Skowhegan. “But the application functioning takes place in a centralized environment.”

“It’s a complete cycle back to where we started with mainframe computers 30 years ago,” added Brian Mullaney, vice president of Covisia solutions, Inc., in Waltham, Mass., a technology consulting firm that helped Skowhegan design and install the VDI technology.“The only difference is that people have a personalized experience in a centralized environment. With the old IBM mainframes, there was no personalized experience.”

For businesses with multiple users and work stations or multiple locations, such

LINDA GOODSPEED is a freelance writer.

8 |

MAINE COMMUNITY BANKER | FOURTH QUARTER 2011

ENERGY SAVINGS Three years ago, when Skowhegan virtualized its servers, going from 40 physical servers down to five. the rationale was not so much reducing energy costs as lowering equipment costs.

“We didn’t get into energy payback at that point,” Haberberger said. “Our decision to virtualize the servers was based on how we were growing, the number of servers we had to add and replace every year. We didn’t take power into consideration.”

Although not part of the original decision matrix, the energy savings from virtualizing the servers quickly caught Haberberger’s attention.

“Our power usage dropped considerably,” he said. “Instead of 40 servers with dual power supplies, we went to five.”

In May 2010, when Skowhegan began analyzing how it could bring virtualization down to the desktop, energy efficiency was the driver.

“A fully-loaded PC uses 230 watts of electricity,” Haberberger said. “A thin client uses 13.”

Over the course of a year, he said the bank’s PCs used 647,580 watts, compared to 40,662 watts for thin clients. This translates into a $17,000 a year savings on energy costs for the bank.

OTHER SAVINGS Mullaney said there are three types of cost savings associated with VDI: Energy, staff and equipment.

In addition to the cost savings from reduced energy consumption, VDI lessens the demand and need for IT staff.

“Every time we updated software we had to touch every desktop machine,” Haberberger said. “We had one product we had to do installs for every month.

Over the course of a year, it literally cost me $10,000 for two staff to upgrade one piece of software. With thin clients, that same application and upgrade costs me only $250. We do one upgrade on the server. Those servers reboot that night, and everybody has the latest version of software in the morning. It frees up the IT staff to do a lot more when they don’t have to physically touch every machine to do an install.”

Skowhegan also had to replace one third of its PCs every year. Because the thin clients have no hard drive or moving parts, the bank can put them on its books for five to seven years instead of three.

“The amount of break downs and needed repairs are also a lot less,” Haberberger said.

“Businesses need to spend money anyway on replacing and upgrading equipment,” Mullaney noted. “They should at least evaluate this technology.

It’s more cost effective than buying new PCs and servers every year.”

Mullaney said there are also many “soft” cost savings with VDI. “Staff who need to leave early can work at home,” he said. “If they can’t get into work because of the weather or a sick child or some other reason, they can work at home.”

“It’s made us a lot more flexible in the way we work,” Haberberg agreed.

SECURITY Every user has his/her own password into the VDI system that can be used in the office, at home, on the go, on a variety of devices from iPads to mobile phones.

“The real key to security is that nothing ever leaves the data center,” Mullaney said. “The only thing sent to the user is keystrokes back and forth and screen shots. For banking, this is a big deal.

With VDI, they can represent the data to the end user wherever they are, in the office, at home, but not put the data out there. The data is safely back in the data center or server closet. If a computer or laptop is stolen, there is nothing on it to steal. If it breaks, there is no data to lose. If they’re running on thin clients, there’s no hard drive to crash. If they’re running VDI on a PC and the hard drive crashes, there’s nothing on it to lose. Instead of waiting for someone to rebuild the personal computer, reload all the applications, people simply log onto another PC and have all their information back up in 10 minutes.”

STARTUP COSTS While end users need no training to switch to a virtual environment, IT staffs do.

It took Skowhegan a full year to go from a proof of concept mini project to full bank live. And then, of course, there was the $200,000 price tag.

A $43,000 incentive grant from Efficiency Maine, a quasi-governmental agency that promotes more efficient energy use, was instrumental in getting Skowhegan over that financial hurdle.

“Skowhegan Bank’s project is a great model,” said Paul Badeau, communications director at Efficiency Maine. “It’s very innovative. A lot of businesses think they need to run large equipment, computers, for example.

This project shows how the bank saved a substantial amount of money and resources through technology changes.”

Haberberger and Efficiency Maine have presented the Skowhegan model at other banks and conferences around the state and New England.

“It’s not just the energy savings you get from the VDI technology, but all the efficiencies it creates,” Haberberger said. n

FOURTH QUARTER 2011 | MAINE COMMUNITY BANKER

|

9

Rx F O R SUCCESS

CUSTOMER SERVICE BRAND CHECK-UP

BY DAVID ENDER

A

s the president and owner of a mystery-shopping service firm that serves the needs of financial institutions, I am always struck by the absence of top-notch quality customer service. At a time when the level of business competition has significantly increased, is it any wonder that customer loyalty is fast becoming an endangered species? Overall, customer service is lackluster and non-descript at best.

Given this epidemic of poor or nonexistent customer service, successful business organizations are checking up on their most valuable and important marketing tools –their employees. These organizations know all too well that each member of their customer service team is a critical link and personifies, pleasant or unfriendly, the professional service brand image in the eyes of their customers.

Recognizing this vital fact, these companies invest marketing research dollars in a quality service engagement to learn of their customer’s expectations. The conclusions drawn from such customer surveys and focus groups often mirror the ABCs of very basic customer service expectancies. All customers want to feel valued and appreciated by the business organizations to which they have given their trust and their dollars. Customers evaluate service experiences with representatives in two ways – verbal communication and non-verbal communication.

Who among us has not experienced the total lack of interest and interpersonal skills demonstrated by the majority of supermarket personnel who process our grocery needs? Generally speaking, these supermarket employees are uninspired, unmotivated and disconnected from the needs of the people who make their employment possible. Unlike 40 years ago when quality customer service

10 |

MAINE COMMUNITY BANKER | FOURTH QUARTER 2011

went hand-in-hand with competitive prices, today’s service experience is often severely lacking in warmth, friendliness and the overall mannerism of helpfulness so critical to customer attraction and retention.

As the owner of a mystery-shopping company, I tell my clients that their service teams, when interacting with the customers, represent the bank’s image in their business brand. Rather than assuming that these representatives take personal ownership of personifying an exceptional level of quality customer service, these organizations conduct regular, timely customer service quality checkups that take the form of professional mystery shops. The shops are designed to evaluate incumbent customer service and selling skills based upon an existent and established set of customer service standards that are emblematic of an organization’s service brand. Once initial mystery shops have been completed for a bank, a baseline of service performance can be created to serve as a diagnostic tool to identify what is working well and what service skills need improvement.

As a training and development tool, institutions utilizing these shopping services can strengthen their service brand in the eyes of those they serve. In doing so, these organizations are better equipped to deliver a level of customer service that is in step with customer expectations.

When selecting mystery shopping services, financial institutions should always seek out firms that are familiar and qualified in the degree of knowledge necessary to evaluate both customer expectations and employee performance standards. The shops should seek to capture moments of professional real-life employee behavior in both verbal and non-verbal forms of communication in

order to assess the overall quality of a one-to-one customer service experience.

In working with my clients, I recommend that a series of mystery shops be conducted three to four times annually for an accurate assessment of staff service performance, ensuring that a high level of customer service is consistently delivered and felt by customers. Institutions that regularly include mystery shopping services as part of a total marketing plan

soon discover that they have greater control of how their service brand is delivered by their service teams.

By following this easy business prescription for success, these banks enhance their competitive ability to attract, retain and grow their customer base. So, if your institution is overdue for a service check-up, perhaps now is the time to consider this straightforward and trouble-free Rx for continued success. n

DAVID ENDER is owner of Sellright & Customer Insights. His area of expertise is in banker sales training. He can be reached at prosalestrng@aol.com.

Go-To Resourceto toSolve Solvethe theBenefit BenefitPuzzle” Puzzle” “Your Go to Resource

Executive Compensation/Benefits • Attract/Retain Executives & Directors • Financing Strategies to Offset Costs and Increase to Earnings • Compliance/Monitoring The Pangburn Group Completely Independent fee only record keeper and compliance partner.

Represents over 750 financial institutions across the nation.

…. Thirty years of success protecting corporate Human and Financial Resources. and “Solving the Benefits Puzzle” Kaeding & Company - Leader in Integrated Employee Benefits 420 Lakeside Ave | Suite 303 | Marlborough, MA 01752 | 508.460.0165 | www.kaedingco.com

FOURTH QUARTER 2011 | MAINE COMMUNITY BANKER

|

11

12 |

MAINE COMMUNITY BANKER | FOURTH QUARTER 2011

SUPPORT YOUR LOCAL GROWER LOCAL BANKS OFFER A CHRISTMAS CLUB FOR FOOD

BY CHRISTINA P. O’NEILL

M

ainers love their local growers and many want to participate in a Community Supported Agriculture program (CSA), in which consumers pay a designated amount up-front to receive weekly orders of produce from a local grower. The offerings vary by season, and are often priced at or below their supermarket counterparts.

For growers, a robust CSA program improves cash flow and creates a more predictable market for their harvest. But the entry cost of $150 to $300 per season can be daunting for consumers of moderate means to pay all at once.

Enter the CSA savings program. It’s like a Christmas Club for food. Bank customers start a term savings program specifically to put aside cash to join and participate in a CSA. The consistent small savings add up. Unlike many Christmas purchases, however, local food is the gift that keeps on giving – often, all year round.

According to local media accounts, four Belfast-area banks reportedly offer CSA programs. They are Bangor Savings Bank, Camden National Bank, Damariscotta, and Key Bank. We spoke to two of them – Bangor Savings Bank and Camden National Bank.

TWO BANKS, TWO APPROACHES, ONE GOAL Bangor Savings Bank offers a standard savings account with no minimum balance and no monthly fee. It requires a $25 deposit to open the account. The bank has agreed to provide two free checks per year for the account-holder,

CHRISTINA P. O’NEILL is editor of Maine Community Banker.

FOURTH QUARTER 2011 | MAINE COMMUNITY BANKER

|

13

CREATING A BIGGER MARKET FOR LOCAL GROWERS As interest grows in the Community Supported Agriculture (CSA) initiative in Maine’s Waldo County, a former Belfast City Councilor is preparing to open a food-processing facility that will provide yet another outlet for local growers. Jan Anderson and her business partner Wayne Snyder are raising capital for the $2 million project, Coastal Farms Food Processing, which will serve local growers by offering the equipment and service to process, store and freeze locally-grown foods.

The enterprise will be based in a 50,000-square-foot warehouse on Route 1. Anderson says it’s an ideal regional location – Belfast is located midway up the Maine coast along a highway system from which Coastal Farms can ship the finished product to the marketplace, from a robust seller’s market.

Tenants of the facility will be able to store, process or manufacture value-added products there – products that will be competitive with and stand up to products that are now shipped in from thousands of miles away.

The processing facility will provide an additional market for produce that might not sell at a farmer’s market because it’s “less than perfect” – in other words, not consumer-attractive.

Coastal Farms’ climate-controlled storage capabilities will help local growers overcome a major roadblock to business growth. Anderson cites a USDA feasibility study in which 90 percent of respondents said they couldn’t increase production because of a lack of climate controlled storage.

“I was sad to see farmland lost because [farmers] couldn’t make a living,” Anderson says. She expects Coastal Farms Food Processing to create jobs and strengthen the local economy. Currently, Maine supplies only 20 percent of the food Mainers eat, and there’s plenty of room to drive that figure up – at prices compatible with what the local economy can support.

Raising the bar on local food consumption would do many things – increase farm income, increase food processing income, save farmland, save transportation costs, and provide a higher quality food product, and reduce the food-safety risk associated with buying food from foreign countries whose safety measures don’t match those of the United States.

Within a 50-mile radius of Belfast, there were 1,652 farms in 2007, which sold $463,000 worth of produce by direct sale that year, according to the U.S. Department of Agriculture’s National Agriculture Statistics Service.

14 |

MAINE COMMUNITY BANKER | FOURTH QUARTER 2011

who requests a check payable to the CSA farm. The account-holder can either take the check to the CSA farm, or, with the consent of the CSA farm, pay the bill online through the BillPay system.

Shanna Barrows, custom service representative at Bangor Savings Bank, personally opened a CSA-related account in the bank’s Belfast office. Bangor Savings got into the program after Barrows received a call from Jennika Lundy, assistant to the city manager at City Hall, asking if the bank would be interested in opening a CSA-related program. Because the bank wants to support its agricultural community, management readily agreed.

“Bangor Savings Bank is very pleased to be partnering with the city of Belfast, Maine Farmland Trust, and most importantly, the local farmers by participating in Community Supported Agriculture,” says Barrows. “By helping customers budget money on a weekly basis, this will enable them to receive fresh vegetables from local farmers. At Bangor Savings Bank we are committed to supporting the vitality and prosperity of Maine and its communities and this is just one more way to do that.”

Camden National Bank offers its customers a Select Savings Account, which allows each customer to select his or her distribution date, according to Camden National Corporation Marketing and Communications Specialist Megan Richardson. The customer selects a date in the future, near when the CSA payment is due, and the bank helps the customer calculate how much to save each month to meet his or her goal by the date chosen.

When the savings term is up, the amount saved is automatically sent to the customer, either by electronic transfer to another Camden National account, or by check. Interested customers would be able to sign up with any of the participating growers – growers aren’t bank-specific.

BAHNER FARM Mike and Christa Bahner, owners of the Bahner Farm in Belmont, do their

banking at Bangor Savings. Participation in a CSA initiative “has advantages for us,” says Mike Bahner. “Rain or shine, customers are getting their produce.

We love our CSA members. There’s a personal relationship with each [one].”

The Bahners now have about 30 CSA customers. The support of a steady customer base results in more of the harvest being sold and consumed, and more market and cash-flow predictability.

Growers need cash long before the growing season starts, in order to prepare the grounds and soil for the season ahead.

The Bahner Farm grows produce and plants year-round. Turnips, potatoes, carrots, onions, beets, cabbage and kohlrabi, as well as celery root, can be harvested in the fall and stored all winter.

The first winter CSA pickup this year occurred on Oct. 1.

SATISFIED CUSTOMERS Tom Kittredge is Belfast’s economic director, and is also a CSA customer of Bahner Farm. He and City Manager Joseph Slocum chipped in $100 each on a CSA share, and each receives a package on alternate weeks. “There was some stuff I’d never seen before,” Kittredge notes – as well as items he’d never have thought to use, such as beets. Now, roast beets have become a regular menu item, he says.

Twenty-six farmers in Waldo County participate in the CSA program. Belfast is an agricultural hub in Maine, and the city’s web site contains a page under

Our Community and Waldo County, where visitors can click onto different farms to find the items and the prices that appeal to them most. “We need to look for opportunities for economic development,” Kittredge says. “We decided to look at ourselves first, and keep more value inside the community. … The common thread is to retain value, not letting it go away.”

Bahner customer Jennika Lundy notes that produce prices on a CSA plan are competitive with those of local grocers, and the items are fresh-picked, as well. The adventure of using fresh new produce and expanding her family’s menu have great appeal. “Feeding my toddler a scallion pancake, I loved that,” she says. n

FOURTH QUARTER 2011 | MAINE COMMUNITY BANKER

|

15

A NEW REGULATORY DAY FOR APPRAISERS

WHAT LOCAL LENDERS NEED TO KNOW

BY DAVID SHUGARS Rule replaces the TILA 2008 Appraiser Independence Rules that went into effect on Oct. 1, 2009.

F

ederal regulation of lenders and how they work with real estate appraisers has become more stringent over the past year, and lending institutions are still learning about what these changes mean for them. Dodd-Frank, Interagency Appraisal and Evaluation Guidelines, and the Interim Final Rule all represent significant change in the governance of appraisals.

Because appraisals provide the foundation for an institution’s lending decisions and because the underlying assumptions about real estate value are challenged today to a degree not seen in almost a century, lenders need to take a holistic approach to the appraisal process – not always easy when the regulations demand separation of the loan production staff and appraisals in a lending organization.

Real estate lending policies must conform to principles of safety and soundness. Examiners will review the institution’s appraisal and lending

programs, and institutions that don’t comply will be cited in supervisory letters or examination reports and may be criticized for unsafe and unsound banking practices – deficiencies which will require corrective action.

The Office of the Comptroller (OCC), the Board of Governors of the Federal Reserve System (FRB), the Federal Deposit Insurance Corporation (FDIC), the Office of Thrift supervision (OTS), and the National Credit Union Administration (NCUA) have jointly issued the Interagency Appraisal and Evaluation Guidelines, which supersede the 1994 Interagency Appraisal and Evaluation Guidelines.

The Federal Reserve released the Interim Final Rules, implementing Section 129E of the Truth in Lending Act (TILA), published Oct. 18, 2010. TILA Section 129E establishes new requirements for appraisal independence for consumer credit transactions secured by the consumer’s principal dwelling. The new Interim Final

DAVE SHUGARS, president of DAS, is a certified residential appraiser with 23 years’ experience. DAS Appraisal Management offers a full suite of appraisal management services, including streamlined equity products that meet new regulatory guidelines. Contact 207-885-0590 for additional information.

16 |

MAINE COMMUNITY BANKER | FOURTH QUARTER 2011

LENDER CHALLENGES UNDER THE INTERAGENCY GUIDELINES AND INTERIM FINAL RULE: • Identifying staff who are fully independent of loan production who can select, retain, recommend, approve or communicate with appraisers.

• Identifying staff independent of loan production who have appropriate training and qualifications in appraisal to add appraisers to an approved panel and monitor the ongoing performance of appraisers.

• Ensuring proper documentation and written notice to an appraiser for removal from the approved appraiser panel for acceptable reasons.

• Accepting appraisals done by another lender: banks must have written assurance that it met the guidelines of the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corp., the Office of Thrift Supervision, Treasury, and the National Credit Union Administration. Appraisals must also meet the standards of the Uniform Standards of Professional Appraisal Practice (USPAP).

• Identifying staff who can perform adequate reviews of appraisals to ensure appraiser compliance with the guidelines and the USPAP. • Ensuring that appraisals contain sufficient information to support the credit decision.

• Referring unethical, fraudulent or misleading appraisals to the State Board of Appraisers.

• Identifying evaluation products for low risk loans to replace the use of

tax bills and Broker Price Opinions, which are no longer allowed for new loans.

• Using engagement letters to document expectations and identify the intended use and user(s) of the report as defined in USPAP. SIX POPULAR MISCONCEPTIONS Loan production staff only pertains to commissioned employees that benefit from the closing of a loan. Loan production extends beyond just commissioned staff, and legal council should be consulted to determine the impact of the lending institution. The Interagency definition is: “Generally, all personnel responsible for generating loan volume or approving loans, as well as their subordinates and supervisors.”

Tax bills and Broker Price Opinions (BPOs) are allowed for low risk loans. Not any more. These products are no longer allowed under the regulations for any new residential or commercial loan, regardless of risk.

A third-party website or portal offers the separation needed between loan production staff and appraiser. A third-party website or portal does not by itself protect a lender under the regulations. The person(s) responsible for developing and managing an appraiser panel must not be considered loan production personnel.

A rotation of appraisers on the approved panel protects the lender. A rotation does not by itself create separation, and the proper development and management of a panel by non loan production staff is the key.

A lender considered a “small bank” is exempt from these regulations. Although there is some leeway given in some areas, even “small lenders” have to comply with most of the regulations.

A staff person tasked with the review function of appraisals does not need USPAP knowledge. Any staff person tasked with an appraisal review function must have appropriate appraisal knowledge, which has been construed to include USPAP knowledge to the degree that is consummate with the complexity of the appraisal.

GET IT FAST, GET IT CHEAP OR GET IT RIGHT Appraisal management companies (AMC) address the challenges of the appraisal management function for lending institutions. But they often face competitive pressure to lower pricing to appraisers (by as much as 50 percent), quick turnaround, and other promises to win a lender’s business.

This trend of lower fees paid to appraisers and in quicker timeframes ultimately leads to reduced quality. The majority of experienced and ethical appraisers refuse to do work under these conditions, which leaves no other choice for the AMC to utilize many appraisers that either intentionally, or unintentionally violate the USPAP by not completing the entire appraisal process and providing the quality appraisals lenders are required to obtain to satisfy regulators.

The second area of concern from traditional AMCs is that of quality assurance. Although traditional AMCs may guarantee internal quality control and review of all appraisals, they more typically utilize inexperienced processing staff and check lists for review versus experienced appraisal staff.

WHAT LENDERS REALLY NEED The real check list for banks and credit unions selecting an AMC should include provisions that the AMC do the following: • Establish a single point of contact to ensure that no member of the lender’s loan production staff will have access to appraisers, thus eliminating the possibility of improper communication between the client and the appraiser.

• Strict written policies established to safeguard from appraiser pressure and independence.

• Ensure that no referrals for appraiser selection come from an inappropriate source, such as loan production staff, real estate brokers or borrowers.

• Take responsibility for selection, retention, approval and communication with appraisers.

• Take responsibility for the approval of qualified appraisers and conduct quality control analysis of all appraisal reports by qualified personnel for USPAP compliance, agency

compliance, and specific lender guidelines prior to delivery.

• Work with the lender to manage borrower complaints.

• Be responsible for value dispute resolution, with written responses to the client.

• Refer unethical, fraudulent or misleading appraisals to the State Board of Real Estate Appraisers.

• Provide documentation and written notice to appraisers who are removed from its own approved appraiser panel.

• Certify, warrant and represent that every appraisal has been completed in compliance with USPAP and regulatory guidelines. The lender is notified if any violation occurs, what steps are taken to rectify the situation and any disciplinary action that is necessary.

DAS Appraisal Management, the only Maine-based AMC, provides its clients the services on the above checklist.

“Androscoggin Bank utilizes DAS for its retail appraisal management process,” says Bruce Miller, vice president of Androscoggin Bank. “DAS has allowed Androscoggin Bank to streamline its mortgage origination process and remain compliant with regulatory appraisal requirements.

DAS has also developed a low cost, streamlined evaluation product for equity loans, which replaces tax bills and Broker Price Opinions, which are disallowed under the new regulations. Additionally, to avoid competitive pressure on fees and turnaround times, DAS pays market-rate fees to its appraisers, and its lender clients pay a management fee for its service, typically passed on to the borrower.

Maine’s economy is complex having very diverse housing stock and locational dynamics. Its small-business backbone requires experience and institutional knowledge on the appraiser’s part, and its residential market is more exposed to seasonal and economic shifts than that of many other states. As an appraisal management company owned and operated by appraisers, we know firsthand how important USPAP and specific lender compliance are. And DAS knows Maine. n

FOURTH QUARTER 2011 | MAINE COMMUNITY BANKER

|

17

SMALL CHANGE

FROM LEFT TO RIGHT: Kennebunk Savings Vice Presidents Francine Cram and Susan Morgan, Kennebunk Savings Board of Trustees Member Geoff Titherington and Allen Mapes.

KENNEBUNK SAVINGS DONATES $5,000 FOR GOODALL PARK With the help of Kennebunk Savings’ $5,000 donation, substantial improvements have been made to the historic Goodall Park in Kennebunk. The improvements, which will benefit both players and fans, include repaving the parking lot and replacing dugout benches, as well as the fence behind the field.

Goodall Park dates to 1915 when it first opened its

gates, and each year the park fills its grandstand with thousands of visitors and fans. Recent improvements are necessary to maintain its upkeep, while providing an adequate space for the ballplayers in the Sanford Mainers’ league as well as Sanford High School’s baseball and field hockey teams. n

KATAHDIN BANKSHARES ANNOUNCES ADDITIONAL BRANCH EXPANSION AND 9 MONTH EARNINGS Katahdin Bankshares Corp., parent company of Katahdin Trust Company, announced the bank’s continued expansion plans in the Bangor market with renovations set to begin on a full-service branch located on Springer Drive in the Christmas Tree Shops Plaza.

“We continue to experience a good reception to our entry into the greater Bangor area,” said Katahdin Trust Company President and CEO Jon J. Prescott.

“Our new Bangor branch will offer customers a spacious and comfortable retail banking facility as well as access to a team of commercial lending professionals.”

Prescott noted that the new branch has tremendous accessibility from the mall area and to I-95. “This new location will enhance our customers’ experience by providing both deposit and loan services for individual and business needs and supplements our branch offices on Western Avenue in Hampden and

18 |

MAINE COMMUNITY BANKER | FOURTH QUARTER 2011

Bangor’s Broadway Shopping Plaza,” he said.”

The company’s net income for the first nine months of the year was $3.4 million.

“Although this was down by 5.7 percent over the prior year, given the economic conditions prevalent during this period, we are pleased with our results,” Prescott said. Total loans increased by $32.11 million or 8 percent over the prior year.

“We are certainly pleased with this strong loan growth that has enabled us to provide significant support for individuals and businesses in our local market area as we all work together during these challenging times,” he said.

Deposits also increased by $39.9 million. Prescott attributed much of that growth to the bank’s expansion into the Bangor market area. Total assets reached a record high of $527.2 million, an increase of 5.8 percent over the prior year. n

NORWAY SAVINGS BANK RECOGNIZED AS ONE OF THE HEALTHIEST COMPANIES IN AMERICA

Norway Savings Bank was presented with a Gold-Level Well Workplace Award by the Wellness Council of America (WELCOA). This award distinguishes Norway Savings Bank as one of the healthiest companies in America.

The Gold Award recognizes those companies that have successfully built comprehensive worksite wellness initiatives and are demonstrating and capturing concrete outcomes related to behavior change, productivity, cost effectiveness,

and return on investment. A Gold Award designation from WELCOA is a significant recognition by a world-renowned organization at the forefront of workplace health promotion.

In 2010, Norway Savings Bank introduced a one-on-one, behaviorbased wellness program with Occupational Medical Consultants (OMC). Through OMC’s wellness program, bank employees meet with a dedicated health coach throughout the year to complete a health risk assessment and on-site biometric screening, as well as to set and track personal health and wellness goals.

Norway Savings Bank also has a Safety and Wellness Committee that is dedicated to making the bank a safer and healthier workplace through new and ongoing objectives geared towards employee education, awareness, intervention and results. To date, overall participation in the wellness program is at 94 percent and the bank

has already seen an improvement in its aggregate risk-data scores in less than two years.

“The Gold Award is reflective of the commitment, investment and results we have demonstrated through our wellness efforts,” said Patricia Weigel, president of Norway Savings Bank.

“A strong wellness program enhances the quality of life for our employees and contributes toward managing our health care, our health care costs and our health insurance premiums.

Our employees are very engaged and involved with our wellness program, and we are very proud of our accomplishments.”

Founded in 1866, Norway Savings Bank is a leading mutual banking and financial services company headquartered in Norway, Maine.

As of Sept. 30, 2011, Norway Savings Bank had $944 million in total assets and provided financial services to over 38,000 households throughout western and southern Maine. n

TE DA 12 HE T 20 VE , SA 9

IL

R AP

1

NEW ENGLAND’S LARGEST MOST EXCITING CREDIT UNION SHOW THURSDAY, APRIL 19, 2012, 8:00A.M. – 2:30P.M. HOLIDAY INN, BOXBOROUGH, MASSACHUSETTS Sponsorship & Exhibiting Opportunities Available Questions? Contact The Warren Group at 617-896-5314 or at greatcushow@thewarrengroup.com As the date approaches, check our website for updates and event information.

Visit www.greatcushow.com Presented By

FOURTH QUARTER 2011 | MAINE COMMUNITY BANKER

|

19

MA INE ON T HE M OVE

PAMELA J. WARD

JOHN BURCKE

STEVEN M. BYRNES

BRIAN E. LEADER

ANNETTE LEWIA

20 |

KATAHDIN TRUST COMPANY Pamela J. Ward has joined the Katahdin Trust Company as assistant vice president of credit control. In her role, Ward will be responsible for assisting in the management of the collections function for the bank, handling delinquent disputes and negotiating payment plans, as well as repossessions and foreclosures. Ward is a graduate of Livermore Falls High School, attended the Northern New England School of Banking and the America’s Community Bankers in Fairfield, Connecticut. She has completed several professional seminars and financial banking courses through the American Institute of Banking. Prior to joining Katahdin Trust Company, she had been affiliated with Skowhegan Savings Bank for over 23 years, most recently serving as a Branch Manager and consumer lender.

KENNEBUNK SAVINGS John Burcke has been promoted to the commercial loan area as vice president and small business team leader. In his new position Burcke will be responsible for growing Kennebunk Savings’ small business presence throughout York County and the greater seacoast New Hampshire market while working closely with the bank’s 15 banking office managers. With over 14 years of experience in the banking industry, Burcke was previously the retail market manager for Kennebunk Savings’ newest banking office in Portsmouth, New Hampshire.

Steven M. Byrnes has joined the bank as executive vice president and chief sales officer.

Byrnes will be responsible for Kennebunk Savings’ sales efforts and will oversee the organization’s commercial and retail lending divisions, the branch office network, and the Kennebunk Savings Insurance and Kennebunk Investment Services operations. With a wide-ranging banking career that spans 25 years, Byrnes has been particularly focused on sales and sales process administration at banks throughout Maine and the Northeast.

Byrnes’ has spent the majority of his career at Maine National Bank and its successors, Fleet Bank and Bank of America, where he held management positions in commercial credit and senior management positions in commercial relationship management. After a working for a national banking organization in New York City, he returned to Maine in 2010 to serve as a small business lending team leader for a large regional bank.

Brian E. Leader has joined Kennebunk Savings as vice president and branch manager of its newest office, located in Portsmouth. Leader’s responsibilities will include business development in the Portsmouth area and New Hampshire’s greater seacoast communities as well as day-to-day management of the branch. Prior to Kennebunk Savings, Leader worked for another New Hampshire financial institution serving the greater seacoast area.

He brings with him several years of experience in branch management, lending, customer service and sales.

Annette Lewia has been promoted to be the vice president and banking office manager of the Wells office. As an employee of Kennebunk Savings for nearly 30 years, Lewia has had a varied career at Kennebunk Savings. From her first position as an administrative assistant to her most recent as vice president and retail special assets manager, she has also managed the residential and consumer lending departments and worked in lending quality control. Lewia holds an associate’s degree from the University of New England and went on to continue her education, attending the Center for Financial Studies at Fairfield University in Fairfield, Connecticut and completing numerous classes through the Northern New England Center for Financial Training.

MAINE COMMUNITY BANKER | FOURTH QUARTER 2011

M A INE O N T HE M O VE

ARE YOUR EMPLOYEES ON THE MOVE? Email submissions to Cassidy Murphy at cnortonmurphy@thewarrengroup.com.

Alexander Meagher has recently joined the bank as assistant vice president and associate general counsel. He will be responsible for ensuring compliance with all banking regulations and new requirements promulgated by regulators. Meagher received his degree from the University of New Hampshire School of Law. He also holds a bachelor’s degree in sports management and economics from the University of Massachusetts.

ALEX MEAGHER

KAREN J. NASH

ROBIN V. WORDEN

FEDERAL SAVINGS BANK Tim Dargan has been promoted to the position of vice president and senior commercial lending officer. Dargan will be responsible for supervisory duties of commercial loan officers and will assist in growing the bank’s commercial loan portfolio through active participation in sales management and officer call programs. A graduate of Boston College School of Management, Dargan has more than 25 years of commercial lending experience, which combined with his extensive knowledge of various lending programs makes him a great asset to the bank and its customers.

TD BANK William A. Fuller has been named the store manager of the store located at 299 Elm St. in Biddeford. An assistant vice president, he is responsible for new business development, consumer and business lending, and managing personnel and day-to-day operations at the store serving customers throughout the area. Fuller has five years of banking experience.

Prior to joining TD Bank, he served as a relationship manager at Key Bank in Portland.

Fuller is a member of Heart of Biddeford and the Biddeford-Saco Chamber of Commerce.

A Standish, resident, Fuller is a 2008 graduate of Kaplan University in South Portland.

Karen J. Nash has joined TD Insurance, Inc., a subsidiary of TD Bank, as assistant vice president and account administration manager in employee benefits in Portland. She will manage a staff of customer service agents who service employer group clients located across the TD Bank footprint in 10 states from New England to Florida. Nash has 20 years of experience in the insurance industry, including 14 years in employee benefits. Prior to joining TD Insurance, she served in both supervisory and staff account management roles with insurance agencies in Massachusetts and New Hampshire as well as a large national health insurer.

William T. Olsen Jr., has been named senior relationship manager and team leader in commercial lending in Portland. He is responsible for managing a commercial lending team and developing commercial banking relationships with business clients throughout Southern Maine. Olsen has 20 years of experience in banking, commercial banking and equipment leasing/finance. Prior to joining TD Bank, he served in commercial lending positions with Bangor Savings Bank, GE Capital, KeyCorp, and Casco Northern/Bank of Boston.

Robin V. Worden has been promoted to vice president and portfolio manager in Portland. She will administer and monitor a large portfolio of commercial real estate loans, underwrite and identify key risks and strengths in real estate loans, and assist in management of the portfolio. Worden has 11 years of experience in banking and lending. She joined TD Bank in 1999 as a commercial loan administrator, and served as a commercial credit analyst before joining the commercial real Estate division in 2010.

Worden is a member of the Risk Management Association (RMA), and is a graduate of the University of Southern Maine. n

FOURTH QUARTER 2011 | MAINE COMMUNITY BANKER

|

21

MA INE HOU SIN G R E P O RT

MAINE HOME SALES UP 7.56 PERCENT IN SEPTEMBER Maine real estate sales continue to climb: Single-family existing home sales increased 7.56 percent comparing September 2011 to September 2010.

According to the Maine Real Estate Information System, Inc. (MREIS), Realtors report 967 sales across Maine’s 16 counties. The statewide median sales price (MSP) decreased 6.42 percent to $159,000 in that same time period.

Nationally, single-family existing home sales rose 12.2 percent over the past 12 months. The National Association of Realtors (NAR) reported a national median sales price of $165,600 – a decrease of 3.9 percent. In the regional Northeast sales were up 6.8 percent, while the regional MSP decreased 3.3 percent to $229,400.

Mike LePage of RE/MAX Heritage in Yarmouth says, “Despite continued downward pressure from short sales and foreclosures, the Maine real estate market has weathered the storm in the third quarter this year. The numbers are up significantly from last year and, although a bit premature for a major celebration, we are pleased with a 14.87 increase in unit sales over the last year. The statewide median sales price continues to show signs of stabilization.”

LePage continues, “First-time home buyers have been taking advantage of the lowest prices in years combined with the best interest rate environment anyone can remember. The high end has also seen improvement. Cash buyers have found value in the more expensive properties and the results reflect that.

The tougher market in the near term has been the middle market, due in part to buyers needing to sell their homes in order to purchase a new one. I think that one fact has put a damper on the very real demand that exists in the middle market.”

At right are two charts showing

22 |

statistics for Maine and its 16 counties.

The first chart lists statistics for the month of September only, statewide. The second chart compares the number of

existing, single-family homes sold (units) and volume (MSP) during the months of July, August and September of 2010 and 2011. n

MONTHLY REAL ESTATE STATISTICS September 1-30, 2010 – September 1-30, 2011 County

STATEWIDE

#Units Sold 2010

899

#Units Sold 2011

967

Percent Change

7.56%

Sale Price 2010

$169,900

Sale Price 2011

$159,000

Percent Change

-6.42%

ROLLING QUARTER CHART: FROM JULY 1, 2010 – SEPTEMBER 30, 2010 AND JULY 1, 2011 – SEPTEMBER 30, 2011 County

#Units Sold 2010

#Units Sold 2011

Percent Change

Sale Price 2010

Sale Price 2011

Percent Change

STATEWIDE

2656

3051

14.87%

$170,000

$167,900

-1.24%

Androscoggin

182 202

10.99%

$139,450

$128,750

-7.67%

0.50%

Aroostook

86

98

13.95%

$89,500

$80,000

-10.61%

Cumberland

668

770

15.27%

$230,000

$229,450

-0.24%

Franklin

61

70

14.75%

$140,000

$125,000

-10.71%

Hancock

120

135

12.50%

$170,500

$167,000

-2.05%

Kennebec

258

262

1.55%

$135,000

$137,750

2.04%

Knox

75

103

37.33%

$197,000

$182,000

-7.61%

Lincoln

85

90

5.88%

$183,900

$178,000

-3.21%

Oxford

112

142

26.79%

$139,500

$119,450

-14.37%

Penobscot

275

313

13.82%

$132,000

$133,000

0.76%

Piscataquis

51

56

9.80%

$85,000

$75,250

-11.47%

Sagadahoc

77

90

16.88%

$180,000

$168,000

-6.67%

Somerset

75

113

50.67%

$85,900

$117,000

36.20%

Waldo

87

83

-4.60%

$150,000

$149,000

-0.67%

Washington

20

23

15.00%

$97,500

$98,000

0.51%

York

424

501

18.16%

$225,000

$210,700

-6.36%

Source: Maine Real Estate Information System, Inc. Note: MREIS, a subsidiary of the Maine Association of REALTORS, is a statewide multiple listing service with over 4,600 licensees inputting active and sold property listing data. Statistics reflect properties reported as sold in the system within the time periods indicated.

MAINE COMMUNITY BANKER | FOURTH QUARTER 2011