New Jersey Banker Summer 2016

NEW

JERSEY

S U MMER 2 0 1 6

B A N K E R

NJBankers 112th Annual Conference

Succession Planning | Liquidity Management | TRID Update ENDORSED BY THE NEW JERSEY BANKERS ASSOCIATION

SCoTT BARAnoWSki, CiA DiReCToR – inTeRnAl AuDiT SeRViCeS

At Wolf & Company, we pride ourselves on insightful guidance and responsive service. As a leading regional firm, our dedicated professionals and tenured leaders provide Assurance, Tax, Risk Management and Business Consulting services that help you achieve your goals.

Download From Deregulation to Dodd-Frank.

Visit wolfandco.com/doddfrank.

NEW

JERSEY B A N K E R

NJBankers Board of Directors Gerard Banmiller President/CEO 1st Colonial Community Bank

David J. Hemple President/CEO Century Savings Bank

Christopher Martin Chairman/President/CEO The Provident Bank

Thomas Shara President/CEO Lakeland Bank

Frederick Bertoldo EVP/Regional President, Northern New Jersey Wells Fargo Bank, N.A.

Stanley J. Koreyva Jr. Executive Vice President/COO Amboy Bank

Peter Michelotti* President/CEO Community Bank of Bergen County

Louis Anthony Costantino Managing Director, Industry Manager JP Morgan Chase

Anthony Labozzetta* President/CEO Sussex Bank

Craig L. Montanaro President/CEO Kearny Bank

Kathleen A. Stone Senior Vice President/Senior Business Banking Executive BB&T

Edward Dietzler President The Bank of Princeton

Thomas Lupo President/CEO Regal Bank

Michael O’Brien* Senior Vice President/Market Manager Bank of America

John S. Fitzgerald President/CEO Magyar Bank

Christopher Maher President/CEO OceanFirst Bank

Gerald L. Reeves* President/CEO Sturdy Savings Bank NJBankers Immediate Former Chairman

NJBankers Officers

NJBankers Staff John E. McWeeney Jr. President and CEO ext. 627 jmcweeney@njbankers.com James M. Meredith Executive Vice President and Chief Operating Officer ext. 614 jmeredith@njbankers.com

Claire Anello Office Manager, Database and Website Manager ext. 631 canello@njbankers.com

Michael P. Affuso, Esq. Executive Vice President and Director of Government Relations ext. 628 maffuso@njbankers.com

Cris Goncalves Manager of Education ext. 630 cgoncalves@njbankers.com

Jenn Zorn Senior Vice President and Director of Education & Business Development ext. 611 jzorn@njbankers.com Emily T. DeMasi Vice President and Director of Communications ext. 610 edemasi@njbankers.com Wendy C. Mandelbaum Controller ext. 603 wmandelbaum@njbankers.com

Contributing Editor Emily T. DeMasi

Nicholas J. Tedesco Jr. President/CEO GSL Savings Bank

Lauren Barraza Executive Assistant ext. 618 lbarraza@njbankers.com Cynthia M. Zaccaro Administrative Assistant II/ Senior Administrative Assistant ext. 632 czaccaro@njbankers.com Erin Suckiel Assistant to the Director of Communications ext. 629 esuckiel@njbankers.com

Angela Snyder * Chairwoman Chairwoman/CEO Fulton Bank of New Jersey

William D. Moss * Second Vice Chairman President/CEO Two River Community Bank

James S. Vaccaro * First Vice Chairman Chairman/President/CEO Manasquan Bank

John E. McWeeney Jr. President and CEO New Jersey Bankers Association

Counsel Michael M. Horn, Esq. McCarter & English, LLP Mary Kay Roberts, Esq. Riker, Danzig, Scherer, Hyland, Perretti LLP

*Executive Committee

Contact New Jersey Bankers Association www.njbankers.com 411 North Avenue East Cranford, NJ 07016-2436 Phone: 908-272-8500 Fax: 908-272-6626

The Warren Group Design / Production / Advertising custompubs@thewarrengroup.com

Diane Starr Administrative Assistant to Education Department ext. 600 dstarr@njbankers.com

www.thewarrengroup.com 280 Summer Street • Boston, MA 02210 617-428-5100

Published continually as a quarterly publication by the New Jersey Bankers Association from 1929 to Winter 1986. Revived as a quarterly publication by NJBankers and The Warren Group in 1998 under the name New Jersey Bank & Thrift and continued as New Jersey Banker in 2002. Combined with The League Leader, published by the New Jersey League of Community Bankers, in December 2008 and continued as New Jersey Banker.

Summer 2016 New Jersey Banker

3

SPECIALIZED EXPERTISE

Table of Contents

Audit & Compliance SEC Rules & Regulations SOX 404 Internal Audit Control

Network Attack & Penetration Information Systems Audit Business Resumption Planning

Cover Strategic & Succession Planning

16 New Jersey Bankers Association 112th Annual Conference

Profit & Process Improvement Enterprise Risk Management

Departments 6 Chairwoman’s Platform Planning for Our Future

Tax Planning & Advice Tax Preparation & Compliance Tax Accounting

8 From the President’s Office A Commitment to Service 10 Politics & Policy Three-Card Monte

11 Upcoming Events 28 Bank Notes 29 New Associate Members

30 Bank Shots

Features Audit & Co-Sourcing Regulatory Compliance Insurance & Trust

THE SNODGRASS APPROACH: PERSONAL, PROACTIVE and EVOLVING over time. Our team of expert practitioners have been providing business consulting services since 1946.

5

Director’s Corner Retaining Talent Through Succession Planning

24 Feature

TRID’s Rocky Road:

Past, Present and Future

12

Behind the Teller Line From Teller Line to Transaction Pod

26

Meet Our Endorsed Service Provider StoneCastle Financial

14 Feature

Succession Planning 2.0 Visit us on www.srsnodgrass.com | 800-580-7738

4

New Jersey Banker

20 Feature

Liquidity Management in a

Changing Environment

Summer 2016

Director’s Corner

Retaining Talent Through Succession Planning

By James G. Edrington

S

uccession planning is a concept that is gaining more and more prominence. As Baby Boomers continue to retire in record numbers, banks are faced with making decisions about key positions that will impact their future success and it’s important to “get it right.”

The bank’s board of directors play an important role in this process – helping to ensure the bank has a robust and effective process for identifying top talent and ensuring a smooth transition for key management positions, especially the C-suite.

Succession planning is all about ensuring you develop your “bench” – recruiting and developing the talent that represents the future – and instilling in these employees with the knowledge, skills and abilities (also reJames G. Edrington ferred to as KSAs) that will enable them to Executive Vice President, ABA’s Professional Development Group be successful in their current roles, and be well positioned to take on increasing areas of responsibility and more challenging positions. Having a formalized succession planning process in place to support this objective provides several key benefits to the bank: • Identifies the key roles in the bank’s management structure • Documents the critical skills and competencies needed to support strategic objectives • Identifies the potential internal candidates for succession by job role • Assesses whether internal candidates possess the necessary job skills • Communicates the importance of succession planning to all key stakeholders From ABA’s perspective, the industry has embraced the need for succession planning and is taking concrete steps to address talent gaps. Many State Bankers Associations, including NJBankers, have implemented Emerging Leaders programs – designed to engage younger bankers in the advocacy process and help them develop their skills and professional networks. The NJBankers Leadership Academy, launched in May, offers tracks for managers, supervisors and women bankers. In addition, a directors’ module is forthcoming. NJBankers also recognizes emerging leaders through their “New Leaders” awards presented in December in conjunction with the BankHorizons event.

The Graduate Banking School marketplace is seeing a resurgence, with in some cases record attendance levels – further demonstrating the investment many banks are making in their future. ABA created an internal Leaders at all Levels program that helps us further develop our leadership pool, and proactively address the long tenure of many of our staff and pending retirements. In addition to the wide range of educational resources and a succession planning guide offered by

ABA, there are similar products available in the marketplace as well as professionals who can assist you in your efforts.

A clear byproduct of this heightened interest in succession planning and leadership development is that as the industry distances itself from the financial downturn, banking will be positioned once again as a “career of choice.” As an industry, we’re taking small, but important steps in this direction – and I for one, continue to be impressed with the young and energetic talent I meet when visiting banks and speaking with those participating in ABA’s educational programs. Equally as impressive, is the dynamic culture being created in many community banks – which is engaging employees and providing opportunities for them to grow and advance – again tying back to succession planning. This culture development should be organic and it requires the full support of the CEO, Board and senior leaders. When executed correctly, culture can be a competitive advantage and a key opportunity to reach out to the new generation of bank employee (aka the much talked about Millennials).

The board of directors has many competing responsibilities – especially given the current regulatory environment and importance of risk management oversight. Your shareholders and regulators want to know that you have in place a solid plan of action as part of the bank’s long-term vision or if called upon in an emergency. This fiduciary responsibility goes beyond the CEO’s office and includes most other key positions, including division heads.

Not only must the board address the risks associated at the C-suite level, it must also look internally at director succession to ensure that the board’s composition continues to satisfy the needs of the bank. It’s important to integrate this level of review into the annual process leading to the recommendation of the slate of directors in support of the annual shareholder vote. Additionally, boards must consider the key skills required to serve as a director, who in the community may represent ideal candidates and how best to attract these individuals. Given the demands on these individuals in their current day jobs, and the increased level of governance required of bank boards, this can often be a challenging proposition. Proper planning and the development and management of a well thought-out succession planning methodology will go a long way toward ensuring that your board of directors remains vital and serves the bank well.

Succession planning is the continued evolution of leadership in any business cycle. Having a culture that recognizes the importance of leadership development, as well as the discipline to identify critical roles and functions at the bank, with an eye towards the future, can help position the bank for continued growth and success.

■ James G. Edrington is executive vice president of the ABA’s Professional Development Group. He can be reached at (202) 663-5490 or jedringt@aba.com.

Summer 2016 New Jersey Banker

5

Chairwoman’s Platform

Planning for Our Future

By Angela Snyder

I

was recently re-reading Jerry Reeves’ message to you from the summer 2015 issue. He noted that “there is no doubt that we have been through one of the most significant and challenging financial downturns in the history of the U.S.” He noted that in 2004, the number of banks in the U.S. was roughly half of what existed in Angela Snyder 1994. And he Chairwoman NJBankers proudly stated Chairwoman/CEO that “NJBankers Fulton Bank of New Jersey members have not only weath-

ered the storm, but continue to be successful through it all.”

Jerry was absolutely right, we are the survivors! And a year ago, that fact alone gave pride and purpose to many of us who consider ourselves to be career bankers. Now, one year later, it’s time to turn focus less on the past and more on the future. We need to turn our thoughts to a topic that is very important to me and to all of us as bankers. We all need to devote some energy and some resources to successfully developing the next wave of emerging leaders in our industry.

Recently, at the NJBankers 2016 Annual Conference, I challenged those in attendance to remember the day they began their career in banking.

Admittedly, for many of us in the room

A subsidiary of Herbein + Company, Inc.

Addressing Your Bank’s Needs • • • • • • •

Internal Audit Outsourcing Regulatory Compliance Audit & Training Collateral Field Examinations Asset Liability & Liquidity Examinations Information Technology Audits Data Mining & Analysis Penetration & Vulnerability Assessments

• Sarbanes-Oxley & FDICIA Documentation & Testing • Trust Department Examinations • Fraud Examinations • Staff Training • BSA & Anti-Money Laundering Examinations

Financial Outsourcing Solutions www.fosaudit.com 6

New Jersey Banker

that day, our first day on the job was probably a long time ago! But back then, banking was a career to be respected. If you got a job at a bank, it really felt like you had “made it.” We were the lucky ones. We worked in an industry that was highly regarded. We served customers who needed our advice, our products and our services. We gave back to our communities. And if we worked hard, we knew there were opportunities to be promoted and to enjoy career success.

Compare that with how it must feel to be beginning your banking career in today’s world. What is the image young people, who are newly navigating their career paths, are shown of the financial services world? My guess is that many of us are still talking about “surviving” rather than “growing, developing and thriving.” Because of the actions of a few, our entire industry has been painted in an unfair and unflattering light, and this is affecting our ability to attract, retain and grow talented leaders.

If we are to cultivate the interest and help develop the careers of talented young people who can be the leaders of tomorrow, we need to change the way we talk. And act. We need to reconnect with the positive feelings we get from learning, from growing our skills, from being part of a team, from being tapped to lead and from helping our community.

But the responsibility for career development does not only rest with benevolent senior leaders who mentor others. Rather, a shared investment is required. It is important that talented young people who have the desire and ability to lead are proactive in building the skills, experience, and network of people who will advocate for them as they progress through their careers.

As senior leaders, during our careers, many of us were fortunate to have mentors – talented people who really enjoyed their work. They took us under

Summer 2016

their wing, and their enthusiasm was contagious. That type of positive energy and “can-do” spirit helped propel us forward in our careers.

Now we need to do the same. We need to reconnect with the things that make banking great – learning about customers’ needs, finding solutions, working as part of a winning team. As established leaders, we’re the people with the perspective, the longer-range view, the patience, the kindness, the knowledge, the energy and the influence to make mentoring and leadership development a priority. Not only can we mentor young professionals, we can also advocate for them. We can be sure that they are given new opportunities to develop new skills…to try new roles… to work hard and see the rewards.

But the responsibility does not only lie with senior leaders. I have always believed that all of us are partners in our own career development. And so I urge young professionals to work hard to create your own possibilities rather than waiting for opportunity to come to you. Network with colleagues. Identify others whose skills you admire. Seek out opportunities to grow and develop your skills. Find a mentor who will provide you with honest feedback on issues that are important to you. By doing these things, and by striving to be a top performer in everything you do, you can become a senior leader in the banking world of tomorrow.

By working together, we will ensure that the tremendous knowledge and experience of our senior leaders gets passed on to bright, talented and creative young leaders who can successfully guide the financial services industry in the future.

■ Angela Snyder is chairwoman of the New Jersey Bankers Association and chairwoman and CEO of Fulton Bank of New Jersey. She can be reached at asnyder@fultonbanknj.com.

We assist banks, attorneys and title agencies with Corporate and UCC searches in NJ and PA.

Signature Information Solutions provides Charles Jones® and Data Trace® products and services.

We offer a full suite of corporate and UCC products for your due diligence needs.

9 Experience you can trust - 55 years of combined experience in corporate and UCC searching.

9 Online order entry and retrieval - you can access your searches right when you want them.

9 Expert customer service staff available to assist via Live Chat, email or telephone.

• UCC PLUS Search (NJ) • Franchise Tax Report • Corporate Status Report • Corporate Copies • Good Standing Certificate • Nationwide Corporate Services also available

We can help you with Corporate and UCC Searches.

Call Lyman Hopper or visit our web site 609-218-4037 www.signatureinfo.com Charles Jones and Signature Information Solutions are registered trademarks of Signature Information Solutions LLC. Data Trace is a registered trademark of Data Trace Information Services LLC. ©2016 Signature Information Solutions LLC. All rights reserved.

Summer 2016 New Jersey Banker

7

From the President’s Office

A Commitment to Service

By John E. McWeeney Jr.

N

JBankers recently held its 112th Annual Conference and I was struck yet again by the outstanding commitment to service displayed by our bankers. Perhaps we get so caught up in the day to day that we forget all that bankers do to not only serve their institutions, but the banking industry and their communities as well.

That level of commitment to the industry was John E. McWeeney Jr. certainly evident President/Chief Executive Officer NJBankers in Arizona as we swore in a new slate of officers and directors and the former slate completed their term of service. When circumstances created the need in 2015, our outgoing chairman Gerald Reeves and his fellow officers Angela Snyder, James Vaccaro, Stewart McClure and Kevin Cummings all stepped up for an unprecedented two year term in their respective positions. Each of them committed an additional year to leading NJBankers and the New Jersey banking industry through the exciting, but challenging times we live in. Our thanks and gratitude go out to all of them, especially Jerry for his commitment and leadership over these past two years. Going through the chairs at NJBankers normally requires a five-year commitment, which is significant in and of itself. This group of officers, though, will have served a total of six years when they’ve completed their terms. That’s a lot of extra meetings, conference calls, events and travel in addition to running their banks. We look forward to working with our new chairwoman, Angela Snyder, and her slate of officers which includes Jim Vaccaro as first vice chairman, newly appointed Second Vice Chairman Bill Moss and Immediate Past Chairman Jerry Reeves.

With this changing of the guard we bid an appreciative farewell to former chairs Kevin Cummings and Stew McClure and directors John Alexander, Paul Fitzgerald, James Genoy, Thomas Holt, James Hughes,

8

New Jersey Banker

Henry Ingrassia, Thomas Kemly, Nicolas Miceli, Michael Nardo, Robert Rey and Peter Schoberl as they all step down from our board of directors. Our members owe a great debt of gratitude to these bankers for their service to the association and the industry.

While this represents a big turnover on our board and these great leaders will be missed, we’re fortunate to have a strong team of new directors take their place. We extend a warm welcome to Christopher Maher, Christopher Martin, Thomas Shara, Stanley Koreyva, Gerard Banmiller, Thomas Lupo, Nicholas Tedesco, Frederick Bertoldo and Michael O’Brien as they join our board. We thank them for their willingness to serve.

During the annual conference each year I have the honor of presenting the Service Anniversary Awards and the Community Service Awards. The Service Anniversary Awards recognize both institutions and individuals that are celebrating milestone anniversaries. For institutions, this year we recognized Millville Bank on the occasion of its 75th anniversary. For individuals we recognized Gerard Banmiller of 1st Colonial Community Bank, celebrating 45 years; Daniel Crowley and Detlef Felschow of Roselle Savings Bank; and Joseph Lukacs Jr. of Magyar Bank, all celebrating 40 years of service. Congratulations to all for their long and distinguished service. It’s not unusual for us to celebrate milestone anniversaries like this each year. There’s something special about a career in banking, once people start, they stay for their entire careers.

The Community Service Awards were started by the NJBankers Public Relations and Marketing Committee as a way to recognize the many civic and charitable activities that are conducted by member banks throughout the year. Members are invited to share some of their community service activities and then an independent group of judges from the New Jersey Chapter of the Public Relations Society of America reviews the entries and select those for special recognition. We recognize institutions in different deposit size categories. This year the institutions recognized were Metuchen Savings Bank

(below $300 million), Century Savings Bank ($300 million to $500 million), Unity Bank ($500 million to $999 million), OceanFirst Bank ($1 billion to $2 billion), Fulton Bank of New Jersey ($2 billion to $5 billion), Investors Bank ($5 billion) and TD Bank (large national bank category). New Jersey banks do an outstanding job of supporting their communities through sponsorships, charitable donations and volunteerism.

NJBankers prepares a summary of all of the programs that are submitted and we share that with legislators and the media to promote the many ways that banks are serving their communities.

As we head into summer many of our banks will be out there in their local communities providing a host of services. NJBankers will be conducting its successful Habitat for Humanity Bankers Build Program for the fourth consecutive year. This summer we’ll be working with Coastal Habitat for Humanity again in Monmouth County but also working for the first time with the Morris County Habitat group. If it’s like the past three years, we expect 20 or so banks and over 200 bankers to be out in the community swinging their hammers. It’s another great example of our banker’s commitment to service.

In closing, I’d like to take this opportunity to recognize a very special banker who’s retiring in May. Norman Beatty has been a passionate advocate for banking in New Jersey and at the national level for over thirty three years. Norm has successfully led First Hope Bank to continued growth and success under his tenure. During that time he has served both the New Jersey Bankers Association and the American Bankers Association in many roles and capacities, including former chairman of NJBankers and former director of ABA. I feel privileged to have had the opportunity to work with Norm and get to know him and his wife Agnes. On behalf of bankers everywhere, thank you Norm for your service and best wishes to you and Agnes in retirement!

■ John E. McWeeney Jr. is president and CEO of the New Jersey Bankers Association and can be reached at jmcweeney@njbankers.com.

Summer 2016

THE POWER OF AN ADVANCE

One advance can help fund hundreds of neighborhood needs.

FHLBNY advances are a reliable liquidity source for our member lenders to finance home mortgage, small business, and economic development activities.

Magyar Bank and Metuchen Savings Bank used FHLBNY advances to partake in a loan consortium project from TICIC, Inc., a wholly owned subsidiary of the New Jersey Bankers Association. Funds were used to convert a brownfield site into Berry Street Commons, a multifamily rental apartment complex in Franklin Township, New Jersey. The four-story, 94-unit housing project revitalized the neighborhood and increased the availability of high-quality affordable housing in Somerset County.

Contact us to see how the power of an advance can improve your community.

101 Park Avenue, New York, NY 10178 | (212) 441- 6700 | www.fhlbny.com Note: The Federal Home Loan Bank of New York uses the word “advances� to refer to the loans it provides to our member lenders.

Politics and Policy

Three-Card Monte

By Michael P. Affuso, Esq.

F

or your summer reading pleasure, I’d like to present you with three stories about three bets being placed that directly affect you.

LONG SHOT: NORTH JERSEY CASINOS

One of the many plagues that has beset Atlantic City is the continued growth of out of state casinos. Where once Atlantic City gaming was the only show on the East Coast, casinos have sprung up in neighboring Delaware, Pennsylvania, New York and Connecticut. The diffusion of the gambling dollar has manifested itself in the shrinking Atlantic City Michael P. Affuso economy. As a means of stemming the North Executive Vice President/ Director of Government Relations Jersey gaming dollar from moving to New NJBankers York and Pennsylvania, a referendum is on the ballot to allow for casino gaming in Northern New Jersey.

While some see this as a panacea to staunching the flow of gaming dollars outside of New Jersey (Atlantic City will get a revenue stream from the North Jersey casino), others are not so sure. For example, Jersey City Mayor Steve Fulop has embraced and then stated reservations about a casino in his city. A visit to Atlantic City’s Boardwalk casinos on any weeknight may be instructive. Ask any banker who attended BankHorizons over the past few years if they believe that a North Jersey casino to be a worthy endeavor. If supported by voters (and that’s a big if) North Jersey casinos could be the Xanadu of the next decade.

As a means of stemming the North Jersey gaming dollar from moving to New York and Pennsylvania, a referendum is on the ballot to allow for casino gaming in Northern New Jersey.

MONEY SHOT: QUARTERLY PENSION PAYMENTS Another ballot initiative in November will be a move to force the state to make quarterly pension payments. That sounds reasonable enough. You owe money, stagger it out in quarterly payments instead of a balloon at year end and you’ll reap some additional market performance as well as not having to choke on a huge one-time payment. Not so simple. In BIG round numbers this is what we face. The current and future year state budget is around $34 billion. The state is scheduled to make around a $2 billion dollar pension payment. The actual necessary payment is nearly $4 billion. The amendment would force the state to

10 New Jersey Banker

pay the additional $2 billion. Proponents contend rightly that the payment is due and has not been paid in full in nearly two decades. The amendment would force the state’s hand. Opponents contend that the state would be straight jacketed from other worthy government functions. Either way nobody is saying where the other $2 billion will come from whether it is forced to be paid by law or by moral obligation.

The politics are even murkier. The main proponent of the amendment is the New Jersey Education Association (NJEA). In the past they have been willing to spend political dollars to elect supporters. Fair enough – that’s the game. They are even more likely to spend a small fortune on this initiative – also fair game. But what happens when or if they lose? Ballot questions are often the least voted upon issue on the ballot. What happens if a “Vote No” campaign occurs in South Jersey in response to the casino referendum and this gets piggy backed into it?

What if a Northern Urban Mayor realizes that the state might “find” the additional $2 billion were this to pass in the form of reduced state aid to cities? Finally, what would happen to the NJEA’s clout if the initiative were to go down strongly in a legislative district where legislators were heretofore supportive of the NJEA? Wouldn’t that give those legislators ample air-cover to cast their lot in the future against the NJEA and with their constituents since the issue was so distilled and so resoundingly defeated. High stakes indeed.

SURE SHOT New Jersey has nearly 55,000 properties currently in foreclosure awaiting judicial action. Approximately 15,000 are properties where NJBankers members are the plaintiff. Much ink has been spilled about the inefficiency of the judiciary and the sheriffs – in most cases the words have been tempered from reality. However, there is one piece that is critical, that bankers can actually and primarily effect – your attorneys. According to the Administrative Office of the Courts, 33 percent of foreclosure filings are returned for being incomplete. That means only 66 percent of filings are being prepared with the skill and diligence to ensure a day in court. Usually these filings are not very complex; indeed they are often prepared by paralegals. Up until a recent change, these filings were returned and not dismissed, attorneys then often blamed the courts during a client status inquiry. The client had no idea of the return and would only know that something was amiss if the case was dismissed. This is about to change. The courts are going to begin to dismiss incomplete filings. This means you will have to pay to refile the case.

Attorneys often blamed the court for their own failures in discussions with clients. Graded on the whole, they received a “D.” Would you go to a doctor, dentist, architect or accountant who could perform the simplest of tasks correctly only 66 percent of the time? They bet you’d never find out – I guess they were wrong. I’ll bet this is even malpractice – but don’t take it from me – I’m a “C” student.

■ Michael Affuso, Esq. is executive vice president and director of government relations for NJBankers. He can be reached at maffuso@njbankers.com.

Summer 2016

Upcoming Events Sept. 27, 2016

Enterprise Risk Management Conference APA Hotel Woodbridge, Iselin Oct. 13, 2016

BSA 101: BSA/AML Compliance Management Hotel Woodbridge at Metropark, Iselin Oct. 14, 2016

Advanced BSA: BSA/AML “Hot Topics” Seminar Hotel Woodbridge at Metropark, Iselin Oct. 20, 2016

Annual Human Resources Conference Caesars Resort, Atlantic City Nov. 1, 2016

Annual Senior Management Conference Borgata Hotel and Casino, Atlantic City Nov. 8, 2016

Operations and Technology Roundtable Crowne Plaza Monroe, Monroe Township Nov. 15, 2016

CFO Conference W/FMS, New York/New Jersey Hotel Woodbridge at Metropark, Iselin

There’s a Reason Leading Banks Call on Mercadien Responsive, forward-thinking, relationship-driven, we provide the answers they need and service they trust.

Regulatory Compliance Bank Secrecy Act Reviews

Dec. 2, 2016

BankHorizons 2016

Outsourced Internal Audits

Ocean Place Hotel, Long Branch

Enterprise Risk Management

May 17, 2017

Information Technology Audits

113th Annual Conference The Breakers, Palm Beach, Florida

NJBankers Leadership Academy See njbankers.com for details.

Sept. 15, 2016

Directors College with FDIC ABA Hotel Woodbridge, Iselin Classes Begin Sept. 28, 2016

Emerging Leaders Curriculum

Leading by example.

Salvatore Zerilli, CPA, CAMS szerilli@mercadien.com

Certified Public Accountants • Consultants • Technology • Wealth Management Mercadien.com | 609.689.9700

Summer 2016 New Jersey Banker

11

Behind the Teller Line

From Teller Line to Transaction Pod THE CREATION OF CSBK – YOUR FOREVER BANK

C

SBK, or Clifton Savings Bank, was founded in the Botany Village section of Clifton in 1928. Over the past 80-plus years, the bank grew and prospered, serving residents of Clifton and neighboring communities primarily by offering two core banking products typical for traditional savings banks: certificates of deposit and residential mortgages.

In 2013, the bank began its next step: the transition to a fully public company. At the same time, CSBK saw a change at the helm, as longtime Chairman John A. Celentano Jr. and President Walter Celuch simultaneously retired after many years of service. The board of directors appointed Paul M. Aguggia to the position of chairman, president and CEO. Aguggia had served as the bank’s chief legal counsel for more than a decade and was well known to its constituents.

Under the direction of Aguggia, a series of changes were put into motion to enhance the bank’s operations, product offerings and market positioning. As part of that process, Tricia Hrotko was appointed chief revenue officer and challenged with driving organic growth.

Working in concert with retail banking, operations, information technology, human resources, compliance and risk management, the CSBK team created a roadmap to transform the bank to compete more effectively in today’s marketplace.

The first order of business was to identify Clifton Savings Bank’s inherent strengths, and leverage those strengths to new audiences.

Clifton Savings partnered with a firm to help them through the brand definition phase, with the end results including: a recommendation to rely more heavily on CSBK (the company stock ticker) as the primary moniker; a well-defined, differentiated market position; and a new corporate look that included a refreshed CSBK logo and forwardthinking tagline: “Your Forever Bank.”

The tagline represents CSBK’s desire to expand beyond its core banking business to provide products customers need on an ongoing basis, and offerings that support individuals throughout various life stages.

To support this new approach, a significant change in the Bank’s core operations was undertaken, including a transition to a more robust processing vendor and an overhaul of the bank’s deposit products. New features were added, and products that were no longer relevant were eliminated. The bank also developed a more comprehensive product offering for businesses.

Additionally, CSBK launched its new digital banking platform, including a banking app for mobile devices that, like the updated logo, portrayed the bank’s more modern persona. CSBK mobile’s attractive interface and easy-to-use design set it apart from other mobile banking apps – it even has some capabilities that many “big bank” banking apps do not have.

Outwardly, the updated brand was introduced first to existing customers and then to the general public. The bank’s website was updated, a monthly newsletter introduced and a self-scheduling appointment banking feature launched.

12 New Jersey Banker

Summer 2016

But perhaps the most crucial aspect of the process was the transformation of the customer experience in the bank’s offices. With CSBK’s rebrand came the realization that the traditional, “center layout” style design also needed to be reimagined, with consideration given to the evolving nature of banking visits: fewer transactions and more customized, advice- or consultationdriven interactions.

CSBK decided to build a new banking center prototype from scratch, and selected the city of Hoboken as the initial market.

Opened in early 2016, the CSBK Hoboken Banking Center is unlike any CSBK has operated previously. Gone are the glass-encased teller lines and mundane colored walls. The open-concept banking center exudes a professional but friendly atmosphere where visitors feel relaxed and comfortable.

The walls of CSBK’s Hoboken office feature local area photos transferred into wall-sized art, and oversized digital screens displaying dynamic content such as news, weather and top Twitter trends interspersed with CSBK product and service messages.

The animations, about 20 seconds in length, showcase a variety of CSBK’s finest assets: digital banking, including mobile check deposit and photo bill-pay, home mortgages and the CSBK brand positioning. The digital screens are the focal point of the banking center – visible inside and outside.

The “teller line” was replaced with a transaction pod – a walk-up kiosk designed to make customers feel welcome and allow the CSBK Client Service Specialists to deliver a more direct, personalized experience. The opposite end of the banking center has a coffee station and comfortable chairs should a longer conversation ensue.

The final aspect of the transformation was the rethinking of how CSBK employees operate in the new space. In the past, job functions were divided between “transactions” conducted by tellers and “new accounts and services” conducted by customer service representatives. CSBK combined both functions, with all employees provided with the training and tools to address any need a customer might have – thus more efficiently serving the bank’s clients.

Soon, CSBK also will join the Montclair community, where the bank is on track to open a banking center in the Valley and Bloom development later this year. The storefront space will be outfitted in a similar fashion as its Hoboken counterpart.

Despite the bank’s revamp, community involvement remains an important aspect of CSBK’s culture. The bank is intimately involved in each community in which it operates through sponsorships, donations to local organizations, high school scholarships and overall community development.

■

THE

SECRET

IS OUT! Today’s banks are searching everywhere for a technology partner that does business the same way they do—a commitment to innovation and a focus on service. Well, look no further than CSI. Our innovative solutions and customer-centric approach are the secret combination you’ve been waiting for.

Summer 2016 New Jersey Banker

13

Feature

Succession Planning 2.0 BUILDING THE FUTURE LEADERS OF BANKING

By Nicholas DeMedio

S

uccession planning has resonated from the board room throughout every level of the organization. Conceptually, we would be hard pressed to find a director or executive who does not see the advantages of formalizing a program. As with most initiatives though, the devil is in the details, and execution remains as the key step in the process. So why does succession planning still mystify us in defining and aligning our talent?

Succession plans are typically developed in two ways. Emergency succession is the first method, where an executive leaves the organization unexpectedly and we must determine an acting replacement until the permanent successor can be determined. Longterm succession is the second method, where a plan is designed by the board of directors, typically through the compensation comNicholas DeMedio mittee, for the executive team, to plan for the natural attrition of key leaders. With both types of plans, it is not uncommon to see an unnamed successor, where an external search is required. While I believe outside hires are good for organizations as they may allow you to upgrade a position and bring in diverse talent with new thoughts and possibly best practices from another organization, the statistics are overwhelming in the advantage of promoting internal talent. In 2012, the University of Pennsylvania’s Wharton School of Business published the results of a study performed by Assistant Professor Matthew Bidwell. In this study, Bidwell determined that the termination rate of external hires was 61 percent greater than internal hires. He further noted that external hires take up to two years to achieve the same performance review rating as internal hires. This is due to the often underestimated amount of time it takes new hires to understand and apply the corporate culture. Therefore, the most successful succession planning is an across-the-board initiative where leadership designs, updates and monitors the plan, and employees at all levels take an active role in their professional development.

Succession plans are meant to be evolutionary and not left on the shelf for review when requested by a regulator or auditor. Organizations need to think beyond the C-suite when developing their plan.

The board should take an active role in strategizing for the successor to the CEO, which often comes from the executive ranks. Then what happens to back-fill the position vacated by the CEO’s successor?

These positions are often overlooked as it is not financially practical to retain a No. 2 in each department who can immediately assume the vacated role. As of the date of this article, the FDIC maintains records of 91 banks domiciled in New Jersey, with the number shrinking. Out of these banks, 58 percent have total assets less than $500 million and 74 percent have total assets under $1 billion. Based on the March 31, 2016, Call Reports, these organizations have an aver-

14 New Jersey Banker

age full-time headcount of 73 employees; this average is much less at the lower end of the asset range. With shrinking margins and higher operating costs, salary expenses need to be adequately managed. So how can an organization balance succession and maintain expenses?

The most effective way is to focus on the development of internal staff. In addition to the cultural and performance advantages previously noted from the Wharton School’s study, Bidwell further determined that external hires demand an 18 percent higher salary than that of an internal successor. This increase not only hits the bottom line, but could also cause internal equity issues with current staff. The Human Resources Department works hard to safeguard employee compensation information; however, breakdowns seem to occur outside of their control, which leads to disgruntled employees.

As the organization looks to develop its top performers for inclusion into the succession plan, the first and most important step is to assess the quality of talent currently in-house. This is best done through a combination of an internal review and an external review. The internal assessment should include a review of the employee’s performance review records, as well as an assessment of his/ her technical abilities. Additionally, the organization should review the employee’s performance as a member of any internal, cross-departmental committees, such as the loan/credit committee, compliance committee, etc. In conjunction with this internal review, it is also helpful to consider the use of outside assessment tools. This could include engaging a third-party to conduct a 360 degree review of the employee. 360 degree reviews allow the organization to gain confidential insight from multiple stakeholders involved with the employee. These include the employee’s direct supervisor, his/her peers and his/her direct reports (if applicable). The employee also provides a self assessment as part of the 360 degree review. An independent third-party interview is also an important tool in conducting the assessment.

Organizations should consider engaging a firm which specializes in talent management within the industry. Besides being skilled interviewers and assessors of talent, these organizations maintain industry benchmarks of successful peer organizations to which the employee can then be compared. Current performance is a rather easy attribute to assess provided the organization has a performance management system that aligns with corporate goals and assesses the employee’s performance against those goals as it relates to his or her functional area. The larger and most important attribute to gauge is the employee’s potential. The above methods are the best ways in which to accomplish this goal. As part of the internal and external assessment, the organization should also determine the employee’s career desires. While the employee may have the skills and potential to assume a larger role within the organization, if their desire is lacking, they will undoubtedly fail. The most elementary example of this concept is where a great individual performer is thrust into a leadership

Summer 2016

role. Even the best training cannot make an individual a strong leader if they lack the desire.

After compiling the above data on the employee, we can then determine what, if any, skill gaps exist for which we will need to supplement to prepare him or her for career progression and inclusion in the succession plan. Gaps in regard to functional training are the easiest to recognize and supplement. There are numerous organizations that provide functional training for the various disciplines within the bank. The ability to lead is a skill set which employees should continually aim to evolve. Leadership development programs are highly impactful for an employee’s career development. A mentorship program is the most impactful element of these programs. The best leaders often speak of those that have mentored them throughout their career and the valuable lessons they have gained.

As the above development programs are an enterprise-wide initiative and not one that can be started as the executive is about to retire, many banks have used mergers/acquisitions as a way to achieve succession. This method is often considered in a situation where the executive or executive team is approaching retirement at virtually the same time. I can recall one such example with a client where two banks came together as the CEO announced his retirement within one year. The larger bank did not have a successor in place and considered a dual track approach in conducting an external search and looking for merger partners where the smaller bank’s management

team was to assume most of the executive roles within the new bank.

The new CEO ultimately blended the two management teams to best position the top talent and to allow for diversity among the group.

Another common approach to CEO succession is to hire/promote an individual to the position of president where he/she oversees some functional areas and shadows the exiting CEO while he/she nears retirement. This approach works very well from a cultural integration standpoint and provides the board with comfort in the new successor, especially if he/she has come from the outside and the current CEO has been long tenured. It is best to determine early when the exiting CEO will retire as an open-ended transition date could cause confusion among the executive team and frustration from the new president in his/her ability to incorporate changes within the organization.

With the decreased number of new hires into our industry, ensuring adequate depth of talent is pivotal for organizations to continue to thrive. Like any corporate initiative, the succession plan must be monitored and evolve as the organization evolves. Accountability at all levels must be in place for the plan to receive the same level of attention and urgency as other strategic initiatives.

■ Nicholas DeMedio is a senior consultant at Mosteller & Assoc., a human resources professional firm with a focus in executive search, compensation and talent management. DeMedio can be reached at (610) 779-3870 and/or nick@ mostellerhr.com. Please also visit www.mostellerhr.com for more information.

Guidance to help you navigate the maze of OCC vendor management regulations.

The Office of the Comptroller of the Currency has strict standards regarding vendor management. Our banking industry specialists understand the increased burden this places on financial institutions and can help organizations implement guidelines, monitoring, and oversight.

Connect with us: bakertilly.com/industries/banking

Sign up to receive timely alerts and articles: bakertilly.com/insights/subscribe Baker Tilly refers to Baker Tilly Virchow Krause, LLP, an independently owned and managed member of Baker Tilly International. © 2016 Baker Tilly Virchow Krause, LLP

Summer 2016 New Jersey Banker

15

NJBankers Events

NJBankers 112th Annual Conference This year’s Annual Conference in Scottsdale, Arizona, drew numerous representatives from 59 bank and more than 70 associate members. By all accounts, it was another successful conference which combined the beautiful landscape, a top notch resort and professional development sessions led by dynamic speakers.

■

Incoming Chairwoman Angela Snyder addresses the attendees and presents her platform for the next fiscal year.

This year’s Annual Conference drew numerous representatives from 59 bank and more than 70 associate members.

Gerald Reeves, president and CEO, Sturdy Savings Bank and immediate former chairman of NJBankers, welcomes Angela Snyder, chairwoman and CEO of Fulton Bank of New Jersey, who was sworn in as the 2016-2017 NJBankers chairwoman at the NJBankers Annual Conference.

In addition, James Vaccaro, chairman, president and CEO, Manasquan Bank, assumed office as first vice chairman. William Moss, president and CEO, Two River Community Bank was inducted as the association’s second vice chairman.

John McWeeney presented the 2016 Forrey-Gallman Award to Jay Ford, president and CEO of Crest Savings Bank, during the Second General Session. The award is bestowed upon members who have demonstrated long-term outstanding service to the New Jersey banking industry.

16 New Jersey Banker

The Forrey-Gallman Award is bestowed upon members who have demonstrated long-term outstanding service to the New Jersey banking industry. It is named for Robert C. Forrey and Emil A. Gallman, long-time chief executive officers of the New Jersey Bankers Association and the New Jersey Savings League, respectively, who inspired association members with their leadership in assuring that members were well represented in the areas of government relations, public relations and educational opportunities.

On behalf of the NJBankers Board of Directors, President and CEO John E. McWeeney Jr. presented the 2016 Forrey-Gallman Award to Jay M. Ford, president and CEO of Crest Savings Bank.

Ford has worked in the financial services industry in southern New Jersey for over 45 years. He is a director of the Federal Home Loan Bank of New York, where he serves as chair of the Audit Committee, vice chair of the Strategic Planning Committee and a member of the Executive Committee. He was the 200304 chairman of the New Jersey League of Community Bankers.

In 1998-1999 he chaired the Community Bank Council of the Federal Reserve Bank of Philadelphia. He also served on the board of directors of America’s Community Bankers and on ACB’s Audit and Finance & Investment committees. In December 2000, he was appointed by Gov. Christine Todd Whitman to the New Jersey Department of Banking & Insurance Study Commission.

We congratulate Jay and thank him for his service to the banking industry.

Summer 2016

Photos : Don Christensen, CTC Communications; Dave Gruol, David Gruol Photography

2016 FORREY-GALLMAN AWARD

Service Awards were presented to Joe Lukacs (40 years), Magyar Bank; Detlef Felschow (40 years) and Daniel Crowley (40 years), Roselle Savings Bank; and Gerard Banmiller (45 years) of 1st Colonial Community Bank for their years of service to the banking industry by John McWeeney. (Not present, OceanFirst Bank.)

Virginia Heyburn, Fiserv, has spoken for NJBankers at previous conferences and joined us this year to discuss “Game Changers You Need to Know Now.”

THE NEW JERSEY BANKERS ASSOCIATION 2016 – 2017 BOARD OF DIRECTORS Chairwoman Angela Snyder, Chairwoman/CEO Fulton Bank of New Jersey First Vice Chairman James Vaccaro, Chairman/President/CEO Manasquan Bank Second Vice Chairman William Moss, President/CEO Two River Community Bank

Attendees of the conference visited with service providers in the bustling Market Showplace to learn about the products and solutions which will benefit members.

Immediate Former Chairman Gerald Reeves, President/CEO, Sturdy Savings Bank President/CEO John McWeeney Jr., NJBankers

The presentation of colors by the Marine Corp Honor Guard. The National Anthem was performed by The University of Arizona Pep Band (go Wildcats).

Gerald L. Reeves presents his outgoing chairman remarks to the attendees of the Annual Conference. Reeves served as chairman of the Association for two years.

Keynote speaker Stuart Rothenberg, editor and publisher of The Rothenberg-Gonzales Political Report, columnist for Roll Call and political analyst, presented “Politics NOW.”

Kelly McDonald, McDonald Marketing, wowed attendees with her presentation “Changing Demographics & How This Affects Your Business, Today & Tomorrow.” She later signed her book in the Market Showplace.

Ben Plotkin, KBW, A Stifel Company, focused on understanding non-bank competitors.

Gerard Banmiller President/CEO, 1st Colonial Community Bank Frederick Bertoldo EVP/Regional President, Wells Fargo Bank, NA Louis Anthony Costantino Managing Director, Industry Manager, JP Morgan Chase Edward Dietzler President, Bank of Princeton John Fitzgerald President/CEO, Magyar Bank David Hemple President/CEO, Century Savings Bank Stanley Koreyva EVP/COO, Amboy Bank Anthony Labozzetta President/CEO, Sussex Bank Thomas Lupo President/CEO, Regal Bank Christopher Maher President/CEO, OceanFirst Bank Christopher Martin Chairman/President/CEO, The Provident Bank Peter Michelotti President/CEO, Community Bank of Bergen County Craig Montanaro President/CEO, Kearny Bank Michael O’Brien Senior Vice President/Market Manager, Bank of America Thomas Shara President/CEO, Lakeland Bank Kathleen Stone Senior Vice President/Senior Business Banking Executive, BB&T Nicholas Tedesco President/CEO, GSL Savings Bank

Summer 2016 New Jersey Banker

17

NJBankers Events continued from previous page

President/CEO John McWeeney presented Gerald L. Reeves with an outgoing chairman plaque, thanking him for his service over the past two years.

John McWeeney Jr. presents his President’s Report to the members.

Michael Barrack, Accume Partners, discussed cybersecurity and the increasing threat to banks.

Dr. Gary Wagner, Federal Reserve Bank of Philadelphia, presented a regional economic update.

Scott Hildenbrand, Sandler O’Neill + Partners, discussed “Balance Sheet Management Strategies.”

Banking Fundamentals

INSIGHT

Rob Nichols, president and CEO, ABA, presented a view from Washington.

FEEDBACK

Banking Education for a New Generation of Bankers This innovative new suite of online courses teaches the principles of banking in an interactive and collaborative format.

Designed for new bankers, the three courses leverage a virtual environment to offer the latest in online coursework, multi-media resources and peer collaboration.

A dynamic learning experience—destined to become a classic. Group discounts and private classes are available.

%

SHARE

PROGRESS

DISCOVER SEARCH

Enroll your new bankers at aba.com/BankFundamentals

18 New Jersey Banker

Summer 2016

THANKS TO OUR SPONSORS Many thanks to NJBankers’ top sponsors of 2015–2016!

Congratulations to the members who received special recognition for the NJBankers Community Service Award program at the Annual Conference! From left: Katherine Liseno, Metuchen Savings Bank; David Hemple, Century Savings Bank; James Hughes, Unity Bank; Angela Snyder, Fulton Bank of New Jersey; William Cosgrove, Investors Bank; Nicholas Miceli, TD Bank; and John McWeeney, who presented the awards.

COMMUNITY SERVICE AWARDS Congratulations to the following members who received special recognition at the Annual Conference: Banks with Deposits Below $300M Metuchen Savings Bank Banks with Deposits Between $300M and $500M Century Savings Bank Banks with Deposits Between $500M and $999M Unity Bank Banks with Deposits Between $1B and $2B OceanFirst Bank Banks with Deposits between $2B and $5B Fulton Bank of New Jersey Banks with Deposits over $5B Investors Bank National Banks TDBank The judges were also asked to choose “silver” participants since they found it difficult to choose just one entry per category.

Those receiving recognition include: Banks with Deposits Below $300M Highlands State Bank Banks with Deposits Between $300M and $500M Regal Bank and Roselle Savings Bank Banks with Deposits Between $500M and $999M Newfield National Bank Banks with Deposits Between $1B and $2B Oritani Bank Banks with Deposits between $2B and $5B Peapack-Gladstone Bank Banks with Deposits over $5B Valley National Bank

For more information about sponsorships, please contact Jenn Zorn, senior vice president, NJBankers, at jzorn@njbankers.com.

Summer 2016 New Jersey Banker

19

Feature

Liquidity Management in a Changing Environment

By David Shadix

T

he topic of liquidity management as it pertains to depository institution balance sheets inherently involves broader discussions around the regulatory environment, interest rate environment, and more generally, the margin headwinds facing the industry. The recent publication of the proposed Net Stable Funding Ratio (NSFR), to apply generally to institutions with over $250 billion in standard form and more than $50 billion in a modified form, marks the latest of the Dodd-Frank regulatory rules regarding liquidity to be drafted. This new calculation contains elements that reinforce the fierce deposit competition from these larger institutions toward fully FDIC-insured stable retail deposits that began with implementation of the Liquidity Coverage Ratio (LCR). As these stable retail deposits are the primary funding vehicle a typical community banking institution is built upon, this changes the opportunity set as further discussed below. And of course, the persistence of a low-interest rate environment, and one which nevertheless requires assessment of risks to gradual or sharp moves up as the Fed attempts normalization, presents continued challenges in managing the balance between liquidity and margin.

The following sections will explore these dimensions in more detail as we look at potential strategies for optimizing both funding and securities portfolios under the theme of liquidity management.

LCR AND NSFR: OPPORTUNITIES AND CHALLENGES For institutions with more than $50 billion in assets that are subject to the LCR calculation, drastically different LCR-prescribed runoff rates i) between stable retail deposits and other retail deposits and ii) between operational deposits and nonoperational deposits has motivated a dramatic rotation in focus towards funding that is treated more favorably, stable retail deposits and operational deposits. The effect is visible through both reported data and constant commentary from the large money center banks on earnings calls.

“While we’re on the balance sheet, you can see on the callouts on the page that on a spot basis, our balance sheet is down $160 billion year-to-date and an incremental $32 billion this quarter, as we reduced non-operating deposits by over $150 billion, exceeding our commitment. Total deposits are only down $90 billion, reflecting growth in more stable balances, particularly consumer.”

— JPMorgan Third Quarter 2015 Earnings Call The ultimate motivation behind this is the required amount of High Quality Liquid Assets (HQLA) that must be held against the stressed net outflow calculated, of which deposit

20 New Jersey Banker

runoff amounts are a main driver. A lower amount of stable retail deposits means more outflow and thus more HQLA, which are often low yielding assets. This substantive difference in leverage capability given the type of deposit leads to both liquidity challenges and opportunity for non-LCR institutions. As larger banks focus on trying to rotate their deposits towards stable retail deposits, competition has/will become more fierce, not only as a matter of pricing, but also potentially via the advantages in the technology platform (mobile banking) and market budgets (more advertising to consumers).

“We added over 1 million households since last year, and our active mobile customer base was up 19 percent.”

— JPMorgan First Quarter 2016 Earnings Call

“[W]e added 910,000 net new mobile users this quarter.

We now have nearly 20 million active users and deposit transactions from mobile devices now represent 16 percent of deposit transactions. Interestingly, this quarter we added more new net users than any quarter in the last three years […]”

— Bank of America First Quarter 2016 Earnings Call

“Customers are increasingly using our award-winning digital offerings with digital active customers up 6 percent from a year ago, including 17.7 million mobile active users with continued double-digit growth in mobile adoption.”

— Wells Fargo First Quarter 2016 Earnings Call

The opportunity is also evident. These other retail and nonoperational deposits are leaving larger institutions where they are undesired and looking for new homes, already migrating to smaller institutions. These opportunities with larger loan customers, municipalities and treasury management clients can be substantive in driving core funding at reasonable rates from constituents where cross selling and enhanced profitability is possible.

While these LCR-related effects have been at play to some degree for many quarters now, the proposed NSFR calculation, however, is new and will likely reinforce these competitive dynamics, while potentially altering incentives around some off-balance sheet

Summer 2016

Example: Selling Into Low Bid Yields Sell Side Description

Maturity

Cpn

Book Price

Mkt Price

Curr

Mkt Val

Gain Loss

Book

Market

-200

-100

Base

+100

+200

+300

+400

10Yr Agency MBS

10-22

3.000

103.45

104.13

$10,000

$10,413

$68,000

1.13%

0.79%

1.5

1.6

2.0

2.3

2.3

2.4

2.4

Bullet Agency

06-18

4.750

106.86

108.31

$10,000

$10,831

$145,000

1.49%

0.84%

2.2

2.2

2.2

2.2

2.2

2.2

2.2

AA BQ Muni

05-26

4.000

112.69

115.34

$10,000

$11,534

$265,000

2.43%

2.13%

9.0

9.0

9.0

9.0

9.0

10.0

10.0

$30,000

$32,778

$477,986

1.70%

1.28%

4.2

4.3

4.4

4.5

4.5

4.9

4.9

Sell Side Total:

Yields

Average Lives (in years)

Buy Side Description

Maturity

Cpn

Mkt Price

Curr

Mkt Val

Market

-200

-100

Base

+100

+200

+300

+400

20y AA BQ Muni

04-36

2.550

100.00

$16,389

$16,389

3.84%

20.0

20.0

20.0

20.0

20.0

20.0

20.0

15y AA BQ Muni

04-31

2.050

100.00

$16,389

$16,389

3.07%

15.0

15.0

15.0

15.0

15.0

15.0

15.0

$32,778

$32,778

3.46%

17.5

17.5

17.5

17.5

17.5

17.5

17.5

13.3

13.2

13.1

13.0

13.0

12.6

12.6

Buy Side Total: Net

$14

Yields

$477,986

and hedging activities. The structure of the NSFR calculation is that an institution applies stability weightings to its capital instruments, deposits, and wholesale liabilities to arrive at the Available Stable Funding amount (ASF), and that amount must be greater than the overall Required Stable Funding (RSF) calculated again by applying liquidity weightings against the asset base. The interpretation would be that for a given asset type (based on credit quality, tenor, counterparty type, market characteristics and encumbrance), there is a required stable funding amount.

Insight into the relative liquidity value that regulators assign to various assets and liabilities can be gained by studying the ASF and RSF factors. A few interesting notes on this front would be: i.

Available Stable Funding (Equity and Liabilities) a. Stable retail deposits, regardless of maturity or collateralization, are assigned a 95 percent ASF factor, lower only than regulatory capital instruments and wholesale funding with a remaining maturity greater than one year. b. Disincentive to pairing short-term funding from the FHLB and entering into a pay fixed/receive floating interest rate swap for subject institutions as liabilities with less than six months to maturity receive a 0 percent ASF factor. ii. Required Stable Funding (Assets) a. General Obligation municipals are assigned a 50 percent RSF factor, the same factor assigned to level 2B liquid assets (certain corporates and equities), while revenue bonds receive a 85 percent RSF factor (assuming remaining maturity is longer than one year). b. Committed liquidity facilities are assigned a 100 percent RSF factor to the degree funds can be drawn in the next year, while, unconditionally cancelable unfunded commitments receive a 0 percent RSF, which could perhaps push subject institutions further towards inserting unconditionally cancelable language in more of these contracts to the extent possible as they are renewed.

Average Lives (in years)

Again, this is not a comprehensive review of each piece of the NSFR calculation, but rather a highlighting of certain wrinkles in the rule that could be of interest in understanding how subject institutions might operate in optimizing the balance sheet under this framework.

TRANSACTIONS TO ACHIEVE OR ENHANCE LIQUIDITY POSITION With continued compression of margin and competition around core funding, capital allocation becomes increasingly important. Strategies involving the AFS securities portfolio would include assessing bid yields available in certain securities classes compared to book yields available elsewhere, whether securities or loans, to optimize capital allocation. Trends include selling 10 year amortizing MBS, SBAs, and bullet agencies with very low bid yields, especially those that have rolled down the curve, with reinvestment into longer call protected taxable structures, municipals or purchased loans. While the example below is balanced to reinvest the full amount of liquidity generated on sell side execution, note that the strategy can be structured to balance dollars of income, thus freeing up liquidity (see chart above).

The same general theme can be applied to a broader delever/ relever transaction against wholesale funding positions, using gains from sales of AFS securities to offset prepayment penalties on FHLB advances or repurchase agreements, resetting the balance sheet away from nonstrategic funding positions while improving profitability. Many of these wholesale liabilities represent some of the higher costs remaining in the liability structure and the best/largest opportunity to lower the overall cost of funds, and the current flatness in the yield curve improves the math on the strategy.

In the example on the following page, a negative 21-basispoint spread is removed from the balance sheet at no gain/loss continued on next page

Summer 2016 New Jersey Banker

21

Feature continued from previous page Example: Delever/Relever Strategy Description

Book Price

Market Price

Orig Par

Current Par

Book Value

Market Value

Gain/Loss (04/25/16)

Book Yield

Market Yield

Effective Duration

Average Life

Bullet Agency

$99.91

$101.32

$1,000,000

$1,000,000

$999,100

$1,013,165

$14,065

1.65%

1.26%

3.69

1.26

Bullet Agency

$99.80

$101.32

$1,000,000

$1,000,000

$998,000

$1,013,165

$15,165

1.68%

1.26%

3.69

1.26

Bullet Agency

$99.25

$100.85

$1,000,000

$1,000,000

$992,500

$1,008,505

$16,005

1.80%

1.47%

4.40

1.43

Bullet Agency

$100.59

$101.89

$1,000,000

$1,000,000

$1,005,900

$1,018,915

$13,015

1.57%

1.18%

3.35

1.18

Bullet Agency

$98.91

$100.21

$1,000,000

$1,000,000

$989,100

$1,002,115

$13,015

1.57%

1.19%

3.41

1.19

Treasury

$100.28

$101.48

$1,500,000

$1,500,000

$1,504,200

$1,522,148

$17,948

1.40%

1.00%

2.85

0.97

15yr Agency MBS

$100.29

$102.63

$3,500,000

$1,698,061

$1,702,985

$1,742,741

$39,756

2.37%

1.85%

2.38

1.75

15yr Agency MBS

$102.11

$104.16

$1,775,000

$1,028,588

$1,050,291

$1,071,403

$21,112

2.35%

1.77%

2.77

1.85

10yr Agency MBS

$103.37

$104.10

$1,000,000

$579,362

$598,886

$603,116

$4,229

1.51%

1.33%

1.85

1.47

Floating SBA

$110.54

$112.64

$3,000,000

$1,543,424

$1,706,101

$1,738,457

$32,356

2.10%

2.73%

0.68

2.73

Cash

$100.00

$100.00

$3,452,936

$3,452,936

$3,452,936

$3,452,936

$0

0.50%

0.50%

0.00

0.00

Total:

$19,227,936

$14,802,371

$15,000,000

$15,186,667

$186,667

1.54%

1.34%

2.14

1.20

Maturity

Description

Amount

Prepay Fee (04/21/16)

Rate

Average Life

12/6/18

Fixed Rate Hybrid

$7,500,000

($138,386)

1.98%

2.60

12/7/17

Fixed Rate Hybrid

$7,500,000

($48,271)

1.50%

1.60

Total:

$15,000,000

($186,657)

1.74%

2.10

$10

-0.21%

0.90

Difference:

Delever Results Action

Potential Reinvest Action

Summary of Transaction

Amount

Rate

Impact

Amount

Rate

Impact

Action

Amount

Spread

Monthly Income

Sell Securities

($14,802,371)

1.54%

($18,970)

New Liabilities

$15,000,000

0.50%

($6,250)

Delever

$15,000,000

-0.21%

$2,816

Unwind Advances

($15,000,000)

1.74%

$21,786

New Assets

$15,000,000

2.18%

$27,250

Relever

$15,000,000

1.68%

$21,000

1.89%

$23,816

$2,816

$21,000

Cost Comparison: Pay Fixed Interest Rate Swaps versus FHLB Term Funding Swap Details FHLB Pittsburgh Fixed Rate Advance

Swap Rate (vs. 3 Mo LIBOR)

FHLB Pittsburgh LIBOR Floater Spread

Total Borrowing Cost (Swap + Spread)

Cost Savings

3Y

1.29%

1.17%

0.03%

1.20%

9 bps

4Y

1.46%

1.29%

0.03%

1.32%

14 bps

5Y

1.64%

1.40%

0.03%

1.43%

21 bps

6Y

1.92%

1.51%

0.03%

1.54%

38 bps

7Y

2.08%

1.61%

0.03%

1.64%

44 bps

Indicative levels as of 4/26/16 using Six-Month Term LIBOR floater indexed to Three-Month LIBOR with implied spread assumed to remain over the life of the hedge.

22 New Jersey Banker

Summer 2016

Brokered CD Rates

Callable Brokered CD Rates CD Funding Pricing

Callable Brokered Deposit Funding

Term

Coupon

All In

FHLB Advance

Spread

Term

Lockout

Coupon

Int. Payment

Fee/Annum

Upfront Fee

All in Cost

3 Month

0.35%

0.45%

0.64%

-0.19%

2 Year

6 Months

0.95%

Monthly

15 BPs

30 BPs

1.10%

4 Month

0.35%

0.45%

0.65%

-0.20%

2.5 Year

6 Months

1.05%

Monthly

15 BPs

37.5 BPs

1.20%

6 Month

0.45%

0.55%

0.66%

-0.11%

3 Year

6 Months

1.15%

Monthly

15 BPs

45 BPs

1.30%

9 Month

0.50%

0.60%

0.74%

-0.14%

4 Year

6 Months

1.40%

Monthly

15 BPs

60 BPs

1.55%

1 Year

0.60%

0.70%

0.81%

-0.11%

5 Year

6 Months

1.50%

Monthly

15 BPs

75 BPs

1.65%

15 Month

0.70%

0.80%

0.90%

-0.10%

6 Year

6 Months

1.70%

Monthly

15 BPs

90 BPs

1.85%

18 Month

0.75%

0.90%

0.98%

-0.08%

7 Year

6 Months

1.85%

Monthly

15 BPs

105 BPs

2.00%

2 Year

0.90%

1.05%

1.16%

-0.11%

10 Year

6 Months

2.20%

Monthly

15 BPs

150 BPs

2.35%

2.5 Year

1.00%

1.15%

1.23%

-0.08%

15 Year

6 Months

2.80%

Monthly

12 BPs

180 BPs

2.92%

3 Year

1.10%

1.25%

1.31%

-0.06%

20 Year

6 Months

3.15%

Monthly

10 BPs

200 BPs

3.25%

3.5 Year

1.20%

1.35%

1.41%

-0.06%

4 Year

1.30%

1.45%

1.52%

-0.07%

5 Year

1.45%

1.60%

1.69%

-0.09%

6 Year

1.65%

1.80%

1.91%

-0.11%

7 Year

1.80%

1.95%

2.08%

-0.13%

10 Year

2.10%

2.25%

2.62%

-0.37%

15 Year

2.75%

2.90%

3.12%

-0.22%

20 Year

3.05%

3.20%

3.42%

-0.22%

Indicative levels as of 5/9/16

Indicative levels as of 5/9/16

on the delever execution. If executed, a relever can further drive profitability by adding new loans and/or securities funded by deposits/advances with the desired interest rate risk profile.

Furthermore, pairing short term borrowings indexed or correlated to LIBOR with a pay fixed/receive floating interest rate swap can generate additional savings on the relever execution, as illustrated in the cost comparison table on the facing page. By rolling shorter term FHLB advances and entering into a pay fixed interest rate swap, an institution can remove the term premium of the FHLB, while obtaining the advantageous accounting on the swap where the mark to market goes through Other Comprehensive Income, mitigating changes in tangible book value caused by AFS securities. From a liquidity perspective, utilizing a six-month or one-year maturity contract that resets quarterly to three monthly LIBOR, as opposed to rolling three month fixed rate contracts, can be more advantageous, and often the cost differential is minimal.

ADDITIONAL FUNDING SOURCES As loan to deposit ratios have begun to increase, a review of brokered CDs as a funding option can be assessed. They are deposits, resulting in an improved loan to deposit ratio as well as other liquidity ratios involving deposits. That said, despite the truer stability of brokered funding, constraints need to be established and honored. A little bit of everything but not all of

anything is prudent when considering allocations. Of particular interest in the brokered CD market is the very small payup between bullet and callable structures at five basis points out to the seven-year point. With term funding in the branches almost nonexistent, this becomes a great alternative to establish longer maturities while still having the right to shorten up and refinance if rates fall (see tables above).

Finally, loan sales can be an important avenue for liquidity in situations where noninterest income via gains on sales and/ or servicing revenues have particular importance, or where concentrations to certain types of exposures are approaching or are outside maximum policy ranges.

CONCLUSION It is important for a depository institution to actively monitor and manage its liquidity position to appropriately balance safety and margin, especially given the strict regulatory environment and difficult interest rate environment. As greater regulatory burden is targeted towards larger banks, exempting community banks, an awareness of the new constraints and the strategic impacts that flow from them is essential to understanding an institution’s own positioning. Just as inelastic flows into certain securities classes by the Federal Reserve’s reinvestment and through LCR effects have made diversifying securities allocations more important, similar effects are playing out on the liability side, resulting in a further need to assess a wide range of funding sources, forms and structures to achieve optimal balance sheet efficiency.

■ David Shadix, CFA, is vice president, financial institutions strategies at Stifel Fixed Income Capital Markets. He may be reached at shadixd@stifel.com or (205) 271-6218.

Summer 2016 New Jersey Banker

23

Feature

TRID’s Rocky Road: Past, Present and Future

By Sharon Blanchette

T

he news on April 28, 2016, of a potential TRID rewrite was met with online cheers from mortgage and compliance professionals across the U.S. Consistent with the April spring season, hope sprung eternal that the CFPB would bring clarity to the aspects of TRID that remained fuzzy and provide much needed guidance for banks to follow. This article will explore how we got to this point on the rocky road called TRID, and how to tackle TRID between now and the time any revised guidance is released.

THE EARLY DAYS In October 2015 (the early days) TRID hit like a TRID-ent missile and mortgage lenders Sharon Blanchette experienced widespread changes to their processes, procedures and workflows. Attaining compliance with the accuracy and timing requirements of the two new disclosures – the loan estimate (LE) and the closing disclosure (CD) – was difficult in the early days due to the complexity of the requirements and the readiness of the loan origination/forms software vendors to address those

requirements. (See sidebar, “Top TRID Challenges of 2015.”) Even when lenders successfully met the accuracy and timing requirements, many had difficulties documenting their compliance. They didn’t have time to implement documentation procedures because there was simply too much that was new at once.

Lenders became jittery over the possibility of examination findings, having loans returned by investors, and even lawsuits. More importantly, though, lenders became concerned about the additional resources and time required across the enterprise to manage key processes in mortgage lending: 1) the quality assurance (QA) process; and 2) the closing process. Lenders understood that managing the QA and closing processes would increase the likelihood of providing accurate disclosures to the borrower, but found that the processes required additional time and people. Combine this with the additional time mortgage and IT staff spent on the phone with software vendors asking questions and installing dozens of software updates, and you can quickly see the time crunch that existed. The additional time required in the early days was costly and challenged the lender’s ability to deliver timely disclosures – in some cases, it resulted in delayed closings.

Top TRID Challenges of 2015 1. The readiness of software systems: • Formatting errors in the disclosures (decimal places, number of digits, alphabetizing fees, font sizes, proper placement, blank information, etc.).

• Calculation errors in the disclosures – math errors, sub-totaling errors and errors in interpretation of how the calculations should occur.

• Numbers not flowing from one table in the disclosures to another table properly.

2. Mis-mappings of settlement fees into tolerance categories during the configuration of the software leading to tolerance errors and missed “cures.”

3. Difficulties interpreting the new definitions of loan “purpose.”

4. Difficulties with lender credits, especially understanding what the impact of a decreased lender credit was.

5. Uncertainty about when to send revised loan estimates (LEs) and closing disclosures (CDs) and the implications of such. There was much confusion around “when must I revise,” “when can I revise” and “when can’t I revise.”

24 New Jersey Banker

6. Uncertainty about who must receive copies of the LE and CD, especially when a transaction is rescindable.

7. Errors where manual input was required, such as inserting the vendor name for a settlement service.

8. Timing violations with sending the disclosures, and closing delays. Oftentimes timing violations were caused by a quality review process interjected into the workflow, creating a logjam.

9. Difficulties with new closing processes – who will issue the CD, how will the communication take place to ensure an accurate CD. 10. Difficulties with disclosing the “special situations” described below.

11. Uncertainty about how to cure and when to cure, and when to send a revised CD post-closing.

12. Difficulty documenting compliance. Procedures and workflows not updated to enable the capturing of the lender’s compliance.

Summer 2016

TRID TODAY Nine months of effort by lenders and software vendors brought many improvements, including: • Improvement in the ability of software to produce compliant disclosures – to the extent that the software vendors could interpret sometimes fuzzy regulatory requirements. Most of the initial errors with formatting and calculations have been resolved.

• Improvement in the mortgage staff’s knowledge of how their software handles TRID transactions, resulting in fewer mapping errors and missing information on disclosures.

• Refinement of workflows, especially in the change of circumstance/reissue process, the closing process, the cure process, the QA process and how to document compliance.

• The decrease in QA and post-closing error rates.

Despite the positive accomplishments above, many TRID challenges remain and the road remains rocky. There is difficulty with disclosing “special situations” – meaning those mortgage scenarios that aren’t clearly addressed in the regulation. Not only are lenders struggling with the lack of guidance regarding how to disclose special situations, they’re also struggling with disclosures that weren’t designed to accommodate the disclosure of the special situations.

The result is that it’s any lender’s guess as to how to disclose some special situations. Below are examples of those special situations.

• Disclosing anything pertaining to construction-to-perm loans, such as: -- Selecting the appropriate “purpose” (construction loans can be any of the four purpose types: purchase, refinance, construction and home equity purposes).

-- Disclosing construction holdbacks in the LE and CD. Although the above may seem like an annoyance, it has caused some lenders to simply discontinue making construction loans.

• Disclosing payments in the projected payments table, validating the amount paid in five years in principle, interest, MI and loan costs in the comparison table, and validating TIP, especially on construction-to-perm loans that are ARMs. • Disclosing what are frequently called wrap-around mortgages.

• Disclosing simultaneous close mortgages.

For many of the situations above, the lender might believe they have a solution to disclose properly, but the software they use might not support the solution.

There remain some difficulties with the detailed requirements in each form, especially where staff have to manually enter information into the software. Failing to enter this information, or check a box, results in field-level errors, such as a missing vendor name on a disclosed service on page 2 of the CD, or a missed checkbox on page 4 of the CD explaining why an escrow account wasn’t set up.

There has even been a slight increase in HMDA coding errors due to staff applying the TRID “purpose” definitions to HMDA. (See sidebar, “TRID ‘Purpose’ Versus HMDA ‘Purchase.’”)

MOVING FORWARD –THE SHORT RUN The following four items (two of which are technology-related) will save time and improve TRID compliance overall, and should be

TRID ‘Purpose’ Versus HMDA ‘Purchase’ A borrower intends to refinance their existing mortgage on their current residence, to be secured by their current residence, in order to purchase another single-family residence.

HMDA: This would be a “purchase” for HMDA coding.

TRID: This would be a “refinance” for TRID. If HMDA coding staff use the TRID definitions of “purchase” and “refinance” on the LE or CD for coding the HMDA LAR, there will likely be HMDA coding errors.

considered over the next few months as lenders anticipate revised TRID guidance: Implement automated software controls: The controls can be programmed in the software system such that manual input fields become mandatory and can’t be skipped over. This can be useful for not only inserting vendor names for settlement services, but also for ensuring that recording fees are broken out properly on the CD. There are likely more areas where automated software controls can increase compliance, and mortgage lenders should have a strategy meeting where they brainstorm how they can enable and program the software to help them maximize compliance.

Implement analytical reporting: The use of analytical reporting creates a continuous monitoring situation of certain fields (that lenders identify) in the disclosures, using reports crafted in the software system. This activity can identify and report on field-level errors that would take hours to identify via manual reviews. Most lenders should be able to craft analytical reports in the software, but some may need vendor assistance with identifying the correct database fields to include in the report and designing the format of the report.

The careful use of analytics can assist mortgage department managers, quality review managers and compliance officers with a cost-effective solution to quickly spot errors, freeing up personnel to focus on the more complex issues in a file, such as the special situations mentioned above. This results in greater compliance overall.

(See sidebar “Examples of Analytical Reporting in Action” for an example of how analytics identified dozens of errors that could be fixed before closing.)

Attend TRID workshop training and/or “top findings” training: TRID cannot be taught by reciting regulatory citations in webinars. Lenders will learn the most from attending workshops that utilize real scenarios and forms. Lenders can also benefit from attending sessions on “TRID top findings” because that, too, uses reallife material. Even though lenders anticipate revised guidance, the more they understand about the current issues, the more they’ll benefit from the revised guidance.

Write operational desk procedures: During the early TRID days, it was impossible to write operational desk procedures, because there continued on next page

Summer 2016 New Jersey Banker

25

Meet Our Endorsed Service Provider

StoneCastle Financial

S

toneCastle Financial is the newest NJBankers Endorsed Service Provider. Formed in February 2013, StoneCastle Financial is an SEC-registered, closed-end investment company established to serve as a direct investor in community banks seeking capital for growth opportunities, share repurchases and other refinancing activities.

The first investment vehicle of its kind focused on community banks, StoneCastle provides banks with access to permanent, passive and reasonably priced capital. It focuses its investments on community banks with experienced management teams, stable earnings, sustainable markets and growth opportunities. To date, StoneCastle Financial and parent company StoneCastle Partners have made capital contributions to more than 250 community banks across the country.

New Basel III capital rules and regulatory pressures, along with a sustained low-interest rate environment, have created difficulty for community bank leaders to generate organic funds for expanding market presence and developing new products. StoneCastle Financial provides a unique, straight-forward and non-invasive solution to New Jersey community banks and their capital needs.

Knowing the ability to raise capital is becoming even more important for banks to thrive, StoneCastle Financial’s goal is to be a long-term partner that understands the needs of

community banks. It makes investments with a long-term view and reasonable return requirements. Upon a bank’s indication of interest, StoneCastle will initiate a four-step process that includes pre-screening, due diligence, investment committee analysis, documentation and funding.

“StoneCastle Financial is the first investment company specifically created to make permanent, passive Tier 1 and Tier 2 capital investments in healthy community banks,” said StoneCastle Financial Chairman and CEO Joshua Siegel. “It bridges the gap between investors and community banks, allowing banks access to the capital they need to grow and satisfy regulatory needs.”

To summarize, with the experience and knowledge gained from its senior management team investing more than $5 billion directly in community banks, StoneCastle Financial was formed to provide investors with exposure to community banks. StoneCastle Financial is focused on investing its capital in long-term, passive, non-control investments and is proud to expand access to capital for publicly traded and privately held community banking institutions across the country. StoneCastle Financial is listed on the NASDAQ Global Select Market under the symbol “BANX.” ■

Feature continued from previous page simply wasn’t time and workflows and procedures weren’t quite established. There’s no time like the present for this. Writing operational desk procedures for the special situations described above will help document the “reasonable” approach that was chosen and help ensure that the approach is consistent each time. Lenders should include the following in the operational desk procedures: what is done, how it’s done, when it’s done, how it’s documented and where the documentation resides.

Examples of Analytical Reporting in Action

MOVING FORWARD - THE LONG RUN

not have an escrow account because,” yet neither of

More than any other consumer regulation in the past, TRID impacted processes and workflows throughout the mortgage cycle starting with the application process and ending with post-closing quality review. The road has been rocky and compliance with the regulation has been difficult for lenders, due in part to the lack of clarity in the regulation in certain areas.

Over the next year, however, lenders should continue to learn about best practices from TRID gurus on posting boards and in seminars, should continue to revise internal processes and procedures, and should look forward to revised guidance from the CFPB to clarify some of the fuzzy areas.

■

the reason checkboxes were checked. Mortgage staff,

Sharon Blanchette, CPA, CIA, CRCM, CAMS, MBA, is a director with FIS Risk, Information Security, and Compliance (RISC) Solutions. She invites you to link with her on LinkedIn.

26 New Jersey Banker

In the early days of TRID, ABC Bank kept noticing that page 4 of the CD had the checkbox checked for “will

working with their software vendor, designed a report that showed every time page 4 of the CD indicated there wouldn’t be an escrow account. The report also showed which of the two reason checkboxes were checked. CDs that had neither of the reason checkboxes checked were flagged on the report and fixed quickly, prior to closing. This report was run daily. ABC Bank also uses analytics to alert them proactively regarding an approaching deadline or expiration.

Summer 2016

KNOWLEDGE IS THE BASIS OF SOUND ADVICE. TWENTY SEVEN YEARS OF EXPERIENCE TELLS US SO.

As an advisor to financial companies nationwide for more than 27 years, Sandler O’Neill’s knowledge and insight have served clients well in bull and bear markets alike. The depth of experience gives our firm a unique perspective on how financial companies can best position themselves in the current environment.

Sound, straight-from-the-shoulder advice – it’s what we do best.

To learn more, please contact John Beckelman, Principal, at 212.466.7832, or visit www.sandleroneill.com.

Sandler O’Neill + Partners, L.P.

Bank Notes

Nancy E. Graves

Michele M. Calise

Phoebe A. Haddon

Robert V. Puccio

Michelle Reardon

Lisa Chalkan

James D. Narron

James M. Nigro

Michael McCambridge

BANK OF NEW JERSEY Bancorp of New Jersey, Inc., the holding company of Bank of New Jersey, announced the appointment of Nancy E. Graves as the new president and CEO of the holding company and the bank. Graves, who recently served as president and CEO of Pascack Bancorp, Inc. and Pascack Community Bank, has also been appointed to the boards of directors of the Bancorp of New Jersey, Inc. and Bank of New Jersey. Gerald A. Calabrese Jr., chairman of the board, had been serving as interim chief executive officer and president.

FEDERAL RESERVE BANK OF PHILADELPHIA The Federal Reserve Bank of Philadelphia announced the appointment of Phoebe A. Haddon, chancellor of Rutgers University – Camden, as a class C director of its board of directors. Her three-year term begins in March 2016. In addition, the Federal Reserve Bank of Philadelphia announced the appointment of Michelle Reardon to vice president of the bank’s public affairs department. Reardon was previously with DuPont, where she held various leadership roles in the company’s corporate communications department. She will report to Deborah Hayes, senior vice president of corporate affairs. Also, The Federal Reserve Bank of Philadelphia announced the appointment of James D. Narron to first vice president and COO. Narron is currently a senior vice president and product manager at the Federal Reserve Bank of San Francisco, where he leads the Federal Reserve System’s Cash Product Office (CPO). The CPO provides standard software and processing tools for all cash processing and vault automation systems nationwide and guides policy, product development and currency and coin capacity planning for all Federal Reserve cash operations. Narron will succeed D. Blake Prichard, who has retired after more than four decades of service to the Federal Reserve System.

Ben Watts

Bruce Collins

Beverly Monk

and treasurer of Highlands State Bank since the bank’s inception in 2005, and senior vice president, chief financial officer and treasurer of Highlands Bancorp, Inc. since its inception in 2010.

Piersa is a graduate of Montclair State University and received her MBA from Fairleigh Dickinson University. She has over 30 years of banking experience and has previously held financial management positions with other local financial institutions including First Fidelity Bank, Independence Bank of New Jersey, and Commerce Bank.

She is a member of NJBankers’ CFO Committee and the Institute of Management Accountants.

LAKELAND BANK James M. Nigro has been appointed to the newly created position of executive vice president and chief risk officer based in Oak Ridge, New Jersey. Nigro has more than 30 years of industry experience most recently at The Provident Bank in Iselin as senior vice president and credit risk manager. He graduated magna cum laude from Seton Hall University with a bachelor’s degree in finance, and was a member of Beta Gamma Sigma and the Financial Management Association. Nigro has served as a director and treasurer for Morris Habitat for Humanity since January 2013 and currently serves as secretary for the Morris County Housing Alliance. He is also a member of the Risk Management Association and serves on a committee of the New Jersey Bankers Association.

LIBERTY BELL BANK Liberty Bell Bank announced Ben Watts, president and CEO, has been appointed to the Rowan College at Burlington County Foundation board.

Also, Bruce Collins has joined the bank as assistant vice president and senior credit analyst and Beverly Monk has been promoted to assistant vice president and deposit operations manager.

NOAH BANK Noah Bank named Dong Pil Joo as first executive vice president and chief loan officer. In this position, Joo will manage all lending activity, including SBA and commercial lending, as well as loan portfolio management and collections. He has over 30 years of banking experience.

HIGHLANDS STATE BANK

ORITANI BANK

Highlands State Bank announced the promotion of Eileen D. Piersa to executive vice president, chief financial officer and treasurer of Highlands State Bank and its parent company Highlands Bancorp, Inc. Piersa has served as senior vice president, chief financial officer

Oritani Bank announced that it has hired Michele M. Calise as senior vice president retail banking. Calise has more than 30 years of commercial banking experience and has previously led sales and service activities for more than 90 branches of Wachovia Bank/Wells

28 New Jersey Banker

Summer 2016

Fargo in New Jersey and New York. In her new role at Oritani Bank, Calise will be responsible for all deposit gathering efforts including marketing, advertising, training and deposit product development.

PEAPACK-GLADSTONE BANK Peapack-Gladstone Financial Corporation and Peapack-Gladstone Bank announced the appointment of Robert V. Puccio as senior managing director of commercial private banking specializing in commercial and industrial lending. Puccio is now a part of the bank’s commercial lending team and will focus on the southeastern New York State and northeastern New Jersey marketplace. Also, the bank announced the promotion of Lisa Chalkan to executive vice president and chief credit officer at Peapack-Gladstone Bank. In her current role, Chalkan directs Peapack-Gladstone Bank’s credit professionals and quality assurance teams to efficiently manage the quality of the loan portfolio.

ROSELLE SAVINGS BANK Roselle Savings Bank announced the appointment of Michael McCambridge as senior vice president and CFO of Roselle Savings Bank. Prior to joining the Bank, McCambridge served as senior vice president of finance at Hudson City Bancorp, Inc. He had previously served as first vice president of investments among several other positions at the same institution. McCambridge received a Bachelor of Science in accounting from Ramapo College and a bachelor’s degree in political science from the University of Delaware. He earned his CPA designation in the state of New Jersey.

■

New Associate Members Central State Appraisal Services, LLC 1700 Main St., Suite 5 Lake Como, NJ 07719 Contact: Daniel McDonald, owner and president Phone: (732) 280-2242, ext. 11 Email: dan@centralstateappraisal.com

Mirador (ENDORSED PROVIDER) 317 SW Alder St., Suite 200 Portland, OR 97204 Contact: Amanda DePaul, marketing director Phone: (503) 451-0518, ext. 719 Email: adepaul@miradorfin.com

Partner Engineering & Science, Inc. 611 Industrial Way, West Eatontown, NJ 07724 Contact: Frank Romeo, president Phone: (732) 380-1700 Email: fromeo@partneresi.com

as of January 2016

Twin Securities Inc. 10 Park Place Building 6C-4 Butler, NJ 07405 Contact: Ryan P. Bradbury, president and CEO Phone: (973) 838-0050 Email: rbradbury@twinsecurity.com

Ultimate Software 55 Madison Ave., Suite 400 Morristown, NJ 07960 Contact: Henry Niemczyk, strategic development manager Phone: (973) 216-2160 Email: henry_niemczyk@ ultimatesoftware.com

XpertSavers Inc. 24 Central Park South, Suite 9W New York, NY 10019 Contact: Jennifer Armstrong, CEO Phone: (516) 815-4800 Email: jen@xpertsavers.com

Bringing Your Commercial Portfolio Risk Management Efforts Full Circle.

LOAN REVIEW PROGRAMS

LOAN LOSS RESERVE METHODOLOGY

LOAN PORTFOLIO STRESS TESTING

CEIS REVIEW CONSULTING

• General Loan Review • Methodology Validation • Portfolio Acquisition Review (Due Diligence) • Methodology Refinement • Leveraged Loan Review/Structured Finance Review • Bottom Up Loan Level Approach • Top Down Capital Adequacy Assessment

• Credit Risk Process Review • Loan Policy Maintenance

CONTACT US NOW TO LEARN MORE!

888-967-7380 // www.CEISReview.com Summer 2016 New Jersey Banker

29

Bank Shots

Magyar Bancorp, parent company of Magyar Bank, celebrated the 10th anniversary of its initial public offering by ringing the closing bell on the NASDAQ Stock Market. The bank’s president and CEO, John S. Fitzgerald, was joined by members of the bank’s board of directors and senior management team on stage at the NASDAQ studios located in Times Square.

Beneficial Bank Blue-Gooders spent time volunteering at YMCA Camp Ockanickon on Earth Day helping to clean up their camp grounds in preparation for the upcoming camp season.

Manasquan Bank recently hosted a Q&A session for students of the Wall High School Business and Finance Academy. The students and their advisor, Colleen Badecker, traveled to the bank’s headquarters where they were treated to a breakfast buffet as well as a learning opportunity. James Vaccaro, chairman, president and CEO of the bank, shared his insight regarding careers in finance.

According to Badecker, the students raved about the opportunity and thanked Manasquan Bank for bringing such positive energy to the students. Pictured is Vaccaro and the students.

Columbia Bank volunteered as “Reading Heroes” at the Boys and Girls Club of Passaic. Shown participating are the “Team Columbia” volunteers and their after school reading partners. The special program is designed to encourage reading to elementary school children. Following the reading of several stories, the children attended a book fair where they were allowed to select their favorite books, compliments of Columbia Bank.

NVE Bank’s Spring Cereal Food Drive resulted in the donation of over 70 grocery bags of breakfast cereal to the Office of Concern Food Pantry, located at St. Cecilia’s Church in Englewood. Staffed by dedicated volunteers, the Office of Concern Food Pantry in Englewood, supplies weekly groceries to over 900 families in Englewood and surrounding communities and is the largest single location food pantry in Bergen County. The food drive, part of the Office of Concern’s “Share Breakfast” program, will help pantry volunteers provide a nutritious breakfast to those in need.

Kearny Bank entered into another year of partnership with Junior Achievement and supported JA Finance Park. Bank employee volunteerism supported more than 100 Rahway High School students in a program that will help empower them to own their economic success.

30 New Jersey Banker

Valley National Bank employees participated in World Autism Awareness Day by donating and wearing blue as part of the “Light It Up Blue” campaign.

Summer 2016

ness loan portfolio...

ur small busi yo ow gr to t an w u yo If

Banks have money to lend. Small businesses need money to grow. But the risk in lending to small businesses keeps many banks on the sidelines—but not New Jersey Economic Development Authority (EDA) Premier Lenders. The EDA partners with our Premier Lenders to provide financing to qualified small businesses. The result for these banks is an increased small business lending portfolio, fast turnaround and reduced risk through EDA loan and line of credit participation and guarantees. If you want to be a more active player in the small business lending arena, we’re here for you.

To find out how your bank can become an EDA Premier Lender, call 609-858-6767 or visit NJEDA.com/PremierLender

TALENTED. INNOVATIVE. EXPERIENCED. RIKER DANZIG. EXCELLENCE AT WORK. It takes years of commitment and dedication to perform at the top of your game.

At Riker Danzig, our highly skilled attorneys have expertise and training to deliver the right outcome for every client. We’re focused on providing creative and efficient solutions that will serve our clients’ best interests over the long-term. No matter what the challenge, we have our eye on one key goal—our clients’ success.

M O R R I S T O W N, NJ | T R E NTON, NJ | NEW YOR K | WWW. R IKER . C OM

PROUDLY SERVING AS COUNSEL TO THE NEW JERSEY BANKERS ASSOCIATION