New Jersey Banker Fall 2012

NEW

JERSEY

FALL 2 0 1 2

B A N K E R

IT’S GETTING EASIER TO BE

GREEN CUSTOMERS LOVE IT, AND SO DO THE BALANCE SHEETS

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NEW

JERSEY B A N K E R

NJBankers Board of Directors John W. Alexander Chairman/President/Chief Executive Officer Northfield Bank

Thomas J. Kemly President/Chief Executive Officer Columbia Bank

Christopher Martin Chairman/President/Chief Executive Officer The Provident Bank

Gerald L. Reeves President/Chief Executive Officer Sturdy Savings Bank

Paul E. Fitzgerald President/Chief Executive Officer First Bank

Peter Kenny President/Chief Executive Officer Heritage Community Bank

D. Nicholas Miceli Market President TD Bank, N.A.

Robert Rey President/Chief Executive Officer NVE Bank

James P. Genoy, Jr. President/Chief Executive Officer/Treasurer Monroe Savings Bank, SLA

Frank A. Kissel Chairman/Chief Executive Officer Peapack-Gladstone Bank

Michael Schutzer President/Chief Executive Officer Harmony Bank

Thomas J. Holt Senior Vice President Bank of America

Anthony Labozzetta President/Chief Executive Officer SussexBank

Michael Nardo Executive Vice President/NE U.S. Market Executive – Corporate Banking PNC Bank, N.A.

James A. Hughes President/Chief Executive Officer Unity Bank

Gerald H. Lipkin Chairman/President/Chief Executive Officer Valley National Bank

John E. McWeeney, Jr. President and Chief Executive Officer ext. 627 jmcweeney@njbankers.com

Michael P. Affuso, Esq. Senior Vice President and Director of Government Relations ext. 628 maffuso@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 Jenn Zorn Vice President, Director of Education and Business Development ext. 611 jzorn@njbankers.com Claire Anello Office Manager, Database and Website Manager ext. 631 canello@njbankers.com

Contributing Editor Emily T. DeMasi

Mortimer J. O’Shea President/Chief Executive Officer Hilltop Community Bank

Robert E. Stillwell President/Chief Executive Officer Boiling Springs Savings Bank

NJBankers Officers

NJBankers Staff

James M. Meredith Executive Vice President and Chief Operating Officer ext. 614 jmeredith@njbankers.com

Angela Snyder Chief Executive Officer/Vice Chairman Fulton Bank of New Jersey

Cris Goncalves Manager of Education ext. 630 cgoncalves@njbankers.com Candida Johnson Assistant Vice President/ Assistant to the COO ext. 615 cjohnson@njbankers.com Lauren Barraza Executive Assistant ext. 618 lbarraza@njbankers.com Paula H. Cassidy Assistant to the Director of Communications ext. 604 pcassidy@njbankers.com Cynthia M. Zaccaro Assistant to the Director of Education and Business Development ext. 632 czaccaro@njbankers.com

Kevin Cummings Chairman President/Chief Executive Officer Investors Bank

Stewart E. McClure, Jr. Second Vice Chairman President/Chief Executive Officer Somerset Hills Bank

Robert H. King First Vice Chairman Senior Vice President Roma 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

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

Erin Suckiel Administrative Assistant/ Receptionist ext. 600 esuckiel@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.

Fall 2012 New Jersey Banker

3

Table of Contents

NEW

JERSEY B A N K E R

Departments

6 Chairman’s Platform Living in Interesting Times 8 From the President's Office At the Crossroads

10 Politics & Policy

Summer Vacation?

30 Bank Notes 32 Bank Shots 35 New Associate Members 36 Upcoming Events

20 Cover Story: It’s Getting Easier to be Green Customers Love It, and So Do the Balance Sheets

Features

12 Directors' Corner Modifying the Game Plan 14 Behind the Teller Line Colonial American Bank 16

4

Feature The Top Five Reasons Banks Should Implement Image-Enabled ATMs

New Jersey Banker

17

Meet Our Endorsed Service Provider SNL Financial for Community Banking

24 Feature

Cloud Computing: The Simplicity of

Banking in the Past is Now in Our Future

18

Feature Retention is a Two-Way Street

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Feature Hidden Benefits of an Automated Vendor Risk Management Program

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Chairman’s Platform

Living in Interesting Times

By Kevin Cummings

G

reetings from Short Hills! I cannot believe that as I welcome you to the fall issue, the summer has come and gone.

As bankers, we have arrived at historic crossroads of social, political and economic issues, and our country is drawing close to a tipping point. The issues before us are persistent unemployment, an anemic housing marKevin Cummings ket, overleveraged Chairman consumers, and U.S. President/Chief Executive Officer Investors Bank fiscal policies that are on an unsustainable path. Add to that the economic uncertainty across Europe, a lack of leadership on both sides of the aisle in Washington, and the upcoming presidential election.

Yogi Berra told us, “When you come to a fork in the road, take it,” advice currently unheeded by Washington, which appears to be stuck and unable or unwilling to assume responsibility for improving our current economic situation. Our elected officials’ current inaction, especially if the full range of tax increases and spending cuts are allowed to take effect, could lead us to what is being termed a fiscal cliff – a scenario that could cause a shallow recession early next year.

Also, we continue to see misleading articles that reinforce misconceptions about banks and distorts our real role in the economy, society and our communities.

We have a duty to enhance our industry’s reputation by focusing on our strengths while maintaining high ethical standards in all our transactions.

As chairman of NJBankers, I ask you to come together under our association banner and take an active role in its advocacy efforts. The banking industry is contending with “headwinds” created by all levels of

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New Jersey Banker

government, as well as other factors, and we are being unfairly singled out for criticism.

Most of our members avoided the subprime lending that helped spark the financial crisis, and we are now helping fuel our state’s growth by being out in the market and lending to NJ companies. Overall, New Jersey bank loan volume has increased by 11 percent during this past year. Now more than ever, we need to get the good word out to all of our constituents – from Main Street to Trenton to the halls of Congress.

UPDATE FROM NJBANKERS As Mike Affuso reports in this issue, NJBankers has had a very active year with three Washington visits. Our trip in June included productive stops at the Consumer Financial Protection Bureau, the Federal Reserve, the Office of the Comptroller of the Currency (OCC), the FDIC, ABA and ICBA. As a result of these meetings, a follow-up session is scheduled for September in New York City with the Federal Reserve, the FDIC and the OCC to discuss regulatory issues.

Bringing these entities together to review the burdens stemming from the newly created regulatory regime marks a tremendous step forward in our association’s efforts to be heard. With your help, this can be the start of an effective legislative and regulatory campaign.

Other steps in this direction include our biannual conference call in June with the Committee on Examination and Supervision, during which we again addressed regulatory issues. We have also distributed positive articles to the media. In August, I wrote a piece that detailed how the U.S. taxpayers are, in fact, winners with the TARP program.

Finally, in keeping with giving back to our communities, Mike is leading fund raising efforts for the Boardwalk Race this September to benefit the FoodBank of Monmouth and Ocean Counties.

THE ‘GREENING’ OF OUR GARDEN STATE In this issue, the feature article is on green initiatives that are being implemented across our state. According to the Solar Energy Industries Association, we have added more solar photovoltaic installations in the first quarter of 2012 than any other state. We beat out California and Arizona – states with ample sunshine and plenty of space. You can also read about other initiatives being undertaken, many by member banks which are providing the project financing. One of Investors’ clients – Cox Printers, for whom we provided a loan for solar panel and wind turbine installation – is highlighted in the article.

In the eco-conscious eyes of many NJ entrepreneurs, green is becoming the new black. Technological innovations have launched new businesses which, in turn, create more jobs. Eco-friendly businesses are a win-win for New Jersey.

They are improving our environment while supporting economic growth and exemplify the innovative thinking and entrepreneurial spirit that is putting New Jersey back to work.

TODAY’S CHALLENGES WILL BRING TOMORROW’S OPPORTUNITIES In closing, I turn to the words of another sports legend, Pat Riley: “There are only two options regarding commitment; you’re either in or you’re out. There’s no such thing as life in-between.”

While times are, indeed, tough, we must continue to stay the course by working hard and taking care of the customers, employees, and communities that we serve, because “with New Jersey banks, New Jersey prospers.”

■ Kevin Cummings is chairman of the New Jersey Bankers Association and president and chief executive officer of Investors Bank. He can be reached at kcummings@myinvestorsbank.com.

Fall 2012

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From the President’s Office

At the Crossroads

By John E. McWeeney, Jr.

A

s we head into fall, it seems that so many major issues are at the crossroads. Who will win the Presidential election? Will Congress find a way to work in a bipartisan manner and avoid the fiscal cliff? In what direction is the economy headed? Will Europe ever step up and take action to resolve its crisis?

The outcome of these issues will afJohn E. McWeeney, Jr. fect all of us, and President/Chief Executive Officer NJBankers future generations, for years to come.

So much for the ancient Chinese proverb “may you live in interesting times.”

In many respects it seems like the banking industry is also at a crossroads.

Will we be able to restore the public trust that banks enjoyed for so long but lost, unfairly or not, in the aftermath of the financial crisis? Will there be any relief from the continuous flow of regulatory burden? Will community banks be able to survive and prosper or are we facing the massive industry consolidation that many are predicting?

None of us have the answers to these questions. Certainly some of the domestic and international political and economic issues are largely out of our control. That’s not true for the banking issues, though, and it’s incumbent upon all of us that work in this great industry to do everything within our power to protect it and strengthen it. That’s why NJBankers exists, to serve our members and the industry at large and we’re trying to do our part.

NJBankers started its new fiscal year on July 1, and we did so in a position

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New Jersey Banker

of strength. Our membership base is firm and bankers are engaged (over 700 bankers serving on our committees), our operations and balance sheet are strong and our relationships with legislators and regulators are open and respectful.

NJBankers has never been in a better position to represent New Jersey’s banks to these various constituencies and that’s exactly what we intend to do.

In June we visited Washington, DC, with a contingent of 30 bankers for our annual Regulatory Visit. It was one of the more productive visits we’ve had to our nation’s capital for two reasons: First, we had a candid and open dialogue with very senior level officials, including Richard Cordray, director of the Consumer Financial Protection Bureau, Acting Chairman Martin Gruenberg of the FDIC, Senior Deputy Controller for Mid-Size Community Bank Supervision Jennifer Kelly of the OCC and Gov. Daniel Tarullo of the Federal Reserve Bank. Second, our dialogue was actually productive, as Tarullo has convened a follow-up meeting with a group of New Jersey bankers to discuss the issues of regulatory compliance costs and examiner overreach.

Tarullo enlisted the FDIC and the OCC to participate as well.

At press time, we have not had our first meeting yet, but we’re excited about the opportunity to share very specific examples of our concerns about the cost of regulatory compliance and examiner overreach with senior level Washington representatives of the regulatory agencies.

Staying on the regulatory theme, we’ve had two other recent interactions with the regulators. In June, following our Executive Committee meeting, we held a meeting of our Committee on

Examination and Supervision (COES).

We were pleased to have the FDIC, CFPB, OCC, Fed and New Jersey Department of Banking and Insurance participate, as well as over 70 bankers who dialed in via conference call.

In July, I had the privilege of attending a meeting in Manhattan hosted by Gruenberg on the future of community banking.

Gruenberg has identified supporting community banking as one of the three major priorities of the FDIC under his term. Many states on the East Coast were represented by their banking commissioners, community bankers and state association banking executives for an active dialogue on the issues facing community banks. New Jersey was well represented by acting DOBI Commissioner Ken Kobylowski and bankers Frank Sorrentino of North Jersey Community Bank and David Hanrahan of Capital Bank of New Jersey. Finally, on the national regulatory front, NJBankers submitted comments on the proposed Basel III capital guidelines and the potential negative impact they could have on community banks.

At the state level, our highest priorities continue to be improving New Jersey’s foreclosure process – the slowest in the nation – and minimizing risk to banks that participate in the Governmental Unit Deposit Protection Act (GUDPA) program, as credit unions enter the government deposit business. We’ve made significant progress working with the judiciary on expediting commercial foreclosures and believe we’re on the verge of legislation to do the same for abandoned residential properties. As far as GUDPA, we believe that DOBI is being prudent in their process to admit credit unions into GUDPA.

Fall 2012

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Working hand in hand with our government relations efforts are our public relations strategies. We believe that it’s critical that NJBankers educate the media and the public on banking issues and promote all the good things that banks are doing to support their communities. One of the ways we do that is by holding Editorial Board meetings with the major media outlets across the state. In June, our Chairman Kevin Cummings of Investors Bank and Bill Moss of Two River Community Bank joined us for a meeting with the Asbury Park Press. Late in the summer Tom Geisel of Sun National Bank and Jay Ford of Crest Savings Bank joined us for a meeting with the Philadelphia Business Journal. We’re also planning on doing a series of press releases promoting positive stories about banking. Through the summer we did press releases on our newly elected officers and board, the winners of our community service awards, a Flag Day ceremony for NJBankers new flag and a recent visit by a delegation of Japanese bankers. Expect to see NJBankers and our members in the news a lot because we intend to promote banking at every opportunity that we get.

The next few months will certainly be historic ones, both for our country as well as our industry. Thanks for all of the support you provide to NJBankers as we try to fulfill our mission of serving our members and the banking industry.

Let’s stay engaged and keep up the fight.

It’s worth the effort and we can effect change.

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

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Politics & Policy

Summer Vacation?

By Michael P. Affuso, Esq.

W

hile summer may be a time to sip a cool drink, or swing a golf club, at NJBankers it was a time to redouble our efforts in advocacy and messaging.

With the ascension of Kevin Cummings to the chair of NJBankers, a focus will be placed on measurable goals and outcomes.

Michael P. Affuso The summer Senior Vice President/ Director of Government Relations began auspiciously NJBankers with the annual Regulatory Visit to Washington, DC. Cummings and John McWeeney led a group of 30 bankers to Washington for the

NJBankers annual Regulatory Visit. The meetings were a success.

The bankers met with ABA and ICBA to be briefed on current issues. The trade groups discussed the burdens of unintended consequences stemming from regulation, particularly focusing on the effect of Basel III on capital. They noted that the effort to create a regulatory regime to limit the effects of a future financial meltdown will have consequences on community banks that had little, if nothing, to do with the underlying problem.

The group then met with Director Richard Cordray of the Consumer Financial Protection Bureau. The meeting was cordial; however, it was evident that the mission of the agency remains fluid. It was stated that the goals were not to inhibit

community banks; however, it seemed clear that the precise effect of the agency’s goals will indeed affect all institutions. Cordray noted with specificity the actions being taken against banking institutions, but lacked specificity when discussing actions that the agency planned on taking against non-bank actors in their jurisdiction.

The following day, bankers traveled to other regulatory agencies on a bus generously provided by the Community Bankers Association of New Jersey. The first meeting was held at the Federal Reserve. Fed Gov. Daniel Tarullo briefed the bankers on past Fed actions and offered suggestions as to how to successfully comment on future rule proposals. continued on page 38

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Directors’ Corner

Modifying the Game Plan COMMUNITY BANKS FACE DIFFICULT DECISIONS IN CHANGING TIMES

By Donald Musso

B

ankers are all too familiar with all the pending issues facing the industry.

It seems like everyone is writing off community banking, typically with the refrain “you must be $1 billion in assets to survive.”

I understand the negativity and have even expressed concerns myself on occasion. Today, as I see it, community banks are at a fork Donald Musso in the road and have a basic choice to make. Should the board acquiesce and simply sell the bank for the best price possible, or should the board develop a new game plan allowing the bank to compete in an uncertain environment?

To remain independent and to thrive under today’s adverse conditions, bank strategies must change. Simply put, banks that don’t adapt to the new realities will not survive. The five biggest areas to look at for change include: 1. Merging enterprise risk management (ERM), budgeting, planning, ALCO and stress testing into one cohesive process with one single model.

2. Reviewing the corporate structure to determine if a holding company is still required, the bank holds the appropriate charter, and whether or not the bank should be listed and registered.

3. Proactively addressing the bank’s CAMELS+ risk factors and make changes now to prepare for proposed Dodd-Frank regulations.

4. Re-examining the bank’s value proposition and understanding the bank’s M&A position.

5. Focusing on core banking including loan growth, expense control, funding management and fee income.

12 New Jersey Banker

MERGING ERM, BUDGETING, PLANNING, ALCO AND STRESS TESTING This is probably the hardest of the five to accomplish because it is the biggest change to the way banks have historically been run. Merging all of these functions into one cohesive process means breaking down the established silos that banking has been built upon. The typical reason given for not merging these functions and establishing a single model is “we already have these processes in place and are comfortable with them.”

Unfortunately, continuing the silo approach won’t work going forward.

Decisions need to be integrated and multiple degrees of cause and effect need to be considered. This can only occur if ERM, budgeting, planning, ALCO and stress testing are merged into one function.

As importantly, banks need to consolidate to a single model. The bank must be able to see its ALCO position both point in time today, but also at any point in the future. The impact of changing any one assumption, or variable, needs to be assessed organization wide. This can only be done if a bank is using a single model for all functions. Finally, merging these functions and going to a single model will actually save money for the bank and pay for itself. This is an area banks must adopt early to avoid problems in the future.

REVIEWING THE CORPORATE STRUCTURE Banks need to determine if a holding company is still required, whether the bank holds the appropriate charter, and whether or not the bank should be listed and registered.

As a result of Dodd-Frank, banks should review their corporate structure to ensure that it is all necessary and worth the cost.

Most small banks do not need their holding companies anymore as Dodd-Frank has eliminated many of the capital tools that used to be housed at the holding company level,

such as trust preferred securities. Banks can save money by switching their charters.

Banks with holding companies should consider becoming either state member banks or national banks, but why have three primary regulators when two will do? Small bank illiquid stocks are getting pummeled in the market. If the bank is illiquid anyway, why spend the money on being listed? The new JOBS Act allows for many banks to consider deregistering, another cost savings idea.

Obviously not all of these strategies work for every bank. Banks must analyze each of these opportunities and select those that work for them.

CAMELS+ RISK FACTORS The heart of any ERM program should be a solid CAMELS+ self-assessment. When conducting this analysis, banks should contemporaneously identify stress tests to run and mitigating strategies to correct any shortcomings that arise from the risk assessment and stress testing exercise. A good example of this would be moving investments from available for sale to held to maturity to avoid the BASEL III capital impact if the current BASEL III proposed approach survives. Another example would be to restructure collateral today to optimize liquidity.

A final example might be to conduct detailed asset migration on problem loans and troubled debt restructurings to avoid having the troubled debt restructuring classified or labeled as non-accrual. A little work today can save a ton of money and regulatory heartache tomorrow.

RE-EXAMINING THE BANK’S VALUE PROPOSITION As Albert Einstein stated: “Things should be made as simple as possible, but not any simpler.” Following this approach, there are seven key steps to building value at a bank:

Fall 2012

1. Grow deposits and diversify the mix.

2. Grow loans and diversify the mix.

3. Grow and diversify non-interest income.

4. Control expenses.

5. Enhance the branch network and alternative delivery options.

6. Increase the number of, and penetration within, customers.

7. Utilize capital market tools.

Let’s face it, all of these concepts are easy to understand, but maybe not so easy to effectively implement. Bottom line is to remember that there are three fundamental ways for shareholders to realize value. Every action taken needs to improve (a) cash dividends; (b) trading value; and (c) takeout value. If considering M&A activity, it is essential to remain disciplined. Absent extenuating circumstances, only acquire when it is earnings accretive, only modestly tangible book value per share dilutive, and the work-back period is reasonable.

FOCUSING ON CORE BANKING Banks need to grow loans, but not reach beyond established risk thresholds.

To accomplish this, contemplate new loan products, but do not exceed the knowledge and understanding of the board and management team. Price loans for risk, but recognize that opportunity to “take share” from competitors may exist with pricing flexibility. Control expenses, but be careful not to eliminate critical areas such as audit, internal controls, risk management, backroom operations, etc.

Penny wise can be pound foolish if we attempt to cut costs without appropriate analysis.

Finally, take advantage of this low funding cost environment, but stop offering market rate deposit accounts to non-relationship customers.

Ultimately, integrating ERM, planning, budgeting, ALCO and stress testing into one function is the essential first step. Follow this step with a comprehensive review of the corporate structure. Address the CAMELS+ risk factors with an eye toward creating and preserving value. Finally, re-focus on core banking. Forget the fluff. Difficult times require new ideas and execution.

■ Donald Musso is president of FinPro, Inc. He founded FinPro, Inc. in 1987 as a consulting and financial advisory firm located in New Jersey that specializes in providing advisory services to the financial institutions industry. He can be reached at (908) 604-9336 or dmusso@finpronj.com.

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Behind the Teller Line

Colonial American Bank A NEW EXPERIENCE IN COMMUNITY BANKING

The design of the bank offers an architecturally striking lobby where service counters have been eliminated and replaced with carefully designed banquettes, and spacious and well-equipped conference and closing rooms are available for bank customers to use.

Left: Cutting the ribbon at Colonial American Bank’s grand opening on May 5, 2012, from left to right: Nancy Mazza, executive vice president of retail banking; Anthony Giordano, III, president and CEO; Middletown Mayor Anthony P. Fiore; Patricia Zilly, vice president and Middletown branch manager; Philip A. Nisbet, chairman of the board; Lisa Borghese, executive vice president and chief lending officer; and Michael Malloy, senior vice president and chief financial officer.

Right: Colonial American Bank’s Middletown branch offers amenities such as a coffee bar, free public WiFi, complimentary access to iPads, and art collections on loan from a local art gallery.

W

hen a local investor group recruited former Central Jersey Bank Chief Financial Officer Anthony Giordano to help launch a new bank in Monmouth County, he and the team conceptualized a banking experience that was innovative.

Their ideal bank would be more than a place to secure loans, open checking accounts, and make teller transactions.

It would be more than a dispensary of financial products and services. It would

14 New Jersey Banker

take apprehension out of what had become mainstream by putting a warm, caring, relationship-focused staff in place.

Most of all, this bank would serve as a community hub – an inviting, familyoriented space where people would enjoy congregating. Aside from conducting their banking business, they could embrace amenities such as free use of iPads and freshly baked cookies.

The investors’ idea came to fruition when they recapitalized the failing Horsham,

Pennsylvania-based Colonial American Bank in April 2011. By March 2012 – with Giordano as president and chief executive officer and a new board of directors and management team in place – a completely overhauled Colonial American Bank (CAB) opened its second branch office location by expanding to Middletown, in Monmouth County, NJ. With amenities like an architecturally striking lobby, chic coffee bar, free public WiFi, complimentary access to iPads, art collections on loan from a local art gallery, and doting staff, the bank appears to have more in common with a luxury hotel than with other banks.

The design of the branch echoes the bank’s goal to foster and support business relationships among staff, customers and their affiliates. Traditional, impersonal service counters have been eliminated and replaced with carefully designed banquettes, where a customer and bank officer can jointly view electronic records and transactions in real time. State-ofthe-art teller machines allow for universal transactions on service islands. Spacious and well-equipped conference facilities and closing rooms are available to bank customers to use, not only for banking transactions, but also as off-site meeting spaces for their own business needs. In fact, the branch is not just a place that customers visit to do banking – it is a series of sites for collaboration and exchange, useful to and in the control of the customer.

CAB also serves up a host of products and services that makes their customers’ business and personal lives easier, including online banking, mobile banking, and remote-deposit capture. For those technophobes who love convenience – but get cold feet when it comes to virtual banking – CAB offers free tutorials on iPads and other mobile devices to bring them up to speed on the bank’s cutting-edge technology.

Despite the fact that CAB is new to Middletown, its staff is not. Giordano and

Fall 2012

his executive team – including Executive Vice President/Chief Lending Officer Lisa Borghese and Executive Vice President/ Retail Banking Nancy Mazza – have been successful area bankers for more than 25 years, leaving both a professional and humanitarian imprint on the community.

Admired as much for their business track records as for their charitable endeavors and local involvement, they are strongly connected with – and passionate about – the Jersey Shore. Their mission is to create a banking culture the community has never experienced before.

Along with the rest of the management team and support staff, they make relationships their number-one priority. So when customers walk through the door, chances are they are greeted by faces they have known and liked for years.

Impersonal banking is a foreign concept at CAB, where staff is known to give out cell-phone numbers and schedule appointments when it’s convenient for clients – often after hours or on weekends. And because the bank is small, unencumbered by layers of management or confined to a fixed set of rules, it can be creative when crafting solutions to customers’ needs. Plus, business decisions are made at the local level, so customers get the answers they want quickly, avoiding tension-filled waiting periods.

Maintaining pace with the needs of today’s customer, CAB has several initiatives on deck for 2012. First, it recently implemented a residential mortgagelending department. With a healthy number of loans in the pipeline, it has already begun closing loans. Next, in order to meet the strong market demand for small business credit and banking services, the bank plans to commence SBA lending in the fall. And finally, in the late fall of 2012, CAB will open its third branch office in Shrewsbury, NJ. In keeping with the bank’s philosophy to leverage technology and expand efficiently and strategically – as opposed to the old model of setting up shop on every corner – management will roll out future branches as warranted by market demand.

CAB’s management team has only been in place for a relatively short time, but

it is already winning accolades. In June, bankinggrades.com awarded the bank an “A” or “Excellent” rating for lending to small businesses. This rating signifies that a bank invests 25 percent or more of its deposits in small-business loans. Out of 6,716 banks in America, CAB is ranked 491.

A year and a half ago, one forwardthinking group of Monmouth County

investors masterminded an idea for a revolutionary new concept in banking. Today, Colonial American Bank is filled with grateful customers who sip coffee, tap on iPads, learn the ropes of online transactions, and yes, conveniently conduct their financial business in ways they never thought possible.

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Fall 2012 New Jersey Banker

15

Feature

The Top Five Reasons Banks Should Implement Image-Enabled ATMs

By Tamara Coole

B

anks and customers alike are realizing the many benefits of advanced function ATMs – the most efficient method for capturing and processing ATM deposits.

After relatively slow adoption, ATM deposit automation is gaining momentum and is expected to be one of the fastest-growing banking technologies during Tamara Coole the next several years.

Image-enabled ATMs have become much more affordable, reliable and user-friendly, so many banks are building business cases to replace their conventional, envelope-accepting ATMs with the tangible cost savings and efficiencies offered by this technology.

Customers value the convenience and immediacy of depositing checks at image-enabled ATMs and walking away with a printed receipt that displays the check image and a real-time account balance. This ATM advancement is a true win-win for everyone.

Below are the top reasons that banks should consider investing in image-enabled ATM technology.

Reduce the cost of processing deposits: Image-enabled ATMs provide many of the benefits of brick and mortar branches at a fraction of the cost. Research suggests image-enabled ATM deposits are approximately three times more costeffective than standard envelope deposits.

The images are official legal documents, so their paper counterparts don’t need to be emptied from the machines as often, which reduces ATM service calls by bank personnel. Additionally, image-enabled ATMs provide an economical option for banks to expand their geographical reach, which is materially more cost-efficient than building branches.

16 New Jersey Banker

Reduce the potential for fraud: According to ATM Marketplace, approximately 70 percent of deposit fraud takes place at the ATM. Image-enabled ATMs virtually eliminate empty envelope fraud and save banks money on the cost of envelopes as well. Image-enabled ATMs can also shorten the window for fraud, because they allow banks’ processing departments to review ATM deposits earlier in the day, meaning they can catch potential fraud sooner than with conventional ATMs. Imageenabled ATMs also help reduce internal kiting. For additional protection, many banks incorporate ancillary fraud products that are integrated with their core systems and ATM channel for added ATM deposit fraud protection and prevention.

Optimize the efficiencies of your ATM channel: Deploying image capture technology at the ATM optimizes the efficiencies of this convenient channel. In addition to eliminating the need for banks to collect paper items each day from their ATMs, image-enabled ATMs also reduce back-office expenses because deposit processing is accelerated and the time spent balancing ATMs is significantly reduced.

Unless the ATM cannot read a check, misreads a check, or the check is suspected to be fraudulent, there’s no need for an employee to physically process ATM deposits.

Dramatically improve the customer experience: Turning paper checks into electronic files enables banks to process the deposits faster, which means funds are available sooner. Business day cut-off times for ATM deposits become virtually nonexistent. Customers no longer have to fill out deposit slips or bank envelopes, and they receive the digital image of the front of their checks directly on their receipts. The immediate validation of this process gives customers peace-of-mind.

Sharpen your competitive edge: Imageenabled ATMs can help banks attract and

retain retail and business customers alike, because it frees bank staff to focus their time and attention on sales and service rather than routine transaction processing. Image-enabled ATMs also offer a “cool” factor that sets your ATMs apart from the ones down the street.

After realizing the benefits of this sophisticated ATM technology, it’s clear why so many banks are choosing to implement image-enabled ATMs. Among those banks, many are selecting fully automated and integrated ATM management solutions.

Integration provides additional efficiencies including speeding banks’ access to realtime data from multiple banking channels, improving the ability to cross-reference information, and reducing the time spent troubleshooting issues.

In addition to integration, there are other important benefits in a fully automated ATM channel. Look for a platform that incorporates leading-edge imaging, transaction balancing, and fraud detection technology to fully automate the processing and management of ATM deposits through their entire lifecycle. Total automation means you will benefit from image capture and processing at the ATM, deposit reconciliation, automated balancing, courier management, fraud detection and prevention, report and audit trail generation, and more.

You’ll want to look for a management system that supports all major ATMs, branch and centralized check transports, teller window devices such as MICR swipe readers, and check image capture devices. And you’ll want to ensure you choose a proven and trusted vendor that can offer you dedicated support every step of the way.

If you haven’t considered an image-enabled ATM platform, what are you waiting for? ■ Tamara Coole is an advanced application educator at Jack Henry Banking, a division of Jack Henry & Associates. She can be reached at tcoole@ jackhenry.com.

Fall 2012

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Fall 2012 New Jersey Banker

17

Feature

Retention is a Two-Way Street

By Cheryl Gochis

E

mployees are expensive. Salaries, benefits and training and development all add up. There is a prevalent concern that if you develop your employees, it will be wasted money, because they will then leave for higher pay.

The truth is, the best people will always have options for where they want to work.

Sometimes people will leave no matter what you do. The unpleasant alternative is to only hire people without options. As the old saying goes, “The only thing worse than training people and having them leave is not training them and having them stay.”

The most talented people got that way because they love to learn, grow, develop and take on new challenges. They do not – and will not – suffer stagnation. Ironically, not developing people gives high performers more incentive to leave, not less.

People will sometimes leave for more money. All things being equal, more money is better than less money, but things are very

18 New Jersey Banker

rarely equal. Just as businesses attract and retain customers on factors in addition to price, people join and choose to stay with employers on factors in addition to salary.

Although money is important, it’s not everything.

Consider your own situation. Is it possible that there is a company out there willing to pay you more money than you’re making right now? Of course! If you’re skilled, talented and know what you’re doing, there will always be companies willing to pay for your skills. So why aren’t you looking?

Sure, you might have to move across the country, or even to a different country. It would probably be hard on your family.

It might mean burning bridges, changing industries, leaving behind friends and families, giving up a fantastic house, working for a company you despise, etc. There are dozens of reasons you aren’t actively looking.

Let’s turn it around. Would you work for less money? Would you actually take

a cut in pay? No? What if it meant a much shorter commute? Significantly better health insurance? Getting away from your current boss? Doing work that really mattered to you? Was in a small town you love with a great quality of life? Meant better schools for your kids? Was better aligned with the kind of work you really enjoy? Would mean working with a phenomenal mentor who is a superstar in your field? Was for a revered company that would create tons of future opportunities?

The fear that talented people will be lured away by the competition is very, very real.

We get that. But not developing good people – the people you really want to have stick around – because they might leave is sort of like refusing to build a great relationship with your spouse based on the fear that he or she might leave you in the future. Yes, it’s possible they will end the relationship after all the time and effort you put in. The great irony, though, is that the best way to ensure

Fall 2012

they leave you is to ignore them – or treat them like you’re expecting them to leave for someone better.

So, how do you develop great people and get them to stick around?

• Approach everything from the perspective that it is impossible to increase the company’s performance without first increasing individual performance. A company will not do better until the people do better. The quality of your people will make or break your company.

• Hire and develop great managers who understand that their primary job is to hire and develop great people. People tend to stay or go based on their relationship with their manager. High performers want to work with a manager who champions, challenges and takes a strong interest in helping them be their very best.

• Realize that development doesn’t have to be expensive. Sure, you can pay $80k for an executive MBA, but you can also develop people through on-the-job training such as intentional and well-planned projects, rotations, and job shadowing.

In-house libraries, lunch and learns, and memberships in professional organizations can also be very inexpensive, yet effective.

• When development is expensive, tie at least some of the cost to a repayment or non-compete agreement.

• Make ongoing growth and development a performance expectation. Not a “nice to do when you get to it,” but a job requirement.

• Acknowledge people. No, we don’t have to give trophies for last place, but all people want to know that their hard work is noticed and appreciated. There are plenty of opportunities for people to be recognized by their supervisor, team, department and company.

• Give people room to fail. All development requires change. It requires learning new skills and habits and that is neither comfortable nor instantaneous.

People need to know that they aren’t expected to get it perfect the first time out.

• Money isn’t everything, but it needs to be in line with the market. One of the best ways to make someone feel unappreciated is to cheap out on their salary. If you

don’t appreciate your folks, they’ll find someone who does.

• Loyalty comes from trust. Do you stand behind your employees in their toughest, most human of moments? Can they count on you to be there when they need you the most?

In short, the best and easiest way to improve retention is to treat your people as

though you need them more than they need you. Because it’s true.

■ Cheryl Gochis is executive vice president and director of human resources for Extraco Banks. She is results-focused and views the employee experience as the linchpin between strategy and execution. She has a master’s in organizational communication and 15 years of experience in the banking industry, leading human resource and training departments.

Fall 2012 New Jersey Banker

19

Cover Feature

IT’S GETTING EASIER TO BE GREEN CUSTOMERS LOVE IT, AND SO DO THE BALANCE SHEETS

A ribbon-cutting ceremony celebrated the greening initiative for SpectraMedia/Cox Printers. From left to right: Kevin Cummings, president and CEO, Investors Bank, and NJBankers chairman; Michael Kaufman, president, Cox Printers; Richard J. Gerbounka, mayor of Linden; and Martin Rubin, president of SpectraMedia. Photo by Brian Pope.

"OVER THE LAST DECADE, THE PUSH TOWARD RENEWABLE RESOURCES HAS CHANGED THE WAY BOTH RESIDENTIAL AND COMMERCIAL CUSTOMERS BUY THE PRODUCTS THEY NEED. "

20 New Jersey Banker

Fall 2012

By Christina P. O’Neill

New Jersey banks are backing energy-efficiency projects for their customers and taking part in such projects themselves. They realize that money saved on energy costs is money earned, not only today, but for many tomorrows – and they are willing to lend to support capital-improvement projects that result in those savings.

They’re also adopting environmentally-friendly, energy-saving practices in their own offices, whether it’s a single branch or a corporate headquarters.

They’re working in concert with suppliers who have mastered the ability to gauge ROI – how rapidly a given project will pay for itself – and who are increasingly more responsive to what today’s business and retail consumer is looking for.

STARTING IN OUR OWN BACK YARD First Hope Bank’s Blairstown office is now almost 97 percent self-sufficient in its

energy usage as a result of a nearly twoacre, 425 kilowatt ground-array solar field behind its building, completed in July of 2011. Carbon emissions are expected to be reduced by 8.6 million tons over the next 25 years. The field was installed by KG Companies of Sparta, NJ. First Hope also finances renewableenergy projects for both residential continued on page 22

First Hope Bank held a ribbon-cutting ceremony to celebrate the completion of a solar field behind its Blairstown office. The ceremony featured members of the community, the team that constructed the nearly two-acre project, and First Hope board members and associates. The solar field will offset nearly 100 percent of the Blairstown office’s energy consumption on a yearly basis and will reduce its carbon emissions by 8.6 million tons over the next 25 years. Pictured, Dan Beatty, COO of First Hope, left, shakes hands with Kurt Gewecke, project general contractor and president of KG Companies of Sparta.

LEED CERTIFICATION

Information on LEED certification – what it is, its advantages, how to achieve it, tips for planning a LEED project, and an abundance of case studies – can be found at the website of the Natural Resources Defense Council, www.nrdc.org/buildinggreen/leed.asp

21

Cover Feature Easier to be Green continued from page 21

STRIVING FOR ZERO IMPRINT ON THE ENVIRONMENT Cox Printers, based in Linden, partners with SpectraMedia, an associate member of the New Jersey Bankers Association. Founded in 1907, Cox Printers operated under three generations of the Cox family before its sale to the Kaufman family in 1982. Second Kaufman generation president Michael Kaufman sought to change the way the venerable financial printing firm operated from the inside out.

“Printing has for years been perceived as a ‘dirty’ industry,” he says. “This is a great way to clean up that image.” But image is only part of the reason to go green. With environmental awareness on the part of the New Jersey business community constantly increasing, it made marketing sense to go green.

The capital improvements made by Cox are described in the main article. But there’s more.

Cox has transitioned to using all nonpetroleum-based ink and the removal of 99 percent of all hazardous chemicals from its processes. This is of vital long-term importance as more information emerges in scientific studies on the long-term effects on human health of traditional petroleum-based products – and the solvents that must be used to clean up after them.

Cox also recycles its wood pallets, which are converted to mulch, and recycles toner cartridges, batteries, and thousands of pounds of paper. It has partnered with UPS to track carbon usage of all its shipments, and pays to have UPS purchase carbon credits to offset its usage. It also offers a wide selection of recycled and reforested papers.

The most striking adaptation is a 100-square-foot roof garden. Cox uses water from the air conditioning systems to water the plants when needed, and the plants help cool the roof.

“There is no way to measure any ROI on the roof garden other than the beauty it brings to a small area of tar-covered flat roof, and to the bees that enjoy it,” he says.

22 New Jersey Banker

and business customers. Its underwriting for such projects is the same as for any other commercial loan – it looks at the company’s ability to service the debt through existing cash flow. It does not factor in energy savings, nor does it consider SREC’s for repayment of the loan, because of the widely fluctuating market for Solar Renewable Energy Certificates (SRECs), which utilities can purchase from homeowners, businesses and investors that own solar installations. Donald Somma, senior executive vice president of First Hope, says that the first renewable-energy deal the bank did, a SREC, fetched $426.

Now it stands at $200. “It could rise or drop – it’s very volatile,” he says.

Needless to say, more and more consumers are looking to become green themselves, and there is a certain level of comfort when the businesses they use are also concerned about the environment.

tax incentives for the 36 KW solar and light projects helped defray the out of pocket costs and ROI of the two projects. Replacing the lights was approximately $19,000 out of pocket but full return on investment should occur in four years, according to an energy-use analysis of the project. The full return on the solar project, about $93,000 out of pocket is harder to determine, but Kaufman says the estimate expects it to be an eight year payback, which is well within the parameters of a 20-year guarantee on the panels “and presuming the sun will continue to shine,” he says. The return on the wind project – $25,000 out of pocket for two Honeywell Windtronic 6500 turbines – is still too new to estimate. A desire to achieve a “green” goal was the driving force behind SpectraMedia/Cox Printers’ comprehensive initiative. “We could have simply bought carbon credits someplace and thought that good enough,” Kaufman says.

ASSESSING ROI

REPAY AS YOU GO

Investors Bank has financed a combination of solar and wind-energy improvement for SpectraMedia/ Cox Printers. SpectraMedia is an associate member of the New Jersey Bankers Association, and it partners with Cox Printers, a Linden, NJ-based commercial financial-services printer that has undertaken a comprehensive green initiative involving both capital improvements and changes in operation.

NJBankers Chairman and Investors Bank President/CEO Kevin Cummings says the bank supports most green initiatives as long as the cash flows of the operating company are sufficient to pay back the loan.

The bank uses real estate for collateral, but this use varies by transaction, loan request, and the company’s relationship with the bank, Cummings says. The energy savings from a completed solar project are factored into the underwriting of the loan at a discounted rate. Investors does not finance suppliers, nor does it factor in the pricing of SRECs when deciding to make a loan.

Cox Printers needed to retrofit more than 180 light fixtures. Firm partner/ president Michael Kaufman notes that the

Constellation is the endorsed energy supplier for the New Jersey Bankers Association. It owns and operates more than 108 megawatts of solar installations either existing or under construction in the United States. Nearly 22 megawatts of that infrastructure is in New Jersey. It structures solar projects as power purchase agreements, requiring no upfront capital from customers, and provides power at a fixed cost that is less than projected market rates. Constellation finds and secures rebates from state agencies and utilities, as well as federal and state tax incentives, which serve to reduce the cost to deliver solar energy.

“We keep hearing from commercial customers who tell us, ‘I’d love to be more energy efficient, but I have to spend money on my core business,’” says Michael Smith, Constellation’s vice president of solar and energy efficiency. “We will do the quick payback energy efficiency measures, such as lighting retrofit – we pay for it, and the customer pays us back over the course of three years from savings on the energy bill.”

While the unit cost of the power under the agreement will be higher, the unit usage will

Fall 2012

be less. “At the end of the three-year time period, you continue to get paid back, I’ve been paid back, and everybody’s happy,” Smith says.

CUSTOMER CLOUT Over the last decade, the push toward renewable resources has changed the way both residential and commercial customers buy the products they need. Gary Saulson, head of realty services at PNC Bank, buys furniture and equipment for the bank’s 33 million square feet of space throughout its network. Its 650,000 square foot Firstside Center, which opened in September of 2000, was the first building in the U.S. to be designated under LEED 2.0.

Saulson recalls getting some strange looks from suppliers during the building’s creation when he and his team sought out low-VOC paint (volatile organic compounds). Now, VOC is part of a more

mainstream lexicon. One furniture supplier warned that it would have to upcharge for renewable-energy items. Saulson’s reaction: We’ll find another supplier. The supplier relented.

Today, Saulson says, “we find more companies are making products that consumers are demanding.”

PNC’s procurement team evaluates hundreds of thousands of items each year, and has become a well-informed consumer sought out by suppliers. “They’re interested in what we as a consumer like or don’t like about products they’re manufacturing or thinking of manufacturing. And now, instead of strange looks and warnings about upcharging, suppliers use PNC endorsements as a marketing tool.

CULTIVATING NEW CUSTOMERS WITH GREEN There’s another factor in the move toward renewable power – the marketing

benefit to power users who want to be able to tell their customers that they buy green.

“We help customers grow their top line by fulfilling the demand for a sustainable product,” says Constellation’s Smith.

Beyond that is the move by very large buyers – for example, WalMart and the federal government – to demand that their suppliers produce in a sustainable way.

Being able to cite renewable energy usage should put suppliers in better standing during the procurement process.

“The point is, even in the absence of compelling regulatory reasons, there are economic reasons for customers to [buy renewable energy],” Smith says. “If I can say buy my product because it will attract more customers and save you power, that’s a hugely important consideration for a whole lot of reasons.”

■

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Fall 2012 New Jersey Banker

23

Feature

Cloud Computing THE SIMPLICITY OF BANKING IN THE PAST IS NOW IN OUR FUTURE

By Chuck Daniels and Christian Ericson HOW DID WE GET HERE?

T

he evolution of technology in the banking industry has both helped and significantly challenged community banks. In the late 1970s, the only technology community bankers needed was a black phone and a green computer screen. Since then, the products and services community banks offer their customers has drastically improved, but it has also created an increasingly complex and expensive burden on the banks.

Currently, technology and telecommunications costs are generally the second-highest non-interest expense for community banks, following employee salaries and benefits. With the constant stream of rapid technological developments over the past 30 years, it’s hard to believe that it’s actually possible to return to the simplicity of the past. So how do we get back to the simplicity of the past?

24 New Jersey Banker

In the timeless movie, “Back to the Future,” Michael J. Fox’s character, Marty McFly, goes back to the past and changes how the future turns out for his parents.

Wouldn’t it be great if we could travel like Marty and go back to a time when banking was less complex and more about … well, community banking? Back to a simpler time when the focus was on customers and relationships, instead of technology and telecommunication problems. Unfortunately, time traveling is not currently an option, but the arrival of “the cloud” offers the perfect solution, enabling us to get back to a time where technology wasn’t associated with constant stress or expenses. Doesn’t that sound appealing?

Let’s retrace our steps and remember how we got here. The first major technology improvement in banking involved telephone systems.

Chuck Daniels The phone system was quickly followed by the personal computer. But the personal computer didn’t come alone – it required a ton of supplementary technology; an operating system, software Christian Ericson applications and core banking applications, file servers to store documents, and printers to print those documents. In order for a bank’s branch to operate more efficiently, local area networks (LANs) were created so that PCs in the same branch could share hardware devices like printers and file servers. And as a bank expanded (adding new branches), new network circuits and routers were needed to form a wide area network (WAN) to connect all branches together so that information could travel among locations.

With the ’90s came the Internet browser and access to the World Wide Web. Undoubtedly, it changed the way society communicates forever, providing users with a consistent interface to data that is stored on websites around the world. But for businesses like banks, it simultaneously meant heaping more complications onto the pile of necessary technology for a bank branch to run. Firewalls, spam filters, virus protection, and other security devices were created to appease the serious risks that came with being connected to the world – a huge concern for businesses like banks.

Fall 2012

Lastly, all this technology requires upfront investments, support, upgrades, and replacements – all tasks that demand significant time from internal IT resources.

In addition to this time, it requires internal resources to possess comprehensive mastery and more time to acquire various technology certifications and gain best practices and specific regulatory requirements.

SO WHAT IS THE CLOUD? It’s quite clear to see how banks now require a lofty laundry list of technology items in order to operate and provide their customers with premium products and services. So how exactly does the cloud ease these complications and make your telecommunication needs a whole lot easier to satisfy?

The cloud is a delivery vehicle by which customers receive a hosted and sometimes managed service from its provider. To make it easier to understand, a lot of necessary everyday services you require in your bank are provided via a cloud. For example, electricity is a service that is delivered over transmission lines to light our offices and power our technology – but is produced in electric power plants. In this case, the cloud are those transmission lines. Another example is water – our water is delivered over piping systems via a water company. In this example, the piping system is the cloud.

The cloud that we talk about is a powerful combination of the Internet and the network circuits that form the bank’s WAN. There are two types of clouds that are important to community banks: • The public cloud: This type of cloud uses the Internet to deliver the service, often unencrypted.

• The private cloud: This type of cloud utilizes dedicated circuits to deliver the service, often encrypted.

Three key technological breakthroughs in the past 10 years provide simplification of banking using the cloud. First, the convergence of voice and data networks, allows for voice, video, core data and Internet traffic to all run on a single network among a bank’s branches. Secondly, “virtualization” allows dozens of file servers

and application servers to be condensed to one virtual server. Finally, the widespread availability of large bandwidth network circuits allows applications and data to be run over the cloud with the same performance as if they were run over the LAN in the bank.

These three technological breakthroughs have enabled the cloud to revolutionize the way traditional community banking will operate in the future. Many of the technologies that finagled their way into banking over the past 30 years will be moved into the cloud – greatly simplifying everything.

WHAT WILL MOVE TO THE CLOUD? Community banks will migrate a majority of their technology to the cloud over the next five to 10 years. Many community banks have already moved their telephone, voicemail and email systems to cloud-based providers. The next major

technology to move to the cloud-based datacenters will be the bank’s PCs and all of the equipment they use; operating systems, applications (both core and Microsoft applications), and virtualized fileservers.

Furthermore, any threats the Internet presents will be moved from the bank’s “front door” to the cloud, protecting the bank’s “private cloud” from the Internet’s “public cloud.”

Once most of the technology that has invaded our community banks has been moved to the cloud, bank executives will be left with the two items they needed to be bankers in the 1970s – a phone and a computer screen. Marty McFly could not have asked for a better future for community banks!

■ Chuck Daniels is CEO of BITS. Christian Ericson is chief marketing officer of BITS and can be contacted at christian.ericson@bitsnetwork.com or 973-474-1828.

Seeking Enforcement Litigation Deputy The Office of Enforcement at the Consumer Financial Protection Bureau (CFPB) seeks to hire a Litigation Deputy to serve on its senior leadership team.

As one of four Litigation Deputies reporting directly to the Enforcement Director, this Litigation Deputy will primarily: • Manage 20-30 litigation attorneys and paralegals who conduct investigations and litigate cases, as well as support compliance examinations, concerning depository and non-depository entities.

• Oversee issue teams analyzing potential matters for Enforcement action relating to consumer financial products and services such as credit cards, deposit accounts, payday lending, and money services.

• Serve as a member of the Office’s senior team in planning, directing, coordinating and evaluating CFPB’s Enforcement programs.

Successful candidates will have the following skills and experiences: • 5+ years experience in-house at a depository institution, handling legal or compliance functions relating to Federal Consumer Financial Laws.

• Demonstrated capacity to manage a complex assortment of simultaneously pending investigations and litigation.

Interested candidates should send a resume and cover letter to CFPBOfficeofEnforcement-Recruiting@cfpb.gov.

Fall 2012 New Jersey Banker

25

Feature

Hidden Benefits of an Automated Vendor Risk Management Program

By Michael Edison

W

hat instigated the requirement for a vendor risk management (VRM) program? Section 501(b) of the Gramm-Leach-Bliley Act (GLBA). The contents of GLBA require the establishment of financial institution guidelines to monitor and manage the institutions vendor relationships, ensuring minimal risk exposure to non-public personal informaMichael Edison tion (NPI). It is expected that a well-designed VRM should

meet examiner expectations regarding these guidelines.

In most cases, financial institutions that have avoided VRM implementation have not slowed their pace of adding new services for clients. These new services frequently lead to new vendor relationships. Should this pattern be followed for an extended period of time, substandard scenarios emerge, creating chaos. Inferior practices occur, such as the inability to locate contracts, infrequent vendor financial reviews, and in some cases, an inaccurate vendor list. As is discussed below, these issues can be overcome through the automated VRM implementation.

By implementing and following a VRM,

We are pleased to announce that Jenna A. Conrad has joined as Of Counsel Jenna is a seasoned commercial banking and real estate practitioner with private practice and in-house experience. Most recently, she was with Beneficial Bank where she was the bank's first in-house lawyer.

Jenna joins Chris Tucci and the Banking Law Practice in the Cherry Hill office, serving South Jersey and the Greater Philadelphia area.

Cherry Hill Liberty View Building, 457 Haddonfield Road, Suite 230, Cherry Hill, NJ 08002 P. 856.317.7100 Philadelphia 1500 Market Street, 12th Floor, East Tower, Philadelphia, PA 19101 P. 215.246.3403 Roseland

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Cherry Hill

www.connellfoley.com 26 New Jersey Banker

Spring Lake

Philadelphia

timely, ongoing due diligence information is maintained. What other benefits lie within the grasp of the institution when implementing an automated VRM?

CONTRACT/AGREEMENT TRACKING AND REPORTING AUTO-RENEW CONTRACTS One of the most frequent issues identified by financial institutions regarding vendor relationships is the problem created by the existence of auto renew contracts. Auto renew contracts are convenient ways of entering into long-term agreements with built in commitment and periodic flexibility to terminate the relationship. The key issue relating to these contracts is the requirement to notify the vendor of intent to terminate the agreement within a predetermined number of days (the renew window) prior to the contract anniversary date of the last year in the initial contract term. If the institution fails to notify the vendor prior to the renew window, the contract automatically renews for a predetermined period of time, which is usually one year. The unfortunate result of this situation is that institutions without automated VRMs typically have no way of knowing when the renew window is approaching. Most attempt to track this oncoming deadline with spreadsheets.

However, if the spreadsheet is not opened and run on a daily basis, the contract is likely to move into the renew window, where it is too late to terminate. Regardless whether the institution no longer wishes to utilize this vendor, it will be saddled with another term of fees, potentially costing the institution tens, or even hundreds of thousands of dollars.

An automated VRM should notify the institution’s stakeholders prior to the start of the renew window. This would allow them time to review the relationship and to determine whether to continue or terminate the continued on page 28

Fall 2012

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.

Investors Savings Bank and The Provident Bank used FHLBNY advances to help provide permanent financing to New Community Corporation (NCC) for its Workforce Development Center, from which NCC offers employment programs, training courses, financial aid, and job placement assistance to New Jersey’s underprivileged residents. The advances helped stabilize the economic future of the Center so NCC can continue to improve the quality of life of inner-city residents.

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.

Vendor Risk Management continued from page 26

relationship. Additionally, the VRM should escalate the notifications in the event that no action has been taken by the stakeholder.

This capability will frequently offset the cost of the VRM software license. The value of this capability is not, however, limited to auto renew contracts.

MAINTENANCE AGREEMENTS Maintenance agreements may not be of the auto renew category. Therefore, it is important to recognize when maintenance agreements are approaching expiration. By recognizing an approaching expiration date in advance, a situation where maintenance is required, yet the vendor is no longer under contract to provide it, is thwarted. A feature of a trusted VRM should be to notify the stakeholders with ample time to avoid this situation.

CERTIFICATES OF INSURANCE Certificates of insurance may exist to protect the institution from major losses due to

vendor negligence. Even though vendors should proactively notify their clients when there are changes in policy, or a policy is being cancelled due to lack of payment, the institution should periodically verify that the insurance certificate is up-to-date and accurate. The automated VRM should notify stakeholders in a manner similar to that used in auto-renew contract notifications. The same can be said for contract addendums.

CORPORATE AWARENESS It is essential that institution executives be aware of risk posed due to vendor relationships. Ongoing due diligence is key to accomplishing this. As previously stated, an automated VRM should proactively create, track, and enforce vendor due diligence pursuant to institution policy. This proactive capability, combined with an institution’s commitment to necessary human resources, will yield the information necessary to keep institution executives aware of vendor risk exposure, thus meeting examination requirements.

Why

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As the banking industry thought leaders they know we can give them the answers they need. We specialize in working with community and commercial banks, credit unions and United States branches of foreign banking institutions.  Outsourced Internal Audits  Bank Secrecy Act Reviews  Information Technology Audits  Enterprise Risk Management  Regulatory Compliance

EFFICIENT USE OF MANPOWER When an institution does commit the necessary resources, the VRM will utilize its detailed workflow capability by notifying the users and leading them through the workflow process. The process will include attaching due diligence documents for easy future reference, leading through the due diligence questionnaire, thus providing the user with the capability to generate reminders for tasks that will be completed in the future. In addition, the process will provide a history of how questions have been answered in the past.

Beneficial for organized, easy access and future reference, this will save the institution significant time over the life of the program.

Time is also saved when needing to access pertinent vendor due diligence and reference information.

ENHANCED REPORTING An often overlooked benefit of an automated VRM is the ability to generate valuable reports based on the information acquired from the due diligence process.

There are reports that have obvious benefits. They include: Contract Detail, Vendor List, Product List, Assessment Status, and Vendor Ranking. These reports provide the institution with valuable information regarding their contracts, vendors, products, and due diligence status and results. Not to be ignored is the ability to provide disaster recovery reports that show the relationship of vendors and products to the line of business which utilized them. In the event of a disaster, this information will prove to be the most valuable knowledge necessary to reestablish services.

SUMMARY Call Sal Zerilli at 609-689-9700 or email szerilli@mercadien.com

Mercadien.coM • 609-689-9700

In summary, there are numerous benefits to implementing an automated VRM. Some are obvious, yet there are hidden benefits that should be recognized as well. They include: • Contract/agreement tracking and reporting.

• Corporate awareness.

• Enhanced reporting.

■ John M. Edison is CEO of Fortrex Technologies, Inc. He can be reached at 301-977-6966.

Certified PubliC ACCountAnts • ConsultAnts Technology • WealTh ManageMenT 28 New Jersey Banker

Fall 2012

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Bank Notes

Bart A. Sobieralski

Kelly Yaede

Mark Purrington

ORITANI BANK The OritaniBank Charitable Foundation recently awarded a $25,000 grant to the Shelter Our Sisters (SOS) Children’s Program.

Founded in 1976, SOS provides emergency shelter for victims of domestic violence in Bergen County. The Children’s Program at the Emergency Shelter works specifically to aid children by stabilizing the child’s environment and counteracting the effects of abuse resulting from violence at home.

“This is our second year supporting Shelter Our Sisters because we believe the

John S. Kosko

Gerald L. Reeves

organization performs an invaluable service by protecting vulnerable children,” said Kevin J. Lynch, president of the OritaniBank Charitable Foundation and chairman, president and CEO of Oritani Bank. “More than 150 children a year are involved in the program, and with the help of SOS they can begin to repair their lives after the impact of domestic violence. The future of Bergen County and our communities is truly about the future of our children, which is why we are so proud to support the positive work of SOS’.”

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OritaniBank Charitable Foundation’s donation to Shelter Our Sisters will help fund, in part, a comprehensive therapy program to address the anger, depression, anxiety, aggression and self-esteem issues, as well as the impaired social skills development, that often result from domestic abuse and violence at home. For more information about Shelter Our Sisters, visit www.shelteroursisters.org or call 201-836-1075.

PWCAMPBELL Bart A. Sobieralski was appointed to the sales and marketing team of PWCampell. As the newest regional vice president, Sobieralski will be responsible for marketing in the current New York and New Jersey territories as well as expanding into New England.

Sobieralski joins PWCampbell with more than seven years experience in sales and marketing in the New England region. He holds a bachelor’s degree from the University of Connecticut.

ROMA BANK Kelly Yaede has joined Roma Bank as vice president of community relations. In this capacity, Yaede will represent the public image for Roma Bank within the communities the bank serves. Most recently, Yaede completed a successful tenure with the American Cancer Society, serving as their senior director of corporate relations. Yaede was elected to the Hamilton Township Council three times and currently serves as council vice president.

She has also served as vice president of the Hamilton Township Board of Education.

SCHUYLER SAVINGS BANK Mark Purrington has joined Schuyler Savings Bank and will be responsible for managing existing accounts, developing new lending opportunities, and ensuring the smooth and efficient processing of loan applications from reviews to closings.

Purrington holds state banking and mortgage originators licenses. He is also a HUD direct endorsed underwriter and holds a bachelor’s degree from the University of North Carolina/ Wilmington.

Fall 2012

TD BANK John S. Kosko has been named vice president and business development officer in Small Business Administration (SBA) Lending. He will be focused on providing SBA financing to qualified small businesses throughout Passaic and Hudson counties in northern New Jersey.

Kosko has 20 years of experience in banking, finance and lending. Prior to joining TD Bank, he served in several positions in the SBA Lending Group at CIT Group including director of credit and risk management, regional sales manager for the Northeast, national training manager and east coast region credit manager.

Kosko received an MBA from Seton Hall University and an undergraduate degree from Penn State University.

THE FEDERAL RESERVE BANK OF PHILADELPHIA Gerald L. Reeves, president, CEO, and director of Sturdy Savings Bank, has been appointed to the Community Depository Institutions Advisory Council (CDIAC) for a three-year term. The 12-member council is composed of representatives from commercial banks, thrift institutions, and credit unions who convene twice a year in Philadelphia to share insights on economic and business trends facing community depository institutions in their local markets.

Reeves has served in his current role at Sturdy Savings Bank since 2008. He joined the bank as vice president in 1991. In that role, he developed Sturdy’s commercial lending department. Before that, he served as a regional vice president with Chemical Bank, overseeing its commercial lending activities in Cape May County. Reeves began his banking career in 1981 at the former Marine National Bank in Wildwood. Chemical merged with Marine National Bank’s holding company, Horizon Bancorp Bank, in 1989.

Reeves is on the board of the New Jersey Bankers Association and a member of its executive committee.

Reeves has a bachelor’s degree from the University of Delaware and an MBA from Monmouth University.

■

Fall 2012 New Jersey Banker

31

Bank Shots

UNION CENTER NATIONAL BANK has established a $15,000 scholarship program with the County College of Morris (CCM). The new scholarship will provide many students the ability to achieve their dream of a college education and a rewarding career. From left to right: Joseph T. Vitale, president, CCM Foundation; Mark S. Cardone, senior vice president Union Center National Bank; and Edward J. Yaw, president, CCM.

In the spirit of community support, a group of NEWFIELD NATIONAL BANK employees, family and friends, in association with the Vineland Rotary Club, volunteered to assist the Challenger Baseball League at Cunningham Park in Vineland. Any physically or mentally challenged boy or girl, age 5 to 18 years old, is eligible to participate. Volunteer buddies include, from left to right: Scott McMahon, Cheryl Crawford, Butch Comparri, Mary Ann Fithian, Geno Mainero, Susan Eastwick, Chuck Grova, Rob Tola and Donata Dalesandro.

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Fall 2012

Volunteers from COLUMBIA BANK teamed up with Paterson Habitat for Humanity to help build a new, affordable-living home in the greater Paterson area. The Columbia volunteers, who completed various framing assignments, provided the elbow grease necessary to move the construction project along. Since 1993, Columbia has also sponsored grants totaling more than $1.2 million, which has funded 130 Habitat homes.

Associate member CHRISTENSEN TAMBURRI COMMUNICATIONS (CTC) received three first place awards at the annual NJ Ad Club awards ceremony. Among the awards was a first place in the category of public relations advocacy/political multimedia campaign for NJBankers. The campaign, themed “Blue Sky Opportunities,” included the NJBankers annual report, posters and various conference guides for programs held throughout the year by the association. The other two first place awards were for clients Columbia Bank and Millington Savings Bank. Pictured from CTC are Don Christensen, partner and account services director; Michael Triano, director of creative services; and Bob Tamburri, partner and creative director.

2013

BANK OF AMERICA has partnered with Junior Achievement of NJ for more than 10 years, providing various financial literacy education initiatives across the state. Throughout this past school year, nearly 125 BoA employees volunteered their time to teach JA’s hands-on, experiential programs at four schools in Camden, Jersey City, Newark and Trenton, reaching 1,100 youth in those areas. Pictured are Bank of America volunteers who taught JA’s financial literacy programs to students at PS 24 in Jersey City.

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Bank Shots

NJBankers hosted a delegation of 20 Japanese bankers, members of the Kanto Shinkin Bank Association, an association much like NJBankers. Chairman Kevin Cummings, president/CEO, Investors Bank; John McWeeney Jr., president/CEO, NJBankers; and Jim Meredith, EVP/COO, NJBankers, provided an overview, through an interpreter, of the banking industry in NJ and as requested by the group, provided information on regulatory issues, channel strategies, lending strategies and the challenges and opportunities for community banks in NJ. A Q&A period confirmed that we are now truly citizens of the world with global and local issues converging.

KEARNY FEDERAL SAVINGS BANK: West Orange High School students received certification in financial literacy after completing the district’s new online “Financial Scholars” program created

by NJBankers endorsed service provider EverFi Inc. and funded by Kearny Federal Savings Bank.

The 10-module, web-based course uses the latest media technologies – video, animations, 3-D gaming, avatars, and social networking – to engage today’s digital generation. Pictured are West Orange High School students with Eric Kesselman, vice president/director of marketing of Kearny Federal Savings Bank.

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

To learn more, please contact Fred D. Price, Managing Principal, at 800.635.6855, or visit www.sandleroneill.com.

Sandler O’Neill + Partners, L.P.

34 New Jersey Banker

Fall 2012

New Associate Members BancAlliance

4445 Willard Avenue, Suite 1100 Chevy Chase, MD 20815 Contact: Lori Bettinger, President Phone: 301-232-5444 Email: lbettinger@alliancepartners.com

Cyberthink, Inc.

1125 U.S. Highway 22, Suite 1 Bridgewater, NJ 08807 Contact: Rajveer Thind, Staffing Consultant Phone: 908-429-8008 Email: rajveer.thind@cyberthink.com

Guardian Analytics

265 Latham Street, Suite 200 Mountain View, CA 94040 Contact: John Love, Director of Marketing Phone: 650-383-9200 Email: jlove@guardiananalytics.com

Levy & Watkinson, P.C.

1460 Route 9 North Woodbridge, NJ 07095 Contact: Wayne Watkinson, Partner Phone: 732-404-1128 Email: waynew@levywatkinson.com RIKER DANZIG SCHERER HYLAND & PERRETTI LLP recently hosted its annual Women in Leadership Reception at the Westin Governor Morris. This year’s guest speaker was actress, playwright and author Tina Sloan. Sloan spoke about her autobiographical book, Changing Shoes. Sloan (bottom row, second from left), is joined by Riker Danzig partners Sigrid Franzblau, Sandra Brown Sherman, Mary Kay Roberts and Marilynn Greenberg, and top row, left to right: Mary Ellen Scalera, Cathleen Giuliana, Jan Bernstein and Jennifer Lazor.

Princeton Global Asset Management, LLC

28 Talbot Lane Princeton, NJ 08540 Contact: Daniel Goldman, Managing Director, Business Development Phone: 609-945-1781 Email: Daniel.goldman@pgam-llc.com

The Original and Still the Best Principles of Banking from the American Institute of Banking For more than 85 years, AIB Principles of Banking (POB) has started the careers of millions of successful bank professionals. Covering every aspect of the industry and its role in the economy, POB is still the most comprehensive introduction to banking and the foundation course for all AIB diplomas.

Principles of Banking Tenth Edition

AIB makes it easy for your employees to manage their professional and personal schedules by offering courses in a convenient instructor-led online format that combines high-quality instruction with a virtual classroom. Or, you can teach it in the bank.

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AIB Principles of Banking is only available through ABA or an authorized Local ABA Training Provider.

American Institute of Banking

from the American Bankers Association

Fall 2012 New Jersey Banker

35

Upcoming Events October 1, 2012

Enterprise Risk Management (ERM) Conference

Crowne Plaza Monroe, Monroe Township October 9 – 10, 2012

ERM Two-Day Session with FinPro, Inc.

Somerset Hills Hotel, Warren October 18 – 19, 2012

Annual Human Resources Conference

Caesars Resort, Atlantic City

NEW JERSEY’S ECONOMIC CONFERENCE

JANUARY 11, 2013

October 22, 2012

Annual Bankers’ Legislative Day in Trenton

Trenton November 1, 2012

New Leaders in Banking Gala

In conjunction with BankHorizons Tropicana Casino & Resort, Atlantic City November 2, 2012

BankHorizons

Tropicana Casino & Resort, Atlantic City November 30, 2012

CFO Conference with FMS

Renaissance Woodbridge Hotel, Iselin November (date TBA)

Bank Secrecy Act Seminar

Location TBA December 4 , 2012

Operations & Technology Seminar

Crowne Plaza Monroe, Monroe Township December 6, 2012

Join Us For New Jersey’s Most Important Economic Conference Join the New Jersey Bankers Association and the state’s most important business leaders as we lay out and discuss the vital issues affecting the Garden State.An impressive and dynamic group of speakers will gather once again to give a benchmark for New Jersey’s economic outlook in 2013. Presenters will touch on New Jersey’s most important business sectors at this year’s New Jersey Economic Leadership Forum – the most far-reaching conference on the issues that shape our state.

Directors College with FDIC

Crowne Plaza Monroe, Monroe Township December 11, 2012

Joint Mortgage Lending Conference

Crowne Plaza Monroe, Monroe Township January 11 , 2013

Economic Leadership Forum

The Palace at Somerset Park, Somerset For more details, see ad, this page.

March 15 , 2013

Directors & Managing Officers Conference

Renaissance Woodbridge Hotel, Iselin May 15 – 19, 2013

109th Annual Conference

The Breakers, Palm Beach, FL

36 New Jersey Banker

Be a part of what will be the most-talked about, most covered economic event in the Garden State.

NEW JERSEY’S ECONOMIC CONFERENCE JANUARY 11, 2013 Keynote Speaker David Walker Founder & CEO Comeback America Initiative.

Called the “Paul Revere on the unsustainable fiscal outlook for our country,” David Walker is the authority on addressing the fiscal challenges that lie ahead for America—and what we must do about them now.

Fall 2012

Friday, January 11, 2013 The Palace at Somerset Park, Somerset, NJ Kick off the New Year with economic insiders who will give insight to the region’s financial future.

Energy

Your organization can play an integral role in this keystone event. Participate as an Outlook Sponsor, and be a lead organizer of one of our industry-specific sessions. Or, look to one of our other sponsorship opportunities to brand your enterprise as an important supporter of New Jersey’s

Healthcare

economic plan.

Produced by

In conjunction with

Sponsored by:

Real Estate

Contact the event management team at The Warren Group today to be part of New Jersey’s Economic Leadership Forum 1-800-356-8805, ext. 344 events@thewarrengroup.com

Economic Development

Fall 2012 New Jersey Banker

37

Summer Vacation? continued from page 10

The Office of the Comptroller of the Currency was next on the agenda. Jennifer Kelly, senior deputy comptroller for midsize community bank supervision and Dan Stipano, deputy chief counsel, addressed the group. They discussed the transition of OTS staff to the OCC noting that there was a full integration of staff. There is no specialized thrift group, however they remain aware of the sensitivity that thrifts have with a new regulatory regime. They listened to banks’ concerns about issues of raising capital.

The final stop was at the FDIC for a lunch discussion with Acting FDIC Director Martin Gruenberg. Gruenberg noted that the list of troubled banks is shrinking, and the insurance fund is growing. This is a manifestation of growing strength in the industry.

We sincerely thank our attendees for your participation in these trips – they would be meaningless without you. We also express our gratitude to the Community Bankers Association of NJ and Wells Fargo Bank for their support.

Tarullo also generously volunteered to spearhead an outreach effort across all federal regulators to meet with NJBankers members in New Jersey to discuss specific concerns of overreach and unintended consequences. We believe this to be a very positive development as a result of our Washington visit.

While traditionally the inking of the New Jersey State budget marks the end of the legislative calendar, the legislature remained in session throughout the summer. As such, NJBankers advocacy efforts in Trenton continued unabated.

Also heating up over the summer was the political world.

Though a presidential election year, New Jersey is not likely to place high on the media

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list of hot races. After a very hard fought primary, Rep. Bill Pascrell defeated Rep. Steve Rothman in a newly redrawn Bergen, Passaic, Hudson County District. This June primary will likely be the premier race of the year. In blue Jersey, it is highly likely that President Barrack Obama and Sen. Robert Menendez will win with sizable margins.

Furthermore, with the new map, as a result of the decennial redistricting, it is unlikely that there will be any competitive races at the Congressional level. While Democrats are targeting Lance and Runyon, though well funded, it is unlikely that the challengers will prevail.

At the state level, there will also be two special elections. Assemblywomen Mosquera and Simon will both stand for re-election; both are expected to prevail.

■ Michael Affuso, Esq., is senior vice president and director of government relations for NJBankers.

He can be reached at maffuso@njbankers.com.

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38 New Jersey Banker

Home of Charles Jones® and Data Trace® NJ/PA products and services

Fall 2012

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With losses at $1 billion a year, threats to ATM security are increasing and alarming. It’s why Diebold is relentlessly proactive with an entire team dedicated to keeping its customers safe. From ATM security alert e-mails and ATM educational seminars to developing security solutions that combat sophisticated attacks, Diebold delivers a multilayered security approach. It’s another example of Diebold doing more to build the relationships that have inspired us to become security leaders and innovators for more than 150 years.

For the entire story, visit www.diebold.com/boldsecurity.

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