New Jersey Banker Spring 2017

NEW

JERSEY

S P RIN G 2 0 1 7

B A N K E R

CECL:

5

Steps to Take Now

Attracting and Retaining Millennial Talent | Coverage of the Economic Leadership Forum | 4Q Statistical Analysis

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JERSEY B A N K E R

NJBankers Board of Directors Gerard Banmiller President/CEO 1st Colonial Community Bank Frederick Bertoldo EVP/Regional President, Northern New Jersey Wells Fargo Bank, N.A. Louis Anthony Costantino Managing Director, Industry Manager JP Morgan Chase Edward Dietzler President The Bank of Princeton John S. Fitzgerald President/CEO Magyar Bank

Dianne M. Grenz Executive Vice President/ Director of Sales, Marketing and Advertising Valley National Bank David J. Hemple President/CEO Century Savings Bank

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

Emily T. DeMasi

Kathleen A. Stone Senior Vice President/Senior Business Banking Executive BB&T Nicholas J. Tedesco Jr. President/CEO GSL Savings Bank

NJBankers Officers

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

Contributing Editor

Thomas Shara President/CEO Lakeland Bank

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

Thomas Lupo President/CEO Regal Bank

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

Wendy C. Mandelbaum Controller ext. 603 wmandelbaum@njbankers.com

Christopher Martin Chairman/President/CEO The Provident Bank

Craig L. Montanaro President/CEO Kearny Bank

Anthony Labozzetta* President/CEO Sussex Bank

John E. McWeeney Jr. President and CEO ext. 627 jmcweeney@njbankers.com

Emily T. DeMasi Vice President and Director of Communications ext. 610 edemasi@njbankers.com

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

Peter Michelotti* President/CEO Community Bank of Bergen County

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

NJBankers Staff

Jenn Zorn Senior Vice President and Director of Education & Business Development ext. 611 jzorn@njbankers.com

Christopher Maher President/CEO OceanFirst 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.

Spring 2017 New Jersey Banker

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Table of Contents

Departments 5

Chairwoman’s Platform The Concept of Accountability

6 From the President’s Office A Window Opens for Regulatory Reform 8 Politics & Policy

Math Problems 9

Director’s Corner Cybersecurity and the Board of Directors

10 Statistical Report Highlights from the NJBankers 4th Quarter 2016 Statistical Analysis Report

11 Upcoming Events

23 New Associate Members 28 NJBankers Notes

29 NJBankers Shots

Cover 16

CECL: 5 Steps to Take Now

Features

12

Meet Our Endorsed Service Provider You’re Going To Need A Bigger Vault

13 Meet Our Endorsed Service Provider

Mirador Powers the Future of Business Lending 14

4

Behind the Teller Line Beneficial Bank: Not Just Built Here – We Were Born Here

New Jersey Banker

18 Feature

Results of Seventh Annual Economic Survey 20

Feature Turning Mortgage Originations Into Fee Income While Passing On The Risk

22

Feature Attracting, Retaining and Rewarding Millennial Talent

24

Feature A Winning Game Plan for 2017

24

Feature Fine Points

26

Feature Economic Leadership Forum – A Success

by Any Standard

Spring 2017

Chairwoman’s Platform

The Concept of Accountability

By Angela Snyder

“A

ccountability is the glue that ties commitment to results.”

At our company, the team has spent the past month discussing the concept of accountability. Not the kind of accountability that looks to affix blame; rather, the kind of accountability that conveys pride in ownership.

The quote above isn’t my own, but to me, it underscores why “accountability” is such a critical part of any business equation. Every day, people demonstrate commitment. We Angela Snyder Chairwoman have empathy. We NJBankers are loyal. We care.

Chairwoman/CEO Fulton Bank of New Jersey We strive. We are dedicated. And each of these items is an essential trait or behavior that supports professional (and personal) success.

However, accountability takes all of these items, which are largely intent-driven, and uses them to positively impact outcomes and results. Accountability is where the difference is made; it’s where opportunities are fully leveraged and where potential is fully realized.

The NJBankers Leadership Academy serves as a catalyst to increase the accountability of committed bankers and help them achieve tangible results. Providing mentoring and coaching for emerging leaders in the banking industry has long been my passion, and therefore I’d like to use my last letter as Chairwoman of NJBankers to highlight the experiences of participants in the organization’s first-ever Emerging Leaders Program. I think their thoughts are the most powerful testament of how NJBankers is working to achieve positive results.

In a recent survey, we asked program

participants to tell us what aspects of the program were most beneficial to them and why. We were pleased to hear many positive comments on the format of the sessions, the quality of the instructors, and the pacing of the program.

One participant said that the structure of the program materials and projects provides accountability. There’s that word again! It’s great to know that emerging leaders recognize the importance of this concept.

Other participants cited the mix of diverse backgrounds, experiences and thoughts represented at each session – they appreciated the opportunity to learn from other class members as well as from the presenters. These leaders are taking ownership for their own career success and looking for ways to broaden their thinking and deepen their skills.

At a recent event, James Ballentine, executive vice president of congressional relations and political affairs for the American Bankers Association, talked about why it’s so important to become involved – engaged, actually – in the broader dialogue in our industry. And he stressed that to become engaged, we need to continually broaden our base of knowledge and consider other perspectives and views. He reminded us that knowledge truly is power, for a lack of knowledge means we will be too timid to engage for fear of showing our ignorance, or ineffective in leading others because our vision and our ideas will not ring true.

So if we want that internal commitment and dedication we feel to be able to produce tangible results, we need to be accountable – to ourselves and to others. We need to be curious.

We need to take action. We need to ask a lot of questions and thoughtfully consider the answers. We need to seek out people whose experiences and opinions differ from our own,

for it is exposure to this diversity of thought that enhances both our learning and our journey.

Mahatma Gandhi told his followers, “Be the change you want to see in the world” and throughout my life, I have tried to take his words to heart. During my tenure as chairwoman of NJBankers, I have worked, in partnership with our talented staff and volunteer bankers, to shine a light on the importance of readying the banking industry leaders of tomorrow for the challenges and opportunities they will face. I have asked senior leaders to step up to the plate, urging them to serve as mentors, providing guidance and opportunity to young banking professionals.

And I have urged those who are newer in their careers to seek learning opportunities, ask for feedback, and look for ways to apply their newfound knowledge and skills.

Accountability is where the difference is made.

And all the while, I have asked the same of myself. As I leave this position, I will take with me wonderful new friends and business associates, new experiences and ideas, and a renewed commitment to our industry.

And I plan to be accountable for using those experiences to help me effect positive change in the years to come.

It has been both a pleasure and a privilege to serve you as chairwoman of NJBankers. I look forward to seeing you later this spring at the NJBankers Annual Conference in Florida! ■ 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.

Spring 2017 New Jersey Banker

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From the President’s Office

A Window Opens for Regulatory Reform

By John E. McWeeney, Jr.

R

egardless of your political views one thing that we all can all agree on is that we’re in a period of great change. Change has become a regular part of banking, of course, with seismic demographic shifts and rapid innovation. What’s new is the level of change in our nation’s capital with the Trump administration and the Republican controlled Congress poised John E. McWeeney, Jr. to deliver major President/Chief Executive Officer NJBankers reforms in healthcare, taxes, immigration and much more. Included on the list is the first real opportunity for meaningful financial regulatory reform in over six years.

For years the banking industry has advocated for reforming the parts of Dodd-Frank that have negatively impacted the ability of banks, especially community banks, to serve their customers. There are many examples

credit. The list goes on but the point is that while Dodd-Frank may have been well-intended, when you have more than 24,000 pages of rules some of them are going to have unintended consequences and should be modified or repealed in order to help American consumers and businesses prosper.

While the new political environment should certainly foster more optimism among bankers, it’s important to maintain some perspective and understand that we can’t just sit back and expect to be successful. First of all, the President and Congress have a lot of important priorities and financial regulatory reform, while important, is not at the top of the list. Second, even with a more business and banking friendly Administration and Congress this is still a heavy lift. Hoping for the repeal of Dodd-Frank in my view is unrealistic. However, hoping for thoughtful and meaningful regulatory reform is realistic. Although as the saying goes, hope is not a strategy.

We need bankers at all levels and directors as well to engage in the political process like they never have before. I know we’ve sounded this alarm bell

There’s a renewed sense of optimism among consumers and businesses alike.

It’s been validated by recent confidence studies.

of this with perhaps the most egregious being the failure to deem loans held in portfolio as Qualified Mortgages. The irony, of course, is that the very people that Congress was intending to protect are negatively impacted by rules like this that unnecessarily restrict access to

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New Jersey Banker

before but it’s never rang truer than now.

The window to implement change may only be open for a matter of months and then who knows when an opportunity like this will present itself again. There are many ways for bankers and directors to engage. Here are some easy ones:

• Respond to “calls to action” when they come from NJBankers, ABA and ICBA. It’s easy to do a quick phone call, letter or e-mail to your Congressional representatives on key issues and numbers do make a difference.

• Participate in our trips to Washington, D.C. when we meet with our Congressional delegation and the regulators. In 2017 we’ll be going down at least two times; the ABA GR Summit which was in March and the ICBA Capital Summit in late April. The legislators and regulators need to hear directly from bankers on how regulations are preventing you from serving your customers.

• Meet with the members of the New Jersey Congressional delegation back home here in the Garden State. There’s absolutely nothing preventing you from reaching out and scheduling a meeting. NJBankers can assist with scheduling and also providing background information and talking points.

• Provide your financial support to the banking industry’s advocacy efforts by contributing to JebPac. It’s a very simple value proposition, make an investment in the future of our industry.

There’s a renewed sense of optimism among consumers and businesses alike.

It’s been validated by recent confidence studies. The opportunity for regulatory and tax reform also has many market analysts optimistic. Even the Federal Reserve has climbed on board with a recent rate hike and a sentiment for more rate hikes, as well as some early signals of possibly contracting their balance sheet.

While it’s true there’s also a lot of political uncertainty and volatility, for the first time in many years optimism reigns. It’s incumbent that bankers and directors engage en masse and support regulatory reform before the window closes.

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

Spring 2017

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Politics and Policy

Math Problems

By Michael P. Affuso, Esq.

N

ew Jersey residents face a double dilemma. According to experts, every United States citizen owes $60,000 to federal, state and local entities if the total debt were apportioned equally. The national average of citizens’ apportionment of state debt is $11,000. In New Jersey, dividing its total debt, when accounting for unfunded pension liabilities in addition to bonded Michael P. Affuso debt, (around $160 Executive Vice President/ Director of Government Relations million) by its nine NJBankers million residents will equal over $17,000 per citizen. So as citizens of the United States each New Jersey resident will owe more than $49,000 per person to the federal tax man and owe $17,000 to the state – that is $66,000 total for every person if we paid equally and we paid today.

We know neither to be the case. First, most experts believe that around 50 percent of tax payers do not pay federal income tax, and due to its progressivity, a sizable group pays only a very small portion of New Jersey income tax. Thus, it is not unreasonable to say that the $66,000 is really closer to $100,000 per “real” taxpayer.

While policy makers debate the question of who should pay, they rarely even raise the question of when. The answer, when it is answered, is usually “later.” Federal debt to GDP (gross domestic product) has risen since 1981 from 32 percent to 106 percent currently.

The path is clearly unsustainable.

Enter politics. Into the political alchemy of this burgeoning maelstrom comes two businessmen from their respective parties at both the state and federal level with a similar silver bullet – growth. One says we should cut taxes and increase defense and infrastructure spending to grow the economy. The other

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New Jersey Banker

says we should slightly raise taxes and spend on infrastructure and fully fund the pension to grow the local economy. They say that the economic growth will cover any corresponding short term deficits.

They point to Kennedy, Reagan and Clinton as proof that these policies will work again.

A deeper dive is necessary. The Clinton program worked because the administration had raised taxes in 1993 and would benefit from that revenue in the second administration in order to reduce taxes and the deficit. Under Clinton, the growth occurred as deficits were shrinking. Under Reagan, the opposite occurred. While growth was present, the debt to GDP ratio doubled during the Reagan and Bush years. In selling the pro-growth agenda, Reagan pointed to the Kennedy tax cuts which produced growth. In this case the tax cut was coupled by balancing the budget and reducing spending.

In addition to this backdrop of economic history, we must also be cognizant of the economic future. Interest rates are going up. This means the cost of debt goes up. Two of the reasons articulated by Fed officials to justify the rate hikes is that we are nearing full

employment and inflationary pressures are beginning to percolate. In a sense, the Federal Reserve is beginning a policy of pulling out the stimulus that a tax cut would be creating while at the same time driving up the cost of the borrowings inherent in the tax cut and spending program itself. This logic also calls for the current expansion, which began in 2009, to continue into the distant future.

Back in New Jersey, there is similar fervent hope that we can either expand for another eight years, one of the longest (though tepid) expansionary cycles in history, or buck the countervailing forces of the Federal Reserve. At the same time it is suggested that a full pension contribution be made ($2.5 billion more than in the current budget) and that a millionaire’s tax which will raise $750 million on its best day will cover this shortfall. The magic of growth will cover the rest.

In both cases, this growth seems to be more like the story of the fishes and the loaves.

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

Spring 2017

Directors’ Corner

Cybersecurity and the Board of Directors

By James Silkensen

C

ybersecurity (defined as “the process of protecting information by preventing, detecting and responding to attacks”) is a “hot button” issue for banks and bank regulatory agencies. In 2016 over 980 entities experienced data breaches in the United States, with Yahoo’s breach alone affecting 1.5 billion records.

The good news for the banking industry is that banks are James Silkensen making progress in guarding against cyber attacks and banking/financial/credit category breaches were down by 40 percent in 2016.

Community banks are not immune from cyber attacks. There have been many reports of distributed denial of service attacks affecting the availability of websites and online banking applications for banks of all sizes in the past year.

Community banks are also receiving a high volume of e-mail messages containing viruses including those containing ransomware.

With technology changing at a fast pace and cyber criminals seemingly a step ahead of efforts to keep data systems secure, board oversight of bank policies and procedures to prevent, detect and respond to cyber attacks is a key part of the board’s overall responsibility for overseeing risk management. With the fast pace of change, an update and discussion of cybersecurtiy trends and preparedness is an excellent idea at each board meeting, particularly as a bank begins planning to offer new services.

The federal bank regulatory agencies expect the board and senior management to ensure that: • Strategic planning and budgeting provide sufficient resources for cybersecurity.

• Sufficient authority, resources and independence are provided for information security.

• Formal written policies and procedures address cybersecuity.

• Cyber risk is incorporated into the risk-based audit plan.

• Reports are provided to the board that document how well the information security program is working and any areas that need to be addressed.

Important areas that should be addressed in the bank’s information security program include ensuring that: • The bank’s data processing system has a strong firewall to identify, log and block cyber threats.

• Back up plans for resiliency and restoration of services in the event of a cyber attack are in place, tested and enhanced as needed over time as threats, vulnerabilities and operational environments change.

• Computer programs are updated and tested as soon as patches are available, are replaced when no longer supported by the vendor and strategies are established to mitigate risk if it is necessary to use unsupported products.

• Administrative access to operating systems and applications by bank staff is limited to that which is required for them to carry out their specific job responsibilities.

• Policies and procedures include requiring the use of strong passwords that are changed according to a set schedule.

• New employees are trained on cybersecurity and training continues on an ongoing basis for all staff as well as the board. We use the Monthly Security Tips Newsletter (which is available from the Multistate Information Sharing and Analysis Center and which may be customized to include the bank’s logo and other information) as one of the means of informing employees on cybersecurity best practices.

• In accordance with Federal Finan-

cial Institutions Examination Council (FFIEC) guidance, management monitors and maintains awareness of cybersecurity threats and vulnerability information so that they may evaluate risk and respond accordingly.

• When utilizing a third party’s services, due diligence is used in selecting the third party provider and the contract spells out the requirements the third party must meet regarding information security, resiliency and restoration of services should there be a cyber attack.

• A plan is in place for restoration of services, communication with customers and dealing with the press in the event of a cyber attack that disrupts services.

In addition to internal testing, we have found that the use of an experienced third party to perform an external penetration assessment of the bank’s network to be invaluable in assessing the ability of the bank’s network to resist attacks from the Internet and other external sources.

In light of the increasing volume and sophistication of cyber threats, the FFIEC has developed a cybersecurity assessment tool to help institutions identify their risks and determine their cybersecurity preparedness. The assessment tool provides a repeatable and measurable process for financial institutions to measure their cybersecurity preparedness over time and strengthen it. Use of the assessment tool is voluntary. We have found this assessment tool to be very useful and you may want to suggest its use if your bank has not already utilized it.

Useful information on cybersecurity for directors is available at: FFIEC: https://www.ffiec.gov/ cybersecurity.htm FDIC: www.fdic.gov.regulations/ resources/director/risk/it-security.htm ■ James Silkensen is a director on the board of directors of Somerset Savings Bank. He was formerly CEO of NJBankers.

Spring 2017 New Jersey Banker

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Highlights from the NJBankers 4th Quarter 2016 Statistical Analysis Report

By James Meredith

N

JBankers publishes the quarterly Statistical Report Analysis which provides detailed analysis of subscriber institutions’ fundamental performance relative to similar sized and chartered institutions located in New Jersey.

It also provides a comprehensive analysis of the state’s banking James Meredith industry, including funding mix, earning asset, credit quality and profitability trends.

Highlights of the Analysis include: The median net interest margin for both banks and thrifts headquartered in New Jersey showed a noticeable improvement in 4Q16, the first time both groups have shown margin expansion in the same quarter in several years.

Continuing a trend lasting for several years, the NPAs-total assets ratio for this group continues to improve.

For commercial banks headquartered in the Garden State, total loans and deposits grew a median 11.1 percent and 7.7 percent annualized, respectively, in 4Q16 versus 6.5 percent and 8.5 percent annualized in 3Q16. For thrifts headquartered in New Jersey, total loans and deposits grew a median 9.4 percent and 3.9 percent annualized, respectively, in 4Q16 versus 4.2 percent and 5.7 percent annualized in 3Q16.

The median non-FTE net interest margin for New Jersey-based commercial banks was up 3 bps on a sequential quarter basis at 3.39 percent in 4Q16.

The median non-FTE net interest margin for New Jersey thrifts expanded to 2.82 percent in 4Q16 from 2.77 percent in the prior quarter.

The median NPAs-to-total assets ratio

10 New Jersey Banker

for commercial banks in New Jersey decreased to 0.84 percent at Dec. 31, 2016 from 0.85 percent three months earlier. The median NPAs-to-total assets ratio for thrifts in New Jersey dipped to 0.54 percent at Dec. 31, 2016 from 0.57 percent three months earlier.

Commercial banks in the U.S. with less than $1 billion in assets are currently trading at a median price-to-tangible book value of 113 percent; thrifts in the U.S. with less than $1 billion in assets are trading at a median price-to-tangible book value of 118 percent.

Deposit costs have been climbing over the last six quarters in New Jersey while remaining relatively stable nationwide.

This has put further pressure on margins

in New Jersey as asset yields were still declining. However, this situation seems to have reversed in 4Q16, as the median loan yield for New Jersey banks climbed to 4.7 percent in 4Q16 from 4.53 percent in 3Q16. Meanwhile, the median securities yield for New Jersey banks rose to 2.07 percent in 4Q16 from 2.06 percent in 3Q16.

The report is prepared by Joseph Gladue, director of research, Merion Capital Group.

■ James Meredith is executive vice president and COO of NJBankers. For subscription information, contact Jim at (908) 272-8500, ext.614, or jmeredith@njbankers.com.

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Meet Our Endorsed Service Provider

You’re Going To Need A Bigger Vault HOW SRM ADDS MILLIONS TO YOUR BANK’S BOTTOM LINE!

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trategic Resource Management (SRM) has negotiated thousands of contracts for banks, either through our cost savings or revenue enhancement process, we have added more than $2.5 Billion to the bottom line of our clients in the 25 years we’ve been in operation. Our proprietary database of information across a variety of areas in the financial services industry makes this possible.

THE BOTTOM LINE IS TOP OF MIND Missing out on hidden cost savings is the same as taking a loss. Given the current competitive environment and increased regulatory challenges, financial institutions are increasing their focus on profitability and in preventing these types of “losses.”

Banks realize that they can benefit from professionals who have experience in benchmarking data, analyzing and assessing where additional cost savings are possible across their operations.

SRM serves as your market intelligence resource, to identify opportunities for increased profitability, and to recommend and implement cost savings or revenue enhancement practices. We provide an objective and informed assessment of savings in various cost centers, contracts, and existing vendor relationships and using the data from thousands of projects, we review and validate your organization’s contracts.

Our proven processes touch every phase of a project, from benchmarking to negotiation, contract development, implementation, management, auditing, and tracking.

WE DON’T GET PAID UNLESS YOU BENEFIT The SRM engagement model is performance-based. We are paid from the savings or revenue enhancement we deliver to your institution. In fact, our initial assessment of areas where your bank can realize savings from its existing vendor relationships is free. In greater than 90 percent of our engagements, the savings or revenue uplift we secure comes from your existing incumbent relationships.

On average, institutions using SRM’s services see a savings in the range of $3

12 New Jersey Banker

million for every $1 billion in client assets.

This ratio scales up or down depending on the size of the institution. We deliver an average of 15 to 20 percent of bottom-line benefit for the projects we implement. The banks we work with realize between one and three percent of non-interest expense reduction. We discover impactful results for institutions who agree to an initial assessment greater than 90 percent of the time.

us the ability to quickly assess key expense and revenue enhancement areas quickly.

The bulk of this work is done off-site by the SRM project team. The staff requirements for our clients are kept to a minimum when assessing each project area. Our engagement model is optimized for establishing a credible baseline and presenting hard dollar opportunities for adoption without disrupting your organization.

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Historically, we have successfully completed projects for all asset classifications. Our core areas of focus are in card branding, card processing, core processing, PIN/POS processing and on-line or mobile banking. For institutions with a larger branch network, we also can help find savings in areas such as ATM procurement, ATM services, teller cash recyclers and operational services (e.g., office supplies, janitorial, telecom and more).

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It turns out, there is such a thing as a free lunch. So, we are inviting you to schedule a complimentary assessment for your bank.

The CEO of one of our clients calls the initial engagement with SRM “a million-dollar handshake.” We are obsessed with making the same type of impression on all of our clients. We think you will find our obsession very rewarding and profitable.

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■

Spring 2017

Meet Our Endorsed Service Provider

Mirador Powers the Future of Business Lending

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irador is powering the future of business lending. As the leading provider of end-to-end lending technology to banks, credit unions, nonprofits and specialty finance companies, Mirador leverages a streamlined, delightful user experience to create efficiencies in the lending process, with an average 69 percent reduction in bank employee time spent on small business loans. Mirador’s fully responsible web and mobile dynamic platform profitably supports loans from $1K to over $20 million and services products that include term loans, lines of credit, collateralized loans, commercial real estate, SBA backed products, quick/instant decision loans and more.

The impact of small business success in our local, regional and national economic success is clear and expanding access to credit is a core driver of Mirador’s development process. Before Mirador, a traditional

lender is unlikely to consider a loan under $100,000 due to the high underwriting costs, but the typical small business loan ranges from $15K-$40K. Hampered by high costs and time intensive process, banks offer limited access to low-dollar capital. After implementation of Mirador’s streamlined digital end-to-end workflow, banks can see an average of $1,161 annual profit based on a $50,000 loan amount, easily allowing the expansion of credit offerings while retaining focus on strategic objectives of efficiency and profitability.

Mirador continues to demonstrate its game changing innovation in borrower experience with loan conversions (open to submitted) of over 54 percent compared to industry standards of about 25 percent.

Our strategic engagement with the borrower throughout the application process and the seamless transfer of digitized loan application documentation emphasizes brand trust

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13

Behind the Teller Line

Beneficial Bank: Not Just Built Here – We Were Born Here

B

eneficial Bank is only a “bank” in the traditional sense of the word. Yes, we’re a place where money is kept safe, loaned, managed and made easily accessible for customers.

But we’re more than just a bank; we’re a community of your Greater Philadelphia neighbors who want to do right by you, our customers, while sharing our passion for pursuing and sharing our knowledge of banking and finance.

WE WERE BORN HERE Like most of our customers, Beneficial Bank was born and raised here in Philadelphia where we've been one of the region’s most trusted financial partners since 1853. Founded on the mission to do what is right, Beneficial Bank was created to provide banking services to immigrants not served by existing banks. Bishop John Neumann (now Saint John Neumann) and a group of like-minded individuals gathered on Sunday, Feb. 14, 1853 in the basement of Old Saint Joseph’s Church in Philadelphia to establish the Beneficial Savings Fund for that very purpose. For many years we have honored our roots by volunteering twice a week at Old Saint Joseph’s Outreach Program serving homeless individuals a hot meal – and we recently celebrated our 164th anniversary by presenting the Outreach Program with a donation to help support their mission in caring for our less fortunate neighbors.

Beneficial Bank is the oldest and largest bank headquartered in Philadelphia, with 63 offices serving the Greater Philadelphia and South Jersey communities. We pride ourselves on being a true local bank. Sure, some of the nation’s major banks have branches located right here in Philadelphia – but the average big bank has about 5,000 branches across the country. So while the big banks can certainly boast about the vast reach of their network, to us at Beneficial Bank, being local means having

14 New Jersey Banker

local values, local connections and giving customers access to local decision makers.

And though the bank might look and sound like your friend next door, we’re every bit as sophisticated as the nation’s big banks. Beneficial is a fullservice financial institution with more than $5.5 billion in assets and over 65 products and services offering financial guidance on commercial, consumer and real estate lending, equipment finance, insurance and wealth management.

Over the past few years, Beneficial has been making strategic acquisitions to bolster our offerings to better serve our customers. For example, Beneficial Mutual Savings Fund gave customers more ways to protect their assets when they created Beneficial Insurance Services, acquiring Paul Hertel & Co. and the CLA agency in 2007. We also continued to grow throughout neighborhoods in the Delaware Valley when we acquired FMS Financial Corporation in 2007, the St. Edmond’s Federal Savings Bank in 2011 and Conestoga Bank in 2016.

WE ARE COMMITTED TO OUR COMMUNITIES Beneficial Bank believes that there’s nothing more important than doing right by our customers and communities.

All of our employees live in the Greater Philadelphia and South Jersey regions and are actively involved in their neighborhoods. We know how to do right by you financially because we are one of you. In fact, 70 percent of Beneficial

employees were born here and lived side by side with you during those defining Philadelphia moments. We were there the first time Rocky ran up the Art Museum steps in 1976. We mourned with you after another devastating end to an Eagles season, saying, “There’s always next year.”

We went to the parade with you when the Phillies won the World Series in 2008. We were also trying to figure out where we could park our car during Pope Francis’ visit in 2015. And while we cannot deny the iconic nostalgia of Pat’s or Geno’s – we also have a favorite neighborhood spot where we get our cheesesteaks.

Beneficial employees are trained to listen to our customers and understand their needs before recommending any of the Bank’s services. Something we call the Beneficial Conversation. Because Beneficial Bank employees live like our customers, we have tailored our services to better suit the lives of the every day Philadelphian. We stress convenience, which is why we offer tablet and mobile banking solutions for our customers who prefer to bank on their own rather than in one of our branches. Beneficial also offers mobile locating services to protect customers from fraud, and we are partnering with Visa on a mobile app that enables customers to manage their debit cards and plan to launch P2P payments functionality within the next six months.

We’re passionate about educating our neighbors and businesses in the Delaware Valley about banking. It’s well-embedded

Spring 2017

into our DNA, and we’ve had programs in place to support these initiatives for over a century. For example, we launched the Beneficial in School Savings Program in 1927 to teach children about the value of their hard-earned money and best practices in saving for their future. As one might imagine, the program has grown significantly over the past 90 years and has evolved into the Financial Literacy program we take to middle schools, high schools, nonprofits and businesses in our community. In 2015, Beneficial Bank team members dedicated more than 1,000 literacy hours to this program and remain committed to providing financial education to Philadelphians.

In 2010, Beneficial opened its first campus concept at branch locations, designed to be a community hub offering free meeting space, Wi-Fi, coffee and a space for kids. Campuses allow us to start

Beneficial Bank believes that there’s nothing more important than doing right by our customers and communities.

the conversation and assist you in making smarter choices with your money through financial workshops, resources in our Financial Learning Libraries, Conversation Stations and more.

Our roots are grounded in helping hardworking Philadelphians make

smarter, more informed financial decisions that support their current needs and future plans – and we know that better banking starts with a conversation.

So come meet with us over coffee, tell us where you are in life and we’ll be ready to listen.

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Spring 2017 New Jersey Banker

15

Cover

CECL:

5

Steps to Take Now

By Chad Kellar, CPA, and Tal M. Scheer, CPA

I

n June 2016, the Financial Accounting Standards Board (FASB) issued a new standard for the recognition and measurement of credit losses for loans and debt securities. The treatment of loan losses is at the heart of bank accounting, and current expected credit loss (CECL) is one of the biggest accounting changes the industry has seen in years. The effective date purposely is several years away so financial services companies will have time to make all the needed adjustments. With all of the changes, many bankers are left wondering what they should be doing now to get ready.

16 New Jersey Banker

Following are five steps for bankers to consider as they start their CECL journey.

1. Educate, and create a task force.

Getting the right people at the table to have an informed discussion on the scope and necessary changes to implement a CECL-compliant model is an integral first step in the process. Banks should form a CECL transition committee or task force across various practice disciplines in the organization that will cover areas such as risk management, credit, accounting, technology and business strategy.

This transition group should be responsible for educating the board and

Chad Kellar

Tal M. Scheer

senior management via periodic updates on progress toward CECL compliance.

Additionally, task force members should assume responsibility for establishing effective internal controls so the data being

Spring 2017

captured throughout the process is reliable.

Executive management and board members must anticipate the impact that CECL could have on their core strategies in order to ensure that decisions made under today’s accounting methodology are not detrimental under a CECL standard. In general, executive management and board members must understand how CECL is going to affect a bank’s strategic growth plans, including mergers and acquisitions.

While the standard will not take effect until 2020 or 2021, decisions made ahead of the effective date can have significant longterm implications, and it’s important for capital planning purposes to understand those implications.

2. Identify risk. Before running out to capture data for the sake of having more data or engaging in a vendor selection process for a new CECL technology solution, it’s wise to take a step back and look at the risk profile of the loan portfolio and what kind of information might be needed in order to capture the life-of-loan risk of loss.

For smaller banks, the high-level risk identification process might be more anecdotal than quantitative and based on past observations and business practices related to how certain products and loan characteristics resulted in a loss. For larger banks with existing data sets, the risk identification step might be more quantitative and statistically grounded.

For the loan portfolio, the first major step is to take a look at a portfolio snapshot in terms of its predominant structures and terms. This step will help to assess how many years of data is needed to support the first year’s calculation.

Doing a preliminary risk assessment and having these discussions internally might help determine how complex such an exercise needs to be in order to comply with the new standard.

3. Inventory data. Data inventory is the next phase of the process and will help with understanding the risk in the portfolio and the scope of the standard’s impact on a financial services company. To develop and maintain an effective CECL model, it is necessary to understand the availability and limitations of the data required. This understanding includes how reliable and

accurate data elements are as well as the time frame for which data is available.

For example, at many institutions the way loans are renewed can affect how data points are archived. The result often is a need to capture renewal dates and renewal amount fields in order to adequately capture the contractual life of the instrument.

models only work if there are significant data points and observations. The complexity of the models might be limited by the very nature of the available data and by what a bank can do with it. As a result, performing the preliminary analysis is critical before going too far down one path.

5. Enable technology. Understanding existing systems that might support the

The treatment of loan losses is at the heart of bank accounting, and current expected credit loss (CECL) is one of the biggest accounting changes the industry has seen in years.

4. Assess methodology. Smaller, less complex banks might be able to use processes similar to those being used today, adjusted for the lifetime credit risk.

It generally is understood that small banks don’t need big models.

For smaller banks, a simple cumulative loss rate method may be a good starting point in terms of modeling. Using this method, banks should take a segment of their portfolio with similar risk characteristics and calculate how many losses were recognized for just those assets outstanding until the pool of loans is completely paid off.

This simple methodology still depends on adequately segmenting risk, among other factors. The more aggregation that is done – that is to say, the fewer pools of loans that are established – the more documentation will be required to support the conclusion that life-of-loan losses are similar for all the loans in that pool.

Larger, more complex organizations, on the other hand, are going to look for more sophisticated methodologies that incorporate more statistical evidence than used by smaller institutions. Understanding expectations related to assessing the methodology will help banks evaluate what preliminary analysis should be performed.

Remember, though, that complex

execution of the CECL model, including the capabilities and limitations of those systems, is essential to effectively implement the standard. Recognizing that the CECL standard will result in additional calculations and disclosures and identifying technology solutions to automate processes and improve internal controls can make the process more efficient and result in lower operating costs going forward.

This recognition includes understanding existing and future capabilities associated with source systems, data warehouses, modeling systems, financial statement spreading software and vendor technology specially designed for CECL.

FULL STEAM AHEAD While there are no simple solutions for implementation issues, it is possible to outline a comprehensive program to assess the coming challenges and to begin planning for the changes the new standard will require financial services companies to make over the next few years.

■ Chad Keller is a partner at Crowe Horwath LLP. He can be reached at (317) 208-2431 or chad. kellar@crowehorwath.com.

Tal Scheer is a partner at Crowe Horwath LLP. He can be reached at (973) 422-4557 or tal. scheer@crowehorwath.com

Spring 2017 New Jersey Banker

17

Feature

NJBankers and the Edward J. Bloustein School of Planning and Public Policy, Rutgers University Release Results of Seventh Annual Economic Survey

T

he New Jersey Bankers Association, in conjunction with the Edward J. Bloustein School of Planning and Public Policy at Rutgers University, has released the results of the seventh annual NJBankers Economic Survey of Bank CEOs. Sponsored by FinPro Inc., the survey inquired about national and state current economic assessments, as well as six-month projections; expectations about long-term and shortterm interest rates; commercial real estate and business loan demand; residential loan demand; cybersecurity and more.

The survey was conducted under the direction of James W. Hughes, Ph.D., distinguished professor and dean, Edward J. Bloustein School of Planning and Public Policy, Rutgers University; Marc D. Weiner, J.D., Ph.D., associate research professor; and Evan Iacobucci, data analyst and research assistant, both of the Bloustein School.

The survey sampled all 98 member institutions of the New Jersey Bankers Association. Of the 98 banks in the panel, 66 fully completed and 3 substantially completed the survey questionnaire for an overall response rate of 70.4 percent.

Highlights of the survey include: • The national economy in 2016 was in the mature expansionary stage of the business cycle and outside of the presidential election, there were no significant events to affect its health. Since this survey began, this is most stable two-year dyad. Nonetheless, this year continues the trend of no respondent, over the life of the survey, ever selecting “excellent” to describe the current health of the United States economy.

• The evaluation of 2016 New Jersey continues a two-year trend showing a majority indicating a “fair” economy. At the same time, a slightly greater share split their assessment

18 New Jersey Banker

between “good” and “poor,” again, a twoyear trend.

• The 2016-17 survey marks the first time in four years there was growth in the percentage of those indicating the national economy would “weaken”; nonetheless, over 90 percent of respondents suggest that the national economy, over the next six months, will remain “unchanged” (76.5 percent), or “strengthen” (14.7 percent).

• Predictions about the New Jersey economy continue a three-year trend of diminished expectations: in 2013, 29.3 percent thought the state economy would “strengthen” over the next six months, which has steadily diminished to 9.0 percent in 2016. This diminishment is matched by a growing concern that the economy will “weaken” (from 7.4 percent to 14.9 percent), at the same time that over three quarters of respondents see stability (at 76.1 percent “remain unchanged”).

• 2016-17 marks a two-year trend of increased expectations for long-term rate in-

creases. Of those who anticipated increases in the long-term interest rates, nearly three fourths of the sample predicted increases 25 to 50 basis points over the next six months.

On December 14, 2016, after the survey field period was closed, the Federal Reserve Board increased the federal funds rate by 25 basis points and indicated the intention to continue to raise rates.

• There is virtual unanimity (88.2 percent) that short term interest rates will increase over the next six months. In the history of this survey, this finding is, by far, the highest expectation of an increase. Over four fifths (81.3 percent) of the sample anticipated short-term interest rate increases between 25 and 50 basis points.

• This year’s data show the most positive rating for current demand for business loans in the history of the survey. During the last four years (2012-2016), those rating this demand steadily increased from 13.5 percent to 43.9 percent, while those rating it “poor” fell from 9.6 percent to 4.5 percent.

• The current demand for residential loans is increasingly positive. The “poor” ranking saw a two-year decline from 19.8 percent in 2014 to 4.6 percent in 2016, the lowest in the history of the survey.

• The expectation for home values in respondents’ markets did not change significantly from 2015 to 2016. In 2016, nearly onethird (32.4 percent) expected home values to “go up,” while 61.8 percent expected them to remain “unchanged.”

• Overall lending is slightly more concentrated in commercial (57.4 percent), as opposed to residential (42.5 percent), properties.

• In light of growing cybersecurity risk, banks are increasing the scope and range of cybersecurity protection activities. This pro-

Spring 2017

tection consists of measures such as hiring third party security contractors or employing full-time IT staff specifically charged with cybersecurity • Consistent with 2014, an overwhelming majority of respondents in 2016 (80.0 percent) still see the need “to change… business practices to meet the needs of the Millennial generation.” For example, this year we learned that only 40.3 percent of respondent banks reported that Millennials are entering the mortgage market.

• Approximately half of respondents (50.8 percent) find that Millennials are similarly difficult (“about the same”) to integrate into their bank’s workforce as members of previous generations. Many respondents (44.6 percent) find it “more difficult” to integrate members of the Millennial generation.

• While a majority of member banks have training programs for new entry-level employees (53.8 percent), a minority have a mentoring program (29.2 percent), and slightly over one-third (35.4 percent) have neither.

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• In terms of orientation programs for new directors, there is a significant split in member banks: 54.1 percent have such a program, while 45.9 percent do not.

• A substantial majority of respondents (76.9 percent) report having no obstacles or difficulties fulfilling their CRA obligations, while less than one-quarter (23.1 percent) do report some concerns in that regard.

According to Dr. Hughes, "This year’s survey took place as the national economic expansion approached 90 months in length - the fourth longest in U.S. history. Not surprisingly, the 2016-17 survey respondents’ optimism reflected this favorable national economic condition. Demand for business, residential real estate, and commercial real estate loans were seen at levels higher than any preceding survey."

Dr. Weiner noted that, “Thanks to the enthusiastic participation of the members of the New Jersey Bankers Association, we achieved just over a 70 percent response rate. As a result, we now have seven years

of longitudinal data points on many vital economic sentiment and projection indicators, as well as related aspects of the functioning of the New Jersey banking industry. This permits us to identify trends and disconnects in the context of the national economy, as well in within the New Jersey banking community.”

President and CEO of NJBankers John E. McWeeney Jr., added, “We conduct this annual survey of our member bank CEO’s because we feel that they really have their hands on the pulse of New Jersey’s economy. This year’s survey reflects their general view that things have continued to steadily improve since we started the survey of bankers seven years ago.”

NJBankers thanks our member managing officers who participated in the survey which yielded this valuable information. We also thank FinPro for sponsoring the survey over the years.

■ For copies of the survey, contact Emily DeMasi, vice president and director of communications, New Jersey Bankers Association at edemasi@ njbankers.com.

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Spring 2017 New Jersey Banker

19

Feature

Turning Mortgage Originations Into Fee Income While Passing On The Risk

By Brian Pool

R

esidential lending has certainly become a complex business. Way beyond normal competition, banks must spend enormous resources just to stay compliant with increasing regulations. There are ways to maintain the fee income that can be generated by residential lending without taking on the risk and expense of residential mortgages.

Competition Brian Pool is tough enough!

Many banks spend enormous sums to maintain a large staff of originators, processors, underwriters, closers, postclosers, final doc clerks, QC reviewers, secondary marketing staff, servicing departments…the list goes on and on… just to maintain a full product line to offer to their clients…and yours!

Dodd-Frank? What do you have to spend on origination systems? Do these systems keep you up-to-date on all the required disclosures?

It can all become overwhelming. Some have chosen to exit the market rather than attempt to navigate the tricky waters that have become residential lending. But what happens to your customers who you can no longer serve?

Generally people go to their bank first for a mortgage loan but they do have options. If turned away, borrowers can seek independent mortgage companies, mortgage brokers, or even another bank down the street. I’m sure readers know that financial institutions are eager to service prospective customers with their solutions. I myself have walked into my local branch many times and I am almost always greeted with a new product or service offering. Additional offers come each month with my statement and when I log on to their website, I often

Residential lending has certainly become a complex business. Way beyond normal competition, banks must spend enormous resources just to stay compliant with increasing regulations.

Are you set up to originate FHA loans?

How about VA? Do your clients ask for fixed rate loans? Originating 30-year fixed rate loans is not usually the best use of your lending portfolio.

How are you dealing with QM/ATR?

20 New Jersey Banker

must view the newest offer before I can view my balance. Once your competition has your customer’s mortgage, it won’t be long before they try to acquire their deposit accounts, their car loans and their credit cards. You work hard to obtain and

maintain new customers. You don’t want to lose them because your product line doesn’t fulfill their needs.

Under Dodd-Frank, there were those who predicted that mortgage brokers would become a thing of the past.

Mortgage brokers took the blame for poor performing mortgages and many of these regulations impacted them the most.

While many brokers did close up shop or merge with mortgage bankers, others saw an opportunity. New regulations shifted a lot of responsibility from the broker to the lender. For example, FHA eliminated what was commonly known as a “minieagle” approval. Now, organizations that wanted to offer FHA financing, a key product in today’s mortgage market, must go through a long, tough process to get approved. Additional staff must be hired including higher-priced DE underwriters.

However FHA allows approved lenders to “sponsor” other originators. As a sponsored originator, brokers could once again offer FHA products, receive a fee from either the borrower or the lender for the origination, but have no performance risk, no audit risk, and outside of committing some type of fraud, virtually no responsibility for the transaction.

The brokers that didn’t give in to the fear of the changing regulations have seen a resurgence and many are thriving.

Perhaps it now makes sense for banks to emulate these successful mortgage brokers. Fee income can be a key to survival in the marketplace. As these brokers have found out, there can be substantial fee income generated from originating mortgage loans and there is already an infrastructure in place to handle the fulfillment of these products.

The fulfillment removes a substantial amount of work from the bank. An FHA approved lender must maintain the necessary staff to meet all of the

Spring 2017

steps required in the origination process as also noted. Brokers have discovered that there is no need to duplicate these steps. They can do what they are good at – selling.

Then they can take their fee and be done. The performance risk then belongs to the lender.

Partnering with a mortgage lender, a bank may have even more advantages than the mortgage broker. While a mortgage broker’s biggest challenge is finding new customers, banks enjoy a customer base with built in relationships.

Mortgage brokers don’t have clients walking in and asking for mortgages.

Mortgage bankers (lenders) also lack those customer relationships, but have all of the other components necessary to originate loans. And not just one type of loan either. Lenders must be able to offer a full product line of mortgages in order to be competitive.

Financial institutions can also join up with a mortgage lender to increase existing mortgage originations. They are equipped with marketing materials they can share or co-brand to remind clients that you can help them with all their mortgage needs. Open up your product line! Lenders can help you offer FHA, VA, USDA, FNMA/ FHLMC and many other options to which you may not have access.

So, rather than eliminating a traditional bank offering or limiting the products you offer and risk losing valuable clients, consider partnering with a mortgage lender.

Use their expertise to handle processing, underwriting, closing and even servicing. Get fee income from the origination of the loan and pass on the risk.

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

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Spring 2017 New Jersey Banker

21

Feature

Attracting, Retaining and Rewarding Millennial Talent

By Wade Connor

I

n the spring of 2015, Millennials surpassed Gen X to become the largest generation in the American workforce. As Millennials flex their workplace muscle, they’ve already changed the rules about communications, work hour flexibility and benefits – in particular retirement benefits. With the 401(k) plan being the primary source of retirement income for many Millennials, ensuring that we communicate plan benefits and features effectively has also taken on a whole new meaning.

Millennials are all about technology and today’s employers must respond to the changing communications dynamic in the workplace – including how they communicate with respect to employee benefits.

Traditional methods of educating employees with a one-on-one meeting is not necessarily the way Millennials like to communicate. Rather, it’s more about “Can you text that to me?” or, “Is there an app for that?”

Even email is passé. Instant messaging within the office is now the preferred way of communicating with the Millennial generation.

But just because they may not want to communicate traditionally doesn’t mean that Millennials don’t want help understanding retirement benefits and how to best utilize their 401(k) plan for maximum results.

These younger employees often want the help, need the help and expect management to provide the help.

A series of inter-generational round tables at Pentegra helped us learn how to better respond to the growing Millennial workforce.

Millennials expect their dedication to the job to be greatly rewarded. A solid retirement benefits package is how many employers are responding.

22 New Jersey Banker

Millennials are relying on two things – one, that their employer offers a 401(k) plan, and two, that there is a generous matching contribution.

According to a recent survey on Millennials and retirement savings, 69 percent think saving for retirement should be mandatory, while 82 percent think employers should be required to offer retirement.1 Millennials are already saving for retirement (48 percent through a 401(k) and 28 percent through an IRA.2 This is despite the fact that Millennials often face some significant financial challenges. They’re graduating with more student loan debt than any other generation. And, even though many of them say they would rather take vacations now and not wait until retirement, they are looking deep into their future. They’re just doing it in a different way.

In fact, according to our recent survey, two-thirds of Millennials are “very” or “somewhat” confident they will be able to fully retire with a comfortable lifestyle. This is good news, as the year 2042, when Millennials will start relying on their 401(k) plans as a definite lifeline will be here before we know it. Time flies as they say!

■ Wade Connor is a regional director for Pentegra. Wade works with employers and plan sponsors to develop retirement plan solutions that best meet the organization’s goals and objectives. Wade can be reached at wade.connor@pentegra.com or (704) 608-4563.

FOOTNOTES 1. 2017 Natixix Asset Management: Millennials Grasp the Importance of Retirement Savings 2. 2016 Fidelity Investments Millennial Money Study: Facts, Figures and Findings

Spring 2017

New Associate Members

as of December 2016

Bankers Toolbox 12331-A Riata Trace Pkwy.

Bldg. 3, Suite 300 Austin, TX 78727 Contact: Alyssa Albertson, product marketing specialist Phone: (512) 279-5876 Email: alyssa.albertson@bankerstoolbox.com Cachet Financial Solutions Southwest Tech Center A 18671 Lake Drive East Minneapolis, MN 55317 Contact: Bob McGuinness, regional vice president of sales Phone: (908) 403-0159 Email: bmcguinness@cachetfinancial.com

CI-Group 10 Salem Park Whitehouse, NJ 08888 Contact: Don Christensen, senior group director of banking Phone: (908) 534-6100, ext. 344 Email: don.christensen@ci-group.com Innovative Financing Solutions 218 Ardmore Avenue Ardmore, PA 19003 Contact: Michael D. Ryan, president and CEO Phone: (610) 733-9955 Email: mryan@innovfs.net Meeker Sharkey 21 Commerce Drive Cranford, NJ 07016 Contact: Thomas J. Sharkey Jr., president Phone: (908) 272-3330, ext. 11 Email: tomsharkey@meekersharkey.com

NAI James E.Hanson 235 Moore Street Hackensack, NJ 07601 Contact: Peter O. Hanson, chairman Phone: (201) 488-5800 Email: phanson@naihanson.com Philadelphia Sign 707 W Spring Garden St Palmyra, NJ 08065-1732 Contact: Robert E. Mehmet III, account executive Phone: (856) 829-1460 Email: robmehmet@philadelphiasign.com United Healthcare 170 Wood Avenue South, 3rd Floor Iselin, NJ 08830 Contact: John F. Verga, vice president of key accounts and account management Phone: (732) 623-1076 Email: John_Verga@uhc.com

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Spring 2017 New Jersey Banker

23

Feature

A Winning Game Plan for 2017

By Rob Nichols

T

o say the 2016 election changed the outlook for banking policy is something of an understatement. It fundamentally altered the landscape and set the stage for a potentially very productive year in Washington. That’s not to say there won’t be challenges. Here’s what bankers hoping for meaningful regulatory relief need to know.

With a Republican House, Senate and White House, odds of pro-growth legislation being enacted are significantly increased but not guaranteed. For any bill to succeed, it will need 60 votes in the Senate. That means bipartisan support – and strong grassroots engagement by bankers – is essential. That said, it’s clear our industry will be starting 2017 with our advocacy efforts closer to Rob Nichols the 50-yard line than our own 5-yard line.

This greatly improves our odds of scoring important successes for economic growth.

The outlook is also positive on the regulatory side, where new leadership at the banking agencies will provide many significant opportunities to improve banking conditions. The Trump administration will have the task over the next several months of appointing new heads of the OCC (Comptroller Tom Curry’s term expires in March), FDIC (Chairman Marty Gruenberg’s term expires in November), Federal Reserve Board (Janet Yellen’s term as chair expires in February 2018) and the Consumer Financial Protection Bureau (Director Richard Cordray’s term expires in July 2018). ABA will work collaboratively with the new leadership at these and other key regulatory agencies as we seek to reform and modernize the regulatory system itself.

Of course, the agenda in Washington will be very crowded, and we’ll need to work together to make sure our policy priorities get – and stay – on Congress’ radar. It helps that our priorities are geared

toward helping our customers, clients and communities thrive, a goal that clearly aligns with lawmaker concerns.

In fact, when ABA’s Government Relations Council leadership and Board of Directors met in December, the bankers discussed the value of advocating not just much-needed changes like mortgage lending regulatory relief and simpler capital rules, but also policy solutions that are less parochial in nature and help the economy grow. These include ways to help those with heavy student debt, urban housing solutions and a stronger Small Business Administration. The council and board members agreed that it made sense to embrace such bigpicture issues given the role bankers play as community leaders and economic stewards.

It’s even more important that the policy positions we advocate are positive and forward-looking, and tell the story of what banks are for, not what we are against. We are for economic growth. We are for job creation. We are for prosperity for our communities. Such optimism drives our industry, and it’s what should drive our advocacy, too. It’s far more compelling than an anti-this, anti-that platform.

So how can we best take advantage of the more favorable legislative and regulatory climate to ensure our “Blueprint for Growth,” as we are referring to our policy priorities, is advanced? The single most important way is for you and bankers like you to actively engage at the grassroots level. That means working closely with your state bankers association to ensure your state’s lawmakers – whether they are newly elected freshmen or seasoned politicos – are hearing from you and your colleagues early and often.

The 2016 election was a game-changer in many ways, but there’s one thing that remains the same: it will take the help of bankers from the C-suite to the tellers on the front lines to move the ball down the field and score meaningful legislative victories.

■ Rob Nichols is president and CEO of the American Bankers Association. E-mail Rob at nichols@aba.com.

Fine Points

By Camden R. Fine DISMANTLING DURBIN

W

e knew this was going to happen. When Congress passed the Durbin amendment, ICBA and community bankers said government price controls on debit interchange fees would dramatically harm our industry. Well, six years later, we are witnessing the unfortunate effects of this retailerpromoted government intervention in the payments marketplace.

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Despite the law’s exemption for financial institutions with $10 billion or less in assets, community bankers repeatedly told Congress that we were never going to be spared the effects of this market intrusion. As ICBA noted at the time, community banks have no real protection from the price ceilings because retailers can now control the routing of debit card transactions, allowing them to bypass smaller institutions. Further, large retailers can now steer

Spring 2017

customers to use the rate-controlled cards issued by the largest financial institutions.

Retailers – not consumers – were always going to be the beneficiaries of the Durbin amendment. And once Congress unleashed the heavy hand of government on the scales of the marketplace, they could not protect community banks from the consequences.

A close look at the evidence today shows Camden R. Fine that policymakers should have heeded our warnings and should now repeal Durbin, as proposed by House Financial Services Committee Chairman Jeb Hensarling (R-Texas).

First of all, consumers are not benefiting from the funding transfer to retailers. The Electronic Payments Coalition estimates that retailers are pocketing up to $8 billion per year – totaling more than $36 billion since the rules were adopted in October 2011.

The retailers even admit as much, with a Federal Reserve Bank of Richmond survey finding that 98 percent of merchants said they have either maintained or raised prices since debit interchange controls took effect.

Second, community banks are experiencing lower net debit interchange revenues because – as we warned – retailers can steer customers to the lowest-cost network. Not only are community banks receiving lower interchange rates while customers lose choice at the point of sale; retailers are also bypassing the network

agreements that allow them to use the electronic payment system in the first place. So merchants get to enjoy the benefits of the payments system while community banks and financial institutions pay an unfair share of the cost to maintain the system.

Last, but certainly not least, community banks are being harmed by network routing and exclusivity provisions that require issuers to add an “unaffiliated” payment network to their debit cards. This involves substantial and recurring administrative costs for local institutions. Here’s why: As interchange revenues at the largest financial institutions shrink, more of the burden for funding the payments system is being shouldered by the community banks that were supposed to be exempt.

All of this is why ICBA strongly supports Chairman Hensarling’s Financial CHOICE Act, which does away with Durbin while enacting significant regulatory relief. All in all, the evidence clearly indicates that government price controls are failing consumers, community banks and the financial system as a whole. Anyone who says otherwise – whether on Capitol Hill or in your own backyard – doesn’t have the interests of community banks at heart.

■ Camden R. Fine is president and CEO of the Independent Community Bankers of America (ICBA) representing the interests of more than 5,800 community banks of all sizes and charter types. He can be reached at camden.r.fine@icba.org. Follow him on Twitter, @Cam_Fine.

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Spring 2017 New Jersey Banker

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Feature

Economic Leadership Forum – A Success by Any Standard Photos courtesy of Don Christensen, CI-Group.

More than 525 bankers and business leaders attended the Economic Leadership Forum.

F

“The Federal Home Loan Bank System’s Role in Supporting Community and Economic Growth in the State of NJ” was presented by Paul B. Héroux, senior vice president/chief bank operations officer/ community investment officer with the Federal Home Loan Bank of New York.

or the sixth year in a row, the Economic Leadership Forum, was held Jan. 20 at The Palace at Somerset Park, and was a great success by any standard. It was an opportunity to hear from key thinkers on the issues that shape our great Garden State and the nation. More than 550 attendees enjoyed a line-up of today’s thought leaders. Attendees included bankers and business people from throughout the state.

■

Dr. James W. Hughes, Ph.D., distinguished professor, Edward J. Bloustein School of Planning and Public Policy at Rutgers University presented “Economic, Demographic and Technological Change.”

26 New Jersey Banker

An Economic Outlook and the Implications for Monetary Policy was presented by Patrick T. Harker, president and CEO, Federal Reserve Bank of Philadelphia.

Spring 2017

The well-received keynote speaker was General Michael Hayden, a retired four-star general who served as director of the CIA and NSA when the course of world events was changing at a rapid rate. After adjournment, General Hayden signed his book “Playing to the Edge.”

Donna Custard, president, NJ Chamber of Commerce Foundation informed attendees on the chamber’s Jobs for New Jersey’s Graduates Program.

The Heart of Innovation – Building High Performing Teams was presented by Sarah Levitt, executive coach, Sarah Levitt LLC.

Donald J. Musso, president and CEO of FinPro Inc., and Michael T. Rave, Esq., partner with Day Pitney, led the “How to Optimize Board Time and Limit Liability” breakout session.

A commercial real estate update was provided by Brian Hosey, regional manager at Marcus & Millichap.

Nicholas DeMedio, senior associate, Mosteller & Assoc. and Chester “Chet” Mosteller, president, Mosteller & Assoc. presented “Leveraging Human Capital in a Changing Workforce.”

“Big Solutions for Small Businesses – How the NJEDA Works with Banks and Community Partners to Support Economic Growth” breakout was presented by Paul Ceppi, director of business banking and community development, New Jersey Economic Development Authority; David Kaiser, senior vice president, market executive Central and Southern New Jersey, Midatlantic Region Bank of America and Michael Ostroff, president, Patella Woodworking.

Spring 2017 New Jersey Banker

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Notes Jill G. Schafhauser

Ferdinand R. Viaud

ROSELLE SAVINGS BANK Roselle Savings Bank announced that Roselle Savings Bank President and CEO Jill G. Schafhauser retired Jan. 27. Executive Vice President and COO Detlef (“D”) Felschow assumed the position of president and CEO. Schafhauser spent her entire 46-year banking career with Roselle Savings Bank, including 16 years as CEO and bank president. She followed in the banking footsteps of her mother, Mrs. Frances Hunter, who preceded her as an officer of the bank. During her time at the helm, the bank has grown and evolved from an institution that offered traditional banking services to one that is now firmly entrenched in the world of high-tech banking products, while still remaining true to its community roots. Schafhauser will remain active with the bank as a member of its board of directors. Felschow has been with Roselle Savings Bank for two years. Prior to that he served as senior vice president and COO of Hilltop Community Bank, and had previously served as senior vice president of retail banking at The Ramapo Bank.

GLEN ROCK SAVINGS BANK Glen Rock Savings Bank promoted longtime senior executive Ferdinand R. (Fred) Viaud to president and CEO. Viaud had held the positions of COO and CFO at the bank for over two decades. He will replace Henry P. Ingrassia who retired after a highly successful tenure as president, and who served a total of 25 years with Glen Rock Savings Bank. In November, Ingrassia received a proclamation from the New Jersey Bankers Association commemorating his outstanding stewardship and service to the banking industry. As the newly appointed president and CEO, Viaud will be responsible for oversight of all banking operations, both commercial and retail. In addition to his senior-level duties at Glen Rock Savings Bank, Viaud has served as a member of the National

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Rosa Fornino

Amy Duffau-Leonard

Board of Directors for the Financial Managers Society, a chapter officer and member of the New York and New Jersey Chapters of the Financial Managers Society, and as a board member and treasurer of the Hawthorne, New Jersey Chamber of Commerce. Earlier in his career, Viaud was vice president and treasurer of Ironbound Bank of Newark, New Jersey.

OCEANFIRST BANK OceanFirst Bank announced the appointment of Executive Vice President Joseph J. Lebel III to the newly established position of chief banking officer and the promotions of George Destafney and Vincent D’Alessandro to regional presidents. As Chief Banking Officer, Lebel leads the banking division which includes all customer-facing areas of the bank.

Destafney leads the bank’s initiatives to deliver an exceptional customer experience and attract new customers in the Central Region which includes Ocean, Monmouth and Middlesex counties, along with lending services extending into Mercer county in New Jersey and the Philadelphia market area. Destafney’s team includes management and staff of the retail branch network, commercial lending, residential lending and wealth management.

D’Alessandro leads the bank’s team serving the Southern New Jersey Region.

D’Alessandro aims to help deliver an exceptional customer experience and attract new customers in Atlantic, Cape May, Cumberland, Gloucester and Burlington counties.

ATLANTIC STEWARDSHIP BANK Atlantic Stewardship Bank announced the appointments of Rosa Fornino to vice president and business development officer of their Wayne Valley office and Amy DuffauLeonard to vice president and Bank Secrecy Act (BSA) Officer.

Ira Robbins

Rudy Schupp

Fornino has an extensive background in the finance industry including customer service, sales, community outreach and management. She will be focused on business prospecting in her new role at ASB and strengthening relationships within the community.

Leonard has over 15 years of banking experience with a focus in BSA including; filing Suspicious Activity Reports (SARs), Currency Transaction Reports (CTRs) and Office of Foreign Asset Control (OFAC) Regulations. She is also CAMS-certified (Certified Anti-Money Laundering Specialist).

VALLEY NATIONAL BANK Valley National Bank announced organizational leadership changes in conjunction with the Bank’s long term succession plan. In executing this strategy the bank announced the promotions of Ira Robbins to president of Valley National Bank and Rudy Schupp as president of Valley National Bancorp and chief banking officer of Valley National Bank. As president of Valley National Bank, Robbins works with Valley’s board of directors and the senior management team to define and lead Valley’s strategic vision and direction. In this role he is also responsible for overseeing the management of many business units including accounting, corporate treasury, human resources, educational resources, the consumer bank, credit division, information technology and bank operations. Schupp works with the management team and with Valley’s board of directors in overseeing opportunities related to growth, strategy and shareholder relations for the bank holding company. As chief banking officer he is responsible for commercial, mortgage and retail lending, as well as trust and wealth management. His commitments to the community include his role as a director on the board of trustees for Jupiter Medical Center in Palm Beach County.

■

Spring 2017

Shots

Kearny Bank’s Wood-Ridge office hosted a financial literacy presentation for Girl Scout Troops # 94454 and 94037. The girls learned about personal finances, completed age-appropriate activities and earned a Kearny Bank Financial Literacy Fun Badge.

Unity Bank launched an Employee Volunteer Program to help build on its community outreach efforts and give employees an opportunity to put their skills to work with the bank’s nonprofit partners. America’s Grow-A-Row and NORWESCAP received more than 220 volunteer hours through early December from 40 bank employees. Unity Bank President and CEO James A. Hughes (left) with Chip Paillex, president and founder of America’s Grow-a-Row.

Amboy Bank collected food and household items for food banks in its branch areas. Every Amboy office manager selected a food bank to collect for in their community. Pictured: Sylvia Rapoport, marketing manager, gathers food collections with Old Bridge Food Bank Director Anahita Feltz and volunteer John Conti.

Investors Bank’s charitable foundation Investors Foundation and the Roma Community Bank Foundation distributed $10,000 in grants to The Salvation Army Ray & Joan Kroc Corps Community Center in Camden. The funds help provide students in kindergarten through eighth grade with an opportunity to do homework, swim, dance, sing, play basketball, draw, craft, study environmental science, etc.

Pictured: Carol-Anne Peacock, Investors Bank assistant vice president and branch manager of Maple Shade (left), presents checks totaling $10,000 to the Salvation Army. Representing the Kroc center and accepting the grants from the Investors Bank and Roma Bank Community Foundation are (from left, next to Peacock) Hillary Jones, education manager; Benjamin Ovadia, resource development manager; Brenda Roldan, after school learning center coordinator; and Kroc Center administrator major Terry L. Wood.

Spring 2017 New Jersey Banker

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Shots

continued from previous page

NVE Bank made a $3,000 donation to fund a Money Management 4 Kids financial literacy program for students attending the nonprofit Bergen Family Center’s after school enrichment program. The eight-week program, run by Bergen County based iPiggiBank teaches students the fundamentals of money management through an interactive curriculum taught by a certified teacher that uses art, writing, literacy and play to reinforce healthy financial habits.

Somerset Savings Bank joined NJBankers Endorsed Service Provider CRA Partners and is helping vulnerable seniors by funding the Senior Crimestoppers program to protect those who live and work in this local care facility.

Pictured: William Taylor, president and CEO of Somerset Savings Bank, presents the Senior Crimestoppers Charter to Bridgeway Senior Healthcare resident Nancy Chiappinelli, Director of Business Development Jessica Pelligrino Tsoukalas and Administrator Susan Lanza.

The Commerce and Industry Association of New Jersey and COMMERCE Magazine hosted their Fourth Annual Chairman’s Reception, where they honored Atlantic Stewardship Bank as one of their Champions of Good Works – paying tribute to the kindness and generosity of the business community. Atlantic Stewardship Bank was honored for its involvement and support of Paterson Habitat for Humanity. Through its unique Tithing Program, ASB tithes or shares, 10 percent of its taxable income with Christian and other local charities each year.

This volunteer crew of Columbia Bank employees recently painted hallways and rooms at the Phoenix Center, a Nutley-based school that provides educational and therapeutic services to children with disabilities from eight New Jersey Counties. All labor and materials were donated by Columbia Bank.

30 New Jersey Banker

Provident Bank team members recently participated in Read Across America Day, an annual reading motivation and awareness program. Bank employees read children’s books to more than 800 pre-school and elementary school students at 15 public schools, early learning centers and community childcare centers across the bank’s footprint. Additionally, Provident Bank donated children’s books to the schools to support the initiative. Pictured left to right: Don Blum, executive vice president/chief lending officer, Provident Bank; Jane Kurek, executive director, The Provident Bank Foundation; Miriam Duro, banking center manager, Bayonne Branch, Provident Bank; Ken Lenskold, investment compliance manager, Beacon Trust Co.

Spring 2017

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