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NJBankers Board of Directors John W. Alexander Chairman/Chief Executive Officer Northfield Bank
James P. Genoy, Jr. President/Chief Executive Officer/Treasurer Monroe Savings Bank, SLA
Anthony Labozzetta President/Chief Executive Officer Sussex Bank
Kevin Cummings President/Chief Executive Officer Investors Bank
David J. Hemple President/Chief Executive Officer Century Savings Bank
Stewart E. McClure, Jr. * Regional President Lakeland Bank
Louis Anthony Costantino, Jr. * Managing Director, Industry Manager J.P. Morgan
Thomas J. Holt Senior Vice President Bank of America
D. Nicholas Miceli Market President TD Bank, N.A.
Edward Dietzler President The Bank of Princeton
James A. Hughes President/Chief Executive Officer Unity Bank
Peter Michelotti President/Chief Executive Officer Community Bank of Bergen County
John S. Fitzgerald * President/Chief Executive Officer Magyar Bank
Henry P. Ingrassia President/Chief Executive Officer Glen Rock Savings Bank
Craig L. Montanaro * President/Chief Executive Officer Kearny Bank
Paul E. Fitzgerald President/Chief Executive Officer First Choice Bank
Thomas J. Kemly President/Chief Executive Officer Columbia Bank
John E. McWeeney, Jr. President and Chief Executive Officer ext. 627 jmcweeney@njbankers.com James M. Meredith Executive Vice President and Chief Operating Officer ext. 614 jmeredith@njbankers.com
Claire Anello Office Manager, Database and Website Manager ext. 631 canello@njbankers.com
Michael P. Affuso, Esq. Executive Vice President and Director of Government Relations ext. 628 maffuso@njbankers.com
Cris Goncalves Manager of Education ext. 630 cgoncalves@njbankers.com
Emily T. DeMasi Vice President and Director of Communications ext. 610 edemasi@njbankers.com Wendy C. Mandelbaum Controller ext. 603 wmandelbaum@njbankers.com
Contributing Editor Emily T. DeMasi
Robert Rey President/Chief Executive Officer NVE Bank Peter G. Schoberl Chairman/President/Chief Executive Officer Community First Bank Kathleen Stone Senior Vice President, Senior Business Banking Executive BB&T
NJBankers Officers
NJBankers Staff
Jenn Zorn Senior Vice President and Director of Education & Business Development ext. 611 jzorn@njbankers.com
Michael Nardo Executive Vice President/NE U.S. Market Executive – Corporate Banking PNC Bank, N.A.
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
Gerald L. Reeves * Chairman President/Chief Executive Officer Sturdy Savings Bank
James S. Vaccaro * Second Vice Chairman President/Chief Executive Officer Manasquan Savings Bank
Angela Snyder * First Vice Chairwoman Chairwoman/CEO Fulton Bank of New Jersey
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
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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.
Winter 2016 New Jersey Banker
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SPECIALIZED EXPERTISE
Table of Contents
Audit & Compliance SEC Rules & Regulations SOX 404 Internal Audit Control
Network Attack & Penetration Information Systems Audit Business Resumption Planning
Cover Strategic & Succession Planning Profit & Process Improvement Enterprise Risk Management
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New Leaders in Banking
Departments 6 Chairman’s Platform 13 Washington Update The Golden Age of Banking The Dangers of a Captive Regulator
Tax Planning & Advice Tax Preparation & Compliance Tax Accounting
8 From the President’s Office The Great Fight for Financial Services Customers 10 Politics & Policy Shifting Sands
13 Upcoming Events 37 Bank Notes 38
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Behind the Teller Line Manasquan Bank: The Bank of the Jersey Shore Flexes Its Muscles
16 Feature Independent Verification and Validation 20
Meet Our Endorsed Service Provider Strategic Resource Management
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Meet Our Endorsed Service Provider The Jordan Real Estate Group
22 Feature Human Trafficking Monies Hiding in Your Bank 24
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35 Feature Inside the Business Valuation Process: A Primer for Commercial Lenders
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New Jersey Banker
Winter 2016
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Chairman’s Platform
The Golden Age of Banking By Gerald L. Reeves
I
s this the golden age of banking? Many of us often look back to a period in our banking careers and think “those were the good old days.” Well some young bankers will look back to this period of time and think that these days were the good old days. There are certainly many reasons why. I feel that the next few years will indeed be great for the banking industry. We have amazing new technology in online banking, mobile banking, full service ATMs, remote teller capability, remote deposits from office equipment or mobile phones and customer relationship data at our fingertips – just to name a few services resulting from new technology. So with that, there are more channels than ever for our products and services through the Internet. Gerald L. Reeves We have a highly educated workforce with Chairman almost all levels of our employees college NJBankers President and CEO graduates or college students. As a result of Sturdy Savings Bank changing business cycles over the past 30 years, some of our employees have vast amounts of experience that they share with those employees who are new to banking.
Banks have very strong capital levels to allow for various opportunities for growth or capital expenditures to upgrade technology. The economy has almost completely recovered to pre-crisis levels and is still showing modest growth. Interest rates are rising and there are those who believe margins will improve for properly positioned institutions. We have just experienced some major legislative reform in regulations like Dodd-Frank and initiatives like Basel III, so it is somewhat unlikely that any major reform is expected soon. Plus, there is growing sentiment gaining support from regulators and legislators which recognizes the value and contributions made by community banks to the overall health of the nation and may lead to some regulatory relief. There are fewer banks in our marketplace which means less competition from banks but unfortunately more competition from non-bank entities. We have a strong trade association in NJBankers that can lead us and help us with training and education initiatives as well as provide access to innovative service providers for new products, services and technology. In addition, the association advocates on our behalf in both Trenton and Washington. We need to grab on and get engaged in the forces swirling around us and take advantage of the many positive avenues available to us. Maybe this is the golden age of banking. ■ Gerald L. Reeves is chairman of the New Jersey Bankers Association and president and CEO of Sturdy Savings Bank. He can be reached at greeve@sturdyonline.com.
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Call 844-232-2709 or visit NJBAQuote.com today for your free quote and special 5% discount. Plymouth Rock Assurance is a marketing name used by a group of separate companies that write and manage property and casualty insurance in multiple states. Insurance in New Jersey is offered by Plymouth Rock Management Company of New Jersey on Behalf of Palisades Insurance Company, 331 Newman Springs Rd, Suite 304, Red Bank, New Jersey 07701, and its affiliates. Each company is financially responsible only for its own insurance products. Certain restrictions and limitations apply. For a full description of the programs, features, and coverages, please visit PlymouthRockNJ.com. Group discounts apply to policies written in High Point Property and Casualty Insurance Company or Palisades Insurance Company. May not be combined with any other group discounts. ©2015 Plymouth Rock Management Company of New Jersey. All rights reserved. 7994/022015
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Winter 2016
THE POWER OF AN ADVANCE
Photo courtesy of DBOX.
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. Sun National Bank, an FHLBNY member, used an advance to help renovate Congress Hall, a historic hotel and conference facility in Cape May, New Jersey. The project not only created more than 160 permanent local jobs and up to 350 jobs during peak season, but it preserved a registered National Historic Landmark building, maintaining the community’s vibrancy. Contact us to see how the power of an advance can improve your community.
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From the President’s Office
The Great Fight for Financial Services Customers By John E. McWeeney, Jr.
W
ith the end of 2015 and the start of a new year there are many important issues on the minds of bankers. Will the banking industry finally win some much-needed regulatory relief in the narrow legislative window between now and the elections? Will the Fed begin to gradually and steadily raise interest rates or we will still be stuck in the current low rate environment? Who will win the 2016 presidential election and how will that impact the economy and the outlook for banking? While all of these issues along with cybersecurity are critical to the future of banking there’s another issue that trumps them all and that’s the great fight for financial services customers. The convergence of changing demoJohn E. McWeeney, Jr. President/Chief Executive Officer graphics, technological advances and new NJBankers entrants into the financial services market-
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New Jersey Banker
place have put banking’s most important asset, its customers, into play. Billions of dollars are being invested each year into new financial technology in an effort towards winning the Millennials before banks even know what hit them. Millennials now represent the largest demographic group and with Baby Boomers retiring at a rate of 10,000 per day the economic power of the Millennials will only continue to grow. While the Baby Boomers will continue to be profitable bank customers and hold a lot of wealth, it’s the Millennials that will shape how financial services are offered in the future. It’s the appeal and potential rewards of serving Millennials that keeps drawing new competitors to the financial services marketplace. We see it already with the preponderance of direct access, online consumer and small business credit options that fall completely outside of our banking system. These competitors are well-funded, innovative and they don’t have the same regulatory burden that banks deal with. So what’s a traditional bank supposed to do? For starters, don’t panic, because banks have one thing that this new breed of fintech
Winter 2016
competitors and alternative players don’t have and that’s the customers, for now at least. Given that, though, banks don’t have the luxury of doing nothing and hoping that this is a fad that goes away. It’s not, so here are some suggestions, certainly not meant to be all-inclusive, that I’ve picked up recently listening to others on the subject: • Know your customers. Know how, when and why they engage with your bank. Build your data to learn everything you can about your customers and then find ways to engage with them more. • Start to develop your digital strategy. Doing nothing is not an option. You have to put your toe in the water and to do so you need the full support of your board of directors and executive management team. Start with something simple, something little, but start. • Embrace and empower Millennials within your institution. Don’t be intimidated and don’t ignore them. They’re not going away. Besides, you already know them. They’re your employees, family and friends. Listen to them and get them engaged in your bank’s strategy. • Seek out partners. There are many solutions providers that are offering to help banks with this initiative. Meet with them. Listen to their ideas. Consider their proposals. Reach out to your core systems providers. Challenge them to help you. There are over 230 associate members in NJBankers who can assist you. • Engage in social media. Use it as a platform to communicate with the millions of people from all generations who actively use it. Tell your bank’s story. Talk about all the great things you do in your
local communities. Assign ownership within your institution. • Cement your role as trusted advisors to your customers. Millennials need your financial expertise and guidance as much as previous generations. Win their trust early on when their needs are small and you’ll have loyal customers when their needs are greater. • The need for financial education has never been greater, with people of all demographic segments. Nobody should own this space better than bankers. Providing financial education in local communities is not only the right thing to do it also resonates well with socially conscious consumers of financial services. The threat of disintermediation is real and it’s upon us. I didn’t even mention the payments system which is another battlefield that the traditional banking industry is playing on. Working collaboratively, though, the banking industry and individual institutions can and must win this fight to become the trusted advisors to this great generation of Millennials. What other option is there? On behalf of all of us at NJBankers we want to wish you a happy and prosperous new year. We’re very grateful for the support of our bank members, associate members and friends. Unfortunately, recent unimaginable events have reminded us once again how precious life is and how blessed we are for our families and friends. ■ 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 and Policy
Shifting Sands By Michael P. Affuso, Esq.
O
n Tuesday, Nov. 3, 2015, New Jersey voters went to the polls for the selection of all 80 members in the Assembly and one Senate seat in the 5th Legislative District (Camden) in the sole Senate race, Nilsa Cruz-Perez was elected after being selected to fill the remaining term of Donald Norcross who is now serving in Congress. Cruz-Perez has been serving in the New Jersey SenMichael P. Affuso ate since she was Executive Vice President/ Director of Government Relations sworn in on DeNJBankers cember 15, 2014. She previously served in the Assembly from 1995-2010. After the NovemberJanuary lame duck session, the Legislature will start a new legislative session on Jan. 12, 2016. Democrats picked up four seats in the 1st, 11th and 16th Districts and extended their majority to 52-28 in the Assembly up from a 48-32 current majority. The Demo-
Assembly Majority Leader. Assemblyman Jon Bramnick (R-21) will retain his position as Assembly Minority Leader in the Republican caucus. There were only a few contested races in the 40 legislative districts, with the following races of particular note: District 1 (Atlantic/Cape May/Cumberland): Democratic incumbent Assemblyman Bob Andrzejczak and his running mate Democrat Vietnam War veteran Bruce Land defeated incumbent Republican Assemblyman Sam Fiocchi and Republican Cumberland Freeholder Jim Sauro by a vote of 28 to 26 to 23 percent. District 2 (Atlantic): In this split district, Republican incumbent Assemblymen Chris Brown and Democratic incumbent Assemblyman Vincent Mazzeo held onto their seats facing a strong challenge by Atlantic County Freeholders Democrat attorney Colin Bell and Republican Will Pauls by a 26 to 25 percent margin. District 5 (Camden/Gloucester): Democratic newcomers Camden City Councilman Arthur Barclay and former Camden County Surrogate Patricia Egan Jones
The entire Legislature and governor will run for election in November 2017.
crats also control the Senate with a 24-16 majority. The entire Legislature and governor will run for election in November 2017. Republican incumbent Gov. Chris Christie is two-term limited and will remain in office until Jan. 16, 2018. The Assembly Democratic caucus previously selected Assemblyman Vincent Prieto (D-32) as Assembly Speaker and Assemblyman Lou Greenwald (D-6) as
10 New Jersey Banker
handily defeated their Republican challengers by a vote of 34 to 32 to 18 percent. Jones and Barclay take the seats held by Assemblymen Angel Fuentes and Whip Wilson. District 11 (Monmouth): In a surprisingly close race, Republican incumbent Assemblywomen Mary Pat Angelini and Caroline Casagrande were narrowly defeated by Democratic challengers former
Neptune Mayor Eric Houghtaling and attorney Joann Downey by a 26 to 25 percent margin. Angelini lost by 165 votes to Downey. District 16 (Hunterdon, Mercer, Middlesex and Somerset): In an extremely close race, Assembly Republican incumbent Jack Ciattarelli held onto his seat, but his running mate incumbent Assemblywoman Donna Simon was defeated by Democrat Andrew Zwicker a Princeton Physicist. Democrat Maureen Vella trails the pack by a small margin. District 38 (Bergen and Passaic): Democratic incumbent Assemblymen Joseph Lagana and Tim Eustace defeated Republican Mark DiPisa by 29 to 22 percent of the vote. The other Republican challenger, Anthony Cappola, remained in the race despite reports that he wrote a book 12 years ago that contained racial and ethnic slurs. Assembly seats will be vacated by the following incumbents: Angel Fuentes (D5); Whip Wilson (D-5); Chris Brown (R8); Linda Stender (D-22); Allison McHose (R-24); Charles Mainor (D-31); Jason O’Donnell (D-31) and Carmelo Garcia (D-33). In the new session, those seats will be held by Arthur Barclay (D-5); Patricia Egan Jones (D-5); Joe Howarth (R8); James Kennedy (D-22); Gail Phoebus (R-24); Angela McKnight (D-31); Nicholas Chiaravalloti (D-31) and Annette Chaparro (D-33). After the November-January lame duck session, the Legislature will start a new legislative session on Jan. 12, 2016. On the local front, there were a number of contests at the county freeholder level, including Bergen (Democrats retained their 5-2 majority); Burlington (Republicans took full control of the 5 member board) and Cumberland (Democrats retain control). The three incumbent county executives – Dennis Levinson (Atlantic), Tom DiGise (Hudson) and Brian Hughes (Mercer) – were all re-elected. What does it all mean? First, Democrats are making their way
Winter 2016
back into power in a widespread statewide level. They essentially swept every legislative seat that was in play. It is questionable on whether the 16th District win was even in play though they won there too. In addition, they solidified themselves in the state’s largest County, Bergen, where Republicans controlled just three years ago. On a municipal level, Democrats solidified themselves in Brick, in the heavily Republican Ocean County. The Republican underbelly was almost exposed in heavily Republican Burlington County where labor endorsed Republican Freeholder candidates won by a mere whisker. The money game is even more interesting. Democrats greatly outspent Republicans in targeted districts. Furthermore, the activity of Pro-Democratic super-PAC’s made their heft felt against incumbent Re-
publicans outspending them in some cases 10-1. However, this advantage could have been vitiated by a Republican party which held the Executive branch and had the ability to tactically deploy these resources should they have been at hand. They were not, they could not, they did not – they lost. The most interesting piece – at least for people like me – is a Jersey City ballot initiative that moved the mayor’s election from May to November – or so it seemed. The effect of this, appears to create a situation where Mayor Steve Fulop or any other future Jersey City mayor need not choose between running in a primary for governor or mayor of Jersey City. Since the mayoral filing deadline is after the June primary, they can do both. In the past 40 years, three mayors (Jordon – 77,
Smith – 81, Schundler – 01) have faced that choice, every one chose to move up and lost. Fulop can choose to move up while attempting to hold what he has. However the initiative was non-binding and passed by a slender majority. Only the City Council can move the election. What it really did by the close margin was potentially expose the mayor to the whims of a City Council where each fancies themselves as the next mayor. A big margin would be a big victory and two bites at the apple. A small margin could be a loss. Here comes 2017. ■ Michael Affuso, Esq. is executive vice president and director of government relations for NJBankers. He can be reached at maffuso@njbankers.com.
Being visionary starts by seeing what’s right in front of you. The biggest opportunities are sometimes the hardest to see. Baker Tilly’s industry specialists have the experience to help you leverage resources and maximize opportunities. And we won’t just tell you what you want to hear, but exactly what’s needed. Want a more insightful advisor? The choice is right in front of you. Connect with us: bakertilly.com/industries/banking/ Want to receive our banking articles? Go to: bakertilly.com/insights/subscribe Baker Tilly refers to Baker Tilly Virchow Krause, LLP, an independently owned and managed member of Baker Tilly International. © 2015 Baker Tilly Virchow Krause, LLP An independent member of Baker Tilly International
Winter 2016 New Jersey Banker
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Directors’ Corner
Do Your Questions Create Value? By Martin Coyne
G
ood directors continuously evaluate and question company performance, strategy and the assumptions used to formulate these plans. Answers to these questions help the board better understand their business and how their CEO and management team approaches and solves complex problems. The tone and phraseology used in these director questions are critically important and can mean the difference between effective board and CEO interactions and potentially destructive tensions. If the CEO and management team perceive the questions as supportive and designed for better director understanding, there will be positive dialogue results. However, if directors ask Martin Coyne questions perceived as accusatory or critical, significant tensions can rapidly develop between the CEO and board. These tensions can rapidly escalate into major issues that can destroy a positive CEO and board relationship. Even in companies with a historically strong and positive relationship between and CEO and their board, poorly phrased questions can create instantaneous tensions. The intensity of any tensions created will ebb and flow over time depending on business results, market conditions, individual personalities and the chemistry between the CEO and the board. Good board chairs pay careful attention to the tone and content of the interactions within the board and between the board and management. They are alert for developing tensions particularly in the area of questions and responses. They try to understand the cause of any tension and address the cause early.
GOOD QUESTIONS PROVIDE VALUE Boards have two roles: fiduciary oversight of their company and supporting the CEO and management to achieve company objectives. Sometimes, in compliance driven organizations like financial institutions, boards can sometimes lose sight of their role of supporting the CEO and management. A good board provides guidance and council on operational problems, strategy and people issues. Directors ask questions to improve their knowledge of the business and to understand their CEO’s thought process. Many times, their questions are based on their personal experience and expertise to help focus the discussion on the right issues and consider other alternative solutions. Good questions can be very reinforcing for management. They can be especially helpful if they provide the opportunity for a broader discussion between the board and the CEO about diverse options or alternatives. Properly structured and phrased questions that encourage discussion rather than find fault can be instrumental to company success and creating value. For example, a non-threatening and guaranteed approach to create a robust discussion would be for
12 New Jersey Banker
a director to ask, “What other alternatives have you considered and why were they rejected?” In contrast, that same director asks, “Your approach won’t work. Why don’t we do it the way I do at my company?” The CEO is now on the defensive and it becomes a one-onone contest to see who is right. You can be sure tension will develop and emotions will rise. Questions that are phrased in an accusatory way, with hidden agendas or with little respect, can be very detrimental. These types of questions are many times “judgmental” and it’s clear that the director asking the question has a different viewpoint and has already made up their mind. These types of questions are more confrontational than supportive and easily lead to defensive answers hindering open dialogue and discussion.
CEO RESPONSE AND FOLLOW-UP DISCUSSION IS CRITICAL Today, boards are asking more detailed operational questions and many CEOs are experiencing intense questioning at board meetings. Directors are questioning business performance, strategy and the capabilities of the management team. Some CEOs fear voicing concern or dismay about these questions but their body language at times conveys a feeling that they are no longer trusted or perhaps their board is concerned with their performance. After particularly intense questioning, a CEO may even believe that their board has lost confidence in her or him. Board chairs need to coach directors on how they ask questions and also encourage their CEO to view their board’s questions and probing from a positive perspective. They are not trying to find where you are failing or what the CEO and management are doing wrong. The directors are trying to ensure that the management team is doing everything possible to create value for shareholders. They have insight and experience available that can be very helpful to you and your management team.
CLOSING THOUGHTS More intense and focused questions from a board are a result of their need to better understand the business, competitive environment and assess performance. Directors need to ensure that they understand the relevant business issues, that alternatives have been thoughtfully considered and that the decisions they have approved at past meetings are being implemented. Fundamentally, good director questions can create real value and sustainable competitive advantage. Bad director questions can destroy investor value, morale and create dysfunctional relationships. Be sure to include some questions in your board evaluations that address this topic and help all your directors ask relevant question in a productive way. ■ Martin Coyne is an experienced director, chairman and CEO of the NJ Chapter of NACD and founder and chairman of the CEO Learning Network.
Winter 2016
Washington Update
The Dangers of a Captive Regulator By Frank Keating
N
CUA’s latest plan to loosen the reins on credit unions and allow them to veer further from their mission has bankers seeing red. The regulatory end-run would give the already tax-exempt $1 trillion industry new and potentially risky lending powers. It’s an audacious proposal that must be stopped – and you can help. First, some background. Acting as cheerleader instead of credit union supervisor, NCUA in June issued a proposal that grants the credit union industry’s wishes for increased business lending authority. Specifically, the proposal would: • Widen loopholes to the member business lending cap by “clarifying” that non-member business loan participations do not count towards the statutory cap and by eliminating regulatory Frank Keating oversight of the concentrations of these loans. • Make the statutory cap meaningless by allowing certain credit unions to exceed the member business loan statutory authority. In fact, if both the proposed business lending and pending capital rules are adopted as proposed, the statutory cap could nearly double without any congressional approval. • Remove important safety-and-soundness checks and balances by, for instance, eliminating the requirement that borrowers pledge personal assets – along with business assets – as collateral for new business loans. Such a relaxation of standards makes the industry’s insurance fund vulnerable and leaves taxpayers holding the bag should anything go wrong. Indeed, NCUA has failed to prove that it is ready or able to supervise institutions with major business loan portfolios. A quick look at credit unions’ track record on business lending raises serious concerns about whether they, or their regulator, are equipped to handle these loans. Since 2010, at least five credit unions have failed because of poorly run business loan programs. These failures accounted for a quarter of all losses to the insurance fund over that period. It’s a situation that does little to instill confidence in broadening credit unions’ commercial lending authority.
All of this should concern not only bankers but Congress, too. When Congress last weighed in on whether and how much credit unions should be lending to businesses, it voted for less, not more. In fact, the 1998 law that restricted member business loans to 12.25 percent of assets emphasized that credit unions should focus on consumer lending in order to remain true to their mission. Since then, credit unions have repeatedly implored Congress to change the rules, and lawmakers have declined to do so. Bankers had a lot – in fact, everything – to do with frustrating credit unions’ ambitions in Congress. Every time they pushed for a member business lending bill, you pushed back harder. You helped make clear to Congress that such a bill would be unacceptable to the nation’s community banks. Now we must do it again. ABA and the state associations mounted a major grassroots letter-writing campaign in August that resulted in an outpouring of banker comment letters to NCUA on the proposal. The letters may not persuade NCUA, but they will slow down the process. That gives us time to bring Congress into the debate. If you are facing unfair and unbridled credit union competition, write to your lawmakers today (And if you aren’t, write anyway – because it’s just a matter of time before an aggressive credit union enters your market). Let lawmakers know how the unlevel playing field between community banks and tax-subsidized credit unions is harming your ability to serve your customers. Unfortunately, the NCUA’s business lending proposal is only the beginning. The agency has already announced that it has an expanded field-of-membership rule and a secondary capital proposal in the works as well. This rulemaking trifecta, which could seriously undermine bank competitiveness, puts NCUA in “captive regulator” territory, and it must be answered. The agency must be reminded not only of credit unions’ mission but also its own: to ensure a safe and sound credit union system. ■ Frank Keating is president and CEO of the American Bankers Association. Email him at keating@aba.com.
Upcoming Events February 23, 2016 CRA/Lending Conference
April 6, 2016 Women in Banking Conference
June 9, 2016 Marketing Conference
Renaissance Woodbridge Hotel, Iselin
The Palace at Somerset Park, Somerset
Crowne Plaza Monroe, Monroe Township
March 4, 2016 Directors & Managing Officers Conference
April 25, 2016 Charity Golf Outing
June 22, 2016 Compliance University
Mercer Oaks Golf Course, West Windsor
Crowne Plaza Monroe, Monroe Township
May 11, 2016 112th Annual Conference
August 8, 2016 Annual Golf Networking Outing
Renaissance Woodbridge Hotel, Iselin
March 14-16, 2016 ABA Government Relations Summit Marriott Marquis Washington Hotel, Washington
The Phoenician Scottsdale, Arizona
October 20, 2016 Annual Human Resources Conference Caesar’s Resort, Atlantic City
May 17, 2017 113th Annual Conference The Breakers, Palm Beach, Florida
Montclair Golf Club, West Orange
Winter 2016 New Jersey Banker
13
Behind the Teller Line
Manasquan Bank: The Bank of the Jersey Shore Flexes Its Muscles joyed a carnival-like atmosphere with food, refreshments, games, pony rides, raffles and prizes – all for free. The event also served as a food drive for the FoodBank of Monmouth and Ocean Counties, which Manasquan Bank supports throughout the year with ongoing food drives and monthly volunteer efforts. Just a few weeks prior, Manasquan Bank’s adamant support of the FoodBank was on full display for Hunger Action Day. Manasquan Bank collected more than 375 pounds of food donations leading up to the event, and sent two teams of volunteers to pitch in on event day. It was a fantastic fundraiser to help the one in every 10 people across Monmouth and Ocean Counties who require emergency food from local pantries, soup kitchens and relatives. Manasquan Bank also provides yearround financial and volunteer support for Coastal Habitat for Humanity, and offers career development teaching with Big Brothers Big Sisters of Monmouth & Middlesex Counties.
CHARITABLE FOUNDATION
A
fter 141 years embedded in New Jersey’s most beloved region, Manasquan Bank is a fixture in Monmouth and Ocean counties. Its proud history and instant recognition among local residents could easily lead to a sense of complacency, yet its leadership continuously shows an evergrowing commitment to the Shore’s families, businesses and communities.
THEN AND NOW To say Manasquan Bank has come a long way since its founding would be an understatement. Originally incorporated in 1874 as the Squan Village Building & Loan Association, the organization spent nearly 50 years in Manasquan’s historic Borden Building. After an interim move, the reincorporated Manasquan Building & Loan Association built its first permanent quarters at 185 Main St.
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Fast-forward to present day, in which Manasquan Bank has eight branches across Monmouth and Ocean counties. Five of those branches opened between 2002 and 2008. Two new locations – one in Howell Township on Route 9 and one in Ocean Township on Route 35 – are slated to open in 2016. The bank’s accelerated growth over the past 15 years is exemplified by its standing in the top 11 percent of all banking institutions in the U.S., with more than $900 million in total assets.
IN THE COMMUNITY While banks are traditionally visible sponsors of local events, Manasquan Bank prides itself in raising the standards for community involvement. Most recently, the bank hosted its second Annual Community Day in downtown Manasquan, where families en-
The Manasquan Bank Charitable Foundation serves as Manasquan Bank’s primary source of financial assistance for nonprofits who share the bank’s passion for making a positive impact in the lives of local residents. The charitable foundation drives local support through grants and other funding, aiming to enhance the efforts of organizations, institutions and initiatives that solve unfulfilled community needs in pivotal areas such as education; health and wellness; social and civic services; culture and arts; and recreation. Eligible nonprofits are encouraged to fill out the grant application form on the bank’s website (www.manasquanbank.com).
EMPLOYEE WELLNESS PROGRAM Forward-thinking institutions know that culture is the key to longevity, continued market relevance and overall success. When employees are pleased with their working environment, it creates a positive atmosphere
Winter 2016
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for tenured staff, new hires and customers alike. Manasquan Bank thrives as a destination for top talent in every facet of operations by cultivating a culture of engagement, trust, accountability and customer service. Meanwhile, a dedicated employee wellness program promotes the elusive work-life balance that so many employers overlook. The program has even yielded improvements in employees’ physical health, bringing standing workstations to Manasquan Bank offices. The new workstations enable employees to work upright and keep their blood flowing.
A REBRAND FOR THE FUTURE Humans are naturally drawn to the ocean. With 141 miles of coastline from Sandy Hook to Cape May, it’s no wonder why Manasquan Bank’s footprint is a generational destination for families. Those who live here enjoy a front row seat to Mother Nature’s beauty, and so, in reimagining its brand, Manasquan Bank drew inspiration from the sea. When visiting their local branch or the Manasquan Bank website, customers will notice a crisp, refreshing new visual identity. A nautical, red and marine blue theme is motored by an emphasis on locality, and anchored with a sleek, progressive logo. The bank also removed the word “Savings” from its name as a nod to its evolution into a fullservice financial institution. “The banking industry is one that seems to believe that mergers and acquisitions are synonymous with efficiency and service improvements,” said President and CEO James S. Vaccaro. “We think differently. Our new brand allows us to differentiate ourselves and showcase our new products, our commitment to technological relevance, and above all, our enduring focus on delivering outstanding customer service.” Indeed, the new look embodies Manasquan Bank’s deep connection to the communities it serves and symbolizes a bright future ahead. ■
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Feature
Independent Verification and Validation THE DEFINITION, THE ORIGIN AND WHY YOU SHOULD BE DOING ONE By Dr. Frank Masi
I
ndependent verification and validation, IVV, model validation, validation or – as Shakespeare might say – a validation by any other name is still a validation. Regardless of the name, it has evolved and been redefined over time. This article will cover the origin, OCC guidance, regulatory pressure, IVV methodology, reporting, independence and vendor due diligence in an effort to provide oversight on the model validation process.
BACKGROUND The term IVV started back in 1970 with the ballistic missile program. It was used to independently validate software packages for targeting and processing ballistic missiles. This had obvious importance. It was adopted by the Department of Defense (DOD) for other software programs and eventually by NASA in 2004. It is widely used by the European Space Agency, Dr. Frank Masi NASA, FAA, DOD and has been formalized in the IEEE 1012. The overall purpose was to validate that the software was performing as designed and achieved the expected results. Today the IVV methodology has been leveraged by the OCC in their Supervisory Guidance on Model Risk Validation, publication SR 11-7. Because institutions rely so heavily on software models to manage compliance and risk within an institution, they need to be periodically reviewed and validated. Systems, data, risks within the institution, products and services all change over time, so these models need to be refreshed to meet these changing variables periodically. There are many reasons why these variables change, such as mergers, new product and service releases, new regulatory concerns and challenges, new emerging threats, new technology and new data. The only way to address this is through continuous/periodic monitoring, testing and validating. Banking organizations should conduct a periodic review – at least annually but more frequently if warranted – of each model to determine it is working as intended and if the existing activities are sufficient.
REGULATORY PRESSURE We are seeing pressure from regulators at all levels. Though the pressure is different based on region and regulatory agency, most are asking for model validations to be completed through exit interviews and exit letters as MRA and MRIAs. The number of IVVs or model validations has been increasing significantly in the past couple of years. This may be for two reasons: 1) Technology and automated solutions software has been in place now for five to 10 years in most institutions and has not been reviewed or revised significantly. 2) The global reach of these institutions is greater. Even community banks and credit unions that are local or regional are seeing the affects.
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MODEL VALIDATION First, what is a model? According to the Board of Governors of the Federal Reserve System, “The term model refers to a quantitative method, system or approach that applies statistical, economic, financial or mathematical theories, techniques and assumptions to process input data into quantitative estimates. … The definition of model also covers quantitative approaches whose inputs are partially or wholly qualitative or based on expert judgment, provided that the output is quantitative in nature.” Thus, a model is any process/system that translates, manipulates, aggregates, summarizes, calculates and decisions data. An example of this is your AML transaction monitoring program. It detects suspicious activity or anomalous activity and presents it for review. The challenge is in what is not presenting. That is where we ask, “Should I have seen that or not?” It is what we do not see that is the real risk to the institution. Models are useful in a number of places: Models meeting this definition might be used for analyzing business strategies, informing business decisions, identifying and measuring risks, valuing exposures, instruments or positions, conducting stress testing, assessing adequacy of capital, managing client assets, measuring compliance with internal limits, maintaining the formal control apparatus of the bank or meeting financial or regulatory reporting requirements and issuing public disclosures. Model validation is a risk control, helping us to manage areas of automation that range from low to high risk. This automation alone helps to reduce risk through the removal of human error, volume challenges and data trends. However, it introduces risk through type 1 and type 2 errors, tuning, data, business and regulatory changes. According to the Fed Board of Governors, “Model risk occurs primarily for two reasons: The model may have fundamental errors and may produce inaccurate outputs when viewed against the design and objective and intended business uses,” or “The model may be used incorrectly or inappropriately.” As the variables to the model become more and more out of date inaccuracies can be introduced. Also, many of us try to leverage technology to solution for challenges that it was not intended or designed for. “All model components – inputs, processing, outputs and reports – should be subject to validation; this applies equally to models developed in-house and to those purchased from or developed by vendors or consultants,” the Fed Board of Governors wrote.
INPUT This is the data, interfaces, import utilities and sources that support the model. Here a review of the data standardization (free-formed text field standards), data normalization (date conversion from European to U.S.), data validation controls (mandatory, required and supplemental/referential) and reconciliation (all transactions from source are received and verified). Accounting of controls needs to be reviewed and evaluated. Do you have weak, moderate, or strong data controls?
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Weak controls include: • Import test for formatting, field and record length checks. • Type casting, text, number, monetary, float, date, alpha characters only, alpha numeric. • Test for missing data in mandatory fields (field required to make the system operate) • Test for missing data in required fields (fields required for system to meet regulatory compliance). Moderate controls include: • Test/validate date type, e.g. US, European. • Text length test for possible truncation. • Country code test 2 characters, 3 characters. • Unexpected data values identified. • Records import match records in file (header information such as number of records in file). Strong controls include: • Field data test example two-character country code meets standard ISO-2 country and validated on import. • Product type ID accurate\validated on import. • Account type ID accurate\validated on import. • First-time data values identification.
What about quantity, quality and appropriateness of data? Are the required fields 100 percent populated, is the data correct and is it what the system needs to run properly? Is this the same for mandatory fields and referential fields? If these data elements are not met, is there an error log recording this information? There are a number of questions that need to be answered for input controls.
PROCESS This is where the bulk of the model or process happens, such as data translations for address parsing, calculated data, derived data or any data manipulations within the model. The model will create aggregations, calculations, translations, thresholds and transformations of the data for the purpose of trending, detection of outliers, ratios, alerts, heat maps, in preparation of output. Here the questions are on the calculations, supporting data, thresholds, filtering criteria, aggregation assumptions and calculated refining or learning: • Are your configurations in line with the business and risk tolerances? • Do these match your business assumptions? • Have your thresholds and configurations been updated with the changes in business over time? continued on next page
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Feature continued from previous page • Does your system still demonstrate outliers or is the false positive rate increasing at a disproportionate rate than volume? • Do alerts fall in the 70th, 80th or 90th percentile, what is appropriate for your risk tolerance? These are just some of the questions that need to be answered.
OUTPUT Output is about results: What final data calculations are being presented? Did information flow through the model effectively and correctly? Are the outputs in line with your expectations? Do they mitigate risk, and address business risk? Are they substantive? The other factors to consider are presentation. You need to have good workflows and controls that drive compliance and standardization. Are your highest risks presenting in a priority order, is there aging, quality controls and escalation points/processes?
REPORTS Reporting must be clear and concise with good workflows and rollup reporting. These reports must ensure aggregation of risk at different levels. Systems can produce output in alert/case format or in report format, either is fine depending on volume. In reporting format, the identification of potential risk must be clearly demonstrated, for example, if you find that you are looking through records of cash deposits and adding them up to see if an individual has deposited
more than $10,000 in a period of time, these reports may not be clear enough.
IVV REPORT The report should provide the following details: the baseline configurations, the analysis results from the observations, staff interviews conducted and the gaps between compliance expectations and actual results and the review observations and recommendations. The report will be based on tested and observed result sets in the context of industry peers. The IVV Report sections are based on three parts of the overall system: input, process and output. This is one example approach to a model validation report: • Executive summary; • Top recommendations; • Demonstrate policies and procedure to system/process GAPs; • Document data analysis (input); • Document product/system/model analysis (process and output); and • Provide observations and recommendations.
VENDOR DUE DILIGENCE In an independent verification and validation, the independent part is the segregation of duty or connection to the current process that you are looking to validate. Independence is measured by two factors: • Distance – how far you are removed from the original project/model setup/changes.
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• Time – how long since the vendor was involved in the project/model setup/changes. A good rule of thumb is that the reviewer should not have been involved in the last setup/ changes within the last 12 to 18 months, and should be: • Independent • Knowledgeable about product or technology • Knowledgeable about compliance • Knowledgeable about the process • Knowledgeable about your lines of business • Strong model validation methodology
CONCLUSIONS The entire process must be evaluated in the context of your policies and procedures, risk tolerance, business lines, industry peers, products and services. Remember, a strong model validation policy, is risk mitigation and supports a strong governance program. ■ Frank Masi, Ph.D., is executive vice president of operations at ARC Risk and Compliance, leads the AML practice, is a thought leader on anti-money laundering compliance and technology and teaches at a number of accredited universities on risk management, compliance and audit. He can be reached at 609-730-4123 or frank. masi@arcriskandcompliance.com. Please visit www. ARCRiskandCompliance.com for more information. REFERENCES 1. Board of Governors of the Federal Reserve System Office of the Comptroller of the Currency. (2011, April 4). Supervision and Regulation Letters (SR 11-7a1). Retrieved May 1, 2014, from Board of Governors of the Federal Reserve System: http://www.federalreserve.gov/bankinforeg/ srletters/sr1107a1.pdf 2. Board of Governors of the Federal Reserve System. (2011, April 4). Supervision and Regulation Letters (SR 11-7). Retrieved April 30, 2014, from Board of Governors of the Federal Reserve System: http://www.federalreserve.gov/bankinforeg/ srletters/sr1107.htm 3. NASA. (2012, June, 6). Independent Verification and Validation Framework (IVV 09-1). Retrieved 2014, November 7, http://www.nasa.gov/sites/default/files/ ivv_09-1_-_rev_o.pdf 4. Wikipedia. Independent software verification and validation (2014). Retrieved 2014, November 7, http://en.wikipedia.org/wiki/ Independent_software_verification_and_ validation
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Meet Our Endorsed Service Providers
Strategic Resource Management Strategic Resource Management is a professional services firm committed to reducing expenses, enhancing revenue and maximizing bottom line performance for our clients. Drawing on our extensive experience, market insight and robust proprietary benchmarking database, SRM helps financial institutions of all sizes reduce operating expenses, optimize efficiency and improve bottom line performance without sacrificing quality or valued vendor relationships. SRM specializes in identifying previously undiscovered opportunities for growth or savings, aligning expenses with industry benchmarks and fostering supplier partnerships with a focus on quality and long-term stability. As a leader in the bottom line enhancement industry, SRM provides a fresh, innovative, resultdriven perspective to supply chain management
and purchasing strategy. Further, we utilize a norisk, performance-based business model. If we cannot objectively demonstrate cost savings and/ or revenue enhancement, we don’t get paid. You can count on complete impartiality from SRM. We have no preferred providers or ancillary products to sell, and we understand the value of your current vendor relationships. In fact, 90 percent of our projects are implemented with our clients’ existing vendors. All assessment work is completed with the highest integrity, based on your economy of scale and specific to your needs only. We consider ourselves an extension of your supply chain organization. While many of our clients want to maximize efficiency in day-today operations, most do not have the time or the resources to continually monitor ever-changing market conditions. We’re here to serve as your market intelligence resource, to identify opportunities for increased profitability and to implement savings measures
on your behalf. SRM continuously tests the market on the goods and services that you purchase every day. SRM understands that no two clients are alike. We’ll work closely with you to identify specific strategic goals, and then leverage our extensive market knowledge to find meaningful savings in routine costs, contracts and existing vendor relationships. Founded in 1992, Strategic Resource Management Inc. is an independent professional services firm that draws on extensive experience, market insight, and a robust, proprietary benchmarking database to help clients all across the U.S. and Canada. Headquartered in Memphis, with offices in Dallas, Indianapolis, South Bend, Spokane, and Jackson, Tenn., SRM assists financial institutions across the U.S. and Canada. ■ For more information, contact Joe Romanello at 781799-3996 or via email at jromanello@srmcorp.com or visit www.srmcorp.com.
Congratulations to ConnectOne Bank's Siya Vansia and to all the 2015 New Leaders in Banking honorees.
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20 New Jersey Banker
Connect with us ConnectOneBank.com or give us a call 844.266.2548
Winter 2016
Meet Our Endorsed Service Providers
The Jordan Real Estate Group
Explore Appraisal Management with the best in the industry! We know your headache ‌ Compliance, tracking appraisals, delivery time frames, value disputes, appraiser monitoring, license and errors & omissions tracking. We know your questions ‌ Are we qualified to review this appraisal? Are we working with the best appraisers in our lending footprint? Are we compliant with true separation between loan origination and the appraiser? Are we properly vetting appraisers? Are we qualified to properly vet appraisers? How do we handle the UCDP
portal for loans sold to Freddie Mac or Fannie Mae? Are we paying reasonable and customary fees? If our appraisal process is reviewed in an audit, will we be compliant? Our clients asked themselves these questions before they became our clients! For over 35 years The Jordan Real Estate Group has offered our partners in the mortgage lending and legal community high caliber appraisal & appraisal management services. While we operate in several states along the East Coast our focus has always been state and community banks which are best suited for our hands-on approach to appraisal management. Our appraisal management and quality control solution allows for an immediate cost and labor savings which is realized as we handle billing, appraiser selection, appraiser tracking, appraiser approvals,
appraiser errors and omissions and licensing expirations, third party review by a certified appraiser and allow our lender clients to be compliant with appraisal independence requirements. An exceptional industry reputation, and state-of-the-art technology, coupled with the longevity and commitment of our management team and production staff, speaks volumes to the integrity of our company. Our ultimate goal is to deliver a quality, cost effective, compliant appraisal as the basis of a lending decision and provide delivery time frames which allow our clients to be competitive. We will always exceed your expectations! â– Please contact Jim Jordan, president and chief appraiser, and let us show you how we can help you. Jim can be reached at 732-440-1768 or Jim@ thejordangroup.net.
Congratulations to all of the 2015 new leaders in banking. Boiling Springs is especially proud to recognize a true leader in banking, our very own Tonice Bunting.
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Winter 2016 New Jersey Banker
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Feature
Human Trafficking Monies Hiding in Your Bank By Nancy Lake
H
uman trafficking is in the news more and more. When it is mentioned, many have a picture in their minds of Asian women working in nail salons. However, this stereotyping of human trafficking is deadly, as it blinds people to the trafficking that occurs in their own local community and the ill-gotten monies that may be passing through their bank unnoticed. After learning of a community bank in the Mid-Atlantic region with an obvious sex trafficking case and performing research on the topic of human traffickNancy Lake ing myself, I was shocked at what I learned. Trafficking involves various forms, including trafficking of organs, trafficking of people for forced labor, child soldiering, trafficking in women, girls and boys for sexual exploitation and commercial sexual exploitation of children in tourism. This is not just in isolated locations but is happen-
22 New Jersey Banker
the staggering amount of money flowing through financial institutions. Is it any wonder that monies from this crime can flow through your bank? There are red flags issued by FinCEN and other sources, but red flags are often indicative of multiple crimes. So how can you identify monies tied to sex trafficking flowing through your bank? Here are some red flags taken mainly from an actual situation in a community bank. Two cleaning companies opened accounts at the bank. The cleaning companies were not doing any transactions such as purchasing cleaning supplies that would indicate they were actually providing cleaning services. They did numerous other things as seen in the red flags below that indicated sex trafficking. Of course some of these red flags could also be indicative of other types of abuse. ing on a global scale. Here in the U.S., we have various forms of trafficking, but sex trafficking is the focus of this article, as it threatens even your children and grandchildren. Sex trafficking can be found in every community of America and affects American boys and girls as young as 11. Some of these children come from good homes, while others are runaways and foster children. Traffickers actually search for children on Facebook and in places that children frequent, such as malls, after-school events, bowling alleys, movie theatres and foster homes. The traffickers are highly trained in how to lure children into a relationship of trust and friendship that eventually snares them into trafficking. Around 300,000 American children are in danger of being sexually trafficked each year. This could be your child or grandchild – and you might not know until it is too late. Globally, the monies involved in this heinous crime are estimated at $150 billion based on a 2012 report. Compare this to the global sports market in 2014, which generated about $146 billion, and you see
RED FLAGS FOR TELLERS AND BRANCH PERSONNEL • Round dollar payroll checks being cashed by ladies scantily dressed and accompanied by a man. • The same ladies presenting foreign ID cards including international drivers’ licenses and valid passports with no visa or an expired visa, or even a student ID. • Evidence of being controlled. • Bruises or other signs of physical abuse. • Fear or depression. • Not speaking on his/her own behalf and/ or non-English speaking. • Having another “handler” answering questions, holding ID, and governing the person cashing a check. Note: the “handler” may not be at the teller window but may be in the lobby observing (as a driver, friend, etc.) or in the parking lot.
RED FLAGS FOR ACCOUNT OPENING PERSONNEL • Be aware of business types that are prone to human trafficking, such as
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hotels, restaurants, truck stops, cleaning/ janitorial services, massage parlors, nail salons, etc. • Articles of Incorporation from other states, such as Florida, California, New York, Nevada or others known as major trafficking states. (Many states require businesses to register, and/or get licenses and permits to do business in the state in which the business is housed. Does yours?) • Addresses for businesses that are a P.O. Box or the physical address of a postal store often found in a strip mall. • Inconsistent dates between ID and business documentation (their ID indicates they have lived in your state for several years, but the business’s physical address is in another state for the same period of time). • Address of the business is in an apartment complex. • Multiple unrelated people living at the same address.
RED FLAGS FOR BSA/AML PERSONNEL • Rent payments for multiple locations within apartment complexes. • Rent payments made by unrelated business types (example: a cleaning business paying rent for several apartments). • Multiple telephone carrier payments (traffickers must use different phone numbers on advertising sites, so they open accounts with multiple carriers and have multiple phone numbers). • New businesses making a lot of money overnight. • Round dollar payroll checks being cashed. • ACH credits received from an international trading site for imports/ exports. • Wires and/or frequent travel to countries known as human trafficking hot spots, such as Mauritania, India, Syria,
Uzbekistan, Pakistan, Central African Republic, Haiti, Democratic Republic of the Congo, Republic of the Congo, Qatar, Sudan, United Arab Emirates.
CHECK CARD DEBITS • From an airline and/or moving company. • For rent payments for related things involving trafficking such as gas, beer/ liquor, restaurants, casinos, a gentleman’s club, etc. • Occurring in various cities over a short period of time such as a month. • Prepaid and credit cards. • Multiple expenditures on websites like the ones listed below and followed by hotel spending. • Travel out of state and multiple hotel expenses. • Multiple payments for Internet ad sites – escort ads posted online do not obviously state that sex with children is being sold, so code words are used. See sidebar for examples. • Websites including benaughty.com, backpage.com and girlsdateforfree.com. If you are interested in learning more about human trafficking, there is a wealth of information available. ACAMS has published my white paper entitled “Human Trafficking Monies in the Community Banks,” which gives details of the case study I referenced in
this article. You can find the white paper here: www.acams.org/aml-resources/aml-whitepapers-surveys. You can also visit these websites: The Blue Campaign: www.dhs.gov/bluecampaign. Shared Hope International (founded by former Rep. Linda Smith): sharedhope.org. Polaris anti-trafficking website: www.polarisproject.org. National Human Trafficking Resource Center (NHTRC) – Information by state: www.traffickingresourcecenter.org/states. According to the NJ Human Trafficking Task Force, “New Jersey has the potential to be one of the country’s major entry, transit and destination states for trafficking. New Jersey, centrally located between the northern portion of the East Coast and the tri-state metropolitan region of Philadelphia, Baltimore and Washington, D.C., is easily accessible by car, bus, truck, van, train, boat and plane.” (www.nj.gov/oag/dcj/humantrafficking/downloads/NJ-Human-Trafficking-Brochure.pdf). Please get involved in some way to stop this heinous crime. Together, we can make a difference! ■ Nancy Lake, CAMS-Audit, CAMS-FCI, is compliance anchor director at Atlantic Community Bankers Bank. She can be reached at 717-303-7854, nlake@acbb.com or visit www.acbb.com for more information.
Words to Watch for in Internet Payments Adult Entertainment Exotic Dancer Beauty Search Inc. Exploit Better Life Forced Labor Candy Fresh/Fresh Meat Dancer Pornography Entertainment Club Pretty Young Thing Escort New to Business/ Sadomasochism New to Game (meaning dominance and discipline)
PutHer2GoodUse Rent Boys Sex Industry Strip Club Torture Work Offer Young and Tender
Winter 2016 New Jersey Banker
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ATROPICANA YEARLY BANKING OASIS&DRAWS THE |INDUSTRY’S ANOTHER SUCCESSFUL CASINO RESORT ATLANTICBEST CITY,FOR NEW JERSEY | DEC. 2,EVENT 2015
Though winter has rolled around again, on Wednesday, Dec. 2, Atlantic City’s Tropicana Resort & Casino was host to the elite of the Mid-Atlantic region’s banking industry. Through a continuing partnership between the New Jersey Bankers Association and The Warren Group, publisher of New Jersey Banker, BankHorizons shined yet again as a gathering of 42 solutions providers, banking information and expertise. This year the conference focused strongly on educational seminars, covering virtually all fields of banking, including operations, technology, lending, retail banking, marketing, human resources, security, compliance and risk management. As if the wealth of industry knowledge and camaraderie was not enough, participants could enter into a raffle to win any of over a dozen prizes, including useful gadgets, New York Giants tickets or even $10,000 in valuable consulting services. With all the fun, collaboration and learning only growing each year, 2016’s event seems just over the horizon. NJBankers and The Warren Group look forward to seeing you next year!
THANKS TO ALL OF THE EVENT’S VALUED SPONSORS: • Wolf & Company • All Covered • CEIS Review Inc. • COCC • The Galbreath Group • Paladin fs, LLC • Pitney Bowes • RSM US LLP • Residential Home Funding Corp. • Western Technologies Group, LLC • Saylent • Praxis Data Systems • eBank Discovery • DarkTrace • Investment Professionals Inc • Meyer-Chatfield
BankHorizons, produced through a partnership be足tween NJBankers and The Warren Group, publisher of New Jersey Banker, enjoyed another successful year with a lineup of speakers, all experts in their fields, who shared information key to the future of community banking. In addition, 42 service providers exhibited their solutions at the tradeshow. The event kicked off the night before with the New Leaders in Banking Awards. The Awards are bestowed upon up-and-coming leaders, who were nominated by their respective banks, and are 40 years old or less. An independent panel of judges reviewed the nominations and this year, there were 12 recipients. We congratulate the class of 2015! 26 New Jersey Banker
Winter 2016
How do you see technology changing the banking industry over the next 10 years? As technology advances, I see customers having access to more products and services without stepping into a branch location. In order to stay competitive, community banks will have to keep up with technology advancements in order to attract new customers as well as retain their current customer base. If you weren’t a community banker, what would you be doing? I would be working at an accounting firm.
Tonice Bunting
Age: 40 Title: Assistant Vice President, Staff Accountant
Bank: Boiling Springs Savings Bank Bank location: Rutherford Town of residence: East Rutherford
How did you come to community banking, and why do you stay? My career in banking began with Boiling Springs Savings Bank as a bank teller fresh out of high school 21 years ago. Five years later, I accepted an entry-level position in their accounting department. I stay, because of the pride that we have as an institution for giving back to our community. It also helps to have great co-workers! What do you consider your biggest success? Completing my bachelor’s degree and working full-time while caring for an infant at home. That wasn’t easy, but I wanted to show my daughter that you can conquer anything that you set out to do, no matter what obstacles are thrown your way.
Recognizing an Honor Well Deserved. Fulton Bank of New Jersey congratulates Amber Friel on being named one of the 2015 “New Leaders in Banking” by the New Jersey Bankers Association. For any business or organization to run successfully, a good leader is required at the helm. Amber is that leader at the Bellmawr branch. She joined in 2008 and quickly proved herself to be a great leader, mentor and individual, who values her relationships with her customers, team members and peers. Amber understands that these relationships provide her not only with an opportunity, but also with an obligation, to ensure that as our customers’ needs change, she is there as their trusted banker. This approach has worked well and afforded her in gaining trust, respect and loyalty from her customers, which in turn aided her in meeting and exceeding many of her branch goals. As a good leader, she instills the same approach within her team.
1.855.900.FBNJ
I
fultonbanknj.com
Member FDIC. Member of the Fulton Financial Family.
Winter 2016 New Jersey Banker
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What do you consider your biggest success? Moving to the United States when I was 19, without any family or friends, obtaining a college degree, and building my career and family life here – that’s what I consider my biggest success. Professionally, I’m very proud of my career growth with Capital Bank of New Jersey from an administrative assistant, to a credit analyst, to a commercial loan officer and now an assistant vice president. How do you see technology changing the banking industry over the next 10 years? Technology has already revamped the entire banking industry, making it more streamlined and efficient for customers. (Who doesn’t love mobile banking or online bill pay?) I hope technology continues to improve customers’ banking experience. I would also like to see future technology having a positive impact on the banks’ ever growing compliance burden.
Nia Coombs
Age: 34 Title: Assistant Vice President/SBA Loan Officer Bank: Capital Bank of New Jersey
Bank location: Vineland Town of residence: Cape May
If you weren’t a community banker, what would you be doing? The world of finance would be unavoidable for me. It is the area that provides for a perfect mix of human interaction, analytical thinking and problemsolving. While I have seriously considered careers in financial planning or investment banking, I couldn’t be happier with my commercial lending path in community banking.
How did you come to community banking, and why do you stay? I joined Capital Bank of New Jersey fresh out of college, and only a few months after the bank first opened for business. The bank’s commitment to the community was immediately evident. I grew to appreciate it even more, as my career transitioned to commercial lending, where our customers have direct access to the bank’s decision makers. Being able to provide financing solutions that are unique to each customer, delivering on exactly what we promise and then seeing the direct benefit for our community – that’s what makes me love what I do.
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Winter 2016
Joseph Covell
Age: 33 Title: General Auditor Bank: The Provident Bank
Bank location: Jersey City Town of residence: Jersey City
How did you come to community banking, and why do you stay? I started at the bank after college. I stayed in banking because I enjoy the work and the challenges that it brings. I started around the time the subprime market problems began to emerge, which began a period of rapid changes along with several different, difficult operating environments. Though banks have faced a number of challenges during this period, it has also been a great opportunity to learn a lot about banking. I also stayed because I’m proud of the success we have had at the bank, and I want to be a part of that. What do you consider your biggest success? I’m proud to be part of a team that has led the bank successfully through a challenging period. I’m also proud to help support my staff ’s development,
to try to help support them to reach their full potential. I’m proud of their developments and accomplishments. How do you see technology changing the banking industry over the next 10 years? Technology is changing how we interact with our customers. With mobile banking and other developments, customers visit branches less often, and so there are fewer opportunities to interact with customers at a branch. Given this reality, it’s important to have a social media and online marketing presence, to be able to reach your customers. However technology changes though, the best way we can reach our customers is by consistently delivering great products and services competently If you weren’t a community banker, what would you be doing? Well, I enjoy what I’m doing. I’m still challenged every day and I have a lot yet to learn. And it’s an exciting time to be in banking, with so much change happening in so many areas. If I wasn’t in banking, maybe I would do something in the legal world.
Congratulations to our very own
Michael Giacobello New Leader in Banking
855-iBank4U (855.422.6548) myinvestorsbank.com Michael Giacobello AVP, Dunellen Branch Manager
Member FDIC Equal Housing Lender Investors Bank name and weave logo are registered trademarks. © 2015 Investors Bank.
Winter 2016 New Jersey Banker
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expanding my customer base. A big part of this accomplishment can be attributed to my exceptional staff, which I have been able to select and groom for our organization. Many of these talented bankers have been successful, earning promotions within my team and throughout the company. How do you see technology changing the banking industry over the next 10 years? Innovations in technology will continue to benefit both the banking industry and its customers in many ways. We, as bankers, will have to rise to the challenge to not only stay technologically-savvy, but also to ensure that we are offering our customers the most up to date and consumer friendly systems and applications. By complimenting this with added specialized support, such as live video chat with bank representatives, we will continue to be able to offer the personalized service we pride ourselves upon.
Amber C. Friel
Age: 37 Title: Branch Manager, Assistant Vice President
Bank: Fulton Bank of New Jersey Bank location: Bellmawr Town of residence: Bellmawr
How did you come to community banking, and why do you stay? For several years I was a manager for a larger retail bank, and after evaluating my career path, I felt that I wanted to find a bank that really valued its employees being invested in the community they serve. I was very fortunate to be able to interview and be chosen to lead the team in my hometown with Fulton Bank of New Jersey. From day one I immediately knew that this was the right move for me, and since then I am proud to say I have become the face and name for Fulton Bank of New Jersey in my community.
If you weren’t a community banker, what would you be doing? One of things that I enjoy most about my job is being able to use my background in communications to support the various events that promote my bank and support community endeavors. If I was not a community banker, I would focus on a career that would allow me to utilize my public relations, marketing and event planning skills.
What do you consider your biggest success? My biggest success has been the ability to consistently achieve my goals, including growing my branch's deposits by $15 million and retaining and 12279 - NJ Bankers Magazine Ad_NJ Banker' Association 11/17/15 3:18 PM Page 1
Congratulations Nia! Congratulations Nia Coombs for being recognized as one of The New Jersey Banker’s Association’s New Leaders in Banking for 2015. We are proud to have you representing Capital Bank of New Jersey.
Nia Coombs, AVP/SBA Loan Officer
Our Focus Is You. Member FDIC
PREMIER LENDER
30 New Jersey Banker
CapitalBankNJ.com
Capital Bank is Rated Five Star by Bauer Financial
APPROVED LENDER
Winter 2016
What do you consider your biggest success? The relationships I’ve built internally as well as with my clients are my greatest professional successes. One of the best things about community banking is that we are able to develop strong and long lasting relationships. Customers are not just account numbers, they are neighbors, coworkers and friends. Making a positive impact within my marketplace has been extremely rewarding. On a personal level my newborn son is one of the greatest things to ever happen to me, he has changed my life in ways I never thought possible. How do you see technology changing the banking industry over the next 10 years?
Michael Giacobello
Age: 32 Bank location: Dunellen Title: Assistant Vice President, Branch Town of residence: Bridgewater Manager Bank: Investors Bank How did you come to community banking, and why do you stay? I come from a family of community bankers, starting with my grandfather and then my father so growing up I was exposed to the industry at an early age. I credit my enjoyment and success in the industry, to Investors Bank and the culture the bank provides. As bankers at Investors we are given the ability to support the communities we live and work in and are encouraged to participate in organizations we believe in. Because of work we do and the help and support we provide to our customers my career at Investors has been extremely fulfilling. We make a direct impact on the lives of the people that bank with us and to me there is nothing more rewarding.
The retail division of banking is going to be most affected by the advancement in technology. Technology is providing convenience at the highest level to all of our customers and decreasing the need to come into a brick and mortar location. I think you will see more technology driven branches in the future. However, I also believe there will always be a need for branch personnel. Technology and the role it will play will never completely eliminate the need for human interactions but will lessen the need for fully staffed branches. It’s an exciting time in the industry as some banks have already begun this process and have experimented with technology branches. Relationship banking will always play a crucial role in the industry; but the younger generations are technology savvy and will demand increased electronic delivery channels as time moves on. If you weren’t a community banker, what would you be doing? I’d like to say I’d be on the PGA tour but I think that might be a pipe dream. I would however, be a small business owner. The industry is yet to be determined but the entrepreneur in me would want me to build something I can pass down for generations to come.
proudly say that they are very happy with how successful I have been and that they do not regret all the hardship they went through to give me a better life. How do you see technology changing the banking industry over the next 10 years? I think that we will see less and less of brick and mortar branches as most banking transactions are done through smart phones or computers nowadays and I expect that to grow. If you weren’t a community banker, what would you be doing? I think I would be an accountant, as I had a hard time deciding on whether to go to finance or accounting during my sophomore year at Seton Hall.
Khanh Le
Age: 34 Title: Vice President – Client Manager Bank: Bank of America
Bank location: Cranford Town of residence: Metuchen
How did you come to community banking, and why do you stay? I came to the business banking industry from the middle market segment in order to gain some sales experience dealing with smaller companies. During my time here, I decided that I liked working personally with the small business owners as well as making a difference in the lives of many in the community with the projects/companies that we fund. What do you consider your biggest success? My biggest success would be where I am today and what I have made of myself. I am the child of two immigrant parents who came over to America without two pennies to their name. They both worked two jobs and weekends in order to give me the opportunities that their parents could not afford them. I can
Winter 2016 New Jersey Banker
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What do you consider your biggest success? Inheriting and continuing to develop a great team of individuals. I am committed to their professional development and they truly continue to be a key part of my success. How do you see technology changing the banking industry over the next 10 years? Technology has changed the industry so much in the last few years. I see it continuing to enhance the customer experience and, equally as important, helping us become even more efficient and effective at reporting and analyzing financial information of banks.
Angela K. Ho
Age: 31 Title: Vice President & Controller Bank: Northfield Bank
Bank location: Woodbridge Town of residence: Jersey City
If you weren’t a community banker, what would you be doing? I would most likely be in the education field. Younger generations are our future leaders and I believe in providing them with the skills and tools needed to be successful. As a banker, I am fortunate to support financial literacy and am proud of my continued involvement with the Junior Achievement organization.
How did you come to community banking, and why do you stay? After starting my career in public accounting, I began looking for opportunities that would provide me with further challenges and greater potential to grow. The relationships that I had built early on in my career helped me see the countless opportunities that community banking offered. I have been lucky to work for banks, in particular Northfield Bank, which provided opportunity for career advancement and the daily motivation to continue to further my career in the community banking industry.
How do you see technology changing the banking industry over the next 10 years? Technology will continue to enhance the customer experience with mobile banking, faster transactions, and by streamlining the lending process. These efficiencies will allow more time to provide better customer service and build a relationship with the customer. It is important to maintain a presence in the communities so I don’t think brick and mortar stores will become extinct, but their function and image will continue to evolve. The challenge for community banks is economies of scale and the continued threat of cybersecurity. If you weren’t a community banker, what would you be doing? Something in the financial sector, either a financial advisor or accounting.
Jodi Magazzu
Age: 36 Title: Vice President, Commercial Credit Officer
Bank: Ocean City Home Bank Bank location: Ocean City Town of residence: Ventnor
How did you come to community banking, and why do you stay? I began my career in community banking immediately after college at Commerce Bank where I received my formal credit training. I continue to stay because Ocean City Home Bank has provided me the opportunity for personal and professional growth, the opportunity to be part of a team of highly esteemed coworkers and to play an integral role in the success and growth of the communities we serve. What do you consider your biggest success? My son, having my parents proud of my accomplishments, and the strength to overcome any obstacle that has been placed in my path.
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Winter 2016
How do you see technology changing the banking industry over the next 10 years? I see the continued push for banking on demand and technology allowing banks to provide a full-service experience wherever the customer has access to a smartphone or computer. I think we will also see mobile payments evolve and technology will push the need for even more stringent security controls. Although brick and mortar will still have a place in banking, technology will extend even the smallest banks’ reach into markets that were once too distant. If you weren’t a community banker, what would you be doing? I would have started my own IT consulting business that would assist businesses large and small find new efficiencies with the help of technology.
Timothy McGill
Age: 33 Title: VP/Director of Information Technology
Bank: Century Savings Bank Bank location: Vineland Town of residence: Franklin
How did you come to community banking, and why do you stay? I previously worked in the financial industry for a private equity firm and I knew I wanted to stay in an industry that allows for such rapid adoption of new technologies. When I saw the opportunity to start a brand new IT department with an institution that cares greatly for the community it serves, I knew it was a great fit. What do you consider your biggest success? I have had many successes in my career and I continue to raise the bar and challenge myself. To date my biggest success has been starting an IT department from the ground up all while learning the intricacies of banking and regulations.
What do you consider your biggest success? My family is definitely my biggest success! I have the most caring, supportive wife and a perfect 1-year-old boy named Desmond. It’s such a great feeling to work hard all week at a job you love and then come home to your beautiful family. It really makes you appreciate life and makes all that time away from home worth it in the end. How do you see technology changing the banking industry over the next 10 years? Technology is already rapidly changing in everyday banking. You can deposit checks right from your phone or go online to open a bank account. Foot traffic in branches will definitely lessen, but I don’t think completely anytime soon. There just might not be a physical person behind that teller line soon! If you weren’t a community banker, what would you be doing? If I wasn’t in banking I would own a breakfast-luncheonette!
Jessica Ocampo-Callaghan Age: 35 Title: Senior BSA Analyst Bank: Manasquan Bank
Bank location: Manasquan Town of residence: Brick
How did you come to community banking, and why do you stay? Honestly, I was young and wasn’t sure where I was headed career-wise. I started as a teller for a large commercial bank, then applied at Manasquan Bank as soon as I saw a new branch opening up. Over 13 years later and five positions throughout the bank, I have now created a career for myself in our BSA Department. It is a completely different feeling coming from a big bank to a community bank. I feel like they care more about their employees and offer endless opportunities for me to grow.
Winter 2016 New Jersey Banker
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How do you see technology changing the banking industry over the next 10 years? Technology will always be changing and we need to keep at pace with the trends. In the future, I believe the consumer will not come to the bank at all. Everything will be online. I am concerned with other banking platforms that are outside of the regulated industry such as Apple Pay or Pay Pal and how this will impact the financial banking industry. If you weren’t a community banker, what would you be doing? I would be a stay-at-home mom with my children Sean, 6, Amber, 3, and Kyle, 1.
Jennie Piperi
Age: 36 Title: Vice President/HR Director/ CO-CISO
Bank: Metuchen Savings Bank Bank location: Metuchen Town of residence: Metuchen
How did you come to community banking, and why do you stay? When I was in college a friend of mine came to work at Metuchen Savings Bank and she recommended that I apply for the part-time night teller position. She told me it was the best place to work, and she was correct! I am also thankful to be able to live and work in Metuchen. It has provided me with the opportunity to be a part of all of the great work the bank does for the community. What do you consider your biggest success? The successful conversion of our core banking system with my team. My team and I were dedicated to the process and the end result was a very positive one.
the team that created a brand that better aligned with the company’s mission, but I had the ability to start developing brand equity for the company, which is one if it’s valuable assets today. For example, in our most recent merger, legacy ConnectOne was actually the entity that was acquired; however the brand was so valuable that the new, combined bank rebranded to ConnectOne Bank.
Siya Vansia
Age: 29 Title: Vice President of Marketing Bank: ConnectOne Bank
How do you see technology changing the banking industry over the next 10 years? It’s definitely an exciting time to be in banking. Between new technologies, Millennials infiltrating the workforce and the surge of fintech companies, the banking industry is ripe for change. I think in the next 10 years what we know to be a bank will be very different. Many transactions will become streamlined. The operations of banks will evolve and begin to look more like lean startups, and branches will be limited and serving more advisory roles. We may even see banks partnering with tech companies to accomplish these goals. Bank location: Englewood Cliffs Town of residence: Cliffside Park
How did you come to community banking, and why do you stay? I came to community banking as a client before I did as a banker. Newly out of college, I launched an online startup and opened my accounts with what was then North Jersey Community Bank. While the startup was in its infancy phases, I received an alert about some open positions at the bank and thought it would be beneficial to apply. I thought it would be valuable to develop some financial experience while I continued to work on the startup. Working with the bank from the client side gave me quite a bit of insight into the company and I knew the bank had an environment I enjoy working in. Since then, I’ve been with ConnectOne for over five years. I stay because I believe in the mission of the company.
If you weren’t a community banker, what would you be doing? I would be working in an environment to develop and enhance a company’s brand experience. No matter what the industry is, this is brand experience is key differentiator for any company and I’d enjoy bringing this skill to another business.
What do you consider your biggest success? In 2013, I was given the opportunity to oversee the rebrand of the company from North Jersey Community Bank to ConnectOne Bank. Not only did I lead
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Winter 2016
Feature
Inside the Business Valuation Process: A Primer for Commercial Lenders By Dan Doran
I
n the end, it all comes down to the bottom line. “Value,” like beauty, is subjective – what the business is worth to the owner may not be what it is worth to the market. But if a business is to be sold, its value must be objectively determined – a sticking point for the lenders involved in the transaction. In all buy-sell transactions, valuation is the proximate issue: Just how much is the business worth? From a seller’s perspective, one Dan Doran way to find out is to let the market speak by soliciting offers. From the buyer’s perspective, past experience might be one method to understand value, or perhaps quantifying what one can afford in terms of cash out of pocket and monthly loan payment. Both of these methods tend to be imprecise. And while they may satisfy the parties – and lenders – in some smaller deals, when it comes to Small Business Administration (SBA) lending, the SBA’s standard operating procedure requires that when goodwill exceeds $250,000, an independent, third-party valuation is required. Typically lending teams within larger financial institutions are more accustomed to the valuation process and requirements. However, for a large segment of community and mid-size banks, the valuation process and related requirements may be more of an enigma where SBA loan volume is lower. This short tutorial provides lenders with guidance on who should perform a valuation for their client, how the lender can help with selecting a valuation professional and an overview of the factors a
valuation analyst will consider.
WHO CAN PERFORM THE VALUATION? The SBA requires that the valuation be performed by someone who routinely performs business valuations. While this makes sense at first blush, it also segues into a recent change: CPAs are not qualified to perform business valuations in the absence of an accompanying valuation credential. Many jump to the conclusion that business valuation is a core component of CPA work. It’s not. While there are CPAs who also perform valuation work, the CPA credential on its own does not indicate that a practitioner routinely performs valuation work. The SBA does recognize several credentials that are acceptable for third-party valuation firms. Those include: • CVA, a credential from the National Association of Certified Valuators and Analysts. • ASA, from the American Society of Appraisers. • ABV, Accredited in Business Valuation, awarded to CPAs by the American Institute of Certified Public Accountants. • CBA, Certified Business Appraiser, from The Institute of Business Appraisers Inc.
WHAT SHOULD LENDERS CONSIDER WHEN SELECTING A FIRM? When selecting a firm to perform a third-party business valuation, it’s important to consider the experience of the appraiser or appraisal firm. Items to look for include: • Industry experience: Does the appraiser have experience working in the given industry? • Valuation specialization: Does the appraiser routinely perform valuation work, or merely hold a valid credential
but rarely perform actual valuations? • Capacity: How long will it take to complete the project? We all know the old saying, “time kills deals.” Ideally the appraiser has capacity to turn the project around in a reasonable time – typically one to three weeks.
WHAT WILL AN ANALYST CONSIDER? Each valuation is slightly different, but the valuator will consider three approaches: the market approach, the income approach and the asset approach. Each of these approaches considers the company in a different light, allowing the appraiser to take a deep look at the business. For SBA loan valuations, the asset approach is usually considered, but not relied upon. The asset approach essentially looks at the book value of the company, perhaps making adjustments for assets and liabilities that may not transfer to the buyer. In most common applications of the asset approach there is no goodwill. Given that the SBA requirement is predicated on goodwill, it stands to reason that the asset approach is infrequently relied upon. The market approach seeks to compare the subject company to other similar companies in the market. This approach – often comparing the subject company’s earnings, gross profit or revenues to other, similar companies – can provide great insights into how the market has priced similar businesses. The downside is the availability of data. Companies that fit within the SBA program are invariably not public, and data can be sparse and misleading. If the business type is common – such as day cares, gas stations or insurance agencies – market data may be robust. But finding data for less common businesses is more challenging. continued on next page
Winter 2016 New Jersey Banker
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Feature continued from previous page
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Perhaps the most common pitfall in valuing businesses in concert with SBA lending is understanding which assets and liabilities are conveying to the purchaser (This also happens to be an area that can derail deals when buyers and sellers do not clearly convey expectations). For example: Is the seller retaining accounts payable and accounts receivable? Or, is the buyer purchasing? How about real estate rental deposits? Or prepaid expenses? Accrued vacation? Identifying which assets and liabilities will be part of the “NewCo” balance sheet early will help both the analyst properly prepare a valuation, as well as ensure buyer and seller are on the same sheet of music at closing time.
The SBA SOP 50-10 5(b) recently added more extensive business valuation requirements to ensure that lenders are utilizing qualified and compliant valuation analysts. Lenders may also consult the websites of The National Association of Certified Valuators and Analysts and the American Society of Appraisers for more in-depth information on the valuation process, such as IRS Business Valuation Guidelines and an International Glossary of Business Valuation Terms. ■
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36 New Jersey Banker
ARE THERE COMMON PITFALLS TO AVOID?
WHERE CAN LENDERS GO FOR MORE INFORMATION ON VALUATIONS?
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The income approach seeks to develop a discount rate – essentially a risk profile – for the subject company. The advantage in doing so is that the appraiser can directly tune the calculation for the subject company. The analyst will look at the earnings stream of the company and apply the discount rate in order to develop the overall value. While not required to rely on all of those approaches, by reviewing each the analyst is able to best triangulate fair market value. A good analyst will be able to select the best approach and model for the subject company to develop a fair market value.
Dan Doran, CVA, is principal of Quantive Business Valuations, a professional business valuation practice specializing in small-to-medium-sized closely held and family-owned businesses.
Winter 2016
Bank Notes
Brian W. Jones
Benjamin Watts
Kathy Hiltner
Philippe Ferreira
Philip Portantino
ATLANTIC STEWARDSHIP BANK
NEWFIELD NATIONAL BANK
Atlantic Stewardship Bank announced the appointment of Sarah Roskowsky to vice president and marketing manager. Roskowsky will be responsible for developing and executing an interactive marketing plan that supports the bank’s mission, while continuing to enhance their brand, awareness and emotional connection with the communities, customers, shareholders and charities that the bank serves.
Newfield National Bank announced the promotion of Rob Tola to the position of senior vice president and chief lending officer for the bank. Tola’s new responsibility is to supervise the lending process as well as monitor the bank’s loan portfolio. He is also responsible for managing the lending team. In addition, the bank welcomed Dainis Basens, to the lending staff as senior vice president and chief credit officer. He has 32 years of lending experience and 22 years of credit administration experience. He attended Cook College, Rutgers University and graduated with a bachelor’s degree in environmental and business economics. Basens will be responsible for the credit process and the bank’s credit department.
THE FIRST NATIONAL BANK OF ELMER The board of directors of the First National Bank of Elmer announced that Brian W. Jones has joined the bank as president, CEO and director. He succeeds Douglas E. Carll, who announced his pending retirement this past spring. Jones brings a wealth of experience in community banking throughout Southern New Jersey. Exhibiting strong civic and banking relationships, he serves as a member of the Risk Management Association’s National Chapters and Membership Council and is a board member of the Kennedy Health Care Foundation.
LIBERTY BELL BANK Benjamin Watts, president and CEO of Liberty Bell Bank, has been appointed to the board of directors of the South Jersey Bankers Association. The South Jersey Bankers Association is a 40-year-old regional bankers association that was formed to provide a forum for bankers to share ideas and address issues concerning the financial services industry. Liberty Bell Bank also promoted Kathy Hiltner to vice president of branch administration and business development. Hiltner was formerly assistant vice-president of business development of Liberty Bell. In her new role she will be responsible for the administration and training of the branch system as well as new business development.
NVE BANK NVE Bank announced the appointment of Philippe Ferreira to vice president and commercial loan officer. Ferreira has over 14 years of experience in the banking industry, most recently working as senior vice president, commercial loan officer for Bank of New Jersey in Hackensack. He received his bachelor’s degree in economics from Rutgers University.
PEAPACK-GLADSTONE BANK Peapack-Gladstone Bank appointed Philip Portantino to the position of executive vice president and director of human capital. Portantino will oversee both the bank’s human resources and training functions, building upon the bank’s record of continued growth, success and strategic objectives. He will provide additional concentration on the expansion and development of the employee talent base and human capital organization and management. Frank H. D’Alto was promoted to the position of senior managing director of commercial private banking. D’Alto will be
Frank H. D’Alto
Bernadette M. Mueller
Thomasine Russo
responsible for further growth of the commercial middle-market lending business with a focus on providing exceptional client service and the bank’s unique private banking experience.
THE PROVIDENT BANK The Provident Bank has named Duyrea Chaplin banking center manager of its West Orange branch. In this position, Chaplin will lead and manage a team of sales and service professionals, as well as oversee daily branch operations. Prior to joining Provident Bank, Chaplin worked for PNC Bank. Chaplin is a graduate of Howard University with a bachelor’s degree in marketing.
VALLEY NATIONAL BANK Valley National Bank announced the appointment of Bernadette M. Mueller, executive vice president, to senior CRA officer. With 35 years of experience in a number of banking business segments, as the senior CRA officer, her responsibilities include the strategic oversight and administration of Valley’s CRA plan. This includes the annual review and update of the bank’s CRA plan goals and the development of appropriate strategies, products and services to support the achievement of these goals. The bank also announced the promotion of Thomasine Russo to senior vice president, marketing manager. Russo joined Valley in 2000 as a retail banking analyst and brings over 15 years of banking experience to her position including a background in retail sales and marketing. In her new position as marketing manager, she will be responsible for the planning, development and implementation of the bank’s marketing strategies and advertising initiatives. This includes the development and promotion of products, services, campaigns and media advertising placements. ■
Winter 2016 New Jersey Banker
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Bank Shots
BCB Community Bank presented the city of Bayonne with the gift of art, in the form of a mural, that now decorates the side of the bank’s Bayonne headquarters. The project – BCBxART, or BCB Experience: Art – is themed “Celebrating the Community” and is part of the bank’s year-long celebration of its 15th year of community service. Pictured: Thomas Coughlin (third from left), BCB Community Bank president and CEO, poses with art students from Bayonne High School who visited the mural shortly after its completion. Left to right: John Dimaano, Ruben Fernandez, Britney Reo, Karen Martinez, Jarelle Thomas and Kiyana Diaz. BCB now will look to expand this project to other Hudson County communities where it has branches located.
In focusing on the hunger crisis that faces as many as 12 percent of New Jersey residents, Peapack-Gladstone Bank has formed an alliance with America’s Grow-a-Row. To assist Grow-a-Row’s initiative in the production of healthy fruits and vegetables, Peapack-Gladstone Bank employees rolled up their sleeves at both the Pittstown and Milford farms harvesting hundreds of pounds of peaches and corn. This produce will supply countless needy individuals with healthy alternatives to offset health concerns that are often associated with those in financial hardship.
President Mark Megee of Brunswick Bank & Trust and his lending and deposit staff raised funds for BAP charities, which included the Boys and Girls Club as well as the Robbinsville Senior Center.
Columbia Bank, through the Columbia Bank Foundation, recently issued a $10,000 community grant to the Fair Lawn Heavy Rescue Squad. The grant was used to purchase emergency escape/extraction equipment. Shown participating in a special presentation are (from left): Mike Van Ness, rescue squad engineer; Thomas Kemly, president and CEO, Columbia Bank; Chief Peter Yuskaitis, and Tom Spear, rescue squad captain.
With financial support from Regal Bank, the Florham Park PBA Local #78 was able to purchase a new 16-foot enclosed support trailer. In addition to assisting the police department in their daily activities, the trailer will be used during community events and the nationally recognized Police Unity Tour. Pictured from left to right are Detective Brian Ford; Patrolman Joel Phillips; Christina Slater, vice president and regional manager, Regal Bank; Sergeant Scott Bartell; and Albert Salas, assistant branch manager, Regal Bank.
38 New Jersey Banker
Roselle Savings Bank selected and congratulated Abraham Clark High School senior Joshua Browne in a random prize drawing for completing the Everfi/ Roselle Savings Bank financial literacy course, and was awarded a Samsung Galaxy Tablet. Pictured above at the presentation of the Roselle Savings Bank (RSB) Financial Literacy Program prize are, from left: Joyce Huber; Dr. Kevin R. West, Roselle superintendent of schools; prize winner Joshua Browne; Jill Schafhauser, president/CEO, RSB; Phyllis Yates, Joshua’s mother; Rashon L. Mickens, principal, Abraham Clark High School; and Detlef Felschow, executive vice president and COO, RSB.
Unity Bank has pledged to donate $250,000 to Hunterdon Healthcare over the next five years to support the health care needs of the community and aid future development projects such as the Norman and Denise Guilloud Cardiovascular Center. In addition to the financial commitment, Unity has agreed to host various financial education programs for Hunterdon Healthcare employees and physicians as well as sponsor important fundraising events throughout the year. Pictured, James Hughes, Unity Bank president/CEO (left), and Robert Wise, president/CEO, Hunterdon Healthcare.
Valley National Bank employees, along with members of AmeriCorps, recently participated in a 9/11 service project to work on the Elysian Community Garden located in Paterson NJ at School 5. The project, which was sponsored by the New Jersey Community Development Corporation, focused on building a greenhouse, finishing a wood deck, cutting grass and clearing overgrown trees and bushes from the garden area. From left, top row: Jim Devaney, Roger Jones and Patrick Cecala; middle: Richard Bevilacqua, Matt Coppola, Vince Kane and Todd Ullrich; bottom row: Denise Dunlap, Milena Bosak, Alix Olivo, Karen Austin, Geriann Smith, Amelie Verma and Michele Chambers.
Winter 2016
ness loan portfolio...
ur small busi yo ow gr to t an w u yo If
Banks have money to lend. Small businesses need money to grow. But the risk in lending to small businesses keeps many banks on the sidelines—but not New Jersey Economic Development Authority (EDA) Premier Lenders. The EDA partners with our Premier Lenders to provide financing to qualified small businesses. The result for these banks is an increased small business lending portfolio, fast turnaround and reduced risk through EDA loan and line of credit participation and guarantees. If you want to be a more active player in the small business lending arena, we’re here for you.
To find out how your bank can become an EDA Premier Lender, call 609-858-6767 or visit NJEDA.com/PremierLender
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