Banking Mid Atlantic (Sept/Oct) 2019

OCTOBER 2019

MARIJUANA

How Two PA Banks Handle Pot and Hemp

JOB BURNOUT Keep Your Workers Engaged

MICHELE LAWRENCE AND CHASE TAKE ON PHILLY PLAN TO OPEN 50 BRANCHES ACROSS THE MID ATLANTIC

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OCTOBER 2019

Know What Your Customers Are Thinking Before It’s Too Late

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COVER STORY Chase Tackles The Mid Atlantic

4 Letter From The Publisher

5 In the Workplace Spot The Signs Of Burnout Before It’s Too Late

8 Mergers &

Acquisitions

Who’s buying NJ Banks And Why

20 Financial Trends

Regional Banks Should Embrace Libor Alternatives

22 Insights

11 Q&A

A Sitdown With Chase’s Michele Lawrence

14 Try To Keep Up

Local Professionals Making Their Move Up The Corporate Ladder

16 New Revenue

Pot And Hemp Bringing New Fees To PA Banks

Make Your Customers Worry Less

25 Marketing

The ROI Of Charitable Giving

27 Branches

Transform More Efficiently

29 Cybersecurity

The Great Fears Your Customers Have

CONTENTS

18 Customer Service

www.ambizmedia.com October 2019 | BANKING MID ATLANTIC

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L ET T E R F RO M T H E P U B LIS H E R

Redefining A Sense Of Community

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hat does it mean these days to be a community banker? At the very least, what does it mean to be a community bank?

There aren’t many who would categorize J.P. Morgan Chase as a community banking institution. But it’s on an expansion tear throughout the Mid Atlantic region, mirroring a similar strategy in New England. In both areas it’s setting out to create scores of new physical branch locations and hire hundreds of branch bankers.

It’s not trying to gain market presence by buying up existing bank franchises. It’s actually explicitly eschewing that approach, VINCE VA LVO concluding that too many banks have branches in the wrong places. Chase wants to put in new branches where they will serve the most people.

That, of course, begs a fundamental question. Isn’t the primary purpose of a community bank to serve specific communities? Could the woes of long established “community banks” be traced in part to having legacy branches serving communities that have moved on?

Moreover, Chase’s initiative wages battle against the assumption that banking is swiftly becoming a digital service only, with the importance of physical branches diminishing. As smaller institutions grapple with an either/or strategy – expand physically or deploy resources to an improved online experience – Chase seems to be going all in on a multichannel strategy: Be there digitally, be there physically, be top of mind at all times and convenient in all ways.

Leadership Strategy For community bank leaders throughout the Mid Atlantic region, Chase’s story should be instructive and enlightening. New Jersey, in particular, has seen a sizeable wave of mergers and acquisitions this year, thinning out the ranks of individual operating companies. Branch performance is just one factor driving consolidation. For decades, banking analysts have warned that we are on the cusp of the demise of the mid-sized bank – that only the very largest and the very smallest will survive. The very largest because of their superior resources and market reach, the very smallest because their focus on being a niche institution keeps them from expanding into too many costly markets.

Our analysis in this issue on the Garden State’s M&A activity delves into whether this time that prognostication might actually be coming true. And if it is, that is just one more reason to ponder: how small must a community footprint be for an institution to be a community bank?

STAFF

CEO, PUBLISHER & EDITOR Vincent M. Valvo ASSOCIATE PUBLISHER Barb Dimauro MANAGING EDITOR Keith Griffin INTERACTIVE DESIGN DIRECTOR Alison Valvo GRAPHIC DESIGN MANAGER Stacy Murray ONLINE CONTENT DIRECTOR Navindra Persaud OPERATIONS MANAGER Kurt Schenher GRAPHIC DESIGNER Scott Ellison

Submit your news to editorial@ambizmedia.com If you would like additional copies of Banking Mid Atlantic Call (860) 719-1991 or email kschenher@ambizmedia.com Cover photo: Submitted

www.ambizmedia.com © 2019 American Business Media LLC All rights reserved.

Banking Mid Atlantic magazine is a trademark of American Business Media LLC. No part of this publication may be reproduced in any form or by any means, electronic or mechanical, including photocopying, recording, or by any information storage and retrieval system, without written permission from the publisher. Advertising, editorial and production inquiries should be directed to: American Business Media LLC

VINCENT M. VALVO CEO, Publisher & Editor

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BANKING MID ATLANTIC | October 2019

345 North Main St., Suite 313 West Hartford, CT 06117

I N T H E WOR K PL ACE

BURNOUT

Is Your Workplace In Crisis?

5 Prevention Strategies

By DENISE D’AGOSTINO, KAREN KIRCHNER and ELLEN KEITHLINE BYRNE, Special To Banking Mid Atlantic

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urnout is becoming an epidemic.

The banking crisis of 2008 was a catalyst for enormous change in the financial world. New technologies, regulations and organizational structures altered working conditions and the pace of banking life became even faster and more complex. Most businesses are attempting to do more with less and the resulting work stress can push your good people into burnout.

A total of 85% of financial professionals have reported being impacted by burnout which one recent study found to be a significant contributor to high turnover.

The good news is that if you understand the problem and put processes in place, burn-out is avoidable.

Here’s what you can do to keep it at bay.

First, what is burnout?

The World Health Organization defines it as “resulting from chronic workplace stress that has not

been successfully managed. It is characterized by three dimensions: • feelings of energy depletion or exhaustion; • increased mental distance from one’s job, or feelings of negativism or cynicism related to one’s job; and • reduced professional efficacy.”

What’s challenging about burnout is that it’s insidious and can slowly creep up on your most diligent employees. Often, those who fall prey are the highly motivated, empathetic, perfectionists who identify with their work. For these employees, often your superstars, things can easily get out of balance and it’s critical for senior leaders to understand what is at the root of this potentially costly problem.

Burn-out is more than the result of exhaustion after a year-end deadline or a crisis with a key client. It

85%

of financial professionals have reported being impacted by burnout.

October 2019 | BANKING MID ATLANTIC

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BANKING MID ATLANTIC | October 2019

becomes a chronic condition. And it’s a phenomenon that cannot be easily remedied with a weeklong beach vacation or a yoga class.

As executive coaches and leadership consultants, we have coached many highly respected and capable leaders, and we often see signs of burn out before management notices there’s an issue. If these leaders can’t change their environment or their reaction to it, they are in danger of leaving, or worse, developing significant mental health issues.

In one case, a client we will call Mary is a VP who is truly passionate about her work, and loves her staff and her leadership team. But after years of tirelessly committing her time to her organization and recent resource cuts, she began sharing that she can’t even listen to the CEO when he walks into her office. In the past, she looked forward to their conversations but no longer.

She explained that she was exhausted most of the time. She was contemplating leaving the company to find something else, (or better yet, going to the beach and never coming back), until we started to identify how she could take control of her situation. Through coaching, Mary learned to establish clear boundaries, delegate what she could, and say “no” to projects that did not have strategic implications. In short, she started taking better care of herself.

She began with taking a 3-month sabbatical and reinvigorating her health regime. With her boss’ help, she re-engineered her position so she would have more resources, less fire drills and feel a sense of greater impact. It took a few months but now the company has their superstar VP back doing great work.

Fortunately, Mary had the help of a coach and a concerned boss who

helped her get on a healthy course and back to her high functioning, happy self.

WHAT ARE THE DANGER SIGNS?

Burnout researcher Christina Maslach identifies three components to watch out for: Physical and emotional exhaustion • Chronic fatigue and insomnia – Are certain employees always tired?

Do they express having difficulties sleeping?

• Physical symptoms – Are they going to the doctor more often and seem to get sick more often? Do they look less well?

• Anxiety, depression and irritability – Are they more worried or edgy these days? Do they seem uncharacteristically sad?

Cynicism and detachment, depersonalization • Loss of enjoyment – Are they not as upbeat and fun as they once were?

• Isolation and detachment – Are they no longer interested in socializing?

• Negativity – Do they seem more negative than usual?

Sense of ineffectiveness and lack of accomplishment • Are they no longer proud of their work and constantly overwhelmed?

• Are their results suffering?

WHAT CAN ORGANIZATIONS DO?

Avoiding this negative spiral is the responsibility of both the individual as well as the organization.

The individual: People have a choice in how they handle the mismatch between the resources they have to do the work and the demands of the position.

The company: It’s also the company’s responsibility to set up employees for success by putting the right people in the right positions with the appropriate resources. And showing appreciation for the value that employees bring to the company is also critical.

5 STEPS YOU CAN TAKE TO HELP YOUR TEAM AVOID BURNOUT:

1. Encourage and model self-care.

It’s starts with you. What is your own mindset around work life balance? Most senior leaders connect their success to their drive and dedication, which often means long hours and 24/7 attention to work. What kind of example are you setting?

2. Be realistic when you cut resources and reallocate work. Burnout is more likely when demands are high and resources are scarce. Check in with staff members to find out if their workload is achievable, and if not, be willing to make changes.

3. Job mismatch – Maslach also emphasizes the importance of people doing work they are wellsuited for. Do you have the right people in the right seats?

4. HR resources – Fight the stigma around getting help. Make support services available to help employees build coping skills to better handle demanding work environments.

5. Be proactive and identify employees at the highest risk. Educate them on the warning signs of burnout and the importance of self-care.

Burnout may be an epidemic but it’s not inevitable. Build awareness and intervene early to protect your organization’s greatest asset. In the process, you’ll be showing your team how much they matter.

Her New Standard, LLC was founded by Denise D’Agostino, Karen Kirchner and Ellen Keithline Byrne, a team of organizational leaders, executive coaches and a PhD, who create programs specifically for women leaders –– to help them rise up in today’s competitive world and make their mark. For additional information visit hernewstandard.com or follow us on LinkedIn and Instagram.

October 2019 | BANKING MID ATLANTIC

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MERGERS & ACQUISITIONS

T

An Update On M&A In New Jersey And Beyond

By JAY JUNIOR, Special To Banking Mid Atlantic

he recent spate of M&A announcements decline in valuations in the fourth quarter of 2018, in New Jersey has focused attention bank stock prices have fought to reclaim investor on the Garden State and has prompted attention for most of 2019. Since 1990, there questions about its banking landscape. have been roughly three periods of significant There have been six M&A transactions M&A activity - the mid-1990s, the mid-2000s and announced since January 2019 with five of them the current period starting roughly in 2012. The announced since June 2019, raising the question: first wave was the result of the industry coming Have external conditions created the start of a wave out of the thrift credit crisis which ended with or is it just a random flurry of announcements? the inflation of the tech bubble. The subsequent The answer lies somewhere in between. To bursting of the tech bubble propelled bank stock Jay Junior understand the issues driving M&A in New Jersey prices forward and pulled M&A activity along in and beyond, it’s important to assess the operating conditions its wake. The Great Recession ended this phase of activity confronting the banking industry – both internal and external. and it took the industry almost 4 years to regain its valuation Also, it’s equally important to examine the market’s current footing and along with it M&A activity. The question around perception of bank stock prices, because there is a strong the current wave is whether it’s peaked due to the rising correlation between bank stock valuation and M&A activity. unease brought on by an uncertain economic path forward The key issues for bank stock investors center on the future and global tensions. growth of the economy (or more precisely the concern over The banking landscape in New Jersey and the subsequent the lack of it) and the impact of those concerns on the shape M&A activity is likely to prove to be a microcosm of similar of the yield curve. Adding to investors’ discussions on the markets in the Mid-Atlantic where the nation’s very largest economy’s growth is a powerful combination of macro issues banks co-exist with their community bank brethren but share such as the U.S. / China trade impasse and a sense that the very little else in terms of philosophy or outlook. credit cycle has entered a late stage.

Chart 2 gives a summary of activity in New Jersey since Chart 1 nicely illustrates the interplay between bank stock 2015. During that period, there have been an average of prices and M&A activity. After experiencing a significant almost six M&A transactions per year. The total value of deals

Chart 1: Market Cycles – SNL Bank Index and Number of Whole Bank M&A Transactions. Market data as of 9/13/2019

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BANKING MID ATLANTIC | October 2019

Chart 2: New Jersey Deal Metrics

in aggregate has been rising due in part to the scarcity value and due in part to buyers seeking growth. Deal value as a percentage of tangible common equity has been rising as has the tangible book premium as a percentage of deposits, a sign of the value of funding in a market where funding challenges are one of the primary operating challenges.

From a strategic perspective, Chart 3 shows some profound

shifts. The significant swing in market rationale for deals as reflected by the rising number of in-market deals versus deals that are either full or partial market extensions suggest that in-market buyers are not simply defending their turf. Their advantage in extracting cost savings is permitting them the ability to pay higher prices.

It’s also noteworthy that over the last two years, the buyers in each of the announced transactions have been New Jersey-based financial institutions. The explanation suggests the “home teams” are prepared to defend their markets, however, it may simply be due to the fact that the selling institutions haven’t been large enough to stimulate the interest of out-of-state buyers.

Another trend of significance is the annual percentage rate at which institutions are being acquired versus the overall number of remaining institutions (See Chart 4).

Over the past 29 years, the banking industry has averaged consolidation due to M&A of 4.4% annually. New Jersey by comparison has experienced an even higher rate than the national average - compared to the last five years, the rate of consolidation in New Jersey is averaging 7% or 59% higher

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Chart 3: Strategic Rationale

Chart 4: Annual Bank Consolidation – Percentage of the Sector. Market data as of 9/13/2019

Chart 5: Evolution of M&A Valuation Metrics

than the national consolidation rate.

There is another important development in M&A that should be highlighted and that is how the market judges M&A transactions.

Historically, M&A transactions were judged on the earnings accretion of the buyer. The Great Recession altered the market’s view of M&A transactions, because earnings forecasts became too imprecise due to the deep credit issues. This resulted in market participants focusing on calculations that tried to identify tangible book value after “burning down” equity for known (and unknown) credit issues. That led many market participants to focus on the dilution to tangible book value per share. Now with earnings predictability having returned, the market has combined earnings forecast with TBVPS dilution and placed tremendous weight on the earnback of tangible book value dilution. (See Chart 4) Finally, it’s difficult to discuss banking today without an acknowledgement of the increasing importance of digital strategies in the banking industry. A trend that has perceptibly altered the largest banks view on M&A. Whereas once the largest banks were at the top of the M&A food chain, technology has led many of the largest banks to a new conclusion regarding growth. External growth can be better and more precisely driven by technology through the use of data mining, customer analytics and the application of artificial intelligence.

The implication for community banks in both New Jersey and other markets is that M&A is going to become a much more intrastate activity, because many states won’t have community banks large enough to attract out-of-state buyers.

Jay Junior is a managing director in the Investment Banking Division of D.A. Davidson.

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BANKING MID ATLANTIC | October 2019

E X PA NS IO N

Behind Chase’s March Into The Mid Atlantic

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An Interview with Regional Director Michele Lawrence

By KEITH GRIFFIN

anking Mid Atlantic sat down for a conversation with Michele Lawrence, Chase Consumer Bank and Wealth Management Regional Director, Pennsylvania and Southern NJ, at a new Chase branch in Cinnaminson, N.J., about 12 miles outside of Philadelphia.

Lawrence’s district covers all of Pennsylvania, Delaware, and Southern New Jersey. As of October, Chase has opened 10 branches in those areas with a goal of 19 by the end of 2019. Ultimately, the area she covers will see more than 50 branches.

What follows is an edited transcript of a 45-minute conversation between Banking Mid Atlantic managing editor Keith Griffin and Lawrence.

Banking Mid Atlantic: Jamie Dimon, chairman and CEO of JP Morgan Chase, doesn’t enter into a market for second place.

A: No, no.

Q: So obviously that’s got to be your goal in Delaware Valley, Pennsylvania and Southern New Jersey. Is that the five-year plan? To be number one?

A: Number one in five years? Well, that’s aggressive.

I haven’t been given a ‘when’ you need to be number one. What I have been given is, “In order for us to get to number one we have to take care of everyone that comes through our door.”

Are we interested in market share? You best believe it. I am not just sitting in branches. Is there networking, is there connecting, are we investing, are we making a difference? That’s how you gain market share. I’ve been doing this for 30 years. It’s not just putting up the branch. It’s how do you connect to the community? it’s how do you bring value to the community? And it’s word of mouth. You and I both know reputation is everything.

Q: It sounds like there is a big push to get branches open?

A: Absolutely, it’s more about the distribution of the branches, making sure that as we are hiring, that we are hiring from the community. We want to be not just reflective but inclusive of the community, we have found great talent. We have had some internal October 2019 | BANKING MID ATLANTIC

11

candidates absolutely who will help us drive the culture and the behavior and employee systems, but for the most part we have been hiring directly from the community.

Q: You have 1.4 million consumer clients in the region and 60,000 business accounts. Couldn’t Chase be a successful bank just to get those people and their deposits?

A: Though there is success just banking the ones that we have, but our success is to enter communities and to bank the communities. Not just to come and say we’re exclusively here for those who are already a customer.

I wouldn’t say it’s our objective just to bank our existing customers. We’re looking to make sure that we are banking all those customers who want the option to have an institution. So that’s our barometer for success. How do we deliver what customers need when they need it, how they want it, and doing it with a smile and with integrity?

Customers still want to come in and do what we’re doing; 75 percent of our deposits come from conversations, inside of the branch. Even millennials when it’s time to make those pivotal decisions, they’re in our branches at least once a quarter. So, to say that you’re going to be able to do business totally digitally, I don’t know that we’re ever going to move the dial where a branch is not needed or necessary.

have the distribution of using our digital. That gets at the customer’s needs.

Each region, each community gets something different that suits the community. We’re in a full service branch here in Cinnaminson, and as we look at each community, we’re going to develop what best suits that community, so there’s not this one size fits all, everybody gets this everybody gets that, but as we enter each community we’re saying, “Well, does this best fit that model, will they need this type of facility or will they need that type of facility?” And I’m very excited to have partners who know real estate a lot better than I do manage all of that. They’ve done all of the research, the background work to say, “This is the model that looks like it’s going to be the best delivery in this particular community.”

Q: As in other markets, is there going to be an emphasis on Low-Moderate-Income [LMI] markets? Will you target 30 percent like Greater Boston does for example? What can LMI areas do for a bank because it’s such an untapped market?

A: Here’s what it does for us.

It’s still helping customers. It’s still getting in deposits. It’s still bringing in checking accounts.

It’s still allowing those folks in those communities to teach them how to become homeowners and providing ways for them Michele Lawrence’s district covers all of Pennsylvania, Delaware, and to become homeowners. Guess Southern New Jersey. As of October, Chase has opened 10 branches where they’ll come when it’s in those areas with a goal of 19 by the end of 2019. time for their mortgage? If you You’re going to come into our are lifting that community as branches, we’re testing it right they climb, they will still keep us now where you’re going to be able to have someone talk to in consideration.

And you shift what that community looks you, and we’re still having digital access within the branch. like and what they do, so LMI communities have always been So, it’s giving the customer the option that when we’re not critical to how we get deposits, checking, those are the things open, we’re still open for them digitally and that when they come into the branch, they can either access through our ATM that typically come from an LMI market. system which does virtually 70-85 percent of what we do, but can also jump on a tablet or our digital bar and handle some transactions.

Q: When you first walk into this branch, there’s like a couple, I’d almost call them traditional teller windows.

Why that set up: the traditional model where the teller is kind of behind a counter type of thing?

A: It is still needed. Again, there are some customers, who say, “I want to talk to someone when I do this transaction.”

And then there are those who come in and they’re like, “You know what, I don’t need you, I’ll go right over here to the ATM.” So, we offer both, if you see that there’s two, where in traditional branches there are usually like seven, or six. You know, the quantity has shifted so it’s not the absence of one, it’s getting a number that fits. We have two, and then we also

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BANKING MID ATLANTIC | October 2019

Q: It seems Chase isn’t just going after deposits. You’re trying to make it a relationship with the financial educational aspect too if I’m not mistaken.

A: Well, that’s what I appreciate about us, right? That’s also why I’m here. It is relationship; it is community.

It’s going where people are saying it’s a bank desert and establishing relationships. That’s why we gave $5 million to Kensington because of the corridor buildup. [Editor’s note: Kensington Lending Partnership is a funding source focused on small business and mixed-use real estate development, housing improvements, and affordable homeownership in Philadelphia.]

When you go back in and reestablish corridors, small business owners hire local. Locals get hired. It raises their income.

Their income-raise changes their affordability and then there’s

“It is bringing more than the check.

It is bringing the whole [bank] to that community.” an economic shift. The more those economic shifts happen, the more communities and neighborhoods move from low to moderate, right?

So we see a lot of neighborhoods moving from low to moderate but we also need to be present in those low-income communities because the more we are able to stimulate business and stimulate financial education and financial health, the more the folks that live in that community will be able to establish a financial roadmap to success. So that’s why we partner, I’m very proud of the work we’re doing around that. I have done a lot of that work myself and it’s nice to have your CEO, both Jamie Dimon, the CEO of the company and Thasunda Duckett, who is the CEO of Chase consumer banking, say, “This is where we are, this is what we do.”

Q: Is it easier for a big institution like Chase to go into the LMI areas and take the time to build up do you think?

It seems like it’s easier maybe long term for Chase to take five years than maybe a small bank or a credit union could do to make that investment in education, financial literacy.

A: I don’t know that easier would be the word I’d use having done probably worked in the top four of the larger banks. I don’t know that I would tag it as easier, what I would say is you have to have the commitment no matter the size.

Chats, we talk to the community, we have round tables. It is not going in saying, “We’ve got the solution, aren’t you glad we’re here?” And there has been some intentionality with doing that, with talking to community leaders, with talking to elected officials, with including business leaders and small business owners. That’s why when we make investments, it’s not just a check. It’s not just the $5 million that we wrote. It’s what we brought in terms of staff, support. You need business planning. How can we help you as you build out these plans?

It is bringing more than the check. It is bringing the whole [bank] to that community.

And that’s what makes a difference. Some would say that makes it easier, it makes it easier when the whole [bank] is there versus a piece of it.

Q: Do you find opportunities with the LMIs where you would talk about the banking deserts before, do you find a lot of depositors are new to banking and they’re not using check cashing services anymore? Is that part of Chase’s push to get people banking instead of cashing their checks and paying those fees?

And getting it right becomes critical, so if there’s a lens on anywhere on getting it right, the lens is bigger for Chase getting it right when we say we’re coming, right?

And so I don’t know if that makes it easier, folks are saying, “Yay, you’re here” and other folks are saying, “Get it right, get it right the first time.”

Q: What is Chase going to do with the LMIs to get it right the first time?

A: We do a lot of Chase

The new Chase branch in Cinnaminson, N.J., about 12 miles outside of Philadelphia.

A: Absolutely, financial help is built around that.

It is built around how do we get you to save, how do we get you to get your arms around spending and investing? And so yes, we are looking to figure out how, create opportunities.

We have products and services whereby if you had credit issues or you’re coming out of a situation, yes, we have a product that will help you graduate from one account to the next account to the next account. So absolutely we can make someone bankable or transition them from the check cashing facility into the banking facility and into the banking industry. I just don’t have any stats on how many of those exist or don’t exist.

October 2019 | BANKING MID ATLANTIC

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MID TIC ATLAN

TRY TO KEEP UP LOCAL PROFESSIONALS MAKING THEIR MARK IN MID ATLANTIC BANKING

The Dime Bank & Dimeco, Inc. Announce Bochnovich As CEO

The boards of directors of The Dime Bank and Dimeco, Inc. have announced the appointment of Peter Bochnovich to the position of CEO effective Sept. 1, 2019, to succeed Gary C. Beilman, who has been CEO of The Dime Bank since Jan. 1, 2002.

Beilman will retain his current position as president, board member, and senior management member until his retirement at the end of 2019.

Bochnovich joined The Dime Bank Peter Bochnovich in March 2001 as vice president commercial lending. Prior to joining The Dime Bank, Bochnovich began his banking career 17 years earlier as a teller, quickly progressing through the ranks. Shortly after joining The Dime Bank, Bochnovich was appointed chief lending officer, giving him responsibility over the entire lending function of the bank, including the overall philosophies adhered to by the commercial loan division, the consumer lending area, and the residential mortgage department.

Bochnovich holds graduate and undergraduate degrees with a Master of Business Administration in Finance and Investments from Marywood University and a Bachelor of Science in Economics from Pennsylvania State University.

Bochnovich lives in Honesdale with his wife Amy. They are the parents of three sons, Andrew, Nicholas, and Jared.

OceanFirst Bank Appoints Sridharan, EVP & CEO

OceanFirst Bank N.A., the wholly owned subsidiary of OceanFirst Financial Corp., announces the appointment of Karthik Sridharan as executive vice president and chief information officer.

Sridharan will lead OceanFirst’s efforts to further enhance its digital banking strategies and to ensure its infrastructure is prepared to support the company’s rapid growth trajectory. He will report directly to Chairman and CEO Christopher D. Maher.

Karthik Sridharan Sridharan is a senior information technology executive with more than 26 years of experience.

Most recently he was the chief technology officer at Citigroup and previously held leadership positions in global technology management with JP Morgan Chase & Co. and Bank of

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BANKING MID ATLANTIC | October 2019

America Corp. Prior to the positions he held in the financial services industry, Sridharan was an Industry Manager at Microsoft Corp.

Sridharan is a graduate of the Temple University Fox School of Business with a bachelor’s degree in business administration and information systems management. He also graduated from the global management executive program at Harvard University’s Business School.

Baron Named President/CEO Of Del-One FCU

The board of directors of Del-One Federal Credit Union has announced the appointment of Ron Baron as president and CEO. Baron had been serving as interim president/CEO since April 2019.

Baron had previously served as the chief financial officer of Del-One since June 2018. Prior to joining Del-One, Baron served as senior vice president and chief financial officer for Azura Credit Union in Topeka, Kansas. His career also includes serving as chief Ron Baron financial officer for two publicly-traded community banks in Virginia and as senior vice president and treasurer at Benjamin Franklin Bancorp, Inc., in Franklin, Massachusetts.

He is involved in several community organizations, including local Rotary Clubs. He and his wife Beth reside in Dover, Delaware.

WSFS Welcomes Ciber in Newly Created Role, Chief Digital Officer

Corynn Ciber, a long-time tech strategist and program leader, has joined WSFS Bank as senior vice president and chief digital officer. In this newly created role, she will work closely with Lisa M. Brubaker, WSFS Bank’s executive vice president and chief technology officer, and with teams of WSFS business leaders and expert thirdparty partners, to execute the bank’s “Delivery Transformation” program. This enterprise initiative was introduced in Corynn Ciber August 2018 when WSFS announced the acquisition of Beneficial Bank and the consolidation of 25 percent of the combined WSFS and Beneficial retail banking locations. Half the savings from the consolidations—an incremental $32 million—will be repurposed into a five-year

investment in WSFS Bank’s physical and digital deliveries, including technologies and solutions that will equip WSFS Associates and Customers with insights and actionable data to better serve Customers’ financial needs.

Hines Named Director Of Cultural Advancement

Customers Bank, a community bank with operations in Pennsylvania, Illinois, New Jersey, New York and New England, announced that AnNette Hines has been promoted to Director of Cultural Advancement.

Hines joined Customers Bank in 2013 and has more than 20 years of banking industry experience. For nearly two years, she has taken a leading role on Customers Bank’s Diversity Council and this new opportunity enables her to AnNette Hines continue to concentrate on developing cultural strategies that further the Bank’s commitment to diversity and inclusion.

In her new capacity, Hines will engage with the board of directors and executive leadership to create accountability and oversight policies and practices to ensure the diversity and cultural health of the organization. She will also be responsible for leading the Diversity Council and the Bank’s efforts in workforce diversity, workplace inclusion, supplier diversity and cultural sustainability. Hines will also be responsible for aligning the Bank’s efforts with the Federal Reserve Board’s recommended diversity and inclusion standards.

Hines will also play a role in creating diversity and inclusion programming for the Bank’s workplace learning and development initiative known as CUBI University.

Selden Promoted To SVP Commercial Deposits & Treasury Services

Peoples Security Bank & Trust announced the promotion of Leigh A. Selden to senior vice president, Commercial Deposits & Treasury Services. In this role, Selden is responsible for cultivating business relationships, providing leadership and mentoring to branch employees, maintaining a cash management training program, and supporting the implementation of new branch locations in the Lehigh Valley and surrounding Leigh A. Selden areas.

In her new role Selden will be taking the lead in cash management services while focusing on further developing Peoples Security Bank’s electronic business banking services. Selden has worked for Peoples Security Bank & Trust since 2015 and has over 30 years of banking experience in the Lehigh Valley.

Selden attended Bloomsburg University of Pennsylvania.

KeyCorp Chairman & CEO Beth Mooney To Retire In May 2020

KeyCorp Beth Mooney and Chris Gorman

the Board of Directors, effective immediately. Gorman will succeed Mooney as Chairman and CEO on May 1. Mooney has served in the role of chairman and CEO since May 1, 2011 after joining the bank in 2006.

Gorman joined the bank in 1998 as part of Key’s acquisition of McDonald Investments, a registered broker-dealer where he held several leadership roles. During his time at Key, Gorman has led KeyBanc Capital Markets and served as president of Key Corporate Bank. Gorman was also responsible for leading the integration of First Niagara Financial Group.

In his current role as president of banking, he is accountable for the revenue generating businesses across Key, including Consumer, Commercial, and Institutional Banking.

Scholarship Fund To Honor Kennedy

Peapack-Gladstone Financial Corporation, parent company of Peapack-Gladstone Bank, announced that Tri-County Scholarship Fund will host its 38th Annual Awards Dinner on Monday, October 28, 2019, at the Hanover Marriott, where it will honor three New Jersey leaders, including Douglas L. Kennedy, President and CEO of Peapack-Gladstone Bank.

Kennedy, who will receive the Leadership Award, heads the bank’s Douglas L. Kennedy wealth, lending and deposit lines of business, along with its branding, human capital, operations and technology functions, to deliver on Peapack-Gladstone Bank’s private banking style of client service and product solutions.

Kennedy has over 40 years of experience in the banking industry. Prior to Peapack-Gladstone Bank, Kennedy was the president of the NJ market for Capital One Bank and North Fork Bank. Over the years, he has held key executive level positions at Fleet Bank, Summit Bancorp and Bank of America.

KeyCorp announced that Chairman and CEO Beth Mooney, will retire on May 1, 2020. Chris Gorman has been appointed President and Chief Operating Officer and a member of

October 2019 | BANKING MID ATLANTIC

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N E W R EVENU E

T Getting In On The Ground Floor Of Pot And Hemp Banking

By GEORGE YACIK, Special To Banking Mid Atlantic

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wo Pennsylvania-based banks are at the cutting edge by offering banking services to newly-legalized hemp and medical marijuana companies.

Wyomissing-based Customers Bank is taking what might be considered the safer route, offering deposit services to companies in the hemp industry, which is legal both in many states and at the federal level. But Jonestown Bank & Trust is offering banking services to companies that deal in medical pot, which is legal in the state but still illegal at the federal level.

Jonestown has been providing banking services to medical marijuana companies for over a year, after it was approached by an existing customer who was getting into the business. For support the client brought along (now former) state Sen. Mike Folmer, who advocated for the legalization of medical marijuana in Pennsylvania and asked the bank to consider it.

“We spent nine months prior to that examining and determining whether this was something we wanted to get into, because initially I really wasn’t for it, for the same reasons as just about everyone else in our industry,” says Troy A. Peters, president and CEO of the $619.5 million asset community bank. “I wasn’t real keen on the idea. We did a lot of due diligence. We talked to a lot of banks around the country, our attorneys, our regulators, both state and federal. Nobody said we can’t do it. We ultimately stepped into it and it’s been good.”

“We felt we have a strong enough compliance program and culture to pull it off,” he adds. “We felt that’s what we’re here for. We are a community bank and we want to serve the needs of our community. Our stance is, if it’s legal we should be able to bank it. Do you want that cash in a regulated system or under the mattress?”

Troy Peters

One concern is that one of the bank’s pot customers might do business with someone in another state, which might raise a red flag. But Peters says “medical marijuana is pretty tightly controlled in Pennsylvania. The buyer must be a resident of Pennsylvania” and have a stateissued card to buy it.

“Banks have to balance providing services to legal businesses with making sure they aren’t getting involved with financing illegal activity,” notes Michael Perito, managing director at Keefe, Bruyette & Woods, where he covers the banking industry. “Hemp is legal but with a lot of restrictions. Where some of the issues come in is when people that are producing hemp also produce related but not legal substances, that are legal state-by-state but not at the federal level.”

Customers Bank began lending to companies in the hemp industry after the 2018 Farm Bill was passed

by Congress. While hemp production and sale are now legal at the federal level, it is still illegal in some states – in other words, just the opposite of medical marijuana, which is legal in many states but illegal federally.

“It is an underserved legal business that we think is an opportunity for us to grow deposits and to serve that market,” says Tim Romig, the bank’s executive vice president, managing director & market president for Pennsylvania and New Jersey. “This is 100 percent legal.

There is no reason not to bank these folks.”

“It doesn’t happen often that regulation creates business opportunities, it usually makes them more difficult,” Romig says, referring to the passage of the farm bill. “This is an opportunity where regulation is going to make it easier and create an opportunity for us to do business with a group of folks that we haven’t been able to do business with before.”

Still, banking hemp companies isn’t like banking other industries. “Because of the due diligence we do, which involves a site visit and background checks, the onboarding process takes a little bit longer than for regular customers,” Romig says. The bank has to satisfy its internal compliance as well as regulators that the customer doesn’t stray into the federally-illegal pot business.

That’s one reason why neither Customers nor Jonestown is making loans to these clients; they’re only taking deposits until the regulatory smoke clears.

“If the hemp customer drifts over into the medical marijuana business, that would be an illegal business for us to bank,” Romig says. “If it’s a deposit account it’s a lot easier to end that relationship than if we had extended a loan. But we are looking at putting in more due diligence in place to make loans,” possibly by early next year. “The hope is that in the interim we get legislative relief on a federal level on medical marijuana.”

Jonestown’s Peters notes that there are three tiers to companies in the medical pot business: dispensaries and growers, those who provide products and services to the industry, and “incidental” players, such as a landlord of a building that houses a dispensary. The bank will make loans to the second and third tiers but not the first.

“The concern with lending to tier 1 companies is if their property is seized, your lien position goes out the window,” he said. “You could wind up with having a large loan with no collateral.”

Michael Perito

Tim Romig

Likewise, Customers Bank won’t do business with retailers that sell hemp-based products, like CBD oil, in case they do business in a state where it’s illegal.

However, Perito from Keefe, Bruyette & Woods sees opportunities for banks in these businesses as legalization spreads.

“There is a first-mover advantage that can be material if you prove to customers that you’re willing to bear some risk for them to give them the services they need,” Perito says. “There could be some goodwill that’s built up by that over time.”

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C USTOME R S ERVICE

What Your Customers Think — And Your Staff Does Not Know — Can Sink or Lift You

By BRUCE PAUL, Special to Banking Mid Atlantic

“How many of the community banks here believe their customer service is average or below average?”

I often ask that when presenting to large community bank conferences. Typically, a small group of attendees — maybe 5-10 percent -- are brave enough to raise their hands. By inference, this means that the vast majority of community banks think the customer service they provide is better than their competitors.

In fact, in the Mid Atlantic, 87 percent of community bank leaders believe their customer service is very good.

However, their customers may not agree. In the latest Banking Benchmarks across Pennsylvania and New Jersey, only 24.4 percent of community banks were rated that high by their own customers. This is based upon 644,898 objective reviews by households and businesses across those 2 states.

How can it be that customers see community banks so differently than they see themselves?

Community banks can be forgiven for usually concluding that their customer service is above average, because so much of the anecdotal feedback they get is positive. And this makes sense, because the very happy customers often want to let you know how happy they are, especially to praise a specific staff member and the

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service they provided. And it is relatively rare indeed that a community bank receives a complaint about a specific staff member’s customer service. And even more rare is to have a customer take the time to let you know that your customer service is neither good nor bad, but just mediocre.

To be fair, there are some banks whose customers do truly rate their customer service as exceptional, and who therefore have an actual competitive advantage when it comes to servicing customers. Some of the best performers in specific areas are listed below. But for the rest of the banks that are not standing out, what are they to do?

First, identify any servicing areas that where the bank is subpar or declining. According to the most recent Benchmarks, the most common servicing elements where banks fall down are: • Not proactively recommending solutions • Giving customers the runaround (especially among business customers) • Staff not being able to answer banking questions (a training issue) • Treating customers like a number • Not listening and understanding customer needs

Avoiding these pitfalls are all crucially important in retaining customers and earning their loyalty. Across the region, 20.1 percent of customers say their bank can’t even answer basic banking questions (slightly higher in NJ than PA) and 26.1 percent say their bank never recommends appropriate banking products (slightly higher in PA than NJ). But do you know how many of your customers think that about you? If you do not already track these, you need to start. To get you started, we can tell you your current baseline since we have been asking your customers (and everyone else’s customers) through the PA and NJ Banking Benchmarks for years.

Just contact our staff and we will share your ratings and rankings (vs your local competitors).

Second, identify areas where you are relatively strong compared to key competitors and use them to your competitive advantage. It is often hard to stand out in a crowded marketplace, but most banks have at least one area of relative advantage. It might be that your staff are better listeners, or more responsive, or better and training customers on mobile banking, etc.

Third, put together a plan of action to tackle the areas where you are weakest, and exploit the areas you are strongest. Not weakest or strongest overall, but where you excel or fall behind compared to key local competitors.

• One of our new subscribers was dismayed to learn that 19% of their own business customers say they sometimes get the runaround. But when they learned that the average was 32 percent among their key local competitors, they realized they actually had a competitive advantage. And they began to leverage that to gain market share.

• Another bank learned that their customers rated their technology low compared to competitors. This was not a surprise, but they also learned that the tools themselves (online, mobile) were actually rated slightly higher than average. According to their own customers, it was the training they received that was well below average. They realized they needed to spend more resources on training their own staff to understand the tools and to answer questions, rather than spending on newer and better bells and whistles.

• A Community Bank subscriber thought they were doing a good job recommending solutions to their customers. In fact, 64 percent of their customers agreed. But when they learned that the average in their trade area was 72 percent, they realized they needed to step up training for front line staff. They went so far as to share the Benchmark results with each branch manager to show that it was their own customers that wanted more “leaning in” and this energized them to work harder.

Fourth, track your progress to make sure you are making the improvements you need to in the eyes of your

customers. You can do that through internal metrics, such as the percent of staff that have completed new training modules, but you should also supplement with directly asking your customers to weigh in. After all, it does not matter if all of your staff receive cross-sell training if customers do not see the effect.

Understanding what you customers actually think about your customer service, your technology, and every other aspect of your bank will tell you where to focus effort. This will allow you to fix what is not working (in the customers’ eyes) and highlight what they really love.

As the old saying goes: Your Customers’ Perception is Your Reality. Do you need a Reality Check?.

Bruce Paul is president and CEO of Customer Experience Solutions, which produces the semiannual New England Banking Benchmarks.

Best Customer Service

According to their own customers and compared to local competitors WESTERN PA Allegheny, Armstrong, Beaver, Butler, Clarion, Erie, Fayette, Greene, Indiana, Lawrence, McKeen, Mercer, Somerset, Venango, Warren, Westmoreland 1 First Fed Greene Co 2 Woodforest 3 Standard 4 S&T 5 Northwest

SOUTHEAST PA Philadelphia, Berks, Bucks, Chester, Delaware, Lehigh, Northampton, Montgomery, Schuylkill County 1 Penn Community 2 DNB First 3 Firstrust 4 Univest 5 QNB

NORTHEAST PA Carbon, Lackawanna, Luzerne, Monroe, Susquehanna, Wayne, Wyoming 1 Luzerne 2 Mauch Chunk 3 Honesdale 4 Community 5 NBT

NORTH CENTRAL PA Bradford, Columbia, Lycoming, Montour, Northumberland, Potter, Snyder, Tioga, Union 1 First Columbia 2 First Citizens 3 Woodlands 4 Citizens & Northern 5 Northumberland SOUTH CENTRAL PA Adams, Cumberland, Dauphin, Franklin, Fulton, Juniata, Lancaster, Lebanon, Mifflin, Perry, York 1 ACNB 2 Ephrata 3 Northwest 4 S&T 5 PeoplesBank

CENTRAL PA Bedford, Blair, Cambria, Centre, Clearfield, Huntingdon 1 1st Summit 2 PNC 3 First National Bank PA 4 CNB 5 M&T

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F I N A N C I A L T R END S

F

Regional Banks Should Embrace Libor Alternatives

By RICHARD L. SANDOR, Special to Banking Mid Atlantic

inancial regulators across the globe recognize that Libor has outlived its usefulness as the dominant benchmark in the financial markets.

Capital market participants are busy developing alternative benchmarks that will better serve the needs of various participants.

The deadline for the sunsetting of Libor in 2021 is causing concern among some market participants, but it need not. It’s been my experience with change and innovation that choice will always benefit markets.

While Libor has undergone technical improvements aimed at correcting its past shortcomings, I believe Libor’s apparent loss of pre-eminence presents opportunities. We have multiple rates emerging to better serve specific segments of the market. The replacements are based on actual market activity and are better suited to different sectors of the marketplace.

For large financial institutions, there is the Federal Reserve’s SOFR (the Secured Overnight Financing Rate), which is a broad measure of the cost of borrowing cash overnight collateralized by US Treasury securities. The ICE Benchmark Administration, which took over the administration of Libor at the request of the United Kingdom government in 2014, has introduced another benchmark for large institutions that revamps Libor to mitigate credit risk.

While these benchmark products work well for large global banks and financial institutions that are active in the repo market, the American Financial Exchange’s AMERIBOR benchmark is designed to fit the specific needs of the smallersized banks by providing a straightforward benchmark that reflects a rate for unsecured overnight lending.

The smaller-sized banks play an integral role in the economy. The liquidity they provide in the regional economies help to create jobs, thereby fueling the engine of growth. Therefore, the choice of a rate is important to ensure these organizations continue to maintain the important social and economic role that they perform.

Since its launch in 2015 the AMERIBOR benchmark has gained considerable traction.

AFX membership and volumes have grown exponentially. Membership now stands at 150

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institutions, represented by 124 banks plus more than 1,000 downstream banks that participate through its correspondent program – or 20% of the U.S. banking sector. Volumes are averaging close to $2 billion per day. With growing volumes and membership, the rate that is generated from the daily transactions on the Exchange — AMERIBOR — is truly a reflection of the borrowing costs of America’s regional, mid-sized and community banks.

For example, banks have started to use AMERIBOR in their commercial loans to build greater/increased acceptance of the rate among its customers.

What else can regional bankers and their affiliates do to prepare for the transition? To mitigate the risks of transition, institutions must understand their current risk profiles. How much is tied to Libor and how much expires before and beyond 2021? What alternatives can be considered? From an asset-liability point of view what can be done to prevent imbalances?

Regulators will be watching for more disclosure and preparedness on these issues.

There are also educational issues – the use of new benchmarks will require educating loan officers, staff and customers. Many people don’t know that their mortgage and credit cards are tied to Libor.

Along with recordkeeping, education and transitioning to a new rate or rates, a bank needs to select the right rate. Does it accurately represent the cost of borrowing for an institution? If the chosen rate creates assetliability mismatches, it obviously increases operational and financial risks for the bank.

Boards and risk (Alco) committees must be aware and prepared to address these issues.

Support for change and choice is coming from regulators. The Federal Financial Institutions Examination Council (FFIEC) is raising awareness and helping to educate financial institutions and examiners about planning and transitioning from Libor as a reference rate. The International Swaps and Derivatives Association (ISDA) is also active in educational efforts related to the transition away from Libor.

The transition to new benchmarks, and the creation of new markets that comes with it, will require building institutional infrastructure. That

means that bankers and regulators need to be joined by accountants, lawyers and academics who can help provide the research and the training required to help a new generation of professionals understand the changes and new options.

We have every reason to believe that the U.S. financial sector, the most developed, flexible and innovative in the world, will maintain an orderly and smooth transition to new interest rate benchmarks. Industry groups are organizing to educate stakeholders. There are contracts currently being traded on organized exchanges, which will provide greater transparency and price discovery. That will speed up adoption.

When it comes to alternative rates, choice is critical.

It enables participants to pick the appropriate rate for their circumstances and helps lower systemic risk. In times of crisis, it is better to have a choice of rates than a single benchmark. A rate like SOFR caters to bigger players, while AMERIBOR, an unsecured rate derived from transactions on the AFX, is better suited for regional,

mid-sized and community banks and other financial institutions.

I urge regional banks to take the long view and embrace Libor alternatives. I started working on interest rate futures in 1969 and we launched the first futures six years later. It took a decade, and the Volcker tightening in late 1979, for them to take off. Likewise in this scenario, there’s time for banks and everyone involved to prepare and benefit from better choices ahead.

Dr. Richard Sandor is chairman and CEO of the American Financial Exchange (AFX), theafex.com, an electronic exchange for direct interbank/financial institution lending and borrowing.

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I N S IG HT S

Worry: The Unspoken Foundation of Bank Customer Dissatisfaction

R

By THEO MOUMTZIDIS, Special to Banking Mid Atlantic

esearch shows that bank customers worry about the interactions with their banks and other financial institutions more than customers in other consumer market segments. Why? Because the stakes are higher. For example, it doesn’t matter if you are late to pick up your dry cleaning. You won’t be charged a late fee. Or, if you buy coffee at the local coffee shop, you won’t be rejected because of a low credit score or missed information in your order.

When it comes to banking, however, there are a myriad of worries, such as funds being lost or data being hacked, fees being charged, unpredictable wait times, administrative red-tape, and confusing, complicated processes. And, it doesn’t stop there. If you have ever spent time listening to incoming call center service calls, you would have heard customer concerns such as, “I am calling to make sure that my ATM deposit was credited to my account.”

Additionally, customers can worry about more trivial things in their day-to-day interactions with their banks such as, “Did I pick the fastest teller line?” or more profound situations like, “Did I make any mistakes when I filled in my mortgage application?” It’s enough to give anyone a headache at best, an ulcer at the worst.

TYPES OF WORRIES Customer worries come in a variety of forms and intensities. They can, however, be categorized, analyzed, and managed. Here is a starter list of “worry categories” to help bankers understand the customer experience and how the bank’s processes, practices and policies impact the customer’s well-being.

• Transaction Completion, e.g., “Did my transaction post?”

• Process Compliance, e.g., “Did I fill in the form correctly?”

• Wait Time, e.g., “How long will I hold until the next agent picks up my call?”

• Customer Choice, e.g., “Did I pick the right product?”

These questions signify worry. Worry is a negative feeling. The source of the worry, in this case the bank, is subconsciously blamed for the negative feeling. When your bank causes worry, or doesn’t take steps to mitigate it, your customers develop negative feelings about your bank.

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A MISSED OPPORTUNITY Why is “worry” generally not recognized, discussed or addressed by bankers? Because worrying is often a feeling that exists in the background. Rarely do customers articulate it in their complaints or voice it when asked general open-ended questions about their experience. Bankers are busy enough addressing the stated problems of customers that they have no time, interest, or appetite to probe for the unstated worries.

Instead, banks measure “first call problem resolution,” but they do not explore “worry identification and resolution.” If it’s silent, it’s not measured. If it’s not measured, it’s not recognized, discussed, or addressed.

And, if it is not even verbalized, why should banks care about it?

The reason is that this sense of “worrying” degrades the customer experience rapidly and has a cumulative impact. Because it is not an instant feeling, it can last for minutes, hours, days, months, or longer. It might not be verbalized, but it is real. You ask customers to stay with your bank forever; to buy more products, open more accounts, refer the bank to their friends and family. Their responsiveness is greatly affected by their experience. Happy customers will stay long-term, open more accounts, refer the bank to others. Perpetually worried customers will not.

TACTICS THAT REMOVE OR MITIGATE WORRIES There is tactical path that systematically can identify and remove or mitigate these worries. The first step is to understand what customers worry about when they interact with the bank. Become knowledgeable about the nature of the worrying and what action (or inaction) of the bank is fueling the worry. This phase is called “worry mapping.” There are two components to successful “worry mapping.”

1. Conduct analyses of bank processes, policies, and communications to develop hypotheses of what is causing customer worries.

2. Conduct customer research to understand what customers actually worry about and validate the hypotheses generated based on the analyses above.

There are two types of customer research that are relevant in this case: passive and active. “Passive” refers to listening to recorded calls (or using speech analytics) and reading customer feedback (or using

“It’s all about listening to what the customer is saying, not drawing conclusions until you hear the whole story. Empathize with them and try to find a solution.”

– Michael Billia, Investors Bank

text analytics). In both cases, the bank has to read (or listen) between the lines to identify the underlying worry. “Active” requires asking questions of customers and frontline employees.

The second step in worry mapping is to identify what modifications to processes or information flows can mitigate the worries. In some cases, there is something the bank does (e.g., a process, a policy) that can be eliminated or modified. In other cases, a new process step or a new information flow needs to be added or modified.

THE ROLE OF THE FRONT LINE It is essential to train the front line to develop the skillset to probe for underlying worries. Part of the training includes developing of targeted questions to ask or even pre-emptively providing answers to questions that are representative of customer worry.

Today’s front line is far more likely to be serving customers who have problems to resolve, need advice, are opening a new account, or require additional information. These are higher worry-propensity interactions. The front line in a digitally transformed world, where mundane transactions have migrated to other channels, have a higher role and responsibility to manage customer worries.

Michael Billia is a senior vice president with New Jersey-based Investors Bank. He says, “It’s all about listening to what the customer is saying, not drawing conclusions until you hear the whole story. Empathize with them and try to find a solution.” Investors Bank trains employees through a program called Customer Connect, which encourages front line employees to have conversations with customers (or potential customers) to find out how they can help and to uncover the questions civilians might have about the banking process.

There are tricks to the trade, says Billia. “I think customers that are nervous are reserved and don’t ask a lot of questions. One of the things bankers need to do better is develop a rapport through an open conversation to make the customer feel at ease, also to make them understand that no question is stupid.” Just listen—really listen to what is being said or is going unsaid.

“We tend not to listen to the full concern and try to answer questions before we really understand what the [issue] is,” Billia notes. When it comes to banking and financial matters the queries are often multifaceted and can head off in several directions. According to Billia, “It starts with having great conversations. Listening and letting the customers know that we are there to help them, not just to sell a product or a service.”

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Banks that proactively address and manage their customers’ “worries” have more satisfied and more loyal customers.

THE IMPACT OF DIGITAL TRANSFORMATION Digital transformation is a powerful tool to assuage customer worries for two reasons.

First, it allows for two-way information flows. Deposits and payments can be confirmed, and alerts can help prevent undesired outcomes.

The amount, frequency, customization, personalization, and ease-of-access of information in a digital environment transforms the customers’ banking experience. Second, digital transformation allows for real-time interactions. Credit applications, even for small businesses, can be instantly decisioned. Mobile check deposits can be instantly checked (e.g., for missing or stale dates) and accepted in real-time. Expected wait times for a chat session are visible, so gone is the worry of “how long will I hold for”? The content of the chat session is emailed to the customer providing a record of the conversation as opposed to yesteryear’s “do you remember who you spoke with who might have told you that?”

TURN WORRY MANAGEMENT INTO A COMPETITIVE ADVANTAGE Senior management must drive the cultural transformation of the bank

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in order to identify and eliminate customer worries. Below the C-suite, executives who will (and should) find themselves in the middle of such efforts include heads of retail, it/ops, digital transformation, and customer experience.

Banks that proactively address and manage their customers’ “worries” have more satisfied and more loyal customers. That’s because a “worryfree” bank creates fewer negative surprises to its customers. The worries about (and the occasional) negative outcomes damage the feeling of trust which is the foundation of a relationship with a financial institution. A bank that can avoid these self-inflicted wounds will have happier customers who will be less likely to defect and more likely to provide referrals. Net promoter scores should rise dramatically. The C-suite and bank boards will value the positive results to customer experience and the impact to shareholder value creation.

Theo Moumtzidis is managing director of Delos Advisors, a NY-based consulting firm that specializes in working with financial institutions in the U.S. and abroad. For additional information, send email to theo. moumtzidis@delosadvisors.com

M A RK ET ING

Is Your Charitable Giving Also Effective Marketing?

How Giving Can Grow Your Bank

By STEVEN K. GOLD, Special to Banking Mid Atlantic

“W

hen our community thrives, our bank thrives,” states Tara Brewster, vice president of business development at Greenfield Savings Bank (Greenfield, MA). Indeed, strong communities equate with community bank success.

Thriving communities are created in several ways, including effective local government, good schools, quality employers, and nonprofit organizations that support a community’s needs – especially those needs that are not being met by government or the for-profit sector. Local nonprofits play a crucial role in the health and economic wellbeing of a community.

Community banks are some of the biggest benefactors of local nonprofits. Even outside of CRA requirements, community banks are generous. Many give hundreds of thousands of dollars a year, to more than a million dollars a year, to support nonprofits in communities they serve.

This makes perfect business sense since, as Brewster points out, thriving communities create conditions of wealth and stability that reinforce bank success.

WHAT MORE CAN BE DONE? What if banks could do even more to support local nonprofits that help our communities to thrive? How could banks be motivated to do this? Is there some underutilized asset held by local nonprofits that can be ‘unlocked’ to

transform nonprofits into valued partners rather than just recipients?

It turns out that there is.

Nonprofits have something that all organizations need in order to succeed in the long run: deep emotional connections with their supporters. Similar to their favorite sports teams, people are passionate about the causes they care about. Unfortunately, despite the best intentions of bank leadership teams, the vast majority of banks and other businesses do not inspire the same emotional connections as the local animal shelter or the Boston Red Sox. Better interest rates and friendly service simply cannot compete.

According to Jim Briand, founder of NexTier Partners and past president of the New England Financial Marketing Association, “One of the key ways that community banks can compete and differentiate themselves is by making their community support dollars work harder. If a community bank competes on technology or rates alone, they are competing on the terms of big banks.”

COMPETING DIMENSIONS Banks compete along dimensions such as service, convenience, technology and rates. Nonprofits are different.

They are borne out of a deep human need. They touch our hearts and minds in ways that banks and other businesses cannot. If you or a loved one has experienced the effects of cancer, then you will be drawn to those organizations that

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help cancer patients, families and survivors. If you love animals, then you will probably support the local animal shelter. If you or a loved one has a need or particular interest, then you will be passionate about the organizations that support your need or interest.

Many community banks support local nonprofits and think they are building emotional connections with members of the community, except that current bank-nonprofit collaborations are generally ineffective. This is evident by the prevalence of the “Giant Cardboard Check” ceremony and photograph. The problem with giant cardboard checks is that they are low value, such as when they appear on page 14 of the local newspaper. They are not widely noticed and are generally ineffective even when they are noticed.

UNLOCKING POTENTIAL This led a group of us to look for ways to do better. We posed a few simple questions to ourselves: what if we could unlock the potential for a nonprofit to be a highly effective advocate (marketing partner) for a community bank? Would nonprofits acting as effective local marketing partners enable banks to keep more dollars in the community, instead of sending dollars to out-oftown advertising agencies or a newspaper owned by an out-of-state media conglomerate? If local nonprofits can help a community bank to be more successful, then the community gets stronger. Everyone wins.

We determined that there are five major goals for such an initiative, and any bank can use these as guidelines to work with nonprofit advocates: • Make customers, prospective customers and employees more fully aware of the bank’s commitment to the community • Create strong emotional connections between the bank and its customers, prospective customers, and employees • Competitively differentiate the bank to drive brand awareness, new business, customer loyalty, and profitability • Elevate the status of local nonprofits to be the bank’s marketing partners – opening the door to additional support • Create a virtuous cycle between the bank and local nonprofits that keeps more dollars local and strengthens communities DRIVING THE COMMUNICATION Although there are ways for community banks to make giving activities more apparent – beyond giant cardboard checks – it’s challenging because a bank is still driving the communication. In order to be most effective, the nonprofit needs to play an active role in the communication. This is why we created A World For Good, to give banks and nonprofits a simple, effective marketing tool – one that builds the virtuous cycle mentioned above.

According to one study, when a non-profit advocates for a brand it is 3.5 times more effective than the brand’s own

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advertising (source: The Authenticity Report, Changing Our World Inc., 2018). Other research says that customer lifetime value for a financial brand is increased by 5.8 times when a customer is emotionally engaged with the brand (source: Motista/The Financial Brand, 2017). There is clearly an opportunity to grow customer loyalty and value.

“Community banks are some of the most charitable businesses around. Yet most banks miss out on a massive opportunity to transform their charitable giving into actions that will help them emotionally connect with customers. It’s a missed opportunity for banks and also for the communities they serve. We address this by providing a simple, turnkey solution that transforms our members’ charitable giving into effective, measurable marketing” says Charlie DiPietro, president of A World For Good. “Banks can now leverage the hidden power that nonprofits have to be powerful advocates for their brand.”

One key to working with a nonprofit advocate is to make it easy for them, as well as for the bank’s marketing team. Most nonprofits are operating with small teams, stretched to their limits, and so any solution needs to be simple. It is also important to offer value to each and every nonprofit advocate, to be a good long-term partner. This means rewarding the nonprofit with greater awareness, and possibly increased giving over time. As a nonprofit does the work of an effective marketing partner, it deserves increased support. This creates the virtuous cycle that benefits the entire community.

When your community thrives, your bank thrives.

Steven K. Gold Is founder and CEO of A World of Good. More Information is available on its website: home.aworldforgood.com.

B R A N CHES

B

Save Branch Transformation Costs By Implementing Greater Efficiencies

By MARK CHARETTE and SANDY DIXON, Special to Banking Mid Atlantic

ranch modernization is an expensive but critical task if a financial institution (FI) is to remain relevant in today’s market, but there are inbuilt savings.

Outdated branches may suffer in several areas; they might lack the appropriate technology to provide a better customer/employee experience, have poorly conceived processes/policies encumbering the front line, or be designed inefficiently, adding cost to the FI. The expense of transforming branches can be intimidating to FIs, but improvements to staffing models, processes, technology/equipment, and facility design can offset those costs and benefit the FI far beyond the expense of the transformation process itself. We frequently make this point to New England’s financial institutions in order to help them overcome the inertia they feel when faced with major transformational decisions.

Traditional branches were built to accommodate transactions that are now being performed online or through other electronic means—and, at the customer’s convenience.

Changes such as the addition of cash recyclers in the teller line, a good 24/7 ITM/ATM strategy, and mobile strategy have managed to simplify in-branch transactions and migrate other transactions to 24/7 solutions, saving some traditional branches money and its customers time. But why stop there?

Services can be made even more convenient for customers and it is all within reach. More importantly, there are almost unlimited cost savings to be recognized going forward.

As with traditional-but-modified branches, transformed branches have also seen significant cost savings due to recyclers and enhanced 24/7 options. By migrating 30 percent of its transactions from in-branch at a cost of roughly $4 per transaction to an ATM at $.60 per transactions (mobile is even less), a transformed branch processing 100k transactions a year can see an annual savings in excess of $102,000 while its customers benefit from banking at their own convenience, not the branch’s. Ultimately, making these strategic changes to be more efficient can recover branch transformation costs for the organization.

What sets a transformed bank apart in additional cost savings

and increased revenue? At Sandy Dixon and Associates (SDA) and at Solidus we find it comes down to focusing on three elements: • Staffing/Scheduling • Process Improvement/Technology/Equipment • Facility Design Much of the discussion around “branch transformation” tends to be centered on the physical aspects of the process— architecture, design, construction, branding, equipment, etc.

The philosophical side of the process, however, is really where the transformation occurs. In most cases, a well-thoughtout transformation focused on these three areas can result in a branch becoming 15 to 25 percent more cost efficient or realizing comparable cost savings.

STAFFING/SCHEDULING Staffing/scheduling is the number one issue in FIs that are converting a traditional branch or building a transformed branch using universal bankers or universal agents (UAs).

Effectively and efficiently staffing—too many people cost money while too few create a poor customer experience—is essential.

SDA has created a staffing model—which also includes how to use managers, assistant managers, and flex teams—to assist FIs with this difficult task. We found staffing as well as scheduling became more challenging with the advent of Universal Associates who perform both teller transactions and a variety of platform transactions, but the resulting flexibility can save money while creating a far superior customer experience. We also found that while cash recyclers can save on average .5 to 1.5 FTE per branch, recyclers in a transformed branch with the UA model can produce even more savings.

Using branch data (e.g., transaction volume, type of transaction, volume by month/day/hour) to determine staffing levels is key to the cost effectiveness of a branch.

Typically, a UA can process 17 to 20 teller transactions per hour (TPH) and also handle the platform side.

In a traditional branch, the typical TPH for tellers is 25 to 30. More involved platform transactions typically take 30 minutes to one hour depending on October 2019 | BANKING MID ATLANTIC

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transaction type and time required to discuss what may be of benefit to the customer. Using data specific to a branch location, FIs can calculate the appropriate staffing levels for the volume of activity at a branch.

PROCESS IMPROVEMENT/TECHNOLOGY/EQUIPMENT Commonly, Solidus’ branch designs seek to resolve inefficient processes, and technology or equipment issues (lack of technology, incorrect technology or poor implementation/set-up). SDA also studies these things, along with cumbersome policies and overstaffing, which are the usual causes of high efficiency ratios. Physical, logistical and philosophical branch transformation all must happen to improve efficiencies across the board to give your UAs the time to work with customers. SDA can calculate staffing numbers but if the staff cannot perform the functions in the standard time, we have to deep dive to uncover the root cause. We are always amazed at what we find. The usual response from the FI is, ‘We didn’t know what we didn’t know!’

A strategic roadmap will guide organizations through the transformation and identify savings to pay for the journey.

Working through the roadmap in a holistic and organized fashion will provide the most benefit to the FI from a costsaving perspective. This is not a haphazard process. There are specific chronological steps to success that experienced transformational experts can deliver.

FACILITY DESIGN Efficient design can save 20 to 30 percent of the transformation cost. Bigger is not better; size is important

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but designing for specific areas of engagement can increase dialogue with the customer and improve the customer experience thereby improving the bottom line. Branches no longer need 3,000 to 4,000 sq. ft.

The UA model, dialogue towers with cash recycler, or assisted/self-serve devices and video conference in flex spaces requires half the space of traditional branches. The key is ensuring your non-branch services are attracting most of your basic transactions. Transformed branches should be designed to process the remaining transactions in the most efficient way possible providing time and space to consult and educate customers as well as identify referral opportunities—all of which add revenue to the bottom line.

We believe you can’t transform your branches or retail strategy until you fix what is broken. A newly designed building or implementation of technology/ new equipment doesn’t necessarily resolve the problems that hinder transformation. When it comes to any type of transformation, do your research or seek help from those who understand transformation from a holistic perspective.

You don’t know what you don’t know, and that can be costly.

Mark Charette has championed his commitment to siting, designing and building efficient branches that improve ROI and reduce waste for over 35 years. Sandy Dixon has over 38 years of experience in all aspects of banking including retail, operations, auditing, accounting, software applications, debit card management, fraud prevention, and human resources.

CY B E RS ECU R ITY

2,000 Consumers Told Us Their Worst Cybersecurity Fears

Here’s what you can do to help your customers conquer their concerns

By STEVE SANDERS Special To Banking Mid Atlantic

T

oday’s consumers are inundated with troubling cybersecurity news, on practically a daily basis. When word of the Capital One data breach broke, consumers again were left scrambling to figure out if their personal information was included in the 106 million exposed records. They are weary, to say the least.

So, how can financial institutions help restore their peace of mind? To find out, CSI polled more than 2,000 American consumers about the cybersecurity threats and challenges surrounding them and their financial institutions. The result? Consumers (unsurprisingly) want to know how to better protect themselves and are open to their bank showing them how. Almost three-fourths (74 percent) said that they would likely participate in a cybersecurity awareness program if offered by their financial institution.

This insight presents banks with a tremendous, inexpensive opportunity to increase their value and retain more customers.

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IF YOUR INSTITUTION HOSTS A CYBERSECURITY AWARENESS PROGRAM, PEOPLE WILL COME. BY DOING SO, YOU CREATE A WIN-WIN FOR CONSUMERS AND YOUR INSTITUTION.

IF YOU HOST IT, CUSTOMERS WILL COME

Per our poll, consumers ages 18 to 44 are the most likely (75 percent) to attend a banksponsored cybersecurity education program, and interest from those age 45 and older is close behind (73 percent).

So, if your institution hosts a cybersecurity awareness program, people will come. By doing so, you create a win-win for consumers and your institution.

Here are just a few of the benefits: • Bolster your institution’s reputation as an active corporate citizen • Increase the potential for new business as you share your knowledge • Create more cyber-aware customers able to thwart malicious cyberactivity • Reduce your own risk from cybercrime as a result

THE KEYS TO A SUCCESSFUL EVENT

To capitalize on this opportunity, you much be intentional and deliberate in your planning: • Create a guest list: You should include your existing customers, but don’t stop there. Cement your status as a local hero by inviting the community at large.

• Save the date: The bad guys aren’t waiting, so don’t procrastinate. Host your event as soon as you can properly plan it.

• Don’t stop at one: Reach the broadest audience by hosting several sessions conveniently scheduled for various demographics, i.e., mornings for senior citizens and stay-at-home parents, evenings or weekends for working adults.

• Remember: location, location, location: Select a venue conducive to a group meeting and one that projects a professional and credible atmosphere.

Also make sure the location is conveniently accessible and big enough to comfortably house your entire guest list.

• Pick a partner: Pairing up with your local chamber of commerce, an area civic organization or academic institution is a great way to reach the broader community.

• Give more than advice: Everyone loves free stuff.

This is a great opportunity to hand out bankbranded items like pens, mugs, etc. You could also give away a more valuable door prize.

• Bring in the experts: Technology can be a dry and complicated topic, so pick a speaker with the cybersecurity chops to inspire confidence and motivate them to heed the advice.

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THE MAKINGS OF A USEFUL MESSAGE

Beyond the logistical details, ensure you craft an informative message, including these topics: • Practicing good cyber hygiene: CSO Online shares several basic cyber-hygiene tips that you can share: - Use secure access points: Only connect devices through private Wi-Fi networks or use a virtual private network (VPN) to encrypt a public Wi-Fi network.

- Install updates: As soon as hardware and software updates are available, download them to protect against known vulnerabilities.

- Protect yourself: Always use strong, unique passwords and incorporate multi-factor authentication whenever it’s available.

- Practice safe emailing: Beware of opening links or attachments from unknown or suspicious persons.

- Use anti-malware protection: Explain that this isn’t just for computers and laptops anymore.

Consumers need to think about mobile and other Internet-connected devices.

• Protecting Online Footprints: The NCSAM 2019 Toolkit is a great resource for anyone hosting a cybersecurity awareness program. It also suggests talking about these online safety tips: - Personalize privacy settings - Post safely to social media - Understand the Internet of Things (IoT) - Protect from social engineering - Stay safe with e-commerce • Responding to a data breach: Explain the key actions consumers should do after a data breach, including finding out what information was stolen and if their personal data was included, as well as putting fraud alerts on affected debit and credit cards and credit reports.

• Dealing with identity theft: It also is important to discuss what consumers should do if their identities are stolen.

• Institutional defenses: Finally, take the opportunity to discuss how your institution protects itself and its customers and their personal data from cyber intrusion.

MORE HELPFUL INSIGHT FROM CSI’S CONSUMER CYBERSECURITY POLL

Consumer receptivity to a bank-sponsored cybersecurity education program is just one of the takeaways from our survey. Download CSI’s 2019 Consumer Cybersecurity Poll Executive Report [bit.ly/2oUf6gv] to gain valuable insight about consumers’ thoughts surrounding cybersecurity.

Steve Sanders is vice president of Internal Audit for CSI. In his role, he oversees the evaluation and mitigation of risks associated with IT, financial and operational systems.

Bigger.

Better.

And Ready To

Bust Out! 2,400+ Attendees EXHIBITOR AND SPONSOR RESERVATIONS OPEN NOW at www.nemortgageexpo.com The New England Mortgage Expo is back again, and it’s all coming together for another spectacular day at Mohegan Sun. Last year, we had over 2,400 attendees, a compelling exhibitor lineup, a roster of top industry speakers, and multiple event partners – and you can expect an even better Expo in 2020!

Attendees will discover a thoughtful layout, high-quality networking opportunities, and an exciting show floor featuring live podcasting, raffle prizes, complimentary food and much more. Exhibitors and sponsors can take advantage of the opportunity to network with mortgage industry professionals and showcase your solutions with our booth and sponsorship opportunities.

PRESENTED BY

For more information: Vincent Valvo, CEO, American Business Media vvalvo@ambizmedia.com or direct at (860) 922-3441

CSI KNOWS EXPERIENCE COUNTS. In its recent core vendor report, Aite Group recognized CSI’s NuPoint® core platform for “providing the best user experience.”* Come meet the core that the industry—and our customers—can’t stop talking about. www.csiweb.com/experience * Source: Aite Group, “AIM Evaluation: The Leading Providers of U.S. Core Banking Systems”

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