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Pennsylvania’s Community Banks. For people and their neighborhoods.

May 2012

Majority Leader

Mike Turzai

Profile in Leadership


Fighting Back




Plan your training for this year with our variety of educational seminars and conferences. Registration is easy and just a click away at

JUNE • 2012



AUGUST • 2012

Compliance Seminar September 26, 2012 DoubleTree Monroeville - Monroeville, PA

Marketing Conference October 17-18, 2012 Hilton Garden Inn - Hershey, PA

ALM Seminar September 27, 2012 DoubleTree Monroeville - Monroeville, PA


Directors Conference June 5-6, 2012 The Nittany Lion Inn - State College, PA

135th Annual Convention August 17-20, 2012 Vail Marriott Resort & Spa - Vail, CO


Compliance Seminar September 18, 2012 PACB Headquarters - Harrisburg, PA

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Audit Seminar September 20, 2012 PACB Headquarters - Harrisburg, PA

OCTOBER • 2012

ALM Seminar October 3, 2012 PACB Headquarters - Harrisburg, PA

Tech Conference October 10, 2012 PACB Headquarters - Harrisburg, PA

Directors College November 1, 2012 Doubletree Monroeville - Monroeville, PA


PACB introduces our




NEW ADVOCACY WEBPAGE KEEPS YOU ON TOP OF THE ISSUES AND LETS YOU BECOME INVOLVED! “We in America do not have government by the majority. We have government of the majority who participate.” - Thomas Jefferson The new PACB Advocacy webpage is a valuable tool that gives you a voice in the nation’s Capital and in the halls of the Pennsylvania legislature. The page will keep you up to date on current legislation and other issues that are affecting or will affect community banks, their employees and customers across Pennsylvania.

congressman to voice his opposition to a bill that would affect community bankers. The congressman told him that earlier that day his office had been overwhelmed by 200 credit union members voicing their support of this same bill. The congressman told him that he had been the one and only community banker to contact him about this bill.

On the Advocacy page, you will be able to find essential information about the most important issues that affect community banking today. The page will also provide information on how to contact your senators, congressman, and your representatives in the Pennsylvania General Assembly quickly and easily. When PACB members directly contact their legislators and government officials, our opportunity for success increases enormously. Combined with the efforts of PACB professionals, grassroots campaigning is a powerful force for change.

It is critical that we in the community banking industry become actively involved in shaping public policy so that it is responsive to the needs of our industry. We must play a role in influencing the decisions that are important to us, especially those that are key to our survival and that allow us to flourish.

We face stiff competition from big banks, credit unions and other organizations these days. But when we unite as a group, our combined voices have a larger and more farreaching influence than just one voice. Here’s an example: A retired community banker told me a story of visiting his

YOU Can Make a Big Difference in Just Five Minutes. That’s all it will take to call or email your elected officials. We encourage you and your colleagues to become involved in shaping our future! Visit the Advocacy webpage at The actions of our government have an enormous impact on our lives and livelihood, so please take time to educate yourself about the issues and take action! | Transactions | 3

Contents May 2012

FEATURE ARTICLES 10 PACB Visits Capitol Hill PACB traveled to Washington, D.C. to visit the members of the Pennsylvania congressional delegation to educate them about the issues that are significant to the community banking industry. 16 Beyond Executive Compensation: Risk Management Compensation Issues for Board Members An overview of the new risk management compliance issues put in place by the regulators. 18 Protect the Community Banking Industry From Negative Publicity How to fight back against the negative publicity that community banks are inadvertently receiving. 22 Leadership Profile: Representative Mike Turzai, House Majority Leader A look into the current topics being addressed in the Pennsylvania House of Representatives. 30 Will the JOBS Act Result in Reducing the Cost to Raise Capital for Banks and Bank Holding Companies On April 5, 2012 President Obama signed into law the Jumpstart Our Business Startups Act. Find out what this means for community banks. 36 Northwest Savings Bank Ranked “Highest in Customer Satisfaction in the Mid-Atlantic Region” for a Third Year in a Row This month’s community bank profile takes a look at the exceptional year of recognition that Northwest Savings Bank is having. 40 The Real Risk in Banking’s Future People are the most important asset for any community bank. Make sure to plan for your bank’s future.

ADVERTISERS 09 09 15 15 15 20 20 42

ParenteBeard Rhoads & Sinon LLP AAS Debt Recovery Inc Smith Elliott Kearns & Company, LLC Latsha Davis & McKenna Financial Outsourcing Solutions Shazam Shumaker Williams PC 4 | Transactions |


House Majority Leader Mike Turzai sits down with PACB’s President/CEO Nick DiFrancesco, to discuss the EmployPA initiative, the budget, his goals for the rest of the year, and other topics. | Transactions | 5

Find ! k n Fra START HAVING SOME FUN WITH PACB’S MONTHLY PUBLICATION! Find Frank offers a way to get rewarded for reading Transactions’ important articles every month. Somewhere on these following pages, a Frank A. Pinto bobble head is hidden. Want to play? Here’s what you do: 1. Find Frank 2. Have a bank representative post on the PACB Facebook wall the exact location (page number & exact location) 3. Make sure your entry has a contact name & email 4. Submit!


Pennsylvania’s Community Banks. For people and their neighborhoods.

is published monthly by the Pennsylvania Association of Community Bankers 2405 North Front Street, P.O. Box 5319, Harrisburg, PA 17110-5319

BUSINESS HOURS: 8:30 a.m. - 5:00 p.m. M-F Telephone: (717) 231-7447

PACB STAFF: Dominic D. DiFrancesco, - President/CEO Saundra J. Cunningham, - VP–Education Services Shirley A. Regan, - Comptroller/Office Manager Patricia Kuharic, - Administrative Assistant Eric A. Kovac, - Publications Manager Natalie S. Bombatch, - Publications Manager

2011-2012 PACB LEADERSHIP EXECUTIVE COMMITTEE Chairperson - Chuck Leyh President/CEO, Enterprise Bank Chairperson Elect - Ronald B. Geib President/CEO, Harleysville Savings Bank Vice Chairperson - Dennis D. Cirucci President/CEO, Alliance Bank Secretary/Treasurer - Andrew W. Hasley President/CEO, Allegheny Valley Bank President/CEO - Dominic D. DiFrancesco Pennsylvania Association of Community Bankers Immediate Past Chairperson - Richard L. Meares President/CEO, Fleetwood Bank Ex-Officio/General Counsel - Keith A. Clark, Esq. Chairman, Shumaker Williams, P.C.

STANDING COMMITTEES: CHAIRS & VICE CHAIRS EDUCATION Diane McElwee, Bally Savings Bank Kevin Schmidt, Neffs National Bank FINANCE & BUDGET Frank S. DePaolo, Sharon Savings Bank FIRSTPAC George M. Evans, Indiana First Bank LEGAL Reginald Evans, Esq., Shumaker Williams, P.C. Angela L. Thomas, Esq., Latsha Davis Yohe & McKenna, P.C. LEGISLATIVE Timothy Zimmerman, Standard Bank Frank Godino, First Star Bank MEMBERSHIP Ted Peters, Bryn Mawr Trust Company Andrew W. Hasley, Allegheny Valley Bank *PACB member banks only please.

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STRATEGIC PLANNING David Hunsicker, New Tripoli Bank

PACB Chairman Chuck Leyh

A word from PACB’s Chairman Tax season is finally over for me, and Nick and I are back on the road again visiting our members. Our association is only as strong as our individual members. This is why it is so important for all of you to communicate to us what is challenging your financial institutions and to share with us how we can assist you in overcoming these challenges. Sharing your successes with us is also important as it provides opportunities for others in the association to learn from their peers. We are a team and only by helping one another can we realize our total potential. It has been a joy visiting with so many of you, and I look forward to continuing our visits. Sharing the successes and finding ways to overcome the challenges make us all stronger competitors united against “Wall Street.” Speaking of challenges, a delegation of PACB members just returned from Washington, DC where we met with fellow members of ICBA and “lobbied on the hill” for a week. We pushed to prohibit the credit unions from expanding their business lending limitation and we pushed to continue the Transitional Account Guarantee program (TAG) currently providing unlimited FDIC insurance coverage for checking accounts for an additional five year period. Small business lending is an important segment of business for community banks and it is unfair, anti-competitive, and just un-American to allow credit unions to compete in this marketplace without paying tax. How would General Motors Corporation feel if it competed with Ford Motor Company selling SUV’s and Ford didn’t pay tax? It is hard to imagine this unfair competition is allowed to continue and we must all do whatever we can to stop it! Even though the Wall

Street banks will now, in theory, be allowed to fail as a result of some provisions in Dodd-Frank, the market still believes government will not allow them to fail as had been the practice in the past. The TAG program is the method that community banks use to fairly compete with the “too big to fail” doctrine from which Wall Street banks benefit. We all need to gather around as a team and fight for these issues. I am hoping you will actively push for these issues as PACB and ICBA request your assistance. It is also time to start thinking about the convention this year in Vail, Colorado. The registration packets have been mailed, our vendor and speaker commitments are made, and now the only thing left is for our members to experience the best convention yet. We can supply great new ideas, great programs, and great speakers, but success will only be achieved if we ALL show up and take advantage of the program. Networking in a relaxed atmosphere is one item that makes our conventions second to none. This benefit is at its optimum when we ALL show up. We have spent almost three years negotiating pricing, recruiting new vendors, and creating a new format to give you the best convention possible with the goal of improving your financial institution. I hope you will join me and take advantage of this opportunity by signing up now and experiencing how strong a team we can really become! As always, I appreciate all you’re doing to build and serve Pennsylvania’s communities and our industry. I look forward to visiting with you all in the upcoming months. | Transactions | 7

edition, I’ll give you a recap of our recent trip to the ICBA’s Annual Washington Policy Summit. While my remarks profile an environment of division, I’m pleased to report that we have never experienced a better relationship with our Commonwealth’s congressional delegation.

President/CEO Nick DiFrancesco

From the president & CEO’s desk It’s hard to believe that one year has past since the courageous members of Seal Team 6 apprehended and eliminated Osama Bin Laden. I was lucky enough to be in Washington last year when this historic event occurred. The celebration, which broke out outside the White House, reminded me of days gone by when Americans overcame by uniting. Things are far different today. Instead of rallying around patriotism, too many in Washington find their personal success through the politics of division. At a time when Americans need to stand up and abide by President Kennedy’s statement “ask what you can do for your country,” the modern day politics of division pushes a message of selfishness. A hard look at each party shows an unwillingness to compromise on the very issues that will restore integrity to the American economy. The battles of the past decade were conducted in lands far away. Today, the battle for our security appears more like a civil war. This month’s center story is a profile in leadership. Specifically, we introduce you to State Representative Mike Turzai, Pennsylvania’s House Republican Leader. As you read the pages, you’ll learn that Leader Turzai is a dedicated public servant who truly understands that compromise is necessary to achieve great outcomes. Through his leadership, Pennsylvania is experiencing an improved business climate, though Mr. Turzai admits that the job is not yet done. While Harrisburg is important to our industry, our central focus remains on the regulatory and legislative policies coming from our nation’s capital. In this

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Pennsylvania is represented by 21 members of congress, most of whom understand the importance of community banking. Representatives like Congressman Mike Kelly, who ran for office out of a strong belief that government should not be able to destroy your business, be it through regulatory, legal or tax policies. He and his colleagues are committed to protecting small business and community banking. As we look ahead, this month’s Transactions also begins to profile PACB’s 135th Annual Convention slated for August in Vail, Colorado. Get ready for an experience like never before. Under the direction of PACB Chairman Chuck Leyh, PACB is poised to offer community bankers a greatly enhanced educational experience, which includes opportunities to network with peers from across Pennsylvania. The convention also offers community bankers and their families a much needed opportunity to get away from the daily grind, refresh, and relax. Attendees of the convention are sure to come home with new ideas on how to improve community services, and a renewed spirit to drive success. PACB is here to serve the community banking industry. Period! We are fighting hard to contain ill-conceived efforts to expand credit union business lending. We are fighting to extend critical TAG coverage, which will keep deposits at work in community banks and on Main Streets across the Commonwealth. We continue to have great success in working with banking regulators to express the concerns of our membership. The right people are listening to our pleas, and we are making headway in changing the current business environment. As the Majority Leader points out, more needs to be done, and we need a unified industry committed to supporting community banking. With the active commitment of the more than 20,000 employees who rely on Pennsylvania’s community banks for their livelihood, we can and will ensure the success of our critical industry! Enjoy this month’s edition.

REPRESENTING FINANCIAL INSTITUTIONS FOR OVER 75 YEARS Mergers & Acquisitions • Capital Formation • SEC Compliance • Federal/State Regulatory Compliance • Corporate Governance • Mutual Thrift Conversions • Executive Compensation & Employee Benefits • Acquisitions of Non-Bank Subsidiaries • Human Resources • Tax Business Litigation • Bankruptcy/Workout

Charles J. Ferry, Esquire 717-231-6631 Dean H. Dusinberre, Esquire 717-231-6618 Kenneth J. Rollins, Esquire 717-237-6782 One South Market Square • Harrisburg, PA 17101 • | Transactions | 9

PACB Visits

Capitol Hill 10 | Transactions |

From April 24 through April 27, PACB staff and about a dozen of its members were in attendance at the ICBA Washington Policy Summit along with about 900 other community bankers from across the US. | Transactions | 11



I was with each of our members’ depth of knowledge and their ability to articulate to each congressman how each of the pieces of legislation would affect not just their businesses, but also their customers and their customers businesses. Everyone joined in the discussion; no shrinking violets here!

From April 24 through April 27, PACB staff and about a dozen of its members were in attendance at the ICBA Washington Policy Summit along with about 900 other community bankers from across the US. PACB members came First on the agenda was the ‘credit union’ bill from several regions in the Commonwealth, which means H.R.1418/S.2231, which would allow credit unions to exwe had great representation for most of our congressional pand their member business lending from 12.25% of asdistricts. It was a chance sets to 27.5%. We explained for us to meet some of our to our representatives PACB’S PRIMARY FOCUS WAS TO VISIT and their staff how this members who had carved out time from their very THE MEMBERS OF THE PENNSYLVANIA bill would affect commubusy schedules to particinity banks and we asked CONGRESSIONAL DELEGATION. pate in PACB’s advocacy them to vote ‘no’ on both efforts in Washington. bills. Each representative listened intently and we While it was a wonderful opportunity to share experiences found several allies. All promised to seriously consider our and ideas with our fellow bankers and some of the ICBA perspective. There is nothing more compelling to make a staff, PACB’s primary focus was to visit the members of case to a congressman than to listen to the perspective of the Pennsylvania congressional delegation. Our plan was our bankers as to how this legislation would affect their to educate our senators and representatives about the is- businesses, particularly when that banker is a constituent. sues that are significant to the community banking industry, particularly in Pennsylvania. We also requested that each legislator sign on to the Communities First Act legislation (H.R.1697) and consider votBecause our appointment schedule was full and because ing for H.R.3213 (regulatory relief legislation) to help curb we did not want to overwhelm any of the congressional excessive regulations, overzealous safety and soundness offices, we started out by forming a couple of teams in or- exams, and paperwork requirements that impose a disder to cover each legislator. I can’t tell you how impressed proportionate burden on community banks. We found our 12 | Transactions |

legislators to be empathetic because they believe that businesses should not be burdened with regulations that keep them from doing business.

On the second day, we had the opportunity to listen to presentations from four members of the Consumer Finance Protection Bureau; the Federal Deposit Insurance Corporation; the Federal Reserve; Elizabeth Duke was on The Dodd-Frank regulations are a much more complex hand to answer questions and discuss regulations along issue. Unfortunately, it seems that getting regulatory re- with four of her deputies, and the Office of the Complief for community banks will take some time. Regulatory troller of the Currency, which was by invitation only. We agencies are proceeding very cautiously as they assess had the opportunity to ask some very pointed questions. the impact of the regulations already in place. The Con- There was some heated discussion, but with only an hour sumer Finance Protection Bureau is still feeling its way in scheduled with each group, there was not enough time addressing a whole host of for a meaningful discusissues, as they continue to sion of all of the issues that THE ICBA HAS MADE THE DECISION TO add personnel and receive were on the minds of our feedback from a multitude OPEN THE WASHINGTON POLICY SUMMIT community bankers. of consumers via their TO ALL PACB MEMBERS NEXT YEAR. website. We plan to continThe ICBA has made the ue to urge our legislators decision to open the Washas to the critical nature of ington Policy Summit to H.R.3213 that would ease the over regulation brought by all PACB members next year. If you want to play a role Dodd Frank. in influencing legislation that affects your everyday life, I would ask that you consider attending. The meetings The importance of extending TAG, was also on the agenda. with our legislators are informal; they tend to be discusWe found that many congressmen understood the impor- sions about issues that you would have with any of your tance of the TAG extension, and we think that this is an is- peers. But it’s important that legislators know your viewsue that will have broad bipartisan support. The issue here point along with your experience in running a business; is getting the TAG extension onto the jam-packed agenda otherwise they may only know what others, like the credit that Congress will address during the next six months unions, tell them. before they adjourn. Many very critical issues have been Please join us in being an advocate for community banks pushed down the road and they will all vie for legislators’ in Pennsylvania! attention as we go forward. | Transactions | 13

T O DO: s not ’ t i y t i n u t r o pp o - Last minute ister f or c onference t oo late! Reg org/pacb-educat ion . on line at pacb irect ors D B C A P d - Atten rategies t s n r a le o t e C onferenc t it ut ion running s DIRECTORS CONFERENCE HIGHLIGHTS t o keep my in HOW DO SUCCESSFUL COMMUNITY BANKS DIVERSIFY THEIR ASSET MIX? smoot hly.



This session will examine community bank business models to assess asset mix and performance. What are the successful strategies? Board members must also focus on the risk aspects of the mix. Decision making will ultimately come down to the risk/reward trade-off your bank is willing to make.

BEYOND EXECUTIVE COMPENSATION: RISK MANAGEMENT COMPENSATION ISSUES FOR BOARD MEMBERS This session provides education about the proposed Dodd-Frank incentive compensation rules, presents a practical action plan for how to come into compliance with these rules, and discusses actions a Board of Directors should consider in satisfying its fiduciary obligations. The session also provides an update on pending Dodd-Frank executive compensation guidance on clawbacks, disclosure of internal pay equity, and say on pay shareholder votes and reviews the FDIC golden parachute rules for banks that are (or may soon become) in “troubled condition.” Finally, the session provides a refresher on a wide variety of employment risk-management topics that Board members should keep in mind when implementing strategic plans that call for scaling back budgets and headcount. DIRECTORS’ RESPONSIBILITIES IN THE INVESTMENT PORTFOLIO Board members for community banks, more than ever, are being required to have hands-on involvement in the policy setting, risk management, and compliance issues involving the investment portfolio. This workshop will present the responsibilities mandated by the regulators, and will describe the tools which ICBA Securities has developed to enable directors to discharge their obligations under the FFIEC Policy Statement.

WHERE? The Nittany Lion Inn

WHEN? June 5-6, 2012


Attendees are eligible to earn up to 10 CPE credits. Attendees are eligible to earn up to 8.5 CLE credits.


Contact Saundra J. Cunningham, PACB VP-Education Services, at 717.231.7447 or

THE HOW’S, WHY’S AND WHAT’S OF A SOUND CAPITAL MANAGEMENT STRATEGY Industry headwinds have reduced the earnings expectations for many community banks. At the same time, regulators are requiring banks to hold more capital. These twin forces are putting pressure on the sector’s ROE, and making new investor capital harder to find. This session will explore the strategies, structures, and skills needed to develop a capital plan that will allow your company to grow at the appropriate pace, while balancing various stakeholder interests. THE BOARD’S ROLE IN RISK MANAGEMENT Enterprise Risk Management (ERM) does not merely focus on risk but balances strategic opportunities with a comprehensive view of risk and reward to achieve high performance. An effective ERM process builds a shared view of risk, measuring the likelihood and significance of particular risk elements across the bank, eliminating the departmental “silo” approach. This presentation will describe ERM from its origins as a control mechanism through its evolution as an essential business management process linked to the corporate strategy. The discussion will address the roles of the directors and management and the need to establish a common framework for measuring risk and demonstrate tactics to balance risk and return. CORPORATE GOVERNANCE: THE ROLE AND RESPONSIBILITIES OF BOARD COMMITTEES This session will discuss best practices for Board committees under corporate law; the requirements for such committees under banking law; and the relationship between board committee and the full Board of Directors.

TECHNOLOGY Technology is changing the face of banking; however, it has also spawned a new wave of crime that can cause significant financial, operational, regulatory, and reputational damage. In this session, you will better understand some of these new technologies and how cybercriminals are using these systems to steal customer and financial information. Topics include: Mobile Banking Solutions/Risks, Cyber Crime/Corporate Account Takeover, Cloud Computing, and Social Media Risks.



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cant new ude: ks. | Transactions | 15

Beyond Executive Compensation: Risk Management Compensation Issues for Board Members

By: Norma M. Sharara, Esq. & Jeffrey M. Cardone, Esq. Luse Gorman Pomerenk & Schick, P.C., Washington, DC


hese days, everyone is being asked to do more with less. Board members are no exception. Regulators have raised the bar on Board members’ responsibilities. Although a bank’s Board of Directors has always been responsible for oversight of the management of the bank, in the past, such oversight was often limited to reviewing reports from management, attending monthly Board meetings, and asking appropriate questions. Now, as a result the stunning collapse of Lehman Brothers and the shock and awe of the bursting of the real estate bubble and its related economic fallout, Board members are saddled with increased risk management oversight by their federal and state regulators as a 16 | Transactions |

result of: (i) the Inter-Agency Guidance on Incentive Compensation; (ii) Dodd Frank Wall Street Reform Act (DoddFrank), and (iii) the expansion of the FDIC Golden Parachute Rules. These rules were enacted to curtail abusive compensation arrangements that contributed to the recent economic fallout. In addition, as result of recent laws that increase an employer’s exposure to discrimination lawsuits, the Board needs to weigh the bank’s potential risks associated with downsizing its business. How is a conscientious Board member who is already committed to the welfare of the institution and its shareholders supposed to step up his or her game? What do the regulators want from you now?

Risk management. Typically, risk management was prinemployees of banks that are in “troubled condition” under cipally thought of as a management-level function, and the FDIC’s golden parachute rules. Board members need to not a Board-level function. However, the regulators have be familiar with the far-reaching scope of those rules, beraised the bar and now expect Board members to engage cause they apply to any agreement entered into or amended in a certain amount of risk management responsibiliwhen the bank is in “troubled condition” or “in contemplaties over areas that were in the traditional realm of the tion of being in troubled condition,” which greatly shortBoard’s jurisdiction, such as executive compensation and ens the window of opportunity for entering into or making over some areas that were typically handled by manageany changes to employment or change in control agreement, such as “below the top” compensation. Specifically, ments. Board members need to consider the implications in June 2010 (before Dodd-Frank was enacted), all of the if the promised benefits under long-standing employment federal bank regulatory agencies issued final interagency or change in control agreements cannot be honored due to guidance on safety and soundness of incentive compenthe FDIC golden parachute prohibitions on most severance sation arrangements. Those rules apply “top to bottom” pay. We understand that the recent FDIC position is very exso that every type of inpansive on when the rules centive compensation is apply, such that the paramnow subject to Board-level eters of the rules are someREGULATORS HAVE RAISED review – including branch what surprising. THE BAR ON BOARD employee incentives, commissions for lenders and Finally, even though manMEMBER’S RESPONSIBILITIES. other producers, and traagement handles the dayditional executive comto-day operations of the pensation, and have become part of a regular routine bank, including taking necessary steps to downsize when a safety and soundness examination. reduction in headcount is required, there are risk-management repercussions that the Board needs to be familiar with, The federal regulators also proposed additional rules since any lawsuit is likely to name the bank as a defendant. under Dodd-Frank that impose even greater Board overMany federal, state, and local laws protect employees against sight on incentive compensation for financial institutions discrimination in disability status, age, national origin, genwith more than $1 billion in assets. The Dodd-Frank inder, ethnicity, and religion. Recent laws, like the federal Lily centive compensation rules are in addition to, not instead Ledbetter Fair Pay Act, increase the employer’s exposure to of, the interagency guidance. Note that privately held possible lawsuits, which are costly to defend, even if the embanks and credit unions are also subject to the proposed ployer ultimately prevails. When mandating strategic plans Dodd-Frank incentive compensation rules. Dodd-Frank that call for reduced headcount, the Board needs to weigh the also requires Board involvement in creating a policy on possible adverse economic costs of certain layoffs. compensation clawbacks and on proxy disclosure of inAll of these issues and a practical action plan for how to ternal pay equity and “say on pay” votes. come into compliance with these rules will be discussed at Increasingly, Board members the PACB Directors Conference, are becoming painfully aware on June 5-6, 2012 at the Nittany of the rather severe restrictions Lion Inn, State College, PA. We that apply to severance pay for hope to see you there! Ms. Sharara is a partner at Luse Gorman Pomerenk & Schick, P.C. She has more than 20 years of experience in the executive compensation and employee benefits field. Ms. Sharara has counseled management and Boards of Directors of financial institutions on ERISA fiduciary duties, employment and income tax issues, non-qualified deferred compensation plans, incentive plans, split dollar arrangements, employment and change in control agreements and executive separation packages. Ms. Sharara advises clients both in the context of on-going compliance and in mergers and acquisitions.

Mr. Cardone is an attorney in the Executive Compensation, Employee Benefits and Taxation Group of Luse Gorman Pomerenk & Schick, P.C. His practice focuses on all aspects of employee benefits and executive compensation, including tax-qualified plans, non-qualified deferred compensation plans, equity compensation arrangements, separation pay plans, and the executive compensation disclosure rules for public companies under federal securities laws. Mr. Cardone has extensive experience in advising financial institutions on tax and employee benefits matters in connection with mergers and acquisitions, corporate reorganizations, and initial public offerings. | Transactions | 17

Protect the Community Banking Industry From Negative Publicity By: Natalie Bombatch

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hese days, it has become a common occurrence to see news articles directing bank customers to oppose fees and move their money from banks to credit unions. What journalists often leave out of the story are the community banks that pay for the bad press stemming from the inefficiencies of mega banks. Credit unions reap all the benefits. Even if the text of an article suggests credit unions or community banks as viable options to mega banks, the title and images can say otherwise. If people read only publication covers or article titles, they can completely miss the real point. Take, for example, an article published by Consumer Reports in February 2012. The cover consisted of a large image of a boxing glove alongside the text, “Fight Back Against Your Bank.” A reader could interpret that to mean they should fight back against all banks, whether community

industry experts. It can support the community banking industry without sounding like a biased article about your bank in particular and build credibility with the reporter. Another option is to issue a public response by means of a press release or an op-ed piece. A press release sent via email is an efficient way to disseminate information to many publications in a short period of time. An op-ed piece or a letter to the editor of the publication in question is beneficial as it targets the publication directly. However, it may take a substantial amount of time between submission and publication, so if the issue is of an urgent nature, this may not be the best route. Regardless of the method you find to be the most beneficial, be sure to address only the issues from the original article in a factual, composed manner. Hold true to the facts as they will speak for themselves. The overall goal is get rid of any

Bring to light what journalists may be leaving out of the banking versus credit uniion issue.

TAKE THESE STEPS TO ENSURE OUR SIDE OF THE STORY IS INCLUDED banks or mega banks. If the person happens to read the actual article, he or she would find that Consumer Reports does indeed combine community banks with credit unions as more affordable options than mega banks. Unfortunately, to the public, banks are banks and credit unions are credit unions; such a vague cover title gives all banks a negative reputation and the damage is done. It’s time to correct those misconceptions. This article will help you to learn to deal with negative publicity. If a news story is factually incorrect or unduly biased, it is probably best to contact the reporter or editor of the publication. If it is truly a factual error, most publications will print a correction. Approach the situation calmly and focus on clearing up misunderstandings and building a relationship. When you build trust with the reporter and introduce a true understanding of community banking, he or she will be more likely to contact you for input in future articles. On the other hand, if you contact the reporter strictly to criticize, he or she will become defensive and it will be difficult to share your point of view, at that moment and in the future. If the issue is one of opinion, it is unlikely that a correction will be printed. However, contacting the reporter is a good opportunity to share your side of the story. Perhaps he or she is not aware of the problems the article caused the community banking industry. They may be willing to print another story in the future from a different angle. In this case, it is beneficial to incorporate evidence from third party

apprehension that potential or current community bank customers may have. Avoid accusations of the reporter or publication; building or maintaining relationships with reporters and their publications is a much better alternative to burning bridges. When issues or events arise in the future, reporters that you have a positive relationship with will be more likely to cover the story. As you can see, the best approach to handling negative publicity is to remain calm and level-headed. You’ll be able to put things into perspective rather than overreact and worsen the situation. Take time to think through your possibilities before responding. Once a statement is put in the public eye, it is hard to retract. Remember, negative press coverage can give you an opportunity to make your side of the story visible, as well as show your strong leadership and composure under pressure. It’s time to bring to light what journalists may be leaving out of the banking versus credit union issue. Take these steps to ensure our side of the story is included in articles. PACB is here to support you and the community banking industry. If you need assistance in handling negative publicity in your area, please don’t hesitate to contact me at or 717-231-7447. | Transactions | 19

Navigating a complex regulatory environment?

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Leadership Profile:


MIKE TURZAI House Majority Leader

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I’m a preparation person; I do believe that preparation is the art of success. The more prepared you are, the better you perform. 24 | Transactions |

NICK DIFRANCESCO (ND): Thank you for doing this interview with us. Can you tell us about the EmployPA initiative that was announced at the beginning of April? What is the intent of the initiative?

to put on the agenda: first, further Unemployment Compensation reform; second, further tort reform, especially venue change; and third, business tax reform.

ND: So you have a very comprehensive package to make REPRESENTATIVE MIKE TURZAI (MT): We‘ve been the private sector a lot more competitive in Pennsylvania. doing a series of bills throughout this session to create a more competitive business climate in Pennsylvania. MT: That’s really been our goal to do that. Some of the bills we have done are the Fair Share Act, which covered tort reform [this legislation limits the li- ND: What is the prospect for an on time budget this year? ability for negligence of I know some of your coldefendants in some civil leagues would like to recourt cases]. The Goversome of the funding I THINK WE’LL BE DONE BY MID-JUNE store nor signed this into law cuts particularly for educain June 2011. We’ve done tion. So what is your outWITH THE BUDGET; I THINK IT WILL Unemployment Compenlook for that this year? CONTINUE TO DECREASE TAXES. sation reform where we put caps on the amount of MT: I think we’ll be done by benefits and the increases mid-June with the budget. I in benefits, and also added a job search requirement. think we will work diligently with the Senate and the GovWe’ve passed HB1294 which allowed for an expedited ernor to have an on-time budget that does not increase taxes Public Utilities Commission review process1. So Unemand will keep spending under the rate of inflation. And that will be the second year in a row that we have delivered an ployment Compensation reform, PUC review, tort reform. We’ve done a couple of other bills that are still over on-time budget, and one that does not increase taxes. In fact, I think it will continue to decrease taxes; the Capitol Stock in the Senate. Another piece of legislation that we thought and Franchise Tax phase out is something that we feel very was important was we repealed the sprinkler mandate in the Uniform Construction Code and changed how we ap- strongly about. proach the building code going forward. As part of our ND: A little different than the previous eight years. EmployPA, we have three additional things that we want | Transactions | 25

MT: Yes! Under the previous administration, spending increased a little over 40%; the rate of inflation was a little over 20%. We were spending well beyond our means. In addition, we were spending borrowed money at an unprecedented clip. Annual debt service increased from a little over $300 million to more than a billion dollars on annual debt service. It’s definitely been a change from where we were, significantly changing where we were. ND: To give some perspective to our members, what we see as outsiders every day when watching the news is a complete breakdown between the two parties. A lot of times what’s going on at the national level is also mirroring what’s going on at the state level in terms of budget cuts versus programs and so forth. Can you give us a sense of are there people talking across the aisle? Are there members that really see the spending and the deficits as a problem and are willing to work? Or is there really this complete breakdown in communication between the sides? MT: I would say that on a lot of the proposals other than the budget, we almost always get Democratic support. We had bipartisan support for the Fair Share Act, for PUC reform, for the building code changes.

ND: We continue to hear about the privatization of state liquor stores; first it’s on again, then off again, then on again. Can you give us your perspective on the possibility of passing House Bill 11 in this session? MT: First, we had to have hearings. Then, the bill was moved out of committee, although it was amended, but the key thing is that it was moved out of committee. We’ve been working with the Governor’s office to put forth a full privatization effort that brings in revenues up front, maintains existing revenue, and eliminates the conflict of interest of government being the entity that sells wine and spirits. The government should be the entity that licenses and provides law enforcement, really that should be its job. The fact is that every state around us has a private sector approach; New York, New Jersey, Delaware, West Virginia, Maryland and Ohio are all officially private sector states. Pennsylvania is one of two states that has a complete monopoly, Pennsylvania and Utah. Other states have modified versions, although our neighboring states primarily do not. Pennsylvania needs to move into the 21st century. So, we certainly put a high priority on moving HB 11. I’ve been meeting with members one-on-one and lining up support, and I think there is significant support within the state House for privatizing the LCB.

You have to be a good listener, you have to

SHOW RESPECT TO EVERYBODY ND: Last week the Redistricting Commission voted on a new plan. How comfortable are you feeling with that plan? Is it going to survive the scrutiny that it will inevitably receive? MT: I have to say that the original House plan, no doubt, satisfied the constitutional requirements and the existing precedent. We had agreement amongst House Republicans and Democratic leaders on the House plan. But they [Supreme Court] don’t review it on just the House plan. They look at the product as a whole. And the Supreme Court did change its standards going forward. Now whether or not the new plan meets these new standards is ultimately determined by the court. But the map that we passed, the earlier version that we passed, was definitely well within the requirements of the state constitution and previous precedent. It was better than the plan that was passed 11 years before in 2001, and that’s just not measured by today but measured by 2001. There’s just no doubt about that. Even the Supreme Court Chief Justice’s opinion made that clear, as did all of the minority opinions because it was a 4-3 decision. We think that this version will continue to hold, and will be strong on its merits. With the House map, we have a product that was agreed to by the House Democratic and Republican leaders. We feel very positive about the product we put on the table. 26 | Transactions |

ND: Lets switch gears here for moment and tell us what a day in life of the Majority Leader is like. MT: Fran, great discussion! It’s a great opportunity to lead and to make a positive difference. And it is a demanding position there’s no doubt, particularly if you want to do it well. I would say this, the great thing about the position is that you get to move legislation that is important to Pennsylvania citizens, and you get to move an agenda. You recognize that if you have a team approach to supporting that legislation and moving that agenda, you can get a great deal of good accomplished. But, you need a team approach. My average day typically starts at 6 in the Capitol. I wake up, I try to go swim and I start by going to breakfasts for many of the members, and then I meet with the staff. I would say that it doesn’t end typically until a little before midnight. And it’s non-stop. We often have a lot of meetings going on at one time, and I stop in on the various meetings in the different offices. We craft an agenda months in advance, and then we have a leadership meeting every Monday. We talk about how we are going to execute what we put on the schedule. We caucus, where we actually talk to our members and listen to our members, discuss things with our members. Then,

My average day typically starts at 6 in the Capitol. I wake up, I try to go swim and I start by going to breakfasts for many of the members, and then I meet with the staff. I would say that it doesn’t end typically until a little before midnight. And it’s non-stop. We often have a lot of meetings going on at one time, and I stop in on the various meetings in the different offices. | Transactions | 27

when we’re on the House floor we’re very focused on the floor debate, and we’re focused on making sure that the votes are there for the pieces of legislation we want to pass. We use that opportunity to also talk to members about other issues of importance for them back home. It is a very, very busy day. The staff is integral to that, my fellow leaders are integral to that. We try to take a very collegial but directed approach. We know our agenda going into the week; we know our objectives going into the week. Most of those items have been vetted out and planned for some time.

I have to say that the days can be very energizing because you’ve gotten something accomplished that you set out to get accomplished. ND: How have you personally grown since becoming Majority Leader? I know it’s only been about fifteen months, but maybe you could talk about some of your accomplishments.

MT: It’s very humbling. You have to keep people on point. You identify your objectives, and go get them. You have to, through all of the clutter, you have to stay foCOMMUNITY BANKERS ARE THE I’m a preparation person; cused on what the imporI do believe that preparatant items are that need to LIFE BLOOD OF A SUCCESSFUL tion is the art of success. be accomplished. You have ECONOMIC CLIMATE. The more prepared you to be a good listener, you are, the better you perhave to show respect to form. We meet regularly everybody. And you have with our Senate colleagues as well. It’s crucial to have to be prepared for floor debate. You never know what’s a positive working relationship with the other side of going to happen; it’s a democracy. We are not autocrats; the Capitol. nobody gets to dictate anything. It’s really team oriented, and it’s not always as streamlined as people might like it ND: I can imagine that at the end of the day you must to be. But that’s why you have to lead. And you cannot be afraid to take people where you think the state needs to go. be exhausted. In the end, you’re the leader, you have to make decisions and you cannot be afraid of your decisions. You cannot be MT: There are days when I am certainly tired. I try to touch defensive. You can’t be dictatorial. You’ve had to have debase with Lidia and my three boys every day particularly veloped consensus and worked hard to get that consensus, around dinnertime and bedtime, and sometimes before they get to school. Lidia is a pediatrician and works three days a and you have to show respect. But you have to stay the week typically. My boys are 13, 12 and 9, and it’s important course and get it done. People are willing to go with you if you are well prepared. to get that into the day too.

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ND: Is there anything that you think you want to accomplish before the end of this session this year? MT: Yes, there is a bill that was passed in the House and is now in the Senate that reforms the Redevelopment Assistance Capital Projects (RACP) HB2175. It reduces the debt dramatically, and it also reforms how that money, that borrowed money, is spent, and it provides more accountability, more openness. I’m hoping that that bill will be part of the budget and signed into law. It does have the Governor’s support and my colleague, Senator Pileggi, has been supportive. Secondly, l would definitely like to work with the Governor and the Senate to make sure we have another on-time budget. We want to ensure another budget that keeps spending under the rate of inflation, that does prioritize spending, and is responsible. Certainly I think for many of us, we’d like to be able to accomplish liquor privatization and education reform for the caucus.

One of the things I am most proud of, is that I can honestly say for myself and for many of my Republican colleagues because I talk to them regularly, they understand how small business makes so many Pennsylvania communities better. They are the life blood of the communities and they also recognize how community bankers are such an integral part of the community. My members get that, and to make a competitive business environment, we need your bankers’ input because they are on the front line. We’re not on the frontline; we’re people who listen and we take the suggestions from the community bankers very, very seriously. We need your bankers because we want to work hand in hand with them to move positive legislation. ND: Thank you for your time and thoughts Leader Turzai!

MT: Community bankers are the life blood of a successful economic climate. Entrepreneurs cannot be entrepreneurs without community bankers. People who want to be part of the capitalist system, who want to be employers, who want to take risks, who want to build prosperity, if they do not have access to capital through community bankers they can’t start up. They can’t expand; they can’t grow. The banker is a crucial advisor and mentor to so many people in small business. Your role is crucial.

Act 11 of 2012 amending Title 66 (Public Utilities) of the Pennsylvania Consolidated Statutes to allow jurisdictional water and wastewater utilities, natural gas distribution companies, city natural gas distribution operations, and electric distribution companies to petition the Commission for approval to implement a Distribution System Improvement Charge (DSIC). The DSIC must be designed to provide for “the timely recovery of the reasonable and prudent costs incurred to repair, improve or replace eligible property in order to ensure and maintain adequate, efficient, safe, reliable and reasonable services.” 66 Pa.C.S. § 1353 (a)

Prior to his House service, Rep. Turzai was an attorney in private practice and an assistant district attorney in Allegheny County, Pennsylvania. He served on the borough council of Bradford Woods, Pennsylvania as Vice President. Turzai was elected for the 28th District in a special election on June 26, 2001, representing communities in the North Hills of Allegheny County. He won election to a full term in 2002 and has won re-election in 2004 and 2006. After the 2008 elections, Turzai was elected as Minority Whip. Following the 2010 elections, which saw Republicans regain their House majority, Turzai was elected Majority Leader. As majority leader, he speaks on behalf of his caucus on the House floor, leads discussion and debate on major issues, plans the voting calendar and promotes the legislative agenda of his caucus.

abuse reform, focusing on tort reform. He has sponsored legislation to eliminate the doctrine of joint and several liability, also known as the Fair Share Act (which has been passed and signed by the Governor). The Fair Share Act implements a system of proportional responsibility in which a defendant is responsible for only his or her share of the damages.

Rep. Turzai has focused his efforts on making Pennsylvania more competitive for businesses. He has called for a reduction in the Personal Income Tax, a cut in the consumer electric tax and for tax incentives for college savings. Turzai has also lead efforts to provide business tax relief and advocated for fair and balanced workers’ compensation and unemployment compensation systems.

He voted against the legislative pay raise and never accepted any increase, and helped to lead efforts to repeal the pay raise.

ND: Is there anything that you would like to say to our members or let them know?

Rep. Turzai has been spearheading the call for lawsuit


Turzai is a graduate of University of Notre Dame and the Duke University School of Law. Mike and his wife, Lidia, and their three sons, Andrew, Stephen and Matthew, live in Bradford Woods and are involved in many community activities. | Transactions | 29


By: Kane G. Davis & Paul A. Adams Shumaker Williams, P.C. 30 | Transactions |


oth the U.S. Senate and the House of Repbank holding company that qualifies as of April 5, 2011 to susresentatives have passed the Jumpstart Our pend its reporting obligations or deregister its shares may do Business Startups (“JOBS”) Act, and Presiso by filing the Form 15 along with an explanatory note. In dent Obama signed it into law on April 5, addition, those bank holding companies that, but for the JOBS 2012. The JOBS Act contains a provision Act, would be required to register their shares because of their that community banks have long desired shareholder base exceeding 500 shareholders and which had a – an increase in the number of shareholdfiscal year end between January 1, 2012 and April 4, 2012 are ers that a bank or a bank holding company can have before now not required to register their shares as long as the number it is required to register its shares with the Securities and of shareholders is less than 2,000 as of April 5, 2012. Exchange Commission. Prior to the JOBS Act, that number was 500; the JOBS Act increases that threshold to 2,000. This It should be noted, that the reporting obligations of a deregischange will provide community banks and holding comtered bank or bank holding company are not terminated, but panies who have been cononly suspended. If the numcerned about the possibility ber of shareholders goes of triggering the registraover 1,200 at any point in the THE JOBS ACT CONTAINS A tion requirement, with its future, the reporting obligaPROVISION THAT COMMUNITY attendant expense and ontions are resurrected. During going reporting obligations, the amendment process, the BANKS HAVE LONG DESIRED. with much more flexibility attempt to overturn the curin terms of their capital raisrent treatment for counting ing activities. The provithe number of shareholders sions for banking and bank holding companies are more to include beneficial ownership was defeated. Congress refavorable than the relief provided to other corporations. jected that approach and further reduced the method of counting shareholders by not including securities held by persons Once a bank or bank holding company has been required to who received them through an employee compensation plan register with the SEC, the Securities Exchange Act of 1934 exempted from registration requirements. provided that it could only deregister if the number of its shareholders fell below 300. The JOBS Act also increases that In light of the intent of the JOBS Act, Shumaker Williams, number - to 1,200. Banks and bank holding companies with P.C. also has requested the FDIC to clarify its guidance on fewer than 1,200 shareholders and which are not listed on a the level of disclosure the FDIC will require for banks that national stock exchange, such as the NYSE or NASDAQ, will do not have registered stock. Shumaker Williams, P.C. has be able to deregister their shares by filing a form with the requested the FDIC to confirm that banks with non-regisSEC. Once the form is filed, the bank’s or bank holding comtered stock be permitted to use the same level of disclopany’s obligation to file reports with the SEC is suspended. sure available to Pennsylvania bank holding companies Any bank or bank holding company that wishes to remain without registered stock. If listed on a national exchange however, must remain regisgranted this will also reduce tered since the Exchange Act requires listed companies to be expenses for small banks to registered, irrespective of the number of shareholders they raise additional capital. have. A bank or bank holding company that decides it does not wish to remain listed would both delist and deregister, Mr. Adams is a sharefiling two forms with the SEC. holder and a member of the Corporate and FiOn April 11th, the SEC issued nancial Services Departstaff interim guidance that a ment. He primarily represents depository and Ms. Davis is a shareholder, non-depository financial a member of the Corporate institutions, their holding companies and and Financial Services affiliates with all aspects of their relationships with Department and heads state and federal, banking, insurance and securithe Firm’s Securities Law ties regulators. This includes enforcement actions, practice. She counsels the examination process, regulatory compliance and clients with respect to privacy issues. He assists financial institutions and corporate and commercial matters, mergers general corporations in strategic planning, mergers and acquisitions, securities regulation and corporate and acquisitions, internal investigations, compensagovernance. As part of the Firm’s International praction plans and negotiating contracts, including joint tice group, she also assists clients with transactions marketing agreements, for financial products and abroad and advises foreign companies establishing a services as well as bank back room operations with presence in the U.S. an emphasis on privacy concerns. | Transactions | 31





FHLBank Pittsburgh Jack Henry Banking


Griffin Financial Group, LLC Luse Gorman Pomerenk & Schick, P.C. PNC Capital Markets S.R. Snodgrass Stevens & Lee


BMO Capital Markets GKST Inc. Buchanan Ingersoll & Rooney, PC Elias, Matz, Tiernan & Herrick LLP Federated Investors, Inc. FTN Financial Kilpatrick Townsend & Stockton LLP ParenteBeard LLC PULSE Shumaker Williams, P.C. Stifel Nicolaus Weisel


Boenning and Scattergood, Inc. GTM Risk Management ICBA Services Network


EXHIBITORS Accume Partners Allied Solutions Barone Murtha Shonberg & Associates Inc. Comptroller of the Currency Computer Services, Inc. GTM Risk Management Herbein + Company, Inc. Hergenroeder Rega Scotti Ewing & Kennedy, LLC ICBA ICBA Securities ICS Risk Advisors iHELP Jack Henry Banking John M. Floyd & Associates Mortgage Services III, LLC Northland Securities, Inc. Pentegra Retirement Services Schneider Downs & Co., Inc. Secure Banking Solutions SHAZAM, Inc. Shumaker Williams, P.C. Star Network/First Data Talaris Terrapin Financial Services, LLC Travelers Vantiv Woodcraft Industries

Atlantic Central Bankers Bank John M. Floyd & Associates Malin, Bergquist & Company, LLP Pentegra Retirement Services The Kafafian Group, Inc. Travelers Vantiv


Are you looking for an opportunity to support the Pennsylvania “Community Banking” industry? Look no further….Sponsorship of the PACB 135th Annual Convention could be the best investment you make. Our Convention is a great juncture to network with community bank presidents/CEOs, senior management and directors from across Pennsylvania. Your 2012 marketing plan should definitely include a sponsorship at the PACB 135th Annual Convention! There are a variety of sponsorship opportunities available. We will work with you to provide a sponsorship that fits your budget.


This “one-stop-shop” advantage provides Pennsylvania community banker presidents/CEOs, directors and senior management an opportunity to explore the latest in banking and technology. In today’s economic environment, our members are looking for ways to streamline operations and productivity while increasing profitability at the same time. This “one-stop-shop” venue provides every exhibitor the opportunity to meet with a large contingency of Pennsylvania community banking “decision makers” one-on-one.


If you have any questions, contact Saundra Cunningham, PACB VP-Education Services, at (717) 231-7447 or by email at | Transactions | 33




August 17-20, 2012 • Vail Mountain Resort & Spa • Vail, CO


ired of the constant challenge of trying to keep up with the current regulatory environment? At a loss as to where you can find the latest accurate information on market trends that will give you a competitive edge? Are you looking for the latest information on technology products that will help you serve your customers better and more efficiently? You can find solutions to these and a host of other challenges at PACB’s 135th Annual Convention in Vail, Colorado. Earlier this month community bankers across Pennsylvania received their registration packets for PACB’s 135th Annual Convention. Of note was the addition of a special day of education sessions specifically focused on helping community banks to use their competitive advantage to the fullest. “We wanted to add value to the convention agenda, and we wanted to counter the total misconception that banks under $500 million in assets could no longer compete,” said Chuck Leyh, President and CEO of Enterprise Bank and 2012 Chairman of PACB. “Community Banks across Pennsylvania are holding their own in the current environment, and most are poised to take advantage as economic conditions improve.” Time has shown that community banks are more dynamic than larger institutions. While they lose the advantage on economies of scale, community banks more than compensate through their ability to see opportunity in the marketplace before the larger, less connected institutions. “The addition of six general education sessions was done to give community bankers specific insights to consider in order to maximize their competitive advantage.” While education is the primary purpose of PACB’s annual convention, Vail also offers the opportunity for community bankers to test drive new technology. Today’s customer is looking for more convenience, and it is surprising just how quickly new technology is introduced. PACB’s Annual Business Expo will

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highlight 39 unique companies offering products built to supercharge a community bank. “The Business Expo is an opportunity for community bankers to test drive products without having to sacrifice a great deal of time or effort,” said PACB President and CEO Nick DiFrancesco. The financial services industry is changing very quickly. With dozens of education sessions, there truly is a topic to pique the interest of community bank directors and officers at every asset level, whether rural, suburban or urban markets. Furthermore, the convention offers plenty of time to network with likeminded community bankers. “We understand the incredible demands that our members face every day,” said Saundra Cunningham, PACB Vice President of Education Services. “The annual convention agenda is designed to meet their education needs, but to also allow these men and women some much needed time to rest, recuperate and reenergize. When they return home they’ll have the knowledge they need to enhance their operations and a renewed spirit to better serve their communities.” The convention agenda is focused on community bankers, but the experience is designed with the family in mind. Vail, Colorado offers so much more than the famous skiing. Outdoor enthusiasts will enjoy playing world class golf courses, numerous mountain biking and hiking trails, the chance to zip line across a mountain canyon or hot air balloon over the Rockies, the exhilaration of whitewater rafting or the peace of fly fishing some of the best Gold Medal waters in America. So much to do and so much to learn! Whether you are a community banker or someone who provides services to community bankers, this will be a convention like none other. For more information about PACB’s annual convention, please contact Saundra Cunningham (717.231.7447 or | Transactions | 35

Northwest Savings Bank ranked

“Highest in Customer Satisfaction in the Mid-Atlantic Region� for the Third Year in a Row

By: Jim Holding Vice President, Communications Northwest Savings Bank 36 | Transactions |

Northwest Savings Bank personnel celebrate the arrival of the J.D. Power and Associates Trophy at company headquarters in Warren during the company celebration. | Transactions | 37


he year 2012 has been an exceptional year of recognition for Northwest Savings Bank.

Statement is that every Northwest employee will “demonstrate leadership in the community.”

For the third consecutive year, Northwest SavAs with any good corporate citizen, Northwest’s public ings Bank ranks “Highest in Customer Satis- support covers a wide spectrum. Perhaps the most visible to faction in the Mid-Atlantic Region,” according customers and the casual passerby is its annual Community to the J.D. Power and Associates 2012 Retail Banking Week Celebration. Northwest encourages each of Banking Customer Satisfaction Study. In addition to the rec- its offices to take part and assists its offices with signage and ognition by J.D. Power, for the second consecutive year, Keefe, support. Local office staffs form their own committees to Bruyette and Woods recently named Northwest Savings Bank organize office events, educational visits, decorations, and to their “Bank Honor Roll,” which consists of the forty top- contests for their customers and communities. This year, performing banks in the country over the last ten years. Also, Community Banking Week took place April 2 through 7. Acfor the second time in four years, Forbes included Northwest tivities at the offices of Northwest Savings Bank included a on its list of “Americas Most Trustworthy Companies” based car show in the parking lot of the Valencia Office in southern on the transparency of the bank’s financial reporting and its Butler County; an egg hunt in Fredericktown, Washington strong governance practices, County; a fundraiser for an and Bank Director Magaanimal hospital in Mount zine named Northwest to Joy, Lancaster County; and EVERY NORTHWEST EMPLOYEE its “Nifty Fifty” as one of the a food drive in State ColWILL “DEMONSTRATE LEADERSHIP top fifty banks in the country lege, Centre County. There for utilization of capital. were many more. IN THE COMMUNITY.” Although Northwest is a fairly large community bank with $8 billion in assets and 168 offices, it retains a “hometown bank” feel. Northwest accomplishes this goal by making decisions locally. Its network of offices is divided into regions, then districts to give Northwest a local feel. Each region has its own personality with the ability to manage resources at the community level. Northwest was founded 116 years ago and became a public company in 1994. Northwest has grown significantly, from assets of $1 billion in 1994, to the size it is today, through a combination of internal growth and acquisitions, having completed 24 whole bank mergers and branch acquisitions in the past eighteen years. In each of these instances, Northwest has emphasized retention of personnel and customers and maintaining strong ties to the community. Additionally, despite its rapid growth and significant size, Northwest has preserved its roots as a community bank with an emphasis on being a good corporate citizen. To ensure that this goal is met, one of the elements of its Mission

Another project involving multiple offices is Operation Overcoat. Annually, local bank offices team up with local dry cleaners and local non-profit organizations. Northwest employees ask their customers and the public to donate gently-used, children-sized winter coats and other winter wear at their offices. The local cleaner launders the coats, and the non-profit delivers the coats to children in need. Over the years, the program has generated more than 10,000 pieces of outerwear. Northwest also supports walks, donations, and team efforts in all of the thirty Pennsylvania counties it serves. The bank supports capital drives for hospitals, volunteer fire departments, clinics, United Way and United Fund drives, Chamber of Commerce events, school, art, theater and sports programs, and many other civic, social and community projects across its footprint. All of the 2,100 employees of Northwest are proud to be community bankers.

Senior Management review awards: Bill Wagner, President and CEO, and the Executive Vice Presidents of Northwest Savings Bank. From left to right, they are: Steve Fisher, Banking Services, Tim Huber, Chief Lending Officer, Mike Smelko, Chief Credit Officer, Greg LaRocca, Investment and Trust Services and Corporate Secretary, Julie McTavish, Human Services, and Bill Harvey, Chief Financial Officer.

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Real Risk

in Banking’s Future

By: Alan J. Kaplan Founder& CEO Kaplan & Associates, Inc. 40 | Transactions |


n my 28 years of association with the banking industry, I have never heard a CEO or Bank Director disagree with the old saying that “people are our most important asset.” However, too many CEOs and Board Members pay lip service to this cliché and fail to deliver on this imperative for the bank’s future.

There are roughly half as many banking institutions in the U.S. today than there were when I joined the First Pennsylvania Bank Management Training Program in 1984. Yet few bankers or Directors today would disagree that despite this significant industry consolidation, the need for strong banking leadership is more important than ever. A bank Board’s singularly most important responsibility is the selection and oversight of the bank’s leadership. Making sure that the CEO sets the tone at the top, and selects a great team, are vital to long term success. Along these lines, it is the Board’s responsibility—not simply the incumbent

boss (often the CEO) is a great motivator and retention tool. Wherever possible, consider a cross-mentoring program where senior execs in one area mentor up-andcomers in another department. This is easy—and free! • Rotate key people into new areas of responsibility. Not every role change requires a step up—many productive career moves are lateral. Give your stars meaningful exposure to other areas of the bank if they are really contenders for a future top job. You can’t afford not to, even if it means moving someone out of an important role and allowing someone new the chance to step up in their place. Well rounded banking skills are crucial for future leaders. • Consider outside coaching for your true future leaders—the handful of folks who could someday run the bank. At some level, succession becomes less about technical competency and banking knowledge, and more about how people manage and lead others. • Send your top people to industry conferences, whether national, state, or private organizations. There is not

Investing in the future leadership of the institution

SHOULD COME NATURALLY CEO’s—to focus on leadership succession in a pro-active way. Simply allowing the “next in line” to be presumed as the best successor may be selling the institution short. The Board’s management of the complexities of leadership succession requires pro-activity, strong communication, and sometimes dealing with the elephants in the room. Community bank Boards are accountable for ensuring that the bank’s leadership builds a talent pipeline not only to successfully compete in the market, but to survive and thrive for the long term. Some community banks, especially smaller institutions, may immediately respond by saying that they cannot afford such an approach. My reaction would be “you cannot afford not to invest in the future leadership of your institution.” Investing does not need to cost big money, but failing to develop the next generation of leaders, in a worst case situation, could put the institution itself at risk. Here is a quick list of actions that Boards can encourage on the path to developing senior bankers and potential future leaders of the institution: • Start early! Succession and Talent Development are long term programs, not short term projects. Planning 3, 4, or even 5 years ahead for succession provides plenty of time for alternatives to develop. • Take an honest assessment of the talent throughout the institution, even if this means using an outside resource to provide an objective perspective. You need to start by knowing who has upside potential and is worth investing in. • Explore mentoring. The personal involvement of their

only strong content at many gatherings, but the development of peer relationships with non-competing fellow bankers is vital. • Get involved! Not with every employee who attends a training seminar, but with the future leaders. Boards and rising stars need exposure to each other, and often the Board can provide selective mentoring where appropriate as well. Terms like “talent development” and “succession management” may seem like they only apply to or can be afforded by mega-banks. The truth, however, is that many talent initiatives do not need to be big or fancy. For Boards and CEOs that accept the premise that “people are our most important asset,” investing in the future leadership of the institution should come naturally. Failing to focus on “talent” as the differentiator in your bank’s performance and long term viability could put the institution at significant risk of survival. Alan J. Kaplan is Founder & CEO of Kaplan & Associates, Inc., a retained executive search and talent advisory firm focused on serving community banks. Based in suburban Philadelphia, K&A is the country’s only retained executive search firm member of both the PACB and ICBA. | Transactions | 41


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PACB welcomes our

PACB welcomes our



EMA / Gibson Consulting Group, LLC has been in business for 19+ years, providing energy consulting and management services to single and multi-location companies specializing in financial institutions. We provide a propriatary, custom energy management program called UTILI-SERV™ Management Program with a 24/7 online energy reporting service available to all clients.

Strategic Risk Associates (SRA) is an innovative consulting and advisory firm specializing in the banking industry. Our team has the credentials and experience to solve your issues and build your franchise. We provide strategic, capital and loan advisory services including loan review, stress testing, internal audit, compliance, and strategic and capital management.

CONTACT INFORMATION: Tom Gibson President 4731 Rt. 30, Suite 303 Greensburg, PA 15601 P: 724.836.5378 F: 724.836.1656 E:

CONTACT INFORMATION: Jack H. Goldstein Managing Director 61 Ulmer Lane North East, MD 21901 P: 443.907.3000 E: W:

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JUNE 7, 2012 JUNE 12, 2012

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JUNE 19, 2012

JUNE 21, 2012 JUNE 26, 2012

JUNE 28, 2012

JULY Frontline Professionalism: Understanding Endorsements Deborah L. Crawford, gettechnical inc Medallion & Signature Guarantee Rules & Risks Elizabeth Fast, Bankers Choice Denied Loan Requirements: Consumer, Commercial & Residential Ann Brode, Brode Consulting Services, Inc. Debt Service Coverage Calculations in Underwriting S. Wayne Linder, Young & Associates, Inc. Documenting Your Required Information Security Program Dr. Kevin Streff, Secure Banking Solutions Accounting & Auditing Reports to the Board David L. Osburn, MBA, Osburn & Associates, LLC Understanding & Navigating ACH Rules for ODFIs Shelly Simpson, AAP, EPCOR Branch Performance Indexing: Are Your Branches Achieving Their Full Potential? John Matheny, Abound Resources

JULY 10, 2012 JULY 11, 2012

JULY 12, 2012

JULY 17, 2012 JULY 18, 2012

JULY 19, 2012 JULY 24, 2012 JULY 26, 2012 JULY 27, 2012

JULY 30, 2012

JULY 31, 2012

Capital is Available: How Do You Find It? Jeffery C. Gerrish, Gerrish McCreary Smith Protecting the SBA Guaranty Start to Finish Ethan W. Smith & Kimberly A. Rayer, Starfield & Smith, PC Facebook & Community Banking: What Should Your Strategy Be? Eric C. Cook, WSI Internet Consulting Asset/Liability Management for Directors Gary J. Young, Young & Associates, Inc. 10 Key Factors in Making Good Consumer Loan Decisions Tim Harrington, Team Resources Call Report Preparation: RC-R Risk-Based Capital Judith Jenkins, Bank Training Services Regulatory Compliance for Deposit/Operations Deborah L. Crawford, gettechnical inc CRA Compliance & FAQs Ann Brode, Brode Consulting Services, Inc. New IRS Rules for Interest Reporting on Nonresident Alien Accounts: Effective With 2013 Tax Year Deborah L. Crawford, gettechnical inc Responsibilities of the Board Secretary Including Electronic Board Package Considerations Ann Brode, Brode Consulting Services, Inc. Dealing with Record/Document Retention & Destruction Elizabeth Fast, Bankers Choice | Transactions | 43





The publication of the Pennsylvania Association of Community Bankers.