Transactions Magazine - February 2012

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February 2012


UPCOMING EDUCATION EVENTS APRIL • 2012

Community Banking Week April 2-6, 2012 Statewide IT Compliance Seminar April 4, 2012 DoubleTree Monroeville - Monroeville, PA IT Compliance Seminar April 5, 2012 PACB Headquarters - Harrisburg, PA New Era for Balance Sheet Management (CFO Seminar) April 17, 2012 DoubleTree Monroeville - Monroeville, PA Security Seminar April 18, 2012 Holiday Inn Hbg.- Hershey - Harrisburg, PA

MAY • 2012

JUNE • 2012

SEPTEMBER • 2012 (CONT)

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

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

AUGUST • 2012

OCTOBER • 2012

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

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

SEPTEMBER • 2012

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

Compliance Seminar September 18, 2012 PACB Headquarters - Harrisburg, PA Audit Seminar September 20, 2012 PACB Headquarters - Harrisburg, PA Compliance Seminar September 26, 2012 DoubleTree Monroeville - Monroeville, PA

Leadership Conference May 1-2, 2012 Omni Bedford Springs Resort - Bedford, PA HR Conference May 16-17, 2012 Holiday Inn Hbg.- Hershey - Harrisburg, PA

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

2 | Transactions | www.pacb.org

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

NOVEMBER • 2012

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


135TH ANNUAL CONVENTION VAIL MOUNTAIN RESORT & SPA 路 VAIL, CO AUGUST 17-20, 2012

LOOKING TO BE AN EXHIBITOR OR A SPONSOR? INFORMATION CAN BE FOUND ON PAGES 10 & 11 -ORCONTACT SAUNDRA CUNNINGHAM, AT (717) 231-7447 OR BY EMAIL AT SAUNDRA@PACB.ORG. www.pacb.org | Transactions | 3


Contents February 2012

FEATURE ARTICLES 12 Pro-Main Street Legislation: Communities First Act

A look at the Community Banks Serving Their Communities First Act, Communities First Act (HR1697).

14 Five Minutes With Congressman Tim Holden

Director of Government Relations Fran Harris had the opportunity to talk to Pennsylvania’s 17th District Congressman to discuss redistricting, the election year, and the Communities First Act. Find out his views on these subjects and more in this interview.

16 How to Get the Most Value From Director Education

An informative article full of ideas on how to make your next director education program more effective.

18 Treasury: Pennsylvania’s Profit Center

Treasurer Rob McCord explains how the Pennsylvania State Treasury generates a positive return for taxpayers and helps Pennsylvanians achieve economic security.

28 It Started With a Dream...

For this month’s member profile, we take a look at the Clover Hill Vineyards & Winery and their ongoing relationship with their local community bank, Fleetwood Bank.

31 Are You Subject to FINRA Notification Requirements and Don’t Know It? An introduction to the Financial Industry Regulatory Authority (“FINRA”).

32 The Importance of Face-to-Face Events

Community Banking Week is approaching quickly. What will you be doing to reach out to your community? Get your ideas flowing with some help from this article.

33 Winter Storms Can Be Hazardous to Federal Benefit Checks

Why you should urge federal benefit check recipients to protect their money today with direct deposit.

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ON THE COVER PA Treasurer Rob McCord

At his exclusive one-on-one meeting with PACB President and CEO, Nick DiFrancesco. 4 | Transactions | www.pacb.org


www.pacb.org | Transactions | 5


d n i F ! 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) www.facebook.com/PACommunityBanks 3. Make sure your entry has a contact name & email 4. Submit!

THE PUBLICATION OF THE PENNSYLVANIA ASSOCIATION OF COMMUNITY BANKERS

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 www.pacb.org

PACB STAFF: Dominic D. DiFrancesco, nick@pacb.org - President/CEO Saundra J. Cunningham, saundra@pacb.org - VP–Education Services Shirley A. Regan, sar@pacb.org - Comptroller/Office Manager Patricia Kuharic, patty@pacb.org - Administrative Assistant Frances M. Harris, frances@pacb.org - Director of Government Relations Eric A. Kovac, eric@pacb.org - Publications Manager Natalie S. Bombatch, natalie@pacb.org - 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 You know you are traveling a lot when the hotel you stay in addresses you on a first name basis! Through January, Nick and I have been able to visit a little more than one third of our membership. I am so thankful to those of you who have expressed ideas and ways in which PACB can help you improve your Community Bank. I also offer my apology to those of you who visited with me as I struggled through two bouts of the flu. Nick and I have taken your comments and suggestions to heart. One of those suggestions was to utilize a certain educator who specializes in teaching commercial lending. This year’s commercial lending conference is designed around this educator. Another suggestion was to assist the membership in providing training to directors on a convenient basis, as the regulators are mandating more director education. PACB has put into place a director training program that goes out through the state to provide director training close to home in the late afternoon/early evening, usually over dinner, to address this request from our membership. Listening to and supporting our members is job one, and Nick and I will continue this process throughout the year.

Our visits have also brought to light various calls for help of a long-term. Topics such as assistance in developing commercial loan volume, safe liquidity investment opportunities with a reasonable rate of return, and affordable technology opportunities that are competitive in the marketplace have all been mentioned as a need by our membership. Currently, PACB is working with our strategic planning committee, technology vendors, ICBA and the Federal Home Loan Bank of Pittsburgh to name a few to address these issues for our membership. This is a continuing process to create value for our members, and we plan to announce some specific proposals at our convention in Vail this August. Nick and I look forward to continuing our travels in the spring and listening to your thoughts and suggestions. I may have caught a few colds during the last round of visits, but I also caught the enthusiasm that exists as I observe your efforts to help your communities in so many different ways. Thanks so much for all you’re doing to build and serve Pennsylvania communities and our industry.

www.pacb.org | Transactions | 7


PRESIDENT/CEO NICK DIFRANCESCO

THAT’S MY BANK! Telling your story is a very important aspect of our work. In this edition of Transactions you’ll read a great story about how Fleetwood Bank is supporting one of Pennsylvania’s top, award winning wine producers. From the start-up days, through the growth spurts, and on to the mature business of today, Fleetwood Bank offered the Skrip family a stable source of funding that remains personal, flexible and respectful of the customer’s needs. Stories like this one remind us how vital Pennsylvania’s community banking industry is to our Commonwealth. Each month, Transactions will profile a member institution. Our goal is to share meaningful stories that show our elected leaders in Harrisburg and Washington the value of community banking. If you want your bank’s story to be told in a future edition, please pick up the phone and give us a call. While our members serve as good stewards of Pennsylvania’s economy, elected leaders like State Treasurer Rob McCord are hard at work protecting our tax dollars. This month we offer you an inside look at the many responsibilities of our state treasurer. I think you’ll agree that Treasurer McCord’s energy and passion shine through, and his work ethic has transformed his office into a modern investment house that rivals those serving the private sector.

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Clearly, current events have proven that the financial services industry is complex, diverse and remains under attack. In Washington, President Obama is pushing for a “highly trained” financial crimes unit to track “large scale fraud.” The President also advocates a new program that allows for the refinancing of underwater mortgages, and the cost of the program comes from a fee on our nation’s “largest institutions.” In Congress, our nation’s credit unions are fighting for an increase in their business lending powers and for a much more generous authorization to raise capital. Community bankers might never be impacted by any of these changes, but we’ve seen the collateral damage caused by misguided policies in the past. It has never been more important for community bankers to stick together and fight for their cause. Every day, PACB is hard at work promoting the community banking industry. We are here to help you build a better business. We offer a host of education offerings specifically designed to meet the unique needs of community bankers and their directors. We coordinate special events like our annual convention and Community Banking Week. We track legislative and regulatory issues that impact community banking. Our business plan is very simple. We serve Pennsylvania’s community banking industry.


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exhibitOr infOrm atiOn Vail Mountain ResoRt & spa · Vail, Co • august 17-20 • 135th annual ConVention

fees

2/11-4/30

afteR 4/30

pacb assOciate member

$1750 $1950 Tabletop displays include: (2) booth personnel, (1) 6’ draped table with (2) chairs, a wastebasket and all other benefits listed below.

tabletOp:

8’x8’: $1900 $2100 8x8 booths include: 75% discount off of 1 full convention registration; (2) booth personnel, (1) 6’ draped table with (2) chairs, a wastebasket and all other benefits listed below.

$2100 $2300 8x10 booths include: 1 full convention registration; (2) booth personnel, (1) 6’ draped table with (2) chairs, a wastebasket and all other benefits listed below.

8’x10’:

non-MeMbeR (Benefits as described above.)

Tabletop: 8’x8’: 8’x10’:

$2250 $2400 $2600

$2450 $2600 $2800

additiOnal bOOth persOnnel may be registered for all food and beverage events held within the Exhibit Center for a cost of: Members - $395 each and Non-Members - $595 each. If, however, any booth personnel wish to attend the entire Convention, they must register as a full Convention registrant, which is an additional fee and registration form. non-MeMbeRs may apply $200 of their registration fee towards PACB Associate Membership. Non-member fees must be paid in

full before the $200 will be applied towards membership. cancellatiOn pOlicy: Cancellations after March 2, 2012 will be subject to a $650 administrative fee. No refunds will be given after May 1, 2012. Cancellations must be in writing.

Why exhibit

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. Other interactiOn OppOrtunities: · Food and beverage functions within the exhibit center. · Silent Auction & Reception within the exhibit center. · Dinner and evening activity specifically created for vendor/banker interaction. · Exhibit center “Walk-Around” game to provide direct interaction with bankers. · Pre-Convention mailing lists for pre-convention marketing opportunities. Other benefits Of exhibiting: · Recognition in convention materials throughout the year. · Acknowledgment in PACB’s monthly publication, Transactions. · Recognition in the Convention Program. · Complimentary on-line listing on PACB’s website. · Product/Service description in the Exhibitor Reference Guide. · Recognition on the PACB on-hold monthly message.

QuestiOns

If you have any questions, contact Saundra Cunningham, PACB VP-Education Services, at (717) 231-7447 or by email at saundra@pacb.org. 10 | Transactions | www.pacb.org

hOtel reservatiOns: Contact the Vail Mountain Resort & Spa directly at 877-622-3140 and reference Pennsylvania Association of Community Bankers. rOOm rates: $179 / night reservatiOn deadline: All reservations must be made by July 17, 2012.


SPONSORSHIP INFORMATION VAIL MOUNTAIN RESORT & SPA · VAIL, CO • AUGUST 17-20 • 135TH ANNUAL CONVENTION

DIAMOND

(ONLY 1 SPONSORSHIP OPPORTUNITY REMAINING)

............................. $15,000

THANK YOU TO JACK HENRY BANKING FOR YOUR SUPPORT!

• • • • • • •

One (1) Full Page Ad in the Convention Edition of Transactions Two (2) Hotel Rooms for Four (4) Nights (Restrictions apply) Exclusive Exhibit Space Six (6) Complimentary Registrations Signage and Recognition at the Sponsored Event Product/Service Marketing Brochure/Item may be inserted into Registration Packets Preliminary Attendee List

• • • • •

One (1) Half Page Ad in the Convention Edition of Transactions Four (4) Complimentary Registrations Signage and Recognition at the Sponsored Event Product/Service Marketing Brochure/Item may be inserted into Registration Packets Preliminary Attendee List

• Two (2) Complimentary Registrations • Signage and Recognition at the Sponsored Event • Preliminary Attendee List • Product/Service Marketing Brochure/Item may be inserted into Registration Packets

• • • •

One (1) Complimentary Registration Signage and Recognition at the Sponsored Event Product/Service Marketing Brochure/Item may be inserted into Registration Packets Preliminary Attendee List

• • • •

75% Discount off of one (1) Registration Signage and Recognition at the Sponsored Event Product/Service Marketing Brochure/Item may be inserted into Registration Packets Preliminary Attendee List

PLATINUM .............................................................................. $10,000

GOLD ...........................................................................................$7,500

SILVER ........................................................................................$5,000

BRONZE ....................................................................................$3,500

GENERAL SPONSORSHIP .................................................$2,500 BENEFITS

• • • • • • • •

(INCLUDED IN ALL LEVELS OF SPONSORSHIP)

Recognition at the Convention during the sponsored event Sponsor Product/Service Listing in the Convention Materials Special Sponsor Listing at the Convention Registration Desk Recognition in Transactions (PACB’s newsletter) Recognition on the PACB website (www.pacb.org), including a direct link to your site Recognition in the Convention Program Recognition on the PACB On-Hold Message Identification as Sponsor on Convention Badge

WHY SPONSOR

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.

HOW TO SPONSOR

To take advantage of this tremendous opportunity, contact Saundra Cunningham at saundra@pacb.org or 717-231-7447. Sponsorships are awarded on a first-come, first-served basis...promptness in securing your reservation is imperative.

QUESTIONS

If you have any questions, contact Saundra Cunningham, PACB VP-Education Services, at (717) 231-7447 or by email at saundra@pacb.org. www.pacb.org | Transactions | 11


Pro-Main Street Legislation: Communities First Act By: Fran Harris

Communities First Act (HR1697) is a compilation of commonsense tax and regulatory relief solutions for smaller financial institutions. The Communities First Act contains 26 tax and regulatory reform provisions. And while no one provision of the legislation is a silver bullet, as a whole they will have a positive impact for community banks and their customers. The expense of over regulation makes it harder for community banks to attract capital and to support the credit needs of their customers and communities. The relief provided by CFA would foster economic growth and assist community banks to serve their communities, boost small business and increase individual savings without compromising safety and soundness or consumer protection. Rep. Blaine Luetkemeyer of Missouri, who introduced the Communities First Act in this session of Congress, is a former community banker. As of mid-February, there are 77 sponsors with 3 from the Pennsylvania: Congressmen Tim Holden (PA-17), Jason Altmire (PA-4) and Mark Critz (PA12). Since being introduced in the House, the CFA legislation has been referred to six committees. The Communities First Act was introduced during the 109th and 110th Congresses where it received bi-partisan support as it has in the 112th Congress. But even with bipartisan support, the bill died in committee in both sessions. We don’t want that outcome for the Communities First Act this time around. It’s an election year; let your representative in Congress know what’s important to you, your bank and your community. Tell them that this legislation will provide much needed relief from overbearing financial regulation, allowing the community banking industry to do what you do best: serving your customers and communities. CFA will benefit the nation’s community banks and Main Street America. Encourage your member of Congress to cosponsor this bill. As one constituent said to his Congressman, “The provisions of this bill are vital to my bank’s continued ability to serve my customers and their communities.” 12 | Transactions | www.pacb.org

As of early February, Title I and II of CFA are moving. Here is a brief summary: TITLE I: TARGETED REGULATORY RELIEF FOR COMMUNITY BANKS Call Reports: Permits highly rated, well-capitalized banks with assets of $10 billion or less to file a short form Call Report in two non-sequential quarters of each year. Sarbanes/Oxley: Exempts insured depository institutions with consolidated assets of $1 billion or less from the internal control attestation requirements of Section 404(b) of the Sarbanes Oxley Act. (Dodd-Frank provides relief for public companies with market capitalizations under $75 million). Small BHCs: Requires the Federal Reserve to revise the Small Bank Holding Company Policy Statement on Assessment of Financial and Managerial Factors so that the policy applies to BHCs with pro forma consolidated assets of less than $1 billion, an increase from the current threshold of $500 million. Qualifying BHCs must not have a significant outstanding debt or be engaged in nonbanking activities that involve significant leverage. Accounting Principles/Business Model: Require the SEC to ensure that accounting principles truly reflect the business model of the preparer. Accounting Principles/Cost-Benefit: Require SEC to conduct both a cost/benefit analysis and economic benefit analysis for proposed changes to any existing accounting principle, as well as for any proposed new accounting principle. SEC may not issue an amended principle or a new principle unless the benefits of such principle significantly outweigh the costs. Also, SEC may not issue any principle which could create an undue negative economic impact upon community banks with assets of $10 billion or less. Shareholder Threshold: Increases SEC shareholder regis-


tration threshold to 2,000 from 500 for banks. To de-register stock for banks, increase shareholder threshold from 300 shareholders to 1700 shareholders.

borrowers of rural, small business loans under $5 million, and allow guarantee of up to 90% of principal.

FSOC Review: Revise FSOC review of CFPB regulations by lowering the threshold and allowing FSOC to veto a rule that could adversely impact a subset of the industry in a disproportionate way.

Reimbursement for Mandatory Production of Records: Requires reimbursement by the Federal government to institutions with assets of $10 billion or less for the production of records for any law enforcement or investigative purpose, modeled after the provision in the Right to Financial Privacy Act.

Fed Exam Authority: Amend sec. 1012 of Dodd-Frank to make it clear that the Fed may not delegate to the CFPB its authority to examine insured depository institutions with assets of $10 billion or less.

Loan Amortization: For purposes of regulatory capital, temporarily allow banks with assets of $10 billion or less to amortize over 10 years any mark to market losses on property acquired through foreclosure, or on impaired loans secured by real estate.

TITLE II: REGULATORY RELIEF FOR BANKS AND THEIR CUSTOMERS Escrows: Amend Dodd-Frank to provide that mortgage loans held in portfolio by banks under $10 billion in assets are excluded from escrow requirements. Annual Privacy Notices: Requires a bank to provide annual privacy notices to consumers when it either shares consumer information (other than as provided by an exception) or changes its policies. Annual privacy notices would otherwise be eliminated. Agriculture Loans: Lower origination and program fees in the Business and Industry guaranteed loan program for

Loan Appraisals: Creates a 5-year rolling average of real estate loan appraisals. Credit Ratings: Amend Dodd-Frank mandate which removes references to external credit ratings by directing bank regulators to require that ratings-based determinations be confirmed by additional analysis of the probability of a loss from holding such an asset, but only where external credit ratings present an incomplete picture of the risks or where those risks are heightened due to concentrations in particular asset classes. Small Business Data Collection: Amend Dodd-Frank to exclude insured depository institutions with assets of less than $1 billion. Requiring small community banks to publicly report this information would make personally identifiable information readily available in small communities across the country.

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www.shumakerwilliams.com www.pacb.org | Transactions | 13


FIVE MINUTES WITH CONGRESSMAN

TIM HOLDEN FRAN HARRIS (FH): With the redistricting this year, you have (I believe) a district of which about 75% is new to you. How are you facing the challenges of getting to know your new constituents and your reelection? CONGRESSMAN HOLDEN (CH): You’re right, the district is about 75% new. However, I was born and raised in Schuylkill County, which is in the Scranton and Wilkes Barre area. It actually feels like going home. I’m a proud son of the coal regions and the new counties that are part of the newly configured 17th Congressional district. I share a lot of common heritage and history with Schuylkill County. It’s been a wonderful experience so far, and I am so encouraged by the support and

I have tried to avoid petty partisan bickering throughout my congressional career, so I believe that it needs to stop. I’m hoping we can do a highway bill and I’m hoping we can do a farm bill, two committees that I have served on for a long time. I’m just fearful that we are going to have gridlock from now until the Presidential election is over. I’m hoping for the best but I’m cautiously worried about what the leadership is going to do. I’m fearful that there are people in the majority who just want gridlock to prevail until after the presidential election. We need to focus on the economy; if we could do a highway bill, if we could do a farm bill, well, that would be a tremendous shot in the arm to the economy across the country and in the Commonwealth of Pennsylvania.

Democrats and Republicans have

WORKED TOGETHER HISTORICALLY help that I’ve received in the new counties where I’m running for reelection. FH: Since this is an election year, can you give us your perspective on what you think Congress can accomplish this year given all the distractions that an election year brings and a sharply divided House? CH: Well, I’m hoping we can accomplish a lot. But in saying that, I’m fearful that nothing is going to happen. The majority of people that I’ve talked to in the district whom I have the honor of representing now and the people I’ve been talking to in the district whom I hope to have the honor of representing all say the same thing: “why can’t you all get along, why can’t you accomplish something?”

14 | Transactions | www.pacb.org

FH: You’ve been on the Agriculture Committee for almost twenty years now. Can you tell us a little bit about your work on the committee? I’m assuming that you will continue on this committee if you are reelected. CH: Oh yes, absolutely. I’m number two in seniority on the Agriculture Committee. Representative Collin Peterson of Minnesota is number one. You know this has been a very, very nonpartisan, apolitical committee. Democrats and Republicans have worked together historically, and we’ll continue to do that. We need to do a farm bill while realizing our fiscal restraints because of the struggling economy, but we need to provide a safety net for our dairy farmers so they have stability. We need to invest in conservation so that our producers who want to be good stewards of the


land have the resources for manure management, take care of our watersheds, and make sure that the Chesapeake Bay is protected. That is what we did in the last farm bill of 2008. We hope to build on that in the next farm bill. At the same time we must realize that we are going to have fewer resources to work with than we did in 2008. But we’ll be able to do it. FH: You are one of the cosponsors of the Communities First Act which is near and dear to the community bankers’ hearts across Pennsylvania and actually across the US. What made you decide to become a cosponsor and what are the prospects of getting this legislation through Congress since in the 109th and 110th Congress it died in committee? CH: I hope it can pass. But the reason I’m a supporter of it is, quite frankly my community bankers came to me; they’re good lobbyists! The Communities First Act includes many Tim was first elected to Congress in 1992 and has been a member of the Agriculture Committee since 1993. He was appointed Vice Chairman of the House Agriculture committee in the 110th Congress and was recently selected to serve as the Ranking Member of the Agriculture Committee’s Subcommittee on Conservation, Credit, Energy, and Research, and continues to serve on the Livestock, Dairy, and Poultry Subcommittee. Tim is also the senior Pennsylvania mem-

sensible provisions to reduce regulatory acts and paperwork burdens on community bankers, and it strives to give community bankers the opportunity to do what they want to do and that’s invest in our communities. I’m a very proud cosponsor of it. I just hope that Congress can realize that this is something very positive that has bipartisan support and that it moves forward. Again I’m just very, very concerned that the people in charge of the Congress right now would rather have gridlock as opposed to results. Hopefully this is something that’s common sense and has bipartisan support that we can move the bill forward. FH: You’re so busy with your hectic schedule; what do you do with your spare time? CH: I try to get to the gym every day for my sanity and for my health. I can’t run anymore; I had back surgery several years ago, so now I use the elliptical machine every day for 45 minutes. ber serving on the House Transportation and Infrastructure Committee and serves on the Subcommittee of Highways and Transit as well as the Subcommittee on Aviation. Tim began his tenth term as a Member of Congress in January 2011. The current 17th District is comprised of Schuylkill, Dauphin and Lebanon Counties, as well as parts of Perry and Berks Counties.

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www.pacb.org | Transactions | 15


HOW TO GET THE MOST VALUE FROM

DIRECTOR EDUCATION By: Cami Ressler

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istorically, director education has focused on new director orientation rather than continuing director education. However, as directors’ responsibilities have become increasingly more complex and as new regulatory demands continue, the scope and frequency of education for all directors must evolve to meet the corresponding needs of community bank boards. If the prospect of these higher demands sounds daunting, you are not alone. According to a 2011 McKinsey Global Survey on Governance, “some directors say they feel ill equipped to live up to these expectations because of inadequate expertise about the business and a lack of time they [individual directors] can commit to their board duties, which they say is less than ideal for them to cover all board-related topics in 16 | Transactions | www.pacb.org

proper depth.” In fact, according to that same survey, only 26 percent of respondents characterize their boards’ overall performance as excellent or very good. The problem exists that while more directors are taking advantage of educational opportunities to improve boardroom practices, many community bank boards are using an ad hoc approach to select director education programs. This random selection strategy is a result of having to choose training programs from a vast array of options which results in poor choices, inefficient use of time, and fails to identify programs that best suit a board’s diverse needs. For example, a new director may need to focus broadly and participate in more than one training experience, while a director who has served for some time might require a deeper understanding into a specific subject area.


DEFINE THE BOARD’S DIRECTOR EDUCATION PROGRAM A better approach to managing a board’s director education program is to first define a board’s purpose for director education and criteria for establishing a director education program. Some community banks use a skills matrix, which illustrates the skills and competencies the board believes it needs to effectively perform its role and add value to the company compared to the board’s current skills and experiences. Using a skills matrix is a visual guide for the board’s strengths while identifying areas of weakness or knowledge gaps.

purpose for offering the training. Next, assess the training program’s relevancy to your board’s professional development. Directors are bombarded with information – if you are spending the time and money, ensure the education program’s scope and training objectives address topics that are applicable and valuable to your board’s situation. If you cannot identify a training program that meets your needs, consider hiring speakers or someone from the bank’s management team to deliver a tailored discussion with the board. Customized training discussions offer the board the opportunity to work together and receive specific advice to overcome challenges being faced.

Second, a board needs to establish its criteria for director education. Some considerations a board needs to resolve are: • Mandatory versus encouraged director education. • Annual minimum number of hours for individual director education and board education. • Payment for director education; i.e. bank pays for everything, including travel, bank pays only for the training, directors pay a portion of the training fee. • Types of director education the board values; i.e. webinars, or conferences sponsored by state banking associations, professional association conferences, third-party accredited education providers, in-house training with the

A DIRECTOR’S RESPONSIBILITY: MAKING THE MOST OF YOUR TIME On the other side of the equation, those directors participating in director education trainings need to have a framework for making the most of their time. For each session you attend or webinar you participate in, a good strategy is to aim for three takeaways or points from the presentation. Ask yourself the question, how does this apply to me, to our board or to our bank? Finally, you should always connect with the person sitting next to you. One of the best ways we gain insights into overcoming challenges we face is to find out how others within the industry handle similar situations.

Education Must Evolve to Meet the Corresponding Needs

OF COMMUNITY BANK BOARDS bank’s management team, regulator sponsored events or board invited guest speakers. • Process for determining director education knowledge gaps; i.e. performance evaluations, skills matrix, 12-month agenda calendar or regulator suggestions. Finally, of paramount importance is determining who is responsible for ensuring directors receive training that strengthens the weaknesses of individual directors and updates directors’ knowledge on industry trends, compliance matters and company strategy. The Chairman of the Board or Chairman of the Nominating or Governance Committee are logical leaders to assume responsibility for a board’s education. SELECTING THE RIGHT DIRECTOR EDUCATION PROGRAM Before selecting an appropriate education program for your board’s needs, annually make a list of director education programs available through professional associations, regulatory agencies, and third party providers. Prior to enrolling in a director education experience, the Chairman and director interested in education might want to discuss the goal or purpose to be achieved from participating in a certain training. You may want to contact the program provider to determine the agenda, list of speakers and their

After participation in an education program, determine a process for sharing relevant and practical information learned in a meaningful way. This step is critical and often the most overlooked. For a bank to get an adequate return on investment for time, money and resources spent on director education, the Chairman of the Board as leader of the board’s agenda, should allocate time to debrief from director education training experiences. A practice to adopt might be for the director who attends an education event to communicate with the Chairman regarding the training opportunity, lessons learned and its applicability to the bank’s current situation or strategic direction. The Chairman can then schedule an appropriate amount of time for debriefing, discussion and Q&A at a board meeting. In conclusion, use these steps and best practice tips to launch or reevaluate your director education program. Boards need members who have the expertise to ask the tough questions, to make informed decisions regarding the company’s strategic objectives and to maintain positive relationships with management, regulators and shareholders.

Cami Ressler is managing director for BR Solutions LLC, a consulting firm that provides educational corporate governance services to financial services institutions. She can be reached at 717.731.1700 or via email at ressler@bybelrutledge.com www.pacb.org | Transactions | 17


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You really have three business roles in a publicly-elected office such as this. The first is that you’re a CEO of an important organization. Second is that you’re a fiscal watchdog, and then third, and arguably most importantly, you’re a Chief Investment Officer, you’re a CIO. 20 | Transactions | www.pacb.org


NICK DIFRANCESCO (ND): Obviously you have a lot of responsibility as state treasurer, how about if you share a little bit with our members about what it is that you do. What are your responsibilities as state treasurer and how do you do your job every day?

basis. I talk with people about how their work connects to larger purposes, the money they’re saving, the wealth they’re helping to create. Morale seems to be up; productivity is up pretty dramatically, and that’s a lot of fun.

Another key point I’d make as a Chief Executive Officer is that we run this place as a profit center. We’re independently elected; we need to be independently measured. So the first question for me is, do we earn the money that we cost? Treasury’s general government appropriation is down from roughly $42, $43 million when I took office in 2009 to about $33 million today. But because of the work we do, we pay for ourselves, arguably, at least four times over before we You really have three invest a nickel, each and business roles in a pubyear, and that’s MORALE SEEMS TO BE UP; PRODUCTIVITY every licly-elected office such been a lot of fun. We’ve IS UP PRETTY DRAMATICALLY, as this. The first is that driven up productivity you’re a CEO of an imin the offices that help AND THAT’S A LOT OF FUN. portant organization. pay for all of the other Second is that you’re operations. So all of those a fiscal watchdog, and then third, and arguably most im- transactions – roughly $70 billion worth of transactions that portantly, you’re a Chief Investment Officer, you’re a CIO. we process every year like a bank would process for its cliEach role has pretty large implications and I’ve enjoyed ent – if we never invested a nickel, all of those transactions playing each role. would be processed not only for free, but for a profit, given the operations that we run and that I have the honor of runFirst, as a Chief Executive Officer, I take very seriously ning as a CEO. whenever I affect other peoples’ lives. We have more than 400 employees. We’re down from about 500 employees as Just the Bureau of Unclaimed Property generates roughly the budget has been cut the past couple of years. And we $100 million a year of positive cash flow. One of the reasons try to be humane about what’s going on there. But I’m the we were able to increase that number, going from $70 milfirst elected chief executive to try and memorize everybody’s lion one year to $115 million, is that I, as a former business name. I visit the various divisions of Treasury on a regular owner, came in with some empathy for business owners. I TREASURER MCCORD (TM): My guess is community bankers would have a lot of empathy for the work we do and the roles we play. Bluntly put, most voters don’t really think about their vote for treasurer. It’s a rather low-attention, but high-power office, which is very interesting to somebody like me who comes out of business and investment.

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said, “Gee, before I started running for this office, I didn’t know there was such a thing as an unclaimed property law. Maybe banks do – with their dormant accounts and safe deposit boxes people so often forget they have - but the average business owner doesn’t.” So we set out to ramp up compliance with the law. We reached out to employers across the state, conducted webinars, worked with professional development associations, to make sure businesses and other organizations knew they had to report unclaimed property. If you’re a taxpayer, you want everybody to be carrying whatever share of the burden there is, and the beauty of unclaimed property is that it’s revenue that doesn’t flow from taxes and doesn’t flow from debt. So you don’t get any of the normal market inefficiencies that could flow from revenue collection. So we really have a lot of fun with that particular bureau because you either win or you win once you’ve collected the money. You either get to act like an Eagle Scout and say, “Ma’am you forgot your purse,” and you return money, or – if we cannot locate the rightful owner – it becomes revenue to the General Fund, and it helps to support the Commonwealth, which lowers the cost of gov-

ber back in 2009 – when the state’s budget took more than 100 days beyond the June 30th deadline to finalize – many community groups and organizations had to wait for state payments. Our team – once the budget was passed – came in, worked through the weekend, worked through a state holiday to process priority payments very rapidly during the depths of the recession, or just as we were coming out of the recession. So I love being a CEO who gets to work with such committed people. It’s been fun to have people say, “Gee, I worked in this office for 21 years and I never met an elected treasurer before, let alone had him or her remember my name and ask me questions and know and understand what my specific role was.” So as somebody who’s led businesses, I get a kick out of that. ND: That’s an awesome perspective. You really bring a more personal touch to the role. Just to take off on what you’ve said, I think most people on the outside don’t realize that when you say you’re a CEO of a large organization like this, I don’t think they realize that most elected officials…what a hands on job that really is.

The Bureau of Unclaimed Property generates

ROUGHLY $100 MILLION A YEAR ernment for everyone. We’ve worked extra hard to return money to working families. We find areas of need. Like last summer, after those historic floods, we found people owned unclaimed property in the hardest hit counties, and we returned nearly $400,000. We’ve also worked hard to find money that’s owed back to first responder organizations, volunteer fire companies and other organizations that maybe were stressed by budget cuts or natural disasters. The Unclaimed Property Program has proven to be one way we’re able to get just-in-time revenues to a lot of community leaders.

TM: It can be. You can get people who take politics like a bureaucrat might and say, “I just want to hold on for X number of decades,” and vest in their pension. Or you can take politics like a career politician and say, “Well, how do I use the Treasury as a trampoline to run for some other office?” I was determined to obsess with its operations, get to really know the people who work here, and treat it sort of lovingly and efficiently like a business leader would and like an entrepreneur would.

So, as I said earlier, we pay for ourselves several times over just out of our Bureau of Unclaimed Property. We also save taxpayers a tremendous amount through our Bureau of Fiscal Review. One of the things you want to have when you have tens of millions of transactions being processed is an independent entity that’s on the hook for finding redundant or erroneous payments. That’s what we do. Our fiscal review team typically identifies and stops between $30 million and $40 million in improper payments each year before they go out the door. So Treasury’s paying for itself that way, as well. And that’s before we’ve just provided this fundamental service of processing all of these transactions very efficiently.

Look, you have constraints because you don’t bring in your own workforce, necessarily, but I’ve run businesses before where most of the people who are working with me aren’t people I hired. So you’re right, it’s been very interesting to do that and to have it remind people they are an independent wing of government. You used to have a much more balkanized sense inside of Treasury where people would think, “Well, I work for the Tuition Account Program, or I work for the Bureau of Unclaimed Property, or I run cash management.” And they wouldn’t realize that we’re all part of Treasury and in the budget we’re treated as a line item. We’d better band together, or we can hang separately kind of thing. I also remind them that it’s a tough environment; we need to be more productive and they seem to be enjoying being more productive. So the CEO role is huge.

So as a CEO, not only am I proud of the work we’ve done, but I’m also proud of the way Treasury’s employees have conducted themselves in these trying times. You’ll remem-

The fiscal watchdog role has been very interesting. It blends with the CEO role as it relates to fiscal review, what they call pre-transaction auditing is just a regular function. I really

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like that. Plus, understand that we have a role to play when it comes to things outside of Treasury, like the issuance of debt. We’re turned to more and more often from Republicans as well as Democrats, for some of our views about issuance of debt. Is this the right kind of debt? The right amount of debt? The right use for debt? Either the auditor general or the treasurer needs to sign off, along with the governor, on the issuance of debt. We’ve worked very creatively with the new Budget Office, and I think very cooperatively to invest in a kind of short-term line of credit that has reduced the cost of debt for the state government in a way that I think Secretary Zogby appreciates. That was a lot of fun to do that on a bipartisan basis. But in addition to that we trimmed one of the last debt issuances of the last administration by $350 million. Auditor General Wagner didn’t want to sign off on the debt at all, and we said we would sign off but they had to trim it by $350 million because we wanted to avoid what finance types call negative carry. We didn’t want to carry and pay for more debt than was necessary. And, frankly, we wanted to have a sense of fiscal and financial transparency. That worked out well, and I think that builds a relationship of trust and information sharing with a lot of the players in the new administration. When it comes to being a watchdog, we also have a role to play with the casinos and gaming. People sort of ignored

that – forgot that the Treasurer is, by law, an ex officio member of the Gaming Board. We thought that the Gaming Board wasn’t necessarily asking all of the tough questions and enforcing the rules exactly the way it should, so we started to ask tough questions and we were basically told, “go away.” You can ask questions in the public hearings, they said. The problem was the tougher decisions were clearly being made in the closed door executive sessions. We felt we had a right to be in those sessions as a legal board member. Plus, when I’m not available – remember I sit on 16 other boards and commissions – I need to be able to send sophisticated staff, including some who helped to write the gaming laws, and probably understood the rules as well as anybody on the Gaming Board. They needed to be allowed into the executive session. We successfully sued; the Commonwealth court unanimously found in our favor, so I’m proud that today we’re actively involved on the Board. We even commissioned a detailed market analysis earlier this year because, we felt, the state didn’t have an up-to-date picture of the competitive environment. We needed current information because there’s a lot riding on gaming revenues in Pennsylvania. .. Many of us who don’t gamble in the Commonwealth of Pennsylvania essentially have been subsidized by the existence of the gaming industry through lower property taxes and revenues to the General Fund. So it’s important that the

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industry be properly overseen and regulated. That’s part of my role, I feel. Even though I don’t have a vote on board matters, I do have a voice and experience in business, so I can ask the tough questions about plans casinos bring before the board. And then third, and most important, is the Chief Investment Officer role, the CIO role. And that has been an enormous opportunity and privilege for me. As somebody who helps to invest tens of billions of public dollars for Pennsylvania alone, this was something that really excited me. ND: Let me talk about that for a minute, because again I’m not sure that everybody in the Commonwealth understands just how sophisticated this operation is in terms of investment. Can you share a little bit with the bankers about how the process works? TM: So, I’m a custodian of virtually all public funds – about $98 billion. I’m the sole fiduciary for anywhere from $10 to $15 billion, and I’ll drill more into that in a moment. I sit on the Pennsylvania School Employees Retirement System as

And then, in addition to that and as I mentioned before, I am the sole fiduciary for $10 to $15 billion. In the long-term account that I run, we generated more than $1.4 billion dollars of capital gains. Last fiscal year, that pool returned more than 14% – its best year in at least the past eight. Remember, the year before I took office that fund only returned about 1%. So to generate those kinds of improved gains on behalf of various accounts that serve the taxpayers of Pennsylvania is really rewarding. ND: Now how is that money segmented out? What does that go for? TM: It’s a very complicated answer. You’re talking dozens of discrete accounts. It could be the Motor License Fund for one thing, the General Fund for another. It’s all over the map. My job isn’t to appropriate those funds – that’s the job of the Legislature. My responsibility is to protect those funds and invest them in a way that generates a positive return. That’s how we really do get help people in measurable ways. Our performance helps to keep the cost of government down. We help seniors a ton; we help students a ton; we help all

We also want to help guide people toward investing

IN A SMARTER, BETTER WAY well as the State Employees Retirement System. When you take those two large pension funds, you’re talking tens of billions of dollars of improved returns. I like to point out to people, if you take a look at those two large pension funds, you’re talking now about $75 billion. Guess what. The year before I came into office, those two funds each lost about 30%. If you look at public press, and you think about how much press and how much attention is paid to big asset allocation and manager selection decisions for our two large pension funds, it’s very, very little. And yet, the amount of debate over, say, a $2 billion swing in the state budget gets mountains of press and attention. That’s the down side. The good side is I’m one of only a handful of real activists who does obsess with these very large numbers. At both the school employees pension fund and the state employees fund we’ve had very good returns since I took office. You get knocked around by market conditions, but I would say we’ve substantially de-risked, we’ve taken into account, in much better ways than previously, potential for tail risk. We’ve done some interesting rotation in some places of consultants and so forth. I also remind people that public, including especially financial leaders, should be grateful for a lot of the real public servants who work at these two large pension funds. There are some really outstanding intellects and outstanding human beings who work in those pension funds doing a huge amount of service. That’s been a real joy, and there we’ve generated tens of millions of dollars as parts of small teams on those two boards. 24 | Transactions | www.pacb.org

taxpayers. I’ve already sort of covered how we help seniors because of all those retirees in those two pension funds. For students, to give you an example, we help them prepare for the cost of higher education with our 529 Guaranteed Savings Plan. It was only 70% funded at its low point. It’s now with a lower risk profile from its asset allocation. It’s now more than 95% funded. So that’s really helped students save for long-term expenses. Things that we do in fact do help people. We’re not just here as a CIO to invest funds and strictly to be a fiduciary. We also want to help guide people toward investing in a smarter, better way, whether it’s for the cost of college, for the cost of retirement, or in their homes. We have an innovative program called Keystone HELP that enables people to invest in their homes, drive up the value of their property with low interest loans, drive down their utility bills, and the savings pay for the loans. It’s all part of our work to drive up the economic security of all Pennsylvanians. And I like to point out that the strong returns that we’ve gotten at PSERS -- even though it’s imperfect because we haven’t gotten enough contributions and they’re far from fully funded -- that pension fund is arguably the largest single driver of property taxes in the Commonwealth of Pennsylvania. We affect the long-term liability of all taxpayers in Pennsylvania because we have a huge effect from both of those pension funds. The healthier those funds, the better their investment performance, the less demand there is for


I’m a custodian of

virtually all public funds -

about

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school districts to hike property taxes to cover retirement benefit contributions.

in assets. So I’m very pleased with all three of those things. But I would eagerly add, any programs that we could work with you on, we’re all ears. That’s my idea of a good ND: Managing those assets obviously require the involvetime. And we also would encourage people to click on to ment of various financial institutions. How does Treasury patreasury.gov. For the people who are leading these banks work with banks, particularly community banks? if you want, I know a lot of people are awash in cash, but if you wanted to become a depository for Pennsylvania’s TM: First of all, culturally, I love community banks! I’m Treasury, click on to patreasury.gov, check on the “Invest always out there making the argument that there are bad and Transparency” tab, and then click “Commonwealth banks and good banks, just depository.” There’s a filike there are bad financial nancial questionnaire there. LIKE MOST PARENTS, I END UP service providers and good That’s sort of “news you can service providers in every use” for the readers who are CHASING MY BOYS AROUND A TON, sector. But the community saying we would love to get AND I HAVE A BLAST DOING IT! bankers are the ones who are some deposits. best equipped to make relationship loans, best equipped to help with economic develND: Challenging economy that we’re in right now. I opment, best equipped to brief people like me about what’s think everybody is struggling with the interest rate enreally going on in Pennsylvania’s communities. So I love vironment, but there’s been a lot of talk about spendthat. And our doors are always wide open. ing policies at the national level and the state level. Is there anything that you’re seeing that you’d like to see Second, we worked hard to make it a little easier for comchanged in the way governments generate revenue or inmunity banks to do business with Treasury. When I came vest the money? into office, we reduced the collateral rule by working with the Legislature. It went from 120 percent collateral for our TM: In terms of the interest rate environment, first and foredeposits to the industry standard of 102 percent. most, we always have to protect our ability to pay bills on a timely basis and protect principle. So, we don’t chase higher And third, we set aside $100 million for certificates of deinterest rates in a low interest rate environment in our cash posit with community banks with a billion dollars or less account. What we do in our longer term account, though, is 26 | Transactions | www.pacb.org


we very creatively use high-yield debt, so we’re getting less than equity-level risk, but we’re getting equity-level types of returns. And that helps to account for why we’ve had a historically high investment return in this longer-term account, what we call Pool 198. Since that’s been in existence it’s never seen the kind of returns that we’ve been enjoying since we came into office. I would say the use of high yield debt was a key part of that, and that was a crucial innovation. We said, “Okay, we can’t get what we would hope for in the near-term, triple-A debt, now let’s take a look at high yield debt.” That’s where there are better returns in the fixed income environment, on a bipartisan basis we consulted on it. So that’s how we’ve managed in that environment. So that’s an answer to the interest rate question.

I’m the first to say, let’s review everything skeptically. We shouldn’t have every infrastructure project get funded, but right now it feels like we’re investing too little. Creative financial leaders usually are smarter than the average bear about saying when it’s time to invest and when and how to use debt. I worry that in the national conversation people are saying every check you write out of your checking account is the same, it’s all “spending.” But people who run banks understand that somebody who takes money out of his near-term checking account to put into a long-term retirement account is making a very different investment than somebody who’s writing a check to pay off their Visa bill to pay for a vacation they just took. We need to have a similar kind of conversation, I believe, at the state level. We’ll try to work constructively in a bipartisan way to have that conversation.

On the fiscal policy, first I always am quick to be respectful of the Legislature and the Governor’s Office, and say we don’t make large fiscal policy in the Treasurer’s Office; we would always respond to questions from them, but with the budget process coming up I don’t want to get out of my lane.

ND: Now, I always like to throw in one personal question at the end. Sometimes it’s what do you do in your leisure time; sometimes it’s what books are you reading? What do you like to do? What would be the right answer to that?

First of all, culturally,

I LOVE COMMUNITY BANKS! I would say the two areas where we do really have a role are investments and debt. People turn to us to talk about investments across the board – public as well as private, obviously, and the use of debt. One of the conversations I’m trying to bring up is that there is a prudent time and way to use debt. I think we should be doing more investing in infrastructure needs across the state. It’s not just “to make jobs,” it’s because we have a physical plant that was designed to be useful for not more than, say 25-30years, and it’s more than 40 or 50 years old. So you can’t just say, well, we’ll never invest in those things. Whether you’re talking about more than $36 billion worth of needs we face just to have clean drinking water and properly functioning sewage systems, or the $3.5 billion a year of investment that’s needed for transportation and roads and bridges, most of that looks like it’s very efficient cost-reducing investing in the long run. I sit back and I say there are three great reasons to do that: the cost of debt right now is low, the cost of labor is low, and the need for employment is high. So you could drive our unemployment rates down dramatically if you just invest the $3.5 billion a year. You could make the case to invest more than that. You could say, “Well where do you get that money?” Part of the answer should be, well what kinds of debt make sense to float and what kind of revenue streams might you be able to attach to various types of infrastructure.

TM: In terms of leisure reading, I’m pathetic in that I do comb through a lot of stuff as it relates to the economy and finance. I love reading competing forecasts and seeing how wrong we all were. I also am a junkie for history, especially Civil War history. I’m reading a book, right now, about President James Garfield and the tragedy of his assassination and how, basically, if it had happened just a decade later, he would have lived. This was a brilliant, honest guy who was cutting the amount of bad patronage, was trying, like Lincoln had been generous to the South - to build bridges across the aisles. He seemed like just an amazing human being, and unlike most union generals early in the Civil War, he had the nerve to attack superior forces. If McClellan had the courage that Garfield had, the Union would have won the Civil War a lot earlier. So I love that kind of leisure reading. For free time, I have teenage boys, so like most parents, I end up chasing my boys around a ton, and I have a blast doing it! They’re very active in music and sports and they’re just really wonderful human beings. I’m an older parent, they’re 17 and 14, and I’m already sort of mourning the day they leave, so I have a ton of fun just doing stuff with them. And my wife is a culture connoisseur, so I go to plays and stuff. And then I’m a gym rat. A lot of people say, “if you want to track Rob down, there are about three gyms within an hour of his house and you usually can find him in one of those.” So, I spend more than my share of time, you know, injuring myself pursuing various sports and then rehabbing myself from the injuries that I’ve developed. www.pacb.org | Transactions | 27


By: Natalie Bombatch

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itting at Clover Hill Vineyards & Winery, struction business in 1987 so that he and Pat could follow their sharing a bottle of wine, the Skrip family re- dream of establishing a full-time vineyard and winery business. called the story of how their family-owned business started with a dream and became a THAT’S MY BANK! family tradition. John said, “This is our family Initially, the Skrips purchased land in the Lehigh Valley as a business. Our roots run deep. We got to where home for the vineyard. They were disappointed with the serwe’re at for the most part through our own vice they received from a large bank, which led them to Fleetefforts, blood, sweat, and tears.” With hard work and help wood Bank. Pat commented about her experience with large from Fleetwood Bank, a local community bank, John and banks, “Every time we went to the bank, it was always a new Pat Skrip were able to see their dreams become a reality. set of people we were dealing with, and they were people As one of the largest prowho didn’t really know ducers in Pennsylvania, us. The end to the converTHIS IS OUR FAMILY BUSINESS. OUR ROOTS Clover Hill Vineyards & sation was, ‘I’ll go back RUN DEEP. WE GOT TO WHERE WE’RE AT FOR and we’ll see where the Winery brought in about 75,000 gallons of wine, or numbers fall.’ So they’d THE MOST PART THROUGH OUR OWN about 27,000 cases, this crunch the numbers and EFFORTS, BLOOD, SWEAT, AND TEARS. past harvest. come back and say yes or no, but they didn’t look at THE BEGINNING you as a person. They didn’t look at your character.” This was Pat was a teacher and John was an owner of a construction one of the main reasons the Skrips decided to look into comcompany. In the 1970s, the husband and wife team began plant- munity banks; they know who they’re banking with and the ing grapes as a hobby at their home in Breinigsville. As the bankers know them. John agreed, “If they [Fleetwood Bank] economy tightened and the stress that came with his construc- just crunched the numbers, we’d have never made it.” tion business rose, he found a temporary escape in tending to the grapes. John recalled, “I’d go through the vineyard, pruners Rich Meares, President and CEO of Fleetwood Bank, believes in hand. This was too long, I’d cut it off or address it the way in supporting members of the community in their business it should be. Pretty soon I forgot my troubles until I got to the ventures. He said, “It’s the people who are the risk-takers who end of the row. Or I would get on my tractor with the mower. make this country what it is with the opportunities they see. It was like the symphony orchestra with the blades singing to Community banks are in the position to know the people, and me. And I forgot my troubles again.” John got out of the con- to understand them, and discern whether they’re thought28 | Transactions | www.pacb.org


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ful and they’re really good business people. To give them the capital to take a risk makes a big difference.” Meares has confidence that the future of the country has a lot to do with the bankers who take the time to know the people involved. He added, “Large mega-banks can’t and don’t know the people in the community because they’re not made in a way to understand them or to spend the time to understand them.”

EXPANDING Along the way, the Skrips came across a property for sale in Robesonia. After touring it, John and Pat agreed that it would be a perfect location. John recalled that Fleetwood Bank looked at the situation open-mindedly and said that it was not just a dream, it was an investment. It was a chance for the Skrips to take the opportunity and run with it.

IT’S ALL IN THE FAMILY John and Pat now share their business and passion with two of their children. Their son, John Skrip III, joined Clover Hill in the early 90s after studying oenology at Fresno State University, California. His educational background gave him a great foundation and with more than ten vintages under his belt, he has blossomed in the field of experience. Their daughter, Kari, joined the family business in 2000 after studying wine marketing at the University of Adelaide, Australia. Today, she has a focus on marketing, promotion and distribution.

The second generation of Clover Hill Vineyards & Winery is determined to continue the family tradition of premium Pennsylvania wines. Both John III and Kari have a real love for Clover Hill and southeastern Pennsylvania. Kari appreciates the relationWith Fleetwood Bank’s LARGE MEGA-BANKS CAN’T AND DON’T KNOW THE ship between Fleetwood support, John and Pat Bank and her family. PEOPLE IN THE COMMUNITY BECAUSE THEY’RE were able to purchase the When she goes into a land in Robesonia to exNOT MADE IN A WAY TO UNDERSTAND THEM OR branch office, all of the pand their business. Their tellers seem to know her TO SPEND THE TIME TO UNDERSTAND THEM. plan was to build a retail and her family and take store with a tasting room pride in the winery. They and warehouse space. After having received the loan and be- ask about what events are coming up or tell her that they ginning construction, John and Pat realized that they missed enjoyed a bottle of Clover Hill wine. She said, “That’s rehaving a fireplace in the tasting room. The Skrips returned ally very impressive and very satisfying from our side. You to the bank worried about asking for more money, since the like to be partners with people that support what you’re bank had asked them to approach them once with all their doing and vice versa.” plans laid out. To the Skrips’ surprise, the bank continued to support the winery and loaned them the extra money to For more information about the Skrip Family and Clover Hill build the fireplace. The Skrips said, “Little things like that go a Vineyards & Winery, or to view their hours of operation and long way. Would you get that with corporate America? I don’t upcoming public events schedule, please visit them online at think so.” He feels like he has a family in Fleetwood Bank. www.cloverhillwinery.com.

30 | Transactions | www.pacb.org


ARE YOU SUBJECT TO

FINRA NOTIFICATION

REQUIREMENTS AND DON’T KNOW IT? By: Jane G. Davis, Esquire Shumaker Williams, P.C.

M

Authority (“FINRA”).

any community banks or their holding companies that are not subject to the reporting requirements of the Securities and Exchange Commission (“SEC”) may still need to comply with certain notification requirements of the Financial Industry Regulatory

FINRA’s role is to help promote investor protection and market integrity, including in the over-the-counter (“OTC”) market, where FINRA operates the OTC Bulletin Board (“OTCBB”) and the OTC Reporting Facility; these facilitate the trading of the stock of non-SEC reporting, non-exchange listed companies. FINRA also has certain other regulatory authority over the OTC market. In accordance with Rule 10-17 under the Securities Exchange Act of 1934’s anti-fraud provisions, companies whose stock is traded in the OTC market are required to provide FINRA with advance notice of certain corporate events. Because OTC trading of a company’s stock can be initiated by a broker-dealer filing a request with FINRA to make a market in the stock and does not require any registration statement on the part of the company, a company may not realize or may lose sight of the fact that it is being traded on the OTC market. A very important thing for a company to know is if and where its stock is being quoted. If it has a ticker symbol and is being quoted, it needs to comply with the FINRA notice requirements. Notice to FINRA Operations is required 10 calendar days in advance of the record date of a cash or stock dividend, a stock split or reverse split or a rights or subscription offering. The notice must include the title of the security, declaration date, record date, payment or distribution date, the amount per share and additional information relating to stock or reverse splits. Additionally, corporate actions that may affect the processing of trades in a company’s stock – e.g., name change, ticker symbol change, merger and acquisition activity that may affect the name or symbol, dissolution, bankruptcy or liquidation – will also require notification to FINRA.

FINRA’S ROLE IS TO HELP PROMOTE INVESTOR PROTECTION AND MARKET INTEGRITY FINRA provides its Company-Related Action Notification Form on its website at www.finra.org/upc/forms. The company’s transfer agent is also required to submit a Transfer Agent Verification Form at the same time. Payment of a $200 fee is required in connection with a timely filing and the fee escalates from between $1,000 to $5,000 in the case of late filings. Failure to comply with the filing requirements can result in FINRA referring the matter to the SEC for enforcement under the anti-fraud provisions of the Federal securities laws. FINRA appears to be stepping up its activities with respect to companies that are not filing or filing in a timely manner the required notification forms. If a company is not certain if it is subject to these requirements or how to comply with them in the event it is, it should check with FINRA or its appropriate advisors.

Ms. Davis is a shareholder, a member of the Corporate and Financial Services Department and heads the Firm’s Securities Law practice. She counsels clients with respect to corporate and commercial matters, mergers and acquisitions, securities regulation and corporate governance. As part of the Firm’s International practice group, she also assists clients with transactions abroad and advises foreign companies establishing a presence in the U.S.

www.pacb.org | Transactions | 31


THE IMPORTANCE OF

FACE-TO-FACE EVENTS

A

s Community Banking Week approaches, it’s important to think about how your bank wants to present itself to the people in your local community. In which activities will you invite your customers to participate? Will you collect goods to donate to local charities? Will you host an open house and serve refreshments? Each bank must decide on appropriate activities for the week to draw in and educate the public about the good things that community banks do. Now, I know we have all seen the explosion of Internet marketing; however, this may be the perfect opportunity to change it up. Take it back to the basics and connect in-person with your customers. A report by The Center for Hospitality Research found that face-to-face events are one of the most effective communication approaches and are an essential part of your marketing strategy. Inperson events help to capture your attendees’ attention, inspire positive emotions and build networks and relationships. That’s not to say you can’t utilize the Internet and social media to spur interest in your event, but keep in mind that the strongest way to connect with your customers is face-to-face. So face-to-face it is. Now what? First, decide who you want to reach and what you want to share with them. Do you want to educate young children on the importance of bank32 | Transactions | www.pacb.org

By: Natalie Bombatch

ing? Do you want to teach high school students about saving for college or a car? Do you simply want to share your good community deeds with your current customers? Perhaps you want to reach them all. Consider whom you are trying to reach and then decide the message you want to share with each of them. Second, choose whether you will host an event at your bank or go elsewhere. Maybe a combination of both would be most effective depending on whom you want to reach. Last year, a few bank representatives visited area classrooms to teach financial literacy. Other banks remained at their locations and hosted cookouts, served as a collection drop-off location or gave bank tours. Third, connect with each audience you target. That’s the whole point of Community Banking Week, right? Make connections and build relationships within your community. Share information, stories and fun with your customers. Get them just as excited as you are about community banking in Pennsylvania. Make as big an impact as you can; doing this will ensure the success of community banking in years to come. If you need help coming up with ideas for your community, please don’t hesitate to contact me at natalie@pacb. org or 717-231-7447. PACB is here to help you make Community Banking Week a fun and exciting time for you and your community!


WINTER STORMS CAN BE HAZARDOUS TO FEDERAL BENEFIT CHECKS URGE FEDERAL BENEFIT CHECK RECIPIENTS TO PROTECT THEIR MONEY TODAY WITH DIRECT DEPOSIT

A

ll federal benefit check recipients are required by the U.S. Department of the Treasury to switch to electronic payments by March 1, 2013. It’s important that banks urge members to switch to direct deposit now instead of waiting for the deadline. In doing so, you will help them immediately get their money in a safer, easier way while improving member loyalty for your bank. The winter months are the perfect time to highlight the reliability and convenience of electronic payments. Ice, snow and subzero temperatures can leave people trapped in their homes and temporarily halt important services like mail delivery. When this happens, people who rely on paper federal benefit checks are left without access to their money, making an already difficult situation even worse. Last winter was a record-setter for many parts of the Northeast.Accuweather.com predicts above normal winter precipitation for most of the Northeast during January and February 2012. It’s important to help federal benefit check recipients take action to protect their money now before a winter storm hits. Help people winterize their money today. By urging your members who are cashing or depositing paper checks to switch

to direct deposit, you will help ensure that they get their money on time no matter what winter brings. Here are simple steps front-line staff can take to encourage people to make the switch: Step 1: Tell them that paper checks are going away as a payment option for federal benefits. They are required to switch to electronic payments by March 1, 2013. Step 2: Highlight the safety, ease and reliability of direct deposit. Emphasize that by making the switch, they will help save taxpayers millions of dollars each year. Step 3: Share your own positive experiences with direct deposit. Step 4: Offer to switch them to direct deposit on the spot using your bank’s enrollment methods. Step 5: If they’re not ready to sign up, urge them to sign up on their own at www.godirect.org or by calling (800) 3331795 Monday – Friday 8 a.m. to 8 p.m. ET. The Treasury Department’s Go Direct campaign provides free materials – such as fliers, newsletter articles and deposit slip stickers – to help banks share information about the move to all-electronic federal benefit payments staff and members. An educational video is also available and can be embedded on websites or shared in presentations and social media channels. To learn more or download or order materials, visit www.GoDirect.org. www.pacb.org | Transactions | 33


PACB welcomes our

NEW ASSOCIATE MEMBER

THE PUBLICATION OF THE PENNSYLVANIA ASSOCIATION OF COMMUNITY BANKERS

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

LIKE WHAT YOU SEE? WANT MORE?

SUBSCRIBE TODAY! www.pacb.org

Investment Professionals, Inc. (IPI) is a nationally recognized broker dealer who specializes in building profitable investment programs inside community banks. IPI assists banks in increasing non-interest income and help them stay competitive in the communities they serve.

CONTACT INFORMATION: Shellane Sauer Sr. Vice President Business Development 16414 San Pedro, Suite 150 San Antonio, Texas 78232 P: 210-308-8800 shellane.sauer@invpro.com www.invpro.net

34 | Transactions | www.pacb.org

Each issue of Transactions is overflowing with timely news and information concerning all aspects of community banking, including: • PACB Member Spotlights • Legislative Updates From the State and Federal Levels • Vendor News • Regulatory Issues Impacting Community Banks • Hot Topics • New Products and Services Announcements

PACB Members & Associate Members:

$60 PER SUBSCRIPTION Non-Members: $84 per subscription


REGISTER TODAY!

WEBINAR & TELEPHONE SEMINARS MARCH

APRIL

MARCH 6, 2012

APRIL 3, 2012

MARCH 7, 2012

MARCH 8, 2012

MARCH 13, 2012 MARCH 15, 2012

MARCH 20, 2012

MARCH 22, 2012

MARCH 27, 2012

MARCH 29, 2012

Overdraft Protection Update: Regulations, Lawsuits & Guidance Deborah Crawford, gettechnical inc Commercial Lending Series: Lending to the Small Business Owner/Guarantor in Today’s Economy David Osburn, Osburn & Associates, LLC Accounting/Auditing Series: Troubled Debt Restructuring Issues: The Accountant’s Perspective S. Wayne Linder, Young & Associates, Inc. Flood Compliance 2012: Review & Update Ann Brode, Brode Consulting Services, Inc. Writing Effective HR & E-Policies to Manage Behavior, Maximize Compliance & Mitigate Risks Nancy Flynn, The ePolicy Institute™ Director Series: Managing Liquidity Risk: The Board’s Role Gary Young, Young & Associates, Inc. You Received a BSA Exam Request Memo, What are the Proper Steps? Ann Brode, Brode Consulting Services, Inc. Real Estate Loan Workouts, Foreclosures, Short Sales & Deficiency Judgments Elizabeth Fast, Bankers Choice Identifying & Preventing Elder Financial Abuse Luann Kohlmann, WACHA

APRIL 5, 2012 APRIL 6, 2012

APRIL 10, 2012 APRIL 11, 2012

APRIL 12, 2012 APRIL 17, 2012 APRIL 19, 2012

APRIL 24, 2012 APRIL 26, 2012

Call Report Revisions and Updates Judith Jenkins, Bank Training Services ACH Rules Update 2012 Shelly Simpson, AAP, EPCOR Making Sense of Bank Financial Statements and Significant Ratios for Directors Tim Harrington, CPA, Team Resources Auditing Your Bank’s Website Ann Brode, Brode Consulting Services, Inc. Computer Security for All Staff Barry Thompson, CRCM, Thompson Consulting Group, LLC Handling the Bank’s Right of Setoff Elizabeth Fast, JD & CPA, Bankers Choice Regulatory Compliance For the Frontline Deborah L. Crawford, gettechnical inc Credit Processes and Asset Quality Issues: Your Bank’s Biggest Risk S. Wayne Linder, Young & Associates, Inc Agricultural Lending Update & Outlook Dr. David Kohl, Agrivisions, LLC Auditing Capital Records: Are Your Bank’s Squeaky Clean? Rhonda Hudson, Compliance +, Inc.

www.pacb.org | Transactions | 35


PRSRT STD U.S. POSTAGE PAID HARRISBURG PA PERMIT NO. 547 RETURN SERVICE REQUESTED 2405 N. FRONT STREET HARRISBURG, PA 17110

PACB PREFERRED VENDORS JUST ANOTHER VALUE INCLUDED IN THE PRICE OF PACB MEMBERSHIP! PACB PREFERRED VENDORS OFTEN OFFER DISCOUNTS OR PROMOTIONS ON PRODUCTS AND SERVICES TO PACB MEMBERS.

CALL PACB AT 717-231-7447 TO FIND OUT HOW YOUR ORGANIZATION CAN BECOME PART OF THIS SELECT GROUP OF PROFESSIONAL FIRMS. WITH THE EXCEPTION OF OFFICIAL ANNOUNCEMENTS, THE PENNSYLVANIA ASSOCIATION OF COMMUNITY BANKERS AND STAFF DISCLAIM RESPONSIBILITY FOR OPINIONS EXPRESSED AND STATEMENTS MADE IN TRANSACTIONS. THIS PUBLICATION IS INTENDED AND DESIGNED TO PROVIDE ACCURATE AND AUTHORITATIVE INFORMATION, NOT TO PROVIDE LEGAL, ACCOUNTING, OR OTHER PROFESSIONAL SERVICES.


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