New Jersey Banker Spring 2014

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JERSEY

S P RIN G 2 0 1 4

B A N K E R

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NEW

JERSEY B A N K E R

NJBankers Board of Directors John W. Alexander Chairman/President/Chief Executive Officer Northfield Bank

Thomas J. Holt Senior Vice President Bank of America

Donald H. McCarty Market CEO Susquehanna Bank

Robert Rey President/Chief Executive Officer NVE Bank

Norman E. Beatty Chairman/President/Chief Executive Officer First Hope Bank

James A. Hughes * President/Chief Executive Officer Unity Bank

D. Nicholas Miceli * Market President TD Bank, N.A.

Michael Schutzer President/Chief Executive Officer Harmony Bank

Kevin Cummings* President/Chief Executive Officer Investors Bank Immediate Former Chairman

Thomas J. Kemly * President/Chief Executive Officer Columbia Bank

Craig L. Montanaro President/Chief Executive Officer Kearny Federal Savings Bank

Robert E. Stillwell President/Chief Executive Officer Boiling Springs Savings Bank

Frank A. Kissel Chairman Peapack-Gladstone Bank

William D. Moss President/Chief Executive Officer Two River Community Bank

Christopher Martin Chairman/President/Chief Executive Officer The Provident Bank

Michael Nardo Executive Vice President/NE U.S. Market Executive – Corporate Banking PNC Bank, N.A.

Paul E. Fitzgerald Vice Chairman First Bank James P. Genoy, Jr. President/Chief Executive Officer/Treasurer Monroe Savings Bank, SLA

NJBankers Officers

NJBankers Staff John E. McWeeney, Jr. President and Chief Executive Officer ext. 627 jmcweeney@njbankers.com James M. Meredith Executive Vice President and Chief Operating Officer ext. 614 jmeredith@njbankers.com

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

Michael P. Affuso, Esq. Executive Vice President and Director of Government Relations ext. 628 maffuso@njbankers.com

Cris Goncalves Manager of Education ext. 630 cgoncalves@njbankers.com

Emily T. DeMasi Vice President and Director of Communications ext. 610 edemasi@njbankers.com Wendy C. Mandelbaum Controller ext. 603 wmandelbaum@njbankers.com Jenn Zorn Vice President and Director of Education and Business Development ext. 611 jzorn@njbankers.com

Contributing Editor Emily T. DeMasi

Lauren Barraza Executive Assistant ext. 618 lbarraza@njbankers.com Erin Suckiel Assistant to the Director of Communications ext. 629 esuckiel@njbankers.com Cynthia M. Zaccaro Assistant to the Director of Education and Business Development ext. 632 czaccaro@njbankers.com

Stewart E. McClure, Jr. * Chairman Regional President Lakeland Bank

Angela Snyder* Second Vice Chairman Chief Executive Officer/Vice Chairman Fulton Bank of New Jersey

Gerald L. Reeves * First Vice Chairman President/Chief Executive Officer Sturdy Savings Bank

John E. McWeeney, Jr. President and CEO New Jersey Bankers Association

Counsel Michael M. Horn, Esq. McCarter & English, LLP Mary Kay Roberts, Esq. Riker, Danzig, Scherer, Hyland, Perretti LLP

*Executive Committee

Contact New Jersey Bankers Association www.njbankers.com 411 North Avenue East Cranford, NJ 07016-2436 Phone: 908-272-8500 Fax: 908-272-6626

The Warren Group Design / Production / Advertising custompubs@thewarrengroup.com

www.thewarrengroup.com 280 Summer Street • Boston, MA 02210 617-428-5100

Published continually as a quarterly publication by the New Jersey Bankers Association from 1929 to Winter 1986. Revived as a quarterly publication by NJBankers and The Warren Group in 1998 under the name New Jersey Bank & Thrift and continued as New Jersey Banker in 2002. Combined with The League Leader, published by the New Jersey League of Community Bankers, in December 2008 and continued as New Jersey Banker.

Spring 2014 New Jersey Banker

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Table of Contents

NEW

JERSEY B A N K E R

Departments

6 Chairman’s Platform Time Flies!

8 Politics & Policy

Messaging Matters –

and Money Talks 11 Upcoming Events 13 New Associate Members 24 Bank Notes

28 Bank Shots

16 Cover Story: Wanna Buy a Bank?

Features

10 Directors' Corner

What Bank Directors Need to Know

About Cybersecurity in 2014

15 Meet Our Endorsed Service Provider

BITS

12

Behind the Teller Line Unity Bank

14

Feature NJBankers Issues 2014 Economic Survey

19 Feature

Top Ten Steps to Fast Tracking

Your Bank’s Political Activity

Compliance Plan

4

New Jersey Banker

20 Feature Is it Time to Consider a

Merger of Equals?

With New Jersey Banks, New Jersey Prospers

22

Feature Join us for the NJBankers 110th Annual Conference!

110th Annual Conference Marco Island, Florida April 30 - May 4, 2014

Spring 2014

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Chairman’s Platform

Time Flies!

By Stewart E. McClure, Jr.

N

otwithstanding the cold, snow and ice, I can’t believe that as I write this, my term as chairman is rapidly coming to a close! Kevin, Frank, Gerry and others before me had said it would go quickly, and they certainly were right. But that gives me the opportunity, as we quickly approach Stewart E. McClure Jr. April, to make one Chairman more plea for your NJBankers Regional President involvement in Lakeland Bank NJBankers.

Beginning April 30 and running until May 4, we will host the 110th Annual Conference of the New Jersey Bankers Association in Marco Island, Florida. You should have received a great looking brochure courtesy of the tremendous staff here at NJBankers outlining a fantastic program.

During this past year I’ve had the opportunity to speak and write many times about the tremendous resource that NJBankers is, and the benefits for banks and their employees that comes from participation. I can’t think of a better time to take advantage of that than during this conference. We have scheduled speakers and break-out sessions covering everything from compliance and M&A to security threats. We will, of course, enjoy a competitive round of golf at the Hammock Bay Golf & Country Club; enjoy some fantastic food; a lot of networking; information from 35 service providers in the Exhibit Hall; and a great keynote speaker.

This year we have Brad Meltzer, noted author and host of the very interesting and successful History Channel show, “Decoded.”

I would be less than honest if I didn’t also admit to the fact that we have a great

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New Jersey Banker

deal of fun throughout the conference and some of the closest bonds we share personally were built at past conferences.

Last year’s conference at The Breakers and the prior year’s conference in Charleston were exceptional!

As a warm up for the conference, we visited our congressional leaders in Washington from March 24 to March 26. Last quarter I wrote about the opportunity to participate in the process that determines and affects so much of the regulation we live with each day. The visit is a chance to share your point of view with our representatives on the Hill and to help us gain their attention with the louder voice that accompanies a large delegation. Get involved in these visits – I guarantee you’ll feel better for the experience!

And when it comes to getting involved, look into joining and having your staff join an NJBankers committee! Committee members benefit from the sharing of ideas and experiences personally and for their banks and firms. They count on one another to help keep their banks forward-thinking, engaged with

customers and compliant. Committee members communicate between quarterly meetings by using the NJBankers listserv, a productive way to ask questions and get updates between meetings from colleagues.

Committees help plan professional development opportunities for the membership, and since NJBankers is all about educating our members, committees help develop the timely and relevant programs we offer.

Lastly, I’d like to thank the many banks, associate members, and individuals who stepped up to support NJBankers involvement with Special Olympics New Jersey and the upcoming 2014 USA Games, which will be hosted in New Jersey from June 14 to June 21. We will be getting out information on teams and athletes we’re sponsoring, and it’s not too late for anyone to get involved and be part of sponsoring The Home Team!

■ Stewart E. McClure Jr. is chairman of the New Jersey Bankers Association and regional president of Lakeland Bank. He can be reached at smcclure@lakelandbank.com.

Spring 2014

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Politics and Policy

Messaging Matters – and Money Talks

By Michael P. Affuso, Esq.

T

he past two elections have been ones of continuity in both New Jersey and the nation. The elections demonstrated no major shifts in the politics of either. The elections came down to one strategic key – messaging. Former Massachusetts Gov. Mitt Romney was the unfeeling plutocrat and former Sen. Barbara Buono was a zealot that stood for nothing of imMichael P. Affuso port to the everyday Executive Vice President/ Director of Government Relations person.

Whether NJBankers true or false, that was the message, and the people bought that message and voted accordingly.

Messaging costs money. For example, a single mailing to one party in a legislative district costs nearly $40,000. Most campaign experts will say that in order to gain a reasonable amount of name recognition, five to seven mailings are necessary; between $200,000 and $300,000 total. A reasonable cable TV buy costs nearly $400,000 and a reasonable radio buy costs nearly $200,000. As a result, in order to run a credible campaign in a competitive district, a candidate for the state legislature must spend at least $800,000 on media alone. A Congressional primary that I was involved in cost $1.75 million for the victor and $800,000 for the vanquished.

In 2003, $4 million was spent to win a State Senate seat. Even a candidate who is in a “safe district” will be wise to spend at least $200,000 to build name recognition and ward off any potential future challengers.

This means that candidates have an insatiable need to raise money. Political action committees (PACs) and super PACs reported spending a record $129 million in 2013, according to a new analysis by the New Jersey Election Law Enforcement Commission (ELEC). This number is staggering, particularly in light of the noncompetitive nature of the governor’s race.

In the Bergen County-centered 38th District, $5.7 million was spent, in the Atlantic County 2nd District $4 million was spent, and in the neighboring Cape May County-based 1st District, $4.6 million was spent. These last facts are especially staggering due to the relative cost of purchasing New York media versus Atlantic City media.

The point, however, cannot be missed in the morass of these numbers. The need for more and more money is insatiable and will grow exponentially.

Candidates rely more heavily on specialinterest PACs and supposedly unaffiliated super PACs in part because pay-to-play laws have sharply reduced the amount of donations from public contractors since 2005. Under current law, super PACs may not coordinate with candidates, but coincidences arise.

Leading the pack among super PACs, is the one affiliated with the New Jersey Education Association (NJEA). This group spent over $13 million in the last cycle, which is an enormous number, but it has also spent millions in connection with candidates.

Another pro labor liberal group spent nearly $8 million. On the other side, two conservative groups spent $13 million. As a result, traditional PACs are beginning to sink beneath the onslaught of super PAC money.

INDUSTRY AND LABOR PACS ENTER THE FRAY In addition to super PACs, there is the additional uphill climb against other competing industry PACs and labor PACs. Let’s take a look at spending before the invention of the super PAC. In the 2009 cycle, according to ELEC, “among all special interest PACs last year, labor union PACs were the heaviest spenders. Their outlay totaled $24

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Spring 2014

million – more than the other seven types of PACs combined. Twenty of the top 25 PAC spenders were established by labor unions.” The other five were: the Realtors®, with $455,000; Business and Industry Association, $270,000; auto dealers, $220,000; dentists, $192,000; and funeral directors, $174,000. As a result, in the top 25, labor outlays exceed general business outlays 20-1. That’s assuming all business interests are parallel, which they are not.

To put it another way, if the $35 million spent in 2009 were equally divided over the entire 120-seat legislature, it would result in approximately $300,000 per seat. If the $24 million in labor contributions were spread at the same rate, it would fund 80 of the 120 seats. This would leave the remaining 40 to be funded by other groups, business being only one of many. This “other” group also includes both sides of the abortion, school choice, environment, and tort reform debates.

When it comes to messaging, the voice labor has due to its ability to contribute is like attending a meeting of 10 in which nine have laryngitis and the other has a megaphone. Flash forward to 2013 and the super PACs are the sound of a sonic boom.

So what does it all mean?

Smaller PACs can still be effective if they raise more money and spend it more effectively. Banks and other regulated industries have an even higher bar. Under New Jersey law, regulated industries may not use any property of that industry for political purposes. Therefore, banks may not use bank letterhead, or any material, equipment or office space for fundraising purpose. Labor groups can merely deduct money from the pay of its members. Finally, under federal law, banks may only solicit from what is deemed a “solicitable class,” which is generally executives and board members. On the other hand, the solicitable class for labor unions is their entire membership. Therefore, while labor can solicit contribution writ large and collect them via payroll deduction, regulated industries cannot.

This is not meant as a solicitation, but merely information for readers to understand the political giving climate in New Jersey.

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

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Spring 2014 New Jersey Banker

9

Directors’ Corner

What Bank Directors Need to Know About Cybersecurity in 2014

By George Gallinger

I

f you have been following the news lately, you have undoubtedly heard reports referring to the data breach that Target Corporation suffered in December 2013. Not only has George Gallinger this breach of customer data, credentials and credit card information been forecasted to cost the retail giant hundreds of millions of dollars, but Target is now seeing a steadily increasing number of smaller, community banks filing lawsuits due to related costs and recovery expenses amounting to over $170 million.

These regional and mid-tier financial enterprises are themselves a prime target for cyber attacks, as they lack the finances, technology and manpower to introduce and implement widespread and efficient cybersecurity defenses, particularly when compared to their larger, commercial bank counterparts. The Target breach is just a glimpse of what the future holds in terms of the severity of cyber attacks. This reality, coupled with the inherent vulnerabilities of the emerging technologies and trends within the banking industry, including the transference of operational data to and from the “cloud” and the widespread usage of mobile computing for financial purposes, places further stress on an organization’s information technology defense strategy.

Once this awareness is paired with the risks associated with the banking industry’s interconnectedness and the uncertainty generally associated with third-party partners and vendors and their IT risk defense practices, we can begin to gauge the importance of the ideation, implementation and oversight of top-level cybersecurity defense strategies.

While the sophistication of cyber attacks has steadily increased at an alarming rate, the efforts by organizations to mitigate these risks have fallen short. Board members are not expected to be IT experts; they

10 New Jersey Banker

should, however, have a sound enough understanding of the topic, enabling them to establish a thorough and robust cyber incident response plan in a conjunctive effort alongside senior management. This understanding should also assist them in assessing the necessity and depth of their involvement with cybersecurity mitigation.

As board members and executive directors, they should be at the helm of these strategies and may potentially be held accountable for the proper governance of the organization’s cybersecurity defense and incident response strategies.

PERSONAL LIABILITY TO BOARD OF DIRECTORS

Failures by boards and senior executives to effectively oversee and mitigate cybersecurity threats can amount to a breach of fiduciary duty or negligence – possibly resulting in declining stock prices, substantial losses of market share and a damaged organizational reputation. This may then lead to shareholder derivative lawsuits against directors and officers on the basis of a deficient IT security program and/or incident response plan that could have been addressed with proper top-level oversight.

Commentators have suggested that the protections of the business judgment rule will persist and apply to boards and directors who fulfill their duty to act in good faith. However, these protections may be called into question in cybersecurity cases due to the existence of widely accepted IT best practices and standards promulgated by various organizations such as the International Organization for Standardization, the National Institute of Standards and Technology and ISACA.

HOW TO AVOID CYBER ATTACKS AND BREACHES

There are several methods to better safeguard and insulate an organization in the event of a cybersecurity breach.

Before moving forward with any other IT risk management efforts, boards should

ensure that a thorough assessment of the organization’s current information security capabilities has been performed and identify internal vulnerabilities and external threats. As previously mentioned, boards should also proactively collaborate with senior management in order to develop a comprehensive incident response plan that has been stress-tested in the case of an actual security breach. This collaboration between the board and senior management should be ongoing – where directors remain informed on management’s most recent risk practices in order to effectively oversee and gauge cybersecurity risks.

Boards should also ensure that due diligence processes across the entire organization include IT and data risk assessments. A few final recommendations would include the following: • Ensure that third-party partners are fully aware of all relevant threats and are consistently auditing their own security programs.

• Develop programs around “high-value” information targets which should be protected at all costs and build outward from there.

• Evaluate risk within third party cloudservice provider systems to prevent the theft of intellectual property and confidential customer data and credentials.

DON’T ALLOW YOUR BANK TO BECOME THE NEXT VICTIM

Boards and their organizations can minimize the risk of falling victim to a cyber attack or data theft by developing, implementing and maintaining robust yet adaptable IT risk management programs and performing periodic due diligence reviews of third-party partners and providers.

■ George Gallinger, CIA, CFE, is a principal with CohnReznick LLP and the national director of the firm’s governance, risk and compliance practice. He can be reached at george.gallinger@ cohnreznick.com or (973) 871-4060.

Spring 2014

Upcoming Events April 10, 2014

Operations & Technology Forum – Cyber Security

June 9, 2014

Seventh Annual Golf Outing to Benefit Special Olympics New Jersey

Crowne Plaza Monroe, Monroe Township

Mercer Oaks Golf Course, West Windsor

April 18, 2014

June 12, 2014

Accounting Seminar with FMS-NY/NJ

Annual Marketing Conference

Stony Hill Inn, Hackensack

Crowne Plaza Monroe, Monroe Township

April 30 – May 4, 2014

June 18–20, 2014

110th Annual Conference

Compliance University

Marco Island Marriot, Marco Island, FL

Crowne Plaza Monroe, Monroe Township

May 13, 2014

June 24–25, 2014

Employment Law Update Seminar

Washington DC Regulatory Visit

Crowne Plaza Monroe, Monroe Township

Mayflower Hotel, Washington, DC

May 15, 2014

August 11, 2014

The 26th Annual Annamae Baerenbach Memorial Lending Conference

Annual Summer Golf Outing and Networking Reception

Pines Manor, Edison

Fiddlers Elbow, Bedminster

June 5, 2014

September 10–12, 2014

The Palace at Somerset Park, Somerset

Dolce Seaview Resort, Galloway

4th Annual Women In Banking Conference

October 6, 2014

Enterprise Risk Management Conference

Pines Manor, Edison October 9, 2014

Bankers Legislative Day in Trenton

Masonic Temple, Trenton October 16–17, 2014

Annual Human Resources Conference

Caesars Resort, Atlantic City May 27–31, 2015

111th Annual Conference

Omni Nashville Hotel, Nashville, TN May 11–15, 2016

112th Annual Conference

The Phoenician, Scottsdale, AZ

Annual Senior Management Conference

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Spring 2014 New Jersey Banker

11

Behind the Teller Line

Unity Bank SUPPORTING AND EMBRACING LOCAL BUSINESSES

1) Treat all employees and customers with dignity and respect 2) Provide the highest level of service to our customers 3) Maintain financial stability 4) Always do the right thing

Chairman of the Board David Dallas (left), and President and CEO James Hughes (right), celebrate Unity Bancorp Inc.’s 15 years as a publicly traded company.

U

nity Bank is a full-service commercial bank based in Hunterdon County, with offices serving Hunterdon, Middlesex, Somerset, Union and Warren counties in New Jersey and Northampton County in Pennsylvania.

Unity Bank was founded in 1991 as First Community Bank with two branches. Today, with 15 branches, it continues to grow and enhance the communities it serves. The bank offers exceptional service by getting to know its customers and taking a personal interest in learning their financial goals. Unity Bank takes pride in helping them achieve their dreams, from entrepreneur to homeowner.

Small businesses are the backbone of the communities they serve. As a commercial and an SBA lender, Unity helps businesses begin and thrive. The bank not only lends to, but embraces business customers, learning their needs and offering services such as remote capture, payment processing, payroll services and powerful online banking. The bank brings the latest innovations to small businesses to help them stay competitive in their communities.

The bank is committed to building strong and vibrant communities. A priority for Unity is to give back to the communities that support it via donations to local charitable organizations, as well as projects and initia-

12 New Jersey Banker

tives in those communities. In 2013, Unity Bank participated in over 200 community events, sponsorships and volunteer opportunities.

Unity’s employees are proud of their connection with the community, participating personally in the efforts of the organizations that strengthen them. The bank’s employee donation campaign has been a success for over 10 years, growing each year. In 2013, Unity Bank and its employees donated a total of $21,000 to 15 local food pantries in Central Jersey and Easton, Penn. The donation represented a 50 percent increase over the previous campaign, with the bank matching funds donated by employees as part of the special holiday community service project.

The bank’s Annual Car Show at its headquarters in Clinton raised a record $6,700 for Family Promise of Hunterdon and Warren counties. The organization’s mission is to end homelessness by mobilizing the community to guide homeless families and individuals to self-sufficiency and permanent housing.

The bank underwrote all the expenses, with 100 percent of the proceeds going to the organizations; the funds were raised through sponsorships, food sales and registration fees to compete in the classic car competition, which drew a record 121 registered cars.

The Unity Commandments define the bank’s corporate culture:

“We recognize that to be successful in this highly competitive business, it is critical that our employees are aligned to our commandments and that we continually reinforce our principles. We believe these commandments speak for themselves. Hire the best employees, train them well, and keep them highly motivated. With great employees providing the highest level of service for our customers, increased profits of the bank are sure to follow,” said James Hughes, president and CEO of Unity Bank.

On Aug. 22, 2013, Hughes rang the closing bell at the NASDAQ, along with members of the bank’s board of directors and executive management, to commemorate Unity Bancorp’s 15 year anniversary of listing on the stock exchange.

“We visited the NASDAQ to celebrate the past, present and future of Unity as our company continues to grow, which means we can continue to enhance community banking services for our customers while providing a strong investment opportunity for Unity’s stockholders. During the last 15 years, we have nearly tripled our number of employees and expanded our services into more communities in Central Jersey and the Lehigh Valley. Even as we grow, our top priority continues to be to provide individuals and businesses with a community banking experience that exceeds their expectations,” Hughes said.

Technology has changed the business of banking and Unity Bank is dedicated to offering the latest innovations to the public.

The vision for Unity Bank has not changed; the bank is committed to exceptional customer service, personal attention, local decision-making and concern for the financial well-being of its customers and shareholders.

■

Spring 2014

New Associate Members

as of February 2014

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Spring 2014 New Jersey Banker

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Feature

NJBankers Issues 2014 Economic Survey SURVEY CAPTURES SNAPSHOT OF BANKERS’ ATTITUDES, INTERESTS AND ASSESSMENTS

E

arlier this year, the New Jersey Bankers Association, in conjunction with the Edward J. Bloustein School of Planning and Public Policy at Rutgers University, released the results of the fourth annual NJBankers Economic Survey of Bank CEOs. The survey inquired about national and state current economic assessments, as well as sixmonth projections; expectations about long-term and short-term interest rates; commercial real estate loan demand; and residential loan and refinance demand.

In general, the portfolio of negative indicators – the number of customer bankruptcy filings, customer foreclosures, and “past dues” for residential mortgage payments in the past six months – has shown steady improvement from past surveys.

The survey also explores real estate values, currently and expected, as well as a set of negative indicators and common obstacles to lending.

The survey was conducted by the Bloustein Center for Survey Research (BCSR) under the direction of James W. Hughes, dean, Edward J. Bloustein School of Planning and Public Policy, Rutgers University; Marc D. Weiner, assistant research professor, associate director and faculty fellow, BCSR; and Orin Puniello, senior research specialist, BCSR. The survey sampled all 119 member institutions of the New Jersey Bankers Association and received a 63 percent response rate.

Highlights of the survey include: • The 2014 survey respondents apparently did recognize improvements in the health of the economy in both New Jersey and the United States. Their

14 New Jersey Banker

pattern of responses suggests there is a general sense that the economy has gotten better, but certainly “boom” times have not yet returned. “Fair” to “good” ratings predominated, with “fair” the primary assessment.

• Short-term future economic expectations (for the next six months) are for current economic conditions (fair/ good) of the state and nation to continue. Only a small minority expected the economy to weaken.

• The basic expectation for the next six months is a rise in long-term interest rates and stability in short-term interest rates.

• Business loan demand, in general, is improving. Despite this improvement, a majority of those surveyed still rated demand only as “fair.” This is similar to the assessment of the national and state economies. There was strong consensus that business loan demand would not experience any substantial change in the short-term future – seemingly business as usual going forward.

• The survey respondents have a generally favorable assessment of current residential loan demand and express optimism for demand for the next six months.

• After years of heavy residential refinancing at record-low interest rates, and expectations of higher long-term interest rates, it is not surprising that the current demand for residential refinance has weakened.

• In general, the portfolio of negative indicators – the number of customer bankruptcy filings, customer foreclosures, and “past dues” for residential mortgage payments in the past six months – has shown steady improvement from past surveys. The respondents also see steady improvements in the foreclosure process.

• The leading concerns for consumer lending were the regulatory environment

and a lack of demand. Lack of demand was viewed as the most significant obstacle.

“The survey comported with all best practices of methodologically rigorous survey research,” noted Weiner, project director. It achieved just under a twothird response rate, which was geographically diverse across the state. As a result, the survey captured a representative snapshot of the attitudes, interests, and assessments of the New Jersey Bankers Association’s membership.”

According to Hughes, “the basic conclusion was that the survey respondents sensed that the New Jersey economy was on a sustainable but modest growth path, and that this trajectory would continue into 2014. However, there was also the sentiment that the economy had not yet reached ‘lift-off.’ This basic perception held for many of the specific components of the banking industry.”

John E. McWeeney, Jr., president/CEO of NJBankers, added, “this survey confirms some of the anecdotal information we hear from our member banks. It demonstrates that though bankers recognize improvements in the health of the economy in both New Jersey and the United States, there continues to be caution by borrowers for taking on debt therefore demand for credit is still not robust even as bankers are anxious to lend.”

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

Spring 2014

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T

his year is a time of both uncertainty and opportunity for community banks. Increasing regulatory pressures are making it more difficult for community banks to offer profitable services. At the same time, the nature of the millennial client is changing. Consumers now not only require, but expect, 24/7 anytime, anywhere banking – and from any device. Additionally, there is an increasing need for familiarity and stellar customer service.

It’s safe to argue that community banks are in a unique position to outshine larger banks with service. Using technology properly and effectively, community banks can minimize a multitude of problems, while taking advantage of the opportunities to deliver outstanding value in these future bank environments.

A rock-solid infrastructure is the

foundation for community banks to springboard to the future. The more flexible the infrastructure, the easier it will be to adapt to changes. BITS sees many clients changing their core service provider, whether it’s to save money or provide better services.

Community banks should look to a network service provider that has multiple redundant connections to all core processors to have the flexibility to quickly connect to the service provider that best meets their needs. Network services that can allow guest access in their facilities while protecting their internal network will be important for better customer service. Having a service provider that can manage networks, security, and telephony across a rapidly changing environment will make it easier for the banker to focus his or her efforts on providing outstanding customer

service. Finally, banks must have the ability to allow for economic yet effective disaster recovery and business continuity.

BITS provides banking infrastructure services to community banks, including full managed network and telephony services, security, and data center colocation and managed services. BITS uses the latest technology with industry-leading experts, so bankers can focus their efforts on providing premium financial services. BITS would be happy to show how it can prepare your infrastructure for tomorrow’s banking needs.

■ For more information about how BITS can help your bank network prepare for the future, please visit www.bitsnetwork.com or contact Christian Ericson at christian.ericson@bitsnetwork.com, or (973) 474-1828.

Assisting New Jersey Banks in

Charting a Path to Success Since 1989

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888-967-7380 • www.ceisreview.com Spring 2014 New Jersey Banker

15

WANNA BUY A BANK? THE CURRENT M & A LANDSCAPE IS ALL IN THE NUMBERS

By Christina P. O’Neill

“Banks aren’t bought – they’re sold.”

We’ve heard that phrase from many sources, which means there are more sellers than buyers, with many smaller sellers looking for larger buyers. The economy, technology, demographics and regulatory costs all play a part.

Big picture: There were more than 18,000 banks in the U.S. in the 1980s. By third-quarter 2013, the FDIC reported that the count was 6,891 banks, the first time the count dropped below 7,000 since the FDIC began keeping records in 1934, and predictions are that the number may drop below 5,000 in the next five to seven years.

Meanwhile, national deposits have increased from about $2.5 trillion in the 1980s to $9.60 trillion today. With the top 10 banks controlling 60 percent of overall deposits, there are fewer banks, but there are more branches now than 20 years ago.

Bank consultants often say that a bank CEO’s age can be an indicator of its likelihood to sell. Retiring senior management may want to convey an intact organization to another entity, to deliver value to long-time shareholders and also to avoid letting employees go, in the hopes that many will find positions within the acquirer.

Kevin Cummings is president and CEO of Investors Bank, a $16 billion bank with more than 130 branches.

“Sometimes it’s easier to sell,” he says. “It gets down to social issues and then financial issues. Sometimes social issues rule the day because community banks are like a family business [in their communities].”

GROW OR SELL

Today’s low rate environment hampers organic growth. Banks that can’t consolidate or merge with an equal partner may decide it’s time to sell, says Robert Kafafian, president and CEO of The Kafafian Group, a Parsippany-based bank consulting firm.

In the last three years, mergers and acquisitions have been coming in at prices well below seller expectations.

Kafafian says sellers are usually uncomfortable selling for less than book value

or less than breakup cost, and are often holding out for a stronger market. Typically, the smaller the bank, the more pricing is based on book multiples; the larger the bank, pricing moves towards earnings multiples. He adds, absent the continued discount pricing of troubled banks, multiples have improved overall.

The closer a bank is to a major metro market, the more intense the competition, particularly from larger banks, says Kafafian. Larger banks across the country are exiting rural areas, leaving smaller banks a better chance to compete in those markets, particularly since the largest banks have retreated from M&A activity given regulatory pressure.

WHAT’S CAUSING M&AS NOW

Low yields that dampen stock performance have pushed stock prices below book value in recent years, due to an inability to generate sufficient returns. And the pressure of regulatory and personnel costs on the expectation of shareholders has also crimped smaller banks. It’s a commonly stated benchmark that a bank has to be at the $1 billion asset level to provide adequate returns to shareholders.

Christopher Martin is chairman, president and CEO of Provident Bank, which is acquiring privately-held Team Capital.

At press time the deal had been approved by both banks’ boards, and was awaiting regulatory and shareholder approval. The combined entity would have $8.3 billion in assets after closing and would have 90 branches in 13 counties in New Jersey and three counties in Pennsylvania.

Martin notes that both banks want to put their capital to work, and that their combination is expected to yield better performance for both.

Blending two organizations requires two-way communication, Martin says.

The two banks discussed what the organizational pressure points might be regarding blending the staff, and to make sure both institutions shared similar risk tolerances and credit culture. Martin’s former bank had been purchased by Provident in 2004. “How would you want to be treated?” he asks rhetorically.

Spring 2014

ECONOMIES OF SCALE

Patrick Ryan, president and CEO of First Bank of New Jersey, agrees that regulatory costs are driving the tendency toward bigger banks. He says First Bank’s merger with Heritage Community Bank, which got regulatory approval last December, was an example of finding a bank in an adjacent market in which First Bank didn’t have a significant foothold, and also to generate economies of scale. When talks began, First Bank was in the $400 million asset range, while Heritage was in the $140 million range. The larger entity could offer larger lending limits – a winning formula. “You spend as much time on a $1 million loan as a $10 million loan, but [the latter] generates significantly more revenue,” Ryan says.

Merger talks began in late 2012; the merger became effective March 7. First Bank grew well on an organic basis through 2013, ending the year with approximately $470 million in assets. The combined post-merger entity has more than $600 million in assets with eight branches.

During the 2008 financial crisis and its resulting lack of liquidity, a lot of capital left the banking industry, and it hasn’t returned for the smaller banks, he says. This essentially cut off growth capital for banks not big enough to generate returns sufficient to allow investors an eventual remunerative exit.

MORE THAN A TYPICAL COMMUNITY BANK

When 1st Constitution Bank acquired Rumson-Fair Haven Bank and Trust Co., effective February 7, the combination created a $1 billion banking entity with 19 branch banking offices in Central New Jersey, primarily in Mercer, Middlesex, Monmouth and Somerset counties. 1st Constitution was approximately $800 million in assets, and by acquiring Rumson-Fair Haven, at $200 million, added five branch banking offices in Monmouth County.

Robert F. Mangano, president of 1st Constitution Bank, said the bank has built several key business lines making it more diverse than the typical community bank. So, the merger became not only a territorial overlay, but a means of bringing more business segments to the Monmouth County area served

by Rumson-Fair Haven, particularly 1st Constitution’s residential mortgage business, its construction lending business, and its SBA small business lending unit. 1st Constitution has been a preferred SBA lender in New York, New Jersey and Pennsylvania, a line of business in which Rumson did not have a focus.

Mangano also indicated that 1st Constitution’s legal lending limit is now approximately $16 million, compared to Rumson’s at $2.8

million. He said that with these additional lines of business, he was looking forward to serving the broad base of consumers and businesses in Monmouth County.

HEALTH OF THE NJ MARKET

The New Jersey market is paramount in market attractiveness, despite the recession and the subsequent lack of strong job creation, making its M&A climate healthy.

As of June 30, 2013, Bergen County had 48 banks, holding over $41 billion in deposits. Kafafian says big banks are withdrawing from M&A activity that they’d dominated, pre-recession.

“Geography is still critically important in the M&A world today,” says Tom Shara, president and CEO of $3.32 billion Lakeland Bank, which acquired $368.9 million Somerset Hills Bank last year. Somerset had been performing well for many years, and the two banks’ markets were contiguous with limited overlap and their culture and balance sheets were similar despite the size difference. At the time of the acquisition, Lakeland, with 46 offices, was almost eight times Somerset’s size.

Stewart McClure Jr., currently chair of the New Jersey Bankers Association, is Lakeland’s regional president. The wealthy Somerset and Morris counties have many small to midsized businesses that have been a solid customer base for both banks. Because Lakeland was so much larger than Somerset, positions opened up for Somerset employees, and the bank was able to keep customer-facing employees in place. After six months, deposits have actually increased in the former Somerset market area. Additionally, a title company originally part of Somerset and now half-owned by Lakeland has contributed fee income, and can contribute a larger revenue stream than it did at the smaller Somerset. Loan limits increased as well, from $5 million to $20 million.

Donald Musso, president of Liberty Corner-based consulting firm FinPro Inc., says New York and New Jersey aren’t likely to offer banks a growth engine for loans coming from new companies, so the trend may be to see more merger-of-equal transactions.

He says he doesn’t see regulators inclined to greenlight “phoenix combinations” – the pairing of two ailing banks.

He cautions that bank management should be sure that advisors are working in the bank’s interest. That said, today’s M&A market is modest – FinPro works with about 400 clients and only four or five of them are up for sale.

Musso points out that the difference between trading value and takeout value can

be a 30 to 40 percent difference. Companies trading at 100 percent of tangible book value per share might want to hold off selling for 130 percent of tangible book value now in a takeout, rather than run the bank for three or more years to realize that same value on a trading basis. Banks with good succession plans might want to ride it out and stay independent. If not, they’re likely to opt for the 130 percent return today.

CREATING SHAREHOLDER VALUE

When it goes well, a merger benefits all sides. Shara estimates that the Lakeland/ Somerset Hills deal was three years in the making, including discussion with Somerset’s board of directors, and with regulators.

Bank management made the case to investors that the merger would supplement organic growth and that both organizations were coming off record years in 2012; that trend continued in 2013. The deal was announced at the end of January 2013 and closed at the end of May. The stock sale was priced at 1.5 times tangible book. Today, Lakeland continues to trade at a “pretty rich” multiple to book, says Shara. “If you get too much of a premium in the sale price, the market will see that and take the stock price down,” McClure says. Both banks benefitted when the stock price rose after the deal; “That’s as good as it gets,” he adds.

Then, there’s the stock liquidity issue. Lakeland stock trades 70,000 to 100,000 shares a day, which would have been a month’s worth of activity at Somerset. Investors can get in and out of Lakeland without affecting the stock price.

CREATING A BIGGER PLATFORM

ConnectOne Bancorp's proposed merger with Center Bancorp (parent company of Union Center National Bank), announced on Jan. 21, would create a company with approximately $3 billion in ascontinued on next page

Spring 2014 New Jersey Banker

17

Wanna Buy a Bank?

continued from previous page sets, $2.3 billion in total deposits and $2.1 billion in total loans in 24 branches, if approved by shareholders and regulators. The combined company will be the fourth-largest New Jersey-headquartered commercial bank, and will focus on middle-market commercial business.

The combination has been approved by both banks’ boards of directors. While Center Bancorp shareholders will own about 54 percent of the company’s stock and ConnectOne shareholders will own about 46 percent, it is Center, with 14 branches, two satellite locations and $1.7 billion in assets,that will combine into the ConnectOne brand. The combined entity will retain sufficient capital to continue its growth strategy, the two banks said in a statement announcing the deal, which is expected to close late in this year’s second quarter or early third quarter.

ConnectOne’s Frank Sorrentino, III will serve as chairman, CEO and president; Center Bancorp’s Anthony Weagley, now president and CEO of that bank, will serve as COO of the combined entity.

Sorrentino says the merger will create a platform with much bigger reach, and with more lending capacity for larger clients with a significantly increased legal lending limit. ConnectOne’s progressive investments in technology coupled with Center’s wealth management division will create a more robust organization better positioned to serve all of the markets that the combined entity will operate in.

Sorrentino says, “The combined organization’s increased footprint coupled with mobile banking technologies will create increased scale and give our clients even more access to the financial resources they need to be successful.”

The two banks’ territories don’t overlap and their specialties are similar, and given the projected growth rate of the combined organization, Sorrentino doesn’t expect major staff cuts.

Anthony Weagley says the combination of ConnectOne and Center is an opportunity to put two quality banks together. Center’s history as a commercial bank taking business from the Princeton, Philadelphia and New York areas makes it complementary to ConnectOne. In the big-bank mergers of the 1990s, the acquirers needed to shed branches because of overlaps in their markets. That’s not so true today, Weagley says. Center recently opened a branch in a historic building in Princeton, where it had established a niche serving independent schools. Community leaders want their banks to have a physical presence, he notes.

Center Bancorp sought to broaden its identity beyond the regional, but based its success on the visibility of experienced staff, creating an advisory board and focusing on retaining clientele. “As an organization gets bigger, it doesn’t matter what the name is,” Weagley says – people want to do business with specialists they know.

Weagley’s role in the merged organization is to build the management team from the staff of the two banks. He calls the Center/ConnectOne merger “a payday for the shareholder.” He adds, in a very compact summation of the how-to: “You have to evaluate all opportunities in order to grow book value and propel stock value.”

As for the effect on stock price, “I think the market has spoken,” Sorrentino said on Feb. 7. “Our stock is up 22 percent – theirs is up 9 or 10 percent – the answer lies right there.”

■ Christina P. O’Neill is editor of custom publications for The Warren Group, publisher of NJBanker.

KNOWLEDGE IS THE BASIS OF SOUND ADVICE. TWENTY FIVE YEARS OF EXPERIENCE TELLS US SO. As an advisor to financial companies nationwide for more than 25 years, Sandler O’Neill’s knowledge and insight have served clients well in bull and bear markets alike. The depth of experience gives our firm a unique perspective on how financial companies can best position themselves in the current environment.

Sound, straight-from-the-shoulder advice – it’s what we do best.

To learn more, please contact John Beckelman, Principal, at 212.466.7832, or visit www.sandleroneill.com.

Sandler O’Neill + Partners, L.P.

18 New Jersey Banker

Spring 2014

Feature

Top Ten Steps to Fast Tracking Your Bank’s Political Activity Compliance Plan

By Rebecca Moll Freed

I

n today’s political climate, smart banks take a proactive approach to educating officers, employees and board members about political activity compliance. Just as a bank’s code of conduct addresses sexual harassment, privacy of customer information and customer relations, a bank’s code of conduct should address the dos and don’ts of political activity.

Since 1911, New Jersey banks have been subject to the regulated Rebecca Moll Freed industry ban.

The ban prohibits banks and their majority shareholders from making political contributions. Despite this prohibition, invitations for political fundraisers are likely crossing the desks of bank officers, employees and board members on a regular basis. Because these individuals have a First Amendment right to participate in the political process and may not be aware of the nuances of the regulated industry ban and pay-to-play restrictions, banks need to put protocols in place to assist compliance with the law.

While it is true that 2013 was a busy election year in New Jersey – with a gubernatorial election, all 120 seats of the legislature up for grabs, a host of municipal races and two ballot questions on the November ballot – political contribution requests do not seem to be slowing down.

This year is also likely to be a busy political year with federal elections, including a race for U.S. Senate, local races in many school districts, municipalities and counties, and New Jersey Assembly candidates getting ready to run again in 2015.

Although no two banks or situations are the same, following these basic tips will put your bank on the fast track to compliance.

Step One: Become familiar with the regulated industry ban. In short, the bank must ensure that bank funds and resources are not used in connection with political activity. This includes, but is not limited to: general treasury funds, conference rooms, letterhead, envelopes, postage machines, email, copy machines and bank staff.

Step Two: Determine whether your bank employees have formed or would like to form a voluntary employee continuing political committee (CPC) or political action committee (PAC). Although the regulated industry ban prohibits banks from forming a corporate CPC or PAC, a carve-out exists for voluntary employee CPCs and PACs. The employee CPC/PAC must function independently from the bank and may not use bank resources in connection with its operation.

Step Three: Determine whether the bank currently holds government contracts in New Jersey and/or wishes to preserve eligibility for future government contracting opportunities.

A bank may be subject to pay-to-play restrictions if, for example, the bank serves as a depository for a government entity.

Step Four: Become familiar with pay-toplay restrictions. Keep in mind that the law may vary from one government entity to another.

Step Five: Determine the department or individual responsible for assisting compliance with the law.

Step Six: Draft language designed to assist compliance with the law. The language can be included in the bank’s already existing code of conduct or can be drafted as a standalone compliance policy.

Step Seven: Determine who is covered by both the regulated industry ban and applicable pay-to-play restrictions. Inform those people that they are covered. It goes without saying, but if someone does not know that they are covered by the regulated industry ban and/or pay-to-play restrictions,

they might not realize what compliance with the law entails.

Step Eight: Conduct training. Remember, a policy isn’t worth the paper it is written on if nobody knows what it says.

Step Nine: Conduct another training.

Remember, people change positions within a bank, people retire and people move on in their careers. Keep in mind that just because all relevant people are educated today does not mean that all relevant people will be educated tomorrow.

Step Ten: Take a breath! Political activity compliance programs do not need to be developed and implemented overnight.

However, having an effective plan in place certainly helps bank officers and board members sleep well knowing that they have taken necessary steps to mitigate against reputational risk, loss of government contracting opportunities and potential violations of the regulated industry ban.

Compliance with New Jersey’s regulated industry ban and pay-to-play restrictions may seem overwhelming. However, as set forth above, when compliance is dissected on a step-by-step basis, it not only becomes manageable, but its value to the bank becomes clear.

The reality is that we live in a world with important (and often controversial) political issues. Expecting officers, employees and board members to sit on the sidelines is not realistic. In today’s word, savvy banks need to embrace this fact, establish meaningful compliance programs and put their best foot forward not only internally, but also externally, to ensure that their corporate reputation is not harmed by a political scandal.

■ Rebecca Moll Freed is counsel in Genova Burns Giantomasi Webster LLC’s Newark, New Jersey office. She is a member of the firm’s Corporate Political Activity Law Group. She can be reached at (973) 230-2075 or rfreed@genovaburns.com.

Spring 2014 New Jersey Banker

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Feature

Is it Time to Consider a Merger of Equals?

By Chad Hull, Anthony A. Latini Jr., Paul Mattaini and Kim Decker

C

ommunity banks are increasingly facing a common question: whether they can remain competitive and relevant at their current size and scale in Chad Hull light of robust competition and dramatically increasing regulation, particularly with respect to capital requirements, compliance and risk management. Historically, industry experts typically Anthony A. Latini Jr. have offered only one or two possible solutions: grow by acquisition, or sell the bank.

However, those two solutions might not be the best (or even a viable) alternative for some Paul Mattaini banks. The current bank M&A market conditions were summarized in the following excerpt from Boenning & Scattergood’s Dec. 18, 2013, Financial Services Industry Report: Kim Decker Both buyers and sellers have incentives to merge. Deal factors include: • Earnings challenges; • Economies of scale, including technology; • Increased regulatory demands which disproportionably burden smaller banks;

20 New Jersey Banker

• Improved asset quality across the industry makes it easier for buyers to determine credit marks; • Strategic acquisitions to gain or defend market share; and • Small bank shareholders gain liquidity.

to remain competitive. As a result, the bank M&A market is showing signs of renewed interest in MOE transactions. In fact, the market reaction to recent bank MOEs has been generally positive.

But there are also sound arguments for a slower pace. Obstacles primarily consist of: • Unrealistic pricing expectations by potential sellers; • Management teams may be reluctant to cede control due to financial and social issues; • Regulatory/legislative uncertainty may cause potential buyers to hesitate; and • Purchase accounting rules tend to create substantial tangible book value dilution.

Typically, an MOE attempts to position the combined company (“Holdco”) as a stronger player in the market and a viable alternative to larger competitors, with greater resources, an increased legal lending limit, ability to attract more skilled personnel, expanded service offerings to customers and improved revenue.

Advantages to Holdco include the ability to spread costs (including regulatory compliance and risk management costs) over a larger asset base, better economies of scale and operational efficiencies that favorably impact earnings, dividends and book value over time.

Unlike an outright sale, an MOE more often retains the community identity for each bank and provides a “shared control” model, with the parties sharing representation on Holdco’s board of directors and using a combination of executive officers from both organizations, with a deeper talent pool to support management succession, also called the “best of breed approach.”

Other benefits of an MOE include: • Allowing Holdco to attract new institutional investment due to the increase in Holdco’s market capitalization and earnings; • Increasing the probability that the banks could remain independent or, if desired, achieving a higher valuation in an eventual exit transaction; • Creating a more liquid market for Holdco stock at higher trading volumes; and • Creating a more attractive “currency” (i.e., Holdco stock) for acquisitions.

However, MOEs offer challenges and are often difficult to put together. For example, one party often ends up being “less equal;” this fact often becomes more apparent after

As a result of these industry dynamics and the other factors cited above, growing by acquisition or selling the bank may not be currently available to many banks. Banks looking for other alternatives may want to consider a “merger of equals” (MOE). An MOE is an alternative to an outright sale, resulting in a combined organization that has the potential to provide each organization’s shareholders with greater long-term value. In some cases, an MOE may be the only effective avenue for a bank seeking non-organic growth to achieve the necessary competitive size and scale.

Growth through acquisition can be difficult for community banks due to their less attractive stock acquisition currencies (due to illiquidity) and their inability to attract capital to fund cash transactions. On the other hand, an exit through a sale transaction may not be possible for some community banks due to a lack of interest by potential buyers in light of the potential seller’s small size, geography and/ or business model.

Thus, an MOE could be the best opportunity for some banks to significantly increase shareholder value in the near term and the most viable option to gain the size required

GENERAL MOE CONSIDERATIONS

Spring 2014

the deal is signed. Social issues can also be a particular challenge in an MOE, especially gaining agreement on board and executive management members. Board issues can present particular challenges, in terms of representation of each party on Holdco’s board (at closing and on an ongoing post-closing basis), appointment of committee members and election of a chairperson. Trade-offs are often necessary to finalize a deal, but can run counter to the long-term objective of ensuring a successful integration of the companies.

Thus, exchange of independence for “shared control” can be difficult to achieve.

Other MOE challenges include: • A possible negative reaction by some shareholders that the banks were not sold at a market premium; • Failure to actually achieve “critical mass” and stock float to positively affect the market value of Holdco’s stock; • Cultural issues of former independent companies; and • Opportunities for cost savings could lead to some employee “dislocation.”

DOES THIS MOE MAKE SENSE? The MOE concept frequently makes sense on paper. In practice, however, MOE’s have historically made up less than 5 percent of transactions and frequently do not reach a successful conclusion despite initial, positive conversations. While the general factors discussed above are important, the more meaningful analysis is whether a specific potential MOE may make sense. It is always difficult to identify all of the considerations that may determine a transaction’s success, but the following are some factors to consider: • Do the parties share a common vision, business plan and exit strategy, and is the “story” better together than separately?

• Are the parties’ cultures compatible?

• Do the financial metrics work? For example, are there synergies that make the whole more attractive/higher performing than the sum of the parts?

• Is each party open to best practices and allowing the best people from each organization to manage the combined company?

MOE PROCESS The MOE process is typically more fo-

cused on social issues than financial issues compared to typical M&A transactions and may take considerably longer. Parties that want to pursue an MOE should consider appointing separate board committees to identify and address “threshold issues” and to establish milestones for specific decision points and tasks. The most important threshold issues typically include: What methodology will be used to determine the exchange ratios for converting the shares of each party’s stock into Holdco stock? In a MOE, fixed exchange ratios are usually chosen with input from the parties’ respective investment banking firms. There are numerous and varied methods to determine the exchange ratio in an MOE. Given that the parties’ market stock prices may not be indicative of their true value, a “contribution analysis” may be used to weigh the parties’ relative contributions in areas such as capital, earnings and assets. Relative pro forma equivalents in dividends, earnings and book value must be examined as well as each bank’s earnings and asset growth trends.

However, each party must be mindful, when negotiating the best possible exchange ratio for its shareholders, that the exchange ratio will ultimately impact the future operations, financial structure and positioning for capital offerings of the combined company (that the shareholders will now own).

What is the best way to structure the transaction? Possibilities include a merger, in which one of the parties survives or a “consolidation” in which the parties “merge” into a brand new company. In either case, the bank subsidiaries of the parties could be maintained as separate subsidiaries (with perhaps some covenants as to how long they must be maintained).

Who will hold the key positions, including CEO, COO and CFO of Holdco (and/ or the bank subsidiaries)? Is there a contemplated management succession? What will the organization chart and reporting lines/ responsibility/authority at Holdco look like?

Future dividend policy – this can be an excellent opportunity to provide for a shareholder return while integration efforts take place.

Social issues – should separate charters and/or names be maintained for the parties’ bank subsidiaries? What is Holdco’s name

and where is it to be headquartered?

How will employees be treated? Relevant issues include the use of employment and non-competition agreements (where appropriate), as well as planning for benefits, the overall compensation structure (including the use of equity as compensation) and employment policies.

Assessing the charter, by-laws, committee charters and governance guidelines of Holdco and considering whether this process presents an opportunity to make changes to the parties’ existing approach to certain governance topics.

INTEGRATION Assuming the parties reach agreement for definitive affiliation documents (which can generally be “mutual,” in terms of representations and warranties and pre-closing covenants), the parties may wish to establish one or more transition teams to address key integration issues.

CONCLUSION For community banks that need the type of size and scale that typically only results from an acquisition of another institution or a sale to a larger entity, an MOE can offer a third alternative. For the right parties, an MOE may permit the combined entity to be a more competitive and relevant player in its market. The MOE solution also may act as a stepping stone to an outright sale transaction when the position of the bank for an outright sale is not yet ripe, but the need for increased size and scale is becoming more urgent. However, putting together a successful MOE presents challenges and requires the parties to make compromises in the MOE process and careful to engage in integration planning. ■ Chad Hull and Anthony A. Latini Jr., CFA, are managing directors at Boenning & Scattergood Inc., a full-service investment banking firm.

Paul Mattaini and Kim Decker are attorneys with Barley Snyder LLP, a full-service law firm of approximately 65 attorneys headquartered in Pennsylvania. Each of the firms has assisted clients in several MOEs. Latini can be reached at alatini@boenninginc.com; Hull can be reached at chull@boenninginc.com; Mattaini can be reached at pmattaini@barley.com; and Decker can be reached at kdecker@barley.com.

Spring 2014 New Jersey Banker

21

Feature

Join us for the NJBankers 110th Annual Conference!

T

he NJBankers 110th Annual Confer• A View from Washington with Jeff Plagge, ence will be held April 30 – May 4, chairman of the American Bankers AssoWith New Banks, New 2014, at the MarcoJersey Island Marriot ciation.Jersey Prospers Beach Resort Golf Club & Spa and it is surely a • The presentation “Interest Rate Risk: learning experience not to miss!

Net Interest Margin” by Kevin Schultze, The Conference Committee has created an managing director, Financial Institutions outstanding program that offers benefits for Group, Oppenheimer & Company. everyone and includes educational sessions • A look at how social media is transforming and time for networking. Attendees will enjoy how banks grow revenue and manage risks informative speakers and social events at this 110th Annual Conferencepresented by Virginia Heyburn, vice presiannual gathering of bankers and service prodent of insights and advocacy, Fiserv.

Marco Island, Florida April 30 - May 4, 2014 • “Key Trends Driving Branch Transforviders.

With more than 40 service providers anticmation” with Brian Porter, solutions exipated, the Exhibit Hall, with a full trade show, ecutive, consumer transaction services, will be a touchstone not only for what’s new in Diebold. the industry, but will serve as a central location • William F. Hickey, principal, Sandler for breakfast, breaks, our welcome reception O’Neill + Partners, will review whether it is and catching up with old and new friends. time to buy or time to sell.

The trade show floor is a perfect oppor• “The Critical Integration of Stress Testing tunity to visit with your existing service prointo the Strategic Planning Process for viders as well as research and speak with new Community Banks” will be presented contacts who can provide the kind of thinking

by Kamal Mustafa, chairman and CEO, and innovation to help you and your instituInvictus Consulting Group. tion succeed.

On the education side, the conference Concurrent Sessions will feature timely once again offers full General Sessions on topics including: Thursday and Saturday and educational • A review of compliance developments in concurrent sessions on Friday. residential and other commercial lending The thinkers and trend setters presenting with Melissa Correa, CRCM, Mercadien at the General Sessions include: Group.

22 New Jersey Banker

• “Hidden in the Data – Unlocking Insights that Improve Marketing ROI” will be presented by Patrick Grosserode, product manager, acquisition and growth solutions, Deluxe Corporation.

• A session on “Key Considerations for Maximizing D&O Liability Insurance in the Wake of the Financial Crisis” with Aaron Kaslow, Esq., partner, Kilpatrick Townsend.

• A look at “Basel III and Capital Formation Strategies” with Mark McCollom, co-head, financial institutions group, Griffin Financial Group, and David Swartz, financial services chair; corporate, finance and capital markets co-chair; shareholder, Stevens & Lee. • “Strategies to Educate America’s Youth” will be presented by Ray Martinez, cofounder and executive vice president, EverFi. • A presentation about protecting seniors while getting CRA credit: “Doing Well by Doing Good – Guaranteed CRA Credit and Positive Public Relations” with Peter K. Gwaltney, chairman and CEO, Senior Housing Crime Prevention Foundation.

• David Payne, COO, and Arnie Winick, partner, BFS Group, will discuss “Providing/Revising Executive and Director Benefit Plans to Significantly Improve a Bank’s Bottom Line.”

• “Current Information Security Threats for Community Banking” with Sudhir Kondisetty, managing director, risk management, McGladrey.

• A session on how a board strikes a balance between shareholder and regulatory interests, presented by Robert C. Azarow, partner, Arnold & Porter.

• A mergers and acquisition panel featuring Ben Plotkin, executive vice president, vice chairman, Keefe, Bruyette & Woods, A Stifel Company; Douglas P. Faucette, partner, Locke Lord; and Eric Luse, partner, Luse Gorman Pomerenk & Schick, P.C. Our Keynote Speaker at the conclusion of the Saturday General Session will be Brad Meltzer, host of the acclaimed History Chan-

Spring 2014

nel series “Brad Meltzer’s Decoded” and bestselling author of The Inner Circle. Meltzer’s presentation, “History Decoded,” will be followed by a book signing. Be inspired by his understanding of three truths for successful leadership: communicate and collaborate with your team, admit and overcome your limitations and represent your organization, don’t have it represent you. Meltzer is a featured speaker not to be missed.

NJBankers thanks our sponsors PLATINUM

DIAMOND

SPONSORSHIPS AND EXHIBIT BOOTHS AVAILABLE Enhance your image by being one of our conference sponsors. Sponsorships give your company maximum exposure and recognition to conference attendees.

Showcase your company and services at the full trade show which will include 35 service providers. Attendance as a sponsor or exhibitor provides an exceptional opportunity to forge new relationships with more than 67 financial institutions (based on last year’s attendance figures). Compliance developments, managing risk, security threats, new regulations and legislation means that more than ever, financial institutions need the support and products offered by service providers.

In addition to professional development, explore a world of paradise at the Marco Island Marriot Beach Resort, Golf Club & Spa. This world-class resort is situated on three miles of pristine beachfront property and offers an exhilarating retreat from the ordinary.

The resort features a lavish spa with Balinese-influenced treatments, two private 18-hole championship golf courses, and spacious accommodations with premier amenities, technology upgrades, and views of the Florida Gulf Coast. NJBankers has arranged for a golf tournament, a tennis tournament, a tour that navigates the backwaters in search of dolphins, manatees and bald eagles, backwater fishing, an Everglades airboat tour, a Waverunner eco-tour, and this year … a farewell “It’s Five O’Clock Somewhere” reception/ dinner featuring a wonderful evening of engaging conversation, delectable international edibles and fun-filled entertainment on the beach. This is one evening you will not want to miss! (Please note that tours require advance reservations.)

See you on Marco Island!

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GOLD

For sponsorship and exhibiting opportunities, please contact Jenn Zorn at (908) 272-8500, ext. 611 or jzorn@njbankers.com, or visit www.njbankers.com

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Spring 2014 New Jersey Banker

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Bank Notes

Michael Lesler

Richard Abbate

Stephen Feehan

Craig C. Spengeman

Eric Kesselman

Katherine J. Liseno

Kevin Cummings

Trina McSorley

Jerald Murphy

Robert Rey

Dianne M. Grenz

Andrea T. Onorato

BANK OF NEW JERSEY

Michael Lesler has been appointed president and CEO of Bank of New Jersey. Lesler had served as the president and COO since 2009, and is vice chairman of the board of directors.

He served as executive vice president and CFO from the bank’s inception through June 2009.

Albert F. Buzzetti, who had served as chairman of the board and CEO of the company and the bank since their inception, passed away on Dec. 13, 2013. In connection with Lesler’s promotion, the board of directors also appointed Richard Capone as senior vice president and CFO. Capone has served as senior vice president and controller since 2009.

COLUMBIA BANK

Richard Abbate has been appointed senior vice president and corporate development officer. Abbate will manage the bank’s business development department. He joined Columbia in 1997 as business development manager and was appointed business development officer a year later. He holds both a bachelor’s degree and an MBA in finance from Fairleigh Dickinson University. He also served in the U.S. Naval Air Reserves. Stephen Feehan has been appointed senior vice president and controller. In this role, Feehan will manage the bank’s accounting department. He joined Columbia Bank in 2002 as assistant controller. A CPA, Feehan holds a bachelor’s degree in accounting from Ramapo College and is a graduate of the ABA Stonier Graduate School of Banking.

OCEANFIRST BANK

Craig C. Spengeman has joined OceanFirst Bank as executive vice president and director of trust and asset management. Spengeman

24 New Jersey Banker

will be responsible for the overall management and growth of the trust and asset management department and will have offices in Red Bank and Manchester. Spengeman is a graduate of East Carolina University and the ABA National Graduate Trust School at Northwestern University; and attended the Paul Stillman Graduate School of Business at Seton Hall University.

KEARNY FEDERAL SAVINGS BANK

Eric Kesselman has been named second vice president and director of marketing at Kearny Federal Savings Bank. Prior to his promotion, Kesselman served as vice president and director of marketing at the bank. With three decades of marketing and advertising related experience, Kesselman has dedicated the majority of his corporate career to the banking and finance industry. A graduate of Baruch College with a bachelor’s degree in business administration, Kesselman serves as director for both the American Bankers Association – New Jersey Bank Marketing chapter and is a member of the NJBankers PR and Marketing Committee.

FEDERAL RESERVE BANK OF NEW YORK

Katherine J. Liseno, president and CEO of Metuchen Savings Bank, has been appointed to its Community Depository Institutions Advisory Council (CDIAC). Liseno will serve a three-year term. The purpose of the CDIAC is to provide information and insight to the New York Fed from the perspective of community depository institutions. The New York Fed’s president and first vice president meet with the council twice a year to discuss regional, economic and financial conditions and other issues confronting community depository institutions.

FEDERAL HOME LOAN BANK OF NEW YORK

Kevin Cummings, president and CEO of Investors Bank, will fill the unexpired term of former FHLBNY Member Director Ronald E. Hermance, Jr., who resigned from the board.

Cummings will serve as a member director representing FHLBNY members in New Jersey from Jan. 17, 2014, through and including Dec. 31, 2014.

STURDY SAVINGS BANK

Trina McSorley has been promoted to senior vice president. McSorley, the bank’s director of human resources, has 20 years of experience in her field. She is a Certified Senior Professional in Human Resources (SPHR). McSorley earned a bachelor’s degree in business from Messiah College in Grantham, PA, and an MBA from Monmouth College in West Long Branch.

ACBB-BITS

Jerald Murphy has been appointed CEO of ACBB-BITS, LLC, a subsidiary of Atlantic Community Bankers Bank. Murphy brings over 20 years of experience in the IT industry.

Murphy has a BSEE from the United States Military Academy and a master’s in electrical engineering from Princeton University. He taught electrical engineering and computer science at West Point, and conducted electrical engineering research at the Army Research Labs, with published research on integrated circuit design for neural networking computing algorithms.

SPENCER SAVINGS BANK

Nicholas Lorusso, Anthony S. Cicatiello and Barry Minkin have accepted re-election to serve on the bank’s board of directors.

Lorusso was president of Spencer Savings

Spring 2014

IN MEMORIAM

David J. Hage

With sadness, we report that David J. Hage passed away on Jan. 22, 2014, at the age of 67. Hage was serving as president and CEO of Freehold Savings Bank. He was born in Newark and had resided in Kenilworth before moving to Jackson Township 18 years ago with his wife, Judith A. Milano-Hage. He served in the U.S. Army from 1966 to 1968. Hage was a member of Knight of Columbus Council No. 4186, Kenilworth. Hage joined the bank in 1989 as CFO during the savings and loan crisis in the 1980s. In 2004 he was appointed to the board of directors. Hage became president/CEO of Freehold Savings Bank in 2007, and was instrumental in laying the groundwork for today’s strong and stable institution under his leadership. He served the bank for 25 years and had devoted 50 years to the banking industry. He was a board member of the Freehold Center Partnership and Thrift Institutions Community Investment Corporation of New Jersey (TICIC). He will be missed by all.

Bank, and is retired. He has been on the board since 1984 and has served as chairman.

Cicatiello is chairman of CN Communications International Inc., a public relations and marketing communications firm. Minkin has more than 30 years of corporate benefit and human resource experience.

NVE BANK

Robert Rey, president/CEO of NVE Bank, has been elected as second vice chair of America’s Mutual Banks, an association of mutual financial institutions. Rey will serve for a twoyear term ending in January 2016. Rey holds a bachelor’s degree in microbiology and has received his MBA from Rutgers University.

He has also completed the Wharton School of Business Leadership Development Program.

VALLEY NATIONAL BANK

Dianne M. Grenz has been promoted to executive vice president and director of sales.

Grenz brings over 25 years of business experience to her position. She graduated from Centenary College with a degree in marketing and management and received her executive MBA in marketing and management from the Business School of Rutgers, The State University of New Jersey. Andrea T. Onorato has been appointed executive vice president and director of retail operations.

Onorato brings over 37 years of banking experience to her position. She received her bachelor’s degree in business administration from William Paterson University and is a graduate of the Stonier Graduate School of Banking.

MANASQUAN SAVINGS BANK

Manasquan Savings has announced the promotion of four key team members. Jeffery Casten has been named senior vice president and director of commercial lending and will assume the lead departmental role. Mary Anne Whittemore has been promoted to senior vice president. Her banking experience spans 30 years and includes commercial credit analysis, smallbusiness and middle-market lending. Michael Acampora has been promoted to underwriting manager. With 25 years of banking experience, he will oversee the underwriting of residential loans. Nancy M. Canary was promoted to senior vice president and controller. Canary joined the bank in 1993, and will continue her oversight of the accounting department while taking on new finance department initiatives.

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Spring 2014 New Jersey Banker

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Bank Notes

Manasquan Savings Bank

FULTON BANK OF NEW JERSEY

Timothy Losch, the regional president of the Central New Jersey market for Fulton Bank of New Jersey has announced his retirement. Losch will continue to chair Fulton Bank of New Jersey’s Central Advisory Board.

ATLANTIC STEWARDSHIP BANK

Paul Van Ostenbridge, president/CEO, was presented with the John A. Pasquale, III Community Award. The award was bestowed upon Van Ostenbridge at the St. Joseph’s Wayne Hospital Foundation Annual Charity Ball. Van Ostenbridge was recognized for his dedicated commitment

Timothy Losch

John R. Garbarino

and contributions to St. Joseph’s Wayne Hospital, as well as to the many community organizations he is actively involved with.

He is a former director of the New Jersey Bankers Association. Van Ostenbridge received his bachelor’s degree from Montclair State University.

GARBARINO NAMED RECIPIENT OF FORREY GALLMAN AWARD

The NJBankers board of directors has named John R. Garbarino, chairman and CEO, OceanFirst Bank, as recipient of the 2014 Forrey Gallman Award. The award is named for Robert C. Forrey and Emil A. Gallman, long-time chief executive officers

of the New Jersey Bankers Association and New Jersey Savings League. Garbarino is being recognized for his long-term service to NJBankers, New Jersey League and to the state’s banking industry. Included among the accomplishments in a 43-year community banking career, he has served as chairman of the New Jersey Savings League, served three terms on the board of directors of the Federal Home Loan Bank of New York, and served as a director of America’s Community Bankers. The award will be presented at the 110th Annual Conference at the Marco Island Marriott Beach Resort in Marco Island, Florida.

NJBANKERS WELCOMES NEW MEMBER NOAH BANK

NJBankers welcomes Noah Bank, headquartered in Elkins Park, Penn., as our newest member. Noah Bank has branches and loan production offices in four states and Washington, DC. Offices are located in Elkins Park and Jenkintown, Penn; Edison, Fort Lee and Palisades Park, NJ; Manhattan, NYC, and Flushing, Queens, NY; and Annandale, Virginia. For more information, visit www.noahbank.com.

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26 New Jersey Banker

Spring 2014

Gerald L. Reeves

Angela Snyder

James S. Vaccaro

NEW JERSEY BANKERS ASSOCIATION NEWS The NJBankers board of directors elected officers for the association’s 2014-15 fiscal year. They are: Chairman: Gerald L. Reeves, president and CEO, Sturdy Savings Bank First Vice Chairman: Angela Snyder, CEO and vice chairman, Fulton Bank of New Jersey Second Vice Chairman: James S. Vaccaro, president and CEO, Manasquan Savings Bank Gerald L. Reeves is president, CEO and director of Sturdy Savings Bank. Reeves joined the bank in 1991, where he started Sturdy’s commercial lending program. During his 30-year banking career, he was also active in commercial lending at Horizon Bancorp and Chemical Bank.

Angela Snyder is CEO and vice chairman of Fulton Bank of New Jersey, a Fulton Financial subsidiary. Snyder is responsible for the strategic direction and growth of Fulton Bank of New Jersey. She has more than 20 years of experience in the financial services industry.

Donald McCarty

James Vaccaro, president and CEO, Manasquan Savings Bank, oversees the $870 million mutual bank formed in 1874. He has more than 30 years of experience in the financial and insurance industries.

He is a former member of the board of the New Jersey Bankers Association.

The officers will take their oath of office during the Second General Session of the 110th Annual Conference at the Marco Island Marriott Beach Resort in Marco Island, Florida.

In addition, Donald McCarty, CEO for Susquehanna Bank’s Greater Delaware Valley Market, has been appointed by the NJBankers board of directors to fill the District 3 vacancy resulting from the resignation of Thomas Geisel.

A 37-year banking veteran, McCarty began his career as a management trainee and has held progressively more responsible management positions at a variety of community and large, regional banks before joining Susquehanna Bank in 2000. He earned his bachelor’s degree in economics from Millersville University and attended graduate school, majoring in business and finance, at Penn State.

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Group discounts apply to policies written in High Point Property and Casualty Insurance Company. May not be combined with any other group discounts. ©2014 Plymouth Rock Management Company of New Jersey. All rights reserved. 7353/022014

Spring 2014 New Jersey Banker

27

Bank Shots

Lakeland Bank President/CEO Tom Shara (back row) stands with colleagues, from left, Joe Kapraszewski, Judy Forrester, Donna Orta, Jennifer Sparnon and Ken Partyka at a ceremony to celebrate their 10 years of service with the bank. (Not pictured: Mary Beth Carney and Debra Reade.)

Mariner’s Bank’s CLO Sal Cortorillo and COO Raul Oseguera presented Brianna Antonelli with the NJCPA Scholarship at an awards ceremony at the Ramsey Country Club. This award is to recognize students who have goals of pursuing a career in accounting with a financial gift that will aid in enhancing their opportunities.

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28 New Jersey Banker

Spring 2014

Bogota Savings Bank donated $2,500 to Family Promise of Bergen County, whose mission is to provide hospitality to the homeless and to keep families together in times of crisis, guiding them through temporary periods of homelessness. Pictured, Joseph Coccaro, president/CEO, Bogota Savings Bank, and Kate Duggan, Family Promise.

John E. McWeeney, Jr., president/CEO of NJBankers, attended the graduation of the Financial Services Academy, a new program from Center for Financial Training, in partnership with RaiseHope Foundation Inc. (RHF). RHF trains, mentors and places people with disabilities and military veterans in competitive careers in financial services.

To celebrate its 175th anniversary and herald a new era, Provident Bank has introduced a new logo. The decision to refresh Provident Bank’s logo was made after conducting extensive research with customers, employees and the marketplace. The new logo retains the beehive theme, which represents Provident Bank’s commitment to strength and partnership, while updating the color, shape and font to reflect a modern look more representative of the 21st century.

Laura Jackson, vice president of Gibraltar Bank, was the winner of a $250 charity check at the NJBankers BankHorizons event. Jackson chose to donate the check to the Morris County Chapter of the Links Inc. Pictured from left to right: Zachary Low, senior vice president, Northeast, BFS Group; Jackson; Walter Provost, president and CEO, Gibraltar Bank; and Arnie Winick, partner, BFS Group. BFS Group provided the funds for the contribution.

Sussex Bank celebrated its 38th anniversary with employees and customers by having cake, coffee and conversations! Sussex Bank opened its first office in Franklin Borough, Sussex County, on Feb. 9, 1976. Anthony Labozzetta, president/ CEO, commemorates the anniversary by cutting the cake at the bank’s recent celebration.

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Spring 2014 New Jersey Banker

29

Bank Shots Beacon Trust Company, a subsidiary of The Provident Bank, has a newly designed website, LinkedIn page and logo to support and promote its brand promise of “Guiding you forward.” The new Beacon Trust logo, featuring the tagline “Guiding you forward,” reflects a modern interpretation of a guiding light as depicted in the company’s previous and well-known “lighthouse” logo.

The trustees of the New Jersey Bankers Education Foundation presented a $10,000 donation to the Office of Veteran Services at Rutgers University to assist veteran students facing financial hurdles in continuing with their education. The foundation is funded

by New Jersey banks. In general, scholarships cover all or a portion of tuition and books/supplies not covered by an academic scholarship and Veteran Administration benefits. Front: Foundation Chairman Robert Stillwell, president/CEO, Boiling Springs Savings Bank; Robert Bright, assistant director, Veteran and Military Programs & Services-Rutgers University; NJBankers Chairman Stewart McClure, Jr., regional president, Lakeland Bank; and Col. Stephen Abel (Ret.), director, Veteran and Military Programs & Services-Rutgers University. Back left to right, NJBankers First Vice Chairman Gerald Reeves, president/CEO, Sturdy Savings Bank; James Silkensen, director, Somerset Savings Bank; Ryan Lind, Rutgers veteran; Thomas Krause, Rutgers student; Kevin Cummings, president/CEO, Investors Bank; John McWeeney, Jr., president/CEO, NJBankers; James Meredith, EVP/COO, NJBankers, and secretary/ treasurer Education Foundation; and NJBankers Second Vice Chairman Angela Snyder, CEO/vice chairman, Fulton Bank of New Jersey.

NJBankers recently hosted a New Associate Orientation. Orientations are designed to inform new NJBankers associate members about the many opportunities that are available to maximize the value of membership in the association. Front row; far left: Chairman Roseanne Casiere and Vice Chairman John Siracusa (far right) of the Associate Member Committee hosted the orientation for our newest associate members. (Please see New Associate Member listing on page 13 of this issue.)

30 New Jersey Banker

Millington Savings Bank contributed to the rebuilding of the Raptor Trust. A microburst that touched down at The Raptor Trust completely destroyed two of the larger cages in the hospital section of the facility. Five other cages were also damaged, but fortunately no birds were injured. The Raptor Trust features more than 70 cages to shelter birds at various stages of rehabilitation. Pictured accepting a supporting donation from Millington Savings Bank are, from left: Dr. Len Soucy, founder and president, Raptor Trust; Chris Soucy, associate director, Raptor Trust; Michael Shriner, president and CEO, Millington Savings Bank; and Karyn Whitehurst, educator, Raptor Trust.

Roselle Savings Bank and its President and CEO, Jill Schafhauser, were honored by HomeSharing for the bank’s longstanding efforts in supporting its mission. HomeSharing is a nonprofit organization that matches residents who need to share residences in order to continue living in them with individuals searching for affordable housing in the community. Schafhauser has been with the bank for 43 years and the bank is celebrating its 125th anniversary this year.

Spring 2014

THE POWER OF AN ADVANCE

One advance can help fund hundreds of neighborhood needs.

FHLBNY advances are a reliable liquidity source for our member lenders to finance home mortgage, small business, and economic development activities.

Sussex Bank, an FHLBNY member, used an advance to help provide financing assistance to Canterbury Village, a senior assisted living residence in West Orange, New Jersey.

Currently home to 40 senior citizens, the advance helped stabilize the not-for-profit housing facility’s economic future, while a portion of the funding was used to renovate its Victorian structure. This project enabled Canterbury Village to continue to offer quality care and housing services to seniors in Essex County and beyond, as it has since 1921.

Contact us to see how the power of an advance can improve your community.

101 Park Avenue, New York, NY 10178 | (212) 441- 6700 | www.fhlbny.com Note: The Federal Home Loan Bank of New York uses the word “advances” to refer to the loans it provides to our member lenders.

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