Transactions November 2016

November 2016

ICBA PRESIDENT AND CEO

CAMDEN R. FINE CHAMPION OF COMMUNITY BANKING

ANNUAL CONVENTION PHOTO RECAP | RISK MANAGEMENT

SM

DECEMBER 1, 2016 | The CFPB’s Four Ds of Fair Lending: Deceptive Marketing, Debt Traps, Dead Ends & Discrimination Susan Costonis, CRCM, Compliance Consulting and Training for Financial Institutions DECEMBER 6, 2016 | HR SERIES: Rewarding & Retaining the Best Employees Diane Pape Reed, CU Doctor DECEMBER 7, 2016 | CALL REPORT SERIES: Improving the Call Reporting Process: Documentation, Efficiency, Accuracy, Common Errors & FAQs Amanda C. Garnett, CPA, CFSA, CliftonLarsonAllen LLP DECEMBER 8, 2016 | Powers-of-Attorney In-Depth: Good Faith, Fraud & Fiduciary Capacity Elizabeth Fast, JD & SPA, Spencer Fane LLP DECEMBER 13, 2016 | CYBER SERIES: Meeting Federal Requirements for Tech-Based Marketing: Websites, Social Media, Robo Calls & More Steven Van Beek, Esq., NCCO, Howard & Howard Attorneys PLLC

DECEMBER 14, 2016 | Loan Review: Consumer, Commercial & Real Estate Ann Brode-Harner, Brode Consulting Services, Inc. DECEMBER 15, 2016 | Branch Transformation: Strategies for Moving from Transaction Centers to Customer Engagement Centers David Peterson, i7strategies DECEMBER 20, 2016 | The Growing Scope of Vendor Management: Business Continuity, Cyber Security, Contract Negotiation & More Branan Cooper, Venminder DECEMBER 21, 2016 | Essential Compliance Training for the Board & Senior Management Dawn Kincaid, Brode Consulting Services, Inc.

November 2016 | CONTENTS

COVER STORY

Features 24 PACB: Standing Up for Community Banks 34 Risk Management Guidance on Periodic Risk Reevaluation of Foreign Correspondent Banking 40 Technology Supplier Selection and Risk Management 42 Look Under the Hood: It Pays To Be Choosy When Buying MBSs 46 When it Comes to Cybersecurity and Your Bank, What Do Your Customers Think?

26 CAMDEN R. FINE: CHAMPION OF COMMUNITY BANKING

48 Superior Court Uses Common Sense: A Charged-Off Loan Is Not a Cancellation 50 News From You 51 Happy Anniversary!

THAT’S MY BANK

52 PACB Welcomes Our New Member Bank: First Priority Bank 52 PACB Member Bank Employment Opportunity: Fleetwood Bank

Advertisers 03 04 45 07 03 04 04 39

08

Baker Tilly Virchow Krause, LLP CSI - Computer Services, Inc. Herbein + Company Promontory Interfinancial Network Shazam Inc. Shumaker Williams, P.C. Smith Elliot Kearns & Company, LLC SR Snodgrass

139 TH ANNUAL CONVENTION RECAP | LAKE BUENA VISTA, FLORIDA WWW.PACB.ORG | TRANSACTIONS | 1

PACB HEADQUARTERS

BUSINESS HOURS

2405 North Front Street Harrisburg, PA 17110 www.pacb.org

8:30 a.m. - 5:00 p.m.

Monday through Friday Telephone: 717.231.7447 Fax: 717.231.7445

2015-2016 EXECUTIVE COMMITTEE Chairman Frederick P. Henrich Coatesville Savings Bank Chairman Elect Troy A. Peters Jonestown Bank & Trust Co. Vice Chairman Troy M. Campbell Altoona First Savings Bank Secretary/Treasurer Jon P. Conklin Woodlands Bank President/CEO Dominic D. DiFrancesco PACB Immediate Past Chairman Terry L. Foster MCS Bank General Counsel Keith A. Clark, Esq. Shumaker Williams, P.C.

PACB STAFF

Education Edward Martel Jonestown Bank & Trust Co. Wendy Nagle PennCrest BANK Finance & Budget Lori Cestra Enterprise Bank FIRSTPAC George M. Evans Indiana First Bank Chuck Leyh Enterprise Bank Legislative Robert J. Fignar First Community Bank of Mercersburg Craig Zurn Jim Thorpe Neighborhood Bank PACB Foundation Richard L. Meares Fleetwood Bank Chuck Leyh Enterprise Bank

President/CEO Dominic D. DiFrancesco nick@pacb.org Twitter: @PACB_Nick

PACB Services Patrick O’Brien Community Bank Thomas Ondek Sewickley Savings Bank

SVP Strategy and Operations Barbara W. Holbert barbara@pacb.org

PACB SOCIAL MEDIA

Communications Director Eric A. Kovac eric@pacb.org Twitter: @PACB_Eric

Facebook: PACommunityBanks Twitter: PaCommBankers Flickr: PaCommunityBankers YouTube: PaCommunityBankers

Comptroller Patricia L. Kuharic patty@pacb.org Director of Government Relations Allison L. Coccia allison@pacb.org

Simply visit http://www.pacb.org/transactions/ from your mobile browser or scan the QR code to the left to access Transactions on the go!

STANDING COMMITTEES CHAIRS & VICE CHAIRS

ADVERTISING SALES To advertise in Transactions, please contact Patty Kuharic patty@pacb.org 717.231.7447

Executive Administrative Assistant Evelyn Sponsler evelyn@pacb.org Executive Assistant to the President Jena Wolgemuth jena@pacb.org

Transactions is published monthly by Pennsylvania Association of Community Bankers, 2405 North Front Street, Harrisburg, Pennsylvania 17110-5319. Member & Associate Member subscriptions, $60 per year. All other subscriptions, $84 per year.

Please send address changes to PACB, Attention: Transactions, 2405 North Front Street, Harrisburg, Pennsylvania 17110-5319.

2 | TRANSACTIONS | WWW.PACB.ORG

Guidance to help you navigate the maze of OCC vendor management regulations.

The Office of the Comptroller of the Currency has strict standards regarding vendor management. Our banking industry specialists understand the increased burden this places on financial institutions and can help organizations implement guidelines, monitoring, and oversight.

Connect with us: bakertilly.com/industries/banking

Sign up to receive timely alerts and articles: bakertilly.com/insights/subscribe Baker Tilly refers to Baker Tilly Virchow Krause, LLP, an independently owned and managed member of Baker Tilly International. © 2016 Baker Tilly Virchow Krause, LLP

WE HAVE NO CHOICE OR FLEXIBILITY WITH OUR CORE PROVIDER.

SIGNIFICANT MONTHLY COST SAVINGS WITH TERM-FIXED PRICING...

WHAT ABOUT SHAZAM CORE SERVICES? THEY ALLOW OPEN INTEGRATION TECHNOLOGY.

WE NEED A TRUE PARTNER, WHAT ELSE DO THEY OFFER? ALSO, CUSTOMER SERVICE & SUPPORT FROM INDUSTRY EXPERTS THAT UNDERSTAND OUR NEEDS. NOW THAT'S...

SHAZAM’s focused on strengthening community financial institutions by offering choice and flexibility for all your core processing needs. Call us today to learn more about SHAZAM Core Services.

Now that’s epic.

Delivering Unlimited Possibilities shazam.net/epic | 855.314.1212 | @SHAZAMNetwork

WWW.PACB.ORG | TRANSACTIONS | 3

Your Bank. Our Experience.

Better Together.

FROM STARTUP THROUGH SUCCESSION

Lawyers Helping Bankers Succeed For More Than 40 Years • Bank Mergers & Acquisitions • Banking & Mortgage Regulation/Compliance

Top L-R: Gary D. Snyder, CPA • Scot E. Orndorff, CPA • Scott N. Drake, CPA Bottom L-R: Luke C. Martin, CPA • DoriAnn F. Hoffman, CPA

• Securities Regulation • Litigation, Arbitration & Mediation • Employment Law & Executive Compensation • Trademark Registration And Protection • Strategic Planning

1-888-794-5542

WWW.SHUMAKERWILLIAMS.COM

• Corporate Governance

Smith Elliott Kearns & Company, LLC CERTIFIED PUBLIC ACCOUNTANTS & CONSULTANTS

Insight. Integrity. Results. TM P R O U D LY S E R V I N G P E N N S Y LVA N I A

•

NEW JERSEY

•

M A RY L A N D

•

NEW YORK

•

DISTRICT OF COLUMBIA

717.263.3910 • 888.272.7351 SEK.com

THE

SECRET

IS OUT! Today’s banks are searching everywhere for a technology partner that does business the same way they do—a commitment to innovation and a focus on service.

Well, look no further than CSI. Our innovative solutions and customer-centric approach are the secret combination you’ve been waiting for.

csiweb.com/Secret 4 | TRANSACTIONS | WWW.PACB.ORG

A WORD FROM PACB’S CHAIRMAN YOUR DUTY AS A PACB MEMBER, AS A COMMUNITY BANKER, AS A LEADER. t is entirely possible that by the time you are reading this we will have elected a new president.

Whether your candidate won or lost we will have to come together as a nation to embrace a new resident in the White House in January.

We may also have to welcome some new faces in Harrisburg in January, too.

This is the process that makes America unique. One that sees the peaceful turnover of the reins of government every few years. It is a process that we should all participate in proudly and prudently.

It is an opportunity for us to exercise our patriotic duty.

Duty.

It’s an interesting term.

The Merriam-Webster Dictionary defines it as “something that is done as part of a job.”

As a result of changes flowing from the election process, of changing regulations, and even from changing markets and demographics across Pennsylvania, you have a duty to become a more engaged member of PACB. Involvement may include as Board members, committee volunteers, education supporters, and even advocacy promoters. Certainly getting to know your representatives and elected officials is a key element.

This is your duty to your fellow community bankers.

But since we’re all so busy in our banks, our families, and our communities, we don’t always have time for this commitment. This is the one we always get push back about.

Oscar Wilde wrote “Duty is what one expects from others, it is not what one does oneself.”

One of my goals for the association over the next year is to increase our member involvement with and promotion of the PACB. We’ll need to not only involve more of our members’ director and management teams in our efforts, but also non-members’ director and management teams. I would wager that many of our non-members don’t really appreciate or understand why our association is so important to them.

“WE MUST COMMIT OURSELVES TO OUR COMMUNITIES; IT’S WHO WE ARE, IT’S WHAT WE DO.”

That’s a rather broad definition and leaves plenty of room for interpretation. I’d like to narrow it a little bit if I may.

And specifically, as it relates to service to others.

Ben Stein, who has very little historical significance, wrote “I came to realize that life lived to help others is the only one that matters and that it is my duty ... This is my highest and best use as a human.”

With that as a bridge, how can we, as community bankers, help others?

Two quick examples come to mind without even giving it much thought.

We must commit ourselves to our communities; it’s who we are, it’s what we do. It’s built into many of our Mission Statements and Strategic Plans. Defining and supporting our individual communities is our duty.

Nobody ever argues that one.

The other involves our duty to support each other as community bankers.

Of course, I’m referring to your involvement with the PACB. First, thank you for your commitment to PACB and for your involvement.

Our efforts at advancing legislation and working with legislators to protect community banks is unrivaled.

Our membership is not skewed in favor of large super regional banks and national Wall Street banks.

Our duty to ourselves, our banks, and our communities then, is to do what we can to strengthen each.

To summarize, the Boy Scouts of America pledge states “On my honor, I will do my best to do my duty to God and my country.”

An admirable goal for all of us.

FRED HENRICH IS CHAIRMAN OF PACB AND PRESIDENT/CEO OF COATESVILLE SAVINGS BANK, COATESVILLE, PENNSYLVANIA. WWW.PACB.ORG | TRANSACTIONS | 5

FROM THE PRESIDENT/CEO’S DESK

elcome to our November edition of Transactions magazine! It is important to note that this publication is going to print prior to November’s General Election, so any thoughts on the meaning of the results will have to wait until next month. In the meantime, we offer you an edition filled with topics of interest to community bankers.

We are pleased to have ICBA President Cam Fine on the cover of this month’s edition. In his role, Cam has time and again shown his dedication and enthusiasm for the community banking industry. He fights hard and has earned the respect of the industry and our elected leaders.

The past eight years have been an extremely challenging time for community banking. Each time a money-center bank like Wells Fargo commits an egregious, unethical, possibly criminal act, the entire banking industry stands at risk of retribution through a swift and negative legislative response. Clearly, Wall Street banks need to be shackled in order to contain their insatiable thirst for profits. After all, this is not the first time a Wall Street bank has been caught committing a compromising act, but community banks–institutions built on trust and integrity–should not be the recipients of the heavy hand of punitive regulation. As a trade association exclusively representing community banks, it is PACB’s responsibility to stand with the ICBA in a united effort to protect our membership’s reputation and to defend the entire community banking industry from the ill-advised policy actions of Washington and Harrisburg.

Why does the loss of local financial services matter? Community banks provide an overwhelming majority of the small business loans that create jobs in Pennsylvania. Community banks provide a significant portion of the home mortgages that allow a firsttime home buyer to provide stability to their family. There are countless stories that describe the manner in which community banking – relationship banking – makes a positive difference in the lives of people. Likewise, communities across this Commonwealth have benefited from the philanthropic efforts of our membership. Many of these stories are profiled in this magazine each month. These are the stories that motivate Cam and his ICBA team and me and my PACB team to fight specifically for our great community banking industry.

Community banking is a critical part of our nation’s economy, so much so, that it deserves to have its very own strong voice fighting to secure its future. I give a lot of respect to community bankers like our current chairman, Fred Henrich, who continues to fight for the City of Coatesville. When Wall Street and the credit unions left town, Fred and his team continued to work with local leaders to promote a stronger community. I respect the fight of community bankers like Chuck Leyh who must face off with regulators nearly every day in order to continue serving the needs of small businesses throughout western PA. Men and women like Fred and Chuck continue to invest their lives into the neighborhoods and communities that make up Pennsylvania. PACB and the ICBA are the organizations fighting to keep them strong and serving.

“COMMUNITY BANKING IS A CRITICAL PART OF OUR NATION’S ECONOMY.”

Last month I had the opportunity to sit and talk to several members of Pennsylvania’s Congressional Delegation. These leaders are friends of community banking and they question why some organizations fail to support legislative efforts to tier regulatory burden to meet the corresponding risk. Even our members of Congress acknowledge the competing policy interests of Wall Street and the community banking industry. Like the ICBA, PACB stands firmly by our mission to defend the interests of small businesses and hardworking families that get their financial resources – mortgages and business loans – from their local community bank. These people do not and will not care about the regulatory burden placed on Wall Street banks, because Wall Street banks are not interested in their business, nor are they interested in them. Our members–local community banks–care about their need, care about them.

I have mentioned this many times before, but some still find it surprising. There are 15 out of 67 counties in Pennsylvania that do not have a community bank headquartered within their border. This number continues to rise as bank mergers continue to occur. Statistically, it is not that we are losing more banks than in the past, but the onerous nature of the current regulatory environment all but prevents the establishment of new (de novo) institutions.

6 | TRANSACTIONS | WWW.PACB.ORG

Some would say that the entire breadth of the financial services industry should be represented by one voice. I say it would be impossible for one voice to represent the incredibly diverse institutions that comprise the financial services industry. For those who disagree with my position, I ask a simple question. Which voice do you want speaking for you? The one that invests their time and effort defending the actions of money-center banks like Wells Fargo or the voice that has the respect of Congress and fights daily for community banking? You truly NICK DIFRANCESCO can’t have it both ways.

IS PRESIDENT/CEO OF Until next month…

PENNSYLVANIA ASSOCIATION OF COMMUNITY BANKERS.

BUILD RELATIONSHIPS

With or Without Keeping Funds on Balance Sheet

REDUCE COLLATERAL BURDENS and Increase Asset Liquidity

DIVERSIFY FUNDING

in a Flexible, Cost-Effective Way

Smart, Profit-Enhancing Solutions To learn more, contact Ryan Geib, Regional Director, at (866) 776-6426, ext. 3441 or rgeib@promnetwork.com.

Limits, terms, and conditions apply. © 2016 Promontory Interfinancial Network, LLC.

139th Annual Convention R ACB’s 139th Convention was a celebration of Community Banking in a Magical World like no other. PACB hosted more than 325 individuals dedicated to the advancement and betterment of the community banking industry in the Commonwealth.

There was an air of excitement throughout the event and bankers used it to reenergize their entrepreneurial and visionary spirit through interaction with other industry leaders, providers and expert presenters…all who clearly recognize the importance and promising future of community banking.

8 | TRANSACTIONS | WWW.PACB.ORG

The four-day event offered more than 10 hours of educational curriculum instructed by highly respected industry consultants, providers and bankers from across the country. The educational program was enhanced by interactive networking events; an exhibit hall starring the “who’s who” of providers, themed entertainment, and of course visits from a very famous Mouse and his friends!

The educational sessions and networking events facilitated the opportunity to exchange ideas and conversations, while challenging attendees to evaluate their own bank and commit to new community banking strategies.

Recap | Lake Buena Vista, Florida By: Barbara Holbert; Photos by: Eric Kovac Our thanks to the exhibitors and corporate sponsors that provided exceptional support of the Convention through financial commitment and exposing bankers to state-of-the-art products, services and strategies that will assist in the growth and development of the community banking industry. Without their support, the Convention, as it is currently enjoyed, could not continue. Bankers and the PACB Team salute them!

The fun and magic of Disney presented participants an exciting and action-packed atmosphere to mix business with pleasure. Groups of financial professionals were often spotted hugging Disney characters, riding rides and

gazing at the spectacular fireworks and Illuminations Show. Bankers also found plenty of time to network with friends and colleagues, take walks around the beautiful Grand Floridian Resort & Spa, enjoy the sun, and just embrace being together and being bankers.

As 2017 approaches, one thing is clear, there is definitely excitement in the air about Community Banking in Pennsylvania…be a part of the “movement” and participate with PACB throughout the year. Mark your calendar for PACB’s 140th Annual Convention, September 20-24 at Coeur d’Alene Golf Resort & Spa, Coeur d’Alene, Idaho.

WWW.PACB.ORG | TRANSACTIONS | 9

ednesday was the perfect kick-off to Convention 2016. We hosted a lovely luncheon to honor PACB’s Past Chairmen and provide them with an association state of the union. Later that afternoon, the PACB Board met and discussed issues and strategies for 2017 before spending the evening at a fantastic dinner event at Epcot® sponsored by Equias Alliance, Midland National and Great-West Financial. We visited,

10 | TRANSACTIONS | WWW.PACB.ORG

had photo ops with the world’s most famous mouse and enjoyed a delicious meal and conversations. The evening was capped with “box seats” at the Epcot® IllumiNations: Reflections of Earth show. This truly was an amazing event and we can’t thank our sponsors enough for their support.

Thursday began with a new educational pre-convention director session. Jack Salvetti provided a valuable pro-

gram to a packed house. The afternoon’s general sessions were outstanding! Chris Low, FTN Financial, Ted Peters, Bluestone Financial Institutions Fund and Matthew Pieniazek, Darling Consulting and Mark Evanco, FHLBank Pittsburgh provided insights into the economy and what bankers can expect in 2017, the state of the community banking industry and positioning the balance sheet in a new interest rate cycle.

Thursday evening, convention delegates attended the Welcome Reception sponsored by PACB Services, Inc. and met with a couple of famous princesses while congregating in the Exhibit Hall to learn about exciting products and services offered through convention vendors and sponsors. The entire Convention delegation greatly appreciated the support and involvement of our exhibitors.

WWW.PACB.ORG | TRANSACTIONS | 11

riday morning provided time to visit with our vendors and sponsors and a dawn-duster Investment Banking Panel. This panel was manned by the who’s who of investment banking with representatives from Sandler O’Neill + Partners, Boenning & Scattergood, Griffin Financial and Keefe, Bruyette & Woods, A Stifel Company.

The delegation then convened for stirring patriotic opening ceremonies and PACB’s Annual Meeting. Terry Foster, PACB Chair, EVP and CEO of MCS Bank addressed his 12 | TRANSACTIONS | WWW.PACB.ORG

peers from the heart, discussing his pivotal year as PACB Chair and then welcomed newly elected Chair Frederick Henrich, President and CEO Coatesville Savings Bank. Fred shared his vision for PACB moving forward and expressed his utmost thanks to Terry for his exemplary service.

The association’s business was conducted and the 2016-17 officers and board members were presented. Nick DiFrancesco awarded and recognized Community Service and FirstPAC award winners. The top Grow Your Community awards were distributed to Woodlands Bank, Somerset

Trust Company, First Columbia Bank & Trust and Sewickley Savings Bank. The top FirstPAC honors went to Community First Bank, Reynoldsville.

The session concluded with an inspirational presentation from ICBA President and CEO Camden Fine. Mr. Fine rallied the community bankers to speak with their voice; to educate legislative officials, media outlets and the public that there is more than one voice in the banking industry, and as community bankers, we speak for the banking industry that this Nation is built on. Community Bankers speak for

friends, neighbors and local businesses…#banklocal. Community Bankers need to speak loudly and often!

Friday afternoon was packed with concurrent sessions covering the most crucial topics for bankers and directors.

During the evening delegates honored “Main Street” and Main Street Banking, with appearances from the Dapper Dans, Mickey & Minnie Mouse and of course Main Street’s Mayor and his lovely wife. Following a dinner of Main Street Fare, bankers headed outside for a private fireworks viewing sponsored by FTN Financial.

WWW.PACB.ORG | TRANSACTIONS | 13

he concluding day of convention 2016 began with three breakfast programs. CEO and Director breakfast sessions were presented and sponsored by S.R. Snodgrass, Luse Gorman, Stevens & Lee and Griffin Financial. The spouses also gathered together to see old friends, make new ones and expand

14 | TRANSACTIONS | WWW.PACB.ORG

communication between themselves and PACB. The remainder of Saturday morning was packed with educational sessions. The rooms were full and the presentations were superb. Some of the subjects included, How Will Your Bank Thrive, Media Relations – Leverag-

ing Your Advantage as a Community bank, How to Make Your Interest Rate Risk Model Relevant, Audit Committees Under the Microscope, Corporate Governance and Why Your Competition’s Cyber Breach is Your Problem, just to name a few.

PACB would like to thank this year’s entire Associate Member speaker slate for their outstanding educational presentations. Without them, our Annual Convention would not be such an excellent educational value year after year!

WWW.PACB.ORG | TRANSACTIONS | 15

aturday evening the bankers dressed to the nines and attended the Annual Gala dinner and its activities. Many thanks to FHLBank Pittsburgh for their Gala dinner sponsorship!

Focus for the evening was the induction of three remarkable

16 | TRANSACTIONS | WWW.PACB.ORG

individuals into the PACB Hall of Fame: former PACB Chair, Dennis D. Cirucci Alliance Bank; Mark E. Nelson, Union Building & Loan Savings Bank; and Frederick “Ted� Peters, Bryn Mawr Trust Company. These gentlemen are true pillars of the community banking industry. Their banking expertise, guided by an unquestionable moral compass, makes

them shining stars of their industry. It was a magical evening and an impeccable conclusion to a successful Convention!

Well that’s a wrap! See you in 2017 for PACB’s 140th Annual Convention. Next year, we will be meeting from September 20-24 at Coeur d’Alene Resort in Coeur d’Alene, Idaho.

139th Annual Convention Lake Buena Vista, Florida September 22-24, 2016

WWW.PACB.ORG | TRANSACTIONS | 17

139th Annual Convention Lake Buena Vista, Florida September 22-24, 2016

18 | TRANSACTIONS | WWW.PACB.ORG

PACB GALA

A RED CARPET PORTRAITS

WWW.PACB.ORG | TRANSACTIONS | 19

139th Annual Convention Lake Buena Vista, Florida September 22-24, 2016

20 | TRANSACTIONS | WWW.PACB.ORG

DISNEY CHARA

ACTER MEET & GREET EVENTS Photos by: Disney Event Group

WWW.PACB.ORG | TRANSACTIONS | 21

139th Annual Convention Lake Buena Vista, Florida September 22-24, 2016

22 | TRANSACTIONS | WWW.PACB.ORG

DISNEY CHARA

ACTER MEET & GREET EVENTS Photos by: Disney Event Group

WWW.PACB.ORG | TRANSACTIONS | 23

PACB: S Com ast month, PACB criss-crossed the commonwealth in an effort to bring community bankers and elected officials together to share ideas and concerns. We talked candidly about the political and legislative climate in DC and the cumbersome and costly regulatory environment plaguing community banks.

The community bank roundtables were held in mid-October with congress in recess. Not to return until after the November election, members of Congress will be in session for approximately four weeks post-election through the end of the year. The big looming question…What will the election bring?

PACB and community banks met with Brian Fitzpatrick, candidate for the 8th Congressional District; Congressman Ryan Costello, of the 6th Congressional District; and Congressman Keith Rothfus, of the 12th Congressional District.

BRIAN FITZPATRICK, CANDIDATE FOR THE 8TH CONGRESSIONAL DISTRICT Covenant Bank graciously hosted our meeting with Brian Fitzpatrick, candidate for the 8th Congressional District, in Doylestown.

Brian’s brother, Congressman Mike Fitzpatrick– currently a member of the House Financial Services Committee and true friend of the community banking industry–is retiring at the end of this session. Brian, an attorney and former FBI agent, displayed an excellent grasp of the issues facing community banks. The bankers talked about the crushing blow of compliance costs, the need for tailored regulatory relief legislation, and concern over the need of separation of powers within the CFPB. John Spier, CEO of Covenant Bank noted that 24 | TRANSACTIONS | WWW.PACB.ORG

community banks are job creators and act like small businesses in their community. Fitzpatrick relayed his natural support for things like a simpler tax code, less regulation and the Regulations from the Executive In Need of Scrutiny Act (or the REINS Act). The legislation “would require any executive branch rule or regulation with an annual economic impact of $100 million or more…to come before Congress for an up-or-down vote before being enacted,”1 according to thehill.com.

CONGRESSMAN RYAN COSTELLO, 6TH CONGRESSIONAL DISTRICT Phoenixville Federal Bank & Trust served as a worthy host for the community bank roundtable with Congressman Ryan Costello. Elected in 2014, Congressman Costello, in just 2 years in office, has been a standout member for community banks, cosponsoring significant regulatory relief legislation.

He was well-versed in the hardships placed on community banks and echoed the need for immediate relief. Brendan McGill, President and COO of Harleysville Savings Bank talked about the nature of community banking and the reason why small business prefers to work with community banks; accessible personal relationships and a thorough understanding of their communities. The bankers talked with the Congressman about the need for CFPB reform, with Dick Kunsch, CEO and Vice Chairman of Phoenixville Federal Bank and Trust noting that a federal appeals court had recently found the CFPB’s single-director structure to be “unconstitutional.”2 Also discussed: the Department of Labor’s New Overtime Rule, the ever-rising rates in the Affordable Care Act, and the progress of the Financial CHOICE Act, a comprehensive package of regulatory relief measures for community banks.

Standing Up for mmunity Banks By: Allison Coccia

CONGRESSMAN KEITH ROTHFUS, 12TH CONGRESSIONAL DISTRICT Community bankers from Altoona, Somerset, Pittsburgh and Lewistown traveled to meet and have lunch with Congressman Rothfus in Johnstown. Congressman Rothfus has been nothing short of a leader for community banks in Congress, co-sponsoring nearly every major community bank proregulatory relief legislation; and authoring legislation addressing mutuality vibrancy and seeking an independent appeals process for community banks without fear of retaliation from regulators. Congressman Rothfus talked about the tenuous state of Washington, D.C. and the importance of working directly with community bankers like Chuck Leyh, President and CEO of Enterprise Bank, whose idea helped draft the independent appeal process legislation.

The recent Wells Fargo scandal was a big topic of discussion in all of the roundtables. Community bankers expressed concern that it has tainted the spirit of regulatory reform for community banks in Washington, and in turn could trigger a response of even more regulation.

PACB President and CEO, Nick DiFrancesco, reminded those in attendance that it is imperative for the community banking industry to set themselves apart and to remind elected officials and their communities that they are not mega banks. Community banks are not “one voice” with the entire banking industry, because community banks operate on a very different model. Cam Fine, President and CEO of the Independent Community Bankers of America said, “Where the megabanks have their branches, community banks have their roots. There’s a huge psychological difference there in the philosophy and approach to banking between a community bank and a megabank.”3

Community banks are founded in true relationship banking, not transactional banking. The community bank model, “know thy customer,” allows them to build a deep understanding of their customers and communities, while taking a vested interest in its enrichment and growing the local economy.

Dodd-Frank was enacted to tamp down on large banks, but has had the unintended consequence of harming community banks and as a direct result, their customers.

The latest Wells Fargo scandal underscores the importance of relationships and education. Community banks must work to educate elected officials on their commitment to customer relationships, their imprint in the fabric of the community and why it is so important to set community banks apart from the rest.

Community banks must work to support those elected officials and candidates who value their vital role in the local economy and support their need for relief.

And for its part, Congress must address community bank regulatory reform now, seeking carve outs when able, to preserve these necessary community institutions.

www.the hill.com The REINS Act will keep regulations and their costs in check 9/4/15

1

https://www.cadc. uscourts.gov/internet/ opinions.nsf/AAC6BFFC4C4 2614C852580490053C38B/$fi le/15-1177-1640101.pdf

2

Cam Fine, President/ CEO, ICBA, interview, The Closing Bell 10/13/16

3

ALLISON COCCIA IS DIRECTOR OF GOVERNMENT RELATIONS AT PACB. SHE CAN BE REACHED AT 717.231.7447 OR ALLISON@PACB.ORG.

CAMDEN R. FINE:

CHAM OF COMMUNI

FRESH FROM JOINING PACB AT THE 139TH ANNUAL CONVENTION, ICBA PRESIDENT TO DISCUSS THE FUTURE OF COMMUNITY BANKING, WELLS FARGO, REGULATOR 26 | TRANSACTIONS | WWW.PACB.ORG

MPION ITY BANKING

T AND CEO CAM FINE SITS DOWN WITH PACB PRESIDENT AND CEO NICK DIFRANCESCO RY RELIEF, CREDIT UNIONS, AND MORE IN THIS EXCLUSIVE INTERVIEW. WWW.PACB.ORG | TRANSACTIONS | 27

“THE FUTURE OF COMMUNITY BANKING DEPENDS ON HOW WE AS AN INDUSTRY AND AS A COUNTRY RESPOND TO THE CHALLENGES OF EXCESSIVE REGULATION AND CONSOLIDATION.” 28 | TRANSACTIONS | WWW.PACB.ORG

PACB PRESIDENT/CEO NICK DIFRANCESCO (ND): Heading into your 14th year as President and CEO of the Independent Community Bankers of America (ICBA), you have guided community banks through some of the most challenging years for the banking industry. What trends are taking shape in the industry and in your opinion what does the future hold for community banking?

bated industry consolidation.

talk about its after-effects?

I think we’re also seeing community banks respond to the changing environment through innovation. Whether that’s using new technologies and social media, partnering with fintech companies, or embracing new custom-

CF: One of the major concerns of community bankers is how Washington responds. We’ve seen again and again how the misdeeds of the big banks result in new regulatory burdens for the community banks that have done nothing wrong. So ICBA is working to make sure any policy response differentiates between community banks and megabanks such as Wells Fargo.

“ICBA CONTINUES EDUCATING THE MEDIA AND THE PUBLIC ON THE DIFFERENCE BETWEEN THE LARGE BANKS AND COMMUNITY BANKS.”

ICBA PRESIDENT/CEO CAMDEN FINE (CF): The future of community banking depends on how we as an industry and as a country respond to the challenges of excessive regulation and consolidation.

We absolutely have to maintain a diverse and decentralized financial system to support our economy, consumers and small businesses. That’s why ICBA fights so hard for equitable regulation and relief for de novo banks, so community banks aren’t hamstrung by rules designed for the largest financial institutions, which has exacer-

ers like the millennial generation and those turned off by the megabanks.

There are plenty of opportunities out there for community banks.

ND: The Wells Fargo scandal has sent shockwaves through the financial institutions sector. It has implications far beyond the harm imposed upon its customers. Can you

Of course, these kinds of scandals at the largest and systemically risky banks can also affect our reputation among consumers, who will sometimes lump all banks together as bad guys. So ICBA continues educating the media and the public on the difference between the large banks and community banks. ICBA has spent decades building up goodwill for the community banking sector with policymakers in Washington, so we are not going to let the misdeeds of Wells tarnish our reputations.

WWW.PACB.ORG | TRANSACTIONS | 29

ND: You recently mentioned that the Wells Fargo scandal is a “defining moment for community banks.” Can you expand on that?

ND: What opportunities do you see for regulatory relief for community banks in the lame duck session and the 2017-2018 cycle moving forward?

CF: ICBA and community bankers are using this opportunity to clearly distinguish our business from that of the largest banks in the minds of both policymakers and the American public. In my view, the Wells Fargo fraud is a result of the megabanks’ transactionbased business model, which profits by squeezing transactions from as many customers as possible. This led directly to Wells Fargo’s phony accounts, and it contrasts sharply against the relationship-based model that keeps community banks accountable to their customers. By making this difference crystal clear, we can reach new customers and at the same time advance tailored banking regulations, which will benefit community banks and the customers and communities they serve.

CF: Much depends on how the election shakes out, but we have teed up a lot of our Plan for Prosperity regu-

30 | TRANSACTIONS | WWW.PACB.ORG

“ICBA IS VERY WELL-POSITIONED FOR THE NEXT CONGRESS.” latory relief proposals in Congress.

The 114th Congress has already passed many of our requests last session, and we are positioned to get more if there is a robust lame duck session. The House has passed a number of ICBA-advocated regulatory relief bills. And the House Financial Services Committee’s passage of the Financial CHOICE Act puts us in

a great position on many of our top regulatory relief items included in that legislation.

Notably, we had success at the end of last year with the inclusion of some of our priorities in the FAST Act and omnibus spending package, such as relief for portfolio mortgage loans and privacy notices as well as the expanded 18-month exam cycle. So we’re going to try to replicate that success this fall.

With all the legislation that we have teed up, and with the excellent reputation that community bankers enjoy on Capitol Hill, ICBA is very well-positioned for the next Congress.

ND: Since their inception, credit unions have enjoyed a tax-exempt status based on their legal requirements to serve those of “modest means” with a common bond. Very recently, the National Credit Union

“IT CONTRASTS SHARPLY AGAINST THE RELATIONSHIP-BASED MODEL THAT KEEPS COMMUNITY BANKS ACCOUNTABLE TO THEIR CUSTOMERS.” WWW.PACB.ORG | TRANSACTIONS | 31

Administration (NCUA), their regulator, has sought to expand their powers, violating statutory requirements. ICBA has filed a lawsuit against NCUA. Can you tell us a little bit about it?

CF: ICBA has said that enough is enough when it comes to the credit union power grab. Our lawsuit has to do with an unlawful rulemaking allowing tax-exempt credit unions to exceed commercial lending limits set by Congress. The NCUA rule would allow credit unions to exclude nonmember commercial loans or participations from how they calculate the cap on member business loans. This flat-out contradicts federal law, so we’re calling the NCUA on it.

This is also part of a larger and

tions. And community bankers can personally help out through ICBA’s Credit Union Litigation Fund. More information on that is available at www.icba.org/stopthecugrab.

ND: We are losing community banks at a fast clip, with over 1,600 community banks folding in the past five years. Including Dodd-Frank, can you talk about some of the issues contributing to this trend?

CF: For me this begins and ends with regulation. Local banks have suffered from a ceaseless barrage of new regulations going back decades, and that has of course been exacerbated by the response to the financial crisis. Again, Washington’s response was intended for the Wall Street institutions that caused

Regulatory relief continues to be our top priority, and

WE’VE BEEN MAKING SIGNIFICANT AND MEANINGFUL PROGRESS. more disturbing trend, in which the NCUA has transformed itself from a federal financial regulator into a cheerleader for the credit union industry. For instance, the agency is also proposing a separate field-ofmembership rule that would significantly relax limits on communitybased credit unions, allowing them to serve entire states in some cases.

We hope that our lawsuit will get the NCUA to reconsider this rule, but we can amend our legal complaint to include the field-of-membership rule if the agency proceeds with it.

the crisis, but it has come down the hardest on community banks.

Ultimately, the NCUA has acted as a regulatory “rubber stamp” for credit unions, and we want to put a stop to it. ICBA continues to believe that the NCUA should not provide competitive advantages to credit unions while they remain exempt from taxation and many core regula-

Of course, we can actually do something about this, which is why tiered regulation is so important. We are not demanding regulatory relief for the sake of regulatory relief itself. We need it so community banks can best serve their local communities, create jobs, and support economic growth

32 | TRANSACTIONS | WWW.PACB.ORG

We’ve gone from about 18,000 banks 30 years ago to more than 8,000 in 2010 and roughly 6,000 today. Obviously there are many factors at work here, but regulations are having a direct impact on the kinds of products and services community banks can offer their customers, which shows how dramatically they affect consolidation.

Further, regulatory burdens inhibit the formation of de novo banks, which adds to the problem.

and opportunity. We want people and communities to prosper.

ND: In light of the current political climate and recent events, what are ICBA’s legislative and regulatory priorities for the coming cycle?

CF: Regulatory relief continues to be our top priority, and we’ve been making significant and meaningful progress. We want to build on our recent successes with the Financial Accounting Standards Board, the FAST Act, the new rules for de novo banks, and so on.

In Congress we’re going to continue advancing our aggressive plan for legislative changes—relief from the CFPB’s mortgage regulations, Basel III capital requirements, Durbin Amendment price controls on debit card interchange, and fair tax treatment given the challenge from our tax-exempt competition. At the regulatory agencies, we’re advocating more substantial reforms to the call report, an exemption from new rules on small-dollar lending, and accommodations in the administration’s overtime rule and forthcoming overdraft regulations.

Obviously there is a lot of political uncertainty surrounding the elections and what Washington is going to look like next year, but ICBA has always worked in a bipartisan manner, and that has served us well. Our seasoned regulatory and congressional teams have secured victories for our sector during times of Democratic or Republican control in Washington. And community banks continue to have an outstanding reputation no matter who is in charge, because of their hard work and dedication to their communities. And of course we enjoy a strong presence in states across the country because of our strong allies like PACB, so I’m confident that we’ll continue making progress.

As we say at ICBA, let’s fix what’s wrong with American financial services by strengthening what’s right with it—community banks.

Camden R. Fine is president and CEO of the Independent Community Bankers of America® (ICBA) representing the interests of nearly 6,000 community banks of all sizes and charter types. ICBA represents community banks in every state in the United States.

A native Missourian and career community banker, Fine came to ICBA in May 2003. Before joining ICBA, Fine chartered and organized Midwest Independent Bank of Jefferson City, MO and served as its president and CEO for nearly 20 years. In addition, Fine owned MainStreet Bank of Ashland, Mo., a $50-million-asset community bank. Prior to his banking career, Fine served as the Missouri State Tax Director under former Governor Christopher “Kit” Bond.

Fine was educated at the Virginia Military Institute and the University of Missouri, Columbia. He served as an officer in the United States Army and Missouri Army National Guard. He is a distinguished graduate and past chairman of the Stonier Graduate School of Banking. He is a member of the Exchequer Club in Washington D.C., as well as several other professional societies and clubs.

Fine has had opinion pieces published in The Wall Street Journal, The Washington Post, The Washington Times, The New York Times, USA Today, Politico and The Hill newspapers. Fine has been a guest host on CNBC’s “Squawk Box” several times and has been featured on CNN, MSNBC, Fox Business News, Bloomberg, PBS and NPR. He has been recognized by The Hill newspaper and CEO Update as one of Washington, D.C.’s most influential trade association CEOs and lobbyists for eight consecutive years.

33 | TRANSACTIONS | WWW.PACB.ORG

WWW.PACB.ORG | TRANSACTIONS | 33

RISK MANAGEMENT GUIDANCE ON PERIODIC RISK REEVALUATION OF FOREIGN CORRESPONDENT BANKING

By: Grovetta N. Gardineer

SUMMARY he Office of the Comptroller of the Currency (OCC) is issuing guidance to national banks, federal savings associations, and federal branches and agencies (collectively, banks) regarding periodic evaluation of the risks related to correspondent accounts for foreign financial institutions (foreign correspondent accounts). This guidance describes corpo34 | TRANSACTIONS | WWW.PACB.ORG

rate governance best practices for banks’ consideration when conducting these periodic evaluations of risk and making account retention or termination decisions relating to their foreign correspondent accounts. This guidance also reiterates the OCC’s supervisory expectation that, in connection with implementing the requirement that banks have established policies and procedures for conducting risk assessments for foreign correspondent accounts, banks should periodically evaluate and reassess this risk (risk reevaluation) as part of their ongoing risk management and due diligence practices.1

NOTE FOR COMMUNITY BANKS This risk management guidance is applicable to all OCC-supervised banks that maintain foreign correspondent banking relationships. Community banks and federal savings associations that engage in foreign correspondent banking and have relatively small portfolios may have different risk considerations than banks with larger correspondent banking portfolios. Those considerations, as well as the nature of smaller banks’ compliance functions or reporting hierarchies, may warrant modifications to these best practices in line with the bank’s particular risk considerations.

HIGHLIGHTS The OCC’s supervisory expectation that banks conduct periodic risk reevaluations of their customer portfolios applies to all banks. This guidance focuses on the periodic risk reevaluation expectation for portfolios that contain foreign correspondent accounts; these risk management expectations include measures taken by banks to ensure that risk profiles of their foreign financial institution customers are periodically updated. In conducting risk evaluations of foreign correspondent accounts, banks should confirm that procedures for reevaluating foreign correspondent account risks and making account-related decisions are implemented. Banks also should ensure that decisions to terminate foreign correspondent accounts, which result from risk reevaluations, are based on analysis of the risks presented by individual foreign financial institutions and the bank’s ability to manage those risks.

Below are examples of best practices observed by the OCC, for banks to consider when conducting periodic reevaluations of the risks related to foreign correspondent accounts and making account retention or termination decisions.

Banks that engage in foreign correspondent banking and have smaller portfolios, including community banks and federal savings associations, may have different risk management considerations than banks with large correspondent banking portfolios, which may warrant modifications to these best practices in line with the bank’s particular risk considerations. Best practices include: • Establishing and maintaining an effective governance function to review the method for periodic risk reevaluation and to monitor the appropriateness of recommendations regarding foreign correspondent account retention or termination.

• Communicating foreign correspondent account termination decisions regularly to senior management, with consideration given to the extent to which account closures may have an adverse impact on access to financial services for an entire group of customers or potential customers, or an entire geographic location.

• Communicating with foreign financial institutions,

considering specific mitigating information these institutions may provide, and providing them sufficient time to establish alternative banking relationships before terminating accounts, unless doing so would be contrary to law, or pose an additional risk to the bank or national security, or reveal law enforcement activity.

• Ensuring a clear audit trail of the reasons and method used for account closure.

BACKGROUND In carrying out the agency’s mission, the OCC requires OCC-supervised banks to manage their risks appropriately, to comply with laws and regulations, and to provide fair access to financial services and fair treatment of their customers. As a general matter, the OCC does not direct banks to open, close, or maintain individual accounts, nor does the agency encourage banks to engage in the termination of entire categories of customer accounts without considering the risks presented by an individual customer or the bank’s ability to manage the risk.2 A decision to terminate a banking relationship or to exit a line of business generally resides with the bank.

Banks must choose whether to enter into or maintain business relationships based on their business objectives; evaluation of the risks associated with particular products or services; evaluation of customers’ expected and actual activity; and banks’ ability to manage those risks effectively. In doing so, banks must comply with national anti-money laundering (AML) and countering the financing of terrorism requirements set forth in applicable laws, including the Bank Secrecy Act (BSA).3 A bank’s safety and soundness can be threatened when it fails to identify risks in the products or activities the bank provides or in the customers it serves.

Further, a bank’s safety and soundness can be threatened if it lacks comprehensive risk management systems and controls to mitigate identified risks. For BSA/AML, effective risk management should be an ongoing process, not a onetime exercise, and each bank’s risk assessment should be periodically updated to identify changes in the bank’s risk profile.4 A bank’s failure to conduct periodic risk reevaluations, including the review of risks posed by bank customers, can give money launderers, fraudsters, terrorists, and other criminals access to the U.S. financial system.

Foreign correspondent accounts are established by a bank for a foreign financial institution to receive deposits from, to make payments or other disbursements on behalf of, or to handle other financial transactions related to the foreign financial institution.5 With regard to foreign correspondent accounts, each bank’s due diligence program must include policies and procedures to assess risks posed by a foreign financial institution and consider all relevant factors including the foreign financial institution’s business and markets; the type, purpose and anticipated activity of the account; the nature and duration of the relationship with the foreign financial institution; the supervisory regime of the jurisdiction in which the foreign financial institution is licensed; and information known or reasonably available about the WWW.PACB.ORG | TRANSACTIONS | 35

foreign financial institution’s AML record.6 Based on these assessments, banks are expected to design and implement controls to manage these risks effectively. These factors are particularly relevant in the context of performing periodic risk reevaluations of foreign correspondent customers. Banks with a clear understanding of the risk profiles of these customers may be more capable of providing banking services to such customers that historically have been considered higher risk.

Nonetheless, in recent years, banks conducting periodic risk reevaluations of foreign correspondent accounts have sometimes determined that particular accounts pose risks that cannot be mitigated in accordance with that bank’s risk profile and have withdrawn from those relationships. In some cases, the closure of foreign correspondent accounts is required by law.7 These account closures may negatively affect access to financial services in the home country of the foreign financial institution, potentially resulting in financial inclusion concerns for that country.8 In addition, because the processes used by banks for risk reevaluation, and specifically for making account termination decisions,

Those perceptions may pose

practices to make decisions about foreign correspondent account risk reevaluations and closures.

SUPERVISORY EXPECTATIONS FOR PERIODIC RISK REEVALUATIONS As part of sound risk management, the OCC expects banks to conduct periodic risk reevaluations of their foreign correspondent account customer relationships. Banks’ risk reevaluations should consider risks present in the foreign financial institutions’ business and markets, as well as the anticipated account activity and the supervisory regime of the geographic location in which the foreign financial institution is licensed.10 Banks should give foreign financial institutions an opportunity to provide sufficient and transparent information to allow banks to make informed risk assessment decisions. The OCC expects banks to include the following practices in their risk reevaluations.

• Ensure that periodic risk reevaluations are conducted and decisions regarding the treatment of foreign correspondent accounts are based on the periodic risk reevaluations.11 Banks should have established processes for periodic risk reevaluations and account decisions resulting from the updated risk assessments, including account terminations, that • address the bank’s risk appetite with respect to the quantity of BSA/AML compliance risk the bank is willing to accept and can effectively manage.

• identify the risk factors to consider when reevaluating foreign correspondent account relationships, including an assessment of the risks posed by the foreign correspondent account relationship, based on a consistent, risk-rating methodology, and determine whether the bank can effectively manage the risk.

• address ongoing due diligence processes for foreign correspondent account relationships, which may include periodic site visits based on risk.

• provide for follow-up by bank personnel on activity that does not comport with the foreign financial institution’s risk profile, customer due diligence information, or expected account activity.

• provide for an assessment of the implications of account closure on managing overall exposure to BSA/AML compliance risk that is consistent with the bank’s articulated risk appetite.

• specify the length of time that foreign correspondent accounts can remain dormant before being subject to closure.

REPUTATION AND LITIGATION RISK TO THE BANKS. are not always clear to foreign financial institutions that are customers of the banks, the decisions may be perceived by those customers or others as arbitrary or lacking a sound basis. Those perceptions may pose reputation and litigation risk to the banks.

OCC-supervised banks are among the major providers of U.S. dollar-based foreign correspondent banking activity.

Before this issuance, there has been no specific OCC guidance related to the management of foreign correspondent accounts that would provide assistance to banks when conducting risk reevaluations and making account retention or termination decisions. As part of its examination activities, the OCC has reviewed policies, procedures, and criteria used by some banks when conducting risk reevaluations and making account retention or termination decisions related to foreign correspondent accounts. The OCC has observed a range of practices that banks use in evaluating the risks in this area, consistent with safety and soundness.9 After summarizing existing supervisory expectations in this area, this guidance describes certain corporate governance practices that, in the OCC’s supervisory judgment, constitute best practices for risk reevaluation of foreign correspondent accounts. Banks should consider using these best 36 | TRANSACTIONS | WWW.PACB.ORG

• Confirm that procedures for reevaluating foreign

correspondent account risks and making accountrelated decisions are implemented.12 In determining whether to close an account based on BSA/AML compliance risk or any other risk category or level of risk the bank finds to be unacceptable, banks should • perform periodic risk reevaluations for all foreign correspondent accounts.

• make reasonable determinations about the bank’s exposure to BSA/AML compliance risk, taking into account the bank’s risk appetite for each foreign correspondent account relationship.

• escalate recommendations for foreign correspondent account closure to appropriate levels of management.

• execute foreign correspondent account closure processes.

• Ensure that decisions to terminate foreign correspondent accounts resulting from risk reevaluation are based on analysis of the risks presented by individual foreign financial institutions and the bank’s ability to manage those risks.13

consider the following, which the OCC believes in its supervisory judgment to be best practices, when updating their customer risk assessments. These considerations, which are reflective of sound risk management, may be applicable to active and dormant foreign correspondent accounts that the bank has determined require closure.

Community banks and federal savings associations that engage in foreign correspondent banking and have relatively small portfolios may have different risk considerations than banks with larger correspondent banking portfolios. Those considerations, as well as the nature of smaller banks’ compliance functions or reporting hierarchies, may warrant modifications to these best practices in line with the bank’s particular risk considerations.

Best practices include: • Establishing and maintaining an effective governance function to review the method for risk reevaluation and to monitor the appropriateness of recommendations regarding foreign correspondent

Those considerations…may warrant

MODIFICATIONS TO THESE BEST PRACTICES.

• Account termination decisions should be based on the unique facts and circumstances of each bank and foreign financial institution, such as the level of risk that the bank’s systems and controls are designed to manage or mitigate, strength of the bank’s systems and controls, and specific foreign financial institution attributes, including the AML and supervisory regime of the jurisdiction that issued the charter or license to the foreign financial institution.

• Account termination practices that lack the appropriate risk assessment and consideration include • terminating foreign correspondent account relationships without a careful analysis of the risks presented by the individual foreign financial institution and the bank’s ability to manage those risks.

• terminating entire categories of foreign correspondent account relationships without regard to the risks presented by individual foreign financial institutions, unless specifically required by law.

BEST PRACTICES FOR ACCOUNT RETENTIONS OR TERMINATIONS Banks that maintain foreign correspondent accounts should

account retention or termination.

This governance function may take the form of an oversight committee or another format, depending on the bank’s general governance structure. This governance function may • review the bank’s policies and procedures for periodic risk reevaluations and foreign correspondent account retentions or terminations, and recommend enhancements as needed.

• evaluate the method the bank uses in making foreign correspondent account retention and termination decisions to determine if the bank’s methodology reflects safe and sound banking practices, and is current and commensurate with the bank’s articulated risk appetite.

• monitor customer due diligence performed by the bank on its foreign correspondent account relationship as the due diligence practices relate to periodic risk reevaluations and for making foreign correspondent account retention and termination recommendations.

• review the appropriateness of foreign correspondent account closure recommendations.

WWW.PACB.ORG | TRANSACTIONS | 37

• Communicating foreign correspondent account termination decisions regularly to senior management.

Policies and procedures for account terminations may clearly define the steps required to elevate recommendations for account closure to the bank’s senior management for their consideration and awareness.

Particular consideration may be given to • establishing a formal process for escalating changes in the risk rating of the foreign correspondent account relationship that results in more severe ratings being escalated to an appropriate management level for review.

• communicating to senior management whether, and to what extent, account closures may have an adverse impact on access to financial services for an entire group of customers or potential customers, or an entire geographic location, including any alternative banking relationships that the foreign financial institution may have with other U.S. banks.

• communicating to senior management whether there are actions that could be taken to manage or mitigate the identified risks with less impact than foreign correspondent account closure, such as placing temporary or additional restrictions on the account. In doing so, banks may • ensure that the need for any such restrictions are well-supported.

• ensure that the restrictions can be effectively implemented to mitigate the identified risks.

• provide mechanisms to communicate any such restrictions to foreign financial institutions.

• Communicating with foreign financial institutions, considering specific mitigating information these institutions may provide, and providing sufficient time to establish alternative banking relationships before terminating accounts, unless doing so would be contrary to law or pose an additional risk to the bank,14 national security, or reveal law enforcement activity.

The communication to foreign financial institutions may • articulate the bank’s concerns and reasons for considering account closure, without disclosing the existence of suspicious activity report filings if the concerns are based on potentially suspicious activity.

• give foreign financial institutions the opportunity to provide any additional customerspecific information to the bank that might address these concerns before the bank makes a final determination to close the foreign correspondent account.

• in cases when the bank has decided to terminate the foreign correspondent account, provide sufficient time for the foreign financial institution to establish an alternative banking relationship with other U.S. banks.

• Ensuring a clear audit trail of the reasons and method used for account closure.

FOOTNOTES This guidance does not create, change, or supersede legal requirements.

2 See OCC Bulletin 2014-58, “Banking Money Services Businesses: Statement on Risk Management.”

3 Other applicable legal requirements are found in sections 312-313 of the USA PATRIOT Act of 2001 and its implementing regulations at 31 CFR 1010.610(d) and 31 CFR 1010.630(d)(2). See also FFIEC Bank Secrecy Act/Anti-Money Laundering (BSA/AML) Examination Manual, p. 5.

4 FFIEC BSA/AML Examination Manual, p. 24.

5 FFIEC BSA/AML Examination Manual, p. 111.

6 See 31 CFR 1010.610(a). In addition, banks are required to conduct enhanced due diligence for certain foreign correspondent accounts. See 31 CFR 1010.610(b).

7 See footnote 3.

8 As used in this guidance, “financial inclusion” refers to access to financial services through formal accounts. See http://www.worldbank.org/en/topic/financialinclusion/overview.

9 Although many of the governance principles outlined in this bulletin could be applicable to account closures of customers in general, this guidance specifically focuses on foreign correspondent bank accounts.

10 See 31 CFR 1010.610(a). See also FFIEC BSA/AML Examination Manual, p. 18.

11 FFIEC BSA/AML Examination Manual, pp. 23-24 and 179.

12 See 31 CFR 1010.610(a)(3) and (d). See also FFIEC BSA/AML Examination Manual, pp. 23, 25, 115, and 179.

13 See 31 CFR 1010.610(a)(2)(i-v). See also FFIEC BSA/AML Examination Manual, p. 114.

14 There may be instances when providing customers with notice of account closure or sufficient time to establish an alternative banking relationship would expose the bank to increased BSA/ AML compliance risk or cause harm to the bank’s safety and soundness, such as when the bank has identified suspected money laundering or terrorist financing-type activities.

1

38 | TRANSACTIONS | WWW.PACB.ORG

GROVETTA N. GARDINEER IS SENIOR DEPUTY COMPTROLLER FOR COMPLIANCE AND COMMUNITY AFFAIRS AT THE OFFICE OF THE COMPTROLLER OF THE CURRENCY. FOR FURTHER INFORMATION, PLEASE CONTACT THE OCC’S COMPLIANCE RISK DIVISION AT 202.649.5470.

INNOVATORS

Let’s face it, we’ve been trying new things for a long time.

That’s how we developed our personal, proactive and evolving approach to accounting and business consulting. Our thought leaders operate six distinct professional units: business consulting, assurance services, internal audit and regulatory compliance outsourcing, information systems security, network security penetration services and tax planning and preparation.

And, we’ve been taking care of business for 70 years. Thanks for joining us on the journey.

Cranberry Township. PA Allentown, PA King of Prussia, PA

CERTIFIED PUBLIC ACCOUNTANTS & CONSULTANTS

800-580-7738 srsnodgrass.com

TECHNOLOGY SUPPLIER SELECTION AND RISK MANAGEMENT

By: Robert Allexon

ith the latest guidance from the OCC and other agencies, financial institutions are called to a much higher standard today for managing the risks in their vendor relationships as well as in the oversight of those relationships. In fact, vendor management has taken over the second spot among all compliance challenges for 2016, according to CSI’s Executive Report: 2016 Banking Priorities Study. It was listed by 42.7% of bankers surveyed as their biggest compliance challenge for 2016, second only to Mortgage Compliance.i COMPLIANCE NEEDS TO GO BEYOND ‘LIP SERVICE’ Jimmy Sawyers of the consulting firm Sawyers & Jacobs lists vendor management as one of the top ten issues for 2016. In a recent article, he states, “The banking regulatory agencies have been serious about vendor management for

40 | TRANSACTIONS | WWW.PACB.ORG

several years now, requiring banks to maintain significant documentation and perform vendor management risk assessments. Unfortunately, in some cases, this risk management function has become more about the amount of paper than the significance and practicality of the relationship.”ii “In 2016, bankers will shine a light on vendors and require them to fully disclose important matters of ownership, location, and business practices.”iii In a recent FS Viewpoint PwC states, “Even after years of growing reliance on third parties and increasing regulation, oversight at most financial institutions still has far too many gaps.”iv In our view, to avoid needless complexities and to mitigate potential risks, there are a handful of important considerations that should be applied to your technology supplier selection and vendor management process.

FINANCIAL VIABILITY, DEMONSTRATED CAPABILITY It is obviously important that the supplier is financially stable and has a sound business plan and performance outlook. However, it is equally important that the supplier has a proven record of delivering on its promises, both initially and for the long haul.

Ask for examples or business cases for successful technology deployments. We have seen

a number of suppliers alter their market presence with some changing their distribution and support structures on multiple occasions. This often involves forming new third-party relationships and abandoning old ones. In short, how long a supplier has been delivering results is important as is how well they have been doing it!

SUPPLIER FOCUS

subcontractor as are being used for the supplier. As stated in Bank Technology News, “One of the most troubling requirements is the expectation that banks must apply every control they would apply to their own third-party agreements to their vendors’ third-party agreements.”v Also understanding the details of the contractual arrangements between the supplier and their subcontractors is essential. For instance, if the term of an agreement with a recommended service subcontractor is not sufficient to cover the planned useful life of the equipment being considered, that should be identified and monitored as a potential business risk.

If the technology under consideration is not in the supplier’s core offerings, lagging sales combined with an unclear commitment could represent a significant business risk. Understand where such products fit in the supplier’s ‘big picture.’ As part of initiating your supplier due Financial institutions diligence, it is helpful to ask, “What percentage of your total company revenues are attributable to the sales and servicing of the proposed solution?” Is the technology really an integral part of the supplier’s core business, or is it just another offering?

are called upon today to also comply with

A HIGHER STANDARD OF RISK MANAGEMENT AND OVERSIGHT.

END-TO-END CONTROL

THE RIGHT APPROACH

Suppliers with full end-to-end control or ownership of the product through planning, development, and deployment are generally more likely to deliver quality solutions consistently as compared to suppliers who simply resell factored products.

Suppliers who are also manufacturers, direct sellers, and servicers of the technology generally bring greater expertise and commitment in all aspects of the customer relationship.

Amidst a sea of new rules and regulations, financial institutions are called upon today to also comply with a higher standard of risk management and oversight in their vendor relationships. As with most ventures, knowing what to ask is paramount to success. We believe that, alongside your assessment of a potential supplier’s financial viability, questions about a supplier’s demonstrated capability, company focus, and level of control over, or ownership of, their supply chain are all key areas of discovery in making the right supplier choice both from a ROI and risk management and oversight standpoint.

The best practice here is to ask for specifics as to engineering resources, product management, sales representatives, and service/support resources. Knowing how many there are, where they reside, who they work for, and what portion of these resources are dedicated to the proposed product is essential. It is also important to understand the supplier’s supply chain for, and the availability of parts and components. This is especially true for suppliers who are not the equipment manufacturer.

Executive Report: 2016 Banking Priorities Study, CSI, p 10. ii Banker as Buyers 2016, Wm. i

SUBCONTRACTORS AND RISK MITIGATION When your supplier is proposing the use of service subcontractors, either partially or totally, it is important to make sure that the service subcontractor is held to the same capability, readiness, and performance standards as compared to a direct organization. These standards include background screening, factory technician certification standards, business continuity plans, and general business practices.

Whenever a supplier is proposing the use of subcontractors to deliver goods and/or services, current guidance requires financial institutions to use the same due diligence, ongoing performance monitoring and reporting processes for each

Mills Agency, “Top Ten Trends Impacting Bank Technology for 2016,” J. Sawyers, p 34. iii Ibid iv Significant others: How financial firms can manage third party risks, FS Viewpoint, PwC, May 2015, p 5. v “Tough Vendor Rule May Drive

ROBERT ALLEXON IS AN INDEPENDENT BUSINESS ANALYST AND CONSULTANT FOR GLORY GLOBAL SOLUTIONS.

Some Bank IT Work Back InHouse”, Penny Crosman, Bank Technology News, 6-11-2014

GLORY GLOBAL SOLUTIONS IS AN ASSOCIATE MEMBER OF PACB.

LOOK UNDER

IT PAYS TO BE CHOOSY ortgage-backed securities (MBSs) are a staple of community bank investment portfolios. The aggregate of all mortgage-related securities, which encompass traditional pass-throughs, collateralized mortgage obligations and

adjustable-rate mortgage pools (ARMs), make up more than half of all the dollars invested by community banks. This makes MBSs a major driver of overall bank profitability.

Something that savvy portfolio managers do is comparison shop. Fortunately for you the MBS market (which is about $10 trillion in size) contains thousands of different pools that can be analyzed to find some relative value. In fact, I’ve heard more than once from experienced community bankers that relative value is all that’s out there.

Absolute value is just a concept, according to them, and who am I to argue? Still, MBSs with certain features improve their chances of success.

MOST LIKELY TO SUCCEED Irrespective of the make or model of mortgage securities your community bank owns, they probably have some attractive trim packages included. MBSs issued by Fannie Mae and Freddie Mac have a 20 percent risk weight-

42 | TRANSACTIONS | WWW.PACB.ORG

R THE HOOD

Y WHEN BUYING MBSS

By: Jim Reber ing, and Ginnie Mae pools have a zero percent weighting. Their liquidity is very good, and like any good automobile, they come with “financing available” as they are readily pledgeable.

Since MBSs produce monthly principal and interest, their cash flows can be used to manage interest rate risk or facilitate liquidity management. (ARMs, of course, are coveted for their rate-risk benefits.) Unlike many assets, MBSs can improve in value as they age. Let’s examine a strategy that is already being utilized in well-managed community bank portfolios.

FOR YOUR CONSIDERATION As an example, we can compare two Freddie Mac 2.50 percent 15-year pools. FG G18549 was issued in April 2015, and FG G18611 in August 2016. The difference in their current average lives is noticeable: 4.3 years versus 5.1 years. Maybe more importantly for the portfolio manager is the expected principal to be received over just the next year. FG G18549 will probably return 7 percent more principal in the next 12 months than will FG G18611. That is significant by anyone’s tachometer.

“Speed” in an MBS is not a measurement of how fast a vehicle can travel. It is a metric to account for the fact that some principal payments will be received before they are scheduled to be. They are usually expressed using the Constant Prepayment Rate (CPR) model. These speeds have a huge effect on how a given MBS pool performs. Given the decades of history, and the existence of homogeneous pools, an investor can reasonably expect a pool with certain characteristics to prepay according to historical patterns.

In closing (I can’t help it), a word of advice. It’s always beneficial to have an exit strategy. Again not unlike a car, the market value will begin to dwindle as it gets to be latter stages of its effective life. A pool with remaining principal of around $200,000 still has decent liquidity, and that’s a good time to consider listing it for sale.

One such application is to buy pools that have a certain amount of seasoning. The early stages of an individual pool will typically see little or no prepayment activity as the homeowners haven’t built up much equity in their homes, and events that cause housing turnover (e.g., job transfers, divorces, deaths) haven’t yet had time to occur. Simultaneously, for short maturity pools, which are those with 20-year or less initial terms, by the time a pool gets two years old, the scheduled principal payments start piling up. The combination of the two really starts to produce significant cash flows while lowering the roof on the average life.

Ask your favorite broker to display some examples of new versus seasoned mortgage pools. Subtle differences in seasoning will make conspicuous improvements in cash flow and asset-liability benefits.

A couple of years’ aging can turn a lemon into a head snapper.

OLDER CAN BE BETTER

JIM REBER IS PRESIDENT AND CEO OF ICBA SECURITIES. HE CAN BE REACHED AT 800.422.6442 OR JREBER@ICBASECURITIES.COM. ICBA SECURITIES IS A PACB PREFERRED PROVIDER.

UPCOMING PACB EDUCATION |

SM

UPCOMING PACB EDUCATION EVENTS: NOVEMBER:

Fraud Workshop: Minimize Risk, Maximize Profit November 9, 2016 | Central Penn College | Summerdale, PA Maximizing Mutuality November 14-15, 2016 | Hershey Lodge & Convention Center Emerging Leaders Program: Building Your Leadership Brand November 30, 2016 | The Radisson Hotel Harrisburg | Camp Hill, PA

DECEMBER:

Quarterly BSA/Compliance Seminar December 7, 2016 | PACB Headquarters | Harrisburg, PA Incorporate Regular Stress Testing to Understand Risk Exposure & Driving Effective Decision Making at ALCO December 8, 2016 | PACB Headquarters | Harrisburg, PA *Schedule as of 10.17.2016

ALL ONE DAY PROGRAMS WILL BE JUST $295 PER PERSON FOR PACB MEMBERS!

44 | TRANSACTIONS | WWW.PACB.ORG

WHEN IT COMES TO CYBERSECURITY AND YOUR BANK, WHAT DO YOUR CUSTOMERS THINK? ational Cyber Security Awareness Month each October reminds us all— in both the public and private sectors— to renew and strengthen our vigilance against cybercrime. So, it’s fitting this time of year for financial institutions to not only review their cybersecurity policies and procedures, but also contemplate which issues most concern their customers.

believe that such threats will decrease in the near future.

To help institutions understand the consumer point of view, CSI recently engaged global market research firm Harris Poll to conduct an independent survey of more than 2,000 randomly selected consumers, age 18 and above, nationwide.

They responded to a series of questions surrounding attitudes toward various banking topics, including questions that centered on security.

In short, financial institutions have done a remarkable job in building trust among consumers in their ability to protect their information and assets, despite increasing global threats. The survey data suggests that organizations should continue these efforts, in particular by focusing on:

And yet, despite the growth in cyber threats, consumers have high regard for how well financial institutions protect their information and assets. In CSI’s poll, 78 percent of respondents said they either somewhat or strongly agree that their financial institution can protect them from hackers and thieves. These high marks were generally consistent across age, gender and region of respondents’ residence.

“CONSUMERS TRUST INSTITUTIONS WITH THEIR MOST SENSITIVE FINANCIAL AND PERSONAL DETAILS.”

It’s no secret that consumer confidence in a financial institution can be shaken by a data breach. Consumers trust institutions with their most sensitive financial and personal details and, in turn, expect their information to remain secure and safe.

Breaches—particularly digital intrusions—have risen over the past several years. Javelin Strategy & Research estimates more than $112 billion was lost over the past six years due to various forms of fraud and identity theft. There is little reason to 46 | TRANSACTIONS | WWW.PACB.ORG

• Creating, implementing and regularly auditing security policies and procedures • Developing a robust risk management program to both prevent and manage risk • Ensuring effective security training and resources for employees • Cultivating a culture in which all employees – from front-line staff all the way up to corporate boards – function with a security-first mindset On another security-related topic, financial institutions also

By: Steve Sanders have done an excellent job of educating consumers on EMV or “chip cards.” EMV implementation, which began in 2012 and continues today, aims to create more secure credit card transactions through an on-card computer chip that creates an encrypted code for every transaction. It is designed to guard against skimming and cloning – two of the main threats to conventional, magnetic stripe cards.

Studies of EMV usage in Europe suggest that the technology works. FICO, drawing from Mercator Advisory Group research, expects the technology to reduce fraud losses in the United States possibly to the tune of $700 million annually, as implementation increases.

And, despite the magnetic stripe being the standard for more than 40 years, consumers overwhelmingly trust EMV. A full 82 percent of survey respondents said that they strongly or somewhat agree that chip cards are more secure than mag-stripe cards for in-store transactions. Interestingly, trust in EMV technology appears to rise among respondents as they get older, with 88 percent of respondents age 65 and older saying they somewhat or strongly agree that EMV technology offers a more secure payment method than mag-stripe cards. Confidence in EMV similarly rises with education and income levels.

It should be noted that only 33 percent of all respondents strongly agree that EMV is more secure. This indicates there is still room for consumer education on the topic. Additionally, it might suggest that consumers, who are now starting to see more EMV-enabled terminals at local retailers, are still waiting to experience the full effects of this new technology.

Still, this is good news for financial institutions, which have spent significant time, energy and resources working to educate and familiarize consumers with this new technology. In CSI’s 2016 Banking Priorities Study, more than 60 percent of banking executives polled indicated they intend to increase spending on EMV implementation.

The results of this consumer survey show that funding EMV initiatives has been—and is likely to continue to be—a good investment, given how confident consumers already are in this emerging technology.

So, while consumer trust in EMV technology— and overall security—is healthy, banks must continue to prioritize their implementation of the latest security measures and technologies designed keep consumer data safe.

To read more about consumer attitudes toward cybersecurity and banking as a whole, download CSI’s Executive Report: 2016 Consumer Survey Report.

STEVE SANDERS IS VICE PRESIDENT OF INTERNAL AUDIT AT CSI. HE CAN BE REACHED AT STEVE.SANDERS@CSIWEB.COM. CSI IS A PACB PREFERRED PROVIDER.

SUPERIOR COURT USES COMMON SENSE: A CHARGED-OFF LOAN IS NOT A CANCELLATION

By: Erin Kawa, Esquire 48 | TRANSACTIONS | WWW.PACB.ORG

n Verdini v. First National Bank of Pennsylvania, the Pennsylvania Superior Court addressed for the first time an issue relating to the legal consequences of a lender’s charge-off of a debt. The appellants, Anthony and Paula Verdini, had obtained a second mortgage from First National Bank of Pennsylvania, on which they defaulted. As required by current IRS regulations, First National Bank issued a IRS Form 1099-C to the Verdinis. The following year, the Verdinis requested that the debt be marked as satisfied so that they could sell the property, but First National Bank refused to do so until the Verdinis paid the outstanding balance. The Verdinis paid and then filed suit, arguing that the debt was cancelled, as evidenced by the issuance of an IRS Form 1099-C.

First, the Superior Court analyzed the nature of a chargeoff and of a cancellation, and held that charging-off debt does not forgive the debt. In fact, the Superior Court noted that the Verdinis were aware of this distinction as they received a Notice of Charge-Off that stated “You are aware the charged off balance is your responsibility. It is legally enforceable and collectable.” This result is relatively unsurprising when one considers the fundamental differences between the nature of a charged-off debt and cancelled debt.

The second issue, whether issuance of a Form 1099-C evidenced cancellation of a debt, seems to be a little more debat-

Once a debt is charged-off,

THE LENDER STILL CAN TRY TO COLLECT THE DEBT ITSELF.

A charge-off is an accounting and regulatory requirement in which a lender will write off a debt after an account has been delinquent for certain periods of time or certain other events have occurred.

Lenders receive tax deductions for charged-off debt.

Once a debt is charged-off, the lender still can try to collect the debt itself or sell it to a third-party collector. Ultimately, the debtor remains liable for repayment of the full amount owed. A cancellation of debt, on the other hand, is actual forgiveness of debt for which the debtor is not liable to repay.

By law, a lender that discharges indebtedness of $600 or more must file a Form 1099-C with the IRS setting forth certain information and the amount of the indebtedness. A debt actually can be considered discharged for reporting purposes whether or not an actual discharge of indebtedness has occurred, provided that an “identifiable event” has occurred.

One such “identifiable event” is the expiration of a certain period of time in which a creditor has received no payment.

Therefore, a Form 1099-C is issued not only when a debt has been cancelled, but also when a delinquent debt has been charged-off. The Form 1099-C instructs the debtor that debt that actually has been discharged must be reported as income. However, it further, and rather confusingly, instructs that in the case of a charge-off, where an identifiable event has occurred but no debt actually has been discharged, the debtor need not include that amount as income. In 2014, the IRS and the Department of Treasury issued a proposed rulemaking which would amend the current rule to remove the requirement that certain debts that actually have not been discharged be reported through a Form 1099-C. However, the comment period on that proposed rulemaking closed in January, 2015, and no amendment has been issued to date.

In its opinion, the Superior Court acknowledged neither it nor the Pennsylvania Supreme Court had addressed the issue of whether a charged-off debt is considered cancelled or whether the issuance of a Form 1099-C creates a presumption that the debt has been cancelled.

able as the form is entitled “Cancellation of Debt.” Nonetheless, in analyzing the applicable regulations and acknowledging that an “identifiable event” triggering the reporting requirements could include charging-off a delinquent debt, the Superior Court joined the majority of courts that have held that utilizing a Form 1099-C did not evidence actual discharge of debt.

The Verdini decision is helpful because the clearer delineation of charging-off and cancelling a debt provides more protection to lenders and collectors from claims that a charged-off debt actually was cancelled.

Further, it provides more clarity to collectors that they may continue collection efforts on charged-off debt for which a Form 1099C was issued. Despite that protection and clarity, however, the wording of the Form 1099-C will continue to cause debtor confusion as to whether a debt actually has been cancelled.

Providing ERIN KAWA IS A MEMBER OF that clear notice that a SHUMAKER WILLIAMS P.C. debt has been chargedSHE CAN BE REACHED off and the debtor reAT 717.763.1121 OR mains liable for the full EKAWA@SHUMAKERWILLIAMS.COM. outstanding balance should help to prevent SHUMAKER WILLIAMS, P.C. IS AN that confusion.

ASSOCIATE MEMBER OF PACB.

NEWS FROM YOU

THE DIME BANK DONATES TO WAYNE COUNTY WALK OF HONOR building a memorial on land granted for the conditional use of the memorial by Wayne County. The memorial is dedicated to remembering deceased service members that are buried in Wayne County or who were born in Wayne County and buried in a national cemetery.

The project is expected to include 14 podiums with the names of the deceased veterans and the cemetery where they are interred, an eight-foot center monument bearing the military insignias of all branches, and a podium will display a map of Wayne County with a key designating the location of the various cemeteries.

The official opening of the monument will take place with appropriate ceremonies on November 11, 2016 at 11:00 AM at 921 Court Street, Honesdale PA. All are welcome to attend. If you would like to check if a loved one is listed or for more information on the project, please visit http://walkofhonor.wixsite.com/waynecounty.

The Dime Bank is proud to be a part of the Wayne County Walk of Honor by donating $1,500.00 to the Wayne County Business and Professional Women (WCBPW) who are

Pictured here on the Walk of Honor are left to right: Gary Beilman, President and Chief Executive Officer The Dime Bank; Ginny Motsko, Reception Committee Walk of Honor; Rochelle Haviland, WCBPW member; Julia Castek, Hardscaping Committee Walk of Honor: Maureen Beilman, Chief Financial Officer The Dime Bank; Ruth Daniels, Vice President The Dime Bank and WCBPW member.

MID PENN BANK CONTINUES LANCASTER COUNTY EXPANSION WITH NEW OREGON PIKE BRANCH Mid Penn Bank has received approval from the Pennsylvania Department of Banking and Securities and the Federal Deposit Insurance Corporation to open a branch at 1817 Oregon Pike in Lancaster.

Mid Penn expects to open the branch in November 2016 once renovations are completed.

“We are pleased to announce our plans for continued growth in Lancaster County,” said Mid Penn Bank President and CEO Rory G. Ritrievi. “Since opening our Elizabethtown branch in early 2015, we have experienced great success in the market thanks to our dedicated and reputable team. We look forward to welcoming new Lancaster-based

commercial, agricultural, small business and consumer customers to Mid Penn.”

Mid Penn also opened an administrative center at 1821 Oregon Pike in July of this year for its growing group of Lancaster-based lenders and support staff.

It is anticipated that the Oregon Pike branch location will employ two to three team members to fulfill personal banking, business banking and lending needs at the location.

Mid Penn currently has 20 branches serving Cumberland, Dauphin, Lancaster, Luzerne, Northumberland and Schuylkill counties.

For publication consideration, please email press releases to Eric Kovac, Communications Director, at eric@pacb.org.

To ensure publication in Transactions, all press releases must be received by the 5th of the preceeding month.

50 | TRANSACTIONS | WWW.PACB.ORG

NEW TRIPOLI BANK NAMES ROBERT B. KERN VICE PRESIDENT COMMERCIAL LENDING New Tripoli Bank has announced that Robert B. Kern has joined New Tripoli Bank as Vice President, Commercial Lending.

Bob has over 30 years commercial lending experience and has held banking positions throughout the Lehigh Valley with National Penn Bank, East Penn Bank, and PNC Bank.

Bob is a graduate of Penn State with a degree in Finance.

He is currently a Board Member of the Valley Housing Development Corporation and Treasurer of the Construction Financial Manager’s Association for Berks/ Lehigh Chapter. Bob is also Past Board Member and Treasurer of Lake Maskenozha Rod and Gun Club. He is also past board member and Treasurer of Housing Association & Development Corporation.

Dave Hunsicker, Chairman, CEO and President stated “We are very excited to have Bob Kern join our organization. He has a stellar reputation in the Lehigh Valley as a Commercial Lender and is very customer focused. New Tripoli Bank is proud to welcome him on board.”

HAPPY ANNIVERSARY

Liverpool Community Bank | Liverpool, PA | 8/13/1906 | 110 years Union B&L Savings Bank | Beaver, PA | 10/1/1886 | 130 years UNB Bank | Mount Carmel, PA | 10/12/1906 | 110 years Hyperion Bank | Philadelphia, PA | 11/1/2006 | 10 years

WWW.PACB.ORG | TRANSACTIONS | 51

PACB WELCOMES OUR NEW MEMBER BANK

CONTACT INFORMATION: Steven A. Ehrlich, President/CEO 2 W. Liberty Blvd | Suite 104 Malvern, PA 19355 P: 610.280.7100 | F: 484.527.4037 sehrlich@fpbk.com | www.fpbk.com

First Priority Bank is a full service commercial bank that provides a complete range of banking and personal financial services and solutions for individuals and businesses. The Bank is a relationship driven organization that provides a highly attentive and focused concierge level of service delivered with the highest level of integrity.

PACB MEMBER BANK EMPLOYMENT OPPORTUNITY Fleetwood Bank offers an exciting opportunity to join the only independent community bank headquartered in Berks County. Fleetwood Bank is looking for professionals that enjoy winning new business and being a part of a local team that can react quickly to customers’ needs. Fleetwood Bank is a well-capitalized, solid performing organization that offers a community banking alternative to the large, national banks in our market, where you can have an impact on the company’s success. The following position is available: CHIEF OPERATING OFFICER and COMPLIANCE OFFICER - This position is responsible for collaborating with the President/CEO in developing and implementing strategic objectives and overall administration of the Bank; providing executive leadership, strategic vision, and business management to drive overall outcomes to achieve profitable growth of the Bank.

This leader will provide new ideas to deliver products and services to customers; leading projects; managing the Bank’s risk elements pertaining to internal audit, compliance, disaster recovery/business continuity, reputation, and security risks; implementing strategies and processes of limiting risk through appropriate risk identification, measurement, and control; ensuring compliance with various operating policies and procedures and various regulatory requirements; overseeing the facilities; leading the Operations Division in order to provide efficient, accurate and cost-effective technical and operational support services; developing, implementing, and achieving annual goals and objectives as established in the Bank’s annual operating plan; supervising assigned personnel; communicating and interfacing with other divisions and management personnel; providing periodic management reports.

Interest in this position may be communicated in confidence to Lynn Kopicz, Vice President Human Resources, Fleetwood Bank, Main & Franklin Streets, Fleetwood, PA 19522. Additional information may be found on our website www.fleetwoodbank.com - Careers. Resumes may be sent confidentially to jobs@fleetwoodbank.com.

Fleetwood Bank is an equal opportunity employer and all qualified applicants will receive consideration for employment without regard to race, color, religion, sex, sexual orientation, gender identity, national origin, age, disability, veteran status, genetic information, or any other characteristic protected by law.

52 | TRANSACTIONS | WWW.PACB.ORG

PRSRT STD U.S. POSTAGE PAID HARRISBURG PA PERMIT NO. 547

2405 N. FRONT STREET HARRISBURG, PA 17110

RETURN SERVICE REQUESTED

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

Check Printing Contract Consulting

CALL PACB AT 717-231-7447 TO FIND OUT HOW YOUR ORGANIZATION CAN BECOME PART OF THIS SELECT GROUP OF PROFESSIONAL FIRMS.

WITH THE EXCEPTION OF OFFICIAL ANNOUNCEMENTS, THE PENNSYLVANIA ASSOCIATION OF COMMUNITY BANKERS AND STAFF DISCLAIM RESPONSIBILITY FOR OPINIONS EXPRESSED AND STATEMENTS MADE IN TRANSACTIONS. THIS PUBLICATION IS INTENDED AND DESIGNED TO PROVIDE ACCURATE AND AUTHORITATIVE INFORMATION, NOT TO PROVIDE LEGAL, ACCOUNTING, OR OTHER PROFESSIONAL SERVICES. AT TRANSACTIONS MAGAZINE, WE ARE COMMITTED TO THE ENVIRONMENT. EVERY ISSUE IS PRINTED ON RECYCLED PAPER USING SOY-BASED INKS.