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Banking and Financial Services Special Coverage

Landmark Decision

Country Bank

Country Bank

The property on Main Street

The property on Main Street has always played an important role in the economic vibrancy of the town, and this is expected to continue with its new function as a police station.

Country Bank recently introduced a new marketing slogan — ‘Made to Make a Difference.’ There have been myriad examples of that mindset over the bank’s 172-year history, but perhaps none bigger than the recent announcement that the bank would gift its former headquarters property on Main Street, valued at more than $3 million, to the town, with the intention of it becoming the site of a new police station and perhaps home to other town offices.

 

Paul Scully says that, over the past few years, or since Country Bank started ramping up discussions about what to do with its vacant former headquarters building on Main Street in Ware, there had been talks with various real estate developers about the property.

But they didn’t go very far, said Scully, the bank’s president, noting that those making inquiries were “more speculators than investors,” as he put it.

“And we didn’t want to sell it on a speculative basis and then not have it maintained,” he explained. “Or have someone say ‘we bought this with the intention of having some office move in but it never came to fruition’ and now the property is abandoned.

“Yes, we were approached by some people,” he went on. “But we really weren’t interested. We really were driven by a desire to use this property to make a difference for the town; that was our guiding compass.”

With that, Scully poignantly described the mindset that ultimately led to the announcement on June 1 that the bank was donating the property at 75-79 Main St. to the town with the intention of it becoming the site of its new police station and perhaps other municipal uses.

Elaborating, he said there were multiple objectives in mind as the bank considered what to do with the property that had been its home until it moved its headquarters into renovated mill space on South Street in 2005.

These included a desire to help the police department find larger, better quarters — something it desperately needs — while also “energizing Main Street,” as Scully put it, noting that the town’s central business district has been hit hard by COVID and other factors and needs a spark. He believes that having the police department and perhaps some other town offices in that complex will provide one.

The decision to gift the property to the town comes, coincidentally, as the bank introduced a marketing tagline: ‘Made to Make a Difference.’

This tagline evolved from a series of focus groups with customers, team members, board members, and non-customers who had gathered to discuss their experiences with the bank and their knowledge of its impact on the people and communities it serves, said Scully, adding that the donation of the Main Street building is the latest example of this mindset at work.

“Yes, we were approached by some people. But we really weren’t interested. We really were driven by a desire to use this property to make a difference for the town; that was our guiding compass.”

“It’s what we’ve been doing for 172 years — we’re made to make a difference; make a difference in your loan, make a difference in the community, make a difference in your financial planning,” he said, adding that this mission has been carried out in countless ways over the years, including a recent project in Worcester to build 55 beds for children in conjunction with the Mass. Coalition for the Homeless, at which the new slogan was formally introduced to the bank’s staff.

“That was the first time they’d heard the slogan, and in the previous two hours, they had just made a difference in a child’s life, someone who did have a bed of their own,” he explained, adding that the donation of the Main Street property adds a new and an intriguing chapter to that long-running story of giving back.

 

Building Momentum

As he talked about the decision to gift the property to the community, a donation he described as rare for a private institution, Scully first set the stage in an effort to explain how this came about, why it makes sense for the town, and how it meets the bank’s ongoing commitment to the community embedded in its new marketing slogan.

He started by discussing Main Street and, more specifically, what was largely missing from it — vitality, or energy. Elaborating, he said that many retail businesses had moved over the past several years from Main Street to the new commercial hub on Route 32, near a Wal-mart. And in recent years, several fires, including one at the bank’s Main Street property, prompted more moves by businesses. Meanwhile, COVID and lengthy and very involved reconstruction of Main Street brought additional challenges to that part of downtown.

These forces coincided with Main Street property going quiet, as a result of the pandemic and forces resulting from it.

That property, valued at approximately $3 million, includes the former banking office located on the corner of Main and Bank Street along with the E2E building located at 79 Main St., the rear parking lot and bunker style garage, and rooftop parking situated behind the 65-71 Main Street location that was also donated by Country Bank to the Quaboag Valley Community Development Corporation back in 2016.

Country Bank president Paul Scully

Country Bank president Paul Scully

It has been vacant since the start of the pandemic, when the bank closed its branch there due to staff and customer safety concerns.

“Not maintaining a presence on Main Street was a tough decision that required months of consideration while assessing how this location might be best utilized to support the community,” said Scully. “The effects of the pandemic combined with a significant decrease in customer foot traffic over the years and a shift in banking habits to more customers adopting electronic delivery channels were all a considerable part of the decision. It is a massive building to be sitting empty. The decision to donate the building became evident as we weighed the usage of this location and discussed the opportunities it could provide to the town.”

Elaborating, Scully said that while there have been ongoing discussions about the fate of the building over the years, they took on new urgency with the pandemic and the bank’s decision not to have on presence on Main Street.

However, that urgency coincided with the large-scale construction work undertaken on Main Street, he went on, adding that nothing could really be done while that work was going on.

“Over the past year, and with more earnest, we’ve been saying ‘let’s figure out what we can do with this building a make a difference,” said Scully. “And it somewhat coincided with hearing about the need for a new police station.”

The pricetag for such a facility was pegged at $7 million to $9 million, he said, adding that a new station is clearly needed, with the department having outgrown its current quarters, the town’s former post office.

By gifting the town its former headquarters, the bank can help save the town much of that expense — it will still need to renovate the property for that new use, said Scully — while also helping to bring some new life to a downtown that is poised for a resurgence given the recent roadwork and an easing of the pandemic.

“We knew that now that the roads had been repaved and new sidewalks installed, there was more of an opportunity for a resurgence on Main Street than there had been during that construction process,” said Scully. “And we didn’t want to circumvent that by having someone buy the building who wasn’t going to be able to maintain it or have the financial resources to take care of it.

“We wanted it to be right formula for the town and for the other merchants on Main Street to allow them to get some foot traffic back,” he went on, adding that a police station, and other town offices that might eventually move into that space, will help accomplish many of those goals.

Although there is no specific timeline for the transfer of ownership, which needs approval from the town at a scheduled town meeting, the bank intends to work on a smooth transition with all parties involved and expects the transfer of the location to happen in 2023, said Scully.

 

The Bottom Line

Reflecting on the long history of the Main Street property, Scully said it has housed different banks, including Country, the Ware Trust Company, and Ware Savings, since before World War I.

It has long played a role in the economic vibrancy of the town, he said, adding that even though its function will change, it will continue to do so. This was that guiding compass the bank used as it went about determining a new use for the property.

“We look at this as a great investment in community — this is what community banking is all about,” he said. “We say that we exist for our customers, our community, and our staff, and this really is the community basis of it. We’re really excited that we can help make a difference downtown and help make a difference to the taxpayers.

“We met internally as a board and a senior management team, and our driving focus was to what’s right for the town,” Scully explained. “We’ve been in town since 1850, and we believed we’ve made a difference over all those years and wanted to continue making a difference.

Banking and Financial Services

Branching Out — Again

Matt Sosik

Matt Sosik says Hometown Financial Group’s latest acquisition, like those that came before it, is all about creating scale at a time when that quality is critical to growth and even survival.

A “survival tactic.”

That’s one of the phrases Matt Sosik, CEO of Hometown Financial Group Inc., the parent of bankESB, used to describe Hometown’s announced plans to acquire Randolph Bancorp Inc., the latest in a series of moves by Hometown to expand through acquisition.

Elaborating, Sosik said this acquisition will certainly give Hometown, the multi-bank holding company for Abington Bank as well as bankESB, a larger, stronger footprint on the state’s South Shore. Indeed, Randolph Bancorp is the holding company for Envision Bank, which will merge with and into Abington Bank to create a $1.4 billion institution with 11 full-service retail locations across the South Shore, including the towns of Abington, Avon, Braintree, Cohassett, Holbrook, Marion, Randolph, and Stoughton.

But the primary reason for this acquisition, as well as the other five undertaken in just the past seven years, he told BusinessWest, is to achieve something that is becoming ever-more critical in today’s banking climate: scale.

“Banking has become such a low-margin business that scale is absolutely critical,” Sosik explained. “We aren’t running our company to survive three years or five years; we’re running to survive 20 and 30 years. We want to be a relevant player in all our markets, and we want to ensure our long-term survival, and to do that, scale is the name of the game.

“We’re not seeking this growth because it makes us feel better or because it allows us to pump our chest out,” he went on. “This is a survival tactic in this business.”

With this latest acquisition, which is expected to be finalized by the fourth quarter of this year, Hometown will have consolidated assets of approximately $4.4 billion and a branch network of 38 full-service offices across Massachusetts and the northeastern part of Connecticut. The move will make Hometown the 10th-largest mutual banking company in the country.

“We aren’t running our company to survive three years or five years; we’re running to survive 20 and 30 years. We want to be a relevant player in all our markets, and we want to ensure our long-term survival, and to do that, scale is the name of the game.”

“That’s scale — that’s about us being one of the survivors when the dust eventually settles,” said Sosik, reiterating, again, the need for size in a changing, still consolidating banking and financial-services sector, where competition is growing — and evolving.

“I talk about low margins and scale, but there’s a dynamic that’s ever-increasing; we now have competitors that aren’t just credit unions or banks,” he went on, listing players such as SoFi, Chime, and others. “The non-bank competition is out to steal our lunch, and to an extent, they will be successful. But we need to be able to play in their space, and that takes scale, too.”

Hometown’s acquisition of publicly traded Randolph Bancorp will provide more of that scale, said Sosik, noting that talks between the institutions started last fall and quickly intensified.

Under the terms of the merger agreement, which has been unanimously approved by both boards of directors, Randolph shareholders will receive $27 in cash for each share of Randolph common stock. The total transaction value is approximately $146.5 million.

This transaction will be the sixth strategic merger for Hometown in the last seven years. In 2015, Hometown acquired Citizens National Bancorp Inc., based in Putnam, Conn., and then merged with Hometown Community Bancorp. MHC, the holding company for Hometown Bank, in 2016. It then acquired Pilgrim Bancshares Inc. and Abington Bank in 2019, and later that same year merged Millbury Savings Bank with and into bankHometown.

Like those other acquisitions, this one will enable Hometown to achieve needed additional growth quickly and effectively, Sosik said.

“From the Hometown Financial Group perspective, this is a move that allows us to grow with very little additional cost,” he told BusinessWest. “This particular acquisition is going to be extremely efficient for Hometown.”

And, as noted, it will give Hometown a much larger and stronger position in a very competitive banking climate on the South Shore.

“With the addition of Envision Bank, we more than double our full-service locations and assets in Eastern Massachusetts,” he explained. “This dramatically increases the branding power we have on the South Shore, as well as market share.”

One matter still to be determined — and there is time to make this decision — is what name will go on the new entity, said Sosik, adding that both brands (Envision and Abington) have value and cache in that market.

“We’ll try to figure out what’s the best brand in that market for that combined bank,” he said. “We want to be thoughtful about that, and we’ll give it some thought.”

Meanwhile, the search for additional strategic acquisitions and partnerships with like-minded acquisitions will continue, he added, because scale will only become more important in the years and decades to come.

As he said, it’s a survival tactic.

 

— George O’Brien

Banking and Financial Services

Smart Tax Planning for 2022

By Barbara Trombley

 

Most of you have probably just filed your taxes or an extension. Maybe you are shell-shocked by the taxes owed on unexpected capital gains, unemployment, or additional income picked up in the last year. Maybe you received a large refund, which means you are estimating a larger tax bill than is due.

It is not the time to close the drawer and forget. Smart taxpayers start planning right away for next year so that they are prepared for their 2022 taxes and have done all they can to minimize them.

The first task is to have a detailed discussion with your accountant to comprehend why you owed extra taxes this year or why you received a big refund.

If it’s the latter, you are having too much money withheld. If you expect your income to be the same in 2022, you can adjust your withholdings. If you are still working, call your payroll department and make a change. If you are retired, you are probably having taxes withheld from a few different sources — possibly Social Security, a pension, or investment distributions. Getting a big refund is not a good thing. Make a change to one or all so you aren’t giving the government an interest-free loan with your money. Also, do the same for state taxes.

Barbara Trombley

Barbara Trombley

“It is not the time to close the drawer and forget. Smart taxpayers start planning right away for next year so that they are prepared for their 2022 taxes and have done all they can to minimize them.”

If you owed money, have a clear understanding why. Many dual-income families enter a higher tax bracket when combing two salaries. Unless you fill out a new version of the W4, your payroll department may not be withholding enough. Also, in our new economy, many people have picked up side jobs. Unless you make quarterly estimated tax payments, you will have to pay the taxes owed on the additional income when you file. Talk to your accountant about making quarterly estimated tax payments. It is easier to fund a large tax bill over the course of the year instead of scrambling to find the funds. Also, you will avoid potential interest and penalties by having the correct amount of taxes paid throughout the year instead of in a lump sum in April.

Another common reason to have owed money for 2021 taxes was due to capital-gains distributions in non-retirement investment accounts. The stock market had a great year in 2021, and many mutual-fund companies realized gains on holdings. These are tough for the investor to plan for. If you have investment accounts that are not retirement-specific, you will see a 1099-Div form from the investment company each year. Dividends and interest may be predictable, but gains and losses, not so much. Taxable gains mean you were successful and made money in your investment account, and taxes are due.

Do you want to try to reduce your tax bill? Consider maximizing your retirement-plan contribution. In 2022, investors can contribute $20,500 to their 401(k), 403(b), or 457 with an additional $6,500 of catch-up contribution if over age 50. This is a great way to get a tax break (your contributions are deducted from your income before taxes are figured) and grow your assets. You will need to log in to your plan and adjust your withholdings to account for the increase, as the maximum contribution allowed was $19,500 in 2021. Contribution limits are also increasing for Simple IRAs, from $13,500 in 2021 to $14,000 in 2022, with a $3,000 catch-up contribution.

There are some notable changes in the 2022 tax year that may impact how much you will owe when figuring next year’s taxes. On the plus side, the standard deduction will slightly increase for all filing categories. Income thresholds for deduction phaseouts will also increase for traditional IRAs and Roth IRAs. In addition, the federal lifetime estate-tax and gift-tax exemption for 2022 jumped from $11.7 million to $12.06 million — $24.12 million for couples if portability is elected when filing after the death of the first spouse. This is more than enough for most Americans.

Unfortunately, the Massachusetts estate tax is not nearly as generous. If you die as a Massachusetts resident, your heirs may have to pay an estate tax, which is calculated on the first dollar of estates that are over $1 million. Gov. Charlie Baker has current legislation that would exclude the first $2 million in assets when figuring the estate tax. This change is long overdue.

There are many other changes coming this year for taxpayers, and this article highlights just a few. If it impacts you, look up changes to child tax credits, earned-income tax credits, deductions for teachers’ expenses, and changes to the kiddie tax. Knowledge and planning are the keys to having a successful, uneventful 2022 tax season.

 

Barbara Trombley is a financial advisor and CPA with Wilbraham-based Trombley, CPA; (413) 596-6992. Securities offered through LPL Financial. Member FINRA/SIPC. Advisory services offered through Trombley Associates, a registered investment advisor and separate entity from LPL Financial. This material was created for educational and informational purposes only and is not intended as ERISA tax, legal, or investment advice.

Banking and Financial Services

The Art of Being Ready

By Chelsea Russell

 

Each year goes by faster than the last, and before you know it, your nonprofit’s year-end audit is right around the corner.

Collectively, we can all agree that the audit process should be quick and easy, but we often face audits that never seem to end. Have you ever wondered what you can do to make an audit go smoothly and be as efficient as possible so that deadlines can be met? This is a great opportunity for you to learn about how your organization can have a more efficient audit process and how your organization can continue to improve procedures surrounding audit preparation.

As an auditor who is involved in many not-for-profits, I’d like to share some best practices to help you prepare for your year-end audit.

 

Have a Planning Meeting

It’s never too early to start reaching out to your auditor. Having a planning meeting with your auditor a month before your organization’s year end is encouraged. This meeting will serve many purposes, such as reminding everyone of specific due dates, discussing significant activity over the last year, and deciding on a start date for the audit based on your readiness.

 

Establish a Timeline

Once you and your auditor have discussed due dates and a start date for the audit, you should start preparing for the audit early by asking for your auditor’s data-request list. Review the list with your auditors, ask for what items are priority for testing purposes, and establish an internal due date for your team. As you and your team start preparing information for the audit, have regular check-ins with your auditor as you approach each due date and the start of the audit.

Chelsea Russell

“Collectively, we can all agree that the audit process should be quick and easy, but we often face audits that never seem to end.”

Reconcile All Significant Trial Balance Accounts

Prior to starting the audit, all significant trial balance accounts should be reconciled, and you should double-check that the supporting documentation agrees with the trial balance accounts. This is a great opportunity to make sure you have the necessary internal control procedures in place, and may present an opportunity for improvement. To prevent a delay in the audit, the earlier you can start your year-end closing process and reconciliation of accounts, the sooner you can review the audit support for potential errors before handing documents over to the auditors.

 

Compliance Requirements

The level of compliance requirements you have to adhere to depends on the funding your organization receives (state, federal, grants, or donations). A best practice would be to review your funding sources and determine the compliance requirements needed well ahead of the annual audit. Depending on where your funding is coming from can dictate the level of compliance requirements you have to adhere to. For example, if you receive federal funding or federal funding passed through the state, this could require additional audit testing to be performed and additional time incurred by the auditor. It’s best to review all funding sources on a regular basis and communicate any changes with your auditors.

 

Bottom Line

Once you invest your time and try these best practices, you’ll be able to develop your own processes throughout the year, keep the information organized, and be ready for your next audit.

 

Chelsea Russell, CPA is a manager at the Holyoke-based accounting firm Meyers Brothers Kalicka, P.C.

Banking and Financial Services

Big Is Getting Even Bigger

By Jeff Liguori

 

Financial advice generally addresses the question ‘where should I put my money?’ It is a simple way of asking ‘what is the optimal investment for my hard-earned dollars?’ The more important meaning may be more literal: with today’s shifting landscape, where do I actually put my money?

The financial-services industry, which employs approximately 6.5 million people and is responsible for more than $123 trillion in assets in the U.S., has been rapidly changing over the past two decades. And the rate of that change is quickening. As with all industries, change may be the only certainty, but when it directly impacts our pocketbooks, it can create anxiety.

At the end of 2020, there were 4,377 FDIC-insured commercial banks in the U.S. That number is down from 6,519 in 2010 and more than 8,000 in 2000. During the same 20-year period, the dollar volume of loans generated by those banks has increased 127%, growing from $1.05 trillion to $2.38 trillion. Consumers seem to have fewer choices in terms of traditional banking.

Despite the number of banks being cut in half since 2000, there are more financial outlets than ever for depositors, borrowers, and investors. Finance has become a complex structure and confusing network of companies, from purely digital firms with a limited product offering, like PayPal, to massive financial supermarkets like Bank of America. Incidentally, in the past five years, the number of total active user accounts with PayPal has risen sharply from 165 million to 380 million, up 130%, with total annual transaction volume approaching $1 trillion.

Jeff Liguori

Jeff Liguori

“Finance has become a complex structure and confusing network of companies, from purely digital firms with a limited product offering, like PayPal, to massive financial supermarkets like Bank of America.”

The adoption of technology in banking is largely a function of age. At the end of 2020, nearly 50% of consumers ages 24 to 39 were making payments with digital or mobile wallets. That percentage decreases slightly up to age 54. But only one-fifth of consumers ages 55 to 73 transact digitally, and only one in 12 consumers age 74 or older are comfortable making digital payments. Focusing on younger demographics, ‘killer app’ technology has become a critical component of growth for companies in financial services. The number of financial-technology startups, or fintech, in North America has grown 90% since 2018.

Beyond technology, financial firms continue to expand their suite of products. For example, the five largest life-insurance companies measured by annual premium revenue are Northwestern Mutual, MetLife, New York Life, Prudential, and MassMutual, in that order. Those firms also have a significant presence in investment management, by way of mutual funds or wealth advisory or both. The same is true for the largest commercial banks, investment banks, and broker-dealers. Financial solutions are ubiquitous across the industry regardless of the type of firm.

Big is getting even bigger. It is an evolution in financial services, and not without precedent. Historically, consumers deposited their paycheck and took out their mortgage from the local bank. They obtained insurance through a local broker and invested with a local advisor. As these independent businesses got bought by larger firms, the relationship to the community slowly eroded. Meanwhile, our bank is connected to our PayPal account, directly pays our mortgage and car payments, and debits our monthly Netflix subscription. The idea of switching banks is enough to cause sleeplessness, even though our relationship manager works at a call center in Tulsa.

As with all trends, opportunities arise. The combination of an intricate financial landscape with rapidly changing technology and a greater access to products and solutions than ever before is exciting. Lost in the consolidation of banking is the local connection. In years past, a bigger institution had greater access, but that is no longer the case.

In It’s a Wonderful Life, George Bailey was the frustrated local banker who single-handedly saved the town from financial ruin. He couldn’t compete with the wealthy industrialist, Henry Potter, who owned half of Bedford Falls. But George had one thing Mr. Potter didn’t, the trust of his neighbors. As financial products and services continue to multiply and digitize at a dizzying pace, it will ultimately be the local trusted banker or advisor who helps confused consumers make the right choices.

 

Jeff Liguori is the co-founder and chief Investment officer of Napatree Capital, an investment boutique with offices in Longmeadow as well as Providence and Westerly, R.I.; (401) 437-4730.

Banking and Financial Services Special Coverage

The Fed Makes Its Move

 

 

Last month’s federal funds rate hike by the Federal Reserve — the first of what may be several such increases — was long-awaited and welcome in the banking community, while the Fed hopes it begins to produce its intended effect of cooling the economy and slowing inflation. The impact on loans and credit of all kinds will be meaningful, finance leaders say, but the long-term, historical perspective suggests this is still a very good time to borrow.

It’s a move many in the finance world are calling overdue, and in some ways welcome.

After keeping interest rates low through the first two years of the COVID-19 pandemic, the Federal Reserve hiked the federal funds rate by one-quarter of a percentage point on March 16, while also suggesting it might issue up to six more small increases before year’s end.

“We’ve lived with this low-rate environment for the last few years, which has been extremely difficult for banks on the margins,” said Brian Canina, executive vice president and chief of Finance and Shared Services at PeoplesBank. “So this was definitely something we have been waiting for.

“Last year was very interesting because, despite the inflation we were seeing, there was no movement on interest rates,” he added. “These have been interesting times, and hopefully, as the Fed continues to monitor this and increase the rates in the future, it would be nice to see us get back to a more normalized interest-rate environment that we’re more familiar with.”

Jeffrey Sullivan, president and CEO of New Valley Bank, said the Fed’s move was not only expected, but had been announced and much discussed in the marketplace.

“People are saying it’s overdue, and many are saying the Fed should have done it earlier to cool off the economy and keep inflation down a little bit,” he told BusinessWest. “Some people are worried there could be a lot of increases coming down the pike. But if it’s slow and steady, it’s probably not going to be a huge shock to people borrowing money, whether businesses or consumers.”

According to Forbes, the Federal Reserve’s mission is to keep the U.S. economy humming, but not too hot or too cold. So when the economy booms and distortions like inflation and asset bubbles get out of hand, threatening economic stability, the Fed can step in and raise interest rates, cooling down the economy and keeping growth on track.

“We’ve lived with this low-rate environment for the last few years, which has been extremely difficult for banks on the margins. So this was definitely something we have been waiting for.”

“When the Fed raises the federal funds target rate, the goal is to increase the cost of credit throughout the economy. Higher interest rates make loans more expensive for both businesses and consumers, and everyone ends up spending more on interest payments,” the publication notes.

“Those who can’t or don’t want to afford the higher payments postpone projects that involve financing,” Forbes adds. “It simultaneously encourages people to save money to earn higher interest payments. This reduces the supply of money in circulation, which tends to lower inflation and moderate economic activity — a/k/a cool off the economy.”

Because so many other rates in the economy are tied to the funds rate, any increase by the Fed has a direct effect on the interest consumers pay when they carry a credit card balance or take out a loan, and on yields for savings accounts and certificates of deposit, Nerdwallet notes.

“In general, the Fed reduces rates to try to stimulate the economy and raises rates to try to head off inflation,” the site explains, using a mechanism that causes rates on savings accounts, mortgages, and credit cards to rise. “Interest rates have been low for so long that many consumers — Millennials and Gen Z, particularly — haven’t really known a time when borrowing wasn’t cheap and savings vehicles didn’t pay next to nothing.”

Sullivan agreed. “Obviously, they’re paying a little more than they were paying a year or two ago. But by historical standards, when you look at mortgage rates — which have been 6%, 8%, even 20% — it’s not as unbearable.

“Everyone wanted to lock it in when a 30-year mortgage was 2.75%, which was the low point — kind of like saying they wish they’d bought Apple stock early on; everyone wants to time it perfectly,” he went on. “But in the broader context, these are still really low rates compared to what consumers have seen. It shouldn’t slow down the economy tremendously.”

 

 

Gimme Shelter

Mortgages will certainly become more expensive following the Fed’s move — at least, the interest costs. Forbes noted that a $300,000, 30-year, fixed-rate mortgage would add about $185,000 in interest charges with a 3.5% rate, but would add $247,000 — almost double the amount of the original loan — with a 4.5% rate.

“In response to this increase, the family in this example might delay purchasing a home, or opt for one that requires a smaller mortgage, to minimize the size of their monthly payment,” the publication notes.

But NPR notes that rising rates could stop the “runaway train” of higher home prices, which rose nearly 20% in the U.S. last year, on average. With a historic shortage of homes for sale and very low interest rates, bidding wars regularly broke out and drove prices ever higher. Meanwhile, soaring selling prices pulled in more buyers who didn’t want to miss out, which further overheated the market.

Jeff Sullivan

Jeff Sullivan says many in the banking world feel the Fed’s rate increase is long overdue.

“Higher mortgage rates may be helpful in cooling the housing market,” Selma Hepp, an economist with CoreLogic, told NPR. “That may help bring us back more to some level of normality, and in that case we won’t see so much bidding over the asking price.”

Prices aren’t likely to fall right away, Hepp said, but they might rise much less this year, say 3%, and a few years like that could give contractors time to catch up with demand and build more homes.

Canina notes, however, that low inventory is still the main factor driving home prices in Western Mass. So with interest rates increasing, “that’s kind of a double whammy, for lack of a better term.”

Sullivan agreed. “Lack of inventory keeps prices high, no matter what the rates are.”

Ninety percent of homeowners have fixed-rate mortgages, protecting them against rising rates. But most home-equity lines of credit — funds borrowed against the home — have variable rates, which will now go up. Forbes noted that some banks will let borrowers take the money they owe on their line of credit and lock that into a fixed interest rate.

On the other side of the coin, retail banking customers may expect interest rates on savings to rise now as well, but that may happen more slowly.

“These historically low rates on savings products won’t jump higher overnight, but a higher federal funds rate can stimulate competition among banks and credit unions, and consumers may benefit from that,” Nerdwallet notes. “It may be worth looking for a savings account with better rates if your financial institution is slow to respond to a Fed rate increase.”

“If they continue to increase interest rates six or seven times before the end of this year, it’s going to be interesting to see what kind of impact that has on the markets and consumers particularly.”

Canina explained that, from a consumer standpoint, banks have been living with historically low rates, and their margins have been squeezed at the same time the federal government has been putting out trillions in stimulus into the economy. As a result, bank balance sheets have significantly expanded with deposits.

“Banks have so much liquidity on their balance sheets, and if loans slow down, even with rates rising, banks will probably be reluctant to raise [savings] rates,” he noted. “We’ve managed to maintain deposit rates at a higher level than our competitors, and we’ll continue to monitor it to make sure we stay in terms of where we are relative to our competition, but banks are likely not raising rates any time in the near-term future.”

Brian Canina

Even if the Fed decides on multiple hikes this year, Brian Canina says, consumers should realize that interest rates are still low from a historical perspective.

The expectation from consumers is that, once the Fed raises rates, savings interest rates will follow shortly after, Canina added. “In the current environment, that’s very likely not to be the case this time around.”

 

Uncertain Times

Canina noted that the Fed employed a similar rate policy in the wake of the Great Recession, but “this is a little different situation, so coming out of it, I think it will be a little different in terms of how it plays out.”

Specifically, the key factors in the financial crisis of the late oughts were credit and housing issues. “In this one, you have the supply chain. You also have the Great Resignation, and the labor market was heavily impacted. The supply chain has not corrected itself, and we do have some labor-market matters to deal with. If they continue to increase interest rates six or seven times before the end of this year, it’s going to be interesting to see what kind of impact that has on the markets and consumers particularly.”

Canina added that commercial lending at PeoplesBank slowed slightly in 2020 and 2021, and 2022 is expected to be stronger.

“But the rising interest-rate environment has not impacted the commercial side just yet,” he explained. “Commercial rates are based more on competition than the markets. Mortgage pricing is really designated by the government agencies, Freddie Mac and Fannie Mae. So that’s kind of a set market, and mortgage companies price off that.

“When pricing commercial mortgages,” he continued, “you’re pricing to competition, and they’re usually a little slower to react, so right now, we’re seeing lower rates for commercial than residential mortgages, which is a total anomaly, something we don’t see in a normalized interest-rate environment. In the next six to nine months or so, that should straighten itself out. We’re seeing some unusual trends right now.”

Sullivan said gas prices are a larger factor for people right now than interest rates. “They’re staring at gas prices that average $4 a gallon and could be going to $5 a gallon. That’s more of a psychological factor for the average person.”

It’s certainly not the first economic shock of recent years.

“The pandemic definitely shocked the system, creating disruption in the supply chain,” Sullivan said. “That certainly includes building materials, which is one reason why real-estate prices aren’t coming down. And those material costs, the people I talk to say it’ll be another year or two before that starts to correct itself. So that will keep the inflation rate high.

“The Federal Reserve has some tools, but they’re limited tools,” he added. “We’re in such a unique situation with the supply chain being so screwed up. It’ll take awhile.”

As for the other factor weighing on the economy — a persistent worker shortage — “wages are going up, and pressure on wages is going up. Is that bad or good? That depends on what lens you’re looking through. It’s tougher for employers who have to pay that.”

Taking the big picture on what’s happening in the economy, Nerdwallet said the Fed’s recent move — and those to come — aren’t necessarily a bad thing.

“Reducing debt, especially when you’re paying a variable interest rate, will help you in a rising-rate environment. So will increasing your savings and staying focused on your long-term investing strategy, in spite of day-to-day fluctuations in the stock market,” the site notes. “If you manage your money carefully and the economy stays strong, rising rates could be a good thing for your wallet.”

 

Joseph Bednar can be reached at [email protected]

Banking and Financial Services

The People Have Spoken

Dan Moriarty (left) and Michael Rouette

Dan Moriarty (left) and Michael Rouette say it’s important to give customers a say in which nonprofits Monson Savings Bank supports.

 

The numbers speak for themselves: 3,500 votes, 373 nonprofits, $15,000.

That’s roughly the number of Monson Savings Bank (MSB) customers who cast votes in the bank’s 12th annual Community Giving Initiative, the number of different nonprofits they wanted to receive donations, and the total money being given to the top 10 vote getters.

“Each and every organization is a well-deserving nonprofit, and it is clear why they were chosen by our community members,” said Dan Moriarty, president and CEO of Monson Savings Bank. “Each nonprofit provides tremendously valuable resources to our communities and their residents.”

The 2022 winners of MSB’s Community Giving Initiative, announced two weeks ago, include Academy Hill School Scholarship, Behavioral Health Network, I Found Light Against All Odds, Miracle League of Western Massachusetts, Shriner’s Hospitals for Children, and Women’s Empowerment Scholarship, all based in Springfield; Rick’s Place and Wilbraham United Players, both based in Wilbraham; Link to Libraries Inc. of Hampden; and Monson Free Library in Monson.

“There are so many nonprofits doing great work, but we don’t know them all; we couldn’t ever know them all.”

“It follows our philosophy of giving back to the local communities. Our local communities help us, so we try to find ways to continually give back, and there are various ways to do that,” Moriarty told BusinessWest.

“There are so many nonprofits doing great work, but we don’t know them all; we couldn’t ever know them all,” he added. “So this is a good way to reach out to the community and all the nonprofits out there by having their followers introduce them to us. It’s been great, and very well-received. We’ve received thousands of votes every year for nonprofits people think are doing worthy things. That’s why we started it, and why we continue to do it.”

MSB isn’t the only bank running such a program, however; other banks have involved the community in giving initiatives as well, perhaps none longer than Florence Bank, which launched its annual Customers’ Choice Community Grants Program 20 years ago. Voting runs to the end of each December, and recipients are celebrated in May.

Unlike MSB’s program, which features a set number of recipients and equal funding to all winners, Florence gives grants to all organizations receiving at least 50 votes and distributes the money ($100,500 last year) according to their share of the votes — in last year’s case, more than 7,000 votes in all.

Last May, those funds went to Dakin Humane Society, Cancer Connection, Friends of Forbes Library, and Big Brothers Big Sisters of Hampshire County, $5,000 each; Our Lady of the Hills Parish, $4,837; Belchertown Animal Relief Committee Inc., $4,326; Friends of the Williamsburg Library, $3,815; J.F.K. Middle School, $3,303; Riverside Industries Inc. and Friends of Lilly Library, $3,146 each; It Takes a Village and Goshen Firefighters Assoc., $3,107 each; Edward Hopkins Educational Foundation, $2,989; Pioneer Valley Chinese Immersion Charter School, $2,556; Northampton Neighbors, $2,399; Hitchcock Center for the Environment, Granby Senior Center, and Friends of Northampton Legion Baseball, $2,281 each; Northampton Community Music Center and Community Action, $2,202 each; Friends of M.N. Spear Memorial Library, $2,084; Safe Passage, $2,005; R.K. Finn Ryan Road School, $1,966; and Historic Northampton and Belchertown K-9, $1,966 each. In addition, the Williamsburg Firefighters Assoc. and Whole Children of Hadley were each granted $500 for coming close to receiving 50 votes.

“We do normal corporate giving, but 20 years ago, we started doing these Customers’ Choice grants in an effort to listen to our customers,” bank President Kevin Day told BusinessWest. “How better to support the community than to support the nonprofits that our customers feel are important and doing a great job in the community?

“It’s a great program, and we’ve given close to a million and a half dollars,” he went on. “And our event in May is a wonderful event that really links us to the community and our customers who have directed where some of our money should go.”

Just as the pandemic has shifted the giving priorities of some banks and credit unions based on community need (see story on page 17), Florence Bank saw the same phenomenon occur in the Customers’ Choice program last year.

In the second half of 2019, only 10% of customers cast votes for organizations that ease food insecurity. But as more people became aware of those needs in 2020, twice as many votes were cast for food-security causes, and $21,528 of the total $100,500 awarded last May went to five organizations focused on feeding people: the Food Bank of Western Massachusetts, the Amherst and Northampton Survival Centers, Manna Community Kitchen in Northampton, and Easthampton Community Center.

“How better to support the community than to support the nonprofits that our customers feel are important and doing a great job in the community?”

Moriarty said the recipients in Monson Savings Bank’s program have shifted over the years as well, with more than 100 nonprofits benefiting in all.

“Some are repeat winners, and that speaks to their efforts to reach out to their followers to vote for them,” he said. “But it’s nice to see different nonprofits chosen.”

In any case, he added, “they are so genuinely appreciative of winning. It’s always nice to win a contest, but they are genuinely honored and thrilled to receive those donations. Every year, I talk to a few of them, and they seem so, so thankful. Some of these nonprofits count on the donations they receive from us and other community banks and other community businesses.”

Moriarty noted that the internet has been an important driver of the Community Giving Initiative, as social media was still on the rise when the program launched 12 years ago, offering a new way to connect people with the bank and generate enthusiasm online. “That was a catalyst for us in the initial stages. Social media wasn’t that big yet, but we knew it was coming.”

Clearly, customers are excited to wield some influence on this one element of their hometown bank’s giving priorities.

“We love working directly with the community and giving members a voice to ensure that the nonprofits that make a positive impact in our communities are recognized and supported,” said Michael Rouette, executive vice president and chief operating officer at MSB, when the 2022 recipients were announced. “As a local, community bank, we are committed to doing whatever it takes to support our customers, businesses, and communities. We understand that these charitable organizations have the power to truly make a difference for our neighbors. Thank you for casting your votes.”

 

—Joseph Bednar

Banking and Financial Services

There Are Few Changes, but Some Could Impact Your Return

By Dan Eger and Shannon Shainwald

 

It’s that time again already: time to file your taxes and close out 2021.

Over the past two years, we have all witnessed rapid changes to how we do business and live our lives. Tax season has been no different and has seen many changes to tax law and deadlines. Unlike the past two years, the 2022 tax season is currently set to complete with the normal deadlines, so be sure to get your taxes in order before the filing deadlines: April 18 for federal returns and April 19 for Massachusetts returns.

 

What’s New on Your 2021 Tax Return?

New changes to tax law for 2021 individual filing are not as hefty as in prior years, but there are still some changes that may make a difference on your return.

Dan Eger

Dan Eger

Shannon Shainwald

Watch out for letters from the IRS. Letter 6419 will reflect the child tax credit advance payments if you receive any in 2021. The child tax credit is also higher and includes 17-year-old children in 2021, so be sure you know which of your dependents qualify and for how much. Letter 6475 will reflect the third stimulus payment if you qualified to receive one. Letter 4869C will share your identity-protection PIN for your 2021 return if you have opted into the program or have dealt with fraudulent returns in the past.

The charitable deduction is once again available for up to $300 to those taking the standard deduction and was expanded to allow up to $600 for those who are married filing jointly in 2021.

For itemized returns, the annual charitable deduction limit for monetary donations is equal to 100% of your adjusted gross income for 2021, which means you can remove all taxable income with your donations.

Cryptocurrency has risen in popularity over the past year. Be aware of the tax implications on your cryptocurrency investments. Speak with a trusted tax preparer to make sure your investments are accounted for properly on your return.

 

Preparing Your Return

Will you be preparing your return yourself, or will you hire someone to file on your behalf? Have a plan in place now, so you know what required information you need to have at hand and what you expect to pay for completion of all needed forms. If you will be using a new tax preparer for 2021, they will ask for a copy of your prior-year return in addition to all relevant documents for your 2021 tax filing.

The IRS also offers a Free File program if your income is below $72,000. Go to irs.gov or see the IRS2Go app to see your options. You may also qualify for local tax assistance through programs like Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE).

 

Use Your Resources

The Interactive Tax Assistant (ITA) is an IRS online tool (irs.gov) to help you get answers to several tax-law items. ITA can help you determine what income is taxable, which deductions are allowed, filing status, who can be claimed as a dependent, and available tax credits. You can also visit www.mbkcpa.com/2021-tax-filing to find more resources for assistance with your 2021 tax filing, including blogs on the latest changes and links to useful IRS and state resources.

 

Be Vigilant

Be especially careful during this time of year to protect yourself against those trying to defraud or scam you. The IRS will never call you directly unless you are already in litigation with them. They will not initiate contact by e-mail, text, or social media. The IRS will contact you by U.S. mail. However, you still need to be wary of items received by mail. Anything requesting your Social Security number or any credit-card information is a dead giveaway for scam identification. Watch out for websites and social-media attempts that request money or personal information. You can check the irs.gov website to research any notice you receive or any concerns you may have. You can also contact your tax practitioner for assistance.

 

What If You Have Been Compromised?

How do you know if someone has filed a return with your information? The most common way is your tax return will get rejected for e-file. These scammers file early. You may also get a letter from the IRS requesting you verify certain information. If this does happen, there are steps to take to get this rectified.

First, contact the IRS Identity Protection Specialized Unit at (800) 908-4490. Then, file Form 14039 Identity Theft Affidavit, and paper file your return.

In addition, we recommend you take further steps with agencies outside the IRS:

• Report incidents of identity theft to the Federal Trade Commission at www.consumer.ftc.gov or the FTC Identity Theft hotline at (877) 438-4338 or TTY (866) 653-4261.

• File a report with the local police.

• Contact the fraud departments of the three major credit bureaus: Equifax: www.equifax.com, (800) 525-6285; Experian: www.experian.com, (888) 397-3742; or TransUnion: www.transunion.com, (800) 680-7289.

• Close any accounts that have been tampered with or opened fraudulently.

 

Identity Protection PIN (IP PIN)

If you are a confirmed identity-theft victim, the IRS will mail you a notice with your IP PIN each year. You need this number to electronically file your tax return.

You may also opt into the IP PIN program. Visit www.irs.gov/identity-theft-fraud-scams/get-an-identity-protection-pin to set up your IP PIN. An IP PIN helps prevent someone else from filing a fraudulent tax return using your Social Security number.

 

Get Your Paperwork in Order

Get your paperwork in order early to ease the stress of tax season. First, make a note of changes to your life. Did you welcome a child to your family this past year? Get married? Will one of your children be claiming themselves for 2021? Or, if you’ve experienced the unfortunate passing of your spouse or dependents, changes to your family will affect your return. Make sure you have all the necessary documentation in order, and you know how it will be handled for your return.

Below is a list the most common required forms and items to gather, as well as few other things for you to consider as you prepare for filing your 2021 tax return. Please note that this list is not exhaustive because everyone’s tax situation is different.

 

 

Documentation of Income

• W-2: Wages, salaries, and tips

• W-2G: Gambling winnings

• 1099-Int & 1099-OID: Interest income statements

• 1099-DIV: Dividend income statements

• 1099-B: Capital gains; sales of stock, land, and other items

• 1099-G: Certain government payments, statement of state tax refunds, unemployment benefits

• 1099-Misc: Miscellaneous income

• 1099-NEC: Independent contractor income

• 1099-S: Sale of real estate (home)

• 1099-R: Retirement income

• 1099-SSA: Social Security income

• K-1: Income from partnerships, trusts, and S-corporations

 

Documentation for Deductions

If you think all your deductions for Schedule A will not add up to more than $12,550 for single, $18,800 for head of household, or $25,100 for married filing jointly, save your time and plan to take the standard deduction.

 

Itemized Deductions

• Medical expenses, out of pocket (limited to 7.5% of adjusted gross income)

– Medical insurance (paid with post-tax dollars)

– Long-term-care insurance

– Prescription medicine and drugs

– Hospital expenses

– Long-term-care expenses (in-home nurse, nursing home, etc.)

– Doctor and dentist payments

– Eyeglasses and contacts

– Miles traveled for medical purposes

• State and local taxes you paid (limited to $10,000)

– State withholding from your W-2

– Real-estate taxes paid

– Estimated state tax payments and amount paid with prior-year return

– Personal property (excise)

• Interest you paid

– 1098-Misc: Mortgage interest statement

– Interest paid to private party for home purchase

– Qualified investment interest

– Points paid on purchase of principal residence

– Points paid to refinance (amortized over life of loan)

– Mortgage insurance premiums

• Gifts to charity

– Cash and check receipts from qualified organization

– Non-cash items need a summary list and responsible gift calculation (IRS tables). If the gift is valued more than $5,000, a written appraisal is required

– Donation and acknowledgement letters (over $250)

– Gifts of stocks; you need the market value on the date of gift

 

Additional Adjustments

• 1098-T: Tuition statement

• Educator expenses (up to $250)

• 1098-E: Student-loan interest deduction

• 5498 HAS: Health savings account contributions

• 1099-SA: Distributions from HSA

• Qualified child and dependent care expenses

• Verify any estimated tax payments (does not include taxes withheld)

Sole proprietors (Schedule C) or owners of rental real estate (Schedule E, Part I) need to compile all income and expenses for the year. You need to retain adequate documentation to substantiate the amounts that are reported.

 

File with Confidence

Make this tax season smooth by getting your paperwork organized early and letting your tax preparer know about any changes to your life or financial situation. The sooner you file, the sooner you can put 2021 in the past and focus on a great outlook for 2022.

 

Dan Eger is a tax supervisor at the Holyoke-based accounting firm Meyers Brothers Kalicka, P.C.; Shannon Shainwald is an administrative assistant at the firm.

 

Banking and Financial Services

The $1 Million Exemption Level Is Among the Lowest in the Country

By Barbara Trombley

Did you ever wonder why all of your Massachusetts neighbors move to Florida when they retire? And they make sure they spend six months and a day at their southern address?

Of course, the warm winter weather in sunny Florida is a draw. But another reason many people in Massachusetts change their state residence is to avoid the Massachusetts estate tax, which is levied on estates valued over $1 million. Given the value of real estate and 401(k) plans in Massachusetts, it is not that hard to pass this threshold for many middle-class people.

Surprisingly, the federal estate tax is $12.06 million per person in 2022. Also, it is portable between spouses. With the correct steps, a married couple can protect $24.12 million after the death of both spouses in 2022. Our state estate tax is shockingly different. Of the 18 states with an estate or inheritance tax, Massachusetts and Oregon have the lowest exemption level of $1 million.

Also, the Massachusetts estate tax has a regressive feature where, if you die with an estate valued at $1,000,001 or more, your heirs will pay a graduated tax starting at the first dollar over $40,000 (which is a small exclusion). The bill on a $1 million estate is about $40,000. The tax rate is a graduated one and rises from 0.8% to 16% depending on the size of the estate. The heirs of an estate worth $3 million could find themselves with a tax bill approaching $200,000.

Massachusetts is shockingly out of step with the nation and with the rest of New England. Maine, Connecticut, and Vermont all have exclusions of more than $5 million, and New Hampshire does not have an inheritance tax at all. Until our legislators raise the exemption to keep up with inflation and make the exemption a true one, residents will continue to flee the state or jump through hoops to help their heirs avoid the tax.

Barbara Trombley

Barbara Trombley

“The tax rate is a graduated one and rises from 0.8% to 16% depending on the size of the estate. The heirs of an estate worth $3 million could find themselves with a tax bill approaching $200,000.”

What is included in your estate? Bank accounts, real estate, retirement accounts, life-insurance proceeds, vehicles, etc. Upon the death of the first spouse, no tax is owed. It is upon the death of the last remaining spouse that the dollar amount of assets is counted and an estate tax will need to be filed if the total value exceeds $1 million. The return must be filed, and any tax must be paid nine months after the death. The state may grant an extension of time, but interest will accrue on any unpaid amounts past the due date.

What can be done to mitigate the tax if the laws don’t change? Perhaps you retitle the ownership of your house to a trust or to an adult child to remove it from your estate. Each spouse can also set up a trust to shelter $1 million upon their death. This keeps the funds out of their estate but available to the surviving spouse to use if set up correctly.

Cash and other assets can be gifted to reduce an estate, but be careful about capital gains or tax owed on retirement funds. Charitable contributions can also be made to reduce the size of the estate. Many retirees move to a tax-friendly state, like Florida, and become residents. Working with a qualified financial planner and an estate attorney is imperative to mitigate the estate tax.

 

Barbara Trombley is a financial advisor and CPA with Wilbraham-based Trombley, CPA; (413) 596-6992. Securities offered through LPL Financial. Member FINRA/SIPC. Advisory services offered through Trombley Associates, a registered investment advisor and separate entity from LPL Financial.

Banking and Financial Services Special Coverage

More Than Writing Checks

Kevin Day

Kevin Day says banks — including Florence — responded strongly to rising food-insecurity needs during the pandemic.

Banks and credit unions have long touted their role in supporting local nonprofits through philanthropic efforts, but those efforts took on more urgency over the past two years, especially in areas such as food insecurity and other basic human needs. But even before the pandemic, these institutions were giving back in ways that went well beyond writing checks, from participating in fundraising events in the community to promoting a culture of volunteerism among officers and employees. In other words, the needs remain numerous, but so do the ways to address them.

 

 

When it comes to philanthropy, Kevin Day, says, Florence Bank’s overall goal never changes.

“We just try to be resilient and strengthen our communities and nonprofit sector,” said Day, the bank’s president and CEO. “We don’t necessarily go out year after year and do the same things; we tend to respond to the needs that arise, and needs in the community ebb and flow each year. Certainly, the last two years with COVID, we’ve responded to what the needs are and basically evaluated requests as they come in and tried to find the ones that have the broadest impact.”

The most obvious such need — one that many banks made a point of focus over the last two years — is food insecurity. Since the start of the pandemic, Florence Bank has donated at least $140,000 to organizations addressing that issue.

“We supported many local pantries and survival centers because the pandemic ramped up that need,” Day said. Meanwhile, “other organizations couldn’t run their normal events or even run the services they normally do. The way we managed our donations was responding to needs as they grew, and we were able to respond in a bigger way than normal.”

Craig Boivin, vice president of Marketing at UMassFive College Federal Credit Union, said it’s “in the DNA” of credit unions to invest money back into their local communities, and his institution does so in four main ways: writing checks to nonprofits, running donation drives, encouraging volunteerism among employees to help out community organizations, and financial-education programs that empower members in their financial lives.

“We had new requests coming in that we never had before because of agencies that were feeling an impact from a surge of families and individuals needing support because of the pandemic.”

Some of the events UMassFive typically supports, such as Will Bike 4 Food and Monte’s March, which both support the Food Bank of Western Massachusetts, took on new importance during the pandemic, while the credit union also raised $16,000 last year for the UMass Cancer Walk and Run, bringing its total support of cancer detection and prevention through that event to around $160,000. It has also made a 10-year, $100,000 commitment to CISA to help people access healthy food through farm shares.

Meanwhile, members can use their ‘Buzz Points’ from a debit-card reward program, typically redeemable for gift cards at local establishments, to donate to area nonprofits instead, Boivin said.

“We’ve really tried to play that up over the past couple years because there’s so much need in those local organizations, and not everyone has the means to support them by writing checks, so, just by doing normal shopping, they can donate points earned from the program.”

On what Boivin calls the “roll up your sleeves” side of the bank’s efforts, members and employees provided 350 pounds of personal items to food pantries and the Amherst and Northampton Survival Centers last year, collected hundreds of winter coats for people in need, while continuing to participate in events like the Connecticut River Conservancy’s Source to Sea Cleanup.

“During the pandemic, we were thinking creatively about what else can we do that’s different than what we’ve done in the past to support different folks,” Boivin said. “In some cases, it was really kind of doubling down on our efforts because the needs jumped more than expected.”

Kevin O’Connor, executive vice president and chief banking officer at Westfield Bank, agreed. He said that, during the pandemic, the bank has received requests for help for many new organizations, as well as different kinds of requests from nonprofits it has assisted in the past.

“We had new requests coming in that we never had before because of agencies that were feeling an impact from a surge of families and individuals needing support because of the pandemic,” he noted. “We looked at every agency we didn’t know and looked at how they were doing things to support people. It might have been people we already gave to before, like the Boys and Girls Club of Westfield, that was doing something new and different.”

The bank was able to support many of these new requests through what he called a ‘reallocation’ of resources, especially when it came to events — and there were many of them — that were canceled because of the pandemic.

Moving forward, he said the bank has increased its budget for giving in 2022 to support events and organizations it has backed for years, if not decades, and also support some of those new, pandemic-related requests that won’t be going away any time soon.

 

Expanding Needs

Dan Moriarty, president and CEO of Monson Savings Bank (MSB), said the bank has long supported the basic needs of people in the community, whether that’s food, shelter, clothing, or education, to name a few. “We look at the basic needs first, and then we look at community development and youth. We try to spread money around to as many organizations as we can. And need plays a major role in those decisions.”

The nature of the pandemic, and how it isolated people and disrupted the economic well-being of families and forced them into challenging situations, certainly changed the calculus of those efforts, Moriarty noted. “I think it exacerbated the need to help people with their basic needs, even more than during a normal cycle, outside of a pandemic. Again, with so much need out there, we strive to eliminate it.”

PeoplesBank recently announced a record level of charitable contributions in 2021, with donations reaching $1,315,000 over the past year with a total of close to $11 million donated since 2011. The bank has doubled its donations in the last five years.

“During the pandemic, we were thinking creatively about what else can we do that’s different than what we’ve done in the past to support different folks. In some cases, it was really kind of doubling down on our efforts because the needs jumped more than expected.”

“We do have funding focus areas, as we call them, that are probably similar to other banks,” said Matt Bannister, the bank’s senior vice president of Marketing and Corporate Responsibility, listing among them economic development, food insecurity, housing, social services, sustainability and the environment, and literacy (both early-childhood and financial).

“I would say 90% of our grant requests fit into one of those categories,” he said. “The other category is community, which is anything that doesn’t fit another category. For instance, fireworks or First Night Northampton — things that are good for community spirit.”

The bank has donated meals to frontline responders during the pandemic (as has UMassFive and other institutions) and PPE, actions which are unique to the current environment, but most people negatively impacted by COVID tend to fall into one of PeoplesBank’s traditional philanthropic focus areas, like housing needs, food insecurity, or social services.

“We’ve given to specific COVID causes as they’ve come up over the past couple of years,” Bannister said. “We’ve done that over and above the normal giving we do anyway.”

He noted that, “even giving what we give, we’re still not able to give to everyone who asks; the needs out there are pressing.” To further address those needs, the bank’s employees donate 10,000 volunteer hours per year, and 74 of them have served on 54 different nonprofit boards.

Florence Bank takes pride in similar efforts, Day said. “We encourage all our officers to be part of the nonprofit community in some way. And our employees are involved in roughly 125 organizations in the area, as board members, volunteering at events, and so on.”

Monson Savings Bank recently announced that its employees donated $8,880 to various local nonprofits in 2021 through the bank’s Team Giving Initiative Friday (TGIF) program.

“Western Massachusetts is not only the bank’s home, but home for many of our team members,” Moriarty said. “We work here, live here, and raise our families here. We are invested in the well-being of the local landscape and ensuring that our neighbors’ needs are met.”

Through the TGIF program, bank employees elect to donate $5 out of each of their paychecks to employee-selected nonprofit organizations that support the bank’s local communities. Since the program was launched seven years ago, MSB employees have donated a total of $45,170 to various charitable organizations.

“The TGIF program is just one example of our employees holding up the bank’s value of helping our neighbors in need,” Moriarty went on. “I often refer to us as a team here at Monson Savings. The TGIF program is a true team effort. Participants of this program donate just $5 out of their pay, and each donation comes together to create a large impact.”

 

Mission Driven

O’Connor said Westfield Bank, like other institutions, looked at new and different ways to support the community as a result of COVID, with many of them being public-health-related.

As one example, he cited the bank’s support of vaccination efforts in Springfield in a partnership effort with the Basketball Hall of Fame and other entities.

“We offered some support to help draw some bands and other kinds of entertainment to the Hall of Fame so that people would then hopefully go in and learn about vaccination, and hopefully get vaccinated, if that was their choosing,” he noted, adding that there were other initiatives with the Food Bank of Western Massachusetts and other agencies working to meet growing needs during the pandemic.

Boivin stressed that part of UMassFive’s community support stems from its financial-empowerment workshops, which have traditionally been offered at branches during the evening and sometimes during lunch hours.

“One silver lining of this pandemic is that it really forced us to get into the virtual world, opening those workshops up to a greater pool of people who might not get into our branches,” he said. “We had people from a much wider range of locations because we put content online and they could log in from home and don’t have to trek over to a branch.”

The workshop topics range from budgeting essentials to understanding credit to the basics of homebuying 101 — “quite a range of topics that all directly support our mission,” Boivin added, noting that these efforts and those directly supporting nonprofits all stem from the same philosophy.

“Even by giving out loans to people buying their first car or their first home, all those big life events, we play a role in the community,” he told BusinessWest. “Part of playing a role in the community is keeping more dollars local, investing in local organizations, and at the same time amplifying the mission of the credit union to better the financial lives of the people we serve. It takes many forms.”

Day agreed. “Community banks are in the same boat. Our employees are here, we all live and work in the community, and we all have a vested interest in making sure our community thrives.”

Unlike larger institutions whose management or directors don’t necessarily have a personal stake in the community, “for us, it’s a very important connection,” he added. “The decision makers are all here in the community. We’re not giving to places we don’t know. We see people impacted every single day, so there’s a tight connection between a bank like ours, where all our customers come from the local community, and our local organizations.”

Moriarty said Monson Savings Bank turns 150 this year, and he’s been looking at documents from the institution’s founding, which drove home MSB’s place in the community and why philanthropy is important, whether in a pandemic year or … well, a more normal one.

“Community banks were established to help people. They’ve always followed that mission,” he said. “We’re here to help the community; our mission is to help people save and prosper, but also to help the community wherever there’s a need, and we take that to heart.”

 

Joseph Bednar can be reached at [email protected]

Banking and Financial Services Special Coverage

Seeking a Return

Paul Scully says customers are feeling more optimistic about the future.

Paul Scully says customers are feeling more optimistic about the future.

While year one of the pandemic taught banks how to constantly pivot — to remote work, new modes of serving customers, and multiple phases of PPP loans — year two has brought more stability, even normalcy, but also new challenges, particularly inflation and supply-chain disruption that has made it more difficult for customers to save, borrow, and invest. That they’re doing all these things, to some degree, lends a healthy sense of optimism to 2022.

 

There’s nothing wrong with normalcy, Paul Scully said.

And if nothing else, the business of banking in 2021 was more stable than in 2020. That doesn’t mean all the economic issues individuals and businesses are dealing with have gone away, just that banks, and businesses in general, had to do less pivoting. Or at least have learned to roll with the punches.

“With vaccination rates increasing — or at least the availability of vaccinations up — we saw business picking up and customers feeling more confident coming into the banking centers,” said Scully, president and CEO of Country Bank. “And with commercial business picking up, people were feeling a little more optimistic with what the future has in store for them — where 2020 was all about trying to figure out what the heck was going on.”

What was going on last year were the early throes of a pandemic with no vaccines available, widespread shutdowns of economic activity, and banks more involved in PPP loans than normal commercial activity. “But we started to see, probably by the second quarter of this year, a normalizing, with customers feeling more confident and feeling more optimistic about the future and for their business.”

“With commercial business picking up, people were feeling a little more optimistic with what the future has in store for them — where 2020 was all about trying to figure out what the heck was going on.”

That’s a positive trend for commercial lending. Glenn Welch, president and CEO of Freedom Credit Union, was on an economic-outlook call with Visa recently, which projected a 7% uptick in 2022 in business investments in fixed assets, which means more borrowing. “That’s pretty healthy growth,” he told BusinessWest. “People are looking to borrow out there. Corporations’ financial statements are looking pretty strong the last couple of years, and a lot of consumers are sitting in pretty good financial shape; we’ll see whether they want to pull the trigger or not.”

On the consumer side, they have, with 2021 being the second straight year of double-digit growth on the mortgage-lending side at Freedom, along with healthy business in auto and home-equity loans. “And last year, deposits were up over 20%; this year, it was 10%. Our balance sheet, like many institutions, has grown pretty significantly since COVID hit.”

Tony Liberopoulos, Liberty Bank’s senior vice president and regional manager for Commercial Banking, said the bank’s new commercial-lending push in Western Mass. — it opened a loan-production office in East Longmeadow in June and has added three more employees since then — has gone well.

“We’ve been very happy. We had a very strong year; we’ve been very busy,” he told BusinessWest, noting that much of that success can be attributed to customers craving normalcy — in this case, face-to-face dealings with a stable team.

“With the amount of market disruption between mergers, community lenders leaving their jobs for other opportunities, and, in many instances, competitors still working from home, we’ve had opportunities to meet prospects and clients to grow our business,” he explained.

Tony Liberopoulos

Tony Liberopoulos says borrowers want access to digital tools, but mainly prefer face-to-face interactions.

“We’re firm believers that, while businesses have been struggling with things like COVID and supply chains, things will bounce back,” he went on. “And we’re seeing a lot of opportunities just by being in front of the clients. They want to see familiar faces; they don’t want to deal with just Webex and phone calls.”

Liberty’s lending numbers have borne that out, with 2021 figures close to what they were pre-COVID, Liberopoulos added. “That’s all we can ask for at this point. We’ve found customers and prospects still want face-to-face meetings; they want a normal relationship with banks.”

With that in mind, “I think the trend is toward more confidence in 2022 than there was in 2021,” he went on. “I think companies have seen their business come back since late May, early June, when a lot of COVID restrictions were lifted. We’re seeing businesses thrive again, and now they’re starting to invest in 2022. That’s what we’re counting on.”

 

Into the Digital Age

While many customers do, indeed, prefer to bank in person, Scully said, one of the big industry stories of the pandemic was how customers who had avoided digital banking options embraced them when they had to — and then stuck with them.

“More and more people developed a comfort level with technology,” he explained. “Many had a fear of the unknown — ‘will my money be safe?’ But the last 20 months allowed people to recalibrate a little bit, and we’re seeing more and more reliance on technology, which is great.”

Country even converted a small branch in the Ware Walmart to an interactive banking office with two interactive teller machines (ITMs). “They can absolutely do anything on the machine. The customer response has been really positive.”

Technology has helped banks in other ways — including combating a workforce shortage that has affected every industry and has not spared banks and credit unions.

“The fact that there aren’t a lot of employable people out there is taking its toll on businesses. Anyone in a customer-service business is looking for people; it doesn’t matter whether if you’re running a bank or a local coffee shop.”

“Honestly, it doesn’t matter what business you’re in these days, the fact that there aren’t a lot of employable people out there is taking its toll on businesses. Anyone in a customer-service business is looking for people; it doesn’t matter whether if you’re running a bank or a local coffee shop.

“But that customer expectation still exists for us, so technology has helped quite a bit,” Scully went on. “Customers during the pandemic became more familiar with doing their banking through technology, and their reduced reliance on coming into the branch reduced some of our traffic.”

At Country, while the banking centers operate five or six days a week with in-person staff, in the back-office areas, employees remain on a hybrid schedule, three days in the office, two remote — with Wednesdays mandatory for everyone to come in. “That’s more of a cultural thing for us, so folks would still be connected to one another.”

And the hybrid model has worked well, he noted. “We recognized early on, as we started to look at the reopening process, there are a lot of benefits to having a hybrid workforce. It’s like 2020 allowed us all to recalibrate, and ask why you’re spending an hour twice a day commuting to the office just to do work you were able to do at home for a year. We decided, ‘let’s rethink this.’”

Staffing has also been a challenge for Freedom, Welch said, which had to close down a branch or revert to drive-up only on occasion to deal with it.

Glenn Welch

Glenn Welch says workforce issues have not only affected staffing for banks and credit unions, but have begun to put pressure on wages.

“We’ve seen other institutions have the same issue. We’re certainly trying to hire people, but it’s been difficult. People leave, and it’s hard to get people interested in coming in and working. I don’t know if it’s because it’s a retail environment — that’s where most of our openings are, in branches — or it’s just people retiring or finding other things they want to do.”

The crunch has started to put pressure on wages, Welch added, which not only affects the banks themselves, but often doesn’t do enough to balance surging inflation for those earning the paychecks.

Liberopoulos said the shift toward digital banking options is a good one, and even though many of his commercial clients have wanted to do business in person, they, too, also want to be able to access the same digital experience — with its speed, flexibility, and personalization — that consumer clients have.

“Innovation is always the key to growth and sustainability. To survive, you need to invest not only in talent, but in products and services,” he said, noting that there’s certainly a need for both online options and a bricks-and-mortar presence.

 

Back to the Street

Communities and nonprofits saw their needs soar during the pandemic, too, and that’s one area community banks and credit unions continued to focus on in 2021. For example, over the summer, Country Bank — which has traditionally focused its giving on basic needs like food insecurity, homelessness, and healthcare — donated a total of $1 million to two regional food banks.

“To be a healthy community, residents in the community need to be in good health. Nutrition should be a right and not a privilege,” Scully said, noting that needs became more dire due to the pandemic, job losses, inflation, and an increase in addiction.

“If you have a heartbeat, you enjoy giving back, and it doesn’t have to be a certain size,” he said, turning the topic around as a challenge to others. “You may be able to donate only a dozen boxes of pasta, but that’s a dozen more boxes of pasta available for someone in need. What we like to do is partner with organizations and get their stories out there, so other people can jump on the bandwagon and be a part of it too.”

That speaks to Liberty’s priorities as well, Liberopoulos said. “We’re very in tune with our community and helping out the non-for-profits; we’ve done a lot of good things so far and continue to do that. That’s very important to us. We live, work, and lend in this area, and we want to support this area as well.”

Welch said Freedom has not only supported nonprofits, but gotten others involved by choosing a charity each month — A Bed for Every Child, the Walk to End Alzheimer’s, and Unify Against Bullying are just three recent examples — and involving members in the giving.

“We have been advertising that on our website and trying to get donations not only from the credit union, but from members who find the causes worthwhile and have the ability to donate,” he explained.

As for member business in the coming year, Welch knows inflation remains a drain on savings and assumes interest rates will rise at some point in an attempt to slow it down. “That could have an impact on people being able to borrow. Student-loan payments are starting up again, too, so people will have $300 or $400 coming out of their pocket for that in addition to increased prices and increased rates.”

These are problems that affect businesses, too, Scully said.

“With inflation and the cost of goods going up, and so many businesses looking at inflated utility expenses, now, with the shortage of qualified, available help, payroll tends to go up as well,” he noted. “Clearly there are a lot of challenges for folks in the business arena — which is why you really want to encourage people to shop local and keep Main Street storefronts occupied.”

Many businesses struggling with higher costs are still looking to borrow and invest, he added. While the PPP loans of 2020 were about keeping the lights on and keeping employees paid, for more traditional loans going forward, borrowers need to show a continuation of revenue streams without the PPP revenue to bolster them.

“For the most part, that’s exactly what happened. Businesses have returned to a good level,” Scully said. “Certainly, some are still taking their hits — hospitality was one of the hardest-hit, whether it’s food services, hotels, or entertainment venues. They had tough restrictions put on them last year. Those restrictions were lifted for the most part, but now they can’t rehire enough workers.”

These are all factors that might cause individuals and businesses to pull back from borrowing, he added.

“What will the impact of inflation be? When will interest rates start to rise a little? The big piece that looms for me is employment: where is the workforce going to be? Will there be enough employable people for all of the jobs? We’ve heard about this Great Resignation. It’s real.”

Still, like other financial leaders we’ve spoken with recently, Scully remains optimistic. “All indications suggest 2022 should be an OK year from a business perspective.”

 

Joseph Bednar can be reached at [email protected]

Banking and Financial Services

Some Moves of Interest

 

For a bank that’s been around for 136 years, PeoplesBank came across commercial lending fairly recently.

“My predecessor, Doug Bowen, started commercial lending at PeoplesBank probably 35 years ago,” Tom Senecal, the bank’s president and CEO, told BusinessWest. “We didn’t do any commercial loans until then, and we started out with just commercial real estate. And we stayed conservative with real estate, and never went into the C&I side because we didn’t have a lot of expertise. Just by virtue of what our comfort zone was, we focused on the real-estate side.”

That’s all changed, as PeoplesBank has made a strong push into the realm of C&I (commercial and industrial) business lending over the past two years.

“A little over two years ago, we started talking about our strengths and weaknesses and who we are are and what we do as the largest mutual institution in Western Mass.,” Senecal explained. “We have a very successful commercial real-estate portfolio. What we didn’t have was the C&I side. So we started talking about how to get into the C&I business.”

The reason the bank hadn’t done so sooner came down to expertise, which it had in spades on the real-estate side but much less so in C&I, where “you’re financing equipment, you’re financing lines of credit, there’s different types of collateral, it requires more monitoring, more analysis … we didn’t have that experience,” Senecal said. “It’s a very complex and very different lending skillset than commercial real estate.”

That’s why Senecal started talking with Frank Crinella, who has decades of experience in lending in the region, about bringing over a group of individuals from a large regional bank to spearhead a push into C&I lending.

“We have a very successful commercial real-estate portfolio. What we didn’t have was the C&I side. So we started talking about how to get into the C&I business.”

“We talked for several months about his group of people coming over, and we brought over five people that have an enormous amount of experience on the C&I side,” Senecal said. “Real estate is much more transactional, and we wanted to develop relationships in our home market much better than we ever had in the past, and C&I, to us, was the way to do it.”

Crinella is now the bank’s senior vice president and senior lender, and will also take the title of senior credit officer when Mike Oleksak, the institution’s longtime senior lender and senior credit officer, retires at the end of the year.

“C&I typically brings over the relationship more than just the real-estate transaction. And now that we have the group of people that we have, I think it’s going to be tremendously successful, not just for the Western Mass. market, but for our growth strategy going down into Connecticut as well,” Senecal said. “Frank and the group of people who came over have been here just over a year and have been enormously successful in that period of time, starting to build relationships here in Western Mass.”

Crinella saw great potential in what PeoplesBank was trying to do.

“What attracted us to Peoples was really the culture,” he said. “And C&I is all about relationship lending, the team approach. We have a very strong credit culture, but we also have a lot of depth on the cash-management side, and our branch network is very strong and plays well to the companies here in Western Mass. and Northern Connecticut.”

The commercial-lending department is now up to 50 people, Crinella noted. “The team complements each other so well. They brought in a lot of credit analysts that have C&I experience, so we’ve got depth now on the underwriting side.”

He was also drawn to a lending model at Peoples that prioritizes the ability of lenders to make quick decisions (more on that later).

“We talk about speed to market around here — we make all our decisions here on Whitney Avenue, so we can turn around a loan request quickly, and kind of outmuscle the big boys in that way … and, with the depth that we brought, outmuscle the local competition as well.”

 

Lending Support

Senecal said he knew PeoplesBank could excel at C&I lending based on its culture and ability to forge relationships through its branches.

“C&I is small business,” he explained. “And the interconnectivity between our branch network and our C&I lending is extremely important. It’s very difficult to develop a relationship on the small-business side without a branch network. So, in a lot of my conversations with Frank, we’re focused on our growth strategy and continuing to have the brick-and-mortar strategy, which complements the C&I side.”

Retail banking, Senecal noted, is moving in the direction of digital modes like mobile banking, online bill pay, and ITMs.

“When you talk C&I lending and small-business lending, you can’t do all that digitally online. You need a relationship. Accounts are very different for small businesses than they are on the retail side, between needing cash-management services, wires, positive pay … there are a lot of different functionalities small businesses utilize, more than the typical retail customer. A lot of services need to be communicated, and you can’t do that necessarily digitally. So the branch network has a huge impact.”

Crinella called it “delivering the bank.”

To explain that concept, he noted that, “when a relationship lender goes out to visit a customer, oftentimes they’ll bring the banking-center manager as well as the cash-management professionals, so the customer gets the entire bank when they’re meeting with the relationship lender. That’s really the difference between C&I and commercial real-estate lending. That’s what we’re trying to capture when we talk about relationship lending.”

The relationships customers already had with the lenders who moved to Peoples have generated some business as well, Senecal said.

“When you transition a group of five people from one institution to another, you create some loyalty from those customers who had relationships with them, and you can tell that the relationship means a lot. We’re getting great, positive feedback as a result of that.”

Crinella agreed. “They become valued advisors to the customer,” he said. “They take the time to understand their business and make informed decisions. Again, I think speed to market has been a huge competitive advantage. We get there quick. We can get a term sheet out in 48 hours, and that’s something, competitively, the big boys have a tough time competing with.”

With Oleksak, and soon with Crinella, it was important that both titles — senior lender and senior credit officer — fall under the same individual, Senecal said.

“From a customer’s perspective, when Frank shows up at the table, he has the decision-making authority for quite a few loans. Certainly, when loans get larger, we have a committee, we meet and talk, but Frank has the ability to sit at the table and make decisions immediately with customers based on what he sees.

“That doesn’t occur at most larger institutions,” Senecal went on, “where the lender goes out and gets the loan, develops the conversation, and then goes back with all the information and says, ‘OK, this is the deal. This is the terms of the deal I’d like to do.’ And they sit around with other people — adjudicators, other credit people, who say, ‘yeah, I don’t like that deal. You need to do this, you need to get that.’ And it becomes a group decision.”

That’s not the best or most efficient experience for the customer, he said.

“When you sit in front of a customer and you make the customer believe we’re going to do the deal, then you go back to the office and all of a sudden five different people have their opinions on what it should look like, it’s really hard to go back to the customer and say, ‘yeah, the deal’s changed.’”

That’s why it’s important to empower people, not committees, to make decisions, Senecal explained. “If the loan is a large loan, yes, it goes up to committee discussion. But in my 25-plus years at the bank, maybe two loans didn’t get through loan committee — because the lenders know what they’re doing.”

 

By All Accounts

When commercial lenders at PeoplesBank were focusing solely on real estate, they excelled at deals for warehouses, multi-family facilities, mixed-use properties, and strip malls. With C&I, they’re talking to manufacturers, healthcare practices, nonprofits, lawyers, accounting firms, and many more entities. And that requires specialized knowledge and, yes, strong relationships.

“You’re not lending on the building, you’re lending on the business,” Senecal said. “In real estate, we lend the money and hope to get paid back. If we don’t, we have the real estate. On the business side, it’s a whole different aspect of trying to understand, ‘how are you going to pay the loan back?’ When you get into all these other industries, it takes a unique skillset to identify whether or not it’s viable and the loan is a good loan or not.”

It’s a skillset the bank plans to further grow as it evolves its lending presence in the region’s C&I landscape.

 

Joseph Bednar can be reached at [email protected]

Banking and Financial Services

‘A True Win-Win’

By Mark Morris

Jim Kelly

Jim Kelly says PNCU and Premier Source offer services and expertise that benefit each other.

Polish National Credit Union started in 1921 with an investment of $325 and has grown to more than $700 million in assets today. But there are always ways to improve and expand its services, said President and CEO Jim Kelly, who describes PNCU’s recently announced merger agreement with Premier Source Credit Union as a joining of two forces.

“No one at Premier Source will be losing their job,” he said. “In fact we are counting on their expertise on offering credits cards to members which is a business we’re not in right now.”

Meanwhile, confronted with rising costs to keep up with technology, compliance, and talent retention, Premier Source had begun looking into a merger as its best way forward. CEO Bonnie Raymond said that, after considering a number of factors, Polish National emerged as the best fit.

“As a larger organization, Polish National offers in-house mortgages and commercial lending, while we bring our credit-card portfolio to expand to their membership,” Raymond said. “Along with the credit-card business, they will benefit from the expertise of our staff, so it’s a true win-win.”

Kelly added that organic growth in Western Mass. is not easy. That’s why he called the merger with Premier Source a “once-in-a-lifetime opportunity.” The current Premier Source headquarters on North Main Street in East Longmeadow will become the ninth branch for Polish National, which is headquartered in Chicopee. That location also addresses one of Kelly’s strategic goals in finding additional space.

“We’re a growing credit union, and there’s not much room left at our headquarters in Chicopee or at our operations center in Wilbraham,” he said. “The Premier Source building is large and beautiful, so it helps us in a huge way.”

What has become known across the U.S. as the Great Resignation has also affected the two credit unions. Between retirements and just leaving the job due to COVID-19 concerns, both organizations felt the impact of people leaving. Raymond noted that the merger will help address staffing issues for both.

“This was another win-win because our staff will stay employed while Polish National will be able to bring on experienced help to fill any openings they might have.”

“This was another win-win because our staff will stay employed while Polish National will be able to bring on experienced help to fill any openings they might have,” she explained.

In recent years, both organizations have grown through mergers with smaller credit unions. On a national level, Kelly told BusinessWest, approximately one credit union per day is involved in a merger.

 

Strategic Partnership

Premier Source began in 1941 as Kelko Credit Union, founded by employees of the Kellogg Envelope Company. Over the years, Premier Source acquired employee credit unions from companies such as Spalding, Hasbro Games, and Western Mass Electric. While membership now exceeds 4,500, Raymond said its growth still doesn’t provide the economies of scale of larger institutions.

“For example, interactive teller machines have become popular, but they are extremely pricey, and just buying one doesn’t recoup the investment,” she said. At $80,000 each, an institution needs to own several ITMs to find any economies of scale.

By agreeing to the merger, Premier Source will not be investing in ITMs, but its members will see a direct benefit. A common practice when a credit union merges involves paying a dividend to its members. Raymond explained that members are the reason Premier Source has a strong capital foundation, so the board will soon vote for a special dividend to compensate members for staying with the credit union.

“It’s a way to reward members for their longevity. Members who have been with us for more than 10 years will receive the largest dividend,” she said, adding that most members have belonged to Premier Source for more than 10 years.

Far from a cold and calculated business deal, Kelly said a credit-union merger is typically a more personal type of transaction, done only with people who have earned one’s trust.

“You don’t merge with someone you’ve only met a few months ago,” he noted. “It usually involves people you’ve known for at least several years because you want to make sure your members and employees are taken care of as a result of the merger.”

Kelly said he and Raymond go way back, having crossed paths many times because they work in the same industry. “I’ve known Bonnie for a long time. She is a high-quality and talented person.”

The next step in the merger process involves regulatory approval from the Massachusetts Division of Banks, the National Credit Union Administration, and the Massachusetts Credit Union Share Insurance Corp., as well as approval from the memberships of both credit unions.

A recent news release suggested the merger could be completed by the spring of 2022. Kelly, a former regulator, said he would not offer a timetable because it’s completely in the hands of the regulators as to when they complete their work on the merger.

 

Healthy Outlook

Polish National ranks 174th among the top 200 healthiest credit unions in the country, according to the Cooperative Credit Union Assoc. Kelly is proud of this accomplishment and noted that it’s positive news considering there are 5,164 credit unions in the U.S.

For now, the numbers Kelly looks forward to involve the 4,500 Premier Source members joining the 25,000-plus members of Polish National. It’s a fitting way to start the next 100 years of the credit union,” he said.

“While our founders were Polish, we have always been a community credit union and will continue that tradition,” he added, noting that the quote credited to the revered TV22 meteorologist John Quill still rings true: “you don’t have to be Polish to be a member.”

Banking and Financial Services

Contractor or Employee?

By Sarah Rose Stack

 

Even prior to the pandemic, the ‘gig economy’ was growing at unprecedented rates. That growth has only been accelerated with more traditional companies relying on remote workers and hiring more contractor workers. Freelancing is big business, with nearly $1 trillion of income generated. However, although that total number is impressive, independent contractors earn 58% less than full-time employees (FTEs), and more than half don’t have any employer-provided benefits.

From a business perspective, there are advantages and disadvantages to how a company classifies its workers. With employees, you’ll have more control, but that comes with more compliance obligations. With contractors, you’ll have fewer compliance obligations, but you will also have less control.

“From a business perspective, there are advantages and disadvantages to how a company classifies its workers.”

Some tax advantages to hiring independent contractors include the ability to avoid several tax obligations that apply to employees. For example, a company generally isn’t required to withhold federal or state income taxes, pay the employer’s share of Social Security and Medicare (FICA) taxes, withhold the workers’ share of FICA taxes, or pay federal or state unemployment taxes.

In addition, companies that use contractors may avoid other obligations, such as the requirement to pay minimum wages and overtime under the federal Fair Labor Standards Act and similar state laws, furnish workers’-compensation insurance (in many states), make state disability-insurance contributions, or provide employee benefits.

Keep in mind that simply having a written agreement or labeling a worker as an independent contractor doesn’t make them so. The IRS and other government agencies look at all the facts and circumstances to determine whether workers are misclassified.

When someone is hired, they must be classified as either an employee or an independent contractor. Here’s how the IRS determines worker status.

 

Behavioral Control

If the company has a great deal of control over the behavior of the worker — for example, where they work, when they work, or how they perform their jobs — the worker should be classified as an employee. If the company is giving the worker evaluations, conducting extensive or ongoing training about procedures and methods, or demanding that the worker attend daily meetings or set hours, then the worker is more likely an employee. Independent contractors will customarily set their own hours, decide on how to implement a project, and dictate where they work.

 

Financial Control

If a company provides equipment for the worker (tools, software, computers, phone, etc.), often reimburses expenses, and/or pays on regular and ongoing basis, then the worker is more likely to be an employee. The IRS clarifies by considering the following:

• Significant investment in the equipment the worker uses in working for someone else;

• Unreimbursed expenses, which independent contractors are more likely to incur than employees;

• Opportunity for profit or loss, which is often an indicator of an independent contractor;

• Services available to the market, as independent contractors are generally free to seek out business opportunities; and

• Method of payment. An employee is generally guaranteed a regular wage amount for an hourly, weekly, or other period of time even when supplemented by a commission, while independent contractors are most often paid for the job by a flat fee.

 

Relationship

Perception of the relationship is considered, but the interactions between workers and employees is what ultimately defines the relationship. Written contracts are considered; however, an employer cannot classify their workers as independent contractors when they, in fact, treat them like employees. If the company is providing employee benefits, insurance, paid time off, sick days, or pension plans, then the worker is most likely an employee.

Another area to consider is the permanency of the relationship. Employees are more likely to be hired indefinitely, and either party can terminate the relationship at any time, for any legal reason. Independent contractors’ rights are subject to a contract.

 

Penalties for Misclassifying Workers

The consequences for misclassifying employees as independent contractors can include IRS penalties and other non-tax implications. The IRS may assess back taxes against the company and demand that the company pay the employees’ share of unpaid payroll and income taxes, regardless of whether or not the independent contractors met those tax obligations. Companies can also expect to pay IRS penalties and interest. Further, workers can file a lawsuit against employers to demand back pay, overtime, and benefits.

 

Review Your Current Workers’ Status and Hiring Policies

The potential tax and non-tax savings do not outweigh the significant cost of misclassifying workers. It’s important to review your hiring policies, even if you are comfortable with your classification of current workers, to ensure that you are meeting all applicable standards for classification. Talk with your advisors if you believe you may have misclassified an employee or have questions about the standards.

 

Sarah Rose Stack is the Marketing manager for Holyoke-based accounting firm Meyers Brothers Kalicka, P.C.

Banking and Financial Services

And Why Investors Should Consider Re-evaluating This Strategy

By Jeff Liguori

 

Humans are historically bad at long-term thinking. In the world of finance, that behavior has dramatically worsened over the past 50 years.

Today, the average investor holds an individual stock for less than six months; in the late 1990s, that period was approximately two years. Go back to the 1950s, and investors were holding individual stock for nearly eight years on average.

What has caused such a drastic shift in investor behavior? First, access to markets has never been greater, which creates ample amounts of liquidity for trading. Second, ever-growing reams of information are disseminated at lightning speed, preying on our psyches. Finally, the cost to trade shares of a stock is negligible — in many cases, zero. Each of these trends is quite beneficial to the average investor. However, the combination of these factors promotes behavior that does not support a long-term view of investing.

For the sake of analysis, let’s look at the performance of Target Corp. (symbol: TGT). From July 1, 2013 through Nov. 30, 2021, the total return of Target’s stock (price appreciation and dividends) was 350%. During that same timeframe, the S&P 500 had a total return of 230%. However, shares of Target largely underperformed the broader market in the five years following July 1, 2013, returning 29% vs. 86% for the S&P 500.

Jeff Liguori

Jeff Liguori

“Ever-growing reams of information are disseminated at lightning speed, preying on our psyches.”

There was no lack of bad news in that five-year period, including a change in leadership with a new CEO and a failed plan to expand into Canada that cost the company more than $5 billion. But a patient investor with a long-term view, who believes in owning solid businesses, has been handsomely rewarded by staying with Target.

A recent article in the Wall Street Journal highlighted a little-known mutual fund manager, Wilmot Kidd, who has had exceptional investment performance.

“Over the past 20 years,” it notes, “Mr. Kidd’s Central Securities Corp. … has outperformed Warren Buffett’s Berkshire Hathaway Inc. Over the past 25, 30, 40, and even nearly 50 years under Mr. Kidd, Central Securities has resoundingly beaten the S&P 500. The keys to his success? Patience, concentration, and courage.

“If you had invested $10,000 in Central Securities at the end of March 1974, when Mr. Kidd officially took over,” the article continues, “you would have had nearly $6.4 million by the end of this October, according to the Center for Research in Security Prices. The same amount put into the stocks in the S&P 500 would have grown to $1.9 million.”

Analysis on Kidd’s fund suggests an average holding period north of 10 years. But some of the companies in which Central Securities is invested have been part of the fund for more than 30 years. And during Kidd’s tenure, the fund has underperformed the S&P 500 several times. But having the courage of his convictions, and staying invested through market cycles, has served his clients very well, despite periods of underperformance.

Investing today is about constant measurement. Companies produce quarterly earnings reports, compelling Wall Street analysts to change projections and adjust ratings, which forces investors to rethink their investment ideas. Add in exogenous events to amplify anxieties, and it is no surprise that the investing public has become so shortsighted. No, I don’t worry about the potential ramifications of Russia invading Ukraine on my stock portfolio (an actual assertion from a client!).

As a kid, I remember my grandfather diligently keeping track of the few stocks he owned, writing the end-of-month prices in a journal. He didn’t have the luxury of technology; his analysis was straightforward and pragmatic. He invested in companies with which he was familiar. He had no formal degree, having to forgo college to support his family during the Depression. The son of immigrants, he owned and operated a small grocery store whose customers were almost entirely working-class or even working poor.

One of his suppliers was a company called Corn Products Inc. The company still exists, now called Ingredion (symbol: INGR). For him, investing was about owning a piece of this company that he had a personal connection to, in the hopes of growing a nest egg. Whenever there was ‘extra’ money from his earnings, he would add to his positions. My grandfather retired in 1982 having never earned more than $30,000 in any given year. The value of his portfolio exceeded $600,000 prior to his death in 2011.

He didn’t know he would live for nearly a century, passing at age 97, but he sure invested like it. u

 

Jeff Liguori is the co-founder and chief Investment officer of Napatree Capital, an investment boutique with offices in Longmeadow as well as Providence and Westerly, R.I.; (401) 437-4730.

Banking and Financial Services Special Coverage

Open for Business

Ben Leonard outside Tower Square

Ben Leonard outside Tower Square, where Country Bank just opened an office to service growing commercial business in and around Springfield.

Businesses didn’t stop borrowing in 2020, although much of last year’s lending activity had more to do with staying afloat with Paycheck Protection Program (PPP) loans than expanding operations. These days, with the economy in a more stable — if not exactly robust — place, many businesses are looking to invest and grow (that is, if they can get enough people to come to work), at a time when banks are sitting on more liquidity than usual and are anxious to lend it out.

When Country Bank announced it was opening a commercial-banking office in Springfield, Ben Leonard was intrigued by the opportunity, noting its similarities to the bank’s push into Worcester in recent years.

“Country Bank has been around a long time, but historically, the physical presence has been between Worcester and Springfield,” noted Leonard, a senior vice president who leads the new Springfield office, located downtown in Tower Square.

“But we’ve always served clients everywhere within a 100-mile radius, and we’ve seen more activity here,” he went on. “We have clients in Springfield and the greater area of Western Mass., so the impetus to build that office was to be closer to those customers. Part of that is growing our C&I [commercial and industrial lending] business — we see a growth market here. It’s an opportunity to grow.”

The C&I lenders who work in the Springfield office have experience in niches like manufacturing, distribution, and equipment-heavy companies, Leonard explained. “That’s kind of what the team knows, and that’s a big part of why Springfield and Worcester are appealing markets for the bank to expand in, because those kinds of businesses are what’s here.”

Those are also the kinds of businesses that maintained operations at a more or less steady level during the pandemic, and now they’re ready to grow — and borrow, he said, adding that the real-estate market is active as well.

Jeff Sullivan

Jeff Sullivan

“If there’s a hindrance to businesses growing, it’s labor. It’s not being able to buy the machine, it’s hiring someone to run the machine.”

“Certainly there’s a need for affordable housing, and we’re seeing a lot of turnover in real-estate properties, some repurposing, and some interesting dynamics with real-estate valuations being as high as they are. We’re also seeing situations where the dynamics have changed, where an office building is half-empty now, and it needs to change hands.”

In short, commercial lenders are busy, which marks a change from a year ago. More accurately, they were just as busy last year, but often dealing with some very pandemic-specific activities, from PPP loan processing to commercial-loan deferments, particularly for hard-hit industries like hospitality. These days, however, businesses (not all, but many) are moving past the treading-water stage and calling on banks to help them expand, not just survive.

“People are spending money,” said Jeff Sullivan, president of New Valley Bank, which is based in downtown Springfield, noting that some business owners are looking to buy property rather than continue to pay a landlord, while others are making speculative investments in real estate, rather than sitting on cash they may have accumulated during the pandemic, when spending was suppressed for both individuals and businesses.

“We’ll see two or three buddies get together and pool some money to use for a down payment on a two-family or three-family house, thinking, ‘I can make 10 to 15% on my money investing in real estate rather than have it make zero percent in my savings account,’” Sullivan said.

Many are first-time real-estate investors, he added, including young people and people of color aiming to build wealth, while established businesses are anxious to invest in their own operations.

“A lot of people have squirreled away cash from the government programs during the pandemic, and have been hanging onto that cash for a rainy day, and now they’re in a situation where they can use some of that — and banks are lending,” he said. “If there’s a hindrance to businesses growing, it’s labor. It’s not being able to buy the machine, it’s hiring someone to run the machine.”

Mike Lynch, senior lender at Florence Bank, said his institution is looking at commercial-loan numbers that are at least equal to pre-pandemic activity — and that’s on top of PPP loans.

Kevin Day says last year’s loan deferments were a “lifesaver” for many businesses.

Kevin Day says last year’s loan deferments were a “lifesaver” for many businesses.

“We do all kinds of loans, commercial real estate and C&I loans. We’ve seen strong activity across all sectors; it hasn’t been one pocket more than others,” Lynch said.

Florence Bank President Kevin Day agreed. “It’s kind of across the board — not every sector, necessarily; we’re not seeing many new hotels and restaurants opening up. But investment properties are creating new borrowers, and they need help with financing.”

The combination of low interest rates and high prices were driving the commercial-loan market a year ago, the last time BusinessWest tackled this story, and that has remained true. “In the real-estate market, everyone understands residential properties are hot,” Day said. “But in commercial real estate, it’s similar.”

 

Back to Normal?

One thing that has changed is the reliance on loan deferments, which was one of the leading stories in commercial lending (and retail lending as well, for mortgages, car loans, and credit cards) last year.

“We were very active in the deferment program. It was a lifesaver for a lot of businesses,” Day said. “As we’ve come into 2021, a lot of the deferment periods have ended, customers are emerging from pandemic lockdown activity, and things are becoming more normal.”

In the business world, “almost all commercial customers are out of deferments, back on normal schedules, and it feels like their business is gaining traction, getting back to to pre-pandemic levels,” he added. “In the hospitality areas — hotels, restaurants, and such — the pandemic hurt them, but even they’re coming back out of the malaise, and business is starting to pick up. The deferments gave people time, and as everything is starting to come back online, those businesses will get their customers back and should come out of it fine.”

Leonard said Country Bank handled close to 1,000 PPP loans totaling around $75 million.

“I’m happy to say we deployed a lot of that, and consulted with folks on the front end to be sure it wasn’t a rubber stamp,” he said. “It was a differentiator; I think the smaller banks really shined, and were nimble enough to support their customers. You can talk about being there for your customers when they need it, but could you deliver? I think Country Bank did.”

The bank is well-positioned to be a stable provider of financing going forward, he added, “because our capital ratios are head and shoulders above most other banks, which allows us to do a couple things. It means our lending limits are higher, but it also allows us to be patient and pragmatic with our customers.

“We have a lot of capital to lend and the ability to lend it, but where we’re going to be most successful is really understanding our businesses, so that we can bank them through cycles.”

“So I think we see an opportunity because of that,” he added. “We have a lot of capital to lend and the ability to lend it, but where we’re going to be most successful is really understanding our businesses, so that we can bank them through cycles. That is more important than ever, I think.”

Elaborating, Leonard said the pandemic reinforced the need for banks to have close relationships with their commercial clients and really understand their business, and to understand how much struggle — or success — over the past two years was a pandemic-induced anomaly and how much might remain the trend going forward.

“The value add for any banker, especially a C&I lender, is knowing a company well enough to make those educated decisions,” he told BusinessWest. “Our strategy is to spend a lot of time getting to know the companies we bank, so once we start a banking relationship, we’re in it, and we find a way to be pragmatic and support companies for the long term. That takes thoughtfulness on the front end.”

Sullivan said New Valley has been actively reaching out to small-business owners, who are often too busy running their business to seek help. “Larger companies have more resources and have banks calling on them all the time. There’s plenty of capital out there, and we want to make sure we connect with those business people, and that’s what we’re trying to do.”

Almost as one, bankers say there’s plenty of liquidity in the market, and once businesses began seeing some clarity with the pandemic — and, to be sure, there’s still plenty of uncertainty — they started moving into growth mode. But, again, the current labor situation is dampening some of that enthusiasm.

“I talk to a lot of business owners who are grateful the government bailed out businesses during the pandemic,” Sullivan said. “But there are some who would rather have a more normalized market where people are coming back to work.”

Meanwhile, “deposits are way up, and all the community banks I know are looking to put that money to work as loans rather than having it sitting around in cash. If anything, that’s become more exacerbated the last few weeks.”

 

Good Business

Like Country Bank, Florence Bank has expanded its geographic footprint in recent years, into Hampden County, specifically, to serve — and expand on — commercial business it was already doing in the region.

It has been a successful transition, Day said, one that has turned into retail business growth as well. But right now, he sees plenty of opportunity on the commercial side.

“Our credit quality, frankly, has never been better. People who had jobs and operated businesses during the pandemic have a lot of cash on hand. Hospitality businesses had to take time off because of the pandemic, but are now starting to get over it. Deferments helped people like that a great deal to come back online.”

The resulting liquidity in the system — and the resulting credit quality — mean delinquencies are at record lows, Day added. “Not only is business good, but the business we have is good business as well.”

 

Joseph Bednar can be reached at [email protected]

Banking and Financial Services

Gathering Storm

Christopher Viale

Christopher Viale says student-loan deferments, set to end in February, may pose issues for families who haven’t paid them back in a while.

 

During times of recession or economic upheaval, the last thing economists expect is for credit-card debt to fall.

Yet, that’s exactly what happened during the first year of the pandemic. According to Experian, from the third quarter of 2019 to the third quarter of 2020, credit-card balances fell by 24% nationally. The percentage of credit-card users carrying an interest-bleeding balance month to month fell from 58% to 53%, according to the American Bankers Assoc.

One reason was that this was no normal economic downturn; during the early months of COVID-19, businesses were shuttered, restaurants were closed, and consumers simply reduced their spending dramatically — even if they were still working, and despite the government stimulus checks.

“For the first year of the pandemic, people weren’t really spending; they were paying down debt. Record amounts of debt were being paid down,” said Christopher Viale, CEO of Cambridge Credit Counseling in Agawam.

But that has not been the case in 2021.

“When things started opening up a little bit, people went haywire; they started spending like crazy,” Viale noted. “Credit-card debt has increased by 13% over the last quarter, which is the most it’s ever increased in a quarter.”

“For the most part, consumers have been in a good position, but then, when all these debts start to come due again, it’s going to be a very difficult time.”

Basically, stimulus worked — in the sense of stimulating spending. “You got free money, the $250 tax credit per child, you got whatever other government programs were there … people had a lot of money in their hands. Even though they weren’t working, the unemployment checks they were getting were as good as if they were working. So, for the most part, consumers have been in a good position, but then, when all these debts start to come due again, it’s going to be a very difficult time.”

And that’s what economic leaders — and people like Viale, who help families get out of debt — worry about. The increased spending in 2021 has coincided with an end to loan-deferment programs launched at the start of the pandemic, and if they haven’t been paying attention to their budget, many families might be in for a shock.

“It really is a perfect storm,” Viale said. “Consumers have had the ability to not pay their rent or mortgage or credit-card payments. Most, if not all, of that has ended, except for the 800-pound gorilla, which is student loans.”

Those will continue to be in moratorium until Feb. 1, which is when $1.3 trillion of debt will start to be drafted back out of consumers’ checking accounts. “Yes, they are being alerted and warned to be ready, but after not paying on these loans for almost two years, it’s going to be a shock for many.”

All of this has banks — with whom Viale talks all the time — worried about huge loss rates due to credit defaults starting in late 2022 and early 2023. In short, we may be heading into perilous times for household debt.

 

Change of Plans

According to a recent CreditCards.com survey, 44% of respondents they are willing to take on debt in the second half of 2021 for non-essential purchases, such as dining out.

That marks a dramatic change from savings-happy 2020. Even after that temporary dip in debt in 2020, 42% of U.S. adults with credit-card debt have increased those balances overall since the pandemic began in March 2020, according to a Bankrate.com survey conducted in September.

“It’s been an upside-down credit environment,” Stephen Biggar, who covers financial institutions at Argus Research, told CNBC this month. “If you told me the market was going to crash 40% and we would have 20% unemployment, you would have also said card delinquency rates would go through the roof, particularly for the lower-end consumer.”

But instead, the savings rate spiked to levels not seen in 70 years, as consumers curtailed spending — and were allowed to halt payments on student loans and mortgages — and started paying back other debt, notably credit-card balances. Now, the tide has completely turned. Meanwhile, most of those deferment programs no longer offer last year’s safety net.

“People haven’t had to pay their bills for a long time,” Viale said. “Mortgage, rent, student loans, even credit cards allowed a period of time when people didn’t have to make payments.”

Unlike payment deferment for credit cards, in which interest keeps accruing, “student loans are very different because that was a true moratorium; no one was being charged,” he explained. “So whatever status someone was in with their student loans when the pandemic started is where they’re going to be in February when they have to start paying again.

“Yes, they are being alerted and warned to be ready, but after not paying on these loans for almost two years, it’s going to be a shock for many.”

But on Feb. 1, those autodrafts will begin again. “And that’s going to be a shock for consumers because they haven’t made these payments in 18 months or so.”

Politico reported that the U.S. Department of Education is considering providing student-loan relief to borrowers who miss a payment during the first 90 days after payments resume, so credit scores won’t be adversely impacted.

According to Forbes, U.S. Sen. Elizabeth Warren wants to go even further; fretting about a surge in student-loan delinquency and default once payments resume, she and other members of Congress have repeatedly asked the Biden administration to postpone the restart of payments.

The average monthly payment for student-loan debt is between $400 and $600, Viale noted. “That’s a pretty big-ticket item they haven’t had to pay for a long time, and now, out of nowhere, they’re going to have to start paying it again.”

This will only exacerbate what seems to be a looming credit crisis, Viale said, one that makes programs like Cambridge’s — which manage and pay down a client’s debt payments in a way that reduces interest costs and protects their credit rating — even more critical.

Because of concerns about consumer debt next year, the Federal Reserve is allowing such relief programs to be extended to offer consumers even more concessions if they are struggling to keep up with mortgage and credit-card payments, Viale added. “My industry has been working flat out to develop and implement these additional hardship programs.”

 

Back to School

It’s not easy to escape credit-card debt — especially with the average annual percentage rate topping 16%.

According to a Bankrate.com survey, 54% of adults carry credit-card balances from month to month, and 50% of have been in credit-card debt for at least a year. The average person with credit card debt owes $5,525.

And that’s only one element of household debt. Wth student-loan payments ramping back up in February, the Department of Education has launched an extensive outreach campaign to borrowers.

“They’re giving people several months notice. They’re doing a pretty good job of letting consumers know this is coming,” Viale said. “But that doesn’t really mean much when you haven’t had to do it in a long time.”

 

—Joseph Bednar

Banking and Financial Services Special Coverage

Open for Business

Romika Odedra says the branch’s layout emphasizes the customer experience.

Holyoke-based PeoplesBank recently expanded its presence in Connecticut with a branch in West Hartford. The new location is projected to help the bank grow its already considerable portfolio of consumer and commercial business from south of the border, especially in an ongoing climate of mergers and acquisitions.

 

When PeoplesBank opened its newest branch in West Hartford on August 30, it wasn’t exactly its first foray into Connecticut’s capital region. Far from it.

“This is a retail opening in West Hartford, but half of our commercial business is in Connecticut already — actually, about 60%,” said Matt Bannister, the bank’s senior vice president of Marketing & Corporate Responsibility.

“Some is up in the Granby-Windsor-Suffield area,” he went on, alluding to PeoplesBank’s first three Connecticut locations, in East Granby, Suffield, and West Suffield. “Some is down here in the Hartford region, and it actually goes all the way down to the shore. We’re kind of catching up with this retail storefront because the commercial customers want a presence here. They’ve been saying to us, ‘come down to Connecticut.’ And West Hartford just makes sense; it’s a great community, and a good place to be.”

Aleda De Maria, executive vice president of Consumer Banking and Operations, said a growing commercial presence in Hartford County cried out for a full-service physical branch.

“The banking centers are there for when they need a little more contact, when they have a little more complexity, or they just want to expand their relationship. We need to make sure we have everything.”

“We absolutely need it. The majority of our new accounts are still opened at brick-and-mortar locations. For more complex conversations, customers want to talk to a person, and they want to have that live interaction. There still is a need for that face-to-face contact.

“I think what the industry is trying to do with the self-service channels — with online, with mobile, with video bankers — is give people the ability to do the quick, day-to-day transactions when they want to, without having to park and go in and talk to somebody, and get it done quickly,” she went on. “The banking centers are there for when they need a little more contact, when they have a little more complexity, or they just want to expand their relationship. We need to make sure we have everything.”

Michael Oleksak, executive vice president and chief lending and credit officer, said all those Connecticut dollars in the bank’s commercial portfolio have not come mainly from the Granby-Suffield area, but predated those physical locations.

Matt Bannister with one of the West Hartford branch’s two interactive video teller machines.

Matt Bannister with one of the West Hartford branch’s two interactive video teller machines.

“We have a significant amount of business in the Greater Hartford area, specifically in the Farmington, Glastonbury, West Hartford communities and downtown Hartford, but we also go as far as New Haven and Greenwich. So our tentacles are fairly long when it comes to our Connecticut presence.

“Most of that is in commercial real estate, which tends to be more transactional,” he went on. “We are able to do a lot of full-service banking for these commercial real-estate customers because of our cash-management expertise and the different products we have, but without a branch presence, it’s really difficult to do business banking.”

The branch presence in West Hartford allows the team to do more commercial and industrial (C&I) lending, and complements a recent expansion of the bank’s C&I team with former TD Bank veterans, Oleksak noted.

“We have a very strong following now, and I think by having a physical presence there, we’ll become a more visible part of the community,” he went on. “We do support our current borrowers, including with a lot of their philanthropic initiatives, but it’s kind of behind the scenes because we don’t have a presence there. But with a physical presence, and with the disruption in the market with the M&T acquisition of People’s United, it will really open the door for us to be a bigger part of the community.”

De Maria agreed. “We’ve already created such a solid foundation with our name and then with the physical presence from the acquisition we did in Suffield in 2018,” she told BusinessWest. “And now, with our West Hartford presence, I think we have a solid opportunity to bring the service we provide for our commercial customers to our retail-customer world, and really marry those two sides together and make an impact.”

 

Making Contact

Many visitors to the new branch will first notice the interactive video tellers, one in the entry and one in the drive-thru lanes, bringing the bank’s total number of such machines to 22 at 17 locations. Users can call up a live teller in Holyoke who manages four or five machines at once.

“That way, we can be open seven days a week and have extended hours and not have to have people physically in the branch. And the video banker can do almost any transaction,” Bannister said, noting that Peoples is the only bank in the Hartford to offer the service. “Part of our technology story is good, consumer-facing technology.”

Romika Odedra, vice president and regional manager, said customers appreciate face time with a live person rather than interacting with a machine and the more limited options available at an ATM. And Bannister added that, with the pandemic still raging, many customers appreciate being able to conduct complex transactions in a contactless way.

“We are able to do a lot of full-service banking for these commercial real-estate customers because of our cash-management expertise and the different products we have, but without a branch presence, it’s really difficult to do business banking.”

“Video tellers are something we’re proud to bring to the market,” De Maria said. “It brings seven-day-a-week banking to West Hartford and our surrounding areas.”

Once inside the branch, customers will see pods instead of traditional customer lines — a model Peoples and other banks have been implementing for years. Customers can stand beside the teller and even see what he or she is looking at on the computer screen, if necessary. “In the beginning, people were like, ‘where do I go?’” Odedra said. “But it’s so easy — it’s warm, it’s welcoming, it’s not ‘there’s the line.’ It’s nice to have that one-on-one experience.”

The branch also employs a ‘universal banker’ model, Bannister said. “Any bank employee you see out here can do all the transactions. You can go to a teller pod or pop into an office if it’s more convenient or you just want privacy to have a conversation.” In other, more specialized offices down the hallway from the main area, he added, the bank will offer a mortgage expert, a wealth adviser, and other ancillary services.

And in front, at the main entrance, is a high table, couch, and coffee bar. “We’re trying to say to people, ‘come on in and hang out; get to know us a little bit,” Bannister said. “The thought is, we want to have sort of an open storefront.”

That’s partly to reflect the neighborhood the branch is in, with restaurants and small shops lining the streets and the shopping and dining mecca Blue Back Square just down the road.

“This area really is hopping with foot traffic,” he said. “And if you’re a bank with a retail storefront, you want foot traffic.”

Those who drive to PeoplesBank will appreciate the free parking lot the bank shares with the town’s Post Office.

“I used to work at a different bank, and that was the biggest issue we had, the parking,” Odedra said. “I’m so glad we have the parking we have. We don’t have to rush the customer out; we have time to have that one-on-one with them and invite them to have a cup of coffee.”

Bannister said West Hartford has been an enthusiastic town to work with, from its Chamber of Commerce to local economic-development leaders.

“Right from the start, when we were saying we wanted to come down, they were like, ‘how can we help?’ We’re in a lot of communities, and some of them are very welcoming, and some are maybe not so much. This one has been great to work with.”

 

Opportunity Knocks

The branch is fully staffed as well, with a mix of on-site and hybrid workers, reflecting the current makeup of the entire PeoplesBank organization. Some are West Hartford natives who know the market, Bannisher said, while some were attracted by working near all the nearby restaurants and other neighborhood amenities.

Aleda De Maria

Even in an age of mobile banking, Aleda De Maria says, people still want face-to-face interaction at branches for many services.

There’s room to expand in Hartford County, he added, with plans to open at least two more branches in the next couple of years.

“We’re coming in with a message of ‘we’re here, and we’re here to stay, and we can do everything the big banks do, but with a local feel and local decisions,’” De Maria said. “And I think that’s what’s missing in banking in general nowadays — being able to bank how you want to bank but also at a community bank where you don’t have to worry about who’s going to buy them.”

That presence means civic involvement and philanthropy as well, Bannister said, noting that PeoplesBank plans to give close to $60,000 in the first month alone to local organizations like Habitat for Humanity, Hands on Hartford (which assists with food pantries and the homeless population), the United Way, Foodshare, and even two West Hartford community events the bank will sponsor this fall and next summer.

“Right from the start, when we were saying we wanted to come down, they were like, ‘how can we help?’ We’re in a lot of communities, and some of them are very welcoming, and some are maybe not so much. This one has been great to work with.”

“We feel like we’re leading with the values we want to be known by in the community, which are innovation, technology, customer service, and the community support.”

De Maria agreed with Bannister than broadening the bank’s footprint in Connecticut is a must. “We will continue to actively look for physical locations, primarily in Hartford County,” she said. “We’re not opposed to outside Hartford County should it make sense, but in Hartford County, we feel we have an opportunity for our brand to really make an impact in the community.”

And that means expanded business, including commercial lending, Oleksak said. “I think there’s tremendous opportunity in this market for us, given our size and the experience of our lending staff. We’re very diverse, and between small business, large commercial real-estate loans, and now C&I expertise, I think we bring a lot to the table. It’s a great opportunity for us.”

 

Joseph Bednar can be reached at [email protected]

Banking and Financial Services

Developments of Interest

By Mark Morris

John Howland calls the recent flood of deposits an “unprecedented” situation.

John Howland calls the recent flood of deposits an “unprecedented” situation.

John Howland admits that the word ‘unprecedented’ is overused these days. But for him and others in the banking business, it seems like the right word to describe all that’s going on.

Howland, president and CEO of Greenfield Savings Bank, was talking specifically about the record amounts of deposits flooding into banks — and what’s happening with those deposits, or not happening, as the case may be.

In the early months of the pandemic, from January to June of 2020, banks in the U.S. saw a surge of nearly $2 trillion in deposits. At that time, most people were staying close to home and had reduced their spending to necessities.

As a local example, PeoplesBank reported deposit increases of 33% since last April, or nearly $700 million in additional deposits.

More deposits arrived as businesses applied for Paycheck Protection Program (PPP) loans and consumers received stimulus checks from the government. During normal times, money gets deposited but does not stay in an account for long. These days, however, deposits are staying and growing to an extent Howland and his counterparts in Western Mass. have never seen before.

And while record deposits would seem like a good thing, all that cash is sitting still, for the most part, and the key to any bank generating revenue and earning profits is loaning its deposits out to borrowers.

“I never thought I would say there are too many deposits and not enough people to lend the money to,” said Tony Worden, president and chief operating officer of Greenfield Cooperative Bank. “The point of our business is to get deposits … so this goes against everything we were taught.”

In normal times, banks take in deposits and lend that money out to businesses and individuals. Balancing the number of loans to deposits helps determine what interest rates will be paid to savers and charged to borrowers. Banks profit on the difference between the two.

“I never thought I would say there are too many deposits and not enough people to lend the money to. The point of our business is to get deposits … so this goes against everything we were taught.”

But these are certainly not normal times. These days, banks have record deposits and diminished loan demand — for several reasons, which we’ll get into later — which translates to lower interest rates for savers and borrowers, as well as lower profits for banks.

Howland pointed out that the lower interest rates are great news for people looking for a business loan or a mortgage.

“The residential and commercial rates are down to levels that were inconceivable 10 years ago,” he said, adding that, moving forward, banks will be competing much harder to entice people to borrow money than deposit it.

 

By All Accounts

There are many theories as to why deposits have soared at area banks — and why those deposits are going largely untouched.

Dan Moriarty, president and CEO of Monson Savings Bank, suggested that once people tightened their spending during the pandemic, they may have changed their overall spending patterns, which is in many ways good for consumers, but not for the overall economy.

“It’s good for consumers to increase their savings and their capacity to have money, but it also slows down the economy,” Moriarty told BusinessWest. “We believe there is still some pent-up rebound spending by both consumers and businesses that we will be seeing.”

Howland agreed, noting that there are a number of reasons contributing to the surge in deposits, with one of them bring what he called a “flight to quality.”

“With all the uncertainty in the world, people understand that putting their money into a bank where their deposits are insured by the FDIC is one of the safest moves you can make,” he said, adding that, despite the consistently upward movement of the stock markets, many consumers are seeking a safe harbor in which to park their money.

Tony Worden says he never expected there to be too many deposits and not enough people to lend to.

Tony Worden says he never expected there to be too many deposits and not enough people to lend to.

As for the business of converting those deposits into loans — and revenue — many of those same factors are holding some consumers back from borrowing, said those we spoke with, although many have pressed ahead with purchases of new cars, new homes, and vacation homes.

Meanwhile, a number of businesses, still struggling to fully recover from the pandemic, are being cautious about moving ahead with expansions or new ventures. And for those that have the confidence to move forward, the current workforce crisis is keeping them from doing so.

Indeed, Worden said the current labor market is affecting activity in commercial lending. “We have businesses that can’t take on all the jobs they want because they don’t have enough staff to get them done.”

Moriarty agreed, but spoke optimistically about the prospects for improvement when people return to the workforce in large numbers. “Once our businesses can hire the staff they need and expand their products and services, they may look to the banks to borrow and grow.”

The surge in deposits and frustrating inability to put much of them to work has been one of many stories to unfold during what has been a challenging — and very different — year for area banks.

They all played a key role in helping businesses apply for PPP loans when they became available last spring. During two rounds of PPP loan offerings, Moriarty said, Monson Savings processed 565 loans totaling nearly $50 million.

In the early days of the pandemic, qualifications for PPP loans included every small business that was affected by COVID-19. Tom Senecal, president and CEO of PeoplesBank, said many applied because they didn’t know if they were going to be impacted.

“It’s good for consumers to increase their savings and their capacity to have money, but it also slows down the economy. We believe there is still some pent-up rebound spending by both consumers and businesses that we will be seeing.”

“There were many businesses that thought they were going to be hit hard but really weren’t,” he noted, giving an example of construction companies that were closed early in the pandemic but were then designated as essential and allowed to reopen.

Worden added that many companies that received PPP loans in the first round didn’t touch the money until it became clear their loan would be forgiven by the government. Once they figured out how to get loan forgiveness, they didn’t sit on the next round.

“We’ve had around 96% of our first- and second-round PPP loans forgiven with no denials,” he said. “The only ones who haven’t been forgiven have all started the process.”

All the bankers who spoke with BusinessWest said they were grateful to process PPP loans for area businesses. Worden said the urgency to get the first-round applications done required an “all hands on deck” approach that brought in many outside the loan department. His story reflects similar efforts from the other banks.

Dan Moriarty

Dan Moriarty says the pandemic changed people’s spending patterns, which may not be good for the overall economy.

Another dominant story during the pandemic was the real-estate boom, driven in part by record-low interest rates. Moriarty said activity on the buying and selling side has been brisk for some time. “We’ve seen a lot of activity where people are moving into a new house or buying a second home, whether it’s for vacation or an investment.”

The low interest rates have also brought a significant increase in people looking to refinance their mortgage.

“While it’s smart for people to refinance their current debt to get a lower rate, it doesn’t necessarily create new funds for the bank,” Worden said.

In early 2020, Monson Savings opened a new branch in East Longmeadow to increase its access to more companies and consumers. Moriarty admitted he had some anxiety about the timing.

“We made the decision back when no one predicted the pandemic would last so long,” he said, noting that, after a soft opening in August 2020, the branch has performed far above its forecasted numbers. “We’ve seen deposits increase 40% to 50% from when we opened.”

 

Bottom Line

All the bankers we talked with agreed the next three to six months will give everyone a better idea of where the economy, COVID, and the prospects for area banks are headed.

“I think we need to focus on getting through these next few months, and let’s get through the Delta variant,” Worden said. “We all have short-range goals, but we’re also keeping our eye on the long range.”

And that long-range forecast will hopefully call for taking that surge in deposits and putting it to work in ways that will bolster the local economy.

Banking and Financial Services

Know the Rules

By James T. Krupienski, CPA

 

At the start of the COVID-19 pandemic in the early parts of 2020, the concern of business survival was the number-one thought of countless businesses, with each industry having its own struggles. The medical industry was not without its own real concerns at that time, particularly given its role in the pandemic fight. People would continue to get sick, require treatment, and see their physicians, but how could it be done safely?

Recognizing the financial crisis that was about to overtake this industry, along with how detrimental it was for the industry to remain open and accessible to patients, the federal government took dramatic steps. In addition to Paycheck Protection Program (PPP) loans, for which medical practices were eligible, the Coronavirus Aid, Relief and Economic Security (CARES) Act also allocated funds directly to the medical industry through the Department of Health and Human Services (HHS) and the newly created Provider Relief Fund (PRF).

James T. Krupienski

James T. Krupienski

“While the COVID-19 relief provisions, as part of the CARES Act, provided a lifeline for many medical, dental, and other healthcare-related practices during the pandemic, that support was not without certain compliance requirements and reporting.”

The first round of funding, which was completely unexpected to many, occurred in early April 2020, when $30 billion was deposited directly into the accounts of eligible practices. Throughout 2020, additional funds were later rolled out in phases 2 and 3, as well as through targeted distributions to specific industries, such as rural providers and skilled-nursing facilities. Of importance is that, for all practices receiving these funds, there are several rules to be followed.

While the COVID-19 relief provisions, as part of the CARES Act, provided a lifeline for many medical, dental, and other healthcare-related practices during the pandemic, that support was not without certain compliance requirements and reporting, which we will dive into within this article.

 

Attestations

First, within 90 days of receipt of the funds, each provider was required to attest to certain terms of use. For those electing to return the funds, it was required to be done within 14 days of this attestation. Attestations were required for receipt of funds in all phases and were to be completed through use of a portal with the HHS (www.hhs.gov/coronavirus/cares-act-provider-relief-fund/for-providers/index.html#how-to-attest).

 

Reporting

As part of the attestation process, any provider receiving more than $10,000 in payments through the PRF would be required to report on use of the funds. While the specifics on the exact reporting took months to be finalized and continued to be reworked by the HHS, the general guidelines were known. Barring no future changes, PRF dollars are to be applied in the order of:

1. Certain qualifying expenses that can be directly attributable to coronavirus; and

2. Lost revenues.

Of greatest importance is the understanding that the use of these funds must be kept separate and distinct from the use of other coronavirus-relief aid. For example, if you report on the use of a personnel or payroll related expense, it cannot also be tied to dollars used in applying for PPP loan forgiveness. Essentially, a practice cannot ‘double-dip.’

Initially, reporting was set to begin back in the summer of 2020, which was then pushed to the fall of 2020 and then again to Jan. 15, 2021. However, because of updated legislation and a change in administration, reporting had been delayed even further. In late June 2021, the reporting requirements were finalized, and the reporting portal is now open to many, depending on when funds were received (see chart).

For all recipients of the fund, it is important to continue to monitor this process so that a reporting deadline is not missed. To stay on top of this process, the HHS has been updating its site (www.hhs.gov/coronavirus/cares-act-provider-relief-fund/reporting-auditing/index.html) with current regulations.

 

Audit Requirement

One stipulation, not known to many, is that a government single audit is required if the combined federal funds (PRF and other federal assistance) received were more than $750,000. Note that PPP funding does not count towards this total.

A single audit would be required of an organization that has $750,000 or more in federal awards. While typically, federal funding is awarded to not-for-profits and governmental organizations, the HHS PRF has opened many organizations, including for-profit medical practices, to these compliance requirements. If a practice has received combined federal awards though the Provider Relief Fund in excess of $750,000, a single audit will be required.

While the majority of relief programs under the CARES Act (such as the Paycheck Protection Program) are subject to reporting requirements, the PRF has its own distinct rules to navigate. If your healthcare practice took advantage of the PRF in any amount, it is highly encouraged that you speak with an advisor as soon as possible to fully understand the compliance requirements. Navigating federal compliance can be intimidating and confusing, especially if this is your first time doing so. Speaking with an advisor can demystify this process and help ensure that you understand the regulations.

 

James T. Krupienski, CPA, MSA, is a partner in the Healthcare Services niche for Holyoke-based Meyers Brothers Kalicka, certified public accountants and business strategists; (413) 536-8510; www.mbkcpa.com

Banking and Financial Services Special Coverage

Stating Its Case

Tony Liberopoulos

Tony Liberopoulos says Liberty Bank might be new to Western Mass., but its lenders are anything but.

Dave Glidden is no stranger to the Western Mass. banking community, and neither is the lending team he’s assembled to grow Liberty Bank — the Connecticut-based institution he currently serves as president and CEO — within this region. Liberty’s leaders believe those community ties — some of the Western Mass. team’s lenders have worked in this market for three decades — will prove fruitful at a time when customers are looking for experience and stability.

Liberty Bank is the oldest currently operating bank in Connecticut. But Dave Glidden prefers not to think in terms of state lines.

“We’ve been in Connecticut a long time, and very recently we’ve crossed the border into Western Mass.,” said Glidden, the bank’s president and CEO and a familiar figure to the Pioneer Valley’s banking community from his years as regional president at TD Bank.

The reasons for the northward push, he said, seemed obvious.

“When I looked at this opportunity and took the job, one of the things I talked about with the board and my teammates was that, when you think about it, there are so many similarities between Connecticut and the Greater Springfield market, economically and culturally; people work back and forth across the border.

“So, really, if you stop looking at state boundaries for a second, we really lend in that I-91 corridor, New Haven on up through Middletown, through Hartford, and now into Greater Springfield,” he went on. “There are many similarities in industries and types of businesses, and we know a lot of the borrowers, the centers of influence, the CPA firms, the legal firms … and we know many of the businesses.”

“Liberty Bank is new to Western Mass., but our team is not new to Western Mass.”

That’s because Glidden and Liberty’s Western Mass. team — Chief Credit Officer Dan Flynn; lenders Tony Liberopoulos, Jeff Sattler, Rick Rabideau, and Gene Rondeau; and Sue Fearn, who specializes in cash management — have roughly 160 years of combined experience working in banking in Western Mass.

“Liberty Bank is new to Western Mass., but our team is not new to Western Mass.,” Liberopoulos said. “We’ve got one of the most experienced teams in Western Mass., even though we’re the rookie bank in this area.”

With the ability to assemble a team with that depth of experience in the market, Glidden said, expansion into this region — lending activity began last year, and a commercial loan-production office is opening this month in East Longmeadow — just made sense.

“Obviously, this commercial loan production under Tony’s leadership is the first foray over the border,” Glidden said, “and we’re continually evaluating and looking at retail branch sites and how we’ll build out the franchise over the course of the next couple of years in support of the commercial-lending activities that really started about a year or so ago.”

With more than $7 billion in assets but strong ties to its local communities, Glidden said Liberty is the kind of stable institution that appeals to customers in Western Mass., especially at a time when mergers and acquisitions (M&A) continue to shake up the landscape.

“With everything that’s going on in all the banking markets, there’s a lot of disruption with M&A, and it’s projected there will be a lot more M&A industry-wide,” he noted. “So, as a bank with our size and history, and the teams we have, we’re in a unique position where we can kind of out-local national banks and out-national local banks and be that entity in the middle that can deliver services and make decisions in a very local fashion, but has the scale and the size to grow with borrowers, usually past where a lot of the other community banks are restricted due to their size.”

Dave Glidden with a map of Liberty’s locations

Dave Glidden with a map of Liberty’s locations, most of which are concentrated along, or not far from, the I-91 corridor.

While commercial lending is the main focus right now, Glidden said, he sees Liberty eventually expanding its presence to offer that type of appeal to retail customers as well. “When a bank gets acquired, customers often say, ‘my bank’s changing, my banking relationship is changing — maybe now is the time I should have the conversation with someone else.”

It’s a sense that was only supercharged by the pandemic, a time when online retailers thrived and changed people’s expectations about service delivery.

“We have to continue to deliver the right type of distribution system for our customers if we expect to gain market share and capture those who get disrupted due to M&A activity, or whatever other market event might happen,” Glidden told BusinessWest.

“There are great banks in Western Mass., super people, experienced bankers, but there’s going to continue to be disruption — everywhere, not just in Western Mass.,” he went on. “And we think, with our balance sheet and existing franchise and the investments we’ve been making, which have been significant over the past few years, to really up our digital offerings across the board, we’re in a great position to enter a great market that means a lot to the executive leadership here at Liberty Bank.”

 

Lending Support

Since launching activity in Greater Springfield, Liberopoulos and the rest of the lending team have assembled a broad variety of clients. “It’s across the board,” he said. “We’ll do loans up to $50 million for the right client, or even higher than that. We’re primarily looking at small to medium-sized businesses. We’ll look at investment real-estate deals, and we’ll look at any privately held business, if it’s the right size for us.”

Like the Greater Hartford market in which Liberty has recently expanded its presence, Glidden doesn’t see loans in a vacuum, but rather takes a big-picture look at how each loan-funded project or expansion impacts economic development in an entire region.

“It’s important, when you’re a community bank and you go into a market, that you have a strategy to align with and understand what’s going on in those markets. Who are the key economic-development companies, the drivers? Who are the key not-for-profits that we can align ourselves with and support? Because when we invest in the communities we do business in, it’s not only the right thing to do, it’s smart business.”

As it eyes growth across its footprint, including expansion of retail, investment, and other services in Western Mass., Liberty is making another kind of investment, Glidden said: in its digital channels.

“Banking customers’ habits are changing rapidly. They were changing rapidly before the pandemic,” he said. “But, obviously, the pandemic forced people to adopt online channels that, before, they wouldn’t have felt comfortable with, or didn’t think they needed — but it became a need during the pandemic.”

Part of the bank’s strategy for this region includes what shape the physical footprint will take to support the services Liberty wants to provide, he noted — but that strategy must roll out in tandem with the digital one.

Tony Liberopoulos (left) and Dave Glidden

Tony Liberopoulos (left) and Dave Glidden say there’s a space in Western Mass. for a bank of Liberty’s size and local focus.

“Branches are changing, and customers’ habits are changing — they’re using them less, but that doesn’t mean they’re not still important,” Glidden said, noting that part of what he called his “aspirational three-year plan” has involved bolstering digital assets, so customers can choose how to interact with the bank.

“It’s not up to us to choose how customers do business with us. It’s for them to choose, and it’s incumbent on us to make sure we have all those channels there. Branches are one of them, as are online, digital, and live chat.”

As he noted earlier, Amazon and other online entities, particularly during the pandemic, have altered people’s expectations when it comes to retail, and banks are, indeed, a retail business — so a bank’s digital channels need to live up to those heightened expectations.

The pandemic impacted Liberty’s Western Mass. plans in another way, Liberopoulos said: by giving it an opportunity to stay aggressive when not every bank did.

“It was an interesting time. We came to work every day, took our precautions, properly distanced, wore our masks,” he said, noting that clients still wanted to meet, some in person, some by phone or Zoom, whatever made them most comfortable. And those meetings were often productive.

“We were firm believers that COVID was going to end, so we’d look at their financial performance prior to COVID,” Liberopoulos said. “We knew 2020 and 2021 were going to be difficult, but if they were strong in ’17, ’18, and ’19 — and if their interim results look good in ’21 now that we’re getting past vaccinations — we were very eager to win that business.

“When some other banks were uncomfortable lending because of the numbers they saw for 2020, we were not,” he went on. “We understood it’s about the owners of the business, the history of the business, and we were all convinced, here at Liberty Bank, that we could see the light at the end of the tunnel and we would find the right clients to work with.”

Glidden said he was “never prouder to be a banker” than he was in 2020.

“I never want to go through it again, of course, but what the banking industry did with the Paycheck Protection Program and the SBA lending as part of the CARES Act, that was a huge challenge for the banking industry.”

He praised not only his own team, but his colleagues at other banks for working non-stop in those chaotic early days of PPP last spring, and kept working to get customers the help they needed.

“I could see it was a very unique, maybe the most unique, time in my career,” he said. “I really felt an obligation as a banker, that we’re the only way this money is getting out there in this once-in-a-lifetime — knock on wood — pandemic.”

 

Community Ties

Getting back to the consolidation landscape, Liberopoulos said acquisitions can often distance a bank’s philanthropic arm from the communities in which is does business, but Liberty continues to be focused on those activities.

“The bank is very sensitive to the fact that we’re seeing consolidations, so we’re seeing less money being given to non-for-profits in the community, and one of our chief slogans now is ‘be community kind.’ We want to give back to the community where we work, where we lend, and where we live. And we’ve done that already,” he said, citing donations to Ronald McDonald House, and the Boys & Girls Club as recent examples.

“It’s certainly been part of Liberty Bank’s DNA and corporate culture,” Glidden agreed, noting that the bank’s foundation, which he also serves as president and CEO, gives away around $1.5 million per year, and the bank itself contributes in the seven-figure range as well.

“And our commitments are growing,” he added. “As a community bank, you have a responsibility and obligation to give back; all of us truly believe that. That’s why we’re here. We walk the talk. We give back to our communities. It’s what community banks should do. We’re mutual, we’re private, we’re owned by our customers, so you have to give back to those communities.”

Which is even more important in an era of M&A activity.

“I just think, given the disruption and consolidation in the market, that we’re a bank that’s still local and makes decisions locally. We give back to our communities; we put our money where our mouth is.”

As one of the largest PPP lenders in Connecticut, Liberty also felt a responsibility to support community members who weren’t customers, which is why it serviced PPP loans for such individuals. In some cases, that opened the door to a new relationship opportunity.

In the end, Liberty grew during the pandemic — by about $1.2 billion during 2020, in fact. Some of that was PPP activity, Glidden noted, but about two-thirds sprung from new market share and new customers.

“We continue to feel optimistic — 196 years is pretty old, but I feel more optimistic about the next 196 years than I was pre-pandemic, and I was pretty optimistic pre-pandemic.”

Liberopoulos is optimistic, too. “We’re new to the market, but we’re not new to banking. We’ve got an experienced, well-known team, and we make local decisions with quick turnaround time. We’ll make loan decisions on the spot, in front of a client, when we meet with them. That’s the kind of bank I’m happy to say I work for.”

And it’s the sort of bank that shouldn’t be constrained by state lines, Glidden added.

“Liberty Bank is coming to Western Mass. to be a business partner with the community. We’re not coming there just to make loans and take deposits. This is the first stake in the ground, so to speak, but I think everyone will see and feel our commitment to Western Mass. as we build out our franchise there.”

 

Joseph Bednar can be reached at [email protected]

Banking and Financial Services

Brokerage App Is a Dangerous Culmination of Intersecting Trends

By Jeff Liguori

 

It was supposed to democratize Wall Street — yet another DIY trend, this time with your hard-earned money.

Robinhood is a popular brokerage application that allows subscribers to open an account with as little as $1, charges nothing for commissions, and allows users to buy fractional shares of stock. Backed by venture capital and slated to go public with an estimated $30 billion valuation, the company has enjoyed meteoric growth with an estimated 13 million users, 50% of whom use the mobile app daily, often multiple times, and 90% of whom use it on a weekly basis. The overwhelming majority of its user base belongs to the millennial demographic.

Robinhood achieved what it set out to do, but at what cost?

I’ve worked in the investment field since 1994 and have managed assets for clients since 2006. I’m also an entrepreneur, so I appreciate disruptive technology amid a changing business landscape. Robinhood, however, is the dangerous culmination of intersecting trends that have harmed investors and, according to financial regulators, may have contributed to a death by suicide.

Jeff Liquori

Jeff Liguori

“Robinhood is not the Home Depot of investing. Do-it-yourself portfolio management has been around since the advent of E-Trade in the mid-’90s. That company disrupted the brokerage industry and forced commissions at most every other firm lower in order to compete for customers.”

The basic business model for financial advisory or money management is that the client pays a percentage of his or her account balance as an annual fee, generally around 1%. To be clear, Robinhood is a brokerage; the firm does not use discretion to manage a client account or offer advisory services. Many brokerage firms have morphed into advisors and now focus more on money management as trading commissions have trended to zero. Overall, this trend has been a positive for individual investors and has improved access to many financial solutions — mutual funds, exchange-traded funds, or individual stocks — as well as financial research and news.

Robinhood is not the Home Depot of investing. Do-it-yourself portfolio management has been around since the advent of E-Trade in the mid-’90s. That company disrupted the brokerage industry and forced commissions at most every other firm lower in order to compete for customers. Just as E-Trade blazed a path for lower commissions, Schwab, Fidelity, and TD Ameritrade slashed commissions to zero in 2019 in response to Robinhood taking market share.

But growth has consequences. Robinhood was at the center of some incredibly volatile trading in a handful of individual stocks. You may have heard of GameStop (GME). The Robinhooders gathered virtually in chat rooms, most notably on a platform called Reddit, and decided as a community which stock they wanted to manipulate. It was no small feat. From Jan. 18 to Jan. 28 of this year, the price of GME went from about $18 to a high of $478, an increase of more than 2,600%. The Robinhood crowd is believed to be the main catalyst for this action. The day GME hit $478, it also went down to $112 before finally closing around $193.

In the month of January, 1.26 billion shares of stock changed hands in GME, almost 15 times the average monthly volume. Robinhood eventually cut off any trading in GME shares on Jan. 28, as well as trading in several other stocks with a similar backstory. Imagine being a small investor, buying GME shares at, say, $250 on Jan. 27, watching your investment nearly double the next day, but not being able to trade and exit your position profitably.

As previously stated, the Robinhood story is the intersection of several trends: fiercely independent millennials, ‘killer app’ technology, and the rewards reaped from the instantaneous decision making of like-minded people, all backed by institutions awash in venture capital, looking for the next big idea. I cringe at the thought that Robinhood may compete with what firms like mine provide for clients, namely deep expertise, sound financial advice, and disciplined investing backed by serious research.

FINRA, a regulatory agency that oversees brokerage firms, recently fined Robinhood $57 million and ordered $13 million in restitution to customers. It is the largest fine ever imposed by that regulator. In the press release, FINRA even referenced the suicide of a 20-year-old trader who panicked when his Robinhood app may have incorrectly displayed a massive $730,000 loss and received only a generic autoreply when he e-mailed Robinhood customer service three times seeking help.

Robinhood the idea is a good one. Robinhood the company has a lot more growing pains on the horizon, which likely won’t prevent the founders from becoming fabulously rich. And I have no problem with wealthy entrepreneurs, who typically risk everything for a single idea. Time and again, however, the investment profession is plagued with these stories in which investors are persuaded to pursue the next big thing. I think FINRA’s message is a powerful one. Now, if someone would just listen.

 

Jeff Liguori is the co-founder and chief Investment officer of Napatree Capital, an investment boutique with offices in Longmeadow as well as Providence and Westerly, R.I.; (401) 437-4730.

 

Banking and Financial Services

Strike Against Hunger

Andrew Morehouse thanks Country Bank

A surprised Andrew Morehouse thanks Country Bank for the $500,000 donation to the Food Bank of Western Massachusetts.

Paul Scully says he wants to “throw hunger a curveball.”

And to the leaders of two Massachusetts food banks, it was a welcome pitch indeed.

At its annual meeting on June 21, Country Bank unveiled its most recent — and largest — donation targeting the persistent issue of food insecurity in the Bay State, surprising Andrew Morehouse, executive director of the Food Bank of Western Massachusetts, and Jean McMurray, executive director of the Worcester Food Bank, with two $500,000 checks, one for each organization.

“With everything we’re hearing these days about the shortage of food and the high expense of food … the need is real out there,” Scully said during the announcement event. “It’s really exciting for us and an honor to announce we’re kicking off a million-dollar pledge to throw hunger a curveball, and we are presenting a $500,000 check to both Jean and Andrew for your organizations.”

It’s just the latest, and largest, in a remarkable show of support from banks across the region in the fight against food insecurity, which spiked during the COVID-19 pandemic and continues to be a persistent problem. Most banks in Western Mass. have ramped up their contributions to area food banks and food pantries, often significantly.

“As a community partner, we care deeply about the sustainability of our communities and the people who live in them,” Scully added, noting that this $1 million pledge reflects an recognition of the burdens many have experienced throughout this past year.

“I’m in awe of Country Bank’s generosity and so impressed by their commitment to the community, whether it be Worcester County or the four counties of Western Massachusetts.”

Newly appointed Country Bank board members Elizabeth Cohen-Rappaport, Richard Maynard, Ross Dik, and Stacey Luster presented the checks to Morehouse and McMurray at the annual meeting.

“I’m in awe of Country Bank’s generosity and so impressed by their commitment to the community, whether it be Worcester County or the four counties of Western Massachusetts,” a visibly surprised Morehouse said. “This demonstrates that Country Bank is for real, and they practice what they preach.”

McMurray was equally touched. “This was totally unexpected, but, when I think about it, Worcester, and Worcester County, is the best place to live, to work, and to give back, and we are going to put this tremendous gift from Country Bank to work so none of our neighbors has to go hungry.”

The Food Bank of Western Massachusetts relies on donations from individuals, businesses, foundations, civic organizations, faith-based groups, schools, and government to fulfill its expanding mission. With the help of that support, it provided the equivalent of 12.3 million meals in in the fiscal year that ended Sept. 30, 2020 — a significant increase from meals provided in previous years, and a pace that continued as the pandemic extended well into 2021.

“Country Bank is always looking at the basic needs of folks in our communities, whether food services, shelter and homelessness, as well as healthcare — those are the primary pillars where the bank tries to make the most of its donations,” said Shelley Regin, the bank’s senior vice president of Marketing.

The support for food banks comes at a critical time, not just in Massachusetts, but nationally. Feeding America estimates that the pandemic caused 13.1 million non-elderly adults to seek free meals or free groceries for the first time.

“The pandemic forced businesses and workers to make tough decisions,” said Ash Slupski, the organization’s website marketing manager. “To prevent the spread of coronavirus, many businesses were forced to close or lay off employees. This is especially true for people employed in restaurants, hotels, other service industries, and small businesses.”

Meanwhile, the needs of remote learning, especially for young children, forced many working parents to temporarily leave their jobs to be home, if they couldn’t work remotely themselves. And many faced reduced hours and paychecks when they did return to work, Slupski noted. “All these changes impact people’s ability to provide for their families now and plan for the future.”

To meet the growing need locally, the Food Bank of Western Massachusetts recently revealed plans for a new distribution center and headquarters, which will be located on the corner of Carew and East Main streets in Chicopee. Construction on the new headquarters, which will be larger and more sustainably build than the current location in Hatfield, is expected to begin next spring.

Regin noted that, in 2020, Country Bank’s philanthropy exceeded $1 million by supporting 450 nonprofits throughout the region, mainly focused on helping food pantries, homeless shelters, COVID-19 relief services, veterans, and other programs that supported the everyday needs of the people in its communities.

“Country Bank really wants to make sure we’re supporting all our communities,” which extend geographically from Springfield to Worcester, she noted. “It starts with Paul, and we all follow his lead in looking for ways the bank can make a difference. We support many charities, as many banks do, but it starts with Paul; he’s a great leader in that way, and we’re all on board.”

 

—Joseph Bednar

Banking and Financial Services Special Coverage

Making Change

As essential businesses that couldn’t shut down operations during the pandemic, banks and credit unions met some daunting challenges over the past year — both logistical and in meeting the needs of customers, many of whom were navigating difficult financial times. While things are starting getting back to normal now, the definition of ‘normal’ has shifted — and area banking leaders say they’ve learned some lessons they will certainly bring into the future.

Aleda De Maria says PeoplesBank

Aleda De Maria says PeoplesBank’s call-center activity tripled over the past 14 months.

By Mark Morris

Winston Churchill gets credit for first remarking, “never let a good crisis go to waste.”

For bankers in Western Mass., the COVID-19 crisis was in many ways a chance to learn what works best for their customers and their workers.

While branch offices for most banks have reopened, they were ordered closed to the general public at the beginning of the pandemic, opening to customers only by appointment. As a result, many customers relied on online banking to handle routine transactions.

For those who needed to open an account, it was no longer necessary to visit a branch, as the entire process can be done online, said Aleda De Maria, senior vice president, Retail and Operations for PeoplesBank, who noted that new account applications doubled in the past year, and the use of mobile deposits is up nearly 40%.

“Customers who may have been reluctant in the past to try our online self-service channels are now using them,” she added. “We’ve also seen occasional users of these tools become more aggressive users.”

Because customers had plenty of questions amid the uncertainty of the past 14 months, De Maria reported a significant increase in activity on the bank’s phone lines. “Our call center tripled the volume of activity we would normally see. Now we’re back to what I would call a busy, but more normal level.”

As cars lined up at drive-up windows during business hours, many banks increased their use of video tellers to extend the hours tellers can be available. A video teller looks and functions like a standard ATM, but the customer can also reach a live professional when they have a more complex transaction.

“Customers who may have been reluctant in the past to try our online self-service channels are now using them. We’ve also seen occasional users of these tools become more aggressive users.”

“It’s as if you are standing in front of a teller,” said John Howland, president and CEO of Greenfield Savings Bank. “We had six of these in place before COVID, and they really worked well for us during that time when we could not allow people to come into the branches.” The bank has since added six more of its Teller Connect video tellers.

De Maria said video tellers made it possible to expand beyond normal business hours to even include Sundays.

Glenn Welch

Glenn Welch says credit-union CEOs have been discussing the future of hybrid work arrangements, since employees will expect that flexibility.

“We can now offer banking services seven days a week without us having to keep our banking centers open seven days a week,” she noted, adding that the pandemic made one point crystal clear: customers want options, now more than ever. “Customers want the flexibility to either interact with someone or not to interact.”

For this issue’s focus on banking and finance, BusinessWest spoke with several executives from local banks and credit unions about how they have weathered the past year, what lies ahead, and what they — and their customers — have learned.

 

From a Distance

In addition to new ways of serving customers, banks were challenged to become more flexible with their employees, many of whom were forced to work from home.

Glenn Welch, president and CEO of Freedom Credit Union, recalled that, at the height of the pandemic, 30 employees worked exclusively from home while another 30 split their time between home and the office. Now, 47 employees are taking a hybrid approach of splitting their work time between the office and home.

“Going forward, employees are going to expect to have an option for some kind of hybrid between working at home and the office,” Welch said, adding that an online forum of credit-union CEOs recently discussed how a hybrid approach might work. “The consensus is to bring people back to the office as much as possible while still allowing them the flexibility to work from home probably one or two days a week.”

“The consensus is to bring people back to the office as much as possible while still allowing them the flexibility to work from home probably one or two days a week.”

John Bissell, president and CEO of Greylock Federal Credit Union, said 176 of his employees work from home right now, and he has no immediate plans to require a mass return to the office.

“In fact, we are so confident in the success of the work-from-home model that we are consolidating one of our branches with a nearby operations center,” Bissell said. While Greylock has no plans to permanently close branches, it is looking into shared-space arrangements to increase efficiency and save on future real-estate investments.

All the bankers agreed that, when possible, they prefer personal interactions with their employees and customers. When that’s not possible, they are grateful for advances in technology that have made it easier to work from home. Sometimes it results in seeing certain jobs in a different light.

John Howland

John Howland says some positions, such as those in loan processing, are more suited for a remote setup than others.

“I never thought I’d say this, but there are some situations where the business and the task is better suited to work remotely,” Howland said, citing certain loan-processing positions as one example. “Because all the documents are electronic, it’s easy to measure a person’s productivity without looking over their shoulder.”

Bissell admits this past year has helped him understand how the pandemic affects employees in different ways.

“Those with school-aged children or who are caregivers have different needs than those who may be at risk themselves or have a partner who works as a first responder,” he said. “We must pay close attention to employee needs and build in opportunities to meet them where they are.”

Whether employees worked in the office or from home, they all stayed busy with mortgage applications for people buying new homes and for those looking to refinance at historically low interest rates.

“Our mortgage business was up nearly 65% last year,” Welch said. “As fewer houses are available for sale, we’re making up some of that slack in the refinancing area.”

He predicts slower growth could loom on the horizon, however. “There are only so many people who can refinance, and when you have less housing inventory to sell, it suggests a slowdown in the mortgage business may be coming.”

While the mortgage market is still active, Bissell pointed out there is a greater demand than housing supply, so Greylock is trying to help increase the supply. “We are partnering with local leaders to look at ways to stimulate development of more housing across the pricing spectrum,” he said, with the goal of a healthy housing market that is accessible to all members of the community.

On the flip side of new mortgages, job losses during the pandemic made staying current on mortgage payments a burden for many.

“We anticipated that people would have trouble when COVID hit,” Howland said, “so we allowed people to defer their mortgage payments without having to substantiate they had a need.”

 

By All Accounts

The pandemic — and the economic shutdown it ushered in — challenged business-banking clients as well, and for the first round of Paycheck Protection Program (PPP) loans, Greenfield Savings Bank created a task force of 43 employees to help local businesses process their loan applications. Employees often made calls on the weekend to clarify any point that might slow down the process. Several applicants received calls from Howland himself.

“It was amazing that no one complained for calling them at 8 p.m. on a Saturday,” he said. “They were all just happy we were working on their behalf.”

In the first round of PPP, Greenfield Savings processed 720 loans totaling around $60 million, and followed up with nearly the same amount in the second round. Meanwhile, the business-banking team at Greylock secured $30 million in PPP loans, which Bissell said helped save nearly 4,000 jobs in the Pittsfield area.

As everyone tries to figure out what lies ahead, bankers remain optimistic. Like every institution, Freedom Credit Union saw a surge in deposits after $1,400 pandemic-relief checks began landing in accounts, Welch noted. “People have only spent about 25% of their government checks, so there’s lot of pent-up demand out there.”

While banks had been increasing their use of technology anyway, industry data suggests COVID accelerated that shift by at least five years. Based on that trend, Welch sees bankers moving toward more of a consulting role.

“I think, eventually, people will visit a bank or credit-union branch when they need financial advice such as buying a home or a car,” he said. “Increasingly, they will handle their routine transactions online.”

Video teller machines are another example of the increased use of technology for everyday transactions.

“I think the pandemic made customers more willing to try new technology that we hadn’t offered before,” De Maria said. “We’ve seen some real success in their adoption of tools like our video banker.”

Still, while bankers are pleased with how well customers have adjusted to making technology part of their banking routine, they all look forward to the time when in-person banking becomes normal once again.

“When you get down to the basics, we provide relationship-based financial services,” Bissell said. “It’s really about personal relationships.”

In addition to engaging customers again, Howland said the camaraderie and collegiality of the staff being together is also essential.

“I’m a big believer in the small talk around the water bubbler,” he said, adding that the pandemic robbed people of those everyday social interactions that were taken for granted in the past.

“We are looking forward to a routine where we see our customers on a regular basis and we can have that friendly conversation once again,” he went on. “Everyone in our company is looking forward to that happening.”

Banking and Financial Services

PV Financial Announces Two Additions to Team

PV Financial Group recently welcomed two new members to its team — Antonio Bastos as retirement plan coordinator and Andrea Santos as digital marketing specialist. Both will be working in PV’s main office located in Ludlow.

Antonio Bastos

Antonio Bastos

Andrea Santos

Andrea Santos

Upon graduating from Nichols College in Dudley with a bachelor’s degree in Business Management, Bastos accepted a job with MassMutual Retirement Services. During his five years with the company, he represented and sold MassMutual’s qualified retirement plan platform to small and mid-sized businesses. Bastos also obtained his Series 6 and Series 63 licenses while gaining beneficial knowledge and experience with qualified retirement plans.

At PV Financial, Bastos’s role is to manage all the qualified retirement plan clients, from day-to-day servicing to fielding all inquiries from retirement plan participants and plan trustees. He will also maintain relationships with retirement-plan providers in the industry. Other responsibilities will include staying connected and up-to-date on new products, services, and ERISA compliance regulations so he can properly and confidently serve PV Financial’s retirement plan clients and participants.

“By having Tony join the team at PV Financial, we have committed to the qualified retirement plan marketplace,” said Edward Sokolowski, PV’s managing partner. “As many local financial firms have been exiting this business, Tony will be able to fill the void and offer professional guidance to companies looking for quality advice for their retirement plans.”

Santos graduated from Holyoke Community College with an associate’s degree in Business Administration, as well as from Elms College with a bachelor’s degree in Business Management and Marketing. Upon graduating from Elms, Santos accepted a job at Northwestern Mutual. During her four years with the company, she held the position of director of Client Services, where she was responsible for the oversight of new business insurance applications and investment accounts, as well as insurance underwriting correspondence. She also worked with clients directly on account inquiries and led the office’s marketing efforts.

At PV Financial, Santos will be the digital marketing specialist. She will be the first point of contact for new and current clients who are a part of PV Financial’s new program, PV Navigator. Other responsibilities include maintaining the program’s website and social media accounts, staying up to date with the services provided within the program, maintaining relationships with the program’s clients, and assisting the advisors with outreach.

“Having Andrea join our team is a major step in the future success of PV Financial,” said Sokolowski. “Andrea’s talents in social media and client relationships will be a cornerstone to our newly launched investment program, PV Navigator.  I look forward to the energy and focus Andrea will bring to our firm and the positive impact she will have on our clients.”


Country Bank Appoints New VP of Marketing

Country Bank announced that Justin Roberts has joined the Marketing and Community Relations team as vice president of Marketing. Roberts’ experience in strategic marketing spans more than a decade in various industries. As a former small-business owner, he brings not just marketing savvy, but real-life experience.

Justin Roberts

Justin Roberts

“I am excited to join the Country Bank team,” Roberts said. “Having admired the brand for several years, I am looking forward to help activate the bank’s founding partnership of the Worcester Red Sox and promoting Country Bank’s presence throughout the region.”

In Roberts’ previous positions, he worked as the Development officer at American International College (AIC) in the office of Institutional Advancement, and also worked at MassLive, where he helped lead the Digital Marketing Strategy team to support local, regional, and national clients. His entrepreneurial spirit recently led him to open his own marketing and community-relations agency before joining the Country Bank team.

Roberts, who earned his bachelor’s degree and MBA in marketing from AIC, is the founder of Suit Up Springfield, a nonprofit organization that provides professional attire and mentorship to young men in Greater Springfield.

He also serves as vice president of the board for Greater Springfield Habitat for Humanity. He has served on many nonprofits and community organizations, including Wonderfund of Massachusetts, the Young Professional Society of Greater Springfield, the Rotary Club of Springfield, and Square One. He is a member of the New England Financial Marketing Assoc. and received the Game Changer award from the Center for Human Development.

“We are thrilled to welcome Justin to the Marketing and Community Relations team. His experience in marketing and digital strategies, combined with his extensive civic and community engagement, makes him a perfect fit for Country Bank,” said Miriam Siegel, first senior vice president of Human Resources. “We’re proud of Justin’s efforts within the communities we serve and look forward to his profound passion for community service while representing Country Bank. u


 

Florence Bank Welcomes Experienced Lender

Florence Bank announced the appointment of Douglas Gilbert to the position of vice president of Commercial Lending. Gilbert comes to the bank with more than 27 years of banking experience.

Douglas Gilbert

Douglas Gilbert

His most recent role was at Country Bank, where he served as first vice president and team leader in the Commercial Lending department. His duties there included managing the Commercial Lending team and an extensive loan portfolio. His experience also includes serving as vice president and head of Commercial Lending at Easthampton Savings Bank and as assistant vice president in Commercial Lending at Westfield Bank.

“It is a great opportunity to be affiliated with Florence Bank, which has such an excellent reputation and does so much good in the community,” Gilbert said. “Everyone here has made me feel right at home from the beginning.”

Gilbert is a certified public accountant who earned an undergraduate degree from Westfield State University and an MBA from the University of Connecticut. He also serves on the board of the Quaboag Valley Business Assistance Corp.

Kevin Day, president and CEO of Florence Bank, added that “Doug is a great addition to the Florence Bank team. His significant lending experience coupled with his knowledge of the communities we serve will be a tremendous value to our business customers.”

Banking and Financial Services Special Coverage

Creating a Powerhouse

M&T Bank Corp. is no stranger to acquisitions, having broadly expanded its geographic footprint through a series of mergers over the past two decades.

But every acquisition is undertaken with purpose, Chairman and CEO René Jones said, and that includes the recent announcement that M&T will purchase Bridgeport, Conn.-based People’s United Financial Inc. in a $7.6 billion, all-stock transaction.

“The combination of M&T and People’s United will benefit both firms, providing additional growth opportunities beyond what either firm could achieve independently,” Jones said during a recent conference call with investors, adding that the culture of M&T will “resonate” with People’s United customers.

The transaction has already resonated through the region’s banking industry, as it will create a ‘super-regional’ banking franchise (as industry analysts are calling it), with approximately $200 billion in assets and a network of 1,135 branches and more than 2,000 ATMs spanning 12 states from Maine to Virginia and the District of Columbia.

The combined franchise will operate across some of the most populated and attractive banking markets in the U.S., M&T officials note. As part of the transaction, People’s United’s current headquarters in Bridgeport will become the New England regional headquarters for M&T.

Jack Barnes

Jack Barnes

“The merger extends our reach by providing customers access to a larger banking network and an expanded array of services.”

“In People’s United, we have found a partner with an equally long history of serving and supporting customers, businesses, and communities,” said Jones, who will continue to lead the expanded company in his current roles. “Combining our common legacies and our complementary footprints will strengthen our ability to serve our communities and customers, and provide solutions that make a difference in people’s lives. I am incredibly excited about this opportunity and look forward to welcoming new customers and team members to our M&T family.”

In the conference call, Jones recognized the value of People’s United’s footprint and resources.

“In addition to new geography, we expanded the talent and capabilities in our organization as well as the product sets vailable to our combined customers,” he noted, adding that the acquisition will make M&T the 11th-largest commercial-bank holding company in the U.S. by both assets and market capitalization.

In addition, “the combined geographic footprint is concentrated, offering a distribution system across the Northeast and mid-Atlantic states that represents over 20% of the U.S. population and over 25% of GDP, and has attractive levels of household income.”

Indeed, the median household income in People’s United’s footprint is almost $87,000, well above the national median, according to the Wall Street Journal. M&T will also add People’s United’s national equipment-finance business and its mortgage warehouse lending business.

“The density allows us to leverage local market knowledge, our recently bolstered technology infrastructure, and our nationally recognized brand,” Jones added, noting that the two companies have a complementary top-tier deposit share in core markets with a top-three share in most of their respective top-10 markets.

People’s United Bank’s headquarters in Bridgeport, Conn

People’s United Bank’s headquarters in Bridgeport, Conn. will become M&T’s New England regional headquarters.

“And People’s United’s outside proportion of core operating accounts makes it among the most attractive franchises in New England,” he added. “In our view, this is the most important characteristic of a stable, well-run franchise.”

 

Cultural Considerations

Jack Barnes, chairman and CEO of People’s United, noted that the cultures of the two banks are a good fit.

“M&T is a like-minded partner that shares our culture of supporting communities by focusing on building meaningful relationships and providing personalized products, services, and local market expertise to customers, while building on our legacy of excellence in service,” he said. “The merger extends our reach by providing customers access to a larger banking network and an expanded array of services. I am confident our shared community-banking philosophies will provide significant long-term value for our shareholders, employees, and loyal customers.”

M&T leaders note that both companies have been long been recognized for their community commitments and support of civic organizations. Over the past decade, M&T, through The M&T Charitable Foundation, has donated $263.7 million to more than 2,800 nonprofit organizations across eight states and the District of Columbia. M&T Bank has been awarded the highest possible Community Reinvestment Act rating on every examination since 1982 from the Federal Reserve Bank of New York.

Meanwhile, People’s United Community Foundation and People’s United Community Foundation of Eastern Massachusetts have granted $40 million to nonprofits aligned with the foundations’ collective mission since their inception in 2007. Through the foundations, M&T will use $90 million to support charitable activities in the communities currently served by People’s United.

In the Greater Springfield area, People’s United Bank traces its roots to the Bank of Western Massachusetts, which opened in 1987 and grew it into a regional commercial-lending power, one that was acquired by Chittenden Bank in 1995 and then again by People’s United in 2008.

People’s United, with a much longer history (it was founded in 1842), boasts more than 6,000 employees these days, offering commercial and retail banking, as well as weath-management services, through a network of more than 400 retail locations in Connecticut, New York, Massachusetts, Vermont, New Hampshire, and Maine. The company also provides specialized commercial services to customers nationwide. As of Dec. 31, 2020, the institution had total assets of more than $63 billion, loans of $44 billion, and deposits of $52 billion.

M&T, headquartered in Buffalo, N.Y., operates banking offices in New York, Maryland, New Jersey, Pennsylvania, Delaware, Connecticut, Virginia, West Virginia, and the District of Columbia. It ranks among the largest regional lenders in the Northeast, with $142.6 billion in assets at the end of 2020. Commercial real-estate loans comprise almost 40% of its portfolio, and despite the pandemic’s impact on that sector, loan performance at the bank has been better than expected over the past year.

Under the terms of the agreement, People’s United shareholders will receive 0.118 of a share of M&T common stock for each People’s United share they own. Following completion of the transaction, former People’s United shareholders will collectively own approximately 28% of the combined company.

The merger has been unanimously approved by the boards of directors of each company and is expected to close in the fourth quarter of 2021, subject to customary closing conditions, including receipt of regulatory approvals and approval by the shareholders of each company.

 

Open the Floodgates

The acqusition is just the latest in a series of regional mergers seeking scale in order to better compete with the largest U.S. banks as low interest rates cut into lending profits, Forbes reported.

Last year, for instance, Huntington Bancshares Inc. agreed to merge with TCF Financial Corp., First Citizens Bancshares Inc. announced plans to acquire CIT Group Inc., and PNC Financial Services Group Inc. struck a deal to buy the U.S. arm of Spain’s BBVA. The year before, BB&T and SunTrust merged to become Truist Financial Corp. in the largest bank deal since the financial crisis of 2008 ushered in stricter regulations.

Ultra-low interest rates and meager loan growth have made it difficult for banks to profit from lending, the Wall Street Journal notes. The effect is most pronounced on regional banks, which rely more on lending profits than their national counterparts. Net interest margin, or the difference between what a bank pays its depositors and what it earns from lending, hit a record low for commercial banks in the fourth quarter of 2020.

Tom Michaud, CEO of Keefe, Bruyette & Woods, recently told Barron’s that, if regional banks want to be “relevant and significant,” they need to compete against the ‘Big Four’ of JPMorgan Chase, Citigroup, Wells Fargo, and Bank of America.

Robert Kafafian of the Kafafian Group, a consulting firm in Bethlehem, Pa., told American Banker he expects a surge in bank mergers in 2021, partly due to needed investments in new technology. “Customers have shown they can adapt to changing technology. Adoption may have advanced three to five years faster than what it might have been otherwise without the pandemic. Tech capability is all the more important now.”

Jones agrees, but stressed that many different considerations went into the decision to purchase People’s United and create a new, super-regional bank.

“Not only are our geographics complementary,” he said, “so too are the talent, product sets, and credit cultures, creating a solid platform we can build upon.”

 

Joseph Bednar can be reached at [email protected]

Banking and Financial Services

Taking the Long View

By Mark Morris

Matt Landon and Jeff Liguori saw an opportunity for Napatree Capital to better serve Western Mass. out of its new location in Longmeadow.

In a co-working office space at the historic Brewer-Young mansion, Jeff Liguori and Matt Landon help people build their financial futures.

Liguori, founder and chief investment officer of Napatree Capital in Providence, R.I., relocated to Western Mass. in 2015 and began to sense increasing demand for his firm’s services in this area. In January, he hired longtime acquaintance and Western Mass. native Landon as a partner in the firm. Together, they discussed opening a local office, and on Feb. 1, Napatree Capital opened its five-person firm in the restored mansion in Longmeadow’s center.

While Napatree could have served clients here from Providence, Liguori and Landon both thought it was important to have a physical presence in Western Mass.

“It was serendipity that there was one opening left in the Brewer-Young mansion,” Landon said. “We felt this iconic and different building fit with our image, so we jumped on the opportunity to locate there.”

Liguori, who grew up in Westerly, R.I., named his firm after Napatree Point in Watch Hill.

“Our investment committee is skilled at finding temporarily undervalued, underloved, and underappreciated companies that are selling at a discount. But we feel they’ll get the recognition they deserve in the near- or medium-term horizon.”

“It’s a beautiful stretch of beach where I’ve spent many summers,” he said. “As the southwesternmost point of Rhode Island, it separates Block Island Sound from Long Island Sound, so it really splits Rhode Island from New York.”

Because he liked the symbolism of its location and the relative obscurity of the name, he sought copyrights for several variations of the Napatree name in anticipation of one day starting his own firm. “Very few people have heard of it; even many Rhode Islanders don’t know Napatree Point.”

Liguori explained that his firm specializes in two areas: working with private investors looking to reach long-term financial goals, and managing endowments for nonprofits, which he called a growing area of business.

The firm’s business philosophy starts with ‘value investments,’ which Liguori says has to do with how a stock measures up against its industry or sector. The firm has had success taking a contrarian approach by investing in companies that are currently under the radar and might be underpriced by the market.

“Our investment committee is skilled at finding temporarily undervalued, underloved, and underappreciated companies that are selling at a discount,” Landon explained. “But we feel they’ll get the recognition they deserve in the near- or medium-term horizon.”

Landon also made it clear that Napatree takes the long view toward investing. “We’re not traders; we are long-term owners of companies.”

All advisors at Napatree are fiduciaries, meaning they can only recommend investments that are in the client’s best interest. By contrast, financial advisors who are not fiduciaries are held to a much more lenient ‘suitability’ standard. For example, two index funds based on stocks listed in the Standard and Poor’s 500 may seem similar on the surface. If one fund charges high fees and the other low fees, they are technically both suitable investments. A fiduciary, however, is required to recommend the fund with the lower fee because it is better for the client. Landon pointed out that he enjoys sticking with a fiduciary approach.

“It makes doing business very simple when you operate from a fiduciary standard,” he explained. “If you do what’s in the client’s best interest all the time, it’s an easy path to follow, and everyone wins.”

 

Upward Projections

Liguori pointed out that growth in his business comes in two ways: investment performance and taking on new clients. When the world came to a halt last March, however, meeting with potential new clients became extremely difficult. As advisors and investors, Liguori and his colleagues listened to the concerns of panicked clients, while at the same time they continued to research and act on investment strategies.

“We are also business owners worried about our business,” Liguori said. “We saw assets evaporate, so that meant our fees went down 30%.” Digging in and working harder was a key to getting through the trying times, he added. “As the founder of the firm, and on a personal level, I couldn’t be more grateful for where we are now after what we went through last March.”

Landon added that the pandemic strengthened client relationships as communication became more important and frequent, especially for clients whose industries were hit hard by coronavirus. While there are clear challenges and roadblocks ahead, the market horizon looks further out and toward more recovery.

“We try to reinforce to our clients that better earnings and brighter days are ahead, along with being empathetic to where they are right now,” Landon said.

After a slowdown at the beginning of COVID, Napatree saw a big uptick in the fourth quarter of last year. Liguori said that set the table for projected 20% growth in 2021.

“The last 12 months have been similar to a full market cycle, something that usually takes place over a five-year time period,” he said. “Clients who were full-on panicked in the beginning and were able to stay invested are now reaping the rewards of their patience.”

He admitted that even clients who have stayed invested are still anxious about the future. Most concerns are ones that existed long before COVID-19. In addition to parents who worry about saving enough for their children’s college education, the number-one concern Landon hears involves retirement.

“About 80% to 90% of the people we talk to have not been trained in investing; they would rather be gardening or hiking. So, if we can help put them at ease and feel good about the path they are on, it’s enormously rewarding.”

“People often ask if they will have enough to retire comfortably and live with dignity,” he said, noting that, because people are living longer, financial planning for retirement now involves making sure people have money for up to three decades after they retire.

Recent findings prove the point. Data from the CDC shows the average life expectancy for everyone born in the U.S. to be 78.9 years, but when calculating life expectancy after reaching age 65, it’s a different story. According to 2018 findings from the Society of Actuaries, there’s a 50% chance that a 65-year-old male lives to age 87, and that a 65-year-old female lives to age 89. For couples at age 65, there is a 50% chance at least one of them will live to age 93, and a 25% chance one will live to 98.

Disruptive events, like pandemics, can create the kind of fear and anxiety in people that lead to bad decision making in their efforts to reach long-term savings goals such as college and retirement.

Liguori said behavioral investing, whether it’s driven by fear or greed, usually leads to dangerous outcomes. His firm looks to avoid the herd mentality that can happen during volatile markets and instead focus on the client’s long-term objectives. He noted the GameStop stock bubble as an example that may look good in the near term, but the usual outcome for a small investor in events like this is disaster. Napatree’s philosophy, Landon added, is the exact opposite of chasing bubbles.

“We want to buy compelling long-term businesses that are selling at a discount right now because we’ve researched the likelihood they will be going up, not down,” he explained, adding that, when Napatree recommends a company to a client, the firm also own it.

“When we believe in an investment, it’s where we are putting our own money as well,” he said. “We think it’s important to show that we invest in the same companies as our clients.”

Another part of Napatree’s business involves helping small and medium-sized companies manage their employee 401(k) programs. Landon said the firm works with a couple dozen businesses to make sure programs are designed well and priced fairly, and that employees feel confident about participating in the plan.

“About 80% to 90% of the people we talk to have not been trained in investing; they would rather be gardening or hiking,” he added. “So, if we can help put them at ease and feel good about the path they are on, it’s enormously rewarding.”

 

Bottom Line

Landon said he and his colleagues love to meet with people to dissect their financial situations, and if it leads to someone being a client, that’s even better.

“We’re excited to be here in Western Mass. to expand the Napatree footprint,” he told BusinessWest. “We look forward to helping a lot of people and doing good things in the community.”

Banking and Financial Services

Tax-loss Harvesting

By Gabe Jacobson

Tax-loss harvesting is the selling of stocks, ETFs, mutual funds, and other securities at a loss with the goal of reducing taxes on other short- and long-term capital gains.

Does It Apply to Me?

Minimizing taxes is an important goal for investors, and tax-loss harvesting is a useful strategy for reducing your total tax bill. If you sell stocks, exchange-traded funds (ETFs), or mutual funds for a gain this year in a taxable, non-retirement, investment account, you may want to utilize tax loss harvesting to reduce potential taxes on any capital gains generated by those sales.

Tax-loss harvesting applies to investments of all sizes, so whether you have $5,000 or $5 million in your portfolio, you can still benefit from tax-loss harvesting.

Full-service financial advisors usually perform tax-loss harvesting as a part of their service and will coordinate with your tax advisor, but robo-advisors are beginning to offer this service for additional fees. These fees may not make sense given your situation, so consult your tax advisor if you are uncertain. Even in a rising stock market, some individual stocks or sectors may decline in price, giving an opportunity for tax-loss harvesting, which can be done at the end of the year but may be more effective during periods of volatility throughout the year.

You may want to consult your tax advisor about tax-loss harvesting if you have a self-service brokerage account. Pay special attention to tax-loss harvesting if you bought and sold securities within the same year because your capital-gains tax will be much higher than if you held the investments for over one year.

How Does It Work?

Tax-loss harvesting is also known as tax-loss selling because it involves selling securities at a loss, generating capital losses. This seems counter-intuitive. After all, most people buy securities hoping that the price per share will increase over time, allowing them to earn capital gains when they sell. These capital gains, like all other sources of income, come with a tax bill attached.

“Tax-loss harvesting works because capital losses are subtracted from capital gains when you file your tax return, so you pay taxes only on the gains in excess of losses.”

Tax-loss harvesting works because capital losses are subtracted from capital gains when you file your tax return, so you pay taxes only on the gains in excess of losses. However, capital gains and losses are grouped into two buckets based on how long the investments were held for.

Capital gains on securities sold more than one year after the purchase date are considered long-term and are taxed at lower rates. In 2020, the long-term capital gains rates range from 0% to 20%, depending on income levels; most people will fall in the 15% range.

However, if securities are sold within a year of the purchase date, the gains are considered short-term and are taxed at the same rate as wages or business income, which in 2020 range from 10% to 37%. These two buckets cannot be mixed, so you cannot reduce your short-term capital gains by long-term capital losses or vice versa.

Sure, it’s nice to mitigate your tax liability, but wouldn’t you lose more money selling your investments for a loss than you save in taxes? Why not just wait for those prices to bounce back and sell for a gain, assuming you expect the investment’s price to eventually recover? The price may recover down the line, but the tax bill associated with any capital gains generated this year cannot be avoided unless a loss is generated in the same year.

The solution is purchasing a similar asset shortly after selling for a loss. This way, you ‘harvest’ the capital loss for tax purposes while making little actual change to your investment portfolio. The IRS instructs that you must wait at least 30 days before purchasing another asset that is “substantially identical” to the asset sold for a loss, but there are enough similar assets available to allow immediate reinvestment in most situations.

An Example to Clarify

Here is a hypothetical example using common investments: the S&P 500 large-company index and Russell 2000 small-company index tracking ETFs (the prices are fictionalized for ease of understanding, but the ETFs are real and can be purchased through most brokerages).

In this example, in your brokerage account, you purchased 10 shares of iShares Core S&P 500 ETF (IVV) on Jan. 1, 2021 for $100 per share, for a $1,000 total investment. On the same date, you also purchased 10 shares of the iShares Russell 2000 ETF (IWM) for $200 per share, or a $2,000 investment. By Nov. 1, 2021 the price of IVV (the large-company index) has doubled to $200 per share, and you decide to sell five of your 10 shares, generating $1,000 in short-term capital gains.

However, you do not want to pay income taxes on an additional $1,000 on top of your regular wages. You notice that the small company index IWM’s price has dropped to $100 per share, so you lost $1,000 on that investment. You do not want to sell at a loss, but then you realize that, if you sell all 10 shares of IWM, you can generate a short-term capital loss of $1,000 which will completely mitigate the short-term gains from your sale of five shares of IVV when you file your income tax return.

You sell all 10 shares of IMW, but you still want to invest in small-company stocks. You immediately purchase $1,000 worth of shares in iShares MSCI small-cap index fund SMLF with the cash received from the sale of IWM. This fund gives you similar exposure to the Russell 2000 small-company index fund (IWM) you just sold without tracking the same index, meaning the IRS will not consider the two funds “substantially identical,” so you can purchase it before the 30 days are up. At this point, you have effectively received $1,000 in capital gains without generating any taxable gains, and you have maintained your portfolio allocations.

Note that, if you had purchased IVV more than a year before you sold it on Nov. 1, 2021, the gain would be classified as long-term, so the short-term loss generated on the sale of IMW would not offset this gain. Speak to your tax advisor regarding capital-loss carry-forwards, as capital losses not used to offset gains in one year can be applied to future tax years.

 

Gabe Jacobson is an associate at the Holyoke-based accounting firm Meyers Brothers Kalicka, P.C.; (413) 536-8510.

Banking and Financial Services Special Coverage

They’re Still Goal-oriented

Dan Moriarty, left, and Mike Rouette.

Dan Moriarty, left, and Mike Rouette.

Michael Rouette says he keeps a copy of the 36-year-old news story in his office. He’ll take it out and read it on occasion, and will proudly show it others, usually without much prompting.

“Moriarty-Rouette Team Buys Ticket to Finals” is the headline over that item in the Palmer Journal Register from November 1984, which goes on to note how goals by Rouette, then a junior, and Dan Moriarty, a freshman, along with a “tenacious defense,” propelled the Monson High School soccer team to a 2-1 win over Monument Mountain, giving the Mustangs, as that headline noted, a ticket to the regional finals in Chicopee a few days later.

Today, the Moriarty-Rouette team is still focused on goals, but now as president and executive vice president and chief operating officer (a new position), respectively, at Monson Savings Bank. They are the leaders writing the next chapter in the bank’s history after the retirement of long-term president Steve Lowell.

As the two talked with BusinessWest earlier this month, just weeks before Moriarty was to add the title CEO to his business card (Lowell is still acting in that capacity until mid-February), they talked often about their time on various fields together — they were both three-sport stars — and made frequent use of sports terms and phrases.

Indeed, when talking about the transition in leadership at the top and work to make it seamless, Moriarty said he will try to act as a good referee would — “you don’t know he’s on the field during the game.” And the two of them made early and very frequent references to the importance of teamwork at this (and any) institution.

Meanwhile, when it comes to the pandemic and this transition in leadership, both said there is no playbook for a such a challenging passing of the baton, so they will essentially write their own.

“We’re driven, we’re motivated, but we’re humble enough to know that teamwork gets you further than individual performance.”

“As far as meeting with customers and being out in the community more, Mike and I haven’t had the opportunity to really do that, for safety reasons,” Moriarty said. “And that makes things more difficult, but we’re adjusting and preparing for that day when this is over.”

As for that article, both men say it conveys more than coincidence that two high-school soccer teammates, now in their 50s, are leading the bank headquartered in the town where they grew up. Much more. They say it conveys other ‘C’ words, including commitment to the community and continuity.

“That article reminds me of who we are and where we’re from, and not to ever forget that,” Rouette said. “But it also speaks to how we’ve grown as individuals, as friends, as co-workers, as partners, and as leaders. That article symbolizes how our lives have changed but really haven’t changed, and how success can be built on people who have the same vision, the same mindset, and the same family values.”

Moriarty concurred. “We’ve known each other for so long, but the values are the same, even though we’re a long way from the soccer field. “We’re driven, we’re motivated, but we’re humble enough to know that teamwork gets you further than individual performance; we try to bring that culture to the bank and to our employees, and we try to lead by example. But we also understand that each individual in the bank is a contributor, and we want them to be part of the team and the success of the bank. We did that before we became leaders of the bank, and we’re just going to continue that and build on that culture of teamwork.”

The two take on their new roles at an intriguing time for the bank — and all banks. The pandemic has created both challenges and opportunities — certainly more of the former than the latter, and made some aspects of being a bank leader more difficult. Meanwhile, there is immense competition in a region described by most in the industry as ‘overbanked.’

Monson Savings’ newest branch, on North Main Street in East Longmeadow

Monson Savings’ newest branch, on North Main Street in East Longmeadow, was opened at the height of the pandemic last year, but it is nonetheless off to a solid start.

Both Moriarity and Rouette said that Monson Savings, now with more than $508 million in assets, has been on a steady growth trajectory and they are committed to moving the bank toward further expansion, geographically and otherwise.

 

They’re on the Ball

As noted earlier, Moriarty and Rouette were both three-sport athletes. While most noted for their exploits on their soccer field — both would go to play in college; Moriarty at Providence College and Rouette at Old Dominion — they were also teammates in baseball and basketball.

And as they recalled those days, they often leaned on some self-deprecating humor to make their points.

Indeed, when discussing their time as starting guards (and captains) on the hardwood, they made it clear they were not exactly go-to options when the Mustangs were looking for points.

“I was the point guard, and I couldn’t shoot,” said Moriarty, as he looked at Rouette, who nodded energetically, but said his front-court mate was ultimately the better alternative.

“I was pretty fast … I could steal the ball, but I could only dribble left-handed,” Rouette recalled. “I would have a breakaway, and our coach, Bill Devine, would essentially tell me to stop, hand the ball to Moriarty, and let him shoot it, because it would be like throwing a brick against the backboard when I let it go. I couldn’t put the ball in the ocean.”

Despite those references, the two were much-heralded for their exploits on various fields, and for their work together, even if it was only for two years.

Indeed, while Moriarty continued to make headlines at Monson High in the mid-’80s, Rouette was playing soccer at Old Dominion, majoring in Economics, and, when home from school in the summer and winter, working as a teller at Monson Savings Bank. During those short stints, he impressed those at the bank enough to get a job offer of sorts — specifically an invitation to become part of the lending team when he graduated.

“When I was a junior at Old Dominion, I already knew where I was heading,” he said, adding that he did join the bank and has been there ever since.

Moriarty, who would take a far more circuitous route to his hometown bank, has memories of seeing Rouette heading for a work in a suit while he was toiling for the town’s Highway Department while he was home from college for the summer. “It’s 95 degrees out, Michael’s going to work in a tie, and I’m thinking, ‘I want to work in air conditioning.’”

He would, first at Coopers & Lybrand in Hartford, and later at Aetna, HealthSouth, and then Unicare.

“But the attraction to Monson Savings was always in the back of my mind,” he recalled, adding that, during some conversations with Rouette, he brought up the possibility of joining the bank, and eventually did so in 1998 as an accounting manager.

The two have risen in the ranks over the years, with Rouette rising to senior vice president and chief lending officer, and Moriarty eventually climbing to senior vice president and chief financial officer in 2011.

When Lowell announced his intentions to retire not quite a year ago, both men sought to succeed him as president and CEO. Those titles would eventually go to Moriarty, but the two essentially form a new leadership team, one that brings complementary strengths and shared values.

Moriarty noted that, through his career at the bank, he’s been focused on the finance side of the equation, while Rouette has concentrated on lending and customer relationships, and, in his new role, will add retail to his list of responsibilities.

“Mike is very customer-focused, while I have somewhat different responsibilities — strategy, human resources, finance, marketing, compliance, and technology,” said Moriarty. “I think the bank is positioned to use our strengths in a proper way.”

 

Net Results

All this prompts more flashbacks, and the inevitable analogies, to 1984 and that soccer semifinal against Monument Mountain, where Moriarty notched the first goal of the game, and Rouette, then the all-time scoring leader for the Mustangs, recorded the game clincher.

As for the finals game … that did not go as well — a loss to an undefeated Wahconah team that still stings three and half decades later. (Moriarty wasn’t able to play in that contest due to a broken ankle he suffered in the semifinal.)

But while they do like to look back, Moriarty and Rouette are obviously far more focused on the present and the future.

As for the former, that means everything from coping with the many aspects of COVID-19 to growing the bank’s latest branch, on North Main Street in East Longmeadow, which opened last summer, in the middle of the pandemic.

That timing wasn’t perfect — many branch lobbies were still closed — but the new facility is off to a solid start.

“We had a good core group of customers in Longmeadow and East Longmeadow,” Moriarty said. “We transitioned them internally to the East Longmeadow branch, so we had a good start, and we’re looking to have that branch in a good position in a shorter period than you normally would in a new market.”

As for the pandemic itself, it’s been a time for the bank to play to its strengths — yes, that’s still another sports phrase — and use its focus on customer service to not only take care of (and retain) existing customers, but also gain some new ones. This has been the case on all fronts, but especially with the commercial lending portfolio and the bank’s strong track record handling applications for Paycheck Protection Plan (PPP) loans.

“We basically got out in front of it,” said Rouette as he explained the bank’s basic strategy with the PPP program and its commercial customers in general. “We knew that that they [customers] couldn’t be chasing us. We had a great team effort to reach out to all our business customers; we said, ‘we know there’s an issue, we know PPP is coming down the road, and when the spigot opens, we’ll be there for you.’ And we did it.

“People needed to hear your voice,” he went on, adding that every commercial customer was called in an effort to gauge their needs and concerns and update them on the status of their application. “And that calmed people, that they weren’t on voice mail or weren’t able to get through.”

This high level of customer service enabled the bank to handle PPP loans for non-customers, gains that both Moriarty and Rouette chalked up to word-of-mouth referrals that should have some long-term benefits for the institution as a new round of the program begins later this month.

Dan Moriarty, left, and Mike Rouette both found a common denominator

Dan Moriarty, left, and Mike Rouette both found a common denominator between their soccer squad from the ‘80s and the staff at Monson Savings — the importance of solid teamwork.

Looking back, and ahead, Moriarty said he was mentored by his two immediate predecessors, Lowell and Roland Desrochers, and he understands what has made the bank successful — especially its employees and community-bank look, feel, and operating values — and has no intention of altering the game plan.

“The vision for the bank is to continue to be the community bank that these communities need,” he told BusinessWest. “From a business side, commercial customers as well as retail customers, we want to stay competitive in our delivery systems — digital, mobile … we can have people bank with us from Monson to the Cape and into Connecticut. We want to be relevant in the communities we serve for not just today, but for years to come.

“The culture will remain the same,” he went on. “And we’re just going to leverage the talent we have inside the bank.”

Meanwhile, both men intend to continue their active involvement in the community, which mirrors the work of Lowell, Desrochers, and others that came before them. This work comes in many forms, with Moriarty devoting time and energy to several groups, including the East of the River Chamber of Commerce (he’s a board member), the Baystate Health Community Benefits Advisory Council, the Community Foundation of Western Massachusetts, the Brightside Golf Classic, and Monson High School, where he’s the assistant varsity soccer coach.

As for Rouette, he is similarly involved, but focuses most of his time on the YMCA of Greater Springfield, with which the bank has long enjoyed close ties. “Everyone has a passion, and that’s mine,” he said, adding that he’s been a long-time board member and supporter on many levels.

 

Bottom Line

Summoning still another sports analogy of sorts, Moriarty said it is customary, at least with good teams, to look ahead, not back, when a season ends.

“Because it’s January, we say, ‘last season’s over … we finished December, we did well, but now it’s 0-0, and we’ve got a new season ahead of us,’” he noted, adding that, given the many variables confronting banks — and all businesses, for that matter — it’s impossible to know how this new season will go.

What these two do know is that Monson Savings Bank will, as noted, continue to play to its strengths, honed over many years and under leaders that these two have learned from.

In short, there’s a winning formula at the bank, and their only real plans for the future are to continue using it.

 

George O’Brien can be reached at [email protected]

 

Banking and Financial Services

Checking on the Community

Paul Scully

Paul Scully says much of Country Bank’s philanthropy in 2020 was directed at “COVID-related initiatives.”

Paul Scully says local philanthropy is baked into the DNA of this region’s financial institutions.

“Banks have always been great about supporting communities. And we are fairly philanthropic,” Country Bank’s president and CEO added, noting that the bank gave $1.3 million to local nonprofits last year, touching about 400 different organizations in some way.

Those numbers aren’t atypical. What made 2020 slightly different is where that money went.

“Of that, about a half-million went to what I would call COVID-related initiatives,” Scully said, citing causes ranging from equipping frontline workers at hospitals to meeting soaring demand at local food banks due to the pandemic’s economic impact on families.

At Freedom Credit Union’s April board meeting — the first one after it and the region’s other banking institutions closed their doors in mid-March — President and CEO Glenn Welch said he asked to make larger monthly donations to the community than usual.

“I told them, ‘I’m not sure what’s going to happen, but we need to support the community.’ The board agreed and allocated a chunk of money that we could utilize in the community.”

In the days that followed, Freedom announced a donation of $55,000 to be dispersed among several community organizations at the front lines of the local fight against the COVID-19 pandemic, including Baystate Health Foundation; Mercy Medical Center; Cooley Dickinson Health Care; the Food Bank of Western Massachusetts; Hampshire Hospitality Group, whose Hampshire County Heroes feed first responders in Hampshire County; and Feed the Fight, an initiative of Peter Pan Bus Lines and area restaurants to feed healthcare workers and first responders in the community.

“If you’re still employed with no interruption in your household income, you might not realize a lot people were living on a shoestring, and that shoestring broke. The opportunity to donate and give back is huge.”

“A lot of those are things we haven’t done every year,” Welch said, noting that the credit union’s philanthropic contributions were up 17% from 2019 to 2020, even though it was a tougher financial year for financial institutions.

It’s a story being told across the region — not that banks and credit unions are being more generous this year (although, in many cases, they are), but that the pandemic has revealed different needs, causing a shift in where those grants are being targeted.

In September, for instance, the Berkshire Bank Foundation contributed an additional $1 million — over its $3 million total annual grant budget — to collaborative efforts supporting nonprofit organizations responding to rising community needs, including MHA, the YMCA of Greater Springfield, Western Massachusetts SCORE, and the Community Foundation of Western Massachusetts, among others.

“The COVID-19 pandemic has affected our local communities in ways that no one could have predicted, and the economic impact has created significant challenges for organizations who help so many every day,” said Jim Hickson, Berkshire Bank’s Pioneer Valley regional president.

The foundation’s grants have supported community-based organizations in the areas of housing, food security, health supplies, student aid, small-business assistance — all needs that have been heightened by a pandemic whose impacts will continue to be felt well into 2021.

 

First Response

Some of the earliest contributions from banks and credit unions, at the start of the pandemic, were targeted to hospitals and first responders. Country Bank donated $250,000 to four local hospitals, and also gave $50,000 to the Hampden County Sheriff’s Department’s First Responder Recovery Home, which provided a safe haven for doctors, nurses, EMTs, police, firefighters, and corrections professionals who were diagnosed with COVID-19, but couldn’t safely go home to recover without jeopardizing the health of a vulnerable family member.

Glenn Welch

Glenn Welch

“I told them, ‘I’m not sure what’s going to happen, but we need to support the community.’ The board agreed and allocated a chunk of money that we could utilize in the community.”

As the pandemic evolved and other nonprofits began reshaping their missions to respond to it, Country Bank directed funds to organizations like the Community Foundation of Western Massachusetts, Springfield Rescue Mission, and Friends of the Homeless, as well as similar organizations in the Worcester area.

PeoplesBank’s charitable giving in 2020 surpassed its previous record high, totaling $1,300,000, and benefiting 292 different nonprofits in the region. While the long-standing funding priorities of PeoplesBank include education, community vibrancy, and environmental sustainability, support in 2020 also included donations to COVID-19 emergency relief funds, purchases of PPE for frontline responders, organizations fighting food insecurity and homelessness, and many area youth groups and early-childhood education centers.

“We try to say ‘no’ as infrequently as possible,” said Matt Bannister, the bank’s senior vice president of Marketing and Corporate Responsibility — even though last year’s needs definitely widened, especially considering that many nonprofits gain much of their funding from annual events that never happened.

“When the COVID hit the fan, we said to all our nonprofits we had agreements with, ‘we are going to honor all our commitments, even if you can’t hold your gala or your walk. The money’s still yours,’” Bannister said.

“The event may go away, but the need doesn’t,” he continued. “On one hand, if they don’t have the event, they don’t have to spend money on it, so that’s good. But these events are money makers. They were counting on this revenue. The visibility we get from these events is nice, but the real reason we do it is to support that cause, not because they put our logo on a T-shirt.”

Matt Bannister

Matt Bannister

“The event may go away, but the need doesn’t. On one hand, if they don’t have the event, they don’t have to spend money on it, so that’s good. But these events are money makers. They were counting on this revenue. The visibility we get from these events is nice, but the real reason we do it is to support that cause, not because they put our logo on a T-shirt.”

 

Kevin Day, president and CEO of Florence Bank, said his institution had no inclination to take back money spent to support such events.

“COVID drove everyone indoors this year, and a lot of events got canceled,” Day said. “We usually sign up for events, and we send money ahead of time. The nonprofits all reached out and said, “we’re not going to hold this ball or gala. Do you need the money back?’ But we’re here to support you, and the fact that you can’t throw a ball actually makes it more important that we support you. So even though we didn’t get to go to these events, we still made the donations; that didn’t change a bit.”

Later in the year, as nonprofits scrambled to find other ways to raise funds, banks looked for new ways to support them, Bannister added. “Like, the Community Foundation put together an emergency COVID fund — there’s a new need. We contributed to buy PPE for the frontline workers — that was something that wasn’t a need before. And a number of chambers put together microgrant programs for the members in their communities, with a special round of fundraising for that, and we supported that, too.”

 

Food for Thought

Like PeoplesBank, Florence Bank directs its philanthropy in a few general ways.

“We’ve always focused on what we call the three H’s: hungry, hurt, homeless. We thought food-insecure people having trouble getting food and buying food might be a big deal this year, so we said, ‘hey, let’s do everything we can in that area, if possible,’” Day said, adding that Florence has made good on that pledge by supporting 11 different food pantries and homeless shelters.

“We’ve always supported many of these organizations,” he was quick to add, but cast a wider net this year, donating nearly $100,000 to 10 organizations that address food insecurity.

Kevin Day

“We’ve always focused on what we call the three H’s: hungry, hurt, homeless.”

“We are so grateful. Without the support of donors, we would not have been able to continue our mission,” Ruben Reyes, executive director of Lorraine’s Soup Kitchen & Pantry in Chicopee, one of the recipients, said in December. “COVID has affected us very hard. All of our fundraisers were canceled, and we were very worried about how to fund our programs.”

Compounding the problem, COVID-19 has also affected Lorraine’s clientele. Reyes said he is seeing an additional 200 to 300 families each month, and provides a month’s supply of groceries and dinners five nights a week to a total of 600 to 700 families. “We’re seeing a lot more families who typically would not need pantry services. They are coming to our doors for the very first time.”

Meanwhile, Scully noted that a Greater Boston Food Bank report that food insecurity in Massachusetts reached an all-time high in November. The state has experienced a 59% increase since 2018, representing more than 1 million people in need of food assistance. Most people are using food pantries for the first time.

“We’ve seen the demand at the food banks, and in so many other different areas,” he told BusinessWest, noting that Country has donated more than $130,000 to local food pantries throughout the year. “We’ve always supported local food pantries and food banks, and we made significant contributions to them as well. Everyone is feeling the demands are greater than ever.”

As another example of the way financial institutions have rallied to the cause of food insecurity, Freedom Credit Union partnered with its members and the local community in December by matching funds donated to benefit the Pioneer Valley USO.

Located at Westover Air Reserve Base in Chicopee, that organization provides more than 102,000 pounds of food to more than 3,200 individuals annually through the Emergency Food Pantry, among other efforts.

“We’d heard that some of the people who serve us in the military are having trouble feeding their families, and the food pantries need to be stocked,” Welch said. “It’s pretty sad when people in the U.S. have to be going to the food banks, with the loss of jobs due to COVID. A lot of people are hurting this year.”

All the region’s banks and credit unions helped customers who were struggling financially in other ways as well, such as mortgage and loan deferrals and relief loans.

“All the institutions did a lot to help members by deferring payments and coming up with loan programs,” Welch said. “It’s important to help people out, and we’re still doing that.”

 

Community Partners

While food insecurity and other basic needs are front of mind these days, banks and credit unions support a host of other nonprofits as well, many of which rely on performances, events, and member activity to pay their bills. Many of these were able to pivot to virtual events to maintain connections with the community until they can go back to live events, but those don’t bring in nearly as much funding as in-person gatherings.

Through its philanthropic efforts, Scully said “what we try to do is help communities thrive, whether it’s economic health, physical health, or nutritional health. Put all those pieces together, and these communities will thrive. If there’s a need and we’re able to help satisfy some of these needs, we’ll do our part to the extent we can.”

That attitude, at most local financial institutions, extends beyond monetary donations into volunteerism, Bannister noted.

“We’ve averaged about 10,000 volunteer hours across the organization pretty consistently for the past four or five years,” he said, adding that the total in 2020 was closer to 5,000, due to organizations moving to remote operations and events being canceled. “That wasn’t from a lack of desire; people were concerned about going out in public, so there was a lack of opportunity. We expect that to come back this year as things start to open up again.”

At an employee giving campaign in November, the bank actually had more associates give more money this year than ever before, Bannister added. “That could have gone the other way. There’s a lot more economic insecurity out there. So that, to us, was a sign that folks are still engaged, and they still want to give.”

While nonprofits have cut back hours and volunteers can’t always come in, especially at organizations that deal with an older population. “people have been creative,” Scully said. “We work once a month with the Ware mobile food pantry. We were there the week before Christmas, and that had upwards of 300 cars coming in. They turned it into a mobile experience. There’s a group of us there, you’re outside, masks on. It’s a way to give back, volunteer, and be safe.”

After all, he added, people want to help, and so do banks.

Day said the outpouring of concern was so great in 2020 that some nonprofits actually weathered the early months of the pandemic well.

“In March, maybe the first week of April, I think my supposition would have been that everyone is going to be hurting instantly,” he said. “But I’m involved in several nonprofit boards, and across the region, many are saying their needs have been met, in my view, pretty well.”

But 2021 poses a trap of sorts.

“The critical aspect is coming in the next year,” Day said. “Many of them received a great deal of donations during this past year, and we’re happy to do our part. I think the needs will come as the recovery moves along this year, once the perception of need goes away.”

That’s because human needs are still great among families that come to nonprofits for help, especially those in the lower economic strata who have experienced economic devastation. “They’re going to need continued support, and I expect that need will continue through 2021, easily.”

Scully agreed. “The needs are greater than the average person realizes. If you’re still employed with no interruption in your household income, you might not realize a lot people were living on a shoestring, and that shoestring broke. The opportunity to donate and give back is huge.”

And will remain so going forward, Day added.

“We gave more money this year than we ever have, sprayed it around, touched every aspect of the nonprofit world,” he said. “People know we’re a good partner of the community, and we’re happy to help out those in need.”

 

Joseph Bednar can be reached at [email protected]

 

Banking and Financial Services

Tax Planning in a Gig Economy

By Ian Coddington

 

In recent years, we have seen a rise in so-called side hustles and gig work, where individuals take on part-time jobs or project-based work for additional income.

This ‘gig economy’ has been accelerated by the effects of the coronavirus outbreak; Americans are being laid off or have to remain at home or socially distance. Without a primary income source, people have turned to other solutions to pay their bills.

Ventures like DoorDash, Uber, Amazon, and Fiver all offer individuals the ability to earn income by doing work for companies and individuals. However, this does not make up the entire market of gig work.

Ian Coddington

Ian Coddington

“This form is different from your W-2 in that 1099 income is considered self-employment earnings, which is taxed differently than W-2 wages.”

People who sell artwork or wrap Christmas presents, handymen, and movers are all examples of individuals who could earn income on the side. We have seen how some side hustles can turn into profitable ventures, while others just use it to have extra spending money. If you took on additional sources of income during the pandemic, there might be some tax considerations you might not be aware of.

 

Self-employed Vs. W-2

Unlike a normal employed job where you receive a Form W-2, most gig work will consider workers independent contractors, and issue you a Form 1099. The most common form received for this work was a 1099-MISC, which is now replaced with the new Form 1099-NEC.

If you were paid at least $600 from a business that was not your employer, you can expect one of these forms come tax time. This form is different from your W-2 in that 1099 income is considered self-employment earnings, which is taxed differently than W-2 wages. When you work for an employer, they will withhold a percentage of your wages for taxes. However, when you are self-employed, you are subject to self-employment taxes and might be subject to estimate payments.

Depending on your level of income and other withholdings, one benefit of this is a self-employment tax deduction, where you can deduct what an employer would have paid on your tax return. For delivery drivers, it is important to track your mileage, as you can deduct the allowable mileage expense against your self-employed earnings. If you used a home office for business, you could potentially deduct a portion of your mortgage, utilities, and even repairs to that space. Prior to taking this deduction, you should review the rules closely.

 

Meet with an Advisor

These benefits sound good, but what if you have unique situations for your side hustle? What if you are paid through cash apps like Venmo or Zelle? Can you deduct the transaction fees paid to payment processors like PayPal or Stripe? What if you receive a Form 1099-K? Questions like these can be answered by an advisor, like a licensed tax preparer. Here is a quick list of things to bring to a meeting with a tax preparer:

• Any W-2s or 1099s received;

• Personal or business bank statements;

• Information on your home office, including square footage;

• Log of mileage; and

• Purchases for the business.

Working a side hustle can be an exciting and hopefully profitable venture; however, it can add complexity to your tax return. Take charge of the additional complexity, gather the required documentation, and minimize your tax liability.

 

Ian Coddington is an associate at the Holyoke-based accounting firm Meyers Brothers Kalicka, P.C.; (413) 536-8510.

 

Banking and Financial Services Special Coverage

Lending a Hand

By Mark Morris

Sometimes being thrown into a challenging situation leads to … well, a good idea or two. Or at least a new way of thinking.

Back in March, when COVID-19 first hit, banks and credit unions in Massachusetts were designated essential businesses by Gov. Charlie Baker. That meant making sure everyone had access to their accounts while, at the same time, limiting in-person banking to appointments only, complete with masks, social distancing, and frequent sanitizing protocols.

“It forced us to think outside the box and to figure out the best ways to serve our members during a time of reduced access,” said Kara Herman, vice president, Retail Administration with Freedom Credit Union, adding that her team set out to first communicate all the options members had available to them to get business done without going inside a branch.

BusinessWest spoke with several local bank and credit-union professionals about the challenge of making adjustments to their businesses in the middle of a pandemic. For Kevin O’Connor, executive vice president and chief banking officer for Westfield Bank, reducing foot traffic in the lobbies back in the spring was a chance to review how to make customer interactions with the bank easier in ways that were not face-to-face.

“We published all our branch phone numbers on our website so people can easily reach their local branch,” O’Connor said. “In this way, we could blend the digital experience with the personal touch of a local branch staff member who is there to assist.”

During the summer months, mandates were relaxed, and banks and credit unions were allowed to reopen their lobbies to walk-in traffic. But this month, as COVID-19 infection rates spiked, lobby restrictions were reinstated at many institutions.

“Because we went through lobby closures back in the spring, we were able to refine the process of helping customers find different ways to accomplish what they need to do,” O’Connor said.

Mike Ostrowski

Mike Ostrowski says the pandemic has been a “disruptive innovation” that helped many customers appreciate the benefits of banking online.

For example, Westfield Bank makes video tutorials available online for those who are new to electronic banking. “We do this to encourage people to be comfortable in whatever way they interact with us.”

Michael Ostrowski, president and CEO of Arrha Credit Union, noted that, when lobby traffic was first curtailed and members would call to complete a basic transaction, his staff would take the the time to educate the caller on how to accomplish what they wanted to do electronically.

“In some ways, the pandemic was a disruptive innovation because it helped us to migrate so many people to the electronic world,” Ostrowski, said adding that online and mobile activity with Arrha has increased 30% in the last nine months.

Educating members is also the approach Craig Boivin, vice president of UMassFive College Federal Credit Union, has taken. While the aim is to reduce traffic in the branch, there’s still one in-person appointment that he encourages.

“A member of our contact center staff will set up an in-branch appointment with folks who aren’t as tech-savvy and take them through a hands-on tutorial on how to use what’s available,” he explained. “We do this so the member can avoid going to the branch in the future for simple transactions.”

Customers who regularly use online banking and mobile apps barely noticed the limited lobby access, but there are others who rely on being able to walk into a branch and do business face-to-face.

“Some of our customers need to come in every day, such as small-business people who need coin and currency to run their shops,” said Kate Megraw, chief operating officer and chief information officer for New Valley Bank and Trust. This past summer, while adhering to all safety and cleaning protocols, New Valley’s lobbies stayed busy.

Kevin O’Connor

Kevin O’Connor

“We published all our branch phone numbers on our website so people can easily reach their local branch. In this way, we could blend the digital experience with the personal touch of a local branch staff member who is there to assist.”

“As a new bank, we are in a growth mode right now, so we were trying to make it easy for customers to come in and open accounts,” she noted. With renewed limits on lobby access, she now encourages appointments as well as the drive-up location at the 16 Acres branch.

Drive-up banking has gone from a routine convenience to a vital service as customers bring more complex transactions to the drive-up window than in the past. It’s one way both bank customers and employees had to adjust to a new environment back in the spring — and may have to adjust again.

 

Striking a Balance

As branches reopened over the summer, loan activity related to the Paycheck Protection Program (PPP) ramped up as as well, Megraw said, providing another opportunity.

“The PPP allowed us to touch a lot of local businesses in Massachusetts and parts of Connecticut,” she added, noting that, through the PPP, New Valley arranged more than 500 small-business loans totaling nearly $90 million.

With branches retreating to a less-accessible time, the challenge now is to strike the right balance between giving people the time they need and keeping the line of cars in the drive-thru moving. Along with placing experienced tellers at the window, O’Connor said, other branch staff speak with people as they approach the drive-up to make sure they have their materials at the ready to make their visit more efficient.

Kate MeGraw

Kate MeGraw

“The pandemic has shown us that high-touch customer service and the ability to speak to someone over the phone or safely take a meeting still makes a big difference when a customer is trying to get something done.”

UMassFive recently converted a drive-up ATM machine at its Hadley branch to a video teller. As a complement to the two existing drive-up tellers, the video teller provides a third option that reduces long lines and still maintains the personal touch.

“It gives our members an additional way to talk to a live person without having to come into the branch or get out of their car,” Boivin said. Installed in two other branch foyers, he added, video tellers have really caught on as usage has tripled just this fall.

Herman said Freedom recently launched video chat as part of its online offerings and said it’s the next best thing to an in-person meeting. “It gives people a chance to see us and talk to us. It’s face-to-face communication even though they are not physically in front of us.”

Because so many people are more comfortable doing things from their home, opening accounts online has substantially increased. While this tool was lightly employed before the pandemic, O’Connor saw an opportunity to enhance it for customers who use it.

“We are supplementing the online account-opening process by having a branch person follow up with the customer to make sure they received the experience they wanted,” he said.

On the lending side of the business, Herman noted that online applications and electronic signatures have further streamlined the process of people conducting bank business from home.

Boivin reported that volume at the UMassFive contact center is up 43% for the year and has nearly doubled in the last two months as coronavirus has spiked. A number of employees moved out of their traditional retail positions to handle the increased activity in the contact center.

“Our staff has been impressive with their flexibility and willingness to work in different departments to get the job done,” he added.

Ostrowski believes his staff were as vulnerable as essential retail workers who have been on the job throughout the pandemic. “Because we appreciate their hard work,” he said, “we recently rewarded our staff with a hazard-pay bonus for all their efforts during COVID-19.”

 

The People Part

As customers increasingly use online and mobile apps for banking, all the managers we spoke with agree that in-person branches still play a vital role. Ostrowski emphasized that technology doesn’t take the place of personal service, but just enhances it.

While acknowledging that digital services are an important and growing part of banking, Megraw also believes the “people part” is still essential.

Craig Boivin

Craig Boivin

“Our staff has been impressive with their flexibility and willingness to work in different departments to get the job done.”

“The pandemic has shown us that high-touch customer service and the ability to speak to someone over the phone or safely take a meeting still makes a big difference when a customer is trying to get something done.”

Boivin hopes the changes that forced people out of the branches will result in more convenience for them and an elevated role for the branches.

“In the long run, we see branches being centers where people can sit down with someone face-to-face for those in-depth conversations about their finances, such as buying a house for the first time,” he said. “We still see a need for those interactions to continue at the branch level.”

Ostrowski predicts banking will move toward a hybrid approach that combines the latest technology innovations with an old-fashioned, hometown banking experience.

“I like the term ‘the big hug,’ meaning, even if you do all your regular business electronically, there are times when you want to come in for a mortgage, or you’re having trouble with a tax bill, and we’re there to give you that big hug of caring service when you need it.”

Herman believes the events of the last nine months have caused banks to re-evaluate the roles and responsibilities that branch staff will have in the future.

“I think the traditional job descriptions we had back in February no longer exist, and they are evolving as we speak,” she said, adding that, while people will remain an important part of branch banking, the industry has to figure out how to serve the new needs their customers will have going forward.

Banking and Financial Services

Play Ball

Paul Scully Charles Steinberg

Paul Scully (right) tours the under-construction Polar Park in Worcester with team President Charles Steinberg.

Baseball season is — hopefully — just four months away, and Paul Scully says that’s reason for excitement in Massachusetts.

“Just think about this year and the fact that so many of us have been inside, just looking for something to do,” said Scully, president and CEO of Country Bank, while talking about the bank’s ‘founding partner’ status with the Worcester Red Sox during a recent episode of BusinessTalk, the BusinessWest podcast.

“Just the prospect of having baseball back, right here within a quick drive for most of us … we’re very excited about it for the fans, for our customers, and for businesses throughout the area. It’s a great time.”

As one of 21 founding partners of the WooSox, who plan to begin play in Worcester’s brand-new Polar Park this spring, Country Bank’s multi-tiered sponsorship includes a large sign in right field atop the stands known as the Worcester Wall, along with the Country Bank Guest Services area located on the first-base concourse.

“We toured the park two weeks ago … and it really has some wonderful attributes that represent the Central Mass. area. It’s different from Fenway, but there are some similarities,” Scully said, noting that the high Worcester Wall is in right field, and will be colored blue, as opposed to the left-field Green Monster in Fenway.

Meanwhile, the Country Bank Guest Services area is a place where fans can come for help with any number of issues, from missing keys to missing kids, he noted — a way for the bank to extend its customer-service philosophy to this new partnership.

Speaking of partnerships, the bank and the WooSox Foundation will work together on a number of charitable efforts, from a Teacher of the Month recognition program to a combined charitable-giving campaign throughout the baseball season.

“We have been impressed and inspired by Country Bank’s sense of community involvement,” WooSox President Charles Steinberg said. “We see how helpful they are to various institutions and thousands of people in our region, and we welcome them to Polar Park with open arms as we work together to enhance the quality of life in our community even more.”

To kick off their partnership last month, a team from Country Bank and the WooSox mascot, Smiley Ball, delivered 500 Thanksgiving meals prepared by Old Sturbridge Village along with apple pies from Worcester-based Table Talk to the St. John’s Food Pantry for the Poor.

“Just the prospect of having baseball back, right here within a quick drive for most of us … we’re very excited about it for the fans, for our customers, and for businesses throughout the area. It’s a great time.”

“The alignment of our organizational values with the WooSox solidifies our commitment to service and teamwork as we continually strive for excellence in all we do,” Scully said.

He noted that, at a time when spectator sports continue to be redefined by new norms of social distancing, sports sponsorships are taking on new forms, extending beyond the stadium walls to make a real impact in the community. But he knows fans want to have a good time, too.

“We couldn’t be more excited to be a part of the WooSox and the Worcester community,” he said. “The addition of year-round entertainment, including ballgames, concerts, and various family activities at Polar Park, is exciting for the people and businesses in the region. We all look forward to the day when we can come together again at the ballpark, enjoying activities with our families and friends. We also look forward to seeing our businesses thrive once again after being heavily impacted by the pandemic.”

Scully knows, of course, that the pandemic is far from over, and the baseball season may or may not start on time in April. But he also senses a regional fan base that will enthusiastically support another professional sports franchise in this region, especially one with the cachet of the Boston Red Sox’ Triple-A affiliate.

“They’re part of the Central Mass. community now, and we’re excited for them, and we’re excited for us,” he told BusinessWest. “But, more importantly, we’re just excited for the fans.”

 

—Joseph Bednar

Banking and Financial Services

More Than Just Bitcoin

By Matthew Ogrodowicz, MSA

 

‘Blockchain’ is a term used to broadly describe the cryptographic technology that underpins several applications, the most widely known of which is Bitcoin and other similar cryptocurrencies.

Matthew Ogrodowicz

Even though it is the largest current application, a survey conducted on behalf of the American Institute of Certified Public Accountants (AICPA) in 2018 found that 48% of American adults were not familiar with Bitcoin, Ethereum, or Litecoin, three cryptocurrencies among those with the largest market capitalizations. The largest of these, Bitcoin, currently sits at a market capitalization of approximately $355 billion. If half of all adults are unfamiliar with this largest application, it is safe to assume that even fewer know about other ways the technology could be used — including for some of the region’s major industries.

Three of these largest industries in Western Mass. are healthcare, manufacturing, and higher education. In each of these industries, the secure and verifiable information network created by blockchain can provide efficiencies. This network, essentially a public ledger, consists of a series of transactions (blocks), which is distributed and replicated across a network of computers referred to as nodes. These nodes each maintain a copy of the ledger, which can only be added to by the solving of a cryptographic puzzle that is verified by other nodes in the network.

The information on the ledger is maintained by another aspect of cryptography, which is that the same data encrypted in the same way produces the same result, so if data earlier in the chain is manipulated, it will be rejected by the other nodes even though the data itself is encrypted. Thus, an immutable chain of verifiable, secure information is created, capable of supporting applications in the aforementioned fields.

Each of these industries can benefit from the blockchain’s ability to host ‘smart contracts.’ A smart contract is a digital protocol intended to facilitate, verify, or enforce the performance of a transaction. The simplest analogue is that of a vending machine — once payment is made, an item is delivered. Smart contracts would exist on the blockchain and would be triggered by a predefined condition or action agreed upon by the parties beforehand. This allows the parties to transact directly without the need for intermediaries, providing time and cost savings as well as automation and accuracy.

Combined with the security and immutability noted earlier, smart contracts should prove to be a valuable tool, though there is still work to be done in codifying and establishing legal frameworks around smart contracts. Other applications of blockchain technology are more specifically applicable to individual fields.

In the field of healthcare, blockchain’s ability to process, validate, and sanction access to data could lead to a centralized repository of electronic health records and allow patients to permit and/or revoke read-and-write privileges to certain doctors or facilities as they deem necessary. This would allow patients more control over who has access to their personal health records while providing for quick transfers and reductions in administrative delay.

In the field of manufacturing, blockchain can provide more supply-chain efficiency and transparency by codifying and tracking the routes and intermediate steps, including carriers and time of arrival and departure, without allowing for unauthorized modification of this information. In a similar fashion, blockchain can provide manufacturers assurance that the goods they have received are exactly those they have ordered and that they are without defect by allowing for tracking of individual parts or other raw materials.

Finally, in the field of higher education, blockchain could be used to improve record keeping of degrees and certifications in a manner similar to that of electronic medical records. Beyond that, intellectual property such as research, scholarly publications, media works, and presentations could be protected by the blockchain by allowing for ease of sharing them while preserving the ability to control how they are used.

And, of course, blockchain development will be a skill high in demand that will benefit from the creation of interdisciplinary programs at colleges and universities that help students understand the development of blockchain networks as well the areas of business, technology, law, and commerce that are impacted by it.

For these reasons and many more, businesses should feel an urgency to increase their knowledge of blockchain’s impact on their industries while exploring the potential dividends that could be reaped by a foray into an emerging technology.

 

Matthew Ogrodowicz, MSA is a senior associate at the Holyoke-based accounting firm Meyers Brothers Kalicka, P.C.

Banking and Financial Services Coronavirus Special Coverage

Lending Support

Chuck Leach, president and CEO of Lee Bank.

Chuck Leach, president and CEO of Lee Bank.

Community banks love commercial lending, Chuck Leach says.

“It’s just good business for us — Main Street lending, that’s where we can have a nice give and take with customers. It’s kind of our wheelhouse.”

That’s all still true, even though 2020 has rocked that wheelhouse in unexpected ways.

“We’re not seeing the same commercial demand,” said Leach, president and CEO of Lee Bank. “It’s either risk aversion or businesses are waiting to see what happens.”

Or, in some cases, they’re extra liquid after taking advantage of the Paycheck Protection Program (PPP) and other stimulus measures, as well as deferring payments on other bank loans, he added. “Put all that together, and they may not have borrowing needs right now, or they’re sitting on their liquidity until they see some clarity with the pandemic or the election or both.”

Clarity has been in short supply since the COVID-19 pandemic forced a widespread economic shutdown at the start of spring that continues to wreak havoc.

Michael Oleksak remembers the first few months of the year, of hearing occasional news about the novel coronavirus back in January, and much more of it as February crept along.

“I’d been asking myself for years, ‘what are we missing? What’s next?’ Because there had to be a ‘next.’ Who would have thought it would be a pandemic?”

“Then, from mid-March into April, everything was a blur. It just spiraled,” said Oleksak, executive vice president, senior lender, and chief credit officer for PeoplesBank, before discussing the PPP surge and other measures that followed (more on that later).

Blurring the picture further was the very uncertainty of what was coming. Having experienced several economic upheavals, from the bank failures of the early ’90s to the bursting of the dot-com bubble in 2000 and 2001, to the housing crisis in 2007 and 2008, he had no idea what the next crisis would be.

“I’d been asking myself for years, ‘what are we missing? What’s next?’ Because there had to be a ‘next.’ Who would have thought it would be a pandemic?

“This will be the fourth economic cycle I’ve been through, and every one has been different,” he added. “And this one is far different than the others. We’re not seeing a lot of new activity. I think everyone is kind of hunkered down, for lack of a better word, in survival mode.”

As Allen Miles, executive vice president at Westfield Bank, put it, “obviously this one was a lot different. You couldn’t see the train wreck coming; that’s the best way to explain it. It just got dropped on us.”

What happened next in commercial lending is an oft-told story recently, but one worth telling again. What will happen next … well, no one really knows. But banks will certainly take lessons from a challenging past seven months as that story takes shape.

 

Lending a Hand

Miles said Westfield Bank started reaching out to loan customers in February when coronavirus became a more widely reported issue. In mid-March, like other banks, it was actively sending employees home. And then the storm hit.

From mid-March into the start of April, “that two weeks was absolutely crazy because you had people looking for loan deferrals, and the bank examiners were very friendly to both the banks and borrowers to try to help these people out,” he recalled. “We were just trying to help our customers. You’re not worried about loan origination; you’re just worried about getting people through the unknown and the craziness.”

Michael Oleksak says new lending activity has been down

Michael Oleksak says new lending activity has been down because many businesses are “in survival mode.”

The first Monday in April, the bank received about 500 PPP applications, and about the same number the next day.

“We needed to get all hands on deck,” Miles told BusinessWest. “We were still waiting on guidance from regulators and the Treasury Department. We had people afraid for their livelihoods, their families, and everything. It was organized chaos.”

The bank got $185 million in PPP loans approved in that first round, what he called a “herculean task.” The second round, several weeks later, was much less chaotic. “That was more for the smaller businesses — a lot more applications, but smaller in dollar size. We were able to keep up with those because we’d been through it, and they weren’t as complicated.”

Oleksak said the PPP was a critical lifeline for a lot of people. “There was kind of a mass panic there wouldn’t be a round two, which put a lot of pressure on the banks and our customers, trying to rush to get them into a program that was not very well-defined from the outset,” he recalled. “Then round two came along, and everyone who needed funds was able to access them, and that made a big difference.”

Leach said the widely reported chaos was quite real, but the larger story was a positive one.

“For now, this has put a lot of capital in the banks and a lot of capital in businesses in our region and beyond. A lot of our customers are in good shape right now.”

“In spite of the controversy, and the people who thought they were making up the rules as they went along, I think the PPP was very functional,” he said. “We’re seeing a lot of customers well-capitalized right now, which is the untold story nationally.

“Maybe that changes and this is just a Band-Aid,” he added, due to the lack of clarity about the next few months, from fears of a second COVID-19 surge to the limbo status of further federal stimulus. “But, for now, this has put a lot of capital in the banks and a lot of capital in businesses in our region and beyond. A lot of our customers are in good shape right now.”

Lee Bank processed 348 PPP loans and has submitted more than 100 forgiveness applications, although some customers are waiting to see if the federal forgiveness guidelines change, specifically whether “they do a sweeping approach where everything under $150,000 is forgiven with a very, very simple forgiveness application.”

Again, borrowers want clarity. Still, Leach came back to the positive impact his bank was able to make with the PPP — and also with loan-payment deferrals for about 240 customers, with about $60 million deferred in total. “In a bank that has $400 million in total assets, you can see that’s a good chunk,” he said, adding that only a fraction of those customers requested a second deferral period.

Oleksak and Miles both reported similar trends, with requests for continued deferrals dropping after the first 90-day period.

“Thirty days before the first deferment was up, we contacted people, and 85% to 90% said, ‘we’re good, we’re not going to be looking for a deferral going forward.’ So that made us feel really comfortable,” Miles said. “With the PPP and the deferrals, it bridged the gap for customers.”

“We’re being very sensitive,” added Kevin O’Connor, Westfield Bank’s executive vice president and chief banking officer. “We’ve been very involved with them, understanding their needs and how the bank can work with them.”

While borrowers in the broad hospitality sector continue to struggle, for obvious reasons, most customers have come through the past seven months well with the help of PPP and loan-payment deferrals, Miles added. “The main ones hurting are the ones being affected by the phases and the rollouts — restaurants, bars. They’ll take a while to get back on their feet.”

 

Starts and Stops

That’s true in the Berkshires as well, Leach said, and restaurants in particular are worried about the onset of cold weather and an inability to seat more customers, due to both the state’s indoor-capacity restrictions and the reluctance among some patrons to eat inside restaurants right now.

But the region’s hospitality businesses have benefited in others ways during the pandemic; in fact, one bed-and-breakfast he spoke with did record business this summer.

Allen Miles says some loan customers are doing well

Allen Miles says some loan customers are doing well, while others, particularly in hospitality, continue to struggle.

“People left urban areas for a safer place, whether for weekends or longer,” he said, adding that some secondary homes became primary homes, while other people bought first homes in an area they felt was safer than, say, New York City. “Interest rates are obviously really low, but there’s also the fear factor of ‘wait, I’ve got to get out of this urban area.’ So there’s been a huge sense of urgency to buy in an area like the Berkshires.”

Unlike some lending institutions, Westfield Bank has seen healthy activity in loan originations recently, Miles said.

“The deferments and PPP money actually made some people stronger because it’s been cash preservation instead of cash burn,” he noted. “Usually for commercial lending, it starts getting busy after Labor Day. We weren’t sure if we were going to see that cycle again, but now it’s quite busy, and people are active. So that’s a really good sign.”

That activity is strong across the board, particularly in commercial real estate, where customers are refinancing for a lower rate or selling, he explained. “It’s a great time to sell — low interest rates, lower cap rates, people are going to pay you more for the property — so you’re seeing a lot of transactions going on right now.”

Commercial and industrial (C&I) loans are healthy as well, he said, adding, of course, that, “with anything related to hospitality or travel, the jury’s still out on that. The longer this [pandemic] hangs over us, the longer the recovery for them.”

At PeoplesBank, Oleksak said, many customers have been accumulating cash and paying down lines of credit, or shopping around to lock in better long-term rates on loans, which is a challenge for banks already facing flattened yield curves. “I think the depth of the crisis is a little bit masked by the amount of stimulus money in the market, from PPP, SBA programs, and deferments.

“The deferments and PPP money actually made some people stronger because it’s been cash preservation instead of cash burn.”

“Some individuals out there are suffering mightily, particularly restaurants and hospitality,” he added. “The other great unknown is, we don’t have a vaccine yet. Are we going to see another spike? People are trying to get back to normal here, but I’m not sure what the new normal is going to look like.”

He pointed to his own institution as an example. Between half and two-thirds of PeoplesBank employees are still working remotely, a trend being reflected across all geographic regions and business sectors.

As a result, “nobody really knows what’s going to happen with the office segment of the market, with so many people working from home. Will they go back at some point? Will companies decide they don’t need so much space, or does social distancing mean you have fewer people but still need more space? It’s a total unknown for us.”

It’s unfortunate that some industries, like restaurants, will likely see a slower return to health, O’Connor said, “but it’s good to see customer confidence in some areas coming back, even a little bit sooner than we would have expected.”

Miles agreed. “We’re very happy with what we’re seeing right now. It’s not behind us, but it’s not as bad as people anticipated. If activity is picking up and people are borrowing, they’re confident, which is good.”

 

Joseph Bednar can be reached at [email protected]

Banking and Financial Services

Seeking Relief

By Lisa White and Malik Javed

 

On March 27, the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, was signed into law. The Act has provided taxpayers with much-needed relief during this pandemic by establishing additional funding sources, such as the Paycheck Protection Program (PPP); by creating new tax credits, such as the Employee Retention Credit; and by significantly changing several existing tax provisions.

Lisa White

Lisa White

Malik Javed

Malik Javed

When reviewing what relief is available, taxpayers should consider all possible opportunities, including cost-segregation studies, which help identify misclassified Qualified Improvement Property (QIP); by reviewing current- and prior-year capital expenditures for retirements, dispositions, or repair deductions; and by considering accounting-method changes necessary to take full advantage of the new provisions in the tax law.

Two key changes to existing tax law within the CARES Act that provide cash flow for taxpayers include changes to the cost-recovery period for QIP and changes to the application and recognition of Net Operating Losses (NOLs).

 

Qualified Improvement Property

Qualified Improvement Property (QIP) is defined as any improvement made by the taxpayer to an interior portion of a commercial building as long as the improvement is placed into service after the building was first placed into service by any taxpayer. Additionally, QIP specifically excludes expenditures for the enlargement of a building, elevators or escalators, and the internal structural framework of a building.

Prior to the CARES Act, a drafting error in the tax law required QIP placed in service after Dec. 31, 2017 to use a 39-year tax life, making it ineligible for bonus depreciation. The CARES Act retroactively changed the recovery period for QIP to 15 years, thus making it eligible for bonus depreciation through 2026 (100% through 2022).

Taxpayers who want to take advantage of deducting the cost of improvements to real estate must segregate between interior and exterior improvements, as well as identify items excluded from QIP. Since budgets and design plans should be reviewed to identify these items, cost-segregation engineers can be engaged to assist with this analysis.

Tenant improvements often include items that are not eligible for QIP treatment. For example, HVAC costs in a retail shopping center might include both ductwork inside the building that is eligible for QIP and package units on the roof that are not eligible. Other examples include certain storefronts and interior seismic retrofits. When evaluating QIP, taxpayers should not assume all tenant improvements automatically qualify. Although QIP is now eligible for 100% bonus depreciation for federal income taxes, many states do not conform to bonus deprecation and require a 39-year tax life. For higher-taxed states, cost segregation can still make sense when interior improvements are significant.

Taxpayers who elected out of the business interest expense limitation under 163(j) are required to use a 20-year ADS life for QIP and are not eligible for bonus depreciation. In these cases, a cost-segregation study is greatly beneficial because the items segregated into personal-property categories do not get ADS treatment and are therefore eligible for bonus depreciation.

There is also an additional interplay with the business interest expense limitation provision. Part of the calculation to determine the amount of limited business interest expense for a given year includes determining the adjusted taxable income (ATI). This calculation favorably considers tax depreciation, but only for one more year. For tax years beginning after 2021, the deduction for depreciation, amortization, or depletion are not taken into account in calculating ATI. Thus, any bonus depreciation recognized on assets identified through a cost-segregation study will incrementally increase the ATI.

 

Net Operating Losses

Prior to the CARES Act, the Tax Cuts and Jobs Act (TCJA) and other legislation severely constrained the ability to use net operating losses to lower tax liabilities. TCJA restricted carrybacks of NOLs generated in tax years after Dec. 31, 2017 and limited carryforwards to 80% of taxable income.

The CARES Act made two significant changes to NOLs that provides cash flow for businesses:

• Net operating losses (NOLs), which are generated in 2018, 2019, or 2020, can now be carried back five years. Businesses that paid federal income taxes in 2013 to 2017 may be able to claim a tax refund as a result of 2018, 2019, or 2020 NOLs. Procedurally, NOLs are carried back to the earliest of their five-year period and then to subsequent tax years. But taxpayers may elect to forgo the five-year carryback and carry NOLs forward.

• The CARES Act suspends the 80% limit on carryforwards, allowing NOLs to fully offset taxable income until the end of 2020. An NOL carryback can also free up unclaimed federal tax credits and other tax attributes from closed tax years. If the NOL carryback results in credits no longer being used in the closed year, these items are eligible to be carried forward. In addition, if credits or other tax attributes were missed on the original return (e.g. unclaimed Research Tax Credit), the taxpayer may determine the unclaimed credits in the closed year and carry them forward without having to amend returns.

The calculation of NOLs for tax years beginning in 2019 and 2020 may be greater because of changes in the CARES Act to Section 163(j). The changes allow certain taxpayers to increase their business interest expense deduction based on a higher percentage of adjusted taxable income. Taxpayers should also consider the impact of additional tax depreciation on shorter-lived assets eligible for bonus depreciation, such as QIP, that can be identified from a cost-segregation study. For tax years beginning in 2020, the CARES Act also allows taxpayers to substitute their 2020 ATI with 2019 ATI if it results in a more favorable NOL calculation.

In these unprecedented times, taxpayers should take advantage of the many tax opportunities provided in the CARES Act to maximize tax deductions. Reach out to a tax specialist to discuss how these changes may impact your tax situation.

 

Lisa White, CPA is a tax manager at Meyers Brothers Kalicka, focusing primarily on federal and state income-tax compliance and planning within the construction and real-estate industries. Malik Javed, CCSP is a principal at KBKG and oversees engineering operations for cost-segregation projects from KBKG’s Northeast practice.

Banking and Financial Services Coronavirus Special Coverage

Uncharted Waters

Michael Tucker

Michael Tucker, president of Greenfield Cooperative Bank.

It’s safe to say 2020 has been an unpredictable year, testing the ability of all businesses to be nimble. Matt Sosik thinks banks are passing that test.

“Community banks may seem like they’re a staid industry, but we’re actually very accustomed to change, and sometimes a fast pace to that change,” said Sosik, president of bankESB. “So we’re used to it. It’s not always visible from the outside, but culturally, we were very well-positioned to deal with the pandemic.

“The unique thing was that it just seemed to happen so fast. It was zero to 60, and you can’t always move at that pace,” he added, noting that bankESB is part of a family of three different banks with almost 500 employees. “But we pivoted as fast as we could.”

Part of that was recognizing that many customers were suddenly in turbid financial waters, and needed help. So, early in the pandemic, all banks were doing what they could to help them, whether that meant deferring mortgage loans for a few months or guiding businesses through the hastily assembled Paycheck Protection Program, or PPP.

“We had a customer-centric focus, which meant helping people navigate payment-related financial issues — at least the financial issues in their lives that could impact their ability to pay us. We did modifications for a lot of folks; we could foresee this was going to be a problematic situation for them. We got out front of it early and tried to alleviate that one piece of stress at a time when so many aspects of life were stressful. We did millions-of-dollars-worth of modifications for customers in the Pioneer Valley.”

Business customers, especially ones forced by a state mandate to shut their doors, were facing similarly dire issues, Sosik said. “We were also doing PPP by the truckload. It was uniquely challenging for us because it all happened at once.”

Such efforts have impacted banks’ bottom line, said Michael Tucker, president of Greenfield Cooperative Bank (GCB), noting that about 15% of mortgage and commercial loan customers took advantage of deferral programs, resulting in an impact of $900,000 from an accounting perspective.

“Everyone else seemed to be in good shape — but that doesn’t mean it’s going to stay that way,” he told BusinessWest. “I don’t see this totally ending until there’s some sort of treatment or vaccine that’s really effective. That being said, things are slowly reopening, and Massachusetts has done a pretty good job keeping infections down.”

And community banks were an important part of that, he said, noting that those loan deferrals, plus costs related to the shutdown and investments in safety protocols in order to reopen, have contributed to GCB being about $1.5 million behind where it would normally be.

“Community banks may seem like they’re a staid industry, but we’re actually very accustomed to change, and sometimes a fast pace to that change. So we’re used to it.”

“It’s going to be a profitable year, but a lot leaner. It’s going to be a challenge,” Tucker went on. “What worries me is what hasn’t risen to the top. We did the payment holiday, but now that the unemployment supplement is gone, and companies rightsize — a lot of them were paying people but couldn’t keep it up forever — I think, until we have a vaccine, we’re looking at a very difficult 2020 and 2021. We’ll be solid; we’ve put a lot of reserves aside, but it’s going to be a challenge.”

Loan Stars

There are some positive signs in the economy, said Jeff Sullivan, president of New Valley Bank, which launched in Springfield last year. He participates in a group of bank CEOs, and on their last group call a couple weeks ago, most said they were pleasantly surprised that, at least on the commercial-loan side, customers who had deferred loan payments had largely returned to their normal payment schedule.

He noted that bank stocks have been “beat up,” as the analyst community didn’t like the idea of deferring principal and interest. “But the overall, totally unscientific trend I’ve seen is that people are pleasantly surprised with how businesses are coming back.

“From our standpoint, we see a lot of growth; businesses are making plans again,” he went on, conceding that New Valley doesn’t yet have a huge portfolio to manage.

Meanwhile, the housing market and stock market are doing better than anyone expected three months ago, he noted, which contributes to an overall mix message when GDP was down 30% in the second quarter and unemployment rose to 16%. “These are troubling numbers, and from a community-bank perspective, we hope it doesn’t turn into a haves-and-have-nots recovery, where the rich get richer and more people get left behind.”

Tucker said demand for loan deferrals has been way down, and banks are now pivoting to help businesses with the forgiveness-application phase of the PPP.

“We did about $18 million worth of PPP, which for us was a lot because most of our loans were under $250,000,” he said, noting that GSB handled about 280 such loans. “It was about a year’s worth of work in a month. Like a lot of banks, our staff was working nights and weekends.”

Sosik added that the waters surrounding the PPP forgiveness phase are still a but murkey and could use some clarity from Congress so the forgiveness path can be clearer. “If people are unclear about forgiveness, they don’t want to spend the money, so it doesn’t get out into the economy.”

At the same time, he added, banks are also being cautious when it comes to growth plans.

“It’s a time to be careful, but at the same time it’s been a very successful year,” he told BusinessWest. “We’ve grown a lot this year, but we’re obviously looking forward, expecting continued economic challenges, and our job is to be here for many years. There are times to push hard and run fast, and times to slow that down and be cautious.”

Still, banking leaders are pleased to have made the investments they did in online and remote banking models, Tucker noted, while holding up his smartphone. “Our fastest-growing branch is this. That’s a reality.”

“Banks caused the 2008 recession. Banks were weakened and in a penalty box and reviled by the mainstream for several years afterward. The big difference now is, this recession was not caused by banks.”

But while the number of GCB customers using remote banking is 25% higher than before COVID-19, branches still serve a critical purpose, he added. “We’ve seen a lot of people realize we are invaluable to them. When they had problems with their mortgage, they can deal with one person and not get shuffled through a lot of bureaucracy. That’s a plus.”

While branches are still necessary, he went on, they’re different than they used to be; the recently opened South Hadley branch is 1,800 square feet, less than half the space the bank used to set aside for new branches. But he doesn’t foresee any closures, aside from two Amherst branches, about a mile apart, that recently consolidated into one.

“Some banks are using this time as a trigger to say, ‘OK, we’re going to close these branches,’” Tucker added. “We’ve chosen not to do that because there’s enough disruption for customers as it is.”

Sosik noted that bankESB has invested a lot of money in the remote infrastructure and platform. “The technology works seamlessly, and the adoption was good. We were looking for a catalyst we could use to push it and have customers really start enjoying the technological advances. We didn’t expect it to come from a pandemic; we didn’t want it to come from a pandemic. But the pandemic absolutely pushed people to use it.”

That said, “we totally believe in the branch part of the overall delivery system, and we’re still investing in branches,” including one recently opened in Amherst. “But they’re much different than the ones we built a decade ago, or even five years ago. There’s still a need for a branch; customers still want that. Even if they don’t need to be there, they still like that someone they know and trust can work with them when they need it.”

Here for the Long Haul

Whatever the model, the presidents BusinessWest spoke with all believe in the work community banks have done and continue to do during a very difficult year for so many.

“We believe in it,” Sosik said. “Everyone who works for a community bank does it because we love that part of it. If you look at any successful New England town, you’re going to find a locally managed, if not locally owned, community-type bank at its economic center”

While banks still grapple with the impact of not only loan deferrals but ultra-low interest rates, they’re still in strong shape, he added.

Sullivan agreed. “Banks caused the 2008 recession. Banks were weakened and in a penalty box and reviled by the mainstream for several years afterward. The big difference now is, this recession was not caused by banks. Banks are healthy and have lots of capital. And hopefully we can turn the page soon and get back to normal lending.”

Tucker doesn’t know what shape the recovery will take — a U, a V, or the one he feels is most likely, resembling the Nike ‘swoosh’ logo, with a long, gradual ascent to normalcy.

“But we’ll do fine, and we are doing fine,” he said. “There’s just a lot of pressure on the margin with rates as low as they are and all the unknown with COVID.

“I’m very optimistic, though,” he added. “Businesses are doing OK. Yeah, a lot of them are struggling, but we see a lot of small businesses trying their damnedest. And we’re trying to support those businesses. We’re here, and we’re going to be here.”

Joseph Bednar can be reached at [email protected]

Banking and Financial Services Coronavirus

Volume Business

By Mark Morris

When COVID-19 made its arrival in Western Mass., it was mid-March, just weeks before the start of the traditional home-selling season. Area mortgage professionals didn’t know what to expect when the pandemic hit, but they certainly weren’t projecting a solid year.

Soon, though, they had to adjust those expectations and projections.

Indeed, a combination of factors, from historically low interest rates to high demand and low inventories, have made this a much busier, much better year than most residential lenders and home sellers could have hoped for back in the dark days of March.

Indeed, instead of completely canceling the spring home-buying market, the pandemic merely postponed it, said James Sherbo, senior vice president of Consumer Lending with Holyoke-based PeoplesBank.

“We’ve been very busy because the activity we would have normally seen in April or May, we saw in June, July, and August,” he told BusinessWest.

Jeffrey Smith, vice president and chief Lending officer with Freedom Credit Union, concurred, noting that any debilitating effects on the housing market from the pandemic have been more than offset by lower interest rates. The rates were already fairly low — in the 3.25% to 3.5% range — before the pandemic, he said, but now consumers can now get a 30-year fixed-rate mortgage for well under 3%.

James Sherbo

James Sherbo

“We’ve been very busy because the activity we would have normally seen in April or May, we saw in June, July, and August.”

“This is probably the best real-estate market I’ve seen in years,” Smith said. “When the pandemic first hit, I thought it was going to be just the opposite.”

Meanwhile, many mortgage holders are taking advantage of these lower rates to refinance, and this high volume of refis, as they’re called, is keeping most all lending institutions busy.

“It’s crazy … we’ve seen an 80% volume increase in our overall business compared to last year,” Smith noted. “And we certainly did not expect that.”

Tami Gunsch, senior executive vice president and director of Relationship Banking at Berkshire Bank, agreed. She said the bank is pleased with the Mortgage Division’s performance, “especially during these unprecedented times of COVID-19.”

For this issue and its focus on banking and financial services, BusinessWest takes an in-depth look at the housing market and the various, and powerful, forces that are driving it.

Rooms for Improvement

Flashing back to mid-March, Sherbo said his department was mostly focused on where (and how) team members would work, and keeping employees and customers safe.

“We just tried to prepare as best as we could to keep our team safe and our customers safe,” Sherbo said. “When COVID-19 first hit, everybody wondered what would happen; nobody had a crystal ball.”

Indeed, no one could have foreseen how the drop in interest rates — one of many steps taken to stimulate the economy — and other factors would collaborate to stimulate virtually all aspects of the housing market and create a unique set of circumstances.

Home sales are strong, again, because of low interest rates even though fewer homes are for sale, said Sherbo, adding that he can’t recall a time when both conditions have happened at the same time.

Jeffrey Smith

“This is probably the best real-estate market I’ve seen in years. When the pandemic first hit, I thought it was going to be just the opposite.”

“I’ve seen rates this low before, but I’m not sure we’ve seen this lack of supply in quite a while,” he said, adding that it’s no surprise that many people do not want to move or sell during the pandemic, so the supply of homes for sale is limited. That creates an environment where many purchase offers are coming in higher than the asking price.

“New listings are selling very quickly,” noted Smith, adding that nearly all the houses offered for sale in early July were sold by early August.

In addition to people moving out of the city and into the suburbs to take advantage of low interest rates, Smith said the demand for second homes is exploding.

“In the last three to six months, prices have increased by 20% or more in areas like Cape Cod or Maine,” he noted. “Second homes are a hot market right now, and because there is a limited supply, properties are on the market for only a short time before they are sold.”

Then, there’s the refi market.

Gunsch said that, in addition to strong new-mortgage activity, Berkshire Bank is doing a high-volume business in refinances.

“Refis account for 52% of our closed-loan production through July,” she said, “while in the prior year, during the same period, they accounted for 35% of the closed loan volume.”

Smith added that, thanks to the robust business Freedom is doing with loan refinancing, he does not anticipate the lack of housing supply to limit the institution’s growth potential this year.

Strong housing-sales activity is even more impressive considering how the entire home-buying process had to quickly change when COVID-19 hit.

The notion of a real-estate agent walking potential buyers through a house for sale sounds almost quaint these days, as virtual tours have replaced showings, and drive-by looks at a house have become the norm.

“People are buying homes based on what they see online,” said Smith. “Many people are not even going out to the house to see it. In some cases, particularly for second homes, they are buying them sight unseen.”

Before COVID-19 struck, Smith said Freedom had limited online mortgage-application capabilities, but the virus forced the institution to quickly go all in.

“Luckily, we had the technology to be able to make a fast adjustment to online only, so we were kind of ready for it,” he told BusinessWest.

PeoplesBank launched its paperless mortgage-application system in October 2019 after two years of refining it. When COVID-19 arrived and disrupted so much of daily life, Sherbo said having a touchless system already up and running made it easier to maintain business levels.

“Our customers don’t have to meet or sign anything in person,” Sherbo explained. “The entire application process can be done online or over the phone. We were ready for this, which was great.”

Gunsch said Berkshire also uses an online application process. When an appraisal of the property is needed, only the exterior is appraised to reduce physical contact.

“Loan closings are still done in-person with everyone wearing masks and following social distancing guidelines,” she added.

Critical Deferrals

A serious concern at the beginning of the pandemic was the potential for mortgage delinquencies to spike due to homeowners affected by financial and health issues. In April, Gov. Charlie Baker signed into law a moratorium on evictions and foreclosures on consumers through March 2021.

Meanwhile, those who are struggling with COVID-related issues are encouraged to contact their mortgage holder to defer payments. The law makes it clear that, by deferring, consumers merely extend the length of the mortgage without taking a hit on their credit rating.

All the mortgage professionals BusinessWest spoke with said the deferral program has worked to keep delinquencies down and allow people to stay in their homes.

“We have a strong team in place to assist our borrowers with loan deferrals and ensure they understand their options to defer payment during this time,” said Gunsch.

Smith said that roughly 5% of Freedom mortgage holders have taken advantage of the deferral program. “We’re actually seeing our delinquencies at very low levels, lower than they’ve been in years.”

Smith added that most of the deferral requests occurred in April and May. With each passing month, the number of new deferrals continues to decline.

“The deferral program is working the way it was intended,” Sherbo added. “It’s giving people the chance to maintain their own stability and credit.”

As for inventories, even that picture may improve soon. A recent report from the U.S. Census Bureau and Housing and Urban Development (HUD) showed new housing construction starts are up more than 23.4% in July 2020 compared to July 2019. The national figure closely mirrors the Northeast, which saw a similar increase of 23.3%.

Locally, Sherbo said new home starts are relatively flat, but if interest rates continue at record lows, that would encourage more new construction in Western Mass.

Just as no one had a crystal ball back in March, none of the mortgage professionals we spoke with can really say what will happen six months or a year from now. That’s the nature of this pandemic — a high level of unpredictability.

For now, the housing market is booming at a time when few thought it would. This is good news for banks and credit unions — and for the customers they serve.

And it’s certainly one of the more intriguing stories in a year with seemingly no end of them.

Banking and Financial Services

Course of Action

By Gabriel J. Jacobson and Ian Coddington

In addition to the obvious financial benefit to the employee, employer-funded advanced education can carry financial and soft benefits for employers, employees, and colleagues alike.

These benefits extend beyond the person who is pursuing advanced education, as this article explains.

More Accessible to Working Professionals

As access to online education grows, the number of professionals seeking to advance their education also increases. In 2017, one in six students enrolled entirely online, and one in three enrolled in at least one online course.

With the advent of the COVID-19 pandemic, schools around the country shut down their physical locations, and students were forced to move to online learning. Now that most students have taken some form of online classes, it is likely that many will choose to continue this method of learning.

Gabriel Jacobson

Gabriel Jacobson

Ian Coddington

Ian Coddington

Advanced education has become more attractive to employees and employers because it is a more accessible option for working professionals. One tax associate at Meyers Brothers Kalicka recently took advantage of the opportunity to pursue an advanced degree while continuing to work full-time. He enrolled at the Isenberg School of Management at UMass Amherst to gain a BBA in accounting and decided to remain online rather than go in-person.

Prior to making this choice, he worked full-time for a few years before deciding he wanted to earn his business degree. He enrolled in a la carte online classes immediately to accelerate his degree track before he was officially admitted. Once he was accepted into Isenberg, he decided to remain online so he could continue working a full-time internship at Meyers Brothers Kalicka, which ultimately led to him being offered an associate position at the firm.

He attributes the combination of full-time school and full-time work to his success, claiming that experiencing real-world situations reminiscent of the subject matter of his classes helped cement key concepts related to his profession. He graduated with more than a year of real-world professional experience under his belt.

The heart of online school is the flexible pace; students choose any quantity of classes each semester, meaning they could offload during busy season and upload during the slow season. Some employers allocate otherwise-unassigned slow-season hours to degree-earning coursework.

“Employers can sponsor employees with funds for academic training to build job-related skills. They may provide up to $5,250 in employer education-assistance benefits for undergraduate or graduate courses tax-free each year.”

With the increase in availability of online education due to the pandemic, companies can leverage this opportunity to attract talent earlier to both their and the student’s benefit.

Tax Incentives for Employers

Employers can sponsor employees with funds for academic training to build job-related skills. They may provide up to $5,250 in employer education-assistance benefits for undergraduate or graduate courses tax-free each year. To receive the benefit, the funds must pay for tuition, fees, books, supplies, and/or equipment. As an added bonus, these funds qualify for a business deduction and are not required to pay FICA or FUTA payroll taxes.

However, the education must be legally required for the employee to maintain their current position, or it must improve or maintain skills required for the position. One of these two stipulations must be met to satisfy the tax-free treatment.

There are limits, as these benefits are for employees only, and not for spouses or dependents. Also, there is no choosing between the education benefit and a cash payment to the employee. Employers should provide these rules and others as a written notice to employees interested in receiving the benefit.

Organizational and Culture Benefits

Outside of the financial benefits, there are workplace benefits to supporting student employees. Collaborative teams are a mainstay of most successful businesses. These teams often group employees with differing niches and experience levels, so they translate directly to supporting newer employees’ development through mentorship.

Mentorship relationships can help maintain accountability and time management for online student professionals. They can also serve as sounding boards for in-class work and discussion that reflect areas of interest to the student employee.

For example, the previously mentioned associate nurtured a mentorship relationship with his manager by discussing his primary interests and questions from his corporate tax class. Outside the mentor relationship, he found solidarity and motivation with peers at his level as many completed online master’s programs to advance their careers.

These relationships foster vibrant cultures of positive reinforcement toward educational goals within firms all over the country. Further, this culture can extend beyond the classroom and cultivate a collaborative and supportive work environment.

The human-capital, financial, and cultural benefits of incentivizing employees’ advanced education through online learning cannot be overlooked in today’s business climate. With the tools highlighted above, companies should take advantage of this opportunity.

Gabriel J. Jacobson and Ian Coddington are associates at Holyoke-based accounting firm Meyers Brothers Kalicka, P.C.; (413) 536-8510.

Banking and Financial Services Special Coverage

Pandemic Lessons

Rich Kump

Rich Kump says the pandemic has forced people who had been reluctant to bank remotely to give it a shot.

It’s the wave of the future, Rich Kump said — and the COVID-19 pandemic simply cast that wave in sharper relief.

“We’ve had a goal of moving routine transactions out of the branch,” the president of UMassFive College Federal Credit Union told BusinessWest. “We’ve been educating our members for three years, trying to move them out of the branch, and there’s still a percentage of America who just likes to everything in person. You need to take a thoughtful approach; you can’t force people into it … although COVID did that, to some extent.”

A widely held vision of the bank (or credit union) branch of the future — one shared, to some degree, by other local banking leaders we spoke with — does indeed promote robust online and mobile tools for routine business like deposits and withdrawals, leaving less traffic in branches, but a greater percentage of that traffic given over to more complex or consultative matters.

“We’ve had a goal of moving routine transactions out of the branch.”

And many people who have long resisted online banking are singing a different tune, said Paul Scully, president of Country Bank.

“Customers, just because of the nature of the pandemic, with people staying at home, started exploring technology,” he noted. “An amazing number of people are using technology who, for a number of years, fought it.”

In most cases, it’s just a matter of breaking old habits, Scully said — “and old habits are comfortable habits. But I think people are becoming better acclimated to technology and getting over their fears. There are still people who think, ‘I have to go into the bank to make that transaction because what if the money doesn’t get there?’ But as an industry and as a bank, we’ve been able to alleviate the concerns some people have.”

Florence Bank President Kevin Day agreed.

“Banking in general is going to change. The stuff you need to do is the same, but how you’re going to do it will change,” he said, noting that lobby traffic has been declining for years, and what was already a high adoption rate of mobile tools only accelerated over the past three months as banks closed lobbies to most routine business. “People are starting to realize it’s probably more secure, so they’re getting more comfortable. It’s also way more convenient.”

And gaining momentum in these shuttered times.

“Customers realized they really can do all their banking online,” Scully said. “We’re no different than Macy’s or Amazon. You realize you can sit down with your laptop or phone and purchase something from a retail outlet, and you can also do your banking that way. People are becoming more comfortable with it — so we need to keep upgrading and enhancing it.”

That’s not all they’re doing. Banks and credit unions, despite a much higher reliance on drive-up lanes and mobile platforms lately, never really closed during the pandemic, and while they continued to serve customers — in some cases, helping them navigate sudden financial hardships — they were also learning lessons and conducting internal conversations about where the industry is heading and what the bank of the future should look like.

Some were discussions that had begun years ago but, again, were suddenly cast in sharp relief as the wave known as COVID-19 came crashing down.

Staying Connected

People have been starved for human contact, Kump said. He knows that from UMassFive’s call center, as calls over the past three months are 25% longer, on average, than last year.

“A lot of it is, people just want to talk,” he noted. “Yes, they call for a reason, but then they want to talk. It’s a bit of a community.”

Bolstering the call center was one of the success stories of late March, which he recalls as a tough time.

“I don’t think anyone was ultimately prepared for this; we were scambling,” he said, explaining that many retail personnel in the branches began covering the phones, often from home. “Within two weeks, 70% of our staff was working from home. That’s when the chaos evolved into routine.”

Like the other institutions we spoke with, UMassFive didn’t close completely, staying open by appointment for services that couldn’t be done remotely, from notary signings to certain loan closings to instant-issue debit cards. The week Kump spoke with BusinessWest, the credit union was operating a soft opening of sorts before announcing a shift to walk-in business.

“Financial wellness isn’t just for people with means; it’s everybody, from somebody with an entry-level job to someone doing college planning or estate planning.”

Day recalls a similar experience.

“In that first week, everything was shutting down, and people were saying, ‘you’re a bank. You can’t shut down,’” he said. But Florence transitioned to drive-up service where possible while witnessing an expansion of remote banking — as well as phone-call volume that was up 100% early on.

“We helped a lot of people transition to mobile and computer options. People have used the drive-ups. We opened the lobbies for people who needed to do something in person. We went out to cars in some cases,” he recalled. “You couldn’t come and go as you wanted, but we never really closed. If you called and the only way to do something was in person, we did it in person.”

Kevin Day

Kevin Day says shifting most employees to remote work was one of the smoother transitions necessitated by COVID-19.

Still, the sudden, in many ways forced expansion of remote banking is just an extension of where the industry was already headed, Day explained. “We had already seen trends toward online, mobile, people doing much more on their computers and phones. The pandemic just really accelerated that.”

Scully said the transition to employees working remotely was one of the easier shifts.

“It wasn’t that difficult for us. We had all the technology in place that allowed us to immediately have all our non-branch staff working remotely, literally overnight. So that fell into place nicely for us; we didn’t miss a beat. Business was never impacted.”

For example, he said Country processed about 450 Paycheck Protection Program (PPP) loans remotely, while Zoom calls and Webex meetings became the order of the day. It has worked so well, in fact, that non-branch employees will continue to work from home until Aug. 31, even as branches begin opening up this week, which is a boon for parents still uneasy about — or unable to access — camps and day-care services.

“We closed a day or two before other banks, just recognizing what was happening, and moved people to drive-up or leveraging technology,” he said, noting that lines were sometimes long, but customers were able to access the services they needed, in some cases using interactive teller machines (ITMs) at two locations.

“We’ve walked a lot of people through the technology, and the customer care center reached out directly to help them. We had curbside service at some locations, and we also used that as an opportunity to talk about technology.”

Branch of the Future

All this enhanced technology goes hand in hand with what many banking leaders say is an evolving role for branches.

Branches are certainly needed, said Jeff Sullivan, president of New Valley Bank, which is opening a new branch on the ground floor of Monarch Place in downtown Springfield this summer. Like every other area bank branch, it will stress pandemic safety, with a mask requirement, six-foot distancing, and glass partitions between customers and employees.

But it will also reflect a move toward a role for branches that emphasizes financial wellness and consultative services more than routine business.

“That’s going to be the bigger component of what a community bank does — trying to help people navigate a lot of things,” he explained, before adding that there will be plenty to navigate in the coming year, when more customers than usual will be struggling to achieve stability. “Financial wellness isn’t just for people with means; it’s everybody, from somebody with an entry-level job to someone doing college planning or estate planning.”

The bank of the future will put greater emphasis on this consultative role, through personal interaction that can’t occur online.

Paul Scully

Paul Scully

“Customers, just because of the nature of the pandemic, with people staying at home, started exploring technology. An amazing number of people are using technology who, for a number of years, fought it.”

“Obviously, if it was just about technology, the big-city, money-center banks could meet the needs of every single person,” Sullivan said. “If you don’t have the technology, you’re going to fall behind, but the extra, community-focused efforts are what’s really going to make an impact.”

Kump said UMassFive has eliminated tellers — or, more accurately, it has eliminated branch employees who handle only that role. Instead, employees are trained to be “universal agents,” able to tackle multiple roles, from traditional teller business to loans and other matters.

To achieve that, the credit union has tripled its training budget over the past few years, seeking to identify not only financial skills, but empathetic personalities with a real desire to help people.

“The face of banking is changing permanently. Branches in the future won’t be as critical, with fewer transactions coming in. But they will always be needed for key parts of financial life,” he explained, citing anything from home and auto loans to opening memberships to simply seeking financial advice.

“We won’t need the huge teller line anymore. We won’t need as many branches, and the services we’re providing in the branches are changing, he added, noting that customers are also discovering they can conduct routine business face to face — sort of — through ITMs. “Someone could be at the Northampton drive-thru, talking to someone working from home in Belchertown.”

That raises the question of how many workers need to be on the premises, both while COVID-19 is still a threat and afterward, considering how effectively operations have continued during the pandemic.

Jeff Sullivan

Jeff Sullivan

“Obviously, if it was just about technology, the big-city, money-center banks could meet the needs of every single person. If you don’t have the technology, you’re going to fall behind, but the extra, community-focused efforts are what’s really going to make an impact.”

“From a back-office standpoint, about half are working remotely,” Day said. “Can they continue to do that long-term? Yes, but there’s still the human element, and people can feel isolated. Feeling part of a team is important to some people, while some people are loners. But technology is certainly giving us some options.”

And the bank, which recently broke ground on its third Hampden County branch, this one in Chicopee, has certainly been discussing those options.

“More transactions are going online, but when you want to talk to a person to problem solve, especially with more complex transactions, that can certainly be done over the phone — and has been during the pandemic — but the way we’ve designed our branch of the future, there’s more consulting. If you want to come in and consult, we’ll talk to you — a lot. So frontline people will still need to be there to handle questions and solve problems.”

Getting Through the Pain

In fact, banks and credit unions never stopped solving problems over the past few months. Scully said Country, like other banks, was able to accommodate deferrals of loan payments for individuals who has been furloughed or were generally dealing with greater financial stress.

“I felt like this was a watershed moment,” Day added, noting that more than 200 mortgage borrowers and 200 commercial borrowers took advantage of three-, six, or 12-month deferrals, the latter being the most popular option. “Having been through downturns in my career, I knew that we needed to give people some time. People are resilient, businesses are resilient, but they needed some time. So we worked with residential and business customers on deferred payments.”

Kump said UMassFive issued forebearance on nearly 1,000 loans for people who were “furloughed or just worred,” as well as launching a small-loan program for those who just needed a little cash. “If you were furloughed, that didn’t change the decision to make a loan for you.”

That was in addition to PPP loans, which the credit union approved for members and non-members in the community alike, 96% of those loans issued to employers of five workers or fewer. It also looked for other ways to support community needs, such as donations to food banks and organizations like Community Involved in Sustaining Agriculture, as well as donating meals to first responders.

Although those needs still exist, banks and credit unions are beginning to get back to normal operations, expanding branch operations under enhanced safety protocols — “it’s a great time to be in the plexiglass business,” Scully said — while considering the lessons learned during the months when most business was conducted remotely.

“Was there frustration at first? Absolutely,” he added. “At first, people were like, ‘what do you mean, a bank is closed?’ But as every industry started to close and people started working remotely, people began to understand.”

After all, a bank that saw a fire ravage its headquarters in 2008 and a tornado rumble through its home region in 2011 has no problem posting social-distancing reminders and directional arrows and getting back to branch business. “This is bigger than a tornado,” Scully said. “The lesson we’ve learned is to always be prepared and remain nimble.”

Even as it moved from a soft-opening week to broader branch service — where walk-in traffic is allowed but appointments are still advised to reduce the wait — Kump marveled at how the credit union’s members have adjusted to remote business. Especially new members, 90% of whom have been joining online, compared to 40% to 50% in a typical year.

“There’s a percentage of customers who will still be reluctant to walk into a business,” he added. “We’re seeing that with restaurants opening and people still not coming.”

It helps, of course, that many have discovered the power of digital banking.

“For a lot of folks, it’s generational; they’ve been intimidated by technology, of depositing a check with a picture on their phone,” Kump continued. “Now they’ve been forced to do it, and they’re asking, ‘why was I taking time out of my day to run over to the credit union to get cash or transfer money? I don’t have to do that.’”

Day also expects people to keep using those tools, but for those ready to return to the branch, even for matters as basic as depositing a check, they’ll do so protected by masks, shields, and any number of other precautions. “The pandemic isn’t over, and people are still going to get sick. We want to keep people safe.”

Bottom Line

Usually, when BusinessWest talks to local banks and credit unions, it’s about their own business outlook for the year ahead, but this is not a typical year, and talk of asset growth and loan portfolios has been pushed aside to some degree by the need to simply stay afloat — and keep customers afloat, as well.

“The outlook is generally positive, but it will not be without pain,” Day said, speaking for both Florence Bank and its customers. “We know it will get better. It’s just a matter of when.”

Joseph Bednar can be reached at [email protected]

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