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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]

Banking and Financial Services

More Relief from the CARES Act

By Lisa White

On March 27, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law. Since its inception, much of the focus has been on the establishment of additional funding sources, such as the Paycheck Protection Program (PPP), or on the creation of new tax credits, such as the Employee Retention Credit.

However, the act also made some significant revisions to existing tax law to provide additional relief to affected businesses. This article takes a closer look at two of these provisions and delves into how the related benefits associated with the changes might be derived.

Technical Correction for Qualified Improvement Property

The Protecting Americans from Tax Hikes (PATH) Act of 2015 created a new category of asset called ‘qualified improvement property’ or QIP. This term referred to any improvement to an interior portion of non-residential real property, but excluded expenditures for elevators or escalators, enlargements, and interior structural components. Although this category of asset technically had a 39-year cost-recovery period, it was specifically identified as being eligible for bonus depreciation.

When the Tax Cuts and Jobs Act (TCJA) was signed into law at the end of 2017, the intention was to assign a shorter, 15-year recovery life to qualified improvement property, thus ensuring its eligibility for the enhanced 100% bonus depreciation provision also included in the TCJA. Unfortunately, the necessary wording was not included in the final bill, resulting in qualified improvement property retaining its 39-year cost-recovery period, but excluding it from being eligible for bonus depreciation.

Lisa White

Lisa White

“With proper planning and timely tax-advisor consultation, realizing additional relief during these unprecedented times can be achieved.”

Not only did the CARES Act include the technical correction necessary for QIP to have its originally intended 15-year cost-recovery period, but the correction was directed to apply retroactively to all eligible assets placed in service after Dec. 31, 2017.

Then, in mid-April, the IRS provided guidance on how to capture this additional benefit from the change in the depreciable life and the possible eligibility for bonus depreciation. Primarily, the two methods are to either file amended returns for the impacted year(s) or to file a Change in Accounting Method (Form 3115), which allows a ‘catch-up’ for the differences in the recovery periods and applicable depreciation methods.

Here’s an example: A business holds commercial rental property and operates on a Dec. 31 year-end. On July 15, 2018, the business incurred expenses of $150,000 in costs that meet the QIP definition. Assume Section 179 expense was not taken. Due to the technical error in the law, only $1,763 of depreciation expense was allowed in 2018, and $3,846 of depreciation expense would be allowed in 2019. With the technical correction, bonus depreciation can now be taken on the entire amount of the qualified improvement property even though it was placed in service in 2018:

• If the 2019 tax return has already been filed, an amended return should be filed for both the 2018 and 2019 tax years. Taxable income in 2018 will be reduced by the additional $148,237 ($150,000 – $1,763) of accelerated depreciation expense, and taxable income in 2019 will be increased by the removal of the $3,846 of depreciation expense originally recognized.

• If the 2019 tax return has not yet been filed, filing a Form 3115 might provide the easier option. Instead of filing two years of returns, only the 2019 tax return is filed, and the $148,237 of additional accelerated depreciation expense not captured in 2018 is included in the 2019 tax return as a section 481(a) adjustment.

It is important to note that there are certain circumstances where either an amended return or an administrative adjustment request (AAR) must be filed. It is important to consult with your tax advisor to determine the best course of action.

Changes to the Business Interest Limitation

Although most of the provisions enacted as part of the TCJA were intended to be favorable to taxpayers, some new components had the opposite effect. One of these was the revision and expansion of the business-interest-limitation rules. If subject to the new rules, the regulation essentially limited the amount of business interest expense to 30% of taxable income adjusted for, among other things, depreciation.

The interest expense in excess of this 30% threshold would not be deductible in the current year but would instead be carried forward to the following tax years.

The TCJA also included an option for certain businesses to elect out of having this regulation apply. Instead, these businesses that met the definition of a ‘real property trade or business’ could make an irrevocable election to realize a longer recovery period for the cost of real property and to forego any bonus depreciation that would otherwise be allowed on that real property.

Prior to the retroactive change under the CARES Act, the differences in the recovery periods were not substantial, and none of the real property was eligible for bonus depreciation. However, with the CARES Act’s retroactive fix to qualified improvement property, that property is now eligible for bonus depreciation. The loss of being able to take that accelerated depreciation, in addition to another CARES Act provision increasing the limitation threshold from 30% to 50% (for all businesses except partnerships) for 2019 and 2020, might now result in the impact of the irrevocable election having an undue, unfavorable result.

To provide relief to those businesses that made the irrevocable election and that could now benefit from the shorter recovery period, and the applicable depreciation methods, the IRS has issued guidance that provides for the irrevocable election to be rescinded for tax years 2018 or 2019. This is accomplished by filing an amended return for the year the election was made. If 2018 was the election year, and 2019 has already been filed, 2019 must be amended as well to reflect any changes to taxable income resulting from withdrawing the election.

So, What Now?

The CARES Act provides several relief provisions, including a number that can be realized through proper tax planning. Owners of non-residential (i.e. commercial) real property should review any expenditures that were capitalized in 2018 and 2019 to see if any of these costs can be realized now under the new qualified improvement property measures.

Also, it would be prudent to review any elections made during those tax years that might need to be revisited to make sure those elections still result in the most favorable tax position.

As with most things related to the tax code, the final answer is usually complex and nuanced and somewhere in the grey. But with proper planning and timely tax-advisor consultation, realizing additional relief during these unprecedented times can be achieved.

Lisa White, CPA is a tax manager at Holyoke-based accounting firm Meyers Brothers Kalicka, P.C.; (413) 536-8510.

Banking and Financial Services

Natural Transition

Kevin Day

Kevin Day

In some ways, Kevin Day is no stranger to running Florence Bank — he was already overseeing about 90% of its departments as executive vice president, a series of responsibilities he gradually took on after coming aboard as CFO in 2008. So he was a natural choice to succeed John Heaps Jr., who recently stepped down after 25 years as president. Day’s mandate is simple — keep a bank known for its steady, organic growth moving forward, and keep cultivating the culture of teamwork that allows such growth to occur.

When Kevin Day joined Florence Bank as chief financial officer in 2008, he was responsible for finance, facilities, and risk management. He must have been doing something right, because his role later expanded to include compliance in 2013, residential lending in 2014, and retail banking in 2016, at which time he earned the title of executive vice president.

“Gradually, my role expanded to where, all of a sudden, I looked back one day and said, ‘wow, 90% of the bank reports to me. How did that happen?’” he said.

That broad oversight made him a natural choice to replace John Heaps Jr., who stepped down as president of Florence Bank in January after 25 years in that role. On May 1, he’ll retire as CEO as well, and Day will take on that title, too.

“Gradually, my role expanded to where, all of a sudden, I looked back one day and said, ‘wow, 90% of the bank reports to me. How did that happen?”

“In my CFO role, I tended to have fingers in a lot of different places anyway — rate setting, strategy in many areas, facilities. We had started to expand into Hampden County. I had full responsibility for that transition, along with retail responsibility,” Day explained. “Then, a few years back, when John said, ‘hey, retirement’s coming up for me. Would you be interested in stepping in after me as president?’ I said I’d be happy to.

“You know, honestly, that wasn’t a role that I came here for,” he added. “My philosophy in life in general, but certainly in business, has been ‘just do the best you can.’ It’s the key tenet I spoke to our employees about at our meeting when I was promoted. I said, ‘the number-one thing you can do is just do your best in whatever role you have.’ And that’s all I’ve ever tried to do. I would have been happy to sit here as CFO the rest of my career, but when John decided to move on, I said, ‘yeah.’”

The job is the culmination of not only more than 11 years at Florence Bank, but a lengthy career spent in the financial world, including roles at more than a half-dozen other banks. This change, at least culturally, promises to be a smooth one, he noted.

“Every job transition I’ve ever had, it takes a year to figure out, ‘what have I gotten into?’ — whether it’s good or bad,” he explained. “After a year, you can look back and say, ‘wow, this is what this place is all about.’ I don’t have any of that here. I know many of our customers, I know our staff, and they all know me. It has been extremely smooth.”

Much of the credit for that has to do with the culture fostered by Heaps over the past quarter-century, Day said — one that emphasizes teamwork in all dealings.

John Heaps Jr., who served as president of Florence Bank for 25 years

John Heaps Jr., who served as president of Florence Bank for 25 years, grew its assets and reach steadily over that time, including a successful and ongoing push into Hampden County.

“That’s the key. It’s one of two key principles I live by. The other is simplicity. I don’t like things complex. When you make decisions when you can’t understand things, you get it wrong more often than you get it right,” he went on. “John always explained things and discussed things. And with all the moves we’ve made, everyone’s been on board.”

Those moves have been many in recent years, including that aforementioned Hampden County expansion (more on that later). And Day is excited to see how the bank continues to evolve from his chair in the office he never thought he’d occupy.

Part of the Team

Immediately after earning his bachelor’s degree in business administration at UMass Amherst, Day worked for five years as a CPA for the accounting firm Arthur Young & Co. in Worcester. When he looked for a career change, he got into banking “totally by accident.”

Well, not exactly — he had been rubbing shoulders with bank controllers, treasurers, and presidents as part of his CPA work, and always found their work interesting. When a position became available as a controller for Consumers Bank, also in Worcester, “it hit all my criteria,” he recalled, and he jumped into a new role.

After three years, the bank was sold, and he jumped off for a position in New Hampshire, where he lived for 25 years and raised a family, working for a number of institutions. “I learned a lot in each job, some from really good experiences and some from really tough experiences, but all of that shapes who you are. Several things I went through in the banking world were really awesome experiences, and some I would never want to repeat again.”

“I learned a lot in each job, some from really good experiences and some from really tough experiences, but all of that shapes who you are. Several things I went through in the banking world were really awesome experiences, and some I would never want to repeat again.”

His next stop was Unibank in Central Mass., where he worked for 15 years, and figured he would remain there as CFO for the rest of his career. But he was intrigued by a job description from Florence Bank, also for a CFO — and by the interview process itself.

“The way we do interviews here, particularly for senior people, is the president and all the senior officers individually interview you. I spent the whole day here, basically every hour talking to a different person, and that really impressed me,” Day recalled. “Number one, it gave me insight into all the different people who were here running the various areas of the bank. And what struck me was, ‘wow, these people are really nice.’ They were very genuine, and the bank’s a good bank — I could tell that from the financials.”

In 2008, at the height of a global financial crisis, it may have been a dicey time to switch banks, he said, but because of Florence’s financial health — Heaps had been steadily growing assets and services since his arrival — and the impression the senior staff had made during those interviews, Day accepted the job.

Job one was moving forward from a time of great difficulty in the industry, he added. “Things started moving in a decent direction. We had low capital ratio at the time, so we put a plan in place to improve that. The economy became better, and the plan worked; our capital levels rose, and we started making decent money, and things just came together.”

That sense of teamwork and collaboration helped, he told BusinessWest. “Every organization likes to think of themselves, ‘oh, we’re a team.’ But very few actually are. We really have a great team. We’re careful to bring people in who buy in and agree with the culture we have. That sense of teamwork is important, which makes my transition to president really easy, honestly.

“There’s no jealousy, no backstabbing,” he added. “That’s one of the things that drew me in the first place. These people aren’t climbing over each other, they’re working together.”

Heading South

Lately, they’ve been working on a multi-phase expansion into Hampden County. Florence Bank, headquartered in its namesake town, has long been a Hampshire County institution, with branches in Amherst, Belchertown, Easthampton, Granby, Hadley, Northampton, and Williamsburg.

But in the past three years, it opened up branches in West Springfield and Springfield, with a site in Chicopee to follow in 2020, and then perhaps two to four more in the next five years.

“I’ve been intimately involved in site selection, branch design, branch staffing, setting up everything related to that,” Day said. “It’s been a great deal of my day-to-day responsibilities over the past several years.”

When he announced the first move a few years ago, Heaps said a recent spate of mergers of community banks in Hampden County created an uncommon opportunity for a mutually held bank that makes decisions about what’s best for customers and the community without input from stockholders.

And a geographic presence needs to be a part of that strategy, Day said — even in the mobile age.

“Branching is changing,” he noted. “Banking in general has gone electronic. Customers can do so much more away from the branch. But they still need to know who they’re banking with, and we feel you’ve got to have a footprint, and people have to be able to see you. If we’re not physically in the communities, it doesn’t feel like we’re there.”

“I feel bad for people who get up in the morning and sort of dread coming to work. I’ve enjoyed coming to work most of my career. But coming here is the best of anything I’ve done. I’m glad I’m ending my career in a place like this.”

Although online and mobile banking are now omnipresent, he went on, customers still want a place they can go to get questions answered and problems solved. “No one wants to wait on the phone — talking face to face is still important, even with all our convenience and technology. Our electronic channels are expanding, but if you have a problem, you want to go to a branch.”

That presence is a form of marketing, but traditional media messaging is important, too. The bank’s marketing emphasizes the tagline ‘always,’ reflecting its mutual form of ownership, which assures, among other things, that it can’t be forced into a sale or merger with another bank.

“We’re always going to be here,” Day said. “You never have to worry that next year we’ll be owned by someone else, and the decision makers will be in Connecticut or Boston or New York or California. The decision makers work here and live here.”

That mutual model is important to many people in the Pioneer Valley who grew up in a community-bank culture, he added. “Our mutual model is what allows us to be local and stay local. When you’re owned by shareholders, those shareholders are from who knows where, and their goals and objectives can be vastly different from what ours are.”

He added that he knows customers who have been with the bank 40 years or more, through all phases of their lives — and all the financial challenges life brings, from buying a home to paying college tuition to saving for retirement.

“I don’t know anybody who really loves change, but it’s a fact of life. You’ve got to deal with it,” he said. “It’s good to know that your banking situation is something that won’t change. Florence will be here.”

In a Good Place

During Heaps’ 25-year tenure as president, Florence Bank’s capital has grown from $24 million to $161 million, and assets have grown from $283 million to $1.4 billion, and from four branches to 11 — soon to be 12. Meanwhile, the staff has doubled from 112 full-time employees to 221 now.

While the future will see at least a couple more branches, Day said the focus will continue to be on steady, organic growth, as opposed to the merger-happy way some local banks have grown over the past two decades.

The coming years will also bring a continued emphasis on community giving, as evidenced by the 18th annual Customers’ Choice Community Grants Program, celebrated at Look Park on March 10, where 57 nonprofits received $100,000 in awards based on voting by bank customers. The program has given more than $1.2 million since its inception.

“Our customers love it, the community loves it — it’s just a heartwarming event,” Day said. “We give a lot outside that program, but this is a step above. It just cements our core mission to help as many people as we can, as best we can.”

Active in the community in other ways, Day is currently a member of the board of directors and the finance committee for United Way of Hampshire County, a board member for the Springfield Rescue Mission, a member of the finance committee for Westfield Evangelical Free Church, and board president for the Northeast Center for Youth and Families.

But serving people through his job gratifies him just as much.

“I think it’s the people I work with,” he told BusinessWest. “Yes, they’re all extremely competent in their disciplines, but I’ve worked in places with really smart people who are not fun to work with. Here, they’re smart and good at what they do and nice to be around.

“I feel bad for people who get up in the morning and sort of dread coming to work,” he added. “I’ve enjoyed coming to work most of my career. But coming here is the best of anything I’ve done. I’m glad I’m ending my career in a place like this.”

Joseph Bednar can be reached at [email protected]

Banking and Financial Services

Volatility Is the Order of the Day

By Jean Deliso

Jean Deliso

Jean Deliso

The market has acted like a roller coaster in recent months, up one day, down another — but where will it end up?

Most investors tend to get unsettled and concerned by such market conditions, and if you are in that group, now is the time to speak to your financial professional to ensure that your investment allocation is consistent with your financial goals. Those investors with a near-term retirement timeline generally should be more focused on preservation of capital. Those with multiple years or even decades before retirement can take a longer perspective as they have more time to wait out market volatility.

All investors should remember to be calm. The worst mistake in this market, or any market, is to try to time the ups and downs. Granted, this volatility can be unnerving, but it’s the price we pay for the potentially greater returns from investing in equities.

In the past 20 years (2000 to 2020), there have been at least two major bear markets with short-term losses in value around 50%, yet it’s also true that, from Dec. 31, 2002 to Dec. 31, 2018, the S&P 500 stock index tripled in value.*

Zacks Investment Management, one of the portfolio managers I work with, produced a white paper listing four reasons to expect more volatility in 2020. I think it’s worthwhile to share some of these highlights:

Reason 1: We cannot ignore history. Over the past 38 years, the S&P 500 has had corrections; they are frequent, and they are the norm.

Reason 2: Low volatility generally gives way to high volatility. From October 2019 to January 2020, the S&P index experienced an unusually low level of volatility. From a historical perspective, such periods of low volatility tend to give way to periods of high volatility. We saw examples of this type of market behavior prior to January 2018 and October 2018.

Reason 3: Stock buybacks are on the decline. Stock buybacks are a corporation’s main tool for reducing outstanding supply of shares, and thereby boosting shareholder value. Stock buybacks were down in 2019, with more declines expected in 2020. Fewer buybacks could mean a tougher road for corporations exceeding their earnings per their share targets. This could make investors jittery.

“The bottom line is that volatility can be a good thing for equity markets, sometimes unsettling but it is normal and to be expected.”

Reason 4: It’s not a straightforward election year. This does not necessarily refer to a political outcome, but more concerning is alleged foreign interference, and potential contested results, civil unrest, and other extraneous factors that might lead to a period of political instability.

 The bottom line is that volatility can be a good thing for equity markets. Though sometimes unsettling, it is normal and to be expected. I tend to agree with Zacks that the S&P 500 index is due for a correction this year on par with the historical averages after several years of increases. We could experience a correction in the 10% to 15% range.

Let’s remember that dollar-cost averaging can be a great tool in managing short-term volatility as well. While no one can predict the future, and the past is no guarantee of future results, historical performance has shown that market downturns can offer attractive investment opportunities, and dollar-cost averaging can help in this regard.

Remember, though, that dollar-cost averaging does not ensure a profit and does not protect against loss in declining markets. It involves continuous investing during a period of fluctuating price levels. To maintain such a strategy, investors should consider their ability to continue investing through differing market conditions.

This article would not be complete without mentioning continuing concerns about COVID-19. As a society, we don’t know enough about it yet to understand how pervasive it will become and how long it will impact the markets. It’s too early to assess the ultimate impact of the virus. Headlines continue to focus on the spread of the virus and those who become ill; however, one should keep in mind that most people who have contracted the virus have gone on to make a full recovery.

Weaker global growth does not often mean recession in the U.S., and the consumer remains a strong factor against a U.S. recession. Lower rates may further boost the housing market, and both manufacturing and wholesaling inventories are at high levels in the U.S., which could mitigate supply-chain disruptions from Asia. More accommodative monetary policy could serve to calm the financial markets and minimize the economic and psychological impacts.

From a financial perspective, it’s important to maintain a diversified portfolio for times like this, and in panicked environments, it’s imperative to keep a level head rather than simply react. Those investors with longer time horizons should try and remain calm and patient when volatility takes hold.

A well-designed financial allocation consistent with your risk tolerance and investment goals is the key. Investors tend to make short-term decisions with long-term assets, but it is important to keep a long-range approach with your money and stick to your investing goals.

For the shorter-term investors, now is a good time to connect and review your plans with your financial professional. Double-check to make sure that your goals and objectives are still in line with your investments. Also, it is important not to stay passive on the sidelines, as investors we need to be engaged in the process and be a full participant in the process.

Jean M. Deliso, CFP is a financial advisor offering investment advisory services through Eagle Strategies LLC, a registered investment adviser, and is a registered representative of and offers securities products and services through NYLIFE Securities LLC, member FINRA/SIPC, a licensed insurance agency. Eagle Strategies and NYLIFE Securities are New York Life companies. Deliso Financial & Insurance Services is not owned or operated by NYLIFE Securities LLC or its affiliates. Neither Deliso Financial & Insurance Services nor Eagle Strategies LLC or its subsidiaries and affiliates provide tax, legal, or accounting advice. Please consult your own tax, legal or accounting professional regarding your particular situation.

*Source: Standard & Poor’s 500 index, 12/31/18. Average annual returns are based on the S&P 500 Index from 12/31/02 to 12/31/18. Large-capitalization stock performance is measured by the S&P 500 index, an unmanaged index considered to be representative of the U.S. stock market. Prices of common stocks will fluctuate with market conditions and may involve loss of principal when sold. Results assume reinvestment of all distributions, including dividends, earnings, and expenses, and are not indicative of any past or future returns of any investment. It is not possible to invest directly into an index. Past performance is no guarantee of future results.

Banking and Financial Services

Forward Progress

President and CEO Mike Ostrowski

Arrha President and CEO Mike Ostrowski says credit unions have in many ways filled the void left by many of the smaller community banks that have disappeared from the landscape. To take full advantage of opportunities that are presenting themselves, an institution must have a blend of size and nimbleness — and a name that resonates. He believes Arrha has all three.

Mike Ostrowski calls it his ‘jungle home.’

Because … that’s what it is. The Osa Peninsula in southwestern Costa Rica is quite remote, and that’s what Ostrowski, president and CEO of Arrha Credit Union, likes about it.

“I have a little hut there — there’s no electricity, there’s no anything,” he explained while grabbing his phone to show photos of the area. “I typically go down there for two weeks; I alternate between living in the jungle and this tiny fishing village where I’ll stay for a few days. That’s my release.”

The upcoming trip, one coinciding with his 60th birthday later this month, will be a shorter stint, only six days, he said, adding that this is a good time of year to go because the fishing is good — he’ll be looking to land blue marlin and black tuna — and it is not rainy season.

“That comes in June,” he said. “And when it rains, it rains. It’s unbelievable how much water comes down. It’s like standing in a shower.”

He’ll return from this trip to a jungle of a different sort — a rapidly changing landscape in banking and financial services. It’s not exactly a hostile environment, but there are plenty of challenges — from razor-thin margins resulting from historically low interest rates to ever-escalating regulation — and competition that comes in all shapes and sizes and from all directions.

To survive and thrive in this environment, he told BusinessWest, an institution needs a solid blend of size and nimbleness and he believes Arrha — that’s the new brand that the former Springfield Teachers Credit Union assumed roughly five years ago — is strategically aligning itself to achieve both.

“We’ve been building that [commercial real-estate] business slowly and methodically for several years now. But it’s accelerating because of that vacuum created when banks like United leave; there’s no question that we’re taking advantage of opportunities like that.”

While size has become increasingly important in this age, that nimble quality is critical as well, he said, especially with all that competition, including the ever-growing roster of fintech companies offering everything from platforms with which the pay bills to risk-management services to payment-protection solutions.

“They’re all nipping at our heels for the dollars that a typical credit union or bank might get,” Ostrowski explained. “We’re fighting the battle on that front, and, fortunately, we have some of the best technology available; we can do anything they can do, and we can probably do it better because we’re local.”

But amid these many challenges there are also opportunities, he said, especially as a pattern of mergers and consolidations within the banking industry continues, such as with the recent acquisition of United Bank by Peoples United Bank.

As banks get larger and more of them become publicly held, he noted, credit unions have in many ways taken the spot once occupied by many of the smaller community banks that have disappeared from the landscape.

“And that’s a healthy thing,” said Ostrowski, who has spent the past 37 years in the financial-services sector and worked for a number of those community banks, including United, where he got his start, and Ludlow Savings. “That’s a normal progression of the industries; we’re looking to fill a void, a vacuum; people want to deal locally. The solid credit unions are taking the place of those local banking institutions that were around.”

To take full advantage of these opportunities and effectively and efficiently fill this void — something many other players are trying to do as well — Ostrowski said Arrha needs to be nimble, take full advantage of technology, stress its personable brand of service, and do what’s needed to attract the younger generations.

All of this, in a nutshell, is the strategic plan moving forward, he said, adding that the bank is looking to introduce ITMs (interactive teller machines) in its two locations, possibly by the middle of the year, and create what he calls the ‘branch of the future,’ something that will become a model for possible future expansion into smaller physical spaces.

This model involves the interactive technology, the ITMs, but also the human touch in the form of banking professionals making sure customers are comfortable using that technology and that all their needs are met.

“We’re not reinventing the wheel,” he said, noting that the technology is already in place in several area institutions. “We just want to be on the cutting edge; this concept will be taking off soon, and I want to be on the forefront of it.”

For this issue and its focus on banking and financial services, BusinessWest talked with Ostrowski about Arrha’s strategic plan moving forward, one that calls for smart growth, taking advantage of the opportunities presenting themselves, and positioning itself for life in this jungle.

Points of Interest

Ostrowski has a small collection of bobbleheads residing atop a bookshelf in his office at Arrha’s Springfield’s facility on Industrial Drive.

When asked about it, he quickly deferred to a different collection, one that has more meaning.

This is an assemblage of coffee cups bearing names of financial institutions he once worked for. A few have been turned upside down, Ostrowski’s way of indicating that the bank in question made some key strategic mistakes, which in some cases led to that brand disappearing from the landscape.

Mike Ostrowski says Arrha will soon be introducing ITMs and creating what he called the ‘branch of the future.’

Opting not to go into specific details about any of these institutions, he hinted strongly that many of these mistakes involved trying to grow too quickly, taking unwarranted risks, and becoming something the bank wasn’t.

And he’s committed to not making these mistakes with Arrha, a credit union that first operated out of a classroom at Commerce High School in Springfield at the dawn of the Great Depression. His plan is for slow, steady growth — in memberships, assets, deposits, commercial loans, and perhaps locations, although he has no immediate plans to broaden the portfolio beyond the current two.

In short, he intends to continue living up to the credit union’s still somewhat new and unusual name — Arrha, an old English word that translates into ‘money in exchange for a contract, a pledge in earnest.’

Ostrowski said the name change was needed because the former name, Springfield Teachers Credit Union, and even the shortened version, STCU, didn’t adequately convey that membership was open to anyone who lives or works in the three counties of the Pioneer Valley.

The new name does — sort of — but often needs to be explained. Ostrowski doesn’t mind; in fact, he looks forward to doing it.

“That’s exactly why we picked the name — it gives us a chance to tell the story,” he told BusinessWest. “So, from a marketing perspective, I think it’s brilliant.”

The story, at present, is of a still relatively small credit union — it’s in the middle of the pack among area institutions of this type with roughly $140 million in assets — working to grow and position itself for success in the long term.

As for growth, Arrha has seen a steady rise in membership, said Ostrowski, noting that, over the past 18 months or so, it has gained more than 1,500 and now boasts more than 11,500.

“If we were Boston, where there’s a lot of inflow of people, I would not be too happy with those numbers, but given where we are and what the statistics show, I’m quite pleased,” he said, noting, as all other bank and credit-union leaders do, that this is, by and large, a no-growth area. Meanwhile, even though Arrha’s expanded criteria for membership — Hampden, Hampden, and Franklin counties in addition to some of Northern Conn. — appears broad, it is still somewhat restrictive, at least when compared to most banks in the region.

In this no-growth environment, the institution must look to do more with existing customers and offer more services, such as commercial lending and commercial checking accounts. Arrha expanded into this realm several years ago, and has built a solid portfolio, most of it involving commercial real estate.

“We’ve been building that business slowly and methodically for several years now,” he explained. “But it’s accelerating because of that vacuum created when banks like United leave; there’s no question that we’re taking advantage of opportunities like that.”

As with all other aspects of the credit union’s operation, the commercial side of the ledger is driven by relationship-building efforts, he said, adding that these relationships are developed far more through trust than interest rates.

By All Accounts

While working to build the membership base and commercial portfolio, Arrha is also taking a number of steps to attract younger audiences, said Ostrowski, noting that these initiatives involve everything from financial-literacy programs involving area high-school students to digital marketing programs, to making sure the credit union remains on the cutting edge of technology — something that’s quite necessary to get and keep the attention of Millennials and those behind them.

“It’s a tough generation to reach,” he acknowledged, adding that digital marketing is fast becoming the most reliable method. “And some of them have never been inside a bank or credit union.”

Still, all members of this generation will eventually need what he called a “warm hug” — the personalized service they’ll need when filling out their first mortgage application or looking to buy a business.

“And we’re here for them when they need that warm hug,” he went on, adding that Arrha is enjoying some success with attracting the younger generations, as evidenced by the fact that the average age of its members has gone down — by two years — while that number has been going up industry-wide.

“That tells me that we’re achieving what we’re intending to do when it comes to reaching out to that generation,” he said, adding that, specifically, this is the 25-to-35 age group.

And if all goes according to plan, when these individuals — and all other customers — enter one of the Arrha locations later this year, they’ll be stepping into that ‘bank of the future’ Ostrowski mentioned.

The credit union is currently in the exploratory stage on the new technology, with plans to implement the changes perhaps six months from now, he noted, adding that the institution will do its homework and due diligence and make sure this important work is undertaken properly.

He expects that the blend of technology and human touch will resonate with not only Millennials, but all generations. And he believes it could also serve as an effective model for smaller, highly efficient branches in the future, facilities that could enable Arrha to expand its physical presence to other communities.

“This will give us the ability to do additional branching at a lower cost structure,” he explained, adding that a facility with a few ITMs and perhaps two or three staff members would need only 1,000 square feet, and perhaps half that, as opposed to a traditional branch several times that size.

Ostrowski said he was inspired by what he saw at an institution in the Washington, D.C. area, which had ITMs and three roving employees qualified to handle everything from car and mortgage loans to wire transfers, and is looking to do something similar here.

“They had the ability to handle every banking need — but they weren’t wasting their time doing transitional deposits or withdrawals,” he said. “It’s a far more efficient way to do things, and it’s still very member-friendly.”

Bottom Line

That branch of the future seems a long way from that hut on the Osa Penninsula — in every way imaginable.

But they’re both in a jungle in some respects.

This jungle in the 413 is a highly competitive environment where, as noted earlier when mentioning banks not around anymore, survival is not assured. It can be secured by being forward-thinking, on the leading edge of technology, and customer-friendly.

In short, it happens by avoiding the kinds of mistakes that would prompt Ostrowski to turn a coffee cup upside down.

And that, in plain, basic terms, is the business plan for Arrha.

George O’Brien can be reached at [email protected]

Banking and Financial Services

A ‘Natural Partnership’

Chris Milne, left, and Mike Matty both say the union of St. Germain and Gage-Wiley is a natural partnership.

Mike Matty says the talks with Chris Milne began roughly two years ago.

And as they often do in such cases, these discussions were somewhat intermittent in nature and came in varying degrees of intensity.

“With those first preliminary talks, you talk, then you stop talking about it for a little while, you revisit it … it’s been percolating for a while,” said Matty. “Half the time, it’s just … you grab dinner or you grab a beer and chat about business more than anything else, primarily because the companies are so similar and dealing with the same issues and you want to see how they’re dealing with these issues. And then, the talk would turn to ‘are we still thinking about this, or are we not thinking about this?’”

‘This’ was a proposed acquisition of Northampton-based Gage-Wiley & Co., which Milne served as president and CEO, by Springfield-based St. Germain Investment Management, which Matty has led for a number of years now. And eventually, the talk led to a deep dive and a decision to go forward.

The combined company has close to $2.4 billion in assets (Gage-Wiley had nearly $800 million), and four offices overall — St. Germain has a second office in Lee, and Gage-Wiley has a second office in Plymouth. This means it has much-needed size at a time of increased — and more complex — regulation, but also a small-enough size to remain nimble. Just as important, it now has nearly two centuries of time in the investment-management business.

Indeed, Matty joked that Gage-Wiley was a little on the young side in comparison to St. Germain, with the former being only 87 years old and the latter 96.

“I realize they’re a fairly new upstart, since they only started in 1933,” said Matty, who then turned serious and called this a “natural partnership.”

Natural because the companies are so similar — they both were started in Springfield, they’ve both remained locally owned and privately held, and they have similar operating philosophies.

Milne agreed. He actually initiated those talks two years ago, not thinking they might eventually lead to this union. Like Matty, he said the early discussion was focused on simply how to do business in a changing environment.

Eventually, though, it became clear that coming together made far more sense than staying apart and competing with each other.

“It’s a case where one plus one equals three,” said Milne. “It seemed like the right thing to do at the right time and for the right reasons; the similarities and compatibility were just too good not to get married.”

The name ‘Gage-Wiley’ will remain over the door of the facility in Northampton, and Milne will serve as managing director, because that brand is well-established, and it made no sense to change it, said Matty.

“I realize they’re a fairly new upstart, since they only started in 1933.”

“There’s a lot of good will built into that name and client relationships built up over time,” he told BusinessWest. “It’s very strong name, and we have no intention of disrupting things and taking all that away from them.”

Thus, in many ways, that office will operate much like October Mountain, St. German’s subsidiary in the Berkshires — a firm with its own name and its own staff, but with a bigger organization behind it.

“Very little, if anything, will change,” said Matty. “From the Gage-Wiley client standpoint, their statements look almost identical to the way they looked before — there just happens to be a new line that says ‘securities offered through St. Germain Securities’ on it. The phone number is the same, they’re talking to the same people … from the client standpoint, it will be almost invisible.”

Beyond the size and wealth of experience the combined firm now boasts, however, it also has what Matty described as a deeper pool of talent and expertise that it can bring to the table to better serve investment clients.

Elaborating, he said the teams at the respective companies bring experience in different areas that will complement each other effectively.

“We bring to the table for them a fixed-income expertise that they didn’t have, and we also bring more resources on compliance, legal matters, and human resources,” he explained. “And that comes with being a bigger company and having to tread these waters for a longer time with more people — we’ve had more experience at it.”

Meanwhile, Gage-Wiley brings different elements to the table, starting with some operational processes and ways of doing things that are in some ways better than those at St. Germain, Matty noted.

Gage-Wiley also brings an expertise in what is known as ESG (environmental, social, and governance) investing, a mindset that is growing in popularity, especially among the younger generations.

“Many people are looking to invest according to their ethics,” said Matty, noting that years ago the acronym for this philosophy was SRI — socially responsible investing.

But there is a difference, he went on, adding that SRI was mostly an exclusionary approach — ‘here’s what we’re not going to buy’ — while ESG is more of an inclusionary approach.

“People will say, ‘here’s a company I want to see a change at — I’m going to buy some of its stock, see if I can be a shareholder activist, and see if we can make some changes from within,’” he explained. “It’s a more comprehensive approach than the old SRI.”

And the team at Gage-Wiley, based in Northampton, has developed an expertise in this realm that St. Germain did not possess.

It does now, though, because of this ‘natural partnership’ that Matty described, one that brings nearly two centuries of local ownership together under the same umbrella — if not the same name and same roof.

As noted, this union gives the combined company more size and the important element of flexibility. But it also provides something else — stability and staying power during an ongoing time of consolidation within this industry.

“We’re going to stay independent,” Milne said. “And we’re now the perfect size — we’re not too big, and we’re not too small, and we’re not going anywhere.”

—George O’Brien

Banking and Financial Services

A Primer on Record Retention

By Emily White

Emily White

Emily White

These days, it’s hard to imagine holding on to paper copies of every paid bill, invoice received, or other financial document. Today’s society has moved from paper copies of documents to digitized, searchable files — all within the click of a mouse or stroke of a keyboard. Many practices even have copies of important documents secured by fingerprints or facial recognition on iPhones or tablets.

However, while the methods of retaining documents have changed, having a record-retention policy is still important and should serve as a guide within a practice, no matter where or how files are kept.

Retention of specific documents should be easily identifiable in a practice’s record-retention policy. A basic record-retention policy should include a listing of recommended retention periods for specific financial items. The length of time certain records should be maintained depends on services offered by the practice, types of files, and any specific regulations that may determine the holding period.

“While the methods of retaining documents have changed, having a record-retention policy is still important and should serve as a guide within a practice, no matter where or how files are kept.”

The retention policy should be reviewed by a practice’s legal counsel to ensure proper compliance with all laws and regulations.

Records retention generally falls into four general time-specific categories: two years, three years, seven years, and permanently. Documentation to be retained for two years includes items such as bank reconciliations and general correspondence. Typical three-year retention-policy items include bank statements, insurance policies, internal reports, and employment applications. Records to be kept for seven years include items such as payroll records, personnel files (for terminated employees), sales records, and subsidiary ledgers. Items to be retained indefinitely include audit reports, active contracts, legal correspondence, meeting minutes of board of directors and stockholders, retirement and pension records, and union agreements.

In addition, specific guidelines provided by the IRS govern retention of income-tax returns and related documents. Generally, income-tax returns are kept indefinitely, along with related depreciation schedules, financial statements (audited or unaudited), and year-end trial balances.

As the world becomes more technologically advanced, it is becoming easier for practices to store files on the ‘cloud.’ Cloud-based storage has become the newest method of storing records and files. Keeping files on the cloud not only frees up physical space, but also significantly reduces the risk of potential for loss of work and crucial documents. Medical practices are recommended to back up their computerized files to the cloud daily, at a minimum.

Record retention on the cloud is a secure and paperless way to keep all required files. Many practices opt to scan in all paper copies of files, support, or related documents and keep these files on the cloud. This method of record retention is a great way to reduce physical paperwork but remain in compliance with applicable laws, regulations, and company policies on record retention. As e-mails have become a significant form of communication, their storage timelines have also become important. E-mails are subject to discovery as evidence in the event of a lawsuit, so ensuring that e-mails are retained for an appropriate amount of time is crucial.

The storage of e-mails should be outlined in a practice’s record-retention policy, dependent upon the nature of the e-mails. Some may need to be kept indefinitely if they include significant legal correspondence or other agreements. Practices should refer to the general guidance for these matters.

Practices should consider the necessary requirements for record retention based on their service offerings and areas of expertise. Practices should also consult with legal counsel to develop an appropriate record-retention plan that follows all appropriate laws and regulations, including specific IRS guidance for tax-related items. In today’s digital world, it is easier than ever to engage in cloud-based storage for the purpose of complying with record retention. Additionally, a record-retention policy should be reviewed annually for possible changes and updates. After all, who knows when paper copies will come back in style?

Emily White is a senior audit associate for the Holyoke-based public accounting firm Meyers Brothers Kalicka, P.C.; (413) 322-3531; [email protected]

Banking and Financial Services

Dollars and Sense

By Steve Siebold

It is now not only the start of a new year, but also the beginning of a new decade. Maybe the last 10 years weren’t exactly your greatest, financially speaking. Maybe you are still dragging around an excess amount of credit-card debt, or you simply haven’t done a good job putting enough money away for retirement.

Whatever the case, the new decade can be different, and it starts with what goes on between your ears.

If you are really serious about taking control of your financial situation in the coming years, start by examining your relationship with money. Here are six changes to make when it comes to how you think about money.

Money Is Your Friend

If you have struggled financially your entire life, chances are you have a bad relationship with money. You may even see it as an evil force that you associate with greed or crooks. The more you see it as a negative, the harder it’s going to be to acquire any of it.

Start by changing your outlook on money, and see it for the positives it really presents, like possibility, opportunity, and freedom. Money isn’t everything, but it does make life easier.

Money Is Infinite

Sadly, most people are stuck with the limited belief that they can only make so much money in a year. They’ve been led down this path by well-meaning but misguided people their entire lives who sold them on the notion that this is the way it has to be.

This is so untrue. In a free-market economy, you can earn as much as your heart desires. The key is solving problems for people. The more problems you solve and the more value you bring to the marketplace, the more money you make.

It Starts with Your Expectations 

The majority of people believe the only way they will ever get wealthy is by guessing the lottery numbers or going to the casino. In the new decade, self-made millionaires expect to make even more money than they made in the previous decade, and there’s no talking them out of it.

“The more problems you solve and the more value you bring to the marketplace, the more money you make.”

You have to expect big things to happen, and this will make you bold, aggressive, and fearless in the pursuit of wealth. Even if you don’t know how it’s going to happen just yet, it starts with a belief that it will.

Separate Logic and Emotion 

Most people use emotion when making financial decisions, and this is one of the worst things you can do. Self-made millionaires, on the other hand, use emotion to motivate them, but stick to pure logic when it comes to money.

Logic means not buying the million-dollar mansion that you can’t afford. Emotion is dangling that big house in front of you like the proverbial carrot in front of the rabbit to make you work harder.

Focus on Your Reason

Behind any defined goal there is always a reason. Why do you want whatever it is you are after? In this case, why do you want more money? Is it for your family? Do you want to take a big trip next summer? Do you finally want to be financially free? When you focus on your ‘why,’ it’s going to push you to take action in achieving those financial goals. Figure out your why and never take your eyes off of it.

Watch Your Dialogue

Begin monitoring everything you say to yourself and others. When you talk about money, is the way you use your language programming you for success or failure? Next, begin listening to the way people around you use their language when it comes to money. Ask yourself the same question about them.

This is an eye-opening experience. What you’ll find is that the masses are always talking about running out of money. The self-made wealthy, on the other hand, are always talking about how to make more of it.  

The Takeaway

As we enter a new decade, make the decision to take control of your finances once and for all. Your thoughts and beliefs about money won’t make you rich on their own, but it all starts here.

If you are rich, keep thinking the way you are thinking. If not, it’s time to change the way you look at money in 2020 and beyond.

 

Steve Siebold is author of the book ‘How Money Works,’ and a self-made millionaire who has interviewed more than 1,300 of the world’s wealthiest people over the last 35 years; www.howmoneyworks.com

Banking and Financial Services

Past Is Prologue

President and CEO John Howland stands by a display commemorating GSB’s first 150 years. I

Greenfield Savings Bank has marked its sesquicentennial in a number of ways this year — from a party with cupcakes in the spring to presenting elm trees to a number of area communities it serves in the summer, to displaying its proud history, something it’s done pretty much all year long. Overall, though, it has celebrated by doing what it has done since it was founded in 1869 — serving as a rock-solid corporate citizen. And a vital partner to its many types of customers.

John Howland jokingly refers to it as his “high-school history project.”

He was referring to the large display of photographs and other materials that trace the 150-year progression of Greenfield Savings Bank. And it’s quite an exhibition.

Indeed, across two walls just off the main lobby and outside the main conference room hang a number of photos, postcards, and framed advertisements and documents that collectively tell the story of an institution that has changed considerably since Ulysses S. Grant roamed the White House — but also hasn’t changed in many ways, as we’ll see.

There are photos of bank lobbies from several different decades, a host of board presidents, groups of employees, Howland himself, who became GSB president in 2015, and many images of the old Mansion House Hotel.

The bank was relocated within the hotel property roughly a decade after its launch — it was one of several ground-floor retail sites — and was still there when the Mansion House was destroyed in a massive fire in January 1959 (there are pictures of that historic moment as well). The bank built its new headquarters roughly where the front lobby of the hotel once stood.

The historic Mansion House Hotel and GSB’s location within that property.

“So we’ve basically operated in the same location since 1880, and that’s very significant to me,” said Howland, adding that this history project is important, for customers and employees alike, because there has been much to commemorate during what has been a year-long celebration, punctuated by a large party in the spring.

Starting with the name over the door. It was Greenfield Savings Bank all those years ago, said Howland, and it still is. This despite the fact that many banks, as they have expanded beyond their original home and added branches in other counties and sometimes another state, have dropped the city or town from their name, opting for something more global and seemingly less defining. Meanwhile, almost every other institution that had ‘Savings’ in its name has dropped that, too, on the theory that it’s anachronistic and doesn’t convey the full line of services.

GSB has done none of that.

“Why would you want to change a name you’ve had for 150 years?” he asked before answering the question himself. “The idea that we’re somehow different because we’ve changed our name and don’t have ‘Savings’ in it anymore is disingenuous to me.”

But the bank is celebrating more than continuity — although that’s certainly important. There has been growth and expansion into other areas, including Northampton, Amherst, and, most recently, the community in between them, Hadley. There has also been a commitment to remain at the forefront of technology, said Denise Coyne, executive vice president and COO (and 41-year employee of the bank), and as evidence, she pointed proudly to the new interactive teller machines, or ITMs, in the drive-through lane, an initiative GSB calls Teller Connect. Customers can speak with a teller based in Turners Falls who can handle a wide range of transactions from that location.

The bank is also celebrating its work within the community, a commitment that manifests itself in a number of ways and on many different levels, including multi-faceted support of Monte’s March, the trek undertaken by radio station WHMP DJ Monte Belmonte to raise money for the Food Bank of Western Massachusetts (Howland himself was to be part of the second leg of the march, from Northampton to Greenfield).

Denise Coyne shows off one of the Teller Connect machines at GSB’s main branch in Greenfield.

But it also includes donating 30 elm trees in communities where the bank has a presence to replace just a few those lost to Dutch elm disease decades ago (these gifts, part of the 150th celebration, are resistant to the disease), and creating a foundation to support an ongoing project whereby students learning each of the trades at Franklin County Technical School collaborate to build a house from scratch (more on those initiatives later).

Mostly, though, the bank is celebrating what Howland called its “infinite horizon.” By that, he meant that this institution isn’t going anywhere, and it can act, and operate, accordingly.

“My job is to hand the keys over to someone else and have the company be better than it was when I got here,” he explained. “At the prior two organizations I worked for, and at many other banks, basically the mission was to figure out how to maximize the value for the shareholders in the shortest period of time and sell the organization; to that extent, our business plan is different than that of most other banks.”

For this issue’s focus on banking and financial services, BusinessWest talked at length with Howland and Coyne about GSB’s first 150 years and what will come next for this venerable institution.

Staying on Track

Hanging on a wall inside the conference room is a framed poster hyping the 20th Century Limited — the historic express passenger train on the New York Central Railroad that traveled between New York and Chicago — and its faster time for completing that run: 16 hours.

This might seem like an odd item to find in a bank headquarters building, but Howland offered an explanation that speaks volumes about how this institution celebrates its past but is by no means stuck in it.

“I put that poster up to remind us that we constantly have to be reinventing ourselves, constantly have to be figuring out how to do it better and faster,” Howland explained. “The poster represents the race between the New York Central Railroad and the Pennsylvania Railroad to attract customers to this high-profile route. When one company dropped their time, the other matched or exceeded it. They conceived idea after idea to improve service, cut down travel time, and maintain schedules. Banking today is just like that — we are all providing the same products. That’s why we continue to provide our customers with exceptional service, the most up-to-date technology, and offer competitive rates.”

And throughout its long history, the bank certainly has operated with that mindset.

Students at Franklin County Technical School work on the framing for a house they constructed in Erving through a program financed by a foundation created by GSB.

Indeed, while the name over the door hasn’t changed and the street address of the main branch has changed by just a few digits, the bank has evolved with the times and advancing technology, all while remaining a hugely important corporate citizen in a region that never had many and has seen those ranks decline over the past several decades.

Coyne, the bank’s longest-serving employee, has certainly seen this blend of change and continuity in her time.

She recalls doing most tasks by hand when she started as a teller at the Turners Falls branch (the only branch at the time) in 1978, and, in fact, she helped lead the institution into the computer age and a succession of improvements, including Teller Connect.

“The technology is so great that we can extend our hours — from 7 a.m. to 7 p.m., Monday through Friday, you can talk with a teller,” she noted, adding that there are extended hours on Saturday as well. “It’s no different than if you go to a drive-up and talk with someone who’s in the building; we can do almost everything you could if you came into the lobby.”

Over the past four decades, Coyne, who has held a number of titles over the years and handled pretty much every assignment other than commercial lending, has seen the bank greatly expand its footprint, first into other communities within Franklin County, then into neighboring Hampshire County.

There are now five branches in Franklin County — in Greenfield, Conway, Shelburne Falls, South Deerfield, and Turners Falls — and the same number in Hampshire County — two in Amherst, two in Northampton, and the latest addition, the branch on Route 9 in Hadley.

That addition to the portfolio wasn’t exactly planned, said Howland, noting that it came about by circumstance — the closing of a credit union — and was viewed as an opportunity to more conveniently serve customers in that area.

Looking ahead, Howland doesn’t see much, if any, additional expansion. But he does see continuous work to improve customer service, take full advantage of ever-improving technology, and, overall, take full advantage of the infinite horizon he mentioned.

“That’s the biggest challenge we face — the non-bank competitors coming in picking off pieces of our business. It’s kind of like Walmart being able to do an MRI for you; it’s large companies picking and choosing where they can make something work.”

And all those qualities will be needed, he said, because, while the pace of consolidation within the banking industry has slowed somewhat, especially in this region, other threats have emerged, especially from what he called “non-bank competition.”

By that, he referred to Apple, Google, Alibaba, PayPal, and a host of other major companies that are chipping away at traditional bank business by creating services of their own in realms ranging from lending to payments to credit cards.

“That’s the biggest challenge we face — the non-bank competitors coming in picking off pieces of our business,” he explained. “It’s kind of like Walmart being able to do an MRI for you; it’s large companies picking and choosing where they can make something work.

“And then we, as an organization, have to provide everything for everyone,” he went on. “And sometimes it can become expensive to provide some products. It’s just capitalism — it’s not a bad thing, necessarily, but it’s a challenge for us as an organization to maintain as much as we maintain and be able to provide an array of services for our customers.”

Saving Graces

To counteract these powerful forces, GSB has to focus on what differentiates it from those non-bank competitors and the larger regional banks so prevalent in this market, said Howland.

These differentiators include both a personalized brand of service and a deep portfolio of services, including a trust department, something most area banks no longer have, he went on.

As just one example, he cited the example of a customer entangled in a fraud situation.

“Unfortunately, the bank on the other side is a huge organization that really doesn’t care — they will not help at all, they won’t talk with us, they won’t do anything,” he noted. “I think the way we differentiate ourselves is the personalized service and the fact that our customers know they can count on us — they know they can call someone who cares and is going to do something about their problem.”

Beyond the brand and scope of services, another differentiator is the bank’s long history of involvement in the community and a commitment to continue that tradition, said Howland.

“As an organization, we’re very proud of our position in the community,” he told BusinessWest. “We’re dedicated to being the best corporate citizen we can be, and we’re involved in our community in many, many different ways.

“Obviously, we’re important in terms of the local economy, but it’s not just the economy that we focus on, it’s just the financial aspect of what we do,” he went on. “It’s striving to improve the conditions in our communities as best we can. We’re one of the larger philanthropic organizations in terms of straight dollar donations, but on top of that, our employees are involved in all kinds of stuff at all kinds of levels.”

And by ‘stuff,’ Howland meant much more than time and energy donated to the boards of dozens of nonprofits — although that’s a big part of it. There’s also volunteerism and the many forms it takes, he said, adding that the bank prides itself on backing up such efforts with dollars and other types of support.

“If an employee comes to me and says, ‘I think this is really important, and I have dedicated myself to volunteering time for it,’ more likely than not, we’ll make a fairly significant financial contribution to that charity on behalf of that employee.”

Overall, the bank is keenly aware of its role and its responsibilities within the largely rural areas it serves, particularly in Franklin County, he went on, adding that it is often asked to step up and, when possible, pitch in. Such was the case with the initiative involving Franklin County Tech and a proposal to have its students build houses.

The bank’s response was to go beyond writing a check and instead do something for the long term.

“I got a phone call from the tech school asking if we would make a donation to this program to build a house,” Howland recalled, adding that the bank eventually created the Franklin Technical School Building Society Inc., a foundation with its own board of directors that essentially finances the home-building project and is replenished when the house is sold.

“They earned a lot of money on the first house, and the second house will hopefully be sold in the spring of 2020, and another house will be started after that,” he went on. “The point of it is to create something that becomes self-sustaining, and ultimately, we hope this grows to the point where it can be a benefactor for other programs at the tech school.”

Long-term thinking was also the motivation for the bank’s decision two years ago to create the Greenfield Savings Bank Foundation. Funded with profits from the bank, it’s an initiative in keeping with GSB’s long-term horizon, said Howland.

“We funded it with $200,000, and our expectation is to continue funding it at some amount per year,” he explained. “My vision, and it will not be in the time that I’m president of the organization, is that, at some point, this foundation will be as large as, if not larger than, the bank, and I think we have the opportunity to do that.

“I’m most proud of where we are as a corporate citizen in our community, and my feelings are a reflection of our board of directors,” he added. “Our board is incredibly committed to making us the best business we can be in Franklin County and Hampshire County.”

Time Passages

There’s some additional 150th memorabilia in the main lobby of GSB’s headquarters.

On one wall, the very first passbook sits in a frame. And a glass display case in the center of the room holds everything from a photocopy of the first mortgage document (a loan issued in 1869 to one Jeremiah Eagan for a building on School Street) to news photos of the Mansion House fire, to a box of fountain pen nibs, a symbol of how things were done more than a half-century ago.

This collection speaks to the two qualities that are really being celebrated with this sesquicentennial — needed change and continuity.

There are plenty of other pieces of evidence outside the bank, from the house built by the technical-school students in Erving to elm trees growing in Look Park in Northampton, Montague center, and a host of other locations, to those branches in Hampshire County.

Together, they speak of a 150-year-old success story — and of many chapters still to come.

George O’Brien can be reached at [email protected]

Banking and Financial Services

Local Approach

Jeff Sullivan says customers use branches in different ways than they used to, but that physical presence is still important.

Every morning, Jeff Sullivan signs new-account letters for the most recent depositors at New Valley Bank. “We like to send a thank-you note to people for opening an account,” he told BusinessWest.

But that task also allows Sullivan, the bank’s president and CEO, to gauge how New Valley is doing, at least by that one metric. “Week by week, the volume goes up. Every morning when I come in, there’s a stack of letters that kind of tells me how the day went yesterday. Sometimes it’s just a couple, sometimes eight or 10.”

The story those piles tell is of a bank — the first new Springfield-based bank to open in 11 years — that is indeed growing, and not just in deposits, but in commercial lending, the niche on which its founders want to focus considerable energy.

“In general, things are going well,” Sullivan said, noting that, at the end of the second quarter, just a month after opening, New Valley reported $34 million in assets. That number rose to $45 million at the end of September, is over $55 million now, and is expected to top $60 million by the end of the year. “So we’re starting to grow.”

While the last bank launched in Springfield, NUVO Bank (since acquired by Community Bank), focused on a mostly digital banking model, New Valley will have slightly more of a brick-and-mortar foundation, Sullivan explained. It currently has two branches — its headquarters on the ninth floor of Monarch Place in downtown Springfield, and a stand-alone branch on Wilbraham Road in Sixteen Acres. A third branch will follow in the second half of 2020, although the location hasn’t been determined.

“We’re a hybrid model, and people use branches in different ways now,” he said. “One of our customers, who opened his accounts here and doesn’t have a lot of need to go to a branch, went into a branch to have them help him figure out the online stuff. He wanted to download the mobile app and get everything enrolled and get bill pay set up, so our staff spent an hour with this gentleman, helping him set it up so he doesn’t have to come to the branch. But he was glad to know it was there so he could go and get some assistance when he needed it.”

On the commercial side, the bank will focus on smaller loans and quick turnaround times, said Sullivan, adding that the merger culture in recent years has created opportunities to serve small to medium-sized businesses in a high-touch way they don’t necessarily experience at large institutions.

“There’s definitely a big learning curve, of trying to educate the broader public about who we are and what we’re trying to do,” he noted. “We do have kind of a captive audience in the 300 shareholders who have invested in us. They know our story. As we convert those shareholders into customers, we want them to have a good experience because they’re very important to us. Then, if we provide good first impressions, they’ll become a sales force for the bank; they’ll tell their friends and business networking groups that we’re doing a good job.”

That’s the challenge for any new bank — to answer the question, ‘why this bank?’ when so many other institutions dot what many have called an overbanked landscape in Western Mass. But Sullivan hopes New Valley’s combination of local, quick-response lending and a retail model built on strong personal service will resonate with people looking for a change.

“We’ve looked at our shareholders and some people we’ve done business with before as our first wave of customers. And they’ve been patient with us because, as a new bank, not everything goes completely smoothly,” he added. “Our branch took a little bit longer than we thought to get open — it opened in September, and it’s doing great.”

New Valley is also in the final stages of testing and rolling out online account opening and other technology by the end of the year, as well as an online lending platform where people can apply for commercial loans up to $250,000 and get an answer quickly. “That’ll be up by the end of the first quarter of next year. We’re working hard on all those things while we’re trying to grow the balance sheet at the same time.”

Successful Connections

The founders of the bank — including Sullivan; Chairman Frank Fitzgerald; Jim Garvey, president of St. James Check Cashing; and Dennis Murphy of Ventry Associates — set several goals early on, first being a high level of engagement with customers, which Sullivan said has been missing at many banks. Second, they hope the bank will build off the recent successes in Springfield and connect the small-business community to that success.

Sullivan, who has spent more than 30 years working in and around the region’s banking community, most recently as chief operating officer for United Bank, told BusinessWest he’s come to understand that, just because there are branches on almost every corner in some cities and towns, that doesn’t mean the region’s population — and especially certain segments of it — are adequately served.

“We’ve got to make sure we make good first impressions with people. Our calling card’s going to be that we’re small, we’re nimble, we’re local, we can turn stuff around quickly. So we just have to live up to that, do a good job of it, and then the word will spread.”

In fact, research continues to show that the volume of business at check-cashing establishments has remained fairly stable — and comparatively high — in this region, despite considerable improvement in the economy over the past decade. Sullivan estimates there are some 20,000 households in Hampden County alone that use a bank sparingly, if at all.

“A lot of people are not well-served on the retail side. They need financial education, low-fee and no-fee accounts, and also a lot of financial-literacy tools,” he said.

“Several companies we’ve talked to say, ‘that profile is my employee base. I’ve got a lot of hourly employees, high-school kids getting their first job with us, people who are coming out of the military, or out of jail,’” he went on. “The employer is saying, ‘if I can cut down on the turnover, if I can make these people more stable, they’re going to be better employees, and that’s better for my business.’ They’re interested in working through their HR departments to make these kinds of accounts and tools available to people. It’s a win-win — lower turnover making for better employees, but they also recognize the challenges people are going through.”

But he also came back repeatedly to the commercial-lending focus New Valley wants to become known for during a time when many banks have been involved in mergers and acquisitions, and longtime community banks have grown significantly and put more emphasis on very large loans.

“As we come to the end of this long expansion cycle we’ve been in for 10 years and we’re seeing a lot of consolidation in the marketplace, banks and credit unions are readjusting their portfolios a little bit. We’re coming to the marketplace and saying, ‘hey, we’re turning stuff around quickly, and it doesn’t take us as long as it takes some of the other banks to go through the process.’ So I think delivering on quick decision making, local decision making, and just rapid service is what defines us at this point.”

One unexpected development has been strong demand for residential mortgages, which was not a big part of the initial business plan, Sullivan said. It’s just one way a new bank has to adjust to market demands — one of many challenges during that first year.

“By making sure all of our systems are in place, working with our regulators to make sure that we’re growing the right way, that our procedures and policies are right for the size of our bank, we’re building a good foundation for the future,” he told BusinessWest. “I’m champing at the bit to scale up and unveil some of these new products and new technologies we’re thinking about.”

To serve the public, he added, “you have to meet them where they want to meet you. Increasingly today, that’s having a good app, having some good social media, being able to reach people through online marketing.”

Spreading the Word

New Valley’s business plan calls opening one more branch in the second half of 2020. Sullivan knows it will be one of many local stories in an industry constantly defined by change.

“A lot of branches are available right now in Greater Springfield and Northern Connecticut. By this time next year, new banks will be coming into the marketplace, and we’ll see some expansion; I think some of the Hampshire County banks will push down, and some banks out of New York are making a lot of noise that they’re coming into Connecticut. So the landscape will continue to change.”

It’s been an exciting first six months, he added, and he and his team intend to keep up the momentum.

“We’ve got to make sure we make good first impressions with people. Our calling card’s going to be that we’re small, we’re nimble, we’re local, we can turn stuff around quickly. So we just have to live up to that, do a good job of it, and then the word will spread.”

Joseph Bednar can be reached at [email protected]

Banking and Financial Services

Going for the Green

One of the more challenging aspects of running a cannabis business is the inability to access banking services because banks are federally regulated, and cannabis is illegal on the federal level. However, change could be coming after the U.S. House of Representatives voted to pass legislation that would legalize cannabis banking. If the Senate agrees, proponents of the effort say, cannabis operations will become easier, less costly, more transparent, and accessible to a wider range of investors.

Want to start a cannabis business? You’d better have a lot of cash on hand.

However, that equation could be changing after the U.S. House of Representatives voted to pass legislation that would allow the cannabis industry to access banking and financial services, even as the substance remains illegal under federal law.

The Secure and Fair Enforcement (SAFE) Banking Act passed the House by a vote of 321 to 103, with nearly half of Republicans joining all Democrats but one in voting in favor of the bill.

Now the bill will move to the U.S. Senate and, eventually, to the president’s desk. Proponents are confident in their chances of passage.

“It would be great for the cannabis industry and great for the banking industry,” said Peter Gallagher, chief financial officer at INSA, a cannabis dispensary in Easthampton. “A lot of banks we’ve talked to are very interested in getting into it, but don’t want the risks associated with it, so they’ve steered clear of it.”

Banks providing services to state-approved cannabis businesses could, in theory, face criminal and civil liability under federal statutes. In fact, only two financial institutions in Massachusetts have taken on the risk, both of them located in the eastern part of the state. So most cannabis companies operate as cash-only businesses.

“The implications of having to handle a lot of cash are pretty profound,” Gallagher told BusinessWest. “A lot of effort goes into counting and transporting it. To the extent that we can move some of this to credit, it would make our operations a lot easier.”

Momentum to legalize cannabis has made the banking issue impossible to ignore at the federal level. Currently, 33 states, the District of Columbia, Guam, and Puerto Rico have all legalized the use of marijuana to some degree. Yet the possession, distribution, or sale of marijuana remains illegal under federal law, which means any contact with money that can be traced back to state marijuana operations could be considered money laundering and expose a bank to significant legal, operational, and regulatory risk, notes the American Banking Assoc. (ABA).

“The rift between federal and state law has left banks trapped between their mission to serve the financial needs of their local communities and the threat of federal enforcement action,” the association wrote recently. “ABA believes the time has come for Congress and the regulatory agencies to provide greater legal clarity to banks operating in states where marijuana has been legalized for medical or adult use. Those banks, including institutions that have no interest in directly banking marijuana-related businesses, face rising legal and regulatory risks as the marijuana industry grows.”

Gallagher said legalizing cannabis banking across the board makes sense on many levels.

“From a business perspective, it would make banking more accessible and less costly, and it would eliminate the risk of enforcement and regulatory action that banks are worried about, which is what’s leading them to abandon the market.”

Most think they would gladly jump in — making the cannabis industry more accessible to a wider range of entrepreneurs, while bringing down costs — if the SAFE Banking Act becomes law. And that’s what the Senate will have to consider as it begins its review.

Dollars and Sense

Scott Foster, a partner with the law firm Bulkley Richardson who helped establish its cannabis practice, said the law, if passed, would open up the ability of cannabis businesses to use local branches of local banks essentially overnight — if the banks decide to get involved, which seems likely, given the ABA’s advocacy on the issue.

“This is driven not by the cannabis industry, but by the banking industry,” Foster said. “We need clarity in this issue, considering all the non-cannabis businesses affected by this.”

“A lot of banks we’ve talked to are very interested in getting into it, but don’t want the risks associated with it, so they’ve steered clear of it.”

Indeed, in addition to growers and retailers, there are plenty of vendors and suppliers, landlords, and employees indirectly tied to the cannabis industry, thus posing legal risks for banks serving those individuals.

Rob Nichols, ABA president, recently wrote about two such examples: a bank in Ohio was forced to turn down a loan to a fencing company hired to build a fence around a marijuana growing facility, and a bank in Washington had to close an account when a law firm took on a marijuana business as a client.

“If either of these banks looked the other way, they risked violating federal law and facing criminal prosecution,” Nichols said, noting that these examples are far from isolated. An ABA survey found that 75% of banks have had to close an account, terminate a client relationship, or turn away a customer because there was some connection to cannabis.

“What we’re seeing is employees of cannabis companies being turned down for mortgages, and checking accounts closed down because they’re being paid by cannabis companies. That’s the biggest impact that’s actually driving the law,” Foster told BusinessWest. “Senators in states where it’s legal are saying, ‘time out.’ This isn’t about cannabis companies, it’s about the people selling stuff to them, landlords, even W.B. Mason delivering supplies. They’re getting caught up because they’re being paid by cannabis companies, and banks are saying they can’t accept the money. It’s an unintended ripple effect that’s causing a shift in thinking in Congress.”

Furthermore, reconciling the legal divide between state and federal laws would bring benefits to the communities banks serve, Nichols argues.

“The estimated $24 billion in cannabis sales by 2025 in states where marijuana has been legalized could be deposited safely with federally regulated financial institutions, enhancing transparency, public safety, and tax revenue,” he said.

And it’s not just banks asking for lawmakers to take action, he noted. A bipartisan group of 19 state attorneys general last year wrote a letter to lawmakers, arguing that bringing cannabis businesses into the banking system would improve accountability and increase public safety.

“This isn’t about cannabis companies, it’s about the people selling stuff to them, landlords, even W.B. Mason delivering supplies. They’re getting caught up because they’re being paid by cannabis companies, and banks are saying they can’t accept the money. It’s an unintended ripple effect that’s causing a shift in thinking in Congress.”

“Without relief from Congress, even banks that have decided not to serve cannabis businesses will find themselves caught in the financial web created by this booming industry,” Nichols said. “The money from cannabis businesses often goes to vendors, landlords, and employees, while the federal criminal association follows that cash.”

Gallagher agreed, and said it shouldn’t be difficult to build consensus around the need to bring clarity to cannabis finances through the well-regulated banking system.

“If, at the end of the day, what we’re worried about is diversion, or being able to track all that money, it’s easier to do that with electronic payments rather than having people carry large cash balances,” he said. “It’s easier for regulators and everyone else to make sure the industry is healthy and operating compliantly.”

Indeed, that very argument became part of the House debate. Colorado state Rep. Ed Perlmutter argued that keeping cannabis banking illegal is “an invitation to theft, it’s an invitation to money-laundering, it’s an invitation to tax evasion, and it stifles the opportunities of this business.”

Joint Resolutions

Foster said the immediate impact of the SAFE Banking Act would be significant on current cannabis businesses, which would now be able to access local branches of local banks, instead of running a ponderous all-cash operation — and requiring the security that entails — or seeking services from an institution across the state.

“We can’t apply for loans — working capital, construction loans, any lending right now,” Gallagher noted, adding that the handful of banks nationwide that are currently risking the cannabis business are passing on exorbitant costs to customers to do so.

“You’ve had some companies that have been willing to shoulder the risk associated with servicing an operation that’s federally illegal,” he told BusinessWest. “They’ve been able to charge excessive rates for that. As [legalization] happens in this industry, the fees will come down and start to normalize.”

Nichols expects that competition to emerge quickly, saying banks typically respect the decisions made by voters in the states where they operate. “Those voters had weighed the societal and cultural issues that come with legalization, and they made their decision. Instead, the industry is focused on the impact of the gap between state and federal laws on banks and their ability to serve those in their communities.”

The other major impact of a change in the law, Foster said, has to do with the concept of social equity. Massachusetts’ Cannabis Control Commission launched what it calls its Social Equity Program to expedite business applications and provide technical assistance, mentoring, and other resources for individuals from communities that have been disproportionately harmed by marijuana prohibition — typically poverty-stricken areas.

“Even though Massachusetts law has a social-equity component to it, giving expedited processing to social-equity candidates, the practical reality is, most of the investors are still wealthy, white gentlemen who have disposable income invested in cannabis,” he noted.

By allowing entrepreneurs to finance these operations instead of needing all the money up front, Foster explained, “you’ll have more players at the table, and be able to leverage smaller sums into larger companies. I haven’t heard a lot of talk about the social-equity piece, but to me, that’s a big piece, to help more people be able to engage in this business and apply for a loan if they qualify. That, to me, is a potential game changer.”

A companion bill in the U.S. Senate has yet to be voted on by the Senate Banking Committee, which held a hearing in late July on the issue. While that debate is coming, some lawmakers believe it’s only the start. For instance, House Majority Leader Steny Hoyer said he doesn’t believe the SAFE Banking Act goes far enough.

“This must be a first step toward the decriminalization of marijuana, which has led to the prosecution and incarceration of far too many of our fellow Americans for possession,” he argued.

For now, people like Gallagher are happy the banking issue may finally be resolved.

“We’ve been following this, so it’s not a surprise,” he said. “It’s something that makes a lot of sense from an operations and compliance perspective. We weren’t sure of the timing of it in terms of the evolution of the industry, but it’s something we expected to happen.”

Joseph Bednar can be reached at [email protected]

Banking and Financial Services

The Business of Selling a Business

By Brendan Mitchell

For business owners looking to sell soon, there is still plenty to be optimistic about.

Capital for purchasing businesses continues to flow thanks to low interest rates from banks and investment portfolios lingering near high-water marks.

Meanwhile, the Massachusetts economy has pushed to new highs from Boston to Springfield. Most recent reports show unemployment rates at historic lows, with both sides of the state making improvements. MGM Springfield and Encore Boston Harbor have attracted out-of-state plates. Private equity and public companies, both flush with cash, continue to show confidence in the state through investments in their workforce and current business as well as construction and new business acquisitions. We’ve seen national tax reform increase cash flows to businesses across the country.

These factors have helped to keep buyers engaged as retiring Baby Boomers head for the exits. The timing has been great for some business owners cashing out recently, but buyers have become more selective in some industries. While some businesses are snagged as soon as they go to market, many are aging on the shelf with buyers and sellers unwilling to bridge pricing gaps.

When figuring the value of their business, owners can fall into the trap of including sentimental value in their estimation. Some are relying on what a similar business sold for in a different market or, worse, have a target number they drew up without any real anchor to reality.

For business owners who have dedicated their lives to a business, it can be hard to take a step back and objectively consider what their business is worth. Business owners who are willing to take an objective look at the value of their business can be proactive now instead of reactive when they are ready to retire and list their business for the first time.

The value of a business is dynamic. While there is no way to get a buyer to price sentimental value into a purchase price, there is a potential to make changes to the business that will increase the value over time.

There are three approaches to valuing a business — asset, income, and market approaches. For most privately held companies, valuators rely on either the income approach, market approach, or a combination of the two. The basic formulas for these calculations are widely available online, but what owners can do with this information may be less obvious.

First, it’s important to know that the years leading up to the valuation or sale are the most important. A long history of profits can show stability for a small business; however, only the most recent three to five years are going to be considered in a calculation. Small-business owners with eyes on an exit have a tendency to disconnect from the business during this most important period when they should be pushing in the opposite direction.

Flat revenues or increases in expenses during this period have the potential to erase even decades of growth and profitability. Owners should resist the temptation to ‘pull the parachute’ as they get closer to the finish line. Continue to push for revenue growth and pay close attention to expense control. This is the time to let the numbers showcase the full potential of the business.

Nobody knows the ins and outs of a small business like the owner. Buyers and valuators weigh heavily on the impact the seller’s exit will have on the future of the business. Owners should focus on replacing themselves in the areas in which they are most intertwined in the business to lessen the impact. To identify these high-dependency areas, owners can interview managers and employees, noting issues that cannot be resolved without them.

Key areas of focus generally depend on the industry or business model but usually include sales generation, relationship management, product development, strategic decision making, or day-to-day business management. If continuity can be achieved through process improvement or process documentation, it should be a key focus. Some results can be found through training current employees and empowering them. Consider restructuring tasks and delegating the current owner’s duties to rising managers.

Revisit labor costs. Business owners with family members at above-market wages face a double expense. While they may overpay weekly on purpose, it will cost them a multiple of that annual salary when it’s time to cash out. For hourly workers, be ready to field questions about how the rising minimum wages will impact more labor-intensive businesses.

Finally, clean up the financial statements. For various reasons, including tax motivations, small-business owners have a tendency to let their personal and business lives collide on their company financial statements. Documentation is important for any personal expenses being charged to the business. Owners should be ready to prove which expenses were not necessary for the business so that buyers and valuators exclude the expenses to calculate the value — buyers will not report findings to the IRS.

Performing a financial analysis can also help owners understand how their business compares to the rest of the industry, making them ready to articulate strengths and defend or improve weaknesses.

Overall, the current market remains friendly to someone looking to sell their business. It’s also a great time to be proactive in managing an exit strategy, whether it lies around the corner or several years out. Getting realistic about the value of their business enables owners to take steps to improve it and make informed decisions.

Brandon Mitchell is a certified valuation analyst and supervisor in auditing and consulting for Blumshapiro, the largest regional accounting, tax, and business-advisory firm based in New England, and winner of the Massachusetts Lawyers Weekly Reader Rankings for Best Appraisal Service and Best Accounting Firm.

Banking and Financial Services

Uniting Forces

People’s United Bank is no longer the small, Springfield-based institution, then known as the Bank of Western Massachusetts, that made its name three decades ago through a strong emphasis on local commercial lending. And the now-Connecticut-based institution is growing again, with a planned acquisition of United Bank that will push its assets well above $50 billion. But local connections are still key to the People’s United ethos, its Massachusetts president says — and he hopes United Bank customers feel the same way.

Patrick Sullivan thinks People’s United Bank has built a strong reputation in Western Mass. — and hopes customers of United Bank feel the same way following a recently announced acquisition.

“We trust that customers kind of know us already in Western Mass., and that they’re confident this isn’t a big change in the sense of somebody they don’t know. They’ve known us for a long time,” said Sullivan, Massachusetts president of People’s United, the Bridgeport, Conn.-based bank that began life in downtown Springfield 32 years ago as the Bank of Western Massachusetts.

“We have people that have worked for either the Bank of Western Mass. or People’s United for a long time,” he added. “Long-term relationships are valued here, and long-time principles and dynamics don’t change. Local is local.”

The two institutions announced in July that People’s United Financial Inc., the holding company for Peoples’s United Bank, would acquire United Financial Bancorp Inc., the holding company for United Bank, in a 100% stock transaction valued at approximately $759 million. Then banks’ leaders characterized it as a strong cultural fit that would benefit customers.

“We are excited to welcome United Bank to People’s United,” said Jack Barnes, chairman and CEO of People’s United Financial. “With the fourth-largest deposit market share in the combined Hartford and Springfield market, a complementary array of commercial and retail capabilities, and a shared legacy of community giving, United will solidify our presence in the Central Connecticut market and strengthen our franchise in Western Massachusetts.”

William Crawford, president and CEO of United Financial Bancorp, added that “People’s United Bank has long been a premier brand in Connecticut that is committed to building meaningful relationships with its customers and communities. We are confident their broad array of products and services, in-market knowledge, and the size and strength of their balance sheet will deliver enhanced value to our stakeholders.”

Patrick Sullivan says the acquisition of United Bank makes sense on a number of levels, both financially and culturally.

Indeed, the move is, in one sense, the story of two Connecticut-based banks —United is based in Hartford — but both banks have a long history and a strong presence in Western Mass.

Sullivan — who joined People’s United six years ago as Massachusetts president and also oversees the bank’s commercial, industrial, and business banking, noted that the institution was already the eighth-largest bank in Massachusetts, and will obviously be slightly larger, growing from 56 branches in its multi-state footprint to around double that, though some are expected to close (more on that later).

“Because of the economy in Massachuetts and the size of the market, we’ve invested a lot in people from other institutions that have joined us with specific expertise in lending, commercial markets, retail, wealth, insurance, whatever,” he went on, citing its government-banking niche as one strength.

“We had a good government business in Western Mass. before I came on six years ago. Today, we’ve got 90 clients in Western Mass. with $162 million in deposits. It’s a big business for us. Likewise, it’s a big business for us throughout the whole company. The city of Springfield is a major customer,” he explained, as are Worcester, Pittsfield, Easthampton, and many others.

For this issue’s focus on banking and finance, BusinessWest spoke with Sullivan about the broadened services and technology People’s Bank will bring to United Bank customers, and why he feels this growing institution will continue to maintain a local focus in the communities where it operates.

Growth Pattern

Immediately after the merger, People’s United will go from five branches in Hampden County to 20, from five to 10 in Worcester County, and from three to four in Hampshire County; its roster of three branches in Franklin County won’t change.

Still, not every branch will remain open; in some communities, both banks now operate within a block or so of each other, which means consolidation is inevitable, Sullivan said. “We’ll make a decision in the best interests of our customers, according to where they bank. But all the retail employees have been told they will have positions with us.”

Just as it has during its growth over the years — People’s United boasts assets around $47.9 billion, and is acquiring a bank with about $7.3 billion — Sullivan said the institution stresses local decision making when it comes to lending, philanthropy, and other matters.

“We still operate just like we did when we had $30 billion. We want to keep it local,” he told BusinessWest. “Our biggest client has its headquarters in Western Mass. Our challenge has been small businesses, those $100,000 loans, the startups. We try to take care of the small-business segment. Let’s face it, those are the heart of a lot of the communities we’re in, and we’re always trying to be more responsive to them.”

In recent years, People’s United has made significant investments in its commercial specialties, including hiring teams of specialized industry experts to better serve customers. Among these niches are technology companies, restaurant franchises, and a healthcare finance team. While those divisions are based out of Boston, they serve the bank’s entire New England and New York footprint and beyond.

The bank has also invested heavily in technology, said Steven Bodakowski, vice president of Corporate Communications.

This United Bank branch in downtown Springfield is just a couple blocks from the People’s United branch — one of many examples of overlapping branches the organization must examine post-merger.

“We’re constantly focused on on how, when, and where we interface with customers in this changing age of banking,” he noted. “Technology and digital enhancements continue to be a major focus for the bank as we aim to stay one step ahead of customer needs and deliver a truly integrated service model that blends the best in customer service with technology.”

To that end, People’s United has developed a strategic initiative to provide customers with online and digital solutions for a suite of its most popular offerings.

“This digital banking experience is designed to mirror and be an extension of the branch experience — serve as another path to interact with and receive guidance from bankers, based on individual customer preferences,” Bodakowski said. “Our bankers are being trained to become digital advocates.”

Offerings include a technology-based home-lending platform designed to simplify and transform the way customers apply for a home-equity loan or home mortgage, providing the ability to virtually interact with mortgage account officers in real time to complete the online application.

Other features include a refreshed online and mobile solution for opening checking and savings accounts, a digital small-business loan application for loans $250,000 or less, a direct-to-client robo-advisory offering, and a new, digitally driven financial-literacy platform that allows customers and the community to access financial-literacy classes and modules.

The latter is an especially important tool to help young people, the elderly, and anyone, really, become more financially savvy, make better decisions, plan for the future, and avoid scams.

“We also launched a new website in May with a fully optimized user experience,” Bodakowski said, one that delivers a fully optimized user experience for mobile devices, an enhanced ‘storefront’ feature to highlight key product areas, and a robust support and security center and new content areas designed to engage and educate customers.

The bank has also enhanced its marketing capabilities to more accurately target its customers and understand their lifestyles, through the use of integrated third-party digital e-mail and marketing platforms such as Marketo and Salesforce.

“We look forward to welcoming [United Bank’s] well-established customer base and delivering to them our enhanced technology and digital capabilities, combined with our network of expert bankers,” Barnes said when the acquisition was first announced.

Living Local

That’s a lot of growth since the institution opened its doors in 1987 as the Bank of Western Massachusetts with $9.3 million in assets. By way of contrast, People’s United awarded almost half that total — about $4 million — to nonprofits last year, about $2.3 million of that in Massachusetts. Of that latter figure, more than $854,000 was contributed by the bank in donations and sponsorships, while more than $1.4 million was awarded in grants by People’s United Community Foundation and People’s United Community Foundation of Eastern Massachusetts.

Those giving decisions remain, as they always been, local, Sullivan said, because the local bankers know the market and its needs. He knows that’s part of the community-bank ethos in Western Mass., and even banks that have grown far beyond community-bank size still have to operate like one.

“Our philanthropy is very local. We take very seriously how things get allocated to these organizations,” he added. “Our principles are always to stay local, whether it’s the specialty expertise in the market or our volunteerism and philanthropy. That’s in our DNA.”

Joseph Bednar can be reached at [email protected]

Banking and Financial Services

Growing Concern

The American Bankers Assoc. argued it’s critical that legal, cannabis-related businesses have access to the regulated banking system as it urged the Senate to advance the SAFE Banking Act in recent testimony before the Senate Banking Committee.

Joanne Sherwood, president and CEO of Citywide Banks in Denver and chair of the Colorado Bankers Assoc., testified on behalf of ABA. Sherwood explained how current federal law prevents financial institutions from banking any money derived from cannabis-related businesses and how a narrow, banking-specific remedy to the cannabis banking problem will reap immediate public-safety, tax, and regulatory benefits.

“Because cannabis continues to be illegal at the federal level, handling funds associated with cannabis businesses can be deemed money laundering,” said Sherwood. “That federal/state divide has particularly severe repercussions for banks and communities like mine, where the cannabis industry is fully operational, but it also impacts banks in every state.”

With limited access to banking services available, large amounts of cash remain on site in many of the cannabis-related businesses, which creates significant safety concerns for the communities where they are located. For example, on average, more than 100 burglaries occur at cannabis businesses each year in Denver, according to the Denver Police Department.

“Providing a mechanism for the cannabis industry to access the regulated banking system would help those businesses and their surrounding communities by reducing the high volume of cash on hand, thereby reducing instances of cash-motivated crime,” Sherwood said.

Additionally, since many cannabis businesses do not have a bank account, they are forced to pay their taxes in cash at local IRS offices. Processing paper-based returns costs the IRS nearly 17 times more compared to an e-filed return — a cost borne by taxpayers. Cash-based taxpayers are also more likely to underreport income than those who receive payment by check or those subject to third-party reporting or withholding.

“Banking the cannabis industry is a straightforward way to ensure that businesses have the means and motivation to remain fully tax-compliant,” Sherwood said.

The SAFE Banking Act, which is currently before the committee for consideration, would help address this urgent problem. The bill specifies that proceeds from a state-licensed cannabis business would not be considered unlawful under federal money-laundering statutes or any other federal law and directs the Financial Crimes Enforcement Network and federal banking regulators to issue guidance and exam procedures for banks doing business with legitimate cannabis-related businesses.

“Although the SAFE Banking Act does not cure all of the cannabis-related banking challenges, it would help the 33 states that have legalized cannabis in some form to make their communities safer, collect their taxes, and regulate their cannabis markets effectively,” said Sherwood. “ABA supports the SAFE Banking Act and urges the committee to mark up and advance this legislation as soon as possible.”

Banking and Financial Services

On the Way Up

PeoplesBank joined Google, Facebook, BMW, Southwest Airlines, and more top companies on the 2019 WayUp Top 100 Internship Programs list. WayUp is a professional networking application that connects college students and recent graduates to career opportunities with reputable employers.

According to WayUp, the bank was selected because “PeoplesBank interns not only get a behind-the-scenes look at what it takes to operate a bank, they also get hands-on experience to work on passion projects like Habitat for Humanity’s Build Days.” The list is determined by a panel of industry experts who consider everything from public votes to internship-program highlights. More than 1,000 employers participated in this year’s assessment.

“Our internship program instills that we can learn just as much from our interns as they can learn from us.”

“PeoplesBank interns make an immediate and direct impact on the organization and the communities that the bank serves,” said Danielle St. Jean, HR Coordinator and Training Specialist. “Each intern is also assigned to a home department at the bank. In addition to day-to-day assignments and value-add projects completed within that department, the group of interns are involved in several hands-on activities.”

PeoplesBank interns participated in on-site professional development, a Habitat for Humanity Build Day, employee-engagement planning, banking-topic webinars, and job shadowing. They also were able to discuss their career paths with senior leadership in the bank’s finance, human resources, information technology, marketing, and retail operations. After spending the summer at PeoplesBank, the interns have returned to study at colleges throughout Massachusetts as well as Connecticut and Colorado.

“Our internship program instills that we can learn just as much from our interns as they can learn from us,” St. Jean said. “We ask for lots of feedback from our group of interns, and even have a private ‘PeoplesBank Internship Alumni’ group on LinkedIn so that we keep in touch with them at the conclusion of the program.”

Recruitment for the next PeoplesBank summer internship program kicks off during the winter. Interested students are encouraged to complete an application on the bank’s career page, www.bankatpeoples.com/careers.

Banking and Financial Services

In the Dark

By Susan Atran

Bank of America recently announced the findings of a new study conducted by Merrill Private Wealth Management, which found that 64% of wealth holders have never talked with family members about how or why they intend to pass on their assets. While 48% plan to communicate this information eventually, or assume family members already know, 10% vow never to divulge details of their estate plan, primarily because they consider it personal and no one else’s business. But is that a good decision?

“This research is designed to help families make better decisions and secure the promise of wealth, including the impact it can have within and beyond one’s family and lifetime,” said Andy Sieg, president of Merrill Lynch Wealth Management.

For this study, Merrill asked more than 650 high-net-worth individuals across the country how different types of financial decisions are made and communicated within their family. Part of an ongoing series of white papers on wealth sustainability from the Merrill Center for Family Wealth, findings from this study were published in a report titled “How Do Families Make Effective Wealth Decisions?” Among them:

• Decisions about family money — such as gifting to family and charities, dividing assets among heirs, and establishing trust provisions or limitations — ranked as the most important and hardest to make, compared to decisions about saving, investing, spending, and other day-to-day finances;

• Just 33% of people have informed their family of lifetime gifts already made or committed to, such as assets held in a trust or funding of education, a down payment on a first house, or another purpose;

• Seventy-two percent have not discussed their philanthropic commitments;

• When asked what they consider to be the most important idea to communicate when discussing wealth with family, the top response was to be a good steward and handle family money wisely. However, only 46% have talked with heirs about fundamental family values and operating principles;

• On the distribution of their estate, 69% of wealth holders plan to divide their assets equally among heirs, while the rest say allocation decisions are based on specific criteria, such as merit for individual contributions (11%) or need (8%); and

• While 22% plan to openly share details of their estate plan with the whole family, 17% would share information only as it applies to each person.

“Decisions about family money have the potential to change lives, yet the outcome depends on how well the purpose and reasoning behind those decisions are understood, and too often that is left unsaid,” said Stacy Allred, head of the Merrill Center for Family Wealth. “Misunderstanding can lead to family conflicts, resentment, and other unintended consequences, including the misuse or loss of family wealth.”

The Merrill Center for Family Wealth specializes in helping families define the purpose of their wealth. This study found that, in six in 10 families, there is no formal structure or rigorous process in place to ensure family wealth decisions are made and communicated effectively. When asked how wealth decisions are typically made, the most prevalent response was an autocratic and top-down approach whereby one person makes decisions with little or no input from anyone else. Seventeen percent of families make financial decisions democratically with collective input or representation of all members.

Three-quarters of participants, including more men (79%) than women (68%), report complete confidence in their financial decisions. Looking back on decisions they’ve made, however, just 56% of people said their decisions always turned out well. The rest reported mixed results, including 21% who said their decisions turned out badly or they delayed making decisions because they were unsure of the outcome.

“The best form of financial parenting and a big part of improving the outcome of decisions involves putting more care into the decision-making process itself,” said Matthew Wesley, director of the Merrill Center for Family Wealth. “Family wealth decisions can be complicated by family dynamics, a long-time horizon, and unrecognized biases that call for a deliberate and disciplined approach.” u

Susan Atran is senior vice president of Communications for Bank of America.

Banking and Financial Services

Steady Course

President and CEO Michael Tucker

President and CEO Michael Tucker

Like most all bank presidents in the 413, Michael Tucker would concede that a great many of the region’s communities are heavily populated with financial institutions, or “overbanked,” to use the term most would put into play.

He’s inclined to include Greenfield on that list, and gestures out the window of his office to make his point. “They used to call the other end of the street Bank Row,” he said, referring to a stretch of Federal Street now occupied by what once were stately bank offices, many of them redeveloped for other uses. “They really should call this Bank Row now.”

Tucker, president and CEO of Greenfield Cooperative Bank (GCB) and Northampton Cooperative Bank (the two institutions merged in 2015, and the former name was kept) was referencing the number of competitors who call a different stretch of Federal Street home, and it’s a large number.

But, unlike most of the other bank leaders who bemoan the overbanked nature of this region, Tucker sees the landscape through a slightly different lens.

“Some bankers would say we’re overbanked; I would say we have choices,” he explained. “It forces you to be more competitive, and it gives people choices. It doesn’t hurt to have competition — otherwise, you get complacent.”

So perhaps all that competition should get some of the credit for what has been a consistent pattern of growth for the bank, especially since Tucker took the helm at GCB in 2003. Since then, the bank has seen assets rise from roughly $175 million to more than $630 million, its branch count soar from three to 10, and its commercial-lending portfolio take a quantum leap.

Overall, the bank’s strategy has been to gradually expand its footprint in Franklin and Hampshire counties, growing mostly via the organic route (although the merger with Northampton Coop certainly accelerated that process), and achieve more of the size that is needed to thrive in today’s banking landscape.

The plan also calls for seizing opportunities when and where they arise, which brings us to the institution’s latest expansion effort — a branch in South Hadley at the Woodlawn Shopping Plaza that will bear a Northampton Cooperative sign over the door and open next January.

Formerly a Bank of America branch — that institution has been closing a good number of facilities in recent years — the new location gives Greenfield Coop presence in another Hampshire County community, but one that enables it to serve residents of several nearby Hampden County cities, especially Chicopee and Holyoke.

The plan for the foreseeable future is summed up neatly in the bank’s annual report, issued just a few weeks ago.

“Our primary strategy remains to look for prudent and measured organic growth right here in Western Massachusetts,” Tucker wrote in the report, noting that many of those aforementioned competitors have ventured into Central Mass., Connecticut, or both. “We need to remain a lean organization, especially in light of the growth of mobile and electronic banking in today’s world. Our branch strategy recognizes the new world order with the continued growth of the internet.”

Michael Tucker says the GCB branch is just one of many banks located on Federal Street

Michael Tucker says the GCB branch is just one of many banks located on Federal Street, a proliferation that provides competition, which he believes makes his bank better.

For this issue and its focus on banking and financial services, BusinessWest asked Tucker to elaborate on all those points and essentially draft a quick blueprint of the bank’s plans for the future. In a nutshell, it simply calls for more of what of what the bank has been achieving under his leadership — smart growth.

Points of Interest

Tucker said he ventured into banking, if that’s the word for it, while he was in law school at Western New England University.

He took a teller’s job at the institution known then as Springfield Institution for Savings (SIS), while attending night classes, not knowing this would be his employer for some time to come.

He remembers his first boss, John Collins, telling him that his law degree could be put to good use in the banking industry.

“He said, ‘I have a lot MBAs who could use some help, because we have this new thing called compliance,’” he recalled, referring specifically to the Truth in Lending Simplification Act of 1981. “That was my first foray into banking law.”

He took the title ‘counsel and compliance officer,’ and later worked his way up to senior vice president and general counsel. When Peoples Heritage acquired SIS, Tucker, like many others, was soon out of work, but he eventually landed at what is now bankESB for several years before being recruited to lead GCB.

When he arrived in Greenfield, he took over one of the smallest banks in the region with a simple goal — “I told the board I was going to keep this place mutual and hopefully leave it a better bank than I found it” — and set about a course of steady if unspectacular growth, which was by design, as he explained with a little humor.

“Our growth is roughly 4% to 6% a year,” he noted. “If we were a stock bank, they would have thrown me out the door. Because we’re a mutual bank, we can take our time. Where I see banks get in trouble is when they try to grow too fast and lose sight of their basic principles.”

GCB hasn’t done that, and its strategic goal — and operating philosophy — are summed up by its web domain name, www.bestlocalbank.com, and a comment from the annual report. “As I’ve often said before, we’ll probably never be the biggest bank,” Tucker wrote. “But we always strive to be the best bank in Western Massachusetts.”

During Tucker’s tenure, the bank has, as noted, expanded to 10 branches. There are two in Amherst (although they will soon be consolidated; more on that later), one in Florence, another in Northampton, two in Greenfield, as well as a commercial and residential and loan-services facility, and single locations in Northfield, Shelburne Falls, Sunderland, and Turners Falls.

Meanwhile, it has also greatly expanded its commercial-lending team and its commercial portfolio, which, like that at many banks in the region, is dominated by commercial real-estate loans, but also reflects the diversity of the local economy, especially in the bank’s hometown.

Indeed, this is an intriguing time for Greenfield, said Tucker, noting that the community once dominated economically by manufacturing has varied its economy, making great strides in technology and hospitality.

“Our growth is roughly 4% to 6% a year. If we were a stock bank, they would have thrown me out the door. Because we’re a mutual bank, we can take our time. Where I see banks get in trouble is when they try to grow too fast and lose sight of their basic principles.”

“There is a lot of energy in the town,” he said. “We have the new courthouse and the new parking garage; they opened the Olver [Transit Center], and there have been many other new developments.”

Still, this region, and especially Franklin County, where many communities are struggling to maintain population and especially young people, would be considered a low- or no-growth area, he acknowledged, meaning growth is a challenge for any financial institution.

This is why many area banks, as he noted in his annual-report comments, have ventured into Connecticut, Central Mass., or both, and why others have grown through acquisition or merger.

GCB has done some of that with its merger with Northampton Coop, a move that Tucker described as “logical” for both institutions because of that overbanked nature of this sector, and the lack of population growth in Franklin County.

“That’s why we looked at Hampshire County and why I talked to Northampton [Coop],” he explained. “It would have been silly for us to build another branch down in Hampshire County and fight 10 other banks for the money when we can partner with another bank.

“That worked out well for everyone because we didn’t have to lay anyone off,” he went on, adding that he spends one day a week in Northampton at that division of the institution. “It was a smooth transition. We were both very small — and we’re still one of the smaller banks — but we now have more size, and that helps. It was a good merger.”

By All Accounts

As he talked about his bank’s branch strategy, Tucker reached for his cell phone and held it aloft.

“This is our fastest-growing branch,” he said, noting that internet banking is becoming an ever-stronger force in this sector.

But brick-and-mortar branches are obviously still needed, he went on, adding that they probably don’t need to be as large as they once were, and they are far less transaction-oriented than they once were.

But they serve an important purpose in that they give a bank a presence and enable it to better serve customers in a particular region or community.

Which brings us to the new South Hadley branch.

The most logical expansion point for the bank moving forward is probably Hampden County, said Tucker, adding that the South Hadley branch provides an opportunity to make some strides in that direction.

Tucker found the branch while on one of his many drives around the area looking for opportunities.

“We keep our eyes open, and I drive around the area a lot and take a look at the communities,” he explained. “South Hadley was a community that I thought had some upside, and I was surprised when I read that Bank of America was closing that branch because they had a fair amount of deposits in that office.

“With this branch, we can serve some customers that we have already in Springfield and Chicopee,” he went on. “But it also gets us to reach a base in South Hadley that BOA is telling, ‘if you want to bank with us, you have to drive over here.’”

BOA’s departure will ultimately lead to GCB’s arrival, specifically its Northampton Coop division, said Tucker, adding that, while moving into South Hadley, the bank will continue to look for other growth opportunities as well as ways to become the ‘leaner organization’ he mentioned in the annual report.

Toward that end, the bank will consolidate its two branches in Amherst into one, a nod to the fact that specific branches are simply handling fewer transactions these days.

“When I was a teller in Forest Park [for SIS], we had seven or eight tellers plus a manager and an assistant manager,” he noted, turning the clock back four decades or so. “People were lined up out the door — we didn’t have deposit — and everyone came in to cash their Social Security checks on the first of the month.”

Elaborating, he said the branches in Amherst that saw 10,000 transactions a month several years ago were down to 5,000 maybe five years ago, and are now seeing roughly 3,000 a month, thanks to ever-advancing technology.

This phenomenon will eventually lead to fewer branches, and, more immediately, smaller facilities.

“The industry is moving in that direction,” he said while again holding his phone aloft and explaining it is now a branch itself in most all respects. “But I don’t think branches will be obsolete; they will be smaller and leaner.”

As for future expansion geographically, Tucker said GCB will continue to look for potential landing spots. “We’ll continue to look south and possibly east to Worcester County,” he told BusinessWest. “A lot depends on what happens; with some of the branches we’ve opened, I didn’t anticipate doing it at that time, as in Turners Falls, but the opportunity arose.”

Bottom Line

In his annual-report statement, Tucker noted that, over the past 114 years, GCB has had three basic operating slogans.

It’s gone from ‘Traditional, Progressive, Locally Focused,’ to ‘In the Community, for the Community,’ to the current ‘Come on Over to the Coop.’

The words are different, but they say the same thing, essentially — that this isn’t the biggest bank on a block crowded with other banks, but it strives to be best, and it’s generally successful in that mission.

This is the strategy that has worked since Teddy Roosevelt was in the White House, and there isn’t any sentiment to change it, said Tucker, because it works, not only for the community, but for the institution as well.

George O’Brien can be reached at [email protected]m

Banking and Financial Services

The Scammers Are Out There

By Jean Deliso

Jean Deliso

Jean Deliso

Have you ever been scammed by someone or received a phone call attempting to pressure you to provide personal information or send money?

If you can say yes, have you thought about what your parents or grandparents might do in similar situations?

Senior citizens are frequent victims of these criminal activities. To help protect older family members and to safeguard yourself, everyone should be better informed about these schemes and how to help prevent becoming a victim.

Scam artists are everywhere, and they are here in Western Mass. Within the past 18 months, I personally had two different clients who were defrauded by a scam tactic that preyed on their love of their grandchildren and their innocence and confusion.

One was contacted and told their grandchild had been in an accident, he had seriously hurt someone, and he was going to spend many years in jail unless money was sent. In the other situation, it was claimed that a grandchild was in a friend’s car, which was stopped by the police, and they found drugs. The scammer stated that the grandchild was not guilty, but he would be charged unless the grandparent sent cash immediately to get him assistance in court.

Both victims were told not to tell anyone, otherwise the assistance would stop. And in both situations, the grandparents went to the bank or withdrew money from their investment accounts, converted it to cash, placed it an envelope, and sent it to these unknown addresses.

These situations are happening more often, and thus there is a pressing need to educate our senior citizens to be aware of these types of scams.

There is nothing more special than the love of a grandchild. These imposters are targeting and exploiting this love and affection.

There have been other articles written on this subject, but not everyone reads them. It is important to educate your parents or grandparents that these scams exist and that, if they ever receive a call where they are instructed to be silent, they should contact a trusted family member or the proper authorities immediately.

Not all children are comfortable talking to their parents or grandparents about these situations, but I highly recommend you do.

I’ve seen too many of these scams recently amongst my clients. As a certified financial planner, it’s my responsibility to help my clients manage their assets and finances and to help safeguard against risks to their financial well-being. If a suspicious phone call or request is unusual or confusing, it’s important for the recipient to question it and alert their loved ones.

Please speak to your parents and grandparents about these threats. If they receive such a call, have them talk to other family members or the police before providing any information to the caller. They should never send cash to someone they don’t know or if they don’t fully understand why it’s being requested. Have them call the grandchild on their personal phone number, and, most importantly, tell them never to send cash to anyone they don’t know.

Jean Deliso, CFP is a principal with Deliso Financial and Insurance Services; (413) 785-1100.