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Unlocking Financial Health

KeyBank’s Courtney Jinjika and Jeff Hubbard

KeyBank’s Courtney Jinjika and Jeff Hubbard

KeyBank is fairly new to the Western Mass. financial marketplace, taking over eight Hampden County branches following its acquisition of First Niagara Bank last year. But its leaders are already fluent in speaking the language of the region’s customers, who want their institutions to be customer-friendly and civic-minded. With a host of high-tech products melded with a focus on helping customers effectively use them to manage their financial health, Key seems ready to unlock more business.

It’s called HelloWallet.

“It’s an online platform that KeyBank uses to help customers make smarter, more confident financial decisions. The user first inputs information about their account balances, income, spending, demographics, and more to produce a score of sorts — a picture of where they are financially, where they want to be, and how to get there, by setting budgets, planning for retirement, and more.

“We focus on bringing financial confidence and wellness to all of our customers — individuals and business — across a broad spectrum of needs,” said Courtney Jinjika, the bank’s regional retail executive for Connecticut and Western Mass. “A key differentiator for us is HelloWallet, an online, real-time financial-assessment and planning tool, which, coupled with personalized guidance from their trusted banker, helps our clients achieve financial wellness and accomplish their goals.”

When it acquired HelloWallet last year, KeyBank saw it as one of several strategies for better connecting their clients, both retail and commercial, to helpful financial resources.

“Our focus is on our clients’ overall financial wellness and helping them make solid financial decisions,” Jinjika explained. “With HelloWallet, we integrated a tool into our system that allows clients to assess where they stand within a few components of overall financial wellness; it actually gives recommendations and feeds information back to bankers, who are able to reach out to clients and help them make difficult financial decisions and guide them to better financial wellness.”

As a digitally based tool, it also appeals to the growing set of customers who prefer resources they can access at any time, not just in a branch, said Jeff Hubbard, Key’s market president for Connecticut and Western Mass. “It’s an exciting tool to offer to customers, and a way to better focus on financial literacy.”

The theme of connection is one KeyBank touts in its marketing efforts and its services, Hubbard noted. When the institution, currently the 29th-largest bank in the U.S. by asset size, acquired First Niagara Bank in 2016, it inherited a large footprint in Western Mass. and Connecticut to complement its existing New England presence in Maine, Vermont, and the Boston area.

And if there’s one thing Hubbard understands about Western Mass., where KeyBank now operates eight branches boasting 70 employees, it’s that customers appreciate a community-focused model.

Those eight branches — in East Longmeadow, Feeding Hills, Holyoke, Ludlow, Southwick, Westfield, and two in West Springfield — have been busy introducing resources including commercial lending, residential mortgage lending, investments, wealth management, and insurance.

In doing so, Hubbard said, it’s also touting the value of “meeting customers on whatever playing field they might want to be on.”

High-tech, Personal Touch

Jinjika said bank employees are skilled at helping customers navigate the various high-tech banking options available to them, from online bill pay and remote deposit capture to the HelloWallet tool, and show them how they can use them to monitor their financial wellness. There’s also an online scheduling tool customers can use to make appointments at the branch and outline what issues they want to discuss.

After all, Hubbard said, online banking hasn’t killed branch banking, not by a longshot. It has certainly forced the branch model to evolve in the ways Jinjika described, but a street-level presence remains crucial.

“Lots of people want to visit a branch for lots of reasons,” Hubbard said. “Here, they’ll visit highly trained, experienced people who want to help them. To be successful in the Springfield market, you need to meet people anywhere they want to meet.”

A decade ago, he went on, products like remote deposit capture for businesses seemed strikingly innovative, and now clients have come to expect them as a baseline. Meanwhile, Millennials might have led the way in adopting technology that allows them to control their finances from their computers and smartphones, there’s less of a demographic breakdown today.

“Millennials get on board faster; they’re quicker adopters, but they’re targeted at everyone,” Jinjika said. “Keeping people out of the branch line is a good thing, so adoption rates are pretty strong.”

In addition, Jinjika said, the vast majority of customers seeking to make major life changes, like a home mortgage, want to sit down with a professional.

“When our clients have a concern or are making major financial decisions, they want to do that in person at the branch,” she explained. “What we find is that they’ll do their research online, but when it actually comes down to fully making that decision, they want to sit down with someone and get answers face to face.”

The same goes for commercial customers, Hubbard said, noting that Key likes to tout itself as a “Main Street bank with Wall Street capabilities,” which can leverage its investment-banking team and industry-specific bankers to bring added resources to commercial clients. We believe that these capabilities, along with our state-of-the-art cash-management services and insurance and benefit consulting services, give us a competitive advantage with our business clients.

He understands the fierce competition in a market that many analysts have called overbanked in recent years, but said loan demand is steady.

“We’re certainly getting our fair share,” he told BusinessWest. “Springfield is a wonderful market with lots of opportunities. We’re grateful to have into some very large clients, very good-sized companies in Greater Springfield, in addition to small, mom-and-pop businesses.”

Another business-minded program is [email protected], which partners with companies and provides free and discounted banking services employees at no cost to the employer. A dedicated [email protected] ‘relationship manager’ delivers a customized program on site to meet the specific needs of workers through financial-education presentations and one-on-one financial assessments.

It’s another way KeyBank aims to broaden its customer base in its existing branches, rather than having to open new branches to grow.

“We’re very happy with the branch locations we have today,” Hubbard said. “The objective is to get our employees out of the branch into the community and grow our business organically.”

Community Ties

The bank also understands that the region’s community-banking culture means community involvement on a charitable level, Hubbard said, noting that Key expects to make $100,000 in community sponsorships and charitable grants to nonprofits serving the Greater Springfield market in 2017. “We think it’s very important to support the market where we live and work. That’s something we take seriously.”

On a national level, KeyBank also released its National Community Benefits plan last year, which includes $16.5 billion in investments across the communities it serves. The commitments are part of a comprehensive blueprint for steps Key will take over the next five years.

As part of a partnership with the National Community Reinvestment Coalition, KeyBank committed to $16.5 billion in mortgage lending, small-business lending, community-development lending, and philanthropy, with the goal of stimulating job and economic growth in those communities. KeyBank has also committed to reducing neighborhood blight as well as maintenance and disposition of foreclosed properties.

Additionally, the KeyBank Foundation is committing $175 million in philanthropic investments for its traditional priorities of education and workforce development. The investments will also focus on the stabilization of urban neighborhoods and rural communities through local capacity building, affordable housing, and building technical assistance to execute locally.

Nationwide, KeyBank employees will support the plan through local service projects and board leadership. Employees will continue to be heavily engaged in their communities, with the expectation of 500,000 of additional volunteer hours over the next five years.

“Key has jumped into this in a big way,” Hubbard said, noting that the effort crosses 15 states, but each market will feel an impact. “This is a broad but very meaningful delivery of strong foundational support.”

The bank has also earned national recognition as one of Points of Light’s top 50 most community-minded companies for the last three consecutive years; a Top 50 Company for Diversity by Diversity Inc. for the last seven years, and eight annual ‘outstanding’ ratings from the Community Reinvestment Act for its levels of lending, investment, and service to low- and moderate-income communities — one of less than 10% of all U.S. banks to achieve that goal.

Those accolades further demonstrate, Jinjika noted, that KeyBank aims to be an effective partner both for customers who walk in the branch and in the communities surrounding those branches.

“We keep clients at the center of all we do,” she told BusinessWest. “We compete where some of the bigger banks won’t, and where the smaller banks can’t. We really think about the individual in front of us when we put together a package that will work for their financial wellness.”

Joseph Bednar can be reached at [email protected]

Banking and Financial Services Sections

Moving Forward

Jim Curran was asked about the heightened state of competition within the commercial-lending realm in Western Mass. and how People’s United Bank is responding to this changing landscape.

Jim Curran

Jim Curran

He began his answer by noting that, while conditions in this region are perhaps somewhat more competitive than they were when he first started working in this market more than 30 years ago, the reality is that there have always been a lot of strong competitors for People’s United, formerly the Bank of Western Mass.

And he knows that because he worked for some of them.

“It’s been a competitive market for 30 years,” said Curran, the recently named senior vice president and regional manager for Central and Western Mass. “When I sit and talk with people about how competitive the market is today, that’s the same conversation we were having 20 years ago; nothing’s really changed in that regard.”

But many other aspects of banking, and doing business in general, have changed over the past few decades, including everything from the way people work to the technology they use, and that’s why Curran will be managing an office occupying the 10th floor of Monarch Place.

Indeed, the 32 employees at the regional office have moved only a few hundred feet across Main Street in downtown Springfield, but the relocation from the property most still know as Harrison Place (even though it had the People’s United name over the front) to Monarch Place is a considerable step forward, said Patrick Sullivan, the bank’s market president for Massachusetts.

He told BusinessWest that the move has been in the planning stages for more than 18 months, and arose from simple necessity.

When I sit and talk with people about how competitive the market is today, that’s the same conversation we were having 20 years ago; nothing’s really changed in that regard.”

“That’s an old building, and its functionality just doesn’t suit today’s world with the technology and the way people work; when you have an old building, you just can’t do certain things,” he explained. “We were spread out over four floors at one time, and, more recently, we were in two or three floors; now, we’re all on one floor, and that’s much more efficient.

“The new building will allow for greater synergies and collaboration between our cross-functional teams,” Sullivan went on, “including commercial, wealth management, consumer, and insurance services.”

The search for new quarters was an extensive one, he noted, adding that a number of sites were considered — within downtown, outside it, and also outside Springfield itself. Ultimately, the bank, which had been headquartered at Harrison Place for more than 20 years, decided to stay in the central business district.

“Although our customers are spread throughout Western Mass., centrally, downtown Springfield is the best place for our people,” he explained.

Curran agreed, saying that “there’s a lot of really good, positive energy with this move.”

As noted, Curran brings to his new position at People’s United a wealth of experience in banking, commercial lending, and in serving business owners in the Western Mass. market.

Most recently, he served seven years as executive vice president of Berkshire Bank and regional manager of the Western Mass./Central Mass. and Northern Conn. commercial-banking teams. In that role, he established Berkshire Bank’s present Central Mass. location, recruited the commercial-lending and credit team, built market identity and brand awareness, and built a loan portfolio from scratch to $215 million.

Prior to that, he served in a similar role with Santander Bank and its predecessor, Sovereign Bank, managing a team with a portfolio of commercial loans that approached $1 billion prior to the Santander acquisition of Sovereign in 2009. He got his start in banking with Bank of New England (later Fleet Financial) in 1983.

Those stops on his résumé translate into being part of that considerable competition within the commercial lending market that he spoke of earlier, so he obviously speaks from experience when he addressed how to thrive within such an environment.

Specifically, he said it comes down to several factors, including having a large portfolio of products, being local (instead of just saying your institution is local), and understanding customers and their needs.

“That’s the beauty of this bank,” he said. “When you go into a relationship, you have everything in front of you to deliver the financial services and products to that customer — whether it’s the retail side or additional services like treasury management, or whether you’re looking to do an interest-rate derivative on a large commercial real-estate deal or you’re simply looking to do payroll for a manufacturer with 30 people.”

Sullivan agreed. “The competitive advantage we have is to keep all our bankers as local as possible,” he said. “But we have people who know how to take care of a Western New England University or a Springfield College, or a healthcare system, or make a $200,000 loan fast. We stick to our core competency, which is commercial lending, which is important, because it’s competitive out there.

“We respect the fact that the local banks are good competition,” he went on. “We have to out-local them and also out-product them; that’s the world today.”

— George O’Brien

Banking and Financial Services Sections

Business Valuation

By Brandon Mitchell

Brandon Mitchell

Brandon Mitchell

For business owners looking to sell in the near future, there is plenty to be optimistic about.

Buyers have access to capital at low interest rates through banks. Stocks are at all-time highs, driving individual net worth and access to down payments. The Massachusetts economy is vibrant. Most recent reports show GDP growth and unemployment rates outperforming the national average. There is positivity around MGM coming to Springfield, a new GE headquarters moving to Boston, and the potential for business-friendly legislation coming down the pipeline.

These factors will drive buyers to jump into the market and take the keys to a business, but there is a catch. With more than 1,100 businesses listed for sale across Massachusetts right now, buyers have options and are willing to wait for a value that makes sense.

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.

Owners should resist the temptation to ‘pull the parachute’ as they get closer to the finish line.”

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.

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 is 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 owner of BLM Valuation Services, LLC, which specializes in certified independent business valuations for SBA lenders and small-business owners; (413) 306-1940.

Banking and Financial Services Sections

Name of the Game

Drew Andrews, managing partner and CEO

Drew Andrews, managing partner and CEO

The accounting firm formerly known as Whittlesey & Hadley has undertaken a rebranding effort, and is now known simply as Whittlesey. The new name was chosen in an effort to be more modern and less formal, while also maintaining valuable name recognition. But the new name is only part of an effort to better communicate all that the firm can do for its clients.

Drew Andrews said the new name was chosen in an effort to be, among other things, less formal, more modern, and perhaps even more efficient by using one word instead of two.

These are trends, if you will, when it comes to the names over the doors and on the letterhead of professional-services providers such as accounting firms and law firms, said Andrews, so much so that a story he’s retelling often these days seems to speak volumes about the matters at hand.

“I was at meetings with two clients over the past two weeks where they were referring to us as ‘Whittlesey,’” he recalled, noting that this wasn’t the firm’s name at the time — but it is now (it became official Oct. 1, to be exact).

Indeed, the Hartford-based firm known as Whittlesey & Hadley for the better part of five decades has officially dropped the ampersand and ‘Hadley’ (dropping just the ampersand was one of many other options considered) but kept Whittlesey as a nod to history, tradition, and, perhaps most importantly, name recognition.

And the fact that people were calling the firm by its new name while it was still using the old name and hadn’t given any hint that a change was coming, only confirms that this was the right decision, said Andrews, CEO and managing partner of the firm.

“Whittlesey & Hadley was more old school,” he said, referring to the name, not the firm, noting that clients, at least some of them, anyway had already come to this conclusion, and were already referring to their accountants in different ways. “What we found was that a lot of people had already shortened it themselves — they were calling us Whittesey or W&H.”

Yes, much ado about a name. But there is a lot more to what Andrews referred to as a ‘rebrand’ than just this new name and the one on the company’s subsidiary — Whittlesey Technology (formerly the Technology Group). There are new colors (blue and coral), a new, more ‘responsive’ website (wadvising.com), and a new marketing tagline, or slogan: ‘Forward Advising.’


Those two words say quite a bit, said Andrews, noting that, historically, and to generalize somewhat, accounting firms have dealt mostly with the past tense, especially with regard to financials, taxes, and audits. But increasingly, clients are looking for help when it comes to the present and future tenses as well, he said, and the firm now known simply as Whittlesey has been ahead of this curve and intends to stay there.

“Even though we’re an accounting firm and we do taxes and audits and things of that nature, our business has morphed into being more of strategic advisors,” he explained. “We’ve helped people with profitability analysis, new products, forecasting, budgeting, succession planning, operational reviews, and a significant effort in technology support in recent years.

“That was kind of a natural progression,” he went on. “We’re really become more advisors than accountants. That’s where we think the profession’s going, and that’s a big part of why we did this rebrand.”

For this issue and its focus on banking and financial services, BusinessWest talked at length with Andrews and Cora Hall, director of Marketing and Communications for Whittlesey, about the rebranding efforts, especially as they relate the firm’s efforts to grow its presence in the Western Mass. market.

It Added Up

Andrews told BusinessWest that the rebranding efforts were launched roughly a year ago, and have taken longer than some might have expected because work naturally slowed down during the height of tax season, when many of those involved had more pressing matters to address.

But this project, like most all those of this nature, was undertaken because it was deemed necessary and important to the company’s broad efforts to continue to grow and claim market share in all its markets, including Western Mass.

“We wanted to look at what our communication was to our clients and our potential clients,” Andrews explained, noting that, over the past several years, the company has merged two firms into its fold, if you will — Holyoke-based Lester Halpern and Hamden, Conn.-based Weinstein & Anastasio, P.C. — and needed a common message to go along with the shared name.

“We had what amounted to three firms, and we wanted to have a unified message going out about who we are, what we do, and how we do it,” he told BusinessWest. “We were doing a lot more than accounting and taxes, and were doing advising in many areas — and this didn’t seem to get communicated through our messaging and our website.”

Drew Andrews and Cora Hall say Whittlesey’s rebranding effort is aimed at better communicating to clients and potential clients the firm’s full range of services.

Drew Andrews and Cora Hall say Whittlesey’s rebranding effort is aimed at better communicating to clients and potential clients the firm’s full range of services.

And improved communication is at the heart of this rebrand, he went on, adding that by this, he means what is being communicated and how it’s being communicated.

Elaborating, he said the overall message needed to change and convey the full portfolio of products and services, and the vehicles for delivering the message — and especially the website and a host of social-media platforms — needed to change in order to better communicate to all audiences, particularly the younger ones, and to both customers and potential employees.

“We needed a refresh on our website and how we were going into digital — not only from a client perspective, but from a recruitment perspective and always getting the best of the best talent-wise,” he explained. “We needed to relate better to them in their language.”

What is being related to all audiences is that the firm will still handle a client’s tax and audit needs — but it can also do much more.

“We can help businesses and individuals gain confidence and assurance before they act,” said Andrews. “We work as an extension of an organization’s management team delivering advisory services in the here and now as well as looking forward.

“When we go visit our clients, we talk about what’s going to happen; we’re not just focused on the past, which is what accountants do, because we usually report on historical information,” he went on. “We ask, ‘where are you going in the future? Where are you bringing this business? How can we help you achieve what your financial goals are?’”

All this wasn’t effectively communicated by the old website or old branding messages, said Hall, adding that the new platforms do a much better job at this, as well as conveying the firm’s commitment to the communities it serves.

“We’ve really made a consolidated effort to invest in the region and really become part of the community,” she explained. “And that’s something else we wanted to communicate.”

As for the new name, Andrews said something ‘new school’ or at least ‘newer school’ was needed.

‘W&H’ or ‘WH’ were considered, and might have worked, he told BusinessWest, adding quickly that, as the firm went through the search process, if you will, it came to the conclusion that ‘Whittlesey’ had both a unique sound to it and a great deal of brand equity in all the markets in which it was operating.

“That was true not only in the Hartford market, where we’ve been since 1961, when we were just ‘Whittlesey’ because [Bob] Hadley, Willis Whittlesey’s first partner, didn’t arrive until 1965, but also in Western Mass. and Southern Connecticut with the two mergers,” he said. “We didn’t want to lose that momentum, but we wanted a modern twist on it.”

Sign of the Times

And these days, one name instead of two constitutes a modern twist.

That became clear to Andrews and others when people started calling this firm ‘Whittlesey’ well before Oct. 1, when the official press release announcing the change went out.

But while the new name is significant, that new tag line ‘Forward Advising’ is perhaps even more so, because of the many kinds of messages it delivers.

“The refreshed Whittlesey brand represents where our firm is today and where we want to strategically grow,” Andrews explained, adding that ‘forward’ is where he expects this important exercise to bring the company.

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

Banking and Financial Services Sections

Making a Statement

United Bank’s new branch at Monarch Place

United Bank’s new branch at Monarch Place is expected to yield a boost in commercial business amid a host of other benefits.

On paper — and on a map — it’s only a few blocks, really.

But United Bank’s relocation of its office in downtown Springfield, from the corner of Main and State streets to the front of Monarch Place, constitutes a major move in all other respects.

The new address — formerly home to a Bank of America branch that closed its doors several months ago — is projected to bring everything from much greater visibility to significantly higher foot traffic, to a likely surge in commercial-side market share as business owners based in the center of downtown take advantage of another bank opening on that site.

“There was a void left by Bank of America’s departure,” said Tony Liberopoulos, regional commercial executive for United, adding that the bank will move aggressively to fill that void.

Dena Hall, Western Mass. regional president and chief marketing officer, agreed.

“This is one of the premier locations in the city, particularly with the renovations currently taking place at Monarch and all the exciting things happening in that area,” she said, noting that a Starbucks soon to go into that building is just one of the items on that list. “We’re thrilled to be there.”

Indeed, even though the bank’s current location downtown is almost directly across Main Street from the $950 million MGM Springfield casino now taking shape and due to open in about a year — and would no doubt see a surge in retail traffic from that development — that branch is limited in many ways, said Hall.

Elaborating, she said that location is relatively small and, more to the point, cannot easily be renovated and enlarged to provide everything that the bank wants to provide the customers downtown.


“Our new branch will really give them that ‘wow’ factor of high technology, an open landscape, and everything people expect today,” she said, adding that the Monarch Place location offers an intriguing blank canvas, if you will.

That’s why United, based in Glastonbury, Conn. and with a main office locally in West Springfield, moved assertively to seize what she called a tremendous opportunity when BOA announced it was closing that location.

“I’m not sure how many other banks looked at it, but I know we moved quickly and started the conversations,” said Hall, adding that the location presents opportunities in many forms, and from many directions.

For starters, there are the many businesses based within a few blocks of the site, most all of them with owners desiring to bank conveniently.

“That Bank of America branch had a lot of commercial clients that utilized that location,” said Liberopoulos. “The buildings all around it are full of commercial clients, and we look at that as an opportunity to grow our commercial base as well as our deposit base. I think there’s a lot of businesses looking forward to having another bank in Monarch Place; we think it’s a great opportunity for us.”

Also, there is the enhanced foot traffic already in evidence downtown due to a slew of new developments in the central business district and growing convention and meeting business — not to mention the additional traffic downtown expected to be generated by MGM Springfield.

Add it all up, and the Monarch Place location seemed to be the right place at the right time, said Hall. And to take full advantage of all that the location presents in terms of opportunities, the bank is building a branch that will be full-service in every respect.

Hall said the branch will be modern and open, but it will still feature what she called a “neighborhood branch” approach, meaning it will have tellers, but also cash recyclers.

“It will be set up to service the retail and business customer in any way they want or need to bank with us,” she explained. “But it will also have a more modern feel to it than some of the current United branches.

Construction began roughly a month ago, she went on, and the branch is due to be open by the end of the year. United will occupy about 3,000 square feet, which is roughly half the old BOA footprint.

As noted earlier, the move is not significant in terms of geography — the bank is only moving a few hundred yards to the north — but it’s a meaningful move forward, said Hall.

“This positions us very well,” she said. “We’ve made some big commitments to Springfield — we’re very committed to the Thunderbirds and to business development and community support in the area. So we feel that moving to this new location will further highlight some of the commitments we’re making to the city and give us some really nice new space in the best building in Springfield.”

—George O’Brien

Banking and Financial Services Sections

Employee vs. Contractor

By Christopher Marini, MSA, MOS

Christopher Marini

Christopher Marini

One of the most exciting moments for any small-business owner is reaching the point of having sufficient demand and capital to need additional help. Many businesses benefit from hiring employees, whereas others function better utilizing independent contractors. Generally, most businesses have a need for both employees and independent contractors.

The most noticeable difference between these classifications is how they are paid. Employees are part of the payroll, and accordingly the employer is also required to pay certain payroll taxes as well as workers’ compensation insurance. In contrast, independent contractors are not part of the payroll, and are typically paid through accounts payable. Following the end of the year, employees must be given a W-2, and all independent contractors who were paid $600 or more must be sent a 1099-MISC.

Determining whether to pay an individual as an employee or independent contractor requires the business owner to understand the distinguishing differences in classification. Failure to do so could have detrimental financial consequences. Under IRS regulations, classification at the federal level follows ‘common-law rules,’ which consist of three categories: behavioral, financial, and type of relationship. Here are some specifics:


Behavioral control relates to the degree of oversight by the employer. If the worker is subject to employer instructions, this tends to be indicative of an employee. Pursuant to IRS Publication 15-A, examples of “instructions” include:

• When and where to do the work;

• What tools or equipment to use;

• What additional workers to hire or to assist with the work;

• Where to purchase supplies and services;

• What work must be performed by a specified individual; and

• What order or sequence to follow when performing the work.

Other behavioral factors to consider are whether the worker undergoes training or periodic evaluations. Both of these circumstances would point to the need for an employee classification.


Independent contractors generally have much more complex financial structures. For example, independent contractors often have a significant personal investment in equipment needed to perform their work. Often, their service is for a short-term period of time, and they perform similar services for several other consumers. Because of this, they often have various unreimbursed expenses.

In terms of pay, independent contractors are typically paid a flat fee for their service, whereas employees are usually paid a wage based on hours worked. Because employees are paid a wage, and don’t typically have significant investments in equipment or unreimbursed expenses, employees are guaranteed a profit.

However, independent contractors incur the possibility of having a loss if expenditures exceed the fee they collect for their service.

Type of Relationship

One important relationship factor is permanency. Workers who are hired for an indefinitely continued period of time are typically employees, whereas workers hired for a specified period, or until a particular project is completed, are generally considered independent contractors. Employers should be cautioned that the behavioral or financial rules could cause temporary or seasonal workers to be classified as employees.

Another important factor to consider is whether the service being provided is considered a key activity of the business. Workers performing activities that are major components of a business’ offered services are typically employees. Independent contractors typically perform services that are outside the realm of key activities.

Consider State Rules

Certain states have their own sets of rules, which may differ from the federal laws, so be sure to consider if there are any significant differences. For example, Massachusetts has established the Massachusetts Independent Contractor Law, which is even stricter than the federal laws. Under the Massachusetts regulations, workers, by default, are assumed to be employees unless the employer can pass a ‘three-prong test,’ which, similarly to the federal regulations, examines control and nature of the service being provided.

Although rare, it is possible that a worker could be classified as an independent contractor per federal laws and as an employee per state laws. In Massachusetts, this unique situation would result in the need for an employer to pay state unemployment tax, even though the employer is not paying any federal payroll taxes.

Misclassification Consequences

If an employer has improperly classified an employee as an independent contractor, they may be held liable for the payroll taxes that they have not paid. The IRS has implemented a Voluntary Classification Settlement Program, which offers partial relief in back taxes owed in exchange for prospectively reclassifying employees previously classified as independent contractors. Additionally, misclassifying employees as independent contractors could carry penalties related to other benefit plans as well as workers’ compensation issues.

Still Unsure?

If, after consideration of all of the above information, it is still unclear which classification is appropriate, Form SS-8 can be filed with the IRS.  Using this method, the IRS will consider the facts provided to make the appropriate determination. However, this process typically takes more than six months, according to the IRS website, so seeking advice from an accountant or lawyer may prove to be the most efficient method.

In any event, knowing these rules will prove to be a tremendous asset, both in the present and in the future. Classification of workers is an important procedure for small businesses beginning operations, as well as for more established businesses. Understanding the regulations allows employers to operate more efficiently and effectively and could help them avoid future problems.

Christopher Marini, MSA, MOS is senior Auditing & Accounting associate at Meyers Brothers Kalicka, P.C.; (413) 322-3549; [email protected]

Banking and Financial Services Sections

Points of Interest

It’s not easy to get from Adams or Williamstown, communities in the far northwest corner of the state, to Boston.

You can get there using Route 2, but that’s not a particularly fast road, especially in the fall, at the height of foliage/tourist season. Taking the turnpike is another option, but it takes nearly an hour just to get to the exit 2 interchange in Lee. And it’s at least two hours from there.

“Either way, you’re looking at three hours, three and a half, depending on the traffic,” said Charlie O’Brien, who has become an expert on this commute. He’s had a lot of practice over the past several years, or since he’s been on the board of the Mass. Bankers Assoc. (MBA), and especially since he assumed leadership positions with the board.

And the travel has increased even more since he became president of the MBA on July 1.

Charlie O’Brien

Charlie O’Brien

But O’Brien, president and CEO of Adams Community Bank, who works in Adams and lives in Williamstown, isn’t begrudging the treks to Boston — or Washington, D.C. (there are many of those, too), because they are both part and parcel to his role with the MBA.

His stint as president is an honor for him personally and professionally, he said, and it puts a spotlight of sorts on both the Berkshires (he’s the first banking leader from that region to serve as chair of the MBA) and also his institution, which, mostly through a series of mergers, has grown from just over $100 million in assets several years ago to more than a half-billion.

But mostly, O’Brien is excited to be part of efforts on behalf of the MBA and organizations like it to press for needed change with regard to the financial-services industry and, more specifically, the laws that govern it.

And his ascension to chair of the MBA — and his recent talk with BusinessWest about that development — provides an intriguing window into the ongoing work of the association, especially in the category of advocacy for its members.

O’Brien, like dozens of banking leaders who have talked with BusinessWest over the past several years, said that, while these are relatively good times for banks, especially the smaller, community-oriented institutions like Adams Community Bank and many others headquartered in Western Mass., they face a number of stern challenges.

Many come in the form of increased regulatory burdens (and the many financial burdens of compliance with these regulations) that arrived with passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act, better known simply as Dodd-Frank.

“We embrace parts of Dodd-Frank,” said O’Brien as he referenced the legislation passed in the wake of financial crisis of a decade ago, brought about in large part because of the subprime mortgage crisis and bursting real-estate bubble. “But, quite honestly, there are parts of Dodd-Frank that have been quite punitive for small banks.

“We embrace proper legislation, but we also embrace a tiered approach,” he went on. “Banks like us, at $500 million, would like to see regulations that are less burdensome. Some of these laws were passed because of the actions of Wells Fargo and Bank of America … it’s a huge burden for us to comply with certain things, when we’re not the offending banks that created these problems.”

Surveying the landscape, O’Brien, who noted that efforts to reform Dodd-Frank have been ongoing for years now, and for the reasons he stated, said momentum is gathering for change, and this might be the year it happens.

That momentum takes many forms, including the so-called Financial Choice Act, a bill introduced this year that would, if enacted, roll back many of the Dodd-Frank regulations. Passed by the House in June, the massive, 600-page bill has moved on to the Senate for consideration.

“Time will tell how far this gets,” O’Brien told BusinessWest. “But right now, the appetite for regulatory change in Washington is greater than it has been in recent years. We’re working with our lobbyists and elected officials to try to advance those initiatives.”

Meanwhile, there are other matters to contend with, including ongoing efforts that fall in the category of leveling the playing field when it comes to a host of what O’Brien called “non-bank competitors.”

He put credit unions in that category, obviously, but also national mortgage players such as Quicken Loans. O’Brien said he and others in the banking industry don’t necessarily mind competing against such rivals, but they would prefer the field to be more level than it is.

This is an old argument and an ongoing fight, especially when it comes to credit unions, which are still exempt from paying the taxes that banks do, despite the huge size, reach, and portfolio of products that many of them now boast.

“For the very large credit unions out there, and there are some in our backyard … they’re twice our size, but they pay no taxes,” said O’Brien. “All bankers struggle with that concept; some of these credit unions have grown to be billion-dollar institutions, and if you’re that size, you should be paying taxes; that’s our position.”

As for other non-bank competitors, especially those mostly doing business on the Internet, such as Quicken Loans, O’Brien said banks take a similar position.

“We just want to make sure the playing field is as level as possible,” he said, “and that they are complying with the same rules and regulations that we have to comply with.”

O’Brien said he isn’t sure what will happen on those fronts and others over the course of his year in office — and well beyond. What he does know is that there are more trips to Washington and especially Boston in his immediate future. Which is fine, because he certainly has those routes down by now.

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

Banking and Financial Services Sections

A Matter to Watch

By Steven Weiss

Steven Weiss

Steven Weiss

One of the biggest priorities for parents of college-age students is paying tuition. While it is not a legal obligation (at least in Massachusetts) to provide education and support to children over 18, many feel a strong moral obligation to do so.

What happens, however, when parents pay a child’s (often substantial) college tuition, but at a time when they can’t pay their own debts and end up in bankruptcy? Can the bankruptcy trustee recover the tuition payments from the university so the payments can be distributed to the parents’ creditors?

Bankruptcy courts across the country have been wrestling with this issue, with inconsistent results. A recent Massachusetts case involving a trustee’s efforts to recover tuition payments is drawing national attention and may ultimately reach the Supreme Court.

The case pits the well-established rights of trustees in bankruptcy to recover funds for creditors, against colleges and universities, who claim it is fundamentally unfair to be required to repay tuition payments made for debtors’ children.

In DeGiacomo v Sacred Heart University, the parents had paid more than $60,000 in tuition payments for their daughter to attend Sacred Heart University (SHU). However, at the same time they were making these payments, they owed millions of dollars to their creditors; worse yet, those debts were the result of a Ponzi scheme perpetrated by the parents.

When they filed for Chapter 7 bankruptcy relief, the trustee in their case filed suit against SHU, seeking to recover the tuition payments made within four years as fraudulent transfers. Under state and federal fraudulent-transfer statutes, the trustee does not need to prove the payments were actually intended to defraud creditors; the transfers are “constructively fraudulent” if they were made while the debtors were insolvent and for which the debtors did not receive “reasonably equivalent value.”

It was on whether the parents received “reasonably equivalent value” that the case turned. There was no question that the parents were not legally obligated to pay their daughter’s tuition. Thus, the trustee argued that they did not receive any legally recognizable value for the payments, and that satisfying a “moral” obligation to provide for their non-minor daughter’s education was not of any direct or sufficiently quantifiable economic benefit to the parents, and certainly of no benefit to their creditors.

SHU, with the support of the debtors, opposed the trustee’s arguments. They pointed out that, while the parents may not have been legally obligated to pay tuition, their daughter was classified as a ‘dependent’ on both the debtors’ tax returns and on college financial-aid applications. More importantly, SHU asserted that the debtors did in fact receive economic consideration for the payments. By paying for their daughter’s education, the university argued, the parents ensured that she would become more financially independent, less likely to be a drain on her parents’ financial resources, and more likely to care for them as they aged. Finally, SHU pointed out that society as a whole benefited from the payments.

Bankruptcy Judge Melvin Hoffman sided with the university. He wrote as follows: “I find that the [parents] paid [SHU] because they believed that a financially self-sufficient daughter offered them an economic benefit and that a college degree would directly contribute to financial self-sufficiency. I find that motivation to be concrete and quantifiable enough. The operative standard used in [the fraudulent conveyance statutes] is ‘reasonably equivalent value.’ The emphasis should be on ‘reasonably.’”

The trustee has appealed the decision. Recognizing the importance of this issue nationally, Hoffman took the unusual step of recommending that the appeal bypass the U.S. District Court and be heard directly by the First Circuit Court of Appeals. The case has drawn national attention.

In addition to briefs by the parties, amicus briefs have been filed by the National Assoc. of Bankruptcy Trustees and by a group of 20 organizations supporting colleges and universities. Briefing has been completed. Oral arguments are scheduled in October, and a decision is expected early next year.

Steven Weiss is a shareholder with the Springfield-based law firm, Shatz, Schwartz and Fentin, P.C.; (413) 737-1131.

Banking and Financial Services Sections

West Side Story

A rendering of the new Florence Bank branch in West Springfield.

A rendering of the new Florence Bank branch in West Springfield.

After recording impressive growth during his 22-year tenure as president, John Heaps Jr. says Florence Bank is ready to take the next strategic step, by opening its first branch in Hampden County later this summer. The move comes at an opportune time, he said — a time when many Greater Springfield banks are being bought up and merging with institutions based well outside the region. A community-focused bank like Florence, he believes, is well-positioned to fill the gap.

John Heaps Jr. has deep roots in Hampden County. A 37-year resident of East Longmeadow who attended Cathedral High School and started his career at Valley Bank & Trust Co. in Springfield, he has personal reasons to celebrate Florence Bank’s first Hampden County branch, set to open in West Springfield in August.

“For me, it’s like coming home,” he said. “I grew up here in East Forest Park, and I’ve lived here all my life. So this is home to me, and coming here is just something that feels like coming back home, even though I live here.”

But as much as the move means to him personally, it says more about the bank’s growth, and the opportunities available to a community-focused institution in the midst of industry consolidation that has left the region without a Springfield-headquartered bank.

“The first part of my career with Florence Bank was focused on expanding within Hampshire County, and now it just makes sense to expand into Hampden County,” said Heaps, who has served as the bank’s president since 1995. “Because of the significant consolidation, many of the independent players are gone. There’s a real need for a community bank. People want banking decisions made locally, by local people and for the right reasons. That’s what we do.”

Bank President John Heaps Jr. visits the construction site.

Bank President John Heaps Jr. visits the construction site.

Construction is nearing the final stages at what will be a 9,000-square-foot plaza at 1010 Union St., one-third of which will house Florence Bank’s new Hampden County Banking Center, scheduled to open this summer.

All Florence Bank services will be offered through the new center, including deposits and loan products, mobile services to provide 24-hour access to accounts, mortgage-application services, debit-card issuance, commercial-loan capacity, and investment services. The center, which will also offer a drive-up ATM and night depository, will be staffed by eight employees, led by Branch Manager Maureen Buxton.

Heaps said the recent spate of mergers — United Bank was acquired by Rockville Savings Bank in 2014; the following year saw Hampden Bank acquired by Berkshire Bank, First Niagara Bank sold to Key Bank, and NUVO Bank & Trust acquired by Merchants Bancshares; and Westfield Bank acquired Chicopee Savings Bank in 2016 — creates an uncommon opportunity for a mutually-held bank that makes decisions about what’s best for customers and the community without input from stockholders.

“The Springfield area needs our kind of independent institution,” he said, and the bank has already found success in Hampden County following its opening, in 2007, of a loan-production office in West Springfield. It’s success helped boost the bank’s total commercial-loan portfolio to more than 36% from Hampden County-based businesses.

In fact, between the loan center, an ATM in Springfield, a relationship with the Basketball Hall of Fame, and employees — like Heaps — who live in Hampden County, the bank already boasts nearly 3,000 retail customers and more than 400 commercial clients in the Greater Springfield region. The bank also has a relationship with 97 nonprofits in Hampden County that have received over $300,000 in grants and gifts in the past five years.

In short, Heaps said, the time was right for the West Springfield branch.

Steady Growth

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. Heaps has seen the bank grow in his tenure from a $250 million institution with two branches to $1.3 billion and 10 branches. But growth didn’t mean abandoning the community culture.

“It was clear the bank wanted to stay mutual and wanted to grow, and quite frankly, we did that in Hampshire County,” he said. “Our capital has grown from $25 million to $135 million, which is really nice growth, so we’ve been extremely profitable while still being able to keep our focus on what we wanted, which was to stay mutual.”

From left, John Heaps Jr., West Springfield Mayor Will Reichelt, developer Frank Colaccino, and West Springfield Fire Chief Bill Flaherty

From left, John Heaps Jr., West Springfield Mayor Will Reichelt, developer Frank Colaccino, and West Springfield Fire Chief Bill Flaherty were among those who attended a recent hard-hat tour of the site.

Another goal was to stay current with technological trends, he added. “We’ve got the best of both worlds; we’ve been able to keep the focus on customer service, but we’ve also added technology that has allowed us to keep up with the Bank of Americas. There’s nothing you can get there that you can’t get at Florence Bank, things like mobile management to get into your bank account, stop a debit card, pay bills, things like that.”

In fact, in the past five years, the percentage of customers using the bank’s mobile services has risen from about 5% to around 40%, and it’s still on the rise, among all demographics.

“Sometimes it’s just a matter of showing people,” he said. “If you come in the branch to talk about mobile banking, we’ll give you a $5 deposit check, and we’ll ask you to deposit it to set up your account. You wouldn’t believe how many people thank us for that.”

Customers aren’t the only ones with questions, however. “Strategically, other senior managers and even the board asks about bricks and mortar, why we continue to build branches when transactions have gone down in the branches,” Heaps said. “Clearly, the number of transactions has gone down significantly in the past five years — to around 60% of what it was. That obviously has an impact.”

But a physical branch still plays a critical role in the communities where a bank operates, he went on, not only because the majority of customers still do business there, but because it shows commitment to a city or town.

“Do you need 10 tellers? No, but you certainly need the branch,” he said, adding that branches of the future are likely to be smaller than in the past, and division of roles between tellers and customer-service professionals at Florence Bank will be blurred, with employees able to handle either task, so the teller window, or pod, will be a one-stop shop of sorts.

John Heaps Jr.

John Heaps Jr. stands before what will be the teller pod area in the new West Springfield branch.

“That’s the teller of the future, and it allows you to have a smaller footprint, and to do everything with much fewer people,” he said. “With remote capture, customers don’t even need to go to the bank to make deposits.”

The result, he said, has been a streamlined workflow, so as the bank has grown in size, it hasn’t added many employees, instead shifting roles to boost efficiency. A branch like the one in West Springfield, had it opened a decade ago, would have required more staff and a larger footprint, he noted.

Branching Out

To create the new space, the Colvest Group of Springfield is developing the new building where St. Ann Roman Catholic Church was once located, at the intersection of Union Street and Memorial Avenue.

The building’s exterior will feature stone wainscoting on the first few feet near ground level and tan siding and multiple windows across the front. Florence Bank will occupy one-third — or 3,000 square feet — of the new plaza, and up to three additional commercial tenants will fill the remaining space, said developer Frank Colaccino.

“We certainly think it’s a high-quality location, and the building is very attractive, he added. “We’re excited to have Florence Bank as our anchor tenant, and we’re confident we’ll have some good-quality tenants in addition to Florence Bank.”

It’s the same promise Heaps sees in the site and, more importantly, in the Greater Springfield region.

“There’s just so much happening in Hampden County,” he said, adding that the region’s economic vibrancy is reflected in Florence Bank’s steadily growing loan activity there. He noted that, at a time when mergers and acqusitions are the order of the day, retail and business customers are still looking for a community-bank experience and a financial partner across all aspects of life. “Eighty percent of our mortgage customers have checking accounts with us; that’s an amazing statistic.”

Which is why West Springfield is just the first stop along the way to the bank’s goal to become much more than a Hampshire County institution.

“It’s not just going to be one branch, just sticking our toe in the water,” he told BusinessWest. “Over the next three or four years, we’ll be adding between three and four new branches as part of a strategic move. I think Hampden County is ready for us, and we’re ready for Hampden County.”

Joseph Bednar can be reached at [email protected]

Banking and Financial Services Sections

Mid-year Tax Moves

By Kristina Drzal Houghton, CPA, MST


Kristina Drzal-Houghton

Kristina Drzal-Houghton

Most people don’t include tax planning on their summertime agenda, but maybe they should.

The problem with waiting until the end of the year is that you reduce the time for planning strategies to take effect. If you take the time now to do mid-year tax planning, you’ll still have six months for your actions to make a difference on your 2017 tax return.

In addition, proposed tax reform could be cause for additional changes to your tax plan. Planning now for 2017 taxes not only helps reduce your tax burden, but it can help you gain control of your entire financial situation.

This year may seem especially tricky with the uncertainty of potential changes in the tax laws. This article is going to focus on planning assuming there is no change, since executives, lobbyists and Wall Street analysts increasingly believe the administration — distracted by repeated crises while facing a short and crowded legislative calendar — will be unable to deliver on President Trump’s promise to slash corporate and individual tax rates this year and ignite significantly faster economic growth.

While Hill Republicans argue that ongoing issues related to the current administration will have no impact on tax reform, movement on Capitol Hill has slowed momentum and emboldened Democrats to try to block Republicans’ every move. And Wall Street analysts believe it will help push tax reform into 2018 and perhaps even beyond next year’s midterm elections.

Here are a few things you should consider.

Assess Changes That Affect Your Situation

Have you experienced any life events that can change your tax situation? Here are some examples:

• A job change. If you are eligible for a distribution from your former employer’s retirement-savings plan, consider rolling the money into another tax-favored plan or an individual retirement account (IRA) to avoid the receipt of currently taxable income.

• A home sale. You may exclude profit — within limits — on the sale of your principal residence from your taxable income if you meet the tax law’s requirements.

• A marriage or divorce. File a new W-4 withholding allowance certificate with your employer, or, if you pay quarterly estimated taxes, review the amount you are paying.

• A new child arrives. As a parent, you may be eligible for various tax breaks.

Size Up Deductions and Credits

Use last year’s tax return to estimate what your highest tax bracket will be and how you can reduce your tax liability through deductions and credits. For instance, you might make deductible charitable donations of money or property to reduce your marginal tax rate.

This might be particularly important for 2017 since rates are expected to decrease in the future.

Examine Your Investment Portfolio

You can harvest capital losses from securities sales to offset capital gains plus up to $3,000 of ordinary income each year. You may also use capital gains to offset capital losses from earlier in the year.

Planning your securities activities early will help you prepare for tax time.

Take Retirement Plans  into Account

When possible, boost contributions to retirement plans within the generous tax-law limits. You may also be able to supplement your retirement plan at work with contributions to an IRA plan.

On the flip side, you’re generally required to take annual required minimum distributions from retirement plans after reaching age 70½. Keep that in mind if you will reach that milestone this year.

Focus on Higher Education

If you have a child in college, you may be able to claim higher-education credits even if the child graduates this year. However, each credit is phased out for upper-income taxpayers. The tuition deduction expired after 2016, so make sure to plan for the best use of the remaining education tax benefits.

Update Your Estate Plan

Finally, review your estate plan to ensure you’re maximizing tax benefits. Currently, transfers between spouses are completely exempt from estate and gift tax, while other transfers are sheltered by a $5.49 million exemption in 2017 ($10.98 million for a couple).

While estate-tax reform remains a strong possibility, if not in 2017 then in a future year, waiting to plan may not be prudent.

Outside Collection Agencies

While many things in the tax arena remain uncertain at this point, two changes at the IRS have taken effect in 2017 that you should be aware of.

First, the IRS is now using outside collection agencies to collect unpaid tax obligations. This new program will start slowly, with only a few hundred taxpayers receiving mailings. The number will grow into the thousands later in the summer.

Taxpayers who are contacted will first receive several collection notices from the IRS before their accounts are turned over to the private collection agencies. The agency will then send its own letter to the taxpayer informing them that the IRS has transferred the account to the agency.

These agencies are required to identify themselves as working with the IRS in all communications. Unfortunately, a change like this can often lead to confusion among taxpayers, which gives scammers a new opportunity to steal taxpayer dollars. The IRS is aware of the potential fraud problems and plans to continue to help taxpayers avoid confusion.

The IRS reminds taxpayers that private collection companies, like the IRS, will never approach taxpayers in a threatening way, pressure taxpayers for immediate payment, request credit-card information, or request payments in gift cards, prepaid debit cards, or a wire transfer. A legitimate letter from a collection agency associated with the IRS will instruct taxpayers to write a check directly to the IRS.

Correspondence Audits on the Rise

The IRS is now handling many routine audit reviews through form letters called correspondence audits. These letters come from the IRS and ask for clarification and justification of specific deductions on your tax return.

Common issues that trigger a correspondence audit are large charitable deductions, withdrawals from retirement accounts and education-savings plans, excess miscellaneous deductions, and small-business expenses.

Don’t panic if you get one of these audit form letters. The IRS often uses computer programs to compare individual return deductions with the averages for a person’s income level or profession. If you’ve received a letter, you may have simply fallen outside the averages.

As long as you respond promptly, thoroughly, and with good documentation, it won’t necessarily become a contentious issue. The key is to keep proper, well-organized documentation under the assumption you may need it to support your deductions. If you do this right, the correspondence audit will end with a ‘no change’ letter from the IRS, acknowledging you’ve addressed their concerns.

These are just a few possible mid-year tax-planning moves to consider. In between summer picnics and family outings, take the time to review actions that might be beneficial to you at tax time next year. It will be here before you know it.

Kristina Drzal Houghton, CPA, MST is a partner and director of the Taxation Division at Meyers Brothers Kalicka in Holyoke; (413) 536-8510.

Banking and Financial Services Sections

Beyond the Numbers

Managing Principal Julie Quink, left, and Principal Deborah Penzias

Managing Principal Julie Quink, left, and Principal Deborah Penzias

The two youngest partners at Burkhart Pizzanelli say they’ve learned well from the accounting firm’s founders, who have long cultivated a relationship-driven culture that builds not only business, but, more importantly, trust. It’s a model they hope to build upon in the coming decades, with the goal of helping clients navigate the many facets of growing a successful enterprise.

To those outside the accounting industry, it may seem like a dry, numbers-driven game.

But that’s not the case at West Springfield-based Burkhart Pizzanelli, said Managing Principal Julie Quink, noting that each of those numbers tells a story, and it’s a story she and her team want to hear and understand.

“We’re very relationship-driven in terms of our clients, and also with our team — we’re a very close-knit team; that’s how we function,” Quink said. “We don’t want to be one-and-done, where we prepare your tax return and don’t hear from you until next year. We want to reach out often to see how things are going. We want to hear when positive things are happening.”

That leads to new business opportunities, said Partner Deborah Penzias, but also a deepening of trust between Burkhart Pizzanelli and its clients that often results in decades-long business relationships.

“We stress the relationship aspect of it; that’s really important to us,” Quink added. “Our topmost priority here is quality, and building relationships is second.”

The company dates back to 1986, when Richard Burkhart and Salvatore Pizzanelli, still partners with the company today, went into business together as an accounting, tax, and consulting firm. A third partner, Thomas Pratt, joined them soon after, and the three steadily grew the firm. Penzias came on board in 1998, followed by Quink in 2011, and today, the five partners are among 18 total employees, performing services in a variety of areas.

“We provide your traditional tax and accounting services, and we also do a lot of things other firms don’t do,” Quink said. “We have a forensic accounting practice, we have our own bookkeeping group in house, and we have access to a third-party administrator on site who can help with defined-contribution plans and plan design.”


We don’t want to be one-and-done, where we prepare your tax return and don’t hear from you until next year. We want to reach out often to see how things are going. We want to hear when positive things are happening.”


The firm specializes in a number of industry groups, including healthcare, construction, affordable housing, auto dealers, manufacturing, nonprofits, professional services, real estate, restaurants, and wholesale and distribution. “It’s a good mix,” Quink said.

In all those areas, she and Penzias stressed that the company’s culture is one of collaboration, honesty, mutual respect, and trust, and that means forging relationships with all the members of a client’s financial-advisory team, which may include an attorney, an investment adviser, a bank, and an insurance agent. “We’re all part of the financial team advising the business,” Penzias noted.

Whether dealing with a small-business client with $100,000 in revenues or a $100 million entity, that philosophy stays the same, Quink added.

“We like to function as a team. If we find something is not in our bailiwick to deal with, we refer it out. We feel that we should be advising on our core competencies, and if something is outside that realm, we’ll refer it to one of the others on the team. There’s a lot of crossover with legal counsel in terms of estate planning, divorce situations, and business planning. That’s why it’s important for us to work as a team.”

Current Events

It’s equally important to stay on the cutting edge of the accounting and business-advisory world, which Burkhart Pizzanelli does in two critical ways.

“We recently rolled out to the team what our financial picture looks like, where we spend our money,” Quink said. “If you look at it as a pie graph, clearly the biggest piece is our human capital, our people. But the next-biggest buckets where we spend our resources are education and technology.”

“The industry has changed so much since I started in business, when we were preparing tax returns by hand with pen and paper,” Penzias said by way of explaining the commitment to current technology. “That has evolved over the years. Now, we replace our computers on a three-year cycle, whether they need it or not. We’re constantly adding new programs, new tools, so we can delegate the calculation tasks to computers and focus on what’s really important to a business.”

Julie Quink

Julie Quink says she sees Burkhart Pizzanelli as a critical part of a client’s financial team.

Quink added that clients are encouraged to use as much technology as possible, both because it creates an electronic trail, and to make their operations as convenient as possible for them. “We’re conscious of the security piece of it, and we’re very secure,” she added.

Burkhart Pizzanelli also invests substantial resources into continuing education, far beyond the minimum requirements of licensing authorities, the partners explained. This includes industry-specific and technical training in the areas in which they operate and want to expand.

Most team members require at least 80 hours of education every two years to retain their certifications, which they usually split into 40 hours each year. But those industry-specific certifications require additional education and may push them well past 60 hours annually.

“The firm pays for this education and makes sure they’re current with what’s happening in different industries, and that we have appropriate knowledge to work in these areas,” said Quink, who became a certified fraud examiner last year. “We should have a working knowledge of any business we’re serving.”

She reiterated that continuing education isn’t just beneficial, but an integral part of the business. “There are certain educational criteria we need to meet. Some folks here have their insurance licenses and are able to help underwrite policies. On the tax side, we need specialized tax knowledge; most of our people here can do tax returns, so the majority of our people get tax training every year to make sure they’re up on their education. We don’t ever want to be in a situation where we’re serving industries we don’t have expertise in.”

Penzias agreed. “We would refer away before doing something we couldn’t handle,” she said, noting that expertise combined with candor helps build trust with clients. “The best referral sources are happy customers.”

The company’s culture is producing happy employees, too, Quink said, noting that more than half of them have been with the firm more than 10 years.

Community Ties

That kind of retention bolsters a relationship-oriented culture that also manifests itself in the community. Many Burkhart Pizzanelli employees volunteer with local organizations in various capacities, including board membership, advising, and other forms of service.

“One thing we stress here is community service,” Quink said. “We encourage the team and provide time during the day or evening to attend events or be involved. We feel like we make a difference in the West Springfield area — both with clients and in our community. We feel it’s important to be a good community partner.”

“We want to give back,” Penzias added, “and we encourage that in our team.”

Meanwhile, the firm continues to expand its reach in professional areas as well. Take Quink’s certification as a forensic accountant, which allows her to work with legal counsel — sometimes on the plaintiff side, sometimes the defense — to help build a case in matters ranging from divorce to business disputes.

“What we don’t do is come up with an opinion on innocence or guilt — just a pattern of facts to help with the case,” she explained. “It’s not just hard numbers; you see what causes people to do things, what motivates them, and it’s often not pleasant for clients because there’s a level of trust that’s been violated, or it may be a marital situation where one spouse is hiding assets from the other. It’s a little more interesting than just doing a tax return.”

The company continues to expand its traditional services as well, now boasting 10 CPAs but also strengthening client relationships on matters from transactional needs to succession planning.

SEE: List of Banks in Western Mass.

“Tom has one client who’s been with him more than 40 years,” Quink said. “They may not need the same level of service anymore, but they stay because of the relationship aspect. They feel comfortable that we’re giving them the best advice for their situation. Clients look to us for advice, and we provide that. If we’re not able to help them with some particular aspect, we refer them to one of the trusted people we deal with.”

As the youngest partners, and the ones who will eventually be fully in charge, Quink and Penzias want that culture to spur the next 30 years of growth at Burkhart Pizzanelli. As a professor at Elms College, Quink has access to a pipeline of talent she can observe and evaluate in the early stages; four of the firm’s employees are Elms graduates.

Counting on Them

In such a diverse business, they added, everything comes back to those relationships they touted multiple times — those real people, with real issues, behind the numbers.

“We’ve seen companies start from seedlings and grow and watch the next generation take over,” Penzias said. “I’ve worked with the parents, and then the kids take over, and we have to foster those relationships as well. It is very gratifying to see our clients succeed.”

But even when they struggle, Burkhart & Pizzanelli has a place — perhaps an even more important one, Quink said.

“When clients aren’t doing so well, I think we shine there,” she said. “We can provide a lot of insight, alternatives, and strategies. At some point in each business’ life cycle, they’ve had some struggles. Most of our clients are closely held, family-run, not publicly traded companies. Family businesses have their own dynamic — and we understand the dynamics of a family business.”

Being there for all aspects of a clients’ business also creates a personal bond as well, Quink said, recalling a client who lost his spouse, and one of the very first calls he made was to Burkhart. “We have so much impact on people’s lives; it’s impressive,” she said. “But, likewise, so is the impact our clients have on our lives.

“As we evolve as a firm, Debbie and I are the future owners; ultimately, she and I will own the firm,” she went on. “With that happening, we are also grooming the next wave. We’re always forward thinking; we’re finding our replacements, too. We’ll be here awhile, but it takes awhile to build referral networks and understand how the business works and really gain experience in the industry. We’re grooming our next leadership team.”

That grooming and training goes far beyond the technical aspects of the accounting industry, Penzias said, but extends to soft skills and relationship building, which are as much art as science, but are critical to continuing the culture first cultivated by the firm’s original partners.

“Trust is important, and relationships are important,” Quink said — much more important, in fact, than the dry numbers on a computer screen.

Joseph Bednar can be reached at [email protected]

Banking and Financial Services Sections

At This Early Juncture, We Honestly Cannot Tell

By Kristina Drzal-Houghton, CPA MST

Kristina Drzal-Houghton

Kristina Drzal-Houghton

President Trump’s skeletal outline of a tax package, unveiled at the White House late last month in a single-page statement filled with bullet points, was less a plan than a wish list.

Treasury Secretary Steven Mnuchin and Gary Cohn, the director of Trump’s National Economic Council, laid out the skeleton of a plan to reporters. They pitched his new tax proposal as a cut for the middle class and not the wealthy. However, it appears as if it would undoubtedly mean lower taxes for top earners, while the impact on middle incomes is less clear.

The proposal envisions slashing the tax rate paid by businesses large and small to 15%. Lowering the corporate tax rate from 35% to 15% is one of the most aggressive moves in the plan. The administration says it gets the rate down to where it is for most other industrialized nations.

Additionally, corporations would pay reduced or no taxes on foreign profits brought back to the U.S. It would be a special, one-time opportunity to bring home cash that they are parking overseas. They did not say how low that rate would be or how they would ensure that the money would be invested productively.

Pass-through businesses, such as S corporations and LLCs, would also pay the same 15% tax rate that Trump has proposed for corporations. As the name suggests, pass-through businesses pass their income through to their owners, who pay tax at their individual rates. For high-income earners, the rate could decrease from 39.6% to 15%. Critics have noted that this will not only benefit small family businesses, but also large business empires like Trump’s own.

On the individual tax front, the number of tax brackets for individuals is reduced from seven to three: 10%, 25% and 35%. The Trump administration did not say where those brackets begin and end. Individual tax rates currently have a ceiling of 39.6% and a floor of 10%. That lowers the top rate by nearly five percentage points, easing the tax burdens on most Americans, including, again, the rich.

Under the plan, the top federal capital-gains rate is cut from 23.8% to 20%. This is achieved by eliminating a 3.8% tax that is used to fund the Affordable Care Act. The reduction is meant to create greater incentives for people to invest.

Currently, single individuals have a standard deduction of $6,350, and married couples can deduct $12,700 from their taxable income. The president’s plan would double the standard deduction. That is intended to put more money in the pockets of the average taxpayers who do not itemize their deductions. It has the added benefit of simplifying the preparation of tax returns for more people. Cohn tried to frame this as a benefit to middle- and lower-income people who don’t have deductions, saying some people would pay little or no taxes under Trump’s plan.

The one-page blueprint proposes, without specifics, to “eliminate target tax breaks that mainly benefit the wealthiest taxpayers.” The proposal would scrap most itemized deductions, such as those for state and local tax payments, a valuable break for taxpayers in Massachusetts and Connecticut, which have high income-tax rates as well as real-estate taxes. But the president would leave in place popular breaks for mortgage interest, charitable contributions, and retirement savings.

The plan would eliminate the estate tax and alternative minimum tax, a parallel system that primarily hits wealthier people by effectively limiting the deductions and other benefits available to them — both moves that would richly benefit Trump himself.

In a brief session with reporters, Cohn and Mnuchin said they had been toiling for weeks on the proposal, much of which closely resembles the plan Trump championed as a presidential candidate. They argued that it would spur robust economic growth that would, along with the elimination of deductions, cover the potentially multi-trillion-dollar proposal entirely, a prospect that even many Republicans believe is virtually impossible.

“This will pay for itself with growth and with reduction of different deductions and closing loopholes,” Mnuchin said, repeating his optimistic estimate that the plan would spur the economy to grow at a rate of 3% annually. “The economic plan under Trump will grow the economy and will create massive amounts of revenues, trillions of dollars in additional revenues.”

The non-partisan Committee for a Responsible Federal Budget has estimated that the Trump outline could cost $5.5 trillion in revenues. The likelihood of our needing to worry about the accuracy of this estimate seems slim given recent developments.

Congressional leaders reached a bipartisan agreement on April 30 to fund the government through September, effectively ending any suspense about the possibility of a government shutdown. The agreement includes increased funding for the military and for border security. But it does not include funding for the wall that President Trump wants to build along the border with Mexico, one of his major campaign promises.

While the agreement avoids the embarrassment of a government shut-down, it also gives a glimpse of the reluctance of lawmakers to bend to Trump’s spending priorities, like his desire for sharp cuts to domestic programs, with the increase in funding for medical research a prime example.

While you may want to consult your tax adviser about the possible benefits the Trump plan would have on your taxes, I would suggest you hold off on changing your withholdings or estimated tax payments for 2017.

Kristina Drzal-Houghton, CPA MST is the partner in charge of Taxation at Holyoke-based Meyers Brothers Kalicka, P.C.; (413) 536-8510.

Banking and Financial Services Sections

Avoiding Identity Theft

By Cheryl M Fitzgerald, CPA, MST


Identity theft has become an increasing concern for all. The Federal Trade Commission (FTC) estimates that as many as 9 million Americans have their identities stolen each year. According to a Jan. 26, 2015, FTC press release, tax-related identity theft was the most common form of reported identity theft in 2014.

Personal information (including Social Security numbers) is stolen by using various methods (including dumpster diving, skimming, and phishing). The people stealing identities have become very adept and strategic in the ways that they are obtaining this information.

According to the Internal Revenue Service (IRS), tax-related identify theft occurs when someone uses your Social Security Number (SSN) to file a tax return claiming a fraudulent refund. Taxpayers are usually unaware of this until they receive a notice from the IRS indicating that multiple returns have been filed using the same SSN. The IRS uses your SSN to make sure your filing is accurate and complete, and that you get any refund you are due.

Cheryl M Fitzgerald

Cheryl M Fitzgerald

Remember to be extremely cautious when you receive unexpected e-mails or phone calls from the IRS. If no written correspondence preceded it, there is reason to be suspicious.”


Identify theft can affect how your return is processed. An unexpected notice or letter from the IRS could alert you that someone else is using your SSN; however, the IRS does not start contact with a taxpayer by sending an e-mail, text, or social-media message that asks for personal or financial information.

Some of the things that you can do to in the event that identify theft (not just with the IRS) has occurred are as follows:

• Call your credit-card companies if you believe fraud has occurred;
• Place a fraud alert on your credit reports and get copies of the report;
• Report identify theft to the FTC;
• File a report with your local police department; and
• Contact your financial institutions and close any financial or credit account opened without your permission.

If your SSN is compromised and you know or suspect you are a victim of a tax-related identify theft, the IRS recommends these additional steps:

• Respond immediately to any IRS notice. Call the number provided or, if instructed, go to idverify.irs.gov;
• Complete IRS Form 14039 (identity-theft affidavit) if your e-filed return rejects because of a duplicate filing under your SSN or you are instructed to do so. Use a fillable form at IRS.gov, print, then attach the form to your paper filed return and mail according to the instructions; and
• Continue to pay your taxes and file your tax return, even if you must do so by paper.

According to the IRS, some suggestions that you can do in order to help reduce your risk are as follows:

• Always use security software with firewall and anti-virus protections, and use strong passwords;
• Learn to recognize and avoid phishing e-mails, threatening calls, and texts from thieves posing as legitimate organizations such as your bank, credit-card companies, and even the IRS;
• Do not click on links or download attachments from unknown or suspicious e-mails; and
• Protect your personal data; do not routinely carry your Social Security card, and make sure your tax records are secure.

These steps should be followed because, if an identity theft does occur, the situation can typically take many months to correct. Some identity-theft victims have experienced a year or more wait before receiving their appropriate refund. The IRS will typically tell taxpayers who inquire about the status of their identity-theft case that cases are resolved within 180 days; however, it has typically taken longer than that time frame.

In conclusion, the single most important takeaway is that the IRS will always send a written correspondence first. Remember to be extremely cautious when you receive unexpected e-mails or phone calls from the IRS. If no written correspondence preceded it, there is reason to be suspicious. With the increased occurrence of identity theft, it is especially important this tax season (and throughout the year) to be diligent with your information and take proper measures to secure it.

Cheryl M Fitzgerald, CPA, MST, is senior manager at Holyoke-based public accounting firm Meyers Brothers Kalicka, P.C.; (413) 322-3500; [email protected]

Banking and Financial Services Sections

Taking Account

Principals Patrick Leary (left) and Doug Theobald

Principals Patrick Leary (left) and Doug Theobald

The field of accounting is broad, diverse, and constantly changing, so the leaders of Moriarty & Primack are rightfully proud that their firm has weathered those changes with near-constant growth and little turnover. They credit a culture of connection, where open communication is valued in the office and client relationships dig deeper than mere numbers on a ledger. As it approaches its second quarter-century, those are values the company intends to preserve.

After a quarter-century in business, it’s natural for an accounting firm to re-evaluate its place in the financial-services industry — particularly for a firm with the consistent growth record of Moriarty & Primack.

“We’re probably at the cusp where we’re not a small firm anymore, but not a large firm, either — maybe a medium-sized firm,” said Patrick Leary, CPA, Assurance Services partner with the firm, which now totals almost 40 employees. “So, what does that mean to our clients and how we market ourselves in the community?”

When he and other leaders of the Springfield-based firm sat down with BusinessWest recently, they talked about how the company’s evolution had sparked conversations, now ongoing, about its messaging and growth strategy going forward. What kept coming up was a wave of young talent.

“You can certainly say we’re younger than we were 10 years ago,” Leary said. “That certainly changes the firm’s culture — younger people with lots of energy, people who are building their careers, striving to move forward.”

They also bring their own, varied perspectives, said Douglas Theobald, Tax Services partner and the firm’s president, noting that they were recruited from both Western Mass. colleges and well outside the region, and hail from both accounting programs and other professions, bringing a richness of life experience to their jobs.

This group — which definitely doesn’t represent the old vanguard of “green-eyeshade accountants,” Leary noted — also bring key experience in modern modes of communication and connection.

“The world is changing so quickly, with social media and technology and such,” said Margie Smith, human resources director, “and they are really savvy in all those areas in a way that some of us older folks may not be.”


We’re probably at the cusp where we’re not a small firm anymore, but not a large firm, either — maybe a medium-sized firm.”


Conversely, noted Lisa Behan, CPA and director, the company’s leaders can model the close client relationships that have been a hallmark of Moriarty & Primack’s 24 years in business. “The only way to teach them that is to show them.”

To that end, Leary said, the firm’s leaders make an effort to draw younger employees into many of their client discussions, if only to help them gain experience in myriad areas. “That builds our bench; someday our clients will be going to them with these questions, and the more situations we throw our staff into, the better they’re going to be in their career.”

Smith said the younger employees appreciate that culture. “It helps them develop more quickly than they might otherwise. We also have an open-door policy here. Everyone is approachable, and they know they can come to anyone, anytime, with any questions. There’s a lot of collaboration here, and everyone is on a first-name basis. It’s not ‘Mr. Theobald’ or ‘Mr. Leary’; it’s Doug and Patrick. That open-door policy helps everyone work together and makes them feel like they can ask questions, that questions aren’t stupid.”

For this issue’s focus on financial services, Moriarty & Primack’s leaders spoke with BusinessWest about how asking the right questions, and answering them with a culture that prioritizes relationship building, has fostered continual growth since 1993, and likely more moving forward.

Making a Name

Richard Moriarty and Jay Primack were long-time employees of Coopers & Lybrand when they decided to put their own names over the door, using their experience and effective recruiting of talented CPAs to make their firm one of the standouts in the local accounting community. They started in a 1,000-square-foot office in One Financial Plaza, then expanded that footprint before moving one block down Main Street to Monarch Place in 2001.

Now in its second generation of leadership, said Theobald, the firm has come to focus on four key areas: Auditing services to business clients, nonprofits, and other business entities; tax-consultation and compliance services to business clients, individuals, and other segments; business-valuation work; and employee benefit plans.

From left, Doug Theobald, Margie Smith, Lisa Behan, and Patrick Leary

From left, Doug Theobald, Margie Smith, Lisa Behan, and Patrick Leary say the company benefits from a culture of open communication.

“Those are our core service lines,” Leary added. “It’s a fairly traditional core set of services for a CPA firm of our size.”

Theobald said the firm is well-versed in virtually every industry, but its accountants aren’t afraid to consult with someone else in the company who might have broader experience in a certain field.

“We do collaborate internally amongst ourselves. Patrick may have more experience in the construction field than I have, and if I have a construction client, I can come to him with a question. And vice versa — he might come to me with a tax issue. That’s been very successful for us; we work with individual clients with a team approach, and try to use the best knowledge we can internally.”

That’s an important part of the culture, Leary added. “We tell our people that nobody here knows everything. To me, being a good CPA means asking a lot of questions. We’re not going to go to a client and just pretend we know all the answers.”

That emphasis on candor and communication appeals to Behan, who joined the firm last year from Owens & Co. in Connecticut. “I’ve seen the whole profession change over the past 10 to 20 years around relationships as opposed to technical expertise,” she said. “What’s really important to clients now is the trust, the connections, the relationships, the experience … a lot of intangibles around our relationships with clients. Twenty years ago, what we did was more of a commodity, and less personal.”

Theobald agreed. “The only way you can be successful in this business is by driving deep in relationships with your clients. They look to you as a confidant. We clearly bring technical expertise, or you wouldn’t be working with us, but it’s also a relationship built on trust. We wouldn’t have approached Lisa to join this business if she didn’t have both those skill sets.”

Smart Growth

Behan’s arrival was one example of organic growth, Theobald said, as she brought her own client base into the firm. Other growth over the years has been driven by acquisition, referrals, and a broadening of services.

“We realize we’ve got to continue to grow, and we give our staff as much opportunity as possible to grow,” he told BusinessWest, and that means drawing in new clients from near and far. “We are committed to Springfield, and we value the Pioneer Valley; we work here and reinvest in this community. But we’re also very active outside Western Mass. — in the Boston marketplace, in the Hartford marketplace. We realize that, if we want to grow the firm, we have to expand our footprint, and we’ve done this very successfully.”

To move forward, though — beyond that ‘medium-sized firm’ status — Moriarty & Primack is now examining its growth goals and formulating new marketing strategies, which is in some ways untilled ground.

A wave of new employees over the past decade

A wave of new employees over the past decade, many of them young professionals, has given Moriarty & Primack an injection of energy and ideas.


“I think our success has been built off hard work and past successes with clients,” Theobald said. “We do very little in marketing, but get a lot of referrals — but we only get those referrals if clients have seen us do a good job, and are confident in our ability to work together, to bring high-end service with good ideas and good execution.”

Smith noted that the firm has also committed to boosting employee training and updating its technology and infrastructure to better serve clients, which is critical in an age when so much business is handled by electronic means.

“A lot of times growth is a byproduct of where the industry as a whole is going, and so much these days is done electronically,” Theobald said. “We can serve clients totally through electronic means. We might meet with a client twice a year but still do a lot of work with them throughout the year.”

Behan agreed. “Relationships can really be built and maintained electronically. We have clients on the West Coast … so much of it is phone and e-mail. If you stay on it and maintain these relationships, you don’t always have to be face to face with people anymore.”

Busy clients tend to appreciate doing business through those channels, because carving out an afternoon meeting can be a real commitment on their end, Leary added. “We get it. We know how clients work — they may wake up at 5:30, check their e-mail, and get a lot of work done during that quiet time.”

The challenge, Theobald said, is to be accessible at all hours, but respectful of the work-life balance that’s such a key factor in retaining talent in the Western Mass. marketplace “Young professionals don’t want to work 8 to 7 every day; they want that work-life balance, and that forces us as managers to run a business that can effectively serve clients but also be a good fit for the staff.”

Getting Involved

So far, it’s working, Theobald added. “We’re only as successful as our staff, and we have a low turnover rate, which translates into continuity of service and not having to retrain the staff every so often. Turnover is very disruptive to a firm, and that is maybe the best judge of what we are doing right as a firm.”

Moriarty & Primack keeps employees engaged in ways that go beyond their job description, he added — for example, though a social-action committee through which employees decide  where to target the firm’s charitable resources, whether through dollars or events. “They like that; it’s empowerment. They’re contributing more than just in an accounting sense.”

The company also manages a mentorship program for younger staff, who have the opportunity to give and get feedback, Smith said. “They can help grow their own careers by talking to someone more experienced, and have someone watching out for them a little bit.”

These sorts of endeavors have myriad positive effects, Leary said, notably building employees’ knowledge — about their field and what’s happening in the community — which they can bring to bear in the future as they move throughout their careers.

As Moriarty & Primack looks to its second quarter-century, he went on, its leaders are drawing on history and experience to craft a vision of what they want to look like down the road.

“We’re a much larger firm than we were 10 years ago, and we’re a more diverse firm,” he told BusinessWest. “So we’re going through a strategic thought process: how do we get from here to there, how do we continue to distinguish ourselves from our competitors? The goal is to create a good strategy and execute it.”

It’s a vision that appeals to Behan. “I admire that Doug and Patrick are looking years down the road instead of looking back. They’re open-minded to how the firm might look in 10 years.”

It will certainly look much different — and has for a long time — from that small office Richard Moriarty and Jay Primack launched 24 years ago, Theobald said. “But we owe a lot to them for what they started.”

Joseph Bednar can be reached at [email protected]

Banking and Financial Services Sections

Seizing an Opportunity

Adam Corcoran

Adam Corcoran says the new facility in Belchertown exudes what he and others call the ‘Alden mystique.’

Adam Corcoran calls it the “Alden mystique.”

And by about the third casual reference to it, he was hard-pressed by BusinessWest to elaborate and elucidate as to just what that is.

He struggled a little with that assignment, because, in his view, and those of others around him nodding their head in agreement as he spoke, this isn’t exactly something you can see or easily qualify.

“The Alden mystique? It’s hard to explain, really … it’s more something you feel; it’s our personality, for lack of a better word,” said Corcoran, president of Chicopee-based Alden Credit Union. “It’s our brand — it’s who we are, it’s everything we say, and how we say it; it’s everything. You have to witness the service and get the full effect to really understand.”

Whatever the Alden mystique is, it will be — again, according to the people acquainted with the phenomenon — very much in evidence at the new, 4,000-square-foot Alden Financial Center on State Street in Belchertown, set to open its doors at the end of this month.

“It speaks to who we are — it adds to our mystique,” said Corcoran, adding that the name ‘financial center’ is significant, because this isn’t a branch, in the strictest definition of that term, and so, therefore, that is not what it is. Rather, it’s a full-service facility to be staffed by a full-time investment/financial advisor, a full-time property and casualty insurance advisor, and those providing traditional banking and loan services.

“It’s truly a one-stop financial center,” said Corcoran, and one that speaks to the credit union’s explosive growth in recent years, from $78 million in assets in 2010, when Corcoran arrived, to $161 million at present — and its ambitious plans to continue on that trajectory.

Indeed, the Belchertown facility, formerly occupied by Easthampton Savings Bank before it relocated to another location in Belchertown, is part of a strategic initiative to better serve the credit union’s many customers in the Ludlow-Belchertown area, and attract more of them, said Corcoran. But it was also pursued (ultra-aggressively, as we’ll see shortly) out of sheer necessity; the company has been growing at such a rate that it simply needed more space, and in a hurry.


The Alden mystique? It’s hard to explain, really … it’s more something you feel; it’s our personality, for lack of a better word. It’s our brand — it’s who we are, it’s everything we say, and how we say it; it’s everything.”


“One of the biggest challenges we’ve had over the years has been trying to find space for the staff we’ve assembled to support the growth we’ve had,” he explained. “Our main office in Chicopee is only so big … we’ve had board meetings in the basement for years. We then moved into the administration building across the parking lot from us, but it seems like every year we run out of space.”

That shouldn’t be the case any longer, he went on, noting that the new center in Belchertown should provide adequate space for years to come.

Meanwhile, it will become the cornerstone of expansion efforts in an area identified as one with high growth potential.

“One of the things we decided was that expanding for the sake of expansion and just putting branches up where we had an opportunity to do so was not really the way to go,” said Alden board chairman David Hodge, referring to a branch opened in Amherst in 2012 and closed three years later due to underperformance. “We all thought this [State Street] location was a great opportunity to not only solve our space problem, but better serve existing new customers and generate additional growth.”


List of Credit Unions in Western Mass.


For this issue and its focus on banking and financial services, BusinessWest takes an in-depth look at the new Alden Financial Center, the circumstances that made in a necessary reality, and the role it will play as the credit union seeks to continue and even accelerate an ambitious pattern of expansion — in every sense of that phrase.

Site for Sore Eyes

Corcoran told BusinessWest that Alden undertook what would be considered a very elaborate search for a location for its new financial center, one that would take it to several communities and a host of potential sites, many of which did not fit that aforementioned Alden personality for one reason or another, or didn’t work from a financial perspective.

To say that it became enamored with the State Street parcel in Belchertown, owned by Pride Stores, would be a huge understatement, as Corcoran’s recollection of efforts to acquire it reveals.

“This wasn’t even available when we first looked at it,” he recalled. “When we first inquired, they said, ‘oh, you want to rent it?’ We said, ‘no, we want to buy it,’ and they said, ‘but it’s not for sale.’”

Continuing with the story, he said the credit union asked the individual in question if inquiries could be made into if, and under what circumstances, the property might come up for sale.

“Some time went by, and we got a call back, and the person said, ‘I hear you’re interested in leasing the bank space in Belchertown,’” he went on. “I said, ‘no, we’re interested in buying it,’ and he said, ‘but it’s not for sale.’ And I said, ‘we’ve had this conversation.’”

Adam Corcoran, left, and David Hodge

Adam Corcoran, left, and David Hodge, chairman of the Alden board of trustees, believe the new facility in Belchertown will enable the credit union to continue its torrid pace of growth.

In essence, Alden wasn’t interested in taking ‘no’ for an answer, and it didn’t, eventually convincing Pride to let it acquire the property and the 1.3 acres it sits upon, a small portion of a much larger development (still owned by Pride) that includes a Tractor Supply Store, Planet Fitness, and other retail outlets, and will soon include a Pride store itself.

Why was Alden so persistent? A combination of factors, said Corcoran, including the geographic location — the proximity to communities with many customers and Belchertown itself, still one of the fastest-growing communities in the region — but also potential traffic flow at that expanding retail site, complete with the new Pride store, and the attractive physical space in the building itself. Also, there are no other credit unions in the vicinity.

“This was one of those things where timing and the pieces to the puzzle all came together,” he said. “It’s worked out fantastic so far.”

To get a better appreciation of all that, we need to back up a bit, to when Corcoran came to the company. It had $78 million in assets and roughly 12,000 members. Today, as noted, the numbers are $161 million and 22,075, respectively, and growing, with all of that growth coming organically and well ahead of the pace industry-wide, he noted.

When asked how this was accomplished, he made perhaps the first reference to the Alden mystique, noting that, during his first few years at the helm, the institution built up what he called its “infrastructure.”

By that, he meant a foundation on which to grow, meaning everything from products, a staff, new branches, and a platform for providing quality service, to aggressive marketing and smart use of improved information technology.

“We’ve set the bar higher for ourselves when it comes to the value we provide the membership and potential new members,” he explained. “We haven’t been afraid to take risks; sometimes they’ve worked out, and sometimes they haven’t, but we haven’t been afraid.”

In that ‘haven’t worked out’ category is that aforementioned branch in Amherst, undertaken as part of a partnership with UMass Amherst Athletics. The branch, located on Main Street, was not ideal, with no drive-up window and limited space, said Corcoran, and didn’t develop as expected.

Thus, the credit union, still desperately in need of more space, commenced a search for a more strategic location in Hampshire County, and for something that would be much more than a branch.

The search ended in Belchertown.

Center of Attention

Thus begins an intriguing new chapter in the story of this nearly 90-year-old institution.

Its marketing slogan is ‘Banking. No Boundaries,’ and that saying now has new meaning with the Alden Financial Center. The literal boundaries have been extended, and the figurative ones — well, there weren’t any to begin with, as evidenced by the Alden mystique.

That phenomenon is, as Corcoran said, hard to see and define. It’s the institution’s personality. And it will be on full display at this new facility.

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

Banking and Financial Services Sections

Expanding the Profile


The planned new Greenfield Savings Bank branches in Northampton (top) and Amherst.

The planned new Greenfield Savings Bank branches in Northampton (top) and Amherst.

Denise Coyne says one of the most important tenets of customer service is listening to the customers. And an even more critical one, she went on, is acting on what is being heard.

Adherence to both parts of that equation sums up, quickly and efficiently, Greenfield Savings Bank’s recent announcement that it will open two new branches in Amherst and Northampton, thus putting another exclamation point on the institution’s expansion into Hampshire County.

In short, the bank listened, and it acted.

“We have a great relationship with our customers, and we talk with them a lot,” said Coyne, the bank’s executive vice president and chief operating officer. “Over the past year or so, what we kept hearing about was location. We have great branches in those communities, and we’re going to keep those branches — they’re great locations. But customers wanted us to be on Main Street.”

In Northampton, that meant literally — the city’s bustling Main Street. In Amherst, it meant what amounts to the main thoroughfare for retail and foot traffic (which is not actually Main Street).

Thus, the bank will augment its large, full-service branches in those communities — 6 University Dr. in Amherst and 325 King St. in Northampton — with smaller, almost full-service branches in the heart of those downtowns. There will soon be a branch at 207 Main St. in Northampton, and another at 108 North Pleasant St. in Amherst.


Over the past year or so, what we kept hearing about was location. We have great branches in those communities, and we’re going to keep those branches — they’re great locations. But customers wanted us to be on Main Street.”


The new branches are being undertaken in direct response to customer need for convenience — “parking is at a premium in Amherst and Northampton, and once you get a spot in those communities, you don’t want to move,” said Coyne — but also as part of the bank’s ongoing efforts to grow market share in communities several exits to the south on I-91 from its base in Greenfield.

And that growth has come across the board, she went on.

“We have a trust department … we’ve seen an increase in wealth-management services,” she explained. “And as far as deposits go, since we opened our branch in Northampton in 2012, we’ve seen 16% growth in deposits annually.”

But perhaps the most profound growth has come on the commercial side of the ledger, said Mark Grumoli, senior vice president and director of Commercial Lending for the nearly 160-year-old institution.

“One of the factors that spearheaded our look to establish another branch in Northampton has been from the commercial-loan growth we’ve experienced,” he said. “Over the past nine years, we’ve generated in excess of $400 million in loan volume, and a large percentage of that has come in Hampshire County; the loan portfolio has grown almost three-fold over those nine years.”

Elaborating, he said that, to better serve that growing number of commercial customers, the additional branches were a necessary strategic initiative.

And the new additions have come after a lengthy search for sites that would meet customers’ needs for more convenience, but also give the bank needed visibility and the desirable space it needed.

“We’ve been looking for locations for more than a year now,” said Coyne, adding that, in Northampton, especially, there were many options to consider, but not many that would allow the bank to accomplish its primary mission. So it waited for such an opportunity to develop.

The Northampton site, located favorably near a Starbucks and across the street from City Hall, was previously home to a clothing store, and covers nearly 700 square feet. The Amherst site, meanwhile, near a CVS and across the street from Judie’s Restaurant, had been occupied by a bookstore and was vacant for some time.

Thus, both sites will require extensive renovation, said Coyne, adding that they will feature most of the traditional services, other than safe-deposit boxes and drive-thru facilities.

Both are slated to open their doors in June, and both are needed additions in those communities, Coyne noted.

“These are ‘walking’ communities,” she stressed. “And we wanted to bring that additional convenience to our customers.”

—George O’Brien

Banking and Financial Services Cover Story Sections
Jim Hickson

Jim Hickson, Berkshire Bank’s Springfield Regional President

Through organic growth and a series of acquisitions, Berkshire Bank has achieved the kind of size ($9 billion in assets at present) that is necessary to succeed in the challenging climate within this industry. But Springfield Regional President Jim Hickson says it blends this size with a small-bank feel and “attitude,” and this is why it has been able to improve its share of the local market.

Jim Hickson says the conference room at Berkshire Bank’s main Springfield offices have become a popular spot lately, seeing far more visitation than would be considered normal — in large part because the bank is certainly encouraging it.

The reason is the room’s windows, which feature northerly and easterly exposures and, more specifically, stunning views of the construction work going on at MGM Springfield, just a few dozen feet away in some cases. Indeed, the massive, 2,000-car parking garage now looms over that conference room — Hickson commented several times on how quickly the structure went up — and the windows at the north end provide views of much of the rest of the construction site.

What visitors obviously see is a casino taking shape, said Hickson, senior vice president and commercial regional president for the Pioneer Valley and Connecticut. What he sees — and what others probably see as well — is what the casino represents: regional momentum and additional growth opportunities, which could come in a number of forms, from large corporations coming to Springfield, like CRRC, to smaller businesses that may take advantage of what will be a growing need for services.

“Those cranes that you see … they translate into momentum for the region; it’s a very exciting time,” said Hickson, adding that he believes Berkshire Bank, a.k.a. America’s Most Exciting Bank (or AMEB, as is written on his zip-front fleece jacket), is very well-positioned to take advantage of the momentum that can now be seen out those conference-room windows, and also in some of the other offices in the bank’s large suite at 1259 Columbus Ave.

That’s because the Pittsfield-based institution has the requisite size — achieved through several acquisitions, including that of Springfield-based Hampden Bank early last year — to be a major player, but it doesn’t act like the proverbial ‘big bank’ you read and hear so much about.

List of Banks in Western Mass.

“We have big-bank resources, but with small-bank attention and approach,” he said, adding that, while this might sound like a line from the marketing department, it accurately conveys what goes on across what is now a huge Berkshire footprint, covering much of the Northeast, as we’ll see later.

And also in those offices on East Columbus Avenue, which comprise a regional headquarters, said Hickson, meaning that customers can avail themselves of a full slate of services, including commercial lending, residential lending, cash management, investment services, private banking, and more.

This combination of large-bank resources and small-bank attitude has enabled the bank to significantly grow its market share in the Greater Springfield area across the board, and especially in the highly competitive commercial-lending realm, said Hickson, adding that a variety of factors are spurring activity among area business owners.

“For the first few years after the recession, even up to three or four years ago, no one was really borrowing money; instead, people were paying down their lines of credit and getting rid of debt,” he explained. “But in recent years, many of our customers are finally saying, ‘I do need to invest in that piece of equipment’ or ‘I do need to put an addition on my building.’ People have been saying, ‘maybe we are finally out of this.’”

To effectively capitalize on these sentiments and this movement, banks need to be large, but also versatile, flexible, and ‘local,’ meaning local decision making, not simply lenders with phone numbers starting with ‘413,’ said Hickson, adding that he believes Berkshire is all those things, and thus well-positioned for what might come.

For this issue and its focus on banking and financial services, BusinessWest talked at length with Hickson about what can be seen out those conference-room windows, and how AMEB is poised to be at the forefront of it all — in every sense of that word.

By All Accounts

As he talked with BusinessWest about the bank, its recent pattern of growth, its growing presence in Greater Springfield, and its large-bank-with-a-small-bank feel, Hickson referred early and often to one ongoing project that underscores seemingly all of the above.

Springfield Innovation Center

Jim Hickson says Berkshire Bank’s involvement with the Springfield Innovation Center is an example of its commitment to the region.

That would be the construction of Springfield’s new Innovation Center on Bridge Street in two buildings acquired by DevelopSpringfield. The $2.7 million project represents a collaborative effort involving a number of partners, including the city, the state, DevelopSpringfield, Valley Venture Mentors, MassDevelopment, the Innovation Hub, and MassMutual. Funding is being provided by the state, through a MassWorks Infrastructure Program grant to MassDevelopment, MassMutual, the Beveridge Foundation, and the Berkshire Bank Foundation.

The bank itself is in the process of underwriting a construction loan to DevelopSpringfield for the renovation work and completion of the innovation center project, said Hickson, adding that final approval is expected within the next several days.

“It’s projects like this that exemplify that we’re here to serve everyone and have a vested interest in Springfield and this region,” he explained. “This a big project in the revitalization of Springfield, and we’re excited to be a part of it.”

Thus, as mentioned, that project checks many boxes when it comes to the bank’s operating philosophy and its goals for being a big part of the progress represented by the view out the back of the company’s offices on East Columbus Avenue.

Hickson arrived there — or back there, to be more precise — last October when he was named to his current post. Indeed, included in his nearly three decades of experience within the banking industry is a stint with Berkshire as senior vice president and asset-based lending relationship manager.

He’s also had tours of duty with People’s United, TD Bank, KPMG Consulting, and Fleet Capital. He is also chairman of the board for Common Capital.

With those accumulated business cards, he’s certainly had a front-row seat from which to witness an era of profound change in the local banking scene, with many new brands ariving, some old ones disappearing from the landscape, and a host of mergers and acquisitions.

Berkshire has been a part of that, he acknowledged, adding that the Pittsfield institution has greatly expanded its footprint in recent years. It now extends all the way from Syracuse, N.Y. in the western corner of the Empire State to Boston — a territory that includes three state capitals (Albany and Hartford are the others). And with the acquisition of New Jersey-based First Choice Bank, it now extends all the way to Philadelphia.

In the current banking climate, size brings a number of advantages — from larger lending limits to all-important economies of scale when it comes to operations in the face of rising technology costs and regulatory burdens — and Berkshire now possesses $9 billion in assets, 96 branches, more than $6.5 billion in loans, $6.6 billion in deposits, and $1.4 billion in wealth assets under management. Such growth has come organically, but also through those acquisitions, the latest of which involved First Choice, a $1.1 billion institution.

The Hampden Bank acquisition, completed in 2015, effectively doubled Berkshire’s presence in the Greater Springfield area, giving it 18 branches, while also doubling its commercial-lending portfolio within the region, said Hickson, adding that this strategic initiative is a good example of how the bank doesn’t simply grow for growth’s sake.

“That acquisition was a key development for the bank; Berkshire has always viewed the Pioneer Valley as a key strategic market,” he explained. “The bank’s not looking to grow to be the biggest in town; it’s looking for key strategic opportunities that fit our core values, and this acquisition was one of them.”

Points of Interest

Hickson said he doesn’t have to look out the conference-room window to know there is more activity in the commercial lending realm these days. He can see it in his office and with everything he sees as a member of the bank’s executive loan committee.

“The economy is better, and with a better economy comes more loan opportunities,” he said while summing up the landscape before getting into more specifics. “It may not be new entrants into the market, but maybe existing companies looking to grow either by diversifying into another product line or acquiring another company in the business sector they’re in.”

As one example, he cited the region’s large core of precision-manufacturing companies (one of Berkshire’s stronger specific niches), many of which are investing in new equipment, expanding facilities or building new ones, and diversifying product lines, largely as a result of greater confidence in the economy.

The next wave, he predicts, with both precision manufacturers and the local business community in general, will come in the form of mergers and acquisitions as smaller firms owned by retiring Baby Boomers face inevitable succession-planning issues.

“There are ways to finance those kinds of transactions,” he explained. “And we obviously want to keep as many of those firms local as we can.”

In the meantime, there is that increased optimism and subsequent lending activity that he mentioned earlier, adding that, to take advantage of it, banks need versatility and the ability to both develop specific niches and be generalists, said Hickson, adding, again, that Berkshire possesses such traits and skills, while some of the larger institutions don’t.

“As banks get bigger, they tend to lose sight of the local community they serve,” he explained, adding that Berkshire hasn’t done that, as evidenced by the Innovation Center and countless others in the portfolio.

This would include the large number of Small Business Assoc.-assisted loans the bank has participated in over the years.

“We’ve been very successful with SBA loans,” he explained, adding that this statement applies to this region, certainly, but also to the wide Berkshire footprint. Indeed, the institution has been top-rated in this realm by the SBA in several of the regions it serves, including the Pioneer Valley, Connecticut, and the Syracuse area.

“We’re very proud of that distinction — the SBA’s a great way to finance things, and we’re a big supporter of the agency,” he went on, adding that the SBA currently ranks the bank among the 100 most active in the country with such loans, with more than 110 transactions totaling more than $21.9 million.

However, those SBA loans are just a tiny fraction of the total portfolio, he went on, adding that, with the size generated by the acquisitions in recent years, Berkshire can make loans of all sizes and serve virtually every customer within the region’s business community, but with a small-bank approach.

Bottom Line

Rising from his chair, Hickson gestured out the conference-room windows and admired the view he and his staff regularly invite visitors to share.

“It’s such a beehive of activity; it’s exciting to take it all in every day and watch things progress,” he said. “It’s mesmerizing.”

He was talking about the MGM project, obviously, but he may as well have been referring to the region’s economy as a whole, although it is probably not worthy of such superlatives — yet.

But those cranes do translate into momentum and, hopefully, more progress and growth for area businesses. And Hickson believes AMEB is ready to be right in the middle of it all, just as it is in the South End.

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

Banking and Financial Services Sections

Business at Hand

Steve Lowell

Steve Lowell says a surge in usage of Monson Savings Bank’s mobile offerings has coincided with a downturn in branch traffic.

You never know what will persuade any given customer to switch banks, Karen Buell says.

Buell, vice president of Customer Technologies at PeoplesBank, recalled a couple of non-customers who recently visited a branch to cash checks. When they saw the bank had recently introduced Apple Pay, Android Pay, and Samsung Pay for its customers, they returned — to open accounts.

“Wow. What a win,” said Buell, who has been tracking the usage rate of the bank’s electronic and mobile banking offerings for years. PeoplesBank launched its first mobile app for iPhones in 2009, one of the first 50 financial institutions in the U.S. to do so. Today, 34% of all the institution’s checking-account holders use mobile services. But it was still pleasantly surprising to see those services create a customer on the spot.

Maybe it shouldn’t be a surprise, particularly among the younger crowd. A study last year by the Federal Reserve reported that 67% of Millennials now use mobile banking, compared to 18% of consumers age 60 or over. This usage gap is projected to widen further as the youngest of the 85 million-strong Millennial generation enters the workforce.

Steve Lowell, president of Monson Savings Bank (MSB), says about half of that institution’s customers bank online, and of this group, more than half, about 60%, use the mobile app — up from 31% three years ago and 8% in 2011, the year the app launched.

Customers can perform a number of banking tasks on their mobile devices, Lowell said, including transferring funds between accounts, making loan and bill payments, taking pictures of their checks to make deposits online, and sending money to other banks through an app called Popmoney.

He said adoption has been strong by customers of all ages, but especially Millennials, who have come to expect robust online and mobile services in many areas of life.

“If you don’t have mobile banking, you won’t get the Millennial generation. That said, we have people in their 80s using their smartphones to do their banking. It’s definitely skewed toward the younger generation, but we see it across all age groups,” he said, noting that he uses the function himself. “It’s so easy to use.”

Buell reports similar momentum driven by younger customers at PeoplesBank, noting that 51% of Millennial customers use mobile check deposit, a service the bank began offering in 2014, compared to 24% of the bank’s Gen-X customers and 16% of Baby Boomers. Given those demographics, it seems like demand for mobile banking will only rise.

“Our customer base has enjoyed this for a while, and we’ve had great adoption of it,” Buell said. Specifically, mobile check deposit has grown 140% in overall usage between 2014 and 2016, and total checks deposited rose by 133%. At the same time, total dollars deposited through mobile check deposit went up 202%, partly because the bank increased the dollar-amount limits for that service for many customers based on their balances and relationship with the bank.

Karen Buell

Karen Buell, seen here in PeoplesBank’s Customer Innovation Lab, says the bank has made just about all its e-banking activities accessible on mobile devices, with more to come.

“We’re constantly looking at data to determine how to serve customers better,” said Buell, who also oversees PeoplesBank’s Customer Innovation Lab, which, as the name suggests, develops new products for retail and business customers. “We saw that some mobile-deposit users were still coming to the branch for larger items, so we made some changes and gave them significantly higher limits to accommodate their needs.”

Making Change

Industry analysts have long noted that adoption of mobile banking followed a path similar to online banking, with some customers enthusiastic early adopters, and others initially reluctant for a variety of reasons, often having to do with security, or perceptions thereof.

“I think that’s absolutely the case,” Lowell said. “You still have to have that discussion with people who are concerned about security. But once we run through the precautions we have, and the logins they have to go through, they get pretty comfortable with it. And once they’ve tried it for a while, they get hooked on it. It’s such a convenience; it makes life easier. Of course, people have the right to be concerned about cybersecurity. But the more they learn about it, the less of a concern it is.”

Surging use of mobile banking has, naturally, raised questions about the future of physical branches — or, at least, their rate of expansion — but these are the same questions that arose when desktop online banking was introduced, and institutions have long asserted there will always be a need for brick-and-mortar offices. But Lowell says it’s something to keep an eye on.

“It’s a really important consideration. From 2013 to 2015, we didn’t see a significant decline in branch traffic — maybe 5% year over year — but from 2015 to 2016, we saw a 19% decrease in branch traffic; we went from roughly 555,000 transactions at our branches in 2015 to 452,000 transactions in 2016,” he explained, noting that, at the same time, the overall customer base has increased.

“We definitely see a transition — not just in mobile banking, but in electronic banking in general — and we’ve adjusted our staffing levels as a result of that, and we’re looking at adjusting our hours. We may not need to be open as many hours as we used to be. It’s something we’re watching really closely.”

Industry analysis is mixed on this topic. The Federal Reserve study indicated that even regular users of mobile banking still want to use other banking channels, from visiting an ATM or branch to withdraw cash to speaking with a customer-service representative or loan officer.

Specifically, survey respondents were asked about their use of five distinct banking channels. In the previous 12 months, 83% of smartphone owners with bank accounts visited a branch, 82% used an ATM, 82% used online banking, 53% used mobile banking, and 29% used telephone banking.

But electronic channels have had an impact on branch growth across the U.S. More than 1,600 branches shut down during 2015, the last year for which full figures are available, and several large, national institutions continued to shed offices in 2016.

The branches that remain boast fewer staff as well, from an average of 13 full-time employees per branch in 2004 to fewer than six last year. A recent study by Citi, “Digital Disruption,” predicts that new technologies could cause up to 30% of branch positions to disappear by 2025.

“People find it more convenient to do their banking from home,” Lowell said. “Our strategy is to do whatever is easy for them — they’re the customer, and we want to develop our relationship with them and make things as easy as possible.”

More to Come

Still, despite the concerns, mobile technology has stirred plenty of excitement in the industry. Lowell is enthusiastic about some advances just around the corner for MSB customers, including CardValet, technology that allows users to turn a debit card on and off with their phones, rendering it useless if stolen, and set custom-designed alerts for things like low balances and cleared checks, instantly transferring money between accounts to protect against overdraws. Another upcoming function is the ability to pay bills by taking photos of the invoice and the check.

“At this point, we’ve really put most of what you can do from your desktop onto your phone,” Buell said, noting that 60% of all electronic-banking logins at PeoplesBank are now made from mobile devices. Last fall, the bank launched fingerprint authentication, which allows users to log in without needing a username or password. The bank is also looking to introduce technology that uses the GPS function on smartphones to shut down a debit card when it’s not in the vicinity of the phone, to combat use of stolen cards.

“We want to be first to market with these things for our customers,” she told BusinessWest. “We’re really committed to being early adopters of technology, so they can get all the functionality of of a national bank, but the personal customer experience of a local bank.”

Joseph Bednar can be reached at [email protected]

Banking and Financial Services Sections

A Matter of Addition

Kristi Reale and Jim Krupienski

Kristi Reale and Jim Krupienski are the newest partners at Meyers Brothers Kalicka.

As part of a strategic plan to generate new opportunities and more profound growth for the company, and also to ensure a steady flow of new leadership, the Holyoke-based accounting firm Meyers Brothers Kalicka has named two new partners — senior managers Jim Krupienski and Kristi Reale. They’ve been acting essentially as partners without that title for more than year now, and say the firm has provided them all the tools they need to succeed.

Jim Barrett says it was maybe the worst-kept secret he’d seen in quite some time.

He was referring to the granting of partner status to two senior managers at the Holyoke-based accounting firm Meyers Brothers Kalicka — Jim Krupienski and Kristi Reale. The two, who have been with the firm for 12 and 15 years respectively, and had risen through the ranks to senior manager, were told more than a year ago, in something approaching confidentiality, that they were on the track to becoming partners and would likely achieve such status so by the end of this year.

Their promotion wasn’t exactly classified information, but it certainly wasn’t broadcast loudly, said Barrett, the firm’s managing partner since 2009, adding that he made it all official in an announcement to the staff on Dec. 19.

To say that it was somewhat anti-climactic was an understatement, as evidenced by this anecdote from Reale, several days before the news was scheduled to break internally.

“Someone walked up to me and said ‘has your promotion been made official yet?’ she recalled. “It wasn’t exactly a secret, but I didn’t think everyone knew. I guess they did.”

But while the promotions may not have been as discreet as intended, they are certainly significant, said Barrett, and represent an important and in many ways unique step in the company’s efforts to grow and put in place an effective succession plan that will ensure solid leadership for decades to come.

“This was a well-thought-out component of our strategic plan,” he explained. “We have a partner who is retiring, so we have a practice need; Jim and Kristi have demonstrated all prerequisite skills to get there, and we’ve been talking to them for almost two years about how they’re on the track.

“It’s been a process that’s taken a number of years to unfold,” he went on. “We want to onboard them so they know what to expect and the know what’s expected of them; we want this to be a success for everyone.”

While Reale and Krupienski took essentially the same path to a partnership, and their resumes have many common denominators, including extensive work in the community, BusinessWest 40 Under Forty plaques (Reale in 2009 and Krupinski a year later), and a number of bylined submissions to this magazine, they arrived at MBK with different career aspirations, as we’ll see in a few moments.

But they arrived at this career moment together, and for now, they’re excited about moving into different, slightly bigger offices and having their names and bios found by clicking the ‘partners’ button on the MBK homepage. But they’re far more focused on meeting the responsibilities that some with that title and helping the firm grow at a time when doing so is certainly challenging for any financial services firm in a region that has seen little, if any, overall expansion.

For this issue and its focus on Banking & Financial Services, BusinessWest talked with the two new partners, as well as the managing partner, about the promotions and the firm’s strategic plans moving forward.

Watching Their Figures

When she first came to Meyers Brothers, P.C. in February of 2001, Reale was thinking more about staying maybe 16 weeks than the nearly 16 years it took her to reach partner.

Indeed, a veteran with seven years of public accounting work under her belt, she was hired to help during tax season on a per-diem basis, and walked in the door already thinking about what she might do next. But a funny thing happened on the way to carrying out those plans.

“I never left,” she said, stating the obvious before moving on to the more important topic — why.

“I was thinking about going into private industry, but after a couple of months at Meyers Brothers, I just loved it and decided to stay,” she explained, adding that she was hired after just five weeks of per-diem work. “It was very professional, everyone was treated well … it was just a great place to work. I looked forward to going there every day.”

Kristi Reale

When she arrived at Meyers Brothers, Kristi Reale was focused on staying 16 weeks, not 16 years, but the environment she found changed those plans quickly.


Meanwhile, Krupienski got off the elevator on the eighth floor of the PeoplesBank Building just off I-91 (the merged companies came together there in 2005) with a much different mindset.

After serving as a senior accountant at a Big-4 firm (PricewaterhouseCoopers) and then shifting gears and working as a senior auditor at the Hartford, he had made up his mind to return to public accounting. The question was where, he said, adding that through a friend he heard about an opening at MBK.

“I interviewed, liked what I heard, liked the firm, the culture, the people I met with … and felt I should throw my hat into the ring,” said Krupienski, adding that while it would be a leap to start thinking about making partner back in 2003, he allowed himself to harbor such thoughts, and before long, that became a hard goal.

“It was kind of a thought in the back of my mind — I had made the jump back into public accounting, and you generally don’t do that if you don’t have some aspirations for being partner someday,” he told BusinessWest, adding quickly that reaching this rung at a firm of that size is never a given and it would likely take much more than a decade.

“I came from a big-firm mentality,” he explained. “It’s very structured there in terms of the progression, and while this firm isn’t PricewaterhouseCoopers … things are similar in many ways.”

Those sentiments help explain how accounting firms are in many ways different from small and medium-sized law firms, said Barrett, adding that with the latter, an associate is in many cases on a partner track soon after arrival, and if they’re good at what they do, can probably expect to make partner within a certain number of years, although the number and circumstances vary widely with the firm.

In accounting, it’s different, he said, adding that law is more of a transactional business, where individual lawyers have what amounts to their own book of business and client list, while in accounting, one to 10 people could be working with the same client.

Jim Krupienski

Jim Krupienski says MBK has provided him and fellow new partner Kristi Reale with all the tools they need to succeed.

When asked why both Reale and Krupienski were named partners at this time, Barrett said it this amounted to a sound business decision. Both are qualified, experienced managers, and both have the capacity to help the firm grow market share.

Elaborating, he said there are certain required skill sets for reaching the partner rung, and both certainly possess them.

“Can you serve clients?” he began. “Are you able to grow the practice — attract new clients and develop relationships with existing clients? Can you train and develop staff? These are the prerequisites, and they have them.”

By the Numbers

Beyond those required skills, Reale and Krupienski also complement each other in many ways, said Barrett, adding that while they’re both involved in auditing and accounting, or A&A as they say in this business, they have different focus areas and specialize in different sectors of the economy.

Krupienski, for example, specializes — and has written about — medical practice operation, tax planning, and retirement plan strategy, while Reale specializes in closely held businesses, business valuations, management advisory services, and business and tax planning, and has extensive experience in retail, manufacturing, construction, distribution, real estate, insurance, and other service organizations.

“We have people with somewhat similar skill sets,” said Barrett. “But they’re different enough so they can go out and not compete with each other, and complement each other in some cases.”

Meanwhile, bringing them both on as partners now is a proactive step within the company’s broad efforts within the realm of succession planning, he went on, adding that many firms, especially smaller operations, are not putting enough emphasis on creating a solid pipeline of leadership of the years to come.

Elaborating, he said that when the two firms merged, there were 13 partners, a large number that the shareholders knew would eventually be whittled down, out of necessity, through retirement. That point has been reached, he went on, and the firm needs to replace that leadership.

“Our number one strategy starting when I became managing partner was to have a succession plan,” he told BusinessWest. “And everything we’ve done subsequent to that has been to develop that plan, including an investment in technology, investment in people through training, investment in human resources; this is just the culmination of that.

“We chopped this down to a five-year program,” he went on. “And the culmination of that is to have our replacements in place. This is the first example of all those efforts coming to fruition.”

When asked if, when, and under what circumstances additional partners would be named, Barrett gave a very quick answer: “Growth of the firm.”

And there are several ways to achieve growth, he went on, listing acquisition, geographic expansion, attaining a larger piece of the existing pie, or moving aggressively and effectively if the pie should happen to become larger.

And the two partners could, and likely will, play a large role in those growth efforts.

“We’re hoping that with their respective areas of expertise — Jim in medical and pension work and Kristi with business valuation — that they’re going to bring another level of services to clients or perspective clients that will allow us to grow,” he explained.

Both partners sounded like they were up for that mix of opportunity and challenge.

“It’s taken us time to get here, we’ve gone through the needed steps,” said Krupienski. “And in terms of where we are — they’ve afforded us with every tool we need to meet those challenges — training, development, helping us get out there, supporting us with joining boards and getting involved in the community … all of that will help in terms of meeting new people, meeting new prospective clients, and meeting other associates and professionals that will develop our base moving forward.”

Said Reale, “we’ve both had a lot of training, whether it’s in our own special niche, sales training, soft-skills training, leadership training … and it’s all going to help us develop professionally. And we’ve already been essentially working as partners, just without the title, for more than a year now.”

Focus on the Bottom Line

That last point certainly helps explain why the promotion of Reale and Krupienski to partner has been the proverbial worst-kept secret.

But while the announcement on the 19th might have been anti-climactic in some ways, it was a milestone moment nonetheless.

That’s because, as Barrett noted, it represented one significant step in ongoing efforts to achieve growth and a solid leadership for the future.

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

Banking and Financial Services Sections

Family Matters


Some of the team at BRP/Grenier

Some of the team at BRP/Grenier, from left: Kelly Landron, Pat Grenier, Kim Galinski, and Lindsey Arventos.

As one of eight children, Patricia Grenier says she really doesn’t need any more family. Yet, as principal at BRP/Grenier, her growing financial-services practice, she treats clients like family members — which often means helping them make tough decisions.

One client was transitioning into assisted living and needed $200,000 immediately, and wanted to take it from her investment account. But the market was down, so Grenier was loath to do that.

“Her response was, ‘I don’t care what you do, just find me the money,’” she told BusinessWest. “So I called an associate at a bank and asked him if we could coordinate an equity line for this woman.” They did, and six months later, she sold her home, paid off the equity line, and moved into the facility.

“Those are the kinds of things we think about,” she said. “If all we focus on is investments, we would not go beyond and start asking the appropriate questions that need to be asked.”

Another client called about wanting to buy a car, and asking about loan options. “I asked, ‘why are you taking out a loan? You have enough money invested. You can use your own money.’ She was elderly; there was no need for her to have debt.”

In short, BRP/Grenier is an investment-strategy firm that goes well beyond its advertised services, which run the gamut from financial planning and education savings to retirement strategies and estate planning. Grenier considers it all life planning, which encompasses far more than crunching numbers.

Clients want to protect what they have but also grow it, and helping them do so takes a comprehensive understanding of their lives and goals — what’s important to them, what their resources are, and what their challenges will be to get there. With close to $200 million under management, it’s a responsibility she takes seriously.

“There are all kinds of issues to resolve: do they need more cash flow? Maybe there’s too much liquid, too much invested. Do they have a will? We’ll prod them to do a will or trust, those kinds of things.”

Those are questions she and her firm are asking many more clients these days, following the acquisition of a practice in Wethersfield, Conn. (more on that later). Getting to know the ins and outs of those lives is a challenge Grenier embraces, because it’s key to helping them succeed.

“I try not to focus on what the market is doing currently,” she said. “It’s a long-term strategy, so I focus on your life — what will make your life better. Temporary moves in the market won’t make a big difference in the scheme of things.”

Getting to Know You

Grenier says her skills as a listener, problem-solver, planner, and fact-checker were developed at a very young age, as the family interpreter and liaison for her large, family of Ecuadorean immigrants. So she enjoys learning the details of clients’ situations to help them formulate a big-picture perspective.

“Some things that people might find daunting, we think are really easy to handle,” she said. “For example, they might not be able to make ends meet, and they’re charging monthly expenses on a credit card. We’ll work on cash flow, figure out how to reprioritize spending. Maybe it’s time to downsize their home, or buy things for less money.”

Pat Grenier

Pat Grenier says crafting a strategy for long-term financial security begins with fully understanding the goals, circumstances, and challenges of each client.

While many clients are concentrated around the pre-retirement years, Grenier said, she helps people in all stages of life — for example, young professional couples making enough to save but worried about mortgages and school debt and saving for their kids’ college education, and knowing they’re in an income bracket that isn’t making them rich, but won’t be a magnet for financial aid. So they need a strategy.

And young people don’t start out with the advantages past generations did, notably the idea that they’ll work for one employer and retire with a healthy pension that will see them through their retirement years. These days, young professionals expect to progress through several jobs, none of them offering pensions. So it’s up to them to navigate investment options like 401(k)s and other vehicles.

“It’s a dynamic process. Life isn’t black and white, and we have to adjust,” Grenier said. “If there’s a job change or an illness or a birth or a divorce, we have to make sure we can adjust their plan so that it’s a viable plan that works for them. Everyone’s different, so the plan is going to be different for everybody.

“We want to help them achieve their goals, and sometimes we have to be the reality check,” she went on. “We have to say, ‘no, you can’t do this; you don’t have enough money.’ And sometimes, we need to say, ‘yes, you can buy that home on the Cape; you can afford it.’ So it works both ways.”

After a while, she explained, as she gets to know clients better, they come to trust her and her team, and they’ll be more comfortable divulging personal matters.

“I feel like sometimes I know them better than their own family members. And sometimes I have to protect them,” she said. For example, one client was diagnosed with Alzheimer’s and her nephew wanted power of attorney, but she didn’t feel he’d do a good job and recommended she pick someone else.

That said, Grenier can’t force anyone to make a financial decision.

“People have to be willing to cooperate. They have to want to be willing to make changes. If not, it’s not going to work. And sometimes it’s not going to work. Maybe they’re not willing to make the change. But it’s our job to explain, in our professional opinion, what they need to do to realize their goals.”

Not every decision is bottom-line based. One client was selling her business to family members and wanted to know how much she should get for it — not necessarily top dollar according to its value, but what she needed to strike a fair deal for her family, yet be able to live comfortably in retirement. “So we needed to make a projection about life expectancy and her needs, and once we figured that out, it was easy to come up with a number.”

Branching Out

Grenier was looking to expand her practice’s footprint when she learned that Joseph Connelly, owner of the Wethersfield Investment Center, was looking to retire. A few months after he and Grenier met, they agreed their cultures were a good match, and Wethersfield became a division of BRP/Grenier in September.

The Wethersfield office, which had previously operated under a different name, became the Wethersfield Investment Center in 2003 when Connelly assumed full ownership and became a Cadaret Grant-registered financial professional. The fact that Wethersfield and BRP/Grenier share the Cadaret Grant connection has made for a smooth transition, Grenier said.

“It’s in Connecticut, so it’s a different market, different laws, things like that, but a lot of the same principles apply,” she told BusinessWest. “I’m getting to know the clients, starting to delve into their lives, telling them, ‘you can count on us to help you with whatever you need help with.’ I know I have big shoes to fill. It’s a big challenge, but I love a challenge.”

All this makes for what she calls an exciting time in her business, but through the growth, she doesn’t want to lose track of the personal involvement that characterizes her relationships with clients. She began her career working for large houses where she had no time to get to know clients, and that frustrated her and drove her to become an independent advisor in 1990. And people welcome the sometimes necessary hand-holding it takes to help them navigate downturns in the market and, sometimes, in their own families.

“Maybe it’s my personality, but I tend to get way involved in people’s lives, maybe because I’m one of eight kids,” she said. “Every person who comes to me is treated as if they were my own family. And every person on my staff, that’s how they look at our clients, too.”

And it’s satisfying, Grenier said, to see financial strategies pay off in the form of peace of mind.

“In this business, we are so overregulated, and we have to love our business to be in it,” she said. “We want to retire people well, and it’s so gratifying to get a note from a client thanking me for what they currently have. I want to help people lead the good, comfortable life they’re accustomed to.”

Joseph Bednar can be reached at [email protected]

Banking and Financial Services Sections

Lending Support

Country Bank President Paul Scully

Country Bank President Paul Scully

Country Bank’s sheer scope in Eastern and Central Mass. — it now boasts 15 branches, almost $1.4 billion in assets, and a loan portfolio approaching $1 billion — positions it among the larger banks in its footprint. But even during a time of financial growth, President Paul Scully is equally committed to growing the bank’s community ties, through an ever-evolving series of initiatives that engage employees, customers, and area residents alike. After all, a bank’s success, he believes, shouldn’t be reflected simply on the bottom line.

Paul Scully is gratified that Country Bank is wrapping up a particularly strong year for both commercial loans and retail business. But the bottom line isn’t all the bank is building.

For instance, employees at the bank’s newest branch, in Worcester, recently teamed with Habitat for Humanity to build a playhouse for children of veterans. “Staff members spent the day building the playhouse in the parking lot,” said Scully, the bank’s president. “They loved it.”

More significantly, Scully recently returned from Haiti, where a team of 14 built two houses over five days before being chased out by the quick-moving Hurricane Matthew. Last year, he accompanied a team of management-level employees on a similar home-building mission in the beleaguered Caribbean nation, and this year, he opened it up to all staff members.

“Thirty-three people said they’d like to go, so we had a lottery,” he explained. “It’s a tremendous feeling giving back in the most impoverished country in the western hemisphere. They realized, if they didn’t before, how amazingly fortunate everyone here is.”

The home-building project was also an exercise in team building, he added. “We got to know people for who they are — not just the role they play Monday through Friday.”

That sense of community — both within the Country Bank family and in service to the cities and towns where its 15 branches operate — has increasingly become a hallmark of the Ware-based institution’s identity, Scully said.

Country Bank employees

Country Bank employees in Worcester celebrate the construction of a playhouse for children of veterans, a project conducted alongside Habitat for Humanity.

“When it comes to giving and community involvement, we believe that’s the role of a community bank, and most community banks feel similarly,” he told BusinessWest, noting that the bank’s support of area food banks, senior centers, and Baystate Mary Lane Hospital, among other entities — in all, totaling some $600,000 annually.

“Donations are geared toward all aspects of the community to improve quality of life for residents,” he said. “We’re a staunch supporter of our local hospital because we believe healthy communities must have access to good healthcare, and people want to stay and live and perhaps move into our communities to access quality healthcare.”

To further focus its community involvement, in 2015, the bank launched its Country Bank Cares community volunteer program, offering volunteer opportunities at various events throughout the year to Country Bank staff. Each volunteer hour is logged, and at the end of the year, staff members who volunteered 10 hours or more are awarded a grant to a charity of their choice for $100; 25 hours earns $250.


Thirty-three people said they’d like to go, so we had a lottery. It’s a tremendous feeling giving back in the most impoverished country in the western hemisphere. They realized, if they didn’t before, how amazingly fortunate everyone here is.”


“They have a stake in where the money goes,” said Shelly Regin, the bank’s marketing director, noting that employees donate about 700 hours of service per year. “They’re really engaged in it and honored to take part in it.”

The spirit of giving even incorporates a dress-down day on Fridays, when employees pay to wear jeans, and the bank matches all donations. At the end of each month, a committee of staff members decides which local nonprofits get the money — to the tune of about $2,500 a month. “That’s a lot of jeans,” Scully said. Meanwhile, a recent event called Be Bald, Be Bold had employees donning bald caps to draw attention to cancer research and raise money for the Baystate Mary Lane Walk of Champions.

“This is something that existed here long before Shelly or me,” he went on, explaining the motivation behind Country Bank Cares and other initiatives. “It’s the idea that Country Bank is engaged in the community and people’s quality of life, and we want our 220 staff members to experience another dimension of giving back.”

Country and City

With assets of $1.39 billion at the end of 2015 and a loan portfolio of more than $978 million, Country Bank is, of course, deeply ingrained in its communities in the traditional banking sense as well. And 2016 has seen further financial growth.

“We’ve had a very robust year in commercial loan originations, really centered in our existing footprint but also throughout New England,” Scully said. “We’ve had a tremendous year in both loan growth and deposit growth. I think that’s attributable, in part, to improvements we’re seeing in the economy and more robust product offerings.”

He noted that the evolution of e-banking solutions increasingly allows banks to develop relationships with customers outside their branch footprint. “That’s opening up the market dramatically. Folks can open up accounts with us online, can do anything they want online.”

Still, physical branches remain important, and the move to Worcester last year made sense on multiple levels, he explained.

Go HERE for a list of Banks in Western Mass.

“We’ve been lending in Worcester for more than 50 years,” he noted, adding that the city boasts a larger population and more diverse demographic than most Country branches, both of which equate into more business opportunity. And without a branch, it was difficult to move commercial customers into other products, such as retail accounts.

“From a cultural perspective, we have not changed the culture to adapt to the city — we’ve just brought the same level of service and quality to Worcester as our other marketplaces.”

Shelly Regin

Shelly Regin says employees are gratified to have opportunities for volunteerism and a say in where the bank’s charitable dollars go.

However, Country remains focused on growing its e-banking platforms as well, reaching a generation that prefers the convenience of doing business on their devices rather than visit a branch. But the community-bank world has long moved past the days of thinking branches will eventually be obsolete.

“They said years ago that ATMs are going to replace branches,” Scully said. “What happens is, every time there’s an advancement, people believe it’s going to replace something, but it doesn’t replace it — it just complements it. In this case, it allows customers to enjoy many different ways to do their banking. Has the foot traffic slowed down? Yes, a little bit, but people still want to know it’s there if they need it for any reason.”

Mortgage applications are one area where the change in customer behavior has been stark. When Country launched an online application option 10 years ago, customers were slow to embrace it, preferring to meet with a loan officer in person. Online applications were filed mostly by customers with poor credit who were targeting multiple banks at once, hoping someone would accept them. Today, 80% of the bank’s mortgage applications originate online, simply because borrowers realize it’s easier.

Brick-and-mortar branches are important for branding as well, but marketing campaigns — through both traditional and social media — remain critical, Regin said, noting that the challenge is to effectively tell a story that’s reflective of the institution and sets it apart.

To that end, with the help of its marketing agency, the bank conducted scores of interviews, not only with customers and employees, but people with no connection at all to Country Bank, asking why they choose to bank or work there, or why they don’t. The overwhelming takeaway, Regin said, is that relationships, and how the bank treats people, are its most important investment. So its current campaign incorporates slogans driving home the importance of priorities like service and even good manners. (One slogan reads, “we think politeness is a higher form of intelligence.”)

“That’s just who we are,” she said, before Scully added that the bank has always conducted business that way, but the campaign simply crystallizes it. Equally important is providing the kind of customer or borrower experience that leads to referrals. “Someone says, ‘I had a great experience with them.’ Another says, ‘OK, maybe I’ll give them a try too.’”

Community Legacy

The Country Bank name is only 35 years old, but the institution has been around since 1850, when it was known as Ware Savings Bank. It took on its current name after a 1981 merger with Palmer Savings Bank; another merger with Leicester Savings Bank 17 years ago further increased the bank’s holdings.

With that long history behind it, the bank understands the importance of helping future generations establish their own financial health, which is why Country conducts financial-literacy programs in 29 elementary schools, conducts a Credit for Life program in area high schools — teaching seniors the importance of prioritizing spending — and expanding that program with seniors at Worcester Polytechnic Institute.

“That next step is really geared toward those graduating from college,” Scully said. “They’re the ones who will be experiencing the real workforce soon, so the engagement is greater.”

Also thinking generationally — this time focusing on Millennials — Country has been overhauling its corporate headquarters to reflect modern workforce trends, such as low walls, collaborative spaces, enhanced technology, and even a café.

“We want to be an employer of choice for Millennials and folks who say, ‘this would be a cool place to work,’” he explained. “There’s great stuff happening; we’re creating a different vibe in this building. I say we’re giving it a Google vibe. We want to have the building become a place where people not only want to work, but feel really engaged.”

It’s just one more way Country Bank continues to identify needs and meet them — just as it has for the past 166 years.

Joseph Bednar can be reached at [email protected]

Banking and Financial Services Sections

Has Little GAAP Emerged?

By Kristi Reale, CPA, CVA

Kristi Reale, CPA, CVA

Kristi Reale

Should privately held businesses be held to the same financial-reporting standards and requirements as publicly traded companies?

For many decades, small, privately held companies have been faced with accounting challenges when attempting to meet the standards set by the Generally Accepted Accounting Requirements (GAAP). The standards set by GAAP are largely influenced by the requirements of those who use the financial reports of publicly traded companies, such as the SEC. However, these standards are often financially burdensome on smaller organizations and often have no significant impact on their financial position or reporting. This has sparked lobbying for the standards of GAAP to be adjusted so that standards for privately held companies (‘Little GAAP’) are less rigorous and more reasonable than those necessary to satisfy the needs of publicly traded companies (‘Big GAAP’).

The call for change was answered, at least in part, when the Financial Accounting Standards Board (FASB), a group responsible for setting financial reporting standards in the U.S., established its Private Company Council (PCC) in 2012 to improve the process of setting accounting standards specifically for private companies. The PCC reviews and proposes alternatives within GAAP to address the needs of users of private-company financial statements.

In 2014, the FASB launched a simplification initiative aimed at reducing the complexity and costs associated with financial reporting while improving the usefulness of the information reported to investors and other third parties. Some of those changes are listed below and may have an impact on the way your organization meets its reporting standards.These changes are technical, and it is suggested that you speak with your accounting professional to determine if these changes apply to your organization:

The following Accounting Standards Updates (ASUs) are a result of the establishment of the PCC and their simplification initiative. I have detailed many of the technical implications of these updates below, but also included the salient implications to your business. Whether or not you have a formal accounting background, it is important to educate yourself on the applicable changes, as they may have an impact on your business reporting.

ASU 2014-02 — Intangibles — Goodwill and Other (Topic 350): Accounting for Goodwill (a Consensus of the PCC)

ASU 2014-02 is available to private, for-profit companies and allows an accounting alternative to amortize goodwill on a straight-line basis over 10 years or less if a lesser time is deemed appropriate. Goodwill is the value of intangible assets such as brand-name recognition or patents, and has historically been tested for impairment.

Impairment testing, which measures whether a balance-sheet item is worth the amount stated on the balance sheet, is performed if a triggering event occurs that indicates the carrying value of goodwill may exceed its fair value. This new update is an important change (and simplification) to this process, as it allows a company to write off the value of its goodwill. This ASU applies to new and existing goodwill on the books.

It is important to note that electing the ASU to amortize goodwill does not eliminate impairment testing.

ASU 2014-07 — Consolidations (Topic 810): Applying Variable Interest Entities Guidance to Common Control Leasing Arrangements (a Consensus of the PCC)

This ASU is available to private, for-profit companies effective for annual periods beginning after Dec. 31, 2014 and effects the variable-interest entity (VIE) consolidation guidance, which historically required companies to create a consolidated financial statement when certain requirements were met. One common example exists when a business owner owns both an operating entity and real-estate entity. When the operating entity rents from the real-estate company, they would be required to consolidate their financial statements.

The ASU permits the private-company lessee (reporting entity) to not apply the variable-interest entity consolidation guidance to a lessor if all of the following conditions are met:

• The lessee and the lessor are under common control;

• There must be a substantial leasing arrangement between the entities;

• Substantially all of the activity between reporting entity and VIE is related to leasing; and

• Any obligations of the lessor are guaranteed or collateralized by the lessee.

Disclosure requirements consist of all required GAAP disclosures for leases, related parties, and guarantees.

It is important to note that this ASU is an accounting-policy election and must be applied by the private-company lessee to all current and future lessor entities that meet the requirements for applying this approach in the future.

ASU 2014-18 — Business Combinations (Topic 805): Accounting for Identifiable Intangible Assets in a Business Combination (a Consensus of the PCC)

This ASU provides an alternative to reduce the cost and complexity of identifying intangible assets in a business combination. If this ASU is elected, customer-related intangibles such as customer lists and commodity supply contracts or non-compete agreements would not be recognized separately, but rather become part of goodwill. Applying this ASU and combining other intangibles with goodwill can eliminate a bargain purchase situation (negative goodwill.)

If this ASU is elected, the reporting entity must elect ASU 2014-02 (the first ASU mentioned in this article) to amortize goodwill over 10 years. Disclosure requirements for intangible assets acquired in a business combination have not changed. If elected, it is applied prospectively. No previous intangibles on the books may be reclassified to goodwill.

ASU 2015-01 — Income Statement — Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items (Simplification Initiative)

This ASU is effective for periods beginning on or after Dec. 31, 2015 and eliminates the concept of extraordinary items (example: earthquakes in Western Mass.)  The term ‘extraordinary item’ has been changed to ‘unusual or infrequently occurring’ items.

Reporting requirements for items that are unusual, infrequent, or both are as a separate component of income from continuing operations (‘above the line’).  This supports a trend of reporting most items of income and expense as part of an entity’s results from operations. Also, the nature and financial effects of each event or transaction are shown on the income statement or disclosed in the notes to the financial statements.

ASU 2015-11 — Inventory (Topic 330): Simplifying the Measurement of Inventory (Simplification Initiative)

This ASU is effective for periods beginning on or after Dec. 31, 2016 and does not apply to entities using the LIFO (last in, first out) or retail method to measure inventory. ASU applies to FIFO (first-in, first-out) or average cost inventory measurement.

This ASU states that an entity should measure its inventory at the lower of cost or net realizable value (formerly of market). Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.

When evidence exists that the net realizable value of inventory is lower than its costs, the difference should be recognized as a loss in the earnings period in which it occurs.

ASU 2015-03 & 2015-15 — Interest; Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs (Simplification Initiative)

The objective of this ASU was to simplify the presentation of costs incurred upon the issuance of debt. For example, when a business takes out a loan (debt), there are often loan-acquisition costs and other expenses (debt issuance costs), which are pre-paid at the beginning of the loan and are historically identified as assets on the books and amortized over the life of the loan as an expense. Confusion often arose among readers of financial statements when the debt-issuance costs were reported as an asset. Therefore, this ASU states that debt-issuance costs should be presented as a direct deduction from the carrying amount of the related debt liability. This requires debt-issuance costs to be changed from an asset to a contra-liability. The recognition and measurement of these costs has not changed.

This ASU is available to private companies for periods beginning on or after Dec. 15, 2016. Early application is permitted, and retrospective application is required.

ASU 2015-17 — Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes (Simplification Initiative)

Previous GAAP presentation required entities to separate deferred-income tax asset and liabilities in current (short-term, within a year) and non-current (more than a year) amounts on the balance sheet. This ASU changes the GAAP presentation to require deferred-income tax assets and liabilities to be classified as non-current (long-term) on the balance sheet. The ASU does not change the requirement that deferred assets and liabilities be presented as a single amount, and income tax disclosures are not changed.

This ASU is effective for periods beginning on or after Dec. 31, 2017; early application is permitted as well as retrospective application to all prior periods presented. In the first year of change, financial statements should disclose the nature and reason for changes and effects on prior periods.

It appears that the FASB is finally trying to simplify the reporting requirements for private businesses. The above was just a sample of some of the ASUs that were released as part of this initiative. By staying informed, you can plan ahead and take advantage of these options for your business.

Prior to making any financial-statement decisions or accounting elections, you should consult your financial expert or a certified public accountant.

Kristi Reale, CPA, CVA is a senior manager with the Holyoke-based public accounting firm Meyers Brothers Kalicka, P.C. and specializes in business valuations; (413) 322-3533; [email protected]

Banking and Financial Services Sections

Lending Optimism

Glenn Welch (left) and Jeffrey Smith

Glenn Welch (left) and Jeffrey Smith say Freedom Credit Union has built a name in local lending, but much more opportunity exists to expand the portfolio.

Banks and credit unions know all too well that the health of a commercial-loan portfolio is often dependent on the economic climate. Several years of improvement on that front has bolstered the portfolios of many regional lenders, some dramatically. But the added opportunity has brought little relief from fierce competition in the sector, both for loan business and the talent to procure it.

When asked about commercial lending, Matt Sosik doesn’t talk in terms of dollars and cents, but of relationships.

“Building long-term relationships brings value on both sides of the table,” said the president and CEO of Easthampton Savings Bank (ESB). “It allows us to transcend the pricing pressures and competitive pressures and focus on the relationship and the importance of it.”

Those relationships have become critical to banks trying to build their commercial-loan portfolio simply because, well, it’s a borrower’s market out there. A generally positive economy has businesses investing — perhaps not at pre-Great Recession levels, but close — yet the competition for those loans has only become more fierce.

“My back ground is in commercial lending, and it’s always been competitive,” said Glenn Welch, president and CEO of Freedom Credit Union. “Nobody wants to lose any deals in their portfolio. But every new loan out there … at least three institutions are looking at it. We’ve seen pricing get pretty skinny. We’ve walked away from some deals because we didn’t think they were appropriately priced for the risk in them.”

List of Banks in Western Mass.

But Freedom is making plenty of deals, too. Vice President and Chief Lending Officer Jeffrey Smith told BusinessWest the credit union’s gross volume in commercial loans is currently doubling from year to year. “We’d generally average $10 to $12 million in commercial lending each year, but in the 12 months that ended in July, we had more than $23 million.” Meanwhile, he added, the business-loan portfolio has grown from $30 million to $50 million.

Matt Sosik

Matt Sosik says a strong commercial-lending portfolio begins with strong relationships with area businesses.

“That’s still really small in a balance sheet of a half-billion,” Welch said, adding that he sees plenty of opportunity to ramp up business loans even further. “Also, commercial lending is the most profitable line of business. You can grow your balance sheet much quicker because generally the loans are larger. We service the small-business market, and we’re mostly comfortable in the $2-$3 million range, but we will go up to $5 million.”

Westfield Bank is another institution seeing significant lending growth, with higher ceilings for individual loans to boot. The bank was long known mainly as a residential lender before James Hagan’s tenure as president and CEO. But over the past two decades, the bank has significantly expanded its commercial-loan portfolio, said Allen Miles, executive vice president and senior lender — a process that will continue with the institution’s acquisition of Chicopee Savings Bank, which, once approved, will increase WB’s lending capacity from $20 million to $35 million.

“We have a small-business team, a middle-market team, and a commercial real-estate team,” Miles explained. “Our sweet spot is businesses with $5 to $10 million in revenues, but we’ve done loans for businesses with $80 to $100 million in revenue. We handle everyone differently.”

Ramping Up

While all banks were hit hard when companies pulled back on capital investments in the wake of the recession, smaller community banks were presented with opportunities as well. The nation’s larger institutions, awash in toxic debt, were having liquidity issues and pushed back on borrowers, many of whom took their business elsewhere, and community banks that had laid some groundwork and build relationships were able to take advantage.

Borrowers also appreciate locally based lenders who can make decisions quickly, Hagan explained, and Westfield became adept at turning credit applications around in 24 to 48 hours for loans up to $750,000, Miles noted. Larger loans are turned around in under a week.

“That has helped us grow,” Hagan said. “Potential borrowers appreciate that we can move things forward quickly.”

ESB, like many community banks in Western Mass., finds that lending to small to mid-size businesses is its bread and butter.

Jim Hagan

Jim Hagan says recruiting talent from area colleges has helped Westfield Bank build a formidable commercial-lending team.

“It’s a very important part of our balance sheet and, increasingly, on most community banks’ balance sheets,” Sosik said. “Commercial lending has become a priority we focus on, and we’ve grown the commercial portfolio over the past three years in particular. We’re trying to approach a level that gives us about a 50% loan mix — in other words, about 50% of the loans in the portfolio being commercially oriented.”

But he returned again to the importance of building long-term relationships with clients, rather than one-time transactions. “It’s easier for us to do that when we focus on medium to smaller businesses and geographically local businesses, for sure.”

Freedom Credit Union’s loan growth has been aided by its designation as a low-income credit union, which allows it to avoid the cap on commercial lending — 12.5% of assets — that most credit unions must adhere to. This, and an aggressive commercial-loan push in recent years, has seen the institution recognized as a top SBA lender in the region.

“The real growth has been over the last couple of years,” Welch said. “We’ve really matured into being more of a business lender than we originally started out. We do have a low-income designation, which does not put a cap on us, and that’s a big advantage to us in the market we’re in.”

Smith called the institution’s portfolio a “nice mix,” boasting clients ranging from IT companies, a construction firm, and commercial real-estate projects to social services and nonprofits. “We have a nice niche right now in the marketplace, with so many institutions in this market, headquartered in Springfield. Many times, we get phone calls based on the fact that we are a local player in this market.”

Valley’s Got Talent

Just because businesses are borrowing these days and plenty of opportunity seems to exist doesn’t mean growing a portfolio is easy, Sosik told BusinessWest.

“Commercial lending is a focus not just here at ESB, but across the community-bank sector, even on the credit-union side. There are a lot of players all vying for a finite group of customers, and that makes for a very competitive environment.”

Indeed, Welch noted that the local lending landscape has been rife with movement, with banks poaching talent from their competitors and even, in a few cases, entire teams moving from one bank to another.

Hagan said Westfield Bank has been fortunate to retain its top talent, and with the acquisition of Chicopee Savings will have three lending teams headquartered in Westfield, Springfield, and Chicopee.

“We have not lost lenders to our competitors,” he said. “But what we’ve also done is, we’ve actively recruited at colleges and universities. We interview folks and bring them on as credit trainees and groom them in-house. They get to know our culture and our customer base, and in so doing, we’ve created a way for them to grow in their career and for us to develop our own lending team. It’s been highly successful.”

It’s one way Westfield Bank has been able to continually grow its commercial-lending team and its book of loans, especially among small to mid-size, family-owned and closely held businesses that form the core of its portfolio.

As for Welch, he certainly thinks continued growth is sustainable. He noted that Springfield was recently named by CNBC as one of America’s “10 Most Overlooked Cities,” meaning cities where economic development — and, presumably, capital investments by companies — are on the rise, though not many people outside their regions are aware of it. And Springfield is only one part of a region currently booming with entrepreneurial life.

“There’s definitely more opportunity for growth, all the way up to Franklin County,” he said. “With our size and capital, we can compete pretty well. We’re trying to get our name out now, but I think there’s a lot of opportunity up and down the Valley.”

And that’s lending a measure of optimism to the region’s growing ranks of commercial lenders.

Joseph Bednar can be reached at [email protected]

Banking and Financial Services Sections

What’s in a Name?

Mike Ostrowski

Mike Ostrowski says Arrha’s new name and logo reflect the concepts of trust and strength, two qualities that appeal to its members.

When Springfield Teachers Credit Union, after almost 75 years of exclusively serving teachers, decided to extend membership to anyone who lives or works in Hampden, Hampshire, or Franklin county, the institution’s leaders, led by then-President and CEO Gary Fishlock, shortened the name to STCU Credit Union.

It wasn’t enough, Michael Ostrowski said.

When he took the reins from Fishlock as president and CEO in early 2011, STCU had been accepting non-teachers as members for almost a decade, and the move had proven to be a wise one, growing the institution’s assets. But the name still didn’t reflect the wider community, he told BusinessWest. So he pushed for a more dramatic rebranding.

“When I got here, the board of directors expected me to make this place grow and thrive, but I was still hearing from lenders and staff that people thought you had to be a teacher to be a member,” he said. “They understood we needed a name change to better reflect what was going on.”

So STCU enlisted Cardinale Design, a Ludlow-based creative marketing firm, to rebrand the company. After considering dozens of possibilities, the leadership decided on Arrha, one of the oldest English words, meaning “money or other valuable things given to evidence a contract; a pledge in earnest.”

“It’s absolutely perfect,” Ostrowski said of the name change, which became official last year. “It says exactly what we do. I’m surprised no one picked up this name sooner. It’s an odd name, edgy, but not over the edge, and that’s what we wanted — something memorable, describable, but not over the top.”

The new logo — a stylized pyramid — is intended to convey strength and power over time, while its purple color reflects wealth, leadership, and trustworthiness. “These were all words that came back on member surveys. And ‘trust’ is one of the biggest words in banking. You have to trust where your money is,” he said.

“We want to tell a story,” he added, “and this is a great way to tell the story.”

It’s a story that begins at the dawn of the Great Depression, when many sector-specific credit unions planted roots. In 1929, 31 teachers — perhaps sensing the rough economic waters ahead — pooled their resources in an attempt to ensure their financial security. They named their institution the Springfield Teachers Credit Union and incorporated in late 1929 with just $2,160 in total assets.

For many years, the credit union operated out of a Commerce High School classroom, then purchased property on State Street in downtown Springfield. Again outgrowing its space, it purchased property on Industry Avenue in 1988 and moved its operations there the following year.

“They started in a room in Commerce and combined their assets and petitioned the government,” Ostrowski said, pointing to the original state charter hanging on his office wall. “My job is to protect that charter.”

From those roots has risen one of the larger credit unions in the region, with $127 million in assets, more than 11,000 members, three branches — in Springfield, Hadley, and the just-opened office in West Springfield — and an eye toward further growth driven by an ever-increasing public awareness of the role of credit unions in an age of big-bank consolidation.

Fueling His Fire

Ostrowski is a veteran of the region’s financial scene, but his lengthy career in banking came about by accident. He was fresh out of Springfield College, pumping gas on the Mass Pike, when Bud Doble, then president of United Co-operative Bank, pulled up. They chatted a bit, and something in Ostrowski’s demeanor impressed Dobel, who handed the young man a business card and asked him to call him. Ostrowski did, and was offered a job as a management trainee.

The problem was, he was making more money at the pump than the bank initially offered. When he told his father, the elder Ostrowski explained the difference between a job and a career, and told him to take the plunge.

As careers in banking go, it’s been a wide-ranging one, including stints at Ludlow Savings Bank, Multibank, and Pioneer Financial Co-operative Bank. He also spent nine years as vice president and chief lending officer at Freedom Credit Union in Springfield, and, more recently, senior vice president of lending at Barre Savings Bank.

With that much experience in what could collectively be called community banks, he knows a thing or two about what draws customers to those institutions, as opposed to, say the Bank of America or Santander type of institution. And credit unions like Arrha, he said, fill a similar role, though they have historically been “the best-kept secret in the Pioneer Valley.”

Still, the benefits are obvious to Ostrowski. “Our motto is ‘people helping people’ so our rates for loans are typically lower than at a bank, and deposit rates are higher,” he explained, noting that not having to answer to stockholders gives Arrha more freedom in those areas. “But we have our own difficulties — banks can go out and sell more stock to raise capital; we have to earn it on the job, which is a lot more difficult.”

But their ability to balance robust lending power with a community atmosphere is becoming more evident as so many smaller banks in the Northeast continue to merge with larger institutions, most recently Westfield Savings Bank’s acquisition of Chicopee Savings Bank.

“So many small, mutual banks that started in Massachusetts — Chicopee Savings, Ludlow Savings, Barre Savings — are gone now,” he said. “They were all great, small hometown banks where people went and trusted. Now they’re being taken over. Hopefully, Arrha is filling that void.”

Room to Grow

Most of Arrha’s programs are targeted at retail consumers, but the credit union plans to hire someone in the next six months to oversee an expansion of what, up to now, has been a limited portfolio of commercial loans. Like many credit unions, it sees plenty of opportunity in the small to mid-sized business customers that the larger banks neglect in their pursuit of $4 million and $5 million accounts.

“That’s not who we are,” Ostrowski said. “That’s not our niche. We want to help the smaller person succeed, with car loans, personal loans, student loans … we do excellent at home mortgages, with the lowest closing costs and rates in the Greater Springfield area. We have checking accounts that are dirt-cheap and don’t rip anyone off with fees. We’ve built a good foundation on those things.”

The foundation is fertile soil, he said, to grow the commercial-lending side over the next few years.

“We’re doing really well. We want to expand, but in this day and age, that’s very difficult. Do you build branches or build software? We want to have a few branches, but we don’t want to be inundated with buildings. Everything is electronic, and that’s where the money is, but we still need a physical presence, a few locations. Overall, the bank is very healthy and thriving.”

That progress puts Arrha at a sort of crossroads, he went on, but one marked by opportunity.

“We want to fill the void of the small, mutual savings banks people loved to go to. I’m positive we are doing that, but whether we can sustain it over the next five or six years and keep up with the Bank of Americas, that’s to be determined. I think we can find our niche, though. We always do.”

Joseph Bednar can be reached at [email protected]

Banking and Financial Services Sections

The Feeling’s Mutual

Tom Senecal

Tom Senecal

Tom Senecal takes the helm at PeoplesBank at an intriguing time for the institution — and the industry. Competition is keen, and efforts to achieve growth are challenged by thin margins and stagnant, historically low interest rates. The bank has made a commitment to continue this fight as a mutual institution, a strategy Senecal believes will continue to bring a host of inherent advantages.

Tom Senecal called it “going from the back room to the front lines.”

That’s how he chose to describe his decision in 2001 to leave his position as controller at Holyoke-based PeoplesBank and join the commercial-lending team led at that time by future President and CEO Doug Bowen.

Looking back on that not-so-subtle and fairly unusual career move, Senecal said that, at that juncture, he understood it was a necessary move if he was to achieve what was an already-emerging goal — to move higher up the ladder in banking administration, and perhaps to the top rung.

“I knew, career-wise, that if I wanted to be … well, where I am today, I needed more exposure and experience than just an accounting background,” he explained, noting that Bowen’s career trajectory has become common in the industry today. “So I made a conscious decision to change careers and move to the front line of servicing customers.

“This was outside my comfort zone — I was 41 years old, moving from an accounting environment to a sales environment,” he went on. “But I knew I needed that experience.”

What Senecal — who was named president last August after prevailing in a search for Bowen’s successor a few months after he made his retirement plans known — didn’t know in 2001 but does know now, is that, while leaving the back room improved his chances to advance in this industry, working in both settings will better enable him to handle that position’s varied job description.

“My experiences, both on the financial side and in lending, brought something different to the table, and that’s important given the current banking environment,” he explained. “Both jobs enabled me to see how the bank operates, but from different perspectives.”

Senecal takes the helm at PeoplesBank at an intriguing time for both that institution and the banking industry as a whole. Indeed, he officially takes both the president and CEO titles (Bowen maintained the latter until late June) just as the bank, probably not coincidentally, announced it was taking its commitment to being a mutual bank to a higher level.

Specifically, the institution changed its bylaws in a way that will make any future conversion to a stockholder-owned company exceedingly more difficult. Before, a vote to take such a step would require a simple majority of votes among corporators to move in that direction; now, it will take a super-majority, or 75% (much more on all this later).

As for the industry in general, a trend toward consolidation and gaining all-important size and economies of scale continues unabated, with the recently announced merger of Westfield Bank and Chicopee Savings Bank being the latest in a lengthy string of such moves.

Senecal acknowledged the benefits of size in this era of rising regulatory costs and razor-thin margins, but said PeoplesBank will continue to address those challenges as a mutual institution, and with an operating strategy forged by his immediate predecessors and honed by Bowen during his 10-year tenure.

Tenets include everything from calculated territorial expansion, including a strong push into Springfield, to permanent residency on the cutting edge of new banking technology and an emerging niche in lending to ‘green’ business ventures.

Describing what might come next, Senecal started by implying strongly that there won’t be any attempts to fix anything that isn’t broken (and that’s most things). Getting slightly more specific, he said the bank will continue its efforts to grow the only way a bank can grow in this region and this banking environment — by gaining additional market share.

And this brings him back to mutuality and a commitment to retain that operating structure. As a mutual institution, the bank is not beholden to stockholders, he explained, and in this case, the word ‘local’ doesn’t refer to where commercial lenders live and play golf, but rather to where decisions are made.

“We believe that local decisions really do mean something,” he noted. “There aren’t many mutuals left, and that means people don’t feel comfortable that the decisions are being made in Western Massachusetts. I think that’s a big advantage for us.”

For this issue and its focus on banking and financial services, BusinessWest talked at length with Senecal about his career in banking, his attainment of that goal he set long ago, and what to expect — or not expect, as the case may be — from PeoplesBank moving forward.

Matters of Note

Summing up the progressive Doug Bowen administration at the 131-year-old institution, Senecal said his predecessor “set the bar very high.”

As he spoke those words, he was referring to awards and honors, specifically to the bank’s regular appearance on a host of regional and statewide ‘best-of’ lists. They include everything from the Boston Globe’s compilation of the best places to work in the Bay State to Boston Business Journal’s list of the top corporate charitable contributors, to MassLive’s Readers Raves.

Meanwhile, Bowen himself was honored in 2009 as one of BusinessWest’s first Difference Makers, and in 2011 as a Globe 100 Innovator for, essentially, creating an environment that fostered and facilitated all of the above.

But that reference to setting the bar high actually referred to much more than placement on lists and plaques for the front lobby. It was also a reference to overall growth (the bank crashed through the $2 billion barrier in total assets during Bowen’s tenure), territorial expansion in the form of six new branches, a ‘green’ philosophy (three of those branches are LEED-certified), innovation (the institution has created a Customer Innovation Lab and hired a so-called ‘data scientist’), and the bank’s strong commitment to mutuality and the many competitive advantages it brings.

Senecal will work to keep the bar where it is and hopefully raise it even higher, and he’ll bring to this task that aforementioned blend of experience in the back room and on the front lines.

A Coast Guard veteran, Senecal eventually decided the military would not become a career, and went back to school, earning a degree in business at the Isenberg School of Management at UMass Amherst.

Tom Senecal, seen with other members of the PeoplesBank

Tom Senecal, seen with other members of the PeoplesBank team, says the bank’s commitment to remain a mutual institution makes a strong statement.

He started his career in the financial-services sector with the Big 4 firm KPMG, as a senior manager and CPA. In that capacity, he provided organizational leadership and technical consulting expertise in the areas of auditing, accounting, tax compliance, and financial reporting for small to mid-sized banks in Massachusetts and Connecticut. One of the clients in his portfolio was PeoplesBank, which eventually recruited him to the role of controller.

As mentioned earlier, he drifted far out of his comfort zone a few years later and joined the commercial-lending team, where he remained until 2004, when he accepted an offer to join Florence Savings Bank as CFO and treasurer.

He returned to Holyoke in 2008 when Bowen, who took the helm at PeoplesBank a year earlier, encouraged him to take that same role with his bank.

“I looked upon coming back here as an opportunity,” he explained. “PeoplesBank is a larger, broader-reaching bank geographically that had a lot of opportunities for growth because of its name recognition and the marketability of PeoplesBank. Having had some conversations about the future with people here, I decided to come back.”

The search for Bowen’s successor, which began in the summer of 2015, eventually focused on two internal candidates, and Senecal prevailed.

Making a Statement

Since taking over as president of the bank, Senecal has put himself even closer to the front line — actually, right on it.

Indeed, he’s spent some time behind teller windows at several of the branches, getting an up-close look at what happens there, while also taking the opportunity to speak with some customers directly.

“I don’t think one of those branches is going to invite me back to scan checks, because I wasn’t very good at it — I think I kept the staff an extra hour,” he joked, adding quickly that those experiences were nonetheless fruitful and somewhat eye-opening. “As much as I can laugh about it now, that’s an example of understanding what the front line is really like.”

Beyond this time in the field, Senecal said he’s spent his first several months as president working toward that vote on mutuality and also developing a new four-year strategic plan. Dubbed Vision 2020, it will be presented to the board of directors in September.

When asked what’s in it, Senecal offered only generalities, and said it focuses on every aspect of the banking operation, including retail and commercial products and services, cash management, retail delivery channels, digital delivery channels, and more.

“We’re strategizing and looking at best-in-class products and services to compete with the larger institutions,” he explained. “Remaining as a mutual enables us to do that; we don’t have to worry about the next quarter’s earnings — we can make investments in these technologies and people and not worry about it. We’re in it for the long term.”

Elaborating, he said the bank changed two bylaws that will make converting to a public company far less likely. The first is the new requirement of a super-majority. The second is a so-called ‘protective self-enrichment clause,’ which prevents any director or senior manager from financially benefiting if that 75% vote from the corporators is actually obtained.

“Management and directors cannot participate in any initial public offering,” he explained. “This takes away all the financial incentive to convert; it requires senior management to focus on the long term and growing responsibly.”

Commenting on the decision to change the bylaws regarding mutuality, Senecal said he’s not sure such a step was necessary given that the bank hasn’t shown any interest in moving toward converting to stock ownership. But the vote does make a statement, and an important one, he went on, in terms of its commitment to the community.

“It was an opportunity to commit the institution and send a message to the community about who we are,” he explained. “I think it’s hard to deliver that message because most people don’t understand what mutuality is and how it affects them.

“Having been the CFO of two banks and having talked to other banks, I’ve gotten a real sense for what community banks do for our communities,” he explained. “You can talk to the big banks and the public banks, and they’ll tell you they’re committed and they’re creating foundations, but take a look at what they contribute to the community compared to what the mutual banks contribute, and you’ll see a huge difference.

“The public doesn’t see that,” he went on. “But on the inside, we see that.”

On-the-money Analysis

Still, despite the apparent advantages of mutuality, it does bring some competitive challenges, especially when it comes to size and its benefits, and capital (which ultimately determines how much a bank can lend) and how to attain it.

“Size is not overrated,” Senecal said, adding that it is the best method for coping with costs that continue to rise (compliance costs have nearly tripled for PeoplesBank over the past three years, from $1 million to $2.5 million, for example), while banks cannot recover them by adjusting rates for loans and deposits.

As for raising capital, public banks do so through stock offerings, he noted, while for mutual banks, the only source of capital is earnings, which are elusive in this era of those rising operating costs and in a region generally defined by the compound modifier ‘no-growth.’

But Senecal said there is room for growth in market share, and, as an example, he pointed to the residential mortgage market.

“We were a top-four mortgage lender in Hampden and Hampshire counties last year,” he explained. “There were probably 190 originators in our market, and we had 4% of that market. To me, there’s a lot of market share that can be acquired — and in many ways beyond bricks and mortar.”

This was a reference to emerging technology in the financial world and digital ways of doing business, a realm the bank has been on the leading edge of for years, Senecal noted — a trend he expects to continue.

Meanwhile, there is also room for growth in commercial lending, he said, adding quickly that the market remains highly competitive, despite the fact that the spate of mergers and acquisitions has actually created fewer players.

“There may be fewer banks, but there aren’t fewer lenders — this remains a very competitive environment fueled by historically low rates,” he explained, adding that area institutions are raising the already-high stakes by recruiting not simply individual lenders, but entire teams of lenders.

“I think the public institutions are feeling that they can steal market share by acquiring a group of commercial lenders,” he explained, adding that PeoplesBank has a different strategy, one focused on creating and maintaining relationships through stability.

“We’ve had very little turnover in our commercial lending area,” he explained, “and that has definitely helped us grow that part of our business.”

As for the overall growth strategy, Senecal said PeoplesBank has historically done it organically (it has never acquired another institution), and this trend will continue.

“When I arrived in 1995, this bank had $450 million in assets; today, we’re just about $2.1 billion,” he explained. “We did that through organic growth — putting branches in, increasing our loans, increasing our deposit base. We will continue to focus on that same strategy, although it’s definitely challenging.”

A Strong Bottom Line

When asked to compare and contrast work in the back room and on the front lines, Senecal said there are basic and very important differences.

“Having worked in the finance area, I’d say it’s very easy to make decisions looking at numbers and not understanding the customer impact,” he explained. “When you get to the front lines, you realize those decisions impact your customers, and they become more difficult.”

As he noted earlier, working in both environments will benefit him immensely as he goes about trying to move an already-lofty bar still higher.

He said he’s ready for the many challenges facing the banking industry today, and so is the institution he now leads.

In other words, the feeling is mutual — in all kinds of ways.

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

Banking and Financial Services Sections

Focus on the Fundamentals

team members

John Howland, far right, with team members (from left) Mark Grumoli, commercial loan officer, Denise Coyle, chief operating officer, and Tom Meshako, treasurer and chief financial officer.

Blocking and tackling.

Those are the fundamentals of winning football at any level, or so most coaches would say. But John Howland uses that phrase often as he talks about banking.

He uses it, as those on the gridiron do, in reference to maintaining a keen focus on the basics, the things one has to do right in order to achieve success. And in the case of financial institutions, that list includes some things that most would consider obvious — everything from good customer service to attractive products and services; from having competitive rates on those products to giving back within the community.

But there are also many items that fall into the category of ‘fundamentals’ that are perhaps less obvious, said Howland, president and CEO of Greenfield Savings Bank, a position he took roughly 16 months ago.

In that category would fall such things as imaginative new products, such as GSB’s ‘express business loan,’ a name that pretty much says it all (more on that later), as well as efforts to stay on the cutting edge of technology. Also fitting that description is the bank’s recent hosting of a meeting of the Franklin County Young Professionals Assoc. and other efforts to help foster leadership, as well as a somewhat related philosophy, said Denise Coyne, GSB’s executive vice president and COO, one centered on the notion that taking care of employees is as important as taking care of customers.

Then, there was the recent Asparagus Festival in Hadley, the town famous for its production of that vegetable. GSB was a sponsor of that event, said Howland, noting this alone constitutes blocking and tackling by supporting a local tradition and helping it continue. But the bank went further, renting additional space beyond that traditionally given to sponsors and awarding some of it to commercial customers who could benefit from the exposure and foot traffic.

“They were able to show their goods and gain awareness,” said Coyne. “It was a great opportunity for them, and for us as well, to show we’re working with businesses like that.

“We continue to do the blocking and tackling of banking — looking at updating technology, continually refining the offerings we have for our customers, and facilitating and expediting the interaction between the customer and the bank,” he added in an effort to sum things up. “We’re committed to organic growth through customer demand — it’s as simple as that.”

But there’s nothing inherently simple about executing all of that, and for this issue and its focus on banking and financial services, BusinessWest talked with several leaders at GSB about how it’s accomplished by a focus on fundamentals — and the expansion of that term as it applies to banking.

Sticking with the Game Plan

As he talked about his first 16 months at the helm and the bank’s broad strategic plan moving forward, Howland interspersed those thoughts with observations — and commentary — about the bank’s hometown of Greenfield.

Where once its economy was in many ways dominated by large manufacturers that employed hundreds who filled the downtown’s restaurants and lunch counters, it is now characterized by smaller businesses, many of them in an emerging ‘green’ energy sector as well as the centuries-old and still-stable agricultural sector.

“Going back 40 or 50 years, there might have been 30 or 40 fairly good-sized companies headquartered here,” he explained. “Most of those have consolidated and been rolled up into large, national organizations.

“What we see now is the next generation coming through,” he went on. “And this is in many areas — food service, manufacturing, green energy. We now have a large number of small companies that make product here and ship it elsewhere; we’ve created a new economy.”

In many respects, GSB is well-suited to meeting the needs of this changing business landscape, he said, adding that very large manufacturers would likely do business with a considerably larger institution. Meanwhile, the bank’s lending sweet spot and small-business focus positions it to serve these emerging ventures.

“We have an opportunity to fuel some of this growth,” he explained. “We can be the institution that can lend to these people when they need a piece of equipment or buy a piece of land. We can be there to assist them.”

That’s just one of many reasons why Howland and his team are optimistic about the prospects for the future — when it comes to the community and the bank. Both are at intriguing junctures in their history.

When he talked with BusinessWest soon after his arrival early last year, Howland, who came to Greenfield from First Bank of Greenwich, described the institution, and the cities and towns it served, with terms like ‘stability,’ ‘continuity,’ and ‘community-centered flavor,’ and what he’s seen and heard since has only reinforced those sentiments.

“This is a wonderful area, not just Greenfield but all of Franklin County,” he said, noting that he and his family have relocated there. “It’s an incredibly close-knit community, and one of the things I really like about this area is that multiple generations can live together; I’ve lived in areas where we have more transient populations where people come and people go. But in this part of the state, it’s not unusual to see parents and children living next door to each other. And that makes for a very special community.”

Later in that discussion with BusinessWest early last year, Howland said the bank was well-positioned for continued stability and growth because of its firm roots in the community, expanding commercial-loan portfolio, and presence in a region that was not as heavily banked — or ‘overbanked,’ as many would say — as other areas in Western Mass.

And, again, his experiences to date have only added figurative exclamation points to all of the above.

For these reasons, Howland said GSB doesn’t have to become preoccupied with gaining size and scale — as so many other institutions across the region have, as witnessed by the spate of mergers and acquisitions and rash of new branch openings — and remains focused on growing organically.

“Growth through acquisition is not really our strategy,” he continued. “We would consider an acquisition if we felt that it made sense, but we really are focused on enhancing our position within the markets that we serve and complementing the services we provide to our customers to expand our relationships with them.”

Gaining Ground

Overall, GSB is focused mostly on maintaining the status quo and growing market share across the spectrum of product lines — through more of that blocking and tackling.

“Our strategy is pretty straightforward, and there’s no magic to it, really; it’s about providing the best service we can provide for customers, and attracting both loans and deposits,” he explained. “There are no silver bullets, and no rabbits you can pull out of a hat.”

But there is plenty of room for innovation and creativity, he went on, pointing to products like the express business loan. Through the program, said Mark Grumoli, senior vice president and commercial loan officer, businesses can get up to $100,000, sometimes in 24 or 48 hours.

Products like this one have enabled the bank to maintain strong market share in Franklin County but also move well beyond ‘dabbling’ in neighboring Hampshire County and especially Northampton, a term he said he would apply a decade ago.

“Over the past eight years, much of the loan growth, especially on the commercial side, has come in Hampshire County,” he said, adding that this has been achieved through a combination of awareness, direct presence (new branches in Amherst and Northampton), and a relationship-driven focus.

There’s also — and this is quite timely — ‘Buy in July,’ a program the bank has staged for a quarter-century now that encourages homebuyers to step up during what is a traditionally the busiest time for that market through incentives such as a 25-year, biweekly product that is fairly unique.

“It’s programs like this that really help the mortgage department,” said Coyne, adding that, for the past 14 years, the bank has been the top residential lender in Franklin County and has registered 38% growth in that realm within neighboring Hampshire County. “It’s because of programs like this that really help borrowers out.”

But this business of blocking and tackling goes beyond products and services, said those we spoke with, a philosophy that brings Howland back to that meeting of the young professionals and, more importantly, a commitment that goes beyond making the lobby available for a meeting.

“We believe that this group is very important to the future of Franklin County,” he explained. “A lot of the outlying areas in the state, those outside the urban areas, are suffering from an aging population; in Amherst, the fastest-growing segment of the population is 80- to 90-year-olds.

“So we’re trying to support, in any we can, the environment for younger people in Franklin County,” he went on. “And we’re doing the same in Hampshire County. This is the kind of basic stuff a community bank needs to do. I’m not expecting any transactions out of this; it’s about building community and making the community stronger.”

Scoring Points

As he continued to talk about continuity and a desire to continue doing what the bank has always done, Howland pointed to the name over the door and on the stationery as perhaps the most visible example.

Indeed, at a time when almost every other institution has dropped the word ‘savings’ for one reason or another, GSB has no plans to follow suit.

“We were Greenfield Savings Bank then, and we’re Greenfield Savings Bank now,” he said, adding that this consistency has a lot to do with history, tradition, pride, and mission.

But also, it’s not really something that needs to be done to propel the bank forward and generate growth.

That assignment comes down to blocking and tackling — and the bank has no intention of losing its focus on those fundamentals.

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

Banking and Financial Services Sections

Proposed Rule Changes the Playing Field in Many Ways

By Charlie Epstein


Charlie Epstein

After a five-month comment period, four days of public hearings, more than 3,000 comment letters, some 300,000 petitions, more than 100 meetings with industry stakeholders, and nearly a year to the day that the Department of Labor (DOL) unveiled its ‘conflict of interest’ proposed rule, we ‘the people’ have a new fiduciary regulation.

The new rule is meant to move the needle when it comes to advice offered to the largest pool of retirement savings in America today — nearly $12 trillion in retirement assets and $7 trillion in IRA assets.

Depending on who you talk to and which side of the investment-advice-fiduciary industry you are in, this more than 1,060 pages of regulation by the DOL represents the best of times, the worst of times, or, more likely, something in between.

So, what’s in this final regulation — and what do you, as a consumer with an IRA or business owner offering a 401(k) plan to employees, need to know?

The ‘New’ Fiduciary

First of all, any individual (think of your current advisor, broker, or consultant) receiving compensation for making investment recommendations that are individualized or specifically directed to a particular plan sponsor running a retirement plan, plan participant, or IRA owner for consideration in making a retirement decision is now a fiduciary.

Prior to this rule, the majority of broker-dealers and wire houses refused to allow their brokers to be fiduciaries when providing advice to a retirement plan. The fact of the matter, is, in reality, in spite of what these organizations may have said about their brokers, it was the actions of their brokers that actually ‘deemed’ them to be fiduciaries, regardless of what their parent companies, legal departments, and executives may have said.

Someone is a fiduciary by their actions, not by who they say they are. This new rule was the path forward for the DOL to insure that any advisor, regardless of what they may say they are, will now be a fiduciary and will need to behave with the highest standard of care, prudence, diligence, and loyalty to 401(k) plan participants and IRA holders (more on this to follow).

Beginning in April 2017, if an advisor provides recommendations regarding any and all retirement accounts, such as 401(k), 403(b), IRA, etc., they will be a fiduciary under ERISA.

Being a fiduciary under the final regulation means an advisor must provide impartial advice in the clients’ best interest and cannot accept any payments creating conflicts of interest — this would be compensation that varies based on the recommendations — unless the advisor qualifies for an exemption to what would otherwise be considered a prohibited transaction (the BIC exemption).

Being a Fiduciary

Anyone who is a fiduciary must adhere to the following requirements:

• They must have a duty of loyalty to the person or persons they serve — think 401(k) plan participants or IRA holders;

• They must have a duty of prudence, acting with a standard of care, skill, prudence, and diligence and to act in the same way that someone ‘familiar with such matters would act’;

• They must disclose all the services being provided;

• They must disclose the fees and expenses for offering such services;

• They must make sure those fees are ‘reasonable’; and

• They must disclose and avoid any conflicts of interest.

Fiduciary Compensation

As already mentioned, anyone acting as a fiduciary can only receive ‘levelized compensation.’

For many advisors providing advice to the 401(k) and IRA industry, this will represent a significant change in not only how they offer their services, but how they will be compensated going forward. Many 401(k) plan providers pay both direct and indirect compensation to both brokers and the broker/dealers they work for. This indirect compensation may be paid as 12b-1 compensation from the mutual funds inside a 401(k) or IRA. It may be in the form of indirect compensation brokers receive from the companies they work for in the form of incentive compensation arrangements, trips, even seminar training and dinners. All of this ‘indirect compensation’ will be prohibited under the new standard of care.

Benefits to the IRA Consumer and Plan Sponsors of 401(k) Plans

Going forward, it will be much easier for consumers in IRAs and businesses that sponsor 401(k) plans to understand the services their advisor provides and the compensation they receive for those services. While the new rule does not require that a fiduciary to a 401(k) plan have a contract, this author believes it would be in the best interest of all parties that the advisor/consultant to a 401(k) plan have a service agreement (contract) that details the specific fiduciary and non-fiduciary services they will provide to the plan, the ‘level fee’ they will charge, and an industry fee-benchmarking report that demonstrates the ‘reasonableness’ of the fees being charged. In this fashion, the plan sponsor fiduciary will have a prudent and documented due-diligence process from their advisor to justify their services and fees.


For advisors interested in preserving (or establishing) a variable compensation model, the DOL has paved a path, though one fraught with a number of complicated and potentially expensive disclosures. Known as the ‘best interest contract exemption’ (BIC), this exemption requires a commitment by the firm and the advisor to:

• Provide advice in the best interest of the client;

• Charge only reasonable compensation;

• Avoid misleading statements about fees and conflicts of interest;

• Adopt policies and procedures designed to ensure that advisors provide best interest advice; and

• Prohibit financial incentives for advisors to act contrary to the client’s best interest.

The Treasury Department and the DOL made it clear that advisors can continue to sell commission-based products (think variable annuities and indexed annuities) and that these products have a place in an individual’s financial plan, provided the advisor demonstrates they are in the client’s best interest and not the advisor’s. The DOL’s concern for many years has been that these are complicated products that most individuals do not understand and therefore may have been sold not in their best interest.

In addition, many in both the DOL and Treasury have long been concerned that, since these products are more expensive than non-guaranteed products (think low-cost index funds), and typically pay variable compensation to agents and brokers, it is harder to discern whose best interest they are being sold for.

The BIC exemption will allow advisors to offer these valuable products where they are and can be demonstrated to be in the best interest of the client. As Tom Perez, Labor secretary, stated during the announcement of the new fiduciary standard, not everyone should drive a Yugo.

Price alone, in the absence of value, is not and should never be the deciding factor for every consumer. The new regulation contains language that emphasizes that fees alone are not the only factor when making investment decisions.


1. A two-year phase-in of the new regulations. First, beginning on April 1, 2017, all advisors to any new 401(k) plan or IRA arrangements will be fiduciaries, and may only receive level compensation, unless they plan to qualify under the BIC exemption.

Second, beginning on April 2, 2018, all existing client-advisor IRA relationships will need to provide new disclosure to the investor.

All of this will require a massive undertaking by a significant segment of the investment industry in increased disclosure, compliance, and government oversight. Look for fees and expenses to the consumer to rise for the small consumer and shrink for the larger 401(k) and IRA accounts.

2. Exodus from the 401(k) business. It is the opinion of this author that 50,000 to 100,000 advisors and firms will exit the 401(k) business in the next two to five years due to increased compliance and litigation.

State Farm already has announced it will exit the 401(k) business and its advisors will not be allowed to sell 401(k) plans.

3. Increased fee litigation. There have already been numerous cases against 401(k) service providers for ‘excessive fees’ that have settled in the $30 million to $100 million range. One case has gone to the Supreme Court (see Tibble vs. Edision). Look for the number of cases to increase, and the size of the 401(k) plans that will be sued to decrease from $100 million plans down to mom-and-pop $1 million plans, as the legal community lines up to be the ‘enforcer’ of this new fiduciary enforceable standard of care. The reality is, the DOL does not have the legal power in the Constitution to enforce the regulation it writes; only the U.S. Treasury can.

The U.S. Treasury has already acknowledged it does not have enough auditors to investigate and enforce this new regulation. The DOL, knowingly and willingly, wrote this rule, all 1,060 pages, with the intent that the legal community would be the enforcer of the regulation.

In addition, five industry groups have already filed lawsuits to block the DOL’s fiduciary rule for the negative impact against consumer choice and government overreach. Look for these cases to accelerate over time.

For a lively and entertaining view of the ongoing fiduciary debate that will certainly continue for years to come, I encourage you to visit YouTube’s “Last week Tonight, John Oliver Retirement Plans” (HBO) and my “America’s 401(k) Coach Rips John Oliver over Retirement Plan Slam!”

Charlie Epstein is the author of two industry leading books — Paychecks for Life, How to Turn Your 401(k) Into a Paycheck Manufacturing Company, and Save America Save, the Secrets of a Successful Retirement Plan. He is the president of Epstein Financial Services, a fiduciary and registered investment advisory firm; [email protected]

Banking and Financial Services Sections

The Relationship Between Lender and Company Is a Key Factor

By Steve J. Schwartz, Esq. and David K. Webber, Esq.

Steve Schwartz

Steve Schwartz

David Webber

David Webber

In the May 13, 2013 issue of BusinessWest; we penned an article titled “A Primer on the ESOP.” This is an extension of that article that specifically focuses on financing an ESOP, or employee stock- ownership plan, and informs the reader of the lender’s concerns in making a loan as part of the structure of a leveraged ESOP.

In the prior article, we described an ESOP as follows: an ESOP is a qualified defined-contribution retirement plan established under §§ 401(a), 409, and 4975 of the Internal Revenue Code. Unlike other qualified plans, an ESOP is designed primarily to invest in shares of a closely held corporation, referred to in the code as ‘employer securities.’ The sponsor company may transfer the shares of common stock as a qualified contribution, or the ESOP may purchase shares from shareholders or the sponsor company. In a ‘leveraged’ ESOP, the company takes out a bank loan to fund the purchase, then lends the funds to the ESOP to finance the purchase of shares. A 100% sale of shares to an ESOP may require a series of smaller transfers because 100% bank financing is unlikely.

The selling shareholder may receive cash as partial or complete consideration for the shares. In the alternative, or in addition to cash, the selling shareholder may self-finance a portion by accepting a note as partial payment. As the note is paid off in installments, the plan trustee transfers shares to each of the employees’ accounts, eventually vesting all the stock in employee accounts in accordance with the terms of the plan.

The lender has its usual concerns in making the loan, which will eventually be used to purchase shares by the ESOP. The considerations do not vary much between financing an ordinary loan and financing an ESOP. The lender’s customary due diligence is utilized to assess the credit worthiness of a borrower. If the company is a customer of the lender, it will normally have a relationship with the current management.

If the ESOP is part of an exit plan and there will be a change of control, the lender will be concerned with the capacity of the new management team to manage the business. It is important that the new management team be involved in dealing with the lender in obtaining the loan. In the event there is not a change of control, it will also consider this issue for the future in case there is a change of control due to death or disability or part of a future plan to vest control in new management. Hopefully, the lender will have experience in dealing with an ESOP transaction.

It is important for the company to prepare a financial plan for the period of the loan so that its needs for financing are included in its request for financing. It is also important that working capital and other financial requirements are included in the request. The company’s request should consider any contingencies.

The lender will analyze the company’s financial circumstances, including the security for its loan and the ability of the company to make the loan payments. The lender will also consider the company’s other financing requests.

As part of the ESOP planning process, the company shall be required to engage an independent appraiser to determine the value of the shares to be sold as part of the ESOP.  The lender will review the appraisal carefully in its approval process. It will provide the lender with an independent view of the company and its prospects.

The terms of the loan should be keyed to the ability of the company to generate profits. However, there are limitations on the term. An ESOP is a retirement plan and must comply with applicable laws; the internal note and pledge agreement from the ESOP to the company will be subject to federal government scrutiny. A term that is too long, or an interest rate greater than market rate, is suspect because it could unduly favor the selling stockholder over the employees.

Shares are released to the employees’ individual accounts on the payment of the loan. A longer term would affect the release of shares to the ESOP participants: the longer the term, the slower the release of shares. The term and interest rate of the note should therefore be reasonably short (fewer than 10 years) in order to mitigate excess scrutiny from the IRS and Department of Labor.

The loan normally will be secured by all the assets of the company. It is not unusual for the lender to request the personal guaranty from the stockholders. Also, it may be necessary for the proceeds of the sale to be pledged as additional security for the loan. The lender may agree to reduce the additional collateral as the loan is repaid.

If the company has existing loans or new loans with the lender, there will be cross-collateralization, cross-default, and cross-guarantee agreements. If any loan is in default, the default will apply to all the other loans. In the event a stockholder is owed money by the company, the lender may require that the stockholder subordinate the obligation to the lender and restrict the payment terms of the obligation to protect the company’s cash flow. The lender may require life insurance on the management team to be assigned to the lender as additional collateral for the loan.

As with any loan, there will be annual reporting requirements, financial covenants, and other performance metrics. The terms should be clearly set out in the commitment letter. The lender may have other requirements such as insurance, landlord’s consent, mortgagee’s consent, and collateral control agreements if some of the assets are not on the premises of the company.

The loan from the company will be documented by a separate note and security agreement to be signed and delivered simultaneously with the loan to the lender. In addition, there will be a stock-purchase agreement between the ESOP and the seller(s) of the shares.

The lender will require that the proceeds of the ESOP loan must be used solely to purchase shares in the company.  The ESOP will be able to repay the note from company contributions to the ESOP or from dividends paid to the ESOP from the company.

In summary, the relationship between the lender and company is a significant factor in the establishment of the ESOP, financing the purchase of company shares and the future of the business.  Even if a lender is initially skeptical, the lender can become an invaluable part of the business-succession team once the plan has its blessing.

We want to thank Vicky Crouse and Frank Crinella of TD Bank, N.A. and L. Alexandra Hogan, Esq. of Shatz, Schwartz and Fentin, P.C. for their assistance in preparing this article.

Attorney Steven J. Schwartz, of Shatz, Schwartz and Fentin, P.C., concentrates his practice in the areas of family business planning, mergers and acquisitions, corporate law, and estate planning; (413) 737-1131; [email protected] Attorney David K. Webber, of Shatz, Schwartz and Fentin, P.C., concentrates his practice in the areas of closely held business, corporate law, real estate, trusts and estates, and bankruptcy; (413) 737-1131; [email protected]

Banking and Financial Services Sections

Record Retention 101

By Patricia Murphy

Patricia Murphy

Patricia Murphy

All entities produce a variety of records. Maintaining these records is more than a matter of filing away a few important documents. A well-thought-out record-retention plan can benefit your company operationally, protect against litigation, and help ensure compliance with state and federal laws and regulations.

Over the past decade, the amount of electronic information has grown exponentially, and organizations are producing far more content than ever before. A significant amount of electronic data is produced and shared through various forms of unstructured data (e-mails, texts, social media). The ability to easily share information, while efficient, puts multiple copies of important documents in multiple locations. Many organizations don’t have systems in place to deal with this unstructured data, yet are liable for this content.

An effective records-management program will provide employees with the knowledge and tools needed to ensure paper and electronic files are properly managed. Establishing and following a record-retention schedule will go a long way to ensure your company keeps the vital records it needs (and doesn’t).

Tax Records

Although the actual tax returns should be kept permanently (including the cancelled checks from tax payments), the supporting documentation from previous years should be kept until the chance of an audit passes. The IRS generally has three years to examine your return, though the limit increases to six years if the agency believes you underreported income by more than 25%. No limit exists if you failed to file or filed a fraudulent return.

Special attention should be given to records connected to assets (i.e. residences, real estate, equipment, stock, etc.), which need to be kept longer. The tax consequences of a transaction this year, such as a sale of property, may depend upon events that happened years ago. Keep records relating to the property until the above period of limitations expires for the year in which you dispose of the property.

For example, to determine tax consequences of the sale of real estate, you must know your basis (the original cost plus later capital improvements). If you received property in a non-taxable exchange (like-kind exchange), your basis in the new property is the same as the basis of the property you gave up, increased by any additional money paid to acquire the new property.

You must keep the records on the old property, as well as on the new property. If stock is sold, you would need to maintain records of your basis of the stock, which includes your initial investment plus any reinvested dividends.

Accounting Systems

Audit reports and financial statements from accountants, trial balances, general ledgers, journal entries, cash books, charts of accounts, check registers, subsidiary ledgers, and investment sales and purchases should be kept permanently. Other records, such as payable and receivable ledgers, bank reconciliations, bank statements, and cash and charge slips should be retained for seven years.

For certain assets, typically you want to keep all of the statements, invoices, and purchase documents that substantiate cost for six years after the asset is sold. Depreciation schedules and asset-inventory records should be kept permanently.

Corporate Records

Small businesses that have a corporate structure also need to retain certain corporate records. All information for annual reports, articles of incorporation, stock ownership and transfers, bylaws, capital stock certificates, dividend register, cancelled dividend checks, and business licenses and permits should be retained permanently.

Employee Records

Small businesses that employ individuals other than the owner or partners should keep the employee records while the person is still employed with the company. The personnel files can then be disposed of after seven years, beginning after the date of termination. Payroll records should be kept as follows:

• W-2 forms, payroll-tax returns, and retirement-plan agreements — permanently;

• Worker’s compensation benefits, employee withholding exemption certificates, payroll records (after termination) — 10 years;

• Payroll checks, time reports, attendance records, medical/dental benefits, commission reports, accident reports — seven years;

• Employee benefit plans — six years; and

• Contractor information upon completion of contract, and tip substantiation — three years.


Occurrence-based policies (which cover claims reported years after the policy expires, as long as the event occurred during the policy period) are essentially active forever and should be kept indefinitely. Property policies/claims-made policies (which cover claims reported only within the policy period) should be kept for six years. Workers’ compensation policies should be kept indefinitely, as claims could take years to develop. Life-insurance policies should be kept permanently.


Documents such as bills of sales, permits, licenses, contracts, deeds and titles, mortgages, and stock and bond records should be kept permanently, while canceled leases and notes receivable can be kept for 10 years after cancellation.

Document imaging (scanning) allows technology to convert paper documents to electronic images. Document imaging can provide major benefits, including reducing storage space, reducing paper purchased, improved employee productivity, and quick overall access to information.

With the threat of identity theft, it is a good practice to shred all the records you no longer need, especially those with personal information. Shredders are inexpensive in destroying small amounts of information; however, a personal shredding service should be considered with a large volume of shredding.

The suggested retention periods shown above are not offered as a final authority, but as a guide to which to compare your needs. If you have any questions or unusual circumstances, or wish to delve more into industry-specific practices, be sure to consult your CPA, attorney, or other industry professional before destroying any important legal, business, or financial paperwork.

If you have questions regarding electronic files, consider speaking with an IT professional in addition to those resources listed above.

Patricia Murphy is a senior associate at the Holyoke-based public accounting firm Meyers Brothers Kalicka, P.C.; (413) 322-3540; [email protected]

Banking and Financial Services Cover Story Sections

Dollars and Sense

Westfield Bank President and CEO Jim Hagan

Westfield Bank President and CEO Jim Hagan

Westfield Bank and Chicopee Savings Bank will come together in the first merger of locally based institutions in more than two decades. The $2.1 billion entity will have a solid foundation on both sides of the Connecticut River, said Westfield Bank President and CEO Jim Hagan, and the capital with which to undertake further territorial expansion.

He couldn’t pinpoint exactly when they started, but Westfield Bank President and CEO Jim Hagan said the talks he’s had with his counterpart at Chicopee Savings Bank, Bill Wagner — about this marketplace, the changes taking place in it, and a possible merger of their institutions — are not exactly a recent development.

Well, that’s true of those first few subjects of conversation, anyway.

“Bill and I had a number of discussions about this market, what was happening in it, bank consolidations, and the importance of size and scale in the industry,” said Hagan, who took the helm at Westfield in 2005, adding that these talks took a different tone and moved to a much higher level of intensity last fall.

That’s when both men were working together on what could be called the financial institutions’ component of the capital campaign to raise funds for the Sr. Caritas Cancer Center at Mercy Medical Center, and thus seeing much more of each other.

Summing up those discussions in general terms, Hagan said the two presidents agreed that there were many shortcomings — and, yes, risks — to remaining at their respective sizes (roughly $1.4 billion in assets at WB and $650,000 at CSB) given the many changes in the region’s banking community and the growing dominance of larger players.

He and Wagner eventually concluded that a merger of their banks not only made sense, but easily made the most sense of the many options that had presented themselves in recent years.

“We were both well-capitalized institutions, and we both felt strongly that we wanted to have what we considered to be a strong, independent bank headquartered in Western Massachusetts, one that would be locally owned and locally managed,” Hagan explained. “And, together, we felt we had a great opportunity to do just that.”

It took several more months to hammer out the details, but those discussions last fall certainly laid the groundwork for the announcement made early last month — that the two institutions would merge and thus become the second-largest locally managed bank in Hampden County, a $2.1 billion entity (to operate under the name Westfield Bank) with 21 locations in Western Mass. and Northern Conn.

As he elaborated on why this was the most sensible route for the banks, Hagan said this would be a merger of two local institutions with long histories in the region — and with footprints that featured hardly any overlap. (The only community where both banks have a branch is West Springfield, and those facilities are separated by several miles, not several blocks or even yards, as is often the case in a region almost always characterized by the term ‘overbanked.’)

These historical and geographical considerations will translate into fewer redundancies and therefore fewer reductions in workforce when the banks come together later this year, said Hagan, as well as less encroachment in this market by the larger regional banks that had shown interest in acquiring CSB.

Meanwhile, the two institutions have similar philosophies, nearly identical operating systems, and even a common marketing approach — one with the accent on a highly personalized brand of service, said Kevin O’Connor, senior vice president of Retail Banking, Retail Lending, and Marketing for Westfield Bank.

All of this should lead to a smooth transition and greater customer retention when the dust eventually settles, said Hagan, as well as a financial institution that will play a much more significant role in the local economy than the banks could individually.

For this issue and its focus on Banking & Financial Services, BusinessWest looks at this latest merger to reshape the local banking community and what the emerging $2.1 billion institution will bring to the proverbial table.

Points of Interest

As he returned to the subject of when and how this merger started to come together, Hagan said it was born from the knowledge — possessed by everyone conducting banking in this market — that size really does matter.

Elaborating, he said that size, or ‘scale,’ the other term used to convey the same points, amounts to far more than bragging rights or a significantly larger limit on commercial loans (although that certainly is an important factor, as will be discussed in a bit).

WestfieldBankLogoChicopeeSavingsLogoInstead, size is easily the most effective means with which to effectively cope with razor-thin margins and significantly deeper layers of regulation that resulted from the financial crisis — caused in good part by a lack of regulation of financial institutions — of nearly a decade ago.

“Size and scale creates efficiencies in terms of your operating costs,” he explained. “And having that 21-branch network creates efficiencies with products, services, and the delivery network.”

Elaborating, Hagan noted that, while there are few redundancies to result from this merger when it comes to physical locations, there will certainly be some redundancies — which can be reduced or eliminated — that involve operations and the staffing of same.

Meanwhile, the merger will enable the larger institution to spread the costs resulting from greater regulation over a wider footprint, he went on, adding that, in simple terms, the costs for the new, larger Westfield Bank will be significantly less than what the two current institutions are paying together at present.

This phenomenon goes a long way toward explaining much of the recent movement within the market, and why a number of brands have disappeared from the landscape.

Along with these mergers have come some growing pains during the process of transforming two banks into one, Hagan acknowledged, adding quickly that he expects this merger to go rather smoothly because the banks operate on different platforms of the same system and there will be few of what would be called ‘institutional changes.’

Kevin O’Connor

Kevin O’Connor says Westfield Bank and Chicopee Savings Bank have similar cultures and operating systems, which should make for a smooth transition.

“What we found is that the culture of Chicopee Savings Bank is very similar to the culture of Westfield Bank,” he explained. “So we expect that the integration of the systems, the people, and the philosophies will go very smoothly.”

But efficiencies constitute only one of the benefits of size, he went on, adding that the merger with CSB takes the Westfield Bank name to places it has never been (physically, anyway), starting with Chicopee, the second-largest city in Western Mass. and one with a huge business community.

Chicopee also has branches in Ludlow, South Hadley, and Ware, locations that will greatly increase Westfield Bank’s presence on the east side of the Connecticut River, which is limited (if that’s the right term) at present to locations in Springfield, East Longmeadow, and Enfield, Conn.

And while the bank has historically done business with residents and businesses in virtually all communities in Western Mass. and Northern Conn., including those on the east side of the river, having one’s name on buildings in more of those cities and towns is a tremendous benefit, Hagan explained.

“A greater percentage of the businesses we lend to — the machine shops, the universities, healthcare institutions — are on that [east] side of the river,” he explained. “And we think we can increase our loan portfolio, our deposits, and more based on the success we’ve already had with a limited presence in those communities.”

Taking Note

In practical terms, the merger will significantly increase the emerging bank’s lending capacity, said O’Connor, noting that the current limit at WB is $22 million, and for CSB it’s $16 million. The larger Westfield Bank will have a $35 million limit. This will enable it to write more loans and generate more deals without the need to collaborate with other institutions, he explained.

“There would less need to do participations with other banks,” he said of the higher limit. “And it broadens the view of what Westfield Bank can do for people in sectors like manufacturing, healthcare, and others that we do well in, even though we can do a lot now.”

Beyond this greater lending capacity, the merger will enable Westfield Bank to greatly accelerate that process of territorial expansion that has been ongoing for several years now, said Hagan.

Significant milestones include a move into downtown Springfield (Tower Square) in 2000, a move that has paid significant dividends, said Hagan, noting more than $65 million in deposits at that location, as well as the East Longmeadow branch, opened in 1997.

These steps were followed by penetration into the Northern Conn. market with branches in Granby, just a few miles from a location in Southwick, in 2013, and the one in Enfield, opened a year later.

Both moves were common-sense expansions of what is truly a network, he said, adding that both Connecticut branches, and especially the one in Enfield, have done extremely well despite the fact that they have the name of a small Western Mass. city over the door.

When this merger is completed, that name should resonate even more, said Hagan, who anticipates further territorial expansion in the years to come.

When asked where it might take place, he was understandably vague, but did offer some insight, hinting that the institution will likely look south to Connecticut, east toward Quabbin and perhaps Worcester County, and within the city of Springfield for potential opportunities. And the merger greatly increases the list of possibilities.

“With the combined capital we’d have, we’d be able to look at additional acquisitions in different marketplaces where we may have an interest in expanding,” he explained. “We like the Northern Connecticut marketplace, we would look at Central Mass., and I’d like to expand in Springfield; there are many possibilities.

“But first and foremost,” he went on, “we want to make sure this merger is successful.”

Bottom Line

As he talked about Chicopee, the pending loss of the community’s name from the institution that has had a huge presence in its downtown since 1854, and how well the new name would play in that proud community, Hagan acknowledged that all this will constitute a significant change that might take a while for some to digest and accept.

Then again, he told BusinessWest, the reaction he’s seen thus far in that city has been overwhelmingly — but not, in his mind, at least, surprisingly — positive.

“That’s because this is the first in-market merger in more than 25 years, and because we’re a local institution, and because of our reputation of being community leaders and community supporters,” he said by way of explaining his theory.  “It’s gone  very well.”

And he expects things to continue to go well, for all those reasons listed above, but mostly because of what they all verify — that this is the option that makes the most sense for both institutions.

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


Banking and Financial Services Sections

Making Their Time Count

Kara Stevens says she likes to keep busy.

That’s good, because attaining that state certainly hasn’t been an issue lately — and it probably won’t be for probably the next 20 or 30 years.

Indeed, as she talked with BusinessWest, Stevens was mentally putting some finishing touches on the final exam she’ll give students in one of the undergraduate accounting classes she teaches at Bay Path University, which she serves as director of Accounting Programs and associate professor. She was also preparing lesson plans for the graduate class she teaches (those students are on a different schedule and won’t see their course work wrap up for another few months).


Kara Stevens

Melyssa Brown

Melyssa Brown

Meanwhile, she’s been hard at work on her own studies — she’s pursuing a doctorate in accounting, with the main focus of her research being financial-literacy programs and how to make them more effective. She has a strong base of knowledge with which to start, having worked with Junior Achievement (JA) on that endeavor for some time, and joining the agency’s board last year.

Then there’s her work with the Mass. Society of CPAs — she was named to that board earlier this year, and has been actively involved with its Western Mass. chapter. And she’s the mother of a 4-year-old daughter, and is expecting another child later this year.

As mentioned earlier, it’s a good thing she likes to be busy. And that full slate, crowded as it is with a combination of professional achievements, work in the community, personal and professional development initiatives, and more clearly resonated with the judges selecting the MSCPA’s Women to Watch in the so-called ‘Leaders Category.’

As did Melyssa Brown’s application, which is equally studded with achievements and community work that would make it clear that she also makes full and effective use of the 24 hours in each day.

Indeed, Brown currently serves as senior manager of the Audit and Accounting Department at Holyoke-based Meyers Brothers Kalicka, and recently began serving as a so-called accounting mentor to area startups involved in programming created by Valley Venture Mentors. In that capacity, she’s providing key financial advice — and words of wisdom on many other aspects of running a business — to entrepreneurs at critical stages in the development of their companies.

“Often, I’m helping people at VVM with questions about finance because that’s what I specialize in,” she said about her role as a mentor at the monthly sessions. “But you can help people in all kinds of ways, and it’s been great — I learn as much as they do.”

Brown is also a key contributor to Girls Inc., a Holyoke-based nonprofit that focuses on empowering young girls across the region. An alumna of that organization, her involvement has grown steadily over the years, serving on the executive, finance, and strategic planning committees, and also as treasurer, vice president of the board (her current role), and, perhaps most importantly, as a role model for the girls in the program.

For this issue and its focus on Banking & Financial Services, BusinessWest profiles these two women to watch — who have much in common, right down to their status as BusinessWest 40 Under Forty winners (Brown in 2013, Stevens with the recently named class of 2016) — as a way to shine a spotlight on the emerging talent in this important sector of the local economy.

Contributions That Add Up

At its core, Brown told BusinessWest, Girls Inc. wants those who participate in its programs to be strong, smart, and bold. She believes she possesses all three qualities, and gives the organization ample credit in that regard.

“That’s what they teach, and that really encompasses it all — mind, body, and spirit,” she explained, crediting the organization with helping her develop perhaps the most important trait needed to succeed in business today: confidence.

And now, she’s trying to help the next generation of young women do the same, through a variety of programs, and her participation with the organization is just one of the many professional and community-oriented activities that fills her calendar.

As is the case with Stevens, Brown’s story begins in college (in this case Elms), which she entered not knowing exactly what she wanted to do with her career other than “something in business.” A strong aptitude for math and accounting helped sharpen her focus and put her on a path toward becoming a CPA.

She started at Downey, Sweeny, Fitzgerald & Co. in Springfield, and eventually came to Meyers Brothers Kalicka in 2004, where she soon became the youngest senior manager in the 65-year history of the company.

She said there are many aspects to her work in auditing, and noted that comes down to working with people more than working with numbers. She came back repeatedly to the notion of herself as adviser and problem solver.

“Clients will often run into something and call us and say, ‘how do I handle this?’ or ‘what do I do with this?’” she said, adding that she enjoys helping clients through what can often be a difficult process.

In many ways, that notion of working with others to solve problems also applies to her work with VVM and Girls Inc.

At VVM, she said, entrepreneurs come to the group with imaginative ideas and usually need guidance and direction about how to convert those ideas into successful ventures.

“They have a passion for something, but often don’t know how to turn it into a business — or a viable business,” she said, adding that her work is rewarding on a number of levels.

“I learn so much from it; you surround yourself with other smart people — it’s inspiring,” she told BusinessWest. “It’s a learning experience for me as much as it is for them.”

As for Girls Inc., which is the only board she sits on, Brown says she has a passion for its multi-faceted mission, especially programs aimed at steering women toward careers in the STEM (science, technology, engineering, and math) careers. Actually, she noted, an ‘a’ has in many cases been added to the acronym, which stands for ‘art.’

One program she helped conceptualize is known as Eureka!, which buses cohorts of girls to UMass Amherst for four weeks in the summer, where they receive training in STEM fields from professors at the university.

Teaching Moments

As she talked about the final exam she was readying for her undergraduate students, those taking an intermediate course in accounting, Stevens said it would obviously go heavy on technical material.

“Debits and credits … technical stuff like that,” she explained. “It’s tough; it’s cumulative, so there’s lots to remember. It’s a lot like the financial-accounting part of the CPA exam, which I like to say is a mile long and inch thick, meaning there’s lots and lots and lots of information that adds up.”

It was just that kind of material for which Stevens showed an aptitude — and an affinity — at Springfield Technical Community College a decade and a half ago. She developed so much of each that her indecisiveness about what to major in was over.

Fast-forwarding a little, she majored in accounting at UMass and eventually went to work at Wolf & Co. But her career took a rather unexpected turn when she started doing some adjunct teaching at West State University.

She discovered she enjoyed teaching accounting at least as much as doing it herself, and joined the faculty at Bay Path on a full-time basis. Not long after doing so, she blueprinted the school’s master’s-degree program in accounting, one of many it has added over the past several years.

And while she enjoys her work in the classroom and is proud of how the school’s accounting programs have grown, she’s perhaps most excited about her work in the community, much of which falls into that category of financial literacy, an important focus of JA.

And she’s been able to blend the various aspects of her professional life by getting many of her students at Bay Path involved in the critical work of helping young people understand money and how to better manage it — for a lifetime.

“My students will visit (Springfield’s) Central High, where they’re teaching the first-year students, the freshmen, about financial literacy,” she said, adding that the experience benefits those on both sides of the equation.

She’s become so involved, and so fascinated, by these efforts to promote and create financial literacy — and make them ever-more effective — that she made this the focus of her doctoral work; she’s in year two of a five-year program she actually hopes to complete in four.

“The effort to make this community more financially literate is a real passion of mine,” she told BusinessWest. “Through Junior Achievement and the research I’m doing, I’m trying to help create ways to increase what we’re doing. We need more volunteers —people on the professional level — to be out there educating young people.

“Studies have shown that these efforts help the community as a whole,” she went on. “If you teach the high-school students to be more financially literate, they’re going into their homes and potentially teaching the parents.”

She said one of her specific points of focus moving forward, from a research perspective, is women.

“Research is showing that, overall, girls in high school are just not as confident in being financially literate,” she explained. “But after these programs, we’re seeing a big increase, compared with the males, when it comes to being more comfortable with these topics. Hopefully, the end result will be that, in their adulthood, they’re making smarter financial decisions.”

Beyond the Numbers

Staying busy. That’s just one of the many things Brown and Stevens have in common.

They’re making their time count — in every sense of that word — in ways that are benefiting their employers, their own careers, and, most importantly, the Western Mass. community.

And that’s why they’re not just busy — they’re women to watch. Closely.

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

Banking and Financial Services Sections

Not Business as Usual

PeoplesBank’s new Northampton branch

PeoplesBank’s new Northampton branch models some of the latest innovations, from ‘green’ construction to two-way video in the drive-up lanes to iPad stations.

When innovations like online and mobile banking began to emerge, banking leaders pondered how they would impact the role of brick-and-mortar branches. Specifically, would customers simply have no need to stop by? The answer to that question, at least so far, has been a resounding no. However, that doesn’t mean branches should stop evolving, say area bank executives who have seen their institutions alter customer interaction in ways both big and small, aiming to provide a more high-tech, yet still highly personalized, experience.

When customers engage the drive-up tellers at PeoplesBank in Northampton, they’re communicating via a video screen. That in itself may not be innovative, but the bank is intrigued by what it could eventually lead to.

“We still have drive-up like a traditional bank, but we have two-way video,” said Stacy Sutton, senior vice president, retail administration. “It’s almost a stepping stone for a future technology — a remote teller. This would be the first step in that process. The customer is getting the personal touch by seeing a teller, but the teller is not necessarily there — they could be back at corporate headquarters in Holyoke, but serving customers here.”

Matthew Bannister, the bank’s vice president, corporate responsibility, compared the idea to how the NFL runs instant replay from one location in New York, with referees from multiple cities around the country communicating with that site.

“It would allow us to have longer branch hours and, from a staffing point of view, more tellers without having to spread them around the area,” he noted.

That’s just one way the bank is looking to the future, discussing concepts and testing out ideas in its customer innovation lab, ideas that may someday be instituted in the branches.

“Technology is always changing, and we’ve got to stay at the forefront of that,” Sutton said. “Of course, not everything we throw against the wall is going to stick or be the best thing for customers or the bank.”

In recent years, questions have arisen in the banking industry about the need for new branches, given the emergence of online and mobile services for customers. But the way PeoplesBank and others see it, branches may be evolving in how they’re designed and what the customer experience is like, but they’re not going away.

“Every customer survey we do says that branches are important to the customer,” Sutton said. “They feel that the brick-and-mortar presence is important. And we do find that they like to come in and see people, have that conversation. That’s why we’re making these offices more inviting places they’ll want to come and stay.”

For example, newer PeoplesBank branches have eliminated teller lines in favor of smaller teller ‘pods’ for a more personal touch. In addition, a quick look around the Northampton branch on King Street — the bank’s newest — reveals refreshment and coffee stands and iPad stations for customers to use, drawing on the facility’s Wi-Fi.

Berkshire Bank

Berkshire Bank has adopted many modern branch-design elements, including teller pods to eliminate counters and lines.

Berkshire Bank has incorporated similar changes in its new branches, said Tami Gunsch, executive vice president, retail banking.

“We’ve enhanced our branch design over the past five years; the new design includes smaller square footage, which allows for a more-personalized experience, greater site-selection opportunities, and overall lower operating costs,” she noted, adding that kiosk-like pods allow customers and tellers to interact quickly without the physical barrier of a teller line. Also like at PeoplesBank, Berkshire customers take advantage of in-branch cafés for coffee and refreshments.

“We have seen the needs of our customers change, with the desire to bank when and where it is convenient for them,” Gunsch noted, explaining why it’s important to make branches more inviting spaces. “Customers want to take advantage of multiple channels to do their banking inclusive of online, mobile, ATM, and branch visits. Meeting their needs is an important component in driving the relationship.”

Checks and Balance

When Connecticut-based Farmington Bank moved into the Western Mass. market, it incorporated some of the same trends adopted by PeoplesBank and Berkshire Bank, including open floor plans and replacing counters and lines with personal bankers serving customers at pods. Its first two offices in the region opened in the fall in West Springfield and East Longmeadow.

Click HERE to view a PDF listing of Banks in Western Mass.

Ken Burns, executive vice president at Farmington, said it was important to get the branch design right because physical locations are critical to a bank’s growth, particularly one new to a region.

“We find that well over 80% of our customers believe branch location in proximity to their house or their work is important for them,” he told BusinessWest. “It’s well-documented that it is very difficult to compete and grow through a geographic area and get new accounts — unless you’re a national competitor with a huge marketing budget — without some sort of physical location, some physical proximity to where your customers are. A lot of statistics drive that; it’s not just a guess.”

That said, Sutton noted, the customer experience is changing as the industry moves to online banking, mobile banking, mobile check deposit, Apply Pay, and other innovations, and those factors are influencing branch design — for example, with the iPad stations.

“We wanted to do something different, and we did a lot of research and looked at a lot of national companies; Apple was one of them,” she said. “We went to the West Coast to see what they’re doing; we took ideas from everyone and have tried to incorporate them into PeoplesBank. We want to be innovative, to introduce new technology to customers, make it inviting to them; we want them to come visit PeoplesBank.”

One shift that has more to do with training than technology is the concept of ‘universal bankers,’ who are able to help customers with a range of tasks, from deposits to loan applications, as opposed to the traditional model, which separates those roles.

“Any one of the employees can help with anything; it doesn’t matter who the customer sees here,” Sutton said, noting that the new Northampton branch is modeling the idea, and other concepts, that will eventually move to other locations. “We hope to take elements of this building and incorporate them in other buildings, such as teller pods, two-way video, anything we see coming down the pike in the future. That is the plan.”

Berkshire Bank has begun to adopt the universal-banker model as well, Gunsch said, emphasizing the need for 21st-century branches to be both high-tech and high-touch.

“The new branch design has evolved to leverage new technology to enhance the customer’s experience in conjunction with our shift to staffing our branches with more universal-banker roles who can address any needs a customer may have, versus needing to deal with multiple team members,” she noted. “This maximizes teamwork through an efficient floor plan.”

Another shift in branch design is actually one being incorporated in myriad types of business — going ‘green’ to maximize energy efficiency and minimize environmental impact. In recent years, PeoplesBank has opened three offices certified by the national LEED (Leadership in Energy and Environmental Design) program.

Indoor and outdoor LEED elements at the King Street location include large windows allowing plenty of natural light, an energy-efficient HVAC system, carpeting and paint products that emit low levels of VOCs (volatile organic compounds), drought-resistant plantings, a rain garden directing water runoff back into the ground as opposed to drainage systems, and, car-charging stations free to anyone.

In addition, the bank built on an existing site instead of clearing trees from a new property, recycled 98% of all materials from demolishing the existing building, and brought in new building materials from within 500 miles. Other banks in the region have also targeted existing sites for new branches, such as Farmington Bank, which revitalized a landmark building in West Springfield once occupied by the West Springfield Trust Co.

Stacy Sutton

Stacy Sutton says PeoplesBank’s customer innovation lab is always discussing ways to improve the customer experience.

For Peoples, the LEED efforts are part of its well-known environmentally conscious culture. “That’s a core value of PeoplesBank — to be sustainable and eco-friendly,” Sutton said. “It’s great for staff and customers who come into the building.”

She expects other banks to make similar efforts as time goes on, if only because building codes are moving toward green design as a baseline.

“We’ve had positive response to doing these offices,” she added. “I’m sure we’ll continue to ramp up, and we’ll see other people incorporate aspects of this type of building going forward.”

Earning and Learning

Finally, Sutton noted, some branch-design elements are aimed simply at making a bank a community meeting place of sorts. Moveable furniture in the Northampton branch allows the staff to conduct customer-education seminars on anything from first-time homebuying to financial strategies to, yes, environmental topics.

Similarly, Berkshire Bank has incorporated community rooms in many branch locations, available to be used for anything from PTA meetings to birthday parties to Little League sign-ups. “The community room is equipped with Wi-Fi, a large presentation monitor, a conference phone, and the newest gaming systems, all at no cost to the group,” Gunsch said. “This has been a differentiator in our local markets.”

It’s all part of efforts to get people into the branches, she noted.

“Customers have shifted away from being solely reliant on the branch to conducting their banking online. However, the majority of customers still visit a branch location at least monthly,” she told BusinessWest. “Person-to-person interaction remains important to the customer and the financial institution. We believe the branch still matters; we just needed to redefine the branch experience.”

Joseph Bednar can be reached at [email protected]

Banking and Financial Services Sections

New Rules of the Road


Although many provisions of the Affordable Care Act (ACA) have already been implemented, a few major ones are still to come. None are as far-reaching as the proposed ‘Cadillac tax’ on employer-sponsored health benefits.

Originally scheduled to take effect in 2018, the Cadillac-tax implementation was recently pushed off to 2020. If implemented, the IRS will impose a 40%, non-deductible excise tax on certain employer-sponsored health benefits that exceed a dollar threshold of $10,200 for an individual and $25,500 for a family. Health-insurance companies and self-insured plan sponsors will have to pay the tax on excess dollar amounts for benefits provided above this threshold. After 2020, the limits are to be adjusted for future changes in the consumer price index.

The thresholds will be increased in certain situations if the majority of covered employees are engaged in specified high-risk professions such as law enforcement and construction, and for group demographics including age and gender. For pre-65 retirees and individuals in high-risk professions, the threshold amounts are currently $11,850 for individual coverage and $30,950 for family coverage.

The Obama administration has stated that the purpose of the tax is to reduce the tax-preferred treatment of employer-provided healthcare benefits and raise revenue to help finance the expansion of subsidized health coverage under the ACA. Most experts believe that, contrary to what the name might imply, the Cadillac tax is going to directly impact the majority of employer-sponsored plans.

Many union plans and municipal plans could be impacted right out of the gate, and employers in high-healthcare-cost states like Massachusetts are going to be hit hard if the law goes into effect in its current form. If you thought your healthcare benefit plans were just a Chevy or a Buick, you are in for a big surprise.

As written, the tax is 40% of the cost of health coverage that exceeds these predetermined threshold amounts. Cost of coverage includes the total contributions paid by both the employer and employees, but not cost-sharing amounts such as deductibles, co-insurance, and co-pays when care is received.

Unfortunately, it’s not just the premiums for the employer health plans that are counted toward these thresholds, either. Currently, the Cadillac tax would also include contributions under certain pre-tax, account-based plans such as flexible spending accounts and health-savings accounts or health-reimbursement arrangements, as well as most wellness programs.

The calculation includes any contributions made by the employer or employees pre-tax. Employers are going to be responsible for calculating the total dollar value of benefits for each employee on a month-by-month basis and apportioning this among the benefits providers.

Cadillac-tax payments are not deductible for federal tax purposes. Consider what this might mean for an employer offering a health plan with a flexible spending account (FSA) or health-savings account (HSA) with the average total cost of coverage at $12,000 per year for self-only coverage. A $12,000 individual plan would pay an excise tax of $720 per covered employee: $12,000 – $10,200 = $1,800 above the $10,200 threshold; $1,800 x 40% = $720.

The tax on family coverage could be even higher. A $32,000 value of benefits provided to employees with family coverage would pay an excise tax of $1,800 per covered employee: $32,000 – $27,500 = $4,500 above the $27,500 threshold; $4,500 x 40% = $1,800.

On Feb. 23, 2015, the Internal Revenue Service issued a notice covering a number of issues concerning the Cadillac tax and requested comments on possible approaches that could ultimately be incorporated into proposed regulations. No new regulations have been issued to date.

How are employers responding to these looming changes? Many have yet to digest the impact, but the biggest trend is the migration to high-deductible health plans (HDHPS), and health-savings accounts. Recent statistics show that 60% of employers are contemplating or already have moved to implement new high-deductible health plans with companion HSAs. These HDHP plans have upfront deductibles of at least $1,300 single and $2,600 family and out-of-pocket cost sharing of up to $6,550 for a single and $13,100 for a family in 2016. As compared to traditional health-benefits plans, HDHP plans typically have dramatically lower premiums, as much as 40% lower.

Employees covered under a qualified HDHP plan can contribute (as can the employer) to an HSA either through pre-tax payroll or a direct, tax-deductible contribution to an individually owned tax-preferred accumulation account that can be used to pay for any qualified out-of-pocket health expenses during one’s lifetime with tax free dollars.

While downgrading health benefits to higher upfront deductibles is not the most popular solution for all employees, if paired with a health-savings account including some employer contributions into the HSA, it could be more palatable. This next-generation ‘consumer-directed healthcare’ is forcing consumers to assume more risk and responsibility in how they spend money on healthcare decisions.

While there is a growing movement in Congress and among business groups to repeal or significantly amend the Cadillac tax before it takes effect, we can be certain that no action will be taken until well after the 2016 election. However, given the broad-based impact, this is a topic that will likely stay high on the radar for Congress and our next president.

Bob Cummings is president of Northampton-based American Benefits Group; (413) 727-7211.

Banking and Financial Services Sections

FAQs About EMVs


The nationwide shift to EMV is well underway.

EMV — which stands for Europay, MasterCard, and Visa — is a global standard for cards equipped with computer chips and the technology used to authenticate chip-card transactions. In the wake of numerous large-scale data breaches and increasing rates of counterfeit card fraud, U.S. card issuers are migrating to this new technology to protect consumers and reduce the costs of fraud.

“These new and improved cards are being deployed to improve payment security, making it more difficult for fraudsters to successfully counterfeit cards,” said Julie Conroy, research director for retail banking at Aite Group, a financial industry research company. “It’s an important step forward.”

For merchants and financial institutions, the switch to EMV means adding new in-store technology and internal processing systems and complying with new liability rules. For consumers, it means activating new cards and learning new payment processes. Most of all, it means greater protection against fraud.

ThinkstockPhotosCreditCardChipHere are some frequently asked questions to help explain the changes.

Why Are EMV Cards a More Secure Option?

That small, metallic square you see on new cards is a computer chip, and it’s what sets apart the new generation of cards.

The magnetic stripes on traditional credit and debit cards store contain unchanging data. Whoever accesses that data gains the sensitive card and cardholder information necessary to make purchases. That makes traditional cards prime targets for counterfeiters, who convert stolen card data to cash.

“If someone copies a magnetic stripe, they can easily replicate that data over and over again because it doesn’t change,” said Dave Witts, president of U.S. payment systems for Creditcall, a payment gateway and EMV software developer.

Unlike magnetic-stripe cards, every time an EMV card is used for payment, the card chip creates a unique transaction code that cannot be used again. If a hacker stole the chip information from one specific point of sale, typical card duplication would never work “because the stolen transaction number created in that instance wouldn’t be usable again and the card would just get denied,” Witts explained.

EMV technology will not prevent data breaches from occurring, but it will make it much harder for criminals to successfully profit from what they steal. Experts hope it will help significantly reduce fraud in the U.S., which has doubled in the past seven years as criminals have shied away from countries that already have transitioned to EMV cards, Conroy said. “The introduction of dynamic data is what makes EMV cards so effective at bringing down counterfeit card rates in other countries.”

How Do I Use an EMV Card?

Just like magnetic-stripe cards, EMV cards are processed for payment in two steps: card reading and transaction verification. However, with EMV cards, you no longer have to master a quick, fluid card swipe in the right direction. Chip cards are read in a different way.

“Instead of going to a register and swiping your card, you are going to do what is called ‘card dipping’ instead, which means inserting your card into a terminal slot and waiting for it to process,” Conroy said.

When an EMV card is dipped, data flows between the card chip and the issuing financial institution to verify the card’s legitimacy and create the unique transaction data. This process isn’t as quick as a magnetic-stripe swipe.

“It will take a tiny bit longer for that transmission of data to happen,” Witts says. “If a person just sticks the card in and pulls it out, the transaction will likely be denied. A little bit of patience will be involved.”

Some EMV cards can also support contactless card reading, also known as near-field communication (NFC). Instead of dipping or swiping, NFC-equipped cards are tapped against a terminal scanner that can pick up the card data from the embedded computer chip.

Will I Still Have to Sign or Enter a PIN?

Yes and no. You will have to do one of those verification methods, but it depends on the verification method tied to your EMV card, not if your card is debit or credit.

Chip-and-PIN cards operate just like the checking-account debit card you have been using for years. Entering a PIN connects the payment terminal to the payment processor for real-time transaction verification and approval. However, many payment processors are not equipped with the technology needed to handle EMV chip-and-PIN credit transactions. So it is not likely you will have to memorize new PINs anytime soon, according to Conroy.

“There aren’t going to be many issuers requiring a PIN,” she said. “A vast majority will be issuing chip-and-signature cards, which aren’t all that different from how credit cards work now.”

As with a magnetic-stripe credit card, you sign on the point-of-sale terminal to take responsibility for the payment when making a chip-and-signature card transaction.

U.S. chip-and-PIN cards will be transitioned in slowly, according to Ferenczi. “The card production demand today is really based on chip-and-signature cards. It will probably take two to three years to fully convert to chip-and-PIN.”

Despite a slow transition overall, those who get chip-and-PIN cards will be able to use them right away. “If a terminal doesn’t have the ability to accept a PIN, it will then step down to accepting a signature,” said Randy Vanderhoof, executive director of the Smart Card Alliance. “There will always be a secondary option.”

If Fraud Occurs, Who Is Liable for the Costs?

Today, if an in-store transaction is conducted using a counterfeit, stolen, or otherwise compromised card, consumer losses from that transaction fall back on the payment processor or issuing bank, depending on the card’s terms and conditions.

Following an Oct. 1, 2015 deadline created by major U.S. credit card issuers MasterCard, Visa, Discover, and American Express, the liability for card-present fraud shifted to whichever party is the least EMV-compliant in a fraudulent transaction.

Consider the example of a financial institution that issues a chip card used at a merchant that has not changed its system to accept chip technology. This allows a counterfeit card to be successfully used. “The cost of the fraud will fall back on the merchant,” Ferenczi said.

The change is intended to help bring the entire payment industry on board with EMV by encouraging compliance to avoid liability costs.

Today, any parties not EMV-ready could face much higher costs in the event of a large data breach. Automated fuel dispensers will have until 2017 to make the shift to EMV. Until then, they will follow existing fraud liability rulings.

Is the Transition to EMV Technology Complete?

Not exactly. Although the deadline was strong encouragement for all payment-processing parties to become EMV-compliant as soon as possible, not everyone has made the transition yet.

“It’s going to take a little time to adapt,” said Doug Johnson, vice president of risk management policy for the American Bankers Assoc.

EMV debit cards in particular are rolling out at a slower pace. While 90% of financial institutions began issuing EMV debit cards in 2015, only 25% of U.S. debit cards (about 71 million cards) were expected to be chip-equipped by the end of 2015. The percentage of EMV debit cards in consumers’ hands is expected to reach 73% by the end of 2016 and 96% by the end of 2017.

So far, the large majority of chip cards going into the hands of cardholders are coming from larger issuers like Bank of America and Chase, according to the Federal Reserve Bank of Chicago. The cost of this EMV transition is causing smaller banks to convert their cards more slowly.

EMV debit cards may be issued at an even slower pace as banks have to prep their software to accept those new cards as well, according to Ferenczi.

“Different companies will have different rollout strategies,” Johnson said. Some will base their actions on card expiration dates; others will work to get chip cards into consumers’ hands as soon as possible.

Can I Use My Card at a Retailer That Doesn’t Support EMV Yet?

Yes. The first round of EMV cards — many of which are in consumers’ hands — will be equipped with both chip and magnetic-stripe functions so consumer spending is not disrupted and merchants can adjust. If you find yourself at a point-of-sale terminal and are not sure whether to dip or swipe your card, have no fear. The terminal will walk you through the process.

“For example, if you enter a card into the chip reader slot but the reader isn’t activated yet, it will come up with an error and you’ll be prompted to swipe the card in order to use it,” Vanderhoof said.

And vice-versa. “If a consumer tries to swipe a chip card instead of inserting it, an error will appear, and they will be prompted to insert the card for chip processing instead,” Vanderhoof said.

If chip-card readers are not in place at a merchant at all, your EMV card can be read with a swipe, just like a traditional magnetic-stripe card. “You can still conduct transactions, you just lose that extra level of chip security,” Johnson said.

Many large retailers, such as Walmart, Target and Costco, have upgraded their POS terminals and are activating them for chip-card acceptance, but smaller businesses may be lagging when it comes to upgrading their payment technology.

Will I Be Able to Use My EMV Card Outside the U.S.?

Yes and no. The U.S. is the last major market still using the magnetic-stripe card system. Many European countries moved to EMV technology years ago to combat high fraud rates. That shift has left many U.S. consumers who have magnetic-stripe cards looking for other forms of payment when they travel.

Since many foreign merchants are wary of magnetic-stripe cards, consumers who hold some type of chip card may run into fewer issues than those without one, according to Ferenczi.

However, chip-and-PIN cards are the norm in most other countries that support EMV technology. So consumers with chip-and-signature cards may find some merchants who are unwilling or unable to process their card, even though it does have an embedded chip.

Still, despite any difficulties in the transition, Ferenczi says the change is a step in the right direction.

“Nobody likes to think that his or her card is being secretly used for other purposes,” he says. “So I think regardless, there is a level of comfort knowing that it will be far more difficult to counterfeit EMV cards.”

Sienna Kossman is a staff reporter for CreditCards.com. Copyright 2016, CreditCards.com, all rights reserved, reprinted with permission.

Banking and Financial Services Sections

Continuing the Momentum

Glenn Welch

Glenn Welch says the community-focused culture at Freedom Credit Union is similar to what he experienced in his previous president’s role at Hampden Bank.

Under 12 years of Barry Crosby’s leadership, Freedom Credit Union dramatically expanded its assets, employee base, membership, lending reach — pretty much all the metrics by which a financial institution is measured. So former Hampden Bank President Glenn Welch, recently chosen to succeed the retiring Crosby, is taking the reins at a time of significant momentum for Freedom. He says the institution will continue to seek out growth opportunities, while maintaining its emphasis on commercial lending and community involvement.

Glenn Welch’s move from Berkshire Bank to Freedom Credit Union wasn’t very far geographically — just a half-mile north on Main Street in Springfield — and, to hear him tell it, perhaps even less of a move culture-wise.

“One of the things I heard before coming here — from at least four people who used to work at Hampden Bank was that Freedom reminded them very much of Hampden with its community orientation,” said Welch, a 17-year veteran of Springfield-based Hampden Bank and its president from 2013 until its acquisition by Berkshire Bank last year.

“You can’t just take people’s money and make loans these days,” he added. “If you’re a community institution, you have to be involved and doing things in the community. That’s how you generate goodwill and increase your customer base.”

After the Berkshire merger, Welch stayed on for several months as executive vice president. But after Freedom Credit Union President Barry Crosby announced his retirement last June and Freedom hired a Boston-based recruiting firm to find the institution’s next president, Welch was among the names chosen as possibilities.

“It was a long process, and we were very thorough,” said Lawrence Bouley, who chairs Freedom’s board of directors. “We brought other candidates forward as well, but found Glenn best fits with our organization, with the commercial background he has, as well as being a local banking leader; he knows the area and knows its people.”

Welch, who spoke with BusinessWest on Jan. 4, his first day on the job at Freedom, agreed that the match is a good one. “Fortunately, I was the one they chose,” he said. “Freedom Credit Union is a very community-minded organization, the same as Hampden Bank was. Plus, they’ve had a real push forward into business lending.”

Specifically, its designation as a low-income credit union allows it to avoid the cap on commercial lending — 12.5% of assets — that most credit unions must adhere to. This, and an aggressive commercial-loan push in recent years, has seen the institution recognized as a top SBA lender in the region, a shift that mirrors Hampden Bank’s commercial-loan growth during Welch’s days at the reins there. “With a real focus on commercial loans here,” he said, “it seemed like a good fit on both sides.”

Specifically, Crosby added, in the past five and a half years, Freedom has gone from no commercial loans to more than $36 million. “It has been slow, steady growth. We’ve grown the department from one individual to five positions.”

That reflects the overall growth of the credit union during Crosby’s tenure. When he came on board in 2003, the bank had one office and 38 employees; today, it boasts 11 locations and 135 employees. Meanwhile, membership has grown in the past 10 years from roughly 16,000 to more than 27,000.

Steady Growth

That growth came both organically and through a series of strategic acquisitions. The credit union’s second branch, in Northampton, came about through a merger with Franklin Hampshire Building Trades Credit Union in May 2004, followed by the opening of a Chicopee branch that November. The following year, a merger with Four Rivers Federal Credit Union brought Freedom offices to South Deerfield and Turners Falls.

Two more branches — in Greenfield and Feeding Hills — opened in 2009, and expansion to Easthampton followed in 2010. A year later, a second Springfield branch opened in Sixteen Acres, and 2012 saw the tenth site open in Ludlow. The most recent office is located in Putnam Academy in Springfield, and is staffed in part by high-school students, many of whom, once they graduate and move on to college, return to work there over winter break. Currently, 12 Freedom employees are Putnam students or graduates.

“With the continued consolidation in the industry,” Welch said, “Freedom having branches up and down I-91 provides a lot of opportunity across the Valley for local decision making.”

Go HERE to download a PDF chart of area credit unions

The broader resources that come with being a larger institution also make it easier to introduce retail and commercial products, Crosby added, from the [email protected] online banking platform to a program known as CUPs, or Credit Union Partners, which offers local businesses and organizations a no-cost benefit package for their employees and retirees, including special promotions for checking and savings accounts and several types of loans.

Freedom has placed much importance on financial education as well, educating area youth at schools and colleges from Springfield to Greenfield through its youth-banking and financial-literacy programs.

For each elementary school in the youth-banking program, employees visit schools to accept deposits, review monthly statements, and explain the fundamentals of saving. Meanwhile, high-school students learn about topics like the importance of maintaining good credit and the process of getting a car loan. Freedom also participates in area Credit for Life financial-literacy fairs — a collaborative effort with other institutions — that teach teens about budgeting and making life decisions with their finances.

The credit union has also conducted new-homebuyer seminars through the Puerto Rican Cultural Center and the New North Citizens Council. Welch again pointed out similarities with Hampden Bank’s activities during his tenure, which included Credit for Life and new-homeowner seminars, among other financial-education efforts.

Deep Roots

Freedom Credit Union was chartered in 1922 as the Western Mass. Telephone Workers Credit Union.  From a small office in the telephone company building on Worthington Street in Springfield, the institution grew until it had to find a new, larger home on Main Street.

As a result of telephone-company downsizing and reorganization, the credit union eventually expanded to include select employee groups. But growth was incremental until January 2001, when the institution applied for a community charter, and membership eligibility was expanded to include anyone who lives or works in Hampden, Hampshire, Franklin, or Berkshire county. In January 2004, just after Crosby took over as president, the membership voted to change the name to Freedom Credit Union.

Barry Crosby, left, and Lawrence Bouley

Barry Crosby, left, and Lawrence Bouley agree that Glenn Welch’s experience, community ties, and commercial-lending acumen make him a good fit to lead Freedom.

“When I took over as president 12 years ago, we were still the Western Mass. Telephone Workers Credit Union, but we changed the name to reflect the broader community, and we are now known up and down the Pioneer Valley,” Crosby said.

Indeed, deposits in Franklin County grew from $10 million to $66 million in that time, and from $17 million to $75 million in Hampshire County. Today, Freedom is a $522 million institution.

“We’ve more than doubled our assets and membership in that time,” he went on, emphasizing the importance of a physical presence in communities, even in an age when online banking is extremely popular. “In my opinion, you need brick and mortar in key locations in the market you want to be in. You cannot just do everything online. Even Millennials need to see bricks and mortar to recognize your name.”

He cited the example of Realtors Federal Credit Union, which launched in Maryland as an online-only enterprise. “It didn’t succeed. They thought they’d run that place with 20 people nationwide, but you can’t replace bricks and mortar in key locations.”

Welch agreed. “When the Internet became popular, some people at Hampden thought we didn’t have to build any more branches. But we doubled our branches to 10. People want to come into a bank and recognize the person behind the counter and know the branch manager. Finance is very personal for people. When you don’t have a high level of touch, it just doesn’t work.”

Efforts to broaden that ‘touch’ at Freedom include financial education targeted at the region’s expansive Hispanic population — Springfield is 38% Hispanic, and Holyoke 48%, and the numbers are larger in the school systems — with efforts like Spanish-language financial-literacy articles in regional Latino publications as well as targeted messaging on TV and radio.

Future Look

Welch, who earned his bachelor’s degree in finance at Western New England University and his MBA from UMass Amherst, held a number of positions at Hampden Bank before becoming president there, including chief operating officer, executive vice president, and senior vice president of business banking. Before that, he served as vice president of the Middle Market Banking Group at Fleet Bank.

His deep roots in the region are also reflected by his civic volunteerism in the Pioneer Valley, including serving on the boards of HAPHousing, the Assoc. for Community Living, the Business School Advisory Board at Western New England University, DevelopSpringfield, and Springfield Business Leaders for Education.

He arrives at a growing credit union that continues to expand its services and recently put its staff through additional training to help them better identify member needs and match them with available products and services — an effort to create more members for life.

“We’ve built a great base for the future,” Crosby said. “We have strong capital, we’re regulatory-compliant, and we see great opportunities over the next few years.”

For his part, Welch said Freedom will continue to examine potential expansion of its geographic footprint while broading its commercial-lending reach and cross-selling services to its existing membership base.

“We see a lot of opportunity here,” he told BusinessWest — and a likelihood of continuing more than a decade of strong momentum.

Joseph Bednar can be reached at  [email protected]

Banking and Financial Services Sections

Taking a Hike

When she announced last month that the Federal Reserve would raise its key interest rate by 0.25% — the first rate hike in nearly a decade — Fed Chair Janet Yellen stressed that the move reflected a number of positive trends for the U.S. economy.

“This action marks the end of an extraordinary seven-year period during which the federal funds rate was held near zero to support the recovery of the economy from the worst financial crisis and recession since the Great Depression,” she noted. “It also recognizes the considerable progress that has been made toward restoring jobs, raising incomes, and easing the economic hardship of millions of Americans.”

She admitted that further improvement in the labor market remains but with the economy performing well and expected to continue to do so, a modest increase in the federal funds rate target is appropriate.

But how does that move affect area banks and their customers?

The short answer is, not much — at least not in the short term.

James Sherbo

James Sherbo

“The banking industry anticipated the Fed’s intention to raise rates. So the increase is already baked into the numbers, and I don’t think this announcement will have any effect,” James Sherbo, senior vice president, consumer lending at PeoplesBank, told BusinessWest.

“We’ve been expecting this for a long time,” he added. “We set mortgage interest rates, for example, by looking at the financial markets and bond interest rates. Neither of those have changed very much. We also price ourselves to be competitive in the market.”

The rate increase is a net positive for banks, which have been forced by seven years of low rates to make do with smaller margins between the interest rate they offer depositors and the rates they charge individuals and businesses for loans. And consumers will be affected depending on the types of debt they have.

“It is a very small move. It will be reflected in some changes in borrowing rates,” Yellen said. “Loans that are linked to longer-term interest rates are unlikely to move very much. For example, some corporate loans are linked to the prime rate, which is likely to move up with the fed funds rate, and those interest rates will adjust. There are some consumer borrowing rates, I think credit card rates, that are linked to short-term rates, that might move up slightly. But, remember, we have very low rates, and we have made a very small move.”

Generating Interest

Tami Gunsch

Tami Gunsch

With the first Fed increase in more than years, there are a few ways consumers may see an impact in their financial lives, said Tami Gunsch, executive vice president, retail banking with Berkshire Bank. “The interest rates you pay and earn and the availability of credit are linked to the projections and judgments of Federal Reserve Board.”

The most immediate impact of the Fed rate hike will be on credit-card consumers because those rates are variable and will rise quickly in response to the Fed’s action. Before the move, the average rate on credit-card balances was 11.07%, according to James Chessen, chief economist of the American Bankers Assoc., but they are set to rise in parallel with the 0.25% Fed hike.

Greg McBride, senior vice president and chief financial analyst at bankrate.com, notes that the rate hike will also mean fewer credit-card promotions offering a 0% introductory-period rate. “But it’s not going to happen overnight. As rates go up, the rates on the offers you see will go up. Or, the promotional time period in which the offer is good will shrink.”

As for consumers thinking about buying a home or car, long-term fixed rates won’t change much in the next few months, analysts say, but they will begin climbing late this year and into 2017.

“Rates are pretty low, and they’re not going to change much” in the short term, Dean Croushore, a University of Richmond professor and former Fed economist, told CNN recently.

Historical context is important here, he added. The average interest rate on a 30-year fixed-rate mortgage right now is 3.9% and expected to gradually increase. But the average mortgage rate was about 6.3% 10 years ago, and 7.2% 20 years ago. In other words, it’s still a good time to borrow, and will remain so even when interest rates creep up.

However, borrowers in adjustable-rate loans might want to speak with their lender about the benefits of refinancing into a fixed-rate loan before too long, McBride said.

“Be wary of variable-rate debts such as home equity lines of credit (HELOCs) or even some private student loans that carry variable rates,” he advised. “Pay those down now or look to refinance into a fixed rate. Some lenders will even let you fix the interest rate on the outstanding portion of your home-equity line to protect against a rising rate environment. And if you have an adjustable-rate mortgage that could adjust upward, now is a great time to unload it and refinance into a fixed rate. Otherwise, a series of interest rate hikes could produce some nasty payment increases a year or two down the road.”

In short, Gunsch told BusinessWest, “consumers may anticipate changes in the interest rate they are paying on outstanding credit-card balances on a monthly basis. On the home-mortgage side, consumers may see an impact on monthly payments if they are in variable or adjustable-rate loan product. If a consumer has a fixed-rate mortgage product, their rate will remain the same with no monthly impact.”

Little Impact on Savings

While those rates rise, however, depositors won’t see much improvement in the interest rates they earn on savings. While America’s largest banks have already said they will start charging more interest for loans, they also intend to sit on the additional income. For instance, a JPMorgan Chase spokesman told CNN, “we won’t automatically change deposit rates because they aren’t tied directly to the prime [rate]. We’ll continue to monitor the market to make sure we stay competitive.”

McBride agreed. “We are not going to see an improvement right off the bat,” he said. “A lot of banks are sitting on a pile of deposits, and their margins have really been squeezed by low rates. So the incentives for banks is to pass on higher rates on loans but not deposits so they can breathe some life into that margin.”

Still, the Fed’s action, by most accounts, portends additional increases over the next two years, which will eventually push up interest rates in savings.

Gunsch said depositors will indeed eventually benefit. “From a savings perspective, consumers will most likely experience an increase in the earnings they see on the funds they are saving each month in interest-bearing accounts such as savings and money market or certificates of deposit.”

Go HERE to download a PDF chart of the region’s Banks

Despite the mixed impact on consumers, Yellen reiterated that the Fed’s decision reflects its confidence in the U.S. economy, and that is an overall positive.

“We believe we have seen substantial improvement in labor-market conditions, and while things may be uneven across regions of the country and different industrial sectors, we see an economy that is on a path of sustainable improvement,” she said. “So, in thinking about their labor-market prospects and their financial prospects going forward, I hope they will take this decision as one that signals [the Fed’s] confidence that conditions will continue to strengthen and job market prospects will be good.”

Meanwhile, Gunsch said, consumers just need to pay attention to what’s happening so the changes don’t take them by surprise.

“Now is a time for consumers to review their finances,” she said, “and look for opportunities to save more and manage their monthly expenditures wisely.”

Joseph Bednar can be reached at [email protected]

Banking and Financial Services Sections

Delayed Reaction


Bob Cummings

Bob Cummings

For many employers, their first challenge with the Affordable Care Act (ACA) may be compliance with the new reporting requirements.

Under the ACA, the Internal Revenue Code added IRS Section 6056, which requires ‘applicable large employers’ to file information returns with the IRS and provide statements to their full-time employees about the health-insurance coverage that the employer offered. Under the terms of the ACA, an applicable large employer generally means an employer that had 50 or more full-time employees (including full-time equivalent employees) in the preceding calendar year.

Last month, the IRS released IRS Notice 2016-4, which delays Sections 6055 and 6056 reporting for the 2015 reporting year. Forms 1095-B and 1095-C must now be distributed to employees by March 31, as opposed to the original due date of Feb. 1. If filing by paper, forms 1094-B, 1095-B, 1094-C, and 1095-C must be filed with the IRS by May 31 (changed from Feb. 29). If filing electronically, the forms are due to the IRS by June 30 (changed from March 31). The extended deadlines apply to all filers automatically. In summary, the deadline for distributing forms to employees has been extended two months, while the filing deadline with the IRS has been extended three months.

The original due dates were aligned so that individual taxpayers could use the information contained in the forms to file their individual tax returns. Specifically, the information is needed by individuals to help determine whether they were eligible for the premium tax credit or subject to the individual mandate. The IRS has granted this automatic extension due to the fact that insurers, self-insuring employers, and other providers of minimum essential coverage need additional time to adapt and implement systems and procedures to comply with the reporting requirement.

As a result of this delay, if individuals have not received the information by the time they file their individual tax return, they may rely upon other information received from employers or coverage providers when filing their returns. They need not amend their returns once they receive the forms, but they should keep them with their tax records.

The IRS reinforced that an employer should make a good-faith effort with reporting. If an employer does not comply with the extended deadlines, the employer could be subject to penalties. Applicable large employers must report whether an individual is covered by minimum essential health benefits coverage, and that an offer such was made to each full-time employee.

Applicable large employers will need to file IRS Form 1094-C, Transmittal of Employer-provided Health Insurance Offer and Coverage Information Returns, and IRS Form 1095-C, Employer-provided Health Insurance Offer and Coverage, to report the information required. These 1095-C forms are to be provided by Jan. 31 for the calendar year 2015 coverage periods. (The final versions of these forms will not available until February.)

What qualifies as an offer of ‘minimum essential health benefits coverage?’ Well, the IRS says it is an offer that satisfies all of the following criteria:

1. An offer of minimum essential coverage that provides minimum value and includes 10 minimum essential healthcare services: outpatient services, emergency services, hospitalization, maternity/newborn care, mental-health and substance-abuse services, prescription drugs, rehabilitation (for injuries, disabilities, or chronic conditions), lab services, preventive/wellness programs and chronic-disease management, and pediatric services;

2. The employee’s cost for employee-only coverage for each month does not exceed 9.5% of the mainland single federal poverty line divided by 12; and

3. An offer of minimum essential coverage is also made to the employee’s spouse and dependents (if any).

These new employer-health-benefits reporting forms and instructions look complicated even to benefits professionals, and they will require gathering quite a bit of information. For example, Form 1095-C is a form an employer is supposed to use to give employees the health-benefits information they need to fill out their own tax forms and insurance coverage applications, and to give the Internal Revenue Service, the Employee Benefits Security Administration, and the U.S. Department of Health and Human Services the information they need to detect individual taxpayers’ violations of the Patient Protection and Affordable Care Act (PPACA) rules.

An employer is also supposed to send the IRS a 1094-C summary form, or report, on the information provided in the 1095-C forms, along with copies of the 1095-Cs.

The IRS and other agencies are supposed to use the 1094-Cs, together with the 1095-Cs, to detect any problems with employer compliance with the PPACA employer mandate rules described in Internal Revenue Code Section 4980(H).

This is a major new compliance burden for employers, and the IRS and other federal agencies will most likely show some compassion initially for employers who are making a good-faith effort to comply with the rules.

Most benefits-compliance professionals believe the IRS will begin a major enforcement initiative by this May, because as many as 50,000 employer-benefit plans may be audited over the first two years for compliance. Employers should do everything possible to avoid compliance traps that could trigger an audit.

Among the compliance challenges is the requirement that employers must track full-time-equivalent employees. Basically an employer must track all of their part-time employees, even if those employees may likely not get the 1095-C forms. If a part-time employee becomes full-time at any point in the year, even for only a short period, then the employer has to provide the 1095-C form for that individual.

One of the major challenges confronting employers who will have to comply is the fact that so many are still relying on a paper-based benefits-administration system. It will be virtually impossible to do the tracking and the reporting without an automated benefits-administration system. This really spells the end of paper-based benefits administration for employers subject to these new tracking and reporting requirements.  Employers will have to adopt an online benefits-administration technology platform in order to perform both the tracking and reporting requirements under Section 6056.

The good news is that there are a number of outstanding benefits-technology solutions available for employers today. Forward-thinking benefits professionals are rapidly incorporating and delivering technology platforms across their client base.

The benefits business today is also a technology business. From ACA reporting to employee communications; benefits enrollment and administration to HRIS functionality like paid-time-off tracking or onboarding, an extensive array of software and employee services can be provided on one fully integrated platform. This means, as an employer’s benefits needs evolve, benefits professionals can provide added functionality, configurability, sophistication, and services.

Are you ready to navigate the new world of healthcare compliance and reporting? Ask your benefits consultant if they are ready to advise and assist you.

Bob Cummings is CEO and managing principal of Northampton-based American Benefits Group; (413) 727-7211.

Banking and Financial Services Sections

A 40-year Plan


ESB President and CEO Matt Sosik

ESB President and CEO Matt Sosik

When asked to describe the current strategic plan for Easthampton Savings Bank (ESB), Matt Sosik, the institution’s president and CEO, said it’s fairly simple, really.

“I want this bank to be here 30 or 40 years from now, and we’re a little myopic about that,” he told BusinessWest. “We’re focused on making sure that this a community asset decades from now.”

“We’ll be gone — maybe we’ll be pushing up daisies, who knows?” he went on, referring to himself and Tom Brown, ESB’s executive vice president Retail Banking who’s already logged 30 years with the institution, and was sitting beside him. “We want this bank to be here; it has a necessary place in the long-term future of the communities we serve.”

Such talk might have seemed melodramatic decades ago, or even a few years ago, he acknowledged, but the times have changed, and mere survival is no longer the foregone conclusion it once was, as evidenced by the number of institutions that are now referred to only in the past tense, said Sosik, who arrived at the bank roughly 15 months ago after a lengthy stint as CEO at Oxford, Mass.-based Hometown Bank.

Indeed, the cost of business is soaring, and margins, dramatically impacted by plummeting interest rates, are razor thin. In this environment, size certainly matters — not in terms of bragging rights, but simply the ability to function properly, and profitably, in a changed landscape.

“We’re never going to measure ourselves by our asset size — we’re going to measure ourselves by how successful we are,” said Sosik as he described a general operating philosophy that was in place long before he arrived at ESB. “But in banking, community banking especially, size continues to a be an incredibly important metric; efficiencies are borne by spreading them over a broader base of assets. Period.”

That’s why most banks have embarked on territorial expansion efforts in recent years, which have taken them to corners of the Bay State far removed from their home bases, and into other states, especially Connecticut, as well. Such efforts have also led to an explosion in new branches, and significant over-banking in communities such as East Longmeadow, Amherst, Northampton, and others.

But in addition to seeking size, banks have also become driven in their quest to become more efficient and create economies of scale. This has been achieved largely through mergers and acquisitions, an ongoing trend that has changed the banking and business landscapes in many ways.

ESB has been part of these trends, said Sosik, as witnessed by its acquisition earlier this year of Citizens National Bank in Putnam, Conn., a move that, as mentioned earlier, gives the institution a broader geographic footprint while also growing its asset base.

But the bank is also being creative in its growth-and-survival strategy, as evidenced by the announcement in late September that ESB and Hometown will form a strategic partnership through the merger of the institution’s holding companies, a transaction that will yield a $1.7 billion entity, and thus the size needed to remain competitive in today’s changing financial services landscape.

However, this somewhat unique union — creation of the so-called multi-bank holding company is becoming more common but is still rare for this market — enables both institutions to operate independently, maintain their names, identities, and operating systems, and thus avoid some of the headaches that accompany typical mergers.

Another benefit of the holding-company-merger model is that it can expanded, said Sosik, adding that other institutions can become part of this larger entity. And he’ll entertain such entreaties, as long as they constitute good fits.

For this issue and its focus on banking and financial services, BusinessWest takes an in-depth look at ESB’s strategy for adding several decades to its 145-year track record of service to the community.

Generating Interest

As he talked with BusinessWest about the merger of holding companies, how it came about, and the many advantages to such a growth vehicle, Sosik said that banks such as ESB may still have a proverbial five-year plan — although most documents have a shorter duration because of the fast pace of change in this industry.

But the overall outlook must be for a much different timeframe, he said, adding that community banks must take a long view — as in 30 or 40 years — and create strategies that will ensure the current name is still over the door after that much time has past.

The strategic plan at ESB is not necessarily focused on acquisitions, said Sosik, adding that rather, it is framed by what he called “well-defined metrics that we wanted to obtain” that are monitored on a regular basis (more on them later).

“But at the end of that business plan, we talked about an acquisition strategy that we thought we could put into practice,” he went on. “And it gets back to that notion that size is a path to efficiency, and for us, if we can drive our overhead ratio, which is simply our non-interest expenses as a ratio of average assets, to 2%, we feel we can be successful over a very long term.

“For us, this is about scale, it’s about efficiency,” he continued, “and it’s about producing a business plan that can stand the test of time.”

Tom Brown

Tom Brown says traditional organic growth will not be enough to enable ESB to create the size it needs to compete in a changing financial services landscape.

As he talked about how this strategic plan has unfolded to date, Sosik said that ESB, like most banks facing similar challenges, is constantly looking for opportunities to achieve that aforementioned scale and efficiency, but in ways that certainly make sense for the institution.

One such opportunity was the recently finalized merger with Putnam, Conn.-based Citizens National, another mutual bank, an acquisition that, when completed, provided the institution with $1.3 billion in assets (Citizens was a $333 million bank when the deal was announced) and a brand network of 15 full-service offices.

“That might not have made a lot of sense to some of our competitors, but it made a great deal of sense to us,” he said, referring specifically to the geographic distance between the two banks’ headquarters. “It stood on its own financially … it made good financial sense, it was creative to our bottom line, and it was a great return on investment.”

The acquisition represented a distinct departure from the way the bank operated through its first 144 years of existence, said Brown, adding quickly that it was a change brought about by necessity.

“We got to this point through normal branching over time — kinder, gentler economic times to be sure,” he told BusinessWest, referring to the past 30 or 40 years in particular. “We had a lot of organic growth, but we can’t continue to grow in that way; I see this strategy as an opportunity for us to ensure that we can carry out our mission of mutuality well into the future.

“We have 200 families that rely on us for their livelihood,” he went on, referring to the bank’s current workforce. “We take that responsibility very seriously.”

Sosik agreed, adding that traditional organic growth is not going to get the job done in the current banking environment, one that seems destined to become increasingly challenging with time.

“To get the scale we think is necessary, you can no longer rely on a de-novo branching strategy,” he explained. “There’s a bank on every corner, there’s a branch on every corner … there’s no way to achieve real growth in that environment. And that’s why you look at acquisitions as a way to geographically diversify and continue to grow that base of assets that provides that needed efficiency.”

By All Accounts

It was this search for effective, practical, and, yes, imaginative, acquisition strategies, that led ESB to pursue talks with Hometown, an institution that Sosik was obviously quite familiar with.

Those talks picked up in intensity several months ago, he said, adding that when finalized — the merger has been approved by both banks’ boards but is awaiting regulatory approval — this deal will yield a bank that will approach $2 billion in assets and $14 million in annual earnings at the outset.

“It will be a powerful, financial, community-driven machine,” he said, adding that it will cover nearly all of the territory between and including the Pioneer Valley and northern Worcester County.

Under the terms of the deal, Hometown Community Bancorp will merge into ESB Bancorp, and Sosik will serve as the merged company’s CEO, while Michael Hewitt, president and CEO of Hometown Bank, will serve as its president. Both Sosik and Hewitt will continue as CEOs of their respective banks. The merged parent holding company is also planning to change its name to Hometown Financial Group to better reflect its strategic positioning as a multi-bank holding company.

Efficiencies will be created through the simple elimination of redundancies, said Brown, adding that the new entity will need only one department for human resources, compliance, auditing, purchasing, technology, marketing, and others, where now there are two.

That doesn’t necessarily mean there will be immediate and dramatic reductions in force, he went on, adding that there will be a sharing of resources undertaken slowly and methodically, with staff consolidation attained mostly through attrition.

But while these efficiencies are being created, there are decidedly fewer of the serious headaches and inconveniences to customers that have resulted from most of the recent mergers, in which one bank is essentially absorbed into the other, Brown went on.

“If you’re focused on community, employees, and customers — if that’s the focus of your mission — then you shouldn’t be able to screw up a merger,” he told BusinessWest, adding that ESB and Hometown are committed to those fundamentals.

As he explained how it all works, Sosik grabbed his copy of the press release announcing the deal and drew a simple schematic on the back. The top half showed two mutual holding companies (MHCs) with a single line to the banks they control. The bottom half had one MHC, representing a multi-bank holding company, with two lines connected to boxes marked ‘ESB’and ‘HB.’

“There’s room for more lines here,” said Sosik, indicating that further expansion of the new holding company is possible, if the fit, or fits, are good ones.

“We’re basically recreating the mission of the MHC to become a multi-bank holding company,” he noted. “And we believe that we can be attractive to other like-minded mutuals who are thinking the same things we’re thinking about size, efficiency, and long-term viability, and are worried about those things. We think we can bring them into a multi-bank holding company that is philosophically attractive to them.

“We’re not in any rush to do that, though,” he went on, while deciding not to speculate on what institutions may fall into that category, other than to say the desired partners would obviously be small- to mid-sized mutual banks.

“We’re taking about institutions that, like us, want to be serving their respective communities 30 or 40 years from now,” he went on, “but don’t have a way of ensuring that on their own. If together, we can put some certainty to that, then we may have something that will work.”

The Feeling’s Mutual

As he talked about his institution and its strategic plan, Sosik speculated that at some other community banks, the thought process may be about how to navigate the next five years or that they simply can’t plan past 10 years because they don’t know what the future will bring.

At ESB, the thinking is different, more proactive, he went on, adding that the focus is on three or four decades from now, when someone else is occupying his office and downtown Easthampton looks much different.

And it’s about shaping the future much more than it is about dreading what it might bring.

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

Banking and Financial Services Sections

Guidance on Grant Guidance


Donna Roundy, CPA

Donna Roundy, CPA

Not-for-profit organizations (NPOs) make up a sizable percentage of the economy in Western Mass. A number of these organizations rely, to some degree, on financial funding from the federal government for program support for the specific clients they serve and the general public.

It is important that leadership of these organizations be aware of a significant change in the grant guidance meant to usher in grant reform, improve consistency, and focus on performance. I recently facilitated informational sessions with local not-for-profit leaders to review this guidance and identify changes that may affect their organizations. This article will cover those topics that were most significant or asked about.

The Federal Office of Management and Budget (“OMB”) oversees the various federal agencies. OMB issued guidance on various aspects of awarding, financial and program management, monitoring, and auditing federal assistance. This guidance brings together seven different grant administration circulars and cost circulars for states, local governments, institutions of higher education, and non-profit organizations into one source. This guidance is being called Uniform Guidance (UG) or the Super Circular, and is applicable to organizations that receive federal funding that is effective for new federal awards received after Dec. 26, 2014, as well as for incremental funding increases for awards granted prior to that date.

The biggest take-away is the sub-recipient and contractor monitoring as well as internal-control review that organizations will have to perform to be compliant with these new requirements. Procurement methods and policies must be updated to conform to proscribed requirements. Organizations will be required to have conflict-of-interest policies and must disclose in writing any potential conflict of interest to the federal agency or pass-through entity. There is no stated materiality in relation to this potential conflict of interest.

A few points of interest came to light in reading through this guidance:

• The definition of ‘equipment’ compares the cost of the tangible personal property to the entity’s capitalization threshold, or $5,000, which signals that the federal government considers a $5,000 capitalization threshold reasonable; an organization will want to consider perhaps increasing their threshold;

• The guidance makes reference to electronic record keeping and reporting, and states that supplies, by definition, includes computing devices.

• The term “must” signifies a task or procedures that non-federal entities are required to perform. The term “should” signifies a  recommended best practice.

• NPOs looking to pass through a portion of the federal funding and program performance goals to another entity will need to perform a risk assessment of the sub-recipient, monitor the required activities and outcomes, and perform mandatory over-sight requirement.

• In the past, awards or grants with the federal government have not always included a budget line item for management and general. This reform requires that each grant or contract awarded will include an indirect cost rate approved for the non-federal entity or a 10% deminimus indirect cost rate.

• Organizations having federal awards must have document-procurement policies that include five approved procurement methods, and must maintain records of the history of procurements. That documentation will include, among other things, the rationale for the contractor selection and rejection. Competition in procurement was also a big emphasis;

• Conflict-of-interest standards must be maintained covering employees who deal with procurement contracts. If conflicts are identified they must be reported, in writing, to the federal awarding agenc;.

• A significant emphasis is placed on recipients of federal awards to establish and maintain effective internal controls based on the guidance in “Standards for Internal Control in the Federal Government” a.k.a. the “Green Book” and the standards issued by the Committee of Sponsoring Organizations of the Tread Way Commission (COSO), as both are examples of best practices;

• Because internal-control literature in recent years has been based on the recommendations found in COSO, it’s likely that a non-profit entity’s internal control system has a foundation in COSO. As monitoring is a key factor in internal control, routinely assessing risk and reviewing processes is good practice;

• As one reads through this easy-to-read and extremely thorough administrative and cost guidance, it’s a clear take-away that the requirements are based on best practices and are an effort by the federal government to get more effective use, monitoring, and performance results for the billions of dollars expended annually;

• An audit of an organization with federal funding is called a Single Audit, and has testing and documentation requirements that exceed those for a commercial audit. Effective for fiscal years ended Dec. 31, 2015, the government has increased the threshold for an organization required to have a Single Audit from $500,000 to $750,000. This will only relieve approximately 5,000 organizations nation-wide from this stringent testing and will still provide audit coverage of over 99% of federal expenditures; and

• Federal agencies have not provided implementation guidance to their award recipients. The Uniform Guidance places additional requirements on states that pass through federal funds to provide clear information on the CFDA and amount of federal funding to NFP organizations.

As the guidance is put into practice, there are sure to be practical implementation questions that arise. Be sure to contact your organization’s CPA or financial professional with any questions you may have.

Donna Roundy, CPA is a senior manager specializing in not-for-profit organizations with the Holyoke-based public accounting firm Meyers Brothers Kalicka, P.C. (413) 322-3534; [email protected]

Banking and Financial Services Sections

Measure Entitles Businesses to Reimbursement


Michael A. Fenton

Michael A. Fenton

Does your business import products from a foreign country? If so, you may be eligible for reimbursement of some or all of the import duties you paid over the last three years. In some cases this can equate to hundreds of thousands of dollars in refunds.

Swift action is required because the deadline to apply for reimbursement is Dec. 28. What follows is some detailed advice on what to do.

Through a trade program known as the Gen-eralized System of Preferences (GSP), the U.S. promotes economic growth in the developing world by providing preferential duty-free entry for up to 4,800 products from 129 designated beneficiary countries and territories. The GSP was instituted on Jan. 1, 1976, by the Trade Act of 1974 and has continued in various forms since its enactment.

As with other legislation, Congress often allows the GSP authority to lapse before it is renewed. This causes duties on imports that are normally covered by the GSP to be charged at the applicable port of entry. Said duties are held in escrow pending renewal of the GSP. Once the GSP is re-authorized, duties held in escrow can be retrieved by importers who paid them on GSP products during the period in which the GSP lapsed.

However, if any item’s GSP status changes, thereby losing eligibility for duty-free treatment, the duties held in escrow will not be refunded to the importer.

Most recently, the GSP expired on July 31, 2013, causing companies all the U.S. to be charged tariffs on imports that previously entered the United States without such fees. The lapse of the GSP continued until June 29, 2015 when President Obama signed into law a bill (H.R. 1295) which reauthorized the GSP retroactively to July 31, 2013. This enables importers of GSP-eligible products to seek reimbursement for tariffs paid during the lapse in GSP coverage. The GSP reauthorization provided retroactive benefits only for goods from a country that is a beneficiary of the GSP program as of July 29, 2015. As such, this would exclude countries such as Bangladesh and Russia that lost eligibility between July 31, 2013 and July 29, 2015.

If your business imported products from a foreign country between July 31, 2012 and June 29, 2015 effective legal counsel can help you determine your reimbursement eligibility and navigate the process of seeking a refund.

Importers who filed their entries electronically, used the appropriate special program indicator for GSP, and paid duty on GSP-eligible goods, will receive an automatic refund. However, many entries were made without using the special program indicator for GSP refunds. Unfortunately, many local importers use couriers that did not properly claim eligible GSP products at the time of entry. Many couriers did not claim products as having GSP status at the time of entry because the GSP legislation was expired. Because the products were not claimed at GSP at the time of entry, a formal request must be made of US Customs and Border Protection for a refund of the tariffs.

A refund request for duties deposited must be received by U.S. Customs and Border Protection no later than Dec. 28. There are very specific requirements for processing these requests and our office has experience in handling these claims. Typically, the only documentation needed to determine eligibility and process any applicable refunds can be found on a statement of the transaction from your courier (e.g. FedEx, UPS, etc.)

These tariff refunds represent thousands of dollars to many area business, but swift action is required to receive the reimbursements. If you have questions about GSP reauthorization and whether your company is entitled to a refund contact qualified legal counsel immediately.

Attorney Michael A. Fenton, of Shatz, Schwartz and Fentin, P.C., concentrates his practice in the areas of business planning, commercial real estate, estate planning and elder law; [email protected]; (413) 737-1131.