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Banking and Financial Services

Tale of Two Cities

Connecticut has had its share of economic challenges in recent years, including a slow but steady outmigration of residents. Many might not be aware, however, of how stark the differences are between Connecticut and Massachusetts when it comes to long-term job recovery from the Great Recession — including Springfield’s relative strength when compared to Hartford. Farmington Bank’s economic adviser recently broke down the numbers, painting a picture that should be encouraging to those north of the border.

As an economic adviser for Farmington Bank, Don Klepper-Smith spends most of his analytical energy on Connecticut, but when he compares that state’s recent performance with its neighbor to the north, the numbers are stark.

“When we talk about Springfield and Hartford, I think the analogy ‘tale of two cities’ is appropriate,” Klepper-Smith said during a recent Farmington Bank webinar on the national and regional economy.

Since the low point of the Great Recession in 2009 — when unemployment spiked across the U.S. before the gradual recovery kicked in — the Greater Springfield area has created 32,000 new jobs, while Greater Hartford has created 37,000.

“So you’ve got close to 70,000 new jobs in the I-91 corridor between these two areas,” he noted. That’s all good. “But when we look at them in the context of our job-recovery rate, you can see Springfield is clearly outperforming Hartford — and looking a lot like the nation.”

The key takeaway is how much of the 2008-09 job losses have returned, he explained, and that’s where Springfield has really outpaced Hartford. While Hartford is now 4,200 jobs above full recovery — that is, above where the job picture stood in March 2008, before the economy collapsed — Springfield is 16,600 jobs above that line. To put it another way, Hartford has recovered 112.7% of its recession-era job losses, while Springfield has recovered 209.2%, gaining back its losses more than twice over. The national recovery figure, by the way, is 217.8%.

“When I think of Springfield, two words that come to mind are ‘stellar performance,’ with a job recovery rate that’s about twice that of Hartford,” Klepper-Smith said. “I think Hartford has its own challenges. We know the fiscal situation there has been tenuous, but I think economic-development policies are the reasons why Springfield is doing as well as it is.”

That’s good news for Springfield, which has been on a hot streak of good economic news for some time now, with the MGM Springfield casino at the forefront of that. But the numbers also reflect an overall disconnect in the way Massachusetts and Connecticut have respectively recovered from the economic downturn of a decade ago — and it’s a striking gap.

Tale of Two States

It’s hard to believe, Klepper-Smith says, that the U.S. recovery from the trough of the recession is now nine years old.

“The average postwar recovery is five years, so we’re getting a little bit long in the tooth here, and we’re looking for what could go wrong and trying to keep a positive attitude as we move through the balance of the year,” he went on. “Looking at the tea leaves and looking at the fundamentals, I’d say there’s a two in three chance we go forward with positive but slower economic growth — in the 2% to 2.5% range.”

Don Klepper-Smith

Don Klepper-Smith says economic-development policies have contributed to Springfield’s recent successes.

Yet, Connecticut continues to struggle — in fact, Hartford is among its strongest metropolitan areas in job growth, putting the rest of the state into stark relief. “State budget issues have undermined business confidence and promoted outmigration,” Klepper-Smith said, noting that the Nutmeg State has been shedding 428 people per week on average to other states.

“But as we go forward,” he said, “it boils down to consumers. Right now, what are consumers going to be doing for rest of 2018?”

Consumer confidence is rooted firmly in job creation, he was quick to note on more than one occasion. And Massachusetts job creation has been running circles around its southerly neighbor for much of the past decade.

Let’s go back to job-recovery rates, this time on the state level. Connecticut peaked at 1,713,000 jobs in March 2008, dropped to 1,594,000 by the following year — a 7% erosion — and has returned to a level of 1,687,000 jobs. That’s a recovery rate of just 78%, far below any other New England state.

“We seem to be stuck in this 80% range for job recovery, and right now we’re the only state in New England not to see full job recovery,” Klepper-Smith said of Connecticut. “I’ll be honest: I don’t see that number going above 100% any time soon. I don’t see robust job growth materializing any time soon.”

Massachusetts, in contrast, has been a model of recovery. From a 3,331,000 peak in 2008, the Bay State fell to 3,191,000 jobs at its 2009 trough — a 4.2% erosion — but now stands at 3,645,000, a whopping 322% recovery rate.

“In Connecticut, I’d have to use the word ‘lackluster’ for job recovery,” Klepper-Smith said, projecting that state likely won’t reach full recovery until 2020, several years after Massachusetts did so multiple times over.

The good news locally, he said, is that the Knowledge Corridor — the amorphous region stretching from Greater Hartford to Hampshire County — is doing well, even on the Connecticut side.

“We’ve got varying degrees of both strength and weakness. What we can say is the regional economy in the I-91 corridor is clearly performing well,” he noted, adding that the total non-farm job-growth rate is currently 0.8% in Hartford and 1.2% in Springfield, while the national figure is 1.6%. Again, Hartford pales in that comparison, but it’s behind only Danbury (1.0%) among Connecticut’s metro areas.

“I think the Connecticut economy seems to be moving sideways more than anything else, with pockets of both strength and weakness. We’re seeing signs of decelerating in many of the economic metrics we have,” Klepper-Smith said, noting that Connecticut’s gross state product ranks 49th nationally, ahead of only Louisiana.

“I’m hoping we can make some progress there as we move into 2019. We’re underperforming in job growth and income creation — and job growth will be what it’s all about. Jobs, jobs, jobs — they’re so important because of income, spending confidence, tax revenue, and all those linkages.”

National Picture

Nationally, Klepper-Smith said, the U.S. continues on a moderately positive path, growing at a seasonally adjusted annual rate of about 2.2%, though inflation — and rising costs of gas, healthcare, and home prices — are a concern.

“One of the things we can all agree on is that there are some pros and cons of living in an interconnected global economy,” he said. “And in economics, there are always tradeoffs; there’s never really a sense of clear winners and losers. Sometimes we have to wait and see how that all shakes out.

“But what we do know is what’s going on with the consumer sector,” he went on. “Consumers are so important to what’s going on because personal consumption accounts for roughly two-thirds of real gross domestic product.”

On one hand, he said, consumer-confidence measurables are strong — up 8% from last year and approaching 1990s levels, which is encouraging. But that trend could be tripped up by any number of factors.

“What we do know is that consumer fundamentals are being pressured, and risks to the current business expansion are becoming imperiled with rising energy prices, higher interest rates, and the expectation of higher healthcare costs heading into 2019. I think that’s a table setter for where we are, with the consumer feeling a little more squeezed and a little less comfortable compared to where we were back in March.”

Klepper-Smith expects the Fed to move with caution for the rest of the year. “We can now say the Fed sees rising inflationary pressures, and I honestly don’t feel they’re going to be aggressive on rate increases going forward. We’re probably not looking at more than two rate increases for the balance of 2018.”

If there’s one indicator to watch closely through the rest of the year, he said, it is, quite simply, how are consumers feeling? “One of the factors is the fact that the labor markets themselves have not shown meaningful progress. What that means is that we have not seen meaningful growth in consumer spending power.

“People ask me, ‘why doesn’t this feel like economic recovery the way I understood it in the past?’” he went on. “The answer is that we haven’t seen robust growth in consumer spending power.”

Back to Work

That comes down to jobs, of course, and Klepper-Smith admitted his dampened enthusiasm is mainly due to what he sees in Connecticut — which, again, puts Massachusetts in a very good light when it comes to its continuing recovery and expansion after the Great Recession.

“The good news is that we’ve seen job recovery in both regions, but I think that the problems that we have in Hartford are a bit more pronounced on the fiscal side, and I don’t think they’ll be going away any time soon,” he concluded.

It’s a sobering reflection of the myriad factors at play in creating an economic outlook — and a reminder that, even on the most challenging days in Massachusetts, things could be a lot worse.

Joseph Bednar can be reached at [email protected]

Banking and Financial Services

Take Caution with Section 199A

By Kristina Drzal Houghton, CPA, MST

Kristina Drzal Houghton

Kristina Drzal Houghton

On Dec. 22, 2017, the Tax Cuts and Jobs Act was signed into law, bringing the biggest changes to both corporations and individuals in the past 30 years. Having spoken before groups of medical professionals on this issue, I have found that many believe limitations in the law will prohibit physicians from benefiting from these tax reductions.

This article will focus on medical practices and highlight some techniques available to benefit from the 20% deduction which might otherwise be limited. Additionally, there will be detailed examples of said techniques that will help to provide perspective and clarity to practice owners and shareholders on this very complicated tax issue.

Over the past few decades, many practices have been formed as pass-through entities. In contrast to C-corporations, income earned by a sole proprietorship, S-corporation, or partnership is subject to only a single level of tax. There is generally no tax at the entity level; instead, owners of these businesses report their share of the business’ income directly on their tax return and pay the corresponding tax at ordinary rates.

The Tax Cuts and Jobs Act, signed into law this past December, reduced the top rate on ordinary income of individuals from 39.6% to 37%, and Section 199A further reduced the effective top rate on qualified business income earned by owners of sole proprietorships, S-corporations, and partnerships to 29.6%. Section 199A allows taxpayers other than corporations a deduction of 20% of qualified business income (QBI) earned in a qualified trade or business, subject to certain limitations.

Business owners below the applicable threshold amount — which is $157,500 of taxable income for all filers except joint filers, and $315,000 for those filing jointly —— can enjoy a QBI deduction for the lesser of 20% of their qualified business income or 20% of their taxable income. It does not matter what type of business is generating the income, nor is there a need to analyze W-2 wages paid by the business or depreciable assets owned by the business. The QBI deduction is what it is.

Business owners over their applicable threshold who derive their income from a business that is not a specialized trade or service business may also have their QBI deduction at least partially phased out, but the full deduction may be ‘saved’ based on how much they pay in W-2 wages and/or how much depreciable property they have in the business.

Business owners over their applicable threshold who derive their income from a ‘specified service’ business — which includes doctors, lawyers, CPAs, financial advisors, athletes, musicians, and any business in which the principal asset of the business is the skill or reputation of one or more of its employees — will have their QBI deduction phased out.

The phaseout range is $50,000 for all filers except joint filers, and $100,000 for those filing jointly. Once a business owner’s taxable income exceeds the upper range of their phase-out threshold ($207,500 for individuals and $415,000 for married filing jointly), they cannot claim a QBI deduction for income generated from a specialized trade or service business.

Examine your practice to determine if all your income is from a specified trade or business. A careful analysis of your practice could identify that it consists of multiple different trades or businesses. For example, an orthopedic practice might sell medical equipment. Breaking this portion of the practice off into its own LLC will decrease the specified service trade or business income and could potentially qualify for a QBI deduction with proper planning.

Shifting Business-owned Real Estate to New Entities and Paying Rent

Many practices own the real estate out of which they operate. If this is the case for a higher-earning business owner, there is an obvious way of converting some of the specified service-business income into income from a business that may qualify for a QBI deduction. In short, the business owner can create a new entity, transfer the real estate into that entity — provided the transfer is not tax prohibitive — and then lease that real estate back to the original business.

The original business’s profits, which are not eligible for the QBI deduction (assuming the business owner’s taxable income exceeds their applicable threshold), will decrease, and profits can be shifted to the new real-estate company, which could potentially qualify for at least a partial QBI deduction.

Example: John is a dentist and is the sole owner of an oral-surgery practice organized as an LLC. His income from the practice — which falls under the specified service business umbrella — is $900,000 per year. Thus, John is currently ineligible for any QBI deduction. Several years ago, the LLC purchased the medical offices out of which the practice operates for $2 million. The upkeep on the office space, the depreciation on the property, and other expenses currently reduce the net profit of the LLC by about $100,000 per year, but the property provides little else in the way of tax benefit for John.

One option to consider in a case like this would be to spin off the medical office building into a separate LLC, or other business structure, and have the dental practice rent space in the building. Those rent payments would be deductible for the medical practice, and taxable income for the new business … except the profit in the new business may be eligible for the QBI deduction.

For instance, suppose that, after spinning the medical office off into its own entity, the dental practice leases the office space at the rate of $220,000 per year. The net result of such a transaction would be reducing the dental practice’s net income $120,000 ($220,000 rental expense minus $100,000 prior expenses ‘lost’ = $120,000). The real-estate entity, on the other hand, would now have a profit of $120,000 — a net shift of zero — but the real estate’s income could qualify for the QBI deduction. Thus, the result is an equivalent amount of business income, but a $24,000 QBI deduction for John on his personal return that, at his tax rate, would save him nearly $9,000 in federal income taxes annually.

Shifting Other Business-owned Assets to Other Entities and Leasing Them Back

For some business owners, there’s the potential to continue to push the boundary even further on shifting depreciable property out of a business, and then leasing it back to the original business entity.

Example: Continuing the earlier example of John and the dental practice above, suppose the practice also owns X-ray machines and a variety of other depreciable medical equipment as well, with an unadjusted basis of $750,000. This equipment could be spun off into yet another business, and the dental practice could lease back the equipment.

The mechanics and potential tax benefits of this move are essentially the same as when real estate is moved into a separate entity. When it comes to the QBI deduction, depreciable business property is depreciable business property. The 2.5% limitation is not impacted by the type of depreciable property or the length of time over which it will be depreciated.

Of course, the limitation to this strategy is that not all small businesses have substantial (or much, or any) depreciable property to spin off into other entities in the first place … and at some point, any and all depreciable property that could be spun off will have been. So that’s it, right? Maybe not.

If You Can’t Lease Equipment, Lease People with an Employee-leasing Company

Many specified service businesses are labor intensive but may not necessarily require a great deal of depreciable property. Anesthesia and radiology practices are both good examples of this. Outside of some office furniture and some computers, these businesses can generate substantial profits without ever owning any significant amount of depreciable property since they operate out of hospital-owned facilities. They do, however, often employ a great number of people, and spend substantial amounts on human capital.

To that end, the language in Section 199A leaves the door open to the possibility of creating an employee-leasing company and leasing back one’s employees from that company. Some practitioners believe this to be a gaping hole in the rules, while other practitioners are a little more cautious at this time. Even on the conservative side, the billing and administrative employees could defensibly be split off into a separate LLC if it can be demonstrated that it is not a specified trade or business because it is not dependent on the skill or reputation of one or more of its employees.

Notwithstanding the benefits of the above strategy, some caution is merited. Tax advisers are understandably eager for answers, but unfortunately, Section 199A is just one small piece of the most significant overhaul of the tax law in 31 years. The IRS is now charged with the herculean task of providing guidance for a host of new and changed statutory provisions, and, as a result, it may be some time before tax advisers have certainty related to some of the strategies posed in this article.

Until that guidance arrives, Section 199A will best be approached cautiously, particularly considering the potential substantial-understatement penalty that comes with claiming a deduction under this provision.

Kristina Drzal Houghton, CPA, MST is a partner with the Holyoke-based accounting firm Meyers Brothers Kalicka, P.C. and director of the firm’s Taxation Division; [email protected]

Banking and Financial Services Sections

The Tax Cuts and Jobs Act

By Sean Wandrei

Sean Wandrei

Sean Wandrei

In December 2017, Congress passed H.R.1, better known as the Tax Cuts and Jobs Act. The act is the largest overhaul of the tax code since 1986. As with any new legislation, there are opportunities and pitfalls that one needs to be aware of when trying to take advantage of the new rules and avoid unwanted situations.

There are still many questions related to the act that the IRS will need to issue guidance on. There is a lot to unpack here, so let’s take a look at some items that businesses and individuals should be aware of.

The act reduces the corporate tax rate to a flat tax rate of 21%. This means the first dollar of taxable income is taxed at a 21% rate. This reduction could cause many owners of non-taxpaying entities (e.g. partnerships, limited liability companies, and S-corporations, also known as pass-through entities) to consider switching to a taxpaying entity (i.e. C-corporation). The maximum tax rate that the income of a pass-through entity could be taxed at is 37%.

Business owners could decide that their business should convert from a pass-through entity to a C-corporation based on this. While the reduction of the tax rate sounds great, there could be some issues that could increase the overall tax due if the entity is a C-corporation. If the owner(s) want to take money out of the C-corporation in the form of dividends, it will have to pay taxes on the dividends from the C-corporation at a maximum rate of 23.8% (20% tax on the dividend plus 3.8% net investment-income tax).

This is known as double taxation, which impacts only C-corporations and not pass-through entities. This could reduce or eliminate the overall tax savings of converting the entity to a C-corporation.

While taxes paid are usually a major factor on entity selection, there are some non-tax items to consider. Owners of C-corporations can receive tax-free employee benefits that pass-through entities are not entitled to. Another tax-savings option that was available prior to the act is the exclusions of the gain on the sale of qualified small-business stock (QSBS) under Code Section 1202. This provision was amended in 2010, allowing QSBS acquired after Sept. 27, 2010 to be eligible to exclude the total gain on the sale.  There are a few rules that have to be met to allow for the 100% exclusion. Section 1202 is available only for C-corporations. This means that, when the owner decides to sell his or her stock, the gain from the sale of that stock would be tax-free. The reduced tax rate and non-tax benefits could make C-corporations more attractive to some.

C-corporations are not the only business entities that received a tax break from the act. Pass-through entities are able to take a deduction of 20% on the qualified business income (QBI) earned from the business. Individuals who are sole proprietor and file a Schedule C and individuals with rental activity reported on Schedule E also qualify for this deduction.

On the surface, this deduction seems to be straightforward, but there is a lot to this deduction. Not all businesses qualify, and the deduction could be limited. QBI can be thought of as ordinary income from the business. The catch is that the deduction is limited to the lesser of 20% of QBI or 50% of the total W-2 wages paid by the business. So wages need to be paid to be able to take this deduction.

The 50% of W-2 wages does not apply if the owner’s taxable income is below $315,000 for married filing jointly (MFJ) and $157,500 for other taxpayers. This deduction may not be available to a specified service trade or business (SSTB). A SSTB is a business involving service in many fields, including law, accounting, consulting, and financial services. Engineers and architects were excluded from the definition of SSTB in a last-minute change. If the owner’s taxable income is below $315,000 for MFJ and $157,500 for other taxpayers, the SSTB limitation does not apply.  

The planning that comes into play for this deduction is based on the entity type. QBI does not include reasonable compensation paid by an S-corporation to the owner(s). Similarly, QBI does not include amounts paid as guaranteed payments by a partnership to the owner(s).

Based on this, if the pass-through entity is an S-corporation, reasonable wages are going to be deducted from the QBI, which will reduce QBI and the deduction. A partnership and sole proprietor are not required to take guaranteed payments, so the QBI could be larger for a partnership than an S-corporation based on this. If the taxable income is below the limits mentioned above, the 50% of W-2 wages option does not come into play, and the larger deduction will be had by the partnership and sole proprietor.

If the 50% of W-2 wages comes into play, then the S-corporation will have to pay W-2 wages, and the partnership will have to pay guaranteed payments to owners or wages to non-owners to be able to take this deduction. With this in mind, the owner’s taxable income will need to be monitored.

For individuals, the elimination of exemptions and the doubling of the standard deduction will cause more taxpayers to take the standard deduction instead of itemizing. It is said that only 10% of the population will itemize in 2018 compared to 30% in 2017. If you fall into the 10% of people who itemize, you may have heard that one of the biggest deductions, state and local taxes, is limited to $10,000 per return.

This is the case if you are single or filing as MFJ; the deduction is limited to $10,000. The marriage penalty is back. If the MFJ couple was not married and filed as single taxpayers, then they each would be able to deduct up to $10,000 in state and local taxes.

In the past, the interest from a home-equity loan was deductible. The proceeds from the home-equity loan could have been used for anything. Now the interest from a home-equity loan is no longer deductible unless it is used to buy, build, or substantially improve the taxpayer’s home that secures the loan. Prior to the act, employees were able to deduct unreimbursed business expenses related to their job. This is no longer the case.

As you can see, the act has provided many new things to consider when it comes to taxes. Now, more than ever, your CPA will be counted on to help with tax planning.

Sean Wandrei is a lecturer in Taxation at the Isenberg School of Management at UMass Amherst. He also practices at a local CPA firm; [email protected]

Banking and Financial Services Sections

Entertaining Thoughts

By Carolyn Bourgoin, CPA

Carolyn Bourgoin

Carolyn Bourgoin

For many businesses, corporate entertainment has long been a means of building relationships with referral sources, vendors, and strategic partners as well as providing networking opportunities for physicians and practice managers to meet new referral sources and industry influencers and to build a presence in the marketplace.

The recently enacted Tax Cuts and Jobs Act (TCJA) has eliminated most deductions for business-entertainment expenses paid or incurred after Dec. 31, 2017. Drawing the line between the portion of an entertainment activity that is business-related versus for pleasure has long been an area of contention between the IRS and taxpayers. Though the TCJA did eliminate most business-entertainment expenses, certain expenditures, mainly those benefiting employees, did survive the tax cut.

Taxpayers need to understand what expenses survived the repeal so that they can properly segregate the deductible costs.

Expenditures Paid or Incurred Prior to 12/31/17

Prior to the TCJA, entertainment expenses and the use of entertainment facilities were deductible only if the taxpayer could establish that the costs were either directly related to a taxpayer’s trade or business or associated with the active conduct of a trade or business for which a substantial and bona fide business discussion occurred either directly before or after the event. In addition to meeting the ‘directly related to or associated with’ test, entertainment-expense deductions had to satisfy strict substantiation requirements, including details on the amount of the expense, the time and place of the entertainment, the business purpose, and the business relationship with the persons entertained. The term ‘entertainment’ includes activities at country clubs, nightclubs, sporting events, cocktail lounges, and theaters. Though not defined by regulations, business-entertainment expenses are to be further reduced by amounts considered “lavish or extravagant.”

Additional cost limitations apply to skybox rentals, sports tickets purchased for more than face value, and attendance at foreign conventions. Country-club dues were (and still are) nondeductible.

Business entertainment expenses that had escaped limitation at this point were then generally limited to 50% of the expense, unless they fell under one of several exceptions, including certain entertainment expenses included as compensation to the recipient and social or recreational entertainment provided primarily for the benefit of employees who were not highly compensated. These business-entertainment expenditures were fully deductible and survived the TCJA repeal and will be addressed later in this article.

Entertainment Expenditures Paid or Incurred After Dec. 31, 2017

Pursuant to the TCJA, expenses related to entertainment, amusement, or recreation that are directly related to or associated with the active conduct of the taxpayers’ trade or business are no longer deductible. As a result, a tax deduction will not be allowed for the following items incurred after Dec. 31, 2017:

• Expenses incurred for the use of entertainment facilities, such as the lease of skyboxes, are no longer deductible. However, businesses should review their lease agreements to see if there may be a component included in the rental price for advertising. This portion of the rental cost would be fully deductible as advertising if properly documented and reclassified;

• Expenses related to the entertainment of a client or prospect at a sporting event, theater, concert, or similar type venue (unless included in a 1099 as a prize) are not deductible under the new rules;

• Expenses for attending charitable sporting events, such as a golf tournament, where the entire net proceeds go to charity, will not be deductible to the extent of the cost of the golf or other goods or services provided. Until further guidance is issued, it is unclear whether the meals offered at an entertainment event are still 50% deductible. To the extent the ticket price exceeds the goods and services received, the taxpayer will be entitled to a charitable deduction; and

• As was the case prior to the tax-reform act, dues paid to any social, athletic, or sporting club or organization are non-deductible expenses.

Business-entertainment Expenses Still Allowed

As discussed previously, there are nine categories of entertainment-related expenditures that were not eliminated by the TCJA, as follows:

• Expenses for recreational, social, or similar activities (including related facilities) offered primarily for the benefit of employees other than highly compensated employees are fully deductible. A holiday party or annual picnic are examples;

• Expenses directly related to bona fide business meetings of stockholders, employees, agents, or directors are allowed. Examples of such expenditures would be refreshments offered to employees at a meeting where they are being instructed in a new business procedure. Food and beverages served at these meetings would be subject to the 50% limitation;

• Expenses directly related and necessary to attendance at a business meeting or convention held by a business league, chamber of commerce, real-estate board, or board of trade are deductible. Meals at these meetings would be subject to the 50% limitation;

• Expenses for services, goods, and facilities made available by the taxpayer to the general public, such as during a promotional campaign, are deductible;

• Expenses for food and beverages furnished on the taxpayer’s business premises primarily for the taxpayer’s employees (i.e. more than half), are deductible. The cost of meals provided for the convenience of the employer, such as when employees must be available throughout a mealtime, are only 50% deductible as of Jan. 1, 2018. Prior to the TCJA, these meals were 100% deductible. In addition, meals provided at an employer’s on-site dining facility are subject to the 50% limitation until Jan. 1, 2026, when meals for the convenience of the employer as well as the meals and cost of operating an on-site dining facility are no longer deductible;

• Entertainment expenses that are treated as compensation to employees, by including the costs in employee wages for income-tax-withholding purposes, are deductible;

• Expenses for entertainment-related goods or services, to the extent they are includible in the gross income of the recipient as compensation for services rendered or as a prize or award, are allowed. The recipient in this case would not be an employee of the taxpayer and must be issued a 1099 to the extent the goods or services received exceed $600;

• Expenses for goods or services (including the use of facilities) which are sold by the taxpayer in a bona fide transaction for adequate and full consideration in money or money’s worth are deductible. An example of this would be the cost of meals sold by a restaurant, and

• Expenses incurred by a professional firm for actual meal expenses that are charged back and reimbursed by a client, where the meals are separately stated in the invoice, are deductible.

De minimis fringe benefits, which are benefits that are so small as to make accounting for them unreasonable, such as coffee, soft drinks, and donuts offered to employees, remain fully deductible through the tax year 2025. In addition, meals associated with the active conduct of the taxpayer’s trade or business are still allowed, subject to the 50% limitation. Until further guidance is issued, it is unclear whether meals purchased at a business-entertainment event, such as after a round of golf or attending a ballgame, are a non-deductible entertainment expense or if they meet the business-related tests and are still deductible subject to the 50% meals limitation.

Classifying sporting tickets provided to clients as business gifts does not provide much relief, as the tax deduction is limited to $25 per item.

Bottom Line

Due to the recent changes in the tax law, it is important for taxpayers to consult with their tax advisors and develop an understanding of the business meals and entertainment expenses that remain deductible and develop a strategy to track them. It would be wise to set up separate accounts based on whether they are 100%, 50% or nondeductible.

Amounts paid to attend entertainment events should be analyzed to see if there are advertising or charitable components to the cost that can be reclassified as fully deductible. Consideration could be given to issuing 1099s to clients or prospects being provided with free tickets to events to make the cost deductible as prizes. Though the TCJA was not favorable to taxpayers that incur business-entertainment expenses, there are still some expenses in this area that remain deductible.

Carolyn Bourgoin, CPA is a senior tax manager with the Holyoke-based public accounting firm Meyers Brothers Kalicka, P.C.; (413) 322-3483; [email protected]

Banking and Financial Services Sections

Happy Returns

Since taking over as president of Monson Savings Bank seven years ago, Steven Lowell has overseen an impressive growth pattern, including striking success in commercial lending and ever-rising assets. He credits that success to a number of factors, from a willingness to embrace technology to a customer-focused culture to an emphasis on financial literacy aimed at making sure the customers of tomorrow are well-positioned to share in the bank’s success.

Five years ago, Monson Savings Bank opened its fourth branch in Ware, to go along with offices in Monson, Wilbraham, and Hampden.

And that’s where the branch total stands today: Four. Which would be a meager haul in one of the big-bank acquisitions that have become so commonplace.

So why is MSB growing at such a healthy rate? President Steven Lowell has a few ideas.

“A lot of people are saying that small banks can’t survive, that they need to be bigger, they need to merge. And we’ve seen some of that. But Monson Savings Bank isn’t just surviving; it’s thriving,” Lowell said, noting that the institution has grown by 7% to 8% every year since he took the reins seven years ago.

“That’s a strong number,” he added, noting that the bank’s assets have risen from $230 million seven years ago to $365 million today.

“People think a bank needs a certain asset size to afford the expenses that every bank has at this point in time,” Lowell said, specifically citing increased regulatory and compliance demands in an industry that’s increasingly heavily regulated. “But we haven’t merged with anyone or had anyone merge into us; we’ve been successful in attracting new customers and developing new relationships.”

We’re performing better than many billion-dollar banks are. We’re living proof that small banks can do it, and do it well.”

He noted that MSB’s return on assets, or ROA — which measures a bank’s profits in relation to its overall resources — was 0.6 last year, while Massachusetts-based banks in MSB’s asset class — $250 million to $500 million — recorded an average ROA of 0.27. Meanwhile, banks in the $500 to $1 billion range averaged an ROA of 0.53 last year, and banks with more than $1 billion in assets averaged 0.72.

“We’re performing better than many billion-dollar banks are,” at least by the ROA metric, Lowell noted. “We’re living proof that small banks can do it, and do it well.”

A few different factors account for that success, he told BusinessWest. First was the determination made several years ago that the strongest market for the bank is commercial lending, and since then, commercial loans have risen from 40% of the total portfolio to around 65%.

“That’s been a significant driver for us,” he said. “We focus on what we do well; we don’t try to be everything for everyone. At our size, we can’t do that. But we know we’re good at commercial lending — and residential lending — and good at providing high-touch customer service. Everything we do goes back to, ‘is this good for the customer?’ We want to make sure we don’t lose that closeness with the customer.”

With all the mergers that have taken place in recent years, he suggested, business owners are looking for a banking partner they know is going to be around, and don’t like it when their loan officer keeps switching.

“We’ve been the beneficiary of a lot of these mergers,” he went on. “And we’ve developed a reputation as a bank that’s easy to do business with. We’re up front with customers and try to be as fast and efficient as we can, and that reputation starts to get around. Now we’re getting phone calls: ‘I was talking to so-and-so, and he raved about you guys, that you’re easy to do business with.’ That reputation is very important to us and has helped us spread our reach much farther.”

He also praised his team, which hasn’t necessarily grown larger — technology has created efficiencies for all banks, and, as noted earlier, MSB’s branch count is only four — but the team is peppered with long-timers who understand the customer-focused culture, a culture Lowell expects to continue to build more organic growth.

Early Adopters

Speaking of technology, MSB has consistently been an early adopter of innovations that make customers’ lives easier, from mobile banking to remote check capture. “We’re not large enough to be an innovator — we can’t be creating new software — but we’ve been right there, so as soon as a product is proven, we’ve adopted it successfully,” Lowell explained.

Some recent products speak to that success. Mobile check deposit allows far-flung cutomers to make deposits from home or anywhere else, on weekdays or weekends.

“Not only our retail customers, but our commercial customers are very comfortable not having a branch within five miles,” he noted, adding that these capabilities have allowed customers — such as a landscaping company on Cape Cod — to access services without needing a physical branch.

“We’re not marketing ourselves on Cape Cod or in the Boston area,” he noted, “but if someone has ties to Western Mass. and wants to do business in one of these areas, we can accommodate them, and they love that.”

Steve Lowell, Monson Savings

Steve Lowell says customers appreciate MSB’s stability at a time when many other small banks have merged or been acquired.

Another recent product, the CardValet mobile app, gives users complete control of their debit card, so they can essentially shut it off between uses, or if it goes missing. “There’s so much fraud in the world, and cybersecurity is a big concern,” Lowell said. “This is a great product, and we don’t charge for it; I think it’s going to be big.”

A new loan product marries the bank’s well-known financial-responsibility messaging by marrying a deposit account and a secured loan, the latter of which is deposited into an account accessible only when the loan is paid off. “From the bank’s standpoint, there’s no credit risk, and the customer is building credit, whether it’s for a down payment on a car or a first month’s security deposit. It’s a good product for people who are just starting out or running into issues trying to re-establish good credit.”

It slots well into MSB’s continued focus on financial literacy, which ranges from its Dollars & Sense program in elementary schools to workshops for college students and community members. A survey conducted by the National Foundation for Credit Counseling shows that 40% of the public would grade themselves a C or worse when it comes to their financial literacy, and that lack of knowledge can lead to poor financial planning and hurdles when it comes time to seek a loan.

“Financial literacy is really important to us,” Lowell said. “Day in and day out, our staff see people they have to turn down for mortgage loans, and they don’t like doing that; it’s not a fun part of the job.”

With that in mind, he went on “we’ve come up with ways to talk to people and help them improve their financial lives, whether it’s how important it is to build credit or how not to get in trouble with credit-card debt, or the importance of saving for retirement and contributing the most you possibly can to your 401(k), and paying yourself before paying others.”

Lowell feels like today’s parents, for whatever reason, don’t like talking about these matters with their kids, and when the kids grow up, they haven’t developed a comfort level, and may be at the mercy of predatory credit companies that aren’t looking out for their best interest. “It’s important for us to be talking about that so they know how to manage money and get into a good place.”

That Monson Savings Bank puts resources into these educational programs says a lot about its desire to be a complete community resource in the towns it serves, and to continue adding products and services that customers want.

“I believe one of our strengths, because of our size, is that we can be really nimble,” he said. “We’re able to come up with new initiatives and new products a lot quicker than some of the bigger banks. We don’t have quite the amount of red tape most banks have to deal with.”

One example, he noted, is MSB’s newest initiative, a foray into municipal banking. Since appointing an officer to lead that effort six months ago, the bank has posted $10 million in municipal deposits. “That decision was made because somebody very good became available, and we saw it as a growth opportunity that presented itself, and we didn’t want to lose that opportunity.”

Giving Back

Monson Savings Bank has invested in the community in other ways as well, most notably through annual donations to various nonprofits, which totaled more than $130,000 last year.

The year Lowell arrived, MSB launched an initiative to ask the public for help in selecting some of the nonprofits that would receive funding. The bank solicits nominations on Facebook and through other outlets, and the top 10 vote getters receive donations. More than 300 organizations received votes last year, and the top 10 were given grants between $750 and $2,000.

“People get really excited about it,” he said. “And I think community philanthropy is really good for business, and that has helped us be successful. We sponsor sports teams, we’re involved in most of the school systems, giving them money for various programs, we give some scholarships … people appreciate that.”

They also appreciate efforts by bank leadership to be accessible, he went on.

“We send a newsletter to all our customers, and my e-mail is on that newsletter. I give out my direct phone number to customers all the time. I’ve even given out my mobile number on the weekend. I think the accessible reputation of the bank is very important to our commercial customers in particular.”

Lowell said an emphasis on accessibility extends to the employees as well.

“Sometimes the people with the best ideas are the people on the front lines, so I’m talking to them, but I’m also asking what the customers are saying,” he told BusinessWest. “When a customer takes the time to send me an e-mail or give me a call because he’s not happy with us, that’s important for me to hear. Some of the best ideas come from a customer saying, ‘you guys did this, and I didn’t like it,’ and we’ve ended up changing it.

“I’ve had really good input from customers who were unhappy or felt we fell a little short,” he went on. “I’m convinced that’s how you get better. We’re in a competitive environment, so if you’re not getting better all the time, you’re losing ground — and we can’t afford to lose ground.”

Joseph Bednar can be reached at [email protected]

Banking and Financial Services Sections

Growth Engine

Tracey Gaylord of Granite State Development Corp. (right) with Shannon Reichelt, who used Granite State’s services to finance a new property for her company, S. Reichelt & Co.

Tracey Gaylord of Granite State Development Corp. (right) with Shannon Reichelt, who used Granite State’s services to finance a new property for her company, S. Reichelt & Co.

Certified development companies, or CDCs, are entities that partner with banks to help small businesses secure financing to grow their operations. But in doing so, they’re also growing the economy by promoting economic development, which is, in fact, a key element of their mission. Since its inception in New Hampshire in 1982 — and its subsequent, ever-expanding work across Massachusetts — Granite State Development Corp. has been executing that mission.

Shannon Reichelt recently purchased a building in Holyoke to consolidate her CPA organization, S. Reichelt & Co.

Meanwhile, Ben LaRoche and Jared Martin purchased a property in Lanesboro to house their technology-integration business, Amenitek; Gordon and Patricia Hubbard bought Hidden Valley Campground in Lanesboro and renamed it Mt. Greylock Campsite Park; and Pat Ononibaku purchased the adult day-care operation known as ThayerCare and renamed it Bakucare.

Then there are Anthony Chojnowski, who is building a new structure for his clothing store, Casablanca, in Lenox, and Frank Muytjens and Scott Cole, who are developing the Inn at Kenmore Hall in Richmond, near the New York line.

While those are six very different businesses, the common thread is how they financed their property purchases: through the certified development company (CDC) called Granite State Development Corp. (GSDC).

“We work with businesses looking to either acquire an existing business that has tangible assets, or take a loan on real estate or piece of equipment,” said Tracey Gaylord, Granite State’s vice president and business development officer.

Specifically, Granite State is a nonprofit lender authorized to process and service Small Business Administration (SBA) loans utilizing the 504 lending program (more on that later). It’s the second active certified development company (CDC) in New England and provide financing in the states of Maine, Massachusetts, New Hampshire and Vermont.

“The main goal is to promote economic development and job growth,” Gaylord said. “We help banks do loans they might not be able to do otherwise.”

Those loans are spread among a broad range of sectors, she added. “We do anything from manufacturing companies to wineries to restaurants to healthcare facilities to assisted living to campgrounds. And equipment financing for manufacturing — big machines they might buy every 10 or 15 years — we do a lot with those types of projects as well.”

For this issue’s focus on banking and financial services, Gaylord explained why companies find the 504 loan program — and Granite State’s services — an attractive option when financing a purchase or investing in future growth.

Impressive Growth

GSDC President Alan Abraham created the company in 1982 in Portsmouth, N.H., with a geographic territory initially limited to three counties in that state. In 1986, its territory expanded to include the entire state of New Hampshire, and it has since grown to provide statewide coverage for the four northernmost New England states, including Massachusetts.

Granite State Development is one of the largest CDCs nationwide, ranking fifth in both loan volume and dollars, and has been the most active 504 lender in New England for almost a decade. Since 1990, in cooperation with its bank lending partners, the nonprofit has participated in more than 4,000 transactions worth more than $1.5 billion, helping create more than 20,000 jobs in New England in the process, based on borrower growth stemming from the loans.

Meanwhile, 2017 was a banner year for GSDC in Western Mass., where it has poured increasing resources in recent years, as most of its Bay State projects have historically been farther east.

Those projects fall under the SBA’s 504 loan program, which provides approved small businesses with long-term, fixed-rate financing to acquire assets for expansion or modernization. These 504 loans are made available through CDCs like Granite State. CDCs — there are more than 260 nationwide — are certified and regulated by the SBA, and work with SBA and participating lenders, typically banks, to provide financing to small businesses.

A typical 504 loan is structured in three parts: 50% is a lien from the bank, 40% is a second lien through the CDC, and 10% is a required down payment from the borrower.

This is an important element in the program, Gaylord noted, as many banks require 20%, 25%, even 30% down for certain loans, simply as a matter of policy, “and this actually allows them to do projects people may need.”

At the same time, it’s a win for the borrower, she added, because a bigger down payment may cut into funds they need to get through a lean time. “Maybe it’s a seasonal business, and they need money to get through the winter, to fill that gap.”

The bank sets its own interest rate and term for its 50% share of the loan, she went on. “If they want to do a fixed five-year rate, they can do that. They do not have to match what we do. That’s the benefit for the bank.”

As for GSDC’s portion, it determines terms based on the type of project, she explained. A real-estate project might come with a 20-year term, while 10 years might be more appropriate when purchasing a piece of equipment with a useful life of 10 to 15 years.

“Whatever the type of project, the bank chooses what to do with the other 50%,” Gaylord said. “People say, ‘why would I use this program?’ My quick response is, ‘it’s a low capital investment and a low fixed rate.’”

There are limits to what 504 loans may be used to purchase, however. They are specifically intended for fixed assets and certain soft costs, including the purchase of existing buildings; the purchase of land and land improvements, including grading, street improvements, utilities, parking lots, and landscaping; the construction of new facilities or modernizing, renovating, or converting existing facilities; the purchase of long-term machinery; or the refinancing of debt in connection with an expansion of the business through new or renovated facilities or equipment.

The 504 program cannot be used for working capital or inventory, consolidating or repaying debt, or refinancing, except for projects with an expansion component.

Bigger Picture

At its heart, the 504 lending program and CDCs like Granite State exist not only to help small businesses, but to boost economic development over an entire region. In short, applicants must demonstrate that their purchase or investment will create jobs.

“That’s one of the primary purposes of this,” Gaylord said. “We have to track the number of jobs the business has at the current time and how many jobs they’re predicting they’ll have in the first year and the next 24 months.”

That calculation incorporates job retention as well, she noted. “If they have only two employees but doing the project means they’ll be able to retain those two, that’s fantastic. If they can create more jobs, that’s even better.”

According to the SBA, community-development goals of the 504 loan program include improving, diversifying, or stabilizing the local economy; stimulating other business development; bringing new income into the community; and assisting manufacturing firms and production facilities located in the U.S.

Public-policy goals include revitalizing a business district of a community with a written revitalization or redevelopment plan; expanding exports; expanding small businesses owned and controlled by women, veterans, and minorities; aiding rural development; increasing productivity and competitiveness; modernizing or upgrading facilities to meet health, safety, and environmental requirements; and assisting businesses in, or moving to, areas affected by federal budget reductions, including base closings; reduction of energy consumption by at least 10%.

There are a few environmental goals as well, including increased use of sustainable design, building design that reduces the use of non-renewable resources and minimizes environmental impact; reduction in the use of greenhouse-gas-producing fossil fuels; and production of alternative and renewable forms of energy.

These are worthy goals, obviously, but businesses that qualify for 504 loans are typically more concerned with how the program affects their bottom line.

“We see ebbs and flows, just like conventional banks do, but we’re obviously in a good market right now,” Gaylord said. “This is a good opportunity for people to lock in those loan rates before they start to rise. Now is a really good time.”

There have been many of those good times since Granite State Development Corp. took root in New England 35 years ago, with a mission to help small businesses expand and grow, thereby helping the New England economy.

“It’s a very easy process,” Gaylord told BusinessWest. “I think that the bankers are comfortable with it, and look to us for guidance. We’re bankers and want to work with them.

“People ask, ‘are you competing with banks?’” she went on. “No, we don’t compete with banks, we work with them. We look at banks as our partners. And I get excited when I see the jobs and economic growth. That’s the best part.”

Joseph Bednar can be reached at [email protected]

Banking and Financial Services Sections

Adding Things Up

Nicholas LaPier, CPA

Nicholas LaPier, CPA

By Nicholas LaPier

Ah, tax reform.

As long as the U.S. has had a federal tax, candidates running for office have promised to simplify and make reforms to the tax code. These promises always fall positively on the ears of the electorate, but often end up on the cutting-room floor.

President Trump campaigned that he wanted to reform the tax code, which, in his opinion, would bring back business, and jobs, to America. In Trump’s opinion, reducing the corporate tax rates would entice American businesses to stay here and not move operations and jobs overseas. Trump also believes that reducing personal taxes that individuals pay would translate into enhanced consumer spending, which is an important element of economic growth. Finally, making sweeping reforms to the federal tax code would also simplify it, and allow for many taxpayers to easily understand and file their own taxes.

True, the federal tax code is complicated. It is hard to read and harder to understand. It may even be unfair or inequitable to some. Its many pages of rules, regulations, and interpretations require many taxpayers to hire professionals to assist them in preparing and filing their required annual tax returns. After all, it is a living document more than 100 years in the making.

But what is this they call tax simplification and reform? Is it something governance does to keep busy between the dog days of summer and the winter solstice? Is it an honest intention to create a simpler, fairer system for all of us to understand and employ? Or is it a necessary act to adjust a system of taxation that will boost our economy and create jobs?

I proffer that it is all of that. The Tax Act signed by president Trump on Dec. 22 is the most comprehensive piece of tax legislation enacted in more than 30 years. Almost all of the provisions began last week, on Jan. 1.

Here’s a quick primer.

Corporate Taxation

First, let’s address the reforms and simplification of the federal corporate tax laws.

Although not in its truest form, the new law does create, for the first time, a virtual flat tax. Strange how this nomenclature never got any media attention. After 2017, U.S. corporations will now have a flat 21% corporate tax rate, truly reform, which Washington believed would be commensurate with, or at least fairly attractive compared with, corporate tax rates around the globe. Further, the act eliminates the corporate alternative minimum tax, which goes hand in hand with the concept of a flat corporate tax rate..”

Although not in its truest form, the new law does create, for the first time, a virtual flat tax. Strange how this nomenclature never got any media attention. After 2017, U.S. corporations will now have a flat 21% corporate tax rate, truly reform, which Washington believed would be commensurate with, or at least fairly attractive compared with, corporate tax rates around the globe. Further, the act eliminates the corporate alternative minimum tax, which goes hand in hand with the concept of a flat corporate tax rate.

Other notable changes include expanding the bonus-depreciation rules, which, unlike many other parts of the act, became effective for assets purchased after Sept. 27, 2017.  The act also significantly enhances the amount of depreciation allowed on business vehicles, which, prior to 2018, was limited. An interesting non-publicized change was the full elimination of the business deduction for meals and entertainment, compared to the previously allowed 50% deduction.

All of these changes are, in fact, tax reforms, but not necessarily tax simplification. The actual process of preparing a corporate tax return is still complex, with numerous calculations, add-backs, subtractions, credits, etc. that didn’t go away with the act, as well as other sundry forms that are still required to be attached to a corporate tax return.

Since these new changes all took effect on Jan. 1, the real economic effect won’t be felt for years to come. Some pundits argue that many U.S. corporations don’t pay the maximum rates anyhow, and the reason why jobs were shifted over the borders and overseas was because of business opportunities and the lower cost of wages. Others believe that the tax savings will either transfer to shareholders as additional dividends, or, if corporations hold onto the cash, will increase the market value of their stock.

Washington wants us to believe otherwise, suggesting that overall surplus corporate money (saved vis-a-vis lower taxes) will be spent here on economic development and used to hire more people. This may be closer to the truth when you consider that smaller, closely held, and non-public corporations do not necessarily worry about shareholder value, nor have the benefits of tax credits and creative tax accounting that publicly traded corporations may have.

Personal Income Tax

In regards to personal income taxes, there were numerous changes made, but, in the interest of brevity, I will highlight those with the most impact.

Congress did give all tax filers a year-end gift by reducing the personal income tax rates, and brackets thereon, across the board. As an added bonus, the act made no changes in the tax rates for qualified dividends or long-term capital gains, keeping those lower rates in place.

At first glance, the reduced rates and other sundry changes should have a positive impact on almost everyone.

Except for the income tax-rate reductions, the biggest reform in the new Tax Act is the significant increase in the standard deduction that all filers will get. The act almost doubles the amount of the standard deduction, which will result in many taxpayers no longer itemizing their deductions. Some state senators lobbied heavily against putting a cap of $5,000 ($10,000 for a married couple) on the state and local tax (SALT) deduction, and among others, the National Assoc. of Realtors hit Congress hard against the mortgage-interest cap, and the possible change to the tax exemption on the gain on the sale of a home (which didn’t get changed). Thus, the much-publicized debates on the limits on state and local tax deductions and the mortgage-interest deduction became mostly moot points.

Additionally, filers will no longer be able to deduct unreimbursed employee expenses, which, if in excess of 2% of their adjusted gross income, would have otherwise been allowed for other itemized deductions. These few changes alone result in tax-filing simplification for millions of filers because they may now qualify for the traditional short-tax-form filing. Expect the IRS to amend the filing rules for who qualifies to use the short-form 1040-EZ compared to the long-form 1040.

The act has eliminated the personal exemptions, which in 2017 filers still have a deduction of up to $4,050 per person. To help counter the tax hit for this, the act has doubled the child tax credit from $1,000 to $2,000, and increased the amount that was refundable to a maximum of $1,400. This is a good tax benefit to qualified low-income filers with dependents. The benefit to other filers is an increase in the threshold of adjusted gross income before the child tax credit is eventually phased out entirely. This new limit is at $200,000, compared to $75,000 under prior law; for a married couple, these amounts are now $400,000, compared to $110,000 in 2017.

Aside from the adjustment to the standard deduction and the reduced tax rates, most of the other changes are far from simple, nor do they qualify as tax reform. For example, the act has a complicated formula to calculate how much of the child tax credit can be refundable, with specific criteria including what type of earned income qualifies, family size, and maximum income limits. Also, deductions that are allowed on page one of the long form, called above-the-line deductions, are still voluminous, and tricky.

Alternative minimum tax (AMT) is still in play, albeit with some minor increases to the limits thereto. Finally, if you are a shareholder in a flow-through business like a partnership or S-corporation, how you calculate the 20% deductible portion, combined with rules on limitations on owner wages and business type, is very complex.

In the end, how much each person and family saves as a result of all these reforms will vary, until an actual tax return is prepared for 2018.

Estate Taxation

Included in the Tax Act is the doubling of the estate- and gift-tax exclusion, as well as the generation-skipping tax (GST) exemption. This can also be deemed a year-end gift because, for federal tax purposes, the scope of taxpayers subject to this tax has been significantly reduced. This change alone is pure tax reform.

Affordable Care Act

Call this reform or political posturing (or both); the first major modification of the original Affordable Care Act (ACA) has become law. As part of the Tax Act, filers who do not have health insurance will no longer be assessed the healthcare penalty, otherwise known as the individual shared responsibility requirement, after 2017. Not only will this save some filers money (reform), it will definitely make their tax filing simpler, removing the very difficult-to-prepare Form 8965 from the return.

State Tax

This article has focused on the new federal Tax Act without taking into consideration the possible impact on your own state income tax. For individual filers, unless you live in one of the last seven states that have no income tax (Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming), the many changes to the federal tax code will most likely have an impact on your own state taxes.

Many states are ‘piggyback’ states, meaning they take your federal adjusted income as a base, then have various add-backs and subtractions, before getting to their own taxable income. For example, Massachusetts never recognized the principles of bonus depreciation, which results in federal-to-state tax differences. As far as the new federal deduction for flow-through income, it will be interesting if any of the states will allow for that; it may already be provided for under existing state law, or it may take specific legislative action to adopt.

Regardless, you should take into consideration how any of the new federal provisions will impact you on your own state tax return. When in doubt, always consult a professional tax advisor.

By the time the ink has dried on this article and published, the new Tax Act will be law, and government lawyers will be putting the finishing touches on the official final regulations. Interpretations and minor fixes will surely follow, well into 2018.

Many of the new tax-law changes will expire after 2025, so expect that the next round of tax simplification and reform will be here before long.  Stay tuned.

Nicholas LaPier, CPA is the principal at Nicholas LaPier CPA PC in West Springfield; (413)732-0200; [email protected]

Banking and Financial Services Sections

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 Key@Work, which partners with companies and provides free and discounted banking services employees at no cost to the employer. A dedicated Key@Work ‘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.

Daily News

EASTHAMPTON — Matthew Sosik, president and CEO of bankESB, announced two promotions at the bank’s recent annual meeting. Erin Joyce was named assistant vice president – Special Assets, while Erik Lamothe was promoted to Asset Management Liability (ALM) officer.

Joyce joined the bank in October 2014 as Special Assets manager. She was named Special Assets officer in 2016. She boasts many years of experience within the local banking industry, the last nine in the area of residential, consumer, and commercial collections.

Joyce attended UMass and has completed numerous Center for Financial Training courses and received certificates and diplomas in many areas of finance, lending, appraisals, and compliance. She is a volunteer tax preparer for the IRS Volunteers in Tax Assistance Program, a volunteer for Meals on Wheels, and a board member with the Northampton chapter of Dollars for Scholars.

Lamothe joined the bank as ALM Manager in 2017. He is responsible for accounting, budgeting, and modeling and forecasting of Interest rate risk.

Lamothe has almost 20 years of experience in bank accounting, financial analysis, and management. He received a bachelor’s degree in management and accounting from Westfield State University and a master’s degree in banking and financial services from Boston University. He is involved with the Westfield YMCA and the Assoc. of Financial Professionals.

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

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

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

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
130 Years Later, PeoplesBank Still Reflects the Character of Its First President

Doug Bowen

Doug Bowen says PeoplesBank shares many of its values with its first president, William Skinner.

William Skinner, Holyoke’s most noted industrialist and philanthropist, was known as an innovator, someone who cared about his employees, and a business owner who was deeply involved in his community. Roughly 130 years after he became the first president of what was then Peoples Savings Bank, the institution still reflects Skinner’s values.

Sarah Skinner Kilborne says that, as a child, she heard little about her great-great-grandfather, William Skinner, founder of the Skinner & Sons Silk Manufacturing Co. and Holyoke’s most noted industrialist and philanthropist.

Actually, she heard far more about the company, which had been sold before she was born, than she did about the man, which created first her curiosity and later a fascination concerning his life and times.

Indeed, she never knew about Skinner’s youth in London, where he grew up in abject poverty and vowed to escape from that life. (Actually, no one knew about those years, because Skinner rarely, if ever, talked about them to anyone). And she also heard very little about perhaps the most important chapter in his life — how he rebounded remarkably from a catastrophic flood in 1874 that destroyed his mill in Skinnerville (near Williamsburg) and built anew in Holyoke.

Intrigued by what she came to know about that latter episode, Kilborne became determined to find out more. Years of intense research resulted in her book American Phoenix, published in 2012, which chronicles how Skinner turned that disaster into destiny.

Sarah Skinner Kilborne

Sarah Skinner Kilborne says she was at first curious about her great-great-grandfather, and then fascinated by his life and times.

“I never heard much about William Skinner the man,” she told BusinessWest. “I knew who he was, I knew he was the founder of the family company, I knew he was my great-great-grandfather. But I knew little about him.”

In the course of researching and writing her book, Kilborne said she learned a great deal, about not just what he did, but how and why. Among other things, she said, he was:

• An innovator. “He took advantage of the most modern machinery, kept an eye on the market, looked for opportunities, saw the big picture, and always looked ahead,” she said;
• A philanthropist who was involved with, among other things, the creation of Holyoke Hospital, the Holyoke Public Library, and the city’s YMCA;
• A business owner who cared deeply about his employees. “If he saw a hard-working employee really struggling and just not able to get ahead, he might step in and pay off all of that man’s debts to help him get a fresh start”; and
• As implied earlier, someone who didn’t glance back. “He was an immigrant who had suffered a terrible childhood, and he’d done everything he could to escape it,” Kilborne said. “He didn’t look back to the past; he cared about the future.”

And those are the very same qualities that still define PeoplesBank, which Skinner served as its first president when it was known as Peoples Savings Bank, said Doug Bowen, who now has that same title and has been with the institution for 40 of its 130 years.

As the bank celebrates its milestone anniversary this year, it is not marking that number or another figure ($2 billion in assets, which the institution just passed), as much as it is highlighting those traits it still has in common with Skinner, he explained.

“If William Skinner were to look at the bank today, he would see that, in some ways, nothing has changed, and in another way, everything has changed,” said Bowen, now in his 10th year at the helm of the Holyoke-based institution.

Certainly, the figures on the ledger sheet have changed. The bank, which opened on St. Patrick’s Day in 1885 and tallied two accounts totaling $65 that day, had $74,000 in deposits its first year of operation, and now has more than $1.5 billion. The number of branches has grown as well; there are now 17.

But the bank is still known for those qualities Skinner instilled in it, including philanthropy — it’s owned a spot on the Boston Business Journal’s list of the state’s largest corporate charitable donors for several years now; innovation, which comes in many forms, from the considerably ‘green’ quality of its recently opened branches to the so-called ‘customer innovation lab’ now taking shape on the fifth floor of the bank’s headquarters building; and as a thoughtful employer — the bank has earned status on the Boston Globe’s list of the best places to work in the Commonwealth the past two years.

“We’re still a mutual bank — our charter is basically the same as it was in 1885,” said Bowen. “And our pillars, our values of innovation, community support, the environment, and employee engagement … there are a lot of parallels and lot of crossovers between where we are today and where we were 130 years ago.”

For this issue and its focus on banking and financial services, BusinessWest details how PeoplesBank can draw some straight lines between the values of its industrious first president and the way the institution conducts business today.

Fabric of the Community

Kilborne said the flood of 1874, caused by the breach of a poorly designed and hastily constructed reservoir dam, was one of the worst industrial disasters of the 19th century and in the history of this region — 139 people were killed by the wall of water crashing down the Pioneer Valley, and the disaster ultimately led to the passage of landmark dam-safety laws.

Still, few in this region know much, if anything, about the catastrophe.

“That was a story that seemed to be lost,” she said, adding that some of her research for American Phoenix benefited greatly from In the Shadow of the Dam, a book about the disaster written by Elizabeth Sharpe and published in 2007.

Lost also were many of the details of how Skinner, whose mill was completed destroyed by the flood — “there was nothing of it left to photograph,” said Kilborne — would go on to build one of the largest silk-manufacturing companies in the world in a then-evolving Holyoke, a unique city specifically designed for industry.

“William Skinner’s story takes the flood’s story to another level,” she said. “This is a personal story in the midst of the flood, and it really addresses this issue of how you rebuild your life after you lose everything.

“I was so taken with his story, and I personally wanted to know how he did it,” she went on. “I was gripped by this sense of loss that he sustained and that everyone else in the Valley sustained at the time of the flood, and how it was that William Skinner’s saga turned into a legendary success story; what set him apart?”

To make a compelling story short, what set him apart were those aforementioned attributes, she said, listing perseverance, innovation, philanthropy, and a burning desire to forge a far better life for his family than the one he endured in the Spitalfields section of East London.

Kilborne mentions the creation of Peoples Savings Bank and Skinner’s appointment as its first president in her book, but doesn’t go into any great detail about the institution or his tour of duty with it.

But she speculated that the values that dominated other aspects of his life and career were undoubtedly evident there as well.

“As the president of the bank, he would have been very community-oriented and conscious of the burden of debt; when he helped found Holyoke Hospital, he was proud of the fact that the hospital was delivered free of debt to the community,” she explained. “When he moved to Holyoke, his reputation was that of being a great financier and manager; within two years, the city wanted him to run for mayor.

“As a banker and as a businessman, he was known to be a man of wise conservatism,” she went on. “But he was also willing to take risks, because he knew the value of investing, he knew the value of innovation, he knew the value of looking to the future. He knew you couldn’t stay stuck in the past and do the same thing over and over again, because if you do, you’re going to be left behind.”

Roughly 114 years after Skinner relinquished the helm at the bank, those same attitudes, if you will, permeate the bank’s operating philosophy, said Bowen, referring specifically to Skinner’s focus on innovation and looking toward to the future and the opportunities and challenges it will bring.

This is reflected in some of the accolades the bank — and Bowen himself — have received in recent years. That list includes everything from placement on the ‘largest corporate charitable donors’ and ‘top places to work’ compilations to recognition for Bowen as one of the Boston Globe’s Top 100 Innovators in 2011, and as one of BusinessWest’s first Difference Makers for essentially creating the environment in which all of the above could happen.

Material Evidence

Before elaborating on how PeoplesBank operates now as it did 130 years ago, Bowen noted that it does so in a banking environment that has changed dramatically since 1885 and is, in many ways, more challenging.

Now, as then, the playing field is crowded with competitors, although the composition of the field is different, with many national and regional players. Meanwhile, due to plummeting interest rates, margins are now razor-thin, making it difficult for banks of all sizes to be profitable.

The customer innovation center now under construction at PeoplesBank

The customer innovation center now under construction at PeoplesBank is one of the many ways in which the bank reflects William Skinner’s innovative character.

In this environment, institutions are looking for any edge they can get and are united in their quest to increase volume and attain greater market share to compensate for those slimmer margins. Locally, most have banks have done this through acquisition and territorial expansion, and PeoplesBank is no exception (at least with the latter), having executed an aggressive pattern of expansion, including the opening of three branches in Springfield and others in Westfield, West Springfield, and Northampton.

This widening of the footprint (along with inflation, of course) helps explain why it took the bank 120 years to reach $1 billion in assets and only a decade to double that total.

But there’s more to the growth equation than physical expansion, said Bowen, adding that today’s institutions, especially community banks like PeoplesBank, can gain an edge with more personalized service than that delivered by the regional and super-regional players. They can also do so by using technology to improve that service.

And this brings Bowen back, once again, to William Skinner, who embraced those ideals.

“When he built in Holyoke, he bought the latest and most innovative machinery that there was for silk making,” Bowen explained. “Skinner silk became the standard for the American silk and satin industry, and a lot of it was because of his investment in those innovative machines.”

In many ways, PeoplesBank is following that example, he went on, citing everything from design of the bank’s LEED-certified branches to the development of apps for smart phones.

“One of the things that was interesting about the buildings Skinner built was that they had monitor roofs, which had a row of ventilating windows above it that could be opened, which pulled all the hot air up and through the building, something that was unique at that time,” Bowen explained. “Also, the skylights let good light into the manufacturing area, and according to the book, his factories were considered the healthiest in the Northeast, and this mirrors some of the things we’re doing.”

As an example, he mentioned branches like the one recently constructed in Northampton, which focuses on providing natural light and fresh air to make the work environment more conducive to productivity and employee satisfaction.

As another example, Bowen cited the customer innovation lab taking shape at the bank’s headquarters building, a step taken to address the incredible pace of technological advances and the ways in which they can be harnessed to better serve customers.

The bank recorded more than 2 million online banking sessions in 2014, more than double the number only three years ago, said Bowen, adding that this pace of growth will only accelerate in the years to come as customers demand even greater convenience. The lab was formed, by and large, to create such convenience.

“The lab is all about tomorrow and addressing those customer demands for convenience in the future,” he said. “We’re using technology to accelerate innovation and enhance the customer experience.

“The lab won’t have any beakers or Bunsen burners, but it will have space where people can brainstorm about that customer experience and places where we can have focus groups and more broadly speak to the different delivery channels,” he went on. “We want to focus on all the different ways you can deliver products, services, and information to our customers.”

The bank already has what are known as ‘tech titans,’ he said, individuals who will analyze new technology, such as the Apple watch, for example, and evaluate what that technology could potentially mean for customers. The new innovation lab will take such efforts to a higher level, with the focus squarely on the customer.

“We’re constantly, constantly, constantly trying to look at things through the customers’ eyes,” he explained. “We’re trying to create as good an experience, and as seamless an experience, as we can.”

Meanwhile, the bank is also working to apply that phrase ‘good experience’ to employees as well. And placement on the ‘best places to work’ list three years in a row — the only firm in this region to make that compilation — is evidence that it is succeeding in that mission.

“This is based an anonymous survey of employees and gauges what they think of you — we’re not sending in all the nice things we do; it’s strictly the employees,” he said of the process of determining who makes the list. “And when you consider all the businesses in Boston that we’re up against, it’s quite an honor.

“We’re a bank — we don’t have beer on tap or a ping-pong table,” he continued, referring to some of the amenities offered by IT companies. “We can make it fun to work here, but there are constraints we are under.”

Back to the Future

Bowen told BusinessWest that the bank has little, if anything, planned to mark its 130th anniversary.

“We’re more focused on the future and on the things that will make a difference for the community and our employees right now,” he said, adding that, in this respect, the bank is once again emulating its first president and his values.

Skinner’s outlook and his manner of doing business are perhaps best captured by these comments from his great-great-granddaughter.

“He was very broad-minded; he was capable of seeing the large relations of things,” she said. “He had a very expansive way of looking at the world, probably because he grew up in England and moved to America. He saw things globally, and he saw things in a very large frame. He looked at the whole picture, while doing everything he could to build on the present.”

Bowen didn’t say as much, but he strongly implied that continuing to conduct business as Skinner would is certainly the best way the bank can celebrate its milestone.

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

Banking and Financial Services Sections
David Hobert Brings Local Focus to People’s United Bank
David Hobert

David Hobert says the bank can’t be all things to all people, but adds value in insurance, wealth management, and other products.

David Hobert has deep roots in Western Mass. and a broad palette of banking experience. His new role allows him to put both to good use.

“I started as a teller for Westbank on Main Street in Holyoke in 1983,” he said, recounting the start of a career that took him to some of the region’s largest institutions over the past 30 years — currently as regional president of People’s United Bank, a position he accepted in February.

“I wanted to come back to my roots a little bit,” the long-time Longmeadow resident told BusinessWest, noting that his previous role was as executive director for Santander Bank’s global-banking business. “I missed the connection to the community, and the travel was quite extensive, and I felt I was ready to get off the airplane and get back in the car for the short drive to Springfield.”

In fact, from 2009 through last year, Hobert focused on Fortune 100 telecommunications, media, and technology companies for Santander. “I spent more than five years building that business, but one of the things I really missed was my roots and working in the community. But I stayed in touch with some of the local leaders in banking, seeking an opportunity to eventually manage a regional bank. Then this opportunity came up in January, and here I am.”

In that role, Hobert replaces the recently retired Tim Crimmins, who launched the Bank of Western Massachusetts in 1987 — just before the onset of a crippling recession — and grew it into a regional commercial-lending power, one that was acquired by Chittenden Bank in 1995 and then again by People’s United Bank in 2008. Today, it’s part of a $36 billion institution with more than 400 branches in Massachusetts, Connecticut, New York, Vermont, New Hampshire, and Maine.

That’s regional clout the old Bank of Western Massachusetts couldn’t match, but Hobert’s challenge is marrying that lending power with a strong community focus.

“I’m managing the commercial-banking business, working closely with our retail business to grow our market share, and working with the community through our foundation and sponsorships,” he said by way of explaining his day-to-day job. “The main thing, really, is just making sure that our clients, many of whom we’ve had for a long time, continue to get the best service and are offered the best product variety possible.”

For this issue’s focus on banking and financial services, BusinessWest sat down with Hobert in his downtown Springfield office to talk about how he plans to do that, and why he’s bullish on the future of the region he has long called home.

The Road Home

After five years in a number of roles at Westbank in the 1980s, Hobert moved to Citytrust Bank in Bridgeport, Conn., managing its workout business for Hartford, New Haven, Norwalk, and Stamford for three years. Then, in 1991, the graduate of Western New England College had the opportunity to move back to this region when he was hired by BayBank in a similar role.

He eventually started handling new loan business for BayBank and Bank of Boston; when those institutions merged, he was appointed team leader in Springfield and, when Sovereign Bank later bought the vested assets of Bank of Boston and Fleet Bank, Hobert became head of corporate banking for the Western Mass. region, before moving on to Santander in 2009 and, eventually, to his new role at People’s United.

He assumes regional leadership with a bank that reported a 12% earnings increase in its first quarter of 2015 compared to a year ago. “We’ve reported five consecutive years of operating-earnings growth — and in a very difficult time, when we’re coming out of a recession,” he said. “So that, in and of itself, is evidence that the business model continues to work, and work well.”

The bank’s client base is business banking and middle-market companies, most of which borrow anywhere from $100,000 to $10 million, although a few clients are larger. But Hobert stressed that the bank has always kept the lending window open to small businesses, a philosophy shared by Crimmins when he launched his enterprise in 1987 with partner Frank Fitzgerald, and by Chittenden Bank, which later purchased it.

“If you look back through the history of Chittenden, when the bank started in Bridgeport, they served middle-class people, while other banks were serving middle-market commercial customers,” Hobert explained. “So, from day one, right through the Chittenden acquisition and to date, our main business has been small business, middle-market business, and the consumer.”

To that end, customer service has always been paramount, he said. “Obviously, it’s a competitive market from a pricing standpoint; that’s no secret — and I believe the market is overbanked. So the way you maintain and grow your client base is by having consistent, excellent service and offering added-value products.”

Those include treasury management and the People’s United Insurance Co., which offers property, casualty, and workers’ compensation products.

“And then we have a strong wealth-management division with a long, proven track record, that focuses on both individual and institutional investment management. That’s an area where we’ve had some recent success and growth. Our wealth management, I think, is as good an offering as any bank in our footprint.

“Again,” Hobert said, “it all comes back to the people and the product. We don’t want to be all things to all people, but where we can add value, that’s where we want to focus our time, playing an advisory role for our clients.”

Street Level

It would be easy for a large bank to lose its focus on individual communities, but Hobert said People’s United’s CEO, Jack Barnes, emphasizes a street-level focus from the top down.

“The values we want to bring are, we want to offer empathy and expertise to our customers, we want to be a good corporate citizen in the community, and we want to understand the knowhow and growth potential of our employees,” Hobert said. “If we do those three things right, we can continue what was started 170-plus years ago in Bridgeport. Those are principles the bank has operated by for some time, and I believe they’re simple to follow, and, if you do them well, clients will stay with you.”

That community focus extends to the bank’s commitment to philanthropy, he went on. “Community development, youth development, and affordable housing are the three areas we focus on through our community foundation; then, separate from that are all the sponsorships we support. We provided more than $700,000 in support last year through a combination of the community foundation and sponsorships in Western Massachusetts, and we’ll continue to do that.”

In fact, the bank strives to support nonprofits in its business dealings as well. “I’d say that, in Massachusetts, we’re definitely one of the leaders in terms of nonprofit lending, which includes all the colleges and healthcare,” Hobert said. “They’re a large part of the community — important assets in the community — and they have the same needs as a for-profit business when it comes to capital.”

The fact that business borrowing is on the upswing among both for-profit and nonprofit companies is encouraging to Hobert, who credits factors like the flat organizational structure favored by Barnes and the bank’s geographically focused regional lending teams with growing and retaining business. And while People’s United has expanded through acquisition in the past, Hobert sees plenty of opportunities to grow within the bank’s current footprint — however overbanked it may be.

“Right now, we’re focused on organic growth,” he said, “but if the right acquisition surfaces in our targeted markets, we would consider that.”

For now, he’s happy to be the regional face of People’s United, especially at a time when the region is showing signs of economic life.

“Locally, I’m positive about what’s going on in our region,” Hobert said, noting developments such as Changchun Railway Vehicles’ investment in the city and vacancy rates in the downtown towers as low as they’ve been in years. “I think the biggest impediments companies face right now if the workforce. The demand is there for our local customers, but we need to work through our workforce-development programs to develop the skill sets in the region to fill these positions. But overall, I am upbeat on where things are going.”

As Tim Crimmins used to say, the lending window is open.

Joseph Bednar can be reached at [email protected]

Banking and Financial Services Sections
GSB’s New President Is Focused on Next 150 Years

John Howland

John Howland

John Howland says he recently had the opportunity to get in a photo with his three immediate predecessors as president of Greenfield Savings Bank — the recently retired Rebecca (Becky) Caplice, Joe Poirier, and Ed Tombs.

When asked what the occasion was, Howland, who took the helm roughly seven weeks ago, shrugged and said there really wasn’t one.

“They’re all around, they all live here — Ed is living in the same house he’s lived in for 40-something years … it doesn’t take much to get them together,” he told BusinessWest, adding that this fact reflects the stability, continuity, and community-centered flavor of this institution.

These qualities certainly helped pique his interest early last fall when an executive search firm called to gauge his interest in succeeding Caplice.

“This is an amazing institution, and positions like this — well, let’s just say it’s the kind of job you don’t leave,” Howland said, adding that by ‘this’ he meant positions leading institutions with long histories, stability, and a future that will look very much like the past and present — with some needed refinements to keep up with the times.

“They asked me when I was being interviewed if this was going to be a stepping stone to the next position,” he went on, adding, without any hesitancy in his voice, that he fully expects this to be the last line on his résumé. “I told them I’d love to be here for the rest of my career. I find it difficult to conceive of something materially better than what I have here.”

Of course, there soon will be another occasion to bring the former presidents — and many others — together. This will be the bank’s 150th anniversary, due to be celebrated some time in 2019.

The exact date of the festivities isn’t known, and hard planning is yet to commence, although discussions are certainly underway for what will be a momentous occasion in Greenfield.

Meanwhile, Howland considers it his unofficial job description to see to it that this institution can and will be around for another 150 years.

Fulfilling that mission is a simple yet critical function of doing what the bank has always done — meeting the many needs of the community it serves, and not attempting to be something it isn’t, or shouldn’t be.

Howland told BusinessWest that this strategy extends to the name over the door and the pocket of the shirt he was wearing.

Indeed, GSB is one of the banks left in this region that has kept the ‘S’ as part of its brand — many consider it somewhat anachronistic and not entirely reflective an institution’s full range of services — and he has no plans to lose it.

“I don’t have any interest in changing that,” he said with a dose of defiance, if it can be called that, in his voice. “I’m not embarrassed by that name … I’m about tradition in this organization, we’re all about tradition, we’re proud of being 150 years old in the same town with the same name, and I don’t see any reason to change it.”

For this issue and its focus on banking and financial services, BusinessWest talked at length with Howland about his new assignment and his outlook on the future.

Interest Bearing

Howland majored in physics in college, but soon determined that this wasn’t his calling and went into finance instead. He went to work for Merrill Lynch in New York City, working specifically with banks, especially small, community institutions, on investment-banking services.

But he soon decided he wanted to work for one of those institutions, not provide them with services.

“I consistently saw that people that ran banks like this seemed to derive significant personal and professional satisfaction from their positions,” he told BusinessWest. “Going back to the 1980s, I knew that this is what I wanted to do.”

So, in 2005, he accepted a position as executive vice president of the Bank of Southern Connecticut in New Haven.

The bank had some fairly significant regulatory issues at the time, said Howland, and he was hired to help clean up that mess. There was a father and son team ahead of him on the leadership ladder, but when the father retired and the son decided he wanted to do something else, Howland became president in 2008 and orchestrated a successful turnaround.

GreenfieldSavingsLogoThe bank was sold in 2010, and Howland interviewed for and then accepted a position as president of the First Bank of Greenwich, where a similar scenario unfolded.

“Greenwich was in very difficult shape with the regulators — it was under what was known as a consent order, which I tell people is the outer marker for failure at an institution,” he explained, adding that he was able to right the ship there and put the bank on solid ground.

He said he’d fielded a few calls from recruiters assessing his interest in other jobs, but wasn’t driven to pursue anything aggressively until the GSB presidency came onto his radar screen.

The job was appealing because, unlike his past two stops, this bank wasn’t troubled, it wasn’t destined to be sold to a larger institution, and it was, in many ways, part of the bedrock of Greenfield.

“Having come from two companies that were in a lot of trouble, this is an appealing change,” he explained. “There’s a reason this company is so strong — it has great people in the right positions.”

Moving forward, Howland says his basic strategy is not to fix anything that isn’t broken — and that covers just about all facets of this operation — and thus continue dealing from a position of strength.

Greenfield is a dominant player in the Franklin County market, he said, adding that the primary competition comes from Greenfield Co-operative Bank, which recently merged with Northampton Cooperative Bank, and several larger regionals and super-regionals.

GSB has a presence in Northampton and Amherst, where there is considerably more competition from mutual banks, he went on, but has a good franchise — “we have, for the most part, very well-positioned locations in the various markets that we serve, with seven branches and solid market share.”

Other branches are in Shelburne Falls, Turners Falls, South Deerfield, and Conway, he went on, adding that he sees little need to put more push pins on a map, even if many banks seem to be in a frenzy to add locations.

“Our decision to open in Northampton and Amherst was really more an accommodation to those customers who commute back and forth to those locations — people who live here and work there and vice versa,” he explained. “We’d have to look closely at things, but there’s no obvious expansion that would be an easy one and make sense to our franchise at this point.”

Change Agent

Still, one of the items on Howland’s to-do list is a long-range strategic plan, an undertaking that usually accompanies a change in leadership, and one that will commence shortly.

One of the focal points of that plan will be developing strategies — and there are few obvious ones other than increasing market share — for becoming more profitable in an ever-more-challenging operating environment for banks of all sizes. The biggest challenge at the moment involves historically low interest rates and the manner in which they are making margins razor-thin.

“The biggest risk that we face right now is interest-rate risk and what happens if rates change drastically,” he said. “We use one of the leading firms in the country to assist us with that endeavor, and we feel we’re well-positioned for changes in interest rates that will mitigate the impact on our bottom line as best as can be expected.

“It’s challenging that every time you get together and have a meeting with a professional to talk about the future of interest rates, it’s going to be two quarters out before the fed starts easing,” he went on.

“This makes it challenging for banks; it’s a tough, tough time for us, and in many ways, it’s like a person on a fixed budget,” he continued. “You have a pile of money, and 10 years ago you were making 5% on your money, and now you’re making 25 basis points — you lost 90% of your income. That’s the easiest way to look at what’s happened to banks and why their profitability has gone down so much.”

This tight squeeze on profits certainly helps explain the recent surge in mergers and acquisitions, said Howland, adding that acquiring banks, through efficiency efforts and economies of scale, can eventually bolster their bottom lines.

But GSB doesn’t see any critical need to expand at this juncture or go public, he noted, adding that it has plenty of capital and can better serve its customers by maintaining the status quo.

“I don’t see how going public is consistent with the notion of sticking around for another 150 years — it takes control away from the community and puts it in someone else’s hands, and we don’t want to do that,” he told BusinessWest. “The mission of this organization is not to expand and drive the bottom line; it’s to serve the community. How does raising capital help with that? If we start down that road, we’ll never be here for another 150 years.”

Photo Finish

Returning to that photo op with his immediate predecessors, Howland said there were a number of stories exchanged at that gathering, as well as a great deal of pride in the history and continuity of the institution.

This is something he certainly doesn’t take lightly.

Indeed, keeping GSB around for another century and a half isn’t a goal as much as it is a responsibility, one he takes very seriously.

Being around for that milestone was one of the motivations for taking this job, he said, adding quickly that the real reason was not to mark history, but to write more of it.

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

Banking and Financial Services Sections
Farmington Bank Makes Its Move into Massachusetts

John Patrick Jr., president and CEO of Farmington Bank

John Patrick Jr., president and CEO of Farmington Bank

John Patrick Jr. says Connecticut-based Farmington Bank’s foray into the Western Mass. market, starting with a commercial-lending office and two anticipated branches, wasn’t exactly planned.

By that, he meant this decision to cross the border — which is becoming far less of a boundary seemingly with each passing year or quarter (more on that later) — was definitely not a line item on a detailed strategic plan penned years or even months ago.

Rather, it was “an opportunity seized,” said Patrick, the institution’s president and CEO, who has presided over a number of well-planned and executed initiatives, including everything from taking the now-$2.5 billion bank public in 2011 to an elaborate territorial expansion effort marked by 10 new branches over the past three and a half years.

Elaborating, he said the merger of equals between United Bank and Connecticut-based Rockville Bank eventually left Farmington with an opportunity to hire a number of seasoned commercial lenders who know the Western Mass. market and have served customers here for years, if not decades, and establish what amounts to a foothold — specifically a small commercial-lending office on Memorial Drive in West Springfield.

“I’d be a fool if I said I knew everything that was going on in Springfield, and that we could manage that market from this area,” he told BusinessWest, referring to Greater Hartford. “That’s why it was important for us, when the opportunity came, to hire the team that we did. We hired a team that lives in Western Massachusetts, grew up there, and has worked for a long time there.”

The bank intends to move forward from its beachhead with branches in West Springfield and East Longmeadow, said Patrick, adding that these locations were carefully chosen — the former for its central location and proximity to major highways, and the latter because of the community’s rapid growth rate, proximity to other high-income towns, and location next to the Connecticut border.

While acknowledging that these specific communities, and the region as a whole, is likely overbanked, Patrick believes there is certainly room for another player, especially one with Farmington’s size — at $2.5 billion, it’s large enough to handle most deals but small enough to be more personal than the regionals and super-regionals — and track record for customer service.

Summing it up, he employed three words that he would return to often — people, technology, and franchise — and said the bank’s recent organic growth has come about directly from investments in each of them.

And he firmly believes that the name of the small Connecticut town (population roughly 25,000) will not be a hindrance to gaining market share in Western Mass., where some brands have been in existence for more than a century.

“Look at TD Bank — most people don’t even know that stands for Toronto Dominion and that this is a Canadian bank,” he said, using that $220 billion institution to get his point across. “It’s not the name on the bank that matters; it’s the people behind it, and we’ve got great people.”

For this issue and its focus on banking and financial services, BusinessWest examines Farmington’s foray across the border while explaining Patrick’s confidence that the move will be another positive step forward for the institution.


Branching Out

Patrick said Farmington Bank can trace its roots back to 1851. For most of its existence, its footprint was Farmington — an affluent suburb of Hartford that is home to Otis Elevator and Carrier Corp., among other major businesses — and surrounding communities.

Patrick joined the institution as president and CEO in the summer of 2008, just as the nation’s economy was heading into freefall and the financial-services industry was entering a period of profound change and challenge.

“I joined the company the day after Bear-Stearns collapsed,” he said, referring to the Wall Street investment bank whose demise and government-backed sale to JPMorgan Chase triggered several months of turmoil and bailouts for the banking sector and the start of a new era for institutions of all sizes.

“During that time, we were in the beginning throes of a very significant financial crisis,” he told BusinessWest. “We recognized, as an organization, that the world had changed, not because of anything we had done, or that community banks had done with regard to subprime lending and those types of things. But things had changed dramatically; liquidity in the markets dried up, and it was a very challenging time.

“I thought that, in order for banks to be relevant in the marketplace, or at least in the marketplace that we were playing in, size mattered,” he went on, “and that it was important for us to have a growth strategy, and the board thought the same thing.”

Elaborating, he said it became clear that the bank, then with roughly $950 million in assets, needed to diversify its customer base and expand geographically beyond those roots in Farmington.

As part of that strategy, the bank went public in 2011, raising roughly $180 million in capital, which it has used for what Patrick called smart, controlled growth aimed at making the bank “an economic driver” in the communities it served.

“We recognized that, if we were going to make these investments we needed to make, especially in technology, you need capital — it’s the key to success, especially on the regulatory side of things” he said, while explaining the move to go public. “But we also wanted to make sure we were raising capital for the right reasons — to take that capital and invest it back into loans and the marketplace, which we did.

“We’re not growing just for the sake of growing,” he went on. “The core of our business of lending has to be good assets because, at the end of the day, that’s one thing that can really crater a bank.”

Overall, Patrick said Farmington’s growth strategy will be the same in Western Mass. that it has been in Connecticut, meaning that the goal is to not merely to have a presence in a community or market, but to be that economic engine he described.

“We want to be a good community player — we’re not up there to take; we’re up there to be a partner in the marketplace,” he explained. “I’ve reached out to several leaders and asked how we can do that. I’ve said, ‘tell us how we can help and be a significant partner with you in the market. How can we make a difference in that market?’”

Points of Interest

As he talked about Farmington’s foray into the Western Mass. market, Patrick said it is similar in almost all ways to the bank’s expansion efforts in the Nutmeg State.

Over the past several years, the bank has essentially extended its reach on both sides of the Connecticut River, with 22 branches that reach about 20 miles south from its original base in and around Farmington, he explained. The bank’s latest gambit will effectively do the same, except the direction is north and across a state line that has been all but erased over the past decade or so as institutions on both sides of the border have ceased viewing the state line as a stopsign.

“There’s a border 20 miles to the north of where our headquarters are here,” he explained. “If I go 20 miles to the south, I’m still in Connecticut, and it’s just another geographic and economic region of our state that is contiguous to where we are in Hartford County. There’s no reason in my mind why I can’t think of Western Massachusetts as the same kind of thing.

“To go to West Springfield and Western Massachusetts, I don’t look at that as necessarily another state type of thing,” he went on. “I look at it as being contiguous to our market; that market is very similar to ours.”

That said, Patrick acknowledged that Western Mass. has its own personality, for lack of a better term, and its own business community, and serving it effectively requires knowledge of the market and its players.

And this brings him back to that notion of seizing a unique opportunity— specifically, the hiring of local commercial lenders and other banking professionals well-versed in this market and also with deep portfolios of clients they’ve served, and could potentially serve in the future as representatives of Farmington Bank.

The new additions include Mike Moriarty, senior vice president of Commercial Lending, Joe Kulig, vice president of Commercial Lending, Joe Young, vice president of Commercial lending, Catherine Turowski, vice president of Cash-management Services, Candace Pereira, assistant vice president and commercial loan officer, and all previously with United.

“The professionals we have on board with us have been imbedded in the community and the marketplace and have a tremendous reputation in that marketplace,” he explained. “And their ability to help their customers day to day, provide value-added service for those customers and businesses, and understand where they are today and what their objectives are for the future … those are things that will enable us to be successful.

“They don’t need me telling them who to call, how to do business up there, or those types of things,” he continued. “What I do is reach out to the community to get an understanding of where and how we can be a good community partner and be an economic driver in those marketplaces, in the same way that we’ve been doing it down here.”

And as he surveys the scene in Western Mass., Patrick believes the timing is good for a move into this region.

He noted that, while the planned $800 million casino to be built by MGM in Springfield’s South End and has garnered most of the attention and the press in recent months, there are other encouraging developments across the region.

“There are a lot of positive things happening in Western Massachusetts,” he said. “Set aside the casino piece; there are still a lot of things that are happening there relative to business expansion. It might not be double-digit growth, but there are still positive things taking place.”

The phrase ‘good timing’ also relates to the state of the Western Mass. banking community, said Patrick, noting that recent spate of mergers and acquisitions, including the announced acquisition of Hampden Bank by Berkshire Bank, should create opportunities, especially for smaller community banks.

“Obviously there is some disruption in the market up there, and that’s OK if we are the beneficiary of that disruption — that works,” he said. “Also, we have four new team members who have been entrenched in lending with some of the same borrowers for 10 or 15 years in that marketplace. And, in many cases, borrowers and businesses follow their lenders, as long as the organization they’re working for gives them the tools to succeed.”

Patrick said locations for the first two branches are still being scouted and should be finalized later this month. He said these initial branches will provide solid opportunities to introduce the bank, exemplify its commitment to the market, and begin the process of gaining market share.

“You don’t just throw some people in an office and say, ‘we’re open for business.’ If we’re really committed to the community and committed to the marketplace, we’re going to make other strategic investments,” he said. “We’re going to invest in a physical plant and start out with two hub branch offices, in West Springfield and East Longmeadow, and then grow around those as the marketplace dictates where the growth opportunities can be.”

Patrick said it’s difficult to project if, how, and where Farmington Bank will expand within the Western Mass. market in the years to come. For now, his focus is on the present and building a firm foundation for growth.

“We need to earn our stripes, and we need to prove ourselves; that’s the first order of business,” he told BusinessWest, adding that the institution has been quite successful at doing that within its broader footprint in Connecticut, and he believes that same pattern can be duplicated north of the border.

Although, as he said, it’s not really a border, or boundary, any longer.

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

Banking and Financial Services Sections
ESB’s Acquisition of Citizens National Will Create Needed Efficiencies

Matt Sosik

Matt Sosik says ESB’s acquisition of Citizens National Bank is a response to the challenging conditions within the financial-services sector.

“The status quo will eat you alive — if you allow it to.”

That was the blunt, yet very effective, short answer offered by Matthew Sosik when asked why Easthampton Savings Bank (ESB) took advantage of what he called a rare and unique opportunity to acquire Putnam, Conn.-based Citizens National Bank last month for $51.3 million.

His much longer answer not only addressed the question but summed up what has become an ever-more-challenging operating climate for banks in this region, while also explaining a surge in mergers and acquisitions within the industry, one that he expects will continue in the new year.

“What you’re seeing in the industry right now is simply a response to a confluence of a number of things,” he told BusinessWest. “First, we’ve been in a prolonged low-interest-rate environment, and the margins in the industry have been shrinking for some time now; this is a really hard time, generally speaking, to produce profitability in this business.

“Then you overlay that on a regulatory-compliance environment that is very expensive,” he went on, “and it’s not just those costs. It’s the cost of doing business today; banks are facing the same rising expenses as other industries — healthcare insurance, attaining and retaining top-level performers … there are a lot of increasing costs in this business. Put it altogether, and you’ve got an industry that’s in flux, and also in a never-ending search for efficiencies.”

That search has led to a number of recent mergers, acquisitions, and territorial expansion efforts, including the merger of equals between United Bank and Rockville Bank completed last spring, the announced acquisition of Hampden Bank by Berkshire Bank, a deal expected to be finalized in the second quarter of this year, and the expansion of Connecticut-based Farmington Bank into the Western Mass. market with planned branches in East Longmeadow and West Springfield (see related story, page 23).

And it led ESB to explore and then seize the opportunity to acquire Citizens National, a roughly $330 million bank that essentially put itself up for sale to the highest bidder last summer.

Sosik said he doesn’t know how many suitors there were for Citizens National (that information has been kept confidential), but he believes there were quite a few. ESB eventually prevailed, and its triumph will enable it to expand its presence into Connecticut with five branches, in Putnam, Woodstock, North Grosvenordale, Brooklyn, and Danielson.

More importantly, said Sosik, the gambit will enable ESB to gain needed size and additional regional market share — it will be roughly 33% larger when the deal closes several months from now — without greatly increasing costs.

In short, the deal gives ESB a greater chance to achieve that elusive profitability Sosik mentioned.

“We see this as an opportunity to do a couple of things,” he explained. “First, create an efficient, combined organization — we’re trying to broaden our asset base and keep our expenses controlled; that will produce efficiencies — and also, this is a means to geographic diversification.”

Most importantly, it gives ESB a much-needed opportunity for growth when standing pat is simply not an attractive option, he went on.

“I don’t think you can sit idle in this industry, in the same way that you can’t in any other business,” he explained. “Because every year, our costs go up 4% to 5% or more, and if you’re not growing at that same pace, you’re going backwards. For us, this is an attempt to keep that status-quo wolf from the door.”

For this issue and its focus on banking and financial services, BusinessWest takes a look at how and why this acquisition came about, and what it means for ESB moving forward.

Checks and Balances

Given ESB’s aversion to the status quo, Sosik said, the institution has long been examining potential opportunities for expansion and growth, both organically and through acquisition.

But organic growth is a considerable challenge in what all those in the industry consider a no-growth region — one that has also seen some new players enter the fray, with more on the way, such as Farmington.

And acquisition opportunities are few and far between for a bank of ESB’s size — it only recently surpassed $1 billion in assets — and geographic playing field, where many players, both publicly owned and mutually held, are considerably larger, or smaller, but still too big to acquire.

So when Citizens National hired a firm to execute a sale last summer, a rare opportunity presented itself.

“We’re always looking at opportunities to continue to grow and prosper, but this particular opportunity was definitely rare and somewhat unique in that we were able to acquire a stock bank of a size that we could afford,” he explained. “We can’t go out and buy a $600 million, $700 million, or $800 million bank, because of simple mathematics; our capital ratio just doesn’t support it.

“So this was a rare opportunity for us, and we treated it as such — we took this very seriously,” he went on. “It really represented a rare combination when you consider the size of the bank and the geographic location; it all made sense.”

Efficiencies will be created as a result of the acquisition, he said, because the institution that will emerge, with roughly $1.4 million in assets, can eliminate redundancies with regard to staff and operations.

“We’re going to look at how we’re going to do each of the functions we need to do,” he explained, “and you can simply do those more efficiently over a wider asset base. You’re going to clearly have operational efficiencies when you consolidate two departments into one in each of the operational areas of the bank.”

Sosik said ESB’s plan is to keep the Citizens National name on the five Connecticut branches because that institution is a known commodity and respected brand in that region, and also because that name will almost certainly resonate more in the Nutmeg State than the name of a small Hampshire County city that most people in Connecticut have never heard of.

“We’re going to try to take advantage of the franchise value they have in that market area — they’re a very well-known and well-respected organization, and we don’t want to lose their identity,” he said, adding that regulatory approval would be needed to keep the name on those branches.

Looking ahead, Sosik said the acquisition of Citizens National will enable Easthampton Savings to build on some momentum generated in 2014, despite those difficult conditions he described earlier.

“This past year turned out to be better than our best-case scenarios,” he said, referring to measures such as assets, deposits, and loan growth. “And that’s because we just grinded it out, doing all the little things you need to do to succeed in this environment.”

The move will also enable the bank to be more competitive at a time, and in a region, where many players are taking similar steps, with further activity possible, if not probable, in the near future, simply because those challenging conditions are not expected to change for the better, at least anytime soon.

“The perfect storm is not likely to abate,” he said. “Given that, the pressures are going to exist on our income statements, and we’re going to continue to have revenue issues on the margin side, and we’re going to continue to have expense pressures. And when you put all that together, you’re going to see certain banks struggle.

“The trend is here for a while — you’re going to see more consolidation in that marketplace,” he went on, adding that such consolidation will improve the overall health of the industry, while also creating opportunities for the remaining community banks in the market because of their smaller size and ability to serve customers in a more personalized fashion.

Bottom-line Improvement

Sosik said he’s not sure if additional acquisitions like this one are in ESB’s future.

That uncertainly stems in large part from the rare nature of such opportunities and an inability to predict just when and how they might come about.

Overall, the bank is not seeking out such opportunities as much as it is reacting to them when they do arise, he told BusinessWest, adding that this approach will continue, because it must, out of necessity.

As he said, the status quo will eat you alive — if you let it.

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

Banking and Financial Services Cover Story Sections
Banks Navigate a Rapidly Changing Chess Board

BankLandscapeDPartIn assessing the many ways banking in Massachusetts has changed, Dan Forte summons two numbers: 338 and 175.

The first, said Forte, president of the Mass. Bankers Assoc., is the number of banks with offices in the Bay State in 1990. The second number is the same tally at the end of 2013.

“That’s a 48% drop, which, annualized, is a 2% drop per year,” Forte said. “There have been some periods where the consolidation was slower, while in some periods, it has been a little faster. We’re coming out of an economic trough, albeit slowly, and as the economy gets stronger, you’ll see mergers pick up over the next few years.”

Indeed, after a few relatively — but never totally — quiet years on the bank-merger front, 2014 has brought a rush of movement, most recently Berkshire Bank bringing Hampden Bank under its banner (see sidebar, page 19).

“It’s a combination of things,” Forte said, noting that the region’s most recent big moves — Berkshire’s in-market acquisition of Hampden, the interstate ‘merger of equals’ between United Bank and Rockville Bank a year ago, and Connecticut-based Farmington Bank’s plan to expand into Massachusetts — are very different from each other.

“The community banks are going to remain strong, but, like every other industry, there’s going to be a lot of change, and this is part of the change,” he said. “It’s really nothing new.”

Or, as Brian Corridan put it, “we have a lot of very good banks here in Western Massachusetts. But the world is changing, and the checker game in banking has become a chess game.”

Corridan, a local expert on the financial-services industry and president of Corridan & Co. in Chicopee, emphasized that not only are mergers and consolidations par for the course these days, they’re not the biggest story.

Hampden Bank

Berkshire Bank leaders are discussing whether to retain, consolidate, or close Hampden Bank branches that overlap Berkshire branch footprints — including Hampden’s headquarters in downtown Springfield.

“The reality goes far beyond the larger banks in our area merging with the smaller banks. We are now banked internationally right here in our Valley,” Corridan said, citing Citizens Bank, an affiliate of the Royal Bank of Scotland; TD Bank, part of Toronto-Dominion Bank in Canada; and the most recent entry, Spain-based Santander, which acquired Sovereign Bank in 2009.

“Look around — people have accounts at Citizens, TD Bank, and Santander. We’re not just talking about regional banks anymore, but foreign banks. They see the value of retail banking in our area,” Corridan said. “And it’s just the tip of the iceberg; there’s a lot of consolidation to come as banks look for economies of scale.”

That’s one of the reasons offered by Sean Gray, Berkshire Bank’s executive vice president of retail sales, in explaining why his institution is “doubling down on Springfield,” where Hampden Bank is headquartered, and where Berkshire already has a significant presence.

“Ultimately, there are economies of scale that come with larger size,” he said. “We believe we have to be big enough to do all the things larger institutions can do, but we feel we need to keep our roots in local decision making, and stay active in foundations and volunteerism and all the things you want a community bank to do at the end of the day.”

When it comes to making moves on this massive chessboard, how does a bank become more efficient, more profitable, and offer expanded services and a broader range of loans, while also maintaining the community involvement and high-touch environment long valued by retail customers in Western Mass.? For this issue’s focus on banking and financial services, BusinessWest examines how creating this balance has become, for banks large and small, the name of the game.

In the Red Tape

Ironically, much of the recent movement among banks to grow larger, quickly, has come as a result of new regulations in the wake of the 2008 financial collapse — a crisis in which the largest banks shouldered much more blame than smaller community banks.

“Since Obama came to town, it’s been a regulatory jungle, and the departments within individual banks experiencing the highest growth rate are the compliance departments,” Corridan said. “In response to more complicated regulations, the federal government is demanding more reports, and that rocks your bottom line. If you have to put $400,000 to $500,000 into your compliance department, that may upset the balance of whether you had a profitable balance or you’re in the red.”

Forte agreed, citing the way ‘call reports’ — the condition reports banks issue to regulators at the end of each quarter — have become much more onerous.

“The costs of doing business are clearly increasing,” he told BusinessWest. “As of 2012, there were 1,995 items in a call report. In 1990, there were 569 items. And the regulations coming out of Dodd-Frank are going to increase them even further; they’re looking now at increasing the number of reporting requirements by 63 elements. Every item takes time and costs money, and the risk of not completing these forms correctly is significant.”

Therefore, he said, banks aren’t just expanding their brand when they merge; they’re spreading these regulatory costs over a larger footprint.

For William Crawford IV, CEO of Rockville Bank, the decision to merge United with Rockville was about investing smartly in an aggressive growth plan.

“Getting to $5 billion in assets, getting to that scale, was very important,” he said. “We’re seeing a lot of small banks seek out strategic partners, much as we saw with Hampden, simply because the economics of being a very small community bank — say, under $1 billion — is very difficult when you look at the interest-rate environment out there. It makes it very difficult to lend money, and, unfortunately, we may be in this environment for an extended period of time.”

Still, he emphasized the importance of maintaining community ties, particularly in the realm of long-established charitable and volunteer efforts.

“Both companies, United and Rockville, have significant foundations that will continue to invest here as we always have,” he said. “And because of our increased size and scale, we have more resources to do those things. So, from a community perspective, two companies coming together is definitely a plus.”

While customers might occasionally feel disoriented by changes in bank ownership, Forte noted that banks have been contracting nationally at a 3% annualized rate, putting Massachusetts behind the U.S. pace. Some of that has to do with the fact that 70% of the banks in Massachusetts are mutual banks, which are limited in how they can merge.

“It requires the right alignment of planets — the board, management, succession timing, etc.,” he said. “Clearly, the trend from this year is a little faster than three years ago, which is not surprising, given all that’s been going on economically.”

The loosening of state laws across the U.S. governing interstate banking, starting around 30 years ago, created a much more nurturing environment for mergers, leading to the remarkable contraction in Massachusetts-based banks since 1990, Forte said.

“State lines are fairly arbitrary; you’re looking more at economies. That’s why interstate banking is so critical; it gave banks large and small the ability to expand geographically, regardless of state boundaries.”

Cache and Carry

Forte emphasized, however, the vigilance with which merging banks protect their reputation as local institutions.

“Community banks are a vibrant sector of the economy, and they help their local communities,” he said. “Their biggest strength is being high-touch. If they can maintain the high-touch aspect and be quick followers of technology and keep costs down going forward, they will continue to confound the pundits who have long predicted their demise.

“I believe there will continue to be a strong community-bank sector of the industry, and we’re not going to become like Canada, with six large banks and 100 credit unions that serve as the local banks,” he added. “We have vibrant community banks here in Massachusetts.”

That said, Corridan noted, “we’re down two publicly traded banks in the Pioneer Valley — Chicopee and Westfield. Look back 25 years, when we had BankBoston, Shawmut, Bank of New England, Baybank … we had smaller banks, and dozens of them.”

With their gradual fade, he predicted that the next 10 to 15 years will see a rapid ascent in credit-union membership. “If you want to bank locally, you’ll see credit unions get stronger, because they’re going to be the local banking entity.”

Springfield resident Morriss Partee, creator of EverythingCU.com, an online source for credit-union information and advocacy, hopes that’s the case, but admitted progress toward that goal has been gradual at best.

“Consolidation in banking has been going on for a very, very long time, and people always say the credit unions stand to benefit from that, and they certainly have to some extent,” Partee said. “At the same time, it’s surprising that they haven’t benefited even more than they have.

“The option of banking locally is just not that important to a lot of people,” he continued. “Of course, it’s important, but a lot of people don’t think deeply about their bank relationship. They say, ‘OK, I have checking; I have a big bank with lots of ATMs around; I can be functional in society.’”

Partee says there’s still plenty of untapped potential for credit unions, but they have to convince people it’s easy to switch over. EverythingCU.com has long offered a ‘switch kit’ to make that task easier and, in recent years, help people do it online. “People hear about credit unions from their friends or see representatives at a trade show and say, ‘OK, your credit union sounds great, but it’s not worth the hassle of moving.’”

Partee, who has been a vocal opponent of a Springfield casino, puts large national and international banks in the same category — businesses, he says, that want to benefit from Springfield but who, at the topmost levels, don’t care about detrimental effects on the community because they don’t live here.

“When lending decisions are made locally, that’s going to help the local community,” he said. “There are still local community banks that are staying local, and a lot of people feel just as passionately about their local community bank as they do about their credit union. With the largest banks — the internationals, especially — it seems like doing business with them is not necessarily helping the local economy; they’re not as responsive to entrepreneurs or people who don’t fit into neat little boxes they can check off in their system.”

Pittsfield-based Berkshire Bank, for its part, has been careful to characterize its acquisition of Hampden as a way of doubling its commitment to Greater Springfield, not uprooting a locally headquartered bank with a 162-year presence.

“We are keeping local leadership and local decision making right here,” Gray said, noting that Hampden Bank President Glenn Welch will remain the combined bank’s regional president for the Pioneer Valley. “We are the largest bank headquartered in Western Mass., and when we look at our overall investment in the region, Springfield has to be a part of that. We are very committed to Glenn and his leadership and his commitment to this region.”

Checking the Landscape

Partly because of the economies of scale produced by the merger, Gray said the combined institution would grow more quickly than the two would have separately. The fate of individual branches, some of which now have overlapping footprints, is still being discussed, though Berkshire is determined, he added, to keep as many current Hampden employees in place as possible.

That brings up a common concern in the industry — overbranching. Strikingly, while the number of banks in the Bay State has been cut in half over the past 25 years, the number of total branches has risen by 12%. “You’ve got a lot more branching,” Forte said, “as well as more services that provide easier access to customers, like remote deposit capture, online banking, and mobile banking.”

Considering these trends, and the fact that real-estate is the second-highest cost for banks after personnel, one would expect banks to start closing branches, rather than open more, he noted. But that hasn’t happened yet.

“New England is overbanked in terms of the number of branches per household,” Crawford said. “And it’s higher than it needs to be. Look at the transaction levels, and look at how frequently people conduct business inside a branch, versus using a mobile device for bill pay, or even a call center. The reality is, there are probably too many bank branches right now, and that structure can’t be supported by the way customers do their banking these days.”

Perhaps that’s the next phase of what has become an intriguing and unpredictable game.

“Think of how much change banks have gone through, and imagine what they will look like in three years, seven years, or 10 years,” Crawford told BusinessWest. “We need to have leadership that can figure out what’s working and work with vendors to get there — and do it in a way that’s attractive to customers and cost-competitive with much larger players. That’s the challenge.”

Berkshire Hills Acquisition of Hampden Bank Creates $7B Institution

Berkshire Hills Bancorp’s recent acquisition of Hampden Bancorp — bringing Hampden Bank under the Berkshire Bank banner — means that, for the first time in generations, no bank will be headquartered in Springfield. But Berkshire leaders say customers and the community will both benefit from the merger.

“This in-market partnership will create a strong platform for serving our combined customers, while producing attractive returns for both our existing shareholders and the new shareholders from Hampden joining us in this transaction,” said Michael Daly, president and CEO of Pittsfield-based Berkshire Bank. “This merger complements our expansion initiatives in Central Massachusetts and Hartford, a combined market area that is the second-largest in New England.”

Berkshire Hills Bancorp and Hampden Bancorp have signed a definitive merger agreement under which Berkshire will acquire Hampden and its subsidiary, Hampden Bank, in an all-stock transaction valued at approximately $109 million. Berkshire’s total assets will increase to $7.1 billion, including the $706 million in acquired Hampden assets.

Sean Gray, Berkshire’s executive vice president of retail banking, said the move “deepens our investment and commitment to the marketplace. We’re already in Springfield and the surrounding communities, so this gives us better economies of scale in that marketplace, which allows is to do more, and we’re excited about that opportunity.”

The in-market merger is expected to create efficiencies, strategic growth, and market-share benefits for the consolidated operations of the two banks in the Springfield area. Hampden operates 10 branches in the Greater Springfield area and reported $508 million in net loans and $490 million in deposits as of Sept. 30, 2014. Berkshire operates 11 branches with $627 million in deposits in the same market area.

“We will move into the top-five position in deposit market share,” Daly said, “and plan to use this opportunity to further capitalize on our strong product set and culture of customer engagement.”

Gray echoed the concept of culture. “I think we started with like values. We believe that a community bank has a responsibility to the community, and I think Hampden Bank thinks about it the same way. There’s a mutual respect there,” he said, adding that “our CEO has a great relationship with their CEO, and they both felt that the time was right.”

He also noted that Berkshire, like Hampden, has a culture of community involvement through donations — $269,852 since 2013 — and employee volunteerism.

Glenn Welch, president and CEO of Hampden Bank — who will become Berkshire’s regional president for the Pioneer Valley — said he is “delighted to be joining the Berkshire franchise. Our two banks share rich histories, consistent core values, and a strong commitment to customers and communities. I’m proud of our 162 years of serving customers in our markets and believe the combination created by our two companies will benefit our clients, communities, and shareholders.”

Under the terms of the merger agreement, each outstanding share of Hampden common stock will be exchanged for 0.81 shares of Berkshire Hills common stock. The merger is valued at $20.53 per share of Hampden common stock based on the $25.35 average closing price of Berkshire’s stock for the five-day period ending Nov. 3, 2014. The $20.53 per-share value represents 133% of Hampden’s $15.49 tangible book value per share and a 6.0% premium to core deposits based on financial information as of Sept. 30, 2014.

Gray conceded that the merger could lead to closings where Berkshire and Hampden have an overlapping branch presence, but nothing has been decided yet.

“Right now, we’re in the evaluation process,” he said. As for employees, “obviously, there will be some redundancy in jobs. But Hampden has 126 employees, and Berkshire right now has 102 openings. Will each of those employees map directly to these openings? We don’t know yet, but we do have a track record here.”

Specifically, he referred to Berkshire’s acquisition of Legacy Bancorp in 2010. “We were able to retain a good majority of those jobs. We put a lot of emphasis on that part of the evaluation process.”

Meanwhile, “from a customer perspective, they will have more branches,” Gray said. “We’ll be looking at what makes sense moving forward, but at the end of the day, the customers of this region will have enhanced services and more total branches.”

Joseph Bednar can be reached at [email protected]

Banking and Financial Services Sections
Dena Hall Takes Regional President’s Role at United Bank

Dena HallDena Hall was talking about some of the many things that have changed since she was promoted to Western Mass. regional president at United Bank roughly a month ago.

She said her phone calls are being returned more frequently and more promptly now. Meanwhile, she’s taking more calls, including some from people who want to know if the attractive positions that once dominated her business card — senior vice president of marketing and community relations and president of the United Bank Charitable Foundation, are “up for grabs.” They are not — she’ll still have those duties.

She said she’s had more invitations for lunch — often to hear requests for monetary donations, from a board member from the bank, or both — and has accepted a good number of them, a slight departure from her previous practice, because she desired to be in the office as much as possible.

And her 6-year-old son isn’t shy about telling anyone and everyone that his mother is now president of the bank. “He leaves off the word ‘regional,’ and we just him let him run with that,’” she said with a laugh.

But mostly, Hall, now arguably the highest-ranking female bank executive in the Western Mass. region, is focused mostly on what hasn’t changed.

“A lot of what I’m doing in this new role I was doing before, between my role with the United Bank Charitable Foundation and being involved in the community, because … that’s who I am,” she told BusinessWest. “I’ve always been one of the faces of the bank, and I’ve always been interacting with the community, fielding customer complaints and compliments. It was happening before; it’s just happening more now.”

Indeed, Hall doesn’t expect much of a learning curve as she moves on with life as regional president. But there is a lot to do as she takes this lead role with what is being called the ‘new United Bank.’

That’s the marketing term that’s been used since a merger of equals between United and Glastonbury, Conn.-based Rockville Financial was announced several months ago, and especially since the union became official on May 1. As with any merger of this type, there is change, she noted, and helping customers and employees understand and cope with it has become a big part of her job description.

“There’s a huge change-management component to what we’re going through right now,” she told BusinessWest. “It’s hard to change, and people need some leadership through change, and that’s one of the things we’ve been doing all along, as a team, and myself in particular — guiding the people here through the change process that’s happening, because some things are different.”

Overall, the task at hand is taking two roughly $2.5 billion banks and shaping them into an efficient, competitive, growth-driven $5 billion bank, a number that means different things to different people, she acknowledged.

“A lot of people have said we’ve turned into a big bank because we have $5 billion in assets,” Hall noted, referring specifically to the many community banks populating Western Mass. and Northern and Central Conn. “But we’re still so tiny when compared to Bank of America or Santander or even TD Bank. Our value proposition is that we create a good alternative to those banks. We’re big enough to manage all the necessary regulatory burdens that are put on us as a bank, but small enough to deliver that really good customer service.”

The broad goal for all those at the merged bank is realization of what Hall called a “new normal,” something that won’t be achieved until probably early next year after the second of two data conversions, this one involving Rockville Bank customers, is complete.

For this issue and its focus on banking and financial services, BusinessWest spoke at length with Hall about her new — and continuing — responsibilities with the bank, and how this process of establishing a new normal will play itself out.

Balance Statement

“Day 61.” That’s how, after doing some quick math, Hall referred to July 1, the day she spoke with BusinessWest.

That means it was the 61st day since the merger between United and Rockville became official, or legal. There was a lengthy countdown before May 1, she noted, and the day counting has gone on since, at least internally.

“We counted down to legal day 1 — from the time this merger was announced until the day the companies came together, there was a countdown, like ‘what do we need to do to get to legal day 1?’” she explained. “Now that we’ve hit that, and there were struggles — everyone has struggles coming together — we’re still counting, saying ‘this is day 14’ or ‘this is day 30 — let’s figure out how, by day 40, we can be in a better spot.’”

It was day 31 when it was announced by the new bank that Jeff Sullivan, then serving as the combined entity’s president, was leaving to pursue “other opportunities.” In the same press release, it was announced that Hall, who joined United just nine years earlier, would add the title ‘regional president’ to those she already had, and that Michael Moriarty, previously senior vice president and team leader, would become executive vice president and Western Mass. commercial banking executive.

Hall told BusinessWest that a press release was being readied to announce that she would be assuming the roles of ‘executive vice president and chief marketing officer’ and ‘head of Community Strategy,’ but Sullivan’s decision brought about a quick change of plans — and titles.

She acknowledged that Sullivan’s departure just a month or so after the merger became official was “certainly not ideal,” because Sullivan was, in many respects, the face of the old United Bank, or what she called the “legacy United,” which he served as executive vice president and chief operating officer, and also because it undoubtedly raised eyebrows concerning how well the banks were coming together as one.

United Bank

Dena Hall says that creating a “new normal” at what is being called the new United Bank is at the top of her current to-do list.

But she noted that, in mergers of equals, there are often differences of opinion about how the combined institution is to be managed, and this was this case with Sullivan’s decision to move on.

“Our merger of equals is so much different than a traditional acquisition, because you’re bringing two companies, two cultures, two management teams, and, in our case, two boards together,” she explained. “And in theory, we were evaluating the practices that each one had and taking the best one.

“What we learned, and what we’re still learning, is that what worked for a $2.5 billion bank isn’t going to work for a $5 billion bank growing to $7 billion, $9 billion, or $10 billion, wherever we go down the road,” she continued. “We’re still working through all the pieces that are necessary to build this new company, because we’re really building a new bank; we’re keeping what was good about both companies, but we’re building something new.”

Sullivan’s departure did leave a critical void in the form of a strong local presence in a top leadership role, said Hall, adding that William Crawford IV, the CEO of the new United and Robert Stewart Jr., chairman of the bank’s board, recognized the need to fill it.

“They decided that local presence and geographic leadership is important,” she noted. “And it’s particularly important here in Springfield, because when you look at the legacy United, 70% of our business is here in Springfield, so if there’s a place where we need some strong geographic leadership, especially at a time when the banks are merging, it’s in Springfield.”

Hall and Moriarty, serving in their respective roles, fill the void left by Sullivan’s departure and provide that geographic leadership, she said, adding that the bank’s decision to place her in the regional president’s position sends a clear message  — actually, several of them.

For starters, it demonstrates that the bank is progressive — there are few women in top leadership positions at area banks, and none around Hall’s age — 40.

Also, the decision confirms the importance of this region to the merged bank moving forward.

“With mergers like this, jobs like this one often go out of the area,” she explained. “When there’s a merger, the geographic leader either comes in from the outside or the geographic leadership role goes away, and the president’s role goes somewhere else.

“The fact that our company has created this role, placed it in West Springfield, and given it to me speaks a lot for where the company is going,” she went on. “We’re both community banks with 120-plus years of history, but at the same time, we’re progressive, and we’re leaning toward maintaining our current customer base, but also attracting a younger customer base, going online, and going more mobile. Putting Mike and I in these roles when we’re both young and local makes a statement.”

Hall acknowledged that, traditionally, such positions within the banking industry have not gone to those from the marketing realm, but rather to commercial lenders. But the priority in all cases is to choose someone who knows the community and has created relationships within it.

“What banks are looking for in regional leaders now are people who are connected to the community — that’s the most important thing,” she noted. “Whenever you go through a merger, the automatic response is, ‘you’re leaving the community; you’re pulling out of the community.’ So regardless of the previous role, putting someone in this role who has a good connection in the community already is the driving factor behind making it successful.”

By All Accounts

It hasn’t rained much on Fridays in recent weeks, and that’s bad — in probably only one respect — because there’s a new policy in place at United’s regional operations facility in the center of West Springfield.

It’s called ‘rainy day Friday pizza,’ which pretty much says it all. If it rains on Friday — actually, even if it’s just cloudy and there’s a decent chance of rain — then Hall orders pizza for the entire building. OK, someone else does the ordering (probably 12 pizzas), and Hall pays the tab.

“This is something they do down in Glastonbury, and we thought it was kind of fun,” she told BusinessWest. “It’s only rained one Friday since we started it, but people really enjoy it. And it’s just one of the ways we’re trying to make sure that people feel valued in our new company and reaffirming to them that their role is still important even through perhaps their supervisor has changed or their job has changed.”

Implementing this new program — she’s also researching how to get a Ding Dong cart to stop by the headquarters building regularly — is clearly the least stressful of the myriad assignments facing Hall in her new role as regional president, and also with those other roles she still carries out.

Chief among them is leading the work to create that new normal she described, adding that this will be a work in progress as two bank cultures and two bank staffs are melded into one.

Hall has considerable experience with this, not only from when United acquired Worcester-based Commonwealth National Bank in 2009 and Enfield-based New England Bancshares in 2012, but also from when Woronoco Savings, which she served as assistant vice president and director of marketing, was acquired by Berkshire Bank a decade ago, a move that ultimately eliminated her job and prompted her to join United.

“I’m spending a lot of time helping people understand some of the things that are happening and why,” she told BusinessWest. “Communication is good at some levels and not so good at other levels, and decisions are made, and people may not understand why, and they instantly jump to the ‘blame the merger’ answer.

“It’s not usually ‘blame the merger,’” she went on, “but rather, ‘let’s look at the process and figure out what the best way is to accomplish what we need to accomplish, and if that means changing a process that we’ve had in place for a long time for the betterment of the organization, let’s have a conversation about it.’”

Creating greater efficiency is the ultimate goal with most of this change, she went on, adding that there have been some staffing reductions designed to eliminate redundancies across the board. And some operations have been moved, such as the loan center, which was relocated from West Springfield to South Windsor, Conn., and others that will be moved to West Springfield from Connecticut.

Beyond her work as change agent, Hall will play a key role in a rebranding initiative that will unfold in September. There will be a new logo and a new identity, she said, and not because of the merger, but because it was simply time for a new look.

“It’s time to give United Bank a facelift, and also position ourselves so that customers understand a little more about who we are, not necessarily here in Springfield, but in other areas,” she explained. “We have to make ourselves known in Connecticut. Because we just acquired New England Bank two years ago, no one really knows who we are; if you’re in one of the branch towns, like Cheshire or Southington, you know who United Bank is, but if you’re in West Hartford, you don’t know who United Bank or Rockville bank are.

“So we’re going to spend some time and money in Connecticut,” she went on, “making sure that everybody knows who United Bank is, what we do, what we offer, and why we’re a good alternative to the big banks.”

The new logo, which has been finalized but not unveiled, will be phased in, starting with the Rockville branches, which must become ‘United,’ by early October, said Hall, adding that there will be other changes, including new products, that are part and parcel of the process of becoming a new bank.

“We’re keeping some products and introducing new products, on both sides, so I’ll certainly have a number of conversations with people in the community and customers about the changes we’re making,” she said in conclusion. “And that’s OK. We need to have an open dialogue; I don’t every want someone to think they can’t walk in here and talk to any member of our staff about something that they’re feeling is not necessarily how they want it to be with their bank.”

Topping the List

As she talked with BusinessWest, Hall was getting ready to head out on a vacation for a few weeks. One of the things she did before leaving was make it clear who was responsible for ordering pizza if it rained on Friday.

That’s because continuing that new policy is one of the many components that go into the process of working through change and building a new bank.

In many respects, that process is just beginning, said Hall, noting while there will now be a number of titles crowding the business cards she’s awaiting, they can perhaps all be summed up with the phrase ‘change agent.’

It’s a role she’s excited about, and for all those reasons mentioned much earlier — from the phone calls being returned to her son getting some new bragging rights.

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

Banking and Financial Services Sections
Sumner & Toner Offers Generations of Insurance Expertise

The two generations of leaders at Sumner at Toner

The two generations of leaders at Sumner at Toner: From left, Warren Sumner, Bud Sumner, Bill Toner, and Jack Toner. Together, they’re charting a course for a company now 80 years old.

There’s an oversized postcard prominently displayed on the bookcase in the conference room at the Sumner & Toner Insurance Agency in Longmeadow. Its few words and accompanying photographs effectively tell the story of this enterprise and the recent history of the insurance industry in general.
Well, they begin to tell the story.
Pictured on one side of the missive is Warren Sumner, and on the other is William “Bill” Toner Jr. In between is a message, written in the form of a subtle warning: “Always treat your competitors with respect,” it reads. “You may end up sharing office space.”
That’s exactly what happened in 1998, when Sumner, a principal with the Sumner Spingler Insurance Agency, located on Williams Street, decided to join forces with Toner, a principal with Smith & Toner, located just a few hundred yards away on Bliss Road.
This merger, which came a few years after Richard Smith and Douglas Spingler both retired from the firms that bore their names, is typical of the many consolidation initiatives that have taken place in the insurance industry over the past few decades. Such unions have materialized with the knowledge that two companies can, theoretically, succeed better as one, with a shared office, computer network, telephone system — and philosophy about how to thrive in an increasingly competitive insurance landscape.
“We have me here, and Warren Sumner across the street,” said Toner, reflecting back on how and why the merger came about. “After three years of that, we said, ‘let’s merge.’ And when you put two businesses together, there are synergies — you don’t have to duplicate expenses.”
But what ultimately determines how successful such mergers are isn’t bottom-line savings on rent and utilities, said Sumner, but how well the new company melds the talents of the merged entities to effectively serve customers and negotiate the many challenges now facing those in a rapidly changing insurance industry.
And the company now known as Sumner & Toner — which sprung from an enterprise born 80 years ago — has been successful with this, Toner said, noting that his expertise in commercial products (especially with contractors’ needs), coupled with Sumner’s experience in personal lines and marketing, has given the company a competitive edge.
“There was and is good synergy between the two of us — we were able to bring our collective expertise to the table,” Toner noted, adding that the next phase of this process is greater use of social media to market the company and communicate with clients and potential clients.
And this is one of many assignments that will mostly fall to the next — and, in many respects, current — generation of leadership at the company, specifically Jack Toner (Bill’s son), and Bud Sumner (Warren’s son).
These younger principals have complementary skill sets as well, said the elder Toner, referencing Bud’s expertise in medical and professional offices on the commercial side of the ledger, and Jack’s work with younger individuals — both as an insurance executive and as current co-vice president of the Young Professional Society of Greater Springfield (YPS).
For this issue and its focus on banking and financial services, BusinessWest takes advantage of the recent milestone anniversary to offer an in-depth look at how Warren Sumner and Bill Toner came to be on that postcard, and what happens next for this enterprise, where things have certainly come together nicely, and in more ways than one.

Policy Makers
As he traced the history of the company, Bill Toner started with his transition from work within an insurance company to owning an insurance agency.
It’s a significant if not uncommon career shift, he said, noting that insurance companies, or carriers, assume the risk for the policyholder and pay the claim when something happens. The agency, or what he called the “intermediary,” helps to market the different insurance products and services of the insurance companies, selling on behalf of those corporations.
Toner said he was drawn to the agency side of the industry after working for one of the many large insurance companies in Hartford. After serving in the Army for three years, he acquired from his father the Angers Agency Inc., the Springfield-based entity founded in 1933 that the elder Toner purchased upon his retirement from the General Accident Insurance Co. in New York. (It is the 80th anniversary of that business venture that is being celebrated this year).
Bill Toner said he ran that agency for 14 years, before opting to merge with Smith in 1984, and then with Sumner in 1998.
Warren Sumner was a marketing and sales vice president for Milton Bradley for years, but, as with Bill Toner, the entrepreneurial bug was biting, and he decided to venture out on his own by purchasing the Spingler Insurance Agency in 1987. A few years later, he merged with his friendly competitor across the street to form Sumner & Toner.
“My father has the advertising, marketing, and sales background, which, with the product knowledge in insurance, makes him a great salesman and advocate for his clients when a claim arises,” said son Bud Sumner. Currently, the elder Sumner is starting to get a small taste of retirement by reducing his hours.
Bud Sumner, who started with Aetna but founded his own small agency in Needham, decided to merge that venture with Sumner & Toner in 2001, giving the company a foothold in Eastern Mass. and Rhode Island — geographical diversity that has benefited the company in a number of ways.
The current leadership team became complete when, after a brief stint as a leasing agent for a real-estate company directly after graduating from Georgetown University — his father’s alma mater — Jack Toner joined the company in 2007.
Together, the two generations of Sumners and Toners are doing what agency operators across the region are trying to do — maintain and ultimately grow market share at a time of change, heightened competition, challenge, and opportunity.
All of those dynamics come together amid the proliferation of online giants such as Geico and Progressive, said Jack Toner, adding that these companies present a challenge because their marketing pitches and promises of savings are alluring, and they essentially eliminate that intermediary role that agencies play.
But they also represent an opportunity, he went on, because those same agencies can let clients and potential clients know that they usually can’t click their way to solutions for their insurance needs. This is the message he’s imparting to many young professionals in YPS, some of whom are buying insurance for the first time.
“The product that we’re offering and the services that we promise to offer are sophisticated,” said Bill Toner, explaining his caution for online one-size-fits-all insurance products. “It’s a complex sale; people think that they can go online to buy auto and home insurance — and they can — but they don’t have the expertise to know what they are missing, and that sophistication of the sale brings us to the table because we can offer that advice.”
Bud Sumner agreed. “Anybody can save you 15%; just don’t call them when you have a claim, because all [national online companies] are doing is raising your deductible and lowering your limits.”
Or they’re taking away coverage, Bill Toner added. “We have the philosophy that we should take the time and labor, which is our capital, to invest in the relationship so that, six months to a year later, they’ll realize we’ve been something of value for them. That’s our general philosophy of business.”
The two terms ‘challenge’ and ‘opportunity’ could also be ascribed to other changes within the industry, said Bill Toner, specifically citing the deregulation of auto insurance in the Commonwealth in 2008, which allowed insurance companies to set their own rates, and agencies to offer package discounts for auto and home or auto and boat, Bill said.
“This was good for the consumer — they got discounts,” he explained. “But it was good for us because we were able to develop the entire account and develop relationships.”
But Sumner & Toner isn’t out to sell everything to everybody, he went on, noting that, with a client base that is 60% personal and 40% commercial, the agency would rather offer advice and good service instead of pushing what Bill calls the ‘horror-story’ campaign. That would be advertising by fear, as in, what would happen if someone came over to visit and fell down the stairs?
“Our proposition has always been a quality product and package that will fit into your financials, which you can afford and protects your assets,” said Jack Toner.
Still another challenge moving forward is creating a strategy for effectively using social media to promote the agency and its services and also communicate with clients and potential clients.
“That’s a whole other arena we’re entering into,” said Jack Toner. “I think that our industry has a place, or is finding a place, in social media, and while we’re not totally sure where we want to place ourselves, we’re very aware of it.”
Facebook, Twitter, blogging, and all the other forms of social technology have created new marketing avenues, but industry-wide, there is no clear consensus on how to best meld these vehicles, said Bill Toner, adding that the company is currently grappling with the question of whether to hire someone to devote specific time to social media.

Predicting the Future
Stating that he’s not an actuary or a meteorologist, Bill Toner explained that the future will only get more expensive for the consumer through property-insurance premium increases due to the many recent instances of Mother Nature’s wrath and the potential escalation of extreme weather globally.
“Obviously, the insurance companies set their rates contemplating catastrophic things, because no insurance company I know of went financially bankrupt or went out of business,” he said, referencing the recent past and its tornadoes, ice dams, freak October snowstorm, and more. “But they found that it was difficult and that, actuarially, they have to cover catastrophes like what we’ve all experienced, because they’re predicting scientifically that it’s going to happen moreso in the future.”
There is no crystal ball for Sumner & Toner to predict the weather, but putting clients together with the best products — and assisting them with their claims should catastrophes, large or small, happen — is the firm’s main mission.
And the effective way they’re varying that mission is proof positive of what’s written on that aforementioned postcard. Sometimes, companies do wind up sharing office space with their competitors, and, in this case, it brought together families, generations, and a shared formula for success.

Elizabeth Taras can be reached at [email protected]

Banking and Financial Services Sections
Principals Say NUVO Has Become a ‘Proven Commodity’

Jeff Sattler

Jeff Sattler says NUVO is on target with its goals for assets, revenue, and gaining respectability in the local banking market.

Jeff Sattler says he feels an attachment to the small-business owners sitting across the conference room table from him, a bond that most commercial-lending officers probably wouldn’t understand.

That’s because he’s been in their shoes.

Indeed, five years ago, he was one of the principals trying to lure investors and amass the capital needed to launch the venture that would become NUVO Bank, which he now serves as president.

“When you’re dealing with a banker, most of them haven’t owned a business — they have to critique the business owner,” he told BusinessWest. “I started this thing with the same mentality as other entrepreneurs — ‘I’m going to do this; there’s a market, and I’m going to make this work.’ And I had the same growth pains, issues, challenges, and fears that any entrepreneur has. I can talk the same language as that business owner.”

This linguistic ability is one of the factors that Sattler and NUVO’s CEO, Dale Janes, believe have contributed to the bank’s steady growth and recent momentum. Like most of its commercial clients, NUVO’s primary objective has been to gain a strong measure of respectability and build a solid foundation for growth, said Janes, adding that, despite being launched just as the worst downturn since the Great Recession was taking hold, the bank has, in his opinion, achieved that goal.

Dale Janes

While other banks rush to add branches, Dale Janes says NUVO will stay with its business model and maintain one location.

“We’ve come a tremendous distance,” he said. “We are now what I call a proven commodity.”

Sattler agreed. “We’re profitable right on plan,” he said. “I don’t want to be the biggest in this market; I want to be the most profitable, and that’s return on assets, return on equity, efficiency ratios … key bank ratios that we want to be leaders in eventually, and we’re getting there now.”

Janes told BusinessWest that the institution’s first four-plus years in business have proven that its basic model — operating through one location with a reliance on technology that would ensure that most clients would rarely see that facility on the ground floor of Tower Square — works, and there is no need to change it.

“Our overhead is so low, we can afford to be aggressive on retail CD rates, savings rates, and the costs of accounts,” he said while citing the main advantages to being small and efficient. “The core of our model is small business, small business, small business — and it’s worked; about a year ago, it really started to kick in.

“With longevity comes credibility,” he continued. “So, more and more now, customers who used to do business with Jeff or with me are saying, ‘these guys are around, and they’re going to be here; let’s go check them out.”

Doing some quick math, Sattler noted that NUVO, which just passed the $100 million mark in assets, has something approaching 1% of the regional market, and is by far the smallest bank in the region. While that number may not sound impressive, he said — while noting that doubling or tripling it would still give the bank only 2% or 3% of a market dominated by huge national and regional players — it is a solid base on which to build.

And as he surveyed the local banking market, especially the smaller, community institutions, Janes, who has been in the business for more than 30 years, sees ample opportunity to grow.

“There is going to be more consolidation within this market; it’s inevitable,” he said with a large dose of certainty in his voice. “And with that consolidation, there will be opportunities for banks with the right products and the right approach to customer service. We’ve positioned ourselves to be one of those banks.”

For this issue and its focus on banking and financial services, BusinessWest looks at how far NUVO has managed to come in four challenging years, and what the future could hold for the institution.


By All Accounts

As he prepared to talk with BusinessWest, Sattler was closing on another small-business loan, giving NUVO just over 80 such clients in its portfolio.

That’s another comparatively small number, especially when put alongside the other institutions with downtown Springfield mailing addresses, but Janes and Sattler both take a ‘glass is much more than half-full’ mentality.

“Every new customer is another dot on the map,” said Sattler, adding that the bank’s approach from the day it opened has been to achieve to measured, smart growth, while also carving out a specific niche in the market — in this case, what would be considered small, or even very small, loans.

And both officers believe the institution has achieved those missions, while also establishing the NUVO brand across Greater Springfield and into Northern Connecticut.

“This is the reason why we knew we were going to be successful — we have a niche,” said Sattler, referring to the small-business loans like the one he closed on that afternoon late last month. “Everyone thought we were going to fail, but we succeeded, because we created that niche.”

Both men said that virtually every bank in the region can write the kinds of small loans that NUVO has made its specialty, but most don’t have the need or desire to do so, and can’t do it as well.

“We’ll look at every single deal, no matter what the industry,” he explained. “I won’t say ‘yes’ to every deal, but if we can’t do it, then nobody can do it.”

Meanwhile, another advantage is the aforementioned ability to “speak the language,” as Sattler described it.

“I appreciate their passion,” he said of entrepreneurs. “They have a vision of where they want to take their company, and I can relate to that. I try to get under the tent with them and say, ‘how are we going to make this loan?’

“They say, ‘Sattler, I’m not talking to you like a banker,’” he continued. “And I’m not; I’m a business owner, not just a banker, who started the same way most of these businesses started.”

Overall, the bank has been “on target” with everything from asset growth to profitability to brand recognition, said Janes, adding that the current momentum has manifested itself in a number of ways.

For starters, there have been roughly 18 months of continued monthly profits, he said, adding that another commercial-lending officer, the bank’s third, was recently hired, and another addition is planned for the first quarter of next year. Meanwhile, the bank is planning another capital raise — the prospectus is currently being finalized — to provide the wherewithal to continue growing.

“We’re doing well against our original plan, and super well against our model,” Janes explained. “We have a lot of focus and a lot of discipline around the business model; we can’t be everything to everyone, and we’re honest about that.”


Balance Statement

Moving forward, Janes and Sattler said NUVO is in the process of scripting a new three-year strategic plan.

When asked what it will likely include, they said, in essence, there would be more of the same that has marked the bank’s four-plus years of existence — with the emphasis on more.

The planned additions to the commercial lending staff — “we’re now building a lending team,” said Sattler — and the capital raise are part of this strategic initiative, noted Janes. Overall, he believes that, given the bank’s steady growth and the current landscape in financial services, NUVO is well-positioned to add market share for the short and long term.

Elaborating, he said there are two trends in the marketplace that are working in NUVO’s favor. The first is a significant shift among consumers, business owners, and investors away from large regional and national banks and toward community banks.

“And why not? They’re just smaller, and they have more flexibility and more options for the small-business customer,” he told BusinessWest. “And we plan to take advantage of that, especially on the investor side, because as we grow, we’re going to need to raise more capital.”

The second trend, although it has slowed in recent years, is a movement toward greater consolidation, said Janes, adding that the many publicly owned regional and community banks serving Western Mass. are both candidates for additional expansion themselves or targets for acquisition. And both scenarios, which will be driven by shareholders and their desire for better returns, bode well for banks like NUVO that can take on customers left wary by such transactions.

“This is a very challenging time to provide a return to your shareholders,” he said of the situation facing the public banks. “Everyone’s had what amounts to a free pass because of the recession, because everyone made bad loans and business slowed down, but that free pass is going to get called in, and banks are going to have to start producing, either a dividend or growth in the market price of the stock.

“People are going to instigate,” he continued, “and get these banks to either perform better on an earnings-per-share basis through the organic nature of their business, or by selling.”

And while NUVO has plans for more lending officers, employees, loans, and assets, one thing there won’t be more of is branches.

“People keep asking me, ‘why don’t you open a branch here?’” said Janes, adding that there have been many suggestions when it comes to ‘here.’

“That’s not who we are or ever intend to be,” he continued. “We will never have a huge branch network, and probably will not have a traditional branch. We will expand our footprint; we will take our model and replicate it somewhere else, in a market where there are a lot of small businesses. That was our intent, and it’s still our intent. We’re not ready for it yet, but our three-year plan contemplates something like that.

“Right now, we just want to dominate where we are,” Janes went on, “and earn our keep in this region.”

Despite its lone location, NUVO has been able to grow its presence and build its brand through track record and word-of-mouth referrals. And with presence and referrals, the bank has opportunities to show what it can do, said Janes, which is an important component in the growth equation.

“Once we get in front of people,” he said, “we’re pretty good at bringing in some business.”


Brand Equity

Looking at the numbers compiled by area banks for assets, deposits, and loans (see pages 38 and 39), Janes and Sattler know they will be looking up at the rest of the region’s banking community for quite some time.

But after four recession-riddled years, the bank is starting to see some real momentum. As Janes said, there is enough statistical and anecdotal evidence to show that the bank is indeed a proven commodity — and that things are truly looking up.


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

Banking and Financial Services Sections
Latest Acquisition Would Take United Bank into Connecticut Market

Richard Collins

Richard Collins says the acquisition of New England Bancshares promises to give United Bank entry into a new and potential-laden market — Connecticut.

Richard Collins calls it “growing into our capital.”
That’s one of the many ways he chose to describe United Bank’s recent announcement that it would acquire Enfield-based New England Bancshares.
Elaborating, Collins, the bank’s president since 2001, said United, like many financial institutions in this region, has large amounts of capital at its disposal, and one of its challenges is to find methods to put it to work in ways that will position the bank for future organic growth, strategic acquisitions, and what he called “continued capital-deployment strategies.”
And he believes this acquisition, the bank’s second major expansion in four years — it merged with Worcester-based Commonwealth National Bank in 2009 — accomplishes all that and more.
For starters, it takes the bank’s footprint into Northern and Central Conn., and, more specifically, into areas with attractive growth potential (more on that later).
“This combination presents a tremendous opportunity to expand our presence in Connecticut, where United Bank currently does not have any branches,” said Collins. “Connecticut is a growing banking market, one we’ve had our eye on for some time.”
Meanwhile, the merger, subject to regulatory and shareholder approval, would also bring the institution to $2.4 billion in total assets, making it the 10th-largest bank headquartered in New England and the largest based in Greater Springfield.
And with that additional size comes strength, flexibility, greater efficiencies, a capacity to do larger commercial loans, and better ability to absorb the higher costs of doing business in an age of greater government regulation, he told BusinessWest.
“The burden of government regulation is becoming greater every year,” he explained. “And a small bank has a lot of trouble staying on top of all the things they have to do to satisfy government regulations; we can take our compliance efforts and spread them over a broader base.”
For this issue and its focus on banking and financial services, BusinessWest looks at United’s latest expansion initiative and what it means for this instiution and its long-term strategic plan.

Branching Out
Collins said informal talks between United and New England Bancshares started a few years ago.
He told BusinessWest that, again, like most banks in the region with capital at their disposal and strategic plans in place, United, which converted from a mutual bank to stock ownership over two stages in 2005 and 2007, has been looking at a number of opportunities for expansion.
“Our board saw opportunities to grow our franchise and expand our brand of banking into other markets,” said Collins, noting quickly that there has been organic growth over the past several years as well. “In going public, we raised a lot of capital, and the idea of having all that capital as a bank is that you grow into it over time.
“And, in essence, that’s what we’ve been doing — growing into our capital,” he continued. “The Worcester acquisition helped us in that regard, and it’s worked out very well for us, but we still have a lot of capital — 17% tangible common-equity ratio, which is a lot more than you need, really — and so we’ve been looking for opportunities.”
And, like the acquisition of Commonwealth National, the New England Bancshares gambit, a $91 million transaction in cash and stock, makes sense on a number of levels, Collins continued, adding that it was consummated after considerable due diligence that determined that United was receiving value for what it was offering, but was not overpaying.
“What I do in these situations is put myself in the shoes of our shareholders — “if I’ve got $91 million to spend, how much should I be earning on that $91 million?” he explained, adding that a detailed assessment concluded that the bank could certainly earn enough to justify that cost.
When asked to quantify why this deal makes sense for United, Collins said a quick look at a map would be a good place to start. It would show that the best opportunities for widening the footprint lay to the east and the south, with the latter being the most attractive.
“We have a branch in Northboro, and if you go north of that, it gets rural very quickly. If you look at Southern Vermont, there’s not much there in terms of real opportunity to grow,” he said. “And we’re probably not going to expand to our west; first, you have to cross the mountains, and then you get to the Pittsfield area, which is pretty heavily banked.
“So looking south made a lot of sense to us,” he continued. “If you look at the demographics of the Greater Hartford area, you see a lot of people there, and many of the communities are growing and fairly wealthy; there are probably four times as many deposits in the Greater Hartford area as there are in the Greater Springfield market. You have people, demographics, and favorable bank deposits — it looks like a place where our kind of banking can take root and flourish.”
Elaborating, he said New England Bancshares offered access to Connecticut markets with more-promising growth potential, meaning areas where large regional institutions, which have taken the brunt of public criticism over excessive fees, hold a good deal of market share.
Specifically, the institution has 15 branches — assembled through some previous mergers and organic growth —that are positioned mostly north and east of Hartford or west and south of the capital city. There are six branches in what Collins calls the southern tier, which stretches into New Haven County, and eight more in the northern tier, which progresses almost to the Massachusetts line and east to Tolland County. The resulting gap is similar to the one United has between Springfield and Worcester.
Beyond geography and specific branch locations, though, New England Bancshares made sense as an acquisition target on several other levels, said Collins, adding that the two banks are similar in many ways, from operating philosophy to loan-portfolio mix.
“They’re a smaller version of us,” he explained. “When it comes to deposits and loan percentages, the two banks are a lot a alike and take the same approach to doing business.”
These similarities should help facilitate the assimilation process, said Collins, who noted that, while there is some degree of apprehension associated with most bank mergers (especially for customers of the acquired institution), this absorption process should go smoothly.
“It’s a matter of making the right introduction,” he explained, adding that the bank will borrow many lessons from its experience in Worcester. “That’s marketing; that’s letters to the customers introducing ourselves and explaining how we do business.”
This communication process will begin several months before the closing and continue right up to that date of conversion and beyond, he continued, adding that the banks share a common data system, which should facilitate the process.
Looking ahead, Collins said that, after the merger has been completed, United will still have “comfortable levels” of capital with which to possibly add branch locations across its now-broader coverage region, perhaps closing those gaps, or pursue other possible acquisitions.
“We should be able to find branch-location opportunities in parts of that territory that are not saturated,” he explained, adding that New England Bancshares has not penetrated Hartford itself or many surrounding communities. “And, conceivably, there could be another acquisition — but right now, we’re focused on New England Bancshares and making this work.”

Interest Bearing
If the planned merger goes through as expected, United will have some impressive numbers to put behind its name.
These include those $2.4 billion in combined assets, $1.7 billion in combined loans, $1.8 billion in combined deposits, and 37 branches in seven counties across Massachusetts and Connecticut.
More important than the numbers, though, will be the capacity they provide for continued growth and a better ability to serve existing customers.
In short, this acquisition provides even more opportunity for the bank to grow into its capital.

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


Spalding Launches NEVERFLAT™ Basketball

SPRINGFIELD — Spalding recently introduced NEVERFLAT™, the first-ever ball with proprietary pressure-retention technologies guaranteed to hold air up to 10 times longer than traditional basketballs. The NEVERFLAT™ basketball, designed by Primo Innovations, is the only ball guaranteed to stay fully inflated for at least one year – with no additional air needed during that period. The basketball, with a suggested retail price of $39.99, hits store shelves in mid-November.

Hampden Bank Opens at Tower Square

SPRINGFIELD — Hampden Bank’s new Tower Square branch office is the seventh in the bank’s branch network and provides a full array of convenient banking and financial services to individuals and companies headquartered at both the Tower Square and Monarch Place office complexes. The 1,000-square-foot facility contains a 24-hour ATM and Night Drop services area, teller and CSR stations, and private banking area. Also, there is space for financial services consultation through the bank’s Hampden Financial division affiliated with The Novak Charter Oak Group and MassMutual. The branch also features plasma screens, interactive kiosks and merchandising walls that inform customers of the latest products and services the bank offers.

Isenberg School MBA Program Receives Top- 10 Rankings

AMHERST — For the second consecutive year, the Isenberg School of Management’s MBA program has received two top-10 national rankings in the Princeton Review’s annual Best Business Schools publication, which ranks MBA programs in 11 strategic categories. In the 2006 edition – the Best 237 Business Schools – the Isenberg School’s full-time residential MBA program repeated last year’s ranking of fourth in the nation in the category “Best Professors.” At the same time, it improved its national ranking in the category “Best Overall Academic Experience,” from tenth to sixth.

3rd Quarter Net Loss for United Financial Bancorp

WEST SPRINGFIELD — United Financial Bancorp Inc., the holding company for United Bank, recently reported a net loss of $173,000 for the quarter ended Sept. 30. The results reflect a one-time after-tax expense of $2.2 million, which was incurred to establish and fund the new United Charitable Foundation. Excluding this charge for the charitable foundation, net income would have been $2.0 million for the three-month period, compared to $1.7 million for the same three-month period in 2004. Since the company’s initial public offering of common stock concluded during this quarter, earnings per share data is not being presented because it is not considered meaningful. For the nine months ended Sept. 30, 2005, net income amounted to $2.8 million compared to $4.3 million for the nine months ended Sept. 30, 2004. The company’s initial public offering concluded on July 11, and raised $74.8 million in the offering, selling 7.5 million shares of common stock at $10 per share.

Paradise City Voted Favorite Arts Festival East of the Rockies

NORTHAMPTON — Paradise City Arts Festivals makes the 2005 list of America’s 10 favorite shows for the second year in a row, with a ranking of #2 nationwide, according to AmericanStyle Magazine. The publication’s December issue reveals their readers’ favorite shows of high-caliber fiber art and craft from across the country. Approximately 300 shows nationwide fit the description for high quality, collectible fine art and craft shows. Paradise City, the only organization of the top five with shows in the Northeast, was the clear first-place winner among gated indoor events. Also, Paradise City’s hometown, Northampton, was ranked #9 nationwide as a small city arts destination. Paradise City, founded in 1995, also was ranked #1 for the best arts festival east of the Rockies.

Belt Technologies Acquires Mississippi Company

AGAWAM — Belt Technologies recently acquired Clark Manufacturing, a belt manufacturer based in central Mississippi. The acquisition will complement Belt Technologies current offerings of steel belts to the robotics, semiconductor, packaging, medical and pharmaceutical industries. Manufacturing from the Mississippi plant will be moved to the Agawam facility where new product lines will be absorbed within the current manufacturing capacity, according to company officials. No terms of the sale were provided at press time.