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WARE — Country Bank recently announced that Tracey Wrzesien, assistant vice President, retail banking officer, is the recipient of its 2021 President’s Platinum Award.

The bank’s recognition program, “CB Shines,” encourages team members to look for coworkers who embody the bank’s corporate values of integrity, service, teamwork, excellence, and prosperity (iSTEP). Within this program, members can receive different levels of recognition: Silver Spotlight, Gold Star, and the President’s Platinum.

“Country Bank’s team members contribute to the bank’s success in so many ways throughout the year, and we are delighted to celebrate their contributions,” said Paul Scully, president, and CEO of Country Bank. “Tracey embodies the bank’s corporate values. In addition, her nominator recognized her contributions to the organization, customers, and coworkers. Our team is extremely dedicated, knowledgeable and committed to delivering the best service to their external and internal customers.”

Banking and Financial Services

Big Is Getting Even Bigger

By Jeff Liguori

 

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

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

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

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

Jeff Liguori

Jeff Liguori

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

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

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

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

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

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

 

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

Banking and Financial Services Special Coverage

Stating Its Case

Tony Liberopoulos

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Dave Glidden with a map of Liberty’s locations

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

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

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

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

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

 

Lending Support

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

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

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

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

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

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

Tony Liberopoulos (left) and Dave Glidden

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

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

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

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

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

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

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

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

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

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

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

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

 

Community Ties

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

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

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

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

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

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

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

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

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

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

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

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

 

Joseph Bednar can be reached at [email protected]businesswest.com

Banking and Financial Services Special Coverage

Making Change

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

Aleda De Maria says PeoplesBank

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

By Mark Morris

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

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

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

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

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

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

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

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

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

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

Glenn Welch

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

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

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

 

From a Distance

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

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

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

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

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

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

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

John Howland

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

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

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

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

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

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

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

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

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

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

 

By All Accounts

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

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

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

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

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

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

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

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

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

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

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

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

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

Economic Outlook

Banking

Donna Boulanger says she doesn’t how the landscape might change in 2021. What she does know is that it changed quite a bit in 2020.

That goes for everything from attitudes regarding online and mobile banking to sentiments on remote working, to thoughts on where people might prefer to live. Overall, she noted, these past 10 months have been a time to rethink how we do things and where we do them. And many of these changes may well be permanent, which will go a long way toward determining what 2021 — and the years that follow — will be like.

“A lot depends on the rollout of the vaccine and the effectiveness of the vaccine,” she said. “There is some pent-up demand, and it’s just a question of how quickly we return to a new normal, because are we ever going to go back to what was normal? Probably not,” said Boulanger, president and CEO of North Brookfield Savings Bank, which has eight branches and serves customers in both Western and Central Mass.

Donna Boulanger

“There is some pent-up demand, and it’s just a question of how quickly we return to a new normal, because are we ever going to go back to what was normal? Probably not.”

“And how much have consumers’ habits changed?” she went on. “Are they going to go back to retail stores? Are they going to go back to restaurants? Will they go back to traveling? They are so many factors in play, and that makes predicting what will happen in 2021 very difficult. There are a lot of moving parts.”

Looking back on 2020, she said it was a period of adjustment — for the bank and many of its customers. Like all financial institutions, North Brookfield Savings Bank had to pivot, as she termed it, when it came to everything from staffing branches — teams would rotate in for two-week periods — to providing much-needed lessons in online and mobile banking to the bank’s generally older customer base.

Overall, Boulanger said, many businesses and consumers adjusted well to the pandemic, and state and federal support played a large role in this.

“In the Western Mass. and Central Mass. area, the loan portfolios held up very well; delinquencies, and I know this is hard to believe, are at record lows,” she explained. “Whether it is the increased unemployment or stimulus checks, our customers have weathered this storm fairly well. But there are certainly pockets, in Massachusetts and across the country, where people are not faring so well.

“We have a lot of customers who have fully recovered,” she went on, meaning they’ve returned to pre-pandemic revenue patterns. “These are generally manufacturers or specialty businesses; they’re not in hospitality, they’re not in retail. The people still being impacted are those in personal service, whether you’re a nail salon, a barbershop, a gym, or daycare facility.”

The bank took what she called a “proactive approach,” calling each and every business customer to see if help was needed, and in what form. Meanwhile, it was active with the Paycheck Protection Program, handling applications not only for customers, but businesses well outside its general service area.

Looking ahead, like others we spoke with, she noted that winter is a slow time for many business sectors, and the next few months could well be tough sledding for many ventures. And beyond those few months, question marks loom about consumer behavior and just how much pent-up demand there will be for some products and services.

But some shifts are already taking place, she said, adding that there are visible signs that attitudes are changing, about everything from where people want to live to how and where they will work.

“There is an outward movement from cities — we see it in our market,” she told BusinessWest. “When I talk to our local Realtors, we see people moving into Central and Western Mass. They’re coming from New York, they’re coming from New Jersey. Is that going to continue? No one knows, but it’s happening now.

“Palmer, Belchertown, Ware … we’re seeing people move there from outside Massachusetts, and I don’t think you would have seen that before,” she went on. “There’s demand for open space because people are going to continue to be able to work remotely. And because people aren’t going to restaurants as much, they don’t need to be in the big city; you’re not going to walk to the local restaurant or the local business.”

The question moving forward is how much permanence can be attached to these changes in attitude and behavior.

“Are these going to be long-term changes, or will people, when they feel safer, return to the cities because of the amenities?” she said in conclusion. “That’s the struggle for all the big cities.”

And that’s just one of the questions, one of those moving parts, that make predicting the future, even the next few years, so difficult.

 

—George O’Brien

Banking and Financial Services

Growing Concern

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

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

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

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

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

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

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

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

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

Banking and Financial Services

Developments of Interest

Richard Kump, president and CEO of UMassFive.

Richard Kump, president and CEO of UMassFive.

As the name suggests, the UMassFive College Credit Union was launched to serve employees at UMass Amherst. But it quickly expanded its mission to the other schools in that region, and then beyond employees of those institutions. Today, the process of expansion and evolution continues, and touches many realms, from new branches to new technology to new member sponsors. In short, those humble beginnings have been left well behind.

Richard Kump has spent his entire career in financial services working for credit unions. That includes a lengthy stint at St. Mary’s Bank in Manchester, N.H.

This line on a résumé leads to a story he likes to tell and has told quite often.

“St. Mary’s was chartered in 1909; it was the first credit union in the country, but they didn’t call them credit unions then,” Kump explained. “It was built out of the French Canadian Catholic parish in the west side of Manchester serving the mill workers. They’ve held onto that ‘bank’ moniker without actually being one. It’s a bit of an identity crisis.

“The one bank in town was owned by the mill owners,” he went on. “They had practiced discrimination; if you were a French Canadian mill worker, you couldn’t get a mortgage from them, because they wanted you on their housing plan, which put you right next to the factory in terrible conditions. And that’s why the credit union was created — so those mill workers could pool their nickels and dimes and lend to each other so they could buy homes.”

While Kump likes relating the story of St. Mary’s, he quickly moved on to one he likes telling even more — the one concerning the institution he now leads as president and CEO — UMassFive College Credit Union, or UMassFive, as it’s known. And it’s a compelling story.

Founded in 1967 to serve employees at UMass Amherst, as the name suggests, it has moved well beyond its somewhat humble beginnings. In all kinds of ways.

Starting with the membership. Indeed, while the credit union still serves UMass employees, and those of the other institutions that make up the Five Colleges — Amherst, Hampshire, Smith, and Mount Holyoke colleges — it also serves their current students and alumni. Membership also extends to UMass Medical School in Worcester, where there is a non-traditional branch, and, most recently, Greenfield Community College.

And UMassFive has extended its reach far beyond what might be called academia, through both acquisition and the addition of several new ‘sponsors,’ as they’re called, including CISA (Community Involved in Sustaining Agriculture), River Valley Co-op, several area communities, and Mercy Medical Center in Springfield, where there is another non-traditional branch.

There are five branches in all, serving more than 43,000 members, said Kump, who became CEO last July. Meanwhile, assets, which totaled roughly $135 million when he arrived in 2000 to serve UMassFive as chief operating officer, are now approaching a half-billion; the institution expects to crash through that barrier this year.

Beyond these various forms of growth, a pattern mirrored by many credit unions over the past 20 years or so, UMassFive has changed in other ways, especially with regard to technology, said Kump, who likes to believe his institution is on the proverbial cutting edge in this realm.

As an example, he pointed to the ITM, or interactive teller machine, in the lobby of the main office just off Route 9 in Hadley. The ITMs, which are becoming increasingly prominent in other markets and are just starting to make their mark in this one, essentially replace ATMs. Customers can use one to talk to a real person (hence the name), conduct a wide range of transactions, and get answers to questions.

“This was a time when many financial institutions were burying their heads in the sand and trying to ride out the recession. Instead, we got very aggressive. We took advantage of those times, and it put us on a very firm setting.”

Beyond the ITMs, the UMassFive lobby is distinct because there are no tellers, at least in the traditional sense, said Kump, adding that each location now has banking specialists who take on what he called the ‘universal agent model.’

These individuals can assist customers with a broad range of banking needs, he went on, adding that this requires additional training and higher compensation than traditional tellers, but these are steps UMassFive is taking to better serve customers in these changing, more technology-driven times.

“What we’ve focused on is a marriage of high touch with high tech,” he explained. “We want to be able to provide the convenience of doing everything at your fingertips; at the same time, a lot of folks need help getting that done, so we want to make sure we have the staff who can help someone who is not tech-savvy.”

Meanwhile, another form of growth has been expansion into commercial products and services and development of a unique and now quite strong niche — the financing of residential solar-energy projects (much more on that later).

And while the present tense is intriguing, when it comes to the UMassFive story, there are some new chapters soon to be written, including a new branch in Greenfield, slated to open later this year, and perhaps some additional acquisitions at a time when they are continuing to dominate the landscape with regard to both banks and credit unions.

For this issue and its focus on banking and financial services, BusinessWest talked at length with Kump about how UMassFive continues to build upon its strong foundation and grow its footprint, in every sense of that term.

Dollars and Sense

When Kump arrived at UMassFive in late 2000 after a stint at Cathedral Credit Union in Manchester, the institution was operating out of cramped quarters in a building next to the Hangar restaurant on University Drive in Amherst.

How cramped?

“My office was a supply closet — literally,” he recalled. “Because the roofs were pitched, to get to my desk I had to bend over to go around to the back of my desk.”

The inconvenience was rather easy to tolerate, he went on, because the institution was building its new home in Hadley at the time, and thus those crawls were to be a temporary nuisance.

The new facility would be the first of many positive developments in this century, one that has proven to be a good one for credit unions — at least those with the size, determination, and imagination to cope with many forms of change, from a host of new regulations to rapidly advancing technology.

As he quickly rehashed his own tenure at UMassFive, as well as that of his predecessor, Kathy Hutchinson, who served the institution for more than four decades, Kump said UMassFive, and all credit unions, for that matter, greatly benefited from both the Great Recession of a decade ago and the ongoing consolidation of the banking industry.

The ITMs installed by UMassFive allow customers to see, and interact with, an employee of the credit union.

The ITMs installed by UMassFive allow customers to see, and interact with, an employee of the credit union.

Elaborating, he noted that, as the recession was escalating and the stock market was collapsing, individuals were looking for a safe place to park their money. And many found one in the local credit union.

“During the early part of the recession, we saw unparalleled growth; we had three consecutive years of double-digit asset growth, including one year with more than 20% growth,” he recalled. “There was a lot of money coming out of the market, and it needed go somewhere safe. Meawhile, there was a lot of national bank disenfranchisement — there were ‘close-your-bank-account’ days and people protesting in front of Bank of America.

“This was a time when many financial institutions were burying their heads in the sand and trying to ride out the recession,” he went on. “Instead, we got very aggressive. We took advantage of those times, and it put us on a very firm setting.”

While this was going on, UMassFive, which has what’s known as a multi-sponsor charter (instead of a single sponsor or employer), as opposed to the more common community charter, was also taking on new sponsors, such as CISA and River Valley Co-op, that have brought many new members — and opportunities — to the institution.

“Some of the sponsors we’ve taken on recently have really been formative to our plans,” he explained. “We’ve found more members through our relationship with CISA than we have through the University of Massachusetts over the last couple of years. That’s because people who can’t join the credit union any other way join CISA, and then they’re eligible for UMassFive.”

While growing membership, the credit union has also recently been expanding its portfolio of products and services, especially on the commercial side of the ledger, specializing in loans for equipment and commercial real estate. The move was a synergistic one, said Kump, noting that many members own businesses or commercial real estate, specifically multi-family housing, and it has created many new opportunities to grow the institution.

“It was symbiotic — we felt we could help our members who had those commercial needs with a level of service we felt could compete very favorably, especially with some of the larger regional and national financial institutions,” he explained. “And at the same time, it develops a wonderful asset for the credit union.”

By All Accounts

Echoing business owners and managers across virtually all sectors, Kump said the pace of change is too great, and the number of potential disruptors on the horizon way too high, for institutions like his to write a traditional five-year plan.

Three years is about the outside for any strategic plan these days, he went on, adding that the latest such document crafted by those at UMassFive doesn’t contain any real secrets — simply ongoing expansion of current initiatives and a focus on continued, sustainable growth, because in the financial-services sector today, size — for banks and credit unions alike — really does matter because of the economies of scale it provides.

The Greenfield branch, a traditional facility, like the one the institution operates in downtown Northampton, will be perhaps the most visible — and costly —avenue of growth, he said, adding that expansion into that Franklin County community is a natural progression for UMassFive and a vehicle for better serving customers such as those at GCC and those in or related to the agriculture sector sponsored by CISA.

“This move has been in the planning stages for some time,” he said, adding that, in recent years, the credit union has been focused on other infrastructure initiatives, such as renovation of both the main office and the Northampton branch. “Now, it’s a matter of looking outward a little bit more.”

This new branch will be like the others the institution operates, he said, referring to the leading of edge of technology.

“We don’t build cookie-cutter branches; we’ve gone through branch metamorphosis the past few years,” he said, referring not only to the ITMs — which are now in drive-throughs as well as branch lobbies — but the personnel staffing these branches.

“We eliminated all tellers more than two years ago, because fewer and fewer of the transactions are coming to the branches,” he explained. “People are using mobile, they’re using online banking … they don’t have a need to come to the branch. But when they do come to the branch, it’s for something important.”

Which brings him back to that ‘universal agent,’ a phrase he uses, although he admits he’d like some better terminology.

“We’ve created a position where the individual has the knowledge that a branch manager would have in years past,” he explained. “They can help someone regardless of what they’re looking for.

“To make all this work, our hiring practices are much different,” he went on. “More of our hires have no banking experience than have banking experience, and what we’ve found works very well for us is that we hire people who are outgoing and care — they just want to help someone else.”

With the changes in technology and hiring strategy has also come a deeper commitment to training, a necessity if the machines and the people are going to properly serve the members, he continued.

“We’ve tripled our professional-development budget over the past three years,” said Kump. “And that’s because we’ve put a big onus on the employee in the branches; they have to know so much. They’re not the specialist anymore.”

Meanwhile, the institution will continue efforts to expand on the commercial side of the ledger and the solar-lending realm as well, he said, adding that UMassFive has already created quite a niche with such transactions.

“In three years, we’ve become the highest-volume residential solar lender in the Commonwealth,” he noted, adding that UMassFive has written more than $45 million in loans covering roughly 1,400 residential, and now commercial, solar projects.

And they’re being written for members across the state, he said, adding that solar installers are recommending the institution to people well outside the 413, many of whom have become members through membership in CISA.

Past Is Prologue

Returning to Manchester, N.H. and the credit union called St. Mary’s Bank, Kump said it was formed 110 years ago to serve the underserved.

“Hopefully, there’s still a lot of that left in that industry,” he said, adding that there’s quite a bit of it at UMassFive.

The institution’s unofficial slogan, put into use by Hutchinson, is “every member, every day.” That’s where its focus is and where it will stay, Kump said, even as it keeps adjusting proactively to new challenges and constant change.

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

Banking and Financial Services

Taking Account

Matt Sosik says branches serve a different role than they used to

Matt Sosik says branches serve a different role than they used to, providing more value but less volume in the age of online and mobile banking.

In this era of rampant mobile banking, opening a physical branch is a different proposition than it used to be, Matt Sosik said. But it’s still an important one.

“At this point in the cycle of our industry, branching has fallen by the wayside a little bit,” said Sosik, president and CEO of bankESB, which recently opened its 11th branch on Sargeant Street in Holyoke — a move that, despite the declining emphasis on bricks and mortar, made a lot of sense.

“We feel we’ve been banking with the people of Holyoke for years and years, so Holyoke is a natural extension of our footprint,” he said, noting that today’s branches are smaller and more efficient than those built in the past, but still must emphasize customer service — something that Tiffany Raines, Holyoke’s branch manager, has said she will emphasize there.

Indeed, online channels do change the dynamics of a branch as a delivery channel, Sosik told BusinessWest, if only because branches simply serve fewer people in person than they used to.

“Customers, as they should, love that technology can improve their banking experience, and we really encourage our customers to use those online and mobile banking products; they’re so robust and provide so much to customers,” he noted. “That said, we’ll never lose our ability to interact with them face to face. We covet that, and when we get our customers in front of us, we certainly take advantage of that and provide guidance to them.”

“Actual in-person branch transaction volume is well off over the past 20 years, so it’s really about building the initial relationships with the customer; that’s what a branch does best in 2019.”

With that in mind, he said, the new Holyoke branch, like any new branch at most banks, is designed to provide value, not volume — a more personalized experience, in other words, for fewer customers each day.

“Actual in-person branch transaction volume is well off over the past 20 years, so it’s really about building the initial relationships with the customer; that’s what a branch does best in 2019,” he went on. “It’s more a source for originating the customer relationship than it is a delivery channel — more for acute problem resolution and consultative conversations.”

Yet, new branches also reflect growth, and bankESB is certainly growing, with $1.3 billion in assets across its 11-branch network in Hampden and Hampshire counties. Meanwhile, its holding company, Hometown Financial Group, also based in Easthampton, boasts $2.1 billion in assets and 24 branches across Western and Central Mass. and Connecticut, with further expansion to come (more on that later).

Banking today, Sosik said, is less about products and “more about how we deliver those products we’ve all become very familiar with.”

Take residential lending, for example. “The mortgage world has lent itself well to the online world, where we can efficiently process a transaction for somebody to buy what is arguably the biggest asset of their life, and we can do that almost entirely online for them — and very efficiently. That’s what technology has done — improved on products we’ve all come to know and love. That’s the difference between 2019 and, say, the 1990s.”

Dena Hall, the bank’s executive vice president and chief Marketing officer, noted that bankESB has the second-highest market share in Hampshire County at almost 22%, and the expansion into Holyoke follows growing name recognition in Hampden County, where it also maintains branches in Agawam and Westfield.

“We’ve seen an increasing level of awareness across the Pioneer Valley, up and down the 91 corridor, which is important to serve customer needs in this region,” she added. “Really, we’re all about meeting customers where they want to meet us. We want them to know we’re a viable option for them.”

Lending Thoughts

To understand the importance of face-to-face relationships in banking, Hall said, look no further than commercial lending, an increasingly important part of bankESB’s business and strategic direction. The institution added three new lenders to its commercial team in 2018, all from larger local banks, in an effort to add more resources to the division and demonstrate the capability to meet the commercial financing needs of businesses in the region. The team now has seven lenders under the direction of Executive Vice President Ryan Leap.

“When you think about how the customer has gotten physically away from us, that’s less so with the commercial business,” Sosik said. “Commercial lending has a lot to do with what we do best — customer service, face-to-face interactions, and building long-term, value-added relationships. For us, it’s a very natural customer-service direction in which to grow.”

The new Holyoke branch

The new Holyoke branch is a physical extension of business that bankESB had been doing in that city for many years.

That growth comes at a time when businesses continue to invest in capital projects, he added.

“We see a lot of things going on in the economy. The economy has such a long and slow build that it’s hard to see it in motion, but take a look back at the past year and years prior, and we’ve definitely seen continuous, slow, steady growth. Thankfully for Western and Central Massachusetts, we see that growth in small and medium-sized businesses coming in and taking advantage of the economy and improvements in commercial real estate.”

At the same time, Hall said, bankESB is building its consumer divisions. “Last year, we hired a new leader for the residential mortgage and consumer loan division with several years of experience in mortgage operations and origination, most recently with Peoples United Bank,” she noted.

In addition, after a year of developing its back-office processing and underwriting area, the bank recently added two new mortgage loan originators and upgraded its online mortgage application so that customers can apply how and when they want, either in person with a loan originator or online.

“With some banks in our market pulling back on their mortgage efforts, we’re excited to make more products and sales people available to the region,” she said.

Sosik agreed. “We continue to build the depth and breadth of the team to handle our growth. That’s generally been our strategic direction when it comes to community lending.”

That’s why developing both sides of the customer-service equation — a more robust online presence and also branches focused on customer service — are equally important, Hall said.

“A lot of customers are doing research online but close the deal in the branch, and we have people ready to serve them,” she told BusinessWest. “Clients want that face-to-face interaction, and we’ve hit a nice balance of being technologically savvy with mobile offerings and very customer-service-oriented, very customer-facing. That’s a perfect fit in this market.”

Mutual Successes

Hall noted that bankESB has received some key accolades of late. In June, it was named one of America’s best-in-state banks by Forbes in a nationwide survey; of the five banks selected in Massachusetts, bankESB ranked second, and was the only bank on that list headquartered in Western Mass.

Understanding the importance of building a bank’s name, its holding company, Hometown Financial Group, continues to grow its franchise and build a separate brand presence in each region. That means three separate banks will operate under the holding-company profile: bankESB, bankHometown, and Pilgrim Bank. The latter acquisition, based in Cohasset, closes this month and adds three branches and $263 million in assets to the Hometown family.

“We have a commitment to mutuality and building those local brands, building market share in each region, then we consolidate and make efficient the back-office and operation side. We think that’s a compelling business structure going forward,” Sosik said.

“Commercial lending has a lot to do with what we do best — customer service, face-to-face interactions, and building long-term, value-added relationships.”

“We’re big believers in our mutual structure,” he continued. “First and foremost, as a mutual company, we’re not owned by stockholders. We choose to be very entrepreneurial, and we run very much like a stock company would from the business side of it. But that mutuality gives us the ability to service customers and the community in ways that stock banks cannot.”

With so many community banks operating in Western Mass., he explained, that mutual structure helps set bankESB apart. “I think that’s a real difference maker for us, showing how much we are committed to mutuality and community banking.”

At the same time, Hall said, the company’s commitment to mutuality and its holding-company structure makes it an attractive partner for other like-minded mutual banks in its current market and beyond.

“We have some exciting transactions in the works, and we hope to be able to announce those transactions within the next 30 to 45 days,” Sosik added. “I think they’re compelling; there will be market interest there. We’re really moving our company forward in a number of ways. We’re excited about that. There’s a lot going on.”

Joseph Bednar can be reached at [email protected]

Banking and Financial Services

Collaborative Culture

 President Paul Scully

President Paul Scully

When Country Bank sought to overhaul its space on South Street in Ware a few years ago — a former mill building that houses about 110 employees — its leaders banked on what they call a collaborative culture, where low cubicles, glass walls, and comfortable, casual meeting spaces all aim to promote better communication and interaction, and a work environment that appeals to the young professionals that comprise the bank’s future.

Walking down the wide main hallway of Country Bank’s headquarters in Ware, you notice certain things. The central, glass-walled café. Conference spaces with names like ‘Integrity Room’ and ‘Prosperity Room,’ reflecting the bank’s values. The occasional beach ball.

Wait, what?

“Someone said to me, ‘what’s the deal with the beach balls?’” bank President Paul Scully said. “Well, we had them at a company event, and they ended up in the hallway. And when you’re walking down the hall and someone’s coming toward you and there’s a beach ball there, what do you do? You kick it.”

It can be an icebreaker of sorts, he went on, as the roughly 110 employees who work in the former mill building on South Street — almost half of the entire Country Bank organization — don’t necessarily all know each other. But it’s also, well, kind of fun.

“For people who visit, it’s unexpected,” said Shelley Regin, the bank’s senior vice president of Marketing, who estimated about 40 such balls reside somewhere in the building. “Normally, the hallway’s full of beach balls, but they make their ways into the offices, too.”

While fun to kick around, Scully said, the balls also promote interaction, a concept which was, frankly, the driving force in a recent, multi-year renovation of Country Bank’s main office. It’s the reason cubicles were lowered, solid walls were replaced by glass, and some of the gathering spaces feature couches rather than traditional chairs.

“When we moved in here 13 years ago, everyone had a cubicle as tall as me, and you couldn’t see one another,” he told BusinessWest. “That didn’t foster good collaboration. And there was no daylight because the work stations were so tall, they blocked the daylight.”

Scully had a catchy description of what the renovation aimed to reflect — “Google comes to Ware” — and explained why that type of culture is important.

One of the casual meeting spaces at Country Bank

One of the casual meeting spaces at Country Bank, is meant to spur creative thinking in an informal setting.

“We love the fact that we are in a mill town and that we’re a flourishing business here. But how can we attract the talent we need? We’re a $1.6 billion bank with 14 locations and growing — and we need to have Millennial talent to help move it forward. And they’re not going to want to hide in a cubicle and come out twice a day, for lunch and to leave. We said, ‘let’s really look at what is happening in workspaces that’s breeding collaboration and fun, and people just working together as a whole unit.’”

Like the low cubicles, the glass promotes more openness as well, Regin said.

“They put me behind glass walls so they can keep an eye on me,” Scully joked, before noting that his office used to be tucked away in a corner, as opposed to its current spot at the end of that main hallway. “You never went there unless you had to. It didn’t do anything for collaboration, nor did it allow me really to be a part of things. Now, right here, at my desk, this is the hub.

“We’re a $1.6 billion bank with 14 locations and growing — and we need to have Millennial talent to help move it forward. And they’re not going to want to hide in a cubicle and come out twice a day, for lunch and to leave.”

“The glass just opens everything up,” he went on, “and it supports the philosophy that we’re all equal components of the organization, and it’s not like you have to be behind a closed wall to do important things. We do have shades that come down. But if you put the shades down, everyone’s going to want to know what’s going on in Paul’s office, so you might as well just have them up and let them see.”

For this issue’s focus on banking and finance, BusinessWest paid a visit to Ware to learn how Country Bank is using its thoroughly 21st-century space — and several touches of fun that go well beyond the stray beach ball — to better position itself as an employer of choice at a time when competition is high for young talent.

Milling About

When Country Bank moved its headquarters in 2005 from Main Street to 44,000 square feet of former mill space on nearby South Street, it had options to relocate in another town, but the bank’s leaders felt it important to remain an economic engine in the community it had called home for more than 150 years.

“We looked at adding onto the main office, which was a Band-Aid approach, and then this fell in our lap,” Scully said of the former American Athletic Shoe plant, famous for its ice skates. “It was a very large employer, and had maintained the building meticulously. We have a lot of space here. You could easily say we could use half of it, but it works well for us; it allows us to have a big area for innovation and technology, and we have a whole education facility as well.”

The first renovation, to make the space suitable for bank operations, took place 13 years ago, and included those high cubicles and some decidedly unattractive color schemes and décor.

“Everything was kind of a pale yellow,” Scully said. “I started to walk around one Saturday and said, ‘this is awful. The color tones aren’t energizing. You can’t see anything. Let’s bulldoze it down and make it something where people are going to come in and say it’s is a really cool space.’

“It’s a great company, too, which is more important than being a cool space,” he was quick to add. “But you have to have those two together in order to really have it become a destination.”

As opposed to 2005, however, the latest renovation, which began around 2015, took place while people were working in the building — and often shifting around to accommodate the changes. “I moved five times in a year,” Regin said.

One of the casual meeting spaces at Country Bank

One of the casual meeting spaces at Country Bank, is meant to spur creative thinking in an informal setting.

“Really, the key piece was that group that moved into the first section that was done,” Scully recalled. “They were going to make it or break it for us, because if they said, ‘oh, it’s awful,’ we were doomed. Like anything else, when you say you’re going to change something, people immediately think of 1,000 reasons why it’s not going to work. It’s like Who Moved My Cheese? — ‘you’re throwing me off, you didn’t ask my input.’

But when that first group of employees settled in, they were more than satisfied. “Within the first week, they invited everybody in the building for brunch on a Friday because they were so excited about their space. We didn’t pay them for that. I think it spoke to just how much they loved it.”

The renovation stretched over two years because of the need to work around each department. In addition to the collaborative elements, the building also features a conference center with state-of-the-art multi-media equipment, an expansive IT space, and a number of small activity rooms. A gym was considered at one point, but Scully worried that it might turn into wasted space if interest waned, and besides, there’s a gym around the corner that Country didn’t want to siphon business from.

He had reservations about the central café as well, but that has proven to be a big hit. The fridge is stocked with fresh fruit all week, and Fridays feature a brunch with pastries or a yogurt bar. Then there are the Friday-morning games, like Hangman or Pictionary, that began with a few employees sneaking away from the brunch.

“We would all be hanging in the café, and one of the departments would go in a conference room and close the doors every Friday, and that wasn’t really working with me,” Scully recalled. When he found out they were using the short morning break to play games, however, “I said, ‘how about if you do that for everybody?’ They said, ‘really? We can do that?’”

bank based in an old mill building.

Paul Scully says visitors are often surprised to see a bank based in an old mill building.

So now, employees get an e-mail telling them what that Friday’s game is, and anyone is welcome to join in. It’s as much a way to get people talking and collaborating as are the small meeting spaces decked out with couches.

“When you go into a conference room, so often people think there’s a protocol of behavior, in the way you interact with one another,” Scully said. “It’s different when you’re sitting on a couch, bouncing ideas around. That’s what we really wanted to do — have it so people can think in an innovative fashion and look at things totally differently.”

Have a Ball

If visitors and new employees are surprised by the culture being fostered inside the building, he added, the exterior can be unexpected, too.

“I had a gentleman come in last week, and I explained, ‘OK, we’re in a mill building. And you’re going to think, this can’t be it. But you’re in the right place.’ And he said to me, ‘Scully, you’ve explained to us your building before, but this is not the typical bank,’ and I said, ‘at many levels, we’re not the typical bank.’ And that’s fine with us.”

He recalled speaking with someone who had also renovated a mill some years ago. “When I explained about the beach balls, he said, ‘beach balls?’ I couldn’t decide at that time whether we had just lost his confidence in us as a bank or not. But that wasn’t the case at all. The next day, I Federal Expressed him a bunch of beach balls and got a text from him the following day saying, ‘where’s the pump?’ I have every reason to believe those beach balls are flying through the air at his office as well.”

Banking, admittedly, has a staid reputation, and it’s not necessarily a field young people get excited about, he noted. But it is an industry where the culture is changing, and banks with an ear toward what Millennials prefer — when it comes to collaboration, flexibility, and even fun — will have an edge in attracting them.

“We would all be hanging in the café, and one of the departments would go in a conference room and close the doors every Friday, and that wasn’t really working with me.”

“This isn’t about a space,” he said. “It’s about the present and the future. Clearly, my generation is the minority this building, which is great. The Scully generation can’t be the generation that dictates how we’re going to do business. We want to be able to attract young talent and then unleash them, and let them think about how to do things differently.”

In that sense, the physical space is critical, Regin said. And it’s working. “A few years ago, most of our people who worked here were very local — 20 minutes to a half-hour away — and now they’re coming an hour. When they come to this space and realize what Country Bank has to offer, they’re willing to travel that hour, or even longer.”

In a job market where banks have to compete for talent, she added, Country Bank has plenty to offer when it comes to culture. “When people walk in here and see there’s a collaborative atmosphere, that’s important. That’s what people are looking for, especially the Millennial segment — they want to be at a place where they feel valued and there’s room for growth. It’s a destination, not just a job, where they sit in their cube all day and don’t see anyone.”

Scully agreed. “It’s important to have a place where, if someone is comparing their options, hopefully they say, ‘hey we like the option of coming here.’”

Joseph Bednar can be reached at [email protected]

Banking and Financial Services

Expanding the Footprint

Glenn Welch

Glenn Welch

Although many Freedom Credit Union members have ties to West Springfield, Glenn Welch said, the institution has never had a physical branch there.

But that will soon change, following the announcement that Freedom has agreed to a merger with West Springfield Federal Credit Union (WSFCU), bringing the West Side institution under the Freedom umbrella.

“This is a tremendous opportunity to extend our products and services to West Springfield, an area where we do not have a branch but where many of our members live and work,” said Welch, Freedom’s president and CEO. “We promise our members accessibility to us, whether it’s at a branch location or through mobile banking. This merger delivers on that promise.”

Freedom, which is headquartered in Springfield and serves members in the four counties of Western Mass. with 10 branches, was originally chartered as the Western Massachusetts Telephone Workers Credit Union in 1922 and renamed in 2004. It currently has $491 million in assets with 28,000 members who live, work, or attend school in Hampden, Hampshire, Franklin, or Berkshire county.

West Springfield Federal Credit Union, which was initially chartered in 1960 as the West Springfield Municipal Employees Credit Union before its name change in 2003, has nearly 3,000 members and more than $29 million in assets.

Welch noted that WSFCU members will have access to many new products and services, including member business lending, use of 55,000 surcharge-free ATMs across the worldwide Allpoint Network, and robust mobile-banking products and services. All employees of WSFCU will become part of the Freedom Credit Union family. The West Springfield Federal Credit Union location will remain open at 58 Union St. and conduct business as Freedom Credit Union.

“This is a tremendous opportunity to extend our products and services to West Springfield, an area where we do not have a branch but where many of our members live and work. We promise our members accessibility to us, whether it’s at a branch or through mobile banking.”

“The additional products, services, and opportunities available to both our members and the employees who serve them is a win-win proposition,” said Ann Manchino, manager of West Springfield Federal Credit Union. “We are excited for a new chapter in our history and to be part of the Freedom Credit Union family.”

The merger will require regulatory and member approvals, and is anticipated to be complete by the end of 2018.

Pending regulatory approval, Freedom Credit Union will have 11 total branches, including three offices in Springfield and locations in Feeding Hills, Ludlow, Chicopee, Easthampton, Northampton, Turners Falls, and Greenfield.

Credit unions are cooperative financial institutions owned by their members. As a not-for-profit organization, Welch noted, Freedom Credit Union returns its profits to its members in the form of high rates on deposit accounts, low rates on loans, and low or no fees for its services.

Banking and Financial Services

Giving Some Insight

By Terri Judycki

Terri Judycki, CPA, MST

Terri Judycki, CPA, MST

The Tax Cuts and Jobs Act (TCJA) has resulted in many changes for taxpayers. One area in particular is charitable giving.

For those who regularly make charitable contributions, changing philanthropic giving habits may result in greater tax benefits. This article will explore various strategies for maximizing the tax benefit of charitable giving under the new law.

The TCJA increases the standard deduction to $12,000 for a single taxpayer and $24,000 for a married couple filing a joint tax return. In addition, the itemized deduction for taxes has been capped at $10,000 for all combined state and local tax payments. The Congressional Budget Office estimates that these changes will reduce the number of taxpayers who itemize deductions by more than half.

To maximize the benefit of the higher standard deduction, consider bunching charitable contributions in alternating years. For example, if a married couple with no mortgage ordinarily gives $12,000 to charity each year, they will likely take advantage of the $24,000 standard deduction ($12,000 to charity plus $10,000 in state and local states is less than the $24,000 standard deduction). If, instead, they give $24,000 every other year, they will use the $24,000 standard deduction in the ‘off’ year and $34,000 in itemized deductions in the year with the gifts ($24,000 charitable contributions plus $10,000 state and local taxes), resulting in lower taxable income without any increase in cash expenditures.

From the charity’s perspective, though, this could leave some budget challenges.

Another way to bunch deductions without bunching the charities’ income is through the use of a donor-advised fund (DAF). DAFs are funds controlled by 501(c)(3) organizations in which the person establishing the fund has advisory privileges as to the ultimate distribution to charities.

In our example above, the married couple might establish a DAF with $24,000 in one year and direct or ‘advise’ that donations be made to specific charities over time. Amounts used to establish the DAF are deductible charitable contributions when transferred to the sponsoring organization.

“For those who regularly make charitable contributions, changing philanthropic giving habits may result in greater tax benefits.”

Whether the idea of bunching appeals to you or not, don’t overlook the benefits of gifting appreciated stock to charity. The stock must have been held for more than a year to take advantage of this planning opportunity. The charitable deduction is the fair market value on the date gifted. Gifting the stock instead of cash avoids income tax on the appreciation.

For example, if a taxpayer wants to make a gift of $10,000 to a charity and sells stock worth $10,000 for which he paid $7,000, he would have a $10,000 deduction and $3,000 taxable gain. If, instead, he directs his broker to transfer the stock to the charity, he is still entitled to a $10,000 deduction, but does not report the $3,000 gain.

Finally, taxpayers age 70½ or older have another option available. An individual who is 70½ or older on the transfer date can direct the trustee of his IRA to distribute directly to a qualified public charity. The distribution is called a qualified charitable distribution (QCD). The amount transferred counts as a distribution for purposes of meeting the minimum distribution requirement but is not included in the taxpayer’s income.

There are a few requirements. The charity cannot be a private foundation or a donor-advised fund. No more than $100,000 can be donated by an account owner each year. The gift to the charity must be one that would have been entirely deductible if made from the taxpayer’s other assets — for example, the donor should obtain adequate substantiation from the charity, and the donation should not be one that entitles the donor to attend a dinner, play golf, or receive any other benefit.

In our example above, the couple who makes a QCD from IRAs for the $12,000 each year reduces taxable income by $12,000 and still uses the standard deduction.

Another possible advantage is the effect the reduction may have on other taxable items. Depending on the taxpayer’s total income, reducing adjusted gross income could result in reduction of the amount of Social Security benefits that are taxed, an allowed loss from certain real-estate rentals, or a reduction in the net investment income tax (if the amount of excess AGI exceeds the net investment income).

Reducing income may also result in lower Medicare premiums that are based on income for higher-income taxpayers. In addition, some states do not provide deductions for charitable donations, but do follow the federal treatment of excluding the QCD from income.

These changes may result in tax savings that could be used to make an even larger donation to a favorite charity.

Terri Judycki is a senior tax manager with the Holyoke-based public accounting firm Meyers Brothers Kalicka, P.C.; (413) 322-3510; [email protected]

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]

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