Many Visionaries, One Voice
It all began with an impending retirement, a critical dinner meeting, and a realization that two groups that seemed like competitors were actually kindred spirits.
It was 1991, and Community Bankers of Pennsylvania President Frank Pinto, Shumaker Williams attorney Keith Clark, and Bob Rosenberger of the Pennsylvania Association of Savings Institutions (PASI) met at the elegant West Shore Country Club in Camp Hill, PA to discuss what seemed like an unlikely marriage. With Rosenberger’s impending retirement from PASI after many years of service, a forward-thinking Pinto saw the opportunity to unite and grow.
Fueled largely by his planning and vision, and with the enlightened guidance of both boards, the marriage finally came together in January 1992, and it has been a fruitful union ever since.
This month, as PACB toasts the silver anniversary of this unique, visionary union, the many voices who have spoken through its “one voice” took the time to remember the milestones and the journey to a quarter-century.
A now-retired Willard Snyder was past Chairman of the Community Bankers of Pennsylvania at the time of the 1992 consolidation.
Tom Bailey of Brentwood Bank had just gotten married.
Jon Conklin of Woodlands Bank was still in junior high school.
Although today, they are all at different ages and stages of their careers, they see the union as remarkably smooth, successful and crucial to weathering today’s storms. The industry’s journey has often been a bruising one these past 25 years. While the wedding was a more glamorous affair, the marriage faced stressor after stressor. Through it all, PACB has been a loyal protector and partner to its member banks.
To trace the storied life of PACB, the tale really begins in post-Civil War days.
It was 140 years ago when the Pennsylvania Association of Savings Institutions formed in 1877, during an era of post-Civil War Reconstruction often referred to as the Gilded Age.
1877 was also the backdrop for violent wars over land between the Native Americans and the U.S. Army, a long and contentious railroad strike, and Pennsylvania’s own infamous Molly Maguires.
But even in the late 1800s, community bankers did what they still do best: they built homes and businesses, saved dying communities and spoke truth to power.
The forerunner to PACB, the Community Bankers of Pennsylvania, was formed many years later, in 1973.
As one of the architects of the synergistic new PACB, the iconic Frank Pinto called the past 25 years “spectacular.” He served as the charismatic President and face of the community banking community from 1986 until his retirement in 2012, when Nick DiFrancesco took the reins.
But many skeptics emerged when the 1992 consolidation of equals first occurred.
It was deemed the unlikeliest of marriages: the Capulets and the Montagues, the Beauty and the Beast, green eggs and ham. In fact, then-Chairman Snyder remembers, the national organization called and asked, “What the hell are you guys doing?”
They feared that the thrifts’ bad loans would become PACB’s albatross.
Pinto recalled that when he first joined the Community Bankers in 1986, his former boss, the late state Sen. Ed Holl, then-Chairman of the Senate’s Banking and Insurance Committee, warned him dubiously, “Why are you going to the community bankers? The little guys will be out of business in six months.”
Sen. Holl proved to not only be wrong, but the consolidation that Pinto helped engineer became a model for the nation.
The union was “precedent-setting,” Pinto explained.
At that fateful Pinto-Clark-Rosenberger meeting in Camp Hill, he said, the thrifts and community banks examined their core missions.
“We weren’t enemies, but we weren’t exactly partners,” Pinto said of the odd alliance.
“Our common denominator was, we were both very community-oriented,” Pinto said.
The new association’s slogan, which stuck for years, was born: “Pennsylvania First.”
For the first six years, the two groups rotated leadership each year.
Pinto said, the proof of the consolidation’s –and the organization’s – success, was that not one piece of legislation was passed to damage the industry significantly in 25 years, proving the old adage that history is not just what happened, but what didn’t happen.
Governors did not balance the state budget on the backs of community banks, nor raid them in a devastating way. They didn’t raise the bank shares tax, fees, or surcharges to excessive levels. And no matter what came at them, a member bank was never alone.
“Everyone involved in the union is like family to me,” Pinto said. “They’re salt of the earth.”
Like a proud father, he was driven to protect those first believers.
One of the earliest, and happiest, consequences of the union was the addition of so many strong, smart women leaders, who came from the thrift industry into PACB, Pinto remembers.
Snyder said, with understated modesty, “We became a very effective lobbying group when we consolidated.”
Pinto remembers meeting with U.S. Rep. Paul Kanjorski in Washington, D.C. at a high point in his tenure. The goal was to give the congressman a memorable demonstration of the excessive morass of “absurd” regulations they must follow in order to process a mortgage. The plan was to stack a pile of papers on a table and have them slide onto the congressman. But the execution was foiled when the pile was so heavy that they couldn’t even lift the table. That was in the late 1990s, before even more regulations were piled on.
Pinto thinks the group clicked because, “We reinvested in the state. That’s how we thrived.” Community bankers were not out selling loans on the secondary market. And that reinvestment created critical mass.
What Lies Behind Us
The union was a product of the times and the forces of political, economic and social change.
In January 1992, George H.W. Bush was president, Kristi Yamaguchi twirled her way to the top as the U.S. women’s figure skating champion, the space Shuttle Discovery was launched into space, and the Americans with Disabilities Act went into effect. That same tapestry of art, beauty, family, exploration and inclusion also factored into PACB’s creation and mission.
Facebook and Fitbit were nowhere to be seen, and Michael Jackson and Boyz II Men topped the charts.
In March 1877, when the Savings and Loan Association was founded, Rutherford B. Hayes became President of the United States in the nation’s much-vaunted “centennial election.” He succeeded Ulysses S. Grant, forged out of the “Great Compromise” in an uncanny historical flashback, when Samuel J. Tilden won the popular vote, but Hayes won the electoral vote.
Later that year saw the Molly Maguires hanged in the Carbon County Prison, a turbulent railroad strike that led to rioting in Baltimore and Pittsburgh, Billy the Kid started his homicidal run, and wars between the Native Americans and the government over land, when many tribal leaders refused government orders to move to a reservation.
Fast forward 100 years. Ed Molnar, former CEO of Harleysville Savings Bank, remembered the pre-consolidation environment of the 1980s. In 1981, inflation was soaring and then-president Ronald Reagan realized it had to be addressed in order for economic prosperity to return to the country, he said. Unfortunately, the savings and loan business was not structured to withstand the high interest rates necessary to drain the inflation problem.
According to Molnar, savings institutions were primarily long-term home mortgage lenders. Therefore, most of their assets had fixed interest rates of seven percent and lower while they had to pay market interest rates to retain their customers’ deposits. Many savings institutions were forced to either merge or be taken over by the FSLIC (which later became part of the FDIC).
“As the number of savings institutions in Pennsylvania dwindled, our state trade organization began to consider how we would remain relevant,” Molnar said.
Citing the Rosenberger retirement, he said, “In a lot of ways, a union made sense for both organizations; however, there were certain historical obstacles that would have to be overcome.”
The commercial bank charter had for years permitted commercial banks to make commercial loans as well as auto, mortgage, home equity loans and more. Savings institutions had only recently been permitted to make these types of loans, creating competition that did not exist prior to 1981. Also, there were deposit rate controls for all financial institutions prior to the 1980s, but the savings institutions were permitted to pay ¼% extra for savings deposits, creating a competitive advantage for savings institutions. Also, savings institutions were not permitted to offer checking accounts to their customers prior to the 1980s, giving a competitive advantage to the commercial banks.
Ironically, an ongoing battle still rages because credit unions do not pay federal income taxes, Molnar said. “This same thing was the biggest source of irritation to the commercial banks during the 60s and 70s as savings institutions did not have to pay federal income taxes on all of their income,” Molnar said.
This, of course, changed so that savings institutions both pay federal income taxes on their income today. “As the old saying goes, there is nothing new under the sun.”
“And so, the executive committees of both state organizations got together and started talking,” Molnar recalls. “What we found first of all was that a certain trust was established between us as we discovered that we weren’t so different.”
The first group of individuals who met were, from the savings institutions, Frank Felton, CEO of First American; Matt Welde, CEO of Commonwealth Federal; Bob McCarthy, CEO of Parkvale Savings Bank, and Molnar. The commercial bankers were Willard Snyder, CEO of New Tripoli; Jack Ord from Hallstead, Paul Richart from Bloomsburg; and Keith Clark, attorney from Shumaker Williams.
Bob Rosenberger and Frank Pinto were important figures in bringing the two organizations together, Molnar acknowledged.
“It should be pointed out that neither of the organizations had to merge. Both had cash balances and assets and a sufficient number of members to continue for many years. But, the executive committees from both organizations put aside their differences and saw that a combined organization would represent both industries from a position of strength,” Molnar said.
“One of the huge challenges during the 90s was the funding of the FDIC. The FDIC had been depleted from the failure of so many institutions during the 80s and early 90s. PACB played a major role in making this happen and, of course, the entire industry has benefited ever since,” Molnar said.
“There were never any regrets among the members that the consolidation took place,” Molnar said. “It was always positive throughout the years that I was actively involved. By bringing the two organizations together, we were able to provide a united front to our elected representatives. As I recall, we were the first state in the country to bring commercial banking and the thrift industry together as one trade association, so yes, it was unusual. Soon, other states began to follow suit.”
The Molnars enjoyed attending the annual conventions and “marveled at how Frank Pinto seemed to know everyone by name.”
“Personally, getting to make friends with our commercial banker peers was a highlight for my wife and me. From PACB’s standpoint, I would say that the first highlight was the union going so smoothly and successfully. The second highlight for me was the success that we had as a trade organization with getting the FDIC recapitalized in the later part of the 90s.”
Molnar served as CEO of Harleysville Savings Bank from 1967 until 2007 and will be retiring as Chairman of the Board and director of the bank on January 25, 2017 after 50 years.
He had asked for the insertion of a mandatory retirement age in the bylaws for directors back in the 70s and “now it is my turn,” he said.
When asked to recall the major accomplishments of PACB, Willard Snyder said, “It was a major accomplishment that we just pulled together.”
And like the popular adage by Henry Ford, “Coming together is a beginning; keeping together is progress; working together is success.”
Another retiree who helped the PACB consolidation, Snyder retired from his bank after 52 years, spending his entire career at only one bank.
“We live in these communities. We go to church with them. We are in the same fire company as them. That’s a big plus,” he said in a recent phone interview.
He now sees today’s paperwork through the eyes of his banker-son. They both deem it “horrendous.”
He remembers, decades ago, a farmer knocking on the front door of his house at 4 a.m. to see if he could secure money to buy a farm. The farmer was up early for milking time. Snyder approved the loan at those pre-dawn hours. That doesn’t happen anymore.
But not everything was rainbows and roses.
Through the years, PACB has weathered many threats to community banking. The industry is still threatened by the impact of the Wall Street meltdown in 2007. Dodd-Frank hit community banking hard, and PACB defended the community banking industry from the worst policies threatened by Congress, today’s President and CEO Nick DiFrancesco said.
Past Chairman Andy Hasley, CEO of Allegheny Valley Bank, echoed those sentiments.
Reflecting on the past 25 years, he said, “As the pendulum swings, so does industry profitability, regulatory environment and capital markets. I thought when entering the banking business over 30 years ago, I was entering a stable, conservative business that consumers had complete faith and confidence in. That has all turned upside down as a result of the unscrupulous behavior of a few large banks and overreaction by the federal government.”
Pinto sees the main threats to bankers today as the avalanche of regulations, the urge to consolidate and the lack of succession planning. At the beginning, 300 community banks were members of PACB. Now there are less than 100 due to consolidation.
Some “Young Turks” job-hop from bank to bank, where in his day, bankers would spend their whole life at one bank and were “so wedded to the community.”
“The next generation doesn’t know what a bank is,” Pinto said. “We combined high-tech with high-touch.” He embraces the move by many progressive banks to reach out to millennials. It is a delicate balancing act, however, as banks must work to keep seasoned customers, who still write checks, while reaching out to tech-savvy millennials.
Tom Bailey, President/CEO of Brentwood Bank, said, “The past 25 years have been somewhat of a blur. I have seen interest rates rise but mostly fall, industry consolidation has reduced the number of banks but ushered in a wealth of new competitors and commoditization, but most of all, I have seen the slow recognition that there is a difference and people are appreciating community banking.”
“PACB along with its national partner ICBA have worked tirelessly to be in front of our representatives explaining the real-world impact proposed legislation will have back at home. This comes from years of nurturing relationships and PACB staff experience. 25 years ago, I probably didn’t appreciate this as much as I do now. While we all know Dodd-Frank and Sarbanes–Oxley, there are countless other proposals that never made it to the floor because PACB was there to snuff it out before it got started. PACB has done a great job of knowing when to hold them and when to fold,” Bailey said.
Tom Bailey married his wife 25 years ago, when PACB married the thrifts.
In 25 years, they raised two healthy children. In 2009, he testified before Congress on FASB’s proposed rule on Mark-to-Market Accounting.
Bailey said, “When I think of PACB, I think of past men and women who have worked for and served PACB (both PACB employees and board members). Time and time again, they have risen to the challenge, whether it be political, regulatory, technology, educational or economic to keep Pennsylvania’s banking industry strong.”
He especially sees as a highlight the change in how FDIC insurance was calculated based on a bank’s assets and capital rather than just deposits.
The Shrinking Number of Bank Charters = the Rising Role of PACB
The declining number of bank charters in America is evidence that the mission of PACB remains relevant and necessary, according to DiFrancesco.
Fred Henrich, President/CEO Coatesville Savings Bank, and current PACB Chairman, agrees.
“I’ve seen a lot of industry consolidation. The community banks either grow, merge, and are no longer community-based, or they are acquired and completely cease to exist. PACB has had to, and continues to, adapt to its changing membership base. Going back eight years or so, the whole regulatory environment took a decided downward turn. The Dodd-Frank-related rules and restrictions caused compliance departments to expand tremendously, pushing costs higher and taking from our ability and desire to lend money. You can’t lend if you don’t have capital, and compliance costs eat into capital. It is a downward spiral and a recipe for disaster. This is one of the reasons the country’s economy is in the shape it’s in.”
As chairman during this anniversary year, Henrich said, “I’ve been given the opportunity to meet with other community bankers across the state, to network, to discuss real-world issues. This year’s election process and results have generated a number of conversations and questions. I’d encourage all of our members to get to know their representatives and to help push the community bank message. If change is going to happen, it will have to be in the next two years. Community bankers cannot afford to sit on the sidelines hoping somebody else will make changes for them.”
He urged bankers to “continue efforts to identify what the organization could, should, or must look like with an ever-shrinking number of members. Identify other avenues and channels that will provide the necessary funding to support our advocacy efforts. The next 25 years for PACB will be harder than its first 25,” Henrich predicted.
“The changing country, the changing industry, and the changing membership and its employees will require creative solutions and thoughtful consideration.”
The Lender of Choice for Small Business
A recent FDIC report identified community bankers as the lender of choice for America’s small businesses.
Andy Hasley, President/CEO Allegheny Valley Bank and former PACB Chairman, said that this is because, “Small business lending is some of the most complicated lending banks can underwrite. Many times we are dealing with ‘less than perfect’ information and unproven business ideas. So it is the character of the borrower that the community banker so often times relies on to gain confidence in the opportunity. Community banks take the time to listen and understand the needs of their customers and craft solutions that meet the needs of the individual borrower. Larger banks simply do not allocate the right resources to care for these customers,” Hasley said.
Tim Snyder, CEO of Fleetwood Bank, has been in banking for a little more than 18 years. “Each year seems to go faster than the one before, but that isn’t any different than life in general. While there are challenges that make each day different, it is very rewarding being part of a community bank that is closely tied to the market we serve. It is the ability to navigate through the more challenging times with a focus on our customers that sets community banks apart from the larger national organizations.”
Snyder sees community banks as the small businessperson’s best friend because, “Decisions are made by people who are local and understand their customers. We live and work in the markets and often patronize those businesses that are our customers. That is different than credit decisions being made by someone outside our local area that might not understand the local environment and economy.”
Community Banks Pay It Forward
While banks are the go-to for business, community banking is more than just dollars on a ledger, PACB’s mission underscores. Community bankers make a very conscientious attempt to support local community efforts and contribute as stellar corporate citizens.
Jon Conklin, President/CEO Woodlands Bank and PACB’s Secretary/Treasurer, said that he has been in banking for a little over six of PACB’s 25-year life span.
“It has definitely been a challenging environment since I came into the industry at a time when the regulatory hammer was just starting to fall, and it hasn’t abated since. I often tell people that my relative newness is somewhat of a benefit in that I never knew any other environment. I’ve only ever operated within an environment that was non-stop regulatory onslaught, so in my case ignorance is bliss in that I’ve never known any different,” Conklin said.
Over the course of PACB’s life, Conklin has graduated high school, gotten married, earned his CPA license, become a father, got hired as a CFO at Woodlands Bank, and then was promoted to CEO at the beginning of 2013 – during what he has termed a “crazy ride.”
“Their ability to have a highly successful transition at the top from Frank to Nick has allowed them to continue to be successful in a landscape of shrinking membership but also at a time when their advocacy efforts for community banks have never been more valuable,” Conklin said. “The ability of the organization to continue to adapt and thrive and to add high quality individuals to their ranks has been outstanding,” Conklin said.
“Corporate citizenship is important because that’s one of the cornerstones of community banking,” Conklin said. “The community is one of the most critical stakeholders for all community banks in addition to its customers, its employees, and its shareholders (for a stock bank). We exist to make our communities better places, whether it be through our lending function or through our charitable efforts and community outreach. I think it’s pretty difficult to call oneself a ‘community bank’ if corporate citizenship is not a top priority in the mission statement.”
Conklin explained that, “Woodlands Bank has concentrated on being a true partner to the communities in which we operate. We look to support local not-for-profit organizations through charitable giving, bank-organized volunteering efforts, and the individual efforts of Woodlands employees who serve as volunteers and board members of those organizations. Woodlands Bank also looks to promote those organizations through our Facebook page and other marketing efforts. And as any community bank, we feel that our financing of small businesses and individuals provides a community benefit given that our close-to-the-street vantage point allows us to have our finger on the pulse of the communities and an intimate feel for the borrowers and their businesses when making those lending decisions.”
What Lies Ahead of Us
What will the next quarter-century –or century– look like for PACB and the industry?
Founding father Frank Pinto’s advice is, “Never lose sight of our purpose, which is to serve the community.” We can lend through high-tech, but must never lose sight of high-touch, he advised. Before, bank directors were those with large deposits in the bank. Today, directors must also create business for the bank.
And remember relationships, he urged.
“It is ‘relationship banking’,” he emphasized. “The mergers and consolidations cannot really be stopped, but the key is to make the community banks successful so there is no need to consolidate.” He applauded Nick’s decision to enlist the involvement of senior bank management in PACB and not just bank presidents.
Jon Conklin’s advice is simply to, “Keep up the great work. Never cease to be that voice for community banks in the fight for our survival as an industry. PACB should always strive to continue to adapt its operations as necessary to allow for the organization to never stop being that advocate for the community banking industry when we need it most. Never succumb to the call for “One Voice” if it means that the “One Voice” might not always have the best interests of the community banks in mind.”
Willard Snyder’s advice is to remember that even though millennials are all focused on online banking and debit cards, “still pay attention to the customer. Still fight with all your power the rules and regulations that prevent us from competing with the big banks for business.”
Tom Bailey’s advice is to remember that “PACB has a unique niche. It represents all that is good in community banks. PACB must continue to beat the drum encouraging involvement as I have found our bank has gotten much more out of PACB than we have put in.”
Ed Molnar’s advice: “Remember that you are not in it for yourself. You are here today because of the efforts of many who have gone before you. A servant leader gives back to the industry that has enabled them to be successful professionally and financially.”
“The decisions that are made each year should be for the benefit of all even if at times it is painful.”
Tim Snyder said that “Maintaining a strong, involved membership base is key to the success of the organization going forward.”
Henrich’s advice is, “Continue efforts to identify what the organization could, should, or must look like with an ever-shrinking number of members. Identify other avenues and channels that will provide the necessary funding to support our advocacy efforts. The next 25 years for PACB will be more challenging than its first 25. The changing country, the changing industry, and the changing membership and its employees will require creative solutions and thoughtful consideration.”
Andy Hasley said to “understand the needs of community bankers, garner their commitment to work jointly with the PACB and seek every opportunity to meet with and educate our state and national representatives on important matters.”
At the 25-year mark, it is clear that, in the marriage of CB and PASI, one plus one produced far more than two.
January 2017 dawns as an exciting moment in PACB’s history.
As PACB toasts its silver anniversary, momentum is high, potential is soaring, and a bright future is something our members, together, can bank on.