Virginia Banking July/August 2016

July/August 2016

Welcome John G. Stallings, VBA Chairman 2016-2017 IN THIS ISSUE

VBA ANNUAL CONVENTION | VBA BANK DAY SCHOLARSHIP WINNERS

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For Forbanks banksanticipating anticipatinga achange changetotoa aUniversal UniversalBanking Bankingenvironment, environment,planning planningand and preparation preparationare arecritical. critical.This Thisprogram programprovides providesa aholistic holisticstrategy strategybanks bankscan canuse usetoto help helpensure ensurea asmooth smoothtransition transitiontotoUniversal UniversalBanking.

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This Thisprogram programexamines examinesfactors factorsfor forUniversal UniversalBanker Bankersuccess successand andprovides providesa achecklist checklist ofofareas areastotoassess. assess.Instead InsteadofofPowerPoint PowerPointand andlecture, lecture,the theprogram programuses usesrealistic realistic case casestudies studiesand andclass classdiscussions discussionstotoensure ensurethat thatparticipants participantsleave leavewith witha aplan planfor for enhancing enhancingtheir theirUniversal UniversalBanking Bankingenvironment. environment.

Who WhoShould ShouldAttend Attend Branch BranchAdministration, Administration,Human HumanResources Resourcesand andTraining TrainingStaff Staff

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This Thisprogram programreinforces reinforcesthe theimportant importantrole roleBranch BranchManagers Managersplay playininthe thesuccess success ofoftheir theirUniversal UniversalBanker Bankerstaff. staff.Instead InsteadofofPowerPoint PowerPointand andlecture, lecture,the theprogram program uses usesrealistic realisticcase casestudies studiesand andclass classdiscussions discussionstotoensure ensurethat thatparticipants participantsleave leave with withskills skillsthey theycan canput puttotouse useimmediately. immediately.The Theprogram programwill willalso alsodiscuss discusshow howtoto integrate integratea abank’s bank’sservice servicestandards. standards.

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To Tolearn learnmore moreabout aboutthese theseprograms programsand and totoregister, register,visit: visit:www.vabankers.org/event-calendar www.vabankers.org/event-calendar

July/August 2016

2016-2017 Officers and Directors of the Virginia Bankers Association John G. Stallings, Chairman, SunTrust Bank William H. Hayter, Chairman-Elect, First Bank & Trust Company T. Gaylon Layfield, III, Immediate Past Chairman, Xenith Bankshares, Inc. Richard M. Adams, Jr., United Bankshares, Inc. Christopher W. Bergstrom, Cardinal Bank Michael W. Clarke, Access National Bank Jeffrey V. Haley, American National Bank & Trust Leton L. Harding, Jr., Powell Valley National Bank Scott C. Harvard, First Bank, Strasburg Charles Henderson, Bank of America, NA

cover

Glen Michael Kelley, Wells Fargo Bank, N.A. Brad E. Schwartz, TowneBank Joe A. Shearin, EVB Susan K. Still, HomeTown Bank Daniel G. Waetjen, BB&T Michael O. Walker, Benchmark Community Bank

VBA Welcome John G. Stallings, 10

Chairman 2016-2017

features

Robert Wojciechowicz, Capital One Financial Corporation

AT-LARGE MEMBERS VBA Benefits Corporation Chair Barry C. Elswick, TruPoint Bank Management Services Inc. Chair M. Andrew McLean, Middleburg Bank Government Relations Committee Chair Ronald D. Haley, River Community Bank, NA VBA Education Foundation Chair Jeffrey M. Szyperski, Chesapeake Bank EDITORIAL & EXECUTIVE OFFICES 4490 Cox Road Glen Allen, VA 23060 804-643-7469 Fax 804-643-6308 www.vabankers.org

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Bruce T. Whitehurst President and CEO Virginia Bankers Association Monica McDearmon Communications & Financial Literacy Coordinator Virginia Bankers Association SUBSCRIPTIONS If you would like to subscribe to Virginia Banking, contact Monica McDearmon at mmcdearmon@vabankers.org Virginia Banking is published bi-monthly. Copyright 2016.

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14

Meet the Winners of the VBA Bank Day Scholarship Program

18

Virginia Bankers Association 123rd Annual Convention

20

Assess Your Examination Process:Tell Us the Good, Bad and Ugly!

in every issue 4 Calendar of Events 5 Insights 6 Legislative Update 7 Worth Noting 8 Washington Update 9 Legal Line 13 Compliance Corner 17 New Associate Members 22 Bankers on the Move Send us your thoughts or ideas on Virginia Banking! Please email Monica McDearmon at mmcdearmon@vabankers.org. Has your information changed? Please email Kellee Edelin at kedelin@vabankers.org with your new contact information.

Calendar of

Visit www.vabankers.org/event-calendar to learn more about these events.

INSTRUCTOR-LED SEMINARS

WEBINARS CONTINUED

CFO CONFERENCE, RICHMOND AUGUST 28-30, 2016

ACH ORIGINATION:YOUR RESPONSIBILITIES & WARRANTEES AUGUST 23, 2016

CECL WORKSHOP, WASHINGTON, DC SEPTEMBER 7, 2016

LENDING TO MUNICIPALITIES AUGUST 24, 2016

FINANCIAL MANAGERS SCHOOL PRESENTED BY FINANCIAL MANAGERS SOCIETY AND GRADUATE SCHOOL OF BANKING, MADISON, WISCONSIN SEPTEMBER 18-23, 2016

COSO 2013 REVIEW & UPDATE AUGUST 26, 2016

CREDIT MANAGEMENT CONFERENCE, CHARLOTTESVILLE OCTOBER 3-4, 2016 LEADERSHIP CONFERENCE, RICHMOND OCTOBER 6-7, 2016 COMMERCIAL LENDING SCHOOL, GLEN ALLEN OCTOBER 11-12, 2016 BANK TECHNOLOGY SECURITY SCHOOL PRESENTED BY THE GRADUATE SCHOOL OF BANKING AT THE UNIVERSITY OF WISCONSIN-MADISON, MADISON, WISCONSIN OCTOBER 23-28, 2016 PREPARING FOR UNIVERSAL BANKING, GLEN ALLEN OCTOBER 24, 2016 ENHANCING YOUR UNIVERSAL BANKING ENVIRONMENT, GLEN ALLEN OCTOBER 25, 2016 LEADING FOR UNIVERSAL BANKER EXCELLENCE, GLEN ALLEN OCTOBER 26, 2016 COMMERCIAL REAL ESTATE LENDING SEMINAR, GLEN ALLEN NOVEMBER 2-3, 2016 WOMEN IN BANKING CONFERENCE, RICHMOND NOVEMBER 9, 2016 ENTERPRISE RISK MANAGEMENT WORKSHOP, GLEN ALLEN NOVEMBER 16, 2016

WEBINARS

TRID FOR CONSTRUCTION LOANS AUGUST 30, 2016 IRA BASICS SEPTEMBER 7, 2016 DISSECT YOUR ACCEPTABLE USE POLICY – PRACTICAL TAKEAWAYS TO BUILD YOUR OWN POLICY SEPTEMBER 7, 2016 PROBLEM LOAN IDENTIFICATION AND PREVENTION SEPTEMBER 13, 2016 ADVANCED TAX RETURN ANALYSIS SEPTEMBER 13, 2016 IRA BENEFICIARY DISTRIBUTIONS SEPTEMBER 14, 2016 THE WORLD OF TRUSTS FOR BANKERS SEPTEMBER 14, 2016 BUSINESS CONTINUITY PLANNING – REGULATORY REQUIREMENTS AND PRACTICAL SOLUTIONS SEPTEMBER 14, 2016 EVERY CIRCUS NEEDS A RINGMASTER – DIRECTING FOR SUCCESS IN SALES SEPTEMBER 14, 2016 LEVERAGING THE MIDDLE OF YOUR ORGANIZATION SEPTEMBER 15, 2016 CONVERTING CUSTOMER SATISFACTION INTO CUSTOMER LOYALTY SEPTEMBER 15, 2016

CONSUMER CONSTRUCTION LOANS AUGUST 8, 2016

HANDLING CONFLICT IN THE WORKPLACE SEPTEMBER 16, 2016

COMMERCIAL CONSTRUCTION LENDING AUGUST 9, 2016

FINANCIAL STATEMENT PROJECTIONS: TOOLS FOR MAKING A SIMPLIFIED AND EFFECTIVE FORECAST SEPTEMBER 20, 2016

THE TOP 25 SECURITY MISTAKES THAT A SMART INSTITUTION NEVER MAKES AUGUST 10, 2016 CORPORATE ACCOUNT TAKEOVER: LATEST COURT CASES AUGUST 11, 2016 FFIEC IT AUDIT AUGUST 12, 2016 IMPROVE YOUR COMMERCIAL LOAN WRITE-UPS & COMMITTEE PRESENTATIONS, MANDATORY 2-PART SERIES AUGUST 15, 2016 CECL: IN THE WEEDS AUGUST 16, 2016 ACH EXCEPTION PROCESSING AUGUST 18, 2016 BSA FRONTLINE STAFF TRAINING AUGUST 19, 2016

4 Virginia Banking | July/August 2016

FORMATION AND USE OF THE BANK HOLDING COMPANY SEPTEMBER 20, 2016 BUSINESS CASH FLOW BASICS AND GLOBAL CASH FLOW INTEGRATION ISSUES FOR LENDERS AND ANALYSTS SEPTEMBER 20, 2016 IRA BENEFICIARY DISTRIBUTIONS SEPTEMBER 21, 2016 MAKING SUBCHAPTER S WORK, EVEN IF YOU THINK IT CAN’T SEPTEMBER 21, 2016 COLLATERAL EVALUATION IN C&I LENDING SEPTEMBER 22, 2016 STRATEGIES FOR FAMILY BANKS SEPTEMBER 22, 2016

www.vabankers.org

Insights The Soft Stuff is the Hard Stuff “Business is ultimately about people and we can’t be effective in business without having some insights into people.” — Abhishek Ratna

G Bruce Whitehurst President and CEO, Virginia Bankers Association

www.vabankers.org

ood people skills not needed.” How often do we see a phrase like this in a job posting?

Instead, we typically see statements like, “Excellent communication skills are essential,” or “able to develop strong interpersonal relationships” or “strong leadership skills essential for this position.” Given how critical great people skills are to a person’s career success, isn’t it interesting that we call people skills the “soft” skills?

Thirty years into my career – and as someone who has benefitted greatly from all kinds of professional development opportunities – I have come to the firm conclusion that the soft stuff is really the hard stuff. Active listening; building and maintaining trust; seeking and providing feedback; working to improve internal communication – none of these are easy and mastering all of them turns a good leader into a great leader.

This spring, the VBA held a CEO event called Leading the Leadership Team. Over two days, about 15 bank CEOs and one state association CEO explored what it means to achieve organizational health. In his latest book, “The Advantage,” Patrick Lencione describes the difference between smart and healthy organizations. Smart companies possess all the technical expertise they need, but absent organizational health, these companies will not reach their full potential. Healthy companies are those who focus on effective leadership, interpersonal relationships and communication in addition to strong technical skills.

At our CEO event, we focused on how to build an outstanding leadership team, which depends on all aspects of organizational health. We compared notes and practiced some exercises we could take back and put into place in our organizations. We did some hard work on the soft stuff!

Today’s younger generation – the ones who are beyond tired of being called Millennials – crave development opportunities. They want to learn new things and develop new skills. This is such good news for all of us whom they will follow! We have the opportunity to provide all kinds of training and

development – and they want it. They seek mentors and we can fill that role. They seek professional advancement and we can provide training that prepares them to take on additional responsibilities as they grow in their careers.

The VBA clearly plays a large role in helping our member banks develop their future leaders. In addition to training that banks provide directly, nearly 3,000 bankers come to VBA training events each year. Our training programs range from online to one-day seminars, to conferences and to our School of Bank Management at the University of Virginia.

Under our current VBA Strategic Plan, we are determining how to fill any training gaps so we can provide a career-long continuum of professional development. While much of our training is appropriately technical, with subjects like credit and compliance, we see the need for more training on people skills – the true differentiator between two employees with the same technical competencies.

Our Emerging Bank Leaders group, now 400 strong, provides a great opportunity for rising stars in banks to connect with the VBA and each other for leadership development, networking and greater industry awareness. For anyone interested in learning more about EBL, it’s as easy as emailing Chandler Owdom at cowdom@vabankers.org or checking out our October 6-7 Leadership Conference at www.vabankers.org and making plans to be there.

Helping our member banks develop their employees and future leaders is one of the most important – and most rewarding – things we do at the VBA. We are always looking for feedback and ideas on how we can do an even better job in service to our members. To that end, please contact Courtney Fleming at cfleming@vabankers.org any time with input for VBA Education & Training.

Please join us as we strive to master the hard, soft stuff!

Email Bruce Whitehurst at bwhitehurst@ vabankers.org with any comments on this article or tweet him at @BruceTW. July/August 2016 | Virginia Banking 5

Legislative

Update

A Potential Replacement For Dodd-Frank

A Matt Bruning Senior Vice President, Government & Member Relations, Virginia Bankers Association

t the beginning of June, U.S. House of Representatives Financial Services Committee Chairman Jeb Hensarling unveiled his framework for a replacement for the Dodd-Frank Act. In a speech scattered with references to Hamilton and Madison’s writings in the Federalist Papers, the chairman argued that the current regulatory scheme emanating from Dodd-Frank “empowers financial regulators to be tyrants.” In what he terms “a market-based, equity financed Dodd-Frank off-ramp,” the plan, titled the Financial CHOICE Act, would provide both immediate tailored regulatory relief as well as provide an alternative opt-in approach to achieving relief through higher, but simpler, capital standards.

The Financial CHOICE Act, which stands for Creating Hope and Opportunity for Investors, Consumers and Entrepreneurs, is a comprehensive reboot of the financial regulatory structure.

Many of the individual provisions mirror previous legislative measures and concepts that have been floated in recent years, similar to many of the planks contained in Senate Banking Committee Chairman Richard Shelby’s omnibus bill from 2015. The framework has been incorporated into the House Republicans’ campaign policy agenda, branded “A Better Way”, meant to provide a platform for their candidates to point to during this election season.

While the actual text of the legislation remains to be released, what has been made public indicates there are a number of provisions that would provide immediate regulatory relief. It seems to incorporate elements of the TAILOR Act, a VBAsupported effort to require federal regulators to tailor regulations to fit a bank’s business and risk model. It also contains commonsense operational improvements such as timelier exam reports, an independent exam appeals process and shortform call reports for well capitalized banks. Additionally, it incorporates efforts for which we have championed in response to the onslaught of mortgage regulations: QM safe harbor for loans held in portfolio and exemption from escrow requirements for small servicers. Each of these have

been individual priorities for the industry in our advocacy efforts for regulatory reform and it is important that they remain at the forefront.

The newest approach unveiled pulls from concepts advanced by FDIC Vice Chairman Tom Hoenig: a trade-off of lowered regulatory burden for increased capital levels. Central to this approach is that banks choose to maintain capital at 10 percent under the Supplementary Leverage Ratio and attain a composite CAMELS rating of 1 or 2. Those qualifying institutions who elect to go this route would benefit from being unyoked from current regulatory restrictions such as Basel requirements, heightened prudential standards or capital distribution, or transaction constraints.

This would be an option, not compulsory, but one that displays the Chairman’s dogmatic belief in the importance of high capital buffers to avoid future financial crises.

The input of Virginia’s 6th District Congressman Bob Goodlatte, chairman of the House Judiciary Committee, is evident in several provisions. In lieu of Title II of Dodd-Frank, Hensarling’s approach replaces the Orderly Liquidation Authority with a bankruptcy process, something Goodlatte and his committee have endorsed. It also embraces the REINS Act, requiring major regulations’ approval

by Congress before final rule implementation and the repeal of the Chevron doctrine granting judiciary deference to regulatory agencies’ interpretations in litigation. Both efforts emanated from the House Judiciary Committee in their efforts to rebalance the overall regulatory environment, including in the financial services sector.

While some of those provisions have and likely will continue to garner bipartisan support, there are large components of Hensarling’s plan that are sure to draw opposition. Removing the power of the Financial Stability Oversight Council (FSOC) to designate significant important financial institutions (SIFIs), altering the structure of the CFPB, repealing the Volker Rule and subjecting the Federal Reserve to the congressional appropriations process are all ideas that have received backlash Continued on page 16

Email Matt Bruning at mbruning@vabankers.org with any comments on this article.

6 Virginia Banking | July/August 2016

www.vabankers.org

Noting

Worth

STAFFORD ELEVATED TO BANK PRESIDENT

Benchmark Community Bank has named Jay A. Stafford president of the bank. The official appointment was made by the board of directors at its meeting on May 19. The promotion follows his progression from executive vice president, a positon he had held since last fall. Former President Mike Walker is retaining the title of chief executive officer.

Stafford joined Benchmark in 1988 as a business development officer. In 1989, he became a branch manager, a position he held until 1998 when he was promoted to regional manager and given the responsibility of overseeing multiple branches of the bank. In 2003, he was promoted to vice president and branch administrator, and given the responsibility of overseeing all of the bank’s branches. Two years later, he was elevated to senior vice president. He was named chief banking officer in 2014 and executive vice president the following year. Throughout his career, Stafford has pursued advanced and specialized education related to his goals as a banker. In 1994, he graduated from the Virginia

Bankers School of Bank Management at the University of Virginia. In 2005, he completed the Graduate School of Banking at the University of Wisconsin and three years later he obtained his MBA from the University of Maryland. His undergraduate degree is from Averett University.

Congratulations to Jay on this appointment!

WE WILL MISS…

David Moncrief Burke, age 90, died at his home at Rappahannock Westminster-Canterbury, in Irvington, Virginia, on May 10, 2016. Born in Alexandria, Virginia, on June 25, 1925, he finished at Episcopal High School in 1943 and graduated from the University of Virginia in 1946 with a bachelor’s degree in commerce. The son of a banking family, in 1961, he first went to work for Burke & Herbert Bank & Trust Company as an assistant cashier. He remained at Burke & Herbert until he retired as chairman and chief executive officer in 2003 and continued at the bank as chairman emeritus until 2009.

He took great pride in the bank’s reputation for customer loyalty and sound management, especially when bank deposits passed the $1 billion threshold during his tenure. Over the years, he was committed to the betterment of his community as well, serving on many boards, including that of the Virginia Bankers Association. David will be missed.

With a 360° perspective, our financial services team is with you every step of the way.

More than 160 banks in the Southeast depend on Elliott Davis Decosimo for personal attention, industry experience and services, including external and internal audit, SEC reporting, M&A consulting, taxation and compliance. Our financial services practice is more than 100 professionals strong, with a 60-year reputation for helping banks operate stronger, wiser, better. Let us help you move forward.

elliottdavis.com

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July/August 2016 | Virginia Banking 7

Update

Washington

Putting Customers in Homes – Despite Washington

B Rob Nichols President and CEO, American Bankers Association

ankers are a resilient bunch.

I know this from the years I have spent working for what I consider to be the most important industry on the planet during what was the most challenging time for banking in a generation.

And I know it from the conversations I have been having on the road these past few months, hearing bankers express both frustration with current banking policy but also resolve to do what it takes to serve their customers.

In fact, these twin sentiments are documented in the results of the American Bankers Association’s latest real estate lending survey. The survey of 159 banks, 68 percent with less than $1 billion in assets, turned up seemingly contradictory findings. It found, for instance, that 72 percent think the ability-to-repay/Qualified Mortgage rule will continue to restrict credit availability and 75 percent say regulation is having a negative impact on their business.

Every time you lose a customer due to regulatory rules – whether because they couldn’t stand the hassles and dropped out of the process, or because their debt-to-income ratio didn’t make the QM cut – drop a line to your elected representatives. Tell them one less loan was made today because Washington has tied your hands.

But it also found that more banks – 74 percent last year, compared to 67 percent in 2014 – are willing to extend some non-QM loans, even if on a highly targeted basis. It also found that banks made the highest percentage of loans to first-time homebuyers – 15 percent – in the survey’s 23-year history.

These latter findings are far from a vindication of Washington’s approach to mortgage rulemaking. Instead, they should be seen as a testament to banks’ resiliency and customer focus.

8 Virginia Banking | July/August 2016

Few would call the current mortgage lending environment particularly appealing. Between the dramatic increase in prescriptive mortgage regulations and the persistent low interest rate environment, there’s not much to recommend the line of business. But customers still want to buy homes. And bankers know better than anyone that communities need vested homeowners to truly thrive. That’s why bankers are finding a way to deliver what customers want and need, Washington be damned.

While this is a positive, it shouldn’t let policymakers off the hook. Yes, there are banks that are making loans happen. But there are still 26 percent too concerned with liability to make a non-QM loan.

And more than a third in the survey report that they have lost customers due to the increased time and paperwork it takes to approve a loan. Where did these customers go – to a less-regulated lender?

Increased costs to the banks are a given. More than eight out of 10 bankers said their compliance costs have climbed thanks to increased personnel, added technology costs and a loss of efficiency.

Ninety-two percent cite increased time allocation.

Of course, members of Congress don’t care what regulation costs banks. But they do care what it costs their customers. So let me suggest that every time you lose a customer due to regulatory rules – whether because they couldn’t stand the hassles and dropped out of the process, or because their debt-to-income ratio didn’t make the QM cut – drop a line to your elected representatives. Tell them one less loan was made today because Washington has tied your hands.

Let lawmakers experience the same steady drip of frustration that you have experienced these last few years as one Dodd-Frank rule after another has made an obstacle course of mortgage lending.

Your stories can help persuade Congress to take action – giving lawmakers the chance to demonstrate that they are as committed to their constituents and communities as banks are theirs.

Email Rob Nichols at nichols@aba.com. www.vabankers.org

Line

Legal

New Virginia Laws Affecting Banking

A Mel Tull General Counsel, Virginia Bankers Association

www.vabankers.org

host of new and amended Virginia statutes took effect July 1, 2016. Here are a few that will be of interest to bankers.

Repeal of superfluous mortgage disclosure. Section 6.2-406 of the Code of Virginia was amended to repeal a provision that required mortgage lenders to disclose that all loan terms not legally locked in were subject to change until settlement. The requirement was repealed because it was determined to be unnecessary in light of abundant federal mortgage disclosure requirements.

Mortgage lender and mortgage broker licenses.

Sections 6.2-1607 and 6.2-1610 were amended to provide that mortgage lender and mortgage broker licenses will expire at the end of each calendar year unless renewed prior to the expiration date. Such licenses will no longer be required to be posted in the licensee’s office, but must be provided upon request and the licensee must display the telephone number and website address for the Virginia State Corporation Commission (SCC) where borrowers can confirm the licensee’s license.

Mortgage loan originator licenses. Section 6.21712.1 was amended to authorize the SCC to issue an inactive mortgage loan originator license to an individual who has satisfied all requirements for licensure except obtaining a surety bond. A licensee with an inactive license is prohibited from engaging in the business of a mortgage loan originator until the SCC determines that the bonding requirement has been satisfied.

Reporting financial exploitation of older or incapacitated adults. Section 63.2-1605 was amended to require the department of social services to refer reports of adult financial exploitation involving more than $50,000 to local law-enforcement agencies for investigation.

State agency to study financial exploitation of adults. House Bill 676 directs a state agency to form a committee to study the issues involved in identifying, reporting, investigating and preventing financial exploitation of adults. The committee is to present its findings and recommendations to the governor and the General Assembly. The Virginia Bankers Association will actively participate to educate study participants and legislators about the safeguards banks maintain to protect elderly and disabled customers from financial abuse.

Limited credit union mergers. Section 6.2-1344 was amended to authorize the merger of Virginia state-chartered credit unions with different fields of membership if one of the merging credit unions has fewer than 35,000 members and neither merging credit union has been a party to a merger pursuant to this exemption within the preceding 24 months.

ABLE savings trust accounts not counted for state benefits eligibility testing. Section 23-38.81 was amended to provide that Achieving a Better Life Experience (ABLE) savings trust accounts will be disregarded for purposes of determining an individual’s eligibility to receive state assistance and benefits. Tax exempt ABLE savings trust accounts were established by legislation in 2015 to facilitate saving for qualified expenses of individuals who were disabled or blind prior to the age of 26.

Annual cap on bank franchise tax payment. Section 58.1-1204 was amended to set a cap of $18 million on the total annual bank franchise tax liability per taxpayer. The cap will increase to $20 million if at least five taxpayers pay the $18 million cap for three consecutive years. After two years at $20 million, the cap will increase by 3 percent annually.

State law references to federal bank regulations updated. The federal Dodd-Frank Act transferred rulemaking authority under certain federal statutes, such as the Truth in Lending Act and the Electronic Fund Transfers Act, from the Federal Reserve Board to the Consumer Financial Protection Bureau. The Virginia banking statutes were amended in several places to replace references to the obsolete Federal Reserve Board regulations with references to the corresponding new regulations promulgated by the Consumer Financial Protection Bureau.

Lien for spouse’s emergency medical care. Section 8.01-220.2 of the Code was amended to provide that a lien arising out of a judgment for one spouse’s emergency medical care will not be enforced against the spouse’s principal residence held as tenants by the entireties with the other spouse until the residence is refinanced or transferred to new owners.

Federal mortgage “closing disclosure” added to Virginia settlement statement statutes. The code sections governing mortgage settlement statements were amended to permit real estate settlement Continued on page 22 July/August 2016 | Virginia Banking 9

Chairman

Get to Know Your New

Welcome John G. Stallings, VBA Chairman 2016-2017

J

ohn G. Stallings, president and CEO of the Virginia Division at SunTrust Bank, was named 2016-2017 chairman of the Virginia Bankers Association on June 21, 2016, at the 123rd VBA Annual Convention.

John received a bachelor’s degree in English from Vanderbilt University and an MBA from Washington University in St. Louis. He began his career at National Bank of Commerce in Memphis in 1988. From 2007 to 2010 he served as regional president of the Central Carolina Region of SunTrust. John has led the Virginia Division of SunTrust since April 2010.

10 Virginia Banking | July/August 2016

www.vabankers.org

HOW DID YOU GET INTO BANKING AND WHAT ATTRACTED YOU TO A BANKING CAREER? As I was taking business courses in college, I developed a strong interest in pursuing a business career. I had heard that banking was a great place to get financial and leadership training, plus exposure to a variety of industries. I signed up for interviews with some local banks including NBC, a Memphis-based predecessor of SunTrust, who offered me a position in their management training program upon graduation.

TALK ABOUT SOME KEY MENTORS YOU HAVE HAD AND WHAT YOU LEARNED FROM THEM. I have benefitted from the wisdom of several mentors and leaders over the last 28 years. From C.T. Hill (former SunTrust executive and VBA chairman), I learned how commitment and connection to your clients, teammates and communities will lead to shareholder value. C.T. was known for encouraging his teams and leaders to “get out of the office and go see someone.”

I borrow that line and other “C.T.-isms” a lot.

And from Bill Reed (retired NBC/SunTrust executive), I learned you can be both large and nimble, that people follow engaging leaders who bring energy and integrity to their team and client relationships and to stay focused on the key drivers of the top and bottom lines.

From Beau Cummins (SunTrust Head of Commercial and Business Banking), I have seen the rewards that come from a clear and disciplined strategy, a structure designed to support it, and seeking out teammates who bring both a passion to win and the credibility and competence to deliver the right solutions to our clients.

And from my father, I have had a priceless sounding board, especially for my big decisions.

Finally, my wife, Celeste, always gives me great advice and the occasional, but always timely, reminders about the importance of work-life balance.

HOW LONG HAVE YOU BEEN INVOLVED WITH THE VBA AND WHAT IMPACT HAS THIS INVOLVEMENT HAD ON YOUR BANK AND ON YOUR CAREER AS A BANKER? I met Bruce and his team almost as soon as I moved to Richmond in 2010. Back in Raleigh, I was involved in the North Carolina Bankers Association (served twice on the board), and I had an appreciation of the value our trade associations bring to our industry. Since joining the VBA board, I have seen the importance of a united front – engaging banks both large and small – in making sure our voice is heard in both Washington and Richmond. Like most banks in Virginia, SunTrust has for many years benefitted from VBA services, training and support.

WHAT DO YOU SEE AS TOP INDUSTRY CHALLENGES AND OPPORTUNITIES? I think the main opportunity is to do a better job demonstrating the value our banks and bankers bring to the citizens of Virginia and across the U.S. Our banking industry helps www.vabankers.org

drive business growth, home purchases and the many tools consumers use to gain financial confidence and achieve the American Dream.

In addition, cybersecurity continues to be a major challenge to our clients and our industry, as well as non-bank competitors that are not held to the same regulatory and reputational standards as banks.

AS OUR NEW CHAIRMAN,WHAT ARE YOUR GOALS FOR THE VBA IN 2016-2017?

Last year, the VBA worked hard to build a compelling threeyear strategic plan. The VBA staff and board met with member banks in sessions across Virginia to get feedback in drafting and vetting the plan. It is clear and well crafted; I would encourage all VBA members to be familiar with it. My primary goal is to support Bruce in executing that strategic plan.

Of the four “Member Outcomes,” I look forward most to helping pursue our legislative and regulatory goals. This is an opportunity for our membership to shine, and I encourage more banker participation in the grassroots outreach to our legislators, which will be critical in the coming year.

Continued on next page July/August 2016 | Virginia Banking 11

Get to Know Your New Chairman continued from page 11

YOU’VE ATTENDED RECENT REGULATORY VISITS AND THE VBA/ABA GOVERNMENT RELATIONS SUMMIT. WHY IS IT IMPORTANT TO MEET WITH OUR LEGISLATORS AND REGULATORY AGENCIES FACE-TO-FACE? Often times, the real and meaningful impact our industry has on our clients, communities and commerce in Virginia is lost.

Face-to-face meetings with our regulatory and legislative decision-makers are opportunities to help drive that point home. It also gives us the chance to share our first-hand stories of how certain well-intended regulations can impact the people of the Commonwealth, and is often the best chance for both better understanding and helpful action.

WHAT IS THE GREATEST BENEFIT YOU SEE FROM MEMBERSHIP IN THE VIRGINIA BANKERS ASSOCIATION, BOTH FOR BANKS AND FOR BANKERS? There are some 70,000 of us bankers across Virginia. While we compete against each other in the marketplace, when it comes to these important industry issues, we have to come together to make sure our voice is unified, and heard loud and clear. We have a duty to protect the livelihoods of both our clients and our teammates. This is where the VBA plays a vital role as our collective industry voice.

WHAT MAKES YOU EXCITED TO COME TO WORK EACH DAY? CONVERSELY, WHAT KEEPS YOU UP AT NIGHT? I really love my job. I am grateful that I get to work every day with a top-notch team, delivering our capabilities and solutions to our clients. My best days are days spent on client calls with my relationship managers and client teams.

I can sometimes dwell on the lost opportunities or occasional disappointments a bit, but the hunger that comes from that usually leads to finding ways to be better positioned to win the next time at bat.

SO FAR,WHAT HAS BEEN THE HIGHLIGHT OF YOUR BANKING CAREER? WHAT IS ONE THING YOU WOULD CHANGE? The highlights for me are when our team can come together and provide a solution that helps a client grow their business, or to transition to another stage of life, while allowing the next generation of leadership to follow in their footsteps. And the moment when a client accepts our team’s proposal is always fun and worth celebrating.

I remember a time when I waited too long to remove an obstacle to our team’s success. Looking back, I would have acted more quickly.

HOW DO YOU ENCOURAGE AND DEVELOP PROMISING LEADERS AT YOUR BANK? I see a duty and an opportunity to develop talent, whether in leadership, relationship management or client support jobs. Everyone deserves a leader who is committed to helping them get 12 Virginia Banking | July/August 2016

better at their jobs. I expect our leadership team to be constantly coaching teammates, helping them win, and removing obstacles to their success. I find the best ways I can be supportive are in helping pitch new business, “clearing out the underbrush” and connecting the right internal experts to ensure we bring our clients the best solutions.

WHAT ADVICE WOULD YOU OFFER TO TODAY’S EMERGING BANK LEADERS? Don’t be in such a rush to “climb the ladder.” That’s an outdated concept today. I believe in working hard to become really good at your responsibilities. Always look for ways to be helpful and to take on more when there’s an opportunity to do so. As you become known for your expertise, hard work and hustle, people will notice. Then the larger assignments and responsibilities will come, at the right time.

Also, consider doing financial literacy volunteer work, along with your teammates. It is rewarding, the team camaraderie is fun, and it enhances our reputation as an industry that cares for those who need us in our communities.

TELL US SOMETHING ABOUT YOURSELF THAT WOULD SURPRISE OUR READERS. I was a co-founder of a youth lacrosse league called Raleigh Rage. The very first year we had about 30 boys sign up, and a year later we had close to 70. That league now has hundreds of boys and girls being taught the sport I enjoyed so much as a high school player. Since “retiring” from coaching my Mohawks team, I have had fun seeing my children play for their club and high school teams. And I hope and fully expect some of my former players may end up as youth coaches themselves someday. www.vabankers.org

Compliance

Corner

Consumer Harm & ARCH: How the FDIC Determines Your Risk

T

By Nathan McDonald Associate General Counsel, Compliance Alliance

www.vabankers.org

he FDIC recently updated its compliance examination manual to include guidance on evaluating consumer harm and the new Assessment of Risk of Consumer Harm (ARCH), a 170-question preliminary risk assessment used to develop an action plan for onsite compliance examinations.

Perhaps one of the most helpful aspects of the guidance is that it clarifies the FDIC’s definition of “consumer harm.” Specifically, the new guidance defines consumer harm as actual or potential injury or loss to a consumer. In confirming its long held position, the guidance clarifies that consumer harm conducted through third-party relationships will be attributed to regulated institutions. Thus, under this rather expansive view of consumer harm, institutions may be held to account for any possible injury to consumers, regardless of whether consumers incurred monetary loss or any other form of measurable economic harm and regardless of the involvement of bank’s own personnel.

The ARCH assessment can be divided into two main sections. The first section identifies an institution’s inherent compliance risk in the following areas: bank structure, supervisory history and operations. Structure considerations include any factors or changes in control; the board; senior officers or key personnel; affiliates or subsidiaries; and business strategies and activities that raise compliance risk. Mergers and acquisitions, growth, pricing strategies, and fee income are also assessed during this phase. Supervisory history questions consider any enforcement actions, significant issues identified during the last examination, complaints and consumer litigation. Assessment of operations is divided into the following operational areas, as applicable to your institution: lending, deposits, non-deposit products, third party risk, other products or issues and UDAAP. ARCH assessment questions regarding the Compliance Management System (CMS)/internal controls track existing guidance set forth in the CMS section of the manual. Accordingly,

board and senior management oversight; compliance program (policies and procedures, training, and monitoring); consumer complaint response; and audit are all addressed. Board and management oversight questions are designed to assess the quality of oversight in terms of comprehension of applicable laws, robustness of discussion, knowledge of the bank’s products and services, and effectiveness of monitoring. Compliance program questions are designed to ascertain the adequacy of policies and procedures and their effectiveness in mitigating and managing inherent risk; the adequacy of training in terms of timeliness, depth of content, relevance to roles and responsibilities, and accountability; and the robustness of the bank’s monitoring activities, in terms of comprehensiveness, independence, and depth. Consumer complaint questions integrate oversight and compliance program considerations. Banks should be reviewing external resources, such as complaint board websites, to proactively identify complaints. Questions regarding audit are primarily concerned with scope, independence, and qualifications of audit personnel, but this area also includes oversight and monitoring considerations. It is important to note that UDAAP, lending to servicemembers and third-party risk were specifically addressed throughout this section, highlighting their continued importance to regulators.

Since the ARCH will be used by examiners to conduct an initial risk assessment prior to each compliance examination, we recommend that banks regulated by the FDIC use the ARCH as an exam preparation tool.

Nathan McDonald is an associate general counsel for Compliance Alliance. A former federal and state banking regulator, Nathan brings unique knowledge and diverse experience to Compliance Alliance. Compliance Alliance offers a wide variety of compliance support solutions. To learn how to put them to work for your bank, call them at (888) 353-3933 or visit compliancealliance.com.

July/August 2016 | Virginia Banking 13

Bank Day

Scholarships

Meet the Winners of the VBA Bank Day Scholarship Program Congratulations to the Statewide Winner After spending a day with a local bank as a part of

The purpose of this experience is for the students to

Bank Day, 375 students were given the opportunity to write essays based on their experience. Six regional

learn about banking, financial services and the vital role banks play in their communities. As Noah said

college scholarships ($2,500) and one statewide scholarship ($5,000) were awarded to the winning students based on the merit of their essays. This year, an additional six $1,000 honorable mention scholarships were

in his essay, “My Bank Day experience exceeded my expectations in a number of ways. I not only learned about banks and the business side of their work, but I also received personal advice and forged personal re-

chosen, one in each of the regions. In total, $26,000 in scholarships was distributed.

The Virginia Bankers Association, together with the VBA Education Foundation and the VBA Emerging Bank Leaders, congratulate Noah Petersen, who shadowed at Village Bank, for winning the statewide VBA Bank Day scholarship award. As the statewide winner, Noah will receive an additional $5,000 scholarship as he heads to William & Mary this fall.

lationships with the employees at Village Bank. More than all else, I came to realize that banks play a crucial role in the well-being of the community.”

Congratulations to Noah, as well as to the 11 other winners of Bank Day scholarships!

The VBA Bank Day Scholarship Program will take place again next year on March 21. Please contact Chandler Owdom at cowdom@vabankers.org to learn how to get involved.

Get to Know the Regional Winners of the VBA Bank Day Scholarship Program STATEWIDE WINNER & CAPITOL REGIONAL WINNER

CENTRAL/SOUTHSIDE REGIONAL WINNER

Noah Petersen, Banner Christian School,Village Bank COLLEGE ATTENDING IN THE FALL: College of William & Mary POTENTIAL MAJOR: English HIGH SCHOOL ACTIVITIES: President of the student government association, player on the basketball and soccer teams, chaplain of the local YMCA Leaders’ Club, writer for the school paper and an avid reader FAVORITE THING ABOUT BANK Village Bank employee Joe Lewis, DAY: I enjoyed spending time getting area manager, presents Noah to know employees and executives Petersen with his scholarship. while at the same time learning about the business and activities that are associated with banking.

ONE THING YOU LEARNED ON BANK DAY THAT YOU DIDN’T KNOW BEFORE: I learned that banks and mortgage companies are separate entities.

ONE FUN FACT ABOUT YOURSELF: I prefer to read the newspaper than to look at sites online.

Ashley Tiller, James River High School, Bank of Botetourt COLLEGE ATTENDING IN THE FALL: Liberty University POTENTIAL MAJOR: Public Health HIGH SCHOOL ACTIVITIES: Varsity softball senior captain, member of Key Club and National Honor Society, indoor track FAVORITE THING ABOUT BANK DAY: I enjoyed getting a tour of the bank branch and meeting some of Scholarship winners Carly Cook the workers there. (left) and Ashley Tiller with Watts ONE THING YOU LEARNED ON Steger, chairman of Bank of BANK DAY THAT YOU DIDN’T Botetourt.

KNOW BEFORE: I did not realize that the bank employees had to complete a number of volunteer hours on their own time in their community. I thought this was a great thing and I am thankful to have such hard workers in my community.

ONE FUN FACT ABOUT YOURSELF: My favorite Christmas movie is “Elf” and I am pretty sure I am able to quote at least 90 percent of it.

14 Virginia Banking | July/August 2016

www.vabankers.org

HAMPTON ROADS/EASTERN SHORE REGIONAL WINNER

Hazel Farmer, senior vice president and consumer education director for Bank of Lancaster, was on hand June 2 at the Northumberland High School Senior Awards Night to present the scholarship to Jessica Thomas.

Jessica Thomas, Northumberland High School, Bank of Lancaster COLLEGE ATTENDING IN THE FALL: University of Mary Washington POTENTIAL MAJOR: Accounting HIGH SCHOOL ACTIVITIES: Softball and volleyball scorekeeper, National Beta Club member, Future Business Leaders of America member FAVORITE THING ABOUT BANK DAY: The story of how one seed a rabbit planted sprouted into something beyond the little rabbit’s wildest dreams.

ONE THING I LEARNED ON BANK DAY THAT YOU DIDN’T KNOW BEFORE: Banking truly is

the backbone to a community.

ONE FUN FACT ABOUT YOURSELF: Kayaking is my favorite thing to do by myself.

NORTHERN VIRGINIA REGIONAL WINNER Matt Wohlleben, Oakton High School, United Bank COLLEGE ATTENDING IN THE FALL: University of Virginia POTENTIAL MAJOR: Economics HIGH SCHOOL ACTIVITIES: Global Finance Club, History Honor Society, National Honor Society FAVORITE THING ABOUT BANK DAY: I really enjoyed having the opportunity to speak to bankers who were in a similar place as me a few years ago and getting their advice. It really meant a lot for college-bound seniors like us who have a lot of questions about the future.

ONE THING YOU LEARNED ON BANK DAY THAT YOU DIDN’T KNOW BEFORE: I’d really like to stress that Bank Day really challenged me to consider how our communities would look if banks didn’t exist, and the people at United really helped me see that banks have an absolutely vital role in our society.

ONE FUN FACT ABOUT YOURSELF: I’m an avid scuba diver!

SOUTHWEST VIRGINIA REGIONAL WINNER Dakota Langford, Eastern Montgomery High School, Union Bank & Trust COLLEGE ATTENDING IN THE FALL: Radford POTENTIAL MAJOR: Undecided, but maybe law or medicine HIGH SCHOOL ACTIVITIES: BETA Club, DECA, English MACC Team FAVORITE THING ABOUT BANK DAY: Getting to look inside the vault.

ONE THING YOU LEARNED ON BANK DAY THAT YOU DIDN’T KNOW BEFORE: The best thing I learned was [how important it is to] establish credit at the right time.

ONE FUN FACT ABOUT YOURSELF: I am the first in my family to go to college.

VALLEY REGIONAL WINNER Rebecca Straley, Riverheads High School, First Bank & Trust COLLEGE ATTENDING IN THE FALL: Christopher Newport University POTENTIAL MAJOR: Social work/special education HIGH SCHOOL ACTIVITIES: Ran cross country 9th-11th grade, FFA member all four years (served as a chapter officer, won a state competition, placed 8th at a national competition), NHS member 11th-12th grade, attend Shenandoah Valley Governors School and volunteer at Ride with Pride.

FAVORITE THING ABOUT BANK DAY: Getting to visit a customer and hear their perspective about banking was really interesting.

ONE THING YOU LEARNED ON BANK DAY THAT YOU DIDN’T KNOW BEFORE: I didn’t realize how important it was to build up credit.

Having no credit can be almost as harmful as having poor credit.

ONE FUN FACT ABOUT YOURSELF: I’m 18 years old, but I still love Disney movies.

Get to Know the Honorable Mention Winners of the VBA Bank Day Scholarship Program CAPITOL HONORABLE MENTION WINNER Anthony Rivas, Brunswick Academy, Benchmark Community Bank COLLEGE ATTENDING IN THE FALL: Hampden-Sydney College POTENTIAL MAJOR: Business or biology/pre-med HIGH SCHOOL ACTIVITIES: National Honor Society, Senior Class Secretary, Spanish Club, Science Club, Agri-science Club, Boy Scouts of America, varsity basketball, varsity baseball, cross country, golf, recreation baseball and basketball FAVORITE THING ABOUT BANK DAY: My favorite thing about Bank Day was [learning] about the wonderful career opportunities in banking.

ONE THING YOU LEARNED ON BANK DAY THAT YOU DIDN’T KNOW BEFORE: I did not realize how involved [banks were] in helping the local communities they serve.

ONE FUN FACT ABOUT YOURSELF: I was runner up in our high school’s “womanless beauty pageant.” I’m glad I didn’t win!

CENTRAL/SOUTHSIDE HONORABLE MENTION WINNER Carly Cook, James River High School, Bank of Botetourt COLLEGE ATTENDING IN THE FALL: Virginia Tech POTENTIAL MAJOR: Human development HIGH SCHOOL ACTIVITIES: Key Club, FCCLA, National Honor Society, FBLA, Pep Club, honor roll, class officer for three years, swim team for four years FAVORITE THING ABOUT BANK DAY: My favorite thing about Bank Day was having the opportunity to ask the senior vice presidents of Bank of Botetourt questions about how to establish credit, apply for loans and other specifics of banking.

ONE THING YOU LEARNED ON BANK DAY THAT YOU DIDN’T KNOW BEFORE: How dedicated small banks are to their customers and the various ways they are engaged in their communities.

ONE FUN FACT ABOUT YOURSELF: My favorite place to travel to in the summer is the Outer Banks in North Carolina.

Continued on next page www.vabankers.org

July/August 2016 | Virginia Banking 15

VBA Bank Day Scholarship Program continued from page 15 HAMPTON ROADS/EASTERN SHORE HONORABLE MENTION WINNER Sean Wells, Warwick High School, Old Point National Bank COLLEGE ATTENDING IN THE FALL: University of Virginia POTENTIAL MAJOR: Finance HIGH SCHOOL ACTIVITIES: Debate, Forensics, Academic Team, Science Bowl FAVORITE THING ABOUT BANK DAY: Credit Report Formula.

ONE THING YOU LEARNED ON BANK DAY THAT YOU DIDN’T KNOW BEFORE: The extent of e-banking.

ONE FUN FACT ABOUT YOURSELF: I have sailed the length of the Chesapeake Bay three times.

NORTHERN VIRGINIA HONORABLE MENTION WINNER

Club, Key Club, Glee Club, marching band, concert band, Dickenson County Partners for Prevention Coalition, and operating the baseball, softball and basketball scoreboard.

FAVORITE THING ABOUT BANK DAY: My favorite thing about Bank Day was having the opportunity to feel respected by a group of successful and influential employers.The individuals at New Peoples Bank spoke to me as though I was an equal, and, because of that, I learned many ins-and-outs to the banking and monetary systems.

ONE THING YOU LEARNED ON BANK DAY THAT YOU DIDN’T KNOW BEFORE: I didn’t realize how involved New Peoples Bank was in our community, and how they affect our society in a positive and influential manner.

ONE FUN FACT ABOUT YOURSELF: I am a twin!

VALLEY HONORABLE MENTION WINNER

Max McNerney, Loudoun Valley High School, Middleburg Bank COLLEGE ATTENDING IN THE FALL: Virginia Tech POTENTIAL MAJOR: Business undecided with a minor in entrepreneurship HIGH SCHOOL ACTIVITIES: DECA, varsity lacrosse FAVORITE THING ABOUT BANK DAY: Being able to see how the bank that I bank at personally operates. The people who run each branch are genuine and truly want to meet the financial needs of all their clients.

ONE THING YOU LEARNED ON BANK DAY THAT YOU DIDN’T KNOW BEFORE: I enjoyed learning about the jobs of commercial lenders and their close relationships with small business owners.

ONE FUN FACT ABOUT YOURSELF: I’ve owned and operated my own lacrosse stringing business for five years called MaxLaxStrings.

SOUTHWEST VIRGINIA HONORABLE MENTION WINNER Allie Smith, Ridgeview High School, New Peoples Bank COLLEGE ATTENDING IN THE FALL: Virginia Tech POTENTIAL MAJOR: Double major in animal and poultry sciences and dairy science (pre-veterinarian) HIGH SCHOOL ACTIVITIES: National Honor Society vice president, Beta

Faith Ritenour, Strasburg High School, First Bank, Strasburg COLLEGE ATTENDING IN THE FALL: Christopher Newport University POTENTIAL MAJOR: Marketing HIGH SCHOOL ACTIVITIES: Fellowship of Christian Athletes, National Honor Society, Student Council, FFA, yearbook FAVORITE THING ABOUT BANK DAY: Getting to see how a bank Dennis A. Dysart, president actually works and getting to eat of First Bank, presented Faith pizza.

Ritenour with the $1,000 ONE THING YOU LEARNED ON VBA Bank Day Scholarship at BANK DAY THAT YOU DIDN’T Strasburg High School.

KNOW BEFORE: Local banks are different from national banks because of their sense of community and generosity.

ONE FUN FACT ABOUT YOURSELF: I love Captain America.

Legislative Update continued from page 6 from the Sen. Elizabeth Warren crowd of Dodd-Frank apologists. Warren immediately and reflexively condemned the entire package as a wet kiss to Wall Street. As the industry has seen on previous efforts for regulatory reform in recent years – including the failure of the Shelby bill to advance late in 2015 – the prospects of advancing a comprehensive package, and sadly even piecemeal incremental changes, reflects the current political reality of the existing makeup of Congress and the occupant of the White House.

16 Virginia Banking | July/August 2016

Due to those realities, the framework advanced by Hensarling in the near term ultimately provides another discussion point in the ongoing process of achieving actual change. In this election year, mere days remain in the time Congress will devote to actual lawmaking and, barring a road to Damascus conversion of the president and others – or some unlikely legislative maneuvering in a lame duck session – the outcome of these and other regulatory reform measures will be pushed into 2017. Even then, much

of the future prospects rest on the country’s choice of leadership in November. Our efforts will continue to educate and make the case for needed regulatory relief and improvements during this time so that we have a running start going into a hopefully more accommodating political environment next year. Maybe then we can accomplish what Hensarling ended his speech with and what we know is desperately needed: “a new policy direction for the financial sector of the 21st century.” www.vabankers.org

Welcome

New Associate Members

FINANCIAL INSTITUTIONS

Presidio

Jefferson Security Bank

Address: 1801 Bayberry Court, Suite 103 Richmond,VA 23226 CONTACT NAME: AMANDA TORREZ Phone: 301-313-2186 atorrez@presidio.com www.presidio.com

Address: PO Box 35 Shepherdstown, WV 25443-0035 CONTACT NAME: MICHAEL SHOLL Phone: 304-876-9000 Fax: 304-876-8122 msholl@jeffersonsecuritybank.com www.jsb.bank Jefferson Security Bank is headquartered in Shepherdstown,West Virginia.

The bank provides a full range of banking services to individuals, agricultural businesses and commercial businesses through its main office and five fullservice offices located in the eastern panhandle region of West Virginia and in Washington County, Maryland.

INVESTMENT BANKING

Olsen Palmer Address: 2020 K St. NW Washington, DC 20006-1806 CONTACT NAME: CHRISTOPHER OLSEN Phone: 202-627-2043 colsen@olsenpalmer.com www.olsenpalmer.com Olsen Palmer is a specialized investment banking firm that provides merger & acquisition, valuation and strategic advice exclusively to independent community banks and thrifts.

IT CONSULTING & SERVICES

All Covered Address: 3700 Arco Corporate Dr. Suite 400 Charlotte, NC 28273-7105 CONTACT NAME: ANTHONY GAROFALO Phone: 704-625-3245 agarofalo@allcovered.com http://www.allcovered.com/

At Presidio, they make it possible for their clients to harness the limitless power of IT to drive their business forward. By taking the time to deeply understand how your business works, they architect transparent, enduring technology solutions that meet your immediate needs – and prepare you for tomorrow.

LAW FIRM

Luse Gorman PC Address: 5335 Wisconsin Avenue, NW, Suite 780 Washington, DC 20015 CONTACT NAME: KENT KRUDYS Phone: 202-274-2019 kkrudys@luselaw.com www.luselaw.com Luse Gorman is a Washington, D.C.-based law firm that has specialized in representing community banks and other financial institutions for over 25 years.Their primary practice focus is in the areas of: capital raising transactions, mergers and acquisitions, securities regulation, corporate governance, bank regulatory and enforcement law, executive compensation, employee benefits, and charter conversions.They are consistently ranked as one of the leading law firms nationally in mergers and acquisitions, mutualto-stock conversions and mutual holding company reorganizations. In 2015, 2012, 2011 and 2009, they were the number one ranked law firm for M&A transactions.They represent more publicly-traded banks than any other law firm in the nation.Their law firm has gained a reputation for innovation in developing solutions to corporate and regulatory challenges facing financial institutions.

All Covered is the leading provider of IT compliance and cybersecurity services to community banks.They assist their customers in maintaining regulatory compliance and mitigating cyber threats, enabling them to implement competitive products and services to grow their business.

MYMIC, LLC Address: 1040 University Blvd. Suite 100 Portsmouth,VA 23703 CONTACT NAME: BRAD CARPENTER Phone: 757-391-9200 brad.carpenter@mymic.net www.mymic.net MYMIC LLC develops technology driven solutions for its customers focusing on business process management (BPM), enterprise information technology, and the development of interactive computer based training programs. MYMIC's team of experienced professionals will identify and deliver technology solutions aligned with your business goals and strategies. www.vabankers.org

Positive coverage helps drive business.

Put your coverage to work with a reprint from Virginia Banking.

To order your latest reprint visit http:// bit.ly/VABanking

July/August 2016 | Virginia Banking 17

VBA

Events

Virginia Bankers Association 123rd Annual Convention

Frank Bell, Jeff Szyperski and Bill Couper at the Chairman’s Reception and Silent Auction.

Legendary golfer Lee Trevino welcomed the golfers to our tournament, pictured here with John O’Shaughnessy.

As she headed into retirement, Bette Albert was presented a resolution from the VBA Benefits Corp. board in honor of her more than 30 years of service to the VBA and the banking industry.

Scott Wayne

A.B. Stoddard

John Ikard

Elliott Eisenberg

18 Virginia Banking | July/August 2016

Todd and Shannon Hall used their mobile devices to bid on items at the Silent Auction, which benefited the VBA BankPAC campaign.

Charley Majors, outgoing VBA Education Foundation Chairman, presented an update on the VBA’s financial literacy efforts and implored attendees to consider donating to the Foundation’s annual fund campaign.

2

015-2016 VBA Chairman Gaylon Layfield of Xenith Bank presided over an outstanding convention at The Greenbrier June 19-22.

Sunday started off with registration in the Exhibit Hall, where 19 exhibitors were on hand to provide information about their available products and services. We officially began our event with a reception later that evening.

Monday morning’s business session was kicked off with ABA Immediate Past Chairman and President and CEO of FirstBank Holding Company John Ikard, who spoke on industry challenges and opportunities, developing future leaders and the importance of being an advocate for banking. Negotiation and innovation expert Scott Wayne from the Frontier Project spoke on the topic “Cartography of Innovation.” We held four excellent breakout sessions on Monday morning, just after the general business session.

The sessions were Trends in Bank M&A presented by Stephens Inc.; Price Setting vs. Price Getting presented by PrecisionLender; Is Your Bank Utilizing the Right Management Information to Make Informed Decisions? presented by The Kafafian Group Inc.; and The Top Five Areas of Focus for Bank Management and Directors presented by Elliott Davis Decosimo. Each banker had the chance to attend two out of the four sessions.

Family members of the bankers participated in an array of activities during the morning session, including a group fitness class taught by Genise Whitehurst, wife of VBA President & CEO Bruce Whitehurst, and the Spouse Program, which was a smartphone photo workshop. Photographer Rob Garland held a tutorial and then led participants on a stroll around The Greenbrier property to practice what they learned. Rob showed attendees how to use apps and editing tools to take share-worthy smartphone photos of The Greenbrier’s most iconic scenery, decor and architecture.

About 100 people participated in the golf tournament Monday afternoon, held at The Greenbrier Course.

Another group fitness class was held Tuesday morning by Genise Whitehurst, and business session attendees heard from www.vabankers.org

Gaylon Layfield installed Bill Hayter as VBA Chairman-Elect.

As John's wife, Celeste, and Gaylon Layfield look on, 2016-2017 VBA Chairman John Stallings addresses the attendees after he is officially installed at the Tuesday night banquet.

a variety of speakers that morning as well. VBA Education Foundation Outgoing Chairman and American National Bank & Trust Company Chairman Charley Majors launched the Foundation Annual Fund Campaign after showing a video about the impact the Foundation’s programs have had on bankers, teachers and students across Virginia. The money raised during the Annual Fund Campaign allows the VBA to promote financial literacy among youth of all ages across Virginia through a variety of excellent programs focused on students and teachers. Just last year, the Foundation awarded $26,000 in college scholarship money through the VBA Bank Day program, provided $50,000 in funding for the VCEE economics and personal finance institutes for teachers and extended a $21,000 grant to help fund the creation of a Center for Economic Education in Southwest Virginia. If you would like to contribute to the Annual Fund Campaign this year, please email Courtney Fleming at cfleming@vabankers.org.

Gaylon Layfield gave a riveting Chairman’s Report about his year as chairman of the VBA before economist Elliot Eisenberg provided an economic update. Bruce Whitehurst provided a President’s Report on what the VBA has done in 2015-2016 and where we are going in the future through our strategic plan goals.

The session closed with a presidential election update from A.B. Stoddard, associate editor and columnist for The Hill newspaper.

Congratulations to 2016-2017 VBA Chairman John Stallings of SunTrust Bank, and VBA Chairman-Elect Bill Hayter of First Bank & Trust, who were elected during the Tuesday business session.

They were officially installed later that night at the Tuesday night banquet, which was preceded by a Chairman’s Reception and Silent Auction. Thank you to the contributors who made the Silent Auction a success again this year! The funds raised during the auction helped us to exceed our BankPAC campaign goal of $400,000.

After the installation, we closed our event with music from the band The Swingin’ Medallions, the “party band of the South.”

Thank you to the more than 450 bankers, sponsors, exhibitors, associates and guests for making our Convention a success!

Please save the date for our 2017 Convention, June 18-21, at The Homestead in Hot Springs, Virginia. www.vabankers.org

(From left) Laurie and Ronnie Milligan and Linda and Watts Steger at the Chairman’s Reception and Silent Auction.

A youth activity was held on Monday afternoon.

Rhonda and Bob Shoemaker enjoyed the entertainment of the evening.

The Swingin’ Medallions

Gaylon and Melissa Layfield danced to the music as they capped off Gaylon’s year as chairman.

VBA President & CEO Bruce Whitehurst’s wife, Genise, taught group fitness classes Monday and Tuesday mornings.

Each business session was packed with attendees in Colonial Hall.

July/August 2016 | Virginia Banking 19

Feedback

Regulatory

Assess Your Examination Process: Tell Us the Good, Bad and Ugly!

By Scott Polakoff Executive Vice President, FinPro Inc. and Steven Brown Klinger Director, FinPro Inc.

Visit www.allbankers.org to share anonymous information about examinations and visitations with the RFI.

B

ankers operate in a highly regulated environment, and regulatory examinations are a necessary ingredient for maintaining a safe and sound financial system. As we all know, though, examinations can often go awry for myriad reasons, and recent observations suggest that we are at risk of veering away from the collaborative approach to much more of a regulatory “gotcha” mentality.

As you may be aware, the Regulatory Feedback Initiative (RFI) consists of an anonymous electronic survey for bankers to provide an assessment of their most recent examination or visitation.

The information is aggregated and analyzed on a national level to improve the regulatory examination process for banks through two fronts: 1. Survey results are communicated to bank regulators on a routine basis when unique examination trends are discovered.

2. Custom bank reports are available to banks to aid them in preparing for an upcoming exam by identifying trending areas of focus or criticism.

20 Virginia Banking | July/August 2016

Created in 2011 by The Coalition of Bankers Associations, of which VBA is part, banks have provided feedback on over 3,000 examinations. In 2015, FinPro joined this important effort to assist with analyzing the data generated by RFI and provide suggestions for improving the survey.

The coalition’s leadership, working closely with FinPro’s advanced analytic group and staff of former senior regulators, has streamlined the survey process and improved the relevance of questions. The enhanced survey that rolled out in May 2016 has cut the number of questions by almost 50 percent, which is projected to reduce the average survey completion time from 27 minutes to less than 15 minutes.

While this new platform is very exciting, its usefulness is determined by banker involvement.

The survey results truly make a difference, and we wanted to share with you some examples of how the RFI survey provides actionable feedback.

Below are three items that, based on the responses generated by banks in the survey, the regulatory agencies should start, stop and continue: www.vabankers.org

START The Riegle Community Development and Regulatory Improvement Act of 1994 required that all regulatory agencies construct an appeals process that attempts to remedy contested filings. RFI data shows a high correlation where banks reported being “unsatisfied” or “extremely unsatisfied” with their examination to whether or not the “examination resolved issues and recommended corrective action in a fair and reasonable manner.”

Bankers’ comments yearn for a healthy appeals process that is standardized across agencies and void of regulatory retaliation.

From an article published in American Banker on April 8, 2015, titled “Fear of Retaliation Stifles Banks’ Appeals to Regulators,” FinPro’s suggestions for improvement are simple and easy to implement. First, examination standards and findings should be the same regardless of an FDIC, OCC or FRB examination team. Second, appeals should be reviewed and resolved by an interagency group of senior executives.

Third, appeals should have all names and identifiable information redacted before submission to the interagency group. Decisions should be made based on the facts of the case.

STOP Only 25 percent of the banks responding to the RFI agreed that “examiners applied ‘guidance,’ as opposed to enforceable regulation, appropriately” during their examination. The most common divergences in expectations historically surrounded the application of Appraisal and Evaluation Guidelines (FIL-822010), but most recently disagreements regarding the Guidance for Managing Third-Party Risk (FIL-44-2008) have emerged as a trend. Not surprisingly, 51 percent of the bankers who disagreed with the above statement reported their examiner-in-charge had been supervising bank examinations for less than five years.

Augmenting the experience of examiners is only one part of the solution though. Some financial institution letters, such as 44-2008, contain language stating the guidance “should not be considered as a set of required procedures.” However, others contain language that is more ambiguous. For example, 82-2010 states that “the guidelines enhance the requirements for collateral valuation methods.” The mention of requirements is understandably confusing. Changes in staffing must be combined with a more clear communication of expectations from the agencies to banks.

Safety and Soundness Examination Exam Area

CONTINUE The most bipolar results from the current RFI survey data surround exam preparation. Overall, institutions had positive feedback pertaining to the examination staff being “knowledgeable about important issues and regulatory requirements” and “knowledgeable about your institution.” This indicates an adequate level of preparation by staff prior to the examination.

However, there have been a significant number of comments pertaining to banks being given short notice to prepare themselves for the examination. Examiners should continue to be vigilant in preparing for the examination and be just as proactive in communicating information about the schedule and timing of the examination as early as possible.

In combination with providing examiners feedback, the improved survey and greater bank participation allows for better reports to aid bankers in upcoming examinations. Past comments from the survey included the desires to know such items as: • “That BSA and IT were growing hot topics” • “There is a new focus on detailed policies” • “The examiner was going to spend 75 percent of their time on interest rate risk” • “Application of UDAAP specifically to their bank” • Or generally “when the goal posts moved” We hear you, and the reports from the new survey will greatly improve your bank’s ability to stay aware of hot topics in preparation for examinations. While it is always incumbent on senior managers and directors to stay educated on current industry issues and regulations, see charts below for the areas of greatest criticism in examinations conducted over the last two years.

Bank participation is paramount to the success of the RFI. We encourage all institutions to visit www.allbankers.org to share anonymous information about their last examination.

Scott Polakoff is executive vice president and Stephen Brown Klinger is the director of FinPro Inc. For more information on FinPro’s strategic planning, capital planning, regulatory advisory, new director orientation, and board retreat facilitation services, contact them at 908-234-9398 or by emailing finpro@ finpro.us.

Compliance Examination % of

% of

Institutions

Institutions

Receiving

Exam Area

Receiving

Criticism

Criticism

Interest rate management approaches

24%

Real Estate Settlement Procedures Act

24%

Credit administration practices

23%

Regulation Z (Truth in Lending Act)

23%

Adversely classified asset levels

21%

Re HMDA/Regulation C

23%

Real Estate appraisal and evaluation processes

20%

Flood Disaster Protection Act

18%

Business Continually Planning

17%

Regulation B (Equal Credit Opportunity Act)

17%

www.vabankers.org

July/August 2016 | Virginia Banking 21

Move

Bankers on the

Are your bankers on the move? Email submissions to mmcdearmon@vabankers.org HomeTrust Bank Amy Lowman, Vice President, Mortgage Lending Manager Mary Ann Miller

Chuck Martin

Chris Bailey

Kristin Worley

Clyde Bailey

Jeff DiMeglio

Jerry Barnette

Mark Smith

Bank of Botetourt Mary Ann L. Miller, Assistant Vice President – Communications Officer Benchmark Community Bank Chris Bailey, Vice President/Financial Consultant Clyde Bailey, Vice President/Senior Loan Officer Jerry Barnette, Branch Manager Robert Bates, Vice President/Branch Manager John Webb, Vice President/Area Manager Joyce Yeatts, Vice President/Senior Loan Officer

Robert Bates

Matthew Buckley

John Webb

Kelly Nachman

Joyce Yeatts

Vincent Wood

Carter Bank & Trust Charlie H. “Chuck” Martin III, Assistant Vice-President, Marketing & Security Kristin C. Worley, Branch Manager Community Bank of the Chesapeake Aaron Fenwick, Vice President, Commercial and Industrial Loan Officer EVB Jeromy Cox, Senior Vice President – Director of Channel Distribution Strategy

John Marshall Bank Jeff DiMeglio, Senior Vice President/Regional Executive National Bank Teresa Mabe, Assistant Vice President and Office Manager Mark A. Smith, Senior Vice President and Chief Credit Officer Park Sterling Bank Brian Lange, Vice President, Business Development Officer TowneBank Matthew J. Buckley, CFP, CTFA, Managing Partner, Towne Wealth Management Kelly M. Nachman, Client Services Assistant, Raymond James Financial Services, Towne Wealth Management Vincent A. Wood III, CFA, Managing Partner, Towne Wealth Management

Legal Line continued from page 9 agents to deliver a settlement statement or a “closing disclosure” as contemplated by new federal mortgage disclosure requirements.

Revised calculation of a surviving spouse’s share of a deceased spouse’s estate. The wills, trusts and estates sections of the code were amended to provide that a surviving spouse’s elective share of a deceased spouse’s estate will be calculated as a graduated percentage, taking into account both spouses’ assets and the length of marriage. This change is consistent with revisions made to the Uniform Probate Code by the Uniform Law Commission.

Uniform Powers of Appointment Act. The wills, trusts and estates sections of the code were amended to codify the Uni22 Virginia Banking | July/August 2016

form Powers of Appointment Act, which provides an estate planning tool that permits the owner of property to grant a third party the power to direct the distribution of that property among some class of eligible recipients. The act was adopted by the Uniform Law Commission.

Voluntary nonsuits toll statutes of limitation and contractual periods of limitation. Section 8.01-229 was amended to provide that a voluntary nonsuit tolls a statute of limitations and a contractual period of limitation. Banks may want to consider this when drafting limitations periods in contracts.

Exemption of annuity contracts and life insurance policies from some creditor claims. Section 38.2-3122 was amend-

ed to exempt the cash surrender value or proceeds of any life insurance policy or annuity contract from execution, attachment, garnishment or other legal process in favor of any creditor of the insured or a beneficiary or owner of the policy or contract. These provisions do not apply to insurance or annuities acquired or assigned in writing for the benefit of a creditor, such as when provided as collateral for a bank loan.

This article has been prepared for informational purposes only and is not legal advice.

For more information about these and other new Virginia laws affecting banking, contact Mel Tull, VBA general counsel, at mtull@ vabankers.org or (804) 819-4710. www.vabankers.org

Virginia Bankers Association

Thanks You!

Board Members

Chairmen

Committee Members Thank you to all of our board members, committee members, chairmen, and the hundreds of bankers that attend our education and training events, support our legislative initiatives, and participate in our many programs. We appreciate your service and dedication to the industry!

Register Now:

2016 VBA Leadership Conference October 6-7, 2016 | Hilton Downtown Richmond This conference is designed for emerging industry leaders and members of the Virginia Bankers Association Emerging Bank Leaders (EBL). This conference will provide an opportunity to share ideas and network with peers from across the state.

Hilton Richmond Downtown 501 East Broad Street Richmond, VA 23219 Members - $395.00 per person Non-Members - $895.00 per person Spouse/Guest (Includes Dinner/Reception on Thursday) - $75.00 per person Register online at www.vabankers.org/leadership-conference. Contact Chandler Owdom at cowdom@vabankers.org for more information.