Virginia Banking Jan/Feb 2017

January/February 2017

6th Annual

Financial Forecast IN THIS ISSUE

VBA MEMBER SPOTLIGHT: MICHELLE CROOK, BANK OF BOTETOURT

VBA ENDORSED PROVIDERS

ENDORSED

VBA Management Services, Inc. is dedicated to providing our member banks with quality products and services that can save your bank time, money and resources, as well as enhance profitability. With the guidance of the VBA MSI Board of Directors, the VBA completes a stringent, ongoing due diligence review of each endorsed provider to ensure that we are offering high value, dependable solutions that our members can count on.

ABA Community Mortgage - Mortgage & Real Estate Services

Office Depot - Office Supplies

ABA Discover Debit - Debit Card Program

Promontory Interfinancial Network, LLC - CDARS and ICS

ABA Insurance Services Inc. - Insurance Services

PWCampbell - Retail and Design/Build Services

ANOVA Financial Corporation - Investment Alternatives Bankers Insurance - Insurance Services Compliance Alliance - Compliance Assistance CRA Partners - Senior Housing Crime Prevention Program

S&P Global - Data and Analytic Tools Thomas Compliance Associates - Compliance Services TSYS|TransFirst - Merchant Card Processing UMB - Credit Card Program UPS - Express Mail Delivery

Decision Dynamics, Inc. - Vehicle Title Management

VBA Career Center - Online Job Postings

Equias Alliance - Employee Benefits/ Insurance

VBA Identity Theft Program

VBA Thumbprint Signature Program

FraudFighter - Uveritech - Counterfeit Detection Scanner

Virginia Community Development Corporation Community Revitalization Opportunities

Harland Clarke - VBA Check Program

WolfPAC Integrated Risk Management - Risk Management Solution

Infinex Financial Group Investment and Insurance Services

Zurich Insurance - Insurance Services

Investors Title Insurance Company - Title Insurance Services For more information, contact Matt Bruning at mbruning@vabankers.org or 804-819-4704.

January/February 2017

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 Ravi Chandra, Wells Fargo Bank, N.A. 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 Brad E. Schwartz, TowneBank Joe A. Shearin, EVB Susan K. Still, HomeTown Bank Daniel G. Waetjen, BB&T Michael O. Walker, Benchmark Community Bank 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, Blue Ridge Bank 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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Sixth Annual Financial Forecast

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 2017.

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feature

16

VBA Member Spotlight: Michelle A. Crook Senior Vice President & Chief Financial Officer, Bank of Botetourt

in every issue 4 Calendar of Events 5 Insights 7 Legal Line 8 Legislative Update 9 Worth Noting 10 Compliance Corner 11 Washington Update 18 New Associate Members 19 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.

Contact Walt Lyons at wlyons@vabankers.org to be added to the VBA’s Weekly Webinar Update.

INSTRUCTOR-LED SEMINARS

WEBINARS

BACK TO SCHOOL AT THE VBA - GLEN ALLEN FEBRUARY 16, 2017

LEADING THE PROSPECTING EFFORT FEBRUARY 7, 2017

SECURITY RISK WORKSHOP - CHARLOTTESVILLE FEBRUARY 28, 2017

BASIC ESTATE PLANNING AND ESTATE SETTLEMENT FEBRUARY 7, 2017

RETAIL BANKING & MARKETING CONFERENCE - CHARLOTTESVILLE MARCH 8-9, 2017

2017 LEGISLATIVE UPDATE FEBRUARY 8, 2017

ANTI-MONEY LAUNDERING & BANK SECRECY ACT 2-DAY SCHOOL GLEN ALLEN MARCH 14-15, 2017

THE FUTURE OF SMALL TOWN BANKING - 3 STEPS TO RENEWED SUCCESS IN 2017 FEBRUARY 8, 2017

VBA/ABA GOVERNMENT RELATIONS SUMMIT - WASHINGTON, DC MARCH 20-22, 2017

STRATEGIES FOR FAMILY BANKS FEBRUARY 9, 2017

VBA/ABA CRCM BOOT CAMP - NASHVILLE, TN MARCH 20-24, 2017

LOAN UNDERWRITING MISTAKES FEBRUARY 9, 2017

COMPLIANCE SCHOOL & ADVANCE COMPLIANCE SESSION CHARLOTTESVILLE APRIL 3-7, 2017

SECRETS OF BUYING AND SELLING A COMMUNITY BANK FEBRUARY 14, 2017

VBA/VACB BANK DIRECTORS’ SYMPOSIUM – CENTRAL - GLEN ALLEN APRIL 5, 2017 VBA/VACB BANK DIRECTORS’ SYMPOSIUM – SOUTHWEST - ROANOKE APRIL 6, 2017 CONSUMER LENDING SCHOOL - GLEN ALLEN APRIL 19-20, 2017 HR & TRAINING CONFERENCE - CHARLOTTESVILLE MAY 8-10, 2017 FUNDAMENTALS OF CREDIT ANALYSIS & BUSINESS FINANCING GLEN ALLEN MAY 9-10, 2017 REAL ESTATE LENDING COMPLIANCE SEMINAR - CHARLOTTESVILLE MAY 16-18, 2017 OPERATIONS & TECHNOLOGY CONFERENCE - CHARLOTTESVILLE MAY 16-17, 2017 BANK MANAGERS 2-DAY SCHOOL - GLEN ALLEN MAY 23-24, 2017 VBA SCHOOL OF BANK MANAGEMENT - CHARLOTTESVILLE JULY 30-AUGUST 4, 2017 CFO CONFERENCE - RICHMOND AUGUST 28-30, 2017 BSA/AML COMPLIANCE MANAGEMENT SEMINAR - KINGSPORT, TN SEPTEMBER 11, 2017 COMMERCIAL LENDING SCHOOL - GLEN ALLEN SEPTEMBER 26-27, 2017 LEADERSHIP CONFERENCE - STAUNTON OCTOBER 12-13, 2017 CREDIT MANAGEMENT CONFERENCE - CHARLOTTESVILLE OCTOBER 30-31, 2017 WOMEN IN BANKING CONFERENCE - MANAKIN SABOT NOVEMBER 9, 2017 ENTERPRISE RISK MANAGEMENT WORKSHOP - GLEN ALLEN NOVEMBER 15-16, 2017

4 Virginia Banking | January/February 2017

IRA BENEFICIARY DISTRIBUTIONS FEBRUARY 22, 2017 FORMATION AND USE OF THE BANK HOLDING COMPANY FEBRUARY 15, 2017 A BEGINNERS GUIDE TO ASSET/LIABILITY MANAGEMENT, RISK APPETITE & CAPITAL PLANNING: SETTING THE ROADMAP TO FUTURE GROWTH & PROFITABILITY FEBRUARY 15, 2017 YOUR DEPOSIT BASE - WHAT IT TELLS YOU TODAY AND HOW YOU CAN USE IT AS AN OFFENSIVE WEAPON FEBRUARY 16, 2017 OUTSOURCING TECHNOLOGY - RISKS AND REWARDS FEBRUARY 21, 2017 COMMERCIAL REAL ESTATE CASH FLOW: ANALYZING INCOMEPRODUCING OR RENTAL REAL ESTATE, PLUS GLOBAL CASH FLOW ISSUES FEBRUARY 21, 28, MARCH 7 & 14, 2017 COMMERCIAL REAL ESTATE APPRAISALS: REVIEWING AND INTERPRETING FEBRUARY 21, 28, MARCH 7 & 14, 2017 KEYS TO UNDERSTANDING PERSONAL AND GLOBAL CASH FLOW FROM TAX RETURNS FEBRUARY 21, 28, MARCH 7 & 14, 2017 CREATE A CULTURE OF EMPLOYEE ENGAGEMENT AND REDUCE TURNOVER FEBRUARY 22, 2017 LEVERAGING THE MIDDLE OF YOUR ORGANIZATION FEBRUARY 23, 2017 DETECT AND RESPOND TO CATO FRAUD FEBRUARY 23, 2017 INTRO TO COMMERCIAL LENDING FEBRUARY 28, 2017 INTRO TO CONSUMER LENDING MARCH 1, 2017 TOP 10 IRA ISSUES MARCH 1, 2017

www.vabankers.org

Insights Lessons From Leaders “A leader is one who knows the way, goes the way and shows the way.” – John Maxwell

I Bruce Whitehurst President and CEO, Virginia Bankers Association

www.vabankers.org

have said many times that one of the best parts of my job is how often I have the chance to interact with – and learn a lot from – accomplished leaders. This was certainly true at a recent VBA meeting for new and recent bank CEOs. Our program featured a panel of three great leaders in Virginia banking who have all chaired the VBA: Joe Boling, chairman emeritus and retired longtime CEO of Middleburg Bank; Gordon Gentry, Peninsula chairman of TowneBank and retired CEO who led two Peninsula banks; and Rob Gilliam, retired longtime president & CEO of First National Bank in Altavista.

We asked these esteemed friends to talk about their banking careers and share leadership lessons. The conversation was rich and valuable and I am pleased to provide a synopsis of six lessons these three fine gentlemen shared with us.

Surround yourself with the best people and keep them happy. Building a culture that values, recognizes and rewards employees is a recipe for success. When your employees feel good about where they work, that will radiate as they interact with each other, with customers and with prospective clients.

Build a strong senior management team and learn to delegate. The more you delegate, the more you empower your team and challenge them to enhance their capabilities. Be collaborative and inclusive as you lead your team. Instead of, “this is what we are going to do,” start with, “what do you think?” A strong senior management team is a clear sign of a great leader.

Build a quality and diverse board of directors. Board engagement is critical to a bank’s success and having the right mix of directors will lead to an engaged board. Diversity is often mentioned as an important goal in connection with boards; what gets less discussion is how much strength comes from a diverse board, as members bring a wider range of experiences to the table and views are broadened in the process.

Be visible and accessible to employees and customers. Harold S. Geneen said, “Leadership is practiced not so much in words as in attitude

and actions.” As you are the one who sets the tone and articulates the vision for your company, being accessible and interacting with employees and customers gives you valuable feedback and the opportunity to reinforce your company’s culture and values.

Don’t be afraid of risk. We can interpret risk in different ways – especially in the banking business – but this is about taking career risks.

One of our panelists reminded us of the saying, “you can never steal second base if you always keep your foot on first.” Leaders tend to be those individuals who have taken on some career risk and have found it to be rewarding, even when things didn’t go as planned. At a minimum, valuable learning will result from taking career risk.

Be invested in the VBA; it’s the best ROI on your time you will find. OK, this sounds pretty good from the writer’s perspective, but – with bias admitted – it also rings true. Our panelists pointed to the peer networking, friendship building and learning that occur for those active in the VBA. They spoke to the VBA’s depth of professional development opportunities – not just from training events, but also from being active as a banking industry advocate.

As we start a new year with a degree of optimism for our industry that we have not felt for quite some time, it is also a good time to reflect on these lasting leadership lessons. They have worked very well for Joe, Gordon and Rob throughout their impactful careers and I know they are also valuable to all current and future industry leaders.

“Leadership is not about a title or a designation. It’s about impact, influence and inspiration. Impact involves getting results, influence is about spreading the passion you have for your work, and you have to inspire teammates and customers.” – Robin S. Sharma Email Bruce Whitehurst at bwhitehurst@ vabankers.org with any comments on this article or tweet him at @BruceTW. January/February 2017 | Virginia Banking 5

Engage with the VBA - Join a Committee!

Committee involvement is an integral part of the success of the Virginia Bankers Association!

The VBA has a number of committees in which member bankers from across the Commonwealth participate. The purpose of the committees is to provide input to the VBA on matters affecting the banking industry and the committee’s functional area of banking, provide input to VBA’s education and training department on the training needs of their functional area, provide a forum for exchange of ideas and for networking that will benefit each committee member and his/her bank, and identify possible legislative and/or regulatory issues on which the VBA should focus as the banking industry’s advocate.

Our Committees: •CFO Committee •Compliance Committee •Emerging Bank Leaders Committee •Enterprise Risk Management Committee •Government Relations Committee •HR Committee •Legal Affairs Committee •Legislative Executives Committee

•Lending Executives Committee •Marketing Committee •Mortgage Executives Committee •Operations & Technology Committee •Retail Executives Committee •Security Committee •Training Committee •Trust & Wealth Management Committee

Join a Committee: If you have enthusiasm and creative ideas, we would like to hear from you. Please take the time to visit our website at www.vabankers.org and click “Get to Know the VBA” and fill out the form under “VBA Boards and Committees”. Your form will be reviewed by the VBA, and your appointment to a committee will be subject to availability and approval by the VBA Chairman. Committee meetings vary by group, but most hold one meeting per quarter, whether in-person or via conference call.

If you have any questions about committees or committee service, please contact Grace Stephens at gstephens@vabankers.org or 804-819-4720. Committee placements will be made in June, with first meetings held in September. Committee members are asked to serve for one year, but may be reappointed.

We hope you will consider joining us on a committee this year!

Line

Legal

Dual-Signature Checking Accounts

S Mel Tull General Counsel, Virginia Bankers Association

www.vabankers.org

mall businesses, non-profit charities, partnerships, co-executors and cotrustees sometimes use dual-signature checking accounts as an internal accounting control procedure. If not implemented carefully, these accounts can make banks liable when the customer’s personnel fail to comply with the customer’s internal dual authorization requirement. For this reason, some banks simply refuse to open dual-signature accounts, which frustrates customers and bankers alike. There are several ways banks accommodate these customers’ needs without undue risk.

MODERN-DAY CHECK PROCESSING AND THE UCC To understand the issues involved requires a basic understanding of modern-day check processing and applicable sections of the Uniform Commercial Code (UCC). Until about forty years ago, banks manually verified all check signatures against account signature cards where requirements for multiple signatures were noted. As the number of checks increased and customers demanded faster transactions, check processing became automated. Today, automated systems process hundreds of checks per minute. It is not feasible to verify signatures on all these checks.

Nor is signature verification an effective fraud prevention method because people’s signatures change over time and high resolution scanning technology makes forging signatures easy and undetectable. Today, most banks use risk management programs and fraud filters to identify fraudulent checks, and only suspect checks are manually inspected.

Acknowledging industrywide acceptance of automated check processing, the UCC was revised to provide that “ordinary care” and “reasonable commercial practices” for banks processing checks by automated means do not require manual examination of checks if the bank follows prescribed procedures and does not vary unreasonably from general banking practices.1 Accordingly, a bank that pays a dual-signature check with only one signature because the bank’s automated check processing system did not verify there were two signatures likely will not be liable to the customer for negligence for failure to

exercise ordinary care or reasonable commercial practices.

However, the UCC also provides that a bank may only charge the account of a customer for checks that are “properly payable,” and that a check is properly payable if it is “authorized by the customer” and is in accordance with an agreement between the customer and bank.2 The UCC further provides that, “[i]f the signature of more than one person is required to constitute the authorized signature of an organization, the signature of the organization is unauthorized if one of the required signatures is lacking.”3 While not necessarily negligent, a bank that pays a dual-signature check with only one signature is strictly liable for re-crediting the customer’s account because the check is treated as having an “unauthorized signature” and is not “properly payable” and cannot be charged against the customer’s account.

PRODUCT OPTIONS There are several ways banks mitigate the risks associated with multiple signature checks. One way is by not offering dual-signature accounts, which may cost the bank some business. Another solution is offering a dual-signature checking account as a special product with procedures to manually inspect all checks written on the account. Additional fees are often charged to compensate for the manual processing and increased liability risk.

Other banks offer dual-signature accounts where the account contract clearly indicates that payment is authorized by a single signature, but that the face of the customer’s checks will have two signature lines to accommodate the customer’s internal dual-authorization procedures.

According to one UCC expert, “[t]his type of provision should be enforceable under the freedomof-contract principle codified in UCC § 4-103(a),”4 which provides that the effect of the UCC provisions discussed above “may be varied by agreement” as long as the agreement does not limit a bank’s responsibilities to act in good faith and exercise ordinary care. This type of agreement varies the effect of the UCC provisions discussed Continued on page 9 January/February 2017 | Virginia Banking 7

Legislative

Update

New Year, New Advocacy Resolutions

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

aving bid farewell to 2016 – fondly or finally – and welcomed in 2017, hopefully each of us is energized and expectant for the promises of the New Year.

Roughly half the population made a resolution as the calendar turned, whether to eat healthier, spend more time with your family or finally take that dream vacation. It is often said that writing out a goal increases the chances of achievement.

However, studies show of those who made resolutions, nearly a quarter are broken before the end of January and less than half remain faithful to it by mid-year.

At the VBA, we hope you include starting or increasing your involvement with your association as part of your resolution – and one that you keep! On the grassroots advocacy side, we want to help you succeed in bucking the statistics and staying true to your resolution throughout the year. To that end, we have a number of ways for bankers to actively engage in our industry advocacy efforts.

The 16th Annual Banker Day in Richmond occurred on January 12th. Thank you to all those who participated in these important meetings with your local state legislative leaders. Engaging with those elected representatives as they begin their duties in this year’s General Assembly session forges relationships between our bankers and those who represent the communities they serve. Even in the absence of major policy battles such as last year’s legislative offensive from the credit unions, raising the visibility of our unified industry and connecting constituent bankers with legislators advances our shared cause in educating officials and promoting the positive impact each of you makes to your customers.

Beyond Banker Day, the VBA will provide opportunities to engage with your state lawmakers throughout the year. Our regional fall state legislative meetings bring bankers and legislators together around Virginia to reinforce those relationships at a local level, away from the bustling of the session at the Capitol. We hope you will commit to attending a meeting in your area later this year and encourage others at your bank to

join you.

All eyes will be on Washington as the new administration and Congress set out to tackle the major issues raised in the election – health care, tax reform, immigration and trade are likely targets for action. To ensure overdue regulatory reform and relief for the banking industry has a top spot among those issues competing for attention, we must bring all the force and tools we have in making our case. There is no better means to advance our position and state our demand for real results than directly to our congressional delegation. With the opportunities in 2017, you can do your part to achieve the industry’s resolution for meaningful change on Capitol Hill’s approach to banking by coming – and bringing others – to the VBA/ABA Government Relation Summit on March 20-22 for our visits with Virginia’s members of Congress. Virginia has historically had almost 100 bankers join the other hundreds of bankers in Washington in the spring to deliver our message; imagine the impact 200 Virginia bankers would have as Congress sets their agenda. With three new members of the House of Representatives from Virginia, educating them and urging all our federal officials to act is critical if any success is to be attained.

The face-to-face opportunities to engage with policy makers offer the most impact and we hope your participation in those events are one of your top resolutions for 2017. However, there are other ways you can pledge to be involved. When we ask you to send a message on a key bill to your representative, take the short amount of time to take action. As we seek to maximize our political levers, we hope you will consider contributing to the VBA BankPAC campaign. If you have or want to build a relationship with your local elected officials, let the VBA know so we can assist in making a connection or leveraging an existing association. While we hope each of these make it on your 2017 resolutions list, at least resolve to find one new advocacy option to commit to this year. The VBA stands ready to ensure you keep that commitment, even if your love of cookies has already derailed your other New Year ambitions.

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

8 Virginia Banking | January/February 2017

www.vabankers.org

Noting

Worth

MIKE WALKER ANNOUNCES RETIREMENT

Michael O. Walker, CEO of Benchmark Community Bank, will retire in May 2017 from his leadership position and board role. Walker has led the company and bank for over a decade and under his leadership, Mike Walker Benchmark has received numerous national awards and almost doubled in size. After his retirement, he will continue to serve as an advisor to management and the Board of Directors. Jay A. Stafford, president of Benchmark Community Bank, will become president and CEO of both the company and the bank Jay Stafford upon Walker’s retirement. We wish Mike all the best in his retirement.

WE WILL MISS…

Garrett with Walter Ayers, past VBA president & CEO.

Garrett, left, with Norman Robinson, Walter Ayers, and Bruce Whitehurst.

Barbara “Bobbie” Allen Garrett, beloved VBA Vice President of Professional Development from 1972-1996, passed away December 8, 2016 after battling Alzheimer’s in recent years. Among her duties at VBA, Bobbie led the Virginia Bankers School of Bank Management for 15 years, making a lasting impact on the many bankers who attended during that time and who became her adoring fans. Bobbie was a lifelong resident of Richmond and was very active in the community, including the Salisbury Presbyterian Church, the Salisbury Woman’s Club, past president and member of the senior board of Children’s Hospital for over 50 years, the Richmond Public Relations Association, and the Tuckahoe Woman’s Club. Bobbie is survived by her husband of 63 years, H. Lewis “Buddy” Garrett. Our thoughts are with her family at this difficult time.

Legal Line continued from page 7 above such that a two-signature check signed by one person will be “authorized by the customer” and “properly payable” by the bank. The following statements should be included in the agreement: • the bank processes claims on an automated basis, based on information encoded on checks; • automated processing reduces costs, to the benefit of all bank customers; • because of automated processing, the bank cannot compare signatures or determine that a dual-signature requirement is being violated; • any dual-signature requirement is a matter that is internal to the customer, whether the bank knows of it or not; • the customer cannot assert a claim against the bank for permitting a transaction that violates the customer’s dual-signature requirement; and • if the customer wants the bank to sight-review presented checks for violation of the customer’s dual-signature requirement, it must give specific notice to the bank and pay a fee for the service.5 A checking account with “positive pay” features is yet another option offered by many banks. Positive pay is a fraud prevention tool where one customer representative has authority to sign checks, and another customer representative has authority to approve checks presented to the bank for payment.

Checks not approved by the second individual upon presentment to the bank are not paid by the bank. Additional fees are www.vabankers.org

often charged for these accounts to compensate for the additional systems and procedures and added liability risk.

TAKEAWAYS One takeaway is that there are a variety of products offered by different banks, and customers should shop around to find the products or services that most closely align with their needs and preferences. Another takeaway is that banking laws and regulations should not treat banks as utilities that are required to offer commodity products and services. For banking products and services to evolve with technological advances and modern business practices, banking laws and regulations must encourage flexibility, creativity and entrepreneurial innovation.

For more information about the dual-signature account matters discussed in this article, contact Mel Tull, VBA General Counsel, at mtull@vabankers.org or (804) 819-4710. This article has been prepared for informational purposes only and is not legal advice.

Footnotes 1.

UCC § 3-103.

2.

UCC § 4-401.

3.

UCC § 3-403.

4. See 2 Clark and Clark, The Law of Bank Deposits, Collections and Credit Cards (3d ed. 2014), § 10.02[2], p.10-30, for more information about this type of contractual provision.

5. Id. at p. 10-31.

January/February 2017 | Virginia Banking 9

Compliance

Corner

Understanding CMS Controls In Depth

A James F. Dray, CRCM President, Thomas Compliance Associates

merican Banker recently published an article titled “CFPB Bullied Me.” This article detailed the experience of a Loan Officer who “ran afoul” of the CFPB and was issued a Consent Order. This loan officer allegedly developed a scheme to manipulate escrow fees to close more mortgages and boost his bonus. The loan officer decided to sign the Consent Order because litigation would be too costly. The settlement amounted to $85,000 to be paid personally by the loan officer. This is obviously costly to the lender and also adds to the reputation woes of his employer.

According to the CFPB press release, the loan officer capitalized on an arrangement with a third-party vendor to “shift around” escrow fees, lowering them for certain customers and making up for the cost by assessing higher fees on other customers. The CFPB used its authority to take action against what they characterized as unfair, deceptive or abusive acts or practices and said the arrangement also violated the Real Estate Settlement Procedures Act, which prohibits fees and kickbacks for referrals related to real estate settlement services. The loan officer told the CFPB, “At no time did I understand or believe that the way I structured my clients’ loans was in violation of RESPA or any other law or regulation. In fact, I was never provided any guidance or training regarding RESPA during the period at issue.”

So, what can we learn from this disastrous tale?

Banks must assess and manage risk by developing controls, such as vendor due diligence, monitoring and training. Training is a critical control for every compliance management system. The guilty person claimed poor training, but as bystanders we can only speculate. What is clear is that compliance training is not just a way to develop staff and a compliance culture. Documentation of compliance training serves as a record that training was completed. Adequate training records can impact where liability could fall.

During compliance examinations, lack of training or insufficient training is often the de facto root cause when violations are discovered. TCA compliance consultants have shared their insight into best practices and common findings they identified in audits they found or learned from examiners.

10 Virginia Banking | January/February 2017

Ensure training includes internal procedures.

Training should not just include the “nuts and bolts” of the law or regulation; but should also include internally developed procedures. Written procedures help to ensure consistent standards and establish accountability. Make sure you are frequently reviewing procedures for key processes with staff on a periodic basis.

Document all training efforts. Make sure you document all training efforts, including coaching sessions. The tale of the “bullied banker” could have turned on the documentation of training provided to the employee.

Examiners expect advanced training for key managers and employees. The Compliance Officer and persons with key compliance responsibilities need advanced training. Examiners are not rubberstamping approvals of compliance training; what is covered, its depth and competency of understanding are being reviewed now. The expectation is that there is a compliance culture throughout the organization and staff is knowledgeable about the rules.

Ensure the Board is receiving the right training. Some topics, such as BSA/AML, must be covered annually by law. Regulators expect the Board to remain aware of their responsibilities for oversight and governance of the Compliance Management System (CMS). In addition to BSA/AML training, we recommend a Board compliance training schedule that includes Fair Lending, Cybersecurity Awareness and Privacy. The schedule of additional training topics should be driven by the specific compliance risks of your institution.

Ensure your training efforts include new or changing laws and regulations. Training needs to be more comprehensive when there are new or changing laws or regulations. At a minimum, compliance training on new regulations and laws should include all staff touched by the new rules. The mantra that compliance is everyone’s job holds true.

Training as a response to identified weaknesses.

You often hear that the standard of a good CMS is your ability to self-identify your compliance shortcomings and self-correct them. The Compliance Officer should ensure that appropriate training which addresses specific weaknesses is completed by afContinued on page 15 www.vabankers.org

Update

Washington

A Winning Game Plan for 2017

T Rob Nichols President and CEO, American Bankers Association

www.vabankers.org

o say the 2016 election changed the outlook for banking policy is something of an understatement. It fundamentally altered the landscape and set the stage for a potentially very productive year in Washington. That’s not to say there won’t be challenges. Here’s what bankers hoping for meaningful regulatory relief need to know.

With a Republican House, Senate and White House, odds of pro-growth legislation being enacted are significantly increased but not guaranteed. For any bill to succeed, it will need 60 votes in the Senate. That means bipartisan support – and strong grassroots engagement by bankers – is essential. That said, it’s clear our industry will be starting 2017 with our advocacy efforts closer to the 50 yard line than our own five yard line.

This greatly improves our odds of scoring important successes for economic growth.

The outlook is also positive on the regulatory side, where new leadership at the banking agencies will provide many significant opportunities to improve banking conditions. The Trump administration will have the task over the next several months of appointing new heads of the OCC (Comptroller Tom Curry’s term expires in March), FDIC (Chairman Marty Gruenberg’s term expires in November), Federal Reserve Board (Janet Yellen’s term as chair expires in February 2018) and the Consumer Financial Protection Bureau (Director Richard Cordray’s term expires in July 2018). ABA will work collaboratively with the new leadership at these and other key regulatory agencies as we seek to reform and modernize the regulatory system itself.

Of course, the agenda in Washington will be very crowded, and we’ll need to work together to make sure our policy priorities get – and stay – on Congress’ radar. It helps that our priorities are geared toward helping our customers, clients and communities thrive, a goal that clearly aligns with lawmaker concerns.

In fact, when ABA’s Government Relations Council leadership and Board of Directors met in December, the bankers discussed the value of advocating not just much-needed changes like mortgage lending regulatory relief and simpler capital rules, but also policy solutions that are

less parochial in nature and help the economy grow.

These include ways to help those with heavy student debt, urban housing solutions and a stronger Small Business Administration. The council and board members agreed that it made sense to embrace such big-picture issues given the role bankers play as community leaders and economic stewards.

It’s even more important that the policy positions we advocate are positive and forwardlooking, and tell the story of what banks are for, not what we are against. We are for economic growth. We are for job creation. We are for prosperity for our communities. Such optimism drives our industry, and it’s what should drive our advocacy, too. It’s far more compelling than an anti-this, anti-that platform.

So how can we best take advantage of the more favorable legislative and regulatory climate to ensure our “Blueprint for Growth,” as we are referring to our policy priorities, is advanced? The single most important way is for you and bankers like you to actively engage at the grassroots level. That means working closely with the Virginia Bankers Association to ensure your state’s lawmakers – whether they are newly elected freshmen or seasoned politicos – are hearing from you and your colleagues early and often.

It also means showing up in force at this year’s ABA Government Relations Summit, March 20-22 in Washington. This event is the largest industry meeting in our nation’s capital, with around 1,000 bankers with a range of titles and responsibilities attending each year. Given all that is at stake this year, I hope we will double that number. This simply must be our largest and best attended Summit ever. To that end, if you’ve attended the Summit before, please come again and bring a colleague. And if you’ve never attended the Summit before, make this your year to start. (Find out more at aba.com/Summit.)

The 2016 election was a game-changer in many ways, but there’s one thing that remains the same: it will take the help of bankers from the Csuite to the tellers on the front lines to move the ball down the field and score meaningful legislative victories.

E-mail Rob Nichols at nichols@aba.com.

January/February 2017 | Virginia Banking 11

6thAnnual

Financial Forecast Hosted by the Virginia Bankers Association and the Virginia Chamber of Commerce

O

n January 6, more than 680 bankers and business people attended the Virginia Bankers Association/ Virginia Chamber of Commerce 2017 Financial Forecast at the Greater Richmond Convention Center in downtown Richmond. Each year, this event brings together business leaders from across the Commonwealth to discuss what lies ahead for Virginia and the economy.

This year’s Forecast speakers were Dr. Sean Snaith and Retired Rear Admiral Bob Day. Dr. Snaith, director of the University of Central Florida’s Institute for Economic Competitiveness, discussed the direction of the economy in the US and Virginia for 2017 in light of the recent election. Admiral Day, who served as the executive director of Governor McAuliffe’s commission on cybersecurity and is the principal at Bob Day and Associates LLC, discussed the cybersecurity landscape in Virginia. He warned at12 Virginia Banking | January/February 2017

tendees of the “cyber battlefield” and the seriousness and presence of cyber hacking not only in the US, but around the world.

Admiral Day predicted that Virginia will become the “Silicon Valley of the East,” noting the amount of talent that is in Virginia.

Welcome and speaker introductions were given by Bruce Whitehurst, president & CEO, Virginia Bankers Association; Thomas C. Palmer, regional vice president and senior vice president, commercial banking, Wells Fargo NA, and chairman of the Virginia Chamber of Commerce; JP O’Sullivan, senior director, global financial solutions & real estate, S&P Global; and John Stallings, president & CEO, Virginia Division, SunTrust Bank and chairman of the Virginia Bankers Association.

Thank you to all who attended the 2017 Financial Forecast.

Please save the date for the 2018 Financial Forecast on January 5, 2018. www.vabankers.org

www.vabankers.org

January/February 2017 | Virginia Banking 13

6th Annual Financial Forecast continued from previous page

2017 VBA LEADERSHIP CONFERENCE

“ALIGN”

A CONFERENCE FOR VIRGINIA’S EMERGING BANK LEADERS OCTOBER 12-13, 2017 | STONEWALL JACKSON HOTEL | STAUNTON EARLY REGISTRATION: $395 UNTIL SEPTEMBER 7TH

PAR TY LINES: LEGISLATIVE UPDATE

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COLORING OUTSIDE THE LINES: INNOVATIVE LEADERSHIP LESSONS

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14 Virginia Banking | January/February 2017

LINE UP: CONFERENCE FEATURES

RE!

www.vabankers.org

Compliance Corner continued from page 10 fected staff and management. Documentation of these efforts is critical. Follow-up comprehension testing is a prudent step to remedial training.

Training must be job-specific. Different managers or staff have different responsibilities for different compliance processes.

Compliance training should be specific to the role of the trainee.

A broad overview of all of the red flags, without making the training specific to how it might be detected within each business unit, is not going to give you the best results you need.

Include expectations for training in job descriptions and assess compliance competency during performance evaluations.

If it is in the job description, an employee knows from the start they are expected to comply with all compliance regulatory requirements. Having compliance as part of performance evaluations reiterates to the employee how important compliance is.

Stagger training due dates throughout the year. It never looks good to have employees (and worse, managers) racing to complete a year’s worth of compliance training in December. In fact, examiners have told us that may lead to more scrutiny of compliance training. Staggering due dates throughout the year will help to keep compliance awareness high and help to maintain the compliance culture.

Hold employees accountable for assigned due dates. Establishing accountability can be done in many ways and it is up to each banker www.vabankers.org

to decide how to enforce it. However, holding persons accountable for assigned training means it is critical to monitor and have an escalation plan when assigned training is not completed in a timely manner.

Always assess the effectiveness of training efforts. Seldom do we find that training is not occurring. More frequently, root causes for deficiencies are tracked back to ineffective training.

Web-based programs are nice in that we can check a box to show the examiner that staff has been trained, but the general regulation knowledge often provided by web-based training courses does not equip staff to understand bank-specific policy and procedures. We have found that, for training to be truly effective, it must include an operational perspective integrated into the training materials.

Thomas Compliance Associates, a VBA Endorsed Provider, provides banks with the compliance insights, analysis, information, and hands-on assistance that allows them to meet the demands of the federal banking agencies. TCA’s audit and consulting services reflect the regulators’ increasingly complex compliance management requirements. Contact their Virginia-based compliance professionals, Brenda Payne, CRCM, senior regulatory affairs consultant at b_payne@tcaregs.com, or Margaret Dolinger, CRCM, compliance consultant at m_dolinger@tcaregs.com to discuss the benefits of a TCA partnership.

January/February 2017 | Virginia Banking 15

Member

Spotlight

Michelle A. Crook

Michelle joined Bank of Botetourt in 1993.

She graduated Magna Cum Laude and Salutatorian from Roanoke College in 1993 with a Bachelor of Business Administration.

During her career, she has served as marketing officer and branch manager before being named CFO of Bank of Botetourt and Botetourt Bankshares, Inc. in 2005. Michelle has been a member of the CFO Committee of the Virginia Bankers Association since 2008 and served as Chairman from 2015-2016.

Michelle is a graduate of the Virginia Bankers School of Bank Management at the University of Virginia and is also a graduate of the Graduate School of Banking at Louisiana State University. She earned her Master of Business Administration degree from Troy University in 2005.

Senior Vice President & Chief Financial Officer, Bank of Botetourt 1. My three goals for the next year: Every New Year I have a strong urge to establish goals for the year, like clean my closets, eat cleaner and exercise more! 2017 is going to be a steep learning curve for me as I am a “newbie” in so many areas right now. As I enter my 24th year in banking, I will benefit from being challenged to this degree at this stage of my career.

• Professional Career: Bank of Botetourt’s SVP of Human Resources, a 46 year banking veteran, will be retiring in the not so distant future and I will be assuming some of her HR related duties in addition to my role as CFO. As a result, I face a learning curve as I step into a new facet of banking in 2017 while training with her.

• Professional Career: As a newly appointed member of the Botetourt County School Board, I have a lot to learn! This is unchartered territory for me as well but I look forward to the opportunity to represent the Buchanan District in Botetourt County.

• Personal: I want to learn to cook at least two of my mom’s dishes in 2017. She is a great cook and I have very limited skills in the kitchen. I want to be able to carry on the tradition of some of her favorite recipes.

2. My Media Mix: a. Music: I am not musically inclined despite coming from a musically talented family. I am stuck in the 80s, my favorite genre of music. I typically listen to Top 40 pop music on the radio. For fun I just pulled up my “recent history” on my iPhone and found this list: George Michael, Van Halen, Def Leppard, Sheryl Crow, Eminem, Roy Orbison, Tom Petty, Stevie Nicks, and Old Dominion. b. TV: This is my favorite time of year…college basketball season and March Madness! Specifically, I am an ACC and Duke 16 Virginia Banking | January/February 2017

fan. I only watch one sitcom faithfully: The Big Bang Theory. It’s the one show that actually makes me laugh out loud. I feel we all have a little bit of Dr. Sheldon Cooper in us. “I’m not crazy.

My mother had me tested.” c. Books: I read out of necessity but rarely out of pleasure. However, I am excited about the current book I am reading, Tim Tebow’s Shaken. It is a great blend of my love of sports and my faith journey. Book on deck is America’s Bank: The Epic Struggle to Create the Federal Reserve. I enjoy reading with my stepdaughter and I thoroughly loved the Junie B. Jones series. We are currently reading the Life of Helen Keller.

3. What I do when I’m not at work: I adore spending time with my family. My husband is a charge nurse in the Emergency Room at Roanoke Memorial Hospital. My step daughter is in the second grade so our nights are filled with reading, homework, gymnastics, and all the typical parenting fun. We have five pets (two dogs and three cats) who are always commanding attention. And it seems like I am always working even when I am not at work! For the last 11 years, I have worked as an adjunct professor at Roanoke College. We lead busy and blessed lives.

4. You were recently elected to the Botetourt County Public School Board as the member from Buchanan. What motivated you to become involved in public service? How has your experience with local schools impacted your view on the importance of promoting financial literacy to the youth in your area?

The appointment to the school board arose from a unique and sad situation. Our district’s school board member, who had www.vabankers.org

served for 19 years and was beloved by our community, passed away after a brief four-month battle with cancer, creating an unplanned vacancy on the school board. State law required an appointment within 45 days and I was approached to put my name in the running. I was selected in December to fill the remaining year of the position’s term and will have to decide in a few months if I will run in November’s election for a full four-year term. As a lifelong resident of the Buchanan community, I am motivated to give our students the best opportunities available and to represent the families of my hometown. Given my adjunct role, I’ve always had a passion for teaching and educating and have always been a proponent of financial literacy during my banking career. With this new role will bring a new vantage point and new opportunities to promote financial literacy to our youth. For example, I recently met with the local educator who introduced the Stock Trak academic stock trading simulation to 5th graders this semester!

5. Do you have or have you had a mentor? If so, how has that person influenced your career?

H. Watts Steger, III, was my mentor at Bank of Botetourt. He was our president & CEO and served as chairman of the VBA from 2009-2010. He took me under his wing from my first day on the job. I would not be where I am in my career without him.

He was a strong advocate of education and professional development and generously transferred his knowledge to the senior management team while demonstrating great patience and compassion. He led by example and I am grateful for the time he invested in my career.

6. What advice would you give bankers who are just starting their banking career?

My top piece of advice to new bankers is embrace and maximize opportunities available to you. You have to be prepared to step up or Lean In (book written by Sheryl Sandberg) to projects and leadership roles when asked. We often are reluctant when presented with those new opportunities because it stretches us outside of our comfort zone but you have to trust your abilities and overcome any doubts or fears in order to excel. Growing, advancing, learning new skills, and expanding your comfort zone are essential to get to the next level of www.vabankers.org

your career. I had to practice my own advice recently in accepting the school board appointment.

7. How long have you been involved with the VBA and what impact has this involvement had on your bank and your career as a banker?

My involvement with the VBA began immediately at the start of my career in 1993. I participated in the VBA’s “Young Bankers” program and graduated from the Virginia Bankers School of Bank Management in 1995. It was evident very early that the education and networking opportunities provided by the VBA were abundant. As my career progressed, I landed on the CFO Committee of the VBA and my tenure on that committee has been instrumental in my banking career. Over the years, I have learned about the wealth of services the VBA offers, such as the legislative efforts which protect and advocate for our industry. Our banks across the Commonwealth benefit from power in numbers for our health insurance, dental insurance, flex spending, group life insurance…the list of benefits goes on and on! I am thankful to be part of such a well-run trade association for banking in Virginia.

8. In what way can bankers attract the next generation to the industry?

Banking has certainly changed since I was hired in 1993. We are all learning the “new normal” in relation to economic conditions, regulation, and technology since the Great Recession. There are great opportunities available to the next generation of bankers, especially for commercial lenders and tech savvy employees as technology based banking delivery channels are a priority. Millennial employees are incredibly bright and want to make an immediate impact. However, they tend to change jobs frequently, not necessarily because they are dissatisfied but because they want to try something new. The biggest challenge I see for this generation of bankers is the lack of patience to “grow” in a career. As the current bankers attempt to groom this generation, we are going to have to get creative on how to retain talent. We are going to have to manage and balance their demands for face-to-face interaction and guidance, work from home requests, and more flexible work hours. My career is half over, which offers a unique perspective. I look forward to the next 20 years in banking!

January/February 2017 | Virginia Banking 17

YOU’RE INVITED!

TEACH CHILDREN TO

SAVE IS TURNING 20!

Join STASH, the Teach Children to Save pig, and bankers across the country in this 20-year celebration—and pledge to inspire local youth to become savvy savers!

Location: Classrooms and Community Centers across the country Date:

April 28, 2017 and throughout the calendar year

RSVP:

aba.com/Teach

#TeachChildrenToSave

Welcome

New Associate Member

CREDIT & LENDING:

Alliance Partners 5235 Elliott Road Bethesda, Maryland 20816 CONTACT NAME: DAVID BROOKS Phone: (301) 232-5476 Fax: (301) 232-5475 Email: dbrooks@alliancepartners.com

18 Virginia Banking | January/February 2017

Alliance Partners’ mission is to enable its members to prudently diversify into high-quality commercial, consumer and other loans in a manner consistent with commercial and regulatory standards – without changing the nature or mission of the traditional community bank.

www.vabankers.org

Move

Bankers on the

Are your bankers on the move?

Email submissions to mmcdearmon@vabankers.org

Nikki Griffin

Dana Tiller

Stephen Anderson

Shannon Miller

Sheryl Burgay

Natasha Gill

Philip Kallam

Robert Campbell

Wendy Lewis

George Whitley

Price Beazley

Kim Branco

Lindsay Cheatham

Jay Hendricks

Bank of Botetourt Nikki Griffin – Vice President, Mortgage Loan Officer Bank of Fincastle Dana Tiller – Retail Loan Processor BNC Bank Stephen Anderson – Vice President of Commercial Banking Shannon Miller – Vice President of Commercial Banking Benchmark Community Bank Sheryl Burgay – VP/Mortgage Officer Natasha Gill – Branch Manager Philip Kallam – Relationship Banker Kim King – VP/Business Banker First Tennessee Bank Brian Andress – Treasury Management Sales Officer Gateway Mortgage Group Fred Elflein – Regional Vice President Park Sterling Bank Robert Campbell – Vice President, Commercial Banking TowneBank Wendy Lewis – Senior Vice President, Director of Marketing George Whitley – Chief Legal Officer

www.vabankers.org

Village Bank and Trust Price Beazley – Senior Vice President & Chief Technology Officer Kim Branco – Vice President & Risk Management Officer Lindsay Cheatham – Senior Vice President, Director of Human Resources

Kim King

Brian Andress

Jim Dingus – Digital Marketing Manager Jay Hendricks – Chief Risk Officer & Chief Operating Officer Village Bank Mortgage Corp.

Paul Sell – Vice President, Systems Integration

First. Best. Next.

Thinking Success?

Think Stonier.

ABA Stonier Graduate School of Banking University of Pennsylvania | June 1-8, 2017 Apply today - abastonier.com 1-800-BANKERS

January/February 2017 | Virginia Banking 19

JOIN US

March 20 – 22 • Washington, DC Register at aba.com/Summit