Virginia Banking SEPT/OCT 2013

THE EDUCATION ISSUE

September/October 2013

Virginia Bankers School

The 2013 Class of the

of Bank Management IN THIS ISSUE

Q&A WITH LEADERSHIP DIVISION CHAIRMAN | THE IMPORTANCE OF PROFESSIONAL DEVELOPMENT

When your instant

issue card solution is so easy and affordable, it’s not luck.

It’s Harland Clarke. harlandclarke.com/CardAtOnce

Instant card issuance is a no-brainer. Your account holders are asking for it, and you want to offer it to them. Now you can issue fully functioning, personalized cards onsite in about a minute — affordably — with Card@Once from Harland Clarke. Because the service is web-based, there’s no software or dedicated server to buy, and no technology management necessary on your end. All you need is an internet connection. Just plug in the printer and you’re ready to go. When it comes to a one-source, low-cost solution for instant issue, it takes more than luck.

© 2013 Harland Clarke Corp. All rights reserved.

It takes Harland Clarke.

Harland Clarke Payment Solutions.

Leave nothing to chance.

Marketing Services - Security Solutions - Payment Solutions 1.800.277.7637

September/October 2013

2013-2014 OFFICERS AND DIRECTORS OF THE VIRGINIA BANKERS ASSOCIATION Gary R. Shook, Chairman, Middleburg Bank John R. Milleson, Chairman-Elect, Bank of Clarke County Jeffrey M. Szyperski, Immediate Past Chairman, Chesapeake Bank Christopher W. Bergstrom, Cardinal Bank Katherine E. Busser, Capital One Financial Corporation Tim Butturini, Wells Fargo Bank, N.A. J. Peter Clements, The Bank of Southside Virginia Randy K. Ferrell, The Fauquier Bank Gary Gore, Bank of America, N.A. Scott Harvard, First Bank, Strasburg William H. Hayter, First Bank & Trust Company G. Lyn Hayth, III, Bank of Botetourt T. Gaylon Layfield, III, Xenith Bankshares, Inc. Monte L. Layman, Blue Ridge Bank Susan R. Ralston, Bank @Lantec John G. Stallings, SunTrust Bank H. Watts Steger, III, Bank of Botetourt Susan K. Still, HomeTown Bank David P. Summers, Virginia Heritage Bank Daniel G. Waetjen, BB&T Michael O. Walker, Benchmark Community Bank AT-LARGE MEMBERS Benefits Corporation Chair J. Peter Clements, The Bank of Southside Virginia Management Services Inc. Chair G. Lyn Hayth, III, Bank of Botetourt Government Relations Committee Chair Monte L. Layman, Blue Ridge Bank VBA Education Foundation Chair H. Watts Steger, III, Botetourt Bankshares, Inc.

EDITORIAL & EXECUTIVE OFFICES 4490 Cox Road Glen Allen, VA 23060 804-643-7469 Fax 804-643-6308 www.vabankers.org Bruce T. Whitehurst President and CEO Virginia Bankers Association Kathryn Roberts Coordinator, Education & Training/ Communications Virginia Bankers Association

PUBLISHED BY

280 Summer Street, Boston, MA 02210 Phone: 617-428-5100 Fax: 617-428-5118 www.thewarrengroup.com

SUBSCRIPTIONS If you would like to subscribe to Virginia Banking, contact Kathryn Roberts at kroberts@vabankers.org.

Virginia Banking is published bi-monthly. Copyright 2013.

Statements of fact and opinion are made on the responsibility of the authors alone and do not imply an opinion or endorsement on the part of the officers or members of VBA.

The Warren Group Design / Production / Advertising www.thewarrengroup.com custompubs@thewarrengroup.com

Š2013 The Warren Group Inc. All rights reserved.

The Warren Group is a trademark of The Warren Group Inc. No part of this publication may be reproduced in any form or by any means, electronic or mechanical, including photocopying, recording, or by any information storage and retrieval system, without written permission from the publisher. Advertising, editorial and production inquiries should be directed to: The Warren Group, 280 Summer Street, Boston, MA 02210. Call 800-356-8805.

cover

16

Sixty-Two Bankers Graduate from Virginia Bankers School of Bank Management

features

26

Get to Know Joe Waters II, VBA Leadership Division Chairman

28

The Importance of Professional Development in a Banking Career

in every issue 4 Calendar of Events 5 Insights 6 Worth Noting 8 New Associate Members 10 Legislative Update 12 Washington Update 14 Legal Line 22 Compliance Corner 30 Bankers on the Move

Send us your thoughts or ideas on Virginia Banking! Please email Kathryn Roberts at kroberts@vabankers.org. Has your information changed? Please email Kellee Edelin at kedelin@vabankers.org with your new contact information.

September/October 2013 | Virginia Banking 3

Calendar of

Events

Live Events

Webinars

INSTRUCTOR-LED SEMINARS

FUNDING PROBLEMS – COMING AROUND AGAIN! OCTOBER 9

CREDIT MANAGEMENT CONFERENCE, CHARLOTTESVILLE OCTOBER 7

DODD-FRANK UPDATE! REGULATIONS Z, B, AND RESPA SEMINAR, VIENNA OCTOBER 8

UNDERSTANDING AND PROCESSING TRANSFERS AND

ROLLOVERS

OCTOBER 9

2013 MASTERING HMDA SEMINAR, VIENNA OCTOBER 10

BANK IN-HOUSE COUNSEL SEMINAR, GLEN ALLEN OCTOBER 15

ESSENTIALS TO IMPROVE YOUR BUSINESS DEVELOPMENT

PROGRAM

OCTOBER 10

2013 COMMERCIAL LENDING SCHOOL, GLEN ALLEN OCTOBER 16

COMPLIANCE HOT TOPICS II, GLEN ALLEN OCTOBER 23

ENTERPRISE RISK MANAGEMENT CONFERENCE, GLEN ALLEN OCTOBER 29

2013 LEADERSHIP CONFERENCE, LEESBURG NOVEMBER 14

WOMEN IN BANKING CONFERENCE, GLEN ALLEN NOVEMBER 19

BUILD AN EFFECTIVE REFERRAL PROGRAM IN 60 DAYS OCTOBER 10

DAILY DOSE OF DERIVATIVES – AN ESSENTIAL PART OF BANK MANAGEMENT – PART 1 OCTOBER 15

MANAGING GENERATIONS IN TODAY’S WORKPLACE OCTOBER 15

HSA BASICS OCTOBER 16

PENETRATION TESTING: START-TO-FINISH OCTOBER 16

RISK MANAGEMENT FOR COMMUNITY BANKS OCTOBER 16

WEBINARS

FINANCIAL STATEMENT ANALYSIS OCTOBER 8

BANK PORTFOLIO INVESTING IN TODAY’S LOW RATE

ENVIRONMENT

OCTOBER 17

PRACTICAL APPROACH TO ANTICIPATING AND MANAGING INTEREST RATE RISK OCTOBER 8

SUCCESSFUL WORKOUT STRATEGIES FOR PROBLEM LOANS – PART 2 OCTOBER 8

EIGHT HABITS OF EFFECTIVE BANK MANAGERS OCTOBER 9

LOAN UNDERWRITING MISTAKES OCTOBER 17 DAILY DOSE OF DERIVATIVES – AN ESSENTIAL PART OF BANK MANAGEMENT – PART 2 OCTOBER 17 COMMERCIAL REAL ESTATE APPRAISALS: REVIEWING AND INTERPRETING – PART 1 OCTOBER 22

Information and online registration is available at the VBA website. Please either go to www.vabankers.org or use this form to check the box next to the program you want information about, then fax the form to the VBA office at 804-643-6308. The VBA will send you information about the program as soon as it is available, usually eight weeks before the program.

Name ___________________________________________________ Bank/Firm______________________________________________ Address_____________________________________________________________________________________________________________________ City ________________________________________________________________ State/Zip ___________________________________ Phone ___________________________ Fax _________________________ Email __________________________________________________ For more information go to www.vabankers.org.

4 Virginia Banking | September/October 2013

www.vabankers.org

Insights Credit Unions vs. American Taxpayers

H Bruce Whitehurst President and CEO, Virginia Bankers Association

ere is a riddle for you: would the average, well-heeled credit union member rather preserve the credit union’s tax exempt status, or see his or her own tax rates go up? Given where we stand with our federal debt and deficits, and with all the talk of tax reform, this riddle captures the true essence of what is going on with credit union efforts to preserve their tax exemption at all costs.

For too long, our issue with unfair competition from aggressive, tax-exempt credit unions has been characterized as credit unions versus banks.

The banking industry points out that when Congress opened a huge barn door in 1998 to make membership access to credit unions virtually a joke in terms of how easy it is to join – yet preserved credit unions’ tax exempt status – an unlevel playing field was legislated into reality. Ever since, credit unions have grown market share at a faster rate than banks, effectively moving taxable bank revenues off the state and federal tax rolls.

Credit unions will talk about their co-operative, member-owned structure as the reason they are tax exempt; we counter that the same exact structure exists for mutual savings banks and insurance companies, who lost their tax exemption in 1951.

Bottom line, the now $1 trillion credit union industr y is costing the federal government $2 billion per year in lost tax revenue.

Credit unions say they are “not for profit,” whereas we say to take a look at the large credit unions’ undivided earnings on their balance sheets and to consider the credit union industry’s

record profits in 2012 as reported by their own regulator. Credit unions portray as something negative that banks have shareholders with an expectation of profit – something we call a capitalist, free enterprise system that has served our nation extremely well since its founding.

I could go on with points and counterpoints, but I know our readers are well versed on this topic. So, let’s shift back to my starting riddle.

According to numerous studies, the average credit union customer is more highly educated and earns higher wages than the average bank customer – a true irony since credit unions were originally granted tax exempt status, at least in part, because they would serve “people of modest means.” These very same individuals and families are therefore much more likely to be in the crosshairs of a future tax increase than those who truly are of modest means.

Bottom line, the now $1 trillion credit union industry is costing the federal government $2 billion per year in lost tax revenue. Some say that $2 billion is a drop in the bucket for our federal budget, but if that subsidy were to translate into a corresponding increase in taxes for the credit unions’ own members, how might they view that development? Would they value the tax subsidized, nominal higher deposit or lower loan rate their credit union might offer over seeing their own taxes increase?

As the VBA’s Matt Bruning points out quite eloquently in his column (see page 10), a huge part of advocacy is to educate others on our industry and on challenges we face. The imbalanced framework between credit unions and banks certainly rises to the top of the list of things we must talk about, teach about and raise awareness about at every opportunity. This includes both policy makers and yes, even credit union members who might think they are doing a good thing to lobby the credit union positions, but whose ultimate tax increases to preserve the credit union subsidy may well change their point of view.

This is worth pondering, to say the least.

Bruce Whitehurst can be reached by email at bwhitehurst@vabankers.org. www.vabankers.org

September/October 2013 | Virginia Banking 5

Noting

Worth

VBA BANKPAC CONTRIBUTES $110,000 TO ABA’S FEDERAL PAC CAMPAIGN

BRENDA SMITH APPOINTED PRESIDENT AND CEO OF MAINSTREET BANKSHARES, INC. AND FRANKLIN COMMUNITY BANK, N.A. MainStreet BankShares, Inc., in Martinsville, Va. and Franklin Community Bank, N.A. in Rocky Mount, Va., appointed Brenda H. Smith the new president and CEO. She has also been named a director of Franklin Community Bank, N.A. Brenda has been acting president and CEO since December 2012, upon the vacancy left by the death of president and CEO, Larry A. Heaton. Prior to December, she was the company’s executive vice president and chief financial officer. Brenda has been with MainStreet Bank since its inception in 1999. Good luck to Brenda in her new role!

State associations and bankers joined together to deliver an incredible $867,000 at the American Bankers Association’s Summer Leadership Conference in July. The Virginia Bankers Association contributed $110,000 to this total thanks to the support and leadership of our members. The VBA and ABA BankPAC campaigns coordinate closely on federal PAC contributions and are effective because of the support of so many banks and their dedication to the industry.

PAST VBA CHAIR BETSY DUKE COMPLETES FIVE HISTORIC YEARS ON BOARD OF GOVERNORS Elizabeth “Betsy” Duke, a former Hampton Roads banker and VBA and ABA past chair, completed her tenure on the Federal Reserve System Board of Governors at the end of August. She was one of the seven members on the Board of Governors who set the nation’s monetary policy and oversee all aspects of the Federal Reserve.

Appointed by President George W. Bush, Betsy was confirmed by the U.S. Senate and joined the board in August 2008, at the start of the financial crisis. She has been an effective governor who helped the Fed work through incredibly challenging conditions over a historic five-year period. Although Betsy’s term expired in 2012, she stayed on until the board had completed the framework for the BASEL III capital structure that will be required for banks in the future. Throughout her tenure on the board, Betsy always brought her community banking experience to the table in a meaningful way. We wish Betsy all the best as she begins this new chapter in her life!

6 Virginia Banking | September/October 2013

BILL FOSTER SELECTED PRESIDENT OF VILLAGE BANK FOLLOWING TOM WINFREE’S RETIREMENT ANNOUNCEMENT William “Bill” G. Foster has been selected to serve as president of Village Bank, succeeding Tom Winfree, the bank’s longtime president and CEO. Tom will continue to serve as the bank’s CEO and chairman of Village Bank Mortgage Company until his retirement in February.

Upon Tom’s formal retirement, he will continue to serve on the Village Bank board of directors and as chair of Village Bank Mortgage Company and Bill will assume the role of CEO. Prior to becoming president, Bill was responsible for the credit administration and asset resolutions group in his capacity as chief credit officer of Village Bank. Congratulations to Bill on his new position and happy retirement to Tom!

DAVE FAIRCHILD RETIRES FROM UNION FIRST MARKET BANK David J. Fairchild, president of Union First Market Bankshares Corp., is leaving the company but will stay as a consultant through September 2015. Dave will also retire from the board of directors effective Sept. 30, 2013. He was named president of Union First Market Bankshares and executive vice president and chief banking officer of Union First Market Bank in February 2010. Dave also served on the MSI Board for three years at the VBA. We wish Dave well in his retirement!

www.vabankers.org

With changes in technology, regulations, demographics and consumer demand, we can help your branch do something dramatic. Change.

Changes in the market and consumer behavior are forcing financial institutions to make equally significant changes. Diebold is uniquely equipped to help with your branch transformation in a way that enhances the customer experience, improves efficiencies, mitigates risk and increases sales. With Diebold, change is very good.

It’s why Diebold has remained an innovative leader for more than 150 years.

For more information, visit www.diebold.com/boldinnovation.

1.800.806.6827 branchtransformation@diebold.com

Welcome

New Associate Members

FINANCIAL INSTITUTIONS

NEWBRIDGE BANK

1501 Highwood Blvd.

Greensboro, NC 27410 Phone: (336) 369-0939 Website: www.newbridgebank.com CONTACT: DAVID P. BARKSDALE, CHIEF STRATEGY OFFICER Email: david.barksdale@newbridgebank.com $1.7 billion commercial bank with offices in the Triad, Charlotte.

FINANCIAL INSTITUTIONS, MORTGAGE & REAL ESTATE SERVICES

VANTAGESOUTH BANK 3600 Glenwood Avenue, Suite 300 Raleigh, NC 27612 Phone: (919) 659-9050 Fax: (919) 659-9001 Website: www.vsb.com CONTACT: SCOTT CUSTER, CEO Email: scott.custer@vsb.com VantageSouth Bank provides commercial banking products and services for individuals, businesses, business owners, and professionals in North Carolina.

Headquartered in Raleigh, NC, with $2.1 billion in assets, $1.3 billion in loans and $1.6 billion in deposits with 45 locations throughout NC.

INSURANCE, INVESTMENT & TRUST SERVICES

KINGSLEY-HUNT

1315 East Blvd., Unit 409 Charlotte, NC Phone: (704) 904-2679 Fax: (866) 467-5260 Website: www.kingsleyhunt.com CONTACT: DENNIS KINGSLEY, PARTNER Email: dkingsley@kingsleyhunt.com 8 Virginia Banking | September/October 2013

Kingsley-Hunt helps bankers design and implement bank-owned life insurance strategies that strengthen the balance sheet, immediately enhance ROA and ROE, build retained earnings and significantly increase shareholder value.They value every client relationship and work with diligence to be the very best in the industry.

INVESTMENT BANKING (FINANCIAL SERVICES MEMBER)

COASTAL SECURITIES, INC. 920 Memorial City Way, 11th Floor Houston, TX 77024 Phone: (713) 435-4330 Fax: (713) 435-4530 Website: www.coastalsecurities.com CONTACT: D. ANN KOMAR, EXECUTIVE VICE PRESIDENT Email: dak@coastalsecurities.com Coastal Securities is a registered securities broker/dealer serving institutional investors for over 20 years.They are one of the premier dealers in the SBA pool market and the purchase and sale of government guaranteed loans.They also trade other asset classes, including municipal bonds, MBS, CMOs and Agencies.

LAW FIRM

JONES WALKER L.L.P. 499 S. Capitol Street SW, Suite 600 Washington, DC 20003 Phone: (202) 203-1000 Fax: (202) 203-1015 Website: www.joneswalker.com CONTACT: GREGORY W. KUEHNLE, ASSOCIATE Email: gkuehnle@joneswalker.com

hedge funds; investment banks; and other financial institutions and their investors.

MARKETING

WORKS24 3508 French Park Drive, Suite 1 Edmond, OK 73034 Phone: (405) 843-4653 Fax: (800) 460-9876 Website: www.works24.com CONTACT: PHILIP EDWARDS, TERRITORY MANAGER Email: pedwards@works24.com Works24, formerly “BankOnHold,” specializes in providing digital media marketing solutions to financial institutions.

The array of products they offer focus on internal marketing to maximize communications to existing customers and prospects while on hold or while waiting in your lobby.Their products include on-hold messaging, lobby video services, website video and overhead music.

RECRUITMENT AND HR SERVICES

SMITH & WILKINSON

383 U.S. Route One Scarborough, Maine 04074 Phone: (804) 824-4620 Website: www.smithandwilkinson.com CONTACT: NICK HAYES,VICE PRESIDENT Email: nhayes@smithandwilkinson.com Smith & Wilkinson’s Executive Search Solutions is a banking-specific search firm focused on middle and senior level management; specializing in serving community/regional banks.

Jones Walker’s banking and financial services attorneys represent local, regional, and national banks; financial services companies; and intermediaries. Our clients include domestic and foreign commercial banks and bank holding companies; insurance holding companies; private equity, venture, debt, and www.vabankers.org

Walter Mc Nairy

Da ve N iles

Walter is the Partner-inCharge of the Financial Institution Services Group and has been serving banks throughout the Southern U.S. for 23 years.

#1 20 125+ 150+

704.367.7080 dave.niles@dhgllp.com

Dixon Hughes Goodman Financial Institution Services Group Banking Partners Banking Clients Bank Professionals

Mike is a Senior Manager based in Richmond and has 12 years of experience serving the financial institution industry.

804.474.1263 michael.gilreath@dhgllp.com

take great pride in treating our members like family, and our “ We advisors at Dixon Hughes Goodman mirror this commitment. We trust their industry knowledge and accounting profi ciency to navigate banking regulations, governance and reporting. Through it all, we receive outstanding client service as we continue to grow our hometown community bank.

“

919.875.4993 walter.mcnairy@dhgllp.com

Dave is the Partner-in-Charge of Risk Advisory Services for Community Banks and an Audit Partner, and he has more than 18 years of experience serving banks.

Mike Gilreath

-G. Robert Aston, Jr., Chairman & CEO, TowneBank

CPAs and Advisors throughout the Southern U.S. www.dhgllp.com/banking | benchstrength@dhgllp.com | 877.999.9343

Legislative

Update

Advocacy is Education

I Matt Bruning Vice President, Government Relations, Virginia Bankers Association

It is often said that education is a life-long endeavor. Albert Einstein pointed out that, “intellectual growth should commence at birth and cease only at death.” Even when formal schooling ceases – whether in high school or after achieving a doctorate degree – there are boundless opportunities to learn and gain new subjects, experiences or perspectives.

Frequently, we stick to those topics or areas with which we are familiar. The businesswoman pursues her MBA or reads the latest best selling how-to marketing book. There are tremendous positive results from seeking greater knowledge in your field. At the VBA, we hope you gain insight from the many educational and training offerings related to your specific position at the bank. Likewise, our School of Bank Management provides education on a broader, multidimensional range of aspects of the industry, exposing students to processes, functions and roles for which they may not be responsible. Discovering new knowledge, whether within or outside your field, can assist in career development, but also in personal growth. There is certainly a sense of accomplishment when the gestalt moment occurs and it all comes together.

Even as we learn throughout our lives, we also have the opportunity to teach others. Whether it involves training a new employee on loan documentation or teaching your daughter her ABCs (a work in progress at the Bruning house), everyone has the capacity to impart their wisdom and experience to others.

It is at these opportunities where education and advocacy intersect (you knew I would get there eventually). Whatever your position at your company, you know something about banking that, likely, millions of others do not. You may not feel like it some days, but you are an expert in some aspect of your job. While you and others in banking are intimately familiar with how to set up an irrevocable trust, when an appraisal is necessary for a mortgage, who can access the safe deposit box or a multitude of other activities related to financial services, it is probably foreign to most people outside the industry. Elected officials are no different.

Most elected officials have a basic understanding of how the banking system works. However, their experience usually culminates in applying for a mortgage or setting up their online bill pay. It is no different than when I stare at my iPhone and know that I received yet another email, but have no idea the complex systems that made it possible.

Unless someone explains – teaches – me the hows and whys behind it, I am left to make my own conclusions. Similarly, if elected officials are not educated on banking, they might make decisions impacting our industry that have little to do with reality.

The Socratic paradox posits that I know one thing: that I know nothing. While maybe not having achieved that level of enlightenment, most legislators understand their experiential limitations regarding banking and want to be informed as they make policy choices that could impact our business. That is why it is critically important for bankers to be advocates, to be educators, about banking.

I recently met with a banker who has regularly attended Banker Day (save the date for Jan. 9, 2014!). He asked what the best approach was when meeting with his local delegate and senator – to try and hit all the talking points for the various bills or to talk about the bank and how they help their customers and communities.

Both are effective educational opportunities, but if there needs to be a choice, always take the time to focus on what you do and why it is important.

Being an advocate on banking extends beyond the walls of The Capitol. Use your knowledge of banking to educate customers and members of your community. Explaining how banks operate, generally, and in your specific role, assists in broadening the educational level amongst the public. And, since hopefully you are proud to be a banker, it also delivers the message that what you do is necessary and beneficial to the financial wellbeing of families, businesses and communities. And you might even have the opportunity to mention that your bank pays taxes, unlike credit unions. Advocacy can most certainly be education.

Matt Bruning can be reached by email at mbruning@vabankers.org.

10 Virginia Banking | September/October 2013

www.vabankers.org

VIRGINIA IS FOR (small business)

LOVERS

How do we love small business? Lenders, let us count the ways Virginia State Small Business Credit Initiative 1. Cash Collateral Program 2. Loan Purchase Participation Program 3. Economic Development Loan Fund 4. Virginia Capital Access Program Credit Enhancement Solutions designed for Small Business Lenders!

www.vabankers.org

804-371-8254

May/June 2013 | Virginia Banking 21

Update

Washington

Our Policymakers’ Guide to Payments System Issues

T

Frank Keating President and CEO, American Bankers Association

he banking industry has long been a leader when it comes to our nation’s payments system. More than 100 years ago, in May 1911, ABA developed in cooperation with our members a uniform system for the identification of financial institutions.

This was needed to identify and route the growing number of drafts, checks and other documents as part of banks’ processing of payments. The routing number helped speed up an increasingly complex payments system. It’s working today in not just identifying check processing endpoints, but also automated clearinghouse participants, electronic funds transfers and other settlement arrangements.

I relate this story to demonstrate that ABA has a history of looking forward. Banks are leaders in the payments system. As payments continue to evolve, we will continue to provide thoughtful solutions, policy considerations and recommendations.

Our Emerging Payments Advisory Group recently issued a report for policymakers on the rapidly evolving payments marketplace. The re-

port, titled “The Changing Face of the Payment System: A Policymaker’s Guide to Important Issues,” identifies three key areas for consideration: consumer protections, payment system integrity and competitive equity.

The advisory group – representing the diversity of our industry with senior executives from community, regional and large banks – met earlier this year to address the need for government policies that promote competitive solutions and recognize the important role banks play in developing and delivering safe, convenient forms of payment.

“Banks – which developed the first credit card in 1958 and have since pioneered technologies like online banking and bill pay, mobile banking, and remote deposit capabilities – continue to push the innovation envelop to improve the banking experience for consumers and businesses,” the advisory group said in its report.

While innovation and customer convenience remain core drivers of the payments system evolution, the report encourages policymakers to ensure that: • Consumer protection laws apply to every part of the electronic payment process, including new nonbank participants; • All participants in the payment system maintain robust bank-like controls that protect the system’s integrity and assist in mandated government law enforcement efforts; and • Participants in the market all play on a level regulatory playing field.

You can find the report online at aba.com/ EmergingPayments. I encourage you to review it so you can be ready advocate on these issues as they come before Congress.

It is in our interest as well as policymakers’ to ensure that the laws and rules governing the payment system keep pace with the evolving marketplace. Your customers and our nation’s commerce depend on a reliable, safe and efficient payments system. And with your help, we will continue to lead in this important area.

Gov. Frank Keating can be reached by email at keating@aba.com.

12 Virginia Banking | September/October 2013

www.vabankers.org

Line

Legal

Patent Trolls Stalking Virginia Banks

S Mel Tull General Counsel, Virginia Bankers Association

everal Virginia banks recently received letters from a patent troll claiming to own patents covering automated teller machine (ATM) transactions. This patent troll typically threatens to sue the bank for patent infringement unless the bank agrees to pay a lump sum or per transaction licensing fee. This particular patent troll has targeted more than 150 community banks along the East Coast and in a couple of Southern states in recent years. It has continued to make these claims knowing that several of its asserted patents and claims have been invalidated by the U.S. Patent and Trademark Office and the courts.

The term “patent troll” is a pejorative term for a patent owner who does not manufacture or use the patented invention, but instead seeks to profit from it through litigation and licensing in a manner that is unduly aggressive or opportunistic. Patent trolls are also referred to as non-practicing entities or NPEs. Patent trolls seek to leverage the substantial cost of defending against a patent infringement lawsuit to extract quick and relatively-small (at least compared to the costs of litigation) settlements from their targets. Those targets are often end users of a technology (rather than manufacturers) who, as a result, typically have less incentive and less ability to defend the lawsuit.

According to a story published in American Banker, patent trolls have increasingly turned their sights on banks in recent years. While banks defended a mere 12 patent cases in 2000, that number rose to 240 in 2011, and patent trolls were responsible for nearly 90 percent of the banking patent cases filed in 2012.

Before receiving a demand letter, there are several strategies banks can employ to protect themselves against patent trolls. Typically, many of the products and services most likely to expose a bank to the risk of a patent lawsuit are provided by third-party vendors. Banks should conduct extensive due diligence on these products and insist that their contracts with these vendors include not only a warranty of non-infringement

but also strong indemnification protection. Banks should also be aware that they are unlikely to be protected against patent troll suits via their regular insurance policies. Standard commercial liability policies rarely cover loss or damages arising out of intellectual property lawsuits. Such protection can be purchased, however, via more specialized policies.

When a bank receives a patent troll demand letter, there are a number of things to consider.

Before taking any action, the bank should learn as much as it can about the patent troll, how it operates, the nature of its patents, and what other banks have done to successfully defend against the troll’s claims. The Virginia Bankers Association and the American Bankers Association have substantial information about many of the patent trolls that have been targeting the banking industry.

Banks will often need to engage special patent litigation legal counsel to research the validity of the troll’s patents, prepare a response to the demand letter, and initiate or defend against patent litigation. A related strategy involves the use of joint defense groups whereby two or more of a troll’s targets join together to cooperate in defending against the claims of patent infringement. The use of a joint defense agreement permits multiple defendants to cooperate in areas such as prior art searching, retention of experts, and the development of invalidity and non-infringement defenses. This form of cooperation can greatly reduce the expense of litigation for each individual defendant and may also lead to stronger defenses for all as a result of the pooled resources.

Unfortunately, when faced with threats of expensive patent litigation (the estimated average cost is between $500,000 and $3.5 million) many banks – especially smaller institutions – find that their only economical option is to settle for thousands, or tens of thousands, of dollars rather than face paying even higher litigation costs to defend themselves against frivolous claims of Continued on page 30

Mel Tull can be reached by email at mtull@vabankers.org 14 Virginia Banking | September/October 2013

www.vabankers.org

CUST M SERVICE tailored expressly for

Community Banks.

Without large, in-house legal departments to rely on, community banks need lawyers who

Sign up!

understand and appreciate the specific issues facing their industry. That’s why Spilman formed its unique Community Banking Group, composed of experienced, insightful and innovative attorneys – to see to the needs of community banks. From traditional banking and finance matters to expanded needs involving regulatory compliance, creditors’ rights, employment law and beyond, Spilman strives to deliver excellent service at an exceptional value. It’s how we help our clients Get There™. ............................................................................................................................................................................

Hugh B. Wellons, Group Leader | 540.512.1809 | hwellons@spilmanlaw.com

We invite yo u to visit www.spilman law.com/ communityb anking to sign up fo r our e-newsl etter

Community Bankin Excellence g

............................................................................................................................................................................

Excellence. Value. Get There!™

VIRGINIA

NORTH CAROLINA

PENNSYLVANIA

WEST

VIRGINIA

20+ industry-specific attorneys 140+ attorneys firm-wide Accessible and responsive Alternative fee approaches

A T

T

O

R

N E

Y

S

A T

L

A W

3 1 0 F i r s t S t re e t , S u ite 1 1 0 0 • R o a n o k e , VA 2 4 0 1 1 • 5 4 0 .5 1 2 .1 8 0 0 | w w w.s p i l m a n l a w.co m A tto r n e y R e s p o n s ib le Fo r T h is M e s s a g e : We b s te r D a y T h is is a n a tto r n e y a d ve rtis e m e n t.

Sixty-Two

Bankers Graduate from Virginia Bankers School of Bank Management

16 Virginia Banking | September/October 2013

www.vabankers.org

PHOTO COURTESY OF: Grogan Photography

Nearly 200 bankers descended upon the Darden School of Business at the end of July, where they attended the Virginia Bankers School of Bank Management week-long resident session.

The students benefited from the outstanding faculty on staff, including: • Maggi Beckstoffer, president of MBM Marketing • Richard S. Coughlan, Ph. D., associate dean for graduate and executive programs and associate professor of management at the University of Richmond Robins School of Business • Mark M. Faircloth, partner at Faircloth Performance Partners • Lynn Hamilton, associate professor of the general faculty, director of the Management Communication Programs and chair of the ICE Steering Committee at the University of Virginia McIntire School of Commerce • Gary F. Higgins, portfolio review executive at Bank of America • Jeffrey S. Kane, director at Park Sterling Bank • Chuck Lewis, CRCM, vice president, compliance services at the Missouri Bankers Association

• • • • •

• • • •

Angela Panzarino Ross, chief branding officer at StellarOne Bank Kerry S. Sauley, Ph. D., instructor at the Department of Management at Louisiana State University Jimmy Sawyers, member of the LLC at Sawyers & Jacobs LLC Edmond J. Seifried, Ph. D., cochairman of Seifried & Brew David C. Smith, C. Coleman McGehee Research Associate and professor of banking and commerce and director of McIntire Center for Financial Innovation at the University of Virginia McIntire School of Commerce Mary Weidner, director, strategic development at The King Agency Scott Wayne, founder of The Frontier Project Bruce T. Whitehurst, president and CEO of the Virginia Bankers Association Ken Yoo, senior vice president, chief risk officer at Federal Home Loan Bank of Atlanta

Classes are designed to provide students with specific skills in the functional areas of banking, an understanding of how commercial and savings banks fit within the financial services industry, sales and business development strategies, the ability to solve problems, work in teams and make decisions in a managerial setting, and exposure to the increasingly complex and important areas of banking law and regulations.

This year, there were a number of changes to the curriculum. The first year students kicked off their week with an opening session taught by instructors Mark Faircloth and Kerry Sauley.

The class included an introduction to the school, a DISC assessment, and networking opportunities for the new students. Additionally, they benefited from a communications and marketing course, taught in three sections by Maggi Beckstoffer, Angela Ross and Mary Weidner. Students learned the difference between bank marketing and branding, the role of social media in product marketing and branding, and corporate communications and reputation management. A commercial banking session was taught in the first Continued on page 19

www.vabankers.org

September/October 2013 | Virginia Banking 17

Virginia Bankers School The 2013 Class of the

Bank School Continued from page 17

of Bank Management Samuel T. Adams III

Christopher Muracco

Tina L. Anderson

Adam Nalls

Berhane H. Beraki

Terri L. Nelson

Joseph Biddlecomb

Beth N. Nilles

Noemie C. Cam

Stephanie L. Oliver

Michael Copty

Dena E. Patrick

Robert L. Cowgill

Randall L. Phelps

Blake Curtis

Thomas L. Rasey Jr.

Melissa A. Denison

Kevin A. Reynolds

Brent J. Dyson

Bradley D. Robinson

Charles Thomas Eure Jr.

Teresa A. Ruby

Linda S. Garman

Matthew W. Santmyer

Michael B. Glover

Helen M. Saulsbury

T. Berkeley Goodloe

Ashley B. Schavel

Lisa A. Grishaw

Steve Seay

Robert W. Gutierrez

Jon Clark Sells

Philip Harvilla

Gabrielle E. Seng

Melissa L. Herke

Diane S. Smith

Gregory D. Hoover

Maury Andrew Stone Jr.

Charles A. Kapur

Christopher L. Suggs

Tracy L. Katz

David A. Talebian

Aaron J. Kelley

Brandon J. Taylor

Meghan D. Kelly

Christy T. Taylor

Andrew K. Maddux

Randall C. Taylor

K. Russel Marsh

Paula M. Tignor

H. Nicole Martin

Belinda Tucker

Bridget C. Martz

Bradley T. Webb

Guy R. McGee

Meghan D. White

Graham T. Miller

Allison L. Wittkamp

James M. Minear

Browning Wynn, II

Donna M. Mitchell

Rebecca Zirkle White

First-year class officers, from left: Don Hillbish, C&F Bank; Stacy Fearrington, Federal Reserve Bank of Richmond; Jennifer Register, Old Point National Bank; and Ron Burley, United Bank.

Second-year class officers, from left: Melinda Williams, Old Point National Bank; Kelly Johnson, Southern Bank and Trust Company; and Marie Brooks, Cardinal Bank.

Third-year class officers, from left: Russel Marsh, Virginia Commerce Bank; Diane Smith, Fulton Bank; Andrew Stone, TowneBank; and Bobby Gutierrez, Virginia Commerce Bank.

18 Virginia Banking | September/October 2013

www.vabankers.org

Third-year class officers present their $12,800 donation to the Roc Solid Foundation’s Eric Newman. year by Gary Higgins, and enterprise risk management with Ken Yoo was another new addition. Students rounded off their week with a new creative thinking course with Scott Wayne called “The Cartography of Personal Innovation.”

New to the second year for 2013 was a compliance course taught by Chuck Lewis. Bruce Whitehurst also led the class through a teamwork session, designed to help the BankExec teams prepare for their upcoming third year at school.

While the third-year students stayed busy with their BankExec simulation, a program designed to allow students the opportunity to make decisions acting as senior officers of a bank, they also benefited from classes including a legal panel featuring Matt Cheek from Williams Mullen, Jake Lutz from Troutman Sanders, and George Whitley from LeClairRyan. The third-year class was assisted by the school’s Fellows, who are on hand to assist during the BankExec process: Frank Bell, Chesapeake Bank; Don S. Buckless, Old Point National Bank; Peter Clements, The Bank of Southside Virginia; AJ Duke, Federal Reserve Bank; Greg Frederick, Middleburg Bank; Jeff S. Kane, Park Sterling Bank; and Watts www.vabankers.org

Steger, Botetourt Bankshares, Inc. In addition to their academic pursuits and showing how bankers are always at the forefront of community service, the graduating class raised $12,800 through a well-organized Casino Night & Masquerade Ball event benefiting the Roc Solid Foundation. The Roc Solid Foundation is an organization, started in Southeastern Virginia, determined to impact the lives of children with cancer and their families throughout the United States.

Eric Newman, founder and chief play officer of Roc Solid Foundation, said, “We are so appreciative of this donation, which will allow us to build hope for more children battling pediatric cancer.

Many of these kids do not get to enjoy their childhoods as they should, and that’s one thing you can’t get back.

Through the support we received from the Virginia Bankers Association, we will impact more children and families through our Play It Forward programs.”

The graduating class of the Virginia Bankers School of Bank Management contributes to a different charity of their choosing each year. Past charities that have received funds raised by Bank

School students include the Virginia Wounded Warrior Program and the Juvenile Diabetes Research Foundation.

On Aug. 2, 62 third-year students completed their last year of Bank School and graduated from the program.

Completion of the program is based upon attending all classes, satisfactory performance in class discussions, examinations, home study problems, and completion of any other assignments.

Each year, the VBA recognizes the student in the third-year class with the highest GPA. This year, the Honor Graduate was Paula M. Tignor, Union First Market Bank, who had a GPA of 97.1! We would also like to congratulate all the students who graduated this year and want to make special mention of the top 10 percent of the class of 2013: Brent Dyson, The Bank of Marion; Adam Nalls, Access National Bank; Brandon Taylor, Lee Bank & Trust Company; Meghan Kelly, Virginia Heritage Bank; and Tom Rasey, The Farmers Bank of Appomattox.

Congratulations to the graduates and we look forward to seeing the returning students and new first year class at the 2014 resident session.

September/October 2013 | Virginia Banking 19

making a difference

commitment recognized providing

non profits

Virginia development

effort

organizations

stories

charity

financial literacy

employment

volunteering dedication

impact

help

better

supported

scholarships future

service

present

participation

donations

Banks

connection

contribution

celebration

statewide

devotion

tools

past

foundation

growth

good cause

focus

team

aid

groups

events

campaign

Community successes

loans

investing

action

employees

education

COmmuNITy INVeSTmeNT SuRVey Virginia Banks Giving Back

resources

Virginia banks provide a safe place for people and businesses to keep their money, and they put that money to work in their communities by lending to families and small business customers to help them realize their dreams.

Banks and the people who operate them are continually donating time, talent and dollars to strengthen the communities in which they do business. Virginia banks are good neighbors in their communities and provide the financial tools and practical assistance to help build a strong and thriving state for all residents.

The Virginia Bankers Association recently conducted a Community Investment Survey among the Commonwealth’s banks on ways in which they support growth and civic development in their local communities. Responses were compiled from 47 banks throughout the state, all of which have a significant impact in their respective communities. The following is just a glimpse of how these banks give back to their communities.

Over 17,680 Virgi nia bankers inve sted a total of 27 2,225 hours volu nteering.1 Virginia banks em ployed over 64,4 84 Virginians in 2 41,700 employed 012, 55% greater in 1994.1 than Banks donated n early $1.8 million in scholarships th Virginia banks m is year.1 ade 239,235 mor tgage loans in 20 $60,661,697,000 11 for a total of .00.3 515 SBA guarante ed small business loans from 93 len for a total of $20 ders were made 2.98 million in 2 2 in Virginia 0 1 2 .

VBA Su 1

rvey of Virginia Ba nks

Small Business Ad minis

2

tration

SNL Financial

3

In partnership with Capital One and the Heart of America Foundation, Chimborazo Elementary School celebrated the grand opening of its new READesign Library Makeover.

Volunteers distributed books in the classrooms and facilitated financial education activities.

In addition, volunteers worked with Radio Disney to lead students in financially-themed sports activities, design fun arts and crafts, conduct library tours for students and their families, distribute five books for each child at the school, and provide lunch for everyone at the celebration.

Middleburg Bank supported the Cherry Blossom Walk and 5K Run for Breast Cancer once again this year. Organized by the Cherry Blossom Breast Cancer Foundation, the Walk and 5K Run was a major fundraiser in the fight against breast cancer. They chose to support the Cherry Blossom Breast Cancer Foundation because the money they raised stayed within their communities, helping support local breast cancer patients and their families.

Village Bank employees took an active part in gathering stuffed animals in support of “Gleaning for the World,” a charity that provides comfort, security and love to children in tough situations through the gift of any type of stuffed animal. Employees had so much fun gathering all kinds of stuffed animals and seeing children and adults donate their “special” pals so that other children can enjoy them as much as they did.

First National Bank supported United Way of Central Virginia through participation in a month-long food drive to stock the pantry of United Way’s partner agency, the Blue Ridge Area Food Bank. First National Bank supported this endeavor by placing United Way food collection barrels in most of its branch locations. Over 12,000 pounds of food were collected by First National Bank and the other participating organizations through this campaign. Along with the food drive, the bank’s employees participated in United Way Day of Caring, a one-day event that provided painting, landscaping, cleaning and other services to partner agencies.

Bank of McKenney supported the 2nd Annual On-a-Roll 5k that raised funds and awareness for the National Spinal Cord Injury Association’s mission of empowering people with spinal cord injury and disorders to achieve the highest quality of life possible.

Bank of McKenney CFO, Bryant Neville, has been a quadriplegic for over 30 years, but demonstrates daily the successes that are still attainable for the physically challenged. To support Bryant and his partnership with NSCIA, over two-thirds of the bank’s employees contributed to this event either as workers or as walkers and, together with their community, were able to raise over $33,00 for the cause. This is truly a testament to what a difference a community bank can make!

First State Bank sponsored its third annual Fill The Bus Campaign. The 2012 Campaign collected over $11,000 in school supplies to be distributed to students who may not have necessary supplies to function in the classroom. In addition, the bank purchased the financial literacy curriculum, Banking Is, for Danville City High School students about budgeting and money matters. This is being used by teachers and students to help students meet the state-wide requirement regarding money management.

Select Bank provides support to the Jubilee Family Development Center in Lynchburg, VA through event sponsorships and educating students during summer camp about careers and finance. Jubilee provides educational, athletic and social programs to children and their families. They provide year round programming, with offerings in educational enrichment and academic assistance, athletics, and technical vocational awareness and training.

Please visit our Facebook page for more examples of Virginia banks supporting their communities: http://www.facebook.com/virginiabankersassociation

Compliance

Corner

Loan Originator Compensation Requirements Under the Truth in Lending Act – Final Rule

By Cristina Equi FIS Enterprise Governance, Risk & Compliance (EGRC) Solutions

T

he CFPB recently published a “Final Rule” that revises and amends Regulation Z to provide for the implementation of requirements and restrictions relating to loan originator compensation imposed by The Dodd-Frank Act (DFA). The bulk of the CFPB’s final rule becomes effective Jan. 1, 2014. The financing of credit insurance premiums provisions that were to take effect June 1, 2013, have been delayed as the CFPB has requested public comment. The provisions prohibiting mandatory arbitration and waiver of federal rights took effect June 1, 2013.

Summaries of the regulation can be found searching the www.consumerfinance.gov and www.federalregister.gov websites. Rather than recap the regulation, the focus of this article is on what you need to do to prepare your institution for January 2014. Accordingly, we have developed the following 16 steps to follow to put your institution on the path to compliance.

ACTION PLAN: 16 STEPS FOR PREPARING YOUR INSTITUTION Institutions should develop an action plan to enhance their compliance management programs to include, but not be limited to, the following: Work with human resources to review all current job descriptions and, if necessary, revise them to ensure your employees are properly categorized and your job descriptions are accurate. Pull all job descriptions for the mortgage department and make sure that the job descriptions for non-loan originators clearly state job duties that do not include loan originator duties. Make sure these job descriptions do not have trigger words like “takes applications,” “assists with communicating/negotiating loan terms,” or any other terms that would lead someone to believe that the person is really a loan originator. Also, remember that the definition of loan originator under Regulation Z is more expansive than the S.A.F.E. Act’s definition, so there are going to be some inconsistencies in job titles and positions. We advise using the Regulation Z definition of loan originator and requiring anyone who falls under that more expansive definition to register under the S.A.F.E. Act. This way, all the appropriate personnel are meeting the requirements of both regulations uniformly, no one will fall through the cracks, and there is consistency in job positions and titles.

Redistribute relevant job duties to ensure appropriate personnel fall under the category of loan originator. This is a good time to do some house cleaning. Take a look not only at your job descriptions, but also ask your employees what they actually do during their work day. Often times what is in the job description does not match the person’s actual responsibilities, and you might find that clerical and administrative staff is unwittingly performing loan originator duties. If that is the case, make sure you redistribute those job duties back to the loan originators.

Review current compensation plans to ensure you are not paying based on improper loan terms.

Continued on page 24

22 Virginia Banking | September/October 2013

www.vabankers.org

Smart Credit StartS with You This October, join the thousands of volunteer bankers participating in the classroom and via social media in the national Get Smart About Credit campaign. Our 2013 program will focus on three critical areas: Paying for College, Protecting Your Identity and Knowing Your Credit Score. Consider taking advantage of this opportunity to raise your bank’s profile in the community while bringing the lessons of sound money management to young people.

Get Smart About Credit Day is October 17, 2013—don’t delay.

Register at aba.com/GetSmart or call 1-800-BANKERS.

www.vabankers.org

September/October 2013 | Virginia Banking 23

Compliance Corner Continued from page 22 This review should consist of all compensation agreements, policies and payroll.

If you are contemplating changing the compensation structure, make sure that you work closely with Human Resources.

Just because a certain manner of compensation is acceptable under Regulation Z does not mean that it is acceptable under federal and/or state wage and hour laws.

Review current compensation plans to identify whether you pay different amounts for different types of loans; if so, test those compensation plans for proxy terms. This is key. Proxies tend to crop up in cases where you pay different amounts for different loans. If you pay the same amount for all loans, then the chances of a proxy (or a violation in general) are very low. However, when you start to get creative you might run the risk of violating this rule. If you pay differently on different loans, you need to isolate the factor that you are paying on and conduct the proxy analysis. For example, let’s say

you pay a higher amount for loans with collateral in State A than for loans with collateral in State B. You must first isolate the factor, which is the location of the collateral. Then you have to determine if any of the terms vary consistently with the factor. So if the loans in State A have a higher interest rate than State B, the term of the loan varies consistently with the factor. The final part of the analysis regards whether the loan officer can manipulate the factor. In this example, the loan officer cannot manipulate where the consumer’s collateral lies, so this is not a proxy.

Review current procedures and compensation plans to ensure that pricing concessions and dual compensation are prohibited. This should be easy to track with internal employees, especially if you do not allow your internal employees to reduce their compensation. This is much harder to track with respect to outside brokers. Make sure you get verification that they are complying with this rule. It is also a good idea, if you pay the broker, to send a request to the consumer asking if they have remitted any monies to the

broker directly and, if they have, what the monies were for.

Review all bonus plans to determine if they are paid based on profits of the mortgage department; if so, ensure that they comply with the 10 percent rule. The calculations for the bonus are a little tricky so make sure you fully understand them.

For example, when calculating how much bonus you can pay in terms of the 10 percent of the “aggregate compensation,” it is key to understand that aggregate compensation includes any salary, commissions, 401(k) contributions and the actual bonus itself. Your payroll personnel must fully understand this portion of the rule.

Review 401(k) or other retirement plans and determine if you will be contributing to the plans.

Obtain verification from outside brokers that they are complying with the new compensation and anti-steering rules. There is a big push to place responsibility on financial institutions to oversee and ensure that any third parties they work with are also following compliance rules. That means you have to make sure that any outside broker you are working

OPTIMIZE YOUR RISK MANAGEMENT PERFORMANCE WITH OUR PROVEN TECHNOLOGY AND EXPERT CONSULTING.

• • •

Enterprise risk management BSA/AML Fair lending

• • •

Information secuirty Dodd-Frank compliance Mortgage compliance

FIS Enterprise Governance, Risk & Compliance (EGRC) Solutions

www.fisglobal.com/egrc

24 Virginia Banking | September/October 2013

www.vabankers.org

with is complying with these rules and is trained on them. If you have a contract, make sure this is written into the contract.

Review language in dwelling secured loans and HELOC contracts to ensure they do not mandate arbitration or require waiver of federal claims. This should have been done already, but it is never a bad idea to conduct another review. It may surprise you of the language in your contracts that has been there for years, and it has been ignored and never updated. This is a good time to not only review for compliance with this rule, but also to update antiquated language.

Update recordkeeping documents and procedures to ensure that the institution is retaining records regarding loan originator compensation for three years.

Update policies and procedures to ensure that the NMLSR information is provided in accordance with the loan originator compensation rules and the S.A.F.E. Act. Remember, there are two sets of rules pertaining to the disclosure of the NMLSR

information. The best thing to do is combine the two standards in one policy and one procedure rather than splitting them up by regulations. Also, consider that the information must to be included in the application, so you will need to have a procedure for identifying whose information will be on an application when a customer randomly requests one. A good procedure is to have the information on a rotating basis. Assuming you have three loan officers: Application A should have Bob’s information, application B should have Tim’s information, application C should have Kim’s information, and then start the rotation all over again.

Work with human resources to ensure that loan originators are qualified under the S.A.F.E. Act and the loan originator rules.

Once qualification information is gathered, work with human resources to ensure an analysis is conducted to determine whether the loan originator has demonstrated financial responsibility, character

and general fitness such as to warrant a determination that the individual loan originator will operate honestly, fairly and efficiently. You should keep some documentation in their personnel file indicating that this analysis was conducted.

We recommend developing a checklist to ensure this task is performed, and that it is performed consistently.

Revise current policies and procedure to comply with the new rule. You may want to combine this with your S.A.F.E. Act policy since the two rules overlap to some extent.

To facilitate compliance, train all employees affected by the new procedures.

One of the most important things you have to emphasize is that employees should only be performing job duties that are assigned to them. You don’t want any Helpful Harrys performing loan originator duties when they are classified as clerical employees.

Ensure that your procedures require an independent annual audit.

For more information about how to prepare your institution for the changes to Regulation Z, please call Alice Judd (410-800-8571) or Steve Manitzas (434-996-5481) at FIS EGRC Solutions.

The official magazine of the Virginia Bankers Association

Reach Your Targeted Business Audience with Accuracy

VIRGINIA BANKERS ASSOCIATION — SERVING VIRGINIA’S FINANCIAL COMMUNITY SINCE 1893

REACH YOUR TARGETED BUSINESS AUDIENCE WITH ACCURACY. Virginia Banking magazine will now be delivered in both print & digital formats.

The official magazine of the Virginia Bankers Association, Virginia Banking, reaches more than 11,000 banking industry professionals in 130 different banks across the state. Financial leaders in Virginia turn to this bimonthly magazine to gather information and move their business forward.

In 2013, Virginia Banking boasts increased circulation, new content, a modernized, full color design, and more. Connect with the leaders of the banking community, increase your market share and grow your business – just by consistently marketing in Virginia Banking. Visibility and repetition within your sales and marketing efforts will establish stronger relationships within this vital market.

Contact The Warren Group at 617-896-5344 or email advertising@thewarrengroup.com and put each solution to work for you. Call today and receive a 20% discount off a new 2013 ad campaign.* *New Advertisers Only

www.vabankers.org

September/October 2013 | Virginia Banking 25

Q&A

Joe Waters II

Get to Know Joe Waters II, VBA Leadership Division Chairman Joe, please tell us a little about yourself.

My name is Joe E. Waters II, originally from Man, West Virginia. I currently live in Abingdon, VA, and work for the greatest bank since sliced bread, The First Bank & Trust Company. I am a vice president with the company, and do all types of lending and am also a licensed financial advisor.

I am a true community banker in the sense that if a light bulb needs to be changed at the branch, or if a new message needs to be placed on our marquee, then I’m your man! I am married to the lovely Angie E. Waters, who just so happens to be a Virginia banker herself! It took some time convincing, but we have been married for 11 wonderful years. We have two beautiful children. Cadence, who is eight years old, loves art and her dog, Penny, and Quinn, who is five years old and loves everything about football, especially Redskins Quarterback RGIII. In my spare time, I enjoy running, lifting weights, golf, and taking my family to sporting events. We love football!

How long have you been in the banking industry, and with First Bank & Trust Company?

I have had the pleasure of working in the banking industry for 14 years now. I started my career with the former Matewan Bank, a company that originated in Matewan, WV. I have also been blessed to have worked at The First Bank & Trust Company for six years now.

To you, what is the most enjoyable aspect of being a banker?

I believe that being a banker carries a lot of responsibility.

Sound banking principles and financial management are even more important in today’s ever changing financial climate. Our customers rely upon us as fiduciaries and have faith in our decision making abilities. I am honored to be in a position of trust, I feel like I get the opportunity to truly solve problems with my customers. The solution just happens to be financial, whether it is a loan, deposit account, or an 26 Virginia Banking | September/October 2013

investment. I truly appreciate the interaction I get to have with my customers as well as my co-workers.

How long have you been involved with the VBA Leadership Division?

I have been involved since its inception in 2009.

What are some of your favorite experiences from being involved in the VBA Leadership Division?

I have so many experiences that I consider favorites; lobbying on Capitol Hill in Washington D.C., meeting and discussing issues that affect our industry with state and local legislators, last year’s first Leadership Conference, and of course meeting other like-minded bankers that want to become more involved in our industry. I truly am grateful to www.vabankers.org

the entire VBA staff, who have given me the opportunity to have such great experiences.

As the new chairman of the Leadership Division, are there any specific goals you would like to achieve?

I plan to expand on the great work that has been done by the two previous chairmen, Ward Currin and Cary Ayers.

I feel as if each of them amplified what it means to be a leader in the banking industry. I plan to continue their great work of truly carrying out the mission statement of the Division; improving financial literacy in our youth, positively influencing the legislative landscape to obtain fairness in our industry, and assisting where I can with

community outreach programs and networking opportunities. Of course growth in membership of the Division will be a priority, especially in the southwest Virginia region.

my job and my bank. The relationships I have formed and developed with other Leadership Division members and VBA staff has been and continues to be very important to me.

What advice do you have for anyone who wants to get involved with the VBA Leadership Division?

Anything else you would like your fellow bankers to know?

I say join us! If you are interested in becoming more involved in our industry and furthering your career as a banker, there is no better place to start.

The Leadership Division has given me valuable experience and has afforded me the opportunity to meet very interesting people. At the same time, it has given me a chance to tell legislators about the day to day issues that affect

I will leave you with one of my favorite quotes; I think it’s applicable in both life and career. “Every morning in Africa, a gazelle wakes up.

It knows it must run faster than the fastest lion or it will be killed. Every morning, a lion wakes up. It knows it must outrun the slowest gazelle or it will starve to death. It doesn’t matter whether you are a lion or a gazelle – when the sun comes up, you’d better be running!”

Your Data.

Your Future.

CRM offers FUTURE FOCUSED Risk Management Tools www.vabankers.org

September/October 2013 | Virginia Banking 27

Continuing

Education

The Importance of Professional Development in a Banking Career

By H. Watts Steger, III Chairman, Botetourt Bankshares, Inc., and Chairman, VBA Education Foundation

T

homas Jefferson once said, “He who knows best knows how little he knows.” This statement adequately sums up the significance of continuing education and professional development opportunities throughout one’s career, no matter the field. As a banker, I have come to know the many benefits and valuable experiences that come from taking advantage of opportunities such as the Virginia Bankers School of Bank Management and the Graduate School of Banking at Louisiana State University. These schools provided me with the educational background necessary for advancement in both my career and at my bank.

As a graduate of Hampden-Sydney College, my college curriculum consisted of a liberal arts background, with limited courses specific to banking.

As I entered the banking profession, I had no prior banking experience and soon recognized the need for and the importance of continuing education. The Virginia Bankers School of Bank Management was 28 Virginia Banking | September/October 2013

a natural progression in the educational process for me and after three years in this multi-dimensional banking program, I graduated in 1979. As a current Virginia Bankers School of Bank Management faculty member and Trustee, which allows me to help plan strategically for the school’s future, I am proud to say that the total number of graduates from the three-year program since 1961 totals 3,640 students.

Both the graduates and their banks have benefitted from their dedication to professional development.

The advantage of continuing education for bankers rests in the fact that the efforts are beneficial in many ways not only to the banker, but to the bank and the community as well.

The advanced financial education I received from the Graduate School of Banking at Louisiana State University during my three years in the program inspired me to become more deeply involved with the school after graduation in 1986.

Having been a Bank Sim instructor for a number of years, I am now also the president elect of the Graduate School of Banking and look forward to the opportunity to support the school’s mission of broadening the knowledge and understanding of major banking functions among bank officers and others at a graduate level. Over 15,000 executives have completed the program at LSU and I hope many more decide to further their education in this program as well.

Georgetown University’s Center for Education and the Workforce (CEW) released a study stating that only 28 percent of jobs in 1973 required workers to have some college or above, and by 2007 that need had increased to 59 percent. CEW projects that jobs requiring some postsecondary education will increase to 62 percent by 2018. Completion of programs like the Virginia Bankers School of Bank Management and the Graduate School of Banking at LSU has helped in the professional advancement of employees in many banks. This can be attributed to the fact that banks recognize the importance of the continuing educational process and the critical need to keep up with change. My experiences have helped me to stay current on new technologies, trends, and best practices, all of www.vabankers.org

Need more which are extremely valuable to me and to my bank. These programs broaden our base of knowledge, expand our horizons, and provide us with a better perspective of overall bank operations, specifically how a bank functions and its importance as the engine of economic growth.

Continuous learning keeps bankers current and updated with the everchanging challenges facing the industry and teaches the importance of thinking outside the box.

Another invaluable benefit of continuing education is networking and developing contacts that provide assistance in various areas in which you may not have expertise. Graduates of Virginia Bankers Bank School and the Graduate School of Banking at LSU recognize the need to work together to accomplish specific goals and collaborate for the greatest results. The networking opportunities and lifetime friendships which have resulted from my time in both programs have opened doors for me to the industry, both within the commonwealth and states beyond. These opportunities eventually led to leadership positions within the Virginia Bankers Association, including serving as VBA chairman a few years ago and now as chairman of the VBA Education Foundation. Through the foundation, I now have the privilege of uniting bankers to make a difference in their communities and local schools through financial education. As bankers, we have the chance to educate children, teens, and adults about the importance of staying financially literate and responsible.

Making visits to the classroom or career fairs in our local communities provides a great example to others of how important a good education is and how remaining knowledgeable on a subject provides lifelong benefits.

My continued involvement with the schools is an opportunity to give back to an industry in which I have been so fortunate to have spent my career. I encourage you to build meaningful and beneficial relationships, share your knowledge with others in your community, and always keep learning! www.vabankers.org

risk management

manpower?

EastPay’s experts are an extension of your team!

EastPay, your Regional Payments Association, has the expertise to help you face increased regulatory scrutiny, with risk management services that include: • ACH Compliance Audit • ACH Risk Assessment • Third-Party Sender Audit

• Service Agreement Review • Remote Deposit Capture Risk Review • Other Strategic Consulting Services

Ask about our new Guide to Establishing ACH Exposure Limits!

Gina Carter, AAP 1-800-681-4224 x301 or audit@eastpay.org Pam Rodriguez, AAP, CIA, CISA 1-800-681-4224 x305 www.eastpay.org

@EastPay

Resourceful. Responsive. Reliable.

Do business with someone who thinks like you. www.CBBonline.com

804.239.0452 September/October 2013 | Virginia Banking 29

Move

Bankers on the

Chernault

Kennedy

Mundy

Robertson

Hubble

Davis

Fox

Kirschenman

Truitt

Kirkpatrick

Benchmark Community Bank

First Bank

Middleburg Bank

Billie Jo Chernault, AVP/Relationship Banker

Dr. Miles K. Davis, Director of First National Corporation and First Bank

David Jolley, Senior Vice President, Commercial Relationship Manager

Franklin Community Bank, N.A.

Monarch Bank

Cardinal Bank Eileen A. Kennedy, Senior Vice President, Commercial Loan Officer William T. “Bill” Mundy, CFP, Senior Vice President, Cardinal Bank and Executive Managing Director, Cardinal Wealth Services Robin Robertson, Senior Vice President, Assistant Director of Marketing

Carter Bank & Trust Bill R. Hubble, Vice President and Managing Officer of Blacksburg Office

William Carr, Peninsula Market President

Todd S. Hammock, Executive Vice President and Senior Lender

National Bank

Freedom Bank of Virginia

Jennifer R. Kirschenman, Vice President of Operations

Laura Powell, Senior Vice President of Corporate Banking Division

TD Bank Steven Truitt, Senior Vice President and Regional Wealth Leader for Metro D.C. Region

George Mason Mortgage Matt Fox, Executive Vice President, Business Development

Virginia Commonwealth Bank

John Marshall Bank

Bard Kirkpatrick, Commercial Banker

Craig Sacknoff, Senior Vice President Daniel Hampton, Vice President

Legal Line Continued from page 14

Jason Caskey, CPA Financial Services Practice Leader

More than 100 banks in the Southeast, large and small, depend on Elliott Davis for personal attention, industry experience and services, including external and internal audit, SEC reporting, taxation and compliance. Our financial services practice is 90 professionals strong, with a 60-year reputation for helping banks operate stronger, wiser, better. Let us know how we can be an asset to you.

3900 Westerre Parkway • Richmond, VA 23233 • www.elliottdavis.com

30 Virginia Banking | September/October 2013

© 2013 Elliott Davis PLLC © 2013 Elliott Davis PLLC

Not all of a bank’s assets are found on its balance sheet.

patent infringement.

Finally, the VBA has been actively supporting legislation to combat patent trolls. The VBA supported the patent reforms Congress put in place through enactment of the America Invents Act (AIA) in 2010, which included provisions that authorize the review of overly broad business methods patents by the Patent and Trademark Office. The VBA is supporting federal legislation by House Judiciary Chairman and Virginia 6th District Congressman Bob Goodlatte that would make it more difficult and costly for trolls to launch unfounded demand letters and threaten frivolous litigation.

The VBA also is considering the potential for similar legislation in Virginia.

For more information about protecting your bank from patent trolls or if your bank receives a demand letter from a patent troll, please contact Mel Tull, VBA General Counsel, at mtull@vabankers.org or (804) 819-4710. www.vabankers.org

Truth is...

we’re not a jack of all trades.

We’ll stick to being a master of one.

Unlike other large broker dealers, our sole focus is on financial institutions. This allows us to custom tailor solutions for your institution that complements your high standard of customer service.

We specialize in facilitating turn-key brokerage programs for banks and credit unions to help increase your institution’s fee income. A partnership with Cetera Financial Institutions can help you reach your untapped potential.

Scan this QR code to order a free white paper on Recognizing the Opportunities for Growth Discover how much fee income your institution can earn.

To learn more about us visit ceterafinancialinstitutions.com or contact Sean Casey at 1.800.245.0467, ext. 65014.

Cetera Financial Institutions is a marketing name of Cetera Investment Services LLC, member FINRA/SIPC. Securities and insurance products are offered through Cetera Investment Services (doing insurance business in CA as CFGIS Insurance Agency), which is not affiliated with the bank/credit union where investment services are offered.

Investments are: *Not FDIC/NCUSIF insured *May lose value *Not financial institution guaranteed *Not a deposit *Not insured by any federal government agency. ©2013 Cetera Financial Group, Inc. 13-0299 04/13

VCDC

Housing Equity Funds of Virginia

Over 20 years of profitable investing

Virginia Community Development Corporation vacdc.org For more information, please contact Arild Trent at 804.343.1200 x116 or atrent@vacdc.org