Virginia Banking Volume 1 2018

Volume 1 | 2018

State Legislative Meetings

IN THIS ISSUE

VBA ENDORSED PROVIDERS SPOTLIGHT AND VBA MEMBER SPOTLIGHT: FRANK BELL, CHESAPEAKE BANK

2018 ABA GOVERNMENT RELATIONS SUMMIT APRIL 23 – 25 WASHINGTON, D.C.

America’s banks are vital to a strong economy. Let’s make sure Washington knows it.

Join the Virginia Bankers Association and fellow bankers from across the country to educate Congress and regulators on the need for commonsense regulatory reform—reform that will help America’s banks better serve their communities, grow the economy and unleash America’s potential.

Register today

aba.com/Summit

Volume 1 | 2018

2017-2018 Officers and Directors of the Virginia Bankers Association William H. Hayter, Chairman, First Bank & Trust Company Scott C. Harvard, Chairman-Elect, First Bank, Virginia John G. Stallings, Immediate Past Chairman, Union Bank & Trust Richard M. Adams Jr., United Bankshares, Inc. John C. Asbury, Union Bank & Trust Ray L. Barnes Jr., BB&T Christopher W. Bergstrom, United Bank Ravi Chandra, Wells Fargo Bank, N.A. Michael W. Clarke, Access National Bank Dabney T.P. Gilliam Jr., The Bank of Charlotte County Jeffrey V. Haley, American National Bank & Trust Leton L. Harding Jr., Powell Valley National Bank Charles R. Henderson, Bank of America, NA Brad E. Schwartz, TowneBank Joe A. Shearin, Sonabank Susan K. Still, HomeTown Bank Robert Wojciechowicz, Capital One Financial Corporation AT-LARGE MEMBERS VBA Benefits Corporation Chair Barry C. Elswick, TruPoint Bank VBA Management Services Inc. Chair Aubrey H. Hall III, First National Bank Government Relations Committee Chair Gary R. Shook, Middleburg Bank, a Division of Access National Bank VBA Education Foundation Chair Jeffrey M. Szyperski, Chesapeake Bank

EDITORIAL & EXECUTIVE OFFICES 4490 Cox Road SUBSCRIPTIONS Glen Allen, VA 23060 If you would like to subscribe 804-643-7469 to Virginia Banking, Fax 804-643-6308 contact Monica McDearmon at www.vabankers.org mmcdearmon@vabankers.org.

Bruce T. Whitehurst President and CEO Virginia Bankers Association

Virginia Banking is published quarterly. Copyright 2018.

Monica McDearmon Communications & Financial Literacy Coordinator Virginia Bankers Association

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.

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cover

12

State Legislative Meetings

features

14

VBA Endorsed Providers Spotlight

18

VBA Member Spotlight: Frank Bell, Chesapeake Bank

in every issue 4 Calendar of Events 5 Insights 6 Legal Line 8 Legislative Update 9 New Associate Members 10 Washington Update 11 Worth Noting 16 Compliance Corner 23 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.

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.

Calendar of INSTRUCTOR-LED SEMINARS

INSTRUCTOR-LED SEMINARS

BACK TO SCHOOL AT THE VBA | GLEN ALLEN FEBRUARY 15, 2018

VBACONNECT | WILLIAMSBURG A conference for bank human resources, marketing, retail banking and training professionals

BANK MANAGER 2-DAY SCHOOL (WINTER SESSION) | GLEN ALLEN FEBRUARY 28 – MARCH 1, 2018 ANTI-MONEY LAUNDERING & BANK SECRECY ACT 2-DAY SCHOOL | GLEN ALLEN MARCH 6, 2018 CONSUMER LENDING SCHOOL | GLEN ALLEN MARCH 14-15, 2018 VBA/VACB BANK DIRECTORS’ SYMPOSIUM – SOUTHWEST | BLACKSBURG MARCH 28, 2018 VBA/VACB BANK DIRECTORS’ SYMPOSIUM – CENTRAL | RICHMOND MARCH 29, 2018 COMPLIANCE SCHOOL | GLEN ALLEN APRIL 10-12, 2018 INTEREST RATE RISK & INVESTMENT STRATEGIES SEMINAR | GLEN ALLEN APRIL 17, 2018 VBAPROTECT | WILLIAMSBURG A conference for bank security, compliance, enterprise risk management, operations and technology professionals

MAY 1-3, 2018

MAY 14-16, 2018 VBA 125TH ANNUAL CONVENTION | THE OMNI HOMESTEAD RESORT, HOT SPRINGS JUNE 17-20, 2018 VBA SCHOOL OF BANK MANAGEMENT | CHARLOTTESVILLE JULY 29 – AUGUST 3, 2018 CFO CONFERENCE & ETHICS SESSION | RICHMOND AUGUST 27-29, 2018 BSA/AML COMPLIANCE MANAGEMENT SEMINAR | KINGSPORT, TN SEPTEMBER 10, 2018 COMMERCIAL LENDING SCHOOL | GLEN ALLEN SEPTEMBER 26-27, 2018 LEADERSHIP CONFERENCE | CHARLOTTESVILLE OCTOBER 4-5, 2018 BANK MANAGER 2-DAY SCHOOL (FALL SESSION) | GLEN ALLEN OCTOBER 10-11, 2018 LENDING & CREDIT CONFERENCE | RICHMOND OCTOBER 29-30, 2018 WOMEN IN BANKING CONFERENCE | RICHMOND NOVEMBER 8, 2018

2018

ce

Wi

Save the Date:

u r th B

2018 Burgers with Bruce

Join Virginia Bankers Association President and CEO, Bruce Whitehurst, for a free burger and a conversation about the latest industry updates and VBA and Emerging Bank Leaders (EBL) news. There will also be a guest speaker on an industry hot topic. More information to come.

11:30 a.m.-1:30 p.m. in all locations. Events are free to attend. Only VBA member bank employees may participate.

We invite you to bring emerging leaders from your bank who are interested in staying engaged with the banking industry and learning more about the EBL. March 12 – Richmond March 13 – Lynchburg March 14 – Abingdon March 15 – Harrisonburg April 16 – Norfolk April 17 – Fairfax Contact Chandler Owdom at cowdom@vabankers.org with questions.

4 Virginia Banking | Volume 1 | 2018

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Insights

125 and Counting “Commitment cannot be taught; it can only be caught. I refer to the crusading spirit. Without the crusading spirit, you may have the starting power, but not the staying power.” — Y.C. James Yen

2

Bruce Whitehurst President and CEO, Virginia Bankers Association

www.vabankers.org

018 marks the 125th anniversary of the founding of the Virginia Bankers Association – a milestone we will acknowledge in various ways throughout the year and especially at the VBA Annual Convention in June. To celebrate a century and a quarter of the VBA’s existence is a point of pride and accomplishment for every Virginia banker!

Banking leaders from around the Commonwealth gathered in Richmond on October 11, 1893 and organized the VBA. It was no coincidence that the VBA’s founding came during a time of financial panic in the United States, often regarded as the secondworst economic downturn behind the Great Depression that would follow four decades later. Virginia banks performed quite well during this crisis, helping keep many businesses open and gaining national credibility for their ability to do so.

Led by Roanoke banker Henry M. Darnell, the VBA’s first mission statement still resonates today: In order to promote the general welfare and usefulness of banks and banking institutions; to cultivate more intimate, social and business relations between members; to collect and disseminate valuable financial and economic information affecting our common interests; to secure unity and cooperation in the furtherance of legitimate and conservative banking, and for the purpose of correct information as to the functions of banks, and their relation to the commercial, industrial and agricultural interests of the State, we submit the following Constitution for the Virginia Bankers Association.

Our mission statement today is much shorter: Enhance banks’ ability to serve their customers and communities. How do we measure whether we are meeting our mission? In effect, we go back to the VBA’s very first mission statement and find it to be as relevant now as it was 125 years ago.

Reading about the VBA’s founding reinforces several things about bankers and banking that are still true today. First, banks were clear-

ly drivers of economic growth and did everything they could to help and sustain their customers during difficult economic times.

Second, bankers were outstanding community leaders. Those who organized the VBA were not only bankers in their hometowns; they also were mayors, state legislators and community leaders in a variety of ways.

Many Virginia banking leaders of the late 1800s were also Civil War veterans and had served as leaders of the Confederate Army.

This is a difficult subject today – understandably so – yet it’s a fact that these bankers, including the VBA’s first president Col. Walter Taylor of Norfolk, Gen. Robert E. Lee’s righthand man, helped lead efforts to restore Virginia’s economy after the war and move the Commonwealth to a prominent, pro-business posture that has served us well ever since.

In a notable juxtaposition, Richmond’s Maggie Walker, an African American leader in Virginia, was the first woman of any race to charter a bank in the United States when she established St. Luke Penny Savings Bank, later renamed Consolidated Bank, in 1903. One of her successors at the bank, Vernard W. Henley, was installed as the VBA’s 101st president at the VBA’s 100th anniversary convention.

The VBA’s staying power is an extraordinary thing and I believe it is due to high banker involvement and our steadfast dedication to accomplishing our mission. The VBA remains the central gathering place for Virginia bankers – in numerous ways and methods these days – and the unified industry voice. To be sure, the VBA has changed and evolved over the past 125 years, always with an eye toward meeting our mission and advancing banking in Virginia. It is both an honor and a pleasure to serve the VBA and the banking industry as we celebrate a significant milestone anniversary.

Email Bruce Whitehurst at bwhitehurst@ vabankers.org with any comments on this article or tweet him at @BruceTW. Volume 1 | 2018 | Virginia Banking 5

Line

Legal

Director Fiduciary Duties in Mergers

O Mel Tull General Counsel, Virginia Bankers Association

ver the past several years, we have seen a good number of bank mergers in Virginia. The deals come in all shapes and sizes, and for a variety of reasons. Banks have combined to gain not only size but operating efficiencies in terms of back office operations, vendor expense and regulatory compliance (speaking of the latter, we at the VBA are continuing our efforts to get Capitol Hill to recognize the unnecessary burden placed on banks over the last decade and to reduce aspects of the regulatory scheme that continue to hamper America’s banks). Other reasons deals have been made include management succession, improving growth opportunities and strengthening contiguous markets. Of course, in a number of mergers the consideration offered was just too good for the boards to pass up.

Just like deposit-taking and lending, keeping an eye on M&A activity is a part of life for all banks. With the holidays in the rear-view mirror and spring right around the corner, now may be a good time to review with your board its fiduciary duties in a merger transaction and help prepare your directors in the event that one day your bank decides to partner with another institution. There are many aspects to merger preparation from a board perspective – recognizing and following fiduciary duties and taking action for good corporate governance is one of the most important.

Fiduciary Duties Generally In general, a board of directors that has complied with its basic fiduciary duties of care and loyalty is entitled to the protection of the business judgment rule. The business judgment rule is the principle that directors are presumed to have acted in good faith and in the best interests of the company when making a decision. Courts are looking for objective evidence that directors have made careful, educated and honest decisions.

Duty of Care. Directors must weigh decisions carefully in light of all available information.

Unlike other jurisdictions, Virginia law does not apply a “reasonableness” standard in considering board action. Instead, it adopts a more process-oriented approach, focusing on the extent to which the board of directors engaged in an informed decision-making process of what, in the exercise of their good faith business judgment, is in the best 6 Virginia Banking | Volume 1 | 2018

interests of the company. The issue is not the substance of the board’s decision, which can always be second-guessed, but the process followed by, and good faith intentions of, the board. Continuous and substantial director involvement is imperative.

The roles of the CEO and other insiders in negotiating a merger transaction and selecting financial and legal advisors should be balanced by active, direct participation of independent, outside directors. The board’s careful consideration of strategic and financial alternatives should be made clear in the minutes and other records of board action.

To ensure that the board of directors has complied with its duty of care under Virginia law, it should, at a minimum, take the following actions when considering a merger: • Gather and consider all available information and documentation about the transaction, making sure it is adequate and sufficient to fully understand the deal.

• Evaluate the transaction in light of alternatives, including the company’s existing strategy and projections, and associated advantages, disadvantages and probabilities of success.

• Evaluate the likelihood of achieving anticipated benefits of the proposed transaction and the anticipated risks.

• Consider the proposed operating strategy of the combined company and the extent to which such strategy is consistent with the board’s view of an appropriate strategic direction.

• Consult with outside experts, including financial and legal advisors.

• Ask questions of management and outside advisors and deliberate candidly about the transaction before making a decision.

• Identify and mitigate any applicable conflicts of interest (as described below).

The terms of the merger (whether it’s the value of the consideration received by the shareholders, the economic provisions of the deal protection provisions, the financial incentives for particular officers and directors or the ability to pursue alternatives) must be considered both separately and in the aggregate. If the totality of the arrangewww.vabankers.org

ments go too far, each one individually may be tainted.

Duty of Loyalty. The duty of loyalty requires directors to act in good faith and in the best interests of the company and its shareholders. Directors must put the interests of the company and its shareholders ahead of any personal interests. Transactions involving conflicts of interest are not prohibited, but steps must be taken to mitigate the conflicts to avoid breaching the duty of loyalty. These mitigation steps are discussed below.

Special Considerations for Transactions Involving Interested Directors Certain transactions involving directors that are not “disinterested” are voidable under Virginia law under certain circumstances. A director is interested (i.e. not “disinterested”) in a matter if the director (or a close associate1) has a financial interest that would reasonably be expected to adversely affect the director’s objectivity. A transaction in which a director is interested is not voidable if it is either fair to the company or approved, with knowledge of the material facts, by (i) a majority of disinterested directors, (ii) a committee of disinterested directors or (iii) the shareholders.2 When a board is considering a transaction involving conflicts of interest or an interested director, it should take the following actions to mitigate the conflicts: • Identify the conflicts and determine whether the conflicts would reasonably be expected to affect a director’s objectivity.

• Establish the body of disinterested directors that will consider the transaction and any alternative transactions (either all disinterested directors or a special committee of disinterested directors).

•

•

Deliberate without influence from the interested director(s) and ensure that deliberations and decision criteria remain confidential.

Take appropriate actions, including those listed under “Duty of Care” above, to ensure an arms-length transaction in the best interests of the company and its shareholders.

The best time to remind directors of their fiduciary duties is not in the middle of a merger but well beforehand. By properly exercising their responsibilities of being well-informed, involved and carefully considering all of the information presented on a merger, your directors can engage in good risk management practices and solid corporate governance.

For more information about directors’ duties in the merger context, 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. A close associate is a person who has a financial interest in a matter and a familial, financial, professional, employment or other relationship with a director.

2. Approval of the shareholders in this context would mean that (i) the directors would not make any recommendation as to how shareholders should vote, and (ii) shareholders holding more than two-thirds of the company’s outstanding shares, excluding shares held by any interested shareholder, would have to vote in favor of the transaction. www.vabankers.org

Volume 1 | 2018 | Virginia Banking 7

Legislative

Update

Every Vote Counts

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

he results of the November 7th election ushered in a seismic shift of the dynamic in Virginia’s 2018 General Assembly session. With a second consecutive Democratic sweep of the three statewide offices of Governor, Lieutenant Governor and Attorney General, Virginia remains solidly blue in the executive branch. Those results were not unexpected, albeit accomplished with greater vote margins than anticipated by public polling. The most significant changes occurred in the outcome of the 100 House of Delegates elections.

Republicans held a considerable 66-34 majority in the House heading into Election Day. Two Washington, D.C. suburban districts with strong democratic performance in past elections were seen as likely to flip, due to the retirements of the Republican delegates that held those seats.

Democrats fielded candidates in 45 of the 66 seats held by Republicans. Of those, 17 were in districts that Hillary Clinton had won in 2016.

Of those 17 districts where Clinton had won, at least 14 changed from a Republican delegate to a Democratic one on election night, including the defeat of 11 Republican incumbents and two open seats in Northern Virginia and one additional open seat in Henrico County. The Democratic challenger also won in a Virginia Beach district that President Trump had carried by 1 percent. Only Republican delegates Rob Bloxom from the Eastern Shore and House Republican Caucus Chairman Tim Hugo from Fairfax survived in Clinton districts, with Hugo prevailing by 99 votes in a recount. With those results – pending litigation on incorrect ballots distributed in a Stafford County split precinct where the Republican in an open seat won by 73 votes – there are 50 Republicans and 49 Democratic delegates. That result for Democratic candidates alone guarantees a very different set of political and policy circumstances.

The last race in the 94th District, based in Newport News and one of the 17 Clinton districts, decided whether Republicans held a slim majority or if there would be an even split. On election night, Republican incumbent David Yancey carried a 10-vote margin of victory. A subsequent recount netted the Democratic challenger Shelly Simonds a single vote margin advantage. The following day, a three-judge panel reviewed the recount and determined a vote that had been discounted in the recount should be counted for Yancey, resulting in each having 11,608 votes. The procedure for resolving a tie is for the State Board of Elections to draw the winner out of a bowl. The last recorded tie in a Virginia legislative race was in 1971, but with party control of the House at stake, this is unprecedented.

Yancey won the seat by luck of the draw, but regardless of whose name was picked the dynamic for the 2018 session was already shaping up to be far different than the last 16 years of Republican control of the House. While the attention focuses on the House, Republicans continue to hold a slim, 21-19 majority in the Virginia Senate. Whether at parity or with a fragile Republican advantage in the House, Democratic Governor-Elect Ralph Northam will need to convince a few Republicans in order to advance any of his policy goals in both chambers. Changes in leadership – already coming in light of current

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

8 Virginia Banking | Volume 1 | 2018

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Welcome

New Associate Members

IT CONSULTING & SERVICES/CONSULTING & TRAINING

COMPLIANCE SERVICES

Strategic Resource Management Inc.

Address: 2890 E. Cottonwood Parkway, Ste 225 Salt Lake City, UT 84121 CONTACT NAME:VALERIE JACKSON Phone: (888) 409-1560 Fax: (888) 409-1560 Email: valerie.jackson@visibleequity.com

Address: 5100 Poplar Avenue, Ste 2500 Memphis,TN 38137 CONTACT NAME: UMA ZIELINSKI Phone: (901) 681-0204 Email: uzielinski@srmcorp.com Strategies Resource Management provides financial institutions with the information and expertise necessary to improve their bottom lines by identifying cost savings and new revenue potential in contractual relationships. More than 700 financial institutions have received savings of more than $3 million for every $1 billion in asset size.

Visible Equity®

Visible Equity® is an analytics and data warehousing company that helps financial institutions identify, measure and monitor risks and opportunities.Their software combines loan, application, deposit, marketing and customer data with advanced analytics to assist each institution in making well-informed, data-driven decisions. Products include loan portfolio analytics, allowance for credit loss (CECL), application analytics, deposit analytics, customer/marketing analytics, fair lending and peer analytics.

Interested in associate membership in the VBA? Contact Amy Binns at abinns@vabankers.org or 804-819-4726.

Legislative Update continued from previous page Speaker Bill Howell’s retirement – and committee chairs and make-up, combined with a new administration and new temporary legislative office space, augur a cacophony of uncertainty as session begins.

With the election of at least 19 new members – there were three additional open seats where the current party candidate won – nearly half of the House of Delegates will have four years or less of legislative service; that is almost double the number of newer legislators than two decades ago. With little or no experience at the Capitol, many of the current delegates do not have the same background on the policy issues important to the banking industry as those they replaced.

This presents an opportunity to develop relationships with these new members and educate them on the importance of

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a vibrant banking industry to all their constituents. It will be imperative for bankers to engage in our grassroots advocacy to further that education and enlightenment.

Thanks to those who attended our 10 legislative meetings throughout the Commonwealth at the end of 2017 and Banker Day at the beginning of the 2018 session. With so many new elected officials in a changing legislative situation, the VBA needs your active participation in our efforts.

If you have an existing relationship with your local legislators, especially those newly-elected, please let us know. If ever there was an election that underscores the importance of voting, this was it. Now, it turns to the importance of being engaged in the legislative process where we will need every vote for banking to count.

Volume 1 | 2018 | Virginia Banking 9

Update

Washington

Textbook Advocacy

W

Rob Nichols President and CEO, American Bankers Association

ashington is anything but textbook these days, which can make the advocacy work of state and national trade associations a challenge. But the recent tax reform effort proves that certain staples of effective advocacy – functions at which ABA and the state associations happen to excel – have enduring value.

All were on display as Congress and the administration worked together on a comprehensive package of tax reforms that we believe will help grow the economy and create jobs. They also will help banks, which previously had one of the highest effective tax rates of any business, better serve their customers and the broader economy.

Those staples of effective advocacy include building respectful relationships and coalitions, speaking with a unified voice, offering expert analysis and showing discretion on when and how to offer public criticism.

We were engaged in the tax reform debate from the very start, offering advice and insight on the potential effects of various provisions – such as the impact of limiting net interest deductibility – and coordinating closely with our state association allies. We also worked closely with other groups in the financial services industry, hosting daily calls to ensure our advocacy was united and effective.

At every turn in the legislative process, we worked respectfully with lawmakers to improve the bill. Recognizing the tightrope lawmakers were walking to create a comprehensive bill that would have sufficient support, we as an industry were careful to offer pragmatic, constructive feedback – not public condemnations or threats that could have derailed the effort.

This approach made a difference. Lawmakers, for example: • adopted a careful approach to limiting net interest deductibility, protecting banks’ small business, agriculture and real estate customers, whom we said would be harmed by more substantial limits; • heeded concerns about the treatment of passthrough entities like Subchapter S banks and brought the rate closer in line to the “promised” rate;

• removed provisions that would have eliminated the benefits of deferred compensation plans; • corrected an issue relating to income recognition for mortgage servicing rights and other transactions; • steered clear of imposing a new bank tax as a means of paying for tax cuts; and • maintained a variety of tax credits, particularly the low-income housing and new markets tax credits that are so important to our communities.

The result is a final package that is largely aligned with ABA’s core principles for tax reform, with one notable exception: It misses the chance to level the playing field with credit unions and the Farm Credit System. While this is hugely disappointing, it’s not for lack of effort. Bankers have made their views plainly clear to lawmakers for years. We articulated a sound rationale for including these tax-privileged competitors in reform and even offered public opinion research that showed Americans back the idea.

In the end, lawmakers viewed this as too controversial to tackle in this bill, but we’ll keep up the fight.

Credit for much of what we achieved goes to the bankers – from institutions of all sizes and from states across the country – who volunteered their time and expertise to the cause. (If you ever doubted whether association service was meaningful, I can put you in touch with the women and men on ABA’s tax committee who helped comb through each 500page iteration of the tax bill to identify the potential effects on banks.)

Our policy experts and lobbying staff also made a tangible difference. Together, this banker-staff tax reform team artfully balanced the politics and policy behind a highly complex and highly charged legislative process, and they did so in a manner that kept the door open to congressional leaders and literally earned us a place at the table.

That gave us just a voice, of course, not the final say – and that’s as it should be. Good public policy must consider the views of many. It just so happens the banking industry represents many – from our two million employees to the countless communities and customers we serve. That makes effective advocacy a must. I’m proud ABA, and the entire industry, delivered.

Email Rob Nichols at nichols@aba.com.

10 Virginia Banking | Volume 1 | 2018

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Noting

Worth

RICHMOND FED APPOINTS THOMAS BARKIN AS NEXT PRESIDENT & CEO

Thomas (Tom) I. Barkin became the Federal Reserve Bank of Richmond’s eighth president and CEO on January 1, 2018. Barkin served on the board of directors for the Federal Reserve Bank of Atlanta from 2009 to 2014, chairing the bank’s board from 2013 to 2014.

BRUCE WHITEHURST PRESENTED J. CURTIS HALL AWARD

On Dec. 1, 2017, Bruce Whitehurst, VBA president & CEO, was presented the J. Curtis Hall Award by the Virginia Council on Economic Education (VCEE).

Bruce is the fourth VBA CEO to receive this award. This annual award recognizes a community leader who has devoted a significant amount of time and energy to the cause of economic literacy in Virginia schools. Further, the award recognizes the recipient’s efforts to promote the vision and mission of the VCEE within the business and education communities. Under Bruce’s guidance and direction, the VBA Education Foundation (VBAEF) has become a prominent partner for VCEE, providing more financial support than any other partner over the past ten years. The VBAEF was awarded the VCEE Community Partnership Award in 2011. Bruce has served on the VCEE Board of Directors since 2006, serving as board chair in 2013 and 2014.

GAIL LETTS NAMED 2017 RICHMOND TIMESDISPATCH PERSON OF THE YEAR HONOREE

Gail Letts, Virginia market president of First Tennessee Bank, was named 2017 Richmond Times-Dispatch Person of the Year Honoree. Gail was recognized for her leadership, service to the industry, civic efforts and her role as a mentor to many.

Join the VBA for Two New Events in 2018

May 1-3, 2018 | Williamsburg Lodge

May 14-16, 2018 | Williamsburg Lodge

www.vabankers.org

Volume 1 | 2018 | Virginia Banking 11

Relations

Government

State Legislative Meetings

T

he VBA traveled across Virginia last fall to meet with state legislators. These meetings provided an opportunity for bankers to interact with members of the Virginia General Assembly and for the representatives to hear directly from bankers on the issues affecting the industry in advance of the 2018 General Assembly session.

Meetings were held in ten cities: Abingdon, Roanoke, Lynchburg, Danville, Staunton, Fredericksburg, Fairfax, Norfolk, Toano and Richmond.

During these meetings, 200 bankers from more than 35 banks were able to visit with 46 legislators.

12 Virginia Banking | Volume 1 | 2018

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Volume 1 | 2018 | Virginia Banking 13

VBA ENDORSED PROVIDERS

RSED

ENDO

VBA Management Services, Inc. (MSI) 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.

Compliance Assistance

Insurance Services

Patricia Williams, CPCU (216) 220-1280 pwilliams@abais.com

Online Small Business Lending

Chris Rentner (888) 601-1772 chris@akoubacredit.com

Insurance Services

Scott Daugherty (888) 353-3933 scott@compliancealliance.com

Senior Housing Crime Prevention Program

Terry Rooker (877) 232-0857 terry.rooker@shcpfoundation.org

Vehicle Title Management

Marshall Fleming (757) 397-2311 mfleming@bankersinsurance.net

Amanda Jensen (803) 808-4922 amanda.jensen@dditechnology.com

Professional Development

Debit Card Program

Laura Howard (804) 920-1039 laura.howard@blueoceanbrain.com

Mark Reda (813) 854-2210 markreda@pulsenetwork.com

Online Financial Education Chris Roche 202-445-8717 croche@everfi.com

Employee Benefits/Insurance

James Olson (804) 784-7216 jolson@equiasalliance.com

Counterfeit Detection Scanner David Silver (800) 883-8822 ext. 128 dsilver@uveritech.com

Marketing & Payment Solutions

John Duffy (571) 241-6319 john.duffy@harlandclarke.com

Investment and Insurance Services W. Jere Colcer (704) 650-7692 jcolcer@infinexgroup.com

Contact Matt Bruning, SVP, government and member relations, at mbruning@vabankers.org for more information.

Visit www.vabankers.org/endorsed-providers-homepage to learn more about each organization.

Title Insurance Services W. Morris Fine (919) 945-2410 mfine@invtitle.com

Data and Analytic Tools

Stacy Sheehy (434) 529-1978 stacy.sheehy@spglobal.com

Online Job Postings Amy Binns (804) 819-4726 abinns@vabankers.org

VBA Identity Theft Program Josh Gravot (615) 647-8106 josh.gravot@nxgstrategies.com

Compliance Services James F. Dray, CRCM (800) 934-7347 j_dray@tcaregs.com

Arild O. Trent (804) 482-5386 atrent@vacdc.org

Office Supplies

Lisa Perlet (855) 337-6811 x 12878 elisabeth.creamer@officedepot.com

Fraud Solutions

Amy Binns (804) 819-4726 abinns@vabankers.org

CDARS and ICS

Dan Elder (866) 776-6426 x3373 delder@promnetwork.com

Retail and Design/Build Services

Glenn Grau (412) 963-0100 x361 glenn.grau@pwcampbell.com

Community Revitalization Opportunities

Merchant Card Processing

Risk Management Solutions Bob Berno (617) 933-3310 rberno@wolfandco.com

Donna J. Burns (731) 772-1425 donnaburns@tsys.com

Employee

Credit Card Program

Insurance Services

Susanne M. Vielhauer (816) 860-1653 Susanne.Vielhauer@umb.com

Mark DeLawter (704) 516-7442 mark.delawter@zurichna.com

Compliance

Corner

CMS Controls Deep Dive – Monitoring and Testing

E James F. Dray President, Thomas Compliance Associates

ffective identification, measurement, monitoring and control of compliance risks in a financial institution’s products, services, business lines and legal entities is the “heart and soul” of the Compliance Management System (CMS). Compliance examinations scrutinize the design and effectiveness of these CMS controls and focus predominantly on compliance monitoring systems by banks.

Today’s compliance officer (CO) is responsible for possessing much more than just compliance knowledge. Community bank COs serve a larger role in managing compliance risk than most of their counterparts at larger institutions; however, there is less diversity of experience and backgrounds with a limited group. For instance, larger banks have risk managers that assess a bank’s board risk appetite, planners to set financial resources for compliance and internal sources to establish controls that reduce risk exposure. COs at community banks do all of this.

As with any business, it is critical to measure performance against goals. In the realm of compliance, this is most effectively accomplished through ongoing testing and monitoring. Compliance monitoring is an internal process used to ensure that policies, procedures and processes are operating as designed. Monitoring allows senior management to demonstrate that it is meeting its responsibilities, accountabilities and fiduciary governance duties – specifically, assessing the adequacy and effectiveness of internal controls. Using risk-based programs, monitoring is your bank’s quality control process; a proactive review to identify compliance weaknesses.

TIPS FOR A SUCCESSFUL MONITORING PROGRAM Make sure your monitoring method makes sense. Depending on your governance framework, monitoring may take place in several areas.

In a “three lines of defense” governance framework, the first line of defense must be able to effectively identify, measure, monitor and report risk. Performance is controlled through first-line

16 Virginia Banking | Volume 1 | 2018

monitoring and testing and can be done inside the department. The second line of monitoring responsibility is independent of the first line and the scope, depth and frequency of monitoring may vary. Independent audit is the third line and may, depending on circumstances, include monitoring. Regardless of roles and accountabilities, ensure there is an adequate “audit trail” – can examiners follow your process and conclusions?

Examiners expect a formal, risk-based compliance monitoring program. Ongoing assessment of compliance risk is a required component of a CMS and the foundation of a risk-based compliance monitoring program. Basing monitoring efforts on risk ensures appropriate oversight by committing resources where they are needed most. How will you monitor? By regulation? By law? Or perhaps by specific business unit activities? Your CMS assessment becomes the path for all compliance controls, especially monitoring.

Be able to explain the scope, depth and frequency of monitoring activities. Consider both inherent compliance risks and risks specific to business lines. In addition to identifying topics or areas, scope, depth and frequency of testing, consider including the following additional information: • Who is responsible (the compliance staff or business unit?); • Line Management’s responsibilities; • Findings; • The root causes of exceptions; • Results and follow-up; • Testing tools/Checklists/Worksheets that will be used; • How testers will be trained; and • How much time it will take.

Remember that a monitoring program which is written may not be formal, but a formal program must be written.

Procedures, procedures, procedures! A compliance monitoring program can be complex, especially if your bank is complex. Procedures are the cornerstone in a well-documented compliance monitoring program. Procedures estabwww.vabankers.org

lish standards for planning, completing, documenting and responding to monitoring findings. Written procedures establish consistency and accountability among those accountable for monitoring.

A thorough monitoring program also sets forth the duties of business units needed to support remediation. With the increased focus on governance, requiring written procedures is one method by which management can exhibit that it has adequate oversight of compliance risk. Finally, written procedures are THE most cost-effective way to ensure continuity of the monitoring function. It is not practical to completely cross-train for all monitoring activities, but detailed written procedures ensure the “know-how” does not depend on any single individual.

Include complaint activity in monitoring schedule. Consumer complaints contain valuable information that can help an organization better understand its compliance risks and issues. Complaint data can be used to validate and strengthen controls and to identify high-frequency trends or individual complaints that may indicate significant compliance risk exposure. A key CMS test is the bank’s ability to self-identify and promptly remediate violations. Analyzing complaint data can help a financial institution identify weaknesses in its controls, compliance violations and the need for enhanced targeted compliance testing.

Let the Compliance Committee, not the Compliance Officer, drive the process. The Compliance Committee is the perfect infrastructure to manage and oversee compliance monitoring. Committee members should report on the status of monitoring of their business units. The Committee should “own” the monitoring process, just as the business units “own” compliance risk.

Be sure monitoring efforts are dynamic. Monitoring is a proactive effort, but it should also be reactive in response to many factors, including any identified weaknesses. Certainly, if violations are found, it is prudent to expand the frequency of monitoring over that www.vabankers.org

area/issue to ensure any remediation is effective. Think about it this way: If a violation is identified in a compliance examination, that violation becomes a top priority to fix. To ensure it is fixed, and avoid the criticism that comes with a repeat finding, the bank wants to monitor high-repeat susceptibilities to ensure an issue is truly fixed. Remember to enhance or expand monitoring when: • Internal procedures or rules are changed • Regulatory changes occur • New products or services are introduced • There are new employees or employees in new positions • Merger or expansion occurs Lasting Thought Examiners are exhibiting in words and actions their desire to transform the role

of a compliance manager from that of an adviser to one that puts more emphasis on active risk management and monitoring. That means going beyond offering advice on laws and regulations and becoming an active co-owner of risks to provide an independent oversight of the control framework. The benefits of monitoring are that instances of error and fraud are reduced significantly, operational efficiency is increased, and bottom-line results are often improved from the early detection of issues.

TCA’s Virtual Compliance Manager (VCM) service assists dozens of banks with developing and implementing compliance monitoring programs. Contact them today at (800) 934-7347 or email them at info@ tcaregs.com to discuss how a custom VCM solution ensures your CMS will stand up to examiner scrutiny in 2018.

ABA

STONIER

Graduate School of Banking

University of Pennsylvania | June 7-14, 2018 abastonier.com

In partnership with the Wharton School.

Volume 1 | 2018 | Virginia Banking 17

Spotlight

VBA Member

Frank Bell

Senior Vice President, Richmond Regional Executive Chesapeake Bank 1. My Media Mix: A. Music – I really like contemporary Christian music and current country, the latter of which is usually off a playlist one of my sons put together.

B. TV – Other than news channels, I don’t watch a lot of live TV … I’m not a big fan of commercials. We watch older sitcoms on Hulu and we are patiently awaiting the new season of NCIS. C. Books – First off, I’m a big audible fan with downloadable books. My Kindle is full of Dan Brown, David Baldacci, John Grisham and Michael Connelly. My most recent read was Cairnaerie, written by my sister, and although it is fiction, it has numerous family tidbits embedded in the story.

2. Describe a small moment in your life that has had a lasting impact on you.

I am not exactly sure when it happened, but at some point I came to the realization that no one should take themselves too seriously. And, when the time comes to retire, if you do it to rest, you have missed the value of what you have done. What you do on a daily basis should energize you, not exhaust you.

3. What is something you haven’t done that you’d really like to do?

We love the outdoors and have taken some great trips. On my to-do list is to see the Great Pyramids and to take an African safari. I currently have a daughter-in-law who is working in Kenya.

18 Virginia Banking | Volume 1 | 2018

4. Chesapeake Bank’s recent hashtags have been #ItsAllAboutCommunity and #TheBuckStaysHere. In what ways have you given back to your community, both on a personal and professional level?

I am a firm believer that community banks have an important role in the communities that they serve. That responsibility is met at a corporate level but also at an individual, hands-on level.

Over the years, I have served on various community boards and been involved in numerous community activities. I have worked with the Boy Scouts, am a charter member of Innsbrook Rotary, served on two private school boards, delivered for Meals on Wheels, and assisted in cooking for Caritas. I have also been involved with Richmond Emmaus and Community Bible Study.

As a community bank in Richmond, our team has worked to clean and maintain a park nearby and is also very active in supporting the mission of the Evelyn Reinhart Guest House at St. Mary’s Hospital. I truly believe what my license plate frame says: Community Banks Build Better Communities.

5. You have served as a Fellow for the Virginia Bankers School of Bank Management since 2009. Why did you initially take on this position and how has the school changed over the years that you have been a part of it?

What keeps you coming back year after year?

Nine years and I am still learning. Over that period of time, I have had the pleasure to work with very talented bankers and professors. When I think of how our industry has changed www.vabankers.org

Frank is a graduate of the VBA School of Bank Management, pictured with his graduating class of 1990.

over the last nine years, it is mind boggling. One of the best things about the school is how dynamic and flexible both the curriculum and the bank simulation are. Throughout the year, the Bank School board of trustees and VBA staff are actively engaged in ensuring that the school remains current and relative to the industry. As the Fellows prepare by selecting an economy for the simulation [for the third year students], there is a very diligent and concerted effort to make the experience both rewarding and educational. Over the years, the Fellows have made changes in how we interact with the students and features of the model used, all in an effort to create the best experience possible.

6. How long have you been involved with the VBA and what do you feel is the biggest benefit for member banks?

www.vabankers.org

I initially knew of the VBA because my father was a community banker. My first real hands-on experience was in the mideighties with the Young Bankers section. It was at a Young Bankers conference at Wintergreen that I first met Bruce Whitehurst. Over the last 20 years, my involvement and respect for the VBA have increased. As far as benefits, the products and services offered to the member banks can have meaningful financial impact. To have access to a group of vetted endorsed products and services certainly provides value to the member banks in addition to a network of peers that share a common interest in providing and maintaining an industry that gives back to communities. I would also be remiss in not mentioning the regulatory battles that we face. We need to be organized and targeted in our efforts to protect our ability to serve our communities. This is achieved by regular and consistent messages to legislators through the VBA.

Volume 1 | 2018 | Virginia Banking 19

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Virginia Bankers Association

Bank Internship Program

Program Overview For Bank Mentors:

• Internship Program Templates & Materials - participating in this program gives banks access to custom banking industry internship resources to include: • Templates for Goal & Expectation Setting • Syllabus & Learning Objectives Templates • Evaluation Templates • Mentor Orientation - one day introduction and training for bank mentors hosted by the VBA. Program includes: • Program Overview • Internships Basics Presentation • Template & Material Review

For Interns:

• Intern Orientation - a one day training and introduction to the summer program hosted by the VBA. Program includes: • Industry Introduction and Program Overview • HR Best Practices, Including Workplace Etiquette Training & Expectations • Networking & Social Opportunities • Mid-Summer Meet Up - Hosted by the VBA • Additional Regional Events

VBA Internship Certificate of Completion Interns who complete the following requirements will be eligible for the VBA Certificate of Completion: • Attend one of the on-site trainings/networking events hosted by the VBA • Attend a community event or volunteer opportunity, selected by the host bank • Complete one of the four-week courses of the ABA online program, Banking Fundamentals • Complete the summer capstone project • Complete the VBA Internship Program self-evaluation

VBA Internship Program

This program will include collaboration with our Emerging Bank Leaders (EBL) group for networking and learning opportunities. The EBL connects Virginia bankers to engage them in the future of the banking industry.

Program Pricing $195 per intern

VBA Contact

Please contact Monica McDearmon at mmcdearmon@vabankers.org or 804.819.4743 with questions or for more information.

CELEBRATING

125 YEARS 1893-2018

Virginia Bankers Association 125th Annual Convention June 17-20, 2018 | The Omni Homestead Resort Ba VBA

•

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ou nd atio n

Bank Day will take place on Tuesday, March 20, 2018.

•

e sor Spon

Sponsored by the VBA Education Foundation and the VBA Emerging Bank Leaders.

ay Scholarshi D p nk

am og r Pr

CALLING ALL BANKERS! PARTICIPATE IN THE VBA BANK DAY SCHOLARSHIP PROGRAM!

by nF the o i t VBA Educa

The third Tuesday in March was declared Bank Day by the Virginia General Assembly in 1991. On this day, high school seniors spend a day in banks across the Commonwealth shadowing a banker in their daily duties. The purpose of this experience is for the students to learn about banking, financial services, and the vital role banks play in their communities. From their experience, the students are required to write an essay on their Bank Day experience. $26,000 in college scholarships are awarded based on student essays.

For more information, visit www.vabankers.org/bank-day-scholarship-program.

Please contact Monica McDearmon at mmcdearmon@vabankers.org or 804-819-4743 for more information.

22 Virginia Banking | Volume 1 | 2018

www.vabankers.org

Move

Bankers on the

Are your bankers on the move? Email submissions to mmcdearmon@vabankers.org.

Roy Giese

Amy Lowman

Jason Bishop

Access National Bank Roy L. Giese – Senior Vice President, Commercial Lending

Amanda Peay

Sheila Petty

Stephanie Ponton

American National Bank & Trust Co. Amy Lowman – Assistant Vice President, Mortgage Loan Officer

Amanda B. Peay – Assistant Vice President, Mortgage Loan Officer Sheila Petty – Retail Banking Officer Stephanie Ponton – Assistant Vice President, Branch Manager S. Shay Stevens – Vice President, Marketing Officer

Bank of Botetourt Jason M. Bishop – Vice President, Human Resources Officer

Federal Reserve Bank of Richmond Niranjan Chandramowli – Vice President, Currency Technology

Shay Stevens

Aaron Hicks

Bill Gregg – Assistant Vice President, National Procurement Office Cheryl Moore – Vice President, Corporate Communications Lisa White – Executive Vice President, Supervision, Regulation and Credit Powell Valley National Bank Aaron Hicks – Chief Financial Officer

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Volume 1 | 2018 | Virginia Banking 23

Inspire the Next Generation of Bankers ABA Foundation’s Teach Children to Save is your opportunity to help youth in your community discover invaluable lessons like sound money skills, or even careers in banking.

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