September/October 2016
Virginia Bankers School of Bank Management
IN THIS ISSUE
GET TO KNOW DOROTHY WELCH, CHAIR OF THE EMERGING BANK LEADERS
W
NE
VBA Universal Banking Training
October 24-26, 2016 | VBA Training Center
Preparing for Universal Banking | October 24, 2016 VBA Training Center | 4490 Cox Road, Glen Allen, VA 23060
For banks anticipating a change to a Universal Banking environment, planning and preparation are critical. This program provides a holistic strategy banks can use to help ensure a smooth transition to Universal Banking. Instead of PowerPoint and lecture, the program uses realistic case studies and class discussions to ensure that participants leave with a road map for Universal Banking implementation. Who Should Attend Branch Administration, Human Resources and Training Staff
Enhancing Your Universal Banking Environment | October 25, 2016 VBA Training Center | 4490 Cox Road, Glen Allen, VA 23060
For banks that have moved to a Universal Banking environment, this represents a significant cultural change. As with any change, there are often “bumps in the road.” This program examines factors for Universal Banker success and provides a checklist of areas to assess. Instead of PowerPoint and lecture, the program uses realistic case studies and class discussions to ensure that participants leave with a plan for enhancing their Universal Banking environment. Who Should Attend Branch Administration, Human Resources and Training Staff
Leading for Universal Banker Excellence | October 26, 2016 VBA Training Center | 4490 Cox Road, Glen Allen, VA 23060
This program reinforces the important role Branch Managers play in the success of their Universal Banker staff. Instead of PowerPoint and lecture, the program uses realistic case studies and class discussions to ensure that participants leave with skills they can put to use immediately. The program will also discuss how to integrate a bank’s service standards. Who Should Attend Branch Managers
To learn more about these programs and to register, visit: www.vabankers.org/event-calendar
September/October 2016
2016-2017 Officers and Directors of the Virginia Bankers Association John G. Stallings, Chairman, SunTrust Bank William H. Hayter, Chairman-Elect, First Bank & Trust Company T. Gaylon Layfield, III, Immediate Past Chairman, Xenith Bankshares, Inc. Richard M. Adams, Jr., United Bankshares, Inc. Christopher W. Bergstrom, Cardinal Bank Michael W. Clarke, Access National Bank Jeffrey V. Haley, American National Bank & Trust Leton L. Harding, Jr., Powell Valley National Bank
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Scott C. Harvard, First Bank, Strasburg Charles Henderson, Bank of America, NA Brad E. Schwartz, TowneBank Joe A. Shearin, EVB
Virginia Bankers School of Bank Management
features
Susan K. Still, HomeTown Bank Daniel G. Waetjen, BB&T Michael O. Walker, Benchmark Community Bank Robert Wojciechowicz, Capital One Financial Corporation AT-LARGE MEMBERS VBA Benefits Corporation Chair Barry C. Elswick, TruPoint Bank Management Services Inc. Chair M. Andrew McLean, Middleburg Bank Government Relations Committee Chair Ronald D. Haley, River Community Bank, NA VBA Education Foundation Chair Jeffrey M. Szyperski, Chesapeake Bank EDITORIAL & EXECUTIVE OFFICES 4490 Cox Road Glen Allen, VA 23060 804-643-7469 Fax 804-643-6308 www.vabankers.org
Bruce T. Whitehurst President and CEO Virginia Bankers Association
280 Summer Street, Boston, MA 02210 Phone: 617-428-5100 Fax: 617-428-5118 The Warren Group www.thewarrengroup.com Design / Production / Advertising www.thewarrengroup.com custompubs@thewarrengroup.com
Ninth Annual CommitteePalooza
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Q&A: Dorothy Welch VP of Strategic Engagement, Blue Ridge Bank and Chair of the Emerging Bank Leaders
Monica McDearmon Communications & Financial Literacy Coordinator Virginia Bankers Association SUBSCRIPTIONS If you would like to subscribe to Virginia Banking, contact Monica McDearmon at mmcdearmon@vabankers.org Virginia Banking is published bi-monthly. Copyright 2016. 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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in every issue 4 Calendar of Events 5 Worth Noting 7 Insights 8 Legal Line 9 Legislative Update 10 Compliance Corner 11 Washington Update 21 New Associate Members 22 Bankers on the Move Send us your thoughts or ideas on Virginia Banking! Please email Monica McDearmon at mmcdearmon@vabankers.org. Has your information changed? Please email Kellee Edelin at kedelin@vabankers.org with your new contact information.
Calendar of
Visit www.vabankers.org/event-calendar to learn more about these events.
INSTRUCTOR-LED SEMINARS
WEBINARS CONTINUED
COMMERCIAL LENDING SCHOOL, GLEN ALLEN OCTOBER 11-12, 2016
OPENING DEPOSIT ACCOUNTS ONLINE – INCLUDES NEW CDD RULE OCTOBER 14, 2016
BANK TECHNOLOGY SECURITY SCHOOL PRESENTED BY THE GRADUATE SCHOOL OF BANKING AT THE UNIVERSITY OF WISCONSIN-MADISON MADISON, WI OCTOBER 23-28, 2016
DECODING FINANCIAL STATEMENTS & TAX RETURNS FOR DIFFERENCE BUSINESS ENTITIES – 2-PART PROGRAM OCTOBER 17, 2016
PREPARING FOR UNIVERSAL BANKING, GLEN ALLEN OCTOBER 24, 2016
GETTING IN THE DOOR WITH PROSPECTS – TIPS ON LEVERAGING YOUR NETWORK OCTOBER 17, 2016
ENHANCING YOUR UNIVERSAL BANKING ENVIRONMENT, GLEN ALLEN OCTOBER 25, 2016
TROUBLED DEBT RESTRUCTURING – 2-PART PROGRAM OCTOBER 18, 2016
LEADING FOR UNIVERSAL BANKER EXCELLENCE, GLEN ALLEN OCTOBER 26, 2016
COMMERCIAL REAL ESTATE CASH FLOW: ANALYZING INCOMEPRODUCING OR RENTAL REAL ESTATE, PLUS GLOBAL CASH FLOW ISSUES OCTOBER 18, 2016
CECL WORKSHOP, WASHINGTON, DC NOVEMBER 2, 2016 COMMERCIAL REAL ESTATE LENDING SEMINAR, GLEN ALLEN NOVEMBER 2-3, 2016 WOMEN IN BANKING CONFERENCE, RICHMOND NOVEMBER 9, 2016 ENTERPRISE RISK MANAGEMENT WORKSHOP, GLEN ALLEN NOVEMBER 16-17, 2016 TRUST & WEALTH MANAGEMENT PEER EXCHANGE, GLEN ALLEN NOVEMBER 30, 2016 FINANCIAL FORECAST, RICHMOND JANUARY 6, 2017
NETWORKING EVENTS
ACCOUNTING BASICS/REFRESHER FOR BANKERS OCTOBER 18, 2016 COMMERCIAL REAL ESTATE APPRAISALS: REVIEWING AND INTERPRETING OCTOBER 18, 2016 KEYS TO UNDERSTANDING PERSONAL AND GLOBAL CASH FLOW FROM TAX RETURNS OCTOBER 18, 2016 INTEREST RATE RISK: OPERATING IN A “NORMAL” RATE ENVIRONMENT OCTOBER 18, 2016 LOAN UNDERWRITING MISTAKES OCTOBER 19, 2016 IRA REQUIRED MINIMUM DISTRIBUTIONS OCTOBER 19, 2016
EMERGING BANK LEADERS MIX & MINGLE EVENT – DEPOT GRILLE, LYNCHBURG OCTOBER 20, 2016
LAYERED CONTROLS FOR ADVANCED PERSISTENT THREATS OCTOBER 19, 2016
EMERGING BANK LEADERS MIX & MINGLE EVENT, WILLIAMSBURG NOVEMBER 10, 2016
INFORMATION SECURITY BASICS: BOARD OF DIRECTORS EDITION OCTOBER 20, 2016
WEBINARS INTRO TO COMMERCIAL LENDING OCTOBER 11, 2016 LANDSCAPE OF AGRICULTURE TODAY AND TOMORROW OCTOBER 11, 2016 COMPLIANCE FOR COMMERCIAL LENDERS OCTOBER 11, 2016 WORKPLACE VIOLENCE OCTOBER 12, 2016 IRA DISTRIBUTIONS OCTOBER 12, 2016 PUT THE SKIDS ON BORING TRAINING OCTOBER 13, 2016 SUCCESSFUL WORKOUT STRATEGIES FOR PROBLEM LOANS OCTOBER 13, 2016 MALICIOUS SOFTWARE: OVERVIEW AND IMPACT OF MALWARE ON THE BANKING INDUSTRY OCTOBER 13, 2016
4 Virginia Banking | September/October 2016
NEW BUSINESS ACCOUNTS: THE INTERVIEW, CIP, NEW CDD RULES & AUTHORITY OCTOBER 21, 2016 RESPA SECTION 8 VIOLATIONS: THEY’RE BACK! OCTOBER 24, 2016 BUILDING AN EFFECTIVE MARKETING PLAN OCTOBER 25, 2016 IS YOUR BUSINESS DEVELOPMENT A HOUSE OF CARDS? OCTOBER 25, 2016 ESTABLISHING AND AMENDING IRAS OCTOBER 26, 2016 TRUSTS FOR PLANNING, PRIVACY AND PROTECTION OCTOBER 26, 2016 BUILDING BLOCKS OF ISP – REVIEW REGULATORY GUIDELINES AND UNDERSTAND SECURITY FRAMEWORK OPTIONS FOR A COMMUNITY BANK OCTOBER 26, 2016 GETTING MORE INFORMATION FROM PERSONAL FINANCIAL STATEMENTS OCTOBER 26, 2016
www.vabankers.org
Noting
Worth
JOE BOLING TO RETIRE
Middleburg Financial Corp. announced Joseph L. (Joe) Boling’s retirement from his position as chairman of the board. The board appointed John C. Lee IV to succeed Boling as chairman of the board and has appointed Boling as chairman emeritus. Past VBA Chairman Boling has served as a director of Middleburg Financial Corp. since 1993 and as chairman of the board since 1997. From 1997 to 2010, Boling served as chief executive officer of the company and served as president and chief executive officer from 1993 to 1997. Gary Shook, president and CEO and a past VBA Chairman, commented, “Joe Boling has been a leader in Virginia banking over the majority of my career. I consider myself privileged to have had the opportunity to serve directly with him these past eleven years and look forward to drawing upon his wise counsel as chairman emeritus for many more years to come.” Congratulations Joe!
VBA BANKPAC CONTRIBUTES $110,000 TO ABA’S FEDERAL PAC CAMPAIGN
Almost 250 state association executives and bankers joined together to discuss the industry’s most pressing priorities at the American Bankers Association Summer Leadership meeting in Seattle this July. States at the meeting presented BankPAC checks exceeding $950,000. The Virginia Bankers Association contributed $110,000 to this total, thanks to 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.
With a 360° perspective, our financial services team is with you every step of the way. More than 160 banks in the Southeast depend on Elliott Davis Decosimo for personal attention, industry experience and services, including external and internal audit, SEC reporting, M&A consulting, taxation and compliance. Our financial services practice is more than 100 professionals strong, with a 60-year reputation for helping banks operate stronger, wiser, better. Let us help you move forward.
elliottdavis.com
www.vabankers.org
September/October 2016 | Virginia Banking 5
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Insights Living in a Half Changed World
T Bruce Whitehurst President and CEO, Virginia Bankers Association
www.vabankers.org
his is not another column about millennials, I promise! It is about the rapidly changing world in which we live and a different spin on what might be causing all this change. At a recent national industry meeting, I heard consultant, author and speaker Seth Mattison use the phrase borrowed as the title to this column: We are living in a half changed world. Seth spoke at length about the transition we are going through in our society and in American business from the traditional, hierarchical approach to one based on how networked we have all become. He suggested that it’s not the younger generations who are changing the world, but rather the unbelievable advances in technology – especially communications technology – that is sparking the changes to which all generations are adapting. In the hierarchical tradition, we relied on org charts, seniority and unwritten rules for organizations, such as, “wait your turn”; “your time will come”; “climb the ladder”; “toe the line”; and many others. The whole idea was to rise through the ranks, gaining more responsibility as you gained more experience. Information was controlled and not readily available. Those with the most information were typically those with the most tenure and seniority. Now we live in an age where an unlimited amount of information is at our fingertips – on our phones, on the web, etc. People can connect and communicate through social media regardless of where each lives or if they have even met in person. For example, I think of the stark differences in my relationships with friends from years past, whether it be those from high school, college, or the ones who have moved away from Richmond. If we are connected through social media, like Facebook, we keep up with each other; if we are not, then we don’t. We truly now live in a networked world, and we find ourselves relying on these digital connections to maintain relationships with our friends, colleagues and even family. These changes are fundamental to our way of life and how we do business. Unprecedented access to information leads to a demand for transparency in ways we have never seen until recent
years. The exponential reach of social media – not to mention that we look up every restaurant, merchant or vacation spot on Yelp before committing to going there – has transformed our consumer behaviors. It has also led to – in my opinion – an “informalization” in the workplace, not necessarily in a bad way, but certainly in a different way. Seth Mattison told the story of a senior manager who said a brand new employee, fresh out of college, walked into their company’s CEO’s office and asked the CEO if he would “hang out and have coffee” with him. The senior manager went on to say that he would have never done that as a young, new employee – and maybe not even now! This, in a nutshell, speaks to the half-changed world and the clash of transitioning from hierarchy to network. To be sure, things are not as simple in reality as they might seem to be in concept, but Seth’s message resonated with me as I hope it does with you. I especially appreciated that he framed this transformation as a result of technological advances (I guess we can thank the late Steve Jobs for much of this), and not something the millennials are pushing as their agenda or cause. At the VBA – and as I have said and written many times – we have the good fortune of being a key resource and partner to our member banks. In addition to advocating for banking, we also provide a wealth of training programs and services that we are evolving in order to meet this new, networked world that is clearly changing the face of banking. We are learning a lot from our Emerging Bank Leaders about the best ways to keep them connected with each other and the VBA. We see more and more personal accountability for bankers’ own professional development, which we view as a very positive trend. We haven’t thrown out the org chart yet, nor do I expect we will any time soon. However, we, like all our banks, are adapting and adjusting as we have one foot in each of the two worlds described above. It keeps life interesting, doesn’t it? Email Bruce Whitehurst at bwhitehurst@ vabankers.org with any comments on this article or tweet him at @BruceTW. September/October 2016 | Virginia Banking 7
Line
Legal
Regulation of Marketplace Lending
B Mel Tull General Counsel, Virginia Bankers Association
y any account, marketplace lending has experienced explosive growth over the past five years, from approximately $1 billion in originations in 2010 to $12 billion in 2014 and $36 billion in 2015, according to some estimates. While the industry has experienced a bit of turmoil in 2016, it increasingly has attracted the attention of traditional banks and regulators alike. By way of background, marketplace lenders generally accept loan applications online and apply proprietary, computerized formulas to evaluate the applications and render quick approval decisions. Lending Club, Prosper and SoFi are examples. Through a focus on automation, quick decisions, fast funding and easier processes, these online platforms have become a popular alternative to traditional bank financing, primarily with consumers and small businesses. While the models can vary, generally the marketplace lender uses investor money to fund loans directly or partners with a traditional bank to facilitate the transaction and purchases the loan from the bank. Over the last year, we have seen increased interest in regulation of marketplace lending at both the federal and state level. Among others, the U.S. Congress, U.S. Treasury, Office of the Comptroller of the Currency (OCC), Consumer Financial Protection Bureau (CFPB) and the California Department of Business Oversight have focused in some way on the current and potential regulation of marketplace lenders. The CFPB announced in March 2016 that it would begin accepting complaints from consumers regarding marketplace lending. This move could be a precursor to the CFPB’s planned supervision of and proposed rules regarding marketplace lending. While much of the regulatory attention is focused on regulation of marketplace lenders themselves, regulators also have been focusing on banks that do business with marketplace lenders. Banks’ business relationships with marketplace lenders can vary widely. Among these variations, banks can: originate loans to borrowers then sell the loans to marketplace lenders; purchase loans originated by or jointly with marketplace lenders; use marketplace lenders’ platforms to originate loans; or refer customers to marketplace lenders’ online platforms. While this article gives a gen-
8 Virginia Banking | September/October 2016
eral overview of some of the regulatory input to date regarding these third-party lending arrangements, the risks and compliance considerations will be highly dependent on a specific transaction or arrangement in which a bank engages. The Federal Deposit Insurance Corp. (FDIC) has said the most on this topic. In its winter 2015 Supervisory Insights, the FDIC provided an initial overview of the marketplace lending model, due diligence considerations and risk identification when engaging with marketplace lenders. More recently, on July 29, 2016, the FDIC issued proposed guidance for third-party lending, which carries forward many of the themes introduced last year as well as specific expectations for institutions that engage in third-party lending. The guidance supplements the FDIC’s Guidance for Managing Third-Party Risk and applies to all institutions that engage in third-party lending, which the FDIC defines as an arrangement that relies on a third party to perform a significant aspect of the lending process, including originating loans for third parties, through or jointly with third parties or using platforms developed by third parties. At the outset, the proposed guidance reiterates the current regulatory theme of board involvement and accountability. Among other things, the FDIC expects that the board and senior management are ultimately responsible for managing activities conducted through third-party lending relationships, and for identifying and controlling the attendant risks. The proposed guidance identifies (and details) risks that may arise from third-party lending relationships, including specific strategic, operational, transaction, pipeline and liquidity, model, credit and compliance risks. To address these risks, institutions are expected to establish risk management programs and policies which, at minimum, should establish: • limits as a percent of total capital for each third-party arrangement and for the program overall, relative to origination volumes, credit exposures, growth, loan types and levels of credit quality; • minimum performance standards for and independent reviews and management overContinued on page 22 www.vabankers.org
Legislative
Update
Party Platforms
A Matt Bruning Senior Vice President, Government & Member Relations, Virginia Bankers Association
t the recent national political party conventions, both the Democratic and Republican parties endorsed their respective party platforms. These quadrennial documents outline the policy goals and principles that the party and their candidates espouse. Written by leaders of the party faithful, the various planks deal with thematic issues that all supposedly roll up into the overarching policy positions. On an extensive range of topics covering everything from domestic issues such as health care, education and the economy to foreign relations and hot button cultural matters, the platform is supposed to represent the unified stance of the party membership. Not surprisingly in this divisive political climate – highlighted by two factious presidential candidates – the platforms endorsed by both major parties were widely divergent on just about every approach to the issues outlined. Both platforms mention policies relating to the banking industry and it will not come as a shock for those paying attention over the last six years to know that, once again, each approach is miles apart from the other. In the Democratic platform, much of the rhetoric in the “Reining in Wall Street and Fixing our Financial System” section demonizes “Wall Street” as the broad brush of the banking industry. They pledge to “vigorously implement, enforce and build on President Obama’s landmark Dodd-Frank financial reform law, and we will stop dead in its tracks every Republican effort to weaken it” before stating their defense of the CFPB and opposition to any changes to it. The document is strikingly and disappointingly devoid of any mention of regional, mid-size or community banks and solutions to their challenges; however, the section concludes with their belief that “we need to give Americans affordable banking options, including by empowering the United States Postal Service to facilitate the delivery of basic banking services.” Judging just by the platform, allowing Post Offices to directly compete with banks is more important than freeing hometown banks from unnecessary regulations. On the Republican side, their platform acknowledges the decline in the number of community banks since Dodd-Frank was enacted and that “the cost and complexity of complying with the law has created impediments to the remaining banks’ ability to support
the customers they serve.” To that end, it endorses “removing roadblocks and regulations that prevent access to capital,” and relieving community banks of excessive regulations. It goes on to attack the CFPB and calls for the end of government’s use of disparate impact theory for lending and safe harbor for mortgage lending compliance. In a section on regulations, it again references Dodd-Frank, calling it a “legislative Godzilla, crushing small and community banks and other lenders.” Despite the complete dichotomy of these platforms relative to banking issues, there is one specific area of agreement common to both. Thanks to a reported last minute injection from Donald Trump’s campaign on the Republican side and one of many attempts to appease the progressive protestations of the Bernie Sanders fomenters on the Democratic side, both platforms call for a return to the Glass-Steagall Act. The Republican platform states their support for reinstating the 1933 law. The Democratic platform calls for empowering regulators to downsize or break apart financial institutions, including an “updated and modernized version of Glass-Steagall.” While the overall stances on banking regulation are polar opposites, somehow the populist extremes of both parties have circumnavigated to a point of agreement on bringing back an eighty-three year old, Depression-era law, provisions from which were repealed in a bipartisan manner under then-President Bill Clinton in 1999. Legislative efforts in recent years to reinstitute a separation of commercial and investment banking functions have failed to gain any traction. Bills from Rep. Marcy Kaptur (D-Ohio) and leader of the bank-bashing movement, Sen. Elizabeth Warren (D-Massachusetts), have not even received a committee hearing under this Republican-controlled Congress. Even efforts at the state level through non-binding resolutions urging Congress to revive Glass-Steagall – in 2013 and 2014 from ultraconservative legislators Delegate Bob Marshall and Sen. Dick Black – were overwhelmingly defeated. As ABA President Rob Nichols noted upon the inclusion of the statement in the GOP platform, “America’s economy depends on banks of all sizes to meet the needs of a large and diverse group of clients, customers and communities.” While proponents of Glass-Steagall Continued on page 22
Email Matt Bruning at mbruning@vabankers.org with any comments on this article. www.vabankers.org
September/October 2016 | Virginia Banking 9
Compliance
Corner
Regulation O – A Quick Refresher
A By James McGuire Associate General Counsel, Compliance Alliance
s much of the to-do surrounding TRID and the recent flood changes dies down, many financial institutions are finding themselves preoccupied with those old standby compliance concerns, like Regulation O and loans made to insiders. While there have been many tweaks and changes to other rules, Regulation O has remained fairly static. But it’s always important to circle back to a few of the quirks that make this particular regulation one of the more difficult with which to comply. Below are a few of the regulation’s finer points that have come up in the course of answering recent questions from our members: HOME LOANS TO EXECUTIVES Typically, financial institutions are capped at $100,000 of loans to executives, per 12 CFR § 215.5(c) (4) of Regulation O, unless those loans fall into one of a select few categories. One such category is for first lien loans on dwellings. Many executives will spot this exception and instantly assume they can take a cash-out loan on their 100 percent-owned dwelling, regardless of the amount of that loan. But not so fast! §215.5(c)(2) states, “A member bank is authorized to extend credit to any executive officer of the bank . . . in any amount to finance or refinance the purchase, construction, maintenance or improvement of a residence of the executive officer, provided: (i) The extension of credit is secured by a first lien on the residence and the residence is owned (or expected to be owned after the extension of credit) by the executive officer; and (ii) In the case of a refinancing, that only the amount thereof used to repay the original extension of credit, together with the closing costs of the refinancing and any additional amount thereof used for any of the purposes enumerated in this paragraph (c)(2), are included within this category of credit[.]” So it’s not as simple as just any first lien loan on a dwelling being exempted. The executive must own the dwelling, and the loan must be “in any amount to finance or refinance the purchase, construction, maintenance, or improvement” of a residence. Non-construction cash-out loans on a home that an executive owns outright do not count for this exception, and therefore must go toward an executive’s $100,000 cap. Furthermore, this exemption only applies to “a” residence, rather than “any” residence,
10 Virginia Banking | September/October 2016
meaning that it only works for one first lien loan on one home, regardless of however many homes an executive may own. CD-SECURED LOANS TO EXECUTIVES On the flipside, one type of executive loan that always will qualify as an exception to the $100,000 cap is a loan fully secured by a segregated certificate of deposit (CD) at the bank. Section 215.5(c)(3) allows for “extension[s] of credit . . . secured in a manner described in §215.4(d)(3)(i)(A) through (d) (3)(i)(C) of this part[.]” Section 215.4(d)(3)(i)(C), in turn, describes “extensions of credit secured by a perfected security interest in a segregated deposit account in the lending bank[.]” Long story short: if your institution plans to make a loan to an executive, and that loan is running up close to the executive’s $100,000 cap, make sure the loan is secured by a segregated CD at your institution in (at least) the full amount of the loan, and you shouldn’t have any problems with exceeding the cap. Don’t forget a tricky aspect of this exception: the loan must be fully secured by the CD. So, for instance, if a $150,000 loan is partially secured by a $100,000 CD, all of that $150,000 would count toward the $100,000 cap because the loan is not fully secured by the CD, therefore yielding a Regulation O violation. LOANING TO INSIDERS UNDER “LINES OF CREDIT” Confusion continues to abound regarding extending credit to insiders under “lines of credit.” Despite section 215.3(a)’s statement that an “extension of credit” includes “a granting of a line of credit,” prior treasury opinions have indicated that loose “lines of credit” and “extensions of credit” are not the same thing; rather, each individual extension of credit made under a line should be treated as an “extension of credit” in and of itself and, for the most part, must comply with Regulation O as if it were a single loan existing outside the line. I say “for the most part” because there is one notable exception: prior board reporting. Section 215.4(b) (3) states that any extension of credit granted under a pre-existing line of credit does NOT need prior board approval if it “is made pursuant to a Continued on page 21 www.vabankers.org
Update
Washington
Dodd-Frank’s Price Tag
T Rob Nichols President and CEO, American Bankers Association
he president’s Council of Economic Advisers seems to have taken to heart Mark Twain’s suggestion to “get your facts first, then you can distort them as you please.” A report from the group released in August reviews the aggregate performance of community banks then boldly – and illogically – concludes that the Dodd-Frank Act has not harmed that segment. Specifically, the report claims that bank branching patterns, lending growth and geographic reach “show that community banks remain strong.” The statement is jaw-dropping in its willful disregard for the true cause and effect of the disappearance of 1,708 banks – or 22 percent of the industry – since the enactment of Dodd-Frank in 2010. It’s as if the White House is saying “What does it matter if we are losing a bank a day, there are others around that can lend.”
The CEA’s conclusions, in short, feel forced and out of touch. Had the researchers called real, live bankers who are grappling with how to grow their business in the current regulatory environment, they could have gotten right to the heart of the matter.
We know how much it matters – to you and to the communities that no longer have their local hometown bank. And we know that it is more than just market forces and “macroeconomic conditions” that are driving the twin trends of bank consolidation and the dearth of new bank charters. As I said in a letter to the CEA respectfully challenging its conclusions, the thousands of pages of new regulations that have been imposed on community banks in recent years is an enormous driver of decisions to sell to a larger bank. Those same regulations are restricting product offerings, like mortgages, and discouraging banks from growing for fear of the increased regulation that is triggered by crossing an arbitrary asset threshold. This leaves customwww.vabankers.org
ers with fewer choices and communities with less service. Complex, ill-fitting rules – from Dodd-Frank and beyond – are also to blame for the lack of de novos in recent years. The CEA suggests the real reason is low interest rates, but large numbers of new banks have formed in past recessionary times, so that argument just doesn’t wash. The CEA’s conclusions, in short, feel forced and out of touch. Had the researchers called real, live bankers who are grappling with how to grow their business in the current regulatory environment, they could have gotten right to the heart of the matter. They might have heard something like this, taken from a note that one of ABA’s members recently sent explaining his bank’s decision to hang it up: “Unfortunately we became a victim of DoddFrank. The effects of Dodd-Frank… plus other regulatory issues… resulted in financial projections showing substantial declines in revenues and increases in compliance costs, reaching the point that in a few short years an otherwise healthy community bank with strong capital and satisfactory earnings could no longer meet a number of financial bench-marks set by the regulators. These conclusions forced the bank to sell now when our shareholders and some of our employees would be less adversely affected.” When this bank merged with a larger one, half of its employees lost their jobs. And that highlights yet another costly toll of governmentinduced consolidation: the lost contributions of men and women who play leading roles in their communities. John Ikard, last year’s ABA chairman, said it well in his farewell speech at our convention. A community can lose their bar or their grocery store, but they can’t lose their bank, adding that online lenders are no replacement. “You can’t go online to get a leader. Banks don’t just provide money. They provide the people who serve on the school board, United Way, churches.” That kind of involvement – which undoubtedly makes communities richer – is not something any economist can put a value on. Email Rob Nichols at nichols@aba.com. September/October 2016 | Virginia Banking 11
Management
School of Bank
Virginia Bankers School of Bank Management
Education and Community Work Culminate In Latest Graduation Ceremony
More than 180 bankers came together this year at the University of Virginia’s Darden School of Business for the Virginia Bankers School of Bank Management. The three-year program is designed around three, week-long summer sessions including a BankExec simulation in the 3rd year. Bankers leave the school each year with a deeper understanding and appreciation for all aspects of the banking industry. This year, the school welcomed back instructors who have been a part of the school for many years for sessions on topics ranging from ethical decision making to marketing and commercial banking. The week was not only about attending classes. Students attended and participated in many charitable, social and networking events. The 3rd year class started the week with a collection for the Ronald McDonald House Charities Charlottesville. They hosted a Bowling for a Cause event, which also supported the Ronald McDonald House Charities. The Emerging Bank Leaders hosted a series of Dine-Around Dinners at favorite Charlottesville restaurants, where students had an opportunity to learn about becoming a member of this motivated group of bankers. The 3rd year class was able to hold on to their title as undefeated kickball champions after dominating the field, and students were given the opportunity to tour Starr Hill, one of Charlottesville’s local breweries. Each year, the VBA recognizes the student in the third year class with the highest GPA. This year, Miles Green, Federal Reserve Bank of Richmond, was recognized for his GPA of 99.1. Congratulations to those who graduated in the top ten percent of the class: Jonathan Kruckow, Grayson National Bank; Chris Noack, Federal Reserve Bank of Richmond; Kyle Swenson, Federal Reserve Bank of Richmond; Michael Galvin, Old Point National Bank; and Stephanie Funkhouser, Bank of Clarke County. 12 Virginia Banking | September/October 2016
For more information about the Virginia Bankers Association School of Bank Management and the admissions criteria, please visit the VBA’s website at www.vabankers.org. Congratulations and best wishes to the class of 2016. We look forward to seeing all new and returning students next summer for the 2017 session.
The 1st year class.
The 2nd year class.
The 3rd year class. www.vabankers.org
Union Bank & Trust CEO Billy Beale reviews “How a Bank Makes Money” with the 1st year class.
Courtney Fleming welcomed students to Bank School during Convocation.
Dr. Ed Seifried discusses “Economic Environment” 2nd year class president Marshall Jett and 3rd with the 1st year class. year class member John Snead play cornhole during the Welcome BBQ.
Jimmy Sawyers talks to the First time faculty member Seth Winter reviews “Legal 2nd year class during his Environment in Banking” with the 3rd year class. “Technology in Banking” session.
All three class presidents enjoy The Pouring at Farmington Country Club. (From Left) Marshall Jett, 2nd year class; Marcus Wade, 3rd year class; Josh Toth, 1st year class.
1st year class officers at The Pouring. (From Left) Keith Smith, Scott Griffin, Bethany Bajsert, and Josh Toth.
3rd year class members had a collection for Ronald McDonald House Charities Charlottesville at registration.
The 3rd year class kickball team was undefeated for the third year in a row!
2nd year class officers at The Pouring. (From Left) Alicia Howard, Marshall Jett, and Amanda Peay.
3rd year class officers and committee chairs at The Pouring. (From Left) Eric Collins, Pam Langfitt, Marcus Wade, Shareema Williams, and Jeromy Cox. Continued on next page
www.vabankers.org
September/October 2016 | Virginia Banking 13
Virginia Bankers School of Bank Management continued from page 13
VBA Chairman John Stallings, president & CEO, Virginia Division, SunTrust Bank, makes remarks at graduation.
2016 Honor Grad Miles Green, Federal Reserve Bank of Richmond, accepts his diploma. Miles earned a 99.1 cumulative GPA.
Marcus Wade, Bank of Botetourt, accepts the inaugural Faircloth Family Award of Excellence from Mark Faircloth.
Virginia Bankers School of Bank Management 2016 Graduates Sarita Baboota
MainStreet Bank
Elaine W. Mintschenko
First Bank, Strasburg
Natasha B. Belcher
TruPoint Bank
Benjamin D. Munson
Old Point National Bank
Steven Nolberto Blanco
John Marshall Bank
Christopher Noack
Federal Reserve Bank of Richmond
Jennifer J. Boyd
TruPoint Bank
James Olevson
MainStreet Bank
Jeffery Bracewell
EVB
Kate S. Pascarella
Farmers & Merchants Bank
Sherri L. Clowser
Chesapeake Trust Company
Jamie Pearson
Middleburg Bank
Eric R. Collins
Union Bank & Trust
Amanda Bosher Porch
Village Bank
Cheryl L. Cook
Access National Bank
Steven Puryear
United Bank, Inc.
Jeromy E. Cox
EVB
Erin M. Ratliff
First Bank & Trust Company
Dana R. Dalton
The Bank of Southside Virginia
R. Curtis Rhea
Bank of Marion
Allison G. Daniels
First National Bank
Ashley L. Robins
Chesapeake Bank
Kelly D. DeWitt
Farmers Bank
Ramon Sanchez
EVB
Melissia Eck
Melissa Nicole Savala
Farmers Bank
William K. Freesmeier
MainStreet Bank
Megan S. Smith
Xenith Bank
Stephanie Funkhouser
Bank of Clarke County
Lang Smith
Union Bank & Trust
Michael J. Galvin
Old Point National Bank
John Holman Snead
VBA Benefits Corporation
Nickolas Ross Gillan
First National Bank
Heather E. Snow
C&F Bank
Keith Gillespie
Southern Bank and Trust Company
Natalie M. Strickler
Farmers & Merchants Bank
Miles Green
Federal Reserve Bank of Richmond
Kripa Subramanian
Burke & Herbert Bank
Matthew C.E. Hubbard
HomeTown Bank
Kyle Swenson
Federal Reserve Bank of Richmond
Lauren Key
Xenith Bank
Daniel C. Tucker
Bureau of Financial Institutions
Jonathan Kruckow
Grayson National Bank
Marcus T. Wade
Bank of Botetourt
Scott Lambert
George Mason Mortgage LLC
Jaynelle M. Walker
City National Bank
Pamela Langfitt
Xenith Bank
John L. Webb
Benchmark Community Bank
Vincent R. Locher
Federal Reserve Bank of Richmond
Janet H. Whitehead
First National Bank
Becky J. Lovelace
TowneBank
Shareema D. Williams
Essex Bank
Chad M. Ludwig
Access National Bank
Martha S. Wilson
Cardinal Bank
Andrea J. McClanahan
Grundy National Bank
Joseph Yednock
Union Bank & Trust
Karyn Mercier
TowneBank
Donna J. Young
HomeTown Bank
14 Virginia Banking | September/October 2016
www.vabankers.org
Palooza
Committee
Ninth Annual CommitteePalooza
Bruce Whitehurst welcomed bankers to the general session and gave an industry update.
John Stallings, VBA chairman and president & CEO of SunTrust, Virginia Division, kicked off the general session.
VBA Special Projects Coordinator Tom Garner explained the evolution of VBA committees.
Over 160 bankers were in attendance at this year’s Palooza.
T
he Virginia Bankers Association hosted its ninth annual CommitteePalooza on September 8th at the Troutman Sanders building in downtown Richmond. Fifteen committees held meetings at Palooza this year with over 160 bankers in attendance. VBA committees work throughout the year to provide input to the VBA on matters affecting the banking industry and the committees' functional areas of banking, identify possible legislative or regulatory issues, provide input on education and training needs and provide a forum for the exchange of ideas and networking. Their commitment to this purpose contributes to creating a stronger banking community in Virginia. Chairmen and committee members met to kick off the committee year and plan for upcoming conferences and events, and also discussed ways their committees can help support Virginia bankers. John Stallings, president & CEO of SunTrust, Virginia Division and VBA chairman, welcomed committee members during the joint session. Jake Lutz, Susan Ancarrow, Ted Fauls, Seth Winter, Alan Wingfield, and Mark Jones from Troutman Sanders gave updates on trends currently affecting bankers. Tom Garner, Special Projects Coordinator with the VBA, shared his “committee evolution” presentation and Bruce Whitehurst gave an industry update. Thank you to all the Virginia bankers that made the trip to Richmond to meet to plan for another great year ahead. www.vabankers.org
2016 committee chairs will lead their committees through valuable discussions.
Some of our committees’ vice-chairs were in attendance for the committee kick-off meetings. Committees That Met During CommitteePalooza: • • • • • • • • • • • • • • •
CFO Committee Compliance Committee Enterprise Risk Management Committee Government Relations Committee Human Resources Committee Emerging Bank Leaders Steering Committee Legal Affairs Committee Lending Executives Committee Marketing Committee Mortgage Executives Committee Operations & Technology Committee Retail Executives Committee Security Committee Training Committee Trust & Wealth Management Committee September/October 2016 | Virginia Banking 15
VIRGINIA BANKERS: INVESTING IN VIRGINIA’S COMMUNITIES
The Virginia Bankers Association recently conducted a survey of the Commonwealth’s banks to determine the ways in which they support growth and civic development in their local communities. Responses were compiled from 43 banks throughout Virginia, each of which make a significant impact in their respective communities. The following is just a glimpse of how these banks work every day to help Virginians grow and prosper.
THE STATS
Virginia bankers completed 162,833 hours of community service.1 7,943 associates helped with banksponsored community service projects.1
Small business loans from 93 lenders were made in Virginia for a total of $10.7 billion. Mortgage loans in Virginia totaled $65.2 billion in 2015.2
$13.7 million was donated by Virginia banks to different charities.1 Virginia banks employed 69,230 Virginians in 2015.2
The Virginia Community Development Corporation reported that 16 banks invested in their Low-Income Housing Tax Credit equity fund for a total of $53 million.3
Virginia banks provided $627,678 towards scholarships for students.1 1
Community Investment Survey
More than 21,846 students received financial literacy education from Virginia bankers in 2015 between Get Smart About Credit Day, Teach Children to Save Day and the VBA Bank Day Scholarship Program.
2
FDIC
3
Virginia Community Development Corporation
PARTICIPATING BANKS
VIRGINIA BANKERS IN ACTION Thank you to the banks that submitted their photos to us:
Thank you to the 43 banks that participated in the survey this year: American National Bank and Trust Company Bank @lantec Bank of America Bank of Clarke County Bank of Floyd Bank of Georgetown Bank of McKenney Bank of the James Benchmark Community Bank Blue Ridge Bank C&F Bank Cardinal Bank CCB Chesapeake Bank Essex Bank EVB F&M Bank Farmers Bank First Bank First Bank & Trust Company First Virginia Community Bank Freedom Bank HomeTown Bank MainStreet Bank Middleburg Bank Oak View National Bank Old Point National Bank Powell Valley National Bank River Community Bank, N.A. Select Bank SunTrust Bank The Bank of Marion The Bank of Southside Virginia The Farmers Bank of Appomattox The Fauquier Bank TowneBank TruPoint Bank Union Bank & Trust Virginia Commonwealth Bank Virginia Community Bank Virginia Community Capital Virginia Partners Bank Xenith Bank
Old Point hosted a class visit from the Downtown Hampton Child Development Center at their downtown Hampton office. The children received an educational, fun experience while learning to use a counting machine and the importance of the vault.
First Bank & Trust Company contributed $5,000 to the Blue Ridge Area Food Bank, $1,000 per year for five years. Since 1979, First Bank & Trust Company has donated over $2.5 million to charitable organizations, and over $731,000 to education.
American National Bank and Trust Company employee Sean Brown and other bank employees taught financial literacy topics to approximately 150 high school students from Martinsville and Henry County, Virginia.
Bank @lantec at Relay for Life, where they raised $1,600 for the American Cancer Society. Team members walked around the track at Salem High School in Virginia Beach to raise funds and bring awareness to the fight against cancer.
Select Bank CEO Mike Thomas with representatives from Beacon of Hope, a program that helps high school students apply for college and provides scholarship dollars. Select Bank sponsors Beacon of Hope’s annual fundraiser and provides annual support through donations.
F&M Bank employees hard at work at Plains Area Day Care during United Way’s 2015 Day of Caring.
TowneBank Richmond teamed up with Virginia Supportive Housing for United Way’s Day of Caring in September 2015.
The Farmers Bank of Appomattox volunteered at the 2015 Fourth of July Library Event, a celebration for the children of Appomattox.
Q&A Dorothy Welch VP, Strategic Engagement, Blue Ridge Bank and Emerging Bank Leaders Chair
Q
: One of your first experiences with banking was through the VBA Bank Day Scholarship Program. Tell us about that and how your career in banking began. A: My high school guidance counselor was looking for a student to participate in the VBA Bank Day program and approached me to participate. I shadowed a banker at a local community bank in our county. Several months later, I went to work for the bank I had visited on Bank Day as a part time teller and continued working for that bank for the next 16 years in various roles. Prior to Bank Day, I had never considered a career in banking and was planning to pursue a career in psychology. The Bank Day program opened my eyes to the possibilities and potential a banking career offers.
Q
: You are currently helping plan the Bank Day program for your bank. What other financial literacy programs do you participate in? Why do you feel the programs are a necessity to Virginia students? A: Currently, Blue Ridge Bank participates in Teach Children to Save Day, and as many other financial literacy outreach efforts as we can. During my banking career, I spent a number of years working in the Collections/Special Assets area. I know firsthand the need Virginia’s youth has for basic personal finance skills. Working in that area of banking, I witnessed the limited knowledge young adults have regarding budgeting and money management. It is a real concern. Currently, I am a Master Financial Volunteer with the Virginia Cooperative Extension Office, and an instructor for First Time Homebuyer Classes through VHDA. The need for financial literacy 18 Virginia Banking | September/October 2016
extends well beyond those individuals currently in elementary and high school. There is a generation of young adults who were not taught any personal finance skills. I feel it is important to reach that audience as well.
Q
: You are passionate about serving your broader community as well. What initiatives have you started since joining Blue Ridge Bank late last year? Why does Blue Ridge make giving back to the community such a priority? A: Blue Ridge Bank (BRB) is committed to giving back. BRB has been an independent community bank since 1893. We are committed to the communities we serve. Our institution is led by a CEO that is consistently the first person out the door to volunteer in the community. When the leader of a company sets this standard, it makes a lasting impression on employees and community members. This year we began giving employees four hours of paid time off to volunteer. We hope this inspires employees to get involved and give more of their time to the community.
Q
: How long have you been involved with the Emerging Bank Leaders (EBL) and why did you decide to join? A: I joined the EBL in 2010, my last year of Bank School. VBA personnel spoke to our class about the new group they were forming and offered us the opportunity to sign up. I thought it would be a great opportunity to stay involved with VBA after graduation and to stay in contact with the people I had connected with at Bank School. I also thought it would provide an opportunity to broaden www.vabankers.org
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1 Dorothy Welch at Elkton Elementary on Teach Children to Save Day. Blue Ridge Bank had the pleasure of teaching four kindergarten classes a lesson on safe places to keep money, reaching 61 students in total at that school. 2 Dorothy Welch gave students from Luray High School a tour of the bank vault at Blue Ridge Bank on Bank Day. 3 Students gathered at a local lunch spot with Dorothy Welch on Bank Day.
4 Dorothy Welch served as the emcee for the Harrisonburg “Burgers with Bruce� event for the Emerging Bank Leaders group this past spring. 5 Dorothy Welch at the 2015 Leadership Conference. Dorothy discussed her experience participating at the VBA/ABA Government Relations Summit and informed her fellow attendees about VBA Government Relations events and how EBL members can get involved. 6 Dorothy Welch graduated from the VBA School of Bank Management in 2010.
the scope of my career. I am thrilled to say I was correct in all three assumptions. The EBL offers a fantastic opportunity for bankers to connect, network and develop additional skills beyond the position they are currently in. If a banker wants to broaden the scope of their career, the first step they should take is to join the EBL.
members. There is a great amount of potential in EBL members. It is important that we keep those members active with the VBA and other bankers to retain the talent in our industry. I hope we can also further financial literacy and government relations efforts among our members.
Q
Q
: What are some of your favorite experiences from being involved with the EBL? A: Being involved with the EBL has given me a plethora of opportunities to network with other bankers I would not have normally crossed paths with. I feel very fortunate to be able to work with such a talented group of bankers on the EBL Steering Committee, the group of bankers that helps the VBA plan events for the EBL. The Leadership Conference, which will be held October 6-7 this year in Richmond, is by far my favorite EBL event.
Q
: What are your goals for the group in the upcoming year? A: I hope to continue to grow engagement with EBL
www.vabankers.org
: What is your favorite government relations event and why do you think other EBL members should attend? A: The VBA/ABA Government Relations Summit is a great event. I would recommend every EBL member put that on a list of things they would like to do. The ability to be part of a united group, discussing real issues with legislators, is an experience every banker should have. Legislators need us to inform them on the issues so they are better prepared for the decisions they must make.
Continued on next page September/October 2016 | Virginia Banking 19
Q&A continued from page 19
Q
: What benefits do you see from attending the VBA Leadership Conference? How has that conference affected your banking career? A: The Leadership Conference has been a fantastic opportunity for professional growth. I have made so many connections with other bankers throughout the state. I would say the networking has been the most beneficial for me. The conference agenda includes relevant and informative presentations. This year the conference is going to be incredibly beneficial for those attending, as there will be more participation by EBL members on panels and as moderators. I hope attendees will see a new level of involvement from EBL members and will see the benefits of being active with the group.
Q
: Your president & CEO, Brian Plum, recently described you as “the quintessential community banker.� What advice do you have for anyone who is considering getting involved with EBL? A: Get involved! As individuals we must advocate for our careers and take ownership of the course we want our careers to take. Be the member of your team that gets involved. Be the person in your bank that volunteers to do community outreach. Join the EBL and discover a ton of opportunities to develop leadership skills, and most importantly, have fun while doing it! That is a part of our mission at BRB, and something I try to keep with me at all times – no matter if I am attending a conference, making a presentation in a school or talking with a legislator about our industry. 20 Virginia Banking | September/October 2016
www.vabankers.org
Welcome
New Associate Members
ACCOUNTING/ COMPLIANCE SERVICES
WeiserMazars Address: 11350 Random Hills Road, Suite 800 Fairfax,VA 22030-6044 CONTACT NAME: CHELSEY TREVINO Phone: (405) 401-4252 Email: chelsey.trevino@ weisermazars.com WeiserMazars is a full service audit, tax, and advisory firm, specific to financial institutions on the cutting edge of regulatory issues facing the industry today. They have expert regulatory compliance professionals including CPAs, CRCMs, CAMS and CIAs, among others.They provide internal audit and consulting services in these areas that enhance the existing internal audit functions and/or provide independent testing.
COMPLIANCE SERVICES
COMPLIANCE SERVICES
IT CONSULTING & SERVICES
ClearTrust LLC
Professional Bank Services
Vigillence Inc.
Address: 16540 Pointe Village Drive, Suite 210 Lutz, FL 33558 CONTACT NAME: MARY J. RAMSEY Phone: (813) 235-4490 Email: mary@ cleartrusttransfer.com ClearTrust is an SECregistered transfer agent serving public and private companies and community banks. ClearTrust is an ally to growing companies, offering robust compliance support and proactive shareholder services designed to bring executive management greater peace of mind. Services include shareholder recordkeeping, paying agent and dividend reinvestment plans, and shareholder meeting administration.
Address: 216 Centerview Drive, Suite 225 Brentwood,TN 37027 CONTACT NAME: RONALD ROBERTS Phone: (800) 966-1727 ext 608 Email: rroberts@probank.com Founded in 1978, Professional Bank Services Inc. (PBS) is one of the largest financial institution-consulting firms. PBS provides authoritative and practical advice in credit evaluation and administration, audit services, operations and technology, consumer compliance, education services, and more. Staff includes former bank regulators, bankers, bank attorneys, financial analysts, and accountants.
Address: 1725 Duke Street, Suite 510 Alexandria,VA 22314 CONTACT NAME: JENNIFER BISCEGLIE Phone: (703) 677-3135 Fax: (703) 852-3974 Email: jbisceglie@vigillence.net Vigillence works in partnership with their clients to identify the risks surrounding their corporate missions.They assist in defining the organization's risk posture based on the organizational vulnerabilities related to supply chain vendors, partners and service providers.
CREDIT AND LENDING RESOURCES
Randolph Square IP Address: 7204 Glen Forest Drive, Suite 110 Richmond,VA 23226 CONTACT NAME:THEODORE B. LUSE, II Phone: (804) 332-6898 Email: tluse@randolphsquareip.com Randolph Square IP assists companies, lenders and investment platforms with evaluating their intellectual property.
Compliance Corner continued from page 10 line of credit that was approved . . . within 14 months of the date of the extension of credit.” As a result, many institutions will have a loose line of credit to their insiders, which they will renew annually, thereby removing the requirement for prior board approval for each individual extension of credit granted under that line. That is fine, but just keep in mind that for parts of the regulation other than prior board approval, every extension made under the line must be considered a single “extension of credit.” Regulation O has remained fairly steady through a stretch of rough seas in the compliance field; nevertheless, as it is a favorwww.vabankers.org
ite target of federal examiners, it’s crucial to check back with the provisions of this complicated regulation to ensure it is being followed correctly. It’s also important to keep one’s eyes on the horizon for any surprise Regulation O changes that may spring up in the future, so make sure to stick with Compliance Alliance for all your Regulation O and insider lending updates. James McGuire has worked as an attorney and legal researcher in the financial industry since 2010. After graduating from the University of Minnesota Law School in 2007, he served as Assistant
General Counsel for the Texas Attorney General in the Open Records Division, and later worked as a solo practitioner in the Austin area. Prior to joining Compliance Alliance in July of 2015, James assisted a major mortgaging servicer with the OCC’s independent foreclosure audit and was an SEC filing researcher for a major financial and legal research firm. He has extensive first-hand experience with open records, mortgage servicing, consumer law and securities regulation. Compliance Alliance offers a wide variety of compliance support solutions. To learn how to put them to work for your bank, call them at (888) 3533933 or visit compliancealliance.com. September/October 2016 | Virginia Banking 21
Move
Bankers on the
Are your bankers on the move? Email submissions to mmcdearmon@vabankers.org
Ramsey Hamadi
Stephanie Cannaday
Jill Chappell
Marc Craun
Legislative Update continued from page 9
Phyllis Karavatakis
Litz Van Dyke
American National Bankshares, Inc. Ramsey K. Hamadi – Executive Vice President
HomeTown Bank Vance W. Adkins – Chief Financial Officer
Carter Bank & Trust Stephanie A. Cannaday – Branch Manager Jill M. Chappell – Branch Manager Marc E. Craun – Branch Manager Phyllis Q. Karavatakis – President Litz H. Van Dyke – Executive Vice President
John Marshall Bank Kent Carstater – Senior Vice President/Market Risk Management Lori Childers – Senior Vice President/Consumer Lending Manager
CCB Bankshares Inc. L. Michael “Mike” Rowe Jr. – Senior Vice President/Residential Market Executive
Old Dominion National Bank Stephanie Lykins-Harvey – Director, Retail Banking.
attempt to tie its 1999 alteration to the financial crisis, many experts – including former Obama Treasury Secretary Timothy Geithner and former Congressman Barney Frank – have said it had no role in causing the crisis. Indeed, those calling for a return to Glass-Steagall restrictions to solve the current economic problems – apparently and regrettably including both major national political parties – simply are not looking at the facts. Alas, as with much of the current political discourse, catchy sound bites and fear-mongering vilification outweigh reason and fact-based decisions. While party platforms are meant to be unified policy positions, individual candidates and legislators can and will disagree on specific aspects included. During this campaign season and in legislative deliberations in Washington and Richmond, we must press our Virginia candidates and legislators from both parties to reject strict adherence to party platforms and focus on achieving meaningful reform for banks of all sizes.
Legal Line continued from page 8 sight of third parties and reporting processes (including board reporting); • credit underwriting, administration, and quality standards; • a consumer complaint process; and • an adequate training program. Perhaps more importantly, the proposed guidance also outlines supervisory considerations and develops new examination procedures for institutions with significant third-party relationships. Among others, the FDIC identifies the following expectations: • credit underwriting and administration standards that are established and enforced by the institution, not the third party; • the institution’s ultimate responsibility for ensuring compliance with consumer protection, fair lending and BSA/AML requirements and safeguarding of customer information; • heightened capital expectations to reflect the risk in an institution’s third22 Virginia Banking | September/October 2016
party lending program; • prompt loan loss recognition and appropriate allowances for loan and lease losses; and • increased liquidity and profitability analyses. For institutions with significant thirdparty lending programs relationships, the examination cycle will be at least every 12 months and include concurrent risk management and consumer protection examinations. In addition, examiners will conduct targeted examinations of significant third-party lending arrangements and may also conduct targeted examinations of other third parties where authorized. While the FDIC has been at the forefront of regulating banks’ business with marketplace lenders, the OCC and Federal Reserve have been focusing on this area as well. The OCC has said that it is keeping tabs on partnerships between marketplace lenders and national banks to ensure that banks don’t cede loan underwriting standards to their new partners.
The Federal Reserve has cautioned that banks should “carefully consider regulatory compliance” in purchasing loans or dealing with marketplace lenders, while a Federal Reserve Bank of Cleveland study expressed concerns regarding data security and privacy and clear disclosure of product features and loan terms by marketplace lenders. Comments on the FDIC’s proposed guidance initially were due Sept. 12, 2016, but that period has been extended until Oct. 27, 2016. Banks that are considering doing business with marketplace lenders are urged to read the proposed guidance, here: https://www.fdic.gov/news/ news/financial/2016/fil16050a.pdf. For more information about the regulation of marketplace lending, 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. www.vabankers.org
SMART CREDIT STARTS WITH YOU This October, join the thousands of volunteer bankers participating in the national Get Smart About Credit campaign. Our 2016 program will focus on four critical areas: Paying for College, Protecting Your Identity, Knowing Your Credit Score and Managing Your Money. Take 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 20, 2016. Register today!
NEW! All materials now available in Spanish.
aba.com/GetSmart
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