Virginia Banking May/June 2014 by The Warren Group

May/June 2014

Teach Children to

Save Day Reaches More Than 11,400 Students Across the Commonwealth

IN THIS ISSUE

BANK DAY 2014 | GOVERNMENT RELATIONS SUMMIT | PREPARING FOR TILA-RESPA DISCLOSURE RULE

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

cover

More Than 11,400 Students across the State Receive Financial Education During TCTSD

features

Bank Day 2014 Brings Together More than 230 Students and Local Banks

Government Relations Summit

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 Melanie Reilly Communications 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.

SUBSCRIPTIONS

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in every issue 4 Calendar of Events 5 Insights 6 Worth Noting 6 New Endorsed Vendors 8 Legislative Update 10 New Associate Members 14 Legal Line 16 Washington Update 18 Compliance Corner 22 Bankers on the Move

Send us your thoughts or ideas on Virginia Banking! Please email Melanie Reilly at mreilly@vabankers.org. Has your information changed? Please email Kellee Edelin at kedelin@vabankers.org with your new contact information. May/June 2014 | Virginia Banking 3

Calendar of Live Events

INSTRUCTOR-LED SEMINARS

2014 ANNUAL CONVENTION, THE SANCTUARY AT KIAWAH, SC

WEBINARS

ROTH IRA DISTRIBUTIONS

MAY 28

JUNE 15

VBA SCHOOL OF BANK MANAGEMENT, CHARLOTTESVILLE

JULY 27

Webinars

BASIC CONSUMER LENDING

MAY 28 AND JUNE 2 CONTINGENCY FUNDING PLANS – THE PAST AND FUTURE

OCTOBER 1

CFO CONFERENCE, RICHMOND

AUGUST 25

SUCCESSFUL WORKOUT STRATEGIES FOR PROBLEM LOANS

OCTOBER 1

CREDIT MANAGEMENT CONFERENCE, CHARLOTTESVILLE

OCTOBER 6

COMMERCIAL LENDING SCHOOL, GLEN ALLEN

OCTOBER 15 ENTERPRISE RISK MANAGEMENT, GLEN ALLEN

OCTOBER 28 WOMEN IN BANKING CONFERENCE, GLEN ALLEN

Information and online registration is available at the VBA website. Please go to www.vabankers.org. The VBA will send you information about the program as soon as it is available, usually eight weeks before the program.

NOVEMBER 5

Visit www.vabankers.org for more information.

4 Virginia Banking | May/June 2014

www.vabankers.org

Insights Legacy of Leadership Leg-a-cy Anything handed down from the past, as from an ancestor or predecessor. (dictionary.com)

F Bruce Whitehurst President and CEO, Virginia Bankers Association

Save the Date for this fall’s CEO Forum Sept. 15-16 at The Greenbrier in White Sulphur Springs, West Virginia

rom Colonel Walter Taylor in 1893-94 to Gary Shook in 2013-14, the Virginia Bankers Association has enjoyed a 121-year long legacy of leadership in service to Virginia’s banking industry. Together we have weathered several financial crises and the Great Depression, two world wars, sweeping banking law changes and incredible social and technological changes. Thousands of banking leaders have joined with the 121 who have chaired the VBA to provide a unified industry voice in Richmond, in Washington and before the media and the general public. Hundreds of individuals have been privileged to work on the VBA staff with the six of us who have served in the chief executive position. It would be difficult to find a more significant legacy than this one! Demographics tell us that the enormous wave of Baby Boomer retirements has begun, and we certainly see that in banking. Nearly one third of bank CEOs in Virginia – and nationwide – are 60 years old or older, so a high number of leadership transitions that have already started to occur will dominate the banking scene for some years to come. That is why the VBA is focused on how we can help bank leaders reflect on what they want their legacy to be, not months before they retire, but several years beforehand. This fall’s CEO Forum will feature a segment on Legacy Development – led by Angela Cusack of Igniting Success Inc. – in which we will explore this very question: if you are a CEO within a few years of retirement, what are you doing now to continue the legacy at your bank? What things should you be thinking about and what actions should you be taking now? This promises to be a most interesting and helpful session. The succession process unfolded quietly and behind the scenes over several years at the VBA, when my predecessor, Walter Ayers, was a few years from retirement and began to focus on how to present me

with professional development opportunities that would best position me as a candidate to become the next CEO. Our banking leaders at the time established a process of discernment, discussion and dialogue with Walter and with me that ultimately led to my selection as his successor. These banking leaders and Walter shared the goal of continuing the VBA’s outstanding legacy, and I have never taken lightly their choice of me as a leader whom they believed was up to that challenge. The VBA’s strong legacy continues as we contemplate joining forces with the West Virginia Bankers Association, established two years before the VBA and an organization with a parallel legacy to ours. Banking industry consolidation in this era of interstate banking has been significant and is expected to continue, especially with virtually no new bank activity for the foreseeable future. Expanding the scope of the VBA’s and WVBA’s work to two states – while keeping each of our individual identities and state advocacy efforts intact – represents a new chapter designed to maintain our strong legacy for many years to come. Incoming VBA and WVBA Chairmen Johnny Milleson and Skip Hageboeck – as well as those who follow in the VBA and WVBA chairs – will have the unique opportunity to work more closely together than any two state bankers association chairmen ever have, further strengthening what both associations can accomplish for their member banks. The VBA and WVBA staff will likewise work closely together and take the best from both associations into both states. As the banking industry that we serve changes and evolves, so must the associations that serve and represent this great and vital industry. As the VBA changes and evolves, its legacy continues. I know succession is one of the most sensitive and difficult things to work on in any company, and yet it is also what determines the legacy today’s leaders leave to those who follow. In whatever appropriate ways the VBA can assist our members with this process, we stand ready to do so. I am looking forward to the Legacy Development session at the CEO Forum this fall and we will keep looking for other ways we can help banks in this most important area.

Email Bruce Whitehurst at bwhitehurst@vabankers.org with any comments on this article. www.vabankers.org

May/June 2014 | Virginia Banking 5

Noting

Worth

FIRST VIRGINIA COMMUNITY BANK PRESIDENT AND VICE CHAIRMAN BURWELL GUNN RETIRES; DAVID PIJOR ASSUMES ROLE First Virginia Community Bank (FVCbank) announced the retirement of President and Vice Chairman Burwell Gunn. Current Chairman and CEO David W. Pijor assumed the position in April. Burwell Gunn During a career that spans more than 42 years, Gunn founded Cardinal Financial Corp. and was managing director of Provident Bank. He was senior vice president at Commerce Bank before joining FVCbank in 2009. He will remain on the FVCbank board. David W. Pijor, current chairman and CEO of FVCbank, assumed the role of president upon Gunn’s retirement in March. Pijor has served as chairman and CEO of the bank since its organization. He was the founding chairman of the board of directors of James Monroe Bank. Prior to becoming chairman and CEO, Pijor was an attorney practicing corporate and tax law in Fairfax, Virginia, for 30 years.

FIRST COMMUNITY BANK COO APPOINTED TO FIFTH TERM ON FEDERAL RESERVE COMMITTEE E. Stephen Lilly, executive vice president, chief operating officer of First Community Bank, Inc., has been reappointed to the Fifth District Payment Advisory Council (PAC) of the Federal Reserve Bank of Richmond. This three-year term is Lilly’s fifth consecutive appointment. Lilly has been in his current role at First Community Bank since 1997. His career in banking and operations began in 1981. He is very active in local and state organizations by serving on a number of industry and local area boards and committees.

WE WILL MISS … We are very sad for the loss of Kit Monroe, former VBA first lady and beloved wife, mother, grandmother and friend. Kit passed on April 23, 2014, after celebrating her 81st birthday on Easter Sunday with her family. She was the wife of former VBA Chairman Douglas Monroe, and mother-in-law of former VBA Chairman Jeff Szyperski. Kit had five children and 16 grandchildren. Kit’s family and friends remember a spirit of hospitality, generosity, enthusiasm and especially her example of faith, love and loyalty. The VBA will sorely miss Kit, and the Monroe and Szyperski families are in our thoughts and prayers.

VIRGINIA PARTNERS BANK CHIEF EXECUTIVE OFFICER TO RETIRE William B. Young, head of Virginia Partners Bank and an active community member, has announced his retirement, effective June 30, 2014. Young has served as the founding CEO for Virginia Partners Bank since its establishment in 2007. With 42 years in the banking industry, he helped establish Virginia Partners Bank after serving as president and CEO of The National Bank of Fredericksburg for 13 years. Young has served as chairman of several significant nonprofit organizations in the Fredericksburg area. In 2007, the Fredericksburg Regional Chamber of Commerce recognized him with the Prince B. Woodard Leadership Award for outstanding service to the community. Lloyd B. Harrison, III, who presently serves as president and chief operating officer of Virginia Partners Bank, will succeed Young upon his retirement. Harrison previously served as president and CEO of Mercantile Southern Maryland Bank before it merged with PNC Bank. Harrison has served as president and COO since 2007.

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Making Vision Reality “Understanding our vision, PWCampbell provided excellent design and construction of our new branch office. It was less than a year from the first time we met with them, to the time we stepped into our building… that’s pretty amazing!” Thomas R. Rosazza, President/CEO Judy Painter, Senior VP of Administration Belinda Tucker, Vice President/COO

When Pioneer Bank decided to expand its retail delivery network, they wanted to do it with a contemporary style facility, which was something very different from all their existing branch offices. PWCampbell took the “contemporary theme” and designed an attractive, efficient, costeffective, state-of-the-art branch office.

Legislative

Update

From Page to Lobbyist

Chandler Dewey Manager, Communications & Government Relations, Virginia Bankers Association

uoting from a presentation that Bruce Whitehurst gave at the recent ABA National Conference for Community Bankers, “You never know where you’ll end up.” For me, my journey into politics began in eighth grade, when I was lucky enough to have the opportunity to be a Senate Page for the General Assembly. As a shy 13-year-old, I was nervous about missing school and meeting new people, but the two months I lived at the Omni Richmond Hotel with the other 30 pages couldn’t have been a better experience for me. From there, I became a government major at UVA and had internships with Rep. Eric Cantor and Sen. John Warner during my summers off. I started at the VBA in a communications and marketing role soon after I graduated in 2009, but when I got the chance in 2012 to tie government relations work into my position, I jumped at it. As a page, I used to bring lunch from Chicken’s to the same senators with whom I am now holding meetings and discussing VBA issues. It’s safe to say that my political career has outlasted Chicken’s, which has since been replaced with Meriwether’s. But it was a career built with its foundation at the

General Assembly Building and the Capitol – I learned a lot about the political process while I was sitting in on voting sessions and committee meetings, hearing constituents testify on issues about which they were passionate and watching a bill go from subcommittee through the Senate. I have been working with the VBA Government Relations team downtown for the last two sessions. Having spent so much time there already, it was a bit easier to regain my bearings. Every day during session, I walk to our locker in the basement of the General Assembly Building to tuck my coat and laptop away before heading into committee meetings. On the way back upstairs, I pass the pages’ room where we spent our breaks, doing homework to make sure we were keeping up while out of school for two months, or passing the time with paper football games. I can’t tell you how many bills I had to collate down there for the legislators’ voting binders. Most times, I pass a couple of pages along my way, in their grey pants and navy blazers, and I am shocked by how much smaller they seem to get every year. I hope that they are getting as much out of their time there as I did. I don’t keep up with many of my page friends, but I am sure they are all doing great things with their careers. As for me, I am thrilled to be right back where I started – building relationships with legislators and being involved in the political process. I got to delve even more into this process while our fearless Government Relations leader, Matt Bruning, was on paternity leave for two weeks. Working with the rest of our Government Relations team, I monitored the bills moving through the General Assembly, making sure our VBA bills of interest passed both houses and checking to see if any bills would have a negative impact on the banking industry. I am excited to say that we had a great session, and I am looking forward to seeing where my political career takes me from here. As a page, I might not have been able to predict that I would end up back in the General Assembly Building session after session, but as Bruce also mentioned in his ABA presentation, “Life is more connected than you might think.” And of that, I am glad.

Email Chandler Dewey at cdewey@vabankers.org with any comments on this article. 8 Virginia Banking | May/June 2014

www.vabankers.org

Congratulations to a leader we can all bank on.

Gary r. Shook President and CEO, Middleburg Financial Corporation Chairman, Virginia Bankers Association

The employees of Middleburg Financial Corporation salute Gary R. Shook on his tenure as Chairman of the Virginia Bankers Association. Not only has he guided us to be neighbors our communities can bank on, he has prepared Virginiaâ&#x20AC;&#x2122;s banking community for a strong future.

www.middleburgbank.com Neighbors You Can Bank On.

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Teach Children to

Save Day

More Than 11,400 Students across the State Receive Financial Education By Melanie Reilly, Communications Coordinator, Virginia Bankers Association

Kindergartners at Greensville Elementary School demonstrate safe and unsafe saving spots with Gateway Bank & Trust’s Gloria Robinson.

Linda Stewart of Franklin Federal Savings Bank prepares to read Trouble with Money to second-graders at Enon Elementary School.

“Money is a finite resource” is not a principle you would expect 20 secondgraders to understand. But during Teach Children to Save Day on April 11, second-graders at Enon Elementary School echoed the phrase (first in normal voices, then in “mouse voices,” “lion voices,” and “whisper voices”) as Linda Stewart of Franklin Federal Savings Bank led students in an interactive lesson about money as a limited – or finite – resource, and how to spend, save and share it in smart ways. This year, more than 315 bankers at 37 Virginia banks participated in Teach Children to Save Day. Bankers reached over 11,400 students in the state while making almost 300 presentations to students of all ages. Established by the American Bankers Association in 1997, Teach Children to Save has reached more than six million young people through the commitment of 134,200

banker volunteers. “Being financially literate is one of the most important skills a young person can develop,” said Bruce Whitehurst, president and CEO of the Virginia Bankers Association. “Through this program, we can motivate students and instill positive habits at a young age, creating a community of lifelong savers.” Along with hundreds of classroom presentations, bankers invited groups of students to travel to branches and learn firsthand how a bank works on a dayto-day basis. Students learned to make transactions with tellers, were given a “behind-the-scenes” tour of the banks, and took turns getting to act as teller at the drive-up windows. Bankers work hard to make sure the principles learned continue beyond Teach Children to Save Day. Many sent students home with activity packets designed to continue a dialogue about

Sonabank’s Naomi Hill and Charlene Benjamin use A Tale of Two Brothers to teach a class at Swansboro Elementary School.

Shirley Davis from Bank of Lancaster’s Main Office visited with 80 third-graders at Lancaster Primary School. smart saving and spending between children and parents, as well as additional materials for parents to use to help children understand how the decisions they make today impact their future. Thank you to the hundreds of bankers who took part in making this day memorable and impactful for Virginia students! Bankers will celebrate Get Smart About Credit Day with high school students on October 16.

THANK YOU TO THE FOLLOWING BANKS THAT PARTICIPATED IN TEACH CHILDREN TO SAVE DAY 2014: American National Bank and Trust Company Bank of Lancaster Bank of McKenney Bank of Botetourt Benchmark Community Bank Burke & Herbert Bank Cardinal Bank Carter Bank & Trust Chesapeake Bank

12 Virginia Banking | May/June 2014

City National Bank of WV Colonial Virginia Bank Farmers & Merchants Bank Farmers Bank First and Citizens Bank First Bank & Trust Co. First Century Bank First National Bank Franklin Federal Savings Bank

Hampton Roads Bankshares MainStreet Bank Old Point National Bank Peoples Community Bank Pioneer Bank Shore Bank Sonabank SunTrust Bank The Bank of Southside Virginia

The Fauquier Bank TowneBank TruPoint Bank Union First Market Bank United Bank Virginia Commonwealth Bank Virginia Heritage Bank

www.vabankers.org

VBA Bank Day

Scholarship Program

Bank Day 2014 Brings Together More than 230 Students and Local Banks

Aaron Green, commercial lender for Farmers & Merchants Bank, gives students a tour during Bank Day.

Bank of Botetourt hosted 10 students at their Bank Day event.

Bank of Lancaster's students pose for a group shot at the bank. On March 18, 2014, more than 230 Virginia high school seniors spent a day at banks in their communities as a part of the VBA’s annual Bank Day. Throughout the day, students learned about the basics of banking, financial services that will help them successfully save and invest after high school, and the vital role that banks play in their communities. This year’s Bank Day was hosted by 25 banks across the state. The third Tuesday in March was declared Bank Day by the Virginia General Assembly in 1991. On this day every year, students shadow bankers across the commonwealth as part of a statewide effort by the VBA Education Foundation and the VBA Leadership Division to promote financial literacy and the banking industry. After spending a day with a local bank, students are given the opportunity to write essays based on their experience. Six regional college scholarships ($2,000) and one statewide scholarship ($4,000) will be awarded to the winning students. Congratulations to the following regional scholarship winners: Capitol Regional Winner • Haley Nininger, Hanover High School, Union First Market Bank Central/Southside Regional Winner • Mitchell Alexander, Northside High School, Bank of Botetourt Hampton Roads/Eastern Shore Regional Winner • Jessica Chandrasekhar, York High School, Old Point National Bank Northern Virginia Regional Winner • Claire Chadwick, Stone Bridge High School, Middleburg Bank Southwest Virginia Regional Winner • Madison Flick, Graham High School, New Peoples Bank Valley Regional Winner • Maddie White, Broadway High School, Farmers and Merchants Bank Thank you to all of the participating banks! www.vabankers.org

Glen Kelley, regional president, Greater Virginia, Wells Fargo, speaks with students from Armstrong, Richmond Community, and Huguenot high schools.

Scott Harvard, president and CEO of First Bank, discusses his role at the bank with 20 high school students. PARTICIPATING BANKS Bank of Botetourt Bank of Clarke County Bank of Lancaster Bank of McKenney Blue Ridge Bank Chesapeake Bank Citizens Community Bank Farmers & Merchants Bank First Bank First Bank & Trust Company First National Bank MainStreet Bank Middleburg Bank

New Peoples Bank Old Point National Bank River Community Bank, N.A. Select Bank SonaBank StellarOne The Bank of Fincastle The Bank of Marion TruPoint Bank Union First Market Bank Virginia Heritage Bank Wells Fargo

May/June 2014 | Virginia Banking 13

Line

Legal

Virginia Courts Expand Penalties for Mortgage Lenders Not Conducting Required Pre-Foreclosure Face-to-Face Meetings

Mel Tull General Counsel, Virginia Bankers Association

n 2012, the Virginia Supreme Court ruled that mortgage lenders who wish to foreclose on real estate securing a Federal Housing Authority (FHA) loan must conduct a pre-foreclosure face-to-face meeting with a borrower if required by U.S. Department of Housing and Urban Development (HUD) regulations. Recently, the Virginia Supreme Court and a federal court in Virginia have issued rulings that a mortgage lender who conducts such a foreclosure sale without conducting the required meeting could be subject to money damages to the borrower. The pre-foreclosure meeting requirement originated in the Virginia Supreme Court’s 2012 opinion in Mathews v. PHH Mortgage Corp. In that case, the court ruled that a reference to certain HUD regulations within the deed of trust resulted in the HUD regulations becoming part of the contractual terms of the deed of trust and enforceable under contract law. The Mathews case addressed suits filed before a foreclosure sale that sought to enjoin a foreclosure until the proper meetings had occurred and left open questions regarding the consequences to mortgage lenders who were sued for failure to conduct a pre-foreclosure meeting after the foreclosure sale occurred. Under Virginia law, a plaintiff must prove that a defendant’s actions caused the plaintiff harm, so it was unclear whether a court would find that a lender’s failure to conduct a pre-foreclosure meeting actually resulted in any harm to the borrower. The first court in Virginia to answer that question was a federal court, the District Court for the Eastern District of Virginia. In Bagley v. Wells Fargo Bank, N.A., the court considered wheth-

er two borrowers’ claim for money damages against a lender who foreclosed on real property securing an FHA loan could proceed. The borrowers admitted to being more than three months behind on their mortgage payments, but claimed the lender’s failure to conduct the required pre-foreclosure meeting led to their inability to discuss with the lender other methods to resolve the debt, eventually resulting in the foreclosure sale. The lender argued that the suit should be dismissed because the borrowers never claimed they were ready, willing and able to pay an amount sufficient to bring their loan current even if the required meeting had occurred, and that the lack of a meeting was therefore not the cause of any harm to the borrowers. The court agreed with the borrowers. The court looked at the federal statutes governing the HUD regulations and determined that the purpose of the pre-foreclosure meeting is to provide an opportunity for homeowners and lenders to seek arrangements to avoid foreclosure. Thus, according to the court, the failure to conduct the meeting harmed the borrowers by depriving them of that opportunity, even if they are not in a position to pay the full debt at the meeting. The borrowers’ suit was therefore allowed to proceed. The Virginia Supreme Court recently reached a similar conclusion. In Squire v. Virginia Housing Development Authority, the court considered whether money damages were ever available to a borrower after a foreclosure sale without a pre-foreclosure meeting. The factual situation in Squire was very similar to the situation in Bagley. When a lower court heard this case,

Email Mel Tull at mtull@vabankers.org with any comments on this article. 14 Virginia Banking | May/June 2014

www.vabankers.org

the lender argued, and the lower court agreed, that while it might be appropriate for a court to issue an injunction preventing a foreclosure sale for failure to conduct a pre-foreclosure meeting when the borrower sues the lender prior to the sale, a suit after the foreclosure sale should not result in an award of money damages to a borrower, particularly when the borrower is unable to claim it would have been able to meet any requirements to prevent the sale. On appeal, the Virginia Supreme Court disagreed with the lower court and the lender. The court instead concluded that the borrower’s allegations that a meeting was not conducted, that a foreclosure sale occurred, and that the borrower suffered damages related to the sale, were sufficient to survive the lender’s attempt to dismiss the suit. Importantly, the court explicitly stated that the borrower was not

required to say what it would do at a pre-foreclosure meeting to prevent the foreclosure sale from occurring. The court stopped short, however, of granting the borrower’s request to rescind the foreclosure sale, saying that there were no grounds to rescind a sale to a third party purchaser unrelated to the lender (or the trustee conducting the sale) without knowledge of the suit and in the absence of fraud. Three other important points can be taken away from Mathews and the line of cases following it. First, in both Bagley and Squire, the courts were only asked to consider whether it was legally possible to impose money damages on mortgage lenders who fail to conduct pre-foreclosure meetings prior to a foreclosure sale. In neither case was the court asked to quantify what those damages might be, nor has any court yet done so in this type of case. The extent of a lender’s possible liability

therefore remains unclear. The second point is that, while each of these cases discusses FHA loans and HUD regulations, there is nothing in the opinions limiting the concept of incorporation of government regulations into contracts. Therefore, by referring to government regulations in a deed of trust, such regulations are likely to become contractually binding. Finally, the Squire decision left open the possibility that a sale to the lender itself or some party colluding with the lender or selling trustee may in some cases be rescindable. This article has been prepared for informational purposes only and is not legal advice. This article does not create an attorney-client or similar relationship. You should consult with your legal counsel if you have a legal matter requiring attention or need legal advice.

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www.vabankers.org

May/June 2014 | Virginia Banking 15

Update

Washington

Remaining Relevant for Generations to Come

W Frank Keating President and CEO, American Bankers Association

hen Viacom’s in-house consumer research team, Scratch, recently unveiled its Millennial Disruption Index, the headline, predictably, sounded alarming. “Sorry Banks, Millennials Hate You,” Fast Company said in announcing Scratch’s threeyear study of 10,000 people born between 1981 and 2000. Those millennials, also known as the technology-savvy Generation Y, cited banking as the industry facing the greatest risk of experiencing a digital disruption or transformation. That’s a potential threat. After all, there are 84 million millennials in the American economy with an expected purchasing power of $1.4 trillion.

Given that two in three U.S. banks have been in business for more than 50 years, our industry has a demonstrated track record of adapting to, and meeting the needs of, customers and communities.

However, it’s also an opening. As Ross Martin, Scratch’s EVP, said on Viacom’s blog, “We see such a big opportunity for banks here.” The opportunity is to remain relevant. I’m confident that we’re up to the challenge if the past is prologue. Given that two in three U.S. banks have been in business for more than 50 years, our industry has a demonstrated track record of adapting to, and meeting the needs of, customers and communities. However, complacency cannot substitute for strategy and planning. Successfully win-

ning the future – providing products and services that meet your customers’ need when and how they want them requires all of us to roll our sleeves up and get to work. Looking ahead, peering around corners, and understanding both where we are and where we need to go are essential parts of what we do together. You rely on us for advocacy, information, training, products and services to make your bank more successful. Our strong alliance with the state bankers associations ensures we are responsive to your views and priorities. You also guide and direct ABA through your participation on our committees and counsels, and task forces and advisory groups, such as our Emerging Payments Advisory Group. By the numbers, the banking industry’s profile is a portrait of economic engagement and empowerment. There are 6,800 banks of different sizes and charters with more than 97,000 branches. They employ more than 2 million people and hold more than $14.5 trillion in assets. The banks’ more than $1.6 trillion in capital supports economic growth in communities across our nation, including $284 billion in small business loans, which is nearly 22 percent of all bank business lending. The bottom line is that banks are the pillar of our economy and are in fact the single largest source of loans and other forms of credit for American consumers and businesses. This has a direct and positive impact on virtually every aspect of American life. ABA is working to ensure that our industry’s leadership role remains undiminished – and even grows – in the decades to come. That’s something that millennials – and customers from any generation – should love.

Email Frank Keating at keating@aba.com with any comments on this article. 16 Virginia Banking | May/June 2014

www.vabankers.org

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Compliance

Corner

Preparing for the TILA-RESPA Integrated Disclosure Rule Michelle Nuckols CRCM, President, Pierce Compliance Consultants, Inc.

fter extensive consumer and industry research, analysis of public feedback through qualitative usability testing and its Know Before You Owe public initiative, and public outreach for more than a year, the CFPB issued the final rule on simplified and improved mortgage disclosures. In March 2014, the CFPB issued the TILA-RESPA Integrated Disclosure rule small entity compliance guide designed to provide an easy-to-use summary of the TILA-RESPA rule. First, the good faith estimate (GFE) and the initial Truth-in-Lending disclosure (initial TIL or preliminary TIL) have been combined into a new form, the loan estimate disclosure. This form must be provided to the consumers no later than the third business day after they submit a loan application. This form also incorporates new disclosure requirements required under the Dodd-Frank Act. Second, the HUD-1 and final Truth-in-Lending disclosure (final TIL) have been combined into the closing disclosure. This form must be provided to consumers at least three business days before consummation of the loan. Similar to current regulations, the TILA-RESPA integrated disclosure rule has provided a definition of “application,” but has removed the seventh “catchall” element that allowed for “any other information deemed necessary by the loan originator.” There are tolerances for charges, such as zero, 10 percent, and charges that can change without a tolerance. The rule allows for changed circumstances that permit a revised loan estimate or a closing disclosure and depending on the changes, this may delay closing. The creditor is still required to provide the written list of providers that must be separate from the loan estimate and provided within the same time frame as the loan estimate. The bureau believes they have reconciled the differences between the existing forms and combined several other mandated disclosures, such as the ap-

praisal notice under the Equal Credit Opportunity Act and the servicing application disclosure under RESPA. The new disclosures must be provided when an application is received from a consumer for a closed-end credit transaction secured by real estate on or after Aug. 1, 2015. Creditors are still required to use the existing GFE, HUD and TIL disclosures on applications received prior to Aug. 1, 2015, but as these applications are consummated, withdrawn, or cancelled, the creditor is required to use the new disclosures. The TILA-RESPA Integrated Disclosure rule applies to most closed-end consumer credit transactions secured by real property, but does not apply to HELOCs; reverse mortgages; or loans secured by a mobile home or by a dwelling that is not attached to real property. The following that are not currently subject to RESPA are subject to the TILA-RESPA Integrated Disclosure rule: • Construction-only loans. • Loans secured by vacant land or by 25 or more acres. • Credit extended by certain trusts for tax or estate planning purposes. Categories on the loan estimate disclosure include: loan terms; a projected payments and costs at closing; itemization of the loan costs and other costs; a calculating cash to close table; an adjustable payment (AP) table for adjustable monthly payment transactions; and adjustable interest rate (AIR) table for adjustable interest rate loans on page 2. On page 3, contact information, a comparison and other considerations tables, and an optional signature statement for the consumer to sign acknowledging receipt. Categories on the closing disclosure include loan terms, projected payments and costs at closing tables on page 1. The loan costs and other costs

Michelle Nuckols, president, Pierce Compliance Consultants, Inc., may be reached at mnuckols@ pccicompliance.com or (804) 467-1380. 18 Virginia Banking | May/June 2014

www.vabankers.org

tables are on page 2. Calculating cash to close and summaries of transactions tables are on page 3. For transactions without a seller, a payoffs and payments table may be substituted for the summaries of transactions table and placed before the alternative calculating cash to close table. On page 4, loan disclosures, adjustable payment (AP) and adjustable interest rate (AIR) tables are shown. Loan calculations, other disclosures, questions notice, contact information and the optional confirm receipt tables are on page 5. When reviewing the model forms in Appendix H of Part 1026, there are roughly 32 model forms; this includes both English and Spanish versions of the loan estimate and closing disclosures, as well as changes to some other post-consummation disclosures currently provided. The bureau has chosen to provide model forms for both the loan estimate and closing disclosures for different types of loan products, e.g. fixed rate loan sample, interest only adjustable rate loan sample, refinance loan sample, etc. In some cases, within the model forms, there are multiple variations of each page to reflect loans with and without the variable content requirements, and loans reflecting a seller and without a seller. The TILA-RESPA rule also changes some other post-consummation disclosures provided by creditors and servicers: the escrow closing notice and mortgage servicing transfer and partial payment notices. The escrow closing notice must be provided three business days before the consumerâ&#x20AC;&#x2122;s escrow account is canceled. This applies to any consumer account for whom an escrow account was established in connection with a closed-end consumer credit transaction secured by a first lien on real property or a dwelling, except for reverse mortgages. There are two excepwww.vabankers.org

tions, cancellation of escrow accounts established solely in connection with the consumerâ&#x20AC;&#x2122;s delinquency or default and when accounts are cancelled as result of repayment, refinancing, rescission, and foreclosure. The partial payment disclosure applies if the creditor is required by existing Regulation Z to provide mortgage transfer notices when the ownership of the mortgage loan is being transferred. This postconsummation disclosure is required for a closed-end consumer credit transaction secured by a dwelling or real property, other than a reverse mortgage and must

include information related to the partial payment policy that will apply to the mortgage loan. Begin mapping out your compliance plan to obtain a full understanding of your obligations under the TILA-RESPA rule. You will want to reach out to software providers, other vendors and business partners to begin the dialogue with them. Closely consider the coverage of the rule to different types of mortgage products you offer to insure which products are subject to the new TILA-RESPA rule and which products are still subject to the current TILA or RESPA, e.g. reverse mortgages.

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May/June 2014 | Virginia Banking 19

Summit

Government Relations

Seventy-Five Virginia Bankers Defend the Banking Industry

Majority Leader Eric Cantor addresses the 75 Virginia bankers.

 Congressman Rob Wittman with Billy Beale.

 Marshall Warner, Jeff Szyperski and Frank Bell braved the snow to visit with the Virginia Congressional Delegation.

eventy-five bankers from Virginia joined the 1,100 bankers from across the nation at the VBA/ABA Government Relations Summit March 24-26 in Washington, D.C. On Monday, the summit began with a new event, the Emerging Leaders Forum, which was attended by more than 15 VBA Leadership Division members. Matt Bruning, VBA vice president of government relations, participated on a panel during the forum, “How to Engage and Make a Difference.” Attendees also heard from Rep. Patrick Murphy on “Empowering a New Generation of Leaders” and Dan Schrider, president and CEO of Sandy Spring Bank, discussed how “Leadership is About the Choices You Make.” Murphy emphasized the importance of telling real-life stories and offering solutions when communicating problems. “Stories of how laws and regulations affect real people are effective,” said Murphy. On Tuesday, the attendees heard from Rep. Shelley Moore Capito (R-W.Va.) and Sen. Heidi Heitkamp (D-ND). Capito discussed how excessive regulation hurts banks’ ability to provide credit and grow jobs. “If our small businesses are not able to get credit, it leads to greater stagnation in the economy,” said Capito, who chairs the House Financial Services Subcommittee on Financial Institutions and Consumer Credit. Attendees also heard from peer bankers, including Billy Beale, president and CEO, Union First Mar-

20 Virginia Banking | May/June 2014

Michael Copty and Matt Bruning at the Emerging Leaders Forum Reception.

ket Bank, on fighting challenges from competitors. Bankers spent the majority of the first day on the Hill meeting with members of Congress. In the overall very positive meetings, bankers covered topics including regulatory relief, exam reform, data security, credit union and Farm Credit System tax reform and mortgage servicing assets. All in all, Virginia bankers were able to meet with 12 out of 13 members of our Congressional delegation. On Wednesday, attendees listened to Charlie Cook, Editor and publisher of The Cook Political Report, and respected authority on U.S. elections and political trends, and Rep. Eric Cantor (R-Va.), as well as Peggy Noonan, Wall Street Journal columnist, former presidential speechwriter and bestselling author. Bruce Whitehurst, VBA president and CEO, was on hand for a panel discussion called “Linking Principles to Policy: Call on Congress to Act.” Noting several areas of U.S. economic potential – energy, health care, higher education – House Majority Leader Eric Cantor (R-Va.) emphasized the role of bankers in “taking a risk to create value and create jobs … None of these superlatives would be there were it not for the deepest, most sophisticated and most developed system of banking and credit in the world.” Thank you to the 75 Virginia bankers in attendance at the summit. As we fight for the industry about which we are all so passionate, meeting with our Congressional representatives is imperative. www.vabankers.org

A group of Congressman Wolf's (center) constituents met with him in his office.

Bruce Whitehurst (right) participating on the Linking Principles to Policy panel.

 Gary Shook, Congressman Rob Wittman, Congressman Randy Forbes and Bruce Whitehurst.

 Courtney Fleming, Adam Hill, Will Clements, Cary Ayers, and Tim Boschen at the Emerging Leaders Forum Reception.

www.vabankers.org

May/June 2014 | Virginia Banking 21

Move

Bankers on the

Lykins-Harvey

McMillan

Allen

Cummins

Gardner

Gibbs

Gravely

Hall

Honeycutt

Jones

Lawson

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

Pratt

Robinson

Testerman

Cardinal Bank Stephanie Lykins-Harvey, Senior Vice President, Regional Sales & Service Manager Jeffrey D. McMillan, Human Resource Information Systems (HRIS) and Payroll Manager

Carter Bank & Trust Karen C. Allen, Assistant Vice President & Managing Officer, Clarksville Office Kathy C. Cummins, Vice President & Managing Officer, Lexington Office Mary W. Gardner, Senior Vice President,

Tompkins

Totten-White

Light

Hershey

Hillsville Office Lorinda R. Gibbs, Assistant Vice President & Managing Officer,Westlake Office Kathy S. Gravely, Vice President, Martinsville Office Theresa A. Hall, Assistant Vice President & Managing Officer, Independence Office Sandra G. Honeycutt, Assistant Vice President & Managing Officer, South Hill Office Tonya R. Jones, Assistant Vice President & Managing Officer, Collinsville Office Nancy J. Lawson, Vice President & Managing Officer, Christiansburg Office

Ruth A. McDaniel, Vice President & Managing Officer, Riverside Office Karen W. Pratt, Vice President, Martinsville Office Sharlene P. Robinson, Assistant Vice President & Managing Officer, Ferrum Office Hank M. Testerman, Vice President & Managing Officer, East Galax Office R. Michelle Tompkins, Vice President, Hillsville Office Karen Totten-White, Assistant Vice President & Managing Officer, Gardens and Ivy Road offices

Chesapeake Investment Group Jean H. Light, President, Chesapeake Trust Company

Paul Pickett, CPA Financial Services Practice Shareholder

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

Community Bankers’ Bank Shannon E. Hairfield, Vice President

First Bank J. Andrew Hershey, Senior Vice President and Business Development Officer

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services practice is 90 professionals strong, with a 60-year

Linda Fourney, Senior Vice President/Director of Human Resources Nadia McGeough, Vice President/Business Development Teresa Peterson, Vice President/Loan Operations Manager

reputation for helping banks operate stronger, wiser, better. Let us know how we can be an asset to you.

Georgia • North Carolina • South Carolina • Virginia www.elliottdavis.com

TowneBank Ryan Eisenberg, Vice President, Solutions and Server Applications Manager

22 Virginia Banking | May/June 2014

www.vabankers.org

Thank you Gary, for your outstanding service to the Virginia Banking Association as its chairman. We join you in your continued support of the VBA and its valued community of bankers.

GARY R. SHOOK Outgoing Chariman Virginia Bankers Association

Bob Newman

Best Wishes, Principals & Staff

Nick Hayes Vice President

S.R. SNODGRASS

James F. Dray President

Bob Newman PRESIDENT & CEO

Tim Warren CEO

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