Virginia Banking Jan/Feb 2011

Page 1

V irginia Banking January/February 2011

Virginia Bankers Association — Serving Virginia’s Financial Community For More Than 100 Years

your way to marketing

success building a digital dialogue with customers

In This Issue

HEALTH AND WELLNESS | FLOOD INSURANCE | INTERCHANGE FEES


2 Virginia Banking | January/February 2011

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irginia V Banking Virginia Bankers Association — Serving Virginia’s Financial Community For More Than 100 Years

2010-2011 OFFICERS AND DIRECTORS OF THE VIRGINIA BANKERS ASSOCIATION Charles H. Majors, Chairman, Danville William Couper, Chairman-Elect, Washington, D.C. H. Watts Steger, III, Immediate Past Chairman, Buchanan O.R. Barham, Jr., StellarOne Corporation Katherine E. Busser, Capital One Financial Corporation Charles K. Collum, Jr., Burke & Herbert Bank & Trust Co. Larry G. Dillon, C&F Bank Randy K. Ferrell, The Fauquier Bank Pete Jones, Wachovia/Wells Fargo Monte L. Layman, The Page Valley Bank Gail Letts, SunTrust Bank Samuel L. Neese, Highlands Union Bank Susan Ralston, Bank @Lantec David P. Summers, Virginia Heritage Bank Jeffrey M. Szyperski, Chesapeake Bank Daniel G. Waetjen, BB&T Richard T. Wheeler, Jr., Franklin Federal Savings Bank 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.

PUBLISHED BY

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

AT-LARGE MEMBERS Benefits Corporation Chair Richard M. Liles, McKenney Management Services Inc. Chair Frank Bell, III, Midlothian Government Relations Committee Chair Christopher W. Bergstrom, McLean VBA Education Foundation Chair J. Peter Clements, Carson EDITORIAL & EXECUTIVE OFFICES 4490 Cox Road Glen Allen, VA 23060 804-643-7469 Fax 804-643-6308 www.vabankers.org

January/February 2011

cover story

12 social media Overcoming the Fear of the Two-Way Conversation

Bruce T. Whitehurst President and CEO Virginia Bankers Association Chandler Dewey Communications & Marketing Manager Virginia Bankers Association

features

SUBSCRIPTIONS If you would like to subscribe to Virginia Banking, contact Chandler Dewey at cdewey@vabankers.org.

8

What is the Health of Your Retail Network? Transforming the branch experience from a simple routine to one of discovery, resourcefulness and community.

10

New Year, New Leaf for Corporate Wellness The shift away from industry has produced an unhealthy workforce: what you can do to help your workers’ health.

Virginia Banking is published bi-monthly. Subscription price is $25 per year and $45 for two years for nonmembers. Copyright 2011.

DIRECTORS Timothy M. Warren, Chairman Timothy M. Warren Jr., CEO & Publisher David B. Lovins, President Vincent M. Valvo, Group Publisher & Editor in Chief FINANCE & ADMINISTRATION Jeffrey E. Lewis, Controller / Director of Operations EDITORIAL Christina P. O’Neill, Custom Publications Editor Cassidy Norton Murphy, Associate Editor ADVERTISING George Chateauneuf, Publishing Division Sales Manager Sarah Cunningham, Events Manager Richard Ofsthun, Advertising Sales Manager Cara Inocencio, Advertising Sales Manager Emily Torres, Advertising, Marketing & Events Coordinator DESIGN & PRODUCTION John Bottini, Creative Director Scott Ellison, Senior Graphic Designer Ellie Aliabadi, Graphic Designer

©2011 The Warren Group Inc. All rights reserved. The Warren Group is a trademark of The Warren Group Inc. No part of this publication may be reproduced in any form or by any means, electronic or mechanical, including photocopying, recording, or by any information storage and retrieval system, without written permission from the publisher. Advertising, editorial and production inquiries should be directed to: The Warren Group, 280 Summer Street, Boston, MA 02210. Call 800-356-8805.

in every issue 4 Calendar of Events 5 Insights 6 Worth Noting 16 Washington Update 17 Legal Line

18 Legislative Update 19 Welcome New Associate Members 20 Compliance Corner 22 Bankers on the Move

Send us your thoughts or ideas on Virginia Banking! Please e-mail Chandler Dewey at cdewey@vabankers.org. Has your information changed? Please e-mail Kellee Edelin at kedelin@vabankers.org with your new contact information.

January/February 2011 | Virginia Banking 3


Calendar of

Events

INSTRUCTOR-LED SEMINARS

Live Event

Online Seminar

RETAIL BANKING CONFERENCE, CHARLOTTESVILLE March 7

Principles of Banking March 21

COMPLIANCE UPDATE SEMINAR, ROANOKE March 22

Principles of Banking April 4

COMPLIANCE UPDATE SEMINAR, CHARLOTTESVILLE March 23 COMPLIANCE UPDATE SEMINAR, SANDSTON March 24 COMPLIANCE UPDATE SEMINAR, VIENNA March 25 BANK DIRECTORS SYMPOSIUM, RICHMOND March 29 BANK DIRECTORS SYMPOSIUM, BLACKSBURG March 30 COMPLIANCE SCHOOL, CHARLOTTESVILLE April 4 SECURITY WORKSHOP, CHARLOTTESVILLE April 12

INSTRUCTOR-LED COURSES general Accounting February 22

Webinar

Principles of Banking April 18 General Accounting April 18 Consumer Lending April 18

WEBINARS ALCO Foundations February 15 Loan Inputs and Analytics February 16 Surviving 2011 – Tactics That Work in the Real World February 17 Commercial Real Estate Appraisals: Reviewing and Interpreting – Part I February 22

Principles of Accounting February 22

IT Audit for Community Banks February 23

Consumer Lending February 28

Strategic Planning for a New Environment February 23

Principles of Banking March 7

Mergers and Acquisitions in the Current Environment February 24

Economics for Bankers March 21

The Next Generation of Customers February 24 Information and online registration is available at the VBA website. Please either go to www.vabankers.org or use this form to check the box next to the program you want information about, then fax the form to the VBA office at 804-643-6308. The VBA will send you information about the program as soon as it is available, usually eight weeks before the program. Name_________________________________________________

Bank/Firm___________________________________________

Address_____________________________________________________________________________________________________ City________________________________________________________________ Phone___________________________

Fax_________________________

State/Zip______________________________

E-mail___________________________________

For more information go to www.vabankers.org. 4 Virginia Banking | January/February 2011

www.vabankers.org


Insights

Communicating with the Digital Natives

M

Bruce Whitehurst President and CEO, Virginia Bankers Association

y kids enjoy asking me what it was

users, please find the Virginia Bankers Associa-

like when I was growing up and

tion and click “like” to follow our page. Bankers,

how in the world we managed to get

please send us items we can add to our page. We

by without computers, the Internet, cell phones

have also established a Twitter account and will

and iPods (to name just a few). Realizing that I

tweet breaking news to bankers who choose to

was out of college before we really entered the

follow us. Our newest offering is the VBA’s Bank-

era of modern communications technology – and

er Banter, a blog for members only that will pro-

that I am only 46 years old – makes it clear that

vide a wealth of information and resources.

an awful lot has changed in not so many years.

We are fortunate to have several members of

We now have an entire generation of what some

Generation Y on the VBA staff; these are energet-

have called the “Digital Natives.” It is the genera-

ic twenty-somethings who bring great ideas for

tion that includes my kids, who were born into a

new ways we can reach, serve and interact with

world of e-communication that many of us could

bankers, associates and other key constituents.

not have even imagined 20 years ago.

They also speak the language of the Digital Na-

Digital Natives are rapidly redefining our soci-

tive and they are patiently teaching the rest of us

ety, including the workplace, with their absolute

that language. Their energy and ideas blend in a

comfort with newer forms of communication.

most positive manner with the experience those

In recent years, I have watched my numerous

of us who are older bring to the table.

phone calls and voicemail messages decline sub-

We continue to be in challenging times, both in

stantially as e-mail volume has exploded. I have

our industry and in the broader economy. Fortu-

entered the world of text messaging, Blackberry

nately, we do see signs of progress and an outlook

Messenger, Twitter and Facebook. I am playing

that shows gradual improvement. As we stay focused on how

to make sure the

Digital Natives are rapidly redefining our society, including the workplace, with their absolute comfor t with newer forms of communication.

banking industry is best equipped

to drive economic recovery, continuing to evolve in our communication with – and on

catch-up to much younger colleagues who con-

behalf of – Virginia bankers is an important and

sider all these things to be second nature.

exciting priority.

That is why the VBA is expanding its commu-

Please connect with us through any or all of

nications into the world of social networking. We

these new forums and also give us feedback on

now have a Facebook page that highlights the

how we are doing and how we can make our

many positive ways our member banks serve

communications even better. Together with you,

communities all over Virginia. All you Facebook

we will join the world of the Digital Natives.

Bruce Whitehurst can be reached by e-mail at bwhitehurst@vabankers.org. www.vabankers.org

January/February 2011 | Virginia Banking 5


Noting

Worth

FEDERAL HOME LOAN BANK OF ATLANTA ANNOUNCES W. WESLEY MCMULLAN AS NEW PRESIDENT AND CEO

HENRY LOGUE PROMOTED TO CEO

The board of directors of the Federal Home Loan Bank of Atlanta (FHL-

dent at Cardinal. Logue joined Cardinal in April and previously served

Bank Atlanta) announced in December that it has selected W. Wesley

as president and CEO of a bank in Madison, Miss.

The Bank of Floyd’s board of directors has promoted Henry A. Logue to CEO of the bank, which is a subsidiary of Cardinal Bankshares. He will retain his titles of president of the bank and executive vice presi-

McMullan to become FHLBank Atlanta’s president and CEO, effective immediately. McMullan was most recently executive vice president and director of financial management for FHLBank Atlanta. McMullan joined the bank as a credit analyst in 1988, and earned promotions to assistant vice president in charge of financial modeling in 1993, vice president of mortgage-backed securities portfolio management in 1995, group vice president of member sales and trading in 1998, and senior vice president of sales and trading in 2001. Promoted to executive vice president in 2004, McMullan oversaw asset liability management, member sales and trading, and financial operations management. He earned a bachelor’s degree from Clemson University and is a Chartered Financial Analyst.

RANN PAYNTER JOINS VBA The VBA is pleased to announce that Rann Paynter joined our staff in December as executive vice president. He comes to the VBA with a background in association management stemming from 14 years with the NC Bankers Association. His duties as executive vice president will include various responsibilities for the Assocation, VBA Management Services and VBA Benefits. He is a graduate of Pfeiffer College, and he completed a masters of business administration at the Kenan-Flagler School of Business at the Uni-

©2011 PULSE

versity of North Carolina at Chapel Hill.

6 Virginia Banking | January/February 2011

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CAPITAL ONE AND JUNIOR ACHIEVEMENT OPEN FINANCIAL LITERACY CENTER Capital One Financial Corporation and Junior Achievement of the National Capital Area recently celebrated the grand opening of Junior Achievement Finance Park, a new 20,000-square foot financial literacy center that will bring in-depth, hands-on financial literacy education to more than 14,000 local middle school students each year. Located on the campus of Frost Middle School in Fairfax County, Finance Park is the result of a three-year collaboration among Junior Achievement, Fairfax County Public Schools and Capital One Financial Corporation. Capital One is the signature sponsor of the $4.375 million facility. Federal Reserve Chairman Ben Bernanke, Virginia Secretary of Education Gerard Robinson, Capital One Founder, Chairman and CEO Rich Fairbank, and a dozen members of the Virginia General Assembly joined more than 300 community leaders for the grand opening ceremony. Every eighth-grade student in the Fairfax County Public School system, as well as other students from the greater Washington area, will visit Junior Achievement Finance Park each

Photo courtesy of Mark Heayn

year. Prior to their visit, students participate in Junior Achievement’s unique six-week Finance Park classroom curriculum, culminating with a daylong, real-life personal budgeting simulation at the center. The students visit the mock city and its shops, which correlate to the students’ 18 personal budget lines, including items such as housing, transportation, healthcare, education and philanthropy. The Junior Achievement Finance Park experience will enable students to act as adults for a day, making tough, realistic budgeting decisions as they move from shop to shop. With guidance from adult volunteers, many of them Capital One associates, the simulation will help students see the relevance of what they are learning in the classroom to the real world awaiting them.

Our focus has been on debit and debit alone for 30 years. Through our experience we’ve developed training, education and analytical services that can be tailored to empower your financial institution. Our comprehensive professional development tools give you the strategic guidance to thrive in the face of adversity. Profit from our passion. Professional Development

Customer Service

Collaboration

A Discover Financial Services Company

pulsenetwork.com/guidance

www.vabankers.org

January/February 2011 | Virginia Banking 7


What is the Health of Your Retail Network? By James G. Caliendo President and COO, PWCampbell

M

arket research repeatedly

This is a challenging, yet measurably

points to the fact that in-

rewarding, opportunity to engage with

branch

con-

your customer. It requires the transfor-

tinue to be an integral part of consum-

mation of the branch experience from

ers’ everyday life experience. Many

one of simple routine (at best) to one of

launching any transformation program,

Americans continue to visit their local

discovery, resourcefulness and a sense

it is imperative to identify and docu-

bank branch at least on a weekly basis,

of community. Successful banks will go

ment the current existing factors, compo-

much as they go to the grocery store,

the extra mile and offer their customers

nents, and objectives important to your

pharmacy or other retail establish-

a richer and more relevant experience,

organization. This can be accomplished

ment. So, in some ways, the bank con-

which will reap the benefits of stronger

through carefully choreographed and

tinues to be a viable retail destination.

loyalties and ultimately higher levels of

documented business model review and

business.

branch-level retail readiness audits.

transactions

In an effort to out-perform the compe-

Throughout the past 20 years, finan-

The business model review will drive

opportunity to address the wants and

cial institutions have grown both organi-

and inform the type of information to

needs of their customer market in a dif-

cally and via mergers and acquisitions,

be acquired during any retail readiness

ferentiated, recognizable and visually

which has been conducive to the eclectic

audit. The type of information to be ac-

appealing manner.

nature of most retail networks. Prior to

quired and rated during branch audits

tition, successful institutions seize this

includes: general street presence and visibility, ingress, egress, building signage, drive-up areas, general facility fitness, millwork, merchandising, marketing, compliance and staff engagement. Each of the aforementioned audited items can be rated using a pre-determined scale (e.g. one to five, five being excellent). By effectively rating each item, one can then build a comparative matrix, or index of the performance factors in your retail network and how they relate, or impact your intended business model and customer experience. Individual branches can be compared based on an individual, demographic or profitability basis. If we had a cash surplus then we

8 Virginia Banking | January/February 2011

www.vabankers.org


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would spend whatever it takes in the branches to satisfy the overall business

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the branch environment, the business goals and objectives, and the customer experience, can dictate how you spend your investment and thereby maximize your ROI. When determining where to spend your dollars, keep in mind that not all upgrades are investments, and improvements can and should be done in a cost-effective manner. For example, when evaluating the architectural/physical part of the matrix, simple improvement to the mechanical room can be an insignificant cost but have a major impact on efficiency. Your audit will also as-

Resourceful. Responsive. Reliable.

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Do business with someone who thinks like you.

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www.vabankers.org

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804.239.0452 January/February 2011 | Virginia Banking 9


New Year, New Leaf for Corporate Wellness By Roxanne Sheppard, COO VBA Benefits Corporation

S

everal years ago PriceWaterhouseCoopers released a repor t prepared by their Health Research Institute, in

conjunction with the World Economic Forum, indicating that “as work becomes more sedentar y, the global workforce is becoming fatter, sicker and less productive.” Wow – this is such a negative pronouncement on the state of our workforce that it bears reexamination. The fact of the matter is that we have shifted from being an industrial economy to a knowledge economy – our workforce sits mostly in one place and uses their brainpower to contribute to business instead of performing physical tasks that were once associated with the industrial boom. In addition to the PWC report, the

than the medical costs themselves. Pay-

World Health Organization predicts that

roll and benefits (the expense associated

by 2020 mental illness will be the second

with healthcare costs and productivity

leading cause of disability worldwide,

or productivity losses) usually are the

after heart disease. So what does this mean for employers? There are two major areas for employer concern – chronic disease and depression. And here’s why these should concern employers – chronic disease drives healthcare costs, and the productivity losses associated with chronic disease and depression are even greater

10 Virginia Banking | January/February 2011

two biggest employer expense items after paying for the cost of providing the business goods or service. This is a bottom-line issue for employers. Studies quantifying the cost of chronic disease and depression indicate that approximately 2 percent of company capital spent on workforce is lost to disability, absenteeism and presenteeism.

www.vabankers.org


Put another way, these problems affect

room, and a reduction in the number of

productivity and morale, reduced ab-

roughly 5 percent of employees, result-

missed days of work due to the condi-

senteeism, improved employee health,

ing in $880,152 in lost productivity per

tion. Both have a positive impact on the

focus and energy on the job, better con-

1,000 employees per year. In a group of

employer and on the employee’s life.

tained health costs, a healthier work en-

8,200 employees – such as those enrolled

The call to action for CEOs, then, is to

vironment, and greater loyalty and re-

in the VBA group medical plan – this can

turn over new leaf in 2011 and get be-

tention. A lot of bang for the buck – and

be a lot of money to the collective em-

hind a corporate wellness and health

well worth turning over a new leaf. Con-

ployers. The irony here is that prevent-

promotion program at your bank. Your

sider making it a company-wide priority

able risk factors such as poor diet, lack

employees will appreciate it, and there

for 2011.

of physical activity, stress and smoking

are compelling business reasons for do-

are the biggest contributors to chronic

ing it. The impact to your bank can be

disease.

extremely positive and foster increased

Roxanne Sheppard is COO of VBA Benefits Corporation.

Because of the business impact, CEOs everywhere need to consider making wellness central to their corporate business strategy. Here’s where you can turn over a new leaf for the new year – by adopting short-term and long-term strategies for wellness and health promotion. The short-term strategy should focus on creating awareness among your employees about chronic disease. Corporate wellness should be an extension of individual wellness and the first step is to make employees aware of the adverse impact to their own health of their sedentary lifestyle. This can be done by providing your employees with the opportunity to participate in a health risk assessment, or health risk screenings for blood pressure, body mass index, glucose and cholesterol levels. The long-term strategy should focus on keeping employees healthy for a long time. This includes offering the risk assessments and health screenings at regular intervals over time, and promoting the benefits of annual preventive care checkups. Another component of the long-term strategy is to partner with a health plan that has programs in place to monitor prescribed courses of treatment and coach employees on appropriate behaviors while living with chronic diseases such as asthma, diabetes, coronary artery disease, and chronic obstructive pulmonary disease. This type of condition management can result in a substantial decrease in visits to the emergency

www.vabankers.org

It’s only a sampling, but look what’s in the compliance services package TCA provides VBA member banks: • • • • •

Hands-on help, with scheduled on-site audits. Timely, accurate information about compliance issues and trends. Advice about how to meet federal compliance requirements. An e-newsletter heads-up when the rules change. Access to the TCA compliance professionals, the people who make TCA the most respected source of compliance information and assistance in banking.

Whether your need is BSA/AML, IT vulnerability scans and web site security reviews, or training that keeps your staff — and directors — up-to-date, TCA is your Compliance Advantage. Call us . . . today . . . to learn more. 1-800-934-7347.

Thomas Compliance Associates, Inc. 2846 N. Mildred Avenue, Suite 150 Chicago, Illinois 60657 1-800-934-7347

www.tcaregs.com

January/February 2011 | Virginia Banking 11


“THERE ARE NO SECRETS.

The networked market knows more than companies do about their own products. And whether the news is good or bad, they tell everyone.”

– Cluetrain

BY CHRISTINA P. O’NEILL

social media 12 Virginia Banking | January/February 2011

www.vabankers.org


T

here’s

so-

and president of Chesapeake Bank. “To

cial media seminars at bank

a

reason

that

me, it’s funny that we all love the idea of

trade

of-

‘word of mouth’ advertising, but when it

face and voice behind Comcast’s Com-

ten the best-attended these days –

comes to social media, we view it differ-

castcares.com, brought about significant

bankers know that social media can work

ently. If you’re doing a good job for your

change in Comcast’s customer service

to banks’ benefit, but they have also seen

customers, you want to encourage use of

through the use of Twitter to respond to

it work to banks’ detriment. They tend to

these channels.”

customer-service problems in real time.

organizations

are

see the “virus” in “viral.” The typical an-

Village

Bank,

with

15

The power of the tweet Frank Eliason, formerly the brains,

branches

Using an outside service to facilitate

ecdote presented by social media experts

throughout the metropolitan Richmond

internal communication efforts was a

is the Google search that brings up web-

area, uses social media not to generate

groundbreaking concept when Eliason

sites or postings detrimental to a bank,

direct sales, to but to keep customers and

first introduced it (without legal per-

causing headaches for the bank’s custom-

potential customers aware of all of the

mission, as he told social-media expert

er service and compliance departments.

things the bank is doing in the commu-

and author Brian Solis in an interview

The Cluetrain manifesto quoted to the

nity. “We are a very community-oriented

earlier this year). Creating a customer

left (www.cluetrain.com) was created in

bank and Village Bank Neighborhood

communications channel on Twitter

1999 to herald the emergence of an online

News on Facebook is an easy way to

was only part of the solution. The other

customer community independent of

keep everyone informed about the many

part was setting the stage for managers

mass marketing efforts. It sounded stri-

projects in which we are involved,” said

to empower their technicians to make

dent and extreme at the time, but 11 years

Marketing Specialist Milly Hudgins.

the needed changes. Eliason left Com-

later, hundreds of thousands of customer

“We’ve had positive feedback from our

cast in mid-July – “They didn’t need me

communities have not only emerged, but

Facebook fans as well as our employees.

anymore,” he told Solis; he left behind a

matured – and they are changing the face

It’s the perfect forum to promote upcom-

team of people who could keep the ini-

of business-to-customer relations in ev-

ing events, as well as alert people about

tiative growing, he said. Eliason is now

ery industry across the globe.

charities with which we are involved and

senior vice president of social media at

Financial institutions, circumscribed

even includes dog tips from our mas-

Citibank, overseeing the bank’s internet

by privacy and disclosure rules, are un-

cot, Banks,” she added. “It truly helps

and mobile marketing team.

derstandably wary about how they’re

followers get a sense of who we are.”

Banks can’t resolve customer-service

going to hold up their end of the social media two-way conversation. But they know they must be in the game. “There is a certain growing segment of our customer base that expects us to communicate via social media. If you don’t, then you are viewed as being behind the times,” says Jeff Szyperski, CEO

overcoming the fear of the

two-way conversation

www.vabankers.org

January/February 2011 | Virginia Banking 13


issues as publicly as cable service pro-

By participating in an open conversa-

ment and lays out the story as the cus-

viders. The rule of thumb for fielding

tion about everything from local events,

tomer presented it. Management knows

customer calls on Twitter – which most

to new businesses launching, people

the story is factually wrong – maybe the

banks advise their customers to do by

can learn about who we really are and

situation arose from customer error or

now – is to request that the customer

how our commitment to providing ex-

misfeasance, not a bank error. But pri-

call a private number, rather than dis-

ceptional service and fostering a vibrant

vacy regulations prohibit it even from

close account information in a public

community is sincere.”

confirming that the source is a cus-

tweet.

“On the few occasions we’ve seen

tomer. Lubetkin advises that the proper

Union First Market Bank is on Twit-

negative comments about our bank,

guidance is not “no comment” but rath-

ter, ranking in the top 10 of all commu-

we’ve used it as an opportunity to im-

er, this: “You can report that, but you

nity banks on Twitter, the top 15 of U.S.

prove, and [we have] also witnessed

would not be accurate when you do.”

banks on Twitter and the top 25 banks

customers defend our practices and our

If a company doesn’t respond when

on Twitter worldwide according to Dor-

principles on our behalf,” says Henry.

the media calls during a crisis or in re-

othea Henry, social media experience

“It’s both heartwarming and motivat-

sponse to a customer-service dispute,

manager at the bank. Union first estab-

ing. I’ve never felt so connected to a

“they’ll fill the void either with misin-

lished a presence on Twitter in May 2009.

community before and my next goal is

formation or input from other parties

“We learned very quickly after our very

to make those connections even stron-

that don’t know what you know. If you

first tweet, ‘It’s time to feel good about

ger through more social channels.”

have nothing about your brand to com-

banking again’ that there are benefits for everyone involved,” says Henry. “Our customers have a way to reach us that is fast and effective. In return, we have gained fabulous insights and ideas from real-time customer suggestions.

14 Virginia Banking | January/February 2011

pare what you are with what people

It’s the media calling But let’s say the customer is complaining to the media, rather than to the bank. The reporter calls bank manage-

are saying about you, third parties are going to be speaking for you and misrepresenting your brand to the public,” he says.

www.vabankers.org


Breaking down walls The Facebook litmus test of whether a financial institution is willing to have a genuine two-way conversation is whether it allows negative postings to remain on its wall – or whether it allows wall postings at all. “I go to so many corporate Facebook pages where you can’t post to their wall,” says Lubetkin. “You’ll never find out their concerns if you don’t let them post stuff.” The ultimate message a financial institution should seek to deliver is

tion probably thinks there is good rea-

As one media specialist puts it, these

son to do so. “There has to be a level of

services are somewhat like the old

trust with employees,” Lubetkin says,

clipping services – but on steroids.

and it should have been established in

Establishing a meaningful presence

the hiring process. That’s a manage-

in social media is not as easy as one

ment issue, not an Internet issue.

would initially believe. Social media

The impact of many bloggers, says

consumers are constantly looking for

Lubetkin, “is out of proportion to their

information that is useful and helpful.

importance in the real world.” Addi-

Social media is not about being hip-

tionally, much of the discourse in the

per than your competition. It’s about

blogosphere is aimed at generating

being confident enough to graciously

attention, that generates more clicks

host an online party where you don’t

and links, in order to get to the top of a

know all the guests. It’s about seeing

search-engine page.

“viral” not as a threat but as a conduit for more-efficient customer service.

this, he says: We are so confident that we will ultimately satisfy you that we

And it’s the market wisdom to sepa-

Something of value

want you to tell us when we fail. Com-

So, how does a financial institution

panies that want to improve service

determine what’s valuable? That de-

invite customers to tell them what it

pends on what data a bank wants to

is like.

mine. Monitoring tools such as Radian6

Then, there are employees. If your

and GeeYee listen for the conversation

bank blocks employee access to certain

topics and alert users, much like Google

websites, someone in your organiza-

Alerts, and notify the subscribing bank.

rate the meaningful from the echochamber rhetoric. In other words, not a crisis, but an opportunity. Christina P. O’Neill is the custom publications editor of The Warren Group, publisher of Virginia Banking.

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January/February 2011 | Virginia Banking 15


Washington

Update

A League of Extraordinary People

I

Edward L.Yingling President and CEO, ABA

n my 25 years of service to you, one thing has

Second, we always come through because

always stood out, and it’s one thing that I

bankers are good people. There is no group of peo-

will happily take away with me in my retire-

ple I would have rather worked for. You are caring,

ment as ABA’s president and CEO and in my new

dedicated, hard-working and very capable people.

life as a humble bank attorney. It’s the people.

You do more in your communities than almost any-

It’s been a privilege to work with volunteer

one. This financial crisis has really hurt our indus-

banker leaders from across the country, and side

try: Hurt its financial strength and its reputation

by side with a staff of extremely talented ABA pro-

– in most cases unfairly – and it has left us with reg-

fessionals who have always put your interests first

ulatory overkill and fundamental questions about

and foremost in the nation’s capital.

our business model. But we will come through it.

Together we have been through many battles,

Many of you have devoted tremendous effort to

including the latest really big one – Dodd-Frank.

working for our industry through your state asso-

This battle required a huge effort by ABA, the

ciation and the ABA. I especially want to thank the

state associations and grassroots bankers across

ABA officers I have worked with over the years.

the country. A recent poll of bankers showed that

They always gave me great advice and provided

94 percent oppose the law, and they have every

our industry great leadership.

reason to oppose it. Now, the conversation – a case in point was

more needs to be done. We need more participa-

the discussion during our recent ABA America’s

tion and more resources to do it. Every bank should

Community Bankers Council meeting here in

belong to its state association and to ABA. Every

Washington – is about how banks can move for-

banker should be participating in our grassroots ef-

ward and get our economy going again. There’s a

forts. Don’t let your friends sit on the sidelines as

reason to be optimistic because, despite all of the

the future of the industry and the banking business

tough fights and tough times, our industry has al-

model is under the political microscope.

ways emerged from the darkness and prospered. We will do so again.

There is much that remains at stake and much

Remember that the ABA is you. We bring together tremendous resources to serve you, and we are your champion in Washington, but as an industry we can, and should,

Don’t let your friends

be doing even more. Everyone

sit on the sidelines as the future of the industr y and the banking business model is under the political microscope.

should be involved. I can’t tell you what a great honor it has been for me to work for all of you, and to work with the state associations and the volunteer bankers who have led the ABA. As I also said at the ABA conven-

We always come through for two reasons. First,

tion, this old soldier is not going to fade away just

banking is critical to our economy and indeed to

yet. I am, however, taking off my officer’s uniform

our way of life. What you do is very, very impor-

and becoming an enlisted man, and will continue

tant, and you should never forget it.

to fight alongside you for our great industry.

Ed Yingling recently retired from the American Bankers Association. 16 Virginia Banking | January/February 2011

www.vabankers.org


Line

Legal

Federal Reserve Board Proposes Debit Card Interchange Rules

O

n Dec. 16, 2010, the Federal Reserve Board proposed rules to implement the debit card interchange restric-

tions in the Dodd-Frank Wall Street Reform and Consumer Protection Act. The proposal would establish standards for determining whether an interchange fee received or charged by an issuer with respect to an electronic debit transaction is “reasonable and proportional to the cost incurred

Joseph E. Spruill General Counsel, Virginia Bankers Association

by the issuer,� and prohibit issuers and networks from restricting the number of networks over which an electronic debit transaction may be processed and from inhibiting the ability of a merchant to direct the routing of an electronic debit transaction to any network that may process such transactions. Because of the difficult issues raised by this proposal, the board emphasized that it will be particularly open to comments on the proposal before finalizing any interchange rules. With respect to the fee restrictions, the proposal sets forth two alternatives for comment. Under the first alternative, an issuer could comply in one of two ways. First, an issuer could calculate its

proposal on fee limits was more aggressive than

costs attributable to its role in the authorization,

many had anticipated.

clearance and settlement of a debit card transac-

While the Dodd-Frank Act requires the board

tion and receive or charge interchange fees based

to take into account the fraud prevention costs of

on those costs, but subject to a cap of 12 cents

issuers in setting interchange fee limits, the board

per transaction. Second, the issuer could simply

chose not to include a specific adjustment in this

charge a safe harbor amount of 7 cents per trans-

proposal. Rather, the proposal includes two gen-

action regardless of costs.

eral approaches and seeks comment on each.

Under Alternative 2, an issuer could receive

Under the first approach, the board would iden-

or charge an interchange fee up to a cap, which

tify innovative technologies that would reduce

would initially be set at 12 cents per transaction.

debit card fraud, and determine those costs for

The board stated that if either of these stan-

purposes of the interchange fee adjustment. The

dards is adopted, the maximum allowable inter-

second approach would establish more general

change fees received by covered issuers for debit

standards that an issuer must meet to be eligible

card transactions would be more than 70 percent

for the adjustment. Any specific adjustment will

lower than the national average. The board’s

Continued on page 21

Joseph E. Spruill can be reached by e-mail at jspruill@vabankers.org. www.vabankers.org

January/February 2011 | Virginia Banking 17


Legislative

Update

Communication is Key

O

ne of the many pieces of advice I re-

orities and let them know about our concerns. This

ceived last year leading up to my wed-

show of force will undoubtedly yield dividends as

ding from those with a long history of

we advance our policy agenda and oppose bills to

matrimonial bliss was that communication is key

create unnecessary burdens to your business prac-

to a successful marriage. I have tried that guidance

tices. Without a doubt, these two are directly linked –

– with varying levels of achievement – to remind

your active engagement in the legislative process

myself of over the past year and a half. And I’ve

and the positive outcomes we hope to achieve.

found it to have sound application beyond keeping domestic harmony.

Matt Bruning Director of Government Relations, Virginia Bankers Association

On the federal level, the November elections welcomed in three new House of Representatives mem-

Indeed, communication is key to successful gov-

bers to the Virginia delegation. It was welcome news

ernment relations. Over the past several months,

to learn that newly elected Rep. Robert Hurt from

the Virginia Bankers Association has utilized time-

the 5th District will be the first Virginian to serve on

tested approaches, along with some new and cre-

the House Financial Services Committee in almost a

ative means, to bolster our communications in our

decade. Already, the VBA and several bank execu-

advocacy and outreach efforts with and to our elect-

tives have met with these new members of Congress

ed officials. The results we have seen underscore

to educate them on Virginia’s banking industry and

the importance of maintaining strong and effective

the vast harm and uncertainty caused by recent

lines of communications in order to accomplish our

federal regulations. We will be continuing with our

government relations objectives.

outreach to the Virginia Congressional delegation

Starting in the fall and continuing into the win-

through the VBA/ABA Government Relations Sum-

ter, our legislative meetings brought together bank-

mit this spring and hope you can join us on Capitol

ers and state legislators throughout the Common-

Hill, March 14-16.

wealth in 14 separate venues. These gatherings

Understanding that good communications is a

were a great forum for individual bankers and the

two-way street, the VBA is using new methods to

VBA to provide insight into issues important to the

communicate with our member banks. This session

financial services field to 97 lawmakers before the

we have expanded into the social media realm and

General Assembly session convened. The tremen-

began using Twitter as a means to update our mem-

dous turnout of local bankers for these interactions

bers on important events and key legislative actions.

with our state policy decision makers on their home

We encourage you to log on to your Twitter account,

turf is a valuable form of direct communication.

search for @vabankers and request to follow us to

Thanks to the 355 bankers who participated in these

receive tweets on session updates, the latest on the

meetings!

Dodd-Frank act, regulatory deadlines and more.

Likewise, our annual Banker Day at the Capitol on

All of these and our many other proactive efforts

Jan. 13 was once again a resounding success. With

to foster greater communication between the VBA,

over 350 bankers in Richmond on the second day

our member banks and our elected officials – includ-

of the 2011 General Assembly session, our indus-

ing VBA BankPAC support – are critical to our over-

try was well represented with a unified voice for a

all government advocacy. While we work to improve

strong banking environment in Virginia. Sending the

upon our existing approaches and offer new and

positive message that you are proud to be bankers,

creative methods, our sustained success can be cred-

participants in Banker Day met with legislators and

ited to the overwhelming commitment of bankers

their staff to remind them of the VBA’s policy pri-

like you.

Matt Bruning can be reached by e-mail at mbruning@vabankers.org. 18 Virginia Banking | January/February 2011

www.vabankers.org


Welcome

New Associate Members

ACCOUNTING

THE SCHINLEVER GROUP, INC. 4320 Reservoir Lane Richmond, VA 23234 Phone: (804) 399-8562 Fax: (804) 275-3436 Website: www.schinlevergroup.com Contact: Darlene Schinlever, President E-mail: dschinlever@schinlevergroup.com The Schinlever Group provides internal audit services to community banks. Their work is performed in accordance with the Institute of Internal Auditor standards including issuing an opinion on the system of control and compliance with that system. They are your solution and partner for an effective outsourced internal audit function that surpasses regulatory scrutiny.

Consulting & Training, Credit & Lending ResourcesS FAIRFAX FINANCIAL GROUP, INC. 7307 Scarlet Oak Ct. Fairfax Station, VA 22039 Phone: (703) 338-4226 Contact: Bob Morriss, President E-Mail: bob@morriss.net They provide risk management advisory services along with acquisition due diligence and Sarbanes/Oxley testing. Their staff has a minimum of 20 years of experience as credit officers, loan review or bank examiners.

IT CONSULTING & SERVICES, SECURITY SERVICES PC CONNECTION, INC.

COMPLIANCE, IT CONSULTING & SERVICES ADI CONSULTING 3919 Old Lee Highway, 81A Fairfax, VA 22030 Phone: (703) 836-1517 Fax: (703) 836-1895 Website: www.adiconsulting.com Contact: Michael L. Mitchell, President E-mail: mmitchell@adiconsulting.com For 10 years, ADI has provided compliance and risk management services to banks, other financial institutions in Virginia and beyond. They specialize in BSA/AML/OFAC and fair lending, and work in all areas of bank compliance. Clients range from community banks to multi-billion dollar holding companies.

730 Milford Road Merrimack, NH 03054 Phone: (603) 683-2018 Website: www.pcconnection.com Contact: Sharon Palermo, SMB Marketing Manager E-Mail: spalermo@pcconnection.com PC Connection, Inc., a Fortune 1000 company headquartered in Merrimack, New Hamphsire, is a rapid-response provider of IT products and services. Backed by years of experience, extensive vendor partnerships, and teams of certified technical experts, PC Connection is ready to design, build, and support end-to-end IT systems for customers of every size.

BECOME A MEMBER

OF THE VIRGINIA BANKers ASSOCIATION

Visit our website at: www.vabankers.org

www.vabankers.org

Advertising Directory Afton Hospitality Management (757) 333-7176 www.aftonhospitality.com

9

Community Bankers Bank (804) 239-0452 www.CBBonline.com

9

Credit Risk Management (919) 846-1601 www.CreditRiskMgt.com

15

Dominion Consulting and Management 14 (703) 753-8072 www.dominion-consulting.com FHLB of Atlanta (404) 225-5910 www.fhlbatl.com

24

ICS Compliance (888) 250-4400 www.icscompliance.com

2

PULSE (800) 420-2122 www.pulsenetwork.com

6-7

Sheshunoff (800) 477-1772 http://compliance.smslp.com

23

Thomas Compliance Associates 11 (800) 934-7347 www.tcaregs.com VBA Benefits Corporation (800) 643-5599 www.vabankers.org

22

January/February 2011 | Virginia Banking 19


Compliance

Corner

Flood Insurance Concerns Continue after Loans are Closed Flood Map Changes, Life of Loan Coverage Must be Monitored By Donna Rakes and Jim Dray Thomas Compliance Associates, Inc.

T

he good news is that the type of massive flooding that brings reporters in waders

and starts the servicing process: •

and TV satellite trucks to record the devas-

assure that proper insurance requirements are

tation is pretty rare in Virginia. The bad news is that the Commonwealth’s 112 miles

Changes in flood maps must be monitored to maintained.

Loan servicers must be aware of flood map

of coastline, 3,300 miles of tidal shoreline and 948

changes – including, for example, whether

square miles of land that is less than five feet above

property that was originally not in a flood zone

sea level do make us susceptible to floods brought

now is in a mandatory insurance zone based

on by hurricanes and other tropics-related storms,

on map amendments.

rain systems that occasionally park over a soon-to-

For convenience, most lenders order flood deter-

be-soaked geography, and even winter rains and spo-

minations with life of loan coverage that requires

radic ice dams.

the flood determination vendor to monitor the flood

For lenders, that makes flood insurance coverage – and, in particular, changes to flood maps and cover-

maps and notify the servicer (usually the bank) of any map changes until the loan is paid off.

ages – a task to be monitored on a regular basis. As

Flood vendors can provide all types of reports

a practical matter, that means banks’ flood insurance

– for example, a report listing all loans in Zones

concerns don’t end once the institution closes a loan

A and V, which require mandatory insurance, or a monthly report of all determinations obtained regardless of zone. Such reporting provides an important audit process to ensure that all loans requiring mandatory insurance are being monitored and that a report can be generated to compare with monthly closing reports to ensure that flood determinations have been obtained as required. Vendor reports are used for these purposes during on-site compliance reviews. The flood determination companies are contacted to request a report listing all the determinations obtained in a flood zone that requires insurance. The report allows the reviewer to compare the client lender’s internal tracking system with a control list to ensure that there is appropriate tracking all the required loans. The process also provides a report to pick loans for testing. In some cases, it is discovered that lenders obtain life of loan coverage but do not follow the notification requirements included in their agreements.

20 Virginia Banking | January/February 2011

www.vabankers.org


In most contracts, flood vendor report-

first lien loan.

Continued from page 17

ing includes paid off loans, withdrawn

It is important that loan servicing

be proposed by the board after consid-

and denied loans, and loans that have

departments understand the monitor-

eration of comments on these general

been transferred to another lender. If the

ing procedures and requirements. Loan

approaches.

bank fails to contact the flood vendor

servicing departments should have pro-

In response to a question from Gov.

when a loan status changes, the vendor

cedures to notify the vendor when the

Betsy Duke about the exemptions from

will track the loan indefinitely. That’s

status of the loan file has changed. The

interchange fee restrictions in the Dodd-

unnecessary and costly.

flood vendor also should have a desig-

Frank Act, particularly the exemption for

Still, when flood reviews are con-

nated point of contact at the bank to no-

institutions with assets of less than $10

ducted, it is often found that the-loan-

tify when map amendments occur that

billion, Federal Reserve staff acknowl-

has-been-transferred notification is not

will change the status of the flood insur-

edged that market forces may cause such

completed.

ance requirements.

exemptions to have little practical ben-

It is typical to recommend that bank-

There’s another potential administra-

efit to smaller issuers. Specifically, staff

ers include life of loan termination in

tive catch as well: when lenders sell the

indicated that the networks may be re-

their payoff procedures. However, this

servicing of a loan, the life of loan moni-

luctant to have a two-tiered interchange

can cause a secondary problem if one

toring too often is not transferred to the

fee structure – one for large issuers and

determination is used for multiple loans.

new servicer. The monitoring should be

another for small issuers – and that there

In such cases, the payoff staff must re-

transferred with the servicing, so chang-

would be pressure from merchants to

search all of a borrower’s properties to

es to the flood maps are provided to the

push debit card usage to large issuers

determine whether additional loans are

current servicer.

because of the benefits of lower costs.

tied to the life of loan coverage. If they

Most flood determination companies

Surprisingly, the board requested

are not, then the life of loan coverage

have online services that will allow the

comment on whether ATM transactions

should be terminated.

loan servicing department to pay off the

and ATM networks should be included within the scope of the rule.

The need to constantly track each loan

determination or transfer the servicing

payoff for related flood coverage is one

through the Internet. Loan departments

With respect to network exclusivity

reason to suggest that banks obtain sep-

should contact their life of loan vendors

and routing, the proposal sets forth two

arate life of loan coverage on each loan.

to determine the correct procedures to

alternatives. Under Alternative A, an is-

If Fred Flintstone has a first lien loan and

ensure that termination and transfers are

suer or payment card network may not

a HELOC, for example, the report will

completed.

restrict the number of payment card net-

list two determinations and two life of

works over which debit transaction may

loan tracking numbers. The vendor re-

VBA members seeking assistance or

be carried to fewer than two unaffili-

port will balance with the internal track-

additional insights on Fair Lending

ated networks. Under Alternative B, an

ing report listing two loans that require

compliance and reporting issues should

issuer on a payment card network may

insurance. When borrower Flintstone’s

call TCA’s Donna Rakes or Jim Dray.

not restrict the number of payment card

HELOC is paid off, the bank can ter-

The toll-free number is 800-934-7347.

networks over which a debit transaction

minate life of loan flood coverage for

Rakes is manager of TCA’s East Coast

may be carried to less than two unaf-

the HELOC without running the risk of

Regional office in Rustburg. Dray is

filiated networks for each method of au-

causing a change with coverage on the

president of TCA.

thorization – PIN or signature – that the card holder may select.

Compliance Management The emergence of regulations that begin to implement Dodd-Frank Act provisions, the fleshing out of the legislation’s new Consumer Financial Protection Bureau and an increasing focus on BSA means that compliance stakes have never been higher. Fortunately, VBA members who also are TCA client banks have a valuable resource – TCA – to connect with at any time to talk about the new compliance environment and about how to rebuild their Compliance Management System to mitigate increasing regulatory risk.

www.vabankers.org

The VBA is very concerned about this proposal. We believe it would have a significant negative impact on all banks, both large and small. Rules must be finalized by April 21, 2011, with an effective date for most of these provisions of July 21, 2011. The comment deadline is Feb. 22, 2011. Bankers are strongly encouraged to comment on this important proposal. January/February 2011 | Virginia Banking 21


Move

Bankers on the

Bodkin

Morales

Black

Benchmark Community Bank, Kenbridge Robert E. Bates, Assistant Vice President/ Branch Manager Cardinal Bank, Tysons Corner William C. O’Connor, Senior Vice President, Senior Credit Officer Essex Bank, Tappahannock Frank L. Besosa, Vice President and Commercial Lender Will Martin, Business Development Officer Hampton Roads Bankshares Inc., Norfolk Stephen P. Theobald, Chief Financial Officer

Popp

Leitch

Register

M&T Bank, Richmond Sean Bodkin, Relationship Manager Philip B. Hager, Vice President and Senior Relationship Manager Ed Kivior, Vice President for Business Banking Eric Morales, Middle Market Relationship Manager

StellarOne, Richmond Robert E. Leitch Jr., Senior Vice President and Regional Commercial Banking Manager

Old Point National Bank, Hampton Cindy L. Black, Vice President of Corporate Lending Shari Popp, Branch Officer Jennifer Register, Branch Officer

Village Bank, Midlothian Hal Dalton, Senior Vice President

Union First Market Bank, Richmond Kristin H. Dobbins, Branch Manager

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

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22 Virginia Banking | January/February 2011

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