V irginia Banking May/June 2011
Virginia Bankers Association — Serving Virginia’s Financial Community Since 1893
Plugging in to
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In This Issue
Teach Children to Save day | VBA/ABA Government Relations Summit
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irginia V Banking V i r g i n i a B a n k e r s A s s o c i at i o n — S e rv i n g V i r g i n i a ’ s F i n a n c i a l C o m m u n i t y S i n c e 1 8 9 3
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 Bruce T. Whitehurst President and CEO Virginia Bankers Association Chandler Dewey Communications & Marketing Manager Virginia Bankers Association
May/June 2011
photo
12
Server Virtualization is Fundamentally Changing the Future of IT How to run your bank better, faster and less expensively
features
SUBSCRIPTIONS If you would like to subscribe to Virginia Banking, contact Chandler Dewey at cdewey@vabankers.org.
8
Virginia Bankers Join ABA for Government Relations Summit National Bankers Unite for Common Cause Representatives from Virginia’s banking industry traveled to Washington, D.C. to speak with Congress about finding regulatory balance after Dodd-Frank.
18
Teach Children to Save Day A Statewide Success Bankers participated in the 15th annual educational day, reaching more than 12,500 students across the state.
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 Timothy M. Warren Jr. David B. Lovins Vincent M. Valvo
Chairman CEO & Publisher President Group Publisher & Editor in Chief
FINANCE & ADMINISTRATION Jeffrey E. Lewis Controller / Director of Operations EDITORIAL Christina P. O’Neill Cassidy Norton Murphy
Custom Publications Editor Associate Editor
ADVERTISING George Chateauneuf Richard Ofsthun Cara Inocencio Emily Torres
Publishing Division Sales Manager Advertising Sales Manager Advertising Sales Manager Advertising, Marketing & Events Coordinator
DESIGN & PRODUCTION John Bottini Creative Director Scott Ellison Senior Graphic Designer Ellie Aliabadi Graphic Designer
in every issue 4 Calendar of Events 5 Insights 6 Worth Noting 9 Washington Update
10 Legislative Update 11 Welcome New Associate Members 14 Compliance Corner 22 Bankers on the Move
Send us your thoughts or ideas on Virginia Banking! ©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.
Please email Chandler Dewey at cdewey@vabankers.org. Has your information changed? Please email Kellee Edelin at kedelin@vabankers.org with your new contact information.
May/June 2011 | Virginia Banking 3
Calendar of
Events
Live Event
Online Seminar
Webinar
INSTRUCTOR-LED SEMINARS
WEBINARS
Annual Convention 2011, White Sulphur Springs, West Virginia June 19-22
Safe Deposit Series June 16
School of Bank Management, Charlottesville July 31-August 5
Dynamite Training Secrets for Everyone June 22
CFO Conference, Charlottesville August 29-31
RESPA Review and Update JuLY 7
Consumer Lending School, Glen Allen (Richmond) September 13-14
Liquidity Risk Management – An Evolving Process September 8
Credit Management Conference, Charlottesville October 3-4 Commercial Lending School, Glen Allen (Richmond) October 18-20
INSTRUCTOR-LED COURSES Principles of Banking June 13
5 Mistakes Bankers Make on Sales Calls September 12 Blueprint for a New Beginning - Bank Director’s Strategy for Recovery September 13 Mergers and Acquisitions in the Current Environment September 14 Strategic Planning for a New Environment September 15
General Accounting June 13
Leading the Prospecting Effort September 19
Principles of Banking July 11
The ALCO Process – The Board Role September 20
Economics for Bankers July 11
IT Risk Assessment – Take Control of Your Program September 21
Consumer Lending July 18
The Basics on HSAs September 21
General Accounting August 1
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______________________________ Email___________________________________
For more information go to www.vabankers.org. 4 Virginia Banking | May/June 2011
www.vabankers.org
Insights A Questionable Anniversary I Bruce Whitehurst President and CEO, Virginia Bankers Association
usually enjoy celebrating anniversaries, don’t
community banks, pointing to the new FDIC as-
you? Here’s one I’m not so sure about: this
sessment base, more oversight of large banks and
July marks the first anniversary since the pas-
of nonbanks as key reasons they believe this to be
sage of the 2,319-page Dodd-Frank Act. Thirteen
the case. Do they know that according to economic
months in the making, Dodd-Frank was heralded as
estimates, a five basis point increase in deposit rates
the response to the Financial Crisis of 2008 and the
neutralizes the beneficial change in FDIC assess-
solution to what was wrong with our financial sys-
ment for most community banks? What about the
tem. Never mind that housing finance reform was
prospective loss of more than 70 percent of debit in-
not included, even though the creation of a second-
terchange revenue? What about the cost to comply
ary market for subprime mortgages is high on the
with every new rule the Consumer Financial Protec-
list of root causes of the financial crisis. Never mind
tion Bureau promulgates? What about all the new
that banks of all sizes – and community banks dis-
reporting requirements relating to small business
parately so – are at the other end of a double-barrel
loans?
shotgun firing over 200 new regulations our way,
As part of the one-year anniversary of Dodd-
both to add unnecessary cost and regulatory burden
Frank, the CFPB goes live on July 21. Although not
and to take away revenue sources through govern-
confirmed by the Senate as contemplated in Dodd-
ment price-fixing. Happy anniversary, Dodd-Frank!
Frank, Elizabeth Warren is setting up the CFPB, and
During the months that Dodd-Frank was debated
there is no mistaking the fact that as a special advisor
in Congress, Virginia bankers continued to ask our
to the President, Warren is in control. She has been
congressmen and senators to weigh carefully the
saying all the right things to community bankers
potential unintended consequences of such a mas-
about how CFPB will focus its efforts on nonbanks
sive legislative effort. We argued that imposing so
and financial industry renegades. But if this is the
much change on our industry during such fragile
case, why not contain CFPB to the shadow banking
economic times would make it more difficult for
sector only, thereby matching actions with words?
banks to drive economic recovery as they would in-
Or at the least, how about giving banking regula-
stead have to spend time figuring out the new rules
tors more oversight of CFPB to make sure consumer
of the road. We pointed out that heaping more new
protection and safety and soundness don’t end up in
regulatory burdens on community banks – and in-
a head-on collision? At about the same time as Dodd-Frank’s passage,
“
Heaping more new regulatory burdens on community banks – and inappropriately so – would put undue pressure on the very institutions our country has been so proud to have and would drive more banking consolidation in and of itself.
”
Federal Reserve Chairman Ben Bernanke testified to Congress about the economy, calling it a time of “unusual uncertainty.” Our industry suggested then that unusual uncertainty would result from DoddFrank and that certainly has been the case. We are still in the early stages of determining exactly how our industry will be reshaped as a result of this new law; unusual uncertainty reigns upon this first an-
appropriately so – would put undue pressure on the
niversary. One thing is certain: with input from
very institutions our country has been so proud to
bankers all over Virginia, the VBA will continue to
have and would drive more banking consolidation
speak out and work toward the best possible indus-
in and of itself.
try environment in Richmond and Washington.
In recent weeks, FDIC and Treasury representatives have suggested that Dodd-Frank is good for
Here’s hoping next year’s anniversary might bring better news.
Bruce Whitehurst can be reached by email at bwhitehurst@vabankers.org. www.vabankers.org
May/June 2011 | Virginia Banking 5
Noting
Worth
VIRGINIA BANKS SHARE PROFIT DISTRIBUTION FROM ABA INSURANCE PROGRAM Virginia banks that purchased directors’ and officers’ and fidelity bond insurance from the ABA Insurance Program and are members of the American Bankers Association will share $53,321 in profit distributions this year from the program’s re-
ranging up to $51,000, with $4,000 being the average amount. The program offers D&O liability, financial institution bond, Internet banking liability, employment practices liability and other related insurance products to community banks.
FIRST COMMUNITY BANK COO APPOINTED TO FOURTH TERM ON FEDERAL RESERVE COMMITTEE
insurer, American Bankers Mutual Insurance Ltd, which has declared a distribution of $4 million in underwriting profits to
E. Stephen Lilly, executive vice pres-
995 banks nationwide that participate in the program. Insured
ident, COO and CIO of First Commu-
banks that are members of the American Bankers Association
nity Bank, N.A. and its holding com-
are automatically owners of the company.
pany, First Community Bancshares,
This is the program’s 21st consecutive profit-sharing distribu-
Inc., has been reappointed to the Fifth
tion – $75 million has been declared since the first distribution
District Payment Advisory Council
in 1991, based on the mutual program’s success and profitabil-
(PAC) of the Federal Reserve Bank
ity. The total distributed to Virginia banks is nearly $1.2 million.
of Richmond. This three-year term is
Participating banks nationwide will receive checks this year
Lilly’s fourth.
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www.vabankers.org
The PAC was formerly known as the Operations Advisory Council and was established by The Federal Reserve Bank of Richmond in 1978 to keep abreast of the technological and regu-
VBA DIRECTOR OF GOVERNMENT RELATIONS RECOGNIZED BY RICHMOND:The ALUMNI MAGAZINE
latory changes impacting national payment systems. The Fifth
Recently, our own Matt Bruning
District includes Maryland, Virginia, West Virginia, North Caro-
was recognized in the University of
lina, South Carolina and Washington, D.C.
Richmond’s Richmond: The Alumni
Lilly has been in his current role at First Community Bank
Magazine in an article about network-
since 1997. His career in banking and operations began in 1981.
ing called “Working the Web.” The ar-
He is very active in local and state organizations by serving on a
ticle discusses how, throughout Matt’s
number of industry and non-profit boards and committees.
career, he has worked for and with a number of University of Richmond alumni. The trend continues, as Bruce
Send us your newS! Please send submissions for Worth Noting and Bankers on the Move to Chandler Dewey at cdewey@vabankers.org.
Whitehurst, VBA president and CEO, was a 2004 graduate of the Robins School of Business. To view the article, visit www.magazine.richmond.edu/ spring11/feature-2/working-the-web.html.
Online Compliance Consulting Identify Deadlines. Understand Requirements. Track Progress.
Your Source for Compliance Support
Call Today to Meet Your Personal Compliance Consultant.
(800) 477-1772 | http://compliance.smslp.com
www.vabankers.org
With Online Compliance Consulting, you gain access to a Compliance Dashboard that has everything you need to prepare for upcoming compliance requirements: • Unlimited compliance questions to your personal compliance consultant • A review by your personal consultant of the policies and disclosures for new requirements • Semi-annual training for your Board of Directors by your personal compliance consultant • Monthly Compliance Alerts on new requirements with step-by-step compliance directions • A quarterly webinar that will help you organize, prepare, and implement new requirements • A calendar of upcoming regulatory deadlines • A progress tool that helps you manage your upcoming requirements and track your progress as you go • Access to our database of common compliance questions and answers from official regulatory sources • As an additional service, unlimited compliance reviews of your advertisements and website.
May/June 2011 | Virginia Banking 7
Virginia Bankers Join ABA for Government Relations Summit 1 Virginia bankers with Rep. Eric Cantor (fourth from left). 2 Participants had the opportunity to meet with Rep. Bobby Scott (fifth from right). 3
Bankers took the chance to discuss some industry issues with Rep. Robert Hurt (right).
4
1
Courtney Fleming, VBA director of training and communications, accepts the 2010 Get Smart About Credit Day Statewide Participation
Award
from
Kathryn Kelly, ABA Education Foundation associate director, on behalf of the VBA.
2
A
lmost 70 banking leaders, including seven members of the VBA’s Leadership Division, attended the VBA Government Relations Summit March 14-15 at the
Renaissance Washington Hotel. With a new Congress just convening – including three freshmen members from Virginia and our own Rep. Eric Cantor as the House Majority Leader – it was an excellent time for bankers to show up in large numbers to attempt to find a regulatory balance much different from what Dodd-Frank intended. The VBA Summit was held in conjunction with the American Bankers Association’s Government Relations Summit. Nearly 1,000 participants, united in our common cause, joined together to make our industry’s voice heard in Congress and the regulatory agencies.
3
This meeting was a key part of our federal government relations program and was a great opportunity for us to hear the latest on banking industry issues, visit all of our members of Congress or their staffers to discuss these issues, and have dialogue with our federal regulators. This year, the lineup of speakers was impressive, as bank participants heard from House Majority Leader Eric Cantor, Sen. Chris Coons (Delaware), FDIC Chairman Sheila Bair, Larry Kudlow, host of CNBC’s “The Kudlow Report,” and new ABA President and CEO Frank Keating. Thanks to all the bankers who took part in this important event!
4 8 Virginia Banking | May/June 2011
www.vabankers.org
Update
Washington
Share Your Bank’s Story
W
Frank Keating President and CEO, American Bankers Association
ith my roots in America’s
survey, a speech and PowerPoint presentation to community
Heartland, my very high
leaders, and tips for working with the media.
esteem for bankers is no secret. In the
You’ll also find great information about the entire banking
many communities I have visited, there
industry. For example, did you know that one out of every three
has always been one thing that stood
banks has served its local community for more than a century? Or
out: The strong, positive presence of a
that most banks (64 percent) have been in business for 50 years or
bank.
more?
You are beacons of hope, signaling
You can use the materials to develop a proactive, positive
a commitment to the economies of the
communications campaign to help your employees – who are all
communities that you serve.
ambassadors for your bank and our industry – speak confidently
Last year, ABA Chairman Steve Wilson, chairman and CEO of LCNB National Bank, Lebanon, Ohio, formed a task force of bankers to take up the challenge of
and comfortably whether serving customers in the bank or talking with friends at a barbecue. ABA members can download the free toolbox at www.aba.com/ members+only/bankstory_toolbox.htm.
improving our industry’s image, to help
We have an opportunity to change negative perceptions about
make those beacons shine brighter than ever. ABA Vice Chairman
our industry. You can tell your bank’s story, rather than let others
Matt Williams, chairman and president of Gothenburg State Bank
drive public and customer opinion by what they write, say or
in Gothenburg, Neb., and Bick Weissenrieder, chairman and CEO
believe about us.
of Hocking Valley Bank in Athens, Ohio, co-chaired the Proud to be a Banker Task Force.
Gov. Frank Keating can be reached by email at fkeating@aba.com.
The result of the task force’s efforts is the new ABA Toolbox on Telling Your Bank’s Story. “There isn’t a banker in this country who isn’t troubled by the criticism that our industry receives – in the media, from the public and in Congress,” Williams and Weissenrieder said in the toolbox’s introduction. “Our real challenge is that customers, neighbors, family and friends, reporters, policymakers, and even our staff members may not be well informed about all we do to contribute to the success and growth of our communities.” The new toolbox is about communicating the good things banks do, such as how they lend to individuals and small businesses every day and faithfully contribute to economic recovery and growth in their communities. It’s about sharing a positive
If you’re thinking about how to be a better, bigger bank you’re probably thinking about the technology driving your business today. Can it get you where you want to go? If it’s time to find a technology platform that can, it’s time to think about Jack Henry Banking. It’s time to think ahead.
story with employees, directors, customers, the media and lawmakers. Resources include, among other things, a sample CEO letter to employees, an outline
are you thinking what we’re doing?
for a bank impact statement, a customer www.vabankers.org
May/June 2011 | Virginia Banking 9
Legislative
Update
Drawing the Lines
E
very decade, the federal government
Matt Bruning Director of Government Relations, Virginia Bankers Association
There are a number of criteria necessary to use in divvying up
undertakes
Virginia’s population properly for elected representation. Both
the process of counting
federal and state boundaries must be compact, contiguous and
every U.S. resident. In 2010, the U.S.
include communities of interest. Under the auspice of the federal
Census Bureau completed the latest
Voting Rights Act, Virginia must also take into account adequate
round of adding up everyone and re-
minority representation. Of course, there are numerous ways to
leased final figures at the beginning
define these concepts and to put them into practice. And, as any
of this year. The Census figures help
time you rest authority in a political body made up of political
calculate federal aid to communities
people, partisan maneuvering does come into play.
and assists experts in determining so-
The Virginia General Assembly has taken what looks to be
cietal trends. However, the main pur-
their first pass at new state legislative districts. After adjourning
pose of the Census is to reapportion
the regular 2011 session, lawmakers reassembled to deal with
representation on all levels of govern-
redistricting. Plans altering the state legislative lines passed both
ment to ensure equal representation.
bodies, albeit not without objections from the minority parties
Based on the official figures, Vir-
in both chambers and criticisms from various outside groups.
ginia’s population grew by just over
As with any bill, the governor is the next step in the process.
922,000 or 13 percent from 2000 to
In marked departure from previous redistricting sessions, Gov.
2010. Not surprisingly, our growth outpaced the nation’s 9.7
Bob McDonnell returned the approved combined plan back to
percent increase. Loudon County led the way in Virginia with a
the legislature with his veto, questioning its legality and casti-
staggering 84 percent increase in population over the last decade,
gating its political gerrymandering.
making it the fifth fastest-growing county in the country.
Where does that leave us now? The General Assembly will
Nationally, while Virginia’s population increased well beyond
continue to debate and formulate new or, potentially, exactly
the average, even more rapid growth in other states such as Tex-
the same redistricting plans. As of now, all 140 seats are up for
as, Florida and Arizona, combined with population decreases in
election this November, with August primaries awaiting. While
many of the Great Lakes states, means shifts in Congressional
Congressional elections are further off, disagreement on fed-
seats to and from those areas with no change in apportionment
eral lines continue to fester. Should legislative agreement not
in the Commonwealth among the 435 House representatives in
come to fruition, the judicial system might be the final arbiter of
Congress. Despite retaining its 11 House districts, change is still
boundaries with approval of the Justice Department necessary
on the way in Virginia.
on any plan.
The process of drawing new Congressional and state legisla-
While all the uncertainty over the redistricting process re-
tive district lines – “redistricting” – is well underway. Once the
mains, the VBA’s Government Relations team continues to reach
Census figures were in hand, students, academicians, political
out to elected officials on the issues important to our industry.
junkies and yes, legislators, took to drawing maps of districts.
Despite the varying machinations, eventually new boundaries
Ultimately, it is up to our elected state officials to pass these new
will be determined, elections will be held and government will
maps. Members of the House of Delegates, controlled by Re-
continue on as it tends to do. We will be certain to keep you up-
publicans, and the Virginia Senate, controlled by Democrats, ap-
dated on the process and the ultimate outcome. Your congress-
proved their versions of how they would slice and dice Virginia
man or state legislator may change based on whatever new lines
to accommodate shifts in populations across the Commonwealth
are adopted, but the VBA will continue to work with our mem-
into 100 state House districts and 40 state Senate districts. Like-
ber banks and our elected representatives to ensure your voice is
wise, each chamber put forward their proposals on Virginia’s 11
heard. As populations and maps change, know that our commit-
House of Representative seats.
ment to advocating for you remains steadfast.
Matt Bruning can be reached by email at mbruning@vabankers.org. 10 Virginia Banking | May/June 2011
www.vabankers.org
Welcome
New Associate Members
BANK ANALYSIS & DESIGN, MORTGAGE & REAL ESTATE SERVICES BALZER AND ASSOCIATES, INC. 15871 City View Drive, Suite 200 Midlothian, VA 23113 Phone: (804) 794-0571 Fax: (804) 794-2635 Website: www.balzer.cc Contact: Christopher M. Shust, P.E., Vice President Email: cshust@balzer.cc Balzer and Associates, Inc. is a multidisciplinary architectural and engineering firm providing architectural, civil and structural engineering, surveying, landscape architecture, geotechnical engineering, environmental and traffic engineering services. Services include due diligence and feasibility studies, pay application verification, and REO evaluation and consulting.
CONSULTING & TRAINING
CORE PROCESSING
IT CONSULTING & SERVICES, INSURANCE
CSI 3901 Technology Drive Paducah, KY 42001 Phone: (407) 880-2784 Website: www.csiweb.com Contact: Debby Davis, Sales Executive Email: debby.davis@csiweb.com Computer Services, Inc. (CSI), provides service and software solutions for community banks in both a service bureau and an in-house environment. In addition to core processing, their integrated banking solutions include imaging, cash management, Internet banking, corporate intranets, secure web hosting, online shopping, teller and platform services, ATM and debit card service and support, network management, and compliance software and services for regulatory compliance, homeland security and fraud prevention. Over 3,000 financial institutions are served with CSI’s products and services.
THE PLATEAU GROUP, INC. PO Box 7001 Crossville, TN 38557-7001 Phone: (931) 484-8411 Fax: (931) 484-0692 Website: www.plateaugroup.com Contact: Dick Williams, President Email: dwilliams@plateaugroup.com The Plateau Group, Inc., provides valuable credit-related insurance products and services in the Southeast. Plateau markets its products and services through financial institutions, and other entities that offer consumer financing as a regular part of their business. Plateau is focused on the continuing development of new products and distribution channels to sustain long-term profitability and steady growth.
FROEHLING & ROBERTSON, INC. 3015 Dumbarton Road Richmond, VA 23228 Phone: (804) 264-2701 Fax: (804) 264-1202 Contact: Jeffrey Hudson,Vice President Email: jhudson@fandr.com Established in 1881, Froehling & Robertson, Inc. is a multi-disciplinary engineering firm that provides clients with the full range of services, including – but not limited to – the core competencies of environmental and geotechnical and construction materials testing. In support of this mission, F&R maintains a fleet of drilling equipment as well as accredited geotechnical and construction material testing laboratories that are utilized by each of their twelve offices. These offices, located throughout the Mid-Atlantic region, possess the local resources needed to deliver quick, efficient, and cost-effective service for clients.
Our integrated core and complementary solutions eliminate the resources banks need to interface multiple products from multiple vendors … the impact of ongoing releases on interfaced products … and the manual processes you just can’t automate with interfaced products. And with three distinct core systems and 100+ complementary solutions, we can build an integrated front- to back-office platform for your near- and long-term requirements. We think integration is the difference between good and great technology.
are you thinking what we’re doing?
www.vabankers.org
May/June 2011 | Virginia Banking 11
Server Virtualization Fundamentally Changing Future of IT By Chris Sutherland, Matrix Network Services
V
ir tualization is a proven software technology that is rapidly transforming the IT landscape and fundamentally changing the way that people compute. Vir tualization allows you to enhance the way your IT environment operates. It simplifies the physical infrastructure, providing centralized management and better flexibility for resource sharing. From data centers to desktops, vir tualization lets banks pool and share IT resources centrally and standardize computer deployment and resources so data is more secure. For years, bankers have been watching and waiting
environmentally friendly way of doing business. This
for the definitive direction of virtualization. Although
option is attractive to banks that are adopting “green”
the technology isn’t new, there has been a delay in
business practices.
adoption for reasons ranging from an overall lack of knowledge about the benefits, to banks fearing a shift in their day-to-day operations. Today, virtualization technology is maturing and the tangible benefits are being realized – and the timing couldn’t be better. In the recent uncertain economic environment, the industry-wide virtualization initiative is generating immediate and ongoing operating efficiencies and cost savings for many banks nationwide. And more and more banks are progressively plugging in. Below are the top five reasons banks are implementing server virtualization: 1. Get more out of resources With virtualization, banks can pool common infrastructure resources and break the legacy “one application to one server” model with server consolidation. Virtualization can dramatically reduce the number of physical servers and dynamically redistribute excess computing power to where it is needed most. As the processing power of today’s servers continues to increase, it is now easier than ever for one more powerful server to replace multiple smaller servers. Reducing the number of physical servers also reduces ongoing energy requirements, making it a more 12 Virginia Banking | May/June 2011
2. Reduce data center costs Cost reduction is one of the primary reasons banks are increasingly taking advantage of virtualization. Virtualization requires fewer servers and related IT hardware and can reduce real estate, power, and cooling requirements. It also provides more efficient management tools, which can enable banks to improve their server-to-administrator ratio and even reduce personnel requirements. And looking at the big picture, virtualization dramatically reduces the hassle and costs associated with ongoing hardware maintenance. 3. Enhance availability and security Virtualization increases availability of hardware and applications, improving business continuity and disaster recovery. It enables banks to securely backup and migrate entire virtual environments with practically no interruption in their day-to-day operations. With virtualization, banks can eliminate planned downtime and recover quickly from unplanned business interruptions. 4. Gain operational flexibility Virtualization enables banks to respond to market changes with dynamic resource management, faster server provisioning and improved desktop applicawww.vabankers.org
tion deployment. Banks need to be able to change software
tor the performance of your environment, which includes
and add new products in a reasonable timeframe. With a
building a history of performance for servers, diagram-
virtual server infrastructure, they can do this without hav-
ming what each workstation needs physically and tracking
ing to find new hardware, order it and wait on having it
performance of bandwidth locally on wide area networks.
shipped to the bank. If you have the growth room in your
Planning – Review your discovery documentation and
setup, you can configure and test without having to wait
determine what elements of your environment are good
for equipment.
candidates for virtualization. Determine your future needs in areas such as management, disaster recovery and cost
5. Improved desktop management and security Virtualization provides environments that users can access locally or remotely, with or without a network connection on almost any standard desktop, laptop, tablet PC or smart device. With desktop virtualization, banks can secure and manage desktops from one centralized location. Using simple management tools, all desktops can be configured the same and the data is stored at a data center to help ensure that security and backup policy requirements are upheld. Getting started with virtualization Banks that are interested in getting started with virtualization should begin the process with discovery and
savings. And make sure you’re working with a trusted and proven vendor that is experienced with evaluating and implementing virtualized environments. Look for a vendor that offers custom network solutions and consultation that support virtualization, server consolidation, storage, communications, conversions, and migrations. Server virtualization can generate significant cost and time saving benefits to banks. If you haven’t researched how this operational enhancement can help your bank save money, improve disaster recovery, and simplify dayto-day processes, there’s never been a better time than right now. Around the world, companies of all sizes are benefiting from virtualization – don’t be left behind!
planning. It’s important to analyze the current operating environment and use that information to decide how and
Chris Sutherland is a network engineer at Matrix Network Ser-
where virtualization should be utilized.
vices, offered by Gladiator Technology, a solution provided by the
Discovery – First, take inventory of your entire environment, including servers, workstations and switches. Moni-
ProfitStars® division of Jack Henry & Associates, Inc. (JHA). He can be reached by email at csutherland@jackhenry.com.
Compliance
Corner
Loan Originator Compensation Rules Now Effective
By Donna Rakes and Jim Dray Thomas Compliance Associates, Inc.
N
ew Regulation Z amendments that imple-
by a dwelling or real property that includes
ment Truth in Lending provisions intended
a dwelling that are subject to Regulation Z –
to deal with loan officer pay are part of a
but not to home equity lines of credit (HELOCs) and
regulatory initiative to protect mortgage borrowers
timeshare transactions.
from what regulators believe are unfair, abusive or
The compensation rule contains two basic compo-
deceptive lending practices that can arise from loan
nents: The first relates to compensation paid to loan
originator compensation practices.
originators, and the second requires creditors to es-
Compliance with these rules became mandatory
tablish procedures which will prevent loan origina-
on April 1. A federal court of appeals temporarily
tors from steering a consumer to a loan product that
blocked implementation of the rule on March 31, but
will generate more compensation for the loan origi-
the United States Court of Appeals for the District of
nator.
Columbia Circuit denied emergency motions for expedited relief on April 5. Initially announced last summer as part of a mortgage regulation revamp, the final rule applies
to
closed-end
The new rules apply to mortgage brokers and companies that employ them, as well as to mortgage
consumer
loans
loan officers employed by depository institutions and other lenders.
secured
Loan originators include mortgage brokers, who
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14 Virginia Banking | May/June 2011
www.vabankers.org
may be natural persons or mortgage bro-
department, business unit or bank,
tion if the consumer pays the loan
ker companies, including companies that
and programs that pay tiered-rate
originator’s compensation directly.
close loans in their own names but use
percentages of the loan amount –
table-funding from a third party.
1 percent for loans of $200,000 or
that provides the loan originator
more and .75 percent for loans of
with greater compensation as com-
less than $200,000, for example.
pared to other transactions the
Paying compensation to a loan
loan originator offered – or could
originator for a particular transac-
Continued on page 20
The term “loan originator” also includes employees of creditors and employees of mortgage brokers that originate loans (i.e. loan officers).
•
•
Steering a consumer to a mortgage
Creditors are excluded from the loan originator definition if they do not use table funding, whether they are a depository institution or a non-depository mortgage company. Employees of such entities are loan originators. As a result, the yield spread premium (YSP) or servicing release premium (SRP) earned by a depository or non-depository institution that closes a loan with its own funds or a bona fide warehouse line of credit is not subject to the rule. However, an institution may not split the YSP or SRP with its loan officer employee or pay loan officer employees based on the YSP or SRP earned. The rule prohibits a creditor or any other person from: •
Paying compensation, directly or indirectly, to a mortgage loan originator that is based on loan interest rates or other terms and conditions of the loan. Compensation based on a fixed percentage of the loan amount, however, is permitted. Examples of prohibited compensation practices that have been fairly common in the industry include programs that allow lenders to vary
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.
rate and receive all or a portion of
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.
the difference or allow lenders to
Call us . . . today . . . to learn more. 1-800-934-7347.
the rate above or below the bank’s
vary the amount of fees above or below the stated fees and receive all
Thomas Compliance Associates, Inc.
or a portion of the difference. Other
2846 N. Mildred Avenue, Suite 150 Chicago, Illinois 60657 1-800-934-7347
prohibitions include programs that pay a bonus or other incentive
www.tcaregs.com
based on the profitability of the www.vabankers.org
May/June 2011 | Virginia Banking 15
Endorsed
Service Providers
VBA MSI Endorses Wolf & Company, P.C.
I
t is unclear if effective enterprise risk
with your bank’s overall strategic objec-
a valuable understanding of their risk
management programs would have
tives by increasing profitability, lowering
profile, and aligning current resources
prevented or limited the damage as-
costs, and reducing exposure to losses.
with existing budgets. The WolfPAC en-
sociated with the recent financial crisis, but
WolfPAC Integrated Risk Management
terprise risk management solutions suite
it is likely that these programs will be in
is an online suite of services developed
includes 13 modules from which banks
place well before another recession. This is
by the risk management experts at Wolf
can create a program that suits their indi-
true for two reasons; it is a good business
& Company, the Boston-based firm with
vidual requirements.
decision, and new and expanded exami-
more than 100 years of experience work-
The changes in the regulatory landscape
nation requirements will soon require this
ing with financial institutions. The lead-
require banks to operate differently today.
approach. While risk management prac-
ership team at WolfPAC has a significant
WolfPAC is ahead of the curve in compli-
tices most likely currently exist at your in-
tenure and knowledge of the banking
ance and regulatory issues and is able to
stitution, it is not always clear how those
industry, and the high quality technical
help banks better understand the threats
efforts relate to each other and if there is
skills that allows them to meet the enter-
and risks to their organization. WolfPAC
a documented risk profile for the bank.
prise risk management needs of all finan-
enterprise risk management solutions al-
cial institutions.
low financial institutions to remain safe,
Wolf & Company, P.C. through their WolfPAC Integrated Risk Management®
WolfPAC helps banks improve opera-
sound, and sustainable.
solution, provides a vital role as a strate-
tional efficiency by automating and ana-
For more information about how you
gic partner to more than 100 banks across
lyzing risk and controls for IT, privacy,
can develop and implement a risk assess-
the country. WolfPAC offers the tools to
vendor, regulatory compliance, and other
ment program that will increase your
create the most efficient and effective risk
operational risk assessments into a single
bank’s profitability while lowering expo-
management program possible. The risk
integrated service. This ability to create a
sure to risk, please contact Joe Romanello
management program your bank devel-
centralized view of the bank’s operations
at (617) 261-8195 or email him at
ops with the help of WolfPAC will align
lowers costs by providing managers with
jromanello@wolfandco.com.
VBA Welcomes VCDC
A
catalyst organization, the Vir-
coordination necessary to make this inno-
By balancing the interests of its partners,
ginia
Develop-
vative approach to investing work. Since
VCDC delivers an above-market rate of
ment
Community
Corporation (VCDC)
1990, they have successfully launched 14
ROI as well as worthwhile affordable
creates opportunities for investor and
tax-credit equity funds and assisted in
housing and historic renovation projects –
project sponsor partners to revitalize
the development of nearly 100 properties
resulting in changed lives and thriving
communities through affordable housing
throughout Virginia with technical assis-
communities.
and community development. VCDC,
tance and equity investments. More than
For more information about the Vir-
one of the VBA MSI’s newest endorsed
30 Virginia banks and corporations enjoy
ginia Community Development Corpo-
vendors, is a 501(c)3 certified non-profit
the benefits of investing in the VCDC’s
ration, please call Arild Trent, Investor
organization that takes a leadership role
tax credit funds while supporting afford-
Relations Director, at (804) 343-1200, ext.
in providing the experience, services and
able housing in their local communities.
116, or visit www.vacdc.org.
16 Virginia Banking | May/June 2011
www.vabankers.org
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17
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6
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2
Dixon Hughes Goodman (877) 999-9343 www.dhgllp.com
23
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22
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24
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9, 11
20-21
7
Resourceful. Responsive. Reliable.
Thomas Compliance Associates (800) 934-7347 www.tcaregs.com
15
Do business with someone who thinks like you.
VBA Benefits Corporation (800) 643-5599 www.vabankers.org
14
VCDC (804) 343-1200 www.vacdc.org
17
Sheshunoff (800) 477-1772 www.smslp.com
www.vabankers.org
www.CBBonline.com
804.239.0452 May/June 2011 | Virginia Banking 17
Teach Children to Save Day a Statewide Success
T
his year, more than 340 bank-
reached over 4 million young people.
ers entered classrooms across
We are very pleased to have the oppor-
the Commonwealth on April
tunity to partner with the VBA and our
12 for Teach Children to Save Day.
local educators to help students reach
The bankers reached more than 12,500
their potential and become productive
students through 422 presentations.
adult citizens.”
Bank of America community vol-
Franklin Community Bank, N.A.
unteers in Norfolk presented to 536
employees Linda Barbour, Julie Da-
students at Mary Calcott Elementary
vid and Lisa Spangler reached 32 kids
School, 47 students at Ready Academy,
at Snow Creek Elementary School in
and 145 students at Campostella El-
Franklin County, and The Bank of
ementary School.
Southside Virginia had employees
In Community Bank’s case, volun-
from all 15 of their branches in various
teers participated in Teach Children
elementary schools throughout South-
to Save Day and spoke to four second-
side Virginia.
grade classes at Seatack Elementary
Bank
em-
ners in education.
Mrs. Lucy Wilson’s kindergarten class Lancaster
at South Hill Elementary, while Karen
planned a number of events for stu-
Whitten spoke to Chase City Elemen-
dents, including hosting first-graders
tary School and Nancy Daniel visited
from Chesapeake Academy as the kick-
with Meherrin-Powellton Elementary
off event for Teach Children to Save
School students. Sharon Pearson and
Day. These students, along with teacher
Amy Cooke also made it to North Car-
Kelly Antonio, toured the bank’s main
olina for a few presentations.
Bank
of
office, met mascot Penny, learned about
18 Virginia Banking | May/June 2011
Community
ployee Holly Blackwell presented in
Meanwhile,
TOP: Eric Philipkosky from Delegate Roxann L. Robinson’s office visits with a Salem Church Elementary student. Middle: Nancy Bulluck and Wes Shepherd, Citizens Community Bank, visited Mrs. Walton’s first-grade class at MeherrinPowellton Elementary School. Bottom: Bank of Lancaster’s Judy Sydnor visited Cople Elementary School in Montross, Virginia on Teach Children to Save Day, reaching 65 third-graders and 17 kindergarteners with programs about the importance of saving.
Citizens
School, which is one of the bank’s part-
Sonabank
participated
with
six
the importance of saving, and conclud-
classes, reaching 144 students. Frank-
ed their bank day with a pizza lunch
lin Federal Savings Bank continued to
served in the bank’s board room.
teach its proprietary financial literacy
Hazel Farmer, senior vice president
curriculum, Making Money Count™,
and consumer education director for
on Teach Children to Save Day. The
the bank, said that as community bank-
one-hour “edutainment” program rein-
ers, “we are doing all we can to help
forces second-grade SOLs in math, eco-
young students understand the differ-
nomics, civics and oral language. Their
ence between wants and needs and the
program is available, free of charge,
importance of saving. Throughout the
to all elementary schools in the city of
month of April we visited elementary
Richmond and surrounding counties of
schools from Colonial Beach to Lan-
Chesterfield, Hanover and Henrico.
caster, helping young people develop
The VBA and the VBA Education
lifelong savings habits and helping
Foundation would like to thank the 47
them understand the important role
banks that participated in Teach Children
banks play in their communities. The
to Save Day (see sidebar, right).
Teach Children to Save Day program is celebrating its 15th anniversary and has www.vabankers.org
1 Bank of America, N.A. Bank of Hampton Roads Bank of Lancaster Bank of McKenney Bank of the Commonwealth BB&T Benchmark Community Bank Cardinal Bank Central Virginia Bank Chain Bridge Bank, N.A. Chesapeake Bank Citizens Bank & Trust Co. Citizens Community Bank Community Bank Community Capital Bank of Virginia (VCC) EVB Farmers & Merchants Bank First and Citizens Bank First Bank First Bank of Virginia First Capital Bank First Citizens Bank First Community Bank, N.A. Franklin Community Bank, N.A. Franklin Federal Savings Bank HomeTown Bank Millennium Bank National Bank New Horizon Bank, N.A. Oak View National Bank Old Point National Bank Pendleton Community Bank Peoples Community Bank Sandy Spring Bank Shore Bank Sonabank StellarOne Bank Summit Community Bank SunTrust Bank The Bank of Southside Virginia The Business Bank The Fauquier Bank TowneBank Union First Market Bank United Bank Village Bank Virginia Savings Bank, FSB www.vabankers.org
4
5 2
3 1 Jennifer Merritt, Franklin Federal Savings Bank, with students at Salem Church Elementary. 2 Chesapeake Bank employees visited Stonehouse Elementary and presented an activity using the book “Alexander, Who Used to Be Rich Last Sunday.” 3 Amy Roberts, The Bank of Southside Virginia, reads a fifth-grade Matoaca Elementary class the story “Rock, Brock, and the Savings Shock.” 4 Sonabank employees visited Nathanael Greene Elementary students in Standardsville. 5 Virginia Delegate Brenda Pogge, right, stopped by Chesapeake Bank’s presentation at Stonehouse Elementary to speak with the students on the importance of saving. 6 Franklin Community Bank, N.A., at Snow Creek Elementary School in Franklin County. There were approximately 32 kids in attendance. 7 Brandon Atkins (pictured) and Mario Huffman, American National Bank & Trust, participated in Teach Children To Save Day with second-graders at Sacred Heart School in Danville. They also went to Epiphany Episcopal School and presented to second- and third-graders on April 5. 8 Community Bank employees participated in Teach Children to Save Day. Lisa Wilkins (pictured) and Kathy Bryan used Teach Children to Save Day lessons to teach two classes of the value of saving money and spending wisely.
6
7
8 May/June 2011 | Virginia Banking 19
Compliance Continued from page 15
Corner
have offered – to the consumer,
qualifies; the lowest points and
unless the loan is in the consum-
origination fees; and the lowest rate
Creditors who compensate mortgage
er’s interest. The anti-steering rule
for which the consumer qualifies
loan originators with any incentive or bo-
does provide a safe harbor to fa-
for a loan with no risky features,
nus feature must retain records to evi-
cilitate compliance.
such as a prepayment penalty,
dence compliance with Regulation Z for at
negative amortization or a balloon
least two years after a mortgage transac-
payment in the first seven years.
tion is consummated.
The safe harbor provision is met if: •
The borrower is presented with
Creditors who offer only portfolio loan
loan options from a significant
products and do not broker loans to sec-
VBA members seeking information or
number of creditors with which
ondary market investors will be deemed in
more direct assistance with federal regu-
the originator regularly does busi-
compliance with the anti-steering prohibi-
lations, including the new loan officer
ness for each type of transaction in
tions in Section 226.36(e)(1) if the creditor
compensation rules, should call TCA’s
which the consumer expresses an
complies with the loan officer compensa-
Donna Rakes or Jim Dray. The toll-free
interest (fixed rate, adjustable rate
tion restrictions in Section 226.36(d)(1).
number is 800-934-7347. Rakes is manag-
or reverse mortgage). •
with the anti-steering requirement.
Creditors who offer both portfolio loan
er of TCA’s East Coast regional office in
The loan options presented to the
products and loan products that are bro-
Rustburg. Dray is president of TCA. TCS
consumer include the lowest inter-
kered to the secondary market must de-
is the VBA’s endorsed provider of compli-
est rate for which the consumer
velop procedures to document compliance
ance services.
20 Virginia Banking | May/June 2011
www.vabankers.org
The Definition of a ‘Mortgage Loan Originator’ All mortgage loan originators employed by a financial institution regulated by the OCC, Federal Reserve, FDIC, OTS, NCUA and FCA must register as required by the SAFE Act. The registration requirement is based on job duties, not title.
involved in extensions of credit related to timeshare plans.” The term “administrative or clerical tasks” means “(1) the receipt, collections, and distribution of information common for the processing or underwriting of a loan in the mortgage industry; and (2) communications with a consumer to obtain
A mortgage loan originator is “an individual who takes a residential mortgage loan application and offers or negotiates
information necessary for the processing or underwriting of a residential mortgage loan.”
terms of a residential mortgage loan for compensation or gain.
VBA members should keep in mind that commercial and
The term does not include an individual who is not a mort-
small business lenders often make consumer-purpose accom-
gage loan originator and: (1) performs purely administrative or
modation loans to their clients – often taking a mortgage se-
clerical tasks on behalf of an individual who is a mortgage loan
curity interest against the business owner’s residence. Based
originator; (2) performs only real estate brokerage activities (as
on the definition of a “residential mortgage loan application,”
defined by the SAFE Act) and is licensed or registered as a real
it appears that some small business and perhaps even some
estate broker in accordance with applicable state law, unless
commercial lenders are subject to the mortgage loan originator
the individual is compensated by a lender, a mortgage broker,
rules.
or other loan originator or by any agent of such lender, mortgage broker, or other mortgage loan originator; or (3) as solely
Lenders should review current compensation policies and make necessary adjustments.
For 30 years, we’ve been alongside our participants through calm seas and rough waters. Today you are faced with new regulatory developments and more uncertainty than ever before. As we face the unknown together, know that we’ll be by your side as an advocate and trusted advisor – empowering you to make smart decisions and build a successful debit program. We see debit opportunities in everything we do, because it’s all we do. Profit from our passion.
Stay informed by visiting our Durbin Amendment Resource Center at pulsenetwork.com/debitregs Collaboration
Professional Development
Customer Service
A Discover Financial Services Company
pulsenetwork.com/debitregs ©2011 PULSE
www.vabankers.org
May/June 2011 | Virginia Banking 21
Move
Bankers on the
DiMeglio
Frasier
Davis
Cardinal Bank Jeff DiMeglio, Senior Vice President, Market Executive Cardinal Financial Corporation David W. Frasier, Executive Vice President and Director of Audit Carter Bank and Trust Jane Ann Davis, Senior Vice President and Chief Financial Officer M. Wesley “Wes” Furrow, Branch Manager Amber P. Norman, Branch Manager
Furrow
Norman
Hazelwood
Old Point National Bank Sylvia Hazelwood, Vice President Gloria Little, Branch Officer Sherri McQuillan, Assistant Vice President and Private Banker Joycelyn Y. Spight, Vice President and Commercial Account Manager Old Point Trust & Financial Services, N.A. Jeff Sheats, Wealth Strategist M&T Bank Edward Kivior, Vice President and Senior Relationship Manager Hinton P. Powers III, Assistant Mortgage Sales Manager
Little
McQuillan
Spight
Virginia Commerce Bank Kimberly Bradford, Branch Manager Wendy M. Clark, Chief Compliance Officer Kimberly Clay, Manager of Loan Administration Libby Fike, Vice President of Project Management Caroline Foster, Assistant Vice President of Compliance Barry Huitema, Vice President of Retail Consumer Operations Laura Jones, Assistant Vice President of Compliance Charles Kapur, Vice President of Community Banking
Sheats
Kivior
Powers
Melanie McAndrew, Vice President and Customer Care Manager John McManus, Senior Vice President of Community Banking Edward F. Powell, Vice President of Commercial Lending
Are your bankers on the move? Email submissions to cdewey@vabankers.org.
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