Virginia Banking July/August 2014

July/August 2014

VBA Welcomes Johnny Milleson, 2014-2015 VBA Chairman

IN THIS ISSUE

THE VBA’S 121ST ANNUAL CONVENTION | TELLING YOUR STORY | BANK DAY SCHOLARSHIPS AWARDED

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July/August 2014

2014-2015 Officers and Directors of the Virginia Bankers Association John R. Milleson, Chairman, Bank of Clarke County T. Gaylon Layfield, III, Chairman-Elect, Xenith Bankshares, Inc. Gary R. Shook, Immediate Past Chairman, Middleburg Bank G. William Beale, Union First Market Bank Christopher W. Bergstrom, Cardinal Bank Michael W. Clarke, Access National Bank J. Peter Clements, The Bank of Southside Virginia Barry C. Elswick, TruPoint Bank Gary Gore, Bank of America, NA Scott C. Harvard, First Bank, Strasburg William H. Hayter, First Bank & Trust Company G. Lyn Hayth, III, Bank of Botetourt Glen Kelley, Wells Fargo Bank Brad E. Schwartz, Monarch Bank John G. Stallings, SunTrust Bank Susan K. Still, HomeTown Bank Daniel G. Waetjen, BB&T Michael O. Walker, Benchmark Community Bank Robert Wojciechowicz, Capital One Financial Corp., Richmond AT -LARGE MEMBERS Benefits Corporation Chair J. Peter Clements, The Bank of Southside Virginia Management Services Inc. Chair G. Lyn Hayth, III, Bank of Botetourt Government Relations Committee Chair Ron Haley, River Community Bank, NA VBA Education Foundation Chair Charles Majors, American National Bank & Trust Co. EDITORIAL & EXECUTIVE OFFICES 4490 Cox Road Glen Allen, VA 23060 804-643-7469 Fax 804-643-6308 www.vabankers.org Bruce T. Whitehurst President and CEO Virginia Bankers Association Melanie Reilly Communications Coordinator Virginia Bankers Association SUBSCRIPTIONS If you would like to subscribe to Virginia Banking, contact Melanie Reilly at mreilly@vabankers.org. Virginia Banking is published bi-monthly. Copyright 2014. 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.

cover features

16

VBA Welcomes Johnny Milleson, 2014-2015 VBA Chairman

14 18 20 24

The Case for Prepaid Cards Bank Day Scholarships

VBA Celebrates 121st Annual Convention in Kiawah Telling Your Story, Part II

in every issue 4 Calendar of Events 5 Insights 6 Worth Noting 6 New Associate Members 8 Legislative Update 10 Legal Line 12 Washington Update 22 Compliance Corner 30 Bankers on the Move

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Send us your thoughts or ideas on Virginia Banking! Please email Melanie Reilly at mreilly@vabankers.org. Has your information changed? Please email Melanie Reilly at mreilly@vabankers.org with your new contact information.

July/August 2014 | Virginia Banking 3

Calendar of VBA Benefits Corporation Events Government Relations Events Live Events Webinars

GOVERNMENT RELATIONS EVENTS

BANKER DAY, RICHMOND

WEBINARS

ADVANCED CALL REPORT: REVISIONS & UPDATE

JANUARY 15, 2015 VBA/ABA GOVERNMENT RELATIONS SUMMIT, WASHINGTON, DC

AUGUST 8 I KNEW SOMETHING WAS WRONG

MARCH 23-25, 2015

AUGUST 11 ADVANCED CALL REPORT: RC-R, RISK-BASED CAPITAL

VBA BENEFITS CORPORATION EVENTS BVBA BENEFITS CORPORATION ANNUAL FALL MEETINGS, VARIOUS CITIES

AUGUST 12 INTEGRATED DISCLOSURES: NEW LOAN ESTIMATE

OCTOBER 1, 2, 7, 8, 9

AUGUST 13 BSA STAFF TRAINING

INSTRUCTOR-LED SEMINARS ANTI-MONEY LAUNDERING AND BANK SECRECY ACT SEMINAR, VARIOUS CITIES

AUGUST 14 ALL THINGS CREDIT

AUGUST 5, 6, 7, 8 CFO CONFERENCE, RICHMOND

AUGUST 21 BRANCH STRATEGY WORKSHOP

AUGUST 25-27 CEO FORUM, WHITE SULPHUR SPRINGS, WV

AUGUST 22 ADVANCED CALL REPORT: REGULATORY REPORT PREPARATION OF FR Y-9C

SEPTEMBER15-16 BACK TO SCHOOL AT THE VBA, GLEN ALLEN

AUGUST 26 THREE WAYS TO IMPROVE YOUR STRATEGIC PLANNING

SEPTEMBER 24 CREDIT MANAGEMENT CONFERENCE, CHARLOTTESVILLE

SEPTEMBER 4 BUSINESS CASH FLOW BASICS AND GLOBAL CASH FLOW INTEGRATION ISSUES FOR LENDERS AND ANALYSTS, PART 1

OCTOBER 6-7 C COMMERCIAL LENDING SCHOOL, GLEN ALLEN

SEPTEMBER 9 ESSENTIALS TO IMPROVE YOUR BUSINESS DEVELOPMENT PROGRAM

OCTOBER 15-16 ENTERPRISE RISK MANAGEMENT CONFERENCE, GLEN ALLEN

OCTOBER 28 REAL ESTATE LENDING COMPLIANCE SEMINAR, CHARLOTTESVILLE

SEPTEMBER 9 FINANCIAL STATEMENT PROJECTIONS: GOING BEYOND HISTORICAL RATIO AND CASH FLOW ANALYSIS TO MAKE A SIMPLIFIED AND EFFECTIVE FORECAST, PART 1

NOVEMBER 4-6 WOMEN IN BANKING CONFERENCE, RICHMOND

SEPTEMBER 9 RECIPE FOR AN EFFECTIVE SALES ENVIRONMENT

NOVEMBER 5 LEADERSHIP CONFERENCE, VIRGINIA BEACH

SEPTEMBER 9 CREATING COMPELLING ADVERTISING FOR COMMUNITY BANKS

NOVEMBER 13-14 REAL ESTATE LENDING COMPLIANCE SEMINAR, SANDSTON

DECEMBER 16-18

SEPTEMBER 10

Information and online registration is available at the VBA website. Please go to www.vabankers.org.

4 Virginia Banking | July/August 2014 www.vabankers.org

Insights

Banking Outlook from Kiawah: Mix of Sun and Clouds

A

mong the stellar lineup of speakers at the VBA’s 121st Annual Convention at Kiawah Island, SC, in June, Jim Jones of First Wellesley Consulting led an interactive session in which he posed a number of questions to the audience. More than 80 bankers from 54 banks represented at the session participated; 56 percent of the banks had assets under $1 billion and 80 percent had assets under $5 billion, so this was predominantly a community banker’s view of future banking trends. Here is a summary of the responses to some of Jim’s questions:

REGULATORY MALAISE In relation to regulatory burden weighing in as the single largest threat to banks, bankers at Kiawah expressed the most concern about these specific regulatory issues: • Federal compliance and safety and soundness exams: 24 percent • Continued Dodd-Frank implementation: 18 percent • New/revised mortgage lending rules: 15 percent I wrote recently in this column about the regulatory overkill that is harming banks and consumers, even as new rules are issued in the name of consumer protection. Our advocacy in this area toward an improved regulatory environment remains critical and a top focus area for the VBA and the industry. BUSINESS LINE EXPANSION AND THE BANK BRANCH MODEL 35 percent of bankers indicated they will focus on electronic banking and electronic payments over the next three years, followed by commercial lending at 18 percent and wealth management at 13 percent. Mortgage lending continues to rate as an important segment, understanding its cyclical nature based on interest rates and housing market conditions. When asked how they view the traditional branch model, bankers had this to say: • Evolving by customer demand: 36 percent • Relevant and necessary: 26 percent • Here to stay: 14 percent • A thing of the past: 4 percent • No longer relevant: 3 percent • Not financially viable: 3 percent These results, which are similar to other recent surveys on the future of bank branches, indicate that bankers view the branch as a vital and ongoing part of the banking model. They also suggest that the branch is an area where we are seeing – and will see – dramatic changes in coming years. Here is how our bankers at Kiawah answered when asked how their banks are Continued on page 23

Bruce Whitehurst President and CEO, Virginia Bankers Association

THE ECONOMY When asked about the economic outlook for the next 12 months, 52 percent were optimistic or somewhat optimistic (4 percent were highly optimistic) and 28 percent were neutral. Considering how challenging the economy of the last few years has been, to have over 80 percent of respondents in the neutral to positive range suggests some reason for optimism on the economy. In terms of the most concerning economic issues, responses were mixed, with a weak housing market and low interest rates both leading at 14 percent apiece. OPPORTUNITIES AND THREATS In a clear shift away from mortgage lending as a top opportunity that reflects the sharp drop in mortgage activity compared to last year, bankers identified their top opportunities as commercial lending (25 percent of responses), wealth management (12 percent) and retail banking and mortgage lending at 11 percent each. The greatest threats identified were regulatory burden at 19 percent and net interest margin compression at 15 percent. When asked what level of threat mobile payments companies represent to banks, 44 percent of bankers identified this threat as high or extremely high; 28 percent assessed it as a medium level threat. With 72 percent of respondents concerned about competition from mobile payments providers, there is clear uncertainty over how mobile payments technology will evolve and how exactly it will impact banking.

Email Bruce Whitehurst at bwhitehurst@vabankers.org with any comments on this article. www.vabankers.org July/August 2014 | Virginia Banking 5

Worth

Noting NATIONAL BANK ELECTS F. BRAD DENARDO AS PRESIDENT & CEO CONGRATULATIONS TO THE VIRGINIA GRADUATES OF GRADUATE SCHOOL OF BANKING AT LSU On June 6, 2014, 187 bankers from 21 states and Mexico received graduation diplomas from the president of the Graduate School of Banking at Louisiana State University, John Jordan, president, The Community Bank of East Tennessee, Clinton, TN. Receiving diplomas from Virginia were: Greg L. Anderson James N. Estep Jeffrey Davidson James Shawn D. Stone BB&T Cardinal Bank Chesapeake Bank First National Bank Danville McLean Williamsburg Altavista

James G. Rakes, chairman of the National Bank board of directors, announced the election of F. Brad Denardo as National Bank’s president and chief executive officer. Denardo has been a senior officer at National Bank for over 30 years. He joined the bank in 1983 as vice president of loans and was promoted to executive vice president of loans in 1989. In 2002 he was named Executive Vice President and Chief Operating Officer and was elected to National Bank’s board of directors. He currently oversees the bank’s lending, consumer banking and business development efforts. Denardo is chairman of the New River Community College board, a board member of the Blacksburg Partnership and a board member of the MBC Development Corporation. He is a member of the Church Council at Blacksburg United Methodist Church, where he also serves as chair of the Finance Committee and assistant church treasurer. A native of Bluefield, Virginia, Denardo is a graduate in finance from Virginia Tech, the Virginia Bankers Association School of Bank Management and the Graduate School of Banking at LSU.

Megan Channon Poppe Old Point National Bank Hampton

Sponsored by 15 southern state bankers associations, in cooperation with the Division of Continuing Education at LSU, the banking school requires attendance on campus for three years, with extensive bank study assignments between sessions. The faculty consists of bankers, business and professional leaders, and educators from all parts of the U.S. During their three years at the Graduate School of Banking, students receive 180 hours of classroom instruction, 30 hours of reviews, planned evening study, and written final examinations at the end of each session.

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Legislative

Direct Talk with Regulators

Update E

Matt Bruning Vice President, Government Relations, Virginia Bankers Association

arlier this spring, VBA Chairman Gary Shook led a contingent of nearly 30 Virginia bankers in meetings with the four federal prudential banking regulators in Washington. While we often include representatives of those agencies in events throughout the year, including our annual Government Relations Summit in the nation’s capitol, a few years had passed since organized visits to discuss specific policy and regulatory issues had occurred. As with all our advocacy efforts, there is no substitute for sitting across the table from key decision makers who impact our industry and voicing our concerns and positions. The VBA, often in conjunction with the ABA, routinely makes our case to regulators on important matters. Whether it is through comment letters on specific regulatory proposals or recurring conversations with state and federal agency leaders, we take the feedback we receive from our members on the regulatory climate and impact on your businesses and use our collective voice of the industry to push for necessary changes and appropriate relief. Recently, we have achieved progress on issues ranging from the Basel III capital standards and the final version of the Ability-toRepay/Qualified Mortgage rules. In those and other instances, the VBA and overall industry’s voice was heard and initial plans were revised in response. Communication is a two-way street and, while the frustration expressed by many bankers that regulators do not seem to be listening is warranted, we as a unified industry must remain vigilant in elevating our voice for a return to commonsense regulation. During our visits in Washington, FDIC Board member Jeremiah Norton recognized the importance of direct industry input, noting, “If we don’t hear from you, we don’t know how our actions will impact the banking system; I implore you to communicate.” We hear regularly from bankers who have good working relationships with their prudential regulators because they are proactive in keeping the lines of communication open. Unfortunately, we also are well aware that positive and productive dialogue can break down further up the chain to Washington or Atlanta. That is why efforts like our visits with the leaders there is essential.

After a briefing from several of the ABA’s regulatory experts, our delegation of bankers were able to articulate many of the fundamental concerns and challenges the current regulatory environment are exacerbating. Reoccurring themes and topics brought up by bankers in our meetings included the impact of the ATR/QM rule, FASB’s ALLL methodology, mortgage servicing rights and cybersecurity among many others. The group heard from outgoing Federal Reserve Board Governor Jeremey Stein, who laid out his view on macroeconomic conditions and monetary policy. OCC Chief of Staff Paul Nash and members of his team were responsive, albeit not always in agreement with our positions, and provided greater insight into interagency coordination or lack thereof. FDIC Director Norton and other agency leaders covered a range of topics, including hot button issues on vendor management, interest rate risk and BSA/AML. Our final visit marked our first trip with bankers to the CFPB, where the selfappointed “cops on the beat” steadfastly – some would say stubbornly – defended their actions. Still, we were able to share our views on the host of mortgage regulations’ impact on credit availability, the bureau’s skewed “deep dive” on overdraft fees and their nebulous guidance on indirect auto lending. In a perfect world, our astute observations and persuasive arguments would have changed the regulators’ hearts and minds and our views will prevail. The reality is that, not dissimilar to our relations in Congress, we undertake these efforts with the understanding that no eureka moment is likely, but hopefully our salient points receive the strong consideration they deserve. A banker at the GR Summit in March used the phrase “gentle pressure applied relentlessly” to describe a long-term approach to policy change. While there are times for the pressure to be gentle, firm and direct is also necessary given the high stakes of the regulatory burden facing our industry. But the relentless application is critical to ensure progress. We hope you will join us in future regulatory visits and other opportunities to be relentless in our advocacy.

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

8 Virginia Banking | July/August 2014 www.vabankers.org

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Legal

New Virginia Laws Affecting Banking tain interstate branching requirements that applied only to out-of-state banks. The repealed provisions were previously preempted by federal law and were no longer effective. Deeds and deeds of trust. Several changes were made to provisions governing deeds, deeds of trust and recording of instruments relating to real property. Cover sheets are allowed (but not required) on instruments presented for recordation in jurisdictions that do not mandate the use of cover sheets. The form and content of cover sheets, deeds and deeds of trust were revised. Deed of trust trustees without an office in Virginia are permitted, and limited liability companies, partnerships, and other entities may serve as trustees. The term “beneficiary” replaced the term “noteholder” in several places to encompass other types of secured parties. Correcting errors in deeds and deeds of trust. A non-judicial process was created to correct obvious description errors in a recorded deed or deed of trust by recording a corrective affidavit. Obvious description errors include errors transcribing courses and distances, errors incorporating a recorded plat or deed reference, errors in listing a lot designation and omitted exhibits supplying the legal property description. Before a corrective affidavit may be recorded, all parties to the deed or deed of trust must be notified and given 30 days to object. Manufactured homes. The process for converting a manufactured home from personal property to real property and vice versa was clarified. Converting from personal property to real property requires affixing the home to real property, canceling its certificate of title (which cannot be done if it is subject to a security interest) and recording an affidavit in the land records. Upon completion of this process, the manufactured home is real estate and will be conveyed and encumbered as real estate. To convert from real property to personal property there must be no security interests in the manufactured home, the home must be physically severed from real property and a new certificate of title must be issued. Once a new certificate of title

Line

Mel Tull General Counsel, Virginia Bankers Association

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host of new and amended Virginia statutes take effect July 1, 2014. Here are a few that will be of interest to bankers. Bank director stock. Directors of Virginia banks may now hold the requisite amount of bank stock jointly with another person or in a brokerage account, living trust or retirement account. This gives bank directors greater flexibility to manage their financial affairs, and enhances the ability of Virginia banks to recruit highly qualified directors. Bank reorganizations. The bank that results when a bank holding company reorganizes into its subsidiary bank is no longer required to meet the $2 million minimum capital requirement for the issuance of a new Virginia bank charter. All other minimum capital and surplus requirements remain. Banks that deregister their stock under the federal JOBS Act often no longer need a holding company. This state law change will make it easier for them to eliminate their holding companies. Interstate branching. Virginia’s interstate branching statutes were amended to repeal cer-

For more information about these and other new Virginia laws affecting banking, contact Mel Tull, VBA general counsel, at mtull@vabankers.org or (804) 819-4710.

10 Virginia Banking | July/August 2014 www.vabankers.org

is issued, the manufactured home is personal property and will be conveyed and encumbered as personal property. Flood insurance. Lenders are now prohibited from requiring flood insurance coverage in excess of the replacement value of improvements on real property securing their loans. This is consistent with FEMA requirements, insurance industry practice and state limits on fire and casualty insurance. Wills, trusts and fiduciaries. Various allowances, threshold amounts, and other dollar-based provisions in the statutes governing wills, trusts and fiduciaries were increased to account for inflation. Amendments were made to clarify that a trust director has the same liability for a breach of fiduciary duties, and may assert the same defenses to liability, as a trustee serving under the trust document. SCC disclosures. A new statute requires the Virginia State Corporation Commission (SCC) to make many of its records available for public inspection. Bank records collected by the SCC’s Bu-

reau of Financial Institutions in the bank examination and supervision process are exempt and will remain confidential in accordance with existing statutes. First-time homebuyer savings plans. Taxpayers may now designate ordinary savings and brokerage accounts as first-time homebuyer savings accounts in which interest and dividends are exempt from Virginia income taxes if account funds are used for a first-time home purchase. If funds are withdrawn for other purposes, previously exempt earnings are taxed and subject to a five percent penalty. Contributions to these accounts are not exempt from Virginia income taxes, and there is no exemption from federal taxes. Banks have no special administrative, recordkeeping, reporting, withholding or other obligations for these accounts. The taxpayer is responsible for recordkeeping, reporting and paying any taxes or penalties. Transitional MLO licenses. Virginia may now issue transitional mortgage loan originator (MLO) licenses that allow individuals to work as an MLO for

up to 120 days while they complete the education and testing requirements for a full MLO license. Transitional licenses are available to MLOs licensed in other states that move to Virginia and to unlicensed MLOs that transfer from a depositary institution. It is unclear whether Virginia transitional licenses will be issued to the latter group because federal law prohibits issuing transitional licenses to unlicensed MLOs that transfer from a depositary institution. Bad faith patent infringement claims. A new statute prohibits making bad faith patent infringement assertions, including baseless claims involving invalid patents or claims made without identifying the patent number or in a deceptive manner. The Virginia Attorney General may investigate bad faith patent claims, and courts may enjoin these claims and impose civil money penalties. This statute provides much needed protection to banks and other businesses recently targeted by bad faith patent infringement claims for using common technologies such as ATMs and the Internet.

Thank You, Gary Shook

www.vabankers.org

July/August 2014 | Virginia Banking 11

Washington

It’s a Wonderful Career

Update O

Frank Keating President and CEO, American Bankers Association

ne aspect of the holiday film classic “It’s a Wonderful Life” is how it examines the grim alternate reality of a town, Bedford Falls, and what befalls the people who live there without the presence of community banker George Bailey. It’s not pretty. Dreams become nightmares. Homes don’t get built, businesses fail or don’t even get started and the quality of life in the community is much diminished. The lesson in this is that George Bailey made a difference in people’s lives. If we pull the camera back and look at the banking industry today and its impact on our economy, we see 2 million people who, like George, work in banks, volunteer in their communities and make a difference. Banking, as I like to point out, is a noble profession. It’s also innovative, challenging and a platform from which young high school and college graduates can launch successful, fulfilling careers. Those careers can rise as far as people can dream through life-long learning programs offered by state bankers associations and ABA. Helping bankers develop their careers and enhance their profession is a long-established tradition. In 1900, for example, ABA established the forerunner of the American Institute of Banking. Its purpose: “To unite, fraternally and socially, through local chapters or otherwise, all those engaged in different localities in the banking business … who desire

to improve themselves by devoting a portion of their time to the study of the matters connected with the banking business.” Banks like yours also have built a tradition of banker learning, professional development and career growth. You offer on-the-job training and encourage your employees to further their educations through a variety of courses, seminars, and training programs. Many of you also set up tuition assistance and reimbursement programs for job-related coursework to help employees increase their capabilities for current and future positions. Banks and their trade associations do this because we recognize the importance of hiring and inspiring the next generation of bankers. We want to groom more George Baileys whose service and expertise will help startups get off the ground, established businesses grow and families buy their first homes. We want employees who – as ABA will celebrate this year with its first George Bailey Distinguished Service Award – give freely of their time, energy and resources for volunteerism, community service and charity. This next generation of George Baileys – today’s high school and college graduates looking to make a start in banking – will be the ones to bring productive change to your institutions. They will be the key to serving customers and growing communities across the nation. And through careers in banking, they too can find a wonderful life.

Email Frank Keating at keating@aba.com with any comments on this article.

Join us September 24, 2014 at the VBA Training Center for Preparing for Teach Children to Save Day and Get Smart about Credit Day Register online at www.vabankers.org or email mreilly@vabankers.org.

12 Virginia Banking | July/August 2014 www.vabankers.org

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A Different

The Case for Prepaid Cards Kari Mitchum Senior Director of Payment Solutions, ABA Prepaid – the presumed target market for prepaid cards. According to an FDIC survey, 28 percent of all U.S. households are considered unbanked or underbanked. Of those, 91 percent speak English at home and are between the ages of 30 and 40. The vast majority – 87 percent – own a cell or smartphone. That profile would fit many current bank customers. But prepaid’s allure doesn’t start or end with the underbanked. In fact, according to MasterCard, 80 percent of prepaid card users already have a banking account. Prepaid cards, however, offer customers some advantages that a regular deposit account does not. A data breach affecting a prepaid card, for example, would not have the same hassle-inducing domino effect as one affecting a card tied to a primary checking account. And for consumers who are wary of shopping online or who are unconvinced of a merchant’s trustworthiness, prepaid fees are a small price to pay for the feeling of security. For other consumers – especially those who don’t have the minimum balance or direct deposits required to qualify for free checking – the average $5 monthly fee for a prepaid card compares very favorably to traditional checking account fees. In fact, this pricing advantage is positioning prepaid cards as an attractive checking account alternative for many consumers, as evidenced by a The Pew Charitable Trusts survey that found prepaid cards are often a better deal than basic checking accounts. That may help explain why prepaid cards are the fastest growing form of payment. Though the volume of prepaid card transactions (9.2 billion in 2012) is half that of paper check transactions (18.3 billion), according to the Federal Reserve, prepaid cards are growing at a rate of 15.8 percent while check transactions are declining. The growth has no doubt been aided by banks entering the marketplace. According to the Pew study, none of the top prepaid issuers in 2012 were banks but by 2013, three of the top 10 issuers were. Banks that are considering offering prepaid

View

A

fter extensive consumer and industry research, analysis of public feedback through qualitative usability testing and its Know Before You Owe public initiative, and public outreach for more than a year, the CFPB issued the final rule on simplified and improved mortgage disclosures. Prepaid cards are often thought of as a product for a relatively small population of “underbanked” or unbanked individuals who can’t qualify for checking accounts. But the universe of potential prepaid card customers is actually quite large and diverse, and banks that underestimate their market opportunities are leaving good business on the table. Let’s start with the underbanked population

Kari Mitchum is the senior director of payment solutions at ABA Prepaid, a VBA/MSI endorsed product. She can be reached at kmitchum@aba.com or 202-663-5573.

14 Virginia Banking | July/August 2014 www.vabankers.org

cards should take care to use accessible language when describing the product – and its value – to consumers. Just as customers do not walk into a branch asking to open a DDA, they are unlikely to seek out a “general purpose reloadable” card. Similarly, the term “prepaid” is not used in most of the major prepaid offerings. Browse the websites for BlueBird by American Express and Walmart and Liquid by Chase. Nowhere do these consumer facing websites use the word “prepaid.” These products are positioned as alternative checking and debit accounts. This makes perfect sense when you think about it. After all, banks don’t market checking accounts

as “pre-funded” or “reloadable.” Just as consumers are viewing prepaid cards as alternative checking accounts, so should bank employees – particularly those on the front line. Customer doesn’t qualify for a checking account? Offer them a prepaid card as an alternative. Not only will these customers benefit from a network-branded card that can be used world-wide, they also can set up auto-deposit, pay bills and do everything they would do with a traditional checking account – except overdraw. That makes a bank’s alternative checking account a very attractive and beneficial turn-down product. Prepaid is also a solution for households that wish to add transaction ac-

counts, perhaps for a college student, but lack liquidity to sufficiently fund them. In fact, banks might suggest that customers with multiple, unprofitable checking accounts replace them with more budget-friendly prepaid cards. The variety of advantages offered by prepaid cards is becoming more apparent as the market evolves and usage increases. Banks would be wise to seize the opportunity to provide these alternative checking accounts before customers are lured away by nonbank competitors. Priced correctly, prepaid cards can be a safe and affordable solution for your customers and a solid revenue source for your bank.

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6/27/14 9:22 AM July/August 2014 | Virginia Banking 15

New VBA Chairman Johnny Milleson stands in front of The Bank of Clarke County plaque that has been on the building since Bank of Clarke County moved to the corner of Church and Main Street in 1906.

Johnny Milleson (with his wife Bette) was installed as the 2014-2015 chairman during the VBA Annual Convention.

VBA Welcomes Johnny Milleson, 2014-2015 VBA Chairman John R. Milleson, president and CEO, Bank of Clarke County, was elected chairman of the Virginia Bankers Association (VBA) on June 17, 2014. He graduated from Bridgewater College with a degree in economics and continued his education at Shenandoah University, where he received his master’s in business. He began his career at Bank of Clarke County in 1984. Johnny will serve a one-year term succeeding Gary R. Shook, president and CEO of Middleburg Bank. We invite you to get to know your new chairman.

A younger Johnny shows his love for Elvis, along with “God, Mom, and Eagle Checking.”

This Elvis painting hangs in the boardroom bathroom at The Bank of Clarke County.

HOW DID YOU BECOME A BANKER? I worked for two years for the accounting firm of Barbour, Drunagle and Renner (which later merged into Yount, Hyde & Barbour). We did mainly bank audits up and down the Shenandoah Valley. During tax season, we worked 75 hours a week doing tax returns and bank audits. I then went to work as the internal auditor for the old Shenandoah Valley National Bank in Winchester for three years. Audit is a great place to learn all aspects of the bank. SVNB later merged into First American Bank of Virginia, where I did commercial loans. I left First American in 1984 and went to work for the Bank of Clarke County as a loan officer. The Bank of Clarke County at that time did not have a single computer in the building. My first year there we converted the entire bank to computers. Those were some long hours. I did loans for two years and then went into operations (jack of all trades, master of none). WHAT MAKES YOU EXCITED TO COME TO WORK EACH DAY? I’m excited to come to work to see my friends and coworkers, many of whom I have worked with for several decades. In the old days, I interacted with customers on an hourly basis; now I try to get to the lobby or out on the road to see customers as much as I can. HOW LONG HAVE YOU BEEN INVOLVED WITH THE VBA, AND WHAT IMPACT HAS THIS INVOLVEMENT HAD ON YOUR BANK AND ON YOUR CAREER AS A BANKER? I have been involved with the VBA since 1980. My first meeting was in Harrisonburg at a Young Banker Section meeting, where I met John Bowers, Monte Layman and Hunter Hollar. We had a blast and I was set. My involvement with the VBA has opened up an extremely wide network of resources to help our bank. WHAT ARE YOUR GOALS FOR THE VIRGINIA BANKERS ASSOCIATION AND BANKING INDUSTRY IN 2014-2015? I’d like to help advocate for the banking industry to prevent the regulations that are designed for big banks from negatively impacting the smaller community banks. Another goal is to successfully launch the VBA affiliation with the West Virginia Bankers Association through a new holding company. WHAT ARE SOME OF THE MOST SIGNIFICANT CHANGES IN THE BANKING INDUSTRY YOU HAVE WITNESSED SINCE YOU EMBARKED ON YOUR CAREER? Technology is the biggest change. As I mentioned earlier, we did not have computers when I started at the Bank of Clarke County – we sorted checks by the signature of the customer. We didn’t even have account numbers! Counter checks would be left at all the merchants in Berryville and folks would just pick up a check, fill in the amount, sign and give it to the merchant. The check would clear and we would sort it by their signature. Now, everyone seems to bank on their iPhone or online. What hasn’t changed: bankers complaining about Congress and regulation – in 2044, we’ll be complaining about Congress and regulation. WHAT IS ONE OF THE BIGGEST CHALLENGES FACING THE BANKING INDUSTRY TODAY, AND WHAT DO YOU THINK IS THE BEST APPROACH TO OVERCOME THIS CHALLENGE? The aging of the community banker is one of the biggest challenges facing our industry. To overcome this, we must recruit www.vabankers.org

younger professionals to begin careers at the bank, and to set them up for success by sending them to bank school, starting them in a management trainee program and, of course, putting them to work! WHAT IS THE BEST ADVICE YOU’VE RECEIVED DURING YOUR BANKING CAREER? The best advice I’ve received is to buy stock in your bank (even if it is just a few shares at a time). You have to have skin in the game. WHAT ADVICE WOULD YOU GIVE THE VERSION OF YOURSELF JUST STARTING OUT IN YOUR CAREER? My college tennis coach once told the team, “I want you all to do several things: you need to exercise and stay in shape the rest of your lives, because one day you are going to have jobs in stressful areas, and exercise will relieve some of the stress. College is just the very beginning of learning; when you get out in the real world, that’s where you need to dig in and learn all you can about your industry. Read everything you can get your hands on. Talk to the older co-workers – they know the ropes. Be a nice person, but be fiercely competitive.” WHO HAS BEEN YOUR MOST VALUABLE MENTOR AND WHY? My father, John F. Milleson Jr., has been my most valuable mentor. He was the first in the family to go off to college. He hitchhiked to Virginia Tech with his buddy, Bucky Wisecarver (my godfather), and they were members of the Corps of Cadets and both graduated in 1949. My father worked almost his entire life in Berryville and had a great love for the community. He was deeply involved in the Bank of Clarke County as a director and Clarke County Public Schools as chair of the school board. My sister, Susan Catlett, is the principal of the elementary school in Clarke County, and we are both devoted to the community due to our father’s love of Clarke County. He had great common sense, loyalty to the community and excellent people skills. HOW DO YOU ENCOURAGE AND DEVELOP PROMISING LEADERS AT YOUR BANK? We encourage potential leaders by giving them more work, more responsibility, and we send them to schools and training programs. At Bank of Clarke County we have four bankers involved in the Leadership Division program at the VBA. I had been involved in Young Bankers (the original name for the VBA Leadership Division) and I still talk to some of the people I met in it to this day. It’s a great place to learn. WHAT IS THE GREATEST BENEFIT YOU SEE FROM MEMBERSHIP IN THE VIRGINIA BANKERS ASSOCIATION? Networking, getting ideas from peers, and financial association with VBA Benefits Corporation, Bankers Title, and Bankers Insurance. WHAT IS YOUR STRONGEST CHARACTER TRAIT? Again, I mention my college tennis coach, Coach Carlyle Whitelow, who said: “Nice guy, but extremely competitive.” TELL US SOMETHING ABOUT YOURSELF THAT WOULD SURPRISE YOUR FELLOW BANKERS. I’m a huge Elvis fan. See my picture included with this article! July/August 2014 | Virginia Banking 17

Bank Day

Congratulations to the Statewide Winner of the VBA Bank Day Scholarship Program

Scholarships

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fter spending a day with a local bank as a part of Bank Day, 230 students were given the opportunity to write essays based on their experience. The essays are judged by a panel of VBA Leadership Division members from across the commonwealth. Six regional college scholarships ($2,000) and one statewide scholarship ($4,000) were awarded to the winning students. The Virginia Bankers Association, together with the VBA Education Foundation and the VBA Leadership Division, congratulate Haley Nininger, who shadowed at Union First Market Bank, for winning the statewide

VBA Bank Day scholarship award. As the statewide winner, Haley will receive an additional $4,000 scholarship as she heads to James Madison University this fall. Billy Beale, CEO of Union First Market Bank, surprised Haley Nininger at her Awards Night at Hanover High School with the news that she won the statewide scholarship (see next page). Congratulations to Haley, as well as to the five other winners of Bank Day scholarships! The VBA Bank Day Scholarship Program will take place again next year on March 17. Please contact Chandler Dewey at cdewey@vabankers.org to learn how to get involved.

18 Virginia Banking | July/August 2014

www.vabankers.org

Getting to Know Our Regional Scholarship Winners MADISON FLICK School: Graham High School Bank Shadow: New Peoples Bank College Attending in the Fall: West Virginia University Favorite Thing About Bank Day: I enjoyed working on job interview skills. One Thing You Learned on Bank Day That You Didn’t Know Before: Banks are willing to work with loan clients to help them catch up on payments. One Fun Fact About Yourself: I like baking and crafting! CLAIRE CHADWICK School: Stone Bridge High School Bank Shadow: Middleburg Bank College Attending in the Fall: Christopher Newport University Favorite Thing About Bank Day: I loved seeing the interaction with customers. The moment they walked in the tellers greeted them using their first names! One Thing You Learned on Bank Day That You Didn’t Know Before: Before Bank Day, I never knew how much community banks actually invest in the people around them. For example, I learned about the various charities Middleburg Bank donates to. It was amazing to see how they help organizations like animal shelters, Loudoun Interfaith Relief, food pantries, the local Salvation Army, and causes that clients recommend. One Fun Fact About Yourself: I am committed to play NCAA lacrosse at CNU. JESSICA CHANDRASEKHAR School: York High School Bank Shadow: Old Point National Bank College Attending in the Fall: University of Virginia Favorite Thing About Bank Day: My favorite thing about Bank Day was witnessing the interactions taking place between clients and employees, which helped to make me realize the approachability of bankers. One Thing You Learned on Bank Day That You Didn’t Know Before: I had no idea how integrated banks were within the community. They act not only as volunteers for local organizations, but also as leaders within and proponents for the community and its residents. Until Bank Day, I held the invalid assumption that the only roles that banks perform relate to money and its distribution. One Fun Fact About Yourself: I ran the Rock and Roll Half Marathon in Virginia Beach when I was 13 and placed second in my division.

MADDIE WHITE School: Broadway High School Bank Shadow: Farmers and Merchants Bank College Attending in the Fall: Radford University Favorite Thing About Bank Day: I enjoyed hearing perspectives from employees that work in different positions at the bank. One Thing You Learned on Bank Day That You Didn’t Know Before: The bank helps the community more than I ever could have imagined. One Fun Fact About Yourself: I want to work for a professional sports team one day. HALEY NININGER School: Hanover High School Bank Shadow: Union First Market Bank College Attending in the Fall: James Madison University Favorite Thing About Bank Day: My favorite thing about Bank Day was learning how each person I shadowed has contributed to my community in their own unique way. One Thing You Learned on Bank Day That You Didn’t Know Before: On Bank Day, I learned that banks play a significant role in real estate. Through loans and account managing, banks are able to help businesses and people construct the ideal establishment. One Fun Fact About Yourself: My favorite pastime is photography and I hope to incorporate it into my college experience. MITCHELL ALEXANDER School: Northside High School Bank Shadow: Bank of Botetourt College Attending in the Fall: Roanoke College One Thing You Learned on Bank Day That You Didn’t Know Before: The Community Reinvestment Act is central to a bank's order of operations; as a result, banks are not allowed to discriminate based on income and other factors. One Fun Fact About Yourself: I spend my summers working at a Boy Scout camp in Southwestern Virginia. www.vabankers.org July/August 2014 | Virginia Banking 19

VBA

VBA Celebrates 121st Annual Convention in Kiawah

Events

M Dan Blanton and Gov. Frank Keating discussed Banking Industry Views from Augusta and Washington.

The Shelling Excursion group poses for a picture before heading back to the Sanctuary.

Gary Shook, as the 2013-2014 chairman, presided over the Business Sessions.

20 Virginia Banking | July/August 2014

ore than 450 bankers, associates, and guests gathered in Kiawah, SC, to celebrate the 121st VBA Annual Convention on June 15-18. The Sanctuary provided a beautiful backdrop for attendees and their families to enjoy time meeting with fellow bankers, hearing from a diverse array of speakers, and participating in unique outdoor activities. The Convention kicked off with a Welcome Reception on the beautiful Grand Lawn, followed by the annual BankPAC Silent Auction and Dinner, which raised $23,000 for our BankPAC campaign. Thank you to the contributors and sponsors who made the Silent Auction a recordbreaking success! Monday’s activities started bright and early, with a Power Breakfast hosted by Vining Sparks, followed by the first business session in which attendees heard from S.R. Snodgrass, A.C. President Jack Salvetti on “The Dynamic Link between Strategy and Risk Management” and Jim Jones, president and CEO of First Wellesley Consulting Group, Inc., who led an instant polling session to garner opinions from attendees on the economy, regulation, competition, technology and the future (see Bruce Whitehurst’s column on page 5 for a summary of the results). The session ended with Dan Blanton, American Bankers Association vice chairman and president and CEO of Southeastern Bank Financial Corporation and Georgia Bank & Trust, and Gov. Frank Keating, ABA president and CEO, who discussed current banking issues, industry advocacy and their experiences with both. Family members of the bankers participated in an array of activities during the morning session, including a boot camp taught by Genise Whitehurst, and the Mingo Point Spouse Program, which included a shrimping and cooking demonstration. During the afternoon, many attendees gathered for the annual golf tournament. On Tuesday morning, attendees packed the room for a second Power Breakfast, this time hosted by Sander O’Neill + Partners. During the business session, Jan Neuharth, director at Middleburg Bank presented the audience with “Telling the Story: Media Perspectives from an Industry Insider,” based on her experience as a best-selling author and daughter of USA Today founder Al Neuharth. One of the highlights of the Tuesday morning session was the installation of Johnny Milleson, president and CEO of Bank of Clarke County, as the new VBA chairman. The VBA also www.vabankers.org

Gary Shook (right) congratulates Gaylon Layfield and his wife Melissa on Gaylon’s installation as chairman-elect of the VBA.

From left, Bill Groves, FinSecure, LLC, Roger Gillispie, Virginia Bank & Trust Co., Howard Pisons, Community Bankers’ Bank, and Tom Sullivan, Community Bankers’ Bank, pose for a picture during the golf tournament.

The beautiful Grand Lawn provided the perfect gathering place for the group. Carole Ferrell, wife of The Fauquier Bank's Randy Ferrell, snapped this close-up shot of an alligator during the Shelling Excursion.

installed T. Gaylon Layfield, president and CEO of Xenith Bank as the chairman-elect. The business sessions adjourned with Director of the University of Virginia Center for Politics Dr. Larry Sabato’s Crystal Ball presentation, which provided an overview of upcoming elections and the current political landscape. During the afternoon, attendees participated in the shelling excursion, historic Charleston tour, or marsh kayaking before attending the closing reception on the Grand Lawn. Thank you to everyone who attended our 121st Annual Convention! The VBA looks forward to hosting this event every year, and we hope to see you next year on June 21-24, 2015, at the joint VBA/WVBA Convention at the Homestead Resort in Hot Springs, Virginia! www.vabankers.org

Bruce Whitehurst gave an excellent presentation during his President’s Report.

July/August 2014 | Virginia Banking 21

Compliance

The Difference between Auditing and Monitoring Darlia Fogarty Director of Compliance, Compliance Alliance

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t seems that every time the regulators come for a visit, bank employees repeatedly hear the words, “auditing” and “monitoring.” More and more, regulators are recommending that banks have a formalized monitoring process, as well as risk-based audits. While we all agree on the importance of having these processes in place, it is often difficult to distinguish specifically what the regulators are asking the bank to do. In order to understand the difference, let’s review the distinguishing characteristics in monitoring and auditing. Auditing and monitoring are similar in principle, but there are important differences between the two. The auditing process includes assessments performed on a scheduled basis to provide assurance to senior management and the board that the bank is complying with rules and regulations, as well as staying within the risk parameters set for the bank. Monitoring is the ongoing testing of transactions and processes to ensure specific areas are operating within the regulatory and board requirements. Why does the bank need to practice both auditing and monitoring? In a continually evolving regulatory environment with increasing market pressure to improve operations and rapidly changing business conditions, regularly performed audits are not enough. Banks must have an on-going monitoring process in place to identify any potential weaknesses before they become problems. Let’s take a closer look at each function. Auditing consists of two main components: risk assessment and control assessment. Risk assessments identify and evaluate risk levels by examining trends and comparisons within a single process or system. For example, product performance could be compared to previous-year results, and could also be assessed within the context of the controls and systems put into place in conjunction with the product. Management is responsible for developing and maintaining a system that identifies and mitigates risk.

Auditors are responsible for evaluating the state of risk and control systems and providing this information to the audit committee and senior management. Auditors can use risk assessments to identify and evaluate risk levels at a certain point in time. This allows auditors to assess management's risk mitigation activities and support the development of objectives for individual audits and the annual audit plan. Risk assessments can include the evaluation of detailed transactions against a cut-off point and a comparative analysis on a summary of the transactions. In the case of legislation such as the U.S. Sarbanes-Oxley Act of 2002, auditors also evaluate management's assessments of their internal controls. Ideally, internal or external auditors are not part of the controls monitoring process and do not design or maintain the controls, which allow them to retain their independence. The auditing of the systems and the controls refers to audit activities, which identify whether selected controls are working properly. Traditionally, control testing is performed on a retrospective and cyclical basis after business activities occur. The testing procedures are often based on a sampling approach and include activities such as reviews of policies, procedures, approvals and reconciliations. The audit provides for an independent assessment of departmental policies and procedures, as well as a review of compliance with rules and regulations. Like the monitoring program, the audit should be risk-based. Determining where to focus audit resources should be based on an initial risk assessment that considers various information, including (but not limited to) examination findings, changes to the regulatory landscape, errors or violations, problems in the past, employee turnover in the compliance department or line of business and results of the quality control reviews. The results of the risk assessment determine the scope of the coverage and testing of the audit. The audit results should be provided in formal, detailed reports that outline findings and manage-

Darlia Fogarty, director of compliance, Compliance Alliance, may be reached at darlia@ compliancealliance.com or (888) 353-3933.

22 Virginia Banking | July/August 2014 www.vabankers.org

ment’s action plan to resolve each finding. Auditing should be conducted on a less frequent basis than the monitoring program; timing of the audits can be on a rotational basis and supported by the results of the risk assessment process. It should be noted that the audit scope can and should cover all of the elements of each department’s offerings, and not be limited to detailed testing of compliance with regulations. The resulting audit reports should be presented directly to the audit committee or the board, and all findings should be tracked for resolution. On the other hand, monitoring is an internal process used to ensure that policies, procedures and processes are operating effectively. Monitoring typically addresses management's responsibility to assess the adequacy and effectiveness of internal controls. Monitoring may occur on a

daily, weekly or monthly basis based on the risk present in the specific area being monitored. Monitoring processes should address and report on an on-going basis, much like a quality control area in other industries. Areas to ensure your bank covers in the monitoring processes are: • Levels of compliance by performing detailed testing of controls; and • Support audit independence by ensuring that auditors have sufficient access to, and understanding of, key business information systems. Monitoring activities will help determine whether controls are effective and information produced for decision-making is relevant and reliable. The significant benefit of monitoring is that instances of error and fraud are reduced significantly, operational efficiency is increased, and

bottom-line results are often improved from the early detection of issues. The end goal of a monitoring process/ program is to monitor how well departmental policies and procedures are being executed. Ultimately, the function should be risk-based, focusing the most resources on the areas of greatest risk. An effective monitoring program has an employee, not involved in the originating activity, review an ongoing risk-based sample of the work performed in an applicable area. Completed monitoring reviews should be aggregated and reported to the audit committee or board of directors for review. Remember: your monitoring program is your bank’s quality control process. The audit is the bank’s assessment of the effectiveness of the bank’s policies, procedures and processes.

Insights: Banking Outlook from Kiawah: Mix of Sun and Clouds Continued from page 5 responding to retail branch trends: • Changing branch and staffing mix: 21 percent • Adding advanced branch technology: 19 percent • Redesigning for more sales: 16 percent MERGERS AND ACQUISITIONS We all know that banking industry consolidation continues to be a key trend and have seen several merger announcements in Virginia over the past few months. When asked about their banks’ M&A strategies, bankers at the annual convention said their bank would: • Consider M&A opportunities as they arise: 30 percent • Remain independent and grow organically: 28 percent • Actively pursue acquisitions of smaller banks: 24 percent These responses suggest we will see continued consolidation, leaving the open question of when or whether we will see new banks chartered, as has happened so frequently over the past few decades www.vabankers.org

amidst a consolidating industry. CAN WE HANDLE ALL THE CHANGES? Perhaps the question that most shows the uncertainty about our industry was this one: Banking industry changes over the next five years will be … 54 percent said the changes will be more than some banks can handle and 26 percent said they will be more than many banks can handle. This may seem like a harsh assessment, but it is really not a surprising one, given the changes we are experiencing in society, technology, regulation, competition and economic uncertainty. That said, my conclusion is that banks will handle all these changes much better than expected; after all, they have handled any number of sweeping legislative, regulatory and economic challenges over the past 80 years, much less the past six. BRUCE’S BOTTOM LINE Having been at this very interesting session at our convention and having studied the responses in preparation for this column, here are the key trends that stand

out and that are consistent with top current banking industry discussions: 1. We are in a time of major change in our industry. 2. We are effectively reinventing the business model of banking, especially in retail banking and with delivery channels. 3. There is an expectation that some banks will change and evolve more successfully than others. 4. Regulatory burden and its related cost burden on banks remains a significant headwind and one that demands a vigilant, ongoing advocacy effort. 5. More industry consolidation is expected and it’s no wonder, given the four trends noted above. The weather in Kiawah was beautiful and the annual convention was a great event. Looking ahead, there are many opportunities for banks as well as many challenges: a mix of sun and clouds. Count on the VBA to be there for you with sunscreen and umbrellas.

July/August 2014 | Virginia Banking 23

Sharing and

Telling Your Story, Part II As a follow-up to my recent Insights column entitled “Telling Your Story” (Jan-Feb 2014 issue), below you will read an outstanding speech that Courtney Fleming, the VBA’s vice president of education/training & communications, gave to a recent gathering of the Northern Neck/Southside Bankers group in Tappahannock, Virginia. As you will read, Courtney decided to put herself out there in order to encourage bankers to do the same on behalf of our great industry. I know that reading Courtney’s remarks will inspire you as much as it did the bankers who were in attendance that evening and me. Happy reading! — Bruce Whitehurst

Overcoming T

Courtney Fleming Vice President, Education & Training/ Communications, Virginia Bankers Association

hanks to all of you for having me here this evening. How many of you have ever been in a meeting where someone asks for volunteers, or asks a difficult question, and you avoid making eye contact with that person at all costs – because everyone knows that avoiding eye contact immediately makes you invisible, right? I want to come clean with you. That is the reason I am standing here tonight. It all started when Meredith Smith contacted Bruce Whitehurst, my boss and the president and CEO of the Virginia Bankers Association, to ask about his availability to speak to you all tonight. Because Bruce already had a prior commitment, he asked several of us during a meeting in our board room if we might be available instead. First, I immediately looked away and avoided eye contact. “I am invisible,” I thought. As the others chimed in with legitimate business excuses for why they could not be here tonight, I began to feel all eyes turn to me. I knew this was a great opportunity – and one I should accept – but instead I told them I didn’t want to do it. But then I could not stop thinking about it, and my nagging thoughts led me to Bruce’s office the very next day to tell him I would do this. The thing is, it’s not that I didn’t want to be here tonight with all of you. In fact, my most favorite part of my job at the VBA is interacting with bankers and getting to know all of you. The problem is the speaking part. In fact, I have been working with Karen Conrad, who I think many of you know, for the last several months on improving my public speaking skills in an effort to make this type of an event a more comfortable one for me – and let’s be honest, for all of you. Tonight, I am putting myself out there. And my message to you is for you to do the same. To tell your banking story. My banking story began in 2007 when I was hired as the VBA’s first ever director of commu-

nications. I accepted the job knowing I had a lot to learn about this great industry, but I was ready to carry out the mission of the VBA, which is to enhance Virginia banking for the benefit of banks, your customers and your communities. I spent my first year tackling three things: member communications, streamlining our branding, and revamping our website. I was also involved with helping out at VBA Education & Training events, which ultimately led to the position I have today. In September 2008, I attended the VBA Community Bank Management Conference. The event started with cocktails on Sunday night and the word began to spread that Lehman Brothers had filed for bankruptcy. I began to see our attendees huddle together, deep in conversation about the impact of this news on our industry. We received word from several of the bankers that they needed to leave the conference immediately to return to their respective banks to deal with the serious repercussions. I ended up spending the rest of the evening firing questions at Bruce about his take on this news, what it would mean for our members, and what we at the VBA could do to help. This was just the beginning of my understanding of the value the VBA provides in support of our member banks during difficult times. Several weeks later, many of us from the VBA, along with dozens of bankers, made our annual visit to the Hill and to the offices of the bank regulators. The number-one issue at hand: TARP, which I know many of you now consider a fourletter word. When TARP was approved, I remember coming back to the office and Bruce and I high-fived. We thought, “Phew, so glad that fight is over. Let’s get back to business.” Little did we know, this was just the beginning of one of the toughest periods for our economy Continued on page 26 www.vabankers.org

24 Virginia Banking | July/August 2014

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Telling Your Story Continued from page 24

and for the banking industry in recent history. The list of obstacles you have faced as a banker over the last six years is a long one: A struggling economy; a lack of qualified borrowers; Fannie Mae and Freddie Mac; Congress; Dodd-Frank; negative media attention; the interest rate environment; data security; overdraft protection; compliance; the regulatory environment; safety and soundness; transparency; the future of the branch; and who can forget credit unions; and I bet all of you could add more. If you think about this list and the myriad of issues I didn’t even mention, it really says something about all of you that you are still here. You are still doing what you have always done, even in the worst of times that anyone can remember. You as bankers are survivors – and you have one heck of a story to tell, and I want to inspire you to tell it, rather than become invisible when the tough questions are asked. What inspires you to do your job?

26 Virginia Banking | July/August 2014

Why are you a banker? Whose lives have you changed for the better through the services your bank and you as a banker provide? In this age of information overload and the 24-hour news cycle, stories are being told every day about this industry, our industry, and with the prominence of social media, these stories are going viral. But the loudest stories being told are not being told by bankers, and therefore often contain inaccuracies and misrepresentations. The Consumer Financial Protection Bureau, for example, has a link on their website where they ask consumers to tell their story. The web page says: “Tell us your story, good or bad, about your experience with consumer financial products. Your story will help inform how we work to protect consumers and create a fairer marketplace.” We can only hope that consumers are taking the time to tell positive stories in this forum, but it is more likely that the majority of the stories being told here are negative in nature. As community bankers, it is nearly im-

possible for you to take on the 24-hour news cycle, but what you can do is win over your customers’ hearts and minds. As bankers, I know you think in facts and figures, and you might believe that the solid financial standing of your bank speaks for itself, when in fact a Stanford research study showed that statistics alone have a retention rate of 5-10 percent, but when coupled with anecdotes, the retention rate rises to 65-70 percent. If you want to be remembered, it is imperative that you tell the story behind the numbers. How many of you are invited to speak about the industry at events for Rotary or the Lions Club? How many of you visit Richmond or Washington to speak with your elected representatives? How many of you are going back to school to speak with high school or college students about the economy? Those of you who have, have probably been asked questions like: Could what happened at Target happen to me at my bank? Are you telling me what I need to know as a bank customer and stockholder? Is my money safe in the bank? In other words, is my bank looking out for me? Calculate the hundreds of volunteer hours your bankers are donating to local organizations, or the thousands of dollars you are contributing in support of local causes – and talk about them. Talk about the number of families you have helped realize the dream of homeownership or about what you did to save one of your customers from a case of fraud. Mention how your bank helped create jobs by providing the financing for small businesses to open their doors. Who knows better than you that bankers are some of the most caring and compassionate citizens in your community, and why banking is integral to promoting growth in the towns in which you live? Tell that story. Change the tone of the conversation to: the positive impact your bank has on the community through charitable and human capital donations; the values Continued on page 28 www.vabankers.org

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> EVENTS Banking Conferences throughout the Mid-Atlantic and the Northeast

Telling Your Story Continued from page 26

system of your bank and the employees who work there; and the accountability you have to your customers to keep their money safe and their best interests in mind. You have the power to change the conversation, one customer, one media representative, one politician and one student at a time, and you are not in this alone. We at the VBA believe in Solutions Through Unified Effort. Since 2009, the Communications and Government Relations teams have been touring the commonwealth and visiting with editorial board members and business writers at prominent Virginia publications. We have responded to more than 200 media inquiries from more than 40 publications. We are educating the writers on the economy, the lending environment, on new regulations and their impact on the business of banking, on data security,

on safety and soundness and all the other issues you are facing on a daily basis. It is truly scary that we have discovered that the very people reporting on the industry have an extremely limited knowledge base on what it is that you all do every day and the obstacles in your way, but we are setting the record straight. Each year, we survey our member banks with questions about your community involvement so we can produce a brochure listing the total volunteer hours donated by Virginia bankers, the total dollar amount of small business loans issued, the total dollar amount of scholarship money given by Virginia banks, the total number of mortgage loans issued and much more. Just as you can change the tone of the conversations in your communities, we at the VBA are using this data to change the conversation with your elected officials and in the media. We have partnered with the American

Do Business With Someone Who Thinks Like You.

www.CBBonline.com • 804.239.0452 28 Virginia Banking | July/August 2014

Bankers Association to help you begin to draft your story. They have created a website called amplifybankers.com that is full of resources to help you tell the story of your bank and your community – and redirect the conversation about the banking industry at the grassroots level. On the site, you will find key messages, sample speeches and letters, media interview tips, guidelines for using social media – even step-by-step instructions for hosting a bank visit, a groundbreaking or a ribbon-cutting ceremony for a bankfinanced project. The site is worth a visit. At the VBA, we provide many opportunities for you to tell your story in Richmond, in your community and in Washington. I hope you will plan to join us in January 2015 for Banker Day in Richmond when we meet with state legislators, or in March for the VBA/ABA GR Summit, when we meet with federal legislators, or at any of the many other events we hold throughout the year. Since the Community Bank Management Conference in 2008, I have become extremely passionate about the banking industry and about my banking friends across the commonwealth. At work, I am always reading and studying the industry, and I find myself defending it and explaining my perspective on banking issues at the dinner table, at cocktail parties and at tailgates. What I didn’t realize until I was preparing for this event is that I am telling the banking story on a regular basis, to anyone who will listen. So I would like to invite you to begin to tell your story, too. I hope I have inspired you to think about who you are as a banker, why you are still in this industry, how you can better serve your customers and your communities every day. Put yourself out there, tell your banking story, and begin to change the conversation, one customer, one media representative, one politician and one student at a time. Thank you for allowing me to put myself out there tonight, and making me realize that if I am invisible, I miss out on my favorite part of my job – getting to know all of you. www.vabankers.org

Virginia Bankers Association

Thanks You!

Board Members

Chairmen

Committees Thank you to all of our board members, committee members, chairmen, and the hundreds of bankers that attend our education and training events, support our legislative initiatives, and participate in our many programs. We appreciate your service and dedication to the industry!

www.vabankers.org

July/August 2014 | Virginia Banking 29

Bankers on the

Move Stone Cifers Lovelace Sexton Hughes Hylton Louis Spencer Douglas Grimes Gray Brown Hunt Foster Thompson Quintana

McAbee

Watson

Burcham

Byrd

Bank of Lancaster John Powell, Senior Vice President and Commercial Banking Relationship Manager

Bank of McKenney Philip E. Cardwell, Chief Financial Officer

Carter Bank & Trust Kelly C. McAbee, Assistant Vice President & Managing Officer, Downtown South Boston office Anita Watson, Assistant Vice President & Managing Officer, South Main-Harrisonburg and Weyers Cave offices Christopher M. Stone, Assistant Vice President & Managing Officer, Floyd office Karen S. Cifers, Assistant Vice President & Managing Officer, Blairs office Patricia R. Lovelace, Assistant Vice President & Managing Officer, 58 East office Dodi F. Sexton, Assistant Cashier, East Galax office

Jaclyn A. Hughes, Assistant Cashier, Martinsville office Jewell W. Hylton, Assistant Cashier & Managing Officer, South Main office James E. Louis, Branch Manager,Wendover office Rachel S. Spencer, Branch Manager, Cave Spring office Deborah L. Burcham, Branch Manager, Franklin Road office Lanetta J. Byrd, Branch Manager, Oak Level office Jennifer L. Douglas, Branch Manager, Laurel Park office Carrie E. Grimes, Branch Manager,West Main office Phyllis K. Gray, Branch Manager, North Mason Street office Lisa S. Brown, Branch Manager, Horsepasture office

Chesapeake Financial Shares John H. Hunt II, Executive Vice President and Business Development Officer for Chesapeake Investment Group Rebecca A. Foster, Chief Financial Officer

Hampton Roads Bankshares, Inc. Amma Guerrier, Director of Cash Management Kenneth Donner, Senior Vice President and Director of Retail Administration

HomeTown Bank Alwyn Harper, Senior Vice President Michael Wright, Chief Technology Officer

National Bank J. Douglas Thompson, Senior Vice President of Commercial Loans

The Fauquier Bank Phil Quintana, Senior Executive for Commercial and Government Lending

2014 LEADERSHIP CONFERENCE: EXPERTISE

NETWORKING

KNOWLEDGE DEVELOPMENT

Save the Date • November 13-14, 2014 • Virginia Beach,VA Sheraton Virginia Beach Oceanfront Hotel 30 Virginia Banking | July/August 2014 www.vabankers.org

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