Virginia Banking Jan/Feb 2011

In ThIs Issue HEALTH AND WELLNESS | FLOOD INSURANCE | INTERCHANGE FEES

success building a digital dialogue with customers

your way to marketing

BankingirginiaV January/February 2011

Virginia Bankers association — serVing Virginia’s Financial community For more than 100 years

2 Virginia Banking | January/February 2011 www.vabankers.org

January/February 20112010-2011 OFFICERS AND DIRECTORS OF THEVIRGINIA 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 BankRandy K. Ferrell,

The Fauquier BankPete Jones,

Wachovia/Wells FargoMonte L. Layman,

The Page Valley BankGail Letts, SunTrust BankSamuel L. Neese,

Highlands Union BankSusan Ralston, Bank @LantecDavid P. Summers,

Virginia Heritage BankJeffrey M. Szyperski,

Chesapeake BankDaniel G. Waetjen, BB&TRichard T. Wheeler, Jr., Franklin

Federal Savings Bank

Statements of fact and opinion are made on the responsibility of the authors alone and do not implyan opinion or endorsement on the part of the officers or members of VBA.

AT-LARGE MEMBERSBenefits Corporation Chair

Richard M. Liles, McKenneyManagement Services Inc. Chair

Frank Bell, III, MidlothianGovernment Relations

Committee ChairChristopher W. Bergstrom, McLean

VBA Education Foundation ChairJ. Peter Clements, Carson

EDITORIAL & EXECUTIVE OFFICES4490 Cox Road Glen Allen, VA 23060804-643-7469 Fax 804-643-6308www.vabankers.org

Bruce T. WhitehurstPresident and CEOVirginia Bankers Association

Chandler DeweyCommunications & Marketing ManagerVirginia Bankers Association

SUBSCRIPTIONSIf you would like to subscribe to Virginia Banking, contact Chandler Dewey at [email protected]. Virginia Banking is published bi-monthly. Subscription price is $25 per year and $45 for two years for nonmembers. Copyright 2011.

social mediaOvercoming the Fear

of the Two-Way Conversation

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

4 Calendar of Events 5 Insights 6 Worth Noting16 Washington Update17 Legal Line

18 Legislative Update19 Welcome New Associate Members20 Compliance Corner 22 Bankers on the Move

Send us your thoughts or ideas on Virginia Banking!

Please e-mail Chandler Dewey at [email protected]. Has your information changed?

Please e-mail Kellee Edelin at [email protected] with your new contact information.

12

8

BankingirginiaVVirginia Bankers association — serVing Virginia’s Financial community For more than 100 years

10

cover story

in every issue

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

DIRECTORSTimothy M. Warren, Chairman Timothy M. Warren Jr., CEO & Publisher David B. Lovins, President Vincent M. Valvo, Group Publisher & Editor in Chief

FINANCE & ADMINISTRATIONJeffrey E. Lewis, Controller / Director of Operations

EDITORIAL Christina P. O’Neill, Custom Publications Editor Cassidy Norton Murphy, Associate Editor

ADVERTISINGGeorge Chateauneuf, Publishing Division Sales Manager Sarah Cunningham, Events ManagerRichard Ofsthun, Advertising Sales ManagerCara Inocencio, Advertising Sales ManagerEmily Torres, Advertising, Marketing & Events Coordinator

DESIGN & PRODUCTIONJohn Bottini, Creative Director Scott Ellison, Senior Graphic DesignerEllie Aliabadi, Graphic Designer

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

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January/February 2011 | Virginia Banking 3

instructor-leD seminars

RETAIL BANKING CONFERENCE, CHARLOTTESVILLE March 7

COMPLIANCE UPDATE SEMINAR, ROANOKEMarch 22

COMPLIANCE UPDATE SEMINAR, CHARLOTTESVILLE March 23

COMPLIANCE UPDATE SEMINAR, SANDSTONMarch 24

COMPLIANCE UPDATE SEMINAR, VIENNAMarch 25

BANK DIRECTORS SYMPOSIUM, RICHMONDMarch 29

BANK DIRECTORS SYMPOSIUM, BLACKSBURGMarch 30

COMPLIANCE SCHOOL, CHARLOTTESVILLEApril 4

SECURITY WORKSHOP, CHARLOTTESVILLEApril 12

instructor-leD courses

GENERAL ACCOUNTINGFebruary 22

PRINCIPLES OF ACCOUNTINGFebruary 22

CONSUMER LENDINGFebruary 28

PRINCIPLES OF BANKINGMarch 7

ECONOMICS FOR BANKERSMarch 21

PRINCIPLES OF BANKINGMarch 21

PRINCIPLES OF BANKINGApril 4

PRINCIPLES OF BANKINGApril 18

GENERAL ACCOUNTINGApril 18

CONSUMER LENDINGApril 18

WeBinars

ALCO FOUNDATIONSFebruary 15

LOAN INPUTS AND ANALYTICSFebruary 16

SURVIVING 2011 – TACTICS THAT WORK IN THE REAL WORLDFebruary 17

COMMERCIAL REAL ESTATE APPRAISALS: REVIEWING AND INTERPRETING – PART IFebruary 22

IT AUDIT FOR COMMUNITY BANKSFebruary 23

STRATEGIC PLANNING FOR A NEW ENVIRONMENTFebruary 23

MERGERS AND ACqUISITIONS IN THE CURRENT ENVIRONMENTFebruary 24

THE NExT GENERATION OF CUSTOMERSFebruary 24

Live Event Online Seminar Webinar

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________________________________________________________________ State/Zip______________________________

Phone___________________________ Fax_________________________ E-mail___________________________________

For more information go to www.vabankers.org.

Calendar of Events


M y kids enjoy asking me what it was

like when I was growing up and

how in the world we managed to get

by without computers, the Internet, cell phones

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

was out of college before we really entered the

era of modern communications technology – and

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

an awful lot has changed in not so many years.

We now have an entire generation of what some

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

tion that includes my kids, who were born into a

world of e-communication that many of us could

not have even imagined 20 years ago.

Digital Natives are rapidly redefining our soci-

ety, including the workplace, with their absolute

comfort with newer forms of communication.

In recent years, I have watched my numerous

phone calls and voicemail messages decline sub-

stantially as e-mail volume has exploded. I have

entered the world of text messaging, Blackberry

Messenger, Twitter and Facebook. I am playing

catch-up to much younger colleagues who con-

sider all these things to be second nature.

That is why the VBA is expanding its commu-

nications into the world of social networking. We

now have a Facebook page that highlights the

many positive ways our member banks serve

communities all over Virginia. All you Facebook

users, please find the Virginia Bankers Associa-

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

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

have also established a Twitter account and will

tweet breaking news to bankers who choose to

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

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

vide a wealth of information and resources.

We are fortunate to have several members of

Generation Y on the VBA staff; these are energet-

ic twenty-somethings who bring great ideas for

new ways we can reach, serve and interact with

bankers, associates and other key constituents.

They also speak the language of the Digital Na-

tive and they are patiently teaching the rest of us

that language. Their energy and ideas blend in a

most positive manner with the experience those

of us who are older bring to the table.

We continue to be in challenging times, both in

our industry and in the broader economy. Fortu-

nately, we do see signs of progress and an outlook

that shows gradual improvement. As we stay

focused on how

to make sure the

banking industry

is best equipped

to drive economic

recovery, continu-

ing to evolve in

our communica-

tion with – and on

behalf of – Virginia bankers is an important and

exciting priority.

Please connect with us through any or all of

these new forums and also give us feedback on

how we are doing and how we can make our

communications even better. Together with you,

we will join the world of the Digital Natives.

Bruce Whitehurst

President and CEO,

Virginia Bankers Association

Bruce Whitehurst can be reached by e-mail at [email protected].

”“ Digital Natives are rapidly redefiningour society, including the workplace,

with their absolute comfor t with newer forms of communication.

Communicating with the Digital Natives

Insights

January/February 2011 | Virginia Banking 5 www.vabankers.org


FeDeral home loan Bank oF atlanta announces W. Wesley mcmullan as neW PresiDent anD ceo

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

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

McMullan to become FHLBank Atlanta’s president and CEO, effective

immediately. McMullan was most recently executive vice president

and director of financial management for FHLBank Atlanta. McMullan

joined the bank as a credit analyst in 1988, and earned promotions to

assistant vice president in charge of financial modeling in 1993, vice

president of mortgage-backed securities portfolio management in 1995,

group vice president of member sales and trading in 1998, and senior

vice president of sales and trading in 2001. Promoted to executive vice

president in 2004, McMullan oversaw asset liability management,

member sales and trading, and financial operations management. He

earned a bachelor’s degree from Clemson University and is a Char-

tered Financial Analyst.

henry logue PromoteD to ceo

The Bank of Floyd’s board of directors has promoted Henry A. Logue

to CEO of the bank, which is a subsidiary of Cardinal Bankshares. He

will retain his titles of president of the bank and executive vice presi-

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

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

rann Paynter Joins VBa

The VBA is pleased to announce that Rann Payn-

ter joined our staff in December as executive vice

president. He comes to the VBA with a back-

ground in association management stemming

from 14 years with the NC Bankers Association.

His duties as executive vice president will in-

clude various responsibilities for the Assocation,

VBA Management Services and VBA Benefits. He

is a graduate of Pfeiffer College, and he completed a masters of busi-

ness administration at the Kenan-Flagler School of Business at the Uni-

versity of North Carolina at Chapel Hill.

WorthNoting©

2011

PU

LSE


caPital one anD Junior achieVement oPen Financial literacy center

Capital One Financial Corporation and Junior Achievement of the

National Capital Area recently celebrated the grand opening of Junior

Achievement Finance Park, a new 20,000-square foot financial literacy

center that will bring in-depth, hands-on financial literacy education

to more than 14,000 local middle school students each year. Located

on the campus of Frost Middle School in Fairfax County, Finance Park

is the result of a three-year collaboration among Junior Achievement,

Fairfax County Public Schools and Capital One Financial Corpo-

ration. Capital One is the signature sponsor of the $4.375 million

facility.

Federal Reserve Chairman Ben Bernanke, Virginia Secretary of

Education Gerard Robinson, Capital One Founder, Chairman and

CEO Rich Fairbank, and a dozen members of the Virginia General

Assembly joined more than 300 community leaders for the grand

opening ceremony. Every eighth-grade student in the Fairfax Coun-

ty Public School system, as well as other students from the greater

Washington area, will visit Junior Achievement Finance Park each

year. Prior to their visit, students participate in Junior Achieve-

ment’s unique six-week Finance Park classroom curriculum, culmi-

nating with a daylong, real-life personal budgeting simulation at

the center. The students visit the mock city and its shops, which

correlate to the students’ 18 personal budget lines, including items

such as housing, transportation, healthcare, education and philan-

thropy. The Junior Achievement Finance Park experience will en-

able students to act as adults for a day, making tough, realistic bud-

geting decisions as they move from shop to shop. With guidance

from adult volunteers, many of them Capital One associates, the

simulation will help students see the relevance of what they are

learning in the classroom to the real world awaiting them.

Photo courtesy of Mark Heayn

A Discover Financial Services Company

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Professional Development

Market research repeatedly

points to the fact that in-

branch transactions con-

tinue to be an integral part of consum-

ers’ everyday life experience. Many

Americans continue to visit their local

bank branch at least on a weekly basis,

much as they go to the grocery store,

pharmacy or other retail establish-

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

tinues to be a viable retail destination.

In an effort to out-perform the compe-

tition, successful institutions seize this

opportunity to address the wants and

needs of their customer market in a dif-

ferentiated, recognizable and visually

appealing manner.

This is a challenging, yet measurably

rewarding, opportunity to engage with

your customer. It requires the transfor-

mation of the branch experience from

one of simple routine (at best) to one of

discovery, resourcefulness and a sense

of community. Successful banks will go

the extra mile and offer their customers

a richer and more relevant experience,

which will reap the benefits of stronger

loyalties and ultimately higher levels of

business.

Throughout the past 20 years, finan-

cial institutions have grown both organi-

cally and via mergers and acquisitions,

which has been conducive to the eclectic

nature of most retail networks. Prior to

launching any transformation program,

it is imperative to identify and docu-

ment the current existing factors, compo-

nents, and objectives important to your

organization. This can be accomplished

through carefully choreographed and

documented business model review and

branch-level retail readiness audits.

The business model review will drive

and inform the type of information to

be acquired during any retail readiness

audit. The type of information to be ac-

quired and rated during branch audits

includes: general street presence and vis-

ibility, ingress, egress, building signage,

drive-up areas, general facility fitness,

millwork, merchandising, marketing,

compliance and staff engagement.

Each of the aforementioned audited

items can be rated using a pre-deter-

mined scale (e.g. one to five, five being

excellent). By effectively rating each item,

one can then build a comparative matrix,

or index of the performance factors in

your retail network and how they relate,

or impact your intended business model

and customer experience. Individual

branches can be compared based on an

individual, demographic or profitability

basis. If we had a cash surplus then we

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


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For more information on performing a

retail readiness audit, please contact

PWCampbell’s vice president, Glenn W.

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or (800) 253-7430.

would spend whatever it takes in the

branches to satisfy the overall business

goals and objectives, and the intended

customer experience. In general, unfor-

tunately, this is not the case.

The information obtained from the au-

dits can drive how you spend your in-

vestment during a transformation exer-

cise. The rating system can be calibrated

against a planned ROI. Understanding

the rating system, and how it relates to

the branch environment, the business

goals and objectives, and the customer

experience, can dictate how you spend

your investment and thereby maximize

your ROI. When determining where to

spend your dollars, keep in mind that

not all upgrades are investments, and

improvements can and should be done

in a cost-effective manner. For example,

when evaluating the architectural/phys-

ical part of the matrix, simple improve-

ment to the mechanical room can be an

insignificant cost but have a major im-

pact on efficiency. Your audit will also as-

sist in determining if a branch should be

renovated, retouched, relocated or re-

leased.


New Year, New Leaf for Corporate Wellness

In addition to the PWC report, the

World Health Organization predicts that

by 2020 mental illness will be the second

leading cause of disability worldwide,

after heart disease.

So what does this mean for employ-

ers? There are two major areas for em-

ployer concern – chronic disease and de-

pression. And here’s why these should

concern employers – chronic disease

drives healthcare costs, and the pro-

ductivity losses associated with chronic

disease and depression are even greater

than the medical costs themselves. Pay-

roll and benefits (the expense associated

with healthcare costs and productivity

or productivity losses) usually are the

two biggest employer expense items af-

ter paying for the cost of providing the

business goods or service. This is a bot-

tom-line issue for employers.

Studies quantifying the cost of chronic

disease and depression indicate that

approximately 2 percent of company

capital spent on workforce is lost to dis-

ability, absenteeism and presenteeism.

Several years ago PriceWaterhouseCoopers released a

repor t prepared by their Health Research Institute, in

conjunction with the World Economic Forum, indicating that

“as work becomes more sedentary, the global workforce is

becoming fatter, sicker and less productive.” Wow – this is

such a negative pronouncement on the state of our work-

force that it bears reexamination. The fact of the matter is

that we have shifted from being an industrial economy to

a knowledge economy – our workforce sits mostly in one

place and uses their brainpower to contribute to business

instead of performing physical tasks that were once associ-

ated with the industrial boom.

By roxanne sheppard, coo VBa Benefits corporation


Put another way, these problems affect

roughly 5 percent of employees, result-

ing in $880,152 in lost productivity per

1,000 employees per year. In a group of

8,200 employees – such as those enrolled

in the VBA group medical plan – this can

be a lot of money to the collective em-

ployers. The irony here is that prevent-

able risk factors such as poor diet, lack

of physical activity, stress and smoking

are the biggest contributors to chronic

disease.

Because of the business impact, CEOs

everywhere need to consider making

wellness central to their corporate busi-

ness strategy. Here’s where you can turn

over a new leaf for the new year – by

adopting short-term and long-term strat-

egies for wellness and health promotion.

The short-term strategy should fo-

cus on creating awareness among your

employees about chronic disease. Cor-

porate wellness should be an extension

of individual wellness and the first step

is to make employees aware of the ad-

verse impact to their own health of their

sedentary lifestyle. This can be done by

providing your employees with the op-

portunity to participate in a health risk

assessment, or health risk screenings for

blood pressure, body mass index, glu-

cose and cholesterol levels.

The long-term strategy should focus

on keeping employees healthy for a long

time. This includes offering the risk as-

sessments and health screenings at regu-

lar intervals over time, and promoting

the benefits of annual preventive care

checkups. Another component of the

long-term strategy is to partner with a

health plan that has programs in place to

monitor prescribed courses of treatment

and coach employees on appropriate

behaviors while living with chronic dis-

eases such as asthma, diabetes, coronary

artery disease, and chronic obstructive

pulmonary disease. This type of condi-

tion management can result in a substan-

tial decrease in visits to the emergency

room, and a reduction in the number of

missed days of work due to the condi-

tion. Both have a positive impact on the

employer and on the employee’s life.

The call to action for CEOs, then, is to

turn over new leaf in 2011 and get be-

hind a corporate wellness and health

promotion program at your bank. Your

employees will appreciate it, and there

are compelling business reasons for do-

ing it. The impact to your bank can be

extremely positive and foster increased

productivity and morale, reduced ab-

senteeism, improved employee health,

focus and energy on the job, better con-

tained health costs, a healthier work en-

vironment, and greater loyalty and re-

tention. A lot of bang for the buck – and

well worth turning over a new leaf. Con-

sider making it a company-wide priority

for 2011.

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

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

most respected source of compliance information and assistance in banking.

Whether your need is BSA/AML, IT vulnerability scans and web site security reviews, or training that keeps your staff — and directors — up-to-date, TCA is your Compliance Advantage.

Call us . . . today . . . to learn more. 1-800-934 -7347.

Thomas Compliance Associates, Inc.2846 N. Mildred Avenue, Suite 150Chicago, Illinois 606571-800-934-7347

www.tcaregs.com

Roxanne Sheppard is COO of VBA

Benefits Corporation.


“THERE ARE NO SECRETS.

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

By christina P. o’neill

social media

– Cluetrain


overcoming the fear of the two-way conversation

There’s a reason that so-

cial media seminars at bank

trade organizations are of-

ten the best-attended these days –

bankers know that social media can work

to banks’ benefit, but they have also seen

it work to banks’ detriment. They tend to

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

ecdote presented by social media experts

is the Google search that brings up web-

sites or postings detrimental to a bank,

causing headaches for the bank’s custom-

er service and compliance departments.

The Cluetrain manifesto quoted to the

left (www.cluetrain.com) was created in

1999 to herald the emergence of an online

customer community independent of

mass marketing efforts. It sounded stri-

dent and extreme at the time, but 11 years

later, hundreds of thousands of customer

communities have not only emerged, but

matured – and they are changing the face

of business-to-customer relations in ev-

ery industry across the globe.

Financial institutions, circumscribed

by privacy and disclosure rules, are un-

derstandably wary about how they’re

going to hold up their end of the social

media two-way conversation. But they

know they must be in the game.

“There is a certain growing segment

of our customer base that expects us to

communicate via social media. If you

don’t, then you are viewed as being be-

hind the times,” says Jeff Szyperski, CEO

and president of Chesapeake Bank. “To

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

‘word of mouth’ advertising, but when it

comes to social media, we view it differ-

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

customers, you want to encourage use of

these channels.”

Village Bank, with 15 branches

throughout the metropolitan Richmond

area, uses social media not to generate

direct sales, to but to keep customers and

potential customers aware of all of the

things the bank is doing in the commu-

nity. “We are a very community-oriented

bank and Village Bank Neighborhood

News on Facebook is an easy way to

keep everyone informed about the many

projects in which we are involved,” said

Marketing Specialist Milly Hudgins.

“We’ve had positive feedback from our

Facebook fans as well as our employees.

It’s the perfect forum to promote upcom-

ing events, as well as alert people about

charities with which we are involved and

even includes dog tips from our mas-

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

followers get a sense of who we are.”

THE POWER OF THE TWEETFrank Eliason, formerly the brains,

face and voice behind Comcast’s Com-

castcares.com, brought about significant

change in Comcast’s customer service

through the use of Twitter to respond to

customer-service problems in real time.

Using an outside service to facilitate

internal communication efforts was a

groundbreaking concept when Eliason

first introduced it (without legal per-

mission, as he told social-media expert

and author Brian Solis in an interview

earlier this year). Creating a customer

communications channel on Twitter

was only part of the solution. The other

part was setting the stage for managers

to empower their technicians to make

the needed changes. Eliason left Com-

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

anymore,” he told Solis; he left behind a

team of people who could keep the ini-

tiative growing, he said. Eliason is now

senior vice president of social media at

Citibank, overseeing the bank’s internet

and mobile marketing team.

Banks can’t resolve customer-service


issues as publicly as cable service pro-

viders. The rule of thumb for fielding

customer calls on Twitter – which most

banks advise their customers to do by

now – is to request that the customer

call a private number, rather than dis-

close account information in a public

tweet.

Union First Market Bank is on Twit-

ter, ranking in the top 10 of all commu-

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

banks on Twitter and the top 25 banks

on Twitter worldwide according to Dor-

othea Henry, social media experience

manager at the bank. Union first estab-

lished a presence on Twitter in May 2009.

“We learned very quickly after our very

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

banking again’ that there are benefits

for everyone involved,” says Henry.

“Our customers have a way to reach us

that is fast and effective. In return, we

have gained fabulous insights and ideas

from real-time customer suggestions.

By participating in an open conversa-

tion about everything from local events,

to new businesses launching, people

can learn about who we really are and

how our commitment to providing ex-

ceptional service and fostering a vibrant

community is sincere.”

“On the few occasions we’ve seen

negative comments about our bank,

we’ve used it as an opportunity to im-

prove, and [we have] also witnessed

customers defend our practices and our

principles on our behalf,” says Henry.

“It’s both heartwarming and motivat-

ing. I’ve never felt so connected to a

community before and my next goal is

to make those connections even stron-

ger through more social channels.”

IT’S THE MEDIA CALLINGBut let’s say the customer is com-

plaining to the media, rather than to the

bank. The reporter calls bank manage-

ment and lays out the story as the cus-

tomer presented it. Management knows

the story is factually wrong – maybe the

situation arose from customer error or

misfeasance, not a bank error. But pri-

vacy regulations prohibit it even from

confirming that the source is a cus-

tomer. Lubetkin advises that the proper

guidance is not “no comment” but rath-

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

would not be accurate when you do.”

If a company doesn’t respond when

the media calls during a crisis or in re-

sponse to a customer-service dispute,

“they’ll fill the void either with misin-

formation or input from other parties

that don’t know what you know. If you

have nothing about your brand to com-

pare what you are with what people

are saying about you, third parties are

going to be speaking for you and mis-

representing your brand to the public,”

he says.


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BREAKING DOWN WALLSThe Facebook litmus test of wheth-

er a financial institution is willing to

have a genuine two-way conversation

is whether it allows negative postings

to remain on its wall – or whether it

allows wall postings at all. “I go to

so many corporate Facebook pages

where you can’t post to their wall,”

says Lubetkin. “You’ll never find out

their concerns if you don’t let them

post stuff.”

The ultimate message a financial

institution should seek to deliver is

this, he says: We are so confident that

we will ultimately satisfy you that we

want you to tell us when we fail. Com-

panies that want to improve service

invite customers to tell them what it

is like.

Then, there are employees. If your

bank blocks employee access to certain

websites, someone in your organiza-

tion probably thinks there is good rea-

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

trust with employees,” Lubetkin says,

and it should have been established in

the hiring process. That’s a manage-

ment issue, not an Internet issue.

The impact of many bloggers, says

Lubetkin, “is out of proportion to their

importance in the real world.” Addi-

tionally, much of the discourse in the

blogosphere is aimed at generating

attention, that generates more clicks

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

search-engine page.

SOMETHING OF VALUESo, how does a financial institution

determine what’s valuable? That de-

pends on what data a bank wants to

mine. Monitoring tools such as Radian6

and GeeYee listen for the conversation

topics and alert users, much like Google

Alerts, and notify the subscribing bank.

As one media specialist puts it, these

services are somewhat like the old

clipping services – but on steroids.

Establishing a meaningful presence

in social media is not as easy as one

would initially believe. Social media

consumers are constantly looking for

information that is useful and helpful.

Social media is not about being hip-

per than your competition. It’s about

being confident enough to graciously

host an online party where you don’t

know all the guests. It’s about seeing

“viral” not as a threat but as a conduit

for more-efficient customer service.

And it’s the market wisdom to sepa-

rate the meaningful from the echo-

chamber rhetoric. In other words, not

a crisis, but an opportunity.

Christina P. O’Neill is the custom

publications editor of The Warren Group,

publisher of Virginia Banking.


edward l. yingling President and CEO,

ABA

A League of Extraordinary People

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

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

will happily take away with me in my retire-

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

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

It’s been a privilege to work with volunteer

banker leaders from across the country, and side

by side with a staff of extremely talented ABA pro-

fessionals who have always put your interests first

and foremost in the nation’s capital.

Together we have been through many battles,

including the latest really big one – Dodd-Frank.

This battle required a huge effort by ABA, the

state associations and grassroots bankers across

the country. A recent poll of bankers showed that

94 percent oppose the law, and they have every

reason to oppose it.

Now, the conversation – a case in point was

the discussion during our recent ABA America’s

Community Bankers Council meeting here in

Washington – is about how banks can move for-

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

reason to be optimistic because, despite all of the

tough fights and tough times, our industry has al-

ways emerged from the darkness and prospered.

We will do so again.

We always come through for two reasons. First,

banking is critical to our economy and indeed to

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

tant, and you should never forget it.

Second, we always come through because

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

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

dedicated, hard-working and very capable people.

You do more in your communities than almost any-

one. This financial crisis has really hurt our indus-

try: Hurt its financial strength and its reputation

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

ulatory overkill and fundamental questions about

our business model. But we will come through it.

Many of you have devoted tremendous effort to

working for our industry through your state asso-

ciation and the ABA. I especially want to thank the

ABA officers I have worked with over the years.

They always gave me great advice and provided

our industry great leadership.

There is much that remains at stake and much

more needs to be done. We need more participa-

tion and more resources to do it. Every bank should

belong to its state association and to ABA. Every

banker should be participating in our grassroots ef-

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

the future of the industry and the banking business

model is under the political microscope.

Remember that the ABA is you. We bring togeth-

er tremendous resources to serve you, and we are

your champion in Washington, but

as an industry we can, and should,

be doing even more. Everyone

should be involved.

I can’t tell you what a great honor

it has been for me to work for all of

you, and to work with the state as-

sociations and the volunteer bank-

ers who have led the ABA.

As I also said at the ABA conven-

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

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

and becoming an enlisted man, and will continue

to fight alongside you for our great industry.

Ed Yingling recently retired from the American Bankers Association.

UpdateWashington

“ Don’t let your fr iends sit on the sidelines as the future of the industr y and the banking business model

is under the political microscope. ”


Federal Reserve Board Proposes Debit Card Interchange Rules

O n Dec. 16, 2010, the Federal Reserve

Board proposed rules to implement

the debit card interchange restric-

tions in the Dodd-Frank Wall Street Reform and

Consumer Protection Act. The proposal would

establish standards for determining whether an

interchange fee received or charged by an issuer

with respect to an electronic debit transaction is

“reasonable and proportional to the cost incurred

by the issuer,” and prohibit issuers and networks

from restricting the number of networks over

which an electronic debit transaction may be pro-

cessed and from inhibiting the ability of a mer-

chant to direct the routing of an electronic debit

transaction to any network that may process such

transactions. Because of the difficult issues raised

by this proposal, the board emphasized that it will

be particularly open to comments on the proposal

before finalizing any interchange rules.

With respect to the fee restrictions, the proposal

sets forth two alternatives for comment. Under

the first alternative, an issuer could comply in one

of two ways. First, an issuer could calculate its

costs attributable to its role in the authorization,

clearance and settlement of a debit card transac-

tion and receive or charge interchange fees based

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

per transaction. Second, the issuer could simply

charge a safe harbor amount of 7 cents per trans-

action regardless of costs.

Under Alternative 2, an issuer could receive

or charge an interchange fee up to a cap, which

would initially be set at 12 cents per transaction.

The board stated that if either of these stan-

dards is adopted, the maximum allowable inter-

change fees received by covered issuers for debit

card transactions would be more than 70 percent

lower than the national average. The board’s

proposal on fee limits was more aggressive than

many had anticipated.

While the Dodd-Frank Act requires the board

to take into account the fraud prevention costs of

issuers in setting interchange fee limits, the board

chose not to include a specific adjustment in this

proposal. Rather, the proposal includes two gen-

eral approaches and seeks comment on each.

Under the first approach, the board would iden-

tify innovative technologies that would reduce

debit card fraud, and determine those costs for

purposes of the interchange fee adjustment. The

second approach would establish more general

standards that an issuer must meet to be eligible

for the adjustment. Any specific adjustment will

Joseph e. spruill

General Counsel,Virginia Bankers

Association

Joseph E. Spruill can be reached by e-mail at [email protected].

LineLegal

Continued on page 21


Communication is Key

O ne of the many pieces of advice I re-

ceived last year leading up to my wed-

ding from those with a long history of

matrimonial bliss was that communication is key

to a successful marriage. I have tried that guidance

– with varying levels of achievement – to remind

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

found it to have sound application beyond keeping

domestic harmony.

Indeed, communication is key to successful gov-

ernment relations. Over the past several months,

the Virginia Bankers Association has utilized time-

tested approaches, along with some new and cre-

ative means, to bolster our communications in our

advocacy and outreach efforts with and to our elect-

ed officials. The results we have seen underscore

the importance of maintaining strong and effective

lines of communications in order to accomplish our

government relations objectives.

Starting in the fall and continuing into the win-

ter, our legislative meetings brought together bank-

ers and state legislators throughout the Common-

wealth in 14 separate venues. These gatherings

were a great forum for individual bankers and the

VBA to provide insight into issues important to the

financial services field to 97 lawmakers before the

General Assembly session convened. The tremen-

dous turnout of local bankers for these interactions

with our state policy decision makers on their home

turf is a valuable form of direct communication.

Thanks to the 355 bankers who participated in these

meetings!

Likewise, our annual Banker Day at the Capitol on

Jan. 13 was once again a resounding success. With

over 350 bankers in Richmond on the second day

of the 2011 General Assembly session, our indus-

try was well represented with a unified voice for a

strong banking environment in Virginia. Sending the

positive message that you are proud to be bankers,

participants in Banker Day met with legislators and

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

orities and let them know about our concerns. This

show of force will undoubtedly yield dividends as

we advance our policy agenda and oppose bills to

create unnecessary burdens to your business prac-

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

your active engagement in the legislative process

and the positive outcomes we hope to achieve.

On the federal level, the November elections wel-

comed in three new House of Representatives mem-

bers to the Virginia delegation. It was welcome news

to learn that newly elected Rep. Robert Hurt from

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

the House Financial Services Committee in almost a

decade. Already, the VBA and several bank execu-

tives have met with these new members of Congress

to educate them on Virginia’s banking industry and

the vast harm and uncertainty caused by recent

federal regulations. We will be continuing with our

outreach to the Virginia Congressional delegation

through the VBA/ABA Government Relations Sum-

mit this spring and hope you can join us on Capitol

Hill, March 14-16.

Understanding that good communications is a

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

communicate with our member banks. This session

we have expanded into the social media realm and

began using Twitter as a means to update our mem-

bers on important events and key legislative actions.

We encourage you to log on to your Twitter account,

search for @vabankers and request to follow us to

receive tweets on session updates, the latest on the

Dodd-Frank act, regulatory deadlines and more.

All of these and our many other proactive efforts

to foster greater communication between the VBA,

our member banks and our elected officials – includ-

ing VBA BankPAC support – are critical to our over-

all government advocacy. While we work to improve

upon our existing approaches and offer new and

creative methods, our sustained success can be cred-

ited to the overwhelming commitment of bankers

like you.

matt Bruning Director of

Government Relations,

Virginia BankersAssociation

Matt Bruning can be reached by e-mail at [email protected].

UpdateLegislative


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T he good news is that the type of massive

flooding that brings reporters in waders

and TV satellite trucks to record the devas-

tation is pretty rare in Virginia.

The bad news is that the Commonwealth’s 112 miles

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

square miles of land that is less than five feet above

sea level do make us susceptible to floods brought

on by hurricanes and other tropics-related storms,

rain systems that occasionally park over a soon-to-

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

radic ice dams.

For lenders, that makes flood insurance coverage –

and, in particular, changes to flood maps and cover-

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

a practical matter, that means banks’ flood insurance

concerns don’t end once the institution closes a loan

and starts the servicing process:

Changes in flood maps must be monitored to •

assure that proper insurance requirements are

maintained.

Loan servicers must be aware of flood map •

changes – including, for example, whether

property that was originally not in a flood zone

now is in a mandatory insurance zone based

on map amendments.

For convenience, most lenders order flood deter-

minations with life of loan coverage that requires

the flood determination vendor to monitor the flood

maps and notify the servicer (usually the bank) of

any map changes until the loan is paid off.

Flood vendors can provide all types of reports

– for example, a report listing all loans in Zones

A and V, which require mandatory insurance, or a

monthly report of all determinations obtained re-

gardless of zone.

Such reporting provides an important audit pro-

cess to ensure that all loans requiring mandatory

insurance are being monitored and that a report

can be generated to compare with monthly closing

reports to ensure that flood determinations have

been obtained as required.

Vendor reports are used for these purposes dur-

ing on-site compliance reviews. The flood determi-

nation companies are contacted to request a report

listing all the determinations obtained in a flood

zone that requires insurance. The report allows the

reviewer to compare the client lender’s internal

tracking system with a control list to ensure that

there is appropriate tracking all the required loans.

The process also provides a report to pick loans

for testing.

In some cases, it is discovered that lenders obtain

life of loan coverage but do not follow the notifica-

tion requirements included in their agreements.

Flood Insurance Concerns Continue after Loans are ClosedFlood Map Changes, Life of Loan Coverage Must be Monitored

By Donna rakes and Jim Dray Thomas

Compliance Associates, Inc.

CornerCompliance


In most contracts, flood vendor report-

ing includes paid off loans, withdrawn

and denied loans, and loans that have

been transferred to another lender. If the

bank fails to contact the flood vendor

when a loan status changes, the vendor

will track the loan indefinitely. That’s

unnecessary and costly.

Still, when flood reviews are con-

ducted, it is often found that the-loan-

has-been-transferred notification is not

completed.

It is typical to recommend that bank-

ers include life of loan termination in

their payoff procedures. However, this

can cause a secondary problem if one

determination is used for multiple loans.

In such cases, the payoff staff must re-

search all of a borrower’s properties to

determine whether additional loans are

tied to the life of loan coverage. If they

are not, then the life of loan coverage

should be terminated.

The need to constantly track each loan

payoff for related flood coverage is one

reason to suggest that banks obtain sep-

arate life of loan coverage on each loan.

If Fred Flintstone has a first lien loan and

a HELOC, for example, the report will

list two determinations and two life of

loan tracking numbers. The vendor re-

port will balance with the internal track-

ing report listing two loans that require

insurance. When borrower Flintstone’s

HELOC is paid off, the bank can ter-

minate life of loan flood coverage for

the HELOC without running the risk of

causing a change with coverage on the

first lien loan.

It is important that loan servicing

departments understand the monitor-

ing procedures and requirements. Loan

servicing departments should have pro-

cedures to notify the vendor when the

status of the loan file has changed. The

flood vendor also should have a desig-

nated point of contact at the bank to no-

tify when map amendments occur that

will change the status of the flood insur-

ance requirements.

There’s another potential administra-

tive catch as well: when lenders sell the

servicing of a loan, the life of loan moni-

toring too often is not transferred to the

new servicer. The monitoring should be

transferred with the servicing, so chang-

es to the flood maps are provided to the

current servicer.

Most flood determination companies

have online services that will allow the

loan servicing department to pay off the

determination or transfer the servicing

through the Internet. Loan departments

should contact their life of loan vendors

to determine the correct procedures to

ensure that termination and transfers are

completed.

VBA members seeking assistance or

additional insights on Fair Lending

compliance and reporting issues should

call TCA’s Donna Rakes or Jim Dray.

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

Rakes is manager of TCA’s East Coast

Regional office in Rustburg. Dray is

president of TCA.

Compliance ManagementThe emergence of regulations that begin to implement Dodd-Frank Act provi-

sions, the fleshing out of the legislation’s new Consumer Financial Protection Bu-

reau and an increasing focus on BSA means that compliance stakes have never

been higher.

Fortunately, VBA members who also are TCA client banks have a valuable re-

source – TCA – to connect with at any time to talk about the new compliance

environment and about how to rebuild their Compliance Management System to

mitigate increasing regulatory risk.

be proposed by the board after consid-

eration of comments on these general

approaches.

In response to a question from Gov.

Betsy Duke about the exemptions from

interchange fee restrictions in the Dodd-

Frank Act, particularly the exemption for

institutions with assets of less than $10

billion, Federal Reserve staff acknowl-

edged that market forces may cause such

exemptions to have little practical ben-

efit to smaller issuers. Specifically, staff

indicated that the networks may be re-

luctant to have a two-tiered interchange

fee structure – one for large issuers and

another for small issuers – and that there

would be pressure from merchants to

push debit card usage to large issuers

because of the benefits of lower costs.

Surprisingly, the board requested

comment on whether ATM transactions

and ATM networks should be included

within the scope of the rule.

With respect to network exclusivity

and routing, the proposal sets forth two

alternatives. Under Alternative A, an is-

suer or payment card network may not

restrict the number of payment card net-

works over which debit transaction may

be carried to fewer than two unaffili-

ated networks. Under Alternative B, an

issuer on a payment card network may

not restrict the number of payment card

networks over which a debit transaction

may be carried to less than two unaf-

filiated networks for each method of au-

thorization – PIN or signature – that the

card holder may select.

The VBA is very concerned about this

proposal. We believe it would have a sig-

nificant negative impact on all banks,

both large and small. Rules must be fi-

nalized by April 21, 2011, with an effec-

tive date for most of these provisions of

July 21, 2011. The comment deadline is

Feb. 22, 2011. Bankers are strongly en-

couraged to comment on this important

proposal.

Continued from page 17


Benchmark community Bank, kenbridge

robert e. Bates, Assistant Vice President/Branch Manager

cardinal Bank, tysons cornerWilliam c. o’connor, Senior Vice

President, Senior Credit Officer

essex Bank, tappahannockFrank l. Besosa, Vice President and

Commercial LenderWill martin, Business Development Officer

hampton roads Bankshares inc., norfolk

stephen P. theobald, Chief Financial Officer

m&t Bank, richmondsean Bodkin, Relationship ManagerPhilip B. hager, Vice President and

Senior Relationship Managered kivior, Vice President for

Business Banking eric morales, Middle Market

Relationship Manager old Point national Bank, hampton

cindy l. Black, Vice President of Corporate Lending

shari Popp, Branch Officer Jennifer register, Branch Officer

stellarone, richmondrobert e. leitch Jr., Senior Vice President

and Regional Commercial Banking Manager

union First market Bank, richmond

kristin h. Dobbins, Branch Manager

Village Bank, midlothianhal Dalton, Senior Vice President

Bodkin morales Black Popp leitch register

Bankers on the Move

are your bankers on the move? email submissions to [email protected].

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Virginia Banking Jan/Feb 2011

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Transcript of Virginia Banking Jan/Feb 2011