Virginia Banking May/June 2011

In ThIs Issue Teach children To Save day | vBa/aBa GovernmenT relaTionS SummiT

BankingirginiaV May/June 2011

Virginia Bankers association — serVing Virginia’s Financial community since 1893

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2010-2011 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.

featuresVirginia Bankers Join ABA for Government Relations Summitnational Bankers unite for common causerepresentatives from virginia’s banking industry traveled to Washington, d.c. to speak with congress about finding regulatory balance after dodd-Frank.

Server Virtualization is Fundamentally Changing the Future of IThow to run your bank better, faster and less expensively

4 calendar of events 5 insights 6 Worth noting 9 Washington update

10 legislative update11 Welcome new associate members14 compliance corner 22 Bankers on the move

Send us your thoughts or ideas on Virginia Banking!

Please email chandler dewey at [email protected]. has your information changed?

Please email Kellee edelin at [email protected] with your new contact information.

8

12

BankingirginiaVVirginia Bankers association — serVing Virginia’s Financial community since 1893

18

photo

in every issue

Teach Children to Save Day A Statewide SuccessBankers participated in the 15th annual educational day, reaching more than 12,500 students across the state.

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 Richard Ofsthun Advertising Sales ManagerCara Inocencio Advertising Sales ManagerEmily Torres Advertising, Marketing & Events Coordinator

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©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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May/June 2011 | Virginia Banking 3

May/June 2011

instructor-leD seminars

AnnuAl Convention 2011, White Sulphur SpringS, WeSt virginiAJune 19-22

SChool of BAnk MAnAgeMent, ChArlotteSvilleJuly 31-AuguSt 5

Cfo ConferenCe, ChArlotteSvilleAuguSt 29-31

ConSuMer lending SChool, glen Allen (riChMond)SepteMBer 13-14

Credit MAnAgeMent ConferenCe, ChArlotteSvilleoCtoBer 3-4

CoMMerCiAl lending SChool, glen Allen (riChMond)oCtoBer 18-20

instructor-leD courses

prinCipleS of BAnkingJune 13

generAl ACCountingJune 13

prinCipleS of BAnkingJuly 11

eConoMiCS for BAnkerSJuly 11

ConSuMer lendingJuly 18

generAl ACCountingAuguSt 1

WeBinars

SAfe depoSit SerieSJune 16

dynAMite trAining SeCretS for everyoneJune 22

reSpA revieW And updAteJuly 7

liquidity riSk MAnAgeMent – An evolving proCeSSSepteMBer 8

5 MiStAkeS BAnkerS MAke on SAleS CAllSSepteMBer 12

Blueprint for A neW Beginning - BAnk direCtor’S StrAtegy for reCoverySepteMBer 13

MergerS And ACquiSitionS in the Current environMentSepteMBer 14

StrAtegiC plAnning for A neW environMentSepteMBer 15

leAding the proSpeCting effortSepteMBer 19

the AlCo proCeSS – the BoArd roleSepteMBer 20

it riSk ASSeSSMent – tAke Control of your progrAMSepteMBer 21

the BASiCS on hSASSepteMBer 21

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_________________________ email___________________________________

For more information go to www.vabankers.org.

4 Virginia Banking | May/June 2011 www.vabankers.org

Calendar of Events

I usually enjoy celebrating anniversaries, don’t

you? Here’s one I’m not so sure about: this

July marks the first anniversary since the pas-

sage of the 2,319-page Dodd-Frank Act. Thirteen

months in the making, Dodd-Frank was heralded as

the response to the Financial Crisis of 2008 and the

solution to what was wrong with our financial sys-

tem. Never mind that housing finance reform was

not included, even though the creation of a second-

ary market for subprime mortgages is high on the

list of root causes of the financial crisis. Never mind

that banks of all sizes – and community banks dis-

parately so – are at the other end of a double-barrel

shotgun firing over 200 new regulations our way,

both to add unnecessary cost and regulatory burden

and to take away revenue sources through govern-

ment price-fixing. Happy anniversary, Dodd-Frank!

During the months that Dodd-Frank was debated

in Congress, Virginia bankers continued to ask our

congressmen and senators to weigh carefully the

potential unintended consequences of such a mas-

sive legislative effort. We argued that imposing so

much change on our industry during such fragile

economic times would make it more difficult for

banks to drive economic recovery as they would in-

stead have to spend time figuring out the new rules

of the road. We pointed out that heaping more new

regulatory burdens on community banks – and in-

appropriately so – would put undue pressure on the

very institutions our country has been so proud to

have and would drive more banking consolidation

in and of itself.

In recent weeks, FDIC and Treasury representa-

tives have suggested that Dodd-Frank is good for

community banks, pointing to the new FDIC as-

sessment base, more oversight of large banks and

of nonbanks as key reasons they believe this to be

the case. Do they know that according to economic

estimates, a five basis point increase in deposit rates

neutralizes the beneficial change in FDIC assess-

ment for most community banks? What about the

prospective loss of more than 70 percent of debit in-

terchange revenue? What about the cost to comply

with every new rule the Consumer Financial Protec-

tion Bureau promulgates? What about all the new

reporting requirements relating to small business

loans?

As part of the one-year anniversary of Dodd-

Frank, the CFPB goes live on July 21. Although not

confirmed by the Senate as contemplated in Dodd-

Frank, Elizabeth Warren is setting up the CFPB, and

there is no mistaking the fact that as a special advisor

to the President, Warren is in control. She has been

saying all the right things to community bankers

about how CFPB will focus its efforts on nonbanks

and financial industry renegades. But if this is the

case, why not contain CFPB to the shadow banking

sector only, thereby matching actions with words?

Or at the least, how about giving banking regula-

tors more oversight of CFPB to make sure consumer

protection and safety and soundness don’t end up in

a head-on collision?

At about the same time as Dodd-Frank’s passage,

Federal Reserve Chairman Ben Bernanke testified to

Congress about the economy, calling it a time of

“unusual uncertainty.” Our industry suggested then

that unusual uncertainty would result from Dodd-

Frank and that certainly has been the case. We are

still in the early stages of determining exactly how

our industry will be reshaped as a result of this new

law; unusual uncertainty reigns upon this first an-

niversary. One thing is certain: with input from

bankers all over Virginia, the VBA will continue to

speak out and work toward the best possible indus-

try environment in Richmond and Washington.

Here’s hoping next year’s anniversary might bring

better news.

Bruce Whitehurst

president and Ceo,

virginia Bankers Association

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

a Questionable anniversary

May/June 2011 | Virginia Banking 5 www.vabankers.org

”

“ Heaping more new regulatory burdens on community banks – and inappropriately so – would put undue pressure on the very institutions our country has been so proud to have and would drive more banking consolidation in and of itself.

Insights

Virginia Banks sHare ProFit DistriBution From aBa insurance Program

Virginia banks that purchased directors’ and officers’ and

fidelity bond insurance from the ABA Insurance Program and

are members of the American Bankers Association will share

$53,321 in profit distributions this year from the program’s re-

insurer, American Bankers Mutual Insurance Ltd, which has

declared a distribution of $4 million in underwriting profits to

995 banks nationwide that participate in the program. Insured

banks that are members of the American Bankers Association

are automatically owners of the company.

This is the program’s 21st consecutive profit-sharing distribu-

tion – $75 million has been declared since the first distribution

in 1991, based on the mutual program’s success and profitabil-

ity. The total distributed to Virginia banks is nearly $1.2 million.

Participating banks nationwide will receive checks this year

ranging up to $51,000, with $4,000 being the average amount.

The program offers D&O liability, financial institution bond,

Internet banking liability, employment practices liability and

other related insurance products to community banks.

First community Bank coo aPPointeD to FourtH term on FeDeral reserVe committee

E. Stephen Lilly, executive vice pres-

ident, COO and CIO of First Commu-

nity Bank, N.A. and its holding com-

pany, First Community Bancshares,

Inc., has been reappointed to the Fifth

District Payment Advisory Council

(PAC) of the Federal Reserve Bank

of Richmond. This three-year term is

Lilly’s fourth.

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The PAC was formerly known as the Operations Advisory

Council and was established by The Federal Reserve Bank of

Richmond in 1978 to keep abreast of the technological and regu-

latory changes impacting national payment systems. The Fifth

District includes Maryland, Virginia, West Virginia, North Caro-

lina, South Carolina and Washington, D.C.

Lilly has been in his current role at First Community Bank

since 1997. His career in banking and operations began in 1981.

He is very active in local and state organizations by serving on a

number of industry and non-profit boards and committees.

VBa Director oF goVernment relations recogniZeD By RICHMOND: THe ALUMNI MAGAZINe

Recently, our own Matt Bruning

was recognized in the University of

Richmond’s Richmond: The Alumni

Magazine in an article about network-

ing called “Working the Web.” The ar-

ticle discusses how, throughout Matt’s

career, he has worked for and with a

number of University of Richmond

alumni. The trend continues, as Bruce

Whitehurst, VBA president and CEO,

was a 2004 graduate of the Robins School of Business.

To view the article, visit www.magazine.richmond.edu/

spring11/feature-2/working-the-web.html.

senD us your neWs! Please send submissions for Worth noting and Bankers on the move to chandler dewey at [email protected].

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Almost 70 banking leaders, including seven members

of the VBA’s Leadership Division, attended the VBA

Government Relations Summit March 14-15 at the

Renaissance Washington Hotel. With a new Congress just convening

– including three freshmen members from Virginia and our own

Rep. Eric Cantor as the House Majority Leader – it was an excellent

time for bankers to show up in large numbers to attempt to find a

regulatory balance much different from what Dodd-Frank intended.

The VBA Summit was held in conjunction with the American

Bankers Association’s Government Relations Summit. Nearly 1,000

participants, united in our common cause, joined together to make

our industry’s voice heard in Congress and the regulatory agencies.

This meeting was a key part of our federal government relations

program and was a great opportunity for us to hear the latest on

banking industry issues, visit all of our members of Congress or

their staffers to discuss these issues, and have dialogue with our

federal regulators.

This year, the lineup of speakers was impressive, as bank

participants heard from House Majority Leader Eric Cantor, Sen.

Chris Coons (Delaware), FDIC Chairman Sheila Bair, Larry Kudlow,

host of CNBC’s “The Kudlow Report,” and new ABA President and

CEO Frank Keating.

Thanks to all the bankers who took part in this important event!


Virginia Bankers Join ABA for government Relations summit

1 Virginia bankers with Rep. Eric

Cantor (fourth from left).2 Participants had the opportunity

to meet with Rep. Bobby Scott

(fifth from right).3 Bankers took the chance to

discuss some industry issues

with Rep. Robert Hurt (right).

4 Courtney Fleming, VBA director

of training and communications,

accepts the 2010 Get Smart

About Credit Day Statewide

Participation Award from

Kathryn Kelly, ABA Education

Foundation associate director,

on behalf of the VBA.

1

2

3

4


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are you thinking what we’re doing?

Share your Bank’s StoryWith my roots in America’s

Heartland, my very high

esteem for bankers is no secret. In the

many communities I have visited, there

has always been one thing that stood

out: The strong, positive presence of a

bank.

You are beacons of hope, signaling

a commitment to the economies of the

communities that you serve.

Last year, ABA Chairman Steve Wilson,

chairman and CEO of LCNB National

Bank, Lebanon, Ohio, formed a task force

of bankers to take up the challenge of

improving our industry’s image, to help

make those beacons shine brighter than ever. ABA Vice Chairman

Matt Williams, chairman and president of Gothenburg State Bank

in Gothenburg, Neb., and Bick Weissenrieder, chairman and CEO

of Hocking Valley Bank in Athens, Ohio, co-chaired the Proud to be

a Banker Task Force.

The result of the task force’s efforts is the

new ABA Toolbox on Telling Your Bank’s

Story.

“There isn’t a banker in this country who

isn’t troubled by the criticism that our industry

receives – in the media, from the public and

in Congress,” Williams and Weissenrieder

said in the toolbox’s introduction. “Our

real challenge is that customers, neighbors,

family and friends, reporters, policymakers,

and even our staff members may not be well

informed about all we do to contribute to the

success and growth of our communities.”

The new toolbox is about communicating

the good things banks do, such as how they

lend to individuals and small businesses

every day and faithfully contribute to

economic recovery and growth in their

communities. It’s about sharing a positive

story with employees, directors, customers,

the media and lawmakers.

Resources include, among other things, a

sample CEO letter to employees, an outline

for a bank impact statement, a customer

survey, a speech and PowerPoint presentation to community

leaders, and tips for working with the media.

You’ll also find great information about the entire banking

industry. For example, did you know that one out of every three

banks has served its local community for more than a century? Or

that most banks (64 percent) have been in business for 50 years or

more?

You can use the materials to develop a proactive, positive

communications campaign to help your employees – who are all

ambassadors for your bank and our industry – speak confidently

and comfortably whether serving customers in the bank or talking

with friends at a barbecue.

ABA members can download the free toolbox at www.aba.com/

members+only/bankstory_toolbox.htm.

We have an opportunity to change negative perceptions about

our industry. You can tell your bank’s story, rather than let others

drive public and customer opinion by what they write, say or

believe about us.

Frank keating president and Ceo,

American Bankers Association

Gov. Frank Keating can be reached by email at [email protected].

UpdateWashington


drawing the lines

Every decade, the federal

government undertakes

the process of counting

every U.S. resident. In 2010, the U.S.

Census Bureau completed the latest

round of adding up everyone and re-

leased final figures at the beginning

of this year. The Census figures help

calculate federal aid to communities

and assists experts in determining so-

cietal trends. However, the main pur-

pose of the Census is to reapportion

representation on all levels of govern-

ment to ensure equal representation.

Based on the official figures, Vir-

ginia’s population grew by just over

922,000 or 13 percent from 2000 to

2010. Not surprisingly, our growth outpaced the nation’s 9.7

percent increase. Loudon County led the way in Virginia with a

staggering 84 percent increase in population over the last decade,

making it the fifth fastest-growing county in the country.

Nationally, while Virginia’s population increased well beyond

the average, even more rapid growth in other states such as Tex-

as, Florida and Arizona, combined with population decreases in

many of the Great Lakes states, means shifts in Congressional

seats to and from those areas with no change in apportionment

in the Commonwealth among the 435 House representatives in

Congress. Despite retaining its 11 House districts, change is still

on the way in Virginia.

The process of drawing new Congressional and state legisla-

tive district lines – “redistricting” – is well underway. Once the

Census figures were in hand, students, academicians, political

junkies and yes, legislators, took to drawing maps of districts.

Ultimately, it is up to our elected state officials to pass these new

maps. Members of the House of Delegates, controlled by Re-

publicans, and the Virginia Senate, controlled by Democrats, ap-

proved their versions of how they would slice and dice Virginia

to accommodate shifts in populations across the Commonwealth

into 100 state House districts and 40 state Senate districts. Like-

wise, each chamber put forward their proposals on Virginia’s 11

House of Representative seats.

There are a number of criteria necessary to use in divvying up

Virginia’s population properly for elected representation. Both

federal and state boundaries must be compact, contiguous and

include communities of interest. Under the auspice of the federal

Voting Rights Act, Virginia must also take into account adequate

minority representation. Of course, there are numerous ways to

define these concepts and to put them into practice. And, as any

time you rest authority in a political body made up of political

people, partisan maneuvering does come into play.

The Virginia General Assembly has taken what looks to be

their first pass at new state legislative districts. After adjourning

the regular 2011 session, lawmakers reassembled to deal with

redistricting. Plans altering the state legislative lines passed both

bodies, albeit not without objections from the minority parties

in both chambers and criticisms from various outside groups.

As with any bill, the governor is the next step in the process.

In marked departure from previous redistricting sessions, Gov.

Bob McDonnell returned the approved combined plan back to

the legislature with his veto, questioning its legality and casti-

gating its political gerrymandering.

Where does that leave us now? The General Assembly will

continue to debate and formulate new or, potentially, exactly

the same redistricting plans. As of now, all 140 seats are up for

election this November, with August primaries awaiting. While

Congressional elections are further off, disagreement on fed-

eral lines continue to fester. Should legislative agreement not

come to fruition, the judicial system might be the final arbiter of

boundaries with approval of the Justice Department necessary

on any plan.

While all the uncertainty over the redistricting process re-

mains, the VBA’s Government Relations team continues to reach

out to elected officials on the issues important to our industry.

Despite the varying machinations, eventually new boundaries

will be determined, elections will be held and government will

continue on as it tends to do. We will be certain to keep you up-

dated on the process and the ultimate outcome. Your congress-

man or state legislator may change based on whatever new lines

are adopted, but the VBA will continue to work with our mem-

ber banks and our elected representatives to ensure your voice is

heard. As populations and maps change, know that our commit-

ment to advocating for you remains steadfast.

matt Bruning director of

government relations,

virginia BankersAssociation

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

UpdateLegislative


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Bank analysis & Design, mortgage & real estate serVicesBalZer anD associates, inc.

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Balzer and Associates, Inc. is a multi-disciplinary architectural and engineering firm providing architectural, civil and structural engineering, surveying, landscape architecture, geotechnical engineering, environmental and traffic engineering services. Services include due diligence and feasibility studies, pay application verification, and REO evaluation and consulting.

consulting & trainingFroeHling & roBertson, inc.

3015 dumbarton roadrichmond, vA 23228phone: (804) 264-2701fax: (804) 264-1202contact: Jeffrey Hudson, Vice Presidentemail: [email protected]

Established in 1881, Froehling & Robertson, Inc. is a multi-disciplinary engineering firm that provides clients with the full range of services, including – but not limited to – the core competencies of environmental and geotechnical and construction materials testing. In support of this mission, F&R maintains a fleet of drilling equipment as well as accredited geotechnical and construction material testing laboratories that are utilized by each of their twelve offices. These offices, located throughout the Mid-Atlantic region, possess the local resources needed to deliver quick, efficient, and cost-effective service for clients.

core Processingcsi

3901 technology drivepaducah, ky 42001phone: (407) 880-2784Website: www.csiweb.comcontact: Debby Davis, sales executiveemail: [email protected]

Computer Services, Inc. (CSI), provides service and software solutions for community banks in both a service bureau and an in-house environment. In addition to core processing, their integrated banking solutions include imaging, cash management, Internet banking, corporate intranets, secure web hosting, online shopping, teller and platform services, ATM and debit card service and support, network management, and compliance software and services for regulatory compliance, homeland security and fraud prevention. Over 3,000 financial institutions are served with CSI’s products and services.

it consulting & serVices, insurancetHe Plateau grouP, inc.

po Box 7001Crossville, tn 38557-7001phone: (931) 484-8411fax: (931) 484-0692Website: www.plateaugroup.comcontact: Dick Williams, Presidentemail: [email protected]

The Plateau Group, Inc., provides valuable credit-related insurance products and services in the Southeast. Plateau markets its products and services through financial institutions, and other entities that offer consumer financing as a regular part of their business. Plateau is focused on the continuing development of new products and distribution channels to sustain long-term profitability and steady growth.

Welcome New Associate Members


By chris sutherland, matrix network services

Server Virtualization Fundamentally Changing Future of IT

v ir tualization is a proven software technology that is rapidly transforming the iT

landscape and fundamentally changing the way that people compute. vir tualiza-

tion allows you to enhance the way your iT environment operates. it simplifies the

physical infrastructure, providing centralized management and better flexibility for re-

source sharing. From data centers to desktops, vir tualization lets banks pool and share

iT resources centrally and standardize computer deployment and resources so data is

more secure.

For years, bankers have been watching and waiting

for the definitive direction of virtualization. Although

the technology isn’t new, there has been a delay in

adoption for reasons ranging from an overall lack of

knowledge about the benefits, to banks fearing a shift

in their day-to-day operations.

Today, virtualization technology is maturing and the

tangible benefits are being realized – and the timing

couldn’t be better. In the recent uncertain economic en-

vironment, the industry-wide virtualization initiative

is generating immediate and ongoing operating effi-

ciencies and cost savings for many banks nationwide.

And more and more banks are progressively plugging

in.

Below are the top five reasons banks are implement-

ing server virtualization:

1. GET MORE OUT OF RESOURCES

With virtualization, banks can pool common infra-

structure resources and break the legacy “one applica-

tion to one server” model with server consolidation.

Virtualization can dramatically reduce the number of

physical servers and dynamically redistribute excess

computing power to where it is needed most. As the

processing power of today’s servers continues to in-

crease, it is now easier than ever for one more powerful

server to replace multiple smaller servers.

Reducing the number of physical servers also re-

duces ongoing energy requirements, making it a more

environmentally friendly way of doing business. This

option is attractive to banks that are adopting “green”

business practices.

2. REDUCE DATA CENTER COSTS

Cost reduction is one of the primary reasons banks

are increasingly taking advantage of virtualization.

Virtualization requires fewer servers and related IT

hardware and can reduce real estate, power, and cool-

ing requirements. It also provides more efficient man-

agement tools, which can enable banks to improve

their server-to-administrator ratio and even reduce

personnel requirements. And looking at the big pic-

ture, virtualization dramatically reduces the hassle and

costs associated with ongoing hardware maintenance.

3. ENHANCE AVAILABILITY AND SECURITY

Virtualization increases availability of hardware and

applications, improving business continuity and disas-

ter recovery. It enables banks to securely backup and

migrate entire virtual environments with practically

no interruption in their day-to-day operations. With

virtualization, banks can eliminate planned downtime

and recover quickly from unplanned business interrup-

tions.

4. GAIN OPERATIONAL FLEXIBILITY

Virtualization enables banks to respond to market

changes with dynamic resource management, faster

server provisioning and improved desktop applica-

tion deployment. Banks need to be able to change software

and add new products in a reasonable timeframe. With a

virtual server infrastructure, they can do this without hav-

ing to find new hardware, order it and wait on having it

shipped to the bank. If you have the growth room in your

setup, you can configure and test without having to wait

for equipment.

5. IMPROVED DESKTOP MANAGEMENT AND SECURITY

Virtualization provides environments that users can ac-

cess locally or remotely, with or without a network con-

nection on almost any standard desktop, laptop, tablet PC

or smart device. With desktop virtualization, banks can se-

cure and manage desktops from one centralized location.

Using simple management tools, all desktops can be con-

figured the same and the data is stored at a data center to

help ensure that security and backup policy requirements

are upheld.

GETTING STARTED wITH VIRTUALIZATION

Banks that are interested in getting started with virtu-

alization should begin the process with discovery and

planning. It’s important to analyze the current operating

environment and use that information to decide how and

where virtualization should be utilized.

Discovery – First, take inventory of your entire environ-

ment, including servers, workstations and switches. Moni-

tor the performance of your environment, which includes

building a history of performance for servers, diagram-

ming what each workstation needs physically and tracking

performance of bandwidth locally on wide area networks.

Planning – Review your discovery documentation and

determine what elements of your environment are good

candidates for virtualization. Determine your future needs

in areas such as management, disaster recovery and cost

savings. And make sure you’re working with a trusted and

proven vendor that is experienced with evaluating and im-

plementing virtualized environments. Look for a vendor

that offers custom network solutions and consultation that

support virtualization, server consolidation, storage, com-

munications, conversions, and migrations.

Server virtualization can generate significant cost and

time saving benefits to banks. If you haven’t researched

how this operational enhancement can help your bank

save money, improve disaster recovery, and simplify day-

to-day processes, there’s never been a better time than

right now. Around the world, companies of all sizes are

benefiting from virtualization – don’t be left behind!

Chris Sutherland is a network engineer at Matrix Network Ser-

vices, offered by Gladiator Technology, a solution provided by the

ProfitStars® division of Jack Henry & Associates, Inc. (JHA).

He can be reached by email at [email protected].


New Regulation Z amendments that imple-

ment Truth in Lending provisions intended

to deal with loan officer pay are part of a

regulatory initiative to protect mortgage borrowers

from what regulators believe are unfair, abusive or

deceptive lending practices that can arise from loan

originator compensation practices.

Compliance with these rules became mandatory

on April 1. A federal court of appeals temporarily

blocked implementation of the rule on March 31, but

the United States Court of Appeals for the District of

Columbia Circuit denied emergency motions for ex-

pedited relief on April 5.

Initially announced last summer as part of a

mortgage regulation revamp, the final rule ap-

plies to closed-end consumer loans secured

by a dwelling or real property that includes

a dwelling that are subject to Regulation Z –

but not to home equity lines of credit (HELOCs) and

timeshare transactions.

The compensation rule contains two basic compo-

nents: The first relates to compensation paid to loan

originators, and the second requires creditors to es-

tablish procedures which will prevent loan origina-

tors from steering a consumer to a loan product that

will generate more compensation for the loan origi-

nator.

The new rules apply to mortgage brokers and

companies that employ them, as well as to mortgage

loan officers employed by depository institutions and

other lenders.

Loan originators include mortgage brokers, who

loan originator compensation rules now effective

By Donna rakes and Jim Dray thomas

Compliance Associates, inc.

CornerCompliance

VBA BENEFITS CORPORATION

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Consolidated monthly billing for all benefit programs•

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Visit our website at www.vabankers.org


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

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

most respected source of compliance information and assistance in banking.

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

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

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

www.tcaregs.com

may be natural persons or mortgage bro-

ker companies, including companies that

close loans in their own names but use

table-funding from a third party.

The term “loan originator” also includes

employees of creditors and employees of

mortgage brokers that originate loans (i.e.

loan officers).

Creditors are excluded from the loan

originator definition if they do not use

table funding, whether they are a deposi-

tory institution or a non-depository mort-

gage company. Employees of such entities

are loan originators.

As a result, the yield spread premium

(YSP) or servicing release premium (SRP)

earned by a depository or non-depository

institution that closes a loan with its own

funds or a bona fide warehouse line of

credit is not subject to the rule. However,

an institution may not split the YSP or SRP

with its loan officer employee or pay loan

officer employees based on the YSP or SRP

earned.

The rule prohibits a creditor or any oth-

er person from:

Paying compensation, directly or •

indirectly, to a mortgage loan origi-

nator that is based on loan interest

rates or other terms and conditions

of the loan. Compensation based

on a fixed percentage of the loan

amount, however, is permitted. Ex-

amples of prohibited compensation

practices that have been fairly com-

mon in the industry include pro-

grams that allow lenders to vary

the rate above or below the bank’s

rate and receive all or a portion of

the difference or allow lenders to

vary the amount of fees above or

below the stated fees and receive all

or a portion of the difference. Other

prohibitions include programs that

pay a bonus or other incentive

based on the profitability of the

department, business unit or bank,

and programs that pay tiered-rate

percentages of the loan amount –

1 percent for loans of $200,000 or

more and .75 percent for loans of

less than $200,000, for example.

Paying compensation to a loan •

originator for a particular transac-

tion if the consumer pays the loan

originator’s compensation directly.

Steering a consumer to a mortgage •

that provides the loan originator

with greater compensation as com-

pared to other transactions the

loan originator offered – or could

Continued on page 20


I t is unclear if effective enterprise risk

management programs would have

prevented or limited the damage as-

sociated with the recent financial crisis, but

it is likely that these programs will be in

place well before another recession. This is

true for two reasons; it is a good business

decision, and new and expanded exami-

nation requirements will soon require this

approach. While risk management prac-

tices most likely currently exist at your in-

stitution, it is not always clear how those

efforts relate to each other and if there is

a documented risk profile for the bank.

Wolf & Company, P.C. through their

WolfPAC Integrated Risk Management®

solution, provides a vital role as a strate-

gic partner to more than 100 banks across

the country. WolfPAC offers the tools to

create the most efficient and effective risk

management program possible. The risk

management program your bank devel-

ops with the help of WolfPAC will align

with your bank’s overall strategic objec-

tives by increasing profitability, lowering

costs, and reducing exposure to losses.

WolfPAC Integrated Risk Management

is an online suite of services developed

by the risk management experts at Wolf

& Company, the Boston-based firm with

more than 100 years of experience work-

ing with financial institutions. The lead-

ership team at WolfPAC has a significant

tenure and knowledge of the banking

industry, and the high quality technical

skills that allows them to meet the enter-

prise risk management needs of all finan-

cial institutions.

WolfPAC helps banks improve opera-

tional efficiency by automating and ana-

lyzing risk and controls for IT, privacy,

vendor, regulatory compliance, and other

operational risk assessments into a single

integrated service. This ability to create a

centralized view of the bank’s operations

lowers costs by providing managers with

a valuable understanding of their risk

profile, and aligning current resources

with existing budgets. The WolfPAC en-

terprise risk management solutions suite

includes 13 modules from which banks

can create a program that suits their indi-

vidual requirements.

The changes in the regulatory landscape

require banks to operate differently today.

WolfPAC is ahead of the curve in compli-

ance and regulatory issues and is able to

help banks better understand the threats

and risks to their organization. WolfPAC

enterprise risk management solutions al-

low financial institutions to remain safe,

sound, and sustainable.

For more information about how you

can develop and implement a risk assess-

ment program that will increase your

bank’s profitability while lowering expo-

sure to risk, please contact Joe Romanello

at (617) 261-8195 or email him at

[email protected].

VBA MsI endorses Wolf & Company, P.C.

VBA Welcomes VCDC

A catalyst organization, the Vir-

ginia Community Develop-

ment Corporation (VCDC)

creates opportunities for investor and

project sponsor partners to revitalize

communities through affordable housing

and community development. VCDC,

one of the VBA MSI’s newest endorsed

vendors, is a 501(c)3 certified non-profit

organization that takes a leadership role

in providing the experience, services and

coordination necessary to make this inno-

vative approach to investing work. Since

1990, they have successfully launched 14

tax-credit equity funds and assisted in

the development of nearly 100 properties

throughout Virginia with technical assis-

tance and equity investments. More than

30 Virginia banks and corporations enjoy

the benefits of investing in the VCDC’s

tax credit funds while supporting afford-

able housing in their local communities.

By balancing the interests of its partners,

VCDC delivers an above-market rate of

ROI as well as worthwhile affordable

housing and historic renovation projects –

resulting in changed lives and thriving

communities.

For more information about the Vir-

ginia Community Development Corpo-

ration, please call Arild Trent, Investor

Relations Director, at (804) 343-1200, ext.

116, or visit www.vacdc.org.

Endorsed Service Providers


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This year, more than 340 bank-

ers entered classrooms across

the Commonwealth on April

12 for Teach Children to Save Day.

The bankers reached more than 12,500

students through 422 presentations.

Bank of America community vol-

unteers in Norfolk presented to 536

students at Mary Calcott Elementary

School, 47 students at Ready Academy,

and 145 students at Campostella El-

ementary School.

In Community Bank’s case, volun-

teers participated in Teach Children

to Save Day and spoke to four second-

grade classes at Seatack Elementary

School, which is one of the bank’s part-

ners in education.

Meanwhile, Bank of Lancaster

planned a number of events for stu-

dents, including hosting first-graders

from Chesapeake Academy as the kick-

off event for Teach Children to Save

Day. These students, along with teacher

Kelly Antonio, toured the bank’s main

office, met mascot Penny, learned about

the importance of saving, and conclud-

ed their bank day with a pizza lunch

served in the bank’s board room.

Hazel Farmer, senior vice president

and consumer education director for

the bank, said that as community bank-

ers, “we are doing all we can to help

young students understand the differ-

ence between wants and needs and the

importance of saving. Throughout the

month of April we visited elementary

schools from Colonial Beach to Lan-

caster, helping young people develop

lifelong savings habits and helping

them understand the important role

banks play in their communities. The

Teach Children to Save Day program is

celebrating its 15th anniversary and has

reached over 4 million young people.

We are very pleased to have the oppor-

tunity to partner with the VBA and our

local educators to help students reach

their potential and become productive

adult citizens.”

Franklin Community Bank, N.A.

employees Linda Barbour, Julie Da-

vid and Lisa Spangler reached 32 kids

at Snow Creek Elementary School in

Franklin County, and The Bank of

Southside Virginia had employees

from all 15 of their branches in various

elementary schools throughout South-

side Virginia.

Citizens Community Bank em-

ployee Holly Blackwell presented in

Mrs. Lucy Wilson’s kindergarten class

at South Hill Elementary, while Karen

Whitten spoke to Chase City Elemen-

tary School and Nancy Daniel visited

with Meherrin-Powellton Elementary

School students. Sharon Pearson and

Amy Cooke also made it to North Car-

olina for a few presentations.

Sonabank participated with six

classes, reaching 144 students. Frank-

lin Federal Savings Bank continued to

teach its proprietary financial literacy

curriculum, Making Money Count™,

on Teach Children to Save Day. The

one-hour “edutainment” program rein-

forces second-grade SOLs in math, eco-

nomics, civics and oral language. Their

program is available, free of charge,

to all elementary schools in the city of

Richmond and surrounding counties of

Chesterfield, Hanover and Henrico.

The VBA and the VBA Education

Foundation would like to thank the 47

banks that participated in Teach Children

to Save Day (see sidebar, right).

Teach Children to save Day a statewide success

TOP: eric philipkosky from delegate roxann l. robinson’s office visits with a Salem Church elementary student. Middle: nancy Bulluck and Wes Shepherd, Citizens Community Bank, visited Mrs. Walton’s first-grade class at Meherrin-powellton elementary School.BOTTOM: Bank of lancaster’s Judy Sydnor visited Cople elementary School in Montross, virginia on teach Children to Save day, reaching 65 third-graders and 17 kindergarteners with programs about the importance of saving.

www.vabankers.org

1 Jennifer Merritt, franklin federal Savings Bank, with students at Salem Church elementary.

2 Chesapeake Bank employees visited Stonehouse elementary and presented an activity using the book “Alexander, Who used to Be rich last Sunday.”

3 Amy roberts, the Bank of Southside virginia, reads a fifth-grade Matoaca elementary class the story “rock, Brock, and the Savings Shock.”

4 Sonabank employees visited nathanael greene elementary students in Standardsville.

5 virginia delegate Brenda pogge, right, stopped by Chesapeake Bank’s presentation at Stonehouse elementary to speak with the students on the impor-tance of saving.

6 franklin Community Bank, n.A., at Snow Creek elementary School in franklin County. there were approximately 32 kids in attendance.

7 Brandon Atkins (pictured) and Mario huffman, American national Bank & trust, participated in teach Children to Save day with second-graders at Sacred heart School in danville. they also went to epiphany episcopal School and presented to second- and third-graders on April 5.

8 Community Bank employees participated in teach Children to Save day. lisa Wilkins (pictured) and kathy Bryan used teach Children to Save day lessons to teach two classes of the value of saving money and spending wisely.

Bank of america, n.a.Bank of Hampton roadsBank of lancaster Bank of mckenneyBank of the commonwealthBB&tBenchmark community Bankcardinal Bankcentral Virginia Bankchain Bridge Bank, n.a.chesapeake Bankcitizens Bank & trust co.citizens community Bankcommunity Bankcommunity capital Bank of Virginia (Vcc)eVBFarmers & merchants BankFirst and citizens BankFirst BankFirst Bank of VirginiaFirst capital BankFirst citizens BankFirst community Bank, n.a.Franklin community Bank, n.a.Franklin Federal savings BankHometown Bankmillennium Banknational Banknew Horizon Bank, n.a.oak View national Bankold Point national BankPendleton community BankPeoples community Banksandy spring Bankshore Banksonabankstellarone Banksummit community Banksuntrust Bankthe Bank of southside Virginiathe Business Bankthe Fauquier BanktowneBankunion First market Bankunited BankVillage BankVirginia savings Bank, FsB

May/June 2011 | Virginia Banking 19

1 4

5

3

2

6

7

8


have offered – to the consumer,

unless the loan is in the consum-

er’s interest. The anti-steering rule

does provide a safe harbor to fa-

cilitate compliance.

The safe harbor provision is met if:

The borrower is presented with •

loan options from a significant

number of creditors with which

the originator regularly does busi-

ness for each type of transaction in

which the consumer expresses an

interest (fixed rate, adjustable rate

or reverse mortgage).

The loan options presented to the •

consumer include the lowest inter-

est rate for which the consumer

qualifies; the lowest points and

origination fees; and the lowest rate

for which the consumer qualifies

for a loan with no risky features,

such as a prepayment penalty,

negative amortization or a balloon

payment in the first seven years.

Creditors who offer only portfolio loan

products and do not broker loans to sec-

ondary market investors will be deemed in

compliance with the anti-steering prohibi-

tions in Section 226.36(e)(1) if the creditor

complies with the loan officer compensa-

tion restrictions in Section 226.36(d)(1).

Creditors who offer both portfolio loan

products and loan products that are bro-

kered to the secondary market must de-

velop procedures to document compliance

with the anti-steering requirement.

Creditors who compensate mortgage

loan originators with any incentive or bo-

nus feature must retain records to evi-

dence compliance with Regulation Z for at

least two years after a mortgage transac-

tion is consummated.

VBA members seeking information or

more direct assistance with federal regu-

lations, including the new loan officer

compensation rules, should call TCA’s

Donna Rakes or Jim Dray. The toll-free

number is 800-934-7347. Rakes is manag-

er of TCA’s East Coast regional office in

Rustburg. Dray is president of TCA. TCS

is the VBA’s endorsed provider of compli-

ance services.

CornerCompliance

Continued from page 15


©2011 PULSE

Collaboration Customer ServiceProfessional Development

pulsenetwork.com/debitregs

A Discover Financial Services Company

For 30 years, we’ve been alongside our participants through calm seas and rough waters. Today you are faced with new regulatory developments and more uncertainty than ever before. As we face the unknown together, know that we’ll be by your side as an advocate and trusted advisor – empowering you to make smart decisions and build a successful debit program. We see debit opportunities in everything we do, because it’s all we do. Profi t from our passion.

Stay informed by visiting our Durbin Amendment Resource Center at pulsenetwork.com/debitregs

All mortgage loan originators employed by a financial in-

stitution regulated by the OCC, Federal Reserve, FDIC, OTS,

NCUA and FCA must register as required by the SAFE Act.

The registration requirement is based on job duties, not

title.

A mortgage loan originator is “an individual who takes a

residential mortgage loan application and offers or negotiates

terms of a residential mortgage loan for compensation or gain.

The term does not include an individual who is not a mort-

gage loan originator and: (1) performs purely administrative or

clerical tasks on behalf of an individual who is a mortgage loan

originator; (2) performs only real estate brokerage activities (as

defined by the SAFE Act) and is licensed or registered as a real

estate broker in accordance with applicable state law, unless

the individual is compensated by a lender, a mortgage broker,

or other loan originator or by any agent of such lender, mort-

gage broker, or other mortgage loan originator; or (3) as solely

involved in extensions of credit related to timeshare plans.”

The term “administrative or clerical tasks” means “(1) the

receipt, collections, and distribution of information common

for the processing or underwriting of a loan in the mortgage

industry; and (2) communications with a consumer to obtain

information necessary for the processing or underwriting of a

residential mortgage loan.”

VBA members should keep in mind that commercial and

small business lenders often make consumer-purpose accom-

modation loans to their clients – often taking a mortgage se-

curity interest against the business owner’s residence. Based

on the definition of a “residential mortgage loan application,”

it appears that some small business and perhaps even some

commercial lenders are subject to the mortgage loan originator

rules.

Lenders should review current compensation policies and

make necessary adjustments.

THE DEFINITION OF A ‘MORTGAGE LOAN ORIGINATOR’


Eastpay

cardinal BankJeff Dimeglio, Senior Vice President,

Market Executive

cardinal Financial corporationDavid W. Frasier, Executive Vice

President and Director of Audit

carter Bank and trustJane ann Davis, Senior Vice

President and Chief Financial Officer

m. Wesley “Wes” Furrow, Branch Manager

amber P. norman, Branch Manager

old Point national Banksylvia Hazelwood, Vice Presidentgloria little, Branch Officersherri mcQuillan, Assistant Vice

President and Private BankerJoycelyn y. spight, Vice President

and Commercial Account Manager

old Point trust & Financial services, n.a.Jeff sheats, Wealth Strategist

m&t Bankedward kivior, Vice President and

Senior Relationship ManagerHinton P. Powers iii, Assistant

Mortgage Sales Manager

Virginia commerce Bank kimberly Bradford, Branch

ManagerWendy m. clark, Chief

Compliance Officerkimberly clay, Manager of Loan

Administrationlibby Fike, Vice President of Project

Managementcaroline Foster, Assistant Vice

President of ComplianceBarry Huitema, Vice President of

Retail Consumer Operations laura Jones, Assistant Vice

President of Compliance charles kapur, Vice President of

Community Banking

melanie mcandrew, Vice President and Customer Care Manager

John mcmanus, Senior Vice President of Community Banking

edward F. Powell, Vice President of Commercial Lending

MoveBankers on the

Dimeglio Frasier Davis sheatsFurrow norman Hazelwood little mcQuillan spight kivior Powers

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

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