West Virginia Bankers Association

2014 Annual Convention

Breakout Session:

Ask the Experts Panel

Panelists:

Paul Reynolds

David Thomas

Christian Gonzalez

Michael Dailey

Ask the Experts Panel

What Questions Are on the Minds of Bankers?

Board and Corporate Governance Mortgage Servicing Rules – Foreclosure Mergers and Acquisitions – What to Look Out For Social Media – Risk Management

Board and Corporate Governance

What will regulators expect from boards in the near future and how will director training and education change?

More Director education in topics important to the regulators (risk, compliance, financial)

Education should enhance the Directors’ ability to, and practice of, challenging management

Informed knowledge and decision making is an important goal of education programs

Board and Corporate Governance

What are the trends in management and director liability following the financial crisis?

Personal liability – FDIC actions Other enforcement and regulatory actions against

management and directors The interest and focus of shareholders and regulators

are not necessarily aligned when determining what is important

Insurance and indemnification

Board and Corporate Governance

What is the ideal composition for a board and how is board governance evolving?

Separation of titles and board independence are focus areas for regulators

Necessary skills – financial and risk expertise not necessarily required for community banks but advisable

Reports and information are keys to Director effectiveness

Board and Corporate Governance

What should directors and management focus on with respect to succession planning?

Board’s role in management decisions and succession Mandatory retirement and impact on building an effective

Board in today’s regulatory environment

Mortgage Servicing Rules – Foreclosure

In general, how do the new mortgage servicing rules implemented by the CFPB affect my ability to foreclosure upon a loan secured by a residential dwelling?

Mortgage Servicing Rules - Foreclosure

Depends upon whether you are a “small servicer” (service 5000 or less mortgages)

“120 day rule” applies to all banks More strict requirements for larger servicers

Special notices and timing requirements Live contact requirements Loss mitigation becomes more important

Need to review policies/processes

Mortgage Servicing Rule - Foreclosure

Do I have to wait until the mortgage loan is 120 days past due before sending a notice of right to cure default and when should right to cure be sent?

Mortgage Servicing Rules - Foreclosure

Cannot initiate “first notice or filing” until loan is more than 120 days past due

CFPB clarified it is document that establishes sale date WVCCPA requires at least 10 day right to cure

Also need to look at loan documents/deed of trust WVCCPA: Can’t threaten action prohibited by law May consider sending multiple notices Review policies/automated notices Carefully review/analyze before referring to foreclosure

Mortgage Servicing Rules - Foreclosures

Can I foreclose if the borrower is continually in default, but remains less than 120 days delinquent?

Mortgage Servicing Rules – Foreclosure

CFPB rule reads “more than 120 days delinquent” No guidance/commentary to define Two ways to interpret:

(1) Loan in default for 120 consecutive days

v/s (2) Loan is literally more than 120 days past due

May need to look at loan documents/state law What about non-monetary defaults? Stay tuned!

M & A: What to Look Out For

What issues should be on the minds of senior management and the board when considering a transaction?

M & A: What to Look Out For

Forming the team Internal External

Due diligence Financial plan and structure

Consideration mix Transaction structure

Integration

M & A: What to Look Out For

What are the critical areas to review and analyze during diligence?

Legal – governance, litigation, environmental, regulatory compliance, shareholders

Financial – statements/reports, ALLL, taxes, pricing

Operational – loans, employment issues, employee benefits, vendors

M & A: What to Look Out For

What issues are on the minds of the regulators when evaluating an application for a transaction?

M & A: What to Look Out For

CAMELS Rating Consumer compliance – CRA, BSA, Fair Lending Presentation of pro formas Impermissible investment activities Pre-application meeting

M & A: What to Look Out For

Generally, what are the significant negotiated issues or points in a definitive agreement?

M & A: What to Look Out For

Typical Elements of Agreement:

Price and adjustments Consideration mix Representations and warranties Covenants Termination/Break-up fees Survival of representations and warranties Closing mechanics

M & A: What to Look Out For

Negotiation Topics in Definitive Agreement

Price/fairness opinion Financial; reserves and allowances Disclosures Employee and benefit matters Taxes Pending litigation Contracts Environmental

M & A: What to Look Out For

How does the regulatory application process work?

Holding company applications and waivers Bank subsidiary application Timing

M & A: What to Look Out For

What are some other issues and pitfalls in bank M & A?

Data Conversion – costs, expenses and timing People Integration – culture Customers – retention and communication

Social Media

Is there one overarching regulatory concern/issue relating to social media in the banking industry?

Social Media

Yes! Risk management Risk Management Program

Governance structure – board/senior management Oversight and monitoring Audit function and compliance Third party vendor management Reporting and evaluation

Social Media

What consumer compliance laws and regulations are implicated by the use of social media?

Social Media

Truth in Savings/ Reg. DD Fair Lending – Equal Credit Opportunity/ Reg. B; FHA Truth in Lending/ Reg. Z UDAAP Fair Debt Collection Practices Act Deposit Insurance Rules CRA Privacy Laws – GLBA; CAN-SPAM

Social Media

In order to manage risk to the bank from negative postings on social media, do we have to widely monitor social media sites?

Social Media

No, But Must Monitor Own Sites Facebook page Twitter account Sponsored bulletin boards

Direct customer complaints via social media Risk based monitoring of other’s social media Analyze risk of not responding

Social Media

Is it necessary for our bank to have a policy to govern employee activity on social media? If so, what should be in the policy?

Social Media

YES, your bank needs a social media policy Clear, concise and tailored

Describe social media covered Indicate applies during and after work Specific actions/comments prohibited Confidential information; proprietary

Inform that bank may monitor social media activity Who permitted to post

Thank you for your participation!

West Virginia Bankers Association

2014 Annual Convention

Breakout Session:

Ask the Experts Panel

Paul Reynoldspaul.reynolds@dinsmore.com

David Thomasdavid.thomas@dinsmore.com

Christian Gonzalezchristian.gonzalez@dinsmore.com

Michael Daileymichael.dailey@dinsmore.com