Update On NCYB Message From The Chairman Health Savings ... · Phone: Email: P.O. Box 19999 Raleigh, NC 27619 (919) 781-7979 [email protected] features [6] From The President’s

Update On NCYB Message From The Chairman Health Savings Accounts

The Harry A. Davis Professorship

The Walker School of Business at Appalachian State University

Names Professorship in Dr. Davis’ Honor

© 2016 First Tennessee Bank National Association. Member FDIC.

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4 Carolina Banker Summer 2016

Carolina Banker

in this issue

SUMMER 2016WWW.NCBA.COM

The NCBA is proud to announce that the Walker College of Business at Appalachian State University (ASU) has introduced the Harry A. Davis Professorship in honor of the tremendous service and lasting impression Dr. Harry A. Davis, NCBA economist and professor of banking at ASU, has had on both the University and on the banking industry in our state. This Professorship, named in Harry’s honor, will allow the Walker College of Business to attract and retain talent to teach, conduct research and perform service in the field of banking and finance. Cover photo taken by Ray Barbour of Ray Barbour Photography.

on the cover

Carolina BankerThe award-winning magazine published quarterly by Community Bank Services (CBS), a wholly-owned subsidiary of the NCBA, as a continuation of The Tarheel Banker since July of 1922.

Editor Kathleen Rollinson

Circulation:Subscription:

5,000+$12 per year

Mailing Address:

Phone:Email:

P.O. Box 19999Raleigh, NC 27619(919) [email protected]

features

[6] From The President’s DeskBy: Peter Gwaltney

[34] Q&A With Congresswoman Virginia Foxx

[59]

[34]

[59]

Introducing The Dr. Harry A. Davis Professorship At The Walker College Of BusinessBy: Kathleen Rollinson


5Summer 2016 Carolina Banker

Officers & DirectorsBob Hatley, Raleigh

ChairmanRick Callicutt, High Point

Vice ChairmanMike Ayotte, MorgantonImmediate Past Chairman

Peter GwaltneyPresident & CEO

Larry Barbour, RaleighWendell Begley, Black Mountain

Scott Custer, RaleighRon Day, Raleigh

Denis de St. Aubin, Siler CityCharles Frederick, Asheville

Mark Holmes, WilsonHarold Keen, Smithfield

Bob Reid, CharlotteKari Stoltz, Raleigh

North Carolina Bankers Association Staff

Peter Gwaltney, President & CEOGrace Sampson, Sr. VP & Secretary / PAC Treasurer

Nathan Batts, Senior Vice President & CounselMeghan Best, Vice President & Chief Financial Officer

Dawn Thompson, VP & Associate CounselVickie Bowers, Director of Human Resources

Christy Santacana, Meetings DirectorKathleen Rollinson, Director of Communications

Brianna Reeder, Director of Professional DevelopmentBlaine Wiles, Director of Community Outreach

Frank Youngblood, Operations CoordinatorTina Dilio, Receptionist

Community Bank Services (CBS) StaffKim Hutchens, Executive Vice President

Lauren Perry, Vice PresidentJanice Royster, Director of Endorsed Vendor Programs

Community Investment Corporation of the Carolinas (CICCAR) Staff

David Bennett, Executive Vice PresidentJohn Bocciardi, VP/Asset and Compliance Manager

Cindy Wiggins-Tiede, Senior UnderwriterShellie Lempert, Servicing and Closing Manager

Vikki Conley Ikard, Portfolio Analyst

ConsultantsRobert A. Singer, Greensboro

Corporate CounselDr. Harry M. Davis, Boone

NCBA Economist and Dean of the NCBA’s North Carolina School of Banking at UNC-Chapel Hill

contentFrom The President’s DeskBy: Peter Gwaltney

[6]

Faces In The News

Around The State

[8] A Message From The ChairmanBy: Bob Hatley, Paragon Bank

Why Your Bank’s Data May Be Inadequate For CECLBy: Emily Boga, Sageworks

[12] Legal Corner: Bankers Take The Capitol By StormBy: Dawn Thompson

[16] 2016 Bank Directors Assembly

[22] Update On North Carolina Young Bankers DivisionBy: David Allen, Bank of North Carolina

[26] The LIHTC Program At 30 - Past Results, Future NeedsBy: David Bennett

[30] A Primer To Understanding Golden Parachute PaymentsBy: Thomas P. Hutton, Luse Law

[50] Financial Literacy Update: How Early Should We Teach Financial Literacy?By: Blaine Wiles

[32] 2016 Washington Bank Caucus

[34] Q&A With Congresswoman Virginia Foxx

[37]

[70][73]

[41] What Keeps HR Executives Awake At NightBy: Kim Hutchens

[47] North Carolina Interest On Lawyer’s Trust Account Program ReportBy: Evelyn Pursley, NC IOLTA

Banks Backing Their Communities[74]

[44] 2016 American Mortgage Conference

[55] News From CICCAR

[18] Health Savings AccountsBy: Kevin Boyles, Ascensus

[56] Employee Benefits Update: Workplace Wellness: Simple Steps To A Successful ProgramBy: Lauren Perry

[59] Introducing The Dr. Harry A. Davis Professorship At The Walker College of BusinessBy: Kathleen Rollinson

[62] The Risk Of Unintended Consequences: Applying A One-Size-Fits-All Rule With Respect To Payoff & Reinstatement QuotesBy: Graham Kidner, Hutchens Law Firm

[64] North Carolina Member Feature: Richard Jefferson

[66] A Message From The Incoming ChairmanBy: Rick Callicutt, Bank of North Carolina


President’s Message

FROM THE PRESIDENT’S DESK

When Congress turned a cold shoulder to the banking industry this past De-cember by eliminating a common sense package of bi-partisan regulatory reforms from a year-end omnibus spending bill, it signaled that Congress sees little risk in upsetting their bankers back home. The clear message from NCBA members, and bankers across the nation, is that com-munity banks are suffering from today’s regulatory burden, and the frustration isn’t just about Dodd-Frank. It’s about decades of ill-fitting one-size-fits-all regulations that have forced many community banks to either give up and sell, merge or acquire other banks in order to achieve the neces-sary scale to spread rising expenses over a larger organization. This trend has been compounded by a long trough of histori-cally low interest rates, but that’s not the only cause.

Some in Congress understand the impact all of this has had on customers and communities, but more need to be “converted.” To do this, bankers, the ABA and state bankers associations must work together in a more coordinated fashion to push back the negative narrative that has affected all banks since the financial crisis and tell the story of how customers and communities are being harmed by today’s regulatory environment. The banking in-dustry must also build our political muscularity to the point where Congress and the Administration understand the real-world impact of their inaction and become more motivated to act.

The way the banking industry has com-municated with Congress in the past will not be enough to move the needle in the future. For example, the full-court press led by the ABA and coordinated through

Peter Gwaltneyis president and CEO of the North Carolina Bankers Association.

the NCBA (and our fellow state bankers associations) prior to the passage of the omnibus spending bill involved inside the beltway radio and print publications, mes-sages through all forms of social media and an easy-to-sign online petition that collect-ed more than 20,000 signatures. Sounds impressive, but it wasn’t enough. We were ignored. As impressive as 20,000 signatures sounds, it’s only 1 percent of the banking industry’s 2 million employees.

Bank employees and directors represent voters, and public officials respond to voters. For most banks represented on the petition for regulatory reform, only the CEO and senior officers signed. There is strength in numbers, and in the future we’re going to have to involve our people – as many of our 2 million employees as possible.

In addition to grassroots advocacy, finan-cial resources will be needed to build our political muscularity and clout on Capitol Hill. The three political funding vehicles described below are components of the NCBA political engagement strategy. Each plays a unique role in our efforts to sup-port friends of banking in Congress and the North Carolina General Assembly, or to replace those who are detrimental to the interests of the banking industry.

NC Bank PAC

The NC Bank PAC is the centerpiece of NCBA political engagement. Approxi-mately half of the money collected by NC Bank PAC is spent on contributions to members of the North Carolina congres-sional delegation, and the other half is spent on contributions to members of the General Assembly. All contributions to


elected officials are reviewed and approved by the NCBA Legislative and Regulatory Committee or the NCBA Board of Di-rectors. A growing number of banks in North Carolina are inviting all employees to contribute to NC Bank PAC, and some are making it easy to contribute by offer-ing payroll deduction. The NCBA offers payroll deduction to our staff of 19, and 100 percent of our staff has contributed a total of $3,000. Our NC Bank PAC goal for 2016 is $125,000. I will be visiting our member banks over the remainder of this year to express gratitude for NC Bank PAC support and to encourage participation. Increasing our political engagement is our top priority this year and will be reflected in how my time and energy is spent for the remainder of this year.

The Fund for Economic Growth

Later this year, the NCBA will begin soliciting corporate contributions from all NCBA member banks to the ABA’s Fund for Economic Growth. The Fund for Economic Growth is a 501(c)4, commonly referred to as a Super PAC. The Fund for Economic Growth will focus a portion of its efforts educating consumers and politi-cians on banking issues, while the other portion will be spent on advocacy for bank-friendly candidates in strategic U.S. House and Senate races nationwide. Ed Willingham, chief operating officer, First Citizens Bank in Raleigh, serves on the Board of Directors of the Fund for Eco-nomic Growth. We will work closely with Ed to communicate the goals and objec-tives of the Fund and to encourage support among North Carolina banks.

Friends of Traditional Banking

Friends of Traditional Banking (FOTB) is a non-partisan grassroots effort, organized by bankers. FOTB chooses two Congres-sional races each cycle, and encourages its membership to donate directly to those campaigns. FOTB is the inverse of a PAC

- instead of spreading a little bit of money to a lot of campaigns, it focuses a large sum of money on a couple of key campaigns. NCBA members will be hearing more about FOTB in the future and will be encouraged to get involved. The only way to affect change in Congress is to defeat those who are not friendly to banking, and that’s what FOTB seeks to do.

These are important tools the NCBA and bankers across the nation will be using this year and in the future to in-crease our political muscularity in our nation’s capital and create a more con-ducive environment for banks to grow, prosper and serve your communities.

In closing, I want to express my sin-cere gratitude to Bob Hatley as he wraps up his term as NCBA chairman this month. Bob’s enthusiasm for the work of the NCBA has permeated our organization and has been a source of constant encouragement for me and our staff. Bob has made himself available for countless conversations and meetings and has represented the NCBA with passion and professional-ism across North Carolina and on the national level. Under Bob’s leader-ship, we’ve increased and encouraged member engagement in NCBA events and activities, encouraged PAC partici-pation and political engagement at all levels in our member banks, and we’ve actively promoted economic develop-ment in North Carolina. Please join me in thanking Bob for a job well done! All the best,

CB


A MESSAGE FROM THE CHAIRMAN

Bob Hatley is president & CEO of

Paragon Bank and is chairman of the North

Carolina Bankers Association (NCBA).

It has been an honor and a joy to serve

as chairman of the North Carolina

Bankers Association (NCBA) these

past 12 months. The time has flown.

Reflecting on my tenure, I want to

mention our group’s leadership. We are

fortunate to have Peter as our presi-

dent, and to have the support of such

a capable and energetic staff. While

attending various meetings and con-

ferences with Peter, I’ve observed just

why he enjoys such an excellent repu-

tation among our professional peers

in the ABA, ICBA and other banker’s

associations.

The NCBA is one of the nation’s top

five bankers associations. With a solid

foundation, a very strong financial

statement, and balance sheet liquidity,

the organization does well at generat-

ing annual cash flow to support our

mission.

Peter’s entry has solidified these

strengths. He remains very involved

in our Association’s financial decisions

and takes his fiduciary responsibility

seriously—protecting the member-

ship’s assets. As with any strong leader,

Peter oversees a very supportive staff

of capable people who enjoy working

with such a fine organization.

The combination of leadership and

staffing help to maintain our lofty

reputation and support the mission of

maintaining relevance and vitality for

banking in North Carolina and across

the country.

I began in June of 2015 with three goals

for myself and the NCBA:

• Support Banking Com-

missioner Ray Grace in his

quest for new bank forma-

tions:

As with the rest of the country,

this has been a challenge in

North Carolina. In fact, there

has only been one new bank

charter in the past 12 months.

New bank formation is critical

to our communities. However,

this will remain difficult until the

regulatory landscape softens and

investment incentives return.

This is a work in progress.

• More involvement from

member banks both large and

small:

We have added directors to our

board from some of our larg-

est and smallest banks. The

large contingent that visited

Washington in April to voice

our concerns is evidence of the

Association’s broad engagement

level. The relevance of banking

in North Carolina is dependent

upon each member’s activity in

the various areas of the Asso-

ciation. Peter and I are working

to establish socials across the

state, so bankers and legisla-

tors can get to know each other

better.

• 100 percent participation

in the NC Bank PAC:

We are not there yet, but we

are well on our way. The NC

Bank PAC and two new orga-

nizations— Friends of Banking

and The Fund for Economic

Growth—help ensure that our

elected officials support and

protect our industry, both in

Raleigh and in Washington.

These three organizations pro-

vide opportunities for corpora-

tions to support congressmen/

women who support banking.

The NCBA, ABA and ICBA are

more active in the political and

regulatory arenas than ever be-

fore, and North Carolina bank-

ers are more engaged than ever.

I am very proud of our effort.

Finally, thank you to our board of

directors for your energy and support.

Particularly, I’d like to recognize the

directors whose terms are expiring:

Harold Keen, KS Bank, Smithfield

Mike Ayotte, Morganton Savings

Bank, Morganton.

Larry Barbour, North State Bank,

Raleigh.

Denis de St. Aubin, Old North State

Bank, Siler City.

Charles Frederick, TD Bank,

Asheville.

Kari Stoltz, Bank of America, Raleigh.

I have very much enjoyed serving you,

and I appreciate your confidence.

HOLD FOR CFNC HALF

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CAMP CHALLENGEGIFT PLANNING

Blaine Wiles director of community outreach, NCBAPhone (919) 781-7979Fax (919) 881-9909 Email [email protected]

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Legal Corner

Dawn Thompson is vice president,

national legislative affairs and associate counsel of the North

Carolina Bankers Association.

BANKERS TAKE THE CAPITOL BY STORM

More than 30 North Carolina bankers,

bank board members and bank attorneys

attended this year’s Washington Bank

Caucus, held at The Willard in Washing-

ton, D.C., to carry the flag for the banking

industry and voice our concerns at the

Capitol. We had a diverse group this year

representing banks of all sizes and charters,

urban and rural, providing an accurate

cross-sampling of our statewide industry.

The primary goal of our annual Washing-

ton Bank Caucus is to advocate on behalf

of the North Carolina banking industry

on regulatory relief, credit union taxation,

regulatory reform and other banking re-

lated issues. Attendees maintained a stren-

uous pace over the two-day trip, meeting

with federal financial regulatory agencies,

including the Office of the Comptroller

of the Currency (OCC), Federal Deposit

Insurance Corporation (FDIC), Consumer

Financial Protection Bureau (CFPB) and

Federal Reserve (Board), in addition to 13

of the 15 member North Carolina Congres-

sional delegation.

Federal Financial Regulatory Agency

Visits

Day one of our Washington Bank Caucus

started with breakfast at The Willard, which

gave us an opportunity to join together and

talk through the most important issues fac-

ing our North Carolina banks. The energy

in the room was palpable and it was obvi-

ous that these bankers were ready to voice

their concerns and frustrations.

From breakfast, we went straight to the

OCC. A panel of representatives of the

OCC, including Senior Deputy Control-

ler and Chief of Staff Paul Nash, Senior

Deputy Comptroller for Midsize and Com-

munity Bank Supervision Toney Bland, and

others fielded questions related to the dis-

cretion the OCC has to tailor regulation to

the spectrum of banks it supervises without

Congressional action, level of interac-

tion with Congress, what to expect in the

Fintech arena, community banking, and

top risk areas the agency is seeing during

examinations. When asked about issues of

concern at the OCC, Mr. Nash focused on

two specific issues – succession planning

and margin compression. Deputy Chief

Counsel Karen Solomon spoke about the

agency’s focus on Fintech and responsible

innovation, stating that the OCC is open

for innovation and is seeking comments

from bankers. When asked about possible

legislation governing Fintech companies,

Ms. Solomon said that legislation might be

premature.

Our group then headed for the American

Bankers Association’s (ABA) headquarters

for a meeting with ABA staff followed by

a meeting with the CFPB. Our bankers

enjoyed a lively discussion with a panel of

representatives from the CFPB, mostly cen-

tered on the new TILA/RESPA Integrated

Disclosures (TRID). Several heads of mort-

gage lending at our member banks gave

specific examples of problems with the new

TRID disclosures, including confusion,

longer time for closing, additional costs to

the customer, higher fees being passed onto

the customer and more. The CFPB noted a

few bumps in the road, but maintained that


The primary goal of our annual Washington Bank Caucus is to advocate on behalf of the North Carolina banking industry on regulatory relief, credit union taxation, regulatory reform and other banking related issues.

the CFPB’s research shows TRID is work-

ing and is better for the consumer. The

panel members also discussed the CFPB’s

consumer complaint database, noting that

debt collection has overtaken mortgage

servicing for receiving the most com-

plaints. Bankers questioned the panelists

on how the complaint information is vali-

dated and by what other means does the

agency collect data. Our bankers stressed

there is a complete disconnect between

how the agency thinks the disclosures will

work and what actually happens at a clos-

ing. Bankers also noted several potential

unintended consequences from TRID.

After the meeting with the CFPB, we

headed to the FDIC. Chairman Martin

Gruenberg, along with Directors Doreen

Eberly and Mark Pearce of the

FDIC, reported that community

banks are performing better than

ever with large profit and growth

nationwide. Bankers contradicted

that assessment with examples of

the burden that has been placed

on conducting business from the

mountains of regulations. One

banker expressed frustration over

the time and energy expended to

prepare the voluminous pre-examination

materials only for those same materials

being requested again during the on-site

examination. Another banker stated that

the complexity of the rules is stifling small

banks and credit to communities. This

banker explained the hundreds of pages of

guides that cross-reference another hun-

dred page guides that cross-reference the

thousand page statute adds to the complex-

ity and confusion of the all the rules. All

in all, it was safe to say our bankers drove

their point home.

On day two, we began at the Federal

Reserve. Governor Jerome Powells of the

Federal Reserve, whose background is

in investment banking and law, remarks

were well-received by the group. Governor

Powell was optimistic about the United

States economy and bet that the economy

would continue to grow, albeit slowly, over

the next year. Prompted by a question from

one banker, Governor Powell explained the

process and procedure around the Finan-

cial Open Market Committee (FOMC) and

discussed how FOMC makes decisions on

interest rate policy.

I – along with many of our attendees –

ended the long, yet successful day with a

beautiful walk back to The Willard, passing

the White House and other monuments.

Overall, we had a great and productive first

day in Washington.

Congressional Visits

Also on day two of our visit, our bankers

met with almost all of our Congressional

delegation in the Henry Hyde Room of

the Capitol Building. In every meeting,

our attendees told Members stories of how

regulatory red-tape is hindering the flow

capital to North Carolina communities and

their constituents. Most members were

receptive to changes to Dodd-Frank, but

warned that large scale fixes will not likely

occur this year. One Congressman stressed

the importance of educating both sides of

the aisle to ensure a bill’s success and urged

the bankers to show other members of

Congress how these regulations are truly

CB

impacting bank customers and their com-

munities.

Members also discussed the Presidential

election, ISIL, National Security, North

Carolina HB2, House leadership, political

inside baseball and the Puerto Rico debt

crisis, among other issues.

After a long day at the Capitol, we cele-

brated at the Willard with a lovely cocktail

reception and dinner with several Mem-

bers of our Congressional delegation and

their staffers.

Optional Visit to the U.S. Naval Academy

After two full days of work, several bankers

chose to take in some American history on

our optional special tour of the U.S. Naval

Academy in Annapolis. The group, which

consisted of 18 bankers and spouses, spent

a beautiful day exploring the scenic Naval

Academy campus, known as the Yard. With

its combination of early 20th century and

modern buildings, the Naval Academy is a

true blend of history, tradition and state-

of-the-art technology. The group ended

the tour with a classic Maryland crab cake

lunch in downtown Annapolis.

Join Us Next Year

Advocating in Washington by giving

practical examples of problems in the

regulatory process is critical for regulatory

reform. We hope you will join us and add

your voice at next year’s Washington Bank

Caucus on March 28-30, 2017 at The Hay

Adams.

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Top Left: Congressman Mark Walker, who represents North

Carolina’s Sixth Congressional District, kicked off the 2016

Bank Directors Assembly with a special address. Top Right:

Patti Blenden, president, Financial Solutions, addressed the

crowd on creating a culture of compliance. Right: Attendees

had the opportunity to hear a dynamic and forward-thinking

presentation from Jack Vonder Heide, president, Technology

Briefing Centers, on planning for emerging technologies and

the future of banking. Below Left: Program participants were

also lucky enough to hear from Commissioner Ray Grace,

North Carolina Office of the Commissioner of Banks, on the

challenges and opportunities in our state’s banking industry.

Top Left: Dr. Harry Davis,

NCBA economist, Dean of

the NCBA’s North Carolina

School of Banking and

professor of finance, Ap-

palachian State University,

provided attendees with an

update on the state of the

economy in North Carolina

and nationwide during a

special dinner presentation

on the first day of the Bank

Directors Assembly. Bot-

tom Left: Attendees also

heard from J. Keith Hughey,

founder, J. Keith Hughey

Company. He provided

attendees with a presenta-

tion on the five areas where

most long-term plans fall

short on the final day of the

Bank Directors Assembly.

2016 Bank Directors Assembly

Camp ChallengeHonor Roll

Camp ChallengeHonor Roll

Support Camp ChallengeContact Blaine Wiles at the NCBA today!

(800) 662-7044 or [email protected]

Friends:

Horizons Club: ($600)

Vista Club: ($2,500)

Summit Club: ($5,000)

Legacy Club: (2016 Endowment Contributions)

Pinnacle Club: ($10,000)

[email protected]

CAHEC

BB&T

David Belk Cannon Foundation

Harvey McNairy Foundation

Live Oak Bank

Square 1 Bank

Bank of America

Bank of North Carolina

Blue Cross & Blue Shield North Carolina

First Community Bank

Wells Fargo

Wren Foundation

Coca-Cola

CommunityOne Foundation

Fifth Third Bank

First Citizens

First Bank

First Tennessee Foundation

Piedmont Federal Savings

Asheville Savings Bank

Belmont Federal Savings Bank

blueharbor bank

Carolina Bank

Cornerstone Bank

Dana & Jana Stonestreet

Farmers & Merchants Bank

Fidelity Bank

First Federal Savings Bank

First Carolina Bank

FISERV

Four Oaks Bank

HomeTrust Bank

James & Gina Bigger

KS Bank

LifeStore Bank

Paragon Bank

Peoples Bank

Roxboro Savings Bank

Select Bank

Sound Bank

Southern Bank Foundation

Staff of Carolina Alliance Bank

SunTrust

Tammy Nicholson

Tarboro Savings Bank

TrustAtlantic Bank

United Community Bank

Union Bank

Uwharrie Bank

Woodforest National Bank

Yadkin Bank

Carter Bank & Trust

Black Mountain Savings Bank

Meredith Begley

Regions Bank

Rick Callicutt

William Granberry

Thad & Jan Woodard



Kevin Boyles is VP/business

development for the retirement products

and services division of Ascenus.

HEALTH SAVINGS ACCOUNTS

A New Magnet For Millennial

Consumers

Today it seems you can hardly avoid

tripping over an article about the state

of American healthcare, health savings

accounts (HSAs), or millennial trends.

The Affordable Care Act (ACA) is still a

political hot button and is certain to move

more firmly into the spotlight given the

upcoming presidential elections. What has

not been evaluated, however, is the impact

of HSAs in the health insurance paradigm

shift the U.S. is currently undergoing.

Consumers’ perspective on healthcare cov-

erage is evolving, and millennials stand to

be affected significantly by the shift. As the

generation looks to expand into the largest

segment of the U.S. workforce, your bank

has the opportunity to capitalize on the

new perspective by including HSAs in your

product line.

Millennial Expansion

Recent data from the Pew Research Cen-

ter shows that in 2015, generation Y, more

commonly known as millennials, caught

up to generation X as the largest genera-

tional segment in the workforce at 53.5

million strong. Considering how many

millennials are still in college or looking

for their first jobs, that number will expand

rapidly in the near term. By 2020, millenni-

als will make up half the workforce and by

2025, they will constitute 75 percent of the

workforce.

The landscape of employer-offered health

insurance is changing just as rapidly, with

large scale migration to high deductible

health plans (HDHPs) by employers of all

sizes, and the advent of defined-contribution

health insurance. According to the Kaiser

Family Foundation, 26 percent of all em-

ployers already offer an HDHP. The larger

the employer, the more likely it is to offer

an HDHP paired with an HSA. When it is

offered, more than half of the employees are

covered under the plan. Coupled with the

ACA mandate for individuals to carry health

insurance or face tax penalties, it’s a recipe

for growth in HSAs beyond the already

exponential evolution since their inception

in 2004.

Millennials will be at the forefront of this

growth, though baby boomers and oth-

ers will have a significant impact. A perfect

storm of legislative, economic and demo-

graphic forces is brewing to fuel unprec-

edented growth in HSAs.

Legislative Factors

The ACA mandates not only that all indi-

viduals carry health insurance, but that all

employers with 50 or more employees offer

health insurance for its employees. HDHPs

are less expensive for small employers to

offer, so it’s reasonable that most businesses

would choose them. Because premiums for

HDHPs also are considerably lower than

most others, individuals buying insurance

on their own (either through healthcare

exchanges like healthcare.gov or from other

sellers of health plans) also are likely to

select the less expensive HDHPs. Because

coverage under an HDHP is a requirement

for having an HSA, the potential is high for

HSA growth among all consumers.


Economic Factors

For years, larger employers (200-plus em-

ployees) have been steadily migrating to

HDHPs as their sole offering. This picked up

considerable steam during the Great Reces-

sion as a way to cut costs, but also to allow

employers to preserve other benefits, such as

401(k) matching. This trend was not repli-

cated in the smaller employer space, as many

of those employers simply stopped offering

health insurance in the pre-ACA environ-

ment.

HDHP Growth By Type Chart

A new tactic being used by employers is

defined contribution healthcare. In this situ-

ation, the employer does not offer a health

plan to employees, but rather makes a “de-

fined contribution” to each employee for the

employee to purchase her own health insur-

ance. As long as the contributions are prop-

erly designated and reported on Form W-2,

Wage and Tax Statement, as contributions

to the employee’s healthcare, this approach

meets regulatory guidelines and is gaining

steam with employers of all sizes. This will

almost certainly drive more people to the

open market for health insurance plans,

which also will lead to a near-certain in-

crease in the individual adoption of HDHPs,

and HSAs by extension, in the years ahead.

Demographic Factors

Although an estimated 2.3 million millenni-

als ages 19–25 are covered by their parents’

health insurance under the ACA, once they

turn 26, they will no longer be eligible for this

coverage.

As younger generations enter the workforce,

it’s not hard to imagine that the HDHP/HSA

choice will become more widespread. One

key reason may be because the premiums are

lower, allowing employees to redirect into

their HSAs the money that they save paying

the lower premiums.

Millennials’ have a more transient approach

to employment compared to prior genera-

tions. Ninety-one percent of surveyed millen-

nials plan to stay with their current employer

for less than three years, according to the

Future Workplace “Multiple Generations @

Work” survey.

When you draw the lines and connect the

dots—especially the economic and demo-

graphic ones—compelling evidence supports

massive ongoing changes to the healthcare

and health savings systems the U.S. has

known for decades. HSAs are already play-

ing a pivotal role in this shift, poised to figure

even more prominently in the years ahead.

How Does A Bank Play Its Part?

Organizations looking to attract and retain

clients, both within the millennial cohort and

outside of it, should consider ways that they

can help consumers understand how HSAs

help with their healthcare saving and expense

management.

The level of education in the consumer space

on HSAs is dismal. Employers, the internet,

insurers, and even the healthcare exchanges

provide sparse information about HSAs and

how to use them. Banks can provide incred-

ible service by simply offering more informa-

tion on HSAs and their benefits.

Banks with small business relationships and/

or select employer groups can provide addi-

tional value by working directly with employ-

ers or those selling their health insurance

plans to be the HSA provider of choice. Public

healthcare exchanges do not market HSAs,

nor do they offer them, so there is room for

financial organizations to make a difference in

the market.

As HSAs continue to expand rapidly each

year, they eventually will become as common-

place as IRAs, if not more so. The HSA mar-

ket is an underserved marketplace and thus, a

critical area for banks to provide value. CB

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AN UPDATE ON NORTH CAROLINA YOUNG BANKERS FROM CHAIRMAN DAVID ALLEN

David Allen is senior vice president at Bank

of North Carolina.

In December of 2015, 12 ambitious bankers

ranging in age between 24 and 44 met with

the North Carolina Bankers Association

(NCBA) and began laying the groundwork

for what would eventually become the

North Carolina Young Bankers (NCYB).

Over the next several months the inaugural

advisory board would define the vision and

mission of the NCYB and what it means

to be a member of the organization. The

NCYB is targeting the next generation

of industry leaders that will navigate the

new world of enhanced regulation, rapidly

changing technology, and an overall para-

digm shift in how society perceives banks.

The vision is simple – to be the premier

organization that develops and engages

emerging bank leaders while strengthen-

ing the communities it serves. The NCYB

will focus on three primary goals to achieve

its vision: (1) promote financial literacy

for North Carolina’s youth; (2) encourage

awareness and active engagement of young

professionals in the banking industry; and

(3) provide education and foster the profes-

sional development of its members.

To accomplish these goals, the NCYB will

engage its members through regional and

statewide events, a monthly newsletter and

volunteer opportunities. The NCYB is plan-

ning multiple events throughout the year

focused on leadership, education and net-

working, designed to strengthen the skill

set of each participant and promote career

engagement. The NCYB will keep members

informed of the relevant issues affecting the

industry and opportunities for advocacy.

Lastly, the NCYB will provide opportuni-

ties for volunteerism and resources that

support financial literacy efforts in the local

communities. Successfully achieving the

mission of the NCYB will help restore the

image of banking, improve the financial

health of the community and engage the

millennial generation in the workforce.

The formation of the NCYB comes at an

opportunistic time in the banking indus-

try. The industry is transforming around

us and with this change brings new chal-

lenges in how banks will manage a complex

regulatory environment, attract and retain

employees and continue to serve their

communities. The mission of the NCYB

will address these challenges and mobilize

the current young professionals towards a

common goal of strengthening the indus-

try. The NCYB will be a driving force in

improving the overall image of banking and

reestablishing banks as trusted partners in

the community.

Prior to 2008, the perception of banking

was positive; banks were pillars of society

and respected for their contributions to the

community. The 2008 Great Recession ush-

ered in a new perception of banking. The

indiscretions of a few tarnished the prevail-

ing image that had defined the industry

for decades. Frequently used terms in the

media now include mistrust, predatory

lending and greed. How quickly forgot-

ten are the benefits that banks provide to

their communities: helping individuals

start their own business and buy their first

home; serving as trusted financial partners,

supporting philanthropic organizations

and providing jobs. Banks of all sizes were

blamed for the financial downturn and have

been attacked for placing profit over cus-

tomers. The reality is that banks have con-


tinued to serve the needs of the community

and are adapting to changing consumer

demands in the banking experience.

The NCYB will help restore the image of

banking through our mission of improv-

ing financial literacy in the youth of North

Carolina. Banks have an obligation to pro-

mote the financial welfare of their commu-

nities, not only through the products and

services they provide, but also with educa-

tional resources and volunteerism of their

employees. Promoting financial literacy will

strengthen our communities and help lay

the foundation of long-term financial suc-

cess for individuals.

The NCYB will encourage a collaborative

effort among all banks in improving finan-

cial education. Financial literacy topics

range from budgeting, saving, managing

credit worthiness, creating financial goals

to also understanding the role of banks in

the community and the broader economy.

The NCYB will develop an education cur-

riculum aimed at elementary through high

school students across the state. We en-

courage our members to partner with other

local organizations and create volunteer

opportunities in their respective commu-

nities to further this goal. The long-term

prosperity of the community is dependent

upon laying the foundation of financial

literacy in our youth. Stronger communi-

ties equal stronger banks. In turn, banks

will have greater resources to reinvest in the

communities and reestablish the positive

relationship between banks and the mar-

kets they serve.

The efforts of the NCYB will also help

promote banking as an attractive career

option for aspiring young professionals. A

recent USA Today article states that increas-

ingly fewer millennials are pursuing careers

in banking and finance. Several factors

contributing to this trend are negative

sentiment that stemmed from the financial

crisis and an image that banking is high-

stress with demanding hours.1 The industry

must change this perception of banking

and reestablish trust with the millennial

generation. Banking should be viewed as

an industry where young professionals can

have a long-term, rewarding career with

diverse opportunities and have the ability

to take an active role in serving the needs of

local communities.

The millennials are now the largest genera-

tion in the workforce surpassing the baby

boomers and generation X. Numerous

articles have been written seeking to un-

derstand how millennials think and what

they value compared to prior generations.

What is clear is that emerging leaders want

to explore new challenges, be involved in

helping their communities and take on dif-

ferent responsibilities. The banking indus-

try can meet this demand. To do so, the

industry must adapt to a changing ideology

and embrace an evolving set of values. This

does not mean that banking should change

its core values of stability, soundness and

focus on customer service, but rather the

industry should incorporate a new set of

beliefs that are representative of a younger

generation. Attracting the best and bright-

est employees will be critical for the indus-

try to adapt to changing market demands

and maintain banks as a vital member of

the community.

It is our hope that involvement in the

NCYB will promote greater engagement of

young bankers not only in their individual

careers but also the industry as a whole.

Young bankers will have opportunities to

learn about different areas of banking from

lending to technology, operations to human

resources. Young Bankers will have access

to state and federal elected representatives

and champion the advocacy efforts of the

NCBA. The NCYB will be inclusive of all

job titles and encourage active participation

1 USA Today, June 26, 2015

CB

across individual banks, regions and the

state. All bank employees can have a voice

in developing their individual skill sets and

positioning themselves as the next layer of

bank leadership. What is not specifically

stated in our mission is that we must rede-

fine what it means to be a banker and have

a career in banking. Banks play an impor-

tant role in the prosperity of the country

and each individual working for a bank

has the opportunity to make a difference in

their community. The NCYB will provide

the pathway that leads young bankers to realize their potential. Engagement equates to ownership and ownership will empower employees to take an active role in the long term success of banking. This is an exciting time in the banking industry and NCYB is poised to lead the new emerging leaders of our future.

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CICCAR

David Bennett is the executive vice president of Com-munity Investment Corporation of the

Carolinas (CICCAR), a wholly-owned

subsidiary of the North Carolina

Bankers Association.

THE LIHTC PROGRAM AT 30 - PAST RESULTS, FUTURE NEEDSThe federal Low Income Housing Tax

Credit (LIHTC) program was created in

1986 as part of the comprehensive budget-

ing and tax reform efforts of Congress and

the Reagan administration. In recognition

of the 30th anniversary of this landmark

legislation, CohnReznick LLP, a national

accounting firm with a significant prac-

tice in the areas of affordable housing and

low income housing tax credits, recently

issued a report entitled “The Low Income

Housing Tax Credit at Year 30: Recent

Investment Performance (2013-2014).” This

report is the fourth in a series issued by

CohnReznick, using property performance

data for more than 20,000 affordable hous-

ing communities located across the

country.

A Look at Performance Results

Based upon an analysis of the national

performance data, CohnReznick found

that the performance history of affordable

LIHTC housing is strong, particularly dur-

ing the years following the Great Recession.

For example, the median physical occupan-

cy rate for the sample improved from 96.4

percent in 2008 to 97.5 percent at the end

of 2014. During the same period, the me-

dian physical occupancy rate for properties

located in North Carolina was higher than

the national rate, rising from 97 percent

in 2008 to a peak of 97.9 percent in 2012,

before settling at 97.3 percent in 2014.

The report also highlights strengthening

economic occupancy rates. Unlike physical

occupancy, which reflects the number of

units occupied by tenants, economic oc-

cupancy measures the percentage of gross

potential rent that is actually collected. Even

with a high physical occupancy rate, there

can be a lower economic occupancy rate due

to rent concessions, turnover lag between

tenants or uncollected rent. For affordable

multifamily units, the CohnReznick report

identified a median economic occupancy

rate of 96.6 percent in 2014, nearly identi-

cal to the median physical occupancy rate

of 97.5 percent. Again, the results for North

Carolina were consistent with this average.

Finally, CohnReznick analyzed median Debt

Service Coverage Ratios (DSCRs) for these

properties. From 2008 to 2014, the median

DCR improved from 1.15x to 1.33x, with a

slow and steady increase of 2-4 basis points

per year.

During the same timeframe, CICCAR’s

performance results were quite comparable

to CohnReznick’s findings, with a median

DSCR climbing from 1.14x in 2008 to 1.24x

in 2014, and a median physical occupancy

rate improvement from 95 percent to 98

percent.

Median DSCR

Median Physical Occupancy

2008 2014 2008 2014CICCAR Portfolio 1.14x 1.24x 95 percent 98 percentRegional Average 1.15x 1.31x 96 percent 97 percentNational Average 1.15x 1.33x 96 percent 98 percent


Even as the real estate market for apartments has boomed over the past 18-24 months, few developers are willing or able to create a new supply of affordable units. Without some degree of financial incentive, high development costs simply make this a difficult - if not impossible task.

Based upon year-end numbers for 2015,

CICCAR’s portfolio performance has con-

tinued to strengthen, with a median DSCR

that now stands at 1.35x and a continued

median physical occupancy rate of 98 per-

cent.

Understanding the Need

There is no shortage of praise for the LIHTC

program, from both sides of the political

aisle. Its unique approach to using public re-

sources to attract private sector invest-

ment and ownership in the affordable

housing sector is widely recognized as

the most effective housing program to

come out of Washington, D.C. Private

developers and tax credit investors such

as banks have become quite adept at

creating an attractive supply of hous-

ing units for low- to moderate-income

households. So, what is driving demand

for the units, and the resulting perfor-

mance improvement?

Much of this trend can be attributed to

two factors: an overall decline in the na-

tional rate of homeownership and stagnant

income levels. In 2004, the U.S. homeowner-

ship rate peaked at 69 percent, and has been

declining steadily ever since then. From that

31 percent level in 2004, the percentage of

renter households has increased steadily to

36 percent at the end of 2014.

With fewer households electing to purchase

a home, the increased demand for rental

units in general has resulted in upward pres-

sure on rents. As rents for market-rate prop-

erties rise, more households that are not tra-

ditionally considered as “low income” face

a household cost burden, defined as paying

more than 30 percent of income for housing

expenses. The National Low Income Hous-

ing Coalition (NLIHC) reports that in 2014,

49 percent of all renter households were cost

burdened, with 26 percent being considered

“severely cost burdened” (i.e., spending

more than 50 percent of income on housing

expenses).

When higher-income cost-burdened house-

holds compete for units with lower rents,

fewer units remain available to households

at the lowest end of the income scale –

namely, the households traditionally served

by LIHTC properties. This demand for af-

fordable units is then manifested in the high

occupancy and debt coverage ratios noted

above.

Even as the real estate market for apart-

ments has boomed over the past 18-24

months, few developers are willing or able

to create a new supply of affordable units.

Without some degree of financial incentive,

high development costs simply make this a

difficult – if not impossible – task.

Resources such as the LIHTC are limited,

and applications for credits continue to out-

pace allocations by a ratio of 3:1 or more.

Meeting the Demand

Fortunately, there have been a number of

responses – both actual and proposed –

that are designed to address the need for

affordable housing. In April 2016, the US

Department of Housing and Urban Devel-

opment announced that it will be allocat-

ing nearly $174 million in funds from the

National Housing Trust Fund to states over

the coming months. This program, which is


CB

funded by contributions from Fannie Mae

and Freddie Mac, will complement existing

local, state and federal programs (such as

the LIHTC program) by providing funding

through the states to support the creation

and preservation of affordable housing.

In North Carolina, affordable housing

advocates have proposed an expansion

of the Workforce Housing Loan Program

(WHLP), created by the General

Assembly to replace the state’s housing tax

credit. Originally established at a level of

$10 million per year to help finance af-

fordable housing in rural areas, the WHLP

allocation increased to $12.5 million in the

2015/2016 budget cycle, and is proposed

for an increase to $15 million in 2016/2017.

Finally, Senator Maria Cantwell (D – WA)

recently proposed a 50 percent expansion

of the competitive tax credit allocation

available via the LIHTC program. Her

proposal came in response to a petition of

more than 1,300 affordable housing

practitioners and stakeholders. While the

appetite for tax reform in Washington is

mixed, it is possible that the LIHTC

program’s track record of success may pave

the way for more resources to help meet

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A PRIMER TO UNDERSTANDING GOLDEN PARACHUTE PAYMENTS IN A CHANGE IN CONTROL

Thomas P. Hutton is a partner with Luse

Gorman, PC.

The best time to ensure various documents

work together is when they are drafted. How-

ever, as mentioned, many of these documents

are drafted at different times (and by different

draftsmen) and on a stand-alone basis with-

out considering how they interact with other

arrangements. The next best time to ensure

the documents work as intended is through

periodic reviews. Periodic reviews are espe-

cially important since many factors occur

over time that impact the intended benefits.

For example, the inclusion of a new element

of the overall executive compensation pack-

age, such as equity grants, the increase in base

compensation over time, or a change in the

terms of an agreement may affect a number

of arrangements. Periodic reviews should in-

clude running specific numeric examples. In

other words, the best way to understand how

arrangements work together is to conduct a

“real life” illustration on a change in control

with realistic assumptions.

Many executive compensation arrangements

include provisions addressing what happens

when payments made to an executive in con-

nection with or following a change in control

exceed the executive’s golden parachute limi-

tations under Section 280G of the Internal

Revenue Code (“Section 280G”). Without

coordination among these arrangements,

the total benefits received by the executive

following a change in control may be dimin-

ished. Section 280G provides that “parachute

payments” that equal or exceed three times

the executive’s average annual taxable income

from the employer for the five preceding

taxable years are considered “excess para-

chute” payments. The term “parachute pay-

ment” generally includes any compensation

received on account of the change in con-

trol, such as severance payments, continued

Completing a merger or acquisition is one

of the most significant events in the life of a

corporation, as well as its management. Ac-

cordingly, it is important that the compensa-

tion arrangements covering executive officers

are designed in a way to protect the execu-

tive from a premature termination of em-

ployment, protect the employer by provid-

ing incentives for executives to stay through

the completion of the transaction and meet

the expectations of each party. The typical

executive compensation arrangements that

come into play in a change in control include

employment agreements, change in control

agreements, deferred compensation plans

and equity grants (stock options, restricted

stock).

Institutions and executives expend signifi-

cant time designing executive compensation

arrangements. Often, the process involves

outside advisors and the various arrange-

ments are designed or modified at different

times by different advisors. For example, the

institution and executive may enter into an

employment agreement when the executive

is hired and later enter into a deferred com-

pensation arrangement to provide the execu-

tive with supplemental retirement benefits.

Many deferred compensation arrangements

provide for an enhanced and/or accelerated

benefit upon a change in control. However,

failure to coordinate the provisions of the

employment and deferred compensation

agreements may result in the executive’s total

benefits not equaling the expected benefits

under each agreement individually. Once the

process of negotiating the merger has begun,

it is generally too late to fix the uncoordinat-

ed provisions, such as common definitions

and golden parachute limitations.


health benefits, accelerated deferred compensation

benefits and accelerated vesting of equity awards. If

the total payments constitute excess parachute pay-

ments, the executive will be subject to a 20 percent

excise tax on all parachute payments over the aver-

age, not over three times the average, of the execu-

tive’s taxable income for the five preceding years.

For example, assume Executive A’s taxable income

received from Company C for the preceding five

years equals $750,000. His Section 280G limit equals

$450,000 (three times the $150,000 average). Execu-

tive A’s employment contract provides that if his em-

ployment terminates in connection with a change

in control, he receives a severance benefit equal to

2.99 times his current base salary. The agreement

also provides that if the total parachute payments to

Executive A exceed the Section 280G limit, the pay-

ments will be cut-back to $1.00 less than the limit.

Assuming Executive A’s salary in 2016 is $150,000,

the severance benefit equals $448,500; which is be-

low his Section 280G limit. After Executive A en-

tered into the employment agreement, he enters

into a salary continuation agreement (“SCA”) pro-

viding him with a lump sum benefit of $500,000 if

he retires after age 65. If he leaves employment after

age 60 and before age 65, the benefit is $300,000.

However, if he terminates employment in connec-

tion with a change in control, he will receive the

entire $500,000, regardless of his age when the

change in control occurs. If Executive A had retired

(without a change in control) in 2016 at age 61, he

would have received $300,000. However, because

his termination was in connection with a change in

control, he receives the full $500,000. The addition-

al $200,000 is a parachute payment under Section

280G. His parachute payments now equal $648,500

($448,500 severance under the employment agree-

ment and $200,000 under the SCA). Since the pay-

ments exceed his Section 280G limit of $450,000,

his benefits must be reduced to $449,999. This ef-

fectively eliminates the change in control benefit

under the SCA. So, while the parties intended for

Executive A to receive the full benefit, the lack of

coordination among the agreements diminished the

benefits payable to him upon the change in control.

Executive compensation arrangements deal with

Section 280G in one of several ways, including:

Cut-Back: cut-back payments to just below the

Section 280G limit.

Modified Cut-Back: provide the executive with

either the benefits as cut-back or the full benefits,

whichever provides the greatest after-tax benefit

(taking into account the excise tax).

Gross-Up: the employer will reimburse the execu-

tive for the excise tax due on the payments and for

all other taxes resulting from the payment of the

excise tax. This approach may become very expen-

sive and has fallen out of favor with shareholders.

Silence: the agreements may not address Section

280G at all, thereby allowing the parties to deter-

mine how to deal with the payments at the time of

the change in control. While this approach allows

for some flexibility, it does provide a level of uncer-

tainty for the parties.

Numerous issues can arise when various agree-

ments treat parachute payments differently. For

example, a deferred compensation arrangement

may include a cut-back provision while an em-

ployment agreement provides for a modified

cut-back. At times this may be acceptable if the

provision only deals with the payments made

under the specific agreement. However, when

the provision in one arrangement addresses all

parachute payments, it can create significant con-

fusion and lead to unintended consequences.

The terms of various executive compensation ar-

rangements, especially when considered together,

can be very confusing and overwhelming. The po-

tential impact of Section 280G further complicates

matters. Not understanding how various arrange-

ments work, either individually and/or together,

and how Section 280G impacts the benefits, often

results in unintended negative consequences to

executives. It is important to take care when draft-

ing or modifying these arrangements and to peri-

odically review these arrangements and run “what

if ” scenarios with realistic numeric illustrations. It

is also important to understand how the terms of

various arrangements will be perceived by outside

parties, such as shareholders or shareholder advi-

sory services. Spending the time to do so well in

advance of a change in control, in fact, well in ad-

vance of even considering a change in control, may

eliminate a great deal of anxiety and confusion.CB


2016 Washington Bank CaucusTop Left: Attendees of the 2016 Washington Bank Caucus kicked

off their trip with a briefing from the OCC. Our delegates heard

from Paul Nash (pictured), senior deputy comptroller and chief

of staff; Toney Bland, senior deputy comptroller for midsize and

community bank supervision; Karen Solomon, deputy chief

counsel; and Kevin Greenfield, director for bank information

technology. Below Left: Following a meeting with the ABA and

CFPB, bankers had a briefing with the FDIC, where they heard

from Martin Gruenberg, chairman, FDIC. Below Right: Bank-

ers began day two of Washington Bank Caucus with the Federal

Reserve, where they spoke with and heard from Jerome Powell

(pictured), governor, Federal Reserve.

Right: Representatives from North State Bank and North State

Bank Mortgage paused for a brief photo prior to the briefing

with the Federal Reserve. Below Left: Following their visit with

the Federal Reserve, our bankers headed to lunch at Old Ebbitt

Grill, a historic oyster bar and grill near the White House. As at-

tendees enjoyed their lunch they heard an update on the ABA, its

activities and its plans for the future from Rob Nichols, president

& CEO, ABA. Below Right: After lunch, our delegates went to

Capitol Hill for a full afternoon of meetings. The first of which

was with U.S. Senator Richard Burr.


The Willard InterContinentalWashington, D.C.

Above Left: Attendees visited with Congressman Patrick McHenry, who is serving his sixth term in the U.S. Con-

gress where he represents the citizens of North Carolina’s 10th district. In the 114th Congress, McHenry serves as

Chief Deputy Whip as well as vice chairman of the House Financial Services Committee. Above Top: Our bankers

also heard from and spoke to Congressman Richard Hudson. Hudson is serving his second term in Congress repre-

senting North Carolina’s 8th Congressional district. Above Bottom: Attendees also had the opportunity to visit with

Congressman Mark Walker, representing North Carolina’s 6th Congressional District in his first term in Congress.

Below Left: Our delegates also heard from Congressman Robert Pittenger, who is serving his second term in Con-

gress representing the citizens of North Carolina’s 9th Congressional District. Pittenger is a member of the House

Financial Services Committee, and sits on the Financial Institutions and Consumer Credit Subcommittee as well as

the Monetary Policy and Trade Subcommittee.

Above Middle: Congressman Mark Meadows, who has been the U.S. representative for North Carolina’s 11th Congressional

District since January 2013, spoke with and answered questions from our engaged attendees. Meadows serves on the House

Oversight and Government Reform Committee where he chairs the Subcommitee on Government Operations. Above Right:

To conclude their visit to Capitol Hill, our bankers meet with Senator Thom Tillis and discussed the political climate in

Washginton.


&QA with Congresswoman

Virginia Foxx

Congresswoman Foxx repre-sents North Carolina’s 5th District in the United States

House of Representatives. She serves on the House Education and the Workforce Committee and is Chairwoman of the Subcommittee on Higher Education and Work-force Training. She also serves on the powerful House Committee on Rules. She was elected by her peers to serve as Secretary of the House Republican Conference. Congresswoman Foxx, who holds the distinction of being the first member of the 2004 congressio-nal freshman class to pass a sub-stantive piece of legislation from the House of Representatives, is the recipient of numerous hon-ors and recognitions, including the U.S. Chamber of Commerce’s Spirit of Enterprise award, the National Federation of Indepen-dent Business’ Guardian of Small Business award and the National Association of Manufacturer’s Award for Legislative Excellence. Before serving on Capitol Hill, Foxx spent 10 years in the North Carolina State Senate. She began her career in the field of higher education, which included serving as a sociology instructor at Ap-palachian State University (ASU) and holding several administrative positions at ASU, including As-sistant Dean of the General Col-lege. She also served as President of Mayland Community College. Congresswoman Foxx is a gradu-

ate of the University of North Carolina at Chapel Hill, where she earned a bachelor’s degree in English and a Master of Arts in College Teaching in Sociology. She also holds a Doctor of Educa-tion degree from the University of North Carolina at Greensboro. Congresswoman Foxx is mar-ried to Tom Foxx. Before her congressional service, the couple owned a nursery and landscap-ing business in North Carolina. She enjoys reading, gardening, and most of all, being a grand-mother to two.

Q: Why did you decide to become involved in politics?

A: In the 1970s, I was a member of the League of Women Voters. Through the League, I attended school board meetings in my county as a public observer to en-courage accountability of elect-ed officials. I went to countless meetings, many times as the only person representing the general public.

During one meeting of an all-male school board, a local report-er leaned over and said, “These guys are incompetent. Why don’t you run for the school board.”

My instinctive response was, “I’m not qualified,” and I think many women can fall prey to this atti-tude of self-disqualification and underestimate their abilities.

The next year I ran for the school board. I lost the first race and learned a valuable lesson: it is possible to lose and live with dignity. I won the next election for the school board and later ran for the state Senate and then suc-cessfully ran for Congress in 2004.

Q: How have you stayed grounded and focused on North Carolina’s 5th Dis-trict?

A: It is important to use many differ-ent ways to gather information from constituents on their concerns. There are ample opportunities for constitu-ents to tell me what they think on any issue: in person, in letters, over e-mail, on the phone, etc. I also return home to the district every weekend and, in addition to the events I attend, I do all the same things that you do - at-tend church, pump my gas, go to the grocery store, work in my yard, etc. Through my many interactions with


constituents, I take their sugges-tions back to my colleagues as I have always done and will con-tinue to do.

My mission is to have the most responsive Congressional office in the nation. I read and answer all of my own mail. The staff and I work very hard to be accessible and to respond promptly to con-cerns. We are here to help and welcome the opportunity to work with constituents who need assis-tance.

Q: How does the banking indus-try impact North Carolina’s 5th District?

A: While it isn’t the focus of life, money is an element of nearly every facet of it. As the industry entrusted with the care of that necessary resource, banks are a fundamental part of our commu-nities and impact them in count-less ways. Local families rely on access to capital, safe stewardship of their savings and the conve-nience of modern banking tech-nologies to have the financial cer-tainty necessary to improve their quality of life. Every day I hear from businesses that are looking for capital to expand their busi-nesses; they also use the incred-ible technology available to pro-cess global payments in a variety of ways, none of which would be possible without a strong banking industry.

North Carolinians feel the im-pact of financial institutions early in life when they open their first checking or savings account, and they progress to building a credit record that enables them to ob-tain an affordable mortgage and take the steps necessary to ensure

their family is financially stable. I have vivid memories of going with my father to the local bank in Avery County when I was a teenager to buy our first home. That early interaction was so en-couraging and it has stayed with me as I started a family, bought a home and became a small busi-ness owner.

Q: What do you consider to be among the largest challenges to growing our North Carolina econ-omy?

A: Our nation grew from nothing into the strongest economy in the world because Americans were free to compete with the market picking winners and losers, not politicians. Unfortunately, gov-ernment has continued to expand its control over businesses. There are virtually no actions business people can take without need-ing the government’s permission or a stack of paper to file. A dis-couraging example of this heavy-handed action from the federal government is the hundreds of regulations resulting from Dodd-Frank, which are significantly impacting access to desperately needed capital and driving com-pliance costs high enough to re-sult in the closure of one commu-nity financial institution a day in America. My colleagues and I are working in the House to rollback Dodd-Frank’s overreach, and I also continue to push the Senate to consider my legislation, the Unfunded Mandates Information and Transparency Act, passed by the House, to increase transpar-ency about the costs of unfunded federal mandates and hold the federal government accountable for considering those costs before passing them on to local govern-ments and the private sector.

It’s also clear that the federal government’s healthcare and tax policies are having a signifi-cant effect on businesses’ abili-ties to expand as well as provide their employees with quality wages and benefits. Top-down mandates from Washington have a track record of failing and Obamacare is no different. Constituents inform me daily of their increased premium costs and dwindling choices in the marketplace. The United States also has the highest corporate tax rate among advanced econo-mies and the unwillingness of some to consider tax reform for individuals and businesses of all sizes is driving investment over-seas and depressing the growth of our economy.

Finally, Washington owes the American people a responsible budget that reins in wasteful federal overspending and guar-antees accountability for the use of taxpayer dollars. Much of the economic turmoil that has gripped this nation is the result of the federal government spending beyond its means. Our ballooning national debt threat-ens economic stability and jeop-ardizes the American dream for their families.

Q: How has owning your own business helped you understand certain issues in Washington, D.C.?

A: As a former small business owner, I know firsthand how the government can make it more difficult for a business to be successful. I recognize the true costs of overregulation, such as lost productivity, increased ex-penses and new financial and le-gal liabilities, which many poli-cymakers often forget about.

Q: You are known as a vocal pro-ponent of government account-ability. Why do you feel this is so important?

A: Accountability, transparency and appropriate public scrutiny are necessary for government to function well. I also recognize that the federal government is funded by the money of hard-working American taxpayers. They deserve to know how the government is spending their tax dollars, and they deserve to have their money spent wisely.

Q: Now for the most important question. You are well known for your boundless energy level. How do you maintain that level of energy day in-and-day-out?

A: I remember why I was elected to serve in the first place and trust in God. God gives me strength to face the challenges of the day. CB

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Emily Bogan is the director of consulting at Sageworks.

WHY YOUR BANK’S DATA MAY BE INADEQUATE FOR CECL

Got data? This is one of the many ques-

tions financial institutions will face once

the Financial Accounting Standards Board

(FASB) finalizes its guidance on the cur-

rent expected credit loss model, known

as CECL. The CECL model is a change

in guidance for the allowance for loan

and lease losses (ALLL), shifting from an

incurred credit loss model to one based on

expected credit losses. It will include re-

quirements for forward-looking estimates,

a longer loss horizon and removal of the

“probable loss” threshold.

After several delays, final CECL guidance

is expected to be released in mid-2016.

One sign that this timeline remains on

track is FASB’s formation of a CECL Tran-

sition Resource Group (TRG) to “solicit,

analyze and discuss implementation is-

sues that could arise when organizations

implement the upcoming credit loss stan-

dard,” according to a FASB news release.

Announced at the end of March 2016,

members of the TRG represent accounting

firms, regulators, banks and credit unions.

In the quest to understand CECL and

how to properly prepare for the transition,

one theme has continued to rise to the

top: data. Based on comparisons of what

data is currently needed for calculating

the ALLL versus what we anticipate will

be needed under CECL, banks may need

to gather, archive and store much larger

amounts of data.

While many banks may believe they are

already collecting sufficient data needed

for a smooth transition, industry experts

warn that data practices may actually fall

short of what will be needed. The specific

data needs will not be known until the final

CECL proposal is released, but in general,

more data will be better, and loan-level data

over time is key.

For example, under the current historical

loss rate methodology, common aggregate

data elements needed for the ALLL calcula-

tion include charge-offs, recoveries, pool

segmentation and balances. Under CECL,

it is expected that several new loan-level

data elements will be needed, including risk

rating, loan duration, loan balance, charge-

offs and recoveries and segmentation.

Banks will have time before having to

implement CECL, but they should begin

reviewing data collection practices and

strategies now if they expect to properly

prepare for changes. In fact, waiting un-

til after guidance is released may result

in a missed opportunity. During a recent


Sageworks webinar, more than 450 bankers

were asked to describe their data adequacy.

Only 36 percent of respondents felt their

data archives were sufficient to prepare for

CECL.

In working with banks across the coun-

try and assessing their data adequacy for

CECL, here are four weaknesses I com-

monly see:

1. The data is incomplete. Calculat-

ing the ALLL under CECL could

mean estimating expected losses for

the life of a loan. This implies that

banks may need to review historical

data on losses for many loan types

over many periods. For a bank cur-

rently aggregating charge-offs and

recoveries quarterly, incorporating

loan-level detail will substantially

increase the loss data required.

While many community banks lack

the systems and resources needed

to capture this historical data, ex-

perts recommend taking steps now

to gather it, whether through hiring

additional staff, improving internal

systems or purchasing software.

2. The data is unreliable. Accurate

data is the central building block

of a defensible ALLL calcula-

tion, therefore, accurate historical

loan-level detail will help prevent

future subjectivity. However, pro-

cesses and policies by which data is

gathered can vary from person to

person, department to department

and institution to institution. As a

result, the bank is subject to data

inaccuracy and inconsistency.

3. The data is not easily accessible.

Even now, gathering data needed

to calculate the ALLL is one of the

biggest challenges banks face in

their reserve process. Many must

gather data from disconnected

sources or spreadsheets, and doing

so can be labor-intensive and time

consuming. Under CECL, banks

will need access to more historical

information – all at the loan level.

Banks storing such information in

PDF form or across systems can be

caught by surprise if they do not

get the data into a usable, accessible

format. For example, many banks

may think their core system is suf-

ficiently capturing and storing loan-

level data. Unfortunately, usable

core data is often discontinued after

13 months – if not sooner. Storing

core archives in a data warehouse or

considering an automated solution

to capture and store the data are

two ways to avoid this challenge.

4. Data governance and accountability

is lacking. If separate departments

develop their own roadmaps for

identifying and gathering data, the

institution can end up with a mish-

mash of information that can mean

different things to different people.

Even subtle differences, such as

how loan segmentations are labeled

or how figures may be truncated,

could cause significant hurdles

when it comes time to accurately

use the data. It is important to have

clear lines of oversight for defining

the necessary fields, gathering the

data and ensuring data integrity.

When it comes to your bank’s data, there

are several important characteristics to

keep in mind, including:

Transparency – Understand how

and where data is stored, and have

a clear process to minimize confu-

sion.

Granularity – With the increase in

data required, make sure the data-


CB

base/system can handle increased

volume and account for the entire

life of a loan.

Accessibility – Ensure data is

readily available in usable, report-

able formats. Storing information

across disparate systems or in

unusable formats (PDFs, text files,

etc.) can create headaches down

the road.

Holistic – Data should be stored

for the whole portfolio, not just for

losses.

Frequency – Ensure data is up-

dated frequently to accommo-

date cross-functional needs. For

example, process it daily, archive

it monthly, or as frequently as

needed to meet the bank’s needs.

Security – The database must be

secure and backed up frequently to

minimize risk.

While the recommendation is to gather

and store as much loan-level detail as

possible, banks must consider the impact

certain loss methodologies will have on

the specific data elements needed. Indus-

try experts, including regulatory agencies,

have highlighted that CECL may result in

community banks utilizing more ad-

vanced loss methodologies, like migration

analysis, vintage analysis and probability

of default/loss given default (PD/LGD).

For example, vintage analysis tracks ho-

mogeneous loans by origination period

and measures losses accumulated on each

vintage. Selecting this methodology will

require data fields such as individual loan

origination dates and individual loan origi-

nation amounts. Compared to other meth-

odologies, vintage analysis isn’t as reliant on

individual loan risk classification and the

migration of loans between classifications.

With CECL on the horizon, it is recom-

mended that banks begin preparing now

rather than waiting for guidance to be re-

leased or until the effective dates. Here are

several steps to help you prepare today:

• Review whether your data sources

are complete, available, reliable and

properly governed.

• Minimize risk in loans you’re un-

derwriting today.

• Create a roadmap to your CECL ef-

fective date and include on that map

the formation of a CECL commit-

tee.

• Review and strengthen risk rating

procedures.

• Start cross-departmental collabora-

tion now, including both credit and

finance departments.

• Consider the impact of moving to a

more robust loss methodology.

By taking the steps now to prepare, your

bank will be one step ahead of peers and

be in a better position to justify and defend

your ALLL calculation under CECL.

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Community Bank Services

Kim Hutchens is executive vice president of Com-munity Bank Services (CBS), a wholly-owned subsidiary of the North Carolina Bankers Association.

2016 HR CONFERENCE REVEALS WHAT KEEPS HR EXECUTIVES AWAKE AT NIGHTThere’s always the question, “What keeps

you awake at night?” For approximately

70 of our NCBA Human Resource (HR)

executives, the answers resonated loud

and clear.

For the first time, NCBA combined the

annual Community Bank Services (CBS)

Benefits Day and Human Resource

Conference. Gathering for a two-day

conference on March 22-23 at the

Greensboro-High Point Airport Marriott,

were approximately 70 human resource

executives eager to hear from seasoned

HR executives and network with their

peers. It was clear from the first day of the

conference that our member bank’s HR

executives are dealing with a host of very

complicated, intense and often delicate

issues. With traditional issues related to

employee performance, pay, recruitment,

benefits and training, executives are now

carefully researching and following legal

cases within the federal and state courts

and departments as well as the never-end-

ing merger and acquisition activity.

Lauren Perry, vice president of CBS,

kicked off the first day of the conference

with an update on the 2016-2017 renewal

rates for the various employee benefits

that CBS sponsors: health, dental, vision

and life/disability. With approximately

50 member organizations/banks enrolled

in one or more of the employee benefits,

attendees were given all the current and

new rates that will go into effect with the

new plan year, which takes place on June

1, 2016.

Peppered with the renewal rate informa-

tion were speakers on issues related to

the benefits we provide our membership.

Speakers lined up for the day’s agenda on

topics related to the Affordable Care Act

(ACA), wellness and fitness initiatives,

an introduction to iBenefits, Inc, the new

voluntary benefits providers, as well as an

update from Dave Marley of Marley Drugs

on the generic prescription drug program

his company provides to all NCBA mem-

bers. (For a complete update on the 2016-

2017 rates for all employee benefit plans,

please contact [email protected]; or

[email protected])

During the second day of the conference,

the presenters included:

• Devon Williams, attorney, Ward

and Smith law firm, provided key

insights into the appropriate use of

social media.

• Melissa Weaver, partner, Brooks

Pierce law firm, laid out the newest

regulations surrounding the topics

of sexual harassment and bully-

ing in the workplace, along with

domestic partnership benefits and

LGBT-related issues.

• Grainger Pierce, attorney, Nexsen

Pruet law firm, detailed updates

from the Equal Employment Op-

portunity Commission’s latest rul-

ings, along with recent employment

cases involving Affirmative Action

and the Family and Medical Leave

Act.

• Kyle Still, labor & employment




CB

partner, and Diane Tindall, at-

torney, Wyrick Robbins law firm

reviewed the Department of Labor’s

latest published rules defining the

difference between an “exempt” and

“nonexempt” employee.

• Ann Smith, principal, Jackson

Lewis law firm, outlined the Na-

tional Labor Relations Board’s

latest rulings on cases surrounding

employee handbooks.

• Tim O’Rourke, president & CEO,

Matthews Young Consulting gave

insightful observations on bank

compensation from the viewpoint

of the bank’s compensation com-

mittee.

• A panel, which included David

Allen, senior vice president, Bank

of North Carolina; David Beaver,

CFO, Uwharrie Capital Corp.;

Kristen Brabble, corporate of-

ficer & director of retail banking,

First Carolina Bank; and Melissa

deBuhr, director, advisory ser-

vices, human capital practice

lead, Carolinas at RGP, provided

thoughts on different work-related

initiatives involving the “Millenni-

als” employee workforce.

• Melissa DeBuhr with RGP ex-

plained how HR executives can

manage the expectations in merger

and acquisition activity.

• A panel including Jon Macklin,

senior strategic policy consultant,

BCBSNC; Diana Mason, employee

benefits consultant, Scott Ben-

efits; and Melissa Weaver, partner,

Brooks Pierce law firm, jumped

into the various components of the

ACA from their separate perspec-

tives.

• Lauren Perry, vice president of

CBS, gave an update on how to

manage enrollment and benefit

questions with employees who

become eligible for Medicare (age

65 and older) while still active full-

time bank employees.

The luncheon on day two of the conference

was kicked off by the current NCBA Vice

Chairman and Bank of North Carolina

CEO, Rick Callicutt. In his remarks, Cal-

licutt was quick to identify and heighten

the important role that HR executives play

in a bank’s overall performance as well as

maximizing the potential from a bank’s

greatest asset – its employees.

We are extremely appreciative of this year’s

participants at the two-day conference

and thank the speakers and sponsors. All

information related to the conference can

be found on the NCBA website – www.

ncbankers.org, or contact Kim Hutchens

([email protected]) or Lauren Perry (lau-

[email protected]) with questions.

Thank you to our 2016 CBS BenefitsDay

and Human Resource Conference Spon-

sors:

GOLD:

BlueCrossBlueShield/North Carolina

SILVER:

BusinessSolver

Express Scripts

Flex-Pay Payroll Services

Scott Benefits Services

BRONZE:

AlwaysCare

HCMS Group LLC

iBenefit Communication

Marley Drug

Matthews Young Consulting

The Standard

http://www.ncbankers.org

http://www.ncbankers.org




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2016 American Mortgage ConferenceRight: David Stevens, president & CEO, Mortgage

Bankers Association, kicked off the first day of the 2016

American Mortgage Conference with an update on real estate

finance and moving forward to economic stability. Below Left:

Attendees also heard from Sean Becketti, vice president & chief

economist, Freddie Mac, on housing and the road ahead. Below

Middle: Rob Chrisman, capital markets consultant, Chrisman,

Inc., addressed the crowd on day one of the American Mort-

gage Conference and spoke about the many changes coming in

residential lending. Below Right: Ted Tozer, president, Ginnie

Mae, kicked off day two of the American Mortage Conference

with a session on the future of government lending.

Left: On day two of the American Mortgage Conference, attendees

also heard from Steve Richman, national spokesperson, Genworth

Mortgage Insurance. Richman talked about generational marketing

and the millennial mindset. Below Left: Day two of the conference

included a panel discussion on the ups and downs of mortgage lend-

ing in community banks. The panel was moderated by Joe Smith,

Joseph A. Smith, Jr. Monitoring Ltd., and included the following

panelists: Roger Dick, Uwharrie Bank; David Rupp, Four Oaks

Bank; Rob Rusczak, North Carolina Housing Finance Agency; and

Ken Sykes, North State Mortgage. Below Right: Matt Tully, vice

president of government and industry relations, Essent Guaranty,

spoke about housing finance reform and the coming election.


Marriott City CenterRaleigh, North Carolina

Above Left: Nadja Vital, affordable lending regional manager, South East, Freddie Mac, kicked off the third and final

day of the 2016 American Mortgage Conference with a presentation entitled “Doing Affordable Lending Profitably.”

Above Right: Attendees also heard from Ed Pinto, co-director and chief risk officer, International Center on Hous-

ing Risk, American Enterprise Institute, on the third day of the conference. Pinto spoke about the future of housing

finance. Below Left: The closing speaker for the conference was Anne McCulloch, senior vice president, credit and

housing access, Fannie Mae. McCulloch spoke about the challenges and opportunities created by demographic change.

Above Right: Attendees had the opportunity for networking

breaks throughout the general session as well as two receptions,

which were both held in the marketplace and allowed for addi-

tional networking opportunities as well as visiting with conference

exhibitors. Left: In addition to the general session, the American

Mortgage Conference had six breakout sessions. Pictured is Rick

Goldbach, executive vice president and director of business devel-

opment, Townebank Mortgage. Goldbach’s session was titled “The

Future of the Loan Originator.”

1.800.351.3843 [email protected]

Research • Analytics • Direct Mail • Email • Contact Center © 2015 Harland Clarke Corp. ClickSWITCH is a trademark of the Fusion Network. All rights reserved.

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NORTH CAROLINA INTEREST ON LAWYER’S TRUST ACCOUNT PROGRAM REPORT

Evelyn Pursley is the executive director of

NC IOLTA.

The North Carolina Interest on Lawyer’s

Trust Accounts (NC IOLTA) program is a

non-profit initiative created by the North

Carolina State Bar. The program works

with lawyers and banks across the state

to collect interest income generated from

lawyers’ pooled client trust accounts for

the purpose of funding grants to providers

of civil legal services for the indigent and

to programs that further the administra-

tion of justice. Since the first such grants

were made in 1985, this partnership

between lawyers and banks has funded

over $75 million in grants to support legal

assistance for at-risk children, the elderly,

the disabled and the poor in need of basic

necessities.

How The Program Works

Lawyers often handle money that belongs

to clients—such as settlement checks or

money to pay various fees. Often, the

amount of money that a lawyer handles

for a single client is quite small and/or is

held for only a short period of time. By

virtue of IOLTA, lawyers place these indi-

vidual deposits together into combined, or

pooled, trust accounts from which banks

forward the interest net of service charges

to the state IOLTA program, which uses

the money to fund law-related charitable

causes.

IOLTA Income Suffers During

Economic Downturn

Because IOLTA’s income depends on

interest being paid on bank accounts,

the economic downturn has dealt us a

double blow: smaller interest rates be-

ing paid on smaller principal balances.

Income from IOLTA accounts has de-

creased by over 50 percent from a high of

more than $5 million in 2008 to less than

$2 million over the last several years. For

2015, income from the accounts was $1.8

million, though we are pleased to report

that, for the first time since 2008, we did

not post a decrease from the previous

year in income from IOLTA accounts.

During this downturn, however, we have

appreciated the fact that many North

Carolina banks resisted lowering inter-

est rates on the accounts even when they

could do so and still maintain the com-

parable interest rates required for pooled

attorney trust accounts. And, though the

number of Prime Partner banks – those

that go above and beyond the eligibility

requirements of the IOLTA rule – has

decreased, we are pleased to feature those

who remain in our Eligible Bank list.

During this economic downturn, the

program has come to rely on funds

Lawyer’s IOLTA Trust Accounts

Bank pays interest less routine service charges

Funds remitted to NC IOLTA Program

Grants awarded for legal services to indigents and for the improvement of the administration of justice


received occasionally from court awards

or settlements. In 2015, we were fortunate

to receive more than $900,000 in such

funds. These funds were crucial to our

ability to make 2016 grants.

We remain hopeful that a rise in inter-

est rates and perhaps further funds from

other sources will bring income levels

back to more normal levels. We have been

notified that all IOLTA programs nation-

wide should expect a major distribution

of funds in 2016 resulting from a national

settlement in 2014 of loan servicing claims

asserted at the national level by the De-

partment of Justice and six state attorneys

general.

We Continue To Make Grants

The IOLTA trustees dramatically reduced

the number of grants beginning in 2010

as we dealt with a significantly changed

income environment due to the economic

downturn. The trustees decided to focus

grant-making on organizations provid-

ing core legal aid services. Even with that

change, IOLTA grants have dramatically

decreased by more than 50 percent from

their highest level of just over $4 million

in 2008 and 2009.

With the additional funds from court

awards, we were able to bring total grants

for 2016 back to $2 million and make just

over a 3 percent increase in the individual

grants – an emotional boost to all.

We have, of course, also tightened ex-

penses during this time, and are pleased to

report that our expense to income ratio

for the life of the program remains less

than 10 percent.

We are proud to be able to say that most

of the funds received are used for making

grants.

Grantee Spotlight: Expunction Projects

Provide Second Chances That Benefit

Individuals And Our State

Work to expunge criminal records for

worthy individuals has involved a num-

ber of IOLTA grantees – including staffed

legal aid organizations and pro bono

programs that bring together volunteer

attorneys and clients in need.

Though it may involve a decades old act

or even an arrest with no conviction,

having a criminal record is a daunting

obstacle to job seekers and others. More

than 1,000 state and federal laws deny

North Carolina residents a wide range

of privileges and rights, including public

benefits, occupational licenses and child

custody, based on criminal records.

In an Associated Press article on expunc-

tions, Daniel Bowes, an attorney with the

Second Chance Initiative at the North

Carolina Justice Center, calls a criminal

record “a scarlet letter that you can’t

escape” due to the availability of

electronic records and the fact that most

employers and landlords run criminal

background checks which document

every criminal incident. Often, these

employers and landlords are denying

worthy applicants based on long-ago

convictions or even charges that were

dismissed or disposed “not guilty.”

More than 150 pro bono lawyers state-

wide, along with paralegals and other

staff, are volunteering to assist these


CB

individuals with free legal services. Law-

yers at corporations and other non-trial

lawyers particularly like this pro bono

work perhaps because it is transactional

and time limited. This expunction work is

also being accomplished through clinics

offered around the state staffed by legal

aid attorneys assisted by students from

North Carolina law schools. And, the

district attorney’s offices in both

Wilmington and Asheville have assisted

with such clinics as well.

Bowes believes, “The primary asset of

our reentry efforts is the diversity of

partners at the table. In the last few years,

state legislators from across the political

spectrum have come to recognize the un-

necessary barriers to gainful employment

and affordable housing facing individuals

with nonviolent convictions and

responded by passing a handful of laws

that significantly expand expunction

opportunities for first-time, nonviolent

misdemeanors and felonies commit-

ted before the age of 18 or more than 15

years ago. Now you have law students,

pro bono attorneys, local community

groups, non-profit legal service providers,

and private firms partnering to bring this

important relief to underserved commu-

nities across the state. The result is hun-

dreds of low-income individuals gaining

genuine opportunities to move beyond

their past mistakes and more fully

contribute to their families and

communities.”

NC IOLTA Is Grateful For Our

Partnership With Banks In North

Carolina

We have appreciated our partnership

with North Carolina banks, and have

particularly valued the knowledge and

expertise our trustees from the bank-

ing industry have brought to the board

and to our decision making. In 2015, Ed

Broadwell of HomeTrust Bank in Ashe-

ville completed two, three-year terms on

the IOLTA board. His service included

two years as vice-chair and a final year as

chair of the NC IOLTA board. Broadwell

brought significant experience from the

banking industry having served on the

Board of the American Bankers Asso-

ciation (ABA) and the North Carolina

Bankers Association (NCBA), including

serving as the NCBA’s chairman.

In leaving the IOLTA board, he noted,

“For decades IOLTA’s Board of Trustees

truly has had a legacy of service by some

of the best public servants I have met in

my 50 plus years in banking leadership

both in North Carolina and nationally.

Having been selected for the Board of

Trustees and then serving as chairman

has been an unanticipated honor to serve

our North Carolina citizens.”

Currently, two of IOLTA’s nine trustees

bring banking industry experience. Ed-

ward C. Winslow III, partner at Brooks

Pierce in Greensboro, has spent his career

practicing in the areas of banking and

financial services, including representing

the NCBA and banks within and out-

side North Carolina. Joseph A. Smith, Jr.

served as North Carolina

Commissioner of Banks for nearly ten

years upon appointment in 2002.

For more than thirty years, IOLTA and

banks in North Carolina have worked in

partnership through this important pro-

gram to provide significant benefits for

our state. We look forward to continuing

the partnership for years to come.


Many of you have children, grandchil-

dren, nieces and nephews that are in

the midst of their middle school edu-

cation. They are starting to resemble

adults rather than children, and have

begun developing their own distinc-

tive personality traits, with their own

thoughts and ideas. They are more

than likely reading Harper Lee’s To

Kill a Mockingbird or a set of poems

by Langston Hughes, can solve math

problems using long division and have

built a DNA model out of tiny marsh-

mallows and toothpicks (something I

never could seem to do without eating

too many marshmallows). They are

finding their own way and learning

new skills that will set them up for

a successful future. But, ask a sixth

grader to create a spending plan for

his/her weekly allowance and you’ll

likely be met with a blank stare.

Despite recent efforts both nation-

ally and statewide in North Carolina,

financial literacy remains notably

absent from the education system, with

efforts to increase awareness of money

matters still largely targeted to adult

consumers at the point of sale. While

it is obviously important to educate

adults in how to spend wisely, save and

share, when do these lessons become

too late to matter? In contrast, when

is it too early to start teaching future

generation’s healthy money skills?

Some school administrators argue that

financial literacy is a topic best left for

the home. Similarly to other subjects

not covered widely in public schools,

Blaine Wiles is the director of

community outreach for the North Carolina Bankers Association.

financial education can potentially be

a touchy area when some may perceive

that they or their children are being

told how to spend their money or what

to do with it. However, if financial

education is left to parents, it must be

noted that some of these same parents

have become a bit too trigger-happy

with their credit cards, often under-

save for their own retirement, and

spend outside of their means without

even realizing it.

Ideally, of course, personal finance

would be taught in both scenarios – in

the school and at home. While having

the opportunity to receive financial

lessons from their parents can be an

invaluable opportunity for students,

teaching in the classroom helps to

level the playing field for those kids

who don’t get this type of education

at home. In the wake of the housing

bubble and The Great Recession, the

movement to make financial educa-

tion mandatory in primary school has

gained momentum in recent years,

and a handful of states already require

high school students to pass a per-

sonal finance class to graduate. But it

doesn’t take a rocket scientist or world-

renowned economist to figure out that

is just too little too late. These are skills

that students should be learning when

they are most impressionable and are

at the time in their lives when they are

developing habits and routines.

So when is the right time to start

educating young people on personal fi-

nance? In short, early and often. Lead-

HOW EARLY SHOULD WE TEACH FINANCIAL LITERACY?

Financial Literacy Update


ers in the financial literacy arena argue

that basic aspects of money-handling

should be integrated into education no

later than elementary school. “Play-

ing sports, exercising and brushing

your teeth are good life habits, and you

start learning them while you are very

little,” said Nan Morrison, president

& CEO of the Council for Economic

Education, one of the leading organiza-

tions in the U.S. focused on financial

education of K-12 students. “Personal

finance is also about establishing good

habits.”

That’s not to say first graders should

be dissecting spreadsheets or trying to

predict market trends, but getting kids

comfortable with money and teach-

ing them the value of the dollar at an

early age is imperative to establishing

healthy habits that they can eventually

carry into their adulthood. Personal fi-

nance is a lesson that is getting increas-

ingly harder to convey as time goes on

and technology advances.

While many of us watched our parents

pay for movie tickets and groceries

with ten and twenty dollar bills, kids

today grow up seeing everything pur-

chased with a seemingly easy swipe of

a card or even with their smart phones.

Although living in a digital age has

made purchasing goods and services

much easier and more streamlined,

there is typically some negative that

comes along with the good in these

advances. Thoroughly explaining that

real money is the unit that backs these

ever prevalent debit and credit cards is

incredibly important in helping young

people understand healthy spending

habits.

“It’s about teaching kids the conse-

quences of their financial decisions,

which relates to living a healthy and

responsible life,” said Amy Hayward,

co-president of A Squared Enter-

tainment, which helped produce the

animated content for billionaire inves-

tor Warren Buffet’s “Secret Millionaire’s

Club,” a program that offers saving,

earning and investing advice for kids.

As students mature and build upon

their financial foundation of knowl-

edge, more complex concepts such as

college planning and entrepreneurship

may be introduced.

Personal finance education, however,

need not (and should not) replace the

coursework already taught in elemen-

tary, middle or high schools. “Expo-

sure to personal finance concepts can

be gained through children’s literature,

such as Aesop’s Fables, like the classic

‘Ant and the Grasshopper’ story, which

is already used in the classroom,” said

Morrison. The goal is seamless and

consistent integration into existing

coursework or materials. Instead of

having students learn about pie charts

by graphing the number of children in

their class with different hair colors,

math teachers can ask students to chart

how they plan to spend or allocate

their allowance.

One arguably major downside to

teaching financial literacy in schools is

that knowledge unfortunately does not

always translate into smart decision

making. That’s partly because bad fi-

nancial decisions are sometimes rooted

in procrastination and inattention,

rather than lack of education. “We

know that people can learn things in

the classroom, but not actually change

their behavior,” said Brigitte Madrian,

professor of public policy and corpo-

rate management for Harvard Uni-

versity’s John F. Kennedy School of

Government. “The challenge in the

classroom is that you can make finan-

cial literacy classes mandatory, but you

can’t cover everything that every student

is going to need to know,” she added. “It

may contribute to making better deci-

sions later on, but we don’t know that.

It’s speculation.”

Regardless of what wise or poor finan-

cial decisions students may make down

the road, it’s our responsibility to ensure

that every young person is equipped

with the education and foundation

necessary to handle whatever obstacle

may arise. “If we can start teaching these

financial building blocks earlier, then

they will have those habits of thought

already in place,” said Morrison. “They

may not be worried about their 401(k)

when they’re just out of college, but they

may remember the jelly bean lesson on

compound interest and be more likely to

save.” CB

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• Top experts from across the state

• More than 25 breakout sessions

• Networking opportunities including a reception

• Special track and CE for housing counselors

• The annual Housing North Carolina Awards

• The annual N.C. Housing Coalition Legislative Awards Breakfast

• And more!

Registration opens early July. Early-bird registration, which ends Sept. 28, 2016, is $245

($215 for members of the N.C. Housing Coalition). After that, registration will be $295

($265 for Coalition members). Registration will cost $350 at the door.

Conference info

www.NCHousingConference.com • (919) 881-0707

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The conference will feature:

Get ready to join nearly 1,000

housing colleagues from North

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to learn the latest news and

innovations in affordable housing!

HOUSING WORKS!2016 NC Affordable

Housing Conference

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News From CICCAR

CLOSINGSCLOSINGSLoan #328306, Viridian Apartments, Lenoir, NC, $245,644 .......................................................................closed on Jan. 29, 2016

Loan #331307, Fountain Pointe Apartments, Rockingham, NC, $550,000 ............................................... closed on Feb. 11, 2016

Loan #373308, Ripley Station Apartments, Raleigh, NC, $875,000 .......................................................... closed on Feb. 17, 2016

Loan #327309, Emerald Forest Apartments, Biscoe, NC, $243,487 ........................................................... closed on Feb. 19, 2016

Loan #316310, Marsh View Place Apartments, Charleston, SC, $1,373,129 ............................................. closed on Feb. 23, 2016

Loan #375311, Allison Square Apartments, Anderson, SC, $605,000 .....................................................closed on March 3, 2016

Loan #374312, Dobbins Hill Apartments, Chapel Hill, NC, $1,039,500 ...............................................closed on March 15, 2016

Mark Morgan and Staurt LeGrand were the developers/sponsors of

Emerald Forest Apartments. The development provides 48 units

affordable to families earning 30%/50%/60% or less of the area median

income. This development received RPP funds for $800,000, a state tax

credit loan for $1,497,064 and $3,206,389 in proceeds from the sale of

federal tax credits.

Emerald Forest ApartmentsBiscoe, NC

Viridian ApartmentsLenoir, NCJim Yamin was the developer/sponsor of Viridian Apartments. The

development provides 64 units affordable to families earning 50%/60%

or less of the area median income. This development received Uni-

four Housing Consortium funds for $200,000, a state tax credit loan

for $2,039,441 and $4,964,304 in proceeds from the sale of federal tax

credits.

Allison Square ApartmentsAnderson, SC

Paladin, Inc. and Olympia Construction were the developers/sponsors of

Allison Square Apartments. The development provides 40 units afford-

able to families earning 50%/60% or less of the area median income. This

development received $5,114,878 in proceeds from the sale of federal tax

credits.

Fountain Pointe ApartmentsRockingham, NC

Connelly Development NC, LLC, was the developer/sponsor of Foun-

tain Pointe Apartments. The development provides 39 units afford-

able to families earning 50%/60% or less of the area median income.

This development received a state tax credit loan for $1,254,419 and

$3,333,377 in proceeds from the sale of federal tax credits.


Employee Benefits Update

Lauren R. Perry vice president of Community Bank Services (CBS), a wholly-owned sub-sidiary of the North Carolina Bankers Association.

WORKPLACE WELLNESS: SIMPLE STEPS TO A SUCCESSFUL PROGRAMEmployer awareness of wellness and its

importance in the workplace has sig-

nificantly increased over the past decade.

There are a multitude of programs avail-

able - and all are heavily marketed to

certain employer groups. Do we all desire

to live a long, healthy, happy life? Do we

believe wellness is important in the work-

place? Do we want to improve the health

of our employees, reduce absenteeism,

improve productivity and reduce the cost

of our health insurance premiums? Of

course we do.

Although the goals are similar, the path

to achieving workplace wellness will be

different for each employer. Each com-

pany has a unique population with diverse

demographics, geographic locations,

resources, as well as a distinct company

culture. Wellness programs are not one-

size-fits-all and finding the right mix can

often require some trial and error until the

best course of action is determined.

The banking industry presents additional

challenges, by nature, which prevent many

employers from implementing a success-

ful wellness program. As most employ-

ees have sedentary positions in a branch

location or corporate office, it is difficult

to incorporate exercise in the daily rou-

tine. Many employees have the pressure

of meeting performance standards and

struggle with work-life balance as a result

of those goals. Banks with multiple loca-

tions in different geographic regions are

constantly challenged with coordinating

the company-wide staff meetings and

trainings that are a necessary part of their

business. Therefore, scheduling on-site

wellness events or biometric screenings

for all employees may seem impossible or

incredibly difficult to coordinate.

Although these challenges may appear in-

timidating, wellness programs are linked to

greater productivity, less absenteeism and

a reduction of long-term health care costs

for employees nationwide. Health and ef-

ficiency have a clear relationship – healthy

employees take fewer sick days and are

more productive at work – and businesses

are starting to take notice of this fact. If

you are not doing enough to ensure the

health of your workforce (and company as

a whole), it is time to empower the people

who make it all possible. Even if you do not

have the resources to implement a com-

plete wellness program, there are six small

investments you can make to show employ-

ees that you value their health - and they

will return big dividends!

1. Promote preventive care. The Af-

fordable Care Act (ACA) requires

all preventive care to be covered

at 100 percent. Remind your em-

ployees of this valuable, FREE

benefit throughout the year. Host-

ing on-site flu shot clinics each year

is a great way to get started. Most

insurance plans now cover flu shots

at 100 percent and have providers

who will make arrangements to

cover employees and family mem-

bers at all locations.


2. Encourage exercise. There are nu-

merous ways to promote employee

activity in and out of the office, but a

few ideas for working hours: Imple-

ment and promote a lunch hour

walking club and offer incentives for

employees who participate. Encour-

age the entire staff to use the stairs

by posting signs in the elevator or

sending out friendly “reminders”

throughout the month. Many em-

ployers offer discounts or partially

subsidize memberships to a local

gym. If you are able to make

structural changes to your

building, some employers

have been successful adding a

workout room with a shower

for employees who wish to

work out during lunch or

after hours. Some banks even

provide employees with a

free Fitbit and encourage

a “healthy” steps competi-

tion between employees or

teams and rewards fun prizes

for those that walk the most steps

per day/week. Who doesn’t love a

“healthy” competition every now and

again?

3. Take time to educate. All company

staff meetings and luncheons are

prime opportunities to help em-

ployees learn about healthy habits.

To do so, recruit speakers to lead

30-minute sessions on heart-healthy

meals, snacking on the go or quick

stress management skills. Many of

the local hospitals, gyms and health

departments have resources for

community health education. If you

have the space, consider bringing in

instructors for lunchtime classes with

light activity for your employees to

enjoy. Keep sessions entertaining but

informative, and offer incentives for

employees who attend like small prizes

or benefits.

4. Encourage utilization of medical

plan resources. Many medical plans

include 24/7 access to a nurse line,

online cost estimator tools and healthy

living programs. The resources are de-

signed to help employees become bet-

ter healthcare consumers. Nurse lines,

for example, are a great resource when

determining if an illness or injury war-

rants an emergency hospital visit. If

the individual can treat themselves at

home or go to the primary care physi-

cian in the morning, they are able to

save significant time and money by

avoiding the ER for a non-emergent

issue.

5. Support better food choices. With

our busy schedules, eating and drink-

ing at the office are often necessary

to make up for lost time. Offer your

employees healthy meal and snack op-

tions that help fuel their performance,

while also meeting their nutritional

needs. Consider replacing sodas with

milk, juice or sparking water, and, if

your budget permits, keep a bowl of

The banking industry presents additional challenges, by nature, which prevent many employees from implementing a successful wellness program. As most employees have sedentary positions in a branch location or corporate office, it is difficult to incorporate exercise in the daily routine.

fresh fruit in the break room. Stock-

ing snack machines with nuts, dried

fruit, healthy crackers or popcorn

is also a good idea with little or no

cost to the company.

6. Be mindful of mental health.

Mental health conditions such as

depression and anxiety have con-

sistently been towards the top of

the list when it comes to health

concerns in this industry. Bank-

ers have higher utilization of drugs

in this therapy class compared to

the benchmark, and the associ-

ated impact on the plan’s pharmacy

cost can be alarming. Unmanaged

stress has also been linked to heart

disease, high blood pressure and

sleep trouble. Consider offering an

employee assistance program (EAP)

CB

or encourage employees to utilize

the EAP that is offered. Allowing

employees to have breaks during

the day to go out for a walk or some

fresh air can also be a small step to

reduce stress in the short-term or

long-term.

To learn more about worksite wellness and

programs available through the NCBA

Health Benefit Trust, please contact

Lauren R. Perry, (800) 662-7044 or

[email protected].

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Editor’s Desk

INTRODUCING THE DR. HARRY A. DAVIS PROFESSORSHIP AT THE WALKER COLLEGE OF BUSINESS AT ASU

Most North Carolina bankers have some

kind of connection with Harry Davis. In

his roles as NCBA economist, dean of the

NCBA’s North Carolina School of Banking

and chair of the NCBA chair of Banking at

Appalachian State University (ASU), Dr.

Davis has served the banking industry and

shaped the careers of thousands of students

and bankers for thirty-seven years.

Dr. Davis joined the faculty at the Walker

College of Business at ASU as professor of

banking in 1980. Shortly after his arrival,

he was asked to chair the Department of

Finance, Banking and Insurance. Consis-

tently rated by students as one of the most

popular professors at ASU, his regular class

load includes undergraduate Commercial

Bank Management and Managerial

Finance in the MBA program.

“Professor Davis offers his students practi-

cal life advice related to current events,

and he lectures with humor and clarity –

making advanced financial concepts easy

to comprehend,” said MBA student Ben

Brown. “Undergrads and graduate students

alike love taking his classes; we all have a

Dr. Davis story to share.”

During his tenure at ASU, Dr. Davis has

balanced his teaching responsibilities with

countless speaking engagements at bank-

ing conferences in North Carolina and na-

tionwide. His economic updates have been

published in countless newspapers and

magazines, and he has been interviewed on

the economy and banking issues on radio

and television stations across the state.

“North Carolina’s banking industry has

Kathleen Rollinsonis the director of communication at the North Carolina Bankers Associa-tion and editor of the Carolina Banker.

been well served for many years by Harry

Davis,” said Peter Gwaltney, president &

CEO of the NCBA. “The NCBA is very

fortunate to have him on our team for the

many contributions he makes through

research, speaking engagements and direc-

tion of our banking school. He is an ambas-

sador for banking like no one else I know.”

In addition to his capacity as NCBA

Economist, Dr. Davis serves as dean and

instructor for the NCBA’s North Carolina

School of Banking. He works closely with

the School’s faculty and class representa-

tives to ensure that the curriculum is rel-

evant and reflective of the changes taking

place in banking. He is also an instructor

for the Director’s College sponsored by the

North Carolina Commissioner of Banks,

the North Carolina Insurance Executive

Management School and the South Caro-

lina School of Banking.

“Harry has been an impact player for a long

period of time – both at the University and

in the community banking space in North

and South Carolina,” said Joe Towell, chair-

man of Yadkin Financial Corporation. “He

has had a positive impact on many students

who went on to become very successful

bankers. He has deep roots in the industry

and has been incredibly successful in both

the classroom and in the board room as a

high quality individual and a high quality

professional.”

Professorship Honoring Our Dear Friend

Harry’s Legacy

In recognition of his nearly four decades


of service to North Carolina’s banking

industry and ASU, the Walker College of

Business at ASU, in collaboration with the

NCBA, is creating an endowed professor-

ship in Harry’s honor. The Harry A. Davis

Professorship will allow the Walker Col-

lege of Business to attract and retain talent

to teach, conduct research and perform

service in the field of banking and finance,

preserving and building upon Harry’s life-

time of work and achievement during his

long tenure at ASU.

“I am humbled that the Walker College

of Business has chosen to name this Pro-

fessorship in my honor,” said Harry. “My

colleagues and students during my career

with ASU have become extended members

of my family, and I – along with my col-

leagues – are hopeful that this Professor-

ship will be used to attract highly moti-

vated future faculty members and students

to continue and expand upon a tradition of

excellence.”

“Harry Davis embodies the very mission of

the Walker College of Business at Appala-

chian,” said Walker College Dean Heather

Norris. “Each and every day, he delivers

transformational educational experiences

that prepare and inspire students to be

ethical, innovative and engaged business

leaders who positively impact our commu-

nity. This professorship will not only honor

Harry, but will also help the Walker College

of Business continue its legacy of excellence

in banking education in North Carolina.”

NCBA Campaign To Fund The Dr. Harry

Davis Professorship

A fully-endowed professorship requires

$1 million in funding, and the the NCBA

has organized a campaign to raise money

for the professorship through contribu-

tions from NCBA members, with a goal

of $1,000,000. When the NCBA members

reach $666,667 in gifts and/or pledges, the

Walker College of Business will apply for

matching funds from the State of North

Carolina; the state will provide matching

funds of $333,333 to create a $1,000,000 en-

dowment. To be eligible for matching funds,

all bank pledges are to be completed within

a five-year period. At the time of this print-

ing, early pledges exceed $100,000 from the

NCBA and its members.

For details on how your organization can

make a pledge contact the NCBA office or

Will Sears at the Walker College of Business

at [email protected] or (828) 262-6231.

“Harry Davis has been a vital contributor

to our bankers association, to Appalachian

State University and to our state for nearly

40 years,” said Bob Hatley, president & CEO

of Paragon Bank in Raleigh. “In his role as

economist for the NCBA, he has provided

North Carolina bankers valuable insight into

what has happened and what appears to be

coming our way in the economy and why.

He has shown the effect this information has

to our banks and to our communities. We

have all made strategic decisions based on

information gained from Harry. Now is our

chance to recognize him for his contribution

to the success of banking in North Carolina.”

NCBA members will receive information

about the Dr. Harry A. Davis Professorship

fundraising campaign in July and regular

updates on pledges received will be provided

through the NCBA Weekly Bulletin during

the campaign. We will continue to keep you

informed throughout the process and ap-

preciate any and all contributions from our

member banks. CB

Above: Harry Davis addressing a crowd at the CEO Lecture Series.


2016 Conferences

Join Us For

Management Team Conference

Oct. 24 - 26

Pinehurst Resort

Pinehurst

Contact the NCBA Meetings Department

at (800) 662-7044 or email

Christy Santacana at

[email protected]

July/August

July 31-Aug. 5: North Carolina School of BankingChapel Hill

Friday CenterAugust

30-31: CFO SymposiumRaleigh Marriott Crabtree Valley

Women In Banking Leadership

SymposiumOmni Hotel, Charlotte

September

28-29:

October

24-26: Management Team ConferencePinehurst Resort, Pinehurst

11-13: North Carolina Young Bankers

(NCYB) ConventionOmni Hotel, Charlotte

November

9-10: Security SummitHilton Charlotte Executive Park

North Carolina School of Banking

July 31 - Aug. 5

University of North Carolina

Chapel Hill

NCYB Convention

Sept. 11 - 13

Omni Hotel

Charlotte



THE RISK OF UNINTENDED CONSEQUENCES: APPLYING A ONE-SIZE-FITS-ALL RULE WITH

RESPECT TO PAYOFF & REINSTATEMENT QUOTES

Graham H. Kidner is general counsel with Hutchens Law Firm.

The recent opinion in Prescott v. Seterus,

Inc., 2015 WL 7769235 (11th Cir. Dec. 3,

2015), has led many mortgage servicers

to direct foreclosure law firms to elimi-

nate the practice of including estimated

or anticipated charges (“estimates”) in

payoff and reinstatement quotes. Such

directions are problematic, particularly in

the Carolinas where Prescott has no legal

force, and no federal court in either state

has addressed the issues in that case. Ad-

ditionally, because Prescott is a Fair Debt

Collection Practices Act (FDCPA) case, its

holding applies only to debt collectors, not

to creditors. While some servicers may be

debt collectors when they communicate

with defaulting borrowers, many are not.

Moreover, both the Mortgage Servicing

Rules and North Carolina law require the

servicer to include estimates it expects the

borrower to pay when responding to a bor-

rower’s authorized payoff request. South

Carolina foreclosure judges frequently

require payoff quotes to include estimated

charges.

In Prescott, the loan servicer was Seterus,

a debt collector. Seterus issued a reinstate-

ment quote to the borrower and included

attorneys’ fees it estimated would be

incurred to the good-through date, but

that had not been incurred as of the date

the quote was issued to the borrower. The

Court held that, even though the estimate

was clearly marked as such and con-

tained in a separate section of the letter,

the servicer violated 15 U.S.C. § 1692f(1),

which prohibits a debt collector from using

“unfair or unconscionable means to collect

or attempt to collect any debt,” including

“[t]he collection of any amount (including

any interest, fee, charge or expense inci-

dental to the principal obligation) unless

such amount is expressly authorized by the

agreement creating the debt or permitted

by law.” Because the mortgage instrument

(believed to be the standard GSE form) did

not require the borrower to pay estimated

fees, but only those actually incurred, the

Court found that Seterus was not autho-

rized to collect them at the time it provided

the statement.

The Court also held that Seterus violated 15

U.S.C. § 1692e(2)(B), providing that a “debt

collector may not use any false, deceptive

or misleading representation or means in

connection with the collection of any debt,”

including the “false representation of…

any… compensation which may be law-

fully received by any debt collector for the

collection of a debt.” Observing that the

“least sophisticated consumer” standard

is used to evaluate claims brought under

the FDCPA, the Court found that the least

sophisticated consumer would not have

understood the terms of the mortgage to

require the payment of “estimated” fees in

order to reinstate the loan.

The FDCPA and the Consumer Financial

Protection Bureau’s Mortgage Servicing

Rules target different audiences, without

reference to their members’ possible dual

status: debt collectors, who may or may


not be mortgage loan servicers; and ser-

vicers, who may or may not be debt collec-

tors. The latter arguably require the inclu-

sion of estimated or anticipated charges in

payoff statements, unless the servicer has

decided to waive collection of such charges.

12 CFR § 1026.36(c)(3) provides, in perti-

nent part, that if the borrower follows the

correct procedure for requesting a payoff

statement, the servicer “must provide an

accurate statement of the total outstanding

balance that would be required to pay the

consumer’s obligation in full as of a speci-

fied date.”

If a borrower follows the statutory pro-

cedure, North Carolina law requires the

servicer to provide a written payoff state-

ment for a specified date up to 30 days

after the borrower’s request. The statement

must contain, inter alia, the “information

reasonably necessary to calculate the payoff

amount as of the requested payoff date.”

N.C.G.S. § 45-36.7(e). This also appears to

require the servicer to include estimates of

fees and costs it expects to incur through

the specified date if it intends to collect

them from the borrower. The servicer’s

failure to comply with § 45-36.7 could

expose it to action from the N.C. Commis-

sioner of Banks. Demanding the payment

of fees or costs incurred subsequent to the

provision of a payoff statement, if esti-

mated or anticipated charges were excluded

from the statement, may violate N.C.G.S.

§ 53-244.111, which makes it unlawful for

a servicer to fail to follow state and federal

laws and regulations related to mortgage

servicing. N.C.G.S. § 53-244.116 provides

that the Commissioner may impose a civil

penalty on a servicer for such a failure of

up to $25,000 per violation.

South Carolina has not enacted legisla-

tion with respect to the provision of payoff

statements. However, a judge presiding

over a foreclosure case will routinely order

the servicer to provide the borrower a pay-

off statement good for up to 30 days, and to

include charges estimated or anticipated to

come due by the end of that period. Failure

to comply may at the least result in a delay

of the proceedings in the event the bor-

rower complains to the court, and may lead

to the imposition of monetary sanctions on

the servicer or a denial of judgment.

Both servicers and their law firms are right

to be concerned about complying with the

FDCPA. However, as with other federal

laws, different federal courts may arrive at

conflicting positions interpreting the same

statutes and each opinion may be the law

for the jurisdiction in question unless and

until the United States Supreme Court ul-

timately settles the conflict. As an on-point

example, federal courts in the Third Circuit

have issued opinions implicitly approv-

ing of debt collectors including estimated

charges in communications to consum-

ers. See, e.g., Kaymark v. Bank of America,

N.A., 783 F.3d 168, 175 (3d. Cir. 2015),

and Stuart v. Udren Law Offices, P.C., 25 F.

Supp. 3d 504, 511 (M.D. Pa. 2014).

In conclusion, applying the Prescott rule in

the Carolinas may have unintended conse-

quences for servicers, including the inabil-

ity to collect otherwise recoverable charges

from borrowers; reimbursement denial

from loan owners; or, adverse action from

the CFPB or the Commissioner of Banks.

Law firms are also concerned whether

servicers will pay their invoices contain-

ing post-statement fees and costs if these

charges are not paid by the borrower. CB


NORTH CAROLINA BANKERS ASSOCIATION MEMBER PROFILE: RICHARD JEFFERSON

WRITTEN BY: KATHLEEN ROLLINSON

As the only full-service community bank

headquartered in Jacksonville and Onslow

County, North Carolina, Coastal Bank &

Trust was the last de novo bank that opened

in North Carolina. Richard Jefferson, who

was named President & CEO in January 2016,

has been with Coastal Bank & Trust since it

opened for business in 2009 as one of the four

original executive team members serving as

CFO.

Prior to the Recession, de novo banks were a

strong business model and there was a void

in locally-owned community banking in the

Jacksonville area. The original officers – who

all had extensive banking backgrounds – did

a tremendous amount of research on Jackson-

ville and its surrounding communities, and

found that the demographics supported the

need for a locally-owned community bank.

The executive team received approval for the

bank from the State and raised capital – all

locally raised with no institutional funds.

“Trying to raise $11 million in 2008 when the

economy was at its lowest point was difficult,”

said Richard. “But, we found that people were

willing to support our mission in bringing

community banking to Jacksonville and On-

slow County.”

Coastal Bank & Trust opened for business

on April 13, 2009, and since that time has

been operating under its same guiding prin-

ciple –providing the highest level of service

by creating a banking experience unique to

the marketplace. Fast-forward seven years

and the bank now has 24 employees, a main/

branch office in Jacksonville, a branch in

Holly Ridge and a Loan Production Office in

Wilmington.

Richard Jefferson, president & CEO of Coastal Bank & Trust, lives in Jacksonville with his wife, Terri, and their children Griffin and Bailey.

Originally from Danville, Virginia, Richard is

a second generation community banker and

grew up in a community bank environment.

His father was president of American National

Bank and was with them for more than 30

years. “As a kid, I remember going into the

bank on the weekends and after school to sim-

ply hang out or help my dad around the bank,”

said Richard. “I’m extremely proud to follow in

his footsteps. Community banking really suits

me. I truly enjoy providing an integral service

to our community.”

Richard is very involved in the local commu-

nity, being a member of and having served as

chairman of the Military Affairs Committee.

Jacksonville is the home to Camp Lejeune, the

largest Marine Corps base on the East coast.

He is also very involved with Jacksonville

Breakfast Rotary Cub and his church. “In the

communities we serve, my focus is to com-

municate and educate people on the difference

of community banking – what it is and the

role that it serves within a community,” said

Richard. “I try to practice what I preach to our

employees, and that is to be actively engaged in

our communities. It is an integral part of our

corporate philosophy as a community bank.” CB

NCBA FOUNDATION SCHOLARS2016

LAUREN DRUMTHE LARRY BARBOUR SCHOLAR

Lauren is the daughter of James and Crystal Drum. James works for High Point Bank & Trust Company. Lauren, the recipient of the Larry Barbour Scholarship, will attend Clemson University. This scholarship is in recognition of Larry’s contin-ued advocacy for leadership train-ing through the curriculum of the NCBA’s North Carolina School of Banking and his dedicated service over decades to the University of North Carolina at Chapel Hill.

ROBERT JUDGE WILL KELLYTHE HAROLD KEEN SCHOLAR THE KEL LANDIS SCHOLAR

SHANN LEONARD REGAN LONG SAMANTHA SHUFORD

Shann, the recipient of the Kim Price Scholarship, is the son of Lee and Bonna Leonard. Lee is employed with Yadkin Bank in Raleigh. Shann will attend Davidson College. This scholarship is named in Kim Price’s honor for his pursuit and implementation during his chairmanship of 100 percent dues refund for the members in 2008. It is also in recognition for his strong voice calling for a halt to credit union expansion.

Regan, the recipient of the John B. Harris, Jr. Scholarship, is the son of Loren and Jane Long. Loren works for Entegra Bank in Franklin. Regan will attend the University of Alabama. The Scholarship is in honor of John Harris’ pursuit of the integrity of banking, fulfillment of bank’s missions as quasi-public trusts due to federal insurance accounts and serving as an advocate to assure a well-trained staff for the benefit of consumers.

Samantha, the recipient of the Donna Goodrich Scholarship is the daughter of Gene and Jane Shuford. Jane is em-ployed by Bank of the Ozarks in Shelby. Samantha will attend the University of South Carolina. A leader of unparalleled comparison, respected by all and admired for her immense capacity as a consen-sus builder, this scholarship was named in Donna’s honor for being a strong and positive advocate for women in banking.

THE KIM PRICE SCHOLAR THE JOHN B. HARRIS, JR. SCHOLAR THE DONNA GOODRICH SCHOLAR

Robert, the recipient of the Harold Keen Scholarship, is the son of Robert and Eliz-abeth Judge. Robert is employed at Live Oak Bank in Wilmington. Robert will at-tend Villanova University. This scholar-ship is named in honor of Harold Keen with great appreciation for his enthusiastic oversight as chairman of the NCBA Foun-dation’s Scholarship Committee, and the fulfillment of its mission and its support of college-bound academic achievers who are children of employees of banks in our state.

Will, the recipient of the Kel Landis Scholarship, is the son of Roy and Kathleen Kelly. Roy works for Fifth Third in Raleigh. Will will attend North Caroli-na State University. This scholarship is named in honor of Kel Landis to express gratitude for his pursuit of superlative performance on behalf of North Caroli-na’s banks and their government relations missions, constructive conversations and regulatory reform.



LETTER FROM INCOMING CHAIRMANRICK CALLICUTT

Rick Callicut is president & CEO of Bank of North Carolina.

“Hope is not a strategy.”

My name Rick Callicutt, and I’m the CEO &

president of Bank of North Carolina. I often

communicate to our employees the

statement referenced above, as a strategy

requires a plan of action, while hope is

simply a belief for something to happen. In

both my professional and personal life, this

quote holds true.

Originally from North Carolina, this state

has always been my home. I was born in

High Point, and grew up in the Davidson

County area. My love of sports has always

been evident, and I played basketball,

football and was on the track team in high

school. I then attended High Point University

where I set a track record that still stands

in the high jump category. Yet my love for

sports is not just dribbling, shooting and

running, but the relationship between the

coach and the players.

After graduating from college, I entered the

world of financial services where I joined

Wachovia Bank in their management

program. I held various roles there;

however, while not my favorite, the one that

was probably the most beneficial was in the

sales finance area as a collector. I describe

that experience as a master’s degree in

people.

In 1991, a new bank was being formed in

Thomasville, North Carolina, and I was

fortunate to be a part of its creation and

development. We opened our doors to

customers in December as Bank of North

Carolina (BNC), and we’ll be celebrating

our 25th anniversary this year. Over the

years, we’ve consistently experienced steady

growth; however, the past five years have

been the most exciting at BNC. During that

time, we’ve had the opportunity to build

our franchise throughout North Carolina,

as well as entering both South Carolina and

Virginia as BNC Bank. Through strategic

acquisitions, we have partnered with

financial institutions to deliver the best

banking experience possible. Our brand

promise is to Deliver More than expected,

and this is not only a part of the culture at

BNC, but it is ingrained in everything we

do. Through the commitment and

dedication of our employees, we strive to

Deliver More to one another, to our

customers and to the community each and

every day.

At BNC, our mission is to provide the best

banking experience possible by

anticipating our customer’s needs, and

exceeding their expectations while

assisting them in achieving their

short-term and long-term goals. We are

committed to providng a challenging and

rewarding work environment for our

employees, while maintaining solid

financial strength to ensure superior

returns to our shareholders.

When you begin a bank, there are many

jobs to be filled by a few select individuals.

This may seem challenging at times;

however, it is through those experiences

you have the ability to learn. During my

tenure at BNC, I’ve probably held about

every role, and much of how I manage

today is because of that thorough

foundation. I hire the best bankers I can find,

and then I allow them to do what they do

best. Yes, I work from a playbook, and we

focus on the fundamentals, but I must also

be deliberate in allowing the employee to

do their job without micro-managing. I’ve

learned through coaching and support,

success will follow.

On a personal level, my family includes my

wife, Jaime, three daughters, two step

daughters, and three grandchildren. We

all have busy schedules; however, we enjoy

spending time together doing activities such

as boating, traveling, saltwater fishing and

supporting our Carolina Panthers, University

of North Carolina Tar Heels and University

of South Carolina Gamecocks.

Accepting the role of Chairman of the NCBA

is not one I take lightly. Our industry has

Think differently about compliance.

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been under siege the last several years. Our

communities, customers, shareholders and

employees have suffered the consequences of

the regulatory burden and the indifference of

our Congress to take significant action. We

have been painted with a brush not fitting of

the contributions we make as an industry of

community banks.

Your board of directors and leadership of the

NCBA are committed to working hard to

ensure our voice is heard. Your NCBA has

never been better positioned, and steadfast in

our resolve to advance the cause we all share.

Thank you for the opportunity to be the

incoming chairman of the North Carolina

Bankers Association. It is an honor and a

privilege, and I look forward to another year

of growth and success.

PAC GOAL$125,000

52,031

2016NC BankPACPOLITICALACTIONCOMMITTEE

2016 Honor Roll

100% Club BB&T, Winston-Salem blueharbor bank, Mooresville Entegra Bank, Franklin First Federal Bank, Dunn First Federal Savings Bank, Lincolnton First South Bank, Washington High Point Bank & Trust, High Point Jackson Savings Bank, Sylva

Lumbee Guaranty Bank, Pembroke Morganton Savings Bank, Morganton North State Bank, Raleigh Old Town Bank, Waynesville Paragon Bank, Raleigh Piedmont Federal Savings Bank, Winston-Salem Regions Bank, Raleigh Roxboro Savings Bank, Roxboro Select Bank & Trust, Dunn Sound Bank, Morehead City SunTrust Bank, Durham Taylorsville Savings Bank, Taylorsville

200% Club Black Mountain Savings Bank, Black Mountain Coastal Bank & Trust, Jacksonville North Carolina Bankers Association, Raleigh Tarboro Savings Bank, Tarboro


Faces in the News

ALBERMARLE BANK & TRUST, A WEST TOWN

BANK

Albermarle Bank & Trust named Deborah Lee vice presi-

dent and city executive for the new branch that recently

opened in Edenton. Albermarle Bank & Trust also named

Heather Sawyer assistant vice president and branch man-

ager for the new full-service banking office in Edenton.

AQUESTA BANK

Aquesta Bank Insurance Services, Inc., a subsidiary of

Aquesta Bank, announced that Denis Bilodeau retired as

president at the end of March. Aquesta Bank announced

the bank has hired Jon McConnell to serve as a Charlotte

city executive to help develop and grow the commercial

relationships in the Charlotte area. Aquesta Insurance

Services, Inc. announced that Kenneth (Ken) McGee has

been named president of the subsidiary of Aquesta Bank.

Aquesta Bank also announced the hiring of Julia Stuckey

to serve as a branch manager for its SouthPark location in

Charlotte.

BANK OF NORTH CAROLINA

Bank of North Carolina announced the promotion of

Patrick W. Pritchard to executive vice president, senior

operations officer. Pritchard leads the branch operations,

deposit administration, loan operations and loan process-

ing teams.

CAROLINA BANK

Carolina Bank announced that Amy Gilmore joined the

bank as Greensboro mortgage loan officer. Gilmore is an

accomplished banker with nearly 30 years of experience

in the financial industry. Carolina Bank also announced

the hiring of Fuller Parham to its Peace Haven Road office.

Fuller will serve as vice president, commercial banking

officer, responsible for developing new customer relation-

ships and managing existing customer portfolios. Carolina

Bank also announced the promotion of Kathryn Watson

to the position of assistant vice president and branch man-

ager in Asheboro.

CAROLINA TRUST BANK

Carolina Trust Bank announced Edwin E. Laws joined the

bank as executive vice president and Chief Financial Of-

ficer (CFO).

CARTER BANK & TRUST

Carter Bank & Trust announced the promotion of Charlie

H. “Chuck” Martin III to assistant vice president. Martin

has been employed by the bank for 21 years and most re-

cently served as the bank’s marketing officer. The bank also

announced the promotion of Kristen C. Worley to branch

manager of the 58 East office, located at 140 Kentuck Road

in Danville, Virginia.

DeborahLee

HeatherSawyer

JonMcConnell

JuliaStuckey

Patrick W. Pritchard

Kenneth (Ken)McGee

FullerParham

KathrynWatson

Edwin E.Laws

AmyGilmore

Charlie “Chuck”Martin III

Kristen C.Worley

JoyCash

DenisBilodeau

BestyJones

BethanyAlger

KristenAnderson

Julie Clark

KimFox King


Faces in the News

CRESCOM BANK

CresCom Bank announced the hiring of Joy Cash to serve

as branch manager and assistant vice president for its new

Wilmington branch, which opened in April, located at

4710 Oleander Dr. This branch is CresCom Bank’s first

Wilmington branch and represents continued expansion

throughout the Carolinas.

F&M BANK

F&M Bank announced Betsy Jones joined the bank as se-

nior compliance officer in Salisbury.

FIDELITY BANK

Fidelity Bank announced the promotion of Bethany Alger

to vice president and business development officer. Fidel-

ity Bank also announced that Kristen Anderson joined its

team at the Sunset Plaza branch in Fuquay-Varina as as-

sistant vice president and office manager. Julie Clark also

joined its team at the Parkway Pointe branch in Cary as

vice president and branch manager. Kim Fox joined the

Fidelity Bank team in Roxboro as vice president and busi-

ness development officer. Fidelity Bank also announced

the promotion of Matthew King, previously serving as

chief credit officer, to executive vice president at the bank.

FOUR OAKS BANK

Four Oaks Bank announced the renaming of their finan-

cial services division. Four Oaks Services is now “Four

Oaks Wealth Management.” Chris Vasques will serve as

senior vice president and manager of Four Oaks Bank

Wealth Management.

KS BANK

KS Bank announced that Earl W. Worley, Jr., KS Bank chief

operating officer, has been elected chair of the University of

Mount Olive board of trustees.

NEWBRIDGE BANK

NewBridge Bank announced that Robin Snipes Hager,

senior executive vice president and chief administrative

officer, has been honored with the ATHENA Leadership

Award by the Greensboro partnership. This award is a na-

tional honor presented to an individual who attains the

highest level of professional excellence, and is committed

to improving the quality of life for others and the advance-

ment of women.

NORTH STATE BANK MORTGAGE

North State Bank Mortgage announced they have en-

hanced its Outer Banks team by hiring Carrie Cubine as

a mortgage loan officer. North State Bank Mortgage also

announced that Jamie Harrington, vice president and re-

gional manager, was named in the top echelon for Homes

Earl W. Worley, Jr

CarrieCubine

JamieHarrington

DavidJoyner Davis

ChrisVasques

Robin Snipes Hager

EllenMcGraw

JasonKranack

JohnGraham

BrookeJenkins

KrissHughes

MichaelCooper

JessePaino

Faces in the News

for Heroes affiliates, having been named the organization’s

#3 lender in the United States and #1 lender in North

Carolina. North State Bank Mortgage also announced the

hiring of David Joyner, mortgage loan officer. Joyner will

work alongside Cubine and the Outer Banks team.

PARAGON BANK

Paragon Bank announced that Matthew C. Davis, chief

operating officer and executive vice president, has been ap-

pointed to the board of directors for WakeEd Partnership

and to the board for A Place at the Table. Paragon Bank

also announced that John Graham has joined the client de-

velopment team at the bank’s Charlotte office as senior vice

president and client development officer. Paragon Bank

also announced the promotions for three key individuals.

Kriss Hughes has been promoted to senior vice president,

Brooke Jenkins has been promoted to assistant vice presi-

dent and Ellen McGraw was promoted to vice president.

SQUARE ONE BANK

Square One Bank announced that Jason Kranack joined

the bank as executive vice president, bank operations.

TD BANK

TD Bank named Michael Cooper as deployment director

of the New Markets Tax Credit Program (NCTC) for TD

Community Development Corporation.

WELLS FARGO

Wells Fargo announced that Jesse Paino was named senior

relationship manager for the Cary market.

YOUNT HYDE AND

BARBOUR HALF PAGE AD WE HELPCOMMUNITY BANKS

GROW CONFIDENTLY

Keep the NCBA in the loop!

CAROLIN

ABANKER

Fall 2010

Honor Flights

Give WWII Vets

Pride and Praise

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HELP KEEP CAROLINA BANKER

CURRENTAs your bank promotes employees or hires new employees, please remember to send an update and the employee’s headshot to Kathleen Rollinson at [email protected]. This special Faces in the News section in Carolina Banker is designed to showcase these announcements each issue. We truly appreciate your submissions.



Around the State

Left: Four Oaks Bank held a Ribbon Cutting Ceremony to celebrate the bank’s move into their brand new facility at 115 Four Oaks Place in Dunn. Approximately 80 well wishers and supporters attending the ceremony and enjoyed a light lunch. Below Left: Senator Thom Til-lis speaks with North Carolina bankers about regulatory red tape, issues in Washington and in North Carolina and his position.

Left: The newest branch of Albermarle Bank & Trust (a West Town Bank) in Edenton celebrated its grand opening with a ribbon cutting ceremony with its employees, stakeholders, government officials and community leaders. Above: In April, Willow Creek, a 53-unit apart-ment community of CICCAR’s for seniors in Cary, celebtrated its official dedication with a ribbon-cutting ceremony. This development provides affordable housing for seniors in the area whose incomes are limited to 60 percent of the area median. Pictured holding the scissors is Represen-tative David Price.


Banks Backing Their Communities

Top Right: United Way of Lincoln County an-nounced Carolina Trust Bank as this year’s winner of the North Carolina Spirit Award. Each year, the United Way of North Carolina recognizes and awards companies and organizations that have demonstrated strong community support through United Way involvement. The Award celebrates the partnership of people working together and implementing innovative solutions for long-term community change. Carolina Trust Bank has demonstrated 15 straight years of 100 percent employee participation and contributions to the United Way campaign.

Left: Wells Fargo team members helped move veterans into their brand new apartments at CASA in Raleigh. The furniture was from The Green Chair Project in Raleigh, which is another organization that Wells Fargo actively supports. Bottom Left: The United Way of Asheville Bun-combe County presented Asheville Savings Bank (ASB) with the United Way Spirit of the Mountains award in recognition of the Bank’s outstanding commitment to the community. Pictured is Suzanne DeFerie, president & CEO of ASB; David Bailey, president & CEO of United Way of Asheville and Jonna Bradham, SVP, human resources, ASB.

Top Right: HomeTrust Bank is celebrating 90 years of commu-nity banking by donating $90,000 to organizations in its banking footprint. The 90K for 90th Community Support Contest will fund initiatives for 45 local ogranizations. In the photo David-son County Market President presents a check to the LHCDC in Davidson County. Bottom Right: Paragon Bank participated in the Triangle MS Walk in April at the PNC Arena in Raleigh. Paragon Bank employees raised more than $4,000 including a matching donation from the Bank.

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Documents

Update On NCYB Message From The Chairman Health Savings ... · Phone: Email: P.O. Box 19999 Raleigh, NC 27619 (919) 781-7979 [email protected] features [6] From The President’s