Getting to Know Chad Prather 2025‑2026 West Virginia Bankers Chairman FALL 2025
Contents ©2025 West Virginia Bankers Association (WVBA) | The newsLINK Group LLC. All rights reserved. West Virginia Banker is published four times per year by The newsLINK Group LLC for WVBA and is the official publication for this association. The information contained in this publication is intended to provide general information for review, consideration and education. The contents do not constitute legal advice and should not be relied on as such. If you need legal advice or assistance, it is strongly recommended that you contact an attorney as to your circumstances. The statements and opinions expressed in this publication are those of the individual authors and do not necessarily represent the views of WVBA, its board of directors or the publisher. Likewise, the appearance of advertisements within this publication does not constitute an endorsement or recommendation of any product or service advertised. West Virginia Banker is a collective work, and as such, some articles are submitted by authors who are independent of WVBA. While a first-print policy is encouraged, in cases where this is not possible, every effort has been made to comply with any known reprint guidelines or restrictions. Content may not be reproduced or reprinted without prior written permission. For further information, please contact the publisher at (855) 747-4003. 6 19 PRESIDENT’S MESSAGE 4 Banker Concerns Shared With the WVBA Help Shape ABA Federal Priorities By Mark Mangano, President & CEO, WVBankers 6 Getting to Know Chad Prather, 2025‑2026 West Virginia Bankers Chairman 8 Creating Political Change By Bryce Himelrick, Government Affairs Strategist, WVBankers 9 Thank You to Our Sponsors 131st WVBankers Annual Convention 10 West Union Bank Announces New President and CEO Amid Retirement of Longtime Leader 12 Leveling the Playing Field By Dr. Sean Payant, President, Haberfeld 14 Wage and Hour Audit Are Your Mortgage Loan Officers Correctly Classified? By Julie A. Moore, Esq., Partner, Bowles Rice LLP 16 Beyond the Headlines Decoding the Latest Trends in Small Business By David Adams, Head of Commercial Product Marketing, Equifax 19 Anti-Financial Crime Investigations Signal Future of Bank Compliance By Shaun Harms, Principal, and Vishal Shah, Director, Forvis Mazars 21 Model Risk Management Best Practices A Substantial Focus on Definition, Governance Best Practices and an Emphasis on Model Validations By Kaitlyn E. Gasper, CAMS, CFE, Vice President, Principal, Risk Advisory, S.R. Snodgrass PC Cover Photo: Fall 2025 Chairman Cover Photo and Convention Photography provided by Erin Hurst, Erin Hurst Photography, Charleston, West Virginia (www.erinhurstphotography.com) 2 WEST VIRGINIA BANKER
CHARLESTON, WV • MARTINSBURG, WV • MORGANTOWN, WV • PARKERSBURG, WV • SOUTHPOINTE, PA • WINCHESTER, VA Banks, retailers, finance companies, and other businesses offering financial services to consumers face the ever-present threat of expensive and potentially ruinous litigation. Lawsuits, based on federal and state laws prohibiting “predatory lending,” “unfair debt collection,” and “deceptive and unfair” practices, strike at the heart of marketing, sales, privacy, and debt collection practices. At Bowles Rice, our Financial Services Litigation team has experience successfully defending clients, big and small, against lending-related lawsuits and class action litigation brought by consumers and regulators. Our lawyers have experience dealing directly with federal and state regulators on behalf of our banking and lending clients. For more information, contact our firm’s Financial Services Litigation team leader Zack Rosencrance at (304) 347-1161. Financial Services Litigation bowlesrice.com Responsible Attorney: Marc Monteleone 600 Quarrier Street • Charleston, WV 25301
PRESIDENT’S MESSAGE MARK MANGANO President & CEO WVBankers Banker Concerns Shared With the WVBA Help Shape ABA Federal Priorities associations’ local connection to their members into federal advocacy. Alliance members meet at least weekly to discuss current federal legislative and regulatory issues and priorities. Alliance meetings include discussions with ABA senior and advocacy leaders. Through the Alliance, state banking associations: • Inform ABA political engagement priorities, • Develop consensus on federal advocacy strategies, • Coordinate communications with federal lawmakers and regulators, • Cooperate in advocacy efforts, and • Provide grassroots support to the ABA legislative and regulatory advocacy teams. The WVBA proudly focuses on improving the banking environment in West Virginia. Success relies on fostering state laws and regulations that support our members’ ability to serve and support their customers and communities. Also, success increasingly requires that WVBA advocate on the federal level. WVBA participation in the Alliance increases the association’s impact in fostering favorable federal laws and regulations. The WVBA is most effective in representing you when we hear from you. We encourage you to share your concerns regarding the banking environment. Sometimes, potential solutions may be achievable at the state level, and other times, federal action may be necessary. Whether the solution requires state or federal action, we are equipped to help. The Trigger Lead Act is a wonderful example of local bankers sharing their concerns with their state associations and the state associations helping drive change at the federal level. On Sept. 5, 2025, President Trump signed the Home Privacy Protection Act, H.R. 2808 (the Act). This event was noteworthy for at least three reasons. 1. The Act should effectively end the credit reporting agencies’ ability to sell “Trigger Leads” when a bank customer applies for a mortgage loan. The Trigger Lead practice currently results in mortgage loan applicants being flooded with postcards and letters containing often misleading mortgage offers and feeling like their bank compromised their personal information. 2. The Act reaffirms that bipartisan advocacy can be successful even in a deeply divided political environment. 3. Success in passing the Act was influenced by bankers expressing to the West Virginia Bankers Association and other state banking associations their desire to stop trigger leads. Through the ABA State Association Alliance (the Alliance), state banking association executives helped inform the ABA advocacy professionals on the need to prioritize a federal remedy to a practice that harmed bank customers. The Alliance is a self-governing group that includes ABA-affiliated state banking associations from all 50 states, Puerto Rico and the District of Columbia. The Alliance provides a means for channeling the state Success relies on fostering state laws and regulations that support our members’ ability to serve and support their customers and communities. 4 WEST VIRGINIA BANKER
Getting to Know Chad Prather, 2025‑2026 West Virginia Bankers Chairman The West Virginia Bankers Association is proud to introduce Chad Prather, Huntington Bank’s West Virginia regional president, as the 2025-2026 West Virginia Bankers Chairman. With a blend of experience, forward-thinking leadership, and genuine enthusiasm for people, Chad brings a unique energy to the role — one that’s both professional and unmistakably his own. A JOURNEY ROOTED IN PEOPLE Chad’s banking story began soon after graduating from Marshall University, where a curiosity for finance led him into a management training program. That early exposure to the many facets of banking helped him discover his passion for client-facing roles — a passion that has since guided his career. From branch manager to small business banker, and eventually to commercial banking and regional president, Chad’s path has always been about helping others succeed. INSPIRED BY MENTORS, DRIVEN BY VALUES Mentorship has played a pivotal role in Chad’s career. He credits countless colleagues for inspiring him with their dedication to people and communities. “There are way too many people to name them all, but I am deeply grateful for their mentorship.” “Prior to becoming Regional President, I worked with the late Andy Paterno, our prior West Virginia Regional President. Andy was exceptional with people — always recognizing how to help others reach their highest potential. He never met a stranger and treated everyone extremely well. As Regional President, I also had the privilege of working with and learning from Sandy Pierce, former Huntington Senior Executive Vice President, during her time at Huntington; I am extremely grateful for her guidance and insight. She, too, showed the importance of getting to know the unique story of each individual. Huntington’s executive leadership, including Steve Steinour, Brant Standridge and Regional Banking Director Christian Corts, sets the bar high for how I approach business, my role as a leader and stewarding our communities. I’m beyond grateful for their leadership and the opportunities they have afforded me, their support and the investments they continue to make in our West Virginia colleagues and communities.” “I would be remiss if I didn’t mention my mother, Diana. She continues to show me how to be resilient, patient and positive — no matter how difficult the situation. She had a career she enjoyed while also always putting our family first. She volunteered in the community and, to this day, takes time to listen and help others, even as she faces physical challenges.” “My personal and professional experiences have allowed me to work closely with many people who have tremendous care and passion for others and their communities. I have tried to identify traits in those people that I admire and try to emulate them. Whether it is how people interact with others, handle difficult situations or give back to their community, they inspire me, motivate me, and keep the fire burning bright because they care so much.” The best advice he has received: “Be true to yourself. If your conviction says this is the route you should go, you don’t have to second-guess it,” he said. Chad believes that following your values — even when decisions are tough — leads to the right outcomes. MOMENTS THAT MATTER Chad’s favorite career memories center on helping others achieve their dreams. Whether promoting a team member, helping a client reach a milestone or supporting a community initiative, he finds deep satisfaction in seeing others succeed. 6 WEST VIRGINIA BANKER
“Helping constituents — colleagues, clients or communities — meet their objectives is why I’m in this job. I love doing all those things,” he said. ADVICE FOR EMERGING LEADERS Chad’s message to those entering banking is clear: “Despite the rise of technology and AI, it’s still a people business. People remember how you make them feel.” He encourages authenticity and genuine care, believing these qualities will lead to a bright future no matter what path you take. BEYOND THE BANK: FAMILY, FUN AND SOMETHING SURPRISING Outside of work, Chad’s life is full of adventure. He and his wife, Gretchen, a physical therapy professor at Marshall University, love to travel and explore new cultures. Recent trips have taken them to Italy, Alaska, and soon, Mexico. Their three children, Haley, Aubrey and Eli, keep family life lively. Chad was Athlete of the Year in high school and is a big fan of live music and karaoke. If you catch him outside West Virginia, expect a rousing rendition of “Country Roads” or “Dixieland Delight.” LOOKING AHEAD: THE FUTURE OF BANKING Chad sees the industry evolving, especially in how branches serve customers. While technology will continue to shape banking, Chad believes relationships and the human touch will always be essential. COMMITMENT TO THE WVBA COMMUNITY Active in the WVBA since 2006, Chad has served on the board and executive committee, advocating for the industry and its vital role in communities. He is passionate about transparent communication and meaningful collaboration, urging members to share ideas, identify gaps and seek opportunities. As chairman of the West Virginia Bankers Association, Chad is committed to championing the industry, supporting its members and fostering a spirit of collaboration and innovation. His door is always open. 7 WEST VIRGINIA BANKER
Creating Political Change By BRYCE HIMELRICK, Government Affairs Strategist, WVBankers The fall foliage is lining the hills, and the air is turning crisp, and the May 12, 2026, Primary Election in West Virginia is just seven months away. There is still over a year until the 2026 General Election, but most races for the West Virginia Legislature will be decided at the close of the Primary Election. West Virginia is a Republican state with a Republican Supermajority Legislature. Most legislative races are unopposed after the Primary or are in such “red” districts that the outcome is essentially predetermined. There are exceptions to this rule, such as Morgantown, Wheeling and Huntington, where races stay competitive until November. But largely, the primary determines the winner. The West Virginia Legislature has undergone a shift. Its Republican Majority has historically been reliably pro-business, but we now see a trend of support for anti-business legislation. Eight years ago, the American Tort Reform Association (ATRA) removed West Virginia from its list of “Judicial Hellholes.” In evaluating the 2025 regular session, ATRA labeled the Senate Judiciary Committee a “Lawsuit Inferno.” During the 2025 Regular Session, 26 bills were introduced that either created or expanded causes of action against businesses. The bills targeted banks, industry and businesses more broadly. The WVBA has successfully advocated against such legislation, but the trend is concerning. Fortunately, this trend need not continue. The 2026 Primary Election is both an opportunity for change and for West Virginia bankers to get involved. John Adams wrote: “We electors have an important constitutional power placed in our hands; we have a check upon two branches of the legislature.” In creating political change, it is you who can make the greatest impact. Being informed is the first step in effective engagement. The 2026 Primary will feature an array of candidates. Many of these will be traditional, pro-business candidates supported by groups like the WVBA. Others will not share these views. The WVBA will communicate information about candidates and their districts so you can know who is running in your area. We will keep you informed and encourage you to interact with these candidates, whether this is reaching out to them directly or attending an event, town hall or other function. Engaging with your candidates requires not just knowing about the candidates, but about the issues. The WVBA will provide information about our priorities and goals so that you can provide candidates with information and resources about issues in business and banking in West Virginia. If you or a candidate has questions, contact us; we are happy to provide more detailed resources. Good policy requires understanding, and building understanding during the campaign season only strengthens the association and its members during the legislative session. The 2026 Primary is nearer than autumn’s arrival suggests. It is an opportunity for positive change and a renewed focus on business policy and growth in West Virginia. The WVBA is ready to be a force in driving that change, and we want to help our members participate with us. If you’d like more information, have questions or simply want to know what to talk about when you engage with your candidates, reach out. I have great hope that the 2026 Primary will bring forth positive changes to our legislature, because when policy enables growth, West Virginia’s people and businesses — and especially banks — are poised for great success. 8 WEST VIRGINIA BANKER
Thank You to Our Sponsors 131st WVBankers Annual Convention TITANIUM SPONSORS GOLD SPONSORS SILVER SPONSORS BRONZE SPONSORS DIAMOND SPONSORS FRIENDS OF CONVENTION Jackson Kelly PLLC Suttle & Stalnaker PLLC 9 WEST VIRGINIA BANKER
West Union Bank Announces New President and CEO Amid Retirement of Longtime Leader Thomas Whaling West Union Bank’s Board of Directors is pleased to announce the appointment of Michael Malfregeot as its next president and chief executive officer, effective Jan. 1, 2026. This leadership transition follows the retirement of Thomas Whaling, who will conclude his distinguished 26-year career with the bank in January 2026. Michael Malfregeot brings over 20 years of experience in community banking and financial leadership, currently serving as executive vice president in the senior lender role at West Union Bank. “We are thrilled to promote Michael Malfregeot to this position,” said Ed Cokeley, chairman of the board. “He brings a passion for community, people and strategic vision that aligns strongly with West Union Bank’s values.” Michael Malfregeot As Malfregeot prepares to step into the role, West Union Bank honors the outstanding service of Thomas Whaling, who has led the bank since 2006 with commitment and integrity. “Under Tom’s leadership, West Union Bank has remained steadfast in serving our customers and communities, while focusing on quality organic growth,” said Ed Cokeley. “We truly thank him for his dedication and leadership and wish him all the best in retirement.” Founded in 1893, West Union Bank is a full-service community bank with locations in West Union, Salem, Pennsboro, Harrisville and Clarksburg. West Union Bank is a Member FDIC and an Equal Opportunity Lender. 10 WEST VIRGINIA BANKER
Federal regulators expect banks to make innovative CRA investments, so MVB Bank in Fairmont, W.Va., elected to try a new program designed to place deposits at Community Development Financial Institutions (CDFIs) and Minority Depository Institutions (MDIs) in underserved communities. “We are aware that CRA regulations encourage banks to make a variety of different CRA investments,” said MVB Treasurer Eric Tichenor. “So, when we heard about this program, we thought it would be a great way to earn CRA credit while also enhancing a low-income market.” The ACT®, or Advancing Communities Together®, Deposit Program offers banks a secure, efficient way to place funds into CDFI banks and MDI banks and earn CRA credit under the regulation’s investment and community development tests. “The ACT Deposit Program is a promising new tool for community and regional banks to earn CRA credit,” says Brian Blake, chief public policy officer at the Community Development Bankers Association and a former CRA officer. “ACT excels at meeting both the spirit and the letter of the CRA, and I believe it is very competitive compared with more complex, costly, or time-consuming alternatives.” ACT’s minimum deposit is $1 million, and the CDFIs and MDIs in the program pay near-market rates on the funds. ACT deposits remain liquid and are eligible for millions in FDIC insurance across IntraFi® network banks because they are placed through the IntraFi Cash Service®. IntraFi has built a network of more than 3,000 banks, including CDFIs and MDIs, that can help keep funds local and provide much-needed financial access in rural, suburban, and urban communities across the nation. The $3.4-billion-asset MVB used the ACT Deposit Program to place $1 million into Adelphi Bank, an MDI in Columbus, Ohio, for several reasons. “First, the interest rate on the deposit is much better than an alternative we had been evaluating,” Tichenor said. “We also wanted flexibility on the amount invested so the $1-million minimum appealed to us. “And another thing that is attractive about the program is if you need access to the funding for some reason, you can bring the funds back at any time. All these factors were extremely attractive to our bank.” There are no MDIs in MVB’s home state of West Virginia, so it looked to neighboring Ohio to find Adelphi, a relatively new bank serving Franklin County, which includes Columbus. “The deposits we receive under the ACT Deposit Program are fuel for the bank to help the community grow and meet its financing needs,” said Adelphi’s Chairman & CEO Jordan A. Miller, Jr. Opened in May 2023, Adelphi Bank is the reincarnation of a bank chartered in 1921 during the Great Migration of Black people moving north. “We named our bank after a historic bank that created the first Black hospital here, financed a theater that hosted every Jazz great, and helped all those newly arriving workers get credit,” Miller said. “We want to extend that legacy by financing the revitalization that is happening here.” Adelphi’s mission to help the people in its community build wealth is yet another reason MVB decided to make its deposit. “This investment is very visible,” Tichenor said. “It is helping to grow Adelphi and its community. That’s more satisfying than buying another municipal water and sewer bond.” Placing funds through the ACT Deposit Program was easy, Tichenor added, and MVB may increase its deposit in the future. “It was extremely simple and a fast process,” he said. “Adelphi provided all the paperwork, and it was very, very easy. We will consider further deposits.” Asked if other bankers should use the ACT Deposit Program to help bolster their CRA credit, Tichenor did not hesitate. “I would recommend it,” he said. “It’s an opportunity to do something a little different and the regulators are looking for folks to do something new—not the same old, tired thing.” Have Any Questions? Get in Touch. Deposit placement through ICS and the Advancing Communities Together Deposit Program are subject to the terms, conditions, and disclosures in applicable agreements. IntraFi is not an FDIC-insured bank, and deposit insurance covers the failure of an insured bank. A list identifying IntraFi network banks appears at https://www.intrafi.com/network-banks. Certain conditions must be satisfied for “pass-through” FDIC deposit insurance coverage to apply. CRA Made Easy: Earning Credit While “Doing Good” Via Innovative New Program www.intrafi.com/act-deposit-program │ Diane Ellis │ dellis@intrafi.com By Diane Ellis | Senior Managing Director, IntraFi PAID ADVERTISEMENT
In our ever-changing industry, many community bankers fall into the trap of trying to grow market share by following the lead of the “big banks.” Many of them are finding that it just doesn’t work. Customers continue to flee from banks that focus on regular service charges and complicated products. Ask yourself: “As a consumer, would I think our institution’s pricing structure is fair?” As bankers, we need to look through the lens of the customer. The number one reason consumers switch banks is service failures, often in the form of unexplained nuisance charges or fees. Numerous studies published by The Financial Brand consistently show that consumers hate monthly service charges, minimum balance requirements and confusing products and services with too many variables and requirements. In an increasingly competitive marketplace, community bankers need to focus on customer perceptions to leverage their competitive advantages. In any given market, most community financial institutions see the big banks as their major competitors. So, let’s compare your institution to some of these larger ones. Since customer perception is reality, we will have to draw some conclusions on what customers are likely to believe. • Locations: For customers choosing a new institution, the biggest factor is still location. The average community bank in the United States has six branches, whereas Chase currently has more than 4,800 locations in 48 states. While some FIs are trimming their footprints, Bank of America recently announced plans to open more than 165 branches by the end of 2026. Further, in a recent article, Chase defended its branch strategy as a deposit-gathering machine. Given that location or convenience remains a primary reason for selecting a financial institution, community institutions leaning into the branch strategy will have an advantage. • Marketing Dollars Available: In 2024, Chase budgeted almost $5 billion and Wells Fargo budgeted $869 million for marketing. The average community bank spends less than $600,000 per year. Spent wisely, that budget can help community banks grow their customer base and double account openings. • Product Offerings: Perception is reality. Suppose you took a random survey of people on the street, asking them, “Which bank offers the most products and services: Bank of America or your bank?” Most people would answer “Bank of America” based on perception. The reality is that most community financial institutions offer nearly everything needed by most consumers and businesses. That said, community banks cannot and should not try to copy the big banks or their products. Since you don’t have the most locations, it is imperative that you have a more compelling offer. • Pricing on Deposits: Based on perception, many people may assume that one of the big banks pays the best. In reality, almost every one of our clients across the United States pays higher rates on deposits than the big banks. • Too Big to Fail: In 2023, the collapse of Silicon Valley Bank and Signature Bank sent the markets into turmoil. Uncertainty causes consumers to pause and question the stability of the banking industry as a whole. Which institution do they think is “too big to fail”: Wells Fargo or your community bank? • Customer Service Culture: All things considered, who has the ability to most fully know their customers and serve them and their business needs: Bank of America or your bank? This is an area in which community banks can win hands down; however, community banks rarely make this a priority. Frankly, it has been my experience that most community banks give “lip service” to customer service. CAPITALIZING ON YOUR COMPETITIVE ADVANTAGES It’s clear that big banks have a few distinct competitive advantages and a number of perceived ones. Unlike community banks, they also have a much higher cost structure and are less nimble. Because community banks operate on a very different business model, they can offer Leveling the Playing Field By DR. SEAN PAYANT, President, Haberfeld 12 WEST VIRGINIA BANKER
more personalized services, lower fees and more compelling products. Pricing and service still matter. Approximately 10% of consumers change financial institutions in any given market in any given year. It is very difficult to persuade people to switch banks. When they do switch, they do so for a variety of reasons, but it is generally event-driven. The goal is to get people to choose your institution when they are ready to change. Being top of mind when people are ready to switch is key. Since convenience is a primary selection criterion for customers, you should be focusing your marketing on the proximity of your branches to prospective retail and business customers in your market area. Once you’ve attracted those customers, you can use service as a differentiator to maximize your share of wallet through added relationships and a strategic approach to cross-selling additional products and services. Should you follow the big banks’ lead and start charging fees? If you start charging for checking accounts (in the absence of any value-added benefits), you will ultimately drive good customers away to other banks with more locations and all the other perceived advantages discussed above. The best way for a community bank to grow its fee income and reduce the cost of funding is to grow its customer base. Nearly every community bank branch in the United States has excess capacity, meaning they could double or triple their customer bases and still not need to add staff. The key to growing customers is to lead with products that are good for them. Products that are simple and logical, easy to sell and even easier to buy, and — yes — that make money for your bank. Community banks that follow the lead of the big banks will lose! The big institutions have too many advantages, some real and some perceived. Community bankers need to differentiate by leading instead of following. Sean C. Payant, Ph.D., is president at Haberfeld, a data-driven consulting firm specializing in core relationships and profitability growth for community-based financial institutions. Sean can be reached at (402) 323-3614 or sean@haberfeld.com. 13 WEST VIRGINIA BANKER
To qualify for exemption, employees must generally be paid on a salary basis at a level of not less than $684/ week ($35,568 annually). Further, the employee’s duties must satisfy certain requirements: • For example, to qualify for the executive exemption, an employee’s primary duty must be managing the enterprise or managing a customarily recognized department or subdivision of the enterprise; the employee must customarily and regularly direct the work of at least two full-time employees or their equivalent; and the employee must have the authority to hire or fire employees, or the employee’s suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of employees must be given particular weight. • To qualify for the administrative exemption, an employee’s primary duty must be the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers, and the employee’s primary duty includes the exercise of discretion and independent judgment with respect to matters of significance. • To qualify for the learned professional exemption, an employee’s primary duty must be the performance of work requiring advanced knowledge, defined as work which is predominantly intellectual in character and which includes work requiring the consistent exercise of discretion and judgment; the advanced knowledge must be in a field of science or learning (e.g., law, medicine, engineering); and the advanced knowledge must be customarily acquired by a prolonged course of specialized intellectual instruction. Importantly, job titles do not determine exempt status. Instead, an analysis of Wage and Hour Audit Are Your Mortgage Loan Officers Correctly Classified? By JULIE A. MOORE, ESQ. Partner, Bowles Rice LLP If you are an employer in the banking industry, chances are you employ one or more employees in the role of mortgage loan officer (MLO). If so, read on to ensure that such employees are properly classified for purposes of wage and hour law. BASICS OF THE FLSA Under the Fair Labor Standards Act (FLSA), which is the federal wage and hour law, employees must be paid at least the federal minimum wage for all hours worked and, with respect to hours worked in excess of 40 in a workweek, employees must be paid overtime pay at a rate of one-and-one-half times their regular rate of pay. However, Section 13(a)(1) of the FLSA provides exemptions from both minimum wage and overtime pay for workers employed in a bona fide executive, administrative or professional capacity. 14 WEST VIRGINIA BANKER
Financial institutions that employ loan officers are wise to audit their classification of such individuals and to consult with legal counsel to determine the correct status. advising that MLOs could qualify for the administrative exemption where they: 1. Collect and analyze customers’ financial information; 2. Advise customers about the risks and benefits of various mortgage loan alternatives in light of their individual financial circumstances; and 3. Advise customers about avenues to obtain a more advantageous loan program. Several years later, in 2010, the DOL abruptly reversed course, issuing an Administrator’s Interpretation, which concluded that the primary duty of the “typical” mortgage loan officer is to sell loan products to customers. Because their primary duty is making “sales,” mortgage loan officers are performing “production work” for their employer, not “servicing the business itself,” and, therefore, they are not within the administrative exemption. This Interpretation was challenged, and ultimately, the U.S. Supreme Court ruled that the DOL did not exceed its authority by issuing this rule; therefore, even though interpretive rules lack the force of law, courts should defer to the DOL’s interpretation of its regulations. Thus, as it stands today, the DOL’s position is that a “typical” MLO will not qualify for the administrative exemption. On occasion, banking clients have inquired whether, notwithstanding the DOL’s position about the administrative exemption, an MLO could qualify for another exemption, such as the executive exemption, discussed in this article, the highly compensated employee exemption or even the outside sales exemption, which is another of the white-collar exemptions. To qualify for the outside sales exemption, an employee’s primary duty must be making sales, and the employee must be customarily and regularly engaged away from the employer’s place of business. The answer to such an inquiry is: “Perhaps. It depends.” As previously set forth, an employee’s job title is not dispositive of their correct classification; rather, careful analysis of job duties is critical to determining exempt vs. nonexempt status. Financial institutions that employ loan officers are wise to audit their classification of such individuals and to consult with legal counsel to determine the correct status. Julie A. Moore is a partner in the Morgantown office of regional law firm Bowles Rice. As co-leader of the firm’s Labor & Employment group, her practice spans the employment law spectrum and consists of advice and counseling, as well as defending litigation involving both single-plaintiff and class action employment disputes. Contact Julie at (304) 285-2524 or jamoore@bowlesrice.com. one’s duties is essential. Employees who do not qualify for an exemption are known as “non-exempt,” and they are entitled to overtime pay. On the other hand, employees who do fall within an exemption are known as “exempt,” and they are not eligible for overtime pay. Misclassifying a non-exempt employee as exempt can lead to costly violations of the FLSA that can be difficult to defend in litigation. MORTGAGE LOAN OFFICERS AND THE FLSA The Section 13(a)(1) exemptions are known as the “white collar exemptions.” Because many MLOs perform non-manual work in an office setting, one might assume that they easily qualify for an exemption. However, the Department of Labor (DOL) has declared otherwise, although that hasn’t always been the Department’s position on this subject. Initially, in 2001, the DOL issued an Opinion Letter, which concluded that a loan officer did not satisfy the administrative exemption under circumstances in which, although they performed the duties of: 1. Acquiring a full understanding of the borrower’s credit history and financial goals in order to advise them regarding the selection of a loan package that will fit their needs and ability; 2. Selecting from a wide range of loan packages in order to properly advise the client; and 3. Supervising the processing of the transaction to closing, they failed to exercise the necessary “discretion and independent judgment” because their work ultimately involved choosing an already-established loan package that best meets the needs and financial abilities of the borrower and which comports with the specified requirements of the lender. Then, in 2006, the DOL issued Opinion Letter FLSA-2006-31, which seemingly reached the opposite conclusion, 15 WEST VIRGINIA BANKER
Beyond the Headlines Decoding the Latest Trends in Small Business By DAVID ADAMS, Head of Commercial Product Marketing, Equifax 16 WEST VIRGINIA BANKER
The August Main Street Lending Report shares the latest small business lending data and trends in this unpredictable economy. In this month’s report, we see that, even through a changing labor market, cautious consumer base, and rising import costs and prices, credit quality appears to have stabilized with short-term delinquencies rising modestly and defaults falling several basis points both month-over-month and year-over-year. To read the full report, scan the QR code. https://www.equifax.com/ resource/-/asset/infographic/ small-business-indices-august-2025/ A SHIFTING LABOR MARKET One of the most prominent trends is the evident softening of the labor market. The July jobs report, which included sharp downward revisions to May and June figures, paints a picture of job growth at its slowest pace since 2010. Year-to-date job growth is historically low, making this the weakest January-to-July stretch for job creation since the Great Recession, excluding COVID-19 pandemic-related disruptions. While private sector job growth, with the exception of healthcare, is stalling, jobless claims and the unemployment rate remain relatively muted, suggesting a “no hire, no fire” environment rather than widespread layoffs. CAUTIOUS CONSUMERS This slowing labor market may have had a direct impact on consumer confidence and spending. Consumer spending during the first half of the year was noticeably slower than last year. Should the labor market weaken further, a more cautious consumer could translate to reduced demand for goods and services, ultimately affecting small business revenue. This cautious consumer behavior, combined with the slowdown in hiring, could lead small businesses to continue deferment of major expansion or change. PRESSURES OF RISING IMPORT COSTS AND PRICES Another significant factor on the horizon is the continued increase in import costs. With a new set of rules that were implemented in early August, there are new costs for U.S. importers. While these changes may reduce some of the previous uncertainty, they are beginning to exert upward pressure on prices. The core Personal Consumption Expenditures price index, produced by the Bureau of Economic Analysis, has risen month-over-month for three consecutive months, and economists anticipate this trend to continue through the latter half of the year. Small businesses are particularly vulnerable to these rising costs. Unlike larger corporations that often have the leverage to share the cost burden with exporters or suppliers, smaller firms typically absorb a greater portion of these increased expenses. This can compress profit margins and potentially reduce a small business’s capacity to service debt, making lenders more cautious. However, small businesses have historically shown remarkable adaptability, a trait that will be crucial in navigating these new cost pressures. KEEP YOUR BUSINESS GOALS WITHIN SIGHT We hope you’ll join us for future Market Pulse webinars. To ask questions in real time and gain deeper insights before anyone else, you have to be there. You can register — as well as find our monthly reports, the Market Pulse podcast and more — at our Market Pulse hub by scanning the QR code. https://www.equifax.com/business/ trends-insights/marketpulse/ A seasoned technology expert, David Adams has spent his career specializing in SaaS based technology and high-growth markets. With Equifax, as the head of commercial product marketing, David is responsible for the Go-To-Market strategy of the commercial portfolio, including B2B marketing solutions, commercial risk and portfolio management. 17 WEST VIRGINIA BANKER
By SHAUN HARMS Principal, and VISHAL SHAH, Director, Forvis Mazars Regulators around the world have been ramping up their investigative efforts into how some of the world’s major banks are handling financial crime risks. What’s striking isn’t just the institutions involved. It’s also the signals that these regulatory efforts are sending regarding the direction of anti-financial crime (AFC) compliance expectations. Financial institutions should heed these signals and prepare for heightened scrutiny of the anti-financial crime programs, including their Bank Secrecy Act (BSA), anti-money laundering (AML), combating the financing of terrorism (CFT) and sanctions compliance programs. Regulatory concerns aren’t just about failures in transaction monitoring or delays in filing suspicious activity reports. Regulators are taking a more thorough approach and asking banking and other financial institutions to consider deeper, foundational questions: Did you really know your customer (KYC)? Did you appropriately act on red flags? Was your governance strong enough to challenge high-risk business decisions in a timely and effective manner? This article will explore regulatory developments, changes in the banking compliance landscape and strategies to consider. RECENT REGULATORY TRENDS AND FINDINGS Some recent investigative efforts have included scrutinizing financial activities with allegations of evasive practices and potentially illicit activities, leading investigators to examine whether these practices led to wide-scale fraud and Anti-Financial Crime Investigations Signal Future of Bank Compliance 19 WEST VIRGINIA BANKER
money laundering. In addition, financial institutions have faced penalties for inadequate disclosure of financial crime risks in their investment communications. Other ongoing investigations in the financial sector include scrutinizing client evaluation and onboarding processes, particularly related to digital and wealth management businesses, as well as legacy client relationships tied to cross-border fund movements. Several other financial institutions with historical exposure to sanctioned regions and complex offshore structures are also undergoing regulatory examination with respect to legacy exposures. These examinations are evaluating their ongoing compliance posture and remediation effectiveness in light of ongoing geopolitical risk. The cases underscore the growing regulatory focus on whether red flags were missed or ignored, how internal concerns were addressed and transparency to investors regarding the effectiveness of AFC. These aren’t just concerns about procedural compliance failures; they’re also concerns about governance breakdowns. Behind each investigative probe is a bigger story, e.g., clients weren’t risk-rated properly, front-line staff weren’t empowered or informed enough to escalate, and control functions couldn’t challenge fast-moving business decisions. In some cases, red flags were raised and buried. The future of compliance will depend less on policies and more on governance framework, including the credibility of a firm’s culture and internal challenge functions. WHERE COMPLIANCE IS POTENTIALLY HEADED Here are four emerging themes that firms should consider acting on now: 1. Substance Over Structure Regulators want more than a documented framework. They want to see how your systems actually respond in real time. Are your risk models adaptive? Do your front-line teams really own the risk, or are they just deferring to compliance? Static controls won’t survive dynamic risk. 2. Historic Risk Is Still Risk Just because a client hasn’t triggered alerts in several years doesn’t mean that your organization is safe. As legacy files are reexamined, expect more scrutiny over dormant accounts, incomplete documentation and historical onboarding that didn’t meet today’s standards. 3. Cross-Functional Accountability The age of siloed compliance is over. Successful programs integrate AML, sanctions, fraud and similar risks into one coherent framework, including a framework that is well supported by credible audit functions and real-time data governance. 4. Artificial Intelligence With Oversight AI can help detect complex financial crime patterns and improve efficiency in monitoring, but it’s not a silver bullet. Financial institutions must enable the explainability of AI models and make sure they’re subject to appropriate model governance and human oversight. AI models must avoid bias and compliance blind spots. Financial institutions should not have overreliance on AI tools and need to have suitable AI governance so that the underlying data and compliance controls are not compromised. HOW FORVIS MAZARS CAN HELP At Forvis Mazars, we’ve supported clients as they reviewed and overhauled their AFC systems; remediated examination, audit and investigative findings; and prepared for compliance program examinations and reviews. We can assist financial institutions with: • Independent reviews of high-risk customer populations and risk-scoring methodologies. • Control testing and validation of suspicious activity escalation procedures. • Rapid response staffing to support onboarding, alert clearance or exam prep. • Strategic alignment across compliance, risk, legal and the front office. • Data remediation and governance across platforms, vendors and partners. • Vendor selection, including AI and other technology partnerships to streamline compliance. AFC investigations and examinations aren’t just about what’s gone wrong — they’re about what’s expected next. Financial institutions that take a proactive, transparent and data-driven approach to compliance are more likely to withstand scrutiny and earn the trust of regulators, clients and investors. Shaun serves as the principal for the financial services practice out of the Little Rock office. His expertise is within the regulatory compliance area and focuses on community financial institutions. Vishal is a director with over 18 years of experience in the financial services industry, as well as with federal government agencies. His areas of expertise include financial crime compliance with a focus on internal audit, regulatory compliance, enforcement action remediation and validation, and testing of internal controls. 20 WEST VIRGINIA BANKER
Model Risk Management Best Practices A Substantial Focus on Definition, Governance Best Practices and an Emphasis on Model Validations By KAITLYN E. GASPER, CAMS, CFE, Vice President, Principal, Risk Advisory, S.R. Snodgrass PC INTRODUCTION According to supervisory guidelines, models refer to “a quantitative method, system or approach that applies statistical, economic, financial or mathematical theories, techniques and assumptions to process input data into quantitative estimates.” While models with less complexity have been used for several years, as the banking industry has moved forward over the past 20 years or so, it has become increasingly complex, and models have become more prevalent for managing risk, operational efficiency and key financial estimates. Our goal is to address how to identify the models currently utilized by your institution, establish a framework for managing model-related risks and discuss the importance of an effective validation program. MODEL INVENTORY In order to properly manage model risk, management must ensure all models currently used by the bank are identified, assess their risk to the institution and apply appropriate mitigation procedures, including governance, training, succession and model validation. When identifying models utilized by the institution, all areas of the bank must be considered, including Bank Secrecy Act/anti-money laundering (BSA/AML), asset liability management/interest rate risk (ALM/IRR), current expected credit losses (CECL) and automated valuation models (AVM), among others. As the types of models used are so diverse, it can be difficult to ensure all models are properly identified. After identifying each model, assessing them for their risk to the institution is a key measure to make sure the model owner(s) have the requisite knowledge and experience to operate the model, training is up to date, the model has been validated when applicable, and known issues or limitations are resolved. We frequently see institutions manage each model within their own silo with inconsistent application of risk mitigation procedures. As a result, the identification of the need for additional training, validation, etc., is the result of comments from regulatory examinations. Management should make sure to be proactive in this area as models become more relied upon within more aspects of the institution. GOVERNANCE AND POLICY As with all key management functions, governance is a critical aspect of model risk management as it establishes an effective environment for models to be managed. Making sure there are key lines of authority from model users/owners to senior management to the board of directors will allow for effective and timely reporting of problems or complications. Institutions can consider the need to identify a risk officer or similar position and/or risk committee to ensure models are discussed and inventoried. Adopting a model risk management policy should also be a priority for the board and management, identifying roles and responsibilities, validation/ testing expectations for each model, vendor management for any third-party involvement, reporting procedures and expectations for the resolution of any issues identified. It should provide guidance and acceptable procedures for management to ensure risk management procedures are consistent with the tolerance established by the board of directors. The bank should also ensure the internal audit’s involvement in assessing whether or not those charged with the day-to-day aspects of the model risk management policy are adhering to those requirements, including retention of all supporting documentation of testing the model, accurate reporting to senior management and the board, timely clearing of any significant validation findings, and adherence to vendor management requirements. Without an effective policy, we frequently see that management of each model is, at best, inconsistent; however, we generally see that a majority of models in use are not considered part of the overall risk management framework. IMPORTANCE OF A MODEL VALIDATION Model validations are an integral part of model risk management. Model validations should be performed, when 21 WEST VIRGINIA BANKER
reasonable, after implementation. There are certain aspects of the model that can be validated soon after implementation, which include mapping, parameters, rules, etc. On the other hand, there are aspects of the model that cannot be validated until sufficient data has been input and run through the model, such as backtesting, alert generation, etc. Institutions should focus on two types of model validations: 1. third-party model validation and 2. a validation of the institution’s specific usage of the model. A third-party model validation should be obtained and reviewed when performing due diligence in model selection and then annually or as completed thereafter. The institution is not responsible for contracting this type of validation, but rather, it is the model provider’s responsibility to hire a third party to validate the software. The results of this validation should be available to model users to ensure they are aware of any model capabilities not functioning properly or the identification of any known limitations. Depending on the type of model, a model certificate may also be available, which certifies the model’s functionality to process and provide necessary outputs. This should not take the place of model validation but provides a determination on whether the technical aspect of the model is functioning properly. The second type of model validation that should be performed validates the institution’s specific use of the model. It is the responsibility of the institution to contract a third party or an independent individual to complete validations on a periodic basis. The current guidance does not explicitly state the frequency with which validations are to be performed, except to say that validations should be performed periodically, considering the complexity of the model and the institution’s risk profile. We typically see validations performed annually for complex, higher-risk institutions and every three years for less complex institutions. If significant updates or changes are made to the model, this should trigger whether a model validation is necessary on a more frequent basis. The model validation should focus on the model capabilities in use to determine whether the necessary information is input to produce the expected outputs. Typically, this validation would not include verification of mathematical accuracy, algorithms, or any other proprietary information. Both types of validations mentioned are equally important and validate the model from the vendor and user perspectives. It is imperative that management integrate model validations into their model risk management. WHAT TO EXPECT DURING A MODEL VALIDATION The primary source for formal regulatory guidance on model governance issued is the “Supervisory Guidance on Model Risk Management” in 2011 by the Office of the Comptroller of the Currency (OCC) jointly with the Board of Governors of the Federal Reserve, later adopted by the Federal Deposit Insurance Corporation in 2017. Model validations should focus on three major components: information input, processing and model outcomes. • The Information Input Component: how data is delivered to the model. • The Processing Component: transformation of data for monitoring. • The Model Outcomes Component: translate data into results, reports, alerts and useful information. The validation process varies depending on the specifics of the model and model type. The validation section of the guidance just referenced should be followed for each model type; however, the data analyzed, objectives, usage of the model results, etc., will vary for BSA/AML, ALM/IRR and CECL models. Assuming issues are not identified in the third-party model validation completed for the model provider or during vendor management reviews, the validation will focus on the information controlled by the institution, quality of data, controls over data, manual manipulation, assumptions, estimates made by management, parameters, etc. We frequently identify issues specific to the information input component when completing model validations. It is a best practice to understand how information is mapped from source systems to the model at implementation. Another best practice relates to default settings or parameters. Typically, model providers will activate default settings based on information they have gathered from peers or other data available. It is important that management review any defaults and either accept with an explanation to support why those fit their risk profile or adjust with an explanation to support why the change was made. The results of the validation should be remediated in a timely manner to maximize model use in managing risk. The key takeaway from this should be that model validations are important when relying on them as a tool to manage risk. Kaitlyn E. Gasper, CAMS, CFE, vice president, principal, risk advisory at S.R. Snodgrass, brings extensive experience working with financial institutions, including exceptional expertise with Bank Secrecy Act (BSA) Model Validations. She also works closely with both public and privately held corporations, nonprofit organizations, partnerships, limited liability corporations and S corporations. Founded in 1946, S.R. Snodgrass is a privately held, multi-faceted public accounting and consulting firm, known for innovative tax, assurance, technology and financial advisory services for financial institutions, nonprofits and businesses of all kinds. The firm has worked with more than 175 financial institutions in 16 states and employs more than 90 professionals. The firm is ranked among the country’s top 300 public accounting firms according to Inside Public Accounting’s 2024 list. REFERENCE Guidance on Model Risk Management. (2011) Board of Governors of the Federal Reserve System. https://www.federalreserve.gov/ supervisionreg/srletters/sr1107a1.pdf. 22 WEST VIRGINIA BANKER
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