SPRING 2026 2026 Industry Outlook Community Bankers’ Top Challenges, Investments and Opportunities
Contents ©2026 West Virginia Bankers Association (WVBA) | Memberlink Solutions DBA 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. 7 12 PRESIDENT’S MESSAGE 4 Spring Is a Time To Indulge in a Little Optimism By Mark Mangano, President & CEO, WVBankers 6 Incremental Effort Leads to Great Results By Bryce Himelrick, Government Affairs Strategist, WVBankers 7 2026 Industry Outlook Community Bankers’ Top Challenges, Investments and Opportunities By Jason Young, Vice President of Product Management, CSI 10 It’s a Good Time to Revisit ERISA Compliance Responsibilities Considerations for Self‑Insured and Level‑Funded Group Health Plans By Grant P.H. Shuman, Attorney, Bowles Rice LLP 12 Investing in West Virginia’s Heritage The Benefits of Purchasing State Historic Rehabilitation Tax Credits By Randall L. Saunders, Esq. and Jonah D. Samples, Esq., Nelson Mullins Riley & Scarborough LLP 14 SBA Lending in a Changing Risk Environment What Compliance Officers Should Be Watching Now By Alison Stokes, CRCM, Virtual Compliance Officer, Compliance Alliance 16 Appeals Courts Say Fraud Debts Can Survive Small Business Bankruptcies By J. Zachary Balasko and Shelby R. Turley, Steptoe & Johnson PLLC WASHINGTON UPDATE 18 Fighting on in 2026 By Rob Nichols, President and CEO, American Bankers Association 20 Community Banks and Crypto-Assets Is It Time To Start Exploring? By Ian F. McDowell, CPA, Principal, Audit and Assurance, S.R. Snodgrass PC 2 WEST VIRGINIA BANKER
As rising health care costs drive employers toward self-insured and level-funded health plans, critical compliance responsibilities shift from insurers to employer plan sponsors. One of the most significant: compliance with the Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA). What Employers Need to Know • Employers with 50+ employees must ensure mental health and substance use disorder benefits are comparable to medical and surgical benefits • MHPAEA enforcement is a top U.S. Department of Labor priority, with required annual audits of group health plans • Compliance requires a detailed comparative analysis meeting complex federal regulations • Comparative analyses must be produced within 10 days of a regulator request or 30 days of a participant request • These reports cannot be created on short notice and must be prepared and maintained in advance • Penalties for noncompliance can be severe—up to $110 per day per affected participant How Bowles Rice Can Help Our employee benefits attorneys work proactively to ensure your plan’s analysis is current, compliant, and ready when needed. We assist plan sponsors with: • Obtaining and analyzing data from third-party administrators and service providers • Preparing compliant MHPAEA comparative analyses • Maintaining defensible documentation ready for audit or disclosure Contact us to ensure your self-funded health plan is protected. CHARLESTON, WV • MARTINSBURG, WV • MORGANTOWN, WV • PARKERSBURG, WV • SOUTHPOINTE, PA • WINCHESTER, VA 600 Quarrier Street • Charleston, WV 25301 Responsible Attorney: Marc Monteleone bowlesrice.com Employers Sponsoring Self-Funded Health Plans: Does Your Plan Comply with Mental Health Parity Requirements? Lesley Russo | 304.347.1717 lesley.russo@bowlesrice.com Ben Thomas | 304.347.1121 bthomas@bowlesrice.com Grant Shuman | 304.347.1150 grant.shuman@bowlesrice.com Gabriele Wohl | 304.347.1137 gwohl@bowlesrice.com
PRESIDENT’S MESSAGE Spring Is a Time To Indulge in a Little Optimism MARK MANGANO President & CEO, WVBankers The naturalist Edwin Way Teale said, “The world’s favorite season is spring. All things seem possible in May.” As we emerge from the harshness of winter, it is human nature to consider the possibilities suggested by the change of season. I believe that this spring, there are good reasons for bankers to reflect on the changes we have seen in the last year and indulge in a little optimism. Bankers face challenges every year, including competition, technology, regulation and human resources. But this spring, we can take heart from significant trends that are creating a more solid foundation from which to meet the challenges. The four major trends contributing to improving banking industry foundations are a stabilizing economy, improving profitability, meaningful regulatory changes and strong voices to help shape future policy. We appear to be emerging from the economic and interest instability resulting from the COVID-19 pandemic and related economic policy responses. A traditional positive yield curve with short-term rates lower than longer-term rates is returning. Since the beginning of 2025, the yield curve as reflected by the U.S. Treasury bond market has seen the spread between one-month and 10-year treasuries grow from eight basis points to 50 basis points. The fed funds rate declined from 4.25% to 3.50% over the same period. Banking industry profitability continues to improve. According to the FDIC, in the third quarter of 2025, the industry-wide ROA was 1.27%. This was a 13-basis point improvement from the prior quarter and an 18-basis point improvement from the prior year. The regulatory environment is broadly and meaningfully improving. The primary federal banking regulators are led by Michelle Bowman, Fed vice chair for supervision; Travis Hill, FDIC chair; and Jonathan Gould, OCC comptroller. These new leaders, both individually and collectively, have expressed the desire to reduce regulatory burdens for community banks, narrow examination focus to addressing potential material financial harm and violations of law, eliminate regulatory pressure to withhold banking services from disfavored groups or individuals, and encourage banking health and competitiveness. Each agency spent 2025 turning good intentions into action. The banking industry has collectively built, sustained and improved associations such as the American Bankers Association and the West Virginia Bankers Association to focus on industry advocacy. The associations are effective in advancing and defending the industry due to four critical elements: banker-driven priorities, talented advocacy professionals, banker political engagement, and commitment to the special and critical roles banks play in supporting our society. In the past year, the industry associations have helped shape the positive regulatory changes and defended against ill-advised measures to undermine the banking industry’s role in society and the economy. Every morning, bankers around our state and nation show up to meet the challenges in providing critically important and often underappreciated service to their communities and our country. It is encouraging that the economic environment is improving, regulators are returning to a focus on fostering bank success, and the industry is speaking forcefully and intelligently to policymakers on the issues critical to future success. It is refreshing to stop and smell the flowers and indulge in a little optimism. 4 WEST VIRGINIA BANKER
Incremental Effort Leads to Great Results BRYCE HIMELRICK Government Affairs Strategist, WVBankers Author Malcom Gladwell argued in “Tipping Point” that great societal change stems from sustained, incremental efforts. In West Virginia, we stand at a tipping point. With a low cost of living and abundant land and natural resources, the Mountain State is positioned to become an economic driver for our nation. As our neighboring states have attracted billions in investment, we can do the same. The WVBankers team and members, through advocating strong banking policy and providing our industry’s perspective on broader legislation, will be a critical resource in placing West Virginia on the right side of its tipping point. During the legislative session, our focus is on advancing legislation that strengthens West Virginia’s banking climate. This includes supporting legislation that eliminates red tape, protects our customers and ensures our communities maintain access to strong banking services. It also entails strongly opposing a troublesome trend in legislation, typically premised on national issues, that creates liability, unnecessary regulations or excessive mandates for business. Our advocacy ensures that banks will be best positioned to be vital partners in West Virginia’s economic future. Advocating for banks sometimes extends to legislation affecting West Virginia’s economy more broadly. Because of our consistent presence at the Capitol and our strong relationships under its gold dome, we are increasingly asked to provide a banking perspective on broader economic development legislation. The Association and its members alike frequently receive requests from legislators asking for our perspective and input on a wide array of bills. Our contributions are sometimes as simple as explaining a bill to a legislator or answering a technical question. At other times, we have been able to offer support or suggest changes to enhance a bill’s efficacy. These efforts, even the smallest, are collectively powerful. The Association and its members’ perspectives have become valued as the legislature considers measures to create jobs, encourage development and attract investment in manufacturing, energy and technology. Extending our knowledge to ensure that legislation strongly positions banks to partner in West Virginia’s economic growth has empowered our team and our members. We have provided a banking perspective on legislation that encourages construction and small business growth, as well as other areas critical to economic development. Likewise, because our members across West Virginia are active in their local economies, we can provide legislators with a localized perspective from trusted members of their communities. These contributions are vital to banking’s role in West Virginia’s economic future. West Virginia’s tipping point is near. The Mountain State has an opportunity to realize its potential and become a keystone of America’s new economic frontier. As our legislature considers policies to drive this growth, we will ensure that our industry’s perspective is voiced. We will likewise stand against efforts that imperil this potential for prosperity and put our banks and businesses at risk. Through these sustained and incremental contributions, our association and industry will remain critical resources and partners in West Virginia’s prosperous future. 6 WEST VIRGINIA BANKER
2026 Industry Outlook Rising competition and consumer expectations mean community financial institutions must operate more efficiently while delivering modern, personalized services. Meanwhile, advances in AI, open banking, cybersecurity and regulatory change are reshaping the industry and creating new opportunities for those who adapt. CSI recently surveyed banking leaders nationwide about how they are preparing for the year ahead. Their responses Community Bankers’ Top Challenges, Investments and Opportunities By JASON YOUNG, Vice President of Product Management, CSI 7 WEST VIRGINIA BANKER
revealed cautious optimism and a focus on strengthening core capabilities while adopting new technologies. FOREMOST CHALLENGE IN 2026: AI Leaders increasingly view AI through a dual lens: a powerful driver of efficiency and automation across operations, but also a potential catalyst for fraud, scams and operational risk. Naturally, it remains a top concern for many in 2026. Institutions are gaining greater confidence in where AI can deliver real value, from automating routine tasks to strengthening security and supporting relationship‑driven work. That confidence is most pronounced among larger community institutions, with 97% of banks holding $5 billion to $10 billion in assets saying they understand how AI can be applied in banking. As a result, the conversation has shifted from whether to adopt AI to how to integrate it responsibly. Success will depend on data readiness, governance frameworks and aligning AI use cases with existing workflows and risk management practices. SECONDARY CHALLENGE IN 2026: CYBERSECURITY AND DATA PRIVACY While the average cost of a financial services data breach declined from $6.08 million in 2024 to $5.56 million in 2025, cyberattacks still carry serious financial, reputational and regulatory consequences for institutions of all sizes. To remain secure, institutions must continue to prioritize investments in advanced monitoring and proactive threat-detection tools. Foundational practices, such as employee training and ongoing risk assessments, also remain essential to strengthening overall cyber resilience. BANKERS’ TOP TECHNOLOGY INVESTMENTS The report shows that 2026 technology investments will be spread across multiple modernization efforts, signaling a balanced and diversified approach. LEADING INVESTMENT IN 2026: EFFICIENCY DRIVERS LIKE AUTOMATION OR AI Efficiency technologies remain the top investment priority, with 37% of bankers citing automation or AI as critical to improving operations, especially in improving back-office processes. As community banks face increased competition from all sides, they look to AI and automation to do more with less. Conversational AI is gaining momentum, but many institutions are still searching for its most valuable use cases. The real differentiator ahead will be how prepared institutions are to use their data, both to support AI initiatives and strengthen decision-making. SECONDARY INVESTMENT IN 2026: DATA ANALYTICS/ACTIONABLE INSIGHTS & DIGITAL ACCOUNT OPENING Many institutions recognize the value of analytics but are still working through data silos and integration challenges that limit the insights that can be gained. AI and clear analytics dashboards can be useful tools for turning data into action. Smart use of data helps institutions understand account holder behavior and identify areas to better serve them, including customizing offerings and promoting them digitally. Interpreting data to create a personalized experience also helps institutions solidify relationships and decrease attrition. Continued focus on digital account opening suggests that even institutions with established solutions see opportunities to streamline onboarding and back-office processes, with open banking increasingly serving as an enabling layer that accelerates integration. BANKERS’ TOP OPPORTUNITIES FOR 2026 Bankers are strategically engaging with consumers and embracing transformative trends that promise to redefine banking operations and customer service in the years to come. GREATEST OPPORTUNITY IN 2026: HARNESSING THE POWER OF AI AI is increasingly top of mind for executives as they explore ways to transform operations, drive efficiency, fight fraud and sharpen decision-making. AI-powered tools present a unique opportunity to level the playing field against big banks by offering assistance and smart automation. Generative AI applications, in particular, hold the promise of hyper-personalized, around-the-clock service, allowing banks to leapfrog their capabilities and retain a competitive edge. From virtual assistants to content creation tools, the applications of generative AI are vast, offering financial institutions newfound agility and efficiency in meeting customer needs. SECONDARY OPPORTUNITY IN 2026: DIGITAL ASSETS 20% of bankers surveyed named digital assets (including stablecoins, tokenized deposits and cryptocurrencies) as one of their top opportunities, signaling growing curiosity about how these technologies could fit into future banking models. While most institutions remain in the early stages of 8 WEST VIRGINIA BANKER
exploration, interest is being driven by potential use cases around payments, efficiency and new revenue streams as the market continues to evolve. While interest in these assets grows, the regulatory landscape for stablecoins and tokenization is still evolving. At the end of 2025, the FDIC released its first rule for the recently passed Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act. Most near-term applications remain limited, primarily in cross-border transactions, and any strategic engagement will require careful analysis and strong compliance frameworks. NAVIGATING THE ROAD AHEAD FOR COMMUNITY BANKING As community banks look toward 2026, strategic focus and adaptability will be essential. While challenges remain, 86% of bankers report optimism about the future, signaling confidence in the industry’s direction. By strengthening foundational capabilities and embracing emerging technologies, institutions can position themselves not just to adapt, but to compete. Bankers are strategically engaging with consumers and embracing transformative trends that promise to redefine banking operations and customer service in the years to come. » This article only scratches the surface. For a more complete picture, scan the QR code to read the 2026 Banking Priorities Executive Report. https://www.csiweb.com/docs/banking-priorities-2026/ Jason Young serves as vice president of product management, helping guide the development of solutions that support CSI’s vision and strategy. With extensive experience in product development and integration, he plays a key role in advancing CSI’s products and services. 9 WEST VIRGINIA BANKER
It’s a Good Time to Revisit ERISA Compliance Responsibilities Considerations for Self‑Insured and Level‑Funded Group Health Plans By GRANT P.H. SHUMAN, Attorney, Bowles Rice LLP Recent trends indicate that more employers will switch from a fully insured group health plan to a self-insured or level-funded group health arrangement over the next few years. Indeed, McKinsey & Company’s 2024 Employer Health Benefits Survey projects that as many as 12 million employees may leave fully insured group health plans by 2030 due to rising costs under the fixed-premium insured model. As a result, employers moving to a self-insured or level-funded group health platform may need to complete additional tasks to ensure compliance with the Employee Retirement Income Security Act of 1974 (ERISA). In the case of fully insured group health plans, an employer may be accustomed to the insurer providing some or much of the information required by ERISA for compliance purposes. Depending on its construction, a self-funded or level-funded plan may need to take a more active role in claims and appeals processes, required plan documents, and compliance with the Health Insurance Portability and Accountability Act (HIPAA), among others. This article will highlight one such responsibility that can slip through the cracks of a self-insured or level-funded group health plan’s compliance procedures: the Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA). The Employee Benefits Security Administration (EBSA) — the U.S. Department of Labor (DOL) agency that ensures the integrity of private-sector employee benefit plans — issued a news release on Jan. 15, 2026, which once again highlighted MHPAEA as a nationwide focus of EBSA’s investigative efforts. In the context of fully insured health plans, the insurance carrier is responsible for compliance with Mental Health Parity requirements. However, self-insured or level-funded plans with 50 or more employees are also required to satisfy MHPAEA’s mandate. Indeed, MHPAEA requires employers who maintain self-insured or level-funded group health plans to have certain documentation in place or face civil penalties under federal law. As a result, MHPAEA is a timely example of a potential ERISA compliance failure that may catch the attention of federal regulators. 10 WEST VIRGINIA BANKER
WHAT DOES MHPAEA REGULATE? • The purpose of MHPAEA is to ensure parity between medical/surgical (M/S) benefits and mental health and substance use disorder (MH/SUD) benefits provided by group health plans. • MHPAEA focuses, in part, on nonquantitative treatment limitations (NQTLs). • Examples of NQTLs include coverage exclusions, prior authorization requirements, medical necessity criteria and network limitations. • If a group health plan includes mental health treatment, then coverage guidelines, exclusions, provider networks and claims practices cannot be applied more stringently to MH/SUD benefits than to M/S benefits. WHAT DOES MHPAEA REQUIRE? • MHPAEA requires self-insured and level-funded group health plans to perform and document a comparative analysis of the design and application of NQTLs to ensure parity between M/S and MH/SUD benefits. • Under the applicable regulations, the comparative analysis must consider six classifications of benefits, including emergency care, prescription drugs, inpatient (in-network and out-of-network) and outpatient (in-network and out-of-network). • In order to comply with MHPAEA, the comparative analysis must undertake certain steps for each of the six classifications. • Ultimately, the analysis must determine if the processes, strategies and evidentiary standards used in applying the NQTLs are comparable and not more stringently applied to MH/SUD than M/S benefits, both as written and in operation. HOW CAN A GROUP HEALTH PLAN SATISFY MHPAEA’S REQUIREMENTS? • In the case of a self-insured or level-funded group health plan, the plan sponsor is required to prepare a written comparative analysis documenting compliance for any NQTLs imposed on MH/SUD benefits. • A compliant comparative analysis for a self-insured or level-funded plan requires obtaining information concerning NQTLs from third-party administrators, evaluating NQTLs within the six classifications of benefits and completing the steps for analyzing the NQTLs. • This requirement can prove burdensome for non-insured plans because the information necessary to complete the analysis is frequently in the hands of third-party administrators and other service providers. • Nevertheless, self-insured and level-funded plans have a fiduciary duty under ERISA to obtain the data required to complete the analysis. WHAT HAPPENS IF THERE IS NO COMPARATIVE ANALYSIS IN PLACE (OR THE ANALYSIS IS INCOMPLETE)? • The comparative analysis must be provided within 10 days if requested by a federal or state agency, or within 30 days if requested by a plan participant. • If EBSA finds that the comparative analysis is insufficient or otherwise fails to meet the requirements of MHPAEA, it is noncompliant. • Noncompliance with MHPAEA may result in a $110 per day penalty for each affected individual, with the potential for other penalties under federal law, which can add up quickly. HOW CAN A GROUP HEALTH PLAN GET STARTED ON THE ROAD TO COMPLIANCE? • As with any law affecting employee benefits plans, the first step is to determine if MHPAEA applies to the plan at issue. • The next step is determining whether the group health plan provides MH/SUD benefits, which are required in most plans governed by the Affordable Care Act (ACA). • At that point, an employer would do well to open a dialogue with its third-party administrators, service providers and contractors to obtain the information these entities have created to support the plan’s design, limitations, exclusions and other factors that may bear on NQTLs for MH/SUD benefits. • An employer may also want to contact experienced ERISA counsel to assist in creating a comparative analysis that navigates this complex area of compliance. Whether an employer recently moved to a self-insured or level-funded plan, or established such a plan some time ago, it is in the best interests of the sponsoring employer to review all its compliance obligations under ERISA, the ACA, HIPAA and other laws affecting employee benefit plans. The objective is to ensure that an employer has processes and procedures in place to address compliance shortcomings before they become the subject of regulatory interest and to satisfy ERISA’s overall compliance requirements. Grant P.H. Shuman, an attorney in the Charleston office of Bowles Rice LLP, focuses his practice on ERISA and employee benefit law, representing welfare benefit and pension plans, plan sponsors and plan administrators. Contact Grant at (304) 347-1150 or grant.shuman@bowlesrice.com. 11 WEST VIRGINIA BANKER
Investing in West Virginia’s Heritage INTRODUCTION The West Virginia Historic Rehabilitation Tax Credit, commonly known as the State Historic Tax Credit (HTC), encourages the rehabilitation of historic properties and serves as a proven economic development tool. It has successfully leveraged private investment, created jobs, supported additional housing development and played a key role in downtown revitalizations in Charleston, Huntington, Martinsburg and Wheeling. Thirty-eight states, including West Virginia, maintain active state historic tax credit programs, all modeled after the successful Federal Historic Tax Credit (FHTC) administered by the National Park Service. In West Virginia, the State Historic Preservation Office (SHPO), under the Department of Arts, Culture and History, oversees the application and historic approval process, working closely with the Department of Revenue to administer the credits. THE WEST VIRGINIA HISTORIC TAX CREDIT Established in 1999, the program provides a 25% credit based on a developer’s qualified rehabilitation expenditures (QREs) for the substantial rehabilitation of income-producing properties. The credit offers a dollar-for-dollar reduction in state income tax liability. Developers can claim the credits but generally transfer (sell) them to raise additional capital needed to support the rehabilitation. Credits represent a significant portion of the capital for these renovations and cannot be used or monetized until the rehabilitation is completed and certified. The Benefits of Purchasing State Historic Rehabilitation Tax Credits By RANDALL L. SAUNDERS, ESQ. and JONAH D. SAMPLES, ESQ. Nelson Mullins Riley & Scarborough LLP 12 WEST VIRGINIA BANKER
WHY PURCHASE WEST VIRGINIA STATE HISTORIC TAX CREDITS? When developers transfer credits upon project completion and certification, other West Virginia income taxpayers — individuals, corporations or banks — can acquire them at a market discount driven by supply and demand. Buyers then apply the face value ($1.00) against their state tax liability. Key motivations for purchasers include: 1. Meaningful Tax Reduction: Acquiring credits provides an efficient, low-risk way to reduce West Virginia personal or corporate income tax liability. The discounted purchase price frequently delivers an effective return superior to many conventional investments — particularly valuable for entities with substantial or ongoing West Virginia tax exposure. 2. Community and Economic Impact: Buyers indirectly fuel the revitalization of historic downtowns, blighted factories, abandoned schools and vacant office buildings across the state. These projects create jobs, elevate property values, boost tourism, and generate additional state and local revenue — contributing to long-term economic vitality. 3. Low-Risk Profile with Flexibility: Credits arise from projects rigorously reviewed by the SHPO and National Park Service, minimizing uncertainty. For banks and financial institutions, purchasing credits may align well with Community Reinvestment Act (CRA) objectives, corporate social responsibility goals and community development strategies — offering a tangible way to support local growth while achieving tax efficiency. In short, purchasing West Virginia State Historic Tax Credits represents a strategic opportunity to efficiently manage taxes while supporting the transformation of underutilized structures into vibrant assets — apartments, offices, retail spaces or hotels — that enhance community vitality. Randy’s practice focuses on providing tailored legal solutions that drive economic development across business, energy, real estate, taxation, banking and financial services. He routinely handles transactional, litigation and administrative matters throughout the Appalachian region. Jonah focuses his practice on banking and financial services, commercial litigation, real estate and taxation. Jonah regularly litigates matters in West Virginia and Ohio courts, represents clients before state agencies, and routinely handles administrative and transactional matters across Appalachia. 13 WEST VIRGINIA BANKER
SBA Lending in a Changing Risk Environment What Compliance Officers Should Be Watching Now By ALISON STOKES, CRCM, Virtual Compliance Officer, Compliance Alliance Small Business Administration (SBA) lending remains one of the most meaningful ways banks can support local communities while building a strong portfolio. At the same time, the risk environment surrounding SBA lending has evolved. Banks are navigating faster origination expectations, more sophisticated fraud schemes, complex third‑party relationships, and heightened documentation and governance standards. For compliance officers, the goal is not to slow down SBA lending. Instead, the objective is to support efficient lending by strengthening controls that protect the bank, the borrower and the SBA guaranty. By establishing clear oversight and well-defined processes, compliance helps the business lend with confidence. The following are key areas currently warranting attention. FRAUD CONTROLS SHOULD BE PART OF DAILY OPERATIONS Fraud attempts tied to small business lending have become more persistent and harder to detect. While some of the most visible cases surfaced during emergency-era lending programs, many of the same patterns continue 14 WEST VIRGINIA BANKER
today. Common indicators include inconsistent borrower information, questionable or altered supporting documentation, and business activity that does not align with the stated purpose or operational profile. Compliance can support SBA lending teams by reinforcing clearly defined fraud-validation steps and escalation protocols. Strong intake controls and consistent handling of red flags reduce reliance on individual judgment and promote timely, well-supported decision-making when activity does not align or raises concern. DOCUMENTATION SHOULD SUPPORT THE DECISION SBA lending has always required strong documentation, but expectations have shifted to ensure the loan file clearly supports each decision. Many banks can explain underwriting decisions in conversation, but the loan file itself may not always reflect the same rationale in a way that a second-line reviewer, auditor or examiner can easily validate. A practical approach is to define what “complete documentation” means and reinforce those expectations through checklists and procedure standards. At a minimum, the file should support borrower eligibility, the credit decision and required approvals. Strong file quality is more than a best practice; it also reduces servicing challenges and helps protect the SBA guaranty. THIRD-PARTY OVERSIGHT MATTERS MORE THAN EVER Banks increasingly rely on third parties such as referral sources, loan agents, technology platforms and document support services. These relationships can improve speed and capacity, but they also introduce risk when responsibilities are unclear or oversight is informal. Compliance should help ensure the bank has clarity around who performs which activities across the SBA lifecycle, from borrower intake through closing and servicing. Monitoring should confirm that third parties operate within the bank’s expectations, issues are escalated in a timely manner, and the bank retains access to critical records. If a loan file cannot be retrieved quickly without third-party involvement, the relationship may be creating more risk than the business realizes. CHANGE MANAGEMENT MUST BE CONSISTENT SBA programs are governed by procedural guidance, operational rules and internal bank requirements. When updates occur, many institutions implement changes operationally but do not consistently document how the change was assessed, approved, communicated and validated. Compliance can strengthen SBA programs by introducing lightweight, consistent and repeatable change-management practices. A sound approach includes defining the change and its impact, identifying affected procedures and training, confirming approvals, documenting implementation timing and validating execution. Banks may reference SBA procedural guidance, such as SBA SOP 50 10, accessible by scanning the QR code. https://www.sba.gov/document/sop-50-10lender-development-company-loan-programs EXCEPTION TRACKING HELPS CONTROL RISK Although SBA lending differs from consumer lending, regulators still expect disciplined and consistent processes. Risk increases when credit decisions rely heavily on discretion without clear documentation standards and structured controls around exceptions. Compliance officers should pay close attention to how exceptions are defined, approved and tracked. A high volume of exceptions, unclear rationale or inconsistent approvals can create both compliance exposure and operational instability. Strong exception governance is one of the most effective ways to reduce avoidable risk while supporting responsible growth. SERVICING CANNOT BE AN AFTERTHOUGHT Many institutions place their strongest controls in origination, but issues often surface during post-close servicing. Missing documentation, incomplete follow-up or weak monitoring can turn a well-underwritten SBA loan into a higher-risk asset over time. Compliance can support servicing teams by confirming they have the procedures and tools needed to maintain file integrity, track key borrower requirements and escalate issues that could affect performance or documentation quality. Strong servicing controls reinforce the bank’s ability to support its decisions long after closing. BUILD EXAM READINESS INTO THE PROCESS A strong SBA program should not require a scramble at the start of an examination. Exam readiness is built through repeatable file standards, clear governance and routine self-review. Compliance can support this effort by implementing a risk-based review cadence that includes periodic file sampling or targeted quality-control testing. The objective is to identify and correct issues early, before they become systemic. This approach also helps the business view compliance as a partner in long-term success rather than a final checkpoint. FINAL THOUGHTS SBA lending remains a key growth strategy for many banks. The strongest SBA programs are not the most complex; they are built on clear expectations, strong file integrity, disciplined execution and proactive readiness. For compliance officers, focusing on fraud resilience, documentation quality, third-party oversight, structured change management, exception discipline and servicing consistency protects the institution while enabling SBA lending to scale responsibly. 15 WEST VIRGINIA BANKER
Appeals Courts Say Fraud Debts Can Survive Small Business Bankruptcies By J. ZACHARY BALASKO and SHELBY R. TURLEY Steptoe & Johnson PLLC 16 WEST VIRGINIA BANKER
Congress provided a streamlined mechanism for small businesses to reorganize by enacting the Small Business Reorganization Act of 2019 and adding Subchapter V to Chapter 11 of the Bankruptcy Code. Subchapter V gives small businesses relief from some of the more burdensome requirements of Chapter 11, including the absolute priority rule and the requirement to have at least one consenting class of impaired creditors to confirm a plan of reorganization. In exchange for these benefits to small business debtors, Congress may have put an arrow in creditors’ quivers by allowing them to object to the discharge of certain types of debts of corporate debtors, a remedy previously applicable only to debts of individuals. Nearly every lower court to consider this question has rejected it. So far, however, appeals courts have uniformly said that Section 1192 of the Bankruptcy Code exempts debts “of the kind specified in Section 523(a)” from discharge, regardless of whether the debtor is an individual or a corporation. In a recent case, BenShot, LLC v. 2 Monkey Trading, LLC (In re 2 Monkey Trading, LLC), Case No. 23-12342 (11th Cir. July 9, 2025), the 11th U.S. Circuit Court of Appeals issued a 2-1 decision allowing creditors to challenge the dischargeability of certain debts in certain circumstances. The Court examined what happens when a small business files for bankruptcy under Subchapter V and seeks to have its repayment plan approved without all creditors agreeing, known as a “cramdown plan.” Writing for the majority, Judge Barbara Lagoa explained that in these situations, a specific part of the Bankruptcy Code, Section 1192, applies to determine which debts can be erased or “discharged.” Section 1192 states that most debts can be discharged, except those listed in Section 523(a), which include debts involving fraud or intentional harm. However, Section 523(a) generally applies only to individuals. The BenShot majority points out that Section 1192 excludes debts “of the kind specified in Section 523(a),” without saying that this only applies to individual debtors. The majority explains that “when Congress wanted to specify which kinds of debtors cannot discharge debts under Section 523(a), it has done so through express language in their respective sections.” Although the court acknowledged the decision was a “close call,” the 11th Circuit ultimately held that “based on the plain language of the statute” under Section 1192, “both individual and corporate debtors cannot discharge any debts of the kind listed in Section 523(a).” This ruling is in line with recent decisions by the 4th and 5th Circuits but diverges from nearly every bankruptcy court, district court and bankruptcy appellate panel that has addressed the issue. For comparison, see Cantwell-Cleary Co. v. Cleary Packaging, LLC (In re Cleary Packaging, LLC), 36 F.4th 509 (4th Cir. 2022), and Avion Funding, LLC v. GFS Industries, LLC (In re GFS Industries, LLC), 99 F.4th 223 (5th Cir. 2024), which agree with the 11th Circuit decision, versus Lafferty v. Off-Spec Sols., LLC (In re Off-Spec Sols., LLC), 651 B.R. 862 (B.A.P. 9th Cir. 2023), which reached a different conclusion. What does this mean for creditors of small business debtors in Subchapter V? The threat of nondischargeability is a powerful tool to bring to the negotiating table. Subchapter V is designed to be flexible and promote consensus that enables small businesses to obtain fresh starts. However, the subchapter isn’t designed to allow these debtors to steamroll their creditors. When faced with a borrower’s Subchapter V filing, banks should review their files to determine whether grounds might exist to object to the discharge of their claims. Did the borrower obtain credit under false pretenses? Did they make a false representation? Was there actual fraud? Any of these factors could be grounds for a court to find a debt is nondischargeable under Section 523(a). Banks should also be mindful of tight deadlines for objecting to the discharge of their claims — typically, an adversary proceeding objecting to discharge must be commenced no later than 60 days after the date first set for the meeting of creditors under Section 341(a). These recent decisions from the 4th, 5th and 11th Circuits represent a positive development in the protection of creditors’ rights in small business bankruptcies. Banks should use nondischargeability as one of many levers of influence they can pull to negotiate their best outcome in Subchapter V small business bankruptcy cases. J. Zachary (Zak) Balasko is a seasoned bankruptcy and corporate restructuring litigator at Steptoe & Johnson PLLC. Zak has represented clients in cases under all chapters of the bankruptcy code, including debtors, secured lenders, trustees, trade vendors, creditors’ committees, governmental units and other parties-in-interest, with significant experience in Delaware, Texas, Virginia and West Virginia. He always seeks to achieve the best outcome for his clients as he guides them through the complexities of corporate restructurings and bankruptcy cases. Shelby Turley is a first-generation college student and attorney who brings a warm and receptive touch to her client interactions. Shelby assists with a wide range of matters in banking and complex commercial transactions and has facilitated millions of dollars in commercial closings across the nation. She also brings an attentive, client-focused attitude to real estate transactions, foreclosures and estate planning. 17 WEST VIRGINIA BANKER
In just the first few weeks of 2026, the banking industry faced two separate and significant policy challenges. The first was a fight over the future of stablecoins and digital asset regulation, which heated up in late 2025, and lawmakers were considering new market structure legislation. For bankers, this legislation represented an opportunity to close a critical loophole in the GENIUS Act that allowed stablecoin partners and affiliates to offer yield-like rewards, clearly undermining the intention of the GENIUS Act’s ban on issuers paying interest. The threat to the banking sector was clear: Failure to address the loophole could lead to billions of dollars in deposits leaving banks, with severe downstream effects on local lending and economic growth. The second major challenge we faced came in early January, when the president expressed support for a 10% cap on credit card interest rates in a social media post. As bankers know all too well, price caps always have unforeseen and costly consequences for consumers, and if such a cap were imposed, as many as 159 million Americans could lose access to credit. In the face of these dual threats, America’s banks sprang into action. Thanks to ABA members and our partners in the State Association Alliance, we sent over 10,000 letters to senators and collected 3,200 signatures on a petition reminding them about the GENIUS Act loophole and its potential impact on families and small businesses across the country. Our Community Bankers Council — which includes community bankers from every state — penned its own letter, and ABA rallied the other community financial institutions trades together, helping the industry demonstrate a united front on Capitol Hill. ABA and our members were also out in front on card issues, issuing a grassroots call to action and quickly publishing new data (available at ratecapreality.com) showing that the proposed 10% rate cap would have a drastic impact on the card industry, threatening up to 85% of open credit card accounts. These policy threats remain very real, and at the time this column was written, ABA was still engaged in an all-out push to ensure that our perspective is being heard by the entire policy community. We’re using every tool in our toolbox, from grassroots calls to action to targeted advertising to in-person lobbying efforts. Even more messaging efforts are planned. The speed at which these issues emerged was a reminder that even as we face a more supportive regulatory environment, major policy challenges remain, and we must be ready to respond. At the same time, it also underscored the strength of our collective advocacy. When bankers come together to elevate the issues that matter, our voices carry significant weight. In these two policy debates, our industry’s response has shifted the momentum, even if the final outcomes remain uncertain. Rest assured, ABA and the state associations are working tirelessly on behalf of the industry, and with your support, I’m confident in our ability to move the needle on major policy challenges, wherever and whenever they arise. But we need your voice. Please consider joining us at the 2026 ABA Washington Summit, March 9-11, in the nation’s capital. This free event is our best opportunity to show up in person in Washington and show the administration and Congress that the banking industry is strong, united and ready to advocate on behalf of the customers, clients and communities we serve. Email Rob at nichols@aba.com. WASHINGTON UPDATE Fighting on in 2026 ROB NICHOLS President and CEO American Bankers Association 18 WEST VIRGINIA BANKER
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Community Banks and Crypto-Assets Is It Time To Start Exploring? By IAN F. MCDOWELL, CPA, Principal, Audit and Assurance, S.R. Snodgrass PC Speaking recently with our many community bank clients, we’ve seen a significant increase in questions and concerns regarding the increased presence of crypto-assets business models. The general sentiment is “I know it’s being discussed, but I’m not sure how the regulators will view this or how it will affect the current operations of my community bank.” As these questions continue to increase, this article has been prepared to provide some insights into the FDIC’s current regulatory developments, as well as some practical information on how community banks can start to explore this topic at their own organization. Let’s start with how the regulatory landscape has changed over the last few years. Between April 2022 and March 2025, the FDIC issued two brief Financial Institution Letters on this topic: FIL-16-2022 and FIL-7-2025. It doesn’t take much reading between the lines to identify an apparent shift from a precautionary, pre-notification stance on banks’ crypto-related activities (FIL-16-2022) to a permissions-based, risk-management stance that rescinds the prior notice requirement (FIL-7-2025). In the 2022 letter, the FDIC required banks to notify the agency before engaging in any crypto-related activity and emphasized evolving safety and soundness, consumer protection, and financial stability risks. Following, in the 2025 letter, the FDIC affirmed that FDIC-supervised institutions may engage in permissible crypto-related activities without prior FDIC approval, provided risks are adequately managed and activities comply with applicable law. Additionally, in February 2025, the FDIC published 25 “pause letters,” which were sent to banks between October 2018 and January 2025, discussing the FDIC’s concerns with their crypto-related activities. In the context of the release, Acting FDIC Chairman Travis Hill commented about the FDIC’s position evolving to provide a pathway forward for banks by saying, “Looking forward, we are actively reevaluating our supervisory approach to crypto-related activities. This includes replacing Financial Institution Letter (FIL) 16-2022 20 WEST VIRGINIA BANKER
and providing a pathway for institutions to engage in crypto- and blockchain-related activities while still adhering to safety and soundness principles.” Taking a slightly deeper look at the remarkably brief 2025 FIL, the following highlights are noteworthy: • Risk-Based Approach: The letter reiterates that banks must conduct all activities “safely and soundly and consistent with all applicable laws and regulations.” Risk areas called out include market/liquidity, operational and cyber, consumer-protection, and AML. • How Permissibility Is Framed: FIL-7-2025 affirms that activities involving new and emerging technologies — including crypto-assets and digital assets — can be permissible if risks are managed. It references OCC interpretive letters on custody and stablecoin reserves as examples of activities that may be permissible when executed appropriately. • Forward-Looking Coordination: The FIL states the FDIC will work with other banking agencies to replace the 2023 interagency statements on crypto-asset risks and liquidity vulnerabilities with further guidance or regulations and continue engagement with the President’s Working Group on Digital Asset Markets. • Tone: The tone is notably pragmatic and enabling. The accompanying press release quotes Acting Chairman Travis Hill as saying the FDIC is “turning the page on the flawed approach of the past three years.” This signals a desire to provide a clearer path for banks to engage in crypto/blockchain activities under safety-and-soundness standards. Additionally, following on the heels of the FIL in March of last year, Congress generated additional tailwind on the topic by signing the GENIUS Act into law. While the details of the GENIUS Act aren’t being discussed in this release, the Act generally defines and regulates stablecoins that are used for payments or settlements. At the time the Act was signed into law, whitehouse.gov described the Act by saying, “This long-overdue legislation creates the first-ever Federal regulatory system for stablecoins, ensuring their stability and trust through strong reserve requirements.” The Act goes a long way to promote more widespread use of stablecoins throughout the economic system while providing regulatory guardrails that a community bank must be familiar with when considering a crypto-friendly business model. With the apparent change in tone at the regulatory level, the question we hear most frequently is, “How are community banks getting involved with crypto-assets in practice?” While the short answer is that not many are, there are a few emerging topics that community banks may want to consider if they want to start preparing for a crypto-friendly environment for their customers. Although the industry is still in its infancy with crypto-assets, there have been a few potential use cases at larger players like JPMorgan and B of A that have shown potential to possibly “trickle down” to the community banking space: • Custody Services: Offering custody services for your customers’ crypto-assets may align with some banks’ current Trust Services or Wealth Management divisions. In the early stages, a streamlined approach to this type of service may involve a mutual partnership with a third-party service where the bank acts as the custodian for the asset broker. This approach may be appealing to banks hoping to attract or retain younger customers who already hold crypto-assets but are unsure about the safety or security of the parties safeguarding those assets. • Stablecoin Reserves: Many crypto exchanges and fintech firms (River, for example) attract customers to their platform by holding client assets in full reserve, meaning that for every dollar invested in crypto-assets, they hold a dollar in a cash reserve with a qualified institution. This provides an opportunity for banks to be that institutional partner. With the passing of the GENIUS Act, we expect to see particular interest in stablecoin activity over the coming years. • Crypto-Backed Lending: As crypto-assets continue to become a larger part of consumers’ asset portfolios, customers may have an increased need to convert those less liquid assets into spendable dollars. While lending against direct crypto-asset holdings, such as bitcoin, is likely to be well outside the risk tolerance of most community banks, other crypto-related assets, such as publicly traded crypto-ETFs, may be a viable source of loan collateral; however, robust risk mitigation policies would need to be developed and implemented to ensure the safety and soundness of the activities. Any time a bank is venturing into uncharted territory, a slow, methodical approach is critical. The following are a few actionable insights to help a community bank explore crypto-related activities consistent with FIL-7-2025: • Start with activities that have clearer supervisory lineage. Consider crypto custody, stablecoin reserve services or participation in permissioned networks/INVN for payments — areas referenced by bank regulators and consistent with FIL-7-2025’s framing of potentially permissible activities. These business models also relate directly to the more robust guidance published by the OCC in Interpretive Letters 1170, 1172 and 1174. • Treat crypto like any other new product — build the risk stack first. Before launch, document product-level risk assessments covering market/price volatility, liquidity risk, operational resilience and cybersecurity, BSA/AML and sanctions, consumer disclosures, and third-party/vendor risks. Align with your existing Part 21 WEST VIRGINIA BANKER
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