Pub. 14 2023 Issue 2


24 CONTENTS ©2023 The West Virginia Bankers Association | The newsLINK Group, LLC. All rights reserved. West Virginia Banker is published four times each year by The newsLINK Group, LLC for the West Virginia Bankers Association 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 the West Virginia Bankers Association, 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 the West Virginia Bankers Association. While West Virginia Banker encourages a first-print policy, 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. 4 President’s Message Successful Leadership Has Set the Stage for the Association’s Continued Relevance By Mark Mangano, WVBankers President & CEO 6 A Conversation with Deborah L. Swiger 2023 West Virginia Young Banker of the Year 8 WV Young Banker of the Year Nominees 12 Interagency Guidance on Third-Party Relationships Continues to Require a Tailored Approach Based on Risk Profile and Complexity By Sandra M. Murphy, Esq. and Amy J. Tawney, Esq., Bowles Rice 16 Home Equity Line of Credit Scams By Travelers 18 Changes to TDR Accounting and Disclosures for CECL Adopters By Kelly Shafer, CPA, Suttle & Stalnaker, PLLC 20 Empowering the Next Generation of Bank Leaders The Future Leaders Council’s Involvement in the ABA Government Relations Summit By Jared Moncman, CFO, Pleasants County Bank 22 West Virginia School of Banking Prepares Future Industry Leaders 24 Adopting a Holistic FRAML Approach to Fight Financial Crime By Ankur Shah, Strategic Product Manager, CSI 27 Why It’s Necessary to Implement a Zero Trust Security Model for Your Business’s Network By ImageQuest 30 2023 Calendar of Events 16 2 West Virginia Banker

CHARLESTON, WV • MARTINSBURG, WV • MORGANTOWN, WV • PARKERSBURG, WV • SOUTHPOINTE, PA • WINCHESTER, VA The world of banking and financial services is evolving at lightning speed. Innovations in new technologies, virtual currencies, digital payment systems, lending services and the overall regulatory landscape are fueling the FinTech revolution, creating a financial services market that is more accessible, responsive and competitive than ever before. At Bowles Rice, our FinTech team is built on the firm’s strong foundational practices in banking and financial services, tax, business and corporate law, cybersecurity and information privacy, and government relations. Whether you are building the next universally adopted application or looking to acquire and implement one into your existing financial services business, our team is ready to assist. For experienced FinTech solutions, contact team leader Sandy Murphy at (304) 347-1131. FinTech Solutions Responsible Attorney: Marc Monteleone 600 Quarrier Street • Charleston, WV 25301 Follow us on Twitter @BowlesRice @bowlesbanklaw @creditors_law

President’s Message Successful Leadership Has Set the Stage for the Association’s Continued Relevance By Mark Mangano, WVBankers President & CEO Our annual convention serves many purposes: renewing and reaffirming our relationships with colleagues, celebrating our shared successes and challenges, and enjoying a very special resort experience in West Virginia that is unique in the world. It is also an occasion to take stock of our accomplishments and cast an eye to the future. As I write this, I have had several months in the association’s leadership role. Humility and excitement describe my initial impressions. I am humbled by the awareness of the association’s tremendous accomplishments under my predecessor, Sally Cline, and the board she served. I am excited by the opportunities available to the association to continue to enhance its service to its stakeholders. Charting a new course requires appreciating where we are and how we arrived there. During Sally’s tenure, she and the association board successfully undertook multiple initiatives to maintain the association’s value and relevance. Some notable accomplishments include completing staff transitions as valuable long-time employees retired, increasing operational efficiency through redesigned workflows, substantially reducing dues for all bank members while maintaining modest dues requirements for associate members, and achieving enhanced member engagement and support. Upon her retirement, Sally delivered an association consistently realizing its commitments to advocacy, education, and leadership, staffed by a very talented and committed set of leaders and poised to embrace continued change in pursuing greater value and relevance to its members. As we move forward, we are fortunate to begin from the solid foundation that Sally and the board have constructed for the membership. The West Virginia banking industry is entering an exciting and dynamic period of opportunity and challenge. The economic opportunities for the state, professional opportunities for bankers and the number and variety of available tools for banks to employ have never been greater. At the same time, bankers face a rapidly changing competitive landscape that is less defined by interbank competition, increasingly complex and nuanced legislative and regulatory pressures, and leadership transitions as we baby boomers pass the torch, and a greater need to efficiently identify and deploy internal and external resources to maintain competitive relevance. The association represents a voluntary cooperation among banking competitors to accomplish goals that would be difficult or impossible for our members to achieve individually. Each member has and will have its own, very specific, definition of the association’s role in that member’s success. Our challenge will be to ensure that the association serves each member’s definition of value. The association’s strength, influence and utility come from its membership’s size, diversity, engagement and shared commitments. In the dynamic environment in which we operate, it is increasingly challenging to understand and build consensus on shared commitments. This has implications for guiding advocacy, designing and delivering education, curating and offering effective and efficient solutions, and facilitating constructive conversations among members, communities, lawmakers, regulators, and potential allies and opponents. A key priority for me will be developing the association’s capacity to facilitate conversations that will help the board, banker leaders and association management in understanding what constitutes relevance to our individual members as we all navigate a constantly changing environment. The association will remain strong, useful, and relevant as long as it continues to find consensus among our members regarding the value of working together to lift our industry, customers, communities and state.  4 West Virginia Banker

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In 2022, the West Virginia Bankers Association established a Young Banker of the Year Award. This award recognizes the achievement, performance and community and industry involvement of a West Virginia banker who is 40 years of age or younger. Each candidate is nominated by a sponsor within their bank, supported by the application process highlighting their accomplishments and credentials. This year, we were given the opportunity to select from eight outstanding candidates. Nominees were reviewed by the Board of Directors through a blind selection process. The 2023 Young Banker of the Year recipient, Deborah L. Swiger has forged her own path at Citizens Bank of West Virginia while continuing to help her teammates, customers and the company and industry thrive and prosper. In your career, what contribution have you made that is the most meaningful to you? Throughout my career, I’ve tried to create efficiencies for various tasks to make daily processes easier and more effective. I think, ultimately, my greatest contribution has been to create the resources to support coworkers in their projects to find success. Whether that’s by creating step-by-step instructions, simplified forms, leading group discussions, or providing training — sometimes it’s just modifying a process or providing troubleshooting help. My goal has been to improve the experience for my coworkers to make everybody’s life go a little bit smoother. I think that those small incremental changes have been my biggest contribution. A Conversation with Deborah L. Swiger 2023 West Virginia Young Banker of the Year 6 West Virginia Banker

What motivates you to work? I like to improve things wherever I go and enjoy seeing the results. Supporting others in finding success and working on team challenges is something I seek out. There is no better feeling than when a goal has been accomplished. I feel my efforts can have a positive impact on coworkers, customers and even the community. What is your favorite thing about living in West Virginia? My favorite thing about living in West Virginia is the many opportunities to enjoy nature. I really like outdoor activities, and we’re surrounded by beautiful mountains and rivers. All kinds of peaceful moments are to be found in nature within just a matter of minutes. It can be hiking, camping or taking photos; there’s a lot of variation in outdoor activities that are available. Looking back on the last five years of your career, what’s the highlight? Not long after moving into my current role, I had the opportunity to lead a team of very talented individuals in the bank through a two-branch acquisition. We had previously completed a core conversion where I was a heavily involved team member, and then soon after, we made the acquisition where we brought in the other branches. I led the team on that acquisition to not only do the work leading up to acquiring the branches but also to welcome the new staff and customers to Citizens Bank. This acquisition took around six months of lead-up and preparation, identifying the files from the bank branches that we were receiving, all the testing and the actual conversion. Finally, following up to make sure everything went the way it was planned. It was a major project for a lot of people. I was very honored to be given that trust in leading the team. What is your favorite part of working in a bank? My favorite part is the opportunity to connect not just with coworkers or customers but also with the community in general. Being part of the bank team is very rewarding in itself, but we also are very involved in our community. We do a lot of corporate sponsorships: education, youth sports and various charities. I’m always very proud to represent Citizens Bank whenever we’re part of those things — giving volunteer hours or going to the event. I really enjoy the feeling of community. What is your favorite way to relax outside of work? I like to spend time with my daughter, Mackenzie, mostly out in nature, hiking and camping in state parks. We like to travel, go to new places, try new foods and have fun new adventures — places like science museums are a favorite, where there’s the learning aspect and the fun aspect. Who is the most influential person in your life, how did they influence you, and why he or she is important? That would be my dad. He spent his whole life as a farmer who raised beef cattle and as a coal miner. Both of those jobs are very hard work, and he did both very well. He never complained that it was too much or that he was tired. He kept going every day. He showed me that hard work, dedication and never giving up create opportunities that lead to success. He led by example and taught me that holding yourself to that high standard and maintaining a strong work ethic pays off. My dad believed in me and that I could achieve great things. I think that pushed me to find success. What is some advice you would give to those thinking about going into banking? I would encourage them to go for it. Banking was not my original career plan, but it quickly became my new passion and has been a very rewarding career for me. I’m very thankful for that. I think banking can actually be a lot more fun and fulfilling than I realized before I got into this industry. It can be very interesting; it is more than just running the numbers. Don’t be afraid to start at an entry-level role because, a lot of times, that’s how you get your start, and that can quickly lead to leadership roles. What are you most excited about for the future? I’m excited to see how banking will continue with the many innovations that we’re seeing. There’s been a lot of change in recent years. Opportunities abound with different products that are being developed, and that’s something that will definitely help the customer and shape how employees function within a bank. I enjoy digital products, and the digital transformations that are going to be possible in the near future are in my area of the bank. I’m really looking forward to the exciting changes that will bring.  Deborah Swiger serves as Senior Vice President & Chief Operations Officer and has been employed at Citizens since 2008. She oversees bank and branch operations. She earned a B.A. in History and B.A. in Sociology from Davis & Elkins College and is a graduate of the West Virginia School of Banking and the Lloyd P. Calvert Graduate School of Banking. Deborah volunteers as a Girl Scout assistant troop leader and with Relay for Life. She participates with the Community Bankers of West Virginia Leadership Development Group and is a member of TopNet — a collaboration of West Virginia bankers. Deborah was also recently appointed to serve on the CSI NuPoint Core Customer Advisory Board with nine other bankers across the country. 7 West Virginia Banker

Jared Moncman CFO/SVP, Pleasants County Bank Jared Moncman embarked on his banking career over 15 years ago, working as a part-time teller at First Neighborhood Bank while completing his college degree. In the years that followed, he gained valuable experience as an external auditor at Suttle & Stalnaker, PLLC, where he conducted year-end financial statement audits and internal audit work from 2013 to 2015. Joining Pleasants County Bank in June 2015 as the Internal Audit and Compliance Officer, Jared quickly showcased his versatility and dedication to the institution. Driven by a passion for professional growth, Jared obtained his CPA license in 2020, solidifying his financial expertise and becoming a trusted authority in his field. At Pleasants County Bank, Jared’s role encompasses a wide range of responsibilities, from executive-level duties as the Chief Financial Officer to overseeing IT operations and assuming compliance and audit responsibilities. His ability to seamlessly navigate various tasks, from running a teller window to engaging with core processors, auditors, and examiners, showcases his unique skill set and commitment to excellence. Beyond his contributions to Pleasants County Bank, Jared actively participates in community initiatives, assuming a leadership role in the Pleasants Area Chamber of Commerce and previously chairing the Future Leaders Council within the West Virginia Bankers Association (WVBA). His recent trip to Washington, D.C., alongside the WVBA, demonstrated his proactive approach in advocating for the banking industry’s interests. Well-known and respected in his community, Jared’s dedication, diverse skill set and unwavering commitment make him a valued employee with a promising future. What is a fun fact about yourself? After listening to motivational speaker Sebastian Terry, I decided to create my own list of “100 things” that I hope to complete over a 20-year timeframe. I just recently started assembling my list at the end of April, so I only have about 20 items on my list so far. They range from serving a meal at a homeless shelter to driving at NASCAR. On May 18th, 2023, I was able to check off my first item, which was flying an airplane (Cessna Skyhawk 172). It was one of the best experiences of my life as I flew the plane for over 40 minutes! I encourage everyone to look up Sebastian Terry and his list of “100 things” — it’s a great story, very inspirational, and it helps you to identify things that will help bring value, joy and purpose to your life. Ashley Brown Senior Vice President, Peoples Bank Ashley Brown started as a bank teller at Peoples Bank 13 years ago and achieved the Senior Vice President title at age 35. She now leads the bank’s largest region in terms of assets and profitability. In 2023, she is leading the retail efforts to launch the new ITM Division. This technology is new to PEBO and will create efficiencies throughout the network. In addition to retail branches, she will oversee the ITM call center. Ashley is a volunteer for United Way Mid-Ohio Valley, has served as the WV Young Banker of the Year Nominees 8 West Virginia Banker

Justin Sparcher AVP, Community Bank Manager, Summit Community Bank Justin is the consummate community servant in both Bluefields (he resides in the City of Bluefield, WV, and his branch is located in the town of Bluefield, VA). He served in leadership positions in Boy Scout Troop #1018, where he became Eagle Scout. He was a member for several years of the Bluefield, WV Fireman’s Civil Service Commission. He was on the Church Council of Immanuel Lutheran, where he is a lifelong member. He volunteered for the ever-growing Holiday of Lights and helps the Bluefield Beautification Commission raise funds with their “Winter Warmer” events. Justin was a member of the Board of Directors of the Chamber of Commerce of the Two Virginias. He currently serves on the Advisory Board of the W. Paul Cole, Jr. College of Business at Bluefield President of the Belpre Area Chamber of Commerce, and was past Rotary board member, past Mid-Ohio Valley Chamber of Commerce’s women in leadership committee chair, past Junior League of Parkersburg board member, and Juleps Pathways playground committee chair and donor. She also volunteers annually for the Wood County Society telethon, which works to create a more diverse, equitable, and inclusive community. Favorite part about working in a bank? Working at a bank is fulfilling. It involves gaining knowledge about various financial products, services, and industry trends. I appreciate the opportunities for advancement, allowing employees to grow and develop their skills over time. Morgan Hodge Vice President, Retail Regional Manager, City National Bank With nine years of experience in the banking industry, Morgan has established herself as a leader among her peers and a trusted customer favorite in her markets. Morgan began her banking career at City as a personal banker in 2014 and quickly earned a promotion to branch manager of the busiest office out of 94 branches in the bank. After many strong performances, including the bank-wide Branch-of-the-Year award, Morgan earned a promotion to her current role as Vice President and Region Manager of a $400-million-dollar region, the youngest region manager in the bank, where she continues to excel. Morgan is a graduate of the WVBA School of Banking, WVBA Branch Manager School and the WVBA Emerging Leaders program. Favorite thing about living in West Virginia? Although I didn’t grow up in this great state, it has been my home for 11+ years now. There is a comfort that I feel in living and working in West Virginia. I believe it starts with the people, but most importantly the relationships I’ve formed over the years with customers, acquaintances and coworkers. The state is made up of amazing, hard-working individuals who want the best for their families, neighbors and friends. I am proud to live and work here and to represent the state that has become home to me! State University. He is the Past President of the Bluefield Lions Club and the Sales Executives Club, is a member of their Boards of Directors and is a member of the Benevolent and Protective Order of Elks. On the Bluefield, VA, side of the state line, Justin is a Trustee of First United Methodist Church and a member of the Board of Directors of the Graham High School Academic Foundation. Several times each year, he helps with the “Field Fest” events which bring visitors and their dollars to the town of Bluefield. He is also Treasurer of the Downtown Development Corporation. At the request of his Alma Mater, Bluefield University where he earned a B.S. Degree in Business Management with a minor in Criminal Justice, Justin spoke at the College of Business Alumni Forum (Ram 2 Ram). Your favorite part of working in a bank? As a fifth-generation banker, my favorite part of working in a bank is conversing with my customers. They frequently come by to visit, even when they have no banking business to transact. I am humbled when patrons of Summit Community Bank pass by a closer branch and then drive even further to come to my branch. This is a testament to my employees, who are a close-knit group and treat customers as they would want to be treated themselves. Jennifer Moore Vice President/Branch Manager, City National Bank For nearly a decade, Jen has led City’s Hurricane and Winfield offices, both routinely placing among the top five in 9 West Virginia Banker

Kayla Addison Vice President and Charleston Regional Manager, City National Bank Kayla began her career at City National Bank in 2007 as an IRA specialist in the operations center. Since then, she’s led several branches including City’s flagship Kanawha City office with assets of $500 million, larger than most banks in the country. Kayla’s dedication to providing excellent customer service and engagement with the local community has been integral in her branches, earning City’s Top Customer Service Award for multiple years and the Charleston Region Community Engagement award in 2022. She was recently promoted to the role of Vice President and Charleston Regional Manager where she oversees the administration and management of activities for six branches. Kayla is a graduate of West Virginia State University, the West Virginia School of Banking, WVBA Branch Management School, WVBA Emerging Leaders program and Leadership Kanawha Valley. Kayla is the treasurer for the Kanawha City Community Association and is involved with various other local non-profit organizations. Kayla is the mother of Graysen and Bailey and the wife of Travis who, together, are a tremendous support system for her. the entire organization out of nearly 100. In 2020, Jen earned branch and manager of the year as the best performer in the company. And in a bank that has won four national JD Power customer service awards since 2018, Jen’s offices continue to rank near the very top. As a coach and leader, she has helped countless individuals become top performers, leading to promotions, career growth and additional opportunities. Jen is an active member of the local Chamber of Commerce’s Network of Women and Generation Putnam. You can often find Jen supporting local community organizations like the United Way, Meeks Mountain Trail Alliance, Putnam County Schools “Teach Kids to Save” and Portfolio Fair events, Facing Hunger Mobile Pantries, local school committees and initiatives, and many others throughout Putnam County. Jen is a graduate of Marshall University, the WVBA School of Banking, the WVBA Branch Manager school, the WVBA Emerging Leaders program, Leadership Putnam County and the City Leadership Program. Jen was recently named one of West Virginia’s 40 Under 40 by the State Journal and is a two-time nominee for the WVBA Young Banker of the Year. In your career, what contribution have you made that is the most meaningful to you? I’m at the point in my career where I get to watch individuals I’ve had on my teams step into their own leadership roles, many of whom are excelling. They deserve ALL the credit for their success, but there’s nothing more gratifying for me to feel that I may have helped just a little bit along the way, or at least know that I was smart enough not to get in their way. Witnessing their successes and celebrating with them makes it all worth it. What is a fun fact about yourself? A fun fact about me is I love to garden. There’s something about digging in the dirt and caring for plants that just melts the everyday stressors away. Every year, I’ve made my vegetable garden larger than the previous year and my kids are getting old enough that they’re able to help now. Seeing how excited they are when the seeds they’ve planted start to sprout is so fun to watch. Jesse Holston Assistant VP, Digital Channels and Credit Card Manager, City National Bank Jesse is a lifelong West Virginian. She was a National Scholar’s Honor Society student at Sissonville High School and earned her Bachelor of Business Administration in Marketing with a minor in Communications from Marshall University. She is a graduate of the WVBA Emerging Leaders program. In her free time, Jesse can be found at the Winfield youth ball fields where she has served as a volunteer, coach and board member. She is a strong supporter of the United Way of Central West Virginia, participating in its Day of Caring for many years. Jesse joined City in 2013 in the Electronic Banking area. Since then, she’s been promoted regularly to her current role as Digital Channels and Credit Card Manager.  10 West Virginia Banker

Interagency Guidance on Third-Party Relationships Continues to Require a Tailored Approach Based on Risk Profile and Complexity By Sandra M. Murphy, Esq. and Amy J. Tawney, Esq., Bowles Rice On June 6, 2023, the federal banking regulators issued final joint guidance to assist all banking organizations in managing risks with third-party relationships. The guidance replaces each federal banking regulator’s existing general third-party guidance to promote consistency in the supervisory review of third-party relationships. The proposed interagency guidance issued in July 2021 was revised to clarify that the guidance does not have the force and effect of law and does not impose any new requirements on banks. However, the final guidance explicitly applies to fintech relationships, including those where the fintech interacts directly with the bank’s customers or serves as an intermediary providing services to the bank’s customers. The recent formal written agreement between the OCC and Blue Ridge Bank NA regarding its fintech partnerships and risk compliance illustrates the heightened regulatory scrutiny of fintech partnerships. Regulatory concern with these partnerships likely contributed to the termination of Blue Ridge Bankshares’ planned merger of equals with FVCBancorp, Inc. For banks involved with fintech partnerships, especially those considering merger and acquisition activity, it is important to review the final guidance and adjust their internal risk management processes if necessary. The guidance remains principles-based and risk-based to enable each bank to develop and implement its own risk management processes that are tailored to the bank’s size, complexity, risk profile, and nature of its third-party relationships. The guidance includes lists of items a bank could consider in each stage of the life cycle of a thirdparty relationship. These lists provide examples, but not requirements, of risk management considerations. The banking regulators have noted that additional resources will be developed to assist smaller, non-complex community banks in managing relevant third-party risk. Third-Party Relationship Life Cycle The guidance lays out the five stages of the life cycle for thirdparty relationships and includes recommended best practices that banks should consider in each stage. The stages and recommended best practices are as follows: 1. Planning • Understand the strategic purpose and how it aligns with the bank’s overall strategic goals, risk appetite and broader corporate policies • Identify and assess benefits and risks • Consider volume, use of subcontractors, technology needed, interaction with customers and use of foreignbased third parties • Evaluate estimated costs • Evaluate the impact on employees, including dual employees and potential outsourcing 12 West Virginia Banker

• Assess third-party’s access to customer information and interactions with customers • Understand potential information security implications • Determine how to select, assess, and oversee the third-party, including monitoring for compliance with applicable laws • Determine the bank’s ability to provide adequate oversight and management on an ongoing basis • Outline the bank’s contingency plans if need to transition to another third-party or bring the product in-house 2. Due Diligence and Third-Party Selection The guidance provides that the scope and degree of due diligence should be commensurate with the level of risk and complexity of the third-party relationship, with more diligence required for critical activities. The guidance permits the use of external parties to assist with due diligence but notes that such use does not abrogate the responsibility of the bank to manage the third-party relationship. The guidance lists the following factors that should be considered as part of due diligence of the thirdparty: strategies and goals; legal and regulatory compliance; financial condition; business experience; qualification and backgrounds of key personnel and other human resources considerations; risk management (policies, processes and internal controls); information security; management of information systems; operational resilience; incident reporting and management processes; physical security; reliance on subcontractors; insurance coverage and contractual arrangements with other parties. 3. Contract Negotiation The guidance addresses the difficulty in negotiating contracts and the importance of banks in understanding their negotiating power and consequential risks. The guidance notes that the board of directors should be aware of and, as appropriate, approve or delegate approval of contracts involving high-risk activities and that legal counsel review may be warranted prior to execution of a contract. The factors listed in the guidance for consideration during contract negotiation include the nature and scope of arrangement; performance measures or benchmarks; responsibilities for providing, receiving and retaining information; the right to audit and require remediation; the responsibility for compliance with applicable laws and regulations; costs and compensation; ownership and licensing; confidentiality and integrity; operational resilience and business continuity; indemnification and limits on liability; insurance; dispute resolution; customer complaints; subcontracting; foreign-based third-parties; default and termination and regulatory supervision. 13 West Virginia Banker

4. Ongoing Monitoring The guidance notes that effective third-party risk management includes ongoing monitoring throughout the duration of the third-party relationship commensurate with the level of risk and complexity of the relationship and the activity performed by the third-party. Factors that should be considered as part of ongoing monitoring include: • The overall effectiveness of the third-party relationship • Changes to the third-party’s business strategy, financial condition, insurance coverage and key personnel • Relevant audits, testing results and other reports that address capability of third-party to manage risks and meet contractual obligations and regulatory requirements • Ongoing compliance with applicable laws and regulations • Performance measured against contractual obligations • Reliance on and use of subcontractors and risk management process for monitoring subcontractors • Employee training • Response to changing threats, new vulnerabilities and incidents impacting the activity • Ability to maintain confidentiality and integrity of banking organization’s systems, information and data • Volume, nature and trends of customer inquiries and complaints and adequacy of responses 5. Termination When a bank needs to terminate a third-party relationship, the guidance recommends consideration of the following factors: • Options for effective transition of services • Relevant capabilities, resources and time frame required to transition the activity • Costs and fees associated with termination • Management of risks associated with data retention and destruction • Handling of joint intellectual property • Managing impact on customers The guidance provides that the board of directors of the bank has the ultimate responsibility for providing oversight for thirdparty risk management and holding management accountable. The board must consider whether third-party relationships are managed consistent with the bank’s strategic goals and risk appetite, whether there is appropriate periodic reporting on the third-party relationship and whether management has taken appropriate actions to remedy performance issues or changing risks. The guidance also lists certain activities that management should perform when carrying out their responsibilities in developing and implementing third-party risk management policies, procedures and practices. Although the final guidance is broadly consistent with the regulator’s existing guidance and should not require significant updates to a bank’s third-party risk management framework, we recommend that bank management review the considerations set forth in the guidance against the bank’s existing risk-management policies and procedures to ensure that there are not areas that have been overlooked.  The proposed interagency guidance issued in July 2021 was revised to clarify that the guidance does not have the force and effect of law and does not impose any new requirements on banks. Sandra M. Murphy focuses her practice on acquisition, regulatory, enforcement, corporate governance and securities law matters for banks and other financial institutions. Admitted to practice in West Virginia and Virginia, she leads the Bowles Rice Banking and Financial Services team. She can be reached at (304) 347-1131 or by email at Amy J. Tawney focuses her practice on banking law, mergers and acquisitions, securities law and regulatory matters. She is admitted to practice in West Virginia and Virginia. Contact Amy by phone at (304) 347-1123 or by email at 14 West Virginia Banker

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Home Equity Line of Credit (HELOC) scams continue to be a costly and challenging issue for financial institutions. Wire transfer fraud can easily reach millions of dollars, and with advancements in technology such as online databases for county clerk records, online banking and online title searching, data commonly used by financial institutions to verify customer identity for wire transactions is routinely and easily compromised. Several financial institutions have fallen victim to losses arising out of wire transfer and check forgery schemes targeting HELOC accounts and have taken action to mitigate the risk of future loss experience. Institutions that place a high value on their customer service and customer confidence in the institution’s security against wire transfer fraud have implemented risk mitigation upgrades to their operations to help solidify customer confidence. According to Travelers, the following steps are initiatives that can help to avoid, or at least significantly reduce, losses arising out of HELOC fraud scams: • Place greater emphasis on getting full account numbers from callers; • Phrase verification questions so that the caller is providing the information, rather than simply confirming what the financial institution has on file; • Remove items from the list of authentication options (such as mother’s maiden name and date of birth) that have become “public information” through social media websites and venues; Home Equity Line of Credit Scams By Travelers • Train employees who field calls to verify authentication items in a specific order and not skip to other items if the caller cannot verify the requested information; • Train personnel with an updated full fraud-awareness module to help employees identify warning signs of fraud; • Encourage customers to set up PIN numbers if the automated phone system allows it; • Update customer account files with driver’s license numbers, if not copies of the entire driver’s license (or other government-issued ID if there is no driver’s license); • Utilize a mandatory callback procedure for all customer-notpresent wire transfer requests; • Use a password to authenticate customers rather than commonly compromised information and only allow in-person modification of passwords and key account information; • Consider requiring full balance transfers (or transfers up to a certain percentage of the available funds) to be made in person while placing a reasonable monetary limit (or percentage limit) on customer-notpresent wire transfer requests; 16 West Virginia Banker

• Establish a reporting procedure that refers all suspicious wire transfer requests to a higher level of authority for confirmation/ processing; • Require a dual telephone confirmation procedure where the financial institution calls the home phone of the customer as well as an alternate number, such as a mobile phone or work phone; • Establish an automatic two-day holding pattern anytime a request is made to initiate a wire transfer from a HELOC account to a foreign bank account within which time the financial institution ensures accurate verification and deters fraudsters seeking immediate processing; • Verify change of address or phone number requests with a call to the customer’s phone number on file; • Customize specific and unique verification questions and procedures with an account holder/ customer that can only be modified in person; and • Consider performing a verification call back when a purported customer calls the bank to set up online banking for the first time. Technology has made it easier than ever for bad actors to obtain data that is commonly used by financial institutions to verify the identity of their customers. That’s why financial institutions must utilize robust authentication procedures to protect their customers — and themselves — from wire transfer fraud. This includes greater awareness, updated and vigilant policies, procedures and training, and implementing imaginative and unique verification procedures to help reduce the risk of loss arising out of wire transfer fraud targeting HELOC accounts.  Travelers is committed to managing and mitigating risks and exposures and does so backed by financial stability and a dedicated team — from underwriters to claim professionals — whose mission is to insure and protect a company’s assets. For more information, visit Technology has made it easier than ever for bad actors to obtain data that is commonly used by financial institutions to verify the identity of their customers. 17 West Virginia Banker

Changes to TDR Accounting and Disclosures for CECL Adopters By Kelly Shafer, CPA, Suttle & Stalnaker, PLLC In March of 2022, the Financial Accounting Standards Board (FASB) issued a follow-up standard to ASU 2016-13 — Measurement of Credit Losses on Financial Instruments (CECL) to address recommendations from a postimplementation review of CECL. This new standard, ASU 2022-02 — Troubled Debt Restructurings and Vintage Disclosures, introduces concepts deemed useful to users of public company financial statements following the adoption of CECL. The objectives of the standard are to: • Eliminate the accounting guidance for troubled debt restructurings (TDRs), requiring all modified loans to follow the same model • Enhance disclosures for certain loan refinancing and restructurings when a borrower is experiencing financial difficulty • Require public business entities to include vintage disclosures for current-period gross write-offs Elimination of TDR Accounting With ASU 2022-02, FASB changes how financial institutions recognize and measure loan modifications that previously met the definition of a TDR. Rather than applying the historical recognition and measurement guidance for TDRs, a modification to a loan with a troubled borrower is now accounted for as any other loan modification by applying the loan refinancing and restructuring guidance contained in ASC 310-20. The shift from an incurred loan loss model to CECL led FASB to determine that the designation of a loan modification as a TDR was unnecessarily complex and no longer provides valuable information to financial statement users. Since CECL requires that the allowance for credit losses be based on estimated lifetime expected losses at the origination of a loan, any credit losses from loans modified as TDRs are already incorporated into the allowance. When applying the guidance of ASC 310-20 to a loan modification, the primary distinction is the determination of whether a refinancing or restructuring represents a new loan or the continuation of an existing loan. Refinancing or restructuring results in a new loan if: • The terms of the new loan (including the interest rate) are at least as favorable to the lender as the terms with other borrowers with similar collection risk that are not refinancing or restructuring their loans; and • The modification to the terms are more than minor. The restructuring is treated as a new loan if both requirements are met. In this case, unamortized net fees or costs from the original loan and any prepayment penalties are recognized in interest income at the time the new loan is granted. A new effective interest rate for the loan is also established at this time. Suppose the restructuring is deemed a continuation of an existing loan (i.e., both requirements are not met). In that case, the fees/costs are carried forward as part of the modified loan, and any new fees/costs associated with the modification are added to the amortized cost basis of the loan. FASB’s objective with ASU 2022-02 was to provide consistency in the guidance for loan modifications made to both troubled and non-troubled borrowers. As such, institutions can no longer consider reasonably expected extensions, renewals, and modifications when measuring the allowance for a modified loan. However, an institution need not reverse the impact of any TDR loans from its historical data used in the CECL model. New Disclosure Requirements While the accounting for TDRs has arguably been simplified by the standard, ASU 2022-02 brings with it a handful of new disclosures that replace traditional TDR disclosures. These disclosures apply to modifications of loans to borrowers experiencing financial difficulty, the definition of which has not changed from previous guidance. Institutions are now required to disclose information related to four specific types of loan modifications: • Principal forgiveness • Interest rate reduction • Other-than-insignificant payment delays • Term extensions 18 West Virginia Banker

For modifications that fall within one or more of these categories, the disclosure must be made of the type and financial effects of the modification and the performance of the modified loan in the 12 months following modification. Additionally, for loans that had a payment default during the current period and had modifications to the contractual cash flows in the 12 months prior to default, the type of contractual change and amount of the default must be disclosed. Qualitative disclosures about how modifications and defaults factor into determining the allowance for credit losses are also required. Institutions may see a change in the mix of loans subject to disclosure under the new standard compared to their historical TDR disclosures since disclosure is no longer based on whether a concession was provided to a borrower experiencing financial difficulty. With the elimination of TDRs from the accounting guidance, the concept of a concession has also been eliminated. Instead, institutions will need to evaluate whether a modification fell within one of the above four categories to qualify for disclosure. For example, an interest rate reduction that was still a market interest rate would not have been considered a concession prior to ASU 2022-02 and would not have required TDR disclosures. Under ASU 2022-02, any interest rate reduction to a borrower experiencing financial difficulty would need to be disclosed. Vintage Disclosures The standard provides new guidance on vintage disclosures that is applicable to public business entities only. Public business entities are required to disclose current period gross write-offs by year of origination. The disclosure is applied on a prospective basis beginning in the year of adoption and will eventually build to a five-year history of gross writeoffs over time. ASU 2022-02 applies to all financial institutions that have adopted CECL. Institutions may elect to apply the guidance on TDR recognition and measurement using either a modified retrospective transition method or prospectively. The TDR and vintage disclosure guidance should be adopted prospectively. If you would like more information on how this new guidance applies to your financial institution, contact Kelly Shafer at (304) 343-4126 or  Kelly Shafer is a member in the Charleston office of Suttle & Stalnaker, PLLC. Kelly has over 15 years of experience in public accounting practice and as a member of the firm’s Financial Institution Services Group, specializes in external audit services for financial institutions. 19 West Virginia Banker

As the former Chair of the Future Leaders Council and CFO of Pleasants County Bank, I am proud to highlight the recent involvement of the Future Leaders Council at the ABA Government Relations Summit held in Washington, D.C., from March 20-22, 2023. The Summit is a great platform to advocate for the banking industry, and the Future Leaders Council had an active presence at the event. The Summit kicked off with the Women and Allies Forum, where attendees had the opportunity to hear presentations on various topics like inclusive culture in a hybrid environment, lessons learned by women leaders in banking and a chat with former FDIC Chairman Jelena McWilliams. This was followed by the Emerging Leaders Forum, where attendees gained valuable insights and knowledge through discussions and presentations on topics such as mindful leadership, leading for today and tomorrow and artificial intelligence in banking. Brian Cayton, Founding Chairman of the FLC, current member of the ABA Emerging Leaders Council and Vice President, and Director of Operations and Innovations at Community Bank of Parkersburg, was invited to be an expert panelist during the forum to discuss Innovations and the Use of Artificial Intelligence in banking. During the forum and summit, members of the Future Leaders Council had an opportunity to network with peers and share ideas about the future of Emerging Leader programs in their state, innovations, best practices and general knowledge. The following day, attendees had the opportunity to hear from Secretary of the Treasury Janet Yellen and Senator Steve Daines (R-MT) and also had the chance to meet directly with congressional leaders like Senator Manchin and Senator Capito to discuss the failures of Signature Bank and Silicon Empowering the Next Generation of Bank Leaders The Future Leaders Council’s Involvement in the ABA Government Relations Summit By Jared Moncman, CFO, Pleasants County Bank Group picture with Senator Shelley Moore Capito 20 West Virginia Banker

Valley Bank. We used this as an opportunity to reassure our leadership that the trust in the banking system is high, and these failures were not due to a lack of governance by the Fed, but poor risk and liquidity management and lack of supervision on behalf of the San Francisco FDIC. We also discussed the effect of such fast rate increases and the unintended negative effects it was having on banks. Given the timing and the significance of the recent events, this was probably the perfect and most stressful time to be in D.C. as a banker. The Summit wrapped up on Wednesday with speakers Tim Scott (R-SC), Ranking Member of the Senate Committee on Banking, Housing, and Urban Affairs; Maxine Waters (D-CA), Ranking Member of the House Financial Services Committee; and Rob Nichols, ABA President all presenting hot topics and the future of banking. The Future Leaders Council is a great way for leaders at any bank to become more active under the umbrella of the West Virginia Bankers Association. Our current Chair, Jesse Bumps of Clear Mountain Bank, leads the Council in its mission to promote careers in banking, advocate for the banking industry, and oversee the emerging leaders’ curriculum. To help promote attendance, the Council created a $750 scholarship to help with the cost of attending the Summit, which pairs with a $750 ABA scholarship. Having an additional $1,500 for one attendee lightens the burden on the bank and allows those to attend that might not have been able to otherwise. Of the 11 attendees for this year’s Summit, six had ties to the Future Leaders Council, which is a testament to the importance of empowering the next generation of bank leaders and executives. The WVBA and the Future Leaders Council are committed to promoting careers in banking and advocating for the industry. Participation in events like the Washington Summit is a great way to achieve this mission. I encourage presidents and CEOs to identify individuals within their organization and promote their participation in groups like the Future Leaders Council, the WVBA and the ABA’s Washington Summit.  Bankers' Choice Certificates of Deposit 6 Month at $100,000 $1,000,000* Amounts of up to 5.00% 12 Month at 5.375% LOCK IN A GREAT RATE *Annual Percentage Yield (APY) is subject to change without notice. A penalty may be imposed for early withdrawal. Minimum deposit is $100,000 not to exceed $1,000,000 per EIN. Effective as of May 26, 2023. Brian Cayton, Community Bank of Parkersburg speaking at the ABA Panel 21 West Virginia Banker