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     A Bi-Weekly News Bulletin for CBAI Members                                    January 4, 2017

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Community Bankers Association of Illinois
Community Bankers Association of Illinois Community Bankers Association of Illinois
  • Agencies Finalize Changes to Community Bank Call Reports
  • CRE Could Significantly Shape Bankers' Strategies in 2017
  • A Whole Lot of Hurt in Auto Lending May Be Coming
  • Core Profitability of Community Banks, 1985–2015
  • Hoping to Spur De Novos, FDIC Offers Application Guide
  • Credit, Debit Card Payments Continue Gaining Ground: Fed
  • Investment News From THE BAKER GROUP
  • CBAI LEGAL: Tenancy by Entirety Beyond Reach of Bankruptcy Creditor
  • FTC Warns of Fraudulent Mobile Apps
  • Comptroller Announces Launch of Office of Innovation
  • Do You Know This Bank Robber? The FBI Created an App for That
  • Double Perks for CBAI Members in January!
  • CBIS Nicoud: Let Us Help You Prepare for 2017
  • It’s a New Year – Toot Your Own Horn!
  • CBAI Announces Opening Speaker at 43rd Annual Convention
  • Compliance Institute Scheduled for January 10 & 11
  • Appraisal Review Slated for January 18 & 19
  • Community Bank Directors’ College Set for January 24 & 25


  • Agencies Finalize Changes to Community Bank Call Reports

    Federal financial regulators finalized changes to the call report for community banks with less than $1 billion in assets. The update cuts the call report from 85 to 61 pages for roughly 5,200 institutions, though ICBA has told the agencies more needs to be done to ease call report burdens.

    In October both ICBA and CBAI told regulators that their plan does not go far enough to provide meaningful relief because the data items to be removed generally do not apply to community banks anyway. Joining thousands of community bankers who submitted comments, ICBA and CBAI called on regulators to implement a short-form call report that community banks would file in the first and third quarters of each year. Read More from Regulators.

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    CRE Could Significantly Shape Bankers' Strategies in 2017

    Bankers are entering a new year feeling a sense of déjà vu about regulatory warnings over commercial real estate concentrations. A decade earlier, regulators were warning that CRE exposure could lead to earnings and capital volatility. While many bankers said those concerns were overblown — arguing that few banks were in trouble — hundreds of banks ended up failing.

    Fast forward to today and regulators are expressing similar reservations, warning that areas such as multifamily could become problematic. Bankers, however, say they believe the industry is better equipped to handle an economic shock, pointing to a system with more capital, backstops from borrowers and improved risk management processes.

    Several banks exceed recommended CRE levels, as a percentage of total risk-based capital, prompting regulators late last year to remind banks of their guidance on concentrations. Regulators prefer that CRE remain below 300% of a bank's total risk-based capital and for construction and land development loans to stay under 100%. Read More.

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    A Whole Lot of Hurt in Auto Lending May Be Coming

    Subprime loans were the fastest-growing segment of the loan market, comprising a significant portion of new originations. An active securitization market fueled the rapid growth. Small nonbank lenders formed to take advantage of the profits to be made at the riskier edges of the market. Delinquencies rose. Lenders went deeper down the credit scale, targeting sub-subprime borrowers. Regulators issued warnings regarding rising delinquencies.

    It all sounds like the lead-up to the 2007 subprime mortgage crisis, right? It's actually the state of the auto loan market in 2016. The similarities are there for all but the (willfully) blind to see. So where does this road lead? Read More.

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    Nothing is more important than keeping your financial institution safe for everyone. SHAZAM’s Crime Response Training can help! Training options include a threat assessment at your location; a one-hour robbery course; a one-hour active shooter workshop; a one-hour internal retail theft presentation to help protect your bottom line; and a crime response kit to help you prepare, respond and recover should a crime occur. Learn more about SHAZAM’s Crime Response Training today!



    Core Profitability of Community Banks, 1985–2015

    The FDIC Quarterly released last week features a paper on the core profitability of community banks for the past 30 years. The relatively low profitability reported by community banks since the 2008 financial crisis has sparked concerns about the core profitability of the community banking model. This paper constructs an econometric model using 31 years of data to estimate the impact of macroeconomic shocks on industry average pretax return on assets (ROA).

    After accounting for macroeconomic factors, the remaining unexplained variation is considered to be the core component of profitability. Core ROA is found to have been relatively stable between 1985 and 2015. It trended downward over the 1990s, but the effect of the financial crisis on industry composition has led to a reversal and a modest increase in core profitability. More than 80 percent of the post-crisis decline in profitability can be explained by negative macroeconomic shocks. Read FDIC Paper.

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    Hoping to Spur De Novos, FDIC Offers Application Guide

    The Federal Deposit Insurance Corporation recently released a guide on the process for seeking new bank charters amid signs that a virtual freeze in new-bank activity is thawing.

    The handbook for de novo bank organizers provides guidance to those applying for deposit insurance on three stages for establishing a new institution: pre-filing, the application process and pre-opening. The agency said that the handbook does not amount to new policy, nor does it modify existing policy.

    In releasing the new handbook, the FDIC also announced a 60-day comment period for interested parties to provide feedback about the guide. Questions include whether the handbook is sufficiently clear about the FDIC procedures, whether it adequately addresses requirements for establishing an insured depository and whether it addresses "the information needs of organizers who are experienced bankers, as well as the information needs of other organizers, such as certain proposed investors or directors." CBAI has long advocated new bank formations and has provided guidance to bank organizers. Read More.

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    Credit, Debit Card Payments Continue Gaining Ground: Fed

    Credit and debit card payments accounted for more than two-thirds of all core noncash payments in the United States from 2012 to 2015, according to the Federal Reserve. The number of domestic core noncash payments rose 5.3 percent from 2012, while their value increased 3.4 percent. ACH payments grew modestly over the same period, and check payments declined at a slower rate than in the past. Read Federal Reserve Release.

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    Investment News From THE BAKER GROUP

    Baker Market Update

    The new Trade Balance report isn’t due out yet, but there are early signs that the perpetually negative gap may be narrowing. The U.S. announced recently that exports to Russia will be going up by about 35 diplomats. Every little bit helps. See Baker Market Update.

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    CBAI LEGAL: Tenancy by Entirety Beyond Reach of Bankruptcy Creditor

    In its December opinion in the case of Loventhal v. Edelson, the U.S. Court of Appeals for the Seventh Circuit (Illinois jurisdiction) upheld lower courts’ rulings that a residence held as “tenants by the entirety” (whether as individuals or as beneficial interest holders under a trust) is exempt from a creditor’s claim in bankruptcy. Read Most Recent CBAI LEGAL.

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    FTC Warns of Fraudulent Mobile Apps

    As more consumers are shopping with mobile apps, fraudsters are following the money. There are fake phone apps popping up that impersonate well-known retailers in order to steal customers' personal information. Their names are similar to well-known brands, and their descriptions promise enticing deals or features. These fraudulent apps can take credit card or bank information. Bankers may want to share these tips from the FTC with customers. Read FTC Article.

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    Comptroller Announces Launch of Office of Innovation

    The Office of the Comptroller of the Currency is establishing a new office aimed at helping banks develop financial technology products and services that comply with federal law while meeting safety and consumer protection standards. The OCC’s Office of Innovation, which will open its doors in the first quarter of 2017, will provide a way for the regulator and the banks it supervises to work together in developing fintech products, while also determining how they will affect the banking system, interact with existing federal laws and improve services for consumers. Read More.

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    Do You Know This Bank Robber? The FBI Created an App for That

    In 2015, there were more than 4,000 robberies, burglaries, and larcenies that took place in violation of the federal bank robbery statute. The Federal Bureau of Investigation (FBI) released a mobile app in hopes of finding who is responsible for many of those crimes that remain unsolved. The app is designed to allow people to view information on bank robberies that happen in their area. The ultimate goal is that someone will notice the suspect(s) and provide the FBI with enough information to make an arrest. Read More.

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    Double Perks for CBAI Members in January!

    Midwest Office is offering CBAI Members "Double Perks" during January. The more HP Ink/Toner you purchase, the more gift cards you get! Haven't ordered from Midwest Office before? This is the perfect time. New customers will not only receive a $50 gift card to either Home Depot or Shell for every $250 in Ink/Toner but also receive an additional $50 Visa gift card for every purchase over $250. See Midwest Specials.

    To place your next order, contact your Midwest Office Sales Representative, Kevin Gaffney, at 217-303-5511 or email kgaffney@midwestoffice.com. Happy New Year!

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    CBIS Nicoud: Let Us Help You Prepare for 2017

    The first of the year is always a good time to press the reset button and start fresh. This is not only true with personal goals but with your business goals aas well. All of us at CBIS encourage you to take a step back and review your insurance program with your insurance broker. A question you may need to ask is, "Have we outgrown our current insurance program?" Read More.

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    It’s a New Year – Toot Your Own Horn!

    The Excellence and Innovation BKD Award Presented by CBAI spotlights exemplary community banks and is sponsored by BKD LLP. All CBAI members are eligible to apply for this annual recognition award. An independent panel of judges selects a bank to honor at the CBAI Annual Convention. Click Here to learn more. To download and complete the BKD Nomination Form, Click Here.

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    CBAI Announces Opening Speaker at 43rd Annual Convention

    CBAI is pleased to announce the Opening Breakfast speaker at CBAI’s 43rd Annual Convention & Expo on September 14-16, 2017, at the Crowne Plaza in Springfield. As a nine year old boy, John O’Leary was burned on 100 percent of his body and was given a one percent chance to live. His amazing journey of survival illustrates the incredible power of the human spirit. John and his family kept their experience private until his parents wrote a book, Overwhelming Odds, to thank the family and friends who supported them on their journey of healing. This book led to organizations around the world requesting to hear first-hand how John defied the odds. Since then, John has empowered more than 500,000 people to Live Inspired. In March 2016, his book On Fire: The 7 Choices to Ignite a Radically Inspired Life, became an instant #1 National Bestseller. His emotional story-telling, unexpected humor, and authenticity make each of his presentations truly transformational. Read More.

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    Compliance Institute Scheduled for January 10 & 11

    Community banks are constantly faced with a bewildering array of ever-changing regulations. In response to this training need, CBAI is pleased to present the “Compliance Institute” this January & April. An introductory course for those compliance officers who are either new to banking or new to their positions, this institute is designed to provide a comprehensive understanding of the major regulatory-compliance regulations that have been determined to be “must knows” for all compliance officers. The school has been divided into two sessions, Operations/Deposit Compliance and Lending Compliance. Attendees can attend one or both sessions, dependent upon need. Offered in January, session I, Operations/Deposit Compliance, addresses topics including compliance management, privacy of customer information, Fair Credit Reporting Act, Customer Identification Program, Bank Secrecy Act, Regulation D: Reserve Requirements, Regulation DD: Truth in Savings Act, Regulation CC: Expedited Funds Availability Act, and Regulation E: Electronic Funds Transfer Act. Topics covered in Lending Compliance, offered in April, include Regulation Z: Truth in Lending, Regulation B and the Fair Housing Act: Fair Lending, Regulation X: Real Estate Settlement Procedures Act, National Flood Insurance Program, Regulation C: Home Mortgage Disclosure Act, compliance management, privacy of customer information, FCRA and Regulation V (lending portion only), and Customer Identification Program (BSA). Bill Elliott, CRCM, senior consultant and manager of compliance, and Adam Witmer, CRCM, consultant, both of Young & Associates, Inc., Kent, OH, lead this institute.

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    Appraisal Review Slated for January 18 & 19

    Since 2010, all regulatory agencies have increased their expectations regarding a bank's review of property appraisals. A checklist simply does not suffice anymore, particularly on commercial property appraisals. Banks must gain a better understanding of the appraisal process and of the appraisals it receives. Just because an appraiser is on the bank's approved appraisal list does not mean the bank should accept his or her work without question or review. Banks are expected to thoroughly review the appraisals, and question the assumptions contained therein when necessary. This seminar focuses on the regulatory requirements and expectations regarding the review of third-party appraisals and in-house evaluations. Both single-family dwelling and commercial property appraisals are discussed. Depending on the individual institution's structure, this seminar should be attended by personnel from loan administration, underwriting/credit analysis, to all general loan personnel. Topics covered include appraisal regulations and guidance, terms used in an appraisal, the review process, reviewing commercial-property appraisals, reviewing residential-home appraisals, and case studies. Leading this seminar is Aaron Lewis, consultant in the lending division of Young and Associates, Inc., Kent, OH.

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    Community Bank Directors’ College Set for January 24 & 25

    The Community Bank Directors’ College was developed in close cooperation with both state and federal regulators and is designed to teach individuals how to become more effective, capable, and supportive members of their banks’ board of directors. Its goal is to graduate directors who return to your bank more active, more knowledgeable, and more decisive. In effect, they will be an even bigger asset to your community bank. The College provides a thorough understanding of bank operations and bank directors’ responsibilities. The college is recommended for both new and seasoned bank directors. It is structured as two, two-day sessions. Either may be attended as a stand-alone course. The first session is being held at the CBAI Headquarters in Springfield on January 24 & 25, 2017, and the second session is June 27, & 28, 2017.

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