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Community Bankers Association of Illinois
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     A Bi-Weekly News Bulletin for CBAI Members                                    May 25, 2016

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Community Bankers Association of Illinois
Community Bankers Association of Illinois Community Bankers Association of Illinois
  • ICBA’s Fine Cites Differing Views of Main Street Banks and Wall Street Mega Firms
  • Hoenig: Risk-Based Capital Complicit in Moral Hazard
  • Senator Urges Regulatory Relief to Spur De Novo Formations
  • USDA Lowers Cost of Refinancing Rural Housing Loans
  • CBAI Education Foundation Is 20 Years Young – Give Us a High Five!
  • ICBA Tells Congress: “Farm Credit System is Abandoning Mission”
  • 10 Strategies to Avoid Selling Your Bank
  • Investment News From THE BAKER GROUP
  • Rural Mainstreet Index: Low Ag Prices a Top Challenge for Many Bank CEOs
  • Register Today for CBAI's Annual Group Meetings!
  • ICBA and Coalition Push for Passage of Data Security Act
  • Congressman Hultgren Introduces Bill to Study Privacy Concerns of New HMDA Data
  • Military Lending Act: Final Regulatory Amendments Create New Compliance Challenges
  • CFPB Commission Structure Included in Appropriations Bill
  • Community Banking Research and Policy Conference Announced
  • Social Engineering: Q&A with Travelers Bond and Specialty Insurance
  • CBAI LEGAL: Cautionary Note About Loan Participations Between Affiliates
  • Stock Up on Bank Statements and Supplies with Midwest Office!
  • Register Today for Early-Bird Pricing at CBAI’s Convention & Expo
  • Principles for Understanding Your Information Systems Slated for June 2 & 29
  • Universal Banker: Growing Business from Millennials to Baby Boomers Set for June 7
  • National Flood Insurance Program Review and Update Scheduled for June 14
  • Compliance for Lenders To Be Held June 15 & 16


  • ICBA’s Fine Cites Differing Views of Main Street Banks and Wall Street Mega Firms

    ICBA President Cam Fine last week noted that his recent disagreement with JPMorgan Chase CEO Jamie Dimon underscores a deeper rift between how Wall Street firms and Main Street community banks view the post-crisis financial world.

    Fine wrote, “While representatives of the largest financial institutions portray their firms as indispensable to the nation's banking system, many community banks view the proliferation of these massive firms as a distortion of our market-based economy. The consequences of the 2008 bailout persist years later. Allowing the megabanks to keep their profits during the good times while enjoying a federal backstop in times of trouble — a system of privatized gains and socialized losses — incentivizes risky behavior and provides outsized competitive advantages to these institutions.”

    He also stated, “The result of this moral hazard is a cycle of high-risk behavior followed by taxpayer-funded government intervention. That in turn contributes to reckless and anticompetitive behavior that has led to international interest rate rigging, mortgage securities fraud, electricity market manipulation and municipal bond trading fraud — as well as a wide-scale increase in regulation for banks of all sizes.”

    Fine offered ways by which the too-big-to-fail banks can be resolved and underscored the importance of a resolution sooner than later. Read Fine's Article.

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    Hoenig: Risk-Based Capital Complicit in Moral Hazard

    The too-big-to-fail problem will remain as long as banks are capitalized based on a marketplace assessment of risk that is independent of taxpayer support and government involvement, according to FDIC Vice Chairman Tom Hoenig this week in Paris, France. He said risk-weighted capital perpetuates a moral hazard in which investors rely on the regulators’ approval of bank capital levels and structure.

    Hoenig defended the leverage ratio for large financial firms as a pure measure of equity capital to total assets. He noted that, as a minimum base of capital dependent solely on asset size, it telegraphs to banks and to the marketplace that they are responsible for assessing the level of risk and allocating capital resources appropriately. Read Hoenig’s Speech.

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    Senator Urges Regulatory Relief to Spur De Novo Formations

    Senate Banking Committee member Dean Heller (R-Nevada) recently asked the FDIC for information on how the agency can remove regulatory barriers to new bank formations. In a letter to FDIC Chairman Martin Gruenberg, Heller said burdensome regulations and compliance costs inhibit the establishment of de novos despite the demand for more community banks. CBAI appreciates the Senator’s efforts and fully concurs with his positions.

    The letter comes after the FDIC last month reduced from seven to three years the period of heightened de novo supervisory monitoring, which followed years of advocacy by CBAI and ICBA. Gruenberg said the shorter review period is more appropriate in the current banking environment, in which de novo applications have declined to a “trickle.” Read Heller Letter. See FDIC Release.

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    USDA Lowers Cost of Refinancing Rural Housing Loans

    The USDA Rural Housing Service recently announced changes designed to help homeowners refinance existing USDA rural housing mortgages. Under the changes, homeowners who are current on their USDA rural housing mortgages for the past 12 months will no longer be required to secure an appraisal, provide a credit report, or undergo a debt-to-income calculation when they refinance into a new USDA rural housing mortgage for a 30-year term.

    The changes take effect June 2 and apply to mortgages issued through USDA and those in which USDA has issued a loan note guarantee. The USDA said it has tested these changes through a pilot program, in which 9,500 homeowners who refinanced their mortgages saved an average of $150 per month. Read USDA Release.

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    CBAI Education Foundation Is 20 Years Young – Give Us a High Five!

    This is the 20th anniversary year of the CBAI Foundation for Community Banking! Nearly $500,000 has been awarded in scholarships! EVERY CBAI MEMBER BANK CAN BENEFIT!

    Help us celebrate! GIVE THE FOUNDATION A HIGH FIVE! The Foundation’s “High Five” program is simple. Just $5 from each bank employee and $50 from each director is the aim of the program. Please participate and help the Foundation celebrate! See Program Form.

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    ICBA Tells Congress: “Farm Credit System is Abandoning Mission”

    Last week Iowa community banker Gus Barker told the Senate Agriculture Committee that the FCS has strayed from its mission of serving farmers and ranchers by making nonfarm loans and weakening community banks.

    Barker also emphasized that, while community banks are providing farm customers with ample credit at near historically-low interest rates, the FCS is using its lavish tax subsidies to offer below-market rates to large farming operations and ignoring small and beginning farmers. CBAI and ICBA are committed to work with the Senate and House Ag Committees to halt FCS mission creep by eliminating the system’s unfair tax advantages and inappropriate nonfarm lending. Read ICBA Release.

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    10 Strategies to Avoid Selling Your Bank

    Reprinted from the May issue of CBAI's Banknotes magazine, "The 10 Strategies to Avoid Selling Your Bank" provides essential information for community banks today. See Article.

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    Investment News From THE BAKER GROUP

    Baker Market Update

    The fact that the market chose to ignore the not-sosubtle hints of what was to come, may be a reflection of diminished Fed credibility and the result of perhaps crying wolf too often. The thing is, the wolf may eventually show up. See Baker Market Update.

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    Rural Mainstreet Index: Low Ag Prices a Top Challenge for Many Bank CEOs

    Creighton University’s index of the rural economy rose in May but remained below growth-neutral for the ninth consecutive month. The Rural Mainstreet Index rose to 40.9 from 38.2 in April, with nine in 10 bank CEOs reporting low agriculture commodity prices as the greatest challenge to the rural economy this year. Nearly one in three said slow or negative rural growth is the biggest economic threat to their bank over the next five years. See RMI Report.

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    Register Today for CBAI's Annual Group Meetings!

    CBAI leaders and executive staff are visiting 11 locations on the 2016 Group Meeting tour this spring. Bankers from nearly 200 banks participate in these enjoyable and informative events each year. Consisting of an optional golf outing and a dinner meeting, Group Meetings also provide an excellent opportunity to get the latest information on key banking issues and catch up with friends and peers. The opening portion of each Group Meeting focuses on critical legislative and association issues. CBAI President Bob Wingert provides updates on Association projects and community banking in general; and Senior Vice President of Governmental Relations Kraig Lounsberry offers an up-to-the-minute report of banking-related legislative activities. This year’s after dinner topic is “The Financial Technology Revolution,” presented by Michael Peterson, Fitech Payments, Ft. Worth, TX. The winds of change in the payments world are gaining strength as financial technology is changing how, where and when payments are made – as well as who it is that facilitates them. If your group meeting has not yet been held, then please sign up today. View Schedule and Register Here.

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    ICBA and Coalition Push for Passage of Data Security Act

    ICBA this week is taking part in a joint advertising campaign calling on Congress to advance important data-security legislation in the wake of massive retailer data breaches. The digital and print campaign urges passage of the Data Security Act (H.R. 2205/S. 961), which would require all entities that handle sensitive financial data to implement data-security processes like those already mandated for banks.

    In the joint advertising campaign, ICBA and a coalition of other financial trade groups are pressing Congress to “stop the data breaches” and ensure that everyone protects consumer data. This week’s campaign is timed to coincide with the National Retail Federation’s advocacy summit in Washington. See Coalition Ad. View Infographic. Learn More About Campaign.

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    Congressman Hultgren Introduces Bill to Study Privacy Concerns of New HMDA Data

    CBAI thanks Illinois Congressman Randy Hultgren (R-14) for introducing the Homeowner Information Privacy Protection Act (H.R. 4993). This bi-partisan legislation protects mortgage borrowers from exposure of their sensitive personal and financial information as a result of the new HMDA mortgage application data collection and reporting requirements. The publication of these new data fields together with real estate sales records and other publicly available information could be used to identify individual borrowers and connect them with the reported information including their credit scores and loan balances.

    Community bankers take very seriously their role as guardians of their customers’ sensitive personal and financial information. CBAI believes it is bad public policy for a government agency to intentionally expose that information to computer hackers and other data thieves and strongly supports H.R. 4993. Read More.

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    Military Lending Act: Final Regulatory Amendments Create New Compliance Challenges

    Effective October 3, 2016, final amendments to the Military Lending Act (MLA) regulation will significantly change how lenders do business with active duty service members and their dependents. In response to financial hardships and service member retention, the Department of Defense (DOD) has expanded the types of transactions subject to the MLA, provided new safe harbor provisions for determining active duty status, increased the list of fees included in the MAPR and created other new compliance requirements. Read More from Wolters Kluwer.

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    CFPB Commission Structure Included in Appropriations Bill

    The House Appropriations Committee’s fiscal 2017 financial services bill would replace single-director governance of the Consumer Financial Protection Bureau with a five-member commission. Commission governance of the CFPB has long been advocated by CBAI and ICBA as a major component of our regulatory relief platform. The appropriations bill also would subject the agency to the congressional appropriations process. Read Appropriations Committee Press Release.

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    Community Banking Research and Policy Conference Announced

    The fourth annual Community Banking in the 21st Century Conference will be held on September 28-9, 2016, at the Federal Reserve Bank of St. Louis. Organizing sponsors are the Conference of State Bank Supervisors and the Federal Reserve System. The goal of the conference is to provide a forum for discussion of key issues affecting community banks and to encourage research that will improve public policy.

    For last year’s conference, state bank regulators conducted a nationwide survey of community banks with about 1,000 banks responding. The results were provided during the conference. The survey for 2016 is now live, and all community banks are encouraged to complete the survey. Read Illinois Division of Banking Memo. See Conference Agenda. Access Conference Survey.

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    Social Engineering: Q&A with Travelers Bond and Specialty Insurance

    Social Engineering is a non-technical method of intrusion that relies heavily on human interaction. In many cases it involves tricking people into breaking normal security procedures. It can be prevented. The best way is to have checks and balances in place for employees and to follow some simple steps. Read More.

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    CBAI LEGAL: Cautionary Note About Loan Participations Between Affiliates

    Interpretive Letters (“ILs”) issued by the Illinois Division of Banking or its predecessors (e.g., Commissioner of Banks & Trust Companies, Office of Banks & Real Estate, etc.) that have not been rescinded are still instructive for state-chartered banks in Illinois. One IL that I recently unearthed from nearly 30 years ago provides a note of caution when a bank considers selling loans, or even participations in loans, to an affiliate. See Most Recent CBAI LEGAL.

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    Register Today for Early-Bird Pricing at CBAI’s Convention & Expo

    Register by June 30, 2016, for early-bird pricing at CBAI’s showcase event, entitled “Community Banking Playmakers.” Scheduled for September 15-17, 2016, CBAI’s Annual Convention & Expo makes its first ever stop in Kansas City, MO, at the Marriott Downtown. Offering a thriving creative arts scene, eclectic mix of entertainment, and die-hard sports, it's safe to say there's something for everyone in Kansas City. But you won’t want to miss the 20 timely education sessions with expert information on the hottest topics in community banking today, not to mention an opening keynote with acclaimed public speaker, consultant, and former NFL athlete, Eric Boles. Education only scratches the surface of the convention’s attributes. Nearly 90 exhibit booths featuring the latest products and services are on display in the Exhibit Hall. Countless networking opportunities and social events include the golf outing at Swope Memorial Golf Course and the Saturday dinner dance featuring the Fabulous Motown Revue. Don’t miss out! Take advantage of the significant pricing discount and register by June 30! Early-bird Registration Here.

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    Principles for Understanding Your Information Systems Slated for June 2 & 29

    As financial institutions become more reliant on technology, it is important that they have a better understanding of their information systems to mitigate and monitor risks. Using basic concepts without using technical jargon, this presentation describes and demonstrates fundamental information-security strategies for protecting your information systems. The primary focus is the Microsoft Windows network. Many of the security principles presented are described in the FFIEC IT Examination Handbook and various interagency guidelines. Mark Scholl, partner for Wipfli LLP, leads this program. He specializes in all aspects of information-security services including information-system security auditing and Internet intrusion-testing services.

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    Universal Banker: Growing Business from Millennials to Baby Boomers Set for June 7

    With reduced in-branch transactions and customer visits and increase in technology, less traditional teller functions are needed. No longer can a frontline team member say: “It's not my job!” Today's frontline team is shifting from traditional positions (tellers, new-account representatives, financial service representatives, etc.) to a multi-tasking, “universal” banker. Today's customer base is shifting from the traditional, visit the bank twice a week, to quick response, electronic banking relationships with the bank. This workshop focuses on the essentials for today's universal banker in providing exceptional service, making referrals, and building profitable relationships from millennials to baby boomers. All bank employees in customer-contact positions throughout the bank including, frontline staff, branch managers and marketing directors would benefit from attending. Leading this seminar is Dianne Barton, founder and president of Performance Solutions, Inc., Kennesaw, GA, a training and consulting company that specializes in providing solutions to the key challenges facing community banks today in attracting, selling, and servicing their customers.

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    National Flood Insurance Program Review and Update Scheduled for June 14

    Every time anyone in the bank makes a flood error, there is potential for a $2,000 fine. And multiple flood errors in the loan can result in multiple fines. As a result, more than ever, we need to ensure that the loan origination and servicing process is free of any deficiencies, including completion of documents, getting insurance when required, and other mistakes. This seminar covers all aspects of the flood process. The focus is on both the loan-origination process and the loan-servicing process, and the steps that bankers must take to ensure appropriate compliance. Included in the presentation are examples from the real world, explaining exactly how “not to do it.” Flood regulations continue to face changes, and this seminar includes all changes instituted up to the date of the presentation. As this presentation includes information for the entire flood-insurance process team, including loan officers, processors, loan-servicing personnel, and loan management. Others in your institution will find value in this presentation, including auditors, and others with flood responsibilities. Leading this seminar is Bill Elliott, CRCM, senior consultant and manager of compliance at Young & Associates, Inc., Kent, OH.

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    Compliance for Lenders To Be Held June 15 & 16

    The compliance officer is responsible for administering your bank's compliance program including policies and procedures. Each employee of the bank has a duty to have a working knowledge of the compliance issues that pertain to his or her assigned position description. And with a relatively new set of Dodd-Frank rules and the even newer TRID rules, the life of a lender is getting more and more complex. The challenge is to ensure that lending personnel have the right information at the right time. Offered in Springfield and Mt. Vernon, this one-day program provides an overview of the current “hot-button” changes that are part of the lender's responsibilities; an overview of the lender's responsibility for assuring that all of the TRID rules are met; an overview of the Loan Estimate and the Closing Disclosure; and up-to-date information on other compliance issues and other developments in bank regulations that relate to lending. Leading this seminar is Bill Elliott, CRCM, senior consultant and manager of compliance at Young & Associates, Inc., Kent, OH.

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