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Community Bankers Association of Illinois
Community Bankers Association of Illinois    Community Bankers Association of Illinois CBAI E-Newsletter Sponsor - SHAZAM
 
     A Bi-Weekly News Bulletin for CBAI Members                            July 9, 2014

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Community Bankers Association of Illinois
Community Bankers Association of Illinois Community Bankers Association of Illinois
  • Win the Trip of Your Dreams at CBAI’s 40th Annual Convention!
  • Governor Quinn Signs CBAI Initiative SB 1812
  • CBAI Endorses David Pirsein for the FHLB of Chicago Board Election
  • Fine: Wall Street Line on TBTF Too Good To Be True
  • ICBA Backs Proposed Asset-Concentration Limit for Mega Banks
  • Obama: Wall Street Reform is Unfinished Business
  • Why the TBTF Battle May Heat Up
  • Baker Market Update
  • Yellen: Fed Won’t Raise Rates Just to Burst Bubbles
  • U of I Study Reveals That Community Banks Are Primary Ag Lenders
  • Congressman: “Keep Farm Credit System Focused on the Farm”
  • CBAI Urges CFPB to Exempt Community Banks from Redundant Privacy Notices
  • BAKER Conference Call: Investment Strategies for Q3-14
  • Agencies Issue Guidance for HELOCs Nearing End-of-Draw Periods
  • Ten Critical Risk Management Services for Consumer Loan Portfolios
  • A Look at Bank Funding Sources Going Forward
  • Harvard: Millenials Key to Housing Recovery
  • News from the Bench: IRA Bankruptcy Exemption Does Not Survive Inheritance
  • Good News for Community Banks in Supreme Court’s ESOP Ruling
  • OCC Reports Spring 2014 Semiannual Risk Perspective
  • CBSC and Harland Clarke Renew Alliance
  • FREE Webcast: A Better Way to Acquire New Checking Households
  • Mobile Payments Changing the Banking Landscape
  • Compliance for Loan Processors Set for July 15, 16, and August 18
  • Training the Credit Analyst to be Held July 30 & 31
  • Auditing Ability to Repay, QM, and ARM Scheduled for August 4
  • Deposit Operations: Implementation and Review Set for August 5 & 6


  • Win the Trip of Your Dreams at CBAI’s 40th Annual Convention!

    CBAI is excited to announce that the Grand Prize give-away at the 40th Annual Convention & Expo is a $3,000 travel voucher to the destination of your choice! Only full-convention banker registrants are eligible and you must be present at the Saturday Night Dinner Dance to win!

    A block of rooms and suites has been reserved for CBAI convention participants at the Chicago Marriott Downtown. To ensure accommodation availability, reservations should be made at the hotel by September 3. Room reservations received after this date will be confirmed on a “space-and-rate available basis.” When you call for hotel reservations, be sure to identify yourself as a CBAI convention attendee to receive the special room rate of $209 plus tax for singles or doubles. Make your room reservation today for September 18-20 by calling 888-253-1628. You won’t want to miss CBAI’s 40th annual showcase event!
    Register Now!

    Please click here to add a reminder to your Outlook calendar for CBAI's showcase event!

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    Governor Quinn Signs CBAI Initiative SB 1812

    Governor Quinn signed Senate Bill 1812 (P.A. 98-0703) on Monday, July 8, 2014, making it easier for public funds to be deposited into community banks. SB 1812 (Link/Brauer) was a CBAI initiative that expands the use of the Insured Cash Sweep (ICS) for Demand Deposit Accounts. Currently, Illinois law enables local governments to invest funds through a network if the funds are placed in certificates of deposit, savings or time deposit accounts. The new law enables public agencies to place public funds into demand deposit accounts at their local banks and then the funds can be moved into accounts at multiple participating banks throughout the country in amounts that do not exceed the standard FDIC insurance maximum. It also allows for unlimited withdrawals of these demand deposit accounts. SB 1812 will benefit community banks and their units of local governments seeking to retain funds in their local community banks.

    CBAI partnered with Promontory Interfinancial Network (Promontory) to draft and pass the legislation. ICS Demand is a Promontory product currently utilized in 40 states and the District of Columbia. Promontory Regional Director Sue Kling stated that “the new law addresses a local government need for Federal Deposit Insurance coverage that would otherwise be unmet and will be a great benefit to units of local governments and Illinois Community Banks.”

    CBAI appreciates the hard work and effort by both of the sponsors, Senator Terry Link (D- Gurnee) and Representative Rich Brauer (R-Springfield). CBAI would also like to thank Governor Quinn for understanding the significance of this bill and community banking in Illinois.
    Read Governor's Release.

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    CBAI Endorses David Pirsein for the FHLB of Chicago Board Election

    CBAI is pleased to endorse David Pirsein, President & CEO of First National Bank in Pinckneyville for election to the Federal Home Loan Bank of Chicago Board of Directors.
    See Announcement.

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    Fine: Wall Street Line on TBTF Too Good To Be True

    While the nation’s largest banks say the world is now safe from too-big-to-fail, the numbers say otherwise, ICBA President and CEO Cam Fine wrote in an op-ed.

    In an op-ed on The Hill website, Fine noted that the assets of the six largest financial institutions have increased every year since the end of 2009. These institutions are responsible for more than half of the total growth in banking assets in that time, Fine wrote.

    It was particularly courageous of the megabanks to mark the end of too-big-to-fail on the same day that BNP Paribas was penalized for doing business with nations that harbor terrorists, Fine wrote. With no major criminal cases against top Wall Street executives in the wake of the financial crisis, the BNP settlement will not eliminate public fears that some megabanks are too big to jail, he wrote.

    Just as we cannot deter criminal behavior without holding criminals personally responsible, Fine wrote in the op-ed, neither can we eliminate the too-big-to-fail problem without requiring the largest and riskiest banks to hold more capital or downsizing and restructuring them.
    Read the Op-Ed.

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    ICBA Backs Proposed Asset-Concentration Limit for Mega Banks

    ICBA told the Federal Reserve it strongly supports the agency’s proposed asset-concentration limit for the nation’s largest financial institutions.

    The proposal would prevent a financial company from merging or consolidating with, acquiring all or substantially all of the assets of, or otherwise acquiring control of another company if the resulting company’s consolidated liabilities would exceed 10 percent of the aggregate consolidated liabilities of all financial companies.

    In a comment letter, ICBA wrote that the megabanks need to have concentration limits to limit their systemic risk and their competitive advantage resulting from being too big to fail. The association cited a Financial Stability Oversight Council study that shows the concentration limit would have a positive impact on U.S. financial stability and likely would not significant affect the cost and availability of credit and other financial services.

    ICBA also expressed support for other aspects of the proposal, including the use of generally accepted accounting principles to compute the assets and liabilities of financial companies that are not subject to consolidated risk-based capital rules.
    Read ICBA Comment Letter.

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    Obama: Wall Street Reform is Unfinished Business

    President Barack Obama said that Wall Street regulation will require “further reforms.” In an interview with Marketplace, Obama said that while policymakers have helped prevent taxpayers from having to bail out faltering megabanks, more needs to be done to restructure the largest banks to avoid risk.

    Obama said policymakers are continuing to work to “rebalance the economy sensibly” so the banking system helps grow the real economy without taking excessive risks due to the promise of high profits and bonuses.
    Read Marketplace Article.

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    Why the TBTF Battle May Heat Up

    The legislative campaign to resolve the too-big-to-fail status of the mega banks may be poised for a comeback as key advocates for reform will likely assume major leadership positions in Congress next year. CBAI and ICBA have been unrelenting in pursuing a TBTF resolution agenda for the sake of community banks, the U.S. economy, and taxpayers.
    See AB Article.

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    Baker Market Update

    The increase in non-farm payrolls helped to bring the unemployment rate down to 6.1 percent, nearly a six-year low. The labor force participation rate remained unchanged for the third month in a row and, with market participants only expecting a modest rise in the jobs count, initial market reaction has been fairly muted.
    See Baker Market Update.

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    Yellen: Fed Won’t Raise Rates Just to Burst Bubbles

    Last week Federal Reserve Board Chairman Janet Yellen said she won’t raise rates just to burst financial bubbles such as the stock market. She acknowledged that there are pockets of increased risk-taking across the financial system , but said it’s up to financial regulation, not interest rates, to nurture a resilient financial system.

    Part of the reason why stock prices have reached record highs and the demand for corporate bonds has climbed is that record low interest rates have led some investors to take on higher risk to achieve higher returns.
    See CNNMoney Article.

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    U of I Study Reveals That Community Banks Are Primary Ag Lenders

    The University of Illinois Urbana-Champaign recently released a report which found that community banks with $10 billion or less in total assets accounted for nearly 80 percent of all agricultural lending in the banking sector in 2013. While banks have increased ag loans 30 percent since 2013, they face the lowest loan-to-deposit ratios in 30 years, threatening future profits. The report noted that, while community banks are doing the lion’s share of the banking sector’s ag lending, they face stiff headwinds, including mounting regulatory compliance costs and weak loan and economic growth.

    The report also reveals a decline of more than 800 ag banks under $100 million in assets since 2007. These challenges to banks are occurring at the same time that credit unions and FCS lenders are seeking expanded powers to cherry pick even more good loans from bank portfolios. CBAI and ICBA continue to urge Congress to oppose credit union and FCS expansion proposals.
    See U of I Study. Read ICBA Release.

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    Congressman: “Keep Farm Credit System Focused on the Farm”

    U.S. Representative Marlin Stutzman (R-Indiana) last week voiced his opinion that the Farm Credit System (FCS) should return to its original mission established in 1916 to help farmers and ranchers access capital. He stated that a too-big-to-fail approach has allowed the FCS, a $247 billion government sponsored enterprise, to overstep its purpose and crowd out private lenders for nonagricultural business.
    Read AB Article.

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    CBAI Urges CFPB to Exempt Community Banks from Redundant Privacy Notices

    In a recent
    Comment Letter, CBAI urged the Consumer Financial Protection Bureau (CFPB) to exempt community banks from redundant annual privacy notice requirements because they represent an unnecessary regulatory burden on community banks and information overload for their customers.

    CBAI recommended that community banks be exempt from these requirements so long as they delivered their privacy policies when the accounts were opened, the privacy policies have not changed, and the customers do not have the opportunity to opt-out because community banks only share nonpublic personal information with nonaffiliated third parties performing services or functions on their behalf.

    If these exemption requirements are met then community banks should only be required to provide their privacy policies on their websites, and in response to in-person, e-mail, telephone, and regular or express mail requests.

    BAKER Conference Call: Investment Strategies for Q3-14

    Please join
    The Baker Group’s FREE quarterly conference call scheduled for 11 a.m. on Thursday, July 10. Topics for discussion include: Fed Policy and Mid-Year Market Assessment, Exam Prep-Interest Rate Risk Update, Relative Value Among Bond Sectors, MBS- Managing Prepays and Tight Spreads, Muni Market Landscape-Supply, Value, and Credit Analysis, and Second Half of the Year Strategies.

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    Agencies Issue Guidance for HELOCs Nearing End-of-Draw Periods

    Federal and state financial regulators issued guidance to financial institutions regarding home equity lines of credit nearing their "end-of-draw" periods, which occur when the principal amount of the HELOC must begin to be repaid.

    The guidance encourages financial institutions to effectively communicate with borrowers about the pending reset and provides broad principles for managing risk as HELOCs reach their end-of-draw periods.

    Regulators said they recognize that financial institutions and borrowers may face challenges as HELOCs near their end-of-draw periods. The guidance describes how financial institutions can effectively manage their potential exposures under these circumstances.
    Read More from Agencies.

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    Ten Critical Risk Management Services for Consumer Loan Portfolios

    Consultant Dennis Child offers guidance on managing risk in consumer loans. He urges banks to generate quarterly reports from a reliable credit migration model in order to monitor the shifting sands of borrowers’ credit scores.
    Read More.

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    A Look at Bank Funding Sources Going Forward

    Since 2008, banks have experienced a significant increase in Money Market Deposit Accounts, savings accounts, and transactional deposits. The current market consensus according to Bloomberg is that short term rates will not begin to increase until the second half of 2015. In addition, new regulations affect depositor relationships. Will traditional sources of funding be viable options going forward?
    Read PMA Funding Article.

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    Harvard: Millenials Key to Housing Recovery

    While many millennials continue to live with their parents, the number of households in their 30s are expected to increase by 2.7 million over the coming decade, according to Harvard’s
    Joint Center for Housing Studies.

    The study found that approximately 2.1 million more adults in their 20s lived with their parents last year, due largely to tight credit, elevated unemployment and mounting student loan debt. Nevertheless, the sheer volume of young adults coming of age should boost demand for new housing, researchers found.

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    News from the Bench: IRA Bankruptcy Exemption Does Not Survive Inheritance

    An IRA that is exempt from turnover to a bankruptcy estate when owned by its original accountholder does not maintain the exemption when transferred by inheritance to the beneficiary of the original accountholder. So said the United States Supreme Court in an opinion released on June 12th in the case of Clark vs. Rameker, Trustee.
    Read More.

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    Good News for Community Banks in Supreme Court’s ESOP Ruling

    Absent ESOPs, there may be fewer independently-owned community banks. ESOPs provide for the transfer of bank ownership to its employees, the very people who live in the community and serve the financial needs of their customers. Without ESOPs, bank owners might be tempted to sell to a larger bank group. Would the universal absorption of community banks by publicly held institutions be beneficial to the American economy? Not if the hard earned lessons of the Great Recession are respected. In this day and age of strident partisanship, few issues claim favor from both sides of the political aisle. It’s important to remember that Congress encourages ESOPs. Conservatives favor ESOPs. Liberals favor ESOPs. Last week, the Supreme Court proved its support of ESOPs as well.
    Read More.

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    OCC Reports Spring 2014 Semiannual Risk Perspective

    The OCC recently reported in its spring 2014 Semiannual Risk Perspective: Operational risks continue to be a threat to the nation’s banks mostly due to a rapidly-changing technology environment and the velocity of change that is occurring. In addition to operational risks, the OCC identifies developing cyber-threats as a top priority for banks.
    See Article.

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    CBSC and Harland Clarke Renew Alliance

    Community BancService Corporation, Inc (CBSC), the business services affiliate of Community Bankers Association of Illinois (CBAI), the state’s largest banking trade organization exclusively representing community banks, today announced that it has extended its partnership with Harland Clarke, a leading provider of best-in-class integrated payments solutions and marketing services to community banks.
    See Release.

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    FREE Webcast: A Better Way to Acquire New Checking Households

    Learn how Harland Clarke’s turnkey checking acquisition solution,
    Acquisition Accelerator®, identifies top prospects in your trade area and sends them highly personalized offers from your financial institution at market saturation prices. Acquisition Accelerator uses 1,400 demographic, purchasing power and lifestyle/behavior variables to determine consumer potential and reach the right prospect with the right offer at the right time. A CBSC preferred provider, Harland Clarke is a leading provider of best-in-class integrated payment solutions, marketing services, and retail products.

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    Mobile Payments Changing the Banking Landscape

    Mobile payments can bring more efficiency into commercial banking, and mobile operators, payment providers, and other online players are changing how traditional financial transactions are conducted.
    Read More.

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    Compliance for Loan Processors Set for July 15, 16, and August 18

    Over the last few years, lending compliance has become more and more confusing, as the rules have become more and more complex. Loan processors often have dealt with changes by learning the “buttons to push”, without any understanding of the actual regulatory requirements. This
    course is designed to enhance understanding of the regulatory requirements and the “decision trees” that are important for processors to fully understand. This course focuses on the documents – the most important portion of the processor’s job. Errors in documents can cost banks thousands of dollars, and, as the Dodd-Frank rules begin to appear, the risks will certainly increase. The course discusses the existing forms and their requirements. This course does not cover items that are more the province of the lender or underwriter. It reviews potential pitfalls, the risks of errors, and the decision making process to avoid these negative outcomes. While others in the bank may benefit and are welcome, this course is designed specifically for loan processors and their management. Leading this seminar is Bill Elliott, CRCM, senior consultant and manager of compliance at Young & Associates, Inc., Kent, OH.

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    Training the Credit Analyst to be Held for July 30 & 31

    As community banks grow and strive to become high-performing financial institutions, the need to cultivate and develop a portfolio of commercial borrowers increases also. Credit analysis is an essential part of this process as banks strive to develop solid commercial relationships. This is a
    two-day seminar designed to address the needs of beginning credit analysts and to reinforce the credit skills of current credit analysts. It teaches how to write effective and comprehensive credit analyses which highlight the important trends shown on the financial spread sheet. Other analytical tools that are covered include cash-flow analysis, break-even analysis, ratio analysis, financial projections, and sensitivity analysis. Leading this seminar is Jeffery Johnson, president and founder of Bankers Insight Group, Atlanta, Georgia, who has more than 37 years’ experience in the banking field.

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    Auditing Ability to Repay, QM, and ARM Scheduled for August 4

    We are now a few months into the Dodd-Frank changes, and it is time to begin to focus on auditing these new portions of the regulation to assure that the bank is in compliance. The regulations have had a varying impact on banks, from very little to quite extreme. The focus of this
    seminar is to first determine how to measure the impact on your institution, and then to design an audit plan that measures your compliance based on the impact. The seminar covers three specific areas of audit – the Ability to Repay (ATR), the other components of a Qualified Mortgage (QM), and the adjustable rate mortgage (ARM) changes, and their impact on both for the ATR regulation and QM status. Case studies are included. Auditing these areas means recalculating and essentially re-underwriting the loans, which makes the audit process even more difficult, as much of the file will contain information that will be required to complete the audit. Worksheets and other tools to assist in the audit process are provided as part of the seminar material, including some electronic versions, which allow the auditor to customize the tools to their individual needs. Bill Elliott, CRCM, is senior consultant and manager of compliance at Young & Associates, Inc.

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    Deposit Operations: Implementation and Review Set for August 5 & 6

    The focus of the fourth quarter of the
    Community Bankers for Compliance program presentation is operations subjects, specifically the Electronic Funds Transfer Act (Regulation E, Subpart A only), Regulation DD (Truth in Savings), and Regulation D (limited to definitions of transaction and savings accounts). The Regulation E presentation is limited to Subpart A, which is the portion of the regulation that discusses electronic issues such as distribution of debit cards, error resolution, disclosures, and similar subjects. It does not cover consumer-initiated foreign wires (Subpart B). It does cover Regulation DD in its entirety. Also covered are the portions of Regulation D that are related to the determination regarding whether the account is a transaction or a savings account. Time is also spent looking at the requirements of each regulation. All operations personnel with responsibilities for these regulations benefit from attending this seminar. While designed primarily for the bank’s compliance officer, this seminar should be attended by loan-operations personnel, head tellers, customer-service representatives, senior management, and others who may be involved with the pertinent regulations. Leading this seminar is Bill Elliott, CRCM, senior consultant and manager of compliance at Young & Associates, Inc., in Kent, OH.

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