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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 23, 2014

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Community Bankers Association of Illinois
Community Bankers Association of Illinois Community Bankers Association of Illinois
  • Register by July 31 for CBAI’s 40th Annual Convention and Be Eligible for Dyn-o-mite Prizes!
  • Time is Now to Reduce Government Overreach and Regulation
  • ICBA and 45 State Groups Ask CFPB to Expand Small Creditor Exception
  • Community Banks are Collateral Damage in Regulations Aimed at Big Banks
  • CBAI Endorses David Pirsein for the Chicago FHLB Board
  • U.S. Senators: “We Need to Rein in ‘Too Big to Fail’ Banks”
  • Survey Finds Americans Want Tougher Regulations on Wall Street
  • Fine: Basel Committee Appears to Endorse Too Big to Fail
  • The Most Important FHLB Reform Has Already Happened
  • Yellen: Fed Will Continue to Prop Up Economy
  • Baker Market Update
  • Rural Economic Index Weakens in July
  • FDIC Issues Letter on Ag Lending in Difficult Economic Cycles
  • Hill Fight Looming with Farm Credit System
  • FDIC Issues S-Corp Guidance on Basel III Capital Buffer
  • BankOnIT Welcomes New Clients in June
  • Deploying Three Layers of Security to Combat Cyber Attacks
  • Order Additional Copies of the CBAI Illinois Financial Institutions Directory!
  • CBIS Comments on the OCC’s Semiannual Risk Perspective
  • Harland to Hold Webinar on New Checking Product
  • Four Mobile Threats Banks Must Neutralize
  • News from the Bench: IRA Bankruptcy Exemption Does Not Survive Inheritance
  • "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
  • "ACH: Stay Informed and In Compliance" Scheduled for August 7, 11, & 14


  • Register by July 31 for CBAI’s 40th Annual Convention and Be Eligible for Dyn-o-mite Prizes!

    You won’t want to miss CBAI’s 40th Annual Convention & Expo! Entitled “Looking to the Past to Plan for the Future,” this special anniversary celebration is scheduled for September 18-20, 2014, at the Marriott Downtown in Chicago. The CBAI Special Events Committee, comprised of fellow community bankers, has designed a dynamic convention and exposition providing new ideas to further your relationship with your customers, shareholders, and community. It offers the perfect mix of educational programs, top-rated speakers, a quality exhibit center, and networking opportunities at numerous social events. Convention highlights include a golf outing at Flossmoor Country Club, general sessions with leadership expert Tom Flick and member favorite David Kemp, 20 concurrent education sessions featuring pertinent, hot topics, an already sold-out 100-booth exhibit center, exciting social events, and unique partners’ programs.

    Don’t wait! Register by July 31, 2014, for CBAI’s 40th Annual Convention & Expo and be eligible to win groovy prizes including an i-pad mini, a $200 Coach gift card, a Visa gift card worth $150, or a taste of Chicago feast!
    See July Prizes.

    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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    ICBA and 45 State Groups Ask CFPB to Expand Small Creditor Exception

    ICBA and 45 state trade associations (including CBAI) representing thousands of community banks strongly urged the Consumer Financial Protection Bureau to revise the current ability-to-repay/qualified mortgage (QM) rules and escrow requirements for higher-priced mortgage loans to allow community bank mortgage loans held in portfolio for the life of the loan to receive automatic QM safe harbor status and an exemption from the escrow requirements if the loans are higher priced.

    In a letter sent to the CFPB last week, the associations highlighted how community banks operate under a completely different business model and incentives than those of the largest financial institutions and nonbank mortgage companies. The letter pointed out how community banks operate based on firsthand knowledge of their customers and communities, thriving on the strength of their reputation-factors that give every community bank strong incentives to make fair, safe and affordable loans for their customers.
    Read Joint Letter to CFPB.

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    Community Banks are Collateral Damage in Regulations Aimed at Big Banks

    In a Small Business Advocate interview last week, ICBA President Cam Fine revealed how community banks have become collateral damage as financial regulators seek to correct big-bank abuses. During the broadcast radio interview, Fine highlighted what ICBA is doing to combat the regulatory burden that community banks face. He also stressed the importance of the symbiotic relationship between community banks and the small businesses they serve.
    Listen to Interview.

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    CBAI Endorses David Pirsein for the Chicago FHLB Board

    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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    "CBAI Connected to Community Banking" Is Sponsored
    by The SHAZAM Network


    For nearly 40 years, SHAZAM has been helping financial institutions compete effectively in their marketplace. Trust your financial services needs to a network that will always be your partner, not your competitor. Learn More.

    U.S. Senators: “We Need to Rein in ‘Too Big to Fail’ Banks”

    Several years after the emergence of the Great Recession and financial crisis, four U.S. Senators including John McCain (R-Arizona) and Elizabeth Warren (D-Massachusetts) are calling on Congress to support the 21st Century Glass-Steagall Act which they introduced in 2013. In a statement last week, the Senators revealed that the chances of another financial crisis remain unacceptably high, the mega banks are even more concentrated and interconnected than in 2008, and their appetite for excessively risky behavior is unchanged. CBAI supports the measure and urges Congress to support it.
    See CNN Opinion Article.

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    Survey Finds Americans Want Tougher Regulations on Wall Street

    Most voters believe regulators should do more to rein in Wall Street, according to a new poll released on the fourth anniversary of the passage of Dodd-Frank. The survey was commissioned by Better Markets, a nonprofit organization that pushes for Wall Street reforms to avert another financial crisis.

    The poll found that Americans still distrust Wall Street and big banks and support tough financial regulations of them. Better Markets CEO Dennis Kelleher called the findings a “wakeup call” for lawmakers who should do more to effectively regulate too-big-to-fail banks. He said, “As this survey confirms, American voters… correctly see that Wall Street’s too-big-to-fail banks remain a real danger to their jobs, savings, retirements and homes, and they want to be protected.” CBAI shares those concerns, recognizes that the TBTF threat has not been resolved, and Congress needs to take decisive action.
    See The Hill Article. See Better Markets Poll Results. See NY Times Article on Better Markets CEO.

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    Fine: Basel Committee Appears to Endorse Too Big to Fail

    ICBA’s Cam Fine recently noted that the Basel Committee on Banking Supervision, in its new consultative document, appears to endorse the too big to fail government backstop. He indicated that the global standard setter states that government loans, guarantees and direct capital injections are options for governments dealing with risky mega banks teetering on the brink. Fine stated, “Apparently, while capital is king under the Basel III regulatory regime, taxpayer funds will do in a pinch.”

    Fine instead urged that the systemically dangerous mega banks be downsized and restructured to remove the specter of government-subsidized TBTF advantages and help restore free financial markets.
    See AB Article.

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    The Most Important FHLB Reform Has Already Happened

    In response to a suggestion that the number of Federal Home Loan Banks be reduced as a means of reform, the chairman of the Council of FHLBs noted that Congress in 2008 already cleared the way of legal impediments for the board of any FHLB to pursue consolidation as long as its members believe such action would be in their best interest.

    Steve Rosenbaum, Council chair and chairman of the Federal Home Loan Bank of Chicago, emphasized that the FHLBs are wholesale banks in which the customer is the member, and they are compelled to stay prudent, well-managed and focused on the needs of their members and the communities they serve. CBAI agrees with Rosenbaum, an active CBAI member, that the issue of consolidation among FHLBs should rest only in the hands of the FHLB member institutions.
    See AB Article.

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    Yellen: Fed Will Continue to Prop Up Economy

    Short-term rates to remain near zero for some time

    During congressional testimony last week, Federal Reserve chairwoman Janet Yellen said the economic recovery remains incomplete, and continuing Fed help is necessary. She reiterated that the economy will continue to grow at a moderate pace, and the Fed is in no hurry to start increasing short-term interest rates.
    Read NY Times Article.

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    Baker Market Update

    Risk has a habit of coming at us from unforeseen sources at unexpected times in unpredictable ways. Thus the name. Financial markets were hit yesterday with a double dose of capriciousness as events in both Europe and the Middle East sent jitters around the globe. Market observers watched as scared money did what it usually does; buy U.S. Treasuries.
    See Baker Market Update.

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    Rural Economic Index Weakens in July

    Creighton University’s index of the rural economy declined in July to 51.8 from 53.6 the month before. The Rural Mainstreet Index was down for the second straight month, though it has remained over growth-neutral since March. Economics chair Ernie Goss cited plummeting commodity prices and predicted slower growth would continue in the coming months.
    See RMI Report.

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    FDIC Issues Letter on Ag Lending in Difficult Economic Cycles

    The FDIC issued a Financial Institution Letter updating its guidance instructing ag lenders to maintain prudent risk-management practices in low-commodity-price environments, reflecting recent USDA price projections.

    The FDIC’s guidance instructs bank management to: consider, but not rely unduly on, secondary repayment sources and collateral positions; consider and closely monitor cyclical factors, such as land values, before and after making credit decisions; identify and effectively manage credit concentrations; and work constructively with borrowers experiencing financial difficulties. The FIL replaces FIL-85-2010, Prudent Management of Agricultural Credit through Farming and Economic Cycles, dated December 14, 2010.
    Read FDIC Financial Institution Letter. Read FDIC Guidance.

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    Hill Fight Looming with Farm Credit System

    One of the top priorities for CBAI and ICBA is reform of the Farm Credit System (FCS), and heightened efforts to expose the dangers of the FCS mission creep are beginning to pay off. Lawmakers recently called for oversight hearings on the FCS and to investigate the soundness of the government-sponsored enterprise (GSE).

    A recent ICBA survey of rural community bankers confirmed that the FCS is using its GSE advantages to under-price community banks, take their largest best borrowers, and ignore the young farmer segment. Meanwhile, FCS officials are strongly defending their actions and intentions to expand FCS lending authority while maintaining its tax-exempt status. Last December, an FCS expansion measure was pulled from consideration due to intense opposition from community banking organizations.
    Read AB Article.

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    FDIC Issues S-Corp Guidance on Basel III Capital Buffer

    The FDIC recently issued guidance to help relieve many Subchapter S corporation community banks from rules that would limit their ability to raise capital. The guidance encourages community banks to request case-by-case exceptions to the Basel III capital conservation buffer, which curtails capital distributions, such as shareholder dividends, when regulatory capital levels fall below preset thresholds.

    The Basel III capital rules include a capital conservation buffer that prohibits or limits the amount of dividends banks can pay when their risk-based capital ratios fall below certain thresholds. Because income taxes are paid directly by S-Corp shareholders, situations could arise in which shareholders have a material income tax obligation on taxable income earned by their bank but the bank is unable to pay enough dividends to meet the shareholders’ tax obligation.

    The FDIC’s guidance establishes criteria under which S-Corp banks would be deemed to qualify for an exception from the buffer, such as highly rated institutions and those with sufficient capital to pay out dividends. The agency said that absent significant safety-and-soundness concerns about the requesting bank, it generally would expect to approve exception requests by well-rated S-Corp banks that are limited to the payment of dividends to cover shareholders' taxes on their portion of an S-Corp's earnings.

    Earlier this year the ICBA wrote the FDIC to emphasize that the capital conservation buffer would limit the ability of many S-Corp community banks to raise capital and serve their communities, and the ICBA urged regulators to allow community banks to distribute at least 35 percent of their reported net income for a reporting period.

    While the FDIC guidance does not provide a total exemption from the capital conservation buffer, CBAI and ICBA appreciate the FDIC’s attention to S-Corp community bank concerns.
    Read FDIC Guidance. See ICBA Letter. See ICBA Response.

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    BankOnIT Welcomes New Clients in June

    CBSC-endorsed cloud-based service helps banks manage technology more efficiently

    Two Illinois community banks selected BankOnIT’s (BOIT) Bankers Private Cloud service in June -- $112 million Henry State Bank in Henry, and $154 million First State Bank Shannon – Polo, Shannon.

    Robin Wilhelms Saar, Executive Vice President at First State Bank Shannon – Polo, said “BankOnIT offered our bank added technical, disaster recovery and security capabilities that would have been challenging and costly to achieve on our own. We think it’s a great fit for our bank.” CBAI welcomes these two fine institutions to the growing BankOnIT client base.
    Learn More.

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    Deploying Three Layers of Security to Combat Cyber Attacks

    Financial Institutions Insights

    You've surveyed your company's digital battlezone and like what you see. The expensive, but fearsome firewalls and other tools are in place, everybody says they understand compliance, patches and vulnerabilities are closely monitored and anti-virus blocking keeps the malware at bay. The moat is full, the drawbridge is up.

    But is your enterprise really secure? Don't kid yourself. It's not. Totally impregnable security does not exist. If you're putting all your hopes into these types of preventive controls, you are, in fact, leaving your enterprise at severe risk for problems when a hacker does breach the electronic moat. And that will happen.
    See Article.

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    Order Additional Copies of the CBAI Illinois Financial Institutions Directory Today!

    The 2014 edition of the CBAI Illinois Financial Institutions Directory is now available!
    Order your copy today! (Available in print, online, or in e-book form).

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    CBIS Comments on the OCC’s Semiannual Risk Perspective

    Lackluster growth and historically low interest rates have increased competitive pressures for many community banks, which explains the key risk the OCC is reporting for community banks: the erosion of lending standards. Like the multinationals, community banks have been forced to increase revenue by controlling operation costs. Doing so has heightened operational risk in many cases. When you outsource a function of your bank’s operation, often necessarily, you do not outsource the risk. At Community BancInsurance Services, we see our role as vital to help banks balance competitive realities with risk management. Expecting anything less from your bank’s insurance agency could become an operational risk of its own.
    See Article.

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    Harland to Hold Webinar on New Checking Product

    Acquisition Accelerator® is a Harland turnkey checking acquisition solution that targets consumers in your footprint with highly personalized offers at saturation pricing. To view an invitation to a special webinar on this product,
    Click Here.

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    Four Mobile Threats Banks Must Neutralize

    Community banks are required to perform initial and ongoing risk assessments on products and services to ensure that every possible threat is recognized and controlled. With new mobile products from a host of developers coming on the scene nearly daily, bank leaders evaluating these emerging products must understand both the inherent and emerging risks they pose. SHAZAM, a CBSC Preferred Provider, identifies
    four areas that bankers should pay attention to offer the safest and most valuable tools to their customers.

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    News from the Bench: Police Access to Customer’s Bank Records Limited

    Looking back to November of 2010, an opinion from the Illinois Appellate Court for the Second District is instructive on the topic of whether a law enforcement officer can have access to a bank customer’s records in the course of an investigation of that customer. The Court’s instruction: It depends. For details on the case of State of Illinois vs. Nesbitt,
    See Details.

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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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    "ACH: Stay Informed and In Compliance" Scheduled for August 7, 11, & 14

    In the ever-changing world of ACH, it is difficult to stay abreast of the risks involved and the ever-changing rules. The presentation gives community banks ideas for reducing risk and improving compliance. The ACH-Rule changes that are effective from 2013-2015 are also explained in a practical, easy-to-understand approach. This seminar identifies areas of ACH activity where a financial institution may be held liable if proper procedures are not in place, and demonstrates what examiners are looking for relative to ACH. The class also gives attendees ideas for policies and procedures that help protect the financial institution from unnecessary losses. Simplified procedures for maintaining compliance and tips for avoiding those commonly-made mistakes, as well as sample written statements for unauthorized debits and stop-payment forms that comply with the new rules and limit the bank's liability under Regulation E are also provided. Nicole Meinhardt, CPA, MST, AAP and manager at Wipfli LLP, Sterling, IL, leads this seminar.

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