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Community Bankers Association of Illinois
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     A Bi-Weekly News Bulletin for CBAI Members                                    August 19, 2015

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Community Bankers Association of Illinois
Community Bankers Association of Illinois Community Bankers Association of Illinois
  • Register Today for CBAI’s 41st Annual Convention & Exposition!
  • Use August Recess to Host Members of Congress
  • Illinois Community Banks Report Strong Q2-2015 Results
  • IDFPR Schedules Cyber Risk Conference
  • Congress Weighs New Cyber Protections and Risks for Community Banks
  • CBAI Comment Letter Opposes Expansion of Overtime-eligible Employees
  • Investment News From THE BAKER GROUP
  • 2015 Crop Tour Preview: Illinois Anticipates Big Yield Swings
  • Federal Reserve Surveys Reveal Weakness in Farmland Values
  • Loan Underwriting and Administration Remain Top Concern of Bank Examiners
  • CFPB Posts Question Index on TILA-RESPA Disclosures
  • Bank Directors Must Also Manage the Challenges of Technology
  • Six Best Practices for a More Efficient, Regulator-Friendly CMS
  • October EMV Deadline Extends to ATM Acquirers
  • Summary on Military Lending Act Expansion Now Available
  • Succession Planning is in Best Interest of All Parties
  • Community Bank Directors’ Workshop Scheduled for August 26 & 27
  • Auditing Fair Lending and FCRA To Be Held September 22
  • Appraisal Review Seminar Slated for September 29 & 30


  • Register Today for CBAI’s 41st Annual Convention & Exposition!

    You won’t want to miss CBAI’s 41st Annual Convention & Expo! The full convention promotional brochure is now available for “Community Bankers: Kickin’ It Country,” scheduled for September 17-19, 2015, at the Omni Hotel in Nashville, TN. 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 The Hermitage Golf Club; general sessions with Federal Reserve Bank of St. Louis President Dr. James Bullard; and entrepreneur, recording artist, and acclaimed speaker Robin Crow; 20 concurrent education sessions featuring pertinent hot topics; an exhibit center with nearly 100 booths; exciting social events; and unique partners’ programs.

    A block of rooms and suites has been reserved for CBAI convention participants at the Omni Nashville Hotel. To assure accommodation availability, reservations should be made with the hotel by September 3, 2015. Room reservations received after September 3 are confirmed on a “space-and-rate available basis.” To reserve your room, call 800/843-6664 and please indicate you are with the Community Bankers Association of Illinois or provide the following code: 091315COMMUNITY. Single and double room rates are $209 + tax.

    Don’t miss out on CBAI’s 41st annual showcase event! Register for CBAI's 41st Annual Convention & Expo!

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    Use August Recess to Host Members of Congress

    With Congress adjourned for the August recess, CBAI and ICBA are calling on community bankers to invite their members of Congress to be a community banker for a day. ICBA’s Main Street Matters online resource center helps community bankers host their lawmakers to demonstrate firsthand the importance of regulatory relief legislation. It’s a perfect opportunity to seek their support for legislation when they return to Washington that provides relief from excessive mortgage rules, examination requirements, and quarterly reporting mandates among others.

    ICBA’s campaign has all the materials community bankers need to invite lawmakers to their community banks, including invitation templates, contact information, materials to prepare staff, and tips for follow-up communication. Go to Main Street Matters.

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    Illinois Community Banks Report Strong Q2-2015 Results
    91% of Illinois community banks were profitable in Q2 2015

    Increased loan demand and a reduction in non-current loans helped Illinois community banks report one of their best operating performances since the economic downturn. Here is a summary of operating highlights provided by Bank Trends, CBSC’s Preferred Provider of Call Report data and peer-analysis tools.

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    IDFPR Schedules Cyber Risk Conference

    The Illinois Department of Financial and Professional Regulation has scheduled a Cyber Risk Conference for banks in Burr Ridge (November 9) and Springfield (November 16). The conference will include speakers from the financial profession, law enforcement, and financial regulatory agencies and will include a representative from a bank that was the subject of a cyber attack who will discuss how they handled their attack, the attacker's demand for ransom money, and the lessons they learned. Read More.

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    Congress Weighs New Cyber Protections and Risks for Community Banks

    High-profile data breaches have forced Congress’ hand, and that has real implications for community bankers’ cyber liability going forward. After failing to refine a final bill, leadership in the Senate has vowed to make the Cyber Security Information Sharing Act a priority this September when it returns from its August recess. See CBIS Nicoud Article.

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    CBAI Comment Letter Opposes Expansion of Overtime-eligible Employees

    The U.S. Department of Labor (“DOL”) has proposed a dramatic increase that would more than double the salary threshold used when determining which employees are exempt from overtime pay mandates under the federal Fair Labor Standards Act (“FLSA”). In its comment letter opposing the proposed increase, CBAI emphasized the potential adverse impact on community bank earnings as well as the possibility that some employees might have to be dismissed or have their hours reduced if necessary to keep expenses under control; CBAI also noted that DOL’s proposal could have an anti-consumer effect if banks increase costs and fees charged to customers or reduce services in order to maintain adequate earnings in the face of any increased payroll expenses that might result from the DOL’s proposal. Read CBAI’s Comment Letter.

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    Investment News From THE BAKER GROUP

    Baker Market Update

    Has the world grown wan with the yuan? The largest, single devaluation of Chinese currency in more than 20 years dominated headlines as financial markets around the globe reacted to the tacit admission by Sino policymakers that all is not well in the People’s Republic. Fears that the world’s second largest economy is headed towards a “hard landing” sparked a universal sell-off of equities and commodities as vague perceptions of a slow – growth future became a more demonstrable cognizance. Does this complicate things for the FOMC? See Baker Market Update.

    Baker Economic Brief

    This could turn out to be a pivotal period for the bond market as the China story gets bigger every day. We’ve already seen a string of ugly data releases as efforts by Chinese monetary authorities have had disturbingly weak effects. The PBOCs currency devaluation follows prior stimulus attempts including regulatory and credit control measures that, taken together, seem almost desperate. Let’s not forget that 7% GDP growth is extremely poor performance for China, and that pace is now questionable. It keeps the global deflation threat very much alive. See Baker Economic Brief.

    MBS Market Strategies
    August 2015 - Prepayment Summary

    Speeds for all three agencies fell in July, with the biggest declines seen in 20yr and 30yr terms. Fannie and Freddie 30yrs fell the most, down 1.9 CPR to 14.4 and 14.7 respectively. Fannie and Freddie 20yrs also fell by the same amount, down 1.2 CPR to 12.1 and 12.6 respectively. Within 15yr terms, Fannies fell 0.6 CPR to 11.8 while Freddies fell 0.8 CPR to 11.6. Fannie 10yrs we’re basically unchanged at 13.5 CPR although Freddie 10yrs actually increased on the month, up 0.6 CPR to 13.4. Ginnie I 30yrs trimmed 1.5 CPR to 20.5 while Ginnie II 30yrs fell by a notable 4 CPR to 17.8. Within 15yr Ginnies, the GN I program slightly increased to 16.8 CPR and GN IIs inched down 0.3 CPR to 14. Speeds came in as expected as mortgage rates have remained above 4% since June and turnover continues to slow. See MBS Market Strategies.

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    2015 Crop Tour Preview: Illinois Anticipates Big Yield Swings

    Rain makes grain – for the most part. But volatile weather always brings variable crops.That’s what 2015 Pro Farmer Crop Tour scouts are certain to see in Illinois, promises University of Illinois Extension specialist Emerson Nafziger. “Scouts will see everything from zero yields to high yields – sometimes in the same field,” he says. Read More.

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    Federal Reserve Surveys Reveal Weakness in Farmland Values

    Lower farmland values through the first half of 2015 are reflected in surveys from the Kansas City, Chicago, and St. Louis Federal Reserve Banks. The FRB Chicago and Kansas City surveys found that good farmland values declined by three percent (3%) as of 6/30/15 compared to one year ago, while the FRB St. Louis survey found values virtually unchanged although most bankers expect values to decline in the third quarter. Read More.

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    Loan Underwriting and Administration Remain Top Concern of Bank Examiners

    In its semiannual report last month, the Office of the Comptroller of the Currency (OCC) noted that many banks have loosened their standards for underwriting loans, bolstering the credit risk for financial institutions. While an increase in risk might be a red flag to the regulatory agencies, the reason many banks have lowered their underwriting standards for auto, home or commercial real estate loans is simply t compete in the changing industry given the rise of online lenders paired with low interest rates nationally. Read Sageworks Blog.

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    CFPB Posts Question Index on TILA-RESPA Disclosures

    The Consumer Financial Protection Bureau has posted an index of questions about the TILA-RESPA Integrated Disclosures. The index allows users to link directly to specific topics within each of five CFPB webinars on the TRID rule. The index is located on the CFPB’s TRID implementation page.

    ICBA recently updated its summary of the TRID rule to include information on several important amendments and clarifications, including the new October 3 effective date. ICBA’s summary can help community banks train their staffs to prepare for the forthcoming changes required by TRID and is a useful tool to share with settlement service partners, including closing and real estate agents. View CFPB Index. Access CFPB TRID Page. Read ICBA Summary.

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    Bank Directors Must Also Manage the Challenges of Technology

    Directors are responsible for setting policy and managing risk in their banks. However, many directors are not confident in their knowledge of information technology issues and as a result are not effective at setting policy or managing risks that relate to information technology. A recent survey of directors revealed only one in five board members are confident in their IT knowledge. While many directors believe they are well versed in assessing and managing credit risk, liquidity risk and interest rate risk, the rapidly changing technology environment is creating new risks every day that many bank boards find challenging to manage. Read BankOnIT Blog.

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    Six Best Practices for a More Efficient, Regulator-Friendly CMS

    Based on regulatory guidance, this white paper explains the six key objectives of an effective Compliance Management System (CMS): understanding the regulations that apply to a financial institution; keeping up with applicable regulatory changes that apply; making sure everyone understands their regulatory responsibilities; embedding regulatory requirements into daily operations; routinely verifying that the FI is on track; and having a reliable and transparent way to fix what breaks. The paper also offers a holistic solution for satisfying and implementing the six points of the CMS framework. Download Continuity White Paper.

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    October EMV Deadline Extends to ATM Acquirers

    MasterCard expects all U.S. ATM acquirers to be EMV-ready by October 1, at which time MasterCard will begin a liability shift for all MasterCard-branded products across all transactions initiated at U.S. ATMs.

    MasterCard’s ATM deadline, announced in September 2012, comes at the same time that fraud liability for in-store transactions shifts to the party—either issuer or merchant—that has not adopted EMV technology. Visa is not scheduled to implement its liability shift for ATMs until October 2017.

    CBAI and ICBA encourage community banks to contact their ATM vendors and determine the best strategy for readying their ATMs for the EMV liability shift dates. More from MasterCard. More from VISA.

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    Summary on Military Lending Act Expansion Now Available

    The U.S. Defense Department’s final rule expanding the types of credit products that are covered by the Military Lending Act has been released, and the ICBA has prepared a Summary as guidance. The final rule expands coverage of the act’s 36-percent rate cap, among other provisions, to all consumer credit offered or extended to active-duty service members or their dependents that is subject to a finance charge or paid in more than four installments, including credit cards.

    The Summary details the Military Annual Percentage Rate calculation, covered borrowers, disclosures, exclusions for application fees and credit card accounts, restrictions and penalties, and compliance suggestions. Compliance is required by October 3, 2016, except for credit card accounts, which are covered under the final rule beginning October 3, 2017. Read Summary. Read Final Rule.

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    Succession Planning is in Best Interest of All Parties

    A bank’s success is dependent upon its people. Recruiting and retaining key talent is an important issue, but banks often overlook another strategy essential to their continued success, succession planning. Regulators also emphasize its importance. Where to begin? Read More.

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    Community Bank Directors’ Workshop Scheduled for August 26 & 27

    Being a member of a community bank's board of directors is a challenging and rewarding experience. The community bank director has duties to the institution, its stockholders, and its depositors. And, he or she has responsibilities to the public-at-large. To meet these duties and responsibilities, a director must be knowledgeable and active. Thus, we invite you to join us at the Community Bank Directors' Workshop. CBAI gathered top banking experts to make this comprehensive, one-day conference a must-attend. Community bank board members, presidents, and CEOs would all benefit from attending this seminar. Topics covered include “Banking Law Update for Directors,” with Jerry Cavanaugh, general counsel at CBAI, Springfield, IL; “Is Information Technology Strengthening Your Bank or Causing Strategic Weaknesses?” with Robert Mendez, executive vice president at BankOnIT, Oklahoma City, OK; and “Succession Planning” with Francis Godfrey, CPA, partner at BKD, LLP, St. Louis, MO. The workshop also includes a networking roundtable session. Modeled after CBAI's peer groups and forums, the networking roundtables are designed to encourage attendees to interact, share ideas, and learn from other directors from across the state.

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    Auditing Fair Lending and FCRA To Be Held September 22

    With the vast number of changes that have taken place in the last few years, many banks have taken great strides to ensure compliance with new rules. However, what about the rules that haven't recently changed? One of the best ways to identify compliance deficiencies is to conduct an in-depth audit. Taking a systematic, step-by-step approach to reviewing certain areas allows a financial institution to discover any compliance deficiencies before the examiners do. Of course, not every bank can allot the time to do that type of audit. The fair lending portion of the seminar will focus on how to conduct a full scope compliance audit based on regulator-examination procedures and guidance, which always should be the goal. For those institutions that cannot accomplish this, or just want to quickly discover where to spend their precious audit time, we offer concrete suggestions for ways to focus a review. We include case studies to demonstrate these techniques. The second portion of the seminar focuses on the Fair Credit Reporting Act, using the examination procedures and regulator guidance for conducting an FCRA audit. Leading this seminar is Adam Witmer, CRCM, is a compliance consultant with Young & Associates, Inc., serving client banks in the Midwest.

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    Appraisal Review Seminar Slated for September 29 & 30

    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. Leading this seminar is Aaron Lewis, consultant in the lending division of Young and Associates, Inc.

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