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Community Bankers Association of Illinois
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     A Bi-Weekly News Bulletin for CBAI Members                                    August 31, 2016

Community Bankers Association of Illinois
Community Bankers Association of Illinois Community Bankers Association of Illinois
  • Sign Up for One-Day Registration at CBAI’s 42nd Annual Convention!
  • Community Bank Income Rises on Higher Lending
  • 92% of Illinois Community Banks Profitable in Q2 2016
  • FDIC: Many Community Banks Getting Lower Assessment Rates
  • Investment News From THE BAKER GROUP
  • Q2 GDP Rises 1.1 Percent: Second Estimate
  • Rural Mainstreet Index Below Growth-Neutral for 12th Straight Month
  • FDIC: Signs of Rising Interest in De Novo Formation
  • ICBA Joins 70 Senators Calling for Community Bank Relief
  • There Are Real Reasons to Bring Back Glass-Steagall
  • Same-Day ACH Starts in Less Than a Month
  • USDA Reducing Fees for Single-Family Housing Program
  • Fannie, Freddie Release Updated Uniform Loan Application
  • The Digital Generation: What Bankers Must Know
  • CBAI Convention Special Coupon from Midwest Office
  • CBAI LEGAL: Ex-Wife Prevails Over Attorneys for Foreclosure Surplus
  • CBIS Nicoud: Could Community Bank Challenges Become Opportunities?
  • Only a Few Days Left to Donate to Community BancPac Auction!
  • Home Mortgage Disclosure Act Seminar Slated for September 7 and 8
  • Lender’s Guide to Mortgage Loan Compliance Set for September 27-28
  • ACH: Stay Informed and In Compliance Scheduled for October 4, 12, and 19
  • Developing a Business-Development Strategy To Be Held October 12

  • Sign Up for One-Day Registration at CBAI’s 42nd Annual Convention!

    Busy schedule? Sign up for a one-day registration at CBAI’s 42nd Annual Convention & Expo, on Friday, September 16, or Saturday, September 17, in Kansas City, MO. Friday’s schedule includes the Opening Breakfast with Eric Boles, highly-acclaimed speaker, consultant, and former NFL player; the Business Meeting Luncheon featuring ICBA Immediate Past Chairman Jack Hartings; 10 education break-out sessions, including expert speakers on the hottest topics in community banking today; and desserts and cocktails in the nearly 90-booth exhibit hall.

    Saturday’s schedule begins with a dawn-buster breakfast featuring “Why Regulators Are Focused on Information Technology at Community Banks;” a Continental breakfast in the Exhibit Hall, jammed packed with the latest in products and services for community banks; 10 more timely break-out sessions, and the Closing General Session with United States Congressman Blaine Luetkemeyer. A member of the U.S. House Financial Services Committee, the Congressman shares his insights on prospects for the enactment of regulatory relief legislation. You can also register to attend the education and exhibit hall only, which excludes meal functions, for only $199 per day!

    Don’t let your busy schedule keep you from attending CBAI’s showcase event! Sign Up for a One-day Registration Today. For complete details and to register for the full 42nd Annual Convention & Expo, please Click Here!

    As a reminder, the deadline for hotel reservations is Monday, September 5. Call the Kansas City Marriott Downtown at 877/303-0104 and book your room today! (Should you need to cancel a hotel room, please do so through CBAI so that we can retain the room in our block:

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    Community Bank Income Rises on Higher Lending

    Community banks reported $5.5 billion in second-quarter aggregate income, a 9 percent increase from a year ago, the FDIC reported in its latest Quarterly Banking Profile. The 5,602 insured institutions identified as community banks reported a $41.2 billion increase in total loans and leases during the quarter, with net operating revenue rising 7.1 percent from the same time last year.

    Community bank loan and lease balances increased by 2.9 percent from the first quarter, outperforming noncommunity banks (1.9 percent). The community bank net interest margin of 3.58 percent was 57 basis points above that of noncommunity banks.

    Overall, insured institutions reported net income of $43.6 billion in the second quarter, a 1.4 percent increase from a year ago. The increase in earnings was mainly attributable to a 4.8 percent increase in net interest income and lower expenses for litigation reserves at a few large banks. Banks increased their loan-loss provisions by 44.2 percent from a year ago, partly in response to rising levels of troubled loans to borrowers in the energy sector.

    The Deposit Insurance Fund increased from $75.1 billion at the end of March to $77.9 billion at the end of June, with the reserve ratio rising to 1.17 percent. The number of banks on the FDIC’s Problem List fell from 165 to 147, the fewest in more than seven years. Read FDIC Release. See FDIC Quarterly Banking Profile.

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    92% of Illinois Community Banks Profitable in Q2 2016

    Nine of 10 most profitable banks had less than $365 million in assets

    Based on an analysis conducted by BankTrends, during the second quarter of 2016, nine of the 10 most profitable community banks in Illinois had less than $365 million in assets, and four of the five most profitable community banks had assets of less than $100 million, dispelling the notion that banks must be at least a billion in assets to make money. BankTrends is CBSC’s Preferred Provider of Call Report data and peer analysis tools. See BankTrends Summary.

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    FDIC: Many Community Banks Getting Lower Assessment Rates

    More than nine out of 10 banks with assets less than $10 billion are likely to pay less for deposit insurance beginning in the current quarter, the FDIC said. The reduction in assessments is due to the Deposit Insurance Fund reserve ratio reaching 1.17 percent at the end of June.

    Earlier this year, the FDIC board of directors approved a final rule revising DIF assessment formulas for community banks with less than $10 billion in assets that have been FDIC-insured for at least five years. Rates are expected to decline at 93 percent of banks under $10 billion, and assessments are expected to drop by an average of approximately one-third, the agency said.

    Banks with more than $10 billion in assets will pay a quarterly surcharge, in addition to regular assessments, equal to an annual rate of 4.5 basis points. Banks under $10 billion will receive assessment credits (applied when the reserve ratio is at or above 1.38 percent) for the portion of their assessments that contribute to the increase in the reserve ratio from 1.15 percent to 1.35 percent.

    Institutions can estimate their assessment rates using the FDIC Online Calculator. Read FDIC Release. Read FDIC Financial Institution Letter.

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    Investment News From THE BAKER GROUP

    Baker Market Strategies

    Recently the Federal Housing Finance Agency (FHFA) announced an extension of the current Home Affordable Refinance Program (HARP) and plans for a new refinance program for high loan-to-value (LTV) borrowers. Originations of HARP loans were extended from December 2016 to September 2017. See Baker Market Strategies.

    Baker Municipal Credit Brief

    Most investors would assume that, all things being equal, a general obligation (GO) bond is far more secure than a revenue (REV) bond. Just a few years ago that was the case. However, there has been a fundamental shift in the way a general obligation pledge is viewed in terms of credit quality. See Baker Municipal Credit Brief.

    Baker Market Update

    Words matter, and when those words come from Central Bankers, they can matter a lot. Sometimes. From the feel of it, this must have been National Jawboning Week as various Fed officials took turns firing rhetorical warning shots across the bows of market participants everywhere. See Baker Market Update.

    Baker Economic Brief

    US economic growth was slightly weaker in the second quarter than initially reported. GDP increased at a pace of 1.1% after revisions versus the 1.2% “flash” estimate. Changes to inventories accounted for much the adjustment. The revision makes the year-over-year rate 1.2%, and the three-month moving average of GDP growth is now less than 1%. See Baker Economic Brief.

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    Q2 GDP Rises 1.1 Percent: Second Estimate

    The U.S. Commerce Department reduced its projected second-quarter increase in the gross domestic product from 1.2 percent to 1.1 percent. The second estimate is based on more complete data than the advance estimated released last month. The GDP rose 0.8 percent in the first quarter. See Commerce Report.

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    Rural Mainstreet Index Below Growth-Neutral for 12th Straight Month

    Farmland Prices Expected to Decline Further

    The Creighton University Rural Mainstreet Index rose for August, but remained below growth neutral for the 12th straight month, according to the monthly survey of bank CEOs in rural areas of a 10-state region dependent on agriculture and/or energy.

    Borrowing by farmers remains strong as the August loan-volume index expanded to 78.3 from last month’s 67.4. The checking-deposit index fell to 41.3 from 49.0 in July, while the index for certificates of deposit and other savings instruments improved slightly to 44.5 from 43.9 in July. Approximately 56.5 percent of bank CEOs expect the Federal Reserve to raise rates before the end of 2016.

    The August RMI for Illinois increased to a feeble 21.2 from July’s regional low of 18.1. The farmland-price index fell to 17.5 from July’s 29.4. The state’s new-hiring index rose to 44.2 from last month’s 42.4. Illinois job growth over the last 12 months: Rural Mainstreet -1.9 percent; Urban Illinois 1 percent. Read Mainstreet Economy Report.

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    FDIC: Signs of Rising Interest in De Novo Formation

    Even with the recovery in community bank earnings following the recent financial crisis, low interest rates and narrow net interest margins have inhibited de novo bank formation, the FDIC said in its latest issue of Supervisory Insights. The agency wrote that there are tentative signs of rising interest in forming de novos as it works to support the formation of new institutions. CBAI has consistently been a strong advocate for de novo bank formations and has urged the FDIC to ease the barriers to market entry.

    In its article, the FDIC also repeated a recent agency pledge to release a practical guide for groups organizing de novo banks on how to apply for charters and deposit insurance. Testifying recently before Congress, FDIC Chairman Martin Gruenberg mentioned the guide as well as a series of upcoming outreach meetings for organizing groups.

    The latest Supervisory Insights also features an article on the types of issues most frequently observed by FDIC risk management examiners as requiring board attention. See FDIC Supervisory Insights. Read Gruenberg Testimony.

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    ICBA Joins 70 Senators Calling for Community Bank Relief

    ICBA urged the Senate to seize on consensus support for tailored community bank regulation. In a letter to 70 senators who recently called on the Consumer Financial Protection Bureau to consider the impact of its rules on community-based financial institutions, ICBA outlined a list of pending bills that support local economic and job growth. U.S. Senator Mark Kirk (R-Illinois) is among those signing the letter.

    While CFPB Director Richard Cordray recently responded to the senators by listing several agency rules with community bank accommodations, his letter fails to recognize the cumulative impact of the CFPB’s more than 5,000 pages of rules and regulations. “Every regulatory change requires software updates, testing, and training, as well as legal and audit expenses,” ICBA President and CEO Cam Fine wrote.

    ICBA cited several pending Senate bills that would implement provisions from ICBA’s Plan for Prosperity legislative platform, including the CLEAR Relief Act (S. 812) and the Community Bank Access to Capital Act (S. 1816). Read ICBA Letter. Read ICBA Release.

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    There Are Real Reasons to Bring Back Glass-Steagall

    Dodd-Frank has not resulted in shrinking the size of the largest Wall Street banks, and even regulators admit that “too big to fail” has not been resolved. Dodd-Frank has also done little to reduce the complexity of the financial system, either in terms of the range of activities permitted to banks, or the interconnections between institutions that are permitted.

    According to Marcus Stanley, the policy director for Americans for Financial Reform, restoring certain provisions of Glass-Steagall would address these issues immediately by shrinking the size of the largest banks and simplifying them by banning complex market-based activities at commercial banks.

    Stanley asserts that restoring Glass-Steagall is a powerful structural reform that would immediately make progress on issues that were not completely addressed by the Dodd-Frank Act. It needs a much more prominent place in the Washington political debate. CBAI has advocated the restoration of the fundamental aspects of the Glass-Steagall Act since its repeal in the late 1990s. Read BankThink Article.

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    Same-Day ACH Starts in Less Than a Month

    The initial phase of same-day automated clearing house services is scheduled to begin September 23, 2016. On that date, ACH originators may begin sending same-day ACH transactions to accounts at any receiving financial institution.

    During the first phase starting next month, same-day service will apply only to payments in which the sender is crediting the account of the receiver. Phase two of the transition, which starts in September 2017, will also enable same-day debits.

    As advocated by CBAI, ICBA and other groups the enhancement includes an interbank fee for receiving banks that will allow them to recover their costs. Community nanks, led by ICBA have been the leading advocate of faster, more efficient and ubiquitous bank-centric payments, which will improve the payment system and benefit consumers and businesses. Read More from NACHA.

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    USDA Reducing Fees for Single-Family Housing Program

    Starting October 1, 2016, USDA Rural Development is reducing fees for its Single Family Housing Guaranteed Loan Program. For the 2017 fiscal year, the upfront guarantee fee will drop from 2.75 percent to 1 percent of the loan amount. The annual fee will decline from 0.50 percent to 0.35 percent of the average scheduled unpaid principal balance for the life of the loan.

    According to the USDA, the program’s Guaranteed Underwriting System will be updated on Aug. 31 to allow lenders to select and underwrite using either the fiscal 2016 or fiscal 2017 fee schedule. Read More from USDA.

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    Fannie, Freddie Release Updated Uniform Loan Application

    Fannie Mae and Freddie Mac released their redesigned Uniform Residential Loan Application, the standardized application form used by most lenders in originating mortgage loans.

    The redesigned URLA form, released with a corresponding Uniform Loan Application Dataset, will require more information from borrowers and lenders. To accommodate these changes, which include revisions from federal agencies, lenders will need to update their loan-origination systems.

    This is the first substantial redesign in more than 20 years, and the forms will now collect expanded information required under the Home Mortgage Disclosure Act. ICBA and other industry groups worked on with project with Fannie, Freddie and the Federal Housing Finance Agency over the past 18 months.

    The updated URLA form does not include a proposed question about borrower language preferences. In recent letters to the FHFA. ICBA and other groups outlined numerous problems with the language-preference proposal and convinced the agency to drop the proposed change—for now.

    The new form will be required for loans originated on or after January 1, 2018. See ICBA Letters. Read More from Fannie Mae.

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    The Digital Generation: What Bankers Must Know

    The Digital Generation (Gen-D) is comprised of technologically savvy consumers comfortable using all types of devices and apps. While Millennials, born between 1980 and 1994, represent the largest segment of this audience, Gen-D is more of a mindset.

    FICO recently completed an extensive consumer research study that looked at Gen-D and how they are consuming financial products. The research found that the Digital Generation is growing in economic strength, social influence and banking potential, and are having some very expected and unexpected impacts on our economy. Read More.

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    CBAI Convention Special Coupon from Midwest Office

    The Midwest Office staff is looking forward to the upcoming CBAI 42nd Annual Convention and Expo on September 15-17. Come see us at booth 327 for your exclusive CBAI convention coupon - $25 off! See Offer.

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    CBAI LEGAL: Ex-Wife Prevails Over Attorneys for Foreclosure Surplus

    In a case decided by the Third District Illinois Appellate Court in April, surplus proceeds from a foreclosure sale were directed to the ex-wife pursuant to her “equitable lien” against the foreclosed-upon marital home. Her equitable lien was deemed superior to a judgment lien recorded by the husband’s attorney(s) for legal fees. See Most Recent CBAI LEGAL.

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    CBIS Nicoud: Could Community Bank Challenges Become Opportunities?

    Banking trends are moving toward an online presence. However, many community banks have not assessed their online insurance exposure. Hackers are getting more and more efficient everyday which requires bankers to stay on top of their online security measures.

    Use this information to stay ahead of the curve. As you integrate your online banking services, ask your insurance broker questions about how this affects your insurance exposure for cyber liability. Be a student of the industry and make sure your entity and customers are protected from hazardous viruses and hackers. Every bank needs Cyber Liability insurance in today’s banking space. Read More from CBIS Nicoud.

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    Only a Few Days Left to Donate to Community BancPac Auction!

    We are in the midst of preparing for Community BancPac’s 25th Annual Silent Auction and 9th Annual Live Auction. Thanks to so many of you, this night is always a fun-filled event and remains one of the highlights of CBAI’s Convention. We hope to make this year’s Auction a successful and memorable event, but we need your help! CBAI deeply appreciates the PAC donations many of you make each year. Be a PLAYMAKER and please make a contribution to the auction! Download Donation Form.

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    Home Mortgage Disclosure Act Seminar Slated for September 7 & 8

    Bankers, now more than ever, need to understand the HMDA rules. While the Home Mortgage Disclosure Act (HMDA) has existed for many years, significant changes are coming that will affect every HMDA reporter. Even though most of the new rules won't be required until 2018, it is important for each financial institution to ensure compliance with the existing rules while also beginning to plan for the unavoidable HMDA changes. HMDA assumes that everyone lives in an absolutely cookie cutter world – which of course is not even close to accurate. Included in this seminar is a discussion of several case studies, some of which will not have a clear answer - and the group will have to determine how to complete the HMDA LAR for these situations. The focus of this seminar will be two-fold. First, the existing HMDA rules are discussed in detail. While some of the existing rules will eventually change due to the new rules, it is important for financial institutions to remain compliant until the changes actually take place in 2018. In addition, many of the existing rules will remain the same under the new rules, making understanding the existing rules even more important. The second part of our seminar focuses on the new HMDA rules, of which the majority will be required for data collected during 2018. In discussing the new rules, we will review the regulation, the associated commentary, and the CFPB HMDA Implementation guide. Leading this seminar is Adam Witmer, CRCM, senior consultant with Young & Associates, Inc., Kent, OH, where he focuses on regulatory compliance.

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    Lender’s Guide to Mortgage Loan Compliance Set for September 27-28

    During the last few years, both Congress and the various federal regulators have crafted revisions to some of the regulations that have been a part of our lending lives. This has resulted in many additional regulatory issues in every mortgage loan transaction. As a result, lenders have been struggling to determine what they should do to assure that they not only make a safe and sound loan for the bank, but also do so in a manner that will not create regulatory problems for the bank. With all of the changes and additions, a one-day seminar to cover this subject has not been possible in recent years. This seminar will be two very full days in length. It covers all aspects of mortgage compliance that a lender should know, including current rules. All subject covered include all of the latest information available. Leading this seminar is Adam Witmer, CRCM, a senior compliance consultant with Young & Associates, Inc., serving client banks in the Midwest.

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    ACH: Stay Informed and In Compliance Scheduled for October 4, 12, and 19

    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 2015 – 2018 are also explained in a practical, easy-to-understand approach. ACH officers and operations officers adn staff would all benefit from attending. Nicole Meinhardt, CPA, AAP and senior manager at Wipfli LLP, Sterling, IL leads this seminar.

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    Developing a Business-Development Strategy To Be Held October 12

    CBAI is pleased to offer Developing a Business-Development Strategy and Plan for Prospects this October. Having an effective and focused business development program is the key to the success of any bank’s growth. This program is designed to provide the foundational systems and develop the skills needed to be effective at making business calls on prospects. This seminar benefits anyone involved in the planning or execution of the bank’s business-development plan, including loan officers, branch managers, trust officers, and retail-banking employees. Topics covered include developing a prospecting program by researching, identifying, and prioritizing prospects; turning a gatekeeper into an influencer; getting an appointment over the telephone; key questions to ask during a meeting with prospects; making the difference – between you and the competition; making joint calls; the five keys to getting a commitment; following up and action planning. Leading this seminar is Dianne Barton, who founded Performance Solutions, Inc. in 1982.

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    THROUGH 09/30/2016






    Finer Points Blog

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