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     A Bi-Weekly News Bulletin for CBAI Members                                    September 2, 2015

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Community Bankers Association of Illinois
Community Bankers Association of Illinois Community Bankers Association of Illinois
  • Top 10 Reasons to Attend CBAI’s 41st Annual Convention & Expo
  • CBAI Calls on NCUA to Withdraw Misguided Member Business Lending Proposal
  • CBAI Meets with Senate Banking Committee Member Joe Donnelly (D-IN)
  • FDIC Releases Second Quarter Financial Results
  • Investment News From THE BAKER GROUP
  • NY Fed Chief: Market Fluctuations Reduce Case for Rate Increase
  • Rural Mainstreet Index Falls to Growth Neutral in August
  • USDA Expects Lower Farm Sector Profitability in 2015
  • Fannie Mae Announces New Low-Income Mortgage Product
  • CFPB to Issue Regulations on Personal and Signature Loans
  • Fee Tolerance Levels Under TRID
  • Midwest Office Acquires Two Office Products Dealers
  • CBAI Members Recommend IT Solutions from BankOnIT
  • Cloud Computing Drives Efficiency
  • Health-Care-Plan Design Solutions Evolve for Community Banks
  • White Paper Features Compliance-Management Best Practices
  • CBAI LEGAL: BMO Harris Bank Loses Real-Estate Tax Recovery in Foreclosure Sale
  • CBAI Attends FDIC’s Cybersecurity Awareness Presentation
  • Auditing Fair Lending and FCRA To Be Held September 22
  • Appraisal Review Seminar Slated for September 29 & 30
  • ACH: Stay Informed and In Compliance Scheduled for October 1, 6, & 27
  • Community Reinvestment Act Seminar Scheduled for October 1


  • Top 10 Reasons to Attend CBAI’s 41st Annual Convention & Expo

    Still Time to Register!

    You won’t want to miss CBAI’s 41st Annual Convention & Expo, “Community Bankers: Kickin’ It Country,” scheduled for September 17-19, at the Omni Hotel in Nashville, TN. Here are some of the many reasons to attend:

      1. Support Community Banking in Illinois! – This is our profession and we need to show our commitment to community banking, come together to address our challenges, and plan for the future.
      2. Expert Speakers – Federal Reserve Bank of St. Louis President and CEO Dr. James Bullard and RCA recording artist, successful entrepreneur, and acclaimed speaker Robin Crow lead informative and thought-provoking general sessions you won’t want to miss.
      3. Hot Topics – One expert after another provides timely information on the hottest topics in community banking today!
      4. Business Meeting Luncheon – Hear about the top regulatory, political, and competitive issues facing community banking today and what CBAI is doing about them.
      5. Exhibit Hall – Keep abreast of new information gain access to nearly 100 firms highlighting the latest products and services for community bankers in one location!

    For hotel reservations, please contact the Association at 217/529-2265. Don’t miss out on CBAI’s 41st annual showcase event! See Top 10 Reasons. Register Today!

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    CBAI Calls on NCUA to Withdraw Misguided Member Business Lending Proposal

    In a comment letter to the National Credit Union Administration (NCUA), CBAI expressed its unequivocal objection to their unprecedented proposal, which would comprehensively rewrite the credit union member business lending (MBL) rule, and recommended its withdrawal. Read More.

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    CBAI Meets with Senate Banking Committee Member Joe Donnelly (D-IN)

    CBAI participated in an August 12, 2015 outreach meeting with U. S. Senate Banking Committee member, Indiana Senator Joe Donnelly, to discuss topics of great interest to Illinois community banks. Read More.

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    FDIC Releases Second Quarter Financial Results
    Insured Institutions Earned $43 Billion in Quarter

    In his opening statement on second quarter results today, FDIC Chairman Martin Gruenberg said, “The banking industry had another positive quarter, as recent trends have continued. Revenues and earnings are up, loan portfolios grew, asset quality improved, the number of problem banks declined, and only one insured institution failed.” He added, “Meanwhile, community banks had another strong quarter. Revenue and income growth outpaced the rest of the industry, and loan balances rose at a faster rate than at larger banks.” Read Gruenberg’s Opening Statement. Read FDIC Release. See Community Bank Performance Information.

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    Investment News From THE BAKER GROUP

    Baker Market Update

    Comfort and solace from any source would have been welcomed, as across the globe equity markets roiled and bond markets churned right along with investors’ stomachs. Aftershocks from the earlier devaluation of the renminbi intensified into new tremors with last week’s rate cuts by the Peoples Bank of China coupled with a reduction in reserve requirements for that nation’s lenders. Surely, things can’t be that bad over there. See Baker Market Update.

    MBS Market Strategies
    Product Focus: SBAP Pools (CDC/504 loans)

    Established in 1980, the Small Business Administration’s (SBA) Certified Development Company (CDC) 504 loan program was designed to expand capital access to small businesses in the United States. The program includes mostly fixed-rate 20yr realestate loans structured by distributing the borrowed funds among three separate parties: The business owner can borrow up to $5.5mm and must provide a minimum 10% down payment, a conventional lender such as a bank will lend up to 50%, and the SBA approved Certified Development Company covers the remaining 40%. The CDC’s financing is a second lien to the privately financed funds so that if a borrower defaults, the private lender has priority over any liquidated or foreclosed assets. See MBS Market Strategies.

    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.

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    NY Fed Chief: Market Fluctuations Reduce Case for Rate Increase

    Last week the President of the Federal Reserve Bank of New York said recent stock-market fluctuations have made the case for raising rates in September less compelling.

    President and CEO William Dudley said the recent economic volatility could hamper the Federal Open Market Committee from raising rates at its meeting next month, though he cautioned against overreacting to recent developments.

    Dudley also noted that a rate increase could become more compelling before the September 16-17 meeting based on future market developments and forthcoming economic information. Read Dudley’s Comments.

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    Rural Mainstreet Index Falls to Growth Neutral in August

    The Index, conducted monthly by Creighton University, is the compilation of survey data among community bank CEOs in a 10-state region dependent on agriculture and/or energy. Overall, the Index sank to a growth neutral 50.0 in August from 53.4 in July, marking the first decline in the overall Index since March of this year. The Illinois results mirrored the overall Index results. See Mainstreet Economy Report. See Survey Details.

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    USDA Expects Lower Farm Sector Profitability in 2015

    Farm sector profitability is expected to weaken in 2015 for the second consecutive year, according to the USDA’s Economic Research Service. Net cash income is expected to fall by 21 percent to $100.3 billion on lower crop and livestock receipts. Net farm income is forecast to decline by 36 percent to $58.3 billion, which would be the largest decline since 1983.

    Total production expenses are projected to fall for the first time since 2009, led by energy inputs and feed. Government payments are anticipated to rise 16 percent. See 2015 Farm Sector Income Forecast.

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    Fannie Mae Announces New Low-Income Mortgage Product

    Fannie Mae announced a program last week that will allow income from non-borrower household members to help borrowers qualify for loans. The new HomeReady Mortgage Loan will permit income from non-occupant co-borrowers, such as parents, and rental payments to augment borrowers’ qualifying income.

    Fannie Mae said its research indicates that these extended households tend to have incomes that are as stable or more stable than other households at similar income levels. Borrowers will be required to complete an online homeownership counseling course. Fannie Mae will provide additional details to lenders in the coming weeks, and the GSE anticipates accepting loan deliveries in late 2015.

    CBAI and ICBA are concerned that neither Fannie Mae nor Freddie Mac has sufficient capital to protect taxpayers against credit losses. Expanding their product lines to purchase higher-risk mortgages could expose the GSEs to losses that would require an additional government bailout. CBAI and ICBA recommend that the Federal Housing Finance Agency allow both government-sponsored enterprises to begin to rebuild their capital base to protect taxpayers. See Fannie Mae Release.

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    CFPB to Issue Regulations on Personal and Signature Loans
    ICBA Surveying Banks on Issue

    CFPB has announced its intention to issue regulations for certain types of personal and signature loans. ICBA and CBAI are working to minimize the impact these forthcoming regulations will have on community banks’ ability to offer certain types of personal or signature loans. To assist in that effort, ICBA has developed a survey to learn more about community banks’ personal or signature loan offerings, including loan characteristics, terms, underwriting, servicing and collection practices. CBAI encourages participation in this survey. To take the survey, please Click Here.

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    Fee Tolerance Levels Under TRID

    Disclosing fees under the TILA-RESPA Integrated Disclosure (TRID) rule will require a comparison of what was disclosed on the Loan Estimate, or Revised Disclosure, with what the consumer actually pays. If the consumer pays more at consummation, that particular fee is considered to not have been disclosed in good faith unless it falls within specific tolerance limits. Read More from Wolters Kluwer.

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    Midwest Office Acquires Two Office Products Dealers

    Midwest Office is pleased to announce its acquisition of two new office product dealers: Triad Business Products of Rolla, Missouri, and Service Office of Coffeyville, Kansas. Both companies will now be operating under the name of Midwest Office. Read More.

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    CBAI Members Recommend IT Solutions from BankOnIT

    Security risks, reliability risks, regulatory risks – every day, banks are facing new and ever-increasing risks due, in part, to the rapidly changing technology environment. These risks are taking up more time and becoming more challenging to manage. Recently, the FDIC raised the compliance bar even higher. It “suggested” that banks should monitor a minimum number of (10) cybersecurity alerts on a daily basis. That would require bankers to read, analyze and take action on 10 separate alerts every day! CBAI has a solution! Read More.

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    Cloud Computing Drives Efficiency

    Technology is changing at a faster rate today than ever before. These changes make it challenging for banks to keep their information technology systems current, secure, reliable and regulatory compliant. Cloud computing lets banks keep their technology infrastructure current and have the flexibility to add employees, applications and new locations without large fixed-asset expenditures.

    Banks have better security, enhanced reliability and improved regulatory compliance with the specific processes and procedures built into top-tier, banking specific cloud providers. Banks could not obtain the same efficient processes and procedures on their own or from a generic cloud-based provider that serves multiple industries. Read BankOnIT Blog.

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    Health-Care-Plan Design Solutions Evolve for Community Banks

    Community-bank executives are no strangers to the turmoil in health care in the past decade. Many institutions hover around the size of business—50 employees—that was specifically targeted by Obama Care.

    Like most business administrators throughout the country, bankers have had to juggle conflicting mandates of providing for their employees, attracting and retaining top talent, while managing mounting benefits costs. Read More from CBIS Nicoud Insurance.

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    White Paper Features Compliance-Management Best Practices

    Continuity, a CBAI marketing partner, has released a new white paper titled, “Six Best Practices for a More Efficient, Regulator-Friendly CMS.” Key objectives include understanding regulations, keeping up with changes, embedding regulatory requirements into daily operations, 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. Read Continuity White Paper. More About Continuity.

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    CBAI LEGAL: BMO Harris Bank Loses Real-Estate Tax Recovery in Foreclosure Sale

    When a mortgagee bank wants to recover real estate taxes that it paid on foreclosed property after initiating foreclosure but before judgment and foreclosure sale, the bank should amend its pleadings to reflect the increased amount sought in the judgment. That $470,000 lesson was served up to BMO Harris Bank, N.A. in an Illinois Appellate Court opinion released on August 20. Read More.

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    CBAI Attends FDIC’s Cybersecurity Awareness Presentation

    CBAI representatives participated in the Federal Deposit Insurance Corporation’s Cybersecurity Awareness Presentation in Chicago on August 11. This informative two hour presentation is being conducted at various regional offices to inform members about cybersecurity from the regulator’s perspective.

    The specific objectives of the presentation were to discuss the evolution of data security, define cybersecurity, review the threat environment, discuss information security program enhancements for cyber risk, describe the (new) Cybersecurity Assessment Tool, and provide various resources for community bankers. Read More.

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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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    ACH: Stay Informed and In Compliance Scheduled for October 1, 6, & 27

    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 2014 - 2018 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 learn what examiners are looking for relative to ACH. Fraud schemes occurring within ACH processing are outlined. In response to each risk or fraud identified, there are solutions provided to mitigate the risk to both the financial institution and its account holders. The class provides attendees with 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 are provided. ACH-Rule changes effective in 2014 and 2015, and those already approved with effective dates 2016 through 2018, are also explained in an understandable manner. Sample written statements for unauthorized debits and stop-payment forms that comply with the rules and limit the bank's liability under Regulation E are provided. Commonly made mistakes regarding ACH-Rules compliance are identified. Nicole Meinhardt, CPA, MST, AAP, and senior manager at Wipfli LLP, Sterling, IL, leads this seminar.

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    Community Reinvestment Act Seminar Scheduled for October 1

    Community Reinvestment Act (CRA) standards and requirements are part of every major banking decision. Over the years, there have been changes in the CRA regulations for banks. However, the concept remains unchanged - take care of all customers at all income levels. As CRA is not going away, all banks should be continuing the process of assuring CRA compliance. This session includes all relevant regulatory information, as well as CRA questions and answers as set forth by the regulators. Proper knowledge of the CRA regulation assists bank management in their decision process. While much of the day focuses on the formal rules, we provide plenty of time later in the day for a discussion of issues that are common to all banks. While we moderate the discussion, the subject(s) of the conversation are determined by attendees. Attendees are strongly encouraged to consider subjects for discussion. Depending on the individual bank's needs, this seminar should be attended by CRA officers, lending managers, loan administrators, senior management, compliance officers, and internal auditors. Leading this seminar is Adam Witmer, CRCM, compliance consultant with Young & Associates, Inc., Kent, OH, serving client banks in the Midwest.

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