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Community Bankers Association of Illinois
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     A Bi-Weekly News Bulletin for CBAI Members                            September 17, 2014

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Community Bankers Association of Illinois
Community Bankers Association of Illinois Community Bankers Association of Illinois
  • CBAI Unveils Mobile Smartsite for the 40th Annual Convention!
  • 2014 CDD Fall Meeting Slated for October 20-21 in Champaign
  • CBAI Endorses David Pirsein for the Chicago FHLB Board
  • 2015 CBAI Essay Contest for 26 Scholarships Now Underway!
  • Home Depot Should Bear the Cost of Its Data Breach
  • Fine Spotlights Overwhelming Regulation in New Video
  • CBAI Urges FHFA to Grant More Time to Comment on Proposed Rule
  • Recent Actions to Resolve Too-Big-To-Fail Banks Fall Short
  • Senators Say Billion Dollar Fines Against Mega Banks Not Enough
  • Baker Market Update
  • The Baker Group Offers Primer on SBA Securities
  • Farm Credit Seeking to Implement Non-Farm Investment Proposal
  • Latest Federal Reserve Beige Book Economic Report Released
  • CBAI Legislative News from the Front
  • Success or Failure: Choosing the Right Cloud Can Make All the Difference
  • CBSC and Diversified Extend Relationship to Help Community Banks Earn Fee Income
  • Mortgage-Protection Insurance: Is A Necessary Risk-Management Tool
  • News from the Bench: Bank Gets “Mulligan” Bid in Foreclosure Sale
  • Bank Policies Publication Now Available
  • FHLB Chicago Announces Financial Strategies Webinar
  • Record Yield Predicted for Illinois Corn Crop
  • ATMs Still Popular for Consumers
  • How Are Banks Performing ALLL Model Validations?
  • The September Issue of Banknotes Magazine Is in the Mail
  • Safe Deposit Operations, Compliance, Legal & Disaster Issues Set for October 1
  • Run, Hide, Fight, or Comply? Robbery Training Scheduled for October 8
  • Ag Credit Analysis to be Held October 9
  • Appraisal Review Scheduled for October 15


  • CBAI Unveils Mobile Smartsite for the 40th Annual Convention!

    Again this year, CBAI is excited to unveil a mobile smartsite for the 40th Annual Convention & Expo. Designed to give you access to all of the convention information at your fingertips, the smartsite can be easily downloaded on your mobile device by scanning a QR code. (You can download a free QR code reader through your mobile-device app store). The smartsite will include a complete schedule of events including locations and hotel maps, keynote-speaker bios, break-out session write-ups, a list of exhibitors and sponsors, details on social events and partners’ programs, and more! You can even access handouts from each of the 20 break-out sessions on your mobile device during the event. The QR code is now available and can be scanned from the link below, or at convention from your convention program book, convention signs that will be posted at the Marriott Downtown during the event, and a flier provided in your registration folder. The mobile smartsite was created by Systemax Corporation, Springfield, IL, a CBAI associate member focusing on bank marketing and materials management. We look forward to seeing you in Springfield on September 18-20, 2014, at CBAI’s “Looking to the Past to Plan for the Future!” See Smartsite Code. For more information on the 40th Annual Convention & Expo, please click here.

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    2014 CDD Fall Meeting Slated for October 20-21 in Champaign

    Be a Game-Changer! That is the challenge presented at the General Session for the CDD Fall Meeting.

    • Change bad habits to achieve your goals.
    • Overcome road blocks in communication.
    • And more!

    To view the brochure and to register, please click here or contact Melinda McClelland at 217.529.2265.

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    CBAI Endorses David Pirsein for the Chicago FHLB Board

    CBAI is urging all community banks to vote only for David Pirsein, President and CEO of First National Bank in Pinckneyville, for election to the Federal Home Loan Bank of Chicago Board of Directors.

    The ballots are scheduled to be mailed to all FHLB member institutions next week, and they must be mailed to the FHLB and received by October 31st. Banks need to adopt a board resolution to be eligible to vote. See Announcement.

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    2015 CBAI Essay Contest for 26 Scholarships Now Underway!

    Get on your area’s high-school radar screen. Start publicizing the CBAI Foundation for Community Banking’s annual essay contest for deserving high-school seniors. No cost to banks to participate! See Details. For the full kit to get you started contact Bobbi Watson at bobbiw@cbai.com.

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    Home Depot Should Bear the Cost of Its Data Breach

    The massive payments card data breach at Home Depot has attracted the attention of Congress. Senators have launched an inquiry into the breach of nearly 2,200 U.S. and Canadian stores and are seeking answers from the retailer’s executives and federal regulators.

    In a letter to Home Depot’s chief executive, Senate Commerce Committee Chairman Jay Rockefeller (D-W.Va.) and Subcommittee on Consumer Protection Chairman Claire McCaskill (D-Mo.), the ICBA requested a briefing on the breach from the company’s information-security officials.

    Senators Richard Blumenthal (D-Conn.) and Edward Markey (D-Mass.) sent a letter to the Federal Trade Commission urging a formal investigation into the breach. The lawmakers raised concerns over Home Depot’s responsiveness to the attack, particularly following other retailer data breaches.

    CBAI and ICBA have publicly stated that the costs of reissuing cards should ultimately be borne by the party that experiences the breach. ICBA offers an online toolkit with resources community bankers can use to respond to security breaches. See ICBA Letter. Read Senators’ Letter. See ICBA Statement. See ICBA Data Breach Toolkit.

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    Fine Spotlights Overwhelming Regulation in New Video

    Washington has responded to the financial crisis with overzealous regulation of even the smallest community banks, ICBA President and CEO Cam Fine told American Banker in a new video recorded during ICBA’s recent media tour in New York City. Fine spotlights the increasingly antagonistic attitude of examiners and growing government overreach, exemplified by the Operation Choke Point initiative. Watch Cam Fine's American Banker Video.

    The media tour has generated several articles on ICBA’s regulatory relief proposals, including a Bloomberg News article on the potential community bank impact of new mortgage rules. Fine met last week with representatives of The Wall Street Journal, The New York Times, Bloomberg and American Banker to expand awareness of the community banking industry’s top policy priorities. See Bloomberg Article.

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    CBAI Urges FHFA to Grant More Time to Comment on Proposed Rule

    The Federal Housing Finance Agency (FHFA) has proposed significant revisions to Federal Home Loan Bank membership eligibility requirements. If adopted the Propose Rule would have a profound impact on the FHLB System, FHLBanks and FHLB members. A thorough analysis and in-depth discussion of the intended and unintended consequences of the Rule requires an extension of the proposed 60 day comment period. CBAI has submitted a formal request to the FHFA to extend the comment period by at least an additional 60 days. Read CBAI Letter.

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    Recent Actions to Resolve Too-Big-To-Fail Banks Fall Short

    Recent regulatory actions to subject big U.S. banks for the first time to “liquidity” requirements (the ability to access cash quickly) have been met with skepticism by lawmakers and industry analysts alike. The decision will require big banks to hold enough cash, government bonds and other high-quality assets to fund operations for 30 days during a time of market stress. See ABC News Article.

    Federal Reserve Governor Daniel Tarullo said, “This measure might also create incentives for them to reduce their systemic footprint and risk profile.” The rules will begin to take effect in January, 2015, and be phased in over two years. Not surprisingly, the big banks are fighting its implementation. See New York Times Article.

    Banking consultant J.V. Rizzi, who is also a banking instructor at DePaul University in Chicago, believes that raising equity capital levels could reduce the benefits of being big but concluded that it is impossible to neatly unwind a failed SIFI. He also noted that “living wills” are a myth meant to calm the populace. Instead, he recommends reducing the size of mega banks so that they are small enough to fail which could be accomplished through ring-fencing various business lines and spinning off others. Rizzi predicted that, unless this approach is implemented, big banks will continue to blow up and taxpayers will continue to rescue them. See AB Article.

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    Senators Say Billion Dollar Fines Against Mega Banks Not Enough

    Criticize Regulators and Justice Department for Failing to Hold Individuals Accountable

    During a recent Senate Banking Committee hearing, Senator Elizabeth Warren (D-Mass.) criticized the Federal Reserve and other agencies for not prosecuting individuals at mega banks for wrongdoing despite the payment of more than $100 billion in fines for various violations of law. She said, “Without criminal prosecutions, the message for every Wall Street banker is loud and clear. If you break the law, you are not going to jail but you might end up with a much bigger paycheck.”

    The ranking Republican on the Committee, Senator Richard Shelby (R-Ala.), agreed and emphasized that no one in the financial sector should be “able to buy their way out from culpability when it’s so strong it defies rationality.” See WSJ Article.

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    Baker Market Update

    Two separate Indexes show consumer optimism is on the rise, as are retail sales. Last week was also a good period for Treasury Bonds, with new auctions of three-year notes, 10-year notes, and 30-year bonds soaking up $61B as bidding produced slightly higher yields compared to August's refunding. In addition, Consumer Credit vaulted to $26B from $18.8B. See Baker Update.

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    The Baker Group Offers Primer on SBA Securities

    THE BAKER GROUP has prepared a primer on SBA securities as guidance for community banks. See BAKER Market Strategies Report.

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    Farm Credit Seeking to Implement Non-Farm Investment Proposal

    The Farm Credit Administration, regulator of the Farm Credit System, appears to be seeking to implement, without a formal rulemaking process, its long-sought rural community investments program aimed at allowing FCS lenders to make non-farm investments.

    Last November, the FCA withdrew its proposed regulation adopted by the board in May 2008 and said all FCS investment pilot projects would come to an end within 12 months. However, the FCA has now published an “informational memorandum” that lays out a series of questions by which FCS lenders can request FCA approval of non-farm investment programs.

    The memorandum requests FCS’s determination that the requesting association maintains sufficient capacity to manage investment risks, including reputation, and legal risk arising from the investments. The memorandum requires information on how the investment benefits rural communities, businesses or agriculture. It also requires information on how institutions determine whether the community or business is in a rural area and asks for a list of other non-FCS financial institutions that will participate.

    CBAI and ICBA oppose this program and do not believe the FCA and FCS have legal authority to allow non-farm lending activities not authorized in statute simply by claiming these lending activities are “investments” (FCA’s stated rationale for the program). See FCA’s “Informational Memorandum.”

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    Latest Federal Reserve Beige Book Economic Report Released

    The Beige Book, published eight times per year by the Federal Reserve System, reports on current economic conditions in each Federal Reserve District. Overall, economic activity has expanded since the last Beige Book report in July; however, none of the Districts pointed to a distinct shift in the pace of growth.

    For the Chicago District, economic growth remained moderate in July and August with survey contacts maintaining an optimistic outlook. Credit conditions improved modestly, and consumer loan demand increased moderately. For the St. Louis District, the economy expanded at a modest pace since the July report with lending activity essentially unchanged. See Beige Book. See Chicago District Report. See St. Louis District Report.

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    CBAI Legislative News from the Front

    The Governor has completed his action on legislation that passed in the 2014 spring session. The Illinois General Assembly is scheduled to return to Springfield November 19 - 21, and December 2 - 4 to take action on bills vetoed by the Governor. Read NFTF Article.

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    Bank Policies Publication Now Available

    Alleviate the tedious task of developing bank policies from scratch! These policies and procedures developed by Young & Associates provide a quick reference with thorough, easy-to-read instructions to navigate through the policy development or revision process. There are more than 95 policies to choose from covering compliance, lending and management series. Using any standard word processor and following the instructions provided, the policies can be customized for each bank.

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    FHLB Chicago Announces Financial Strategies Webinar

    Presentation to be Conducted by Baker Group Representatives

    The Federal Home Loan Bank of Chicago is hosting a special webinar titled “Financial Strategies for an Economy in Transition” which will be held from 3:00 to 4:00 p.m., Thursday, September 25th. The presentation will focus on interest rate risk and investment management as the economy transitions into a new phase. Two professional market analysts from The Baker Group, Ryan Hayhurst and Jeffrey Caughron, will conduct the webinar. The Baker Group is the only institutional investment broker dealer firm recommended by CBAI. See FHLB Webinar Announcement.

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    Success or Failure: Choosing the Right Cloud Can Make All the Difference

    Recent news that nearly 100 celebrities’ iCloud accounts were hacked has placed technology issues and information security concerns at the top of the list for many of us. At this point it’s difficult to say from the outside where the vulnerability occurred. The celebrities may have used easily guessed passwords or perhaps they accessed their accounts from a compromised public network. Maybe some other security vulnerability was exploited.

    It's important for bankers to know the difference between public and private clouds. Private cloud computing provides many advantages for banks. Read BankOnIT Article.

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    CBSC and Diversified Extend Relationship to Help Community Banks Earn Fee Income

    Springfield, IL. (September 15, 2014) - 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 Diversified Crop Insurance Services, a provider of crop insurance and grain marketing services. This agreement gives CBAI member banks access to tools that help their farm clients develop an overall risk management program. See Article.

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    Mortgage-Protection Insurance: Is A Necessary Risk-Management Tool

    We all know there’s no issuing a home loan without the proper guarantee that the home is adequately insured. But what if it isn’t? Read More.

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    News from the Bench: Bank Gets “Mulligan” Bid in Foreclosure Sale

    Due to a procedural snafu that was not prevented by the debtor-mortgagor, a bank was able to get a “second bite at the apple” and reduce its winning bid at two sales of the same foreclosed real estate. See Details of the decision rendered in August by the Second District Illinois Appellate Court in the case of ING Bank, FSB vs. Tanev.

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    Record Yield Predicted for Illinois Corn Crop

    The Allendale Inc. Yield Survey, conducted in mid-August, indicated that Illinois farmers could harvest a record average yield of 199 bushels per acre as a result of consistently high forecasts across the state. For soybeans, the Allendale survey estimated record Illinois yields at 55 bushels per acre. See Farm Week Now Article.

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    ATMs Still Popular for Consumers

    According to the Federal Payments Study Detailed Results, consumers still look to ATMs for cash withdrawals. Nearly six billion ATM withdrawals were made in 2012, compared to two billion in-person withdrawals at brick-and-mortar locations. See SHAZAM Blog. See Federal Payments Study.

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    How Are Banks Performing ALLL Model Validations?

    To help bank and credit union executives better understand the supervisory guidance on ALLL model validation, Sageworks and Crowe Horwath partnered to deliver a webinar in July. The session addressed the three main components of ALLL model validation. During the webinar, over 500 bankers were polled about their model validation practices. The first question asked attendees when they last completed an ALLL model validation. See Poll Results. See Article.

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    The September Issue of Banknotes Magazine Is in the Mail

    Click here for a sneak preview of the latest Banknotes!

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    Safe-Deposit Operations, Compliance, Legal & Disaster Issues Set for October 1

    Are your internal safe-deposit procedures now in compliance with all state and federal security regulations and do you follow correct day-to-day operating procedures? This timely and comprehensive presentation contains important information about your “Most Frequently Asked” operations and compliance questions. It covers the SCRA, USA Patriot Act, Suspicious Activity Reporting, Bank Protection Act, OCC, FDIC, NCUA and ADA regulatory requirements, plus recommended procedures for renting, surrendering, box access, key control, deceased renters, living trusts, payable-on-death accounts, delinquent boxes, record retention, unclaimed property and many other legal and operation issues. David McGuinn, a nationally known expert in the area of safe deposit, leads this
    program. McGuinn will provide clear, concise answers to complicated questions regarding your institution's responsibility and potential liability. He identifies and discusses various compliance issues and provides correct procedures for each regulatory, operations, liability, and disaster topic. McGuinn, president and founder of Safe Deposit Specialists, is a former banker with 45 years of safe-deposit experience.

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    Run, Hide, Fight, or Comply? Robbery Training Scheduled for October 8

    Thinking it was a normal bank robbery, three bank employees complied with the demands of the “robber.” He ultimately took all three employees hostage as part of a rambling daylong ordeal that ended in tragedy, and not until it was too late did anyone realize that the perpetrator never intended to rob the bank. Bank employees in other market areas began asking: What should I do if I am ever in the same position? At what point do I consider other alternatives rather than complying with the robber’s demands? How do you know what to do if it looks like it’s a robbery but then it’s not? Help, I need some guidance to deal with a new world of active threats! Jim Rechel of The Rechel Group, Inc. who worked with the bank and its employees to develop a response to the tragedy, and provided guidance for the future, leads this program. We have put the ideas and strategies together into a full-day workshop for institutions of all sizes and locations, to provide information that can better equip you to deal with “active threats” in the workplace.

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    Ag Credit Analysis to be Held October 9

    An agricultural loan officer's responsibility is to perform sound credit analyses and make loans to good customers. This requires a strong understanding of basic agricultural credit analysis, as well as, the drivers of change in the agricultural production sector. The overall objective of this program is to prepare participants to be informed and effective leaders in agricultural lending. A primary focus of the workshop is to review the basic financial statements and ratios that are important to measuring and monitoring the credit risk of agricultural borrowers. Case studies and computerized decision tools are used to illustrate the important concepts. Other contemporary issues such as farmland markets, rental agreements, crop insurance, and other risk management tools are discussed. All participants receive a complimentary copy of computerized decision tools used in the workshop. Leading this seminar is Dr. Paul Ellinger, professor at the University of Illinois, in Champaign-Urbana. He is currently head of the Department of Agricultural and Consumer Economics at the University of Illinois.

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    Appraisal Review Scheduled for October 15

    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 doesn’t 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 will be 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, a consultant in the lending division of Young and Associates, Inc. For more information or to register, please click here.

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