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Community Bankers Association of Illinois
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     A Bi-Weekly News Bulletin for CBAI Members                                    October 12, 2016

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Community Bankers Association of Illinois
Community Bankers Association of Illinois Community Bankers Association of Illinois
  • CBAI ACTION ALERT: Urge Meaningful Call Report Regulatory Relief
  • CBAI Concerned Wells Fargo Fraud Will Increase Reg Burden on Community Banks
  • Fine: Community Banks the Wells Fargo Alternative
  • Court Finds CFPB Structure Unconstitutional
  • CBAI Urges CFPB to Broadly Exempt Community Banks from Payday Lending Rules
  • CFPB Issues Final Rule on Prepaid Accounts
  • Small Banks Assert Themselves in Fast-Payments Debate
  • Investment News From THE BAKER GROUP
  • Report on Community Banking Research and Policy Conference
  • October is National Cybersecurity Awareness Month
  • What Consumers Think About Cybersecurity
  • Illinois October Lender Update from the SBA
  • Managing Today’s Heightened Capital-adequacy Standards
  • Here’s a Way to Increase Mobile Deposits
  • Midwest Office Offers October Custom Calendar Promotion
  • Kasasa® Ranked Among Largest Global Fintech Providers
  • CBAI Posts New Bank Job Openings
  • CBAI LEGAL: Be Aware of Financial Institution Bond Deadlines
  • CBIS Nicoud: Considering the Benefit of Separate Limits on D&O Coverage
  • HR Round Table Scheduled for October 18
  • ACH: Stay Informed and In Compliance Set for October 19
  • CFO Conference Scheduled for October 27
  • It’s Renewal Time for the Community Bankers for Compliance Program!


  • CBAI ACTION ALERT: Urge Meaningful Call Report Regulatory Relief

    CBAI is calling on all Illinois community bankers to urge the Federal Financial Institutions Examination Council (FFIEC) to provide meaningful Call Report regulatory relief to community banks. Your response to this Action Alert will support CBAI’s comment letter which highlights the tremendous burden the Call Report represents to community banks and urges substantive relief. Please Take Action Now!

    Please respond by October 14, 2016!

    This pre-drafted Action Alert explains how the proposal falls short of providing meaningful regulatory relief for community banks, and urges a short-form Call Report for well-capitalized and highly-rated community banks (both large and small) in the first and third quarters of each year. The short-form Call Report would include the balance sheet, income statement and changes in capital schedules which would provide the regulators with the necessary information to make informed decisions about the safety and soundness of a community bank.

    The regulators have heard the community bank message about regulatory burden and they have promised a solution. At recent EGRPRA hearings the heads of the regulatory agencies stated that, if they go through this extensive decennial review process and do not make substantive changes to regulatory burden, they will have failed. Unfortunately this proposal fails to sufficiently address the regulatory burden and effect a solution.

    You should bring this regulatory failure to FFIEC’s attention and demand meaningful Call Report regulatory relief. Please Take Action Now!

    Please also share this Action Alert with your board members and senior management.

    We need a strong response from Illinois community bankers.

    Thank you for responding!

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    CBAI Concerned Wells Fargo Fraud Will Increase Reg Burden on Community Banks

    The recent U.S. House hearing for John Stumpf, Chairman and CEO of Wells Fargo (second largest bank in the nation), was as disastrous as his U. S. Senate hearing. House Financial Services Committee Chairman Jeb Hensarling (R-TX-05) stated in his opening remarks, “Fraud is fraud and theft is theft. What happened at Wells Fargo over the course of many years cannot be described any other way.” On the other side of the aisle, Ranking Member Maxine Waters (D-CA-43) provided Stumpf with no quarter when she stated in her opening remarks, “So, let’s call this what it really is: some of the most egregious fraud we have seen since the foreclosure crisis.” CBAI and ICBA are working to insure that the Wells debacle doesn't impede implementation of tiered regulatory relief. Read More.

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    Fine: Community Banks the Wells Fargo Alternative

    The widespread consumer fraud at Wells Fargo is a natural result of the very business model that has taken root at the nation’s largest financial institutions, ICBA President Cam Fine wrote in a new op-ed last week. In The Hill, Fine wrote that the transaction-based megabank business model paved the way for customer abuse at the nation’s second-largest bank.

    Fortunately for consumers, there is an alternative in relationship-based community banks, Fine wrote. “While Wells Fargo set cultural expectations that incentivized fraudulent sales scams that harmed consumers, community banks have a built-in motivation to treat their customers fairly,” he wrote.

    Earlier last week, Fine called on policymakers to ensure community banks do not get dragged into Washington’s response to the scandal. Read The Hill Op-Ed.

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    Court Finds CFPB Structure Unconstitutional

    A federal appeals court ruled that the Consumer Financial Protection Bureau’s single-director structure is unconstitutional and gave the president more power over the head of the agency.

    In PHH v. CFPB, the U.S. Court of Appeals for the D.C. Circuit said the agency concentrates “enormous executive power” in a director who cannot be removed except “for cause.” The court noted that whereas other agency heads serve at the pleasure of the president or lead boards of directors, in this case the director is unaccountable and may regulate arbitrarily. As a result, the court struck the “for cause” provision in the Dodd-Frank Act, allowing the president to dismiss the CFPB director at will.

    The ruling is part of a case in which nonbank mortgage lender PHH is appealing a June 2015 decision by CFPB Director Richard Cordray to increase a $6 million administrative law judge penalty to $109 million. Cordray’s decision held that PHH accepted payments for the referral of a settlement service business pursuant to a captive reinsurance arrangement, in violation of RESPA.

    The court agreed that RESPA allows captive reinsurance arrangements so long as the amount paid by the mortgage insurer does not exceed the reasonable market value of the reinsurance. It also ruled that the CFPB departed from prior interpretations of RESPA and violated PHH’s due process rights by retroactively applying its new interpretation of the act.

    Additionally, the court held that the CFPB does not have an unlimited window to pursue administrative actions and said that RESPA’s three-year statute of limitations applies. The three-judge panel remanded the case back to the CFPB, which is expected to appeal the decision.

    CBAI and ICBA strongly support replacing single-director governance of the CFPB with a five-member commission, a provision from the association’s Plan for Prosperity that has passed the House. ICBA President Cam Fine said restructuring the agency would promote more effective and non-partisan regulation.

    ICBA also has argued in a 2015 joint amicus brief that the CFPB’s order contravenes the plain text of RESPA, ignores years of interpretative guidance and the CFPB’s own regulations, and raises the specter of further regulatory changes without notice, which could force smaller entities to exit the marketplace. Read ICBA Statement. Read Joint Amicus Brief.

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    CBAI Urges CFPB to Broadly Exempt Community Banks from Payday Lending Rules

    CBAI urged the Consumer Financial Protection Bureau (CFPB) to broadly exempt community banks from their proposed payday lending rules. In a Comment Letter to the CFPB, CBAI recommended the proposed rules be directed at the unfair and abusive practices of other lenders and not community banks that treat their customers and communities fairly and with respect. CBAI expressed concern that the rules, as proposed, would harm community bank small-dollar consumer lending and provided the Bureau with numerous recommendations to mitigate the harmful impact of the proposed rules on community banks. Read More.

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    CFPB Issues Final Rule on Prepaid Accounts

    The Consumer Financial Protection Bureau issued its final rule expanding regulations on prepaid accounts. The CFPB rule requires financial institutions to limit consumer losses when funds are stolen or cards are lost, investigate and resolve errors, and give consumers free and easy access to account information.

    The rule effectively provides credit card protections under the Truth in Lending Act and CARD Act to prepaid accounts, such as requiring creditors to ensure consumers have the ability to repay. It also extends overdraft rules to prepaid accounts and requires new disclosures under the CFPB’s “Know Before You Owe” initiative. CBAI and ICBA are closely reviewing the final rule. Read More from CFPB. See Final Rule.

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    Small Banks Assert Themselves in Fast-Payments Debate

    Community banks have long been concerned that when the U.S. eventually adopts fast payments, the biggest banks will be in charge. But some small institutions are working hard to avoid that fate — competing head to head with the big banks in a competitive process, overseen by the Federal Reserve Board, to modernize the nation's payment system.

    The Fed said last week that 19 different proposals are currently under consideration, after three submitters decided recently to withdraw their plans. The remaining proposals — roughly 3,100 pages in all — will now be reviewed by two Fed task forces, whose nearly 500 members include people from the private sector, government and consumer groups. Read More.

    ICBA Proposes Safe, Ubiquitous Path to Faster Payments

    ICBA and the North American Banking Co. submitted their proposal to the Federal Reserve Faster Payments Task Force for a ubiquitous, secure and efficient faster U.S. payment system.

    The proposal includes a white-label mobile application and a payments directory to enable secure transactions that clear and settle through the ACH network using Same-Day ACH. The proposed All Payments App can send payments to more than 150 million account holders on day one and allows users to send funds to unbanked individuals.

    “Because the All Payments App uses banks as the distribution points and the ACH as the network, the system offers a much faster and more certain path to ubiquity,” ICBA Executive Vice President for Regulatory Policy Viveca Ware said. Read ICBA Release.

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    Investment News From THE BAKER GROUP

    Baker Market Update

    It was hoped, by the many, that the Unemployment Report would provide some of that much desired clarity to the thoughts, purposes, and actions of the FOMC. If that clarity was achieved, it was only by the few and the muted response of financial markets seems to bear that out. See Baker Market Update.

    Baker Market Strategies

    Speeds were down on the month, but with the absence of 3 business days for mortgages to close, they were effectively higher. The same themes persisted with post 2012 vintages paying the fastest. The best call protection features were seen in low loan balance paper and high LTV HARP collateral. See Baker Market Strategies.

    Baker Economic Brief

    The September jobs report came in at uninspiring increase of 156K versus economists’ expectation of 172K while August payrolls were revised up 16K to 167K. A bright spot came as the labor participation rate ticked up to 62.9%, which caused the unemployment rate to rise slightly to 5.0%. See Baker Economic Brief.

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    Report on Community Banking Research and Policy Conference

    CSBS-Federal Reserve Conference Describes the Value and Business Prospects of Community Banks

    Several key takeaways and common themes emerged from the fourth annual community banking research and policy conference hosted by the Federal Reserve System and the Conference of State Bank Supervisors (CSBS). The Community Banking in the 21st Century Conference was held September 28-29 at the Federal Reserve Bank of St. Louis and brought together academics, community bankers, and federal and state policymakers from across the country to discuss the latest research and trends in community banking.

    The research and discussions centered around three main focal points: the continuing relevance of the community bank business model, the relationship between bank size and performance, and bank regulatory issues. In addition, state regulators in 29 states held interviews with community bankers in their states. These interviews, referred to as “Five Questions for Five Bankers,” provided qualitative insights into the data collected as part of a national survey of more than 550 community banks, which was administered prior to this year’s conference. Read CSBS Release.

    Fed Finds Community Banks Face Challenges after Financial Crisis

    Community banks have faced tough business decisions in recent years as they struggle to deal with regulations and low interest rates, a Federal Reserve survey found.

    The National Survey of Community Banks cited burdens from complying with rules as the top reason the smallest institutions stopped offering specific products or services to customers. Low interest rates and rising costs have also contributed to a challenging environment.

    “Greater expenses to meet the demands of increasing regulations, the reduction of fees and interest rates to meet bank and nonbank competition, greater expenditures on cybersecurity have reduced the profitability of the business,” said an industry member quoted in the survey, unveiled at the fourth annual Community Banking in the 21st Century research and policy conference.

    While much of the focus after the financial crisis squared on reforming Wall Street banks, community banks also faced new regulations stemming from the 2010 Dodd-Frank Act. Fed Governor Jerome Powell, who spoke at the conference, said a valuable lesson from the recession was that “one size does not fit all” when it comes to rulemaking for banks. He stressed that the agency will continue tailoring regulations for banks of different sizes. Read Powell’s Remarks. Read The Hill Article.

    St. Louis Fed President Bullard: “Strong Banks. Strong Communities. Strong Economy.”

    St. Louis Federal Reserve Bank President James Bullard welcomed community bankers, regulators and researchers to the fourth annual Community Banking in the 21st Century research and policy conference, echoing what he’s heard from bankers across the Eighth Federal Reserve District—that a strong banking system supports strong communities, leading to a strong economy. Read Bullard’s Remarks.

    Chicago Fed President Evans Addresses Community Banking Conference

    Chicago Federal Reserve Bank President Charles Evans talked about monetary policy and the banking environment on September 28 during the research and policy conference held at the Federal Reserve Bank of St. Louis.

    To conclude, I feel we will likely be in a low interest rate environment for some time, which leaves monetary policymakers with less room to navigate future downside shocks should they occur. This is one reason that monetary policy is expected to normalize at a very gradual pace. And even once it has normalized, the new equilibrium likely will be one with lower interest rates than we have experienced in the past.

    This environment has been and will continue to be a challenging one for community banking performance. Deposit behavior is a particularly important topic to be further explored by academics and policymakers. I’m also interested in how this lower-for-longer scenario plays into the discussion about community banking performance at this afternoon’s research session on profitability and bank size. It is important for banks, particularly community banks, to carefully plan for the lower-for-longer rate environment and to think hard about its impact on both current and long-term earnings. And it also is critical for banks to recognize — and supervisors to evaluate — the potential effects of alternative strategies on the baseline path. Finally, it is crucial that banks have appropriate controls in place to address the associated risks to their balance sheets. Read Comments.

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    October is National Cybersecurity Awareness Month

    October is the 13th annual National Cybersecurity Awareness Month (NCSAM). Many organizations including the Department of Homeland Security, U.S. Department of State and many state banking associations are promoting awareness of this important subject. Maintaining strong cybersecurity and awareness standards is the responsibility of everyone, including the bank teller, the board of directors and even your bank’s customers. Read BankOnIT's Blog.

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    What Consumers Think about Cybersecurity

    Each year at about this time, financial-services providers are reminded to renew and strengthen vigilance against cybercrime, with various activities related to National Cyber Security Awareness Month. So, it’s a fitting time for financial institutions to not only review their cybersecurity policies and procedures, but also contemplate which issues most concern their customers. CSI did some homework for you with its 2016 Consumer Survey. Read More from CSI.

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    Illinois October Lender Update from the SBA

    Updated lender performance reports are now available. See Lender/CDC Performance for Fiscal Year 2016. See Third Party Lender/CDC Performance for Fiscal Year 2016.

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    Managing Today’s Heightened Capital-adequacy Standards

    Eager to meet more stringent regulatory requirements, community banks are embracing the growing importance of holding on to enough capital, typically through retained earnings, to keep themselves in regulatory good standing.

    Chris Cole, ICBA’s executive vice president and senior regulatory counsel, says the new Basel III capital standard that banks are transitioning to adopt through 2019 is one of the main issues “creating a challenge here for community banks” by raising the capital requirement for common equity Tier 1.

    Don Hutson Jr., a partner with BKD LLP, says that a comprehensive capital plan is critical to manage capital and avoid the need to raise additional capital from other sources. As part of such a plan, he suggests that a comprehensive dividend plan can assist a community bank in planning for its capital needs. Read More.

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    Here’s a Way to Increase Mobile Deposits

    Mobile check deposit has the lowest transaction cost when compared with in-branch and drive-through. It's no wonder that financial institutions are encouraging account holders to use this channel. So, how do you increase adoption of mobile deposit? By getting your account holders to try it! Read More.

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    Midwest Office Offers October Custom Calendar Promotion

    Midwest Office thanks everyone from CBAI who visited its booth at the CBAI 42nd Annual Convention and Expo September 15-17. Congratulations to Jennifer Marantz, Bank of Springfield, for winning a free 32" flat screen TV! Midwest introduced its newest program, MidwestSelect, and looks forward to rolling out this program to many of you in the coming months!

    As the end of the year slowly closes in, Midwest is offering a discounted rate to all CBAI Members on certain custom calendar items during the month of October. See October Special.

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    Kasasa® Ranked Among Largest Global Fintech Providers

    Kasasa®, formerly BancVue, has ranked #83 on the 2016 FinTech Forward 100 list of the leading financial-technology providers in the world for the third consecutive year. Kasasa continues to experience record sales growth, demonstrating the growing popularity of its premium, rewards-based checking and savings accounts. Currently, the company has 415 signed and launched Kasasa community institutions, representing 2,359 branches in all 50 states as well as Guam and D.C. As a result, the brand represents the sixth largest banking branch network in the nation. In addition to its FinTech ranking, Kasasa has received recognition in previous years from Austin Business Journal, BankNews, Inc. 500, Ernst & Young, Fast Company and others. The company is also a three time winner of Finovate’s Best of Show Award. Read Press Release.

    Kasasa is a preferred services provider of Community BancService Corporation (CBSC).

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    CBAI Posts New Bank Job Openings

    Check out the CBAI classified ads on our website. And don’t forget to let CBAI know if you have positions to fill. It’s a free member benefit!

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    CBAI LEGAL: Be Aware of Financial Institution Bond Deadlines

    The September 30 opinion of the First District Illinois Appellate Court in the case of Independent Trust Corporation v. Kansas Bankers Surety Company provides food for thought for community banks and their attorneys regarding deadlines for seeking indemnification from the bank’s blanket bond insurer in cases of loss caused by employee misconduct. Read Most Recent CBAI LEGAL.

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    CBIS Nicoud: Considering the Benefit of Separate Limits on D&O Coverage

    Perhaps no other aspect of your bank’s insurance program warrants the expertise of an agent that specializes in writing financial-institution coverage than the Directors and Officers insurance policies. Specific consideration must be given to policy design and the inclusion of separate limits for specific protections, as opposed to one aggregate policy limit. In our experience as banking-insurance specialists, carrying a D&O policy with separate limits is a clear and necessary best practice. In short, writing separate limits into a bank’s policy broadens the protections for directors and officers from the claims most common to banking institutions. Read More from CBIS Nicoud.

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    HR Round Table Scheduled for October 18

    As the summer of political discontent turns to the autumn of regulatory uncertainty, bank executives and HR professionals face a host of difficult employment-law compliance decisions. Federal agencies continue to issue new regulations and guidance interpretations that seem to provide more questions than answers. Many legal commentators predict the outcome of the presidential election will provide regulatory clarity. Some banks have taken a wait-and-see approach; others have taken a more pro-active posture. Regardless of a senior management team's problem solving style, the guardians of bank human capital need to understand the evolving legal landscape to foster the business decision-making challenges next season promises to deliver. This highly interactive and entertaining HR Round Table will provide practical guidance by legal practitioners and your sophisticated peers on the issues most important to our members. Lenny Sachs, Tracy Litzinger, Emily Bennett, and Michael Powers with Howard & Howard are the speakers for this seminar.

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    ACH: Stay Informed and In Compliance Set for October 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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    CFO Conference Scheduled for October 27

    CBAI’s annual CFO Conference is designed to help community-bank CFOs gain a wide variety of information from expert speakers on hot topics and return to the bank ready to implement newly found ideas and knowledge! This conference not only benefits chief financial officers, it is also geared toward presidents, CEOs, and anyone else who is involved in controlling expenses and increasing profitability for their community banks. Topics and speakers include “Interest Rate Risk Case Study: Managing Through the Turn in Rates” with Matt Harris, vice president of the Financial Strategies Group, THE BAKER GROUP, Oklahoma City, OK; “Preparing for CECL: Financial Considerations and Data Preparation” with Tommy Troyer, executive vice president of Young & Associates, Inc., Kent, OH; “Overcoming Today’s Operational Challenges at Your Bank” with Heather Archer Eastep and Robert Flowers, partners at Hunton & Williams, LLP, Richmond, VA; and “Non-Interest Income: The Performance Difference” with Michael Slater, president of VITAL Financial Services, Clive, IA; and “Accounting Update” with Michael Brown, partner, and Toby Handel, senior manager, of Wipfli, LLP, Sterling, IL.

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    It’s Renewal Time for the Community Bankers for Compliance Program!

    Now more than ever the community bank is faced with a bewildering array of ever-changing regulations. While all banks strive to be in compliance, the regulatory requirements can seem to be overwhelming. Most community banks do not have the time or money to build elaborate compliance systems. In response to these facts, CBAI has teamed up with Young & Associates of Kent, OH to offer "The Community Bankers for Compliance" (CBC) program. Now beginning its twenty-eighth year, this program provides you a cost-effective approach to obtaining up-to-date information concerning bank regulations and practical techniques for maintaining an effective compliance program. The Community Bankers for Compliance Program reduces the risk of regulatory action by reducing compliance errors, since your employees have a better understanding of regulatory requirements, and saves you time and money because the experts at Young & Associates translate each regulation into understandable language, developing model policies, training instruments, and audit procedures for you. The first quarter of the CBC program, entitled “Mortgage Lending Under Regulation Z (Omitting TRID),” is being offered November 1 & 2 in Springfield and Lisle, respectively.

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