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     A Bi-Weekly News Bulletin for CBAI Members                     October 30, 2013 Graphic
Community Bankers Association of Illinois
Community Bankers Association of Illinois Community Bankers Association of Illinois
  • State Police Release Official Firearm Concealed Carry Sign
  • JP Morgan Settles DOJ Legal Issues for $13 Billion
  • American Banker Editor Cites Ongoing Wall Street Wrongdoing
  • ICBA’s Fine: “Wall Street’s Funding Advantage All Too Real”
  • ICBA/CBAI Support Megabank Supplementary Leveraged Capital Standards
  • Rural Community Banks Best at Banking 101
  • BankOnIT Strategic Technology Update: Why Next IT Exam Will Be More Difficult
  • CBAI Offers Complete Compliance Solutions for Your Bank
  • ICBA/CBAI Advocate Legislation to Curtail Patent Trolling
  • SBA Lowers Fees to Increase Lending
  • FHLBC Announces Third Quarter Dividend
  • Baker Market Update
  • Rural Mainstreet Economic Index Remains Positive in September
  • Consumer Confidence Drops in October
  • CBAI Meets with Chicago Federal Reserve Bank President Charles Evans
  • Data Breach Insurance a MUST for Community Banks
  • Legislation to Address Abusive Patent Litigation Introduced in U.S. House
  • Federal Regulators Provide Guidance on Qualified Mortgage Fair Lending Risks
  • Guidance on Certain Issues Related to Troubled Debt Restructurings
  • Consumer Tips on Cybersecurity
  • Final Week to Register for FREE Webinar: Discover Untapped Profitability
  • Survey of UCC Article 9 Professionals Being Conducted
  • Banks and Mortgage-Software Vendors Scramble to Adapt to QM Rule
  • Time to Train the Lending Trainer – Compliance Quarterly on November 5 & 6
  • Seminar for Community Bank Attorneys Scheduled for November 15
  • Ag Credit Analysis Seminar to be Held November 15
  • Women in Community Banking Conference Set for November 19

  • State Police Release Official Firearm Concealed Carry Sign

    The Illinois State Police has released the official design for signs warning bank customers that guns are not allowed in the bank. The law permitting concealed carry passed this summer and becomes effective January 5, 2014. However, businesses that post the official sign may prohibit weapons on the premises. Banks must clearly and conspicuously post the Illinois State Police approved sign, in accordance with Firearm Concealed Carry Act, at the entrance of the building, premises or real property.

    According to the release, “Pursuant to Section 65(d) of the Firearm Concealed Carry Act, signs must be of a uniform design and the Illinois State Police is responsible for adopting rules for standardized signs. The Illinois State Police has proposed rules which require a white background; no text (except the reference to the Illinois Code 430 ILCS 66/1) or marking within the one-inch area surrounding the graphic design; a depiction of a handgun in black ink with a circle around and diagonal slash across the firearm in red ink; and that the circle be 4 inches in diameter. The sign in its entirety will measure 4 inches x 6 inches.” But the State Police has proposed changes that would allow businesses to make the signs larger if desired as well as to include additional language, according to the news release.

    CBAI and Systemax Offer Free Signs

    CBAI members can order the approved signs in color
    here FREE of charge from Systemax, the Association’s Preferred Vendor for printing and supplies management; or they can download a template from the State Police web site. Links to related sites:

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    JP Morgan Settles DOJ Legal Issues for $13 Billion

    Is Justice for Sale?

    In an effort to resolve numerous civil penalties, lawsuits and investigations brought by the U.S. Department of Justice and the state of California and New York over its mortgage securities dealings, the nation’s largest mega bank has negotiated a stunning $13 billion settlement. As part of the deal, JPMorgan has agreed to pay $5.1 billion in settlements to the Federal Housing Finance Agency, Freddie Mac, and Fannie Mae. The settlement has raised concerns that justice may be for sale.

    CBAI has repeatedly expressed concern over the lack of criminal prosecutions among the mega banks in stark contrast to community banks which constitutes an unconscionable double standard.
    See WSBE Article.

    Settlement Could Implode

    Certain disagreements between JPMorgan and the Department of Justice have not been resolved, according to multiple reports, and the settlement could collapse. One of the sticking points concerns criminal prosecution, where JPMorgan want the deal to give the bank extra legal protection from criminal probes that could put bank officers and directors at risk of prosecution. See Fox Business Report.

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    American Banker Editor Cites Ongoing Wall Street Wrongdoing

    Neil Weinberg, editor-in-chief of American Banker, recently penned an article expressing his opinion that, despite Dodd-Frank, Wall Street remains a place where a lot of very bad behavior continues to take place out in the open. He cited areas for abuse such as financial advisory services, pension fund investing, management buyouts, and incestuous ties between Wall Street and Washington.
    See American Banker Article.

    Study: Politically Connected Banks More Likely to Get Emergency Funding

    Last week George Mason University released a study which concluded that politically connected banks were more likely to receive emergency bailout funding than non-politically connected banks. The extraordinary policy responses to the 2008 financial crisis included the emergency lending program by the Federal Reserve to domestic and foreign mega banks, eventually totaling $16 trillion. See George Mason Release.

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    ICBA’s Fine: “Wall Street’s Funding Advantage All Too Real”

    In an American Banker article today, ICBA President Cam Fine cites reasons why the Government Accounting Office should see through the smoke and mirrors of the Wall Street spin machine as the GAO completes its study on the funding advantage of the too-big-to-fail mega banks.
    See BankThink Article.

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    ICBA/CBAI Support Megabank Supplementary Leveraged Capital Standards

    ICBA and CBAI expressed support for a proposed rule to require higher supplementary leverage ratio capital standards on large financial institutions. Under a proposal issued in July, regulators would apply a 6 percent supplementary leverage ratio to the eight largest insured banking organizations and a 5 percent standard on their bank holding companies. The higher capital levels would apply to bank holding companies with $700 billion or more in total consolidated assets or more than $10 trillion in assets under custody.
    Read ICBA Comment Letter.

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    Rural Community Banks Best at Banking 101

    A recent Bloomberg article said several studies in the past year have confirmed that rural community banks make smarter loans than banks in other markets. According to the FDIC, in every five-year period since 1991, a lower percentage of loans from community banks has gone bad. The article also noted that SBA loans from rural banks to rural customers were only 70% as likely to default as those from urban banks to urban customers.
    See Bloomberg Article.

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    BankOnIT Strategic Technology Update: Why Next IT Exam Will Be More Difficult

    Thomas Curry, Comptroller of the Currency recently commented in a speech, “[O]ne of my top priorities is to make sure that . . . the banks that we supervise are doing everything possible to guard against cyber threats.” He also referred to community banks eight separate times during the speech. CBAI marketing partner BankOnIT offers helpful suggestions to prepare for your next IT exam.
    See BankOnIT Strategic Technology Update.

    As BankOnIT clients, community banks have moved their servers out of their banks to a secure location that can withstand an F-5 tornado, managed by some of the brightest minds in the IT world, that passes every IT regulatory exam, never experiences down-time, installs all updates and security patches on a regular basis, and the banks never have to replace a server again. BankOnIT's Bankers Private Cloud and managed IT services provide data and infrastructure protection, systems availability and recovery, fraud detection and mitigation, and helps bankers better manage the pace of technological change. Read More About BankOnIT Services.

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    CBAI Offers Complete Compliance Solutions for Your Bank

    Regulatory compliance has intensified in this age of consumer protection, transparency, and full disclosure. Community banks face unprecedented compliance challenges today, and CBAI has the solutions: 1) comprehensive education and training, and 2) an automated compliance management system.

    The highly-acclaimed Community Bankers for Compliance Program (CBC), now in its 25th year with Young & Associates, conducts quarterly educational sessions with ongoing support services. More than 150 CBAI members participate in this important service. The first quarterly session is November 5th and 6th, and there’s still time to register.
    See CBC Program Benefits. Register for CBC Program.

    CBAI also recommends the Continuity Control compliance management system that standardizes and automates compliance across the bank, thus enabling the bank to handle regulatory changes with speed, accuracy and agility and reducing risk. See Continuity Control Article.

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    ICBA/CBAI Advocate Legislation to Curtail Patent Trolling

    On Tuesday, October 29th, ICBA testified in support of H.R. 3309 (The Innovation Act of 2013) as a strong first step to address the proliferation of patent-assertion entities that allege patent infringement by legitimate businesses, including community banks. CBAI and ICBA believe that, as end users of products purchased from vendors, community banks should not be on the hook for the infringement claims related to those products. In testimony, ICBA urged Congress to amend current law to ensure that vendors provide appropriate warranties and indemnification to protect end users from infringement claims.
    Read ICBA Testimony.

    CBAI members should contact Jerry Cavanaugh, CBAI Legal Counsel, with any questions on this issue at or 800/736-2224 (instate).

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    SBA Lowers Fees to Increase Lending

    Earlier this month the U.S. Small Business Administration, in an effort to stimulate more small business lending, eliminated the upfront two percent (2%) fee, plus an ongoing monthly service fee for loans of $150,000 and less. The change became effective October 1st, the start of the SBA's new fiscal year.
    See SBA Article.

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    FHLBC Announces Third Quarter Dividend

    Last week the Federal Home Loan Bank of Chicago announced a cash dividend for both Class B1 and Class B2 capital stock. This marks the first time the FHLBC has paid an enhanced dividend on Class B1 activity stock. In a letter to FHLBC member institutions, President Matt Feldman also encouraged attendance at member meetings in November.
    See FHLBC Letter.

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    Baker Market Update

    Information received since the Federal Open Market Committee met in September generally suggests that economic activity has continued to expand at a moderate pace. Indicators of labor market conditions have shown some further improvement, but the unemployment rate remains elevated.
    See Baker Market Update.

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    Rural Mainstreet Economic Index Remains Positive in September

    While growth for the Rural Mainstreet economy remains positive, it slowed a bit in September, according to the monthly survey of bank CEOs in a 10-state area including Illinois. Lower grain prices this year were cited as the main reason for slowing growth. The Rural Mainstreet Index (RMI) for Illinois, however, advanced to 52.2 from growth neutral 50.0. The RMI for Illinois has remained at or above growth neutral for 12 straight months.
    See Mainstreet Economy Report.

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    Consumer Confidence Drops in October

    The Consumer Confidence Survey decreased sharply in October, attributable primarily to the federal government shutdown and debt-ceiling crisis. Consumers expecting business conditions to improve over the next six months fell to 16.0 percent from 20.6 percent last month, while those expecting business conditions to worsen increased to 17.5 percent from 10.3 percent.
    See Consumer Confidence Survey Report.

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    CBAI Meets with Chicago Federal Reserve Bank President Charles Evans

    CBAI representatives met last week with Federal Reserve Bank of Chicago President and CEO Charles L. Evans. Participating in the meeting were: David Schroeder, CBAI Vice President Federal Governmental Relations; Greg Ohlendorf, President and CEO of First Community Bank and Trust in Beecher and Chairman of ICBA’s Policy Development Committee; Julie Williams, Federal Reserve SVP (Community Bank and Consumer Compliance Division / Supervision and Regulation); and Steven Durfey, SVP (Risk Specialist Division / Supervision and Regulation). A wide range of topics were discussed during the meeting, including the new Fed Chairman nomination, monetary policy, too-big-to-fail, regulatory relief, tiered regulation for community banks, and observations on Basel III.
    Read More.

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    Data Breach Insurance a MUST for Community Banks

    According to a Verizon 2011 Data Breach Study, more than one billion data records have been compromised as the result of 1,700 breaches since 2004. The International Risk Management Institute estimates the average cost per compromised record is $214.00. As a highly-regulated profession, banks incur greater costs than most other business sectors. As a result, bank regulators have indicated that future bank examinations will include a more thorough evaluation of potential technology-related exposures.
    Learn More.

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    Legislation to Address Abusive Patent Litigation Introduced in U.S. House

    House Judiciary Committee Chairman Bob Goodlatte (R-Va.) introduced legislation to address the ever-increasing problem of abusive patent litigation. The Innovations Act of 2013 would address the proliferation of patent-assertion entities, which assert infringement of poor-quality business-method patents by legitimate businesses, including many community banks.

    ICBA staff is still reviewing the bill, which includes an ICBA-advocated provision that would allow the director of the Patent and Trademark Office to waive the costly filing fee required to initiate a transitional proceeding at the PTO that re-examines the validity of these patents. Absent a waiver, it would be cost-prohibitive for community banks to petition the PTO.

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    Federal Regulators Provide Guidance on Qualified Mortgage Fair Lending Risks

    Five federal regulatory agencies issued a
    statement to address questions about fair lending risks associated with offering only Qualified Mortgages. Creditors have asked for clarity regarding whether the disparate impact doctrine of the Equal Credit Opportunity Act (ECOA) and its implementing regulation, Regulation B, allows them to originate only Qualified Mortgages. For the reasons described in the statement, the five agencies do not anticipate that a creditor’s decision to offer only Qualified Mortgages would, absent other factors, elevate a supervised institution’s fair lending risk.

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    Guidance on Certain Issues Related to Troubled Debt Restructurings

    Federal agencies have jointly issued
    supervisory guidance on certain issues related to commercial and residential real estate loans that have undergone troubled debt restructurings (TDRs). This guidance applies to all national banks (including community banks), federal savings associations, and federal branches and agencies of foreign banks.

    This guidance reiterates key aspects of previously issued regulatory guidance and discusses the definition of collateral-dependent loans and the circumstances under which a charge-off is required for TDRs. The guidance also elaborates on the concept of “operation of collateral” for repayment. The agencies continue to view prudent modifications as positive actions when they mitigate credit risk, and will not criticize banks for engaging in prudent workout arrangements, even if the modified loans result in TDRs.

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    Consumer Tips on Cybersecurity

    As part of Cyber Security Awareness Month, ICBA is offering tips to help consumers stay informed on how to prevent their financial information from being stolen and misused. In a
    news release that community bankers can customize and share in their local communities, ICBA encouraged consumers to:
    • use unique passwords for all financial online accounts,
    • not save financial information on a computer, phone or tablet,
    • be careful about using a password on mobile devices,
    • not provide secure financial information over the phone or Internet if there is uncertainty of who is asking for it, and
    • know the location of their mobile devices at all times.
    More information about Cyber Security Awareness Month is available on the Stay Safe Online Website. Read ICBA Release. Access Customizable Release.

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    Final Week to Register for FREE Webinar: Discover Untapped Profitability

    With net interest margins getting squeezed and pending threats against non-interest income, banks are looking for new avenues of profit. This webinar provides proven tactics for improving the analysis of your current deposit portfolio.

    • Learn why factoring in cost of deposits is essential in determining true marginal profitability.
    • Gain insights on the full impact of deposit vehicles designed to increase your profits.
    Utilizing true profitability metrics, you won't leave huge opportunities on the table.

    Featured speaker, Gabriel Krajicek, chief executive officer, BancVue.
    Register Now!

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    Survey of UCC Article 9 Professionals Being Conducted

    CBAI associate member Corporation Service Company (CSC) is conducting a
    survey of UCC Article 9 professionals. CSC would appreciate your participation and, by participating, you may gain interesting insights about what other bankers are doing. Please note that the survey closes in December. See News Release.

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    Banks and Mortgage-Software Vendors Scramble to Adapt to QM Rule

    The new qualified-mortgage rule is pressuring vendors of loan origination systems to work with lenders to re-code their systems. There's a lot of work to be done before the January 10 deadline.
    Read More.

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    Time to Train the Lending Trainer – Compliance Quarterly on November 5 & 6

    Compliance session completes the discussion on the new 2014 regulations. The comprehensive manual that is provided at each quarterly session is designed to train bank staff on the new rules. The final rules are not complete as at least one change to the appraisal rule is pending, and it may or may not be final prior to this session. The manual will be updated as the rules evolve, and new pages will be placed on the web page as the CFPB finally makes up its mind. This seminar is the first quarterly session of the Community Bankers for Compliance (CBC) program. The presentation will be primarily lending related. The manual and discussion will take the 700 or so pages created for CBC presentations this year and reduce them into a teaching format that allows you to accomplish what you need to get done in your bank prior to January.

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    Seminar for Community Bank Attorneys Scheduled for November 15

    To help community bank attorneys obtain the latest information regarding the myriad of legislative, legal, and regulatory mandates facing community banks, as well as to meet the Supreme Court of Illinois-ordered requirements for Minimum Continuing Legal Education (MCLE), CBAI developed this comprehensive one-day education session entitled,
    Seminar for the Community Bank Attorney.” CBAI has applied for 5.5 hours of MCLE credit. Any attorney who sits on a community bank board of directors, acts as legal counsel to a community bank, or has an interest in these topics would benefit from attending. Scheduled for November 15 in Springfield, this seminar utilizes the expertise of a number of attorneys who specialize in banking law and related topics including an update on state laws and court cases impacting community banks; how to protect the secured lender in bankruptcy; an overview of bank ESOPs; privacy in the workplace; and the Illinois Mortgage Foreclosure Law. Speakers include Jerry Cavanaugh, Community Bankers Association of Illinois, Springfield; Kevin J. Stine, Mathis, Marifian & Richter, Ltd., Belleville, IL; Tim Sullivan, Anthony Jacob, and Marcia Mueller, Hinshaw & Culbertson, Chicago, IL; Michael Lied, Howard & Howard, Peoria, IL; and Emmet Fairfield, Brown Hay & Stephens, LLP, Springfield, IL.

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    Ag Credit Analysis Seminar to be Held November 15

    An agricultural loan officer's responsibility is to perform sound credit analysis 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. Topics covered include an overview of agricultural financial markets, financial statements in agriculture, financial performance measures, farmland markets and leasing arrangements, and crop insurance and risk management tools. Leading this
    seminar is Dr. Paul Ellinger, professor at the University of Illinois in Champaign-Urbana.

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    Women in Community Banking Conference Set for November 19

    Mark your calendar today for CBAI’s seventh annual
    Women in Community Banking Conference scheduled for November 18-19, at the Crowne Plaza in Springfield. The conference begins with an evening social on Monday, November 18, and a full-day conference is scheduled for the following day. CBAI recognizes the powerful influence and potential of women in the banking profession, as well as the many challenges faced on a daily basis. As such, CBAI's Women in Community Banking Committee has shaped this agenda around the top concerns facing women professionals, as well as pertinent banking issues for community banks. A mini-exposition featuring the latest products and services is offered, as well. Topics covered include “Who Hijacked My Fairy Tale” and “Stand Up and Stick Out in a Crowded Market” with Kelly Swanson, professional speaker and National Speakers Association member; “Change Is Good – You Go First” with Elaine Hand of Innerview, Inc.; “Consumer Financial Protection Bureau (CFPB) Update” with Robin Loftus, 2012-13 chair of the CFPB Community Bank Advisory Board; and “Accountability and Emotional Intelligence” with Julia Johnson of Wipfli, LLP. CBAI Chairman Bill Wubben, president of Apple River State Bank, also provides a CBAI Update.

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