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     A Bi-Weekly News Bulletin for CBAI Members                                    November 11, 2015

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Community Bankers Association of Illinois
Community Bankers Association of Illinois Community Bankers Association of Illinois

On this Veteran’s Day 2015, let us remember the sacrifices of the brave men and women who have valiantly fought to make America
the greatest nation on Earth.


“The battle, sir, is not to the strong alone; it is to the vigilant,
the active, the brave.”
- Patrick Henry, March 23, 1775

  • Annual Directors’ Conference a Must-Attend for Bank Directors!
  • House Passes Highway Bill with Amendments on Fed Dividend Cut, Regulatory Relief
  • House Committee Approves Measures Expanding Regulatory Flexibility
  • Freddie Mac Loss Shows Need for Capital Rebuild
  • Fannie Mae Reports $2B Q3 Net Income
  • Farmer Mac Reports $8.4M in Q3 Net Income
  • Farm Loans Continue Rising to Cover Operating Costs
  • Fine Op-Ed: ICBA Offers Better Alternative to FASB Plan
  • Tom Marantz Appointed to the State Banking Board of Illinois
  • Millennials Going Local With Their Money
  • Cybersecurity Risk Is Regulators’ Number One Concern
  • Flood Disaster Protection Act 101 for Financial Institutions
  • Congressman Shimkus Visits Fisher, Illinois
  • CSI: Safety of Financial Information Top Concern for U.S. Consumers
  • Comptroller Highlights Increasing Credit Risk
  • 93% of Illinois Community Banks Profitable in Q3 2015
  • Investment News From THE BAKER GROUP
  • CBAI LEGAL: No Need to Panic (Yet) on Paid Sick Leave Executive Order
  • CBIS Nicoud: Separating the Wheat from the Chaff in Voluntary Insurance Benefits
  • Marketing in the Mobile Age and Financial Email Performance Benchmarks
  • Women in Community Banking Conference Set for November 16-17
  • Auditing Fair Lending and FCRA Scheduled for November 19
  • Account Titling Seminar Slated for December 1-3


  • Annual Directors’ Conference a Must-Attend for Bank Directors!
    The One-Day Session Features a Dynamic Lineup on Essential Issues

    This year’s CBAI Directors’ Conference, scheduled for December 9th at the Crowne Plaza in Springfield, is loaded with fantastic presentations on critical issues for community bank directors. The agenda features top experts from across the nation who will impart their knowledge and wisdom to attendees. It’s a must-attend event for directors as part of their responsibility to keep current on the key issues.

    This dynamic lineup will guarantee a productive day for attendees: Ed Krei of THE BAKER GROUP will identify five essentials to controlling your bank’s destiny; Tim Tedrick of Wipfli LLP will provide a compliance update for directors; Jim Schultz of the Illinois Department of Commerce and Economic Opportunity will discuss community banking and the Illinois economy; Joshua Siegel of StoneCastle Partners, LLC, will review capital raising strategies; Robert Mendez of BankOnIT will share the directors’ role in cyber security; and Kraig Lounsberry and David Schroeder of the CBAI governmental relations staff will deliver a brief legislative and regulatory update. See Details and Register Now.

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    House Passes Highway Bill with Amendments on Fed Dividend Cut, Regulatory Relief

    The U.S. House recently approved highway funding legislation with two CBAI and ICBA-advocated amendments blocking a backdoor tax hike on members of the Federal Reserve System and advancing community bank regulatory relief. Following the vote, ICBA called on the House and Senate to now include these amendments in any final highway-funding measure they send to the President.

    An amendment from Representatives Randy Neugebauer (R-Tx.) and Bill Huizenga (R-Mich.), which passed 354-72, would remove a Senate-passed 75 percent cut to dividends paid on Federal Reserve Bank stock. Sixteen of the 18 House members from Illinois voted for the amendment (Congressman Rush (D-Chicago) did not vote, and Congressman Gutierrez (D-Chicago) opposed the amendment). This Senate plan would take an estimated $17 billion from Fed-member banks. ICBA has led the fight for community banks against the Senate dividend cut, helping secure letters opposing the proposal from 150 members of Congress and 43 state community banking associations. The Neugebauer-Huizenga amendment also removed a provision that would have extended higher guarantee fees on mortgages sold to Fannie Mae and Freddie Mac.

    Another amendment, which was offered by House Financial Services Chairman Jeb Hensarling (R-Tx.) and passed on a voice vote, includes 15 measures that have already passed the House on a broad bipartisan basis, including several provisions from ICBA’s Plan for Prosperity. Specifically, CBAI and ICBA support provisions to eliminate redundant privacy notice requirements, expand the 18-month exam cycle and allow thrift holding companies to take advantage of beneficial SEC registration thresholds.

    The CBAI and ICBA-advocated amendments passed following strong grassroots outreach from community bankers, though continued advocacy will be needed as the House and Senate work to resolve differences between their highway bills. Senate-approved legislation includes the CBAI and ICBA-opposed dividend cut and not the regulatory relief amendments, among other differences, so the chambers still have to negotiate a final bill to send to the president. See Amendments. Read Release. See House Roll Call.

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    House Committee Approves Measures Expanding Regulatory Flexibility

    The House Financial Services Committee has approved two CBAI and ICBA-advocated bills to offer community banks greater regulatory flexibility. H.R. 1660, sponsored by Representives Keith Rothfus (R-Pa.) and Jim Himes (D-Conn.), would allow federal thrifts to exercise the full range of national bank powers without having to change charters. H.R. 2209, sponsored by Rep. Luke Messer (R-Ind.), would allow certain municipal bonds to be considered high-quality liquid assets for the purposes of the liquidity coverage ratio. Read ICBA Letter.

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    Freddie Mac Loss Shows Need for Capital Rebuild

    ICBA last week said Freddie Mac’s $475 million third-quarter net loss shows the need for the Federal Housing Finance Agency to require Fannie and Freddie to rebuild their capital. The association said Freddie Mac’s reported loss is a reminder that the enterprises could require additional draws from the U.S. Treasury. Policymakers should pursue both housing-finance reform and building capital at the government-sponsored enterprises to support their safety and soundness and protect taxpayers, ICBA said.

    Freddie Mac reported that $1.5 billion in losses were driven by fair-value markdowns on derivatives used to hedge its interest rate risk. It did not have to take a draw from Treasury due to its $1.8 billion net-worth reserve. Total dividends paid to the U.S. Treasury remain unchanged at $96.5 billion, $25 billion more than Freddie received from taxpayers. Read ICBA Release. Read More from Freddie Mac.

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    Fannie Mae Reports $2B Q3 Net Income

    Fannie Mae reported third-quarter net income of $2 billion and a $2.2 billion dividend payment to the U.S. Treasury. That brings the government-sponsored enterprise’s total Treasury dividends to $144.8 billion, more than its $116.1 billion in total Treasury draws. See Fannie Mae Report.

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    Farmer Mac Reports $8.4M in Q3 Net Income

    Farmer Mac reported $8.4 million in net income in the third quarter, a decline from $11.6 million during the same quarter a year ago on unrealized fair value changes on financial derivatives and hedged assets. Farmer Mac brought in $498 million in net new business volume growth, which raised total outstanding business volume to $15.6 billion. Core earnings were $13.2 million, up from $11.6 million in the second quarter of 2015 and $9.3 million a year ago. Read Farmer Mac Report.

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    Farm Loans Continue Rising to Cover Operating Costs

    Non-real estate farm loan volumes at commercial banks continued to increase sharply in the third quarter, according to the Federal Reserve Bank of Kansas City. Banks originated $88 billion in loans, the highest volume originated in the third quarter since 1997, after adjusting for inflation. Loans used to pay current operating expenses increased 24 percent from a year ago and continued to drive the overall increase. See KC Fed Release.

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    Fine Op-Ed: ICBA Offers Better Alternative to FASB Plan

    The Financial Accounting Standards Board’s proposed reforms to loan-loss reserve calculations would penalize community banks and restrict the flow of credit, ICBA President and CEO Cam Fine wrote in a new op-ed. He noted that the FASB Current Expected Credit Loss model would require banks to recognize losses earlier in the credit-loss cycle and to deploy complex modeling systems.

    Fine continued ICBA’s push for its alternative plan, which would base loan-loss provisions on community bank historical losses, and noted that nearly 5,000 community bankers have signed ICBA’s petition on the plan. Read Fine’s Op-Ed. Learn More About the FASB Plan.

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    Tom Marantz Appointed to the State Banking Board of Illinois

    Governor Bruce Rauner has appointed Tom Marantz to the State Banking Board of Illinois. Marantz is Chairman and CEO of the Bank of Springfield, and is First Vice Chairman of CBAI. Marantz’s appointment is subject to confirmation by the Illinois State Senate and will last until December 31, 2018. CBAI congratulates Tom Marantz on this appointment and thanks him for his continued service on behalf of community banking in Illinois. Read IDFPR Press Release.

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    Millennials Going Local With Their Money

    According to Accenture, millennials are increasingly shunning big banks and going local with their money. Last year community banks netted a five percent (5%) increase in accountholders ages 18 to 34, while the large regional and national banks lost sixteen percent (16%) of them over the same period.

    Millennials cited high fees and dissatisfaction with certain rewards programs as motivations to switch. Internet banking has also helped level the playing field. Millennials, now numbering 83.1 million people, have surpassed baby boomers as the largest portion of the population, By 2017, they’re expected to attain more spending power than any other generation. See Bloomberg Article.

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    Cybersecurity Risk Is Regulators’ Number One Concern

    Technology continues to progress at a rapid pace, which creates increased opportunities for banks to better meet their customers’ needs. Along with these opportunities in technological advances, significant increases in cybersecurity risks for banks and their customers are also occurring due to the amount and rapid pace of technological changes. New technology opens doors that become gateways for new risks, which means bankers need to take more precautions than ever before to stay ahead of the cybersecurity curve. Read BankOnIT Blog.

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    Flood Disaster Protection Act 101 for Financial Institutions

    Recent changes to the Flood Disaster Protection Act (FDPA) could have financial institutions struggling to stay above water when it comes to flood insurance mandates. FDPA penalties are a whopping 419% higher than previous penalties per violation, and the penalty cap has also been eliminated. So, it’s time for financial institutions to get up to speed on the latest regulatory updates for flood insurance policies and procedures. Read CSI Blog.

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    Congressman Shimkus Visits Fisher

    Illinois Congressman John Shimkus (R-Collinsville) visited Fisher, IL on October 30 and hosted a luncheon at the Fisher Community Center. Approximately 25 people attended, including business people, municipal leaders, school administrators and members of the ag community. Individuals from both Mahomet and Fisher were present. CBAI's Kraig Lounsberry also participated in the event.

    The Fisher National Bank (FNB) arranged for Congressman Shimkus to come to Fisher, the first time he had visited the community. After lunch, the Congressman addressed the group for several minutes, discussing current issues in Washington, DC including the election of new House Speaker Paul Ryan, which had taken place just the day before the Fisher event. After this update, Shimkus invited questions from the group and several minutes of informal discussion on numerous issues that affect those present ensued.

    Before leaving for Fisher High School to address a social studies class, he was presented with a football jersey by Mike Estes, president of The Fisher National Bank. The jersey proudly displayed the Fisher H.S. nickname “Bunnies.”

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    CSI: Safety of Financial Information Top Concern for U.S. Consumers

    As data breaches continue to affect organizations of all types, from major retailers to the federal government, it is no surprise that security has become a hot topic for today’s consumers. According to a new survey from Computer Services, Inc. (CSI), a provider of end-to-end financial technology solutions, 80 percent of consumers cited their bank’s ability to ensure the safety of their financial information as their greatest concern, regardless of demographic. Read More.

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    Comptroller Highlights Increasing Credit Risk

    Comptroller of the Currency Thomas Curry recently discussed increasing credit risk facing the federal banking system. The Comptroller made remarks during the Risk Management Associations’ Annual Risk Management Conference. See Comptroller Curry's Remarks.

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    93% of Illinois Community Banks Profitable in Q3 2015

    BankTrends, CBAI’s preferred provider for Call Report data and peer analysis, has just released third-quarter numbers. Among the findings is that more than nine of 10 Illinois community banks were profitable in the third quarter. See Performance Summary for Illinois Community Banks.

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    Investment News From THE BAKER GROUP

    Baker Market Update

    The latest tile in the Fed’s game of data-dominoes is now on the table. The Bureau of Labor Statistics smacked down the unemployment bone last week and it was a good one. The 271k increase in non-farm payrolls reported for October was well above the previous month’s 137k (revised from 142k) as well as the market’s consensus expectation of 185k. See Baker Market Update.

    Baker Market Strategies
    November 2015 - Prepayment Summary

    Speeds were mostly flat from October in conventional MBS pools with government paper showing modest declines. Aggregate speeds for both Fannie and Freddie 30yrs were unchanged at 12.6 CPR. Fannie 15yr pools increased 0.1 CPR to 10.3 while Freddie 15yrs fell slightly to 10 CPR. See Specified Pool Speeds at Baker Market Strategies-Prepayment Report.

    Baker Economic Brief

    The economy added 271K new, non-farm payrolls for the month of October, better than the consensus estimate. The unemployment rate fell to 5.0%, and labor-force participation rate was unchanged. See Baker Economic Brief - A Solid Jobs Report.

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    CBAI LEGAL: No Need to Panic (Yet) on Paid Sick Leave Executive Order

    In recent years, the Obama Administration has issued Executive Orders that impact the employer-employee relationship when the employer is considered to be a “federal contractor.” Confusion stems from the fact that there is no uniformity as to the meaning of “federal contractor” from one Executive Order to the next; financial institutions have been covered as federal contractors for the purpose of some Executive Orders but not under others. See Most Recent CBAI LEGAL.

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    CBIS Nicoud: Separating the Wheat from the Chaff in Voluntary Insurance Benefits Market

    Increasing volatility in the group health-care market, rising employer premiums over the past decade, and the adoption of high-deductible plans to offset sponsor costs all continue to drive the voluntary market.

    Eastbridge Consulting, which produces annual data tracking for the voluntary market, shows more than 70 percent of employers with 10 or more participants now offer voluntary benefits.

    Carriers have responded to these realities by offering more types of voluntary coverage. See More from CBIS Nicoud.

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    Marketing in the Mobile Age and Financial Email Performance Benchmarks

    Does your financial institution have a mobile strategy in place? The widespread adoption of mobile devices has made it increasingly important for financial institutions to provide a positive mobile experience to account holders. It's never been more valuable than it is today.

    Join Harland Clarke Digital as we present strategies to leverage mobile marketing for financial institutions. We'll also look at the latest email performance benchmarks for Q3 2015 and highlight a few top-performing campaigns to understand what drove the most engagement.

    Webcast: Marketing in the Mobile Age and Financial Email Performance Benchmarks
    Friday, November 13, 2015
    1:00 p.m. ET
    Duration: One Hour
    Register Here

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    Women in Community Banking Conference Set for November 16-17

    Scheduled for November 16-17 at the Hilton Hotel in Springfield, the Women in Community Banking Conference begins with an evening social on Monday, November 16, and a full-day conference is scheduled for Tuesday, November 17. Topics covered include “Seven Magic Wands for Making Difficult People Disappear” and “Overcoming Adversity and Bouncing Back Higher” with Colleen Kettenhofen, award-winning keynote speaker, author, and frequent media guest; “Attracting the Next Generation of Customers – The Millennials” with Sophie Kelley, senior manager at Wipfli, LLP; and “Relax and Renew: Prescription for Stress Relief” with Bridget Rolens, MA, BSOT, St. John's Hospital Center for Living. CBAI Chairman Kevin Beckemeyer, president & CEO of Legence Bank, Eldorado, provides a CBAI Update. The agenda also includes a networking session by area of banking where attendees participate in a roundtable discussion to share issues and ideas with female community bankers statewide. Also highlighting the agenda is remarks by Illinois State Comptroller Leslie Geissler Munger.

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    Auditing Fair Lending and FCRA Scheduled for November 19

    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. 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 focuses 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, compliance consultant with Young & Associates, Inc., Kent, OH, serving client banks in the Midwest.

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    Account Titling Seminar Slated for December 1-3

    This seminar is designed for new account representatives, tellers, and head tellers who need to understand the various types of account ownerships that exist – from single account owners through corporations. You learn what the different ownership types represent and how to make sure you are opening the proper type of account for your customer. In addition, the seminar covers Customer Identification Program requirements and FDIC Insurance, as well as stop payments, forgeries, and tips on spotting and stopping a check-kiting operation. Leading the seminar is Bryan Fetty, who brings more than 26 years of banking experience to Young & Associates, Inc. A former vice president of a mid-sized community bank, Fetty's primary expertise is on the operations side.

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