Community Bankers Association of Illinois
Community Bankers Association of Illinois Community Bankers Association of Illinois Community Bankers Association of Illinois
 
     A Bi-Weekly News Bulletin for CBAI Members              November 19, 2008 Graphic
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Community Bankers Association of Illinois
Community Bankers Association of Illinois Community Bankers Association of Illinois


  • Treasury Releases Capital Purchase Term Sheet for Private Banks
  • ICBA Urges Changes To Increase Economic Stabilization Participation
  • CBAI Responds to FDIC Rule on Risk-Based Assessments
  • ICBA Says Mark-to-Market Accounting Unfair for Community Banks
  • Paulson and Bernanke and Testify on TARP Management
  • FDIC Proposes Program for Loan-Modification Loss Sharing
  • Federal Regulators Issue Statement on Meeting Credit Needs
  • Agencies Seek Comment on Appraisal and Evaluation Guidelines
  • SBA Announces Changes To Increase Capital for Small Businesses
  • CBAI’s Amicus Brief Supports Member Bank in Appellate Court
  • Governor Announces New Director of Illinois Finance Authority
  • Fannie Mae Reports Third-Quarter Results
  • Freddie Mac Releases Financials for Third Quarter
  • Fannie Mae Announces 3-Year and 5-Year Auction Results
  • OTS To Discuss Third-Quarter Thrift Performance
  • Chicago FRB Economist Explains Covered Bonds
  • U. S. Ag Secretary Addresses Farm Issues
  • Baker Market Update
  • Community Bank Directors’ Conference
  • Members Are Our Best Ambassadors
  • CBSC To Conclude Market Analysis and Branch Planning Service


  • Treasury Releases Capital Purchase Term Sheet for Private Banks

    In an effort to enable privately held banks to access the TARP Capital Purchase Program, the Treasury released a new
    term sheet along with a frequently asked questions document. Hinshaw & Culbertson and Howard & Howard have also prepared memos on the Treasury announcement.

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    ICBA Urges Changes To Increase Economic Stabilization Participation

    The ICBA
    outlined ways to improve the Capital Purchase Program (CPP) and the Liquidity Guarantee Program to increase community-bank participation. ICBA asked Treasury to quickly release details as to how private, Sub-S, and mutual institutions can participate in the CPP. In addition, ICBA asked the FDIC to adopt risk-based pricing for the debt guarantee so it will be more attractive for overnight transactions.

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    CBAI Responds to FDIC Rule on Risk-Based Assessments

    On November 12, 2008, CBAI submitted a letter to the FDIC regarding its recent rulemaking on risk-based assessments. CBAI urged the FDIC to exclude FHLB advance from the risk-based deposit-insurance assessment base. CBAI does not believe that including these advances in that base is fair to community banks that have used those assessments as a source of liquidity for over 75 years. Additionally, CBAI urged the FDIC to exclude Certificate of Deposit Account Registry Service (CDARS) deposits from the definition of brokered deposits. CDARS deposits are more like core deposits than brokered deposits and defining them as such does a disservice to community banks and their customers. For more information,
    click here.

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    ICBA Says Mark-to-Market Accounting Unfair for Community Banks

    On November 14, 2008, the ICBA informed the SEC that mark-to-market accounting is inappropriate for community-bank financial statements. The ICBA said that accounting measures should reflect the way financial instruments generate earnings and cash flows, even in the absence of active markets for the instruments.
    Full release.

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    Paulson and Bernanke and Testify on TARP Management

    On November 18, 2008, FRB Chairman Ben Bernanke and Treasury Secretary Henry Paulson testified before the House Committee on Financial Services. They
    defended their management of the TARP which was created to support the normalization of credit markets. See Bernanke’s prepared remarks.

    Paulson often clashed with committee members regarding the TARP implementation. Meanwhile, an editorial on the financial crisis authored by Secretary Paulson appeared in the New York Times on the same day.

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    FDIC Proposes Program for Loan-Modification Loss Sharing

    The FDIC is encouraging lenders to modify loans to reduce foreclosures. It has proposed a program that provides loss-share guarantees as incentives to modify loans.
    More details.

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    Federal Regulators Issue Statement on Meeting Credit Needs

    The FDIC, OCC, OTS, Treasury, and Federal Reserve issued a
    joint release on November 12, 2008, to announce several programs to 1) make new capital widely available to financial institutions, 2) increase guarantees on bank deposit accounts, and 3) provide backup liquidity to banks.

    The statement encourages financial institutions to support the lending needs of creditworthy borrowers, strengthen capital, engage in loss-mitigation strategies and foreclosure-prevention strategies with mortgage borrowers, and assess the incentive implications of compensation policies. The federal government has recently put into place several federal programs to promote financial stability and mitigate the effects of current market conditions on insured depository institutions.

    "Government programs to facilitate economic recovery and credit availability must be used by institutions in a manner that is consistent with their underlying goal. This statement offers guidance on the expectations of regulators on many key issues, including prudent lending practices, executive compensation and the treatment of dividends," said FDIC Chairman Sheila C. Bair.

    Specifically, the FDIC encourages institutions it supervises to lend prudently and responsibly to creditworthy borrowers, work with borrowers to preserve homeownership and avoid preventable foreclosures, adjust dividend policies to preserve capital and lending capacity and employ compensation structures that encourage prudent lending.

    State nonmember institutions' adherence to these expectations will be reflected in examination ratings the FDIC assigns for purposes of assessing safety and soundness, their compliance with laws and regulations, and their performance in meeting the requirements of the Community Reinvestment Act (CRA).

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    Agencies Seek Comment on Appraisal and Evaluation Guidelines

    Federal regulators
    released for comment proposed Interagency Appraisal and Evaluation Guidelines for sound real-estate lending practices.

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    SBA Announces Changes To Increase Capital for Small Businesses

    On November 13, 2008, the SBA revealed loan-program changes to help banks increase capital for small businesses. New SBA loans can now be made using the one-month LIBOR rate in addition to the prime rate, and the SBA has enhanced the flexibility in SBA loan-pool structures.
    More details.

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    CBAI’s Amicus Brief Supports Member Bank in Appellate Court

    On November 10, 2008, the Illinois Appellate Court for the Fifth District granted CBAI’s motion to file an amicus curiae brief in support of financial institutions that make loans to grain elevators. In its brief, CBAI argued that certain grain contracts in which a community bank had taken a secured interest should not be rendered void when the grain elevator’s license was revoked. For more information,
    click here.

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    Governor Announces New Director of Illinois Finance Authority

    John Filan, current COO of the State of Illinois, has been named by Governor Blagojevich as the new executive director of the Illinois Finance Authority. The IFA is a self-funded entity that provides access to capital for Illinois businesses to stimulate local economies.
    See release.

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    Fannie Mae Reports Third-Quarter Results

    On November 10, 2008, Fannie Mae reported a third-quarter loss of $29 billion, compared to a second quarter loss of $2.3 billion.
    More information.

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    Freddie Mac Releases Financials for Third Quarter

    On November 14, 2008, Freddie Mac reported a net loss of $25.3 billion, compared to a net loss of $1.2 billion in the second quarter.
    More information.

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    Fannie Mae Announces 3-Year and 5-Year Auction Results

    The FNMA has released the auction results for its
    3-Year and 5-Year Benchmark Notes.

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    OTS To Discuss Third-Quarter Thrift Performance

    OTS Director John Reich will hold a
    news briefing at 2 p.m. (central) on Thursday, November 20, 2008 to discuss performance data of federally regulated thrifts for the third quarter.

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    Chicago FRB Economist Explains Covered Bonds

    Fed economist Richard Rosen explains covered bonds and their usefulness as an alternative to mortgage-backed securities for home financing.
    See article.

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    U. S. Ag Secretary Addresses Farm Issues

    Speaking before the National Association of Farm Broadcasting on November 12, 2008, Secretary of Agriculture Ed Schafer
    discussed several farm issues and offered suggestions to the new administration of President-elect Obama. Schafer’s term will conclude when the new Cabinet takes office early next year.

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    Baker Market Update

    Treasuries rallied last week as economic indicators generally showed further deterioration in consumer demand. Jobless claims for the week ending November 8 rose to 516,000, which is the highest level since the fallout from 9/11. Business inventories for September fell 0.2%, the most in three years. For more detail,
    click here.

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    Community Bank Directors’ Conference

    Titled “Preparing for the Road Ahead,” the Community Bank Directors’ Conference looks at the issues that have surfaced as a result of the big-bank and mortgage-brokers’ subprime- lending debacle which precipitated the current financial crisis. The day begins with a panel of regulators discussing The Economic Stabilization Act of 2008, and its impact on community banks, capital, liquidity, asset quality, and more. Then, Phil Stenseth from THE BAKER GROUP provides an up-to-the-minute overview of the economy and financial markets and investment strategies specific to the current environment. Afterward, a series of experts discuss lending, capital, and technology strategies for the regulatory and economic environment. These community-bank experts include Jeff Judy of Jeff Judy & Associates presenting “Make Lemonade — The Credit Cycle,” as well as Mike Keeley and Charles “Stormy” Greef from Hunton & Williams on “Enhancing Shareholder Value and Capital Issues.” Finally, Lee Wetherington from Goldleaf Financial Solutions takes a thoughtful, practical, and comedic look at the technology issues in “Convergence, Crisis & Change: Wisdom for the Road Ahead.” For complete details,
    click here.

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    Members Are Our Best Ambassadors

    CBAI has more than 475 member financial institutions and 150 associate member firms. There’s room for more!
    Click here to see how you can benefit by sharing a membership lead.

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    CBSC To Conclude Market Analysis and Branch Planning Service

    Effective January 31, 2009, CBSC will no longer offer its Market Analysis and Branch Planning Service. The service provided CBAI members with detailed demographic and competitive information for a given market area and a new branch pro formula.

    "As new branch construction has slowed, so has demand for the service," said Robin Loftus, chairman of CBSC and COO of Security Bank, S.B., Springfield. She added, "The CBSC board decided to extend the software license agreement for 90 days to give bankers the opportunity to finish existing projects."

    Members should submit information to complete unfinished analysis projects as soon as possible. After January 31, 2009, members are encouraged to work directly with Bancography, the company that developed the software. For more information, contact Judy Wheaton at CBSC, at
    judyw@cbai.com, or via telephone at 800/736-2224.

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