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Community Bankers Association of Illinois
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     A Bi-Weekly News Bulletin for CBAI Members                                    November 25, 2015

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

CBAI Wishes Everyone a Safe and Happy Thanksgiving!!



  • Perennially Popular Community Bank Directors’ Conference Set for December 9
  • CBAI and ICBA Continue Push for Regulatory Relief
  • Community Banker Grassroots Outreach Needed Now!
  • Other Federal Regulatory and Legislative Updates
  • Community Bank Earnings Rise to $5.2 billion
  • Wolters Kluwer Offers Advice on HMDA: Getting It Right
  • NCUA Again Proves a Reliable Advocate for Credit Unions It Regulates
  • Deposit Insurance Premium Assessments Will Decline but Probably Continue
  • SBA Portal Links Potential Borrowers with Lenders
  • Anti-CFPB Ad Stimulates Political Debate
  • Investment News From THE BAKER GROUP
  • Rural Index Continues Decline on Lower Ag Prices
  • Delinquency Rates, Foreclosure Starts at Pre-Crisis Lows
  • Why Community Banks May Face Less Lending Competition
  • Community Banks Offer Financial Technology Innovation
  • CBIS Nicoud: Is Self-Funding Your Bank’s Health Care the Right Option for You?
  • SHAZAM Offers Tips to Customers and Merchants for Safer Shopping
  • CBAI LEGAL: Appellate Court Gives Mortgagee Deficiency Judgment Victory
  • Board-level Management of Your Number One Risk
  • EMV Technology-What You Need to Know
  • ICBA Launches "Go Local for the Holidays"
  • 10 Factors That Impact Email Deliverability
  • Flu Season is Here and Midwest Office Can Help Keep Your Business on Track
  • FHA Insurance Fund Performs Better Than Expected
  • Account Titling Scheduled for December 1-3
  • Lenders’ Guide to Mortgage Loan Compliance Set for December 10 & 11


  • Perennially Popular Community Bank Directors’ Conference Set for December 9
    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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    CBAI and ICBA Continue Push for Regulatory Relief

    CBAI Staff in Washington Advocating for Relief Measures

    Last week CBAI’s Vice President Federal Governmental Relations, David Schroeder, visited every office of the Illinois congressional delegation, the Office of Comptroller of the Currency, the Federal Deposit Insurance Corporation, as well as senior legislative staff at the Independent Community Bankers of America (ICBA), to discuss a variety of important issues and urge the immediate passage of legislation deemed vital to Illinois’ community banks. Read More.

    CBAI Asks Regulators to Consider Combined Regulatory Impact on Community Banks

    In a letter to banking regulators, CBAI raised concerns about the intended and unintended consequences of regulations promulgated by multiple agencies to address the same regulatory concerns. Read More.

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    Community Banker Grassroots Outreach Needed Now!

    CBAI and ICBA are calling on community bankers to make their voices heard on Capitol Hill on three top-priority industry initiatives that are coming to a head in the next few weeks: 1) blocking a tax hike on Federal Reserve members, 2) rewriting accounting standards, and 3) advancing community bank regulatory relief. Read Cam Fine's Blog.

    Call to Oppose Fed Stock Dividend Cut and Support Relief

    CBAI delivered a letter to Senator Richard Durbin and Congressman Daniel Lipinski (D-03), Illinois’ highway and transportation funding bill conferees, to oppose the harmful Federal Reserve Bank stock dividend cut and support community bank regulatory relief. Read Letter to Illinois Conferee Richard Durbin. Read Letter to Illinois Conferee Dan Lipinski.

    Grassroots Outreach Needed Against FASB Accounting Plan

    CBAI and ICBA are calling on community bankers to express their concerns with the Financial Accounting Standards Board’s (FASB) new accounting standards for loan-loss reserves, which is expected to be finalized as soon as next week. Community bankers can register their opposition to FASB’s Current Expected Credit Loss (CECL) model via the ICBA Grassroots Website.

    Meanwhile, FASB recently announced that most U.S. financial institutions would be required to utilize the proposed current expected credit loss model, or CECL, beginning in 2019, although smaller banks would have an additional year to shift from the incurred-loss model. The final, updated standard on accounting for impairments, expected to be issued in first quarter 2016, is still undergoing tweaks as staff and FASB members discuss issues raised during reviews by accountants, financial institutions and other interested parties. See FASB Release.

    CBAI Urges Regulators to Reduce Call Report Burden

    In a comment letter dated November 12, 2015, CBAI responded to the Federal Reserve Board, Federal Deposit Insurance Corporation, and the Office of Comptroller of the Currency regarding a FFIEC-approved proposal, and called for meaningful regulatory relief for community banks by streamlining the Call Report and providing a short-form version of the Call Report for the quarters ending March and September.

    CBAI emphasized that regulatory relief for community banks must be the Agencies' number one priority. Regulatory burden has increased as a result of the financial crisis, and the resulting avalanche of regulation is causing community bankers to focus more on regulatory compliance than serving their customers and communities. The Agencies' current efforts at meaningful regulatory relief are insufficient and much more needs to be accomplished. Every opportunity needs to be embraced by the Agencies to reduce the massive and growing regulatory burden on community banks including Call Report regulatory relief. Read Comment Letter.

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    Other Federal Regulatory and Legislative Updates

    FDIC Modifies Brokered Deposits Positions Following Community Bank Advocacy

    The FDIC issued for comment new frequently asked questions on identifying, accepting and reporting brokered deposits. As a result of advocacy efforts lead by the ICBA and other community banking groups including CBAI, the FDIC substantially modified some of its previous positions when the first FAQ was issued last January.

    For instance, in the original guidance, the FDIC took the position that when insurance agents, lawyers or accountants refer clients to a bank, they should be considered deposit brokers. In the revised guidance, the FDIC acknowledges that when business professionals refer their customers on an informal basis for deposit products, these types of informal deposit referrals would generally not be considered brokered.

    The only time they become brokered is when the business professional has entered into a written agreement with the bank for the referral of depositors or the professional receives fees from the bank. Similarly, the FDIC modified its positions regarding when dual employees are considered deposit brokers and how institutions should treat brokered deposit accounts that are not time deposits when an institution ceases to be well capitalized. Comments are due by December 28. Read the Proposal.

    ICBA and Farm Groups Seek Restoration of Crop Insurance Funding

    ICBA and a coalition of nearly 50 farm, insurance and lending organizations asked Congress to restore funds cut from the crop insurance program as part of the recent budget agreement. The cuts would need to be restored as part of the pending omnibus spending bill that Congress hopes to pass by December 11 to fund the government for the next two years.

    The budget agreement’s changes to crop insurance would cut reimbursements to crop insurance companies and agents by almost 40 percent. This action would eventually gut the private-sector delivery system that has helped boost crop insurance coverage and allow farmers greater ability to obtain and repay their operating loans. A similar letter will be sent to House members.

    U.S. Representative David Young (R-Iowa) is seeking cosponsors to his Crop Insurance Restoration Act (H.R. 3845), which would address these issues. Bankers can urge their representatives to cosponsor the bill as lawmakers return to their districts during this week’s House recess. Read Coalition Letter.

    Summary of New HMDA Rules Now Available

    ICBA has released a summary of the Consumer Financial Protection Bureau’s final rule revising Regulation C reporting requirements under the Home Mortgage Disclosure Act. The rule greatly expands data-collection and reporting mandates, requiring financial institutions to report 48 data fields for each borrower. Read Summary. Read Final Rule.

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    Community Bank Earnings Rise to $5.2 billion

    The FDIC issued its Quarterly Banking Profile for the third quarter yesterday. Community banks reported a net income of $5.2 billion, which is 7.5 percent higher than a year ago at this time. Earnings improvement was broad-based with 60 percent of all banks reporting year-over-year growth.

    “Most performance indicators continued to show improvement,” FDIC Chairman Martin J. Gruenberg said on Tuesday. “Earnings were up from a year ago, loan portfolios grew, asset quality improved, the number of problem banks declined, and only one insured institution failed.”

    Overall, FDIC-insured institutions reported aggregate net income of $40.4 billion, which represents an increase of 5.1 percent from last year. The Deposit Insurance Fund balance is now $70.1 billion, up $2.5 billion in the quarter, and the DIF reserve ratio is 1.09 percent. See FDIC Release. Access FDIC Profile. See Community Bank Performance Report. See Illinois Performance Summary.

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    Wolters Kluwer Offers Advice on HMDA: Getting It Right

    The Home Mortgage Disclosure Act (HMDA) data collection requirements recently finalized represent the most significant modifications to the HMDA regulation in years, and the changes will present additional compliance challenges for lenders. CBSC Preferred Partner Wolters Kluwer Financial Services can help. See More.

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    NCUA Again Proves a Reliable Advocate for Credit Unions It Regulates

    Last week the National Credit Union Administration (NCUA) proposed to drastically relax credit union field-of-membership regulations in a sweeping proposed rule. The CBAI and ICBA-opposed proposed rule, which was unanimously advanced by the regulator and industry advocate for a 60-day comment period, would expand credit union eligibility to millions of Americans.

    The NCUA proposed expanding the “multiple common bond” definition, adding areas that may be served by a community charter, revising the “rural district” definition to include populations of up to 1 million people, and updating the process of defining an underserved area. The agency, which is officially charged with regulating the credit union system but has repeatedly attempted to circumvent congressional restraints on behalf of the industry, said the proposal is consistent with the limitations outlined in the Federal Credit Union Act.

    “There is nothing more vital to the future of a credit union than the ability to attract new members,” NCUA Board Chairman Debbie Matz said. “Our vision is to enable federal credit unions to reach potential members from all walks of life.”

    CBAI views this proposal as yet another attempt by the NCUA to sidestep congressional intent and carry water for an industry it is supposed to regulate, while retaining the credit union’s tax-exempt status. CBAI and ICBA will actively contest and vigorously oppose this proposal as well as the NCUA’s plans to relax the industry’s business-lending and supplemental capital rules. Read NCUA Proposed Rule.

    ICBA Needs Help Reporting Credit Union Mission Creep

    ICBA would like examples of credit union “mission creep” that could be used to address media requests. If you know of instances in which credit unions have advertised outrageous rates for loans or deposits, or have exhibited examples of going outside of their community charter or common bond, please forward them to info@icba.org.

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    Deposit Insurance Premium Assessments Will Decline but Probably Continue

    The Deposit Insurance Fund held a record $67.6 billion last June, and the FDIC projects that the reserve ratio will reach 1.15% of insured deposits next year which will trigger a welcomed premium cut of up to 30% for community banks. Under the FDIC’s recent proposal, most big banks will have to pay a surcharge for two years to boost the ratio to 1.35%, the statutory minimum set by Dodd-Frank.

    However, that level is apparently still far from what the FDIC itself considers adequate in the event of another crisis. As a result, despite the upcoming discount, banks may need to plan on paying steadily for several more years for the reserve ratio to reach the FDIC’s nonbinding target of 2%. Read More.

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    SBA Portal Links Potential Borrowers with Lenders

    LINC (Leveraging Information and Networks to access Capital) is an online referral tool to connect small-business borrowers with participating SBA Lenders. Prospective borrowers complete a short online questionnaire. The responses to that questionnaire are forwarded to participating SBA Lenders that operate within the small business’ county. If lenders are interested in the referral, the lender and prospective borrower’s contact information will be exchanged. Completing LINC’s online questionnaire does not constitute an actual loan application. Instead, LINC is a tool that small businesses can use to identify potential lenders in their communities. Read More. View Complete List of Active SBA Lenders in Illinois.

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    Anti-CFPB Ad Stimulates Political Debate

    An anti-CFPB TV ad produced by the American Action Network (AAN) that appeared during the GOP presidential primary debate on November 10 has generated strong reactions. The AAN is a self-described conservative “action tank” based in Washington.

    The provocative ad delivers the message that the CFPB’s regulations will ultimately hurt the people they claim to help because they will drive up costs for consumer loans, thereby reducing credit access. The ad has sparked debate from the presidential race and Capitol Hill to the press and social media. Read More. See TV Ad.

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    Investment News From THE BAKER GROUP

    Baker Market Update

    The big news out of the Food & Drug Administration heralding the approval of genetically modified salmon may provide some unintended benefits for the nation’s keepers of monetary policy. If genetic scientists can now produce fish that grow bigger and faster than what nature planned, maybe econometric scientists can do the same thing with price levels. Genetically-modified inflation (GMI) may be the new path for the FOMC’s policy-makers. 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 Baker Market Strategies.

    Baker Economic Brief
    The Fed, the Forward Curve & Inflation

    As investors ponder a possible rate increase, current market pricing is giving some interesting signals of what may play out in the future. Right now, the Fed seems intent on lifting the funds rate off of zero this year, and that’s reflected in futures markets where implied probabilities suggest nearly a two-thirds likelihood of a December move. Meanwhile, the forward yield curve (derived from the yields embedded in current market pricing) currently projects that any general increase in rates will be mild by historical standards. See Baker Economic Brief.

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    Rural Index Continues Decline on Lower Ag Prices

    Creighton University’s Rural Mainstreet Index declined in November for the fourth consecutive month on lower agriculture and energy commodity prices and downturns in manufacturing. The index sank to 43.7 from 44.4 in October, well below growth-neutral. Even with lower farmland prices, 34.8 percent of bankers indicated they have sufficient liquidity and continue to lend to farmers as demanded. See Mainstreet Economy Release. See Survey Details.

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    Delinquency Rates, Foreclosure Starts at Pre-Crisis Lows

    The delinquency rate for mortgage loans on one-to-four-unit residential properties decreased 31 basis points in the third quarter to a seasonally adjusted rate of 4.99 percent of outstanding loans, according to the Mortgage Bankers Association. This was the lowest level since the first quarter of 2007. The percentage of loans on which foreclosure actions were started during the third quarter declined two basis points to 0.38 percent, the lowest level since the second quarter of 2005. See MBA Release.

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    Why Community Banks May Face Less Lending Competition

    According to capital markets analyst Chris Nichols, the recently proposed Basel capital rules would require big banks that hold securitized loan positions on their balance sheets for sale will need multiple times more capital than before, thereby hurting their return on equity. As a result, the rule would effectively dry up liquidity because banks that purchase securitizations would do so for their own portfolios and not with the intention to trade, which is most of the market now.

    Nichols concludes that large banks will slow loan production because they will have to portfolio most of their originations, resulting in larger spreads and less conduit activity which means less competition for community banks. Read More.

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    Community Banks Offer Financial Technology Innovation
    Need to Address FinTech Competition

    With FinTech firms enticing customers to bypass FDIC-insured mainstream banks for sometimes risky and harmful products, community banks are patiently and prudently adopting powerful mobile and information technology to address consumer demand.

    To continue to deliver the best, most convenient, and safest technology, community banks need to advocate the benefits of a bank-centric payments system to consumers. As a profession, community banks must also keep innovating with reliable partners and within our institutions. In addition, federal and state regulations should equally apply to FinTech companies and their products and services. Read Cam Fine's Blog.

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    CBIS Nicoud: Is Self-Funding Your Bank’s Health Care the Right Option for You?

    Contrary to a common misconception, self-funding a group health plan can deliver cost savings for small and midsized businesses, and not just large organizations with thousands of participants. In a self-funded group plan, your bank pays employees’ medical claims directly, as opposed to an insurance carrier, while a third party administrator takes care of the back office functions of the plan, like processing claims and fielding employees’ inquiries.

    The key to actualizing the potential cost savings from self-funding a plan is fostering a workplace that is healthier and therefore has less need for costly care. See More from CBIS Nicoud.

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    SHAZAM Offers Tips to Customers and Merchants for Safer Shopping

    For Bank Customers: The holidays are here, so shop with care!

    The holidays often bring friends and family together for celebrations and good cheer. For many, this means spending more time shopping online and at the mall for that perfect gift. Unfortunately, thieves are also busy at this time of year, looking for unsuspecting victims. Share these tips with your customers to help them have a safer holiday shopping experience. Read the Tips.

    For Your Merchants: Eight fishy transaction traits your merchants can monitor

    For any business, turning down a sale is unnatural. After all, the idea is to make money. However, keeping an eye out for fraudulent purchases, particularly those originating from e-commerce, is a smart tactic. By doing things right, your merchants can avoid charge backs and keep themselves out of the fraud victim’s seat. To advise your merchants on some common signs of fraud, Click Here.

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    CBAI LEGAL: Appellate Court Gives Mortgagee Deficiency Judgment Victory

    In its opinion released on November 17, the Third District Illinois Appellate Court ruled that a trial court inappropriately exercised discretion when it refused to grant a mortgagee’s petition for a deficiency judgment following a foreclosure sale. See Most Recent CBAI LEGAL.

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    Board-level Management of Your Number One Risk

    Over the last few months, hundreds of bank senior executives from across the United States have attended Executive Briefing on Cybersecurity seminars. One of the strongest comments consistently made by the banking commissioners was about the need to have CEO and director involvement in managing IT risk. State and federal regulators are all delivering the same message: Technology risk is not just an IT problem, but also a board-level risk-management problem. See BankOnIT Blog.

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    EMV Technology-What You Need to Know

    To read a Question-and-Answer session on EMV with Tracey Santor, CPCU, AFSB, AIC, and bond product manager specializing in financial institutions for Travelers Bond & Specialty Insurance, please Click Here.

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    ICBA Launches "Go Local for the Holidays"

    ICBA has kicked off its 2015 Go Local for the Holidays campaign with customizable resources that community bankers can use to encourage consumers to support local small businesses. ICBA is offering a custom news release and op-ed as well as sample social media posts to support shopping, dining and banking locally this holiday season. Read More.

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    10 Factors That Impact Email Deliverability

    Email is an integral component of any successful digital marketing program but, in order to make the most out of this communication medium and achieve ROI, bankers must ensure deliverability. Deliverability, if properly watched and managed, can yield huge dividends. In this white paper, Harland Clarke, CBAI’s preferred provider of checks and marketing solutions, presents 10 factors that impact email deliverability. Read More.

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    Flu Season is Here and Midwest Office Can Help Keep Your Business on Track

    Each year, businesses across the country face the issue of cold and flu in the workplace. Both illnesses are highly contagious and can easily be spread indoors. Fortunately, you can prevent the spread of colds and influenza in your workplace, keeping your company's productivity as steady as possible! Click Here to view a listing of Midwest Office specials that will help your bank take preventative measures. From antibacterial products like disinfectant wipes, sprays and hand sanitizer to antimicrobial keyboards, mice, staplers and folders, Midwest Office can assist in maintaining your overall office wellness. Midwest Office can supply your business with products for your break-room, washroom, conference rooms, offices and more.

    If you have any questions, please contact Kevin Gaffney at kgaffney@midwestoffice.com or by phone (217) 303-5511.

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    FHA Insurance Fund Performs Better Than Expected

    The Federal Housing Administration said its Mutual Mortgage Insurance Fund capital ratio exceeded its mandated two-percent threshold ahead of schedule. The fund gained $19 billion in value in fiscal 2015 to reach a 2.07 percent capital ratio, topping the two-percent threshold required by Congress ahead of the FHA’s expectations. The FHA, which didn’t expect to surpass the threshold until fiscal 2016, cited improvements in the housing market and better risk management. Read More.

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    Account Titling Scheduled 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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    Lenders’ Guide to Mortgage Loan Compliance Set for December 10 & 11

    During the last few years, both Congress and the various federal regulators have crafted revisions to some of the regulations that have been a part of our lending lives. This has resulted in many additional regulatory issues in every mortgage loan transaction. As a result, lenders have been struggling to determine what they should do to assure that they not only make a safe and sound loan for the bank, but also in a manner that will not create regulatory problems for the bank. This year will continue this process with many, many new rules and mandated ways of doing things. This two-day seminar covers all aspects of mortgage compliance that a lender should know, including the current rules that became effective in October of 2015. If there are additional changes, which are always possible, we will do our very best to assure that they are included in the training. All subjects that will be covered will include all of the latest information available. This seminar is designed to discuss the compliance issues from the perspective of mortgage lenders and lending management. This seminar will also assist compliance officers, senior management, bank trainers, loan auditors, loan operations personnel, and others involved in the mortgage lending compliance process to understand all of the new requirements and to share this information with others inside the bank. Leading this seminar is Adam Witmer, CRCM, a compliance consultant with Young & Associates, Inc., serving client banks in the Midwest.

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