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Community Bankers Association of Illinois
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     A Bi-Weekly News Bulletin for CBAI Members                                    December 21, 2016

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

  • CBAI Promotes Community Banks and their Small Business Lending
  • ICBA Pushes Back Against Credit Union Proposal
  • State Associations Back ICBA Credit Union Lawsuit
  • CBAI Members Attend Federal Reserve's Community Bankers Symposium
  • Community Banking May Be Ready for a Resurgence
  • Final Rule Formalizes Exam Relief for More Than 600 Banks
  • OCC Issues EGRPRA Rule to Reduce Regulatory Burden
  • FDIC Issues Q3 State Banking Profiles
  • Underwriting Standards Ease for Fourth Consecutive Year, OCC Survey Shows
  • Spending Bill Includes CBAI and ICBA-Backed USDA Funding
  • FAQs on FASB Standard Continue Promise of Scalability
  • Investment News From THE BAKER GROUP
  • Rural Index Remains Down on Sluggish Holiday Projections
  • USDA Guide Helps Avoid Incomplete Loan Applications
  • Top 10 Strategic Priorities for Banking in 2017
  • SAVE THE DATE: Increasing Access to Affordable Mortgage Credit Workshop!
  • BankOnIT Announces Bankers Private Cloud® Threat Mitigation Shield
  • CBIS Nicoud: Community Banks’ Websites Exposed to ‘Surf-by’ ADA Lawsuits
  • NEW CBAI Member Service Lets You Talk to a Doctor in Minutes
  • What You Need to Consider Before Closing a Branch
  • CBAI LEGAL: Attorney Duped; Payor Bank Stuck with Loss
  • CBAI Announces Opening Breakfast Speaker at 43rd Annual Convention & Expo
  • Compliance Institute Scheduled for January 10 & 11
  • Appraisal Review Slated for January 18 & 19
  • Community Bank Directors’ College Set for January 24 & 25


  • CBAI Promotes Community Banks and their Small Business Lending

    The Daily Herald, suburban Chicago’s information source newspaper, recently interviewed CBAI’s David Schroeder on community banks and small business lending. In the subsequent article titled A Look at Community Banks and Small Business Lending, Schroeder stated that community banks have earned a strong reputation as lenders of choice for small businesses. He emphasized that community banks’ ability to maintain dominance in small business lending underscores the importance they place on customer-focused relationships that can’t be matched by the mega banks and online lenders. He also noted that small businesses can best help themselves by working with local community bank lenders that support their business model. Read Daily Herald Article.

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    ICBA Pushes Back Against Credit Union Proposal

    ICBA publicly announced its strong opposition to a National Credit Union Administration proposal to decimate field-of-membership rules for federally chartered credit unions. In a comment letter and national news release, ICBA said quadrupling the population limit for most community credit unions to 10 million violates statutory requirements that geographic-based credit unions may serve only a well-defined local area. Read Comment Letter. Read News Release.

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    State Associations Back ICBA Credit Union Lawsuit

    In related news, an organization of independent state community banking associations moved to support ICBA’s lawsuit against the NCUA. The Council of Community Bankers Association, which includes CBAI, filed a request to submit a friend-of-the-court brief backing ICBA’s challenge to the member-business-lending rule.

    The American Bankers Association has filed a similar request. The amicus briefs are designed to advise the court of additional arguments in support of the case from non-litigants. ICBA has pledged to file its own amicus in support of the ABA’s lawsuit challenging the NCUA’s field-of-membership final rule.

    The initiatives represent a comprehensive industry response to an agency that has become a cheerleader for the industry it is charged with regulating. Read Article.

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    CBAI Members Attend Federal Reserve's Community Bankers Symposium

    On, November 18, 2016, CBAI bankers and staff attended the 11th Annual Federal Reserve Bank of Chicago’s Community Bankers Symposium titled “A New Era of Community Banking.” Introductory remarks were provided by Chicago Federal Reserve Bank President and Chief Executive Officer Charles L. Evans, and keynote speakers included the Comptroller of the Currency Thomas J. Curry and Vice Chairman of the Federal Deposit Insurance Corporation Thomas Hoenig. Several regulator panel discussions rounded-out the day-long symposium on Exploring Emerging Risks and FinTech-Innovations in Alternative Lending Models. The evening before the Symposium, CBAI hosted a Welcome Dinner at Swift & Sons American Steakhouse which was sponsored by the Federal Home Loan Bank of Chicago. Read More.

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    Community Banking May Be Ready for a Resurgence

    With the Trump Presidency near at hand, his promise to roll back “unnecessary” regulation and substantially revise the tax code, especially the reduction of marginal tax rates for business, will produce substantial and immediate results for community banks.

    According to one veteran lender and workout expert, community banks could be on the threshold of some truly extraordinary opportunities. Ed O’Leary believes a partial rollback of Dodd-Frank’s onerous provisions could unleash energy and productivity not considered possible only a few weeks ago, and a strong resurgence of loan demand for productive sorts of business opportunities will require resources that have been allowed to wither at many institutions.

    O’Leary recommends making sure that loan review staff, credit analysts, documentation specialists, and customer contact staff are prepared to talk knowledgeably about lending opportunities and trained to make sure that loans are underwritten sensibly and prudently. Read More.

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    Final Rule Formalizes Exam Relief for More Than 600 Banks

    The federal banking agencies recently finalized CBAI and ICBA-advocated rules expanding eligibility for the 18-month regulatory examination cycle. Under the policy, which has been in place since February 29 under interim final rules, banks with up to $1 billion in assets are eligible for the 18-month exam cycle, up from the current $500 million threshold. According to the agencies, more than 600 institutions will qualify. Read FRB Release.

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    OCC Issues EGRPRA Rule to Reduce Regulatory Burden

    While regulators continue their joint Economic Growth and Regulatory Paperwork Reduction Act review, the OCC released its own final rule to reduce burdens on national banks and thrifts. Among its provisions, the rule removes certain notice and disclosure requirements, simplifies certain licensing rules for mutuals, and more. The OCC also recommended legislative changes to Congress, such as a community bank exemption from the Volcker rule. Read OCC Release.

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    FDIC Issues Q3 State Banking Profiles

    The FDIC released its state profiles for the third quarter of 2016. The profiles provide a quarterly data sheet summation of economic and banking conditions for all 50 states, Puerto Rico and the Virgin Islands. See State Profiles. See Illinois Profile.

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    Underwriting Standards Ease for Fourth Consecutive Year, OCC Survey Shows

    Underwriting practices among national banks and federal savings associations (FSAs) eased for a fourth consecutive year in 2016, according to a report released today by the Office of the Comptroller of the Currency (OCC).

    In the survey, OCC examiners noted primary areas of concern relate to aggressive growth rates, weaknesses in concentration risk management, deterioration in energy-related portfolios, and continued general easing of underwriting practices. Examiners noted easing of commercial underwriting in pricing, guarantor requirements, and loan covenants. In the retail sector, easing occurred most frequently in collateral, loan size, and debt-to-income requirements. See OCC Release. See Survey Details.

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    Spending Bill Includes CBAI and ICBA-Backed USDA Funding

    A short-term spending bill expected to pass Congress as soon as today would allow the USDA to spend funds for guaranteed and direct farm loans to meet higher loan demand in the coming months.

    Following advocacy by ICBA, CBAI, and agricultural groups, the continuing resolution would ensure the USDA Farm Service Agency has funds to meet the spike in demand during the upcoming winter and spring months, rather than prorating funding over the entire fiscal year.

    The language is needed due to the significant backlog of loan applications at the October 1 start of the 2017 fiscal year, the high seasonal demand during the winter and spring, and higher loan applications due to lower commodity prices. The spending bill is expected to last until April 28, 2017.

    In a recent letter to lawmakers, ICBA and a coalition of farm organizations noted that the FSA was short $137 million for fiscal 2016 and will face the upcoming seasonal spike in demand. ICBA and CBAI will continue advocating additional funding to meet demand after the short-term spending bill expires. Read Letter.

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    FAQs on FASB Standard Continue Promise of Scalability

    The federal banking agencies issued frequently asked questions and answers on the Financial Accounting Standards Board’s Current Expected Credit Loss standard. The FAQs reiterate that CECL is scalable to institutions of all sizes and that community institutions are not expected to need to adopt complex modeling techniques and engage third-party service providers to estimate credit loss allowances.

    This flexibility is due entirely to the years-long advocacy of ICBA, state community bankers associations, and community bankers, including a 2011 petition and extensive work as part of FASB’s Transition Resource Group. Allowing community banks to continue using qualitative factors, historical losses and spreadsheets is a departure from previous versions of CECL that would have required complex modeling systems.

    The agencies said the FAQs are part of their effort to support institutions as they prepare to implement CECL, which begins in December 2019. Read Agency FAQs. See More CECL Information.

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    Investment News From THE BAKER GROUP

    Baker Market Update

    Recently, the National Federation of Independent Businesses (NFIB) reported that its Small Business Optimism Index posted a positively jaw-dropping (yes, jaw-dropping!) leap to 98.4 from 94.9. Are they putting the sleigh before the reindeer? See Baker Market Update.

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    Rural Index Remains Down on Sluggish Holiday Projections

    Creighton University’s index of the rural economy rose this month to its highest level in six months, but remained weak with its 16th straight reading below growth-neutral. The Rural Mainstreet Index rose to 42.9 from 36.6 in November, with surveyed bankers projecting a 5.6 percent increase in loan defaults over the next 12 months and a scant 0.4 percent increase in holiday sales at local retailers.

    The December RMI for Illinois improved 34.2 from 26.6 in November. The farmland-price index sank to a frail 17.9 from November’s 26.8. The state’s new-hiring index climbed to 52.4 from last month’s 51.5. Illinois job growth over the last 12 months; Illinois Rural Mainstreet -0.6 percent; Urban Illinois +0.7 percent. See Rural Mainstreet Index.

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    USDA Guide Helps Avoid Incomplete Loan Applications

    USDA Rural Development introduced a new Guaranteed Underwriting System (GUS) Loan File Review Guide to reduce application processing time and help lenders better serve homebuyers. The guide is designed to make it easier to identify and respond to incomplete and inaccurate loan applications. See Loan File Review Guide.

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    Top 10 Strategic Priorities for Banking in 2017

    Given the number of strategic challenges facing the banking profession, prioritizing what needs to be focused on is an important exercise. To find out what the most important priorities will be in 2017, the Digital Banking Report surveyed more than 500 financial institutions globally. Overall, the top three priorities mentioned were improving the digital experience (mentioned by 71% of the respondents), enhancing data analytic capabilities (50%), and finding ways to reduce costs (41%). Read More.

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    SAVE THE DATE: Increasing Access to Affordable Mortgage Credit Workshop!

    The FDIC, Federal Reserve Bank of Chicago and OCC are hosting a workshop on January 26 in Chicago. The workshop is designed to provide information on affordable mortgage and refinancing products that may be helpful in meeting the needs of LMI and other underserved consumers. See Save the Date.

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    BankOnIT Announces Bankers Private Cloud® Threat Mitigation Shield

    The FDIC, OCC and Federal Reserve are asking banks during their examinations what defenses the bank has in place to mitigate against the risks associated with ransomware. BankOnIT has released the Bankers Private Cloud® Threat Mitigation Shield to help client banks better defend themselves against the rapidly increasing number of cybersecurity risks, such as ransomware, the financial industry is threatened with. You can find the blog linked on BOIT’s twitter account @BankOnITUSA. Read BankOnIT's Blog.

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    CBIS Nicoud: Community Banks’ Websites Exposed to ‘Surf-by’ ADA Lawsuits

    Community bankers have had to comply with Title III of the Americans with Disabilities Act since President George H.W. Bush signed it into law in 1990.

    Of course, bankers are familiar with the spirit and intent of the ADA—the country’s seven million businesses, including community banks, are required to provide equal access to services for the disabled. The law no doubt has brought improvements to countless disabled. But it has also encouraged a rash of so-called “surf-by” lawsuits whereby attorneys file lawsuits against business owners for alleged infractions of the ADA, even when their clients are not actual customers of the accused businesses. Now, within the larger context of ADA lawsuits, a new cottage industry within the plaintiffs’ bar has emerged. Website accessibility claims—“surf-by” lawsuits—are emerging against financial institutions and other points of commerce online. Read More from CBIS Nicoud.

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    NEW CBAI Member Service Lets You Talk to a Doctor in Minutes

    Thanks to a new service offered by CBIS-Nicoud, CBAI members now have access to a physician 24/7 anytime, anywhere!

    Healthiest You connects participating CBAI members with a board-certified doctor 24/7/365. Within minutes, a doctor will call you, ready to listen and resolve your health issue with no consult fee. If medically necessary, a prescription will be sent to the pharmacy of your choice. Read More.

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    What You Need to Consider Before Closing a Branch

    Does your bank's long-term business plan identify branch consolidations or closures as a strategic action item? That is the question that Paul L. Simoff, principal, Austin Associates, asks community bankers in his timely report, What You Need to Consider Before Closing a Branch. Read More.

    Options to consider are outlined in detail:

    • Understand branch profit metrics
    • Develop realistic assessments about each branch market's growth potential
    • Reconfigure the branch servicing model
    • Migrate toward digital/online sales and service channels
    • Consolidate branch networks where feasible
    • Close branch offices when other options are exhausted

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    CBAI LEGAL: Attorney Duped; Payor Bank Stuck with Loss

    Shockingly, even attorneys can fall prey to counterfeit check scams. However, in the recent case of First American Bank v. Federal Reserve Bank of Atlanta, it was the payor bank that failed to recover the $486,000 scammed from its customer’s account. Read Most Recent CBAI LEGAL.

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    CBAI Announces Opening Breakfast Speaker at 43rd Annual Convention & Expo

    CBAI is pleased to announce the Opening Breakfast speaker at CBAI’s 43rd Annual Convention & Expo on September 14-16, 2017, at the Crowne Plaza in Springfield. As a nine year old boy, John O’Leary was burned on 100 percent of his body and was give a one percent chance to live. His amazing journey of survival illustrates the incredible power of the human spirit. John and his family kept their experience private until his parents wrote a book, Overwhelming Odds, to thank the family and friends who supported them on their journey of healing. This book led to organizations around the world requesting to hear first-hand how John defied the odds. Since then, John has empowered more than 500,000 people to Live Inspired. In March 2016, his book On Fire: The 7 Choices to Ignite a Radically Inspired Life, became an instant #1 National Bestseller. His emotional story-telling, unexpected humor, and authenticity make each of his presentations truly transformational. Read More.

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    Compliance Institute Scheduled for January 10 & 11

    Community banks are constantly faced with a bewildering array of ever-changing regulations. In response to this training need, CBAI is pleased to present the “Compliance Institute” this January & April. An introductory course for those compliance officers who are either new to banking or new to their positions, this institute is designed to provide a comprehensive understanding of the major regulatory-compliance regulations that have been determined to be “must knows” for all compliance officers. The school has been divided into two sessions, Operations/Deposit Compliance and Lending Compliance. Attendees can attend one or both sessions, dependent upon need. Offered in January, session I, Operations/Deposit Compliance, addresses topics including compliance management, privacy of customer information, Fair Credit Reporting Act, Customer Identification Program, Bank Secrecy Act, Regulation D: Reserve Requirements, Regulation DD: Truth in Savings Act, Regulation CC: Expedited Funds Availability Act, and Regulation E: Electronic Funds Transfer Act. Topics covered in Lending Compliance, offered in April, include Regulation Z: Truth in Lending, Regulation B and the Fair Housing Act: Fair Lending, Regulation X: Real Estate Settlement Procedures Act, National Flood Insurance Program, Regulation C: Home Mortgage Disclosure Act, compliance management, privacy of customer information, FCRA and Regulation V (lending portion only), and Customer Identification Program (BSA). Bill Elliott, CRCM, senior consultant and manager of compliance, and Adam Witmer, CRCM, consultant, both of Young & Associates, Inc., Kent, OH, lead this institute.

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    Appraisal Review Slated for January 18 & 19

    Since 2010, all regulatory agencies have increased their expectations regarding a bank's review of property appraisals. A checklist simply does not suffice anymore, particularly on commercial property appraisals. Banks must gain a better understanding of the appraisal process and of the appraisals it receives. Just because an appraiser is on the bank's approved appraisal list does not mean the bank should accept his or her work without question or review. Banks are expected to thoroughly review the appraisals, and question the assumptions contained therein when necessary. This seminar focuses on the regulatory requirements and expectations regarding the review of third-party appraisals and in-house evaluations. Both single-family dwelling and commercial property appraisals are discussed. Depending on the individual institution's structure, this seminar should be attended by personnel from loan administration, underwriting/credit analysis, to all general loan personnel. Topics covered include appraisal regulations and guidance, terms used in an appraisal, the review process, reviewing commercial-property appraisals, reviewing residential-home appraisals, and case studies. Leading this seminar is Aaron Lewis, consultant in the lending division of Young and Associates, Inc., Kent, OH.

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    Community Bank Directors’ College Set for January 24 & 25

    The Community Bank Directors’ College was developed in close cooperation with both state and federal regulators and is designed to teach individuals how to become more effective, capable, and supportive members of their banks’ board of directors. Its goal is to graduate directors who return to your bank more active, more knowledgeable, and more decisive. In effect, they will be an even bigger asset to your community bank. The College provides a thorough understanding of bank operations and bank directors’ responsibilities. The college is recommended for both new and seasoned bank directors. It is structured as two, two-day sessions. Either may be attended as a stand-alone course. The first session is being held at the CBAI Headquarters in Springfield on January 24 & 25, 2017, and the second session is June 27, & 28, 2017.

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