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Community Bankers Association of Illinois
Community Bankers Association of Illinois    Community Bankers Association of Illinois CBAI E-Newsletter Sponsor - SHAZAM
     A Bi-Weekly News Bulletin for CBAI Members                     April 17, 2014

Community Bankers Association of Illinois
Community Bankers Association of Illinois Community Bankers Association of Illinois
  • 30th Annual Capital Conference Highlights
  • ICBA’s Cam Fine Comments on Latest TBTF Studies
  • ICBA and CBAI Advocate Bill Requiring Reserve Offsetting Too-Big-To-Fail Subsidy
  • It Pays to be Obsessed with Your Borrower’s Future
  • No Bank is Too Small to Implement an ERM Program
  • How Banks Can Profit from SBA Lending
  • Sign-Up for USDA Disaster Assistance Programs Underway
  • USDA: Farm Businesses Well-Positioned Despite Rising Debt
  • ICBA and Credit Union Groups Advocate Changes to GSE-Reform Proposal
  • FDIC Cites Community Banking Resiliency in New Study
  • CBAI Legislative News From the Front
  • Federal Reserve Considering Tougher Rules for Mega Banks
  • Baker Market Update
  • Register Now for THE BAKER GROUP’s Quarterly Compliance Conference Call
  • Senator Kirk Supports Fed Board Nominee with Community Banking Experience
  • OCC Chief Counsel Testifies On Community Banks
  • Small Businesses Now Have Easier Access to SBA-Backed Capital
  • CBA: FDIC Study Shows Community-Bank Resiliency
  • FASB to Issue Final Guidance on CECL Model in 2014
  • Third Annual ComplianceOne Users’ Meeting a Big Success
  • EMV Migration Forum Releases Revised Standardized Terms for EMV Chip Technology
  • Young Customers Drive Mobile Migration
  • Fighting Fraud: “Recalculating” Your Bank's Roadmap to Reduced Losses Scheduled for April 22-24
  • A to Z for Bank ESOPs Scheduled for April 24
  • Anatomy of an IT Exam Scheduled for April 28-29
  • Community Bank Marketing Conference Scheduled for May 1
  • Register Today for Early-Bird Pricing at CBAI’s 40th Annual Convention!

  • 30th Annual Capital Conference Highlights

    On Wednesday, April 9, 2014, nearly 100 community bankers from across Illinois gathered in Springfield to meet with state legislators on key community banking issues. This year CBAI is celebrating its 40th anniversary of service to community banks, and it was fitting to begin that celebration with CBAI’s 30th Annual Capital Conference during Community Banking Week in Illinois.
    See Highlights.

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    ICBA’s Cam Fine Comments on Latest TBTF Studies

    Confirm funding advantage for TBTF banks

    In response to recent reports from the Federal Reserve Bank of New York and the International Monetary Fund that mega banks have a decided funding advantage due to their too-big-to-fail status, ICBA President Cam Fine said, “The largest and most powerful arm of the central bank of the U.S. has finally admitted the mega bank emperors have no clothes. It is past time that we as a nation get to the bottom of this dangerous threat and fix it before it takes our economy down again.”
    Read More.

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    ICBA and CBAI Advocate Bill Requiring Reserve Offsetting Too-Big-To-Fail Subsidy

    ICBA and CBAI are backing legislation to address subsidies enjoyed by too-big-to-fail financial institutions. The Subsidy Reserve Act of 2013 (H.R. 2266) would require too-big-to-fail firms to establish and maintain a reserve to be funded annually in the amount of their subsidy.

    In a letter to the bill’s sponsor, Rep. Michael Capuano (D-Mass.), ICBA wrote that numerous studies have confirmed the existence of the too-big-to-fail subsidy. The subsidy comes in the form of lower-cost funding from investors based on the expectation that the government would rescue too-big-to-fail firms rather than allow them to fail.

    ICBA and CBAI support any and all serious and practical approaches to the subsidy problem, especially approaches that do not require complex rules and regulations.
    See ICBA Letter.

    Late last month, banking consultant Mayra Rodriguez Valladares expressed strong support for H.R. 2266 after researching all the proposals aimed at resolving TBTF. See Bank Think Article.

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    It Pays to be Obsessed with Your Borrower’s Future

    Banking advisor Jeff Judy believes that the real risk in lending is letting decisions be driven too much by the past and present, thus missing opportunities and overlooking problems. He advises being obsessed by your borrower’s future in order to anticipate what could change in the future.
    Read More.

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    No Bank is Too Small to Implement an ERM Program

    Enterprise Risk Management (ERM) is not a one-size-fits-all program, and no bank is too small to implement a practical ERM program, according to Eileen Iles of Crowe Horwath. A bank’s ERM program should be based on its risk profile, structure, products, risks and needs. It does not require extensive documentation or systems if the risk profile does not warrant it. Those banks that proactively identify and respond to risks will more likely experience long-term success.
    See Crowe Horwath Article.

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    How Banks Can Profit from SBA Lending

    Community banks are seeking ways to leverage their staff, enhance profits, reduce expenses, and build flexibility into their loan portfolios. One potentially effective approach is to participate in SBA lending via an SBA outsource provider.
    Read More.

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    Sign-Up for USDA Disaster Assistance Programs Underway

    Eligible farmers and ranchers can now sign up for USDA disaster-assistance programs restored by passage of the 2014 farm bill. Eligible producers can enroll in one of four programs administered by the Farm Service Agency, including the Livestock Forage Disaster Program and Livestock Indemnity Program.
    See USDA Release.

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    USDA: Farm Businesses Well-Positioned Despite Rising Debt

    Economists writing in USDA’s Amber Waves magazine noted that farm businesses’ borrowing decisions can affect their growth and survival and the economic vitality of farm-dependent rural communities.

    According to the article, farm income plummeted and interest rates rose rapidly in the early 1980s, leaving many farm businesses relying on debt to finance their operations in an over-extended position. These factors led to farm bankruptcies and rural bank failures that had widespread detrimental effects on rural communities.

    Today’s farm sector is in a strong financial position after several years of rising income and low interest rates, but the potential for lower income and higher interest rates raises concerns about recent increase in farm business debt, the article found.
    See Amber Waves Article.

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    ICBA and Credit Union Groups Advocate Changes to GSE-Reform Proposal

    ICBA and a coalition of credit union associations recommended changes to a housing-finance-reform legislative proposal introduced by Senate Banking Committee Chairman Tim Johnson (D-S.D.) and Ranking Member Mike Crapo (R-Idaho).

    In a joint letter to the lawmakers, the coalition said it appreciates that the proposal would create a separate mutual corporation to allow small lenders equal access to the secondary market and the ability to continue selling individual loans for cash. However, the coalition addressed several concerns and offered recommended changes:

      • prohibiting any institutions from being a guarantor if they are an aggregator or an originator,
      • allowing only approved guarantors to provide the required credit support in front of the Federal Mortgage Insurance Corp. (FMIC) guaranty,
      • requiring FMIC to rely on the prudential banking regulators for safety-and-soundness exams,
      • including at least two community bankers on the mutual cooperative board for small lenders,
      • providing more mortgage-lending flexibility to smaller lenders,
      • requiring lenders to notify senior lienholders of any covered loan upon consummation of any junior lien where the combined loan to value exceeds 80 percent, and
      • providing a streamlined process for mutual membership to institutions under $500 billion in assets approved to sell loans to Fannie Mae and Freddie Mac at the time of transition.

    ICBA and CBAI will continue working with Congress and the administration to ensure housing-finance reforms meet the association’s principles and avoid further concentration of the banking industry.
    See Joint Letter.

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    FDIC Cites Community Banking Resiliency in New Study

    The FDIC released a new community banking study last week which argues that community banks have remained resilient amid a period of consolidation. The study, released ahead of the upcoming FDIC Quarterly Banking Profile, indicates that institutions with assets between $100 million and $10 billion have increased both in number and in total assets since 1985.

    “Our analysis shows that the projected decline of the community banking sector has been significantly overstated,” says the study. “Community banks have, in fact, remained highly resilient among the long-term trend of banking industry consolidation.”

    The FDIC points to three separate factors that have contributed to the growth of community banks between $100 million and $10 billion in assets. First, voluntary bank closures have slowed since 2001 as intra-company consolidation has slowed. Second, community bank failures have occurred almost solely during the Banking Crises of the late 1980’s and the Financial Crisis of 2008. Third, institutions with less than $100 million in assets have declined by 85 percent, largely due to mergers in hopes of realizing economies of scale. The FDIC estimates that most economies of scale for a community bank are realized at an asset size of around $100 million.

    Nevertheless, the study does indicate that large, non-community banks have absorbed the vast majority of asset growth in the industry since 1985. While the number of institutions between $100 million and $10 billion grew by seven percent and increased assets by 27 percent, institutions with assets greater than $10 billion have seen their number almost triple and their assets increase more than ten-fold.

    The ICBA released a statement thanking the FDIC for commissioning the report and highlighting the needs of small community banks. “It cannot be overlooked that consolidation sheds much-needed light on the current regulatory environment that community banks face and the continued need for tiered regulation,” said ICBA President and CEO Cam Fine.
    See ICBA Statement. See FDIC Study.

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    CBAI Legislative News From the Front

    The Illinois General Assembly adjourned for a two week Spring Break on Thursday, April 10. Both chambers are scheduled to return Tuesday, April 29 and will begin working toward a scheduled adjournment date of May 31. For an update of state legislation relating to community banking, please
    Click Here.

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    Federal Reserve Considering Tougher Rules for Mega Banks

    This week Federal Reserve Chairwoman Janet Yellen said Fed officials are “actively considering additional measures” intended to further reduce risks to so-called short-term wholesale funding markets. She also noted that recently announced higher capital requirements are for the largest, most complex banks. CBAI strongly advocates higher capital standards for mega banks.

    Yellen will address the ICBA Policy Summit in two weeks. CBAI’s annual Call on Washington will be held in conjunction with the Summit. Nearly 60 bankers and associates from Illinois are registered for this important event.
    See LA Times Article.

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    Baker Market Update

    In an age characterized by the instantaneous global distribution of information; in an age where high-frequency traders look for timing advantages measured in nano-seconds; in an age where waiting more than five seconds for Google to answer a question is “forever”, it seems incongruous that something that occurred weeks ago could have any contemporaneous relevance. And then there’s the FOMC. Wednesday’s release of the post-mortem of the Committee’s March meeting still managed to influence financial markets. The new news about the old news provided comfort and reassurance to those market participants still wary of a Central Bank they perceive to be transitioning to a more restrictive monetary policy. Not gonna happen. Not soon, anyway.
    See Baker Market Update.

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    Register Now for THE BAKER GROUP’s Quarterly Compliance Conference Call

    To register for free guidance on 2nd Quarter investment strategies,
    Click Here.

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    Senator Kirk Supports Fed Board Nominee with Community Banking Experience

    Illinois Senator Mark Kirk joined with a bipartisan group of United States Senators in a letter to President Obama urging that the next Federal Reserve Board nominee have a background in community banking or community bank supervision. Community banks serve a vital role in the nation’s economy, and CBAI believes that the next Fed nominee should be someone who understands the community bank perspective.
    Read More.

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    OCC Chief Counsel Testifies On Community Banks

    The Office of the Comptroller of the Currency’s Chief Counsel Amy Friend discussed efforts to minimize the regulatory burden facing community banks and savings associations while maintaining safety and soundness of the federal banking system during her testimony before the U.S. House of Representatives’ Financial Services Committee today.

    Related Links

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    Small Businesses Now Have Easier Access to SBA-Backed Capital

    On March 21, 2014, SBA published a
    Final Rule on the Federal Register that eliminates or revises several requirements for its two main loan programs, 7(a) and 504. The rule expands eligibility, makes it easier for small businesses to secure SBA-backed capital and encourages job creation.

    Included in the Final Rule:

    An elimination of the Personal Resource Test:

    SBA is eliminating what’s known as the “Personal Resource Test”, which requires lenders to review the personal resources of any 20% or more owners of the small business loan applicant to certify they do not have excess liquid assets that should be injected into the project. This change increases the number of borrowers eligible for a 504 loan and simplifies the application process.

    A lifting of the 9-Month Rule:

    SBA is eliminating the “9-Month Rule”, which limits project expenses eligible for 504 financing to those incurred within 9 months prior to receipt by SBA of a complete loan application. This change will allow the financing of expenses toward a project regardless of when they were incurred, so long as they are directly attributable to the project.

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    ICBA: FDIC Study Shows Community-Bank Resiliency

    ICBA this week said a
    new FDIC study on banking consolidation demonstrates that community banking remains resilient and has a bright future ahead.

    The association’s comments on the study, which found that most community-bank combinations have been with other community banks, made headlines in The Wall Street Journal, Entrepreneur and the Washington Business Journal.

    According to the study, the number of banks with assets between $100 million and $1 billion rose by 7 percent between 1985 and 2013. Meanwhile, community banks with assets between $1 billion and $10 billion increased by 5 percent. Their total assets grew by 27 percent and 4 percent, respectively.

    In a national news release, ICBA said that the study sheds needed light on the problem of regulatory burdens on community banks and further concentration in the nation’s largest financial institutions.

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    FASB to Issue Final Guidance on CECL Model in 2014

    During a recent Financial Accounting Standards Board (FASB) meeting, two key decisions were announced related to the Current Expected Credit Loss (CECL) model. The FASB is currently discussing the proposed Accounting Standards Update, Financial Instruments-Credit Losses (Subtopic 825-15), with the goal of developing final guidance for the impairment of financial assets. The March 12th meeting minutes call for the final ASU to be issued in the second half of 2014.
    Read More.

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    Third Annual ComplianceOne Users’ Meeting a Big Success

    Almost 60 bankers participated in the Third Annual Wolters Kluwer ComplianceOne users’ meeting held at CBAI headquarters on March 17. The sessions were very lively with 95 percent of attendees indicating that the conference was valuable and will help them do their jobs more effectively. Discussion topics focused on recent and future enhancements including ATR and QM, upcoming changes with TILA / RESPA, navigational tips, shortcuts and regulatory updates specific to ComplianceOne.

    Wolters Kluwer Financial Services is a preferred service provider of Community BancService Corporation. For more information, contact Tom Beverly at 888-539-5554, or via email at, or Ben Snyder at 888-637-3330, or via email at or visit their website at

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    EMV Migration Forum Releases Revised Standardized Terms for EMV Chip Technology

    The EMV Migration Forum has released a new version of "Standardization of Terminology," a glossary designed to encourage consistency and accuracy in communications about chip technology by payments players and the media.
    See Article.

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    Young Customers Drive Mobile Migration

    When James Breen looks into the near future, he sees a dramatic changing of the guard.

    Mobile banking will eclipse online banking in three to five years, said Breen who is SVP at the $5.4 billion Bethpage Federal Credit Union in Bethpage, N.Y.
    Read More.

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    Fighting Fraud: “Recalculating” Your Bank's Roadmap to Reduced Losses Scheduled for April 22-24

    This informative
    session is for personnel with management responsibility for the fraud prevention strategies, and for branch personnel looking to gain a broader perspective of the fraud threats facing their banks. Fraud-prevention efforts within banks are often hampered by the inability to stay abreast of the speed at which fraud schemes appear, change, adapt, and strike. Not unlike a GPS device that recalculates immediately when the driver takes an unexpected turn, your bank should also have a structure in place to recalculate your fraud-prevention efforts to the constantly evolving fraud landscape. CBAI has partnered with The Rechel Group, Inc. to bring you a workshop that will address the issues impacting all banks, including the fraud schemes and responses your bank must be aware of in today's world. Join us for this year's innovative program to learn proactive steps you can take to address the fraud-prevention program in ways you may not have imagined. Jim Rechel, president of The Rechel Group, Inc., a risk-consulting firm headquartered in Cincinnati, OH, leads this seminar.

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    A to Z for Bank ESOPs Scheduled for April 24

    Employee Stock Ownership Plans (ESOPs) offer many advantages, including obtaining financing at a lower after-tax cost; providing an additional employee benefit; and being a succession tool for owners of privately held companies. However, before pursuing an ESOP, several considerations have to be weighed – including the evaluation of other options, the debt capacity of the organization, and the shareholders' estate planning. So how will you know if an ESOP will help your community bank thrive?

    half-day course is designed to introduce you to the steps that need to be taken in order to determine whether an ESOP is right for your organization. Lawyers from national law firm Hinshaw & Culbertson LLP and ESOP experts from the financial world review the pros and cons of pursuing an ESOP. Tax advantages are examined, as well as considerations from all parties involved in the transaction on the many considerations which must be made prior to putting the plan in motion. Community bank presidents, CEOs and board members all benefit from this seminar. Through a combination of live speakers and videoconference technology, we bring the knowledge to you with the convenience of local office attendance options. You can choose to attend this videoconference at Hinshaw & Culbertson LLP offices in Chicago, Rockford, Lisle, Peoria, or Springfield. THE BANK NEED NOT BE A HINSHAW & CULBERTSON CLIENT TO PARTICIPATE.

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    Anatomy of an IT Exam Scheduled for April 28-29

    Regulatory examinations today, while risk-focused and concentrated on management oversight and data security, will be enterprise-wide encompassing all areas of operations as well as IT. Therefore it is imperative that management ensure effective administrative, technical, and physical controls are in place throughout the institution. This
    seminar provides practical information for preparing for the IT examination, regulatory requirements, and point out some of this year's “hot spots” like vendor management and business-continuity planning. At the conclusion of this seminar, participants should have a basic understanding of the traditional focus of an IT examination; have an understanding of the regulatory requirements for the key policies, programs, and plans; have a better understanding of regulatory expectations relating to security and controls; and prepare effectively for the next IT exam or audit. Leading this seminar is Susan Orr is president of Susan Orr Consulting, Ltd., an IT regulatory-compliance consulting and IT audit firm for financial institutions.

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    Community Bank Marketing Conference Scheduled for May 1

    CBAI is pleased to offer the eighth annual
    Community Bank Marketing Conference, scheduled for May 1, 2014, at the Crowne Plaza in Springfield. The keynote speaker is Tom Hershberger, president and founder of Cross Financial Group, a sales and marketing consulting firm based in Lincoln, NE. Hershberger opens the conference with “Money-Making, Money-Saving Marketing Ideas,” which provides attendees with highly effective marketing solutions on a very low budget. Hershberger’s closing session, “Compelling Advertising for Community Banks,” shows participants how to develop effective advertising using a few basic principles that improve newspaper, radio, and direct-mail communications. Other hot topics on the agenda include “Developing a Social Media Content Strategy” with Sid Haas, vice president of business development at LKCS in Peru, IL; “Co-opetition: Break Through the Clutter to Compete and Win” with Lori Peterson, senior vice president of corporate marketing at BancVue in Austin, TX; and “20-80% Response Rates” with Brett Jackson, CEO of Systemax Corporation, Springfield, IL. New this year, a roundtable discussion session has been added to allow participants to learn from each other. Each roundtable is dedicated to a specific marketing topic. A mini-exposition featuring the latest products and services benefitting the community bank and its marketing efforts also highlights the day.

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    Register Today for Early-Bird Pricing at CBAI’s 40th Annual Convention!

    Registration is now open for CBAI’s 40th Annual Convention & Expo, scheduled for September 18-20, 2014, at the Marriott Downtown in Chicago. Expert speakers on the hottest community banking topics fill an education agenda featuring 20 break-out sessions. Dynamic and highly sought after speaker and leadership expert Tom Flick takes the stage for the Opening Breakfast and shares his passion for raising more effective leaders through his unique gift to connect with the listeners’ hearts as well as their heads. Golfers are treated to a beautiful, classic-style course with an amazing history of championship golf in Flossmoor Country Club. Also on the agenda is the Welcoming Reception with BancPac Live and Silent Auction, a jam-packed exhibit hall with 100 booths, fun partner’s programs exploring the exciting city of Chicago, a Closing General Session, and much more. Our annual showcase event closes with the unforgettable music of the seventies, including Hollie Vest as Tina Turner, Quentin Flagg and Bill Downey as The Blues Brothers, and Stayin’ Alive, the number-one Bee Gees tribute band in the world. Don’t miss CBAI’s 40th anniversary celebration, “Looking to the Past to Plan for the Future.”
    Register today for early-bird pricing through June 30, 2014.

    Please click here to add a reminder to your Outlook calendar for CBAI's showcase event!

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    THROUGH 5/15/2014

    › Compliance Institute – Lending Session
    › Consumer & Commercial Loan Documentation
    › Advanced Operations Conference
    › Fighting Fraud: Recalculating Your Bank’s Roadmap to Reduced Losses
    › Anatomy of an IT Exam
    › Community Bank Marketing Conference
    › The Flood Rules


    COMPLETE CBAI's 2014 Annual Compensation Survey Now!
    Deadline April 15





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