Homeowner Information Privacy Protection Act

Issues Related to Cyber Security & Data Security H.R. 1770 - Data Security and Breach Notification Act of 2015 H.R. 2205/S. 961 - Data Security Act of 2015 Issues Related to the Consumer Financial Protection Bureau H.R. 1226 - Financial Products Safety Commission Act of 2015 and S. 3196, Consumer Financial Protection Board Act of 2016 Issues related to the CFPBs rulemaking for prepaid cards Issues related to the CFPBs rulemaking under the Home Mortgage Disclosure Act and HR 4993, Homeowner Information Privacy Protection Act Issues related to Implementation of the TILA/RESPA Integrated Disclosures Issues related to anticipated rulemaking that would affect overdraft products and services Issues related to Campus Banking Products Issues related to The Fair Housing Act Issues related to CFPB Consumer Response Portal and H.R. 5491 Issues related to Auto Guidance Issues related to CFPB Arbitration Rule Issues related to CFPB Small-dollar Rule Issues related to CFPB Semi-annual report to Congress Issues related to H.R. 5983 Financial Choice Act H.R. 5211, CFPB Dual Mandate and Economic Analysis Act H.R. 5112, Unfair or Deceptive Acts or Practices Uniformity Act Issues Related to Student Loans Issues related to the reauthorization of the Higher Education Act Issues related to the CFPBs and Department of Educations actions on student lending H.R. 5838/S. 3399, Transparency in Student Lending S. 3116/H.R. 3179, Empowering Students Through Enhanced Financial Counseling Act H.R. 1434/ S.793, Bank on Students Emergency Loan Refinancing Act H.R. 2677/H.R.5106, In the Red Act of 2016 Issues Related to Appropriations H.R. 5485/S. 3067, Financial Services and General Government Appropriations Act, 2017 HR. 2947 - Financial Institutions Bankruptcy Act Issues Related to Servicemembers S. 2393 - Foreclosure Relief and Extension for Servicemembers Act of 2015 S. 2719 - SCRA Enhancement and Improvement Act of 2016 Issues Related to the Community Reinvestment Act Issues Related to Debit Interchange H.R. 5465, To repeal section 1075 of the Consumer Financial Protection Act of 2010 relating to rules for payment card transactions, and for other purposes Issues Related to EMV (Europay, MasterCard, and Visa) Issues related to the Restructuring of the Fed Dividend Issues related to FinTech HR. 6287 - MOBILE Act Issues related to the E-SIGN Act Regulations: Equal Credit Opportunity issues, Regulation B, 12 CFR Part 1002 Home Mortgage Disclosure Act Issues, Regulation C, 12 CFR Part 1003 Fair Debt Collection Practices Issues, Regulation F, 12 CFR Part 1006 Privacy Issues, 12 CFR Parts 40, 216, 332, 1016 Fair Credit Reporting Issues, 12 CFR Parts 41, 171, 334, 1022 Real Estate Settlement Procedures Issues, Regulation X, 12 CFR Part 1024 Truth in Lending Issues, Regulation Z, 12 CFR Part 1026 Disclosure of Records and Information, 12 CFR Part 1070 Regulations related to the Dodd-Frank Act, Pub. L. No. 111-203 Issues related to the Higher Education Act Issues related to Telephone Consumer Protection Act, 47 U.S.C. 227 Issues related to Electronic Fund Transfer Act, 15 U.S.C. 1693 Department of Education Cash Management Rules Issues related to FDIC Deposit Insurance Issues related to the Paperwork Reduction Act Issues related to the Military Lending Act Community Reinvestment Act Regulations & Q&A issues Issues related to the Servicemembers Civil Relief Act

Client expense: $780,000 · Firm income: Not reported

Government targets: Consumer Financial Protection Bureau (CFPB), Defense, Dept of (DOD), Education, Dept of, Federal Communications Commission (FCC), Federal Deposit Insurance Corporation (FDIC), Federal Reserve System, Federal Trade Commission (FTC), HOUSE OF REPRESENTATIVES, Housing & Urban Development, Dept of (HUD), Internal Revenue Service (IRS), Office of Management & Budget (OMB), Office of the Comptroller of the Currency (OCC), SENATE, Treasury, Dept of

Community Bankers Association of Illinois (CBAI) 2016 Federal Policy Priorities (House and Senate, Federal Reserve) Too-Big-To-Fail Banks and Financial Firms, Our Financial System, Economy, and American Taxpayers - Future Bailouts Reforming the financial system to reduce the possibility, probability, and severity of a future financial crisis - the perception and reality of too-big-to-fail (TBTF) - taxpayer bailouts of mega banks and financial firms - downsize TBTFs Growth, complexity, and interconnection of the TBTF banks - candidates for future bailouts - falling number of community banks representing less than one-fifth of banking professions assets TBTF banks and the mortgage meltdown and financial crisis - protection from massive financial destruction - taxpayer outrage at TBTFs - violations of the law (often criminal) and billions of dollars in fines, settlements and deferred prosecution agreements (conditional amnesty) TBTF effective management, supervision, discipline, and resolution - multi-trillion dollar financial assistance - rightful failure - little assistance for community banks - 500 subsequent failures and devastation U.S. Attorney General Eric Holder admission of a two-tiered system of justice, one for TBTF banks another for everyone else - board resolutions, MOUs, C&Ds, consent orders, monetary penalties, barring individuals from banking, criminal prosecution for community bank, directors, and officers - evidence of a double standard Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank) in Title II - end TBTF bailouts - Wall Street TBTF "single point of entry" (SPOE) plan for resolving failed Systemically Important Financial Institutions (SIFIs) - ensuring future bailouts for SIFIs imposing costs of bailouts on ordinary investors and taxpayers. SIFIs special long-term bonds - conversion to equity when a SIFI fails - sale of bonds to non-systemic investors - ordinary investors primary losers upon conversion into equity - insufficient to recapitalize a failed SIFI, the FDIC borrowing needed funds from the Treasury Department through the Orderly Liquidation Fund (OLF) - OLF current zero balance - backstopped by American taxpayers. Consideration of alternate resolution plans of Arthur Wilmarth, George Washington University Law School - TBTF internalize systemic risks - reduction in size and complexity - prohibition from selling special long-term bonds to ordinary individuals - SIFIs pay risk-adjusted insurance-type premiums to prefund the OLF at a level of $300 billion or more - incentive compensation rule to require SIFIs to pay at least half of total compensation to senior executives and other key employees in the form of contingent convertible bonds - expose insiders to immediate losses if SIFI fail during employment or during post-employment holding period Financial Accounting Standards Board (FASB) Current Expected Credit Loss (CECL) Model Financial Accounting Standards Board (FASB) proposed Current Expected Credit Loss (CECL) model - implications for community banks - prepare financial institutions for a future crisis - use of forward looking information in calculating loan loss reserves The current Incurred Loss model vs. CECL - estimated day one loss and adjust estimated losses continually throughout the life of each loan - pure speculation - CECL models extensive operating system changes and cash flow modeling capabilities - cost and regulatory burden - added reserves - lower future profits, reduce capital levels, decrease community bank lending Tiered Regulation and Supervision for Community Banks - The Independent Community Bankers of Americas Plan for Prosperity- Outsized risks taken by TBTFs during the financial crisis - different/modest risks posed by community banks - regulations reflecting those differences - regulatory burden on community banks - one-size-fits-all approach - disproportionate burden of banking laws and regulations on community banks Credit unions, Farm Credit System lenders and other non-bank financial service providers not subject to the same laws and regulations as community banks - unlevel playing field - a significant competitive disadvantage for community banks Independent Community Bankers of Americas (ICBA) Plan for Prosperity - a regulatory platform - community banks able to thrive and contribute to local economies Address excessive, redundant and costly regulations - regulatory accountability - community banks dedicating resources to promoting economic growth - steady increase in regulations over many decades - regulatory threats to community banks and their communities. The Plan for Prosperity: Basel III original intent. accurately identify Systemic Risk additional capital for small holding companies - modernizing the Federal Reserves Policy Statement relief from Securities and Exchange Commission (SEC) rules robust housing market - reform mortgage lending community bank mortgage servicing accountability in bank exams - providing a workable appeals process bank oversight and examinations - better target risk risk targeting in the Volker Rule consumer regulation and inclusive and accountable CFPB governance arbitrary disparate impact fair lending causes of action viability of mutual banks - new charter and capital options rigorous and quantitative cost-benefit analysis - justify new rules red tape in small business lending - eliminating burdensome data collection credit for low and moderate income customers and American agriculture subchapter S corporation constraints Limited Liability Corporation (LLC) option for community banks Bank Qualified (BQ) bond issuer limitations five-year loss carryback to support lending during economic downturns. Tiered regulatory system based on size and risk profile - banking law, rule, and regulation distinguishing and appropriately regulating community banks. Credit Union Taxation and Expansion of Powers - Credit unions distinguishable from community banks - grown to control a significant share of the banking services market - outdated original business model - straying from founding purpose of serving individuals of modest means and with a common bond - same financial services as community banks - justification for federal tax-exempt status in exchange for serving their original mission - credit unions paying their fair share of income taxes - credit unions adhering to a common bond or operating within a well-defined local community, neighborhood or rural district - tax subsidy and level the playing field between credit unions and tax-paying community banks Credit unions similarity to other types of mutually owned financial institutions - savings banks (SB) and savings and loans (S&L) - the exemption for SBs and S&Ls repealed by Congress in 1951 - (reason) - active competition with taxable institutions [community banks] Credit union expansion of commercial lending powers - increasing the percentage of cap on member business lending (MBL) - loan growth at the expense of tax-paying community banks - fundamental altering the exclusive member-focused character of credit unions - condition for their original tax exemption Applying Community Reinvestment Act (CRA) requirements to credit unions - same asset size distinction as banks and thrifts - the same Call Report filing requirements for credit unions as those imposed on community banks Support and cooperation of NCUA the cheerleader regulator of credit unions - expansion of membership proposal - weaken the common bond requirement - disregarding Congressional limits - end around Congress. Farm Credit System (FCS) - Expansionist agenda of the Farm Credit System (FCS) - the equivalent of commercial banks yet retaining the benefits of Government Sponsored Enterprise (GSE) status - tax advantages - unfair competitive advantage - follow narrow historic mission - abolish or be subject to taxation and oversight and regulation Narrow founding purpose of the System to serve bona fide farmers, ranchers, young-beginning farmers, small farmers, and their farmer-owned cooperatives Support and cooperation of cheerleader regulator of FCS lenders -Farm Credit Administration (FCA) - straying beyond its original mission and scope and engaging in inappropriate and unprecedented lending activities - FCS significant systemic and taxpayer bail-out risks FCS (the only GSE) in active competition with community banks - public sector (multi-billion dollar GSE) competition with the private sector (Main Street community banks) Funding and tax benefit impact on community banks - not following its narrow historical mission - follow narrow mission or abolish FCSystem - abolished or taxation when exceeding a given asset threshold, lending to large borrowers, or engaging in non-farm lending activity FCS requirement to engage in joint rulemaking with federal banking agencies, a member of a federal banking agency on its three person board, requirement to register a class of stock with the Securities and Exchange Commission (SEC), full disclosure as required by the SEC Act, publication of instances of illegal lending and exemptions granted, and subject to regulatory safeguards, disclosures and controls equal to community banks and housing GSEs, including CFPB oversight Congress convening joint committee hearings to investigate the operations, supervision, risks and financial soundness of the FCS, and impact on rural community banks Data, Cyber and Payment Card Security (Data Security) Wide-scale data security breaches at national retail chain stores and other entities - community banks reissuing credit and debit cards at a significant cost - community banks on the frontline of defending against cyber security threats and strong guardians of the security and confidentiality of customer information - central to maintaining public trust and the key to long-term customer retention Core data security principals - cost of data breaches borne by that party that caused the breach - all participants in the payment system (including merchants) should be subject to Gramm-Leach-Bliley Act-like data security standards - a national data security breach and notification standard should replace the current patchwork of state laws - and any new data security standards should ensure that community banks are not burdened with having to implement and comply with new regulations to achieve the same superior results they currently attain - community banks reliance on third party service providers - delicate balance between securing/sharing appropriate customer information Mortgage Lending and Housing Finance Reform Imprudent mortgage lendings contribution to the mortgage meltdown and the financial crisis - community banks common sense relationship lending - no need for prescriptive regulations to compel doing what is right for their customers - not negatively impacting responsible community bank loan products to meet diverse needs of their customers including borrowers with special needs and circumstances, first-time homebuyers, borrowers in rural and underserved areas, and low-to-moderate income borrowers - recognize differences between the non-traditional lending practiced by community banks and the predatory lending practices of others All community bank loans held in portfolio for the life of the loan, including balloon payment loans, in all geographic areas, receive automatic Qualified Mortgage (QM) status and an automatic exemption from escrow requirements for Higher-Priced Mortgage Loans (HPMLs) - an increase in the small servicer exemption, an increase in the HMDA reporting levels - a formalized safe harbor during the TRID implementation period - broad special accommodations for community banks to provide flexibility in serving the needs of their customers and communities, particularly in rural areas - and expand definition of underserved areas to include economically challenged areas Untenable long-term position of government sponsored entities (GSEs) Fannie Mae (Fannie) and Freddie Mac (Freddie) in conservatorship by the United States Treasury run by the Federal Housing Finance Agency (FHFA). In reforming to the housing GSEs, the need for the continued existence of an impartial secondary market for residential mortgages for community banks which is financially strong and reliable - the need for some level of government involvement in the secondary market to ensure the continued flow of credit and market liquidity during periods of severe economic stress - no limit in full participation by community banks or disruption in the housing market - the return of private capital to reduce the reliance on government funding - protection of taxpayers from another bailout. Community bank sale of loans through an independent entity - not competing with community banks - no appropriation of community bank customer data for the purpose of cross selling financial services - the Federal Home Loan Banks preserved as a community bank access point (but not the only access point) to the national secondary market - the pricing of the governmental guaranty being fair and equal to all participants regardless of volume of loans guaranteed - no further consolidation of the housing finance system that would result in mega banks and financial firms dominating the market. Consumer Financial Protection Bureau Reform Consumer Financial Protection Bureau (CFPB) use of its statutory authority under the Dodd-Frank Act to exempt community banks or any products or services from the rules it writes - use of this authority to ensure community banks can continue to provide alternatives to large banks and non-banks for consumers seeking responsible financial service providers CFPB providing community banks with flexibility to meet unique needs of customers and not burden community banks with additional and unnecessary regulatory requirements to prevent them from serving their communities - no one-size-fits-all approach to CFPB regulations which harms community banks in meeting the unique needs of its local customers and communities - Community banks enduring any additional consumer regulatory burden on top of the existing burden they already face Single-Director governance of the CFPB vs. a five-member commission - residential regulators participate with the CFPB in the rule-writing process - Financial Stability Oversight Council (FSOC) power to veto CFPB rules under a practical and realistic standard - a broad definition of firms that grant credit being subject to the CFPB rules, and their supervision and examination Focus of any enhanced regulation of financial products on TBTF banks and financial firms and the unregulated shadow financial industry - efforts to use its authority to address non-banks, such as Wal-Mart, serving as channels for financial products - holding all of the other financial service providers up to the existing high standards for compliance with consumer laws, rules and regulations as currently attained by community banks De Novo Community Bank Formation and the Dual Banking System/Charter Choice Newly chartered (de novo) community banks importance in maintaining a strong, growing, evolving and vibrant banking profession - FDICs inhibiting de novo community bank formation during the financial crisis, FDICs indication of a change in policy direction by rescinding its Financial Institution Letter (FIL) 50-2009, Enhanced Supervisory Procedures for Newly Insured FDIC-Supervised Depository Institutions The importance of the dual banking system where chartering and supervision is divided between the federal government and the states - community banks choice of charters that best fits their business model - multi-agency (state and federal) regulators and charter choice providing necessary checks and balances on the power of the regulators, as well as improved rulemaking, the benefit of each agencies expertise and experience is brought to bear on complex and controversial issues Federal Home Loan Bank System Federal Home Loan Banks (FHLBs) strong partnership with community banks - providing short-term liquidity, long-term funding and other financial products that serve the needs of all member-owners - providing lendable funds for the local communities - regional structure, special functions and purposes of the FHLBs recognized and maintained by the Federal Housing Finance Agency (FHFA). FHFAs proposed rulemaking to revise FHLB membership eligibility requirements - negative impact on the FHLB System and its members - precedent set to terminate through rulemaking FHLB membership and the threat to revisit the broader membership issue in the future - contrary to the will of Congress FHLB System position as a healthy, stable and reliable source of funding for its members - not as the sole aggregator or securitizer of residential mortgages for community banks - FHFAs imposition of an ongoing housing mission asset test on community financial institutions Excessive Intervention in Monetary Policy Sustained record-low zero interest rate policy (ZIRP) engineered and implemented by the Federal Reserve System - disproportionally impact on community banks, senior citizens and savers - a significant drag on the earnings of community banks - THBF banks with non-traditional banking business lines derive a much lower percentage of their earnings from net interest margins and are not as negatively impacted - limits to what Fed monetary policy can accomplish considering major offsetting negative effects on community banks, senior citizens, and savers Legislation - H.R. 1188 -The Credit Union Business Job Creation Act (expand credit union member business lending cap) (All sections) (House and Senate) H.R. 1233 and S. 812 - CLEAR Relief Act of 2015 (tiered regulatory reform and relief for community banks) (All sections) (House and Senate) H.R. 4993 - Homeowners Information Privacy Protection Act (study privacy implications of new HMDA data fields) (All sections) (House and Senate) H.R. 4950 - Small Financial Institution Advisory Committee Act of 2016 (creates a Treasury Department community bank advisory committee) (All sections) (House and Senate) Comment Letters - Comment Letter - OCC, FDIC and Federal Reserve - Incentive-Based Compensation Arrangements: OCC 12 CFR Part 42, Docket No. OCC-2011-0001, RIN 1557-AD39; Federal Reserve System 12 CFR Part 236, Docket No. R-1536, RIN 7100 AE-50; Federal Deposit Insurance Corporation 12 CFR Part 372, RIN 3064-AD86 Miscellaneous - Regarding Federal Reserve Bank of Chicago meeting - dual banking system, electronic delivery of loan files for examinations, prolonged low interest rate environment, shared examination responsibility with other regulators, Financial Accounting Standards Boards (FASB) Current Expected Credit Loss model (CECL) (Federal Reserve) Regarding letter to Illinois Congressional Delegation - the duration, scope and severity of the massive wrongdoing at Wells Fargo, differenced between Main Street and Wall Street, destructive business model, regulatory relief for community banks (House and Senate) Regarding House meeting - Treasury Department community bank study and Treasury Department Community Bank Advisory Committee (House)

Community Bankers Association of Illinois (CBAI) 2016 Federal Policy Priorities (House and Senate, Federal Reserve) Too-Big-To-Fail Banks and Financial Firms, Our Financial System, Economy, and American Taxpayers - Future Bailouts Reforming the financial system to reduce the possibility, probability, and severity of a future financial crisis - the perception and reality of too-big-to-fail (TBTF) - taxpayer bailouts of mega banks and financial firms - downsize TBTFs Growth, complexity, and interconnection of the TBTF banks - candidates for future bailouts - falling number of community banks representing less than one-fifth of banking professions assets TBTF banks and the mortgage meltdown and financial crisis - protection from massive financial destruction - taxpayer outrage at TBTFs - violations of the law (often criminal) and billions of dollars in fines, settlements and deferred prosecution agreements (conditional amnesty) TBTF effective management, supervision, discipline, and resolution - multi-trillion dollar financial assistance - rightful failure - little assistance for community banks - 500 subsequent failures and devastation U.S. Attorney General Eric Holder admission of a two-tiered system of justice, one for TBTF banks another for everyone else - board resolutions, MOUs, C&Ds, consent orders, monetary penalties, barring individuals from banking, criminal prosecution for community bank, directors, and officers - evidence of a double standard Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank) in Title II - end TBTF bailouts - Wall Street TBTF "single point of entry" (SPOE) plan for resolving failed Systemically Important Financial Institutions (SIFIs) - ensuring future bailouts for SIFIs imposing costs of bailouts on ordinary investors and taxpayers. SIFIs special long-term bonds - conversion to equity when a SIFI fails - sale of bonds to non-systemic investors - ordinary investors primary losers upon conversion into equity - insufficient to recapitalize a failed SIFI, the FDIC borrowing needed funds from the Treasury Department through the Orderly Liquidation Fund (OLF) - OLF current zero balance - backstopped by American taxpayers. Consideration of alternate resolution plans of Arthur Wilmarth, George Washington University Law School - TBTF internalize systemic risks - reduction in size and complexity - prohibition from selling special long-term bonds to ordinary individuals - SIFIs pay risk-adjusted insurance-type premiums to prefund the OLF at a level of $300 billion or more - incentive compensation rule to require SIFIs to pay at least half of total compensation to senior executives and other key employees in the form of contingent convertible bonds - expose insiders to immediate losses if SIFI fail during employment or during post-employment holding period Financial Accounting Standards Board (FASB) Current Expected Credit Loss (CECL) Model Financial Accounting Standards Board (FASB) proposed Current Expected Credit Loss (CECL) model - implications for community banks - prepare financial institutions for a future crisis - use of forward looking information in calculating loan loss reserves The current Incurred Loss model vs. CECL - estimated day one loss and adjust estimated losses continually throughout the life of each loan - pure speculation - CECL models extensive operating system changes and cash flow modeling capabilities - cost and regulatory burden - added reserves - lower future profits, reduce capital levels, decrease community bank lending Tiered Regulation and Supervision for Community Banks - The Independent Community Bankers of Americas Plan for Prosperity- Outsized risks taken by TBTFs during the financial crisis - different/modest risks posed by community banks - regulations reflecting those differences - regulatory burden on community banks - one-size-fits-all approach - disproportionate burden of banking laws and regulations on community banks Credit unions, Farm Credit System lenders and other non-bank financial service providers not subject to the same laws and regulations as community banks - unlevel playing field - a significant competitive disadvantage for community banks Independent Community Bankers of Americas (ICBA) Plan for Prosperity - a regulatory platform - community banks able to thrive and contribute to local economies Address excessive, redundant and costly regulations - regulatory accountability - community banks dedicating resources to promoting economic growth - steady increase in regulations over many decades - regulatory threats to community banks and their communities. The Plan for Prosperity: Basel III original intent. accurately identify Systemic Risk additional capital for small holding companies - modernizing the Federal Reserves Policy Statement relief from Securities and Exchange Commission (SEC) rules robust housing market - reform mortgage lending community bank mortgage servicing accountability in bank exams - providing a workable appeals process bank oversight and examinations - better target risk risk targeting in the Volker Rule consumer regulation and inclusive and accountable CFPB governance arbitrary disparate impact fair lending causes of action viability of mutual banks - new charter and capital options rigorous and quantitative cost-benefit analysis - justify new rules red tape in small business lending - eliminating burdensome data collection credit for low and moderate income customers and American agriculture subchapter S corporation constraints Limited Liability Corporation (LLC) option for community banks Bank Qualified (BQ) bond issuer limitations five-year loss carryback to support lending during economic downturns. Tiered regulatory system based on size and risk profile - banking law, rule, and regulation distinguishing and appropriately regulating community banks. Credit Union Taxation and Expansion of Powers - Credit unions distinguishable from community banks - grown to control a significant share of the banking services market - outdated original business model - straying from founding purpose of serving individuals of modest means and with a common bond - same financial services as community banks - justification for federal tax-exempt status in exchange for serving their original mission - credit unions paying their fair share of income taxes - credit unions adhering to a common bond or operating within a well-defined local community, neighborhood or rural district - tax subsidy and level the playing field between credit unions and tax-paying community banks Credit unions similarity to other types of mutually owned financial institutions - savings banks (SB) and savings and loans (S&L) - the exemption for SBs and S&Ls repealed by Congress in 1951 - (reason) - active competition with taxable institutions [community banks] Credit union expansion of commercial lending powers - increasing the percentage of cap on member business lending (MBL) - loan growth at the expense of tax-paying community banks - fundamental altering the exclusive member-focused character of credit unions - condition for their original tax exemption Applying Community Reinvestment Act (CRA) requirements to credit unions - same asset size distinction as banks and thrifts - the same Call Report filing requirements for credit unions as those imposed on community banks Support and cooperation of NCUA the cheerleader regulator of credit unions - expansion of membership proposal - weaken the common bond requirement - disregarding Congressional limits - end around Congress. Farm Credit System (FCS) - Expansionist agenda of the Farm Credit System (FCS) - the equivalent of commercial banks yet retaining the benefits of Government Sponsored Enterprise (GSE) status - tax advantages - unfair competitive advantage - follow narrow historic mission - abolish or be subject to taxation and oversight and regulation Narrow founding purpose of the System to serve bona fide farmers, ranchers, young-beginning farmers, small farmers, and their farmer-owned cooperatives Support and cooperation of cheerleader regulator of FCS lenders -Farm Credit Administration (FCA) - straying beyond its original mission and scope and engaging in inappropriate and unprecedented lending activities - FCS significant systemic and taxpayer bail-out risks FCS (the only GSE) in active competition with community banks - public sector (multi-billion dollar GSE) competition with the private sector (Main Street community banks) Funding and tax benefit impact on community banks - not following its narrow historical mission - follow narrow mission or abolish FCSystem - abolished or taxation when exceeding a given asset threshold, lending to large borrowers, or engaging in non-farm lending activity FCS requirement to engage in joint rulemaking with federal banking agencies, a member of a federal banking agency on its three person board, requirement to register a class of stock with the Securities and Exchange Commission (SEC), full disclosure as required by the SEC Act, publication of instances of illegal lending and exemptions granted, and subject to regulatory safeguards, disclosures and controls equal to community banks and housing GSEs, including CFPB oversight Congress convening joint committee hearings to investigate the operations, supervision, risks and financial soundness of the FCS, and impact on rural community banks Data, Cyber and Payment Card Security (Data Security) Wide-scale data security breaches at national retail chain stores and other entities - community banks reissuing credit and debit cards at a significant cost - community banks on the frontline of defending against cyber security threats and strong guardians of the security and confidentiality of customer information - central to maintaining public trust and the key to long-term customer retention Core data security principals - cost of data breaches borne by that party that caused the breach - all participants in the payment system (including merchants) should be subject to Gramm-Leach-Bliley Act-like data security standards - a national data security breach and notification standard should replace the current patchwork of state laws - and any new data security standards should ensure that community banks are not burdened with having to implement and comply with new regulations to achieve the same superior results they currently attain - community banks reliance on third party service providers - delicate balance between securing/sharing appropriate customer information Mortgage Lending and Housing Finance Reform Imprudent mortgage lendings contribution to the mortgage meltdown and the financial crisis - community banks common sense relationship lending - no need for prescriptive regulations to compel doing what is right for their customers - not negatively impacting responsible community bank loan products to meet diverse needs of their customers including borrowers with special needs and circumstances, first-time homebuyers, borrowers in rural and underserved areas, and low-to-moderate income borrowers - recognize differences between the non-traditional lending practiced by community banks and the predatory lending practices of others All community bank loans held in portfolio for the life of the loan, including balloon payment loans, in all geographic areas, receive automatic Qualified Mortgage (QM) status and an automatic exemption from escrow requirements for Higher-Priced Mortgage Loans (HPMLs) - an increase in the small servicer exemption, an increase in the HMDA reporting levels - a formalized safe harbor during the TRID implementation period - broad special accommodations for community banks to provide flexibility in serving the needs of their customers and communities, particularly in rural areas - and expand definition of underserved areas to include economically challenged areas Untenable long-term position of government sponsored entities (GSEs) Fannie Mae (Fannie) and Freddie Mac (Freddie) in conservatorship by the United States Treasury run by the Federal Housing Finance Agency (FHFA). In reforming to the housing GSEs, the need for the continued existence of an impartial secondary market for residential mortgages for community banks which is financially strong and reliable - the need for some level of government involvement in the secondary market to ensure the continued flow of credit and market liquidity during periods of severe economic stress - no limit in full participation by community banks or disruption in the housing market - the return of private capital to reduce the reliance on government funding - protection of taxpayers from another bailout. Community bank sale of loans through an independent entity - not competing with community banks - no appropriation of community bank customer data for the purpose of cross selling financial services - the Federal Home Loan Banks preserved as a community bank access point (but not the only access point) to the national secondary market - the pricing of the governmental guaranty being fair and equal to all participants regardless of volume of loans guaranteed - no further consolidation of the housing finance system that would result in mega banks and financial firms dominating the market. Consumer Financial Protection Bureau Reform Consumer Financial Protection Bureau (CFPB) use of its statutory authority under the Dodd-Frank Act to exempt community banks or any products or services from the rules it writes - use of this authority to ensure community banks can continue to provide alternatives to large banks and non-banks for consumers seeking responsible financial service providers CFPB providing community banks with flexibility to meet unique needs of customers and not burden community banks with additional and unnecessary regulatory requirements to prevent them from serving their communities - no one-size-fits-all approach to CFPB regulations which harms community banks in meeting the unique needs of its local customers and communities - Community banks enduring any additional consumer regulatory burden on top of the existing burden they already face Single-Director governance of the CFPB vs. a five-member commission - residential regulators participate with the CFPB in the rule-writing process - Financial Stability Oversight Council (FSOC) power to veto CFPB rules under a practical and realistic standard - a broad definition of firms that grant credit being subject to the CFPB rules, and their supervision and examination Focus of any enhanced regulation of financial products on TBTF banks and financial firms and the unregulated shadow financial industry - efforts to use its authority to address non-banks, such as Wal-Mart, serving as channels for financial products - holding all of the other financial service providers up to the existing high standards for compliance with consumer laws, rules and regulations as currently attained by community banks De Novo Community Bank Formation and the Dual Banking System/Charter Choice Newly chartered (de novo) community banks importance in maintaining a strong, growing, evolving and vibrant banking profession - FDICs inhibiting de novo community bank formation during the financial crisis, FDICs indication of a change in policy direction by rescinding its Financial Institution Letter (FIL) 50-2009, Enhanced Supervisory Procedures for Newly Insured FDIC-Supervised Depository Institutions The importance of the dual banking system where chartering and supervision is divided between the federal government and the states - community banks choice of charters that best fits their business model - multi-agency (state and federal) regulators and charter choice providing necessary checks and balances on the power of the regulators, as well as improved rulemaking, the benefit of each agencies expertise and experience is brought to bear on complex and controversial issues Federal Home Loan Bank System Federal Home Loan Banks (FHLBs) strong partnership with community banks - providing short-term liquidity, long-term funding and other financial products that serve the needs of all member-owners - providing lendable funds for the local communities - regional structure, special functions and purposes of the FHLBs recognized and maintained by the Federal Housing Finance Agency (FHFA). FHFAs proposed rulemaking to revise FHLB membership eligibility requirements - negative impact on the FHLB System and its members - precedent set to terminate through rulemaking FHLB membership and the threat to revisit the broader membership issue in the future - contrary to the will of Congress FHLB System position as a healthy, stable and reliable source of funding for its members - not as the sole aggregator or securitizer of residential mortgages for community banks - FHFAs imposition of an ongoing housing mission asset test on community financial institutions Excessive Intervention in Monetary Policy Sustained record-low zero interest rate policy (ZIRP) engineered and implemented by the Federal Reserve System - disproportionally impact on community banks, senior citizens and savers - a significant drag on the earnings of community banks - THBF banks with non-traditional banking business lines derive a much lower percentage of their earnings from net interest margins and are not as negatively impacted - limits to what Fed monetary policy can accomplish considering major offsetting negative effects on community banks, senior citizens, and savers Legislation - H.R. 1188 -The Credit Union Business Job Creation Act (expand credit union member business lending cap) (All sections) (House and Senate) H.R. 1233 and S. 812 - CLEAR Relief Act of 2015 (tiered regulatory reform and relief for community banks) (All sections) (House and Senate) H.R. 4993 - Homeowners Information Privacy Protection Act (study privacy implications of new HMDA data fields) (All sections) (House and Senate) H.R. 4950 - Small Financial Institution Advisory Committee Act of 2016 (creates a Treasury Department community bank advisory committee) (All sections) (House and Senate) Comment Letters - Comment Letter - OCC, FDIC and Federal Reserve - Incentive-Based Compensation Arrangements: OCC 12 CFR Part 42, Docket No. OCC-2011-0001, RIN 1557-AD39; Federal Reserve System 12 CFR Part 236, Docket No. R-1536, RIN 7100 AE-50; Federal Deposit Insurance Corporation 12 CFR Part 372, RIN 3064-AD86 Miscellaneous - Regarding Federal Reserve Bank of Chicago meeting - dual banking system, electronic delivery of loan files for examinations, prolonged low interest rate environment, shared examination responsibility with other regulators, Financial Accounting Standards Boards (FASB) Current Expected Credit Loss model (CECL) (Federal Reserve) Regarding letter to Illinois Congressional Delegation - the duration, scope and severity of the massive wrongdoing at Wells Fargo, differenced between Main Street and Wall Street, destructive business model, regulatory relief for community banks (House and Senate) Regarding House meeting - Treasury Department community bank study and Treasury Department Community Bank Advisory Committee (House)

Community Bankers Association of Illinois (CBAI) 2016 Federal Policy Priorities (House and Senate, Federal Reserve) Tiered Regulation and Supervision for Community Banks - The Independent Community Bankers of Americas Plan for Prosperity- Outsized risks taken by TBTFs during the financial crisis - different/modest risks posed by community banks - regulations reflecting those differences - regulatory burden on community banks - one-size-fits-all approach - disproportionate burden of banking laws and regulations on community banks Credit unions, Farm Credit System lenders and other non-bank financial service providers not subject to the same laws and regulations as community banks - unlevel playing field - a significant competitive disadvantage for community banks Independent Community Bankers of Americas (ICBA) Plan for Prosperity - a regulatory platform - community banks able to thrive and contribute to local economies Address excessive, redundant and costly regulations - regulatory accountability - community banks dedicating resources to promoting economic growth - steady increase in regulations over many decades - regulatory threats to community banks and their communities The Plan for Prosperity: Basel III original intent. accurately identify Systemic Risk additional capital for small holding companies - modernizing the Federal Reserves Policy Statement relief from Securities and Exchange Commission (SEC) rules robust housing market - reform mortgage lending community bank mortgage servicing accountability in bank exams - providing a workable appeals process bank oversight and examinations - better target risk risk targeting in the Volker Rule consumer regulation and inclusive and accountable CFPB governance arbitrary disparate impact fair lending causes of action viability of mutual banks - new charter and capital options rigorous and quantitative cost-benefit analysis - justify new rules red tape in small business lending - eliminating burdensome data collection credit for low and moderate income customers and American agriculture subchapter S corporation constraints Limited Liability Corporation (LLC) option for community banks Bank Qualified (BQ) bond issuer limitations five-year loss carryback to support lending during economic downturns. Tiered regulatory system based on size and risk profile - banking law, rule, and regulation distinguishing and appropriately regulating community banks. Data, Cyber and Payment Card Security (Data Security) Wide-scale data security breaches at national retail chain stores and other entities - community banks reissuing credit and debit cards at a significant cost - community banks on the frontline of defending against cyber security threats and strong guardians of the security and confidentiality of customer information - central to maintaining public trust and the key to long-term customer retention Core data security principals - cost of data breaches borne by that party that caused the breach - all participants in the payment system (including merchants) should be subject to Gramm-Leach-Bliley Act-like data security standards - a national data security breach and notification standard should replace the current patchwork of state laws - and any new data security standards should ensure that community banks are not burdened with having to implement and comply with new regulations to achieve the same superior results they currently attain - community banks reliance on third party service providers - delicate balance between securing/sharing appropriate customer information Mortgage Lending and Housing Finance Reform Imprudent mortgage lendings contribution to the mortgage meltdown and the financial crisis - community banks common sense relationship lending - no need for prescriptive regulations to compel doing what is right for their customers - not negatively impacting responsible community bank loan products to meet diverse needs of their customers including borrowers with special needs and circumstances, first-time homebuyers, borrowers in rural and underserved areas, and low-to-moderate income borrowers - recognize differences between the non-traditional lending practiced by community banks and the predatory lending practices of others All community bank loans held in portfolio for the life of the loan, including balloon payment loans, in all geographic areas, receive automatic Qualified Mortgage (QM) status and an automatic exemption from escrow requirements for Higher-Priced Mortgage Loans (HPMLs) - an increase in the small servicer exemption, an increase in the HMDA reporting levels - a formalized safe harbor during the TRID implementation period - broad special accommodations for community banks to provide flexibility in serving the needs of their customers and communities, particularly in rural areas - and expand definition of underserved areas to include economically challenged areas Untenable long-term position of government sponsored entities (GSEs) Fannie Mae (Fannie) and Freddie Mac (Freddie) in conservatorship by the United States Treasury run by the Federal Housing Finance Agency (FHFA). In reforming to the housing GSEs, the need for the continued existence of an impartial secondary market for residential mortgages for community banks which is financially strong and reliable - the need for some level of government involvement in the secondary market to ensure the continued flow of credit and market liquidity during periods of severe economic stress - no limit in full participation by community banks or disruption in the housing market - the return of private capital to reduce the reliance on government funding - protection of taxpayers from another bailout. Community bank sale of loans through an independent entity - not competing with community banks - no appropriation of community bank customer data for the purpose of cross selling financial services - the Federal Home Loan Banks preserved as a community bank access point (but not the only access point) to the national secondary market - the pricing of the governmental guaranty being fair and equal to all participants regardless of volume of loans guaranteed - no further consolidation of the housing finance system that would result in mega banks and financial firms dominating the market. Consumer Financial Protection Bureau Reform Consumer Financial Protection Bureau (CFPB) use of its statutory authority under the Dodd-Frank Act to exempt community banks or any products or services from the rules it writes - use of this authority to ensure community banks can continue to provide alternatives to large banks and non-banks for consumers seeking responsible financial service providers CFPB providing community banks with flexibility to meet unique needs of customers and not burden community banks with additional and unnecessary regulatory requirements to prevent them from serving their communities - no one-size-fits-all approach to CFPB regulations which harms community banks in meeting the unique needs of its local customers and communities - Community banks enduring any additional consumer regulatory burden on top of the existing burden they already face Single-Director governance of the CFPB vs. a five-member commission - residential regulators participate with the CFPB in the rule-writing process - Financial Stability Oversight Council (FSOC) power to veto CFPB rules under a practical and realistic standard - a broad definition of firms that grant credit being subject to the CFPB rules, and their supervision and examination Focus of any enhanced regulation of financial products on TBTF banks and financial firms and the unregulated shadow financial industry - efforts to use its authority to address non-banks, such as Wal-Mart, serving as channels for financial products - holding all of the other financial service providers up to the existing high standards for compliance with consumer laws, rules and regulations as currently attained by community banks Excessive Intervention in Monetary Policy Sustained record-low zero interest rate policy (ZIRP) engineered and implemented by the Federal Reserve System - disproportionally impact on community banks, senior citizens and savers - a significant drag on the earnings of community banks - THBF banks with non-traditional banking business lines derive a much lower percentage of their earnings from net interest margins and are not as negatively impacted - limits to what Fed monetary policy can accomplish considering major offsetting negative effects on community banks, senior citizens, and savers Legislation - H.R. 1233 and S. 812 - CLEAR Relief Act of 2015 (tiered regulatory reform and relief for community banks) (All sections) (House and Senate) H.R. 4993 - Homeowners Information Privacy Protection Act (study privacy implications of new HMDA data fields) (All sections) (House and Senate)

H.R. 766 Financial Institution Customer Protection Act H.R. 1113 Portfolio Lending and Mortgage Access Act H.R. 1188 Credit Union Small Business Jobs Creation Act H.R. 1195 The Bureau of Consumer Financial Protection Small Business Advisory Board Act H.R. 1210 Portfolio Lending and Mortgage Access Act H.R. 1233 CLEAR Relief Act H.R. 1334 Holding Company Registration Threshold Equalization Act of 2015 H.R. 1486 The Taking Account of Bureaucrat's Spending Act H.R. 1523 Community Bank Access to Capital Act H.R. 1529 The Community Institution Mortgage Relief Act H.R. 1553 Small Bank Exam Cycle Reform Act H.R. 1660 The Federal Savings Association Charter Flexibility Act H.R. 1661 Mutual Bank Capital Opportunity Act H.R. 1766 Right to Lend Act of 2015 H.R. 2205 Data Security Act of 2015 H.R. 2896 Tailor Act of 2015 H.R. 2987 Community Bank Capital Clarification Act H.R. 3705 Financial Regulatory Clarity Act of 2015 H.R. 3791 A bill to increase Small Bank Holding Policy Statement threshold from $1B to $5B in assets H.R. 4099 CFPB Exam and Reporting Threshold Act H.R. 4116 To amend the Federal Deposit Insurance Act to ensure that reciprocal deposits are not considered to be funds obtained by or through a deposit broker H.R. 4500 The Community Bank Reporting Relief Act H.R. 4950 Small Financial Institution Advisory Committees Act of 2016 H.R. 4993 Homeowner Information Privacy Protection Act H.R. 4997 The Home Mortgage Disclosure Adjustment Act H.R. 5027 To amend the Federal Reserve Act to adjust the circumstances under which Federal reserve bank stock is callable, and for other purposes. H.R. 5076 Main Street Parity Act H.R. 5465 To repeal section 1075 of the Consumer Financial Protection Act of 2010 relating to rules for payment card transactions, and for other purposes. H.R. 5485 Financial Services and General Government Appropriations Act of 2017 S. 482 CFPB Exam and Reporting Threshold Act S. 774 Financial Institutions and Exam Fairness Reform S. 812 The CLEAR Relief Act S. 927 CLEAR Relief Plus Act S. 961 Data Security Act of 2015 S. 970 18-Month Exam Cycle S. 1484 Financial Regulatory Improvement Act S. 1491 Community Lender Regulatory Relief and Consumer Protection Act S. 1816 Community Bank Access to Capital Act S. 2471 401 (Kids) Education Savings Account Act of 2016 S. 2722 Federal Savings Association Charter Flexibility Act - all provisions S. 2790 Financial Institutions Customer Protection Act S. 2943 National Defense Authorization Act of 2017 S. 2992 Small Business Lending Oversight Act S. 3067 Financial Services and General Government Appropriations Act of 2017 Call Report Streamlining Capital Access for Community Banks Capital Rules--Basel III CFPB Data Collection CFPB Overdraft CFPB Reforms/Governance CFPB Small Business Data Collection CFPB Small Dollar/Payday Lending Credit Union Business Lending Powers Credit Union Field of Membership Cybersecurity - Information Sharing Data Security and Breaches De Novo Bank Applications Department of Justice Operation Chokepoint EMV Chip Migration Escrow Mortgage Requirements FASB Accounting Rules for Loan Loss Reserves Faster Payments FDIC Small Bank Assessments Federal Reserve Reform Flood Insurance Reform Home Mortgage Disclosure Act (HMDA) Regulations Housing Finance Reform Innovation Initiative (FinTech) Interchange Military Bank Leases Military Lending Act Rules Mortgage Lending Reform Mutual Banks Nomination of Amias Gerety as Treasury Asst Sec for Financial Institutions Nominations of Allan Landon and Kathryn Dominguez to the Board of Governors of the Federal Reserve System Online/Marketplace Lending Qualified Mortgages, Ability to Repay Rules Regulatory Burden for Community Banks Regulatory and Tax Relief for Community Banks Repeal of Durbin Amendment SBA 7(a) Lending Limit Small Bank Holding Company Policy Statement TILA/RESPA Integrated Disclosures Implementation Too Big To Fail Virtual Currency

Community Bankers Association of Illinois (CBAI) 2016 Federal Policy Priorities (House and Senate) Tiered Regulation and Supervision for Community Banks - The Independent Community Bankers of Americas Plan for Prosperity- Outsized risks taken by TBTFs during the financial crisis - different/modest risks posed by community banks - regulations reflecting those differences - regulatory burden on community banks - one-size-fits-all approach - disproportionate burden of banking laws and regulations on community banks Credit unions, Farm Credit System lenders and other non-bank financial service providers not subject to the same laws and regulations as community banks - unlevel playing field - a significant competitive disadvantage for community banks Independent Community Bankers of Americas (ICBA) Plan for Prosperity - a regulatory platform - community banks able to thrive and contribute to local economies Address excessive, redundant and costly regulations - regulatory accountability - community banks dedicating resources to promoting economic growth - steady increase in regulations over many decades - regulatory threats to community banks and their communities The Plan for Prosperity: Basel III original intent. accurately identify Systemic Risk additional capital for small holding companies - modernizing the Federal Reserves Policy Statement relief from Securities and Exchange Commission (SEC) rules robust housing market - reform mortgage lending community bank mortgage servicing accountability in bank exams - providing a workable appeals process bank oversight and examinations - better target risk risk targeting in the Volker Rule consumer regulation and inclusive and accountable CFPB governance arbitrary disparate impact fair lending causes of action viability of mutual banks - new charter and capital options rigorous and quantitative cost-benefit analysis - justify new rules red tape in small business lending - eliminating burdensome data collection credit for low and moderate income customers and American agriculture subchapter S corporation constraints Limited Liability Corporation (LLC) option for community banks Bank Qualified (BQ) bond issuer limitations five-year loss carryback to support lending during economic downturns. Tiered regulatory system based on size and risk profile - banking law, rule, and regulation distinguishing and appropriately regulating community banks. Data, Cyber and Payment Card Security (Data Security)- Wide-scale data security breaches at national retail chain stores and other entities - community banks reissuing credit and debit cards at a significant cost - community banks on the frontline of defending against cyber security threats and strong guardians of the security and confidentiality of customer information - central to maintaining public trust and the key to long-term customer retention Core data security principals - cost of data breaches borne by that party that caused the breach - all participants in the payment system (including merchants) should be subject to Gramm-Leach-Bliley Act-like data security standards - a national data security breach and notification standard should replace the current patchwork of state laws - and any new data security standards should ensure that community banks are not burdened with having to implement and comply with new regulations to achieve the same superior results they currently attain - community banks reliance on third party service providers - delicate balance between securing/sharing appropriate customer information Mortgage Lending and Housing Finance Reform - Imprudent mortgage lendings contribution to the mortgage meltdown and the financial crisis - community banks common sense relationship lending - no need for prescriptive regulations to compel doing what is right for their customers - not negatively impacting responsible community bank loan products to meet diverse needs of their customers including borrowers with special needs and circumstances, first-time homebuyers, borrowers in rural and underserved areas, and low-to-moderate income borrowers - recognize differences between the non-traditional lending practiced by community banks and the predatory lending practices of others All community bank loans held in portfolio for the life of the loan, including balloon payment loans, in all geographic areas, receive automatic Qualified Mortgage (QM) status and an automatic exemption from escrow requirements for Higher-Priced Mortgage Loans (HPMLs) - an increase in the small servicer exemption, an increase in the HMDA reporting levels - a formalized safe harbor during the TRID implementation period - broad special accommodations for community banks to provide flexibility in serving the needs of their customers and communities, particularly in rural areas - and expand definition of underserved areas to include economically challenged areas Untenable long-term position of government sponsored entities (GSEs) Fannie Mae (Fannie) and Freddie Mac (Freddie) in conservatorship by the United States Treasury run by the Federal Housing Finance Agency (FHFA). In reforming to the housing GSEs, the need for the continued existence of an impartial secondary market for residential mortgages for community banks which is financially strong and reliable - the need for some level of government involvement in the secondary market to ensure the continued flow of credit and market liquidity during periods of severe economic stress - no limit in full participation by community banks or disruption in the housing market - the return of private capital to reduce the reliance on government funding - protection of taxpayers from another bailout. Community bank sale of loans through an independent entity - not competing with community banks - no appropriation of community bank customer data for the purpose of cross selling financial services - the Federal Home Loan Banks preserved as a community bank access point (but not the only access point) to the national secondary market - the pricing of the governmental guaranty being fair and equal to all participants regardless of volume of loans guaranteed - no further consolidation of the housing finance system that would result in mega banks and financial firms dominating the market. Consumer Financial Protection Bureau Reform - Consumer Financial Protection Bureau (CFPB) use of its statutory authority under the Dodd-Frank Act to exempt community banks or any products or services from the rules it writes - use of this authority to ensure community banks can continue to provide alternatives to large banks and non-banks for consumers seeking responsible financial service providers CFPB providing community banks with flexibility to meet unique needs of customers and not burden community banks with additional and unnecessary regulatory requirements to prevent them from serving their communities - no one-size-fits-all approach to CFPB regulations which harms community banks in meeting the unique needs of its local customers and communities - Community banks enduring any additional consumer regulatory burden on top of the existing burden they already face Single-Director governance of the CFPB vs. a five-member commission - residential regulators participate with the CFPB in the rule-writing process - Financial Stability Oversight Council (FSOC) power to veto CFPB rules under a practical and realistic standard - a broad definition of firms that grant credit being subject to the CFPB rules, and their supervision and examination Focus of any enhanced regulation of financial products on TBTF banks and financial firms and the unregulated shadow financial industry - efforts to use its authority to address non-banks, such as Wal-Mart, serving as channels for financial products - holding all of the other financial service providers up to the existing high standards for compliance with consumer laws, rules and regulations as currently attained by community banks Excessive Intervention in Monetary Policy - Sustained record-low zero interest rate policy (ZIRP) engineered and implemented by the Federal Reserve System - disproportionally impact on community banks, senior citizens and savers - a significant drag on the earnings of community banks - THBF banks with non-traditional banking business lines derive a much lower percentage of their earnings from net interest margins and are not as negatively impacted - limits to what Fed monetary policy can accomplish considering major offsetting negative effects on community banks, senior citizens, and savers Legislation - H.R. 1233 and S. 812 - CLEAR Relief Act of 2015 (tiered regulatory reform and relief for community banks) (All sections) (House and Senate) H.R. 4993 - Homeowners Information Privacy Protection Act (study privacy implications of new HMDA data fields) (All sections) (House) Comment Letters - Comment Letter - Federal Financial Institutions Examination Council (FFIEC, FDIC, Federal Reserve, OCC), Uniform Interagency Consumer Compliance Rating System - FFEIC-2016-00 - undertake a new and thorough analysis of the burden, remove the opportunity for misguided interpretation, elevate the legal standard for accountability, and clarify that consumer harm can only be caused by violations of law) Miscellaneous - Regarding CFPB rulemaking - specifically regarding Qualified Mortgage (QM) exemption for small creditors and those operating in rural and underserved areas, recommendation that future rulemaking justifiably grant community banks the broad regulatory relief they deserve at the outset of rulemaking, not after a long and painful rulemaking process which only adds to the frustration and regulatory burden on community banks (CFPB)

Community Bankers Association of Illinois (CBAI) 2016 Federal Policy Priorities (House and Senate) Too-Big-To-Fail Banks and Financial Firms, Our Financial System, Economy, and American Taxpayers - Future Bailouts - Reforming the financial system to reduce the possibility, probability, and severity of a future financial crisis - the perception and reality of too-big-to-fail (TBTF) - taxpayer bailouts of mega banks and financial firms - downsize TBTFs Growth, complexity, and interconnection of the TBTF banks - candidates for future bailouts - falling number of community banks representing less than one-fifth of banking professions assets TBTF banks and the mortgage meltdown and financial crisis - protection from massive financial destruction - taxpayer outrage at TBTFs - violations of the law (often criminal) and billions of dollars in fines, settlements and deferred prosecution agreements (conditional amnesty) TBTF effective management, supervision, discipline, and resolution - multi-trillion dollar financial assistance - rightful failure - little assistance for community banks - 500 subsequent failures and devastation U.S. Attorney General Eric Holder admission of a two-tiered system of justice, one for TBTF banks another for everyone else - board resolutions, MOUs, C&Ds, consent orders, monetary penalties, barring individuals from banking, criminal prosecution for community bank, directors, and officers - evidence of a double standard Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank) in Title II - end TBTF bailouts - Wall Street TBTF "single point of entry" (SPOE) plan for resolving failed Systemically Important Financial Institutions (SIFIs) - ensuring future bailouts for SIFIs imposing costs of bailouts on ordinary investors and taxpayers. SIFIs special long-term bonds - conversion to equity when a SIFI fails - sale of bonds to non-systemic investors - ordinary investors primary losers upon conversion into equity - insufficient to recapitalize a failed SIFI, the FDIC borrowing needed funds from the Treasury Department through the Orderly Liquidation Fund (OLF) - OLF current zero balance - backstopped by American taxpayers. Consideration of alternate resolution plans of Arthur Wilmarth, George Washington University Law School - TBTF internalize systemic risks - reduction in size and complexity - prohibition from selling special long-term bonds to ordinary individuals - SIFIs pay risk-adjusted insurance-type premiums to prefund the OLF at a level of $300 billion or more - incentive compensation rule to require SIFIs to pay at least half of total compensation to senior executives and other key employees in the form of contingent convertible bonds - expose insiders to immediate losses if SIFI fail during employment or during post-employment holding period Financial Accounting Standards Board (FASB) Current Expected Credit Loss (CECL) Model - Financial Accounting Standards Board (FASB) proposed Current Expected Credit Loss (CECL) model - implications for community banks - prepare financial institutions for a future crisis - use of forward looking information in calculating loan loss reserves The current Incurred Loss model vs. CECL - estimated day one loss and adjust estimated losses continually throughout the life of each loan - pure speculation - CECL models extensive operating system changes and cash flow modeling capabilities - cost and regulatory burden - added reserves - lower future profits, reduce capital levels, decrease community bank lending Tiered Regulation and Supervision for Community Banks - The Independent Community Bankers of Americas Plan for Prosperity- Outsized risks taken by TBTFs during the financial crisis - different/modest risks posed by community banks - regulations reflecting those differences - regulatory burden on community banks - one-size-fits-all approach - disproportionate burden of banking laws and regulations on community banks Credit unions, Farm Credit System lenders and other non-bank financial service providers not subject to the same laws and regulations as community banks - unlevel playing field - a significant competitive disadvantage for community banks Independent Community Bankers of Americas (ICBA) Plan for Prosperity - a regulatory platform - community banks able to thrive and contribute to local economies Address excessive, redundant and costly regulations - regulatory accountability - community banks dedicating resources to promoting economic growth - steady increase in regulations over many decades - regulatory threats to community banks and their communities. The Plan for Prosperity: Basel III original intent. accurately identify Systemic Risk additional capital for small holding companies - modernizing the Federal Reserves Policy Statement relief from Securities and Exchange Commission (SEC) rules robust housing market - reform mortgage lending community bank mortgage servicing accountability in bank exams - providing a workable appeals process bank oversight and examinations - better target risk risk targeting in the Volker Rule consumer regulation and inclusive and accountable CFPB governance arbitrary disparate impact fair lending causes of action viability of mutual banks - new charter and capital options rigorous and quantitative cost-benefit analysis - justify new rules red tape in small business lending - eliminating burdensome data collection credit for low and moderate income customers and American agriculture subchapter S corporation constraints Limited Liability Corporation (LLC) option for community banks Bank Qualified (BQ) bond issuer limitations five-year loss carryback to support lending during economic downturns. Tiered regulatory system based on size and risk profile - banking law, rule, and regulation distinguishing and appropriately regulating community banks. Credit Union Taxation and Expansion of Powers - Credit unions distinguishable from community banks - grown to control a significant share of the banking services market - outdated original business model - straying from founding purpose of serving individuals of modest means and with a common bond - same financial services as community banks - justification for federal tax-exempt status in exchange for serving their original mission - credit unions paying their fair share of income taxes - credit unions adhering to a common bond or operating within a well-defined local community, neighborhood or rural district - tax subsidy and level the playing field between credit unions and tax-paying community banks Credit unions similarity to other types of mutually owned financial institutions - savings banks (SB) and savings and loans (S&L) - the exemption for SBs and S&Ls repealed by Congress in 1951 - (reason) - active competition with taxable institutions [community banks] Credit union expansion of commercial lending powers - increasing the percentage of cap on member business lending (MBL) - loan growth at the expense of tax-paying community banks - fundamental altering the exclusive member-focused character of credit unions - condition for their original tax exemption Applying Community Reinvestment Act (CRA) requirements to credit unions - same asset size distinction as banks and thrifts - the same Call Report filing requirements for credit unions as those imposed on community banks Support and cooperation of NCUA the cheerleader regulator of credit unions - expansion of membership proposal - weaken the common bond requirement - disregarding Congressional limits - end around Congress. Farm Credit System (FCS) - Expansionist agenda of the Farm Credit System (FCS) - the equivalent of commercial banks yet retaining the benefits of Government Sponsored Enterprise (GSE) status - tax advantages - unfair competitive advantage - follow narrow historic mission - abolish or be subject to taxation and oversight and regulation Narrow founding purpose of the System to serve bona fide farmers, ranchers, young-beginning farmers, small farmers, and their farmer-owned cooperatives Support and cooperation of cheerleader regulator of FCS lenders -Farm Credit Administration (FCA) - straying beyond its original mission and scope and engaging in inappropriate and unprecedented lending activities - FCS significant systemic and taxpayer bail-out risks FCS (the only GSE) in active competition with community banks - public sector (multi-billion dollar GSE) competition with the private sector (Main Street community banks) Funding and tax benefit impact on community banks - not following its narrow historical mission - follow narrow mission or abolish FCSystem - abolished or taxation when exceeding a given asset threshold, lending to large borrowers, or engaging in non-farm lending activity FCS requirement to engage in joint rulemaking with federal banking agencies, a member of a federal banking agency on its three person board, requirement to register a class of stock with the Securities and Exchange Commission (SEC), full disclosure as required by the SEC Act, publication of instances of illegal lending and exemptions granted, and subject to regulatory safeguards, disclosures and controls equal to community banks and housing GSEs, including CFPB oversight Congress convening joint committee hearings to investigate the operations, supervision, risks and financial soundness of the FCS, and impact on rural community banks Data, Cyber and Payment Card Security (Data Security)- Wide-scale data security breaches at national retail chain stores and other entities - community banks reissuing credit and debit cards at a significant cost - community banks on the frontline of defending against cyber security threats and strong guardians of the security and confidentiality of customer information - central to maintaining public trust and the key to long-term customer retention Core data security principals - cost of data breaches borne by that party that caused the breach - all participants in the payment system (including merchants) should be subject to Gramm-Leach-Bliley Act-like data security standards - a national data security breach and notification standard should replace the current patchwork of state laws - and any new data security standards should ensure that community banks are not burdened with having to implement and comply with new regulations to achieve the same superior results they currently attain - community banks reliance on third party service providers - delicate balance between securing/sharing appropriate customer information Mortgage Lending and Housing Finance Reform - Imprudent mortgage lendings contribution to the mortgage meltdown and the financial crisis - community banks common sense relationship lending - no need for prescriptive regulations to compel doing what is right for their customers - not negatively impacting responsible community bank loan products to meet diverse needs of their customers including borrowers with special needs and circumstances, first-time homebuyers, borrowers in rural and underserved areas, and low-to-moderate income borrowers - recognize differences between the non-traditional lending practiced by community banks and the predatory lending practices of others All community bank loans held in portfolio for the life of the loan, including balloon payment loans, in all geographic areas, receive automatic Qualified Mortgage (QM) status and an automatic exemption from escrow requirements for Higher-Priced Mortgage Loans (HPMLs) - an increase in the small servicer exemption, an increase in the HMDA reporting levels - a formalized safe harbor during the TRID implementation period - broad special accommodations for community banks to provide flexibility in serving the needs of their customers and communities, particularly in rural areas - and expand definition of underserved areas to include economically challenged areas Untenable long-term position of government sponsored entities (GSEs) Fannie Mae (Fannie) and Freddie Mac (Freddie) in conservatorship by the United States Treasury run by the Federal Housing Finance Agency (FHFA). In reforming to the housing GSEs, the need for the continued existence of an impartial secondary market for residential mortgages for community banks which is financially strong and reliable - the need for some level of government involvement in the secondary market to ensure the continued flow of credit and market liquidity during periods of severe economic stress - no limit in full participation by community banks or disruption in the housing market - the return of private capital to reduce the reliance on government funding - protection of taxpayers from another bailout. Community bank sale of loans through an independent entity - not competing with community banks - no appropriation of community bank customer data for the purpose of cross selling financial services - the Federal Home Loan Banks preserved as a community bank access point (but not the only access point) to the national secondary market - the pricing of the governmental guaranty being fair and equal to all participants regardless of volume of loans guaranteed - no further consolidation of the housing finance system that would result in mega banks and financial firms dominating the market. Consumer Financial Protection Bureau Reform - Consumer Financial Protection Bureau (CFPB) use of its statutory authority under the Dodd-Frank Act to exempt community banks or any products or services from the rules it writes - use of this authority to ensure community banks can continue to provide alternatives to large banks and non-banks for consumers seeking responsible financial service providers CFPB providing community banks with flexibility to meet unique needs of customers and not burden community banks with additional and unnecessary regulatory requirements to prevent them from serving their communities - no one-size-fits-all approach to CFPB regulations which harms community banks in meeting the unique needs of its local customers and communities - Community banks enduring any additional consumer regulatory burden on top of the existing burden they already face Single-Director governance of the CFPB vs. a five-member commission - residential regulators participate with the CFPB in the rule-writing process - Financial Stability Oversight Council (FSOC) power to veto CFPB rules under a practical and realistic standard - a broad definition of firms that grant credit being subject to the CFPB rules, and their supervision and examination Focus of any enhanced regulation of financial products on TBTF banks and financial firms and the unregulated shadow financial industry - efforts to use its authority to address non-banks, such as Wal-Mart, serving as channels for financial products - holding all of the other financial service providers up to the existing high standards for compliance with consumer laws, rules and regulations as currently attained by community banks De Novo Community Bank Formation and the Dual Banking System/Charter Choice - Newly chartered (de novo) community banks importance in maintaining a strong, growing, evolving and vibrant banking profession - FDICs inhibiting de novo community bank formation during the financial crisis, FDICs indication of a change in policy direction by rescinding its Financial Institution Letter (FIL) 50-2009, Enhanced Supervisory Procedures for Newly Insured FDIC-Supervised Depository Institutions The importance of the dual banking system where chartering and supervision is divided between the federal government and the states - community banks choice of charters that best fits their business model - multi-agency (state and federal) regulators and charter choice providing necessary checks and balances on the power of the regulators, as well as improved rulemaking, the benefit of each agencies expertise and experience is brought to bear on complex and controversial issues Federal Home Loan Bank System - Federal Home Loan Banks (FHLBs) strong partnership with community banks - providing short-term liquidity, long-term funding and other financial products that serve the needs of all member-owners - providing lendable funds for the local communities - regional structure, special functions and purposes of the FHLBs recognized and maintained by the Federal Housing Finance Agency (FHFA). FHFAs proposed rulemaking to revise FHLB membership eligibility requirements - negative impact on the FHLB System and its members - precedent set to terminate through rulemaking FHLB membership and the threat to revisit the broader membership issue in the future - contrary to the will of Congress FHLB System position as a healthy, stable and reliable source of funding for its members - not as the sole aggregator or securitizer of residential mortgages for community banks - FHFAs imposition of an ongoing housing mission asset test on community financial institutions Excessive Intervention in Monetary Policy - Sustained record-low zero interest rate policy (ZIRP) engineered and implemented by the Federal Reserve System - disproportionally impact on community banks, senior citizens and savers - a significant drag on the earnings of community banks - THBF banks with non-traditional banking business lines derive a much lower percentage of their earnings from net interest margins and are not as negatively impacted - limits to what Fed monetary policy can accomplish considering major offsetting negative effects on community banks, senior citizens, and savers Legislation - H.R. 4500 - Community Bank Reporting Relief Act (amends the FDIC Act to permit reduced reporting requirements (Call Reports) for the first and third quarters for highly-rated well-capitalized banks (All Sections) (House) H.R. 1188 -The Credit Union Business Job Creation Act (expand credit union member business lending cap) (All sections) (House and Senate) H.R. 1233 and S. 812 - CLEAR Relief Act of 2015 (tiered regulatory reform and relief for community banks) (All sections) (House and Senate) H.R. 4993 - Homeowners Information Privacy Protection Act (study privacy implications of new HMDA data fields) (All sections) (House) H.R. 4950 - Small Financial Institution Advisory Committee Act of 2016 (creates a Treasury Department community bank advisory committee) (All sections) (House) Comment Letters - Comment Letter - Federal Housing Finance Agency (FHFA , Proposed Rule on Acquired Member Assets - RIN 2590-AA69 - revise to better allow for appropriate product innovation and development) Comment Letter - Federal Financial Institutions Examination Council (FFIEC - FDIC, Federal Reserve, OCC), Uniform Interagency Consumer Compliance Rating System - FFEIC-2016-00 - undertake a new and thorough analysis of the burden, remove the opportunity for misguided interpretation, elevate the legal standard for accountability, and clarify that consumer harm can only be caused by violations of law) Action Alerts - Action Alert - Regarding Farm Credit System (FCS) - halt FCS mission creep (Senate) Miscellaneous - Regarding CFPB rulemaking - specifically regarding Qualified Mortgage (QM) exemption for small creditors and those operating in rural and underserved areas, recommendation that future rulemaking justifiably grant community banks the broad regulatory relief they deserve at the outset of rulemaking, not after a long and painful rulemaking process which only adds to the frustration and regulatory burden on community banks (CFPB) Regarding the Action Alert - Farm Credit System (FCS) halt mission creep (Senate) - reinforced community bank position on this issue and corrected the inaccurate statement of CBAI position in the form letter e-mail response to the Action Alert (Senate) Regarding Member Letter regarding High Volatility Commercial Real Estate (HVCRE) - Responded to member request for position on this issue (House)

Community Bankers Association of Illinois (CBAI) 2016 Federal Policy Priorities (House and Senate) Too-Big-To-Fail Banks and Financial Firms, Our Financial System, Economy, and American Taxpayers - Future Bailouts - Reforming the financial system to reduce the possibility, probability, and severity of a future financial crisis - the perception and reality of too-big-to-fail (TBTF) - taxpayer bailouts of mega banks and financial firms - downsize TBTFs Growth, complexity, and interconnection of the TBTF banks - candidates for future bailouts - falling number of community banks representing less than one-fifth of banking professions assets TBTF banks and the mortgage meltdown and financial crisis - protection from massive financial destruction - taxpayer outrage at TBTFs - violations of the law (often criminal) and billions of dollars in fines, settlements and deferred prosecution agreements (conditional amnesty) TBTF effective management, supervision, discipline, and resolution - multi-trillion dollar financial assistance - rightful failure - little assistance for community banks - 500 subsequent failures and devastation U.S. Attorney General Eric Holder admission of a two-tiered system of justice, one for TBTF banks another for everyone else - board resolutions, MOUs, C&Ds, consent orders, monetary penalties, barring individuals from banking, criminal prosecution for community bank, directors, and officers - evidence of a double standard Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank) in Title II - end TBTF bailouts - Wall Street TBTF "single point of entry" (SPOE) plan for resolving failed Systemically Important Financial Institutions (SIFIs) - ensuring future bailouts for SIFIs imposing costs of bailouts on ordinary investors and taxpayers. SIFIs special long-term bonds - conversion to equity when a SIFI fails - sale of bonds to non-systemic investors - ordinary investors primary losers upon conversion into equity - insufficient to recapitalize a failed SIFI, the FDIC borrowing needed funds from the Treasury Department through the Orderly Liquidation Fund (OLF) - OLF current zero balance - backstopped by American taxpayers. Consideration of alternate resolution plans of Arthur Wilmarth, George Washington University Law School - TBTF internalize systemic risks - reduction in size and complexity - prohibition from selling special long-term bonds to ordinary individuals - SIFIs pay risk-adjusted insurance-type premiums to prefund the OLF at a level of $300 billion or more - incentive compensation rule to require SIFIs to pay at least half of total compensation to senior executives and other key employees in the form of contingent convertible bonds - expose insiders to immediate losses if SIFI fail during employment or during post-employment holding period Financial Accounting Standards Board (FASB) Current Expected Credit Loss (CECL) Model - Financial Accounting Standards Board (FASB) proposed Current Expected Credit Loss (CECL) model - implications for community banks - prepare financial institutions for a future crisis - use of forward looking information in calculating loan loss reserves The current Incurred Loss model vs. CECL - estimated day one loss and adjust estimated losses continually throughout the life of each loan - pure speculation - CECL models extensive operating system changes and cash flow modeling capabilities - cost and regulatory burden - added reserves - lower future profits, reduce capital levels, decrease community bank lending Tiered Regulation and Supervision for Community Banks - The Independent Community Bankers of Americas Plan for Prosperity- Outsized risks taken by TBTFs during the financial crisis - different/modest risks posed by community banks - regulations reflecting those differences - regulatory burden on community banks - one-size-fits-all approach - disproportionate burden of banking laws and regulations on community banks Credit unions, Farm Credit System lenders and other non-bank financial service providers not subject to the same laws and regulations as community banks - unlevel playing field - a significant competitive disadvantage for community banks Independent Community Bankers of Americas (ICBA) Plan for Prosperity - a regulatory platform - community banks able to thrive and contribute to local economies Address excessive, redundant and costly regulations - regulatory accountability - community banks dedicating resources to promoting economic growth - steady increase in regulations over many decades - regulatory threats to community banks and their communities. The Plan for Prosperity: Basel III original intent. accurately identify Systemic Risk additional capital for small holding companies - modernizing the Federal Reserves Policy Statement relief from Securities and Exchange Commission (SEC) rules robust housing market - reform mortgage lending community bank mortgage servicing accountability in bank exams - providing a workable appeals process bank oversight and examinations - better target risk risk targeting in the Volker Rule consumer regulation and inclusive and accountable CFPB governance arbitrary disparate impact fair lending causes of action viability of mutual banks - new charter and capital options rigorous and quantitative cost-benefit analysis - justify new rules red tape in small business lending - eliminating burdensome data collection credit for low and moderate income customers and American agriculture subchapter S corporation constraints Limited Liability Corporation (LLC) option for community banks Bank Qualified (BQ) bond issuer limitations five-year loss carryback to support lending during economic downturns. Tiered regulatory system based on size and risk profile - banking law, rule, and regulation distinguishing and appropriately regulating community banks. Credit Union Taxation and Expansion of Powers - Credit unions distinguishable from community banks - grown to control a significant share of the banking services market - outdated original business model - straying from founding purpose of serving individuals of modest means and with a common bond - same financial services as community banks - justification for federal tax-exempt status in exchange for serving their original mission - credit unions paying their fair share of income taxes - credit unions adhering to a common bond or operating within a well-defined local community, neighborhood or rural district - tax subsidy and level the playing field between credit unions and tax-paying community banks Credit unions similarity to other types of mutually owned financial institutions - savings banks (SB) and savings and loans (S&L) - the exemption for SBs and S&Ls repealed by Congress in 1951 - (reason) - active competition with taxable institutions [community banks] Credit union expansion of commercial lending powers - increasing the percentage of cap on member business lending (MBL) - loan growth at the expense of tax-paying community banks - fundamental altering the exclusive member-focused character of credit unions - condition for their original tax exemption Applying Community Reinvestment Act (CRA) requirements to credit unions - same asset size distinction as banks and thrifts - the same Call Report filing requirements for credit unions as those imposed on community banks Support and cooperation of NCUA the cheerleader regulator of credit unions - expansion of membership proposal - weaken the common bond requirement - disregarding Congressional limits - end around Congress. Farm Credit System (FCS) - Expansionist agenda of the Farm Credit System (FCS) - the equivalent of commercial banks yet retaining the benefits of Government Sponsored Enterprise (GSE) status - tax advantages - unfair competitive advantage - follow narrow historic mission - abolish or be subject to taxation and oversight and regulation Narrow founding purpose of the System to serve bona fide farmers, ranchers, young-beginning farmers, small farmers, and their farmer-owned cooperatives Support and cooperation of cheerleader regulator of FCS lenders -Farm Credit Administration (FCA) - straying beyond its original mission and scope and engaging in inappropriate and unprecedented lending activities - FCS significant systemic and taxpayer bail-out risks FCS (the only GSE) in active competition with community banks - public sector (multi-billion dollar GSE) competition with the private sector (Main Street community banks) Funding and tax benefit impact on community banks - not following its narrow historical mission - follow narrow mission or abolish FCSystem - abolished or taxation when exceeding a given asset threshold, lending to large borrowers, or engaging in non-farm lending activity FCS requirement to engage in joint rulemaking with federal banking agencies, a member of a federal banking agency on its three person board, requirement to register a class of stock with the Securities and Exchange Commission (SEC), full disclosure as required by the SEC Act, publication of instances of illegal lending and exemptions granted, and subject to regulatory safeguards, disclosures and controls equal to community banks and housing GSEs, including CFPB oversight Congress convening joint committee hearings to investigate the operations, supervision, risks and financial soundness of the FCS, and impact on rural community banks Data, Cyber and Payment Card Security (Data Security)- Wide-scale data security breaches at national retail chain stores and other entities - community banks reissuing credit and debit cards at a significant cost - community banks on the frontline of defending against cyber security threats and strong guardians of the security and confidentiality of customer information - central to maintaining public trust and the key to long-term customer retention Core data security principals - cost of data breaches borne by that party that caused the breach - all participants in the payment system (including merchants) should be subject to Gramm-Leach-Bliley Act-like data security standards - a national data security breach and notification standard should replace the current patchwork of state laws - and any new data security standards should ensure that community banks are not burdened with having to implement and comply with new regulations to achieve the same superior results they currently attain - community banks reliance on third party service providers - delicate balance between securing/sharing appropriate customer information Mortgage Lending and Housing Finance Reform - Imprudent mortgage lendings contribution to the mortgage meltdown and the financial crisis - community banks common sense relationship lending - no need for prescriptive regulations to compel doing what is right for their customers - not negatively impacting responsible community bank loan products to meet diverse needs of their customers including borrowers with special needs and circumstances, first-time homebuyers, borrowers in rural and underserved areas, and low-to-moderate income borrowers - recognize differences between the non-traditional lending practiced by community banks and the predatory lending practices of others All community bank loans held in portfolio for the life of the loan, including balloon payment loans, in all geographic areas, receive automatic Qualified Mortgage (QM) status and an automatic exemption from escrow requirements for Higher-Priced Mortgage Loans (HPMLs) - an increase in the small servicer exemption, an increase in the HMDA reporting levels - a formalized safe harbor during the TRID implementation period - broad special accommodations for community banks to provide flexibility in serving the needs of their customers and communities, particularly in rural areas - and expand definition of underserved areas to include economically challenged areas Untenable long-term position of government sponsored entities (GSEs) Fannie Mae (Fannie) and Freddie Mac (Freddie) in conservatorship by the United States Treasury run by the Federal Housing Finance Agency (FHFA). In reforming to the housing GSEs, the need for the continued existence of an impartial secondary market for residential mortgages for community banks which is financially strong and reliable - the need for some level of government involvement in the secondary market to ensure the continued flow of credit and market liquidity during periods of severe economic stress - no limit in full participation by community banks or disruption in the housing market - the return of private capital to reduce the reliance on government funding - protection of taxpayers from another bailout. Community bank sale of loans through an independent entity - not competing with community banks - no appropriation of community bank customer data for the purpose of cross selling financial services - the Federal Home Loan Banks preserved as a community bank access point (but not the only access point) to the national secondary market - the pricing of the governmental guaranty being fair and equal to all participants regardless of volume of loans guaranteed - no further consolidation of the housing finance system that would result in mega banks and financial firms dominating the market. Consumer Financial Protection Bureau Reform - Consumer Financial Protection Bureau (CFPB) use of its statutory authority under the Dodd-Frank Act to exempt community banks or any products or services from the rules it writes - use of this authority to ensure community banks can continue to provide alternatives to large banks and non-banks for consumers seeking responsible financial service providers CFPB providing community banks with flexibility to meet unique needs of customers and not burden community banks with additional and unnecessary regulatory requirements to prevent them from serving their communities - no one-size-fits-all approach to CFPB regulations which harms community banks in meeting the unique needs of its local customers and communities - Community banks enduring any additional consumer regulatory burden on top of the existing burden they already face Single-Director governance of the CFPB vs. a five-member commission - residential regulators participate with the CFPB in the rule-writing process - Financial Stability Oversight Council (FSOC) power to veto CFPB rules under a practical and realistic standard - a broad definition of firms that grant credit being subject to the CFPB rules, and their supervision and examination Focus of any enhanced regulation of financial products on TBTF banks and financial firms and the unregulated shadow financial industry - efforts to use its authority to address non-banks, such as Wal-Mart, serving as channels for financial products - holding all of the other financial service providers up to the existing high standards for compliance with consumer laws, rules and regulations as currently attained by community banks De Novo Community Bank Formation and the Dual Banking System/Charter Choice - Newly chartered (de novo) community banks importance in maintaining a strong, growing, evolving and vibrant banking profession - FDICs inhibiting de novo community bank formation during the financial crisis, FDICs indication of a change in policy direction by rescinding its Financial Institution Letter (FIL) 50-2009, Enhanced Supervisory Procedures for Newly Insured FDIC-Supervised Depository Institutions The importance of the dual banking system where chartering and supervision is divided between the federal government and the states - community banks choice of charters that best fits their business model - multi-agency (state and federal) regulators and charter choice providing necessary checks and balances on the power of the regulators, as well as improved rulemaking, the benefit of each agencies expertise and experience is brought to bear on complex and controversial issues Federal Home Loan Bank System - Federal Home Loan Banks (FHLBs) strong partnership with community banks - providing short-term liquidity, long-term funding and other financial products that serve the needs of all member-owners - providing lendable funds for the local communities - regional structure, special functions and purposes of the FHLBs recognized and maintained by the Federal Housing Finance Agency (FHFA). FHFAs proposed rulemaking to revise FHLB membership eligibility requirements - negative impact on the FHLB System and its members - precedent set to terminate through rulemaking FHLB membership and the threat to revisit the broader membership issue in the future - contrary to the will of Congress FHLB System position as a healthy, stable and reliable source of funding for its members - not as the sole aggregator or securitizer of residential mortgages for community banks - FHFAs imposition of an ongoing housing mission asset test on community financial institutions Excessive Intervention in Monetary Policy - Sustained record-low zero interest rate policy (ZIRP) engineered and implemented by the Federal Reserve System - disproportionally impact on community banks, senior citizens and savers - a significant drag on the earnings of community banks - THBF banks with non-traditional banking business lines derive a much lower percentage of their earnings from net interest margins and are not as negatively impacted - limits to what Fed monetary policy can accomplish considering major offsetting negative effects on community banks, senior citizens, and savers Legislation - H.R. 4500 - Community Bank Reporting Relief Act (amends the FDIC Act to permit reduced reporting requirements (Call Reports) for the first and third quarters for highly-rated well-capitalized banks (All Sections) (House) H.R. 1188 -The Credit Union Business Job Creation Act (expand credit union member business lending cap) (All sections) (House and Senate) H.R. 1233 and S. 812 - CLEAR Relief Act of 2015 (tiered regulatory reform and relief for community banks) (All sections) (House and Senate) H.R. 4993 - Homeowners Information Privacy Protection Act (study privacy implications of new HMDA data fields) (All sections) (House) H.R. 4950 - Small Financial Institution Advisory Committee Act of 2016 (creates a Treasury Department community bank advisory committee) (All sections) (House) Comment Letters - Comment Letter - Federal Housing Finance Agency (FHFA), Proposed Rule on Acquired Member Assets - RIN 2590-AA69 - revise to better allow for appropriate product innovation and development) Comment Letter - Federal Financial Institutions Examination Council (FFIEC, FDIC, Federal Reserve, OCC), Uniform Interagency Consumer Compliance Rating System - FFEIC-2016-00 - undertake a new and thorough analysis of the burden, remove the opportunity for misguided interpretation, elevate the legal standard for accountability, and clarify that consumer harm can only be caused by violations of law) Action Alerts - Action Alert - Regarding Farm Credit System (FCS) - halt FCS mission creep (Senate) Miscellaneous - Regarding CFPB rulemaking - specifically regarding Qualified Mortgage (QM) exemption for small creditors and those operating in rural and underserved areas, recommendation that future rulemaking justifiably grant community banks the broad regulatory relief they deserve at the outset of rulemaking, not after a long and painful rulemaking process which only adds to the frustration and regulatory burden on community banks (CFPB) Regarding the Action Alert - Farm Credit System (FCS) halt mission creep (Senate) - reinforced community bank position on this issue and corrected the inaccurate statement of CBAI position in the form letter e-mail response to the Action Alert (Senate) Regarding Member Letter regarding High Volatility Commercial Real Estate (HVCRE) - Responded to member request for position on this issue (House)

MTBs - Footwear - (H.R. 4926, H.R. 4927, H.R. 4928, H.R. 4929, H.R. 4502, H.R. 4503, H.R. 4504, H.R. 4505, H.R. 4993, H.R. 4994, H.R. 4995, H.R. 5330) (S. 2399, S. 2400, S. 2401, S. 2402, S. 2403, S. 3055, S. 3056, S. 3057, S.3058, S. 3036, S. 3037, S. 3038, S. 3039, S. 3040, S. 3041, S. 3042, S. 3043) Technical Correction - (S. 3073) Sleeping bag shells/carrying cases - (H.R. 4973, H.R. 4974, H.R. 4975) Travel/Cargo/Duffel/Rolling Backpack Bags - (H.R. 5034, H.R. 5631, H.R. 5632, H.R. 5633, H.R. 5634, H.R. 5635, H.R. 5636) (S. 2621) (Bill numbers refer to 112th Congress)

Client expense: Not reported · Firm income: $30,000

Government targets: HOUSE OF REPRESENTATIVES, Intl Trade Administration (ITA), SENATE, U.S. Customs & Border Protection, U.S. Trade Representative (USTR)