SDBA eNews

November 9, 2017

South Dakota Banking Division Nationally Accredited

The South Dakota Division of Banking has received a certificate of accreditation from the Conference of State Banking Supervisors (CSBS). This latest accreditation is the Division’s third consecutive five-year accreditation.

“South Dakota has an experienced team of banking regulators,” said state Labor and Regulation Secretary Marcia Hultman. “The Division practices the highest standards while serving the public and our banks, trust companies and other financial institutions.”

The CSBS Accreditation Program involves a comprehensive review of the critical elements that assure a banking department’s ability to discharge its responsibilities. This is done through an investigation of all department operations, including administration and finance, personnel, training, examination, supervision and legislative powers.

“The accreditation process is time consuming and demanding, but demonstrates our commitment to quality supervision,” said Banking Director Bret Afdahl. “It makes us better at what we do by measuring us against independent, peer-reviewed standards.”

The Division of Banking promotes the safety and soundness of state-chartered financial institutions by identifying, monitoring and addressing risks to those institutions to protect public interests.

Sioux Falls Man Sentenced for Financial Elder Abuse

A Sioux Falls man was sentenced to prison this week for financial elder abuse, according to an Argus Leader story.

Ronald Wayne Whalen, 47, was sentenced on Wednesday to 2.5 years in prison. Whalen was convicted of forgery after he lied to an elderly victim to obtain money, according to the Attorney General's Office. His sentence will be concurrent with a separate forgery conviction he received in June 2017.

The case was investigated by the South Dakota Attorney General’s Elder Abuse and Financial Exploitation Subdivision.

Appraisal Qualifications Board Issues New Proposal to Combat Appraiser Shortage

As lenders continue to raise concerns about a lack of certified appraisers, particularly in rural areas, the Appraisal Qualifications Board last week released a fourth exposure draft of a proposal to change the qualification criteria for real property appraisers.

Importantly, the AQB proposed to remove college degree requirements for licensed residential appraisers and provide alternatives to the bachelor’s degree requirement for certified residential appraisals. The proposal also outlines an alternative track for licensed residential appraisers to become certified without obtaining a bachelor’s degree. In addition, it would reduce the number of field hours needed from 2,000 to 1,000 for licensed appraisers and 2,500 to 1,500 for certified appraisers.

ABA has previously called for changes to the appraiser qualifications as part of its ongoing effort to address the appraiser shortage in rural areas and welcomed the proposal. Comments on the proposal are due Jan. 12. View the proposal. For more information, contact ABA's Sharon Whitaker.

Sweeping House Tax Reform Bill Introduced

House Republican leaders last week unveiled a draft of sweeping tax reform legislation--the first major overhaul of the tax code in more than three decades. The 429-page draft includes numerous provisions affecting banks, and ABA staff experts are reviewing it thoroughly to understand its impact on the financial sector.

ABA President and CEO Rob Nichols welcomed the bill’s introduction as “an important and positive step toward finally reforming our nation’s tax code. We appreciate that [Ways and Means Committee] Chairman [Kevin] Brady and the committee recognize that a lower tax rate is necessary for all U.S. businesses, including America’s banks, to be more competitive in the global market.”

Key provisions in the bill include:

  • A corporate income tax rate for C-corporations of 20 percent
  • An income tax rate of 25 percent for passive income from “pass-through” entities, including Subchapter S banks (with potential restrictions on the ability of active shareholders to claim the lower corporate rate)
  • Restrictions on net interest deductibility, with businesses whose average gross receipts exceed $25 million prohibited from deducting net interest expense exceeding 30 percent of adjusted taxable income
  • Retained homeownership provisions but subject to new caps going forward
  • Eliminating the deduction for deposit insurance premiums for banks with more than $50 billion in assets and phasing in the elimination for banks with $10-50 billion in assets
  • Broadening the tax base by eliminating new markets and historic tax credits and net operating loss carrybacks

“We are in the process of evaluating the proposal against those principles, and we are encouraged by our initial analysis,” Nichols said, noting that ABA is looking closely at the provisions on net interest deductibility, pass-throughs and homeownership incentives and is concerned about the FDIC premium proposal.

“We are disappointed the House has not taken this critical opportunity to address the tens of billions of dollars in outdated, unfair and unreasonable tax advantages enjoyed by credit unions and the Farm Credit System,” Nichols added. “We will continue to make the case that businesses offering similar services should be treated equally under the tax code."

ABA is working with the Independent Community Bankers of America and the Subchapter S Bank Association to address industry concerns over how pass-through entities are taxed under the tax bill. The effort, which ABA believes the committee is committed to addressing, comes as part of the broader tax reform conversation around broad-based, pro-growth tax reform.

Trump Names Jerome Powell as Fed Chairman

President Trump last week said he would name Federal Reserve Governor Jerome Powell as chairman of the Fed. Powell first joined the board in 2012 and has played a major role in bank supervision and payments systems activities while on the board.

Rob Nichols congratulated Powell on his nomination. “President Trump has chosen someone of great integrity, intellect and experience for this critically important position, and we know Governor Powell will be up to this challenge,” he said. “He has demonstrated sound judgment in his handling of monetary policy since joining the Federal Reserve. He has also demonstrated a keen understanding of the important relationship between monetary policy and sound regulatory policy and how the two can work together to reinforce economic growth.”

A lawyer by training, Powell’s pre-Fed experience includes work as an investment banker, as a senior Treasury official during the George H.W. Bush administration and as a private equity investor. If confirmed, he will be (with a brief exception during the Carter administration) the first non-economist to chair the Fed since 1970.

Nichols also saluted outgoing Fed Chairman Janet Yellen for her leadership. “Her actions helped lift the economy while strengthening the financial system,” he said. “Under her leadership, the Fed has also begun the important task of reviewing and reforming key elements of financial supervision, including stress tests and capital simplification.”

SD Department of Ag Can Help Finance Swine Facilities

Are your customers in the swine industry? Or maybe an existing or potential customer wants to join the industry? The South Dakota Department of Agriculture (SDDA) has financial programs available to help alleviate bank risk and help you provide more competitive rates.

SDDA’s financial programs partner with lenders to provide borrowers with lower interest rates. Programs are available for beginning farmers, livestock purchases, facility expansion, grain storage, manure management projects and value added businesses in South Dakota.

  • The Rural Development Ag Loan Participation program can help fund up to $500,000 of building construction. This program partners with the bank for up to 80 percent of the loan amount. Applications are accepted at any time, and there is no application fee.
  • Tax-exempt bond programs through the Value Added Finance Authority Board can be utilized to take advantage of tax-exempt interest income for banks. This program has been widely used in the dairy industry and can be used in the swine industry and in conjunction with the participation loan or stand alone. Any costs associated with the collection and storage of manure are eligible, which is a substantial portion of a swine facility. (Federal tax reform may impact bond programs.)
  • The Livestock Nutrient Management bond provides tax benefits to the bank (bond purchaser) while providing lower interest rates on the manure management portion of the project. The application fee is $200. VAFA meeting schedule and agendas are available online.

SOOEY! Call the pigs and let SDDA help you help your customers. For information on any of the financial programs offered through the SD Department of Agriculture, contact Terri LaBrie, finance administrator, at 605.280.4745 or via email. All program summaries, application forms and fee information are available online.

ABA to Host Briefing on ADA Compliance, Human Resources Issues

ABA will host a free webinar on Tuesday, Nov. 14, at 1 p.m. CST to update bankers on the latest information about the Americans with Disabilities Act and overtime-related issues. ABA's Toni Cannady will discuss website accessibility and considerations for banks working toward ADA compliance. ABA VP Chris Naser will provide an update on the Obama administration's overtime rule--including current litigation and the rule's future--and discuss the impact of the Trump administration on human resources issues. Register for the webinar.

NDBA/SDBA Bank Management Conference Set for February

The 2018 NDBA/SDBA Bank Management Conference will be held Feb. 16-17 at the Westin Kierland Resort in Scottsdale, Ariz.

Events will include general sessions, a spouse/guest event, optional golf and a gala dinner.

Be watching the SDBA's website for the registration packet and complete agenda coming soon. Learn more.

Compliance AllianceQuestion of the Week

Question: I need clarification on community development services for CRA credit. If an executive officer volunteers for a community service, can that be counted for credit under the service test?

Answer: That all depends. If they are acting on behalf of the bank and they are out there representing the bank, then you could use that as a service credit. However, if they are volunteering on their own behalf (i.e. not getting paid by the bank to be out there), then the bank would not receive credit. That is just a service the EO is doing out of the kindness of their heart.

Not a Compliance Alliance member? Learn more about membership with Compliance Alliance by attending one of our live demos:

Compliance rules and regulations change quickly. For timely compliance updates, subscribe to Compliance Alliance’s email newsletters.

Compliance Alliance offers a comprehensive suite of compliance management solutions. To learn how to put them to work for your bank, call 888.353.3933 or email.

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Contact Alisa DeMers, SDBA, at 800.726.7322 or via email.