SDBA eNews

February 1, 2018

Still Time to Register for SDBA State Legislative Day, Meeting with Neel Kashkari

It is not too late to register to attend the SDBA's State Legislative Day next Wednesday, Feb. 7, at the Ramkota Hotel & Conference Center in Pierre. The event is bank employees' opportunity to stay up-to-date on both state and federal legislation which could affect the banking industry and to visit with state legislators.

The day will include a luncheon and banking legislation review, discussion on the U.S. economy (past, Trump and the coming decade), a chance to visit with legislators at the State Capitol, and an evening reception. A special reception will also be held for emerging leaders in the banking industry, and the Governor will speak on the importance of banks on Main Street.

Bankers are also invited to a bankers-only meeting with Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, on Thursday, Feb. 8, in Pierre to discuss local and regional business conditions. The meeting will be held at 7:30 to 8 a.m. at the Ramkota Hotel. A Town Hall Forum that is open to the public will follow at 8 to 9 a.m.

  • If you haven't yet registered for the SDBA's State Legislative Day on Feb. 7, click here.
  • Those interested in attending the bankers-only meeting with Neel Kashkari on Feb. 8 at 7:30 a.m. should contact the SDBA's Halley Lee, which will also automatically register you for the Town Hall Meeting at 8 a.m.
  • Those interested in attending only the Town Hall Meeting with Neel Kashkari on Feb. 8 at 8 a.m. should register online

Registration Open for SDBA 2018 Agricultural Credit Conference

The SDBA will present the 2018 Agricultural Credit Conference April 11-13 at the Ramkota Hotel & Conference Center in Pierre. This conference focuses on the unique needs of ag bankers and the need for quality information and training to better serve their customers. The SDBA has lined up speakers on a variety of timely topics to help ag bankers navigate through challenging times. Experienced and new ag lenders, as well as CEOs, will all benefit from this conference.

The event will kick off Wednesday afternoon with a pre-conference session by Farmer Mac titled "Winning Secondary Market Strategies for South Dakota Ag Bankers." Learn about Farmer Mac’s ag lender tools available to compete and attract new business. Farmer Mac will also review the current  interest rate environment and dive into some recent South Dakota loan sale transactions. 

Conference sessions include "Profitability Through Execution: The Fundamentals" by Dr. Mike Swanson, "Ag Banking in the Push-Pull Farm Economy" by John Blanchfield, "Surviving Difficult Markets" by Steven Knuth and "Managing Weather Risk in Agriculture" by Eric Snodgrass. The conference will also include three panel discussions titled "A Conversation About Conversations," "Succession Planning: Building Bridges or Burning Bridges?" and "Buy Land, They're Not Making It Anymore." Peterson Farm Bros will close the conference with "I'm Farming and I Grow It: An AgVocating Success Story."

Secret Services Issues Warning about ATM 'Jackpot' Attacks

The U.S. Secret Service has issued an alert warning ATM owners and operators of cash-out criminals conducting “jackpotting” attacks on standalone front-loading ATMs located in drive-throughs and retail outlets in multiple locations across the United States. Jackpot attacks, also known as “logical attacks,” combine physical intrusion and malware to command ATMs to empty themselves out in a matter of seconds.

According to the alert, criminals dressed as service technicians use ATM access keys readily available online to gain entry via the ATM’s top hat, install malware on the ATM and take control of the machine in order to initiate ATM withdrawals. In some cases, the criminals swap out the ATM’s existing hard drive and replace it with one already infected with malware. Banks are recommended to contact their ATM service providers for the latest security updates and patches to mitigate the risk from these attacks, to ensure proper physical security controls limiting access to the machine and to monitor for communications failures and alarms.

Diebold Nixdorf, a major ATM vendor, recommended limiting physical access to the ATM; implementing protection mechanisms for cash modules; monitoring unexpected opening of ATMs’ “top hats”; and keeping operating systems, software stacks and configurations up to date. NCR, another major ATM provider, also issued an alert with specific recommendations to address common forms of logical attacks against ATMs. The Financial Services Information-Sharing and Analysis Center is also issuing information on the attacks; the American Bankers Association encourages all banks to join FS-ISAC to receive the latest security alerts.

Sen. Hatch Writes NCUA with 'Concerns' about Credit Union Activities

Senate Finance Committee Chairman Orrin Hatch (R-Utah), the top tax policymaker in the Senate, yesterday sent a letter to the National Credit Union Administration expressing concern about whether credit union activities--and NCUA’s supervision--align with the purposes of the tax exemption they enjoy. “I am concerned that the credit union industry is evolving in ways that take many credit unions further from their original tax-exempt purpose,” he wrote to NCUA Chairman Mark McWatters, noting in particular NCUA’s actions to relax field-of-membership constraints, alternative capital use and expanded business lending. “While these may be worthwhile pursuits, they should give us pause and cause a reflection on the core mission of credit unions and their tax-exempt purpose.”

Hatch expressed particular concern about NCUA’s “common bond” requirements, which he said “seems to have been significantly watered down.” He also noted the common credit union tactic of allowing new members to join by paying a nominal fee to join a linked association that may even be “operated by the credit union itself,” as well as the overbroad fields of membership that may make up entire states. “In other cases, credit unions have been established to serve the banking needs of otherwise highly paid individuals with easy access to banking services,” he wrote. “This is not the ‘well-understood sense of cohesion’ that [the 1998 credit union bill] envisaged credit union members sharing.”

Hatch also noted that many credit unions now offer insurance, real estate brokerage and wealth management, “appear[ing] to operate in the same manner as taxable banks,” including acquiring for-profit banks and buying stadium naming rights. Hatch asked NCUA to provide information to the committee on how the agency oversees associations for purposes of CU membership, how NCUA enforces policies related to CUs offering services outside of their tax-exempt purpose and how it oversees executive compensation and corporate sponsorships. McWatters’ response is due by April 6. Read the letter

Appeals Court Upholds Constitutionality of CFPB

A federal appeals court yesterday upheld the constitutionality of the Consumer Financial Protection Bureau’s leadership structure--a single powerful director who can be removed by the president only “for cause,” not at will--reversing a three-judge panel’s decision in 2016. However, the full court upheld the three-judge panel’s findings with respect to the statutory claims of PHH, a mortgage lender fined by the CFPB under the Real Estate Settlement Procedures Act.

In a complex ruling with two concurring opinions, one opinion concurring in the judgment and three dissenting opinions in addition to the court’s majority opinion, the D.C. Circuit Court of Appeals held that the limitation on the president’s power to remove is consistent with Supreme Court rulings on other federal agencies, including the Federal Trade Commission and the Securities and Exchange Commission. “The Supreme Court has never struck down a statute conferring the standard for-cause protection at issue here,” the court held.

The case arose in 2015, when then-CFPB Director Richard Cordray overruled an administrative law judge’s recommendation for a $6.5 million fine against mortgage lender PHH for allegedly engaging in unlawful arrangements in violation of the Real Estate Settlement Procedures Act. Cordray demanded that PHH pay 18 times more--or $109 million--for each time it received a payment deemed improper by the bureau on or after July 21, 2008. PHH objected, arguing that the bureau was misinterpreting Section 8 of RESPA in forbidding the kind of captive reinsurance arrangement that PHH used, as well as changing prior RESPA interpretations long since issued by the Department of Housing and Urban Development and applying them retroactively.

The full circuit court left intact the panel’s holding that retroactive applying of a new RESPA interpretation violated PHH’s due process rights and that the bureau is bound by the three-year statute of limitations for RESPA violations, even in administrative actions. In so doing, the court sided with ABA’s amicus brief in the case, which argued that agencies cannot ignore their own regulations and adopt interpretive constructions that conflict with their own rules.

ABA has long believed that a five-member, bipartisan commission--as originally envisioned in drafts of the Dodd-Frank Act--would balance the bureau’s needs for independence and accountability while broadening perspectives on rulemaking and enforcement and providing appropriate checks and balances. Should the case be appealed to the U.S. Supreme Court, ABA will continue to monitor it closely.

CFPB Seeks Feedback on Administrative Adjudications

The Consumer Financial Protection Bureau yesterday issued a request for information seeking feedback from the public on administrative adjudications for contested matters that were not resolved by consent order. The request is the second RFI the bureau has issued following Acting Director Mick Mulvaney’s announcement earlier this month that the CFPB will engage in a broad public feedback initiative to ensure that it is fulfilling its statutory requirement to protect consumers. A third request on the bureau’s enforcement processes is expected next week. 

Yesterday’s RFI seeks public feedback on whether and how the CFPB should use the administrative adjudications process and how processes could be improved to achieve the bureau’s statutory objectives while minimizing the burdens and costs on those subject to the proceedings. View the RFI. For more information or to provide input for ABA's comments on the RFI, contact ABA's Virginia O’Neill

ABA to Offer Free Webinar to Sub S Banks on Tax Reform

ABA and the Subchapter S Bank Association will cosponsor a free webinar on Feb. 14, from 1 to 2:30 pm CST, to help Subchapter S banks evaluate the effects of the tax reform law’s reduced rates on a bank’s decision to organize as a pass through entity or as a C corporation. Experts from Crowe Horwath will provide an overview of the changes in the new law and review operating considerations related to electing S versus C status as well as sample financial analytics that might be considered in a bank’s evaluation. Register for the webinar

Federal Reserve Bank of St. Louis EVP to Speak in Brookings

Julie Stackhouse with the Federal Reserve Bank of St. Louis will present “From Financial Crisis to Recovery–The Important Role of the U.S. Central Bank" on Monday, Feb. 5, at South Dakota State University in Brookings. Stackhouse is executive vice president and managing officer of Supervision, Credit, Community Development and Learning Innovation.

Prior to joining the St. Louis Fed in September 2002, Stackhouse served as vice president and managing officer of the risk management department of the Federal Reserve Bank of Minneapolis. Before moving to Minnesota in 1995, she was an officer with the Federal Reserve Bank of Kansas City, where she served in many capacities, starting as an examiner in 1980. Stackhouse holds a bachelor's degree in business administration from Drake University and is a graduate of the Wisconsin Graduate School of Banking. In 2010, Stackhouse was named a St. Louis Business Journal “Most Influential Business Women” recipient.

The presentation at SDSU is free to attend and will be held at 7 p.m. at the SDSU Performing Arts Center at 1601 11th St. The event is sponsored by the Dykhouse Scholar Program in Money, Banking and Regulation. Questions, contact Dr. Joseph M. Santos.

Compliance AllianceQuestion of the Week

Question: Is it accurate to disclose that a 36-month CD, compounded and credited monthly, has the same annual rate and annual percentage yield?

Answer: No. If you compound monthly, the interest will be paid each subsequent month on a higher principal. The same “rate” applied to a higher principal is going to yield a higher amount of interest than the first month, and each month thereafter will be higher than the previous month. The final, annual percentage yield as calculated by dividing the aggregate interest over a year by the initial principal amount will be higher than the rate quoted. 

Refer to the appendix to Reg. DD regarding calculation of APY:

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