SDBA eNews

April 4, 2019

Position for Success at SDBA Ag Credit Conference Next Week

Ag bankers can learn about positioning for success in the economic reset at the SDBA's Agricultural Credit Conference next week in Pierre.

The conference will open Wednesday, April 10, with pre-conference workshop "Implementing Farmer Mac as Part of Your Ag Lending Strategy in South Dakota." Learn about Farmer Mac’s tools available, including its new AgXpress scorecard program, a simplified loan application process with minimal documentation and attractive pricing. Farmer Mac will also review popular products, the current interest rate environment, and dive into some recent South Dakota loan sale transactions. The workshop will be followed by a reception with exhibitors. 

Dr. David Kohl will kick off Thursday's events with his session "Positioning for Success in the Economic Reset."  Join this energizing session and take a walk around economic trends followed by their implications to your organization, business and personal endeavors. Regardless of the cycle, if managed well and pro-actively, then you will be on the positive end of the profit spectrum.

Other conference topics will include precision agriculture, taking control of your workday, a livestock and grain market outlook, proactive communications with customers, having tough conversations, and farmland and equipment worth. Attendees will also hear from the South Dakota Department of Agriculture, ABA's Agricultural & Rural Banking and a young producer panel. The event will close Friday morning with V.J. Smith's presentation "Grateful Ways; Amazing Days." 

The conference will be held at the Ramkota Hotel & Conference Center in Pierre. Attendees can register for the full conference or individual days. Learn more and register now

ABA Welcomes More Than 1,300 Bankers to Washington

ABA’s annual Washington Summit and several related programs began Monday, with more than 1,300 attendees, including bankers from South Dakota. The formal Summit program opened Tuesday morning with keynote presentations by House Financial Services Committee Chairwoman Maxine Waters (D-Calif.), Chairman of the White House Council of Economic Advisers Kevin Hassett and  Senate Banking Committee Chairman Mike Crapo (R-Idaho). 

Tuesday's agenda also included a session with senior personnel from the FDIC, OCC and Federal Reserve, as well as an advocacy update from a panel of ABA leaders. Tuesday afternoon, Summit attendees visited their representatives on the Hill to advocate for meaningful changes that grow the economy and give bank customers more choices.

On Wednesday, attendees heard from Federal Reserve Bank Presidents Tom Barkin (Richmond), Raphael Bostic (Atlanta) and Esther George (Kansas City), as well as Donna Brazile, former chairman of the Democratic National Committee, and Mike Murphy, political analyst for NBC News. Meanwhile, ABA Sunday night kicked off its Mutual Community Bank Forum, which continued Monday, along with ABA's Emerging Leaders Forum. On Wednesday, ABA held its annual Women's Leadership Forum.

If you missed the Summit, tune in for insight and analysis on the past few days, and if you attended, revisit the highlights with the ABA Banking Journal Podcast. Listen to this episode

ABA to Donate $25,0000 to Nebraska Bankers Flood Relief Effort

As banks in Nebraska continue to help their communities recover from recent devastating floods, ABA President and CEO Rob Nichols announced Tuesday that the association will donate $25,000 to a fund created by the Nebraska Bankers Association. The fund, Bank On Nebraska Strong, will help assist with the initial needs of those affected by the flooding, and support the ongoing rebuilding of businesses and communities. Learn more and donate.

FDIC Warns on 'Gaps' in Tech Vendor Contracts

The FDIC issued a letter to all banks on Tuesday outlining gaps that some examiners had noted in banks’ contracts with technology vendors and reiterating regulatory requirements for these contracts.

“Examiners have noted in recent FDIC reports of examination that some financial institution contracts with technology service providers may not adequately define rights and responsibilities regarding business continuity and incident response or provide sufficient detail to allow financial institutions to manage those processes and risks,” the agency said. Specifically, it added, some contracts did not require the vendor to have a business continuity plan, establish recovery standards, define remedies if a vendor misses a standard, detail a vendor’s post-incident notification duties or define key terms related to business continuity and incident response.

The letter reminded banks about the interagency guidelines setting information security standards, which were issued under the Gramm-Leach-Bliley Act and the notification requirements under Section 7 of the Bank Service Company Act. The FDIC also said that long-term contracts and those that automatically renew “may be at higher risk” for coverage gaps and that banks should assess and manage risks around those gaps. Read the letter. For more information, contact ABA's Krista Shonk

FASB Keeps CECL Unchanged; ABA Continues to Urge Impact Study

The Financial Accounting Standards (FASB) Board yesterday declined to make changes to its current expected credit loss model, as proposed by a group of regional banks, speeding CECL on its path to being implemented for Securities and Exchange Commission registrants as scheduled in 2020. The regional banks’ proposal called for recognizing in other comprehensive income the credit losses forecasted beyond 12 months, rather than in earnings, as CECL calls for.

“While FASB may not have accepted this specific proposal, that does not mean there is a consensus to move forward with CECL in its current form,” said ABA SVP Mike Gullette. “ABA and others, including many bank investors and members of Congress from both parties, have raised significant concerns about the impact this accounting change could have on banks and their ability to lend. This is why we continue to call for a delay until a quantitative impact study can be conducted to assess both financial reporting and regulatory capital concerns raised by CECL.”

In related news, FASB voted five to one to determine that the disclosure of gross charge-offs and recoveries by vintage is not required—although further discussion on this point is expected. View ABA resources on CECL. For more information, contact ABA's Josh Stein

On a related note, the federal financial institution regulatory agencies will host an interagency webinar on Thursday, April 11, at 1 p.m. CDT, covering the use of the weighted-average remaining maturity (WARM) method for estimating allowances for credit losses under CECL. The webinar will be held in conjunction with the Financial Accounting Standards Board, the Securities and Exchange Commission and the Conference of State Bank Supervisors. Read more.

House Committee Advances ABA-Backed Cannabis Banking Bill

By a vote of 45 to 15, the House Financial Services Committee last Thursday advanced the ABA-backed Secure and Fair Enforcement Banking Act, which would address the issue of providing financial services to cannabis-related businesses.

The SAFE Banking Act specifies that proceeds from “cannabis-related legitimate businesses” would not be considered unlawful under federal money laundering rules or other laws. It would also direct the Financial Crimes Enforcement Network and federal banking regulators to issue guidance and exam procedures for banks that serve cannabis-related legitimate businesses. ABA welcomed the vote, calling it “an important step forward in providing regulatory and legal clarity” for institutions operating in states that have legalized marijuana, as well as providing access to financial services to legitimate cannabis businesses.

“Lawmakers on both sides of the aisle recognize this problem needs to be addressed, particularly with the public safety concerns that arise when these businesses are cut off from the banking system and forced to hold large amounts of cash,” said ABA President and CEO Rob Nichols. “Not only will the SAFE Banking Act address some of those concerns, but it will also make tax collections from cannabis-related business activity more efficient and increase transparency.”

ABA Issues Staff Analysis, Seeks Banker Feedback on Proposed Overtime Rule

ABA has published a staff analysis on the Department of Labor’s proposed rewrite of the Obama administration’s overtime rule, which was adopted in 2016 but never took effect due to a federal judge’s ruling later that year. Comments on the proposal are due by May 21, 2019.

DOL’s proposed rule sets the “salary level” for the white collar exemptions at $679 per week ($35,308 per year); permits nondiscretionary bonuses, incentives, and commissions to satisfy up to 10 percent of the salary level test; revises the threshold for an employee to be classified as a “highly compensated employee” to $147,414; and states DOL’s intention to update the salary level every four years through rulemaking. Read the staff analysis.

ABA is inviting interested bankers to participate in conference calls scheduled over the next two weeks to provide feedback on the proposed rule. For more information, or to provide feedback on the proposed rule, contact ABA's Jonathan Thessin.

FDIC Deposit Insurance Coverage and Related Matters Webinar

Now is a great time for bankers to refresh their knowledge on FDIC insurance regulations as the FDIC continues to examine bankers’ understanding of deposit insurance rules that apply to third-party agency accounts. FDIC insurance eligibility is a key benefit banks provide to depositors. It can be an important selling point in maintaining key customer relationships and obtaining bank funding.

Promontory Interfinancial Network, LLC is offering the free webinar "FDIC Deposit Insurance Coverage and Related Matters." This 45-minute educational webinar is designed for all levels of bank employees and executives and will include a Q&A segment to address your specific concerns. The webinar will be presented by Joe DiNuzzo, a former attorney with the FDIC and an expert in FDIC insurance regulations.

The webinar will be offered twice in May. Registration is required. 

Compliance Alliance

Question of the Week

Question:  On a business loan where we have personal guarantees, do we have to check MLA on the guarantees, since they are acting as individuals?

Answer: No, because a business loan is not a covered transaction under the MLA. The MLA applies to "consumer credit" offered to covered borrowers, as those terms are defined in the MLA.

Regarding the applicability of the MLA to guarantors, the Act is not clear as to whether it does apply or does not apply to guarantors. Conservatively, the bank would treat guarantors as if they fall under the scope of the MLA because they are to some extent "obligated on the consumer credit transaction..."

12 CFR § 232.3(g)(1) ("Covered borrower means a consumer who, at the time the consumer becomes obligated on a consumer credit transaction or establishes an account for consumer credit, is a covered member (as defined in paragraph (g)(2) of this section) or a dependent (as defined in paragraph (g)(3) of this section) of a covered member."

12 CFR § 232.3(f)(1) ("Consumer credit means credit offered or extended to a covered borrower primarily for personal, family, or household purposes, and that is: ...")

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 Bousa, SDBA, at 800.726.7322 or via email.