SDBA eNews

May 30, 2019

SDBA/NDBA Annual Convention Kicks Off on Sunday

Question: How do you climb a mountain? Answer: One step at a time.

Dr. Richard Deming will be the fellowship keynote at this year's SDBA/NDBA Annual Convention on Monday, June 3. Join Dr. Deming for his session "Above + Beyond Cancer" as he teaches us that through adversity, we can all achieve personal growth. As we focus forward, Dr. Deming will teach us that life is a gift and not a single minute should be “un-lived.”

This year's convention "Focus Forward" will kick off with an evening welcome party on Sunday, June 2, and run through Tuesday, June 4, at the Sioux Falls Convention Center. See the full convention agenda. The SDBA Office will be closed during the Annual Convention. 

South Dakota Lottery Warns of Fraudulent Checks

South Dakota Lottery last Friday warned of fraudulent checks being cashed at various locations. The fraudulent checks are very similar to legitimate checks, as they feature South Dakota Lottery’s logo and bank information.

If you have questions about the legitimacy of a check from the South Dakota Lottery, call the office at 605.773.5770 to confirm its authenticity. For more information on lottery scams, visit South Dakota Lottery's website

OCC Issues Long-Awaited Final Rule on HOLA Flexibility

The OCC last Friday issued a long-awaited final rule implementing a new section of the Home Owners’ Loan Act permitting certain federal stock and mutual savings associations to elect the rights and duties of national banks. The provision—long advocated for by ABA—was included as part of last year’s S. 2155 regulatory form law.

Under the final rule—which takes effect July 1—federal savings associations with total consolidated assets of $20 billion or less as of Dec. 31, 2017, may at any time elect to become “covered associations.” Making this election will remove portfolio asset restrictions that have limited some banks’ ability to respond to changing needs in their communities. It will also subject those institutions to the same duties, restrictions, penalties, liabilities, conditions and limitations that apply to national banks without requiring a charter conversion 

ABA welcomed the final rule. “HOLA-chartered banks are an important part of the banking industry, and the added flexibility will allow these institutions to better meet the evolving needs of their customers and communities without having to change charters,” said ABA SVP Joe Pigg. “The final rule provides a clear and efficient process for banks seeking to take the election provided under the rule.”

Pigg added ABA’s view, however, that “the statute provides greater flexibility in some areas than the OCC included in the final rule.” The association will continue to work closely with the OCC to communicate its views on HOLA flexibility and seek additional avenues for HOLA-chartered banks to serve their communities. Read the final rule.

ABA Slams NCUA Proposal Expanding FCU's Access to Non-Members

The National Credit Union Administration board last Thursday proposed a rule that would allow federal credit unions to have up to 50% of their deposits come from other credit unions and government entities, up from a 20% cap. As NCUA acknowledged in its proposal, the 20% cap dates to the late 1980s and was imposed “because of the asset/liability management problems related to public unit and nonmember shares that arose at certain FCUs, which resulted in material losses for the National Credit Union Share Insurance Fund.”

Under the proposal, FCUs could take these insured deposits (or “receive payment on shares,” in NCUA terminology) of up to half of their paid-in and unimpaired capital and surplus, less the public unit and non-member shares. Public units include the federal government, states and territories, counties and municipalities and tribal entities. Under the proposal, designated low-income FCUs—which account for 57% of all FCUs, according to current NCUA figures—would be able to accept deposits from any non-member up to the 50% level. Comments on the proposal are due 60 days after publication in the Federal Register.

ABA criticized the “deeply troubling” proposal. “It would allow credit unions to take even more deposits from outside their traditional membership base, further accelerating their growth at a time when NCUA is already struggling to oversee the industry and putting taxpayers at risk,” said ABA’s Ken Clayton. “This proposal also undermines one of the founding principles behind credit unions, the cooperative notion that the resources for credit union lending come from their members and that they serve people of modest means who share a common bond.” Read the proposal For more information, contact ABA’s Alison Touhey

House Fails to Pass Temporary NFIP Extension 

The potential for a lapse in funding for the National Flood Insurance Program increased Tuesday as the House failed to pass two separate measures that would have temporarily extended the program, which is currently set to expire at midnight on Friday. The bills—a disaster relief bill and a separate, standalone two-week extension measure both passed by the Senate last week—were denied a voice vote on the House floor.

The House is scheduled to meet again on Thursday afternoon and may make another attempt to pass the bills. Additionally, lawmakers have signaled that should the program lapse, they will reinstate it retroactively once authorization is obtained.

ABA encourages bankers to plan for a potential lapse by reading an online feature from the ABA Banking Journal about what to do before, during and after a lapse occurs. The article includes links to agency guidance on operations during an NFIP lapse, as well as steps to take to prepare and respond to a lapse in the NFIP. Read the article. For more information, contact ABA’s Diana Banks.

FinCEN Announces New Innovation Program

The Financial Crimes Enforcement Network announced last Friday a new program to facilitate innovative approaches to combating money laundering and terrorist financing. The program, Innovation Hours, is part of a larger initiative—introduced at the ABA/ABA Financial Crimes Enforcement Conference last December—to spur BSA/AML innovation among financial institutions.

Innovation Hours will provide fintech and regtech companies the opportunity to present new and emerging products to FinCEN, demonstrating how they could be used by financial institutions. Primary consideration will be given to companies that are already operational. Read the announcement.

White House to Host Conference Call with ABA Members on Opportunity Zones

The White House will host a conference call for ABA members June 19 at 9 a.m. CDT on the new Opportunity Zone tax incentive program, which allows investors to take proceeds from capital gains and invest them in defined qualified opportunity funds, potentially capturing a variety of tax advantages. On the call, staff implementing the program will offer highlights and answer banker questions.

The Internal Revenue Service recently issued proposed regulations and guidance related to the program, which was authorized by the 2017 tax reform law. Interest from investors has been strong, with estimates of pending investment dollars totaling more than $20 billion.

While investors are absorbing the proposed rules and evaluating opportunities, it is clear that there is significant interest in the program in communities around the country. In many cases, it will be most advantageous for investments to be made by the end of 2019. Banks can potentially be involved in a variety of roles, including lending, community decision making, advising and, in certain circumstances, investing. 

Safe Banking Act: What You Should Consider

The House of Representatives have taken up the Safe Banking Act, which will allow banks to offer products and services to previously unbanked entities. This doesn’t necessarily mean you should jump right in and open accounts for just anyone.

The Graduate School of Banking (GSB) in Wisconsin will offer the hot topic webinar "Safe Banking Act: What You Should Consider on June 18 at 10 a.m. CDT. During this session, GSB will help you navigate through HR 1595 and identify the challenges of banking tier I, II, and III marijuana-related businesses and hemp operations.

We’ll discuss appropriate risk assessment and program modifications to set the stage for banking members of these high‐risk groups, including measures for handling banking relationships with business entities that deal with tier 1 marijuana businesses, or employees of these higher risk entities. We’ll also explore the customer due diligence efforts and account monitoring necessary to ensure your institution will pass examiner scrutiny.

The cost for the 90-minute webinar is $189. Learn more and register

Compliance Alliance

Question of the Week

Question: We have two commercial lines of credit that originated in 2016 but were increased by $200,000 each in 2019. We did not have new disclosures signed, and we simply executed a loan modification for the loan amount increase to both files. Should these increases be reported on the small business LAR for this year or is this just for originations?

Answer: Yes, the bank should report in this case because increases are treated as new originations for CRA purposes, as set out in the Guide here:

A3. Institutions must collect and report data on lines of credit in the same way that they provide data on loan originations. Lines of credit are considered originated at the time the line is approved or increased; and an increase is considered a new origination. Generally, the full amount of the credit line is the amount that is considered originated.

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