Fed to Maintain Interest Rates but Signals Shift in Sentiment

The Federal Open Market Committee announced yesterday that it would maintain the target range for the federal funds rate at the current 2.25-2.5%. While the FOMC noted that it expects labor market to remain strong and economic expansion to continue, “uncertainties around this outlook have increased.” All but one FOMC member voted for the action.

Significantly, the committee removed from its statement language noting that it would be “patient” in determining future rate adjustments, noting instead that it “will assess realized and expected economic conditions relative to its maximum employment objective and its symmetric 2 percent inflation objective.” The FOMC projections showed a sharp division among committee members about how many rate cuts to expect this year; seven participants said they expected two quarter-point cuts, while eight expected no change. (One each projected a single quarter-point hike and a single quarter-point cut.) Read the FOMC statement.

Credit Card Skimmers Discovered in Vermillion

On June 16, the Vermillion Police Department (VPD) investigated the discovery of two fraudulent credit card “skimmers” at Pump & Pak, located at 629 Stanford St. in Vermillion, according to a report by the VPD. Staff at the business noted customers’ comments about how the countertop card readers did not feel quite right and ultimately found that a “second face” had been installed over the top of the readers. The VPD has retrieved those items as evidence and has determined that their intended purpose was to record and/or transmit credit card information fraudulently. Investigation into the incident is continuing, including an attempt to determine exactly when the skimmers were installed. The readers at Pump & Pak are no longer believed to be compromised since the removal of the devices.

The VPD is asking area businesses to inspect their credit card readers for any evidence of additions or modifications. If evidence of tampering is discovered, secure the reader(s) and contact police. Additionally, customers who have recently used the indoor credit card readers at Pump & Pak should monitor accounts for fraudulent activity and should contact their card’s issuing bank for instructions related to those account(s). Persons who believe they are a victim of a crime or who have noticed suspicious persons or activity potentially related to this investigation should contact the Vermillion Police Department at 605.677.7070.

FDIC Provides Relief to South Dakota, Arkansas Banks Affected by Severe Weather

The FDIC said on Monday that it would provide relief for banks to facilitate recovery in areas of South Dakota affected by recent winter storms, snow storms and flooding, as well as banks in Arkansas affected by recent severe storms and flooding. The agency encouraged banks to work constructively with borrowers experiencing difficulties due to the weather, including extending repayment terms, restructuring existing loans or easing terms for new loans. The agency also said it would consider relief from certain filing and publishing requirements. Read the notice for South Dakota banks. Read the notice for Arkansas banks.

Minneapolis Fed to Hold Town Hall in Aberdeen

Do you have a question about how the Federal Reserve System affects you? Wondering about economic disparities, regulating big banks or the Fed's recent interest rate decisions? Curious about how the Federal Reserve Bank of Minneapolis gathers data and informs its work within the Federal Reserve System?

Minneapolis Fed President Neel Kashkari will speak on these topics and more during a town hall meeting in Aberdeen on July 11 at 4 p.m. CDT. Kashkari is a member of the Federal Open Market Committee, the body of the Federal Reserve System that sets national monetary policy. Since taking over as president of the Minneapolis Fed in January 2016, he has spearheaded several initiatives including releasing a plan to end the too big to fail problem and launching the Federal Reserve's Opportunity & Inclusive Growth Institute, housed at the Minneapolis Fed.

Kashkari will give brief remarks, followed by a Q&A with the audience. The meeting will be held in Community Room 112 A & B at the K.O. Lee Aberdeen Public Library, 215 4th Ave. SE, Aberdeen. Learn more and register to attend.

ABA Offers Feedback on OCC Innovation Pilot Program Proposal

The ABA last Friday offered support for a proposed pilot program by the OCC that would allow banks to test innovative products and programs. Under the program, OCC-supervised banks—and third parties working with those banks—may receive regulatory input early in the process of developing their product offerings, which will help develop appropriate controls during a pilot.

ABA has long advocated for the establishment of such programs, and noted that “if implemented properly, voluntary pilot programs can encourage banks to test new innovations and give regulators insight into new technologies while ensuring that customers remain protected in the event of unforeseen adverse consequences.” ABA emphasized, however, that the program be strictly voluntary in nature, and that adding mandatory steps to the process could actually discourage innovation within the banking system.

In addition, ABA flagged several areas in need of further clarification to ensure the overall effectiveness of the program. Among other things, ABA urged the OCC to clarify that banks can rely on the decisions made as part of the pilot program; the steps and expectations for the bank and the agency at the end of a pilot program; how it will share findings, best practices and other lessons learned from the pilot programs while maintaining confidentiality; and how banks can collaborate on pilots. Read the comment letter. For more information, contact ABA’s Rob Morgan

Podcast: A $4 Billion Bank's Nationwide Affordable Housing Strategy

As banks across the country mark American Housing Month in June, the ABA Banking Journal Podcast sat down with Michael Petrie, who leads the $4 billion Merchants Bancorp in Carmel, Ind.—one of the nation’s largest affordable housing lenders. With affordable homes accounting for 40% of the company’s originations through its bank and nonbank subsidiaries, Petrie discusses:

How staff at Merchants’ nonprofit affiliate, which owns 2,500 affordable housing units, help developers apply for tax credits, bonds and grants. “We’ve taken developers who have never done affordable housing through a 4% tax credit, and they’re now quite successful at it,” says Petrie.
Why Merchants employs both banks and nonbanks in its housing finance strategy—including its start as a nonbank lender that acquired a bank.
The state of the real estate market and the challenges facing newly formed households. “Today it’s pretty tough, especially for the first-time home buyer,” he says. “There’s just not enough supply."
How Merchants retains a skilled workforce to support its specialized lending programs, including multifamily, single-family and warehouse lending, and develop partnerships with Fannie Mae, Freddie Mac and the Federal Home Loan Banks.

Listen to this episode. Access American Housing Month resources.

Agencies Issue Final Rule Reducing Call Report Burden on Small Banks

The financial regulatory agencies on Monday finalized changes that would expand the number of banks eligible to file a more streamlined version of the Call Report, as directed by regulatory reform law S. 2155. Under the final rule, non-complex institutions with less than $5 billion in assets would be permitted to file the most streamlined version of the FFIEC 051 Call Report. Banks filing the FFIEC 051 Call Report will also see a reduction of the number of data items required in their first- and third-quarter filings. Read the final rule. For more information, contact ABA's Alison Touhey.

SDBA Offers 2020 Scenes of South Dakota Calendar

The SDBA is offering the 2020 Scenes of South Dakota Calendar, which will feature photos of South Dakota submitted by South Dakota bankers, their family members and customers. These calendars are a great opportunity to thank your customers for their business and promote your bank or business. Your bank, branch or business' logo and name can be printed on each calendar to display in homes and businesses all year long.

The Scenes of South Dakota Calendar is exclusive to SDBA member banks and associate members. Calendar orders are due by Sept. 1, 2019, to get the low price of $1.29 per calendar. After Sept. 1, the price is $1.60 per calendar. Orders cannot be accepted after Sept. 15, 2019. Learn more and place a calendar order.

Question of the Week

Question: If we need to temporarily shut down one of our branches to treat for dangerous mold, do we need to give any kind of notice to our regulator?

Answer: At the federal level, there’s a specific exemption for temporary closings that are not in the bank’s control (for example, due to natural disaster), and this dangerous mold will likely be considered not in the bank’s control and, thus, subject to the exception:

Section 42 also does not apply when a branch ceases operation but is not closed by an institution. Thus, the law does not apply to:
• A temporary interruption of service caused by an event beyond the institution's control (e.g., a natural catastrophe), if the insured depository institution plans to restore branching services at the site in a timely manner; ..
Interagency Policy Statement: https://www.fdic.gov/regulations/laws/rules/5000-3830.html

Even if this is the case, though, providing notice would certainly be good customer service, and our director, who is a former examiner, would consider it a best practice.

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