SDBA eNews

August 6, 2020

SDBA to Offer 2020 IRA School Live and Virtually 

IRA PhotoIRAs are one of the most complicated areas of bank personnel responsibility, and it is not possible to learn and understand everything. Continual education is necessary to ensure confidence. Working with IRAs is a process and must start with a strong foundation. The SDBA’s 2020 IRA School on Sept. 29 to Oct. 2, which will be offered live in Sioux Falls and virtually, can provide this foundation through a comprehensive curriculum. 

Days one to three of the school will cover new and current IRA material, and previous topics covered at the school will be expanded. Day four of the school, which is optional, is for anyone who is involved indirectly or directly in IRA operations, reporting, auditing or compliance and covers how the SECURE Act will affect bank operations. 

In addition to the school being held live in Sioux Falls at the Holiday Inn & Suites Sioux Falls Airport, sessions will also be live-streamed and recorded to be watched at a later date. If you are not comfortable attending in person, simply choose to participate virtually, and you can attend from the comfort of your home or office. 

Learn more and register

State Associations: Include E-Sign Modernization Bill in COVID Relief Package

As Senate leaders continue to negotiate provisions in the latest round of legislative coronavirus relief, the 51 state bankers associations yesterday urged them to include S. 4159, the E-Sign Modernization Act, in the package. Originally authored by Sen. John Thune (R-S.D.), the bill would streamline how consumers consent to receiving electronic documents, such as bank statements, account information and contracts.

The bill would update the 20-year-old E-Sign Act to reflect advancements in technology and shifting consumer preferences. Specifically, it would remove the current requirement for consumers to reasonably demonstrate that they can access documents electronically before they can receive an electronic version—which the groups noted created obstacles for companies of all sizes during the coronavirus pandemic.

“Because of temporary branch closures, concerns about postal mail and other factors, more Americans are asking to use digital channels to work with their bank,” the associations wrote. “But an outdated provision in the E-Sign Act is impeding the ability of banks and other businesses to quickly fulfill these requests. As America’s banks continue to support their customers through both traditional banking and the delivery of COVID-related government programs, updating this law is a simple way to ensure maximum access to efficient and timely services.” Read the letter.

ABA Seeks Tax Reporting Exemption for PPP Loan Forgiveness Income

ABA on Tuesday wrote to congressional leaders urging them to exempt Paycheck Protection Program forgiveness income from tax reporting. In the absence of an exception, ABA noted that banks “may be required to report on Form 1099-C any amounts that are forgiven in situations where a debtor meets the requirements of the CARES Act to have their PPP indebtedness forgiven,” which could generate “confusion and concern” among taxpayers who have been operating under the assumption that PPP debt forgiveness is non-taxable.‌

ABA also flagged several operational issues that would arise if Form 1099-C reporting is required, noting that banks would have to set up new systems and processes to capture and report the information. Read the letter.

SBA Releases New PPP Forgiveness FAQs, Lending Data

The Small Business Administration on Tuesday released a new set of frequently asked questions regarding the forgiveness of PPP loans. The document includes sections addressing general questions on loan forgiveness, questions related to forgiveness of payroll and non-payroll costs and questions on forgiveness reductions.

"Borrowers and lenders may rely on the guidance provided in this document as SBA’s interpretation, in consultation with the Department of the Treasury, of the CARES Act, the Flexibility Act and the Paycheck Protection Program Interim Final Rules," SBA said. 

As of July 31, a total of 5.08 million PPP loans were made totaling $521.4 billion, SBA reported in a new data release. Forty-four percent of PPP loans were made by lenders with less than $10 billion in assets. Firms between $10 billion and $50 billion accounted for 19% of overall PPP lending, while firms with more than $50 billion in assets accounted for 36%. The overall average loan size was $103,000. View the FAQs. View the data release.‌

ABA Opposes Student Loan Amendments in NDAA

ABA wrote to Senate Armed Services Committee Chairman Jim Inhofe (R-Okla.) on Tuesday to oppose two private student loan amendments included in the House version of the National Defense Authorization Act that the association noted were “financially infeasible and could lead banks to exit the private student loan market.”

Amendment number 843, offered by Rep. Alma Adams (D-N.C.), would allow a bank’s private student loan borrowers to stop making payments until Sept. 30, 2021. Amendment number 840, offered by Rep. Madeleine Dean (D-Pa.) would provide authorization for the treasury secretary to provide every private student loan borrower with a lump sum payment of $10,000 or the balance of their loan (whichever is less) without requiring documentation of need.

“If enacted, these non-defense, non-germane provisions would seriously and adversely change the private student loan marketplace and limit the availability of non-government backed credit available to students and their families seeking to finance post-secondary education,” ABA said. “We urge you to reject these amendments during the House-Senate conference.” Read the letter.

Crapo Presses Regulators to Extend CARES Act Relief Provisions

As reported by Politico this week, Senate Banking Committee Chairman Mike Crapo (R-Idaho) wrote to the heads of the financial regulatory agencies urging them to extend certain CARES Act relief provisions. Specifically, Crapo urged regulators to:

  • Maintain the 8% community bank leverage ratio through Dec. 31, 2021.
  • Extend the temporary relief from troubled debt restructuring categorizations until Jan. 1, 2022.
  • Delay the implementation of the current expected credit loss standard until Jan. 1, 2023, and clarify and minimize unintended effects of mid-year adoption.

Crapo also urged regulators to consider several additional steps to strengthen minority depository institutions, which he noted have played a significant role during the pandemic. He also called for the extension of several existing mortgage-related relief programs, including HUD and FHFA foreclosure and eviction moratoriums and forbearance for multifamily loans backed by Fannie Mae and Freddie Mac. Read the letter.

ABA Seeks Participants for Agricultural Lender Survey

ABA is seeking participants for its agricultural lenders survey, which the association conducts annually with Farmer Mac. The survey examines overall industry sentiment of the farm economy, expectations on land values, prospects for the coming year and issues facing the broader economy. Lenders who have already signed up or who have participated in previous surveys should have already received an email invitation to participate in this year’s survey. New respondents can sign up here to participate in the survey. For more information, contact ABA’s Tyler Mondres.

Community Bank M&A in Light of COVID-19 Webinar

COVID-19 has significantly impacted every aspect of American life. This includes community bank mergers and acquisitions (M&A). The community bank M&A environment is different today than it was pre-COVID-19.

The Graduate School of Banking at Colorado will hold a complimentary webinar hosted by community bank M&A expert Greyson Tuck on Thursday, Aug. 13, at 2 p.m. CDT. Discussion topics will include:

  • Current state of community bank M&A in light of COVID-19.
  • Specific issues and areas of concern for prospective transactions.
  • Risk mitigation strategies to provide appropriate protection and risk allocation in potential transactions.
  • Capital raising strategies and opportunities to complete transactions in the current environment.

This engaging and informative discussion should not be missed by any community bank that is looking to better understand the opportunities and challenges created by the current M&A environment. Learn more and register.

 Compliance Alliance

Question of the Week

Question: Our institution is working on the call report, and we have several PPP loans to report. Should we report them as “held for investment” or “held for sale”? We don’t plan to sell them but want to verify to be sure.

Answer: From what you describe, it seems that these loans would be reported as "held for investment." They should be categorized as held for investment if the bank intends and has the ability to hold the loan for the foreseeable future or until maturity or payoff. On the other hand, they would be reported as "held for sale" if the bank intends to sell the PPP loans on the secondary market, which you have indicated that the bank does not plan to do.

Consistent with U.S. generally accepted accounting principles (U.S. GAAP), the agencies would expect banking organizations to report PPP covered loans on their balance sheets. Starting with the June 30, 2020, report date, institutions would include the outstanding balances of their PPP covered loans held for investment or held for sale in the appropriate loan category in Schedule RC-C, Part I, and, as applicable, in other Call Report schedules in which loan data are reported.
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Report all loans and leases that the bank has the intent and ability to hold for the foreseeable future or until maturity or payoff, i.e., loans and leases held for investment, in Schedule RC-C, part I.

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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 and ask for our Membership Team.

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