SDBA eNews

February 11, 2021

South Dakota Banks Make a Difference in Our Communities

South Dakota Banks Make a Difference Survey The SDBA unveiled the results of its annual South Dakota Banks Make a Difference Survey during the SDBA State Legislative Day held virtually yesterday. Each January, the SDBA surveys the state’s banks on the ways they support their local communities. The annual project is just a glimpse of how these banks found creative ways to meet the needs of their communities during 2020.

The promotional handout  is a great tool that banks can use to promote all of the things they do for their communities. Banks are encouraged to use the document in their promotional efforts, make copies as needed and link the document on their websites. Download a high-resolution copy for printing.

Of the 70 member banks, 34 banks responded to the survey and 18 banks provided photos and/or a short narrative about a community service project. If you have questions about the survey or if you need the handout in a different format, contact Alisa Bousa at 605.224.1653.

Judge Rules Recreational Marijuana Measure Unconstitutional in South Dakota

A South Dakota judge ruled Monday that a constitutional amendment to legalize marijuana for recreational use in the state was in itself unconstitutional. Circuit Judge Christina Klinger ruled that Amendment A approved by voters in November violated the state’s requirement that constitutional amendments deal with just one subject and would have created broad changes to state government.

“Amendment A is a revision as it has far-reaching effects on the basic nature of South Dakota’s governmental system,” Klinger wrote in her ruling.

Brendan Johnson, who sponsored the amendment and represented a pro-marijuana group in court, said it was preparing an appeal to South Dakota’s Supreme Court.

Two law enforcement officers, Highway Patrol Superintendent Col. Rick Miller and Pennington County Sheriff Kevin Thom, sued to block legalization by challenging its constitutionality.

Noem Announces Plan to Implement Medical Marijuana, SDBA Supports Bill to Allow Banking of Cannabis

Gov. Kristi Noem and leadership in both chambers of the South Dakota Legislature yesterday announced a plan to implement medical marijuana in South Dakota (Initiated Measure 26). 

“We are working diligently to get IM 26 implemented safely and correctly,” said Gov. Noem. “The feasibility of getting this program up and running well will take additional time. I am thankful to our legislative leaders for helping make sure that we do this right.”

The plan would add a year of additional flexibility on the implementation timeline and create an interim committee to meet and recommend solutions before next legislative session. HB 1100 was amended to be the vehicle for the plan’s passage. Read the Governor's announcement

The SDBA initiated the introduction of HB 1203 to authorize expanded banking services for banks to engage in business with marijuana licensees and associated persons. The bill would allow South Dakota banks that are interested in banking the cannabis industry to begin to implement policies and procedures which would support their efforts. 

Yesterday, the SDBA encouraged participants of the SDBA State Legislative Day to contact their legislators and ask for their support of HB 1203, which would allow the banking industry to properly prepare for the upcoming changes regarding medical marijuana.

"HB 1203 is not an endorsement of cannabis, but rather to establish a legal pathway for banks in South Dakota to provide banking services to cannabis-related businesses if they so choose," said SDBA President Karlton Adam.

HB 1203 will be heard in the House Commerce and Energy Committee on Wednesday, Feb. 17, at 10 a.m. CST. Contact your legislator

South Dakota Division of Banking Issues Industrial Hemp Guidance

The South Dakota Division of Banking on Tuesday issued guidance to South Dakota state-chartered banks and licensed money lenders that have customers engaged in industrial hemp growth, production and transportation in South Dakota.

Prior to offering financial services to these customers, the guide states that an institution must have appropriate risk management practices in place, including: 

  • A strong understanding of applicable state and federal laws and regulations.
  • A risk assessment that considers potential impacts to all areas of your institution.
  • An effective audit program.
  • Policies and procedures to effectively guide staff.
  • A training program for staff and management.
  • Management information systems to monitor trends and activities.
  • A robust BSA/AML program that ensures: appropriate methods exist for identifying customers engaged in these activities, customers have obtained proper state and federal licensure, customers possess and maintain necessary records, and customers have appropriate plans for testing and inspections.

"While the demand for industrial hemp production in South Dakota remains unknown, I encourage you to review this information with your board of directors and senior management team to ensure  your institution understands the unique risks involved with industrial hemp and that you have appropriate risk management plans in place," said South Dakota Division of Banking Director Bret Afdahl. 

Institutions considering providing financial services to customers engaged in the industrial hemp industry or with questions are encouraged to  contact the Division of Banking at 605.773.3421. Read the guidance. 

Federal Retail Pharmacy Program Begins in South Dakota, Vaccination Age to Drop to 70

The South Dakota Department of Health (SDDH) announced that starting today the Federal Retail Pharmacy Program (FRPP) will be activated in South Dakota. The FRPP for COVID-19 vaccination is a collaboration between the federal government, states and territories, and 21 national pharmacy partners and independent pharmacy networks to increase access to COVID-19 vaccination across the United States.

The four retailers initially participating in South Dakota include pharmacies supplied by Cardinal Health, Hy-Vee Pharmacy, Lewis Drug and Walmart Pharmacy. The initial activation includes 13 retail sites statewide and all participating pharmacies will follow the already established PHASE I vaccination and priority group schedule. 

Participating retail pharmacies in the state will receive an initial allotment of 2,600 doses a week total from the federal government, which is not subtracted from the state’s already established weekly allotment of approximately 13,500 doses. As vaccine supply increases in the future, participating locations and their designated allotment is also expected to increase accordingly.

The SDDH also announced that beginning Monday, Feb. 15 , the age for vaccinating those in Group 1D will be lowered to those who are 70 and older. This was previously 75 and over and will continue to be decreased in five-year increments in the coming weeks as vaccine supply allows.  Individuals previously eligible but not vaccinated are encouraged to contact their vaccinating provider here to schedule their vaccination.

View all participating retailers in South Dakota. For additional information and the latest resources, visit COVID.SD.GOV.

SBA Issues Procedural Notice on Addressing PPP Loan Error Codes

In response to recent reports of lenders receiving hold codes and compliance check error messages when submitting first- and second-draw Paycheck Protection Program loan applications, the Small Business Administration yesterday issued a procedural notice with instructions for addressing these codes. Specifically, the procedures address second-draw PPP loan guaranty applications where there is a hold code on the borrower’s first-draw PPP Loan, and first-draw PPP loan guaranty applications and second-draw PPP Loan guaranty applications with compliance check error messages. The changes will go live on the PPP loan portal today.

SBA outlined several methods lenders may use to resolve hold codes and compliance check error messages. Depending on the error code, the lender may resolve the code through a certification process, which involves collecting documentation and information from the borrower. In other instances described in the notice, hold codes may also be resolved through SBA review. The procedures also address how SBA will handle duplicate loans and other hold codes that cannot be resolved any other way.

ABA had urged the SBA to address hold codes and other error messages, including through a Jan. 25 letter to SBA and the Treasury Department. Read the procedural noticeRead ABA’s letter. To provide feedback, contact [email protected].

ABA Condemns Latest NCUA Proposal to Loosen CU Field of Membership Rules

The ABA yesterday strongly opposed a proposal by the National Credit Union Administration that would expand the definition of “service facility” and erase the distinction between service to select groups and service to underserved areas as delineated in the Federal Credit Union Act.

In a letter to NCUA, the ABA noted that the proposal would undermine congressional intent to demand a heightened standard of in-person service for underserved communities and called for the proposal to be withdrawn. The ABA also raised concerns that the proposal would consider counting a credit union website or mobile banking application as a “service facility,” potentially paving the way for national online fields of membership.

The association added that the proposal “has no reasonable basis in law or regulation and improperly expands the available field of membership for multiple common bond federal credit unions at the expense of providing financial services to underserved areas, including low- to moderate-income communities.” Read the letter. For more information, contact ABA’s Tim Keehan.

Dakota School of Lending Principles to be Held in April

The Dakota School of Lending Principles, hosted by the North Dakota Bankers Association and co-sponsored by the SDBA on April 6-9, 2021, in Bismarck, is a learning event with one foot grounded in the classroom and one foot in the bank. This school allows students to learn the theory and process of basic lending and then put this knowledge to work in actual nuts-and-bolts sessions

This school provides basic instruction appropriate for loan officer trainees, loan support personnel and personal bankers. To ensure exposure to bank structure and terminology, it is recommended that applicants have a minimum of six months lending experience or one year of loan department experience. Applicants not meeting the suggested prerequisites will be contacted to discuss admission qualifications

Learn more and register

 Compliance Alliance

Question of the Week

Question: We are getting requests from our lending team to give a residential loan to a borrower who is an LLC.  Are there issues with this?

Answer: Luckily if the borrower is an LLC or other legal entity, then the loan will not be subject to Reg. Z, which would include all of its subparts like TRID, ATR/QM, etc.: From a fair lending standpoint and even UDAAP, if it is a small business, the bank does want to make sure it has objective, detailed guidelines for when rate/terms will and will not apply. Typically, this type of loan would be classified as a commercial loan for this purpose, even if it might also be secured by the principal dwelling. If that is how it is reflected in the bank’s policy, it sounds like it would be a policy exception to give this applicant the rate and terms of a consumer loan product. So, there are considerations with that.

Reference: "9. Organizational credit. The exemption for transactions in which the borrower is not a natural person applies, for example, to loans to corporations, partnerships, associations, churches, unions, and fraternal organizations. The exemption applies regardless of the purpose of the credit extension and regardless of the fact that a natural person may guarantee or provide security for the credit." 

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.

For timely compliance updates, subscribe to Bankers Alliance’s email newsletters.

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Contact Alisa Bousa, SDBA, at 605.224.1653 or via email.