SDBA eNews

April 22, 2021

Registration Open for SDBA Ag Credit Conference

Agriculture Conference PhotoThe SDBA will hold the 2021 Agricultural Credit Conference in person on July 21-22 at the Ramkota Hotel & Conference Center in Pierre.

This conference focuses on the unique needs of ag bankers and the need for quality information and training to better serve their customers. The SDBA has lined up speakers on a variety of timely topics to help ag bankers navigate through challenging times. Experienced and new ag lenders, as well as CEOs, will all benefit from this conference. 

Session topics include the U.S. economy in 2021 and beyond, current fraud trends impacting the banking industry, cutting expenses versus increasing yields, proper loan restructuring, weather risk in production agriculture, higher prices and increased volatility in the grain and cattle markets, avoiding the pitfalls of marijuana and hemp, federal banking and policy update, and speed networking. Learn more and register.

There is an opportunity for business partners to exhibit and sponsor at this year's event. Questions, contact Halley Lee

House Passes ABA-Backed SAFE Banking Act

By a bipartisan vote of 321 to 101 on Monday night, the House passed the SAFE Banking Act of 2021, the ABA-supported bill that provides clarity to financial institutions seeking to serve legitimate cannabis businesses. “We thank Rep. Perlmutter (D-Colo.) and the bill’s 180 cosponsors for their leadership and support and urge the Senate to move quickly to pass this much-needed legislation to clarify these issues for both the banking industry and regulators,” ABA President and CEO Rob Nichols said after the bill's passage. 

Earlier in the day, ABA and 51 state bankers associations wrote to lawmakers in support of the bill, which provides a safe harbor for depository institutions seeking to serve legitimate cannabis-related businesses in states where such activity is legal. The SDBA thanks Congressman Dusty Johnson for voting in support of the bill. 

The bill was previously passed by the House in the last Congress but was not taken up in the Senate. Currently, 36 states have legalized cannabis for medical or adult use, but current federal law prevents banks from safely banking cannabis businesses, including ancillary businesses that provide them with goods and services. “Our member banks find themselves in a difficult situation due to the conflict between state and federal law, with local communities encouraging them to bank cannabis businesses and federal law prohibiting it,” ABA said in its letter of support. “Congress must act to resolve this conflict between state and federal law.”

In a separate letter, the state bankers associations emphasized that as a result of this conflict, “this segment of our local economies is forced to operate on an all-cash basis, which creates serious public safety, revenue administration and legal compliance concerns.” They added that “our members are committed to serving the financial needs of their communities—including those that have voted to legalize cannabis.” Read ABA’s letterRead the state bankers associations’ letter.

SBA Updates Guidance on Deadlines for PPP Extension

The Small Business Administration on Tuesday night issued a procedural notice addressing Paycheck Protection Program-related deadlines in the wake of the PPP Extension Act. The law extends the PPP application period through May 31 and provides an additional 30 days for SBA to process pending applications.

The procedural notice addresses several narrow sets of circumstances, including: applications for increased first draws on unforgiven PPP loans approved before Aug. 8, 2020, for eligible partnerships, seasonal employers and agricultural producers; re-applications by or re-disbursements to eligible borrowers who fully or partially repaid their first-draw PPP loans before Dec. 27, 2020; and increases for eligible borrowers who did not accept the full amount of an approved first-draw PPP loan before Aug. 8, 2020. The notice also covers procedures when these types of PPP loans are delayed by SBA hold codes. Read the notice. For more information, email [email protected].

ABA Calls for Removal of Physical Presence Requirement for Spousal Consent

In a letter to the Internal Revenue Service this week, the ABA and several insurance trade groups reiterated their request that the IRS make permanent its temporary relief from the physical presence requirement for spousal consent. The groups made previously requested this permanent relief in a comment letter last October.

Under IRS regulations, retirement plans must obtain spousal consent for certain distributions and beneficiary elections, which must be witnessed by a notary or plan representatives. However, the IRS has offered temporary relief from that requirement for any participant election witnessed by a notary public of a state that permits remote electronic notarization, or witnessed by a plan representative that electronically meets certain requirements. This temporary relief is set to expire June 20.

“Remote witnessing has worked well during the pandemic and allowed retirement plan participants to access their benefits without unnecessarily jeopardizing their health by physically meeting with a notary public or plan representative,” the groups noted. “These personal and public health benefits, however, have not been the only benefits resulting from the use of remote witnessing. Specifically, remote witnessing has proven, under the [IRS’] temporary relief, to be more secure and more convenient than physical witnessing.” Given that, the trade groups urged the IRS to make the relief permanent. Read the letter. For more information, contact ABA’s Tim Keehan.

ABA, Trade Groups Urge Senate to Pass Board Diversity Bill

The ABA joined several other financial trade groups in urging the House Committee on Financial Services to advance H.R. 1277, the Improving Corporate Governance through Diversity Act of 2021. The bill would require public companies to disclose annually the self-reported racial, ethnic and gender composition and veteran status of their board members, board nominees and executive officers, as well as whether they have adopted policies or strategies to promote board and executive diversity.

The bill was introduced by Rep. Gregory Meeks (D-N.Y.) and would “establish a model to organically boost diversity on boards through disclosure,” the groups said. “This legislation would also establish an advisory group that would carry out a study and provide recommendations on private sector strategies to increase gender, racial and ethnic diversity among boards of directors.” The bill previously passed the House in a bipartisan vote in 2019. Read the letter.

Bank Volunteers Encourage Saving for the Unexpected 

Bank employees across the country today are bringing financial education to more than 70,000 K-8 students as part of the ABA Foundation’s Teach Children to Save Day. The annual event is a centerpiece of the banking industry’s longstanding commitment to youth financial education.

Since 1997, the ABA Foundation’s financial education initiatives have reached 11.6 million young people through more than 375,000 banker presentations. This year, the banker volunteers will deliver their lessons through a mix of both virtual and in-person classes due to the ongoing COVID-19 pandemic.

In a Teach Children to Save lesson, volunteer bank employees teach students the fundamentals of personal finance through age-specific activities and interactive scenarios. This year, the ABA Foundation rolled out a suite of new resources centered around saving for the unexpected, in addition to its traditional lessons on the basics of saving and distinguishing needs from wants. Some of those news lessons include virtual escape rooms, puzzles and directed drawing activities that reinforce saving strategies and the importance of preparing for unexpected expenses. 

“Even a global pandemic can’t interrupt the banking industry’s efforts to ensure that young people have the financial education they need to succeed in a complicated world,” said Rob Nichols, ABA president and CEO. “We are grateful for our bank volunteers and their extraordinary efforts to reach students with these important financial lessons, despite the challenges posed by COVID-19.” 

Click here for the full list of participating banks

ABA to Host Webinar on Farmer Mac, Community Bank Partnerships

The ABA will host a free interactive webinar on Tuesday, April 27, at 1 p.m. CDT about community bank partnerships with Farmer Mac. Speakers include Farmer Mac VP Patrick Kerrigan, Heartland Tri-State Bank President Shan Hanes, Bank of the Rockies VP Heather Malcolm and Carrollton Bank executive Alan Karcher. Panelists will discuss the current state of agriculture lending and the innovative ways banks are delivering benefits to their customers during this unprecedented period. Register now.

Bank Compliance School to Be Held in Bismarck and Virtually

The 2021 Bank Compliance School is set for May 24-27 in Bismarck, N.D., and virtually. Compliance Alliance is offering the school in partnership with the South Dakota Bankers Association, North Dakota Bankers Association, Montana Bankers Association and Wyoming Bankers Association.

Lending compliance will be covered on May 24-25, and operations compliance will be covered on May 26-27. Attendees can register for the entire school or the lending or operations modules. Compliance officers, internal audit staff and any employee who assists with compliance management should attend the school.

Compliance Alliance, an SDBA endorsed vendor, is the only banking industry compliance resource owned, operated and managed by state bankers associations. Compliance Alliance experts provide members an all-inclusive set of bank compliance tools and services that help bankers stay up to date with requirements. Learn more about the school and register


Question of the Week

Question: The bank is considering approval for a loan request where one of the guarantors has a significant amount of equity holdings in a business which produces cannabis. There is no expectation that any of the loan proceeds will be used or co-mingled with those of the enterprise involved in cannabis production. However, management remains concerned with entering into transactions with individuals connected with cannabis, in any way. Is there any guidance as to how much distancing the bank should maintain in a situation like this? 

Answer: While there is not express guidance in this area, FinCEN resources addressing the filing of Suspicious Activity Reports for cannabis related activities may be instructed here. FinCEN frequently cites the “Cole Memo,” for priorities and activities that trigger the “Marijuana SAR” filing requirements. The Cole Memo was subsequently rescinded by the Sessions Memo; however, the priorities expressed therein remain instructive in evaluating the bank’s approach here, from a risk perspective. While these are not the only considerations to review in your question, that may provide a good starting point. Generally, parties who do not directly touch cannabis present a lower risk to the bank, mainly arising from the points under the Cole Memo. However, such parties remain associated with the cannabis industry, which leaves this decision up to the bank’s risk-based approach. Parties who traditionally present a lower risk in these circumstances include researchers, marketing industry, information providers, and to a certain extent, medical professionals, among others. In the context of an investor, the bank should investigate the level of their involvement with the business and also evaluate that as well as the business in light of the Cole Memo priorities. A purely passive investor who gives funds but does not participate in any management of the business should not by itself give rise to the typical cannabis related concerns. However, if there is reason to believe that the business triggers any of the Cole Memo priorities, our recommendation would be to steer clear. Despite being rescinded, the priorities set forth in the Memo provide insight into the type of conduct the federal government would generally sanction. This generally includes enterprises potentially distributing cannabis to children, trafficking, or violating laws by engaging in the cannabis business other than possession under federal law. None of the above is a bright line determination. However, the bank is not categorically prohibited from associating with a grantor in the context of your question. The bank should review the circumstance in light of the above and the bank’s existing cannabis policy, which may require revision if the bank will make exceptions to such a policy. There is not much value in a policy that is not followed and that does not adequately represent the bank’s practices. In light of the priorities set forth in the Cole Memo, the bank may reasonably consider entering into such a transaction if the only remaining concern is that a guarantor purely invests in a business related to cannabis; and this loan is otherwise within the bank’s policy. 

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.

  IntraFi Network

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