SDBA eNews: January 28, 2016

In This Issue

Cybersecurity Virtual Tabletop Exercise To Be Held in Pierre

Bankers are invited to take part in a Cybersecurity Virtual Tabletop Exercise hosted by FEMA and facilitated by the South Dakota Office of Emergency Management on Monday, Feb. 8, in Pierre.

FEMAs Emergency Management Institute conducts a monthly series of Virtual Tabletop Exercises (VTTX) using a teleconference platform to reach community-based training audiences around the country providing a virtual forum for disaster training.

The event begins at 10:30 a.m. CT at the State Capitol Building at 500 E. Capitol Ave.  and is scheduled to be done at 3 p.m. There is no fee to attend the exercise. To register, contact Patti Broer at BankWest, who is helping organize the training, at 605.399.4242 or via email. View the schedule.

Fed Webinar to Focus on CRA Community Development Credit

The Federal Reserve will hold a free webinar on Feb. 18 at 1 p.m. CT to provide insights on how community development activities are credited in Community Reinvestment Act examinations.

During the webinar, senior Fed staff will provide an overview of what qualifies as community development activities, cover geographic requirements and review best practices for community development. Fed staff will also answer questions during the webinar. Register now.

Question of the Week

When we close an account due to overdraft, we mail notices to the customer of the amount owed and that the account should be brought to a positive balance to avoid any collection proceedings. However, we will then turn the charged-off account to a collection agency. Do we have to notify the customer of this action?

Answer: The bank does not have to notify the customer that the charged-off account has been turned over to a collection agency. The collection agency will contact the customer requesting a verification of the debt and inform them they are handling the collection efforts of the debt from the charged-off checking account.

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Contact Alisa DeMers, SDBA, at 800. 726.7322 or via email.

SDBA Calling on Bankers to Attend State Legislative Day on Feb. 10

The SDBA is calling on all member banks to send bankers to attend the SDBA's 2016 State Legislative Day in Pierre on Wednesday, Feb. 10.

The evening reception and dinner is an opportunity for the banking industry to thank our state legislators and elected officials, and we need as many bankers as possible to help host them and visit about bills of interest.

The day will also include a luncheon and update on state and federal legislation of interest to the banking industry. The featured afternoon speaker is Dr. Steffen Schmidt who will present "Fear and Loathing in the Campaign Trail 2016," and Gov. Dennis Daugaard will visit with bankers in the afternoon. The day-long event will be held at the Ramkota RiverCentre at 920 W. Sioux Ave.

If you have not yet reserved your hotel room, the deadline to reserve a room has been extended to this Friday, Jan. 29. The block will be released Friday afternoon, so it is important that you make your room reservations by calling the Ramkota at 605.224.6877 by Friday morning in order to qualify for the reduced conference rate of $115.99 per night. 

Scholarships Available for SD Bankers to Attend Emerging Leaders Forum

SDBA To Provide $250 Stipend to GR Summit Attendees

The American Bankers Association (ABA) is offering two South Dakota bankers a $750 scholarship to help cover expenses to attend its 2016 Emerging Leaders Forum on March 14. The Forum is being held in conjunction with the ABA's 2016 Government Relations Summit March 14-16 in Washington, D.C.

The Emerging Leaders Forum is an opportunity for new voices in banking to share challenges and strategies, network with peers from across the country and gain new perspectives on leadership. There will be a private reception following the Forum. While there is no fee to attend, the scholarship will help cover travel expenses. Pre-registration is required.​​​

If you are interested in applying for the scholarship, contact the SDBA's Deb Gates at 605.224.1653 or via email. View the agenda and registration form.

In addition, the SDBA will provide a $250 stipend to a banker from each member bank to help cover expenses to attend the ABA Government Relations Summit. The SDBA will issue stipends following the Summit.

Senate Banking Committee Chairman Richard Shelby (R-Ala.) and House Financial Services Committee Chairman Jeb Hensarling (R-Texas) will keynote the Summit. With Shelby and Hensarling joining the lineup, Summit attendees will hear from the two most powerful financial services lawmakers, who join other big names on the program, including former White House Press Secretary Dana Perino, Politico economics correspondent Ben White and election-watchers Charlie Cook and Stu Rothenberg. While there is no fee to attend, registration is required.

In addition, to the Emerging Leaders Forum, the ABA will hold a Women's Leadership Forum on March 16. The program will feature a panel of a women bank CEOs discussing how to develop, engage and retain women leaders, roundtable discussions, and a networking lunch that will encourage an exchange of ideas and solutions sure to result in valuable takeaways. Learn more and register.

FDIC Approves Extended Exam Cycle for Small Banks

The FDIC last week approved an interim final rule extending the on-site exam cycle for banks with up to $1 billion in assets from 12 months to 18 months, effective immediately. Previously, the 18-month exam cycle was only available to institutions with asset sizes less than $500 million.

This regulatory change--long advocated as part of ABA’s Agenda for America’s Hometown Banks--was included in the 2015 year-end highway bill as a result of strong advocacy efforts by ABA and the state associations. The measure will qualify an estimated 617 institutions for the extended exam cycle.

“The 18-month cycle will reduce the burden on well-managed community banks and thrifts,” said Comptroller of the Currency Thomas Curry. “It will also allow the federal banking agencies to focus our supervisory resources on those institutions that need it most.” Read more.

FDIC Revises Proposal on Assessments for Banks Under $10B

The FDIC last week issued a revised proposed rule for assessing deposit insurance premiums on banks with under $10 billion in assets. The proposal incorporates several of ABA’s recommendations on the earlier proposal issued last July, including the elimination of an assessment penalty for funding with reciprocal deposits or Federal Home Loan Bank advances.

“We appreciate that the FDIC considered all of our issues with the earlier proposal and incorporated several of our suggestions. We are evaluating the latest version to see if it now fairly allocates assessments by risk,” said ABA Senior Economist Rob Strand.

In response to numerous comments from bankers across the country, the revised proposal would not factor core deposit funding into assessments (which would punish banks for funding with reciprocal deposits or Federal Home Loan Bank advances). Under the updated proposal, funding with brokered deposits--not counting reciprocal deposits for well capitalized banks with CAMELS ratings of 1 or 2--in excess of 10 percent of assets would lead to higher assessments (and the existing “brokered deposit adjustment” would be eliminated).

As supported by ABA, the revised proposal would also adopt a fairer standard for assessing growth; assets would have to grow more than 10 percent over a one-year period to trigger higher assessments, meaning that fewer banks will be penalized for healthy, well-managed growth.

The new proposal would not alter the loan portfolio factor from the earlier proposal, which ABA criticized as being “of questionable value” in forecasting bank failures, since it does not account for the quality of credit underwriting, portfolio management and risk hedging. However, the proposal would cap assessment rates by CAMELS rating, which ABA supported, potentially limiting the impact of the loan portfolio factor and the weighting for the tier 1 core capital ratio, which ABA also objected to earlier.

The FDIC will accept comments on the proposal for 30 days following publication in the Federal Register, and posted a calculator for bankers to test the impact on their assessments.

ABA, Groups Request Extension for DMDC Feb. 1 Access Deadline

ABA and several trade associations yesterday requested that the Department of Defense extend its deadline for financial institutions to opt-in for access to the Pentagon’s Defense Manpower Data Center database until March 1, 2016. The database provides lenders with a way to verify military status for applicants applying for consumer credit other than a mortgage or purchase money loan as required by the Military Lending Act, which takes effect in October.

The Department of Defense announced earlier this year that financial institutions would have until Feb. 1 to opt-in for direct access to the database by emailing [email protected]. The groups pointed out that the current deadline may not give institutions ample time to analyze their options for fulfilling their regulatory obligation under the new law, and that limiting the availability of the database may negatively affect smaller and midsize institutions.

Bankers who intend to request access via the above email address may include a subject line stating “Request of [bank name] for direct connection to the DMDC database to determine military status” and repeating the request, along with the bank’s full name, address and contact information in the body of the email.

In addition to directly querying the database, lenders can verify military status for free through the DMDC website, or through the three credit bureaus (fees may apply). Both the database and the website provide information about all covered borrowers, including dependents; however, the credit bureaus do not provide information about dependents under the age of 18. Read the letter. For more information, contact ABA's Nessa Feddis.

Study: State, Local Economies Suffer Without Commercial, Ag Lending

A new study released Tuesday by the Missouri Bankers Association found that the state and local economies would suffer significant losses if banks were to halt agriculture and commercial lending efforts. Loans in these areas accounted for 25 percent of investment spending in the state, with banks lending $10.8 billion between 2012 and 2014.

The study found that if banks were to stop making these loans, it would translate to a loss of $170.2 billion in real GDP and 130,000 lost jobs in the state over the course of 25 years (2015-2040). The impact would also contribute to a $6.5 billion loss in revenue for state government, leading to the downsizing of state-funded initiatives and infrastructure projects.

In related news, at the end of 2015, the Nebraska Bankers Association released a study of the negative effects of government-subsidized credit unions and the Farm Credit System. It found that the expansion of both the credit unions and the GSE since the financial crisis has been a cause of bank consolidations occurring throughout the state and has created an unlevel playing field for banks.

Both studies were funded by grants from the independent 501(c)(4) organization set up by ABA’s bank leadership and supported by individuals across the banking industry. A total of nine state associations were awarded grants to examine the economic impact of the financial industry. View the Missouri Bankers study. View the Nebraska Bankers study.