subchapter 06C - CREDIT UNIONS
SECTION .0100 - GENERAL INFORMATION
04 NCAC 06C .0101 DEFINITIONS
When used in this Subchapter, the following words and
phrases shall have the following meaning, except to the extent that any such
word or phrase is specifically qualified by its context:
(1) "Administrator" means the Administrator
of State-Chartered Credit Unions.
(2) "Board of Directors" means at least five
persons elected or appointed to oversee the management of each organization.
(3) "Book value of loans" means the dollar
amount of loans the Credit Union has on its books.
(4) "Branch Office" means a facility which a
Credit Union maintains and staffs at a location other than its main office to
furnish Credit Union services to its members.
(5) "Capital" consists of shares, undivided
earnings, and reserves.
(6) "Commission" means the Credit Union
Commission established by G.S. 143B-439.
(7) "Corporate Credit Union" means a Credit
Union with an institutional field of membership, as set forth in G.S. 54-110.1.
(8) "Credit union" means a cooperative
nonprofit corporation organized for the purpose of promoting thrift among its
members by affording them an opportunity for accumulating their savings; and to
create for them a source of credit for loans for provident and productive
purposes. It may undertake such other activities relating to the purpose of
the corporation as its bylaws may provide, such Credit Union being chartered
under the General Statutes of North Carolina.
(9) "Credit Union Service Organization" or
"CUSO" means an organization formed and operated by Credit Union(s),
or associations or organizations of Credit Unions, to provide revenue
generating services of the highest quality to Credit Union members, Credit
Unions and others which are needed or wanted and can be provided efficiently
and economically with a satisfactory overall rate of return on investment.
(10) "Deposits" means a preferred savings
account on which the Credit Union is obligated to pay a guaranteed interest
rate on a continuing basis in such amounts and terms as the Board of Directors
approve.
(12) "Dividend" means an operating expense of a
Credit Union which is declared payable on share accounts from time to time by
the Board of Directors. Dividends are paid as set forth in G.S. 54-109.54.
(13) "EDP" means electronic data processing.
(14) "Funds" means cash on hand or cash in the
bank and investments.
(15) "Interest on deposit accounts" is an
expense paid by the Credit Union for obtaining funds in a deposit account.
(16) "Interest on loans" means an amount
charged to a member for borrowing funds from a Credit Union at a specified rate
as declared by the Board of Directors, not to exceed the maximum legal rate.
(17) "Interest refund" means a percentage of
the interest collected on loans which is refunded to those members who borrowed
during a specific period pursuant to action of the Board of Directors.
(18) "Members" means persons or organizations
who have been accepted for membership by either the Board, membership officer,
or an executive committee, after having met qualifications of being within the
field of membership.
(19) "Membership" in a Credit Union is limited
to those persons or groups as stipulated in the bylaws of such Credit Union.
(20) "Membership fee" means a fee that may be
charged to applicants for membership as an entrance fee or as an annual
membership fee as determined by the Board of Directors or as the bylaws may
provide.
(21) "Reserve fund" means the portion of income
to be entered on the books of the corporation to offset uncollectible loans in
accordance with Section 54-109.86 of the General Statutes.
(22) "Shares" means the primary capital owned
by the members and is comprised of the savings of the members. The par value
shall be as the bylaws provide.
(23) Types of investment transactions are defined as
follows:
(a) "Standby commitments" means an
agreement to purchase or sell a security at a future date, whereby the buyer is
required to accept delivery of the security at the option of the seller.
(b) "Cash forward agreement" means an
agreement to purchase or sell a security at a future date more than five days
after the agreement is made and requires mandatory delivery and acceptance.
(c) "Reverse repurchase agreement"
means an agreement whereby a credit union enters into an understanding to sell
securities to a purchaser and to repurchase the same securities from that
purchaser at a future date, regardless of the amount of consideration paid by
the Credit Union or the purchaser.
(d) "Repurchase agreement" means an
agreement whereby a Credit Union enters into an agreement to buy securities
from a vendor and to resell securities at a future date. Repurchase agreements
may be of two types:
(i) "Investment-type repurchase
agreement" means a repurchase that contains the essential elements of a
sale of security as specified in Rule .1202(5) of this Subchapter.
(ii) "Loan-type repurchase agreement"
means any repurchase agreement that does not qualify as an investment-type
repurchase agreement.
(e) "Future" means a standardized
contract for the future delivery of commodities, including certain government
securities, sold on designated commodities exchange.
(24) "Unimpaired capital" consists of the shares,
undivided surplus and reserves less any known or probable losses, as determined
by management.
History Note: Authority G.S. 54-109.1; 54-109.2; 54-109.12;
54-109.21(25); 54-109.26; 54-109.86; 143-439;
Eff. February 1, 1976;
Readopted Eff. April 4, 1978;
Amended Eff. July 1, 2013; January 1, 1992; October 1,
1983; April 1, 1979.
04 NCAC 06C .0102 POWERS OF A
CREDIT UNION
History Note: Authority G.S. 54‑109.12;
Eff. February 1, 1976;
Readopted Eff. April 4, 1978;
Repealed Eff. April 1, 1985.
04 NCAC 06C .0103 TAXATION
History Note: Authority G.S. 54‑109.1; 54‑109.2
(b)(5); 54‑109.22; 54‑109.99;
Eff. February 1, 1976;
Readopted Eff. April 4, 1978;
Amended Eff. October 1, 1983;
Repealed Eff. January 1, 1992.
s
SECTION .0200 ‑ ORGANIZATION OF CREDIT UNIONS
04 NCAC 06C .0201 INCORPORATION OF STATE CHARTERED
CREDIT UNIONS
(a)
All credit unions desiring a state charter must be organized as a corporation
under the General Statutes, Articles 14A to 15 of Subchapter III, Chapter 54.
The Credit Union law requires that the responsibility, character, and general
fitness of the officers, directors, and committeemen is such to command the
confidence of the members and the community, and to warrant belief by the
Credit Union administrator that the business of the Credit Union will be
operated honestly, fairly, and efficiently. The Administrator shall determine
whether the proposed field of membership is favorable to the success of such
credit union and such determination will include an evaluation of any overlap
in field of membership with existing credit unions, the field of membership
requirements, the number of potential members, availability of payroll
deductions, data processing, and evaluation of feasibility studies as conducted
by North Carolina Credit Union League, the Credit Union Division or others, and
other factors involved in its successful operation.
(b)
The following fees shall be charged when new credit unions are established:
(1) five
dollars ($5.00)‑‑charter fee; and
(2) twenty
dollars ($20.00)‑‑investigation fee.
History Note: Authority G.S. 54‑109.1; 54‑109.2(e);
54‑109.3; 54‑109.11(3); 54‑109.12;
Eff. February 1, 1976;
Readopted Eff. April 4, 1978;
Amended Eff. October 1, 1983.
04 NCAC 06C .0202 MINIMUM POTENTIAL MEMBERSHIP
GUIDELINES
(a) Based on experience, established policy and standards,
the Administrator shall determine if the breadth and strength of the proposed
field of membership is too broad or too weak to effectively operate as a credit
union.
(b)
Established minimum potential membership guidelines for chartering credit
unions in each of the various types of groups are as follows:
TYPE OF GROUPS MINIMUM
POTENTIAL MEMBERSHIP
Occupational or Employer 300 Employees
Associational 500 Members
Residential or Community 1,000 Members
Multiple Occupational or
Combination of Groups 500 Members
Notwithstanding the minimum potential membership numbers,
the makeup of the membership group and the level or support is a key indicator
for the degree of potential success. Further, determination of the economic
advisability of chartering a credit union is based upon such other things as
level of group interest, leadership, willingness of management to become
involved, local economic factors, and availability of other credit union
service.
A group which
is close to the minimum and has exceptional prospects for successful credit
union operation may be considered for a state credit union charter.
History Note: Authority G.S. 54‑109.2; 54‑109.3(3);
54‑109.11(3); 54‑109.12; 54‑109.21(25); 54‑109.26(b);
Eff. February 1, 1976;
Readopted Eff. April 4, 1978;
Amended Eff. October 1, 1983.
04 NCAC 06C .0203 FIELDS OF MEMBERSHIP
(a) Parity, for the purpose of this Section, allows the
Administrator to approve fields of membership and permit state chartered credit
unions the same latitude with regard to membership limitations and restrictions
as is available to federally chartered credit unions, as set forth in 12 C.F.R.
Part 701.1.
(b) New charters and expansion requests shall be reviewed
and approved in conformity with credit unions organized under G.S. 54-109,
Articles 14A to 14L.
(c) In allowing an expansion of the field of membership,
any credit union shall be bound by membership limitations or restrictions
contained in its charter or bylaws as amended and approved by the,
Administrator, based on applicable rules and statutes.
History Note: Authority G.S. 54‑109.1; 54‑109.2(e);
54‑109.3(3); 54‑109.4; 54‑109.11(3); 54‑109.12; 54‑109.21(25);
54‑109.22; 54-109.26; 54-109.27; 54-109.28;
Eff. February 1, 1976;
Amended Eff. March 1, 1977;
Readopted Eff. April 4, 1978;
Amended Eff. March 1, 2015; November 1, 1990; October 1,
1983; April 1, 1979.
04 NCAC 06C .0204 BYLAWS AND ARTICLES OF INCORPORATION
In
addition to submitting the articles of incorporation, all credit unions
desiring a state charter must prepare and adopt bylaws for the general
government of the Credit Union, consistent with the General Statutes, Articles
14A to 15 of Subchapter III, Chapter 54. The articles of incorporation and
bylaws shall be executed in duplicate and filed with the Administrator for
approval.
History Note: Authority G.S. 54‑109.2(c)(e); 54‑109.12;
Eff. February 1, 1976;
Readopted Eff. April 4, 1978;
Amended Eff. October 1, 1983.
04 NCAC 06C .0205 LOANS TO CREDIT UNION OFFICIALS
(a) Officials. For purposes of this Rule, an
"official" is a member of the Board of Directors, credit committee,
or supervisory committee; the President, Chief Executive Officer, Chief
Financial Officer, Comptroller, General Manager, Treasurer/Manager, or
Executive Vice President; and Outside Attorneys and Outside Accountants of the
credit union. For the purpose of this Paragraph, the following definitions
apply:
(1) "Outside Attorneys" means
independent attorneys or law firms that are retained to provide 25 percent or
more of the legal services for the credit union, based on the annual legal expense;
and
(2) "Outside Accountants" means
independent accountants or accounting firms that are retained to provide
accounting or audit services for the credit union.
(b) Loans to Officials. A loan or line of credit extended
to an official as the borrower, direct obligor, endorser, cosigner, or
guarantor with direct or indirect pecuniary interest in the loan shall be
reviewed by the Board of Directors or a duly appointed committee thereof, as
provided in Paragraph (c) of this Rule, at the next regular meeting following
the date of such extension of credit, provided the following computation produces
a total amount in excess of fifty thousand dollars ($50,000) including limits
of credit cards.
(1) Add:
(A) the loan amount extended for the current loan;
(B) the outstanding balances of loans, including the
used portion of an approved line of credit, extended to or endorsed, cosigned
or guaranteed by the official; and
(C) the total unused portion of approved lines of credit
extended to or endorsed, cosigned, or guaranteed by the official.
(2) Subtract from the above total:
(A) the amount of shares pledged by the official on
loans or lines of credit extended to, or endorsed, cosigned, or guaranteed by
the official; and
(B) the amount of shares pledged by the official on the
current loan or line of credit.
(c) Review of Loans to Officials by Duly Appointed
Committee. The Board of Directors may appoint a committee to review and report
on loans made to officials. All members of the committee shall be on the
Board of Directors. The committee shall meet before the regular monthly board
meeting to review all officials' loans that have been approved since the
previous meeting. The committee shall make a report to the board that
shall consist of at least the official's loan number, his or her title or
position, the amount of the loan, purpose of the loan, aggregate amount of
indebtedness to the credit union, and a statement regarding compliance with
loan policies. Each credit union's Board of Directors shall review this loan
approval report on a monthly basis. This review shall be done at the regular
monthly board meeting. In the event the board does not meet monthly, a
procedure shall be established whereby a written report shall be sent to each
director on a monthly basis.
(d) Non preferential treatment. The rates, terms, and
conditions on a loan or line of credit made to or endorsed, co-signed, or
guaranteed by:
(1) an official;
(2) an immediate family member of an official. For
the purpose of this Rule, "immediate family member" means a spouse or
other family member living in the same household; or
(3) any individual having a common ownership,
investments, or other pecuniary interest in a business enterprise with an
official or with an immediate family member of an official, shall not be more
favorable than the rates, terms and conditions for comparable loans or lines of
credit to other credit union members.
(e) Avoidance of conflicts. No official or any employee of
the credit union shall in any manner, directly or indirectly, participate in
the deliberation upon or the determination of any question affecting his or her
pecuniary interest or the pecuniary interest of any corporation, partnership,
or association (other than the credit union) in which he or she is directly or
indirectly interested.
(f) Indirect Benefits. It shall be unlawful for an
official or employee to:
(1) have any interest or to benefit in any
manner in the proceeds of a loan or from the sale by the credit union of any
real or personal property unless the official or employee has disclosed to the
Board of Directors of the credit union the nature and extent of the benefit
that may be received and the loan or sale, regardless of the amount of money
involved, has been approved by a vote of at least two thirds of the directors
of the credit union; or
(2) have any interest direct or indirect, in
the purchase at less than face value of any savings account or evidence of
indebtedness issued by a credit union.
(g) Penalty. A violation of the provisions of this Rule
shall be sufficient basis for removal of any official or employee by the.
Administrator, as set forth in G.S. 54-109.19.
History Note: Authority G.S. 54‑109.12; 54‑109.19;
54‑109.39;
Eff. February 1, 1976;
Readopted Eff. April 4, 1978;
Amended Eff. March 1, 2015; August 1, 1998; October 1,
1983.
04 NCAC 06C .0206 MERGER OF CREDIT UNIONS
Two or more credit unions may merge into a single credit
union, provided the Administrator, after an investigation, is satisfied that
the proposed merger is favorable to the continued success of the surviving credit
union. Credit unions interested in merging should contact and discuss the
proposed merger with the Administrator, after which the following must be
accomplished to affect such merger:
(1) Secure the Administrator's tentative approval of
such a merger and his authorization to proceed with merger plans;
(2) Have a plan of merger which has been agreed upon
and approved by the majority of the Board of directors of each credit union
joining in the merger;
(3) The plan of merger must obtain the affirmative vote
of a majority of the members of the merging credit union present at the meeting
of the members duly called for such purpose;
(4) For the surviving credit union in the merger, only
a vote by the majority of the Board of directors of the Credit Union is
required;
(5) The present secretary of each credit union shall
execute a certificate of merger, which shall set forth the following:
(a) the time and place of the meeting of the
Board of directors at which the plan was agreed upon,
(b) the vote in favor of adoption of the plan,
(c) a copy of the resolution or other action by
which the plan was agreed upon,
(d) the time and place of the meeting of the
members at which the plan was agreed upon,
(e) the vote by which the plan was approved by
the members of the merging credit union;
(6) Approval of the appropriate regulatory authority if
one or more of the merging credit unions is not a North Carolina chartered
credit union.
(7) Such certificates and a copy of the plans of merger
agreed upon including amended bylaws to reflect changes in field of membership
shall be forwarded to the Administrator of Credit Unions, certified by him, and
returned to the merged credit union within 30 days.
Upon any such merger so effected, all property, property
rights, and interest of the merged credit union shall vest in the surviving
credit union without deed, endorsement or other instruments of transfer, and
all debts, obligations and liabilities of the merged credit union shall be
deemed to have been assumed by the surviving credit union under whose charter
the merger was effected.
The charter of the credit union whose identity is lost
should then be revoked.
If circumstances warrant and if deemed necessary, the
Administrator may waive or modify any of the foregoing procedures to affect a
merger to protect the interest of the members of the Credit Unions.
History Note: Authority G.S. 54‑109.03; 54‑109.4;
54‑109.12; 54‑109.21(25); 54‑109.94;
Eff. February 1, 1976;
Readopted Eff. April 4, 1978;
Amended Eff. October 1, 1983; April 15, 1980.
04 NCAC 06C .0207 CONVERSION OF CHARTER FROM NORTH
CAROLINA CHARTER
(a) A North Carolina credit union may be converted into
another state or federal credit union if permitted by the other state or the
Federal Credit Union Act. The proposition for such conversion shall be
approved, and a date set for a vote thereon by the members (either at a meeting
to be held on such date or by written ballot to be filed on or before such
date), by a majority of the Directors of the North Carolina Credit Union. Written
notice of the proposition and of the date set for the vote shall then be
delivered in person to each member, or mailed to each member at the address for
such person appearing on the records of the Credit Union, not more than 30 days
or less than seven days prior to such date. Approval of the proposition for
conversion shall be by the affirmative vote of a majority of the membership of
the members voting in person or in writing.
(b) A statement of the results of the vote, verified by the
affidavits of the president or vice‑president and the secretary, shall be
filed with the North Carolina Credit Union Division within 10 days after the
vote is taken.
(c) Promptly after the vote is taken and in no event later
than 90 days thereafter, if the proposition for conversion was approved by such
vote, such credit union shall take such action as may be necessary under the
other state or the Federal Credit Union Act to make it a credit union of
another state or a federal credit union; and within 10 days after receipt of
the new credit union charter there shall be filed with the North Carolina
Credit Union Division a copy of the charter thus issued. Upon such filing, the
Credit Union shall cease to be a North Carolina chartered credit union.
(d) Upon ceasing to be a North Carolina credit union, such
credit union shall no longer be subject to any of the provisions of the North
Carolina Credit Union laws. The successor credit union shall be vested with
all of the assets and shall continue responsibility for all of the obligations
of the North Carolina Credit Union to the extent as though the conversion had
not taken place.
History Note: Authority G.S. 54‑109.95;
Eff. February 1, 1976;
Readopted Eff. April 4, 1978;
Amended Eff. April 1, 1981.
04 NCAC 06C .0208 CONVERSION OF CHARTER TO NORTH
CAROLINA CHARTER
(a) Another state or federal credit union organized under
applicable laws, may be converted into a North Carolina Credit Union by
complying with all applicable requirements requisite to enabling it to convert
to a North Carolina Credit Union or cease being a credit union of another
state, or a federal credit union; and filing with the North Carolina Credit
Union Division proof of such compliance, satisfactory to the Administrator of
credit unions, and filing with the North Carolina Credit Union Division an
organization certificate as required by the North Carolina Credit Union Act.
(b) When the Administrator of the North Carolina Credit
Union Division has been satisfied that all of such requirements, and all other
requirements of the General Statutes of North Carolina have been complied with,
the Administrator of the Credit Union Division shall approve the organization
certificate. Upon such approval, the Credit Union shall become a North
Carolina credit union as of the date it ceases to be a credit union of another
state or a federal credit union. The North Carolina Credit Union shall be
vested with all of the assets and shall continue responsibility for all of the
obligations of the Credit Union to the same extent as though the conversion had
not taken place.
History Note: Authority G.S. 54‑109.95;
Eff. February 1, 1976;
Readopted Eff. April 4, 1978;
Amended Eff. April 1, 1981.
04 NCAC 06C .0209 OUT OF STATE OFFICE FACILITIES
Before a credit union may open a branch office in another
state, a written request must be submitted to the Administrator of credit
unions for his approval insofar as North Carolina law is concerned. (The Administrator
may request necessary information and conduct an investigation in evaluating
the request.) It shall be the responsibility of the Board of directors of each
credit union operating in more than one state to seek the advice of an attorney
to see that the Credit Union complies with applicable state laws of the other
state(s).
History Note: Authority G.S. 54‑109.21(25);
Eff. April 4, 1978.
04 NCAC 06C .0210 OUT‑OF‑STATE CREDIT UNIONS
History Note: Authority G.S. 54‑109.5; 54‑109.21(25);
54‑109.94; 54‑109.95;
Eff. October 1, 1983;
Repealed Eff. January 1, 1992.
section .0300 - BASIC INTERNAL CONTROLS: ACCOUNTING PROCEDURES
AND OPERATION STANDARDS FOR STATE-CHARTERED CREDIT UNIONS
04 NCAC 06C .0301 GENERAL PROVISIONS
(a) Internal controls, accounting procedures, and
operational standards adequate to safeguard the assets shall be established by
all. Credit Unions.
(b) Credit Unions with ten million dollars ($10,000,000) or
more in assets shall follow generally accepted accounting principles (GAAP) for
financial statement and report preparation. Credit Unions with less than ten
million dollars ($10,000,000) in assets may follow GAAP or use the procedures
in the "Accounting Manual for Federal Credit Unions" posted on the
National Credit Union Administration website.(www.ncua.gov).
(c) At least 60 days before a credit union converts its
records from a manual to an Electronic Data Processing, (EDP) system through an
outside servicer or changes EDP services, a copy of the proposed contract and a
description of the data processing system shall be submitted to the
Administrator for review and approval. If an in-house EDP system or the
sponsoring company's EDP facilities are to be used, the Administrator shall be
notified in writing of the proposed change before extensive planning and system
programming begins. Contracts and agreements, for EDP systems shall conform
with the following as a minimum:
(1) The right of the Administrator or his or
her representative to request and receive directly from the service center any
reports, summaries, or information contained in or derived from the data in the
possession of the service center relating to the credit union.
(2) Terms of the contract, including dates for
the beginning and end with disclosure of the charges to be incurred.
(3) Notice of the termination of the servicing
contract or agreement, consistent with industry standards.
(4) The description of the equipment, services,
reports, location of original documents and source data; method of transmittal
of input information to the service center and applicable controls.
(5) Maintenance agreement that is consistent
with industry standards.
(6) Availability of technically qualified
personnel.
(7) The due diligence and review by the Board
of Directors or legal counsel.
(8) Fidelity bond coverage for service center
personnel and for losses due to system errors; and insurance coverage for
losses from fire, disaster, or other causes resulting in an interruption of
service.
(d) Requests for modification of the rules and regulations
in regard to the general provisions shall be submitted in writing to the
Administrator.
History Note: Authority G.S. 54-109.12; 54-109.16;
54-109.17(a),(b);
Eff. February 1, 1976;
Amended Eff. November 1, 1977;
Readopted Eff. April 4, 1978;
Amended Eff. March 1, 2015.
04 NCAC 06C .0302 PROCEDURES
The basic internal controls, accounting procedures
and operation standards for all credit unions are as follows:
(1) An adequate general ledger and detailed cash
journal shall be maintained for the control of all transactions of the Credit
Union.
(2) A record of all correcting and adjusting entries,
with an explanation of each entry, shall be maintained.
(3) For manual and computerized accounting
systems, all receipts and disbursements shall be recorded and posted daily to
cash journal and subsidiary accounts.
(4) Deposits in the bank or credit union shall consist
of an entire day's receipts as entered in the journal and cash record. If
amounts are less than three hundred dollars ($300.00), more than one day's
total receipts may be combined in a single deposit provided that no funds are
held more than three banking days.
(5) Security shall be provided (cash drawer and lockbox)
at a minimum for storage of funds.
(6) Credit union funds shall be kept separate from all
other funds.
(7) Cash shall be balanced at the end of each working
day, and a record made by each teller detailing coins, currency, checks, and
other items counted as cash.
(8) A "cash over and short" account shall be
maintained in the expense ledger, with a record showing the name of each person
responsible for each difference.
(9) A pre‑numbered receipt slip or other original
record shall be made and preserved covering each payment received.
(10) All bank or credit union accounts shall be
reconciled at least monthly and such reconciliations preserved, as set forth in
Rule .1002 of this Subchapter.
(11) A duplicate of itemized bank or credit union deposit
slips, or other comparable detailed item record, shall be preserved, as set
forth in Rule .1002 of this Subchapter.
(12) The exact status of all the credit union's funds,
including investments and funds held by agents or attorneys shall be
determinable at all times.
(13) Checks shall be pre‑numbered by the printer
and not signed in blank in advance of issue. Facsimile signature plates
shall be maintained in the credit union vault under dual control.
(14) Disbursements shall be supported by invoices,
vouchers, or other explanations of record, each showing the nature or purpose
of each disbursement.
(15) Dual control shall be maintained over all negotiable
investment securities.
(16) Members' accounts shall be posted and balanced not
less frequently than monthly and supported by member trial balance or adding
machine tapes, identified, dated, and preserved.
(17) A trial balance of the general ledger shall be
prepared within 15 working days from the close of business of the last day of
each month and financial statements prepared therefrom.
(18) Erasures and eradications for correction of errors
in records are prohibited; corrections must be approved by an authorized
person, that shall be approved by the Board of Directors.
(19) Members' passbooks shall be held in the Credit Union
office only if authorized by the Board of Directors.
(20) A signed membership card file covering all accounts
shall be maintained.
(21) Payment of dividends or interest on accounts shall
be accomplished by check or by credit to the individual account. A record in
support of dividend or interest paid by check or credited to accounts shall be
preserved.
(22) A cross‑index card record shall be maintained
for each co‑maker showing the date, name, and original amount of each
note on which the individual appears as co‑maker.
(23) Minutes of meetings of the Board of Directors shall
record all of its business transactions and be signed by the presiding officer
and the secretary. Upon meeting as a Board of Directors, the secretary or
designated member shall make a matter of record in the minutes of the meeting
all written communications from the Division.
(24) The supervisory committee shall have work papers to
support its audit report. The reports and work papers shall be retained and
made available for review by the state, as set forth in Rule .1002 of this
Subchapter.
(25) A report of actions taken by the credit committee or
loan officers shall be prepared, signed, and preserved, as set forth in Rule
.1002 of this Subchapter.
(26) Minutes of each annual meeting of the members of the
Credit Union shall record all business transacted.
(27) All books and records of the Credit Union shall have
protection from fire and other hazards at all times. Active books and records
of the Credit Union should be located at the principal office at all times.
(28) Dormant accounts shall be controlled to prevent
improper withdrawal.
(29) Annual vacations of at least five consecutive
working days (during periods when proofs of subsidiary ledgers are being made)
shall be taken by each employee having access to cash and the general ledger. During
the vacation, the employees shall remain continuously absent.
(30) A record shall be maintained that shall at all times
show the tax and insurance status of each piece of real estate securing the Credit
Union's investment of funds in real estate mortgage loans.
(31) All tax liabilities shall be determined and paid in
accordance with the law.
History Note: Authority G.S. 54‑109.11(4); 54‑109.12;
54‑109.16; 54‑109.17;
Eff. February 1, 1976;
Readopted Eff. April 4, 1978;
Amended Eff. March 1, 2015; January 1, 1992; July 1,
1988; December 1, 1979.
04 NCAC 06C .0303 DEPRECIATION AND AMORTIZATION
SCHEDULES
History Note: Authority G.S. 54-109.12;
Eff. February 1, 1976;
Readopted Eff. April 4, 1978;
Repealed Eff. March 1, 2015.
04 NCAC 06C .0304 MANAGEMENT DUTIES
All credit unions shall conduct their business and the
selection of their employees using a sufficiently high degree of management and
business skills to assure the safe and sound operation of the Credit Union. To
maintain familiarity with current developments in the field of credit union
management, services and operations as may be necessary, all management
personnel and employees of credit unions should avail themselves of the
educational opportunities as may be provided by the N.C. Credit Union League,
the Credit Union Division, and others.
History Note: Authority G.S. 54‑109.12; 54‑109.35;
54‑109.36;
Eff. February 1, 1976;
Readopted Eff. April 4, 1978;
Amended Eff. October 1, 1983.
04 NCAC 06C .0305 INDEPENDENT AUDITS
(a) An audit of each state‑chartered credit unions
shall occur at least once each calendar year and shall cover the period elapsed
since the last audit. The audit will be performed using generally accepted
auditing procedures and standards. It is the responsibility of the supervisory
committee, or board of directors if there is no supervisory committee, to
ensure that the annual audit is timely, that generally accepted auditing
standards are used, that an adequate audit of the credit union records is
conducted, and the audit report is promptly prepared and submitted to the board
of directors. Workpapers of the supervisory committee and/or its independent
auditors shall be made available for review by the Credit Union Division.
(b) Compensated auditors performing audits for credit
unions must be independent of the credit union's employees, members of the
board of directors, supervisory committee, credit committee, and/or the credit
union's loan officers and members of their immediate families. Compensated
auditors must be a Certified Public Accountant (CPA), or a bonded auditing
firm, or a person who is bonded or has accountants' professional liability
insurance coverage.
(c) Annual verification of depositors' and members'
accounts will be done in conjunction with the annual audit and shall be made by
either a controlled verification of 100 percent of share, deposit and loan
accounts or a controlled random sampling method that provides assurance that
the General Ledger accounts are fairly stated and that members' and depositors'
accounts are properly safeguarded.
(d) A credit union shall obtain an outside independent
audit by a certified public accountant for any fiscal year during which any one
of the following is present:
(1) the required annual audit was not performed
or was not in accordance with Paragraphs (a), (b), and/or (c) of this Rule;
(2) the credit union has experienced serious
and/or persistent recordkeeping deficiencies. Persistent means continuing to exist
or endure. Serious is when there is given cause for concern that the financial
condition is not fairly and accurately presented and/or that management
practices are not sufficient to safeguard the assets of the credit union. When
a credit union fails to comply with this Rule, the administrator has the
authority to engage an outside certified public accountant at the credit
union's expense to conduct the required annual audit.
(e) This Rule shall not in any manner modify or limit the
administrator's responsibility or authority to examine credit unions as set
forth in G.S. 54‑109.16, and it shall not modify or limit the
administrator's authority to assess the cost of the examination against any
credit union.
History Note: Authority G.S. 54‑109.12; 54‑109.17;
54‑109.35(b); 54‑109.49;
Eff. February 1, 1976;
Readopted Eff. April 4, 1978;
Amended Eff. October 1, 1991; October 1, 1983; May 1,
1983; January 1, 1983.
04 NCAC 06C .0306 DISPLAY OF FINANCIAL STATEMENTS
Each credit union shall display at its main office and all
branches, copies of its monthly financial statement. Such statement shall be
posted in both a conspicuous and available manner, so as to be accessible for
inspection by members.
History Note: Authority G.S. 54‑109.12;
Eff. February 1, 1976;
Readopted Eff. April 4, 1978;
Amended Eff. October 1, 1983.
04 NCAC 06C .0307 LISTING OF OFFICIALS AND OPERATING
HOURS
(a) Each credit union shall notify the Administrator of the
names and addresses of its officers, directors, committee members of the Credit
Committee and Supervisory Committee, managers or internal auditors.
(b) Each credit union shall notify the Administrator of its
days and hours of operation.
(c) The credit union shall notify the Administrator of any
changes to the information required by this Rule within 10 business days.
History Note: Authority G.S. 54-109.12;
Eff. February 1, 1976;
Readopted Eff. April 4, 1978;
Amended Eff. July 1, 2013.
04 NCAC 06C .0308 BORROWING LIMITATIONS
No credit union may borrow funds from any source in excess
of 50 percent of its unimpaired capital without the written approval of the
Administrator. Nonmember deposit accounts are considered to be borrowed funds.
History Note: Authority G.S. 54‑109.12;
Eff. February 1, 1976;
Readopted Eff. April 4, 1978.
04 NCAC 06C .0309 OPERATIONAL SYSTEMS
(a) Credit unions, associations of credit unions, and any
other parties interested in credit union programs may submit pilot programs
relating to electronic funds transfer through remote service units, loan
programs, and other operational systems to the Administrator for evaluation and
approval.
(b) A program will be designated a pilot program if it is
determined that the implementation of the program will provide the
Administrator with the information necessary for the establishment of permanent
programs which will effectively benefit all credit unions and the parties they
serve.
(c) Where a pilot program is deemed appropriate and the
submitting party is a state‑chartered credit union, such state‑chartered
credit union will be designated as a credit union to implement the pilot
program, provided the Administrator determines that the implementation by such
state‑chartered credit union would best serve the Administrator's
observation and evaluation of the actual operation of the pilot program. If
the requesting credit union is deemed unqualified for implementation, or if the
submitting party is not a state‑chartered credit union, the Administrator
may, with the consent of the submitting party, designate an alternate credit
union to test the program.
(d) A termination date will be specified for the Credit
Union designated to implement a pilot program. If, at the termination date,
additional time is needed for complete evaluation, the Administrator may extend
the time at the request of the designated credit union. The Administrator
reserves the right to terminate or otherwise modify any ongoing pilot program.
At the end of the evaluation period or extensions thereof, the Administrator
will determine the benefits of the program and may authorize other qualified
credit unions to adopt the same program, or a modification thereof, in which
case approval by the Administrator will be required.
History Note: Authority G.S. 54‑109.12;
Eff. February 1, 1976;
Readopted Eff. April 4, 1978.
04 NCAC 06C .0310 SHARE DRAFT PROGRAMS
Share draft programs are permissible if provided for in the
Credit Union bylaws or have otherwise been approved by the Administrator.
History Note: Authority G.S. 54‑109.12; 54‑109.3(9)(11);
54‑109.21(23); 54‑109.22; 54‑109.53;
54‑109.55;
Eff. December 1, 1979.
04 NCAC 06C .0311 SURETY BOND AND INSURANCE COVERAGE
(a) It shall be the duty of the Board of Directors to
purchase a blanket fidelity bond including such other bond coverage as required
by the statutes or as may be required by the Administrator as set forth in G.S.
54-109.44(2).
(b) Every state chartered credit union shall maintain the
minimum bond and insurance coverage as required by statute. No form of surety
bond shall be used except as is approved by the Administrator. The approved
bond forms are Credit Union Blanket Bond 500 Bond Series, plus faithful
performance rider, NCUA Optional Form 581 or its equivalent. These bond forms
shall be considered the minimum coverages required for the purpose of this
section. The approved bond forms in this Paragraph provide faithful performance
coverage for all employees and officials. Fidelity bonds must provide coverage
for the fraud and dishonesty of all employees, directors, officials, and
supervisory and credit committee members. Other forms, or changes in the
amount of bond coverage, must be approved by the Administrator.
(c) Maximum deductible limits may be applied to the
required coverage contained in 500 Bond Series, as specified in this Paragraph:
Assets
Maximum Deductible
0 to $100,000
-0-
$100,001 to $250,000 $
500
$250,001 to $500,000
50
$500,001 to $750,000
1,000
$750,001 to $1,000,000
1,500
$1,000,001 to $2,000,000
2,000
$2,000,001 to $3,000,000
3,000
$3,000,001 to $5,000,000
4,000
$5,000,001 to $50,000,000
5,000
$50,000,001 to $100,000,000
7,500
Over $100,000,001
10,000
Deductibles in excess of those shown must be approved by the
Administrator. In no event shall any deductible be applied to the fidelity
coverage or the faithful performance provision of the bond unless approved by
the Administrator.
(d) In considering a request to deviate from the bond
coverage and deductible amounts set forth in this Rule, the Administrator shall
consider the credit union's:
(1) financial strength;
(2) net worth;
(3) return on assets;
(4) quality of assets; and
(5) Capital, Assets, Management, Earnings, and
Liquidity (CAMEL) rating, used by the Division and NCUA to evaluate the
soundness of credit unions on a uniform basis.
History Note: Authority G.S. 54-109.11 (5); 54-109.12;
54-109.44 (2);
Eff. April 1, 1981;
Amended Eff. July 1, 2013; February 1, 1992; April 1,
1985.
04 NCAC 06C .0312 INSURANCE AND GROUP PURCHASING
Credit unions may purchase, or make available, or enter into
cooperative marketing arrangements (group purchasing) to facilitate its
members' voluntary purchase of insurance and such other goods and services as
are in the interest of improving economic and social conditions of its
members. Prior to entering into any agreement with a third party to provide
goods, services, and/or insurance to its members, the Credit Union board of
directors should ensure that the service is professionally researched, is
needed and wanted by the members, is accurately communicated, and is carefully
monitored and evaluated to ensure that such action will not have an adverse
effect on the safety and soundness of the Credit Union.
History Note: Authority G.S. 54‑109.12; 54‑109.75;
54‑109.77; 54‑109.92;
Eff. March 1, 1982.
04 NCAC 06C .0313 CREDIT UNION SERVICE ORGANIZATION
(CUSO)
(a) For purposes of this Section, a "credit union
service organization" is an entity defined in Paragraph .0101(21) of these
Rules.
(b) The purpose of a credit union service organization is
to provide revenue generating services of the highest quality to credit union
members, credit unions, and others which are needed or wanted and can be
provided efficiently and economically with a satisfactory overall rate of
return on investment. It may provide, but is not limited to, any or all of the
following functions or services:
(1) credit union operational functions
including but not limited to, credit card and debit card services, ATM
services, accounting systems, data processing, management training and support,
payment item processing, record retention and storage, locator services,
research services, debt collection services, credit analysis and loan
servicing, and coin and currency services;
(2) family financial services including, but
not limited to, financial planning, and counselling, including retirement
counselling, estate planning and income tax preparation, developing and
administering IRA and Keogh plans and other personnel benefit plans, and
provision of trust services including acting as trustee or in other similar
fiduciary capacities;
(3) acting as agent for the sale of liability,
casualty, automobile, life, health, accident, title and other insurance;
(4) personal property leasing and development
of leasing plans;
(5) other services, as determined by the Board
of directors.
(c) A credit union may, either by itself or by agreement
with other entities, form, invest in, or lend to a credit union service
organization, within the limits specified by credit union law.
(d) A credit union investing in or lending to a credit
union service organization must submit call reports or any other information
upon request by the Administrator.
History Note: Authority G.S. 54‑109.2(b)(5); 54‑109.21
(4); 54‑109.21(14); 54‑109.21(25);
54‑109.22; 54‑109.27; 54‑109.82(2);
Eff. October 1, 1983.
SECTION .0400 ‑ LOANS
04 NCAC 06C .0401 DELINQUENT LOANS AND LOAN LOSSES
(a) Monthly Schedule of Delinquent Loans. Each credit
union shall, at the end of each month, prepare and review a schedule of
delinquent loans which shall list in columnar form the account number, names of
borrowers, date of loan, date of last payment, original amount of loan and
outstanding balance of loan at date of schedule, together with space to note
current action or status.
The unpaid balance of loans shall be set apart in columns
of the schedule of delinquent loans which will indicate the extent of
delinquency as determined by the delinquent installments according to the note
contract, as follows:
(1) Loans on which the delinquent installments are
two months but less than six months past due;
(2) Loans on which the delinquent installments are
six months but less than 12 months past due;
(3) Loans on which the delinquent installments are
past due 12 months or more.
(b) Allowance for Loan Losses.
(1) Each credit union shall establish and maintain
such reserves as may be required by the Act or by regulation, or in special
cases by the Administrator. All Credit Unions shall establish an Allowance for
Loan Losses Account. The Allowance for Loan Losses Account is not an addition
to but a part of the Regular Reserve as required by statute.
(2) The maintenance of a valuation Allowance for
Loan Losses Account shall not eliminate the requirement for transferring a
percentage of gross income before the payment of each dividend to the Regular
Reserve as required by the Credit Union Laws.
(3) As a minimum, adjustments to the valuation
Allowance for Loan Losses shall be made prior to the distribution or posting of
any dividend to the accounts of all the members so that the valuation allowance
established fairly presents the value of loans and anticipated losses.
(4) Adjustments to the valuation Allowance for Loan
Losses will be recorded in the expense account "Provision for Loan
Losses."
(5) Dividends shall not exceed the amount available
for that purpose after provisions have been made for the statutory transfer to
the Regular Reserve Account and the removal of any deficit in the Regular
Reserve Account.
History Note: Authority G.S. 54‑109.12; 54‑109.17;
54‑109.86; 54‑109.87;
Eff. February 1, 1976;
Readopted Eff. April 4, 1978;
Amended Eff. February 1, 1992; October 1, 1983; January
1, 1983; March 1, 1982.
04 NCAC 06C .0402 CHARGE‑OFF OF UNCOLLECTIBLE
LOANS
(a) All losses resulting from uncollectible loans shall be
charged against the Allowance for Loan Losses or any special reserve required
by the Administrator.
(b) A record shall be maintained of all loans charged
off. Such record shall contain the following information: account number,
name, original date, amount of original loan, security, balance at time of
charge‑off, efforts made to collect, and what if any, recovery has been
made on the security. This record shall be kept current and made available to
the examiners at each examination.
(c) Any loans delinquent 12 months or more, unless there
is a high probability of no loss, will be charged off in accordance with
Paragraph (a) of this Rule.
(d) Any recovery of charged‑off loans shall be
credited to the Allowance for Loan Losses.
History Note: Authority G.S. 54‑109.12; 54‑109.17;
Eff. February 1, 1976;
Readopted Eff. April 4, 1978;
Amended Eff. February 1, 1992; January 1, 1983.
04 NCAC 06C .0403 REAL ESTATE LOANS
(a) Loan Limitations. No more than 30 percent of the
total dollar amount of shares and deposits shall be made in fixed rate real
estate loans with a remaining maturity of more than seven years without the
permission of the Administrator, based on the Administrator's evaluation of the
credit union's management.
(b) Selection of Attorneys. If an attorney's fee is paid
by the borrower in connection with any loans, the borrower shall have the right
to select an attorney of his choice; provided, the attorney or attorneys are
acceptable to the Credit Union. The decision as to the acceptability of the
attorney or attorneys must be on a reasonable, nondiscriminatory standard to be
determined by the Board of directors of each credit union.
History Note: Authority G.S. 54‑109.12; 54‑109.18;
54‑109.21(25);
Eff. February 1, 1976;
Readopted Eff. April 4, 1978;
Amended Eff. February 1, 1992; January 1, 1988; October
1, 1983; October 1, 1982.
04 NCAC 06C .0404 LINE OF CREDIT LOANS
(a) Limitations. A credit union shall not make a line of
credit loan that exceeds the stated sum or specified period of time approved by
the Board of directors of that credit union.
(b) Reserves. A credit union shall maintain for a period
of one month, beginning on the seventh day of each month, a reserve, which
shall consist of cash on hand or legal investments that mature in one year or
less, in an amount not less than five percent of the aggregate unused portion
of its line of credit loans determined as of the close of the previous month.
Not more than 20 percent of the required reserve shall be in direct United
States Government obligations. The Credit Union shall keep current records of
the aggregate unused portion of its line of credit loans and reserves, and the
Administrator may require periodic or special reports based on these records.
History Note: Authority G.S. 54‑109.12;
Eff. February 1, 1976;
Readopted Eff. April 4, 1978;
Amended Eff. January 1, 1992; December 1, 1979.
04 NCAC 06C .0405 MAXIMUM INTEREST RATE ON LOANS
History Note: Authority G.S. 54‑109.65;
Eff. April 4, 1978;
Amended Eff. April 15, 1980;
Repealed Eff. April 1, 1985.
04 NCAC 06C .0406 MAXIMUM UNSECURED LOAN LIMITS
History Note: Authority G. S. 54‑109.67;
Eff. October 1, 1983;
Repealed Eff. April 1, 1985.
04 NCAC 06C .0407 BUSINESS LOANS
(a) Prohibited fees. A North Carolina credit union shall
not make any loan or extend any line of credit if, either directly or
indirectly, any commission, fee or other compensation is to be received by the
Credit Union's directors, committee members, senior management employees, loan
officers, or any immediate family members of such individuals, in connection
with underwriting, insuring, servicing or collecting the loan or line of
credit. However, salary (except commissions) for employees is not prohibited
by this Section. For purposes of this Section, "senior management
employees" means the Credit Union's chief executive officer (typically
this individual holds the title of President or Treasurer/Manager), any
assistant chief executive officers (e.g., Assistant President, Vice President
or Assistant Treasurer/Manager), and the chief financial officer (Comptroller),
and "immediate family member" means a spouse or other family member
living in the same household.
(b) Member Business Loans.
(1) Definitions:
(A) Member business loans mean any loan, line of
credit, or letter of credit, the proceeds of which will be used for commercial,
corporate, business, investment property or venture, or agriculture purpose,
except that the following shall not be considered member business loans for
purposes of this Section:
(i) A loan or loans fully secured by a lien on a
one to four family dwelling that is the member's primary residence.
(ii) A loan that is fully secured by shares in the
credit union or deposits in other financial institutions.
(iii) A loan meeting the general definition of member
business loans under Part (b)(1)(A) of this Rule, and, made to a borrower or an
associated member, which, when added to other such loans to the borrower or
associated member, is less than fifty thousand dollars ($50,000).
(iv) A loan, the repayment of which is fully insured
or fully guaranteed by, or where there is an advance commitment to purchase in
full by, any agency of the federal government or of a state or any of its
political subdivisions.
(v) A loan granted by a corporate credit union
operating under the provisions of the North Carolina General Statutes to
another credit union.
(B) Reserves means reserve fund, undivided earnings,
current earnings, and excludes the Allowance for Loan Losses.
(C) Associated Member means any member with a shared
ownership, investment or other pecuniary interest in a business or commercial
endeavor with the borrower.
(D) Immediate Family Member means a spouse, or other
family member living in the same household.
(E) Loan-to-Value (LTV) ratio means the quotient of the
aggregate amount of all sums borrowed from all sources on an item of collateral
divided by the market value of the collateral used to secure the loan.
(F) Construction or development loan means a financing
arrangement for the purpose of acquisition of property or rights to property or
rights to property including land or structures with the intent of conversion
into income-producing property including residential housing for rental or
sale, commercial or industrial use, or a similar use.
(2) Requirements. Member business loans, as
defined in Part (b)(1)(A) of this Rule may be made by credit unions only in
accordance with the applicable provisions of Rule .0409 and .0205(d) and the
following additional requirements:
(A) Written loan policies. The Board of Directors must
adopt specific business loan policies and review them at least annually. The
policies shall, at a minimum, address the following:
(i) Types of business loans that will be made;
(ii) The credit union's trade area for business
loans;
(iii) Maximum amount of credit union assets, in
relation to reserves, that will be invested in business loans;
(iv) Maximum amount of credit union assets, in
relation to reserves, that will be invested in a given category or type of
business loan;
(v) Maximum amount of credit union assets, in
relation to reserves, that will be loaned to any one member or group of
associated members, subject to Subpart (b)(2)(C)(i) of this Rule;
(vi) Qualifications and experience of personnel
involved in making and administering business loans with a minimum of two years
direct experience with this type of lending;
(vii) Analysis of the ability of the borrower to repay
the loan;
(viii) Documentation supporting each request for an
extension of credit or an increase in an existing loan or line of credit shall
(except where the Board of Directors finds that such documentation requirements
are not generally available for a particular type of business loan and states
the reasons for those findings in the credit union's written policies) include
the following: balance sheet, cash flow analysis, income statement, tax data,
leveraging; comparison with industry averages; receipt and periodic updating of
financial statements and other documentation; including tax returns;
(ix) Collateral requirements, including loan-to-value
ratios; appraisal, title search and insurance requirements; steps to be taken
to secure various types of collateral; and how often the value and
marketability of collateral is reevaluated;
(x) Appropriate interest rates and maturities of
business loans;
(xi) Loan monitoring, servicing and follow-up
procedures, including collection procedures;
(xii) Provision for periodic disclosure to the credit
union's members of the number and aggregate dollar amount of member business
loans;
(xiii) Identification, by position, of those senior
management employees prohibited by Rule .0205(d) of this Chapter from receiving
member business loans.
(B) Other policies. The following minimum limits and
policies shall also be established in writing and reviewed at least annually
for loans granted under this Section:
(i) Loans shall be granted on a fully secured basis
by collateral as follows:
(I) Second lien for LTV ratios of up to 70
percent;
(II) First lien for LTV ratios of up to 80
percent;
(III) First lien with a LTV ratio in excess of 80
percent shall be granted only where the value in excess of 80 percent is
covered through acquisition of private mortgage, or equivalent type insurance
provided by an insurer acceptable to the credit union or insurance or
guarantees by or subject to advance commitment to purchase by, an agency of the
federal government or of a state or any of its political subdivisions, and in
no event shall the LTV ratio exceed 95 percent;
(ii) Loans shall not be granted without the personal
liability and guarantees of the principals (natural person members) except
where the borrower is a not-for-profit organization as defined by the Internal
Revenue Service Code (26 U.S.C. 501);
(iii) All loans to non-natural persons, except to
other credit unions, must be secured as required in Chapter 54-109.27 of the
North Carolina General Statutes.
(C) Loan Limits.
(i) Unless a greater amount is approved by the
Administrator based on the factors set out in Subpart (b)(2)(C)(ii) of this
Rule with the concurrence of the Regional Director of the National Credit Union
Administration, the aggregate amount of outstanding member business loans to
any one member or group of associated members shall not exceed 15 percent of
the credit union's reserves (less the Allowance for Loan Losses account), or
seventy-five thousand dollars ($75,000) whichever is higher. If any portion of
a member business loan is secured by shares in the credit union, or deposits in
another financial institution, or fully or partially insured or guaranteed by,
or subject to an advance commitment to purchase by, any agency of the federal
government or of a state or any of its political subdivisions, such portion
shall not be calculated in determining the 15 percent limit.
(ii) Exceptions. Credit unions seeking an exception
from the limits of Subpart (b)(2)(C)(i) or Subparagraph (b)(3) of this Rule
must present the Administrator of Credit Unions and the Regional Director of
the National Credit Union Administration with, at a minimum; the higher limit
sought; an explanation of the need by the members to raise the limit and
ability of the credit union to manage this activity; an analysis of the credit
union's prior experience making member business loans; and a copy of it
business lending policy. The analysis of credit union experience in making
member business loans shall document the history of loan losses, loan delinquency,
volume and cyclical or seasonal patterns, diversification, concentrations of
credit to one borrower or group of associated borrowers in excess of 15 percent
of reserves (less the Allowance of Loan Losses account), underwriting standards
and practices, types of loans grouped by purpose and collateral and
qualifications of personnel responsible for underwriting and administering
member business loans. The credit union must have written approval of the
Administrator of Credit Unions and the Regional Director of the National Credit
Union Administration to exceed the limitations contained in this Rule.
(iii) Maturity. Member business loans shall be
granted for periods consistent with the purpose, security, creditworthiness of
the borrower and sound lending policies.
(iv) Monitoring requirement. Credit unions with
member business loans in excess of 100 percent of reserves (less the Allowance
for Loan Losses account) shall submit the following information regarding
member business loans to the Administrator on a quarterly basis: the aggregate
total of loans outstanding; the amount of loans delinquent in excess of 30
days; the balance of the allowance for member business loan losses; the
aggregate total of all concentrations of credit to one borrower or group of
associated borrowers in excess of 15 percent of reserves (less the Allowance
for Loan Losses account); the total number and amount of all construction,
development or speculative loans; and any other information pertinent to the
safe and sound condition of the member business loan portfolio.
(D) Allowance for loan losses.
(i) The determination whether a member business
loan will be classified as substandard, doubtful, or loss, for purposes of the
valuation allowance for loan losses, will rely on factors not limited to the
delinquency of the loan. Nondelinquent loans may be classified depending on an
evaluation of factors, including but not limited to, the adequacy of analysis
and documentation.
(ii) Loans classified shall be reserved as follows:
(I) Substandard loans at ten percent of
outstanding amount unless other factors (e.g. history of such loans at the
Credit Union) indicate a greater or lesser amount is appropriate. Loans
classified as substandard loans are inadequately protected by the current sound
worth and paying capacity of the obligor or of the collateral pledged, if any.
Loans classified must have a well-defined weakness or weaknesses that
jeopardize the liquidation of the debt. They are characterized by the distinct
possibility that the Credit Union will sustain some loss if the deficiencies
are not corrected. Loss potential, while existing in the aggregate amount of
substandard loans, does not have to exist in individual loans classified
substandard.
(II) Doubtful loans at 50 percent of outstanding
amount. Loans classified as doubtful loans have all the weaknesses inherent in
ones classified substandard, with the added characteristic that the weaknesses
make collection or liquidation in full, on the basis of currently existing
facts, conditions, and values, highly questionable and improbable. The
possibility of loss is extremely high, but because of certain important and
reasonably specific pending factors which may work to the advantage and
strengthening of the loan its classification as an estimated loss is deferred
until its more exact status is determined. Pending factors include: proposed
merger, acquisition, or liquidation actions, capital injection, perfecting
liens on additional collateral, and refinancing plans.
(III) Loss loans at 100 percent of outstanding
amount. Loans classified as loss loans are considered uncollectible and of
such little value that their continuance as loans is not warranted. This
classification does not necessarily mean that the loan has absolutely no
recovery or salvage value, but rather it is not practical or desirable to defer
writing off this basically worthless asset even though partial recovery may
occur in the future.
(3) Construction and development lending.
Loans granted under this Section to finance the construction or development of
commercial or residential property shall be subject to the following additional
provisions:
(A) The aggregate of all such loans, excluding any
portion of a loan secured by shares in the credit union, or deposits in another
financial institution, or fully or partially insured or guaranteed by, or
subject to an advance commitment to purchase by, any agency of the Federal
Government or of a State or any of its political subdivisions, shall not exceed
15 percent of reserves (less the Allowance for Loan Losses account);
(B) The borrower shall have a minimum of 35 percent
equity interest in the project being financed;
(C) Funds for such projects shall be released following
on-site inspections by independent credit union personnel, qualified as in
Subpart (b)(2)(A)(vi) of this Rule in accordance with a draw schedule
preapproved by the credit union.
(4) Prohibitions.
(A) Senior management employees. A credit union may not
make member business loans to the following:
(i) Any member of the Board of Directors who is
compensated as such;
(ii) The credit union's chief executive officer
(typically this individual holds the title of President or Treasurer/Manager);
(iii) Any assistant chief executive officers (e.g.
Assistant President, Vice-President or Assistant Treasurer/Manager);
(iv) The chief financial officer (Comptroller);
(v) Any associated member or immediate family member
of the senior management employees listed in Subparagraphs (b)(4)(A)(i) thru
(iv) of this Rule.
(B) Equity kickers/joint ventures. A credit union shall
not grant a member business loan where a portion of the amount of income to be
received by the credit union in conjunction with such loan is tied to the
profit or sale of the business or commercial endeavor for which the loan is
made.
(5) Recordkeeping. All loans, lines of credit,
or letters of credit, the proceeds of which will be used for a commercial,
corporate, business, investment property or venture, or agriculture purpose,
shall be separately identified in the records of the credit union and reported
as such in financial and statistical reports required by the Administrator in
Subpart (b)(2)(C)(iv) of this Rule or the Regional Director of the National
Credit Union Administration.
History Note: Authority G.S. 54‑109.12; 54‑109.21(25);
54‑109.78; Federal Regulation NCUA 741.3;
Eff. January 1, 1988;
Amended Eff. August 1, 1998; March 2, 1992.
04 NCAC 06C .0408 SALE OF LOANS
(a) A credit union may sell its loans provided the Board
of Directors or designated Committee approves the sale and a written agreement
and a schedule of loans covered by the agreement are retained in the credit
union office.
(b) A credit union may not sell loans with recourse
without the permission of the Administrator of Credit Unions.
(c) A credit union may agree to service any obligation it
purchases or sells in whole or in part.
History Note: Authority G.S. 54‑109.12; 54‑109.21(9);
54‑109.21(25); 54‑109.22;
Eff. June 1, 1991.
04 NCAC 06C .0409 LOAN LIMITATIONS
(a) No loan or line of credit advance shall be made to an
individual member or immediate family member, as defined in Rule
.0407(b)(1)(D), if such a loan or line of credit advance would cause that
member along with that member's immediate family to be indebted to the credit
union in an aggregate amount exceeding 10 percent of the credit union's
unimpaired shares and surplus. For purposes of this Section "unimpaired
shares" shall mean shares without any assignments or pledges.
"Surplus" shall mean undivided earnings and reserves.
(b) In the case of member business loans, additional loan
limitations apply as set forth in Rule .0205(d) of this Subchapter and Rule
.0407(b)(2)(C)(i) of this Section.
History Note: Authority G.S. 54-109.67;
Eff. August 1, 1998.
SECTION .0500 ‑ IMPAIRMENT AND INSOLVENCY
04 NCAC 06C .0501 IMPAIRMENT
(a) An impairment of share capital shall be deemed to exist
if the Credit Union is unable to provide for Allowance for Loan Losses, or any
other reserve required by the Administrator.
(b) In determining the degree of capital impairment which
may exist, loans receivable shall be valued at book value less the amount of
reserves required. The total of the credit union's assets, valued according to
generally accepted accounting principles, including loans receivable, less
current and long‑term liabilities, shall be considered to be net assets.
If share deposit balances exceed net assets so determined, an impairment shall
be deemed to exist.
(c) Whenever it is determined that there exists an
impairment of capital, the Board of directors shall notify the Administrator.
If required by the Administrator, the Board of directors shall disclose to all
shareholders the impairment of capital and such other matters regarding the financial
condition of the Credit Union as deemed relevant by the Administrator.
History Note: Authority G.S. 54‑109.12;
Eff. February 1, 1976;
Readopted Eff. April 4, 1978;
Amended Eff. January 1, 1983.
04 NCAC 06C .0502 INSOLVENCY
Inability to meet demands of shareholders or creditors shall
constitute insolvency.
History Note: Authority G.S. 54‑109.12;
Eff. February 1, 1976;
Readopted Eff. April 4, 1978.
SECTION .0600 ‑ DIVIDENDS: DEPOSITS AND INTEREST REBATE
04 NCAC 06C .0601 DIVIDENDS
(a) The Board of directors of any credit union may declare
dividends as its bylaws provide.
(b) No dividend may be declared or paid unless the Credit
Union has satisfied the statutory reserve requirements and any other reserve
account that is required to be maintained in the discretion of the
Administrator.
History Note: Authority G.S. 54‑109.12; 54‑109.44(5);
Eff. February 1, 1976;
Readopted Eff. April 4, 1978;
Amended Eff. October 1, 1983.
04 NCAC 06C .0602 DEPOSITS
History Note: Authority G.S. 54‑109.12; 54‑109.44(6);
Eff. February 1, 1976;
Readopted Eff. April 4, 1978;
Repealed Eff. April 1, 1985.
04 NCAC 06C .0603 INTEREST REBATES
The Board of directors may authorize the payment of an
interest rebate on loan accounts upon such reasonable terms as are consistent
with the following provisions:
(1) The Board of directors shall authorize the method
of computation, payment and qualifications for participation in such rebate.
(2) Any rebate of interest shall be recorded as a
reduction of loan interest for the accounting period to which it applies.
History Note: Authority G.S. 54‑109.12; 54‑109.44(3);
Eff. February 1, 1976;
Readopted Eff. April 4, 1978.
SECTION .0700 ‑ ACCOUNTS
04 NCAC 06C .0701 GENERAL
04 NCAC 06C .0702 INDIVIDUAL ACCOUNTS
04 NCAC 06C .0703 JOINT ACCOUNT AGREEMENT
04 NCAC 06C .0704 REVOCABLE TRUST AGREEMENT
04 NCAC 06C .0705 CUSTODIAL ACCOUNT FOR MINORS
History Note: Authority G.S. 54‑109.12; 54‑109.44(6);
Eff. February 1, 1976;
Readopted Eff. April 4, 1978;
Repealed Eff. June 1, 1990.
04 NCAC 06C .0706 DORMANT ACCOUNTS
After an account is declared dormant and the provisions of
the law have been complied with, the Credit Union must transfer the dormant
account to accounts payable (N.C. Escheats Fund) and maintain detailed records
of such accounts until paid to the N.C. Escheats Fund according to the North
Carolina Escheats Law.
History Note: Authority G.S. 54‑109.12;
Eff. February 1, 1976;
Readopted Eff. April 4, 1978;
Amended Eff. October 1, 1982.
04 NCAC 06C .0707 STATEMENTS OF ACCOUNTS
Each credit union member shall be furnished, at least
semiannually, statements of accounts. Such statements shall clearly reflect
all transactions involving a member's accounts during the previous period. Any
member, pursuant to request, shall receive within a reasonable time, a
statement reflecting his current outstanding balances in his accounts. A
passbook shall suffice as a statement of accounts when not inconsistent with
state and federal law, and shall be updated when presented by holder.
History Note: Authority G.S. 54‑109.12;
Eff. February 1, 1976;
Readopted Eff. April 4, 1978.
SECTION .0800 - REPORTS TO ADMINISTRATOR
04 NCAC 06C .0801 FINANCIAL STATEMENTS AND OTHER
INFORMATION
Each credit union shall furnish a report of condition due on
the same date as designated by the federal insurer in January, April, July, and
October. The report shall be submitted to the Administrator on forms supplied by
the federal insurer for that purpose. The Administrator shall assess fines and
penalties for reports not timely filed, as set forth in G.S. 54-109.13 and G.S.
54-109.15(b).
History Note: Authority G.S. 54-109.12; 54-109.13; 54-109.15;
Eff. February 1, 1976;
Readopted Eff. April 4, 1978;
Amended Eff. July 1, 2013; December 1, 1979.
04 NCAC 06C .0802 ADDITIONAL REPORTS
The Administrator may require any additional reports of the
status of credit unions as he deems necessary. The additional reports are due
within fifteen (15) days of the date specified by the Administrator.
History Note: Authority G.S. 54‑109.12; 54‑109.15;
Eff. February 1, 1976;
Readopted April 4, 1978;
Amended Eff. December 1, 1979.
SECTION .0900 ‑ PENSION PLANS
04 NCAC 06C .0901 CREDIT UNION AS CUSTODIAN
A credit union is authorized to act as custodian, and may
receive reasonable compensation for so acting, under any written trust
instrument or custodial agreement created or organized in the United States and
forming part of a pension plan which qualifies or qualified for specific tax
treatment under Section 401(d) or 408 of the Internal Revenue Code, for its
members or groups or organizations of its members, provided the funds of such
plans are invested solely in share accounts of the Credit Union. All funds
held in a custodial capacity must be maintained in accordance with applicable
laws and rules and regulations as may be promulgated by the Secretary of Labor,
the Secretary of the Treasury, or any other authority exercising jurisdiction
over such custodial accounts. The Credit Union shall maintain individual
records for each participant which show in detail all transactions relating to
the funds of each participant or beneficiary.
History Note: Authority G.S. 54‑109.12; 54‑109.21(21);
Eff. February 1, 1976;
Readopted Eff. April 4, 1978.
04 NCAC 06C .0902 SUCCESSOR CUSTODIAN
The plan shall provide for the appointment of a successor
custodian by a person, committee, corporation or organization other than the
Credit Union or any person acting in his capacity as a director, employee or
agent of the Credit Union, upon notice from the Credit Union or the
Administrator that the Credit Union is unwilling or unable to continue to act
as custodian.
History Note: Authority G.S. 54‑109.12; 54‑109.21(21);
Eff. February 1, 1976;
Readopted Eff. April 4, 1978.
SECTION .1000 ‑ RETENTION OF RECORDS
04 NCAC 06C .1001 PERMANENT RECORDS
The following original records shall be retained
permanently:
(1) the minutes of meetings of members and board of
directors;
(2) audit reports;
(3) copies of the examination reports of the Credit
Union Division;
(4) charter, bylaws, and amendments;
(5) rulings and opinions from the Credit Union
Division.
History Note: Authority G.S. 54‑109.12; 54‑109.17;
Eff. February 1, 1976;
Readopted Eff. April 4, 1978.
04 NCAC 06C .1002 NONPERMANENT RECORDS
The following credit union records will be kept in either
the original, or on microfilm or microfiche, for the period indicated:
Ledgers:
General 15 years
Journal:
Cash (Journal of Original Entry) 15 years
Subsidiary
Ledgers (Shares, Loans & Deposits) 10 years
Registers:
(Check, Money Order, & Collateral) 10 years
Record
of Receipts: (Deposit Tickets, Collection Sheets,
Payroll
Deduction Records) 10 years
Withdrawal
Slips: (Cash Payments, Check Payments) 10 years
Cancelled
Checks, Money Orders, Vouchers 10 years
Check
Stubs Optional
Bank
Statements 10 years
Bank
Deposit Slips 10 years
Expense
Vouchers 5 years
Invoices
for Sale or Purchase of Securities 10 years
Reports:
Statistical Reports to Credit Union Division 10 years
Minutes
of the Credit Committee Meetings 10 years
Loan
Applications 2 years
after
loan
is
paid
Charged
Off Loans:
Note
and Application 10 years
Ledger
Sheet 10 years
Bond
Claims 10 years
Tax
Records 10 years
Court
Orders (after case closed) 10 years
Personnel
Records 10 years
Registered
Mail Records 10 years
Delinquent
Loan Schedules 4 years
EDP
Records:
Members'
Quarterly Statements 10 years
Transaction
Records 4 years
Month
End EDP Trial Balance 2 years
History Note: Authority G.S. 54‑109.12; 54‑109.17;
Eff. February 1, 1976;
Readopted Eff. April 4, 1978.
SECTION .1100 ‑ FORMS USED BY CREDIT UNION DIVISION
04 NCAC 06C .1101 ORGANIZATION CERTIFICATE
04 NCAC 06C .1102 BYLAWS
04 NCAC 06C .1103 OATH OF OFFICE FORM
04 NCAC 06C .1104 CHARTER
04 NCAC 06C .1105 FINANCIAL AND STATISTICAL REPORT
04 NCAC 06C .1106 TAX IDENTIFICATION FORM
History Note: Authority G.S. 54‑109.2(a),(b),(c),(d),(e);
54‑109.3; 54‑109.4; 54‑109.12;
54‑109.15;
Eff. February 1, 1976;
Readopted Eff. April 4, 1978;
Amended Eff. October 1, 1983; December 1, 1979;
Repealed Eff. April 1, 1985.
SECTION .1200 ‑ INVESTMENTS
04 NCAC 06C .1201 INVESTMENT ACTIVITIES
The North Carolina Credit Union Law, Article 14‑I,
specifies the investments which credit unions are authorized to make, which
includes loans to members and the purchase of securities guaranteed by the U.S.
government. Transactions such as agreements or options to buy or sell
government securities at a future date, which are merely speculative in nature,
are considered unsafe and unsound practices.
History Note: Authority G.S. 54‑109.12; 54‑109.82;
54‑109.92(a);
Eff. April 1, 1979.
04 NCAC 06C .1202 PERMISSIBLE TRANSACTIONS
Credit unions may:
(1) purchase or sell securities in accordance with G.S.
54-109.1 et seq. and when the purchase or sale is to be completed within five
business days after the agreement is made;
(2) buy or sell a future contract only if it is used as
a hedging contract incidental to the assembly of a pool of loans for sale in
the secondary market;
(3) enter into reverse repurchase agreements to meet
ordinary and unexpected liquidity needs such as temporary share withdrawal or
loan demands, but such agreements represent borrowing and are limited to the
borrowing limitations as specified in Rule .0308 of this Subchapter;
(4) enter into loan‑type repurchase agreements
only with their own members, other credit unions, or credit union
organizations;
(5) enter into investment‑type repurchase
agreements if the following elements of a sale of security are included:
(a) The Credit Union takes possession of the
securities or receives a custodial or safekeeping receipt from a bank or other
financial institution evidencing that the securities have been segregated from
the general assets of the vendor.
(b) The Credit Union is not required to deliver
the identical securities in the event of repurchase.
(c) The Credit Union assumes the risks of market
fluctuation in the value of the securities at purchase.
(d) The Credit Union receives the coupons or
stated interest rate dividend on the securities purchased for the time period
owned.
(6) deliver written application to the Administrator to
make investments and purchase insurance, mutual funds and fixed or variable
annuity products. The Administrator shall promptly grant or deny the
application within 60 calendar days following receipt with or without
conditions or provisions, upon consideration of the following factors:
(a) The investment or product is for the sole
purpose of funding employee benefit, retirement or deferred compensation plans
for employees of the Credit Union; and
(b) The investment or purchase is made
consistent with G.S. 54-109.12.
History Note: Authority G.S. 54‑109.12; 54‑109.82;
54‑109.92(a);
Eff. April 1, 1979;
Amended Eff. January 1, 2007.
04 NCAC 06C .1203 RESTRICTED TRANSACTIONS
Transactions such as options to buy or sell securities for
merely speculative purposes are unsafe and unsound practices. Credit unions
may not enter into standby commitments or cash forward agreements to purchase
or sell securities or reverse repurchasing agreements when used in a
speculative pyramiding manner with the intent of using the funds received to
purchase other securities.
History Note: Authority G.S. 54‑109.12; 54‑109.82;
54‑109.92(a);
Eff. April 1, 1979.
04 NCAC 06C .1204 FEDERAL FUNDS
A credit union may invest in federal funds through a bank
located in North Carolina and any bank insured by F.D.I.C.
History Note: Authority G.S. 54‑109.21(8); 54‑109.21(25);
Eff. May 15, 1981;
Amended Eff. October 1, 1983.
04 NCAC 06C .1205 Automatic liens upon all shares to
secure all debts
In addition to the lien on shares, deposits and accumulated
dividends of members as granted by G.S. 54-109.59, a credit union shall also
have an automatic lien upon all such shares, deposits and accumulated dividends
to secure the full amount of all debts owed to the credit union by its member.
This lien shall be equivalent to that lien upon members' shares granted to all
federally chartered credit unions by the National Credit Union Act and its
regulations.
History Note: Authority G.S. 54-109.21(25);
Eff. December 1, 2006.
SECTION .1300 ‑ RESERVES
04 NCAC 06C .1301 LIQUIDITY RESERVES
(a) Credit unions with assets of two million ($2,000,000)
or more and credit unions which offer share draft accounts shall maintain a
reserve of liquid assets (liquidity reserve) equal to a minimum of five percent
(5 percent) of the total dollar value amount of the Credit Union's liability
base.
(b) The liability base shall consist of shares, deposits,
and notes payable with a maturity of less than one year. Specifically pledged
shares or deposits or both are exempted up to the amount of the loans.
(c) The liquidity reserve shall consist of cash, shares and
deposits in the National Credit Union Administration Central Liquidity
Facility, and investments with a maturity of less than one year as authorized
under G.S. 54‑109.82(3)(4)(5)(9)(10) and (12) of the North Carolina
Credit Union laws. Government securities with a maturity of more than one year
may be included provided securities are carried at the lower of cost or market
and adjusted monthly on a consistent basis. Documentary evidence must be kept
on file supporting the adjustments for a period of 18 months.
(d) The liquidity reserve shall be determined monthly, not
later than the tenth day of each month, and shall be based on the Credit
Union's liability base as the last day of business of the preceding month.
(e) The liquidity reserve can only be used to satisfy
contractual line of credit agreements, share and deposit withdrawals. In the
event the liquidity reserve falls below the required amount the Credit Union
must immediately notify the Administrator of Credit Unions. The Credit Union
will have 60 days to replenish the liquidity reserve.
(f) In any special case, the Administrator shall have the
authority to require a liquidity reserve for credit unions with assets of less
than two million dollars ($2,000,000) if deemed necessary to meet the liquidity
needs of its creditors.
History Note: Authority G.S. 54‑109.12; 54‑109.86(c);
Eff. December 1, 1979;
Amended Eff. February 1, 1992; March 1, 1980.
04 NCAC 06C .1302 OTHER RESERVES
(a) Regular reserves shall be maintained as set forth in
G.S. 54‑109.86 of the North Carolina Credit Union laws.
(b) Special reserves for delinquent loans and reserves for
line of credit shall be maintained as required in .0401 and .0404(b) of these
Rules and Regulations.
History Note: Authority G.S. 54‑109.12; 54‑109.86(a)(b)(c);
Eff. December 1, 1979.
04 NCAC 06C .1303 CORPORATE CREDIT UNION RESERVES
(a) Definitions.
(1) A "corporate credit union" is a
credit union whose primary mission is to serve corporate (credit union)
accounts. The membership of a corporate credit union shall be institutional and
only credit unions can become members, unless the bylaws otherwise prescribe.
(2) Risk assets of a corporate credit union
shall be defined in G.S. 54‑109.88.
(b) Corporate Reserve.
(1) Immediately, before the payment of each
dividend but more often if the Board of directors so determine, the gross
earnings derived from activity with the Credit Union corporate members will be
determined. From this amount there shall be transferred to a reserve known as
the Corporate Reserve, 2 per centum of specified gross earnings until the
Corporate Reserve shall equal one and one half per centum of the corporates
total assets.
(2) Whenever the Reserves fall below one and
one half per centum of total assets it shall be replenished by regular
transfers of 2 per centum of specified gross earnings or by contributions in
such amounts as may be needed to maintain the Reserves at one and one half per
centum of total assets, whichever is less.
(3) The Administrator may increase or decrease
the reserve requirement set forth herein when such action is deemed necessary
or desirable.
(4) Charges may be made against the Reserves to
offset losses on loans, and investments.
History Note: Authority G.S. 54‑110.8;
Eff. December 1, 1979;
Amended Eff. October 1, 1983.
SECTION .1400 ‑ SIGNATURE GUARANTEE SERVICES
04 NCAC 06C .1401 SIGNATURE GUARANTEE
Provided the following conditions are satisfied, a credit
union may offer its members signature guarantee services in connection with the
transfer of securities, name change on a security certificate, replacement of
lost certificates, or erasures on a security certificate:
(1) The credit union obtains a bond endorsement
protecting it against any loss or liability resulting from granting an improper
signature guarantee.
(2) The credit union participates in a signature
guarantee program endorsed by the Securities Transfer Association.
(3) The credit union obtains the prior written approval
of the Administrator before commencing its signature guarantee program.
History Note: Authority G.S. 54‑109.12; 54‑109.21(25);
Eff. March 1, 1994.
