Chapter 1301:9-2 General Provisions

(A) “Service facility” as used in Chapter 1733. of the Revised Code includes a shared service facility and any additional credit union office, agency, or any branch place of business at which member accounts are established or money lent. A credit union may, subject to the approval of the superintendent, provide one or more service facilities for the transaction of any credit union business. A set of all accounting records of the service facilities shall be maintained at the home office of the credit union. A service facility may also include a shared service facility.

(B) The credit union shall file with the superintendent a request for approval to establish a new service facility in writing prior to establishing the service facility. The superintendent shall notify the credit union not more than fifteen days after the filing of the request for approval to establish the service facility whether it is denied, approved, or modified. If the superintendent does not respond within fifteen days after the filing of the request for approval to establish the service facility it shall be deemed approved; unless, the superintendent notifies the credit union in writing within fifteen days of the credit union’s request being filed that additional documentation is required. If additional documentation is required, the credit union shall have thirty days to file the additional documentation with the superintendent. If the service facility includes the purchase of real estate, the notice and approval required for the service facility shall be subject to the provisions of rule 1301:9-2-25 of the Administrative Code.

Replaces: 1301:9-2-01

Effective: 07/01/2006

R.C. 119.032 review dates: 11/15/2010

Promulgated Under: 119.03

Statutory Authority: 1733.41

Rule Amplifies: 1733.04

Prior Effective Dates: 8/3/93

(A) Voting by proxy or by mail ballot by members is permitted if a provision for the same is made in the credit union articles or regulations. Minimum standards for the form of ballot or proxy must be stipulated in the articles or regulations.

(B) The form of any proxy or mail ballot shall have the prior written approval of the superintendent.

(C) Irrespective of whether a vote is accomplished by actual vote, mail ballot, electronic ballot, by proxy, or other means approved by the superintendent, only qualified members may vote. Each qualified member is entitled to one vote on each matter properly submitted to the membership. The credit union may use any identifiable method or code unique to the member that verifies the member’s identification to vote.

(D) At a minimum, the form of the proxy shall provide for the date of execution, name of member, and any identifiable method or code unique to the member that verifies the member’s identification to vote; shall, in bold type, indicate whether the proxy is solicited on behalf of management; and shall clearly and impartially identify each matter or group of related matters intended to be acted upon, whether proposed by the management or by shareholders. No appointment of a proxy shall be valid after the expiration of eleven months from the time it is issued.

(E) A proxy may confer discretionary authority to vote with respect to any of the following matters:

(1) Matters of which the persons soliciting the proxy are unaware, provided that a specific statement to that effect is made in the proxy statement or form of proxy.

(2) Approval of the minutes of the prior meeting if such approval does not amount to ratification of the action taken at that meeting.

(3) Matters incidental to the conduct of the meeting.

Effective: 07/01/2006

R.C. 119.032 review dates: 03/17/2006 and 11/15/2010

Promulgated Under: 119.03

Statutory Authority: 1733.41

Rule Amplifies: 1733.13

Prior Effective Dates: 2/11/88

(A) Each credit union shall obtain and maintain a fidelity bond subject to approval of the superintendent. As a minimum, the fidelity bond must provide coverage for the fraud and dishonesty of all employees, directors, officers, and committee members. It shall be the responsibility of the board of directors to determine what coverage in excess of the minimum requirement is needed for its particular credit union.

(B) The superintendent may require additional coverage for any or all credit unions when, in his opinion, current coverage is insufficient.

(C) All bond claims or potential bond claims shall be reported to the superintendent within three days of the filing of the claim or notice of potential claim with the bonding company. The notice to the superintendent shall include a copy of the claim or notice of potential claim.

(D) All bonds shall include a provision, in a form approved by the superintendent, requiring written notification by the surety to the superintendent:

(1) When the bond of a credit union is terminated in its entirety and when bond coverage is terminated, by issuance of a written notice, on an employee, director, officer or committee member. The notification shall be sent to the superintendent and shall include a brief statement of cause for termination.

(2) When the bond coverage is changed by the credit union or surety. The notification shall include a copy of the change in coverage.

(E) The minimum amount of bond coverage required shall be computed based on the credit union’s total assets and shall be:

For Table — To obtain the appendix, table, image, etc. please call LSC’s ERF Helpdesk at 614-387-2078 or send an email to erfhelpdesk@lsc.state.oh.us.

(F) The superintendent must approve in writing any proposal made to reduce coverage at least twenty days in advance of the proposed effective date of the reduction.

(G) The maximum amount of deductibles allowed are based on the credit union’s total assets. The following table sets out the maximum deductibles:

For Table — To obtain the appendix, table, image, etc. please call LSC’s ERF Helpdesk at 614-387-2078 or send an email to erfhelpdesk@lsc.state.oh.us.

No deductible shall exceed ten percent of the credit union’s regular reserve unless the credit union creates a segregated contingency reserve for the amount of the excess. Valuation allowance accounts, such as allowance for loan losses, may not be considered part of the regular reserve when determining the maximum deductible. The superintendent must approve in writing any proposal made by the credit union to implement deductibles at least twenty days in advance of the proposed effective date of the deductibles.

R.C. 119.032 review dates: 03/17/2006 and 11/15/2010

Promulgated Under: 119.03

Statutory Authority: 1733.41

Rule Amplifies: 1733.23

Prior Effective Dates: 8/3/93

(A) The purpose of the allowance for loan losses is to represent the management’s estimate of loan losses in a credit union’s loan portfolio. The allowance for loan losses will be charged with the amount of uncollectible loans and loan-derived assets which have been authorized for charge-off by the board of directors: likewise, recoveries on loans previously charged-off will be credited to this account.

(B) A record shall be maintained of all loans charged-off. Said record shall contain the following information: account number, name, original date, amount of original loan, security, balance at the time of charge-off; 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) Loans should be written-off when they are deemed uncollectible. That practice should be applied consistently in all interim financial reporting periods.

(D) Interest should not be accrued on loans which are doubtful of collection. For this purpose, loans on which payments have not been received for six months or more, should be considered as doubtful of collection.

R.C. 119.032 review dates: 03/17/2006 and 11/15/2010

Promulgated Under: 119.03

Statutory Authority: 1733.41

Rule Amplifies: 1733.

Prior Effective Dates: 2/11/88

(A) Statement of accounts

Each credit union member shall be furnished, at least semiannually, a statement of accounts. Such statement shall clearly reflect all transactions involving a member’s account during the previous accounting period. Any member, pursuant to request, shall receive within a reasonable time a statement reflecting his current outstanding balances in his account.

(B) Display of financial statements

Each credit union shall display at all operating locations, copies of its current and previous month’s financial statements. Such statements shall be posted in both a conspicuous and available manner, so as to be accessible for inspection by all members.

R.C. 119.032 review dates: 03/17/2006 and 11/15/2010

Promulgated Under: 119.03

Statutory Authority: 1733.41

Rule Amplifies: 1733.32

Prior Effective Dates: 10/14/91

Each credit union shall preserve its corporate records either as originals or by some other method in accordance with generally accepted accounting principles and with the following schedule.

(A) Records to be permanently maintained:

(1) Articles of incorporation with any amendments thereto;

(2) Code of regulations and amendments thereto;

(3) Minutes of the meetings of the board of directors;

(4) Minutes of the annual meeting of shareholders;

(5) Monthly financial statements;

(6) Litigation record; and

(7) Repossession record.

(B) Records to be maintained for six years:

(1) Minutes of all committees of the board of directors;

(2) Minutes of the meetings of the credit committee and supervisory audit committee; and

(3) Subsidiary loan and share ledgers.

(C) Records to be maintained for two years:

(1) Disclosure records as required by federal truth-in-lending laws and regulations; and

(2) Proxies, cancelled checks, or other records as the superintendent may require.

(D) Every credit union shall, at a minimum, retain or preserve the following credit union records and supporting documents for the following periods of time:

(1) For one year:

(a) Broker’s confirmations, invoices, and statements relating to security transactions of the credit union with its customers, after the date of transaction;

(b) Corporate resolutions, partnership authorizations, and similar authorizations relating to closed accounts, loans that have been paid, or other completed transactions, after the date of closing, payment, or completion;

(c) Ledger records of safe deposit accounts, after date of last entry on the ledger;

(d) Night depository records, after their date;

(e) Records relating to closed Christmas club or similar limited duration special purpose accounts, after the date of closing;

(f) Records relating to customer collection accounts, after the date of the transaction;

(g) Stop payment orders, after their date;

(h) All records relating to closed consumer credit loans and discounts, after date of closing;

(i) Deposit tickets relating to demand deposit accounts, after their date.

(2) For six years:

(a) Deposit and withdrawal tickets relating to open or closed savings accounts, after their date;

(b) Individual ledger sheets or other records serving the same purpose that show a zero balance and that relate to demand, time, or savings deposit accounts, and safekeeping accounts, after the date of last entry, or, where the ledger sheets or other records indicate an open balance, after the date of transfer of the amount of the balance to another ledger sheet or record;

(c) Official checks, drafts, money orders, and other instruments for the payment of money issued by the credit union and that have been canceled, after the date of issue;

(d) Records relating to closed escrow accounts, after the date of closing;

(e) Records, other than corporate resolutions, partnership authorizations, and similar authorizations relating to closed loans and discounts other than consumer credit loans and discounts, after the date of closing;

(f) Safe deposit access tickets and correspondence or documents relating to access, after their date;

(g) Lease or contract records relating to closed safe deposit accounts, after the date of closing;

(h) Signature cards relating to closed demand, savings, or time accounts, closed safe deposit accounts, and closed safekeeping accounts, after the date of closing;

(i) Undelivered statements for demand deposit, negotiable order of withdrawal, savings, agency, brokerage, or other accounts for which customer statements are prepared, and canceled checks or other items, after the date of statement, provided the credit union has attempted to send the statements and checks or other items to its customer, has held them pursuant to the instructions of or an agreement with its customer, or has made them available to its customer;

(j) The superintendent of financial institutions may designate a retention period of either one year or six years for any record maintained by a credit union but not listed in paragraph (D) of this rule. Records that are not listed in paragraph (D) of this rule and for which the superintendent has not designated a retention period shall be retained or preserved for six years from the date of completion of the transaction to which the record relates or, if the last entry has been transferred to a new record showing the continuation of a transaction not yet completed, from the date of the last entry.

(E) The requirements of paragraphs (D) and (E) of this rule may be complied with by the preservation of records in the manner prescribed in section 1109.68 of the Revised Code.

(F) A credit union may dispose of any records that have been retained or preserved for the period set forth in paragraphs (D) and (E) of this rule.

(G) Where a record may be classified under either paragraph (D)(1) or (D)(2) of this rule, the record shall be retained or preserved for the period set forth in paragraph (D)(2) of this rule.

Replaces: 1301:9-2-06

Effective: 07/01/2006

R.C. 119.032 review dates: 11/15/2010

Promulgated Under: 119.03

Statutory Authority: 1733.41

Rule Amplifies: 1733.29

Prior Effective Dates: 9/1/79

(A) A credit union may, for any business purpose, retain a document, paper, or other instrument or record by use of a process to record, copy, photograph, or store a representation of the original document, paper, or other instrument or record, if all of the following apply:

(1) The process correctly and accurately copies or reproduces, or provides a means for correctly and accurately copying or reproducing, the original document, paper, other instrument, or record with regard to both its substance and appearance, except the copy or reproduction need not reflect the original paper or other medium, size, or color, unless the medium, size, or color is necessary to establish the authenticity of the original;

(2) The process does not permit the recording, copy, photographic image, or stored representation of the original document, paper, other instrument, or record to be altered or manipulated;

(3) Any medium the process uses to record, copy, photograph, or store a representation of the original document, paper, other instrument, or record is a durable medium for retaining and reproducing records.

(B) The superintendent shall identify and publish a list of processes that satisfy the conditions of paragraph (A) of this rule.

(C) Each credit union that uses a process authorized by this section to preserve any of its records shall also provide for safekeeping and for examining, viewing, or projecting the records preserved, and for producing reproductions of the original records.

Effective: 07/01/2006

R.C. 119.032 review dates: 11/15/2010

Promulgated Under: 119.03

Statutory Authority: 1733.41

Rule Amplifies: 1733.29

(A) For the purchase of notes of liquidating other credit unions, notes made by individual members of a credit union may be purchased by another credit union at a price agreed upon by the credit unions and subject to the prior written approval of the superintendent.

(B) Authorized investments and investment restrictions

(1) No credit union shall invest any of its funds in any securities or other property not specifically authorized in section 1733.30 of the Revised Code unless the superintendent has approved of the investment policy in writing. The credit union shall file with the superintendent such investment or investment policy of the credit union with the application for approval, a copy of a resolution of the board of directors of such credit union approving such investment policy. The superintendent shall notify the credit union not more than fifteen days after the filing of the request or policy whether it is denied, approved, or modified. If the superintendent does not respond within fifteen days after the filing of the request or policy, it shall be deemed approved; unless, the superintendent notifies the credit union in writing within fifteen days of the credit union’s request being filed that additional documentation is required. If additional documentation is required, the credit union shall have thirty days to file the additional documentation with the superintendent.

(2) In addition to investments authorized by section 1733.30 of the Revised Code, credit unions may invest in the following, subject to paragraph (B)(1) of this rule:

(a) Government security mutual funds and government security money market funds not to exceed in the aggregate ten per cent of its shares and undivided earnings;

(b) Shares, stocks, deposits in, or other obligations of any organization, corporation, or association providing services associated with the general purposes of the credit union or engaging in activities incidental to the operations of a credit union, provided that such investments in the aggregate do not exceed five per cent of the credit union’s shares and undivided earnings;

(c) The credit union shall file with the superintendent a copy of the credit union participation policy prior to engaging in participation loans; with other credit unions, credit union organizations, or other credit unions. The superintendent shall notify the credit union not more than fifteen days after the filing of the request or policy whether it is denied, approved, or modified. If the superintendent does not respond within fifteen days after the filing of the request or policy, it shall be deemed approved; unless, the superintendent notifies the credit union in writing within fifteen days of the credit union’s request being filed that additional documentation is required. If additional documentation is required, the credit union shall have thirty days to file the additional documentation with the superintendent.

(d) Shares, share certificates or share deposits of insured credit unions;

(e) Any securities or other properties not specifically described in section 1733.30 of the Revised Code and paragraph (B)(2) of this rule, to an extent not exceeding in the aggregate five per cent of shares and undivided earnings as of the thirty-first day of December of the previous year.

(3) No investment in any securities of the United States, any state or territory of the United States, or the District of Columbia, or any municipal corporation may be made if the issuer has not been in existence for at least ten years. Nor may any such aforementioned investment be made if the issuing government has, within the preceding ten-year period from which the investment is to be made, defaulted for more than ninety days in the payment of any part of either principal or interest of any debt contracted by it.

(4) In addition to investments authorized by section 1733.30 of the Revised Code, a corporate credit union may invest in the following, subject to paragraph (B)(1) of this rule:

(a) Deposits in, the sale of federal funds to, and debt obligations of foreign banks subject to the following requirements:

(i) The bank must have assets of at least U.S. twenty billion dollars and the investment must not be rated lower than A-1 (or equivalent for short-term (initial maturity of one year or less) by a rating agency recognized by the securities and exchange commission (SEC), and not lower than AA- (or equivalent) for long-term (initial maturity over one year) investments. The corporate credit union must divest itself of short-term investments, if material in amount, downgraded below A-2 (or equivalent) and long-term investments downgraded below A- (or equivalent) by the same rating agency used when the investment was purchased.

(ii) The investment shall be dominated in united states dollars;

(iii) The country in which the issuing bank is located shall be rated AAA (or equivalent) for political and economic stability by a SEC-recognized rating agency;

(iv) The aggregate investments in any single foreign bank shall not exceed five per cent of the corporate credit union’s net assets.

(b) Debt obligations of U.S. bank holding companies and other U.S. chartered corporations subject to the following requirements:

(i) The investments must not be rated lower than A-1 (or equivalent for short-term (initial maturity of one year or less) investment by a SEC-recognized rating agency and not lower than AA- (or equivalent) for long-term (initial maturity of over one year) investments. The corporate credit union must divest itself of short-term investments, if material in amount, downgraded below A-2 (or equivalent) and long-term investments downgraded below A- (or equivalent) by the same rating agency used when the investment was purchased.

(ii) The aggregate investments in the obligations of any single issuer shall not exceed five per cent of the corporate credit union’s net assets.

(iii) This authority does not apply to debt obligations that are convertible into the stock of the corporation or the holding company.

(c) Asset-backed securities subject to the following requirements:

(i) The security must not be rated lower than AAA (or equivalent) by a SEC-recognized rating agency. The corporate credit union must divest itself of asset-backed securities, if material in amount, downgraded below AA- (or equivalent) by the same rating agency used when the investment was purchased;

(ii) The investment in any single security or trust shall not exceed five per cent of the corporate credit union’s net assets; and

(iii) The security must have an average life at time of purchase of no more than five years.

(d) Federally issued collateralized mortgage obligations (CMOs) and real estate mortgage investment conduits (REMICs) and privately issued CMOs and REMICs as defined in section 3(a)(41) of the Securities and Exchange Act of 1934 subject to the following requirements:

(i) An investment in a fixed rate obligation must have an average life at time of purchase and on subsequent review dates not to exceed five years given an immediate increase of three hundred basis points in mortgage loan commitment rates assuming market interest rates and prepayment speeds at the time the tests are applied. Industry consensus prepayment models will be used when computing the average life. This limitation does not apply if principal payments of the investment are specifically matched to principal payments of the corresponding liability.

(ii) For an investment in a variable rate obligation with a cap, the lesser of the highest interest rate cap or the final interest rate cap during the average life at the time of purchase must be at least two hundred basis points above the rate of the corresponding liability that the investment is matched against. This limitation does not apply if principal payments of the investment are specifically matched to principal payments of the corresponding liability.

(iii) The corporate credit union must divest itself of any CMO or REMIC security, if material in amount, downgraded below AA- (or equivalent) by the same SEC-recognized rating agency used when the investment was purchased;

(iv) The investment in any single issuer shall not exceed five per cent of the corporate credit union’s net assets;

(e) Additional investments provided the corporate credit union has obtained prior written approval from the superintendent.

(f) The requirements of this rule to divest investments downgraded below the minimum acceptable ratings do not apply if the expected maturity of the downgraded investment is three months or less. The corporate credit union has ten business days to divest itself of any investment downgraded below the minimum credit ratings specified in this rule or to request in writing permission from the superintendent to retain the investment.

(g) The following definitions apply for purposes of this rule for corporate credit union investments:

(i) “Capital” means the total of regular or statutory reserves, undivided earnings, net income, and membership capital share deposit accounts.

(ii) “Material” means an amount that exceeds five per cent or more of the corporate credit union’s capital.

(iii) “Net assets” mean total assets minus central liquidity facility (CLF) stock subscriptions, CLF loans guaranteed by the national credit union share insurance fund, U.S. central credit union CLF certificates, and member reverse repurchase transactions.

(5) For any investments not expressly authorized in division (A) of section 1733.30 of the Revised Code, or paragraph (B)(2) of this rule, the superintendent may require a reserve to be established and maintained to be used as a reserve against losses resulting from such investments. The superintendent may, in his discretion, require an allowance for investment losses to be maintained based on the degree of risk and exposure of the investment.

(6) The provisions of this rule shall not affect the propriety of legality of an investment made by any credit union which was in accordance with the laws of this state at the time such investment was made, nor shall this rule affect the propriety or legality of any investment or investment policy authorized by the division of credit unions prior to December 31, 1975; except where a program exists which provides for the automatic reinvestment of income or capital gains in additional securities from which such income is derived and the reinvestment of which income would exceed the limits of this rule.

(7) In applying the provision of this rule, membership fees and annual assessments required by sections 1761.01 to 1761.18 of the Revised Code shall not be considered an investment for the purpose of this rule.

Effective: 07/01/2006

R.C. 119.032 review dates: 03/17/2006 and 11/15/2010

Promulgated Under: 119.03

Statutory Authority: 1733.41

Rule Amplifies: 1733.30

Prior Effective Dates: 8/3/93

(A) Each credit union shall establish and maintain reserves and allowances as required by section 1733.31 of the Revised Code, this rule, and administrative guidelines issued by the superintendent of credit unions.

(B) Pursuant to section 1733.31 of the Revised Code, the superintendent has established the following as additional nonrisk assets:

(1) Prepaid share insurance; other prepaid insurance;

(2) Other prepaid and deferred expenses;

(3) Accrued income on nonrisk assets;

(4) Deposits in corporated credit unions with maturities of two years or less.

(C) Pursuant to division (C) of section 1733.31 of the Revised Code, the superintendent has permitted the following to be included in the calculation of liquidity as additional assets: insured certificates of deposit with a remaining maturity of one year or less.

(D) Reserves for corporate credit unions.

(1) At the end of each dividend cycle and prior to paying a dividend (or, at the option of the corporate credit union, on a monthly basis if dividends are paid more frequently than monthly), sums shall be set aside in a corporate reserve in accordance with the following schedule:

(a) When the credit union’s corporate reserve and undivided earnings are less than two per cent of the assets at the end of the transfer period, the credit union shall set aside an amount equal to .0015 times the number of days in the transfer period divided by three hundred sixty-five.

(b) When the corporate reserve and undivided earnings are equal to or greater than two per cent of the assets but the corporate reserve is less than four per cent of the assets, the credit union shall set aside an amount equal to .0010 times the credit union’s average daily assets for the transfer period times the number of days in the transfer period divided by three hundred sixty-five.

(2) Charges may be made to the corporate reserve for loan losses and for investment losses accrued by factors other than trading losses or market fluctuations. No other charges shall be made except as may be authorized in writing by the superintendent of credit unions. Charges shall be made in accordance with full and fair disclosure requirements as described in the credit union accounting manual, state of Ohio.

(E) Refinance or extension agreements.

For purposes of this paragraph, the following principles shall control:

(1) In the determination of the amount of delinquency of a loan and the proper amount to be added to the allowance for loan losses account, the terms “refinance” and “extension” shall be treated as if they are one and the same.

(a) Credit unions are authorized to grant to members in certain cases an extension of the time in which a loan must be paid off; this is accomplished by an agreement between the credit union and the member borrower.

(b) In making such renegotiated arrangements, the credit union must comply with all provisions of the credit union’s loan policy.

(i) In either case, the loan so negotiated shall be deemed to be of current status only if three consecutive payments are made thereon, pursuant to the new loan terms.

(ii) Should the borrower make three consecutive payments and then default for any reason, the resultant delinquency and allowance for loan losses shall be determined based upon the original terms of the loan and not upon the renegotiated loans.

(2) The new note or extension agreement shall be attached to a copy of the original note in either example given above.

(3) Only one refinance or extension agreement shall be permitted for the purpose of determining delinquency and allowance for loan losses.

(F) Dividends

The board of directors may approve payment of dividends on shares from current earnings only. No dividend may be declared or paid unless the credit union has satisfied the reserve requirements of section 1733.31 of the Revised Code. However, the superintendent may permit the payment of dividends subject to a plan of corrective action.

(G) Liquidity fund

Liquidity represents the capacity of a credit union to most efficiently accommodate decreases in shares and other liabilities, as well as funding increases in loan demand. Liquidity could be adequate or inadequate for different credit unions or for the same credit union at different times. Particular factors and conditions needed in order to determine the proper funding to satisfy liquidity needs are thoroughly discussed in the credit union accounting manual.

Pursuant to division (C) of section 1733.31 of the Revised Code, all credit unions must maintain, as a minimum, a liquidity fund equal to five per cent of its shares. Nothing herein shall prevent the superintendent from requiring a particular credit union or all credit unions to establish a liquidity fund greater than or less than five per cent of total shares unless the superintendent establishes a greater or less amount for particular credit unions or all credit unions. Nothing herein shall preclude a credit union from requesting that the superintendent establish a less restrictive liquidity fund less than five per cent of total shares.

(H) Repossessions.

After the sale of repossessed security, the allowance for loan losses is to be funded in an amount equal to the deficiency balance until the loan is charged-off. A permanent record shall be maintained of all security that is repossessed.

Effective: 07/01/2006

R.C. 119.032 review dates: 03/17/2006 and 11/15/2010

Promulgated Under: 119.03

Statutory Authority: 1733.41

Rule Amplifies: 1733.31

Prior Effective Dates: 2/11/88

(A) As specified in division (G) of section 1733.32 of the Revised Code, the superintendent may charge a fee not to exceed the following:

(1) Fifty cents per page for the reproduction of articles of incorporation, code of regulations and amendments thereto, and

(2) Fifty cents per page for the reproduction of examination reports and other documents.

(B) The documents necessary to organize a credit union shall include the articles of incorporation, the code of regulations, and the appointment of statutory agent. A credit union shall submit these documents in duplicate with to the superintendent together with a check made payable to the secretary of state in the amount required by the secretary to file the articles of a credit union and a check made payable to the division of credit unions in the amount of fifty dollars.

R.C. 119.032 review dates: 03/17/2006 and 11/15/2010

Promulgated Under: 119.03

Statutory Authority: 1733.41

Rule Amplifies: 1733.31, 1733.07

Prior Effective Dates: 8/3/93

(A) A condition of impairment shall be deemed to exist if the difference between total assets minus current and long-term liabilities (not including shares) is less than the total amount of all share accounts.

(B) Whenever it is determined that there exists an impairment, the board of directors shall notify the superintendent of such conditions. If required by the superintendent, the board of directors shall disclose to all shareholders the fact of the impairment.

R.C. 119.032 review dates: 03/17/2006 and 11/15/2010

Promulgated Under: 119.03

Statutory Authority: 1733.41

Rule Amplifies: 1733.

Prior Effective Dates: 2/11/88

(A) Every credit union must maintain adequate, complete and correct accounts and shall observe generally accepted accounting principles as the superintendent prescribes.

(B) A credit union must notify the superintendent of credit unions on a form prescribed by the superintendent, within ten days after the retention of an outside auditor, of the name, address, and telephone number of such auditor, whether or not the retainer is pursuant to section 1733.19 of the Revised Code. Any changes in this information shall be reported to the superintendent within ten days of the change, on a form prescribed by the superintendent.

(C) A credit union may dismiss, release, or otherwise terminate its relationship with an outside auditor. All facts surrounding such termination and the subsequent investigation of the circumstances shall be submitted to the superintendent, in accordance with the provisions of division (B) of section 1733.19 of the Revised Code.

(D) The superintendent of credit unions may require at any time that a credit union have its accounts audited in accordance with generally accepted auditing standards by an outside auditor, at the expense of the credit union. Before commencement of the independent audit, and within fifteen days of written notice from the superintendent that an audit of the books and records will be required, to be conducted by an independent qualified public accountant, the credit union shall submit in writing, the name and address of a qualified public accountant of its choosing, for approval by the superintendent.

(E) The credit union shall file with the superintendent a copy of the report of audit no later than fifteen days following the receipt thereof. For the purpose of this filing requirement, the term “report of audit” includes in addition to the audit report itself and the accountant’s certificate, any special supplemental report, letter or reports to management, or any other documents which are related to the audit or the report thereof. Notwithstanding the foregoing, in no event shall the audit report itself and the accountant’s certificate be filed with the credit union later than ninety days after the end of the reporting period for which the audit is conducted unless the credit union has received a prior written extension of the time for filing.

(F) Pursuant to section 1733.322 of the Revised Code, the credit union examined by an outside auditor shall waive the confidentiality with regard to discussion of the outside audit with the superintendent. The form of the waiver must contain the following:

(1) A statement to the effect that the waiver of confidentiality has been duly noted and recorded in the minutes of the credit union and the date of the board of directors’ meeting on which the fact was recorded.

(2) A certification of the above statement of fact and a restatement of the intent to waive the confidentiality which is usually present between the auditor and client in order to allow discussion of the case between the auditor and the superintendent of credit unions. This waiver must be signed by the president and secretary of the credit union.

R.C. 119.032 review dates: 03/17/2006 and 11/15/2010

Promulgated Under: 119.03

Statutory Authority: 1733.41

Rule Amplifies: 1733.

Prior Effective Dates: 2/11/88

This rule is issued by the superintendent of credit unions pursuant to division (C) of section 9.02 of the Revised Code. It establishes the rates and conditions for reimbursement of actual and necessary costs directly incurred by credit unions in assembling or providing customer financial records to any party.

(A) Except as proved in this rule or in section 9.02 of the Revised Code, any party, including a governmental authority, that requires or requests a credit union to assemble or provide a customer’s financial records shall pay the credit union for all actual and necessary costs directly incurred in searching for, reproducing, or transporting these records according to the following schedule:

(1) Search and processing costs. Reimbursement of reasonable search and processing costs shall be the total amount of personnel direct time incurred in locating and retrieving, reproducing, packaging, and preparing financial records for shipment. The rate for search and processing costs shall not exceed twenty-five dollars per hour per person, computed on the basis of six dollars and twenty-five cents per quarter hour or fraction thereof, and is limited to the total amount of personnel time spent in locating and retrieving documents or information or reproducing or packaging and preparing documents for shipment where required or requested by a party. Specific salaries of such persons shall not be included in search costs. In addition, search and processing costs do not include salaries, fees, or similar costs for analysis of material or for managerial or legal advice, expertise, research, or time spent for any of these activities. If itemized separately, search and processing costs may include the actual cost of extracting information stored by computer in the format in which it is normally produced, based on computer time and necessary supplies; however, personnel time for computer search may be paid for only at the rate specified in this paragraph.

(2) Reproduction costs. Reimbursement for reasonable reproduction costs shall be for costs incurred in making copies of documents required or requested. The rate for reproduction costs for making copies of required or requested documents shall not exceed two dollars for each page, including copies produced by reader/printer reproduction processes. Photographs, films, and other materials are reimbursed at actual cost.

(3) Transportation costs. Reimbursement for transportation costs shall be for necessary costs, directly incurred, to transport personnel to locate and retrieve the information required or requested; and necessary costs, directly incurred solely by the need to convey the required or requested material to the place of examination.

(B) A credit union is not entitled to reimbursement under this rule for costs incurred in assembling or providing the following records or information:

(1) Security interest, bankruptcy claims, debt collection. Any financial records provided as an incident to perfecting a security interest, proving a claim in bankruptcy, or otherwise collecting on a debt owing to the credit union.

(2) Nonidentifiable information. Financial records that are not identified with or identifiable as being derived from the financial records of a particular customer.

(C) Payment shall be limited to material required or requested. Payment shall be made only for costs that are directly incurred, actual, and necessary. No payment shall be made until the credit union satisfactorily complies with the request or requirement, except that in the case where the request or requirement is withdrawn or revoked, the credit union shall be reimbursed for the actual and necessary costs directly incurred in assembling financial records required or requested to be produced prior to the time the party notifies the credit union that the request or requirement is withdrawn or revoked. No payment shall be made unless the credit union submits an itemized bill or invoice showing specific details concerning search and processing, reproduction, and transportation costs.

(D) For the purposes of this rule, the term “costs directly incurred” means costs incurred solely and necessarily as a consequence of searching for, reproducing, or transporting books, papers, records, or other data, in order to comply with a request or requirement to produce a customer’s financial records. The term does not include any allocation of fixed costs (overhead, equipment, depreciation, etc.). If a credit union has financial records that are stored at an independent storage facility that charges a fee to search for, reproduce, or transport particular records requested, these costs are considered to be directly incurred by the credit union.

(E) Where terms used in the rule are defined in section 9.02 of the Revised Code, they shall have the meaning set forth in that section.

(F) A credit union shall receive prior written approval from the superintendent to charge a rate or cost above the maximum amount as stated herein.

Effective: 07/01/2006

R.C. 119.032 review dates: 03/17/2006 and 11/15/2010

Rule amplifies: RC 9.02

(A) No director or committee member shall receive compensation for his services as such, except for reimbursement of expenses incurred in connection with the business of the credit union, if authorized by the board of directors.

(B) As a fiduciary the director:

(1) Shall act for the benefit of the credit union;

(2) Has a duty not to profit at the expense of the credit union;

(3) Has a duty not to compete without the consent of the credit union;

(4) Has a duty to make full disclosure to, and to operate fairly when engaged in transactions with, the credit union;

(5) Must avoid all but arms-length transactions.

(C) All transactions, other than expenses reimbursement and employee wages, between the credit union and the members of the board of directors, committee members, employees, immediate family thereof or businesses controlled thereby must be disclosed annually on a form prescribed by the superintendent. This form is a required report and shall remain confidential.

(D) The board of directors shall adopt a travel and expense reimbursement policy and procedures and forward a copy to the superintendent for review. The policy and procedures shall, as a minimum, include:

(1) Board resolution adopting policy and procedures;

(2) Procedure for monitoring compliance with the policy and IRS guidelines, which shall include review by the credit union’s accountant or audit committee;

(3) Audit trail with hard copy available for review by examiners;

(4) Criteria for reimbursement

(5) If the policy is abused, reimbursement to the credit union by the individual; and

(6) Safety and soundness considerations.

(E) For purposes of this rule, if authorized by the board of directors and pursuant to IRS guidelines, reimbursement for guest expenses is not considered compensation.

(F) A credit union may provide, at its expense, a director or committee member reasonable health, accident, and related types of personal insurance protection.

Effective: 07/01/2006

R.C. 119.032 review dates: 03/17/2006 and 11/15/2010

Promulgated Under: 119.03

Statutory Authority: 1733.41

Rule Amplifies: 1733.22

Prior Effective Dates: 8/3/93

(A) The term “depreciation” means the systematic allocation of the cost of an asset to expense over the accounting periods making up the assets’ useful life according to “Generally Accepted Accounting Principles (GAPP).” In keeping with (GAAP) and to assure consistency and uniformity, the straight-line method of depreciation used for the following assets generally held by credit unions shall not exceed the following:

(1) Office furniture – ten years;

(2) Office equipment – seven years;

(3) Buildings;

(a) Concrete and steel – thirty to fifty-five years;

(b) Masonry – twenty-five to forty-five years;

(c) Wood frame – twenty to forty years;

(d) Portable units – fifteen to thirty years;

(4) Automobiles – five years;

(5) Computer software – five years;

(6) Leasehold improvements shall;

(a) Amortize over the life of the lease or the usefulness of improvements, whichever has the shortest life.

(b) For purposes of this paragraph, life of lease may be for a fixed time period or for a time period that may be extended at the option of the credit union.

(c) Improvements to space provided free of charge by the sponsor, amortize over ten years or over estimated length of occupancy, whichever is less.

(d) Organization expenses shall amortize over five years.

(B) This rule applies to assets placed into service after the effective date of this rule.

Effective: 07/01/2006

R.C. 119.032 review dates: 03/17/2006 and 11/15/2010

Promulgated Under: 119.03

Statutory Authority: 1733.41

Rule Amplifies: 1733.02, 1733.03, 1733.04

Prior Effective Dates: 8/3/93

(A) Any new charter, charter amendment, conversion, merger, or field of membership expansion pursuant to division (D)(1) of section 1733.05 of the Revised Code, the field of membership of a credit union shall be subject to the approval of the superintendent.

(B) The field of membership may include the families of members; that is, persons related by blood, adoption or marriage to or living in the same household with a person having the common bond, as well as surviving spouses of persons who have left the field of membership in good standing. When the individual member of a credit union leaves the field of membership, all persons who are members by virtue of his or her membership may continue as members.

(C) Pursuant to division (D)(1) of section 1733.05 of the Revised Code, the superintendent has established the following as field of membership expansions:

(1) Division (D)(1) of section 1733.05 of the Revised Code describes the addition of a group to the field of membership of a credit union if the articles of incorporation and, if appropriate, the code of regulations of such credit union authorize such field of membership expansion, and the superintendent approves in accordance with the rule;

(2) A clause in the field of membership provision of a credit union charter, under division (D)(1) of section 1733.05 of the Revised Code, creates a procedure which permits the following: a field of membership expansion without charter amendment facilitates inclusion of more than one occupational, associational or community group in the field of membership of that credit union on the condition that each group has its own common bond, and the superintendent approves in accordance with the rule.

(D) In its application to expand its field of membership, the applicant credit union shall submit to the superintendent the following:

(1) The articles of incorporation and, if appropriate, the code of regulations of the applicant credit union which authorize expansion of the field of membership to include such a group;

(2) The group shall be defined and described including, the number of persons in the group, the potential membership size of the group, the dispersion of the group, and the general characteristics of the sponsor of the group, if any;

(3) Evidence that the group is within the operational area of the home office or a service facility of the applicant credit union or the applicant credit union provides evidence of one or more of the following:

(a) The associational or occupational group expresses its desire to obtain the credit union’s services;

(b) The credit union has or will have the means or a process for providing credit union services to the group;

(c) The majority of the group has the capability to regularly access the credit union’s services;

(d) The credit union meets any additional conditions or considerations the superintendent may deem reasonable for approval of the credit union’s application.

(4) The associational or occupational group, through its authorized representative, has requested service from the applicant credit union.

(5) The applicant credit union demonstrates it is financially and organizationally sound to provide credit union service to the group.

(6) Certification of the applicant credit union vote to approve extension of membership services to the group.

(E) For a multiple group field of membership approval, a credit union field of membership may include associational, occupational, and community groups provided each group has its own common bond.

(1) The superintendent shall require for multiple group field of membership approval of occupational, associational, and community groups the following:

(a) Evidence that each affected associational or occupational group has requested service from the applicant credit union;

(b) The applicant credit union is financially and organizationally sound to provide credit union service to each group;

(c) The application is economically feasible and advisable;

(d) Each group shall be within the operational area of the home office or a service facility of the applicant credit union or the conditions of paragraphs (D)(3) and (D)(4) to (D)(6) of this rule have been satisfied.

(i) “Operational area” means an area accessible by the home office, a service facility, a shared branch, shared service facility, or any other means through which the credit union provides services that can reasonably be served by the applicant credit union as determined by the superintendent.

(ii) “Service facility” means any place of business of a state-chartered credit union in which member accounts are established, where payment on shares or share accounts is accepted or money is lent.

(2) A community group shall be limited to a well-defined neighborhood, community or rural district as determined by the superintendent. A multiple group field of membership may include groups having a common bond of occupation, association, and community. Any individual or group, as the case may be, that is within the defined neighborhood, community or rural district is eligible for membership in the community group, subject to the approval of the superintendent. A credit union may have within its field of membership more than one well-defined neighborhood, community or rural district.

(3) Groups may be found to exist within a well-defined neighborhood, community or rural district, for purposes of this rule, on the basis of the geographic location of the person’s residence, property, worship, school attendance, or employment. “Well-defined” means the proposed area has specific geographical boundaries, including a political subdivision of the state, or a clearly definable neighborhood.

(F) Subject to the applicable requirements and approval of the superintendent as identified in paragraphs (D) and (E) of this rule, for service to underserved communities:

(1) A field of membership may include, without regard to location, underserved communities, which are local communities, neighborhoods, or rural districts which are investment areas as defined in section 103(16) of the Community Development Banking and Financial Institutions Act of 1994. More than one credit union may serve the same underserved area.

(2) Once an underserved community has been added to the credit union’s field of membership, the credit union must establish and maintain an office or service facility in the community. A “service facility” is defined as a place where shares are accepted for members’ accounts, loan applications are accepted and loans are disbursed. This definition includes a credit union owned branch, a shared branch, an office or location operated on a regularly scheduled weekly basis, and a credit union owned electronic facility that meets these requirements, but not including an automated teller machine.

(3) The credit union adding the underserved community shall document that the community meets the definition of an underserved community in Ohio. The charter type of a credit union adding such a community group may change and the credit union may be able to receive the benefits afforded to low-income designated credit unions, such as:

(a) Expanded use of non-member deposits.

(b) Access to the community development revolving loan program for credit unions.

(4) The credit union must submit a business plan specifying how it will serve the underserved community. The business plan at a minimum must:

(a) Identify the credit, deposit, and other financial service needs of the community.

(b) Detail how the credit union plans to serve those needs.

(5) The credit union will be expected to regularly review the business plan to determine if the community is being adequately served. The superintendent may:

(a) Require periodic service status reports from a credit union about the underserved community to ensure that the needs of the area are being met.

(b) Require such reports before the superintendent permits a credit union to add an additional underserved community.

(G) “Association member” of a credit union is defined pursuant to division (E) of section 1733.01 of the Revised Code.

Replaces: 1301:9-2-16

Effective: 07/01/2006

R.C. 119.032 review dates: 11/15/2010

Promulgated Under: 119.03

Statutory Authority: 1733.41

Rule Amplifies: 1733.05

Prior Effective Dates: 12/31/99

(A) A credit union desiring to expand its field of membership, whether within or outside this state, shall submit an application to the superintendent of financial institutions. No credit union shall expand its field of membership without the written approval of the superintendent.

(1) In the case where the credit union charter does not authorize inclusion of multiple groups within the field of membership, an application shall be deemed filed only if accompanied by an amendment of the credit union articles of incorporation authorizing expansion of the field of membership and the required filing fee which shall be in the form of a check made payable to the secretary of state.

(2) Upon receipt of an application to expand a credit union’s field of membership to an associational, occupational, or community group, the superintendent shall notify the credit union not more than fifteen days after the filing of the application to expand a credit union’s field of membership to an associational, occupational, community group whether the application is denied, approved or modified. If the superintendent does not respond within fifteen days after the filing of the application it shall be deemed approved; unless, the superintendent notifies the credit union in writing within fifteen days of the credit union’s request being filed that additional documentation is required. If additional documentation is required, the credit union shall have thirty days to file the additional documentation with the superintendent.

(3) If the superintendent denies an application to expand a field of membership, the superintendent shall notify the credit union of the basis or reason for the order and the credit union may request a hearing in accordance with the provisions of sections 119.01 to 119.13 of the Revised Code.

(B) In considering whether to approve an application for expansion of a credit union’s field of membership, the superintendent shall consider the following:

(1) The convenience and needs of the members of the applicant credit union will be served by the proposed expansion;

(2) The population and economic characteristics of the potential membership pool afford reasonable promise for adequate support for the proposed expansion.;

(3) The policies, condition and operation of the applicant credit union afford no basis for supervisory objection;

(4) The proposed expansion shall occur within twelve months of approval unless the superintendent allows otherwise; and

(5) Any other pertinent factors relating to the field of membership expansion.

Effective: 07/01/2006

R.C. 119.032 review dates: 03/17/2006 and 11/15/2010

Promulgated Under: 119.03

Statutory Authority: 1733.41

Rule Amplifies: 1733.05

Prior Effective Dates: 12/31/99

(A) Definitions

(1) The term “group” for the purposes of this rule shall be as described in division (D)(1) of section 1733.05 of the Revised Code, except that for the purpose of a vote to disaffiliate group membership, shall not include a member who acquires his “common bond” for member status through familial relationship.

(2) “Original credit union” for the purposes of this rule shall mean the credit union from which the group intends to disaffiliate.

(3) “Applicant credit union” for the purposes of this rule shall mean the credit union with which the group intends to affiliate.

(B) Members of a group may disaffiliate from the field of membership of a credit union by a majority vote of the members of the group, subject to approval of the plan of disaffiliation by the superintendent.

(C) The group shall notify the superintendent in writing of its intent to disaffiliate before the solicitation of approval of the disaffiliation plan begins.

(D) The vote to disaffiliate shall be in person, by proxy or by mail ballot, and each member of the group, except as provided in paragraph (A)(1) of this rule, is entitled to cast one vote on the issue, irrespective of the number of shares he owns.

(1) A copy of the disaffiliation proposal shall be distributed to all of the members of the group on or before the date on which solicitation begins for approval of the disaffiliation.

(2) Such disaffiliation proposal shall consist of the key points of the written plan of disaffiliation to be submitted to the superintendent for approval.

(3) The written plan of disaffiliation shall include, but not be limited to, the following:

(a) The services, the share accounts and loans and interest rates thereof, the size and composition of the field of membership, and the date of incorporation of the original credit union and the applicant credit union, if any, and in the instance of a group intending to form its own credit union, the articles of incorporation and the regulations, pursuant to section 1733.07 of the Revised Code, of the proposed credit union.

(b) The manner of disaffiliation:

(i) Whether group members intend to disaffiliate share accounts only or share accounts and loans.

(ii) If group members intend to disaffiliate loans, whether the loans are to be sold to or refinanced by the applicant credit union.

(E) Submission of disaffiliation proposal to original credit union.

(1) The group shall present the disaffiliation proposal to the board of directors of the original credit union in order that such credit union be given the opportunity to voluntarily release the group.

(2) The original credit union shall respond to the disaffiliation proposal within thirty days of submission thereof.

(F) The majority vote of the group to approve disaffiliation from the original credit union shall be certified and submitted to the superintendent in conjunction with the written plan of disaffiliation, along with such financial information as the superintendent may require.

(G) Upon submission of the plan of disaffiliation, the superintendent shall contact the applicant credit union to verify orally and in writing such credit union’s willingness and ability to serve the group.

(H) The superintendent may approve the plan of disaffiliation provided the plan has due regard for the division of share accounts and loans of the group seeking to disaffiliate, and such other factors as determined by the superintendent. No undivided earnings, reserves or other forms of equity shall be divided between the original credit union and the applicant credit union or transferred from the original credit union to the applicant credit union.

(I) Upon approval of the plan of disaffiliation, the member of the group who votes for disaffiliation shall transfer his membership account to the applicant credit union.

(J) Each member of the group seeking to disaffiliate shall be responsible for the identification and the maintenance of his or her share accounts and loans with either the original or applicant credit union, as the case may be. Each individual and association member of the group shall decide which share accounts, in addition to the membership account, shall be included in the disaffiliation. The plan of disaffiliation shall clearly set forth whether the loans of the group seeking to disaffiliate shall be purchased or refinanced by the applicant credit union or remain with the original credit union.

R.C. 119.032 review dates: 03/17/2006 and 11/15/2010

Promulgated Under: 119.03

Statutory Authority: 1733.41

Rule Amplifies: 1733.05

Prior Effective Dates: 2/11/88

The incorporators shall submit to the superintendent along with the articles and the regulations of the proposed credit union:

Commitment of share insurance as required by section 1733.041 of the Revised Code;

Evidence of a common bond and the number of potential members in the field of membership, as well as their stability of employment or association in the common bond group and the economic characteristics thereof;

Evidence of availability of credit union services to potential members and geographic dispersion of members; and

Two years forecast of financial performance.

R.C. 119.032 review dates: 03/17/2006 and 11/15/2010

Promulgated Under: 119.03

Statutory Authority: 1733.41

Rule Amplifies: 1733.

Prior Effective Dates: 2/11/88

(A) No credit union shall loan, directly or indirectly, to any member or other credit union more than ten per cent of the lending institution’s shares and undivided earnings. Fully share secured loans are exempt from the ten per cent limitation.

(B) Official family members, including directors, officers, employees and members of the credit committee or supervisory audit committee, shall not act as comakers, endorsers, guarantors, or sureties, for any loan or advance made by the credit union, except a loan made to a member of such official family member’s immediate family. As used in this rule: “immediate family” includes a spouse of the member, or the member’s child, parent, grandchild, grandparent, brother or sister, or the spouse of any such individual.

(C) In the discretion of the superintendent, all corporate loans shall be reported quarterly to the superintendent by the borrowing credit union. This report shall contain the following information: name of borrowing credit union, name of lender, date of loan, repayment schedule, amount of loan and the aggregate total of notes payable to each source.

R.C. 119.032 review dates: 03/17/2006 and 11/15/2010

Promulgated Under: 119.03

Statutory Authority: 1733.41

Rule Amplifies: 1733.25

Prior Effective Dates: 8/3/93

(A) First mortgage purchase money real estate loans may be made only on a one to four family dwelling.

(B) All appraisals required by rule for loans greater than two-hundred fifty thousand dollars unless otherwise determined by the superintendent shall be made by a certified or licensed independent appraiser who has satisfied the requirements of Chapter 4763. of the Revised Code and applicable rules or other comparable statute.

(C) A credit union may make first mortgage real estate loans, provided it has, as a minimum, an approved and functioning asset/liability management committee; and policy and procedures, based on an asset liability management program which may include secondary market standards. However, nothing in this regulation shall preclude a credit union from making non-conforming loans pursuant to the credit union’s loan and risk management policies.

(D) Any credit union may make first mortgage real estate loans secured by liens not exceeding:

(1) The lesser amount of eighty per cent of the appraised value or eighty per cent of the sale price, if such real estate is in the process of being improved by a one to four family dwelling; and

(2) The lesser amount of ninety-five per cent of the appraised value or ninety-five per cent of the sale price, if such real estate is improved by a one to four family dwelling.

(E) A credit union may make first mortgage real estate loans secured by liens exceeding ninety-five per cent of the lesser amount of the appraised value or sale price, provided that the credit union files with the superintendent a copy of the loan policy and information regarding the placement of proper private mortgage insurance and the excess amount. The superintendent shall notify the credit union not more than fifteen days after the filing of the policy whether it is denied, approved, or modified. If the superintendent does not respond within fifteen days after the filing of the policy, it shall be deemed approved; unless, the superintendent notifies the credit union in writing within fifteen days of the credit union’s request being filed that additional documentation is required. If additional documentation is required, the credit union shall have thirty days to file the additional documentation with the superintendent.

(F) Installment payments shall be required that are sufficient to amortize the entire principal and interest of the loan within a period of not more than forty years.

(G) A loan secured by real estate shall be in the form of an obligation or obligations secured by a mortgage, trust deed or other instrument, which shall constitute a lien on real estate. Any credit union may sell any obligations so secured in whole or in part.

(H) The limitations and restrictions set forth in this rule do not apply to loans made prior to the effective date of this rule, and do not apply to:

(1) Real estate loans that are insured under the National Housing Act, 48 Stat. 1246 (1934), 12 U.S.C.A. 1441, as amended; or

(2) Real estate loans that are insured by the secretary of agriculture of the United States pursuant to Title I of the Bankhead-Jones Farm Tenant Act, 50 Stat 522 (1937), 7 U.S.C.A. 1001, as amended.

(I) Quality of loan underwriting requires a thorough and efficient system of handling loan documents as they pertain to lending by a credit union on first mortgages. The following are mandatory documents that shall be obtained by the credit union:

(1) Note or bond which represents evidence of debt and contains the terms of repayment. This is in addition to the drafting of a valid purchase contract and approved application form;

(2) Mortgage deed or trust which establishes the credit union’s rights to the property securing the loan. The mortgage deed or trust shall contain detailed property description;

(3) The application which represents a formal request for a loan detailing basic underwriting data such as security property offered. The purpose of the loan sales price if applicable and the borrower’s capacity to repay, as a minimum of facts to be disclosed;

(4) An appraisal report which represents a professional judgment as to the market value of the security offered and may indicate market or other trends useful to the underwriting process. The appraisal shall be made by a certified or licensed independent appraiser who has satisfied the requirements of Chapter 4763. of the Revised Code and applicable rules or other comparable statute, if the loan is greater than two-hundred fifty thousand dollars unless otherwise determined by the superintendent. Appraisals or determinations of the property value for loans two hundred fifty thousand dollars and under shall, at a minimum, be made by qualified staff personnel who have been approved by the board of directors and include a written report documenting the comparable sales, other information, and documentation that accurately reflect the appraised value. Appraisals shall be in writing, dated, and signed. Certified or licensed independent appraisers shall be paid the same fee whether or not the loan is granted. Sales price and loan information shall be withheld from the independent appraiser;

(5) A credit report which is a formal or informal indication of the borrower’s financial stability;

(6) Asset and liability verification or other acceptable verification requirements;

(7) Title evidence which establishes the validity of the association’s lien position through title insurance or an attorney’s opinion of validity;

(8) Hazard insurance coverage which insures the borrower and contains a loss payable clause in favor of the credit union;

(9) Termite inspection, if required in the locality;

(10) Flood insurance coverage when the property securing a loan is or will be located in a flood plain. Credit unions shall comply with all federal requirements including apprising the borrower of the fact that the property is located within a flood plain and maintaining records, placed in individual loan files, which indicate how the credit union determined whether flood insurance is required, a copy of the flood insurance policy, and the written acknowledgment of all parties of compliance with the federal requirements;

(11) A settlement and/or cost statement which indicates all charges and fees paid in connection with the loan, in compliance with truth in lending regulations, the real estate settlement procedures act, the dates, amounts, receipts of each disbursement of loan proceeds, and evidence that the borrower received a copy of the statement;

(12) A construction loan agreement which constitutes an agreement between the credit union and the borrower and/or contractor, setting forth in detail the rights and responsibilities of the parties involved pursuant to rule 1301:9-2-22 of the Administrative Code pertaining to construction loans;

(13) A commitment letter which specifies the terms and conditions under which the credit union promises to lend to the applicant; and

(14) Any other documents as may be required for certain types of loans, such as loans for land acquisition and development, loans on developed lots and sites, loans in excess of eighty percent of value, loans to one borrower, loans requiring flood insurance coverage, VA and FHA certifications and loans requiring truth-in-lending, equal credit opportunity, real estate settlement procedures act, disclosures, termite inspection, gas line inspection, and homeowners’ insurance certification.

(J) The provisions of this rule shall be applicable to the refinancing of first mortgage purchase money real estate loans, with the exception of the use of the sale price.

(K) If requested by a credit union, the superintendent may approve a less restrictive real estate loan policy than provided by this rule. The request shall be made in writing and include a copy of the proposed real estate loan policy and a certified copy of the resolution of the board of directors adopting the policy. The credit union shall substantiate that it has the expertise, capital, management, and experience to implement the proposed policy. The credit union shall file with the superintendent a copy of the loan policy and information regarding the placement of proper private mortgage insurance on the excess amount. The superintendent shall notify the credit union not more than fifteen days after the filing of the request or policy whether it is denied, approved, or modified. If the superintendent does not respond within fifteen days after the filing of the request or policy, it shall be deemed approved; unless, the superintendent notifies the credit union in writing within fifteen days of the credit union’s request being filed that additional documentation is required. If additional documentation is required, the credit union shall have thirty days to file the additional documentation with the superintendent.

(L) Nothing herein shall preclude the superintendent from requiring a more restrictive real estate loan policy than provided by this rule.

Replaces: 1301:9-2-21

Effective: 07/01/2006

R.C. 119.032 review dates: 11/15/2010

Promulgated Under: 119.03

Statutory Authority: 1733.41

Rule Amplifies: 1733.25

Prior Effective Dates: 8/3/93

(A) “Construction loans” are loans made for the purpose of building on vacant land or construction additions to existing structures. Because the incomplete structure and the land represent the security for the loan, funds are disbursed in installments as work progresses. One of three methods, or variants thereof, are used to ensure a lien free, and an adequately collateralized loan throughout construction. These three basic methods are:

(1) Progress payment, also referred to as a draw plan. Under this method, portions of the loan proceeds are disbursed to the borrower or general contractor when construction reaches certain stages of completion. These stages must be stipulated in the construction loan agreement. This method provides the least protection to the credit union since frequently no information is obtained as to whether the borrower or general contractor is compensating the subcontractors and materialmen;

(2) Voucher method, under which construction fund payments are usually made directly to the subcontractors and materialmen by the credit union. Payments are made on the basis of vouchers signed by the borrower, general contractor or other persons authorized in the construction loan agreement. Vouchers should be supported by lien waivers, appropriate to the requirements for the area in which the property is located. Under this method some credit unions hold back a percentage of the payments and disburse these funds at some predetermined time following completion of construction; and

(3) Title insurance method, under which a title company assumes responsibility for making construction disbursements and for obtaining the necessary assurance of an unencumbered first lien position for the lender. An updated title insurance policy is issued with each disbursement, insuring the lender to the full amount of the construction disbursements to date. It remains the credit union’s responsibility to ensure, through construction inspections, that work is progressing in accordance with plans and specifications.

(B) Construction loans usually involve a higher degree of risk than other types of loans. A high degree of expertise is necessary to assure that construction results in a structure or structures that comply with plans and specifications. Procedural controls must be sophisticated to the degree necessary to assure that disbursements are made in such a way that precludes intervening liens and which prevents misappropriation of relative loans-in-process balances.

(C) The following safeguards must be implemented to assure that construction loans are issued and serviced on a safe and sound basis:

(1) No disbursement of funds in advance of construction progress. As a result, the credit union will have sufficient undisbursed loan funds to ensure project completion;

(2) Approval of only loan agreements that include precautionary measures to avoid the filing of mechanics’ liens or stop notices. Liens and stop notices can cause costly delays in construction;

(3) Due consideration must be given to builder’s past performance on similar projects;

(4) Approval of loan agreements that provide for progress inspection to ensure that construction has been performed in accordance with approved plans and specifications, and that labor and material for which reimbursement is requested is evidenced by the construction progress prior to disbursement;

(5) Approval of construction loans with prior review of the builder’s cost estimates to determine their accuracy and reasonableness when related to the proposed sales price;

(6) Disbursement of construction funds that are properly supported by inspection reports;

(7) Approval of loan agreements that provide that changes in plans and specifications can be made only with prior approval of the credit union; and

(8) Segregation of construction loan appraisal, inspection and disbursement functions. The disbursement function shall be separate and apart from appaisal and inspection, with all procedures documented as part of the policy.

(D) Credit unions must establish standard procedures for the review and approval of construction loans. These procedures should be designed to provide the credit union with adequate safeguards to ensure lien-free construction of the improvements in accordance with approved plans and specifications. Records should be available that include the following:

(1) Construction loan agreements that include:

(a) Allocation of loan proceeds and methods of disbursement; and

(b) Descriptions of documents required to support requests for reimbursement.

(2) Risk analysis work sheets.

(3) Copies of feasibility studies.

(4) Construction plans and specifications, and the builder’s cost estimates.

(5) Appraisal reports issued by a certified independent appraiser who has satisfied the requirements of Chapter 4763. of the Revised Code and applicable rules or other comparable statute.

(6) Inspection reports.

(7) General ledger accounts for construction loans in process, and individual subsidiary ledger accounts for each loan.

(8) Construction progress and disbursement records.

(9) Reimbursement requests, supporting vouchers, lien waivers, affidavits, releases, and receipted bills.

(10) Surveys, soil tests, and data disclosing the availability of water, sewers, and utilities.

R.C. 119.032 review dates: 03/17/2006 and 11/15/2010

Promulgated Under: 119.03

Statutory Authority: 1733.41

Rule Amplifies: 1733.25

Prior Effective Dates: 8/3/93

(A) A “home equity loan or a second mortgage loan” is a loan secured by the equity in a dwelling, and is made for a purpose other than the purchase or refinancing of the dwelling, regardless of the lien priority. A home equity loan may be one with lines of equity credit which are either variable or fixed-rate. Home equity loans qualify as consumer credit.

(B) Adequate insurance on properties securing home equity and second mortgage loans shall be in place and the borrower shall furnish a copy of a fire and casualty policy in at least the amount of any outstanding mortgage with a mortgage loss payable clause in favor of the credit union.

(C) Credit unions engaging in equity lending shall obtain a title search of the property securing home equity and second mortgage loans for outstanding liens and must retain a copy in the member’s file.

(D) The combined aggregate amount of first mortgage and home equity or second mortgage loans shall not exceed one hundred per cent of the appraised value of the property securing the loan. An appraisal made by a certified or licensed independent appraiser who has satisfied the requirements of Chapter 4763. of the Revised Code and applicable rules or other comparable statute, shall be obtained for home equity or second mortgage loans of two-hundred fifty thousand dollars or more, or for ninety-five per cent of appraised value or more unless otherwise determined by the superintendent. Appraisals or a determination of the property value for home equity or second mortgage loans which are less than two hundred fifty thousand dollars or less than ninety-five per cent of appraised value shall, as a minimum, be made by qualified staff personnel approved by the board of directors and include a written report documenting the comparable sales or based on other acceptable information and documentation that accurately reflects the appraised value.

(E) A credit union may make home equity or second mortgage loans secured by liens exceeding ninety-five per cent of the appraised value, provided that the credit union files with the superintendent a copy of the loan policy and information regarding the placement of proper private mortgage insurance of the excess amount. The superintendent shall notify the credit union not more than fifteen days after the filing of the request or policy whether it is denied, approved, or modified. If the superintendent does not respond within fifteen days after the filing of the request or policy, it shall be deemed approved; unless, the superintendent notifies the credit union in writing within fifteen days of the credit union’s request being filed that additional documentation is required. If additional documentation is required, the credit union shall have thirty days to file the additional documentation with the superintendent.

(F) All home equity and second mortgage loans shall be made contingent upon the credit union’s having made a current title search of the property securing the loan. The title to the property securing a home equity or second mortgage loan shall be in fee-simple absolute.

(G) The payment schedules for home equity and second mortgage loans shall provide for monthly installments but no less than quarterly, that include amortization of the principal and interest within terms of the loan agreement.

(H) Home equity and second mortgage loans shall be made in accordance with truth-in-lending disclosure requirements.

(I) If requested by a credit union, the superintendent may approve a less restrictive real estate loan policy than provided by this rule. The request shall be made in writing and include a copy of the proposed real estate loan policy and a certified copy of the resolution of the board of directors adopting the policy. The credit union shall substantiate that it has the expertise, capital, management, and experience to implement the proposed policy. The credit union shall file with the superintendent a copy of the loan policy and information regarding the placement of proper private mortgage insurance the excess amount. The superintendent shall notify the credit union not more than fifteen days after the filing of the request or policy whether it is denied, approved, or modified. If the superintendent does not respond within fifteen days after the filing of the request or policy, it shall be deemed approved; unless, the superintendent notifies the credit union in writing within fifteen days of the credit union’s request being filed that additional documentation is required. If additional documentation is required, the credit union shall have thirty days to file the additional documentation with the superintendent.

(J) Nothing herein shall preclude the superintendent from requiring a more restrictive real estate loan policy than provided by this rule.

Replaces: 1301:9-2-23

Effective: 07/01/2006

R.C. 119.032 review dates: 11/15/2010

Promulgated Under: 119.03

Statutory Authority: 1733.41

Rule Amplifies: 1733.25

Prior Effective Dates: 8/3/93

(A) A “member business loan” is defined as any loan, line of credit or letter of credit which will be used for commercial, corporate, business, investment property or venture, or agricultural purpose. Exceptions to this definition are:

(1) Loans fully secured by a lien on a one-to-four-family dwelling;

(2) Loans fully secured by shares in the credit union or deposits in other financial institutions;

(3) Member business loans to a member or an associated member for less than fifty thousand dollars;

(4) Loans fully insured or guaranteed by the federal, state, or local government, including its political subdivisions or by an agency of the federal, state, or local government; and

(5) Loans granted by a corporate credit union to another credit union, a credit union to another credit union, or a credit union to a credit union service organization(s).

(B) Definitions.

(1) “Reserves” means all reserves, including the allowance for loan losses and undivided earnings.

(2) “Associated member” means any member with a shared ownership, investment or other pecuniary interest in a business or commercial endeavor with the borrower.

(3) “Immediate family member” means a spouse or other family member living in the same household.

(4) “Loan-to-value” (LTV) ratio means the quotient of the aggregate amount of all sums borrowed including outstanding balances plus any unfunded commitment or line of credit from all sources on an item of collateral divided by the market value of the collateral used to secure the loan.

(5) “Construction or development loan” means a financing arrangement for the purpose of acquisition of 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, industrial use, or similar use.

(6) “Net Worth” means retained earnings as defined under “Generally Accepted Accounting Principals.” Retained earnings normally includes individual earnings, regular reserves and any other appropriately designated by management or regulatory authority.

(C) For member business loans made to a business entity, the credit union’s records shall indicate the intended source of repayment and the borrower’s capacity to service the debt. As a minimum, the credit union shall obtain financial statements of the business and tax returns for the three years immediately preceding the application for credit. Where there is security other than real estate, the file shall contain documentation indicating that a security interest has been created and perfected in favor of the lender. Financing statements are evidence of perfection for most types of collateral used in commercial financing. Credit unions may make working capital or seasonal loans which provide temporary capital in excess of normal needs and are repaid at the end of the cycle or season, by converting inventory and accounts receivable into cash. If a credit union engages in this type of lending, sufficient accounts receivable and/or inventory shall be pledged as collateral.

(D) Term member business loans granted for the purpose of acquiring capital assets such as plant and equipment shall be secured, and require amortization because of the time involved and the greater amount of risk inherent in such loans. Loan agreements on such credit shall contain certain restrictive covenants during the life of the loan.

(E) The board of directors shall adopt specific written member business loan policies, which shall be reviewed by the board at least annually. The policies shall take into consideration, and address the following:

(1) Particular types of member business loans which the credit union may make;

(2) The credit union’s trade area for member business loans;

(3) Maximum amount of credit union assets, in relation to net worth, that may be invested in member business loans, and maximum amount to be invested in given categories or type of member business loans;

(4) Maximum amount of credit union assets in relation to reserves that may be lent to any individual member or group of associated members;

(5) An objective appraisal of the ability of the borrower to repay the loan;

(6) Qualifications and experience of personnel involved in making and administering business loans with a minimum of two years direct experience in business loans;

(7) Balance sheet data; trend and structure analysis; ratio analysis of cash flow income and expenses; leveraging; comparison with industry averages; receipt of and periodic updating of financial statements; and other documentation including tax returns;

(8) Collateral requirements, including loan to value ratios which shall not exceed the lesser amount of eighty per cent of the appraised value or eighty per cent of the sale price; appraisals; 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 re-evaluated;

(9) Identification by position of those individuals prohibited from receiving member business loans;

(10) Provision for periodic disclosure to the credit union’s members, of the aggregate dollar amount of business loans made by the credit unions;

(11) Loan monitoring, servicing and follow-up procedures, including collection practices;

(12) Loans shall be granted on a fully secured basis by collateral as follows:

(a) Second lien for LTV ratios of up to eighty per cent;

(b) First lien for LTV ratios of up to eighty per cent;

(c) First lien with an LTV ratio in excess of eighty per cent shall be granted only where the value in excess of eighty per cent is covered through acquisition of private mortgage or equivalent type insurance provided by an insurer acceptable to the credit union and the superintendent or insurance or guarantees by or subject to advance commitment to purchase by an agency of the federal, state or local government, and in no event shall the LTV ratio exceed ninety-five per cent.

(13) Guidelines for purchase and sale of business loans and business loan participations, if the credit union engages in that activity.

(F) Unless prior written approval is granted by the superintendent of credit unions, allowing a greater amount to be lent to an individual member or a group of associated members, the aggregate business loans to such member or group shall be fifteen per cent of the credit union’s reserves (less allowance for loan losses account) net worth or one hundred thousand dollars, whichever is greater. 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 the federal, state or local government including its political subdivisions, or by any agency of the federal, state or local government, such portion shall not be calculated in determining the fifteen per cent limit.

(G) Maturities on member business loans shall be consistent with the purpose, security, creditworthiness of the borrower, and sound lending policies.

(H) Construction and development loans granted under this rule to finance the construction or development of commercial or residential property shall be subject to the following additional provisions:

(1) 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 the federal, state or local government, its political subdivision or by any agency of the federal, state, or local government, shall not exceed fifteen per cent of net worth;

(2) The borrower shall have a minimum of:

(a) Thirty per cent equity interest in the project being financed if the loan is for land development; or

(b) Twenty-five per cent equity interest in the project being financed if the loan is for construction or a combination of construction and development;

(3) Funds for such projects shall be released following on-site inspections by independent, qualified personnel in accordance with a preapproved draw schedule and any other conditions as set forth in the loan documentation.

(I) No credit union shall make member business loans to the following nonvolunteer, senior management employees or to any associated member or immediate family member of such employees:

(1) The credit union’s chief executive officer;

(2) Any assistant chief executive officer;

(3) The chief financial officer;

(J) No credit union shall grant a member business loan where a portion of the amount of income to be received by the credit union in conjunction with the loans is tied to the profit of the business or commercial endeavor for which the loan is made. A credit union shall not take an equity interest in the commercial endeavor in lieu of payment.

(K) All loans, lines of credit, or letters of credit, the proceeds of which may be used for a commercial, corporate, business, investment property or venture, or agricultural purpose, shall be separately identified in the records of the credit union and reported as such in financial and statistical reports required by the superintendent.

(L) All member business loans shall be secured by collateral in accordance with this section, except the following:

(1) A credit card line of credit granted to nonnatural persons that is limited to routine purposes normally made available under such lines of credit;

(2) A loan made by a credit union if:

(a) The amount of the loan does not exceed one hundred thousand dollars; the aggregate of all unsecured member business loans does not exceed ten percent of the credit union’s net worth; and

(b) The credit union has a net worth of at least seven percent.

(M) Notwithstanding the provisions of this section;

(1) A credit union that engages in business loan participation(s) with another credit union(s), any interest obtained in the participation loans is excluded from a purchasing credit union’s aggregate member business loan; or

(2) A credit union that purchases business loans or purchases participations in business loans that are originated by a credit union service organization (CUSO) the interest is excluded from the purchasing credit union’s aggregate member business loans.

(N) Unless otherwise determined by the national credit union administration or the superintendent, a credit union whose accounts are insured pursuant to 12 USC 1783 are subject to the provisions of 12 USC 1757(a) and 12 CFR Part 723.

(O) If requested by a credit union, the superintendent may approve a less restrictive member business loan policy than provided by this rule. The request shall be made in writing and filed with the superintendent. It shall include a copy of the proposed member business loan policy and a certified copy of the resolution of the board of directors adopting the policy. The credit union shall also substantiate that is has the expertise, capital, management, and experience to implement the proposed policy. The superintendent shall notify the credit union not more than fifteen days after the filing of the request or policy whether it is denied, approved, or modified. If the superintendent does not respond within fifteen days after the filing of the request or policy, it shall be deemed approved; unless, the superintendent notifies the credit union in writing within fifteen days of the credit union’s request being filed that additional documentation is required. If additional documentation is required, the credit union shall have thirty days to file the additional documentation with the superintendent.

Replaces: 1301:9-2-24

Effective: 07/01/2006

R.C. 119.032 review dates: 11/15/2010

Promulgated Under: 119.03

Statutory Authority: 1733.41

Rule Amplifies: 1733.25

Prior Effective Dates: 8/3/93

(A) As used in this rule:

(1) “Fixed assets” means any premises, furniture, fixtures, and equipment as these terms are defined in this rule.

(2) “Furniture, fixtures, and equipment” include all office furnishings, office machines, computer hardware and software, automated terminals, heating and cooling equipment and machinery.

(3) “Premises” includes any parking lot, office, branch office, service facility as defined in 1301:9-2-01 of the Administrative Code, other facility, or real estate where the credit union transacts or will transact business.

(B) In the case of a purchase of fixed assets other than real estate, if the aggregate amount of fixed assets, including real estate, exceeds or may exceed the aggregate of fixed assets above five per cent of shares and retained earnings, or a greater amount if approved, the credit union shall submit to the superintendent prior to the purchase the following:

A letter proposing the purchase that shall address the following:

(1) An estimate of the cost of the fixed assets;

(2) Certified board resolution evidencing the directors’ decision to purchase the fixed assets;

(3) Pro forma financial statements; and

(4) Any other information the superintendent requires.

(C) A credit union may purchase and hold real estate, which is being used or is intended to be used as premises and other fixed assets in an amount aggregating not more than five percent of the shares and retained earnings of the credit union unless otherwise approved by the superintendent.

(D) In the case of a purchase of real estate, the superintendent shall be notified in writing by the credit union by filing the notice with the superintendent prior to the purchase of the real estate. The superintendent shall notify the credit union not more than thirty days after the filing of the notification to purchase the real estate if the purchase is denied, approved, or modified. If the superintendent does not respond within thirty days after receipt of the notification to purchase the real estate, it shall be deemed approved; unless, the superintendent notifies the credit union in writing within thirty days of the credit union’s request being filed that additional documentation is required. If additional documentation is required, the credit union shall have thirty days to file the additional documentation with the superintendent. If the credit union fails to file the additional documentation within that time period the superintendent shall notify the credit union that its request has been denied. If the credit union files the additional documentation within the thirty day time period, the superintendent shall notify the credit union not more than thirty days after the filing of the additional documentation whether it is denied, approved, or modified. If the superintendent does not respond within thirty days after the filing of the additional documentation, it shall be deemed approved.

(E) In the case of a purchase of real estate which does not raise the aggregate amount of fixed assets to more than five per cent of the shares and retained earnings, the credit union shall submit the following:

(1) A letter notice proposing the purchase that shall address all of the following:

(a) The circumstances surrounding the purchase;

(b) The amount of the proposed purchase;

(c) How the credit union intends to fund the purchase;

(d) The total amount the credit union has invested in fixed assets after the purchase; and

(e) Any other information the superintendent requires.

(2) The following supporting documents:

(a) Certified board resolution evidencing the directors’ decision to purchase the real estate or other fixed assets;

(b) Pro forma financial statements; and

(c) Certification that the proposed purchase when added to the total amount of current fixed assets does not exceed five per cent of the shares and retained earnings.

(F) In the case of a purchase of real estate which raises the aggregate amount of fixed assets to more than five per cent of shares and retained earnings, or a greater amount if approved, the credit union shall submit the following:

(1) A notice proposing the purchase of real estate that shall address all of the following:

(a) All of the items listed in paragraphs (E)(1)(a) to (E)(1)(e) of this rule;

(b) An estimate of the fixed assets subsequent to the purchase and percentage of the fixed assets to the shares and retained earnings of the credit union;

(c) A complete description of the proposed purchase item(s);

(d) The proposed use of the purchase items(s); and

(e) Any other information the superintendent requires.

(2) The following supporting documents:

(a) All of the items listed in paragraphs (E)(2)(a) to (E)(2)(c) of this rule;

(b) A copy of the offer, contingent upon division approval, and acceptance of the agreement to contract for the purchase of real property intended to be used as premises; and

(c) A copy of the appraiser’s report, if applicable.

(G) If the purchase of real estate also includes the construction of an office building and raises the aggregate above five per cent of shares and retained earnings, the credit union shall submit, in addition to the items listed above, the following:

(1) A copy of the blueprints and architect drawings of the proposed building and estimates of the cost for such construction;

(2) Copies of all written bids by proposed general contractors, indicating the proposed cost of constructing the credit union building; and

(3) A certified copy of the resolution of the board of directors awarding the general contract.

(H) If requested by a credit union, the superintendent may approve a less restrictive fixed asset investment policy than provided in this rule. The request shall be made in writing and filed with the superintendent. It shall include a copy of the proposed fixed asset policy and a certified copy of the resolution of the board of directors accepting the policy. The superintendent shall notify the credit union after the filing of the request or policy whether it is denied, approved, or modified. If the superintendent does not respond within fifteen days after the filing of the request or policy, it shall be deemed approved; unless, the superintendent notifies the credit union in writing within fifteen days of the credit union’s request being filed that additional documentation is required. If additional documentation is required, the credit union shall have thirty days to file the additional documentation with the superintendent.

Replaces: 1301:9-2-25

Effective: 07/01/2006

R.C. 119.032 review dates: 11/15/2010

Promulgated Under: 119.03

Statutory Authority: 1733.41

Rule Amplifies: 1733.25, 1733.02, 1733.03, 1733.04, 1733.30

Prior Effective Dates: 8/3/93

By resolution of the board of directors, reasonable fees or service charges may be assessed, and such charges or fees shall be subject to proper disclosure to the membership.

R.C. 119.032 review dates: 03/17/2006 and 11/15/2010

Promulgated Under: 119.03

Statutory Authority: 1733.41

Rule Amplifies: 1733.15

Prior Effective Dates: 8/3/93

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:

(A) The board of directors shall authorize the method of computation, payment and qualifications for participation in such rebate; and

(B) Any rebate of interest shall be recorded as a reduction of the loan interest for the accounting period to which it applies.

R.C. 119.032 review dates: 03/17/2006 and 11/15/2010

Promulgated Under: 119.03

Statutory Authority: 1733.41

Rule Amplifies: 1733.04

Prior Effective Dates: 8/3/93

Prior to entering a credit card lending program, a credit union shall file with the superintendent a certification by the board of directors that the implementation of a credit card lending program will not negatively affect the operations of the credit union on a long-term basis. The superintendent shall notify the credit union not more than fifteen days after the filing of the certification whether it is denied, approved, or modified. If the superintendent does not respond within fifteen days after the filing of the certification, it shall be deemed approved; unless, the superintendent notifies the credit union in writing within fifteen days of the credit union’s request being filed that additional documentation is required. If additional documentation is required, the credit union shall have thirty days to file the additional documentation with the superintendent.

Replaces: 1301:9-2-28

Effective: 07/01/2006

R.C. 119.032 review dates: 11/15/2010

Promulgated Under: 119.03

Statutory Authority: 1733.41

Rule Amplifies: 1733.25

Prior Effective Dates: 8/3/93

(A) Each credit union shall have one class of shares designated as a “membership share.” These shares shall have a par value as set by the board of directors of the credit union, as shall all shares, regardless of how many classes of shares or the number of shares are in existence in the credit union.

(B) A credit union may, pursuant to its regulations or policies, establish a joint membership on an account as follows:

(1) Two or more persons that are eligible for membership that have jointly subscribed for one or more shares under a joint account each may be admitted to membership.

(2) To jointly subscribe to a joint membership share the credit union shall do the following:

(a) Comply with membership requirements of the credit union;

(b) Disclose to the joint owners the requirements and benefits of joint ownership in a membership share account;

(c) Maintain and verify member service eligibility for members who have a joint membership; and

(d) Comply with paragraph (B)(3) of this rule.

(3) The member listed first on the joint membership share account shall be the member qualified to vote as provided by law, the articles or the regulations.

(4) If each joint owner, under a joint account, has subscribed to a membership share, as provided for in the regulations, each shall have a vote as a qualified member.

(C) A credit union is authorized to receive funds for deposit in various types of accounts pursuant to division (A) of section 1733.24 of the Revised Code. Classes of shares are authorized pursuant to division (B) of section 1733.24 of the Revised Code.

(D) Share and share accounts may be of one or more classes, as designated by the board of directors, subject to approval of the superintendent, based upon assurance of equitable distribution of dividends among the classes, and other appropriate standards of fairness. A disproportionately high rate may not be paid on large accounts to the detriment of smaller accounts.

(E) As a part of the examination process, the number and classes of shares shall be reviewed and submitted along with the examination report to the superintendent for approval.

(F) A registry of all shares shall be kept, including all of the transactions of the credit union pertaining to such shares.

(G) All other transactions concerning shares and share accounts shall be executed in accordance with divisions (H) and (I) of section 1733.24 of the Revised Code.

(H) A credit union may maintain share draft accounts in accordance with division (E) of section 1733.24 of the Revised Code.

(I) The board of directors shall certify in writing by certified mail to the superintendent, that the implementation of a share draft program will not negatively affect the operation of the credit union on a long-term basis.

Replaces: 1301:9-2-30

Effective: 07/01/2006

R.C. 119.032 review dates: 11/15/2010

Promulgated Under: 119.03

Statutory Authority: 1733.41

Rule Amplifies: 1733.24

Prior Effective Dates: 8/3/93

(A) Credit unions may act as a representative of and enter into a contractual agreement with one or more credit unions or other organizations for the purpose of sharing, utilizing, renting, leasing, purchasing, selling, and/or jointly owning fixed assets, or engaging in activities and/or services which relate to the daily operations of credit unions. Agreements must be in writing and shall advise all parties subject to the agreement that the goods and services provided shall be subject to approval by the superintendent of the division of credit unions.

(B) Where any agreement calls for or requires payment in advance of the actual or estimated charges for more than three months, such payment shall be deemed an investment in a credit union service organization and subject to the limitations in rule 1301:9-2-32 of the Administrative Code.

R.C. 119.032 review dates: 03/17/2006 and 11/15/2010

Promulgated Under: 119.03

Statutory Authority: 1733.41

Rule Amplifies: 1733.02, 1733.03, 1733.04, 1733.15

Prior Effective Dates: 8/3/93

(A) A credit union may invest in shares, stock or obligations of a credit union service organization in amounts not exceeding three per cent of the credit union’s total paid in and unimpaired capital and surplus of the credit union, unless otherwise approved by the superintendent.

(B) A credit union may make loans to a credit union service organization in amounts not exceeding three per cent of the credit union’s total paid in and unimpaired capital and surplus of the credit union, which percentage is independent of the three per cent investment limit, unless otherwise approved by the superintendent.

(C) A credit union’s maximum investment and loans in credit union service organizations not exceeding, in the aggregate; five per cent of its total paid in and unimpaired capital and surplus of the credit union, unless otherwise approved by the superintendent.

(D) A credit union service organization chartered as a corporation, a limited liability company, or a cooperative must be adequately capitalized and operated as a separate entity. A credit union investing in or making loans to such organizations must take those steps necessary to ensure that it will not be held liable for obligations of the organization.

(E) A credit union may participate only as a limited partner in a credit union service organization structured as a limited partnership. As such, the credit union shall not engage in those activities which may cause the credit union to lose its status as a limited partner, and correspondingly its limited ability, and thereby be treated as a general partner.

(F) A credit union making an investment in or loan to a credit union service organization structured as a limited liability company shall obtain written legal advice as to whether such organization is established in a manner that will limit the credit union’s potential exposure to no more than the loss of funds invested in or lent to the credit union service organization.

(G) A credit union may invest in or lend to a credit union service organization only if the organization primarily serves credit unions and/or the membership of affiliated credit unions.

(H) Investments in or loans to credit union service organizations shall be limited to organizations which engage in activities or services which relate to the daily operation of credit unions, are incidental to the credit union, are for the benefit of their members, or have been approved by the superintendent. The following are examples of activities in which a credit union service organization may participate:

(1) Operational services. Credit card and debit card services; check cashing and wire transfers; internal audits for credit unions; ATM services; EFT services; accounting services; data processing; shared credit union branch (service center) operations; sale of repossessed collateral; management, development, sale or lease of fixed assets; sale, lease or servicing of computer hardware or software; management and personnel training and support; payment item processing; locator services; marketing services, research services; record retention and storage; microfilm, microfiche, optical and electrical imaging, CD-ROM data storage and retrieval services; alarm-monitoring and other security services; debt collection services; credit analysis; consumer mortgage loan origination; loan processing, servicing and sales, coin and currency services, and provision of forms and supplies; money orders; savings bonds; travelers checks; purchase and sale of U.S. mint commemorative coins services; courier services; facsimile transmissions and copying services; supervisory committee audits; electronic income tax filing; and cyber financial services;

(2) Financial services. Financial planning and counseling; retirement counseling; investment counseling; securities brokerage services; estate planning; income tax preparation; acting as administrator for prepaid legal service plan; developing and administering IRA, Keough, deferred compensation, and other personnel benefit plans; trust services; acting as trustee, guardian, conservator, estate administrator, or in any other fiduciary capacity; real estate brokerage services; travel agency services; agent or agency for sale of insurance; personal property leasing; and provision of vehicle warranty programs; provision of vehicle warranty programs; provision of group purchasing program; real estate leasing of excess credit union service organization property; alarm-monitoring and other security services; disaster recovery services; student loan origination; all telephone and telecommunication services; and business loan origination.

(3) In connection with providing a permissible service, a credit union may invest in a non-credit union service organization service provider.