La. Admin. Code tit. 10 § IX-505

Current through Register Vol. 50, No. 11, November 20, 2024

Section IX-505 - Residential Group Common Bond

A. The applying credit union must demonstrate by the weight and accumulation of facts presented that a residential group common bond has unifying characteristics that clearly meet the applicable definition(s). The commissioner will consider the volume and value of evidence in establishing the commonality criteria to meet the definitions for a well-defined neighborhood, small community, or rural district common bond.

B. Safety and Soundness Criteria

1. Credit unions are subject to safety and soundness criteria based on the financial and managerial capacity of the credit union to serve the proposed field of membership. The commissioner will not approve any application unless the credit union can meet the criteria set forth in this rule.

2. The following criteria may be considered in determining the financial and managerial capacity of a credit union to support a request for a residential group common bond.

a. A composite CAMEL rating of "1" or "2" was assigned at the most recent examination.

b. Any credit union receiving a CAMEL rating of "3" in any component area at its most recent examination shall be considered only after review of the following additional factors:

i. the underlying reasons for ratings outside the criteria in Subparagraph a above;

ii. the overall condition of the credit union and ability to support expanded activities;

iii. management's progress and commitment to improve such ratings; and

iv. the prospects for improving performance and ratings in the near term.

c. Credit unions with any CAMEL component rating more severe than a "3" in its most recent report of examination may not apply for a residential group common bond based on residence in a well defined neighborhood, small community, or rural district.

d. Credit Unions with a Composite CAMEL rating of "3", or more severe, may not apply for a residential group common bond until the overall condition of the credit union is restored to a satisfactory level.

e. The credit union must demonstrate in its application for a residential group common bond that it has a sufficient level and depth of management to meet the requirements of the residential common bond proposed.

f. The credit union must demonstrate in its application for a residential group common bond that it has sufficient data processing resources and capacity to serve the residential group that is being proposed.

g. If the commissioner deems it appropriate, he may require the credit union to submit a comprehensive business/strategic plan that addresses the following:

i. how the credit union intends to service the targeted well-defined neighborhood, small community, or rural district;

ii. a list of the financial services that will be provided to the targeted well-defined neighborhood, small community, or rural district;

iii. a projection of the expected size and penetration into the target market over a three year period, including an analysis of the market's current financial service providers;

iv. the impact of the proposed expansion upon the credit union's capital, property and equipment (including technology resources), and personnel resources;

v. the adequacy and sufficiency of fixed assets and data processing facilities to meet the expected levels of growth;

vi. the effect upon management's ability to recognize, monitor, and control all types of risks including, but not limited to, the following: audit, interest rate, liquidity, transaction, compliance, strategic, and reputation.

vii. a comprehensive income statement budget and proforma balance sheet reflecting realistic financial, capital, and operating goals for the next three calendar years beyond the year in which the field of membership expansion is requested.

3. If the commissioner deems it appropriate, he may require that the credit union submit revised loan and collection policies and procedures that recognize the additional complexities of a residential group common bond.

4. If the commissioner deems it appropriate, he may require that the credit union provide adequate policies related to asset/liability management, recognizing the additional complexities that could result from expanded lending and deposit taking activities.

La. Admin. Code tit. 10, § IX-505

Promulgated by the Office of the Governor, Office of Financial Institutions, LR 33:1630 (August 2007).

AUTHORITY NOTE: Promulgated in accordance with R.S. 6:121(B)(1).