ARLINGTON, Va.-In the latest NAFCU Flash Report, NAFCU Economist Jeff Taylor found some surprisingly good news for credit unions on the approvals of select employee groups (SEGs). “Overall, it appears that the majority of SEG applications, regardless of size, are being approved when the appropriate details are provided and regulations are followed,” the study found. “Further, it appears that NCUA is doing a good job at turning around the SEG applications in a timely manner.” Acting NCUA Chairman Dennis Dollar commented, “We are extremely pleased with the improved efficiency of the SEG approval process.[W]e are glad that they (NAFCU) recognize that as well.” In the survey of approximately 125 NAFCU members, the report found that the percentage of credit unions denied SEGs with more than 500 potential members was only 15.5%. Taylor said he was expecting a higher number. Approximately 21% of respondents said they were denied for a smaller group. The two most common answers given as to why SEGs were not approved were reasonable proximity (13.6%) and the SEG’s size (3.4%). After first being rejected for SEG approval, only 15.3% of credit union reapplied. Additionally, 86% of credit unions surveyed waited less than a month for their SEG application to be approved. The remainder said it took longer than 30 days. Dollar said the actual numbers from NCUA look even better. He pointed out that the average wait for all SEG approvals, according to NCUA statistics, is 4.68 days. The acting chairman agreed that at one time, when H.R. 1151 first passed, the SEG approval process was extremely slow because of the new regulations that had to be put in place. Once the agency became more adept at working within the new system, the process sped up tremendously. Additionally, NCUA instituted an online application for credit unions wishing to add groups under 500. Dollar called this an “almost automatic approval process” with one qualifier: “as long as [the credit unions] answer the questions accurately.” Dollar also noted that he could only think of one complaint in the last six months about the wait involved in the SEG approval process, which he said used to amount to a considerable number. On the reverse side, deferrals of SEG applications totaled 46%, according to the survey. Missing information was the number one reason given at 37.3% for deferrals by NCUA to the surveyed credit unions. The second most popular reason was because NCUA needed to conduct further analysis (20.3%). Dollar explained that this analysis is conducted on an application-by-application basis and has no set format. “Each SEG application is as different as each credit union is different,” he said. NAFCU President and CEO Fred Becker pointed out that the applications that are deferred are not included in NCUA’s benchmarks set last year for the approval process. “As you know, [NCUA] now has timelines.We will continue to watch [the deferrals] to make sure-and I’m not suggesting that they are-that the deferrals aren’t going up just to make the timelines look good,” he said. While Dollar did not dispute NAFCU’s survey, he said that possibly some statistical anomaly occurred with the survey. According to NCUA statistics, only 545 of 8,342 multiple common bond expansions were deferred for a total of 6.1% as of July 31, 2001, and just 25.6% of single common bond groups adding SEGs, which must meet higher standards for adding a SEG. Dollar said the agency places applications in deferral oftentimes because they lack information and it would be inappropriate to deny the applications just because a simple yet necessary piece of information is missing. He also pointed out that the number of deferrals of SEG applications by the agency has decreased since credit unions are becoming more familiar with the process. He added that most applications that are deferred are ultimately approved. NAFCU Director of Regulatory Affairs Gwen Baker said that NAFCU offers a tool kit on its Web site to help members with their applications. The kit includes examples of a good application that will probably be approved and a poor one. Baker admitted she has no idea how many members actually take advantage of the tool kit. Dollar said that NCUA also helps credit unions to understand exactly why their application was deferred and what information, is necessary to jumpstart the process again. The survey also asked random NAFCU members how many SEG applications for groups with more than 500 members each credit union made since 1999. Just one application over 500 was filed by 46% of surveyed credit unions, while 39.7% of those surveyed indicated that they made between two and nine applications. An additional 10% said they made applications for between 10 and 21 SEGs with over 500 members and 4.2% answered that they made between 40 and 50 SEG applications during that period. When reviewing numbers for SEGs with less than 500 members since 1999, the percentage of applicants increased. Ten or fewer applications were the most common number, standing at 30.6% of surveyed credit unions. Nearly 29% applied for 50 or less, 20.8% applied for between 50 and 100 smaller groups, and 20% of the surveyed credit unions applied for more than 100 groups with less than 500 members. A full 60% of credit unions applying for groups over 500 members said that none of their applications were deferred. More than a quarter (27.6%) indicated that their applications were deferred, while two and five deferrals came in at 5% each, and 2.5% of credit unions experienced three deferrals. For groups of less than 500 members, 61% said that no applications had been deferred, and approximately 15% said that one application had been deferred since January 1999. Twenty-four percent said that between three and five applications had been deferred. Currently, just 12.8% of SEG applications for groups over 500 are in deferral, while 6% of applications for fewer than 500 members are in deferral. [email protected]

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