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ALEXANDRIA, Va.-The NCUA Board had a full agenda for its nearly two-hour monthly board meeting last week, approving final rules for overseas branching, federal credit union employee benefits, and advertising with the NCUA logo, as well as three community charter requests and the quarterly insurance fund review. NCUA’s long-awaited final rule on overseas branching was approved unanimously with a few changes from the proposal. The process began in September 2000 with an advance notice of proposed rulemaking. Under the new rule federal credit unions must develop a detailed business plan and receive approval from the host country to operate the branch. CUNA had originally asked that this provision be changed to have NCUA negotiate with the foreign country, but NCUA Director of Examination and Insurance Dave Marquis pointed out during his presentation that this is not permissible by law. CUNA Associate General Counsel and Director of Regulatory Advocacy Mary Dunn said that credit unions have raised the issue with the trade group that the individual credit union is not on equal footing with the foreign government. “We still do have a concern about that, but we do need to commend NCUA [on the rule],” she said indicating the added flexibility over the proposal. She added that CUNA would like to work with NCUA in the future to possibly get help for interested credit unions through the state department or in other ways. The credit union must obtain written acknowledgement of NCUA’s authority over the branch, but is not requiring exclusive authority. The agency also added that the credit union looking to build a branch on foreign soil must adhere to the local employment laws. In addition, federally insured state chartered credit unions must receive the approval of the state regulator and get final approval from NCUA. However, the state was given the authority to revoke a credit union’s ability to operate a branch overseas without NCUA stepping in, but the agency must be notified. NAFCU Director of Regulatory Affairs Gwen Baker explained that the trade group would have liked to have seen a slight easing of the business plan requirements, but has no major concern that it was not changed and does not see it as overly burdensome. Generally, she added, NAFCU was very pleased with the rule. The rule is effective July 1, 2003. Regarding the federal credit union employee benefits rule, CUNA and NAFCU were pleased with the amenability of NCUA to the commenters’ suggestions. Two complaints that credit unions had expressed with the proposal was the distinction between defined benefits and defined contributions, due to the complexity of some retirement plans, and restrictions on variable rate investments. Those provisions were removed from the final rule, which was approved 3-0 and has a 30-day effective date. NCUA also spoke with one voice in passing the final rule on advertising and the use of the official NCUA logo on credit union Web sites. Under the new rule, federally insured credit unions will be permitted-following a 60-day effective date-to alter the NCUA logo in color and font size to better suit their virtual needs. Credit unions will be required to include the logo on the sign-in page of the Web site, but not on subsequent pages. Additionally, the rule clarifies that federally insured credit unions may use their trade names, except on official documents and in dealing the agency where they must use their official charter name. This was added to clear up member confusion regarding deposit insurance coverage with the same institution operating under a name other than the official one. Dunn said, “The employee benefits and advertising rules are both good examples of NCUA listening to practical concerns raised by credit unions.” Of three community charter requests, Tooele Federal Credit Union’s request for an expansion of its community charter turned out to be the most controversial. The $158 million credit union located in Utah served Tooele County prior to the expansion, approved by a 2-1 vote, which included serving Davis, Morgan, Salt Lake, Summit, and Weber Counties in Utah. The population of the six-county area had more than 1.4 million residents at the last census. The credit union’s penetration rate of its one-county charter was 72% and losing room to grow. NCUA Board Member Deborah Matz said she felt the application did not show strong enough ties to make the area a community for NCUA’s chartering purposes and the credit union’s marketing plan was strategically deficient. However, NCUA Chairman Dennis Dollar and Vice Chair JoAnn Johnson went on to approve the charter, over Matz’ objection. Dollar commented, “These standards are in the eyes of the beholder.” In his first appearance before the board as NCUA’s Region II director, Ed Dupcak-with three and a half days experience-and his staff presented two community charter conversions to the board. The first was for the $469 million Aberdeen Proving Ground Federal Credit Union to convert from a multiple group credit union to serve Hartford and Cecil Counties, Maryland. Aberdeen Proving Ground is the greatest employer of civilians and military in the area with 11,000 employees. While 12 census tracts in the community qualified as underserved areas, an additional eight could be classified as “housing hot zones,” according to NCUA Insurance Analyst Cynthia Kochendarfer. These are areas that bear a high cost of housing combined with high levels of poverty or many low-income persons. Dollar noted that the credit union’s conversion was helping move families toward President George W. Bush’s housing goals, and Johnson pointed out that the credit union would be providing free financial counseling and a first time homebuyer program. Members 1st Federal Credit Union of Mechanicsburg, Pa., also requested to convert to a community charter to serve more than 1.1 million residents of Adams, Dauphin, Lebanon, Perry, York Counties, Pa., including the Borough of Shippensburg in Cumberland and Franklin Counties. The credit union plans to add 10 branches to its existing 11 within the first five years, which Dollar said is truly taking advantage of its RegFlex waiver on the fixed asset cap. Finally, NCUA CFO Dennis Winans provided the board an overview of the National Credit Union Insurance Fund’s quarterly data. While gross income was up $1 million in March from February, which has three fewer days for investments, it was still part of a steady downward trend over the last 12 months and was off from March of 2002 by $4.4 million. Compounding that, operating expenses were up $1.7 million due to merit pay increases this year to $8 million. Net income for 2003 was projected about $70 million due to declining interest rates. Insurance losses for March fell to $1.9 million from $2.8 million in February, but March 2002 recorded no losses. The NCUSIF equity ratio for March was up to 1.31%, but is expected to land around 1.26% at year-end based on an anticipated 10% share growth. Even with the poor economy the credit union community remains financially strong. CAMEL 4/5 credit unions are down one from 211 in 2002 to 210 this year. These credit unions represent 0.79% of the total NCUSIF insured shares. Winans predicted that credit unions could be on their way to a record low for credit unions failures this year with just two as of the first quarter. The record low, he said, was eight. [email protected]

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