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ALEXANDRIA, Va.-NW Preferred Federal Credit Union has made history by being the first credit union to be approved for a trade, industry, or profession-TIP-charter. Last week, NCUA Region VI Director Melinda Love gave her stamp of approval to NW Preferred to serve the employees, independent contractors or self-employed persons who work regularly in the licensed insurance industry in Washington, Oregon or Idaho – meaning they or the entities for which they regularly work, are licensed to sell, underwrite or service insurance products. As of late this summer, 10 credit unions had applied for TIP charters including two that have withdrawn their applications. “Our board has studied this decision for a number of years,” NW Preferred CEO Tom Edwards said. He explained that they had been looking at it long before the TIP was even invented. After serving the insurance industry for 63 years, he said that the credit union was looking to grow but did not want to lose that niche. “It was almost as though we had written it,” Edwards added of the TIP charter. Many insurance companies are simply one agent working independently or in small groups, so they have many of the same capital issues that self-employed people have. Edwards said the credit union has been doing some business lending for small offices or office equipment to meet the needs of the credit union members. The currently $94 million credit union was originally chartered by NCUA in 1940 to serve employees of Farmers Insurance working in Portland, Ore. The credit union had no select employee groups. Now, with the TIP charter it can serve the needs of more than 100,000 insurance agents or agencies throughout Washington, Oregon, and Idaho. Edwards said the credit union has already begun executing its business plan, starting with the larger metropolitan areas like Portland, Ore. first. Next is Seattle. The business plan for the expansion should take about three years, according to Edwards. The CEO said that NCUA had been very helpful throughout the application process. “It actually was more pleasant than I thought it was going to be,” he said. He added that NCUA actually asked if the credit union wanted to expand to serve California as well, which it declined for the time being. While the process went smoothly from both parties’ points of view, NCUA’s Love said, “Whenever we add something new like this, it’s an evolutionary process.” She explained that the region conferred with the Office of Examination and Insurance and the Office of General Counsel to ensure every `i’ was dotted and every `t’ was crossed. “We were setting precedence, so we needed to do it very deliberately,” she said. She did not know how long E&I and OGC would remain involved in the process. Love added that some items that would be useful in an application are a clear definition of the TIP, an estimated population, and an explanation of how the credit union will verify who is eligible for membership. The agency is also taking a very hard look at a credit union’s ability to serve the potential FOM, so CUs should include whether branches will be added, if electronic service will be available, or if the credit union plans to join a shared service center. She said the business plan should not only provide the services the applicant offers or plans to offer but also how to make that operational, like showing how marketing will work and the budget for it. Include growth goals, the number of service facilities and what the credit union plans to add, and the addition of employees and fixed assets, among other things. This part is fairly similar to a community charter application, Love said. The regional director said that she was taken by surprise at the start when credit unions tried to apply for a TIP as if it were a SEG, but with this experience and others coming through the pipeline currently, the agency is better able to explain exactly what it wants. “As we move forward, we think the process will get easier for credit unions and for us,” she predicted. NCUA Chairman Dennis Dollar said on the occasion of the first TIP approval, “We do not want to lose otherwise financially healthy credit unions solely because they are tied to a single occupational sponsor that may not be in a position to remain a long term sponsor for business reasons outside of the control of the credit union. TIP strengthens the long term viability of credit unions by providing a diversification option for single sponsor credit unions that feel they need that type of risk and membership diversification, and as a safety and soundness regulator NCUA sees great potential value in TIP for some of those credit unions.” NCUA’s new FOM rule became effective May 15, 2003. [email protected]

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