Chapter DFI-CU 72

DFI-CU 72.15   Exceptions to the aggregate business loan limit.

DFI-CU 72.16   Obtaining an exception.

DFI-CU 72.17   Record keeping requirements.

DFI-CU 72.01 DFI-CU 72.01 Definitions. In this chapter:

DFI-CU 72.01(1) (1) “Amount” of a business loan includes all the following:

DFI-CU 72.01(1)(a) (a) Any unfunded commitment to make the loan.

DFI-CU 72.01(1)(b) (b) The outstanding balance of the loan.

DFI-CU 72.01(1)(c) (c) Any undisbursed proceeds of the loan.

DFI-CU 72.01(2) (2) “Associated member” means a person who is associated with another by means of a shared ownership, investment or other pecuniary interest in a business or commercial endeavor.

DFI-CU 72.01(3) (3) “Business purpose loan” means a loan where the borrower intends to use the proceeds for any of the purposes listed in s. DFI-CU 72.02 (1).

DFI-CU 72.01(4) (4) “Construction or development loan” means a financing arrangement for acquiring real property or rights to real property, including land or structures, with the intent to develop or improve it for any of the following:

DFI-CU 72.01(4)(a) (a) Residential housing for sale.

DFI-CU 72.01(4)(b) (b) Income property.

DFI-CU 72.01(4)(c) (c) Commercial use.

DFI-CU 72.01(4)(d) (d) Industrial use.

DFI-CU 72.01(4)(e) (e) Any similar uses.

DFI-CU 72.01(5) (5) “Director” means the director of the office of credit unions or an authorized representative of the director.

DFI-CU 72.01(6) (6) “Loan-to-value ratio” or “LTV ratio” means the amount of all loans by the credit union secured by an item of collateral added to the amount of all outstanding loans by other lenders secured by that item of collateral, that total amount then being divided by the market value of that item of collateral.

DFI-CU 72.01(7) (7) “Member business loan” has the meaning set forth in s. DFI-CU 72.02.

DFI-CU 72.01(8) (8) “NCUA” means the National Credit Union Administration.

DFI-CU 72.01(9) (9) “Net worth” means the retained earnings as defined under Generally Accepted Accounting Principles. Retained earnings include undivided earnings, regular reserves and any other appropriations designated by management or regulatory authorities.

DFI-CU 72.01 History History: CR 02-034: cr. Register August 2002 No. 560, eff. 9-1-02.

DFI-CU 72.02 DFI-CU 72.02 Member business loan.

DFI-CU 72.02(1) (1) “Member business loan” means any loan, line of credit, letter of credit or any unfunded commitment to make a loan, where the borrower intends to use the proceeds for any of the following purposes:

DFI-CU 72.02(1)(a) (a) Commercial.

DFI-CU 72.02(1)(b) (b) Corporate.

DFI-CU 72.02(1)(c) (c) Investment property.

DFI-CU 72.02(1)(d) (d) Business venture.

DFI-CU 72.02(1)(e) (e) Agricultural.

DFI-CU 72.02(2) (2) “Member business loan” shall not include any of the following:

DFI-CU 72.02(2)(a) (a) A business purpose loan fully secured by a lien on a 1 to 4 family dwelling that is the member’s primary residence.

DFI-CU 72.02(2)(b) (b) A business purpose loan fully secured by shares or deposits in the credit union making the extension of credit or in other credit unions, or by deposits in other financial institutions.

DFI-CU 72.02(2)(c) (c) One or more business purpose loans to a member or an associated member that, in the aggregate, are less than $50,000. The entire amount of such a loan or loans that equals or exceeds this amount, or that causes the aggregate to exceed this amount is a business loan.

DFI-CU 72.02(2)(d) (d) A business purpose loan where a federal or state agency or any of their political subdivisions fully insures repayment, or fully guarantees repayment, or provides an advance commitment to purchase in full.

DFI-CU 72.02(2)(e) (e) A loan granted by a corporate credit union to another credit union.

DFI-CU 72.02 History History: CR 02-034: cr. Register August 2002 No. 560, eff. 9-1-02.

DFI-CU 72.03 DFI-CU 72.03 Prohibited member business loans.

DFI-CU 72.03(1) (1) Officers. A credit union shall not grant a member business loan to any of its following:

DFI-CU 72.03(1)(a) (a) Chief executive officer.

DFI-CU 72.03 Note Example: President, Treasurer or Manager.

DFI-CU 72.03(1)(b) (b) Assistant chief executive officers.

DFI-CU 72.03 Note Example: Assistant President, Vice President, Assistant Treasurer or Assistant Manager.

DFI-CU 72.03(1)(c) (c) Chief financial officer.

DFI-CU 72.03 Note Example: Comptroller.

DFI-CU 72.03(1)(d) (d) Any associated member or immediate family member of anyone listed in this subsection.

DFI-CU 72.03(2) (2) Equity agreements or joint ventures. A credit union shall not grant a member business loan if any additional income received by the credit union or its senior management employees is tied to the profit or sale of the business or commercial endeavor for which the loan is made.

DFI-CU 72.03(3) (3) Directors. A credit union shall not grant a member business loan to one of its directors unless the board of directors approves granting the loan and the director is recused from the decision-making process.

DFI-CU 72.03 History History: CR 02-034: cr. Register August 2002 No. 560, eff. 9-1-02.

DFI-CU 72.04 DFI-CU 72.04 Construction and development loans. Unless the director grants a waiver, a credit union that makes construction or development loans shall be subject to all of the following:

DFI-CU 72.04(1) (1) The aggregate of all construction and development loans shall not exceed 15% of the credit union’s net worth. In determining the aggregate, the credit union may exclude any portion of a loan that is any of the following:

DFI-CU 72.04(1)(a) (a) Secured by shares or deposits in the credit union making the extension of credit or in other credit unions, or by deposits in other financial institutions.

DFI-CU 72.04(1)(b) (b) Insured or guaranteed by any agency or subdivision of the state or the federal government.

DFI-CU 72.04(1)(c) (c) Subject to an advance commitment to purchase by any agency of the federal government, the state, or any of their political subdivisions.

DFI-CU 72.04(2) (2) The borrower shall have a minimum of the following:

DFI-CU 72.04(2)(a) (a) 30% equity interest in the project being financed if the loan is for land development.

DFI-CU 72.04(2)(b) (b) 25% equity interest in the project being financed if the loan is for construction or for a combination of development and construction.

DFI-CU 72.04(3) (3) The funds shall be released only after on-site inspections, documented in writing, by qualified personnel and according to a preapproved draw schedule and any other conditions as set forth in the loan documentation.

DFI-CU 72.04(4) (4) The credit union shall not make construction or development loans unless it utilizes the services of an individual with at least 5 years direct experience in construction and development lending.

DFI-CU 72.04 History History: CR 02-034: cr. Register August 2002 No. 560, eff. 9-1-02.

DFI-CU 72.05 DFI-CU 72.05 Implementation of a member business loan program.

DFI-CU 72.05(1) (1) The board of directors shall adopt a specific member business loan policy and review it at least annually.

DFI-CU 72.05(2) (2) In making member business loans, the credit union shall utilize the services of an individual with at least 2 years direct experience with the type of lending in which it will engage, except as provided s. DFI-CU 72.04 (4).

DFI-CU 72.05(3) (3) A credit union does not have to hire staff to meet the requirements of this section. However, credit unions shall ensure that expertise with the type of lending in which it will engage is available.

DFI-CU 72.05 Note Example: A credit union may meet the experience requirement through various approaches, such as the services of a credit union service organization, an employee of another credit union, an independent contractor or other third parties.

DFI-CU 72.05(4) (4) The actual decision to grant a loan shall reside solely with the credit union.

DFI-CU 72.05 History History: CR 02-034: cr. Register August 2002 No. 560, eff. 9-1-02.

DFI-CU 72.06 DFI-CU 72.06 Member business loan policy requirements. A credit union’s member business loan policy shall include all of the following:

DFI-CU 72.06(1) (1) The types of business loans the credit union will make.

DFI-CU 72.06(2) (2) The credit union’s trade area.

DFI-CU 72.06(3) (3) The maximum amount of the credit union’s assets, in relation to net worth, that it will invest in member business loans.

DFI-CU 72.06(4) (4) The maximum amount of the credit union’s assets, in relation to net worth, that it will invest in a given type of business loan.

DFI-CU 72.06(5) (5) The maximum amount of the credit union’s assets, in relation to net worth, that it will loan to a member or associated members, subject to s. DFI-CU 72.08.

DFI-CU 72.06(6) (6) The qualifications and experience of personnel involved in making and administering business loans.

DFI-CU 72.06(7) (7) A requirement for analysis and documentation of the ability of the borrower to repay the loan.

DFI-CU 72.06(8) (8) A requirement for the receipt and periodic updating of financial statements and other documentation, including tax returns.

DFI-CU 72.06(9) (9) A requirement for documentation sufficient to support each request to extend credit, or increase an existing loan or line of credit, except where the board of directors finds that the required documentation is not generally available for a particular type of loan and states the reasons for those findings in the credit union’s written policies. The documentation shall include all of the following:

DFI-CU 72.06(9)(a) (a) Balance sheet.

DFI-CU 72.06(9)(b) (b) Cash flow analysis.

DFI-CU 72.06(9)(c) (c) Income statement.

DFI-CU 72.06(9)(d) (d) Tax data.

DFI-CU 72.06(9)(e) (e) Analysis of leveraging.

DFI-CU 72.06(9)(f) (f) Comparison with industry average or similar analysis.

DFI-CU 72.06(10) (10) Collateral requirements, including all of the following:

DFI-CU 72.06(10)(a) (a) Loan-to-value ratios.

DFI-CU 72.06(10)(b) (b) Determination of value.

DFI-CU 72.06(10)(c) (c) Determination of ownership.

DFI-CU 72.06(10)(d) (d) Steps to secure various types of collateral.

DFI-CU 72.06(10)(e) (e) A schedule as to how often the credit union will reevaluate the value and marketability of collateral.