Manual
Updated
2006
XYZ Corp
Policy Manual
Forward
The Board of Directors of XYZ Corp Federal Credit Union is responsible for establishing Credit Union policy. This Policy Manual is designed to provide written statements of policy; (1) to establish and implement the objectives of members as interpreted by the Board, and (2) to govern the policy and not detailed procedures, and thus, is intended to be augmented by a procedures manual. In addition to policy, the necessary operating authorizations and other details must be adopted at the Annual Policy Review.
Each year at the Policy Seminar meeting of the Board of Directors, the Policy Manual in its entirety is presented, adopted by Board resolution, and incorporated as a part of the meeting minutes. It thus becomes the policy of the Board. The purpose of the annual review and adoption is to:
1. Provide information to new Board Members on existing policy and the opportunity to question and understand the reasons for Policy as it exists,
2. Assure a systematic review and evaluation of Policies at least once each year; and
3. Reaffirm Policy guides for the Management and Staff.
The Policy and Bylaw Committee is responsible for the initial study, development, and recommendation of new and revised policies to the Board of Directors. Additions, deletions, or changes to the Policy Manual are made by reference to specific parts and sections of the Policy Manual and become operative when adopted by the Board, whether initiated by the Policy and Bylaw Committee or the Board of Directors.
Table of Contents
Section 1. Organization
Section 2. Board of Directors, Independent Accountants and Management Relations
Section 3. Human Resources
Section 4. Compliance/Loans
Section 5. Budgetary and Financial Control
Section 6. Cash and Investment Control
Section 7. Delinquent Loans
Section 8. Policy Statement Truth in Savings Act
Section 9. Asset Liability Management
Section 10. Anti Money Laundering
Section 11. Operational Policies and Procedures
Section
1
Organization
1. Governing Rules and Regulations
A. The laws will govern XYZ Corp Federal Credit Union as well as The National Credit Union Association, its articles of incorporation, by-laws adopted by the Board of Directors and approved by the NCUA.
B. Nothing included in this manual is to be in conflict with the rules and regulations as identified in (a) above.
C. The policy of XYZ Corp Federal Credit Union shall be to emphasize it as a membership-owned organization. Its policy shall be to provide maximum communications to members and openness within the constraints of the law.
2. Organization Structure
The organization structure of XYZ Corp Federal Credit Union shall be as follows: (see Appendix XA)
D. Each year immediately after the organization meeting, the Chairman of the Board of Directors shall appoint standing committees for the year that follows.
E. The Chairman for each Committee shall be generally designated from the Board of Directors.
F. Committee members may be, but are not required to be, members of the Board of Directors.
G. The Vice Chairman of the Board of Directors shall be Chairman of the Policy and By-law Committee.
H. The Treasurer of the Board of Directors shall be Chairman of the ALM Committee.
I. The Personnel Committee shall be the Executive Committee of the Board of Directors and the President/CEO.
J. The Chairman of the Board of Directors shall be notified of all Board and Committee Meetings.
1-2. Organization Structure (Continued)
K. The Chairman of the Board of Directors and President/CEO shall be ex-officio members of all committees except those on which they are regular members.
L. Nominating Committee
The committee shall be comprised of three (3) Credit Union members, whom shall be appointed at the Organizational Meeting of the Board of Directors. One member shall be from the Supervisory Committee.
The committee responsibilities shall include:
1. Selecting qualified candidates for the Board of Directors and Supervisory Committee.
2. Ascertaining the willingness and desire of candidates to serve.
3. Placing names of candidates in nomination.
M. Committees and Staff Liaison.
Employees with duties directly related to the committee function may be designated as staff liaison to the committee without voting rights, namely:
▪ Asset Liability Management – President/CEO
▪ Insurance - President/CEO
▪ Marketing - Manager
▪ Personnel - Management Team
▪ Policy and Bylaw - President/CEO
3. Sponsor Relations
A. XYZ Corp Federal Credit Union will coordinate its operation with the select employee groups listed in the By-Laws, keeping key administrators of the SEGs informed of policy issues and decisions.
B. The autonomous nature of the Credit Union is to be respected by both the Credit Union and the administrator of the select employee groups
1-3 Sponsor Relations (Continued)
C. It is the intent of XYZ Corp Federal Credit Union to operate in such a manner and to provide such excellent service to members that the Credit Union could be considered a fringe benefit for the employee of the select employee group.
D. The Policy of XYZ Corp Federal Credit Union is to provide the best service possible to all members in good standing.
4. Relations to Credit Union Organizations and Associations
A. It is the policy of the Credit Union to take advantage of relationships with Credit Union organizations and associations. Participation in NYSCUL, and other association affairs is anticipated.
B. The Board of Directors’ prime responsibility is to the Credit Union members, and not to any other group or individual.
C. As part of the annual budget function the Board of Directors shall approve dues payments to associations.
5. Compensation - Job Classifications, etc.
A. Management and Staff
Salary ranges for management and staff shall be established and reviewed annually by the Personnel Committee. The actual remuneration of each staff member shall be reviewed annually. Interim raises may be granted following completion of an orientation and training period (Part III, Personnel Policy), or upon transfer or promotion to another job classification, which offers a higher pay schedule.
B. Job Descriptions
The Management Team in cooperation with the Personnel Committee prepares job descriptions. Such descriptions become the Operational Procedure of the Credit Union and not part of the Organizational or Personnel Policy. Such descriptions shall be exhibited in Appendix A of the Policy Manual. (See Sect. 3 Personnel, on job descriptions.)
C. Officer, Directors and Committees
It is the general policy that Officers, Directors and Committee Members of the Credit Union shall be compensated in accordance with the By-Laws of XYZ Corp Federal Credit Union.
Any reimbursements for business related expenses would be paid according to the following policy:
1-5 Compensation-Job Classifications, etc. (continued)
1. Reimbursement of personal vehicle mileage at an applicable rate per mile (and any applicable tolls) from the local personal residence to the location of the Board of Directors or Committee meeting and return
2. For Board and Committee Meetings reimbursement of the expense of a meal of moderate cost, supported by a receipt unless the Credit Union provides a meal. Provision of a meal is at the discretion of the Chairman of the Board of Directors or Committee Chairman.
3. For business related conferences and seminars, reimbursement of reasonable expenses incurred while attending business related conferences and seminars. Also, additional expenses for one immediate family member/guest to attend not more than one conference or seminar per calendar year will be reimbursed. All IRS applicable regulations will apply.
6. Authorizations
The authorizations included in this section are to be adopted each year by the Board of Directors in accordance with the forward of the Policy Manual. Specific authorizations prescribed below plus the annual salary schedules are to be reproduced in the minutes of the Policy Seminar Meeting.
A. Financial Institution
Empire Corporate FCU is designated, as the primary depository institution with Management control of cash in the checking account, normally maintained, at a level required meeting daily needs. Authorization is hereby given to open such accounts and obtain such services as deemed necessary by the President/CEO.
B. Legal Representation
The law firm of Damon and Morey is the official Corporate Attorney.
The law firm of Miskell and Moxam is the official Real Estate Attorney.
The law firm of Horwitz and Frankel is the official Collection Attorney.
C. Investment Account
The investment account is authorized with O'Keefe Shaw & Co., Membertrade, and Membersfirst Advantage, in the name of XYZ Corp Federal Credit Union with any one of the following (Chairman, Treasurer or President/CEO authorized to represent the Credit Union in the sale of securities held as collateral against loans and in other transactions involving the use of the account. The President/CEO is authorized to execute the agreements necessary to establish and maintain the account.
1-6 Authorizations (continued)
D. Bond
The Board of Directors reviews existing bond coverage annually and directs the maintenance of the blanket bond coverage commensurate with the assets of the Credit Union for the current and future years.
E. Legal Papers - Signatures
Any one designated member of the Management Team shall be authorized to sign and release real estate mortgage documents on behalf of the Credit Union. Notice of this authorization shall be filed with the Registrar of Deeds.
Financing statements, security agreements all forms required under the Uniform Commercial Code and releases of titles may be signed by a member of the Management Team.
F. Representatives
The Chairman of the Board of Directors shall appoint four delegates (two for the Buffalo District) to vote on matters of interest to the Credit Union at Credit Union National Association Inc., New York State Credit Union League, and other association meetings.
G. Notary Service
The Credit Union shall have a minimum of two (2) notary publics on staff to notarize Credit Union documents and provide a no-charge service to members. The expense of bonds and seals shall be paid by the Credit Union.
H. Appraiser
The President/CEO may contract the services of any licensed appraiser to appraise real estate in the best interest of the Credit Union and at reasonable cost to the members.
Management shall be authorized to charge a reasonable fee for services to members (telephone, fax copies, etc.)
Share draft certifications may be authorized by management and shall be communicated to the Accounting Department share draft section
I. Credit Reports
1-6 Authorizations (continued)
Management is authorized to contract with various credit bureaus to provide credit reports. The Credit Union will also report to these Credit Bureaus. Such contracts shall be subject to the Fair Credit Reporting Act and CUMIS Insurance requirements.
J. Funds Transfer
A reasonable fee may be charged on accounts for a bank transfer.
K. VISA Card
Management is authorized to contract with Certegy to process our VISA
L. Endorsements
It is the policy of XYZ Corp Federal Credit Union not to provide endorsements of non-Credit Union products or services available from others. From time to time, the Board of Directors and Management may select products and services to be made available to members. Such selection is based on careful evaluation of benefits to be provided to the members of the financial cooperative. The final decision to use the service or select the product rests with the member. Availability does not constitute an endorsement. Notice of this statement of policy shall normally accompany the release of a new service to members.
7. Regular and Special Meetings of the Board of Directors
A. Preparation and Distribution of Agenda
It shall be the joint responsibility of the Chairman of the Board of Directors and the President/CEO of the Credit Union to prepare the agenda for distribution in advance of all meetings.
The President/CEO and staff of the Credit Union shall prepare the necessary reports, exhibits, and supporting documents for each meeting for distribution with the agenda.
B. Notification of Board of Directors and Committee Members
A written or verbal notice will normally precede special meetings at least three (3) days in advance of the special meeting. The majority of a quorum of the Board of Directors shall be adequate to take action. In the event of an emergency, the Chairman can call a special meeting at his pleasure and without notice. An effort shall be made to contact each member of the Board of Directors.
C. Notification of the Board of Directors and Committee Members
1-7 Regular and Special Meetings of the Board of Directors (continued)
It shall be the joint responsibility of the Chairman of the Board of Directors and the President/CEO of the Credit Union to prepare the agenda for distribution in advance of all meetings.
The President/CEO and staff of the Credit Union shall prepare the necessary reports, exhibits, and supporting documents for each meeting for distribution with the agenda.
8. Organization Security – Physical and Information
A. Physical Security
The credit union’s main defense against robberies, burglaries, and larcenies, is a 24/7-motion detection and surveillance system. The interior cameras monitor the vault, the entrance halls into the credit union, the teller stations, the front door and the front vestibule. The exterior cameras monitor the parking lots and the driveway into the credit union. In addition, a monitor displaying members entering the credit union is in the front vestibule. Two signs on the front of the building notify members that the facility has surveillance cameras.
We have posted a sign asking our members to take off their sunglasses and hats when entering the building. The doors to the branches have height charts posted next to them to help staff describe a robber. The frontline staff has description sheets to help describe a robber.
The first employee who enters the building walks through the building looking for any signs of entry and then changes the entry signal to let other staff know it’s safe to enter the building. The buildings have exterior lights located around the building that are controlled by a timer.
To control access to the building, all employees who have keys for the credit union have unique PINs to enter the building. The security system retains this information for 45 days.
B. Data Security
Three layers of password protection protect the members’ records. The PCs have an initial password to start the system, a second password to start the data processing application and a third password to view the member data. All passwords are at least 6 characters long and include letters and numbers. The second and third passwords are changed monthly and can be repeated only after 32 uses. All staff is instructed to keep their passwords confidential. Members are encouraged to select a password/code to confirm identity access to their account. Those members who do not select one are asked to answer randomly selected questions pertaining to their account until CU staff is assured of the caller's identity. If a perpetrator attempted to enter via the Internet, they would have to get passed our firewall and then crack the three layers of passwords.
1-8 Organization Security (continued)
We utilize an online data processor that backs up our member data daily and archives a copy offsite. We receive a disk monthly of our member statements and reports. We save this information to a computer hard drive and send the backup disks to our Dunkirk branch for storage. All original member data is stored at the credit union. This eliminates any member data being stored offsite other than at CUAnwers, which retains back up tapes and discs. We review our data processor’s disaster recovery program annually and we participated in test of the backup site on April 23, 2005. We have our most important documentation in fireproof cabinets and fire extinguishers are located through out the building.
All offices and cabinets that store confidential information are locked at night. As of April 30, 2006, no member data is stored outside of the credit union locations with the exception of CUAnswers.
Because CUAnswers is unable to track data downloads from our credit union, the CFO and CEO have the security clearance to download member information onto their personal computers. Member social security numbers are not allowed to be stored on any laptop computers.
All member data that is scheduled for destruction is deposited into locked bins and destroyed by a certified destruction vendor according to a record retention schedule of seven years. We receive certification when any documents are destroyed. In addition, keypad locks are on the computer room and records room.
Our security assessment determined that we require dual authentication for our online banking program. Our data processor has assured us that we will have dual authentication by the end of 2006.
C. Information Security – Unauthorized Access Response
The purpose of this unauthorized access response program is to ensure the security and confidentiality of member information and records; to protect against unauthorized access to or use of such information or records that could result in substantial harm or inconvenience to a member; and to respond to incidents of unauthorized access to sensitive member information.
Sensitive member information includes the following:
1. Member’s name
2. Address or telephone number
3. Social Security number
4. Driver’s license number
5. Credit or Debit card number
1-8 Organization Security (continued)
6. Personal Identification Number (PIN)
7. Password to gain account access
8. Any combination of components of member information that would allow someone to gain access to an individual’s account; such as a username or password
D. Security Features
Access to secured member information via CU BASE (XYZ Corp’s data processing application) is limited by the use of employee computer, application, and user identifications and associated passwords. Each individual staff member changes these passwords every 30 days. To further mitigate risk, the credit union employs dual controls on most functions to prevent embezzlement, in addition to surprise cash counts by credit union staff and our outside CPA firm and an annual examination by our CPA firm. All new hires are given background, bonding and credit checks.
E. Response Program
1. Assess the nature and scope of the incident
Management will identify the member information system and type of member information that has been either accessed or misused. Management will promptly investigate all known or suspected unauthorized access of physical or electronic data, enlisting the help of the police or private agency if necessary.
2. Notice to Regulatory and Law Enforcement Agencies
Management will promptly notify the Board of Directors and Supervisory Committee of the known or suspected unauthorized access; notify the appropriate NCUA Regional Director; notify government authorities by filing a Suspicious Activity Report (SAR) as required by federal guidelines; and notify CUNA Mutual Insurance- Bond Claims Division. The state attorney general's office, the Consumer Protection Board and other agencies will be notified if 5,000 or more members have been exposed to the security breach. Notification will occur as soon as possible when the credit union becomes aware of such an incident. Individuals responsible for attempted or successful unauthorized access shall be prosecuted to the full extent of the law.
3. Containing and Controlling the Incident
If an unauthorized attempt is possible or attempted, management will ensure that staff immediately change all passwords, access codes, security codes, combinations, keys, or access telephone numbers as deemed necessary.
Steps to prevent further unauthorized access to or use of member information may include any of the following: monitoring, freezing, or closing of affected accounts.
1-8 Organization Security (continued)
4. Member Notice and Assistance
If the credit union, based on its investigation, can determine from its logs or other data, precisely which members’ information has been improperly accessed, it may limit notification to those members with regard to whom the credit union determines that misuse of their information has occurred or is reasonably possible. However, there may be situations where the credit union determines that a group of files has been accessed improperly, but is unable to identify which specific member’s information has been accessed. If the circumstances of the unauthorized access lead the credit union to determine that misuse of the information is reasonably possible, it will notify all members in the group.
Member notice will be given in a clear and conspicuous manner. The notice will include the following:
a) Description of the incident in general terms;
b) Type of member information that was the subject of unauthorized access or use;
c) Description of what the credit union has done to protect and prevent member’s information from further unauthorized access;
d) Telephone number that the members can call for further information (716) 632-9328;
When appropriate, the notice will also include the following additional items:
a) A recommendation that the members review account statements and immediately report any suspicious activity to the credit union;
b) A description of fraud alerts and an explanation of how the member may place a fraud alert on their consumer reports to alert their creditors that they may be a victim of fraud;
c) A recommendation that the member periodically obtain their credit reports from each nationwide credit reporting agency and have information relating to fraudulent transactions deleted;
d) Instructions on how to obtain a credit report free of charge;
e) Information about the availability of the Federal Trade Commission’s online guidance regarding steps consumers may take to prevent and protect them from identity theft. The notice will encourage the member to report any incidents of identity theft to the FTC, and will provide the FTC’s Web site address (idtheft) and toll-free number 1-877-IDTHEFT (1-877-438-4338), which members may use to obtain guidance and report known or suspected instances of identity theft.
D. Section
2
E. Board of Directors and Management Relations
The Board of Directors
The Board of Directors is ultimately responsible for all operations and functions of the Credit Union. To carry out this responsibility it must (1) clearly establish policy (2) select competent Management, and (3) assure itself conclusively that Management is performing properly.
A. A Director of a Credit Union is, by definition, one that directs. He/she represents the best interests of the members and is not directed by others.
B. Some of the detailed responsibilities of Directors are as follows
1. Meet regularly.
2. Review new memberships
3. Review membership expulsions. (see Appendix IIA)
4. Establish and approve the annual business plan.
5. Establish interest rates, and approve expenditures.
6. Authorize necessary bond coverage, investments, and depositories for funds.
7. Declare dividends, and establish reserves.
8. Fill vacancies on the Board of Directors and Committees between Annual Meetings.
9. Review delinquent loans.
10. Maintain a cooperative working relationship with Credit Union Management and Committees.
11. Receive, review and take appropriate action on the reports of the regulatory authorities and Supervisory Committee.
12. Review the progress of the Credit Union in serving member needs.
2-1 Board of Directors (continued)
13. Plan for the long-term development and needs of the Credit Union
14. Participate in relevant Chapter and League programs.
C. Conflict of Interest
When matters pertaining to the specific personal interest of a Director are discussed, the affected Director(s) shall not engage in the discussions and shall abstain in the vote. The minutes shall note the abstentions.
Some examples of conflict of interest situations are action to reduce interest on the obligation of a relative, purchase land for the purpose of erecting a Credit Union office, where the land is owned by a Director, or sell casualty insurance through the Credit Union when a Director is an agent.
The President/CEO
The President/CEO shall be the principal Executive Officer of the Credit Union, but shall not be a member of the Board of Directors.
The President/CEO is responsible for the implementation of the policy of the Board of Directors. He/She is expected to be the person best informed on the operation of the Credit Union and those matters, which should come to the attention of the Board of Directors. Among his/her major duties and responsibilities is that of keeping the Board of Directors properly informed on important issues.
A. The job description for the position of President/CEO is set forth in Appendix A of this manual.
B. The President/CEO shall operate the Credit Union in accordance with regulatory agencies, Credit Union By-Laws and Board policy.
C. The President/CEO shall communicate with the Board of Directors directly at its regular meeting and between meetings, normally through the Chairman of the Board of Directors and/or the Executive Committee.
D. The President/CEO shall cooperate with the supervisory authorities and keep the Board Of Directors informed if differences exist.
E. The President/CEO shall work to build a favorable image for the Credit Union within the community.
F. The President/CEO shall represent the Credit Union and participate actively in appropriate League Programs.
2-2 The President/CEO (continued)
G. The President/CEO shall report to the Board of Directors monthly all relevant events occurring since the prior meeting that have not otherwise been reported. He/she shall make specific recommendations to the Board of Directors for its action as necessary and appropriate.
H. The President/CEO shall provide the necessary staff support including specific data and other relevant information, (liaison) to enable the Board of Directors or Committees to make informed judgments and actions.
I. The President/CEO can expect the Board of Directors to provide authorizations and policy as necessary, to implement or clarify operational procedures.
1. Loan Applications:
The President/CEO shall recommend that the Loan Underwriter reconsider loan applications approved or disapproved
2. Communications:
The President/CEO shall have the opportunity to express himself/herself on all matters of policy and be in attendance at regular Board of Directors and Committee meetings.
3. Personal Development:
The President/CEO shall be given the opportunity to attend credit union and managerial schools and conferences for the express purpose of increasing his/her ability to manage the Credit Union more effectively.
4. Personnel:
The President/CEO shall have the right to hire staff and handle all personnel problems in accordance with the personnel policy. The President/CEO shall direct the activities of staff personnel. The Board of Directors and Committees may make recommendations related to personnel to the President/CEO.
5. Performance Appraisal:
The President/CEO shall be entitled to an annual appraisal of performance and a review of compensation and establishment of performance goals.
6. Request for Examination:
The President/CEO shall be entitled to have the Board of Directors request an examination by the regulatory agency immediately following his/her termination.
2-3 The Board of Directors and President/CEO
The Board of Directors and President/CEO
A. The Board of Directors and President/CEO can carry out their functions properly only by effective coordination and cooperation with each other. They must achieve and maintain a full understanding on issues of central importance to the Credit Union and its members. The regular monthly meeting, and the discussions which take place on that occasion, can be one of the principal means for achieving the necessary coordination.
B. It is the decision of the Board of Directors that the Board of Directors meetings are closed to membership participation for the purpose of maintaining confidentiality.
C. At least once a year a special planning and coordination meeting will be held.
The meeting is not to consider the usual business, but is to be devoted exclusively to planning and coordination, and will be conducted according to the following agenda.
1. A statement on the "State of the Credit Union" by the President/CEO.
2. A discussion of key insures and goals as they relate to the coming year(s).
Management Team
The Management Team of the Credit Union shall include the President/CEO and Managers.
Code of Ethics
A Code of Ethics shall be adopted in principle noting that the priority of concern is for the members and the Credit Union to advance the Credit Union movement. The Code of Ethics will be reviewed with all Credit Union staff members and volunteers annually.
2-6. Independent Accountants – In Relation to the Sarbanes Oxley Act 2002
A. Services Outside the Scope of Practice of Independent Accountants; Prohibited Activities
It shall be “unlawful” for a registered public accounting firm to provide a non-audit service to the Credit Union contemporaneously with the agreed upon services, including; (1) bookkeeping or services related to the accounting records or financial statements of the audit client; (2) financial information systems design and implementation; (3) appraisal or valuation services, fairness opinions, or contribution-in-kind reports; (4) actuarial services; (5) internal audit outsourcing services; (6) management functions or human resources; (7) broker or dealer, investment adviser, or investment banking services; (8) legal service expert services unrelated to the audit; (9) any other service that the Board determines regulation, is impermissible. The Board of Directors may,
2-6 Independent Accountants (continued)
on a case-by-case basis, exempt from the prohibitions any person, public accounting firm or transaction.
It will not be unlawful to provide other non-audit services if they are pre-approved by the Supervisory Committee in the following manner: The bill allows an accounting firm to “engage any non-audit service, including tax services,” that is not listed above, only if the activity is pre-approved by the Supervisory Committee of the Credit Union. The Supervisory Committee will disclose to members in periodic reports its decision to pre-approve non-audit services.
The authority to pre-approve services can be delegated to one (1) or more members of the Supervisory Committee, but any decision by the delegate must be presented to the full Supervisory Committee.
B. Independent Accounting Firm
The accounting firm providing agreed upon services will change every 5 years.
C. Independent Accounting Firm Reports to Supervisory Committee
The accounting firm must report to the Supervisory Committee all “critical accounting policies and practices to be used…all alternative treatments of financial information within (GAAP) that have been discussed with management…ramifications of the use of such alternative disclosures and treatments, and the treatment preferred” by the firm.
D. Consideration of Appropriate State Regulatory Authorities
State regulators are directed to make an independent determination as to whether the Boards Standards shall be applied to small and mid-size non-registered accounting firms.
E. Corporate Responsibility For Financial Reports
The CEO and CFO shall prepare a statement to accompany the audit report to certify the “appropriateness of the financial statements and disclosures contained in the periodic report, and that those financial statements and disclosures fairly present in all material, respects the operations and financial condition of the Credit Union.” A violation of this section must be knowing and intentional to give rise to liability.
F. Improper Influence on Conflicts of Interest
It shall be unlawful for any officer or director of the Credit Union to take any action to fraudulently influence, coerce, manipulate, or mislead any accountant engaged in the performance of an agreed upon services engagement for the purpose of rendering the financial statements materially misleading.
G. Prohibition on Personal Loans to Executives
Generally, it will be unlawful for the Credit Union to extend credit to any director or executive officer.
2-6 Independent Accountants (continued)
The Credit Union may make home improvement and consumer credit loans and issue credit cards to its directors and executive officers if it is done in the ordinary course of business on the same terms and conditions made to the membership.
H. Management Assessment of Internal Controls
Requires each annual report of the Credit Union to contain an “Internal control report”, which
1. states the responsibility of management for establishing and maintaining an adequate internal control structure and procedures for financial reporting: and
2. contain an assessment, as of the end of the Credit Union’s fiscal year, of the effectiveness of the internal control structure and procedures of the Credit Union for financial reporting.
The Credit Union’s independent accountant shall attest to, and report on, the assessment made by the management of the Credit Union. An attestation made under this section shall be in accordance with standards for attestation engagements issued or adopted by the Board. An attested engagement shall not be the subject of a separate engagement.
Requires the Credit Union to disclose whether it has adopted a code of ethics for its senior financial officers and the contents of that code.
I. Disclosure of Supervisory Committee Financial Expert
Requires the Credit Union to disclose whether at least one (1) member of the Supervisory Committee is a “financial expert.”
J. Real Time Disclosure
The Credit Union must disclose information on material changes in the financial condition or operations of the Credit Union on a rapid and current basis.
K. Tampering with a Record or Otherwise Impeding an Official Proceeding
It is a crime for any person to corruptly alter, destroy, mutilate, or conceal any document with the intent to impair the object’s integrity or availability for use in an official proceeding or to otherwise obstruct, influence or impede any official proceeding.
APPENDIX iia
Member Expulsion Guidelines
II-A. 1. A member in XYZ CORP will be in jeopardy of expulsion by the Board of Directors for the following reasons:
a. Loan loss; including principal, interest and any fees incurred to collect the debt.
b. A negative savings balance; including but not limited to fees assessed, returned deposits, ATM withdrawals and POS purchases.
c. Any other loss to the credit union.
d. Abuse of employees including, but not limited, to swearing, yelling, name calling, and threatening.
II-A. 2. The following procedure will take place for each membership in jeopardy of expulsion:
a. A registered letter will be mailed to the member in jeopardy of expulsion that includes the following:
▪ The condition of the member’s account that places the membership in jeopardy of expulsion.
▪ The action, with a timeframe to comply, which the member must follow to stop the expulsion process.
▪ The contact information to set up a meeting to be heard before the BOD, with a timeframe to comply.
b. The Board of Directors, upon a majority vote of those Directors present, will determine expulsion of a member from XYZ Corp.
Chapter
3
Human Resources
Section 3 - Table of Contents
Section Page Subject
3.1 3-4 Philosophy
3.2 3-4 Personnel Committee and Function
3.3 3-4 Compensation
3-5 Amounts/Salary Ranges
3-5 Annual Compensation Report
3-5 Approval/Payroll
3-5 Increase/President
3-5 Increase/Staff
3-5 Overtime
3-5 Staff Expense Reimbursement
3-6 Staff Suggestions
3.4 3-6 Employment
3-6 Code of Conduct
3-7 Hiring
3-8 Job Descriptions
Sect. 3 Table of Contents (continued)
Section Page Subject
3.4 (cont.) 3-8 Lateral Moves/Transfers
3-8 Orientation and Training
3-8 Part Time Employees
8. Performance Reviews
9. Staff Office Hours
3-9 Supervision
3-10 Time Computation/Office Closings
3-10 Vacancies and Advancement
3-10 XYZ Corp Membership
3.5 3-10 Fringe Benefits for Employees
3-10 Benefits Required by Law
3-10 Disability Leave & Benefits
3-11 Funeral Leave
3-11 Insurances
3-12 Leave of Absence
3-12 Other Leave Approved
3-12 Paid Time Off
3-13 Pension Plans
3-13 XYZ Corp Observed Holidays
3.6 3-14 Managerial and Staff Development
14. Educational Assistance
Sect. 3 Table of Contents (continued)
Section Page Subject
3.7 (cont.) 3-15 Manual-Grievances-Records Resignations/Terminations
3-15 Employee Manual
3-15 Grievance Procedure
3-16 Personnel Records
3-16 Resignations/Terminations
3.8 3-16 Related Personnel Policies
3-16 Appearance Guidelines
3-18 CUNA, League, Chapter Offices
3-18 Employment of Relatives
3-18 Personal Phone Calls
3-19 Public Office
3-19 Sexual Harassment Policy
3-19 Smoking Policy
Philosophy
XYZ Corp personnel include two groups: (President/CEO & Department Managers) and Staff. The general intent is to encourage staff to train for careers in this or other Credit Unions. Western Division looks to the community, other Credit Unions and other financial institutions for guidance in establishing XYZ Corp policies.
XYZ Corp prohibits discrimination in recruiting, hiring assignment, promotion, wages, transfer, training, vacation, fringe benefits, and other terms and conditions of employment on the basis of sex, class, age, race, color, religion, disability, marital status, sexual orientation, ancestry, or national origin.
This personnel policy is not an employment contract, but rather serves as a source of information for employees on established XYZ Corp policies. It is understood that XYZ Corp may revise its policies at any time and will attempt to give notice of major revisions to its employees. It is also understood that employees are employees at will and employment may be terminated at any time, for any reason, with or without notice and with or without cause.
Personnel Committee and Function
The Board of Directors shall annually appoint a Personnel Committee. The Committee shall include the President/CEO and the Executive Committee.
The Committee shall be responsible for the administration and integration of personnel policies and procedures and will recommend the amount to be budgeted for staff salaries to be included in the annual budget. (See section 3.3 - Compensation.)
The specific functions of the Personnel Committee shall include:
1. The review of the existing organizational chart to include consideration/recommendation of changes as deemed desirable.
2. The review of existing and new job descriptions
3. The review and updating of forms, procedures and policies for employment application evaluation and application for transfer, promotion and reclassification.
4. The review of disciplinary procedures and penalties for employees.
5. The review of procedures pertaining to salary increases, including an annual review of staff actual compensation for the previous fiscal year.
6. The review of orientation and training requirements for XYZ Corp positions.
Compensation
3-3 Compensation (continued)
A. Salary ranges
A salary range will be established for each job classification. The salary of each employee will be maintained within these ranges.
B. Annual Compensation Report
A confidential annual report will be submitted by the President/CEO to the Personnel Committee and to the Supervisory Committee by February 1st of each year listing each employee, the employee’s approved base salary and actual compensation (broken down by salary, overtime, expense reimbursements, and pay in lieu of PTO) for the previous fiscal year.
C. Approval/Payroll
The Human Resource Coordinator will compile the bi-weekly payroll. The payroll will be reviewed and approved by the President/CEO prior to submittal for disbursements.
D. Increase/President
The President/CEO's salary will be recommended by the Personnel Committee, (absent the President/CEO), to the Board of Directors. Change may be effective January 1st of each year.
E. Increase/Staff
Salary increases (not to exceed the maximum of the grade level) will generally be evaluated at least annually and may be effective January 1st of each year. The President/CEO will set and may modify individual staff salaries within annual budget considerations.
F. Overtime
Overtime is pay for hours actually worked in excess of 37.5 hours per week. Management must authorize all overtime work in advance. Overtime for staff is one and one half times (1½) the hourly rate. Authorized overtime shall be paid in the payroll it is earned in and may not be accumulated. Compensatory time off for extraordinary time worked by management employees is at the discretion and approval of the President/CEO.
Employees are expected to work a reasonable amount of overtime when required to maintain XYZ Corp operations.
G. Staff Expense Reimbursement
Employees incurring an authorized expense in conjunction with their normal position, position duties or upon special duties assigned shall submit a detailed summary of those expenses with
3-4 Employment (continued)
appropriate receipts. Vehicle mileage is at the IRS approved rate per mile with parking fees and tolls in addition. Travel expenses of staff shall be a reasonable amount for travel, lodging, meals and out-of-pocket expenses to be accompanied by receipts and approved by the President/CEO.
H. Staff Suggestions
Employee's suggestions for cost saving ideas, new services or other improvements shall be recognized with an appropriate written notice in their personnel folder or at a staff meeting. The President/CEO may consider monetary awards with approval by the Board of Directors.
Employment
A. Code of Conduct
The employees of XYZ Corp are required to adhere to a Code of Conduct, which sets the standards of conduct appropriate to the Board of Directors, committees, management and staff of a financial institution.
Every employee shall:
1. Recognize his/her personal responsibility to maintain the good name and reputation of XYZ Corp both within and outside XYZ Corp. This includes, but is not limited to, the exercise of courtesy to members, employees, and management under all circumstances. Within XYZ Corp, this also includes the wearing of appropriate business attire and the exercise of appropriate grooming and cleanliness. False statements of any type under any circumstances are strictly prohibited.
2. Give a full day's labor for a full day's pay. This includes, but is not limited to, regular and prompt attendance when scheduled; being present at your work station when expected; working for XYZ Corp for the entire period that you are scheduled to work; promptly returning from breaks; reporting unexpected absences to the President/CEO or department manager before 9:00 A.M. on any day of absence; providing the President/CEO with a doctor's excuse or a written release to return to work when requested.
3. Give his/her earnest effort and best thought to the performance of his/her duties. This includes, but is not limited to, being alert and productive on behalf of XYZ Corp while at work. The conduct of personal work on XYZ Corp time or the use of XYZ Corp equipment or materials for personal business is prohibited. Posting and distribution of literature unrelated to XYZ Corp work in workstations or common areas or to the membership or to employees during work hours is prohibited, as is the posting, removal, or tampering with bulletin board notices and information without authorization.
4. Do your part to insure that XYZ Corp is a safe and healthy place to work. This includes, but is not limited to, a responsibility to observe all safety, health and fire regulations; a duty to follow good
3-4 Employment (continued)
housekeeping practices at your work station, around equipment, and throughout Western Divisioin; a duty to report any on-the- job accident or injury to the President/CEO or Manager immediately after the occurrence of the accident or injury; a duty to report any unsafe conditions that may distract or otherwise endanger yourself or others.
5. Comply with instructions, procedures, job assignments and other directions of any manager of XYZ Corp.
6. Seek to find and utilize more efficient and economical means of performing one’s job. Submit any and all ideas for improving XYZ Corp functions and procedures. Never discriminate unfairly by granting any special favors or privileges to anyone whether for compensation or not.
7. Never discriminate unfairly by granting special favors or privileges to anyone whether for compensation or not.
8. Never accept, any gift, benefit or hospitality that might be construed by reasonable persons as tending in any way to influence him/her in the performance of his/her duties. Cash gifts in any amount may not be accepted. In general, no employee or volunteer of XYZ Corp may accept a business-related gratuity exceeding an equivalent cash value of $50. If there is any question regarding the propriety of accepting a gratuity that could exceed the equivalent monetary limit (e.g. acceptance of a dinner, invitation to a sporting event, theater performance, etc.,) it should be discussed with the CEO to determine if there is any undue influence before accepting such a gratuity.
9. Never engage in any personal business with XYZ Corp, either directly or indirectly, that is inconsistent with the conscientious performance of his/her duties.
10. Never transact any business on behalf of a personal friend or relative.
11. Never disclose any information given in confidence in the performance of your duties. Never use such information for making private profit.
12. Never participate on behalf of XYZ Corp, directly or indirectly, in deliberations or decisions or any questions in which he/she has a pecuniary interest including any decisions affecting the procurement of equipment, supplies or services from any source, which would give him/her financial gain.
13. Disclose the facts, should any possible conflict of interest arise, so that it may be determined (a) whether a problem exists and (b) if so, how best to eliminate it.
14. Uphold these principles as fundamental to the well being of XYZ Corp and to its continued service, growth and progress.
3-4 Employment (continued)
B. Hiring
The Board of Directors is responsible for hiring and terminating the President/CEO.
The President/CEO is responsible for hiring and terminating the, department managers and staff in accordance with policy of the Board of Directors and within budgetary guidelines and limitations. The President/CEO is responsible for the day-to-day management of all personnel.
Prior to the time of initial employment, a previous employment record will be reviewed and validated in addition to a background check, a bondability check, and a credit report.
C. Job Descriptions
There shall be a written job description for each authorized position within XYZ Corp. See Appendix IIIA.
D. Lateral Moves and Transfers
When an employee transfers from one functional department to another with similar or equal responsibilities, no salary increase shall be provided.
Employees who accept a position, which is lower on the organizational chart than their current position, shall be paid at a rate based on their qualifications as per the job description in the new position, but not to exceed the maximum range for the new position. The rate of pay will be recommended by the immediate supervisor and approved by the President/CEO.
E. Orientation and Training
New employees or employees assuming a new position will undergo a minimum six (6) month orientation and training period.
F. Part Time Employees
Part-Time employees shall be paid at a rate within the salary range for the position. The rate shall not be less than the minimum wage
G. Performance Reviews
1. Each employee will participate in a job performance review with his immediate Department Manager at least once a year. The subsequent written review rating becomes a matter of record and aids in the development of employees. Communications and discussion enable the Department Manager and the employee to improve mutual understanding.
3-4 Employment (continued)
2. Performance rating reports cover many aspects of job performance, grouped under such major factors as adaptability, quality of work, and job performance. There is room for overall evaluation and comments by both the rater and employee.
3. These and all other reports will be forwarded to the President/CEO for filing in the employee’s personnel records.
4. The President/CEO shall make salary recommendations for managers and staff to the Personnel Committee. The President/CEO shall use these performance reviews and salary recommendations as a basis for developing the annual compensation budget, and for determining salary adjustments.
H. Staff Office Hours
1. Full time staff works 37 1/2 or more hours each week according to a schedule of work and breaks established by management.
2. The office will be open and staffed according to a schedule set by Management.
I. Supervision
Each employee will be provided with a copy of the organizational chart, which outlines the reporting structure. See Appendix XA.
J. Time Computation for Unscheduled Office Closing
When weather related or other unforeseen office closings occur, the following is the policy for payment of regularly scheduled staff hours:
1. When office is closed for weather related occurrence and is broadcast to the public over previously established website, radio and/or television channels, or staff is phoned by management not to come in, any staff scheduled to work that day may take PTO time for their normally scheduled hours.
2. When office is open, then closes during the course of the day for any unforeseen occurrence, all staff on duty at that time will be paid the greater of 4 hours or time worked and may elect to take PTO for the rest of their scheduled day. Any staff called to not come in may take PTO for their normally scheduled hours. It will be at the discretion of the Department Manager to make up hours for work that must be completed.
3. Any staff on a PTO day or scheduled for a PTO day during times of unscheduled unforeseen office closings will take the PTO as scheduled.
3-4 Employment (continued)
K. Vacancies and Advancement
Vacancies and advancement opportunities shall be:
1. Filled by qualified existing employees whenever and wherever appropriate.
2. Based on qualifications required for the position as outlined in the job description.
3. Job award will be based on an evaluation of work record, performance evaluations, recommendations of managers, management training record and educational records and or may include a written and/or oral examination as required for the position job description.
L. XYZ Corp Membership
Each employee shall join XYZ CORP.
Fringe Benefits for Employees
A. Benefits Required By Law
1. Disability Insurance:. This is a program to protect the employee in case of a non-work related accident or illness resulting in a period of disability.
2. Social Security (F.I.C.A.): This fund is intended to provide retirement, long-term disability payments or survivor’s benefits in the event of your death. Contributions are matched equally by XYZ Corp ‘s contribution to your account.
3. Workers’ Compensation: This is an insurance that pays for all medical, surgical and disability costs as a result of an on-the-job accident or illness. All work-related injuries or illnesses must be reported to a supervisor as soon as possible.
4. Unemployment Insurance: This insurance provides funds for individuals who are unemployed and/or between jobs.
B. Disability Leave and Benefits
Employees shall receive the following disability benefits:
1. First five (5) days of disability, earned but unused PTO; for the next 25 weeks, 70% of pay by disability insurance carrier; after 26 weeks, long term disability @60% of pay by the disability insurance carrier. Qualifications for disability benefit payments will be determined pursuant to the eligibility provision under New York State Disability Benefits Law. In all cases the absence must be continuous and verified in writing by a licensed physician.
3-5 Fringe Benefits for Employees (continued)
2. XYZ Corp will require proof of disability, including a physician's statement with the option to have a physician of its choosing confirm the disability at its expense and shall require a medical release to return to work. At the end of twenty-six (26) weeks of disability leave out of a 52-week period, XYZ Corp cannot and will not guarantee a position.
3. Absence from the workplace, for any reason or reasons, exceeding a total of 3 months in a 12-month period may affect salary increases.
4. XYZ Corp shall continue insurance coverage, including hospital and surgical insurance, under the same condition that existed before the disability took place, up to a maximum of 26 weeks.
C. Funeral Leave
Funeral leave with pay up to three (3) days may be granted in the event of the death of a spouse, parent, sibling, child, grand parent, mother-in-law or father-in-law.
D. Insurance
XYZ Corp has insurance through:
The Guardian……………………………... Dental and New York State Disability
Independent Health……………………….. Major Medical and Hospital
The Guardian……………………………... Long Term and Short Term Disability
Paul Revere Life Ins. Co.………………….. Life Insurance
CUNA Mutual..……………………………. Workers’ Compensation
E. Health and Dental Insurance
XYZ Corp will provide for single and family health and dental insurance. XYZ Corp will pay for the total cost of single and family dental insurance. XYZ Corp will pay for the total cost of single health insurance and 80% of the cost of family health insurance. Part time staff will pay for dental and health insurance according to the percentage of their hours worked from chart provided upon employment.
3-5 Fringe Benefits for Employees (continued)
F. Leave of Absence
Provisions for leave of absence without pay must be made by written application and approved by the President/CEO. Such leave shall be for a predetermined fixed term. Leave of more than
three (3) months shall not guarantee return to the same position. During a leave of absence period, the employee shall be eligible for XYZ Corp group insurances, but the employee will pay the premium.
G. Other Leave Approved
Release time for required service (not normally to exceed two (2) weeks) in the National Guard, regular reserves encampments or Jury Duty shall be provided with no charge against PTO. XYZ Corp will pay the difference between the employee’s salary and what is earned from the National Guard and Reserves. XYZ Corp will pay the difference between the normal workweek's pay and the jury duty pay for the period of jury duty, not to exceed ten (10) days.
H. Paid Time Off (PTO)
PTO shall be considered earned* by employees on January 1st of each year as follows:
If the employee has completed: Time Allowed Jan. 1st
Less than 6 months 10 days first year
Less than 10 years 20 days
Over 10 years 25 days
Employees must use all but 5 days of their earned PTO by December 31st. Any PTO over 5 days at the end of the year will be lost. Remaining PTO of 5 days or less at the end of the year will be paid the first week in January.
*New employees earn 1 days PTO per calendar month up to 10 per year. These days are awarded on the first day of each month and are immediately available to use based on all other stated criteria. PTO hours will be based on the following schedule:
Normal Work Week PTO Awarded
37.5 hours work week 7.5 hrs
Part time employees will receive their normal work week hours divided by five (5).
3-5 Fringe Benefits for Employees (continued)
PTO days are not to be scheduled during peak periods. The PTO schedule for the year is to be established by the President/CEO and Department Managers. To assist in XYZ Corp workflow, staff is encouraged to submit their request for PTO of 5 days or more for the first ½ year (Jan. 1 – Jun. 30) by November 15 of the preceding year. The second ½ year (Jul. 1- Dec. 31) must be submitted by May 15; thus increasing the chances that the days requested are granted. PTO requests by staff shall be submitted in writing to the President/CEO and their Department Manager.
In the event of conflicts between two or more employees, the employee submitting the initial PTO request will be given priority except when submitted prior to May 15, and November 15 in which case seniority will prevail unless there is an agreement on the change by all individuals involved. Any request for changes in PTO must be submitted in writing to the President/CEO and their Department Manager at least twenty-four (24) hours before the change.
PTO shall be taken in increments of no less than one half (1/2) hour. All employees are required to be off of work at least five (5) continuous days after their initial 12-month period.
Upon notification of termination of employment, the President/CEO will calculate earned but unused PTO days for reimbursement to the employee. PTO days will be calculated at their last hourly wage rate and disbursed in the next full pay period following their separation.
Request for PTO of less than 5 consecutive days must be submitted at least 48 hours in advance to Department Managers.
For unscheduled PTO, you must notify your Department Manager or President/CEO by 9:00 A.M.
Requests for use of PTO are subject to the approval of Department Managers or President/CEO based upon the needs of XYZ Corp.
I. Pension Plans
XYZ Corp has a SEP and 401Kplan. XYZ Corp contributes 10% of an employee’s salary to the SEP/IRA at XYZ Corp and matches up to 3% of the employee’s salary to the 401K plan employees are eligible for both plans after 1 year of service and obtaining age 21 years.
J. XYZ Corp Observed Holidays
XYZ Corp will observe the Federal Reserve holiday schedule. Employees who are normally scheduled to work on the day of the week the holiday falls, but do not work, will be paid for such days. Employees who work on days that are observed as a holiday will be paid double time and one-half for hours worked.
3-5 Fringe Benefits for Employees (continued)
Holidays normally observed include:
New Year’s Day
Martin Luther King, Jr. Day
Presidents’ Day
Memorial Day
Independence Day
Labor Day
Columbus Day
Veterans' Day
Thanksgiving Day
Christmas Eve 1/2 Day
Christmas Day
New Year's Eve 1/2 Day
Part time employees will be paid for holidays under the same schedule used for PTO. (Page 3-11)
Managerial and Staff Development
The policy of the Board of Directors is to provide opportunities for management and staff to attend meetings, conferences, and other educational sessions that provide desired training, depth of understanding in technical areas or ideas helpful to the development or operation of XYZ Corp. XYZ Corp will normally pay necessary training costs and provide managerial and staff training time. Training sessions and conferences where expenses are not payable by XYZ Corp shall be clearly defined.
Educational Assistance
In order to develop knowledgeable personnel, XYZ Corp will reimburse an employee for the cost of tuition, books, and fees for course enrollment and instruction directly related to XYZ Corp operations.
The President/CEO must approve courses in advance so that applicable expenses may be reimbursed upon successful completion. The requester must describe the benefits to be derived by this educational course/program, and receive a grade of C or better.
1. A limit of six (6) credit hours per semester is eligible for reimbursement.
2. A provision for reimbursement to XYZ Corp for the educational cost if employment is terminated within eighteen (18) months of course completion is determined by the following formula:
3-7 Employee Manual-Grievances-Records- Resignations/Terminations (continued)
18 – (# of months employed x ( reimbursement/18 (amt. Due to Western Division)) since completion of course)
3. This reimbursement, if applicable, is to be paid by the employee at the termination of employment with XYZ Corp.
4. Tuition reimbursement will be limited to $4,000 in any 1-year period.
Manual-Grievances-Records-Resignations/Terminations
A. Employee Manual
Each employee shall be furnished with an employee manual, which normally shall include:
▪ Job description of current position
▪ Organizational chart of XYZ Corp
▪ Employee benefits
▪ Personnel policies
▪ Code of conduct
B. Grievance Procedure
In an effort to resolve personnel problems, the following grievance procedure shall apply to all employees:
1. The employee in written form to a member of management submits a notice of the alleged personnel problem or claim of unfair treatment.
2. Management will meet with and deliver a written response to the employee within ten (10) working days of personal receipt of the grievance.
3. If the employee is dissatisfied with the decision, the employee may submit any additional documentation in support of his/her grievance and/or appeal to the Personnel Committee. The Personnel Committee will render its final answer to the employee within fifteen (15) working days, in writing, with copies to Management. This shall be the final disposition of the grievance. Times may be extended by mutual consent.
4. No employee will be penalized for using the grievance procedure as outlined herein
3-7 Employee Manual-Grievances-Records- Resignations/Terminations (continued)
C. Personnel Records
A complete personnel file shall be kept and maintained on each employee by the President/CEO. The file shall contain all employee records relating to performance i.e. the employee's evaluation, promotions, grievances, disciplinary actions and a record of training offered and completed by the employee. A copy of any material placed in an employee file, which may affect job performance evaluation, shall be presented to the employee involved at the time it is placed in the file.
Upon written request, an employee shall have the opportunity to review his/her personnel file
and make submissions to his/her personnel file. This review will normally take place within one working day of the receipt of the request by the President/CEO. The President/CEO shall be
present during the review.
D. Terminations/Resignations
A minimum of two (2) weeks notice of resignation by an employee is requested. Such notice shall include the reasons for the resignation. In consideration of individual circumstances, the President/CEO may make exceptions to this policy.
XYZ Corp reserves the right to terminate employment for any reason or no reason, with or without notice. Under appropriate circumstances, XYZ Corp will attempt to provide an employee with two (2) weeks prior notice of termination or pay in lieu of notice. However, no notice or pay in lieu of notice will be provided if an employee is terminated for reasons related to job performance or a violation of XYZ Corp Policy.
Related Personnel Policies
A. Appearance Guideline
First impressions are considered lasting impressions. The goal of XYZ Corp Federal Credit Union is to present a professional image to the public at all times, both in person and on the phone. Whether interacting with internal or external “customers”, employees convey the reputation of XYZ Corp Federal Credit Union; therefore, maintaining a businesslike appearance and behaving in a mature, responsible manner is very important to our overall success.
APPROPRIATE ATTIRE
1. Clothing must be clean, neat, pressed and non-tattered.
2. Attire should be conservative. Examples include dress slacks, dress skirts, blouses, dress shirts, dress shoes, ties, business suits, business dresses, blazers with coordinating skirt/slacks, collared polo/golf type shirts, sweaters, vests, “Dockers-type” and khaki slacks, sport shirts, credit union
3-8 Related Personnel Policies (continued)
logo attire. Logo attire is limited to shirts with XYZ Corp logo, any national credit union logos (NYSCUL,) and manufacturing logos such as IZOD, Lands End, etc.
3. Dresses or skirts must be a professional length. Professional length is defined as no more than 2” above the knee when standing and/or slits that open to no more than 2” above the knee when standing.
4. Slacks, pants or trousers must be full length with the exception of Gaucho and crop pants styles.
5. Hosiery is required at all times.
6. Hair must be clean, neat, dry and well groomed.
7. Cleanliness of body and good dental hygiene are to be observed at all times.
8. Shoes must be in good repair and polished if appropriate.
9. Visible tattoos are allowed as long as they are not offensive.
INAPPROPRIATE ATTIRE
1. Soiled, spotted, wrinkled or stained clothing.
2. Jean-style denim slacks or skirts of any color, warm-up suits, sweatshirts/pants, leggings, stirrup, pants.
3. Loud clothing, i.e. Hawaiian shirts.
4. Transparent, see-through, low cut or revealing clothing.
5. Tight fitting clothing that is revealing.
6. Shorts, skorts, and Capri pants.
7. Apparel with advertising for other businesses.
8. Visible pierced accessories other than earrings.
9. Sneakers/athletic shoes. (These are acceptable when traveling to or from work, but not during business hours.)
10. Undergarments that are visible
3-8 Related Personnel Policies (continued)
MAKE-UP/FRAGRANCES/JEWELRY
1. Make-up, if worn, must be conservative and tasteful.
2. Jewelry must be appropriate and not distracting (noisy).
3. Fingernails must be an appropriate length, and polish must be neat and not chipped if worn.
4. Due to the fact that many people are allergic to fragrances such as cologne or after-shave, etc., employees are asked not to wear strong scented fragrances.
Accommodations will be made for employees with documented medical conditions and/or religious beliefs that require special clothing, jewelry, shoes, etc.
B. CUNA, League, Chapter Offices
It is recognized that active participation in the Credit Union industry by management and staff is valuable to the growth and success of XYZ CORP. Such participation is strongly encouraged.
The Board of Directors will provide time for official meetings for management and staff who are serving as directors or officers of the Credit Union National Association, Inc., the New York State Credit Union League, Empire Corporate FCU, the Buffalo District of the New York State Credit Union League or associations thereof.
C. Employment of Relatives
No relative of any Director, committee member or employee shall be hired at XYZ Corp.
D. Personal Phone Calls
XYZ Corp Federal Credit Union recognizes that there may occasionally be times when personal calls must be made or received during business hours. Such calls must be held to a minimum, however, and must not interfere with the employee’s work. Employees are encouraged to make such calls during their breaks or at lunchtime.
When a long-distance call results in a charge, the call must be billed to the callers home phone number or charges reimbursed to the Credit Union.
Cell phones are subject to the same policy as the business phone above. Cell phones should be turned off or put on the silent mode during work hours so as not to disturb the working environment of the credit union.
3-8 Related Personnel Policies (continued)
E. Public Office
Management and Staff may seek public office as long as holding such office will not interfere or be in conflict with the duties of their position at XYZ Corp.
F. Sexual Harassment Policy
It is the policy of XYZ Corp that all employees have a right to work in an environment free of sexual harassment.
Harassment on the basis of sex is a violation of Section 703 of Title VII. Unwelcome sexual
advances, requests for sexual favors, and other verbal, e-mails or physical conduct of a sexual
nature constitute sexual harassment when: (1) submission to such conduct is made either explicitly or implicitly a term or condition of an individual's employment, (2) submission to or rejection of
such conduct by an individual is used as the basis for employment decisions affecting such individual's work performance or creating an intimidating, hostile or offensive work environment.
XYZ Corp is committed to providing a working environment free of sexual harassment. Any individual who believes that he or she has been the victim of sexual harassment is strongly encouraged to seek redress. Complaints and concerns are to be addressed to Management.
All complaints will be promptly investigated. Any individual engaging in sexual harassment may face a variety of penalties depending on the nature of the offense, including termination.
G. Smoking Policy
Smoking is prohibited within Credit Union facilities.
APPENDIX iIIa
Supplement for Coach Attributes
1. Understand and commit to the Credit Union’s mission, philosophy, goals and objectives.
2. Facilitate open and honest communication throughout the organization while maintaining
confidentiality where necessary.
3. Focus on solutions. Don’t dwell on problem or “point fingers”.
4. Empower staff to demonstrate initiative, and be supportive of their decisions.
5. Assure that meetings are well planned and productive.
6. Be objective and fair.
7. Be visible to your staff.
8. Provide timely feedback (including reports, analysis, etc.).
9. “Show” how, don’t just “tell”.
10. Be a “cheerleader”.
11. Provide only constructive criticism!
12. Demonstrate mutual respect, trust and sensitivity.
13. Provide vision.
14. Accept “ownership” of individual job responsibilities.
15. Demonstrate initiative in identifying problems/solutions and enhancing quality service.
16. Praise employee achievement publicly; but reprimand privately.
17. Lead by example.
18. Listen to and encourage creative thinking.
Appendix IIIA (continued)
Supplement for Team Player/Role Model
1. Commit to self-improvement through continuing education and training.
2. Promote mutual respect and trust.
3. Accept and understand your role.
4. Be willing to participate and share ideas.
5. Help team members to their goals (i.e. organizational goals).
6. Provide and support common vision (objective).
7. Support each other.
8. Accept the bad with the good.
9. Good attitude (positive).
10. Work effectively (work smarter not harder).
11. Do your part.
12. Maintain confidentiality.
13. Follow “Chain of Command.”
14. Be willing to “pitch in.”
15. Actively participate to help out..
16. Be willing to accept new “ideas.”
17. Be willing to accept change.
18. Be unselfish.
Appendix IIIA (continued)
BASE EXPECTATIONS FOR:
ACCOUNTING MANAGER
MEMBER SERVICE MANAGERS
INFORMATION TECHNOLOGY MANAGER
MARKETING MANAGER
BUSINESS DEVELOPMENT MANAGER
LENDING MANAGER
BRANCH MANAGER
1.* For each area of responsibility, develop the strategic/tactical plans that would support the annual
objectives as well as the long-term vision.
2.* Communicate expectations to their direct subordinates with timely feedback on performance and
fully empower them to carry out their responsibilities.
3. Be involved in community and professional related activities.
4.* Recognize/listen to member requests, both external and internal and/or concerns, identify their
needs and build relationships with the members.
5.* Assure proper staff is in place.
6.* Provide an atmosphere, which promotes open and honest participation of their staff.
7.* Possess general knowledge of all products, services, and operations within the Credit Union and
understand their interrelationships.
8.* Possess specific knowledge of all products, services and functions within their area of responsibility.
9. * Responsible for making major decisions, which impact their area of responsibility with advice from
their appropriate Manager.
10.* Responsible for enforcement of all policies and procedures.
11. Be visible within their area of responsibility.
12.* Meet regularly with their staff.
Appendix IIIA (continued)
13.* Participate in the annual budget process and adhere to annual budget.
14.* Responsible for the continuous improvement of their departments’ products
and services.
15.* Keep abreast of and advise Management of changes in regulations,
rules and laws.
16.* Develop procedures for each area of responsibility with revisions to be
presented to the appropriate Manager.
17.* Responsible for timely and accurate processing of member transactions,
inquiries and problem resolutions within their area of responsibility.
18.* Assist in resolution of regulatory and audit findings.
19.* Responsible for the disaster recovery plan as it pertains to their area.
20.* Participate in fraud and other security investigations as required.
21.* Be a “Team Player/Role Model” for all Credit Union staff. (See Supplement
for “Team Player/Role Model”.)
22. Be a good “Coach”. (See supplement for “Coach”.)
* These are essential Functions for these positions.
Appendix IIIA (continued)
BASE EXPECTATIONS FOR:
MEMBER SERVICE REPRESENTATIVES (MSRs)
MEMBER SERVICE STAFF
TELLERS
ACCOUNTING STAFF
MARKETING ASSISTANT
HUMAN RESOURCE COORDINATOR
ADMINISTRATIVE ASSISTANT
1.* Be able to handle different situations (i.e., demonstrate versatility).
2.* Willingness to gain product knowledge.
3.* Recognize/listen to member requests and/or concerns, identify their needs and build relationships
with the members.
4.* Adequately perform all operational functions.
5.* Assist with information gathering.
6. Provide other functions as required.
7. Be a “Team Player” and serve as a “Role Model” for all Credit Union staff. (See Supplement for
“Team Player/Role Model”.)
8. Be a good “Coach.” (See Coach Supplement)
* These are essential functions for these positions.
H. Section
4
I. Compliance/Loans
It is the declared policy of this Credit Union to comply with the letter and intent of all applicable laws of the United States and of the NCUA and all regulations promulgated there under. This policy is specifically intended to include all facets of the granting of credit and making loans, the handling and processing of credit applications, credit inquiries, information concerning interest rates, credit terms and costs, earnings and penalties on shares and all other requirements of the Federal Consumer Credit Protection Act and associated regulations.
As required by law, membership in this Credit Union is open only to individuals who are included in the field of membership, as it is defined in the Credit Union By-laws. No member will be denied any service of this Credit Union because of race, color, religion, national origin, sex, marital status, sexual orientation or age (provided that the applicant has the capacity to enter into a binding contract), the fact that all or part of the applicant's income derives from any public assistance program or the fact that the applicant has, in good faith, exercised any right under the Consumer Protection Act or any similar state law.
No official or staff member of this Credit Union will, in any manner, discourage a member from submitting an application for credit. This Credit Union will accept and consider a completed application from any person who wishes to submit a request for credit.
4-1. Loan Underwriters
A. The Board of Directors will authorize the Loan Underwriters to grant loans to members.
B. Authority is given to the Loan Underwriters at the organizational meeting each year.
4-2. Loan Underwriter Duties
The Loan Underwriters are responsible for reviewing loan applications and for decision making on the granting of loans and extensions/refinances. This responsibility is subject only to the restrictions set forth from time to time by the Board of Directors, the bylaws, and by the NCUA, which governs the operation of Credit Unions.
All loans shall be based on the following:
A. The member applying for a loan is of responsible character.
B. All loans are made for a meaningful (provident and productive) purpose.
C. The member in question has the ability to repay the loan, within the terms of the note.
4-2 Loan Underwriter Duties (continued)
D. That collateral will be required as regulated by the Board of Directors, the by-laws and statutes that govern this aspect of Credit Union service.
4-3. Rates of Interest
In conformance with the Credit Disclosure Act (Truth in Lending) XYZ Corp Federal Credit Union shall calculate interest on the unpaid balance for all loans on the number of days the principal was used incorporated with the Julian Calendar as approved by the NCUA for Credit Unions using data processing services.
Example: PxRxT=I $1,000x12%x31=$10.19
365
Loans shall be made to help a member’s financial need at the lowest possible cost.
Each application will be reviewed on its own merits. An ECOA (Equal Credit Opportunity Act) notice will be sent to the applicant if not approved or if more information is needed.
If the member is dissatisfied with the original decision, the Lending Manager, President/CEO, or Board of Directors will review the loan, if necessary.
The Board of Directors shall set policy regarding the types of loans offered by XYZ CORP.
4-4 Loan Policies
A. Risk Based Pricing
The credit bureau Fair, Isaac & Company (FICO) score is used to determine interest rate. FICO software calculates a credit score on the basis of data collected in five basic categories: payment history, amounts owed, length of credit history, new credit and types of credit used.
The FICO score ‘grading structure’ is:
|Score |Paper Grade |
|730 + |A+ |
|680 – 729 |A |
|640 – 679 |B |
|600 – 639 |C |
|550 – 599 |D |
|549 & below |E |
4-4 Loan Policies (continued)
A tiered system by product and term is used. The rate is higher as the maturity lengthens. The interest rate schedule (see page 9) is the index that determines interest rates for all risk based loan products.
In determining the interest rate when two individual credit scores are offered we adhere to the following:
▪ In the event that the two signers are joint borrowers, the credit score used to determine the interest rate will be the member whose income most supports the loan request; i.e. highest income.
▪ In the event that there is an applicant and co-signer, the credit score will be based on the applicant’s score only.
In the event there is no credit report or score, the Credit Union will assign a score of B for all applicants. After 6 months of timely payments, the Credit Union will assign a score of A for these members.
At the member’s request, the Credit Union will adjust an interest rate within the first 90 days to a more favorable rate when the member’s FICO score improves to a score warranting a lower interest rate.
B. FICO Scores
Listed below is an example of an ODDS SUMMARY TABLE showing the probability of default. As you can see, only 1.72% who scored over 800 points defaulted, yet 86.47%, that scored under 549 points, defaulted. Our employees will always look to secure loans with FICO scores below 600 points.
Negative Performance
Score Base Category Cumulative # of Cumulative % Negative Odds
Range # of Records % Records % to Base Value to 1
A 800 or More 96,728 9.88% 1,662 0.99% 1.72% 57.20
780 - 799 117,797 21.91 2,945 2.76 2.50 39.00
760 - 799 123,403 34.51 4,886 5.68 3.96 24.30
740 - 759 114,841 46.24 6,480 9.56 5.64 16.70
720 - 739 100,064 56.46 8,307 14.53 8.30 11.00
700 - 719 89,899 65.65 10,337 20.72 11.50 7.70
A 680 - 699 80,829 73.90 13,695 28.91 16.94 4.90
4-4 Loan Policies (continued)
Negative Performance
Score Base Category Cumulative # of Cumulative % Negative Odds
Range # of Records % Records % to Base Value to 1
660 - 679 69,185 80.97 16,186 38.60 23.40 3.30
B 640 - 659 47,970 85.87 15,501 47.88 32.31 2.10
620 - 639 35,551 89.50 15,148 56.94 42,61 1.30
C 600 - 619 25,831 92.14 13,682 65.13 52,97 0.90
D 550 - 599 45,914 96.82 31,374 83.91 68.33 0.50
E 549 - Less 31,088 100.00 26,883 100.00 86.47 0.20
Total 979,100 100.00 167,086 100.00 17.07 4.90
C. Debt Ratio's
As a guideline only for determining credit worthiness, the Credit Union will use a maximum debt to income ratio of 50% based on monthly gross income. While it is important that a member has the ability to pay, it is equally or more important how they are currently paying and what is the probability of future default on the loan we are granting. To determine this, the Credit Union will rely on the member’s credit report and their FICO score. These scores are based on the Credit Bureau having tested millions of borrowers using proven characteristics that work. They have been validated and are revalidated every other year. These scores are not discriminating and have been proven to be a far better indicator of predicting the probability of default than debt ratios. The Credit Union debt ratio guideline applies to all members including those who want to co-sign. It is not a requirement to be a member in order to co-sign.
D. Unsecured Loan Amounts
As a guideline, the Credit Union will loan up to $25,000 with no collateral for all combined unsecured loans. The amount a member can borrow will be twice their monthly gross income. A member of the Management Team must approve any exceptions. In the case of joint borrowers, both incomes will be included.
4-4 Loan Policies (continued)
Example:
Annual Income $48,000
Monthly Income $ 4,000
Maximum Unsecured 2 x $4,000 or $8,000
The member could have a combination of the following:
Credit Card $ 5,000
Signature Loan $ 3,000
For a member to qualify for the two (2) months gross income rule, they should generally have a higher FICO score of A or B paper. The lower the score, C, D or E paper, the lower the amount the Credit Union will loan a member without collateral.
E. Terms
The Credit Union will, first and foremost, always attempt to provide the member a payment the member is most comfortable with, provided it is in the best interest of the member and the Credit Union. Members, who represent more risk, will generally be offered shorter maturities so that they will always have positive equity in the vehicle they are financing. Other factors are the age, price and condition of the vehicle they are financing. Vehicles that are older with higher mileage will have shorter maturities.
Loan duration may be increased by the amount of payment protection.
F. Employment Verification
The Credit Union will verify employment/ income for loans greater than $50,000 and only on an exception basis, i.e., when the Credit Union has reason to believe the member has overstated their income, or has misrepresented their place of employment, or if the loan amount is over $50,000.
G. Job and Residence Stability
The Credit Union understands the importance of stability, however, we will not require the member to have been on their job or at their address a specific time in order to give them a loan. If a member has frequent jobs and/or address changes, we will instruct our employees to look at this as a possible area of concern.
H. Loan Denials
Loan officers will be authorized to deny any unsecured loan that is C, D or E paper. All A & B paper or any secured loan denial will be discussed with the Loan Manager. A denial should be
4-4 Loan Policies (continued)
explained to the member, by phone or in person before the member receives the ECOA notice. Every reasonable option to grant the loan should be explored before denying it.
I. Membership Requirements
We evaluate new members in the same manner as existing members, focusing on their job and residence stability, their ability to pay, their credit history and FICO scores. New members are encouraged to apply for a loan at anytime. A member’s credit history with XYZ Corp is taken into consideration when reviewing a loan request.
J. Debt Consolidation Loans
Debt consolidation loans, by their nature, are considered high-risk loans. Debt consolidation loans will be made to members on an unsecured basis who are of good credit quality (usually A & B paper). Generally C, D & E paper members will require collateral. Even A & B paper members who have a high level of unsecured debt (21 - 30% of their annual gross income), may require collateral.
K. Vehicle Inspection
The Credit Union will normally not inspect a vehicle unless the member is a very high-risk borrower (D & E paper) and the vehicle is the determining factor in making the loan. The member has to have other qualifications, such as ability to pay, in order to qualify. The security is not going to be the sole reason to make the loan. When this is the case, the Credit Union will complete a vehicle inspection report focusing on the condition plus the mileage. The Credit Union will take a photograph of the collateral. Vehicles with high mileage and in poor to average condition will be financed at less than wholesale value and for shorter time frames.
L. Bankruptcy
Bankruptcy is a serious problem, not only for XYZ Corp, but for all Credit Unions. In an effort to control bankruptcy, we have instructed our employees to observe the following:
1. High unsecured debt: Unsecured debt is the primary cause of bankruptcy. In determining if a member's debt is too high, our employees will focus on the member's annual income and the level of their unsecured debt in relation to their income.
Low Risk Range 0 - 10% Unsecured debt in relation to annual salary
Medium Risk Range 11 - 20% Unsecured debt in relation to annual salary
High Risk Range 21 - 30% Unsecured debt in relation to annual salary
4-4 Loan Policies (continued)
XYZ Corp will attempt to make secured loans to members in the high risk range
2. Escalating Debt: The employees will be instructed to focus on how much the member’s debt was incurred over the last 18 months. If most of the member's debt was incurred in the last 18 months, the Credit Union must use caution when granting the loan.
3. Capacity: Members who are near their credit card limit are a greater risk.
M. Loan Extensions/Refinances
Loan Refinances will only be granted if there is a probability of enhancing the collectability of problem loans. Any changes should be documented fully and uniformly. Management will have the authority to grant refinances after determining if a refinance is feasible. A review of the member’s current situation will be undertaken to determine what circumstances have changed to warrant a refinance.
N. Decision Making
The Credit Union will instruct its employees to identify how risky the borrower is and how risky the type of loan they are applying for is. To assist our employees, we have developed the following decision tree.
Type of Loan Vs. Type of Borrower
A. Low Risk Loan Type B. Low Risk A & B Paper
Savings Secured Established Credit History-Min. 2years
80% Equity Loans Established trades – Min. 4 trades
Car Loans 80% LTV Established Amounts Over $10,000
or Wholesale/Good Down Lots of Capacity on CR/CD's Payment. No Evidence of Escalating Debt
Share Secured Credit Cards Assets with Equity
Low Mileage Cars Payroll Deduct or Direct Deposit
Very Stable Residence/Employment
C. High Risk Loan Type D. High Risk C, D, & E Paper
Unsecured (Debt Consolidation) Weak Job/Resident Stability
Credit Cards Limited or No Established Credit
90 - 100 % + Equity No Assets or Assets with no equity
Car Loans 100% MSRP No Capacity on Credit Cards or Full Retail (UA's) Debts are Escalating
High Mileage Cars No Savings/Checking/NSFs
High unsecured debt over 20% gross
4-4 Loan Policies (continued)
Combinations that WORK:
B, A & C
Combinations that SELDOM work:
D & C
5. Types of Loans
SECURED LOANS
A. New and Used Vehicle Loans
1. Loans for vehicles up to 100% of invoice including tax and registration fees.
2. Terms available up to 72 months.
3. Vehicles used as security must be insured for property damage at a level acceptable to XYZ Corp
B. Recreational Vehicle Loans - Includes large loans for RVs, boats, camping trailers, etc.
1. Loans for vehicles up to 100% of invoice including tax and registration fees.
2. Terms available up to 180 months with a 5-year balloon for new and used vehicles.
3. Vehicles used as security must be insured for property damage at a level acceptable to XYZ Corp.
C. Personal Loans - Security may include, but is not limited to, automobiles, trucks, motor homes, camper, trailers, boats, etc.
1. Terms available up to 60 months.
2. Vehicles used as security must be insured for property damage at a level acceptable to XYZ Corp.
D. Share Secured Loans
Share savings
4-5 Types of Loans (continued)
1. 300 bp above tier rate.
2. Terms up to 120 months.
Share certificate
1. 300 bp above share certificate rate.
2. Terms to CD maturity.
Money Market Account
1. 300 bp above tier rate.
2. Terms up to 120 months.
E. VISA Classic – secured card
1. Minimum line $2000.00.
2. Shares secured must be on deposit in applicants name in a XYZ Corp account.
3. After one year of timely payment history, one-half (1/2) of the secured balance may be released.
UNSECURED LOANS
F. Personal- Fixed Rate, open-end
1. Terms available up to 60 months
G. Overdraft Line of Credit- Fixed Rate, open-end
1. Maximum line of $25,000
2. 12.00 % interest rate for A+, A, and B paper.
3. 18.00 % interest rate for C, D, and E paper
H. Visa Classic – 13.96% APR Interest rate.
1. Maximum line of $5,000.
2. Minimum payment is 3% of balance per month.
4-5 Types of Loans (continued)
3. $15.00 over the limit fee.
4. $20.00 late fee.
I. Visa Gold – 9.96% interest rate
1. Minimum line of $5,000.
2. Maximum line of $25,000.
3. Minimum payment is 3% of balance per month.
4. $15.00 over the limit fee.
5. $20.00 late fee.
REAL ESTATE LOANS
J. Home Equity Loans/Home Equity Line of Credit
1. Residential, owner occupied principal dwelling, 1 – 4 family.
2. NY State property, Syracuse and west.
3. 100% LTV when the Credit Union is in the first lien holder position.
4. LTV (Loan to Value) up to 90% minus first mortgage for second lien holder position.
5. Not assumable by 3rd party.
6. 5 to15-year repayment.
7. Interest rate set at application.
8. Applicant must provide latest survey and deed.
9. Fixed rate, closed end minimum loan of $25,000
10. Variable rate, open-end initial advance a minimum of $25,000.
11. Member pays title insurance when Management determines it is necessary.
K. Mini-Equity Loans
4-5 Types of Loans (continued)
1. Residential, owner occupied principal dwelling, 1 – 4 family
2. NY State property, Syracuse and west.
3. Up to 90% Loan to Value.
4. Up to 10 years repayment.
5. Applicant must provide verification of improvement being made.
6. Fixed rate, closed end, minimum – maximum $5,000 - $25,000.
7. Platinum A & B Paper Only (Score 640-730+).
8. No fees.
9. Applicant must provide deed.
L. Home Mortgages
A variety of residential mortgage programs are available through CUC Mortgage Corporation.
CUC Mortgage handles all underwriting, processing, servicing and compliance including but not
limited to Private Mortgage Insurance (PMI). If XYZ Corp were to offer mortgage
products directly, we would be responsible for the duties handled by CUC mortgage including
PMI cancellation as explained below. A loan officer will sign off on all mortgages retained by the
credit union.
PMI Cancellation Determination
There are two different laws governing the cancellation of private mortgage insurance (PMI) for mortgages in New York State: the Federal Homeowners Protection Act (HPA) and Section 6530(d) of the New York Insurance Law [6503(d)].
The lender is responsible to determine which law provides the greater benefit to the consumer of each mortgage serviced.
The HPA determination covers all conventional non-high-risk mortgage loans made for single
family primary residences on or after July 29, 1999. It is based on “original value” (OV), which is the lesser of the purchase price and the original appraised amount. HPA requires that PMI be cancelled when the remaining principal is equal to or less than 78%OV and the loan is current. If the loan is not current at 78%OV, then PMI must be cancelled as soon as the loan becomes current. HPA also allows the consumer to request that PMI be cancelled at 80%OV if the loan is
4-5 Types of Loans (continued)
current, the property value has not decreased, and there are no additional subsequent liens on the property.
The 6503(d) requires that PMI be cancelled when the remaining principal is equal to or less than 75%OA, regardless of whether the loan is current.
Based on these regulations, there are four times at which PMI must be cancelled:
1. when the principal reaches 75%OA;
2. when the principal reaches 80%OV, the member requests cancellation, the loan is current, and the property value has not decreased (per a new appraisal of Broker Price Opinion (BPO) at the member’s expense);
3. when the principal reaches 78%OV and the loan is current; and/or
4. when the loan becomes current if it was not current at 78%OV.
The earliest event that occurs will be used to determine which law to follow. If 75%OA is reached before 80%OV, PMI must be cancelled at that time; if the member was not current at 80%OV, but reaches 75%OA before 78%OV, PMI must be cancelled at that time. The set of conditions that is met first determines when the PMI must be cancelled.
In addition, per the Fannie Mae (7/29/99) and Freddie Mac 5/7/99) guidelines: PMI can be cancelled based on loan seasoning and “current value” (CV) as determined by a new appraisal or BPO at the member’s expense. The guidelines present three options for PMI cancellation.
1. If the loan is more than five years old, the principal must reach 80% CV or less.
2. If the loan is two to five years old, the principal must reach 75% CV or less.
3. If the increase in value is due to property improvements made by the borrower after origination, then no seasoning is required. In this case, the PMI may be cancelled when the principal reaches 80%CV or less, regardless of the age of the loan.
OTHER LOANS
M. Student Loans
1. XYZ Corp participates in the Credit Union Student Loan Network through CUNA Service Group, Inc.
4-5 Types of Loans (continued)
2. Great Lakes Higher Education Corporation (Great Lakes), a non-profit guarantor/servicer, provides the loan guarantee and servicing for the credit Union Student Loan Network.
3. Interest rates are established by the Federal Government through the Federal Family Education Loan Payment Program (FFELPP).
4. The following loans are offered:
▪ Stafford
▪ SLS
▪ PLUS
5. The Credit Union approves PLUS loans.
6. The Loan Manager will review the default rate of any proprietary (for profit) school that a student borrower applies for attendance and decides, case-by-case, whether to lend to the student borrower.
N. Section
5
O. Budgetary and Financial Control
5-1. Responsibility
The Asset Liability Management (ALM) Committee of XYZ Corp Federal Credit Union shall have responsibility for bringing the appropriate annual budget and financial recommendations to the Board of Directors in accordance with this policy.
5-2 Operating Budget Philosophy
A. XYZ Corp Federal Credit Union shall utilize an annual budget as the structure for planning and, to a lesser extent, control. The credit union will use a strategic plan for long term planning.
B. The Board of Directors is fully committed to formulate policy, make decisions, and to the planning necessary for the success of the annual budget..
C. The budget represents a proposed plan of operations. It facilitates the means of selecting among alternatives when resources are limited, but should not be so inflexible as to preclude the implementation of new ideas arriving subsequent to budget approval.
D. All individuals or groups responsible for performance under the budget are to be involved in its preparation. The budget should reflect goals, objectives, the programs, and workloads for the coming period. Primary emphasis in the budget preparation should be on the work program and plan, not the dollars to which such plans must be reduced.
The budget is a plan, and as such, can be of great benefit in determining whether actual programs were successful and how to improve future plans.
E. The President/CEO has the authority to place the approved budget into operation and to spend within the structure of the budget.
5-3 Operating Budget Procedure
A. Planning Meeting
Each year there will be a special Board of Directors Meeting to consider problems requiring
5-3 Operating Budget Procedure (continued)
solutions, plan goals, and determine the objectives and the direction for the Credit Union in the upcoming year.
B. Budget Requests
In mid-September the President/CEO shall, in writing, request proposed workloads and programs from responsible committee chairmen, officers, management and staff members. The President/CEO or his staff will provide resource data and will assist in the cost estimation of programs when it is desired. Responses are also to be written.
C. Preliminary Decisions
At the 4th quarter Board of Directors meetings, the wage and salary adjustment recommendations will be considered. Key issues and decisions relating to other activities will also be considered.
D. Budget Document
The President/CEO shall bring together all plans into the budget document. The ALM Committee shall review the budget document with the proposed workloads and projects being studied to make certain that an acceptable and internally consistent plan is produced. Where there are inconsistencies, the ALM Committee shall discuss the matter with the recommending individual or group to attempt to clarify the matter.
E. Budget Evaluation
Progress toward accomplishment of the plan shall be presented to the Board of Directors quarterly and more often if, in the opinion of the Chairman of the Board of Directors or Treasurer, any aspect of the budget requires adjustment.
F. Approval for Change
Board of Directors action is necessary to change salary range. The President/CEO is authorized to over-spend individual budget items by a small amount, but not the budget total. Interest expense over budget requires no authorization other than for borrowing. The budget must change to fit circumstances.
G. Responsibilities for Budget Recommendations
1. Share Goals - Board of Directors at planning meeting.
2. Loan Goals - Board of Directors at planning meeting.
5-3 Operating Budget Procedure (continued)
3. Dividend & Reserve Policy - Board of Directors at planning meeting.
4. Revenue estimates - ALM Committee.
5. Salaries & related costs - Personnel Committee.
6. All insurance - Insurance Committee, management team & consultants.
7. Member Services Department - Member Services Manager.
8. Office Administration – Management.
9. Collection - Lending Manager.
10. Audit examination and protection – President/CEO.
11. Marketing and Member Education - Marketing Manager.
12. Depreciation and amortization – Accounting Manager.
13. Dues to League and Associations - Chairman & President/CEO.
H. Additional Considerations
1. Budgets are tools for use by managers; budgets do not manage.
2. All efforts are needed to follow a plan and to accomplish goals. The accomplishment of budget goals is not automatic.
3. Judgment is needed to interpret budgets, as they are estimates based on certain assumptions.
5-4 Cash Budgeting
See Section 6 - Cash and Investment Control
5-5 Capital Budget
A capital budget shall be considered each year with the operating budget.
Capital budget requests can originate with the President/CEO, a Director or a Manager.
I. Section
6
J. Cash and Investment Control
1. Purpose and Scope
The board of directors of XYZ Corp Federal Credit Union is responsible for the formulation and annual review of the investment policy. The purpose of this policy is to provide operating guidance for the administration of the credit union’s investment portfolio consistent with generally accepted funds management practices and complying with applicable federal regulations. Any investments held at the time of this policy that are not in compliance with the policy may be retained, at the discretion of management and with the approval of the board of directors, as long as they do not threaten the safety and soundness of the credit union.
The main function of the credit union is to provide financial services to its members. Since loan demand and deposit flows are subject to variation over time, liquidity management activities are required in the management of these assets and liabilities. The major objectives of the policy are to
❑ Minimize risks from interest rate changes or other factors
❑ Optimize the rate of return on surplus funds
❑ Ensure that the types and maturity mix of investments purchased and held are sufficiently diversified and provide adequate liquidity to meet future needs
2. Investment Authority
The board delegates decision-making authority with respect to specific investments to the Chief Executive Officer (CEO) and Chief Financial Officer (CFO) for implementing investment policies and executing day-to-day investment decisions consistent with this policy.
The CEO and CFO have authority to perform an investment transaction up to the limits identified:
CEO - $1,000,000 plus accrued interest plus any premium paid in connection with the investment.
CFO - $1,000,000 plus accrued interest plus any premium paid in connection with the investment.
6-2 Investment Authority (continued)
Lending Manager - $250,000 plus accrued interest plus any premium paid in connection with the investment.
Member Service Manager - $250,000 plus accrued interest plus any premium paid in connection with the investment.
The board also delegates authority to the Asset/Liability Management Committee (ALCO) to act as liaison between the board and management in investment-related matters. In addition to the asset/liability management functions specified in the ALM
Policy, the investment-related functions of ALCO are:
❑ Monitor and review investment criteria and standards
❑ Monitor investment decisions for compliance with the policy and applicable regulation
❑ Review this policy and recommend changes to the board when appropriate
3. Investment Characteristics
The portfolio as a whole should have the following characteristics:
❑ Low degree of default risk
❑ Acceptable degree of price risk resulting from changes in interest rates
❑ Reasonably high degree of liquidity and/or marketability
❑ In compliance with regulatory directives
These characteristics limit the types of investments that may be acquired. The yield on investments is secondary to liquidity and safety. In addition to the emphasis on liquidity and safety, regulations and/or policies of the board of directors further constrain investment activity. In this section, authorized investments are outlined along with certain restricted and unauthorized investments and investment-related transactions. Maturity constraints and diversification requirements are also specified.
A. Authorized Investments
The credit union may invest only in securities that are specifically authorized in this section. The following investments are legally permitted and authorized by the board of directors:
6-3 Investment Characteristics (continued)
❑ U. S. Treasury Securities
❑ U.S. Agency Securities
❑ Empire Corporate FCU certificates and shares
❑ Insured Bank and Savings Bank CDs, Credit Union Certificates – Negotiable and non-negotiable certificates of any domestic commercial bank, credit union and savings bank may be acquired if:
1. The deposit does not exceed $100,000 (including accumulated interest)
2. The deposit is FDIC or NCUA insured
B. Restricted/Unauthorized/Prohibited Investments and Investment Activity
Investments that are prohibited or limited by regulations are not permitted. Allowable investments not listed above may be purchased with the approval of the Board of Directors after all due diligence (Part 703.8 of NCUA Rules and Regulations) has been completed.
4. Risk Management
A. Interest Rate
Interest rate risk guidelines are specified with respect to:
1. Individual securities
2. The investment portfolio as a whole
3. The interests of such risks on the credit union as a whole
Certain securities as indicated below are subject to a more comprehensive pre-acquisition analysis.
1. Maturity of individual securities - The maturity and average life of investments in the portfolio are subject to the constraints in this section.
▪ Treasuries, CDs and Notes – Management is restricted to securities that mature not later than five years. The purpose of this restriction is to control the risk of loss, realized or unrealized, resulting from an increase in the level of interest rates
2. Weighted Average Maturity of the Portfolio – The weighted average maturity of the portfolio should not exceed 36 months. The analysis should be conducted at lease semi-annually.
6-4 Risk Management (continued)
3. Interest Rate Risk of Investment in Relation to Net Worth - When the portfolio is shocked +300 basis points from the current market level; the resulting projected decline in market value should not exceed 30% of net worth at book value as shown on the financial statement. This analysis should be conducted at least semi-annually.
4. Interest Rate Risk of Investments in Relation to Earnings – The interest rate risk of the entire portfolio with respect to earnings should be monitored by means of Net Interest Income (NII) Simulation and other ALM reports. The targeted maximum allowable percent loss in Net Interest Income over a one-year horizon is not to exceed 15.00% of the budgeted base with a +/- 200bp rate shock. This will enable the credit union to periodically assess the responsiveness of investment income to changes in market interest rates.
B. Liquidity Risk
The credit union will keep at least 15% of the total investment portfolio in overnight funds or investments with maturities less than 1 year to assist the credit union in ensuring that it has adequate liquidity for unanticipated increases in its uses of funds.
C. Credit and Concentration Risk
The Board intends that the portfolio be sufficiently diversified whereby the credit union does not have greater than 50% of the portfolio exposure to one issuer, maturity range, security type, or risk profile (e.g. call risk). For those issuers who are not the United States government and or its agencies and Empire Corporate FCU, unless otherwise restricted, the maximum credit exposure to those issuers is 10% of the credit union’s paid-in and unimpaired capital and surplus, defined as total shares plus post closing, undivided earnings.
5. Trading Activity
Trading securities with the intent to profit from short-term swings in interest rates is prohibited. However, this does not mean that all securities must be held to maturity, as explained below.
6. FASB 115 Considerations
Pursuant to the Financial Accounting Standards Board Statement No. 115 (FASB115), each investment at the time of purchase shall be classified in one of the following categories:
1. Held-to-Maturity – In order for securities to be classified under this category, the credit union must have the positive intent and ability to hold the securities to maturity.
2. Available-for-Sale – Management will generally classify investments under this category, with changes in market value reflected in a separate equity account, Accumulated Unrealized Gains/Losses on Available-for-Sale Securities.
6-4 FASB 115 Considerations (continued)
3. Trading account – Unrealized gains or losses on this category is reflected in the Income Statement. (However, trading is a prohibited activity.)
Management may, at its discretion, classify certain investments as Held-to-Maturity. In this classification process, management will take into consideration the credit union’s:
1. Investment maturity structure
2. Liquidity position
3. Cash flows
4. Borrowing power
Pursuant to FASB 115, it is recognized that the sale of securities in the Held-to-Maturity category may result in the entire portfolio being reclassified and marked-to-market. However, as stated in FASB 115 (page 4), when the remaining maturity or call date is sufficiently short such that changes in market interest rates would not have a significant effect on the fair value of the securities, the securities may be sold without tainting the entire portfolio. Accordingly, the credit union reserves the right to sell securities with a remaining maturity of six months or less without tainting the portfolio.
The credit union also reserves the right to sell any securities regardless of the classification if there is deterioration in credit quality, or in the case of amortizing securities, if the remaining principal is uneconomical to service in terms of accounting, custody and safekeeping expenses. Empire Corporate investments and insured CDs are not subject to FASB 115 requirements.
7. Conflicts of Interest
The credit union’s officials and senior management employees, and their immediate family members, may not receive anything of value in connection with the credit union’s investment transactions. This prohibition also applies to other employees, if the employee is directly involved with investments. This prohibition does not include compensation for employees. Further, the credit union’s officials, senior management employees and other employees directly involved in investments must disclose any investment relationship they have with an approved broker-dealer and must recuse themselves from any investment decision with that broker-dealer.
8. Multiple Bids
Before purchasing or selling a security, the credit union must obtain either price quotations on the security from at least two different broker-dealers or a price quotation on the security from an industry- recognized information provider. The requirement to obtain two price quotations does not apply to new issues purchased at par or at original issue discount.
6-8 Multiple Bids (continued)
When a price quotation is not available for a particular security under the procedure described immediately above, a quote or spread over Treasury for a security with reasonably similar characteristics may be used as a guide.
9. Reporting Requirements
Management is responsible for the creation of monthly reports for the board of directors. Monthly reports should include, for each security held, the fair value and dollar change since the previous month-end with summary information for the entire securities portfolio.
The board of directors will review the monthly and quarterly reports (or a summary of the information contained in the reports if each member of the ALCO receives a copy of the reports) and make the review a matter of record in the board minutes.
A. Other General Policies
1. Assessment of Price quotes – On an annual basis the internal auditor, supervisory committee or the independent auditor will assess the reliability of the market values received from safe keepers or brokers
2. All NCUA rules and regulations pertaining to investments shall be observed.
10. Investment Transactions
A. Investment Firms
Investment transactions will be conducted with broker-dealers who are registered as such with the Securities and Exchange Commission under the Securities Exchange Act of 1934, and that are SIPC insured. Investment transactions may also be conducted with depository institutions whose broker-dealer activities are regulated by a federal or state regulatory agency. Before purchasing an investment through a broker-dealer, the credit union must analyze and annually update the following:
1. The background of any sales representative with whom business is conducted
2. Information available from state or federal securities regulators and securities industry self-regulatory organizations, such as the National Association of Securities Dealers and the North American Securities Administrators Association, about any enforcement actions against the broker-dealer, its affiliates, or associated personnel
3. If the broker-dealer is acting as the credit union’s counter party, introducing credit risk, the ability of the broker-dealer and its subsidiaries or affiliates to fulfill commitments, as evidenced by capital strength, liquidity, and operating results. The board of directors should consider
6-10 Investment Transactions (continued)
current financial data, annual reports, reports of nationally recognized statistical rating agencies, relevant disclosure documents, and other sources of financial information.
The requirement that the broker-dealer be regulated by the Securities and Exchange Commission or be a depository institution whose broker-dealer activities are regulated by a federal or state regulatory agency, does not apply when the credit union purchases a certificate of deposit or share certificate directly from a bank, credit union, or other depository institution.
B. Payment, Delivery, and Safekeeping
The following policies apply to payment, delivery and safekeeping:
1. Purchased investments must be in the credit union’s possession, recorded as owned by the credit union through the Federal Reserve Book-Entry System, or held by a board-approved safe keeper under a written custodial agreement. A custodial agreement is a contract in which a third party agrees to exercise ordinary care in protecting the securities held in safekeeping for its customers
2. Any safe keeper that the credit union uses must be regulated and supervised by either the Securities and Exchange Commission or a federal or state depository institution regulatory agency, or a state trust company regulatory agency
3. An individual confirmation statement must be obtained from each broker-dealer for each investment purchased or sold
4. All security transactions must be executed by regular way settlement, meaning delivery of a security from a seller to a buyer within the time frame that the securities industry has established for immediate delivery of that type of security.
5. Annually, the credit union must evaluate the ability of the safe keeper to fulfill its custodial responsibilities, as evidenced by capital strength, liquidity, and operating results. The ALCO should consider current financial data, annual reports, reports of nationally recognized statistical rating agencies, relevant disclosure documents, and other sources of financial information
6. A statement of purchased investments and repurchase collateral held in safekeeping must be obtained and reconciled monthly
7. All purchases and sales of investments must be delivery vs. payment (i.e., payment for an investment must occur simultaneously with its delivery).
8. Regardless of their form, Federal Reverse book-entry, physical or held in a privately operated book-entry system such as the Depository Trust Corporation (DTC) or a similar
6-10 Investment Transactions (continued)
institution, securities may be held in street name with a reputable securities or securities clearing firm.
C. Empire Corporate FCU
At least annually, the credit union will review the Corporate:
❑ Operating level under Part 704 of the NCUA Rules and Regulations
❑ Capital level
❑ Earnings
❑ Investment portfolio
❑ Projected financial performance and Net Economic Value (NEV) of Empire Corporate assuming a +/-300 basis point immediate, sustained and parallel shift in interest rates
D. Broker/Dealers
The following broker/dealers are approved to conduct investment transactions:
❑ MemberTrade Financial Group, 1021 Watervliet Rd., Albany NY 12205
❑ Okeefe and Shaw, 646 N.French Rd., Suite 7, Amherst, NY 14221
Other broker/dealers may be qualified by management and approved by the board at a subsequent board meeting.
E Limits
There are no limits on the amount of funds invested or types of investments made through the individual broker/dealers. The amounts invested or types of investments made through a particular broker/dealer will be at the discretion of management and based on:
1. Product offerings
2. Pricing
3. Execution
4. Market Information
5. Expertise
6. Other services provided by the individual broker/dealer
F. Custody Safekeeping
The following custody/safekeeping agents are approved:
1. First Clearing Corporation
6-10 Investment Transactions (continued)
2. The FDIC insured financial institution that we have purchased a Certificate of Deposit from
3. Empire Corporate Federal Credit Union
11. Policy Exceptions
The board recognizes that minor policy exceptions may arise from time to time. Significant deviations from this policy must be avoided. In the event an investment that is held is no longer within policy, or has failed a requirement of applicable regulation, the board will be notified no later than the next regularly scheduled board meeting. The board will document the action taken regarding the investment in the minutes of the board meeting, including a detailed explanation of any decision not to sell it. Within 5 days after the board meeting, management must notify the appropriate NCUA regional director of an investment that has failed a requirement of regulation.
12. Record Retention
Documentation used by the board of directors to approve a broker-dealer or safe keeper must be maintained as long as the broker-dealer or safe keeper is approved and until it has been both audited and examined. The documentation should include:
1. Bids and prices at purchase and sale and for periodic updates
2. Relevant disclosure documents or a description of the security from an industry-recognized information provider such as
❑ Bloomberg description page (DES)
❑ Bloomberg FMED page
❑ An offering circular with terms and conditions announcing a new issue
❑ A prospectus
3. Financial data, tests and reports required by policy and regulations
13. Policy Review
The board of directors, along with management and the ALCO, will review this policy at least annually to ensure that the policy continues to meet the goals and objectives of the credit union. The minutes of the board meeting must reflect this review.
APPENDIX VIa
Your Ability to Withdraw Funds at XYZ Corp Federal Credit Union REG CC
Our policy is to make funds from your deposits available to you on the first business day after the day we receive your deposit. Electronic direct deposits will be available on the day we receive the funds. The following is how to determine the availability of a Deposit: The availability of your funds is counted in business days from the day of your deposit. Every day is a business day, except Saturdays, Sundays, and federal holidays. If you make a deposit after regular business hours or on a day we are not open, we will consider that deposit was made on the next business day we are open. Once they are available, you can withdraw the funds in cash and can use the funds to pay checks that you have written.
Longer delays may apply.
In some cases, we will not make all of the funds available to you on the first business day after the day of your deposit. Depending on the type of check that you deposit, funds may not be available until the fifth business day after the day of your deposit. However, the first $100.00 of your deposit will be available on the first business day.
If we are not going to make all of the funds from your deposit available on the first business day, we will notify you at the time you make your deposit. We will also tell you when the funds will be available. If your deposit is not made directly to one of our employees, or if we decide to take this action after you have left the premises, we will mail you the notice by the day after we receive your deposit.
If you will need the funds from a deposit right away, you should ask us when funds will be available.
In addition, funds you deposit by check may be delayed for a longer period under the following circumstances:
▪ We believe a check that you deposit will not be paid.
▪ You deposit checks totaling more than $5,000 on any day.
▪ You deposit a check that has been returned unpaid.
▪ You have overdrawn your account repeatedly in the last six months
Appendix VIA (continued)
▪ There has been a failure to communications or computer equipment.
Special Rules for New Accounts
If you are a new member, the following special rules will apply during the first 30 days that your account is open.
Funds from electronic direct deposits to your account will be available on the day we receive the funds. Funds from deposits of cash, wire transfers, and the first $5,000 of a day's total deposits of cashier's, certified, teller's, traveler's and federal, state and local government checks will be available on the first business day after the day of your deposit if the deposit meets certain conditions. For example, the checks must be payable to you. The excess over $5,000 will be available on the ninth business day after the day of your deposit. If your deposit of these checks (other than U.S. Treasury checks) is not made in person to one of our employees, the first $5,000 will not be available until the second business day after the day of your deposit.
Funds from all other check deposits will be available on the 10th business day after the day of your deposit.
Appendix VIA (continued)
exception hold notice
Account Number #__________________________ Date of Deposit___________________
Amount of Deposit__________________________
We are delaying the availability of $ from this deposit. These funds will be available on the business day after the day of your deposit.
We are taking this action because:
A check you deposited was previously returned unpaid.
You have overdrawn your account repeatedly in the last six months.
The checks you deposited on this day exceed $5,000.
An emergency, such as failure of communications or computer equipment,
has occurred.
We believe a check you deposited will not be paid for the following
reasons:
(If you did not receive this notice at the time you made the deposit and the check you deposited is paid, we will refund to you any fees for overdrafts or returned checks that result solely from the additional delay that we are imposing. To obtain a refund of such fees, put your request in writing indicating the deposit date and amount, as well as the transaction fees which you believe should be refunded and mail to XYZ Corp Federal Credit Union, 6750 Main Street, Williamsville, NY 14221-5947.)
Appendix VIA (continued)
WHEN FUNDS CAN BE WITHDRAWN BY CASH
DESCRIPTION OF DEPOSIT OR CHECK
Direct Deposits
Cash
Wire transfers
Cashier’s checks
Certified checks
Teller’s checks
Government checks day we receive the funds
The first $100 of a day’s
Deposit of other checks next business day
Local checks Two business days after
the day of deposit
Non local checks The fifth business day after
the day of deposit
A. Section
7
B. Delinquent Loans
1. Philosophy
A. XYZ Corp Federal Credit Union must implement and maintain an effective control of all loans in order to safeguard the funds entrusted to it by its members.
B. Every consideration shall be given to retaining members when collecting loans. The Credit Union shall always consider the well being of the member as part of a sound collection policy.
C. When responsible financial planning is exhibited, satisfactory arrangements can be made to accommodate the member.
D. As a thrift institution, XYZ Corp Federal Credit Union shall encourage regular payments and point out to its members the additional cost of using money through periods of neglected principal payments.
E. Vigorous collection action, within the limits of the Fair Debt Collections Practices Act, shall be initiated when it is apparent that the member has no intent of fulfilling his obligation.
2. Delinquent Loan Committee
A. This committee shall consist of:
Collection Staff
Lending Manager
President/CEO
B. A monthly report of delinquency shall be submitted to the Board of Directors.
3. Collections
A. Policy and procedures relating to the collection of delinquent loans and interest apply to all members, irrespective of their professional or social standing, with equal force.
B. One objective of the collection procedures shall be the retention of members. These procedures shall include provisions for determination of the causes of delinquency and for cooperation with the member to the fullest extent possible without incurring a financial loss to the Credit Union, in order that the member may repay the loan.
7-3. Collections (continued)
C. Loans will be considered delinquent if the repayment is one week past due.
D. Recovery from the signer shall be instituted within 7 days of delinquency.
E. Repossession of goods:
1. The Collection Staff will handle all repossessions.
2. The Collection Staff will handle all sales of repossessed goods.
F. Collateral shall normally be recovered if payment has not been made for two consecutive months.
G. This Credit Union does not extend credit on delinquent accounts. All delinquent principal and interest must be paid in full prior to considering additional credit. Only cash or official bank checks will be accepted.
4. Procedure Policies
A. Necessary precautions shall be taken in the granting of loans to eliminate most delinquency before it starts. These shall include: complete applications, credit checks and the explanation of terms.
B. Delinquent loan records shall be examined each month and properly marked for delinquency control.
C. SPECIAL PROBLEMS
It is recognized that a member may face unexpected or uncontrollable circumstances. Management has the authority to modify repayment schedules or accept reduced amounts in settlement of past-due accounts.
5. Write-Offs
A. All loans considered uncollectible should be charged to reserve for bad debt by the Board of Directors upon the recommendation of Management. Management shall write-off all loans that are delinquent for more than six months with the exception of those that are receiving regular payments.
B. All loans that cannot be collected shall be written-off as necessary.
C. Collection efforts shall be continued on such loans by the collection staff for continual follow-up and recovery.
D. Charged-off accounts shall be placed in the hands of a collection agency or attorney for continual follow-up and recovery.
7-.5. Write-Offs (continued)
A. The Credit Union shall retain the unpaid balances of accounts written-off for future record.
B. Credit Union policy is to never again lend funds to any person causing the Credit Union a loss.
6. Collected Accounts
Loans collected in full through action of the attorney or collection agency shall be marked "paid". The expenses of collection shall be charged to "legal and collection" expense.
7. Delinquent Follow-Ups
A. Upon delinquency, the maker will be sent a letter to contact the Collection Department.
B. A transfer of all shares will be applied to the delinquent loan.
C. All cosigners will be notified of any and all correspondence with the maker.
1. Upon an unsuccessful attempt to contact the maker, the cosigner(s) will be requested to arrange for payment of the delinquent loan at the Credit Union office. Other collateral offered as security would be considered and proper action taken.
8. Bankruptcy
A. All notifications of bankruptcy will be referred to the Credit Union's attorney for collection along with all copies required by the attorney to take proper action.
B. The attorney will make every attempt to collect 100% of principal and interest due, where permissible. Stays will be lifted on all cosigners at the first meeting of creditors
C. Payroll distributions to loans in the name of the bankrupt member will be discontinued upon notification of bankruptcy.
D. Upon such time as all principal and interest is paid in full, and the discharge of the debtor has been received from the courts, all services can be reinstated.
9. Loan Review and Classification of the Allowance for Loan and Lease Loss Accounts
General Policy Statement:
The NCUA board adopted Interpretive Ruling and Policy Statement (IRPS) No. 02-3 in May 2002, for the Allowance for Loan and Lease Losses Methodologies and Documentation for Federally Insured Credit Unions. This new approach is to fund the Allowance for Loan and Lease Losses (ALLL) account based on the “incurred loss” method of generally accepted
7-9. Loan Review and Classification (continued)
accounting principles (GAAP) rather than the “expected loss” model that we currently use. XYZ Corp will comply with FAS 5 and FAS 114-Allowance for Small Balance homogeneous Pools of Loans, when evaluating loans for potential loss.
Guidelines:
1. Loan Segment Identification
a. Various pools of Loans. Management will segment the credit union loan portfolio into several broad categories of loans. Each category will demonstrate similar risk characteristics. The board will review the assignment of categories annually to insure that they are still appropriate. At this time the loan portfolio is segmented as follows:
1. Secured Loans
2. Unsecured Loans
3. Student Loans
4. Visa Loans
1. Home Equity Loans
2. Mortgages
3. Share Secured Loans
4. Overdraft loans
b. Annual Supervisory Committee Audit. The Credit Union’s Supervisory auditor will periodically select loans for review on a random basis. The auditor will verify loan documentation, compliance with Credit Union’s lending and charge-off policy, and proper reporting to the Board of Directors. The auditor will report findings directly to the Supervisory Committee.
2. Segment Documentation. XYZ Corp uses a variety of documents to support the segmentation of their portfolio, including:
a. Loan trial balances by categories and types of loans,
b. Management reports about the mix of loans in the portfolio,
c. Delinquency and non-accrual reports, and
3. Estimating Loss on Loan Segments. Management will then apply an empirically derived loss rate to each loan segment to determine an appropriate level of funding for that segment’s Allowance for Loan Loss Account. Initially, that loss rate will be equal to the past 48 months loan loss ratio. Management will maintain supporting documentation for the technique used to develop their loss rates including the period of time over which they incurred the losses. The board will review these
7-10. Loan Review and Classification (continued)
loss rates annually for appropriateness and refine as warranted. In developing and maintaining loss measurements, management will consider the impact of current environmental factors and document which factors they used in the analysis and how these factors affect the loss measurements. Management should also consider the following factors when developing loss measurements.
a. Levels of and trends in delinquencies and impaired loans,
b. Levels of and trends in charge-offs and recoveries,
c. Trends in volume and terms of loans,
d. Effects of any changes in risk selection and underwriting standards, and other changes in lending policies, procedures, and practices,
e. Experience, ability, and depth of lending management and other relevant staff,
f. National and local economic trends and conditions
g. Industry conditions, and
h. Effects of changes in credit concentrations.
4. Oversight. Management should consider all known relevant internal and external factors that affect the collectibility of a loan during any given period. Management’s current judgments about the credit quality of the loan portfolio should determine the amounts of the ALLL and provisions for loan and lease losses and should include the following:
a. The board should review and approve the ALLL and provisions for loan and lease losses reported each period,
b. The board should periodically validate and, if appropriate, revise the methodology to ensure it remains appropriate for the credit union,
c. The supervisory committee should oversee and monitor the internal controls over the ALLL determination process,
d. The officials should adjust the ALLL through current earnings in accordance with GAAP, and
e. The officials should realize that they must meet the full and fair disclosure requirements in P702.402, NCUA Rules and Regulations before distributing dividends.
7-10. Loan Review and Classification (continued)
5. Summarizations Reports. Management prepares a summary document supporting the amount of ALLL it reports on the credit union’s financial statements. This will verify that the ALLL is fairly presented in accordance with GAAP and is auditable. The Board should review and approve this summary. Common elements in the summary will include:
a. An estimate of the probable loss incurred for each category,
b. The aggregate probable loss estimated using the credit union’s methodology,
c. The amount, if any, of the necessary ALLL adjustment, and
d. Detailed sub-schedules of loss estimates that reconcile to the summary schedule if so warranted by the level of detail supporting the ALLL analysis.
E. Section
8
F. Policy Statement Truth in Savings Act
BOARD OF DIRECTORS
1. Philosophy
It is the policy of this Credit Union to provide members and potential members with the most accurate, up-to-date information possible regarding our products, thereby allowing them to make meaningful comparisons of our products to the products offered by other institutions as required by the Truth-In-Savings Act and the implementing regulations.
To meet this goal, we will ensure that both existing and potential members are provided with our account disclosures either at account opening, or at the request of the member/potential member. Such disclosures will include all terms applicable to a given account, including but not limited to, the dividend rate, the annual percentage yield, balance and time requirements, fee, and penalties. Our members will be provided notice of any change in the terms in advance of the effective date of the change as required by the regulation. They will also receive, on a periodic basis, a statement detailing, among other things, the dividends and annual percentage yields earned on their accounts and the fees imposed.
It is also the policy of this Credit Union to insure that all our staff members receive adequate training on this regulation as it applies to their job and that this training be started as soon as reasonably possible to ensure that staff is fully trained prior to the implementation date of 1/1/95. It will be the responsibility of management staff to ensure the employees are adequately trained at the necessary levels based on their job. The compliance officer will provide guidance as necessary to Credit Union supervisors to assist with training.
Since correctly worded advertising will be a major component of Truth In Savings, it will be the responsibility of the Marketing Department to seek any specialized training necessary to comply with this
regulation. The Management Team should review advertising prior to publication or posting to help ensure compliance.
A separate document outlining our time-line for compliance and our specific policies and procedures for posting dividends, responding to rate inquiries, distributing of disclosures, handling time accounts, and conducting staff training is being developed and will be reviewed by the Board of Directors for approval.
Approved by the Board of Directors this 14th day of January 1995 Section
Section
9
Asset Liability Management
ALM POLICY
General Policy Statement
The Asset/Liability Management Policy provides credit union management with a framework for maximizing net interest margin, maintaining adequate sources of liquidity, and controlling interest rate risk. The general policy sets forth key Asset/Liability Management objectives and pricing guidelines. We will use a third party vendor (currently P-ALM Associates) to prepare quarterly ALM risk monitoring reports to assist us in monitoring our risk position.
9-1. Guidelines
A. Asset/Liability Management Committee (ALCO)
The Chairman, Treasurer, Pres/CEO, CFO and Lending Manager will serve as the Asset/Liability Management Committee (ALCO) for the Credit Union’s funds management program.
B. Board Review
The Board will regularly review the following information to determine whether the Credit Union's asset and liability structure is likely to further key objectives:
1. Asset yields and liability costs through spread analysis;
2. Budgetary projections of income, expenses, and profitability;
3. Analysis of economic and competitive conditions and projections of current and future liquidity needs;
4. Sources of funds available to meet liquidity needs, including the remaining maturities of all assets and liabilities; and
5. Loan to deposit reports.
C. Pricing
9-1. Guidelines (continued)
The Board will price loans and deposits after thoroughly analyzing conditions in the local economy, rates offered by the competition, and the effect on net interest margin, return on assets, and capital. Pricing shall be based on the Credit Unions’:
1. Reasonable return;
2. Overhead costs;
3. Credit risk;
4. Default risk;
5. Marginal cost of funds; and
6. Fair return to its members.
D. Objectives of the ALCO
1. Assist in meeting the Board's strategic plan.
2. Increase net interest margin.
3. Maintain adequate liquidity.
4. Optimize return on assets.
5. Protect principal.
6. Maintain a minimum 8.00% Capital/Assets ratio.
7. Identify, monitor and control the following risk exposure:
a) Interest Rate Risk (IRR) -This is the risk that changing rates will adversely affect the Credit Union's financial performance. Management will evaluate underlying payment streams, maturities, rates and risks inherent in assets and liabilities given current and anticipated changes in market interest rates. We will focus on changes in Net Economic Value (NEV), changes in Net Interest Income (NII), and Effective Gap as tools to measure IRR.
b) Liquidity Risk -This is the risk that current loan and deposit withdrawal demands will exceed the availability of liquid assets (assets with maturities of less than one year). On a monthly basis the Board will review a list of liquid assets and investments. The Credit Union will maintain a ratio of cash and short-term investments to assets of no less than 15% of assets.
c) Credit Risk - This is the risk that the quality of the loan and investment portfolios will be impaired by deficient credit standards, poor judgment, or inadequate management review. ALCO will control credit risk exposure by monitoring and controlling:
a. Lending policies and procedures.
b. Trends in economic conditions.
c. Financial condition of field of membership.
9-1. Guidelines (continued)
d) Concentration Risk –This is the risk resulting from concentrating loans (investments) in single or related borrowers (issuers) or in particular geographic areas, or holding several obligations with similar characteristics. Management will control concentration risk by carefully monitoring the composition of the investment and loan portfolio.
e) Default Risk –This is the risk of loss on an investment due to an issuer's inability or unwillingness to meet contractual obligations or on a loan due to a borrower's inability or unwillingness to repay. Management will control default risk by implementing sound lending and collection policies.
2. Asset/Liability Structure
A. ALM Guidelines for Projected NEV position
This measures the effect of interest rate risk on net worth. It is a measure of solvency and future earnings capacity. This is the present value of the cash flows (payments) generated by earning assets less the present value of the cash flows of liabilities. The mathematical definition of present value (worth) is the equivalent value now of future dollars discounted back from a specified future date to the present date at a given rate of compound interest (discount). Here we focus on the percentage change through various interest rate scenarios and its impact on the NEV Ratio.
We will target the maximum allowable percent losses in the NEV (Balance Sheet at Par Value) for a hypothetical +/-200 basis point parallel shift in all rates not to exceed 20%. This process focuses on interest earning assets and costing liabilities as a total balance sheet package.
Quarterly, we will compare our actual results to our benchmarks. If we exceed our parameters, we will initiate corrective action.
1. Asset Mix
a) Loans: 50%-80%. Since loans to members are the Credit Union's primary asset, ALCO strategies should aim at meeting member's lending needs.
a. Limits on Maturity Structure: Residential real estate first trust deed maturities should not exceed 30 years; second trust deed maturities should not exceed 15 years; and consumer vehicle loan maturities should not exceed six years. RVs, campers, boats etc. can have terms up to 15 years.
b. Loan to Deposit Ratio: 70%-80%. Since the ALCO will rely on asset management to fulfill the Credit Union's liquidity needs, it will need to restrict loan growth to that which can be supported by available deposit funds.
9-2. Asset/Liability Structure (continued)
c. Variable Rate Home Equity Loans: Since variable rate real estate loans have no impact on NEV, the credit union will restrict these loans only to stay within our liquidity guidelines.
d. Fixed Rate Real Estate Loans: Fixed rate real estate loans will not exceed 30% of assets unless the parameters set for NEV and Liquidity are exceeded.
b) Investments: The Credit Union's investment portfolio shall provide a secondary source of liquidity. The percentage of assets held in investment will depend on the amount of surplus funds available; those funds exceeding anticipated loan demand and deposit withdrawals. Investments will be made according to the Investment Policy.
c) Fixed Assets: 5% of shares and retained earnings. Investment in fixed assets shall be limited to those necessary to carry out member services.
d) Cash: 5% of Assets. Vault cash and checking balances should be maintained at minimum levels sufficient to satisfy operating needs. Cash and Short-term investments (less than 1 year) will not fall below 15 percent of total assets.
e) Other Assets: 1%-5%.
f) Asset Quality. The Board will monitor asset quality as described in the Investment and Lending Policies.
2. Liability and Equity Mix
a) Deposits: 80% to 87%
b) Borrowings: An approved line of credit of $1,500,000 is available at the Empire Corporate Federal Credit Union that can be used as additional source of liquidity. Borrowing funds from this line of credit, other than for overdraft protection, would require Board approval.
c) Primary Capital: We will not let our capital fall below 8% or exceed 20%. Our target net worth ratio is 10%. If capital falls below 8% we will take the appropriate measures to bring it within our established guidelines.
d) Net Economic Value (NEV): We will not let our loss in NEV decrease more than 20% in a +/- 200 bp parallel shift in interest rates. If NEV falls more than 20%, we will take the appropriate measures to bring it within our established guidelines.
NEV = Fair Value Assets minus Fair Value of Liabilities.
9-2. Asset/Liability Structure (continued)
B. Risk to Income (Income Statement Risk):
Our target net interest income will provide sufficient income to cover operating expense. We will target the maximum allowable percent loss in Net Interest Income over a one-year horizon not to exceed 15 % of the base with a +/-200bp rate shock.
Likewise, we will target the maximum allowable Effective Gap not to exceed +/- 20 % for a hypothetical +/- 200 bp shift in our driver rate. We currently use the average monthly Fed Funds rate as our driver rate.
Section
10
Anti Money Laundering
BANK SECRECY ACT (BSA)
OFFICE OF FOREIGN ASSETS CONTROL (OFAC)
MEMBER IDENTIFICATION PROGRAM (MPI)
OPERATIONAL REQUIREMENTS
Congress enacted the Bank Secrecy Act (BSA) in 1970 to prevent financial institutions from being used as intermediaries for the transfer or deposit of money derived from criminal activity.
10-1. Bank Secrecy Act (BSA)
The primary objective of the Bank Secrecy Act (BSA) is to provide a paper trail of cash and cash like transactions performed at a financial institution. This is done in an effort to help detect and prevent money laundering associated with organized crime, tax evasion, drug trafficking, white-collar crime, funding of terrorism, and other illegal activities. Credit unions are required by federal law to report and maintain records regarding various types of cash and non-cash transactions.
The two mechanisms for reporting suspected money laundering are the Currency Transaction Report (CTR), FinCEN Form 104 and the Suspicious Activity Report (SAR).
A. Currency Transaction Report (CTR), FinCEN Form 104
1. The Credit Union will report all deposits, withdrawals, purchases, and payments made in cash exceeding $10,000 or multiples totaling more than $10,000 made during the Credit Union’s business day. Deposits made at night, over the weekend or a holiday shall be considered as if received on the next business day following the date the deposit was received. A CTR must be filed for a reportable transaction by the 15th calendar day after the day of the transaction. A copy of each CTR filed must be maintained for a period of five (5) years from the date filed.
2. The Credit Union is not required to file a CTR for transactions conducted by “exempt persons”. The two most prevalent “exempt persons” are:
10-1. Bank Secrecy Act (continued)
A. Financial Institutions
B. Business Accounts that:
▪ have been maintained at the credit union for at least 12 months
▪ engage in frequent currency transactions over $10,000
▪ are incorporated, registered as, and eligible to do business in the U.S. or an individual state
Additionally, business account exemptions must be updated biannually.
▪ To exempt an account, file a Designation of Exempt Person Form (TD 90-22.53) with the U.S. Department of the Treasury within 30 days of the first reportable transaction.
An example of a completed CTR FinCEN Form 104 is below:
Picture 1: Example of top and bottom half of CTR Form 104
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10-1. Bank Secrecy Act (continued)
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The Credit Union collects and retains information on any sale of a credit union official check, money order, or traveler’s check for $3,000 or more in currency. The BSA also requires that specific information on the issuance/sale of one or more of these instruments to any one person, which when combined, involves currency in amounts of $3,000-$10,000 in the same business day, must be recorded for each instrument purchased. To satisfy this requirement, the Credit Union requires that all cash purchases of monetary instruments must be processed through the member’s account. Purchases of monetary instruments are only processed for members of XYZ Corp Federal Credit Union. A computer log maintains this information.
B. Suspicious Activity Report (SAR)
The Credit Union recognizes that certain member transactions are suspicious in nature and may trigger the filing of a Suspicious Activity Report (SAR) SARs can be filed on any transaction occurring in any department. SARs must be filed no later than 30 days after the date of initial detection of facts that may constitute a basis for filing a SAR. A copy of each filed SAR along with any supporting documentation must be maintained for a period of five (5) years from the date filed.
The Credit Union must file a SAR following the discovery of:
1. Transactions aggregating $5,000 or more when unusual activity is suspected
10-1. Bank Secrecy Act (continued)
2. Transactions aggregating $25,000 or more when unusual activity is suspected
3. Insider abuse involving any amount
4. Any other suspicion of illegal or money laundering activity
5. Structuring - sometimes referred to as “smurfing.” This is the act of breaking up large cash transactions to evade BSA requirements, usually the filing of a CTR.. For example, a member might try to deposit $8,000 in cash on two consecutive days in an attempt to prevent the credit union from filing a CTR. Another form of structuring might involve a member conducting numerous cash transactions in one day (or several days) at different branches.
Picture 1: Part I of the SAR, Reporting Financial Institution
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10-1. Bank Secrecy Act (continued)
Picture 2: Part II of the SAR: Suspect Information
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10-1. Bank Secrecy Act (continued)
Picture 3: Part III of the SAR: Suspicious Activity Information
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Picture 4: Parts IV and V of the SAR: Contact and Explanation
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10-1. Bank Secrecy Act (continued)
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1. Examples of Suspicious Activities: (Teller and new accounts)
▪ Members reluctant to provide information requested for identification
▪ Members opening multiple accounts in one or more names and making deposits for less than $10,000 in each
▪ Members reluctant to proceed with a transaction after learning about the need for a CTR
▪ Members making frequent large cash transactions for no apparent reason or which are inconsistent with the type of business they are involved in
▪ Members exchanging large amounts of currency from small to large bills
▪ Member’s frequent purchase of monetary instruments for cash in amounts less than $10,000
▪ Members making large cash deposits and requesting wire transfers to another city or country inconsistent with the business of the client
▪ Members receiving wire transfers and immediately purchasing monetary instruments for payment to another party
▪ Traffic patterns of a member change in the safe deposit area possibly indicating the safekeeping of large amounts of cash
▪ Member discusses CTR filing requirements with the apparent intention of avoiding them or makes threats to an employee to deter filing
▪ Members making large cash deposits and requesting wire transfers to another city or country inconsistent with the business of the client
▪ Member requests to be included on the institution’s CTR exempt list
10-1. Bank Secrecy Act (continued)
2. Examples of Suspicious Activities (Wire Transfers)
▪ Member who experiences increased wire transfer activity when previously there was very little
▪ International transfers for accounts with no history of such transfers and where the stated business activity of the account holder does not warrant it
▪ Member receives many small incoming transfers or makes small deposits of checks, money, and/or money orders and then requests wire transfers to another city or country
▪ Member uses wire transfers to move large amounts of money to a bank secrecy haven country
▪ Request from non-account holders to receive or send wire transfers that involve currency near the $10,000 limit or that involve numerous monetary instruments
▪ Non-account holder receives incoming wire transfers under instructions to the bank to “Pay Upon Proper Identification” or to convert the funds to a cashier’s checks and mail them to the non-account holder
C. Currency Monetary Interest Reports (CMIR)
The Credit Union will report any receipt of currency or other monetary instrument in an aggregate amount exceeding $10,000 at one time that is transported, mailed, or shipped to the Credit Union from any place outside the United States.
Disclosures made to Customs officials will fall within the restrictions of the Right to Financial Privacy Act. The Credit Union will disclose only identifying information of the person, corporation, or account, and the nature of any suspected illegal activity.
D. Funds Transfer Transactions
The Credit Union will obtain, transmit and/or relay, and retain specific information regarding the originator and beneficiary on all transfers in amounts of $3,000 or more. This does not apply only to cash transactions, but to all transactions of $3,000 or more, whether or not the transaction involves cash.
10-2. Office Of Foreign Assets Control (OFAC)
The Office of Foreign Assets Control (“OFAC”) of the US Department of the Treasury administers and enforces economic and trade sanctions based on US foreign policy and national security goals against targeted foreign countries, terrorists, international narcotics traffickers, and those engaged in activities related to the proliferation of weapons of mass destruction.
10-2. Office of Foreign Asset Control (continued)
The Specially Designated Nationals (SDN) list (offices/enforcement/ofac/sdn) will be reviewed, Credit Union computer software, and other processes to ensure compliance with the following:
1. New and existing memberships
2. Incoming and outgoing wire transfers to/from non-members
3. Account Disbursements in excess of $10,000 where the payee is a non-member
4. Names of all parties (including members) to a non-real estate loan greater than $30,000
5. Non-members involved in a loan transaction greater than $10,000 (includes, but is not limited to payees and cosigners)
6. All parties (including members) to a real estate loan greater than $100,000
7. All parties to loan proceeds payable to a member residing in a foreign country
8. The Compliance Officer will monitor and identify anyone transacting business as a person identified by OFAC, report and act as required by law, and maintain all records of compliance.
10-3. Member Identification Program
A. Member Identification Requirements
1. Personal Account - The Credit Union requires anyone opening a new account relationship to provide, at a minimum, the following information in order to form a "reasonable belief” that the true identity of a member is obtained. Included in this list is the information required for all new account relationships and any added signatory to an account. The forms of identification we will accept are
▪ Name
▪ Date of birth
▪ Residential or business street address
❑ For an individual who does not have a residential or business street address, an Army Post Office (APO) or Fleet Post Office (FPO) box number, or the residential or business address of the next of kin or of another contact individual
▪ If the individual is a US person, a taxpayer identification number, e.g. Social Security Number, Employee Identification Number, or Individual Taxpayer Identification Number. If the individual is a non-US person, all of the following that they possess (minimum of one required): a US taxpayer identification number; a passport number and country of issuance and alien identification card number; number and country of issuance of any other government-issued document evidencing nationality or residence and bearing a photograph or similar safeguard
▪ Telephone number
▪ Driver's license number
▪ Email address (optional)
10-3. Member Identification Program (continued)
2. Business Account
▪ Business name
▪ The address of the member's principal place of business and, if different, the member's mailing address. If the member has a local address different from its principal place of business, the local address
▪ If the member is a US person, an employer identification number, if the person does not have an employer identification number or is not required to apply for an employer identification number, the social security numbers of the principals involved with the account. If the member is a non-US person, a US taxpayer identification number; if the member is not required to have US taxpayer identification number, a taxpayer identification number issued by the
country of the member’s residence
▪ Telephone number (optional)
▪ Driver's license number (optional)
▪ E-mail address (optional)
A Credit Union Account is considered a "Contractual Relationship" between the Credit Union and the member, with the responsibilities of both parties based on specific law. All corporations, partnerships and trust accounts must have the identity of all individuals’ verified and valid social security numbers must be provided to the Credit Union prior to the addition or opening of the account.
3. Taxpayer Identification Number Requirement
▪ US persons - The Credit Union must obtain the Taxpayer Identification Number prior to opening an account or adding a signatory to the account. There is no exception to this rule for individuals.
▪ Businesses - The Credit Union recognizes that a new business may need access to financial services, particularly to the savings account or an extension of credit, before it has received an employer identification number. For this reason, the Credit Union has a limited exception to the requirement to this rule. The Credit Union may permit the opening or addition of a signatory, to an account for a person other than the individual (such as a corporation, partnership, or trust) that has applied for, but has not received, an Employee Identification Number. However, in such a case, the Credit Union must obtain a copy of the application before it opens or adds a signatory to the account and obtain the Employee Identification Number within two weeks of the account opening or addition of the signatory to the account.
4. Non US Persons – The credit union must obtain one or more of the following:
▪ Taxpayer Identification Number
▪ Passport Number and Country of Issuance
▪ Alien Identification Card Number
10-3. Member Identification Program (continued)
▪ Number and Country of Issuance of any other Government-issued document evidencing nationality or residence and bearing a photograph or similar safeguard.
Explain the nature of each type of account and all needed facts including all appropriate disclosures, terms, and fees. Clarify with the member their responsibility in transacting business with our Credit Union.
Note: While opening a deposit or lending account relationship, remember to carefully identify the member when establishing a new account financial responsibility. Be alert to the following circumstances when opening a new account relationship:
a) Insufficient or questionable identification
b) No employer
c) P.O. Box for an address with no physical address
d) No telephone
e) Minimum cash deposit
B. Verification Process for Identification used in Opening of Account Relationship
1. Credit Union employees shall verify the identity of a member using the information obtained in accordance with Section 1 of this MIP. Verification must take place within a reasonable time, and be completed no longer than fourteen days after the account is opened, or such longer period as approved on a case-by-case basis by the Credit Union's MIP compliance officer.
2. Documents used in opening an account relationship must be verified prior to establishing the account. In most cases identification used will be valid and not fraudulent; however, in the cases in which a fraudulent account may be attempted, validity of the identification used will be imperative.
The following documents will be acceptable as forms of identification:
▪ Current Driver's License (photograph required)
▪ Current Armed Forces Identification (photograph required)
▪ Valid Passport (photograph required)
▪ Current Alien Identification (current photograph required)
▪ Valid Social Security Number
▪ Valid Employee Identification Number3
A description of the document(s) used to verify the identity of a member will be made. Information to be noted includes
▪ Type of document
▪ ID number
▪ Place of issuance
▪ Date of issuance
▪ Expiration Date
10-3. Member Identification Program (continued)
3. It is important to verify the following information on all identification
▪ The address on the Driver's License, Passport, or Alien Identification Card to the address given upon opening or at application
▪ The date of birth on the Driver's License, Passport, or Alien Identification Card to the date of birth given upon opening an application
C. Verification Process for Non-Documentary Identification used in Opening of an Account Relationship
1. In many cases, minors and the elderly do not have the appropriate documents to confirm their true identity. Below are some situations that may occur when documents are unavailable
▪ Expired Passport, Driver’s License or ID Card or similar safeguard that bears a photograph
▪ The Credit Union is not familiar with the documents presented
▪ The account is opened without obtaining documents
▪ The account is not opened face-to-face
▪ The type of account increases the risk that the Credit Union will not be able to verify the true identity of the member through documents.
2. In the case of a minor who cannot produce the required documents, we will verify the identity of the minor's next of kin.
3. In the case of the elderly member who cannot produce the required documents, we will accept any of the following documents
▪ Electric bill
▪ Telephone bill
▪ Social Security Card
-- Optional -- Social Security, Employee Identification and Individual Taxpayer Identification Numbers must be verified using a current consumer report from a bad check database or credit reporting agency.
-- Optional -- When the Credit Union is unfamiliar with the documents produced, the member must be directed to apply for a valid Identification Card issued by the State or other valid government issued document.
4. When the account is opened without obtaining documents, attempts must be made to retrieve the required documentation to confirm the identity of the member or signatory on the account relationship. If through these attempts the Credit Union is unable to retrieve the required documents within fourteen business days, the account will be closed and funds will be returned to the current address listed.
10-3. Member Identification Program (continued)
5. When the account is not opened face-to-face, attempts must be made to retrieve the required documentation to confirm the identity of the member or signatory on the account relationship. If through these attempts the Credit Union is unable to retrieve the required documents within 14 business days, the account will be closed and funds will be returned to the current address listed and payable to the current signers.
6. When the type of account increases the risk that the Credit Union will not be able to verify the true identity of the member through documents is confirmed, the account must be closed. This action should take no longer than 14 business days from the start of the application or opening of the account.
7. If no documentation was used due to the above situations, a notation on the signature card and comment log must indicate the reason. Always date and initial this documentation.
D. Identity Verification Process
The Credit Union's identity verification procedures ensure the validity of member's information provided on the deposit or lending application. The following are non-documentary verification methods the Credit Union will use
1. Sending a thank you card after the relationship has been established
2. A telephone call after the account relationship is open
3. Obtaining a financial statement
4. Compare the identifying information provided by the member against fraud, and bad check databases to determine whether any of the information is associated with known incidents of fraudulent behavior. (negative verification)
5. Comparing the identifying information with information available from a trusted third party source, such as a credit report from a consumer-reporting agency. (positive verification)
6. Analyze whether there is logical consistency between the identifying information provided, such as the member’s name, street address, ZIP code, telephone number, date of birth and social security number. (logical verification)
E. Lack of Verification
1. In the event that a Credit Union employee cannot form a reasonable belief that he/she knows the true identity of a member
▪ The account will not be opened, or
▪ A regular savings account will be opened but restrictions will apply until the member's identity can be verified. List any restrictions that the Credit Union will place on the member's ability to transact business, e.g. No loans will be granted, No checking
10-3. Member Identification Program (continued)
accounts will be opened, No ATM/Debit card will be issued, No other services will be provided.
2. The Credit Union will verify the member's identity within 14 days. If the identity is not verified within that time frame, the account will be closed. Include the following regardless of which option above is chosen
3. In the event a Credit Union employee has reason to believe the member has committed a criminal violation of federal law or suspect’s activity related to money laundering, the Credit Union would file a Suspicious Activity Report.
F. Recordkeeping
The Credit Union will make a record of identifying information obtained from the member and retain this information for 5 years after the date the account is closed. The Credit Union will retain any records it makes regarding the documentation used to verify a member's identity for 5 years after the record is made.
G. Comparison with Government List
Compare each new member's name to the names on any list of known or suspected terrorists or terrorist organizations issued by any Federal government agency and designated as such by Treasury and NCUA. In addition, the names of all persons subject to this policy shall be checked against current Office of Foreign Asset Control (OFAC) (offices/enforcement/ofac/sdn) control lists and against any other lists of known or suspected terrorists or terrorist organizations provided to the Credit Union by a federal government agency. All federal directives issued in connection with such list shall be strictly adhered to. In the event a member's name appears on such list, the Credit Union will follow the directions provided in the federal directives.
H. Equal Credit Opportunity Act (ECOA)
An emphasis has been placed on the collection and retention of information about a member, such as an individual's race or sex, as an additional part of collecting identifying information. This does not relieve the Credit Union from its obligations to comply with anti-discrimination laws or regulations such as ECOA against discrimination in any aspect of a credit transaction on the basis of race, color, religion, national origin, sex, marital status, age or other prohibited classifications. The Credit Union will be vigilant in ensuring that none of the information obtained is used to discriminate on a prohibited basis.
I. Member Notification
A notice informing new account members that the Credit Union is requesting information to verify their identity is posted in the following places
10-3. Member Identification Program (continued)
▪ In each branch location and at all new account relationship areas
▪ The Credit Union's website in a location that will ensure a member will receive the notice prior to establishing an account via the Internet
▪ For accounts opened through the mail, the notice will be sent with the account card and Membership and Account Agreement.
4. Operational Requirements
Part 748 of the NCUA Rules and Regulations requires the Credit Union to establish and maintain procedures reasonably designed to assure and monitor compliance with BSA and its implementing regulations. This program includes:
▪ A system of internal controls to ensure ongoing compliance
▪ Independent testing of compliance
▪ Daily coordination and monitoring of compliance by a designated person; and
▪ Training for appropriate personnel.
A. Internal Controls
The Credit Union has appropriate internal control procedures that allow for the detection of money laundering. These procedures provide the Credit Union with the ability to identify, monitor, and report:
1. Currency transactions in excess of $10,000 on the Currency Transaction Report (CTR) FinCEN Form 104
2. Transactions suspicious in nature by completing a Suspicious Activity Report (SAR)
3. Internal reports that allow monitoring of reportable transactions, structuring, and OFAC compliance
▪ Review Bank Secrecy Act Cash Reporting by Account Number daily
▪ Review Bank Secrecy Act Cash Reporting by SSN daily
▪ Review BSA query report to detect structuring monthly
▪ Retain copies of receipts, reports, etc. to address issues with core processor for “reportable transactions”
4. Section 314(a) of the USA Patriot Act authorized law enforcement authorities to communicate with financial institutions about suspected money launderers and terrorists.
5. The member database is compared to the current SDN list monthly and exceptions are verified.
10-3. Operational Requirements (continued)
The Credit Union’s CEO and CFO currently receive “314(a) request” notifications made by the Financial Crimes Enforcement Network (FinCEN), and search credit union records to confirm subject matches.
B. Independent Testing
Compliance with the BSA is independently tested at least annually by the Supervisory Committee. The audit program consists of:
1. Attesting the effectiveness of internal procedures for monitoring compliance with BSA by:
a) Sampling large currency transactions traced to CTR filings
b) Testing the validity and reasonableness of exemptions granted
c) Reviewing a sample of SAR filings to ensure completeness and accuracy
2. Assessing employee’s knowledge of regulations and procedures
3. Assessing the adequacy of training programs
Audit findings are incorporated into a report for senior management and board review. Appropriate follow-up to deficiencies are ensured.
C. Compliance Officer
The Credit Union has designated the Compliance Coordinator as the BSA compliance officer. This individual is responsible for the day-to-day management of the BSA compliance program.
D. Employee Training
Credit Union management as well as the Compliance Coordinator ensures that appropriate credit union personnel are trained in all aspects of the regulatory requirements of the BSA and internal policies and procedures to ensure compliance with BSA. The Credit Union utilizes training material through different Internet sources, guest training presentations, attendance at seminars/conferences, as well as in-house training conducted by management to ensure staff receives proper training.
Section
11
Operational Policies and Procedures
Purpose and Scope
The purpose of this policy is to provide guidance regarding wire transfers and to minimize the credit union's risk of loss through wire transfers.
1. General Security Measures
a) Access to wire transfer software is restricted to personnel authorized by management and by passwords.
b) Suspicious inquires relating to wire transfer procedures and suspicious/irregular transfer attempts will be reported to management.
c) Wire requests are limited to members and for Credit Union business. Third party requests are not allowed.
d) Prior to processing a wire transfer request, the Credit union member's account must contain a sufficient amount of collected funds (free from any encumbrances or holds).
e) All wires greater than $5,000 will be verified by a manager/supervisor.
f) No member wires will be processed for over $5,000 unless the member comes in to the credit union or can be identified by voice over the phone by an employee.
g) If the member cannot be identified by voice or cannot come into the credit union, a bank check can be sent over night in lieu of a wire.
h) There will be separation of duties among those employees receiving, processing, verifying and reconciling wire transfers.
i) There will be an end-of-day reconciliation of completed wires against the original transfer instructions.
j) Each employee involved in a transaction must sign off on the task they performed.
2. Types of Wires Permitted
a) Member incoming and outgoing domestic and international wires.
b) XYZ Corp incoming and outgoing wires for investments, loans, and other credit union business
11-3. Member Eligibility for Wire Transfers
3. Member Eligibility for Wire Transfers
a) Any member, in good standing with the credit union at the time of request is eligible.
Wire amounts will be limited to the amount of available funds in a member’s account.
Whenever possible, a member will be required to fill out and sign the wire transfer request form.
All members requesting wire transfers will be required to give identifying information.
4. Member Identification
C. In person requests
a) Knowing the member by face and name is acceptable identification.
b) Picture ID is required if the member is not recognized by the employee.
D. Telephone Requests (Emails without a signature will be considered a telephone request)
a) Standard member verification is required. Standard verification includes verifying 2 pieces of information maintained on the member’s account. It does not include information that could be obtained on the member’s most recent statement.
b) Voice identification is acceptable.
E. Fax Requests (Emails with a signature will be considered a fax)
Check the signature against the membership application signature for authenticity.
5. Member Verification
a) Telephone/fax requests: All member requests over $5,000 will be verified by a manager/supervisor by contacting the member at a phone number currently listed on their account to identify them by voice. If the member cannot be identified by voice, a bank check can be sent over night in lieu of a wire
b) In person requests: All requests over $5,000 will be verified by a manager/supervisor before the member leaves the Credit Union.
6. OFAC Verification
Outgoing and incoming wires will be matched against the Specially Designated Nationals (SDN) list and countries on the Sanctions Program & Country Summaries list at before completion.
11-7. Required Information
7. Required Information
a) Name, account number and the current physical street address of the member wiring the funds.
b) Routing number, name and telephone number of the Financial Institution receiving the funds.
c) Name, account number and address of the beneficiary of funds.
8. Fees
Outgoing wires are subject to a fee as listed on the XYZ Corp Fee Schedule.
WIRE TRANSFER PROCEDURES
9. Time Schedule
a) Domestic wires can be processed up to 3:30 pm for same day service.
b) International wire can be processed up to 12:00 pm for same day service.
10. Member Wire Transfer Request
A. Staff – Receives the request
1. Identify the member – a password/code, when active on an account, is to be used to identify the member for all requests/transactions.
a) In Person Requests – When a password/code is not active, knowing the member by face and name is acceptable identification. Picture ID is required if you do not recognize the member. Matching the signature with the Member’s file can be done to verify identify.
b) Telephone Requests – When a password/code is not active, standard member verification is required. Standard verification includes verifying 2 pieces of information maintained on the member’s account. It does not include information that could be obtained on the member’s most recent statement. The date an account was opened, collateral used on a loan, the last transaction made to the checking account are just a few of the examples of questions that can be asked. Voice identification is acceptable.
c) Fax Requests – Check the signature against the membership application signature for authenticity.
2. Document the verification - Indicate on the Wire Transfer Request form what information was utilized to verify the identity of the member making the request.
3. Complete the Outgoing Wire Transfer Request form
11-10. Member Wire Transfer Procedure (continued)
a) Locate this form on the ERC
b) Complete the form. For in-person requests, have the member sign the Wire Transfer Request form
c) Verify the information received against the member’s account information for consistency.
4. OFAC Compliance – go to offices/enforcement/ofac/sanctions/ to complete the following
a) Domestic/International Wires – verify the recipient of the funds against the Specially Designated Nationals (SDN) list.
b) International Wires - verify the country receiving the wire is not currently on the Sanctions Program & Country Summaries list.
c) If there is a match, give the wire request to your supervisor immediately.
5. Withdraw funds from the member’s account using the Misc. Receipt function.
a) The M/R code is EWT for the amount being transferred
b) The M/R code is WTF for the amount of the fee being charged based on XYZ Corp’s Participation Tier Program
6. Withdraw funds from the member’s account using the Misc. Receipt function.
B. Manager/Supervisor – Processor of the Wire Transfer Request
1. Verification
a) Telephone requests (Email without signature)- For amounts over $5,000 the member must be identified by voice recognition.
b) Fax requests-(Email with signature)-Contact the member at a phone number currently listed on their account to confirm the wire instructions.
c) In person requests-A manager/supervisor must sign off on all wires over $5,000 before the member leaves.
d) Verify that the staff member taking the request documented how they verified the identity of the member/owner of the account.
2. Process the wire transfer request on-line/telephone at superhighway.default.asp/telephone at 800-253-0053.
3. If the wire is over $5,000, it will need to be verified by another authorized manager/supervisor on-line/telephone at superhighway.default.asp/ telephone at 800-253-0053.
4. Sign, date and enter the verification number received when you submitted/verified the request on the Wire Transfer Request form.
5. Give the Wire Transfer Request form to the Accounting Department.
11-10. Member Wire Transfer Procedure (continued)
C. Accounting Staff – Reconciliation of Wire Transfers
1. At 3PM every business day, a member of the accounting staff will review the list of outgoing wires on the Empire Corporate Super Highway at superhighway.default.asp/ - “View Outgoing Wires” screen to ensure all wires initiated for that day are in a “complete” status. If there are any wires requiring verification, the accounting staff member will advise a member of management for completion.
2. At the end of the day (~4:00PM), a member of the Accounting department will retrieve a summary of all wire transfers initiated by XYZ Corp on the Empire Corporate Super Highway at superhighway.default.asp/ - “View Outgoing Wires” screen.
3. The Accounting department will ensure that they are in possession of a Wire Transfer Request Form for each wire appearing on the outgoing wire transfer summary report.
4. The Wire Transfer Request Forms will be compared to the outgoing wire transfer summary report to ensure that the amounts processed are accurate. In addition, the Accounting department will review the member’s account where the wire transfer originated to ensure the accuracy of the funds withdrawn.
5. The Accounting department would initial/stamp the Wire Transfer Request Form evidencing that the aforementioned review was completed. The Wire Transfer Request Forms will be filed with the daily work processed by the Accounting department.
D. Accounting Staff – Incoming Wire Transfer Procedures
1. The Accounting department will review the summary of wires incoming to XYZ Corp on the Empire Corporate Super Highway at superhighway.default.asp/ - “View Incoming Wires” screen on approximately an hourly basis. Any new wires appearing on this screen will be posted to the applicable member’s account.
2. Documentation supporting the receipt of the wire, along with the posting receipt to the member’s account, will be filed with the daily work processed by the Accounting
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