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Subject 80-2-4 INVESTMENT OF CREDIT UNION FUNDS

Rule 80-2-4-.01 Investment of Credit Union Funds in Other Financial Institutions

(1) No credit union chartered by the State of Georgia shall invest its funds which are not used in loans in any bank, savings and loan association, or credit union in an amount exceeding five (5) percent of the total deposits of the bank, savings and loan association or credit union; or such larger amount as may be approved by the Department.
(2) For purposes of this Rule, the total deposits of the bank, savings and loan association, or credit union shall be that amount reported in the depository's most recent statement of condition.

Rule 80-2-4-.02 Investment of Credit Union Funds in Fixed Assets; Requirements

(1) The aggregate investment by a credit union in fixed assets shall not exceed sixty (60) percent of total equity capital and reserves (excluding the allowance for loan losses) except that a greater sum may be invested with the prior approval of the Department.
(2) In the event a credit union invests in a leasehold in order to occupy the premises for the transaction of its business and the investment does not cause the credit union to exceed the fixed asset limitation set forth in paragraph (1), the credit union shall provide the Department with written notification of the investment.
(3) Letter form applications seeking approval to invest in fixed assets in an amount in excess of sixty (60) percent of total equity capital and reserves (excluding the allowance for loan losses), must provide for an orderly plan of restoring the fixed asset investment to the sixty (60) percent limitation within not more than five (5) years.
(4) Nothing herein shall be construed as permitting a credit union to acquire real estate without the prior approval of the Department or as expressly provided in Rule 80-2-4-.04.

Rule 80-2-4-.03 Investment of Credit Union Funds in Subsidiaries

(1) Unless otherwise precluded by law or regulations, a credit union may acquire and hold for its own account shares of stock or interest in a subsidiary or affiliate corporation or limited liability company engaged in the following functions or activities that do not pose undue risk to the safety and soundness of the credit union and that are consistent with the objectives of O.C.G.A. § 7-1-3. The functions or activities that the credit union subsidiary or affiliate is authorized to conduct include, but are not limited to:
(a) offering third-party payment services as provided in O.C.G.A. § 7-1-670;
(b) holding real estate;
(c) acting as a financial planner or investment adviser;
(d) offering a full range of investment products;
(e) exercising powers incidental to financial activities as provided in O.C.G.A. § 7-1-650; and
(f) exercising powers granted by Department rules or powers determined by the Commissioner to be financial in nature or incidental to the provision of financial services.
(2) O.C.G.A. § 7-1-650(6)contemplates that a credit union can have a separate subsidiary or affiliate to exercise powers that are express or incidental to the credit union's authority with the approval of the Department. Subject to certain investment limitations for credit unions, the subsidiary or affiliate can conduct such powers as may be financial in nature or incidental or complimentary to the provision of financial services. Prior to the subsidiary or affiliate engaging in any functions or activities that a credit union is authorized to engage, the credit union must submit a letter form application to the Department describing the proposed activity, detailing the activity's relationship to the business of the credit union, and setting forth the provisions that will be implemented in order to mitigate any related risks. Upon review of the application, the Department may request additional information if it determines such additional information is necessary in order to fully and completely evaluate the application. After completion of its review, the Department shall either approve, conditionally or otherwise, or deny such application in writing.
(3) If more than one credit union has an ownership interest in such subsidiary or affiliate, the credit union that has the largest percentage ownership in the subsidiary or affiliate must submit the application to the Department. In the event the largest credit union percentage ownership in the subsidiary or affiliate is held by multiple credit unions, then only one credit union is required to submit an application to the Department.
(4) For purposes of this rule only, "affiliate" means a corporation or limited liability company, that a credit union has less than a majority ownership interest.

Rule 80-2-4-.04 Purchase of Real Estate for Future Expansion; Letter Notification

(1) The purchase of real estate solely for expansion purposes may be made without the prior consent of the Department and by letter notification when:
(a) The real property is to be utilized solely as the premises of a credit union or its wholly owned subsidiary within five years of the date of purchase;
(b) The purchase of the real property does not result in the credit union exceeding the fixed asset limitation;
(c) The credit union is not subject to any special requirements whereby the Department requires prior approval for such purchases; and
(d) If a director, officer, or committee member is a party to the transaction, a certification is provided stating that all requirements of O.C.G.A. § 7-1-656 and the provisions of any applicable federal requirement have been satisfied.
(2) The letter notification shall state the date of purchase, purchase price, location of the property, and why the credit union qualifies for letter notification under the provisions of this rule.
(3) The ability to hold property for future expansion shall expire five (5) years from the date of purchase unless the property is utilized as credit union premises prior to that time. Credit unions holding property beyond the five-year period must divest themselves of the property through sale unless the time limitation is extended by the Department.

Rule 80-2-4-.05 Credit Union as a Lessor of Real Estate

(1) Pursuant to O.C.G.A. § 7-1-650(8)(a), a credit union may purchase, hold, and convey real estate the credit union occupies or intends to occupy primarily for the transaction of its business. Subject to compliance with the provisions of this rule as well as the Department's prior written approval, a credit union may lease excess real estate.
(2) For purposes of this rule, the phrase "occupy primarily" means occupation and use, on a full-time basis, of at least sixty-seven (67) percent of the square footage of each individual premise by the credit union or by a credit union and a wholly owned subsidiary of the credit union.
(3) The underlying real estate must have been acquired in good faith for permissible purposes and with the intent of providing services to the credit union's members. Nothing herein shall be deemed to authorize a credit union to acquire real estate for speculative purposes.
(4) The credit union may not lease real estate to a third-party if it raises safety and soundness concerns.
(5) The application for approval to lease real estate to a third-party shall contain, at a minimum, the following information:
(a) A detailed description of the lease that is contemplated, including but not limited to, the terms of the lease, a description of the proposed lessee's operations, the relationship, if any, between the credit union and the proposed lessee, the real estate that is proposed to be leased, and the percentage of the real estate that will be occupied by lessee;
(b) The total amount of the credit union's fixed assets that will be leased in the event the lease is approved;
(c) An affirmative statement that there is no involvement by any director, committee member, officer or employee of the credit union or any related interest of such individuals with the individual or entity that is the proposed lessee. In the event there is any such involvement, then it should be detailed in the application; and
(d) A copy of the resolution adopted by the Board of Directors authorizing the lease of the specific premises to the proposed lessee.

Rule 80-2-4-.06 Charitable Donation Accounts

Credit unions are authorized to invest in charitable donation accounts subject to the following limitations:

(1) The primary purpose of the charitable donation account must be to generate funds to donate to 501(c)(3) non-profit organizations that serve a charitable, social, welfare, or educational purpose and serves the credit union's field of membership;
(2) Prior to investing in a charitable donation account, the Board of Directors must adopt a Conflict of Interest and Ethics Policy that specifically addresses charitable contributions. Such Conflict of Interest and Ethics Policy must include all designated charitable purposes authorized to receive contributions and each designated charitable purpose must be consistent with the best interests of the membership of the credit union. The credit union shall develop written procedures regarding the funding of charitable donation accounts and the distribution of funds from such accounts;
(3) The terms and conditions controlling the charitable donation account must be documented in a written agreement. At a minimum, the written agreement must provide that donations will only be made to authorized organizations, document the investment strategies and risk tolerances that must be followed in administering the account, provide that all records of the account, including distributions and liquidation, will be maintained in conformity with generally accepted accounting principles, and provide for the frequency of distributions to authorized organizations;
(4) The charitable donation account may purchase an investment that would otherwise be impermissible if purchased by the credit union so long as the type of investment is authorized by the written agreement;
(5) Prior to the charitable donation account investing in an otherwise impermissible investment under Paragraph (4), the credit union must develop policies and procedures, approved by the Board of Directors, detailing the risk management processes that will be utilized prior to investing in an otherwise impermissible investment, including, but not limited to, the controls that will be implemented to monitor the investment, the timing and methodology of evaluating the quality and risks posed by the investment, and a documented and reasonable approach to transfer or otherwise divest of the investment in an expedited manner;
(6) The aggregate investment in charitable donation accounts cannot exceed five (5) percent of the credit union's net worth;
(7) A credit union cannot contribute funds to a charitable donation account if it has negative earnings unless it has received prior written approval from the department;
(8) A minimum of 51 percent of the total return from each charitable donation account must be distributed to one or more authorized organizations;
(9) Distributions must be made to authorized organizations no less frequently than every five (5) years;
(10) Assets of charitable donation accounts must be held in segregated custodial accounts or special purpose entities specifically identified as charitable donation accounts. If a credit union structures the charitable donation account as a trust, such trust must be a revocable trust and the trustee must be an entity regulated by a state or federal regulatory agency;
(11) Upon termination of the charitable donation account and subject to compliance with Paragraph 8, the credit union may receive a distribution of the remaining assets in cash or, alternatively, in kind so long as those assets are permissible investments for state-chartered credit unions; and
(12) Such investment must be consistent with principles of safety and soundness.

Rule 80-2-4-.07 Life Insurance as an Employee Benefit

Subject to any additional limitations the Commissioner or applicable federal regulator may impose by policy, guidance, or order, including, but not limited to, the Interagency Statement on the Purchase and Risk Management of Life Insurance as well as safety and soundness principles, a credit union may purchase, hold or fund life insurance as follows:

(1) Life insurance purchased, held, or funded in connection with employee compensation or benefit plans approved by the credit union's board of directors;
(2) Life insurance purchased or held to recover the cost of providing preretirement or postretirement employee benefits approved by the credit union's board of directors;
(3) The kind and amount of life insurance must be reasonable given the size of the credit union, the financial condition of the credit union, the duties of the employee, and other compensation of the employee;
(4) Obtain written approval from the Department prior to purchasing, holding, or funding split dollar life insurance or a product substantially similar to split dollar life insurance to ensure consistency with the Interagency Statement on the Purchase and Risk Management of Life Insurance and safety and soundness principles;
(5) A credit union investing to fund life insurance obligations may purchase an investment that would otherwise be impermissible if the investment is approved by the credit union's board of directors, is directly related to the credit union's obligation or potential obligation under such life insurance, and the credit union holds the investment only for as long as it has an actual or potential obligation under such life insurance; and
(6) Prior to the board of directors approving an otherwise impermissible investment under Paragraph (5), the credit union must develop board approved policies and procedures detailing the risk management processes the board will take into consideration in approving an otherwise impermissible investment, including, but not limited to, the controls that will be implemented to monitor the investment, the timing and methodology of evaluating the quality and risks posed by the investment, and a documented and reasonable approach to transfer or otherwise divest of the investments in an expedited manner.