ARC 6553C

ARC 6553C

CREDIT UNION DIVISION[189]

Adopted and Filed

Rule making related to generally accepted accounting principles (GAAP)

The Credit Union Division hereby amends Chapter 2, "Organization, Chartering and Field of Membership of a Credit Union," Chapter 9, "Real Estate Lending," Chapter 15, "Foreign Credit Union Branch Offices," Chapter 17, "Investment and Deposit Activities for Credit Unions," and Chapter 18, "Maintenance of Allowance for Loan and Lease Losses Account," Iowa Administrative Code.

Legal Authority for Rule Making

This rule making is adopted under the authority provided in Iowa Code section 533.104.

State or Federal Law Implemented

This rule making implements, in whole or in part, Iowa Code sections 533.205, 533.301 and 533.303.

Purpose and Summary

The amendments to Chapters 2, 9, and 15 correct minor errors and provide necessary updates. The amendments to Chapters 17 and 18 mirror federal credit union regulation regarding application of generally accepted accounting principles (GAAP) and provide regulatory relief to credit unions with assets less than $10 million. The amendments do not require a credit union with less than $10 million in assets to comply with GAAP and therefore do not require compliance with Current Expected Credit Loss calculations.

Public Comment and Changes to Rule Making

Notice of Intended Action for this rule making was published in the Iowa Administrative Bulletin on August 10, 2022, as ARC 6443C. No public comments were received. No changes from the Notice have been made; however, Item 8 has been broadened to show all of subrule 18.5(1) in order to provide more context.

Adoption of Rule Making

This rule making was adopted by the Division on September 14, 2022.

Fiscal Impact

This rule making has no fiscal impact to the State of Iowa.

Jobs Impact

After analysis and review of this rule making, no impact on jobs has been found.

Waivers

Any person who believes that the application of the discretionary provisions of this rule making would result in hardship or injustice to that person may petition the Division for a waiver of the discretionary provisions, if any, pursuant to 189—Chapter 23.

Review by Administrative Rules Review Committee

The Administrative Rules Review Committee, a bipartisan legislative committee which oversees rule making by executive branch agencies, may, on its own motion or on written request by any individual or group, review this rule making at its regular monthly meeting or at a special meeting. The Committee's meetings are open to the public, and interested persons may be heard as provided in Iowa Code section 17A.8(6).

Effective Date

This rule making will become effective on November 9, 2022.

The following rule-making actions are adopted:

Item 1. Amend subrule 2.12(2) as follows:

2.12(2) Method of notice of decisions on applications. The superintendent shall notify the applicants in writing of the decision of approval or denial of any application made under this chapter and shall mail send the decision to the applicants. If an application is denied, the superintendent shall provide the applicants with the reasons for the denial.

Item 2. Amend subrule 9.1(3) as follows:

9.1(3) Real estate loan loans made for sale into the secondary market shall be considered in transit for a period of up to 90 days after being sold and shall not be considered risk assets for reserving purposes during this time period.

Item 3. Amend subrule 15.2(2) as follows:

15.2(2) The application may be obtained by writing the Superintendent, Credit Union Division, 200 East Grand Avenue, Suite 370, Des Moines, Iowa 50309; or calling (515)281-6514(515)725-0505.

Item 4. Amend subrule 17.4(1) as follows:

17.4(1) All state-chartered State-chartered credit unions with assets of $10 million or greater must comply with generally accepted accounting principles (GAAP) applicable to reports or statements required to be in reports filed with the superintendent and maintained by the credit union. This contrasts with only federal credit unions with assets of $10 million or greater that must comply with GAAP in reports and statements filed with the NCUA. State-chartered credit unions with assets less than $10 million may comply with GAAP or other regulatory accounting principles in reports filed with the superintendent and maintained by the credit union.

Item 5. Amend rule 189—18.1(533), definition of "Allowance for loan and lease losses," as follows:

"Allowance for loan and lease losses" means an estimate of loan and lease losses in the entire loan portfolio, including estimated inherent losses , in conformity with generally accepted accounting principles and which meets regulatory requirements for full and fair disclosure of the financial statements. Credit unions with assets of $10 million or greater must conform with generally accepted accounting principles and meet regulatory requirements for full and fair disclosure of the financial statements. Credit unions with less than $10 million in assets must conform with these rules and meet regulatory requirements for full and fair disclosure or generally accepted accounting principles.

Item 6. Amend subrule 18.3(1) as follows:

18.3(1) Credit union Credit unions with assets of $10 million or greater must prepare financial statements shall be prepared in accordance with generally accepted accounting principles (GAAP), except for authorized intentional regulatory accounting practices (RAP) which may differ, and. Credit unions with assets of less than $10 million may prepare financial statements in accordance with authorized intentional regulatory accounting principles (RAP). All credit union financial statements shall provide for the complete and accurate disclosure of all assets, liabilities, and equity, including any valuation allowance accounts as may be necessary to correctly present the financial position; and all income and expenses necessary to correctly present the results of operations for the period concerned.

Item 7. Amend subrule 18.4(1) as follows:

18.4(1) The amount carried in this account shall represent an amount at least equal to reasonably foreseeable loan and lease losses. Each credit union is required to establish and maintain a methodology to determine the amount needed in the allowance for loan and lease losses account in accordance with generally accepted accounting principles (GAAP). Credit unions with $10 million or greater in assets must determine allowance for loan and lease losses account in accordance with generally accepted accounting principles (GAAP).

Item 8. Amend subrule 18.5(1) as follows:

18.5(1) Credit unions are responsible for determining an adequate allowance for loan and lease losses account and adopting a reasonable methodology for doing so. Credit unions with assets $10 million or greater shall follow generally accepted accounting principles (GAAP). In determining the appropriate allowance, each credit union with less than $10 million in assets shall:

a. Separate the loan portfolio into homogenous loan pools based on common risk factors;

b. Calculate the net loss percentage of each pool, using the historical loss or adjusted loss method which includes consideration of: loan delinquency status; collection experience of the credit union; economic conditions that may affect collectibility; availability of pledged shares; collateral, security, or endorsers; insured or guaranteed status; and the general credit reputation of the borrowers;

c. Individually classify loans with unique characteristics;

d. Add the resulting amounts to determine the amount needed in the allowance for loan and lease losses account.

[Filed 9/14/22, effective 11/9/22]

[Published 10/5/22]

Editor's Note: For replacement pages for IAC, see IAC Supplement 10/5/22.