any of the several Territories and possessions of the United States, the Panama Canal Zone, and the Commonwealth of Puerto Rico.

(h) Pursuant to section 101(4) of the Federal Credit Union Act, the term "low income members" shall include (1) those members whose annual income falls at or below the lower level Standard of Living classification as established by the Bureau of Labor Statistics, U.S. Department of Labor, (2) those members who are residents of a public housing project who qualify for such residency because of low income, and (3) members who qualify as recipients in a community action program.

(1) As used in section 101(4) of the Federal Credit Union Act, the term "predominantly" is defined as a simple majority.

(j) For the purpose of establishing the reserves required by section 116 of the Federal Credit Union Act, all assets except the following shall be considered risk assets:

(1) Cash on hand.

(2) Deposits and/or shares in Federally or State insured banks, savings and loan associations, and credit unions.

(3) Assets which are insured by, fully guaranteed as to principal and interest by, or due from the U.S. Government, its agencies, the Federal National Mortgage Association, or the Government National Mortgage Association.

(4) Loans to other credit unions.

(5) Loans to students insured under the provisions of title IV, part B of the Higher Education Act of 1965 (20 U.S.C. 1071 et seq.) or similar State insurance programs.

(6) Loans insured under title I of the National Housing Act (12 U.S.C. 1703) by the Federal Housing Administration.

(7) Shares or deposits in central credit unions. A central credit union is defined as a credit union whose membership primarily consists of:

(10) Accrued interest on nonrisk investments.

(11) Furniture and equipment. (12) Land and buildings.

(k) (1) Insolvency. A credit union will be determined to be insolvent when the total amount of its shares exceeds the present cash value of its assets after providing for liabilities unless:

(i) It is determined by the Administrator that the facts that causd the deficient share-asset ratio no longer exist; and

(ii) The likelihood of further depreciation of the share-asset ratio is not probable; and

(iii) The return of the share-asset ratio to its normal limits within a reasonable time for the credit union concerned is probable; and

(iv) The probability of a further potential loss to the insurance fund is negligible.

(2) For purposes of this section, the following definitions are used:

(i) "Cash value of assets". Recorded value will be considered the cash value of any asset account providing accepted accounting principles and practices are followed and the provisions of law, regulation, and bylaws are met.

(ii) "Liabilities". Recorded liabilities which are due and payable, excluding shares of members and non-members, are considered liabilities.

(Sec. 16, 48 Stat. 1221, as amended, sec. 120, 73 Stat. 635; 12 U.S.C. 1766) [36 F.R. 23794, Dec. 15, 1971; 37 F.R. 329, Jan. 11, 1972, as amended at 37 F.R. 10342, May 20, 1972]

(i) Other credit unions organized under State or Federal law,

701.5

701.21

701.22

701.23

701.24

701.25

701.26 701.27

Payment or amortization of loans.
Selling checks and money orders.
Cashing checks and money orders.
Refund of interest.

Insured loans to student members
in eligible higher education or vo-
cational institutions.

Purchase of accounting services. Participation in accounting service center.

701.28 Joint operations and activities. 701.29

Purchase of notes of a liquidating credit union.

701.30 Safe deposit box service.

AUTHORITY: The provisions of this Part 701 issued under sec. 21, 73 Stat. 635; 12 U.S.C. 1766, unless otherwise noted.

SOURCE: The provisions of this Part 701 appear at 25 F.R. 5286, June 14, 1960; 36 F.R. 18637, Sept. 18, 1971, unless otherwise noted. Redesignated at 35 F.R. 17398, Nov. 13, 1970. § 701.1 Organization of Federal credit

unions.

(a) Persons desiring to form a Federal credit union shall, in conjunction with the preparation of a proposed Organization Certificate in accordance with paragraph (b) of this section, accomplish the following:

(1) Arrange a meeting and sufficiently advertise the meeting so as to afford all persons in the field of membership an opportunity to attend;

(2) Provide that an investigator shall be present at the meeting; it is not necessary that the investigator be an employee of the National Credit Union Administration;

(3) Prior to the convening of the meeting, accomplish the following:

(i) Selection of at least seven but not more than 10 persons who will be the subscribers and who will be from and representative of the group to be served by the credit union;

(ii) Selection of at least five qualified persons who will agree to serve on the board of directors, three qualified persons who will agree to serve on the credit committee, and three qualified persons who will agree to serve on the supervisory committee (a signed written agreement to serve in these capacities until the first annual meeting and until the election of their successors shall be executed by

84-052-73-36

those who will so serve. This agreement shall be submitted to the appropriate regional office of the National Credit Union Administration with other documents listed below);

(iii) Determination, by appropriate means, of the number of persons who intend to join and support the credit union, (this information shall be supplied to the investigator at the preliminary meeting);

(4) (i) Provide that the following shall be accomplished at the meeting:

(a) Review of necessary papers and presentation of general background by the investigator as directed by the Administrator, National Credit Union Administration;

(b) Completion of the Investigation Report by the investigator;

(c) Execution of page 3 of Organization Certificate;

(d) Election of board of directors and credit committee by the subscribers;

(ii) Within a reasonable time after meeting held pursuant to subparagraph (a) above, a second meeting shall be held during which the following shall be accomplished, if these tasks cannot be accomplished at the first meeting:

(a) Election of officers and appointment of members of supervisory committee by board of directors;

(b) Election of chairmen and secretaries by credit and supervisory committees;

(c) Voting by the board of directors to apply for Share Insurance as provided in title II of the Federal Credit Union Act and completion of the necessary application (said insurance will become effective upon approval of the charter);

(d) Setting by the board of directors of the initial operating policies;

(e) Forwarding by the investigator of the Investigation Report, Application and Agreements for Insurance, the proposed Organization Certificate, Confidential Report of Official (completed by each official), the Agreement to Serve, and the Report of Officials to the appropriate regional office of the National Credit Union Administration.

(b) Persons desiring to form a Federal credit union shall submit in duplicate, on forms prescribed by the Administration, a proposed Organization Certificate (Form NCUA 4006, 4007, and 4008). The certificate shall be subscribed to, either individually or collectively, before an officer competent to administer oaths by not less than seven natural persons who have a common bond

of occupation, or association, or are within a well-defined neighborhood, before an officer competent to administer oaths by not less than seven natural persons who have a common bond of occupation, or association, or are within a well-defined neighborhood, community, or rural district, and shall specifically state:

(1) The proposed name of the Federal credit union;

(2) The location of the proposed Federal credit union and the territory in which it will operate;

(3) The names and addresses of the subscribers to the certificate and the number of shares subscribed by each;

(4) The par value of the shares, which shall be $5 each;

(5) The proposed field of membership, specific in detail;

(6) The term of the existence of the corporation, which may be perpetual;

(7) The fact that the certificate is made to enable such persons to avail themselves of the advantages of the Federal Credit Union Act, as amended.

Copies of the form of the Organization Certificate may be obtained from the Washington Office of the Administration or from any Regional Office.

(c) The proposed Organization Certificates shall be submitted to the Regional Director together with a check or money order payable to the National Credit Union Administration in the amount of $25 in payment of the investigation fee of $20 and charter fee of $5. The Regional Director will investigate and make recommendations as to whether the proposed Organization Certificate conforms to the Act, as to the general character and fitness of the subscribers thereto, and as to the economic advisability of establishing and insuring the proposed Federal credit union. The report and recommendation of the Regional Director shall be forwarded to the Administration in Washington, D.C. The Administrator shall consider the proposed Organization Certificate and the recommendations of the Regional Director and shall approve or disapprove the proposed Organization Certificate. The Organization Certificate, if approved, shall be the charter of the Federal credit union. If the Organization Certificate is disapproved, the incorporators shall be notified of the basis for such action and the charter fee of $5 shall be returned to

them. Under no circumstances shall the investigation fee of $20 be returned.

[37 F.R. 2946, Feb. 10, 1972; 37 F.R. 3508, Feb. 17, 1972]

§ 701.2 Incorporation by reference.

(a) The publications used by Federal credit unions, which are identified and described in this chapter, are hereby incorporated by reference pursuant to 5 U.S.C. 552(a) (1) and the regulations issued thereunder.

(b) Copies of the publications prescribed in this chapter may be obtained on request addressed to National Credit Union Administration, 1325 K Street NW., Washington, DC 20456.

(c) Revisions or amendments of the publications may be issued from time to time by the National Credit Union Administration. An historic file of such amendments or revisions is maintained and made available for inspection at the National Credit Union Administration, 1325 K Street NW., Washington, DC 20456.

(d) The publications listed below, and more fully described in §§ 701.14 and 701.15, are hereby incorporated by reference:

(1) Handbook for Federal Credit Unions,

(2) Accounting Manual for Federal Credit Unions,

(3) Supervisory Committee Manual for Federal Credit Unions,

(4) Credit Manual for Federal Credit Unions,

(5) Federal Credit Union Bylaws, (6) Guide to Standard Amendments to the Federal Credit Union Charter and Bylaws,

(7) Organizing a Federal Credit Union,

(8) Data Processing guidelines for Federal Credit Unions,

(9) Sale and Redemption of U.S. Savings Bonds by Federal Credit Unions, (10) NCUA Bulletin,

(11) Annual Report of Operations, (12) State Chartered Credit Unions, (13) Accounting Machine Handbook for Federal Credit Unions.

(e) Copies of these publications are on file with the Director, Office of the Federal Register, National Archives and Records Service, General Services Administration, Washington, D.C. 20408. The text of any changes in said publications will be filed with the Director, Office of the Federal Register, and a no

tice thereof will be periodically published in the FEDERAL REGISTER.

[37 F.R. 6181, Mar. 25, 1972]

§ 701.3 Standard form of bylaws.

(a) Proposed bylaws, in form and content approved by the Administrator, shall be submitted by the incorporators to the Director for his approval at the time of submitting an organization certificate to the Regional Director.

(b) Copies of the bylaws and of the standard amendments thereto are made available as set forth in §§ 701.14 (e) and (f).

[25 F.R. 5286, June 14, 1960, as amended at 36 F.R. 18637, Sept. 18, 1971. Redesignated, 35 F.R. 17398, Nov. 13, 1970]

§ 701.4 Amendment of bylaws and

charters.

Amendments to the bylaws of a Federal credit union may be adopted and amendments to the charter requested as provided in the bylaws. No amendment of the bylaws or of the charter shall become effective, however, until approved in writing by the Administrator.

§ 701.5 Other applications.

(a) Except as otherwise provided by rule or regulation of the Administrator all applications, requests, and submittals regarding Federal credit unions, for which no form of application has been prescribed by the Administrator, shall be in writing, signed by the applicant or his duly authorized agent, and shall contain a statement of the action requested, the reasons and facts relied upon as the basis for such requested action, and the

applicant's interest in the matter. The application, request, or submittal shall be addressed to the Regional Director or to the National Credit Union Administration in Washington, D.C. The applicant shall furnish such other pertinent information as may be required by the Administrator.

(b) Unless otherwise provided in these regulations, all applications regarding Federal credit union matters shall be investigated and reviewed by the Regional Director. The report and recommendations of the Regional Director as to the application shall be transmitted to the Administration in Washington, D.C. Notice of the action of the Administrator shall be promptly transmitted to the applicant together with a statement as to the basis for the action.

§ 701.6 Fee for supervision.

(a) Extent of fee. (1) Not later than January 31 of each calendar year, each Federal credit union shall pay to the Administration, for the preceding calendar year, a supervision fee in accordance with the graduated scale set forth in subparagraph (2) of this paragraph on the basis of assets as of December 31 of such preceding year, but such fee shall in no event be less than $10.00: Provided, however, That no such annual fee shall be payable by such an organization with respect to the year in which its charter is issued or the year in which final distribution is made in liquidation of the credit union or the charter is otherwise canceled.

(2) Scale of supervision fees:

Total assets

Maximum fee

$500,000 or less----

Over $5,000,000--

Provided, however, That no fee shall be payable with respect to the last fractional part of $1,000 of total assets.

(3) Definition of assets:

(1) The term, "assets," as used in this section shall mean all items properly coming within the classification of asset accounts as stated in the Accounting

Manual for Federal Credit Unions, NCUA 8022, as revised.

(ii) The term, "total assets," as used in this section shall mean the sum of all assets.

(b) Supervision fee certificate. The treasurer of each Federal credit union shall certify as to the correctness of the