The Florida Senate

657.043  Reserves.--

(1)  TRANSFERS TO REGULAR RESERVE.--Immediately before paying each dividend, the total of all income for the period shall be determined. From this amount, there shall be set aside sums as a regular reserve in accordance with the following schedule:

(a)  A credit union shall set aside:

1.  Five percent of the total of all income for the period, until the regular reserve equals 6 percent of the risk assets, then,

2.  Two percent of the total of all income for the period, until the regular reserve equals 8 percent of the risk assets.

(b)  Whenever the ratio of regular reserves to risk assets falls below the stated percent, it shall be replenished by regular contributions as provided in paragraph (a).

(c)  The office may decrease the reserve requirements set forth in this subsection when in its opinion such a decrease is necessary to preserve the fiscal soundness of the credit union.

(2)  ALLOWANCE FOR LOAN LOSSES ACCOUNT.--The credit union shall maintain an account for loan losses. The amount in the account must equal the board's estimate of losses in the loan portfolio and be consistent with the rules of the commission. The account must be provided for, before paying a dividend, in the manner provided by rule. This account constitutes part of the regular reserve for the purpose of determining the ratio of regular reserves to risk assets.

(3)  USE OF REGULAR RESERVE.--The regular reserve shall belong to the credit union and shall be used to meet losses. In the event of a decrease, the office may require additional transfers to the regular reserve above the amount required by subsection (1) until the decrease has been restored. The regular reserve may not be decreased without the prior written approval of the office or as provided by rule of the commission.

(4)  RISK ASSETS DEFINED.--The following assets shall be considered risk assets:

(a)  All loans, except:

1.  Loans fully secured by a pledge of shares or deposits in the lending credit union, equal to and maintained to at least the amount of the loan outstanding.

2.  Loans which are purchased from liquidating credit unions and guaranteed by the corporation or insured by the National Credit Union Administration or other insuring agencies.

3.  Investments in or loans to the corporation.

(b)  All investments that have remaining maturities greater than 3 years, unless a specific reserve has been established to mark the investment to current market value.

(c)  Uninsured or nonguaranteed deposits and shares in financial depository institutions, except deposits in the Federal Reserve Bank, the Federal Home Loan Bank, the Southeast Corporate Federal Credit Union, and any other corporate credit union.

(d)  All investments in commercial paper and bonds.

(e)  All investments in banker's acceptances.

(f)  All investments in federal funds.

(g)  All investments that are authorized pursuant to subsection (6) or subsection (7).

(h)  Fixed assets greater than the statutory limit imposed by this chapter, unless a specific reserve has been established for the excess.

(5)  ALLOWANCE FOR INVESTMENT LOSSES.--The credit union may maintain a contra asset account to provide an allowance for investment losses, which will not be included in the determination of equity. The account must be maintained consistent with the rules of the commission.

(6)  SPECIAL RESERVES.--In addition to such regular reserve, special reserves shall be established:

(a)  To protect members against losses resulting from credit extended or from risk assets when required by rule, or when found by the office, in any special case, to be necessary for that purpose; or

(b)  As authorized by the board of directors.

(7)  RESERVE FOR CONTINGENCIES.--The board of directors may, after the regular reserve required by this section and rules of the commission has been set aside, transfer a portion of undivided earnings to an auxiliary reserve account to provide for additional possible losses and expenses.

(8)  RESERVES.--The ratio of equity to total assets for each credit union must be maintained at not less than 5 percent. At the end of the calendar quarter when this ratio is determined to be less than 5 percent, the credit union shall, within 60 days thereafter, prepare and file with the office for approval a plan to achieve the minimum ratio within 4 years, or such longer period of time approved by the office. Once achieved, each credit union must maintain a ratio of equity to total assets of not less than 5 percent, unless otherwise authorized by the office. The commission, by rule, shall prescribe the information, types of restrictions and limitations on operations, reporting requirements, and other criteria that are required to be included in an acceptable plan. An acceptable plan must recognize the unique characteristics and risk differences for the individual credit union.

(9)  GUARANTY ASSISTANCE AGREEMENT.--The amount of any liability arising out of a guaranty assistance agreement with the corporation or National Credit Union Administration must be maintained as a reserve and be included in the determination of undivided earnings of the credit union.

History.--ss. 1, 6, ch. 80-258; s. 443, ch. 81-259; ss. 2, 3, ch. 81-318; ss. 16, 58, ch. 85-82; s. 1, ch. 91-307; ss. 1, 94, ch. 92-303; s. 10, ch. 93-111; s. 1752, ch. 2003-261.