Substitute House Bill No. 5015

Public Act No. 00-14

An Act Concerning Bank Conversions.

Be it enacted by the Senate and House of Representatives in General Assembly convened:

Section 1. Section 36a-3 of the general statutes, as amended by section 1 of public act 99-22, section 1 of public act 99-63 and section 1 of public act 99-158, is repealed and the following is substituted in lieu thereof:

Other definitions applying to this title or to specified parts thereof and the sections in which they appear are:

"Account". Sections 36a-155 and 36a-365.

"Advance fee". Sections 36a-510, 36a-485 and 36a-615.

"Advertise" or "advertisement". Sections 36a-485 and 36a-510.

"Agency bank". Section 36a-285.

"Alternative mortgage loan". Section 36a-265.

"Amount financed". Section 36a-690.

"Annual percentage rate". Section 36a-690.

"Annual percentage yield". Section 36a-316.

"Applicant". Section 36a-736.

"Associate". Section 36a-184.

"Bank". Section 36a-30.

"Bankers' bank". Section 36a-70.

"Banking business". Section 36a-425.

"Billing cycle". Section 36a-565.

"Bona fide nonprofit organization". Section 36a-655.

"Branch". Sections 36a-145 and 36a-410.

"Branch or agency net payment entitlement". Section 36a-428n.

"Branch or agency net payment obligation". Section 36a-428n.

"Broker". Section 36a-510.

"Business and industrial development corporation". Section 36a-626.

"Business and property in this state". Section 36a-428n.

"Cash advance". Section 36a-564.

"Cash price". Section 36a-770.

"Certificate of organization". Section 36a-435.

"Closely related activities". Section 36a-250.

"Collective managing agency account". Section 36a-365.

"Commercial vehicle". Section 36a-770.

"Community bank". Section 36a-70.

"Community development bank". Section 36a-70.

"Connecticut holding company". Section 36a-410.

"Consumer". Sections 36a-155, 36a-676 and 36a-695.

"Consumer Credit Protection Act". Section 36a-676.

"Consumer debtor" and "debtor". Sections 36a-645 and 36a-800.

"Consumer collection agency". Section 36a-800.

"Controlling interest". Section 36a-276.

"Credit". Sections 36a-645 and 36a-676.

"Creditor". Sections 36a-676, 36a-695 and 36a-800.

"Credit card", "cardholder" and "card issuer". Section 36a-676.

"Credit clinic". Section 36a-695.

"Credit rating agency". Section 36a-695.

"Credit report". Section 36a-695.

"Credit sale". Section 36a-676.

"De novo branch". Section 36a-410.

"Debt". Section 36a-645.

"Debt adjustment". Section 36a-655.

"Debt mutual fund". Section 36a-275.

"Debt securities". Section 36a-275.

"Deliver". Section 36a-316.

"Deposit". Section 36a-316.

"Deposit account". [Section 36a-316] Sections 36a-136, as amended by section 2 of this act, and 36a-316.

"Deposit account charge". Section 36a-316.

"Deposit account disclosures". Section 36a-316.

"Deposit contract". Section 36a-316.

"Deposit services". Section 36a-425.

"Depositor". Section 36a-316.

"Earning period". Section 36a-316.

"Electronic payment instrument". Section 36a-596.

"Eligible account holder". Section 36a-136.

"Eligible collateral". Section 36a-330.

"Equity mutual fund". Section 36a-276.

"Federal Home Mortgage Disclosure Act". Section 36a-736.

"Fiduciary". Section 36a-365.

"Filing fee". Section 36a-770.

"Finance charge". Sections 36a-690 and 36a-770.

"Financial institution". Sections 36a-41, 36a-155, 36a-316, 36a-330 and 36a-736.

"Financial records". Section 36a-41.

"First mortgage loan". Sections 36a-485, 36a-705 and 36a-715.

"Fiscal year". Section 36a-435.

"Foreign banking corporation". Section 36a-425.

"General facility". Section 36a-580.

"Global net payment entitlement". Section 36a-428n.

"Global net payment obligation". Section 36a-428n.

"Goods". Sections 36a-535 and 36a-770.

"Graduated payment mortgage loan". Section 36a-265.

"Guardian". Section 36a-365.

"Holder". Section 36a-596.

"Home banking services". Section 36a-170.

"Home banking terminal". Section 36a-170.

"Home improvement loan". Section 36a-736.

"Home purchase loan". Section 36a-736.

"Home state". Section 36a-410.

"Immediate family". Section 36a-435.

"Instalment loan contract". Sections 36a-535 and 36a-770.

"Instrument". Section 36a-596.

"Insurance bank". Section 36a-285.

"Insurance department". Section 36a-285.

"Interest". Section 36a-316.

"Interest rate". Section 36a-316.

"Lender". Sections 36a-510 and 36a-770.

"Lessor". Section 36a-676.

"License". Section 36a-626.

"Licensee". Sections 36a-510, 36a-596 and 36a-626.

"Limited branch". Section 36a-145.

"Limited facility". Section 36a-580.

"Loan broker". Section 36a-615.

"Loss". Section 36a-330.

"Made in this state". Section 36a-770.

"Managing agent". Section 36a-365.

"Member". Section 36a-435.

"Membership share". Section 36a-435.

"Money order". Section 36a-596.

"Mortgage broker". Section 36a-485.

"Mortgage insurance". Section 36a-725.

"Mortgage lender". Sections 36a-485 and 36a-705.

"Mortgage loan". Sections 36a-261 and 36a-265.

"Mortgage rate lock-in". Section 36a-705.

"Mortgage servicing company". Section 36a-715.

"Mortgagor". Section 36a-715.

"Motor vehicle". Section 36a-770.

"Multiple common bond membership". Section 36a-435.

"Municipality". Section 36a-800.

"Net worth". Section 36a-596.

"Network". Section 36a-155.

"Note account". Sections 36a-301 and 36a-445.

"Office". Section 36a-316.

"Open-end credit plan". Section 36a-676.

"Open-end loan". Section 36a-565.

"Organization". Section 36a-800.

"Out-of-state holding company". Section 36a-410.

"Outstanding". Section 36a-596.

"Passbook savings account". Section 36a-316.

"Periodic statement". Section 36a-316.

"Permissible investment". Section 36a-596.

"Person". Section 36a-184.

"Post". Section 36a-316.

"Prime quality". Section 36a-596.

"Principal amount of the loan". Section 36a-510.

"Principal officer". Section 36a-485.

"Processor". Section 36a-155.

"Public deposit". Section 36a-330.

"Purchaser". Section 36a-596.

"Qualified financial contract". Section 36a-428n.

"Qualified public depository" and "depository". Section 36a-330.

"Records". Section 36a-17.

"Relocate". Section 36a-145.

"Residential property". Section 36a-485.

"Retail buyer". Sections 36a-535 and 36a-770.

"Retail credit transaction". Section 42-100b.

"Retail deposits". Section 36a-70.

"Retail instalment contract". Sections 36a-535 and 36a-770.

"Retail instalment sale". Sections 36a-535 and 36a-770.

"Retail seller". Sections 36a-535 and 36a-770.

"Reverse annuity mortgage loan". Section 36a-265.

"Sales finance company". Sections 36a-535 and 36a-770.

"Savings department". Section 36a-285.

"Savings deposit". Section 36a-316.

"Secondary mortgage loan". Section 36a-510.

"Security convertible into a voting security". Section 36a-184.

"Share". Section 36a-435.

"Simulated check". Sections 36a-485 and 36a-510.

"Single common bond membership". Section 36a-435.

"Social purpose investment". Section 36a-277.

"Standard mortgage loan". Section 36a-265.

"Tax and loan account". Sections 36a-301 and 36a-445.

"The Savings Bank Life Insurance Company". Section 36a-285.

"Time account". Section 36a-316.

"Transaction". Section 36a-215.

"Travelers check". Section 36a-596.

"Troubled financial institution". Section 36a-215.

"Uninsured bank". Section 36a-70.

"Unsecured loan". Section 36a-615.

Sec. 2. Section 36a-136 of the general statutes is repealed and the following is substituted in lieu thereof:

(a) As used in this section: [, "eligible account holder"] (1) "Eligible account holder" means any person holding a qualifying deposit; [. A "qualifying deposit" is] (2) "deposit account" means a deposit account, as defined in subdivision (19) of section 36a-2, but does not include an escrow account established pursuant to section 49-2a; (3) "qualifying deposit" means a deposit in a deposit account held on the eligibility record date. [, but does not include an escrow account established pursuant to section 49-2a.] The amount of the qualifying deposit of an eligible account holder shall be the total of the deposit balances in the eligible account holder's deposit accounts in the converting institution as of the close of business on the eligibility record date.

(b) With the approval of the commissioner, any mutual savings bank, mutual savings and loan association, federal mutual savings bank or federal mutual savings and loan association may convert [into] to a capital stock bank in accordance with the provisions of this section and the regulations adopted pursuant to subsection (h) of this section, provided this section does not apply to the conversion of a mutual federal bank to a capital stock federal bank. The commissioner may deny an application for conversion made pursuant to this section after allowing the applicant a reasonable opportunity to be heard.

(c) A conversion of a federal mutual savings bank or federal mutual savings and loan association to a capital stock Connecticut bank shall be authorized only if permitted by federal law and shall be subject to all requirements prescribed by federal law. A conversion of a mutual savings bank or mutual savings and loan association to a capital stock federal bank shall be authorized only if permitted by federal law and shall be subject to all requirements prescribed by federal law.

(d) The converting institution shall file with the commissioner a proposed plan of conversion, a copy of the proposed certificate of incorporation and a certificate by the secretary of the converting institution that the proposed plan of conversion has been approved, in accordance with subsection (e) of this section, by the governing board and in the case of a converting savings and loan association, federal savings bank or federal savings and loan association, the depositors or members thereof.

(e) The plan of conversion shall require the approval of a majority of the governing board of the converting institution. In the case of a converting savings and loan association, the plan of conversion shall also require the favorable vote of not less than fifty-one per cent of the votes cast by depositors of such association at a special meeting called to consider such conversion. In the case of a federal savings bank or federal savings and loan association, the plan of conversion shall require any vote of depositors or members prescribed by federal law.

(f) In any conversion under this section, [(1)] each eligible account holder of the converting institution shall receive, without payment, nontransferable subscription rights to purchase capital stock of the converted institution pursuant to a subscription offering, [: (A) In which every eligible account holder may receive the right, subject to modification in the event of an over-subscription to the subscription offering by all eligible account holders, to purchase up to a maximum of one-half of one per cent of the total number of the shares of stock being offered by the converting institution; (B) in which every eligible account holder, regardless of such account holder's relationship to the converting institution, may participate at the same time as every other eligible account holder; and (C) which] and such offering shall precede any offering of the converting institution's stock to the members of the general public. [; (2) the plan of conversion may provide that any savings account with total balances of less than five hundred dollars, or any lesser amount as determined by the governing board, shall not constitute a qualifying deposit for participation in the subscription offering; and (3) not later than fifteen days from the date of submission of a plan of conversion to the commissioner, the converting institution shall mail notice to each eligible account holder in accordance with regulations adopted by the commissioner.]

(g) Each converting institution shall, at the time of conversion, establish a liquidation account for the benefit of eligible account holders [in an amount equal to the amount of equity capital, less any subordinated debt approved as bona fide capital of the institution, as of the latest practicable date prior to conversion. The] and such liquidation account shall establish a priority upon liquidation. [and, except as provided by regulation, the existence of the liquidation account shall not operate to restrict the use or application of any of the equity capital of the converted institution. The liquidation account shall be maintained for a period of ten years subsequent to the date of conversion. During the term of the liquidation account, the converted institution may either: (1) Maintain, without annual reduction or increase, the initial amount of the liquidation account and the value of the initial subaccount balances for savings accounts held by the eligible account holders as provided by regulation; or (2) annually reduce the amount of the liquidation account and the subaccount balances for savings accounts held by eligible account holders as provided by regulation.] The provisions of this subsection shall not apply to the formation of a mutual holding company or a reorganized savings institution of such mutual holding company under sections 36a-192 and 36a-193 or to the issuance of capital stock by such reorganized savings institution under sections 36a-195 and 36a-196.

(h) The commissioner shall adopt regulations in accordance with chapter 54 to govern the conversion of mutual institutions to capital stock institutions. Such regulations shall be similar in scope and content to the regulations of the Office of Thrift Supervision, 12 CFR Part 563b, as from time to time amended, for the conversion of mutual savings institutions into stock savings institutions. [, provided any such regulations shall not contravene any provision of this section, sections 36a-2, 36a-95, 36a-181 and 36a-182. The commissioner may make such adjustments and exceptions in such regulations as in the commissioner's judgment are necessary to carry out the purposes of said sections.] The commissioner may waive any provision of the regulations adopted pursuant to this section that is inconsistent with the regulations of the Office of Thrift Supervision or if such waiver is necessary to comply with the requirements of the Federal Deposit Insurance Corporation or its successor agency.

(i) If the commissioner certifies in writing that the protection of depositors or other creditors of such converting institution requires that the conversion proceed without delay, the commissioner may waive any provision of the regulations adopted pursuant to subsection (h) of this section that the commissioner determines will cause such delay.

(j) The commissioner shall approve a conversion under this section if the commissioner determines that: (1) The converting institution has complied with all applicable provisions of law; (2) the conversion would not result in any reduction of the converting institution's amount of equity capital, less any subordinated debt [reorganized] recognized as bona fide capital; (3) the conversion would not result in a taxable reorganization of the converting institution under the Internal Revenue Code of 1986, or any subsequent corresponding internal revenue code of the United States, as from time to time amended; and (4) the plan of conversion is fair to depositors. The converted institution shall not commence business unless its insurable accounts and deposits are insured by the Federal Deposit Insurance Corporation or its successor agency.

Sec. 3. This act shall take effect from its passage.