SB500: relative to certain procedures of financial institutions.

CHAPTER 231

SB 500-FN – FINAL VERSION

01/22/04 0107s

22Apr2004… 1007h

05/25/04 1591cofc

2004 SESSION

04-3221

06/10

SENATE BILL 500-FN

AN ACT relative to certain procedures of financial institutions.

SPONSORS: Sen. Flanders, Dist 7; Rep. Hunt, Ches 28

COMMITTEE: Banks

ANALYSIS

This bill makes certain changes to procedures of financial institutions.

This bill is a request of the banking department.

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Explanation: Matter added to current law appears in bold italics.

Matter removed from current law appears [in brackets and struckthrough.]

Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.

01/22/04 0107s

22Apr2004… 1007h

05/25/04 1591cofc

04-3221

06/10

STATE OF NEW HAMPSHIRE

In the Year of Our Lord Two Thousand Four

AN ACT relative to certain procedures of financial institutions.

Be it Enacted by the Senate and House of Representatives in General Court convened:

231:1 Change in Control of Financial Institution; Application Fee. Amend RSA 383:9-h to read as follows:

383:9-h Change in Control of Nondepository Financial Institution. No change in control of a nondepository financial institution shall occur without the prior approval of the bank commissioner. The term “change of control” shall mean the direct or indirect acquisition by a person or group of persons acting in concert of 10 percent or more of the beneficial ownership or control of the voting shares. The person or group seeking to acquire control of the nondepository financial institution shall submit an application and a $500 application fee to the bank commissioner for approval which shall contain such financial, business, experience, and other information as the bank commissioner shall require to determine whether such person or group is suitable to exercise control of a nondepository financial institution. Upon receipt of a complete application, the bank commissioner may hold a hearing on such application and shall make a decision within 60 days after receipt of the application.

231:2 Trustees, Directors, and Officers; Limitation; Credit Union Added. Amend RSA 384:5-a, I(f) to read as follows:

(f) Mutual savings and guaranty savings banks[.];

(g) Credit union.

231:3 Removal by Bank Commissioner; Financial Institution. Amend RSA 384:6 to read as follows:

384:6 Removal by Bank Commissioner. Whenever, in the opinion of the bank commissioner, any officer, trustee, or director of a [savings bank, state bank, guaranty savings bank or trust company] financial institution shall have continued to violate any law relative thereto, or shall have continued unsafe or unsound practices in conducting the business of said [bank] financial institution, after having been warned in writing by the commissioner to discontinue such violations of law or such unsafe or unsound practices, he may cause notice to be served upon such officer, trustee, or director to appear before him to show cause why he should not be removed from office. A copy of such order shall be sent by registered mail to each trustee or director of the [bank] financial institution affected. If, after granting such officer, trustee, or director a reasonable opportunity to be heard, the commissioner finds that he has continued to so violate the law, or has continued unsafe or unsound practices after having been warned, the commissioner may, with the approval of 2 persons of good standing in the banking business, to be named by the governor upon the request of the bank commissioner, order that such officer, director, or trustee be removed from office. A copy of such order shall be served upon such officer, trustee, or director and upon the [bank] financial institution of which he is an officer, trustee, or director whereupon he shall cease to be an officer, trustee, or director of such [bank] financial institution. Provided that such order and the findings of fact upon which it is based shall not be made public or disclosed to any one except the officer, trustee, or director involved and the trustees or directors of the [bank] financial institution affected, otherwise than in connection with proceedings for a violation of this section. No such officer, trustee, or director removed from office as herein provided shall, without the consent of the bank commissioner, participate in any manner in the management or operation of said [bank] financial institution. Any person so removed from office may, with the approval of the trustees or directors of the [bank] financial institution affected expressed by majority vote in which he shall not participate, appeal by petition to the supreme court within 30 days from the date of the order of removal. Upon hearing, after such notice as the court may order, the burden of proof shall be upon the petitioner to show that the order of removal is clearly unreasonable or unlawful, and all findings of the bank commissioner upon all questions of fact properly before him shall be deemed to be prima facie lawful and reasonable and the order shall not be set aside or vacated except for errors of law unless the court by a clear preponderance of the evidence before it finds that such order is unjust or unreasonable. Pending decision of the supreme court, the order of removal shall continue in effect.

231:4 Interest on Escrow Accounts; “Regular” Added. Amend RSA 384:16-c to read as follows:

384:16-c Interest on Escrow Accounts. Any bank which requires or accepts moneys for deposit in escrow accounts maintained for the payment of taxes or insurance premiums related to loans on property secured by real estate mortgages shall credit each such escrow account with interest at a minimum rate set for a 6-month period by the bank commissioner on February 1 and August 1 of each year which shall be one percent below the mean interest rate paid by New Hampshire chartered banks on regular savings accounts. The commissioner shall announce such rate to applicable New Hampshire trade associations. Each bank subject to the provisions of this section shall inform itself of such rate by contacting applicable New Hampshire trade associations or the banking department.

231:5 Escrow Accounts of Mortgage Companies; “Passbook” Removed. Amend RSA 384:16-e to read as follows:

384:16-e Escrow Accounts of Mortgage Companies. Any company which is in the business of or customarily makes loans for the purpose of financing the acquisition of single family homes and which is not subject to the requirements of RSA 384:16-c and which requires or accepts moneys for deposit in escrow accounts maintained for the payment of taxes or insurance premiums related to loans on single family homes secured by real estate mortgages on property located in New Hampshire shall credit each such escrow account with interest on all existing and future escrow accounts at a rate set for a 6-month period by the bank commissioner on February 1 and August 1 of each year which shall be one percent below the mean interest rate paid by New Hampshire chartered banks on regular [passbook] savings accounts. The commissioner shall announce such rate to applicable New Hampshire trade associations. Each company subject to the provisions of this section shall inform itself of such rate by contacting applicable New Hampshire trade associations or the banking department.

231:6 Annual Audit; Engagement Letter Requirement Removed. Amend RSA 384:43, IV to read as follows:

IV. Each financial institution shall direct its auditor to provide the bank commissioner with a copy of its [engagement letter, and the subsequent] audit report, within 60 days after each is made available to the financial institution. Reports on the review of internal audit program shall be submitted in a format prescribed by the commissioner in a rule adopted pursuant to RSA 541-A. All such reports, memoranda, and correspondence remain the property of the individual financial institution.

231:7 Branch Offices; Board Replaced by Commissioner. Amend RSA 384-B:2 to read as follows:

384-B:2 Branch Offices. No bank or officer, director, agent, or employee thereof shall transact any part of its usual business of banking at any branch office except as follows:

I. With the approval of the [board] commissioner, any bank with its principal office within the state of New Hampshire may establish and operate one or more branch offices in any town within the state. The [board] commissioner shall not grant any application for a branch office if the dollar volume of the total deposits, time, savings, and demand of the applicant bank is greater than 30 percent of the dollar volume of the total deposits, time, savings, and demand of all banks, national banks, and federal savings and loan associations in this state as determined by the [board] commissioner on the basis of the most recent annual deposit reports of the Federal Deposit Insurance Corporation available at the time of filing the application; nor if the applicant bank is an affiliate of a bank holding company which with all its affiliates then holds a dollar volume of total deposits, time, savings, and demand greater than 30 percent of the dollar volume of total deposits, time, savings, and demand of all banks, national banks, and federal savings and loan associations in this state as determined by the [board] commissioner on the basis of the most recent annual deposit reports of the Federal Deposit Insurance Corporation available at the time of filing of the application.

I-a. With the approval of the bank commissioner and subject to any rules adopted by the bank commissioner pursuant to RSA 384-B:2-b, any bank may establish and operate one or more mobile branch offices. A mobile branch office shall consist of a motor vehicle specifically designed to conduct a banking business which is moved to one or more predetermined locations in any town or towns within or without the state on a predetermined schedule. A mobile branch office may conduct any banking business that is permitted for a stationary branch. A mobile branch office is a “branch office” as defined in RSA 384-B:1, III and shall be subject to any and all applicable requirements relating thereto. The bank commissioner shall adopt rules, pursuant to RSA 384-B:2-b, regulating the operation, location, and schedule of mobile branch offices.

I-b. With the approval of the bank commissioner and subject to any rules adopted by the bank commissioner pursuant to RSA 384-B:2-b, any bank may establish and operate one or more defined service branch offices. A defined service branch office shall consist of an office designed to conduct a banking business which may be operated on a predetermined schedule for fewer than the normal hours of operation of the bank or for designated days and times. A defined service branch office is a “branch office” as defined in RSA 384-B:1, III and shall be subject to any and all applicable requirements relating thereto. The bank commissioner shall adopt rules, pursuant to RSA 384-B:2-b, regulating the operation and schedule of defined service branch offices.

I-c. For purposes of this section “bank” shall mean:

(a) A “bank” or “national bank” as defined in this chapter; and

(b) An “out-of-state bank” as defined in RSA 384:57, V which has merged with such a bank or a national bank pursuant to RSA 384:59.

II. With the approval of the [board] commissioner, the resulting bank, after a consolidation as herein defined, may operate as a branch office or offices the business of any other bank acquired in such consolidation, at any location in the same town or towns in which such business was formerly carried on, wherever in the state such town or towns may be; provided, however, that the dollar volume of the total deposits, time, savings, and demand of the remaining bank at the time of filing its application for such branch office or offices does not exceed 30 percent of the dollar volume of the total deposits, time, savings, and demand of all banks, national banks, and federal savings and loan associations in this state as determined by the [board] commissioner on the basis of the most recent annual deposit reports of the Federal Deposit Insurance Corporation available at the time of filing of the application.

III. Written applications for branch offices shall be submitted by the bank, in the first instance, to the commissioner and shall be verified under oath and made upon forms which may be prescribed by the commissioner for the purpose with all the information required by such form fully set forth thereon, including the types of service to be offered at such branch office. Each application shall be accompanied by a fee of $1,500 in the case of a new branch and one single fee of $1,500 for the composite of all branches. The [commissioner] department shall investigate and examine each application [and if the commissioner finds that it is duly completed, the commissioner shall then refer the application to the board for consideration]. A notice stating the date before which objections may be filed shall then be published by the petitioner in such form as the [board] commissioner may order. Any interested person or corporation may, within the time specified, file with the board a statement of objection to the granting of such application. The [board] commissioner may, upon request of any interested person or corporation, or at the [board’s] commissioner’s own discretion, order a public hearing, or may approve said application without a hearing. If a public hearing is to be held, the petitioners shall cause to be published such notices as the [board] commissioner may order. Said hearing shall be held at the time and place fixed by the [board] commissioner. The [board] commissioner shall keep a permanent verbatim record of all such evidence. [The commissioner shall serve as chairperson of the board.] The [board] commissioner may prescribe reasonable procedural rules to govern the proceedings[, and it may be convened to consider any pending business on call of the commissioner]. There shall be no refund allowed on any application fee once it has been filed. In addition to the application fee, each applicant for a branch office shall be obligated to pay the reasonable cost of processing, hearing and deciding each such application, as assessed by the [board] commissioner, which cost may be collected by the commissioner in an action of debt unless paid within 30 days after demand. Sums collected under this section shall be payable to the state treasurer as restricted revenue and credited to the appropriation for the bank commissioner.

IV. In making the decision on each application, the [board] commissioner shall take into consideration the following factors:

(a) The financial history and condition of the bank or banks concerned including the adequacy of its or their capital funds;

(b) Its or their prospects; and

(c) The character of the management.

V. The [board] commissioner shall render a decision granting or denying each application in writing and shall maintain a file of all such approvals or denials [at the banking department] and shall forthwith furnish a certified copy thereof to the applicant bank. [No application shall be granted except upon the affirmative vote of a majority of members of the board.] Full power is delegated to the [board] commissioner to grant a particular application upon such reasonable conditions, including limitations on the scope of service which may be offered and given, consistent with the general purposes of this chapter and sound banking principles as the [board] commissioner may determine and set forth in the decision. The authority derived from an application which has been granted in whole or upon conditions shall lapse and terminate unless business is actually commenced thereunder not later than one year after the date of the [board’s] commissioner’s decision; provided, however, that the [board] commissioner, for good cause shown, may extend the time after which such authority shall lapse. Rehearings of and appeals from decisions of the [board] commissioner shall be governed by RSA 541.

231:8 Limited Liability Company. Amend RSA 386-A:1-a to read as follows:

386-A:1-a Limited Liability Company. Notwithstanding RSA 304-C:7, I or any other provision of law to the contrary, a guaranty savings bank may be organized as a limited liability company. A bank organized as a limited liability company shall be subject to the provisions of state law applicable to such type of entity, provided, however, any filing required to be made with the secretary of state shall be made instead with the bank commissioner. Any reference to a corporation in the banking statutes shall also include a limited liability company. A bank organized as a limited liability company shall be subject to all of the same laws and regulations that relate to a bank organized as a corporation. [Any manager or senior executive officer of a bank organized as a limited liability company who exercises significant influence over, or participates in, major policymaking decisions shall be subject to the same duties and liabilities as pertain to directors, trustees, and senior executive officers of a bank organized as a corporation.] All managers and employees of a bank organized as a limited liability company shall be subject to the same duties and liabilities as pertain to directors, trustees, and employees of a bank organized as a corporation. Any reference to corporations, directors, officers, stockholders or other like terms used to describe corporations in the banking statutes shall be construed to apply in the same manner to limited liability companies, managers, employees, members or other like terms used to describe limited liability companies unless the context otherwise requires. The organizational instruments of a bank either chartered or operating as a limited liability company shall satisfy the requirements of the Federal Deposit Insurance Corporation in order to be deemed “incorporated” for purposes of federal deposit insurance.

231:9 Name and Charter Powers. Amend RSA 388:14 to read as follows:

388:14 Name and Charter Powers. The bank resulting from a consolidation under the provisions of this chapter may adopt the charter of either of the consolidating banks with such change of name as may be desirable. Any proposal for such adoption of charter and change of name shall be set forth in the petition filed under RSA 388:1 and 388:8 and shall become effective upon approval thereof by the bank commissioner [and the attorney general or assistant attorney general], and filing in the office of the secretary of state together with the payment of a fee of $5.

231:10 Record of. Amend RSA 386-A:15 to read as follows:

386-A:15 Record of. Thereupon the certificate shall be filed in the office of the secretary of state, who, upon payment of a fee [equal to 1/10 of one percent of the authorized capital debentures, special deposit, or capital stock of the corporation as set forth in the articles of agreement] equal to the fee charged by the secretary of state to business corporations under RSA 293-A shall cause the certificate with the indorsement thereon, to be recorded.

231:11 Approval of Petition; Filing With Secretary of State. Amend RSA 386-A:29, II to read as follows:

II. If the board of trust company incorporation finds that the proposed amendment satisfies the requirements of RSA 386-A:26 and was adopted in accordance with RSA 386-A:27, and that the public convenience and advantage and the interest of the petitioning institution, its members, stockholders and depositors will be promoted by the proposed amendment, it shall so certify, and shall endorse its approval on one of the certified copies of the amended articles of agreement or amended charter. The petitioning savings bank shall thereupon file the same in the office of the secretary of state, accompanied by a fee [equal to 1/10 of one percent of any increase in its authorized capital debentures, capital stock or special deposits provided for by such amendment] equal to the fee charged by the secretary of state to business corporations under RSA 293-A. The secretary of state shall thereupon cause said amended articles of agreement or amended charter, with the endorsement thereon, to be recorded, and shall issue a certificate of amended incorporation, and thereafter such savings bank shall have all the powers and privileges provided for by said amended articles of agreement or amended charter. The fee for recording with the secretary of state any amended articles of agreement or amended charter, which does not embody any increase of the authorized capital debentures, capital stock or special deposits, shall be $25.

231:12 New Section; Limited Liability Company. Amend RSA 392 by inserting after section 2 the following new section:

392:2-a Limited Liability Company. Notwithstanding RSA 304-C:7, I or any other provision of law to the contrary, a trust company subject to the regulation of the bank commissioner may be organized as a limited liability company. A trust company organized as a limited liability company shall be subject to the provisions of state law applicable to such type of entity; provided, however, any filing required to be made with the secretary of state shall be made instead with the bank commissioner. Any reference to a corporation in the statutes governing trust companies shall also include a limited liability company. A trust company organized as a limited liability company shall be subject to all of the same laws and regulations that relate to a trust company organized as a corporation. All managers and employees of a trust company organized as a limited liability company shall be subject to the same duties and liabilities as pertain to directors, trustees, and employees of a trust company organized as a corporation. Any reference to corporations, directors, officers, stockholders or other like terms used to describe corporations in the statutes governing trust companies shall be construed to apply in the same manner to limited liability companies, managers, employees, members or other like terms used to describe limited liability companies unless the context otherwise requires. The organizational instruments of a trust company chartered as a limited liability company shall satisfy the requirements of the Federal Deposit Insurance Corporation in order to be deemed “incorporated” for purposes of federal deposit insurance.

231:13 Record of. Amend RSA 392:17 to read as follows:

392:17 Record of. Thereupon said certificate shall be filed in the office of the secretary of state, who, upon payment of a fee [equal to 1/10 of one percent of the capital stock of said corporation as set forth in said articles] equal to the fee charged by the secretary of state to business corporations under RSA 293-A, shall cause the same, with the indorsement thereon, to be recorded.

231:14 Disposal of Papers; Holding Period Removed. Amend RSA 383:17 to read as follows:

383:17 Disposal of Papers. The commissioner may destroy[, at the end of 6 years from the time of filing,] any records, reports, or miscellaneous papers filed in his office which, in his opinion, are no longer of any value to the state.

231:15 Participation in Meetings; “Trust Company” Changed to “Financial Institution”. Amend RSA 384:7-b to read as follows:

384:7-b Participation in Meetings. Unless the charter or bylaws provide otherwise, a board of directors or trustees may permit any or all directors or trustees to participate in a regular or special meeting by, or conduct the meeting through the use of, any means of communication by which all of the directors or trustees participating may simultaneously hear each other during the meeting. A director or trustee participating in a meeting by this means is deemed to be present in person at the meeting. However, a director or trustee shall be physically present at a majority of the meetings such director or trustee attends. If any member of the board of directors of a nondepository [trust company] financial institution resides outside of the state of New Hampshire, the board may permit such out-of-state director to be physically present at a lesser number of meetings, if such arrangement is approved in writing by the bank commissioner, based upon a finding that the safety and soundness of such [trust company] financial institution will not be impaired by such less frequent physical presence.

231:16 Name and Charter Powers. Amend RSA 388:14 to read as follows:

388:14 Name and Charter Powers. The bank resulting from a consolidation under the provisions of this chapter may adopt the charter of either of the consolidating banks with such change of name as may be desirable. Any proposal for such adoption of charter and change of name shall be set forth in the petition filed under RSA 388:1 and 388:8 and shall become effective upon approval thereof by the bank commissioner, and filing in the office of the secretary of state together with the payment of a fee of [$5] $35.

231:17 Approval of Petition; Filing With Secretary of State. Amend RSA 386-A:29, II to read as follows:

II. If the board of trust company incorporation finds that the proposed amendment satisfies the requirements of RSA 386-A:26 and was adopted in accordance with RSA 386-A:27, and that the public convenience and advantage and the interest of the petitioning institution, its members, stockholders and depositors will be promoted by the proposed amendment, it shall so certify, and shall endorse its approval on one of the certified copies of the amended articles of agreement or amended charter. The petitioning savings bank shall thereupon file the same in the office of the secretary of state, accompanied by a fee equal to the fee charged by the secretary of state to business corporations under RSA 293-A. The secretary of state shall thereupon cause said amended articles of agreement or amended charter, with the endorsement thereon, to be recorded, and shall issue a certificate of amended incorporation, and thereafter such savings bank shall have all the powers and privileges provided for by said amended articles of agreement or amended charter. The fee for recording with the secretary of state any amended articles of agreement or amended charter, which does not embody any increase of the authorized capital debentures, capital stock or special deposits, shall be [$25] $35.

231:18 Fees for Recording. Amend RSA 392:29 to read as follows:

392:29 Fees for Recording. The fee for recording with the secretary of state any amended certificate, which does not embody an increase of the authorized capital stock, shall be [$5] $35.

231:19 Contingency. If HB 1348-FN of the 2004 legislative session becomes law, sections 16-18 of this act shall take effect on July 1, 2004 at 12:01 a.m. If HB 1348-FN does not become law, sections 16-18 of this act shall not take effect.

231:20 Repeal. The following are repealed:

I. RSA 386-B:9, VII, relative to an exemption for the directors or trustees of certain financial institutions from the responsibilities of directors, trustees and officers.

II. RSA 387:19, relative to safe deposit business buildings.

III. RSA 392:21, relative to the payment of par value and surplus before the issue of trust company stock .

231:21 Effective Date.

I. Sections 16-18 of this act shall take effect as provided in section 19 of this act.

II. The remainder of this act shall take effect upon its passage.

(Approved: June 11, 2004)

(Effective Date: I. Sections 16-18 shall take effect as provided in section 19.

II. Remainder shall take effect June 11, 2004.)