04/03/03 0996s

2003 SESSION

03-1146

06/10

SENATE BILL 177

COMMITTEE: Banks

AMENDED ANALYSIS

This bill makes various changes to the law regulating credit unions, including:

I. Makes a change in member voting.

II. Requires the bank commissioner's approval for any lease of property by a credit union.

III. Makes a change in dividend payments.

IV. Establishes certain conditions when credit union directors, credit committee and supervisory committee members may borrow from the credit union in excess of their holdings in it.

V. Adds a provision for regular reserves and deletes the provision for a guaranty fund.

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Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.

04/03/03 0996s

03-1146 06/10

STATE OF NEW HAMPSHIRE

In the Year of Our Lord Two Thousand Three

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

164:1 Voting; Prohibition Against Voting by Proxy Removed. Amend RSA 394-B:11 to read as follows:

394-B:11 Voting. No member shall be entitled to [vote by proxy or to] have more than one vote.

164:2 Purchase of Real Estate; Lease Added. Amend the section heading of RSA 394-B:27 to read as follows:

394-B:27 Purchase or Lease of Real Estate.

164:3 Lease; Approval of Bank Commissioner Required. Amend RSA 394-B:27, II to read as follows:

II. Any purchase, lease, mortgage, exchange or sale of real estate acquired or to be acquired for the purposes of this section shall be subject to the approval of the bank commissioner.

164:4 Declaring; Use of Earnings of Previous Years. Amend RSA 394-B:39 to read as follows:

394-B:39 Declaring. At such intervals and for such periods as the board of directors may authorize, and after [provision for] any required transfers to the required reserves, the board of directors may declare dividends on shares and interest on deposits from [the undivided] current earnings. Dividends may be paid at various rates with due regard to the conditions that pertain to each type of share or deposit account such as minimum balance, notice and time requirements. [Such dividends may be paid in whole or in part from undivided earnings of preceding years, not to exceed 20 percent of such earnings in any one year without the commissioner's approval and provided that such earnings are a part of the surplus of the credit union in excess of all requirements of the guaranty fund.] Dividends may be paid from the undivided earnings of previous years if the payment of the dividends does not cause the net worth of the credit union to fall below "Well Capitalized," as set forth in Title 12 of the Code of Federal Regulations, Part 702 Prompt Corrective Action (PCA). Payment of these dividends from prior years' undivided earnings shall be reported to the bank commissioner within 30 days of dividend declaration. With prior approval of the bank commissioner, dividends may be paid from the undivided earnings of previous years if the payment of the dividends does cause the credit union's net worth to fall below "Well Capitalized" as set forth in Title 12 of the Code of Federal Regulations, Part 702 Prompt Corrective Action (PCA).

164:5 Preliminary Audit; 100 Percent Verification Removed. Amend RSA 394-B:41 to read as follows:

394-B:41 Preliminary Audit. The supervisory committee shall at least semi-annually conduct or cause to be conducted an audit of the books and records and an examination of the business and affairs of the credit union, or, with the approval of the bank commissioner, the credit union may engage an independent professional auditor to conduct such an audit and examination at least annually. The supervisory committee or such independent professional auditor shall conduct a thorough audit of receipts, disbursements, assets and liabilities. The supervisory committee or such independent professional auditor shall conduct [100 percent] verification not less than every 2 years.

164:6 Loans to Officials; Approval and Ratification. Amend RSA 394-B:46 to read as follows:

394-B:46 Loans to Officials. Members of the board of directors, credit committee, or supervisory committee may borrow from the credit union. Members of the board of directors, credit committee, and supervisory committee may borrow or become surety for loans in excess of their holdings in such credit union provided such loans are approved by a majority of the members of the [credit] board of directors and ratified by a majority of the members of the supervisory [committees] committee; provided, that no member of a credit committee or supervisory committee shall have a vote concerning his or her own loan application, or be entitled to participate in the deliberations regarding said loan. No loan to any such official shall receive terms more favorable than those extended to other persons borrowing from said credit union.

164:7 Guaranty Fund Replaced with Regular Reserves. RSA 394-B:49 is repealed and reenacted to read as follows:

394-B:49 Regular Reserves. At the end of each quarterly reporting period, a transfer from current earnings shall be made to the regular reserve as set forth in Title 12 of the Code of Federal Regulations, Part 702 Prompt Corrective Action (PCA). In the event that current earnings are incapable of providing the required transfer, undivided earnings shall be utilized to augment the amount transferred from current earnings. The credit union shall notify the commissioner within 30 days of any required transfers made from undivided earnings to the regular reserve. Prior approval of the commissioner is required before any disbursements from the regular reserve.

164:8 Repeal. The following are repealed:

I. RSA 394-B:14, relative to the inclusion of shares in the capital of a credit union.

II. RSA 394-B:48, relative to the purpose for the loan, security offered, and the requirement that the application be in writing, is repealed.

164:9 Effective Date. This act shall take effect 60 days after its passage.

(Approved: June 17, 2003)

(Effective Date: August 16, 2003)