Law:Division 2. Savings Association Law (California)

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Contents

Chapter 1. Short Title, General Definitions, And General Provisions

Article 1. Short Title

Ca Codes (fin:5000) Financial Code Section 5000



5000. This division may be cited as the "Savings Association Law."


Article 2. General Definitions

Ca Codes (fin:5100-5124) Financial Code Section 5100-5124



5100. When used in this division, the words and phrases set forth in this article shall have the meanings given in this article unless the context requires another meaning.


5100.2. For purposes of this division: (a) Any reference to regulations of the federal Office of Thrift Supervision or the Federal Deposit Insurance Corporation shall also be deemed to include and refer to regulations adopted by the Federal Home Loan Bank Board or the Federal Savings and Loan Insurance Corporation, to the extent these regulations have been continued in effect and made enforceable by the Office of Thrift Supervision or Federal Deposit Insurance Corporation, respectively, pursuant to the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (Public Law 101-73). (b) Any reference to charters issued by the Office of Thrift Supervision shall also be deemed to include and refer to charters issued by the Federal Home Loan Bank Board.


5100.5. "Affiliated person" of a savings association means the following: (a) A director, officer, or controlling person of the savings association. (b) A spouse of a director, officer, controlling person of the savings association. (c) A member of the immediate family of a director, officer, or controlling person of the savings association, who has the same home as that person or who is a director or officer of any subsidiary of the savings association or of any holding company affiliate of the savings association. (d) Any corporation or organization other than the savings association or a corporation or organization through which the savings association operates, of which a director, officer or controlling person of the savings association meets any of the following criteria: (1) Is chief executive officer, chief financial officer, or a person performing similar functions. (2) Is a general partner. (3) Is a limited partner who, directly or indirectly either alone or with his spouse and the members of his immediate family who are also affiliated persons of the savings association, owns an interest of 10 percent or more in the partnership (based on the value of his contribution) or who, directly or indirectly with other directors, officers, and controlling persons of the savings association and their spouses and their immediate family members who are also affiliated persons of the savings association owns an interest of 25 percent or more in the partnership. (4) Directly or indirectly either alone or with his or her spouse and the members of his or her immediate family who are also affiliated persons of the savings association, owns or controls 10 percent or more of any class of equity securities or owns or controls, with other directors, officers, and controlling persons of the savings association and their spouses and their immediate family members who are also affiliated persons of the savings association, 25 percent or more of any class of equity securities. (e) Any trust or other estate in which a director, officer, or controlling person of the savings association or the spouse of the person has a substantial beneficial interest or as to which the person or his or her spouse serves as trustee or in a similar fiduciary capacity.

5100.6. "Affiliate" of a savings association, unless otherwise defined, includes any corporation, business trust, unincorporated association or other similar organization which meets the criteria of subdivision (a), (b), or (c), as follows: (a) The savings association directly or indirectly, owns or controls either a majority of the voting shares or more than 50 per centum of the number of shares voted for the election of its directors, trustees, or other persons exercising similar functions at the preceding election, or controls in any manner the election of a majority of its directors, trustees, or other persons exercising similar functions. (b) Control thereof is held, directly or indirectly through stock ownership or in any other manner, by the shareholders of a savings association who own or control either a majority of the shares of the savings association or more than 50 per centum of the number of shares voted for the election of directors of that savings association at the preceding election, or by trustees for the benefit of the shareholders of any savings association. (c) A majority of its directors, trustees, or other persons exercising similar functions are directors of any one savings association.


5100.7. "Controlling person" of a savings association means any person or entity which (a) either directly or indirectly or acting in concert with one or more other persons or entities, owns, controls, or holds with power to vote, or holds proxies representing, 10 percent or more of the voting shares or rights of the association or (b) controls in any manner the election or appointment of a majority of the directors of the association. However, a director of a savings association shall not be deemed to be a controlling person of the association based upon his or her voting, or acting in concert with other directors in voting, proxies (a) obtained in connection with an annual solicitation of proxies or (b) obtained from savings account holders and borrowers if the proxies are voted as directed by a majority vote of the entire board of directors of that association, or of a committee of those directors if the committee's composition and authority are controlled by a majority vote of the entire board and if its authority is revocable by such a majority.


5100.8. "Immediate family" of any natural person means any of the following (whether by the full or half blood or by adoption): (a) The person's spouse, father, mother, children, brothers, sisters, and grandchildren. (b) The father, mother, brothers, and sisters of the person's spouse. (c) The spouse of a child, brother, or sister of the person.


5100.9. "Institution-affiliated party" means any of the following: (a) Any director, officer, employee or controlling stockholder of, or agent for, a savings association. (b) Any person who has filed or is required to file an application to become a savings and loan holding company with the commissioner pursuant to Section 5801. (c) Any shareholder, consultant, joint venture partner, and any other person as determined by the commissioner (by regulation or case-by-case) who participates in the conduct of the affairs of a savings association. (d) Any independent contractor (including any attorney, appraiser, or accountant) who knowingly or recklessly participates in any of the following which caused or is likely to cause more than a minimal financial loss to, or a significant adverse effect on, the savings association: (1) Any violation of law or regulation. (2) Any breach of fiduciary duty. (3) Any unsafe or unsound practice.


5101. "Approved by the members," in the case of a mutual association, means approved by a majority of all votes cast at a duly held regular or special meeting or by the written consent (including consents by proxy) of a majority of the total votes of members outstanding at the close of business on the next business day prior to the date that the requisite written consents have been filed with the association.


5102. (a) "Association" or "savings association" means a mutual or stock savings association, savings and loan association or savings bank subject to the provisions of this division, but excluding a federal association. (b) "Federal association" means a savings and loan association or federal savings bank that is chartered by the Office of Thrift Supervision under Section 5 of the Home Owners' Loan Act of 1933 (12 U.S.C. Sec. 1464), as amended.


5103. "Certificate of authority" means: (a) A certificate of authority to transact the business of an association, which is issued by the commissioner pursuant to this division. (b) An uncanceled annual license issued to an association under prior law which is valid on the effective date of this division.


5103.5. "Commercial paper" means any note, draft, or bill of exchange which arises out of a current transaction or the proceeds of which have been or are to be used for current transactions, and which has a maturity at the time of issuance of not exceeding nine months, exclusive of days of grace, or any renewal thereof the maturity of which is likewise limited.


5104. "Commissioner" means the Commissioner of Financial Institutions.

5105. "Community" means a centralized area or locality in which a body of inhabitants is gathered in one group having common residential, social, or business interests. The term does not necessarily mean a municipal corporation or other political subdivision. A community need not be limited by lines and boundaries. A city, village, town, or other governmental unit, either incorporated or unincorporated, may constitute one community, but a large, populous area under one or more forms of government may be composed of several communities.


5105.5. "Consumer loan" means a loan for personal, family, or household purposes, and loans reasonably incident thereto, and may be made as either open-end or closed-end consumer credit, but does not include credit extended in connection with credit cards or bona fide overdraft loans.


5105.8. "Corporate debt security" means a marketable obligation, evidencing the indebtedness of any corporation in the form of a bond, note, or debenture, or both note and debenture, which is commonly regarded as a debt security and is not predominantly speculative in nature. A security is marketable if it may be sold with reasonable promptness at a price which corresponds reasonably to its fair value.


5106. "Department" means the Department of Financial Institutions.


5107. "Financial institution" means a thrift institution, commercial bank, or trust company.


5108. "Impaired condition" means a condition in which the assets of an association in the aggregate do not have a value, as determined in accordance with generally accepted accounting principles, equal to or greater than the aggregate amount of liabilities of the association to its creditors, including the holders of its savings accounts and all other persons who are creditors.


5109. "Mutual association" means an association for which the articles of incorporation do not authorize the issuance of capital stock.

5110. "Member" means a person holding a savings account of a mutual association. A joint and survivorship or other multiple owner constitutes a single membership.


5111. "Mutual capital certificate" means a certificate evidencing an investment in a mutual association and issued pursuant to provisions of this division.

5112. "Net worth certificate" means a certificate issued by an association in accordance with Section 13i of the Federal Deposit Insurance Act, as amended (12 U.S.C., Sec. 1823i) and regulations promulgated thereunder by the Federal Deposit Insurance Corporation.


5113. "Person" means any individual, domestic, or foreign corporation, entity, voting trust, business trust, partnership, limited liability company, association, syndicate, organized group of persons, or similar organization, group or entity, whether incorporated or not.


5114. "Primarily residential property" means real estate on which there is located, or will be located pursuant to a real estate loan, any of the following: (a) A structure or structures designed or used primarily for residential rather than nonresidential purposes and consisting of more than one dwelling unit. (b) A structure or structures designed or used primarily for residential rather than nonresidential purposes for students, residents, and persons under the care of, or the employees or members of the staff of, an educational, health, or welfare institution or facility. (c) A structure or structures that are used in part for residential purposes for not more than one family and in part for business purposes if the residential use of the structure or structures is substantial and permanent and not merely transitory.


5114.5. "Residential real estate" means any improved real property that is used or intended to be used as a residence and contains not more than four dwelling units.


5115. "Real estate loan" means a loan or other obligation secured by a lien on real estate, if: (a) The security property is real estate as defined pursuant to Section 658 of the Civil Code. (b) The security interest of the association may be enforced as a real estate mortgage, deed of trust, or its equivalent. (c) The security property is capable of separate appraisal. (d) The association relies substantially upon the real estate as primary security for the loan. (e) With regard to security property which is a leasehold or other interest for a period of years, the term of interest extends, or is subject to extension or renewal at the option of the association, for a term of at least five years following maturity of the loan.


5116. "Savings account" means that part of the savings liability of an association that is credited to the holder of the account. A savings account may be referred to as a deposit. For the purposes of Sections 6661, 6662, and 6663 and Article 4 (commencing with Section 6725) through Article 10 (commencing with Section 7000), inclusive, of Chapter 5 of this division, the term "savings account" includes shares, demand accounts, savings deposits and other savings accounts of federal associations.


5117. "Savings bank" means a savings bank organized under this division.

5117.5. "Savings institution" means a financial institution as defined in Section 5102.


5118. "Savings liability" means the aggregate amount of savings accounts of depositors, including interest credited to the accounts, less redemptions and withdrawals.


5119. "Service corporation" means a corporation, other than a wholly owned subsidiary referred to in Section 7300 or a wholly owned subsidiary doing business as a finance subsidiary in accordance with the requirements of 12 C.F.R. 563.132, in which at least 80 percent of the shares of stock having voting power are owned by one or more associations or federal associations. As used in this section "voting power" shall have the same meaning as defined in Section 194.5 of the Corporations Code.


5120. "Statutory net worth" or "net worth" means the sum of the following: (a) Issued and outstanding capital stock. (b) Issued and outstanding capital certificates. (c) Paid-in surplus. (d) Retained earnings. (e) Pledged savings accounts of a mutual association with the approval of the commissioner. (f) General reserves and other amounts as the commissioner prescribes.

5121. "Stock association" means an association for which the articles of incorporation authorize the issuance of capital stock.


5122. "Stockholder" means the holder of one or more shares of any class of capital stock of a capital stock association which is organized and operating pursuant to the provisions of this division.


5123. "Thrift institution" means an association, a cooperative bank, a homestead association, a building and loan association, a federal association, a federal savings bank, a state or federal credit union, an industrial loan company, and a supervised thrift and residential financing institution of a substantially similar nature.


5124. "Withdrawal value" means the amount credited to a savings account less lawful deductions, as shown by the records of the association.


Article 3. General Provisions

Ca Codes (fin:5203-5209) Financial Code Section 5203-5209



5203. (a) The name, rights, powers, privileges, and immunities of each association in existence on the effective date of this division shall be governed by the provisions of this division to the same extent and effect as if the association had been incorporated pursuant to this division. The articles of incorporation and bylaws of an association existing on the effective date of this division may be amended to conform to the provisions of this division, with or without the issuance or approval by the commissioner of conformed copies of those documents, and the provisions in the articles and bylaws are superseded to the extent that they are inconsistent with the provisions of this division, except that the obligations of the existing association between the association and its stockholders, members, or any valid contract between the stockholders or members of the association or between the association and any other persons, existing at the time this division takes effect, shall not be impaired by the provisions of this division. With these exceptions, each association in existence on the effective date of this division shall possess all the rights, powers, privileges, and immunities and shall be subject to all the duties, liabilities, disabilities, and restrictions conferred and imposed by this division, notwithstanding anything to the contrary in its articles of incorporation, bylaws, or rules. (b) The power of each association in existence on the effective date of this division pursuant to its articles of incorporation or bylaws to issue voting interests to savings account holders, shall not be impaired by any provision of this division.


5204. (a) Wherever it is stated in this division that an agreement or contract contrary to any of the division's provisions is void, the statement is limited to the particular portion of the agreement or contract that is contrary to the provision, and the entire agreement or contract is not void unless the particular part is not a separable portion. Unless expressly so provided by the commissioner, the violation of any provision of this division does not render invalid any agreement, contract, stock, savings account, note, trust deed, mortgage, or other instrument. (b) No provision of this division imposing any liability, either civil or criminal, applies to any act done or omitted in good faith in conformity with any rule, regulation, approval, consent, order, direction, or other act of the commissioner, even if the rule, regulation, approval, consent, order, direction, or other act of the commissioner is amended, rescinded, or determined invalid by judicial or other authority, after the act or omission.


5205. Whenever the term " association" is used in any provision of law, such term shall be deemed to include savings banks organized under this division; and wherever the term "federal association" is so used, such term shall be deemed to include federal savings banks.


5205.5. (a) All references in this division to financial statements, balance sheets, income statements, and statements of changes in financial position of an association and all references to assets, liabilities, earnings, retained earnings, shareholders' equity, and similar accounting items of an association, mean financial statements or items prepared or determined in conformity with generally accepted accounting principles then applicable which fairly present in conformity with generally accepted accounting principles the matters that they purport to present, subject to any specific accounting treatment required or permitted by any provision of this division, or by any regulation or order issued under this division. (b) The commissioner may, by regulation or order, require any financial statement or accounting item of an association to be prepared or determined in a manner other than in conformity with generally accepted accounting principles if it is found that the other manner of preparation or determination is necessary or appropriate to carry out the purposes or provisions of this division. A report utilizing accounting methods required pursuant to the provisions of this subdivision shall not be available for other than purposes as provided by the commissioner.


5206. Whenever the terms "board of directors," "directors," or "director" are used in any provision of law, such terms shall mean, with respect to savings banks organized under this division, "board of trustees," "trustees," or "trustee."


5207. If any provision, clause, or phrase of this division or application to any person or circumstance is held invalid, its invalidity shall not affect other provisions or applications of this division that can be given effect without the invalid provisions or application, and to this end, the provisions of this division are separable.


5208. This division, being a comprehensive coverage of its subject matter, shall not be deemed to be impliedly repealed, in whole or in part, by subsequent legislation not specifically repealing it, if that construction can be avoided.

5209. Insofar as the provisions of this division are inconsistent with any other law in effect at the time the provisions of this division are enacted, the provisions of this division shall control. Except as provided in subdivision (a) of Section 6500, nothing within this section is intended to provide for preemption of other provisions of law expressly overruling the provisions of this division and enacted subsequent to the effective date of the inconsistent provision within this division.


Article 4. Penalties

Ca Codes (fin:5300-5311) Financial Code Section 5300-5311



5300. Every person who willfully violates or willfully fails to comply with any of the provisions of this division is guilty of a public offense. Except where the offense is declared to be a felony or a misdemeanor or a different punishment is prescribed, a person convicted under this section shall be punished by a fine of not more than ten thousand dollars ($10,000), or by imprisonment in the county jail not exceeding one year or in the state prison, or by both that fine and imprisonment.


5300. Every person who willfully violates or willfully fails to comply with any of the provisions of this division is guilty of a public offense. Except where the offense is declared to be a felony or a misdemeanor or a different punishment is prescribed, a person convicted under this section shall be punished by a fine of not more than ten thousand dollars ($10,000), or by imprisonment in the county jail not exceeding one year or pursuant to subdivision (h) of Section 1170 of the Penal Code, or by both that fine and imprisonment.

5301. (a) The commissioner may refer such evidence as is available concerning any violation of this division or of any regulation, order issued by the commissioner, or of any condition imposed in writing by the commissioner in connection with any grant of any application or request by the savings association or of a written agreement between the savings association and the commissioner to the Attorney General or to the district attorney of the county in which the violation occurred, who may, with or without such a referral, institute appropriate civil or criminal proceedings under this division. (b) The commissioner and his or her counsel, deputies, or assistants may, upon request of the Attorney General or district attorney, assist the Attorney General or district attorney in presenting law or facts at any trial in these proceedings.


5302. (a) Whoever knowingly violates subdivision (a) or (b) of Section 6525.5 shall be punished by a fine of not more than one million dollars ($1,000,000) for each day the violation continues, by imprisonment in the state prison for 2, 3, or 4 years, or by both that fine and imprisonment. (b) Any person who is subject to an order issued pursuant to Section 8201 who knowingly violates the order, directly or indirectly, shall be punished by a fine of not more than one million dollars ($1,000,000) for each day violation continues, by imprisonment in state prison for 2, 3, or 4 years, or by both that fine and imprisonment.

5302. (a) Whoever knowingly violates subdivision (a) or (b) of Section 6525.5 shall be punished by a fine of not more than one million dollars ($1,000,000) for each day the violation continues, by imprisonment pursuant to subdivision (h) of Section 1170 of the Penal Code for 2, 3, or 4 years, or by both that fine and imprisonment. (b) Any person who is subject to an order issued pursuant to Section 8201 who knowingly violates the order, directly or indirectly, shall be punished by a fine of not more than one million dollars ($1,000,000) for each day violation continues, by imprisonment pursuant to subdivision (h) of Section 1170 of the Penal Code for 2, 3, or 4 years, or by both that fine and imprisonment.


5303. Any officer, director, employee, or agent of any association who (a) willfully makes or knowingly concurs in the making or publishing of a false or untrue material entry in any book, record, report, statement concerning the business or affairs of the association, or statement of condition or in connection with any transaction of the association, with intent to deceive any officer or director thereof, or with intent to deceive any agency or examiner, whether private or public, employed or lawfully appointed to examine into the association's condition or to examine into any of the association's affairs or transactions, or with intent to deceive any public officer, office, or board to which the association is required by law to report or that has authority by law to examine into the association's affairs or transactions, (b) with like intent, willfully omits to make a material new entry of any matter particularly pertaining to the business, property, condition, affairs, transactions, assets, or accounts of the association in any appropriate book, record, report, or statement of the association, which entry is required to be made by law or generally accepted accounting principles applicable to a savings institution, or (c) with like intent, willfully alters, abstracts, conceals, refuses to allow to be inspected by the commissioner or the commissioner's deputies or examiners, or destroys any books, records, reports, or statements of the association made, written, or kept, or required to be made, written, or kept by him or her or under his or her direction, shall be punished by a fine of not more than one million dollars ($1,000,000), by imprisonment in the state prison for two, three, or four years, or by both that fine and imprisonment.


5303. Any officer, director, employee, or agent of any association who (a) willfully makes or knowingly concurs in the making or publishing of a false or untrue material entry in any book, record, report, statement concerning the business or affairs of the association, or statement of condition or in connection with any transaction of the association, with intent to deceive any officer or director thereof, or with intent to deceive any agency or examiner, whether private or public, employed or lawfully appointed to examine into the association's condition or to examine into any of the association's affairs or transactions, or with intent to deceive any public officer, office, or board to which the association is required by law to report or that has authority by law to examine into the association's affairs or transactions, (b) with like intent, willfully omits to make a material new entry of any matter particularly pertaining to the business, property, condition, affairs, transactions, assets, or accounts of the association in any appropriate book, record, report, or statement of the association, which entry is required to be made by law or generally accepted accounting principles applicable to a savings institution, or (c) with like intent, willfully alters, abstracts, conceals, refuses to allow to be inspected by the commissioner or the commissioner's deputies or examiners, or destroys any books, records, reports, or statements of the association made, written, or kept, or required to be made, written, or kept by him or her or under his or her direction, shall be punished by a fine of not more than one million dollars ($1,000,000), by imprisonment pursuant to subdivision (h) of Section 1170 of the Penal Code for two, three, or four years, or by both that fine and imprisonment.


5304. (a) It is unlawful for any person to corruptly give, offer, or promise anything of value to any other person, with intent to influence or reward any institution-affiliated party in connection with any business or transaction of a savings association. (b) It is unlawful for any institution-affiliated party to corruptly solicit or demand for the benefit of any person, or corruptly accept or agree to accept, anything of value from any person, intending to be influenced or rewarded in connection with any business or transaction of the savings association. (c) Any person who violates subdivision (a) or (b) shall be punished by a fine of not more than one million dollars ($1,000,000) or three times the value of the thing given, offered, promised, solicited, demanded, accepted, or agreed to be accepted, whichever is greater, by imprisonment in the state prison for 2, 3, or 4 years, or by both that fine and imprisonment. However, if the value of the thing given, offered, promised, solicited, demanded, accepted, or agreed to be accepted does not exceed one thousand dollars ($1,000), the offense shall instead be punishable by a fine of not more than one thousand dollars ($1,000), by imprisonment in the county jail for not more than one year or in the state prison, or by both that fine and imprisonment. (d) This section does not apply to bona fide salary, wages, fees, or other compensation paid, or expenses paid or reimbursed, in the usual course of business or where the amount of money or monetary worth of the thing of value is one hundred dollars ($100) or less.


5304. (a) It is unlawful for any person to corruptly give, offer, or promise anything of value to any other person, with intent to influence or reward any institution-affiliated party in connection with any business or transaction of a savings association. (b) It is unlawful for any institution-affiliated party to corruptly solicit or demand for the benefit of any person, or corruptly accept or agree to accept, anything of value from any person, intending to be influenced or rewarded in connection with any business or transaction of the savings association. (c) Any person who violates subdivision (a) or (b) shall be punished by a fine of not more than one million dollars ($1,000,000) or three times the value of the thing given, offered, promised, solicited, demanded, accepted, or agreed to be accepted, whichever is greater, by imprisonment pursuant to subdivision (h) of Section 1170 of the Penal Code for 2, 3, or 4 years, or by both that fine and imprisonment. However, if the value of the thing given, offered, promised, solicited, demanded, accepted, or agreed to be accepted does not exceed one thousand dollars ($1,000), the offense shall instead be punishable by a fine of not more than one thousand dollars ($1,000), by imprisonment in a county jail for not more than one year, or pursuant to subdivision (h) of Section 1170 of the Penal Code, or by both that fine and imprisonment. (d) This section does not apply to bona fide salary, wages, fees, or other compensation paid, or expenses paid or reimbursed, in the usual course of business or where the amount of money or monetary worth of the thing of value is one hundred dollars ($100) or less.


5305. Any institution-affiliated party who abstracts or willfully misapplies any of the money, funds, or property of the savings association, or willfully misapplies its credit, is guilty of a felony and shall be punished by a fine of not more than one million dollars ($1,000,000), by imprisonment in the state prison for 2, 3, or 4 years, or by both that fine and imprisonment. However, if the amount abstracted or willfully misapplied does not exceed two hundred fifty dollars ($250), the offense shall instead be punishable by a fine of not more than one thousand dollars ($1,000), by imprisonment in the county jail for not more than one year or in the state prison, or by both that fine and imprisonment.

5305. Any institution-affiliated party who abstracts or willfully misapplies any of the money, funds, or property of the savings association, or willfully misapplies its credit, is guilty of a felony and shall be punished by a fine of not more than one million dollars ($1,000,000), by imprisonment pursuant to subdivision (h) of Section 1170 of the Penal Code for 2, 3, or 4 years, or by both that fine and imprisonment. However, if the amount abstracted or willfully misapplied does not exceed two hundred fifty dollars ($250), the offense shall instead be punishable by a fine of not more than one thousand dollars ($1,000), by imprisonment in a county jail for not more than one year, or pursuant to subdivision (h) of Section 1170 of the Penal Code, or by both that fine and imprisonment.


5306. Any institution-affiliated party who knowingly executes, or attempts to execute, a scheme or artifice to defraud a savings association or to obtain any of the moneys, funds, credits, assets, securities or other property owned by or under the custody or control of a savings association by means of false or fraudulent pretenses, representations, or promises, shall be punished by a fine of not more than one million dollars ($1,000,000), by imprisonment in state prison for 2, 3, or 4 years, or by both that fine and imprisonment.


5307. Whoever willfully and knowingly makes, issues, circulates, transmits, or causes or knowingly permits to be made, issued, circulated, or transmitted, any statement or rumor which is written, printed, reproduced in any manner, or communicated by word of mouth, that is untrue in fact and is directly or by inference false, or malicious in that it is calculated to injure the reputation or business, financial condition, or standing of any association shall be punished by a fine of not more than ten thousand dollars ($10,000), by imprisonment in the county jail not exceeding one year or in the state prison, or by both that fine and imprisonment.


5307. Whoever willfully and knowingly makes, issues, circulates, transmits, or causes or knowingly permits to be made, issued, circulated, or transmitted, any statement or rumor which is written, printed, reproduced in any manner, or communicated by word of mouth, that is untrue in fact and is directly or by inference false, or malicious in that it is calculated to injure the reputation or business, financial condition, or standing of any association shall be punished by a fine of not more than ten thousand dollars ($10,000), by imprisonment in a county jail not exceeding one year or pursuant to subdivision (h) of Section 1170 of the Penal Code, or by both that fine and imprisonment.


5308. Whoever knowingly makes or causes to be made, directly or indirectly, or through any agency whatsoever, any false statement or report, or willfully overvalues any land, property, or security, for the purpose of influencing in any way the action of any association upon any application, advance, discount, purchase or repurchase agreement, commitment, or loan or the change or extension of any of these transactions by renewal, deferment of action, or otherwise, or the acceptance, release, or substitution of security for these transactions shall be punished by a fine of not more than ten thousand dollars ($10,000) or, by imprisonment in the county jail not exceeding one year or in the state prison, or by both that fine and imprisonment.


5309. (a) A person shall be sentenced to consecutive terms for each violation of Section 5303, 5304, 5305, or 5306 up to a mandatory term of 20 years in state prison if all of the following are charged in the accusatory pleading and admitted by the defendant, or found to be true by the trier of fact: (1) The person is an institution affiliated party. (2) The person engaged in a pattern and practice of activity involving multiple violations of Section 5303, 5304, 5305, or 5306. (3) The person acted with intent to cause substantial harm, or with reckless disregard of the possibility of causing substantial harm, to the savings institution. (4) The violations did in fact result in substantial harm to the savings institution. (b) No part of a consecutive sentence required pursuant to subdivision (a) may be suspended or revoked by the court. (c) Nothing in subdivision (a) shall limit the court's discretion to sentence the defendant to a consecutive term longer than provided for in that subdivision, if otherwise permitted by law. (d) Nothing in subdivision (a) shall limit the court's discretion to order consecutive sentences for violations of Section 5303, 5304, 5305, or 5306 under any other provision of law.


5310. (a) Any person violating or conspiring to violate Sections 5303, 5304, 5305, or 5306 shall be subject to a civil penalty in an amount assessed by the court in a civil action under this section. (b) The maximum amount of the penalty which may be imposed under this section shall be determined in accordance with the following: (1) Except as provided by paragraphs (2) and (3), the civil penalty shall not exceed one million dollars ($1,000,000). (2) In the case of a continuing violation, the amount of the civil penalty may exceed the amount described in paragraph (1), but may not exceed the lesser of one million dollars ($1,000,000) for each day the violation continues or five million dollars ($5,000,000). (3) If any person derives pecuniary gain from the violation, or if the violation results in pecuniary loss to a person other than the violator, the amount of the civil penalty may exceed the amounts described in paragraphs (1) and (2) but may not exceed the amount of that gain or loss. (c) A civil action to recover a civil penalty under this section shall be brought in the name of the people of the State of California by the Attorney General, who shall be required to establish the right to recovery by a preponderance of the evidence. (d) For the purpose of conducting a civil investigation in contemplation of proceeding under this section, the Attorney General may do all of the following: (1) Administer oaths and affirmations. (2) Take evidence. (3) By subpoena or subpoena duces tecum, summon witnesses and require the production of any books, papers, correspondence, memoranda, or other records which the Attorney General deems relevant or material to the inquiry.


5311. (a) Any fine or civil penalty imposed under this chapter shall be based upon the ability of the defendant to pay. In setting the amount of the fine or civil penalty, consideration shall also be given to the seriousness of the offense, the amount of any pecuniary gain by the defendant, and the amount of any pecuniary loss, other than defendant's own loss, caused by the offense. (b) A civil penalty may not be imposed against a person under this chapter if that person has been punished by a fine or imprisonment for the same violation. (c) A fine may not be imposed under this chapter if a civil penalty has previously been imposed for the same violation.


Article 5. Criminal Forfeiture

Ca Codes (fin:5320-5325) Financial Code Section 5320-5325



5320. If a person is convicted of a violation of Section 5303, 5304, 5305, or 5306, or is convicted of a felony for a violation of Section 25540 or 25541 of the Corporations Code in connection with the operation of a lending institution subject to the jurisdiction of the department pursuant to this division, or is convicted of a felony violation of Section 487 or 504 of the Penal Code in connection with the operation of a lending institution subject to the jurisdiction of the department pursuant to this division any property which constitutes or is derived from proceeds traceable to that violation is subject to forfeiture pursuant to this article.


5321. (a) The prosecuting agency shall, prior to, in conjunction with, or subsequent to the criminal proceeding, file a petition of forfeiture with the superior court of the county in which the defendant has been or will be charged with the underlying criminal offense. The petition shall allege that the defendant has engaged in acts chargeable as crimes pursuant to the criminal provisions enumerated in Section 5320 and shall identify the property subject to forfeiture. A notice regarding the petition shall be provided, by personal service or registered mail, to every person who may have an interest in the property specified in the petition. However, if the notice cannot be given by registered mail or personal delivery, the notice shall be published for at least three successive weeks in a newspaper of general circulation in the county where the property is located. The notice shall state that any interested person may file a verified claim with the superior court stating the amount of their claimed interest and an affirmation or denial of the prosecuting agency's allegation. The notice shall set forth the time within which a claim of interest in the property seized is required to be filed. (b) If the property alleged to be subject to forfeiture is real property, the prosecuting agency shall, at the time of filing the petition of forfeiture, record a lis pendens in each county in which the real property is situated which specifically identifies the property by legal description, the name of the owner of record as shown on the latest equalized assessment roll, and assessor's parcel number. The judgment of forfeiture shall not affect the interest in real property of any third party which was acquired prior to the recording of the lis pendens. (c) If a petition of forfeiture is filed pursuant to this section prior to filing of the complaint in a criminal action, the prosecuting agency shall provide concurrent notice to any parties subject to the proposed forfeiture that they are targets of an anticipated criminal action. (d) If a petition of forfeiture is filed pursuant to this section prior to the filing of a complaint in a criminal action, the petition and any injunctive order shall be dismissed by operation of law, unless a criminal complaint or grand jury indictment is filed within 120 days after the filing of the petition. If a petition is dismissed pursuant to this section, it shall not be refiled, except upon the filing of a criminal complaint or grand jury indictment.


5322. (a) Any person claiming an interest in the property may, at any time within 30 days from the date of the first publication of the notice of seizure, or within 30 days after receipt of actual notice, file with the superior court of the county in which the action is pending a verified claim stating his or her interest in the property or proceeds. A verified copy of the claim shall be given by the claimant to the Attorney General or district attorney, as appropriate. (b) (1) If, at the end of the time set forth in subdivision (a), an interested person, other than the defendant, has not filed a claim, the court, upon motion, shall declare that the person has defaulted upon his or her alleged interest, and it shall be subject to forfeiture upon proof of the provisions of subdivision (d). (2) The defendant may admit or deny that the property is subject to forfeiture pursuant to the provisions of this article. If the defendant fails to admit or deny or to file a claim of interest in the property or proceeds, the court shall enter a response of denial on behalf of the defendant. (c) (1) The forfeiture proceeding shall be set for hearing in the superior court in which the underlying criminal offense will be tried. (2) If the defendant is found guilty of the underlying offense, the issue of forfeiture shall be promptly tried, either before the same jury or before a new jury in the discretion of the court, unless waived by the consent of all parties. (d) At the forfeiture hearing, the prosecuting agency shall have the burden of establishing beyond a reasonable doubt that the defendant was engaged in actions in violation of Sections 5303, 5304, 5305, and 5306 and that the property specified in the petition otherwise meets the criteria for forfeiture under Section 5320. If a jury is the trier of fact, the verdict shall be unanimous in order to impose the forfeiture.

5323. (a) Concurrent with, or subsequent to, the filing of the petition, the prosecuting agency may move the superior court for the following pendente lite orders to preserve the status quo of the property alleged in the petition of forfeiture: (1) An injunction to restrain all interested parties and enjoin them from transferring, encumbering, hypothecating or otherwise disposing of that property. (2) Appointment of a receiver to take possession of, care for, manage, and operate the assets and properties so that such property may be maintained and preserved. (b) No preliminary injunction may be granted or receiver appointed without notice, that meets the requirements of Section 5321, to all the interested parties, including actual notice to targets of the anticipated criminal action, and a hearing to determine that such an order is necessary to preserve the property, pending the outcome of the criminal proceedings, and that there is probable cause to believe that the property alleged in the forfeiture proceedings are proceeds or property interests forfeitable under Section 5320. However, a temporary restraining order may issue pending that hearing pursuant to the provisions of Section 527 of the Code of Civil Procedure. (1) In determining whether to issue a preliminary injunction or temporary restraining order in a proceeding brought by a prosecuting agency in conjunction with or subsequent to the underlying criminal proceeding, the court shall weigh the relative degree of certainty of the outcome on the merits and the consequences to each of the parties of granting the interim relief. If the prosecution is likely to prevail on the merits and the potential harm to the public outweighs the potential harm to the defendants and the interested parties, the court should grant injunctive relief. The court shall give significant weight to the following factors: (A) The public interest in preserving liquid capital and other financial assets pendente lite. (B) The difficulty of preserving financial assets pendente lite where the underlying alleged crimes involve issues of fraud and moral turpitude. (C) The fact that the requested relief is being sought by a public prosecutor on behalf of alleged victims of financial crimes. (D) The likelihood that substantial public harm has occurred where financial crimes are alleged to have been committed. (2) In determining whether to issue a permanent injunction or temporary restraining order in a proceeding brought by a prosecuting agency before the filing of a complaint in the underlying criminal proceeding, the court shall weigh the relative degree of certainty of the outcome on the merits and the consequences to each of the parties of granting the interim relief. (3) No injunctive order issued under this section shall impair the ability of a defendant or interested party to pay the actual legal fees or retainer for his or her legal defense to the criminal charges and the petition for forfeiture. (c) Notwithstanding any other provision of law, the court in granting these motions may order a surety bond or undertaking to preserve the property interests of the interested parties, but the court shall give significant weight to the unique circumstances of public agencies, as opposed to private litigants, in determining whether to order a surety bond or undertaking. (d) The court shall, in making its orders, seek to protect the interests of those who may be involved in the same enterprise as the defendant, but who were not involved in the commission of the violation of a crime enumerated in Section 5320.


5324. (a) If the trier of fact at the forfeiture hearing finds that the alleged property or proceeds is forfeitable pursuant to Section 5320, the court shall declare that property or proceeds forfeited to the state or local governmental entity, subject to distribution as provided in Section 5325. No property solely owned by a bona fide purchaser for value shall be subject to forfeiture. (b) If the trier of fact at the forfeiture hearing finds that the alleged property is forfeitable pursuant to Section 5320, but does not find that a person holding a valid lien, mortgage, security interest, or interest under a conditional sales contract acquired that interest with actual knowledge that the property was to be used for a purpose for which forfeiture is permitted, and the amount due to that person is less than the appraised value of the property, that person may pay to the state or the local governmental entity which initiated the forfeiture proceeding, the amount of the difference between the appraised value of the property and the amount of the lien, mortgage, security interest, or interest under a conditional sales contract. Upon that payment, the state or local governmental entity shall relinquish all claims to the property. If the holder of the interest elects not to make that payment to the state or local governmental entity, the property shall be deemed forfeited to the state or local governmental entity and any indicia of ownership of the property shall be forwarded. The appraised value shall be determined as of the date judgment is entered either (a) by agreement between the holder of the lien, mortgage, security interest, or interest under a conditional sales contract and the governmental entity involved or (b) if they cannot agree, then by a court-appointed appraiser for the county in which the action is brought. A person holding a valid lien, mortgage, security interest, or interest under a conditional sales contract shall be paid the appraised value of his or her interest. (c) If the amount due to a person holding a valid lien, mortgage, security interest, or interest under a conditional sales contract is less than the value of the property and the person elects not to make payment to the governmental entity, the property shall be sold at public auction by the county if the district attorney is the prosecutor, by the city if the city attorney is the prosecutor, or by the Department of General Services if the Attorney General is the prosecutor. Notice of the sale shall be provided by one publication in a newspaper published and circulated in the city, community, or locality where the sale is to take place.


5325. Notwithstanding that no response or claim has been filed pursuant to Section 5322, in all cases where property is forfeited pursuant to this article and, where necessary, sold by the Department of General Services or local governmental entity, the money forfeited or the proceeds of sale shall be distributed by the state or local governmental entity as follows: (a) To the bona fide or innocent purchaser, conditional sales vendor, or holder of a valid lien, mortgage or security interest, if any, and from the balance of any forfeited funds to any victim of a crime enumerated in Section 5320 committed by the defendant, up to the amount of his or her interest in the property or proceeds, when the court declaring the forfeiture orders a distribution to that person. The court shall endeavor to discover all such lienholders and protect their interests and may, at its discretion, order the proceeds placed in escrow for up to an additional 60 days to ensure that all valid claims are received and processed. The aggregate of all money distributed pursuant to this subdivision and all money received pursuant to a restitution order of a court shall not exceed the amount of the person's interest in the property or proceeds. (b) To the Department of General Services or local governmental entity for all expenditures made or incurred by it in connection with the sale of the property, including expenditures for any necessary repairs, storage, or transportation of any property seized under this article. (c) The balance of forfeiture funds remaining after the obligations in subdivisions (a) and (b) have been satisfied shall be paid to the general fund of the state or local governmental entity, whichever prosecutes.


Article 6. Civil Penalties

Ca Codes (fin:5330) Financial Code Section 5330



5330. The commissioner may impose civil penalties on any savings association, and any institution-affiliated party as follows: (a) Except as provided in subdivision (b) or in subdivisions (c) and (d), any savings association which, and any institution-affiliated party who, commits any of the following violations shall forfeit and pay a civil penalty of not more than five thousand dollars ($5,000) for each day during which the violation continues: (1) Violation of any statute or regulation. (2) Violation of any order issued by the commissioner. (3) Violation of any condition imposed in writing by the commissioner in connection with the grant of any application or other request by the savings association. (4) Violation of any written agreement between the savings association and the commissioner. (b) Any savings association which, and any institution-affiliated party who, (1) commits any violation specified in subdivision (a), (2) recklessly engages in an unsafe or unsound practice in conducting the affairs of the savings association, or (3) breaches any fiduciary duty shall forfeit and pay a civil penalty of not more than twenty-five thousand dollars ($25,000) for each day during which the violation, practice, or breach continues if the violation, practice, or breach (1) is part of a pattern of misconduct, (2) causes or is likely to cause more than a minimal loss to the savings association, or (3), was committed by an institution-affiliated party and results in pecuniary gain or other benefit to that institution-affiliated party. (c) Notwithstanding subdivisions (a) and (b), any savings association which, and any institution-affiliated party who, (1) knowingly commits any violation specified in subdivision (a), engages in any unsafe or unsound practice in conducting the affairs of the savings association, or breaches any fiduciary duty, and (2) knowingly or recklessly causes a substantial loss to the savings association or, in the case of an institution-related party, a substantial pecuniary gain or other benefit to the institution-related party results by reason of violation, practice or breach, shall forfeit and pay a civil penalty in an amount not to exceed the maximum amount determined under this subdivision for each day during which the violation, practice, or breach continues. The maximum daily amount of any civil penalty which may be assessed pursuant to this subdivision for any violation, practice, or breach described in the subdivision is as follows: (1) In the case of any person other than a savings association, an amount not to exceed one million dollars ($1,000,000). (2) In the case of any savings institution, an amount not to exceed the lesser of one million dollars ($1,000,000) or 1 percent of the total assets of the association. (d) (1) Any penalty imposed under subdivisions (a), (b), or (c) may be assessed and collected by the commissioner by written notice. (2) If, with respect to any assessment under paragraph (1) a hearing is not requested pursuant to subdivision (g) within the period of time allowed under subdivision (g), the assessment shall constitute a final and unappealable order. (e) The commissioner may compromise, modify or remit any penalty which may be assessed or which has been assessed pursuant to subdivision (a), (b), or (c). (f) In determining the amount of any penalty imposed under subdivision (a), (b), or (c), the commissioner shall take into account the appropriateness of the penalty with respect to all of the following: (1) The size of financial resources and good faith of the savings association or other person charged. (2) The gravity of the violation, practice, or breach. (3) The history of previous violations, unsafe or unsound practices, or breaches of fiduciary duty. (4) Such other matters as justice may require. (g) The savings association or other person against whom any penalty is assessed under this section shall be afforded a departmental hearing if the association or person submits a request for a hearing within 20 days after the issuance of the notice of assessment. (h) (1) If any savings association or institution-related party fails to pay an assessment after any civil monetary penalty assessed under this section has become final, the department shall recover the amount assessed by action in superior court. (2) Notwithstanding any other provision of law, review under Section 8055 of the validity or appropriateness of any civil penalty assessed under this section shall be conducted solely pursuant to Section 1085 of the Code of Civil Procedure. (i) All penalties collected under authority of this section shall be deposited in the Savings and Loan Account in the Financial Institutions Fund.


Chapter 2. Corporate Organization And Corporate Changes

Article 1. Organizing Permit

Ca Codes (fin:5400-5403) Financial Code Section 5400-5403



5400. (a) No funds from proposed stockholders, members, or organizers of any proposed association may be collected until a verified application for an organizing permit has been filed and a permit has been issued by the commissioner authorizing collection of funds, and then only in accordance with the terms of the permit. (b) As used in this chapter, the term "organizer" means a person who agrees to contribute funds to a proposed association to be used for its organization expenses.


5401. The application for an organizing permit shall be in writing and shall be filed in the office of the commissioner. The application shall be executed and verified by the chairman of the organizers, who shall be elected by a majority vote of the organizers, and shall include the following: (a) The names and addresses of the organizers of the proposed association and, to the extent known, its proposed directors and officers, together with the proposed amount of capital stock and savings accounts to be purchased and funds for organization expenses to be contributed by each. (b) The proposed location of its office. (c) A copy of any contract proposed to be used for the solicitation of subscriptions for stock and savings accounts and funds for its organization expenses. (d) A copy of any advertisement, circular, or other written matter proposed to be used for soliciting stock and savings accounts subscriptions and funds for organization expenses. (e) An itemized estimate of the organization expenses proposed to be incurred. (f) A copy of the certificate of reservation of name issued under Section 5403. The name selected shall conform with the requirements of Article 4 (commencing with Section 5650). (g) Any additional information that the commissioner may require by written instructions.


5402. (a) The commissioner may impose conditions in an organizing permit concerning the deposit in escrow of funds collected pursuant to the permit, the manner of expenditure of the funds, and any other conditions deemed reasonable and necessary or advisable for the protection of the public, the subscribers, and the organizers. (b) Contributions of organization expenses may be repaid to organizers on a pro rata basis by the association in amounts not to exceed its net income from operations after provision for statutory reserves.

5403. (a) Before filing an application for an organizing permit with the commissioner under Section 5400, an organizer shall file with the Secretary of State an application for a certificate of a reservation of the name for the proposed association in accordance with the provisions of Article 5 (commencing with Section 5650). (b) The application filed with the Secretary of State shall recite the fact of the application to be filed under Section 5400 and the Secretary of State shall issue a certificate of reservation of name upon payment of any required fee. (c) Notwithstanding the provisions of subdivision (c) of Section 201 of the Corporations Code, the name contained in the certificate of reservation of the name shall be reserved to the applicant until (1) the commissioner denies the petition for a certificate of authority, or (2) if a certificate of approval of articles of incorporation is issued, as long as it continues in effect, or (3) for a period of up to one year from the date when the certificate of reservation of the name is issued, whichever of these occurs first. (d) The Secretary of State may, upon the request of the applicant and the approval of the commissioner, extend the reservation of the name for an additional six months.


Article 2. Petition For Certificate Of Authority

Ca Codes (fin:5500-5506) Financial Code Section 5500-5506



5500. Within 60 days after issuance of an organizing permit under Article 1 (commencing with Section 5400) any person may request authority to form a capital stock or mutual association by filing with the commissioner three copies of a petition for a certificate of authority and proposed articles of incorporation. The petition shall also be accompanied by three copies of proposed bylaws which shall make provisions for the following: (a) Annual and special meetings of members or stockholders, and notice of meetings. (b) Procedure for nomination of directors. (c) Meetings of board of directors. (d) Resignation and removal of directors. (e) Compensation of directors. (f) Officers. (g) Execution of instruments. (h) Evidence of savings accounts. (i) Corporate seal. (j) Fiscal year. (k) Amendments. (l) Disaster preparedness. (m) Other matters, if any. The petitioners shall submit with their petitions any applicable filing fee prescribed under Section 9001 and any statements, exhibits, maps, and other data that the commissioner may require by written instruction in a form which is sufficiently detailed and comprehensive to enable the commissioner to make a decision on the petition based on the criteria set out in Section 5502.


5501. Upon receipt of a petition for a certificate of authority, the commissioner shall give written notice to each association that a petition for the issuance of a certificate has been made. The notice shall state the name of the proposed association, where the petitioners propose to establish the home office of the association, and if the commissioner determines that a hearing is to be held on the petition, the time and place of the hearing. The hearing shall be held 10 or more days after the mailing of the notice but in no event later than 60 days after the mailing of the notice. Any interested person may appear at the hearing in person or by agent or attorney, and orally or in writing show cause upon any relevant ground why a certificate should not be issued.


5501.5. The articles of incorporation of each domestic association incorporated after January 1, 1984, shall include a statement that it is formed for each of the following purposes: (a) To engage primarily in the specific business of a savings association and any other lawful activities not prohibited to a savings association by applicable laws and regulations. (b) To encourage industry, frugality, home building, and the accumulation of savings. That statement shall add either "among its members" or "among its savings account holders" and may also add "and among others." (c) For the loaning of the money accumulated, with the interest and earnings thereon. The statement shall add either "to its members" or "to its savings account holders" and the statement may also add "and to others." (d) For the repayment subject to the provisions of this division and any act amendatory thereof or supplementary thereto of the savings and interest to each savings account holder whenever the savings account holder desires to withdraw the same, or when the association desires to repay the same. (e) In the case of a stock association, for the purpose of issuing capital stock and savings accounts. (f) In the case of a mutual association, for the purpose of accumulating capital by the issuance of savings accounts and to grant holders of savings accounts the right to be a member of the association with entitlement to one vote for each one hundred dollars ($100) of the withdrawal value of each savings account to be voted in person or by proxy to transact the business of the association. (g) For any and all purposes specified in the Savings Association Law with all the rights, powers, privileges and immunities as set forth in that law. The above provisions are in lieu of paragraph (1) of subdivision (b) of Section 202 of the Corporations Code and may be supplemented or modified with such provisions as the commissioner may approve.


5502. The commissioner shall not approve any petition for certificate of authority unless it is found from the data furnished with the petition, the evidence adduced at the hearing, if one is held, and official records, that the prerequisites of this division have been complied with and that: (a) The character, responsibility, financial resources, and general fitness of the persons named in the petition warrant belief that the business of the proposed association will be honestly and efficiently conducted in accordance with the intent and purpose of this division and that the proposed association will have qualified full-time management. (b) There is a public need for the proposed association and the business plan, and the anticipated volume of business of the proposed association indicates a profitable operation.


5503. (a) The commissioner shall, within a reasonable time after the petition is filed, or within a reasonable time after the hearing, if one is held, either approve or deny the petition for a certificate of authority. (b) If approved, the commissioner shall issue a certificate of approval of the articles of incorporation of the association and shall issue a notice of conditional approval of the petition for a certificate of authority. Upon satisfaction of all of the conditions in the notice, the commissioner shall execute and issue to the association a certificate of authority. (c) If denied, upon written request of any petitioner, the commissioner shall provide the statutory reason for denial. Denial of the petition is a final decision and the petitioner shall not be entitled to any further administrative remedy. The petitioner shall discontinue the use of the reserved name and provide evidence to the commissioner that the Secretary of State has been notified to release the name reservation.

5504. Upon issuance of a certificate of approval of articles of incorporation to a proposed association, the commissioner shall attach the original signed copy of the certificate of approval to the original signed copy of the articles and deliver it to the proposed association for filing with the Secretary of State. Corporate existence shall begin on the date of filing of the articles with the Secretary of State. Prior to the date the commissioner issues the association a certificate of authority, the activities of the association shall be limited to completing its organization activities and the association shall not open its office for transacting business with the public.


5505. The articles of incorporation of a proposed association shall not be filed in the office of the Secretary of State unless a certificate of approval of the articles of incorporation issued by the commissioner is attached thereto.

5506. Within 30 days after the corporate existence of an association begins, the directors of the association shall hold an organization meeting and shall elect officers pursuant to the provisions of this division and the bylaws. At the organization meeting, the directors shall take any other action that is appropriate in connection with the organization of the association. The commissioner may extend by order the time within which the organization meeting shall be held.


Article 3. Postincorporation Organization Of Associations

Ca Codes (fin:5600-5618) Financial Code Section 5600-5618



5600. (a) The board of directors of an association which is in the process of organization shall select a financial institution within this state as a depository for stock, savings account and mutual capital certificate subscription funds. (b) The financial institution shall assure the safekeeping of the subscription funds and the delivery of these funds to the association after the issuance of the certificate of authority and after the bonding of the officers. In the event of the failure to complete the organization of the association and to commence business, the financial institution shall insure the return of the amounts collected to the respective subscribers or their assigns, plus any earnings on the funds, less reasonable charges of the financial institution for services as depository of the funds.


5601. Before a certificate of authority is issued, the capital of the association shall be paid into the association and, in the case of stock, shall be the sum of the par or initially stated value of all shares of capital stock, plus the initial paid-in surplus. The minimum required capital shall be established by regulations, or instructions, issued by the commissioner.


5602. In addition to the minimum capital required, the commissioner may require that the consideration for the issuance of capital stock shall be sufficient to create a paid-in surplus in an amount satisfactory to the commissioner. The minimum capital and surplus may be used for the reserves required by law and for other purposes as may be permitted by the board of directors, provided that the par value or stated value of the stock subscribed shall be maintained as the permanent capital of the association, as required by Sections 5604 and 5605.

5603. In the case of a stock association, prior to issuance of a certificate of authority, the association shall file with the commissioner a statement in a form and with supporting data and proof that the commissioner may require, that verifies that the entire capital and paid-in surplus has been unconditionally paid in, that these funds are on deposit with the depository financial institution, and that all conditions contained in the notice of conditional approval of the petition for a certificate of authority have been met.

5604. (a) In the case of a stock association, on or after the date the commissioner issues the association a certificate of authority, the association shall issue the capital stock necessary to satisfy the minimum capital requirements of Section 5601 and any additional capital stock approved for issuance by its board of directors, up to the amount authorized in its articles of incorporation, and shall issue no additional shares except as authorized in this division. (b) The capital stock of an association, when issued, shall constitute permanent capital and shall not be retired or withdrawn except as provided in this division until all liabilities of the association have been satisfied in full, including the withdrawal value of all savings accounts, and until outstanding capital certificates have been retired.


5605. (a) Any association that does not commence business within one year after the date of the issuance of its certificate of approval of articles of incorporation shall forfeit its certificate of approval of articles of incorporation, unless the commissioner, before the expiration of the one year period, shall have approved the extension of time within which it may commence business, upon a written application stating the reasons for delay. Upon forfeiture, the association's certificate of approval of articles of incorporation shall expire. Amounts credited on savings accounts or paid in on capital stock, including any income earned on these funds, shall be returned on a pro rata basis to their respective subscribers. (b) The commissioner shall immediately notify the Secretary of State of forfeiture under this section.


5606. (a) Prior to doing business in this state, an association shall obtain and maintain insurance of its savings accounts by the Federal Deposit Insurance Corporation. (b) Prior to doing business in this state, a foreign savings association, as defined in Sections 10000 and 10010, shall maintain insurance of its savings accounts by the Federal Deposit Insurance Corporation. (c) The commissioner may enforce any statutes pertaining to, or any regulations of, the Federal Deposit Insurance Corporation or the Office of Thrift Supervision insofar as those statutes and regulations apply to associations, and may enforce any and all other federal statutes and regulations applicable to associations.


5612. For the purposes of this article, "security" means any stock, subordinated debenture, warrant, or right or option to purchase any stock issued by an association.


5613. (a) No association shall sell, except upon a sale for a delinquent assessment made in accordance with the provisions of the General Corporation Law, or offer for sale, or take subscriptions for, or issue any of its securities (except stock dividends), until the association has applied for and obtained from the commissioner a permit authorizing it to offer, sell or issue that security. (b) Notwithstanding subdivision (a), an association may enter into agreements for the sale of securities with accredited investors (as defined in Section 230. 215 of the Securities Exchange Commission regulations) or persons approved by the commissioner prior to obtaining a permit pursuant to subdivision (a). (c) The commissioner may, by regulation, instruction, or order exclude certain transactions from the operation of this section.


5614. (a) Except as provided in subdivision (b), no issued and outstanding stock of an association shall be sold or offered for sale to the public, nor shall subscriptions be solicited or taken for those sales, until the association or the selling stockholders have applied for and obtained from the commissioner a permit authorizing the sale of the capital stock. (b) Subdivision (a) shall not apply to any of the following: (1) An offering involving less than 10 percent of the issued and outstanding capital stock of an association and less than five hundred thousand dollars ($500,000). (2) An offering made under a registration statement filed under the Securities Act of 1933. (3) Any offering exempted by regulation, instruction, or order issued in writing by the commissioner.

5615. An application for a permit to sell securities shall be in writing, verified as provided in the Code of Civil Procedure for the verification of pleadings, and shall be filed in the office of the commissioner by the association or the selling stockholders. The application shall include the following: (a) Regarding the association. (1) The names and addresses of its officers. (2) The location of its office. (3) A balance sheet or statement of its financial condition as of a date within 90 days of the filing date. (4) A copy of all minutes of any proceedings of its directors, shareholders, or stockholders relating to or affecting the issue of such securities. (b) Regarding the offering. (1) A brief description of the method by which the securities are to be offered for sale, including the offering price and the underwriting commissions and expense, if any. (2) A copy of a prospectus or advertisement or other description of the securities prepared for distribution or publication in accordance with requirements prescribed by the commissioner. (3) A copy of any contract concerning the sale of the securities. (4) With respect to any permit issued pursuant to Section 5614, the names and addresses of the selling stockholders and of the officers of any selling corporation and the partners of any selling partnership. (c) Such additional information as the commissioner may require. (d) An application fee as prescribed by the commissioner pursuant to Section 9001.

5616. Upon the filing of the application for a permit to sell securities, the commissioner shall examine the application and other papers and documents filed therewith, and he or she may make a detailed examination, audit, and investigation of the association and its affairs. If the commissioner finds that the proposed plan for the issue and sale of such securities is fair, just, and equitable, the commissioner shall issue to the applicant a permit authorizing it to issue and dispose of its securities in such amounts and for such considerations and upon such terms and conditions as the commissioner may provide in the permit. If the commissioner does not so find, the commissioner shall deny the application and notify the applicant in writing of his or her decision.


5617. Every permit to sell securities shall recite in bold type that the issuance thereof is permissive only and does not constitute a recommendation or endorsement of the securities permitted to be issued.

5618. The commissioner may amend, alter, or revoke any permit issued by the commissioner, or temporarily suspend the rights of the association under such permit.


Article 4. Issuance Of Stock And Certificates

Ca Codes (fin:5620-5624) Financial Code Section 5620-5624



5620. (a) A stock association may issue shares of common stock and preferred stock, with or without par value, and common and preferred stock may be divided into classes and the classes into series. (b) Stock associations which have withdrawable shares outstanding as of the effective date of this section may continue to issue savings accounts in that form and the holders of these accounts shall have the same rights as they had before this section became law.


5621. (a) With the approval of the commissioner, a mutual association may amend its articles of incorporation to authorize the issuance of stock and may issue stock. Any amendment to the articles of incorporation and bylaws of an association which for the first time authorizes it to issue stock shall be approved by the vote or written assent of a majority of the total votes of members outstanding, except that the amendment shall require approval only of the commissioner and board of directors of an association if the commissioner finds that grounds exist for the appointment of a conservator for the association pursuant to subdivision (a) of Section 8225. (b) An amendment to the articles of incorporation of an association pursuant to this section may include provisions with respect to the surplus, reserves, and undivided profits of the association and in that case the surplus, reserves, and undivided profits shall be retained and disposed of in accordance with those provisions. (c) The corporate existence of a mutual association which amends its articles of incorporation pursuant to this section to authorize the issuance of stock and which issues stock shall continue to be, and the resulting stock association shall be deemed to be, a continuation of the mutual association. The Legislature finds and declares that Section 563b.41 (d)(3) of Title 12 of the Code of Federal Regulations sets forth the law of this state with regard to the continuity of corporate existence in mutual association to stock association conversions and that this section has reflected that law from the time of the original adoption of Section 563b.41 of Title 12 of the Code of Federal Regulations.


5622. Capital stock of a stock association shall be issued pursuant to the following requirements: (a) Except for stock issued pursuant to a stock dividend, stock split, reverse stock split, reclassification of outstanding stock into stock of another class, exchange of outstanding stock for stock of another class or other change affecting outstanding stock or an employee stock option plan or a plan of merger, consolidation, conversion from a mutual to a stock association, or other type of reorganization that has been approved by the commissioner, the consideration for the issuance of capital stock shall be money paid, debts or securities canceled or tangible or intangible property actually received either by the association or by a wholly owned subsidiary. The par value or stated value of stock shall be maintained as the permanent capital of the association and any additional amount paid in shall be credited to paid-in surplus. (b) The aggregate par value or stated value of all outstanding shares of capital stock shall be the permanent capital of the association and except as otherwise specifically provided by this division, capital stock shall not be retired until final liquidation of the association. (c) No association shall reduce the par or stated value of its outstanding capital stock without first obtaining the written approval of the commissioner, and approval shall be withheld if the reduction would cause the par or stated value of outstanding capital stock to be less than the minimum required by this division or would result in less than adequate statutory net worth as the commissioner may determine under Section 6475. (d) No association shall retire any part of its capital stock unless the retirement is approved by the commissioner. (e) No association shall make loans secured by its capital stock. (f) With the written approval of the commissioner, an association may purchase its capital stock or may contract with a stockholder for purchase of stock upon the stockholder's death. However, the purchase shall not reduce the net worth accounts of the association, or any of them, to an amount less than required by applicable law. An association which agrees with a stockholder to purchase that stockholder's capital stock upon death may purchase insurance upon the life of the stockholder to fund or partially fund the purchase.


5623. A mutual association may issue mutual capital certificates in accordance with regulations of the commissioner.


5624. An association may issue net worth certificates in accordance with applicable regulations of the Office of Thrift Supervision or the Federal Deposit Insurance Corporation.


Article 5. Association Name, Office

Ca Codes (fin:5650-5655) Financial Code Section 5650-5655



5650. Notwithstanding the provisions of subdivision (a) of Section 201 of the Corporations Code and Division 1 of the Financial Code, the name of every association shall include either the words "savings association," "savings and loan association," "savings bank" or such other designation as the commissioner may approve. These words shall be preceded by an appropriate descriptive word or words approved by the commissioner.


5651. (a) No certificate of approval of articles of incorporation of a proposed association having the same name as an association in existence in this state on the date an application is filed under Section 5401, or a name so nearly resembling it as to be likely to deceive, shall be issued by the commissioner, except to an association formed by the reincorporation, reorganization, or consolidation of the association with other associations, or upon the sale of the property or franchise of an association. The commissioner may presume that the use of any word or words already adopted, appropriated, or used in its corporate name by any association then existing in this state, except the words "the," "and," "mutual," "guarantee," "building," "loan," "savings," "association," or "bank," constitutes such similarity of names as to be likely to mislead the public. (b) An association shall not adopt or change to a name that will result in unfair competition or public confusion, or be deceptive, scandalous, or otherwise unsuitable.


5652. Except as otherwise authorized under existing law, no person, unless lawfully authorized to do business in this state under the provisions of this division and who is actually engaged in carrying on a savings association business, shall: (a) Do business under any name or title that contains the following terms: (1) "Savings association." (2) "Savings bank." (3) "Savings and loan association." (4) "Building and loan association." (5) "Building association." (6) Any combination employing either or both of the words "building," or "loan," with one or more of the words "saving," "savings," or words of similar import. (7) Any combination employing one or more of the words "saving," "savings," or words of similar import with one or more of the words "association," "bank," "institution," "society," "company," "fund," "corporation," or words of similar import. Notwithstanding the provisions of this subdivision, use of the term "savings bank" in a name or title is not prohibited to any person regulated by the provisions of Division 1 (commencing with Section 99), Division 7 (commencing with Section 18000), or under procedures and regulations promulgated by the Comptroller of the Currency, Federal Reserve Board, Office of Thrift Supervision, Federal Housing Finance Board, or Federal Deposit Insurance Corporation. Any reference to the term "savings bank" in this division is not intended to apply to any person other than persons authorized to do business in this state under this division. (b) Use any name or sign or circulate or use any letterhead, billhead, circular or paper whatever, or advertise or represent in any manner that indicates or reasonably implies that the business is the character or kind of business carried on or transacted by an association or is likely to lead any person to believe that the business is that of an association.


5653. Upon application by the commissioner or any association, a court of competent jurisdiction may issue an injunction to restrain any person from violating or continuing to violate any of the provisions of Section 5652. Any person who violates any provision of Section 5652 shall be punished by a fine of not more than five thousand dollars ($5,000), and each day of violation shall constitute a separate offense. The prohibitions of Section 5652 shall not apply to any corporation or association formed for the purpose of promoting the interests of thrift institutions, the membership of which is comprised of thrift institutions, their officers, or other representatives.


5654. (a) Without the prior approval of the commissioner, as provided in this division, no association shall do any of the following: (1) Establish or maintain any office, other than its home office, which shall be in the location named in the certificate of authority. (2) Change the location or designation of any office from its approved location or designation. (3) Change its corporate name by amendment of its articles of incorporation and its certificate of authority. A change of name is subject to the same criteria as set out in Sections 5650 and 5651. (4) Amend its articles of incorporation or bylaws. (5) Establish or maintain a subsidiary. (6) Acquire all or substantially all of the assets or savings account liabilities of a branch or branches of another financial institution. (b) Applications for approval under this section shall be filed in the office of the commissioner, shall include information as prescribed by regulation or written instruction of the commissioner, and shall be accompanied by any filing fee prescribed by the commissioner pursuant to Section 9001. (c) A public hearing may be held on applications filed under this section in accordance with procedures prescribed by law or by regulations adopted by the commissioner. (d) No certificate of amendment or other certificate to amend the articles of incorporation of an association shall be filed in the office of the Secretary of State unless there is attached thereto the certificate of the commissioner approving the certificate. (e) Applicants filing under this division shall publish notice as prescribed by the commissioner.


5655. No association shall advertise or hold itself out to the public as a bank. This subdivision shall not be construed to prohibit an association which is a savings bank from advertising or holding itself out to the public as a "savings bank."


Article 6. Conversions

Ca Codes (fin:5700-5718) Financial Code Section 5700-5718



5700. A state association may convert itself into a federal association by following the procedure outlined in Sections 5701 through 5708.

5701. At any regular or special meeting called to consider the conversion of an association into a federal association, in the case of a stock association, the stockholders entitled to vote and any members entitled to vote, by an affirmative majority of the votes cast in person or by proxy; and in the case of a mutual association the members, by action on a proposal approved by the members, may resolve to convert the association into a federal association.


5702. Any executor, administrator, guardian, conservator of a natural person or receiver, and any fiduciary or trustee, and any public corporation, political subdivision, public instrumentality, charitable institution, educational and eleemosynary institution, trust company or financial institution, and any insurance company or cemetery association may, without obtaining court approval: (a) Vote in person or by proxy in favor of or against converting a state association into a federal association, or may approve or disapprove the determination to so convert. (b) Exchange any stock, savings accounts, or other rights or claims, for securities issued by the federal association, and hold the securities as legal investments.


5703. Promptly after the meeting approving a conversion into a federal association, the association shall file in the office of the commissioner a certificate verified by the president or vice president and the secretary or assistant secretary of the association. The certificate shall contain a copy of the minutes of the meeting and a statement of the number of stockholders and members entitled to vote and the number voting to approve the determination to convert the association into a federal association. A like certificate shall be filed in the office of the Secretary of State.


5704. A certified copy of the certificate required by Section 5703 filed in the office of the Secretary of State is presumptive evidence of the holding of the meeting, the action taken at the meeting, and of the approval of stockholders and members.


5705. After the meeting of the stockholders and members, the association shall take any action necessary to make it a federal association, and promptly after receipt of the federal charter the association shall file in the office of the commissioner and in the office of the Secretary of State, a copy of the charter issued to it by the Office of Thrift Supervision or a certificate showing the organization of the association as a federal association certified by or on behalf of the Office of Thrift Supervision. Upon the filing of this instrument in the office of the Secretary of State the association ceases to be a state association and is a federal association.


5706. At the time the conversion into a federal association becomes effective the association ceases to be supervised by this state and all of the property of the association, including all of its right, title, and interest in and to all property of every kind and character immediately, by operation of law and without any conveyance, or transfer and without any further act or deed, is vested in the association under its new name and style as a federal association and under its new jurisdiction.


5707. The converted federal association shall have, hold, and enjoy the property mentioned in Section 5706 in its own right as fully and to the same extent as the property was possessed, held, and enjoyed by it as a state association and the federal association shall continue to be responsible for all of the obligations of the converted state association to the same extent as though the conversion had not taken place. The federal association is merely a continuation of the state association under a new name and new jurisdiction and the revision of its corporate structure as is considered necessary for its proper operation under the new jurisdiction.


5708. Where a copy of a charter of a federal association, issued by the Federal Home Loan Bank Board pursuant to the laws of the United States was filed with the Secretary of State prior to September 13, 1941, with the intent of converting a building and loan association organized and existing under the laws of this state into a federal association, those conversions are validated, legalized, ratified and confirmed.


5709. Any federal association may convert itself into an association by following the procedure set forth in Sections 5710 through 5718.

5710. At any regular or special meeting called to consider the action, the stockholders and members entitled to vote by an affirmative majority of the votes cast in person or by proxy, may resolve to convert a federal association into an association.


5711. Copies of the minutes of the proceedings of the meeting of the stockholders or members in which they vote to convert into an association, verified by the president or vice president and the secretary or an assistant secretary, shall be filed promptly after the meeting in the office of the commissioner, and, in duplicate, with the federal home loan bank of which the association is a member.


5712. The verified copies of the minutes of the meeting, when filed as required by Section 5711, are presumptive evidence of the holding and action of the meeting.


5713. After a meeting as provided for in Section 5710, the federal association shall take or cause to be taken such action as shall make it an association in the manner prescribed and authorized by this division. The directors elected at the meeting shall file the documents with applicable fees and take such proceedings as are required by this division in the case of the original incorporation of an association. The decision for approval or denial shall be issued in writing. No association incorporated by conversion from a federal association is required to comply with any of the provisions of law or any regulations promulgated by the commissioner relating to the minimum amounts of capital required to be subscribed in connection with the original incorporation of an association under this division.


5714. The directors of an association converted from a federal association may insert in the articles of incorporation the following statement: "This association is incorporated by conversion from a federal savings and loan association. "


5715. Promptly after the filing of the articles of incorporation with the Secretary of State, there shall be filed with the federal home loan bank of which the association is a member, two copies of the articles of incorporation, certified by the Secretary of State.


5716. Upon the filing of the articles of incorporation with the Secretary of State, the federal association ceases to be a federal association and is an association under the laws of this state. All of the property of the federal association, including all of its right, title, and interest in and to all property of every kind and character immediately, by operation of law and without any conveyance or transfer, and without any further act or deed, is vested in the association under its new name and style as an association and under its new jurisdiction.


5717. The converted association shall have, hold, and enjoy the property mentioned in Section 5716 in its own right as fully and to the same extent as the property was possessed, held and enjoyed by it as a federal association and the converted association continues responsible for all of the obligations of the converted federal association to the same extent as though conversion had not taken place. The association is merely a continuation of the federal association under a new name and new jurisdiction and such revision of its corporate structure as is considered necessary for its proper operation under the new jurisdiction.

5718. In the event stock is to be issued by the converted association, the commissioner may issue an organizing permit to the federal association or to the board of directors elected to serve after conversion, authorizing the association or the board of directors to take subscriptions to stock, to collect subscription payments and to impound the payments pending the issuance of stock, and authorizing the converted association to issue stock after the filing of its articles of incorporation with the Secretary of State. The commissioner may require that all stock to be initially issued be subscribed and fully paid. The commissioner may also issue a certificate of authority to the converted association to be effective upon filing of its articles of incorporation, and may also issue any other orders and permits necessary to authorize the association to continue business without interruption upon the filing of its articles of incorporation.


Article 7. Power To Reorganize, Merge, Consolidate, Or Transfer Assets

Ca Codes (fin:5750-5762) Financial Code Section 5750-5762



5750. (a) Pursuant to a plan or agreement (referred to as "agreement" in this article) adopted by the board of directors and approved by the commissioner as fair, just and equitable, and as adequately protecting the interests of the association, its members, or stockholders, its savings account holders and the public, an association shall have the power to reorganize or to merge or consolidate with or transfer all or substantially all its assets to another association or federal association, or any other corporation, provided that the principal terms of the plan of the reorganization, merger, consolidation, or transfer shall, in the case of a stock association, be approved at an annual meeting or at any special meeting, or by the written consent of the stockholders voting on the action, by not less than a majority of the total number of votes eligible to be cast. In the case of a mutual association, if required by the commissioner, the principal terms of such a plan shall be approved by members representing not less than a majority of the voting power. (b) In all cases the survivor association shall succeed to all the rights, obligations, and relations of the constituent associations. (c) As a step in a plan of the reorganization, merger, consolidation, or transfer under this section, an interim corporation may be formed. As used in this section, "interim corporation" means a corporation formed to facilitate the acquisition of 100 percent of the voting stock of an existing association or other insured stock institution by or for a newly formed company or an existing savings and loan holding company or to facilitate any other transaction the commissioner may approve.


5751. At the sole discretion of the commissioner a public hearing may be held on applications filed under this article, in accordance with procedures established by the commissioner by regulation.


5752. Applications filed under this article shall be accompanied by any applicable filing fee prescribed by the commissioner pursuant to Section 9001.

5753. The provisions of Chapter 13 (commencing with Section 1300) of Division 1 of Title 1 of the Corporations Code shall apply only to stockholders and shares of stock owned by them in the association being merged, or where assets are being transferred into a surviving association, or where a merger or transfer is approved under the provisions of this article by written consent of the stockholders.


5754. In a merger the agreement shall state any matters with respect to which the articles of the surviving association are deemed amended and the articles shall be amended accordingly, without any further proceedings, upon the effective date of the merger, but with respect to any amendments, the agreement shall meet the requirements of Section 907 of the Corporations Code in identifying any provisions to be amended, stricken, or added and shall set forth in full the wording of the provision as amended or added or the wording of the amended articles if they be amended in full.


5755. When a merger or consolidation agreement has been approved by the directors and the stockholders or members of an association, the association shall mail notice of the approval to each of its stockholders or members at least 10 days before filing the certificate as provided in this section unless the consents of all stockholders or members entitled to vote have been solicited and received in writing. After approval by the directors and stockholders or members has been given, the association shall prepare and submit to the commissioner for written approval a certificate in the form of an officers' certificate (Section 173 of the Corporations Code) which shall set forth the following: (a) An identification of the agreement of merger or consolidation by reference to names of parties and date. (b) That the agreement was approved by the board of directors of the association. (c) The total number of outstanding shares of each class of stock entitled to vote, or in the case of a mutual association the total value of accounts outstanding. (d) That the principal terms of the agreement were approved by the vote or written consent of a number of shares of each class of stock which equaled or exceeded the vote required, or in the case of a mutual association that approval by the members was not required by the commissioner or that the principal terms of the agreement were approved by the vote or written consent of members holding a total value of accounts which equaled or exceeded the vote required. (e) The percentage vote required of each class. (f) That the agreement for merger or consolidation submitted to the commissioner for written approval and for filing with the Secretary of State concurrently with this certificate is the agreement hereinabove referred. (g) Any additional matters that the commissioner may require.


5756. Any amendment to a merger or consolidation agreement may be adopted, and the agreement so amended may be approved at the meeting of the stockholders or members of any of the associations or by written consent of the stockholders or members, in the same manner and by the same vote as the original agreement. If the agreement so amended is approved at a meeting or by written consent by the stockholders or members and by the board of directors of each of the associations by the vote or written consent required for approval of the original agreement, the agreement so amended shall be signed and acknowledged and shall have certified therewith the approval of the directors and of the stockholders or members in the same manner as provided for in the original agreement, and shall then constitute the merging or consolidating agreement.


5757. Notwithstanding any other provision of law, the approval of transactions under this article shall not be required by any borrowers or by holders of savings accounts in associations that issue stock.

5758. The executed agreement, or an executed counterpart of it and the respective certificate of each constituent association or any other corporation and of the surviving association shall be filed with the Secretary of State. Neither the agreement nor any certificate shall be filed, however, unless the commissioner's written approval is attached. The effective date of the merger or consolidation under this article shall be the date of the filing with the Secretary of State of the copy of the approved agreement of merger or consolidation. A copy of the approved agreement certified by the Secretary of State shall be filed with the commissioner. If the resulting association is a federal association, the effective date of merger shall be the date the merger is effective under regulations of the Office of Thrift Supervision.


5759. An association may acquire all or at least 90 percent of the issued and outstanding stock of another association, or any other corporation, with the prior written approval of the commissioner upon conditions that the commissioner may impose as a step in a plan of merger to be approved by the commissioner. The acquisition of stock shall be upon terms as may be approved by the board of directors of the acquiring association and ratified by the vote or written consent of holders of a majority of the outstanding stock of each class of stockholders of the acquiring association.


5760. (a) Any association, owning all the outstanding stock of any corporation, may merge its wholly owned subsidiary corporation if the laws under which the subsidiary corporation exists permit a merger as this section provides. The association shall submit to the commissioner for approval a certificate of ownership in its name signed by its president or a vice president, and its secretary or an assistant secretary, which shall be verified by their affidavit, stating, in effect, that the matters set forth in the certificate are true of their own knowledge. The certificate shall set forth: (1) That it owns all the outstanding stock of the merged corporation. (2) A copy of the resolution adopted by its board of directors to merge the corporation, and to assume all of its obligations. (3) The time and place of the meeting of the board of directors at which the resolution was adopted, and the vote by which it was adopted. (b) If an association owns less than all the outstanding stock but at least 90 percent of the outstanding shares of stock of each class of a corporation or corporations, domestic or foreign, the merger of the subsidiary corporation or corporations into the parent association may be effected by resolutions adopted by the boards of the parent and each subsidiary corporation, and the filing of a certificate of ownership as provided in subdivision (d). The resolution of the board of the parent association shall provide for the merger, shall provide that the parent association assumes all the liabilities of each subsidiary corporation and shall set forth the securities, cash property or rights to be issued, paid, delivered or granted by the parent association upon surrender of each share of stock of each subsidiary corporation not owned by the parent association. The resolution of the board of each subsidiary corporation shall approve the fairness of the consideration to be received for each share of stock of the subsidiary corporation not owned by the parent association. (c) Notwithstanding any other provision of law, in any merger pursuant to this section, the parent association may change its name regardless of whether the name so adopted is the same or similar to that of one of the disappearing associations. In this case the resolution shall provide for the amendment of articles to change the name. (d) After adoption of the resolution or resolutions of merger, as provided under subdivision (b), the association shall submit to the commissioner for approval a certificate of ownership in its name signed by its president or a vice president, and its secretary or an assistant secretary, which shall be verified by their affidavit, stating, in effect, that the matters set forth in the certificate are true of their own knowledge. The certificate shall set forth: (1) That the association owns at least 90 percent of the outstanding stock of the merged corporations. (2) A copy of the resolution adopted by the association's board of directors to merge the corporation, to assume all of its obligations, and including the resolution for a change of name if applicable. (3) A copy of the resolution or resolutions adopted by the board of each subsidiary corporation, if required. (4) The time and place of the meeting of the boards of directors of the parent and the subsidiary at which the resolutions were adopted, and the vote by which they were adopted. (e) In the event all of the outstanding shares of stock of a subsidiary domestic corporation party to a merger effected under this section are not owned by the parent association immediately prior to the merger, the parent association shall, at least 20 days before the effective date of the merger, give notice to each stockholder of the subsidiary corporation that the merger will become effective on or after a specific date, which notice shall contain (1) a copy of the resolutions of the boards of directors of the parent and the subsidiary required by subdivision (b) above and (2) the information which must accompany the notice required by subdivision (a) of Section 1301 of the Corporations Code. The notice shall be sent by mail addressed to the stockholder at the address of the stockholder as it appears on the records of the corporation. The stockholder shall have the right to demand payment of cash for the shares of stock of the stockholder pursuant to the provisions of Chapter 13 (commencing with Section 1300) of Division 1 of Title 1 of the Corporations Code. (f) If a merger authorized by this section is approved, the commissioner shall attach to the certificate written approval, and the certificate shall be filed with the Secretary of State. A copy of the approved certificate certified by the Secretary of State shall be filed with the commissioner. Thereupon, all of the estate, property, rights, privileges, and franchises of the merged corporation shall vest in and be held and enjoyed by the parent association as fully as the same were before held and enjoyed by the merged corporation, but subject to all the liabilities and obligations of the merged corporation and the rights of all creditors. The parent association shall not, however, thereby acquire the right to engage in any business or to exercise any right, privilege, or franchise of a kind which it could not lawfully engage in or exercise under the provisions of this division. The parent association shall be deemed to have assumed all the liabilities and obligations of the merged corporation, and shall be liable in the same manner as if it had itself incurred the liabilities and obligations. (g) If the merged subsidiary is a domestic corporation, a copy of the certificate shall be filed in the office of the Secretary of State on behalf of the subsidiary corporation. If the merged subsidiary is a foreign corporation qualified for the transaction of intrastate business in this state there shall be filed in the office of the Secretary of State on behalf of the foreign subsidiary a certificate of surrender and right to transact intrastate business as provided in Section 2112 of the Corporations Code.


5761. The directors of an association may, in their discretion, abandon a transaction under this article, subject to the rights of third parties under any contracts relating thereto, without further action or approval by the stockholders or members of the association, at any time before the transaction has been completed.


5762. The commissioner may adopt rules and regulations relating to any transaction regulated by this article.


Article 8. Holding Companies And Stock Acquisitions

Ca Codes (fin:5800-5811) Financial Code Section 5800-5811



5800. For the purposes of this article the following words and phrases shall have the following meanings: (a) "Savings and loan holding company" means any person that either, directly or indirectly, or acting in concert with one or more other persons: (1) Owns, controls, or holds with power to vote, or holds proxies to vote: (A) Where the association or savings and loan holding company has fewer than 500 stockholders or members, 25 percent or more of the outstanding voting capital stock of any capital stock association or savings and loan holding company or 25 percent or more of the total number of votes or proxies of votes eligible to be cast by the members of any mutual association located in this state. (B) Where the association or savings and loan holding company has at least 500 stockholders or members, 10 percent or more of the outstanding voting capital stock of any capital stock association or savings and loan holding company or 10 percent or more of the total number of votes or proxies of votes eligible to be cast by the members of any mutual association located in this state. (2) Controls in any manner, whether by the holding of proxies or otherwise, the election of a majority of the directors of any association or savings and loan holding company located in this state. (b) Notwithstanding subdivision (a), an individual or group of individuals shall not be deemed to be a "savings and loan holding company" solely because an individual or group of individuals solicits, holds, or votes proxies in an association if, at the time of receiving the proxies, the individual or group of individuals serve as directors of the association and solicited or received the proxies pursuant to authorization by the board of directors of the association. (c) "Subsidiary" of a person means any person, except an individual that is directly or indirectly owned, controlled, or otherwise held by that person to the extent or in the manner described in the preceding subdivision. (d) "Completed application" means an application for acquisition of control of an association, as filed with the commissioner, together with any amendments by the applicant, additional information requested in writing by the commissioner, and accompanied by the applicable filing fee pursuant to Section 9001. If the additional required information is not received within 30 days of the date of the request, the commissioner may consider the application complete upon written notice to the applicant.


5801. (a) Except as provided in subdivision (b), no person may become a savings and loan holding company, or thereafter register under Section 5804, unless the commissioner approves a completed application. The application shall be in a form prescribed by the commissioner, contain the following information and any additional information that the commissioner may determine by regulation or by written instructions to be necessary or appropriate to preserve the public interest, the integrity of the state's savings association system, and to protect the interests of savings account holders, borrowers, and stockholders resident in this state: (1) The identity, experience, and financial and managerial resources of each acquiring person by whom or on whose behalf the application is made. (2) The terms, conditions, and method of any proposed acquisition, including copies of all tender offers used or to be used in connection with any proposed acquisition of capital stock. (3) The source, kind, and amount of the consideration used or to be used in making the acquisition, and, if any part of the consideration has been or is to be borrowed or otherwise obtained for the purpose of making the acquisition, a description of the transaction and the names of all participating persons. (4) Any plans or proposals that any acquiring person may have to liquidate or convert the association or savings and loan holding company, to sell its assets or merge it with any company, to change the number of its employees in this state or the terms and conditions of their employment, or to make any other substantial change in its business, corporate structure, management or employees upon becoming a holding company. (5) The names of those officers and directors that the acquiring person proposes to install in any change of managements, and for each of those officers and directors a financial statement, a description of experience in savings association related matters, and a statement as to whether the officer or director ever has been found guilty of misrepresentation, fraud, or financial misdealings. (6) If any tender offer, request or invitation for tenders or other agreement to acquire control is proposed to be made by means of a registration statement under the federal Securities Act of 1933, as amended, or in circumstances requiring the disclosure of similar information under the federal Securities Exchange Act of 1934, as amended, or in an application filed with the Office of Thrift Supervision or Federal Deposit Insurance Corporation requiring similar disclosure, that registration statement or application may be filed with the commissioner in lieu of the requirements of this section. (b) The commissioner may exempt any transaction from the operation of this section if the commissioner determines that regulation of the transaction is not necessary or appropriate.


5802. The commissioner shall within 60 days after the date of filing of a completed application, unless good cause is shown why a decision to approve or deny could not be made within 60 days, approve the application with any conditions reasonably necessary or advisable in the public interest, or deny the application. The commissioner shall determine whether the following criteria are met, and if the criteria are not met, the application shall be denied: (a) The acquisition, under any federal or state law, will not substantially lessen competition and will not in any manner be in restraint of trade or result in a monopoly, or be in furtherance of any combination or conspiracy to monopolize or attempt to monopolize the savings association business in any part of the state unless the commissioner finds that the anticompetitive effects of the proposed acquisition are clearly outweighed in the public interest in meeting the convenience and needs of the community that the association serves. (b) The financial condition of any acquiring person will not jeopardize the financial stability of the association or the savings and loan holding company sought to be acquired and will not prejudice the interest of the savings account holders, borrowers, or stockholders of the association and is in the public interest. (c) The plan or proposal under which the acquiring person intends to liquidate the savings association or the savings and loan holding company, to sell its assets or to merge it with any person or association, or to make any other major change in its business or corporate structure or management, is fair and reasonable to the association, its savings account holders, borrowers, and resident stockholders, and will not tend to impair the integrity of the state' s savings association system, and is in the public interest. (d) The competence, experience, integrity, and resources of any acquiring person indicate that approval would be in the interest of the association, its savings account holders, borrowers, and resident stockholders and of the community that the association serves. (e) The requirements of this article have been met. (f) The acquisition would not violate state or federal law and the commissioner determines that approval is in the public interest. (g) The applicant has provided all information requested by the commissioner.

5803. (a) After the decision under this article by the commissioner either approving or denying the application, upon the filing with the commissioner within 30 days after the date of the decision of a written request for a hearing by any person aggrieved by the decision, the commissioner shall hold a public hearing on the merits of the request, after which the decision shall be affirmed, modified, or reversed. (b) The commissioner shall have authority to amend, suspend, or revoke an approval of the application for acquisition of control upon failure of the applicant to meet the conditions of the approval, or upon a finding that the approval was based on false statements, misrepresentations, or omission of material facts.


5804. (a) Within 60 days following approval, or a later date if extended by the commissioner, each savings and loan holding company shall register with the commissioner in a prescribed form which shall require information with respect to the financial condition, ownership, operations, management, and intercompany relationships of the savings and loan holding company and its subsidiaries, and related matters as the commissioner may deem necessary or appropriate. (b) The registration shall automatically expire if the approval of the application for acquisition of control is revoked or suspended or the person ceases to be a savings and loan holding company. (c) The commissioner shall be notified in writing by a registered savings and loan holding company upon any change in its beneficial or legal ownership of stock of an association.


5806. Each savings and loan holding company, which is not an individual, shall pay an initial and an annual registration fee of five hundred dollars ($500) if the registrant's association subsidiaries have total assets of up to one hundred million dollars ($100,000,000) or one thousand dollars ($1,000) if the subsidiaries have total assets of one hundred million dollars ($100,000,000) or more. These fees shall be paid within 30 days following notice from the commissioner that payment is due.


5807. When a savings and loan holding company has satisfied the requirements of this article, the commissioner shall issue the holding company a certificate of registration, and shall send a copy to each association subsidiary in this state with respect to which the holding company has registered.


5808. No association that is a subsidiary in this state of any savings and loan holding company that does not have in effect a certificate of registration for that association as required by this article or whose holding company has failed to comply with (1) an order of a court made in respect to the provisions of this division or (2) an order of the commissioner under Section 8200, shall knowingly, without consent of the commissioner, do any of the following: (a) Transfer or register stock or other securities on its books for or issue certificates to its holding company. (b) Pay dividends on stock of which its holding company is the record or beneficial owner. (c) Permit the voting of stock owned or controlled by its holding company. (d) Make any other payments of any nature to its holding company. (e) Enter into any agreement, contract, or transaction with its holding company.


5809. (a) The commissioner from time to time may require reports from any savings and loan holding company and its subsidiaries in a format deemed necessary or appropriate and relevant to the jurisdiction and responsibilities of the commissioner under this division. Any savings and loan holding company and its subsidiaries shall file reports and be subject to examination as required by the commissioner in the manner provided for associations in Article 3 (commencing with Section 8150) of Chapter 7. (b) The cost of any examination may be assessed against each savings and loan holding company examined and the assessment shall be paid to the department.


5810. The commissioner shall have the enforcement powers with respect to savings and loan holding companies and their subsidiaries that are provided with respect to associations in Section 8200.


5811. This article shall not apply to an acquisition of stock made pursuant to a plan or agreement of reorganization, merger, consolidation, or transfer of assets under Section 5750.


Article 9. Dissolution

Ca Codes (fin:5850) Financial Code Section 5850



5850. (a) An association may dissolve pursuant to the General Corporation Law (Division 1 (commencing with Section 100) of Title 1 of the Corporations Code). (b) In the case of a mutual association, the required vote of members to elect voluntarily to wind up and dissolve shall be by members representing 50 percent or more of the voting power required to elect directors of the association. (c) No certificate of election to dissolve or certificate of dissolution of an association shall be filed with the Secretary of State unless there is attached thereto the certificate of the commissioner approving the same.


Article 10. Mutual Holding Companies

Ca Codes (fin:5860-5868) Financial Code Section 5860-5868



5860. Notwithstanding any other provision of law, but subject to prior approval of the commissioner, any mutual association may reorganize so as to become a mutual holding company by causing a reorganized savings and loan association to be incorporated and organized as a stock association under this chapter, transferring to the reorganized stock association a substantial part of the assets of that mutual association and causing the reorganized stock association to assume all or a substantial part of the liabilities of the mutual association, including all of its savings account liabilities.


5861. Upon transfer of assets and assumption of liabilities pursuant to Section 5860, persons who prior thereto held savings accounts with, or other rights as creditors of, the mutual association with respect to accounts and liabilities transferred shall have such accounts and rights solely with respect to the reorganized stock association, and the corresponding liability or obligation of the mutual association to those persons shall be assumed by the reorganized stock association without a change in terms. Persons who had ownership, liquidation, or voting rights with respect to the mutual association shall continue to have those rights solely with respect to the mutual association in its reorganized form as a mutual holding company.


5862. A reorganization of a mutual association pursuant to this article shall be approved by the board of directors and by the members of the mutual association.


5863. An application to the commissioner for approval of a reorganization under this article shall contain such relevant information as the commissioner may require. The commissioner may disapprove any proposed mutual holding company formation and refuse to issue a certificate of authority for the reorganized stock association only if within 60 days after the date of filing of a completed application he or she finds the following: (a) The disapproval is necessary to prevent unsafe and unsound practices. (b) The financial or managerial resources of the mutual association warrant disapproval. (c) The mutual association fails to furnish the information required by the commissioner pursuant to this section. (d) The mutual association fails to comply with the requirements of Section 5862.


5864. In connection with reorganization pursuant to the provisions of this article, a mutual association may, subject to the approval of the commissioner, retain capital assets at the holding company level to the extent that the capital exceeds adequate reserves as prescribed by state or federal law.


5865. A mutual holding company shall be deemed to be a savings association continuing its organization under this division and may engage only in activities authorized for an association, but may not issue or accept savings accounts or other deposits and the provisions of subdivision (a) of Section 5606 requiring insurance of savings accounts by the Federal Deposit Insurance Corporation shall not be applicable. The articles of incorporation of the mutual holding company shall be amended to delete any inappropriate statements otherwise required by Section 5501.5 and shall include the following statement: "This corporation is a mutual holding company organized under the California Savings Association Law (Article 10 (commencing with Section 5860) of Chapter 2 of Division 2 of the Financial Code)."


5866. Sections 5801, 5802, and 5803 shall not apply to a reorganization pursuant to this article.


5867. Notwithstanding any other provision of law, a reorganized stock association may exercise any and all powers, rights, and privileges of and be subject to all limitations not inconsistent with this article which are applicable to stock associations as provided in this division.


5868. A reorganized stock association shall have the power to issue additional amounts of capital stock to the mutual holding company of which it is a subsidiary and, in addition, to other persons an amount of capital stock and securities convertible into capital stock which in the aggregate does not exceed 49 percent of the issued and outstanding capital stock of that organized association. For the purposes of the 49 percent limitation, any issued and outstanding securities that are convertible into capital stock shall be considered issued and outstanding capital stock.


Chapter 3. Corporate Administration

Article 1. Meetings Of Members Of Mutual Associations

Ca Codes (fin:6000-6006) Financial Code Section 6000-6006



6000. An annual meeting of the members of each mutual association shall be held at a time and place fixed in the bylaws of the association.

6001. Special meetings of the members of a mutual association may be called at any time by the president or the board of directors, and shall be called by the president, a vice president, or the secretary upon the written request of members holding of record in the aggregate at least 10 percent of the outstanding savings deposits of the association. Such written request shall state the purposes of the meeting and shall be delivered at the principal office of the association addressed to the president.


6002. Notice of each annual and special meeting shall be either published once a week for the two successive calendar weeks (in each instance on any day of the week) immediately prior to the week in which such meeting shall convene, in a newspaper printed in the English language and of general circulation in the city or county in which the principal office of the association is located, or mailed postage prepaid at least 15 days and not more than 45 days prior to the date on which such meeting shall convene to each of its members of record at the last address of the member appearing on the books of the association. Such notice shall state the name of the association, the place of the meeting, the time when it shall convene and, in the case of a special meeting, the purpose or purposes for which the meeting is called. A similar notice shall be posted in a conspicuous place in each of the offices of the association during the 14 days immediately preceding the date on which such meeting shall convene. Notice need not be given to any member who in person or by proxy, in writing, waives notice of such meeting.


6003. In the consideration of all questions requiring action by the members of a mutual association, each member shall be entitled to cast one vote for each one hundred dollars ($100), or fraction thereof, of the withdrawal value of his or her savings account or accounts. No member, however, shall be entitled to cast more than 1,000 votes nor shall votes be cumulated for the election of directors.


6004. (a) In order that the association may determine the members entitled to notice of any meeting or to vote or entitled to receive any distribution or entitled to exercise any rights in respect of any other lawful action, the board of directors of the association may fix, in advance, a record date, which shall not be more than 60 or less than 10 days prior to the date of such meeting or more than 60 days prior to any other action, provided, however, that if the provisions hereof conflict with the provisions of any federal statute or regulation relating to fixing of record dates for associations, the provisions of the federal statute or regulation shall prevail. (b) If no record date is fixed pursuant to subdivision (a) above: (1) The record date for determining members entitled to notice of or to vote at a meeting of members shall be at the close of business on the business day next preceding the day on which notice is given or first published, or if notice is waived, at the close of business on the business day next preceding the date on which the meeting is held. (2) The record date for determining members entitled to give consent to action in writing without a meeting, when no prior action by the board of directors has been taken, shall be the date on which the first written consent is given. (3) The record for determining members for any other purpose shall be at the close of business on the day on which the board adopts the resolution relating thereto, or the 60th day prior to the date of such other action, whichever is later. (c) A determination of members of record entitled to notice of or to vote at a meeting of members shall apply to any adjournment of the meeting unless the board fixes a new record date for the adjourned meeting.


6005. At any meeting of the members, voting may be in person or by proxy, provided that no proxy is eligible to be voted at any meeting unless it has been filed with the secretary of the association, for verification, prior to the meeting. Each proxy shall be in writing and when filed with the secretary, shall, unless otherwise specified in the proxy, continue in force from year to year until revoked by a writing delivered to the secretary or by a subsequent proxy executed by the member executing the prior proxy or as to any meeting by attendance at such meeting and voting in person by the person executing the proxy. A proxy is not revoked by the death or incapacity of the maker unless, before the vote is counted, written notice of such death or incapacity is received by the association. Section 604 of the Corporations Code does not apply to any mutual association.

6006. Any number of members present at a regular or special meeting of the members shall constitute a quorum. A majority of all votes cast at any meeting of members shall determine any question unless this division specifically provides otherwise.


Article 2. Access To Books And Records; Communication With Stockholders Or Members; Derivative Actions

Ca Codes (fin:6050-6053) Financial Code Section 6050-6053



6050. (a) The register of stockholders or members, the books of account, and the minutes of an association shall be subject to inspection upon the written demand of any stockholder or member or group of stockholders or members at any reasonable time during usual business hours, for a proper purpose reasonably related to the stockholder's or member's interest. The right of inspection is limited to a stockholder, or member, or group of stockholders or members, who hold of record voting shares having a cost of not less than one hundred thousand dollars ($100,000), or who hold of record voting shares constituting not less than 1 percent of the outstanding voting shares, provided in either case, the stockholder, member, or group of stockholders or members, have been holders of record of the voting shares for at least six months before making the written demand. The right of inspection created by this subdivision shall extend to the records of each subsidiary of an association subject to this subdivision and includes the right to make extracts. (b) Notwithstanding the right of inspection granted in subdivision (a), no stockholder, member, or group of stockholders or members, shall have the right to inspect or make extracts of any portion of any register, book, or minutes of an association containing any of the following: (1) A list of depositors in or borrowers from the association. (2) The addresses of depositors or borrowers from the association. (3) Individual deposit or loan balances or records. "Records" for the purposes of this paragraph means confidential facts pertaining to personal financial information about an individual, including, but not limited to, an individual's credit file and any loan application. (4) Any data from which any of the information described in paragraphs (1) to (3), inclusive, could be reasonably constructed. (c) Each association director shall have the right at any reasonable time to inspect all books, records, documents of every kind, and the physical properties of that association. The inspection may be made in person or by agent or attorney, and the right of inspection includes the right to make extracts. In the case of foreign associations the right of inspection extends only to books, records, documents, and property located in this state. (d) Savings accountholders who are not stockholders, members, or directors of an association shall have no right of inspection under this section.


6051. (a) If any member, members, stockholder or stockholders desire to communicate with other members or stockholders of an association about any question pending or to be presented for consideration at a meeting of the members or stockholders, the association shall furnish upon request a statement of the approximate number of members or stockholders of the association at the time of the request, and an estimate of the cost of forwarding the communication. The requesting member, members, stockholder or stockholders shall then submit the communication, together with a sworn statement that the proposed communication is not for any reason other than the business welfare of the association, to the commissioner. If after examination of the facts the commissioner finds it to be appropriate, truthful, and in the best interests of the association and the association's members or stockholders, the commissioner shall execute a certificate setting out the facts and findings and shall forward the certificate together with the communication to the association and direct that the communication be prepared and mailed by the association to the members or stockholders upon the payment to it by those making the request of the expenses of preparation and mailing. (b) If the commissioner finds the proposed communication to be inappropriate, untruthful, or contrary to the best interests of the association and its members or stockholders, the commissioner may deny or make other disposition of the request to communicate deemed proper and shall execute a certificate setting out facts and findings and deliver it to the party or parties making the request together with an order denying or making other disposition of the request.


6052. (a) No action may be instituted or maintained in the right of any association by any savings account holder who is not a stockholder or member of the association. (b) An action may be instituted or maintained in the right of an association by a stockholder or member of that association only if all the following conditions exist: (1) The plaintiff alleges in the complaint that the plaintiff was a registered stockholder or member at the time of the transaction or any part of it, or that the stock or membership devolved upon the plaintiff by operation of law from a holder who was a holder at the time of the transaction or any part of it. (2) The plaintiff alleges in the complaint with particularity the efforts of the plaintiff to secure from the board of directors the desired action and alleges further that the plaintiff has either informed the association or its board of directors in writing of the ultimate facts of each cause of action against each defendant director or delivered to the association or its board of directors a true copy of the complaint which plaintiff proposes to file, and the reasons for the plaintiff's failure to obtain the desired action or the reasons for not making an effort to secure the desired action from the association. (3) The commissioner has determined, after a hearing upon at least 20 days' written notice to the association and each of its directors, that the action is proposed in good faith and that there is a reasonable probability that the prosecution of the action will benefit the association and its stockholders or members. (c) Subdivisions (c), (d), (e), and (f) of Section 800 of the Corporations Code apply to any actions under this section.


6053. In the case of an association which converts from a mutual association to a stock association, for a period of up to five years from the date of conversion, special meetings of the stockholders of a stock association may be called at any time by the president, or the board of directors, and shall be called by the president, vice president, or secretary upon the written request of stockholders holding of record in the aggregate at least 20 percent of the outstanding shares of the association, which request shall state the purpose of the meeting and shall be delivered at the principal office of the association addressed to the president. The date for any special meeting called by stockholders shall be set by the board of directors and shall be not less than 60 nor more than 90 days after the date of receipt of the request.


Article 3. Financial Statement Publication

Ca Codes (fin:6100) Financial Code Section 6100



6100. Each association shall prepare and publish annually within the time prescribed by the commissioner in a newspaper of general circulation in the county in which its home office is located, and shall deliver to each member or stockholder upon request, a statement of its financial condition in the form prescribed or approved by the commissioner.


Article 4. Directors

Ca Codes (fin:6150-6157) Financial Code Section 6150-6157



6150. (a) The business of each association shall be directed by a board of directors elected by ballot by a plurality of the votes of the members or stockholders present or voting by proxy. (b) Each director and officer of an association has a legal responsibility and fiduciary duty to administer the affairs of and provide sound management to the association. (c) In the case of an association which converts from a mutual association to a stock association, for a period of up to five years from the date of conversion, cumulative voting shall not be required in the election of directors unless otherwise provided in the association's articles of incorporation.


6151. No person shall be eligible for election or shall serve as a director or officer of an association who has been convicted of a criminal offense involving dishonesty or a breach of trust.


6152. (a) A director shall automatically cease to be a director upon becoming the subject of an order for relief in bankruptcy or upon conviction of a criminal offense involving dishonesty or a breach of trust. (b) In the case of an association which converts from a mutual association to a stock association, for a period of up to five years from the date of the conversion, a director may not otherwise be removed except for cause on the affirmative vote of a majority of the votes of members or stockholders eligible to be cast at a legal meeting.

6153. Directors shall be elected for periods of three years and until their successors are elected and qualified, but provision shall be made for the election of approximately one-third of the board of directors each year.

6154. If the members or stockholders fail to elect a director to fill each vacancy created by an increase in the number of directors, the current directors may fill the vacancy by electing a director to serve until the next annual meeting of the members or stockholders at which time a director shall be elected to fill the vacancy for the unexpired term for the class of directors in which the vacancy exists.


6155. Whenever the number of directors is changed and vacancies caused by the change are filled, the directors so elected shall be elected to terms in accordance with the provisions of Section 6153.


6156. (a) Any vacancy among directors, not filled by the members or stockholders, may be filled by a majority vote of the remaining directors, though less than a quorum, by electing a director to serve until the next annual meeting of the members or stockholders, at which time a director shall be elected to fill the vacancy for the unexpired term for the class of director in which the vacancy exists. (b) In the event of a vacancy on the board of directors from any cause, the remaining directors shall have full power and authority to continue direction of the association until the vacancy is filled.


6157. Every savings association subject to the new director or senior executive officer notice requirements of Section 32 of the Federal Deposit Insurance Act (12 U.S.C. Sec. 1831i) based upon recent chartering or change of control or failure to maintain the minimum required capital or otherwise troubled condition shall provide the commissioner, at the same time the notice is submitted to the appropriate federal agency, with a copy of the notification submitted in compliance with that requirement.


Article 5. Indemnity Bonds

Ca Codes (fin:6200-6204) Financial Code Section 6200-6204



6200. Except as provided in subdivision (b) of Section 6203, all directors, officers, and employees of an association shall, before entering upon the performance of any of their duties, execute their individual bonds with adequate corporate surety payable to the association as an indemnity for any loss the association may sustain of money or other property by or through any fraud, dishonesty, forgery or alteration, larceny, theft, embezzlement, robbery, burglary, hold-up, wrongful or unlawful abstraction, misapplication, misplacement, destruction or misappropriation, or any other dishonest or criminal act or omission by the director, officer, or employee.


6201. Associations that employ collection agents, who for any reason are not covered by a bond required under Section 6200, shall provide for the bonding of each of those agents in an amount equal to at least twice the average monthly collection of the agent. The agents shall be required to make settlement with the association at least monthly.


6202. No indemnity bond coverage is required of any agent that is a financial institution insured by the Federal Deposit Insurance Corporation.

6203. (a) The amounts and form of indemnity bonds and sufficiency of the surety shall be approved by the board of directors and by the commissioner. (b) In lieu of individual bonds, a blanket bond, protecting the association from loss through any act or acts of any director, officer, employee or agent, may be obtained. (c) A true copy of every indemnity bond shall be on file at all times at the association's home office.


6204. Indemnity bonds shall provide that their cancellation either by the surety or by the insured shall not become effective unless and until 10 days' notice in writing first shall have been given to the commissioner, unless the cancellation is approved earlier by the commissioner.


Article 6. Records

Ca Codes (fin:6450-6458) Financial Code Section 6450-6458



6450. Each association shall keep correct and complete books and records of accounts, as specified in Section 1500 of the Corporations Code.

6451. (a) Except as provided in subdivision (b), each agency of an association, as defined in Section 6551, shall keep an original record of each transaction of business completed on behalf of the association at the agency. (b) Records of transactions are not required to be maintained at the agency if they are maintained at the association's home office or branch office.

6452. Each association shall observe generally accepted accounting principles and practices except to the extent that the commissioner may require or permit different accounting treatment of accounts by regulation.

6453. Each association shall close its books at the close of business at least annually, or more often if authorized or required in writing by the commissioner.


6454. No association by any system of accounting or any device of bookkeeping shall, either directly or indirectly, enter any of its assets upon its books in the name of any other person, partnership, association, or corporation or under any title or designation that is not truly descriptive of the assets.

6455. (a) Each association shall maintain complete loan and investment records, and shall do so in a manner satisfactory to the commissioner. Detailed records necessary to make determinations of compliance by an association with the requirements of Chapter 6 (commencing with Section 7200) and other provisions of this division shall be maintained at all times. (b) The record of each real estate loan or other secured loan or investment shall contain documentation satisfactory to the commissioner of the type, adequacy and characteristics of the security.


6456. Each mutual association shall maintain membership records which shall show the name and address of the member and the date of membership.

6457. Each capital stock association shall maintain a register of stockholders.


6458. (a) Any association may cause any or all records of the association to be copied or reproduced by any photostatic, photographic, or microfilming process that correctly and permanently copies, reproduces, or forms a medium for copying or reproducing the original record on a film or other durable material. (b) Any copy or reproduction made under subdivision (a) shall be deemed to be an original record for all purposes and shall be treated as an original record in all courts or administrative agencies for the purpose of its admissibility in evidence. (c) A facsimile, exemplification, or certified copy of any copy made pursuant to subdivision (a), or a reproduction produced from a film record, shall, for all purposes, be deemed a facsimile, exemplification, or certified copy of the original record.


Article 7. Statutory Net Worth; Reserve Accounts

Ca Codes (fin:6475-6477) Financial Code Section 6475-6477



6475. (a) Each association shall maintain an adequate statutory net worth appropriate for the conduct of its business and the protection of its savings account holders. (b) The commissioner shall fix a minimum statutory net worth requirement applicable to all associations, which shall not be less than 3 percent of an association's total assets. In defining total assets, the commissioner may issue regulations to exclude from the total asset figure any asset items deemed appropriate by the commissioner. (c) If the statutory net worth falls below the level specified by the commissioner, the commissioner may require the association to increase its statutory net worth within the time and in a manner designated by the commissioner, so as to bring the amount to the level determined adequate under this section, and may require the association to do any one or more of the following: (1) Increase its liquid assets and maintain that increased liquidity at the level specified by the commissioner. (2) Cease to: (A) Accept savings accounts of all classes or categories, except in exchange for accounts already outstanding. (B) Accept savings accounts of any particular class, category, or amount. (C) Receive additional funds upon savings accounts already outstanding other than installment accounts. The provisions of paragraph (2) of subdivision (c) shall not prevent an association from crediting to savings accounts the interest earned on the accounts. (3) Cease all lending, lending in a particular area, or making a particular type or category of loans. (4) Cease purchase of loans or other investments. (5) Cease or limit promotional expenditures. (6) Convene a meeting or meetings of its board of directors with the commissioner in attendance to accomplish the objectives of this section. (7) Take any other steps that the commissioner deems necessary to safeguard the interests of the association and the public.


6476. Each association shall set up and maintain the reserves required by, and may set up and maintain any additional reserves that are permitted by, this division. The board of directors may make additional transfers to surplus or other reserve accounts.


6477. Any association which, for the purpose of evading provisions of this division or any order of the commissioner, knowingly participates, directly or indirectly, in an exchange with another association of any loan, investment, or other asset held by either association in violation of any provision of this division or any order of the commissioner, shall, upon direction of the commissioner, set up and maintain a reserve in the full amount of the asset acquired and shall not include that reserve in its statutory net worth.


Chapter 4. Powers Of Associations

Article 1. General Powers

Ca Codes (fin:6500-6530) Financial Code Section 6500-6530



6500. (a) Each association incorporated pursuant to or operating under the provisions of this division shall have all the powers enumerated, authorized, and permitted by this division and other rights, privileges, and powers, and may engage in any activities singly or with others, that are incidental to or reasonably necessary or appropriate for the accomplishment of the objects and purposes of the association, as provided by this division. Among others, and except as otherwise limited by the provisions of this division, each association shall have the powers set out in this chapter. Associations shall be subject to the provisions of the General Corporation Law (Division 1 (commencing with Section 100) Title 1 of the Corporations Code) and shall also have all the powers and privileges provided in the General Corporation Law of this state to other corporations except those powers and privileges that are expressly denied to associations in this division. If any provision of the General Corporation Law is inconsistent with any provision of this division, the provisions of this division shall prevail. (b) All references in this division to the General Corporation Law mean the General Corporation Law effective January 1, 1977, and any subsequent amendments thereto. (c) In the application of Chapter 23 (commencing with Section 2300) of the Corporations Code to associations, the definition of effective date in Section 2300 is January 1, 1978.


6501. An association may have perpetual existence, adopt and use a corporate seal which may be affixed by imprint, facsimile, or otherwise, and adopt and amend bylaws as provided in this division.


6502. An association may sue, be sued, complain, and defend in any court.

6502.5. An association may, acquire, hold, sell, develop, subdivide, dispose of, and convey real and personal property consistent with its objects and powers. It may mortgage, pledge, or lease any real or personal property and may take the property by gift, devise, or bequest.


6503. (a) No association or subsidiary thereof, without the prior written consent of the commissioner, shall enter into either of the following: (1) Any transaction or modification of any transaction with an affiliated person to buy, lease, or sell real or personal property, or take that property by gift. (2) Any consulting contracts or contracts for services with an affiliated person. (b) As a condition to approving a transaction specified in subdivision (a), the commissioner shall make both of the following findings: (1) The terms of the transaction are fair to, and in the best interests of, the savings association or subsidiary. In the case of real or personal property transactions, this finding shall be supported by an appraisal not prepared by an affiliated person or employee of the association or subsidiary. (2) The transaction was approved in advance by a resolution duly adopted with full disclosure by at least a majority, with no director having an interest in the transaction voting, of the entire board of directors of the association or subsidiary, or alternatively, by a majority of the total votes eligible to be cast by the voting members or stockholders of the association at a meeting called for that purpose, with no votes cast by proxies not solicited for that purpose. For purposes of this subdivision, "full disclosure" shall include, but not be limited to, (A) the affiliated person's source of financing for any real property involved in the transaction and (B) whether the association or any subsidiary thereof has a deposit relationship with any financial institution or holding company or affiliate thereof providing the financing.


6504. (a) Except by the prior written consent of the commissioner, an association in organization that is not a member of a federal home loan bank may borrow money from any source not more than an aggregate amount equal to 25 percent of its assets on the date of borrowing, and may pledge and otherwise encumber any of its assets to secure its debts. (b) An association that is a member of a federal home loan bank may borrow money from any source without limitation and may pledge and otherwise encumber any of its assets to secure its debts or savings accounts.


6505. (a) An association may issue and sell, directly or through underwriters, capital certificates that represent nonwithdrawable capital contributions, and constitute part of the reserves and statutory net worth of the association. The certificates shall have no voting rights and shall be subordinate to all savings accounts, debt obligations, and claims of creditors of the association. The certificates shall constitute a claim in liquidation against any reserves, surplus, and other statutory net worth accounts remaining after the payment in full of all savings accounts, debt obligations, and claims of creditors. The capital certificates shall be entitled to the payment of interest prior to the allocation of any income to surplus or other statutory net worth accounts of the association and may be issued with a fixed rate of interest or with a prior claim to distribution of a specified percentage of any net income remaining after required allocations to reserves, or a combination of those features. Losses may be charged against capital certificates only after reserves, surplus, and other statutory net worth accounts have been exhausted. (b) To the extent permitted by its articles of incorporation, an association authorized to issue capital stock may provide for the conversion of capital certificates into common stock.


6507. An association may qualify as and become a member of a federal home loan bank and a home loan bank established as an agency or instrumentality of this state.


6508. An association may become a member of, deal with, maintain reserves or deposits with, or make reasonable payments or contributions to any organization or instrumentality whether government or private, to the extent that the organization or instrumentality assists in furthering or facilitating the association' s purposes, powers, services, or community responsibilities, and it may comply with any reasonable requirements or conditions of eligibility.

6509. An association may act as depository for receipt of payments of federal or state taxes and loan funds, and may satisfy any related federal or state statutory or regulatory requirements, including pledging of assets as collateral, payment of interest at prescribed rates, and, notwithstanding any other provision of this division, may issue the accounts subject to the right of immediate withdrawal.


6510. An association may sell any loan, including a participating interest in a loan, at any time.


6511. Loans secured by real property may be sold to, and are legal investments for, among others, any public or private pension fund, credit union, labor union fund, or public employee association and may be purchased by those institutions directly from an association. Nothing in this subdivision shall be construed as altering any limits imposed by law on the extent of participation in an investment that is made by any entity covered by this subdivision.


6513. An association may service loans and investments for others.


6514. (a) An association may act, and receive compensation for so acting, as trustee of any trust created or organized in the United States and forming a part of a stock bonus, pension, or profit-sharing plan that qualifies for specific tax treatment under Section 401 of the Internal Revenue Code of 1986 (26 U.S.C., Sec. 401), as amended. (b) It may also act, and receive compensation for so acting, as trustee or custodian of an individual retirement account within the meaning of Section 408 of the Internal Revenue Code of 1986, as amended. (c) Assets of the trust or account must be invested only in savings accounts of the association, in obligations or securities issued by the association, or in other investments that are approved by the commissioner. (d) All assets held in fiduciary capacity by any association under the authority of this section may be commingled and consolidated for appropriate purposes of investment if records reflecting each separate beneficial interest are maintained by the fiduciary or by another appropriate party who assumes that duty. (e) The trustee or custodian may accept noncash assets under this section if the assets are converted into cash as soon as practicable.


6515. (a) Notwithstanding any provisions of Division 1 (commencing with Section 99), Section 202 of the Corporations Code, or any other provisions of law relating to trusts and trust authority, subject to regulations of the commissioner, an association may act as trustee, executor, administrator, guardian, or in any other fiduciary capacity in which banks, trust companies, or other corporations are permitted to act under the laws of this state, directly or through a state or nationally chartered subsidiary. (b) All acts provided in this code to be performed by the commissioner, the State Treasurer, or other public officials for or in respect to the deposit of securities by trust companies for the protection of court and private trusts shall be performed as well for or in respect to the deposit of securities by any association or the trust companies of any association organized or doing business under the laws of this state, or by any federal association authorized to transact a trust business. An association may advertise its authority to engage in and conduct a trust business and to advertise for and solicit a trust business in this state, notwithstanding any other provision of law. (c) Pursuant to the authority contained in Section 1 of Article XV of the California Constitution, the restrictions upon rates of interest contained in Section 1 of Article XV of the California Constitution shall not apply to any obligations of, loans made by, or forbearances of, an association or federal association, or a service corporation which is authorized to exercise trust powers, when the association, federal association, or service corporation is acting in its fiduciary capacity as trustee. (d) Subdivision (c) creates and authorizes an exempt class of persons pursuant to Section 1 of Article XV of the Constitution. Notwithstanding any other provision of law, subdivision (c) does not exempt an association, federal association, or a service corporation of such associations, from complying with all other laws and regulations governing the business in which the association, federal association, or service corporation is engaged.


6516. (a) Subject to regulations issued by the commissioner, an association may own and use or participate in the use or ownership and use of remote service units. (b) A remote service unit is not a branch or agency.


6517. Subject to Regulation E (12 CFR Part 205) and to rules and regulations of the commissioner, an association may transfer funds between holders of savings accounts, and third parties, or their designees, by means of an electronic funds transfer system. No system or any part of it, including terminals or processing centers, shall of itself be considered a branch office or agency.


6518. (a) An association may maintain and rent safes, boxes, or other receptacles or premises for the safekeeping of personal property upon terms and conditions that may be agreed upon. (b) An association that rents or otherwise makes safe-deposit boxes available to the public is entitled to all of the remedies set forth in Article 2 (commencing with Section 1660) of Chapter 13 of Division 1, and may dispose of the unclaimed contents of safe-deposit boxes in the manner set forth in that article.


6519. An association may sell money orders, travel checks, and similar instruments drawn by it on its bank accounts or as agent for any organization empowered to sell the instruments through agents within this state.

6520. An association, service corporation, or a person authorized in writing by an association may act as an agent for others except that an association may not act as an insurer or transact insurance as agent for an insurer. Any savings and loan association holding company or any service corporation that acts as an agent of an insurer shall conform to the requirements of Section 7455 and Section 770.1 of the Insurance Code.


6521. (a) Notwithstanding the provisions of Division 6 (commencing with Section 17000) or any other provision of law, an association or service corporation may act as an escrow agent in connection with the sale, transfer, encumbering or leasing of real or personal property. (b) The name for any subdivision of an association operating as an escrow agent pursuant to this section, if different from the name of the association, shall be approved by the commissioner.


6522. (a) An association that declares and pays dividends may distribute its own shares or may make payments in cash or property. Payment of cash or property shall be made only if there is a sufficient balance of unappropriated retained earnings which is that portion of income retained in the business since its organization or reorganization and which has not been appropriated or reserved for some specific purpose. Dividends shall not be distributed unless the association meets its required statutory net worth before and after that distribution. No dividends shall be paid if that payment would cause the association to be in an impaired condition. (b) A stock split, as defined in Section 188 of the Corporations Code, and a reverse stock split, as defined in Section 182 of the Corporations Code, are authorized and shall not be construed to be dividends within the meaning of this section. (c) Any distribution of permanent capital or paid in surplus shall require prior approval of the commissioner. (d) Any shareholder who receives any distribution prohibited by this section with knowledge of facts indicating the impropriety thereof is liable to the association for the amount received. The commissioner may bring an action for the benefit of the association to recover the distribution from the shareholder.


6523. (a) An association may use advertising, whether printed, broadcasted by radio, televised, displayed, or communicated in any other manner or make any representation that is accurate and does not misrepresent its services, contracts, investments, or financial condition. (b) The commissioner may require an association to file a true copy of the text of any advertising in the office of the commissioner at least five days prior to its issuance, circulation, or publication. Advertising filed under this subdivision may be used upon the commissioner's express approval or failure to disapprove it within five days of its filing. (c) Associations shall not issue, circulate, or publish any advertising after notice in writing from the commissioner that in the commissioner's opinion the advertising is inaccurate or misrepresents the association's services, contracts, investments, or financial condition.


6524. An association may organize, sponsor, operate, control, or render investment advice to, an investment company, or underwrite, distribute, or sell securities of any investment company which has qualified to sell its securities in this state pursuant to Part 2 (commencing with Section 25100) of Division 1 of Title 4 of the Corporations Code, if the officers and employees of the association who sell these securities meet such standards with respect to training experience, and sales practices as established by the Savings and Loan Commissioner. For the purpose of this section, "investment company" means an investment company as defined in the Investment Company Act of 1940 (15 U.S.C., Sec. 80a-1 et seq.).


6525. (a) Notwithstanding the provisions of Sections 1051, 1052, and 1054 of the Labor Code and Section 2947 of the Penal Code, an association, a subsidiary or affiliate of an association, or any officer or employee thereof may deliver fingerprints taken of a director, an officer, an employee, or an applicant for employment to local, state, or federal law enforcement agencies for the purpose of obtaining information as to the existence and nature of a criminal record, if any, of the person fingerprinted relating to convictions, and to any arrest for which that person is released on bail or on his or her own recognizance pending trial, for the commission or attempted commission of a crime involving robbery, burglary, theft, embezzlement, fraud, forgery, bookmaking, receiving stolen property, counterfeiting, or involving checks or credit cards or using computers. (b) The Department of Justice shall, pursuant to Section 11105 of the Penal Code, and a local agency may pursuant to Section 13300 of the Penal Code, furnish to the officer of the association or subsidiary or affiliate thereof responsible for the final decision regarding employment of the person fingerprinted, or to his or her designees having responsibilities for personnel or security decisions in the usual scope and course of their employment with the association, subsidiary, or affiliate summary criminal history information when requested pursuant to this section. If, upon evaluation of the criminal history information received pursuant to this section, the association, subsidiary, or affiliate determines that employment of the person fingerprinted would constitute an unreasonable risk to the association, subsidiary, or affiliate or its customers, the person fingerprinted may be denied employment. (c) A request for records pursuant to this section made of the Department of Justice shall be on a form approved by the department. The department may charge a fee to be paid by the requesting association, subsidiary, or affiliate pursuant to subdivision (e) of Section 11105 of the Penal Code. No request shall be submitted without the written consent of the person fingerprinted. (d) Any criminal history information obtained pursuant to this section is confidential and no recipient shall disclose its contents other than for the purpose for which it was acquired. (e) "Affiliate," as used in this section, means any corporation controlling, controlled by, or under common control with, a savings association, whether directly, indirectly, or through one or more intermediaries.


6525.5. Except with the prior written consent of the commissioner: (a) No person who has been convicted of any criminal offense involving dishonesty or breach of trust may participate, directly or indirectly, in any manner in the conduct of the affairs of a savings association. (b) A savings association shall not permit any person who has been convicted of any criminal offense involving dishonesty or breach of trust to participate, directly or indirectly, in any manner in the conduct of the affairs of the savings association.


6526. An association may issue commercial and standby letters of credit in conformance with the Uniform Commercial Code or the Uniform Customs and Practice for Documentary Credits Act and may pledge collateral to secure its obligations thereunder. Except as otherwise provided by regulations of the commissioner, such issuance shall be subject to the following requirements: (a) Each letter of credit must conspicuously state that it is a letter of credit. (b) The issuer's undertaking must contain a specified expiration date or be for a definite term, and must be limited in amount. (c) The issuer's obligation to pay must be solely dependent upon the presentation of conforming documents as specified in the letter of credit, and not upon the factual performance or non-performance by the parties to the underlying transaction. (d) The account party must have an unqualified obligation to reimburse the issuer for payments made under the letter of credit. To the extent funds are advanced under a letter of credit without compensation from the account party, the amount shall be treated as an extension of credit subject to percentage of assets limits and other requirements under an applicable provision of this division.


6527. If a loan or other investment is authorized under more than one section of this division an association may designate under which section the loan or investment has been made. Such a loan or investment may be apportioned among appropriate categories, and may be moved, in whole or in part, from one category to another.


6528. An association may provide correspondent services primarily to other depository institutions to the extent that the activity does not violate other provisions of law. (a) An association may maintain a noninterest-bearing account at any institution at which accounts are insured by the Federal Deposit Insurance Corporation, if the account is necessary or incidental to a correspondent relationship. (b) An association may receive non-interest-bearing deposits from correspondent institutions for use as compensating balances, for settlement purposes, or for other purposes incidental to a correspondent relationship. These deposits may be payable on demand and subject to withdrawal by negotiable or transferable instrument, order, or authorization. These deposits shall not give rise to voting rights of membership in a state mutual association.


6529. (a) No affiliated person of a savings association may receive, either directly or indirectly, from the association, a subsidiary thereof, or any other source any fee or other compensation of any kind in connection with the procurement of a loan from that association or subsidiary. (b) No savings association shall give and no person shall accept any fee, kickback, or thing of value pursuant to any agreement or understanding, oral or otherwise, that business incident to or part of a real estate closing service shall be referred to any person by the savings association or by a subsidiary or affiliated person thereof, in connection with any loan on real property made by a savings association or subsidiary thereof. (c) Other than for services actually performed, no person shall give and no savings association or subsidiary or affiliated person thereof shall accept any portion, split, or percentage of any charge made or received for the rendering of a real estate closing service in connection with a transaction involving a loan on real property made by a savings association or subsidiary thereof. (d) For purposes of subdivisions (b) and (c), "real estate closing service" includes any service provided in connection with the execution of a real estate escrow transaction, including, but not limited to, title searches, title examinations, the provision of title reports, title insurance, services rendered by an attorney, the preparation of documents, property surveys, the rendering of credit reports or appraisals, pest and fungus inspections, services rendered by a real estate licensee, and the handling of the processing.


6530. (a) No savings association may discharge or otherwise discriminate against any employee with respect to compensation, terms, conditions, or privileges of employment because the employee (or any person acting pursuant to the request of the employee) provided information to the commissioner, the Attorney General, or any district attorney regarding a possible violation of any law or regulation by the savings association or any of its officers, directors, or employees. (b) Any employee or former employee who believes he or she has been discharged or discriminated against in violation of subdivision (a) may file a civil action in superior court before the close of the 2-year period beginning on the date of that discharge or discrimination. The plaintiff shall also file a copy of the complaint initiating the civil action with the commissioner. (c) If the court determines that a violation of subdivision (a) has occurred, it may order the association which committed the violation to do any of the following: (1) Reinstate the employee to his or her former position. (2) Pay compensatory damages. (3) Take other appropriate actions to remedy any past discrimination. (d) The protections of this section shall not apply to any employee who does either of the following: (1) Deliberately causes or participates in the alleged violation of law or regulation. (2) Knowingly or recklessly provides substantially false information to the commissioner, the Attorney General, or any district attorney.


Article 2. Branching And Agency Powers

Ca Codes (fin:6550-6558) Financial Code Section 6550-6558



6550. (a) A branch office is a legally established place of business of an association other than the home office, a remote service unit, or any agency, authorized by the board of directors and approved by the commissioner, where the business of an association may be conducted. (b) An association may, with the approval of the commissioner, conduct business outside this state, subject to the laws of the state in which the business is done.


6551. (a) An agency of an association is a place or facility, stationary or mobile, other than the home office, a remote service unit, or a branch office, at or through which the association may transact business that is specified by the board of directors and approved by the commissioner. (b) The agency may perform other special duties and functions as may be directed from time to time by the home office or a branch office and approved by the commissioner. (c) An agency may perform only those activities, duties, or functions as are authorized for savings associations by the provisions of this division or regulations of the commissioner.


6552. No association may establish or maintain a branch office or agency without the prior written approval of the commissioner, except that temporary and incidental agencies may be created for individual transactions and for special temporary purposes without approval.


6553. (a) Each application for approval of the establishment and maintenance of a branch office or one or more agencies shall include the following: (1) The proposed location of the branch or agency. (2) The functions to be performed at the branch or agency. (3) Any additional information the commissioner deems necessary to reach a decision. (b) Each application shall be accompanied by the filing fee as prescribed pursuant to Section 9001 and by a budget of the association for the current earnings period and for the next succeeding annual period, which reflects the estimated additional expense of the maintenance of each branch or agency covered by the application.

6554. Upon receipt of a complete application for a branch office, the commissioner shall give written notice of the filing of the application to each association. The notice shall state the name of the association and the name of the city or community in which the branch is proposed to be located.


6555. (a) Before acting on an application for a branch office, the commissioner may hold a hearing at a time and place specified in a notice of hearing. (b) If a hearing is to be held, the hearing shall not be held less than 10 days after the mailing of a notice of hearing under subdivision (a). (c) Any person may appear at the hearing in person or by agent or attorney, and, pursuant to regulations issued by the commissioner, show cause why the application should not be approved.


6556. (a) Upon review of the application for a branch office or agency and after a hearing on the branch application, if one is deemed necessary, the commissioner shall determine whether all of the following criteria are met: (1) The applicant's policies, financial condition, and operations afford no basis for supervisory objection. (2) The proposed branch office or agency will be opened within a reasonable time after approval, as determined by the commissioner. (b) If the commissioner determines that the criteria set forth in subdivision (a) are met the application shall be approved. (c) If the commissioner determines that the criteria set forth in subdivision (a) are not met the application shall be denied.


6557. The provisions of this article relating to branch office and agency applications do not apply to a branch office or agency of an existing association acquired pursuant to a merger, consolidation, conversion, or transfer of assets.

6558. The commissioner may adopt rules and regulations relating to any action pertaining to branch offices and agencies regulated by this article.


Chapter 5. Savings Operations

Article 1. Savings Liability

Ca Codes (fin:6600-6603) Financial Code Section 6600-6603



6600. The savings liability of an association shall consist only of the aggregate amount of its savings accounts, plus interest earned or credited to the accounts, less redemption and withdrawal payments.


6601. Except as limited by the association from time to time or by state or federal law or regulations, account holders may make additions to their savings accounts in amounts and at times they elect.

6602. Savings accounts may be opened for cash or, subject to any limitations or restrictions in regulations issued by the commissioner, for property in which the association is authorized to invest. In the absence of fraud in the transaction, the value of the property taken in payment, as determined by the board of directors, shall be conclusive.


6603. No member of a mutual association is responsible for any losses of the association, no savings account is subject to assessment, and no savings account holder is liable for any unpaid installments on the account.


Article 2. Savings Accounts

Ca Codes (fin:6651-6663) Financial Code Section 6651-6663



6651. Except for savings accounts issued in marketable or bearer form, savings accounts shall be represented only by the account of each savings account holder on the books of the association, and the accounts or any interest in the accounts shall be transferable only on the books of the association and upon proper written application, and acceptance by the association of the transferee as a holder upon terms approved by the board of directors.


6652. (a) Upon the filing with an association by the savings account holder of record as shown by the books of the association, or by the holder's legal representative, of an affidavit to the effect that the evidence of account, if any, has been lost or destroyed, and that the account has not been pledged or assigned in whole or in part, the association shall issue a new evidence of account, if applicable, in the name of the holder of record. (b) The new evidence of account may state that it is issued in lieu of the one lost or destroyed and that the association shall not be liable for the loss or destruction of the original evidence of account. (c) The association may require an indemnification or a bond in an amount it deems sufficient to indemnify the association against any loss which might result from the issuance of a new evidence of account under this section.


6653. (a) No association shall, directly or indirectly, for the opening or increasing of any savings account, give, sell, dispose of, or permit the giving, selling, or disposition of, for any one opening or increase anything having a cost or value in excess of the amount authorized by the commissioner by regulation. (b) Notwithstanding subdivision (a) the commissioner is authorized to impose by regulation restrictions on associations, relating to the distribution and advertising of giveaways, equivalent to those imposed on federal associations doing business in this state.


6653.5. (a) A troubled savings association may not accept funds obtained, directly or indirectly, by or through any deposit broker for deposit into one or more accounts. (b) Any renewal of a savings account in any troubled savings association and any rollover of any amount on deposit in such a savings account shall be treated as an acceptance of funds by the troubled savings association for purposes of subdivision (a). (c) The commissioner may, on a case-by-case basis and upon application by a savings association, waive the applicability of subdivision (a) upon a finding that the acceptance of these deposits does not constitute an unsafe or unsound practice with respect to that savings association. (d) The commissioner may impose, by regulation or order, such additional restrictions on the acceptance of broker deposits by any troubled savings association as the commissioner may determine to be appropriate. (e) For purposes of this section: (1) "Deposit broker," except as otherwise provided in paragraph (2), means either of the following: (A) Any person engaged in (i) the business of placing deposits, or facilitating the placement of deposits, of third parties with financial institutions or (ii) the business of placing deposits with financial institutions for the purpose of selling interests in those deposits to third parties. (B) An agent or trustee who establishes a savings account to facilitate a business arrangement with a financial institution to use the proceeds of the account to fund a prearranged loan. (2) Subject to paragraph (3), "deposit broker" does not include any of the following: (A) A savings association with respect to funds placed with that savings association. (B) An employee of a savings association with respect to funds placed with the employing savings association. (C) A trust department of a savings association, if the trust in question has not been established for the primary purpose of placing funds with financial institutions. (D) The trustee of a pension or other employee benefit plan, with respect to funds of the plan. (E) A person acting as a plan administrator or an investment adviser in connection with a pension plan or other employee benefit plan, provided that that person is performing managerial functions with respect to the plan. (F) The trustee of a testamentary account. (G) The trustee of an irrevocable trust (other than one described in subparagraph (B) of paragraph (1), as long as the trust in question has not been established for the primary purpose of placing funds with financial institutions. (H) A trustee or custodian of a pension or profitsharing plan qualified under Section 401(d) or 403(a) of the federal Internal Revenue Code of 1986. (I) An agent or nominee whose primary purpose is not the placement of funds with financial institutions. (3) The exceptions specified in paragraph (2) do not apply to, and the term "deposit broker" includes, any savings association, and any employee of any savings association, that engages, directly or indirectly, in the solicitation of deposits by offering rates of interest (with respect to those deposits) which are significantly higher than the prevailing rates of interest on deposits offered by other associations and federal associations in the savings association's normal market area. (4) "Employee" means any person meeting all of the following criteria: (A) The person is employed exclusively by the savings association. (B) The person's compensation is primarily in the form of a salary. (C) The person does not share that compensation with a deposit broker. (D) The person's office space or place of business is used exclusively for the benefit of the savings association which employs the person. (5) "Troubled savings association" means any savings association which does not meet the minimum capital requirements applicable with respect to that savings association.


6660. (a) For the purposes of this section: (1) "Account" means withdrawable or repurchasable shares, investment certificates, deposits, or savings accounts as defined in Section 561.2, 561.16, 561.28, 561.29, 561.42, or 563.6 of Title 12 of the Code of Federal Regulations pursuant to which the account holder from time to time may make deposits and effect withdrawals. (2) "Account holder" means a person who is identified on the signature card for an account, or in the absence of a signature card, a person who has an interest in an account which is reflected on the records of the association for that account to whom statements of account or other notices are normally given, or the agent of such person. (3) "Charges" means those charges which an association may, from time to time, impose on an account in the normal course of business in the operation of the account and, does not include: (A) Charges which may be imposed for extraordinary services furnished at the specific request of the account holder. (B) Charges or amounts required to be disclosed to the depositor pursuant to the Truth-in-Lending Act (15 U.S.C. Sec. 1601 et seq.) and Regulation Z (12 C.F.R. 226.1 et seq.), as amended. (4) "Customer" means one or more natural persons. (5) "Debt" means an interest-bearing obligation or an obligation that by its terms is payable in installments, which has not been reduced to judgment, arising from an extension of credit to a natural person primarily for personal, family, or household purposes, and does not mean a charge for savings and loan services, for a debit for uncollected funds, for dishonored checks cashed for a customer, or for an overdraft account imposed by an association on a savings account. (b) An association is limited in exercising any setoff for a debt claimed to be owed to the association by a customer in that a setoff shall not result in an aggregate balance of less than one thousand dollars ($1,000) as shown on the records of the association for all accounts maintained by a customer with the association or any of its branches. (c) Not later than the day following the exercise of any setoff with respect to an account for any debt claimed to be owed to the association by a customer, the association shall deliver to each customer personally or send by first-class mail postage prepaid to the address of each customer as shown on the records of the association a written notice in at least 10-point type containing the following: (1) A statement that the association has set off all or part of a debt against the customer's account, identifying the account, and giving the respective balances before and after the setoff. (2) A statement identifying the debt setoff against the account and giving the respective balances due before and after the setoff. (3) A statement that if the customer claims that the debt has been paid or is not now owing, or that the funds in the account consist of moneys expressly exempt pursuant to Chapter 4 (commencing with Section 703.010) of Division 2 of Title 9 of Part 2 of the Code of Civil Procedure, and listed in the notice, the customer may execute and return the notice to the association by mail at the address shown or personally to the branch where the customer's account is maintained not later than 20 days after the date of mailing or personal delivery. (4) A statement that (A) if the notice is executed and returned, the association may file an action in court to collect the debt, (B) that if a lawsuit is filed, the customer will be notified and have an opportunity to appear and defend, and (C) that if the association is successful, the customer will be liable for court costs, and attorney's fees, if the debt so provides. (5) A response form in at least 10-point type containing substantially the following: "The debt described in the Notice of Setoff received from the savings and loan association is__ isnot__ my debt or the debt of another person in whose name the account is maintained. "I claim that the debt: _____ has been paid. _____ is not now owing. _____ is not subject to setoff because the money in the account is: _____ Paid earnings (CCP 704.070) _____ Proceeds from execution sale of or insurance for loss of a motor vehicle (CCP 704.010) _____ Proceeds from execution sale of household furnishings or other personal effects (CCP 704.020) _____ Relocation benefits (CCP704.180) _____ Life insurance proceeds (CCP 704.100) _____ Disability and health insurance benefits (CCP 704.130) _____ Workers' compensation benefits (CCP 704.160) _____ Unemployment or strike benefits (CCP 704.120) _____ Retirement benefits including, but not limited to, social security benefits (CCP 704.080, 704.110, 704.115) _____ Public assistance benefits including welfare payments and supplemental security income (SSI) or charitable aid (CCP 704.170) _____ Proceeds from sale of or insurance for damage or destruction of a dwelling (CCP 704.720, 704.960) _____ Proceeds from execution sale of or insurance for loss of tools of a trade (CCP 704.060) _____ Award of damages for personal injury (CCP 704.140) or wrongful death (CCP 704.150) _____ Financial aid paid by an institution of higher education to a student for expenses while attending school (CCP 704.190) I declare under penalty of perjury that the foregoing is true and correct. Executed at ________________, California on City or County ______ Date Signed: _____________________________" (d) If the response form described in subdivision (c) executed by the customer is received by the association not later than 20 days after the date of mailing or personal delivery of the written notice, the amount of the setoff for any debt claimed to be owed to the association by a customer, and any service charges resulting from the setoff, shall be reversed and shall be credited to the customer's account not later than the end of the third business day following receipt of the executed response form. (e) The limitations provided in this section do not apply to accounts in which the association has a security interest expressed by a written contract as collateral for the debt owing to the association by the customer. (f) The limitations provided in this section do not apply when a customer previously has authorized an association in writing to periodically debit an account as the agreed method of payment of the debt. (g) The limitations provided in this section shall apply only to the exercise by an association of a setoff with respect to debts claimed to be owing to it by customers on or after July 1, 1976. (h) Nothing in this section shall prejudice a person's right to assert exemptions under Chapter 4 (commencing with Section 703.010) of Division 2 of Title 9 of Part 2 of the Code of Civil Procedure, or to assert a claim or defense as to the validity of the debt, in a judicial proceeding.


6661. Notice to an association or federal association of an adverse claim to a savings account of, or to personal property held for the account of, any person shall be disregarded, and the association or federal association, notwithstanding the notice, shall honor withdrawal applications and shall pay withdrawals and interest to the person or persons to whose credit the account stands or shall deliver the property to or upon the order of the person for whose account the property is held, without any liability on the part of the association or federal association; subject, however, to the exceptions provided in subdivisions (a) and (b): (a) If an adverse claimant delivers to the association or federal association at the office at which the account is carried or the property held an affidavit of the claimant stating that of the claimant's own knowledge the person to whose credit the deposit stands or for whose account the property is held is a fiduciary for the adverse claimant and that the claimant has reason to believe the fiduciary is about to misappropriate the account or the property, and stating the facts upon which the claim of fiduciary relationship and the belief are founded, the association or federal association shall refuse to pay withdrawals or interest on the account and shall refuse to deliver the property for a period of not more than three court days (including the day of delivery) from the date that the association or federal association received the adverse claimant's affidavit, without liability on its part and without liability for the sufficiency or truth of the facts alleged in the affidavit. (b) If at any time, either before, after, or in the absence of the filing of an affidavit by the adverse claimant, the adverse claimant procures and serves upon the association or federal association at the office at which the account is carried or the property held a restraining order, injunction, or other appropriate order against the association or federal association from a court of competent jurisdiction in an action in which the adverse claimant and all persons in whose names the account stands or for whose account the property is held are the parties, the association or federal association shall comply with the order or injunction, without liability on its part. (c) The provisions of this section shall be applicable even though the name of the person appearing on the books to whose credit the account stands or for whose account the property is held is modified by a qualifying or descriptive term such as "agent," "trustee," or other word or phrase indicating that the person may hold the account or property in a fiduciary capacity. (d) Nothing in the California Multiple-Party Accounts Law contained in Part 2 (commencing with Section 5100) of Division 5 of the Probate Code limits the applicability of this section.


6662. Nothing in this chapter shall prohibit an association or federal association from issuing tenancy in common, community property, and other types of savings accounts authorized by law.


6663. If any attachment is levied upon any savings account or any other property maintained with an association or federal association, a copy of the writ and notice of attachment shall be served upon the manager or any other officer of the association or federal association. Service shall be made at the office or branch at which the savings account or other property is maintained, if the office or branch is in operation at the time of the service or, if the office, agency, or branch is not in operation at the time of service, at the home office of the association or federal association. Writs and notices of attachment which are not so served are not effective as to any savings account or other property maintained with the association or federal association, irrespective of any other provision of law relating to service of attachments.


Article 3. Contracts For Savings Programs

Ca Codes (fin:6700-6702) Financial Code Section 6700-6702



6700. An association may contract with the proper authorities of any public or nonpublic elementary or secondary school or institution of higher learning, or any public or charitable institution caring for minors, for the participation and implementation by the association in any school or institutional thrift or savings plan, and it may accept savings accounts at the school or institution, either by its own collector or by any representative of the school or institution that becomes the agent of the association for that purpose.

6701. An association may contract with any employer, as follows: (a) With respect to the solicitation, collection, and receipt of savings by payroll deduction to be credited to a designated account or accounts of its employees who voluntarily elect to participate. (b) With respect to the direct deposit of wages or salary paid to the account of the employee by electronic or other medium upon authorization in writing by the employee and designation of the association as the recipient of the deposits.


6702. An association may pay commissions or fees in cash or merchandise for soliciting deposits to any employee of the association or to any broker or agent as determined by the association.


Article 4. Powers Of Attorney On Savings Accounts

Ca Codes (fin:6725) Financial Code Section 6725



6725. (a) Notwithstanding any other provision of law, an association or federal association may continue to recognize the authority of an attorney-in-fact authorized in writing to manage or to make withdrawals either in whole or in part from the savings account of a holder, whether minor or adult, until it receives written notice or is on actual notice of the revocation of authority, whether the revocation is express or by operation of law. (b) Except as provided in Division 4.5 (commencing with Section 4000) of the Probate Code, written notice of the death or adjudication of incompetency of the account holder that is delivered to the office where the account is maintained shall constitute written notice of revocation of the authority of the attorney-in-fact. (c) No association or federal association shall be liable for damages, penalty, or tax by reason of any payment made pursuant to this section.


Article 5. Married Persons And Minors

Ca Codes (fin:6750-6752) Financial Code Section 6750-6752



6750. Except as otherwise expressly provided in this article, an association or federal association may issue savings accounts to any married person or minor as the sole and absolute owner of the account, and receive payments by or for the owner, and pay withdrawals, accept pledges to the association, and act in any other manner with respect to the accounts on the order of a married person or minor. A married person or minor may establish a trust under Sections 401 and 408 of the Internal Revenue Code of 1986, as amended, and an association or federal association may issue savings accounts to the trust.


6751. Any payment or delivery of rights to a married person, to any minor, or to a trust established by or for a married person, or a minor, or a receipt or acquittance signed by a married person or by a minor who holds a savings account, shall be a sufficient release of the association or federal association for any payment made or delivery of rights to the married person or minor.


6752. (a) In the case of a minor, the receipt, acquittance, pledge, or other action required by the association or federal association to be taken by the minor shall be binding upon the minor with like effect as if the minor were of full age and legal capacity. (b) Except under subdivision (c), the parent or guardian of the minor shall not have the power to attach or transfer any savings account issued to or in the name of the minor, provided that a parent or guardian of a minor aged 13 or less may require, by written notice delivered to the office where the account is maintained, that the signatures of both the minor and the parent or guardian be required for withdrawals from the account. (c) In the event of the death of a minor the receipt or acquittance of either parent, guardian, or foster parent of the minor is a sufficient discharge of the association or federal association for any sums not exceeding in the aggregate two thousand five hundred dollars ($2,500) unless the minor has given written notice to the association or federal association to accept the signature of the parent, guardian or foster parent to withdraw a greater amount.


Article 6. Multiple-party Accounts

Ca Codes (fin:6800-6805) Financial Code Section 6800-6805



6800. An account in an association or federal association that is a multiple-party account as defined in Section 5132 of the Probate Code is governed by Part 2 (commencing with Section 5100) of Division 5 of the Probate Code.

6804. No association or federal association paying any survivor in accordance with Part 2 (commencing with Section 5100) of Division 5 of the Probate Code shall, because of the payment, be liable for any estate, inheritance, or succession taxes that may be due this state.


6805. The pledge or hypothecation to any association or federal association of all or part of a multiple party account, as defined in Section 5132 of the Probate Code, signed by any one or more tenants, whether minor or adult, upon whose signature or signatures withdrawals may be made from the account shall, unless the terms of the account provide specifically to the contrary, be a valid pledge and transfer to the association or federal association of that part of the account pledged or hypothecated, and shall not operate to sever or terminate all or any part of the account.


Article 7. Accounts Of Administrators, Executors, Guardians, Custodians, Trustees, And Other Fiduciaries

Ca Codes (fin:6850-6856) Financial Code Section 6850-6856



6850. Any association may accept fiduciary savings accounts in the name of any administrator, executor, custodian, conservator, guardian, trustee, or other fiduciary for a named beneficiary or beneficiaries.

6851. (a) The withdrawal value of a fiduciary account, and interest on it, or other rights relating to it, may be paid or delivered, in whole or in part, to the fiduciary without regard to any notice to the contrary as long as the fiduciary is living. (b) The payment or delivery to the fiduciary or a receipt or acquittance signed by a fiduciary to whom payment or delivery of rights is made shall be a sufficient release of an association for the payment or delivery.

6852. (a) Whenever a person holding an account in a fiduciary capacity dies and no written notice of the revocation or termination of the fiduciary relationship has been given to an association and the association has no written notice of any other disposition of the beneficial estate, the withdrawal value of the account, and interest on it, or other rights relating to it, may, at the option of an association, be paid or delivered, in whole or in part, to the beneficiary or beneficiaries. (b) In the absence of written notice to the contrary an association may presume that each beneficiary of an account with two or more beneficiaries has an undivided equal beneficial interest in the account.

6855. No association paying any fiduciary, beneficiary, or designated person in accordance with this article or the California Multiple-Party Accounts Law contained in Part 2 (commencing with Section 5100) of Division 5 of the Probate Code shall, because of the payment, be liable for any estate, inheritance, or succession taxes that may be due this state.


6856. The provisions of this article apply to federal associations to the extent that they are not inconsistent with and do not infringe upon federal laws governing federal associations.


Article 8. Accounts Of Incompetents

Ca Codes (fin:6900) Financial Code Section 6900



6900. If an association or federal association has received no written notice and is not on actual notice that the savings account holder has been adjudicated incompetent, it may pay or deliver funds to the account holder in accordance with the provisions of the savings account contract, and the receipt or acquittance of the holder shall be a sufficient release of that association or federal association for the payment or delivery.


Article 9. Accounts Of Deceased Nonresidents

Ca Codes (fin:6950-6951) Financial Code Section 6950-6951



6950. (a) When a savings account is held in any association or federal association by a person who dies while domiciled in a sister state or foreign nation, the account, together with additions and interest, or any part of it, shall be exempt from any taxation otherwise imposed by this state. (b) When a savings account is held in any association or federal association by a person who dies while domiciled in a sister state, the account, together with additions and interest, or any part of it, shall be paid to the sister state personal representative or other claimant under the Probate Code, provided the personal representative or other claimant has furnished the association or federal association with all of the documentation required under applicable provisions of the Probate Code and evidence of ownership of the account, if any, issued under Section 6652. (c) Upon payment or delivery to the personal representative or other claimant after receipt of the documents specified in subdivision (b), the association or federal association is released and discharged to the same extent as if the payment or delivery had been made to a legally qualified local personal representative, and is not required to account for the application or disposition of the property.


6951. No action at law or in equity shall be maintained against an association or federal association for payment made in accordance with this article.


Article 10. Savings Accounts As Legal Investments And As Security; Public Funds

Ca Codes (fin:7000-7002) Financial Code Section 7000-7002



7000. (a) Administrators, executors, custodians, conservators, guardians, trustees, and other fiduciaries, insurance companies, business and manufacturing companies, banks, trust companies, credit unions, and other types of similar financial organizations, charitable, educational, eleemosynary and public corporations, funds and organizations, and municipalities and other public corporations and bodies, and public officials are specifically authorized and empowered to invest funds held by them, without any order of any court, in savings accounts of associations and federal associations and the investments are legal investments for those funds. (b) No association shall have on deposit at any one time funds of the State of California, of the cities, counties, and other political subdivisions of the state, and of the public corporations and districts of the state, that, in the aggregate, exceed in amount 400 percent of its statutory net worth. The amount of funds on deposit secured by surety bonds shall not at any time, in the aggregate, exceed 100 percent of statutory net worth. The limitations of this subdivision as to the amount of funds which may be on deposit at any one time shall not apply to negotiable certificates of deposit. (c) An association or federal association may act as a depositary or fiscal agent for the holding or handling of public funds notwithstanding the fact that a member of the legislative body or an officer or employee of the depositor is an officer, employee, or stockholder of the association or federal association, or of a savings and loan holding company or service corporation of the association or federal association. (d) Under this section a member of a legislative body, or an officer or employee shall not be deemed "interested in any contract" as that phrase is used in Section 1090 of the Government Code, if that person's sole interest is the fact that the person is an officer, employee, or stockholder of the association or federal association selected to act as depositary, paying agent, or fiscal agent or of its savings and loan holding company or service corporation. (e) An officer or employee of a local public agency shall be deemed to have only a "remote interest" in a contract, as that term is used in Section 1091 of the Government Code, where the contract is entered into without competitive bidding under a procedure established by law, if the sole interest is that of an officer, director, or employee, of an association or federal association or savings and loan holding company or service corporation of the association or federal association with which a party to the contract has the relationship of borrower or depositor, debtor, or creditor, and if the conditions of subdivision (a) of Section 1091 of the Government Code are met.


7001. (a) Whenever, under the laws of this state or otherwise, a deposit of securities is required for any purpose, the savings accounts and accounts made legal investments by this article shall be acceptable deposits. (b) Whenever, under the laws of this state or otherwise, a bond is required with security, the bond may be furnished, and the savings accounts and accounts made legal investments by this article in the amount of the bond shall be acceptable as security without other security.


7002. The provisions of this article supplement any and all other laws relating to and declaring what shall be legal investments for the persons, fiduciaries, corporations, organizations' funds, municipalities, bodies, and officials referred to in this article and supplement the laws relating to the deposit of securities and the making and filing of bonds for any purpose.


Article 11. Interest

Ca Codes (fin:7050-7055) Financial Code Section 7050-7055



7050. An association may issue savings accounts earning interest at different rates of return. The annual rate of return paid on a savings account may either be fixed at the time the account is issued or may vary on any basis specified at the time the account is accepted.


7051. An association may classify its savings accounts on any basis including, but not limited to, character, amount, or duration of the account, regularity of additions, or location of origin of the account.

7052. Except for accounts that are classified according to a specified contractual time or notice period, interest shall be based on the withdrawal value of each savings account at the beginning of the accounting period, plus additions made during the period (less amounts previously withdrawn and noticed for withdrawal, which for interest purposes shall be deducted from the latest previous additions) computed at the rate for the time the funds have been invested, determined as provided in Section 7053.


7053. (a) The date of investment in a savings account shall be the date of actual receipt by the association of the account or an addition to the account, except that if the association shall so determine, accounts in one or more classifications or additions received by the association on or before a date not later than the 20th day of the month (unless the day determined is not a business day, in which case it may be the next succeeding business day) shall receive interest as if invested on the first day of the month in which the payments were received. (b) If the association makes a determination under subdivision (a) it also shall determine that payments received subsequent to that determination date shall either receive interest as if invested on the first day of the next succeeding month, or receive interest from the date of actual receipt by the association, except as provided by Section 866.3.


7054. The board of directors, by resolution, may determine any of the following: (a) That interest shall not be paid on designated types of savings accounts from which withdrawals may be made upon demand or by negotiable and transferable order or authorization. (b) That an association may establish minimum balance requirements for savings accounts to be eligible for distribution of interest. (c) That, subject to applicable maximum regulatory limitations, an association may pay interest on a savings account at a rate or anticipated rate of return determined at the time that the account is accepted.

7055. The directors shall determine the method of calculating the amount of any interest on any savings account classification as provided in this article and the time or times when the interest is to be paid or credited.


Article 12. Withdrawals

Ca Codes (fin:7100) Financial Code Section 7100



7100. (a) Notwithstanding any other provision of law, but subject to subdivision (b), an association may permit the owner of a deposit or account to make withdrawals by negotiable or transferable instruments for the purpose of making transfers to third parties. (b) With respect to deposits or accounts on which interest or dividends are paid, subdivision (a) shall apply only to the deposits or accounts which consist solely of funds in which the entire beneficial interest is held by one or more individuals or by an organization which is operated primarily for religious, philanthropic, charitable, educational, political, or other similar purposes and which is not operated for profit. (c) Notwithstanding any other provision of law, an association may provide for the automatic transfer of funds services at the direction of an account holder.


Article 13. Redemption

Ca Codes (fin:7150-7154) Financial Code Section 7150-7154



7150. At any time funds are on hand for the purpose, an association shall have the right to redeem by lot or otherwise, as the board of directors may determine, all or any part of any of its savings accounts on an interest date by giving 30 days' notice by registered mail addressed to each affected account holder at the holder's last address as recorded on the books of the association.


7151. Except with the prior consent of the commissioner, no association shall redeem any of its savings accounts when the association is in an impaired condition and when it has applications for withdrawal that have been on file more than 14 days and have not been reached for payment.


7152. The redemption price of savings accounts redeemed shall be the full value of the account redeemed, as determined by the board of directors, but in no event shall the redemption price be less than the withdrawal value.

7153. If the notice of redemption under Section 7150 has been given, and if on or before the redemption date the funds necessary for the redemption have been set aside and continue to be available for the redemption, interest upon the accounts called for redemption shall cease to accrue from and after the interest date specified as the redemption date and all rights with respect to those accounts shall terminate after the redemption date, except only as to any right of the account holder of record to receive the redemption price without interest.

7154. (a) All certificates of ownership evidencing former savings accounts that have been called for redemption must be tendered for payment within the time limit specified in subdivision (b) of Section 1513 of the Code of Civil Procedure for escheat of unclaimed funds. (b) Savings accounts that are not tendered for payment as set forth in this section shall escheat to the state as provided in the Unclaimed Property Law, Chapter 7 (commencing with Section 1500) of Title 10 of Part 3 of the Code of Civil Procedure.


Chapter 6. Investment Operations

Article 1. Required Liquidity

Ca Codes (fin:7200) Financial Code Section 7200



7200. No association shall invest in any security under this chapter, other than in liquid assets, or in any loan at any time if the association fails to meet the minimum liquidity requirements prescribed by Section 566.2 of Title 12 of the Code of Federal Regulations, unless the commissioner has issued prior written approval. "Liquid assets," as used in this section, has the same meaning as defined by the regulations codified in Section 566.1 of Title 12 of the Code of Federal Regulations.


Article 2. Investment In Securities

Ca Codes (fin:7250-7252) Financial Code Section 7250-7252



7250. Notwithstanding any other provision of law, an association may invest in the following securities without limit, and in addition may invest not in excess of 5 percent of its assets in other securities that are deemed prudent by the association: (a) Bonds or other interest bearing notes and obligations of the United States and those for which the faith and credit of the United States are pledged for the payment of principal and interest, or obligations that are fully guaranteed as to principal and interest by, the United States, any state, or any state's political subdivisions, including its agencies, corporations and instrumentalities. (b) Stock, bonds or obligations of any federal home loan bank. (c) Stock or obligations of any international home loan bank or similar agency incorporated by authority of an act of Congress. (d) Stock, obligations, participations, or other instruments of or issued by, or fully guaranteed as to principal and interest by, the Federal National Mortgage Association, the Student Loan Marketing Association, Government National Mortgage Association, Federal Home Loan Mortgage Corporation, or any other agency of the United States and an association may issue and sell securities that are guaranteed under paragraph (g) of Section 306 of the National Housing Act (12 U.S.C. Sec. 1701 et seq.). (e) Bonds, other evidences of indebtedness or obligations of, or guaranteed as to principal and interest by, the Dominion of Canada or any of its provinces, provided that the principal and interest of the obligations are payable in United States funds. (f) Obligations issued or guaranteed by the International Bank for Reconstruction and Development, by the Inter-American Development Bank, or by the Asian Development Bank. (g) Demand, time or savings deposits, shares or accounts, or other obligations of any financial institution the accounts of which are insured by a federal agency. (h) Commercial paper and corporate debt securities. Investments under this subdivision in the paper or securities of any one obligor or maker shall not exceed the greater of (1) the amount a national bank having identical total capital and surplus could so invest in the paper or securities of any one obligor or maker, or (2) the amount a commercial bank, as defined in Section 105, having an identical shareholders' equity could so invest in the paper or securities of any one obligor or maker. (i) Shares or certificates in any open-end management investment company that is registered with the Securities and Exchange Commission under the Investment Company Act of 1940 and the portfolio of which is restricted by the management company's investment policy, changeable only if authorized by shareholder vote, primarily to investments authorized under this section. (j) Bankers' acceptances of the kind, character, and maturity eligible for rediscount with a Federal Reserve bank, and such other bonds and securities as authorized by Article 2.5 (commencing with Section 7260) or as the commissioner may authorize by rules and regulations.

7250.5. No savings association may directly or indirectly acquire or retain any corporate debt security unless the corporate debt security is rated in one of the four highest rating categories by at least one nationally recognized rating service.


7251. An association holding investments which have been approved by the commissioner shall not be required to dispose of them or to establish a reserve account if later the commissioner rescinds approval of the investments.

7252. (a) Notwithstanding any other provisions of this chapter, an association may, subject to regulations of the commissioner, invest in the capital stock, obligations, or other securities of service corporations. (b) The total of all investments under this section shall not exceed 10 percent of the total assets of the savings association. (c) A service corporation in which a savings association may invest shall only engage in those activities reasonably related to the activities of savings associations as the commissioner may approve. (d) An association may make an investment under this section notwithstanding that the service corporation in which investment is authorized has invested in any other corporation (1) that is not incorporated in this state, or (2) that has stock available for purchase by persons other than associations.


Article 2.5. Other Authorized Investments In Bonds And Securities

Ca Codes (fin:7260-7275) Financial Code Section 7260-7275



7260. Stock of a Federal Reserve bank.


7261. Bonds of the State of California and those for which the faith and credit of the State of California are pledged for the payment of principal and interest, and registered warrants of the State of California.

7262. Bonds of any flood control and water conservation districts, or any zone thereof, having an assessed valuation on taxable real property of not less than one million dollars ($1,000,000), county, city and county, city, metropolitan water district, municipal utility district, any special district established by and within any municipal utility district, transit district, rapid transit district, including sales tax revenue bonds of that district of the State of California (herein referred to generally as public corporations) except the bonds of any particular such public corporation which may be declared ineligible for investment by commercial banks by regulations of the commissioner.


7263. Bonds of any other political subdivision, public corporation, or district of the State of California (herein referred to generally as public corporations) having the power, without limit as to rate or amount, to levy taxes to pay the principal and interest of those bonds upon all property within its boundaries subject to taxation by the public corporation, if the net direct debt of that public corporation together with its net overlapping debt does not exceed 25 percent of the assessed valuation of the taxable property within its boundaries according to the last official equalized county assessment roll.

7264. Bonds or other evidences of indebtedness of, or which are unconditionally guaranteed by the State of Israel, the United States of Mexico, the Commonwealth of Puerto Rico, or any state of the United States other than California, for the payment of both principal and interest of which in United States dollars, the faith and credit of that entity is pledged; in limited obligations; and in the bonds or other evidences of indebtedness of any city, county, political subdivision, public corporation, or district (herein referred to generally as public corporations) of any state of the United States other than California, or of the State of Israel, or of the United States of Mexico, or of the Commonwealth of Puerto Rico, having the power without limit as to rate or amount to levy taxes to pay the principal and interest of those bonds upon all property within its boundaries subject to taxation by that public corporation; subject to the following: (a) In the case of bonds constituting general obligations of any such state, commonwealth, dominion, or country, the state, commonwealth, dominion, or country has not within 10 years prior to that investment defaulted for a period of more than 90 days in the payment of any part of either principal or interest of any of its debts. (b) In the case of limited obligations of any such state or commonwealth, (1) that the state or commonwealth has not within 10 years prior to the date of the investment defaulted for a period of more than 90 days in the payment of either principal or interest of any of its debts; (2) the special taxes pledged for the payment of the limited obligations shall have been collected for five fiscal years next preceding any investment and during the five fiscal years shall have averaged at least 1 1/2 times the debt service requirements, including those for principal, interest, and sinking fund, on all such special obligations existing at the time; and (3) the special taxes for each of those five fiscal years shall have equaled at least the amount of all the debt service requirements on those special obligations. (c) In the case of bonds or other evidences of indebtedness of any public corporation of any state other than California, or of such commonwealth: (1) The public corporation has had a corporate existence or been otherwise established and functioning for at least 10 years prior to the time of the investment. (2) The public corporation has a population of at least 50,000 inhabitants according to the last federal or state census. (3) The public corporation for a period of at least 10 years prior to the investment has not defaulted in the payment of any part of the principal or interest of any of its debts for a period of more than 90 days. (4) The net direct debt together with the net overlapping debt of the public corporation does not exceed 10 percent of the assessed valuation of the property subject to taxation by the public corporation according to the last, official equalized assessment roll or list upon the basis of which taxes for debt service are based. For the purposes of this subdivision: (A) The term "net direct debt" of any public corporation means all indebtedness of every kind after deducting from that indebtedness sinking funds available for the payment thereof, any indebtedness evidenced by tax anticipation notes for the payment of which nondelinquent taxes are pledged, obligations payable only from special assessments, revenue obligations payable only from special revenues pledged for their payment, and the proportion of any indebtedness issued for revenue-producing works, properties, or utilities which have been in operation for at least one year as the amount of the annual net revenue therefrom bears to the amount of the annual debt service requirements of those bonds. (B) The term "net overlapping debt" of any public corporation means that proportion of the net direct debt, as defined, of any other public corporation (herein called overlapping corporation) which lies wholly or partially within the boundaries of the public corporation as the assessed valuation of the taxable property of the overlapping public corporation lying within the boundaries of the public corporation as shown by the last official equalized county assessment roll bears to the assessed valuation of all taxable property of the overlapping public corporation as shown by the last official equalized county assessment roll.


7265. Bonds of any irrigation district, water, storage district, water conservation district, county water district, reclamation district, drainage district, and any district the primary function of which is the irrigation, reclamation, or drainage of land within its boundaries, located in California, other than bonds referred to in Section 7262, subject to any of the following: (a) The bonds qualify under Section 7263. (b) The bonds have been certified as legal securities pursuant to Chapter 1 (commencing with Section 20000) of Division 10 of the Water Code and the certification remains unrevoked. (c) The total outstanding bonded indebtedness of the district, including bonds authorized, but not issued, but excluding bonds payable solely from revenues and not directly or indirectly from assessments, does not exceed 50 percent of the aggregate of the assessed value of the lands, exclusive of improvements, subject to assessment by the district, and the value of the property owned by the district or to be acquired or constructed with the proceeds of the bonds under consideration.

7266. Bonds, consolidated bonds, collateral trust debentures, consolidated debentures, or other obligations issued by federal land banks or federal intermediate credit banks established under the Federal Farm Loan Act, as amended, the Farm Credit Act of 1971, in debentures and consolidated debentures issued by the Central Bank for Cooperatives and banks for cooperatives established under the Farm Credit Act of 1933, as amended, and the Farm Credit Act of 1971, and in stocks, bonds, debentures, participations, and other obligations of, or issued by, the Federal National Mortgage Association, the Student Loan Marketing Association, the Government National Mortgage Association, and the Federal Home Loan Mortgage Corporation.


7267. Bonds, notes, or other obligations issued by the Federal Financing Bank, the United State Postal Service, or issued or assumed by the International Bank for Reconstruction and Development, the Tennessee Valley Authority, the Inter-American Development Bank, the Government Development Bank for Puerto Rico, the Asian Development Bank, or the African Development Bank.


7268. (a) Notes with a maturity not exceeding 15 months after the date of issue, issued in anticipation of uncollected taxes, income, revenue, cash receipts, and other moneys of the State of California or any city, county, city and county, or school district, therefore, provided the notes and warrants and the interest thereon shall be a first lien and charge against, and shall be payable from, the first moneys received by the local agency from the pledged moneys, provided the total amount of the notes issued at any one time or during any specified period does not exceed 85 percent of the receipts or revenues. (b) Grant anticipation notes issued by the agencies and payable not later than 36 months after the date of issue, provided that the total amount of the notes and interest payable thereon issued at any one time or during any specified period does not exceed 80 percent of the grant funds stated in writing by the granting authority as committed, appropriated and shall be paid on a specified date or dates within a 36-month period from the dating of the notes.


7269. In revenue securities of any state of the United States, or of the Commonwealth of Puerto Rico, and of any city, county, city and county, political subdivision, public corporation, or district (herein referred to generally as public corporations) of any such state or commonwealth and of any department, board, agency, or authority of any such state or commonwealth or of any public corporation subject to the following: (a) The revenue securities constitute obligations payable out of the revenues from a revenue-producing property owned, controlled, or operated by the state, commonwealth, public corporation, or by a department, board, agency, or authority thereof and are secured by those revenues. (b) Either: (1) The new income from the property available for the payment of the securities for the five fiscal years next preceding any such investment, shall have averaged at least one and one-tenth times all debt service requirement for principal, interest, and sinking fund of all revenue securities payable only out of the revenues from the property during each of those fiscal years, and for each of those five fiscal years shall have equaled at least all debt service requirements for principal, interest, and sinking fund of those securities, and for the last fiscal year shall have amounted to at least the maximum annual debt service requirement for any fiscal year thereafter on all such securities which were outstanding during the last fiscal year and which will be outstanding in any fiscal year thereafter. The gross income from the property, the net income from which is pledged for the payment of those securities, in the last fiscal year prior to that investment was not less than one million dollars ($1,000,000), is located in California, and was not less than five million dollars ($5,000,000) if located elsewhere. The issuer is obligated to maintain rates at least sufficient to meet debt service requirements and those obligations are legally enforceable. (2) The issuer of the securities is entitled to receive under a legally enforceable contract with a corporation any of the securities of which are a legal investment for commercial banks under Division 1, annual payments averaging not less than nine hundred thousand dollars ($900,000) a year commencing with the completion of a project or projects as fixed in the construction contract therefore and continuing during the maximum term for which those revenue securities are to mature. The issuer of the securities is obligated to maintain rates to produce revenue, or will receive contract payments, either or both of which will be sufficient to meet debt service requirements and that obligation contract is legally enforceable. (c) The public corporation or any department, board, agency, or authority thereof which issues the securities, if existing elsewhere than in California, has not within 10 years prior to that investment defaulted for a period of more than 90 days in the payment of principal or interest on any of its debts.


7270. Bonds of any local public housing agency (as defined in the United States Housing Act of 1937, as amended) as are secured either, (a) by an agreement between the public housing agency and the Public Housing Administration in which the public housing agency agrees to borrow from the Public Housing Administration, and the Public Housing Administration agrees to lend to the public housing agency, prior to the maturity of those obligations (which obligations shall have a maturity of not more than 18 months), moneys in an amount which (together with any other moneys irrevocably committed to the payment of interest on the obligations) will suffice to pay the principal of those obligations with interest to maturity thereon, which moneys under the terms of that agreement are required to be used for the purpose of paying the principal of, and the interest on, those obligations at their maturity, or (b) by a pledge of annual contributions under an annual contributions contract between the public housing agency and the Public Housing Administration if the contract shall contain the covenant by the Public Housing Administration which is authorized by subsection (b) of Section 22 of the United States Housing Act of 1937, as amended, and if the maximum sum and the maximum period specified in the contract pursuant to subsection (b) of Section 22 of the United States Housing Act of 1937 shall not be less than the annual amount and the period for payment which are requisite to provide for the payment when due of all installments of principal and interest on those obligations.


7271. Bonds secured by an insurance commitment of the Federal Housing Administration.


7272. Evidences of indebtedness of companies incorporated in the United States and, directly or indirectly, engaged in manufacturing, extraction, merchandising, or commercial financing and in bonds of authorities established pursuant to the California Industrial Development Financing Act (Title 10 (commencing with Section 91500) of the Government Code), to which those institutions are obligated with respect to payment, provided: (a) Any unsecured evidences of indebtedness shall be issued by a company substantially all of whose property is free of mortgage and shall carry a covenant by the obligor that they will be secured equally with any mortgage bond, except a purchase money mortgage, which may be later issued. (b) The company is of such size as to attract at least statewide interest in its publicly held securities and its gross income shall have averaged not less than ten million dollars ($10,000,000) and its net income shall have averaged not less than one million dollars ($1,000,000) for the five fiscal years preceding the investment and its gross income was not less than one million dollars ($1,000,000) for at least three of those five fiscal years. (c) Working capital as measured by consolidated current assets less consolidated current liabilities as shown in the latest published balance sheet shall exceed 150 percent of the total of consolidated debt due in longer than one year and "minority interest" (i.e., any outstanding interest in a subsidiary having a prior claim on the earnings of the subsidiary), except that the foregoing ratio requirement shall not apply in the case of evidences of indebtedness of any corporation whose consolidated gross assets less any valuation reserves exceed five hundred million dollars ($500,000,000) and whose consolidated current assets exceed consolidated current liabilities by at least one hundred million dollars ($100,000,000) as shown by the latest published balance sheet. When new financing is involved, the changes in gross assets, capital structure, and working capital shall be considered and reliance may be placed on the representations made in the official prospectus prepared under the rules of the Securities and Exchange Commission as to the application of the proceeds of that financing. (d) The total consolidated debt of the company including current liabilities and "minority interest" (i.e. any outstanding interest in a subsidiary having a prior claim on the earnings of the subsidiary), as shown on the latest published balance sheet, does not exceed 33 1/3 percent of its gross assets less valuation reserves. (e) The consolidated annual net income for the five fiscal years next preceding the investment, before deductions of state and federal taxes imposed on or measured by income or profits but after deducting all charges (including reserves, regularly recurring charges for amortization of discount, and expense allocable to funded debt) (1) shall have averaged not less than six times the annual consolidated interest charges existing at the time the investment is made; (2) in at least three of those five fiscal years shall have been at least four times the annual consolidated interest charges for the same year; and (3) for the fiscal year next preceding the investment shall have been not less than six times the consolidated interest charges for that year and not less than six times the annual consolidated charges on the funded debt outstanding at the time of the investment.

7273. Fixed interest railroad bonds meeting the requirements of subdivisions (a) and (b), bonds secured by a mortgage on jointly operated railroad facilities meeting the requirements of subdivision (c), and railroad equipment trust certificates meeting the requirements of subdivision (d), as follows: (a) The railroad bonds are issued by or are assumed, guaranteed, or provision is made unconditionally for the payment of principal and interest on specified dates, by a solvent railroad company: (1) That operates at least 500 miles of standard gauge road within the continental United States and that has had average annual operating revenues of at least ten million dollars ($10,000,000) during the five years next preceding the investment. (2) Whose average annual balance of income available for fixed charges for the last 15 years for which the necessary statistical data are available, when divided by an amount equal to its fixed charges for the last fiscal year, shall produce a quotient that is at least 15 percent higher than the quotient obtained by dividing the average annual balance of income available for fixed charges of all class 1 railroads for the same 15-year period by an amount equal to the fixed charges of all class 1 railroads for the last year in the period. (3) Whose average "balance of net income" (computed by deducting the sum of its fixed charges and contingent interest charges for the latest fiscal year from the average annual balance available for fixed charges for the latest 15 years for which the necessary statistical data are available) when divided by its average annual railroad operating income for the same 15-year period, shall produce a quotient at least 15 percent greater than the quotient obtained by dividing the average balance of income of all class 1 railroads, computed in the same manner, by the average annual railway operating income of all class 1 railroads for the same 15-year period. (4) Whose average balance of income available for fixed charges for the last three fiscal years preceding the investment, or for the lesser number of fiscal years that may have elapsed since December 31, 1946, has not been less than one and one-half times its fixed charges for the last fiscal year. (b) The railroad bonds are secured by any of the following: (1) A mortgage, either direct or collateral, that shall be a first mortgage on not less than 75 percent of the mileage subject to the mortgage. (2) A first mortgage on terminal properties comprising the company' s principal freight or passenger terminal in a city of not less than 250,000 population according to the latest federal or state census. (3) A refunding mortgage on not less than 75 percent of the railroad mileage owned or operated by the issuing company under which bonds may be issued for retirement or refunding of all debts secured by prior liens on all or any part of the property, other than liens on equipment, subject to the mortgage, if the amount of debt senior to the refunding mortgage is not more than 50 percent of the sum of all senior debt and the refunding mortgage or if underlying mortgage bonds in an amount equal to at least 50 percent of the debt outstanding under the refunding mortgage are pledged as security under that refunding mortgage. (4) A first mortgage on railroad property leased to and operated by the company if the lease extends beyond the maturity date of the bonds and the company has guaranteed, assumed, or committed itself under the terms of the lease to pay principal and interest on the bonds. (c) Bonds secured by a mortgage on jointly operated railroad facilities shall be secured by a first mortgage on a terminal, depot, tunnel, or bridge used by or leased to two or more railroads that have jointly and severally agreed unconditionally to pay the interest and principal payment, one of which railroads shall meet the requirements set forth in subdivision (a). (d) Railroad equipment trust certificates shall be issued by a solvent class 1 railroad whose average balance of income available for fixed charges for the last three fiscal years preceding the investment, or for the lesser number of fiscal years that may have elapsed since December 31, 1946, shall be not less than one and one-half times its fixed charges for the last fiscal year. Those certificates shall be issued to provide funds for the construction or acquisition of new standard gauge railroad equipment made with the approval of the Interstate Commerce Commission and secured by an equipment trust, lease, conditional sales contract, or first lien on the equipment. The aggregate principal amount of the obligations shall not exceed 80 percent of the purchase price of the equipment and the certificates shall mature within 15 years of the date of issuance in equal annual, semiannual, or monthly installments, beginning not later than one year after the date of issuance. (e) As used in this section, "balance of income available for fixed charges," "fixed charges," "contingent interest," and "railway operating income" shall have the same meaning as in the accounting reports filed by common carriers by rail pursuant to regulations of the Interstate Commerce Commission, except that "balance of income available for payment of fixed charges" shall be computed before deduction of federal income of excess profits taxes, and "fixed charges" and "contingent interest" of the railroad shall be those charges existing as of the time the computation is made, excluding charges with respect to debt that has been retired or will be retired within six months and for the payment of which funds have been or are contemporaneously being set aside in trust but including charges with respect to new debt issued or in the process of being issued.


7274. Bonds and debentures of gas, electric, or gas and electric companies meeting the requirements of subdivision (a), bonds and debentures of telephone companies meeting the requirements of subdivision (b), and the bonds and debentures of water companies meeting the requirements of subdivision (c), as follows: (a) Bonds or debentures of gas, electric, or gas and electric companies shall be of an issue that originally amounted to not less than one million dollars ($1,000,000) and, if bonds, be secured by a mortgage on substantially all of its physical property, and, if debentures, shall be issued by a company substantially all of whose physical property is free of mortgage and shall carry a covenant to be secured equally with any mortgage indebtedness, except a purchase money mortgage, subsequently issued, and both bonds and debentures shall be issued by a public utility corporation, which does all of the following: (1) Derives more than 50 percent of its gross operating revenue from the business of supplying electricity, artificial gas, or natural gas or all or any of these services, and at least 80 percent of its gross operating revenue from all or any of the public utility businesses enumerated in this section. (2) Has a gross operating revenue of not less than seven million five hundred thousand dollars ($7,500,000) for its most recent fiscal year. (3) Has a funded debt not exceeding two-thirds of the value of its physical property as shown by the books of the corporation or by a statement of a certified public accountant issued within one year, which statement may be based upon the books of the corporation, less the amount of any reserves for depreciation, retirement, or amortization of the physical property. Physical property of a corporation shall include the physical property of a subsidiary corporation if the corporation owns not less than 90 percent of the outstanding voting shares of the subsidiary corporation. (4) Has had earnings, including earnings of subsidiaries mentioned in paragraph (3), available for interest payments, before deduction of state and federal taxes imposed on or measured by income or profits, during four of the five most recent fiscal years and during the most recent fiscal year equal to at least twice the existing annual interest charges on the corporation's total funded debt during those respective fiscal years. (b) Bonds or debentures of telephone companies shall be of an issue originally amounting to at least one million dollars ($1,000,000) and, if bonds, secured by a mortgage on substantially all of the physical property of the company, and, if debentures, be issued by a company substantially all of whose physical property is free of mortgage and shall carry a covenant to be secured equally with any mortgage indebtedness, except a purchase money mortgage, subsequently issued, and both bonds and debentures shall be issued by a company subject to the following: (1) The company has during its last fiscal year had gross revenues of at least seven million five hundred thousand dollars ($7,500,000), more than 50 percent of which was derived from owned properties used in furnishing telephone and other communication services and at least 80 percent of its gross revenues from all or any of the public utility businesses enumerated in this section. (2) The funded debt does not exceed two-thirds of the value of its physical property as shown by the books of the corporation or by a statement of a certified public accountant issued within one year, which statement may be based upon the books of the corporation, less the amount of any reserves shown on the statement for depreciation, retirement, or amortization as the physical property. Physical property of a corporation shall include the physical property of a subsidiary corporation if the corporation owns not less than 90 percent of the outstanding voting shares of the subsidiary corporation. (3) For four of the five most recent fiscal years and for the last fiscal year has had earnings, including earnings of subsidiaries mentioned in paragraph (2), available for the payment of interest charges, before deduction of state and federal taxes imposed on or measured by income or profits, at least equal to twice the interest charges on the company's total funded debt during those respective fiscal years. (c) Water company bonds or debentures shall be of an issue originally amounting to at least one million dollars ($1,000,000) and, if bonds, secured by a first mortgage on the company's property, and, if debentures, issued by a company substantially all of whose property is free of mortgage and carry a covenant to be secured equally with any mortgage indebtedness, except a purchase money mortgage, subsequently issued, and both bonds and debentures shall be issued by a company subject to the following: (1) The company is the supplier of substantially all water for domestic use in a community or communities having a population of not less than 25,000. (2) The funded debt of the company does not exceed two-thirds of the value of its physical property as shown by the published statement of the company for its next preceding fiscal period, less the amount of any reserves shown for depreciation, retirement, or amortization of the physical property. Physical property of a corporation shall include the physical property of a subsidiary corporation if the corporation owns not less than 90 percent of the outstanding voting shares of the subsidiary corporation. (3) For four out of the five most recent fiscal years and for the most recent fiscal year has had earnings, including those of subsidiaries mentioned in paragraph (2), available for the payment of interest charges, before deduction of state and federal taxes imposed on or measured by income or profits, of at least one and one-half times the interest charges on the company's total funded debt during those respective fiscal years.

7275. As used in this article, "funded debt" means all interest-bearing indebtedness of a corporation not maturing within one year of the date it was incurred.


Article 3. Investment In Business Property

Ca Codes (fin:7300) Financial Code Section 7300



7300. (a) Each association shall have power to invest in real property, tangible personal property and interests in real property for the conduct of the business of the association, or its service corporation, which power shall include the ownership of stock of a wholly owned subsidiary corporation having as its exclusive activity the ownership and management of the property or interests. (b) As used in this section, the term "real property" includes structures or buildings located on land owned in fee or held under a lease or sublease by the association with an unexpired term, including extensions or renewals that are automatically effective or may be exercised at the association's option, of 25 years at the date of execution by the association of the lease or sublease. (c) No association may without written approval of the commissioner purchase, sell, or pay interest on or dividends involving, gold or silver bullion or related instruments or securities except gold coins minted and issued by the United States Treasury pursuant to Public Law 99-185, 99 Stat. 1177 (1985).


Article 4. Purchase Of Real Estate

Ca Codes (fin:7350) Financial Code Section 7350



7350. (a) An association may acquire and hold stock of one or more corporations the primary activities of which are engaging in real property investment, in which event the sum of (1) investments made by an association pursuant to the authority of this subdivision, (2) any loans and guarantees extended by an association to, or for the benefit of, corporations the stock of which it holds pursuant to the authority of this subdivision, and (3) real property investments made pursuant to the authority of subdivision (b), unless a higher percentage is approved by the commissioner in writing, shall not exceed 10 percent of the total assets of the association. (b) An association may engage in real property investment. The total of all real property investments made pursuant to the authority of this subdivision, unless a higher percentage is approved by the commissioner in writing, shall not exceed the total shareholders' equity of the association. (c) Prior to initially engaging in real property investment activities authorized by subdivision (a) or (b), an association shall make application with the commissioner for approval of its general plan of real property investment. The application for approval shall be in letter form, shall contain a copy of the general plan for real property investment as approved or adopted by the board of directors of the association, which shall include a brief description of either the activities of the corporations the association will invest in or the activities the association will engage in, or both, the approximate amount to be invested, the extent, if any, of diversification of those activities or investment, and the approximate date of the initial investment, and shall be signed by the chief executive officer of the association. Unless the commissioner finds (1) that the capital, assets, management, earnings, and liquidity of the association are, on a composite basis, not satisfactory or (2) that the plan for the association to engage in real property investment or to acquire and hold the stock of one or more real property investment corporations is unsafe or unsound, the commissioner shall approve the application. An application for approval shall be deemed approved on the 46th day after the application is filed with the commissioner, unless the commissioner earlier makes a final decision on the application or extends the period for approving or denying the application. For purposes of this subdivision, an application for approval shall be deemed to be filed with the commissioner on the date when the application, substantially in compliance with the requirements of this subdivision, is received by the commissioner. Upon the filing of the application for approval, the applicant shall pay to the commissioner a filing fee of five hundred dollars ($500). (d) As used in this section, "real property investment" means all forms of investing in real property, whether direct or in the form of partnerships, joint ventures, or other methods of investment. It includes, but is not limited to, the purchasing, subdividing, and developing of real property or any interest therein, the building of residential housing or commercial improvements, and the owning, renting, leasing, managing, operating for income, or selling of that property. (e) The legality of any investment lawfully made pursuant to former Section 7350, as repealed by the act enacting this section, shall not be affected by this section, nor shall this section be construed to require the changing of any investments lawfully made prior to January 1, 1991.


Article 5. Investment In Loans

Ca Codes (fin:7450-7462) Financial Code Section 7450-7462



7450. (a) An association may make any loan authorized by this division, but the association shall first determine that the type, amount, purpose, and repayment provisions of the loan in relation to the borrower's resources and credit standing support the reasonable belief that the loan will be financially sound and will be repaid according to its terms, and that the loan is not otherwise unlawful. (b) Subject to any regulations of the commissioner, an association may make or acquire loans directly or indirectly to or from any director, officer, affiliated person, or any parent or subsidiary. Loans made or acquired, directly or indirectly, the proceeds of which are intended to inure or have inured to the benefit of these parties are subject to the same regulations.


7450.2. Except with the prior written consent of the commissioner, no association shall knowingly make: (a) Any loan to any corporation of which 10 percent or more of the stock is owned or controlled individually or collectively by any one or more of the directors, officers, employees, or substantial stockholders of the association. As used in this subdivision, "substantial stockholder" means a person who has a real or beneficial ownership of more than 10 percent of the outstanding stock of the association. For this purpose, stock owned by the person's immediate family shall be deemed owned by that person. (b) Any loan the proceeds of which are intended to inure to the benefit of any corporation specified in subdivision (a).


7451. Except as otherwise provided by the commissioner, an association shall not make or acquire total loans with respect to one borrower or on one project in an amount exceeding 25 percent of the net worth of the association. As used in this section, "one borrower" has the meaning defined in Section 7453.


7452. (a) An association may make consumer loans, provided that the total of such loans shall not exceed 30-percent of the assets of the association. (b) An association may include loans to dealers in consumer goods to finance inventory and floor planning in the total investment as part of the 30-percent limitation described in subdivision (a). For purposes of the limitations on loans to one borrower, loans to dealers in consumer goods to finance inventory and floor planning shall be treated as commercial loans.


7453. (a) An association may make, invest in, sell, purchase, participate in, or otherwise deal in secured or unsecured loans for agricultural, business, commercial, or corporate purposes, provided that the total investment in such loans does not exceed 10 percent of the assets of the association. (b) An association may invest in, sell, purchase, participate in, or otherwise deal in loans specified in subdivision (a) which are originated by any savings association, federal association, holding company of a federally insured savings association, commercial bank, bank holding company, subsidiary of a bank holding company, or insurance company, provided that the total investment in such loans shall not exceed 10 percent of the association's assets. (c) For the purposes of this section, the term "loan" does not include any corporate debt security unless it is rated in one of the four highest rating categories by at least one nationally recognized rating service. (d) No association shall make, invest in, purchase, or participate in a loan for agricultural, business, commercial, or corporate purposes to one borrower, except as the commissioner may approve in writing, if the sum of the amount of the association's interest in the loan and the total balance of the association's interest in all outstanding loans for those purposes owed to the association by that borrower exceed the greater of (1) the amount a national bank having an identical total capital and surplus could lend to one borrower, or (2) the amount a commercial bank, as defined in Section 105, having an identical total shareholders' equity, capital notes, and debentures, could lend to one borrower. This subdivision shall not apply to loans (1) secured by real property, (2) sold without recourse, (3) on the security of the association's deposit accounts, or (4) of unsecured day funds, including federal funds or similar unsecured loans. (e) As used in this section the term "one borrower" means: (1) Any person that is, or upon the making of a loan will become, an obligor on the loans. However, a guarantor shall not be included within the meaning of "obligor" if, in connection with a loan the association has determined, in good faith, that the primary obligor has qualified for the loan irrespective of the existence of the guarantor. In the case of a loan that has been assumed by a third party with the consent of the association, the former debtor and any guarantor shall not be deemed to be an "obligor." (2) Nominees of the obligor. (3) All persons, trusts, syndicates, partnerships and corporations of which the obligor is a nominee, a beneficiary, a member, a general partner, a limited partner owning an interest of 10 percent or more based on the value of his or her capital contribution, or a record or beneficial stockholder owning 10 percent or more of the capital stock. (4) If the obligor is a trust, syndicate, partnership or corporation, all trusts, syndicates, partnerships and corporations of which any beneficiary, member, general partner, limited partner owning an interest of 10 percent or more based on the value of his or her capital contribution, or record or beneficial stockholder owning 10 percent or more of the capital stock, is also a beneficiary, member, general partner, limited partner owning an interest of 10 percent or more based on the value of his or her capital contribution, or record or beneficial stockholder owning 10 percent or more of the capital stock of the obligor.


7454. Each association is authorized to issue credit cards, extend credit in connection with the cards, and otherwise engage in or participate in credit card operations. The provisions of Title 2 (commencing with Section 1801) of the Civil Code shall not apply to any credit extended by an association pursuant to the provisions of this section.


7455. No association or director, officer, or employee of an association shall require, as a condition to the granting of any loan or the extension of any other service by the association, that the borrower or any other person undertake a contract of insurance with any specific company, agency, or individual.


7456. Any loan commitment made by an association shall be counted as an investment and shall be included in total assets of the association only to the extent that funds have been advanced (and not repaid) pursuant to the commitment. For the purposes of this section, the term "loan commitment" includes a loan in process, a letter of credit, or any other commitment to extend credit.


7457. An association may make loans on the security of its savings accounts, whether or not the borrower is the owner of the account, subject to the limitations of this article.


7458. An association may make overdraft loans specifically related to transaction accounts, subject to regulations issued by the commissioner.

7459. In addition to establishing reserves pursuant to Section 6476, an association or federal association, as defined in Section 5102, may establish a separate loan reserve account regarding losses resulting from fraud by a borrower and may recover any of those losses from that borrower.


7460. (a) Notwithstanding Section 726 of the Code of Civil Procedure or any other provision of law to the contrary, an association, a federal association, an affiliate of an association or federal association, a service corporation, or any successor in interest thereto, that originates, acquires, or purchases, in whole or in part, any loan secured directly or collaterally, in whole or in part, by a mortgage or deed of trust on real property, or any interest therein, may bring an action for recovery of damages, including exemplary damages not to exceed 50 percent of the actual damages, against a borrower where the action is based on fraud under Section 1572 of the Civil Code and the fraudulent conduct by the borrower induced the original lender to make that loan. (b) The provisions of this section shall not apply to loans secured by single-family, owner-occupied residential real property, when the property is actually occupied by the borrower as represented to the lender in order to obtain the loan and the loan is for an amount of one hundred fifty thousand dollars ($150,000) or less, as adjusted annually, commencing on January 1, 1987, to the Consumer Price Index as published by the United States Department of Labor. (c) Any action maintained under this section for damages shall not constitute a money judgment for deficiency or a deficiency judgment within the meaning of Section 580a, 580b, or 580d of the Code of Civil Procedure.


7461. The provisions of any deed of trust or mortgage on real property which authorize an association, federal association, affiliate or service corporation of an association or federal association, or any successor in interest thereto, to accelerate the maturity date of the principal and interest on any loan secured thereby or to exercise any power of sale or other remedy contained therein upon the failure of the trustor or mortgagor to pay, at the times provided for under the terms of the deed of trust or mortgage, any taxes, rents, assessments, or insurance premiums with respect to the property or the loan, or any advances made by the association, federal association, affiliate or service corporation of an association or federal association, or any successor in interest thereto, shall be enforceable whether or not impairment of the security interest in the property has resulted from the failure of the trustor or mortgagor to so pay the taxes, rents, assessments, insurance premiums, or advances.


7462. The provisions of any deed of trust or mortgage on real property which authorize an association, federal association, affiliate or service corporation of an association or federal association, or any successor in interest thereto, to receive and control the disbursement of the proceeds of any policy of fire, flood, or other hazard insurance respecting the property shall be enforceable whether or not impairment of the security interest in the property has resulted from the event that caused the proceeds of the insurance policy to become payable.


Article 6. Real Estate Loans

Ca Codes (fin:7500-7509) Financial Code Section 7500-7509



7500. (a) Subject to limitations, if any, within this chapter, an association may originate, invest in, sell, purchase, service, participate, or otherwise deal in (including brokerage or warehousing) loans, including construction loans, made on the security of residential or nonresidential real property, or interests in these loans. (b) No investment in real property or a real estate loan shall be made by an association until one or more written appraisal reports, prepared at the request of an association or its agent, have been submitted to the association by a person or persons meeting the qualification standards for an appraiser as set forth in the commissioner's regulations. No commitment to disburse shall be made by the association until the person or persons have been duly appointed and qualified as appraisers by the association. Such a person or persons shall have made a physical inspection and submitted to the association a fully documented appraisal of the real estate that would secure the loan or constitute the investment, or, in the case of a purchased loan, the person or persons have reviewed and approved an appraisal report in support of the loan. If the balance of any purchased loan is one million dollars ($1,000,000) or more, the person or persons reviewing and approving the appraisal report shall have inspected the real estate. Each appraisal report submitted to an association pursuant to this subdivision shall be signed and shall include the tax identification number, social security number, or other form of verifiable identification of the person or persons signing the appraisal report. (c) For the purpose of determining appraised value, unimproved property without offsite improvements shall be evaluated as though offsite improvements have been installed if a subdivision map has been recorded and a bond or other instrument guaranteeing installation of the offsite improvements has been accepted by the governing authorities in connection with the recording of the subdivision map.


7501. Each real estate loan shall be evidenced by a note or instrument of obligation for the amount of the loan. The note or instrument shall specify the amount and terms of repayment including any penalty or charge for late payment, and may contain all other terms of the loan contract.


7502. (a) Each real estate loan shall be secured by a deed of trust, mortgage, or other transaction or instrument constituting a lien or claim, or its equivalent, upon the real estate securing the loan, according to any lawful and recognized practice that is suited to the transaction. Any deed of trust or other instrument or transaction constituting a lien or claim is included in the term "mortgage" in this division. (b) A mortgage shall provide specifically for full protection to the association with respect to the loan and additional advances, including any terms and conditions that the association deems necessary and appropriate to state the agreement between the parties.


7503. Except as specified by the loan contract or by Section 2954.8 of the Civil Code, an association shall have no obligation to pay interest to the borrower upon funds credited to an impound, trust, or other type of account for payment of taxes, insurance, or other charges relating to the property, or to invest them for the benefit of the borrower, unless the funds have been placed in an interest bearing savings account under the terms of the loan contract.


7504. Notwithstanding any other provision of law, an association may adjust the interest rate, payment, balance, or term-to-maturity on any loan secured by real property as authorized by the loan contract, and may receive a portion of the consideration for making a real estate loan in the form of a percentage of the amount by which the current market value of the property during the loan term or at maturity exceeds the original appraised value, subject to the limitations of subdivision (b) and Section 341 of P.L. 97-320 (H.R. 6267, the Garn-St. Germain Depository Institutions Act of 1982). (a) For the purposes of this section: (1) "Fully amortized loan" means a loan in which, at inception of the loan, the entire principal balance, together with accrued interest, shall be payable with the scheduled term of the loan in substantially equal installments (excepting the last payment, which may be smaller than a regular scheduled payment). (2) "Home loans" means loans made on the security of one- to four-unit residential dwellings (including condominiums and cooperatives), combinations of these dwellings and business property (where no more than 20 percent of the total appraised value of the real estate is attributable to the business use), farm residences and combinations of farm residences and commercial farm real property. (3) "Nonamortized loan" means a loan in which none of the principal balance shall be payable prior to the maturity of the loan. (4) "Open end line of credit" means a loan plan in which the association reasonably contemplates repeated transactions; the association may impose interest from time to time on the unpaid principal of the loan plan, and the amount of credit that may be extended to the borrower during the term of the loan plan (up to any limit set by the association) is generally made available to the extent that any outstanding principal balance is repaid. (5) "Partially amortized loan" means a loan in which some but not all of the principal balance, together with accrued interest, shall be payable prior to the maturity of the loan. (6) "Reverse annuity mortgage" means an instrument which provides for periodic payments to be made to a homeowner based on accumulated equity. The payments are made monthly directly by the association, or are made through the purchase of an annuity from an insurance company. The loan becomes due on a specified date after disbursement of the entire principal amount of the loan or when a specified event occurs, such as sale of the property or death of the borrower. The interest rate on this instrument may be fixed, or may be adjusted periodically as provided by this section. (b) Adjustments to the interest rate, payment, balance, or term-to-maturity on home loans shall be subject to the limitations of this subdivision. (1) The loan term shall not exceed 40 years, with interest payable at least semiannually, except as expressly authorized by this section. (2) The loan balance for other than nonamortized and open end line of credit loans shall be repayable in at least semiannual installments; provided, that loans on the security of farm residences and combinations of farm residences and commercial farm real property may be repayable in annual installments. (3) The loan may be fully amortized, partially amortized, nonamortized, a reverse annuity mortgage, or an open end line of credit loan. The loan contract may provide for the deferral of principal and capitalization of a portion of interest, or of all interest, in the case of loans to natural persons secured by borrower-occupied real property and on which periodic advances are being made. (4) (A) At origination, the loan-to-value ratio may not exceed the maximum permitted by Section 7509, as determined by the association' s board of directors (but not more than 100 percent). During the term of the loan, the loan-to-value ratio may increase above the maximum percentage otherwise permissible if the increase results from an adjustment described in paragraph (3) or (5). The commissioner shall assume continued compliance with applicable loan-to-value limitations where the original loan-to-value ratio met the requirements of this paragraph, but in no event may the loan balance exceed 125 percent of the original appraised value of the security property during the term of the loan unless pursuant to clause (i) of subparagraph (B) of paragraph (5) of subdivision (b) or unless the loan contract provides that the payment shall be adjusted at least once every five years, beginning no later than the 10th year of the loan, to a level sufficient to amortize the loan at the then existing interest rate and loan balance over the remaining term of the loan. However, this 125 percent limitation shall not apply to the portion of a loan balance that is interest received in the form of a percentage of the appreciation in value of the security property. (B) If, at maturity of a loan secured by a home that provides for adjustments pursuant to paragraph (3) or (5), the ratio of the loan balance to the current market value of the security property exceeds the maximum permissible amount under Section 7509, the association may offer to refinance the loan if (i) the refinanced loan complies with subdivision (b) of Section 7509 and (ii) the loan contract for the refinanced loan requires that, in addition to full or partial amortization of the loan, the pro rata portion, based on the number of installments due annually, of estimated annual taxes and assessments on the security property be paid in advance to the association with each installment payment. (5) For any home loan secured by borrower-occupied property or property to be occupied by the borrower, adjustments to the interest rate, payment, balance, or term-to-maturity shall comply with the limitations of this paragraph. (A) Adjustments to the interest rate shall correspond directly to the movement of an interest rate index or of a national or regional index that measures the rate of inflation or the rate of change in consumer disposable income, which index is readily available to, and verifiable by, the borrower and is beyond the direct control of the association. An association also may increase the interest rate pursuant to a formula or schedule that specifies the amount of the increase and the time at which it may be made and which is set forth in the loan contract. An association, in its sole discretion, may decrease the interest rate at any time. (B) Adjustments to the payment and the loan balance that do not reflect an interest rate adjustment may be made if: (i) the adjustments reflect a change in a national or regional index that measures the rate of inflation or the rate of change in consumer disposable income, is readily available to and verifiable by the borrower, and is beyond the direct control of the association; (ii) in the case of a payment adjustment, the adjustment reflects a change in the loan balance or is made pursuant to a formula, or to a schedule specifying the percentage or dollar change in the payment as set forth in the loan contract; or (iii) in the case of an open end line of credit loan, the adjustment reflects an advance taken by the borrower under the line of credit, or a payment made by the borrower, that is permitted by the loan contract. (C) Any combination of indices or a moving average of index values may be used as an index, and an association (i) may use more than one index during the term of a loan, if set forth in the loan contract and (ii) may provide for the selection of a substitute index by the association in the event the index being used is no longer available to or verifiable by the borrower or as otherwise provided in the loan contract. (D) The loan term may be adjusted only to reflect a change in the interest rate, the payment or the loan balance. A loan contract may provide an association with the right to call the loan due and payable either after a specified period of time has elapsed following the date of the loan contract or as specified in a reverse annuity mortgage. (6) For any home loan secured by borrower-occupied property and on which the interest rate may be adjusted pursuant to paragraph (5), an association may not impose a prepayment charge on any prepayment made within 90 days of a required notice of an interest-rate increase with respect to the loan. (c) Disclosure and notices for loans made pursuant to this section shall comply with the regulations codified in Section 563.99 of Title 12 of the Code of Federal Regulations.

7505. (a) Notwithstanding any other provision of law, an association may originate, invest in, sell, purchase, service, participate, or otherwise deal in loans (including construction loans) on the security of real property for primarily residential (other than a one- to four-unit dwelling) or nonresidential use, subject to the limitations of this article. (b) An association's aggregate investment in real property loans for primarily nonresidential use under this section shall not exceed 40 percent of assets.


7505.5. (a) A savings association may make loans the principal purpose of which is to provide financing with respect to what is, or what is to become, primarily residential real estate, for which the association relies substantially on the borrower's general credit standing and projected future income for repayment, without other security, or relies on other assurances for repayment, including guarantees or other obligations of third parties. (b) An association's aggregate investment in residential real estate loans described in subdivision (a) shall not exceed an amount equal to 5 percent of the association's assets.


7506. Notwithstanding any other provision of the law, an association may make a loan secured by an assignment of a loan or loans to the extent that it could, under applicable law and regulations, make or purchase the underlying assigned loan or loans.


7507. (a) An association may make loans or advances of credit, or invest in interests therein, on the security of real property, which loans, advances of credit, or investments are not otherwise authorized under the law because of the following reasons: (1) The loan-to-value ratio, stated maturity, or loan amount is in excess of the maximum allowable limits. (2) Lack of any required borrower certification or required private mortgage insurance. (3) The loan would cause an applicable percentage-of-assets category to be exceeded. (4) A combination of the foregoing factors. (b) Investments made under the authority of this section are subject to the following restrictions: (1) No association shall have investments under this section aggregating at any one time more than 5 percent of its total assets. (2) Each investment made under this section shall be fully documented to support the conclusion that it was made on a prudent basis. (3) Loans made pursuant to this section shall comply with subparagraph (D) of paragraph (5), and paragraph (6), of subdivision (b), of Section 7504, where applicable.


7509. (a) (1) At the time of origination, a real estate loan may not exceed 100 percent of the market value of security property. An association shall, by vote of its board of directors, establish maximum loan-to-value ratios for loans made on the security of real estate, and the resolution adopting those ratios shall be included in the minutes of the directors' meeting. Home loans, as defined in Section 7504, made on the combined security of real estate and savings accounts may be made in excess of the maximum loan-to-value ratios adopted pursuant to this subdivision with the excess secured by the savings account. (2) However, for loans originated in excess of 90 percent of the initial appraised value of the security property, the savings account shall consist only of funds belonging to the borrower, the borrower' s family, or the borrower's employer, and the loans shall not exceed the appraised value of the real estate. (b) With respect to home loans originated or refinanced in excess of 90 percent of the appraised value of the security property, that part of the unpaid balance that exceeds 80 percent of the property value shall be insured or guaranteed by a mortgage insurance company that the Federal Home Loan Mortgage Corporation has determined to be a "qualified private insurer." (c) With respect to all other loans on the security of real estate originated in excess of 90 percent of the appraised value of the security property, an association's board of directors shall approve each of these loans prior to its origination and that approval shall be recorded in the minutes of its meeting. (d) An association shall not make a loan secured by unimproved real property if the loan-to-value ratio would exceed 80 percent of the appraised value of the unimproved real property securing the loan. (e) In determining compliance with maximum loan-to-value-ratio limitations for real estate loans, at the time of making a loan, an association shall add together the unpaid amount, or in the case of a line-of-credit loan, the approved credit limit, of all recorded loans secured by prior mortgages, liens, or other encumbrances on the security property that would have priority over the association's lien, and shall not make the loan unless the total amount of those loans, including the loan to be made but excluding loans that will be paid off out of the proceeds of the new loan, does not exceed the applicable maximum loan-to-value-ratio limitations prescribed in this subdivision. In determining the value of the real estate security, an association shall use the current appraised value of the security property, which may include any expected value of improvements to be financed. (f) "Value" for a real estate loan means the market value of the real estate.


Article 7. Successors In Interest In Loans

Ca Codes (fin:7600) Financial Code Section 7600



7600. In the case of any investment made by an association in a real estate loan, in the event all or part of the ownership of the real estate security becomes vested in a person other than the party or parties originally executing the security instruments and if there is not an agreement in writing to the contrary, an association may, without notice to the party or parties, deal with a successor in interest to the mortgage and debt in the same manner as with the original party or parties, and may forbear to sue or may extend time for payment of or otherwise modify the terms of the debt, without discharging or in any way affecting the original liability of the party or parties or their debt.


Article 8. Salvage Of Loans And Investments

Ca Codes (fin:7650) Financial Code Section 7650



7650. (a) Except as provided in subdivision (b), nothing in this division or the laws of this state shall be construed as denying to an association the right to invest its funds, operate a business, manage or deal in property, or take any other action over whatever period of time may reasonably be necessary to avoid loss on a loan or investment made or an obligation created in good faith. (b) Associations which do not meet the requirements of Section 6475, or have been issued an order pursuant to Section 8200, shall not take any action pursuant to this section without first obtaining approval, in writing, from the commissioner.


Article 9. Usury Exemption

Ca Codes (fin:7675) Financial Code Section 7675



7675. (a) Pursuant to the authority contained in Section 1 of Article XV of the California Constitution, the restrictions upon rates of interest contained in Section 1 of Article XV of the California Constitution shall not apply to any obligations of, loans made or arranged by, or forbearances of, an association; a federal association; a qualified foreign savings association; an entity that is a savings and loan holding company; a subsidiary of a savings and loan holding company that is not an association; or a service corporation which is a subsidiary of an association, a federal association, or a qualified foreign savings association. As used in this section, the terms "savings and loan holding company" and "subsidiary" mean a savings and loan holding company or a subsidiary, as defined in Section 10 of the Home Owners Loan Act, as amended (12 U.S.C. Sec. 1467a), and the term "service corporation" means a service corporation described in Section 5(c)(4)(B) of the Home Owners' Loan Act of 1933 (12 U.S.C. Sec. 1464), as amended, or Section 7252, or a wholly owned subsidiary referred to in Section 7300. (b) Subdivision (a) creates and authorizes an exempt class of persons pursuant to Section 1 of Article XV of the California Constitution. Notwithstanding any other provision of law, subdivision (a) does not exempt an association; a federal association; a foreign savings association; a savings and loan holding company, a subsidiary of a savings and loan holding company; a service corporation which is a subsidiary of an association; a federal association, or foreign savings association from complying with all other law and regulations governing the business in which the association, federal association, foreign savings association, savings and loan holding company, subsidiary of a savings and loan holding company, or service corporation which is a subsidiary of an association, a federal association, or a foreign savings association is engaged. (c) For purposes of this section, "foreign savings association" means a foreign savings association as defined in Chapter 10 (commencing with Section 10000) or Chapter 10.1 (commencing with Section 10010) and "qualified foreign savings association" means a foreign savings association that has been authorized to conduct the business of an association in this state by the commissioner.


Article 10. Finance Leasing

Ca Codes (fin:7700.3-7704) Financial Code Section 7700.3-7704



7700.3. An association may engage in leasing activities that are the functional equivalent of lending, subject to the limitations of Sections 7701 to 7704, inclusive.


7701. An association may become the legal or beneficial owner of tangible personal property or real property for the purpose of leasing such property, may obtain an assignment of a lessor's interest in a lease of such property, and may incur obligations incidental to its position as the legal or beneficial owner and lessor of the leased property, if: (1) The lease is a net, full-payout lease representing a noncancelable obligation of the lessee, notwithstanding the possible early termination of the lease. (2) At the expiration of the lease, the association's interest in the property shall be liquidated or released on a net basis as soon as practicable.


7702. (a) A lease of tangible personal property made to a natural person for personal, family, or household purposes pursuant to this section shall be subject to all limitations applicable to the amount of an association's investment in consumer loans. (b) A lease made for commercial, corporate, business, or agricultural purposes pursuant to this section shall be subject to all limitations applicable to the amount of an association's investment in commercial loans. (c) A lease of residential or nonresidential real property made pursuant to this section shall be subject to all limitations applicable to the amount of an association's investment in real estate loans.


7703. For the purposes of this article: (a) A "net lease" is a lease under which the association will not, directly or indirectly, provide or be obligated to provide for: (1) The servicing, repair, or maintenance of the leased property during the lease term. (2) The purchasing of parts and accessories for the leased property; provided that improvements and additions to the leased property may be leased to the lessee upon its request in accordance with the full pay-out requirement of this section. (3) The loan of replacement or substitute property while the leased property is being serviced. (4) The purchasing of insurance for a lessee, except where the lessee has failed to discharge a contractual obligation to purchase or maintain insurance. (5) The renewal of any license, registration, or filing for the property unless such action by the association is necessary to protect its interest as an owner or financer of the property. (b) A "full-payout" lease is one from which the lessor can reasonably expect to realize a return of its full investment in the leased property, plus the estimated cost of financing the property over the term of the lease, from rentals, estimated tax benefits, and the estimated residual value of the property at the expiration of the initial term of the lease; provided that no more than 20 percent of the return may be realized from the residual value of the property at the expiration of the initial term of the lease. Both the estimated residual value of the property and that portion of the estimated residual value relied upon by the lessor to satisfy the requirements of a full-payout lease must be reasonable in light of the nature of the leased property and all relevant circumstances so that realization of the lessor's full investment plus the cost of financing the property depends primarily on the creditworthiness of the lessee, and not on the residual market value of the leased property. The maximum term of a full-payout lease shall be 40 years.


7704. If, in good faith, an association believes that there has been an unanticipated change in conditions that threatens its financial position by significantly increasing its exposure to loss, the provisions of Sections 7702 and 7703 of this article shall not prevent the association: (a) As the owner and lessor under a net, full pay-out lease, from taking reasonable and appropriate action to salvage or protect the value of the property or its interest arising under the lease. (b) As the assignee of a lessor's interest in a lease, from becoming the owner and lessor of the leased property pursuant to its contractual right, or from taking any reasonable and appropriate action to salvage or protect the value of the property or its interest arising under the lease. (c) From including any provisions in a lease, or from making any additional agreements, to protect its financial position or investment in the circumstances set forth in subdivisions (a) and (b) of this section.


Article 10.5. Leasing

Ca Codes (fin:7720) Financial Code Section 7720



7720. (a) An association may invest in tangible personal property, including without limitation, vehicles, mobilehomes, machinery, equipment, or furniture, and may hold the property for rental or sale. (b) Investment under this section is limited to not in excess of 10 percent of the total assets of the association.


Article 11. Hazard Insurance

Ca Codes (fin:7800) Financial Code Section 7800



7800. Subject to the provisions of Section 2955.5 of the Civil Code, the board of directors of every association and affiliate or service corporation of an association shall establish standards for the maintenance of hazard insurance which are considered necessary to protect the institution's interest in real estate security for its loans. The standards may include establishment of criteria based on such factors as recognized financial ratings of insurers and coverage forms, but those standards may not be based on the insurer's corporate structure. Subject to compliance with these standards, an association, an affiliate or service corporation of an association shall permit a borrower to have reasonable freedom of choice in selecting the insurer to provide hazard insurance coverage on the real estate security.


Chapter 7. Supervision

Article 1. Department Of Savings And Loan

Ca Codes (fin:8009-8010) Financial Code Section 8009-8010



8009. (a) Except where required by law, regulation, or court order, or permitted under subdivision (b), the commissioner, and all employees of the department, shall not disclose any information acquired by them in the discharge of their duties as prescribed by this division. (b) The commissioner may furnish information relating to the condition or operation of any association or other person to state and federal authorities that supervise financial institutions, to state, local and federal law enforcement agencies, and state agencies that are engaged in any investigation of an unsafe or unsound business practice. (c) No record or document in the possession or custody of the department which contains information specified in subdivision (a) shall be produced pursuant to a subpoena duces tecum addressed to the commissioner or any employee of the department except upon a determination of a court of competent jurisdiction that disclosure of the information in the record or document would serve the public interest and assist the department in conducting the duties prescribed by this subdivision. With respect to each item subject to the subpoena duces tecum, the court shall either make this determination or shall determine that the item is not subject to disclosure. The court's determination shall be made upon hearing on a motion by the subpoenaing party under this subdivision to compel production of the document or record.


8010. The commissioner, after a determination of value made in accordance with Article 4 (commencing with Section 8150) of Chapter 7, may order that assets, individually or in the aggregate, to the extent that the assets are overvalued on an association's books, be charged off against current operations, or that a special reserve or reserves equal to the overvaluation be set up by transfers from retained earnings or reserves.


Article 2. Savings And Loan Account

Ca Codes (fin:8030-8037) Financial Code Section 8030-8037



8030. (a) To meet the operating costs and expenses of the department in administering this division and other laws relating to savings associations or the savings association business, for the payment of which no provision is otherwise made, the commissioner shall require each association doing business in this state to pay in advance an annual assessment for its pro rata share of all operating costs and expenses as estimated by the commissioner for the ensuing year. (b) As used in this article, "association" includes a foreign savings association doing business in this state under an approval issued by the commissioner.

8031. The proportion of operating costs and expenses to be assessed against each association shall be determined and prescribed by the commissioner by regulation. The total amount assessed for all associations, together with any existing surplus, shall not exceed the amount of the budget for the ensuing fiscal year plus a reasonable reserve for contingencies.


8032. (a) On or before the 20th day of June of each year the commissioner shall notify each association by mail of the amount assessed and levied against it. (b) Except as provided in this article, an association shall pay one-half or more of the amount assessed so as to be received by the commissioner not later than the 10th day of July and shall pay the remainder so as to be received by the commissioner not later than the following 10th day of January. (c) If payment is not received by the commissioner on time, the commissioner shall assess and collect in addition to the annual assessment, a penalty of 5 percent of the unpaid assessment for each month or part of a month that the payment is delinquent.


8033. If an association ceases to be an association by reason of merger, consolidation, conversion, acquisition of assets, or a similar type of transaction, any unpaid assessment for the fiscal year ended June 30 in which the conversion, merger, or acquisition occurs shall be due and payable on or before the day preceding the date of the conversion, merger, or acquisition. Payment of the unpaid assessment under this section shall be a condition of approval of any transaction requiring the commissioner's approval.


8034. (a) If a new domestic association is formed during a fiscal year, the initial assessment provided for by this article shall be computed on the same basis as if such new association had been an association and assessed on or before the 20th day of June in the fiscal year preceding the initial assessment except that the initial assessment shall be based on the assets of the new association at the time of issuance of its certificate of authority and, except as provided in subdivision (b), the assessment shall be reduced, if the certificate of authority is not issued in July, by one-twelfth for each full month of the fiscal year which has expired at the time of issuance of the certificate of authority and shall be payable in full on the date of issuance. (b) In the levy and collection of an assessment under this article, no association shall be assessed for, or be permitted to pay less than five hundred dollars ($500) for the unexpired portion of the fiscal year in which the domestic association is formed.


8035. If any domestic association proposes to acquire the assets of any federal association or any state or national bank by transfer, conversion, or otherwise, the initial assessment provided for by this article shall be computed on the same basis as if the federal association or state or national bank had been an association and assessed on or before the 20th day of June in the fiscal year preceding the initial assessment, except that the initial assessment shall be based on the assets of the federal association or of the state or national bank, as shown by the institution's report to the Office of Thrift Supervision, the commissioner, or the Comptroller of the Currency, respectively, next preceding the 20th day of June in the fiscal year preceding the initial assessment and the assessment shall be reduced, if the certificate of authority is not issued in July, by one-twelfth for each full month of the fiscal year which has expired at the time of the issuance of the certificate of authority and shall be payable in full on the date of issuance.


8035.5. As of the operative date of this section: (a) The Savings Association Special Regulatory Fund is converted into a separate account in the Financial Institutions Fund and designated as the Savings and Loan Account. (b) All moneys and other assets and all liabilities of the Savings Association Special Regulatory Fund shall be transferred to the Savings and Loan Account.

8036. All money collected or received by the commissioner under this division or any other law relating to savings associations or the savings association business, except money belonging to associations whose business property and assets are in the possession of the commissioner, shall be deposited with the State Treasurer to the credit of the Savings and Loan Account in the Financial Institutions Fund.


8037. All expenses of the department in administering the division and other laws relating to savings associations or to the savings association business shall be paid by the Savings and Loan Account; and, except as otherwise provided in Section 276 or 277, and the Savings and Loan Account shall be used only for such purposes.



Article 3. General Supervisory Powers And Duties Of Commissioner

Ca Codes (fin:8050-8055) Financial Code Section 8050-8055



8050. (a) The commissioner shall have general supervision over all (1) associations, (2) savings and loan holding companies, (3) service corporations, (4) finance subsidiaries, and (5) other persons that are subject to the provisions of this division. (b) The commissioner shall enforce the purposes of this division by use of the powers conferred by it and by an action in any court of competent jurisdiction if required.


8051. Each decision, order, or instruction shall be in writing signed by the commissioner or a deputy commissioner and shall be sent by registered or first-class mail, addressed to the home office of the appropriate association or person.


8053. The commissioner may from time to time issue, amend and rescind any rules, regulations, forms, and orders that are necessary to carry out the provisions of this division, including rules and regulations governing the administration of any association, savings and loan holding company and their subsidiaries, and defining any terms whether or not used in the law insofar as the definitions are not inconsistent with the provisions of this division. The commissioner may waive any requirement of any rule or regulation in situations where, in the commissioner's opinion, the requirement is not necessary in the public interest or for the protection of the public.


8054. (a) Notwithstanding any other provision of law, whenever by statute or regulation there is extended to federal associations doing business in this state any right, power, privilege, or duty not authorized for state associations, the commissioner may by regulation extend to state associations that right, power, privilege, or duty. (b) Any regulation adopted under this section shall expire at 12 p.m. on December 31 of the year following the calendar year in which it is promulgated. (c) For the purposes of Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code regulations adopted under this section are subject only to the provisions of Sections 11343.4, 11346.1, and 11349.6 of the Government Code. (d) The provisions of this section shall not apply to any federal statute or regulation promulgated prior to January 1, 1984.


8055. Every final decision of the commissioner is subject to judicial review in accordance with law. An action or proceeding for judicial review pursuant to this section shall be commenced within 60 days after issuance of the final decision.


Article 4. Reports And Examinations

Ca Codes (fin:8150-8160) Financial Code Section 8150-8160



8150. (a) On or before the last day of January in each year, or within 30 days following the end of the fiscal year, each association, savings and loan holding company, and those subsidiaries of an association or savings and loan holding company that the commissioner may require, shall make an annual written report to the commissioner, in a format to be prescribed by the commissioner. (b) Each report shall be verified by an authorized officer.


8151. Each association, savings and loan holding company and subsidiary of any association or savings and loan holding company that is required to file an annual report under Section 8150 also shall make any other reports that the commissioner may from time to time require, which shall be in a format and filed on a date that the commissioner may prescribe and shall, if required by the commissioner, be verified in the same manner as the annual report.


8152. From time to time the commissioner may, without previous notice, examine or cause an examination to be made into the affairs of each association, and any office of the association within or outside this state, savings and loan holding company and subsidiary of any association or savings and loan holding company subject to this division.


8153. (a) In lieu of a report or an examination under Section 8150 or 8152, the commissioner may accept any report made to, or examination made by, a federal or state authority that supervises financial institutions, or by a certified or other public accountant or firm of certified or other public accountants selected by the association and approved by the commissioner. (b) An examination under Section 8152 may be conducted in conjunction with an examination by a federal authority that supervises financial institutions.


8154. (a) Whenever, in the judgment of the commissioner, the condition of any association, savings and loan holding company, or any of their subsidiaries renders it necessary or expedient to make an extra examination or audit or to devote any extraordinary attention to its affairs, the commissioner shall do so or may appoint a certified public accountant or any expert to do so. (b) The association, savings and loan holding company, or subsidiary specially examined under this section may be required to pay the actual expenses incurred by the commissioner for all extra services rendered by the commissioner, by the appointed accountant, or any expert.


8155. (a) The commissioner is authorized in connection with any examination or audit of any association or any subsidiary to cause to be made appraisals of real estate or other property held by it or securing its assets. (b) Unless otherwise ordered by the commissioner, appraisal of real estate or other property in connection with any examination or audit pursuant to this article shall be made by a department appraiser or by an independent professional appraiser employed or selected by the commissioner, and the cost of the appraisal promptly shall be paid by the association or subsidiary to the commissioner or directly to the appraiser upon receipt by it of a statement of cost bearing the written approval of the commissioner. (c) A copy of the report of each appraisal caused to be made by the commissioner pursuant to this section shall be furnished to the association or subsidiary within a reasonable time, not to exceed 60 days, following the completion of the appraisals.


8156. (a) Each association shall at least annually cause its books and accounts to be audited at its own expense by a certified public accountant or firm of certified public accountants selected by the association and approved by the commissioner. (b) The annual audit date and audit period shall be approved in writing by the commissioner prior to commencement of the audit. (c) Each savings association which engages certified public accountant services for any audit shall transmit to the accountant or accountants copies of the most recent report of condition made by the association pursuant to state or federal law and a copy of the most recent report of examination received by the savings association. (d) In addition to the copies of the reports required to be provided pursuant to subdivision (c), each savings association shall provide the auditing accountant or accountants with all of the following: (1) A copy of any supervisory memorandum of understanding with the association and any written agreement between the association and any federal financial regulatory agency or the commissioner which is in effect during the period covered by the audit. (2) A report of any action initiated or taken pursuant to subdivisions (a), (b), (c), (e), (g), (i), or (s) of Section 8 of the Federal Deposit Insurance Act (12 U.S.C. 1818), and a report of any action taken by the commissioner pursuant to Section 8200 or 8201, or any other civil monetary penalty assessed under any provision of law with respect to the savings association or any institution-affiliated party.

8157. (a) The commissioner may prescribe the scope of the annual audit and may require the auditor to furnish information in addition to that contained in the audit report. (b) Each association shall furnish the commissioner annually, within 90 days after the end of the period covered by the audit, five copies of the financial statements, which shall be accompanied by a report signed by the auditor, prepared and containing the information prescribed in regulations of the commissioner. The financial statements shall be certified by the auditor.


8158. (a) The commissioner, or any department employee authorized by the commissioner, shall have free access to all books and records of an association, savings and loan holding company, and any of their subsidiaries that relate to the business of the association, holding company, or subsidiary, and to the books and records kept by any officer, agent, or employee that relate to the business of the association, holding company, or subsidiary. (b) The commissioner, or any department employee authorized by the commissioner, may summon witnesses and administer oaths or affirmations in the examination of the directors, officers, agents, or employees of any association, savings and loan holding company, any of their subsidiaries, or any other person, in relation to their affairs, transactions, and conditions, and may require and compel the production of records, books, papers, contracts, or other documents by court order, if not voluntarily produced. (c) This section applies to all parties designated in subdivisions (a) and (b) when an association is placed in conservatorship or receivership.

8159. For each department examination or appraisal made outside this state, a reasonable fee and the actual traveling expenses incurred shall be paid to the department by the association, savings and loan holding company, or subsidiary so examined.


8160. If an association, savings and loan holding company, or any subsidiary of an association or savings and loan holding company fails to report to the commissioner as required by this article, the commissioner may impose penalties in accordance with the following: (a) Any association, savings and loan holding company, or any subsidiary of an association or savings and loan holding company which (1) maintains procedures reasonably adapted to avoid any inadvertent error and, unintentionally and as a result of such an error (A) fails to make, obtain, transmit, or publish any report or information required by the commissioner by the due date set forth in this article or, if no due date is set forth in this article, the date specified by the commissioner, or (B) submits or publishes any false or misleading report or information or (2) inadvertently transmits or publishes any report which is minimally late, shall be subject to a civil penalty of not more than two thousand dollars ($2,000) for each day during which the failure continues or the false or misleading information is not corrected. The association, savings and loan holding company, or subsidiary of an association or savings and loan holding company shall have the burden of proving that an error was inadvertent and that a report was inadvertently transmitted or published late. (b) Any association, savings and loan holding company, or any subsidiary of an association or savings and loan holding company which (1) fails to make, obtain, transmit, or publish any report or information required by the commissioner by the due date set forth in this article or, if no due date is set forth in this article, the date specified by the commissioner or (2) submits or publishes any false or misleading report or information, in a manner not described in subdivision (a) shall be subject to a civil penalty of not more than twenty thousand dollars ($20,000) for each day during which the failure continues or the false and misleading information is not corrected. (c) Any association, savings and loan holding company, or any subsidiary of an association or savings and loan holding company which knowingly or with reckless disregard for the accuracy of any information or report subject to this section submits or publishes any false or misleading report or information, shall be subject to a civil penalty of not more than one million dollars ($1,000,000) or 1 percent of total assets of the savings institution, whichever is less, per day for each day during which the false or misleading information is not corrected. (d) Any penalty imposed under subdivisions (a), (b), or (c) shall be assessed and collected by the commissioner in the same manner as provided in Section 5330.


Article 5. Enforcement

Ca Codes (fin:8200-8202) Financial Code Section 8200-8202



8200. The commissioner may issue cease and desist orders which may order affirmative action in accordance with the following: (a) If the commissioner, as a result of any examination or from any report, finds or has reasonable cause to believe (1) that any savings association, savings and loan holding company or any of their subsidiaries, or an institution-affiliated party, (A) is violating or has violated any provision of this division or the laws of this state or of the United States or any order, regulation, or any condition imposed in writing by the commissioner in connection with the granting of any application of an association or any written agreement entered into with the commissioner or (B) is engaging or has engaged in an unsafe or unsound business practice, or (2) that an association, savings and loan holding company, or any of their subsidiaries are maintaining books and records that are so incomplete and inaccurate that the commissioner is unable, through the normal supervisory process, to determine their financial condition or the details or purpose of any transaction that may have a material effect on their financial condition, the commissioner may issue a formal written order to be served by delivery to the home office of the association or to the person named in the order. The order shall state the alleged violation or practice and state the facts in support of the allegation, and shall order discontinuance of the violation or practice and order conformance with all requirements of law. The commissioner may require the association or other named person to take affirmative action (A) to prevent the insolvency or dissipation of assets of the association, or (B) to restore the books and records to a complete and accurate state. (b) The authority of the commissioner to issue orders to correct any conditions resulting from any violation or practice includes the authority to require the person named in the order to do any of the following: (1) Make restitution or provide reimbursement, indemnification, or guarantee against loss if (A) the person named in the order was unjustly enriched in connection with the violation or practice or (B) the violation or practice involved a reckless disregard for any state or federal statute or applicable regulations or prior order of the commissioner. (2) Restrict the growth of the association. (3) Dispose of any loan or asset involved. (4) Rescind agreements or contracts. (5) Employ qualified officers or employees (who may be subject to prior approval of the commissioner at his or her direction). (6) Take such other action as the commissioner determines to be appropriate. (c) The authority to issue orders includes the authority to place limitations on the activities or functions of the person named in the order. (d) The order shall specify an effective date, which may be immediate or may be at a later date, and shall remain in effect until withdrawn by the commissioner or until terminated by a court order. (e) Any association or person affected by an order of the commissioner may apply within 10 days after service of the order to a court having jurisdiction for an immediate hearing and may request a stay of the order until the hearing has been completed. The hearing shall be held as provided in a notice to the commissioner by the court. (f) The commissioner may, on or after the effective date of the order, apply for enforcement of the order to the superior court in the county in which the home office of the association or the person is located. The order shall be enforced ex parte and without notice by the court. The proceedings shall be given precedence over other cases pending in court, and shall in every way be expedited. (g) Whether upon application by the commissioner or by the person named in the order, the court shall have jurisdiction, shall adjudicate the question, and shall enter and enforce the proper order or orders.

8201. (a) Whenever the commissioner determines that any institution-affiliated party or any director, officer, or employee of a savings and loan holding company or affiliate thereof has committed any of the following violations, engaged or participated in any of the following unsafe or unsound practices, or committed any of the following breaches of fiduciary duty that meet the additional criteria of subdivision (b), the commissioner may serve upon that person a written notice of the commissioner's intent to order the removal of the person from his or her office or employment or to prohibit any further participation (in any manner) in the conduct of the affairs of any savings association, or both: (1) Violation of any statute or regulation, any cease and desist order which has become final, any condition imposed in writing by the commissioner in connection with the grant of any application or other request by the savings association or any written agreement between the savings institution and the commissioner. (2) Engaging or participating in any unsafe or unsound practice in connection with any savings association. (3) Committing or engaging in any act, omission, or practice which constitutes a breach of the person's fiduciary duty. (b) A violation, practice, or breach specified in subdivision (a) is subject to the commissioner's authority under this section if the commissioner finds both of the following: (1) By reason of the violation, practice, or breach (A) the savings association has suffered or will probably suffer financial loss or other damage (B) the interests of the savings association's depositors have been or could be prejudiced, or (C) the institution-affiliated party or other person specified in subdivision (a) has received financial gain or other benefit by reason of the violation, practice, or breach. (2) The violation, practice, or breach (A) involves personal dishonesty on the part of the institution-affiliated party or other person specified in subdivision (a) or (B) demonstrates willful or continuing disregard by the institution-affiliated party or other person for the safety or soundness of the savings institution. (c) The written notice shall contain a full statement of the alleged violations, practices, or breaches of fiduciary duty, shall state the facts alleged in support of the violation, practice or breach, and shall state the commissioner's intention to enter a removal or prohibition order, or both. The notice shall be delivered to the board of directors of the association, savings and loan holding company, or subsidiary, and to the institution-affiliated party or other director, officer, or employee concerned. If a hearing on the matter is requested within 10 days after service of the written notice, the commissioner shall hold a public hearing at which any pertinent evidence relating to the matters set forth in the written notice may be presented. After the hearing, the commissioner, on the basis of the evidence presented at the hearing, may proceed to enter (1) an order for the immediate removal of the institution-affiliated party or director, officer, or employee affected, (2) an order prohibiting further participation by the person, in any manner, in the conduct of the affairs of any savings association, (3) a reprimand of the individuals and entities or other persons concerned, or (4) a dismissal of the entire matter. (d) If no hearing is requested within the time specified, the commissioner may proceed to issue orders of removal, prohibition, or both on the basis of the facts set forth in the written notice. (e) No institution-affiliated party or director, officer, or employee who has been removed from his or her position pursuant to a removal order that has become final, shall thereafter participate in any manner in the conduct of the affairs of the savings association from or with respect to which that director, officer, or employee was removed, or without prior written approval of the commissioner, serve as a director, officer, or employee of any other savings association. No institution-affiliated party, including an officer, director, or employee, who is subject to an order of prohibition which has become final shall thereafter participate, in any manner, in the conduct of the affairs of any savings association. (f) In respect to any officer, director, or employee of a savings association, savings and loan holding company or subsidiary thereof who is the subject of a written notice served by the commissioner pursuant to subdivision (a), the commissioner may, if the commissioner deems it necessary for the protection of the savings association or the interests of the association's depositors, by written notice to that effect served upon the officer, director, employee, suspend him or her from office or prohibit him or her from further participation in any manner in the conduct of the affairs of the savings association or related entity, or take both these actions. The suspension or prohibition shall become effective upon service of the notice and, unless stayed by the court in proceedings authorized by subdivision (g), shall remain in effect pending completion of the proceedings pursuant to the written notice served under subdivision (a) and until the effective date of an order entered by the commissioner under subdivision (c) or (d). Copies of the notice shall also be served upon the savings association, savings and loan holding company, or subsidiary of which the person is a director, officer, or employee. (g) Within 10 days after any director, officer, or employee has been suspended from office or prohibited from participation in the conduct of the affairs of a savings association, savings and loan holding company, or subsidiary thereof under subdivision (f), the director, officer, or employee may apply to a court having jurisdiction for a stay of the suspension or prohibition pending completion of the proceedings pursuant to subdivision (c), and the court shall have power to stay the suspension or prohibition.


8202. (a) The commissioner shall publish and make the following available to the public: (1) Any final order issued with respect to any administrative enforcement proceeding initiated by the commissioner pursuant to this division or any other provision of law. (2) Any modification to, or termination of, any final order specified in paragraph (1). (b) If the commissioner makes a determination in writing that the publication of any final order pursuant to subdivision (a) would seriously threaten the safety or soundness of a savings association, the commissioner may delay the publication of the order for a reasonable time.


Article 6. Conservatorship

Ca Codes (fin:8225-8230) Financial Code Section 8225-8230



8225. (a) Whenever the commissioner deems it necessary in order to conserve the assets of any association for the benefit of the depositors and other creditors, or if the commissioner finds any of the following with respect to any association: (1) the association is in an impaired condition; (2) the association is engaging in practices that threaten to result in an impaired condition; (3) the association has substantially dissipated its assets due to violation of law or regulation or to unsafe or unsound practice; (4) the association is in an unsafe or unsound condition to transact business; (5) the association is in violation of an order or injunction, as authorized by this division; or (6) the association refuses to submit its books, papers, and affairs to the inspection of the commissioner, the commissioner may, ex parte and without notice, appoint a conservator for the association. (b) The conservator may be the commissioner, deputy commissioner or any other person. (c) The conservator shall, upon appointment, immediately take possession of the books, records, and assets of every description of the association and shall take any further action as he or she may deem necessary to conserve the assets of the association pending further disposition of its business. (d) Within six months of the date of appointment of the conservator, or within 12 months if the commissioner extends the six months' period, the association shall be returned to its board of directors to be managed and operated as if no conservator had been appointed, or a receiver shall be appointed as provided in Section 8250. (e) If the commissioner or a department employee is appointed conservator no additional compensation shall be paid, but if another person is appointed then the compensation of the conservator, as determined by the commissioner, shall be paid by the association. (f) Any expenses of such conservatorship shall be paid out of the assets of the association and shall be a lien against association assets prior to any other lien.


8226. Any conservator shall have all the rights, powers, and privileges possessed by the officers, directors, members and stockholders of the association.

8227. Except as authorized by the commissioner, the conservator shall not retain special counsel or other experts, incur any expense other than normal operating expenses, or liquidate assets except in the ordinary course of operations.

8228. The directors and officers shall remain in office and the employees shall remain in their respective positions, but the conservator may remove any director, officer, or employee, provided the order of removal of a director or officer shall be approved in writing by the commissioner.


8229. (a) While the association is in the charge of a conservator, savings account holders, borrowers, and other obligors of the association shall continue to make payments to the association in accordance with the terms and conditions of their contracts, and the conservator may permit savings account holders to withdraw their accounts from the association pursuant to the provisions of this division but shall not declare, credit, or distribute interest for savings accounts without prior approval of the commissioner. (b) The conservator shall have power to accept savings accounts and additions to savings accounts, but any amounts received by the conservator may be segregated if the commissioner shall so order in writing. If so ordered, these amounts shall not be subject to offset and shall not be used to liquidate any indebtedness of the association existing at the time the conservator was appointed for it or any subsequent indebtedness incurred for the purposes of liquidating the indebtedness of the association existing at the time the conservator was appointed. (c) All expenses of the association during conservatorship shall be paid by the association.

8230. Whenever a conservator has taken possession of the property and business of any association pursuant to this article, that association, within 10 days after the taking, if it deems itself aggrieved thereby, may apply to the superior court in the county in which the home office of the association is located to enjoin further proceedings. The court, after citing the commissioner to show cause why further proceedings should not be enjoined and after hearing and determination of the facts, may dismiss the application or enjoin the commissioner from further proceedings and direct the commissioner to surrender the property and business to that association.


Article 7. Receivership

Ca Codes (fin:8250-8254) Financial Code Section 8250-8254



8250. (a) If the commissioner finds that any association (1) is in an impaired condition, (2) is engaging in practices that threaten to result in an impaired condition, or (3) is in violation of an order or injunction issued pursuant to this division, the commissioner may appoint a receiver for the association. (b) The receiver may be the commissioner, deputy commissioner or any other person. (c) The receiver shall, upon appointment, immediately take possession of the books, records, and assets of every description of the association.

8251. (a) In the case of an insured association, the appointment by the commissioner of a receiver under this article shall constitute an official determination of a public authority of this state pursuant to which a receiver is appointed for the purpose of liquidation as contemplated by and within the meaning of subdivision (d) of Section 401 of the National Housing Act of 1934 (12 U.S.C. Sec. 1701 et seq.), as amended. (b) A receiver shall have all the powers and authority of a conservator plus the power to liquidate, and shall have any other powers and authority that are expressed in an order of a court.


8252. If the commissioner or a department employee is appointed receiver, no additional compensation shall be paid, but if another person is appointed, then the compensation of the receiver, as determined by the court, shall be paid from the assets of the association.


8253. If the association is an institution insured by the Federal Deposit Insurance Corporation, the Federal Deposit Insurance Corporation shall be tendered appointment as receiver or coreceiver. If it accepts the appointment, it may, nevertheless, make loans on the security of or purchase at public or private sale any part or all of the assets of the association of which it is receiver or coreceiver, provided the loan or purchase is approved by the court.


8254. Whenever a receiver has taken possession of the property and business of any association pursuant to this article, that association, within 10 days after the taking, if it deems itself aggrieved thereby, may apply to the superior court in the county in which the home office of the association is located to enjoin further proceedings. The court, after citing the commissioner to show cause why further proceedings should not be enjoined and after hearing and determination of the facts, may dismiss the application or enjoin the commissioner from further proceedings and direct the commissioner to surrender the property and business to that association.


Chapter 8. Federal Associations

Ca Codes (fin:8500-8501) Financial Code Section 8500-8501



8500. (a) Every federal association and the holders of stock, shares, share accounts, savings accounts, and certificate accounts issued by any federal association have all the rights, powers, and privileges, and are entitled to the same exemptions and immunities granted, respectively, to associations organized under the laws of this state and to the holders of their stock, membership accounts, and savings accounts. (b) This section is in addition and supplemental to any provision that, by specific reference, is applicable to federal associations and their members or stockholders.


8501. No director of a federal association shall be liable for monetary damages to the federal association, its stockholders or members, based upon the laws of this state, to the extent that the stockholders, or in case of a mutual federal association the members of the federal association, adopt a resolution limiting liability. The resolution shall not eliminate or limit the liability of directors for any acts or omissions or transactions from which directors of a corporation may not be relieved of liability as set forth in the exception to paragraph (10) of Section 204 of the Corporations Code.


Chapter 9. Fees

Ca Codes (fin:9000-9001) Financial Code Section 9000-9001



9000. Associations shall pay all fees required by this division to the department.


9001. (a) Except where otherwise expressly provided, the commissioner shall prescribe by regulation the amount of each fee expressly required by the provisions of this division, including both existing provisions and provisions that are added by future enactments. (b) The commissioner may require, and prescribe by regulation the amount of a fee not to exceed one hundred dollars ($100), for filing any application that requires the commissioner's approval where a fee is not expressly required by the provisions of this division.


Chapter 10. Foreign (national) Savings Companies (chapter 10.1. Foreign (regional) Savings Companies )

Ca Codes (fin:10000-10009) Financial Code Section 10000-10009



10000. Terms not expressly defined in this chapter have the meaning given in Chapter 1 (commencing with Section 5000) or as the commissioner may provide by regulation. For the purposes of this chapter: (a) "California savings association" means either (1) an association or (2) a foreign association or successor thereof that was licensed to do the business of an association in California on September 15, 1935. (b) "Foreign holding company" means a savings and loan holding company as defined in Section 10 of the Home Owners Loan Act, as amended (12 U.S.C. Sec. 1467a) or bank holding company as defined in Section 3 of the federal Bank Holding Company Act, as amended, (12 U.S.C. Sec. 1841 et seq.), which savings and loan or bank holding company (1) has its principal place of deposits outside of California and (2) does not control a subsidiary California savings association or a subsidiary federal association with, or a subsidiary foreign savings association with, an authorized home or branch office in California at which accounts may lawfully be opened and deposits may lawfully be accepted. (c) "Foreign savings association" means an insured institution other than a California savings association and other than a federal association. (d) "Insured institution" means an entity: (1) that is organized and licensed as a savings association, savings and loan association, or savings bank under the laws of another state of the United States and the deposits of which are insured by the Federal Deposit Insurance Corporation or (2) that is chartered by the Office of Thrift Supervision. However, "insured institution" does not include any savings bank of the type defined in Section 3(g) of the Federal Deposit Insurance Act (12 U.S.C. Sec. 1813(g)). (e) The "principal place of deposits" of an entity is that state in which the total deposits of all of that entity's depository operations and those of its affiliates are largest.


10001. (a) No person, other than a California savings association or other person authorized by this division, shall do any business of an association. (b) No foreign savings association may control a California savings association. (c) No foreign holding company may control a California savings association. (d) The commissioner shall obtain an injunction or take other action necessary to prevent any person from unlawfully doing any business of an association in this state.


10002. Notwithstanding Section 10001, and subject to Section 10003, on and after January 1, 1991, a foreign savings association may conduct the business of an association in California or may acquire control of a California savings association, and a foreign holding company may acquire control of a California savings association; provided that, if the commissioner determines that the laws, court decisions, or practices of the jurisdiction under which the foreign savings association is incorporated or, in the case of a foreign holding company, the holding company's principal place of deposits, would operate to prohibit, restrict, condition, or otherwise limit a California savings association from conducting the business of, or acquiring control of, a savings association in the relevant jurisdiction pursuant to the laws, court decisions, or practices of that jurisdiction, a similar prohibition, restriction, condition, or limitation to be prescribed by regulation or order of the commissioner shall apply in California to the foreign savings association or foreign holding company.


10003. No foreign savings association may conduct the business of an association in California, and no foreign savings association or foreign holding company may acquire control of a California savings association, without the written approval of the commissioner. A foreign savings association or foreign holding company shall submit to the commissioner a written application for approval in the form and shall pay such fees as the commissioner prescribes. The foreign savings association or foreign holding company shall submit with the application such information, data, and records as the commissioner may require in order to make his or her determination. The commissioner may issue such regulations as he or she deems to be appropriate to preserve the public interest and integrity of the state's savings association system and to protect the interests of savings account holders, borrowers, and stockholders resident in this state. The commissioner may make arrangements with the supervisory officials of other states for reciprocal examination of California savings associations, foreign savings associations and foreign holding companies, and the imposition of fees therefor and may condition his or her approval pursuant to this chapter upon the existence of those arrangements.


10004. Except as expressly provided for in this chapter, any person who, as principal, agent, salesperson, solicitor, or in any other capacity, solicits or conducts in this state the business of selling, disposing of, taking, or soliciting savings accounts of any foreign savings association that has not complied with all the requirements of this chapter, is guilty of a public offense punishable by imprisonment in the state prison, or in a county jail not exceeding one year, or by a fine not exceeding ten thousand dollars ($10,000), or by both a fine and imprisonment.


10004. Except as expressly provided for in this chapter, any person who, as principal, agent, salesperson, solicitor, or in any other capacity, solicits or conducts in this state the business of selling, disposing of, taking, or soliciting savings accounts of any foreign savings association that has not complied with all the requirements of this chapter, is guilty of a public offense punishable by imprisonment pursuant to subdivision (h) of Section 1170 of the Penal Code, or in a county jail not exceeding one year, or by a fine not exceeding ten thousand dollars ($10,000), or by both that fine and imprisonment.

10005. For the purposes of this article and any other law of this state prohibiting, limiting, or regulating the doing of business or the selling, taking, or solicitation of savings accounts in this state by foreign savings associations or foreign corporations, any federally insured foreign savings association subject to state or federal supervision, which by law is subject to periodic examination by that supervisory authority and to a requirement of periodic audit, and any broker-dealer registered in accordance with the requirements of the Securities Exchange Act of 1934 and the Corporate Securities Law of 1968, and any partner, officer, director, branch manager, or person performing similar functions, and employees of that broker-dealer, shall not be considered to be doing business or selling, taking, or soliciting savings accounts in this state by reason of engaging in the following: (a) (1) Any of the activities specified in subdivision (d) of Section 191 of the Corporations Code, or (2) the advertising or solicitation of savings accounts in this state by a federally insured foreign savings association through the media of the mail, radio, television, magazines, newspapers, or any other media that are published or circulated within this state, except through or as a result of telemarketing, provided that the advertising or solicitation as a whole is accurate and does not create a misleading impression even though statements considered separately are literally accurate. A federally insured foreign savings association shall not sell, take or solicit savings accounts through telemarketing by use of the telephone or telephone transceiving equipment, or through the use of an automatic dial-announcing device as defined in Section 2871 of the Public Utilities Code. (b) The offering by a registered broker-dealer of, or the placement by a registered broker-dealer of a customer's funds into, a savings account at a federally insured foreign savings association chartered under the laws of a state in which broker-dealers make available savings accounts of associations chartered under the laws of this state, provided that (1) any advertising, offering material, or solicitation as a whole is accurate and does not create a misleading impression even though statements considered separately are literally accurate and (2) the savings accounts of the federally insured foreign savings association are rated "investment grade" by either Standard & Poor's Corporation or Moody's Investors Service, Inc. based upon the foreign savings association's ability to repay the savings accounts independent of federal deposit insurance benefits.


10006. Except as provided by regulation, this division applies to a foreign savings association or its holding company as if business conducted in this state were that of a California savings association.

10007. If a foreign savings association is controlled by a foreign holding company, the requirements under this chapter applicable to both a foreign savings association and foreign holding company are required to be met.

10009. This chapter shall become operative on January 1, 1991.


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