Title of Rule: Title 50 WAC, Division of Banking.

Purpose: Housekeeping changes and recodifying Title 50 WAC as a chapter of Title 208 WAC.

Statutory Authority for Adoption: RCW 30.04.030 and 43.320.040.

Statute Being Implemented: RCW 30.04.030 and 43.320.040.

Summary: To make housekeeping changes in Title 50 WAC and to recodify Title 50 WAC as a chapter of Title 208 WAC. Title 50 WAC refers to "supervisor of banking" and "division of banking." These terms were changed in October 1993 to "director of the department of financial institutions" and "division of banks."

Reasons Supporting Proposal: Terms were changed in October 1993 after the division of banking, the division of savings and loan association, and the Securities Division of Department of Licensing merged to form the Department of Financial Institutions. The intent of the rule remains unchanged.

Name of Agency Personnel Responsible for Drafting, Implementation and Enforcement: Mike Abe, 210 11th Avenue S.W., Suite 300, (360) 902-8704.

Name of Proponent: The Department of Financial Institutions, governmental.

Rule is not necessitated by federal law, federal or state court decision.

Explanation of Rule, its Purpose, and Anticipated Effects: To make housekeeping changes in Title 50 WAC and to recodify Title 50 WAC as a chapter of Title 208 WAC. Title 50 WAC refers to "supervisor of banking" and "division of banking." These terms were changed in October 1993 to "director of the department of financial institutions" and "division of banks."

Proposal does not change existing rules. No substantive changes to rules.

June 21, 2000

John L. Bley

Director

OTS-4090.2

AMENDATORY SECTION(Amending Order 2, filed 12/23/68)

WAC 50-12-030
Definitions and characterization of time deposits.

The term "time deposits" means "time certificates of deposit" and, "time deposits, open account," as defined below.

(1) Time certificates of deposit.      The term "time certificate of deposit" means a deposit evidenced by a negotiable or nonnegotiable instrument which provides on its face that the amount of such deposit is payable:

(a) On a certain date, specified in the instrument, not less than thirty days after the date of the deposit; or

(b) At the expiration of a specified period not less than thirty days after the date of the instrument; or

(c) Upon written notice to be given not less than thirty days before the date of repayment.

(2) Time deposits, open account.      The term "time deposit, open account," means a deposit, other than a "time certificate of deposit," with respect to which there is in force a written contract with the depositor that neither the whole nor any part of such deposit may be withdrawn, by check or otherwise, prior to the date of maturity, which shall be not less than thirty days after the date of the deposit, or prior to the expiration of the period of notice which must be given by the depositor in writing not less than thirty days in advance of withdrawals.

A time deposit is a deposit and therefore not subject to individual bank and trust company lending limits, as proscribed by RCW 30.04.110.      However, before a bank or trust company may deposit its funds with another bank in the form of a time deposit, the depository bank must first be appointed a depository by a vote of a majority of the directors of the depositing bank and approved as a depository by the ((supervisor of banking)) director of the department of financial institutions.

If a bank acquires a time deposit with a bank that has not been approved as a depository by the ((supervisor of banking)) director of the department of financial institutions, such transaction shall be considered to be an investment and subject to the bank's lending limitation.

[Order 2, § 50-12-030, filed 12/23/68.]

(1) The ((supervisor)) director shall collect the following fees:

(a) Hourly charges for services plus actual expenses for review of application and attendant investigation for:

(i) New bank or trust company;

(ii) Conversion to a state chartered institution;

(iii) Alien bank to establish and operate an office or bureau in the state;

(iv) Certificate conferring trust powers;

(v) Branch;

(vi) A satellite facility or facilities which are to be used by its own customers or customers of another bank;

(vii) A network system of satellite facilities as defined in WAC 50-40-010(4) or modification of a previously approved network system made in accordance with WAC 50-40-060 (1) or (2);

(viii) Merger, consolidation, or reorganizational agreement;

(ix) Relocation of main office or branch;

(x) An out-of-state bank holding company acquisition and control of more than five percent of the shares of voting stock or substantially all of the assets of a bank, trust company, national banking association or bank holding company, the principal operations of which are conducted within this state;

(xi) The purchase or sale of a branch;

(xii) Voluntary or involuntary liquidation of a bank or trust company pursuant to chapter 30.44 RCW or for acting as conservator of a bank or trust company pursuant to chapter 30.46 RCW;

(xiii) Conversion from a mutual savings bank to a stock savings bank;

(xiv) Notice of change of control.

(b) Hourly charges for opinions rendered regarding interpretations of statutes and rules.

(c) $100.00 for issuing the following certificates:

(i) Branch certificate;

(ii) Increase or decrease of capital stock certificate;

(iii) Certificate of authority;

(iv) Satellite facility;

(v) Certificate of good standing;

(vi) Other.

(d) $100.00 for filing articles of incorporation, or amendments thereof, or other certificates required to be filed with the ((supervisor)) director.

(e) Fifty cents per page for furnishing copies of papers filed with the ((supervisor)) director.

(2) The hourly fee for services shall be $90.00 per employee hour expended.      The ((supervisor)) director may require a lump sum payment in advance to cover the anticipated cost of review and investigation of the activities described in subsection (1)(a) and (b) of this section.      In no event shall the lump sum payment required under this section exceed actual amounts derived in subsection (1)(a) and (b) of this section.

[Statutory Authority: RCW 30.08.095.      91-18-055, § 50-12-045, filed 8/30/91, effective 9/30/91; 90-12-008, § 50-12-045, filed 5/25/90, effective 6/25/90.]

A mutual savings bank may accept or hold accounts in excess of one hundred thousand dollars on the following terms and conditions:

(1) Such accounts in the aggregate are placed in assets of similar maturity;

(2) The following records are maintained at all times with respect to each such account:

(a) The name(s) and address(es) of the depositor(s);

(b) The manner in which the account is held;

(c) The amount of the initial deposit;

(d) The contemplated time of withdrawal, if known;

(e) The interest rate; and

(f) Such other information available to the mutual savings bank as the ((supervisor)) director may from time to time require in order to carry out the duties of his office;

(3) A separate report maintained showing at all times the aggregate total of all such accounts accepted or held; and

(4) Asset liquidity records and controls are maintained.      The ((supervisor)) director may from time to time impose such requirements or restrictions as he deems appropriate in connection with accepting or holding one or more such accounts, based upon the nature and size of the account, the condition of the mutual savings bank accepting the same, the general economic conditions then existing, and such other factors as the ((supervisor)) director may deem relevant to the prudent operation of the mutual savings bank accepting or holding the account.

[Order 29, § 50-12-060, filed 10/2/75; Order 7 and Emergency Order 6, § 50-12-060, filed 1/7/70.]

In determining whether an asset of a bank, mutual savings bank or trust company is bankable all of the circumstances of the asset shall be weighed, including but not limited to the following:

(1) Character of the borrower

(2) Capacity of the borrower

(3) Capital of the borrower

(4) Collateral, sufficiency of

(5) Economic conditions pertaining to the type of business in which the borrower is engaged

(6) Conformance to general banking standards as then currently practiced in the banking industry.

If, in the examination of a bank, mutual savings bank or trust company, an examiner finds an asset which in his opinion, after weighing all the circumstances of the asset, is nonbankable, the ((supervisor)) director may require that such asset be charged off the books of the bank, mutual savings bank or trust company.

Within fifteen days following the next meeting of the board of directors following receipt of written notice from the ((supervisor)) director to charge off such asset, but in no event more than forty-five days following receipt of such written notice, the bank, mutual savings bank or trust company, shall write the same off as an asset or file a written statement with the ((supervisor)) director explaining why, in its opinion, the asset should not be so treated.      After considering such written statement and within ten days after receipt thereof, the ((supervisor)) director will notify the bank in writing of his decision as to the treatment of the asset.

[Order 9, § 50-12-070, filed 5/9/72.]

Nothing in WAC ((50-12-110, 50-12-115, or 50-12-116)) 208-512-110, 208-512-115, or 208-512-116 shall limit the authority of a bank or trust company to invest in corporations or entities, with the prior authorization of the ((supervisor)) director, pursuant to RCW 30.04.___, (section 1, chapter 498, Laws of 1987).

[Statutory Authority: RCW 30.08.140.      87-24-042 (Order 71), § 50-12-117, filed 11/25/87.]

The division of ((banking)) banks, hereinafter referred to as the "division," after due and proper notice, and pursuant to chapter 30.60 RCW hereby adopts and promulgates the following rules and regulations, effective January 1, 1986.

[Statutory Authority: Chapter 30.60 RCW, RCW 30.04.212 and 30.04.214.      87-02-010 (Order 66), § 50-12-120, filed 12/30/86.]

For purposes of interpreting and administering the provisions and procedures contained herein, the definitions of terms used shall be identical to the corresponding definitions set forth in the Community Reinvestment Act of 1977, Public Law 95-128, sections 801-806, 12 U.S.C. 2901, et seq. and regulations promulgated pursuant thereto; provided, these definitions are not inconsistent with the context used, or otherwise defined, in this regulation.

The term "division" means the division of ((banking)) banks of the state of Washington.      The term "supervisor" means the ((supervisor of banking)) director of the department of financial institutions.

[Statutory Authority: Chapter 30.60 RCW, RCW 30.04.212 and 30.04.214.      87-02-010 (Order 66), § 50-12-140, filed 12/30/86.]

In connection with its examination of a bank, the division shall assess the record of performance of the bank in helping to meet the credit needs of its entire community, including low-income and moderate-income neighborhoods, consistent with safe and sound operation of the bank.      The division will review the bank's Community Reinvestment Act statement(s) and any other written and signed reports, documents, or comments prepared or filed by the bank with the division, or one or more federal bank regulatory agencies, and will use this material as part of or in lieu of an investigation as set forth by RCW 30.60.010.      The foregoing material, together with such additional information as may be deemed necessary and obtained by investigation performed by the division, will be considered in assessing the bank's record of performance, based upon the following factors:

(1) Activities conducted by the institution to ascertain credit needs of its community, including the extent of the institution's efforts to communicate with members of its community regarding the credit services being provided by the institution;

(2) The extent of the institution's marketing and special credit related programs to make members of the community aware of the credit services offered by the institution;

(3) The extent of participation by the institution's board of directors in formulating the institution's policies and reviewing its performance with respect to the purposes of the Community Reinvestment Act of 1977;

(4) Any practices intended to discourage applications for types of credit set forth in the institution's Community Reinvestment Act statement(s);

(5) The geographic distribution of the institution's credit extensions, credit applications and credit denials;

(6) Evidence of prohibited discriminatory or other illegal credit practices;

(7) The institution's record of opening and closing offices and providing services at offices;

(8) The institution's participation, including investments, in local community development projects;

(9) The institution's origination of residential mortgage loans, housing rehabilitation loans, home improvement loans, and small business or small farm loans within its community, or the purchase of such loans originated in its community;

(10) The institution's participation in governmentally insured, guaranteed, or subsidized loan programs for housing, small businesses, or small farms;

(11) The institution's ability to meet various community credit needs based on its financial condition, size, legal impediments, local economic condition, and other factors;

(12) Other factors that, in the judgment of the ((supervisor)) director, reasonably bear upon the extent to which an institution is helping to meet the credit needs of its entire community.

[Statutory Authority: Chapter 30.60 RCW, RCW 30.04.212 and 30.04.214.      87-02-010 (Order 66), § 50-12-150, filed 12/30/86.]

(1) Based upon the foregoing investigation and assessment, the ((supervisor)) director shall annually assign to the bank a numerical community reinvestment rating based on a one through five scoring system in accordance with RCW 30.60.010.      Such numerical scores shall represent performance assessments as follows:

(a)	Excellent performance:	1
(b)	Good performance:	2
(c)	Satisfactory performance:	3
(d)	Inadequate performance:	4
(e)	Poor performance:	5

(2) For each calendar year commencing after December 31, 1986, the most recent community reinvestment rating assigned to the bank by the ((supervisor)) director shall be used as a basis for limiting the funds invested in real property and improvements thereof pursuant to RCW 30.04.212.      These investments shall be limited to a percentage of capital, surplus, and undivided profits, as follows:

(a)	Excellent performance-rating (1):	10% limitation
(b)	Good performance-rating (2):	8% limitation
(c)	Satisfactory performance-rating (3):	6% limitation
(d)	Inadequate performance-rating (4):	3% limitation
(e)	Poor performance-rating (5):	no investment

No bank may at any time be required to dispose of any investment made in accordance with this section because the bank is not then authorized to acquire such investment, if such investment was lawfully acquired by the bank at the time of acquisition.

[Statutory Authority: Chapter 30.60 RCW, RCW 30.04.212 and 30.04.214.      87-02-010 (Order 66), § 50-12-160, filed 12/30/86.]

The division shall consider, among other factors, the record of performance of the applicant in helping to meet the credit needs of the applicant's entire community, including low-income and moderate-income neighborhoods in determining the approval or disapproval for the following applications:

(1) For a new branch or satellite facility;

(2) For a purchase of assets;

(3) For a merger;

(4) For an acquisition;

(5) For authority to engage in a business activity;

(6) For a conversion from a national bank to a state-chartered bank; and

(7) Such other application as the ((supervisor)) director may consider appropriate.

The performance record need not be considered for subsections (2), (3), and (4) of this section where solvency and safety soundness of the bank is threatened.      Assessment of an institution's CRA performance may be a basis for denying an application.

[Statutory Authority: Chapter 30.60 RCW, RCW 30.04.212 and 30.04.214.      87-02-010 (Order 66), § 50-12-200, filed 12/30/86.]

The division of ((banking)) banks, hereinafter referred to as the "division," after due and proper notice, and pursuant to the provisions of RCW 30.04.111 hereby adopts and promulgates the following rules and regulations, effective September 9, 1987.

[Statutory Authority: RCW 30.04.111.      87-20-022 (Order 69), § 50-12-210, filed 9/30/87.]

(1) The term "person" shall include an individual, sole proprietor, partnership, joint venture, association, trust, estate, business trust, corporation, sovereign government or agency, instrumentality, or political subdivision thereof, or any similar entity or organization.

(2) The term "loans and extensions of credit" means any direct or indirect advance of funds to a person made on a basis of any obligation of that person to repay the funds, or repayable from specific property pledged by or on behalf of a person.      "Loans and extensions of credit" also includes a "contractual commitment to advance funds" as that term is defined in this section, and includes a renewal, modification, or extension of the maturity date of a loan or extension of credit.      Provided, the term "loan or extension of credit" does not include a renewal, extension or restructuring of an existing loan, with interest paid current and no further advance of funds, by a bank under the direction and control of a conservator appointed by the ((supervisor)) director.

(3) The term "contractual commitment to advance funds" means:

(a) An obligation on the part of the bank to make payments (directly or indirectly) to a designated third party contingent upon a default by the bank's customer in the performance of an obligation under the terms of that customer's contract with the third party; or

(b) An obligation to guarantee or stand as surety for the benefit of a third party.      The term includes, but is not limited to, standby letters of credit, guarantees, puts, and other similar arrangements.      Undisbursed loan funds, loan commitments not yet drawn upon which do not fall under this definition, and commercial letters of credit or similar instruments are not considered contractual commitments to advance funds.

(4) The term "readily marketable collateral" means financial instruments and bullion which are saleable under ordinary circumstances with reasonable promptness at a fair market value determined by daily quotations based on actual transactions on an auction or a similarly available daily bid and ask price market.

(5) The term "financial instruments" shall include stocks, notes, bonds, and debentures traded on a national securities exchange, "OTC margin stocks" (as defined in Regulation U of the Federal Reserve Board), commercial paper, negotiable certificates of deposit, bankers' acceptances, and shares in money market and mutual funds of the type which issue shares in which banks may perfect a security interest.

(6) The term "current market value" means the bid or closing price listed for an item in a regularly published listing or an electronic reporting service.

(7) The term "capital" will include the amount of common stock outstanding and unimpaired, the amount of preferred stock outstanding and unimpaired, and capital notes or debentures issued pursuant to chapter 30.36 RCW.

(8) The term "surplus" shall include capital surplus, reflecting the amounts paid in excess of the par or stated value of capital stock, or amounts contributed to the bank other than for capital stock, and amounts transferred to surplus from undivided profits pursuant to resolution of the board of directors.

(9) The term "subsidiary" means:

(a) Any company twenty-five percent or more of whose voting shares (excluding shares owned by the United States or by any company wholly owned by the United States) is directly or indirectly owned or controlled by such person, or is held by it with power to vote;

(b) Any company the election of a majority of whose directors is controlled in any manner by such person; or

(c) Any company with respect to the management or policies of which such person has power, directly or indirectly, to exercise a controlling influence, as determined by the division, after notice and opportunity for hearing.

[Statutory Authority: RCW 30.04.111.      88-16-066 (Order 74), § 50-12-230, filed 8/1/88; 87-20-022 (Order 69), § 50-12-230, filed 9/30/87.]

(1) Loans or extensions of credit by a state bank to a person outstanding at one time and fully secured by readily marketable collateral having a market value, as determined by reliable and continuously available price quotations, shall not be subject to any limitations based on capital and surplus.      However, if the total of such loans and extensions of credit, together with loans made under general limitations pursuant to WAC ((50-12-240)) 208-512-240 exceed forty-five percent, the division of ((banking)) banks will review the credits as a possible concentration, with regard to both risk diversification within the bank's asset structure and diversification or other risk in the marketable collateral securing the loan.      This limitation shall be separate and in addition to the general twenty percent limitation set forth in WAC ((50-12-240)) 208-512-240.

(2) Each loan or extension of credit based on the foregoing limitation shall be secured by readily marketable collateral having a current market value of at least one hundred fifteen percent of the amount of the loan or extension of credit at all times.

(3) Financial instruments may be denominated in foreign currencies which are freely convertible to United States dollars.      If collateral is denominated and payable in a currency other than that of the loan or extension of credit which it secures, the bank's procedures must require that the collateral be revalued at least monthly, using appropriate foreign exchange rates, in addition to being repriced at current market value.

(4) Each bank must institute adequate procedures to ensure that the collateral value fully secures the outstanding loan at all times.      If collateral values fall below one hundred fifteen percent of the outstanding loan, to the extent that the loan is no longer in conformance with this section and exceeds the general twenty percent limitation, the loan must be brought into conformance within five business days, except where judicial proceedings, regulatory actions, or other extraordinary occurrences prevent the bank from taking actions.

[Statutory Authority: RCW 30.08.140.      87-24-042 (Order 71), § 50-12-250, filed 11/25/87.      Statutory Authority: RCW 30.04.111.      87-20-022 (Order 69), § 50-12-250, filed 9/30/87.]

The division of ((banking)) banks, after due and proper notice, and pursuant to the general rule-making authority in RCW 30.04.030 hereby adopts and promulgates the following rules and regulations.

[Statutory Authority: RCW 30.04.030.      90-10-074, § 50-12-310, filed 5/2/90, effective 6/2/90.]

(1) A bank located in a city of not more than five thousand inhabitants may act as insurance agent from an office in that city.      A bank exercising this power may continue to act as insurance agent notwithstanding a change of the population of the city in which it is located.

(2) A trust company may act as an insurance agent pursuant to its powers under RCW 30.08.150(3) "to act as attorney in fact or agent of any corporation, foreign or domestic, for any purpose, statutory or otherwise."

(3) A bank may engage in insurance activities that have been determined by the board of governors of the federal reserve system or by the United States Congress to be closely related to the business of banking, as of June 11, 1986.      These activities include, but are not limited to:

(a) General insurance agency activities conducted by a bank with total assets of fifty million dollars or less, provided, however, that such bank may not engage in the sale of life insurance or annuities.      For purposes of this exception "total assets" is determined by the latest consolidated report of condition filed with the ((supervisor of banking)) director of the department of financial institutions.      This exception ceases when the value of the assets of the bank exceed fifty million dollars.      The insurance agency license must be surrendered and the assets sold or otherwise disposed of within three years unless otherwise extended by the ((supervisor of banking)) director of the department of financial institutions.

(b) A bank may act as agent for life, disability, and involuntary unemployment insurance if the insurance is limited to assuring the repayment of the outstanding balance due on a specific extension of credit by the bank.

(c) A bank may act as agent for property insurance on loan collateral, provided such insurance is limited to assuring repayment of the outstanding balance of the extension of credit and such extension of credit is not more than ten thousand dollars (twenty-five thousand dollars to finance the purchase of a residential manufactured home and which is secured by such home) increased by the percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers published monthly by the Bureau of Labor Statistics for the period beginning on January 1, 1982, and ending on December 31 of the year preceding the year of the extension of credit.

(4) A bank or trust company may engage in any insurance agency activity lawfully engaged in by national banks located in the state of Washington.

[Statutory Authority: RCW 30.04.030.      90-10-074, § 50-12-350, filed 5/2/90, effective 6/2/90.]

It shall be considered an unsafe and unsound practice in conducting the affairs of the bank or trust company if in the opinion of the ((supervisor)) director the insurance agency activities of the bank or bank subsidiary are:

(1) A violation of any applicable state or federal consumer protection law; or

(2) A violation of any applicable state or federal statute prohibiting anticompetitive activities.

[Statutory Authority: RCW 30.04.030.      90-10-074, § 50-12-370, filed 5/2/90, effective 6/2/90.]

The following sections of the Washington Administrative Code are recodified as follows:

Old WAC number	New WAC number
50-12-020	208-512-020
50-12-030	208-512-030
50-12-045	208-512-045
50-12-050	208-512-050
50-12-060	208-512-060
50-12-070	208-512-070
50-12-080	208-512-080
50-12-090	208-512-090
50-12-100	208-512-100
50-12-110	208-512-110
50-12-115	208-512-115
50-12-116	208-512-116
50-12-117	208-512-117
50-12-120	208-512-120
50-12-130	208-512-130
50-12-140	208-512-140
50-12-150	208-512-150
50-12-160	208-512-160
50-12-170	208-512-170
50-12-180	208-512-180
50-12-190	208-512-190
50-12-200	208-512-200
50-12-210	208-512-210
50-12-220	208-512-220
50-12-230	208-512-230
50-12-240	208-512-240
50-12-250	208-512-250
50-12-260	208-512-260
50-12-270	208-512-260
50-12-280	208-512-280
50-12-290	208-512-290
50-12-300	208-512-300
50-12-310	208-512-310
50-12-320	208-512-320
50-12-330	208-512-330
50-12-340	208-512-340
50-12-350	208-512-350
50-12-360	208-512-360
50-12-370	208-512-370

Reviser's note: The typographical error in the above section occurred in the copy filed by the agency and appears in the Register pursuant to the requirements of RCW 34.08.040.

OTS-4091.2

AMENDATORY SECTION(Amending Order 36, filed 7/8/76)

WAC 50-14-010
Facilitating loans -- Real property.

For purposes of this section the following words shall have the following meanings:

(1) "Foreclosed property" means real estate or interest therein, or other property used in connection therewith acquired through foreclosure or similar action, deed of trust sales, or by deed in lieu of any thereof.

(2) "Facilitating loan" means a loan or real estate contract covering foreclosed property made by a mutual savings bank to the purchaser of the foreclosed property.

(3) "Loan limits" means the limitations on investments imposed by RCW 32.20.410.

A mutual savings bank may make a facilitating loan for not in excess of the sale price of the property if the board of trustees or officers or committees designated by the board deem it prudent to dispose of the property in that manner.      Facilitating loans shall not be deemed violations of RCW 32.20.250 or 32.20.260, nor shall the division of ((banking)) banks require facilitating loans to be classified as loans made pursuant to RCW 32.20.255.      Until such time as a facilitating loan conforms to the requirements of RCW 32.20.250, 32.20.255 or 32.20.260, or other investment statutes relating to mutual savings bank, it shall be carried on the books and records of the bank as "Other real estate loans - Debts previously contracted," and shall not be carried at more than the value of the property securing it.      Facilitating loans shall be included in determining the amounts invested which are subject to the loan limits to the extent of the value at which they are carried on the books of the bank.      The bank may, however, make facilitating loans regardless of the loan limits.

[Order 36, § 50-14-010, filed 7/8/76.]

This chapter implements the authority of the ((supervisor of banking)) director of the department of financial institutions (the "((supervisor)) director") under chapters 32.08, 32.34, and 34.05 RCW to enact regulations concerning the organization and operation of mutual holding companies.      It addresses only those features of the organization and operation of mutual holding companies and their subsidiary stock savings banks that are not governed by Title 32 RCW.      Among the provisions that must be considered are:

(1) Chapter 32.32 RCW for the chartering of a mutual savings bank and the conversion of a mutual savings bank to a stock savings bank;

(2) Title 32 RCW generally for the operations of any such savings bank; and

(3) Chapter 32.34 RCW for any merger or acquisition of assets involving a mutual holding company or banking subsidiary of a mutual holding company.

In addition, the ((supervisor)) director has determined that formation of a business trust is not the sole and exclusive method by which a state savings bank may form a mutual holding company ("MHC").

Under RCW 32.34.050, a state savings bank is allowed to form a business trust that, in turn, is authorized to become a MHC.      However, based on the statutory authority granted to the ((supervisor)) director under that statute as well as chapters 32.08 and 34.05 RCW, the ((supervisor)) director has determined that utilization of a business trust is not the exclusive procedure for creation of MHCs.

By enacting RCW 32.08.142, the legislature evidenced a clear intent that state-chartered savings banks not be placed at a competitive disadvantage to federally chartered savings banks.      While the state Constitution prohibits automatic incorporation into state law of federal laws enacted after adoption of RCW 32.08.142, that restriction does not invalidate the legislative intent that state institutions not be placed at an undue competitive disadvantage with federal savings banks.

Conditioning MHC formation on the utilization of a business trust to act as the MHC is potentially disadvantageous to state savings banks in view of:

(a) The absence of state statutory and regulatory guidance concerning the governance and authority of trusts when acting as holding companies;

(b) The uncertainty of regulations of such trusts as MHCs; and

(c) The potential federal tax uncertainties that would arise by utilizing a trust in connection with a tax free reorganization into a mutual holding company.

In addition, business trusts are permitted by statute (chapter 23.90 RCW) to exercise the general powers of domestic corporations, including the power to merge into a domestic corporation.      As a result, the ((supervisor)) director has determined that the scope of chapter 32.34 RCW and the incidental powers clause of RCW 32.08.140 make it convenient or useful in connection with a savings bank's performance of its specifically enumerated powers to accomplish a MHC reorganization, to utilize either a corporation formed under the laws of the state of Washington or a business trust.

[Statutory Authority: RCW 32.34.040 - [32.34].050 and chapters 32.08 and 34.05 RCW.      93-13-142, § 50-14-020, filed 6/23/93, effective 7/24/93.      Statutory Authority: RCW 32.34.040 - [32.34.]050.      92-06-041, § 50-14-020, filed 2/28/92, effective 3/30/92.]

(1) The definitions in RCW 32.32.025 shall apply to any transaction under these rules unless the context requires otherwise and except as provided herein.

(2) The reorganization of a mutual savings bank into mutual holding company form ("reorganization") and the subsequent conversion of the MHC into stock form or the offering of common stock of a subsidiary of a MHC that will cause the MHC to hold less than fifty-one percent of the issued and outstanding common stock of the stock savings bank ("conversion to stock form") shall be governed by chapter 32.32 RCW, except as provided in these rules.

(3) The term "mutual holding company" shall mean the business trust or mutually owned corporation, or the successor of either, originally established by a savings bank to serve as the holding company of a stock savings bank subsidiary, provided that a MHC shall at all times own fifty-one percent or more of the issued and outstanding common stock of a stock savings bank subsidiary that is the successor by merger or purchase to substantially all of the assets and all of the deposits and other liabilities of the savings bank that has reorganized into a mutual holding company pursuant to RCW 32.34.050 and these rules.

(4) To achieve the intent of RCW 32.34.050 in a manner that ensures consistency with chapter 32.32 RCW, and acting pursuant to RCW 32.32.010, the ((supervisor)) director hereby waives or modifies to the extent set forth in these rules the applicability of the following provisions of chapter 32.32 RCW as they relate to the organization and operation of mutual holding companies and their stock savings bank subsidiaries: RCW 32.32.035, 32.32.045 through 32.32.070, 32.32.085, 32.32.090, 32.32.095, 32.32.110, 32.32.120, 32.32.135 through 32.32.160, 32.32.185 through 32.32.205, 32.32.240 through 32.32.275, 32.32.315, 32.32.320, 32.32.330, 32.32.335, 32.32.355, 32.32.440, and 32.32.485.

[Statutory Authority: RCW 32.34.040 - [32.34].050 and chapters 32.08 and 34.05 RCW.      93-13-142, § 50-14-030, filed 6/23/93, effective 7/24/93.      Statutory Authority: RCW 32.34.040 - [32.34.]050.      92-06-041, § 50-14-030, filed 2/28/92, effective 3/30/92.]

(1) Notwithstanding any other provision of law, and in accordance with the general requirements set forth in WAC ((50-14-050 through 50-14-140)) 208-514-050 through 208-514-140, a mutual savings bank may reorganize under a plan of reorganization so as to cause its deposit-taking and one or more other activities to be conducted by a stock savings bank subsidiary of a mutual holding company, which subsidiary is formed for such purpose.      The plan of reorganization must be adopted by the bank's trustees and submitted to and approved by the ((supervisor)) director as provided in these rules.

(2) Except to the extent that such provisions are inconsistent with these rules, the new stock savings bank subsidiary of the mutual holding company shall be subject to the same provisions of Title 32 RCW as apply to other stock savings banks.

[Statutory Authority: RCW 32.34.040 - [32.34].050 and chapters 32.08 and 34.05 RCW.      93-13-142, § 50-14-040, filed 6/23/93, effective 7/24/93.      Statutory Authority: RCW 32.34.040 - [32.34.]050.      92-06-041, § 50-14-040, filed 2/28/92, effective 3/30/92.]

(1) A reorganization of a mutual savings bank pursuant to these rules shall be approved by not less than two-thirds of the board of trustees of the mutual savings bank.

(2)(a) A mutual savings bank proposing a reorganization pursuant to these rules shall provide the ((supervisor)) director with written notice of such proposed reorganization.      Such notice shall include (i) a copy of the plan of reorganization approved by the board of trustees pursuant to subsection (1) of this section, (ii) the proposed incorporation and authorization certificates for the mutual holding company and/or the stock savings bank subsidiary, as appropriate, and (iii) such other information as the ((supervisor)) director shall require.      The ((supervisor)) director shall approve or disapprove the plan of reorganization within sixty days of acceptance of a completed plan of reorganization.

(b) In determining whether to approve the plan of reorganization, the ((supervisor)) director shall consider:

(i) Whether the formation of the mutual holding company would be in the interests of the depositors of the mutual savings bank proposing to reorganize;

(ii) Whether the reorganization would promote safe and sound banking practices;

(iii) Whether the reorganization would serve the public interest;

(iv) Whether the financial and management resources of the mutual savings bank proposing to reorganize are sufficient to warrant approval of the reorganization; and

(v) Whether the mutual savings bank proposing to reorganize either fails to furnish any information required under (a) of this subsection or furnishes information containing any statement that, at the time and in the circumstances under which it was made, was false or misleading with respect to any material fact or omits any material fact necessary to make statements therein not false or misleading.

(c) When the ((supervisor)) director shall have determined to approve or disapprove the plan of reorganization, the ((supervisor)) director shall so advise the mutual savings bank in writing and, if appropriate, shall endorse approval on the incorporation and authorization certificates and cause the same to be filed in such manner and in the respective offices provided in chapter 32.08 RCW.      Upon the filing of the authorization certificate as provided in RCW 32.08.080, the existence of the mutual holding company and/or stock savings bank, as appropriate, shall commence.      As used in these rules, the term "authorization certificate" shall include an amended authorization certificate.

[Statutory Authority: RCW 32.34.040 - [32.34].050 and chapters 32.08 and 34.05 RCW.      93-13-142, § 50-14-050, filed 6/23/93, effective 7/24/93.      Statutory Authority: RCW 32.34.040 - [32.34.]050.      92-06-041, § 50-14-050, filed 2/28/92, effective 3/30/92.]

(1)(a) The plan of reorganization may authorize the formation of a MHC by:

(i) The organization by or at the discretion or request of the mutual savings bank of a business trust or mutual corporation that shall serve as a MHC, the organization by the MHC of a stock savings bank subsidiary and the transfer to such stock savings bank of substantially all of the mutual savings bank's assets and liabilities, including all of its deposit liabilities, in accordance with these rules;

(ii) The organization by or at the direction or request of the mutual savings bank of a business trust or mutual corporation that shall serve as the MHC, and the organization by such MHC of a stock savings bank subsidiary that merges with the mutual savings bank; or

(iii) The reorganization of the mutual savings bank under any other method approved by the ((supervisor)) director.

(b) For the purposes of (a) of this subsection and when authorized by the ((supervisor)) director, as hereinafter provided, the trustees of the mutual holding company, consisting of five or more natural persons who are citizens of the United States, may incorporate an interim stock savings bank subsidiary in the manner herein prescribed.      No savings bank shall incorporate for less amount nor commence business unless it has a paid-in capital stock in such amount as may be determined by the ((supervisor)) director after consideration of the proposed transaction.

(i) Persons desiring to incorporate an interim stock savings bank shall file with the ((supervisor)) director a notice of their intention to organize a savings bank in such form and containing such information as the ((supervisor)) director shall prescribe by regulation or otherwise require, together with proposed articles of incorporation and bylaws, which shall be submitted for examination to the ((supervisor)) director at his office in Olympia.      The proposed articles of incorporation shall state:

(A) The name of such savings bank.

(B) The city, village or locality and county where the head office of such savings bank is to be located.

(C) The nature of its business (i.e., that of a savings bank).

(D) The amount of its capital stock, which shall be divided into shares of a par or no par value as may be provided in the articles of incorporation.

(E) The names, places of residence, and mailing addresses of the persons who as directors are to manage the bank until the first annual meeting of its shareholders.

(F) If there is to be preferred or special classes of stock, a statement of preferences, voting rights, if any, limitations and relative rights in respect of the shares of each class; or a statement that the shares of each class shall have the attributes as shall be determined by the bank's board of directors from time to time with the approval of the ((supervisor)) director.

(G) Any provision granting the shareholders the preemptive right to acquire additional shares of the bank and any provision granting shareholders the right to cumulate their votes.

(H) Any provision, not inconsistent with law, which the incorporators elect to set forth in the articles of incorporation for the regulation of the internal affairs of the corporation, including, without limitation, any provision restricting the transfer of shares.

(I) Any provision the incorporators elect to so set forth, not inconsistent with law or with the purposes for which the bank is organized, or any provision limiting any of the powers granted in the applicable provisions of the Revised Code of Washington.

It shall not be necessary to set forth in the articles of incorporation any of the corporate powers granted in the applicable provisions of the Revised Code of Washington.      The articles of incorporation shall be signed by all of the incorporators and acknowledged before an officer authorized to take acknowledgements.

(ii) In case of approval, the ((supervisor)) director shall forthwith give notice thereof to the proposed incorporators and file one of the triplicate articles of incorporation in his own office, transmit another triplicate to the secretary of state, and the last to the incorporators.      Upon receipt from the proposed incorporators of the same fees as are required for filing and recording other articles of incorporation, the secretary of state shall file such articles and record the same.      Upon the filing of articles of incorporation approved as aforesaid by the ((supervisor)) director, with the secretary of state, all persons named therein and their successors shall become and be a corporation, which shall have the powers and be subject to the duties and obligations prescribed by the applicable provisions of the Revised Code of Washington, and whose existence shall continue from the date of the filing of such articles until terminated pursuant to law; but such corporation shall not transact any business, except as is necessary or convenient to its organization and preparation to engage in business, until it has received from the ((supervisor)) director a certificate of authority to engage in the banking business as a stock savings bank.

(c) For the purposes of (a) of this subsection, WAC ((50-14-080)) 208-514-080 permits a newly organized stock savings bank to issue to persons other than its parent MHC, an amount of common stock and securities convertible into common stock that, in the aggregate, does not exceed forty-nine percent of the issued and outstanding common stock of such stock savings bank upon completion of the offering.      Issued and outstanding securities that are convertible into common stock shall be considered issued and outstanding common stock for purposes of computing the forty-nine percent limitation.      This subsection shall not limit the authority of such stock savings bank to issue equity or debt securities other than common stock and securities convertible into common stock.

(2) In connection with the reorganization of a mutual savings bank as provided in WAC ((50-14-040)) 208-514-040, the MHC may acquire assets of the mutual savings bank to the extent that such assets are not then required to be transferred to (or retained by) the stock savings bank in order to satisfy capital or reserve requirements of any applicable state or federal law or regulation.

(3) A stock savings bank whose outstanding common stock is at least fifty-one percent but less than one hundred percent owned by a mutual holding company shall have at least one director, but no more than two-fifths of its directors, who are "unaffiliated directors" who shall represent the interests of the minority shareholders.      An "unaffiliated director" is a director who is not:

(a) An officer or employee of the stock savings bank (or any affiliate thereof); or

(b) An officer, trustee, or employee of the mutual holding company.

If the incorporation certificate or bylaws of the stock savings bank provide that the board of directors shall be divided into two or more classes, then to the extent possible, each class shall contain the same number of unaffiliated directors as each other class.

[Statutory Authority: RCW 32.34.040 - [32.34].050 and chapters 32.08 and 34.05 RCW.      93-13-142, § 50-14-060, filed 6/23/93, effective 7/24/93.      Statutory Authority: RCW 32.34.040 - [32.34.]050.      92-06-041, § 50-14-060, filed 2/28/92, effective 3/30/92.]

(1) Upon the formation of a MHC:

(a) The MHC shall possess all the rights, powers, and privileges (except deposit-taking powers) and shall be subject to all the limitations, not inconsistent with these rules, of a mutual savings bank under Title 32 RCW; and

(b) The MHC shall be subject to the limitations imposed by the Bank Holding Company Act of 1956 (12 U.S.C. Section 1841, et seq.) or, in the case of a MHC resulting from the reorganization of a savings bank that elected either before or after such reorganization to be treated as a savings association (as defined in 12 U.S.C. Section 1467a), such mutual holding company shall be subject to the limitations imposed by the savings and loan holding company provisions of the Home Owners' Loan Act (12 U.S.C. Section 1467a).

(2) Notwithstanding any inconsistent provisions of Title 32 RCW, and subject to the express approval of (or additional rules promulgated by) the ((supervisor)) director, a MHC may:

(a) Merge with, acquire, or purchase the assets of a mutual holding company established pursuant to these rules or the savings and loan holding company provisions of the Home Owners' Loan Act (12 U.S.C. Section 1467a);

(b) Acquire or purchase the assets or stock of a stock savings bank, commercial bank, credit union, stock savings and loan association, stock federal savings bank, or stock federal savings and loan association;

(c) Acquire a mutual savings bank, mutual savings and loan association, federal mutual savings bank, or federal mutual savings and loan association through the merger of such institution with a stock subsidiary of such mutual holding company;

(d) Convert to a stock holding company pursuant to the provisions of a plan which is approved by the ((supervisor)) director, preserves the subscription and liquidation account rights of depositors of the mutual savings bank who then remain depositors of the stock savings bank and otherwise complies with WAC ((50-14-130)) 208-514-130; and

(e) Engage in any other acquisition or combination, specifically permitted by the ((supervisor)) director, including a merger into or sale of assets to another mutual or stock corporation.

[Statutory Authority: RCW 32.34.040 - [32.34].050 and chapters 32.08 and 34.05 RCW.      93-13-142, § 50-14-070, filed 6/23/93, effective 7/24/93.      Statutory Authority: RCW 32.34.040 - [32.34.]050.      92-06-041, § 50-14-070, filed 2/28/92, effective 3/30/92.]

(1) Any offering of shares of voting securities by a MHC which converts to stock form or of common stock of a stock savings bank subsidiary of a MHC that will cause the holding company to hold less than fifty-one percent of the issued and outstanding common stock of the stock savings bank upon completion of the offering (a "subsequent offering") shall be governed by the rules prescribed in chapter 32.32 RCW, except to the extent that those rules are explicitly waived or modified by the ((supervisor)) director.

(2) Any offering of shares of any class of stock of a stock savings bank subsidiary of a MHC that will not cause the MHC to hold less than fifty-one percent of the issued and outstanding common stock of the stock savings bank upon completion of the offering may be accomplished through either a public distribution or by means of a limited distribution or placement of the securities, none of which methods of offering will require the stock of the savings bank subsidiary to be offered to members of the unconverted mutual savings bank or of the MHC.      Any such offering shall comply with the disclosure requirements of chapter 32.32 RCW, shall be made by means of an offering circular approved by the ((supervisor)) director, and shall be sold at a price that is approved (a) by the ((supervisor)) director in the case of the initial offering of shares to persons other than the MHC, and in such case based upon a proposed price range established by qualified persons who are independent of the bank and (b) by the board of directors in the case of other offerings contemplated by this subsection.

(3) The procedures to follow in conducting a subsequent offering may, with the ((supervisor's)) director's approval, differ from those set forth in chapter 32.32 RCW.

(4) Notwithstanding any contrary provision of Title 32 RCW, there shall be no requirement to use an underwriter in an offering made pursuant to subsection (2) of this section, though such use is permissible.

(5) Subject to approval of the ((supervisor)) director, a stock savings bank subsidiary of a MHC may declare or pay a cash dividend that is payable only to shareholders of the stock savings bank other than the MHC.

(6) Notwithstanding any contrary provision of Title 32 RCW, no offering circular used in connection with an offering pursuant to subsection (2) of this section shall be required to set forth the estimated subscription price range of the shares being offered.

(7) A stock savings bank subsidiary of a MHC may issue and, consistent with these rules, any person may acquire any amount of preferred stock of the bank.

[Statutory Authority: RCW 32.34.040 - [32.34].050 and chapters 32.08 and 34.05 RCW.      93-13-142, § 50-14-080, filed 6/23/93, effective 7/24/93.      Statutory Authority: RCW 32.34.040 - [32.34.]050.      92-06-041, § 50-14-080, filed 2/28/92, effective 3/30/92.]

(1) Upon a conversion to stock form, as such conversion is defined in WAC ((50-14-030)) 208-514-030(2), by a MHC or a stock savings bank subsidiary of a MHC, depositors of the stock savings bank at the record date of the conversion to stock form who continuously have been depositors since the reorganization, or were depositors of any savings association subsequently acquired by a MHC at a time when the association was in mutual form and remained depositors of the stock savings bank, shall receive, without payment, nontransferable rights to subscribe for stock of the converted MHC or the converted stock savings bank to be sold in the subsequent offering, to the extent that such depositors would have received those rights pursuant to RCW 32.32.045 in a stock conversion of the savings bank as prescribed in chapter 32.32 RCW; provided, however, that such depositors who are not shareholders of the stock savings bank at the record date for the subsequent offering shall have priority rights, not inconsistent with the provisions of chapter 32.32 RCW, to subscribe for shares to be issued in the subsequent offering in accordance with a plan approved by the ((supervisor)) director or made pursuant to subsequent rules to be promulgated by the ((supervisor)) director.

(2) For purposes of this section, an "eligible account holder" is any depositor of a stock savings bank at the record date for a conversion to stock form of the bank or the MHC who has continuously owned in such bank one or more accounts valued in the aggregate of fifty dollars or more since the date that the trustees of the unconverted mutual savings bank approved the reorganization or the date that the bank's predecessor mutual association was acquired by the MHC.

(3) Nothing in chapter 32.34 RCW or chapter ((50-14)) 208-514 WAC shall be construed to authorize or require that depositors in a mutual savings bank that reorganizes as a MHC be offered stock in the stock savings bank subsidiary except as provided in subsection (1) of this section.

(4) Depositors in a mutual savings bank that reorganizes as a MHC with a stock savings bank subsidiary shall become depositors in such subsidiary when the mutual savings bank merges with or transfers its assets and liabilities to the stock savings bank.

[Statutory Authority: RCW 32.34.040 - [32.34].050 and chapters 32.08 and 34.05 RCW.      93-13-142, § 50-14-090, filed 6/23/93, effective 7/24/93.      Statutory Authority: RCW 32.34.040 - [32.34.]050.      92-06-041, § 50-14-090, filed 2/28/92, effective 3/30/92.]

The authority for a stock savings bank subsidiary of a MHC to issue stock shall be subject to the following limitations, unless otherwise approved by the ((supervisor)) director.

(1) The stock sold in the reorganization shall be sold at a total price equal to the estimated pro forma market value of such stock, based on an independent valuation as provided in WAC ((50-14-080)) 208-514-080(2) and any stock sold in a later offering shall be sold at its fair value as determined by the board of directors of the stock savings bank.

(2) The aggregate amount of issued and outstanding common stock of the stock savings bank owned or controlled by persons other than the MHC at the close of any proposed issuance shall be forty-nine percent or less than the savings bank's total outstanding common stock.

(3) The aggregate amount of common stock acquired in the proposed issuance, plus all prior issuances of the savings bank, by any nontax-qualified employee stock benefit plan of the savings bank or any insider (which for the purpose of these rules will mean an officer, director, or associate of an officer or director) of the savings bank (exclusive of any stock acquired by said plan or insider and his or her associates in the secondary market) shall not exceed ten percent of the outstanding shares of common stock of the savings bank held by persons other than the savings bank's MHC parent at the close of the proposed issuance.      In calculating the number of shares held by any insider or associate, shares held by any tax-qualified or nontax-qualified employee stock benefit plan of the savings bank that are attributable to such person shall not be counted.

(4) The aggregate amount of stock, whether common or preferred, acquired in the proposed issuance, plus all prior issuances of the savings bank, by any nontax-qualified employee stock benefit plan of the savings bank or any insider of the savings bank and his or her associates (exclusive of any stock acquired by said plan or insider and his or her associates in the secondary market) shall not exceed ten percent of the stockholders' equity of the savings bank held by persons other than the MHC parent at the close of the proposed issuance.

(5) The aggregate amount of common stock acquired in the proposed issuance, plus all prior issuances of the savings bank, by any one or more tax-qualified employee stock benefit plans of the savings bank (exclusive of any stock acquired by such plans in the secondary market) shall not exceed ten percent of the outstanding shares of common stock of the savings bank held by persons other than the MHC parent at the close of the proposed issuance.

(6) The aggregate amount of stock, whether common or preferred, acquired in the proposed issuance, plus all prior issuances of the savings bank, by any one or more tax-qualified employee stock benefit plans of the savings bank (exclusive of any stock acquired by such plans in the secondary market) shall not exceed ten percent of the stockholders' equity of the savings bank held by persons other than the MHC parent at the close of the proposed issuance.

(7) The aggregate amount of common stock acquired in the proposed issuance, plus all prior issuances of the savings bank by all nontax-qualified employee stock benefit plans of the savings bank and insiders of the savings bank (exclusive of any stock acquired by said plans and by insiders in the secondary market) shall not exceed thirty-five percent of the outstanding shares of common stock of the savings bank held by persons other than the MHC parent at the close of the proposed issuance if the savings bank has less than fifty million dollars in total assets prior to the issuance or twenty-five percent of such outstanding shares if the savings bank has more than five hundred million dollars in total assets before the issuance.      If the savings bank has between fifty million dollars and five hundred million dollars in total assets before the issuance, the maximum percentage shall be equal to thirty-five percent minus one percent multiplied by the quotient of total assets less fifty million dollars divided by forty-five million dollars.      In calculating the number of shares held by insiders and their associates, shares held by any tax-qualified or nontax-qualified employee stock benefit plan of the savings bank that are attributable to such persons shall not be counted.

(8) The aggregate amount of stock, whether common or preferred, acquired in the proposed issuance, plus all prior issuances of the savings bank, by all nontax-qualified employee stock benefit plans of the savings bank, insiders of the savings bank, and associates of insiders of the savings bank (exclusive of any stock acquired by said plans and by insiders in the secondary market) shall not exceed thirty-five percent of the stockholders' equity of the savings bank held by persons other than the association's mutual holding company parent at the close of the proposed issuance if the savings bank has less than fifty million dollars in total assets before the issuance or twenty-five percent of such stockholders' equity if the savings bank has more than five hundred million dollars in total assets prior to the issuance.      If the savings bank has between fifty million dollars and five hundred million dollars in total assets before the proposed issuance, the maximum percentage shall be equal to thirty-five percent minus one percent multiplied by the quotient of total assets less fifty million dollars divided by forty-five million dollars.

(9) Shares of authorized but unissued stock of a stock savings bank subsidiary of a MHC may be reserved to satisfy and may be issued pursuant to any stock-based incentive plan for employees, directors, and others approved by the savings bank's board of directors and a majority of its stockholders.

(10) If, at the close of any stock issuance, the stock savings bank has holders of record of its outstanding voting securities that would require registration under the Securities Exchange Act of 1934, then such requirement shall be met.

(11) For a period of three years following the proposed issuance, no insider of the savings bank shall sell, without the ((supervisor's)) director's prior written approval, any stock of the savings bank purchased in connection with the reorganization except that the personal representative of such insider may sell shares in the event of the death of the insider.

[Statutory Authority: RCW 32.34.040 - [32.34].050 and chapters 32.08 and 34.05 RCW.      93-13-142, § 50-14-100, filed 6/23/93, effective 7/24/93.      Statutory Authority: RCW 32.34.040 - [32.34.]050.      92-06-041, § 50-14-100, filed 2/28/92, effective 3/30/92.]

(1) The mutual holding company may retain or acquire assets of the mutual savings bank only to the extent permitted by the ((supervisor)) director.

(2) A stock savings bank established in connection with a reorganization shall reserve no authorized but unissued shares, except as necessary to satisfy a stock option plan or issue securities convertible into stock.

(3) A plan of reorganization shall contain the provisions referenced in RCW 32.32.035, except that it need not provide for the sale of any stock and the aggregate price of any stock sold shall bear the same proportion to total estimated pro forma market value of the subsidiary savings bank(s) determined by an independent appraisal that the shares sold bear to the total issued and outstanding shares of the savings bank(s).

[Statutory Authority: RCW 32.34.040 - [32.34.]050.      92-06-041, § 50-14-120, filed 2/28/92, effective 3/30/92.]

(1) If approved by the ((supervisor)) director, a MHC may convert to a stock form holding company.

(2) The MHC shall adopt a plan of conversion which the ((supervisor)) director finds to be in accordance with the provisions of chapter 32.32 RCW and these rules.

(3) The conversion must include such provisions requiring the exchange of shares of the subsidiary savings bank(s) for shares of the resulting stock holding company as the ((supervisor)) director finds to be fair to members of the MHC who possess subscription rights and to stockholders of the subsidiary banks.

[Statutory Authority: RCW 32.34.040 - [32.34].050 and chapters 32.08 and 34.05 RCW.      93-13-142, § 50-14-130, filed 6/23/93, effective 7/24/93.      Statutory Authority: RCW 32.34.040 - [32.34.]050.      92-06-041, § 50-14-130, filed 2/28/92, effective 3/30/92.]

The following sections of the Washington Administrative code are recodified as follows:

Old WAC Number	New WAC Number
50-14-010	208-514-010
50-14-020	208-514-020
50-14-030	208-514-030
50-14-040	208-514-040
50-14-050	208-514-050
50-14-060	208-514-060
50-14-070	208-514-070
50-14-080	208-514-080
50-14-090	208-514-090
50-14-100	208-514-100
50-14-110	208-514-110
50-14-120	208-514-120
50-14-130	208-514-130
50-14-140	208-514-140

OTS-4092.2

AMENDATORY SECTION(Amending Order 21, filed 8/6/73)

WAC 50-28-020
Operations and procedures.

A notice of intention to incorporate a bank or trust company shall be filed with the ((supervisor)) director at the division of ((banking)) banks in Olympia.      As a matter of general procedure, it has been found desirable and is recommended that interested groups visit the office of the ((supervisor)) director for a round-table discussion of statutory and other requirements, the forms, documentation and general information needed, the fees payable to the ((supervisor of banking)) division of banks and the secretary of state, plus a general discussion of the primary market area the applicants wish to serve and of economic resources of that area together with a brief review of existing financial institutions now serving that area.

[Order 21, § 50-28-020, filed 8/6/73.]

The notice of intention to organize a state bank or trust company shall be filed with the ((supervisor)) director in duplicate, on a form furnished by the division of ((banking)) banks.      It is the established policy of the division of ((banking)) banks to require diligent and timely completion and submission of forms, schedules, surveys, economic studies, maps and all supporting data deemed necessary and required to conduct the statutory investigation. For the purpose of expediting the investigation and correlating said investigation with that of the Federal Deposit Insurance Corporation, in the event deposits of the proposed bank or trust company are to be insured by that agency, the schedules, statements and supporting data shall be organized under six basic general headings or factors:

(1) Financial history and condition.

(a) Pro forma statement of condition - beginning of business.

(b) Premises to be occupied by proposed bank, whether owned or leased, whether permanent or temporary, details as to description, costs, from whom purchased or leased, insurance coverage, estimated annual depreciation.      If property is to be purchased or leased from a director, officer, a large shareholder, or an interest of any such, complete details should be furnished.

(c) Details as to proposed investment in and rental of furniture, fixtures and equipment.

(d) Relationships and associations with proposed bank of any of the sellers or lessors of land, buildings or equipment, either directly or indirectly.

(e) Organization expenses (which should not be borrowed from any source) - complete and detailed accounting is required for all expenses related to organization, including detailed account of actual legal work performed together with any additional costs anticipated prior to opening or costs incurred or work performed during the organization period for which disbursement has been deferred beyond the opening date.

(2) Adequacy of the capital structure.

(a) Proposed allocations within total capital structure.

(i) Amount of paid-in common capital stock (No. shares x par value).

(ii) Amount of paid-in surplus.

(iii) Amount of paid-in undivided profits.

(iv) Amount of other segregations, including the organization or expense fund, if planned.

(b) Minimum capital requirements of state law (RCW 30.08.010 as amended by chapter 104, Laws of 1973).

(c) The adequacy (deemed reasonable) of the proposed capital structure is evaluated, in part, by:

(i) The population of the community to be served.

(ii) Ratio the projected net total capital structure will bear to the estimated volume of deposits at the end of each of the first three years of operations.

(3) Future earnings prospects.      A detailed projection of earnings and expenses is to be submitted showing the breakdown of income and expenses for each of the first three years of operations.      Provision should be made for the bad debt reserve (loan losses) based upon the major types of loaning demands the proposed bank expects to serve and total loans expected by the end of the first, second and third years of operations.

(4) General character of management.

(a) A financial report and a biographical report for each officer and director is required together with a report by each officer and director stating the number of shares to be purchased, the total cost of such shares and details as to source and financing terms for such portion as not paid in cash.      (If disclosure of any of the proposed officers would jeopardize current employment, include the information in a special "CONFIDENTIAL SECTION.")

(b) The subscribers (proposed shareholders) are to be listed alphabetically with name and address, occupation and number of shares being purchased indicated by number of shares and total subscription price.      The list should indicate "D" for the directors designee, "O" for officers.

(c) For any subscribers for 5% or more of the proposed capital stock, the financing terms are required as for directors and officers.

(d) The membership of the committees of the directorate are to be designated and duties outlined, including:

(i) Loan and/or executive committee.

(ii) Investment committee.

(iii) Audit committee.

(e) Management of the proposed bank will report:

(i) Name of principal correspondent bank or banks and basis upon which the selection was made.

(ii) Determination that sufficiency of surety bond coverage conforms with generally accepted banking practices.

(f) Any changes contemplated in the proposed directorate or active management during the first year are to be reported, or, if none, so state.

(5) Convenience and needs of the community to be served.

(a) Applicants have the responsibility of developing as fully as possible the economic support and justification for the proposed bank including:

(i) The community and "surrounding country" (the trade territory or market area) which the proposed bank will serve, including the geographic boundaries within which all or most of the bank's potential customers reside.

(1) Furnish a detail map of such area pinpointing and indexing each financial institution (banks and savings and loan associations and mutual savings bank, whether head office or branch office).

(2) Provide list or recapitulation of subscribers residing in or closely identified with the area to be served.

(3) Provide estimates of the total deposits anticipated during the early period of operations together with totals expected by the end of each of the first three years.      The latter should be segregated:

(a) Demand deposits.

(b) Savings passbook accounts.

(c) Other time deposits.

(d) Public funds.

(e) Recapitulation as to total demand and total time.

(4) The economic characteristics of the trade territory specified above for the most recent five-year period where possible... including manufacturing, agricultural and other industrial data, construction activity, retail and wholesale sales, housing starts, school population, census figures and projections.

(5) Such additional data relating to the trade area considered relevant and indicating support for the proposed bank as may be obtained from such sources as local offices of utilities, planning commission, chamber of commerce or trade associations, traffic surveys, county auditor, title insurance company, etc.      (In the event an economic survey or feasibility study has been prepared it may provide most of the information needed.)

(ii) List principal business and industries of the market area by name of company, type of business, average number of employees, approximate annual payroll and annual sales.      If significant, furnish details as to public employment of the area, including schools, military, U.S., state, county, municipal or other.

(b) List all banks, branches, trust companies, mutual savings banks and branches, together with savings and loan associations presently serving in the proposed market area and surrounding country, including any authorized but unopened offices, indicating "N/A" for information determined unobtainable:

(i) Name of the financial institution.

(ii) Location.

(iii) Distance (road miles or city blocks) from proposed site.

(iv) Direction from site.

(v) Date established.

(vi) Date of latest statement available.

(vii) Deposits: Demand, time and total.

(viii) Loans: Commercial, consumer, real estate secured and total to extent available.

(6) Consistency of corporate powers.      In addition to the proposed articles of incorporation submitted with the notice of intention to organize, the proposed bylaws should be submitted together with articles of incorporation and complete details for any proposed affiliate (i.e., a premises holding company).

[Order 21, § 50-28-030, filed 8/6/73.]

The required field investigation will be undertaken promptly upon submission of the notice of intention to organize a bank or trust company accompanied by statutory fees, provided the required documentation is determined by preliminary review to be complete in all respects.      If, in the judgment of the ((supervisor)) director, matters of substantive nature are missing or incomplete the notice of intent to organize and submitted documents may be returned to the correspondent of record.      If the matters deemed incomplete be of relatively minor nature the applicants may be notified in writing thereof and given a reasonable time to make corrections or submit additional information or schedules required.      For purposes of section 5, chapter 104, Laws of 1973 1st ex. sess. (RCW 30.08.030), a notice of intention to organize a bank or trust company shall not be deemed to be received by the ((supervisor)) director unless and until all of the information required by the ((supervisor)) director has been provided to him.

[Order 21, § 50-28-050, filed 8/6/73.]

The division of ((banking)) banks hereby adopts for use of all persons requesting permission to organize a state bank or trust company, the form attached hereto as Appendix No. 1, entitled "Notice of intention to organize a state bank or trust company."

[Order 21, § 50-28-060, filed 8/6/73.]

The subscription agreement with prospective purchasers of the capital stock of a proposed new bank or trust company shall not contain any agreement for any amount to be paid in advance for the purpose of defraying organization costs.      No payment on subscription for stock shall be made until the articles of incorporation have been approved by the ((supervisor of banking)) director of the department of financial institutions and filed with the secretary of state.

[Order 30, § 50-28-070, filed 10/2/75.]

[Order 21, Appendix I -- Form (codified as WAC 50-28-990), filed 8/6/73.]

The following sections of the Washington Administrative Code are recodified as follows:

Old WAC number	New WAC number
50-28-010	208-528-010
50-28-020	208-528-020
50-28-030	208-528-030
50-28-040	208-528-040
50-28-050	208-528-050
50-28-060	208-528-060
50-28-070	208-528-070
50-28-990	208-528-990

OTS-4094.2

AMENDATORY SECTION(Amending WSR 99-01-119, filed 12/18/98, effective 1/18/99)

WAC 50-36-020
Administration of fiduciary powers.

(1)(a) The board of directors is responsible for the proper exercise of fiduciary powers by the trust company.      All matters pertinent thereto, including the determination of policies, the investment and disposition of property held in a fiduciary capacity, and the direction and review of the actions of all officers, employees, and committees utilized by the trust company in the exercise of its fiduciary powers, are the responsibility of the board.      In discharging this responsibility, the board of directors may assign, by action duly entered in the minutes, the administration of such of the trust company's fiduciary powers as it may consider proper to assign to such director(s), officer(s), employee(s) or committee(s) as it may designate.

(b) No fiduciary account shall be accepted without the prior approval of the board, or of the director(s), officer(s) or committee(s) to whom the board may have designated the performance of that responsibility.      A written record shall be made of such acceptances and of the relinquishment or closing out of all fiduciary accounts.      Upon the acceptance of an account for which the trust company has investment responsibilities a prompt review of the assets shall be made.      The board shall also ensure that at least once during every calendar year thereafter, all the assets held in or for each fiduciary account where the bank has investment responsibilities are reviewed to determine the advisability of retaining or disposing of such assets.

(2) All officers and employees taking part in the operation of the trust department shall be adequately bonded.

(3) Every qualified fiduciary subject to this regulation and exercising fiduciary powers in this state shall designate, employ or retain legal counsel who shall be readily available to pass upon fiduciary matters and to advise the trust company and its trust department.

(4)(a) The trust department may utilize personnel and facilities of other departments of the trust company or its affiliates, and other departments of the trust company may utilize the personnel and facilities of the trust department or its affiliates only to the extent not prohibited by law and as long as the separate identity of the trust department is preserved.

(b) Agency agreements. Pursuant to a written agreement, a trust company exercising fiduciary powers may perform services related to the exercise of fiduciary powers for another trust company or other entity, and may purchase services related to the exercise of fiduciary powers from another trust company or other entity.

(5) Fiduciary records shall be kept separate and distinct from other records of the trust company and maintained in compliance with the provisions of RCW 30.04.240.      All fiduciary records shall be kept and retained for such time as to enable the fiduciary to furnish such information or reports with respect thereto as may be required by the ((supervisor of banking)) director.

(6) Every such fiduciary shall keep an adequate record of all pending litigation to which it is a party in connection with its exercise of fiduciary powers.

[Statutory Authority: RCW 43.320.010, 43.329.040 and 30.04.030.      99-01-119, § 50-36-020, filed 12/18/98, effective 1/18/99; Order 22, § 5