Minnesota Session Laws - 1986, Regular Session

  

                         Laws of Minnesota 1986 

                        CHAPTER 339-H.F.No. 671 
           An act relating to financial institutions; authorizing 
          interstate acquisition and formation of banks between 
          this state and certain states on a reciprocal basis; 
          amending Minnesota Statutes 1984, sections 46.044; and 
          48.512; proposing coding for new law in Minnesota 
          Statutes, chapters 48 and 51A. 
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
    Section 1.  Minnesota Statutes 1984, section 46.044, is 
amended to read: 
    46.044 [CHARTERS ISSUED, CONDITIONS.] 
    If (1) the applicants are of good moral character and 
financial integrity, (2) there is a reasonable public demand for 
this bank in this location, (3) the organization expenses being 
paid by the subscribing shareholders do not exceed the necessary 
legal expenses incurred in drawing incorporation papers and the 
publication and the recording thereof, as required by law, (4) 
the probable volume of business in this location is sufficient 
to insure and maintain the solvency of the new bank and the 
solvency of the then existing bank or banks in the locality 
without endangering the safety of any bank in the locality as a 
place of deposit of public and private money, and (5) the 
commissioner of commerce is satisfied that the proposed bank 
will be properly and safely managed, and (6) the applicant, if 
it is an interstate bank holding company, as defined in section 
6, has provided developmental loans as required by section 14, 
and has complied with the net new funds reporting requirements 
of section 4, the application must be granted; otherwise it must 
be denied.  In case of the denial of the application, the 
commissioner of commerce shall specify the grounds for the 
denial.  A person aggrieved, may obtain judicial review of the 
determination in accordance with chapter 14.  
    Sec. 2.  [48.1585] [GOVERNMENT CHECKS.] 
    No financial institution with deposits insured by the 
federal deposit insurance corporation owned by an interstate 
bank holding company doing business in this state may refuse to 
honor a check or draft drawn on the account of the United States 
treasury, the state of Minnesota, or any county within the state 
of Minnesota, that is presented by an individual offering 
sufficient identification. 
    Sec. 3.  Minnesota Statutes 1984, section 48.512, is 
amended by adding a subdivision to read: 
    Subd. 6.  [BASIC SERVICES TRANSACTION ACCOUNT.] A financial 
intermediary owned by an interstate bank holding company shall 
offer a basic services transaction account to eligible 
individuals.  For purposes of this subdivision: 
    (a) "basic services transaction account" means a 
transaction account that has no initial or periodic service 
fees, allows at least six checks per month to be drawn on the 
account without charge, and allows at least six free financial 
transactions per month on an electronic financial terminal; and 
    (b) "eligible individual" means a person whose annual 
family income is less than the federal poverty income guidelines 
as published annually in the Federal Register, or a person 
receiving income maintenance and support services as defined in 
section 268.0111, subdivision 5. 
    Sec. 4.  [48.90] [LEGISLATIVE INTENT.] 
    Subdivision 1.  [SEVERABILITY.] It is the express intention 
of the Minnesota legislature to act pursuant to the United 
States Code, title 12, section 1842(d) to provide an orderly 
transition to interstate banking by initially permitting limited 
interstate banking on a regional basis.  Therefore, 
notwithstanding the provisions of section 645.20, if any 
provision of this act, other than sections 1 to 3, and 14, 
providing for the supervisory powers of the commissioner or 
limiting expansion into this state to bank holding companies 
located in states defined as "reciprocating states" is 
determined by final, nonappealable order of any Minnesota or 
federal court of competent jurisdiction to be invalid or 
unconstitutional, this entire act is null and void and of no 
further force and effect from the effective date of the final 
determination.  
    Subd. 2.  [NONAFFECTED ACTIVITIES.] This act should not be 
construed to limit the power granted to a bank in this state to 
conduct its business or to limit the conduct of business by any 
bank holding company in which the operation of its banking 
subsidiaries are principally conducted in this state.  
    Subd. 3.  [PROHIBITED ACTIVITIES.] This act does not 
authorize:  
    (1) the establishment in this state of branch offices of a 
banking subsidiary of any out-of-state bank holding company 
making an acquisition pursuant to this act if the banking 
subsidiary does not have its principal place of business in this 
state; or 
    (2) the establishment in this state of branch offices of a 
bank having its principal place of business in this state unless 
authorized by sections 47.51 to 47.57. 
    Sec. 5.  [48.91] [TITLE.] 
    This act may be cited as the "reciprocal interstate banking 
act."  
    Sec. 6.  [48.92] [DEFINITIONS.] 
    Subdivision 1.  [TERMS.] When used in sections 1 to 9, the 
terms defined in this section have the meanings given them, 
unless their context requires a different meaning.  
    Subd. 2.  [CONTROL.] "Control" means, with respect to a 
bank holding company, bank, or bank to be organized pursuant to 
chapters 46, 47, 48, and 300, (1) the ownership, directly or 
indirectly or acting through one or more other persons, control 
of or the power to vote 25 percent or more of any class of 
voting securities; (2) control in any manner over the election 
of a majority of the directors; or (3) the power to exercise, 
directly or indirectly, a controlling influence over management 
and policies. 
    Subd. 3.  [BANK.] "Bank" means any bank, or bank and trust 
company which is now or may hereafter be organized under the 
laws of this state that is an insured institution as the term is 
defined in section 3(h) of the Federal Deposit Insurance Act, 
United States Code, title 12, section 1813(h), that:  
    (1) accepts deposits that the depositor has a legal right 
to withdraw on demand; and 
    (2) engages in the business of making commercial loans.  
    Subd. 4.  [COMMISSIONER.] "Commissioner" means the 
commissioner of commerce of the state of Minnesota.  
    Subd. 5.  [DEPARTMENT.] "Department" means the department 
of commerce of the state of Minnesota.  
    Subd. 6.  [LOCATED IN THIS STATE.] "Located in this state" 
means:  (1) a bank whose organizational certificate identifies 
an address in this state as the principal place of conducting 
the business of banking; or (2) a bank holding company as 
defined in the Bank Holding Company Act of 1956, as amended, 
with banking subsidiaries, the majority of whose deposits are in 
Minnesota. 
    Subd. 7.  [RECIPROCATING STATE.] "Reciprocating state" is: 
(1) a state that authorizes the acquisition, directly or 
indirectly, or control of, banks in that state by a bank or bank 
holding company located in this state under conditions 
substantially similar to those imposed by the laws of Minnesota 
as determined by the commissioner; and (2) limited to the states 
of Iowa, North Dakota, South Dakota, and Wisconsin. 
    Subd. 8.  [RECIPROCATING STATE BANK HOLDING 
COMPANY.] "Reciprocating state bank holding company" means a 
bank holding company as defined in the Bank Holding Company Act 
of 1956, as amended, whose operations are principally conducted 
in a reciprocating state other than Minnesota and is that state 
in which the operations of its banking subsidiaries are the 
largest in terms of total deposits. 
    Subd. 9.  [INTERSTATE BANK HOLDING COMPANY.] "Interstate 
bank holding company" means (a) a bank holding company located 
in this state, engaging in interstate banking under reciprocal 
legislation, (b) a reciprocating state bank holding company 
engaged in banking in this state, and (c) other out-of-state 
bank holding companies operating an institution located in this 
state having deposits insured by the federal deposit insurance 
corporation. 
    Subd. 10.  [EQUITY CAPITAL.] "Equity capital" means the sum 
of common stock, preferred stock, and surplus and undivided 
profits. 
    Sec. 7.  [48.93] [ACQUISITION PROCEDURE.] 
    Subdivision 1.  [APPLICATION.] A reciprocating state bank 
holding company may, through a purchase of stock or assets of a 
bank, or through a purchase of stock or assets of or merger with 
a bank holding company, acquire an interest in an existing bank 
or banks located in this state if it meets the conditions in 
this section and, if the interest will result in control of the 
bank or banks, it files an application in writing with the 
commissioner on forms provided by the department.  The 
commissioner, upon receipt of the application, shall act upon it 
within 30 days of the end of the public comment period provided 
by section 12, and, unless he or she disapproves the proposed 
acquisition within that period of time, it becomes effective 
without his or her approval, except that the commissioner may 
extend the 30-day period an additional 30 days if in his or her 
judgment any material information submitted is substantially 
inaccurate or the acquiring party has not furnished all the 
information required by subdivision 3 or the commissioner.  No 
application for approval required by this section is complete 
unless accompanied by an application fee of $5,000 payable to 
the state treasurer.  Compliance with the requirements of this 
section satisfies the requirements of section 48.03, subdivision 
4.  Within three days after his or her decision to disapprove 
any proposed acquisition, the commissioner shall notify the 
acquiring party in writing of the disapproval.  The notice must 
provide a statement of the basis for the disapproval.  
    Subd. 2.  [HEARINGS.] Within ten days of receipt of notice 
of disapproval pursuant to subdivision 1, the acquiring party 
may request an agency hearing on the proposed acquisition.  At 
the hearing, all issues must be determined on the record 
pursuant to Minnesota Statutes, chapter 14 and the rules issued 
by the department.  At the conclusion of the hearing, the 
commissioner shall by order approve or disapprove the proposed 
acquisition on the basis of the record made at the hearing. 
    Subd. 3.  [CRITERIA FOR APPROVAL.] Except as otherwise 
provided by rule of the department, an application filed 
pursuant to subdivision 1 must contain the following information:
    (1) the identity, personal history, business background, 
and experience of each person by whom or on whose behalf the 
acquisition is to be made, including his or her material 
business activities and affiliations during the past five years, 
and a description of any material pending legal or 
administrative proceedings in which he or she is a party and any 
criminal indictment or conviction of that person by a state or 
federal court;  
    (2) a statement of the assets and liabilities of each 
person by whom or on whose behalf the acquisition is to be made, 
as of the end of the fiscal year for each of the five years 
immediately preceding the date of the notice, together with 
related statements of income, sources, and application of funds 
for each of the fiscal years then concluded, all prepared in 
accordance with generally accepted accounting principles 
consistently applied, and an interim statement of the assets and 
liabilities for each person, together with related statements of 
income, source, and application of funds as of a date not more 
than 90 days prior to the date of the filing of the notice;  
    (3) the terms and conditions of the proposed acquisition 
and the manner in which the acquisition is to be made;  
    (4) the identity, source, and amount of the funds or other 
consideration to be used in making the acquisition, and if any 
part of these funds or other consideration has been or is to be 
borrowed or otherwise obtained for the purpose of making the 
acquisition, a description of the transaction, the names of the 
parties, and any arrangements, agreements, or understandings 
with those persons;  
    (5) any plans or proposals which an acquiring party making 
the acquisition may have to liquidate the bank, to sell its 
assets or merge it, or make any other major change in its 
business or corporate structure or management;  
    (6) the identification of any person employed, retained, or 
to be compensated by the acquiring party, or by any person on 
his or her behalf, to make solicitations or recommendations to 
stockholders for the purpose of assisting in the acquisition, 
and a brief description of the terms of the employment, 
retainer, or arrangement for compensation;  
    (7) copies of all invitations, tenders, or advertisements 
making tender offers to stockholders for purchase of their stock 
to be used in connection with the proposed acquisition;  
    (8) a statement of how the acquisition will bring "net new 
funds" to Minnesota.  The description of net new funds must be 
filed with the application and annually thereafter stating the 
amount of capital funds, including the increase in equity 
capital that will result from the acquisition or establishment 
of a bank.  The level of total equity capital must exceed 
$3,000,000 for a new chartered bank and $1,000,000 for an 
acquired bank.  The description must state the net increase in 
loanable funds expressed as an increase in the total loan to 
asset ratio of Minnesota loans and assets.  The statement must 
also include a discussion of initial capital investments, loan 
policy, investment policy, dividend policy, and the general plan 
of business, including the full range of consumer and business 
services which will be offered; and 
    (9) any additional relevant information in the form the 
commissioner requires by rule or by specific request in 
connection with any particular notice.  
    Subd. 4.  [DISAPPROVAL.] The commissioner shall disapprove 
any proposed acquisition if:  
    (1) the financial condition of any acquiring person is such 
as might jeopardize the financial stability of the bank or 
prejudice the interests of the depositors of the bank;  
    (2) the competence, experience, integrity of any acquiring 
person or of any of the proposed management personnel indicates 
that it would not be in the interest of the depositors of the 
bank, or in the interest of the public to permit the person to 
control the bank;  
    (3) the acquisition will result in undue concentration of 
resources or substantial lessening of competition in this state; 
    (4) the application fails to adequately demonstrate that 
the acquisition proposal would bring net new funds into 
Minnesota; or 
    (5) the application is incomplete or any acquiring party 
neglects, fails, or refuses to furnish the commissioner all the 
information required by him or her.  
    Subd. 5.  [APPEALS.] The court of appeals of the state of 
Minnesota will have exclusive original jurisdiction of any 
judicial review of an order issued under this section.  The bank 
holding company that is the subject of the order may seek 
judicial review at any time within 90 days of the date of an 
order lawfully issued pursuant to this section.  
    Sec. 8.  [48.94] [NEW BANK APPLICATION.] 
    Any application to organize a bank pursuant to chapter 45 
may include control by a reciprocating state bank holding 
company if, in addition to the conditions in section 46.041, the 
application does not present any facts which would be grounds 
for disapproval in section 7, subdivision 4, and if the 
application would result in the acquisition and operation of no 
more than one bank in this state by the same reciprocating state 
bank holding company.  
    Sec. 9.  [48.95] [VIOLATIONS.] 
    Subdivision 1.  [DIVESTITURE; CEASE AND DESIST.] In the 
event a reciprocating state bank holding company makes an 
acquisition other than in full compliance with the requirements 
and procedures of this act the commissioner may:  
    (1) by order immediately require the reciprocating state 
bank holding company to divest itself of its direct or indirect 
ownership or control of any bank located in this state; or 
    (2) by order require the reciprocating state bank holding 
company to cease and desist the violations by a date certain. 
The order would be subject to the procedures applicable to cease 
and desist proceedings pursuant to sections 46.23 to 46.33 and 
any applicable rules.  
    Subd. 2.  [NET NEW FUNDS; MISREPRESENTATION.] If the 
commissioner determines that at any time subsequent to the 
acquisition of a bank located in this state by a reciprocating 
state bank holding company it has materially misrepresented or 
substantially failed to conform to the statement submitted in 
the application required by section 7, subdivision 3, clause 
(8), the determination shall be considered prima facie evidence 
of a violation subject to the divestiture or cease and desist 
procedures in subdivision 1.  In any proceeding under this 
section, the burden of proving compliance with the requirements 
of this act is upon the reciprocating state bank holding company.
    Sec. 10.  [48.96] [SUPERVISION.] 
    The department may enter into cooperative and reciprocal 
agreements with federal or bank regulatory authorities of 
reciprocating states for exchange or acceptance of reports of 
examination and other records from the authorities in lieu of 
conducting its own examinations.  The department may enter into 
joint actions with federal or bank regulatory authorities of 
reciprocating states to carry out its responsibilities under 
this act and assure compliance with the laws of this state. 
    Sec. 11.  [48.97] [REPORTS.] 
    Subdivision 1.  [REGULAR AND PERIODIC REPORTS.] Any 
reciprocating state bank holding company that directly or 
indirectly, through any subsidiary, acquires a bank pursuant to 
this act shall file with the commissioner copies of all regular 
and periodic reports which the bank holding company is required 
to file under section 13 or 15(d) of the Securities and Exchange 
Act of 1934, as amended, excluding any portions not available to 
the public, and such other reports as the commissioner may 
require by rule.  
    Subd. 2.  [INVESTMENT; REPORTING REQUIREMENTS.] Each 
financial institution located in this state owned by an 
interstate bank holding company shall fully and accurately 
disclose in an annual report to the commissioner of commerce the 
dollar value and volume of loans by zip code tract approved in 
the previous year in non-real estate commercial and farm lending 
categories established by the commissioner.  Lending categories 
must be delineated in sufficient detail to evaluate the lender's 
loan performance.  Loan categories may include:  demand or 
accrual notes, installment loans, equipment loans, inventory or 
accounts receivable loans, small business administration loans, 
and FmHA guaranteed loans.  Housing loans must be disclosed 
statewide in the same manner and form as required by the Federal 
Home Mortgage Disclosure Act.  The annual report must also 
disclose by zip code tract the dollar value and volume of 
deposits receiving during the previous year.  The annual report 
must also disclose information by the categories required in 
section 14 demonstrating that developmental loans of a 
sufficient quantity are being made.  The report must be 
accompanied by a copy of the most recent disclosures required 
under the Federal Community Reinvestment Act and the most recent 
Quarterly Statement of Income and Conditions. 
    Subd. 3.  [RATING.] On the basis of the reports required in 
this section, the commissioner of commerce shall annually rate 
each financial institution owned by an interstate bank holding 
company on its lending performance.  The commissioner shall 
adopt by rule a five point rating scale based on the financial 
institution's performance in meeting the credit needs of the 
community and its performance in reaching its targeted level of 
developmental loans.  A rating may be contested under the 
contested case proceedings of chapter 14. 
    Subd. 4.  [RATING REPORTS.] The commissioner of commerce 
shall make all ratings and reports available to the public upon 
request as provided by section 12.  The ratings must be 
accompanied by an explanation of the rating assigned to each 
bank and the rationale behind the rating system. 
    Sec. 12.  [48.98] [PUBLIC PARTICIPATION.] 
    Subdivision 1.  [PUBLIC INFORMATION.] Consistent with 
federal law, the commissioner shall make available to the public 
at reasonable cost copies of all applications, including 
supporting documents and any other information required to be 
submitted to the commissioner. 
     Subd. 2.  [NOTICE.] Upon the filing of an application: 
     (1) an applicant shall publish in a newspaper of general 
circulation notice of the proposed acquisition as prescribed by 
the commissioner by rule;  
     (2) the commissioner shall prepare and update with each new 
application a bulletin listing all pending applications.  The 
bulletin must be published and mailed without charge to any 
person upon request; and 
    (3) the commissioner shall accept public comment on an 
application for a period of not less than 30 days from the date 
of the final publication required by clause (1), or 30 days 
after the date of the availability of the first periodic 
bulletin required by clause (2), whichever is later.  
    Sec. 13.  [48.99] [SPECIAL ACQUISITIONS AUTHORIZED.] 
    Subdivision 1.  [APPLICATION CRITERIA FOR 
APPROVAL.] Pursuant to the present requirement of the United 
States Code, title 12, section 1842(d) and notwithstanding any 
other provision of state law, a reciprocating state bank holding 
company, or any subsidiary of the bank holding company, may 
acquire a bank located in this state where the commissioner has 
determined that a merger, consolidation, or purchase of assets 
and assumption of liabilities is necessary and in the public 
interest to prevent the probable failure of a bank.  The 
acquisition is subject to the prior written approval of the 
commissioner of an application submitted under this section and 
after the following considerations:  
    (1) the financial and managerial resources of the applicant;
    (2) the future prospects of the applicant and the state 
bank or its subsidiary whose assets, interest in, or shares it 
will acquire;  
    (3) the financial history of the applicant;  
    (4) whether the acquisition or holding may result in undue 
concentration of resources or substantial lessening of 
competition in this state;  
    (5) the convenience and needs of the public of this state; 
and 
    (6) whether the acquisition or holding will strengthen the 
financial condition of the state bank.  
    Subd. 2.  [INTRASTATE PRIORITY.] In determining the 
priority of applications submitted to seek approval to acquire a 
bank located in this state which meets the criteria in 
subdivision 1, the commissioner shall give first consideration 
to the approval of applications from applicants located in this 
state, then to reciprocating state bank holding companies.  
    Subd. 3.  [SUPERVISION.] The department may enter into 
cooperative and reciprocal agreements with federal or bank 
regulatory authorities of other states for exchange or 
acceptance of reports of examination and other records from the 
authorities in lieu of conducting its own examinations of 
acquiring reciprocating state bank holding companies.  The 
department may enter into joint actions with federal or bank 
regulatory authorities of other states to carry out its 
responsibilities under this act and assure compliance with the 
laws of this state. 
    Subd. 4.  [REPORTS.] A reciprocating state bank holding 
company that directly or indirectly, through any subsidiary, 
acquires a bank pursuant to this act shall file with the 
commissioner copies of all regular and periodic reports which 
the bank holding company is required to file under section 13 or 
15(d) of the Securities and Exchange Act of 1934, as amended, 
but excluding any portions not available to the public, and such 
other reports as the commissioner may require by rule.  
    Sec. 14.  [48.991] [DEVELOPMENTAL LOANS.] 
    A financial institution located in this state owned by an 
interstate bank holding company shall provide a level of 
developmental loans as defined by the commissioner by rule.  A 
"developmental loan" includes, but is not limited to, (1) loans 
for low and moderate income housing, loans to community 
development corporations, loans to woman and minority owned 
businesses, student education loans, and alternative energy or 
energy conservation loans, and (2) loans within distressed areas 
and on any Indian reservation for any commercial non-real estate 
purpose, home loans, home improvement loans, and operating loans 
to family farmers.  The commissioner of commerce shall annually 
designate distressed areas.  A distressed area may be made for a 
geographic region smaller than a county within the counties of 
Anoka, Carver, Dakota, Hennepin, Ramsey, Scott, and Washington.  
The determination of a distressed area should be made on the 
area's unemployment rate, economic conditions, and credit needs. 
    Sec. 15.  [48.992] [EXEMPTION.] 
    Subdivision 1.  [RESOLUTION.] The board of directors of a 
bank or a bank holding company located in this state may adopt a 
resolution before July 1, 1987, to exempt the bank or bank 
holding company from section 4.  If the board of directors 
adopts the resolution and files a certified copy of it as 
required by subdivision 2, the bank or bank holding company may 
not be acquired under section 4. 
    Subd. 2.  [FILING.] If a resolution is adopted under this 
section, the board of directors shall file a certified copy of 
the resolution with the department in person or by certified 
mail.  The board of directors may revoke the resolution by 
notifying the department in writing of its decision to revoke 
the resolution. 
    Sec. 16.  [51A.58] [INTERSTATE BRANCHING.] 
    An association may, by acquisition, merger, or 
consolidation, establish or operate branch offices in any 
reciprocating state, and a savings and loan association 
chartered in the state may establish branch offices in this 
state.  For the purposes of this section, "reciprocating state" 
is:  (1) a state that authorizes the establishment of branch 
offices in that state by an association located in this state 
under conditions no more restrictive than those imposed by the 
laws of Minnesota as determined by the commissioner of commerce; 
and (2) limited to the states specifically enumerated as 
reciprocating states in section 6, subdivision 7. 
    The commissioner of commerce shall adopt rules to provide 
that procedural requirements equivalent to those contained in 
sections 1 to 9 apply to reciprocal interstate branching by 
savings and loan associations. 
    Sec. 17.  [EFFECTIVE DATE.] 
    (a) Sections 1 to 3 and 9 are effective the day following 
final enactment.  
    (b) If paragraph (c) does not apply, sections 4 to 8 are 
effective July 1, 1986.  
    (c) If any reciprocating state enacts legislation that 
permits bank holding companies located in this state to acquire 
banks or bank holding companies in that state, and that piece of 
legislation has an effective date prior to July 1, 1986, which 
apply to these acquisitions, then this act is effective on that 
date of enactment, but in no event may sections 4 to 8 be 
effective prior to July 1, 1985. 
    Approved March 19, 1986