(a) A Connecticut credit union shall establish and maintain an allowance for loan and lease losses account in an amount that represents the estimated losses on loans and leases. The allowance for loan and lease losses account requirement shall be computed and adjusted, through the provision for loan and lease losses account, prior to the declaration or payment of dividends.

(b) A Connecticut credit union shall contribute from its earnings, as net worth, the greater of (1) such amounts as may be required by 12 CFR Part 702, as from time to time amended, or (2) amounts in accordance with the following schedule: (A) In the case of a Connecticut credit union in existence for more than four years and having assets of two million dollars or more, ten per cent of its gross income until its net worth equals four per cent of total assets, then five per cent of gross income until its net worth equals six per cent of total assets; and (B) in the case of a Connecticut credit union in existence for four years or less or a Connecticut credit union having assets of less than two million dollars, ten per cent of its gross income until its net worth equals seven and one-half per cent of total assets, then five per cent of its gross income until its net worth equals ten per cent of total assets.

(c) The commissioner may increase the net worth requirement of any Connecticut credit union set forth in subsection (b) of this section when the commissioner deems it necessary to protect the safety and soundness of such Connecticut credit union.

(d) Whenever the net worth falls below the applicable percentages of total assets specified in subsection (b) of this section, the Connecticut credit union shall make regular contributions in such amounts as specified in subsection (b) of this section as may be needed to maintain such net worth. Such contributions shall be made prior to the declaration or payment of dividends.

(e) As used in this section, the term “net worth” means the retained earnings balance of the Connecticut credit union at the end of each dividend period, excluding the allowance for loan and lease losses account and, in the case of a Connecticut credit union designated by the National Credit Union Administration as a low-income credit union under 12 CFR 701.34, as from time to time amended, net worth includes any secondary capital account that is uninsured and subordinate to all other claims, including claims of creditors, shareholders and the National Credit Union Share Insurance Fund. Retained earnings shall consist of undivided earnings, as determined under generally accepted accounting principles, regular reserves and other appropriations designated by the commissioner or the National Credit Union Administration, or its successor agency, or by the governing board of the Connecticut credit union with the approval of the commissioner.

(P.A. 02-73, S. 43; P.A. 03-84, S. 50.)

History: P.A. 03-84 changed “Commissioner of Banking” to “commissioner” in Subsecs. (c) and (e), effective June 3, 2003.