17:12B-128. General reserve, bad debt reserves and Federal insurance reserve accounts

(a) A general reserve account shall mean a reserve account established and maintained for the purpose of absorbing losses. Each State association shall establish such a general reserve account.

(b) A bad debt reserve account shall mean a reserve account established for the purpose of absorbing losses due to bad debts, which may be established by each State association in addition to the general reserve account defined in subsection (a) of this section, but the establishment of such bad debt reserve account shall not prohibit a State association from charging losses due to bad debts to the general reserve account or any other available reserve account or the undivided profits account.

(c) "Federal insurance reserve account" shall mean a reserve account established and maintained by an insured association in accordance with the requirements of the Federal Savings and Loan Insurance Corporation. Any insured association may maintain such reserve account separately or may designate its general reserve account or the bad debt reserve account, or both, as its Federal insurance reserve account.

(d) At the end of each accounting period and before the declaration of any dividends, each State association shall transfer to the general reserve account an amount equal to 5% of the State association's net income for such accounting period, less any amounts transferred for such period to the bad debt reserve account; provided, however, that the provisions of this subsection shall not apply to any insured association, as defined in section 5 of this act.

(e) Any State association may at any time, in the discretion of its board, transfer additional amounts beyond those required by the provisions of this section, to any of the reserve accounts hereinbefore mentioned, provided, that any amount transferred to the general reserve account in excess of the minimum amount set forth in this section may be used for the purposes of meeting the requirements of paragraph (d) of this section in subsequent accounting periods within 5 calendar years from the year such excess amount was transferred to the State association's reserve accounts; provided, however, if the State association is an insured association, as defined in section 5 of this act, the time within which such excess amounts may be used to meet the requirements of subsection (d) of this section shall be the time permitted for such purposes under the regulations promulgated by the Federal Savings and Loan Insurance Corporation.

(f) Additions to any of the reserve accounts hereinbefore mentioned, whether required or discretionary, may be made by transfer from the net income of the period for which such transfer is made, from the undivided profits account or from any other unapportioned profits.

(g) No transfer to the general reserve account, required by subsection (d) of this section, shall be required to be made so long as either:

(1) the amount held in all reserve accounts of the State association plus the undivided profits account, equals or exceeds an amount equal to 6% of the State association's capital; or

(2) the State association is an insured association, as defined in section 5 of this act, and has complied with the reserve requirements promulgated by the Federal Savings and Loan Insurance Corporation for such accounting period.

(h) The board of a State association may, in its discretion, authorize transfers, in whole or in part, from the bad debt reserve account to the general reserve account or to the Federal insurance reserve account and in addition the board may from time to time, in its discretion, authorize the transfer of all or a part of the general reserve account to the Federal insurance reserve account and, provided further, that when the amount held in the general reserve account exceeds 6% of the State association's capital because of a decline in capital, the board of the State association, with the approval of the commissioner, may authorize the transfer of amounts in excess of 6% of capital to the undivided profits account.

L.1963, c. 144, s. 128. Amended by L.1975, c. 237, s. 1, eff. Oct. 24, 1975.