Untitled Texas Attorney General Opinion ( 1974 )

THEA~TORNEYGENERAL
OF-TEXAS
January 17, 1974
The Honorable W. Sale Lewis Opinion No. H- 215
Commis,sioner
Texas Savings and Loan Department Re: Can a state chartered
P. 0. Box 1089 savings and loan asso-
Austin, Texas 78767 ciation designate all or
any part of its perma-
nent reservd~fund stock
as a part of its Federal
Dear Mr. Lewis: Insurance Reserve account?
You have requested our opinion on the following question:
“Can a state chartered savings and loan association
designate or earmark all or any portion of its per-
manent reserve fund stock as a part of its Federal
Insurance Reserve account? ”
Section 2.02 of Article 852a, V. T. C. S., empowers a state savings
and Loan association to issue Permanent Reeerve Fund Stock, subject to
its provisions.
Section 563.11 of the insurance regulations promulgated by the
Federal Home Loan Bank Board (12 C. F. R. § 563. 11) applicable to state
savings and loan associations which are insured by the Federal Savings
and Loan Insurance Corporation, provides that such permanent reserve
fund stock (called “capital stock ” in the regulations) may be earmarked
as part of the association’s federal insurance reserves where such stock
is “permitted by State law to be used for absorbing losses. ”
There is no case law answering your question nor do the applicab,le
statutes expressly prohibit or allow the use of such stock for the purposes
in question. The basic issue is whether such stock is “permitted by State
law to be used for absorbing losses?”
p. LOOS
. .
The Honorable W. Sale Lewis, page 2 (H-215)
In our opinion the stock is permitted under Texas law to be used
for absorbing losses and therefore can be used as part of an association’s
federal insurance reserve fund,
Section 2.02 of Article 852a, V. T. C. S., provides as follows:
” . . . Such,Permanent Reserve Fund Stock, when
issued, may not be retired or withdrawn except as
hereinafter provided, until after all liabilities of
the association shall have been satisfied in full,
including the withdrawal value of all savings accounts
. . . . II
This not only permits, it requires the use of such stock for absorbing
losses.
The same $2.02 also provides:
,I . . . Associations whose savings accounts are
insured by the Federal Savings and Loan Insurance
Corporation may retire in whole or in part any such
stock heretofore issued when such associations are
authorized to do so by a majority vote at any annual
meeting of its members, or any special meeting of
members called for such purpose; provided, that
the basis of such retirement shall have been first
approved by the Commissioner and consent to such
retirement upon the part of the Federal Savings and
Loan Insurance Corporation has been filed in writing
with the Commissioner. ”
Apparently the Legislature contemplated that the Federal Savings and
Loan Insurance Corporation would have some interest in the permanent
reserve fund stock, and the primary if not the only reason for such interest
would be if the stock were permitted to be used as part of an association’s
insurance reserve. This implies a legislative intent to permit such use.
p. 1006
The Honorable W. Sale Lewis, page 3 (H-215)
It further appears that a prohibition against use of such stock for
federal insurance reserve would, in effect, place a more stringent
reserve requirement upon stock companies tha,n upon non-stock state
associations or federal associations. Unless a stock company can use
its stock as part of its reserve, it, in effect, has an additional reserve
cushion available solely for the absorption of losses, such cushion not
being required of other associations. Such inequality should not be
read into the statutes unless clearly expressed, which it is not.
SUMMARY
A state chartered savings and loan association
may designate or earmark all or any portion of its
permanent reserve fund stock as a part of its federal
insurance reserve account.
Very truly yours,
Attorney General of Texas
DAVID M. KENDALL, Chairman
Opinion Committee
p. 1007