DEPARTMENT OF REGULATORY AGENCIES Division of Financial Services RULES AND REGULATIONS OF THE COLORADO DIVISION OF FINANCIAL SERVICES PERTAINING TO SAVINGS AND LOAN ASSOCIATIONS 3 CCR 703-1 [Editor’s Notes follow the text of the rules at the end of this CCR Document.] _________________________________________________________________________ SECTION ONE: IN-STATE OFFICES 1-1. Definitions.

(a) "Principal office" is that office in this state which is designated as the principal office of the association in its articles of incorporation or bylaws. Such office may be authorized to accept savings deposits.

(b) "Branch office" is an office as defined by C.R.S. 11-40-102 (1).

(d) "Loan office" is an office, other than a principal office or branch office, established for the primary purpose of originating loans. Activities incidental to the loan origination function may be carried

1. out. Savings deposits may not be solicited or accepted at such an office. 1-2. Relocation of Principal Office.

Any relocation of a principal office shall be submitted to the Commissioner as an amendment to an association's articles of incorporation or bylaws.

1-3. Opening or Relocation of Branches.

An association shall give the Commissioner 30 days prior written notice of the opening date and address of any de novo or relocated branch office.

1-4. Other Actions Related to Offices.

An association that seeks to open, close, or relocate a loan office may do so without prior notification to or approval from the Commissioner, if the association deems such actions appropriate and consistent with safe and sound business practices. An association that seeks to close a branch office must comply with C.R.S. 11-105-606.

SECTION TWO: OUT-OF-STATE OFFICES AND FACILITIES 2-1. In accordance with the provisions of C.R.S. 11-41-116, an association may operate offices located outside of the State of Colorado which engage in the functions specified under Section 1-1(b) and

1. (d) for branch and loan offices.

2-2. The Commissioner will require, to the extent deemed applicable, the same procedure to be followed in the opening, relocation or closing of both in-state and out-of-state offices. Code of Colorado Regulations 1 2-3. The association must comply with the applicable laws and regulations of the jurisdiction in which it is to operate. The Commissioner may require appropriate evidence of such compliance. 2-4. The Commissioner may, to the extent consistent with state law, enter into cooperative agreements with the appropriate supervisory authorities of other states regarding the examination and supervision of out-of-state offices.

SECTION FOUR: THE SAVINGS AND LOAN ASSOCIATION PUBLIC DEPOSIT PROTECTION ACT 4-1. Definitions.

(a) "Association" means any state or federally chartered savings and loan association having an office in the State of Colorado.

(b) "Custodian" means a state or national bank in Colorado, a savings and loan association in Colorado, a Federal Home Loan Bank or branch thereof, or a Federal Reserve Bank or branch thereof which holds eligible collateral in trust, escrow, or safekeeping pursuant to C.R.S. 11-47-109.

(c) "Depository" means an association which has been designated an eligible public depository.

(d) "Deposit pledge agreement" means a written agreement between the custodian and the depository wherein the depository transfers or delivers eligible collateral to a custodian in trust, escrow, or safekeeping pursuant to the Savings and Loan Association Public Deposit Protection Act for the purpose of securing 100% of the aggregate amount of public deposits accepted and held by the depository which exceed that amount insured by the Federal Deposit Insurance Corporation or its successor.

(e) "Segregation of collateral" means the transfer and delivery of eligible collateral by an association pursuant to a deposit pledge agreement.

4-2. Determination of Current Market Quotation of Eligible Collateral. The current market quotation of eligible collateral pledged by a depository under the Savings and Loan Association Public Deposit Protection Act shall be determined as follows:

(a) If the eligible collateral is regularly traded and its value regularly quoted by the Federal Reserve Bank of New York or a securities dealer, the current market quotation shall be as reported by said Federal Reserve Bank of New York or securities dealer in its published quotation sheets.

(b) Except as provided in subsection (a) hereof, the current market quotation of eligible collateral shall be as determined by a licensed Colorado securities dealer.

(c) If the current market quotation is determined by a licensed Colorado securities dealer pursuant to subsection (b), the reports submitted to the Commissioner by the depository shall include written confirmation of a current market quotation. Such written confirmation shall be signed by said securities dealer.

(d) For eligible collateral consisting of obligations wholly or partially guaranteed or insured as to payment of principal by the United States or any agency thereof, or other obligations evidenced by notes secured by first lien mortgages or deeds of trust, the amount eligible for collateral pledging is 75% of the unpaid principal balance.

4-3. Mandatory Segregation and Identification of Collateral. Code of Colorado Regulations 2 All eligible collateral required to be maintained or pledged under the Savings and Loan Association Public Deposit Protection Act shall be segregated from the other assets of the depository and held by a custodian in trust, escrow, or safekeeping, pursuant to a deposit pledge agreement. Each depository shall file a current executed copy of said deposit pledge agreement with the Commissioner. All collateral so held shall be clearly identified as being security maintained or pledged for the aggregate amount of uninsured public deposits accepted and held on deposit by the specific depository. 4-4. Provisions to be Included in Deposit Pledge Agreements. With respect to the segregation of collateral, each deposit pledge agreement between the custodian and the depository shall be in a form prescribed by the Commissioner and shall contain the following provisions:

(a) That upon receiving notice of default and seizure from the Commissioner, pursuant to C.R.S. 11-47- 113, the custodian maintaining custody of eligible collateral for the depository shall immediately surrender title and possession of said collateral to the Commissioner.

(b) That for the purpose of transfer of collateral to the custodian, in the case of insured, guaranteed or conventional mortgage loans, the original note and deed of trust, at minimum, shall be transferred. For other types of collateral, the security instrument itself or the original safekeeping receipt for such security shall be transferred.

(c) That the agreement shall be terminated (1) if the Commissioner seizes all eligible collateral pledged, or (2) by either party to the agreement, if 10 days' prior written notice thereof is given to the other party and if such termination is approved by the Commissioner. Upon any such termination, any remaining eligible collateral pledged hereunder shall be returned to depository, and the custodian shall be relieved of all further responsibility under the agreement.

(d) That if said custodian is a Federal Home Loan Bank or a Federal Reserve Bank, the custodian shall promptly, upon the request of the Commissioner and in a form prescribed by the Commissioner, provide a written inventory of pledged collateral signed by one of its officers. 4-5. Surrender of Files Relating to Mortgage Loan Collateral. Upon receiving notice of default and seizure of collateral from the Commissioner, pursuant to C.R.S. 11- 47-113, the depository, in the case of insured, guaranteed or conventional mortgage loans pledged as collateral, shall immediately surrender to the Commissioner all loan document files relating to any eligible collateral pledged pursuant to C.R.S. 11-47-108.

4-6. Release of Eligible Collateral.

Upon written notice to a particular depository and custodian, the Commissioner may require that all releases of collateral receive the Commissioner's prior written approval. From the date of receipt of such notice from the Commissioner, the custodian shall not effect any release of collateral to the depository or any other person or entity in the absence of the Commissioner's written approval. 4-7. Reports to the Commissioner.

The Commissioner may require reports from any depository covering the information specified in C.R.S. 11-47-112 (1) in such form and at such frequency as he deems necessary. Such reports may include financial statements of the depository. In order to accomplish the purpose of C.R.S. 11-47-112, the Commissioner or his designee may visit any office of a depository and shall have free access to the records of the depository relating to the Savings and Loan Association Public Deposit Protection Act. Code of Colorado Regulations 3 4-8. Additional Collateral Requirements and Restrictions on Amounts of Public Deposits Held.

(a) If the tangible capital of a depository does not meet the following requirements at the end of any calendar quarter, pursuant to C.R.S. 11-47-112 (6) (a), the depository shall pledge additional eligible collateral in the following manner:

1. (1) If the depository's tangible capital is less than 4% but greater than or equal to 3% of total assets, the depository shall pledge eligible collateral having a market value at all times no less than 125% of the aggregate of uninsured deposits held by it.
2. (2) If the depository's tangible capital is less than 3% but greater than or equal to 2% of total assets, the depository shall pledge eligible collateral having a market value at all times no less than 200% of the aggregate of uninsured deposits held by it.
3. (3) If the depository's tangible capital is less than 2% of total assets, the depository shall pledge eligible collateral having a market value at all times no less than 300% of the aggregate of uninsured deposits held by it.

(b) In addition to the requirements of subsection (a), if a depository's tangible capital is less than 3% of total assets, said depository shall not accept any additional uninsured public deposits or renew any uninsured public deposits that mature.

(c) In addition to the requirements of subsections (a) and (b), if a depository's tangible capital is less than 2% of total assets, said depository shall eliminate its uninsured public deposit liability except its uninsured public deposit liability evidenced by a contract with a specific maturity.

(d) Compliance with this regulation shall be the responsibility of each depository regardless of the frequency or form of the reports required by the Commissioner.

(e) "Tangible capital" means the sum of perpetual preferred stock, common stock, paid-in capital in excess of par value, retained earnings, and unrealized gains or losses on available-for-sale securities.

4-9. Recordkeeping.

Each depository shall maintain sufficient records to evidence its compliance with C.R.S. 11-47-108 (1) and to support the required reports filed with the Commissioner. 4-10. Inclusion of Accrued and Credited Interest.

Public deposits, as defined in C.R.S. 11-47-103 (11), shall include all interest or dividends accrued and credited to the individual account of the governmental unit or to any other liability account on the books of the depository.

4-11. Verification of Collateral.

(a) In addition to other required reports and examination procedures, the Commissioner may, as he deems necessary, make a direct verification with the custodian of all collateral pledged and held by the custodian on behalf of the depository. All collateral so held by the custodian shall, at all times, be accessible for verification by the Commissioner without the prior approval or notification of the depository.

(b) After the effective date of this rule, the above subsection (a) shall be included as a provision in all future deposit pledge agreements executed between a depository and its custodian. Code of Colorado Regulations 4 4-13. Minimum Amount of Eligible Collateral.

(a) In accordance with C.R.S. 11-47-112 (6) (a), the aggregate market value of the total pledged eligible collateral of an eligible public depository shall, at all times, be no less than 100% of the depository’s uninsured public deposit liability, notwithstanding additional amounts required by Section 4-8 of these regulations, or $250,000, whichever is greater.

(b) Compliance with this regulation shall be the responsibility of each depository regardless of the frequency or form of reports required by the Commissioner. SECTION SIX: NEW CHARTER APPLICATIONS 6-1. In addition to the items set forth in C.R.S. 11-41-107 (1) (c), as comprising an application for certificate of approval for a domestic savings and loan association to incorporate in this state, the following information is required and will be considered by the Commissioner:

1. (a) A business plan pursuant to Section 14-1, including an itemized statement of estimated receipts and expenditures for the proposed association covering consecutive annual periods from the estimated opening date through the annual period in which the association is estimated to operate at a profit. Such itemized statement must be supported by estimates of the volumes of savings deposits or other sources of funds and loans to be generated by the association.
2. (b) A statement of initial capitalization, including a list by name and amount of written withdrawable savings pledges or, if applicable, written subscriptions for permanent stock. A certified statement of total funds on deposit from cash receipts for permanent stock or withdrawable savings must be submitted by the financial institution holding such funds in escrow.
3. (c) A description of proposed office facility arrangements, including the following factors: leased or owned office space, freestanding building or inline space, floor space, space to be leased to others, staffing, and an estimate of initial fixed asset investment.
4. (d) Evidence of compliance with the applicable provisions of state securities laws.
5. (e) Evidence that any solicitation of withdrawable savings pledges includes full disclosure of the status of the proposed association with regard to incorporation under state law and insurance of accounts by the Federal Deposit Insurance Corporation or its successor.
6. (f) Other information deemed necessary by the Commissioner. SECTION SEVEN: MERGER APPLICATIONS 7-1. In addition to the agreement of merger, savings and loan associations proposing to merge shall submit to the Commissioner one copy of the application for merger filed with the Federal Deposit Insurance Corporation or its successors.

7-2. The following factors will be considered by the Commissioner in acting on a merger application:

1. (a) The soundness of financial condition of the merging associations, with particular emphasis on the financial condition of the surviving association. The following indicators of soundness of financial condition will be considered:
   1. (1) Size of association and recent growth trends.

Code of Colorado Regulations 5

1. (2) Capital position.
   1. (3) Recent trends in operating results.
   2. (4) Amount and character of substandard and other classified assets.
2. (b) The degree of compliance with applicable laws and regulations and the existence of serious problems which have not been corrected by management or the board of directors. 7-3. The procedures set forth in these regulations need not be followed if the merger is to be initiated by the Commissioner or a federal regulatory agency for supervisory reasons. 7-4. The application filed pursuant to C.R.S. 11-41-121 (1.5) (c) shall contain sufficient information to demonstrate compliance with C.R.S. 11-41-121 (1.5) (a). The Commissioner may also request additional information in order to make the determinations under C.R.S. 11-41-121 (1.5). In addition, a copy of the application filed with the Federal Deposit Insurance Corporation or its successors shall be filed with the Commissioner.

SECTION EIGHT: RECORDKEEPING FOR NONCONFORMING LOANS 8-1. Savings and loan associations must maintain a listing or other record which is sufficient, at all times, to verify compliance with the 3% of assets limitation set forth in C.R.S. 11-41-114 (4). SECTION NINE: TRUST POWERS APPLICATIONS 9-1. Definition. "Trust powers" means the power to act in any fiduciary capacity authorized by C.R.S. 11-41-112 (1) (l) or by the general fiduciary laws of this state. 9-2. An association desiring to exercise trust powers shall file with the Commissioner an application indicating which trust services it wishes to offer and providing sufficient information to enable the Commissioner to make the evaluations under Section 9-3. 9-3. The following factors will be evaluated by the Commissioner in acting on a trust powers application:

1. (a) The financial condition of the association.
2. (b) The degree of compliance with applicable laws and regulations and the existence of serious problems which have not been corrected by management or the board of directors.
3. (c) The organizational and operational plan for providing trust services, including the availability of legal counsel and the qualifications, experience and character of the proposed officer or officers supervising the trust function.

9-4. Failure of an association to exercise trust powers in a lawful and sound manner shall be grounds for the suspension or revocation of its authority to engage in trust services. SECTION TEN: APPLICATIONS FOR ACQUISITION OF MAJORITY CONTROL OVER AN ASSOCIATION 10-1. The application filed pursuant to C.R.S. 11-41-133 (2) (a) shall contain sufficient information to demonstrate compliance with C.R.S. 11-41-133 (3). In addition, a copy of the application filed with the Federal Deposit Insurance Corporation or its successors shall be filed with the Commissioner. Code of Colorado Regulations 6 10-2. The application filed pursuant to C.R.S. 11-41-133 (6) (c) shall contain sufficient information to demonstrate compliance with C.R.S. 11-41-133 (6) (a). The Commissioner may also request additional information in order to make the determinations under C.R.S. 11-41-133 (6). In addition, a copy of the application filed with the Federal Deposit Insurance Corporation or its successors shall be filed with the Commissioner.

SECTION ELEVEN: LETTERS OF CREDIT 11-1. An association may issue commercial and standby letters of credit in conformance with the Uniform Commercial Code and may pledge collateral to secure its obligations thereunder, subject to the following requirements:

1. (a) Each letter of credit must conspicuously state that it is a letter of credit.
2. (b) The issuer's undertaking must contain a specified expiration date or be for a definite term and must be limited in amount.
3. (c) The issuer's obligation to pay must be solely dependent upon the presentation of conforming documents as specified in the letter of credit, and not upon the factual performance or nonperformance by the parties to the underlying transaction.
4. (d) The account party must have an unqualified obligation to reimburse the issuer for payments made under the letter of credit.

11-2. To the extent funds are advanced under a letter of credit without compensation from the account party, the amount shall be treated as an extension of credit subject to percentage-of-assets limits and other requirements under applicable provisions of state law. SECTION TWELVE: CONVERSION PROCEDURES 12-1. For the purpose of conversion from a federal to a state savings and loan association pursuant to C.R.S. 11-45-103, in the case of a permanent stock association, the requirement of subsection

1. (1) of the above noted section for a majority vote of members shall be satisfied by a majority vote of the holders of permanent stock, who possess exclusive voting rights in accordance with C.R.S. 11-42-107 (6).

12-2. The following items shall be submitted by the converting federal association to the Commissioner for approval:

1. (a) A copy of the minutes of the proceedings of the meeting of members as required by C.R.S. 11-45-103 (1).
2. (b) Two copies of the certificate of incorporation as required by C.R.S. 11-45-103 (2), which shall comply with the content requirements of C.R.S. 11-41-104.
3. (c) One copy of the bylaws as required by C.R.S. 11-45-103 (2), which shall comply with the content requirements of C.R.S. 11-41-112 (1) (g).

12-3. If the Commissioner's review of the items submitted pursuant to Section 12-2 indicates compliance with state law, the Commissioner shall issue a certificate of approval to the converting federal association.

Code of Colorado Regulations 7 12-4. The converting federal association shall file its certificate of incorporation, accompanied by the Commissioner's certificate of approval, with the Secretary of State in accordance with C.R.S. 11- 41-109 (2).

12-5. Upon the filing pursuant to Section 12-4 and the payment of required fees to the Secretary of State, the conversion of the federal savings and loan association into a state association shall be deemed completed.

SECTION THIRTEEN: INVESTMENTS PURSUANT TO C.R.S. 11-41-114(5) 13-1. Definition. The term "amount invested by the association in real estate through service corporations" means the association's investment in capital stock in any service corporation as well as any loans (including guarantees of loans and letters of credit) made by the association to the service corporation or to a joint venture in which the service corporation is a partner, shareholder or investor.

13-2. For the purpose of determining the amount defined in Section 13-1, in the case of a service corporation involved in real estate investments as well as other permitted activities, an association shall maintain sufficient records to document a fair allocation of its investments between the real estate investments and non-real estate activities of the service corporation. In the absence of sufficient records to document the allocation, the Commissioner shall consider the entire service corporation investment to be an investment in real estate through service corporations.

SECTION FOURTEEN: BUSINESS PLANS AND DIRECTORS' POLICIES 14-1. Business Plans. Each savings and loan association shall prepare a written business plan that specifies the association's operating goals and details the strategies to achieve the association's goals. The plan shall consist of a narrative and proforma financial statements. Said business plan shall reflect a minimum period of three years into the future, updated no less than annually. 14-2. Each association's business plan and any amendments thereto shall be approved by the association's board of directors, at which time such plan or amendments shall become effective. Such approval shall be recorded in the minutes of the board of directors. 14-4. Directors' Policies. The board of directors of each savings and loan association shall establish sufficient written policies to guide the association's operations. The directors shall annually review and revise, as necessary, all policies previously established. SECTION SEVENTEEN: CONFIDENTIALITY OF EXAMINATIONS 17-1. The Commissioner's report of examination is the property of the Division of Financial Services and is furnished to the savings and loan association for its confidential use. Under no circumstances shall any of a savings and loan association's directors, officers or employees disclose or make public in any manner the report or any portion thereof. However, a savings and loan association may share the report with a Federal Home Loan Bank of which the association is a member or has applied for membership.

_________________________________________________________________________ Editor’s Notes History Code of Colorado Regulations 8 Sections 4-2, 4-4, 4-13, 7-1, 7-4, 10, 14-1 eff. 01/01/2013. Code of Colorado Regulations 9