I 

113TH CONGRESS 

1ST SESSION H. R. 1603 

To support and promote community financial institutions in the mutual form, 

and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

APRIL 17, 2013 

Mr. GRIMM (for himself, Mr. KING of New York, and Mr. MEEKS) introduced 

the following bill; which was referred to the Committee on Financial Services 

A BILL 

To support and promote community financial institutions 

in the mutual form, and for other purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Mutual Community 

5 Bank Competitive Equality Act’’. 

6 SEC. 2. FINDINGS. 

7 Congress finds the following: 

8 (1) Mutual financial institutions have been an 

9 integral part of the American banking landscape for 

10 almost 200 years. 

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1 (2) Such institutions operate for the purpose of 

2 serving the local depositors and borrowers and the 

3 communities in which they operate. 

4 (3) Mutual banks play a critical role in encour5 aging thrift, providing home loans and loans for 

6 small businesses. 

7 (4) Mutual banks are among the strongest fi8 nancial institutions in the country and are charac9 terized by high capital ratios and conservative, com10 munity-focused management. 

11 (5) Congress deems it necessary to provide for 

12 the support and continued development of these vital 

13 community financial institutions. 

14 SEC. 3. MUTUAL NATIONAL BANKS AUTHORIZED. 

15 Chapter one of title XII of the Revised Statutes of 

16 the United States (12 U.S.C. 21 et seq.) is amended by 

17 inserting after section 5133 the following new section: 

18 ‘‘SEC. 5133A. MUTUAL NATIONAL BANKS. 

19 ‘‘(a) IN GENERAL.—Notwithstanding the section des20 ignated the ‘Third’ of section 5134, in order to provide 

21 mutual institutions for the deposit of funds, the extension 

22 of credit, and provision of other services, the Comptroller 

23 of the Currency may charter mutual national banks either 

24 de novo or through a conversion of any insured depository 

25 institution or any State mutual bank or credit union, submstockstill on DSK4VPTVN1PROD with BILLS

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1 ject to regulations prescribed by the Comptroller of the 

2 Currency in accordance with this section. The powers con3 ferred by this section are intended to provide for the cre4 ation and maintenance of mutual national banks as bodies 

5 corporate existing in perpetuity for the benefit of their de6 positors and the communities in which they operate. 

7 ‘‘(b) REGULATIONS.— 

8 ‘‘(1) REGULATIONS OF THE COMPTROLLER.— 

9 The Comptroller of the Currency is authorized to 

10 prescribe appropriate regulations for the organiza11 tion, incorporation, governance, conversion, examina12 tion, operation, supervision, and regulation of mu13 tual national banks. 

14 ‘‘(2) APPLICABILITY OF CAPITAL STOCK RE15 QUIREMENTS.—The Comptroller of the Currency 

16 shall prescribe regulations regarding appropriate 

17 capital substitutes for the requirements of this title 

18 with respect to capital stock, and limitations im19 posed on national banks under this title based on 

20 capital stock, as such requirements shall apply to 

21 mutual national banks. 

22 ‘‘(c) DE NOVO CHARTERS.— 

23 ‘‘(1) The Comptroller of the Currency is au24 thorized to issue a certificate of authority to com25 mence the business of banking to a mutual national 

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1 bank in accordance with the requirements set forth 

2 in section 5169, provided that references to ‘capital 

3 stock’ shall mean ‘pledged accounts, nonwithdraw4 able investment certificates, or similar instruments’ 

5 by the incorporators. 

6 ‘‘(2) Upon the issuance of the certificate re7 quired by paragraph (1), the mutual national bank 

8 shall become a body corporate and the incorporators 

9 shall become the first board of directors, with the 

10 power and authority to manage the affairs of the 

11 bank as herein set forth. 

12 ‘‘(d) CONVERSIONS.— 

13 ‘‘(1) CONVERSION OF A MUTUAL DEPOSITORY

14 TO A MUTUAL NATIONAL BANK.—Subject to such 

15 regulations as the Comptroller of the Currency may 

16 prescribe, any mutual depository may convert to a 

17 mutual national bank by filing with the Comptroller 

18 of the Currency a notice of its election to convert on 

19 a specified date that is not earlier than 30 days 

20 after the date on which the notice is filed, and the 

21 mutual depository shall be converted to a mutual na22 tional bank charter on the date specified in the no23 tice. 

24 ‘‘(2) CONVERSION TO STOCK NATIONAL

25 BANK.—Subject to such regulations as the Compmstockstill on DSK4VPTVN1PROD with BILLS

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1 troller of the Currency may prescribe for the protec2 tion of depositors’ rights and for any other purpose 

3 the Comptroller of the Currency may consider ap4 propriate, any national bank that is organized in the 

5 mutual form under subsection (a) may reorganize on 

6 an equitable basis as a stock national bank. 

7 ‘‘(3) CONVERSION TO STATE BANKS.—Any na8 tional mutual bank may convert to a State bank 

9 charter in accordance with regulations prescribed by 

10 the Comptroller of the Currency and applicable 

11 State law. 

12 ‘‘(e) TERMINATING MUTUALITY.—If a mutual na13 tional bank elects to terminate mutuality, it must do so 

14 by— 

15 ‘‘(1) liquidating; or 

16 ‘‘(2) converting on an equitable basis to a na17 tional banking association operating in stock form. 

18 ‘‘(f) STATUS AND RIGHTS OF MEMBERS.— 

19 ‘‘(1) IN GENERAL.—In general, the status of a 

20 member is primarily that of a depositor and second21 arily that of a holder of an inchoate right to partici22 pate in the equity of a mutual national bank upon 

23 a liquidation or conversion in accordance with regu24 lations prescribed by the Comptroller of the Cur25 rency. 

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1 ‘‘(2) MANDATORY RIGHTS.—Each member of a 

2 mutual national bank shall have the following rights: 

3 ‘‘(A) Such rights as may be agreed upon, 

4 by contract, between the member and the mu5 tual national bank. 

6 ‘‘(B) In the event the board of directors, in 

7 its sole discretion, determines a conversion of a 

8 mutual national bank to a national banking as9 sociation operating in stock form is in the best 

10 interests of the community in which the bank 

11 operates, then the members as of a record date 

12 set by the board of directors shall have the first 

13 right to subscribe for and purchase stock in the 

14 converted bank, on an equitable basis based on 

15 the amount of the deposit held by such member 

16 as of the record date. 

17 ‘‘(C) In the event— 

18 ‘‘(i) the board of directors, in its sole 

19 discretion, determines a liquidation of the 

20 mutual national bank is in the best inter21 ests of the community in which the bank 

22 operates, and such board of directors has 

23 adopted a plan of liquidation in accordance 

24 with regulations proscribed by the Comp25 troller of the Currency, and the Compmstockstill on DSK4VPTVN1PROD with BILLS

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1 troller of the Currency has approved if 

2 such plan; or 

3 ‘‘(ii) if for any other reason the bank 

4 is liquidated by operation of law, 

5 then the members as of the date of liquidation 

6 shall have the right to have credited to their ac7 counts, on a pro rata basis, any residual assets 

8 left after the payment of all liabilities and ex9 penses, including expenses of liquidation of the 

10 mutual national bank. 

11 ‘‘(g) MANAGEMENT OF THE BANK.—The board of di12 rectors shall have the entire management and control of 

13 the affairs of the mutual national bank. No depositor or 

14 borrower shall have the right to vote on any matter relat15 ing to the mutual national bank. Any voting rights of 

16 members prior to a conversion to a mutual national bank 

17 shall be extinguished upon a conversion to a mutual na18 tional bank. 

19 ‘‘(h) MUTUAL HOLDING COMPANY FORMATION.—A 

20 mutual national bank may reorganize into the mutual 

21 holding company form of organization in accordance with 

22 regulations promulgated by the Comptroller of the Cur23 rency. 

24 ‘‘(i) DEFINITIONS.—For purposes of this section, the 

25 following definitions shall apply: 

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1 ‘‘(1) INSURED DEPOSITORY INSTITUTION.—The 

2 term ‘insured depository institution’ has the same 

3 meaning as in section 3 of the Federal Deposit In4 surance Act. 

5 ‘‘(2) MUTUAL NATIONAL BANK.—The term 

6 ‘mutual national bank’ means a national banking as7 sociation that operates in mutual form and is char8 tered by the Comptroller of the Currency under this 

9 section. 

10 ‘‘(3) MUTUAL DEPOSITORY.—The term ‘mutual 

11 depository’ means a depository institution that is or12 ganized in nonstock form, including a Federal non13 stock depository and any form of nonstock deposi14 tory provided for under State law, the deposits of 

15 which are insured by an instrumentality of the Fed16 eral Government. 

17 ‘‘(4) MUTUALITY.—The term ‘mutuality’ means 

18 the quality of being an insured depository institution 

19 organized under a Federal or State law providing for 

20 the organization of nonstock depository institutions, 

21 or a holding company organized under a Federal or 

22 State law providing for the organization of nonstock 

23 entities that control one or more depository institu24 tions. 

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1 ‘‘(5) MEMBER.—The term ‘member’ means 

2 each insured account holder in a mutual depository’s 

3 savings, demand, or other authorized depository ac4 counts and each insured account holder in such an 

5 account in a depository subsidiary of a mutual bank 

6 holding company. The board of directors may adopt 

7 a bylaw setting a minimum dollar threshold to qual8 ify as a member up to $1,000. 

9 ‘‘(6) MEMBERSHIP RIGHTS.—The term ‘mem10 bership rights’ means the rights of each member 

11 under this section. 

12 ‘‘(j) CONFORMING REFERENCES.—Unless otherwise 

13 provided by the Comptroller of the Currency— 

14 ‘‘(1) any reference in any Federal law to a na15 tional bank operating in stock form, including a ref16 erence to the term ‘national banking association’, 

17 ‘member bank’, ‘national bank’, ‘national associa18 tion’, ‘bank’, ‘insured bank’, ‘insured depository in19 stitution’, or ‘depository institution’, shall be deemed 

20 to refer also to a mutual national bank; 

21 ‘‘(2) any reference in any Federal law to the 

22 term ‘board of directors’, ‘director’, or ‘directors’ of 

23 a national bank operating in stock form shall be 

24 deemed to refer also to the board of a mutual na25 tional bank; and 

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1 ‘‘(3) any terms in Federal law that may apply 

2 only to a national bank operating in stock form, in3 cluding the terms ‘stock’, ‘shares’, ‘shares of stock’, 

4 ‘capital stock’, ‘common stock’, ‘stock certificate’, 

5 ‘stock certificates’, ‘certificates representing shares 

6 of stock’, ‘stock dividend’, ‘transferable stock’, ‘each 

7 class of stock’, ‘cumulate such shares’, ‘par value’, 

8 ‘preferred stock’ shall not apply to a mutual national 

9 bank, unless the Comptroller of the Currency deter10 mines that the context requires otherwise.’’. 

11 SEC. 4. MUTUAL INVESTMENT CERTIFICATES AUTHORIZED. 

12 Section 38(c)(1) of the Federal Deposit Insurance 

13 Act (12 U.S.C. § 1831o(c)(1)) is hereby amended by delet14 ing ‘‘subparagraph (B)(ii)’’ in paragraph ‘‘(A)’’ and in15 serting ‘‘subparagraph (B)(ii) and paragraph (C)’’ and by 

16 adding at the end of subparagraph (B)(ii) the following: 

17 ‘‘(C)(i) Notwithstanding any other provi18 sion of law, a mutual depository, as defined in 

19 (12 U.S.C. 5133A(h)(3)), is authorized to issue 

20 Mutual Investment Certificates, which shall be 

21 included as Tier 1 capital for purposes of any 

22 capital standards issued by an appropriate Fed23 eral banking agency, provided that such certifi24 cates must be— 

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1 ‘‘(I) nonvoting, except that the issuing 

2 mutual depository institution may permit 

3 voting in the event that— 

4 ‘‘(aa) the mutual depository insti5 tution fails to pay dividends for a 

6 minimum of three consecutive divi7 dend periods, and then the holders of 

8 the class or classes of Mutual Invest9 ment Certificates granted such voting 

10 rights, and voting as a single class, 

11 with one vote for each outstanding 

12 certificate, may elect by a majority 

13 vote a maximum of one-third of the 

14 institution’s board of directors, the di15 rectors so elected to serve until the 

16 next annual meeting of the institution 

17 succeeding the payment of all current 

18 and past dividends; 

19 ‘‘(bb) any merger, consolidation, 

20 or reorganization (except in a super21 visory case) is sought to be author22 ized, where the issuing institution is 

23 not the survivor, provided that the 

24 regulatory capital of the resulting in25 stitution available for payment of any 

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1 class of Mutual Investment Certifi2 cates on liquidation is less than the 

3 regulatory capital available for such 

4 class prior to the merger, consolida5 tion, or reorganization; 

6 ‘‘(cc) any action is sought to be 

7 authorized which would create any 

8 class of Mutual Investment Certifi9 cates having a preference or priority 

10 over an outstanding class or classes of 

11 Mutual Investment Certificates; 

12 ‘‘(dd) any action is sought to be 

13 authorized which would adversely 

14 change the specific terms of any class 

15 of Mutual Investment Certificates; 

16 ‘‘(ee) action is sought to be au17 thorized which would increase the 

18 number of a class of Mutual Invest19 ment Certificates, or the number of a 

20 class of Mutual Investment Certifi21 cates ranking prior to or on parity 

22 with another class of Mutual Invest23 ment Certificates; or 

24 ‘‘(ff) action is sought which 

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1 ditional class or classes of Mutual In2 vestment Certificates without the in3 stitution having met specific financial 

4 standards; 

5 ‘‘(II) redeemable at the sole discretion 

6 of the Board of Directors of the mutual 

7 depository; and 

8 ‘‘(III) provide that any dividends paid 

9 must be non-cumulative. 

10 ‘‘(ii) Notwithstanding any other provision 

11 of law, nonwithdrawable accounts, pledged ac12 counts, mutual capital certificates, or similar 

13 instruments, authorized as of the date of the 

14 enactment of the Mutual Community Bank Eq15 uity Act, shall be included as Tier 1 capital for 

16 purposes of any capital standards issued by an 

17 appropriate Federal banking agency. 

18 ‘‘(iii) The appropriate Federal banking 

19 agencies are hereby authorized to prescribe ap20 propriate regulations to implement these provi21 sions.’’. 

22 SEC. 5. PROTECTION OF MUTUAL DEPOSITORIES. 

23 (a) IN GENERAL.—Subsection (h) of section 10 of the 

24 Home Owners’ Loan Act (12 U.S.C. 1467a(h)) is amend25 ed— 

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1 (1) by striking ‘‘or’’ after the semicolon at the 

2 end of paragraph (2); 

3 (2) by striking the period at the end of para4 graph (3) and inserting ‘‘; or’’; and 

5 (3) by inserting after paragraph (3), the fol6 lowing new paragraph: 

7 ‘‘(4) any company or any subsidiary of any 

8 company, any director, officer, employee, or person 

9 owning, controlling, or holding with the power to 

10 vote, or holding proxies representing more than 25 

11 percent of the voting shares, of such company or 

12 subsidiary, or any director, officer, employee, or per13 son acting in concert with such company or sub14 sidiary, to hold, solicit, or exercise any proxies in re15 spect of a savings association which is a mutual as16 sociation, with the view or intention to, directly or 

17 indirectly, control or attempt to control the mutual 

18 association.’’. 

19 (b) ENFORCEMENT ACTION.—Subsection (i) of sec20 tion 10 of the Home Owners’ Loan Act (12 U.S.C. 

21 1467a(i)) is amended by inserting after paragraph (3) the 

22 following new paragraph: 

23 ‘‘(4) CIVIL ACTIONS BY ASSOCIATION.— 

24 ‘‘(A) EQUITABLE RELIEF.—Any aggrieved 

25 mutual savings association may bring a civil acmstockstill on DSK4VPTVN1PROD with BILLS

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1 tion in a court of appropriate jurisdiction and 

2 may recover such equitable relief, including in3 junctive relief, and reasonable attorney’s fees, 

4 as determined by the court for any violation or 

5 attempted violation of paragraph (1) or (4) of 

6 subsection (h). 

7 ‘‘(B) PROXIES NULL AND VOID.—In addi8 tion to any damages or relief under paragraph 

9 (1), any proxy held or exercised by any party 

10 the holding or exercise of which has been deter11 mined to be a violation of paragraph (1) or (4) 

12 of subsection (h) shall be deemed null and void, 

13 as of the inception of such proxy, and shall not 

14 be counted for purposes of determining a 

15 quorum at any meeting of such aggrieved mu16 tual association. 

17 ‘‘(C) STATUTE OF LIMITATION.— 

18 ‘‘(i) IN GENERAL.—An action may not 

19 be brought under subparagraph (A) after 

20 the end of the 180-day period beginning on 

21 the later of— 

22 ‘‘(I) the date of the discovery of 

23 the alleged violation by the aggrieved 

24 mutual savings association; or 

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1 ‘‘(II) the date of the enactment 

2 of the Mutual Savings Association 

3 Preservation Act. 

4 ‘‘(ii) ‘NO ATTRIBUTION’ RULE.—For 

5 purposes of clause (i)(I), the knowledge of 

6 the facts and circumstances giving rise to 

7 an alleged violation by any party to the 

8 violation shall not be attributed to the sav9 ings association.’’. 

10 SEC. 6. ESTABLISHMENT OF CHARITABLE FOUNDATIONS 

11 AUTHORIZED. 

12 (a) Any mutual holding company or direct or indirect 

13 stock subsidiary of a mutual holding company may con14 tribute or issue shares of such stock subsidiary to a chari15 table foundation established by the mutual holding com16 pany or any direct or indirect stock subsidiary of the mu17 tual holding company, provided that— 

18 (1) the charitable foundation qualifies as a 

19 501(c)(3) organization under the Internal Revenue 

20 Code, as amended; 

21 (2) the Foundation’s governance complies with 

22 regulations adopted by the appropriate Federal 

23 banking agency; 

24 (3) at the time of the contribution or issuance 

25 to the charitable foundation, no direct or indirect 

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1 stock subsidiary of the mutual holding company, nor 

2 any affiliate thereof, has issued shares of common 

3 stock to any nonaffiliate of the direct or indirect 

4 stock subsidiary of the mutual holding company; 

5 (4) the value of the stock so contributed or 

6 issued by the direct or indirect stock subsidiary of 

7 the mutual holding company, as determined in ac8 cordance with subsection (b), shall not exceed more 

9 than 10 percent of the insured depository institu10 tion’s consolidated Tier 1 capital, as of the quarter 

11 end prior to the establishment of the charitable 

12 foundation; 

13 (5) the direct or indirect stock subsidiary of the 

14 mutual holding company that contributes or issues 

15 the shares to the charitable foundation must reason16 ably expect to utilize the tax deduction within the 

17 time period proscribed by the Internal Revenue 

18 Service for contributions to charitable foundations; 

19 and 

20 (6) the mutual holding company and each di21 rect or indirect stock subsidiary of the mutual hold22 ing company will be ‘‘well capitalized’’ under the 

23 prompt corrective action regulations immediately fol24 lowing the contribution to the charitable foundation. 

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1 (b) Prior to any contribution or issuance by a direct 

2 or indirect stock subsidiary of the mutual holding com3 pany to a charitable foundation pursuant to subsection 

4 (a), the mutual holding company shall obtain an appraisal, 

5 by an independent appraiser experienced in such matters, 

6 of the pro forma value of the stock so contributed on a 

7 fully converted basis. The value of the stock so contrib8 uted, as determined by the appraiser, shall be limited in 

9 accordance with paragraph (4) of subsection (b). 

10 SEC. 7. DIVIDENDS PAID BY SUBSIDIARIES OF MUTUAL 

11 HOLDING COMPANIES. 

12 Section 10(o)(11)(B) of the Home Owners’ Loan Act 

13 (12 U.S.C. 1467a(o)(11)(B)) is amended by deleting ‘‘or’’ 

14 at the end of (i), deleting the period at the end of (ii) 

15 and inserting a semicolon at the end thereof, and adding 

16 the following: 

17 ‘‘(iii) a majority of the board of direc18 tors of the mutual holding company, or a 

19 committee thereof, consists of directors 

20 who are not affiliates of any stock sub21 sidiary of the mutual holding company and 

22 who do not directly or indirectly own any 

23 shares of the stock to which the waiver 

24 would apply, and vote in favor of the waiv25 er of the dividend; or 

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1 ‘‘(iv) an independent corporate com2 mittee consisting of persons who are not 

3 stockholders, affiliates, depositors, bor4 rowers, or members of the mutual holding 

5 company or any stock subsidiary of the 

6 mutual holding company vote in favor of 

7 the waiver of the dividend.’’. 

8 SEC. 8. PRESERVING MUTUALITY BYLAWS AUTHORIZED. 

9 (a) The Board of Directors of a mutual depository 

10 may adopt a bylaw to preserve the mutuality of a mutual 

11 depository. Such bylaw provisions may include— 

12 (1) supermajority voting requirements, up to 80 

13 percent, by the members to approve a conversion to 

14 stock form; 

15 (2) a prohibition against any person from serv16 ing, or nominating a person to serve, on the Board 

17 of Directors of the mutual depository, if such person 

18 or nominee has an intention to propose a conversion 

19 from mutual to stock form; 

20 (3) a requirement that any person serving or 

21 nominated to serve on the Board of Directors may 

22 not propose a conversion from mutual to stock form 

23 for a period of time not exceeding five years, as de24 termined by the Board, beginning on the later of the 

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1 date such bylaw is adopted or such person is elected 

2 to serve on the Board; 

3 (4) a prohibition against any member from pro4 posing a conversion to stock form at any annual or 

5 special meeting of members or by the written con6 sent of members; and 

7 (5) a violation of one or more of the bylaw pro8 visions adopted to preserve mutuality shall be a 

9 basis for termination as a member of the Board of 

10 Directors. 

11 (b) Notwithstanding the foregoing, in no event shall 

12 any bylaw adopted pursuant to section (a) have any force 

13 and effect in the event the mutual depository is not well 

14 capitalized in accordance with the rules established by 

15 such depositories appropriate Federal banking agency. 

16 SEC. 9. APPLICABILITY OF SMALL BANK HOLDING COM17 PANY POLICY STATEMENT TO SMALL MU18 TUAL HOLDING COMPANY. 

19 The Board of Governors of the Federal Reserve shall 

20 apply its Small Bank Holding Company Policy Statement 

21 to any mutual holding company that would otherwise qual22 ify as a small bank holding company, if it were a bank 

23 holding company. 

Æ 

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