Opinion ID: 2373765
Heading Depth: 1
Heading Rank: 4

Heading: The Banking Code

Text: Section 131(27) of the Maine Banking Code defines a mutual financial institution as any financial institution ... in which the earnings and net worth of the institution inure to the ultimate benefit of the depositors or members. As this definition and our cases make clear, depositors or members of a mutual savings bank hold a beneficial interest in the institution. See, e.g., Savings Inst. v. Makin, 23 Me. 360, 364 (1845) (depositors hold beneficial interest); Androscoggin County Sav. Bank v. Campbell, 282 A.2d 858, 860-61 (Me.1971) (savings bank encourage thrift among depositors by mutuality of ownership); see also Paulsen v. Commissioner of Internal Revenue, 469 U.S. 131, 134, 105 S.Ct. 627, 629, 83 L.Ed.2d 540 (1985) (federally-chartered mutual savings and loan owned by depositors). While the extent of this ownership interest will be discussed below, we are here concerned with whether the applicable statutes require a distribution of the institution's surplus to depositors on conversion. We conclude they do not. 9-B M.R.S.A. § 344 authorizes and governs the conversion of a mutual savings bank to a stock institution. The text of section 344 contains no requirement that a distribution of surplus be made to the mutual depositors as part of a plan of conversion. [16] The introduction to section 344 provides that the conversion must be conducted in a manner equitable to all parties. Section 344(1) provides that the plan of conversion must insure that the interest of depositors and account holders in the net worth of the institution are equitably provided for, and that the conversion will not have an adverse impact on the stability of any other financial institution. Section 344(2)(B) requires that the plan provide fair and equitable treatment to the depositors and to the institution. Section 344(6) requires the Superintendent to insure that the safety and soundness of the institution are protected. Section 253 of the Banking Code also requires that the Superintendent consider the effect of a conversion on the capital adequacy of the institution, and to consider the fairness and equities involved in any conversion. 9-B M.R.S.A. § 253(2)(B), (G). Plaintiffs contend that the constant reference to equitable treatment in the statute, particularly the requirement that depositors' interest in the institution's net worth be equitably provided for, coupled with the statutory definition of mutual financial institution, shows that they have an interest in the surplus of the bank that must be recognized in the form of cash or free stock on conversion. An examination of the genesis of 9-B M.R.S.A. § 344 indicates the contrary. Section 344 was enacted in 1975, shortly after the release of the Report of the Governor's Banking Study Advisory Committee (1974). The Committee's Report specifically addressed the issue here under considerationwhether a mutual financial institution should distribute surplus to depositors when it converts to stock form. The Committee expressly endorsed the sale of stock method of the FHLBB (which eschewed the free distribution method). Indeed, the Committee's recommended conversion criteria were specifically based on the FHLBB regulations. Report of the Governor's Banking Study Advisory Committee at 20, 48 (1974). The Statement of Fact accompanying L.D. 1134 (107th Legis.1975), clearly shows that the bill that became the 1975 Banking Code was based on the Advisory Committee Report. [17] The sale of stock and liquidation account method of conversion, supported by the Superintendent in Bureau of Banking Bulletin No. 41, [18] and employed by Maine Savings Bank in the instant case, was the method suggested to the legislature by the Governor's committee and presumably the method contemplated by the legislature when it enacted 9-B M.R.S.A. § 344. There is nothing in the language of the conversion statute or in the underlying legislative history that would indicate that a distribution of surplus to the depositors of a mutual savings bank is required on its conversion to stock form.