Article 2. General Definitions of California Financial Code >> Division 2. >> Chapter 1. >> Article 2.

When used in this division, the words and phrases set forth in this article shall have the meanings given in this article unless the context requires another meaning.

For purposes of this division:
  (a) Any reference to regulations of the federal Office of Thrift Supervision or the Federal Deposit Insurance Corporation shall also be deemed to include and refer to regulations adopted by the Federal Home Loan Bank Board or the Federal Savings and Loan Insurance Corporation, to the extent these regulations have been continued in effect and made enforceable by the Office of Thrift Supervision or Federal Deposit Insurance Corporation, respectively, pursuant to the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (Public Law 101-73).
  (b) Any reference to charters issued by the Office of Thrift Supervision shall also be deemed to include and refer to charters issued by the Federal Home Loan Bank Board.

"Affiliated person" of a savings association means the following:
  (a) A director, officer, or controlling person of the savings association.
  (b) A spouse of a director, officer, controlling person of the savings association.
  (c) A member of the immediate family of a director, officer, or controlling person of the savings association, who has the same home as that person or who is a director or officer of any subsidiary of the savings association or of any holding company affiliate of the savings association.
  (d) Any corporation or organization other than the savings association or a corporation or organization through which the savings association operates, of which a director, officer or controlling person of the savings association meets any of the following criteria:
  (1) Is chief executive officer, chief financial officer, or a person performing similar functions.
  (2) Is a general partner.
  (3) Is a limited partner who, directly or indirectly either alone or with his spouse and the members of his immediate family who are also affiliated persons of the savings association, owns an interest of 10 percent or more in the partnership (based on the value of his contribution) or who, directly or indirectly with other directors, officers, and controlling persons of the savings association and their spouses and their immediate family members who are also affiliated persons of the savings association owns an interest of 25 percent or more in the partnership.
  (4) Directly or indirectly either alone or with his or her spouse and the members of his or her immediate family who are also affiliated persons of the savings association, owns or controls 10 percent or more of any class of equity securities or owns or controls, with other directors, officers, and controlling persons of the savings association and their spouses and their immediate family members who are also affiliated persons of the savings association, 25 percent or more of any class of equity securities.
  (e) Any trust or other estate in which a director, officer, or controlling person of the savings association or the spouse of the person has a substantial beneficial interest or as to which the person or his or her spouse serves as trustee or in a similar fiduciary capacity.

"Affiliate" of a savings association, unless otherwise defined, includes any corporation, business trust, unincorporated association or other similar organization which meets the criteria of subdivision (a), (b), or (c), as follows:
  (a) The savings association directly or indirectly, owns or controls either a majority of the voting shares or more than 50 per centum of the number of shares voted for the election of its directors, trustees, or other persons exercising similar functions at the preceding election, or controls in any manner the election of a majority of its directors, trustees, or other persons exercising similar functions.
  (b) Control thereof is held, directly or indirectly through stock ownership or in any other manner, by the shareholders of a savings association who own or control either a majority of the shares of the savings association or more than 50 per centum of the number of shares voted for the election of directors of that savings association at the preceding election, or by trustees for the benefit of the shareholders of any savings association.
  (c) A majority of its directors, trustees, or other persons exercising similar functions are directors of any one savings association.

"Controlling person" of a savings association means any person or entity which (a) either directly or indirectly or acting in concert with one or more other persons or entities, owns, controls, or holds with power to vote, or holds proxies representing, 10 percent or more of the voting shares or rights of the association or (b) controls in any manner the election or appointment of a majority of the directors of the association. However, a director of a savings association shall not be deemed to be a controlling person of the association based upon his or her voting, or acting in concert with other directors in voting, proxies (a) obtained in connection with an annual solicitation of proxies or (b) obtained from savings account holders and borrowers if the proxies are voted as directed by a majority vote of the entire board of directors of that association, or of a committee of those directors if the committee's composition and authority are controlled by a majority vote of the entire board and if its authority is revocable by such a majority.

"Immediate family" of any natural person means any of the following (whether by the full or half blood or by adoption):
  (a) The person's spouse, father, mother, children, brothers, sisters, and grandchildren.
  (b) The father, mother, brothers, and sisters of the person's spouse.
  (c) The spouse of a child, brother, or sister of the person.

"Institution-affiliated party" means any of the following:
  (a) Any director, officer, employee or controlling stockholder of, or agent for, a savings association.
  (b) Any person who has filed or is required to file an application to become a savings and loan holding company with the commissioner pursuant to Section 5801.
  (c) Any shareholder, consultant, joint venture partner, and any other person as determined by the commissioner (by regulation or case-by-case) who participates in the conduct of the affairs of a savings association.
  (d) Any independent contractor (including any attorney, appraiser, or accountant) who knowingly or recklessly participates in any of the following which caused or is likely to cause more than a minimal financial loss to, or a significant adverse effect on, the savings association:
  (1) Any violation of law or regulation.
  (2) Any breach of fiduciary duty.
  (3) Any unsafe or unsound practice.

"Approved by the members," in the case of a mutual association, means approved by a majority of all votes cast at a duly held regular or special meeting or by the written consent (including consents by proxy) of a majority of the total votes of members outstanding at the close of business on the next business day prior to the date that the requisite written consents have been filed with the association.

(a) "Association" or "savings association" means a mutual or stock savings association, savings and loan association or savings bank subject to the provisions of this division, but excluding a federal association.
  (b) "Federal association" means a savings and loan association or federal savings bank that is chartered by the Office of Thrift Supervision under Section 5 of the Home Owners' Loan Act of 1933 (12 U.S.C. Sec. 1464), as amended.

"Certificate of authority" means:
  (a) A certificate of authority to transact the business of an association, which is issued by the commissioner pursuant to this division.
  (b) An uncanceled annual license issued to an association under prior law which is valid on the effective date of this division.

"Commercial paper" means any note, draft, or bill of exchange which arises out of a current transaction or the proceeds of which have been or are to be used for current transactions, and which has a maturity at the time of issuance of not exceeding nine months, exclusive of days of grace, or any renewal thereof the maturity of which is likewise limited.

"Commissioner" means the Commissioner of Business Oversight.

"Community" means a centralized area or locality in which a body of inhabitants is gathered in one group having common residential, social, or business interests. The term does not necessarily mean a municipal corporation or other political subdivision. A community need not be limited by lines and boundaries. A city, village, town, or other governmental unit, either incorporated or unincorporated, may constitute one community, but a large, populous area under one or more forms of government may be composed of several communities.

"Consumer loan" means a loan for personal, family, or household purposes, and loans reasonably incident thereto, and may be made as either open-end or closed-end consumer credit, but does not include credit extended in connection with credit cards or bona fide overdraft loans.

"Corporate debt security" means a marketable obligation, evidencing the indebtedness of any corporation in the form of a bond, note, or debenture, or both note and debenture, which is commonly regarded as a debt security and is not predominantly speculative in nature. A security is marketable if it may be sold with reasonable promptness at a price which corresponds reasonably to its fair value.

"Department" means the Department of Business Oversight.

"Financial institution" means a thrift institution, commercial bank, or trust company.

"Impaired condition" means a condition in which the assets of an association in the aggregate do not have a value, as determined in accordance with generally accepted accounting principles, equal to or greater than the aggregate amount of liabilities of the association to its creditors, including the holders of its savings accounts and all other persons who are creditors.

"Mutual association" means an association for which the articles of incorporation do not authorize the issuance of capital stock.

"Member" means a person holding a savings account of a mutual association. A joint and survivorship or other multiple owner constitutes a single membership.

"Mutual capital certificate" means a certificate evidencing an investment in a mutual association and issued pursuant to provisions of this division.

"Net worth certificate" means a certificate issued by an association in accordance with Section 13i of the Federal Deposit Insurance Act, as amended (12 U.S.C., Sec. 1823i) and regulations promulgated thereunder by the Federal Deposit Insurance Corporation.

"Person" means any individual, domestic, or foreign corporation, entity, voting trust, business trust, partnership, limited liability company, association, syndicate, organized group of persons, or similar organization, group or entity, whether incorporated or not.

"Primarily residential property" means real estate on which there is located, or will be located pursuant to a real estate loan, any of the following:
  (a) A structure or structures designed or used primarily for residential rather than nonresidential purposes and consisting of more than one dwelling unit.
  (b) A structure or structures designed or used primarily for residential rather than nonresidential purposes for students, residents, and persons under the care of, or the employees or members of the staff of, an educational, health, or welfare institution or facility.
  (c) A structure or structures that are used in part for residential purposes for not more than one family and in part for business purposes if the residential use of the structure or structures is substantial and permanent and not merely transitory.

"Residential real estate" means any improved real property that is used or intended to be used as a residence and contains not more than four dwelling units.

"Real estate loan" means a loan or other obligation secured by a lien on real estate, if:
  (a) The security property is real estate as defined pursuant to Section 658 of the Civil Code.
  (b) The security interest of the association may be enforced as a real estate mortgage, deed of trust, or its equivalent.
  (c) The security property is capable of separate appraisal.
  (d) The association relies substantially upon the real estate as primary security for the loan.
  (e) With regard to security property which is a leasehold or other interest for a period of years, the term of interest extends, or is subject to extension or renewal at the option of the association, for a term of at least five years following maturity of the loan.

"Savings account" means that part of the savings liability of an association that is credited to the holder of the account. A savings account may be referred to as a deposit. For the purposes of Sections 6661, 6662, and 6663 and Article 4 (commencing with Section 6725) through Article 10 (commencing with Section 7000), inclusive, of Chapter 5 of this division, the term "savings account" includes shares, demand accounts, savings deposits and other savings accounts of federal associations.

"Savings bank" means a savings bank organized under this division.

"Savings institution" means a financial institution as defined in Section 5102.

"Savings liability" means the aggregate amount of savings accounts of depositors, including interest credited to the accounts, less redemptions and withdrawals.

"Service corporation" means a corporation, other than a wholly owned subsidiary referred to in Section 7300 or a wholly owned subsidiary doing business as a finance subsidiary in accordance with the requirements of 12 C.F.R. 563.132, in which at least 80 percent of the shares of stock having voting power are owned by one or more associations or federal associations. As used in this section "voting power" shall have the same meaning as defined in Section 194.5 of the Corporations Code.

"Statutory net worth" or "net worth" means the sum of the following:
  (a) Issued and outstanding capital stock.
  (b) Issued and outstanding capital certificates.
  (c) Paid-in surplus.
  (d) Retained earnings.
  (e) Pledged savings accounts of a mutual association with the approval of the commissioner.
  (f) General reserves and other amounts as the commissioner prescribes.

"Stock association" means an association for which the articles of incorporation authorize the issuance of capital stock.

"Stockholder" means the holder of one or more shares of any class of capital stock of a capital stock association which is organized and operating pursuant to the provisions of this division.

"Thrift institution" means an association, a cooperative bank, a homestead association, a building and loan association, a federal association, a federal savings bank, a state or federal credit union, an industrial loan company, and a supervised thrift and residential financing institution of a substantially similar nature.

"Withdrawal value" means the amount credited to a savings account less lawful deductions, as shown by the records of the association.