AN ACT Relating to banks and banking; amending RCW 30.12.010, 30.04.230, 30.08.020, and 30.08.090; reenacting and amending RCW 30.04.230; adding new sections to chapter 30.08 RCW; adding a new section to chapter 30.12 RCW; repealing RCW 30.04.200, 30.23.010, 30.23.020, 30.23.030, 30.23.040, 30.23.050, 30.23.060, 30.23.070, 30.23.080, 30.23.900, and 30.23.901; providing an effective date; and declaring an emergency.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

Sec. 1. Section 30.12.010, chapter 33, Laws of 1955 as last amended by section 30, chapter 279, Laws of 1986 and RCW 30.12.010 are each amended to read as follows:

Every bank and trust company shall be managed by not less than five directors, who need not be residents of this state. Directors shall be elected by the stockholders and hold office for such term as is specified in the articles of incorporation, not exceeding three years, and until their successors are elected and have qualified. In the first instance the directors shall be those named in the articles of incorporation and afterwards, those elected at the annual meeting of the stockholders to be held at least once each year on a day to be specified by the bank's or trust company's bylaws. Shareholders may not cumulate their votes unless the articles of incorporation specifically so provide. If for any cause no election is held at that time, it may be held at an adjourned meeting or at a subsequent meeting called for that purpose in the manner prescribed by the corporation's bylaws. The directors shall meet at least once each ((~~month~~)) quarter and whenever required by the supervisor. A majority of the then serving board of directors shall constitute a quorum for the transaction of business. At all stockholders' meetings, each share shall be entitled to one vote, unless the articles of incorporation provide otherwise. Any stockholder may vote in person or by written proxy.

Immediately upon election, each director shall take, subscribe, swear to, and file with the supervisor an oath that he will, so far as the duty devolves upon him, diligently and honestly administer the affairs of such corporation and will not knowingly violate or willingly permit to be violated any provision of law applicable to such corporation. Vacancies in the board of directors shall be filled by the board.

Sec. 2. Section 30.04.230, chapter 33, Laws of 1955 as last amended by section 4, chapter 305, Laws of 1985 and RCW 30.04.230 are each amended to read as follows:

(1) A corporation or association organized under the laws of this state or licensed to transact business in the state((~~, other than a bank or trust company,~~)) may acquire any or all shares of stock of any bank, trust company, or national banking association. Nothing in this section shall be construed to prohibit the merger, consolidation, or reorganization of a bank or trust company in accordance with this title.

(2) Unless the terms of this section are complied with, an out-of-state bank holding company shall not acquire more than five percent of the shares of the voting stock or all or substantially all of the assets of a bank, trust company, or national banking association the principal operations of which are conducted within this state.

(3) As used in this section a "bank holding company" means a company that is a bank holding company as defined by the Bank Holding Company Act of 1956, as amended (12 U.S.C. Sec. 1841 et seq.). An "out-of-state bank holding company" is a bank holding company that principally conducts its operations outside this state, as measured by total deposits held or controlled by its bank subsidiaries on the date on which it became a holding company. A "domestic bank holding company" is a bank holding company that principally conducts its operations within this state, as measured by total deposits held or controlled by its bank subsidiaries on the date on which it became a bank holding company.

(4) Any such acquisition referred to under subsection (2) of this section by an out-of-state bank holding company requires the express written approval of the supervisor of banking. Approval shall not be granted unless and until the following conditions are met:

(a) An out-of-state bank holding company desiring to make an acquisition referred to under subsection (2) of this section and the bank, trust company, national banking association, or domestic bank holding company parent thereof, if any, proposed to be acquired shall file an application in writing with the supervisor of banking. The supervisor shall by rule establish the fee schedule to be collected from the applicant in connection with the application. The fee shall not exceed the cost of processing the application. The application shall contain such information as the supervisor of banking may prescribe by rule as necessary or appropriate for the purpose of making a determination under this section. The application and supporting information and all examination reports and information obtained by the supervisor and the supervisor's staff in conducting its investigation shall be confidential and privileged and not subject to public disclosure under chapter 42.17 RCW. The application and information may be disclosed to federal bank regulatory agencies and to officials empowered to investigate criminal charges, subject to legal process, valid search warrant, or subpoena. In any civil action in which such application or information is sought to be discovered or used as evidence, any party may, upon notice to the supervisor and other parties, petition for an in camera review. The court may permit discovery and introduction of only those portions that are relevant and otherwise unobtainable by the requesting party. The application and information shall be discoverable in any judicial action challenging the approval of an acquisition by the supervisor as arbitrary and capricious or unlawful.

(b) The supervisor of banking shall find that:

(i) The bank, trust company, or national banking association that is proposed to be acquired or the domestic bank holding company controlling such bank, trust company, or national banking association is in such a liquidity or financial condition as to be in danger of closing, failing, or insolvency. In making any such determination the supervisor shall be guided by the criteria developed by the federal regulatory agencies with respect to emergency acquisitions under the provisions of 12 U.S.C. Sec. 1828(c);

(ii) There is no state bank, trust company, or national banking association doing business in the state of Washington or domestic bank holding company with sufficient resources willing to acquire the entire bank, trust company, or national banking association on at least as favorable terms as the out-of-state bank holding company is willing to acquire it;

(iii) The applicant out-of-state bank holding company has provided all information and documents requested by the supervisor in relation to the application; and

(iv) The applicant out-of-state bank holding company has demonstrated an acceptable record of meeting the credit needs of its entire community, including low and moderate income neighborhoods, consistent with the safe and sound operation of such institution.

(i) The financial institution structure of this state; and

(ii) The convenience and needs of the public of this state.

(5) Nothing in this section may be construed to prohibit, limit, restrict, or subject to further regulation the ownership by a bank of the stock of a bank service corporation or a banker's bank.

Sec. 3. Section 30.04.230, chapter 33, Laws of 1955 as last amended by section 4, chapter 305, Laws of 1985 and by section 2, chapter 310, Laws of 1985 and RCW 30.04.230 are each reenacted and amended to read as follows:

(2) Unless the terms of this section or RCW 30.04.232 are complied with, an out-of-state bank holding company shall not acquire more than five percent of the shares of the voting stock or all or substantially all of the assets of a bank, trust company, or national banking association the principal operations of which are conducted within this state.

(b) The supervisor of banking shall find that:

(iii) The applicant out-of-state bank holding company has provided all information and documents requested by the supervisor in relation to the application; and

(i) The financial institution structure of this state; and

(ii) The convenience and needs of the public of this state.

(5) Nothing in this section may be construed to prohibit, limit, restrict, or subject to further regulation the ownership by a bank of the stock of a bank service corporation or a banker's bank.

Sec. 4. Section 30.08.020, chapter 33, Laws of 1955 as last amended by section 18, chapter 279, Laws of 1986 and RCW 30.08.020 are each amended to read as follows:

Persons desiring to incorporate a bank or trust company shall file with the supervisor a notice of their intention to organize a bank or trust company in such form and containing such information as the supervisor shall prescribe by regulation, together with proposed articles of incorporation, which shall be submitted for examination to the supervisor at his office in Olympia.

The proposed articles of incorporation shall state:

(1) The name of such bank or trust company.

(2) The city, village or locality and county where the head office of such corporation is to be located.

(3) The nature of its business, whether that of a commercial bank, or a trust company.

(4) The amount of its capital stock, which shall be divided into shares of a par or no par value as may be provided in the articles of incorporation.

(5) The names and places of residence and mailing addresses of the persons who as directors are to manage the corporation until the first annual meeting of its stockholders.

(6) If there is to be preferred or special classes of stock, a statement of preferences, voting rights, if any, limitations and relative rights in respect of the shares of each class; or a statement that the shares of each class shall have the attributes as shall be determined by the bank's board of directors from time to time with the approval of the supervisor.

(7) Any provision granting the shareholders the preemptive right to acquire additional shares of the bank and any provision granting shareholders the right to cumulate their votes.

(8) Any provision, not inconsistent with law, which the incorporators elect to set forth in the articles of incorporation for the regulation of the internal affairs of the corporation, including any provision restricting the transfer of shares and any provision which under this title is required or permitted to be set forth in the bylaws.

(9) Any provision the incorporators elect to so set forth, not inconsistent with law or the purposes for which the bank is organized, or any provision limiting any of the powers granted in this title.

(10) Any provision, not inconsistent with law, which the incorporators elect to set forth in the articles of incorporation regarding a provision eliminating or limiting the personal liability of a director to the corporation or its shareholders for monetary damages for conduct as a director: PROVIDED, That such provision shall not eliminate or limit the liability of a director for acts or omissions which involve intentional misconduct or a knowing violation of law, or for any transaction from which the director will personally gain a financial profit or other advantage to which the director is not legally entitled.

It shall not be necessary to set forth in the articles of incorporation any of the corporate powers granted in this title. The articles of incorporation shall be signed by all of the incorporators and acknowledged before an officer to take acknowledgments.

Sec. 5. Section 30.08.090, chapter 33, Laws of 1955 as last amended by section 28, chapter 279, Laws of 1986 and RCW 30.08.090 are each amended to read as follows:

Any bank or trust company may ((~~increase or decrease its capital stock or otherwise~~)) amend its articles of incorporation, in any manner not inconsistent with the provisions of this title, by a vote of the stockholders representing two-thirds of each class of shares entitled to vote under the terms of the shares at any regular meeting, or special meeting duly called for that purpose in the manner prescribed by its bylaws. A certificate of the fact and the terms of the amendment shall be executed by a majority of the directors and filed as required herein for articles of incorporation. ((No issuance of capital stock shall be valid, until the amount thereof shall have been actually paid in and a certificate of increase is received from the supervisor. No reduction of the capital stock shall be made to an amount less than is required for capital by the supervisor.)) No amendment shall be made whereby a bank becomes a trust company unless such bank shall first receive permission from the supervisor.

((Banks having authorized but unissued stock shall disclose on all statements of condition the amount of authorized stock and the amount of issued and paid in stock, as certified by the supervisor. The supervisor shall certify to each bank having authorized but unissued stock the amount of its issued and paid in capital stock and this amount shall be used in all statements of condition and in computing the capital of the bank for purposes of determining loan or investment limits until a new certificate is issued by the supervisor. In cases where a bank issues authorized but unissued stock as permitted by this title, a new certificate need not be requested upon each stock issue. However, if the bank so requests and the supervisor approves, a certificate of issued and paid in capital stock shall be issued by the supervisor. A new certificate must be requested at such time as any increase of paid in capital stock represents five percent of the authorized capital stock and at such time as there is no remaining authorized but unissued stock.)) No amendment to the articles of incorporation eliminating or limiting the personal liability of a director to the corporation or its shareholders for monetary damages for conduct as a director shall eliminate or limit the liability of a director for any act or omission occurring prior to the date when such provision becomes effective.

NEW SECTION. Sec. 6. A new section is added to chapter 30.08 RCW to read as follows:

(1) For purposes of this section:

(a) "Corporation" means a bank or trust company organized pursuant to Title 30 RCW.

(b) An "interested shareholder transaction" means any transaction between a corporation, or any subsidiary thereof, and an interested shareholder of such corporation or an affiliated person of an interested shareholder that must be authorized pursuant to the provisions of chapter 30.44 or 30.49 RCW.

(i) Includes any person or group of affiliated persons who beneficially own twenty percent or more of the outstanding voting shares of a corporation. An affiliated person is any person who either acts jointly or in concert with, or directly or indirectly controls, is controlled by, or is under common control with, another person;

(ii) Excludes any person who, in good faith and not for the purpose of circumventing this section, is an agent, bank, broker, nominee, or trust for another person, if such other person is not an interested shareholder under (c)(i) of this subsection.

(2) Except as provided in subsection (3) of this section, an interested shareholder transaction must be approved by the affirmative vote of the holders of two-thirds of the shares entitled to be counted under this subsection, or if any class of shares is entitled to vote thereon as a class, then by the affirmative vote of the holders of two-thirds of the shares of each class entitled to be counted under this subsection and of the total shares entitled to be counted under this subsection. All outstanding shares entitled to vote under this chapter or the articles of incorporation shall be entitled to be counted under this subsection, except shares owned by or voted under the control of an interested shareholder may not be counted to determine whether shareholders have approved a transaction for purposes of this subsection. The vote of the shares owned by or voted under the control of an interested shareholder, however, shall be counted in determining whether a transaction is approved under other sections of this chapter and for purposes of determining a quorum.

(3) This section shall not apply to a transaction:

(a) Approved by a majority vote of the corporation's board of directors. For such purpose, the vote of directors whose votes are entitled to be counted under this subsection who are directors or officers of, or have a material financial interest in, an interested shareholder, or who were nominated for election as a director as a result of an arrangement with an interested shareholder and first elected as a director within twenty-four months of the proposed transaction, shall not be counted in determining whether the transaction is approved by such directors;

(b) In which a majority of directors whose votes are entitled to be counted under (a) of this subsection determines that the fair market value of the consideration to be received by noninterested shareholders for shares of any class owned by any interested shareholder is not less than the highest fair market value of the consideration paid by any interested shareholder in acquiring shares of the same class within twenty-four months of the proposed transaction; or

(c) By a corporation whose original articles of incorporation have a provision, or whose shareholders adopt an amendment to the articles of incorporation by the affirmative vote of the holders of two-thirds of the shares entitled to be counted under this subsection, expressly electing not to be covered by this section. All outstanding shares entitled to be counted under this title or the articles of incorporation shall be entitled to be counted under this subsection, except shares owned by or voted under the control of an interested shareholder may not be counted to determine whether shareholders have voted to approve the amendment. The vote of the shares owned by, or voted under the control of, an interested shareholder, however, shall be counted in determining whether the amendment is approved under other sections of this chapter and for purposes of determining a quorum.

(4) The requirements imposed by this section are to be in addition to, and not in lieu of, requirements imposed on any transaction by any other provision in this chapter, the articles of incorporation, or the bylaws of the corporation, or otherwise.

NEW SECTION. Sec. 7. A new section is added to chapter 30.08 RCW to read as follows:

A bank or trust company may increase or decrease its capital stock by amendment to its articles of incorporation. No issuance of capital stock shall be valid, until the amount thereof shall have been actually paid in and a certificate of increase is received from the supervisor. No reduction of the capital stock shall be made to an amount less than is required for capital by the supervisor.

Banks having authorized but unissued stock shall disclose on all statements of condition the amount of authorized stock, and the amount of issued and paid-in stock, as certified by the supervisor. The supervisor shall certify to each bank having authorized but unissued stock the amount of its issued and paid-in capital stock, and this amount shall be used in all statements of condition and in computing the capital of the bank for purposes of determining loan or investment limits until a new certificate is issued by the supervisor. In cases where a bank issued authorized but unissued stock as permitted by this title, a new certificate need not be requested upon each stock issue. However, if the bank so requests and the supervisor approves, a certificate of issued and paid-in capital stock shall be issued by the supervisor. A new certificate must be requested at such time as any increase of paid-in capital stock represents five percent of the authorized capital stock and at such time as there is no remaining authorized but unissued stock.

NEW SECTION. Sec. 8. A new section is added to chapter 30.12 RCW to read as follows:

If the articles of incorporation or the bylaws so provide, the board of directors, by resolution adopted by a majority of the full board of directors, may designate from among its members an executive committee and one or more other committees each of which, to the extent provided in such resolution or in the articles of incorporation or the bylaws of the corporation, shall have and may exercise all the authority of the board of directors, except that no such committee shall have the authority to:

(1) Authorize distributions or the issuance of shares, unless a resolution of the board of directors, or the bylaws, or articles of incorporation expressly so provide;

(2) Approve or recommend to shareholders actions or proposals required by this chapter to be approved by shareholders;

(3) Fill vacancies on the board of directors or any committee thereof;

(4) Amend the bylaws;

(5) Fix compensation of any director for serving on the board of directors or on any committee;

(6) Approve a plan of merger, consolidation, or exchange of shares not requiring shareholder's approval;

(7) Appoint other committees of the board of directors or the members thereof; or

(8) Amend the articles of incorporation, except that a committee may, to the extent authorized in the resolution or resolutions providing for the issuance of shares adopted by the board of directors as provided in RCW 30.08.083, fix any of the relative rights and preferences of such shares.

NEW SECTION. Sec. 9. A new section is added to chapter 30.08 RCW to read as follows:

A bank shall have the power to indemnify any person made a party or threatened to be made a party, whether named defendant or respondent in a proceeding, to any threatened, pending or completed action, suit, or proceeding whether civil, criminal, administrative or investigative, by reason of the fact that that person is or was a director, officer, or employee or agent of the bank, to the same extent and limits as a corporation organized pursuant to Title 23A RCW, may indemnify such a person or persons.

NEW SECTION. Sec. 10. The following acts or parts of acts are each repealed:

(1) Section 30.04.200, chapter 33, Laws of 1955 and RCW 30.04.200;

(2) Section 1, chapter 82, Laws of 1981 and RCW 30.23.010;

(3) Section 2, chapter 82, Laws of 1981 and RCW 30.23.020;

(4) Section 3, chapter 82, Laws of 1981 and RCW 30.23.030;

(5) Section 4, chapter 82, Laws of 1981 and RCW 30.23.040;

(6) Section 5, chapter 82, Laws of 1981 and RCW 30.23.050;

(7) Section 6, chapter 82, Laws of 1981 and RCW 30.23.060;

(8) Section 7, chapter 82, Laws of 1981 and RCW 30.23.070;

(9) Section 8, chapter 82, Laws of 1981 and RCW 30.23.080;

(10) Section 9, chapter 82, Laws of 1981 and RCW 30.23.900; and

(11) Section 11, chapter 82, Laws of 1981 and RCW 30.23.901.

NEW SECTION. Sec. 11. This act is necessary for the immediate preservation of the public peace, health, and safety, the support of the state government and its existing public institutions, and shall take effect immediately, except section 3 of this act shall take effect July 1, 1987.