Chapter 1
Department of Financial Institutions

Part 1
Department of Financial Institutions

45-1-101. Short title.

This chapter and chapter 2  of this title shall be known and may be cited as the “Tennessee Banking Act.”

Acts 1969, ch. 36, § 1 (1.101); T.C.A., § 45-101.

Cross-References. Funds transfers, title 47, ch. 4A.

Letters of credit, title 47, ch. 5.

Negotiable instruments, title 47, ch. 3.

Revocation, denial or suspension of professional, driver, and other licenses, to enforce child support obligations, title 36, ch. 5, part 7.

Tennessee Reciprocal Savings Institution Act, title 45, ch. 3, part 14.

Law Reviews.

Information Technology and Non-Legal Sanctions in Financing Transactions, 54 Vand. L. Rev. 1627 (2001).

Regulation by Hypothetical, 67 Vand. L. Rev. 1247 (2014).

45-1-102. Purpose — Standards for exercise of authority by commissioner — Rules of construction.

  1. It is the underlying purpose of this chapter and chapter 2 of this title to provide the citizens of Tennessee with a sound system of state chartered banks by providing for and encouraging the development of the banks while restricting their activities to the extent necessary to safeguard the interests of depositors.
  2. This underlying purpose includes, but is not limited to, providing for:
    1. The sound conduct of the business of banks subject to this chapter and chapter 2 of this title;
    2. The conservation of their assets;
    3. The maintenance of adequate reserves against deposits;
    4. The opportunity for banks subject to this chapter and chapter 2 of this title to compete with other businesses including, but not limited to, other financial organizations existing under the laws of this and other states, the United States and foreign countries;
    5. The opportunity for banks to serve the citizens of this state by improving and expanding their services and facilities and the opportunity for banks to participate in and promote the economic progress of Tennessee and the United States;
    6. The opportunity for the management of banks to exercise business judgment in conducting the affairs of their institutions; and
    7. Modernization and simplification of the law governing banking by providing that banks subject to this chapter and chapter 2 of this title shall have all the rights and powers granted corporations for profit by the Tennessee Business Corporation Act, compiled in title 48, chapters 11-27, except for the rights and powers withheld by those chapters or by rule or regulation of the commissioner of financial institutions.
  3. It is not a purpose of this chapter and chapter 2 of this title to restrict the activities of banks for the purpose of protecting any person, as hereinafter defined, from competition from banks, and this chapter and chapter 2 of this title do not confer any right or cause of action upon any competitor.
  4. The purposes of this chapter and chapter 2 of this title shall constitute standards to be observed by the commissioner of financial institutions in the commissioner's exercise of authority under this chapter and chapter 2 of this title, and shall constitute rules of construction in all matters of construction and application of those chapters.

Acts 1969, ch. 36, § 1 (1.102); 1973, ch. 294, § 6; T.C.A.,§ 45-102; Acts 1994, ch. 551,§ 19.

Attorney General Opinions. The general power to conduct a banking business includes the power to prevent fraud by requiring customers or other individuals who wish to do business with a bank to provide a fingerprint for identification purposes, OAG 01-060 (4/17/01).

NOTES TO DECISIONS

1. Construction.

The powers bestowed upon the commissioner of the Tennessee department of financial institutions are limited to those judicial powers reasonably necessary to the accomplishment of the purposes for that the department of financial institutions was created; therefore, T.C.A. § 45-2-1504 does not violate the separation of powers provision of Tenn. Const. art. II, § 2. Sentinel Trust Co. v. Lavender (In re Sentinel Trust Co.), 206 S.W.3d 501, 2005 Tenn. App. LEXIS 841 (Tenn. Ct. App. 2005), appeal denied, In re Sentinel Trust Co., — S.W.3d —, 2006 Tenn. LEXIS 612 (Tenn. 2006), appeal denied, In re Sentinel Trust Co., — S.W.3d —,2006 Tenn. LEXIS 613 (Tenn. 2006), appeal denied, Sentinel Trust Co. v. Lavender, — S.W.3d —, 2006 Tenn. LEXIS 614 (Tenn. 2006), cert. denied, Sentinel Trust Co. v. Lavender, 549 U.S. 1021, 127 S. Ct. 566, 166 L. Ed. 2d 412, 2006 U.S. LEXIS 8410 (2006).

45-1-103. General definitions.

As used in this chapter and chapter 2 of this title, unless the context otherwise requires:

  1. “Act as a fiduciary” or “acting as a fiduciary” means to act in the capacity of a fiduciary as defined in § 35-2-102;
  2. “Action,” in the sense of a judicial proceeding, includes recoupment, counterclaim, setoff, suit in equity and any other proceedings in which rights are determined;
  3. “Bank” means any person, as hereinafter defined, doing a banking business subject to the laws of this or any other jurisdiction and, for the purposes of supervision, examination and liquidation, includes industrial investment companies and industrial banks authorized by chapter 5 of this title;
  4. “Branch” with respect to a state bank means any place of business separated from the main office of a bank at which deposits are received, or checks paid or money lent;
  5. “Commissioner” means the commissioner of financial institutions;
  6. “Community” means a city, town, or incorporated village in this state, or where not within any of the foregoing, a trade area in this state;
  7. “Company” includes a bank, trust company, corporation, partnership, association, business or other trust, or similar business entity;
  8. “Department” means the department of financial institutions;
  9. “Deposit” means a deposit of money, bonds or other things of value, creating a debtor-creditor relationship;
  10. “Depository institution” means any company included for any purpose within any of the definitions of insured depository institution, as set forth in 12 U.S.C. § 1813(c)(2) and (3);
  11. “Executive officer,” when referring to a bank, means any officer designated as such in the bylaws and includes, whether or not so designated, the president, any vice president, the treasurer, the cashier, the comptroller and the secretary, or any officer who performs the duties appropriate to those officers;
  12. “Fiduciary record” means a matter written, transcribed, recorded, received or otherwise in the possession or control of a trust institution, whether in physical or electromagnetic form, that is necessary to preserve information concerning an act or event relevant to an account or a client of a trust institution;
  13. “Foreign bank” means a foreign bank, as defined in the International Banking Act of 1978 § 1(b)(7), codified in 12 U.S.C. § 3101(7);
  14. “Good faith” means honesty in fact in the conduct or transaction concerned;
  15. “Home state” means:
    1. With respect to a federally chartered trust institution and a foreign bank, the state in which the institution maintains its principal office; and
    2. With respect to any other trust institution, the state that chartered the institution;
  16. “Home state regulator” means the bank supervisory agency with primary responsibility for chartering and supervising an out-of-state trust institution;
  17. “In operation” or “operating” means that:
    1. A charter has been issued to a bank by the United States comptroller of the currency or a certificate of authority has been issued by the commissioner; or
    2. A bank has all appropriate approvals to accept insured deposits from the public;
  18. “Item” means any instrument for the payment of money, even though not negotiable, but does not include money;
  19. “New trust office” means a trust office located in a host state that:
    1. Is originally established by the trust institution as a trust office; and
    2. Does not become a trust office of the trust institution as a result of:
      1. The acquisition of another trust institution or trust office of another trust institution; or
      2. A merger, consolidation, or conversion involving the trust institution or trust office;
  20. “Office,” with respect to a trust institution, means the principal office or a trust office, but not a branch;
  21. “Officer,” when referring to a bank, means any person designated as such in the bylaws and includes, whether or not so designated, any executive officer, the chair of the board of directors, the chair of the executive committee and any trust officer, assistant vice president, assistant treasurer, assistant cashier, assistant comptroller, assistant trust officer, or any person who performs the duties appropriate to those offices;
  22. “Person” means an individual, corporation, firm, trust, estate, partnership, joint venture, or association;
  23. “Principal office” with respect to a:
    1. State trust company means a location registered with the commissioner as the state trust company's home office at which:
      1. The state trust company does business;
      2. The state trust company keeps its corporate books; and
      3. At least one (1) executive officer of the state trust company maintains an office; or
    2. Trust institution, other than a state trust company, means its principal place of business in the United States;
  24. “Reason to know” means that, upon the information available, a person of ordinary intelligence in the particular business, or of the superior intelligence or experience that the person in question may have, would infer that the fact in question exists or that there is such a substantial chance of its existence that, if exercising reasonable care with reference to the matter in question, conduct would be predicated upon the assumption of its possible existence;
  25. “Savings association” means an association as defined and operating under chapter 3 of this title or under the laws of the United States;
  26. “State bank” means any bank chartered by this state;
  27. “State trust company” means a corporation or limited liability company organized or reorganized under the Tennessee Banking Act, compiled in this chapter and chapter 2 of this title, whose purposes and powers are limited to fiduciary purposes and power, including a trust company previously organized under the laws of this state;
  28. “State trust institution” means a trust institution having its principal office in this state;
  29. “Subsidiary corporation” means any corporation, all or part of the stock of which is owned by a bank principally for the purpose of participating in the active management of the business of the corporation as distinguished from the purpose of deriving profit from the appreciation in value of the stock or from dividends paid on the stock;
  30. “Terms” when referring to loans means maturities, security for, rates of interest and other charges;
  31. “Trust company” means a state trust company or any other company chartered to act as a fiduciary that is neither a depository institution nor a foreign bank;
  32. “Trust institution” means a depository institution, foreign bank, state bank or trust company authorized to act as a fiduciary;
  33. “Trust office” means an office, other than the principal office, at which a trust institution is authorized by the commissioner to act as a fiduciary; and
  34. “Unauthorized trust activity” means:
    1. A company, other than one identified in chapter 2, part 10 of this title, acting as a fiduciary within this state;
    2. A trust institution acting as a fiduciary in this state at any location that is not its principal office, trust office or branch; or
    3. An out-of-state trust institution acting as a fiduciary in this state in violation of an order issued by the commissioner.

Acts 1969, ch. 36, § 1 (1.103); 1973, ch. 294, §§ 6, 8; T.C.A., § 45-103; Acts 1983, ch. 274, § 2; 1993, ch. 22, § 1; 1996, ch. 768, § 3; 1999, ch. 112, § 1; 2014, ch. 642, § 1.

Compiler's Notes. Acts 1996, ch. 768, which amended this section, is known and may be cited as the Bank Reform Act of 1996.

For the Preamble to the act concerning the market for trust and trust services, please refer to Acts 2014, ch. 642.

45-1-104. Department to execute laws.

The department, created by § 4-3-101, is charged with the execution of all laws relative to persons doing or engaged in a banking or other business as provided in this title, except for pawnbrokers covered by chapter 6 of this title.

Acts 1969, ch. 36, § 1 (2.101); impl. am. Acts 1971, ch. 137, § 1; modified; T.C.A., § 45–1–104; Acts 1983, ch. 274, § 3; 1995, ch. 186, § 16; 2005, ch. 440, § 17.

Cross-References. Department of financial institutions, creation, § 4-3-101.

Law Reviews.

Selected Tennessee Legislation of 1983 (N. L. Resener, J. A. Whitson, K. J. Miller), 50 Tenn. L. Rev. 785 (1983).

45-1-105. Commissioner, deputy and assistant commissioners — Qualifications — Vacancy.

    1. The department will have as its chief executive officer a commissioner who will be appointed by the governor as commissioner of financial institutions, and who shall have the same official status as all other commissioners. The commissioner shall hold office for the term of office of the governor except the commissioner may be removed from office by the governor for cause.
    2. The commissioner shall be a person of good character with at least five (5) years of experience in the theory and practice of bank management, three (3) years of which must have been in a full-time management or regulatory capacity. No person under thirty (30) years of age is eligible for appointment as commissioner.
    1. With the consent of the governor, the commissioner has the power to appoint a deputy commissioner and one (1) assistant commissioner for each division within the department who shall serve at the will of the commissioner.
    2. The deputy commissioner and assistant commissioners shall be persons of good character and have a minimum of three (3) years experience in the theory and practice of banking, or in the function and operation of credit unions in the case of the assistant commissioner for the credit union division, or in the function and operation of a financial institution in the case of the assistant commissioner for the compliance division, all of which must have been in a full-time management or regulatory capacity. For the purpose of this subsection (b), “financial institution” means any institution subject to the commissioner's jurisdiction and includes similar entities regulated by any other state or federal regulatory agency.
    3. If the office of the commissioner is vacant, or if the commissioner is absent and unable to act, the governor may designate the deputy commissioner to be acting commissioner. If both the office of the commissioner and the office of the deputy commissioner are vacant or both are unable to act, the governor may designate one (1) of the assistant commissioners as acting commissioner.

Acts 1913, ch. 20, § 1; Shan., § 3273a14; Code 1932, § 5940; T.C.A. (orig. ed.), § 45-102; Acts 1973, ch. 294, §§ 10, 13; modified; T.C.A., §§ 45-106, 45-125; Acts 1983, ch. 274, § 4; 1993, ch. 22, §§ 2, 3; 2004, ch. 747, § 17.

Cross-References. Commissioner of financial institutions, appointment and term, §§ 4-3-111, 4-3-112.

Law Reviews.

State Regulation of Bank Holding Companies and the Future of Interstate Banking: A Tennessee Perspective (Colman B. Hoffman and Kathryn R. Edge), 51 Tenn. L. Rev. 383 (1984).

45-1-106. Salary of commissioner.

The commissioner shall receive an annual salary as provided in § 8-23-101, to be paid monthly in the same manner as the salaries of other state officers are paid.

Acts 1913, ch. 20, § 1; Shan., § 3273a16; Acts 1927, ch. 30, § 7; Code 1932, § 5941; Acts 1949, ch. 38, § 1; C. Supp. 1950, § 5941; impl. am. Acts 1955, ch. 193, § 1; impl. am. Acts 1961, ch. 183, § 1; impl. am. Acts 1963, ch. 261, § 1; impl. am. Acts 1965, ch. 252, § 1; impl. am. Acts 1972, ch. 526, § 6; Acts 1973, ch. 294, § 6; T.C.A., § 45-107.

Code Commission Notes.

For the fiscal year county officials salary schedule, see the County Technical Assistance Service web site at http://www.ctas.tennessee.edu.

45-1-107. Powers and duties of commissioner.

  1. In addition to other powers conferred by this title, the commissioner has the power to:
    1. Interpret the provisions of this chapter and chapter 2 of this title, and regulate banking practices thereunder;
    2. Restrict the withdrawal of deposits from all or one (1) or more state banks where the commissioner finds that extraordinary circumstances make the restriction necessary for the proper protection of depositors in the affected institutions;
    3. Authorize a state bank to participate in a public agency hereafter created under the laws of this state or of the United States, the purpose of which is to afford advantages or safeguards to banks or to depositors and to comply with all requirements and conditions imposed upon the participants;
    4. Order any person to cease violating a provision of this title or lawful regulation issued under this title;
    5. Order any person to cease and desist from engaging in any unsafe or unsound banking practice when the practice is likely to cause insolvency or dissipation of assets or earnings of a state bank or is likely to otherwise seriously prejudice the interests of the depositors of a state bank; and
    6. Bring an action in the chancery court of Davidson County to enjoin any act or practice in or from this state that constitutes a violation of any provision of law or any rule or order that the department has the duty to execute pursuant to § 45-1-104. The court may not require the commissioner to post a bond in bringing the action. Upon a proper showing by the commissioner, the court shall grant a permanent or temporary injunction, restraining order, writ of mandamus, disgorgement, or other proper equitable relief including the recovery by the commissioner of costs and attorney fees. Further, to the extent that this subdivision (a)(6) does not conflict with other provisions of this title, a receiver or conservator may be appointed for the defendant or the defendant's assets.
  2. The commissioner may remove a director, trustee, officer or employee of a state bank who becomes ineligible to hold the position or who, after receipt of an order to cease under subsection (a), violates this title or a lawful regulation or order issued under this title, or who is dishonest. It is a criminal offense against the state for any such persons, after receipt of a removal order, to perform any duty or exercise any power of any state bank for a period of three (3) years. A removal order shall specify the grounds of removal and a copy of the order shall be sent to the bank concerned.
  3. Notice and opportunity for a hearing shall be provided in advance of any of the foregoing actions in this section taken by the commissioner, except the formulation of regulations of general application. In cases involving extraordinary circumstances requiring immediate action, the commissioner may take the action but shall promptly afford a subsequent hearing upon application to rescind the action taken.
  4. The commissioner may, on petition of any interested person and after hearing, issue a declaratory order with respect to the applicability to any person, property or state of facts under this title or a rule issued by the commissioner. The order shall bind the commissioner and all parties to the proceeding on the state of facts alleged unless it is modified or reversed by a court. A declaratory order may be reviewed and enforced in the same manner as other orders of the commissioner, but the refusal to issue a declaratory order shall not be reviewable.
  5. In addition to other powers conferred by this title, the commissioner has power to require a state bank to:
    1. Maintain its accounts in accordance with regulations that the commissioner prescribes, having regard to the size of the organization;
    2. Observe methods and standards that the commissioner prescribes for determining the value of various types of assets;
    3. Charge off the whole or part of an asset that at the time of the commissioner's action could not lawfully be acquired;
    4. Write down an asset to its market value;
    5. Record liens and security in property or at the option of the bank, insure against losses from not recording;
    6. Obtain a financial statement from a prospective borrower to the extent that the bank can do so;
    7. Search, or obtain insurance of, the title to real estate taken as security;
    8. Maintain adequate insurance against other risks that the commissioner determines to be necessary and appropriate for the protection of depositors and the public; and
    9. Call a special meeting of the shareholders.
  6. The commissioner has the power to subpoena witnesses, compel their attendance, require the production of evidence, administer an oath and examine any person under oath in connection with any subject relating to duty imposed upon or a power vested in the commissioner. These powers shall be enforced by a court of competent jurisdiction of the county in which the hearing is held.
  7. No person shall be subjected to any civil or criminal liability for any act or omission to act in good faith in reliance upon a subsisting order, regulation or definition of the commissioner, notwithstanding a subsequent decision by a court invalidating the order, regulation or definition.
  8. The commissioner is granted the power to enact reasonable substantive and procedural rules to carry out the purposes of any and all chapters within the commissioner's regulatory authority as conferred by law. This power shall specifically include, but not be limited to, the authority to establish a schedule of fees to be charged by the department relative to notifications or applications to be reviewed by the department. The promulgation shall be done in conformity with the Uniform Administrative Procedures Act, compiled in title 4, chapter 5.
    1. The commissioner may accept payments to the department by credit card, debit card, electronic funds transfer, electronic check or other electronic means. The commissioner may adopt reasonable policies and rules governing the manner of acceptance of such payments.
    2. The commissioner may enter into appropriate agreements with card issuers or other appropriate parties as needed to facilitate the acceptance of payments authorized under this subsection (i). The commissioner may impose and collect a convenience fee from any person making payment by credit card, debit card, electronic funds transfer, electronic check or other electronic means in order to offset the actual administrative fees and costs incurred by the department for accepting or processing such payments. Notwithstanding any law to the contrary, the convenience fee shall be charged in addition to all other fees, penalties, taxes and costs required by law.
    3. The commissioner also may enter into appropriate agreements with third-party service providers for the acceptance and processing of payments made by credit card, debit card, electronic funds transfer, electronic check or other electronic means. Such agreements may authorize third-party service providers to impose and collect a convenience fee from persons making such payments.
    4. When a person elects to make a payment to the department by credit card, debit card, electronic funds transfer, electronic check or other electronic means and a convenience fee is imposed and collected as authorized by this subsection (i), the payment of the convenience fee shall be deemed voluntary and shall not be refundable.

Acts 1969, ch. 36, § 1 (2.012); impl. am. Acts 1971, ch. 137, § 2; Acts 1973, ch. 294, § 12; 1975, ch. 59, § 1; 1978, ch. 516, § 1; T.C.A., § 45-108; Acts 1992, ch. 658, § 1; 1993, ch. 130, § 1; 1994, ch. 551, § 1; 1996, ch. 562, § 2; 2001, ch. 54, §§ 1, 2; 2013, ch. 102, § 1.

Code Commission Notes.

Pursuant to § 39-11-111, when the performance or nonperformance of any act is made criminal by statute, and no penalty, punishment or forfeiture for the violation of that statute is imposed, the doing of the act is a misdemeanor. The criminal offense in this section has been designated as a Class A misdemeanor by authority of § 40-35-110, which provides that an offense designated a misdemeanor without specification as to category is a Class A misdemeanor. See also § 39-11-114.

Compiler's Notes. Acts 1993, ch. 130, § 2 deletes (h), effective July 1, 1996.

Acts 1996, ch. 562, § 2 deleted Acts 1993, ch. 130, § 2, which provided that (h) would expire on July 1, 1996.

45-1-108. Review of commissioner's orders — Enforcement.

  1. A person who is aggrieved by an order of the commissioner issued pursuant to § 45-1-107 is entitled to judicial review as provided in the Uniform Administrative Procedures Act. A person who is aggrieved and directly affected by an order of the commissioner issued pursuant to other provisions of this title may seek judicial review as provided in title 27, chapter 9, except that judicial review of orders issued pursuant to chapter 5 of this title shall be governed by the Uniform Administrative Procedures Act.
  2. In the event a person does not comply with an order issued pursuant to § 45-1-107, the commissioner may petition a chancery court having jurisdiction to seek injunctive relief to compel compliance with the order. The power is conferred and the duty is imposed upon the several chancery courts, in all proper cases, to award injunctive relief; provided, that the order issued by the commissioner shall not be reviewable in a proceeding initiated under this subsection (b).
  3. In lieu of the procedure set forth in subsection (b), the commissioner may assess a civil penalty of not more than five hundred dollars ($500) per day against any bank or other person who violates an order issued pursuant to § 45-1-107 for each day during which the violation has occurred and continues. The maximum aggregate civil penalty assessed against a bank and any other person participating in the violation, however, shall not exceed five hundred dollars ($500) per day for each proceeding. In determining the amount of the penalty, the commissioner shall consider the appropriateness of the penalty with respect to the size of the financial resources and good faith of the person charged, the gravity of the violation, and other matters that justice may require. The person shall be afforded an opportunity for hearing upon request made within ten (10) days of the issuance of the notice of assessment. The commissioner's decision after a hearing or otherwise shall constitute a final order and may be reviewed in accordance with subsection (a); provided, that the original order shall not be reviewable in a proceeding initiated under this subsection (c).

Acts 1973, ch. 294, § 18; T.C.A., § 45-126; Acts 1981, ch. 24, § 1; 1983, ch. 274, § 5.

Law Reviews.

Justiciability in Tennessee, Part Two: Standing (Barbara Kritchevsky), 15 Mem. St. U.L. Rev. 179 (1985).

NOTES TO DECISIONS

1. Evidence.

A party should allege facts demonstrating that he, she or it is adversely affected by the decision of the administrative agency in order to be classified as an aggrieved person and therefore to be entitled to judicial review; the aggrieved and directly affected person should be able to show a special interest in the final decision and that he, she or it is subject to a special injury not common to the public generally. League Cent. Credit Union v. Mottern, 660 S.W.2d 787, 1983 Tenn. App. LEXIS 623 (Tenn. Ct. App. 1983).

2. Liability of Commissioner.

Absent a clear legislative intent to the contrary, it would be a dangerous precedent to hold that a public official is subject to suit by a private individual or entity in competition, direct or indirect, with another individual or entity, chartered, licensed and/or regulated by that official under law. League Cent. Credit Union v. Mottern, 660 S.W.2d 787, 1983 Tenn. App. LEXIS 623 (Tenn. Ct. App. 1983).

45-1-109. Oaths of office.

  1. The commissioner shall, within fifteen (15) days from the time of notice of the appointment, take and subscribe to the constitutional oath of office.
  2. In addition, the commissioner, examiners and other employees, before entering upon discharge of their duties, shall take and subscribe to an oath to faithfully and impartially perform the duties of their respective offices and to keep secret all information acquired by them in the discharge of their duties except as may be otherwise required by this chapter and chapter 2 of this title or otherwise by law. Willful violation of this oath is declared to be a criminal offense.
  3. The oath of the commissioner shall be filed with the secretary of state. The oaths of other employees of the department shall be filed with the commissioner.

Acts 1969, ch. 36, § 1 (2.104); 1973, ch. 294, § 14; T.C.A., § 45-109; Acts 1993, ch. 22, §§ 4-6.

Code Commission Notes.

Pursuant to § 39-11-111, when the performance or nonperformance of any act is made criminal by statute, and no penalty, punishment or forfeiture for the violation of that statute is imposed, the doing of the act is a misdemeanor. The criminal offense in this section has been designated as a Class A misdemeanor by authority of § 40-35-110, which provides that an offense designated a misdemeanor without specification as to category is a Class A misdemeanor. See also § 39-11-114.

45-1-110. [Repealed.]

Compiler's Notes. Former § 45-1-110 (Acts 1969, ch. 36, § 1 (2.105); 1973, ch. 294, § 6; T.C.A. § 45-110), relating to surety bond of the commissioner of banking (now financial institutions), was repealed by Acts 1980, ch. 887, § 9. For present law, see § 4-4-108.

45-1-111. Limitation of personal liability.

Neither the commissioner nor any other employee of the department shall be liable in any civil action for damages for any act done or omitted in good faith in performing the duties of the person's office.

Acts 1969, ch. 36, § 1 (2.106); 1973, ch. 294, § 6; T.C.A., § 45-111.

45-1-112. Official seal.

The secretary of state shall provide the commissioner with an official seal. Every paper executed by the commissioner, in pursuance of any authority conferred on the commissioner by law and sealed with the official seal, shall be received in evidence, and may be recorded in any proper recording office in this state, in the same manner and with the same effect as a deed regularly acknowledged or proven.

Acts 1969, ch. 36, § 1 (2.107); 1973, ch. 294, § 6; T.C.A., § 45-112.

45-1-113. Office facilities.

The governor shall assign to the commissioner a suitable room or rooms for conducting the business of the department, and this department shall be furnished with the necessary furniture, stationery, lights, and other proper conveniences and clerical assistants in the same manner as is furnished to other state departments.

Acts 1969, ch. 36, § 1 (2.108); 1973, ch. 294, § 6; T.C.A., § 45-113.

45-1-114. Removal of commissioner from office — Causes — Procedure.

The commissioner may be removed from office for neglect of duty, malfeasance, misfeasance, extortion or corruption in office, incompetency, or intemperance in the use of intoxicating liquors or narcotics to such an extent, in view of the dignity of the office and the importance of its duties, as to render the commissioner unfit for the discharge of the duties, or for any offense involving moral turpitude while in office committed under color of or connected with the office.

Acts 1913, ch. 20, § 1; Shan., § 3273a18; Code 1932, § 5943; T.C.A. (orig. ed.), § 45-108; Acts 1973, ch. 249, §§ 6, 15; T.C.A., § 45-114.

Cross-References. Disclosing condition of bank, its depositors or debtors, § 45-2-1713.

45-1-115. Divisions within department — Classification and salaries of department positions.

    1. There are created within the department the following divisions:
      1. The bank examination division;
      2. The bank charter and branch application division;
      3. The credit union division;
      4. The administrative and support services division; and
      5. The industrial loan and thrift companies division.
    2. The commissioner is authorized, with the consent of the governor, to combine, consolidate or abolish any of these divisions, or to create new divisions that are necessary to carry out the duties imposed upon the commissioner and the department.
  1. All positions in the department, with the exception of the commissioner, shall be classified by the commissioner according to the nature of the duties to be performed and the minimum qualifications for appointment, subject to § 45-1-105(b) and this section. The commissioner, having regard for the nature of the services to be performed and the salaries paid for similar work elsewhere, shall establish a salary range for each class of positions and within the salary range shall provide for recognition of professionalism and efficiency of service and for length of service.

Acts 1973, ch. 294, § 13; T.C.A., § 45-125; Acts 1983, ch. 274, § 6.

45-1-116. Examiners — Employment and duties.

The commissioner may, from time to time, if necessary, employ examiners to aid the commissioner in the discharge of official duties, and the examiners shall perform the duties the commissioner assigns them.

Acts 1969, ch. 36, § 1 (2.102); 1973, ch. 294, § 6; T.C.A., § 45-115.

Cross-References. Examination of banks and reports, title 45, ch. 2, part 16.

Violations of banking laws, title 45, ch. 2, part 17.

45-1-117. Banking interests of employees of department — Criminal history records check.

    1. No officer or employee of the department, except as provided in this title, shall receive, directly or indirectly, any payment or gratuity from any institutions regulated by the department, or be indebted to any state institutions regulated by the department, or engage in the negotiation of loans for others with the institutions regulated by the department. This provision shall not prohibit any employee from being a depositor or a lessor of safe deposit boxes on the same terms as are available to the public generally nor being indebted to any institution regulated by the department:
      1. Upon a mortgage loan upon the residence of the mortgagor;
      2. Upon any evidence of indebtedness transferred to any institution regulated by the department in the regular course of business by a seller of consumer goods or services purchased by the employee; or
      3. Pursuant to any revolving credit arrangement offered to the employee upon the same terms as are available to the public generally.
    2. A violation of subdivision (a)(1) is a criminal offense.
    1. The commissioner, or any other employee of the department, shall not hold office or position in, have any indirect pecuniary interest in, or directly or indirectly own shares or securities issued by an institution supervised by the department, except that the commissioner may continue to own shares or securities issued by an institution that are owned on the date of the commissioner's appointment and all shares or security distributed by the institution and received by the commissioner on account of the shares or securities so owned.
    2. A violation of subdivision (b)(1) is a criminal offense.
  1. In the event of ownership of shares or securities by the commissioner, the commissioner shall disclose the ownership, amount and date of acquisition of the shares or securities in writing to the state treasurer immediately after the commissioner's appointment and shall not during the commissioner's term of office participate in any decision or take any action concerning an institution in which the commissioner owns the shares or securities other than actions or decisions generally applicable to institutions or classes of institutions.
  2. The prohibitions of this section do not apply to employees of the department who hold clerical or support staff positions as determined by the commissioner.
  3. Notwithstanding subsections (a)-(d), the commissioner has the authority by rule or by policy to determine what situations are material to the maintenance of regulatory independence and shall establish appropriate exceptions for those situations subject to this section where, by actions beyond the employee's control, there is no intent by the employee to circumvent this section. In so doing, the commissioner shall establish the circumstances under which covered department employees must be recused from official duties and has the authority to define the terms of this section. In establishing these standards, the commissioner shall consider the ethical standards established by other state or federal regulators. Nothing in this subsection (e) shall apply to the requirements otherwise imposed on the commissioner.
    1. As a condition of employment with the department, the commissioner is authorized to require an applicant to provide the department or a duly authorized state contractor with a fingerprint sample in a form acceptable to the commissioner, as well as consent to a criminal history records check. Any criminal history records check conducted under this subdivision (f)(1) shall be conducted by the Tennessee bureau of investigation or the federal bureau of investigation, or both, and the results of the check shall be forwarded to the commissioner. The department shall pay the reasonable costs incurred in conducting the criminal history records check. The commissioner shall by rule or by policy determine what classes of applicants shall submit to a fingerprint criminal history records check and what officers or employees of the department shall have access to the results of the criminal history records check.
    2. Subdivision (f)(1) shall not apply to applicants for clerical or support staff positions as determined by the commissioner.
    3. The department shall maintain the confidentiality of all criminal history records information received pursuant to this subsection (f).

Acts 1969, ch. 36, § 1 (2.109); 1973, ch. 294, § 6; T.C.A., § 45-116; Acts 1983, ch. 274, § 7; 1993, ch. 25, § 1; 2001, ch. 54, § 3; 2009, ch. 499, § 9.

Code Commission Notes.

Pursuant to § 39-11-111, when the performance or nonperformance of any act is made criminal by statute, and no penalty, punishment or forfeiture for the violation of that statute is imposed, the doing of the act is a misdemeanor. The criminal offense in this section has been designated as a Class A misdemeanor by authority of § 40-35-110, which provides that an offense designated a misdemeanor without specification as to category is a Class A misdemeanor. See also § 39-11-114.

Cross-References. Confidentiality of public records, § 10-7-504.

45-1-118. Charter application costs — Annual banking fee — Assessments — Recovering the costs of examination and supervision.

  1. Each state bank shall pay to the department the cost, as determined by the commissioner, of investigating an application by the bank for a charter as a new bank or for a branch bank.
    1. The commissioner shall determine an annual budget for the department.
    2. The amount of the budget attributable to the regulation and examination of state banks shall thereafter be divided among the state banks by the commissioner.
    1. The assessment against each state bank, which shall be known as the banking fee, shall be allocated in proportion to the total assets beneficially owned by each state bank; provided, that:
      1. The commissioner may establish a minimum assessment in lieu of any pro rata assessment, which shall not exceed five thousand dollars ($5,000); and
      2. The maximum assessment shall not exceed the annualized fee that a state bank would pay if it were a national bank of equivalent asset size.
    2. Nondepository trust companies that are regulated by the department shall, in lieu of a banking fee based on asset size, pay to the commissioner, by July 1 of each year, the sum of one thousand dollars ($1,000) for each office operated by the trust company. In addition, nondepository trust companies shall pay the actual expenses of examination at the time of examination. The fees are payable in addition to other fees and taxes now required by law and are expendable receipts for the use of the commissioner in defraying a portion of the cost of administration of this chapter.
    1. Assessments shall be paid into the state treasury upon notice from the commissioner, and all moneys collected by the commissioner shall be used for the administration of the department and for the department's sole use.
    2. Any funds collected by the department but unexpended at the end of a fiscal year shall not revert or in any way be transferred to the general fund but shall be rebated to the state banks, within one hundred eighty (180) days, or shall be credited against the banking fee owed by the state banks for the current fiscal year.
  2. If any state bank fails to make payment within thirty (30) days after notice from the commissioner of the amount of its assessment, the commissioner may issue an execution against its property for an amount equal to one hundred fifty percent (150%) of the delinquent payment.
    1. The department may recover the costs of examination and supervision of a financial institution, subsidiary, or service corporation for supervision or examination that are in addition to the costs associated with the level of supervision ordinarily required for a financial institution in sound financial condition and that are in excess of the normal regulatory fees paid by the institution. The department may also recover the costs of any review of any affiliate of a financial institution determined by the department to have contributed to an unsafe or unsound practice at a financial institution, subsidiary, or service corporation.
    2. The commissioner may issue orders and promulgate rules and regulations pursuant to the Uniform Administrative Procedures Act, compiled in title 4, chapter 5, for the purpose of establishing and defining costs associated with complying with this subsection (f) and for the purpose of enforcing the recovery of the costs.
    1. The commissioner, in cooperation with the department of human resources, shall on an annual basis conduct a review of the salaries of employees in the department. The review shall include a comparative analysis of salaries of the departmental employees, employees in similar state positions in bank regulatory agencies of other states, employees in federal regulatory agencies, similar employees in other Tennessee state departments, and employees in similar positions in the private sector. Based on the review or other factors including, but not limited to, staff turnover, qualifications, or availability of qualified employees, the commissioner shall make recommendations for changes in classifications, salary improvements, or both.
    2. The commissioner shall establish, maintain, and review on a periodic basis a method for assessing the staffing needs for the department. The method shall include, but not be limited to, assessment of the statutory requirements of the department, the number and type of institutions regulated within each regulatory category, and the size of the assets under the departmental supervision in each category.
  3. The commissioner, in the commissioner's discretion, may, by regulation, establish the criteria and circumstances by which a credit toward the annual banking fee may be given to a Tennessee state-chartered bank for the annual banking fee assessment, if any, assessed against an out-of-state branch of the Tennessee state-chartered bank by the host state banking supervisory agency.
    1. Persons regulated and supervised by the department's compliance division shall be assessed an annual supervision fee as described in this subsection (i).
    2. Pursuant to subdivision (b)(1), the commissioner shall determine an annual budget for the department. The commissioner shall determine the amount of the budget attributable to the regulation and examination of the persons regulated by the compliance division.
    3. Mortgage loan originators, as defined in §§  45-5-102 and 45-13-105, as applicable, shall not be assessed the annual supervision fee, but mortgage loan originators shall continue to pay the licensing, renewal and any other fees required in chapters 5 and 13 of this title. The total number of mortgage loan originators licensed with the department at the end of the previous fiscal year shall be multiplied by the annual renewal fee for mortgage loan originators, and the product shall be deducted from the compliance division's budget. The remaining amount of the compliance division's budget shall be allocated as described in subdivision (i)(4).
      1. The commissioner shall periodically determine the per diem costs of conducting a routine examination of persons regulated and supervised by the compliance division.
      2. After deducting the amounts referenced in subdivision (i)(3), the remaining budget shall be assessed as a supervision fee among all licensed and registered locations based on the relative complexities of examining and regulating each industry.
      3. Payment of the supervision fee calculated in this subsection (i) shall be a condition of licensure or registration renewal. The supervision fee shall be nonrefundable and no abatement of the supervision fee shall be made if the license or registration is surrendered, cancelled, revoked or suspended prior to the expiration of the period for which it was issued.
      4. The supervision fee includes annual licensing and registration fees and the costs for a routine examination or investigation of a licensee or registrant regulated by the compliance division.
    4. In addition to the supervision fee, a licensee or registrant shall pay the actual expenses incurred for out-of-state examinations and inspections of books, records, and papers maintained out-of-state.
    5. In addition to the supervision fee, the commissioner may impose a special assessment upon a licensee or registrant for the purpose of recovering costs in excess of those costs normally incurred for conducting a routine examination.
    6. A person who applies for a new license or registration shall pay, as a condition of licensure or registration, the same supervision fee for each licensed or registered location as a person holding the same license or registration type has paid as a supervision fee during that fiscal year. If the supervision fee for a fiscal year has not yet been determined, the person applying for a new license or registration shall pay, as a condition of licensure or registration, the supervision fee required to obtain the license or registration type in the previous fiscal year, except as designated in subdivision (i)(8).
    7. A person submitting an application to the compliance division for a new license or registration from July 1, 2015 through September 30, 2015, shall pay a supervision fee of five hundred dollars ($500). Thereafter, the supervision fee shall be an amount determined by the commissioner pursuant to subdivision (i)(4).
    8. All funds collected by the department's compliance division shall be used for the administration of that division.

Acts 1969, ch. 36, § 1 (2.110); 1973, ch. 294, § 16; T.C.A., § 45-117; Acts 1988, ch. 655, § 1; 1992, ch. 628, § 1; 1993, ch. 233, § 1; 1995, ch. 451, §§ 1, 2; 1996, ch. 562, § 4; 1999, ch. 112, § 2; 2014, ch. 736, § 1.

Compiler's Notes. Pursuant to Acts 2007, ch. 60, references to the department of personnel were changed to the department of human resources, effective April 24, 2007.

Pursuant to Article III, Section 18 of the Constitution of Tennessee, Acts 2014, ch. 736 took effect on April 21, 2014, for the purpose of promulgating rules and regulations.

45-1-119. Annual report.

  1. The commissioner shall report to the governor annually within sixty (60) days after the end of each calendar year. The report shall include:
    1. The text of all rules of the department of general application adopted or altered since the commissioner's last previous report;
    2. Recommendations for legislation;
    3. A statement of the status and remaining assets and liabilities of all banking organizations in the possession of the commissioner;
    4. A summary of all changes occurring since the commissioner's last previous report by reason of opening new state banks, mergers and conversions, increases and decreases in capital and the like; and
    5. A combined statement of condition of all state banks as of the date of the most recent reports of condition rendered to the commissioner, and reference to the availability in the commissioner's office of the statements of condition of each state bank, as of the date of the most recent reports to the commissioner.
  2. Copies of the last annual report not previously so submitted shall be available to the general assembly at the opening of each regular session.
  3. The annual report of the commissioner may be published on the order of the governor, if the governor deems the report to be of sufficient importance to the public.

Acts 1969, ch. 36, § 1 (2.111); 1973, ch. 294, § 6; T.C.A., § 45-118; Acts 2003, ch. 253, § 1.

45-1-120. Records of department.

  1. No information from the records of the department shall be revealed without the consent of the commissioner.
  2. Reports of examinations made by the department shall be retained for five (5) years.
  3. A copy of any document on file with the department that is certified by the commissioner as being a true copy may be introduced in evidence as if it were the original. The commissioner shall establish a schedule of fees for copies of documents.

Acts 1969, ch. 36, § 1 (2.112); 1973, ch. 294, §§ 6, 17; T.C.A., § 45-119; Acts 1993, ch. 22, § 7.

45-1-121. Traveling expenses.

The necessary traveling expenses in the discharge of the duties of the commissioner and examiners employed by the commissioner shall be audited by the commissioner of finance and administration and shall be paid monthly by warrants drawn by the commissioner of finance and administration on the state treasurer in favor of the commissioner of financial institutions.

Acts 1969, ch. 36, § 1 (2.113); 1973, ch. 294, § 6; T.C.A., § 45-120.

45-1-122. Suits to vacate and annul bank charters.

In addition to other remedies provided in this chapter and chapter 2 of this title, the commissioner of financial institutions, in the name of the state, is authorized to institute a quo warranto, or other appropriate proceedings, to vacate and annul the charter of any bank where the bank has done or permitted such act or acts as under the law authorized a vacation of its charter, and no suit shall be instituted by any person to vacate the charter of any bank except by the commissioner.

Acts 1969, ch. 36, § 1 (2.114); 1973, ch. 294, § 6; T.C.A., § 45-121.

Cross-References. Applicability to industrial banks, § 45-5-607.

45-1-123. Legal counsel for commissioner.

  1. The district attorneys general in each county, when requested by the commissioner, shall, as a part of their official duty and without compensation, represent the commissioner in any suit that the commissioner may desire to bring, or that may be brought against the commissioner, in the commissioner's official capacity, in their respective counties.
  2. The attorney general and reporter shall advise the commissioner on any question of law submitted to the attorney general and reporter by the commissioner, respecting the commissioner's authority and duties under the law.

Acts 1969, ch. 36, § 1 (2.115); 1973, ch. 294, § 6; modified; T.C.A., § 45-122.

Cross-References. Submission of criminal violation of banking law to district attorneys general by commissioner, § 45-2-1717.

45-1-124. Application of this chapter and chapter 2 of this title.

  1. The existence of state banks formed or existing on April 2, 1969, shall not be impaired by the enactment of  this chapter and chapter 2 of this title, or by any change in the requirements for the formation of state banks, or by any amendment or repeal of the laws under which they were formed or created, and except as otherwise expressly provided in those chapters, the repeal of a prior act or acts by those chapters shall not affect any right accrued or established, or any liability or penalty incurred, under  the act, prior to the repeal of the act.
  2. To the full extent consistent with such rights, liabilities, and penalties, all state banks and, to the extent applicable, all banks, shall hereafter be operated in accordance with this chapter and chapter 2 of this title. Unless the commissioner determines otherwise, this chapter and chapter 2 of this title, and the rules of this chapter and chapter 2 of this title, shall also apply to the operation and regulation of state trust companies and banks whose purposes and powers are limited to fiduciary purposes and powers.
  3. All powers granted in this chapter and chapter 2 of this title may be freely exercised by any corporation, which is empowered by its charter under any prior act of the general assembly and any amendments thereto, to exercise the rights and powers that appertain and belong to a banking institution or to conduct a general banking business, without the necessity of amending its charter, unless the charter expressly prohibits the exercise of such powers.
  4. Except to the extent inconsistent with or contrary to specific provisions of chapters 1, 2 and 3 of this title, Tennessee state banks, trust companies, savings and loan associations, and savings banks, and their directors, officers and shareholders shall be governed by and subject to the Tennessee Business Corporation Act, compiled in title 48, chapters 11-27, as the same may be amended from time to time, and successor statutes thereto. The commissioner has the authority to interpret the Tennessee Business Corporation Act as it applies to financial institutions subject to regulation by the commissioner.
  5. The charter of a trust company granted by the commissioner shall not be void due to the enactment of any amendment or repeal of the laws under which it was formed if the trust company is in operation, as determined by the commissioner, on July 1, 1999.
  6. A company engaged in activities subject to this chapter and chapter 2 of this title, on July 1, 1999, but formed, as determined by the commissioner, prior to the enactment of Acts 1980, ch. 620, and not previously subject to regulation by the commissioner, may continue to act as a fiduciary without submitting an application. However, the entity shall be otherwise fully subject to this chapter and chapter 2 of this title.
  7. A company authorized by its charter, prior to the enactment of Acts 1980, ch. 620, to engage in fiduciary activities, but not engaging in fiduciary activities on July 1, 1999, must file the appropriate application to establish a trust company and then fully comply with this chapter and chapter 2 of this title.
  8. All state trust companies operating on July 1, 1999, shall have a period of time that the commissioner determines to be reasonable and prudent to conform to the requirements of this chapter and chapter 2 of this title and the regulations  under this chapter and chapter 2 of this title, but the period shall not exceed three (3) years from July 1, 1999. During this period of time, to conform to the requirements of this chapter and chapter 2 of this title, the commissioner may conduct examinations at the company's expense, and apply the requirements of this chapter and chapter 2 of this title as deemed appropriate.

Acts 1969, ch. 36, § 1 (1.104); T.C.A., § 45-123; Acts 1980, ch. 620, § 3; 1994, ch. 551, § 2; 1999, ch. 112, §§ 3, 4.

Compiler's Notes. Section 5 of Acts 1980, ch. 620 reads:

“The existence and operation of any trust company formed prior to the effective date of this act shall not be impaired by the enactment of this act.”

NOTES TO DECISIONS

1. Applicability

The taking emergency possession of a trust company by the commissioner of the Tennessee department of financial institutions was proper where there was a $7 million deficit, and there was ample evidence that the company was being run in unsound manner, because the legislature's intent to bring state trust companies under the umbrella of the Tennessee Banking Act is clear from the plain and ordinary meaning of the statutory language of T.C.A. § 45-1-124(b) and (d); therefore, T.C.A. § 45-2-1502, that authorizes the commissioner to take possession of a state bank under certain circumstances, also vests in the commissioner the full authority to take possession of a Tennessee trust company under the same set of circumstances. Sentinel Trust Co. v. Lavender (In re Sentinel Trust Co.), 206 S.W.3d 501, 2005 Tenn. App. LEXIS 841 (Tenn. Ct. App. 2005), appeal denied, In re Sentinel Trust Co., — S.W.3d —, 2006 Tenn. LEXIS 612 (Tenn. 2006), appeal denied, In re Sentinel Trust Co., — S.W.3d —,2006 Tenn. LEXIS 613 (Tenn. 2006), appeal denied, Sentinel Trust Co. v. Lavender, — S.W.3d —, 2006 Tenn. LEXIS 614 (Tenn. 2006), cert. denied, Sentinel Trust Co. v. Lavender, 549 U.S. 1021, 127 S. Ct. 566, 166 L. Ed. 2d 412, 2006 U.S. LEXIS 8410 (2006).

45-1-125. Liability of director or officer of financial institution in receivership or reorganization.

A director or officer, including a former director or officer of a financial institution, shall not be liable to the financial institution in receivership or reorganization or to the receiver, shareholders, depositors or creditors of the closed financial institution for money damages for breach of fiduciary duty, unless the claim or action arises out of the breach of the director's duty of loyalty to the financial institution or for acts or omissions not in good faith or that involved intentional misconduct or knowing violation of the law by the director or officer during the director's or officer's term of office with the financial institution. For purposes of this section, “financial institution” means a bank organized under the laws of this state, a national bank with its principal office in this state, a savings and loan association or savings bank organized under the laws of this state, or a federal savings and loan association or federal savings bank with its principal office in this state. This section shall apply both retrospectively and prospectively.

Acts 1994, ch. 551, § 3.

45-1-126. Compliance review documents — Confidentiality.

  1. As used in this section, unless the context otherwise requires:
    1. “Compliance review committee” means:
        1. An audit, loan review or compliance committee appointed by the board of directors of a depository institution; or
        2. Any other person to the extent the person acts in an investigatory capacity at the direction of a compliance review committee; and
      1. Whose functions are to evaluate and seek to improve:
        1. Loan underwriting standards;
        2. Asset quality;
        3. Financial reporting to federal or state regulatory agencies; or
        4. Compliance with federal or state statutory or regulatory requirements;
    2. “Compliance review documents” means documents prepared for or created by a compliance review committee;
    3. “Depository institution” means a state bank, national bank, state or federal savings and loan association, or a state or federal savings bank located in this state that is authorized to maintain deposit or share accounts;
    4. “Loan review committee” means a person or group of persons who, on behalf of a depository institution, reviews loans held by the institution for the purpose of assessing the credit quality of the loans, compliance with the institution's loan policies, and compliance with applicable laws and regulations; and
    5. “Person” means an individual, group of individuals, board, committee, partnership, firm, association, corporation or other entity.
  2. Except as provided in subsection (c):
    1. Compliance review documents are confidential and are not discoverable or admissible in evidence in any civil action arising out of matters evaluated by the compliance review committee; and
    2. Compliance review documents delivered to a federal or state governmental agency remain confidential and are not discoverable or admissible in evidence in any civil action arising out of matters evaluated by the compliance review committee.
  3. Subsection (b) does not apply to any information required by statute or regulation to be maintained by or provided to a governmental agency while the information is in the possession of the governmental agency to the extent applicable law expressly authorizes its disclosure.

Acts 1994, ch. 551, § 18.

Cross-References. Confidentiality of public records, § 10-7-504.

45-1-127. Fiduciary responsibilities or liabilities of financial institutions, officers or employees.

  1. No financial institution or officer or employee thereof shall be deemed or implied to be acting as fiduciary or have a fiduciary obligation or responsibility to its customers or to other parties, other than shareholders of the institution, unless there is a written agency or trust agreement under which the financial institution specifically agrees to act and perform in the capacity of a fiduciary. The fiduciary responsibility and liability of a financial institution or any officer or employee of a financial institution shall be limited solely to performance under the contract and shall not extend beyond the scope of the contract. Any claim for a breach of a fiduciary responsibility of a financial institution or any officer or employee thereof may only be asserted within the time provided in § 48-18-601.
  2. For purposes of this section, “financial institution” means a state or national bank, a savings and loan association, savings bank, industrial loan and thrift company, or mortgage lender.
    1. It is the legislative intent that this section is not intended to restrict, alter, or modify a court's application of the equitable doctrines of resulting or constructive trusts.
    2. It is the further legislative intent that this section shall be applied only to transactions or relationships that are entered into after May 10, 1994; provided, that any transaction or relationship that may have existed prior to May 10, 1994, may be ratified, altered, or amended by meeting the requirements of this section.

Acts 1994, ch. 955, § 1.

45-1-128. [Repealed.]

Compiler's Notes. Former § 45-1-128 (Acts 1995, ch. 451, § 3), concerning preemption by federal law, was repealed by Acts 1996, ch. 629, § 2.

45-1-129. Electronic applications.

All applications required to be submitted to the commissioner under  chapters 2, 3 and 14 of this title or any regulations promulgated under these chapters, may be submitted by electronic communications, including, but not limited to, facsimile transmissions and electronic mail. Applications submitted in this manner shall be deemed complete for purposes of processing as of the date the electronic submission is received by the commissioner, as long as any filing fees or original documents required to be submitted with the application are received by the commissioner within three (3) business days of the electronic communication. If the application is incomplete, the commissioner may request additional information and the time for processing shall date from the receipt of the information.

Acts 1996, ch. 768, § 4.

Compiler's Notes. Acts 1996, ch. 768, which enacted this section, is known as and may be cited as the Bank Reform Act of 1996.

45-1-130. License, certification or registration — Notifications — Prerequisites — Web site.

  1. The department and each board, commission, agency or other governmental entity created pursuant to this title shall notify each applicant for a professional or occupational license, certification or registration from the department, board, commission, agency or other governmental entity where to obtain a copy of any statutes, rules, guidelines, and policies setting forth the prerequisites for the license, certification or registration and shall, upon request, make available to the applicant a copy of the statutes, rules, guidelines, and policies.
  2. The department and each board, commission, agency or other governmental entity created pursuant to this title shall notify each holder of a professional or occupational license, certification or registration from the board, commission, agency or other governmental entity of changes in state law that impact the holder and are implemented or enforced by the entity including newly promulgated or amended statutes, rules, policies, and guidelines, upon the issuance and upon each renewal of a holder's license, certification or registration.
  3. The department and each board, commission, agency or other governmental entity created pursuant to this title shall establish and maintain a link or links on the entity's web site to the statutes, rules, policies, and guidelines that are implemented or enforced by the entity and that impact an applicant for, or a holder of, a professional or occupational license, certification, or registration from the entity.
    1. The department and each board, commission, agency, or other governmental entity created pursuant to this title shall allow each holder of a professional or occupational license, certification or registration from the department, board, commission, agency or other governmental entity to have the option of being notified by electronic mail of:
      1. Renewals of the holder's license, certification or registration;
      2. Any fee increases;
      3. Any changes in state law that impact the holder and are implemented or enforced by the entity, including newly promulgated or amended statutes, rules, policies and guidelines; and
      4. Any meeting where changes in rules or fees are on the agenda. For purposes of this subdivision (d)(1)(D), the electronic notice shall be at least forty-five (45) days in advance of the meeting, unless it is an emergency meeting then the notice shall be sent as soon as is practicable.
    2. The department and each board, commission, agency or other governmental entity created pursuant to this title shall notify each holder of a license, certification or registration of the availability of receiving electronic notices pursuant to subdivision (d)(1) upon issuance or renewal of the holder's license, certification or registration.

Acts 2008, ch. 1070, § 11; 2012, ch. 952, § 8.

Compiler's Notes. Acts 2008, ch. 1070, § 13 provided that each entity subject to the act shall promulgate rules to effectuate the purposes of the act. The rules shall be promulgated in accordance with the Uniform Administrative Procedures Act, compiled in title 4, chapter 5.

Part 2
Banking Advisory Board [Repealed]

45-1-201 — 45-1-208. [Repealed.]

Compiler's Notes. Former part 2, §§ 45- 1-201 — 45-1-208, (Acts 1973, ch. 294, § 11; 1976, ch. 806, § 1(10); T.C.A., § 45-124), concerning the banking advisory board, was repealed by Acts 1983, ch. 216, § 10.

Part 3
Bank Customer Dispute Resolution Act of 1981.

45-1-301. Short title.

This part shall be known and may be cited as the “Bank Customer Dispute Resolution Act of 1981.”

Acts 1981, ch. 25, § 1.

Cross-References. Negotiable instruments, title 47, ch. 3.

Law Reviews.

Alternative Dispute Resolution in the Personal Injury Forum (William P. Zdancewica), 26 U. Mem. L. Rev. 1169 (1996).

45-1-302. Commissioner authorized to mediate or arbitrate.

The commissioner has the discretion to mediate or arbitrate a complaint against a state bank made by a customer of the bank.

Acts 1981, ch. 25, § 2.

45-1-303. Decision to intervene discretionary with commissioner.

Upon receipt of a complaint, the commissioner shall determine whether mediation or arbitration is appropriate; however, the commissioner's decision not to resolve a complaint shall not be reviewable, and the commissioner shall not resolve a complaint unless the customer and the bank both agree to the resolution. The commissioner shall consider the amount of money in dispute, the complexity of facts and law, the ability of the customer to obtain judicial relief, and other matters that may be relevant to determine whether a dispute appropriately may be resolved by the commissioner's mediation or arbitration. The commissioner, however, shall not resolve through arbitration a complaint involving more than seven hundred fifty dollars ($750).

Acts 1981, ch. 25, § 3.

45-1-304. Informal conference or hearing — Mediation or arbitration — Award.

  1. In resolving a complaint, the commissioner may conduct an informal conference or informal hearing or may require that the parties submit written statements or sworn affidavits.
  2. In addition, the commissioner may designate a qualified person, whether or not an employee of the department, to mediate or arbitrate the complaint.
  3. When the commissioner conducts an informal hearing or conference, the parties are not bound by the rules of procedure and evidence pertaining to contested cases.
  4. Upon reaching a decision, the commissioner shall notify the parties with a written award.

Acts 1981, ch. 25, § 4.

45-1-305. Award is binding — Review on appeal — Compliance orders.

  1. An award of the commissioner issued pursuant to this part shall be binding upon the parties, but either party may seek to vacate the award in any court with jurisdiction over the original subject matter, by commencing the appropriate original action against the other party within thirty (30) days of receiving a copy of the award.
  2. Review by the court shall be de novo.
  3. If the party against whom an award is rendered does not initiate an appeal as  provided in subsection (a) and does not comply with the award, the commissioner shall consider the lack of compliance as a violation of this section and may order the party to comply as provided by § 45-1-107.

Acts 1981, ch. 25, § 5.

45-1-306. Commissioner to notify parties of effect of award, right to appeal.

The commissioner shall advise both parties in writing, at the time the award is made, that the commissioner's decision will be binding on both parties unless appealed to a court of law within thirty (30) days, as provided in § 45-1-305.

Acts 1981, ch. 25, § 6.

45-1-307. Commissioner's rulemaking authority.

The commissioner is granted the power to enact reasonable substantive and procedural rules to carry out the purposes of this part.

Acts 1981, ch. 25, § 7.

45-1-308. Legislative intent — Liberal construction.

  1. This part is enacted for the purpose of providing the citizens of the state of Tennessee with an informal and expeditious method of resolving customer disputes with state chartered banks.
  2. This part is not intended to create a new agency or division within the department. It is intended that the purpose of this part be carried out primarily by existing personnel of the department, or qualified persons designated to resolve disputes by the commissioner, who will act without compensation.
  3. This part shall be liberally construed to effect its declared purpose.

Acts 1981, ch. 25, § 8.

45-1-309. General arbitration law inapplicable.

Title 29, chapter 5, part 1 does not apply to an arbitration covered by this part.

Acts 1981, ch. 25, § 9.

Chapter 2
Banking Institutions

Part 1
General Provisions

45-2-101. [Repealed.]

Compiler's Notes. Former § 45-2-101 (Acts 1969, ch. 36, § 1 (3.319); 1973, ch. 294, § 6; T.C.A., § 45-230), concerning accounting requirements for capital, surplus and undivided profits, was repealed by Acts 2001, ch. 54, § 4, effective April 4, 2001.

45-2-102. [Repealed.]

Compiler's Notes. Former § 45-2-102 (Acts 1969, ch. 36, § 1 (3.320); T.C.A., § 45-231), concerning waivers and corporate action by unanimously signed writing, was repealed by Acts 1994, ch. 551, § 4.

45-2-103. Changes affecting bank control.

    1. As used in this section, unless the context otherwise requires:
      1. “Bank” means a bank or trust company organized under the laws of this state;
      2. “Control” means possession, direct or indirect, of the power to direct or cause the direction of management and policies of a person, whether through the ownership of voting securities by contract or otherwise; provided, that no individual shall be deemed to control a person solely on account of being a director, officer, or employee of the person. For purposes of this section, a person who, directly or indirectly, owns, controls, holds the power to vote, or holds proxies representing twenty-five percent (25%) or more of the then outstanding voting securities issued by another person is presumed to control the other person. For purposes of this section, the commissioner may determine whether a person, in fact, controls another person;
      3. “Controlling person” means a person who, directly or indirectly, controls a bank;
      4. “Person” means an individual, a corporation, an association, a syndicate, a partnership, a business trust, an estate, a trust, or an organization of any kind, or any combination of any of the foregoing acting in concert; and
      5. “Shareholder” means:
        1. In the case of a corporation, a holder of a share of any class or series;
        2. In the case of a nonprofit or charitable corporation, an unincorporated association, or a syndicate, a member;
        3. In the case of a partnership, a partner;
        4. In the case of a business trust, an estate, or a trust, a holder of a beneficial interest; and
        5. In the case of an organization of any other kind, a holder of an ownership interest.
    2. No person shall, directly or indirectly, unless the commissioner has approved the acquisition of control, acquire control of a bank or a controlling person; provided, that nothing in this subdivision (a)(2) shall be considered to prohibit any person from negotiating to acquire (but not acquiring) control of a bank or a controlling person.
      1. The application shall be on a form prescribed by the commissioner and shall be made under oath. The application shall, except to the extent expressly waived by the commissioner, contain the following information:
        1. The identity, personal history, business background and experience, and financial condition of each person by whom or on whose behalf the acquisition is to be made, including a description of the managerial resources and future prospects of each acquiring party and a description of any material pending legal or administrative proceedings in which the person is a party;
        2. The terms and conditions of any proposed acquisition and the manner in which the acquisition is to be made;
        3. The identity, source, and amount of the funds or other consideration that has been or is to be borrowed or otherwise obtained for the purpose of making the acquisition, a description of the transaction, the names of the parties, and arrangements, agreements, or understanding with those persons;
        4. Any plans or proposals that any acquiring party making the acquisition may have to liquidate the bank, to sell its assets or merge it with any company, or to make any other major changes in its business or corporate structure or management;
        5. The terms and conditions of any offer, tender, invitation, agreement, or arrangement under which any voting security will be acquired and any contract affecting the security or its financing after it is acquired; and
        6. Other information that the commissioner by rule shall require to be furnished in an application, as well as any information that the commissioner orders to be included in the particular application filed.
      2. The applicant shall pay a filing fee as established by the commissioner when the application is filed.
      3. Information obtained by the commissioner under this section is confidential and is subject to the confidentiality requirements contained in § 45-2-1603.
    3. The commissioner shall deny an application for the proposed acquisition of control of a bank or a controlling person if the commissioner finds that:
      1. The effect of the proposed acquisition of control may be to substantially lessen competition or to tend to create a monopoly or that the proposed acquisition of control would in any manner be in restraint of trade, and that the anticompetitive effects of the proposed acquisition of control are not clearly outweighed in the public interest by the probable effect of the transaction in meeting the convenience and needs of the community to be served;
      2. The financial condition of any acquiring person might jeopardize the financial stability of the bank or controlling person being acquired, or prejudice the interests of the depositors, creditors, or shareholders of the bank or controlling person;
      3. Plans or proposals to liquidate the bank or controlling person, to sell the assets of the bank or the controlling person, or to make any other major change in the business, corporate structure or management of the bank or the controlling person;
      4. The competence, experience, or integrity of any acquiring person indicates that it would not be in the interests of the depositors, creditors, or shareholders of the bank or the controlling person or in the interest of the public to permit the person to control the bank or controlling person;
      5. The bank will not have adequate capital structure, or be in compliance with the laws of this state after the acquisition;
      6. The proposed acquisition is unfair, unjust, or inequitable to the bank or the controlling person or to the depositors, creditors, or shareholders of the bank or controlling person;
      7. The applicant neglects, fails or refuses to furnish to the commissioner all the information required by the commissioner; or
      8. The applicant is not acting in good faith.
    4. The commissioner may, in approving a proposal to acquire control of a bank or a controlling person pursuant to subdivision (a)(4), impose conditions that the commissioner deems reasonable or necessary or advisable in the interest of the public.
    5. The commissioner may, for good cause, amend, alter, suspend, or revoke any approval of a proposal to acquire control of a bank or a controlling person issued pursuant to subdivision (a)(4).
      1. Notwithstanding any other provision of this section, any application for approval to acquire control of a bank or a controlling person that is not denied or approved by the commissioner within a period of sixty (60) days after the application is filed with the commissioner, or if the applicant consents to an extension of the period within which the commissioner may act, within the extended period, shall be considered to be approved by the commissioner as of the first day after the period of sixty (60) days or the extended period as the case may be.
      2. For purposes of this section, an application for approval to acquire control of a bank or a controlling person is considered to be filed with the commissioner at the time when the complete application, including any amendments or supplements, containing all the information in the form required by the commissioner, is received by the commissioner.
    6. After denying an application for approval to acquire control of a bank or a controlling person, the commissioner, upon the filing of a written request for a hearing by any person prejudiced by the commissioner's decision, may conduct a hearing and upon the hearing shall affirm, modify, or reverse the decision. The hearing shall commence within a period of sixty (60) days after the written request for the hearing is filed with the commissioner or, if the person filing the written request for the hearing consents to an extension of the period within which the hearing is to commence, within the extended period.
    7. This section does not apply to:
      1. The acquisition of securities in connection with the exercise of a security interest or otherwise by way of foreclosure on default in the payment of a debt previously contracted for in good faith; provided, that the person acquiring the securities does not vote the securities so acquired without having given written notice of the foreclosure to the commissioner;
      2. Transactions requiring the prior approval of the board of governors of the federal reserve system under the Bank Holding Company Act of 1956,12 U.S.C. § 1841 et seq., and 26 U.S.C. § 1101 et seq.;
      3. Acquisitions or transfers by operation of law or by will or intestate succession; provided, that the person acquiring the securities does not vote the securities so acquired without having given written notice of acquisition to the commissioner;
      4. Transactions governed by §§ 45-2-1304, 45-2-1313 and 45-2-1505; or
      5. Any transaction that the commissioner by rule or order may exempt as not being contemplated by the purposes of this section or the regulation of which is not necessary or appropriate to achieve the objectives of this section.
    8. No provision of this section shall be construed to prevent the commissioner from investigating, commenting upon, or seeking to enjoin or set aside any transfer of voting securities, whether the transfer is included within this section or not, if the commissioner considers the transfer against the interest of the depositors, creditors, or shareholders of the bank or the controlling person or against the interest of the public.
  1. Whenever a loan or loans are made by a bank, which loan or loans are or are to be secured by twenty-five percent (25%) or more of the voting stock of another state bank, the president or other chief executive officer of the bank that makes the loan or loans shall report the facts to the commissioner within twenty-four (24) hours after obtaining knowledge of the loan or loans, except when the borrower has been the owner of record of the stock for a period of one (1) year or more, or the stock is of a newly organized bank prior to its opening.
  2. The reports required in subsections (a) and (b) shall contain whatever information is available to inform the commissioner of the effect of the transaction upon control of the bank whose stock is involved, and shall contain, when known by the person making the report, the number of shares involved, the identity of the sellers or transferors, and purchasers or transferees of record, the identity of the beneficial owners of the shares involved, the purchase price, the total number of shares owned by the sellers or transferors and purchasers or transferees of record, both immediately prior to and after the transaction being reported, and the total number of shares owned by the beneficial owners of the shares involved, both immediately prior to and after the transaction being reported, and the identity of the borrowers, the name of the bank issuing the stock securing the loan, the number of shares securing the loan and the amount of the loan or loans. The report shall be in addition to any report that may be required pursuant to other provisions of law.
  3. All state banks shall report to the commissioner within twenty-four (24) hours any changes in chief executive officers, including in their reports a statement of the past and current business and professional affiliations of any new chief executive officers.

Acts 1969, ch. 36, § 1 (3.321); 1973, ch. 294, § 6; T.C.A., § 45-232; Acts 1983, ch. 441, § 1.

Cross-References. Applicability to industrial banks, § 45-5-607.

“Bank” includes state-chartered savings and loan associations, § 45-3-108.

Confidentiality of public records, § 10-7-504.

Tennessee Reciprocal Savings Institution Act, title 45, ch. 3, part 14.

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Banks and Banking, §§ 2-5.

Law Reviews.

Selected Tennessee Legislation of 1983 (N. L. Resener, J. A. Whitson, K. J. Miller), 50 Tenn. L. Rev. 785 (1983).

45-2-104. Equality of taxation.

Except for taxes on property and the banking fees provided by law, no tax levied by this state, whether privilege, excise, franchise, sales or otherwise, shall be levied upon or be applicable to any bank chartered under the laws of this state, unless and until the same tax may be legally levied upon and be applicable to national banks in this state, in which case the tax shall be levied upon and be applicable to all the state and national banks.

Acts 1969, ch. 36, § 1 (3.701); T.C.A., § 45-233.

45-2-105. Exemption of nonprofit general welfare corporations.

The commissioner may exempt a trust company from any requirement of this chapter or chapter 1 of this title or the rules of the department that would threaten the viability of the corporation, including, but not limited to, capitalization requirements, fees, and procedures that are not essential to the protection of the interests of the trust beneficiaries, if the trust company is:

  1. Chartered as a nonprofit general welfare corporation under the laws of Tennessee for the purpose of providing fiduciary services to mentally or physically disabled persons;
  2. Exempt from federal taxation under 26 U.S.C. § 501(c)(3); and
  3. Approved by the commissioner of mental health and substance abuse services or the commissioner of intellectual and developmental disabilities as providing a necessary service that is not otherwise generally available for those persons.

Acts 1982, ch. 895, § 1; 2010, ch. 1100, § 71; 2012, ch. 575, § 2.

Compiler's Notes. Acts 2010, ch. 1100, § 153 provided that the commissioner of mental health and developmental disabilities, the commissioner of mental health, the commissioner of intellectual and developmental disabilities, and the commissioner of finance and administration are authorized to promulgate rules and regulations to effectuate the purposes of the act. All such rules and regulations shall be promulgated in accordance with the provisions of the Uniform Administrative Procedures Act, compiled in title 4, chapter 5.

Cross-References. Nonprofit corporations generally, title 48, chs. 51-68.

45-2-106. Provisions applicable to savings and loan associations and savings banks — Conflicting laws.

  1. The following provisions of this chapter are applicable to state and federal savings and loan associations and savings banks; provided, that in the event of a conflict between the provisions and the provisions of a law on the same subject relating specifically to state or federal savings and loan associations or savings banks, the provisions of the specific law shall be controlling:
    1. Section 45-2-703 relating to deposits in two (2) or more names;
    2. Section 45-2-704 relating to deposits in trust;
    3. Section 45-2-706 relating to adverse claims to deposits;
    4. Section 45-2-707 relating to powers of attorney;
    5. Section 45-2-806 relating to the deposit of public funds and security requirements;
    6. Part 9 of this chapter relating to safe deposit and safekeeping; and
    7. Part 10 of this chapter relating to fiduciary powers.
  2. The following provisions of this chapter are applicable to state and federal savings and loan associations, savings banks, and credit unions; provided, that in the event of a conflict between the provisions and the provisions of a law on the same subject relating specifically to state or federal savings and loan associations, savings banks or credit unions, the provisions of the specific law shall be controlling:
    1. Section 45-2-708, relating to payment from accounts or contents of safe deposit boxes when no executor or administrator has qualified and given notice of the executor or administrator's qualifications; and
    2. Section 45-2-710, relating to the accrual of a civil action to enforce a claim on accounts.

Acts 1985, ch. 168, § 2; 1992, ch. 834, § 1; 2005, ch. 30, § 3.

45-2-107. Acquisition, formation or control of banks and savings institutions.

    1. As used in this subsection (a), unless the context otherwise requires:
      1. “Bank” means any company that accepts deposits in Tennessee that are eligible for insurance under  the Federal Deposit Insurance Act, 12 U.S.C. § 1811 et seq.;
      2. “Bank holding company” means any company that is a bank holding company under  the Bank Holding Company Act of 1956, 12 U.S.C. § 1841 et seq.;
      3. “Banking institution” means any institution organized under this title, or under title 12, chapter 2 of the United States Code;
      4. “Company” has the meaning set forth in subsection 2(b) of the Bank Holding Company Act of 1956, 12 U.S.C. § 1841(b); and
      5. “Control” has the meaning as set forth in subdivisions 2(a)(2) and (3) of the Bank Holding Company Act of 1956, codified in 12 U.S.C. § 1841(a) (2) and (3).
    2. No bank holding company or other banking institution shall acquire, form or control a bank, as defined herein, unless the bank:
      1. Accepts deposits in Tennessee that the depositor has a legal right to withdraw on demand; and
      2. Engages in the business of making commercial loans in Tennessee.
    3. No company that is not a bank holding company shall acquire, form or control a bank.
    4. If any person has engaged or proposes to engage in a transaction that is not permitted under this section, the commissioner shall apply, and any other interested person, which shall include, but not be limited to, any Tennessee bank or Tennessee bank holding company, may apply, for equitable relief, including, but not limited to, a permanent or temporary injunction or restraining order, to the chancery court of Davidson County, or any other chancery court having jurisdiction or any court of the United States having jurisdiction.
    5. Nothing in this section shall prohibit the ownership or control of a bank by an entity that is not a bank holding company, if:
      1. The bank received a charter under this chapter, or its predecessor, prior to January 1, 1920; and
      2. The ownership or control of the bank by the entity that is not a bank holding company existed prior to July 1, 1983.
    1. As used in this subsection (b), as distinguished from subsection (a) relating to banks, unless the context otherwise requires:
      1. “Company” has the meaning set forth in subdivision (a)(1)(C) of the Savings and Loan Holding Company Amendments of 1967,  12 U.S.C. § 1730a et seq. [repealed];
      2. “Control” has the meaning set forth in subdivision (a)(2) of the Savings and Loan Holding Company Amendments of 1967, 12 U.S.C. § 1730a et seq. [repealed];
      3. “Savings and loan holding company” means any company that is a savings and loan holding company under  the Savings and Loan Holding Company Amendments of 1967, 12 U.S.C. § 1730a et seq. [repealed]; and
        1. “Savings institutions” means any institution organized under chapter 3 of this title, or under title 12, chapter 12 of the United States Code; and
        2. “Savings institutions” means a savings and loan association or a savings bank, state or federal, eligible for insurance under  the Federal Savings and Loan Insurance Act, 12 U.S.C. § 1724 et seq. [repealed].
    2. No savings and loan holding company or other savings institution shall acquire, form, or control a savings institution, as defined herein, unless the savings institution:
      1. Accepts deposits in Tennessee that the depositor has a legal right to withdraw on demand; and
      2. Engages in the business of making commercial loans in Tennessee.
    3. No company that is not a savings and loan holding company shall acquire, form, or control a savings institution.
    4. If any person has or proposes to engage in a transaction that is not permitted under this section, the commissioner shall apply, and any other interested person, which shall include, but not be limited to, Tennessee savings institutions or Tennessee savings and loan holding companies, may apply, for equitable relief, including, but not limited to, a permanent or temporary injunction or restraining order, to the chancery court of Davidson County or any other chancery court having jurisdiction, or any court of the United States having jurisdiction.

Acts 1985, ch. 262, §§ 1, 2.

Compiler's Notes. Chapters 2 and 12 of Title 12 of the United States Code, referred to in this section, are codified as 12 U.S.C. §§ 21-213 and 1461-1470.

Cited: KW Bancshares, Inc. v. Syndicates of Underwriters at Lloyd's, 965 F. Supp. 1047, 1997 U.S. Dist. LEXIS 11064 (W.D. Tenn 1997).

Part 2
Organization of Banks

45-2-201. Incorporators — Applicant requirements.

  1. A corporation seeking to conduct a banking business in Tennessee may be organized by five (5) or more incorporators, a majority of whom shall be residents of the state of Tennessee. The incorporators shall complete the process provided in this part and as outlined in subsection (c).
  2. Each incorporator shall subscribe and pay in full, in cash, for common stock in a minimum amount as determined by the commissioner.
  3. In order to provide for the organization of the business authorized to conduct banking business in Tennessee, applicants shall complete the following:
    1. Submit a notice of intention and request for issuance of a charter for a corporation seeking to conduct banking business in Tennessee to be filed with the secretary of state as provided in § 45-2-202;
    2. Submit and complete an application for charter, as provided in § 45-2-204; and
    3. Submit and complete an application for certificate of authority, as provided in § 45-2-212.
  4. For purposes of this part, a bank may be organized as a corporation as provided in title 48, chapters 11-27 or as a limited liability company as provided in title 48, chapters 201-249 and as outlined in § 45-2-220.

Acts 1969, ch. 36, § 1 (3.304); T.C.A., § 45-201; Acts 1996, ch. 768, § 5; 2006, ch. 660, § 1.

Compiler's Notes. Acts 1996, ch. 768, which amended this section, is known and may be cited as the Bank Reform Act of 1996.

Acts 2006, ch. 660, § 6 provided that the act shall not apply to any notice of intention filed on or after May 12, 2006.

Cross-References. Conversion of financial institutions, title 45, ch. 11.

45-2-202. Notice of intention — Request for issuance of charter — Approval or nonapproval of notice of intention or request for issuance of charter and accompanying documents — Notice — Filing — Restriction on acceptance of shares of capital stock until notice of approval received.

  1. The incorporators shall file with the commissioner a notice of their intention to organize a corporation seeking authority to become a state bank, signed by each of the incorporators. The notice shall state the following and other information that the commissioner may require:
    1. The name, residence and occupation of each incorporator, and the amount of stock subscribed and paid for by each;
    2. The name and address of an individual within the state to whom notice to all incorporators may be sent;
    3. The total capital, the number of shares of each class and series, the par value of the shares of each class and series of the corporation and a copy of the stockholder offering circular and subscription agreement. For purposes of Tennessee law, any securities with different voting, distribution, or liquidation rights or preferences shall be deemed to be securities of different classes;
    4. Whether it is intended that the proposed state bank shall have trust powers;
    5. The community in which the proposed state bank is to be headquartered;
    6. The proposed name of the institution, which, in the commissioner's judgment, is not likely to cause confusion to the affected public. The incorporators shall use the phrase “in organization” after the proposed bank's name, until such time as the certificate of authority has been issued;
    7. A statement of the method of financing and amount of organizational expense fund as required in § 45-2-203;
    8. A copy of the escrow agreement; and
    9. The filing fee required by the secretary of state.
  2. The incorporators may also file with the commissioner a request for issuance of charter for a corporation seeking to conduct banking business in Tennessee, accompanied by an executed charter. The executed charter filed with the commissioner shall be in the form the commissioner prescribes, containing the following information:
    1. The name of the state bank;
    2. If the state bank is to exercise trust powers, a statement to that effect;
    3. The community in which the main office is to be located;
    4. The amount of capital, the number of shares of each class and series, the relative preferences, powers and rights of each class and series, the par value of the shares of each class and series, if any, and the amount of the paid-in surplus; and
    5. Any other proper provisions to govern the business and affairs of the state bank that may be desired by the incorporators, including, but not limited to, the initial directors of the proposed state bank.
    1. If the notice of intention, request for issuance of charter or any accompanying documents do not comply with the requirements of this section, the commissioner shall, within ten (10) business days after receipt, either:
      1. Notify the incorporators that the notice of intention, request for issuance of charter and accompanying documents are approved as to form pending the receipt of any additional information requested of the applicant in the notice; or
      2. Notify the incorporators that the notice of intention, request for issuance of charter and accompanying documents, have not been accepted, calling attention to the defect or defects in the documents. The incorporators may resubmit the notice of intention, proposed charter or accompanying documents, revised as necessary, to address the defect or defects noted by the commissioner.
    2. The commissioner shall have five (5) business days after receipt of the revised notice of intention, request for issuance of charter and accompanying documents to review the notice, request and documents and either:
      1. Notify the incorporators that the revised notice of intention, request for issuance of charter and accompanying documents are approved as to form; or
      2. Notify the incorporators that the notice of intention, request for issuance of charter and accompanying documents have not been accepted, calling attention to the defect or defects still in the documents.
    3. If the revised notice of intention, request for issuance of charter and accompanying documents are not accepted, any subsequent filing by the incorporators for the proposed bank shall be as if it were an initial filing.
    4. If the commissioner does not refuse to accept the notice of intention and request for issuance of charter or revised notice of intention and revised request for issuance of charter within the time provided, they shall be deemed to be approved as to form.
  3. After the notice of intention and request for issuance of charter for a corporation seeking to conduct banking business in Tennessee is accepted for filing or deemed to have been filed with the commissioner, the commissioner shall authorize the filing of the executed charter by endorsing approval on all copies thereof and filing the originally executed charter with the secretary of state, retaining one (1) copy for the department's files and returning one (1) copy to the incorporators within ten (10) business days thereafter, so that the incorporators may take any further steps necessary to duly incorporate the proposed new state bank as a corporate entity. However, the commissioner shall retain the right to require any amendment to the charter or disallow any proposed officer or director of the proposed new bank prior to granting a certificate of authority. Nothing in this subsection (d) shall prevent the commissioner from otherwise rejecting the application or refusing to grant a certificate of authority.
  4. It is a Class C misdemeanor, under this chapter and chapter 1 of this title, to accept any stock subscription for shares of capital stock of the proposed bank from any persons other than the incorporators until the incorporators have received the notification from the commissioner that the notice of intention and accompanying documents are approved as to form, or in violation of any order of the commissioner. Any subscription for capital stock of the proposed bank accepted in violation of this subsection (e) shall be enforceable by the commissioner and only to the extent the commissioner determines it to be necessary to protect investors.

Acts 1969, ch. 36, § 1 (3.305); 1973, ch. 294, § 6; T.C.A., § 45-202; Acts 1989, ch. 591, § 113; 1996, ch. 768, §§ 6, 7; 2001, ch. 54, § 5; 2006, ch. 660, § 1.

Compiler's Notes. Acts 1996, ch. 768, which amended this section, is known and may be cited as the Bank Reform Act of 1996.

Acts 2006, ch. 660, § 6 provided that the act shall not apply to any notice of intention filed on or after May 12, 2006.

Cross-References. Penalty for Class C misdemeanor, § 40-35-111.

Violations of banking laws, title 45, ch. 2, part 17.

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Banks and Banking, § 5.

45-2-203. Organizational expenses.

  1. Organizational expenses shall not be paid from capital or surplus funds of the bank without the prior written consent of the commissioner.
    1. Prior to filing the notice of intent, the incorporators shall subscribe for shares of the corporation seeking to conduct banking business in Tennessee in an amount the commissioner deems adequate to pay the organizational expenses of the proposed bank.
    2. The expense fund shall be used for expenses incurred by the incorporators in connection with the organization of the proposed bank. Subscriptions paid by the incorporators for their shares in the proposed bank may be used to pay organizational expenses, but, in that case, shall not be commingled with funds in any account in which any non-incorporator funds have been or are to be deposited.
  2. Payment from the expense fund for payment of broker commissions to secure subscriptions to stock shall not be permitted without prior written consent of the commissioner.

Acts 1969, ch. 36, § 1 (3.306); 1973, ch. 294, § 6; 1977, ch. 35, § 1; T.C.A., § 45-203; Acts 2006, ch. 660, § 1.

Compiler's Notes. Acts 2006, ch. 660, § 6 provided that the act shall not apply to any notice of intention filed on or after May 12, 2006.

Cross-References. Applicability to industrial banks, § 45-5-607.

45-2-204. Application for charter — Acceptance, nonacceptance and filing of application — Notice to other banks — Formation of interim bank.

  1. After the incorporators have received notification from the commissioner that the notice of intention and other accompanying documents are approved as to form, the incorporators or, after the charter has been filed, the corporation seeking authority to conduct banking business in Tennessee, may file an application and request for charter, if not previously requested, with the commissioner. The incorporators shall submit the following, if not previously filed with the commissioner:
    1. The information required by the commissioner in § 45-2-202(b);
    2. The application fee required by the commissioner;
    3. Proposed bylaws in the form the commissioner prescribes; and
    4. An application in the form and containing the information the commissioner requires, including the following:
      1. The name, residence and occupation of each subscriber from whom subscriptions have been accepted as of the date the application is filed, and the number of shares for which each subscriber has subscribed, which list shall be updated not less than every thirty (30) business days to add all additional subscribers and any amendments to any information previously filed;
      2. The past and present connection with any bank, other than as a customer on terms generally available to the public, of each director and each subscriber to more than ten percent (10%) of the capital stock, updated as necessary to identify subscribers not previously identified in the application; and
      3. The address at which it is proposed that the state bank do business, or, if the address is not known, the area within the community in which it is proposed that the business be located.
    1. If the application, the proposed charter or any other accompanying documents do not comply with the requirements of this chapter and chapter 1 of this title, the commissioner shall, within twenty (20) business days after the receipt thereof, either:
      1. Return them to the incorporators, calling attention to the defect or defects therein; or
      2. Notify the incorporators of the rejection of the application, calling attention to the defect or defects therein.
    2. If the application, proposed charter and accompanying documents, if any, are not so returned or rejected by the commissioner within twenty (20) business days of the receipt thereof, they shall be deemed to have been filed with the commissioner.
  2. Should the application be rejected or should a certificate of authority not be granted, the commissioner shall give appropriate notice to the secretary of state. The incorporators shall either:
    1. Return the original charter to the commissioner and take the steps that are necessary to dissolve the proposed state bank as a corporate entity as provided in the Tennessee Business Corporation Act, compiled in title 48, chapters 11-27; provided, that all subscription proceeds, except those proceeds made by incorporators to establish an organizational expense fund as provided in § 45-2-203, shall be returned to all subscribers in accordance with the subscription agreement; or
    2. Amend the original charter to rename the corporate entity and revise any other provisions as determined by the commissioner as provided in the Tennessee Business Corporation Act, compiled in title 48, chapters 11-27.
  3. The commissioner may also require publication of the notice.
  4. Notwithstanding the provisions in this chapter and chapter 1 of this title to the contrary, the commissioner may prescribe by rule or regulation the application procedure for the formation of an interim bank to facilitate an interim bank merger, as defined in § 45-2-1402.

Acts 1969, ch. 36, § 1 (3.307); 1973, ch. 294, § 6; 1977, ch. 36, § 1; T.C.A., § 45-204; Acts 1983, ch. 74, § 4; 1996, ch. 768, § 8; 2006, ch. 660, § 1.

Compiler's Notes. Acts 1996, ch. 768, which amended this section, is known and may be cited as the Bank Reform Act of 1996.

Acts 2006, ch. 660, § 6 provided that the act shall not apply to any notice of intention filed on or after May 12, 2006.

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Banks and Banking, §§ 4, 5.

Law Reviews.

State Regulation of Bank Holding Companies and the Future of Interstate Banking: A Tennessee Perspective (Colman B. Hoffman and Kathryn R. Edge), 51 Tenn. L. Rev. 383 (1984).

45-2-205. Determination of application for charter — Factors considered.

  1. When an application for a charter has been filed with the commissioner, the commissioner shall make or cause to be made a careful investigation and examination relative to the following:
    1. The character, reputation and financial standing of the organizers or incorporators and their motives in seeking to organize the proposed state bank;
    2. The character, financial responsibility, banking or trust experience, and business qualifications of those proposed as officers of the bank;
    3. The character, financial responsibility, business experiences and standing in the community of the proposed directors of the bank;
    4. The need in the community where the bank would be located for banking, banking and trust, or trust facilities, or additional facilities of like character, giving particular consideration to the adequacy of existing banking and trust facilities;
    5. The ability of the community to support the proposed bank, giving consideration to:
      1. The competition offered by existing banks and other financial institutions;
      2. The banking history of the community;
      3. The opportunities for profitable employment of bank funds as indicated by the average demand for credit, the number of potential depositors, the volume of bank transactions, and the business and industries of the community, with particular regard to their stability, diversification and size; and
      4. If the bank is to exercise trust powers, the opportunities for profitable employment of fiduciary services; and
    6. Other facts and circumstances bearing on the proposed bank and its relation to the community that, in the opinion of the commissioner, may be relevant.
  2. Within the longer of six (6) months after the filing of the application or three (3) months after the filing of a listing of subscribers showing that at least seventy-five percent (75%) of the stock has been subscribed, the commissioner shall consider the commissioner's findings and recommendations and all other relevant information available to the commissioner and shall have the discretion to approve the application, but the commissioner shall not approve the application before ascertaining to the commissioner's satisfaction that:
    1. The public need and advantage will be promoted by the establishment of the proposed bank;
    2. Conditions in the community in which the bank would transact business afford reasonable promise of successful operation;
    3. The bank is being formed for no other purpose than the legitimate objects contemplated by this chapter and chapter 1 of this title;
    4. The proposed capital and surplus are not less than the required minimum and are adequate in the light of current and prospective banking conditions;
    5. Those proposed as officers and directors have sufficient experience, ability and standing to afford reasonable promise of successful operation; and
    6. The applicants have complied with all applicable provisions of this chapter and chapter 1 of this title.
  3. If the charter has not been previously granted in accordance with § 45-2-204(c), upon approval of the application, the commissioner shall grant a charter by endorsing the approval on all copies of the charter and filing one (1) copy with the secretary of state, one (1) copy with the register in the county in which the bank is located, retaining one (1) copy for the department's files and returning one (1) copy to the incorporators within twenty (20) days of the action approving the application.

Acts 1969, ch. 36, § 1 (3.308); 1973, ch. 294, § 6; T.C.A., § 45-205; Acts 1980, ch. 620, § 2; 1996, ch. 768, § 9; 2001, ch. 54, § 6.

Compiler's Notes. Section 5 of Acts 1980, ch. 620 reads:

“The existence and operation of any trust company formed prior to the effective date of this act shall not be impaired by the enactment of this act.”

Acts 1996, ch. 768, which amended this section, is known and may be cited as the Bank Reform Act of 1996.

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Banks and Banking, § 5.

Law Reviews.

State Regulation of Bank Holding Companies and the Future of Interstate Banking: A Tennessee Perspective (Colman B. Hoffman and Kathryn R. Edge), 51 Tenn. L. Rev. 383 (1984).

Decisions Under Prior Law

1. Basis of Decision.

Method by that superintendent of banks acquires facts upon that to base decision rests in his discretion so long as it is based upon some material fact or facts and is not arbitrary or illegal. Peoples Bank of Van Leer v. Bryan, 55 Tenn. App. 166, 397 S.W.2d 401, 1965 Tenn. App. LEXIS 290 (Tenn. Ct. App. 1965).

45-2-206. Subscription calls.

After the charter for a corporation seeking to conduct banking business in Tennessee has been filed with the secretary of state, the incorporators or, if directors have been initially appointed, the directors of the proposed state bank, may call for the payment of the subscriptions. The subscriptions shall be placed into an escrow account. The incorporators or directors, as appropriate, may not remove any funds from the escrow account prior to the issuance of the certificate of authority or upon written approval from the commissioner.

Acts 1969, ch. 36, § 1 (3.309); T.C.A., § 45-206; Acts 1996, ch. 768, § 10; 2001, ch. 54, § 7; 2006, ch. 660, § 2.

Compiler's Notes. Acts 1996, ch. 768, which amended this section, is known and may be cited as the Bank Reform Act of 1996.

Acts 2006, ch. 660, § 6 provided that the act shall not apply to any notice of intention filed on or after May 12, 2006.

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Banks and Banking, § 5.

45-2-207. Capital structure.

  1. A state bank shall have the capital structure that the commissioner deems adequate. The capital structure of an interim bank chartered pursuant to § 45-2-204(d) shall consist of amounts as determined by the commissioner and prescribed by rule or regulation.
  2. The commissioner may require the bank to increase its capital structure to the point deemed adequate by the commissioner before granting approval of an application for a branch office, amendment to charter, change of location or trust powers.
  3. The issuance of preferred or convertible preferred stock shall be authorized by the commissioner. The stock shall have the preferences, powers and rights the commissioner may approve. It shall not be retired without the approval of the commissioner, and the requirement of the approval shall be stated in the stock certificates, but the commissioner may give advance approval to sinking funds payable exclusively out of earnings available for dividends.
  4. The commissioner may direct a state bank to sell additional stock in a designated amount to remedy an impairment of capital.
  5. The commissioner may consider the value of outstanding debentures as capital for the purpose of determining the legal lending limits of the bank.

Acts 1969, ch. 36, § 1 (3.301); 1973, ch. 294, § 6; T.C.A., § 45-207; Acts 1983, ch. 74, § 5; 1993, ch. 447, § 2; 2001, ch. 54, §§ 8, 9.

Compiler's Notes. The section as set out above reflects the version prior to the amendment of this section by Acts 1996, ch. 447, § 2. Section (13) of that act provided that that amendment expired July 1, 1996, and that the prior version was reinstated.

Cross-References. Applicability to industrial banks, § 45-5-607.

Law Reviews.

Section I: Symposium - Rethinking The U.S. Regulatory Structure Governing Financial Institutions: 21st Century Solutions For a 21st Century Marketplace: When the Government Becomes a Stockholder: Impact of the Capital Purchase Program on Bank Regulation (Jackie Prester), 39 U. Mem. L. Rev. 931 (2009).

Selected Tennessee Legislation of 1983 (N. L. Resener, J. A. Whitson, K. J. Miller), 50 Tenn. L. Rev. 785 (1983).

45-2-208. Capital notes and debentures.

  1. Any bank, after obtaining the prior approval of the shareholders owning two thirds (2/3) of the stock of the bank entitled to vote and after obtaining the prior approval of the commissioner, may issue and sell its convertible or nonconvertible capital notes or debentures. Capital notes or debentures that are by their terms convertible into stock may be converted into shares of common or preferred stock in accordance with the provisions therefor as may be made in the capital notes or debentures with the approval of the commissioner.
  2. Capital notes and debentures issued by banks shall be unsecured indebtedness of the bank and shall be subordinate to the claims of all depositors and of all other creditors of the bank, regardless of whether the claims of the depositors arose before or after the issuance of the capital notes or debentures. In order to secure the payment of the capital notes or debentures, however, provisions for sinking funds may be made. In the event of liquidation, all depositors and all other creditors of the bank shall be entitled to be paid in full before payment shall be made on account of principal or interest on the capital notes or debentures. No payment shall be made at any time on account of the principal thereof unless following the payment the aggregate of the capital, surplus and undivided profits and capital notes or debentures thereafter outstanding shall be at least equal to the aggregate immediately before the original issuance of the capital notes or debentures, or as may otherwise be expressly authorized by the commissioner. The claims of holders of capital notes or debentures shall, however, be superior to the claims of stockholders for dividends or other claims on account of shares of capital stock held by them.
  3. The amount of outstanding capital notes and debentures issued and outstanding by any bank shall be, subject to the approval of the commissioner, treated as capital for the purpose of computing the loan limits prescribed by § 45-2-1102(a) and for the purpose of computing investment limits prescribed by § 45-2-607(a)(9).

Acts 1969, ch. 36, § 1 (3.302); 1973, ch. 294, § 6; T.C.A., § 45-208.

Cross-References. Applicability to industrial banks, § 45-5-607.

NOTES TO DECISIONS

1. Debentures.

Debentures are both unsecured and subordinated in payment to the claims of depositors and other creditors, and thus debenture holders are not entitled to pro rata distribution of the remaining assets in a sinking fund. First American Nat'l Bank-Eastern v. Federal Deposit Ins. Corp., 782 F.2d 633, 1986 U.S. App. LEXIS 21910 (6th Cir. Tenn. 1986).

45-2-209, 45-2-210. [Repealed.]

Compiler's Notes. Former §§ 45-2-209 and 45-2-210 (Acts 1969, ch. 36, § 1 (3.303) and (3.310); 1973, ch. 294, § 6; T.C.A., §§ 45-209, 45-210), concerning authorized but unissued stock, first meetings of stockholders and directors, and adoption of bylaws, were repealed by Acts 1994, ch. 551, §§ 5, 6.

45-2-211. Indemnification of officers, directors or employees.

A state bank may provide for indemnification of its officers, directors or employees as provided in the Tennessee Business Corporation Act, compiled in title 48, chs. 11-27.

Acts 1969, ch. 36, § 1 (3.311); T.C.A., § 45-211; Acts 1980, ch. 549, § 1; 1994, ch. 551, § 7.

Law Reviews.

National Banks — National Banks Need Not Comply With State Banking Laws When Seeking To Relocate Principal Office And Retain The Former As A Branch, 24 Vand. L. Rev. 175.

45-2-212. Application for certificate of authority — Contents.

After the applicant has received notification from the commissioner that the application for charter has been approved and subscription proceeds have been accepted and collected for at least the minimum capital of the proposed state bank as required by the commissioner, the proposed state bank shall file a request with the commissioner for the issuance of a certificate of authority, which request shall contain:

  1. A statement that the capital and surplus have been paid in;
  2. The name and address of each stockholder and the number of shares held by the stockholders; and
  3. Any other information that the commissioner may require to enable the commissioner to determine whether authority to commence business should be issued.

Acts 1969, ch. 36, § 1 (3.312); 1973, ch. 294, § 6; T.C.A., § 45-212; Acts 1996, ch. 768, § 11; 2006, ch. 660, § 3.

Compiler's Notes. Acts 1996, ch. 768, which amended this section, is known and may be cited as the Bank Reform Act of 1996.

Acts 2006, ch. 660, § 6 provided that the act shall not apply to any notice of intention filed on or after May 12, 2006.

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Banks and Banking, § 5.

45-2-213. Return of noncomplying applications — Effect of failure to return.

  1. If the application for a certificate of authority or any accompanying documents do not comply with the requirements of this chapter and chapter 1 of this title, the commissioner shall, within ten (10) business days after the receipt thereof, return them to the incorporators, calling attention to the defect or defects in the application.
  2. If the application and accompanying documents are not so returned within the ten-day period, they shall be deemed to have been filed with the commissioner.

Acts 1969, ch. 36, § 1 (3.312); 1973, ch. 294, § 6; T.C.A., § 45-213; Acts 1996, ch. 768, § 12; 2007, ch. 29, § 1.

Compiler's Notes. Acts 1996, ch. 768, which amended this section, is known and may be cited as the Bank Reform Act of 1996.

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Banks and Banking, § 5.

45-2-214. Time for approval or denial of application — Conditions for approval.

The commissioner shall approve or deny the application for a certificate of authority within thirty (30) days after the application has been filed. The commissioner shall approve the application if:

  1. The capital and surplus have been fully paid in cash;
  2. Appropriate bylaws have been adopted;
  3. Any conditions imposed by the commissioner in granting the charter have been fulfilled;
  4. The requirements of this chapter and chapter 1 of this title have been satisfied; and
  5. An amount of fidelity bond coverages satisfactory to the commissioner is in force.

Acts 1969, ch. 36, § 1 (3.312); 1973, ch. 294, § 6; T.C.A., § 45-214; Acts 1996, ch. 768, § 13.

Compiler's Notes. Acts 1996, ch. 768, which amended this section, is known and may be cited as the Bank Reform Act of 1996.

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Banks and Banking, § 5.

45-2-215. Approval or denial of application — Action by commissioner — Limitation of bank or trust company to fiduciary purposes and powers.

  1. If the commissioner approves the application, the commissioner shall promptly issue a certificate of authority and mail the same to the incorporators. If the commissioner denies the application, the commissioner shall promptly mail a notice of the denial to the incorporators, stating therein the reason or reasons for denying the application.
  2. A state bank or trust company, for which the commissioner has approved the filing of a charter and has issued a certificate of authority, is not illegally organized because its purposes and powers are, or have been required by the commissioner to be, limited to fiduciary purposes and powers.

Acts 1969, ch. 36, § 1 (3.312); 1973, ch. 294, § 6; T.C.A., § 45-215; Acts 1980, ch. 620, § 1; 1996, ch. 768, § 14.

Compiler's Notes. Section 5 of Acts 1980, ch. 620 read:

“The existence and operation of any trust company formed prior to the effective date of this act shall not be impaired by the enactment of this act.”

Acts 1996, ch. 768, which amended this section, is known and may be cited as the Bank Reform Act of 1996.

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Banks and Banking, § 5.

Decisions Under Prior Law

1. Purpose.

The provision of the former statute for approval of the bond required to be executed for protection of the deposit of state funds, and the provision for issuance of a permit to the trust company to do a general banking business, were designed for the protection of the depositors, and could not be converted into a shield to protect the trust company from liability. State v. Holston Trust Co., 168 Tenn. 546, 79 S.W.2d 1012, 1934 Tenn. LEXIS 85 (1934).

2. Operation Without Certificate.

The abuse of corporate power by a trust company by failing to obtain a permit from the (former) state superintendent of banking to do a general banking business, prior to receiving a deposit from the state, did not render the transaction ultra vires, in view of § 45-2-1707 where its charter conferred upon it the power. State v. Holston Trust Co., 168 Tenn. 546, 79 S.W.2d 1012, 1934 Tenn. LEXIS 85 (1934).

Even if a transaction whereby the state deposited a sum of money with a trust company was ultra vires, because the trust company had not received a permit from the state superintendent of banking to do a general banking business, the defense was not available to the trust company so long as it retained the benefits received by the transaction. State v. Holston Trust Co., 168 Tenn. 546, 79 S.W.2d 1012, 1934 Tenn. LEXIS 85 (1934).

Where state officials were dealing with a trust company in a transaction relating to deposit of state funds, and it appeared from the trust company's charter that it had full power to do a general banking business, including reception of deposits, the state was not chargeable with notice that the trust company had failed to obtain from the (former) superintendent of banking a permit to do a general banking business, as affecting the right of recovery. State v. Holston Trust Co., 168 Tenn. 546, 79 S.W.2d 1012, 1934 Tenn. LEXIS 85 (1934).

45-2-216. Forfeiture of charter for failure to obtain certificate of authority or to commence business — Restitution of improper expenditures.

If no application for a certificate of authority is filed within six (6) months following the grant of a charter or any additional period allowed by the commissioner, or if a certificate of authority has been finally denied, or if the bank fails to commence business within six (6) months after the issuance of a certificate of authority or any additional period allowed by the commissioner, the charter shall be forfeited, and the bank shall be liquidated in accordance with the orders of the commissioner. If an improper expenditure has been made, the commissioner may order the persons who were incorporators or directors at the time to restore the sum by equal contributions.

Acts 1969, ch. 36, § 1 (3.312); 1973, ch. 294, § 6; T.C.A., § 45-216.

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Banks and Banking, § 7.

45-2-217. Operation before receiving certificate of authority prohibited.

It is a criminal offense against this chapter and chapter 1 of this title for a state bank to perform any act other than to perfect its organization, obtain and equip a place of business and otherwise prepare to do business before receiving a certificate of authority to operate.

Acts 1969, ch. 36, § 1 (3.312); T.C.A., § 45-217.

Code Commission Notes.

Pursuant to § 39-11-111, when the performance or nonperformance of any act is made criminal by statute, and no penalty, punishment or forfeiture for the violation of that statute is imposed, the doing of the act is a misdemeanor. The criminal offense in this section has been designated as a Class A misdemeanor by authority of § 40-35-110, which provides that an offense designated a misdemeanor without specification as to category is a Class A misdemeanor. See also § 39-11-114.

Cross-References. Violation of banking laws, title 45, ch. 2, part 17.

45-2-218. Charter amendment.

  1. A state bank shall apply to the commissioner to amend its charter or to change its location or the location of any of its branches. The change of location shall be consistent with § 45-2-614.
  2. An application for an amendment of the charter shall be authorized by the vote of at least a majority of the outstanding voting stock at a meeting of stockholders except as provided by § 48-20-102(1)-(7).
  3. Notice of the application shall be sent to the persons and organizations that the commissioner may require.
  4. In making a determination, the commissioner shall consider whether the public convenience and advantage would be served by granting the application and shall be guided by the standards prescribed for the approval of an application for a charter, insofar as they are reasonably applicable.
  5. Any amendment to the charter of an incorporated bank increasing or decreasing its capital stock or otherwise must be recorded in accordance with § 45-2-205(c).
  6. Any other provision of the law to the contrary notwithstanding, any bank that was exercising fiduciary powers on April 2, 1969, may continue to exercise the powers without changing any provisions of its charter.

Acts 1969, ch. 36, § 1 (3.313); 1971, ch. 343, § 1; 1971, ch. 433, § 1; 1973, ch. 294, § 6; T.C.A., § 45-218; Acts 1994, ch. 551, § 8; 2001, ch. 54, § 10.

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Banks and Banking, § 6.

45-2-219. Charter null and void on ceasing business — Definition.

Any charter issued under  this chapter shall be null and void if an institution that is chartered and commences business ceases to conduct business and no business is conducted for a period of two (2) years. For the purposes of this section, “business” means:

  1. Receiving deposits, paying out money on checks and making loans; or
  2. Acting as a fiduciary for the purposes of a trust company.

Acts 1999, ch. 112, § 5.

45-2-220. Organization as a limited liability company — Rules and regulations — Applicability of limited liability company laws.

  1. Subject to the requirements and restrictions of this chapter, including, but not limited to, deposit insurance requirements where applicable, a bank or trust company may organize as a limited liability company pursuant to title 48, chapters 201-249.
  2. The department shall have the authority to promulgate rules and regulations specifying the conditions under which a bank or trust company may organize as a limited liability company.
  3. To the extent title 48, chapters 201-249 is consistent with and not in conflict with this chapter and the rules and regulations of the department, title 48, chapters 201-249 shall apply to a bank or trust company that has organized as a limited liability company.

Acts 2006, ch. 660, § 4.

Compiler's Notes. Acts 2006, ch. 660, § 6 provided that the act shall not apply to any notice of intention filed on or after May 12, 2006.

Part 3
Stockholders

45-2-301. [Repealed.]

Compiler's Notes. Former § 45-2-301 (Acts 1969, ch. 36, § 1 (3.314); 1973, ch. 294, § 6; T.C.A., § 45-219), concerning stockholders' meetings, was repealed by Acts 1994, ch. 551, § 9.

45-2-302. Voting of shares.

The bank may not vote shares that it holds in any capacity other than as fiduciary.

Acts 1969, ch. 36, § 1 (3.314); T.C.A., § 45-220; Acts 1994, ch. 551, § 9.

45-2-303. Items allowed in the charter of a bank — Required language if bank amends its charter — Shareholder consent to release of information — No fee for approving charter amendment — Right of shareholder to be informed in writing of number of shares counted — Shareholder right to declaratory judgment regarding dispute about votes.

  1. In addition to any provisions permitted or required by this chapter and the Tennessee Business Corporation Act, compiled in title 48, chapters 11-27, the charter of a bank may include all, but not less than all, of the following:
    1. The bank shall not disclose the name, address or number of shares of a bank shareholder, except as required or permitted by the Financial Records Privacy Act, compiled in chapter 10 of this title, and such information shall be deemed to be a financial record within the meaning of that act;
    2. No person shall solicit a proxy or written consent from any shareholder to vote shares of the bank, unless the information specified by the bank's bylaws is delivered to the bank and to the shareholders as a group no later than the date specified in the bank's bylaws. In adopting an informational requirement, a bank shall provide the information to all shareholders or specify a reasonable and timely method for a shareholder to communicate with other shareholders about bank business;
    3. If the bylaws state that the bank will communicate the information to the other shareholders on the shareholder's behalf, the bank may charge a reasonable fee to cover the cost of distribution, which shall be provided for in the bylaws; and
    4. The bank shall notify the requesting shareholder that it has provided the requested information to the other shareholders. The bank shall notify the requesting shareholder within seven (7) days after receiving the request and the information to be provided to the shareholders. The bylaws shall describe the means by which the bank will notify the requesting shareholders.
  2. If a bank amends its charter in accordance with subsection (a), the charter shall include the following language, in all capital letters and in at least twelve (12) point bold type:

    THE RECORD OF SHAREHOLDERS OF THIS BANK IS NOT SUBJECT TO INSPECTION AND COPYING IN ACCORDANCE WITH TENN. CODE ANN. § 48-26-102. IT IS A FINANCIAL RECORD AND MAY BE OBTAINED ONLY IN ACCORDANCE WITH THE FINANCIAL RECORDS PRIVACY ACT, COMPILED IN TENN. CODE ANN. §§ 45-10-101 ET SEQ.

  3. If a shareholder of a bank, which amends its charter in accordance with subsection (a), notifies the bank in writing that the shareholder consents to the release of information in the shareholder record relating to such shareholder, the bank shall timely provide such information to any shareholder requesting the information.
  4. If a bank adopts a charter amendment pursuant to subsection (a), the commissioner shall not charge a fee for approving the amendment.
  5. Any shareholder, if the bank's charter or bylaws expressly authorize shareholder actions by written consent, shall have the right to be informed in writing by the bank of the number of shares counted:
    1. Toward a quorum for a shareholders meeting;
    2. Regarding any nomination or proposal voted upon at a shareholders meeting; or
    3. Regarding an action taken by written consent.
  6. Any bank shareholder of record shall have the right to seek a declaratory judgment with respect to a bona fide dispute regarding votes described in subsection (e) in a court of record in the county in which the bank's main office or chief executive's office is located.
  7. For purposes of this section:
    1. “Bank” has the same meaning as provided in § 45-1-103, except that “bank” shall be deemed to include any controlling person;
    2. “Controlling person” has the same meaning as provided in § 45-2-103(a)(1); and
    3. “Person” has the same meaning as provided in § 45-2-103(a)(1).
  8. Nothing in this section shall in any way limit the authority held by the commissioner.

Acts 2013, ch. 119, § 1.

Compiler's Notes. Former § 45-2-303 (Acts 1969, ch. 36, § 1 (3.314); T.C.A., § 45-221), concerning proxies, was repealed by Acts 1994, ch. 551, § 9.

Cross-References. Confidentiality of public records, § 10-7-504.

45-2-304. Voting trusts — Approval of commissioner.

  1. No shares deposited under a voting trust agreement shall be voted by the trustees unless the agreement has been approved by the commissioner.
  2. Approval shall be withheld, or if previously granted, revoked whenever it appears that the existence of the trust would tend to reduce competition among lending institutions or to affect adversely the character or competence of the management or the bank's policies or operation procedures.

Acts 1969, ch. 36, § 1 (3.314); 1973, ch. 294, § 6; T.C.A., § 45-222.

45-2-305, 45-2-306. [Repealed.]

Compiler's Notes. Former §§ 45-2-305 and 45-2-306 (Acts 1969, ch. 36, § 1 (3.314); T.C.A., §§ 45-223, 45-224), concerning stock purchasing rights and transfer of shares, were repealed by Acts 1994, ch. 551, § 9.

45-2-307. Stockholders relieved of double liability.

Stockholders in banking institutions doing a general banking business in this state pursuant to charters granted under authority of Acts 1909, ch. 54, §§ 1-4 (compiled as §§ 3892-3895, inclusive, of the Code of 1932, and repealed by Acts 1939, ch. 106), are relieved of the double or additional individual liability to the depositors of the institutions; notwithstanding that such double liability feature may be written in the body of the charters of the banking institutions, and shown on the face of the stock certificates.

Acts 1969, ch. 36, § 1 (3.314); T.C.A., § 45-225.

Compiler's Notes. For cases involving double liability under §§ 3892-3895 of the 1932 Code, see Rose v. Morrow, 153 Tenn. 97, 282 S.W. 379 (1926); Rose v. Morrow, 10 Tenn. App. 698 (1929).

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Banks and Banking, § 12.

Part 4
Directors and Officers

45-2-401. Directors and officers — Qualifications of directors — Election — Terms.

  1. The affairs of a state bank shall be managed by a board of directors, which shall exercise its powers and be responsible for the discharge of its duties. The charter or bylaws may establish a variable range for the size of the board of directors by fixing a minimum of not less than five (5) members and a maximum of not more than twenty-five (25) members. If a variable range is established, the number of directors may be fixed or changed from time to time, within the minimum and maximum, by the shareholders or the board of directors; however, unless the charter or bylaws provide otherwise, only the shareholders may change the range for the size of the board or change from a fixed to a variable-range size board or vice versa. Each bank director must, during each director's whole term of service, be a citizen of the United States. A majority of the directors must reside in a state in which the bank has a branch location or within one hundred (100) miles of the location of any branch, both for at least one (1) year immediately preceding their election and during their term of service as a director. The bylaws of the bank may specify other qualifications for directors. Any director who becomes disqualified shall forthwith resign the office, but, upon removal of the disqualification, shall be eligible for election. A director who is disqualified may be removed by the board of directors or by the commissioner. No action taken by a director prior to resignation or removal shall be subject to attack on the ground of the director's disqualification.
  2. Except in cases of disqualification, directors shall serve until their successors are elected and qualified.
  3. Directors shall be elected by the stockholders at the first meeting and thereafter at the annual meeting or at a special meeting called for the purpose. If the charter provides for cumulative voting, the votes of each share may be cast for one (1) person or divided among two (2) or more, as the stockholders may choose. The person or persons (to the number of directors to be elected) having the largest number of votes shall be elected.
  4. The term of office of directors shall be one (1) year or, if the bylaws so provide, three (3) years, in which case one third (1/3) of the directors, or as nearly one third (1/3) as possible, shall be elected for each year following the first election of directors. Vacancies at any one time to the number of one third (1/3) of the board may be filled by vote of the board of directors until the next meeting of the stockholders.
  5. The officers designated by the bylaws shall be elected by the board of directors. The bank shall have only one (1) officer designated as president and the president shall be a member of the board of directors. No officer shall be elected or a contract executed for employment for a period longer than three (3) years. An officer may be removed by the board of directors at any time but removal shall not prejudice any rights that the officer may have to damages for breach of contract of employment.

Acts 1969, ch. 36, § 1 (3.315); 1971, ch. 77, § 1; 1973, ch. 294, § 6; T.C.A., § 45-226; Acts 1989, ch. 57, § 1; 1994, ch. 551, § 10; 1996, ch. 768, §§ 15, 16; 2001, ch. 54, § 11.

Compiler's Notes. Acts 1996, ch. 768, which amended this section, is known and may be cited as the Bank Reform Act of 1996.

Cross-References. Bank deposits and collections, title 47, ch. 4.

Funds transfers, title 47, ch. 4A.

Letters of credit, title 47, ch. 5.

Negotiable instruments, title 47, ch. 3.

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Banks and Banking, §§ 15, 19.

Law Reviews.

A Realistic Duty of Care for Outside Bank Directors, 51 Tenn. L. Rev. 569 (1984).

NOTES TO DECISIONS

1. Construction.

There is nothing in the Tennessee Banking Act that purports to require the FDIC to warn banks of irregularities of their officers. FDIC v. Blackburn, 109 F.R.D. 66, 1985 U.S. Dist. LEXIS 14440 (E.D. Tenn. 1985).

45-2-402. Directors — Meetings and duties — Examinations and reviews — Fiduciary powers.

  1. The board of directors shall meet at least quarterly. The commissioner, one third (1/3) of the directors, or any two (2) executive officers may call a special meeting. A majority of the board shall constitute a quorum. The board shall keep minutes of each meeting, including a record of attendance and of all votes cast by each director.
  2. The board, or an executive committee appointed by the board, shall review periodically, in a manner satisfactory to the commissioner, the lending and investment transactions occurring since the last review.
  3. The board shall cause a review, at least once in each calendar year at intervals of not more than fifteen (15) months, of all the affairs of the state bank, including the character and value of investments, loans, the efficiency of operating procedures, and any other matters as the commissioner may prescribe, with the review discussed and recorded in the minutes. Compliance with the external auditing requirements of the federal regulatory agencies shall be deemed as compliance with this subsection (c). However, the commissioner may require, at the commissioner's discretion, any state bank to obtain a financial statement audit or balance sheet audit should conditions warrant that action.
  4. A state bank authorized to exercise trust powers shall not accept or voluntarily relinquish a fiduciary account without the approval or ratification of the board or of a committee of officers or directors designated by the board to perform this function, but the board or the committee may prescribe general rules governing acceptance or relinquishment of fiduciary accounts, and action taken by an officer in accordance with these rules is sufficient approval. Any committee so designated shall keep minutes of its meetings and report at each meeting of the board all action taken since the previous meeting of the board. The board shall designate one (1) or more committees to supervise the investment of fiduciary funds. The investment shall not be made, retained or disposed of without the approval of a committee. At least once in every calendar year, at intervals of not more than fifteen (15) months, the committee shall review all the assets of each fiduciary account and shall determine their current value, safety and suitability and whether the investments should be modified or retained. The committee shall keep minutes of its meetings and shall report at each meeting of the board its conclusions on all questions considered and all action taken since the previous meeting of the board.
  5. The board of a state trust company is responsible for the proper exercise of fiduciary powers by the state trust company and each matter pertinent to the exercise of fiduciary powers, including, but not limited to:
    1. The determination of policies;
    2. The investment and disposition of property held in a fiduciary capacity; and
    3. The direction and review of the actions of each officer, employee, and committee used by the state trust company in the exercise of its fiduciary powers.

Acts 1969, ch. 36, § 1 (3.316); 1973, ch. 294, § 6; T.C.A., § 45-227; Acts 1999, ch. 112, § 6; 2001, ch. 54, § 12.

Law Reviews.

Residential Mortgage Lending: Charting a Course Through the Regulatory Maze, 29 Vand. L. Rev. 957.

45-2-403. Fidelity bonds and other insurance — Special reserve fund.

  1. The directors of a state bank shall direct and require good and sufficient fidelity bonds on all active officers and employees, whether or not they draw salary or compensation, which bonds shall provide for indemnity to the bank on account of any losses sustained by it as the result of any dishonest, fraudulent or criminal act or omission committed or omitted by them acting independently or in collusion or combination with any person or persons. The bonds may be in individual, schedule or blanket form, and the premiums for the bonds may be paid by the bank.
  2. The directors shall also direct and require suitable insurance protection to the bank against burglary, robbery, theft, liability and other similar insurable hazards to which the bank may be exposed in the operations of its business on the premises or elsewhere.
  3. The directors shall be responsible for prescribing at least once in each year the amount of penal sum of the bonds or policies and the sureties or underwriters thereon, after giving due and careful consideration to all known elements and factors constituting the risk or hazard. The action shall be recorded in the minutes of the board of directors and be subject to the approval of the commissioner.
    1. In lieu of providing a good and sufficient fidelity bond on all active officers and employees as required by subsection (a), a state bank with sufficient capital to assets ratio as established by the commissioner may establish a special reserve fund in such form, amount, and including such assets, as approved by the commissioner.
    2. The commissioner shall promulgate necessary rules and regulations to implement  subdivision (d)(1).

Acts 1969, ch. 36, § 1 (3.317); 1973, ch. 294, § 6; T.C.A., § 45-228; Acts 1986, ch. 865, § 1.

Law Reviews.

The Nuts and Bolts of a Fidelity Bond Claim, 27 No. 3 Tenn. B.J. 22 (1991).

45-2-404. Authority to declare dividends.

The board of directors of a state bank may not declare dividends in any calendar year that exceeds the total of its net income of that year combined with its retained net income of the preceding two (2) years without the prior approval of the commissioner.

Acts 1969, ch. 36, § 1 (3.318); T.C.A., § 45-229; Acts 2001, ch. 54, § 13.

Cross-References. Applicability to industrial banks, § 45-5-607.

Law Reviews.

Section I: Symposium - Rethinking The U.S. Regulatory Structure Governing Financial Institutions: 21st Century Solutions For a 21st Century Marketplace: When the Government Becomes a Stockholder: Impact of the Capital Purchase Program on Bank Regulation (Jackie Prester), 39 U. Mem. L. Rev. 931 (2009).

45-2-405. Government service.

  1. Notwithstanding  any law to the contrary, any officer, director, or employee of any bank may serve in any capacity in state or local government, except in any capacity with the department, or on any board, commission, or other agency of the governmental unit; provided, that the officer, director or employee has:
    1. Disclosed to the chief executive officer of the bank and the board of directors of the bank the capacity in which the officer, director or employee is serving with the governmental unit; and
    2. Disclosed to the chief executive officer of the governmental unit and to the appropriate board, commission or other agency the relationship to the bank.
  2. Where there has been compliance with this section, the existence of the dual relationship shall not invalidate, or adversely affect, any sale, contract or other business transaction between the bank and the governmental unit.
  3. As used in this section, “bank” means any state or national bank, or state or federal savings and loan association, or credit union established pursuant to chapter 4 of this title.

Acts 1983, ch. 287, § 1.

Law Reviews.

Selected Tennessee Legislation of 1983 (N. L. Resener, J. A. Whitson, K. J. Miller), 50 Tenn. L. Rev. 785 (1983).

Attorney General Opinions. T.C.A. § 45-2-405 authorizes any officer, director, or employee of any bank to serve in any local office, including on the county commission, the county budget committee, or the county purchasing commission, so long as he or she discloses the position to the bank and the local government, OAG 07-141 (10/10/07).

Part 5
Membership in Federal Reserve Banks

45-2-501. Part definitions.

As used in this part, unless the context otherwise requires:

  1. “Federal Reserve Act” includes the act of congress of the United States approved December 23, 1913, as amended;
  2. “Federal reserve bank” means the federal reserve banks created and organized under the authority of the Federal Reserve Act;
  3. “Federal reserve board” means the federal reserve board, created and described in the Federal Reserve Act; and
  4. “Member bank” means any national bank, state bank, or banking and trust company that has become or that becomes a member of one (1) of the federal reserve banks created by the Federal Reserve Act.

Acts 1969, ch. 36, § 1 (3.323); T.C.A., § 45-301.

Compiler's Notes. The Federal Reserve Act, referred to in this section, is compiled in 12 U.S.C.

Cross-References. Negotiable instruments, title 47, ch. 3.

45-2-502. Power to subscribe to stock.

Any state bank has the power to subscribe to the capital stock and become a member of a federal reserve bank.

Acts 1969, ch. 36, § 1 (3.323); T.C.A., § 45-302.

45-2-503. Powers of federal reserve bank membership.

A state bank that is or that becomes a member of a federal reserve bank is by this part vested with all powers conferred upon member banks of the federal reserve banks by the terms of the Federal Reserve Act as fully and completely as if the powers were here specifically enumerated and described, and all the powers shall be exercised, subject to all restrictions and limitations imposed by the Federal Reserve Act, or by regulations of the federal reserve board made pursuant to the act. The right, however, is expressly reserved to revoke or to amend the powers herein conferred.

Acts 1969, ch. 36, § 1 (3.323); T.C.A., § 45-303.

Compiler's Notes. The Federal Reserve Act, referred to in this section, is compiled in 12 U.S.C.

45-2-504. Reserves of Federal Reserve Act sufficient.

A compliance on the part of a bank with the reserve requirements of the Federal Reserve Act shall be held to be a full compliance with those  laws of this state that require banks to maintain reserves, and the bank shall not be required to carry or maintain reserves other than those required under the terms of the Federal Reserve Act.

Acts 1969, ch. 36, § 1 (3.323); T.C.A., § 45-304.

Compiler's Notes. The Federal Reserve Act, referred to in this section, is compiled in 12 U.S.C.

45-2-505. Supervision and examinations — Disclosures to federal reserve board.

The bank shall continue to be subject to the supervision and examinations required by the laws of this state, except that the federal reserve board shall have the right, if it deems necessary, to make examinations, and the authorities of this state having supervision over the bank or trust company may disclose to the federal reserve board, or to examiners duly appointed by it, all information in reference to the affairs of any bank that has become, or desires to become, a member of a federal reserve bank.

Acts 1969, ch. 36, § 1 (3.323); T.C.A., § 45-305.

Part 6
General Powers of Banks

45-2-601. General powers.

Subject to regulation by the commissioner and any restrictions expressly imposed by this chapter and chapter 1 of this title, any bank may enjoy any and all rights and may exercise any and all powers, as defined herein, conferred upon banking corporations for profit by the Tennessee Business Corporation Act, compiled in title 48, chapters 11-27, as same may be amended from time to time. In addition, any state bank may exercise any power or engage in any activity that it could exercise or engage in if it were a national bank located in Tennessee, subject to regulation by the commissioner for the purpose of maintaining the state bank's safety and soundness.

Acts 1969, ch. 36, § 1 (3.101); 1973, ch. 294 § 6; 1977, ch. 274, § 1; T.C.A., § 45-401; Acts 1986, ch. 666, § 1; 1994, ch. 551, § 19.

Cross-References. Common trust funds, establishing for purpose of furnishing investments to itself as fiduciary, § 35-4-102.

Cooperative scholarship corporations, banks participating in plan, § 49-4-106.

Development credit corporations, § 48-101-101 et seq.

Loans and investments utilizing federal housing administration, Federal National Mortgage Association and veterans' administration authorized, § 35-3-120.

Negotiable instruments, title 47, ch. 3.

Tennessee Valley Authority, investment in bonds and obligations of, § 35-3-119.

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Banks and Banking, § 29.

Law Reviews.

The Competitive Equality Doctrine and the Demise of Intrastate Bank Branching Restrictions (Henry N. Butler), 55 Tenn. L. Rev. 703 (1989).

Attorney General Opinions. Both former T.C.A. § 56-6-201 (repealed), prohibiting a bank holding company from owning or controlling an insurance agent, and T.C.A. § 56-35-131(a)(1), limiting the amount of business income a title insurance agent may receive through owners and affiliates, are preempted by federal law, including the Gramm-Leach-Bliley Financial Modernization Act (GLB), P.L. 106-102, to the extent these statutes prohibit or significantly interfere with a national bank's exercise of its authority to control or own an interest in a title insurance agency; under the state “wild-card” statute, T.C.A. § 45-2-601, then, state banks may also control or own a financial subsidiary that acts as a title insurance agent under the same conditions national banks would be permitted to engage in the same activity, OAG 02-013 (2/1/02).

Effect of regulations issued by the comptroller of the currency, OAG 04-057 (4/06/04).

Effect of regulations issued by the comptroller of the currency, OAG 04-059 (4/07/04).

NOTES TO DECISIONS

1. Federally Chartered Institutions.

Federally chartered savings and loans have engaged in statewide branching in Tennessee because, under the “wild card” statute, they may do as state chartered savings banks may do. Permitting a national bank to branch statewide merely creates a level playing field for nationally chartered banks and further enhances competition in the financial industry. Volunteer State Bank v. National Bank of Commerce, 684 F. Supp. 964, 1988 U.S. Dist. LEXIS 4286 (M.D. Tenn. 1988).

2. Usury Not Shown.

Dismissal of a debtor's suit against the bank that issued the promissory note and the holder of the note for charging usurious interest was proper because the bank was authorized to charge interest at the default rate under T.C.A. § 45-5-301(2) when the note was executed, and the holder was entitled to collect interest at the default rate. Foster Bus. Park, LLC v. J & B Invs., LLC, 269 S.W.3d 50, 2008 Tenn. App. LEXIS 52 (Tenn. Ct. App. Jan. 30, 2008), appeal denied, — S.W.3d —, 2008 Tenn. LEXIS 634 (Tenn. Aug. 25, 2008).

Decisions Under Prior Law

1. Capital Stock — Payment in Notes.

The capital stock of a banking corporation cannot be paid in the notes of the stockholders or directors, mutually indorsed. Moses v. Ocoee Bank, 69 Tenn. 398, 1878 Tenn. LEXIS 110 (1878).

2. Purchase of Stock in Another Bank.

Power to deal in stocks does not authorize the purchase of the controlling interest in another bank, for the reason that the control of one corporation by another would tend to monopoly. Wood v. Green, 131 Tenn. 583, 175 S.W. 1139, 1914 Tenn. LEXIS 128 (1915).

The contract of the bank, through its officers, to purchase of the stockholders of another bank their stock therein, was void as being ultra vires. Wood v. Green, 131 Tenn. 583, 175 S.W. 1139, 1914 Tenn. LEXIS 128 (1915).

45-2-602. Subsidiary corporations.

    1. Any bank may exercise any of its powers through the medium of a subsidiary corporation or corporations. Any and all rights conferred upon banks shall be fully applicable to the subsidiary corporations of banks. Banks shall not be permitted, however, through the use of subsidiary corporations to circumvent the restrictions imposed by § 45-2-614. Whenever the commissioner deems it necessary, the commissioner may examine any corporation that is a subsidiary corporation of a state bank.
    2. A bank may organize, participate in or own an ownership interest in a limited liability company, or limited liability partnership, under the provisions of this section and this title.
    1. For the purposes of this section, a minority stock ownership interest in a credit insurance company whose capital meets or exceeds the requirements of § 56-2-114, or in an insurance holding company system as defined in § 56-11-101, whose principal business is conducted through one (1) or more credit insurance companies whose capital meets or exceeds the requirements of § 56-2-114, shall be deemed to be a subsidiary; provided, that the original cost of the stock ownership interest does not exceed five percent (5%) of the capital and surplus of the bank; and provided further, that no one (1) bank shall own more than five percent (5%) of the stock in the credit insurance company or insurance holding company system.
    2. The existence and operation of any subsidiary corporation formed prior to June 9, 1981, shall not be impaired by subdivision (b)(1).

Acts 1969, ch. 36, § 1 (3.102); 1973, ch. 294, § 6; T.C.A., § 45-402; Acts 1981, ch. 253, §§ 1, 2; 1996, ch. 768, § 17.

Compiler's Notes. Acts 1996, ch. 768, which amended this section, is known and may be cited as the Bank Reform Act of 1996.

45-2-603. Emergency powers.

In the event of an emergency resulting from fire, act of God, attack by a foreign nation, riot, insurrection, civil disorder or any similar disaster, any bank, without regard to any restrictions imposed by this chapter and chapter 1 of this title, may take any action that it deems necessary to preserve its assets and protect the interests of its depositors, shareholders or employees including, but not restricted to, suspending business activity or obtaining the benefit of, or participating in, emergency action authorized by the government of the United States, or the state of Tennessee or its political subdivisions.

Acts 1969, ch. 36, § 1 (3.103); T.C.A., § 45-403.

Textbooks. Tennessee Jurisprudence, 4 Tenn. Juris., Bailments, § 3.

45-2-604. Hours of operation — Days closed — Effect on transactions.

  1. A bank shall establish hours of operation it deems necessary or appropriate; provided, that a bank may not be closed for more than two (2) consecutive calendar days without the prior approval of the commissioner, except a bank, without prior approval, may be closed Saturdays, Sundays, legal holidays and during emergencies as provided in § 45-2-603.
  2. Nothing in any law of this state shall in any manner whatsoever affect the validity of, or render void or voidable, the payment, certification, or acceptance of a check or other negotiable instrument or any other transaction by a bank because it was done or performed during any time other than regular banking hours; provided, that nothing herein shall be construed to compel any bank that by law or custom is entitled to close or suspend business for the whole or any part of any day to keep open for the transaction of business, or to perform any of the acts or transactions aforementioned, on any optional closing day or legal holiday, except at its own option.

Acts 1969, ch. 36, § 1 (3.202); 1973, ch. 294, § 6; T.C.A., § 45-405; Acts 1996, ch. 768, § 18.

Compiler's Notes. Acts 1996, ch. 768, which amended this section, is known and may be cited as the Bank Reform Act of 1996.

Cross-References. Holidays, title 15.

45-2-605. Transmitting money — Dealing in foreign exchange.

  1. A bank may accept money for transmission and may transmit money.
  2. A bank may buy and sell foreign exchange to the extent necessary to meet the needs of customers.

Acts 1969, ch. 36, § 1 (3.210); T.C.A., § 45-413.

45-2-606. Depositories.

Any bank may, for the convenience of its customers, provide suitable receptacles on, in, or as a part of the bank premises for the deposit of money, checks and other property, and may contract with its customers, through display of appropriate notice upon the receptacles or by written notice to its customers, that the receptacles are instrumentalities of the customer and that money, checks or other property placed in them shall not be considered to be deposited with the bank until received by an employee or officer of the bank. The receptacle shall not be placed in or located on, in or about any premises where the bank cannot legally carry on the business of banking.

Acts 1969, ch. 36, § 1 (3.211); T.C.A., § 45-414.

45-2-607. Investments.

  1. Investments by state banks shall be limited to:
    1. Obligations that satisfy the requirements of this chapter and chapter 1 of this title for loans;
    2. Obligations of the United States, a state of the United States or the Dominion of Canada;
    3. Obligations of the International Bank for Reconstruction and Redevelopment or the African Development Bank;
    4. Obligations of a territory of the United States, a province of the Dominion of Canada, a subdivision or instrumentality of a state or territory of the United States, an authority organized under state law, an interstate compact or by substantially identical legislation adopted by two (2) or more states;
    5. Obligations of a corporation chartered by the United States or a state thereof doing business in the United States;
    6. The stock of one (1) or more banks or corporations chartered or incorporated under the laws of the United States, or of any state of the United States, and principally engaged in international or foreign banking, or banking in a dependency or insular possession of the United States, either directly or through the agency, ownership or control of local institutions in foreign countries, or in the dependencies or insular possessions, including the stock of one (1) or more banks or corporations chartered or incorporated under § 25a of the Federal Reserve Act, as approved December 24, 1919. Any state bank shall have the power to acquire and hold directly or indirectly stock or other evidences of ownership in one (1) or more banks organized under the law of a foreign country or dependency or insular possession of the United States and not engaged directly or indirectly in any activity in the United States, except that which is incidental to the international and foreign business of the foreign bank and to make loans or extension of credit to or for the account of the bank. Investments in the stock of banks or corporations under  this subdivision (a)(6) shall not exceed in the aggregate ten percent (10%) of the state bank's paid-in capital stock and surplus;
    7. The capital stock of joint stock land banks for carrying on the business of lending money on farm mortgage security created and organized under the act of congress of the United States, approved July 17, 1916, and known as the Federal Farm Loan Act. Any bank, firm, person, or corporation doing a banking business may invest its funds and accumulations in stocks, notes, bonds, debentures, or other obligations issued under  the act of congress of the United States entitled the Federal Home Loan Bank Act approved July 22, 1932, and in notes, bonds, debentures, or other obligations issued under  title IV of the act of congress of the United States entitled the National Housing Act, approved June 27, 1934;
    8. Stock, debentures, and other obligations of national mortgage associations or similar institutions now or hereafter organized under title III of the National Housing Act, to the same extent as national banks are now or hereafter permitted to invest in the stock and/or obligations;
    9. Real property to the extent that the total depreciated value thereof does not exceed the capital and surplus of the bank;
    10. Personal property acquired for lease to customers;
    11. The stock of any other bank located in the state of Tennessee; provided, that the investment in the stock of all the banks shall not exceed ten percent (10%) of the capital, surplus, and undivided profits of the investing bank; and provided further, that if the stock is voting stock, the investment shall not exceed five percent (5%) of the total of the voting stock. The investment shall be made only upon thirty (30) days' prior written notice to the commissioner of financial institutions, and any investment that is consummated without giving notice shall be void. The commissioner shall have the right to disapprove the investment if the commissioner finds that the investment does not conform with the standards set forth in §§ 45-1-102 and 45-1-107, and gives written notice detailing the reasons for disapproval on or before the end of the thirty-day period. If the commissioner disapproves the transaction, the bank shall have a right to a hearing before the commissioner under the Uniform Administrative Procedures Act, compiled in title 4, chapter 5. This investment shall be in addition to the right of any bank to invest in the stock of a banker's bank otherwise permitted under this section;
    12. Adjustable rate preferred stock of any publicly held corporation created or existing under the laws of the United States or any state, district, or territory of the United States that is rated in one (1) of the four (4) highest investment grades by one (1) or more recognized investment rating services approved by the commissioner for rating the investments. The bank's investment in adjustable rate preferred stock shall be permitted to the same extent the investments are permitted to national banks domiciled in Tennessee, subject to regulation by the commissioner for the purpose of maintaining the state bank's safety and soundness;
      1. Shares or certificates in any open-end management investment company that is registered with the securities and exchange commission under the Investment Company Act of 1940, and the portfolio of which is restricted by the management company's investment policy, changeable only if authorized by shareholder vote, solely to any investments in which a bank by law or regulation may invest;
      2. The bank's investment in the shares or certificates of the open-end investment companies shall be permitted to the same extent the investments are permitted to national banks domiciled in Tennessee, subject to limiting regulations promulgated by the commissioner pursuant to the Uniform Administrative Procedures Act, compiled in title 4, chapter 5, for the purpose of safety and soundness;
    13. Other investments that are authorized national banks or member banks of the federal reserve system;
    14. Subject to regulations promulgated by the commissioner for the purpose of maintaining the state bank's safety and soundness, a bank may invest in a Tennessee business and industrial development corporation (BIDCO) as provided in § 45-8-203; provided, that the investment in the stock of the BIDCO shall not exceed ten percent (10%) of the capital, surplus, and undivided profits of the investing bank. The investment shall be made only upon thirty (30) days' prior written notice to the commissioner and an investment that is consummated without giving notice shall be void. The commissioner shall have the right to disapprove the investment if the commissioner finds that the investment does not conform to the standards set forth in §§ 45-1-102 and 45-1-107 and gives written notice detailing the reasons for the disapproval on or before the end of the thirty-day period. If the commissioner disapproves the transaction, the bank shall have a right to a hearing under the Uniform Administrative Procedures Act, compiled in title 4, chapter 5. This investment shall be in addition to the right of any bank to invest in the stock of a bankers' bank, otherwise permitted under this section and in the stock of any other bank located in Tennessee, otherwise permitted by this section; and
    15. Stock, debentures, and other obligations of community development corporations subject to the rules the commissioner may prescribe.
  2. Any investment in property that is not authorized by subsection (a) may be acquired by any state bank to satisfy or protect a loan previously made in good faith and in the ordinary course of business. Property acquired in satisfaction of a loan shall be held subject to the following limitations:
    1. All property except real property shall be sold within six (6) months or such additional period as the commissioner may allow; and
      1. Except as provided in subdivision (b)(2)(B), real property shall be sold within ten (10) years;
      2. If the bank holds the real property for a period longer than five (5) years, then after an initial five-year period, the bank, in reporting its financial status to the department, shall write off twenty percent (20%) of the appraised value of the real property each subsequent year it is held until the real property is either sold or the ten-year period has elapsed. Upon application of the bank, the commissioner may, in extraordinary circumstances, adjust or waive the percentage a bank shall write off the real property each year, may extend the period in which the real property may be held beyond ten (10) years, or any combination of the foregoing. If the commissioner reduces, waives, or adjusts the amount of write-off, the real property may not be carried at more than the appraised value of the property;
      3. Real property which has been written off but not disposed of shall be maintained on the bank's books at some nominal value;
      4. If the bank's board of directors deem the real property owned to be a prudent investment for income or appreciation for the bank, the board may take action to maintain the real property on the bank's books as an investment, pursuant to subdivision (a)(9);
      5. Not more than one hundred twenty (120) days before or thirty (30) days after the date the parcel is acquired by the bank as real property owned, or from the date on which the bank legally acquires the real property for investment purposes, the bank shall obtain from an independent, qualified appraiser an appraisal of the parcel; provided, however, that:
        1. For parcels whose book value is two hundred fifty thousand dollars ($250,000) or less, the bank may obtain an evaluation in lieu of an appraisal; and
        2. For parcels whose book value is one hundred thousand dollars ($100,000) or less, no appraisal or evaluation shall be required; and
      6. Within twelve (12) months from the date the bank acquires the real property, and every twelve (12) months thereafter for as long as the bank owns the real property, the bank shall obtain another appraisal or evaluation, whichever is appropriate as provided for in subdivision (b)(2)(E).
  3. As used in this section, “investment” means the purchase of any interest in any property of any nature principally for the purpose of deriving profit from changes in the value of the property or from dividends, interest or rent thereon, as distinguished from the purpose of using the property in the conduct of the business of a bank. Notwithstanding the foregoing, the investment by a bank or trust company in one (1) or more subsidiaries, or the underwriting of or dealing in certificates of deposit, bankers' acceptances or those securities that are permissible investments for a bank under subdivisions (a)(1)-(14), shall not constitute an investment within the meaning of this section.
    1. In addition to the other provisions of this section, upon thirty (30) days' prior written notice to the commissioner, providing such detail as the commissioner may require, a bank may invest, in the aggregate, up to seventy-five percent (75%) of its unimpaired capital, surplus and undivided profits in the stock or purchase the assets of other corporations, firms, partnerships or companies, including limited liability corporations and limited liability partnerships, which are or will be:
      1. Primarily engaging in activities permissible for federally chartered financial institutions, their authorized subsidiaries or bank holding companies under applicable laws, rules, regulations or orders;
      2. Primarily engaging in activities of a financial nature, including, but not limited to, the transmission or processing of information, data or payments relating to the activities, all forms of securities activities not otherwise authorized, together with other activities that the commissioner shall determine and that may be permissible for other bank and non-bank financial institutions chartered by Tennessee or other states by regulation or order; or
      3. Engaging in any other activities approved by the commissioner.
    2. Unless denied by the commissioner within thirty (30) days following receipt of the written notice or upon approval prior to the expiration of the thirty (30) days, a bank may complete its investment in the stock or purchase the assets of the other corporation, firm, partnership or company, or commence a new activity through an existing subsidiary. The commissioner may extend the thirty-day period for approval or denial, for an additional thirty-day period, by notifying the applicant if the commissioner determines that the proposed investment or activity raises issues that require additional information or additional time for analysis.
    3. The commissioner shall monitor the impact of activities and investments of banks approved under this section on the safety and soundness of the banks. Any stocks owned or hereafter acquired in excess of the limitations herein imposed shall be disposed of at public or private sale within six (6) months after the date of acquiring the stocks, and if not so disposed of, they shall be charged to profit and loss account, and no longer carried on the books as an asset. The limit of time in which the stocks shall be disposed of or charged off the books of the bank may be extended by the commissioner if, in the commissioner's judgment, it is for the best interest of the bank that the extension be granted.
    4. The commissioner may, as a condition of approving an investment under this section, impose limits on the loans that each bank can make to the corporation, firm or partnership.
    5. The commissioner shall maintain a public file, available for inspection at the department's offices, which shall contain a summary or synopsis of any application submitted under this subsection (d). The summary shall include only the name of the institution applying, the proposed activity and the decision of the commissioner.
    6. Any state or national bank or subsidiary that engages in an activity that subjects it to licensure and/or regulation under other than title 45, chapter 2, shall be subject to licensure and/or regulation on a basis that does not discriminate by the appropriate regulatory agency that licenses and/or regulates non-banks that engage in the same activity.

Acts 1969, ch. 36, § 1 (3.242); 1973, ch. 294, § 6; T.C.A., § 45-436; Acts 1983, ch. 74, § 6; impl. am. Acts 1983, ch. 216, §§ 1-9; Acts 1986, ch. 602, § 1; 1987, ch. 86, §§ 1, 2; 1988, ch. 819, § 1; 1989, ch. 124, § 25; 1989, ch. 150, § 1; 1989, ch. 168, § 2; 1994, ch. 551, §§ 11, 12; 1996, ch. 768, § 19; 2013, ch. 233, § 1.

Compiler's Notes. Section 25a of the Federal Reserve Act, referred to in this section, is found in 12 U.S.C. §§ 611-631. The Federal Home Loan Bank Act is compiled throughout 12, 15 and 18. U.S.C. title III of the National Housing Act is found in 12 U.S.C. §§ 1716 and note, 1717-1723c, and title IV of the National Housing Act is found in 12 U.S.C. §§ 1721-1730. The Investment Company Act of 1940, referred to in this section, is compiled in 15 U.S.C. § 80a-1 et seq.

Acts 1996, ch. 768, which amended this section, is known and may be cited as the Bank Reform Act of 1996.

Acts 2013, ch. 233, § 2 provided that the department of financial institutions is authorized to promulgate rules and regulations in accordance with the Uniform Administrative Procedures Act, compiled in title 4, chapter 5, or to issue departmental bulletins in lieu of such regulations, to implement the provisions of the act, which amended subdivision (b)(2).

Cross-References. Applicability to industrial banks, § 45-5-607.

Investing in obligations of public housing authority authorized, § 35-3-115.

Investment in obligations of federal housing administration, Federal National Mortgage Association and veterans' administration authorized, § 35-3-120.

Law Reviews.

State Regulation of Bank Holding Companies and the Future of Interstate Banking: A Tennessee Perspective (Colman B. Hoffman and Kathryn R. Edge), 51 Tenn. L. Rev. 383 (1984).

Attorney General Opinions. The general assembly did not intend to prohibit the department of commerce and insurance from enforcing the restrictions on bank holding company ownership of a title insurance agency or conditions on continued licensure of a title insurance agent, OAG 02-013 (2/1/02).

The administrative entity or person charged with interpreting and determining whether an agency has engaged in the type of discrimination prohibited by T.C.A. § 45-2-607(d)(6) is the one charged by T.C.A. § 45-2-607(d)(6) to license and/or regulate any state or national bank or subsidiary on a basis that does not discriminate within the meaning of that subdivision, OAG 02-013 (2/1/02).

A limited liability corporation with 15 members with equal ownership, each of which is a state or national bank, is not a subsidiary of a state or national bank within the meaning of T.C.A. § 45-2-607(d), OAG 02-013 (2/1/02).

45-2-608. Acceptances.

  1. A bank may accept:
    1. A draft that has not more than six (6) months' sight to run, exclusive of days of grace, and is drawn to finance the purchase of goods with maturity in accordance with the original terms of purchase, or is secured by shipping documents transferring or securing title to goods or by receipt of a licensed or bonded warehouse or elevator transferring or securing title to readily marketable, nonperishable staples; and
    2. A draft that has no more than three (3) months' sight to run, exclusive of days of grace, and is drawn by a bank outside the continental limits of the United States for the purpose of furnishing dollar exchange for trade.
  2. A bank may issue a letter of credit, but unless the authority conferred to draw upon the bank or its correspondents is limited to the drafts that a bank is authorized by this section to accept, the amount of the credit outstanding at any one time shall be deemed to be a loan to the person for whose account the credit was issued.

Acts 1969, ch. 36, § 1 (3.243); T.C.A., § 45-437.

45-2-609. Sale of assets in ordinary course.

A bank may sell any asset in the ordinary course of business, but the sale of all or substantially all of the assets of a bank shall entitle dissenting shareholders to the rights provided by § 45-2-1309.

Acts 1969, ch. 36, § 1 (3.244); T.C.A., § 45-438.

45-2-610. Borrowing.

Any bank may borrow money and issue evidence of indebtedness for a loan.

Acts 1969, ch. 36, § 1 (3.245); T.C.A., § 45-439.

45-2-611. Pledge of assets.

  1. A bank may pledge its assets only:
    1. To enable it to act as an agent for the sale of obligations of the United States;
    2. To secure borrowed funds;
    3. To secure the public funds of a governmental entity; and
    4. For other purposes that are approved by the commissioner.
  2. As used in this section, unless the context otherwise requires:
    1. “Governmental entity” means:
        1. The United States government or any agency thereof; or
        2. Any instrumentality of the United States the funds of which are required by law to be secured; and
      1. The state of Tennessee or any other state, counties, incorporated municipalities and their political subdivisions or any utility district organized under the laws of a state or an interstate compact; and
    2. “Public funds” means:
      1. Funds in which the entire beneficial interest is owned by a governmental entity; or
      2. Funds held in the name of a public official charged with the duty to receive or administer funds and acting in the person's official capacity.
  3. A financial institution authorized to secure public funds of any governmental entity shall do so in the same manner and under the same conditions as state deposits under title 9, chapter 4, or as provided in a collateral pool as provided in title 9, chapter 4, part 5.

Acts 1969, ch. 36, § 1 (3.246); 1973, ch. 294, § 6; T.C.A., § 45-440; Acts 1990, ch. 1043, § 3.

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Banks and Banking, § 32.

Attorney General Opinions. Rural cooperative not a utility district, OAG 96-108 (8/30/96).

45-2-612. Endorsement and signature guaranty.

  1. Any bank may assume secondary liability as an endorser of a negotiable or nonnegotiable instrument that it owns or has received for collection or that of the guarantor of the genuineness of a signature.
  2. A bank may disclaim all or any part of the foregoing obligation in its guaranty; however, nothing in this section shall conflict with the Uniform Commercial Code, compiled in title 47, and the Uniform Commercial Code shall govern.

Acts 1969, ch. 36, § 1 (3.247); T.C.A., § 45-441.

45-2-613. Exchange charges.

  1. Banks, both state and national, have the right to make an exchange charge for the handling of cash items, and when the cash items are presented to the payer bank for payment through or by any bank, banker, trust company, federal reserve bank, post office, express company, collection agency, or by any other agency whatever, the amount of the charge shall not exceed one tenth of one percent (.1%) of the total amount of the cash item, so presented and paid at one (1) time, and the minimum charge shall be ten cents (10¢); provided, that the charge shall not be made on checks or drafts given or drawn in settlement of obligations due the state or any subdivision of the state, or of the United States, and that the charge may not be made by banks for the collection of checks deposited with the banks, when the check is drawn on any other bank in the same municipality, city, town or village; and provided further, that nothing in this section shall be deemed mandatory upon the banks to charge exchange on checks or drafts payable to a person in this state, and drawn on a bank, trust company, or persons within or without this state, but it shall be optional with the banks whether they shall so charge exchange.
  2. No officer shall protest for nonpayment the cash item when the nonpayment is solely on account of the failure or refusal of any of the agencies to pay the exchange, and there shall be no right of action, either at law or in equity, against any bank in this state for a refusal to pay the cash item when the refusal is based alone on the ground of the nonpayment of the exchange.
  3. If, by any law, rule, regulation or court decision, the national banks in this state are not permitted to charge and collect the exchange, subsections (a) and (b) shall remain in full force and effect as to all other banks in this state; and in the event of the holding by the courts, or the refusal of any national bank in this state to comply with the sections, it shall be optional with state banks located in the same municipality with national banks or state banks that are members of the federal reserve system as to whether the charge shall be made.

Acts 1969, ch. 36, § 1 (3.248); T.C.A., § 45-442.

45-2-614. Branch banking.

  1. Any Tennessee-chartered bank may establish or otherwise acquire and maintain branch offices, branch banks and other branch facilities for the conduct of its banking business at any location in Tennessee and, except as may be prohibited by applicable law of other jurisdictions, at any other location.
  2. No branch, branch office or other facility at which deposits may be accepted shall be established until approved by the commissioner. Notwithstanding the above, the commissioner shall provide by regulation that a bank with a regulatory rating of 1 or 2 may, in lieu of an application, file a written notification for a branch office with the commissioner providing the information as the commissioner may require, including, but not limited to, proof of public notice. Unless objected to by the commissioner with a request for additional information, the notice shall be deemed sufficient and approved at the expiration of the public notice comment period as established by regulation. For an application from any other bank, the application shall be deemed to have been approved by the commissioner unless disapproved within ninety (90) calendar days after the submission of the application. In the event the notification or application to open a branch bank is disapproved and the bank feels aggrieved, the bank may petition for a review by certiorari as provided in title 27, chapter 9. For purposes of this subsection (b), “regulatory rating” means a confidential regulatory rating established, assigned or accepted, pursuant to agreement with a federal regulatory agency, by the department to assess the condition of the bank. The rating shall at all times remain confidential.
  3. Any other laws to the contrary notwithstanding, any branch bank presently located in any county may be incorporated as a bank, with all of the rights and powers granted to a bank under this title, and without restriction on the acquisition or ownership of its stock by a bank holding company, as defined in the Federal Bank Holding Company Act of 1956, that owns controlling interest in the principal bank. The commissioner shall grant a charter and forthwith issue a certificate of authority to the bank if the charter is in the form prescribed by § 45-2-204, the proposed officers and directors are qualified under § 45-2-205, the proposed capital structure is adequate under § 45-2-207 and the conditions of § 45-2-214 have been satisfied, other requirements of this title relative to the initial organization of a bank not being applicable.
    1. A branch office, branch bank, or other branch facility shall not be established or acquired in Tennessee by any bank, except:
      1. A Tennessee-charted bank;
      2. A national bank that has its main office located in this state;
      3. A bank that merges or consolidates with a bank described in subdivision (d)(1)(A) or (d)(1)(B); or
      4. An out-of-state bank that acquires a branch in accordance with § 45-2-1412.
    2. Subdivision (d)(1) shall not be construed to prohibit the surviving or resulting bank following a merger or consolidation referenced in subdivision (d)(1)(C) or the out-of-state bank acquiring a branch referenced in subdivision (d)(1)(D) from establishing and acquiring additional branch offices, branch banks, and other branch facilities in this state.
  4. No Tennessee bank or branch office or facility of a Tennessee bank that conducts the following transactions as an agent on behalf of another Tennessee bank, whether or not the Tennessee banks are affiliated through common control or otherwise, and no bank that is a subsidiary of a bank holding company or branch office or facility of a bank holding company that conducts the following transaction on behalf of another bank that is a subsidiary of the same bank holding company, shall be deemed a branch of the principal bank: receipt of deposits, renewal of time deposits, closing of loans, servicing of loans, and receipt of payments on loans and other obligations. The commissioner may establish by rule additional types of agency transactions, the performance of which shall not cause the agent bank to be deemed a branch of the principal bank. With respect to the agency relationships to which a Tennessee-chartered bank is to be a party, the commissioner may establish rules requiring receipt of notification, or approval, by the commissioner before the agency transactions are conducted. For the purposes of this subsection (e), “Tennessee bank” and “bank holding company” have the meanings set forth in § 45-2-1402.

Acts 1969, ch. 36, § 1 (3.249); 1973, ch. 294, § 6; 1974, ch. 463, § 1; 1977, ch. 172, § 1; T.C.A., § 45-443; Acts 1980, ch. 510, § 6; 1984, ch. 570, § 1; 1985, ch. 165, § 1; 1987, ch. 119, § 1; 1989, ch. 85, § 1; 1990, ch. 644, §§ 1, 2; 1995, ch. 165, §§ 3, 4; 1996, ch. 768, §§ 20, 21; 1998, ch. 742, § 3; 2001, ch. 54, §§ 14, 15.

Compiler's Notes. The Federal Bank Holding Company Act of 1956, as amended, is compiled in 12 U.S.C. §§ 1841-1849.

Acts 1995, ch. 165, § 6 provided that nothing in that act shall be deemed or construed as to: (i) authorize or permit, prior to June 1, 1997, merger or consolidation of any bank having its home state, as defined in § 45-2-1402, in Tennessee with or into any bank which does not have its home state in Tennessee; or (ii) authorize or permit, whether before, on, or after June 1, 1997, a bank which does not have its home state in Tennessee to establish or acquire a branch in Tennessee by any means other than merger or consolidation, on or after June 1, 1997, of such bank with or into a bank having its home state in Tennessee.

Acts 1996, ch. 768, which amended this section, is known and may be cited as the Bank Reform Act of 1996.

Cross-References. Acquisition of bank shares by holding company not a violation of this section, § 45-2-1404.

Branch banks, exception for national or state bank resulting from merger or conversion, §§ 45-2-1302, 45-2-1303.

Merger of financially troubled bank permissible notwithstanding this section, § 45-2-1313.

Trust officers, § 45-2-1009.

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Banks and Banking, § 65.

Law Reviews.

The Competitive Equality Doctrine and the Demise of Intrastate Bank Branching Restrictions (Henry N. Butler), 55 Tenn. L. Rev. 703 (1989).

NOTES TO DECISIONS

1. Federally Chartered Institutions.

Federally chartered savings and loans have engaged in statewide branching in Tennessee because, under the “wild card” statute, they may do as state chartered savings banks may do. Permitting a national bank to branch statewide merely creates a level playing field for nationally chartered banks and further enhances competition in the financial industry. Volunteer State Bank v. National Bank of Commerce, 684 F. Supp. 964, 1988 U.S. Dist. LEXIS 4286 (M.D. Tenn. 1988).

Decisions Under Prior Law

1. Basis of Decision.

Method by that superintendent of banking acquires facts upon that to base decision rests in his discretion so long as it is based upon some material fact or facts and is not arbitrary or illegal. Peoples Bank of Van Leer v. Bryan, 55 Tenn. App. 166, 397 S.W.2d 401, 1965 Tenn. App. LEXIS 290 (Tenn. Ct. App. 1965).

2. Review.

The granting or withholding of permission to establish a branch office of a bank is an administrative function and not a judicial function and the procedural requirements of §§ 27-901 — 27-913 (now §§ 27-9-10127-9-113) must be read in this light and review limited to determining legal validity of action of superintendent of banking. Peoples Bank of Van Leer v. Bryan, 55 Tenn. App. 166, 397 S.W.2d 401, 1965 Tenn. App. LEXIS 290 (Tenn. Ct. App. 1965).

45-2-615. [Repealed.]

Compiler's Notes. Former § 45-2-615 (Acts 1969, ch. 36, § 1 (3.250); T.C.A., § 45-444), concerning issuing and underwriting securities, was repealed by Acts 1989, ch. 168, § 4, effective January 1, 1990.

45-2-616. Preservation of bank records.

  1. Every bank shall retain its business records for the periods that are or may be prescribed by or in accordance with the terms of this section.
  2. Each bank shall retain permanently the minute books of meetings of its stockholders and directors, its capital stock ledger and capital stock certificates ledger or stubs, its general ledger, its daily statements of condition, its general journal, its investment ledger, its copies of bank examination reports, and all records that the commissioner shall, in accordance with the terms of this section, require to be retained permanently.
  3. All other bank records shall be retained for the periods that the commissioner shall, in accordance with the terms of this section, prescribe.
  4. The commissioner shall, from time to time, issue regulations classifying all records kept by state banks and prescribing the period for which records of each class shall be retained. The periods may be permanent or for a lesser term of years. The regulations may from time to time be amended or repealed. Prior to issuing the regulations, the commissioner shall consider:
    1. Actions at law and administrative proceedings in which the production of bank records might be necessary or desirable;
    2. State and federal statutes of limitation applicable to the actions or proceedings;
    3. The availability of information contained in bank records from other sources; and
    4. Other matters that the commissioner deems pertinent, in order that the commissioner's regulations will require banks to retain their records for as short a period as is commensurate with the interests of bank customers and shareholders and of the people of this state in having bank records available.
  5. Any bank may dispose of any record that has been retained for the period prescribed by or in accordance with the terms of this section for retention of records of its class, and shall thereafter be under no duty to produce the records in any action or proceeding.
    1. Any bank may cause any or all records at any time in its custody to be reproduced and/or preserved by itself, or by any other person who agrees in writing to submit its operations to the examination of the commissioner, to the extent that the operations directly affect the recordkeeping, by any:
      1. Microphotographic process;
      2. Electronic and/or mechanical data storage technique; or
      3. Any other means approved by the commissioner.
    2. A record reproduced and/or preserved by a process, technique or means approved under subdivision (f)(1) shall have the same force and effect as the original record and be admitted into evidence equally with the original.
  6. To the extent that they are not in contravention of any law of the United States, this section applies to all banks doing business in this state.

Acts 1969, ch. 36, § 1 (3.251); 1973, ch. 294, § 6; T.C.A., § 45-445.

Cross-References. Applicability to industrial banks, § 45-5-607.

Decisions Under Prior Law

1. Presumption of Payment.

Since a requirement that a bank must forever retain evidence of payment of its indebtedness would be contrary to the public policy of Tennessee, the presumption of payment after 16 years is applicable to deposits in a checking account. Commerce Union Bank v. Horton, 225 Tenn. 679, 475 S.W.2d 660, 1972 Tenn. LEXIS 382, 69 A.L.R.3d 1305 (1972).

45-2-617. [Repealed.]

Compiler's Notes. Former § 45-2-617 (Acts 1970, ch. 532, § 1; T.C.A., § 45-446), concerning check cashing charges, was repealed by Acts 2003, ch. 32, § 1, effective April 17, 2003.

45-2-618. Notification at maturity of certificate of deposit — Requirement.

  1. Compliance with the requirements of the Truth in Savings Act, 12 U.S.C. § 4301 et seq., contained in the Federal Deposit Insurance Corporation Improvement Act of 1991, (Pub. L. No. 102-242, 105 Stat. 2236, §§ 261-274), and applicable federal regulations shall be deemed compliance with any requirements of the laws and statutes of Tennessee relating to the disclosure of information in connection with deposit accounts.
  2. Notwithstanding subsection (a), in the case of a nonrenewable certificate of deposit having a term of more than one (1) month but no longer than one (1) year, the bank shall provide a maturity notice that meets those requirements of the Truth in Savings Act, as to both timing and content, that would be applicable to the certificate if its term exceeded one (1) year. The bank's liability for failing to provide the maturity notice shall equal but not exceed that liability the bank would have incurred under the Truth in Savings Act had the certificate's term exceeded one (1) year.

Acts 1979, ch. 163, § 1; T.C.A., § 45-449; Acts 1981, ch. 312, §§ 1, 2; 1993, ch. 77, § 1.

45-2-619. Definitions — Electronic cash dispensing devices.

  1. As used in this section, unless the context otherwise requires:
      1. “Depository institution” means:
        1. An insured bank as defined in § 3 of the Federal Deposit Insurance Act (12 U.S.C. § 1813);
        2. A mutual savings bank as defined in § 3 of the Federal Deposit Insurance Act (12 U.S.C. § 1813);
        3. An insured credit union as defined in § 101 of the Federal Credit Union Act (12 U.S.C. § 1752);
        4. A member as defined in § 2 of the Federal Home Loan Bank Act (12 U.S.C. § 1422); a savings association as defined in § 3 of the Federal Deposit Insurance Act (12 U.S.C. § 1813) that is an insured depository institution as defined in the act; or
        5. An association or entity that is wholly owned by or that consists only of institutions referred to in subdivisions (a)(1)(A)(i)-(iv); and
      2. That:
        1. Is domiciled in Tennessee;
        2. Has a branch lawfully doing business in Tennessee pursuant to  this part;
        3. Is a federally chartered institution described in (a)(1)(A)(i)-(v); or
        4. Is a state chartered institution described in (a)(1)(A)(i)-(v); provided, that the home state of the institution does not prevent or limit a Tennessee chartered institution's ability to own or operate similar devices in the home state. If the home state has those restrictions, then out-of-state institutions from the home state may own or operate to the same extent and under the same terms and conditions that would apply to a Tennessee institution in the home state; and
    1. “Electronic cash dispensing device” means an electronic device other than a telephone operated by a consumer, through which a consumer may obtain cash by means of initiating an electronic fund transfer instruction to the consumer's depository institution to debit the consumer's deposit account. For purposes of this part, “electronic cash dispensing device” includes, but is not limited to, automated teller machines.
  2. A person other than a depository institution may own or operate, alone or in combination with other persons, one (1) or more electronic cash dispensing devices located or to be located in this state; provided, that the electronic cash dispensing device does not receive money on deposit.

Acts 1995, ch. 165, § 5; 2001, ch. 54, § 16; 2014, ch. 540, § 1.

Compiler's Notes. For the preamble to the act concerning electronic cash dispensing services, please refer to Acts 2014, ch. 540.

Attorney General Opinions. Ownership of automatic teller machine, OAG 96-056 (3/28/96).

45-2-620. Acceptance of deposits or placement in federally insured institutions — Deposits by state or other governmental entities.

  1. A state or national bank or savings institution or savings bank may accept funds for deposit or placement in federally insured institutions, within or without the state; provided, that the bank has entered into a deposit agreement or deposit placement agreement with the depositor.
  2. The depository may also enter into a custodial agreement with the customer to maintain any certificate of deposit or other evidences of the deposits so received or placed. Depositors for these purposes shall include the state or any governmental entity.

Acts 2005, ch. 432, § 3.

Part 7
Deposits in Banks

45-2-701. Interest on accounts.

Banks shall be invested with the right and power to receive money on deposit, allowing therefor to the depositor, if the corporation chooses so to contract, interest at a rate not in excess of the maximum rate of interest authorized by the laws of the United States or by regulations issued under authority of these laws to be paid on deposits by member banks of the federal reserve system or by nonmember banks whose deposits are insured by the federal deposit insurance corporation, whichever is lower.

Acts 1969, ch. 36, § 1 (3.201); T.C.A., § 45-404.

Cross-References. Negotiable instruments, title 47, ch. 3.

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Banks and Banking, §§ 31, 41.

45-2-702. Deposit of minor.

A bank may operate a deposit account in the name of a minor or in the name of two (2) or more persons, one (1) or more of whom are minors, with the same effect upon its liability as if the minors were of full age.

Acts 1969, ch. 36, § 1 (3.203); T.C.A., § 45-406.

45-2-703. Deposits in two or more names — Multiple-party deposit accounts.

  1. When a deposit has been made or is hereafter made, in any bank, in the names of two (2) or more persons, payable to either, or survivor, the deposit, or any part of the deposit, or any interest or dividend on the deposit, may be paid to either person, whether the others are living or not; and the receipt or acquittance of the person so paid shall be a valid and sufficient release and discharge to the bank for any payment so made. Any balance so created, including, but not limited to, any balance held by spouses, shall be subject to assignment by, or the claim of any creditor of, either depositor, as if the depositor were the sole owner of the funds; provided, that if the creditor realizes its claim by any means other than enforcement of an assignment, pledge, or the grant of a security interest made by any one (1) of the depositors, any other depositor not indebted to the creditor may, by commencing a separate action against the creditor, establish the rights that the depositor may have in the funds.
  2. A bank paying a survivor in accordance with subsection (a) is not liable for any estate, inheritance or succession tax due this state.
  3. As used in subsections (c)-(f), “multiple-party deposit account” means a deposit account, including a certificate of deposit, established in the names of, payable to, or in form subject to withdrawal by two (2) or more natural persons, or any of them, including, but not limited to, an account of the type described in subsection (a).
    1. When opening a multiple-party deposit account, or amending an existing deposit account so as to create a multiple-party deposit account, each bank shall utilize account documents that enable the depositor to designate ownership interest therein in terms substantially similar to the following:
      1. Joint tenants with right of survivorship;
      2. Additional authorized signatory; and
      3. Other deposit designations that may be acceptable to the bank.
    2. Account documents that enable the depositor to indicate the depositor's intent of the ownership interest in any multiple-party deposit account may include any of the following:
      1. The signature card;
      2. The deposit agreement;
      3. A certificate of deposit;
      4. A document confirming purchase of a certificate of deposit; or
      5. Other documents provided by the bank or deposit institution that indicate the intent of the depositor.
  4. Accounts described in subsection (c) shall establish the following interests:
    1. A designation of joint tenants with right of survivorship, or substantially similar language, shall be conclusive evidence in any action or proceeding of the intentions of all named that title vests in the survivor;
    2. The designation of a person as an additional authorized signatory, or substantially similar language, shall be conclusive evidence in any action or proceeding that the person so designated has power of attorney with respect to the account and is not an owner of the account;
    3. Other designations acceptable to the bank shall establish interests in accordance with their respective provisions; and
    4. In the absence of any specific designation in accordance with subsection (d), property held under the title, tenancy by the entireties, carries a right of survivorship; property held under the title, joint tenancy, carries no right of survivorship unless a contrary intention is expressly stated. Any other person to whose order the accounts or certificate of deposit is subject shall be presumed to have power of attorney with respect to the account or certificate of deposit and not to be an owner of the account or certificate of deposit. The presumptions may be rebutted by clear and convincing evidence presented in the course of legal or equitable proceedings. Final judicial determinations contrary to the presumptions shall not affect a bank's earlier payment in accordance therewith, or the limitations on liability conferred by  § 45-2-707(a) and (b).
  5. Without incurring any liability, any bank may, but shall not be required to, provide to depositors disclosures in form similar to the following:
    1. Joint tenants with right of survivorship.  This designation means that the deposit account or certificate of deposit shall become the property of each owner as joint tenants, and that the survivor is entitled to all moneys in the account or represented by the certificate even if the first person to die had a will specifically directing disposition to someone else. The bank may release all moneys in the account or represented by the certificate to, or honor checks or orders drawn by, or withdrawal requests from, the survivor upon the death of any joint tenant; and
    2. Additional authorized signatory.  This designation means that the person named as additional authorized signatory shall have authority during the lifetime of one (1) or more owners to withdraw moneys from the deposit account or represented by the certificate of deposit. Moneys remaining in the account or represented by the instrument upon the owner's death shall become part of the deceased owner's estate, subject to the deceased person's will or applicable law if the deceased person left no will. The bank may release all moneys in the account or represented by the certificate to, or honor checks or orders drawn by, or withdrawal requests from, the authorized signatory until notified of revocation of the authority.
  6. Subsections (c)-(f) shall not apply to any accounts in existence prior to January 1, 1989.

Acts 1969, ch. 36, § 1 (3.204); T.C.A., § 45-407; Acts 1983, ch. 110, § 1; 1988, ch. 926, §§ 1, 2; 2014, ch. 597, § 1.

Cross-References. Applicability to savings and loan associations and savings banks, § 45-2-106.

Textbooks. Pritchard on Wills and Administration of Estates (4th ed., Phillips and Robinson), §§ 439, 629.

Tennessee Jurisprudence, 5 Tenn. Juris., Banks and Banking, § 34.

Law Reviews.

Selected Tennessee Legislation of 1983 (N. L. Resener, J. A. Whitson, K. J. Miller), 50 Tenn. L. Rev. 785 (1983).

TennCare: Expanded Estate Recovery - Recover at ALL Cost, 45 U. Mem. L. Rev. 711 (2015).

Where There's a Will: New Tennessee Trusts Map Route to Better Estate Planning for Married Clients, 50 Tenn. B.J. 28 (2014).

NOTES TO DECISIONS

1. In General.

This statute applies to joint accounts even where the account is not a joint survivorship account. Simmons v. Foster, 622 S.W.2d 838, 1981 Tenn. App. LEXIS 542 (Tenn. Ct. App. 1981).

This section was designed to protect the paying bank, not to change a basic and fundamental form of property ownership in bank deposits. Griffin v. Prince, 632 S.W.2d 532, 1982 Tenn. LEXIS 402 (Tenn. 1982).

T.C.A. § 45-2-703 which absolves a bank of liability upon its payment to either joint tenant or the survivor, was enacted for the protection of the bank and does not affect the rights of the joint tenants, as between themselves, during their lifetime. Leffew v. Mayes, 685 S.W.2d 288, 1984 Tenn. App. LEXIS 3055 (Tenn. Ct. App. 1984).

2. Construction.

T.C.A. § 45-2-703 directs banks to use a certain type of document when opening or amending a deposit account. The reference is obviously to the signature card that is ordinarily used by banks for accounts subject to withdrawals. The section does not apply to certificates of deposit that require no signature card and provide no withdrawal until maturity. Roberts v. Roberts, 827 S.W.2d 788, 1991 Tenn. App. LEXIS 834 (Tenn. Ct. App. 1991).

Trial court erred in holding that certificates of deposit held by a decedent at the time of death were not covered by T.C.A. § 45-2-703, as that statute applied to such certificates; a holding to the contrary in Roberts v. Roberts, 827 S.W.2d 788, 1991 Tenn. App. LEXIS 834 (Tenn. App. 1991) was wrongly decided. Guess v. Finlay, — S.W.3d —, 2012 Tenn. App. LEXIS 241 (Tenn. Ct. App. Apr. 16, 2012).

T.C.A. § 45-2-703, which absolves a bank of liability upon its payment to either joint tenant or the survivor, was enacted for the protection of the bank and does not affect the rights of the joint tenants, as between themselves, during their lifetime. Knight v. Lancaster, 988 S.W.2d 172, 1998 Tenn. App. LEXIS 483 (Tenn. Ct. App. 1998), rehearing denied, — S.W.2d —, 1998 Tenn. App. LEXIS 567 (Tenn. Ct. App. 1998).

3. Payment to Survivor.

The comma after “either” and the word “or” seem to indicate that if the account is payable to either party, or to either party or survivor that the bank is protected if it pays the funds to the survivor. Simmons v. Foster, 622 S.W.2d 838, 1981 Tenn. App. LEXIS 542 (Tenn. Ct. App. 1981).

During the lifetime of joint tenants (other than husband and wife), with right of survivorship, the funds deposited in the an account are held in divisible parts and, upon the death of one, the other takes the whole only by survivorship. Leffew v. Mayes, 685 S.W.2d 288, 1984 Tenn. App. LEXIS 3055 (Tenn. Ct. App. 1984).

4. Tenancies by the Entireties.

This section does not indicate any legislative intent to abolish tenancy by the entirety in bank deposits held by spouses or to convert the accounts into some other form of ownership merely because they are payable to either or subject to individual checking or withdrawal. Griffin v. Prince, 632 S.W.2d 532, 1982 Tenn. LEXIS 402 (Tenn. 1982).

The 1983 amendment, which relieved the depository bank of the responsibility to resist a third party's claim to an account, did not abolish tenancy by the entirety. Edwards v. Edwards, 713 S.W.2d 642, 1986 Tenn. LEXIS 834 (Tenn. 1986), cert. denied, 479 U.S. 1024, 107 S. Ct. 863, 93 L. Ed. 2d 819, 1987 U.S. LEXIS 3 (1987).

5. Actions to Determine Ownership.

When a party to a joint bank account (not husband and wife) with a right of survivorship has, during the lifetime of the parties to the joint account, filed a lawsuit alleging that he put about one-half of the money into the account and prayed that one-half thereof be adjudged to him (the other party by intervening petition alleged that the original plaintiff had not paid any amount into the joint account and prayed that the certificate be delivered to him) and, while suit is pending, the other party to the joint account dies, the plaintiff may not amend the complaint and enforce a claim for the entire fund that the survivor. The joint tenants having differed on the ownership of the funds and having, during their lifetime, brought suit to establish their respective interest therein, the ownership of the funds must be determined in that lawsuit, even though one claimant died while the suit was pending. Leffew v. Mayes, 685 S.W.2d 288, 1984 Tenn. App. LEXIS 3055 (Tenn. Ct. App. 1984).

6. Presumptions.

Where funds are on deposit in a joint account with right of survivorship, during the lifetime of the joint tenants a rebuttable presumption arises that the parties own the money on deposit equally. Leffew v. Mayes, 685 S.W.2d 288, 1984 Tenn. App. LEXIS 3055 (Tenn. Ct. App. 1984); Knight v. Lancaster, 988 S.W.2d 172, 1998 Tenn. App. LEXIS 483 (Tenn. Ct. App. 1998), rehearing denied, — S.W.2d —, 1998 Tenn. App. LEXIS 567 (Tenn. Ct. App. 1998).

The presumption raised in T.C.A. § 45-2-703(e)(4) did not arise where depositor's friend was not listed as just an additional authorized signatory, but rather was designated as an owner of the account. Bligh v. Snider (Estate of Bligh), 30 S.W.3d 319, 2000 Tenn. App. LEXIS 94 (Tenn. Ct. App. 2000).

7. Estate of Decedent.

Where there was no evidence in the record regarding the issuance of certificates of deposit other than an agreement contained on the certificates showing son of deceased to be a joint tenant with the right of survivorship, the trial court's finding that the property represented by the certificates was includable in the deceased's estate could not be sustained. Nichols v. Nichols, 856 S.W.2d 397, 1993 Tenn. LEXIS 203 (Tenn. 1993).

8. Resulting Trusts.

The creation of a resulting trust is not a means to avoid the law with regard to joint tenancies with rights of survivorship. Nichols v. Nichols, 856 S.W.2d 397, 1993 Tenn. LEXIS 203 (Tenn. 1993).

9. Rights Between Depositors.

Even though a joint tenant may withdraw the entire fund, one who does withdraw funds in excess of his moiety is liable to the other joint tenant for the excess so withdrawn. Knight v. Lancaster, 988 S.W.2d 172, 1998 Tenn. App. LEXIS 483 (Tenn. Ct. App. 1998), rehearing denied, — S.W.2d —, 1998 Tenn. App. LEXIS 567 (Tenn. Ct. App. 1998).

A contractual agreement between the bank and the joint depositors does not conclusively determine the rights between the depositors during their lifetime. Knight v. Lancaster, 988 S.W.2d 172, 1998 Tenn. App. LEXIS 483 (Tenn. Ct. App. 1998), rehearing denied, — S.W.2d —, 1998 Tenn. App. LEXIS 567 (Tenn. Ct. App. 1998).

10. Delivery of Gift.

Delivery of gift was established where depositor of certificate of deposit designated a friend as joint owner of the funds giving the friend the unfettered right to withdraw them. Bligh v. Snider (Estate of Bligh), 30 S.W.3d 319, 2000 Tenn. App. LEXIS 94 (Tenn. Ct. App. 2000).

11. Garnishment.

Non-debtor depositor was entitled to dismissal of a garnishment of execution and a release of the funds in a joint bank account because the depositor was the sole source of the funds at issue and the judgment debtor had no right in or to the funds outside of a business partnership with the depositor. Trustmark Nat'l Bank v. Sunshine Carwash No. 5 Partners, — S.W.3d —, 2018 Tenn. App. LEXIS 179 (Tenn. Ct. App. Apr. 5, 2018).

12. Bank's Liability.

In a case in which plaintiff alleged that the bank modified a contract without plaintiff's consent by processing new signature cards that changed the ownership of the joint tenant with right of survivorship account, this statute did not provide the bank with protection from liability for removing plaintiff's name from a multiple-party joint tenancy with right of survivorship account because the bank did not pay the mother, the other joint tenant, all of the funds in the accounts. Estate of Haire v. Webster, — S.W.3d —, 2019 Tenn. LEXIS 146 (Tenn. Mar. 20, 2019).

45-2-704. Deposits in trust — Contracts with bank for payable-on-death accounts — Living trusts.

    1. Whenever any deposit is made in any bank by any person in trust for another, and no other or further notice of the existence and terms of a legal and valid trust is given in writing to the bank, the bank is entitled to deem the following with respect to the deposit, that:
      1. The person designated as trustee is the owner of the deposit account;
      2. The owner retains the right during the owner's lifetime to withdraw, assign or pledge the balance of the deposit account, in whole or in part, as though no survivor beneficiary had been named, and to delete or change a survivor beneficiary; and
      3. The interest of a person designated as beneficiary shall not vest until the death of the owner, or in the case of joint owners, until the death of the last surviving owner, and the interest shall be subject to any lien, assignment, pledge, right of offset or other claim that the bank could have asserted against the owner.
    2. No change in the designation of the survivor beneficiary is valid unless executed on a form and in a manner prescribed by the bank.
    3. The following terms shall be deemed to apply to the account, unless the owner notifies the bank otherwise:
      1. The interest of the beneficiary in the account vests, only if the beneficiary survives the last surviving owner;
      2. Multiple beneficiaries surviving the last surviving owner shall be entitled to equal shares of the account; and
      3. If no beneficiary survives, the account shall remain in the estate of the last surviving owner.
    4. When a deposit account is so established, the account, or any part of the account, or any interest in the account, may be paid to any owner during the owner's lifetime. On the death of the last surviving owner, the deposit account, or any part of the account, or interest in the account, unless otherwise provided by notice to the bank and its acknowledgement, may be paid either:
      1. To each designated beneficiary in equal shares; or
      2. To all beneficiaries as tenants in common, the duty of any apportionment among beneficiaries devolving to the beneficiary or beneficiaries receiving payment; and the receipt or acquittance of the person or persons so paid shall be a sufficient release and discharge of the bank from liability to any person for payment.
    5. In the event that any beneficiary, or any other person, contests any payment to a beneficiary, the bank may interplead the funds into a general sessions court, circuit court, or probate court with appropriate jurisdiction. A bank initiating, joining in, joined into, or defending in any manner, an interpleader action shall be entitled to recover from the funds tendered or offered to be tendered the costs of the action, including reasonable attorneys' fees.
    6. In determining persons to be paid, or shares to be paid, if a bank chooses to pay more than one (1) beneficiary, a bank is entitled to presume the survival of an owner, or beneficiary, and no payment need be made to a beneficiary until the person's entitlement by right of survivorship is confirmed by official death certificate or other proof acceptable to the bank.
    1. Any person, or persons jointly as tenants with right of survivorship, owning a deposit account may enter into a written contract with any bank whereby the balance of the deposit account may be made payable on the death of the last surviving owner to another person or persons, notwithstanding any provisions of law to the contrary.
    2. In creating the account, “payable-on-death” or “payable on the death of” may be abbreviated to “P.O.D.”
    3. The contract shall be deemed to contain a right on the part of an owner during the owner's lifetime both to withdraw, assign or pledge the balance of the deposit account, in whole or in part, as though no death payee had been named, and to delete or change a designated death payee.
    4. The interest of a death payee shall be deemed not to vest until the death of the owner, or, in the case of joint owners until the death of the last surviving owner, and the interest shall be subject to any lien, assignment, pledge, right of offset or other claim that the bank could have asserted against the owner.
    5. The following terms shall apply to the account, unless the contract provides otherwise:
      1. The interest of a death payee in the account vests only if the payee survives the last surviving owner;
      2. Multiple death payees surviving the last surviving owner shall be entitled to equal shares of the account; and
      3. If no death payees survives, the account shall remain in the estate of the last surviving owner.
    6. No change in the designation of a death payee shall be valid unless executed on a form and in a manner prescribed by the bank and authorized by all account owners living at the time of the change.
      1. When a deposit account is so established, the account, or any part of the account or any interest in the account, may be paid to any owner during the owner's lifetime. On the death of the last surviving owner, the deposit account, or any part of the account or any interest in the account, unless otherwise provided in the contract, may be paid either:
        1. To each designated death payee in equal shares; or
        2. To all death payees as tenants in common, the duty of any apportionment among death payees devolving to the death payee or payees receiving payment;(B)  The receipt or acquittance of the person or persons paid shall be a sufficient release and discharge of the bank from liability to any person for payment.
    7. In the event that any death payee or any other person contests any payment to a death payee, the bank may interplead the funds into a general sessions court, circuit court, or probate court with appropriate jurisdiction. A bank initiating an interpleader action shall be entitled to recover from the funds tendered the costs of the action, including reasonable attorneys' fees.
    8. In determining persons to be paid, or shares to be paid, if a bank contracts or chooses to pay more than one (1) death payee, a bank is entitled to presume the survival of an owner, or death payee, and no payment need be made to a death payee until the person's entitlement by right of survivorship is confirmed by official death certificate or other proof acceptable to the bank.
  1. No bank so paying the survivor or death payee shall be liable for any estate, inheritance or succession taxes due this state.
    1. Notwithstanding any provision of this section or any other law to the contrary, nothing contained within  this section shall be construed to prevent a living trust from being designated as a beneficiary of a payable-on-death account.
    2. Prior to accepting the designation of a living trust as beneficiary, a bank may require the account owner to deliver a copy of:
      1. Certificate or affidavit of trust:
        1. In the form and containing the information required by the bank;
        2. Signed by the grantor, trustee or both; and
        3. Notarized; or
      2. Other documents establishing the trust as may be acceptable to the bank.
    3. A bank may rely on the continuance of the trust and the information provided in the certificate, affidavit or other documentation, until the bank receives actual notice of any amendment, revocation or change, including, but not limited to, appointment of a co-trustee or successor trustee, or removal of a trustee. Actual notice shall not be effective until delivery of documentation acceptable to the bank to support the amendment, revocation or change.

Acts 1969, ch. 36, § 1 (3.205); T.C.A., § 45-408; Acts 1983, ch. 110, §§ 2, 3; 1991, ch. 51, § 1; 1993, ch. 39, §§ 1-5, 7-9; 1994, ch. 655, § 1; 2017, ch. 264, § 5.

Cross-References. “Payable-on-death” share accounts and share deposits in trust held by credit unions, § 45-4-406.

Applicability to savings and loan associations and savings banks, § 45-2-106.

Law Reviews.

Selected Tennessee Legislation of 1983 (N. L. Resener, J. A. Whitson, K. J. Miller), 50 Tenn. L. Rev. 785 (1983).

NOTES TO DECISIONS

1. Jurisdiction.

Because the origin of the decedent's surviving family members'  claim that the decedent's friend unduly influenced the decedent to close some of the decedent's bank accounts and to name the friend's spouse as the sole payable-on-death beneficiary on the remaining accounts did not change merely because the family members named the bank as a co-defendant, the undue influence claim arose from the common law, so that the issue of standing was not so interwoven with that of subject matter jurisdiction so as to be a jurisdictional prerequisite. Jarnigan v. Moyers, — S.W.3d —, 2018 Tenn. App. LEXIS 118 (Tenn. Ct. App. Mar. 2, 2018).

45-2-705. Final adjustment of statements of account.

  1. When a statement of account has been rendered by a bank to a depositor or has been mailed to the depositor's last known address, showing the condition of the depositor's account, the account shall, after the period of six (6) years from the date of the rendition of the statement, in the event no objection to the statement in writing has been theretofore made by the depositor or suit brought to correct same, be deemed finally adjusted and settled and its correctness conclusively presumed, and the depositor shall thereafter be barred from questioning the account for any cause. Banks shall accordingly not be required to preserve or keep their records or files relating thereto for a longer period than six (6) years.
  2. Nothing herein shall be construed to relieve the depositor from the duty now imposed by law of exercising due diligence in the examination of the account and vouchers, if any, accompanying the statement, when rendered by the bank and of immediate notification to the bank upon discovery of any error therein, nor from the legal consequences of neglect of that duty.

Acts 1969, ch. 36, § 1 (3.206); T.C.A., § 45-409.

45-2-706. Adverse claim to bank deposit.

Notice to any bank of an adverse claim to a deposit standing on its books to the credit of any person shall not be effectual to cause the bank to recognize the adverse claimant unless the adverse claimant shall procure a restraining order, injunction or other appropriate process against the bank from a court of competent jurisdiction.

Acts 1969, ch. 36, § 1 (3.207); T.C.A., § 45-410.

Cross-References. Applicability to savings and loan associations and savings banks, § 45-2-106.

NOTES TO DECISIONS

1. Jurisdiction.

Because the origin of the decedent's surviving family members'  claim that the decedent's friend unduly influenced the decedent to close some of the decedent's bank accounts and to name the friend's spouse as the sole payable-on-death beneficiary on the remaining accounts did not change merely because the family members named the bank as a co-defendant, the undue influence claim arose from the common law, so that the issue of standing was not so interwoven with that of subject matter jurisdiction so as to be a jurisdictional prerequisite. Jarnigan v. Moyers, — S.W.3d —, 2018 Tenn. App. LEXIS 118 (Tenn. Ct. App. Mar. 2, 2018).

45-2-707. Powers of attorney.

  1. A bank, which for the purposes of this section also includes a lessor, as defined in § 45-2-901, may recognize the authority of a power of attorney authorizing in writing an attorney-in-fact to operate, in whole or in part, the account of a depositor, or to access a customer's safe deposit box, until the bank receives written notice of the revocation of this authority.
  2. Written notice of the death or adjudication of incompetency of the depositor or customer shall constitute written notice of revocation of the authority of the attorney-in-fact, except where the Uniform Durable Power of Attorney Act, compiled in title 34, chapter 6, part 1, is applicable. Until the bank receives written notice of adjudication of incompetency of the depositor, the bank's authority to recognize a power of attorney shall not be rendered ineffective by the incompetency, whether existing at the time the power of attorney is granted or at the time the bank acts upon it.
  3. Notwithstanding that a bank has received written notice of revocation of the authority of the attorney-in-fact, it may, until ten (10) days after receipt of notice, pay any item made, drawn, accepted or endorsed by the attorney-in-fact prior to the revocation; provided, that the item is otherwise properly payable.
  4. No bank shall be liable for damages, penalty or tax by reason of any payment made or property withdrawn pursuant to this section.

Acts 1969, ch. 36, § 1 (3.208); T.C.A., § 45-411; Acts 1983, ch. 299, § 9; 1988, ch. 926, § 3.

Cross-References. “Payable-on-death” share accounts and share deposits in trust held by credit unions, § 45-4-406.

Applicability to savings and loan associations and savings banks, § 45-2-106.

Uniform Durable Power of Attorney Act, title 34, ch. 6.

Law Reviews.

Selected Tennessee Legislation of 1983 (N. L. Resener, J. A. Whitson, K. J. Miller), 50 Tenn. L. Rev. 785 (1983).

45-2-708. Payment when no executor or administrator qualifies.

    1. Notwithstanding § 30-2-317, where no executor or administrator of a deceased depositor has qualified and given notice of the person's qualifications to the bank, the bank may, in its discretion, and at any time after thirty (30) days from the death of the depositor, pay out of all accounts, maintained with it by the depositor in an individual capacity, all sums that do not exceed fifteen thousand dollars ($15,000) in the aggregate:
      1. To the executor named in any will known to the bank; or
      2. In the absence of knowledge of a purported will naming a surviving executor to:
        1. A creditor for expenses of the funeral;
        2. A creditor for the expenses of the last illness;
        3. The surviving spouse; and
        4. The next of kin.
    2. In the case of conflicting claims, the order of priority shall be that set out in subdivision (a)(1)(B).
  1. The receipt of any guardian, administrator or executor, duly appointed or qualified by the courts of this state, or any other state, acknowledging the payment or transfer of funds, standing in the name of the person whose estate the fiduciary represents, in the form of deposits in banking institutions, shall be a good and sufficient acquittance for payment or transfer and shall constitute a valid defense in favor of the banks against the demands or claims of all parties.
  2. No bank shall be liable for damages, penalty or tax by reason of any payment made pursuant to this section.

Acts 1969, ch. 36, § 1 (3.209); T.C.A., § 45-412; Acts 1980, ch. 615, § 1; 1988, ch. 926, § 4; 1991, ch. 136, § 1; 1995, ch. 103, § 1; 1997, ch. 426, § 22; 2000, ch. 570, § 1; 2016, ch. 804, § 2.

Compiler's Notes. Acts 1995, ch. 103, § 2 provided that the amendment by that act applies to all estates where the decedent has died after July 1, 1995.

Acts 1997, ch. 426, § 26 provided that the amendments to this section by that act shall apply to all estates of decedents dying on or after January 1, 1998 and to all wills, other documents and proceedings related thereto.

Textbooks. Pritchard on Wills and Administration of Estates (5th ed., Robinson and Mobley), § 1133.

Law Reviews.

Joint Bank Accounts Jus Accrescendi in Tennessee, 7 Mem. St. U. L. Rev. 332.

45-2-709. Reserve against deposits.

A state bank shall maintain a reserve against deposits in the form and manner that the commissioner prescribes by regulation. In promulgating regulations hereunder, the commissioner shall consider the reserve requirements of the federal Monetary Control Act of 1980, 94 Stat. 132, and the liquidity needs of state banks.

Acts 1969, ch. 36, § 1 (3.249); 1973, ch. 294, § 6; T.C.A., § 45-427; Acts 1981, ch. 226, § 1.

Compiler's Notes. The Monetary Control Act of 1980, referred to in this section, is compiled as 12 U.S.C. §§ 248, 248a, 342, 347b, 355, 360, 412, 461, 463, 505, 1425a (repealed).

NOTES TO DECISIONS

1. Reserve.

The rule that the reserve may consist, not only of cash, but of the balance due by bank and bankers to the bank when payable on demand, does not include the portions of the balances as have been subjected to counter or offsetting obligations of an insolvent bank to a correspondent bank. State ex rel. Robertson v. Thomas W. Wrenne & Co., 170 Tenn. 131, 92 S.W.2d 416, 1935 Tenn. LEXIS 117 (1935).

45-2-710. Statute of limitations.

An action to enforce the obligation of a bank to pay all or part of the balance of a deposit account or certificate of deposit, collectively a deposit, must be commenced within six (6) years of the earlier of the following:

  1. The time that the six-year statute of limitations period begins to run under § 47-3-118(e)(1), if the deposit is a certificate of deposit subject to title 47, chapter 3; or
  2. The later of:
    1. The maturity date of the deposit, as set forth in the applicable original contract of deposit;
    2. The due date of the deposit indicated in the bank's last written notice of renewal sent pursuant to § 45-2-618;
    3. The date of the last written communication from the bank recognizing the bank's obligation with respect to the deposit; or
    4. The last day of the taxable year for which the owner of the deposit last reported interest income earned on the deposit on either a federal or state income tax return.

Acts 2005, ch. 30, § 1.

NOTES TO DECISIONS

1. Jurisdiction.

Because the origin of the decedent's surviving family members'  claim that the decedent's friend unduly influenced the decedent to close some of the decedent's bank accounts and to name the friend's spouse as the sole payable-on-death beneficiary on the remaining accounts did not change merely because the family members named the bank as a co-defendant, the undue influence claim arose from the common law, so that the issue of standing was not so interwoven with that of subject matter jurisdiction so as to be a jurisdictional prerequisite. Jarnigan v. Moyers, — S.W.3d —, 2018 Tenn. App. LEXIS 118 (Tenn. Ct. App. Mar. 2, 2018).

45-2-711. Payment and negotiation of check when no estate has been opened or the estate has been closed.

    1. Notwithstanding § 30-2-317, where no executor or administrator of a decedent has qualified and given notice of the person's qualifications to the bank, or where the qualified executor or administrator of a decedent has been discharged and a check or checks made payable to the decedent or the decedent's estate is presented to the bank for payment or collection, the bank may, in its discretion, and at any time after ninety (90) days from the death of the deceased, negotiate or send for collection and pay out the proceeds of one (1) or more checks made payable to the decedent or the decedent's estate, whether written or electronic, all sums that do not exceed ten thousand dollars ($10,000) in the aggregate:
      1. To the executor named in any will known to the bank whether probated or not;
      2. To any personal representative appointed by a court whether active or discharged; or
      3. In the absence of knowledge of a purported will naming a surviving executor or an administrator to the:
        1. Surviving spouse; or
        2. Next of kin.
    2. In the case of conflicting claims, the order of priority shall be that set out in subdivision (a)(1).
  1. The receipt of any guardian, administrator or executor, duly appointed or qualified by the courts of this state, or any other state, or of any spouse or next of kin acknowledging the negotiation, payment or transfer of funds of a check, standing in the name of the person whose estate the fiduciary represents, shall be a good and sufficient acquittance for payment or transfer and shall constitute a valid defense in favor of the bank against the demands or claims of all parties.
  2. The negotiation or payment of a check under this section without an endorsement of the payee or with the endorsement of a person authorized by this section to negotiate the check shall not be a violation of or give rise to any claim under title 47, chapter 3 or 4.
  3. No bank shall be liable for damages, penalty or tax by reason of any payment made pursuant to this section.

Acts 2014, ch. 597, § 2; 2016, ch. 804, §§ 3-5.

45-2-712. Acknowledgement or affidavit; guaranty.

  1. A bank shall require any persons seeking to cash checks payable to a decedent as provided in § 45-2-711 to deliver to the bank an affidavit, given under the penalty of perjury, in a form acceptable to the bank that, at the minimum, contains the following:
    1. The name of the decedent;
    2. The decedent's date of death;
    3. The amount and payor of any checks, if the funds are from checks or electronic payments;
    4. The identity of the creditor or creditors to whom the funds are to be paid, if the funds are to be paid directly to a creditor of the decedent or the decedent's estate; and
    5. If the funds are to be paid other than to a creditor of the decedent or the decedent's estate, the affiant shall:
      1. Identify the decedent's surviving spouse and heirs at law, and provide their residence addresses; and
      2. Affirmatively state that:
        1. There are no unpaid creditors of the decedent;
        2. There are no unpaid income, gift, estate, inheritance or other transfer taxes owed by the decedent or the estate of the decedent; and
        3. The funds distributed to the affiant will be distributed by the affiant as provided in any will or testamentary document or in appropriate shares to the decedent's heirs at law.
  2. A bank may, in its discretion, require any persons seeking to collect monies from a deceased depositor's account or accounts, as provided in § 45-2-708, to deliver to the bank an affidavit, given under penalty of perjury in a form acceptable to the bank as provided in subsection (a).
  3. A bank may require any person who obtains funds from a deposit account pursuant to § 45-2-708 or to negotiate checks pursuant to § 45-2-711 to provide an indemnity and guarantee to the bank in the amount of the funds obtained.

Acts 2014, ch. 597, § 2.

Part 8
Deposit Insurance

45-2-801. Membership in federal deposit insurance corporation authorized.

Any state bank is empowered, on the authority of its board of directors or the majority of the board, and with the approval of the commissioner, to enter into contracts, incur obligations and generally to do and perform any and all acts and things whatsoever necessary or appropriate in order to take advantage of any and all memberships, loans, subscriptions, contracts, grants, rights or privileges that may at any time be available or inure to banking institutions or to their depositors, creditors, stockholders, conservators, receivers or liquidators, by virtue of those provisions of § 8 the Federal Banking Act of 1933, § 12B of the Federal Reserve Act, which established the federal deposit insurance corporation, and in order to provide for the insurance of deposits or to take advantage of any other provisions of that or any other act or resolution of congress to aid, regulate or safeguard banking institutions or their depositors, including any amendments or substitutions; and to subscribe for and acquire any stock debentures or other types of insurance of the federal deposit insurance corporation and to comply with all lawful regulations and requirements from time to time issued or made by that corporation.

Acts 1969, ch. 36, § 1 (3.322); 1973, ch. 294, § 6; T.C.A., § 45-501.

Cross-References. Applicability of part to industrial banks for thrift certificate purposes, § 45-5-604.

Negotiable instruments, title 47, ch. 3.

Trustees and guardians, investment of funds in certificates of deposit and saving accounts where insured, § 35-3-114.

45-2-802. Appointment of federal deposit insurance corporation as receiver of state bank — Powers and duties.

  1. The federal deposit insurance corporation may be appointed receiver of any state bank, the deposits in which are to any extent insured by that corporation and that has been closed on account of inability to meet the demands of its depositors, or otherwise by the law of Tennessee.
  2. The commissioner, after taking possession of a state bank, shall have the right to appoint the federal deposit insurance corporation as receiver.
  3. Upon acceptance of the appointment as receiver, the federal deposit insurance corporation shall not be required to post bond or security.
  4. If the corporation accepts the appointment, it shall have and possess all of the duties, powers, and privileges provided by the laws of this state with respect to receivers of closed banks, except insofar as the duties, powers, and privileges are in conflict with the Federal Deposit Insurance Act. In addition, the federal deposit insurance corporation as receiver shall have the right to make an emergency sale of assets of a closed bank, as provided in part 15 of this chapter.

Acts 1969, ch. 36, § 1 (3.322); 1973, ch. 294, § 6; T.C.A., § 45-502; Acts 1980, ch. 510, § 1.

Compiler's Notes. The Federal Deposit Insurance Act referred to above is compiled in 12 U.S.C. §§ 1811-1832.

Law Reviews.

State Regulation of Bank Holding Companies and the Future of Interstate Banking: A Tennessee Perspective (Colman B. Hoffman and Kathryn R. Edge), 51 Tenn. L. Rev. 383 (1984).

NOTES TO DECISIONS

1. Receivership.

Where a statutory bank receivership has been instituted pursuant to statutory authority, the proceeding is pending until all statutory directives are complied with and the final accounting is approved. In re United Southern Bank, 718 S.W.2d 251, 1986 Tenn. LEXIS 797 (Tenn. 1986).

T.C.A. § 45-2-802 and § 45-2-805 give discretionary authority, co-extensive with that permitted by federal law, to the receiver to enter into a purchase and assumption agreement. In re Liquidation of United Am. Bank, 743 S.W.2d 911, 1987 Tenn. LEXIS 1072 (Tenn. 1987).

2. Parties.

Debtors and prospective debtors have no standing to intervene at any stage of a bank receivership pursuant to chapters 1 and 2 of this title. In re United Southern Bank, 718 S.W.2d 251, 1986 Tenn. LEXIS 797 (Tenn. 1986).

45-2-803. Subrogation rights of federal deposit insurance corporation on payment of insured deposits.

Whenever any state bank is closed and the federal deposit insurance corporation has paid or made available for payment the insured deposit liabilities of the closed institution, the corporation, regardless of whether it has become liquidating agent, shall be and become subrogated to all rights against the closed bank of the owners of the deposits in the same manner and to the same extent as subrogation of the corporation is provided for in subsection (1) of § 12B of the Federal Reserve Act, § 8 of the Banking Act of 1933, in the case of the closing of a national bank, and shall be generally subrogated to all rights of the depositors as provided by the laws of Tennessee; provided, that the rights of depositors and other creditors of the closed institution shall be determined in accordance with the applicable provisions of the laws of this state.

Acts 1969, ch. 36, § 1 (3.322); T.C.A., § 45-503.

Compiler's Notes. Section 8 of the Banking Act of 1933 (formerly section 12B of Federal Reserve Act) is found in 12 U.S.C. §§ 1811-1831.

NOTES TO DECISIONS

1. Purchase and Assumption Agreements.

When not all assets and liabilities are included in a purchase and assumption agreement, the FDIC, as a corporation, not only holds the subrogated claims of the assumed creditors, but it also becomes the surety of the FDIC, as a receiver, for the value of the transferred assets in an amount equal to the value of the assets of the insolvent. In re Liquidation of United Am. Bank, 743 S.W.2d 911, 1987 Tenn. LEXIS 1072 (Tenn. 1987).

45-2-804. Commissioner to furnish deposit insurance corporation copies of examinations and other information.

The commissioner may furnish to the corporation, or to any official or examiner of the corporation, a copy or copies of any or all examinations made of the bank, and of any or all reports made by same, and shall give access and disclose to the corporation, or any official or examiner of the corporation, any and all information possessed by the office of the commissioner with reference to the conditions or affairs to the insured institution.

Acts 1969, ch. 36, § 1 (3.322); 1973, ch. 294, § 6; T.C.A., § 45-504.

45-2-805. Loans to closed banks — Security — Sale of assets.

  1. With respect to any bank that is now or may hereafter be closed on account of inability to meet the demands of its depositors, or by action of the commissioner or of a court, or by action of its directors, or in the event of its insolvency or suspension, the commissioner and/or the receiver or liquidator of the institution, with the permission of the commissioner, may borrow from the federal deposit insurance corporation and pledge or mortgage any part or all of the assets of the institution to the corporation as security for a loan by it; provided, that where the corporation is acting as the receiver or liquidator, the order of a court of record of competent jurisdiction shall be obtained first approving the loan. The commissioner, upon the order of a court of record of competent jurisdiction, and upon a like order and with the permission of the commissioner, the receiver or liquidator of the institution may sell to the corporation any part or all of the assets of the institution.
  2. This section shall not be construed to limit the power of any bank, the commissioner or receivers or liquidators to pledge or sell assets in accordance with any existing law.

Acts 1969, ch. 36, § 1 (3.322); 1973, ch. 294, § 6; T.C.A., § 45-505.

NOTES TO DECISIONS

1. Purchase and Assumption Agreements.

T.C.A. § 45-2-802 and § 45-2-805 give discretionary authority, co-extensive with that permitted by federal law, to the receiver to enter into a purchase and assumption agreement. In re Liquidation of United Am. Bank, 743 S.W.2d 911, 1987 Tenn. LEXIS 1072 (Tenn. 1987).

45-2-806. Depositories of public funds exempt from security requirements to extent of deposit insurance.

Notwithstanding any provisions of the existing laws of this state that may require security for the deposit of the public funds of the state or of any political subdivision of the state or of any municipality created under the laws of the state, in the form of a surety bond, deposit of collateral or otherwise, hereafter no bank receiving the deposits shall be required to furnish any security for the deposits, to the extent that the deposits are now insured under § 8 of the Banking Act of 1933, compiled in 12 U.S.C. §§ 1811 et seq.

Acts 1969, ch. 36, § 1 (3.322); T.C.A., § 45-506.

Cross-References. Applicability to savings and loan associations and savings banks, § 45-2-106.

Part 9
Safe Deposit and Safekeeping

45-2-901. Part definitions.

As used in this part, unless the context otherwise requires:

  1. “Agent” means any person duly authorized in writing by a lessee to enter a safe deposit box rented by the lessee, whether the person be denominated as “agent,” “deputy,” “attorney-in-fact,” or otherwise. The agent's authority shall be established and shall continue until revoked, both in accordance with § 45-2-707;
  2. “Fiduciary” means trustee, agent, executor, administrator, committee, guardian or conservator for a minor or other incompetent person, receiver, trustee in bankruptcy, assignee for creditors or any holders of a similar position of trust;
  3. “Lessee” means a person contracting with a lessor for the use of a safe deposit box;
  4. “Lessor” means a bank or subsidiary corporation of a bank renting safe deposit facilities, and includes a safe deposit company organized and operating under the jurisdiction of the department solely for the purpose of leasing safe deposit facilities; and
  5. “Safe deposit box” means a safe deposit box, vault, or other safe deposit receptacle maintained by a lessor and the rules relating thereto apply to property or documents kept in safekeeping in the bank's vault.

Acts 1969, ch. 36, § 1 (3.220); T.C.A., § 45-415; Acts 1984, ch. 624, § 1; 1988, ch. 926, § 5.

Cross-References. Applicability of part to savings and loan associations and savings banks, § 45-2-106.

Negotiable instruments, title 47, ch. 3.

45-2-902. Authority to engage in leasing safe deposit facilities — Liability of lessor.

Any bank has the right to construct a vault on its real estate, or on premises leased by it, or to rent any vault that, in the judgment of the directors, will provide reasonable means of safety against loss by theft, fire or other cause, in which vault may be placed safes, boxes, or receptacles, for the keeping of jewelry, diamonds, gold, bank notes, bonds, notes, and other valuables, and that may be rented by the bank to other persons on the terms agreed to by the parties, but it is understood that in no event shall the bank be liable for any loss of the jewelry, diamonds, gold, bank notes, bonds, notes, or other valuables by theft, robbery, fire, or other cause, the bank not being the insurer of the safety of the property, nor in any manner liable for the safety of the property. The bank is not required to take any note of property thus deposited, as the person who rents a safe, box, or receptacle is, for the term of the lease, the owner thereof.

Acts 1969, ch. 36, § 1 (3.221); T.C.A., § 45-416.

Decisions Under Prior Law

1. Nature of Relationship with Renter.

Where a purchaser of a bond from a bank understood the bond was to be placed in her father's tin box in the bank's vault, but she relied on the promise of the bank president to take care of the bond for her, and he assured her that it would be safely kept, and he himself selected the father's box that the receptacle for the bond, the bank clearly became a bailee of the bond itself, and not a mere bailee of the father's box. Pennington v. Farmers & Merchants Bank, 144 Tenn. 188, 231 S.W. 545, 1920 Tenn. LEXIS 72, 17 A.L.R. 1213 (1921).

The relationship between a national bank and the renter of a safe deposit box installed in the bank's vault is that of bailor and bailee. Young v. First Nat'l Bank, 150 Tenn. 451, 265 S.W. 681, 1924 Tenn. LEXIS 20, 40 A.L.R. 868 (1924).

The rental of safe deposit boxes by banks creates a bailment relationship between the bank and the customer and the bank can be liable for loss or damage to bailed property if the bank fails to meet its duty of care to provide the customer with a level of care commensurate with that of banks in similar communities. Paehler v. Union Planters Nat'l Bank, 971 S.W.2d 393, 1997 Tenn. App. LEXIS 564 (Tenn. Ct. App. 1997).

2. Care Required.

Usage and custom in a particular business reflect on the care exacted of the bailee, but in an action against a bank to recover the value of a bond stolen from its vault by burglars, it was not competent to permit proof of what one or two other banks may or may not have done toward safeguarding their valuables, nor of the business policy of burglary insurance companies, nor of the advertisements of the bank, where the plaintiff relied wholly on the personal assurances from the bank president. Pennington v. Farmers & Merchants Bank, 144 Tenn. 188, 231 S.W. 545, 1920 Tenn. LEXIS 72, 17 A.L.R. 1213 (1921).

Proof that a bank in a small town, that did not represent or advertise that its safe deposit boxes were burglar proof, did not employ any night watchmen, only kept electric lights burning in bank until approximately 11 o'clock p.m., did not equip the building with burglar alarm, and deposited its own securities in a screw door steel safe, does not show lack of ordinary care to protect the complainant's bonds deposited in safe deposit box from burglary, for the term “safe deposit box” is a trade-name, and it does not mean that the boxes are burglar proof. Young v. First Nat'l Bank, 150 Tenn. 451, 265 S.W. 681, 1924 Tenn. LEXIS 20, 40 A.L.R. 868 (1924).

Plaintiff's action for loss of items placed in safety deposit box was properly dismissed where there was no allegation that the bank failed to exercise the care required of banks in safeguarding property deposited in a safety deposit box. Whitaker v. First Am. Corp., 779 S.W.2d 383, 1989 Tenn. App. LEXIS 482 (Tenn. Ct. App. 1989).

45-2-903. Access by fiduciaries.

  1. Where a safe deposit box is made available by a lessor to one (1) or more fiduciaries, the lessor may, except as otherwise expressly provided in the lease or the writings pursuant to which the fiduciaries are acting, allow access thereto to any one (1) or more of the fiduciaries or to any agent authorized in writing by any one (1) or more of the fiduciaries.
  2. The lessee, the lessee's estate or any successor fiduciary is bound by any dealings between the agent and the lessor pursuant to a power granting the agent access to a safe deposit box until the lessor has written notice of revocation of that power.

Acts 1969, ch. 36, § 1 (3.222); T.C.A., § 45-417.

45-2-904. Lease to minor.

A bank may lease a safe deposit box to and in connection therewith deal with a minor with the same effect as if leasing to and dealing with a person of full legal capacity.

Acts 1969, ch. 36, § 1 (3.223); T.C.A., § 45-418.

45-2-905. Death of persons having access.

  1. No lessor shall rent any safe deposit box without first requiring all persons entitled to access to the safe deposit box to agree in writing to notify the lessor of the death of a sole or last surviving lessee of the safe deposit box, and all persons having the right of access to the safe deposit box, upon the death of the other person having the right of access to the safe deposit box, before seeking access, shall notify the lessor of the death of the lessee, and the lessor may rely conclusively upon the absence of notification in allowing a person with a right of access to enter the box.
  2. Access to a safe deposit box shall be in accordance with the agreement between a lessor and lessee or lessees. The death of a person authorized access to a safe deposit box by the agreement shall not terminate the access of others so authorized in all cases where there is a surviving lessee, whether the surviving lessee is an individual, trust, corporation or other entity, unless further access is restricted by the agreement or by court order.
  3. Upon the death of the sole or last surviving lessee of a safe deposit box, access is authorized as follows:
    1. The duly qualified executor or administrator of the lessee may have access to and remove contents from the safe deposit box, without inventory unless an inventory is required by the lessor or by court order;
    2. In order to search for and remove any written instrument purporting to be the lessee's last will and testament, or any writing relating to a burial plot or burial instructions, or any writing purporting to be an insurance policy on the life of the lessee, a lessor shall permit a person named in a court order for that purpose, or if no order has been served upon the lessor, the lessee's spouse, parent, adult sibling or adult descendant, or a person named as executor in a copy of the lessee's purported will provided to the lessor, or any person with a right of access to the safe deposit box immediately prior to the death of the lessee, to open the safe deposit box with an officer or employee of the lessor and remove the documents. A record of items removed from the box by the person authorized entry shall be made by the lessor and the other person. If a purported will is found that does not name as executor the person conducting the will search with the lessor's representative, the lessor may make a copy thereof and mail or deliver it to the executor named therein, or to the court having jurisdiction of the decedent's estate according to the decedent's domicile as declared in the instrument; and
    3. If an executor or administrator of the lessee's estate has not requested access to the contents within sixty (60) days following the lessee's death, the lessor may then permit access by the surviving spouse or any next-of-kin of the lessee for the purposes of inventory and the removal of contents. Prior to removal, an officer or employee of the lessor and the surviving spouse or next-of-kin of the lessee shall inventory the contents of the box and prepare a record thereof to be retained by the lessor.
  4. Upon the death of the sole or last surviving lessee, the lessor shall notify the department of revenue of the death of the lessee and the existence of a safe deposit box within thirty (30) days of the time the lessor has actual knowledge of the lessee's death. The lessor shall retain records made pursuant to subsection (c) for a period of three (3) years after entry. Chapter 10 of this title notwithstanding, the lessor shall provide copies of the record to the department upon its request, to the executor or administrator of the decedent upon request, and to any party designated by court order, and the lessor may elect to provide copies to any person authorized access to the box at the time of the decedent's death, or to any person having a degree of kinship to the decedent equal to that of the next-of-kin who received contents following the death of the decedent.
  5. A lessor shall not be liable to any person for the removal or loss of any contents from a safe deposit box during a period of access by an executor or administrator of a deceased lessee, or by any other person or persons authorized access to open and examine contents, whether the property removed or lost is that of the decedent's estate, a surviving lessee, or any other person, and the lessor is entitled to its expenses in defending against such a claim of liability.
  6. To the extent that there is a conflict between this section and § 67-8-417 or § 67-8-418, this section shall control.

Acts 1969, ch. 36, § 1 (3.224); 1974, ch. 597, §§ 1, 2; T.C.A., § 45-419; Acts 1984, ch. 624, § 2; 1993, ch. 107, §§ 1, 2; 1998, ch. 1085, § 1.

Cross-References. Access to box after death, § 67-8-418.

Textbooks. Pritchard on Wills and Administration of Estates (4th ed., Phillips and Robinson), §§ 316, 964.

45-2-906. Adverse claims to contents of safe deposit box.

  1. An adverse claim to the contents of a safe deposit box, or to property held in safekeeping, is not sufficient to require the lessor to deny access to its lessee unless:
    1. The lessor is directed to do so by order of a court of competent jurisdiction; or
    2. The safe deposit box is leased or the property is held in the name of the lessee with the addition of words indicating that the contents or property are held in a fiduciary capacity, and the adverse claim is supported by a written statement of facts disclosing that it is made by or on behalf of a beneficiary and that there is reason to know that the fiduciary will misappropriate the trust property.
  2. A claim is also an adverse claim where one (1) of several lessees claims, contrary to the terms of the lease, an exclusive right of access, or where one (1) or more persons claim a right of access as agents or officers of a lessee to the exclusion of others as agents or officers, or where it is claimed that a lessee is the same person as one using another name.

Acts 1969, ch. 36, § 1 (3.225); T.C.A., § 45-420.

45-2-907. Special remedies for nonpayment of rent.

  1. Notice.  If the rental due on a safe deposit box has not been paid, the lessor shall, not sooner than thirty (30) days nor later than four (4) years after the rental was due, send a notice by certified mail, return receipt requested, or by registered mail to the last known address of the lessee, stating that unless payment of the rental is made within thirty (30) days after the date of the notice:
    1. The safe deposit box will be opened and its contents stored for a minimum of one (1) year at the expense of the lessee;
    2. Without additional notice to the lessee, the contents may be offered for sale and unsold or unsalable items will be destroyed; and
    3. The proceeds of the sale, less expenses, unpaid rental charges, and storage will be transferred to the state treasurer pursuant to title 66, chapter 29, part 1.
  2. Inventory and Report to State Treasurer.  If the rental is not paid within thirty (30) days from the mailing of the notice, the box shall be opened in the presence of an officer or employee of the lessor and a notary public who also may be, but is not required to be, an officer or employee of the lessor. Those persons shall take an inventory of the contents of the safe deposit box. The contents, together with the inventory, shall be sealed in a package by the notary public who shall write on the outside the name of the lessee and the date of the opening. The lessor shall report the name and last known address of the lessee and the contents of the box, as attested by the notary public, to the state treasurer pursuant to title 66, chapter 29, part 1. The report shall be delivered to the state treasurer in a format as prescribed by the state treasurer and shall be due on May 1 of the year following the calendar year in which the box is opened. The package shall then be retained by the lessor at a rental not exceeding the rental charges for the box.
    1. Disposition of Property.  Prior to an auction or sale, the following types of property may be rejected as unsalable by an independent appraiser, an auctioneer, or the lessor and disposed of in the following manners:
      1. Documents or writings of a private nature having little or no apparent value may be destroyed by the lessor;
      2. Coins or currency with a face value of twenty dollars ($20.00) or less each that are valued at no more than twice the face value, shall be treated as proceeds from a sale and deposited as provided in subsection (e);
      3. Coins or currency with a face value of greater than twenty dollars ($20.00) each that are valued at one hundred twenty-five percent (125%) or less of face value, shall be treated as proceeds from a sale and deposited as provided in subsection (e);
      4. Any tangible item having an estimated sale value of less than twenty-five dollars ($25.00) may be destroyed by the lessor; provided, that the aggregate value of the items for a specific lessee does not exceed two hundred fifty dollars ($250); and
      5. Any tangible property including, but not limited to, stocks, bonds and promissory notes, shall be delivered to the state treasurer pursuant to title 66, chapter 29, part 1.
    2. A current version of any recognized numismatist publication may be utilized for purposes of valuation of coins and currency.
  3. Sale of Property.  If the contents of the safe deposit box have not been claimed and redeemed by the payment of charges within one (1) year after filing the report with the state treasurer, but not before May 1 of the succeeding year, the lessor shall sell the contents of the box at public auction or by other commercially reasonable sale at whatever time and place affords, in the judgment of the lessor, the most favorable price for the property involved. For purposes of this section, “commercially reasonable” includes, but is not limited to, a sale that would be commercially reasonable under § 47-9-610, or a sale, or sale methodology, that is approved by the commissioner of financial institutions. A lessor may sell the contents of safe deposit boxes in a sale conducted exclusively for the lessor, or in a sale conducted jointly for the lessor and any number of other financial institutions or other entities. The time, place and manner of any public sale shall be posted conspicuously on the premise, of the lessor and advertised once in a newspaper of general circulation in the community, or in some other commercially reasonable manner of advertising. Property sold through other than a public auction shall be appraised, in writing, by a person who does not acquire the appraised contents and who is regularly engaged in the business of appraising, buying or selling like merchandise, or any other combination thereof. Firearms shall be sold through a federal firearm licensed dealer, or if sold at public auction, through an auctioneer who possesses a federal firearm license.
  4. Disposition of sale proceeds.  The monetary proceeds resulting from any sale conducted pursuant to this section, after deducting accumulated charges, including a proportionate share of the expense of advertising and conducting the sale, shall be deposited to the credit of the lessee in any existing account maintained by the lessor on behalf of the lessee; provided, that the deposit shall not constitute account activity under title 66, chapter 29, part 1. If no account exists, proceeds shall be delivered to the state treasurer pursuant to title 66, chapter 29, part 1.
  5. Immunity for Destruction of Property.  Property offered for sale at a public auction or other commercially reasonable sale for which no purchaser exists shall be destroyed by the lessor and no action or proceeding may be maintained against the lessor, the independent appraiser or auctioneer, the state treasurer or any of their employees for or on account of the action. If, prior to the sale, the property is rejected by an independent appraiser or auctioneer in accordance with subsection (c), the property shall be destroyed by the lessor and no action or proceeding may be maintained against the lessor, the independent appraiser or auctioneer, the state treasurer or any of their employees for or on account of the action.
  6. Final Report.  After disposition of all contents of a safe deposit box, the lessor shall provide to the state treasurer an updated inventory on the contents of the box, together with property not sold pursuant to subdivision (c)(5). The report shall include information that the state treasurer may, by rule and regulation, direct.

Acts 1969, ch. 36, § 1 (3.226); T.C.A., § 45-421; Acts 1983, ch. 78, §§ 6-8; 1985, ch. 181, § 1; 1994, ch. 773, § 1; 1999, ch. 194, § 1; 2008, ch. 677, § 1.

Compiler's Notes. Acts 1999, ch. 194, § 1 provided that for the purpose of transitioning from the law in effect prior to May 19, 1999, to the process specified in this section, the following provisions shall apply:

  1. The contents of all safe deposit boxes opened pursuant of this section, on and after May 19, 1999, shall be subject to the provisions of this section as amended by Acts 1999, ch. 194, § 1; and
  2. The contents of all safe deposit boxes opened pursuant of this section, prior to May 19, 1999, shall be subject to the notice provisions of prior law; provided, that the financial institution may elect to apply the provisions of subsections (c)-(g) of this section as amended by Acts 1999, ch. 194, § 1, to the sale and disposal of such property.

    Cross-References. Certified mail instead of registered mail, § 1-3-111.

    Compiler's Notes. Former § 45-2-908 (Acts 1998, ch. 1085, § 4), concerning required notices to safe deposit box lessees, was repealed by Acts 2003, ch. 32, § 2, effective April 17, 2003.

    1. A state trust company;
    2. A state bank authorized to act as a fiduciary;
    3. A savings association or savings bank organized under the laws of this state and authorized to act as a fiduciary;
    4. A national bank having its principal office in this state and authorized by the comptroller of the currency to act as a fiduciary pursuant to 12 U.S.C. § 92a;
    5. A federally chartered savings association or savings bank having its principal office in this state and authorized by its federal chartering authority to act as a fiduciary;
    6. An out-of-state bank with a branch in this state established or maintained pursuant to this chapter, or a trust office authorized by the commissioner pursuant to this chapter;
    7. An out-of-state trust company with a trust office authorized by the commissioner pursuant to this chapter;
    8. A foreign bank with a trust office authorized by the commissioner pursuant to this chapter; or
    9. A private trust company to the extent authorized by the commissioner pursuant to this chapter.
    1. A bank authorized to act as a fiduciary, which includes a trust company for the purposes of this section and §§ 45-2-1002 — 45-2-1006, having and maintaining paid-in capital and surplus of five hundred thousand dollars ($500,000), may be appointed a fiduciary or cofiduciary by any person or any court having jurisdiction and authority to appoint fiduciaries.
    2. When appointed as a fiduciary for a minor or other incompetent person, a bank shall have only the custody, control, management and administration of the property or estate of the person.
    3. The personal care and custody of any minor or other incompetent person shall be committed and confided to those individuals who would otherwise be entitled by law to the guardianship or care and custody of the person of the minor or incompetent person.

45-2-908. [Repealed.]

45-2-1001. Company authorized to act as fiduciary.

No company shall act as a fiduciary in this state except:

No company shall engage in an unauthorized trust activity. No company shall be deemed to be subject to this chapter and chapter 1 of this title, regulating fiduciary activities to the extent that the company's activities are permitted by existing statutory authority or are customarily performed as a traditional incident to the company's regular business activities.

Acts 1969, ch. 36, § 1 (3.230); T.C.A., § 45-422; 1999, ch. 112, §§ 7, 9.

Cross-References. Applicability of part to savings and loan associations and savings banks, § 45-2-106.

Appointment and removal of trustees, title 35, ch. 1.

Bank acting as fiduciary on April 2, 1969, may continue without changing charter, § 45-2-218.

Negotiable instruments, title 47, ch. 3.

Textbooks. Pritchard on Wills and Administration of Estates (4th ed., Phillips and Robinson), § 526.

Law Reviews.

Yes, Virginia, Tax Loopholes Still Exist: An Examination of the Tennessee Community Property Trust Act of 2010 (J. Paul Singleton), 42 U. Mem. L. Rev. 369 (2011).

45-2-1002. Fiduciary powers.

  1. Unless otherwise expressly provided by statute, a bank acting as a fiduciary shall have, alone or with others, all of the rights, powers, privileges and immunities, and be subject to the same liabilities and duties as an individual fiduciary under like circumstances. The fiduciary powers include, but are not limited to, the power to act as:
    1. Fiduciary as defined in § 35-2-102;
    2. Custodian of property;
    3. Agent or attorney-in-fact;
    4. Registrar or transfer agent of securities;
    5. Fiscal agent or any political entity, public body, corporation, unincorporated association or individual;
    6. Investment advisor;
    7. Insurer of titles to, mortgages on, and other interests in any real estate; and
    8. Guarantor of the payment of bonds owned by other persons.
  2. A bank acting as fiduciary shall have the same investment powers as an individual fiduciary under like circumstances and other investment powers that are provided by law. In exercising the powers, a bank shall, unless otherwise authorized by law or by the instrument creating the relationship, exercise the judgment and care, under the circumstances then prevailing, or as related to the specific purposes for which the fiduciary relationship was created, that persons of prudence, discretion, and intelligence exercise in the management of their own affairs under like circumstances. Within the limitation of the foregoing standard, a bank, as fiduciary, is authorized to acquire and retain interests in every kind of property, real, personal or mixed, and every kind of investment, specifically including, but not by way of limitation, bonds, debentures, and other corporate and governmental obligations, insurance policies, stocks, rights, warrants, and securities of any open or closed-end management fund that persons of prudence, discretion, and intelligence acquire for their own account; and within the limitations of the same foregoing standard, the bank may retain property properly acquired, without limitation as to time and without regard to its suitability for original purchase.
  3. A bank, acting as fiduciary in any capacity for which an annual or periodic court accounting is required, shall not be required to exhibit to the court or the clerk thereof the originals or copies of receipts and cancelled checks for disbursements or distributions made by the fiduciary to support the accounting; provided, that the accounting consists of the bank's computer prepared statements showing all income and principal transactions for the accounting period, but the court may require that receipts and cancelled checks be exhibited for the final distribution of assets on termination or transfer of the account to a successor.

Acts 1969, ch. 36, § 1 (3.231); T.C.A., § 45-423; Acts 1987, ch. 300, § 1.

NOTES TO DECISIONS

1. Responsibilities as Trustee.

A trust company advising its customers in legal matters assumes the same responsibilities as to good faith, frank and fair dealing as does an individual attorney in advising his client. Bank of Commerce & Trust Co. v. Dye, 1 Tenn. App. 486, 1926 Tenn. App. LEXIS 3 (1926).

45-2-1003. Segregation and registration of fiduciary assets — Nominee.

    1. A bank or trust company holding any asset as a fiduciary, cofiduciary, agent for a fiduciary or custodian shall segregate the assets from any other assets of the bank except as may be expressly provided otherwise by law or by the instrument creating the fiduciary relationship and the asset may be kept by the bank or trust company.
    2. Stocks, bonds, and other securities may be held by the bank or trust company in a manner such that all certificates representing the securities from time to time constituting the assets of a particular estate, trust or other fiduciary account are held separate from those of all other estates, trusts, or fiduciary accounts; or, in a manner such that certificates representing securities of the same class of the same issues from time to time constituting assets of particular estates, trusts, or other fiduciary accounts are held in bulk, without certification as to ownership attached; provided, that a bank or trust company when operating under the aforementioned method of safekeeping securities shall be subject to the rules and regulations now in effect or hereinafter promulgated by the state banking board with regard to state-chartered institutions and the comptroller of the currency in the case of national banking institutions.
    3. A bank or trust company holding the securities in bulk may also merge certificates of small denominations into one (1) or more certificates of large denominations and all banks or trust companies acting as a fiduciary with regard to the securities shall on demand certify in writing the securities held by it for any estate, trust or fiduciary account.
    1. Any bank, when acting as a fiduciary or a cofiduciary with others, or as an agent for other fiduciaries, may, with the consent of its cofiduciary or cofiduciaries, if any, who are hereby authorized to give consent, or the fiduciaries for whom it is acting, cause any investment held in such a capacity to be registered and held in its own name, or the name of a nominee, or nominees, of the bank.
    2. The bank shall be liable for the acts of the nominee with respect to any investment so registered.
    3. The records of the bank shall at all times show the fiduciary relationship under which the investment is held, and the securities, or a proper receipt therefor, shall be in the possession and control of the bank.
    4. The securities shall be kept separate and apart from the assets of the bank.
  1. Any bank may deposit funds of a fiduciary account awaiting investment or distribution in its commercial banking department or in the commercial banking department of any affiliate bank in the same bank holding company as defined in § 45-2-1402 where the funds may be used in the conduct of its business to the extent that the deposits do not exceed the aggregate of:
    1. The insurance on the deposits provided by the federal deposit insurance corporation;
    2. Cash on hand;
    3. The value of obligations of the United States or any state or any subdivision or instrumentality thereof owned by the bank; and
    4. Other property approved for this purpose for national banks or for member banks of the federal reserve system.

Acts 1969, ch. 36, § 1 (3.232); 1974, ch. 550, § 1; T.C.A., § 45-424; Acts 1988, ch. 926, § 6.

45-2-1004. Investment in undivided interest in property.

  1. A bank may, subject to the limitations of this section, create undivided interests in property of any nature for the purpose of sale from time to time to accounts held by the bank in any fiduciary capacity. The bank may retain a portion of the undivided interests for its own account if the property is one that it would be authorized to acquire pursuant to this chapter wholly for its own account.
  2. The limitations on the undivided interest shall be:
    1. The interest shall be one that:
      1. The bank would be authorized to acquire pursuant to this chapter and chapter 1 of this title wholly for its own account, and, in the absence of broader investment powers under the terms upon which it was designated as fiduciary, would also be authorized to acquire as a legal investment for funds held by fiduciaries; or
      2. The bank would be authorized to acquire as an investment by the terms upon which it was designated as fiduciary of each account in which it acquires an undivided interest.
    2. Interests not retained by the bank may be sold only to a fiduciary account.
  3. The bank shall exercise all rights of ownership in respect of an interest in which undivided interests have been sold pursuant to this section, and in respect of any property acquired by foreclosure or otherwise in connection with the interest, in its own name but for the benefit of itself and all other owners of the undivided interests in the property.
  4. The bank shall at all times maintain records of all undivided interests created pursuant to this section showing the extent of the undivided interest of each owner of the interest.
  5. The bank may issue a certificate evidencing each undivided interest created pursuant to this section, keep records showing the holders of the certificates, provide for transfer of a certificate by the registered holder of the certificate upon surrender of the certificate and deal with the registered holder of a certificate as the owner of the undivided interest represented by the certificate. Each certificate shall contain a summary of the rights of an owner of the undivided interest represented thereby and expressly disclaim any guarantee by the bank of payment of any amount.

Acts 1969, ch. 36, § 1 (3.233); T.C.A., § 45-425.

45-2-1005. Fiduciary bond or oath excused.

No oath or bond shall be required of a bank to qualify upon appointment as a fiduciary, unless the instrument creating a fiduciary position expressly provides otherwise.

Acts 1969, ch. 36, § 1 (3.234); T.C.A., § 45-426.

Cross-References. Bond of personal representative, § 30-1-201.

Textbooks. Pritchard on Wills and Administration of Estates (4th ed., Phillips and Robinson), § 526.

Tennessee Forms (Robinson, Ramsey and Harwell), No. 4-705.

45-2-1006. Deposit of securities in federal reserve bank when acting as fiduciary authorized.

    1. Any bank or trust company, when acting as a fiduciary, or when holding securities as custodian for a fiduciary, is authorized to deposit, or arrange for the deposit of, with the federal reserve bank in its district, any securities, the principal of and interest on which the United States, or any department, agency or instrumentality thereof, has agreed to pay, has guaranteed to pay, or has guaranteed payment in the manner so as to be credited to one (1) or more accounts on the books of the federal reserve bank in the name of the bank or trust company, to be designated fiduciary or safekeeping accounts.
    2. The bank or trust company so depositing securities with the federal reserve bank shall be subject to the rules and regulations with respect to the making and maintenance of the deposits that, in the case of state chartered institutions, the commissioner, and, in the case of national banking associations, the comptroller of the currency, may from time to time issue.
    3. The records of the bank or trust company shall at all times show the ownership of the securities held in the account.
    4. Ownership of, and other interest in, the securities credited to the account may be transferred by entries on the books of the federal reserve bank without physical delivery of any securities.
    5. A bank or trust company acting as a custodian for a fiduciary shall, on demand by the fiduciary, certify in writing to the fiduciary the securities so deposited by the bank or trust company with the federal reserve bank for the account of the fiduciary.
    6. A fiduciary shall, on demand by any party to its accounting or on demand by the attorney for the party, certify in writing to the party the securities deposited by the fiduciary with the federal reserve bank for its account as the fiduciary.
  1. This section shall apply to all fiduciaries and custodians for fiduciaries, acting on May 3, 1973, or who thereafter may act, regardless of the date of the instrument or court order by which they are appointed.

Acts 1973, ch. 294, § 6; 1973, ch. 384, §§ 1, 2; T.C.A. § 45-447.

45-2-1007. Deposit of securities in central depository.

    1. Notwithstanding any other provision of law, any bank or trust company holding securities as a fiduciary, cofiduciary, agent for a fiduciary or custodian pursuant to § 45-2-1003(a) and (b), is authorized to deposit or arrange for the deposit of the securities in a clearing corporation, as defined in § 47-8-102.
    2. When the securities are so deposited, certificates representing securities of the same class of the same issuer may be merged and held in bulk in the name of the nominee of the clearing corporation with any other securities deposited in the clearing corporation by any person, regardless of the ownership of the securities, and certificates of small denomination may be merged into one (1) or more certificates of larger denominations.
    3. The records of the bank or trust company acting as a fiduciary, cofiduciary, agent for a fiduciary or custodian, shall at all times show the name of the party for whose account the securities are so deposited.
    4. Title to the securities may be transferred by bookkeeping entry on the books of the clearing corporation without physical delivery of certificates representing the securities.
    5. A bank or trust company so depositing securities pursuant to this section shall be subject to the rules and regulations as, in the case of state-chartered institutions, the commissioner and, in the case of national banking associations, the comptroller of the currency may from time to time issue.
    6. A bank or trust company acting as agent for a fiduciary or custodian shall, on demand by the fiduciary, certify in writing to the fiduciary the securities so deposited by the bank or trust company in the clearing corporation for the account of the fiduciary.
  1. This section shall apply to any bank or trust company holding securities as a fiduciary, cofiduciary, agent for a fiduciary or custodian acting on March 6, 1978, or who thereafter may act, regardless of the date, agreement, instrument, or court order by which it is appointed and regardless of whether or not the fiduciary, cofiduciary, agent for a fiduciary or custodian, owns capital stock of the clearing corporation.

Acts 1978, ch. 575, § 1; T.C.A., § 45-448.

45-2-1008. Transfer of fiduciary accounts — Substitute fiduciaries.

  1. Absent written objection from the commissioner, a bank, trust company or trust department, referred to in this section as the “transferor,” may transfer one (1) or more fiduciary accounts administered by the bank, trust company or trust department to another bank, trust company or trust department, referred to in this section as the “transferee;” provided that the transferee bank has trust powers.
  2. Approval of the commissioner shall be deemed granted in the absence of written objection from the commissioner within ten (10) business days after receipt by the commissioner of written notice from the transferor bank of the proposed transfer.
    1. Within thirty (30) days after the date of the transfer of the fiduciary accounts, the transferor shall send written notice by first class mail to the last known address (as then set forth on the records of transferor, or if not set forth, as may be determined by the transferor in the exercise of reasonable diligence) of the following persons or entities:
      1. For employee benefit plans, to the plan sponsors;
      2. For individual retirement accounts and retirement accounts for the self-employed, to the account owners;
      3. For agency and escrow accounts, to the principals;
      4. For securities for which a transferor bank serves as trustee, registrar, transfer agent or paying agent, to the issuers;
      5. For revocable trusts under agreement, to the settlors;
      6. For irrevocable trusts under agreement, to any co-fiduciary, to the settlor, to each current income beneficiary who is an adult, and if a current income beneficiary is a minor, to a parent of the minor with whom the minor resides or to the conservator or guardian of the minor. For purposes of this subsection (c), “current income beneficiary” means a person currently entitled to income from a trust or a person to whom the trustee, in the trustee's discretion, may currently pay principal or income;
      7. For testamentary trusts, to the persons notified under subdivision (c)(1)(F);
      8. For conservatorships, to any co-fiduciary, to the protected person for whom the conservatorship was created, or if the conservatorship was created for a minor, to a parent of the minor with whom the minor resides or to the guardian of the minor;
      9. For guardianships, to any co-fiduciary, to the minor or legally incapacitated person for whom the guardian was appointed if the ward is at least fourteen (14) years of age;
      10. For probate estates, to any co-fiduciary, to the surviving spouse, if any, and to those persons notified pursuant to subdivision (c)(1)(G); and
      11. For corporate trust indentures to the issuer of the securities subject to each indenture; provided, that notwithstanding the foregoing, the transferor may, if it deems it appropriate, comply with any notice procedures contained in the trust indenture instrument with respect to succession of trustees.
    2. For purposes of this section, notice shall be deemed effective when mailed by the transferor. Should the transferor learn after the expiration of thirty (30) days from the transfer that through inadvertence, error, neglect or otherwise, notice was not mailed as herein provided, delayed notice may be given in the manner set forth herein. The recipient of the notice shall then have thirty (30) days to object to the transfer as provided in subsection (d).
    1. Any person given notice pursuant to subsection (c) may file a written objection to the fiduciary transfer with the commissioner, stating grounds for objection, within thirty (30) days of receipt of notice of the transfer by the person notified pursuant to subsection (c). The transferor shall then have thirty (30) days to either:
      1. Abandon the transfer of fiduciary accounts to which objection was given and hold the transfer for nought; or
      2. Submit a written response to the commissioner addressing the objections to the transfer. The commissioner shall either approve or deny the transfer.
    2. Nothing shall preclude the transferor from appointing a related bank, trust company or trust department as its agent for the performance of any and all fiduciary obligations as provided in subsection (h).
    1. Within a reasonable time after the date of a transfer of the fiduciary accounts in accordance with the procedures set forth in subsections (c) and (d), the transferor shall file an affidavit in the office of the chancery court of the county in which the main office of the transferor is located; and from time to time, the transferor may file a copy of the affidavit in the office of the chancery court in other counties that the transferor deems appropriate. The affidavit shall set forth the names and addresses of the transferor and transferee, identification of the fiduciary accounts transferred that the transferor deems appropriate, and other information that the transferor deems desirable.
    2. In the event that notice of objection to the transfer is received by the transferor after the filing of record of the original affidavit with respect to the transfer, and in the event that pursuant to subsection (d), the transfer is abandoned, the transferor shall promptly file notice of the abandonment in the office of the appropriate chancery court.
  3. If a bank, trust company or trust department completes a fiduciary transfer, the bank, trust company or trust department to which the fiduciary accounts have been transferred shall be automatically substituted as the fiduciary of all the accounts so transferred without further action and without any order or decree by any court or public officer; and without the transfer being treated or considered as a resignation by the transferor as a fiduciary; and the transferee bank, trust company or trust department shall have all the rights, duties, responsibilities, obligations and liabilities, financial or otherwise, of the transferor bank with respect to the accounts. A bank, trust company or trust department that completes a fiduciary transfer shall be relieved as fiduciary without an accounting and without any order or decree of any court or public officer, and prospectively shall have no continuing duties, responsibilities, obligations or liabilities, financial or otherwise, with respect to the accounts transferred. The transfer shall not, however, relieve the transferor bank of liability on the transferee for action or inaction prior to the transfer, nor shall it impose liability on the transferee for action or inaction of the transferor prior to the transfer. The transfer shall not constitute a relinquishment of trust powers by the transferor bank.
    1. A transferor bank, trust company or trust department is related to a transferee bank, trust company or trust department if:
      1. The transferee controls the transferor;
      2. The transferor controls the transferee;
      3. The same entity controls, directly or indirectly, the transferor and the transferee;
      4. A majority of the directors of the transferor are directors of the transferee; or
      5. A majority of the directors of the transferee are directors of the transferor.
    2. “Control” and “controls,” as used in subdivision (g)(1), means the ownership of a majority of the voting shares of another bank, trust company or of the bank operating the trust department.
    1. Regardless of objection to any fiduciary transfer as provided in subsection (d) and the outcome of the objection, and notwithstanding any procedure under this chapter, any bank may appoint a related bank, trust company or trust department as its agent for the performance of any or all acts, obligations and responsibilities of the bank with respect to any fiduciary account. A bank, trust company or trust department may also delegate, to an unrelated party pursuant to a written agreement, any investment, management or administrative function if the bank, trust company or trust department exercises reasonable care, judgment and caution in:
      1. Selecting the agent, taking into consideration the agent’s financial standing and reputation;
      2. Establishing the scope and other terms of any delegation; and
      3. Reviewing periodically the agent’s actions in order to monitor overall performance and compliance with the scope and other terms of the delegation.
    2. In the event of a delegation pursuant to subdivision (h)(1), the appointing bank shall remain fully responsible and liable with respect to all actions of the related bank, trust company, trust department or unrelated party as if performed by the appointing bank itself. The agency relationship shall not:
      1. Be deemed an impermissible delegation of responsibility or duty by the appointing bank;
      2. Constitute a resignation or disqualification of the appointing bank as fiduciary or relinquishment of trust powers by the appointing bank; or
      3. Require the consent of any person, entity, court or other governmental authority.

Acts 1984, ch. 691, §§ 2-5; 1987, ch. 300, §§ 2, 3; 1995, ch. 768, § 22; 1999, ch. 112, § 8; 2010, ch. 725, § 23.

Compiler's Notes. Acts 1995, ch. 768, which amended this section, is known and may be cited as the Bank Reform Act of 1996.

45-2-1009. Trust offices.

  1. No bank shall operate any trust office for the purpose of conducting a general banking business, including, but not limited to, receiving deposits, paying checks, making loans, or receiving or discounting bills and notes at any place where it is prohibited from establishing a branch bank for this purpose.
  2. A bank at any trust office may receive money or other things of value, disburse funds, extend credit and otherwise perform all acts necessary or appropriate for it to carry out its obligations and duties as fiduciary if the activity is otherwise lawful.

Acts 1984, ch. 691, § 6.

45-2-1010. Fiduciary activities of state trust institution.

  1. A state trust institution may act as a fiduciary in this or any other state or foreign country, subject to complying with applicable laws of the state or foreign country.
  2. In addition, a state trust institution may conduct any activities at any office outside this state that are permissible for a trust institution chartered by the host state where the office is located, except to the extent the activities are expressly prohibited by the laws of this state or by any regulation or order of the commissioner applicable to the state trust institution; provided, that the commissioner may waive the prohibition if the commissioner determines that the involvement of out-of-state offices of state trust institutions in particular activities would not threaten the safety or soundness of the state trust institutions.
  3. A state trust institution may:
    1. Perform any act as a fiduciary at each trust office established under this title and at an authorized branch; and
    2. Exercise any incidental power that is reasonably necessary to enable it to fully exercise commonly accepted fiduciary powers conferred in this chapter and chapter 1 of this title.
  4. A state trust institution may exercise any other power authorized by this chapter and chapter 1 of this title, or any power authorized to federally chartered trust institutions whose purposes and powers are limited to fiduciary purposes and powers, subject to the commissioner's regulation for safety and soundness. A state trust institution may exercise any power authorized to trust institutions chartered by another state whose purposes and powers are limited to fiduciary purposes and powers, subject to the commissioner's regulation for safety and soundness.

Acts 1984, ch. 691, § 6; 1999 ch. 112, § 10.

Cross-References. Branch banking, § 45-2-614.

45-2-1011. Fiduciary activities of out-of-state trust institution.

An out-of-state trust institution that establishes and maintains one (1) or more offices in this state under this chapter may conduct any activity at each office that would be authorized under the laws of this state for a state trust institution to conduct at the office.

Acts 1999, ch. 112, § 10.

45-2-1012. State trust company principal office.

  1. Each state trust company must have and continuously maintain a principal office in this state.
  2. A state trust company shall apply to the commissioner to change its location or the location of any of its offices pursuant to § 45-2-218.

Acts 1999, ch. 112, § 10.

45-2-1013. Trust office.

  1. A state trust institution may establish or acquire and maintain trust offices anywhere in this state. Any prohibition on the acquisition of an institution that has not been in operation for at least three (3) years shall not apply to trust companies. A state trust institution desiring to establish or acquire and maintain an office shall file a written notice with the commissioner setting forth the name of the state trust institution, the location of the proposed additional office, furnish a copy of the resolution adopted by the board authorizing the additional office and pay the filing fee prescribed by the commissioner. If acquiring a trust office, the trust institution shall provide evidence that all fiduciary obligations and liabilities of the parties have been properly discharged or otherwise assumed.
  2. The notificant may commence business at the additional office on the thirty-first day after the date the commissioner receives the notice, unless the commissioner specifies an earlier or later date.
  3. The acquiring trust institution shall succeed by operation of law to all of the rights, privileges and obligations of the selling trust institution.
  4. The thirty-day period of review may be extended by the commissioner on a determination that the written notice raises issues that require additional information or additional time for analysis. If the period of review is extended, the state trust institution may establish the additional office only on prior written approval by the commissioner.
  5. The commissioner may deny approval of the additional office if the commissioner finds that the notificant lacks sufficient financial resources to undertake the proposed expansion without adversely affecting its safety or soundness or that the proposed office would be contrary to the public interest.
  6. A state trust institution may also establish and maintain a new trust office or acquire and maintain an office outside of this state. In addition to the notice required to be provided in subsection (a), the trust institution must also provide evidence that the laws of the jurisdiction where the office is to be located permit an office, a copy of the authorizing board resolution and the filing fee, if any, prescribed by the commissioner. The process of review in subsections (b), (d) and (e) shall be applicable. The commissioner shall also consider the views of the appropriate bank supervisory agencies.

Acts 1999, ch. 112, § 10; 2003, ch. 32, § 7.

45-2-1014. Out-of-state trust institution trust office.

    1. An out-of-state trust institution may act as a fiduciary from a trust office only if it maintains:
      1. An office in this state as permitted by this chapter; or
      2. A branch in this state.
    2. Similar institutions chartered under the laws of Tennessee are permitted to establish or acquire offices and engage in substantially similar activities permitted to out-of-state trust institutions by this chapter in the state where the out-of-state trust institution has its principal office.
  1. An out-of-state trust institution desiring to establish or acquire and maintain a trust office in this state pursuant to this part shall provide, or cause its home state regulator to provide, written notice of the proposed transaction to the commissioner on or after the date on which the out-of-state trust institution applies to the home state regulator for approval to establish and maintain or acquire the office. The notice shall set forth the name of the out-of-state trust institution, the location of the proposed office, satisfactory evidence that the notificant is a trust institution, furnish a copy of the resolution adopted by the board authorizing the office and pay the filing fee, if any, prescribed by the commissioner. If acquiring a trust office, the out-of-state trust institution shall provide evidence that all fiduciary obligations and liabilities of the parties have been properly discharged or otherwise assumed. Any prohibition on the acquisition of an institution that has not been in operation for at least three (3) years shall not apply to trust companies.
  2. The acquiring trust institution shall succeed by operation of law to all of the rights, privileges and obligations of the selling trust institution. The acquisition alone shall not result in the establishment of a branch.
  3. An out-of-state trust institution may not establish or acquire a trust office in this state unless:
    1. The notificant shall have provided satisfactory evidence to the commissioner of compliance with:
      1. Any applicable requirements of title 48; and
      2. The applicable requirements of its home state regulator for acquiring or establishing and maintaining the office; and
    2. The commissioner, acting within sixty (60) days after receiving notice, shall have certified to the home state regulator that the requirements of this section have been met and the notice has been approved or, if applicable, that any conditions imposed by the commissioner pursuant to subsection (e) have been satisfied.
  4. The out-of-state trust institution may commence business at the trust office on the sixty-first day after the date the commissioner receives the notice unless the commissioner specifies an earlier or later date; provided, that with respect to an out-of-state trust institution that is not a depository institution and for which the commissioner has conditioned approval on the satisfaction by the notificant of any requirement applicable to a state trust company, the institution shall have satisfied the conditions and provided the commissioner satisfactory evidence of satisfaction of the conditions. The sixty-day period of review may be extended by the commissioner on a determination that the written notice raises issues that require additional information or additional time for analysis. If the period of review is extended, the out-of-state trust institution may establish the office only on prior written approval by the commissioner.
  5. The commissioner may deny approval of the office if the commissioner finds that the notificant lacks sufficient financial resources to undertake the proposed expansion without adversely affecting its safety or soundness or that the proposed office is contrary to the public interest. In acting on the notice, the commissioner shall consider the views of the appropriate bank supervisory agencies.
  6. An out-of-state trust institution that maintains a trust office in this state under this section may establish or acquire additional trust offices in this state to the same extent that a state trust institution may establish or acquire additional offices in this state pursuant to the procedures for establishing or acquiring the offices.
  7. If an out-of-state trust institution does not act as a fiduciary through the establishment or acquisition of a trust office or through an authorized branch office, it may engage in other fiduciary related activities in Tennessee including, but not limited to, marketing, soliciting and operating through a trust representative office only to the extent that the home state of the out-of-state trust institution permits state trust institutions to engage in similar activities in the other state.

Acts 1999, ch. 112, § 10; 2002, ch. 656, § 1; 2003, ch. 32, § 8.

45-2-1015. Name of trust institution.

A state trust company or out-of-state trust institution may use any name in connection with establishing an office in this state pursuant to this chapter, except that the commissioner may determine that a name proposed to be used is potentially misleading to the public and require the company or institution to select a name that is not potentially misleading.

Acts 1999, ch. 112, § 10.

45-2-1016. Designation of trustee.

Any person residing in this state may designate any trust institution to act as a fiduciary on behalf of the person.

Acts 1999, ch. 112, § 10.

45-2-1017. Choice of law governing trust and fiduciary investments.

Any trust institution that maintains a trust office in this state and its affected clients may designate as the state whose laws shall govern any written agreement between the trust institution and its client or any instrument under which the trust institution acts for a client and with respect to the fiduciary investment standards applicable to the agreements, either:

  1. This state;
  2. A state where affected clients reside; or
  3. The state where the trust institution has its principal office.

Acts 1999, ch. 112, § 10.

45-2-1018. Engaging in commerce prohibited.

A state trust company may not invest its funds in trade or commerce by buying, selling, or otherwise dealing in goods or by owning or operating a business not related to its fiduciary business, except as necessary to fulfill a fiduciary obligation to a client.

Acts 1999, ch. 112, § 10.

45-2-1019. Pledge of assets.

  1. A state trust company may not pledge or create a lien on any of its assets except:
    1. To secure the repayment of money borrowed;
    2. As specifically authorized or required by § 45-2-611; or
    3. By rules adopted under this chapter.
  2. An act, deed, conveyance, pledge, or contract in violation of this section is void.

Acts 1999, ch. 112, § 10.

45-2-1020. Merger authority.

A state trust company may merge with another trust company or into a depository institution pursuant to the applicable provisions of part 13 of this chapter, or as otherwise permitted. However, any requirement that an institution must be in operation for three (3) years before engaging in a merger transaction shall not apply to trust companies. Mergers of state trust companies into a resulting out-of-state trust institution is permitted to the same extent that the other state's law permits Tennessee trust institutions to merge with trust companies of the other state. If a state trust company merges into an out-of-state trust institution, the resulting out-of-state trust institution may operate a trust office at the location of the state trust company pursuant to the notice requirements for the offices under this chapter, but the office shall not constitute a branch.

Acts 1999, ch. 112, § 10; 2003, ch. 32, § 9.

45-2-1021. Sale of assets.

  1. The board of a state trust company, with the commissioner's approval, may cause a state trust company to sell all or substantially all of its assets, including the right to control accounts established with the trust company, without shareholder approval if the commissioner finds the:
    1. Interests of the state trust company's clients and creditors are jeopardized because of insolvency or imminent insolvency of the state trust company; and
    2. Sale is in the best interest of the state trust company's clients and creditors.
  2. A sale under this section must include an assumption and promise by the buyer to pay or otherwise discharge:
    1. All of the state trust company's liabilities to clients;
    2. All of the state trust company's liabilities for salaries of the state trust company's employees incurred before the date of the sale;
    3. Obligations incurred by the commissioner arising out of the supervision or sale of the state trust company; and
    4. Fees and assessments due the department.
  3. This section does not affect the commissioner's right to take action under another law. The sale by a trust company of all or substantially all of its assets with shareholder approval is considered a voluntary dissolution and liquidation and is governed by § 45-2-1501.

Acts 1999, ch. 112, § 10.

Part 11
Loans

45-2-1101. Loans authorized.

Any state bank may lend money and discount or purchase evidences of indebtedness and any agreement for the payment of money.

Acts 1969, ch. 36, § 1 (3.241); T.C.A., § 45-428.

Cross-References. Negotiable instruments, title 47, ch. 3.

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Banks and Banking, § 48.

Law Reviews.

“Bad Faith Breach”: A New and Growing Concern for Financial Institutions, 42 Vand. L. Rev. 891 (1989).

Lender Liability: A Survey of Common-Law Theories, 42 Vand. L. Rev. 855 (1989).

Lender Liability and Arbitration: Preserving the Fabric of Relationship, 42 Vand. L. Rev. 947 (1989).

Written Agreements in the Lender-Borrower Context: The Illusion of Certainty, 42 Vand. L. Rev. 917 (1989).

45-2-1102. Limit of loans to any one borrower — Classified loans.

    1. Except as provided in this section, no state bank shall be allowed to lend to any one (1) person, firm or corporation (including loans to a firm or loans to the several members thereof) more than fifteen percent (15%) of its capital, surplus and undivided profits. However, the loans may be in excess of that percent, but not above twenty-five percent (25%) except as provided in subsection (b), if each specific loan in excess of fifteen percent (15%) is first submitted to and approved in advance in writing by the board of directors or by the finance committee of the bank and a record is kept of the written approval.
    2. No loan limit shall be applicable to any state bank in any situation or circumstance in which no loan limit is applicable to national banks.
    3. No loan limit shall be applicable to the extent that the loan or extension of credit is secured by a segregated deposit account in the lending bank.
    1. Obligations of any person in the form of notes or drafts secured by shipping documents, warehouse receipts or other documents transferring or securing title covering readily marketable nonperishable staples shall be subject to a limitation equal to the percent of the sum of the lending bank's capital, surplus, and undivided profits shown in column A below, when the market value of the staples securing the obligations is not at any time less than the percent of the face amount of the obligation shown in column B below:

      Column A  Column B

      25%  115%

      30%  120%

      35%  125%

      40%  130%

      45%  135%

      50%  140%

    2. The exceptions listed in subdivision (b)(1) do not apply to obligations of any one (1) person, copartnership, association or corporation arising from the same staples, for more than ten (10) months.
    1. Notwithstanding any other provision of law, a state bank or bank holding company may not sell a classified loan or participation in a classified loan to, or purchase the loan or participation from, another financial institution without obtaining the prior approval of the commissioner.
    2. For purposes of subdivision (c)(1):
      1. “Classified loan” means a loan that is designated “substandard,” “doubtful,” or “loss” in the most recent state or federal report of examination; and
      2. “Financial institution” means a bank, savings bank, savings and loan association or any subsidiary of those entities, industrial loan and thrift company, credit union, mortgage broker, mortgage banker, or leasing company accepting deposits, making or arranging loans and making or arranging leases.
    1. The loan limit applicable to any one (1) person under this section shall take into consideration credit exposure arising from derivative transactions between the state bank and the person.
    2. For purposes of subdivision (d)(1), “derivative transaction” includes any transaction that is a contract, agreement, swap, warrant, note, or option that is based, in whole or in part, on the value of, any interest in, or any quantitative measure or the occurrence of any event relating to, one (1) or more commodities, securities, currencies, interest or other rates, indices, or other assets.

Acts 1969, ch. 36, § 1 (3.241); T.C.A., § 45-429; Acts 1983, ch. 69, § 1; 1984, ch. 573, § 1; 1985, ch. 226, § 1; 2001, ch. 54, §§ 17, 18; 2012, ch. 634, § 1.

Compiler's Notes. Section 3 of Acts 1984, ch. 573, provided that the 1984 amendment shall not affect rights and duties that matured, penalties that were incurred, or proceedings that were begun before April 27, 1984.

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Banks and Banking, § 48.

Law Reviews.

State Regulation of Bank Holding Companies and the Future of Interstate Banking: A Tennessee Perspective (Colman B. Hoffman and Kathryn R. Edge), 51 Tenn. L. Rev. 383 (1984).

45-2-1103. Loans to officers and directors.

Compliance with the requirements of 12 U.S.C. §§ 375a, 375b, and 1828(j) and applicable federal regulations shall be deemed compliance with the laws of Tennessee concerning loans to directors and officers of state banks.

Acts 1969, ch. 36, § 1 (3.241); 1973, ch. 294, § 6; T.C.A., § 45-430; Acts 1989, ch. 591, § 1; 2001, ch. 54, § 19.

Cross-References. Penalty for Class A misdemeanor, § 40-35-111.

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Banks and Banking, § 48.

Decisions Under Prior Law

1. Approval After Loan.

Loans to bank officials during the year and approved at next annual meeting by the directory were not violative, though irregular. State ex rel. Robertson v. Farmers' State Bank, 162 Tenn. 499, 39 S.W.2d 281, 1930 Tenn. LEXIS 114 (Tenn. Dec. 1930).

45-2-1104. Loans and transactions involving banks own stock as collateral or otherwise.

    1. A state bank may make a loan secured by not more than fifty percent (50%) of the book value of its own stock upon the approval of a majority of the bank's board of directors; provided, that this subsection (a) shall not permit a purchase money loan for the initial acquisition of the bank's own stock. Loans secured by the bank's own stock shall be limited to and shall not exceed:
      1. In the aggregate, twenty percent (20%) of the bank's capital, surplus and undivided profits; or
      2. To any one (1) borrower, ten percent (10%) of the bank's capital, surplus and undivided profits.
    2. A loan that is otherwise adequately secured to the extent required of loans of the type provided and in which the bank's stock is taken as additional or secondary collateral shall not be included in the limits provided in this subsection (a).
    1. Except as expressly limited or restricted in this title, a state bank may engage in transactions involving its own stock, including, but not limited to, the transfer, repurchase, holding, sale or division, to the same extent permitted to corporations under the Tennessee Business Corporation Act, compiled in title 48, chapters 11-27.
    2. The bank shall give the commissioner thirty (30) days' advance notice of any proposed transaction and may consummate the transaction at the end of the thirty-day period unless the commissioner advises the bank in writing of the commissioner's objection to the proposed transaction.

Acts 1969, ch. 36, § 1 (3.241); T.C.A., § 45-431; Acts 1996, ch. 768, § 23; 2001, ch. 54, § 20.

Compiler's Notes. Acts 1996, ch. 768, which amended this section, is known and may be cited as the Bank Reform Act of 1996.

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Banks and Banking, § 48.

Decisions Under Prior Law

1. Bylaw Reserving Lien on Stock.

While there is no statute creating a lien in favor of the bank, upon its stock for debts of stockholders to it, in the absence of statutory or charter provisions to the contrary, it may by bylaw reserve the lien. Wilkinson v. Home Bank, 137 Tenn. 198, 192 S.W. 920, 1916 Tenn. LEXIS 71 (1916).

Where the bank had reserved a lien upon its stock by bylaw and by reservation on the face of the certificate of shares, the mere possession of a certificate by the pledgee of the owner who was a debtor of the bank did not affect the lien. Wilkinson v. Home Bank, 137 Tenn. 198, 192 S.W. 920, 1916 Tenn. LEXIS 71 (1916).

2. Contract Reserving Lien on Stock.

A banking corporation, under its general authority to contract, may acquire a lien on its stock for the security of the debts of its stockholders to it, in the absence of statutory or charter prohibition. Wilkinson v. Home Bank, 137 Tenn. 198, 192 S.W. 920, 1916 Tenn. LEXIS 71 (1916).

45-2-1105. Participation with other lenders.

A state bank may participate in a loan with another lender to the extent that its participation does not exceed its legal limit for the type of loan except that participation may not violate  § 45-2-1102(c).

Acts 1969, ch. 36, § 1 (3.241); T.C.A., § 45-432; Acts 1984, ch. 573, § 2.

Compiler's Notes. Section 3 of Acts 1984, ch. 573, provided that the 1984 amendment did not affect rights and duties that matured, penalties that were incurred, or proceedings that were begun before April 27, 1984.

45-2-1106. Installment loans — Interest and insurance.

In addition to all other powers granted them elsewhere in this chapter and chapter 1 of this title, banks have the power to make installment loans, either secured or unsecured, with repayment in equal, or substantially equal, monthly or other periodic installments over the term of the loans.

    1. Interest computed on the principal amount of the loan for the entire term of the loan at a rate not to exceed six percent (6%) per annum may be either deducted in advance or added to the principal; provided, that if the unpaid balance of the loan is either paid or renewed prior to its maturity date, the borrower or other person paying or renewing the loan shall be refunded or credited with unearned interest in an amount that represents at least as great a proportion of the original charge as the sum of the periodical time balances after the date of prepayment bears to the sum of all the periodical time balances under the schedule of payments in the original installment loan; provided, that the bank shall not be required to make a refund or credit where the amount thereof would be less than one dollar ($1.00) for each loan. In no event, however, shall the effective rate of interest on any loan made pursuant hereto, when computed from its inception to its originally contracted maturity, exceed the annual rates as follows:
      1. Ten and fifty-three one hundredths percent (10.53%) on loans of less than six (6) months;
      2. Eleven and fifty-eight one hundredths percent (11.58%) on loans as long as six (6) months but less than twelve (12) months;
      3. Twelve and fifty-nine one hundredths percent (12.59%) on loans as long as twelve (12) months but less than twenty-four (24) months;
      4. Thirteen and thirty-eight one hundredths percent (13.38%) on loans as long as twenty-four (24) months but less than thirty-six (36) months;
      5. Fourteen and seventeen one hundredths percent (14.17%) on loans as long as thirty-six (36) months but less than forty-eight (48) months;
      6. Fifteen and four one hundredths percent (15.04%) on loans as long as forty-eight (48) months but less than sixty (60) months;
      7. Sixteen and two one hundredths percent (16.02%) on loans as long as sixty (60) months but less than seventy-two (72) months;
      8. Seventeen and fifteen one hundredths percent (17.15%) on loans as long as seventy-two (72) months but less than eighty-four (84) months; and
      9. Eighteen and zero one hundredths percent (18.00%) on all loans for a period of eighty-four (84) months or longer.
    2. Notwithstanding any other provision herein to the contrary, the nominal rate of interest on any loan permitted by this section shall not exceed six percent (6%) per annum.
    3. In addition to such interest, a bank may require a borrower to pay loan charges in accordance with the following:
      1. A bank may require a borrower to make, or require a borrower to reimburse the bank for having made, to third parties payments necessary or incidental to the loan, including insurance premiums, official fees, taxes, appraisal fees, fees for title examination, attorney fees for documenting or closing the loan, fees for inspection or control of collateral, and, upon default, all costs of collection, including reasonable attorney's fees;
      2. A bank may require a borrower to pay to the bank a reasonable sum to reimburse the bank for its direct cost in originating, making, securing, processing, servicing and collecting the loan, and the reasonable sum may be an approximation of the direct costs; provided, that the approximation may be based on the bank's actual average cost; and provided further, that the approximation shall never exceed an amount equal to four percent (4%) of the principal amount of the loan; and provided further, that a bank may make a flat charge of not more than twenty-five dollars ($25.00) on any loan in lieu of the direct cost and without regard to the four percent (4%) limitation;
      3. A bank may require a borrower to pay delinquency charges on installments past due by more than fifteen (15) days; provided, that no charge shall exceed five percent (5%) of any such installment, nor shall any bank impose a delinquency charge on a loan more than once on account of the same past due installment; and
      4. Notwithstanding any other provision herein or elsewhere to the contrary, no bank shall be permitted to charge a commitment fee or brokerage commission in connection with any installment loan made pursuant to this section.
    1. A bank, in making an installment loan in excess of three hundred dollars ($300) pursuant to this section, may require a borrower to insure tangible personal property offered as security for the loan against any substantial risk of loss, damage or destruction for any amount not to exceed the actual value of the property or the approximate amount of the loan, whichever is lesser, and for a term and upon conditions that are reasonable and appropriate considering the nature of the property and maturity and other circumstances of the loan; provided, that the insurance is sold by a licensed agent, broker or solicitor and the borrower may furnish the borrower's own insurance policy.
    2. The bank may also request as security for any loan obligation in excess of three hundred dollars ($300) insurance on the life of the borrower or one (1) of them, if there are two (2) or more. The initial amount of credit life insurance shall not exceed the total amount repayable under the total amount of the indebtedness. Not more than one (1) policy of life insurance may be written in connection with any installment loan transaction unless requested by the borrower, comaker or endorser.
    3. In accepting any insurance provided for in this subdivision (2) as security for a loan, the bank may deduct the premiums for the insurance from the proceeds of the loan, and remit the premiums to the insurance company writing the insurance and any gain or advantage to the bank or any employee, officer, director, agent, affiliate, or associate from the insurance or its sale shall not be considered as additional or further charge or interest in connection with any loan made under this section.
    4. Every insurance policy or certificate written in connection with a loan transaction pursuant to this section shall provide for cancellation of coverage and a refund of the premium unearned upon the discharge of the loan obligation for which the insurance is security, without prejudice to any claim existing at the time of discharge. Whenever insurance is written in connection with a loan transaction, the bank shall deliver or cause to be delivered to the borrower a policy, certificate or other memorandum that shows the coverages and the costs of the insurance, if any, to the borrower within thirty (30) days from the date of the loan.

Acts 1969, ch. 36, § 1 (3.241); 1979, ch. 205, §§ 1, 2; 1979, ch. 412, § 1; T.C.A., § 45-433.

Law Reviews.

Bank Credit Cards in Tennessee — Usury?, 3 Mem. St. U. L. Rev. 51.

Decisions Under Prior Law

1. Constitutionality.

The former provisions in subdivision (1)(A) of this section, that purported to authorize state banks to discount loans at a maximum rate of six percent, violated Tenn. Const., art. XI, § 7 to the extent that they authorized state banks to charge interest in excess of an effective annual rate of 10 percent. Ray v. American Nat'l Bank & Trust Co., 443 F. Supp. 883, 1978 U.S. Dist. LEXIS 19959 (E.D. Tenn. 1978).

45-2-1107. Disclosure of terms and conditions of loan.

When an installment loan is made and interest is charged as provided in § 45-2-1106(1)(A) and (B), the lending bank or trust company shall make disclosures of the terms and conditions of the loan that may from time to time be required for the loan under the Federal Consumer Credit Protection Act, 15 U.S.C. § 1601 et seq.

Acts 1969, ch. 36, § 1 (3.241); 1979, ch. 205, § 4; T.C.A., § 45-434.

Law Reviews.

Bank Credit Cards in Tennessee — Usury?, 3 Mem. St. U. L. Rev. 51.

45-2-1108. Same power to make loans as national banks.

Notwithstanding any provision to the contrary in this chapter and chapter 1 of this title or elsewhere, state banks have the power to make loans upon the same terms and at the maximum effective interest rates as loans are authorized and credit extended by national banks in this state. This power includes, but is not limited to, the right to take, receive, reserve and charge on any loan or discount made, or upon any notes, bills of exchange, or other evidence of debt, interest at a maximum effective interest rate of one percent (1%) in excess of the discount rate on ninety-day commercial paper in effect at the federal reserve bank in the federal reserve district where the state bank is located.

Acts 1969, ch. 36, § 1 (3.241); 1979, ch. 209, § 1; T.C.A., § 45-435.

Law Reviews.

Residential Mortgage Lending: Charting a Course Through the Regulatory Maze, 29 Vand. L. Rev. 957.

Part 12
Elderly and Vulnerable Adult Financial Exploitation Prevention Act. [Repealed effective June 30, 2022.]

45-2-1201. Short title. [Repealed effective June 30, 2022.]

This part shall be known and may be cited as the “Elderly and Vulnerable Adult Financial Exploitation Prevention Act.”

Acts 2017, ch. 264, § 1.

Compiler's Notes. Acts 2017, ch. 264, § 1 enacted a new part 22, §§ 45-2-220145-2-2206, but the part has been redesignated as part 12, §§ 45-2-120145-2-1206 by authority of the Code Commission.

Acts 2017, ch. 264, § 6 provided that the Department of Financial Institutions is encouraged, within existing public or private resources, to consult with financial service providers as defined in this act, the Tennessee Commission on Aging and Disability, and the Department of Human Services to consider distributing public education and information to alert the public to the dangers posed to elderly and vulnerable adults by financial exploitation.

Acts 2017, ch. 264, § 7 provided that the act, which enacted this section, shall be repealed on June 30, 2022.

45-2-1202. Part definitions. [Repealed effective June 30, 2022.]

As used in this part, unless the context otherwise requires:

  1. “Account” means funds or assets held by a financial service provider, including, but not limited to, a deposit account, savings account, share account, certificate of deposit, trust account, IRA, guardianship or conservatorship account, investment or securities account, retirement account, or loan or extension of credit;
  2. “Department” means the department of financial institutions unless otherwise designated in this part;
  3. “Elderly adult” means a person sixty-five (65) years of age or older;
  4. “Financial exploitation” means the unlawful appropriation or use of an elderly or vulnerable adult's property, as defined in § 39-11-106(a), for one's own benefit or that of a third party;
  5. “Financial service provider” means any of the following engaged in or transacting business in this state:
    1. A state or national bank or trust company;
    2. A state or federal savings and loan association;
    3. A state or federal credit union;
    4. An industrial loan and thrift company, regulated by chapter 5 of this title;
    5. A money transmitter, regulated by chapter 7, part 2 of this title;
    6. A check casher, regulated by chapter 18 of this title;
    7. A mortgage loan lender, mortgage loan broker, mortgage loan originator, or mortgage loan servicer, regulated by chapter 13 of this title;
    8. A title pledge lender, regulated by chapter 15 of this title;
    9. A deferred presentment services provider, regulated by chapter 17 of this title;
    10. A flex loan provider, regulated by chapter 12 of this title; or
    11. A home equity conversion mortgage lender, regulated by title 47, chapter 30;
  6. “Financial transaction” means any of the following as applicable to the business or services provided by a financial service provider:
    1. A transfer or request to transfer or disburse funds or assets in an account;
    2. A request to initiate a wire transfer, initiate an automated clearing house (ACH) transfer, or issue a money order, cashier's check, or official check;
    3. A request to negotiate a check or other negotiable instrument;
    4. A request to change the ownership of an account;
    5. A request to sell or transfer securities or other assets if the person selling or transferring the securities or assets is not required to register pursuant to title 48, chapter 1, part 1;
    6. A request for a loan, extension of credit, or draw on a line of credit; or
    7. A request to transfer the title to any real property, or the title of any motor vehicle or mobile home, or to encumber such real property, motor vehicle, or mobile home;
  7. “Law enforcement agency” means a district attorney general, municipal police department, county sheriff, the Tennessee bureau of investigation, United States attorney, FBI, secret service, or other federal law enforcement agency; and
  8. “Vulnerable adult” means a person eighteen (18) years of age or older who, because of mental or physical dysfunction, is unable to fully manage the person's own resources, carry out all or a portion of the activities of daily living, or is unable to fully protect against neglect, exploitation, or hazardous or abusive situations without assistance from others.

Acts 2017, ch. 264, § 1.

Compiler's Notes. Acts 2017, ch. 264, § 1 enacted a new part 22, §§ 45-2-220145-2-2206, but the part has been redesignated as part 12, §§ 45-2-120145-2-1206 by authority of the Code Commission.

Acts 2017, ch. 264, § 6 provided that the  Department of Financial Institutions is encouraged, within existing public or private resources, to consult with financial service providers as defined in this act, the Tennessee Commission on Aging and Disability, and the Department of Human Services to consider distributing public education and information to alert the public to the dangers posed to elderly and vulnerable adults by financial exploitation.

Acts 2017, ch. 264, § 7 provided that the act, which enacted this section, shall be repealed on June 30, 2022.

45-2-1203. Refusal or delay of financial transaction due to suspicion of financial exploitation. [Repealed effective June 30, 2022.]

  1. If a financial service provider has reasonable cause to suspect that financial exploitation may have occurred, may have been attempted, or is being attempted, the financial service provider may, but is not required to, refuse a financial transaction or delay a financial transaction on an account:
    1. Of the elderly or vulnerable adult;
    2. On which the elderly or vulnerable adult is a beneficiary, including a trust, guardianship, or conservatorship account; or
    3. Of a person suspected of perpetrating financial exploitation.
    1. A financial service provider may also refuse a financial transaction or delay a financial transaction under this section if the department of human services or a law enforcement agency provides information to the financial service provider demonstrating that it is reasonable to believe that financial exploitation may have occurred, may have been attempted, or is being attempted.
    2. Except as ordered by a court, a financial service provider is not required to refuse a financial transaction or delay a financial transaction when provided with information by the department of human services or a law enforcement agency alleging that financial exploitation may have occurred, may have been attempted, or is being attempted, but may use its discretion to determine whether to refuse a financial transaction or hold a financial transaction based on the information available to the financial service provider.
  2. A financial service provider that refuses a financial transaction or holds a financial transaction based on reasonable cause to suspect that financial exploitation may have occurred, may have been attempted, or is being attempted shall:
    1. Except with regard to an account administered by a bank or trust company in a fiduciary capacity, make a reasonable effort to notify one (1) or more parties authorized to transact business on the account orally or in writing; and
    2. Report the incident, if it involves financial exploitation, to the department of human services adult protective services division, as provided in § 71-6-103.
  3. No notice under this section shall be required to be provided to any party authorized to conduct business on the account if the party is the suspected perpetrator of financial exploitation.
  4. Any refusal by a financial service provider to conduct a financial transaction or hold a financial transaction as authorized by this section based on the financial service provider's reasonable cause to suspect that financial exploitation may have occurred, may have been attempted, or is being attempted expires upon the earlier of:
    1. Ten (10) business days after the date on which the financial service provider first refused or held the financial transaction unless earlier terminated by an order of a court of competent jurisdiction, if the transaction involved the sale of a security or offer to sell a security and the person selling or offering to sell is not required to register pursuant to title 48, chapter 1, part 1;
    2. Five (5) business days after the date on which the financial service provider first refused a financial transaction or held the financial transaction, if the transaction did not involve the sale of a security or offer to sell a security, unless earlier terminated by an order of a court of competent jurisdiction;
    3. The time when the financial service provider reasonably believes that the financial transaction will not result in financial exploitation; or
    4. The time when the customer requesting the transaction has been advised of a potential risk in the transaction and the customer has requested the transaction to continue as long as the customer is not the suspected perpetrator of financial exploitation.
  5. A financial service provider may extend the time permitted in this section to refuse a financial transaction or hold a financial transaction based on a reasonable belief that additional time is needed to investigate the financial transaction or to prevent financial exploitation.
  6. Notwithstanding subsection (e), a court of competent jurisdiction may enter an order extending the time that a financial service provider must refuse a financial transaction or hold a financial transaction based on reasonable cause to suspect that financial exploitation may have occurred, may have been attempted, or is being attempted.
  7. A financial service provider, or an employee of a financial service provider, is immune from all criminal, civil, and administrative liability:
    1. For refusing or not refusing a financial transaction, or holding or not holding a financial transaction under this section; or
    2. For actions taken in furtherance of the determination made under subdivision (h)(1) if the determination was based upon a reasonable belief.

Acts 2017, ch. 264, § 1.

Compiler's Notes. Acts 2017, ch. 264, § 1 enacted a new part 22, §§ 45-2-220145-2-2206, but the part has been redesignated as part 12, §§ 45-2-120145-2-1206 by authority of the Code Commission.

Acts 2017, ch. 264, § 6 provided that the  Department of Financial Institutions is encouraged, within existing public or private resources, to consult with financial service providers as defined in this act, the Tennessee Commission on Aging and Disability, and the Department of Human Services to consider distributing public education and information to alert the public to the dangers posed to elderly and vulnerable adults by financial exploitation.

Acts 2017, ch. 264, § 7 provided that the act, which enacted this section, shall be repealed on June 30, 2022.

45-2-1204. List of contact persons. [Repealed effective June 30, 2022.]

  1. A financial service provider may offer to an elderly or vulnerable adult the opportunity to submit and periodically update a list of persons that the elderly or vulnerable adult authorizes the financial service provider to contact when the financial service provider has reasonable cause to suspect that the adult is a victim or a target of financial exploitation.
  2. Notwithstanding subsection (a), a financial service provider, or an officer or employee of the financial service provider, that has reasonable cause to suspect that an elderly or vulnerable adult is the victim or target of financial exploitation may convey the suspicion to one (1) or more of the following, provided that the person is not the suspected perpetrator:
    1. Persons on the list described in subsection (a), if a list has been provided by the elderly or vulnerable adult;
    2. A co-owner, additional authorized signatory, or beneficiary on the elderly or vulnerable adult's account; or
    3. A person known by the financial service provider to be a family member, including a parent, adult child, or sibling.
  3. When providing information under this section, the financial service provider may limit the information and disclose only that the financial service provider has reasonable cause to suspect that the elderly or vulnerable adult may be a victim or target of financial exploitation without disclosing any other details or confidential personal information regarding the financial affairs of the elderly or vulnerable adult.
  4. The financial service provider may choose not to contact one (1) or more persons on the list provided pursuant to subsection (a) if the financial service provider suspects that the person or persons are engaged in financial exploitation.
  5. The financial service provider may rely on information provided by the customer in compiling a list of contact persons.
  6. A financial service provider, or an employee of a financial service provider, is immune from all criminal, civil, and administrative liability for contacting a person or electing not to contact a person under this section and for actions taken in furtherance of that determination if the determination was made based on reasonable belief.
  7. Contact with any person, and any information provided under this section, is exempt from the customer consent and customer notice provisions in §§ 45-10-105 and 45-10-106.

Acts 2017, ch. 264, § 1.

Compiler's Notes. Acts 2017, ch. 264, § 1 enacted a new part 22, §§ 45-2-220145-2-2206, but the part has been redesignated as part 12, §§ 45-2-120145-2-1206 by authority of the Code Commission.

Acts 2017, ch. 264, § 6 provided that the  Department of Financial Institutions is encouraged, within existing public or private resources, to consult with financial service providers as defined in this act, the Tennessee Commission on Aging and Disability, and the Department of Human Services to consider distributing public education and information to alert the public to the dangers posed to elderly and vulnerable adults by financial exploitation.

Acts 2017, ch. 264, § 7 provided that the act, which enacted this section, shall be repealed on June 30, 2022.

Cross-References. Confidentiality of public information, § 10-7-504.

45-2-1205. Refusal to accept power of attorney due to suspicion of financial exploitation. [Repealed effective June 30, 2022.]

  1. A financial service provider may refuse to accept an acknowledged power of attorney if the financial service provider has reasonable cause to suspect that the principal is or may be the victim or target of financial exploitation by the agent or person acting for or with the agent.
  2. A financial service provider, or an employee of a financial service provider, is immune from all criminal, civil, and administrative liability for refusing to accept a power of attorney or for accepting a power of attorney under this section and for actions taken in furtherance of that determination if the determination was based upon reasonable belief.

Acts 2017, ch. 264, § 1.

Compiler's Notes. Acts 2017, ch. 264, § 1 enacted a new part 22, §§ 45-2-220145-2-2206, but the part has been redesignated as part 12, §§ 45-2-120145-2-1206 by authority of the Code Commission.

Acts 2017, ch. 264, § 6 provided that the  Department of Financial Institutions is encouraged, within existing public or private resources, to consult with financial service providers as defined in this act, the Tennessee Commission on Aging and Disability, and the Department of Human Services to consider distributing public education and information to alert the public to the dangers posed to elderly and vulnerable adults by financial exploitation.

Acts 2017, ch. 264, § 7 provided that the act, which enacted this section, shall be repealed on June 30, 2022.

45-2-1206. Legislative intent. [Repealed effective June 30, 2022.]

It is the intent of the general assembly in adopting this part to allow financial service providers the discretion to take actions to assist in detecting and preventing financial exploitation without liability. The general assembly recognizes that financial service providers are in a unique position by conducting financial transactions on behalf of and at the request of their customers. Financial service providers have duties imposed by contract and duties imposed by both federal and state law to conduct financial transactions requested by their customers faithfully and timely in accordance with the customer's instructions. Further, financial service providers do not have a duty to contravene the valid instructions of their customers, nor to prevent criminal activity directed at their customers, and nothing in this part creates such a duty.

Acts 2017, ch. 264, § 1.

Compiler's Notes. Acts 2017, ch. 264, § 1 enacted a new part 22, §§ 45-2-220145-2-2206, but the part has been redesignated as part 12, §§ 45-2-120145-2-1206 by authority of the Code Commission.

Acts 2017, ch. 264, § 6 provided that the  Department of Financial Institutions is encouraged, within existing public or private resources, to consult with financial service providers as defined in this act, the Tennessee Commission on Aging and Disability, and the Department of Human Services to consider distributing public education and information to alert the public to the dangers posed to elderly and vulnerable adults by financial exploitation.

Acts 2017, ch. 264, § 7 provided that the act, which enacted this section, shall be repealed on June 30, 2022.

Part 12
Foreign Institutions Investing in Loans [Repealed]

45-2-1201 — 45-2-1203. [Repealed.]

Compiler's Notes. Former §§ 45-2-120145-2-1203 (Acts 1953, ch. 47, §§ 1-3; Williams, §§ 4129.4 — 4129.6; Acts 1957, ch. 111, § 1; 1959, ch. 28, §§ 1-3; 1959, ch. 310, §§ 1, 2; Acts 1968, ch. 523, § 1; T.C.A. (orig. ed.) §§ 45-1201 — 45-1203; Acts 1982, ch. 860, § 1; 1983, ch. 189, § 6), concerning foreign institutions investing in loans, were repealed by Acts 1990, ch. 1087, § 1.

Part 13
Voluntary Corporate Changes

45-2-1301. Part definitions.

As used in this part, unless the context otherwise requires:

  1. “Bank” means a state or a national bank;
  2. “Continuing bank” means a merging bank the charter of which becomes the charter of the resulting bank;
  3. “Converting bank” means a bank converting from a state to a national bank, or the reverse;
  4. “Merger” includes consolidation;
  5. “Merging bank” means a party to a merger;
  6. “National bank” means a national banking association located in this state;
  7. “Resulting bank” means the bank resulting from a merger or conversion; and
  8. “State bank” means a bank chartered by this state.

Acts 1969, ch. 36, § 1 (3.401); T.C.A., § 45-601.

Cross-References. Conversion of financial institutions, title 45, ch. 11.

Negotiable instruments, title 47, ch. 3.

Law Reviews.

State Regulation of Bank Holding Companies and the Future of Interstate Banking: A Tennessee Perspective (Colman B. Hoffman and Kathryn R. Edge), 51 Tenn. L. Rev. 383 (1984).

45-2-1302. Resulting national bank.

  1. Subject to this chapter and chapter 1 of this title, a state bank may convert into a resulting national bank, or a state or national bank in operation for at least three (3) years shall have the right to merge with any other bank in operation for at least three (3) years in this state so as to result in a national bank. The action to be taken by the merging or converting bank, if a state bank, and its rights and liabilities and those of its stockholders, shall be the same as those prescribed for national banks at the time of the action by the laws of the United States and not by the laws of this state, except that a vote of the holders of two thirds (2/3) of each class of voting stock of a state bank shall be required for a merger or conversion and that, on conversion by a state bank into a national bank, the rights of dissenting stockholders shall be those specified in § 45-2-1309. The requirement that both banks be in operation for three (3) years shall not apply if:
    1. Both merging banks have their principal offices in the same county; or
      1. One (1) merging bank was in existence, as defined in § 45-12-102 [repealed], as a bank prior to July 1, 1985, and was located in one (1) of the counties in Tennessee having a population in excess of two hundred thousand (200,000), according to the 1970 federal decennial census, and the other merging bank has been in operation for three (3) years;
      2. Notwithstanding § 45-2-614, the resulting national bank may create and operate branch banks in the county where the merging banks or any branch of either of the merging banks was located prior to the merger.
  2. Upon the completion of the merger or conversion, the franchise of any merging or converting state bank shall automatically terminate.
  3. A national bank in operation for at least three (3) years shall have the right to merge with an association as defined in § 45-3-104, in operation for at least three (3) years in this state so as to result in a national bank. The action to be taken by the merging bank or association and its rights and liabilities and those of its stockholders shall be the same as those prescribed for national banks at the time of the action by the laws of the United States and not by the laws of this state, except that a vote of the holders of two thirds (2/3) of each class of voting stock of a state association shall be required for a merger. The requirement that both financial institutions be in operation for three (3) years shall not apply if both merging institutions have their principal offices in the same county.

Acts 1969, ch. 36, § 1 (3.402); T.C.A., § 45-602; Acts 1983, ch. 74, § 1; 1985, ch. 174, § 3; 1985, ch. 204, § 1; 1986, ch. 615, § 1; 2001, ch. 54, § 21; 2003, ch. 32, § 5.

Compiler's Notes. Section 45-12-102 referred to in this section, was repealed by Acts 1995, ch. 165, § 1.

For table of U.S. decennial populations of Tennessee counties, see Volume 13 and its supplement.

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Banks and Banking, § 64.

Law Reviews.

Selected Tennessee Legislation of 1983 (N. L. Resener, J. A. Whitson, K. J. Miller), 50 Tenn. L. Rev. 785 (1983).

45-2-1303. Resulting state bank.

    1. Upon approval by the commissioner:
      1. Banks whose principal offices are located in this state and have been in operation for at least three (3) years may be merged to result in a state bank; or
      2. A national bank may convert into a state bank, except that the action by a national bank shall be taken in the manner prescribed by and shall be subject to limitations and requirements imposed by the laws of the United States, which shall also govern the rights of its dissenting shareholders.
    2. The requirement that both banks be in operation for three (3) years shall not apply if:
      1. Both merging banks have their principal offices in the same county; or
      2. One (1) merging bank was in existence, as defined in § 45-12-102 [repealed], as a bank prior to July 1, 1985, and was located in one (1) of those counties in Tennessee having a population in excess of two hundred thousand (200,000), according to the 1970 federal decennial census, and the other merging bank has been in operation for three (3) years.
  1. Notwithstanding § 45-2-614:
    1. The resulting state bank may create and operate branch banks in any county where the merging banks or any branch of either of the merging banks was located prior to the merger; and
    2. A state bank, whether or not a merging bank, with the approval of the commissioner, may create and operate branch banks in any county where a branch bank, office, or agency of the bank was maintained and operated on April 6, 1925.
  2. Upon approval of the commissioner, a state bank in operation for at least three (3) years shall have the right to merge with an association as defined in § 45-3-104 in operation for at least three (3) years in this state so as to result in a state bank. This part shall govern any merger or consolidation pursuant to this subsection (c). The requirement that both financial institutions be in operation for three (3) years shall not apply if both institutions have their principal offices in the same county. The resulting state bank may create and operate branch banks in accordance with § 45-2-614.

Acts 1969, ch. 36, § 1 (3.403); 1973, ch. 294, § 6; T.C.A., § 45-603; Acts 1983, ch. 74, § 2; 1984, ch. 555, § 1; 1985, ch. 174, § 4; 1985, ch. 204, § 1; 1986, ch. 615, § 1; 2001, ch. 54, § 22; 2003, ch. 32, § 6.

Compiler's Notes. Section 45-12-102, referred to in this section, was repealed by Acts 1995, ch. 165, § 1.

For table of U.S. decennial populations of Tennessee counties, see Volume 13 and its supplement.

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Banks and Banking, § 64.

Law Reviews.

Selected Tennessee Legislation of 1983 (N. L. Resener, J. A. Whitson, K. J. Miller), 50 Tenn. L. Rev. 785 (1983).

45-2-1304. Merger procedure — Resulting state bank.

  1. The board of directors of each merging state bank shall, by a majority of the entire board, approve a merger agreement, which shall contain:
    1. The name of each merging bank and location of each office;
    2. With respect to the resulting bank:
      1. Its name and the location of the principal and of each additional office, which shall not be at places other than pre-existing offices of any merging bank;
      2. The name and residence of each director to serve until the next annual meeting of the stockholders;
      3. The name and residence of each officer;
      4. The amount of capital, the number of shares and the par value of each share;
      5. Whether preferred stock is to be issued and the amount, terms, and preference; and
      6. The designation of the continuing bank, the charter of which is to be the charter of the resulting bank, together with the amendments to the continuing charter and to the continuing bylaws;
    3. Provisions governing the manner of converting the shares of the merging banks into shares of the resulting state bank;
    4. A statement that the agreement is subject to approval by the commissioner and by the stockholders of each merging bank;
    5. Provisions governing the manner of disposing of the shares of the resulting state bank not taken by dissenting stockholders of merging banks;
    6. Provisions for terminating any activities and disposing of any assets that do not conform to the requirements of the resulting institution when the merger involves an association; and
    7. Other provisions that the commissioner requires in order to discharge the commissioner's duties with respect to the merger.
  2. After approval by the board of directors of each merging state bank, the merger agreement shall be submitted to the commissioner for approval, together with certified copies of the authorizing resolutions of each board of directors showing approval by a majority of the entire board and evidence of proper action by the board of directors of any merging national bank.
  3. The commissioner shall approve the agreement if it appears that:
    1. The resulting state bank meets the requirements of state law as to the formation of a new state bank;
    2. The agreement provides an adequate capital structure, including surplus, in relation to the deposit liabilities of the resulting state bank and its other activities that are to continue or are to be undertaken;
    3. The agreement is fair;
    4. The merger is not contrary to the public interest; and
    5. When the merger involves an association, the schedule for termination of any nonconforming activities and disposition of any nonconforming assets is timely, and the plan for termination and disposition does not include any unsafe and unsound practices.
  4. If the commissioner disapproves an agreement, the commissioner shall state any objections and give an opportunity to the merging banks to amend the merger agreement to obviate the objections.
  5. The merger procedure prescribed in this section shall also apply to the merger of an association and state bank resulting in a state bank.

Acts 1969, ch. 36, § 1 (3.404); 1973, ch. 294, § 6; T.C.A., § 45-604; Acts 1985, ch. 174, §§ 5-7.

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Banks and Banking, § 64.

NOTES TO DECISIONS

1. Bond to Protect Depositors.

It is proper for the superintendent of banks [now commissioner of financial institutions] to require as a condition precedent to the merger of banks that the directors execute a bond for the protection of depositors and creditors where the banks to be merged have liabilities far in excess of assets and where the resulting bank would be in an unsafe and unsound financial condition without the bond requirement and the action by the superintendent [now commissioner] did not amount to exacting the bond under duress. State ex rel. Robertson v. Moriarty, 20 Tenn. App. 51, 95 S.W.2d 70, 1935 Tenn. App. LEXIS 5 (1935).

Where, upon the formation of new bank to take over the assets and assume the liabilities of two other banks, the superintendent of banks [now commissioner of financial institutions] required the directors of the new bank to execute a bond to secure its depositors and unsecured creditors as a condition precedent to the opening of the bank for business on the superintendent's [now commissioner's] finding that the new bank was in an unsafe condition, the directors of new bank were not entitled to a reasonable time in that to strengthen the bank where the assets of new bank were impaired by frozen assets of old bank. State ex rel. Robertson v. Moriarty, 20 Tenn. App. 51, 95 S.W.2d 70, 1935 Tenn. App. LEXIS 5 (1935).

45-2-1305. Approval by stockholders of merging state banks.

  1. To be effective, a merger that is to result in a state bank must be approved by the stockholders of each merging state bank by a majority vote of the outstanding voting stock of each class eligible to vote for the merger; provided, that a greater vote may be required by the charter. The vote shall be held at a meeting called to consider the action. The vote shall constitute the adoption of the charter and bylaws of the continuing state bank, including the amendments in the merger agreement, as the charter and bylaws of the resulting bank.
  2. Notice of the meeting of the stockholders shall be given by publication in a newspaper of general circulation in the place where the principal office of each merging bank is located, at least once a week for four (4) successive weeks, and by mail, at least fifteen (15) days before the date of the meeting to each stockholder of record of each merging bank at the stockholder's address on the books of the stockholder's bank, who has not waived notice in writing. No notice by publication need be given if written waivers are received from the holders of two thirds (2/3) of the outstanding shares of each class of voting stock. The notice shall state that a dissenting stockholder will be entitled to payment of the value of the stockholder's shares only if written notice of intent to demand payment is delivered to the bank before the vote is taken, and the stockholder does not vote the shares in favor of the plan.

Acts 1969, ch. 36, § 1 (3.405); T.C.A., § 45-605; Acts 1984, ch. 571, § 1; 1993, ch. 95, § 1; 1994, ch. 551, §§ 13, 14.

Compiler's Notes. Section 2 of Acts 1984, ch. 571, provided that:

“This act shall not affect rights and duties that matured, penalties that were incurred, or proceedings that were begun before its effective date.”

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Banks and Banking, § 64.

45-2-1306. Effective date of merger — Certificate of merger.

  1. A merger that is to result in a state bank shall, unless a later date is specified in the agreement, become effective upon the filing with the commissioner of the executed agreement, together with copies of the resolutions of the stockholders of each merging bank approving it, certified by the bank's president or a vice president and a cashier. The charters of the merging banks, other than the continuing bank, shall thereupon automatically terminate.
  2. The commissioner shall then issue to the resulting bank a certificate of merger, which shall constitute a continuing charter, specifying the name of each merging bank and the name of the resulting state bank. The certificate shall be conclusive evidence of the merger and of the correctness of all proceedings therefor in all courts and places, and shall be recorded in the same manner as is provided for the recording of a charter of a new bank in § 45-2-205(c).

Acts 1969, ch. 36, § 1 (3.406); 1973, ch. 294, § 6; T.C.A., § 45-606.

45-2-1307. Conversion of national into state bank.

  1. Except as provided in § 45-2-1310, a national bank located in this state that follows the procedure prescribed by the laws of the United States to convert into a state bank may be granted a state charter by the commissioner if the commissioner finds that each office of the national bank is legally in operation, that the resulting state bank will have an adequate capital structure, including surplus, in relation to its deposit liabilities and its other activities, not less than the capital structure required for a new state bank, and that the officers and directors of the resulting bank are persons of sound judgment and discretion.
  2. The national bank may apply for the charter by filing with the commissioner:
    1. A certificate signed by its president and cashier and by a majority of the entire board of directors, setting forth the corporate action taken in compliance with the laws of the United States governing the conversion of a national to a state bank; and
    2. The plan of conversion and the proposed articles of incorporation approved by the stockholders, for the operation of the bank as a state bank.

Acts 1969, ch. 36, § 1 (3.407); 1973, ch. 294, § 6; T.C.A., § 45-607.

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Banks and Banking, § 64.

45-2-1308. Continuation of corporate entity — Use of old name.

  1. A resulting state or national bank shall be considered the same business and corporate entity as each merging bank or as the converting bank with all the property rights, powers, duties, fiduciary appointments subject to § 45-2-1310 and obligations of each merging bank or the converting bank, except as affected by the state law in the case of a resulting state bank or the federal law in the case of a resulting national bank, and by the charter and bylaws of the resulting bank.
  2. A resulting bank shall have the right to use the name of any merging bank or of the converting bank whenever it deems it more convenient to do so.
  3. Any reference to a merging or converting bank in any writing, whether executed or taking effect before or after the merger or conversion, shall be deemed a reference to the resulting bank if not inconsistent with the other provisions of the writing.

Acts 1969, ch. 36, § 1 (3.408); T.C.A., § 45-608; Acts 1999, ch. 112, § 11.

45-2-1309. Dissenting stockholders.

The owners of shares of a state bank shall have dissenters rights as provided by  the Tennessee Business Corporation Act, compiled in title 48, ch. 23, part 1, with respect to any plan of merger, merger agreement, plan of conversion, plan of share exchange or any other corporate action described in § 48-23-102.

Acts 1969, ch. 36, § 1 (3.409); 1973, ch. 294, § 6; T.C.A., § 45-609; Acts 1981, ch. 330, § 2; 1983, ch. 441, § 2; 1994, ch. 551, § 15.

45-2-1310. Resulting bank without trust powers.

Where a resulting state bank is not to exercise trust powers, the commissioner shall not approve a merger or conversion until satisfied that adequate provision has been made for successors to fiduciary positions held by the merging banks or the converting bank.

Acts 1969, ch. 36, § 1 (3.410); 1973, ch. 294, § 6; T.C.A., § 45-610.

45-2-1311. Nonconforming assets or business.

If a merging or converting bank has assets that do not conform to the requirements of state law for the resulting state bank, or carries on business activities that are not permitted for the resulting state bank, the commissioner may permit a reasonable time to conform with state law.

Acts 1969, ch. 36, § 1 (3.411); 1973, ch. 294, § 6; T.C.A., § 45-611.

45-2-1312. [Repealed.]

Compiler's Notes. Former § 45-2-1312 (Acts 1969, ch. 36, § 1 (3.412); 1973, ch. 294, § 6; T.C.A., § 45-612), concerning book value of assets, was repealed by Acts 2001, ch. 54, § 23, effective April 4, 2001.

45-2-1313. Merger of bank in financial difficulty.

  1. If a bank is determined to be in financial difficulty by the appropriate regulatory officials, as defined in § 45-2-1402, it may be merged into any other bank in this state, notwithstanding §§ 45-2-614 and 45-2-1302(a).
  2. The merger procedure shall be the same as that procedure required for a regular merger pursuant to this part except that no notice by publication need be given.
  3. Prior to approving a merger pursuant to this section, the appropriate regulatory officials shall determine that alternative methods of protecting the depositors and stockholders of a bank in financial difficulty are not feasible.

Acts 1981, ch. 330, § 1.

45-2-1314. Share exchanges.

  1. A corporation may acquire all of the outstanding shares of one (1) or more classes or series of a bank, and a bank may acquire all of the outstanding shares of one (1) or more classes or a series of another bank or corporation, if the board of directors of each corporation or bank adopts and its shareholders, if required by § 48-21-104, approve the exchange. The share exchange shall be subject to and in accordance with the Tennessee Business Corporation Act, compiled in title 48, chapter 21, except as chapter 21 of the Tennessee Business Corporation Act, is inconsistent with this title.
  2. Any share exchange involving a bank or a bank holding company shall be subject to any regulatory approval required by applicable law.

Acts 1994, ch. 551, § 16.

45-2-1315. Review of exchange by commissioner — Hearings — Costs.

Upon the request of any person or entity that proposes to issue any security in exchange for one (1) or more bona fide outstanding securities of a bank or bank holding company or partly in exchange for outstanding securities of a bank or bank holding company and partly for cash, the commissioner is authorized to approve the terms and conditions of the issuance and exchange after a hearing on the fairness of the terms and conditions at which all persons to whom it is proposed to issue securities in the exchange shall have the right to appear. Nothing in this section shall require the commissioner to hold a hearing or to approve the terms or conditions of any specific exchange of securities. Any party requesting a hearing shall agree to pay the cost for the hearing, including the cost for the department to retain outside legal or investment advice as deemed necessary by the commissioner. The commissioner may require the requesting party to post a bond in cash or by accepted sureties to cover the cost.

Acts 1994, ch. 551, § 17.

Part 14
Bank Holding Companies—Bank Structure Act of 1974

45-2-1401. Short title.

This part shall be known and may be cited as the “Bank Structure Act.”

Acts 1974, ch. 469, § 1; T.C.A., § 45-619; Acts 1995, ch. 165, § 2.

Compiler's Notes. Acts 1995, ch. 165, § 6 provided that nothing in that act shall be deemed or construed as to: (i) authorize or permit, prior to June 1, 1997, merger or consolidation of any bank having its home state, as defined in § 45-2-1402, in Tennessee with or into any bank which does not have its home state in Tennessee; or (ii) authorize or permit, whether before, on, or after June 1, 1997, a bank which does not have its home state in Tennessee to establish or acquire a branch in Tennessee by any means other than merger or consolidation, on or after June 1, 1997, of such bank with or into a bank having its home state in Tennessee.

Cross-References. Negotiable instruments, title 47, ch. 3.

Tennessee Reciprocal Banking Act, title 45, ch. 12.

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Banks and Banking, § 64.

Law Reviews.

The Federal Income Tax Considerations Involved in Forming and Operating a Bank Holding Company (Clayton D. Smith), 11 Mem. St. U.L. Rev. 453 (1981).

45-2-1402. Part definitions.

As used in this part, unless the context otherwise requires:

  1. “Acquisition of a branch” means the acquisition of all or substantially all of the assets other than loans, cash or securities and the assumption of all or substantially all of the liabilities of or related to a branch that has been open and engaged in the business of banking for at least three (3) continuous years without the acquisition of the entire bank;
  2. “Affiliate” means any company that controls, is controlled by, or is under common control with another company;
  3. “Appropriate regulatory official” means:
    1. For any national bank, the comptroller of the currency of the United States; and
    2. For any Tennessee-chartered bank, the commissioner of financial institutions, the federal deposit insurance corporation, or the board of governors of the federal reserve system, if the bank is a member bank;
  4. “Bank” has the meaning stated in § 3(a)(1) of the Federal Deposit Insurance Act, codified as 12 U.S.C. § 1813(a)(1);
  5. “Bank holding company” has the meaning set forth in § 2(a)(1) of the Bank Holding Company Act of 1956, 12 U.S.C. § 1841(a)(1);
  6. “Branch” means a branch as defined in § 45-1-103;
  7. “Commercial activities” means any activities in which a bank holding company, financial holding company, a national bank, or a national bank subsidiary, may not engage under federal law;
  8. “Company” has the meaning set forth in § 2(b) of the Bank Holding Company Act of 1956, 12 U.S.C. § 1841(b);
  9. “Control” has the meaning set forth in § 2(a)(2) of the Bank Holding Company Act of 1956, 12 U.S.C. § 1841(a)(2);
  10. “De novo acquisition” means acquisition of shares of a bank prior to the time it is authorized to commence operations;
  11. “De novo branch” means a branch of a bank that:
    1. Is originally established by the bank as a branch; and
    2. Does not become a branch of the bank as a result of:
      1. The acquisition by the bank of an insured depository institution or a branch of an insured depository institution; or
      2. The conversion, merger, or consolidation of the institution or branch;
  12. “Home state” means:
    1. With respect to a national bank, the state in which the main office of the bank is located;
    2. With respect to a state bank, the state by which the bank is chartered; and
    3. With respect to a bank holding company, the state in which the total deposits of all banking subsidiaries of the company are the largest on the later of:
      1. July 1, 1966; or
      2. The date on which the company becomes a bank holding company under the Bank Holding Company Act of 1956;
  13. “Host state” means a state, other than the home state of a bank, in which the bank maintains or seeks to establish and maintain a branch;
  14. “Interim bank merger” means the technique by which a new bank charter is obtained solely for the purpose of merging an existing bank into the bank for which the charter is sought, or solely for the purpose of merging the bank for which the charter is sought into an existing bank; the technique is a transaction intended to qualify the exchange of stock between the bank holding company and the stockholders of the existing bank as a reorganization within the meaning of § 268(a) of the Internal Revenue Code of 1986, 26 U.S.C. § 368(a);
  15. “Out-of-state bank” or “out-of-state bank holding company” means a bank or bank holding company of which Tennessee is not the home state; and
  16. “Tennessee bank” or “Tennessee bank holding company” means a bank or bank holding company for which Tennessee is the home state of the bank or company.

Acts 1974, ch. 469, § 2; T.C.A., § 45-620; Acts 1995, ch. 165, § 2; 1996, ch. 562, § 3; 1998, ch. 742, § 1; 2001, ch. 54, § 24; 2001, ch. 140, § 1; 2003, ch. 32, § 3; 2007 ch. 5, §§ 1, 2.

Compiler's Notes. Acts 1995, ch. 165, § 6 provided that nothing in that act shall be deemed or construed as to: (i) authorize or permit, prior to June 1, 1997, merger or consolidation of any bank having its home state, as defined in § 45-2-1402, in Tennessee with or into any bank which does not have its home state in Tennessee; or (ii) authorize or permit, whether before, on, or after June 1, 1997, a bank which does not have its home state in Tennessee to establish or acquire a branch in Tennessee by any means other than merger or consolidation, on or after June 1, 1997, of such bank with or into a bank having its home state in Tennessee.

Acts 2001, ch. 140, § 4 provided that should any provision of that act or the application thereof to any person or circumstance be held invalid for any reason by a final nonappealable order of any Tennessee or federal court of competent jurisdiction, then such court shall declare the entire act to be null and void in its entirety and shall give no further force or effect to it; provided, however, that any transaction that has been finally consummated in good faith pursuant to that act prior to a determination of invalidity, and which is not the subject of dispute or litigation, shall be unaffected by such determination.

Cross-References. Branch banks, § 45-2-614.

Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994, Pub. L. No. 103-328, 108 Stat. 2338 (1994)(codified in various sections of 12 U.S.C. (1994)).

45-2-1403. Prohibition against acquiring shares of bank in operation less than three (3) years — Exceptions.

  1. Except as otherwise provided in subsection (b):
    1. No bank holding company acting directly or indirectly shall acquire control of, merge, or consolidate with a Tennessee bank that has not been in operation for at least three (3) years; and
    2. No out-of-state bank acting directly or indirectly shall acquire control of, merge, or consolidate with a Tennessee bank that has not been in operation for at least three (3) years.
  2. Subsection (a) shall not prohibit the following transactions:
    1. An interim bank merger for the purpose of acquiring control of a Tennessee bank that has been in operation for at least three (3) years, but the requirement of that period of operation shall not apply if the bank holding company owned more than fifty percent (50%) of the shares of the bank prior to the time of merger by reason of the purchase of the shares in a de novo acquisition;
    2. Acquisition of control, merger or consolidation of any Tennessee bank in financial difficulty, as determined by the appropriate regulatory officials; provided, that the officials determine that the acquisition will protect the stockholders and depositors by maintaining financial soundness;
    3. Acquisition of shares of stock given as collateral security upon a debt contracted in good faith; provided, that:
      1. The acquisition is necessary to prevent loss upon the debt;
      2. The making of the loan and the acquisition of the shares are in the ordinary course of business and not as a means of circumventing this part; and
      3. The shares so acquired shall be sold or disposed of at public or private sale within a period of one (1) year from the acquisition of the shares or by a later time that the appropriate regulatory officials deem required to permit the disposition of the shares without undue risk or loss;
    4. Acquisition of shares of stock by a bank acting solely in a fiduciary capacity in the ordinary course of its trust business and not for the purpose of circumventing this part;
    5. Acquisition of control of a bank by a company that will become a Tennessee bank holding company solely by reason of the acquisition; and
    6. The acquisition of shares of a bank holding company by another bank holding company where more than fifty percent (50%) of the total consolidated assets of the holding company being acquired are held by banks in operation for more than three (3) years.

Acts 1974, ch. 469, § 3; 1979, ch. 76, § 1; T.C.A., § 45-621; Acts 1980, ch. 616, § 1; 1981, ch. 228, § 1; 1983, ch. 74, § 3; 1987, ch. 45, § 1; 1995, ch. 165, § 2; 1996, ch. 768, § 24; 2003, ch. 32, § 4.

Compiler's Notes. Acts 1995, ch. 165, § 6 does not: (i) authorize or permit, prior to June 1, 1997, merger or consolidation of any bank having its home state, as defined in § 45-2-1402, in Tennessee with or into any bank which does not have its home state in Tennessee; or (ii) authorize or permit, whether before, on, or after June 1, 1997, a bank which does not have its home state in Tennessee to establish or acquire a branch in Tennessee by any means other than merger or consolidation, on or after June 1, 1997, of such bank with or into a bank having its home state in Tennessee.

Acts 1996, ch. 768, which amended this section, is known and may be cited as the Bank Reform Act of 1996.

45-2-1404. Acquisition by holding company prohibited.

A bank or bank holding company shall be prohibited from acquiring any bank in Tennessee if the bank or bank holding company, including all insured depository institutions that are affiliates of the bank or bank holding company, upon consummation of the acquisition, would control thirty percent (30%) or more of the total amount of the deposits of the insured depository institutions in Tennessee. For purposes of this part, “deposit” has the meaning set forth in § 3(l ) of the Federal Deposit Insurance Act, 12 U.S.C. § 1813(l ).

Acts 1974, ch. 469, § 4; T.C.A., § 45-622; Acts 1995, ch. 165, § 2.

Compiler's Notes. Acts 1995, ch. 165, § 6 does not: (i) authorize or permit, prior to June 1, 1997, merger or consolidation of any bank having its home state, as defined hereinabove in § 45-2-1402, in Tennessee with or into any bank which does not have its home state in Tennessee; or (ii) authorize or permit, whether before, on, or after June 1, 1997, a bank which does not have its home state in Tennessee to establish or acquire a branch in Tennessee by any means other than merger or consolidation, on or after June 1, 1997, of such bank with or into a bank having its home state in Tennessee.

45-2-1405. Power of commissioner.

The commissioner has the power to establish rules and regulations to carry out the legislative purposes of this part.

Acts 1974, ch. 469, § 5; T.C.A., § 45-623; Acts 1981, ch. 386, § 1; 1995, ch. 165, § 2.

Compiler's Notes. Former § 45-2-1405 (Acts 1974, ch. 469, § 5;T.C.A., § 45-623; Acts 1981, ch. 386, § 1), prohibiting Tennessee holding companies from acquiring certain banks, was effectively repealed by Acts 1995, ch. 165, § 2, which rewrote the part but did not include this section.

Cross-References. Acquisitions of Tennessee bank holding companies or banks, title 45, ch. 12.

45-2-1406. [Transferred.]

Compiler's Notes. Acts 1995, ch. 165, § 2 transferred this section to § 45-2-1405.

45-2-1407. Powers.

  1. An out-of-state state bank that establishes and maintains one (1) or more branches in Tennessee under this part may conduct any activities at the branch or branches that are authorized under the laws of this state for Tennessee state banks.
  2. Notwithstanding any other state law to the contrary and in addition to any other activities a state bank may conduct, a Tennessee state bank may conduct any activities at any branch outside Tennessee that are permissible for a bank chartered by the host state where the branch is located, subject to regulation by the commissioner for the purpose of maintaining the state bank's safety and soundness.

Acts 1996, ch. 562, § 1.

Law Reviews.

1996 Real Estate Legislation: What You Don't Know Can  Hurt You (William R. Bruce), 32 No. 6 Tenn. B.J. 12 (1996).

45-2-1408. Examinations — Periodic reports — Cooperative agreements — Assessment of fees.

  1. To the extent consistent with subsection (c), the commissioner may make the examinations of any branch established and maintained in this state pursuant to this part by an out-of-state state bank that the commissioner deems necessary to determine whether the branch is being operated in compliance with the laws of this state and in accordance with safe and sound banking practices. The commissioner may also participate in examinations of out-of-state state banks that have branches located in Tennessee. The applicable provisions of § 45-2-1602 shall apply to the examinations.
  2. The commissioner may prescribe requirements for periodic reports regarding any out-of-state bank that operates a branch in Tennessee pursuant to this part. The required reports shall be provided by the bank or may be provided by the bank supervisory agency having primary responsibility for the bank.
  3. The commissioner may enter into cooperative, coordinating and information-sharing agreements with any other bank supervisory agencies or any organization affiliated with or representing one (1) or more bank supervisory agencies with respect to the periodic examination or other supervision of any branch in Tennessee of an out-of-state state bank, or any branch of a Tennessee state bank in any host state, and the commissioner may accept the parties' reports of examination and reports of investigation in lieu of conducting the commissioner's own examinations or investigations.
  4. The commissioner may enter into contracts with any bank supervisory agency that has concurrent jurisdiction over a Tennessee state bank or an out-of-state state bank operating a branch in this state pursuant to this part to engage the services of the agency's examiners at a reasonable rate of compensation, or to provide the services of the commissioner's examiners to the agency at a reasonable rate of compensation to be paid by either the other bank supervisory agency or by the out-of-state state bank. The contract shall be deemed a sole source contract under Tennessee law.
  5. The commissioner may enter into joint examinations or joint enforcement actions with other bank supervisory agencies having concurrent jurisdiction over any branch in Tennessee of an out-of-state state bank or any branch of a Tennessee state bank in any host state; provided, that the commissioner may at any time take such actions independently if the commissioner deems the actions to be necessary or appropriate to carry out the commissioner's responsibilities under this part or to ensure compliance with the laws of this state.
  6. Each out-of-state state bank that maintains one (1) or more branches in this state may be assessed and, if assessed, shall pay supervisory and examination fees in accordance with the laws of this state and regulations of the commissioner. The fees, as well as a portion of the banking fee assessed on a Tennessee state bank that maintains one (1) or more branches in other states, may be shared with other bank supervisory agencies or any organization affiliated with or representing one (1) or more bank supervisory agencies in accordance with agreements between the parties and the commissioner.
  7. In order to encourage the effective coordination and implementation of home state laws and host state laws with respect to interstate branching, the commissioner has the authority and the discretion to determine the applicability of Tennessee laws that are within the commissioner's regulatory authority as conferred by law to the operation of branches in Tennessee by out-of-state state banks.

Acts 1996, ch. 562, § 1; 1998, ch. 593, § 1.

45-2-1409. Notice and filing requirements.

Any out-of-state bank that will be the resulting bank pursuant to an interstate merger transaction involving a Tennessee state bank shall notify the commissioner of the proposed merger not later than the date on which it files an application for an interstate merger transaction with the responsible federal bank supervisory agency, and shall submit a copy of that application to the commissioner and pay the filing fee, if any, required by the commissioner. Any Tennessee state bank that is a party to the interstate merger transaction shall comply with all applicable state and federal laws. Any out-of-state bank that is the resulting bank in the interstate merger transaction shall provide satisfactory evidence to the commissioner of compliance with applicable requirements of Tennessee law.

Acts 1996, ch. 562, § 1.

45-2-1410. Notice of subsequent merger.

  1. Each out-of-state state bank that has established and maintains a branch in this state pursuant to this part shall give at least thirty (30) days' prior written notice to the commissioner of any merger, consolidation, or other transaction that would cause a change of control with respect to the bank or any bank holding company that controls the bank, with the result that an application would be required to be filed pursuant to the federal Change In Bank Control Act of 1978, 12 U.S.C. § 1817(j), or the federal Bank Holding Company Act of 1956, 12 U.S.C. § 1841 et seq., or any successor statutes. In the case of an emergency transaction, the out-of-state state bank shall provide a shorter notice that is consistent with applicable state or federal law. The home state supervisory agency of the bank may provide the prior written notice required.
  2. The notice requirement of subsection (a) shall apply to out-of-state trust institutions that maintain an office in this state pursuant to this chapter. The notice shall also be required of:
    1. Any transfer of all or substantially all of the trust accounts or trust assets of the out-of-state trust institution to another person; or
    2. The closing or disposition of any office in this state.

Acts 1996, ch. 562, § 1; 1999, ch. 112, § 12.

45-2-1411. Enforcement.

If the commissioner determines that a branch maintained by an out-of-state state bank or a trust office maintained by an out-of-state trust institution in this state is being operated in violation of any provision of the laws of this state, or is being operated in an unsafe and unsound manner, the commissioner shall have the authority to take all enforcement actions that the commissioner would be empowered to take if the branch or office were a Tennessee state bank; provided, that the commissioner shall promptly give notice to the home state supervisory agency of each enforcement action taken against an out-of-state state bank or out-of-state trust institution. To the extent practicable, the commissioner shall consult and cooperate with the home state supervisory agency in pursuing and resolving the enforcement action. The commissioner may issue an order temporarily or permanently prohibiting a trust institution from acting as a fiduciary in this state.

Acts 1996, ch. 562, § 1; 1999, ch. 112, § 13.

45-2-1412. Acquisition of branch by out-of-state bank.

  1. An out-of-state bank that does not already maintain a branch in Tennessee and that meets the requirements of this title may establish and maintain a branch in Tennessee through the acquisition of a branch or establishment of a de novo branch.
  2. No branch of an out-of-state bank may be established through the acquisition of a branch or establishment of a de novo branch, unless the laws of the home state of the out-of-state bank permit Tennessee banks to establish and maintain branches in that state through the acquisition of a branch or establishment of a de novo branch under substantially the same terms and conditions as set forth in this title.
  3. No bank or out-of-state bank may establish or maintain a branch in this state on the premises or property of an affiliate if the affiliate engages in commercial activities.

Acts 1998, ch. 742, § 2; 2001, ch. 140, § 2; 2007, ch. 5, § 3.

Compiler's Notes. Acts 2001, ch. 140, § 4 provided that should any provision of that act or the application thereof to any person or circumstance be held invalid for any reason by a final nonappealable order of any Tennessee or federal court of competent jurisdiction, then such court shall declare the entire act to be null and void in its entirety and shall give no further force or effect to it; provided, however, that any transaction that has been finally consummated in good faith pursuant to that act prior to a determination of invalidity, and which is not the subject of dispute or litigation, shall be unaffected by such determination.

Cross-References. Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994, Pub. L. 103-328, 108 Stat. 2338 (1994) (codified in various sections of 12 U.S.C. (1994)).

Part 15
Liquidation, Dissolution, and Reorganization

45-2-1501. Voluntary liquidation and dissolution.

  1. With the approval of the commissioner, a state bank may liquidate and dissolve. The commissioner shall grant approval if it appears that:
    1. The proposal to liquidate and dissolve has been approved by a vote of two thirds (2/3) of the outstanding voting stock at a meeting called for the purpose of considering the action; and
    2. The state bank is solvent and has sufficient liquid assets to pay off depositors and creditors immediately.
    1. Upon approval by the commissioner, the bank shall cease to do business, shall have only the powers necessary to effect an orderly liquidation and shall proceed to pay its depositors and creditors and to wind up its affairs.
    2. Within thirty (30) days of the approval, a notice of liquidation shall be sent by mail to each depositor, creditor, person interested in funds held as a fiduciary, lessee of a safe deposit box or bailor of property. The notice shall be posted conspicuously on the premises of the bank and shall be published as the commissioner may require. The bank shall send with the notice a statement of the amount on the books to be the claim of the depositor or creditor. The notice shall demand that property held by the bank as bailee or in a safe deposit box be withdrawn by the person entitled thereto and that claims of depositors and creditors, if the amount claimed differs from that stated in the notice to be due, be filed with the bank before a specified date not earlier than sixty (60) days thereafter in accordance with the procedure prescribed in the notice.
    3. As soon after approval as may be practicable, the state bank shall resign all fiduciary positions and take the actions necessary to settle its fiduciary accounts.
    4. Safe deposit boxes, the contents of which have not been removed within thirty (30) days after demand, shall be opened and the contents dealt with in the manner provided for boxes upon which the payment of rental is in default and the sealed packages containing the contents and the certificates, together with any other unclaimed property held by the bank as bailee and certified inventories thereof, shall be reported to the state treasurer, who shall act in accordance with the Uniform Unclaimed Property Act, compiled in title 66, chapter 29.
    5. The approval of an application for liquidation shall not impair any right of a depositor or creditor to payment in full, and all lawful claims of creditors and depositors shall promptly be paid. The unearned portion of the rental of a safe deposit box shall be returned to the lessee.
    6. Any assets remaining after the discharge of all obligations shall be distributed to the stockholders, in accordance with their respective interests. Distribution shall not be made before:
      1. All claims of depositors and creditors have been paid or, in the case of any disputed claim, the bank has transmitted to the commissioner a sum adequate to meet any liability that may be judicially determined; and
      2. Any funds payable to a depositor or creditor and unclaimed have been transmitted to the commissioner. Any unclaimed distribution to a stockholder or depositor shall be transferred to the state treasurer, who shall deal with the unclaimed funds in accordance with  the Uniform Unclaimed Property Act, compiled in title 66, chapter 29.
  2. If the commissioner finds that the assets will be insufficient for the full discharge of all obligations or that completion of the liquidation has been unduly delayed, the commissioner may take possession and complete the liquidation in the manner provided in § 45-2-1504 for involuntary liquidations.
  3. The commissioner may require reports of the progress of liquidation, and whenever satisfied that the liquidation has been properly completed, the commissioner shall cancel the charter and enter an order of dissolution.

Acts 1969, ch. 36, § 1 (3.501); 1973, ch. 294, § 6; 1978, ch. 561, § 34; T.C.A., § 45-901; Acts 1983, ch. 78, §§ 9, 10; 2017, ch. 457, § 2.

Cross-References. Applicability of part to industrial banks and industrial investment companies, § 45-5-602.

Negotiable instruments, title 47, ch. 3.

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Banks and Banking, §§ 56, 60.

45-2-1502. Commissioner in possession.

  1. The commissioner may take possession of a state bank if, after a hearing, the commissioner finds:
    1. Its capital is impaired or it is otherwise in an unsound condition;
    2. Its business is being conducted in an unlawful or unsound manner;
    3. It is unable to continue normal operations; or
    4. Its examination has been obstructed or impeded.
    1. The commissioner shall take possession by posting upon the premises a notice reciting that the commissioner is assuming possession pursuant to this section and the time, not earlier than the posting of the notice, when possession shall be deemed to commence. A copy of the notice shall be filed in a court of general or equity jurisdiction in the county in which the institution is located. The commissioner shall notify the federal reserve bank of the district of taking possession of any state bank that is a member of the federal reserve system, and shall notify the federal deposit insurance corporation of the taking possession of any insured bank.
    2. When the commissioner has taken possession of a state bank, the commissioner shall be vested with the full and exclusive power of management and control, including the power to continue or to discontinue the business, to stop or to limit the payment of its obligations, to employ any necessary assistants, to execute any instrument in the name of the bank, to commence, defend and conduct in its name any action or proceeding in which it may be a party, to terminate the commissioner's possession by restoring the bank to its board of directors, to appoint a receiver to have all of the rights, powers, duties and obligations granted to the commissioner in possession for the purpose of liquidation or reorganization, and to reorganize or liquidate the bank in accordance with §§ 45-2-1503 and 45-2-1504. As soon as practicable after taking possession, the commissioner shall make an inventory of the assets and file a copy of the inventory with the court in which the notice of possession was filed.
    3. When the commissioner has taken possession, there shall be a postponement until six (6) months after the commencement of possession of the date upon which any period of limitation fixed by a statute or agreement would otherwise expire on a claim or right of action of the bank, or upon which an appeal must be taken or a pleading or other document must be filed by the bank in any pending action or proceeding.
    1. If, in the opinion of the commissioner, an emergency exists that will result in serious losses to the depositors, the commissioner may take possession of a state bank without a prior hearing. Any person aggrieved and directly affected by this action of the commissioner may have a review by certiorari as provided in title 27, chapter 9.
    2. If the commissioner determines to liquidate the state bank, the commissioner shall give notice of the determination to the directors, stockholders, depositors and known creditors. Upon a determination to liquidate, the commissioner may, with ex parte approval of the court in which the notice of possession was filed, sell all or any part of the state bank's assets to another state or national bank or to the federal deposit insurance corporation. The commissioner may also, with ex parte approval of the court, borrow from the federal deposit insurance corporation any amount necessary to facilitate the assumption of deposit liabilities by a newly chartered or existing bank and may assign any part or all of the assets of the state bank as security for the loan.
    3. If the commissioner determines to reorganize the state bank, after according a hearing to all interested parties, the commissioner shall enter an order proposing a reorganization plan. A copy of the plan shall be sent to each depositor and creditor who will not receive payment of a claim in full under the plan, together with notice that, unless within fifteen (15) days the plan is disapproved in writing by persons holding one third (1/3) or more of the aggregate amount of the claims, the commissioner will proceed to effect the reorganization. A department, agency or political subdivision of this state holding a claim that will not be paid in full is authorized to participate as any other creditor.
  2. No judgment, lien or attachment shall be executed upon any asset of the state bank while it is in the possession of the commissioner. Upon the election of the commissioner in connection with a liquidation or reorganization:
    1. Any lien or attachment, other than an attorney's or mechanic's lien, obtained upon any asset of the state bank during the commissioner's possession or within four (4) months prior to commencement thereof shall be vacated except liens created by the commissioner while in possession; and
    2. Any transfer of an asset of the state bank made after or in contemplation of its insolvency with intent to effect a preference shall be voided.
  3. The commissioner may borrow money in the name of the state bank and may pledge its assets as security for the loan.
  4. All necessary and reasonable expenses of the commissioner's possession of a state bank and of its reorganization or liquidation shall be defrayed from the assets thereof.

Acts 1969, ch. 36, § 1 (3.502); 1973, ch. 294, § 6; T.C.A., § 45-902; Acts 1980, ch. 510, §§ 2-4; 1999, ch. 112, § 14.

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Banks and Banking, §§ 59, 60.

NOTES TO DECISIONS

1. Preferences.

The purpose of the preference provision is to prevent dissolution or diminution of the fund held by the receiver for pro rata distribution to proven creditors and claimants. In re Liquidation of United Am. Bank, 743 S.W.2d 911, 1987 Tenn. LEXIS 1072 (Tenn. 1987).

Subdivision (d)(2) does not affect the statutory authority provided in other sections to make discretionary sales of assets with the approval of a court of competent jurisdiction; this reading of the preference section construes it in pari materia with the entire statutory scheme. In re Liquidation of United Am. Bank, 743 S.W.2d 911, 1987 Tenn. LEXIS 1072 (Tenn. 1987).

An intent to create a preference could be inferred where no provision of a fund for ratable distribution to unassumed creditors or claimants was made. In re Liquidation of United Am. Bank, 743 S.W.2d 911, 1987 Tenn. LEXIS 1072 (Tenn. 1987).

A purchase and assumption agreement that provides for assumption of all liabilities does not create a preference as a general rule. In re Liquidation of United Am. Bank, 743 S.W.2d 911, 1987 Tenn. LEXIS 1072 (Tenn. 1987).

If a pre-distribution purchase and assumption agreement, that is statutorily authorized as part of the conduct and administration of a receivership, provides for the disposition of losses, liabilities, and assets for a statutorily sanctioned purpose but the amount of the receivership fund available for distribution to any remaining proven, unassumed claimants is not thereby diminished, then a preference has not been created because nothing has been done to decrease the amount available for a pro rata distribution to satisfy the insolvent's liabilities. In re Liquidation of United Am. Bank, 743 S.W.2d 911, 1987 Tenn. LEXIS 1072 (Tenn. 1987).

As long that the receiver takes the necessary steps to provide a fund for pro rata satisfaction of unassumed claims from an undiminished (or enhanced) fund, a purchase and assumption agreement that does not provide for assumption of all liabilities does not per se constitute a voidable or illegal preference under subdivision (d)(2). In re Liquidation of United Am. Bank, 743 S.W.2d 911, 1987 Tenn. LEXIS 1072 (Tenn. 1987).

Decisions Under Prior Law

1. Nature of Power — Liability for Wrongful Exercise.

The power to close and take over a bank is discretionary and for an erroneous exercise the superintendent [now commissioner] is liable only if he acts willfully or maliciously or transcends legal authority. State ex rel. Robertson v. Farmers' State Bank, 162 Tenn. 499, 39 S.W.2d 281, 1930 Tenn. LEXIS 114 (Tenn. Dec. 1930).

2. Conditions Warranting Taking Possession.

The superintendent [now commissioner] has no power to regulate the internal management or assume authority over the bank unless facts appear that authorize a closing. State ex rel. Robertson v. Farmers' State Bank, 162 Tenn. 499, 39 S.W.2d 281, 1930 Tenn. LEXIS 114 (Tenn. Dec. 1930).

The superintendent [now commissioner] is not empowered to take charge of a bank for misconduct of its officers or directors, but is so empowered where the bank is found to be insolvent or unable to pay demands in the ordinary course of business, or where its officers have misappropriated its funds or are using same contrary to provisions of the banking law. State ex rel. Robertson v. Farmers' State Bank, 162 Tenn. 499, 39 S.W.2d 281, 1930 Tenn. LEXIS 114 (Tenn. Dec. 1930).

3. Resolution and Assignment Distinguished.

The passage of a resolution by the directors declaring the bank insolvent and inviting bank examiner to take charge of its assets for administration under statutes is not an assignment, general or special. State ex rel. Robertson v. Liberty Bank & Trust Co., 165 Tenn. 40, 52 S.W.2d 150, 1931 Tenn. LEXIS 167 (1932).

45-2-1503. Requirements of reorganization plan.

  1. A plan of reorganization shall not be prescribed under this chapter unless:
    1. The plan is feasible and fair to all classes of depositors, creditors and stockholders;
    2. The face amount of the interest accorded to any class of depositors, creditors or stockholders under the plan does not exceed the value of the assets upon liquidation, less the full amount of the claims of all prior classes, subject, however, to any fair adjustment for new capital that any class will pay in under the plan;
    3. The plan provides for the issuance of common stock in an amount that will provide an adequate ratio to deposits;
    4. Any exchange of new common stock for obligations or stock of the bank will be effected in inverse order to the priorities in liquidation of the classes that will retain an interest in the bank and upon terms that fairly adjust any change in the relative interest of the respective classes that will be produced by the exchange;
    5. The plan assures the removal of any director, officer or employee responsible for any unsound or unlawful action or the existence of an unsound condition; and
    6. Any merger or consolidation provided by the plan conforms to the requirements this chapter and chapter 1 of this title.
  2. Whenever, in the course of reorganization, supervening conditions render the plan unfair or its execution impractical, the commissioner may modify the plan or liquidate the institution. The action shall be taken by order upon appropriate notice.

Acts 1969, ch. 36, § 1 (3.503); 1973, ch. 294, § 6; T.C.A., § 45-903.

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Banks and Banking, § 61.

45-2-1504. Liquidation by commissioner.

  1. In liquidating a state bank, the commissioner may exercise any power of the office of commissioner, but shall not, without the approval of the court in which notice of possession has been filed:
    1. Sell any asset of the organization having a value in excess of five hundred dollars ($500);
    2. Compromise or release any claim if the amount of the claim exceeds five hundred dollars ($500), exclusive of interest; or
    3. Make any payment on any claim, other than a claim upon an obligation incurred by the commissioner, before preparing and filing a schedule of the commissioner's determinations in accordance with this chapter.
  2. Within six (6) months of the commencement of liquidation, the commissioner may elect to terminate any executory contract under which the state bank has contracted either to receive or to provide services, the services specifically including advertising, or any obligation of the bank as a lessee. A lessor who receives sixty (60) days' notice of the commissioner's election to terminate the lease shall have no claim for rent other than rent accrued to the date of termination or for claims for damages for the termination.
  3. As soon after the commencement of liquidation as is practicable, the commissioner shall take the necessary steps to terminate all fiduciary positions held by the state bank and take any action necessary to surrender all property held by the bank as a fiduciary and to settle its fiduciary accounts. The fiduciary accounts may be transferred by the commissioner to another qualified corporate fiduciary as determined by the commissioner, and notice of the transfer must be given by registered mail to the parties by the transferee corporate fiduciary.
  4. As soon after the commencement of liquidation as practicable, the commissioner shall send notice of the liquidation to each known depositor, creditor and lessee of a safe deposit box or bailor of property held by the bank at the address shown on the books of the institution. The notice shall also be published in a newspaper of general circulation in the community once a week for three (3) successive weeks. The commissioner shall send with the notice a statement of the amount shown on the books of the institution to be the claim of the depositor or creditor. The notice shall demand that property held by the bank as bailee or in a safe deposit box be withdrawn by the person entitled thereto and that claims of depositors and creditors, if the amount claimed differs from that stated in the notice to be due, be filed with the commissioner before a specified date not earlier than sixty (60) days thereafter in accordance with the procedure prescribed in the notice.
  5. Safe deposit boxes, the contents of which have not been removed before the date specified, shall be opened by the commissioner in the manner provided for boxes upon which the payment of rental is in default, and the sealed packages containing the contents and the certificates, together with any unclaimed property held by the bank as bailee and certified inventories thereof, shall be reported to the state treasurer who shall deal with them in accordance with  the Uniform Unclaimed Property Act, compiled in title 66, chapter 29.
  6. Within six (6) months after the last day specified in the notice for the filing of claims or a longer period that may be allowed by the court in which notice of possession has been filed, the commissioner shall:
    1. Reject any claim if the commissioner doubts the validity thereof;
    2. Determine the amount, if any, owing to each known creditor or depositor and the priority class of the claim under this chapter and chapter 1 of this title;
    3. Prepare a schedule of the commissioner's determinations for filing in the court in which notice of possession was filed; and
    4. Notify each person whose claim has not been allowed in full and publish once a week for three (3) successive weeks a notice of the time when and the place where the schedule of determinations will be available for inspection and the date, not sooner than thirty (30) days thereafter, when the commissioner will file the schedule in court.
  7. Within twenty (20) days after the filing of the commissioner's schedule, any creditor, depositor or stockholder may file an objection to any determination made. Any objections so filed shall be heard and determined by the court, upon such notice to the commissioner and interested claimants as the court may prescribe. If the objection is sustained, the court shall direct an appropriate modification of the schedule. After filing the schedule, the commissioner may, from time to time, make partial distribution to the holders of claims that are undisputed or have been allowed by the court, if a proper reserve is established for the payment of disputed claims. As soon as is practicable after the determination of all objections, the commissioner shall make final distribution.
    1. The following claims shall have priority:
      1. Obligations incurred by the commissioner;
      2. Wages and salaries of officers and employees earned during the three-month period preceding the commissioner's possession in an amount not exceeding six hundred dollars ($600) for any one (1) person;
      3. Fees and assessments due to the department; and
      4. Deposits to the extent of ten dollars ($10.00) for each depositor.
    2. After the payment of all other claims with interest at the maximum rate permitted on time deposits, the commissioner shall pay claims otherwise proper that were not filed within the time prescribed.
    3. If the sum available for any class is insufficient to provide payment in full, the sum shall be distributed to the claimants in the class pro rata.
  8. Any assets remaining after all claims have been paid shall be distributed to the stockholders in accordance with their respective interests.
  9. Unclaimed funds remaining after completion of the liquidation shall be transferred to the state treasurer to be dealt with in accordance with  the Uniform Unclaimed Property Act, compiled in title 66, chapter 29.
  10. When the assets have been distributed in accordance with this chapter and chapter 1 of this title, the commissioner shall file an account with the court. Upon approval thereof, the commissioner shall be relieved of liability in connection with the liquidation and the charter shall be cancelled.

Acts 1969, ch. 36, § 1 (3.504); 1973, ch. 294, § 6; 1978, ch. 561, § 34; T.C.A., § 45-904; Acts 1983, ch. 78, §§ 10, 11; 1999, ch. 112, § 15; 2017, ch. 457, § 2.

Cross-References. Certified mail instead of registered mail, § 1-3-111.

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Banks and Banking, §§ 60, 63.

NOTES TO DECISIONS

1. Receivership.

Where a statutory bank receivership has been instituted pursuant to statutory authority, the proceeding is pending until all statutory directives are complied with and the final accounting is approved. In re United Southern Bank, 718 S.W.2d 251, 1986 Tenn. LEXIS 797 (Tenn. 1986).

2. Parties.

Debtors and prospective debtors have no standing to intervene at any stage of a bank receivership pursuant to title 45, chapters 1 and 2. In re United Southern Bank, 718 S.W.2d 251, 1986 Tenn. LEXIS 797 (Tenn. 1986).

3. Sales of Assets.

Section 45-2-1502(d)(2) relating to voiding transfers of assets of state banks made with the intent to create a preference, does not affect the statutory authority provided in other sections to make discretionary sales of assets with the approval of a court of competent jurisdiction; this reading of the preference section construes it in pari materia with the entire statutory scheme. In re Liquidation of United Am. Bank, 743 S.W.2d 911, 1987 Tenn. LEXIS 1072 (Tenn. 1987).

45-2-1505. Formation of new bank.

  1. Upon application of either five (5) individual incorporators or a bank holding company domiciled in this state, the commissioner may grant a charter and may issue a certificate of authority to the incorporators if the commissioner finds that the immediate formation of a new state bank will protect the depositors of a state bank closed in accordance with § 45-2-1502.
  2. The requirements contained in this chapter pertaining to the formation and operation of a state bank shall not be applicable for a period of one (1) year after formation of a new state bank hereunder, unless the commissioner determines that the requirements are necessary to the operation of the new state bank.
  3. None of the restrictions contained in the Bank Structure Act of 1974, compiled in part 14 of this chapter, or as the same may be hereafter amended, shall apply to the formation of the new state bank.
  4. The new state bank may acquire all or any part of the assets or deposits of a closed bank in accordance with  this chapter.

Acts 1980, ch. 510, § 5.

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Banks and Banking, § 61.

Part 16
Examination and Reports

45-2-1601. Supervision of banks.

  1. Every person doing a banking business under the laws of this state shall be subject to supervision and regulation by the commissioner.
  2. In addition to other powers conferred by chapters 1-9 of this title, the commissioner has the power to require banks subject to the commissioner's supervision to:
    1. Maintain their accounts and to value their assets in accordance with generally accepted principles of accounting;
    2. Charge off the whole or part of an asset that at the time of its acquisition could not lawfully have been acquired and that could not lawfully be retained at the time of the commissioner's action; provided, that the commissioner's action is within two (2) years of the aforementioned acquisition;
    3. Record liens and security in property or, at the option of the bank, insure against losses from not recording;
    4. Obtain a financial statement from a borrower to the extent that the bank can do so;
    5. Search, or obtain insurance of, the title to real estate taken as security; and
    6. Maintain adequate insurance against the risks that the commissioner determines are necessary and appropriate for the protection of depositors.
  3. No person shall be subjected to any civil or criminal liability for any act or omission to act in good faith in reliance upon a subsisting order, regulation or interpretation of the commissioner, notwithstanding a subsequent decision by a court invalidating the order, regulation or interpretation.

Acts 1969, ch. 36, § 1 (2.201); 1973, ch. 294, § 6; T.C.A., § 45-701.

Cross-References. Negotiable instruments, title 47, ch. 3.

45-2-1602. Examination of banks.

    1. The commissioner shall, either personally or by competent examiner appointed by the commissioner, visit and examine every bank subject to the commissioner's supervision at least once in each year. The commissioner has discretion to determine the scope of the examination; provided, that a full-scope examination, as set out in subsection (b), shall be conducted by the commissioner or the commissioner's designee at least once in every three (3) years. The commissioner has discretion to accept, in any calendar year, all or part of an examination report of a federal banking regulatory agency conducted of a state bank in that year.
    2. The provision of subdivision (a)(1) requiring an examination at least once in each year may be extended to eighteen (18) months; provided, that the bank meets the criteria applicable to the examination cycle imposed on federally insured depository institutions in Section 10(d) of the Federal Deposit Insurance Act (12 U.S.C. § 1820(d)).
    3. The commissioner shall examine a state trust company at least once in an eighteen-month period, except that the commissioner may extend this examination cycle up to an additional eighteen (18) months. In making this determination, the commissioner may consider the state trust company's quality of management, capitalization, risk profile and any other factors the commissioner deems relevant. In no event may a state trust company's examination cycle be extended if the company did not receive a composite rating of one (1) or two (2) at its last examination.
  1. On every examination, inquiry shall be made as to the condition and resources of the bank, the mode of conducting and managing the affairs of the bank, the action of its directors, the investment of the funds of the bank, the safety and prudence of the management of the bank, and whether the requirements of its charter and law have been complied with in the administration of the affairs of the bank, and as to any matters that the commissioner uniformly prescribes.
  2. In addition, the commissioner has the power, and it is the commissioner's duty in like manner, to examine or cause to be examined into the affairs of every bank whenever, in the judgment of the commissioner, the management and condition of the bank are such as to render an examination of its affairs necessary or expedient, or whenever, in the opinion of the commissioner, the interest of the public demands an examination.
  3. The commissioner also has the power to examine, or cause to be examined, every agency located in this state of any foreign bank or banking corporation, in the manner and for the same purpose that the commissioner shall examine domestic banks.
  4. The commissioner also has the power to examine or cause to be examined subsidiary corporations of banks subject to the commissioner's supervision.
  5. The commissioner, and every examiner acting under or appointed by the commissioner, has the power and authority to administer oaths and to examine under oath any person whose testimony may be required on the examination of any bank, or on the examination of any agency of any foreign bank or banking corporation, or on examination of any subsidiary of any bank subject to the commissioner's supervision, and has the authority and power to compel the appearance and attendance of the person for the purpose of the examination.
  6. Any stockholder in any incorporated bank, any corporation doing a banking business, or any person interested in a firm or individual bank may call upon the commissioner, at any time, to make an examination of the bank in which the stockholder, corporation or person is interested, which examination the commissioner, either in person or by an examiner, may or may not make, in the exercise of discretion, upon the one making the request depositing with the commissioner in advance a sum sufficient to cover the cost of the examination.
    1. Each examiner shall act under the direction of the commissioner, and shall forthwith examine fully into the books, papers, and affairs of the bank that the examiner may be directed by the commissioner to examine.
    2. The commissioner shall furnish to each examiner a commission under the signature of the commissioner and official seal of the department, which commission the examiner shall exhibit to the officer or officers of the bank proposed to be examined as the examiner's authority for making the examination.
    3. Each examiner shall report on oath to the commissioner the result of each examination made by the examiner, which report the commissioner shall keep on file in the commissioner's office; and when the commissioner in person makes an examination of the affairs of any bank, the commissioner shall in like manner make out a report under oath of the result of the examination, and the same shall be kept on file in the office of the commissioner, and a duplicate copy furnished the bank examined.
  7. In the discretion of the commissioner, a state bank may be notified in advance that an examination is about to commence in order to afford the bank an opportunity to prepare reports or other information requested by the commissioner. In the discretion of the commissioner, a state bank may be examined at any time without prior notice to the bank.
  8. The commissioner has the power to review the operations of any location engaging in activities as principal or on behalf of a state or out-of-state trust institution or any other company to determine if the location is engaging in unauthorized trust activity.

Acts 1969, ch. 36, § 1 (2.202); 1973, ch. 294, § 6; 1978, ch. 563, §§ 1, 2; T.C.A., § 45-702; Acts 1980, ch. 540, § 1; 1987, ch. 165, § 1; 1993, ch. 31, § 1; 1996, ch. 768, § 25; 1997, ch. 9, § 1; 1999, ch. 112, § 16; 2014, ch. 642, § 2.

Compiler's Notes. Acts 1996, ch. 768, which amended this section, is known and may be cited as the Bank Reform Act of 1996.

For the Preamble to the act concerning the market for trust and trust services, please refer to Acts 2014, ch. 642.

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Banks and Banking, § 55.

Law Reviews.

Local Government Law (Clyde L. Ball), 6 Vand. L. Rev. 1206.

45-2-1603. Confidentiality, disclosure and reproduction of information.

  1. The information obtained by the commissioner, or any bank examiner in making an examination into the affairs of the bank, shall be for the purpose of ascertaining the true condition of the affairs of the bank, shall be privileged and confidential, shall not be subject to subpoena, and shall not be disclosed by the party making the examination to any person, except that the examiner shall report the condition of the affairs of the bank to the commissioner, and except that the commissioner is authorized to make the following disclosures from reports of examination:
    1. Within the department in the course of official duties;
    2. To the federal deposit insurance corporation as provided in § 45-2-804 and to the federal reserve board, or its duly authorized representative, as provided in § 45-2-505;
    3. To the federal reserve board, or its duly authorized representative, in the case of an application to form a bank holding company if the principal affiliate bank to be acquired is a state bank or to the federal reserve board in any other circumstance when the commissioner believes that disclosure is in the interest of sound banking regulation;
    4. To the United States comptroller of the currency, or the comptroller's duly authorized representative, in the case of an application of a state bank for conversion to a national charter or to the comptroller in any other circumstance when the commissioner believes that disclosure is in the interest of sound banking regulation;
    5. To the United States department of justice, federal bureau of investigation, state district attorneys general, Tennessee bureau of investigation or the attorney general and reporter in the case of any suspected criminal violations discovered during the course of an examination;
    6. In any administrative proceeding or court action filed by the commissioner or the department to which the commissioner is an actual party;
    7. To the directors of a state bank as provided in § 45-2-1602;
    8. The comptroller of the treasury or the comptroller's designee for the purpose of an audit of the department of financial institutions;
    9. The state treasurer and commissioner of finance and administration pursuant to § 9-4-402;
    10. To other state financial institutions regulatory agencies;
    11. To the federal consumer financial protection bureau, federal trade commission, United States department of labor and the securities and exchange commission, or their duly authorized representative, when the commissioner believes that disclosure is in the best interest of sound banking regulation;
    12. The department of commerce and insurance; and
    13. The United States department of justice, federal bureau of investigation, state district attorneys general, Tennessee bureau of investigation, state attorney general and reporter, internal revenue service, Tennessee office of homeland security, United States department of the treasury and the financial crimes enforcement network for purposes of information sharing to promote enforcement of and compliance with the Bank Secrecy Act, codified at 12 U.S.C. § 1829b, 12 U.S.C. §§ 1951-1959, and 31 U.S.C. §§ 5311-5332.
  2. Disclosures made under subsection (a) shall be made under safeguards designed to prevent further dissemination of confidential information. If any agency or department that has received confidential information under  subsection (a) receives a valid subpoena to produce documents of the department of financial institutions or desires to use the documents in litigation, including, but not limited to, discovery proceedings, in which it is involved, the agency or department shall notify the department of financial institutions for permission to produce the documents. The commissioner may, in the commissioner's discretion, authorize the requesting agency or department to use the documents under a protective order approved by the commissioner and designed to prevent the unnecessary further dissemination of the documents.
  3. A bank may reproduce all or any part of a report of examination and send or deliver the reproduction to a bank holding company of which it is a subsidiary, and may also send or deliver the reproduced information to the bank's consultants, external auditors and legal counsel. The disclosure shall not affect the confidential nature of the disclosed information.
  4. As used in this section, unless the context otherwise requires:
    1. “Bank holding company” has the same meaning as in § 45-2-1402; and
    2. “Subsidiary,” with respect to a specified bank holding company, means:
      1. Any company, twenty-five percent (25%) or more of whose voting shares, excluding shares owned by the United States or by any company wholly owned by the United States, is directly or indirectly owned or controlled by the bank holding company, or is held by it with power to vote;
      2. Any company in which the election of a majority of whose directors is controlled in any manner by the bank holding company; or
      3. Any company with respect to the management or policies of which the bank holding company has the power, directly or indirectly, to exercise a controlling influence, as determined by the commissioner, after notice and opportunity for hearing.
  5. Notwithstanding any provision of this section to the contrary, the commissioner may, in the commissioner's discretion and in the interest of justice, and when under a validly issued subpoena, waive the privilege created herein and produce bank examination reports and other related documents under the provisions of a protective order entered by a court or administrative tribunal of competent jurisdiction where the order is designed to protect the confidential nature of the information so disclosed from public dissemination.
  6. Notwithstanding any other provision of the law to the contrary, confidential information regarding insurance, securities and investment functions of financial institutions, and known or suspected violations of the insurance, banking or securities laws, may be shared among the departments of financial institutions and commerce and insurance, the district attorneys general for the respective counties, the Tennessee bureau of investigation and the attorney general and reporter. Information disclosed by the commissioner under this section shall not become matters of public record by virtue of the disclosure absent a waiver by the commissioner, or a protective order as provided for in this section.

Acts 1969, ch. 36, § 1 (2.203); 1973, ch. 294, § 6; T.C.A., § 45-703; Acts 1980, ch. 642, § 1; 1983, ch. 58, § 1; 1985, ch. 176, § 1; 1986, ch. 556, § 1; 1989, ch. 29, §§ 1-4; 1991, ch. 235, §§ 1-3; 1993, ch. 205, § 1; 2001, ch. 54, §§ 25-29; 2006, ch. 596, § 1; 2007, ch. 29, §§ 2, 3; 2013, ch. 36, §§ 1, 2.

Cross-References. Confidential records, § 10-7-504.

Textbooks. Tennessee Criminal Practice and Procedure (Raybin), § 27.78.

Tennessee Jurisprudence, 5 Tenn. Juris., Banks and Banking, § 55.

Tennessee Law of Evidence (2nd ed., Cohen, Paine and Sheppeard), § 501.21.

45-2-1604. Reports by banks.

  1. All banks shall make to the commissioner, on the call of the commissioner for the reports, at least two (2) reports during each year according to the form, including electronic transmission, that may be prescribed by the commissioner. The report must be verified by the oath or affirmation of the executive officers or agents thereof, and in the case of a corporation, by the president or cashier or secretary, and must be attested by the signature of at least three (3) directors of the corporation. The commissioner shall make one (1) of the calls in the first one half (½) of the year and another in the latter one half (½) of the year.
  2. Each report shall exhibit in detail and under appropriate heads the resources and liabilities of each bank at the close of business on any past day specified by the commissioner. The day for reports shall be uniform throughout the state, and shall be transmitted by the bank to the commissioner within the period the commissioner prescribes, but in no instance less than five (5) days after receipt of a request or requisition thereof from the commissioner. Instead of the report required under this subsection (b), the commissioner may accept a copy of a call report required by federal regulatory agencies or deems the filing of the report, electronic or otherwise, as required by federal regulatory agencies to constitute compliance with this section.
  3. The commissioner may call for a special report from any particular bank whenever, in the commissioner's judgment, the same is necessary or deemed necessary for the protection of the public or for a full and complete knowledge of the condition of the bank by the commissioner. Special reports called for shall be made in all particulars as required in subsections (a) and (b); provided, that a bank is not required to publish a copy of a special report in a newspaper.

Acts 1969, ch. 36, § 1 (2.204); 1973, ch. 294, § 6; 1977, ch. 56, § 1; T.C.A., § 45-704; Acts 1996, ch. 768, § 26; 2001, ch. 54, § 30; 2004, ch. 455, § 1.

Compiler's Notes. Acts 1996, ch. 768, that amended this section, is known and may be cited as the Bank Reform Act of 1996.

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Banks and Banking, § 55.

Part 17
Prohibited Acts

45-2-1701. Unauthorized conduct of banking or fiduciary activity — Violation a criminal offense.

  1. It is unlawful for any person not so authorized to carry on a banking business under this chapter and chapter 1 of this title, falsely and with intent to defraud, to act as a bank, or to represent that the person is or is acting for a bank, or to use an artificial or corporate name that is the name of a bank. The right to receive money on deposit and the right to pay out money on checks are declared to be the exclusive privileges of the banking business.
  2. No trust company hereafter may be incorporated or be qualified to act as a fiduciary unless it is incorporated under this chapter and chapter 1 of this title, or the laws governing national banking associations. The foregoing, however, shall not be deemed to restrict the activity of a foreign bank or trust company acting as a trustee under  § 35-50-107; nor shall it be deemed to restrict the fiduciary activity of any other class of regulated financial institutions that may now have, or hereafter acquire, fiduciary powers; provided, that nothing herein shall be construed to increase the powers of other classes of regulated financial institutions.
  3. A violation of this section is a Class C misdemeanor.

Acts 1969, ch. 36, § 1 (3.601); T.C.A., § 45-1101; Acts 1980, ch. 620, § 4; 1989, ch. 591, § 113.

Compiler's Notes. Section 5 of Acts 1980, ch. 620 reads:

“The existence and operation of any trust company formed prior to the effective date of this act shall not be impaired by the enactment of this act.”

Cross-References. Negotiable instruments, title 47, ch. 3.

Penalty for Class C misdemeanor, § 40-35-111.

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Banks and Banking, § 23.

Law Reviews.

A Realistic Duty of Care for Outside Bank Directors, 51 Tenn. L. Rev. 569 (1984).

45-2-1702. Receiving deposit, premium payment or investment in failing financial institution.

  1. A person directing or participating in the direction of a financial institution commits an offense who receives or permits the receipt of a deposit, premium payment or investment in the institution knowing that, due to the financial condition of the institution:
    1. It is or will be unable to make payment of the deposit on demand, if it is a deposit ordinarily payable on demand; or
    2. It is about to suspend operations or go into receivership.
  2. It is a defense to prosecution under this section that the person making the deposit, premium payment or investment was adequately informed of the financial condition of the institution.
  3. An offense under this section is a Class E felony.

Acts 1969, ch. 36, § 1 (3.602); T.C.A., § 45-1102; Acts 1989, ch. 591, §§ 111, 118.

Sentencing Reform Notes.

Although the penalty provided in this section was purportedly changed to a Class A misdemeanor by Acts 1989, ch. 591, § 111, the code commission deems the later amendment of this section by § 118 of that act, which contains Class E felony provisions, to control.

Cross-References. Penalty for Class E felony, § 40-35-111.

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Banks and Banking, §§ 32, 58.

45-2-1703. Unlawful service as officer or director — Exceptions at commissioner's discretion.

  1. It is unlawful for any person to serve as an officer or director of a bank who:
    1. Has been convicted of an offense constituting, in the jurisdiction in which the judgment was rendered, a felony involving a violation of banking laws, fraud, embezzlement, or breach of trust;
    2. Would be disqualified by federal law from serving as a director or officer of a federally chartered bank; or
    3. Is indebted to the bank for more than thirty (30) days upon judgment that has become final.
  2. Notwithstanding subsection (a), the commissioner shall have the discretion to approve the application of any person to become a director or officer of a bank chartered under Tennessee law, if the commissioner finds the person has demonstrated fitness to participate in the conduct of the affairs of the bank through evidence of the person's rehabilitation, including, but not limited to, the person's reputation since the person's conviction, the person's age at the time of conviction, and the time that has elapsed since the conviction and other factors as the commissioner determines.

Acts 1969, ch. 36, § 1 (3.603); T.C.A., § 45-1103; Acts 2006, ch. 660, § 5.

Compiler's Notes. Acts 2006, ch. 660, § 6 provided that the act shall not apply to any notice of intention filed on or after May 12, 2006.

Cross-References. Penalty for Class C misdemeanor, § 40-35-111.

45-2-1704. Unlawful gratuity or compensation.

  1. It is unlawful for an affiliate of a bank or for an officer, director or employee of a bank or affiliate of a bank to willfully and knowingly and without authority from the board of directors or governing body of the bank or two (2) or more of the active managing officers of the bank to receive, consent to receive, or agree to receive, any commission, emolument, gratuity or reward, or any promise of any commission, emolument, reward, property or thing of value or of personal advantage for procuring, or endeavoring to procure, for any person any loan from, or the purchase or discount of, any paper, note, draft, check or bill of exchange by the bank.
  2. As used in this section, “affiliate” includes:
    1. Any person who holds a majority of the stock of a bank, any other corporation in which the person owns a majority of the stock and any partnership in which the person has an interest;
    2. Any corporation in which the bank or an officer, director, or employee thereof holds a majority of the stock and any partnership in which the person has an interest; and
    3. Any corporation of which a majority of the directors are officers, directors, or employees of the bank or of which officers, directors, trustees or employees constitute a majority of the directors of the bank.
  3. A violation of this section is a Class C misdemeanor.

Acts 1969, ch. 36, § 1 (3.604); T.C.A., § 45-1104; Acts 1989, ch. 591, § 113.

Cross-References. Alcoholic beverage commission, receipt of gifts or bribes by members, § 57-1-109.

Officers and employees of mental health hospitals or developmental center, receipt of gift or bribe from patient, § 33-3-106.

Penalty for Class C misdemeanor, § 40-35-111.

45-2-1705. Unlawful concealment of transactions.

  1. It is unlawful for an officer, director, or employee of a bank to conceal or endeavor to conceal any transaction of the bank from any officer, director or employee of the bank or any official or employee of the department to whom it should properly be disclosed.
  2. A violation of this section is a Class C misdemeanor.

Acts 1969, ch. 36, § 1 (3.605); T.C.A., § 45-1105; Acts 1989, ch. 591, § 113.

Cross-References. Penalty for Class C misdemeanor, § 40-35-111.

45-2-1706. Improper maintenance of accounts — False or deceptive entries and statements.

  1. It is unlawful for an officer, director, employee or agent of a bank to:
    1. Maintain or authorize the maintenance of any account of the bank in a manner that, to the person's knowledge, does not conform to the requirements prescribed by this chapter and chapter 1 of this title or by the commissioner;
    2. Make any false or misleading statement or entry or omit any statement or entry that should be made in any book, account, report or statement of the institution, with intent to deceive; or
    3. Obstruct or endeavor to obstruct a lawful examination of the institution by an officer or employee of the department.
  2. A violation of this section is a Class B misdemeanor.

Acts 1969, ch. 36, § 1 (3.606); 1973, ch. 294, § 6; T.C.A., § 45-1106; Acts 1989, ch. 591, § 112.

Cross-References. Penalty for Class B misdemeanor, § 40-35-111.

45-2-1707. Payment of penalties and judgments against others.

  1. It is unlawful for a state bank to pay a fine or penalty imposed by law upon any other person or any judgment against the person or to reimburse directly, or indirectly, any person by whom the fine, penalty or judgment has been paid, except in settlement of its own liability or in connection with the acquisition of property against which the judgment is a lien, or as provided in § 45-2-211.
  2. A violation of this section is a Class C misdemeanor.

Acts 1969, ch. 36, § 1 (3.607); T.C.A., § 45-1107; Acts 1989, ch. 591, § 113.

Cross-References. Penalty for Class C misdemeanor, § 40-35-111.

45-2-1708. Unlawful use of term “safe deposit.”

  1. It is unlawful for any person to use the terms “safe deposit,” “safety deposit,” or other words deceptively similar, in connection with the rental of storage space, or in the title or name under that business is done, except:
    1. A person subject to the jurisdiction of the department;
    2. A manufacturer or dealer in safe deposit facilities or equipment; or
    3. An association, the membership of which is composed of officers or institutions subject to regulation under this chapter and chapter 1 of this title, or the laws of the United States or any state.
  2. A violation of this section is a Class C misdemeanor.

Acts 1969, ch. 36, § 1 (3.608); T.C.A., § 45-1108; Acts 1989, ch. 591, § 113.

Cross-References. Penalty for Class C misdemeanor, § 40-35-111.

45-2-1709. Unlawful use of banking terms.

      1. It is unlawful for any person, firm or corporation, other than those defined in § 45-1-103, to use or employ in any manner the terms bank, banks, or banking in connection with the carrying on or operation of business in this state; provided, that this section shall have no application to national banking associations or existing persons whose name contains these terms. The commissioner of financial institutions may permit, upon application or by rule, the subsidiary of a bank or bank holding company to employ the terms bank, banks, or banking.
      2. Notwithstanding this section, the commissioner may permit, upon application, a person, corporation, partnership or other business entity to employ the term “bank”, “banks”, or “banking” if the commissioner, in the commissioner's discretion, determines that the person, corporation, partnership, or business entity has not or will not mislead the public by employing the terms and the person, corporation, partnership or business does not provide financial services. Upon proper showing, the commissioner may rescind approval if the public welfare so requires. For purposes of this section, any person, corporation, partnership, or business that provides financial services shall include, but not be limited to, insurance companies and agents, money order or exchange companies, investment companies, stock brokers or dealers, mutual funds, industrial loan and thrift companies, credit unions and business and industrial development corporations (BIDCOs).
      3. It is unlawful for any person, firm or corporation, other than those defined as a trust institution pursuant to § 45-1-103, to use or employ in any manner the term “trust” in connection with the carrying on or operation of business in this state. This section shall have no application to existing persons as of July 1, 1999, whose name contains the term “trust.” Notwithstanding the above, the commissioner may permit the use of the term “trust” upon application on the same basis as under subdivisions (a)(1)(A) and (B).
      4. It is unlawful for a person to use the trade name or trademark, or a confusingly similar trade name or trademark, of any bank, savings and loan association, savings bank or subsidiary or affiliate of any bank, saving and loan association, saving bank or subsidiary in a solicitation for the offering of services or products if such use is likely to cause confusion, mistake or deception as to the source of origin, affiliation or sponsorship of such products or services; or, to use the trade name or trademark, or confusingly similar trade name or trademark, to that of any bank, savings and loan association, savings bank or subsidiary or affiliate of any bank, saving and loan association, saving bank or subsidiary in any manner in a solicitation for the offering of services or products unless the solicitation clearly and conspicuously states the following in bold-face type on the front page of the solicitation:
        1. The name, address and telephone number of the person making the solicitation;
        2. A statement that the person making the solicitation is not affiliated with the bank, savings and loan association, savings bank or subsidiary or affiliate of any bank, saving and loan association, saving bank or subsidiary; and
        3. A statement that the solicitation is not authorized or sponsored by the bank, savings and loan association, savings bank or subsidiary or affiliate of any bank, saving and loan association, saving bank or subsidiary.
      5. It is unlawful for a person, other than the lender or a person authorized by the lender, to use a loan number, loan amount, or other specific loan information that is not publicly available in a solicitation for the purchase of services or products, unless the solicitation clearly and conspicuously states the following in bold-face type on the front page of the solicitation:
        1. The name, address, and telephone number of the person making the solicitation;
        2. A statement that the person making the solicitation is not affiliated with the bank, savings and loan association, savings bank or subsidiary or affiliate of any bank, saving and loan association, saving bank or subsidiary;
        3. A statement that the solicitation is not authorized or sponsored by the bank, savings and loan association, savings bank or subsidiary or affiliate of any bank, saving and loan association, saving bank or subsidiary; and
        4. A statement that the loan information used was not provided by the bank, savings and loan association, savings bank or subsidiary or affiliate of any bank, saving and loan association, saving bank or subsidiary.
    1. A violation of subdivision (a)(1) is a Class C misdemeanor.
  1. The commissioner or attorney general and reporter in the name of the state is given the power and right by bill of complaint in any court of competent jurisdiction of the parties, to seek injunctive relief to compel compliance by any offending parties with this section.

Acts 1969, ch. 36, § 1 (3.609); 1973, ch. 294, § 6; T.C.A., § 45-1109; Acts 1989, ch. 591, § 113; 1990, ch. 759, § 1; 1993, ch. 397, § 1; 1999, ch. 112, § 17; 2003, ch. 31, § 4; 2011, ch. 89, §§ 2, 3.

Cross-References. Penalty for Class C misdemeanor, § 40-35-111.

Attorney General Opinions. T.C.A. § 45-2-1709(a)(1)(D) and (E), which regulate commercial speech and prescribe criminal penalties, are constitutional and do not offend either the First Amendment of the United States Constitution or Article I, § 19 of the Tennessee Constitution.    OAG 13-54, 2013 Tenn. AG LEXIS 55 (7/11/13).

45-2-1710. Advance notice of bank examination.

  1. If the department notifies a bank of an examination, a department employee who, before the notification of the visitation, gives notice or information to any officer or agent or employee of a bank as to when a bank will be visited for examination commits a criminal offense.
  2. If the department does not notify a bank of an examination, a department employee who, before a visitation, gives notice or information to any officer or agent or employee of a bank as to when a bank will be visited for examination commits a criminal offense.
  3. A violation of this section is a Class C misdemeanor.

Acts 1969, ch. 36, § 1 (3.610); T.C.A., § 45-1110; Acts 1989, ch. 591, § 113; 1993, ch. 31, § 2.

Cross-References. Penalty for Class C misdemeanor, § 40-35-111.

45-2-1711. False reports.

Any employee of the department who makes a report on oath, as to the result of any examination made by the employee, that is knowingly and willfully false, commits a Class C misdemeanor.

Acts 1969, ch. 36, § 1 (3.611); T.C.A., § 45-1111; Acts 1989, ch. 591, § 113.

Cross-References. Penalty for Class C misdemeanor, § 40-35-111.

45-2-1712. False swearing on examination by commissioner or bank examiner.

Any person who willfully and corruptly swears or affirms falsely when being examined under oath by any bank examiner or the commissioner in regard to any material matter or thing commits a Class C misdemeanor.

Acts 1969, ch. 36, § 1 (3.612); 1973, ch. 294, § 6; T.C.A., § 45-1112; Acts 1989, ch. 591, § 113.

Cross-References. Penalty for Class C misdemeanor, § 40-35-111.

45-2-1713. Disclosing condition of bank, its depositors or debtors.

Any bank examiner or commissioner who knowingly and willfully discloses the condition and affairs of any bank ascertained by an examination as examiner of the bank, or who knowingly and willfully, except to the extent as authorized by this chapter and chapter 1 of this title, reports or gives information as to who are depositors or debtors of a bank where the information is obtained as examiner of the bank, commits a Class C misdemeanor and shall be removed from office; and the fact of the disclosure shall be prima facie evidence that the information was obtained by virtue of the person's office.

Acts 1969, ch. 36, § 1 (3.616); 1973, ch. 294, § 6; T.C.A., § 45-1113; Acts 1989, ch. 591, § 113.

Cross-References. Confidential records, § 10-7-504.

Penalty for Class C misdemeanor, § 40-35-111.

45-2-1714. Director voting to impair capital or other acts detrimental to bank.

Any director of a bank commits a Class B misdemeanor who concurs in any vote or act of the directors of the bank by which it is intended to:

  1. Make a dividend except from the surplus profits arising from the business of the bank;
  2. Divide, withdraw or in any manner pay to the stockholders or any of them any part of the capital stock of the bank, or to reduce the capital stock, except in pursuance of law;
  3. Discount or receive any note, or other evidence of debt in payment of capital stock required to be paid or with intention to provide the means of making the payment;
  4. Receive or discount any note or other evidence of debt with the intent to enable any stockholder to withdraw any part of the money paid in by the stockholder or the stockholder's stock; or
  5. Apply any portion of the funds of the bank except as allowed by law, directly or indirectly, to the purchase of shares of its own stock.

Acts 1969, ch. 36, § 1 (3.613); T.C.A., § 45-1114; Acts 1989, ch. 591, § 112.

Cross-References. Penalty for Class B misdemeanor, § 40-35-111.

Decisions Under Prior Law

1. Notes Given by Stockholders — Validity.

A former similar statute was enacted for the protection of depositors and creditors, and to declare void a note given by a stockholder to the bank upon security of capital stock belonging to the borrowers would defeat the purpose of the statute and enable officers and stockholders of a failing bank to secure to themselves its funds with no fear of punishment except that meted out to misdemeanants. Tennessee-Hermitage Nat'l Bank v. Bruce, 9 Tenn. App. 321, 1928 Tenn. App. LEXIS 238 (1928).

45-2-1715. Unlawful increase of capital stock.

Any officer or director of a bank who knowingly and willfully issues, participates in issuing, or concurs in a vote to issue, any increase of its capital stock beyond the amount of the capital stock thereof duly authorized by or in pursuance of law, or who knowingly and willfully sells or agrees to sell, or is interested directly or indirectly in the sale of the shares of stock of the bank, or in any agreement to sell the same, commits a Class C misdemeanor.

Acts 1969, ch. 36, § 1 (3.614); T.C.A., § 45-1115; Acts 1989, ch. 591, § 113.

Cross-References. Penalty for Class C misdemeanor, § 40-35-111.

45-2-1716. Appropriation of property, false entries, or refusal to make reports.

  1. Any director, officer, or employee of any bank commits a Class C misdemeanor who:
    1. Knowingly receives or possesses any of the bank's property, otherwise than in payment for a just demand, or with intent to defraud, and omits to make, or causes the omission of, a full and true entry thereof in its books and accounts;
    2. Concurs in omitting to make any material entry in its books or accounts; or
    3. Knowingly by letterhead, newspaper advertisement, or otherwise represents its capital stock to be in excess of the actual capital paid in, or knowingly concurs in making or publishing any written report, exhibit, or statement of its affairs or pecuniary conditions, making any material statement that is false and by which the bank is made to appear in better condition than it really is, or knowingly omits or concurs in omitting any statement required by law.
  2. This section shall not be construed to conflict with § 39-14-103.

Acts 1969, ch. 36, § 1 (3.615); T.C.A., § 45-1116; Acts 1989, ch. 591, § 113; 1996, ch. 675, § 46.

Cross-References. Penalty for Class C misdemeanor, § 40-35-111.

45-2-1717. Criminal sanctions for violations — Reports — Confidential information.

  1. It is the duty of the commissioner to submit to the district attorneys general for the respective counties of the state any criminal violation of the banking laws known by the commissioner to have occurred in the county. The commissioner shall also report the violation to the appropriate division of the Tennessee bureau of investigation.
  2. The commissioner may submit to the district attorneys general, to the attorney general and reporter, and to the appropriate division of the Tennessee bureau of investigation any criminal violation of the securities laws known by the commissioner to have occurred.
  3. Confidential information that is communicated by the commissioner pursuant to this section, whether the reporting is required or authorized by law, remains confidential in the hands of the agency to which the information is reported, and does not become a matter of public record by virtue of this communication.

Acts 1969, ch. 36, § 1 (3.617); 1973, ch. 294, § 6; modified; T.C.A., § 45-1117; Acts 1984, ch. 632, § 1; 1991, ch. 235, § 4.

Cross-References. Confidentiality of public records, § 10-7-504.

Violations indictable without prosecutor, § 40-13-104.

45-2-1718. Criminal sanctions for violations.

  1. Except as otherwise specifically provided in this chapter and chapter 1, any person responsible for an act or omission expressly declared to be a criminal offense by this chapter and chapter 1 of this title commits:
    1. A Class C misdemeanor; or
    2. If the act or omission was intended to defraud, a Class E felony.
  2. An officer, director, or employee of a bank is responsible for an act or omission of the institution declared to be a criminal offense against this chapter and chapter 1 of this title whenever, knowing that the act or omission is unlawful, the person participates in authorizing, executing, ratifying or concealing the act, or in authorizing or ratifying the omission or, having a duty to take the required action, omits to do so.
  3. Unless otherwise provided in this chapter and chapter 1 of this title, it is no defense to a criminal prosecution hereunder that the defendant did not know the facts establishing the criminal character of the act or omission charged, if the defendant could and should have known the facts in the proper performance of the defendant's duty.

Acts 1969, ch. 36, § 1 (3.618); T.C.A., § 45-1118; Acts 1989, ch. 591, §§ 38, 113.

Cross-References. Forgery, § 39-14-114.

Penalty for Class C misdemeanor, § 40-35-111.

Penalty for Class E felony, § 40-35-111.

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Banks and Banking, § 23.

45-2-1719. Injunction.

Whenever a violation of this chapter and chapter 1 of this title by a bank or an officer, director or employee thereof is threatened or impending and will cause substantial injury to the institution or to the depositors, or stockholders thereof, a court of competent jurisdiction shall, upon the suit of the commissioner, issue an injunction restraining the violation.

Acts 1969, ch. 36, § 1 (3.619); T.C.A., § 45-1119.

45-2-1720. False advertising.

  1. It is unlawful for any entity to make, publish, disseminate, circulate, or place before the public, or cause, directly or indirectly, to be made, published, disseminated, circulated or placed before the public, in a newspaper, magazine or other publication, or in the form of a notice, circular, pamphlet, letter or poster or over the internet or any radio or television, or in any other way, an advertisement, announcement or statement containing any assertion, representation, or statement with respect to the sale, distribution, offering for sale or advertising of any loan, refinance, insurance or any other product or service that is untrue, deceptive, misleading, or that uses the name or logo of any other lender without the express written consent of the lender whose name is used. For purposes of this section, “lender” means any bank, savings and loan association, savings bank, trust company, credit union, industrial loan and thrift company, mortgage company, mortgage broker, or any subsidiary or affiliate therof.
  2. Each solicitation to an individual in violation of this section shall be considered a separate act. The commissioner of financial institutions, the commissioner of commerce and insurance, and the attorney general and reporter are entitled to enforce  this section against any regulated entity within their jurisdiction or against any other person. The commissioners shall have authority to issue a cease and desist order and to impose a civil penalty of up to one thousand dollars ($1,000) per violation.
  3. Any lender whose name or logo is used in violation of this section is entitled to sue for damages, which shall include any actual damages, statutory penalties of one thousand dollars ($1,000) per violation, and court costs and attorney's fees.

Acts 2006, ch. 801, § 11.

Part 18
Investment and Security Powers

45-2-1801. Legislative intent.

  1. It is the intention of the general assembly both to broaden the permissible activities available to state chartered banks and to ensure the soundness of the state's banking system by protecting depositors.
  2. It is further the intention of the general assembly to provide for the sound conduct of the business of banks while authorizing the availability of expanded services under the authority of the appropriate state regulatory entities.

Acts 1989, ch. 168, § 1.

Cross-References. Negotiable instruments, title 47, ch. 3.

45-2-1802. Powers generally.

An authorized state bank, directly or indirectly through a subsidiary, may:

  1. Provide portfolio investment advice to customers;
  2. Serve as investment advisor to investment companies, including, but not limited to, open-end and closed-end mutual funds, private investment companies and investment companies registered under the Investment Companies Act of 1940;
  3. Serve as investment or financial advisor to states, counties and municipalities or subdivisions or instrumentalities thereof;
  4. Act as general partner to investment partnerships;
  5. Act as dealer-manager or financial advisor to corporations or partnerships, including, but not limited to, providing valuation advice, opinions with respect to sales or purchases or assets, corporate restructuring, issuances of securities, mergers and other acquisitions;
  6. Engage in the sale, distribution, and underwriting of, and deal in, commercial paper issued by any entity;
  7. Engage in the sale, distribution, and underwriting of, and deal in, promissory notes secured by real estate mortgages, credit obligations secured by real or personal property or manufactured housing, participation interests in promissory notes and credit obligations, and mortgage related payment bonds secured by promissory notes; and
  8. Engage in the sale, distribution and underwriting of, and deal in, stocks, bonds, debentures, notes, mutual fund shares or unit investment trust interest, and other securities which may be sold by a broker-dealer, financial institution or investment company under Tennessee law.

Acts 1989, ch. 168, § 1.

45-2-1803. Regulations — Adoption — Office of subsidiaries.

  1. The commissioner of financial institutions shall adopt regulations, for the protection of depositors, that state banks, or any class of state banks determined by the commissioner to be appropriate, are required to apply to and receive approval of the commissioner before engaging in one (1) or more of the activities permitted in § 45-2-1802, and may be required to conduct certain of the activities, other than those activities that may be conducted directly by a national bank, only through a subsidiary.
  2. Any offices of the subsidiary shall not be considered branches of the bank for purposes of § 45-2-614.
  3. In addition, the commissioner of commerce and insurance may adopt regulations, if the commissioner determines that the action is necessary for the protection of investors and in the public interest, to require the underwriting, market making or dealing in securities (other than securities which may be underwritten or dealt in by national banks or in which national banks may make a market) activities of state banks be conducted through a subsidiary.

Acts 1989, ch. 168, § 1.

45-2-1804. Duties of commissioner.

The commissioner of financial institutions, in adopting regulations pursuant to § 45-2-1803, shall:

  1. Determine the appropriate level of capital or assets required for a bank to engage directly in an activity permitted in § 45-2-1802;
  2. Determine whether the risk to depositors is sufficiently significant as to require that the activity permitted in § 45-2-1802 must be conducted in a separately capitalized subsidiary;
  3. Determine the appropriate minimum level of capital required for the subsidiary;
  4. Condition the bank's or subsidiary's engaging in an activity permitted in § 45-2-1802, upon a specified level of demonstrated expertise or training;
  5. In connection with subsidiaries engaged in the activities specified in § 45-2-1802(6)-(8), adopt regulations restricting transactions between the subsidiary and a state bank parent or affiliate of the subsidiary to those transactions which are permissible under and consistent with the federal deposit insurance corporation regulations; the regulations may be adopted by reference; and.
  6. Adopt other regulations that are necessary to provide adequate protection for depositors of the state bank, giving due consideration to the limitations, or lack of limitations, on the same or similar activities conducted by other financial institutions.

Acts 1989, ch. 168, § 1.

45-2-1805. Lending limits.

  1. The lending limit provisions of § 45-2-1102 shall apply to extensions of credit by a state bank to any subsidiary engaging in one (1) or more of the activities permitted in § 45-2-1802, and the sale and purchase of classified loans or loan participations restrictions of § 45-2-1102 shall apply to sales or purchases of classified loans from a state bank to any subsidiary engaged in one (1) or more of the activities permitted in § 45-2-1802.
  2. The amount of any outstanding underwriting commitment or obligation of a state bank or its subsidiary with respect to any single issuer shall not exceed:
    1. The total of the combined lending limits, state and federal, of the state bank and all other banks that are controlled by the same holding company as the state bank; less
    2. The total of all outstanding extensions of credit to the issuer from the state bank and from all other banks that are controlled by the same bank holding company as the state bank; provided, that:
      1. The distribution of open-end mutual funds shall not be considered underwriting; and
      2. An obligation authorized by § 45-2-607 that is held as an investment by a state bank shall not be considered an extension of credit by the bank.

Acts 1989, ch. 168, § 1.

45-2-1806. Investment advisors — Registration.

Any state bank or state bank subsidiary that acts as an investment advisor to any mutual fund shall register as an investment advisor with the United States securities and exchange commission and with the department of commerce and insurance. For purposes of this section, a bank common trust fund, investment in which is limited to accounts in which the bank acts as fiduciary or co-fiduciary, shall not be considered a mutual fund.

Acts 1989, ch. 168, § 1.

Law Reviews.

SEC Injunctions, 68 Tenn. L. Rev. 427 (2001).

45-2-1807. Uninsured depository accounts.

Any depository account with a state bank or state bank subsidiary upon which drafts, checks, or other negotiable instruments can be drawn and that is not insured or partially insured by a corporation or subdivision of the United States government must in the application for the account inform the customer of the lack of deposit insurance, and the customer must acknowledge by signature and date of the same.

Acts 1989, ch. 168, § 1.

45-2-1808. Insured and noninsured deposits and investments — Disclosures to customers.

  1. Any state bank, or securities broker-dealer that offers both insured deposit accounts, including, but not limited to, insured management accounts or insured certificates of deposit, and noninsured investments shall in any advertisement, brochure, prospectus or other advertising statement and in documents opening a customer account provide the disclosures provided in subsection (b).
    1. The disclosure required in subsection (a) shall, with regard to the account or investment offering, indicate:
      1. In the case of a noninsured investment, the fact that the investment is not insured; and
      2. In the case of an insured deposit account or insured certificate of deposit, the fact that the deposit is insured. In addition, prior to the acceptance of a deposit or sale of a certificate of deposit, the bank or securities broker-dealer shall disclose the name of the insured institution where the deposit is or will be located if other than the institution accepting or selling the deposit.
    2. Compliance with the disclosure requirements of the federal deposit insurance corporation under 12 C.F.R. 337.4(repealed) or 12 C.F.R. 328.0 et seq., applicable to the investments, insured deposits, or institutions, shall be deemed to comply with this section. This section shall not entitle any bank or securities broker-dealer to advertise that the institution is a federally insured institution in violation of applicable federal rules.

Acts 1989, ch. 168, § 1.

45-2-1809. [Repealed.]

Compiler's Notes. Former § 45-2-1809 (Acts 1989, ch. 168, § 3), concerning regulation of solicitors as agents, was repealed by Acts 2001, ch. 54, § 31, effective April 4, 2001.

Part 19
Credit Card State Banks

45-2-1901. Part definitions. [Amendments effective until July 1, 2020. See subdivision (3)(C).]

As used in this part, unless the context otherwise requires:

  1. “Control” has the meaning set forth in 12 U.S.C. § 1841(a)(2);
  2. “Credit card state bank” means a state bank chartered under the laws of Tennessee and whose principal office is in this state and the activities of which are limited to those permitted under § 45-2-1902;
  3. [Amendments effective until July 1, 2020. See subdivision (3)(C).]
    1. “Domestic holding company” means a company, itself or through its parent company, subsidiary, or other affiliate, that either:

      [Effective until July 1, 2020. See subdivision (3)(C).]

      1. Controls a domestic or foreign lender and has its principal place of business in this state; or
      2. Controls a company, or is a company, that:
  1. Is licensed pursuant to chapter 7 of this title;
  2. Has a consolidated net worth of not less than twenty-five million dollars ($25,000,000); and
  3. Has had its principal place of business in this state for at least five (5) consecutive years, including the company's predecessor by merger;

    [Effective until July 1, 2020. See subdivision (3)(C).]

“Domestic holding company” also means a company that is controlled by, or under common control with, a company described in subdivision (3)(A)(ii). For purposes of this subdivision (3)(B), “under common control” means no less than fifty percent (50%) ownership;

Effective July 1, 2020, subdivisions (3)(A)(ii) and (3)(B) are hereby deleted. Also effective July 1, 2020, the language “, itself or through its parent company, subsidiary, or other affiliate,” in subdivision (3)(A) is hereby deleted. However, any company that organized pursuant to subdivision (3)(A)(ii) or (3)(B), and this part prior to July 1, 2020, and that continues to own or control a credit card state bank after July 1, 2020, shall retain authority to own or control a credit card state bank under the terms and conditions provided in this part;

“Domestic lender” means any bank, savings and loan association, savings bank, or credit union organized and supervised under the laws of this state or the United States, that has its principal place of business in this state or any other business organization that is authorized by law to accept deposits and make loans and has its principal place of business in this state;

“Foreign lender” means any bank, savings and loan association, savings bank, credit union, organized or chartered under the laws of the United States, or any state other than this state, or the District of Columbia, that has its principal place of business outside this state, or any other business organization that is authorized by law to accept deposits and make commercial loans and has its principal place of business outside this state;

“Holding company” means any company that controls a domestic or foreign lender; and

“Qualifying organization” means a corporation, partnership, or other entity that at all times maintains an office in the state of Tennessee, at which it employs at least one hundred (100) persons residing in this state, and that is directly engaged in providing the following services, either for the qualifying organization or on behalf of other domestic or foreign lenders or credit card state banks:

The distribution of credit cards or other devices designed and effective to access credit card accounts;

The preparation of periodic statements of amounts due under credit card accounts;

The receipt from credit card holders of amounts paid on or with respect to the accounts; and

The maintenance of financial records reflecting the status of the accounts from time to time. “Qualifying organization” also includes any domestic bank or credit card bank satisfying the employment and activities requirements set forth in this subdivision (7)(D).

Acts 1993, ch. 447, § 4; 2007 ch. 6, §§ 1, 4; 2012, ch. 646, § 1; 2015, ch. 230, §§ 1, 2; 2018, ch. 550, § 1.

Compiler's Notes. Acts 2007, ch. 6, § 4 provided that the provisions of the act shall sunset effective July 1, 2012, unless reenacted or extended by the general assembly prior to that date; however, any company that has organized and continues to own or control a credit card state bank pursuant to the provisions of the act on July 1, 2012, shall retain the authority to own or control a credit card state bank under the terms and conditions provided in title 45, chapter 2, part 19. Acts 2012, ch. 646, § 1 reenacted and extended the provisions of Acts 2007, ch. 6, § 4 until July 1, 2015, effective June 30, 2012.

Cross-References. Negotiable instruments, title 47, ch. 3.

45-2-1902. Organization — Filing fees — Authorized activities. [Amendments effective until July 1, 2020. See subdivisions (a)(2) and (d)(1)(B).]

  1. [Amended effective July 1, 2020. See subdivision (a)(2).]
    1. Subject to this chapter and to the approval of the commissioner, any domestic lender, foreign lender, or holding company, including a domestic holding company, may organize, own, and control a credit card state bank on the terms and conditions provided in this part. Notwithstanding § 45-2-607(11), a state bank may own up to one hundred percent (100%) of the shares of a credit card state bank.
    2. Effective July 1, 2020, the language “, including a domestic holding company,” in subdivision (a)(1) is hereby deleted. However, any company that organized pursuant to such language, § 45-2-1901(3)(A)(ii) or (3)(B), and this part prior to July 1, 2020, and that continues to own or control a credit card state bank after July 1, 2020, shall retain authority to own or control a credit card state bank under the terms and conditions provided in this part.
  2. If the credit card bank is to be organized under the laws of this state, the bank shall be organized as provided in this chapter, and the commissioner shall supervise, regulate, examine, and exercise enforcement authority as provided for in this chapter and chapter 1 of this title, and all applicable rules and regulations, to the extent the commissioner deems applicable to the entities. The credit card state bank shall at all times maintain capital stock and paid-in surplus of not less than two million dollars ($2,000,000).
  3. In connection with the application to organize, own, and control a credit card state bank, the applicant shall pay a filing fee in an amount determined by rule by the commissioner.
  4. A credit card state bank shall:
    1. [Amended effective July 1, 2020. See subdivision (d)(1)(B).]
      1. Engage only in credit or debit, including prepaid debit, card operations or the making of loans;
      2. Effective July 1, 2020, the language “or debit, including prepaid debit,” in subdivision (d)(1)(A) is hereby deleted. However, any company that organized pursuant to such language, § 45-2-1901(3)(A)(ii) or (3)(B), and this part prior to July 1, 2020, and that continues to own or control a credit card state bank after July 1, 2020, shall retain authority to own or control a credit card state bank under the terms and conditions provided in this part;
    2. Not accept demand deposits or deposits that the depositor may withdraw by check or similar means for payment to third parties or others;
    3. Not accept any savings or time deposits of less than one hundred thousand dollars ($100,000);
    4. Maintain only one (1) office that accepts deposits; and
      1. If in existence on May 17, 1999, not engage in the business of making commercial loans, unless the charter is amended to include a provision electing to engage in commercial lending; or
      2. If organized on or after May 17, 1999, not engage in the business of making commercial loans, unless the charter contains a provision or is subsequently amended to include a provision electing to engage in commercial lending.
  5. A credit card state bank, unless the subsidiary of a domestic lender or domestic holding company, shall either:
    1. Have, within one (1) year of the date it commences operations, fifty (50) employees located in this state devoted to the credit card activities contemplated by this part; or
    2. Contract with a qualifying organization for the performance of the services.
  6. A credit card state bank may issue credit in accordance with §§ 45-2-1903 — 45-2-1908.
  7. A domestic lender is not required to establish a credit card state bank in order to issue credit cards, create credit card accounts and make loans, but may itself issue credit cards, create credit card accounts and make loans in accordance with §§ 45-2-1903 — 45-2-1908, or as otherwise permitted by law.

Acts 1993, ch. 447, § 5; 1999, ch. 168, §§ 1, 2; 2007, ch. 6, §§ 2-4; 2012, ch. 646, §§ 2, 3; 2015, ch. 230, § 3; 2018, ch. 550, § 1.

Compiler's Notes. Acts 2007, ch. 6, § 4 provided that the provisions of the act, which amended subsection (a) and subdivision (d)(1), shall sunset effective July 1, 2012, unless reenacted or extended by the general assembly prior to that date; however, any company that has organized and continues to own or control a credit card state bank pursuant to the provisions of the act on July 1, 2012, shall retain the authority to own or control a credit card state bank under the terms and conditions provided in title 45, chapter 2, part 19. Acts 2012, ch. 646, §§ 2 and 3 reenacted and extended the provisions of Acts 2007, ch. 6, § 4 until July 1, 2015, effective June 30, 2012.

Attorney General Opinions. By providing that three different defined entities, i.e., a domestic lender, a foreign lender, or a holding company, may organize, own, and control a credit card bank, the general assembly meant to exclude entities that fall outside these defined terms from exercising the same powers, OAG 01-129 (8/17/01).

45-2-1903. Part definitions — Credit card accounts.

  1. For purposes of this part, unless the context otherwise requires:
    1. “Bank” means a credit card state bank established and operated in accordance with § 45-2-1902 or a domestic lender;
    2. “Credit card account” or “credit card plan” means any account that can be accessed by a credit card, including a debit card with a credit feature, whereby the cardholder may obtain loans from time to time either by credit card cash advance or by the purchase or satisfaction by the bank of obligations of the cardholder incurred pursuant to a credit card. “Cardholder” includes borrowers and other primary obligors on loans. With regard to a state credit card bank electing to make loans pursuant to § 45-2-1902(d)(5), and with regard to a domestic lender electing to make loans pursuant to §§ 45-2-1901 — 45-2-1908, “credit card account” or “credit card plan” also includes loans; and
    3. “Loan” means any extension of credit, including, but not limited to, credit extended under plans or in transactions for which no credit card is issued, whether by way of installment, single payment, add-on, discount factoring, or otherwise for personal, consumer, agricultural or commercial purposes.
  2. A bank may extend credit under this part through a credit card account.
  3. This part governs the entire credit card account and all transactions thereunder, including transactions made by check or by another access device or instrument not constituting a credit card. Regardless of the cardholder's place of residence, a credit card account authorized by this part shall be governed solely by federal law and the law of this state, except to the extent the agreement relating to the account provides otherwise. Any other law of this state, including any statute, regulation, or common law, that limits the authority provided by this part or the rate or amount of interest, discount, points, finance charges, time-price differential, service charges or other fees and charges that may be charged, taken, collected, received, or reserved, shall not apply to extensions of credit under a credit card plan that is subject to this part.

Acts 1993, ch. 447, § 6; 1999, ch. 168, §§ 3, 4; 2001, ch. 54, § 34.

45-2-1904. Interest — Fees and charges.

  1. With respect to extensions of credit made on credit card accounts, a bank may charge and collect interest at an annual rate not exceeding thirty percent (30%) per year or at an equivalent daily, weekly, monthly, or quarterly rate.
  2. In addition to the interest charges authorized by subsection (a), a bank may charge and collect with respect to credit card accounts additional types of fees and charges that are agreed upon between the bank and the cardholder, in amounts that are specified in or determined in accordance with the agreement between the bank and the cardholder. The additional fees and charges may include, but are not limited to, a monthly, annual or other periodic charge, and/or a one-time charge, for the privileges or services made available to the cardholder under the plan; transaction charges for each purchase or cash advance under the plan; a minimum charge for each monthly, annual or other scheduled billing period under the plan during any portion of which there is an outstanding unpaid indebtedness; a late payment or delinquency charge; fees incident to the application for and/or the opening, administration and termination of a plan, which in the case of secured plans, may include, but not be limited to, fees and charges relative to the inspection, verification, and protection of the collateral and the establishment, perfection, enforcement and release of the security interest; returned payment charges; charges for providing sales slips, invoices, checks, duplicate periodic statements or other documents; stop payment fees; charges for exceeding a predetermined credit limit or for initiating a transaction that, if consummated, would result in an outstanding balance in excess of the credit limit; automated teller machine charges or similar electronic or interchange fees or charges; charges for issuing additional or replacement credit cards; and other fees and charges that may be agreed upon between the bank and the cardholder.
  3. If credit under a credit card plan is offered and extended in connection with overdrafts under a demand deposit account or other transaction account maintained by the cardholder with a bank, the bank may continue to impose any charges customarily imposed by it under the terms governing the demand deposit or other transaction account, including, but not limited to, check charges, monthly maintenance charges, checkbook charges, debit card charges, charges for checks drawn on funds in excess of an available line of credit and other similar charges, without the necessity of the bank making specific reference to the charges in the agreement governing the credit card plan, and the amount of the charge may be charged to the cardholder's account under the plan.
  4. In the event a borrower defaults under the terms of a plan and the bank refers the borrower's account to an attorney (including a regular salaried employee of the bank) for collection, the bank may, if the agreement governing the credit card plan so provides, charge and collect from the cardholder a reasonable attorney's fee and, in addition, if the agreement governing the plan (or, in the case of secured plans, the security agreement or similar instrument) so provides, the bank may recover from the cardholder all court and other collection costs, including, in the case of secured plans, all costs of enforcing the security agreement or similar instrument, actually incurred by the bank, including those incurred on appeal. Banks may charge and collect interest charges following default of the cardholder and/or judgment in favor of the bank at the rates permitted by this part.
  5. If a bank purchases or satisfies an obligation of the cardholder at less than the face amount of the obligation, the discount is not considered a fee or charge limited by this section.

Acts 1993, ch. 447, § 7; 2017, ch. 225, § 1.

45-2-1905. Variable interest rates.

If the agreement governing the credit card plan so provides, the rate or rates of interest under the plan may vary in accordance with a schedule or formula, and/or upon the happening of any event or circumstance specified in the agreement, including, but not limited to, the failure of the cardholder to perform in accordance with the terms of the agreement. The interest rates, as so varied, may be made applicable to all or any part of the outstanding indebtedness under the plan on or after the effective date of the variation, including the indebtedness arising out of extensions of credit made prior to the variation in the interest rates.

Acts 1993, ch. 447, § 8.

45-2-1906. Computation of interest.

  1. A bank may charge and collect the interest charges authorized by § 45-2-1904(a) on each credit extension under the credit card plan from the date the cardholder makes a purchase or obtains a cash advance through the date payment is credited to the account in accordance with applicable federal law.
  2. Subject to the terms of the written agreement between a bank and a cardholder, outstanding balances may be computed at the beginning or end of any period or on an average basis for the period. Outstanding balances may include any interest charges and other fees and charges posted to the account. Accordingly, a bank may compound interest charges on extension of credit under this part, on a daily or other basis.
  3. For purposes of determining the daily, weekly, monthly or quarterly rate of interest equivalent to an annual rate, the annual rate shall be divided by: three hundred sixty (360), if the written agreement so provides, or three hundred sixty-five (365), fifty-two (52), twelve (12), or four (4), as the case may be, without regard to the effect of leap years, periods of varying lengths, compounding of interest charges or other factors. A billing period shall be deemed to be a month or monthly if the last day of each billing period is on the same day of each month or does not vary by more than four (4) days from the same day.
  4. Payments received by a bank under a credit card account may be applied by the bank to purchases, cash advances and/or fees and charges imposed by the bank, in any order, and a bank shall not be required to set forth its payment allocation method in the account agreement or give notice of a change in its payment allocation method, except as required by federal law.

Acts 1993, ch. 447, § 9; 2001, ch. 54, § 33.

45-2-1907. Amendment of credit card agreement.

  1. Except as otherwise provided in subsection (b), a bank may amend its credit card agreement with a cardholder by any method permitted therein upon complying with applicable federal disclosure laws, including, but not limited to, by sending a written change-in-terms notice prior to the effective date of the change, if the change-in-terms notice is required by federal law. The agreement, as so amended, may be made applicable to all or any part of the outstanding indebtedness under the plan on or after the effective date of the amendment, including indebtedness arising out of extensions of credit made prior to the amendment.
  2. An amendment that materially increases applicable interest rates or other charges or is otherwise materially adverse to the cardholder shall take effect only if the cardholder consents. If the cardholder does give any required consent, the amendment may be made applicable to all or any part of the outstanding indebtedness under the plan on or after the effective date of the amendment, including indebtedness arising out of extensions of credit made prior to the amendment. If the cardholder does not give any required consent, the cardholder shall be permitted to pay the outstanding unpaid indebtedness in accordance with the terms of the agreement, without giving effect to the amendment, and the bank may terminate any further credit extensions under the plan, unless the credit card agreement provides otherwise.
  3. The cardholder's consent, for purposes of subsection (b), may be expressed by any affirmative act, including, but not limited to, continued usage of the account after a date specified in a change-in-terms or amendment notice sent by the bank. As an alternative, the change-in-terms or amendment notice may require that the cardholder take specified action, such as returning all credit cards and other access devices to the account by a specified date, in which case the cardholder's failure to take action shall be deemed consent by the cardholder to the changed or amended terms.

Acts 1993, ch. 447, § 10.

45-2-1908. Security for cardholders' obligations.

A bank may take security of any type, including, but not limited to, a mortgage or deed of trust on residential property or a deposit account or certificate of deposit, for a cardholder's obligations under a credit card account.

Acts 1993, ch. 447, § 11.

Part 20
Private Trust Companies

45-2-2001. Private trust company.

  1. A private trust company acting as a fiduciary in this state is a company that does not transact a trust business with the general public. All individuals who control the private trust company, who establish trusts or charitable organizations controlling the private trust company, or who control corporations, sole proprietorships, partnerships, joint ventures, associations, trusts, estates, business trusts, limited liability companies, or other companies controlling the private trust company must be family members. The company shall comply with this chapter and chapter 1 of this title, and the rules of this chapter and chapter 1 of this title applicable to a public trust company unless expressly exempted therefrom in writing by the commissioner pursuant to this part or by rule adopted by the department.
    1. A private trust company or proposed private trust company may request in writing that it be exempted from any provision of the Banking Act or the rules thereof. The commissioner may grant the exemption in whole or in part if the commissioner finds that the private trust company does not and will not transact business with the general public.
    2. As used in this part, unless the context requires otherwise:
      1. “Collateral kinship” means a relationship that is not lineal, but stems from a common ancestor;
      2. “Designated ancestor” means one (1) or more ancestors of the family designated as such in the application submitted under this part. A designated ancestor may be either living or deceased. If two (2) designated ancestors are designated, they must be or have been spouses to each other, and if more than such first two (2) designated ancestors are designated, each such additional designated ancestor must be or have been a spouse of either of the first two (2) designated ancestors;
      3. “Family affiliate” means a company or other entity in which one (1) or more family members, directly or indirectly, through ownership of voting securities or equity, by contract, through power of direction, through beneficial or other ownership in one (1) or more other entities, or otherwise:
        1. Owns a majority interest; or
        2. May direct or cause the direction of the management and policies of the company or other entity, whether alone or in combination with others;
      4. “Family client” means:
        1. A family member;
        2. An organization, foundation, or trust:
          1. Whose primary purpose is not-for-profit or charitable, whether or not tax-qualified; and
          2. Of which one (1) or more family clients is an organizer, incorporator, officer, member of the governing board, trustee, or donor, alone or in combination with other family clients, of a substantial portion of its assets;
        3. The officers, directors, individual trustees and managers of the entity defined in subdivision (b)(2)(D)(ii), and their immediate family;
        4. An estate of a family client;
        5. An inter vivos or testamentary trust established by one (1) or more family clients, whether or not in combination with a third party;
        6. An inter vivos or testamentary trust if the noncharitable beneficiaries with vested interests consist of one (1) or more family clients;
        7. A family affiliate, its directors, officers, managers, or trustees and their immediate family;
        8. A family services provider; and
        9. A maximum of thirty-five (35) individuals designated by the private trust company if each individual is a full-time employee of a family affiliate. Any individual described in subdivisions (b)(2)(D)(i)-(viii) does not count against the maximum number of individuals established by this subdivision (b)(2)(D)(ix);
      5. “Family member” means a designated ancestor and:
        1. An individual within the twelfth degree of lineal kinship of a designated ancestor;
        2. An individual within the eleventh degree of collateral kinship of a designated ancestor;
        3. A spouse or former spouse of a designated ancestor or of an individual defined as a family member in subdivision (b)(2)(E)(i) or (ii); and
        4. An individual who is a relative of a spouse or former spouse specified in subdivision (b)(2)(E)(iii) who is within the fifth degree of lineal or collateral kinship of the spouse or former spouse;
      6. “Family services provider” means:
        1. A full-time employee of the private trust company; or
        2. A full-time employee of a family member providing personal services to the family member, including, but not limited to, household, legal, or accounting services;
      7. “Foster child” means an individual raised or being raised by someone who is not the individual's natural or adoptive parent;
      8. “Immediate family” means an individual's spouse or former spouse, any descendant of that individual, and any relative living in the same residence as that individual;
      9. “Lineal kinship” means the direct ancestors and descendants of an individual; and
      10. “Transact a trust business with the general public” means any sale, solicitation, arrangement, agreement, or transaction to provide fiduciary services as described in § 45-2-1002, whether or not for a fee, commission, or any other type of remuneration, with any client that is not a family client.
    3. For purposes of this part:
      1. A legally adopted person shall be treated as a natural child of the adoptive parents;
      2. A stepchild shall be treated as a natural child of the individual who is or was the stepparent of that child;
      3. A foster child, or an individual who was a minor when an adult became the individual's legal guardian, shall be treated as a natural child of the adult appointed as foster parent or guardian;
      4. A child of a spouse or former spouse of an individual shall be treated as a natural child of that individual;
      5. Degrees are calculated by adding the number of steps from a relevant designated ancestor through each individual to the family member either directly, in case of lineal kinship, or through a designated ancestor, in the case of collateral kinship; and
      6. A person who was a family client at the time of becoming a client of the private trust company shall not cease to be a family client solely due to a death, divorce, retirement, or other similar event.
  2. At the expense of the private trust company, the commissioner may examine or investigate the private trust company in connection with an application for exemption. Unless the application presents novel or unusual questions, the commissioner shall approve the application for exemption not later than the sixty-first day after the date the commissioner considers the application complete and accepted for filing. Otherwise, the application shall be deemed approved unless the commissioner extends the time for review by requiring the submission of additional information as considered necessary to an informed decision.
  3. Any exemption granted under this section may be made subject to conditions or limitations imposed by the commissioner consistent with this chapter.
  4. The department may adopt rules defining other circumstances that do not constitute transaction of business with the public, specifying the provisions of the Banking Act that are subject to an exemption request, and establishing procedures and requirements for obtaining, maintaining, or revoking exempt status.

Acts 1999, ch. 112, § 18; 2011, ch. 26, § 1; 2012, ch. 793, §§ 1, 2; 2016, ch. 714, §§ 1, 2; 2018, ch. 632, § 1.

Cross-References. Negotiable instruments, title 47, ch. 3.

45-2-2002. Requirements to apply for and maintain status as a private trust company.

  1. Application.
    1. A private trust company requesting an exemption from provisions of the Banking Act shall file an application with the commissioner containing the following:
      1. A nonrefundable application fee as set by the department;
      2. A detailed statement under oath showing the private trust company's assets and liabilities as of the end of the month previous to the filing of the application;
      3. A statement under oath of the reason for requesting the exemption;
      4. A statement under oath that the private trust company is not currently transacting business with the public and that the company will not conduct business with the public without the prior written permission of the commissioner;
      5. The current street mailing address and telephone number of the physical location in this state at which the private trust company will maintain its books and records, together with a statement under oath that the address given is true and correct and is not a United States postal service post office box or a private mail box, postal box, or mail drop;
      6. A listing of the specific provisions for which the request for exemption is made; and
      7. A statement under oath of the name of the individual who will be the designated ancestor of the private trust company.
    2. The commissioner shall not approve a private trust company exemption unless the application is completed as required in this section.
  2. Requirements.  To maintain status as an exempt private trust company under this chapter, the private trust company shall comply with the following:
    1. An exempt private trust company shall not transact business with the public;
    2. An exempt private trust company shall file an annual certification that it is maintaining the conditions and limitations of its exempt status. This annual certification shall be filed on a form provided by the commissioner and be accompanied by a fee determined by the department. The annual certification shall be filed on or before June 30 of each year. The commissioner may examine or investigate the private trust company, at the company's expense, periodically as necessary to verify the certification; and
    3. An exempt private trust company shall comply with the principal office provisions, address and telephone requirements of this section.
  3. Change of Control.
    1. Control of an exempt private trust company may not be transferred or sold with exempt status. In any change of control, the acquiring control person must comply with this chapter, and the exempt status of the private trust company shall automatically terminate upon the effective date of the transfer. A separate application for exempt status must be filed if the acquiring person wishes to obtain or continue an exemption pursuant to this section.
    2. For the purposes of this part, a transfer of control of an exempt private trust company to a family member shall not be a change of control resulting in the termination of private trust company's exempt status regardless of whether the transfer is:
      1. Direct or indirect;
      2. Inter vivos; or
      3. A result of death.

Acts 1999, ch. 112, § 18; 2012, ch. 793, §§ 3, 4.

45-2-2003. Remedies.

  1. If a private trust company violates any provisions of this chapter, the commissioner may:
    1. Institute any action or remedy prescribed by this chapter and chapter 1 of this title, or any applicable rule; or
    2. Refer the private trust company to the attorney general and reporter for institution of a quo warranto proceeding to revoke the charter.
  2. After notice and an opportunity for a hearing pursuant to the Uniform Administrative Procedures Act, compiled in title 4, chapter 5, the commissioner shall have authority to revoke the exempt status of a private trust company in the following circumstances:
    1. The exempt private trust company makes a false statement under oath on any document required to be filed by the department;
    2. The exempt private trust company fails to submit to an examination as required by this chapter;
    3. The exempt private trust company withholds requested information from the commissioner; or
    4. The exempt private trust company violates any provision applicable to exempt private trust companies.
  3. After taking effect, the revocation is final and nonappealable as to that private trust company. The private trust company shall then be subject to all of the requirements and provisions applicable to non-exempt state trust companies within the period of time that the commissioner determines reasonable and circumstances warrant.

Acts 1999, ch. 112, § 18.

45-2-2004. Conversion to public trust company.

  1. A private trust company may terminate its status as a private trust company and commence transacting business with the general public. A private trust company desiring to commence transacting business with the general public shall file a notice on a form prescribed by the commissioner, which shall set forth the name of the private trust company and an acknowledgment that any exemption granted or otherwise applicable to the private trust company shall cease to apply on the effective date of the notice, furnish a copy of the resolution adopted by the board authorizing the private trust company to commence transacting business with the general public, and pay the filing fee, if any, prescribed by the commissioner. The commissioner may examine or investigate the private trust company, at the company's expense, in order to act on the notice.
  2. The notificant may commence transacting business with the general public on the thirty-first day after the date the commissioner receives the notice, unless the commissioner specifies an earlier or later date.
  3. The thirty-day period of review may be extended by the commissioner on determination that the written notice raises issues that require additional information or additional time for analysis. If the period for review is extended, the notificant may commence transacting business with the public only on prior written approval by the commissioner.
  4. The commissioner may deny approval of the notice of the private trust company to commence transacting business with the general public if the commissioner finds that the notificant lacks sufficient financial resources to undertake the proposed expansion without adversely affecting its safety or soundness, or that the proposed transacting of business with the general public would be contrary to the public interest, or if the commissioner determines that the notificant will not within a reasonable period be in compliance with any provision from which the notificant had been previously exempted.
  5. Upon the effective date of conversion, the private trust company shall then be subject to all of this chapter and chapter 1 of this title, and the rules thereof that are applicable to non-exempt state trust companies.

Acts 1999, ch. 112, § 18.

45-2-2005. Modification or revocation of exemption — Commissioner's authority — Notice — Hearing.

  1. The commissioner shall not modify or revoke any exemption granted to a private trust company under § 45-2-2001 unless:
    1. The commissioner determines that, based upon the safety and soundness of the private trust company or any action that the private trust company has taken or proposes to take, modification or revocation is necessary to protect the viability of the private trust company; or
    2. The private trust company fails to comply with any conditions or limitations imposed by the commissioner in connection with granting the exemption.
  2. The commissioner's authority to modify an exemption under subsection (a) includes the authority to impose conditions or limitations with respect to the exemption.
    1. The commissioner must provide notice in writing to the private trust company at least thirty (30) days prior to the effective date of the proposed modification or revocation of an exemption.
    2. Within thirty (30) days following receipt of the notice provided pursuant to subdivision (c)(1), the private trust company may request in writing that the commissioner hold a hearing for the private trust company to show cause as to why the proposed modification or revocation of an exemption should not become effective.
    3. If a hearing is requested within the time period set forth in subdivision (c)(2), the commissioner shall schedule and conduct the hearing, and the proposed modification or revocation shall not become effective until the commissioner's final determination following the hearing.
    4. If a hearing is not requested within the time period set forth in subdivision (c)(2), the proposed modification or revocation shall become effective without further notice or hearing on the date specified in the notice provided pursuant to subdivision (c)(1).
  3. This section does not modify, limit, or repeal § 45-2-2003.

Acts 2018, ch. 632, § 2.

Part 21
State Trust Companies

45-2-2101. Parts of chapter applicable to trust companies.

  1. Parts 1, 2, 3, 4, 5, 7, 8, and 19 of this chapter do not apply to trust companies, except for §§ 45-2-104, 45-2-105, 45-2-208, 45-2-211, 45-2-215(b), 45-2-217, 45-2-218, 45-2-219, 45-2-220, 45-2-402(d) and (e), 45-2-404 and 45-2-405, and as otherwise provided in this part or as determined by the commissioner.
  2. Part 14 of this chapter does not apply to trust companies, except for §§ 45-2-1408 — 45-2-1411; and, in regards to § 45-2-1409, for a state trust company, the “application for an interstate merger transaction with the responsible federal bank supervisory agency,” means the merger application that is filed with the responsible state agency.
  3. All provisions referenced in this section are in addition to those other statutes in this chapter that are not applicable to trust companies, as determined by the commissioner under § 45-1-124.

Acts 2014, ch. 642, § 3.

Compiler's Notes. For the Preamble to the act concerning the market for trust and trust services, please refer to Acts 2014, ch. 642.

45-2-2102. Organization of state trust company.

  1. Any number of persons may act as incorporators or organizers of a state trust company.
  2. Subject to this chapter, a state trust company shall be organized as a corporation under the Tennessee Business Corporation Act, compiled in title 48, chapters 11-27, or a limited liability company under the Tennessee Revised Limited Liability Company Act, compiled in title 48, chapter 249.
  3. To form a state trust company, the incorporators or organizers shall:
    1. Submit an application for charter, pursuant to § 45-2-2103; and
    2. If the application is approved by the commissioner, submit an application for a certificate of authority, pursuant to § 45-2-2106.
  4. For purposes of this part, if the trust company is being formed as a limited liability company, all references to an application for charter shall also mean an application for articles of organization; all references to incorporators shall also mean organizers; and all references to stock or shareholders shall also include membership interests or members, respectively. Any reference to a director shall also mean a manager, if the trust company is being formed as a manager-managed limited liability company. Any reference to applicant shall mean the incorporators or organizers, or the trust company itself, once its corporate existence has begun.
  5. Prior to submitting an application for charter, each incorporator or organizer shall subscribe and pay in full, in cash, for common stock in a minimum amount representing in aggregate at least ten percent (10%) of the proposed capital of the company. Subscriptions paid by the incorporators for their shares in the proposed trust company may be used to pay organizational expenses, but, in that case, shall not be commingled with funds in any account in which any non-incorporator funds have been or will be deposited.

Acts 2014, ch. 642, § 3.

Compiler's Notes. For the Preamble to the act concerning the market for trust and trust services, please refer to Acts 2014, ch. 642.

45-2-2103. Application for charter — Records check — Notifications — Withdrawal.

  1. The application for charter shall be filed with the commissioner, in the form the commissioner prescribes, containing the following information:
    1. The name, residence and occupation of each incorporator or organizer, or of each individual controlling any entity acting as an incorporator or organizer, as determined by the commissioner, as well as the amount of stock subscribed to, and paid for, by each;
    2. The name and contact information of an individual to whom correspondence relative to the application may be sent;
    3. The names and addresses, and other biographical information as the commissioner may require, of the initial directors or managers and officers of the trust company;
    4. The proposed charter or articles of organization of the company, which, in addition to the provisions required by the Tennessee Business Corporation Act, compiled in title 48, chapters 11–27, or the Tennessee Revised Limited Liability Company Act, compiled in title 48, chapter 249, shall contain the following:
      1. The proposed name of the trust company, which, in the commissioner's judgment, is not likely to cause confusion to the affected public; and
      2. A statement that the company is being formed under the Tennessee Banking Act, as compiled in chapters 1 and 2 of this title, to act as a state trust company;
    5. The proposed bylaws or operating agreement;
    6. The address of the principal office in this state and of each proposed office, or, if not yet known, the communities in which the offices will be located;
    7. A three-year business plan for the trust company including pro forma financial projections specifically identifying the opportunities for profitable employment of its fiduciary services;
    8. The proposed capital structure of the trust company, complying with § 45-2-2107;
    9. The offering circular or offering letter if capital is to be raised by public offering or private placement offering whether at the trust company level or by an entity that will control the state trust company and a copy of the escrow agreement for the escrow account in which funds shall be placed;
    10. The nonrefundable application fee required by the commissioner; and
    11. Such other information as the commissioner may require.
  2. The commissioner shall require each individual identified in subdivision (a)(1) and (3) to consent to a criminal history records check and provide their fingerprints in a form acceptable to the commissioner. The criminal history records check shall be conducted by the Tennessee bureau of investigation or the federal bureau of investigation, or both, at the expense of the applicant, and the results of the check shall be forwarded to the commissioner. For any individual who is not a citizen of the United States, the commissioner shall conduct an international background investigation at the expense of the applicant, or require the applicant or individual to provide the results of an international background investigation on the individual, which the commissioner has the discretion to accept or reject.
  3. The applicant shall use the phrase “in organization” after the proposed trust company's name, until the certificate of authority has been issued.
  4. At any time prior to approval of the application for charter, so long as the applicant has provided the address for the principal office, the applicant may request that the commissioner issue the charter or articles of organization by endorsing the document and having it filed with the secretary of state at the expense of the applicant and returning the original to the applicant.
  5. Within thirty (30) calendar days of filing the application, the commissioner shall notify the applicant whether the application for charter is deemed complete, or whether additional information is needed. Once the applicant has been notified that the application is deemed complete, the applicant shall promptly publish public notice of the formation of the trust company in the form and manner that the commissioner specifies. The ninety-day period referenced in § 45-2-2104(a) shall not commence until evidence of publication has been received by the commissioner.
  6. The commissioner may consider an application to be withdrawn if the commissioner has not received all information and fees required to complete the application within twelve (12) months after the date the application is first submitted, unless the commissioner has granted a request for extension. If an application is deemed withdrawn, a new application for charter, including a new application fee, is required to form a state trust company.

Acts 2014, ch. 642, § 3.

Compiler's Notes. For the Preamble to the act concerning the market for trust and trust services, please refer to Acts 2014, ch. 642.

45-2-2104. Investigation and examination of charter applicants — Determination on application.

  1. Within ninety (90) days after the filing of a complete application for charter, the commissioner shall investigate and examine the application to determine whether:
    1. The character, reputation and financial standing of the incorporators or organizers is such to establish that the trust company is being formed in good faith for a proper purpose;
    2. The character, financial responsibility, and business experience and qualifications of the proposed directors and officers justify the belief that the trust company will be operated lawfully and successfully;
    3. The anticipated volume and nature of business indicates a reasonable probability of success and profitability based on the market sought to be served;
    4. The proposed capital structure is adequate, considering the factors described in § 45-2-2107 and other information in the application; and
    5. The incorporators or organizers have complied with all applicable provisions of this chapter.
  2. The commissioner may extend the ninety-day period if unique or novel issues are presented, or if additional time is needed to complete the investigation and examination.
  3. The commissioner shall consider the results of the investigation and examination, as well as any additional information that is available to the commissioner, and shall approve the application if satisfied that each requirement in subsection (a) has been met. If approval is granted, the commissioner shall issue the charter or articles of organization, if not yet issued, by filing the charter or articles with the secretary of state at the expense of the applicant and returning the original to the applicant.
  4. If the commissioner determines that the applicant does not meet the requirements in this chapter, the commissioner may deny the application by providing written notice to the applicant stating the basis for denial.

Acts 2014, ch. 642, § 3.

Compiler's Notes. For the Preamble to the act concerning the market for trust and trust services, please refer to Acts 2014, ch. 642.

45-2-2105. Payment of subscriptions — Placement in escrow account — Removal of funds.

After the trust company charter or articles of organization have been issued by the commissioner, the incorporators, or, if directors have been initially appointed, the directors of the proposed state trust company, may call for the payment of the subscriptions. The subscriptions shall be placed into an escrow account. The incorporators or directors, as appropriate, may not remove any funds from the escrow account prior to the issuance of the certificate of authority or upon written approval from the commissioner. In the case of an offering to raise capital to form a state trust company by an entity that will control the company, subscriptions shall also be placed into an escrow account and may not be removed prior to the issuance of the certificate of authority or upon written approval from the commissioner.

Acts 2014, ch. 642, § 3.

Compiler's Notes. For the Preamble to the act concerning the market for trust and trust services, please refer to Acts 2014, ch. 642.

45-2-2106. Application for certificate of authority — Effect of failure to timely file or full denial — Effect of approval.

  1. In order to obtain a certificate of authority to begin acting as a fiduciary in this state, the applicant shall file an application for a certificate of authority, containing:
    1. Evidence that capital and surplus have been fully paid in;
    2. The name and address of each investor, and the number of shares or membership units purchased by each;
    3. Evidence that adequate fidelity bond coverage on all active officers and employees satisfactory to the commissioner is in force;
    4. Evidence that suitable insurance against burglary, robbery, theft, liability and similar insurable hazards to which the trust company may be exposed has been acquired;
    5. Evidence that the bylaws or operating agreement, as applicable, have been adopted; and
    6. Any other information that the commissioner may require to enable the commissioner to determine whether authority to commence business should be issued.
  2. The commissioner shall approve or deny an application for a certificate of authority within thirty (30) days after it is filed. If no application for a certificate of authority is filed within six (6) months following approval of an application for charter or any additional period allowed by the commissioner, or if a certificate of authority has been finally denied, the charter or articles of organization shall be forfeited and the company shall be liquidated in accordance with the orders of the commissioner.
  3. If the commissioner approves the application for a certificate of authority, the commissioner shall promptly issue a certificate of authority and deliver the same to the applicant. If the commissioner denies the application, the commissioner shall promptly mail a notice of the denial to the applicant stating the reasons for the denial.
  4. As of the date indicated on the certificate of authority, the applicant shall be a state trust company and authorized to act as a fiduciary in this state.

Acts 2014, ch. 642, § 3.

Compiler's Notes. For the Preamble to the act concerning the market for trust and trust services, please refer to Acts 2014, ch. 642.

45-2-2107. Adequate capital structure — Factors considered.

  1. No state trust company shall be organized with capital of less than five hundred thousand dollars ($500,000), or such greater amount as may be required by the commissioner after considering the factors in this section.
  2. The commissioner may at any time prescribe a capital structure for a state trust company that the commissioner deems adequate for it to operate in a safe and sound manner. The commissioner shall consider the following factors in determining an adequate capital structure:
    1. The nature and type of business conducted or to be conducted;
    2. The nature and liquidity of assets currently held or to be held in the state trust company's own account;
    3. The amount of fiduciary assets currently or projected to be under management or administration;
    4. The type of fiduciary assets currently held or proposed to be held, and the depository of such assets;
    5. The complexity of fiduciary duties and degree of discretion proposed currently or to be undertaken;
    6. The competence and experience of current or proposed management;
    7. The extent and adequacy of internal controls;
    8. The reasonableness of any business plan for retaining or acquiring additional equity capital;
    9. The existence and adequacy of insurance for protecting the state trust company's fiduciary assets; and
    10. Any other factors the commissioner may deem relevant.

Acts 2014, ch. 642, § 3.

Compiler's Notes. For the Preamble to the act concerning the market for trust and trust services, please refer to Acts 2014, ch. 642.

45-2-2108. Board of directors — Membership — Meetings — Chief executive officer — Fidelity bond and insurance — Audited financial statement.

  1. The business and affairs of a state trust company organized as a corporation shall be managed under a board of directors consisting of a minimum of five (5) and a maximum of twenty-five (25) members, as specified in the charter or bylaws. A trust company organized as a limited liability company shall be managed by a board consisting of a minimum of five (5) and a maximum of twenty-five (25) directors or managers, as specified in the articles of organization or operating agreement.
  2. A majority of the board shall be citizens of the United States.
  3. The board of directors shall meet at least quarterly, and a majority shall constitute a quorum. The commissioner may call a special meeting of the board. The board shall keep minutes of each meeting, including a record of attendance and of all votes cast by each director.
  4. A state trust company shall have only one (1) officer designated as the chief executive officer of the company, who shall also be a member of the board of directors.
  5. A state trust company shall report to the commissioner within twenty-four (24) hours any change in the position of chief executive officer and shall provide such other information as the commissioner may require.
  6. As indicated in § 45-2-2101, § 45-2-402(d) and (e) shall apply to a state trust company.
  7. The directors shall at least annually prescribe the amount or penal sum of the fidelity bond and insurance coverage required by § 45-2-2106(a) and designate the sureties and underwriters of the bond and insurance, after giving due and careful consideration to all known elements and factors constituting a risk or hazard. The action shall be recorded in the minutes of the board of directors and be subject to approval by the commissioner.
  8. At least once in each calendar year, at intervals of not more than fifteen (15) months, a state trust company shall obtain and provide to the commissioner an audited financial statement prepared by an independent certified public accountant licensed to do business in this state. In the case of a trust company that is a subsidiary of a holding company, the commissioner may, in the commissioner's discretion, alternatively accept audited consolidated financial statements of the holding company, after considering the structure and complexity of the consolidated organization; provided, that the consolidated total assets of the trust company comprise seventy-five percent (75%) or more of the consolidated total assets of the holding company.

Acts 2014, ch. 642, § 3.

Compiler's Notes. For the Preamble to the act concerning the market for trust and trust services, please refer to Acts 2014, ch. 642.

45-2-2109. Change of control in or of controlling person of state trust company.

Section 45-2-103(a), including the requirement to file an application and receive the prior approval of the commissioner, shall apply to a change of control in a state trust company or a controlling person of a state trust company. In the case of a change of control in a controlling person, the commissioner may waive the filing of an application if, in the commissioner's discretion, the change in control does not pose any risk to the public. Along with the change of control application the commissioner may, in the commissioner's discretion, require fingerprints and consent to a criminal history records check, or an international criminal background investigation, as provided in § 45-2-2103(b).

Acts 2014, ch. 642, § 3.

Compiler's Notes. For the Preamble to the act concerning the market for trust and trust services, please refer to Acts 2014, ch. 642.

Part 10
Fiduciary Powers

Chapter 3
Savings and Loan Associations

Part 1
General Provisions

45-3-101. Short title.

This chapter shall be known and may be cited as the “Tennessee Savings and Loan Act.”

Acts 1978, ch. 708, § 1.01; T.C.A., § 45-1301.

Compiler's Notes. Former chapter 3 (Acts 1875, ch. 142, § 14; 1919, ch. 136, §§ 2, 3, 8, 9, 11; 1929, ch. 117, §§ 3, 5-8; Shan. Supp., §§ 2135, 2179a2, 2179a3, 2179a8, 2179a9, 2179a11; Code 1932, §§ 3899, 3902, 3903, 3907, 3909, 3910-3911, 3914, 3915, 3917; Acts 1933, ch. 19, §§ 1-4, 6, 7, 9-11, 15, 16; 1935 (E.S.), ch. 27, §§ 1-3, 5; 1935 (E.S.), ch. 28, § 4; 1935 (E.S.), ch. 34, § 1; Code Supp. 1950, §§ 3898.1-3898.11, 3898.23-3898.29, 3898.31-3898.33, 3898.46-3898.50, 3898.57; (Williams, §§ 3898.1-3898.4, 3898.6, 3898.7, 3898.9-3898.11, 3898.15, 3898.16, 3902, 3903, 3904.1-3904.5, 3914, 3918.8); Acts 1957, ch. 281, §§ 1, 2; 1957, ch. 282, §§ 1, 2; 1968, ch. 501, § 1; 1969, ch. 124, § 1; 1973, ch. 274, § 1; 1973, ch. 360, §§ 1, 2; 1973, ch. 361, §§ 1, 2; 1974, ch. 698, §§ 1, 3, 4; 1976, ch. 582, §§ 1, 2, 3(a), (b), (f)-(i), 4), concerning operation and management of building and loan associations was repealed by Acts 1978, ch. 708, § 6.01 and the present provisions substituted therefor in 1980.

This chapter was reenacted by Acts 1980, ch. 617.

For transfer of functions under this chapter from the department of commerce and insurance to the department of financial institutions, see Executive Order No. 38 (February 11, 1983).

Cross-References. Bank deposits and collections, title 47, ch. 4.

Conversion of financial institutions, title 45, ch. 11.

Cooperative scholarship corporations, building and loan associations participating in plans, § 49-4-106.

Funds transfers, title 47, ch. 4A.

Investment of public funds in federal savings and loan associations accounts, § 9-1-107.

Letters of credit, title 47, ch. 5.

Negotiable instruments, title 47, ch. 3.

Tennessee Reciprocal Savings Institution Act, title 45, ch. 3, part 14.

Law Reviews.

State and Local Taxation of Financial Institutions: An Opportunity for Reform (C. James Judson & Susan G. Duffy), 39 Vand. L. Rev. 1057 (1986).

45-3-102. Scope and application.

  1. Effect on Existing Associations.  The charter of every savings and loan association, by whatever name called, heretofore organized under the laws of this state existing and in good standing on July 1, 1978, shall continue in full force and effect, subject to compliance with  this chapter, and the same shall be deemed as modified to conform with this chapter without the adoption or approval of a new charter, as to corporate powers and functions, and all associations shall bring themselves into compliance as to corporate powers and functions within twelve (12) months from July 1, 1978. An association existing on July 1, 1978, and that is not then in compliance with minimum capital requirements may continue to operate with its existing capital so long as its accounts are insured as provided in this chapter. Unless otherwise invalid or unenforceable, the contracts, obligations, rights, powers, and liabilities of every such association, and the contracts, notes, mortgages, investments, and other assets of every kind and nature whatsoever held by it, as well as its bylaws and resolutions, shall continue in full force and effect. Every existing association and every association hereafter organized under this chapter shall, except as otherwise provided, be subject to this chapter.
  2. Effect on Federal Associations.  Unless federal laws or regulations provide otherwise, federal savings and loan associations and their members shall possess all of the rights, powers, privileges, immunities, and exemptions granted by this chapter to associations operating hereunder.

Acts 1978, ch. 708, § 1.02; T.C.A., § 45-1302.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-101.

45-3-103. Application of general corporation law and the Uniform Administration Procedures Act.

Unless otherwise specifically provided by this chapter or unless the application would otherwise conflict with the purposes of this chapter, the Tennessee Business Corporation Act, compiled in title 48, chapters 11-27, and of the Uniform Administrative Procedures Act, compiled in title 4, chapter 5, as each of those acts may be amended from time to time, shall apply to all associations governed by this chapter.

Acts 1978, ch. 708, § 1.03; T.C.A., § 45-1303; Acts 1994, ch. 551, § 19.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-101.

The Tennessee General Corporation Act, compiled in title 48, ch.1, has been repealed effective January 1, 1988. New provisions concerning business corporations may be found in title 48, chs. 11-27. New provisions concerning nonprofit corporations may be found in title 48, chs. 51-68.

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Building and Loan Associations, §§ 4, 6, 9.

45-3-104. Chapter definitions.

  1. As used in this chapter, unless the context otherwise requires:
    1. “Association” means a capital stock or mutual savings and loan association;
      1. “Capital stock association” means an association, the ownership of which rests in the holders of shares of capital stock, who may receive dividends on their shares, and who have the sole right to vote on matters affecting the association; and
      2. “Mutual association” means an association, the ownership of which rests in members, who receive interest on their deposit accounts, and who have the sole right to vote on all matters affecting the association;
    2. “Branch office” means an office or facility, other than the home office, at which payments on accounts and loans may be accepted and applications for loans may be received, at which accounts may be opened, and loans may be closed, and at which any other authorized business of the association may be transacted;
    3. “Commissioner” means the commissioner of financial institutions;
    4. “Deposit” or “deposit account” means that part of the deposit liability of an association that is credited to the account of the holder;
    5. “Deposit liability” means the aggregate amount of deposit accounts of depositors or members, including interest credited to the accounts, less redemptions and withdrawals;
    6. “Depositor” means the holder of a deposit account in an association;
    7. “Dividend” means that part of the net income or capital surplus of a capital stock association that is declared payable to the stockholders of the association from time to time by the board of directors, and is to be distinguished from “interest”;
    8. “Electronic funds transfer system (EFTS)” means a computer payment system for transferring funds from one (1) party to another;
    9. “Federal association” means a savings and loan association operating under the laws and regulations of the United States;
    10. “Financial institution” means a thrift institution, commercial bank, or trust company;
    11. “Home” means a structure designed for residential use by not more than four (4) families or a single condominium unit, including common elements pertinent thereto, designed for residential use by one (1) family in a multiple dwelling unit structure or complex, and includes fixtures;
    12. “Home office” means the principal place of business maintained by the association and so designated in its charter, at which all authorized business of the association may be transacted;
    13. “Home property” means real estate on which there is located, or will be located, a home;
    14. “Homeowner” means any person or persons in whose name or names legal title to a home, or real property on which a home is located, or is to be located, is registered pursuant to the laws of this state;
    15. “Impaired condition” means a condition in which the assets of an association in the aggregate do not equal the aggregate amount of its liabilities;
    16. “Interest” means that part of the net income, retained earnings, or surplus of an association that is payable to or credited to holders of deposit accounts;
    17. “Interest date” means the effective date on which interest is payable to depositors on deposit accounts;
    18. “Liquid assets” means:
      1. Cash on hand;
      2. Time certificates of deposit or cash on deposit in federal home loan banks, state banks performing similar functions, or in commercial banks, that is withdrawable upon not more than thirty (30) days' notice and that is not pledged as security for indebtedness, except that any deposits in a bank that is being liquidated or rehabilitated by any supervisory authority shall not be considered as liquid assets;
      3. Obligations of, or obligations that are fully guaranteed as to principal and interest by, the United States or this state; and
      4. Other assets that the commissioner may, by rule or regulation, designate as liquid assets;
    19. “Member” means a person holding a deposit account of a mutual association;
    20. “Mobile home” means a dwelling designed for occupancy by a single family unit, which may be permanently affixed to real property, and is designed to be movable from one (1) location to another. “Mobile home” does not include recreation vehicles or campers;
    21. “Net income” means gross revenues for an accounting period, less all interest and expenses paid or incurred, taxes, and losses sustained that have not been charged to any reserve accounts;
    22. “Net worth” means the aggregate of all loan contracts of an association, plus the aggregate value of all other assets of the association, less the aggregate amount of deposit accounts of depositors, including interest credited to the accounts, and less any other liabilities of the association;
    23. “Person” means an individual, firm, partnership, joint venture, trust, estate, unincorporated association, company, or corporation organized under the laws of this or any other state, the United States or foreign country;
    24. “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:
      1. A structure or structures designed or used primarily for residential rather than nonresidential purposes and consisting of more than one (1) dwelling unit;
      2. A structure or structures designed or used primarily for residential rather than nonresidential purposes for students, residents, and persons under care, employees, or members of the staff of an educational, health, or welfare institution or facility; or
      3. A structure or structures that are used in part for residential purposes for not more than one (1) family and in part for business purposes; provided, that the residential use of the structure or structures must be substantial and permanent, not merely transitory;
    25. “Primary lending area” means any area within the territorial limits of this state or within a radius of one hundred (100) miles from the home office or branch of an association;
    26. “Real estate loan” means any loan or other obligation secured by a lien on real estate in any state held in fee or in a leasehold extending or renewable automatically for a period of at least ten (10) years beyond the date scheduled for the final principal payment of the loan or obligation, or any transactions out of which a lien or claim is created against the real estate, including, inter alia, the purchase of the real estate in fee by an association and the concurrent or immediate sale thereof on installment contract;
    27. “Remote service unit” means a facility where deposits to, withdrawals from, and transfers between existing accounts may be made and where payments on loans made or serviced by the association may be made;
    28. “Satellite office” means a facility that is operated ancillary to a home or branch office and that does not have more than one thousand (1,000) square feet of floor space nor more than four (4) teller stations;
    29. “Service organization” means either a corporation, the majority of the capital stock of which is owned by one (1) or more associations, and that has the powers to engage in those activities of general service corporations in which federal associations may invest; or a corporation, business trust, or other similar organization that is an affiliate of an association that owns a majority of the voting shares of the organization and that has the powers of an affiliate of a federal association;
    30. “Stockholder” means the holder of one (1) or more shares of any class of capital stock of a capital stock association organized and operating pursuant to this chapter;
    31. “Surplus” means the aggregate amount of the undistributed net income of an association held as undivided profits or unallocated reserves for general corporate purposes, and any paid-in surplus or initial undivided profits held by an association;
    32. “Thrift institution” means an association, a mutual savings bank, a cooperative bank, a homestead association, a credit union, a federal association, a small loan company, and any supervised thrift or residential financing institution of a substantially similar nature as determined by the commissioner; and
    33. “Withdrawal value” means the amount paid to an association on a deposit account, plus interest credited thereto, less lawful deductions therefrom, as shown by the books of the association.
  2. Any reference in this chapter or elsewhere in this code to a savings and loan association, or to a federal savings and loan association, or to any association as may be defined in this chapter, includes a federal savings bank or other financial institution, the accounts of which are insured by the federal savings and loan insurance corporation (FSLIC) or any successor of the corporation.

Acts 1978, ch. 708, § 1.04; T.C.A., § 45-1304; Acts 1984, ch. 705, § 2.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-101.

For transfer of functions under this chapter from the department of commerce and insurance to the department of financial institutions, see Executive Order No. 38 (February 11, 1983).

The federal savings and loan insurance corporation, referred to in this section, was abolished, effective February 1, 1992. See the Historical and Statutory Notes under 12 U.S.C. § 1437.

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Building and Loan Associations, § 7.

45-3-105. Powers of associations generally.

Every association has all the powers enumerated, authorized and permitted in this section and other rights, privileges, and powers as may be incidental to or reasonably necessary or appropriate for the accomplishment of the objects and purposes of the association, including those rights and powers not in conflict with this chapter conferred generally upon corporations by the Tennessee Business Corporation Act, compiled in title 48, chapters 11-27. Without limiting the foregoing, and except as otherwise provided by this chapter, every association has the power to:

  1. Deposits and Investments.  Acquire deposits and pay interest on deposits, and lend and invest its funds;
  2. Property Transfers.  Acquire, hold, sell, dispose of, convey, mortgage, pledge, or lease any real or personal property;
  3. Borrowing.  Subject to any rules or regulations promulgated by the commissioner, borrow from sources, individual and corporate, for the uses and purposes of the association, which borrowings may be evidenced by the notes, bonds, debentures, or other obligations or securities as the commissioner may prescribe; and pledge, mortgage, or otherwise encumber any of its assets in connection therewith; provided, that in no event shall any borrowing by an association exceed seventy percent (70%) of the deposit liability of the association unless the commissioner shall grant written approval of a greater percentage;
  4. Sale of Loans.  Sell any loan, without recourse, including any participating interests therein;
  5. Insurance of Accounts.  Obtain and maintain insurance of its deposit accounts by the federal savings and loan insurance corporation, any agency of this state or other federal agency established for the purpose of insuring deposit accounts in associations, or with any other insurer approved by the commissioner and having a net worth not less than one hundred million dollars ($100,000,000);
  6. Membership in Organizations.  Qualify as and become a member of a Federal Home Loan Bank, or any other agency of the United States or the state of Tennessee or of any organization to the extent that the agency or organization assists in furthering or facilitating the association's purposes or powers, and comply with any reasonable conditions of eligibility;
  7. Safe Deposit Boxes.  Maintain and let safes, boxes, or other receptacles for the safekeeping of personal property in the same manner as banks are authorized to do under the laws of this state; provided, that in the event of any conflict with the law relating to safe deposit boxes in banks, this law shall be controlling. Any association has the right to construct a vault on its real estate, or on premises leased by it, or to rent any vault that in the judgment of the directors will provide reasonable means of safety against loss by theft, fire, or other cause, in which vault may be placed safes, boxes, or receptacles, for the keeping of jewelry, diamonds, gold, bank notes, bonds, notes, and other valuables, and that may be rented by the association to other persons on terms that may be agreed by the parties, but it is understood that in no event shall the association be liable for any loss of the jewelry, diamonds, gold, bank notes, bonds, notes, or other valuables by theft, robbery, fire, or other cause, the association not being the insurer of the safety of the property, nor in any manner liable therefor. The association is not required to take any note of property thus deposited, as the person who rents a safe, box, or receptacle is, for the term of the lease, the owner thereof;
  8. Money Orders, etc.  Sell money orders, travel checks, and similar instruments drawn by it on its bank accounts or as agents for any organization empowered to sell the instruments within this state;
  9. Fiscal Agent.  Act as fiscal agent of the United States, of this state, or of any subdivision of this state when duly designated for that purpose, and as fiscal agent perform the reasonable functions that may be required by it;
  10. Servicing.  Service loans and investments for others;
  11. Limited Trusteeship.  Act as trustee or custodian within the contemplation of the Federal Self-Employed Individual Tax Retirement Act of 1962, the Federal Employee Retirement Income Security Act of 1974, or similar federal acts, all as may be amended from time to time; and act as trustee or custodian with regard to other activities that may be authorized to federal associations by federal law or regulation. An association exercising the powers authorized by this subdivision (11) shall segregate all funds held in those fiduciary capacities from the general assets of the association and shall keep a separate set of books and records, showing in detail all transactions made under authority of this subdivision (11). If the individual records are kept as aforementioned, all funds held in the fiduciary capacities by an association may be commingled for appropriate purposes of investment. The funds may be invested in deposit accounts of the association in the event that the trust, custodial, or other plan does not prohibit the investment;
  12. Employee Stock Option Plans.  Establish, as part of its compensation benefits to its full-time employees, a plan or plans whereby the employing association may issue shares of its capital stock to the employees as compensation to them at a value to be established periodically, but at least annually, by the board of directors of the employing association, which value may be less than the market value of the stock or less than the price at which the stock may be offered to nonemployees; provided, that the plan is approved by a majority of the stockholders of the employing association. The plan may include provisions for the creation of a retirement trust whereby the stock issued to the employees and accumulated earnings on the stock are held in trust for the employees' retirement; and
  13. Electronic Funds Transfer Systems.  Subject to rules and regulations of the commissioner, transfer funds between holders of deposit accounts, and third parties, or their designees, by means of electronic funds transfer systems. No such system or any part of the system, including terminals or processing centers, shall of itself be considered a branch or satellite office.

Acts 1978, ch. 708, § 1.05; T.C.A., § 45-1305; Acts 1981, ch. 36, § 1; 1984, ch. 626, § 1; 1994, ch. 551, § 19.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-101.

The Federal Employee Retirement Income Security Act of 1974 referred to in this section is compiled in 5 U.S.C. §§ 5108, 5109; 18 U.S.C. §§ 664, 1027, 1954; 26 U.S.C. generally; 29 U.S.C. §§ 1221, 1222, 1302, 1381; 31 U.S.C. §§ 846, 1037; 42 U.S.C. § 1320b-1.

The federal savings and loan insurance corporation, referred to in this section, was abolished, effective February 1, 1992. See the Historical and Statutory Notes under 12 U.S.C. § 1437.

The Federal Self-Employed Individual Tax Retirement Act of 1962 referred to in this section is compiled in 26 U.S.C. §§ 37, 62, 72, 101, 104, 105, 172, 401-405, 503, 805, 1361, 2039, 2517, 3306, 3401, 6047, 7207.

The Tennessee General Corporation Act, compiled in title 48, ch. 1, has been repealed effective January 1, 1988. New provisions concerning business corporations may be found in title 48, chs. 11-27. New provisions as to nonprofit corporations may be found in title 48, chs. 51-68.

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Building and Loan Associations, §§ 8, 13.

45-3-106. Tie-in provision.

Notwithstanding anything to the contrary in the laws of this state, every association organized and incorporated pursuant to or operating under this chapter has all the powers granted to savings and loan associations whose home offices are located in this state and that are incorporated or operating under the laws of the United States.

Acts 1978, ch. 708, § 1.06; T.C.A., § 45-1306.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-101.

NOTES TO DECISIONS

1. Federally Chartered Institutions.

Federally chartered savings and loans have engaged in statewide branching in Tennessee because, under the “wild card” statute, they may do as state chartered savings banks may do. Permitting a national bank to branch statewide merely creates a level playing field for nationally chartered banks and further enhances competition in the financial industry. Volunteer State Bank v. National Bank of Commerce, 684 F. Supp. 964, 1988 U.S. Dist. LEXIS 4286 (M.D. Tenn. 1988).

45-3-107. Corporate form required — Capital stock and mutual associations authorized.

  1. No person, except a corporation chartered by the state of Tennessee or a federally chartered association, shall engage in the business of a savings and loan association in this state.
  2. The charter of an association may provide for the issuance of capital stock or for the organization of the association as a mutual association.

Acts 1978, ch. 708, § 1.07; T.C.A., § 45-1307.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-101.

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Building and Loan Associations, §§ 4, 6, 9.

45-3-108. Ownership of associations — Changes affecting control.

  1. The rights and incidents of ownership in a capital stock association shall be vested in the holders of capital stock as shown on the books of the association and in no other persons. Depositors in capital stock associations shall not be vested with any rights or incidents of ownership in the association. The rights and incidents of ownership in a mutual association shall be vested in the depositors of the association.
  2. Section 45-2-103 is applicable to state-chartered savings and loan associations. Unless the context requires other meaning, references to bank in § 45-2-103 include state-chartered savings and loan associations for the purposes of this subsection (b) only, and shall not be construed to give the associations any rights or powers not set forth in this chapter.

Acts 1978, ch. 708, § 1.08; T.C.A., § 45-1308; Acts 1984, ch. 697, §§ 1, 2.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-101.

Acts 1984, ch. 697, § 3 provided that the provisions of the 1984 amendment by that act were remedial in nature and to be liberally construed to effectuate its purposes.

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Building and Loan Associations, § 7.

45-3-109. Capital stock — Nature.

Capital stock shall constitute a reserve out of which losses shall be paid after all other available reserves have been exhausted, and shall have a par value, or if the capital stock has no par value, then a stated value, of one dollar ($1.00) per share or another amount that the charter may prescribe.

  1. Nonwithdrawability.  Capital stock shall be nonwithdrawable, except as otherwise specifically provided by this chapter, or by the Tennessee Business Corporation Act, compiled in title 48, chapters 11-27.
  2. Dividends.  Capital stock shall be entitled to dividends, unless limited by this chapter, or by the Tennessee Business Corporation Act, compiled in title 48, chapters 11-27.

Acts 1978, ch. 708, § 1.09; T.C.A., § 45-1309; Acts 1994, ch. 551, § 19.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-101.

The Tennessee General Corporation Act, compiled in title 48, ch. 1, has been repealed effective January 1, 1988. New provisions concerning business corporations may be found in title 48, chs. 11-27. New provisions concerning nonprofit corporations may be found in title 48, chs. 51-68.

45-3-110. Capital stock associations — Issuance of capital stock.

An association may issue the shares of capital stock authorized by its charter and none other. The capital stock of an association, when issued, shall not be retired or withdrawn except as hereinafter provided until all liabilities of the association have been satisfied in full, including the withdrawal value of all deposit accounts. An association may issue shares of common stock and preferred stock, with or without par value, and the common and preferred stock may be divided into classes and the classes into series. Capital stock of an association shall be issued pursuant to the following requirements:

  1. Consideration for Issuance of Stock.  Except for stock issued pursuant to an employee stock option plan, or pursuant to a plan of merger, consolidation, conversion from a mutual to a stock association, or other type of reorganization that has been approved by the commissioner, the consideration for the issuance of capital stock shall be paid in cash and the par value or stated value thereof shall be maintained as the permanent capital of the association, and any excess shall be credited to paid-in surplus;
  2. Permanent Capital — Reduction and Retirement.  The aggregate par value or stated value of all outstanding shares of capital stock shall be the permanent capital of the association, and, except as otherwise specifically provided by this chapter, the capital stock shall not be retired until final liquidation of the association. No association shall reduce the par or stated value of its outstanding capital stock without first obtaining the written approval of the commissioner, and approval shall be withheld if the reduction will cause the par or stated value of outstanding capital stock to be less than the minimum required by this chapter, or will result in less than adequate net worth as the commissioner may, in the commissioner's discretion, determine. No association shall retire any part of its capital stock unless the retirement is approved by the commissioner. With the written approval of the commissioner, an association may purchase its capital stock from the personal representative of a deceased stockholder; and with the written approval, an association may contract with a living stockholder for the purchase upon the stockholder's death. The purchase shall be for a price, and upon terms and conditions, that are agreed upon by the association and the stockholder or personal representative; provided, that the purchase shall not reduce the net worth accounts of the association, or any of them, to an amount less than required by applicable law or by the approved insurer of the association's deposit accounts. An association agreeing with a stockholder to purchase that stockholder's capital stock upon the stockholder's death may purchase insurance upon the life of the stockholder to fund or partially fund the purchase. Any stock purchased from a decedent's personal representative may be resold by the association at the price, and upon terms and conditions, that the board of directors of the association approves or may be retired; provided, that prior to resale, notice shall be filed with the commissioner disclosing the price, terms, and conditions of the proposed resale.

Acts 1978, ch. 708, § 1.10; T.C.A., § 45-1310.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-101.

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Building and Loan Associations, § 6.

45-3-111. Capital stock and mutual associations — Minimum capital requirements.

    1. The minimum capital with which an association shall commence business shall be determined by reference to, in the case of a capital stock association, the sum of the par or stated value of all issued and outstanding shares of voting common capital stock, and, in the case of a mutual association, the total of all subscribed and paid-in deposit accounts. The minimum capital of an association shall be prescribed by the commissioner; provided, that the minimum capital shall not be less than:
      1. One hundred thousand dollars ($100,000) if the home office of the association is to be located in a county having less than ten thousand (10,000) inhabitants;
      2. Two hundred fifty thousand dollars ($250,000) if the home office is to be located in a county having between ten thousand (10,000) and one hundred thousand (100,000) inhabitants; and
      3. Five hundred thousand dollars ($500,000) if the home office is to be located in a county having one hundred thousand (100,000) inhabitants or more.
    2. The population of each county shall be based upon the latest federal census.
  1. Notwithstanding the above requirements, if the home office of an association is to be located in a county that is contiguous to a county the population of which would require higher minimum capital requirements, and if the commissioner determines that the association will draw a substantial amount of its depositors from the contiguous county, the commissioner shall require that the association meet the higher capital requirements of the contiguous county.

Acts 1978, ch. 708, § 1.11; T.C.A., § 45-1311.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-101.

For table of U.S. decennial populations of Tennessee counties, see Volume 13 and its supplement.

45-3-112. Capital stock associations — Paid-in surplus.

  1. In addition to the minimum capital required by this chapter for a capital stock association to commence business, the subscribers to the capital stock of the association shall pay an additional amount for their stock equal to not less than fifty percent (50%) of the par or stated value of the stock subscribed, which additional amount shall be credited to the paid-in surplus account and may be used for organization and operating expenses, including interest to the holders of deposit accounts. The minimum capital and surplus may be used for the reserves required by this chapter and as permitted by the commissioner.
  2. The capital, paid-in surplus, retained earnings, and other net worth accounts of an association, or any combination of the net worth accounts, may, by action of the association and subject to approval of the commissioner, be specifically earmarked as an insurance reserve account to be used solely for absorbing losses.

Acts 1978, ch. 708, § 1.12; T.C.A., § 45-1312.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-101.

45-3-113. Mutual associations — Expense fund requirements.

  1. The incorporators of a mutual association, in addition to their subscriptions to deposit accounts, shall create an expense fund in an amount not less than fifty percent (50%) of the minimum capital required by this chapter for the association to commence business.
  2. Any organization and operating expenses may be paid from the fund until such time as the net income of the association is sufficient to pay the interest that is declared and paid or credited to deposit account holders from sources available for the payment of interest.

Acts 1978, ch. 708, § 1.13; T.C.A., § 45-1313.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-101.

45-3-114. Mutual associations — Repayment of contributions to expense fund.

  1. Contributions made by the incorporators and others to the expense fund and to the undivided profits account, if so required by the commissioner, may be repaid pro rata to the contributors from the net income of the association after provision for required loss reserves and declaration of interest of not less than two percent (2%) on deposit accounts.
  2. In case of the liquidation of an association before contributions to the expense fund and to the undivided profits account have been repaid, any contributions to the expense fund and to the undivided profits account remaining unexpended, after payment of expenses of liquidation, all creditors and the withdrawal value of all deposit accounts, shall be paid to the contributors pro rata.
  3. The books of the association shall reflect the expense fund and undivided profits account.
  4. Contributors to the expense fund and to the undivided profits account shall be paid interest on the amounts paid in by them and for that purpose the contributions shall in all respects be considered as deposit accounts of the association.
  5. Except as otherwise provided by this chapter or by rules and regulations prescribed by the commissioner, the amounts contributed to the expense fund and to the undivided profits account shall not constitute a liability to the association.

Acts 1978, ch. 708, § 1.14; T.C.A., § 45-1314.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-101.

45-3-115. Change of office or name.

No association shall, without the prior approval of the commissioner:

  1. Establish any branch or satellite office other than the home office stated in its charter;
  2. Move any home, branch, or satellite office of the association from its immediate vicinity; or
  3. Change the name of any association.

Acts 1978, ch. 708, § 1.24; T.C.A., § 45-1324.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-101.

45-3-116. Exemption from securities laws.

All associations subject to this chapter and all federal associations, the directors, officers, agents, or employees of the associations, deposit accounts and capital stock of the associations and the sale, issuance, or offering for sale of deposit accounts and capital stock of the associations are exempted from all provisions of law of this state, other than this chapter, that provide for supervision, registration, or regulation in connection with the sale, issuance, or offering for sale of securities, and the sale, issuance, or offering for sale of the accounts or stock shall not require any action or approval whatsoever by any official authorized to license, regulate, or supervise the sale, issuance, or offering for sale of securities.

Acts 1978, ch. 708, § 5.23; T.C.A., § 45-1723.

45-3-117. Acknowledgments by stockholders, members, and employees.

No public officer qualified to take acknowledgments or proofs of any instrument in writing in which an association is interested shall be disqualified by reason of the officer's status as a stockholder, member, or employee of the association so interested, and the acknowledgments or proofs previously taken are validated.

Acts 1978, ch. 708, § 5.24; T.C.A., § 45-1724.

45-3-118. References to “building and loan associations.”

Any and all references in any provision of the laws of this state to the term “building and loan association” are deemed to refer to the term “savings and loan association.”

Acts 1978, ch. 708, § 5.25; T.C.A., § 45-1725.

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Building and Loan Associations, §§ 1, 2.

45-3-119. References to federal savings and loan associations.

Any and all references in any provision of the laws of this state to “federal savings and loan associations” are deemed to refer to “savings and loan associations operating under the laws of this state and federal savings and loan associations.”

Acts 1978, ch. 708, § 5.26; T.C.A., § 45-1726.

45-3-120. Liberal construction.

This chapter shall be liberally construed to promote and foster a sound and efficient system of savings and loan associations.

Acts 1978, ch. 708, § 5.27; T.C.A., § 45-1727.

Part 2
Organization

45-3-201. Application to organize.

Any five (5) or more individuals, referred to as the incorporators, who are residents of this state, may form a capital stock or mutual savings and loan association subject to the commissioner's approval as hereinafter provided, by filing a written application for authority to organize with the commissioner in a form and manner prescribed by the commissioner. The application shall be signed by each of the incorporators and shall include:

  1. Home Office.  The name and the proposed location of the home office of the proposed association;
  2. Incorporators.  The name and address of each incorporator;
  3. Capital.  In the case of a capital stock association, the total amount of capital stock proposed and subscribed, if any has then been subscribed, and in the case of a mutual association, the total amount of subscribed deposit accounts, if any, together with the name and address of each subscriber; and
  4. Other Information.  Detailed financial and biographical information for each incorporator and subscriber that the commissioner may require, and economic data, projections of business volume, income, expense, and other information that the commissioner may require.

Acts 1978, ch. 708, § 1.15; T.C.A., § 45-1315.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-101.

For transfer of functions under this chapter from the department of commerce and insurance to the department of financial institutions, see Executive Order No. 38 (February 11, 1983).

Cross-References. Negotiable instruments, title 47, ch. 3.

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Building and Loan Associations, § 4.

45-3-202. Commissioner's approval of application for certificate of authority — Hearing.

  1. Upon receipt of an application for authority to organize an association, including all supporting data, the commissioner shall promptly give written notice to at least one (1) of the incorporators of the proposed association designated to receive notices, and the incorporators shall cause the notice to be published in a newspaper of general circulation in the county where the home office of the proposed association is to be located. The notice shall state the name of the proposed association, where the incorporators propose to establish the home office of the association, and that the association shall have an opportunity to request a hearing on the application. If so requested, the hearing shall not be held within ten (10) days nor more than thirty (30) days after the publication of the notice. Any interested person may appear at the hearing in person or by agent or attorney, and orally or in writing show cause, upon any relevant ground, why the application should be approved or denied; provided, that any person objecting to the application shall reduce the substance of the objection to writing and file the same with the commissioner and give notice of the objection to the applicant at least five (5) days prior to the date of the hearing. The hearing shall be conducted in accordance with the Uniform Administrative Procedures Act, compiled in title 4, chapter 5.
  2. The commissioner shall not approve any application before affirmatively finding from all the information furnished with the application, the evidence produced at the hearing, and the commissioner's official records, that the prerequisites of this chapter have been complied with and that as to:
    1. Management.  The character, responsibility, and general fitness of the persons named in the application are such as to command confidence and warrant belief that the business of the proposed association will be honestly and efficiently conducted in accordance with the purposes of this chapter, and that the proposed association will have qualified full-time management;
    2. Public Need.  There is public need for the proposed association in the county stated in the application;
    3. Capital Structure.  The proposed capital structure meets the requirements of this chapter;
    4. Undue Harm.  The operation of the proposed association will not unduly harm any properly conducted federal or state association existing in the county or in a contiguous county in which the home office of the proposed association is to be located;
    5. Name.  The name of the proposed association is not the same as, or deceptively similar to, the name of any other association in the state, and this chapter has been complied with with respect to the use of a name by the proposed association; and
    6. Insurance.  A commitment for insurance of deposit accounts has been obtained by the proposed association that meets the requirements of this chapter.
  3. If the commissioner so finds, the commissioner shall state approval and findings in writing and shall promptly mail one (1) copy of the proposed application and the attached findings to at least one (1) of the incorporators by registered or certified mail. In addition, the incorporators shall cause notice of approval to be promptly published in a newspaper of general circulation in the county where the home office of the proposed association is to be located.

Acts 1978, ch. 708, § 1.16; T.C.A., § 45-1316.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-101.

Cross-References. Certified mail instead of registered mail, § 1-3-111.

45-3-203. Denial of application.

  1. The commissioner, if unable to make the findings as required by the preceding section, shall endorse upon each copy of the application the word “denied” with the date of the endorsement and attach a written statement of the grounds for the denial.
  2. One (1) copy of the proposed application and attached grounds of refusal shall be promptly mailed to at least one (1) of the incorporators by registered or certified mail.

Acts 1978, ch. 708, § 1.17; T.C.A., § 45-1317.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-101.

Cross-References. Certified mail instead of registered mail, § 1-3-111.

45-3-204. Subscription to capital and interim organization.

  1. If the commissioner approves the application for authority to organize, the incorporators shall perfect an interim organization by electing a chair, vice chair, and secretary, who shall act as the interim officers of the association until their successors are duly elected and qualified.
  2. The interim officers shall have the following, and only the following, duties during the period after approval of the application by the commissioner and before issuance of a certificate of authority as provided in this chapter:
    1. Subscriptions.  They shall secure subscriptions for payments of the required amount of capital and, as the case may be, the required amount for paid-in surplus or for the expense fund, in the form and manner approved by the commissioner; and
    2. Adoption of Charter and Bylaws.  They shall call a meeting of subscribers, who shall adopt a charter and bylaws for the proposed association and elect directors to serve upon the issuance of the certificates of authority until the first annual meeting of the association and until their successors are elected and qualified.

Acts 1978, ch. 708, § 1.18; T.C.A., § 45-1318.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-101.

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Building and Loan Associations, § 4.

45-3-205. Requirements for charter and bylaws.

The proposed charter and bylaws of the association adopted at the meeting of subscribers shall contain those provisions required of charters and bylaws under the Tennessee Business Corporation Act, compiled in title 48, chapters 11-27, as well as other information that the commissioner may, by regulation, prescribe, including, but not limited to, a statement in the charter that the association is organized under this chapter.

Acts 1978, ch. 708, § 1.19; T.C.A., § 45-1319; Acts 1994, ch. 551, § 19.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-101.

The Tennessee General Corporation Act, compiled in title 48, ch. 1, has been repealed effective January 1, 1988. New provisions concerning business corporations may be found in title 48, chs. 11-27. New provisions concerning nonprofit corporations may be found in title 48, chs. 51-68.

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Building and Loan Associations, § 4.

45-3-206. Certificate of authority.

  1. Filing of Required Information.  After approval by the commissioner of the application for authority to organize, the proposed association shall:
    1. File with the commissioner its charter and bylaws for approval; and
    2. File with the commissioner a statement in a form and with supporting data and proof that the commissioner may require, showing that the entire capital including paid-in surplus or expense fund has been fully paid in lawful money unconditionally and that the funds representing the capital and, as the case may be, paid-in surplus or expense fund less sums spent with the approval of the commissioner for organization are on hand, and that it has acquired a commitment for the insurance of deposit accounts as provided in this chapter.
  2. Issuance of Certificate of Authority.  If the commissioner finds that the proposed association has in good faith complied with all the requirements of law, the commissioner shall approve the issuance of a certificate of authority and shall within thirty (30) days after the filing of the statement specified in this section, issue, in triplicate, a certificate of authority to transact a general savings and loan business. The commissioner shall then transmit a copy of the charter and the certificate of authority, together with all required supporting documents, to the secretary of state for filing as provided under the Tennessee Business Corporation Act, compiled in title 48, chapters 11-27. Upon filing by the secretary of state, the existence of the association shall begin. Until that time, and except for the limited activities of incorporators and officers during the period of interim organization under this chapter, any proposed association shall not engage in any savings and loan business.
  3. Opportunity to Answer Objections.  If the commissioner does not approve the issuance of a certificate of authority, the commissioner shall state any objections in writing and give an opportunity to the proposed association to obviate the objections.

Acts 1978, ch. 708, § 1.20; T.C.A., § 45-1320; Acts 1994, ch. 551, § 19.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-101.

The Tennessee General Corporation Act, compiled in title 48, ch. 1, has been repealed effective January 1, 1988. New provisions concerning business corporations may be found in title 48, chs. 11-27. New provisions concerning nonprofit corporations may be found in title 48, chs. 51-68.

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Building and Loan Associations, § 4.

45-3-207. Completion of organization.

Upon filing by the secretary of state, the directors elected during the period of interim organization shall proceed to:

  1. Approve and adopt the charter and bylaws;
  2. Elect officers pursuant to the bylaws;
  3. Take action necessary to effect the insurance of the deposit accounts of the association; and
  4. Take other action that may be necessary to complete the organization.

Acts 1978, ch. 708, § 1.21; T.C.A., § 45-1321.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-101.

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Building and Loan Associations, § 4.

45-3-208. Forfeiture of certificate of authority and charter for nonuse.

  1. Any association that does not commence business within one (1) year after the date upon which its corporate existence begins, or, in the case of any association existing on July 1, 1978, within one (1) year after July 1, 1978, shall forfeit its corporate existence, unless the commissioner, before the expiration of the one-year period, approved in writing the extension of time within which it may commence business, upon a written application stating the reasons for the delay; provided, that the foregoing one-year provision shall not apply to existing associations that are engaged in litigation or that are in the process of having their insurance of accounts finalized.
  2. Upon forfeiture, the certificate of authority and the charter shall expire, and all action taken in connection with the incorporation thereof except the payment of the incorporation fee shall then be void.
  3. Amounts credited on deposit accounts, less expenditures authorized by law, shall be returned pro rata to the respective holders of the accounts.

Acts 1978, ch. 708, § 1.22; T.C.A., § 45-1322.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-101.

45-3-209. Corporate name — Exclusive use by associations.

  1. The name of every association shall include the words “savings and loan association” and “savings bank.” These words shall be preceded or followed by an appropriate descriptive word or words approved by the commissioner. An ordinal number may not be used as a single descriptive word preceding the words “savings and loan association” unless the words are followed by the name of the town, city, or county in which the association has its home office.
  2. No certificate of authority of a proposed association having the same name as any other financial institution authorized to do business in this state under this chapter or a name so nearly resembling it as to be calculated to deceive shall be issued by the commissioner, except to an association formed by the reincorporation, reorganization, merger, consolidation, or conversion of other associations, or upon the sale of the property or franchise of an association.
  3. Except as otherwise provided by § 45-5-203, no person, either domestic or foreign, unless authorized to do business in this state under this chapter, shall do business under any name or title that indicates or reasonably implies that the business is of the character or kind of business carried on or transacted by an association or that is calculated to lead any person to believe that the business is that of an association.
  4. Upon application by the commissioner or by any association, a court of competent jurisdiction may issue an injunction to restrain an entity violating or continuing to violate any of the provisions of subsections (a)-(c).

Acts 1978, ch. 708, § 1.23; T.C.A., § 45-1323; Acts 1985, ch. 330, § 1.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-101.

Part 3
Branch or Satellite Offices

45-3-301. Location — Effect of de novo branches.

  1. Any state association, as defined in § 45-3-1402, may establish and maintain branch or satellite offices or other facilities for the conduct of its business at any location in any county in this state.
  2. No branch of an out-of-state savings and loan association or savings bank, or savings institution, may be established through the establishment of a de novo branch, unless the laws of the home state of the out-of-state savings institution permit Tennessee savings institutions to establish and maintain branches in that state through the establishment of de novo branches under substantially the same terms and conditions as set forth in this title.
  3. For purposes of this section, “de novo branch” means a branch of a savings institution that:
    1. Is originally established by the savings institution as a branch; and
    2. Does not become a branch of the savings institution as a result of:
      1. The acquisition by the savings institution of an insured depository institution or a branch of an insured depository institution; or
      2. The conversion, merger, or consolidation of the institution or branch.

Acts 1990, ch. 624, § 1; 2001, ch. 140, § 3.

Compiler's Notes. Former part 3, §§ 45-3-30145-3-308 (Acts 1978, ch. 708, §§ 4.01-4.08; T.C.A., §§ 45-1601 — 45-1608), concerning branch offices, was repealed by Acts 1990, ch. 624, § 1.

Acts 2001, ch. 140, § 4 provided that should any provision of that act or the application thereof to any person or circumstance be held invalid for any reason by a final nonappealable order of any Tennessee or federal court of competent jurisdiction, then such court shall declare the entire act to be null and void in its entirety and shall give no further force or effect to it; provided, however, that any transaction that has been finally consummated in good faith pursuant to that act prior to a determination of invalidity, and which is not the subject of dispute or litigation, shall be unaffected by such determination.

Cross-References. Negotiable instruments, title 47, ch. 3.

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Banks and Banking, § 8.

Decisions Under Prior Law

1. Federally Chartered Institutions.

Federally chartered savings and loans have engaged in statewide branching in Tennessee because, under the “wild card” statute, they may do as state chartered savings banks may do. Permitting a national bank to branch statewide merely creates a level playing field for nationally chartered banks and further enhances competition in the financial industry. Volunteer State Bank v. National Bank of Commerce, 684 F. Supp. 964, 1988 U.S. Dist. LEXIS 4286 (M.D. Tenn. 1988).

45-3-302. Approval by commissioner.

  1. No branch or satellite office, or other facility at which deposits may be accepted shall be established until approved by the commissioner.
  2. In the event the application to open a branch or satellite office is disapproved and the applicants feel aggrieved, they may have a review by certiorari as provided in title 27, chapter 9.
  3. Should the commissioner fail to approve or disapprove an application to open a branch or satellite office within ninety (90) calendar days after the submission of the application, the application shall be deemed to have been approved by the commissioner.

Acts 1990, ch. 624, § 1.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-301.

45-3-303. Rules and regulations.

With respect to the matters contained in this part, the commissioner has full power and authority to promulgate rules and regulations in accordance with applicable law.

Acts 1990, ch. 624, § 1.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-301.

Part 4
General Powers and Duties

45-3-401. Required liquidity.

No association shall invest in any security, other than in liquid assets, or in any real estate or other loan at any time when its liquid assets are less than a minimum percentage of its deposit liability, which percentage shall be set by the commissioner.

Acts 1978, ch. 708, § 2.22; T.C.A., § 45-1422.

Compiler's Notes. For transfer of functions under this chapter from the department of commerce and insurance to the department of financial institutions, see Executive order No. 38 (February 11, 1983).

Cross-References. Negotiable instruments, title 47, ch. 3.

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Building and Loan Associations, § 8.

45-3-402. Regulation of loans and investments.

The commissioner shall, from time to time, promulgate rules and regulations in respect to all loans and investments authorized under this chapter that may be reasonably necessary to assure that the loans and investments are in keeping with sound lending practices and promote the purposes of this chapter.

Acts 1978, ch. 708, § 2.29; T.C.A., § 45-1429.

45-3-403. Right to act to avoid loss.

Nothing in this chapter or in the laws of this state shall be construed as denying to an association the right to invest its funds, operate its business, manage or deal in property, or take any other action over whatever period of time as may reasonably be necessary to avoid loss on a loan or investment theretofore made or an obligation created in good faith.

Acts 1978, ch. 708, § 2.32; T.C.A., § 45-1432.

45-3-404. Computation of net income.

Every association shall close its books on the last business day of its fiscal year, and at other times that its charter or bylaws provide, or as the commissioner requires, for the purpose of determining the gross income of the association for its fiscal year or for the period since the date of the last closing of its books, and from which shall be deducted the expenses of operating the association for that period, the balance remaining being the net income for the period.

Acts 1978, ch. 708, § 2.33; T.C.A., § 45-1433.

45-3-405. Reserves — Liquid assets.

Every association shall set up and maintain reserves for the purpose of absorbing losses and shall maintain such portion of its assets in cash and other liquid assets as required by the commissioner. If an association has obtained insurance of accounts by the federal savings and loan insurance corporation, or by any other insurer approved by the commissioner, any portion of the loss reserves of the association may be considered as constituting a portion of the insurance reserves required by the insurer and may be set up as an insurance reserve account on the books of the association.

Acts 1978, ch. 708, § 2.34; T.C.A., § 45-1434.

Compiler's Notes. The federal savings and loan insurance corporation, referred to in this section, was abolished, effective February 1, 1992. See the Historical and Statutory Notes under 12 U.S.C. § 1437.

45-3-406. Transfers to loss reserves.

  1. If, at the date of any closing of its books, the loss reserves of an association equal an aggregate amount of a percentage as the commissioner may prescribe, then an amount necessary to increase its loss reserves to the required amount shall be transferred from the net income of the association to its loss reserves.
  2. In the event that any credit to the loss reserves of an association is made following July 1, 1978, in excess of the minimum percentage required herein, the dollar amount of the excess may be carried over as a credit toward the minimum requirement for any subsequent accounting period.

Acts 1978, ch. 708, § 2.35; T.C.A., § 45-1435.

45-3-407. Dividends on capital stock.

In the case of a capital stock association, the balance of net income of the association, if any, after providing for all expenses of operation, allocation to loss reserves, and payment of interest, may be credited to a retained earnings or surplus account, from which the board of directors may, at its discretion, and at such times as it may determine, declare, and pay dividends in cash or additional stock to the holders of record of the stock outstanding at the date the dividends are declared.

Acts 1978, ch. 708, § 2.36; T.C.A., § 45-1436.

Part 5
Accounts

45-3-501. Deposit liability.

  1. The deposit liability of an association shall consist only of the aggregate amount of deposit accounts of its depositors, plus interest credited to the accounts, less redemption and withdrawal payments.
  2. Except as limited by the board of directors from time to time, a depositor may make additions to the depositor's deposit accounts in the amounts and at the times that the depositor may elect.
  3. Deposit accounts shall be open for cash.
  4. Interest shall be declared in accordance with this chapter.
  5. No preference between depositors shall be created with respect to the distribution of assets upon voluntary or involuntary liquidation, dissolution, or winding up of an association.

Acts 1978, ch. 708, § 2.01; T.C.A., § 45-1401.

Compiler's Notes. Former §§ 45-1401 — 45-1411 (Acts 1875, ch. 142, § 14; 1919, ch. 136, §§ 1, 2, 5-7, 10, 13; Shan., § 2139; Shan. Supp., §§ 2179a1, 2179a2, 2179a5-2179a7, 2179a10, 2179a12; Acts 1929, ch. 117, §§ 2, 4; Code 1932, §§ 3900-3902, 3905, 3906, 3908, 3913, 3916, 3918; Acts 1933, ch. 19, §§ 5, 7, 8; 1935, ch. 137, § 1; 1935, ch. 152, §§ 1, 2; 1937, ch. 77, § 1; C. Supp. 1950, §§ 3898.13-3898.22, 3898.30 (Williams, §§ 3898.5, 3898.7, 3898.8, 3900, 3902, 3905.1, 3905.2, 3906)), concerning loans and investments by building and loan associations, were repealed by Acts 1974, ch. 698, § 5 and replaced by Acts 1974, ch. 698, §§ 2, 6-16, codified in §§ 45-1401 — 45-1412, which in turn were repealed by Acts 1978, ch. 708, § 6.01 and the present material substituted therefor.

For transfer of functions under this chapter from the department of commerce and insurance to the department of financial institutions, see Executive Order No. 38 (February 11, 1983).

Cross-References. Negotiable instruments, title 47, ch. 3.

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Building and Loan Associations, § 11.

45-3-502. Authorization of deposit accounts.

  1. Acceptance of Deposit Accounts.  An association may accept deposit accounts of any type and in any form not prohibited by this chapter or by other applicable law or by rules and regulations of the commissioner. An association shall not accept accounts other than deposit accounts; provided, that in the event of a conversion of a federal association to a state association, savings accounts in the federal association, existing at the time it so converts shall remain savings accounts unless and until they are exchanged for deposit accounts. Exchanges of savings accounts shall be governed by rules and regulations promulgated by the commissioner.
  2. Priority of Deposit Accounts.  In any situation in which the priority of deposit accounts is to be determined or is in controversy, deposit accounts shall be debts of the association having the same priority as the claims of general creditors of the association not having priority, other than any priority arising or resulting from consensual, or, if so determined by a court, equitable, subordination, over other general creditors of the association.

Acts 1978, ch. 708, § 2.02; T.C.A., § 45-1402.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-501.

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Building and Loan Associations, § 11.

45-3-503. Nature of deposit accounts.

  1. Ownership.  Deposit accounts may be opened by any person and held solely and absolutely in the person's own right, or jointly by, or in trust or other fiduciary capacity for, any person or persons, including, but not limited to, an adult or minor individual, male, female, single or married, partnership, association, fiduciary, corporation, political subdivision or any governmental, public or quasi-public entity specifically referred to in § 9-1-107.
  2. Transfer of Accounts.  Deposit accounts shall be represented only by the account of each depositor on the books of the association, and the accounts or any interest in the accounts shall be transferable only on the books of the association upon proper application by the transferor or transferee and upon acceptance by the association of the transferee as a depositor upon terms approved by the board of directors. The association may treat the holder of record of a deposit account as the owner of the account for all purposes without being affected by any notice to the contrary unless the association has acknowledged, in writing, notice of a pledge or other transfer of the deposit account.
  3. Deposit Account Contract.  Subject to the prior approval by the commissioner of the form of each type of deposit account contract, each depositor shall execute a deposit account contract setting forth any special terms and provisions applicable to the deposit account and the ownership of the account and the conditions upon which withdrawals may be made. The contracts shall be held by the association as part of its records pertaining to the account, and a copy of the contract shall be furnished to the depositor.
  4. Evidence of Ownership.  An association shall issue evidence of accounts that the commissioner may authorize.
  5. Inducements.  For the opening or increasing of any deposit account, no association shall, directly or indirectly, give, sell, dispose of, or otherwise advertise or permit the giving, selling, or disposition of, for any one (1) opening or increase, anything having a cost or value in excess of amounts permitted with respect to federal associations by applicable federal law and regulation, but inducement shall be allowed to the extent permitted to federal associations under the applicable federal law and regulation.

Acts 1978, ch. 708, § 2.03; T.C.A., § 45-1403.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-501.

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Building and Loan Associations, § 11.

45-3-504. Prohibited transactions.

Any other provision of the law to the contrary notwithstanding, no association shall have the authority to receive demand deposit accounts or offer checking accounts, negotiable orders of withdrawal, or share accounts until federal associations in Tennessee are authorized to do so by federal law or regulation.

Acts 1978, ch. 708, § 2.04; T.C.A., § 45-1404.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-501.

45-3-505. Contracts for savings programs.

  1. Payroll Savings Programs.  An association may contract with any employer with respect to the solicitations, collection, and receipt of savings by payroll deduction to be credited to a designated account or accounts of the employer's employee or employees who voluntarily may participate.
  2. Other Savings Programs.  Subject to rules and regulations of the commissioner, an association may contract with any other person or persons, including, but not limited to, educational or charitable institutions, for the participation by the association in any savings plan with the person or persons.
  3. Federally Approved Savings Programs.  Any association insured by the federal savings and loan insurance corporation may contract with or enter into any savings program approved by the federal savings and loan insurance corporation.

Acts 1978, ch. 708, § 2.05; T.C.A., § 45-1405.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-501.

The federal savings and loan insurance corporation, referred to in this section, was abolished, effective February 1, 1992. See the Historical and Statutory Notes under 12 U.S.C. § 1437.

45-3-506. Power of attorney on accounts.

  1. Any association may continue to recognize the authority of a power of attorney authorizing in writing as attorney-in-fact to operate, in whole or in part, the account of a depositor, unless and until it receives actual notice of the revocation of authority.
  2. Actual notice of the death, adjudication of incompetency, or adjudication of bankruptcy of the depositor shall constitute actual notice of revocation of the authority of the attorney-in-fact, except where the Uniform Durable Power of Attorney Act, compiled in title 34, chapter 6, is applicable.
  3. No association shall be liable for damages, penalty, or tax by reason of any payment made pursuant to this section.

Acts 1978, ch. 708, § 2.06; T.C.A., § 45-1406; Acts 1983, ch. 299, § 10.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-501.

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Building and Loan Associations, § 11.

45-3-507. Accounts of minors.

  1. Any association may accept deposit accounts from any minor as the sole and absolute owner of the account, and receive payments on the accounts by or for the owner, and pay withdrawals, accept pledges to the association, and act in any other manner with respect to the accounts on the order of the minor.
  2. Any payment or delivery of rights to any minor, or a receipt of acquittance signed by a minor who holds an account, shall be a valid and sufficient release and discharge of the association for any payment so made or delivery of rights to the minor. The receipt of acquittance signed by a minor who holds an account shall be a valid and sufficient release and discharge of the association for any payment so made or delivery of rights to the minor. The receipt, acquittance, pledge, or other action required by the association to be taken by a minor shall be binding upon the minor with like effect as if the minor were of full age and legal capacity.
  3. The parent or guardian of the minor shall not, in the person's capacity as parent or guardian, have the power to attach or in any manner to transfer any account issued to or in the name of the minor; provided, that in the event of the death of the minor, the receipt or acquittance of either parent or guardian of the minor shall be a valid and sufficient discharge of the association for any sum or sums not exceeding in the aggregate one thousand dollars ($1,000), unless the minor has given written notice not to accept the signature of the parent or guardian.

Acts 1978, ch. 708, § 2.07; T.C.A, § 45-1407.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-501.

45-3-508. Accounts in two or more names.

Deposit accounts and certificates of deposit maintained in any association in the names of two (2) or more persons shall be governed by § 45-2-703.

Acts 1978, ch. 708, § 2.08; T.C.A., § 45-1408; Acts 1988, ch. 926, § 7.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-501.

Textbooks. Pritchard on Wills and Administration of Estates (4th ed., Phillips and Robinson), § 440.

Tennessee Jurisprudence, 5 Tenn. Juris., Building and Loan Associations, § 11.

NOTES TO DECISIONS

1. Beneficial Interests.

Although legal title passed to the survivor, the court could impose a resulting trust in favor of a third person; equity infers or assumes that the beneficial interest did not go with the legal title. Wardell v. Dailey, 674 S.W.2d 293, 1983 Tenn. App. LEXIS 662 (Tenn. Ct. App. 1983).

2. Joint Account with Right of Survivorship.

Absent clear and convincing evidence of contrary intent expressed at the time of its execution, a bank signature card containing an agreement in clear and unambiguous language that a joint account with rights of survivorship is intended, creates a joint tenancy enforceable according to its terms; and upon the death of one of the joint tenants, the proceeds pass to the survivor. In re Estate of Roark, 829 S.W.2d 688, 1991 Tenn. App. LEXIS 867 (Tenn. Ct. App. 1991), appeal denied, — S.W.2d —, 1992 Tenn. LEXIS 228 (Tenn. Mar. 9, 1992).

45-3-509. Pledge to association of an account in joint tenancy.

The pledge or hypothecation to any association of all or part of an account in joint tenancy signed by any tenant or tenants whether minor or adult, upon whose signature or signatures withdrawals may be made from the account, shall, unless the terms of the account provide specifically to the contrary, be a valid pledge and transfer to the association of that part of the account pledged or hypothecated, and shall not operate to sever or terminate the joint and survivorship ownership of all or any part of the account.

Acts 1978, ch. 708, § 2.09; T.C.A., § 45-1409.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-501.

45-3-510. Incompetency of a joint tenant.

  1. The adjudication of incompetency of any one (1) or more of the joint tenants shall not operate to sever or terminate the joint tenancy ownership of all or any part of the account, and the account may be withdrawn or pledged by any one (1) or more of the joint owners in the same manner as though the adjudication of incompetency had not been made, except that any withdrawal or pledge on behalf of the incompetent joint owner shall be by guardian or conservator.
  2. Payment of any or all of the moneys in the account shall discharge the association from liability with respect to the moneys so paid.

Acts 1978, ch. 708, § 2.10; T.C.A., § 45-1410.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-501.

45-3-511. Accounts of administrators, executors, guardians, custodians, trustees, and other fiduciaries.

  1. Any association may accept accounts in the name of any administrator, executor, custodian, conservator, guardian, trustee, or other fiduciary for a named beneficiary or beneficiaries.
    1. A fiduciary shall have power to vote as a member in a mutual association as if the membership were held absolutely, and shall have power to open and to make additions to, and to withdraw the account in whole or in part from, any association governed by this chapter.
    2. The withdrawal value of the account, and interest on the account, or other rights relating to the account may be paid or delivered, in whole or in part, to the fiduciary without regard to any notice to the contrary as long the fiduciary is living.
    3. The payment or delivery to the fiduciary to whom the payment or the delivery of right is made shall be a valid and sufficient release and discharge of an association for the payment or delivery so made.
  2. Whenever a person holding an account in a fiduciary capacity dies and no written or actual notice of the revocation or termination of the fiduciary relationship has been given to an association, and the association has no written or actual notice of any other disposition of the beneficial estate, either to a successor fiduciary or otherwise, the withdrawal value of the account, and interest on the account, or other rights relating to the account may, at the option of an association, be paid or delivered, in whole or in part, to the beneficiary or beneficiaries.
  3. Whenever an account is opened by any person, describing the person in opening the account as trustee for another and no other or further notice of the existence and terms of a legal and valid trust than the description has been given in writing and to the association, in the event of the death of the person so described as trustee, the withdrawal value of the account or any part of the account, together with the interest on the account, may be paid to the person for whom the account was thus described to have been opened.
  4. The payment or delivery to the beneficiary, beneficiaries, or designated person, or a receipt or acquittance signed by the beneficiary, beneficiaries, or designated person for payment or delivery shall be a valid and sufficient release and discharge of an association for the payment or delivery so made.
  5. No association paying the fiduciary, beneficiary, or designated person in accordance with this section shall be liable for any estate, inheritance, or succession taxes that may be due this state.

Acts 1978, ch. 708, § 2.11; T.C.A., § 45-1411.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-501.

45-3-512. Accounts of incompetents.

When an account is held in any association by a person who becomes incompetent and an adjudication of incompetency has been made by a court of competent jurisdiction, the association may pay or deliver the withdrawal value of the account and any interest that may have accrued on the account to the guardian or conservator for the person upon proof of the appointment and qualification of the guardian or conservator; provided, that if the association has received no written notice and is not on actual notice that the depositor has been adjudicated incompetent, it may pay or deliver the funds to the depositor in accordance with the provisions of the account contract, and the receipt or acquittance of the depositor shall be a valid and sufficient release and discharge of the association for the payment or delivery so made.

Acts 1978, ch. 708, § 2.12; T.C.A., § 45-1412.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-501.

45-3-513. Accounts of deceased nonresidents.

  1. When an account is held in any association by a person residing in another state or country, in the event of the death of the depositor, the account, together with additions to the account, or any part of the account, shall be exempt from any taxation otherwise imposed by this state and may be paid to the administrator or executor appointed in the state or country where the holder resided at the time of death; provided, that the administrator or executor has furnished the association with:
    1. Authenticated copies of the letters of the administrator or executor and of the order of the court that issued the letters to the person authorizing the person to collect, receive, and remove the personal estate; and
    2. An affidavit by the administrator or executor that, to the administrator's or executor's knowledge, no letters then are outstanding in this state and no petition for letters by an heir, legatee, devisee, or creditor of the decedent is pending on the estate in this state, and that there are no creditors of the estate in this state.
  2. Upon payment or delivery to the representative after receipt of the affidavit and authenticated copies, the association is released and discharged to the same extent as if the payment or delivery had been made to a legally qualified resident executor or administrator and is not required to see to the application or disposition of the property.
  3. No action at law or in equity shall be maintained against the association for payment made in accordance with this section.

Acts 1978, ch. 708, § 2.13; T.C.A., § 45-1413.

Compiler's Notes. Former § 45-1413 now appears in § 45-3-705.

45-3-514. Payment when no executor or administrator qualifies.

    1. Notwithstanding § 30-2-317, where no executor or administrator of a deceased depositor has qualified and given notice of the person's qualification to the association, it may in its discretion and at any time after thirty (30) days from the death of the depositor pay out of all accounts or contents of safe deposit boxes maintained with it by the depositor in an individual capacity all sums that do not exceed fifteen thousand dollars ($15,000)  in the aggregate:
      1. To the executor named in any will known to the association; or
      2. In the absence of knowledge of any purported will naming a surviving executor to:
        1. A creditor for expenses of the funeral;
        2. A creditor for the expenses of the last illness;
        3. The surviving spouse; and
        4. To the next of kin.
    2. In the case of conflicting claims, the order of priority shall be that set out in subdivision (a)(1)(B).
  1. The receipt of any guardian, administrator or executor, duly appointed and qualified by the courts of this state or any other state, acknowledging the payment or transfer of funds, standing in the name of the person whose estate the fiduciary represents, in the form of deposits in associations shall be good and sufficient acquittance for the payment or transfer and shall constitute a valid defense in favor of the associations against the demands or claims of all parties.
  2. No association shall be liable for damages, penalty or tax by reason of any payment made pursuant to this section.

Acts 1978, ch. 708, § 2.14; T.C.A., § 45-1414; Acts 1983, ch. 191, § 3; 1988, ch. 926, § 8; 1995, ch. 177, § 13; 1997, ch. 426, § 22; 2016, ch. 804, § 6.

Compiler's Notes. Former § 45-1414 now appears in § 45-3-706.

Acts 1997, ch. 426, § 26 provided that the amendments to this section by that act shall apply to all estates of decedents dying on or after January 1, 1998 and to all wills, other documents and proceedings related thereto.

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Building and Loan Associations, §§ 11, 12.

45-3-515. Account payable on death.

An association may accept deposits made by any person in trust for another or may contract for deposits that may be made payable on the death of the last surviving owner under the same terms and conditions provided by § 45-2-704.

Acts 1978, ch. 708, § 2.15; T.C.A., § 45-1415; Acts 1993, ch. 39, § 10.

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Building and Loan Associations, § 12.

45-3-516. Accounts as legal investments and as security.

  1. Legal Investments.
    1. In addition to investments in savings and loan associations as authorized by other law, administrators, executors, custodians, conservators, guardians, trustees, and other fiduciaries of every kind and nature, insurance companies, business and manufacturing companies, banks, trust companies, savings and loan associations, credit unions, and other types of similar financial institutions, charitable, educational, eleemosynary corporations, funds and organizations, cemeteries, perpetual care funds, state and local governmental agencies and municipal and other public corporations and bodies, and public officials, including, but not limited to, all officials, boards, agencies, and entities described in §§ 9-1-107 and 35-3-117, and all other legal entities are specifically authorized and empowered to invest or deposit funds held by them, without any order of any court, in accounts of associations covered by this chapter and in accounts of federal associations organized under the laws of the United States and under federal supervision, and the investments shall be deemed and held to be legal investments for the funds.
    2. With respect to investments by custodians, associations are deemed to be “banks” within the meaning of that term as used in § 35-7-102 [repealed].
    3. The commissioner may by regulation provide that accounts in associations shall be legal investments for any persons, firms, corporations, or entities not herein specifically referred to.
  2. Security.  Whenever, under the laws of this state or otherwise, a deposit of securities is required for any purpose, the accounts made legal investments by this section shall be acceptable for deposits, and whenever under the laws of this state or otherwise, a bond is required with security, the bond may be furnished, and the accounts made legal investments by this section in the amount of the bond, when deposited therewith, shall be acceptable as security for the bond without other security.
  3. Provisions Supplemental.  This section is supplemental to any and all other laws relating to and declaring what shall be legal investments for the persons, fiduciaries, corporations, organizations and officials referred to in this section, and the laws relating to the deposit of securities and the making and filing of bonds for any purpose.

Acts 1978, ch. 708, § 2.16; T.C.A., § 45-1416.

Compiler's Notes. Former § 35-7-102, referred to in this section, was repealed by Acts 1992, ch. 664, § 2.

45-3-517. Lien on accounts.

  1. Any association shall have a lien, without further agreement or pledge, upon all accounts owned by any depositor to whom or on whose behalf the association has made an advance of money by loan or otherwise.
    1. Upon the default in the repayment or satisfaction thereof, the association may, after giving ten (10) days' written notice to the depositor, cancel on its books all or any part of the accounts owned by the depositor and apply the value of the accounts in payment on account of the obligation. After the ten-day notice is given, the depositor may withdraw only the funds that are in excess of the amount of the lien.
    2. The depositor shall have thirty (30) days after receipt of the notice within which to object in writing to the validity of the lien. If the depositor objects within that period, the association must, within sixty (60) days after the date of receipt by the association of the objection, file a legal action to enforce the lien and shall be entitled to collect the reasonable expense of the action, including attorney fees.
  2. An association may by written instrument waive its lien in whole or in part on any account.
  3. Any association may accept a pledge of an account or accounts of the association owned by a depositor other than the borrower as additional security for any loan secured by an account or by real estate, or by both.

Acts 1978, ch. 708, § 2.17; T.C.A., § 45-1417; Acts 1988, ch. 581, § 1.

45-3-518. Interest on accounts.

  1. An association may pay interest on its deposit accounts from sources available for payment of interest at the rate or rates and at the times and for the time that is determined by resolution of its board of directors. Interest shall be declared on the withdrawal value of each account at the beginning of the accounting period, plus additions to the account made during the period, less amounts previously withdrawn and noticed for withdrawal, which for interest purposes shall be deducted from the latest previous additions to the account, computed at the declared rate for the time the funds have been invested, determined as next provided. The date of investment shall be the date of actual receipt by the association of an account or an addition to an account, except that if the board of directors shall so determine, accounts in one (1) or more classifications or additions thereto received by the association on or before a date not later than the fifteenth day of the month, unless the day determined is not a business day, shall receive interest as if invested on the first day of the month in which the payments were received, and the board also may determine that payments received subsequent to the determination date shall either:
    1. Receive interest as if invested on the first day of the next succeeding month; or
    2. Receive interest from the date of actual receipt by the association.
  2. Notwithstanding this section, the board of directors, by resolution, may determine that interest shall not be paid on any account that has a withdrawal value of a specified amount less than ten dollars ($10.00).
  3. The directors shall determine by resolution the method of calculating the amount of any interest on accounts as herein provided, and the time or times when interest is to be declared, paid or credited.
  4. Notwithstanding any of the foregoing provisions of this section, the commissioner is empowered to promulgate rules and regulations with respect to the payment of interest on deposit accounts, including, but not limited to, rules and regulations concerning the types of deposit accounts that may be offered by associations to depositors and the maximum rates of interest that shall be paid to depositors on each type of deposit account.

Acts 1978, ch. 708, § 2.18; T.C.A., § 45-1418.

45-3-519. Withdrawal.

  1. Except for accounts that provide for a specified contractual time or notice before withdrawal or are subject to a pledge, a depositor may at any time present a written order for withdrawal of all or any part of the depositor's account.
  2. Every association shall either pay, or shall number, date, and file in the order of actual receipt every withdrawal order.
  3. Withdrawals shall be made in the order of actual receipt of orders except as otherwise provided by this chapter or by regulation of the commissioner.
  4. Upon order, an association shall pay the amount of the withdrawal order or the withdrawal value of the account; provided, that the association shall not be required to honor any withdrawal order that exceeds the withdrawal value of the account.
  5. The commissioner shall by regulation establish the rules and procedures to apply in the event the association is unable to pay immediately all orders for withdrawal as made, including a rotation plan or any other plan for equitable payment of withdrawals, the payment in full of accounts of less than a specified amount and the application of receipts to withdrawals.
  6. The commissioner may prescribe the circumstances and conditions under which the failure of the association to pay withdrawals as applied for shall be deemed the conduct of its business in an unsound or imprudent manner so as to empower the commissioner to take possession of an association or to take other remedial action as provided by this chapter.

Acts 1978, ch. 708, § 2.19; T.C.A., § 45-1419.

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Building and Loan Associations, § 12.

45-3-520. Redemption of accounts.

  1. At any time funds are on hand for the purpose, the association shall have the right to redeem by lot or otherwise, as the board of directors may determine, all or any part of any of its deposit accounts on an interest date by giving thirty (30) days' notice by registered mail addressed to each affected depositor at the depositor's last address as recorded on the books of the association.
    1. No association shall redeem any of its accounts when the association is in an impaired condition or when it has any delinquent applications for withdrawal on file that have not been paid in full.
    2. The redemption price of an account shall be the withdrawal value of the account redeemed, or such greater price as determined by the board of directors.
    3. If the  notice of redemption has been duly given, and if on or before the redemption date the funds necessary for the redemption has been set aside so as to be and continue to be available therefor, interest upon the accounts called for redemption shall cease to accrue from and after the interest date specified as the redemption date, and all rights with respect to the accounts shall immediately, after the redemption date, terminate, except only any right of depositors of record to receive the redemption price without additional accrual of interest after the redemption date.
  2. All account books or other evidence of deposit accounts that have been validly called for redemption must be tendered for payment within seven (7) years from the date of redemption designated in the redemption notice; otherwise, they shall be cancelled, the funds set aside for the accounts shall become the property of the association, and all claims of the former depositors against the association shall be barred forever.

Acts 1978, ch. 708, § 2.20; T.C.A., § 45-1420.

Cross-References. Certified mail instead of registered mail, § 1-3-111.

45-3-521. Statute of limitations on accounts.

  1. All claims shall be barred in this state on any inactive account; provided, that at least sixty (60) days before the claim becomes barred, the association shall mail by registered or certified mail a notice of the imminent barring of all claims to the depositor at the depositor's last known address.
    1. For the purposes of this section, “inactive account” means an account with respect to which there has been an absence for at least seven (7) years of:
      1. Additions to the account other than creditings of interest;
      2. Withdrawals from the account; and
      3. Written communication from the depositor.
    2. In the case of an account that provides for a specified contractual time, the seven (7) years shall commence on the maturity date of the account.

Acts 1978, ch. 708, § 2.21; T.C.A., § 45-1421.

Cross-References. Certified mail instead of registered mail, § 1-3-111.

Uniform Unclaimed Property Act, property held by banking or financial organizations, § 66-29-104.

45-3-522. Final adjustment of statements of account.

    1. When a statement of account has been rendered by an association to a depositor or has been mailed to the depositor's last known address, showing the condition of the depositor's account, the account shall, after the period of six (6) years from the date of the rendition of the statement, in the event no objection to the statement in writing has been theretofore made by the depositor or suit brought to correct same, be deemed finally adjusted and settled and its correctness conclusively presumed, and the depositor shall thereafter be barred from questioning the account for any cause.
    2. Associations shall accordingly not be required to preserve or keep their records or files relating thereto for a longer period than six (6) years.
  1. Nothing in this section shall be construed to relieve the depositor from the duty imposed by law of exercising due diligence in the examination of the account and vouchers, if any, accompanying the statement, when rendered by the association and of immediate notification to the association upon discovery of any error in the statement, nor from the legal consequences of neglect of that duty.
  2. Nothing herein shall be construed as exempting associations from compliance with title 66, chapter 29 to the extent applicable.

Acts 1983, ch. 191, § 1.

Law Reviews.

Selected Tennessee Legislation of 1983 (N. L. Resener, J. A. Whitson, K. J. Miller), 50 Tenn. L. Rev. 785 (1983).

45-3-523. Association deposits and collections.

To the extent that an association accepts demand deposit accounts, or offers checking accounts or negotiable orders of withdrawal, the Uniform Commercial Code setting out the relationship between a payor bank and its customers, compiled in title 47, chapter 4, part 4, shall apply to the association, and all references to “banks” are deemed references to “associations.”

Acts 1983, ch. 191, § 2.

Law Reviews.

Selected Tennessee Legislation of 1983 (N. L. Resener, J. A. Whitson, K. J. Miller), 50 Tenn. L. Rev. 785 (1983).

45-3-524. Payment and negotiation of check when no estate has been opened or the estate has been closed.

    1. Notwithstanding § 30-2-317, where no executor or administrator of a decedent has qualified and given notice of the person's qualifications to the savings institution, or where the qualified executor or administrator of a decedent has been discharged and a check or checks made payable to the decedent or the decedent's estate is presented to the savings institution for payment or collection, the savings institution may, in its discretion, and at any time after ninety (90) days from the death of the deceased, negotiate or send for collection and pay out the proceeds of one or more checks made payable to the decedent or the decedent's estate, whether written or electronic, all sums that do not exceed ten thousand dollars ($10,000) in the aggregate:
      1. To the executor named in any will known to the savings institution whether probated or not;
      2. To any personal representative appointed by a court whether active or discharged; or
      3. In the absence of knowledge of a purported will naming a surviving executor or an administrator to the:
        1. Surviving spouse; or
        2. Next of kin.
    2. In the case of conflicting claims, the order of priority shall be that set out in subdivision (a)(1).
  1. The receipt of any guardian, administrator or executor, duly appointed or qualified by the courts of this state, or any other state, or of any spouse or next of kin acknowledging the negotiation, payment or transfer of funds of a check, standing in the name of the person whose estate the fiduciary represents, shall be a good and sufficient acquittance for payment or transfer and shall constitute a valid defense in favor of the savings institution against the demands or claims of all parties.
  2. The negotiation or payment of a check under this section without an endorsement of the payee or with the endorsement of a person authorized by this section to negotiate the check shall not be a violation of or give rise to any claim under title 47, chapter 3 or 4.
  3. No savings institution shall be liable for damages, penalty or tax by reason of any payment made pursuant to this section.

Acts 2014, ch. 597, § 3; 2016, ch. 804, §§ 7-9.

45-3-525. Acknowledgement or affidavit — Guaranty.

  1. A savings institution shall require any persons seeking to cash checks payable to a decedent as provided in § 45-2-711 to deliver to the savings institution an affidavit, given under the penalty of perjury, in a form acceptable to the savings institution or in a form that, at the minimum, contains the following:
    1. The name of the decedent;
    2. The decedent's date of death;
    3. The amount and payor of any checks, if the funds are from checks or electronic payments;
    4. The identity of the creditor or creditors to whom the funds are to be paid, if the funds are to be paid directly to a creditor of the decedent or the decedent's estate; and
    5. If the funds are to be paid other than to a creditor of the decedent or the decedent's estate, the affiant shall:
      1. Identify the decedent's surviving spouse and heirs at law, and provide their residence addresses; and
      2. Affirmatively state that:
        1. There are no unpaid creditors of the decedent;
        2. There are no unpaid income, gift, estate, inheritance or other transfer taxes owed by the decedent or the estate of the decedent; and
        3. The funds distributed to the affiant will be distributed by the affiant as provided in any will or testamentary document or in appropriate shares to the decedent's heirs at law.
  2. A savings institution may, in its discretion, require any persons seeking to collect monies from a deceased depositor's account or accounts, as provided in § 45-2-708, to deliver to the savings institution an affidavit, given under penalty of perjury in a form acceptable to the savings institution as provided in subsection (a).
  3. A savings institution may require any person who obtains funds from a deposit account pursuant to § 45-2-708 or to negotiate checks pursuant to § 45-2-711 to provide an indemnity and guarantee to the savings institution in the amount of the funds obtained.

Acts 2014, ch. 597, § 3.

Part 6
Investments

45-3-601. Investment in securities.

Every association has the power to invest in securities as set forth in this section.

  1. No Percent-of-Asset Limitation.  The following investments shall not be subject to a percent-of-assets limitation:
    1. Obligations of, or obligations that are fully guaranteed as to principal and interest by, the United States or any state;
    2. Stock or obligations of any federal home loan bank;
    3. Stock or obligations of the federal savings and loan insurance corporation;
    4. Obligations of the Federal National Mortgage Association, the Government National Mortgage Association, the Federal Home Loan Mortgage Corporation, or any successor or successors thereto;
    5. Obligations of any agencies or instrumentalities created pursuant to the Tennessee Valley Authority Act of 1933, as may be amended from time to time;
    6. Obligations of, or guaranteed as to principal and interest by, the Dominion of Canada or any province of the Dominion of Canada; provided, that the principal of and interest on the obligations are payable in United States currency or funds;
    7. Obligations of, or guaranteed as to principal and interest by, the International Bank of Reconstruction and Development, the Inter-American Development Bank or the African Development Bank;
    8. Demand, time, or savings deposits, shares or accounts, or other obligations of any financial institution, the accounts of which are insured by a federal agency;
    9. Bankers' acceptances that are eligible for purchase by federal reserve banks; and
    10. Other investments approved in writing by the commissioner, subject to the conditions that the commissioner may impose.
  2. Twenty-Five Percent-of-Asset Limitation.  The following investments, either separately or in the aggregate, shall be subject to a limitation of twenty-five percent (25%) of an association's total assets:
    1. Bonds, notes, or other evidence of indebtedness that are general obligations of, or guaranteed as to principal and interest by, any agency or instrumentality of the United States not specified in subdivision (1);
    2. General obligations, not specified in subdivision (1), of any state or of any city, county, school district, or other municipal corporation or political subdivision of any state;
    3. Corporate obligations, exclusive of common stock, of any corporation that does not own or control, directly or indirectly, more than ten percent (10%) of the capital stock of any kind or class of the investing association, or of any corporation, no more than ten percent (10%) of whose capital stock of any kind or class, is owned or controlled, directly or indirectly by the investing association; provided, that the corporation is listed on an exchange registered under the Securities Exchange Act of 1934;
    4. Adjustable rate preferred stock of any publicly held corporation created or existing under the laws of the United States or any state, district, or territory of the United States that is rated in one (1) of the four (4) highest investment grades by one (1) or more recognized investment rating services approved by the commissioner for rating the investments;
    5. Shares or certificates in any open-end management investment company that is registered with the securities and exchange commission under the Investment Company Act of 1940, and the portfolio of which is restricted by the management company's investment policy, changeable only if authorized by shareholder vote, solely to any investments in which an association by law or regulation may invest; and
    6. Other securities and obligations that the commissioner approves and places on a list to be published and distributed to every association at least once each year, and the commissioner is directed to publish and make distribution of the list. An association holding investments that are listed by the commissioner shall not be required to dispose of the investments if, at a later time, the commissioner removes any investments from the list.
  3. Investment Rating.  Notwithstanding any of the above provisions of this section, none of the securities or obligations described hereinabove, except for investments set forth in subdivision (1)(J), shall be eligible for investment in any amount, unless rated in one (1) of the four (4) highest investment grades by one (1) or more recognized investment rating services approved in writing by the commissioner, or unless otherwise approved for investment in writing by the commissioner as constituting a safe and prudent investment.
  4. Percent-of-Asset Limitation Set by Commissioner.  The following investments, either separately or in the aggregate, shall be subject to a limitation of one percent (1%) of an association's total assets or of a greater percent that may be set by the commissioner:
    1. Capital stock, obligations, or other securities of service organizations that assist in furthering or facilitating the association's purposes, powers, or community responsibilities; and
    2. Other investments that may be approved in writing by the commissioner.
  5. Valuation.  No security owned by an association shall be carried on its books at more than the actual cost thereof unless a different treatment is approved by the commissioner in writing.

Acts 1978, ch. 708, § 2.23; T.C.A., § 45-1423; Acts 1981, ch. 520, §§ 1, 2; 1986, ch. 602, § 2; 1988, ch. 819, § 2.

Compiler's Notes. The federal savings and loan insurance corporation, referred to in (1)(C), was abolished, effective February 1, 1992. See the Historical and Statutory Notes under 12 U.S.C. § 1437.

For transfer of functions under this chapter from the department of commerce and insurance to the department of financial institutions, see Executive Order No. 38 (February 11, 1983).

The Investment Company Act of 1940, referred to in this section, is compiled in 15 U.S.C. § 80a-1 et seq.

The Securities Exchange Act of 1934, referred to in this section, is compiled in 15 U.S.C. § 78.

The Tennessee Valley Authority Act of 1933, referred to in this section, is compiled in 16 U.S.C. § 831.

Cross-References. Negotiable instruments, title 47, ch. 3.

45-3-602. Investments in real estate.

  1. Business Property.  Every association has the power to invest in real property or interests in real property that the b