Chap. 4.—An ACT to amend and re-enact section 6 of an act entitled “An act
to revise, collate and codify into one act the general statutes of the
Commonwealth relating to building and loan associations, which act shall
constitute and be designated and cited as the Virginia building and loan
association act, and to repeal all Code sections and all acts and parts of
acts inconsistent therewith, and to provide penalties for violations thereof,”
approved March 5, 1932, as heretofore amended, so as to enlarge the
powers of building and loan associations to make loans and to authorize
such associations to have indebtedness secured by mortgages and deeds of
trust, and shares, certificates and deposit accounts of such associations
insured under the provisions of the National housing act, and to further
amend the said Virginia building and loan association act, as heretofore
amended, by adding thereto two new sections, numbered 23-b and 23-c,
providing for the conversion of State building and loan associations into
Federal savings and loan associations and Federal savings and loan asso-
tions into State building and loan associations, prescribing the procedure
to be followed, and setting forth the rights, powers, duties, obligations and
liabilities of such associations upon conversion. ([S B 1]

Approved February 4, 1936

1. Be it enacted by the General Assembly of Virginia, That section
six of an act entitled “an act to revise, collate and codify into one
act the general statutes of the Commonwealth relating to building and
loan associations, which act shall constitute and be designated and
cited as the Virginia building and loan association act, and to repeal
all code sections and all acts and parts of acts inconsistent therewith,
and to provide penalties for violations thereof,” approved March fifth,
nineteen hundred and thirty-two, as heretofore amended, be amended
and re-enacted, and that the said Virginia building and loan associa-
tion act be further amended by adding thereto two new sections num-
bered twenty-three-b and twenty- -three- c, so that the said amended
section and said new sections shall read as follows:

Section 6. Building and Loan Association; How Incorporated;
by What Laws Governed; Branches, Shares; Dues, Interest Premiums
and Fines; Powers.—Any number of persons, not less than five, may
hereafter form a building and loan association for the purpose of
encouraging industry, frugality, saving and home ownership among
its members, upon being incorporated as provided in chapter one
hundred and forty-eight of the Code of Virginia, nineteen hundred
and nineteen. Building and loan associations formed under said
chapter, or heretofore chartered or incorporated under said chapter,
or by general or special act, shall have the right to lend to their share-
holders or to other persons the money accumulated from time to
time, and the right to purchase land or erect houses, and to sell, con-
vey, lease or mortgage the same at their pleasure to their shareholders
or others for the benefit of their shareholders. Such associations may
acquire, hold, convey, and incumber all or any property, real or per-
sonal, acquired by them in the due course of business; and may also
secure the payment of loans and the performance of the conditions
upon which loans are made, and the payment of the purchase money
for any property sold by taking personal security, or by mortgage or
deed of trust upon real or personal property and by a transfer and
pledge of its shares; and may accept bonds of the Home Owners
Loan Corporation, a corporation created pursuant to an act of the
Congress of the United States, approved June thirteenth, nineteen
hundred and thirty-three, in exchange for home mortgages and other
obligations and liens secured by real estate which are subject to ex-
change under the provisions of said act of Congress. Such associa-
tions shall have the power to establish and maintain by their officers
and agents, branch offices for the transaction of their business at such
places as may be desirable; but no building and loan association shall
establish more than one office nor maintain branches other than those
already established, except with the approval of the State Corporation
Commission, previously had in writing.

It shall be lawful for every such association to fix by its by-laws
the premiums or bonus at which it will dispose of the money in its
treasury to its shareholders, and award or lend to any member or
shareholder the par value of any shares standing in its name, less such
premium or bonus, and the mode of making the disposal, loan or
award shall be fixed by the by-laws, and to charge and receive said
premium in advance, or in installments, or in default of application
for said money by its shareholders or members, it shall be lawful for
such companies or associations to lend money to other persons on such
terms as may be agreed upon, and in such manner as may be fixed
by the by-laws ; provided, that where the company lends its funds, taking
as security any order or assignment of the wages of the debtor, tangible
personal property, or any security except real estate or the shares of
stock or other evidences of indebtedness of the said association, upon
which there has been actually paid a sum equal to or greater than the
amount of said loan, the laws of this State and the ordinances of the
cities and towns thereof, in reference to the conduct of the business
of lending money and the rates to be charged therefor, shall apply to
building and loan associations as to other persons or corporations.

Direct reduction of principal loans may be made by any building
and loan association authorized to do business in this State upon reso-
lution of the board of directors permitting borrowing members to
repay their mortgage indebtedness by such periodic reduction of
principal method, and in which case the borrowers shall in writing
make such agreement with the association relative to the repayment
of their respective loans as may be required by the directors. The
agreement shall stipulate that the borrower shall make periodic pay-
ments not less frequently than once each month until such mortgage in-
debtedness, advances, if any, made by the association for payment of
taxes, assessments, insurance premiums, etc., as shall have accrued or shall
accrue with interest or interest and premium thereon, same to be com-
puted monthly, quarterly or semi-annually shall have been fully paid. The
balance of each loan account under such direct reduction of principal
method shall be determined monthly, quarterly or semi-annually in
order to ascertain the amount then necessary to satisfy in full the
mortgage obligation. Regardless of any provisions or restrictions
now in the charter or by-laws of any association to the contrary, it
shall be lawful in calculating such periodic balances for any associa-
tion permitting such a method of repayment to adopt a plan by which
the interest or interest and premiums shall be computed monthly on
the preceding monthly balance, and such interest or interest and
premium shall be added to that balance, together with any and all
advances for taxes, insurance and premiums, and such other charges
as are lawful debts of the borrower to the association since the pre-
ceding balance, and then deducting any payment or payments made by
the borrower on the loan accruing during such current period. All pay-
ments made on a loan under such plan of direct periodic reduction of
principal shall apply first to interest or interest and premium, as may have
theretofore accrued. Shares pledged on any loan which is being re-
paid on the direct reduction of principal method shall be automatically
reduced in even shares as the loan is repaid, and the obligation evi-
dencing such loan or advance and the mortgage or other security
given to secure the same, shall not in anywise be prejudiced by the
making of the written agreement hereinabove referred to, whether the
terms of such written agreement or such cancellation of shares shall
be provided for in the obligation evidencing such loan and advance
and the mortgage securing same or not. There is hereby authorized
to be issued a class of shares known as direct reduction loan shares
with a fluctuating dues or installment payment as required, to mem-
bers contracting to repay their real estate mortgage by a direct
periodic reduction of principal method, and the owner of such shares
shall be considered to have waived all participation in the profits of
the association and instead shall receive the benefits of membership
through the application of all the dues or installments paid on such
shares to the direct reduction of the principal amount of such loan
as provided. Notwithstanding anything in this act to the contrary,
mutual building and loan associations may exercise fully the powers
conferred by this paragraph, and shall if they exercise such powers or
any of them still be considered and treated for all purposes as mutual
building and loan associations ; in such event any such association may
provide that any person who shall borrow any money from such asso-
ciation, shall if not a shareholder be and constitute a member of such
association and be entitled to one vote at all meetings of shareholders.

Every building and loan association doing business in this State
shall be authorized to issue as many series or classes and kinds of
shares and at such stated periods as may be provided for in its
charter and by-laws.

Shares may be issued to be paid for in a single lump sum (these
being of the class of shares usually designated as fully paid, paid up
or prepaid shares), or by installment payments upon one or more
plans of installments. These shares, either or both, may be issued to
participate in the earnings of the association upon the same basis as
the pledged shares; or, if desired, the fully paid, paid up or prepaid
shares, and the installment shares, either or both, or classes of either
or both, may be issued to bear a limited rate or rates of earnings or
dividends, but such limited rate shall not exceed the legal interest rate of
this State ; and the issue of such shares shall not, by reason of the differ-
ent dividend rates, disqualify the association as a mutual association
doing business on a purely mutual plan. Shares may be reduced or
transferred from one class to another class by agreement in writing
between the holder and the association. In the case of pledged shares,
the amount to the credit of the borrower may be applied to the loan
secured and a new balance established on which the borrower shall
pay according to the plan agreed upon, whether the same be the direct
reduction loan or share reducing fund plan. From and after the
passage of this act, all prepaid stock issued by any building and loan
association now incorporated or hereafter to be incorporated, shall be
issued only by issuing to the subscriber, in the manner and form pre-
scribed by this act, a numbered certificate of stock. Each such cer-
tificate of stock shall have the corporate title of the association printed
thereon and shall also bear the date of issue, the name of the person,
or persons, firm or corporation in whose name the stock is issued, the
number of shares and the par value thereof. Upon the withdrawal of
such prepaid stock, the certificate shall be surrendered by the holder
thereof to the association, and shall be preserved indefinitely ; and to
have the transfer thereof made on the books of the association to a
purchaser, the said certificate of stock duly assigned shall likewise be
surrendered to the association and preserved indefinitely, the same as
hereinbefore provided in case of withdrawal.

A borrower from such association may repay the loan at any time;
but in case of the repayment thereof before the maturity of the loan
the borrower shall pay an amount for the privilege as may have been
agreed upon or is provided for in the by-laws; and there shall be re-
funded to such borrower, in case the premium shall have been de-
ducted in advance, such proportion of the premium bid as the by-laws
may determine.

Every association may levy, assess and collect from its share-
holders dues or payments upon every share of its stock, the amount,
time, and manner of payment of the same to be fixed by the by-laws,
and the said stock may be paid off and retired as the by-laws shall
direct, and may levy, assess, and collect from members to whom loans
have been made interest upon the par value of the shares redeemed ;
and may levy, assess, and collect fines for the non-payment of dues or
for failure to comply with or perform any other obligation to the
association. The amount of the respective fines shall be fixed by the
by-laws, and they may be imposed under regulations to be made by
the by-laws.

Every building and loan association incorporated under the laws
of this State is hereby authorized and empowered to take such action
and perform such acts as may be necessary to have indebtedness
secured by mortgages and deeds of trust insured by the Federal
housing Administration, and to have its shares, certificates and deposit
accounts or any of the same insured under the provisions of Title IV
and other applicable provisions of the National Housing Act and
amendments thereof.
The provisions of chapter one hundred and forty-seven, of the Code
of Virginia, nineteen hundred and nineteen, and of all amendments
thereto, shall apply to all building and loan associations incorporated
under the laws of Virginia, in all cases where not inconsistent with
the provisions of this act.

Section 23-b. State Building and Loan Association Becoming
Federal Savings and Loan Association; Procedure; Effect; Valida-
tion of Certain Prior Conversions.—(a) Any building and loan asso-
ciation, incorporated under the laws of this State, hereinafter referred
to in this section and section twenty-three-c of this act as a “State
association” may convert itself into a Federal savings and loan asso-
ciation, hereinafter referred to in this section and section twenty-
three-c of this act as a “Federal Association,’ by following the pro-
cedure hereinafter outlined.

(1) At any regular meeting of the shareholders of State associa-
tion or at any special meeting of the shareholders of such State associa-
tion, in either case called to consider such action and called and held
in accordance with the laws of Virginia, such shareholders by an
affirmative vote of the shareholders holding and voting two-thirds of
the voting shares in force, provided the two-thirds represents at least
fifty-one per centum of the capital paid in to said association, present
in person or by proxy, may declare by resolution the determination to
convert said association into a Federal association.

(2) A copy of the minutes of such meeting of the shareholders
duly certified by the president or vice-president and the secretary of
such State association under the seal thereof, shall be transmitted to
the State Corporation Commission within ten days after the passage
thereof.

(3) Within a reasonable time and without any unnecessary delay
after the adjournment of such meeting of shareholders, such State
association shall take such action as may be necessary to make it a
Federal association; within ten days after receipt of the Federal
charter or authorization as a Federal association, there shall be filed
with the State Corporation Commission a copy of the said charter
issued to such State association by the Federal Home Loan Bank
Board, duly certified by or on behalf of the said board, or a certificate
of the board showing the organization of such State association as a
Federal association. Upon the filing of such instrument, such associa-
tion shall cease to be a State association and thereafter be a Federal
association.

(b) At the time when such conversion become effective as here-
inbefore provided, the said State association shall cease to be super-
vised by this State and all of the property of such State association,
including all of its rights, title and interest in and to all property of
every kind and character, whether real, personal or mixed, shall
immediately by operation of law and without any conveyance or trans-
fer whatsoever and without any further act or deed, continue to be
vested in said association under its new name and style as a Federal
association and under its new jurisdiction ; and the said Federal associa-
tion shall have, hold and enjoy the same in its own right as
fully and to the same extent as the same was possessed, held and
enjoyed by it as a State association; and the said Federal association
at the time of the taking effect of such conversion shall continue
responsible for all of the obligations of the said State association
including liabilities created by law or incurred by it before becoming
a Federal association, taxes imposed by the laws of this State up to
the date of its becoming such Federal association in proportion to the
time which has elapsed since the next preceding payment therefor,
and assessments, penalties and forfeitures imposed or incurred under
the laws of this State up to the date of becoming a Federal associa-
tion, to the same extent as though said conversion had not taken
place; it being expressly declared that the said Federal association
shall be merely a continuation of the said State association under a
new name and new jurisdiction and such revision of its corporate
structure as may be considered necessary for its proper operation
under said new jurisdiction.

(c) All State associations which heretofore have converted them-
selves into Federal associations under the provisions of the Federal
Home Owners’ Loan Act of nineteen hundred and thirty-three, as
amended, and have received charters from the Federal Home Loan
Bank Board as Federal associations, shall hereafter be recognized as
Federal associations and their Federal charters shall be given full
credence by the State of Virginia to the same extent as if such con-
version had taken place under the provisions of this section, provided
the provisions of the first paragraph of this section relating to the
recordation of the charter or certificate are complied with. All such
conversions are hereby ratified and confirmed and all of the obliga-
tions of State associations which have so converted shall continue as
valid and subsisting obligations of such Federal associations and the
title to all the property of such State associations shall pass by opera-
tion of law to such Federal associations as fully and completely as if
a valid transfer were executed, delivered, and recorded, and as to
such Federal associations supervision by this State is hereby re-
linquished.

Section 23-c. (a) Federal Savings and Loan Association Becom-
ing a State Building and Loan Association; Procedure; Effect—Any
Federal association organized under the laws of the United States and
doing business in this State may become a State association with all
the powers and subject to all the obligations and duties imposed under
the provisions of this section, provided such Federal association has
authority by virtue of any law of the United States, to dissolve its
organization as a Federal association. A Federal association desiring
to become such State association shall proceed in the following
manner :

(1) It shall take such action, in the manner prescribed or author-
ized by the laws of the United States, as shall make certain its dissolu-
tion as a Federal association effective at a specified future date.

(2) The required number of its directors shall thereafter and
before the time when its dissolution becomes effective, organize a
corporation according to the provisions of chapter one hundred and
forty-eight, with the same officers and directors as the said Federal
association, and shall make application for a certificate of authority
to do business under section eight of this act, attaching thereto, as a
part thereof, a statement of its financial condition, on forms prescribed
by the State Corporation Commission, as of the close of business the
day preceding the date of the said application, copies of the written
authority of stockholders or shareholders and resolutions fixing the
date on which its dissolution as a Federal association shall become
effective, properly verified by the affidavit of the president or vice-
president of the said Federal association.

(3) Upon granting of a certificate of authority to do business in
accordance with the provisions of section eight of this act, and as soon
as its dissolution as a Federal association becomes effective, its cor-
porate existence as a State association shall begin. But such associa-
tion shall transact no business as a State association other than that
relating to its organization until its certificate of authority to do busi-
ness shall have been granted.

(4) At the time when the corporate existence of said State asso-
ciation begins all the property of the said Federal association, includ-
ing all its rights, title and interest in and to all property of whatsoever
kind, whether real, personal or mixed, and things in action, and every
right, privilege, interest and asset of any conceivable value or benefit
then existing, belonging or pertaining to it, or which would inure to
it, shall immediately by act of law and without any conveyance or
transfer, and without any further act or deed, be vested in and become
the property of such State association, which shall have, hold and
enjoy the same in its own right as fully and to the same extent as if
the same was possessed, held or enjoyed by said Federal association ;
and such State asseciation shall be deemed to be a continuation of the
entity and of the identity of said Federal association, operating under
and pursuant to the laws of this State, and all the rights, obligations
and relations of said Federal association to or in respect to any person,
estate, or creditor, depositor, trustee or beneficiary of any trust, and
in or in respect to any executorship or trusteeship or other trust or
fiduciary function, shall remain unimpaired, and such State associa-
tion, as of said beginning of its corporate existence, shall by operation
of this section succeed to all such rights, obligations, relations and
trusts, and the duties and liabilities connected therewith, and shall
execute and perform each and every such trust and relation in the same
manner as if such State association had itself assumed the trust or rela-
tion, including the obligations and liabilities connected therewith. If said
Federal association be acting as administrator, co-administrator, ex-
ecutor, co-executor, trustee, or co-trustee of or in respect to any estate
or trust being administered under the laws of this State, such relation,
as well as any other or similar fiduciary relations, and all rights,
privileges, duties and obligations connected therewith shall remain un-
impaired and shall continue into and in said State association, from
and as of the said beginning of its corporate existence, irrespective of
the date when any such relations may have been created or established
and irrespective of the date of any trust agreement relating thereto or
the date of the death of any testator or decedent whose estate is
being so administered. Neither the act of said Federal association,
under subdivision one of this section, in fixing the date of or pro-
viding for its liquidation or dissolution nor its liquidation or dissolu-
tion under the Federal Home Owners’ Loan Act and amendments
thereof, nor any other thing done in connection with the change from
a Federal association to a State association, shall, in respect to any
such executorship, trusteeship or similar fiduciary relations, be deemed
to be or to effect, under the laws of this State, a renunciation or re-
vocation of any letters of administration or letters testamentary per-
taining to such relation, nor a removal or resignation from any such
executorship or trusteeship nor shall such act or any other thing done
be deemed to be of the same effect as if the executor or trustee had died
or otherwise become incompetent to act.

(5) The directors of said Federal association in office at the time
of its dissolution shall be the directors of the State association created
in pursuance hereof until its first annual election of directors there-
after, and shall have power to take all necessary measures to perfect
its organization, and to adopt such regulations concerning its business
and management as may be proper and not inconsistent with law.

(b) If any provision in this section or in section twenty-three-b, or
the application thereof to any person, corporation or circumstance, is
held invalid, the remainder of the said sections, and the application of
such provision to other persons, corporations or circumstances, shall
not be affected thereby.

(c) All acts and parts of acts inconsistent with the provisions of
this section and section twenty-three-b of this act are hereby repealed
to the extent of such inconsistency.

2. An emergency existing, this aet shall be in force from its
passage.