A. Every savings institution doing business in the Commonwealth shall maintain an adequate net worth appropriate for the conduct of its business and the protection of its account holders. Every savings institution (i) shall set up and maintain the reserves required by this chapter and (ii) may set up and maintain such additional reserves as are permitted by this chapter.
B. On or before the closing date of each accounting period, after payment of or provision for all expenses, every savings institution shall transfer to a separate reserve account that shall be set up and maintained for the sole purpose of absorbing losses, referred to in this section as the “general reserve,” an amount equal to at least five percent of its net income. A savings institution that at the close of such accounting period has assets in excess of $20 million or that has done business as a savings institution in the Commonwealth for more than 20 years shall transfer to such separate reserve account the greater of five percent of its net income or an amount obtained by subtracting an amount equal to its general reserve at the beginning of the period from an amount equal to four percent of its assets, excluding liquid assets, at the end of the period, until the general reserve is equal to at least five percent of the total amount of its deposit accounts at the beginning of such accounting period. Upon advanced written application of a savings institution, the Commissioner may approve the transfer to the general reserve of a lesser amount for such accounting period. If any credit to the general reserve is made after July 1, 1985, in excess of the minimum requirement, the dollar amount of any such excess may be carried over as a credit toward the minimum requirement of any subsequent period.
C. When the general reserve of a savings institution does not equal at least five percent of the deposit account liability of the institution, credits, as provided in subsection B, shall again be made to the general reserve until it again equals at least five percent of the institution’s deposit account liability.
D. In the case of stock savings institutions, the capital stock account, to the extent that the capital has not been impaired, shall be treated as part of the reserve and the board of directors may, by resolution, permanently or conditionally designate all or part of the capital stock, capital surplus, earned surplus, or undivided profit accounts as a part of its general reserve. A savings institution may retain its undivided profits in such amounts as may from time to time be fixed by resolution of its board of directors.
E. The Commission may temporarily reduce the reserve requirements for a savings institution if it finds such reduction to be in the best interest of the institution and its stockholders or members.
F. Notwithstanding the requirements of this section, an insured savings institution may maintain its reserves in accordance with the requirements of the Federal Deposit Insurance Corporation or other federal agency.