[Federal Register Volume 85, Number 135 (Tuesday, July 14, 2020)]
[Rules and Regulations]
[Pages 42630-42661]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-12784]
[[Page 42629]]
Vol. 85
Tuesday,
No. 135
July 14, 2020
Part IV
Department of the Treasury
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Office of the Comptroller of the Currency
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12 CFR Parts 3, 4, 11, et al.
Employment Contracts, Mutual to Stock Conversions; Final Rule
Federal Register / Vol. 85, No. 135 / Tuesday, July 14, 2020 / Rules
and Regulations
[[Page 42630]]
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DEPARTMENT OF THE TREASURY
Office of the Comptroller of the Currency
12 CFR Parts 3, 4, 11, 16, 19, 23, 26, 32, 108, 112, 141, 160, 161,
163, 192, and 195
[Docket ID OCC-2018-0041]
RIN 1557-AE21
Employment Contracts, Mutual to Stock Conversions
AGENCY: Office of the Comptroller of the Currency (OCC), Treasury.
ACTION: Final rule and technical amendments.
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SUMMARY: The OCC is issuing a final rule that repeals the OCC's
employment contracts rule for Federal savings associations. This change
was recommended in the March 2017 Economic Growth and Regulatory
Paperwork Reduction Act report. The final rule also amends the OCC's
rule for conversions from mutual to stock form of a savings association
to reduce burden, provide clarity, increase flexibility, and update
cross-references. Additionally, the final rule updates cross-references
to repealed and integrated rules, removes unnecessary definitions, and
makes technical changes to other OCC rules.
DATES: This rule is effective on August 13, 2020.
FOR FURTHER INFORMATION CONTACT: For additional information, contact
Charlotte Bahin, Senior Advisor for Thrift Supervision, (202) 649-6281,
Marta Stewart-Bates, Senior Attorney, (202) 649-5490, Chief Counsel's
Office, for persons who are deaf or hearing impaired, TTY, (202) 649-
5597, Office of the Comptroller of the Currency, 400 7th Street SW,
Washington, DC 20219.
SUPPLEMENTARY INFORMATION:
I. Background
The OCC continually reviews its regulations with the goal of
updating them to reduce burden, increase flexibility, and provide
clarity where possible.\1\ Section 2222 of the Economic Growth and
Regulatory Paperwork Reduction Act of 1996 (EGRPRA) requires that, at
least once every 10 years, the Federal Financial Institutions
Examination Council (FFIEC) and each appropriate Federal banking agency
(Agencies) represented on the FFIEC (the OCC, the Federal Deposit
Insurance Corporation (FDIC), and the Board of Governors of the Federal
Reserve System (Federal Reserve Board)) conduct a review of their
regulations.\2\ The purpose of this review is to identify outdated or
otherwise unnecessary regulatory requirements imposed on insured
depository institutions. Specifically, EGRPRA requires the Agencies to
categorize and publish their regulations for comment, requesting
commenters to identify areas of the regulations that are outdated,
unnecessary, or unduly burdensome, and eliminate unnecessary
regulations to the extent that such action is appropriate. The Agencies
completed their second EGRPRA review on March 30, 2017, and published a
Report to Congress in the Federal Register.\3\ The OCC published a
proposed rule on January 8, 2020,\4\ that sought comment on OCC
proposed changes recommended in the March 2017 EGRPRA report, including
the repeal of 12 CFR 163.39 (Federal savings association employment
contracts) and possible amendments to 12 CFR 9.8 and 150.420 (fiduciary
recordkeeping) and 9.10 and 150.320 (acceptable collateral for
fiduciary funds awaiting investment or distribution).\5\
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\1\ Most recently, the OCC published for notice and comment
amendments to 12 CFR part 5 (Rules, Policies, and Procedures for
Corporate Activities) and 12 CFR part 7 (Activities & Operations).
See 85 FR 18728 (April 2, 2020); 85 FR 40794 (July 7, 2020).
\2\ Section 2222 of EGRPRA is codified at 12 U.S.C. 3311(b).
\3\ 82 FR 15900 (March 30, 2017).
\4\ 85 FR 1052 (January 8, 2020).
\5\ See FFIEC Joint Report to Congress (March 2017), available
at https://www.ffiec.gov/pdf/2017_FFIEC_EGRPRA_Joint-Report_to_Congress.pdf.
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The OCC also proposed to amend 12 CFR part 192 (Federal savings
association conversions from mutual to stock form) to reduce burden,
increase flexibility, and replace cross-references to repealed 12 CFR
197 (Securities offerings rules for Federal savings associations) with
cross-references to 12 CFR part 16 (Securities offering disclosure
rules). The OCC proposed to clarify which forms and accounting
standards savings associations must use in connection with a part 192
conversion and to increase flexibility and reduce burden for Federal
savings associations by encouraging electronic filing, electronic
meetings, providing notice by email, and reducing the number of copies
of proxy materials that must be filed with the OCC.
Finally, the proposed rule contained various technical and
clarifying amendments to 12 CFR parts 3, 4, 8, 11, 16, 19, 23, 26, 32,
108, 112, 141, 160, 161, and 163.
II. Summary of the Proposals, Comments Received, and the Final Rule
In response to the proposal, the OCC received four comment letters
from industry stakeholders and the public. The commenters generally
supported the proposed amendments, but requested particular changes and
additional clarity.
A. Employment Contracts for Federal Savings Associations
Twelve CFR 163.39 sets forth the requirements for a Federal savings
association that enters into an employment contract with its officers
and employees. Section 163.39(a) requires written employment contracts
for officers and employees that are approved by a Federal savings
association's board of directors. Section 163.39(a) also prohibits a
Federal savings association from entering into an employment contract
with any of its officers or other employees if the employment contract
would constitute an unsafe or unsound practice. Under section
163.39(b), a contract must include a Federal savings association's
right to terminate the employee at will. There are no similar
requirements for national banks.
In March 2017, the FFIEC made its Joint Report to Congress under
EGRPRA. One EGRPRA commenter recommended that the OCC eliminate Sec.
163.39 in its entirety because the regulation only applies to Federal
savings associations and there is no reason to distinguish Federal
savings associations from national banks. Additionally, the EGRPRA
commenter stated that it is unnecessary to require board approval of
all employment contracts because there are comprehensive safety and
soundness standards and interagency guidance on compensation.
The OCC proposed to eliminate Sec. 163.39 in its entirety.
Commenters supported the repeal. One commenter agreed that the OCC
should eliminate the entire rule because it is confusing and
unnecessarily burdensome. Another commenter stated that the
requirements are more onerous than those applied to national banks
because the current rule applies to all Federal savings association
employment contracts and mandates a number of detailed contractual
provisions that must be included in each contract. The commenter noted
that the OCC already has a robust regulatory framework governing
Federal savings association employment contracts, making the rule
duplicative and unnecessary, and that there are no persuasive policy
reasons for the OCC to impose more stringent
[[Page 42631]]
regulatory requirements on the employment contracts of Federal savings
associations as opposed to national banks. The commenter stated that
the current rule increases a Federal savings association's litigation
risks and limits its ability to tailor its compensation programs in
ways that best suit its size and complexity.
The OCC is repealing 12 CFR 163.39 in its entirety. The repeal
provides for consistent treatment of Federal savings associations and
national banks with respect to employment contracts and compensation.
The OCC believes that the current framework of rules and guidance on
compensation and employment contracts, independent of Sec. 163.39, is
adequate to address and safeguard against unsafe and unsound employment
and compensation practices for Federal savings associations. Federal
savings associations, like national banks, are subject to the safety
and soundness standards of 12 U.S.C. 1818; 12 CFR part 30, the
prohibition on unsafe and unsound compensation in appendix A to part
30; the prompt corrective action restrictions on compensation to senior
executive officers in 12 CFR 6.6(a)(3) and section 38 of the Federal
Deposit Insurance Act (FDIA); and are informed by the 2010 Interagency
Guidance on Sound Incentive Compensation Policies. Moreover, the boards
of directors at national banks and Federal savings associations have
oversight responsibilities for compensation, benefits arrangements, and
employment contracts for their executive officers and employees.
The repeal of Sec. 163.39 also reduces burden and increases
flexibility for Federal savings associations by eliminating the
requirement for written contracts that the board of directors must
approve, although Federal savings associations are not prohibited from
voluntarily using those procedures for their employment contracts. It
is a good corporate governance practice to have agreements relating to
employment and compensation in writing and that the board, or committee
thereof, review and approve those agreements. The repeal of Sec.
163.39 does not alter any other obligation with regard to employment
agreements entered into by a Federal savings association. For example,
if there are other laws and regulations that apply to a Federal savings
association regarding employment contracts, the repeal of Sec. 163.39
does not affect the application of those laws.
B. Fiduciary Recordkeeping
12 CFR part 9 sets forth the standards that apply to national bank
fiduciary activities. Twelve CFR part 150 sets forth the standards that
apply to the fiduciary activities of Federal savings associations.
Sections 9.8 and 150.420 contain requirements for the documentation and
retention of records for fiduciary accounts at national banks and
Federal savings associations, respectively. Sections 9.8(b) and 150.420
require national banks and Federal savings associations to retain
fiduciary account records for a period of three years from the later of
the termination of the account or the termination of any litigation
relating to the account. During the 2017 EGRPRA process, a commenter
recommended that the OCC amend 12 CFR 9.8(b) to require the retention
of documents for a ``necessary period'' or to refer to applicable State
law on the retention of documents, instead of the current three-year
requirement. The commenter explained that three years may be inadequate
to protect beneficiaries in some situations, such as a suit filed by a
beneficiary against a predecessor trustee more than three years after
an account is closed but before a State statute of limitations has run.
In the proposal, the OCC requested comment on whether to amend
Sec. Sec. 9.8(b) and 150.420 to require a national bank or Federal
savings association to retain fiduciary account records for the later
of three years from the termination of account, three years from the
termination of any litigation relating to the account, or the minimum
period required by applicable fiduciary State law. The OCC noted that
this approach could place additional burdens on institutions by
increasing the number of years an institution would be required to
retain records, and because this approach may require institutions to
monitor changes to states' fiduciary laws. The OCC received no comments
in response and declines to amend Sec. Sec. 9.8(b) and 150.420. The
OCC notes that nothing in Sec. Sec. 9.8(b) and 150.420 prohibits
financial institutions from holding fiduciary account records longer
than the three-year period.
C. Acceptable Collateral for Self-Deposited Trust Funds
Under 12 U.S.C. 92a(d), 12 CFR 9.10(b)(1), 12 U.S.C. 1464(n)(3),
and 12 CFR 150.310, a national bank or Federal savings association may
deposit trust funds awaiting investment or distribution in the
commercial, savings, or other department of the bank, unless prohibited
by applicable law. To the extent the funds are not insured by the
Federal Deposit Insurance Corporation (FDIC), the national bank or
Federal savings association must set aside U.S. bonds or other
securities and assets designated by the OCC as collateral for the
deposit. Sections 9.10(b)(2) and 150.320 list acceptable collateral
types for national banks and Federal savings associations,
respectively. During the notice and comment period for the 2017 EGRPRA
report, one commenter suggested an expansion of the Sec. 9.10(b)(2)
list of acceptable collateral for fiduciary funds to allow for other
instruments that provide similar protection from loss.
In the proposed rule, the OCC requested comment on whether to
expand the list of acceptable collateral in Sec. Sec. 9.10(b)(2) and
150.320 to include additional types of instruments. The OCC received
one comment in response. The commenter requested that the OCC expand
the list of acceptable collateral to include Federal Home Loan Bank
(FHLB) letters of credit. The same commenter also requested that, with
respect to surety bonds as an acceptable form of collateral, the OCC
remove the phrase ``unless prohibited by applicable law'' from 12 CFR
9.10(b)(2)(iv) and 150.320(d) because the phrase requires institutions
to conduct burdensome 50-state surveys to ensure compliance. The OCC
plans to take these comments into consideration in any future proposal
to revise the OCC's fiduciary rules.
D. Amendments to Securities Offering Disclosure Rules
Twelve CFR 16.8 provides an exemption from the registration and
prospectus requirements for offers and sales of national bank- or
Federal savings association-issued securities that satisfy the
requirements of SEC Regulation A (17 CFR part 230) (General rules and
regulations, Securities Act of 1933). The SEC's Form 1-A, the offering
statement required by Regulation A, requires audited financial
statements for certain offerings. However, a national bank or Federal
savings association in organization does not have an operating history
and cannot generate detailed financial statements that require an
audit. The audited financial statements of a national bank or Federal
savings association in organization typically do not add materially to
the information already available to the OCC through the chartering
process. The OCC proposed to amend Sec. 16.15(e) to clarify that a
national bank or Federal savings association in organization is not
required to include audited financial statements as part of its
offering statement for the issuance of securities pursuant to Sec.
16.8, unless the OCC determines otherwise.
Twelve CFR 16.17 sets forth the filing requirements and inspection
of
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documents for securities offerings. The OCC proposed to add a sentence
to Sec. 16.17(b) to clarify that all registration statements, offering
documents, amendments, notices, or other documents relating to a mutual
to stock conversion pursuant to 12 CFR part 192 must be filed with the
appropriate OCC licensing office and not the Securities and Corporate
Practices Division of the OCC.
The OCC received one comment in support of the amendments to the
securities offering disclosure rules in Sec. Sec. 16.15 and 16.17. The
OCC is finalizing those amendments as proposed.
E. Removal, Suspension, or Debarment of Independent Public Accountants
Section 36(g)(4)(A) of the FDIA (12 U.S.C. 1831m(g)(4)(A)) provides
that the FDIC or an appropriate Federal banking agency may remove,
suspend, or bar an independent public accountant, upon a showing of
good cause, from performing audit services required by section 36. The
OCC's implementing rules for insured national banks and insured Federal
branches of foreign banks are set forth in subpart P to 12 CFR part 19.
The former Office of Thrift Supervision (OTS) implemented section
36(g)(4) with respect to insured savings associations at 12 CFR 513.8,
and these rules are substantively identical to subpart P. However, when
republishing the former OTS rules as OCC rules pursuant to Title III of
the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-
Frank Act), the OCC inadvertently did not republish 12 CFR 513.8 nor
amend subpart P of part 19 to apply to Federal savings associations. In
the proposed rule, the OCC proposed amendments that would correct that
error by amending subpart P to also apply to insured Federal savings
associations.
In addition, the OCC proposed several clarifying amendments to
subpart P. First, the OCC proposed amending Sec. 19.243(b)(2), which
provides that hearings will be conducted in the same manner as other
hearings under the Uniform Rules of Practice and Procedure (12 CFR part
19, subpart A), by adding a cross-reference to the specific rules and
limitations for subpart P hearings set forth in Sec. 19.243(c)(4).
Second, the OCC proposed a clarifying change to Sec. 19.243(c)(3),
which currently states that an accountant or firm immediately suspended
from performing audit services may, within 10 calendar days after
service of the notice of immediate suspension, file a petition to stay
the immediate suspension with the OCC and that, if no petition is
filed, the immediate suspension will remain in effect. The OCC proposed
to clarify that if the accountant or firm has not filed a petition
within 10 calendar days, they have waived their right to file a
petition. The OCC also proposed to revise Sec. 19.243(c)(3) (petition
for stay of immediate suspension) to add a cross-reference to Sec.
19.243(c)(2), which sets forth the rules for when the OCC may lift an
immediate suspension. Third, the OCC proposed to amend Sec.
19.243(c)(4), which provides that upon request of a stay petition, the
Comptroller must designate a presiding officer who must fix a place and
time for the hearing that is not more than 10 calendar days after
receipt of the petition, unless extended by the OCC at the request of
petitioner. The amendment provides that a later hearing date may occur
only if permitted by the OCC, and, therefore, the request for an
extension would not receive automatic approval. This change would allow
the OCC some discretion as to how far into the future a hearing may
take place. Fourth, the OCC proposed a technical correction to subpart
P by adding ``insured Federal branches of foreign banks'' where
appropriate and removing references to Federal ``agencies.'' Section
36(g)(4) of the FDIA only applies to insured depository institutions
and no insured Federal agencies exist. Finally, the OCC proposed to
replace the word ``shall'' with ``must,'' ``will,'' or other
appropriate language, which is the recommended drafting style of the
Federal Register.
The OCC received one comment on the proposed amendments to subpart
P of part 19. The commenter supports the application of subpart P of
part 19 to Federal savings associations. The commenter also supports
the clarifying amendments to subpart P of part 19 that provide more
detailed procedures for the removal, suspension, or debarment of an
independent public accountant. With respect to the proposed amendment
to Sec. 192.243(c)(4) that would give the OCC 10 days to hold a stay
petition hearing (unless the presiding officer allows further time
requested by the petitioner), the commenter urges the OCC to exercise
reasonable judgment in each circumstance. Therefore, the OCC finalizes
the amendments to subpart P of part 19 as proposed. Under both the
current rule and the amended rule, the presiding officer is expected to
exercise reasonable judgment in their discretion to determine whether
to allow further time requested by the petitioner in Sec.
192.243(c)(4).
F. Definitions of Loans to Small Businesses and Loans to Small Farms in
Lending Limits Rules
The OCC proposed to revise the definitions of ``small business
loans'' and ``small farm loans or extensions of credit'' in 12 CFR
32.2(cc) and (dd) of the lending limits rule to align the definitions
with the language of the Call Report instructions. The revisions to
Sec. 32.2(dd) clarify that the $500,000 limit contained within the
``loans to small farms'' definition in the Call Report instructions
does not apply for purposes of the supplemental lending limit program.
The OCC received one comment on the proposed changes. The commenter
encouraged the OCC to work collaboratively with other federal agencies
on the definitions of a ``small business'' and a ``small farm'' so that
there is greater consistency across all prudential financial regulators
and regulations. The commenter believes this will assist banks as they
lend to these segments of the economy. The commenter recommended that
the definitions in the Call Report should also be consistent with the
definitions adopted. The commenter filed a corresponding letter in
response to the Federal banking agencies' request for comment \6\ on
ways to modify the current requirements for reporting data on loans to
small businesses and small farms in the Call Report.
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\6\ 84 FR 55687 (October 17, 2019).
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Because the OCC did not propose to amend the definitions of ``small
businesses'' and ``small farms'' in the proposal and because this final
rule is not an interagency rulemaking, the OCC is unable to make the
changes recommended by the commenter in this final rule. However, the
federal banking agencies received and are considering the corresponding
comment letter submitted in response to the agencies' request for
comment on ways to modify the current requirements for reporting data
on loans to small businesses and small farms in the Call Report.
Therefore, the OCC is finalizing the changes to Sec. 32.2(cc) and
(dd) and making the technical change of replacing the terms ``small
business loans'' and ``small farm loans or extensions of credit'' with
the terms ``loans to small businesses'' and ``loans or extensions of
credit to small farms,'' respectively, to conform with the Call Report
instructions. These technical changes are made to Sec. Sec. 32.2(cc),
32.2(dd), 32.7(a)(1), 32.7(a)(2), and 32.7(d).
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G. Savings Association Conversions From Mutual to Stock Form
The OCC proposed amendments to 12 CFR part 192, which governs how a
savings association may convert from mutual to stock form of ownership
under standard and voluntary supervisory conversions. The amendments
reduce burden, provide clarity, and increase flexibility for savings
associations and make several technical amendments. Unless otherwise
noted, part 192 applies to both Federal and State savings associations.
Forms. The OCC proposed to amend Sec. 192.5(b) to clarify that a
savings association must use the forms prescribed under part 192 and 12
CFR part 16 (the securities offering disclosure rules for Federal
savings associations and national banks), including the applicable form
for a registration statement under Sec. 16.15. Use of the registration
forms required by Sec. 16.15 is currently the standard industry
practice, and should not increase burden on savings associations. The
OCC also proposed to clarify the accounting guidance and requirements
used in the preparation and filing of these forms, financial
statements, and related financial data under part 192. The accounting
guidance and requirements that applied to part 192 conversions and
proxy materials were repealed in 2017.\7\ New Sec. 192.5(d) would
provide that the institution must prepare and present the form and
content of financial statements and related financial data in a filing
under part 192 in accordance with U.S. Generally Accepted Accounting
Principles (GAAP), pursuant to 12 U.S.C. 1463(b)(2)(A), and other
applicable accounting guidance and requirements as specified by the OCC
in the relevant mutual to stock conversion forms required under Sec.
192.5(b). The OCC notes that it is currently revising its forms under
part 192, including Form AC (Application for Conversion); Form PS
(Proxy Statement); Form OC (Offering Circular); and Form OF (Order
Form), to conform with these amendments to part 192.
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\7\ See 82 FR 8082 (January 23, 2017).
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The OCC proposed a technical change to this section by defining
``OCC'' as the Office of the Comptroller of the Currency in the text of
Sec. 192.5(b).
The OCC received one comment on the proposed changes to Sec.
192.5. The commenter supports the proposed changes to Sec. 192.5 that
would specify which forms a Federal savings association must use when
converting from mutual to stock form because the changes would increase
clarity. The OCC is finalizing the amendments to Sec. 192.5 as
proposed.
Electronic filing and computation of time. The OCC proposed a new
Sec. 192.7 to encourage the electronic filing of all part 192
applications, notices, or other documents through http://www.banknet.gov, consistent with other licensing-related filings \8\
and a new Sec. 192.8 to clarify the computation of time under part 192
when the last day of a time period falls on a Saturday, Sunday, or
Federal holiday. Specifically, in computing the time period, the OCC
would exclude the day of the act or event (e.g., the date an
application is received by the OCC) from when the period begins to run.
When the last day of a time period is a Saturday, Sunday, or Federal
holiday, the time period would run until the end of the next day that
is not a Saturday, Sunday, or Federal holiday. This amendment makes the
computation of time under part 192 consistent with the computation of
time rule that applies to corporate activities and transactions
pursuant to 12 CFR part 5.\9\
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\8\ See 12 CFR 5.2(d).
\9\ See 12 CFR 5.12.
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The OCC received one comment in support of the additions of new
Sec. Sec. 192.7 and 192.8. The OCC is finalizing Sec. Sec. 192.7 and
192.8 as proposed.
Definitions. In Sec. 192.25, the OCC proposed to add definitions
of ``community offering,'' ``offering circular,'' and ``voluntary
supervisory conversion,'' because these terms are currently undefined
in part 192. The proposal defined ``community offering'' as the
offering to sell to members of the general public in the savings
association's community the securities not subscribed for in the
subscription offering and provides that the community offering may
occur concurrently with the subscription offering and any syndicated
community offering or upon conclusion of the subscription offering. The
proposal defined ``offering circular'' as the securities offering
materials for the conversion. The proposal defined ``voluntary
supervisory conversion'' as a mutual to stock conversion for a savings
association that is unable to complete a standard mutual to stock
conversion under subpart A to part 192 and that meets the eligibility
requirements of Sec. 192.625.
The OCC also proposed to add several definitions to Sec. 192.25
that are currently included in 12 CFR part 141 (Definition for
regulations affecting Federal savings associations), and 12 CFR part
161 (Definitions for regulations affecting all savings associations).
Although the definitions in parts 141 and 161 apply to part 192, the
OCC believes that it is more appropriate, for clarity and as an aid to
the reader, to include these definitions in part 192 than in a separate
rule. Specifically, the proposal would add the definition of: (1)
``appropriate Federal banking agency'' from Sec. 161.7, which is
defined in section 3 of the FDIA (12 U.S.C. 1813(q)); (2) ``demand
accounts'' from Sec. 161.16, as meaning non-interest-bearing demand
deposits that are subject to check or to withdrawal or transfer on
negotiable or transferable order to the savings association and that
are permitted to be issued by statute, regulation, or otherwise and are
payable on demand; (3) ``Federal savings association'' from Sec.
141.11, which means a Federal savings association or Federal savings
bank chartered under section 5 of the Home Owners' Loan Act (HOLA) (12
U.S.C. 1464); (4) ``savings account'' from Sec. 161.42, which means
any withdrawable account, including a demand account, except this term
does not mean a tax and loan account, a note account, a United States
Treasury general account, or a United States Treasury time deposit-open
account; and (5) ``savings association'' from Sec. 161.43, which means
a savings association as defined in section 3 of the FDIA (12 U.S.C.
1813(b)(1)). In addition, the OCC proposed to add the definition of
``state'' to mean any State of the United States, the District of
Columbia, any territory of the United States, Puerto Rico, Guam,
American Samoa, the Trust Territory of the Pacific Islands, the Virgin
Islands, and the Northern Mariana Islands. This definition would be the
same as the definition in Sec. 161.50 as amended by this rule,
discussed below.
Finally, the OCC proposed to add a definition of ``state savings
association,'' defined to have the same definition as in section 3 of
the FDIA (12 U.S.C. 1813(b)(3)). This definition is not included in
parts 141 or 161. However, the OCC believes it would be helpful to
define this term in part 192 because the proposed rule adds the
definitions of other related terms.
The OCC received one comment on the amendments to Sec. 192.25. The
commenter supports the definitions of ``community offering'' and
``offering circular'' in Sec. 192.25 because the commenter believes
the definitions reflect common sense and clarity. However, the
commenter believes that the definition of ``voluntary supervisory
conversion'' is incomplete because it does not specify what is needed
to
[[Page 42634]]
qualify for a voluntary supervisory conversion. The commenter believes
that it would be more helpful to have a definition of the term that
also includes the full eligibility requirements for a voluntary
supervisory conversion. In the interest of keeping the definition
concise, the OCC believes the cross-reference to Sec. 192.625 in the
definition of ``voluntary supervisory conversion'' to be sufficient, as
the cross-reference directs the reader to the subpart of part 192 that
specifies the eligibility requirements for this type of conversion.
Therefore, the OCC is finalizing the amendments to Sec. 192.25 as
proposed.
Prior to conversion. Twelve CFR 192.100 (Preparing for a
conversion) requires that a savings association's board, or
subcommittee of the board, meet with the appropriate Federal banking
agency before adopting its plan of conversion. The OCC proposed to
increase flexibility by allowing in person or electronic board meetings
for purposes of Sec. 192.100. The OCC also proposed to amend Sec.
192.115 (Review of business plan by the appropriate Federal banking
agency) to clarify that the business plan must be filed as a
confidential exhibit to Form AC (Application for Conversion).
The OCC received one comment in support of the proposed changes to
Sec. Sec. 192.100 and 192.115. The OCC is finalizing the amendments to
Sec. Sec. 192.100 and 192.115 as proposed.
Plan of conversion. Twelve CFR 192.135 (Notifying members of plan
of conversion) requires that a savings association promptly notify its
members that its board of directors adopted a plan of conversion and
that a copy of the plan is available for the members' inspection in its
home office and its branch offices. The savings association must make
this notice by mailing a letter to each member or by publishing a
notice in the local newspaper in every local community where the
savings association has an office. The savings association may also
issue a press release. The OCC proposed to increase flexibility and
reduce burden by allowing a savings association to email a letter with
a notification of the plan of conversion instead of mailing a letter to
its members who receive electronic communication. The amendment also
allows a savings association to make the press release available on its
website.
The OCC received one comment in support of its proposed changes to
Sec. 192.135. The OCC is finalizing the amendments to Sec. 192.135 as
proposed.
Rejection of application for conversion. Twelve CFR 192.150
(Information required in an application for conversion) provides that
the appropriate Federal banking agency will not accept for filing, and
will return, any application for conversion that is executed
improperly, materially deficient, substantially incomplete, or that
provides for unreasonable conversion expenses. The OCC proposed to
amend Sec. 192.150(b) to permit, rather than require, the appropriate
Federal banking agency to return any application for conversion that is
executed improperly, materially deficient, substantially incomplete, or
that provides for unreasonable conversion expenses. A materially
deficient or substantially incomplete application may not always be
returned, especially if it is submitted electronically as a PDF
document or if there are supervisory or enforcement reasons to retain
the application.
The OCC received one comment in support of its proposed changes to
Sec. 192.150. The OCC finalizes the amendments to Sec. 192.150 as
proposed.
Notice of filing of application and comment process. Twelve CFR
192.185 sets forth the process for commenters to submit public comments
on an application for conversion. Section 192.185 currently requires a
commenter to file the original and one copy of any comments on an
application for conversion with the appropriate OCC licensing office.
The OCC proposed to amend Sec. 192.185 to require the commenter to
file only one copy of the comment instead of both an original and copy
of any comments with the appropriate OCC licensing office.
The OCC received one comment on the amendment to Sec. 192.185. The
commenter supports the proposed change because it eliminates
unnecessary paperwork. The OCC finalizes the amendment to Sec. 192.185
as proposed.
Proxy solicitation. Twelve CFR 192.275 requires a savings
association to file seven copies of its revised proxy materials and
related documents as an amendment to its application for conversion.
The OCC proposed to revise Sec. 192.275 to reduce burden for savings
associations by requiring the filing of only one copy of these
materials with the OCC. The OCC also proposed to amend Sec. 192.275(c)
to remove the requirement that four copies of the revised proxy
solicitation materials be marked to clearly indicate the changes from
the prior filing. Instead, the savings association would need to file
only one copy of the revised proxy solicitation materials that clearly
indicates the changes.
The OCC received one comment on the proposed amendments to Sec.
192.275. The commenter believes the amendments would eliminate
unnecessary paperwork. The OCC is finalizing the amendments to Sec.
192.275 as proposed.
Offering circular requirements. Twelve CFR 192.300 currently
requires a Federal savings association to file its offering circular
with the Securities and Corporate Practices Division of the OCC and
that a State savings association file its offering circular with the
appropriate FDIC region in compliance with part 192 and Form OC, and,
where applicable, part 197. The OCC proposed to amend Sec. 192.300 to
replace the cross-reference to repealed part 197 with a more specific
cross-reference to the applicable SEC registration statement form
required under 12 CFR 16.15. Additionally, the OCC proposed to clarify
that a Federal savings association must file its offering circular with
the appropriate OCC licensing office, not the Securities and Corporate
Practices Division.
As a corresponding change, the OCC proposed to amend Sec. 16.17
(Filing requirements and inspection of documents) to clarify that all
registration statements, offering documents, amendments, notices, or
other documents relating to a mutual to stock conversion pursuant to
part 192 must be filed with the appropriate OCC licensing office.
The OCC proposed to amend Sec. Sec. 192.305(b) and (c),
192.310(a), and 192.310(b) to clarify that the SEC, not the
``appropriate Federal banking agency,'' declares Federal savings
association holding company offering circulars effective in mutual to
stock conversions under part 192.
The OCC received one comment on the amendments to Sec. Sec.
192.300, 192.305, and 192.310 and no comments on the amendment to Sec.
16.17. The commenter supports the proposed changes to Sec. 192.300
that would specify where the offering circular must be filed and what
forms must be included because the changes will reduce the potential
for confusion. The same commenter also supports the clarifications in
Sec. Sec. 192.305(b), (c), 192.310(a), and 192.310(b). The OCC
finalizes the amendments to Sec. Sec. 192.300, 192.305, 192.310, and
16.17 as proposed.
Offers and sales of stock. Section 192.340(d) states that any
person who is found to have violated the restrictions in Sec.
192.340(b) may face prosecution or other legal action. To clarify and
make consistent the actions that may result from engaging in any of the
prohibited activities listed in Sec. 192.340, the OCC proposed to
amend Sec. 192.340(d) to state that persons engaged in any of the
activities listed in Sec. 192.340(a) and
[[Page 42635]]
Sec. 192.340(b) may be subject to enforcement actions, civil money
penalties, or criminal prosecution.
The OCC received one comment on the amendment to Sec. 192.340. The
commenter disagrees with the proposed changes to Sec. 192.340(d) that
impose sanctions for violating the conversion share restrictions found
in Sec. 192.340(a) and (b). The commenter believes that the OCC
already has broad powers to seek an enforcement action and that the
proposed changes are unnecessary. The OCC is finalizing the amendment
to Sec. 192.340 as proposed because the change clarifies the variety
of tools available to address violations of Sec. Sec. 192.340(a) and
(b).
Priority of accounts. Twelve CFR 192.430 describes the requirements
for charter amendments, charter cancellations, and new charters that
apply to a savings association conducting a conversion under part 192.
The OCC proposed to add a new paragraph in Sec. 192.430 to require
that, in any conversion pursuant to this section that involves a mutual
holding company, the charter of each resulting subsidiary savings
association of the holding company must contain a provision, specified
in Sec. 192.430(d), indicating that the claims of depositors of the
savings association have the same priority as the claims of general
creditors of the savings association not having priority (other than
any priority arising or resulting from consensual subordination) over
other general creditors of the association. The former OTS regulation
for mutual holding companies, 12 CFR 575.9(b) (2011), originally
required the inclusion of a similar priority of accounts provision in
the charters of subsidiary savings associations of mutual holding
companies, regardless of whether the subsidiary had a State or Federal
charter. When promulgating 12 CFR 575.9(b), the OTS stated that the
purpose of the priority of accounts provision was to ensure that claims
of depositors of the insured institution were not relegated to a lower
priority because the deposits confer membership rights in the
association's mutual holding company.\10\ However, after the enactment
of the Dodd-Frank Act, which transferred the holding company
regulations of the former OTS to the Federal Reserve Board,\11\ the
Federal Reserve Board republished 12 CFR 575.9(b) as a Federal Reserve
Board regulation without including this charter requirement because it
related to savings associations and not mutual holding companies.\12\
The OCC believes that the priority of accounts provision in the former
OTS regulation protected member rights, and the amendment reinstates
this charter requirement for all savings association subsidiaries of a
mutual holding company.\13\
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\10\ See 56 FR 1126, 1133 (January 11, 1991).
\11\ Section 312(b)(1), Public Law 111-203. 121 Stat. 1376 (July
21, 2010).
\12\ See 76 FR 56508, 56523 (September 13, 2011) (``[This
section] contains the provisions from section 575.9 concerning
charters, as revised to delete unnecessary provisions specific to
savings associations and to reflect the change in supervisory
authority.'') See also, 12 CFR 239.13.
\13\ Twelve CFR 5.21 requires all Federal mutual savings
association charters to include this priority of accounts provision.
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The OCC received one comment on the addition of new paragraph (d)
to Sec. 192.430. The commenter is uncertain that the addition
regarding priority of accounts is necessary. While the commenter
acknowledges that the OCC may view the addition as protective of
depositor rights, the commenter also believes that the FDIC rules for
conservatorship and receivership would govern any asset distribution.
Because the FDIC has the definitive role, the commenter believes that
it is not clear that the new language on priority of accounts is
needed. Further, the commenter suggests that if the OCC includes the
new priority of accounts language in Sec. 192.430(d), it also adds a
proviso that recognizes that the rights of depositors are ``subject to
any applicable legal and regulatory requirements affecting depositors'
rights.'' In response, the OCC notes that, notwithstanding this
priority of accounts provision, if a savings association is placed in
conservatorship or receivership, its assets would be distributed in
accordance with the FDIA, 12 U.S.C. 1811, et seq., and the depositor
preference provisions of section 11(d)(11) of the FDIA, 12 U.S.C.
1821(d)(11). The OCC believes the addition of the priority of accounts
provision is crucial to protecting members' rights by ensuring that
claims of depositors of the insured institution are not relegated to a
lower priority because the deposits confer membership rights in the
association's mutual holding company. For these reasons, the OCC is
finalizing Sec. 192.430(d) as proposed.
Liquidation account. A liquidation account represents the potential
interest of all the savings association's eligible account holders and
supplemental eligible account holders in the savings association's net
worth at the time of conversion. A liquidation sub-account represents
the potential interest of each individual eligible account holder and
supplemental account holder in the liquidation account. Twelve CFR
192.460 sets forth how a savings association determines the initial
balances of liquidation sub-accounts. The OCC proposed to revise Sec.
192.460(a)(1) to provide that a savings association must calculate the
initial liquidation sub-account balance of each eligible and
supplemental eligible account holder at the time of the conversion.
Because current Sec. 192.460 does not explain when a savings
association must perform the calculation, this amendment clarifies that
the initial liquidation sub-accounts must be calculated at the time of
the conversion.
Section 192.460(a)(1) provides the calculation for a savings
account held by an eligible account holder, which is to multiply the
initial balance of the liquidation account by a fraction that has as
its numerator the qualifying deposit in the savings account expressed
in dollars on the eligibility record date and as its denominator the
total qualifying deposits of all eligible account holders on the
eligibility record date. Section 192.460(a)(2) provides the same
calculation for a savings account held by a supplemental eligible
account holder, except that the eligibility record date is replaced
with the supplemental eligibility record date. However, the denominator
used for the calculation of the initial sub-account balances for both
eligible account holders and supplemental eligible account holders is
incorrect because the denominator in the current regulation does not
include both the deposits of eligible account holders and the deposits
of the supplemental eligible account holders. This results in both
eligible account holders and supplemental account holders having a
greater claim than their appropriate portion of the liquidation
account.
The amendments correct this error by inserting language in Sec.
192.460 similar to that in the previous OTS regulation, renumbering the
Sec. 192.460(a)(1) and (a)(2) calculations to be in Sec.
192.460(a)(2) and (a)(3), making the denominator in the fractions in
Sec. 192.460(a)(2) and (a)(3) the total sub-account balances of
eligible account holders and supplemental eligible account holders as
calculated in proposed revised Sec. 192.460(a)(5). As proposed, Sec.
192.460(a)(5) provides that the denominator for calculating the initial
sub-account balance of each eligible and supplemental eligible account
holder is the sum of the numerator calculations in Sec. 192.460(a)(2)
through (a)(4). These changes make clear that the eligible account
holders and the supplemental
[[Page 42636]]
eligible account holders would be allocated their proportionate shares
of the liquidation account (the association's net worth, as defined in
12 CFR 192.455).
In addition, the 2002 OTS amendments to the liquidation account
provision inadvertently removed language that addressed savings
accounts that increased in value between the eligible record date and
the supplemental eligibility record date.\14\ As a result, the current
regulation does not address accounts that increased in value between
the two dates. Therefore, the OCC proposed to add language in Sec.
192.460(a)(4) providing that for a savings account held on both the
eligibility record date and the supplemental eligibility record date,
the amount of the qualifying deposit for calculating the sub-account is
the higher account balance of the savings account on either the
eligibility record date or the supplemental eligibility record date.
The initial sub-account is calculated by multiplying the liquidation
account balance by the following fraction: The numerator is the higher
amount of the qualifying deposit in the savings account on either the
eligibility record date or the supplemental eligibility record date and
the denominator is the calculation in proposed Sec. 192.460(a)(5).
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\14\ See 67 FR 52009 (August 9, 2002). The pre-2002 OTS
regulation at 12 CFR 563b.3(f)(4) stated ``The initial subaccount
balance for a savings account held by an eligible account holder
and/or supplemental eligible account holder shall be determined by
multiplying the opening balance in the liquidation account by a
fraction of which the numerator is the amount of qualifying deposits
in such savings account on the eligibility record date and/or the
supplemental eligibility record date and the denominator is the
total amount of qualifying deposits of all eligible account holders
and supplemental eligible account holders in the converting savings
association on such dates. For savings accounts in existence at both
dates, separate subaccounts shall be determined on the basis of the
qualifying deposits in such saving accounts on such record dates.''
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The OCC invited comment on whether the proposed changes to Sec.
192.460 help to clarify the computation of liquidation sub-account
balances, asking specifically whether commenters have any alternative
methods for clarifying these computations. The OCC received one comment
in response. The commenter requested that, with respect to the
calculation of the initial balance of liquidation sub-accounts and
required adjustments in Sec. Sec. 192.460 and 192.470, the OCC provide
a more detailed explanation as to how the calculation of sub-accounts
prohibits sub-account increases. The commenter believes that the
statements in Sec. Sec. 192.460(b) and 192.470(b) that a Federal
savings association may not increase the balance of liquidation sub-
accounts are insufficient to prevent confusion. The commenter appears
to suggest that the statements should instead be included in the
calculation formulas set forth in Sec. Sec. 192.460(a) and 192.470(a).
In response to the comment, Sec. 192.470(a)(1) is revised to
clarify that the liquidation sub-account balance must not be increased
and to provide that a savings association must reduce the balance of an
eligible account holder's or supplemental eligible account holder's
sub-account if the deposit balance in the account holder's savings
account at the close of business on any annual closing date (ACD) \15\
falls below the lesser of: (i) The deposit balance in the account
holder's savings account as of the relevant eligibility record date; or
(ii) the deposit balance in the account holder's savings account as of
its lowest balance as of any subsequent ACD. Also, Sec. 192.470(a)(2)
is revised to clarify that the proportionate reduction in the
liquidation sub-account must be made from its balance at the time of
conversion and to provide that the reduction in the account holder's
liquidation sub-account from its balance at the time of conversion must
be proportionate to the reduction in the account holder's savings
account from its balance at the time of conversion. In addition, Sec.
192.470(e) is revised to clarify that, if there is a complete
liquidation, the savings association must provide the account holder of
a liquidation sub-account with a liquidation distribution in the amount
of the account holder's remaining liquidation sub-account balance.
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\15\ For purposes of Sec. 192.470, the annual closing date
(ACD) is the end of the savings association's fiscal year.
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For example, at the time of conversion, the account holder's
savings account balance is $10,000 and the account holder's liquidation
sub-account balance is $1,000. At ACD 1, if the savings account balance
is $8,000, then the liquidation sub-account balance is proportionately
reduced from $1,000 by 20 percent to $800. At ACD 2, if the savings
account balance is $9,000, then the liquidation sub-account balance is
$800. At ACD 3, if the savings account balance is $5,000, then the
liquidation sub-account balance is proportionately reduced from $1,000
by 50 percent to $500.
Contributions to charitable organizations. Twelve CFR 192.550
permits a savings association to contribute some of its conversion
shares or proceeds to a charitable organization, provided certain
requirements are met. One of these requirements, set forth at 12 CFR
192.575(a)(3), is that the charitable organization must annually
provide the appropriate Federal banking agency with a copy of the
annual report that it submitted to the IRS. The OCC proposed to remove
this requirement because it is often not used and, if necessary, the
OCC may obtain it from the IRS or request it directly from the
charitable organization.
The OCC received one comment in support of removal of paragraph
(a)(3) in Sec. 192.575 and finalizes the amendment as proposed.
Prohibition on self-dealing for charitable organizations. 12 CFR
192.575 (Other requirements for charitable organizations) provides that
a charitable organization may not engage in self-dealing. The OCC
proposed to amend Sec. 192.575(a) to provide that a charitable
organization must not engage in self-dealing, to emphasize the
prohibition on self-dealing. The OCC also proposed to move the
requirement that the charitable organization comply with all laws
necessary to maintain its tax-exempt status under the Internal Revenue
Code to a new paragraph (a)(5) in Sec. 192.575.
The OCC received no comments on the proposed amendments to Sec.
192.575(a) and finalizes the amendments as proposed.
Voluntary supervisory conversions. Section 192.600 describes the
purposes of subpart B to part 192, which governs voluntary supervisory
mutual to stock conversions. A voluntary supervisory conversion is a
transaction to recapitalize an eligible mutual savings association
where the association's members have no rights of approval or
participation and no rights to the continuance of any legal or
beneficial ownership interest in the converted association pursuant to
a plan of voluntary supervisory conversion approved by a majority of
the board of directors of the converting savings association. The OCC
proposed new language in Sec. 192.600 to clarify that a voluntary
supervisory mutual to stock conversion would be appropriate when the
appropriate Federal banking agency and, in the case of a State-
chartered savings association, the appropriate State banking regulator,
determines that the savings association has demonstrated that it is
unable to complete a standard mutual to stock conversion under subpart
A to part 192.
Section 192.650 sets forth the information required to be included
in a plan of voluntary supervisory conversion. Among other things,
current Sec. 192.650 requires the savings association's name and
address; the
[[Page 42637]]
name, address, date and place of birth, and social security number of
each proposed purchaser of conversion shares. The OCC proposed to
remove the personal identifying information from the plan of voluntary
supervisory conversion (i.e., the name, address, date and place of
birth, and social security number of each proposed purchaser of
conversion shares) as the OCC does not believe the inclusion of such
information is necessary or appropriate. The plan is a publicly
available document and the OCC believes that requiring this information
raises privacy concerns. The OCC also proposed to amend Sec. 192.650
to remove from the plan of voluntary supervisory conversion the title,
per-unit par value, number, and per-unit and aggregate offering price
of shares that the savings association will issue; and the number and
percentage of shares that each investor will purchase. The OCC does not
find this information to be necessary in the plan of voluntary
supervisory conversion. In addition, the OCC proposed to move the
information required in the plan by Sec. 192.650(e) (the aggregate
number and percentage of shares that each director, officer, and any
affiliates or associates of the director or officer will purchase) to
the application for voluntary supervisory conversion in Sec.
192.660(d)(5). The OCC believes this information more appropriately
belongs in the application, rather than the plan, because the OCC
reviews these proposed purchases during the application review process
and because the proposed purchases may change during the review of the
application. As a result, under revised Sec. 192.650, a plan for
voluntary supervisory conversion would be required to contain a
complete description of the proposed voluntary supervisory conversion
that also describes plans for any liquidation account and certified
copies of all resolutions relating to the conversion adopted by the
savings association's board of directors.
Twelve CFR 192.660 specifies the information a savings association
must include in its application for voluntary supervisory conversion.
To assist in its review of these applications, the OCC proposed to
require the application to contain some additional information. As
described in the preceding paragraph, the OCC proposed to relocate the
information contained in current Sec. 192.650(e) (the aggregate number
and percentage of shares that each director, officer, and any
affiliates or associates of the director or officer will purchase) to
Sec. 192.660(d)(5). The OCC proposed to add a new Sec. 192.660(e)(3)
to require that the voluntary supervisory conversion application
include any securities offering circular and other securities
disclosure materials that the savings association has prepared to use
in connection with the proposed voluntary supervisory conversion. In
addition, the OCC proposed to require that the application include a
statement indicating the role in the successor savings association each
director, officer, and affiliate of the savings association or
associate of the director or officer will have after the conversion.
The OCC finds that information on the role that each director, officer,
affiliate, and associate will have after the conversion to be necessary
for consideration of the decision factors in Sec. 192.670(c) and
(d).\16\ Finally, the OCC proposed to require as part of this
application any other information requested by the OCC, as authorized
by law.
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\16\ Under Sec. 192.670(c) and (d), the appropriate Federal
banking agency will generally approve a voluntary supervisory
conversion application unless it determines the savings association
or its acquiror, or the controlling parties or directors and
officers of the savings association or its acquiror, have engaged in
unsafe or unsound practices in connection with the voluntary
supervisory conversion, or the savings association fails to justify
an employment contract incidental to the conversion, or the
employment contract will be an unsafe or unsound practice or
represent a sale of control.
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The OCC received one comment letter on subpart B of part 192
concerning voluntary supervisory conversions. As a general matter, the
commenter believes that the policy objectives of this subpart are
confusing and that it could benefit from further review and
consultation with industry stakeholders to clarify the goals of the
subpart. The commenter urged the OCC to clearly state the policy
objectives and goals of voluntary supervisory conversions and describe
in general terms its expectations for the conversion.
The commenter also had several specific recommendations for subpart
B of part 192 that are unrelated to the OCC's proposed amendments.
First, the commenter states that it is not clear when a financial
institution qualifies as ``significantly undercapitalized'' under Sec.
192.625(a)(1). The commenter asserts that, in the past, the OTS tied
the component to capital standards and Prompt Corrective Action (PCA).
The commenter believes that the OCC should clarify whether PCA levels
are a triggering event for a voluntary supervisory conversion and, if
so, expressly cross-reference those provisions and state whether there
will be PCA waivers or growth restrictions.
In response to the comment regarding PCA, the OCC may take into
account the PCA levels and other capital standards when determining a
savings association's eligibility for a voluntary supervisory
conversion. However, the PCA levels are not the sole determinant of: A
``significantly undercapitalized'' or ``undercapitalized''
determination on eligibility under Sec. 192.625(a)(1); a ``severe
financial circumstances'' determination on eligibility under Sec.
192.625(a)(2); and an ``adequately capitalized'' determination on
viability after a voluntary supervisory conversion under Sec.
192.625(b)(1). The PCA category is only one factor in making these
decisions. Among other factors, these decisions may include the OCC
assessing capital adequacy based on the savings association's risk
profile and risk management.\17\ Therefore, the OCC declines to cross-
reference the PCA provisions in Sec. 192.625.
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\17\ The PCA capital categories generally are not to be
considered indications of capital adequacy under 12 CFR 3, the OCC's
capital rules. For example, a bank that is well capitalized for the
purposes of PCA may be found by the OCC to have inadequate capital
for the purposes of 12 CFR 3. The OCC assesses capital adequacy
based on the bank's risk profile relative to its risk management.
See OCC Bulletin 2018-33, Prompt Corrective Action: Guidelines and
Rescissions (September 28, 2018), available at https://www.occ.gov/news-issuances/bulletins/2018/bulletin-2018-33.html.
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Second, the commenter asserts that the market supporting voluntary
supervisory conversions is limited and that subordinated debt may be an
alternative means to help an undercapitalized Federal savings
association become adequately capitalized and viable. Because the OCC
did not propose any subordinated debt-related amendments in the
proposed rule, the OCC declines to address this concern in the final
rule.
Finally, the commenter believes that the provision in Sec.
192.670(d) that generally limits employment contracts to one year for
existing management of Federal savings associations that are undergoing
voluntary supervisory conversions is in potential conflict with the
provision in Sec. 192.660(d)(5) which recognizes that directors,
officers, and their affiliates and associates may participate in a
voluntary supervisory conversion. The commenter is concerned that an
officer with a one-year contract is unlikely to make a significant
investment in a Federal savings association. The OCC disagrees that
Sec. 192.670(d) and 192.660(d)(5) are in conflict. The OCC believes
that it is not likely that the deciding factor for significant
investment hinges on whether the officer's employment contract is
limited to one year and that
[[Page 42638]]
there is no evidence of correlation between contract length and
investment.
Federal Home Loan Bank (FHLB) membership. The OCC proposed to
remove the references to FHLB membership in Sec. Sec. 192.135(b)(12)
and 192.660(g)(4) because Federal savings associations are no longer
required to be members of the FHLB System.\18\ The existing provisions
of part 192 that reference FHLB membership were drafted when FHLB
System membership was required for Federal savings associations.
Whether the Federal savings association retains FHLB membership has no
impact on the OCC's consideration of an application for a voluntary
supervisory conversion in Sec. 192.660(g)(4), nor would it be of
interest to members as part of the notice in Sec. 192.135(b)(12).
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\18\ In 1999, HOLA was amended to no longer require Federal
savings associations to become FHLB members. See 12 U.S.C. 1464(f);
Public Law 106-102 section 603 (1999).
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The OCC received one comment in support of the removal of the
references to FHLB membership in Sec. Sec. 192.135 and 192.660 and
finalizes these amendments as proposed.
Technical amendments. The OCC proposed several global technical
changes to part 192. First, the OCC proposed to change the text of part
192 from the OTS question and answer format to the standard format of
the national bank rules in 12 CFR parts 1 through 50. Second, the OCC
proposed to add paragraph headings in compliance with Federal Register
guidelines. Third, the OCC proposed to clarify that calendar days are
used for computations of time under part 192. Finally, the OCC proposed
to replace cross-references to the repealed 12 CFR part 197 (2017)
(Securities offering disclosure rules) with cross-references to the OCC
rule that now applies to Federal savings associations, 12 CFR part 16.
Furthermore, the OCC proposed to make a number of technical changes
to specific sections of part 192. First, the OCC proposed to amend
Sec. 192.200 to remove the cross-reference to the FDIC's repealed
capital rules in subpart Z to 12 CFR part 390. In addition, the OCC
proposed to remove from Sec. 192.520(b) the cross-reference to 12 CFR
part 167 and replace it with a cross-reference to integrated 12 CFR
part 3. Finally, the OCC proposed to amend Sec. 192.660 by replacing
an outdated cross-reference to the Thrift Financial Report with the
Call Report.
The OCC received one comment in support of the technical amendments
to part 192 and finalizes the amendments as proposed.
H. Miscellaneous Technical Amendments
The OCC proposed to amend subpart J to 12 CFR part 3 to correct an
out-of-date cross-reference. Currently, at 12 CFR 3.601(b), OCC
regulations provide, in part, that a capital directive (i.e., an order
issued by the OCC to a national bank or Federal savings association to
take certain actions to achieve and/or maintain a specified capital
ratio) is enforceable in the same manner and to the same extent as a
final cease and desist order as defined under 12 U.S.C. 1818(k).
Because section 1818(k) has been repealed, the OCC proposed to amend
Sec. 3.601(b) to provide instead that a capital directive is
enforceable under section 1818(i) in the same manner and to the same
extent as an effective and outstanding cease and desist order issued
pursuant to section 1818(b) that has become final. This revision is
consistent with the OCC's existing authority as set forth under the
International Lending Supervision Act at 12 U.S.C. 3907(b) and is not
intended to have any substantive impact on the procedures for the
enforcement of a capital directive.
The OCC proposed to amend 12 CFR 4.14(a)(9) to remove cross-
references to 12 CFR parts 194 (2017) and 197, which have been
repealed. The requirements in former parts 194 and 197 have been added
to 12 CFR parts 11 and 16, respectively, and the cross-references to
those parts have been added to Sec. 4.14(a)(9) accordingly.
The OCC proposed to amend 12 CFR 4.34(c)(2), 4.37(a)(2)(ii),
108.6(d), 108.7(c) and (d), and 112.4 to change ``the OCC's Enforcement
and Compliance Division'' to ``the OCC's Law Department.'' Similarly,
the proposal would amend 12 CFR 11.3(a), 16.17(a) and (f), and 16.30(a)
by removing the phrase ``the OCC's Securities and Corporate Practices
Division'' and replacing it with ``the OCC's Law Department.''
The OCC proposed to amend 12 CFR 8.2 to change ``full service'' to
``full-service.''
The OCC proposed to amend 12 CFR 23.6 to change an incorrect
singular subject and verb to the correct plural subject and verb.
The OCC proposed to amend 12 CFR 26.6(b)(4) to correct a cross-
reference. The cross-reference to Sec. 5.51(c)(6) is incorrect; the
correct cross-reference is Sec. 5.51(c)(7).
The OCC proposed to remove several definitions in the OCC's rules
for Federal and State savings associations that are no longer
necessary. These definitions are currently included in 12 CFR part 141
(Definition for regulations affecting Federal savings associations) and
12 CFR part 161 (Definitions for regulations affecting all savings
associations). These definitions apply only to the OCC's rules in 12
CFR parts 100 through 195 that the former OTS originally issued and the
OCC republished as OCC rules pursuant to the Dodd-Frank Act. Because
the OCC has integrated and amended a number of these rules, many of the
terms defined in parts 141 and 161 are no longer used in parts 100
through 195 and, therefore, these definitions are no longer necessary.
Specifically, the OCC proposed to remove the definitions of ``Act,''
``debit card,'' ``improved nonresidential real estate,'' ``improved
residential real estate,'' ``interim Federal savings association,''
``interim state savings association,'' ``unimproved real estate,''
``withdrawal value of a savings account,'' ``accountholder,'' ``audit
period,'' ``land loan,'' ``low-rent housing,'' ``Money Market Deposit
Accounts,'' ``Negotiable Order of Withdrawal (NOW) accounts,''
``nonresidential construction loan,'' ``nonwithdrawable account,''
``parent company,'' ``principal office,'' ``service corporation,'' and
``subordinated debt security.''
The OCC also proposed to amend the definition of ``state'' in 12
CFR 161.50 so that it is identical to the definition of this term in
section 3 of the FDIA (12 U.S.C. 1813(a)(3)). Specifically, the
definition includes any territory of the United States, American Samoa,
the Trust Territory of the Pacific Islands, and the Northern Mariana
Islands, in addition to a State, the District of Columbia, Guam, Puerto
Rico, and the Virgin Islands.
The OCC proposed to amend 12 CFR 160.60(b)(3) to remove a cross-
reference to the repealed 12 CFR 163.43 and replace it with 12 CFR
31.2. The rule also amends parts 160 and 163 to define ``OCC'' as the
Office of the Comptroller of the Currency in the text of Sec. Sec.
160.1 and 163.47 and to define ``FDIC'' as the Federal Deposit
Insurance Corporation in Sec. 163.80.
Finally, the OCC proposed to update the authority citation for 12
CFR 195.11(a) to include a citation to section 312 of the Dodd-Frank
Act (12 U.S.C. 5412(b)(2)(B)).
The OCC received one comment in support of the miscellaneous,
technical amendments and finalizes them as proposed.
[[Page 42639]]
III. Regulatory Analysis
Regulatory Flexibility Act
The Regulatory Flexibility Act, 5 U.S.C. 601 et seq., (RFA),
requires an agency, in connection with a final rule, to prepare a final
Regulatory Flexibility Analysis describing the impact of the rule on
small entities (defined by the Small Business Administration (SBA) for
purposes of the RFA to include commercial banks and savings
institutions with total assets of $600 million or less and trust
companies with total revenue of $41.5 million or less) or to certify
that the final rule would not have a significant economic impact on a
substantial number of small entities. The OCC currently supervises
approximately 782 small entities, of which 258 are Federal savings
associations.\19\ The final rule places one new mandate on Federal
savings associations to submit additional information to the OCC as
part of their voluntary supervisory conversion applications to convert
from mutual to stock form pursuant to 12 CFR 192.660. Because the
additional reporting requirement for Federal savings associations that
are converting from mutual to stock form through a voluntary
supervisory conversion would likely require minimal additional effort
and cost relative to the overall cost of the conversion, the costs
associated with this additional information would likely be de minimis.
Therefore, the OCC certifies that the final rule would not have a
significant economic impact on a substantial number of OCC-supervised
small entities.
---------------------------------------------------------------------------
\19\ The OCC bases its estimate of the number of small entities
on the SBA's size thresholds for commercial banks and savings
institutions, and trust companies, which are $600 million and $41.5
million, respectively. Consistent with the General Principles of
Affiliation 13 CFR 121.103(a), the OCC counts the assets of
affiliated financial institutions when determining if we should
classify an OCC-supervised institution a small entity. The OCC uses
December 31, 2018, to determine size because a ``financial
institution's assets are determined by averaging the assets reported
on its four quarterly financial statements for the preceding year.''
See footnote 8 of the U.S. Small Business Administration's Table of
Size Standards.
---------------------------------------------------------------------------
Unfunded Mandates Reform Act of 1995
Consistent with the Unfunded Mandates Reform Act, the OCC's review
considers whether the mandates imposed by the final rule may result in
an expenditure of $100 million or more (currently $154 million adjusted
for inflation) by state, local, and tribal governments, or by the
private sector, in any one year. The final rule places one new mandate
on Federal savings associations to submit additional information to the
OCC as part of their voluntary supervisory conversion applications to
convert from mutual to stock form pursuant to 12 CFR 192.660. This
additional requirement for Federal savings associations to submit
additional information to the OCC would likely require minimal effort
and cost relative to the overall cost of the conversion. Therefore, we
conclude that the final rule would not result in the expenditure of
$100 million or more annually ($154 million adjusted for inflation) by
state, local, and tribal governments, or by the private sector.
Paperwork Reduction Act
Under the Paperwork Reduction Act of 1995,\20\ the OCC may not
conduct or sponsor, and a person is not required to respond to, an
information collection unless the information collection displays a
valid OMB control number. The OCC submitted the information collection
requirements contained in the final rule at the proposed rule stage.
OMB filed a comment on the submission instructing the OCC to resubmit
the collection at the final rule stage. Therefore, the OCC has
submitted the information collection requirements imposed by the final
rule to OMB for review.
---------------------------------------------------------------------------
\20\ 44 U.S.C. 3501 et seq.
---------------------------------------------------------------------------
The final rule adds a new Sec. 192.660(e)(3) to require that the
voluntary supervisory conversion application include a statement
indicating the role in the successor savings association each director,
officer, and affiliate of the savings association or associate of the
director or officer will have after the conversion. This burden for
this requirement will be added to the existing information collection
for OCC's Licensing Manual.
Title: Voluntary Supervisory Conversion Application: Successor
Savings Association Roles.
OMB Control No.: 1557-NEW.
Frequency of Response: On occasion.
Affected Public: Businesses or other for-profit organizations.
Estimated Number of Respondents: 1.
Estimated Burden per Respondent: 2 hours.
Estimated Total Annual Burden: 2 hours.
In the proposed rule, the OCC invited comments on:
(a) Whether the collections of information are necessary for the
proper performance of the functions of the OCC, including whether the
information has practical utility;
(b) The accuracy of the OCC's estimates of the burden of the
collections of information;
(c) Ways to enhance the quality, utility, and clarity of the
information to be collected;
(d) Ways to minimize the burden of the collections on respondents,
including through the use of automated collection techniques or other
forms of information technology; and
(e) Estimates of capital or start-up costs and costs of operation,
maintenance, and purchase of services to provide information.
The OCC received no comments on the information collection
requirements.
Riegle Community Development and Regulatory Improvement Act of 1994
Pursuant to section 302(a) of the Riegle Community Development and
Regulatory Improvement Act (RCDRIA),\21\ in determining the effective
date and administrative compliance requirements for new regulations
that impose additional reporting, disclosure, or other requirements on
IDIs, each Federal banking agency must consider, consistent with
principles of safety and soundness and the public interest, any
administrative burdens that such regulations would place on depository
institutions, including small depository institutions, and customers of
depository institutions, as well as the benefits of such regulations.
In addition, section 302(b) of RCDRIA requires new regulations and
amendments to regulations that impose additional reporting,
disclosures, or other new requirements on IDIs generally to take effect
on the first day of a calendar quarter that begins on or after the date
on which the regulations are published in final form.\22\
---------------------------------------------------------------------------
\21\ 12 U.S.C. 4802(a).
\22\ Id. at 4802(b).
---------------------------------------------------------------------------
In accordance with these provisions of RCDRIA, the OCC considered
any administrative burdens, as well as benefits, that the final rule
would place on IDIs and their customers in determining the effective
date and administrative compliance requirements of the final rule. The
final rule contains one new mandate for IDIs in the form of additional
reporting requirements for voluntary supervisory conversion
applications under 12 CFR 192.660(e)(3). Because the additional
reporting requirements for Federal savings associations that are
converting from mutual to stock form through a voluntary supervisory
conversion would likely require minimal additional effort and cost
relative to the overall cost of the conversion, we expect that the
additional burden of collecting this information for the application
will be de minimis. In conjunction with the
[[Page 42640]]
requirements of RCDRIA, the final rule is effective on August 13, 2020.
Congressional Review Act
For purposes of Congressional Review Act (CRA), the Office of
Management and Budget (OMB) makes a determination as to whether a final
rule constitutes a ``major'' rule.\23\ If a rule is deemed a ``major
rule'' by the OMB, the CRA generally provides that the rule may not
take effect until at least 60 days following its publication.\24\
---------------------------------------------------------------------------
\23\ 5 U.S.C. 801 et seq.
\24\ 5 U.S.C. 801(a)(3).
---------------------------------------------------------------------------
The CRA defines a ``major rule'' as any rule that the Administrator
of the Office of Information and Regulatory Affairs of the OMB finds
has resulted in or is likely to result in (1) an annual effect on the
economy of $100,000,000 or more; (2) a major increase in costs or
prices for consumers, individual industries, Federal, State, or local
government agencies or geographic regions; or (3) significant adverse
effects on competition, employment, investment, productivity,
innovation, or on the ability of United States-based enterprises to
compete with foreign-based enterprises in domestic and export
markets.\25\ As required by the CRA, the OCC will submit the final rule
and other appropriate reports to Congress and the Government
Accountability Office for review.
---------------------------------------------------------------------------
\25\ 5 U.S.C. 804(2).
---------------------------------------------------------------------------
List of Subjects
12 CFR Part 3
Administrative practice and procedure, Banks, banking, Federal
Reserve System, Investments, National banks.
12 CFR Part 4
Administrative practice and procedure, Freedom of Information,
Individuals with disabilities, Minority businesses, Organization and
functions (Government agencies), Reporting and recordkeeping
requirements, Women.
12 CFR Part 11
Business information, National banks, Reporting and recordkeeping
requirements, Securities.
12 CFR Part 16
National banks, Reporting and recordkeeping requirements,
Securities.
12 CFR Part 19
Crime, Equal access to justice, Investigations, National banks,
Penalties, Securities.
12 CFR Part 23
Banks, banking, National banks, Reporting and recordkeeping
requirements.
12 CFR Part 26
Antitrust, Holding companies, National banks.
12 CFR Part 32
National banks, Reporting and recordkeeping requirements.
12 CFR Part 108
Administrative practice and procedure, Crime, Savings associations.
12 CFR Part 112
Administrative practice and procedure, Investigations.
12 CFR Part 141
Reporting and recordkeeping requirements, Savings associations.
12 CFR Part 160
Consumer protection, Investments, Manufactured homes, Mortgages,
Reporting and recordkeeping requirements, Savings associations,
Securities.
12 CFR Part 161
Administrative practice and procedure, Savings associations.
12 CFR Part 163
Accounting, Administrative practice and procedure, Advertising,
Crime, Currency, Investments, Mortgages, Reporting and recordkeeping
requirements, Savings associations.
12 CFR Part 192
Reporting and recordkeeping requirements, Savings associations,
Securities.
12 CFR Part 195
Community development, Credit, Investments, Reporting and
recordkeeping requirements, Savings associations.
For the reasons set out in the preamble, the OCC amends 12 CFR
chapter I as follows:
PART 3--CAPITAL ADEQUACY STANDARDS
0
1. The authority citation for part 3 continues to read as follows:
Authority: 12 U.S.C. 93a, 161, 1462, 1462a, 1463, 1464, 1818,
1828(n), 1828 note, 1831n note, 1835, 3907, 3909, and 5412(b)(2)(B).
Sec. 3.2 [Amended]
0
2. Section 3.2 is amended in in paragraph (1) of the definition of
``Qualifying master netting agreement'' by adding ``and'' after
``counterparty;''.
0
3. Section 3.601 is amended by revising paragraph (b) to read as
follows:
Sec. 3.601 Purpose and scope.
* * * * *
(b) A directive issued under this rule, including a plan submitted
under a directive, is enforceable under the provisions of 12 U.S.C.
1818(i) in the same manner and to the same extent as an effective and
outstanding cease and desist order issued pursuant to 12 U.S.C. 1818(b)
that has become final. Violation of a directive may result in
assessment of civil money penalties in accordance with 12 U.S.C.
3909(d).
PART 4--ORGANIZATION AND FUNCTIONS, AVAILABILITY AND RELEASE OF
INFORMATION, CONTRACTING OUTREACH PROGRAM, POST-EMPLOYMENT
RESTRICTIONS FOR SENIOR EXAMINERS
0
4. The authority citation for part 4 continues to read as follows:
Authority: 5 U.S.C. 301, 552; 12 U.S.C. 1, 93a, 161, 481, 482,
484(a), 1442, 1462a, 1463, 1464 1817(a), 1818, 1820, 1821, 1831m,
1831p-1, 1831o, 1833e, 1867, 1951 et seq., 2601 et seq., 2801 et
seq., 2901 et seq., 3101 et seq., 3401 et seq., 5321, 5412, 5414; 15
U.S.C. 77uu(b), 78q(c)(3); 18 U.S.C. 641, 1905, 1906; 29 U.S.C.
1204; 31 U.S.C. 5318(g)(2), 9701; 42 U.S.C. 3601; 44 U.S.C. 3506,
3510; E.O. 12600 (3 CFR, 1987 Comp., p. 235).
Sec. 4.14 [Amended]
0
5. Section 4.14 is amended in paragraph (a)(9) by removing the phrase
``parts 11, 16, 194 or 197 of this chapter'' and adding in its place
``part 11 or 16 of this chapter''.
Sec. 4.34 [Amended]
0
6. Section 4.34 is amended in paragraph (c)(2) by removing the phrase
``and Compliance''.
Sec. 4.37 [Amended]
0
7. Section 4.37 is amended in paragraph (a)(2)(ii) by removing the
phrase ``and Compliance''.
PART 11--SECURITIES EXCHANGE ACT DISCLOSURE RULES
0
8. The authority citation for part 11 continues to read as follows:
Authority: 12 U.S.C. 93a, 1462a, 1463, 1464 and 5412(b)(2)(B);
15 U.S.C. 78j-1(m), 78m, 78n, 78p, 78w, 78l, 7241, 7242, 7243, 7244,
7261, 7262, 7264, and 7265.
Sec. 11.3 [Amended]
0
9. Section 11.3 is amended:
[[Page 42641]]
0
a. In paragraph (a)(1)(i) and the second sentence of paragraph
(a)(1)(ii) by removing the phrase ``the Securities and Corporate
Practices Division'' and by adding the phrase ``the OCC's Law
Department'' in its place; and
0
b. In the first sentence of paragraph (a)(1)(ii) by removing the phrase
``the OCC's Securities and Corporate Practices Division'' and by adding
the phrase ``the OCC's Law Department'' in its place.
PART 16--SECURITIES OFFERING DISCLOSURE RULES
0
10. The authority citation for part 16 continues to read as follows:
Authority: 12 U.S.C. 1 et seq., 93a, 1462a, 1463, 1464, and
5412(b)(2)(B).
Sec. 16.15 [Amended]
0
11. Section 16.15 is amended in paragraph (e) by adding the phrase ``or
as part of its offering statement for the offer and sale of its
securities pursuant to 12 CFR 16.8,'' after ``registration statement
for the offer and sale of its securities,''.
0
12. Section 16.17 is amended:
0
a. In paragraph (a), by removing the phrase ``the OCC's Securities and
Corporate Practices Division'' and by adding the phrase ``the OCC's Law
Department'' in its place;
0
b. In paragraph (b), by adding a sentence at the end; and
0
c. In the first and second sentences of paragraph (f), by removing the
phrase ``the OCC's Securities and Corporate Practices Division'' and by
adding the phrase ``the OCC's Law Department'' in its place.
The addition reads as follows:
Sec. 16.17 Filing requirements and inspection of documents.
* * * * *
(b) * * * All registration statements, offering documents,
amendments, notices, or other documents relating to a mutual to stock
conversion pursuant to 12 CFR part 192 must be filed with the
appropriate OCC licensing office at http://www.banknet.gov/.
* * * * *
Sec. 16.30 [Amended]
0
13. Section 16.30 is amended in paragraph (a) by removing the phrase
``the OCC's Securities and Corporate Practices Division'' and by adding
the phrase ``the OCC's Law Department'' in its place.
PART 19--RULES OF PRACTICE AND PROCEDURE
0
14. The authority citation for part 19 continues to read as follows:
Authority: 5 U.S.C. 504, 554-557; 12 U.S.C. 93(b), 93a, 164,
481, 504, 1817, 1818, 1820, 1831m, 1831o, 1832, 1884, 1972, 3102,
3108(a), 3110, 3909, and 4717; 15 U.S.C. 78(h) and (i), 78o-4(c),
78o-5, 78q-1, 78s, 78u, 78u-2, 78u-3, 78w, and 1639e; 28 U.S.C. 2461
note; 31 U.S.C. 330 and 5321; and 42 U.S.C. 4012a.
Sec. 19.241 [Amended]
0
15. Section 19.241 is amended by:
0
a. Removing the phrase ``Federal Deposit Insurance Act (FDI Act)'' and
adding in its place ``FDIA'';
0
b. Removing the phrase ``section 36 of the FDI Act'' and adding in its
place ``section 36 of the FDIA''; and
0
c. Removing the phrase ``insured national banks and Federal branches
and agencies of foreign banks'' and adding in its place the phrase
``insured national banks, insured Federal savings associations, and
insured Federal branches of foreign banks''.
Sec. 19.242 [Amended]
0
16. Section 19.242 is amended:
0
a. By removing the word ``shall'' in the introductory text; and
0
b. In paragraph (b), by adding ``(12 U.S.C. 1831m)'' after the phrase
``section 36 of the FDIA''.
0
17. Section 19.243 is amended:
0
a. In paragraph (a)(1) introductory text, by adding ``(12 U.S.C.
1831m)'' after ``section 36 of the FDIA'';
0
b. In paragraph (a)(1) introductory text, by adding the phrase ``,
insured Federal savings associations, or insured Federal branches of
foreign banks'' after the phrase ``national banks'';
0
c. In paragraphs (a)(1)(vi) and (vii), by removing the word ``state''
and adding the word ``State'' in its place;
0
d. In paragraph (a)(3), by removing the phrase ``particular national
bank or class of national banks'' and adding in its place the phrase
``particular insured national bank, insured Federal savings
association, or insured Federal branch of a foreign bank or class of
insured national banks, insured Federal savings associations, or
insured Federal branches of foreign banks'';
0
e. In paragraph (b)(2) by:
0
i. Removing the word ``shall'' and adding in its place the word
``will''; and
0
ii. Adding the phrase ``, subject to the limitations in Sec.
19.243(c)(4)'' at the end of the second sentence;
0
f. In paragraph (c)(1) introductory text, by adding the phrase ``,
insured Federal savings associations, or insured Federal branches of
foreign banks'' after the phrase ``national banks'';
0
g. In paragraph (c)(3), by revising the last sentence;
0
h. In paragraph (c)(4) by:
0
i. Removing the phrase ``who shall fix a place'' in the first sentence
and adding in its place the phrase ``who will fix a place'';
0
ii. Removing the phrase ``unless extended'' in the first sentence and
adding in its place the phrase ``unless further time is allowed by the
presiding officer'';
0
iii. Removing the phrase ``there shall be no discovery'' in the last
sentence and adding in its place the phrase ``there will be no
discovery''; and
0
iv. Removing the phrase ``of this part shall apply'' and adding in its
place ``of this part apply'';
0
i. In paragraph (c)(5), by removing the word ``shall'' in the first
sentence and adding in its place the word ``will''; and
0
j. In paragraph (c)(6), by removing the word ``shall'' wherever it
appears and adding in its place the word ``will''.
The revision reads as follows:
Sec. 19.243 Removal, suspension, or debarment.
* * * * *
(c) * * *
(3) * * * If no petition is filed within 10 calendar days, the
right to a petition is waived and the immediate suspension remains in
effect pursuant to paragraph (c)(2).
* * * * *
0
18. Section 19.244 is amended:
0
a. By revising the section heading;
0
b. In paragraph (a) introductory text, by adding the phrase ``, insured
Federal savings associations, or insured Federal branches of foreign
banks'' after the phrase ``national banks'';
0
c. In paragraph (a)(1) by:
0
i. Adding the word ``former'' before the phrase ``Office of Thrift
Supervision''; and
0
ii. Adding ``(12 U.S.C. 1831m)'' after the phrase ``section 36 of the
FDIA'';
0
d. In paragraph (b) by:
0
i. Adding the word ``insured'' before the phrase ``national banks'';
0
ii. Adding the phrase ``, insured Federal savings associations, or
insured Federal branches of foreign banks'' after the phrase ``national
banks''; and
0
iii. Removing the word ``shall'' and adding in its place the word
``must''.
The revision reads as follows:
Sec. 19.244 Automatic removal, suspension, or debarment.
* * * * *
Sec. 19.245 [Amended]
0
19. Section 19.245 is amended:
0
a. By adding a comma after the word ``suspension'' in the section
heading;
0
b. In paragraph (a), by removing the word ``shall'' and adding in its
place the word ``will'';
0
c. In paragraph (b) introductory text by:
[[Page 42642]]
0
i. Adding the word ``insured'' before the phrase ``national bank''; and
0
ii. Adding the phrase ``, insured Federal savings association, or
insured Federal branch of a foreign bank'' after the phrase ``national
bank'';
0
d. In paragraph (b)(1), by removing ``Sec. 19.243(a)(1)(vi) through
(a)(1)(vii) or Sec. 19.244(a)(2) through (a)(3)'' and adding in its
place ``Sec. 19.243(a)(1)(vi) through (vii) or Sec. 19.244(a)(2) and
(3)'';
0
e. In paragraph (b)(2), by removing the phrase ``Sarbanes-Oxley Act)''
and adding in its place the phrase ``Sarbanes-Oxley Act''; and
0
f. In paragraph (c), by removing the word ``shall'' and adding in its
place the word ``must''.
Sec. 19.246 [Amended]
0
20. Section 19.246 is amended:
0
a. In paragraph (a), by removing the word ``shall'' and adding in its
place the word ``must''; and
0
b. In paragraph (b):
0
i. By removing the phrase ``shall bear'' wherever it appears and adding
in its place the word ``bears''; and
0
ii. In the penultimate and last sentences, by removing the word
``shall'' and adding in its place the word ``will''.
PART 23--LEASING
0
21. The authority citation for part 23 continues to read as follows:
Authority: 12 U.S.C. 1 et seq., 24(Seventh), 24(Tenth), and 93a.
Sec. 23.6 [Amended]
0
22. Section 23.6 is amended by:
0
a. Removing the word ``lease'' before the phrase ``entered into
pursuant to this part'' and adding in its place the word ``leases'';
and
0
b. Removing the word ``is'' before the phrase ``subject to the lending
limits prescribed'' and adding in its place the word ``are''.
PART 26--MANAGEMENT INTERLOCKS
0
23. The authority citation for part 26 continues to read as follows:
Authority: 12 U.S.C. 1, 93a, 1462a, 1463, 1464, 3201-3208,
5412(b)(2)(B).
Sec. 26.6 [Amended]
0
24. Section 26.6 is amended in paragraph (b)(4) by removing
``5.51(c)(6)'' and adding in its place ``5.51(c)(7)''.
PART 32--LENDING LIMITS
0
25. The authority citation for part 32 continues to read as follows:
Authority: 12 U.S.C. 1 et seq., 12 U.S.C. 84, 93a, 1462a, 1463,
1464(u), 5412(b)(2)(B), and 15 U.S.C. 1639h.
0
26. Section 32.2 is amended by revising paragraphs (cc) and (dd) to
read as follows:
Sec. 32.2 Definitions.
* * * * *
(cc) Loans to small businesses means loans or extensions of credit
``secured by nonfarm nonresidential properties'' or ``commercial and
industrial loans'' as defined in the instructions for preparation of
the Consolidated Report of Condition and Income.
(dd) Loans or extensions of credit to small farms means ``loans
secured by farmland'' or ``loans to finance agricultural production and
other loans to farmers'' as defined in the instructions for preparation
of the Consolidated Report of Condition and Income.
* * * * *
0
27. Section 32.7 is amended by revising the section heading and
paragraphs (a) and (d) to read as follows:
Sec. 32.7 Residential real estate loans, loans to small businesses,
and loans or extensions of credit to small farms (``Supplemental
Lending Limits Program'').
(a) Residential real estate, loans to small businesses, and loans
or extensions of credit to small farms. (1) In addition to the amount
that a national bank or savings association may lend to one borrower
under Sec. 32.3, an eligible national bank or eligible savings
association may make residential real estate loans or extensions of
credit to one borrower in the lesser of the following two amounts: 10
percent of its capital and surplus; or the percent of its capital and
surplus, in excess of 15 percent, that a State bank or savings
association is permitted to lend under the State lending limit that is
available for residential real estate loans or unsecured loans in the
State where the main office of the national bank or savings association
is located. Any such loan or extension of credit must be secured by a
perfected first-lien security interest in 1-4 family real estate in an
amount that does not exceed 80 percent of the appraised value of the
collateral at the time the loan or extension of credit is made.
(2) In addition to the amount that a national bank or savings
association may lend to one borrower under Sec. 32.3, an eligible
national bank or eligible savings association may make loans to small
businesses to one borrower in the lesser of the following two amounts:
10 percent of its capital and surplus; or the percent of its capital
and surplus, in excess of 15 percent, that a State bank is permitted to
lend under the state lending limit that is available for loans to small
businesses or unsecured loans in the state where the main office of the
national bank or home office of the savings association is located.
(3) In addition to the amount that a national bank or savings
association may lend to one borrower under Sec. 32.3, an eligible
national bank or eligible savings association may make loans or
extensions of credit to small farms to one borrower in the lesser of
the following two amounts: 10 percent of its capital and surplus; or
the percent of its capital and surplus, in excess of 15 percent, that a
State bank or savings association is permitted to lend under the State
lending limit that is available for loans or extensions of credit to
small farms or unsecured loans in the State where the main office of
the national bank or savings association is located.
* * * * *
(d) Discretionary termination of authority. The appropriate
supervisory office may rescind a bank's or savings association's
authority to use the supplemental lending limits in paragraphs (a)(1),
(2), and (3) of this section based upon concerns about credit quality,
undue concentrations in the bank's or savings association's portfolio
of residential real estate, loans to small businesses, or loans or
extensions of credit to small farms, or concerns about the bank's or
savings association's overall credit risk management systems and
controls. The bank or savings association must cease making new loans
or extensions of credit in reliance on the supplemental lending limits
upon receipt of written notice from the appropriate supervisory office
that its authority has been rescinded.
* * * * *
PART 108--REMOVALS, SUSPENSIONS, AND PROHIBITIONS WHERE A CRIME IS
CHARGED OR PROVEN
0
28. The authority citation for part 108 continues to read as follows:
Authority: 12 U.S.C. 1464, 1818, 5412(b)(2)(B).
Sec. 108.6 [Amended]
0
29. Section 108.6 is amended in paragraph (d) by removing the phrase
``and Compliance''.
Sec. 108.7 [Amended]
0
30. Section 108.7 is amended in the first sentence of paragraph (c) and
in paragraph (d) by removing the phrase ``and Compliance''.
[[Page 42643]]
Sec. 108.13 [Amended]
0
31. Section 108.13 is amended in paragraph (c) by removing the phrase
``and Compliance''.
PART 112--RULES FOR INVESTIGATIVE PROCEEDINGS AND FORMAL
EXAMINATION PROCEEDINGS
0
32. The authority citation for part 112 continues to read as follows:
Authority: 12 U.S.C. 1462a, 1463, 1464, 1467, 1467a, 1813,
1817(j), 1818(n), 1820(c), 5412(b)(2)(B); 15 U.S.C. 78l.
Sec. 112.4 [Amended]
0
33. Section 112.4 is amended in the second sentence by removing the
phrase ``and Compliance''.
PART 141--DEFINITIONS FOR REGULATIONS AFFECTING FEDERAL SAVINGS
ASSOCIATIONS
0
34. The authority citation for part 141 continues to read as follows:
Authority: 12 U.S.C. 1462a, 1463, 1464, 5412(b)(2)(B).
Sec. Sec. 141.2, 141.8, 141.15, 141.16, 141.18, and 141.19 [Removed
and Reserved]
0
35. Sections 141.2, 141.8, 141.15, 141.16, 141.18, and 141.19 are
removed and reserved.
Sec. Sec. 141.27 and 141.28 [Removed]
0
36. Sections 141.27 and 141.28 are removed.
PART 160--LENDING AND INVESTMENT
0
37. The authority for part 160 continues to read as follows:
Authority: 12 U.S.C. 1462a, 1463, 1464, 1467a, 1701j-3, 1828,
3803, 3806, 5412(b)(2)(B); 42 U.S.C. 4106.
Sec. 160.1 [Amended]
0
38. Section 160.1 is amended in paragraph (a) by removing ``OCC'' and
adding in its place the phrase ``Office of the Comptroller of the
Currency (OCC)''.
Sec. 160.60 [Amended]
0
39. Section 160.60 is amended in paragraph (b)(3) by removing the
phrase ``12 CFR part 32 and Sec. 163.43 of this chapter'' and adding
in its place ``12 CFR 31.2 and part 32 of this chapter''.
PART 161--DEFINITIONS FOR REGULATIONS AFFECTING All SAVINGS
ASSOCIATIONS
0
40. The authority citation for part 161 continues to read as follows:
Authority: 12 U.S.C. 1462a, 1463, 1464, 1467a, 5412(b)(2)(B).
Sec. Sec. 161.3, 161.6, 161.26, 161.27, 161.28. 161.29, 161.30,
161.31 [Removed and Reserved]
0
41. Sections 161.3, 161.6, 161.26, 161.27, 161.28, 161.29, 161.30, and
161.31 are removed and reserved.
Sec. 161.37 [Amended]
0
42. Section 161.37 is amended by removing the first sentence.
Sec. Sec. 161.39 and 161.45 [Removed and Reserved]
0
43. Sections 161.39 and 161.45 are removed and reserved.
0
44. Section 161.50 is revised to read as follows:
Sec. 161.50 State.
The term ``State'' means any State of the United States, the
District of Columbia, any territory of the United States, Puerto Rico,
Guam, American Samoa, the Trust Territory of the Pacific Islands, the
Virgin Islands, and the Northern Mariana Islands.
Sec. 161.51 [Removed and Reserved]
0
45. Section 161.51 is removed and reserved.
PART 163--SAVINGS ASSOCIATIONS--OPERATIONS
0
46. The authority citation for part 163 continues to read as follows:
Authority: 12 U.S.C. 1462a, 1463, 1464, 1467a, 1817, 1820, 1828,
1831o, 3806, 5101 et seq., 5412(b)(2)(B); 31 U.S.C. 5318; 42 U.S.C.
4106.
Sec. 163.39 [Removed and Reserved]
0
47. Section 163.39 is removed and reserved.
Sec. 163.47 [Amended]
0
48. Section 163.47 is amended in paragraph (d) by removing ``OCC'' and
adding in its place the phrase ``Office of the Comptroller of the
Currency (OCC)''.
Sec. 163.76 [Amended]
0
49. Section 163.76 is amended:
0
a. In paragraph (b), by removing the phrase ``Sec. 197.10 of this
chapter'' and adding in its place ``Sec. 16.32 of this chapter''; and
0
b. In paragraph (c), in the Form of Certification, by removing ``]''
after the phrase ``I should call the Office of the Comptroller of the
Currency''.
Sec. 163.80 [Amended]
0
50. Section 163.80 is amended in paragraph (c) by removing the phrase
``or the FDIC'' and adding in its place the phrase ``or the Federal
Deposit Insurance Corporation (FDIC)''.
Sec. 163.180 [Amended]
0
51. Section 163.180 is amended by removing the first paragraph
designation of (d)(12)(i)(A) and its subject heading ``General rule''
and redesignating the paragraph as paragraph (d)(12)(i) introductory
text.
0
52. Part 192 is revised to read as follows:
PART 192--CONVERSIONS FROM MUTUAL TO STOCK FORM
Sec.
192.5 Purpose, prescribed forms, waiver.
192.7 Electronic filing.
192.8 Computation of time.
192.10 Forming a holding company upon conversion.
192.15 Forming a charitable organization upon conversion.
192.20 Acquiring another insured depository institution upon
conversion.
192.25 Definitions.
Subpart A--Standard Conversions
Prior to Conversion
192.100 Preparing for a conversion.
192.105 Information required in business plan.
192.110 Review of business plan by chief executive officer and board
of directors.
192.115 Review of business plan by the appropriate Federal banking
agency.
192.120 Confidentiality of conversion information.
Plan of Conversion
192.125 Adoption of plan of conversion by board of directors.
192.130 Information required in plan of conversion.
192.135 Notifying members of adopted plan of conversion.
192.140 Amendments to plan of conversion.
Filing Requirements
192.150 Information required in an application for conversion.
192.155 Filing an application for conversion.
192.160 Request for confidential treatment.
192.165 Amendments to an application for conversion.
Notice of Filing of Application and Comment Process
192.180 Public notice of an application for conversion.
192.185 Public comment on application for conversion.
Agency Review of the Application for Conversion
192.200 Review, approval, or denial of application for conversion.
192.205 Court review of final action on application for conversion.
Vote by Members
195.225 Approval of plan of conversion by members.
192.230 Members' voting eligibility.
192.235 Notice of members' meeting.
192.240 Submission of documents to the appropriate Federal banking
agency after the members' meeting.
[[Page 42644]]
Proxy Solicitation
192.250 Compliance with proxy solicitation provisions.
192.255 Form of proxy requirements.
192.260 Previously executed proxies.
192.265 Proxies executed under this part.
192.270 Proxy statement requirements.
192.275 Filing revised proxy materials.
192.280 Mailing member's proxy solicitation materials.
192.285 Prohibited solicitations.
192.290 Remedial measures for prohibited solicitations.
192.295 Re-solicitation of proxies.
Offering Circular
192.300 Offering circular requirements.
192.305 Distribution of offering circular.
192.310 Filing a post-effective amendment to an offering circular.
Offers and Sales of Stock
192.320 Order of priority to purchase conversion shares.
192.325 Timing of offer to sell conversion shares.
192.330 Pricing of conversion shares.
192.335 Procedures for the sale of conversion shares.
192.340 Prohibited sales practices.
192.345 Permissible forms of subscriber payment.
192.350 Interest on payments for conversion shares.
192.355 Subscription rights for eligible account holders and
supplemental eligible account holders.
192.360 Officers, directors, and associates as eligible account
holders.
192.365 Purchase of conversion shares by other voting members.
192.370 Limits on aggregate purchases by officers, directors, and
associates.
192.375 Allocation of oversubscribed conversion shares.
192.380 Purchase of conversion shares by employee stock ownership
plan.
192.385 Purchase limitations.
192.390 Community offering of conversion shares.
192.395 Other conditions for community and public offerings.
Completion of the Offering
192.400 Time period for completion of sale of stock.
192.405 Extension of the offering period.
Completion of the Conversion
192.420 Time period for completion of the conversion.
192.425 Termination of conversion.
192.430 Charter amendments.
192.435 Corporate existence after conversion.
192.440 Stockholder voting rights after conversion.
192.445 Savings account holder's account after conversion.
Liquidation Account
192.450 Liquidation accounts.
192.455 Initial balance of liquidation account.
192.460 Initial balance of liquidation sub-account.
192.465 Retention of voting rights based on liquidation sub-
accounts.
192.470 Required adjustments to liquidation sub-accounts.
192.475 Definition of liquidation.
192.480 Effect of liquidation account on net worth.
192.485 Required liquidation account provision in new Federal
charter.
Post-Conversion
192.500 Possible management stock benefit plans after conversion.
192.505 Restrictions on the trading of shares by directors,
officers, and associates.
192.510 Repurchase of shares after conversion.
192.515 Information to be filed with Federal banking agency prior to
repurchase of shares.
192.520 Declaring and paying dividends after the conversion.
192.525 Restrictions on acquisition of shares after conversion.
192.530 Other post-conversion requirements.
Contributions to Charitable Organizations
192.550 Donating conversion shares or conversion proceeds to a
charitable organization.
192.555 Member approval of charitable contributions.
192.560 Limitations on charitable contributions.
192.565 Contents of organizational documents of charitable
organization.
192.570 Conflicts of interest among directors.
192.575 Other requirements for charitable organizations.
Subpart B--Voluntary Supervisory Conversions
192.600 Voluntary supervisory conversions.
192.605 Conducting a voluntary supervisory conversion.
192.610 Member rights in a voluntary supervisory conversion.
Eligibility
192.625 Eligibility for a voluntary supervisory conversion.
192.630 Eligibility of State-chartered savings bank for voluntary
supervisory conversion.
Plan of Supervisory Conversion
192.650 Contents of plan of voluntary supervisory conversion.
Voluntary Supervisory Conversion Application
192.660 Contents of voluntary supervisory conversion application.
Appropriate Federal Banking Agency Review of the Voluntary
Supervisory Conversion Application
192.670 Approval of voluntary supervisory conversion application.
192.675 Conditions imposed upon approval of voluntary supervisory
conversion application.
Offers and Sales of Stock
192.680 Offer and sale of shares in a voluntary supervisory
conversion.
Post-Conversion
192.690 Restrictions on acquisition of additional shares after
voluntary supervisory conversion.
Authority: 12 U.S.C. 1462a, 1463, 1464, 1467a, 2901 et seq.,
5412(b)(2)(B); 15 U.S.C. 78c, 78l, 78m, 78n, 78w.
Sec. 192.5 Purpose, prescribed forms, waiver.
(a) General. This part governs how a savings association may
convert from the mutual to the stock form of ownership. Subpart A of
this part governs standard mutual-to-stock conversions. Subpart B of
this part governs voluntary supervisory mutual-to-stock conversions.
This part supersedes all inconsistent charter and bylaw provisions of
Federal savings associations converting to stock form.
(b) Prescribed forms. A savings association must use the forms
prescribed under this part and part 16 and provide such information as
the appropriate Federal banking agency may require under the forms and
by regulation. The forms required under this part include: Form AC
(Application for Conversion); Form PS (Proxy Statement); Form OC
(Offering Circular); Form OF (Order Form); and the applicable form for
a registration statement under 12 CFR 16.15. Forms AC, PS, OC, and OF
are available on the website of the Office of the Comptroller of the
Currency (OCC) at http://www.occ.gov.
(c) Waivers. The appropriate Federal banking agency may waive any
requirement of this part or a provision in any prescribed form. To
obtain a waiver, a savings association must file a written request with
the appropriate Federal banking agency that:
(1) Specifies the requirement(s) or provision(s) the savings
association wants the appropriate Federal banking agency to waive;
(2) Demonstrates that the waiver is equitable; is not detrimental
to the savings association, its account holders, or other savings
associations; and is not contrary to the public interest; and
(3) Includes an opinion of counsel demonstrating that applicable
law does not conflict with the waiver of the requirement or provision.
(d) Financial statements. The form and content of financial
statements and related financial data in a filing under this part must
be prepared and presented in accordance with U. S. generally accepted
accounting principles and other applicable accounting guidance and
requirements
[[Page 42645]]
as specified by the OCC in the forms required under paragraph (b) of
this section.
Sec. 192.7 Electronic filing.
For Federal savings associations, the OCC encourages the electronic
filing of all applications, notices, or other documents required by
this part through http://www.banknet.gov/. The Comptroller's Licensing
Manual describes the OCC's electronic filing procedures.
Sec. 192.8 Computation of time.
In computing the period of days, the OCC excludes the day of the
act or event (e.g., the date an application is received by the OCC)
from when the period begins to run. When the last day of a time period
is a Saturday, Sunday, or Federal holiday, the time period runs until
the end of the next day that is not a Saturday, Sunday, or Federal
holiday.
Sec. 192.10 Forming a holding company upon conversion.
A savings association may convert to the stock form of ownership as
part of a transaction where the savings association organizes a holding
company to acquire all of the savings association's shares upon their
issuance. In this transaction, the savings association's holding
company will offer rights to purchase its shares instead of the savings
association's shares. Regulations of the Board of Governors of the
Federal Reserve System address holding company application
requirements.
Sec. 192.15 Forming a charitable organization upon conversion.
When a savings association converts to the stock form, it may form
a charitable organization. A savings association's contributions to the
charitable organization are governed by the requirements of Sec. Sec.
192.550 through 192.575.
Sec. 192.20 Acquiring another insured depository institution upon
conversion.
When a savings association converts to stock form, it may acquire
for cash or stock another insured depository institution that is
already in the stock form of ownership.
Sec. 192.25 Definitions.
The following definitions apply to this part and the forms
prescribed under this part:
Acting in concert has the same meaning as in 12 CFR 5.50(d)(2). The
rebuttable presumptions of 12 CFR 5.50(f)(2), other than 12 CFR
5.50(f)(2)(ii)(A) and (B), apply to the share purchase limitations at
Sec. Sec. 192.355 through 192.395.
Affiliate of, or a person affiliated with, a specified person is a
person that directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with the
specified person.
Appropriate Federal banking agency means appropriate Federal
banking agency as defined in section 3 of the Federal Deposit Insurance
Act (12 U.S.C. 1813(q)).
Associate of a person is:
(1) A corporation or organization (other than a savings association
or its majority-owned subsidiaries), if the person is a senior officer
or partner, or beneficially owns, directly or indirectly, 10 percent or
more of any class of equity securities of the corporation or
organization.
(2) A trust or other estate, if the person has a substantial
beneficial interest in the trust or estate or is a trustee or fiduciary
of the trust or estate. For purposes of Sec. Sec. 192.370 through
192.395 and 192.505, a person who has a substantial beneficial interest
in a savings association's tax-qualified or non-tax-qualified employee
stock benefit plan, or who is a trustee or a fiduciary of the plan, is
not an associate of the plan. For the purposes of Sec. 192.370, a
savings association's tax-qualified employee stock benefit plan is not
an associate of a person.
(3) Any person who is related by blood or marriage to such person
and:
(i) Who lives in the same home as the person; or
(ii) Who is the savings association's director or senior officer,
or a director or senior officer of the savings association's holding
company or its subsidiary.
Association members or members are persons who, under applicable
law, are eligible to vote at the meeting on conversion.
Community offering means the offer to sell to the members of the
general public in the savings association's community the securities
not subscribed for in the subscription offering. The community offering
may occur concurrently with the subscription offering and any
syndicated community offering, or upon conclusion of the subscription
offering.
Control (including controlling, controlled by, and under common
control with) means the direct or indirect power to direct or exercise
a controlling influence over the management and policies of a person,
whether through the ownership of voting securities, by contract, or
otherwise as described in 12 CFR 5.50.
Demand accounts means non-interest-bearing demand deposits that are
subject to check or to withdrawal or transfer on negotiable or
transferable order to the savings association and that are permitted to
be issued by statute, regulation, or otherwise and are payable on
demand.
Eligibility record date is the date for determining eligible
account holders. The eligibility record date must be at least one year
before the date a savings association's board of directors adopts the
plan of conversion.
Eligible account holders are any persons holding qualifying
deposits on the eligibility record date.
Federal savings association means a Federal savings association or
Federal savings bank chartered under section 5 of the Home Owners' Loan
Act (HOLA) (12 U.S.C. 1464).
IRS is the Internal Revenue Service.
Local community includes:
(1) Every county, parish, or similar governmental subdivision in
which a savings association has a home or branch office;
(2) Each county's, parish's, or subdivision's metropolitan
statistical area;
(3) All zip code areas in a savings association's Community
Reinvestment Act assessment area; and
(4) Any other area or category that a savings association sets out
in its plan of conversion, as approved by the appropriate Federal
banking agency.
Offer, offer to sell, or offer for sale is an attempt or offer to
dispose of, or a solicitation of an offer to buy, a security or
interest in a security for value. Preliminary negotiations or
agreements with an underwriter, or among underwriters who are or will
be in privity of contract with a savings association, are not offers,
offers to sell, or offers for sale.
Offering circular means the securities offering materials for the
conversion.
Person is an individual, a corporation, a partnership, an
association, a joint-stock company, a limited liability company, a
trust, an unincorporated organization, or a government or political
subdivision of a government.
Proxy soliciting material includes a proxy statement, form of
proxy, or other written or oral communication regarding the conversion.
Purchase or buy includes every contract to acquire a security or
interest in a security for value.
Qualifying deposit is the total balance in an account holder's
savings accounts at the close of business on the eligibility or
supplemental eligibility record date. A savings association's plan of
conversion may provide that only
[[Page 42646]]
savings accounts with total deposit balances of $50 or more will
qualify.
Sale or sell includes every contract to dispose of a security or
interest in a security for value. An exchange of securities in a merger
or acquisition approved by the appropriate Federal banking agency is
not a sale.
Savings account means any withdrawable account, including a demand
account, except this term does not mean a tax and loan account, a note
account, a United States Treasury general account, or a United States
Treasury time deposit-open account.
Savings association means a savings association as defined in
section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813(b)(1)).
Solicitation and solicit is a request for a proxy, whether or not
accompanied by or included in a form of proxy; a request to execute,
not execute, or revoke a proxy; or the furnishing of a form of proxy or
other communication reasonably calculated to cause a savings
association's members to procure, withhold, or revoke a proxy.
Solicitation or solicit does not include providing a form of proxy at
the unsolicited request of a member, the acts required to mail
communications for members, or ministerial acts performed on behalf of
a person soliciting a proxy.
State means any State of the United States, the District of
Columbia, any territory of the United States, Puerto Rico, Guam,
American Samoa, the Trust Territory of the Pacific Islands, the Virgin
Islands, and the Northern Mariana Islands.
State savings association means a State savings association as
defined in section 3 of the Federal Deposit Insurance Act (12 U.S.C.
1813(b)(3)).
Subscription offering is the offering of shares through
nontransferable subscription rights to:
(1) Eligible account holders under Sec. 192.355;
(2) Tax-qualified employee stock ownership plans under Sec.
192.380;
(3) Supplemental eligible account holders under Sec. 192.355; and
(4) Other voting members under Sec. 192.365.
Supplemental eligibility record date is the date for determining
supplemental eligible account holders. The supplemental eligibility
record date is the last day of the calendar quarter before the
appropriate Federal banking agency approves a savings association's
conversion and will only occur if such agency has not approved such
conversion within 15 months after the eligibility record date.
Supplemental eligible account holders are any persons, except a
savings association's officers, directors, and their associates,
holding qualifying deposits on the supplemental eligibility record
date.
Tax-qualified employee stock benefit plan is any defined benefit
plan or defined contribution plan, such as an employee stock ownership
plan, stock bonus plan, profit-sharing plan, or other plan, and a
related trust, that is qualified under section 401 of the Internal
Revenue Code (26 U.S.C. 401).
Underwriter is any person who purchases any securities from a
savings association with a view to distributing the securities, offers
or sells securities for a savings association in connection with the
securities' distribution, or participates or has a direct or indirect
participation in the direct or indirect underwriting of any such
undertaking. Underwriter does not include a person whose interest is
limited to a usual and customary distributor's or seller's commission
from an underwriter or dealer.
Voluntary supervisory conversion is a mutual to stock conversion
for a savings association that is unable to complete a standard mutual
to stock conversion under part 192, subpart A, and that meets the
eligibility requirements of Sec. 192.625.
Subpart A--Standard Conversions
Prior to Conversion
Sec. 192.100 Preparing for a conversion.
(a) Meeting with appropriate Federal banking agency prior to
passing plan. A savings association's board, or a subcommittee of its
board, must meet, in person or electronically, with the appropriate
Federal banking agency before the savings association passes its plan
of conversion. At this meeting the savings association must provide the
appropriate Federal banking agency with a written strategic plan that
outlines the objectives of the proposed conversion and the intended use
of the conversion proceeds.
(b) Consultation with appropriate Federal banking agency before
filing application. A savings association also should consult with the
appropriate Federal banking agency before filing its application for
conversion. The appropriate Federal banking agency will discuss the
information that the savings association must include in the
application for conversion, general issues that it may confront in the
conversion process, and any other pertinent issues.
Sec. 192.105 Information required in business plan.
(a) Minimum requirements. Prior to filing an application for
conversion, a savings association must adopt a business plan reflecting
its intended plans for deployment of the proposed conversion proceeds.
The savings association's business plan is required, under Sec.
192.150, to be included in its application for conversion. At a
minimum, the business plan must address:
(1) The savings association's projected operations and activities
for three years following the conversion. These projections must
include how the savings association will accomplish the following by
the final year of the business plan:
(i) Deploy the conversion proceeds at the converted savings
association (and holding company, if applicable);
(ii) What opportunities are available to reasonably achieve its
planned deployment of conversion proceeds in the proposed market areas;
and
(iii) How the deployment will provide a reasonable return on
investment commensurate with investment risk, investor expectations,
and industry norms. The savings association must include three years of
projected financial statements. The business plan must provide that the
converted savings association must retain at least 50 percent of the
net conversion proceeds. The appropriate Federal banking agency may
require that a larger percentage of proceeds remain in the institution.
(2) The savings association's plan for deploying conversion
proceeds to meet credit and lending needs in the proposed market areas.
The appropriate Federal banking agencies strongly discourage business
plans that provide for a substantial investment in mortgage securities
or other securities, except as an interim measure to facilitate
orderly, prudent deployment of proceeds during the three years
following the conversion or as part of a properly managed leverage
strategy.
(3) The risks associated with the savings association's plan for
deployment of conversion proceeds, and the effect of this plan on
management resources, staffing, and facilities.
(4) The expertise of the savings association's management and board
of directors, or plans for adequate staffing and controls to prudently
manage the growth, expansion, new investment, and other operations and
activities proposed in the business plan.
(b) Prohibited information. The savings association may not project
returns of capital or special dividends in any part of the business
plan. A newly
[[Page 42647]]
converted company may not plan on stock repurchases in the first year
of the business plan.
Sec. 192.110 Review of business plan by chief executive officer and
board of directors.
(a) Review and approval. A savings association's chief executive
officer and members of the board of directors must review, and at least
two-thirds of the board of directors must approve, the business plan.
(b) Certification. A savings association's chief executive officer
and at least two-thirds of the board of directors must certify that the
business plan accurately reflects the intended plans for deployment of
conversion proceeds, and that any new initiatives reflected in the
business plan are reasonably achievable. The savings association must
submit these certifications with its business plan, as part of its
application for conversion under Sec. 192.150.
Sec. 192.115 Review of business plan by the appropriate Federal
banking agency.
(a) Agency review. The appropriate Federal banking agency will
review the savings association's business plan to determine that it
demonstrates a safe and sound deployment of conversion proceeds, as
part of its review of the application for conversion. In making its
determination, the appropriate Federal banking agency will consider how
the savings association has addressed the applicable factors of Sec.
192.105. No single factor will be determinative.
(b) Filing of business plan. A savings association must file its
business plan as a separate confidential exhibit to the Form AC with
the appropriate OCC licensing office if it is a Federal savings
association, or with the appropriate Federal Deposit Insurance
Corporation (FDIC) region if it is a State savings association. The
appropriate Federal banking agency may request additional information,
if necessary, to support its determination under paragraph (a) of this
section.
(c) Operation within business plan. If the appropriate Federal
banking agency approves a savings association's application for
conversion and the conversion is completed, the savings association
must operate within the parameters of its business plan. The savings
association must obtain the prior written approval of the appropriate
Federal banking agency for any material deviations from its business
plan.
Sec. 192.120 Confidentiality of conversion information.
(a) Permitted disclosure. A savings association may discuss
information about its conversion with individuals that the savings
association authorizes to prepare documents for its conversion.
(b) Confidential information. Except as permitted under paragraph
(a) of this section, a savings association must keep all information
about its conversion confidential until its board of directors adopts
the plan of conversion.
(c) Violations of confidentiality. If a savings association
violates this section, the appropriate Federal banking agency may
require the savings association to take remedial action. For example,
the appropriate Federal banking agency may require the savings
association to take any or all of the following actions:
(1) Publicly announce that the savings association is considering a
conversion;
(2) Set an eligibility record date acceptable to the appropriate
Federal banking agency;
(3) Limit the subscription rights of any person who violates or
aids a violation of this section; or
(4) Any other action to assure that the conversion is fair and
equitable.
Plan of Conversion
Sec. 192.125 Adoption of plan of conversion by board of directors.
Prior to filing an application for conversion, a savings
association's board of directors must adopt a plan of conversion that
conforms to Sec. Sec. 192.320 through 192.485 and 192.505. The savings
association's board of directors must adopt the plan by at least a two-
thirds vote. Pursuant to Sec. 192.150, the savings association must
include the plan of conversion in the application for conversion.
Sec. 192.130 Information required in plan of conversion.
A savings association must include the information included in
Sec. Sec. 192.320 through 192.485 and 192.505 in its plan of
conversion. The appropriate Federal banking agency may require the
savings association to delete or revise any provision in its plan of
conversion if it determines the provision is inequitable; is
detrimental to the savings association, its account holders, or other
savings associations; or is contrary to public interest.
Sec. 192.135 Notifying members of adopted plan of conversion.
(a) Notice. A savings association must promptly notify its members
that the board of directors adopted a plan of conversion and that a
copy of the plan is available for the members' inspection in the
savings association's home office and in its branch offices. The
savings association must provide this notice by sending to each member
a letter, through the mail or electronically if the member receives
electronic communication, or by publishing a notice in the local
newspaper in every local community where the savings association has an
office. The savings association also may issue a press release and may
make this notice available on its website. The appropriate Federal
banking agency may require broader publication, if necessary, to ensure
adequate notice to the savings association's members.
(b) Contents of notice. The savings association may include only
the following statements and descriptions in the letter, notice, or
press release.
(1) The savings association's board of directors adopted a proposed
plan to convert from a mutual to a stock savings institution.
(2) The savings association will send its members a proxy statement
with detailed information on the proposed conversion before the savings
association convenes a members' meeting to vote on the conversion.
(3) The savings association's members will have an opportunity to
approve or disapprove the proposed conversion at a meeting. A majority
of the eligible votes must approve the conversion.
(4) The savings association will not vote existing proxies to
approve or disapprove the conversion. The savings association will
solicit new proxies for voting on the proposed conversion.
(5) The appropriate Federal banking agency, and in the case of a
State-chartered savings association, the appropriate State regulator,
must approve the conversion before the conversion will be effective.
The savings association's members will have an opportunity to file
written comments, including objections and materials supporting the
objections, with the appropriate Federal banking agency.
(6) The IRS must issue a favorable tax ruling, or a tax expert must
issue an appropriate tax opinion, on the tax consequences of the
savings association's conversion before the appropriate Federal banking
agency will approve the conversion. The ruling or opinion must indicate
the conversion will be a tax-free reorganization.
(7) The appropriate Federal banking agency, and in the case of a
State-chartered savings association, the appropriate State regulator,
might not approve the conversion, and the IRS or a tax expert might not
issue a favorable tax ruling or tax opinion.
(8) Savings account holders will continue to hold accounts in the
converted savings association with the same dollar amounts, rates of
return, and general terms as existing deposits.
[[Page 42648]]
The FDIC will continue to insure the accounts.
(9) The savings association's conversion will not affect borrowers'
loans, including the amount, rate, maturity, security, and other
contractual terms.
(10) The savings association's business of accepting deposits and
making loans will continue without interruption.
(11) The savings association's current management and staff will
continue to conduct current services for depositors and borrowers under
current policies and in existing offices.
(12) The savings association may substantively amend its proposed
plan of conversion before the members' meeting.
(13) The savings association may terminate the proposed conversion.
(14) After the appropriate Federal banking agency, and in the case
of a State-chartered savings association, the appropriate State
regulator, approves the proposed conversion, the savings association
will send proxy materials providing additional information. After the
savings association sends proxy materials, members may telephone or
write to the savings association with additional questions.
(15) The proposed record date for determining the eligible account
holders who are entitled to receive subscription rights to purchase the
savings association's shares.
(16) A brief description of the circumstances under which
supplemental eligible account holders will receive subscription rights
to purchase the savings association's shares.
(17) A brief description of how voting members may participate in
the conversion.
(18) A brief description of how directors, officers, and employees
will participate in the conversion.
(19) A brief description of the proposed plan of conversion.
(20) The par value (if any) and approximate number of shares the
savings association will issue and sell in the conversion.
(c) Other requirements. (1) The savings association may not solicit
proxies, provide financial statements, describe the benefits of
conversion, or estimate the value of its shares upon conversion in the
letter, notice, or press release.
(2) If the savings association responds to inquiries about the
conversion, it may address only the matters listed in paragraph (b) of
this section.
Sec. 192.140 Amendments to plan of conversion.
A savings association may amend its plan of conversion before it
solicits proxies. After the savings association solicits proxies, it
may amend the plan of conversion only if the appropriate Federal
banking agency concurs.
Filing Requirements
Sec. 192.150 Information required in an application for conversion.
(a) Required information. A savings association's application for
conversion must include all of the following information.
(1) The savings association's plan of conversion.
(2) Pricing materials meeting the requirements of Sec. 192.200(b).
(3) Proxy soliciting materials under Sec. 192.270, including:
(i) A preliminary proxy statement with signed financial statements;
(ii) A form of proxy meeting the requirements of Sec. 192.255; and
(iii) Any additional proxy soliciting materials, including press
releases, personal solicitation instructions, radio or television
scripts that the savings association plans to use or furnish to its
members, and a legal opinion indicating that any marketing materials
comply with all applicable securities laws.
(4) An offering circular described in Sec. 192.300.
(5) The documents and information required by Form AC. The savings
association may obtain Form AC from the appropriate Federal banking
agency.
(6) Where indicated, written consents, signed and dated, of any
accountant, attorney, investment banker, appraiser, or other
professional who prepared, reviewed, passed upon, or certified any
statement, report, or valuation for use. See Form AC, instructions.
(7) The savings association's business plan, submitted as a
separately bound, confidential exhibit. See Sec. 192.160.
(8) Any additional information that the appropriate Federal banking
agency requests.
(b) Rejection of filing. The appropriate Federal banking agency
will not accept for filing, and may return, any application for
conversion that is executed improperly, materially deficient,
substantially incomplete, or that provides for unreasonable conversion
expenses.
Sec. 192.155 Filing an application for conversion.
A Federal savings association must file Form AC with the
appropriate OCC licensing office. A State savings association must file
its application with the appropriate FDIC region.
Sec. 192.160 Request for confidential treatment.
(a) In general. The appropriate Federal banking agency makes all
filings under this part available to the public, but may keep portions
of the application for conversion confidential under paragraph (b) of
this section.
(b) Requests for confidential treatment. A savings association may
request that the appropriate Federal banking agency keep portions of
the savings association's application confidential. To make this
request, the savings association must clearly designate as
``confidential'' any portion of its application for conversion that it
deems confidential. The savings association must provide a written
statement specifying the grounds supporting its request for
confidentiality. The appropriate Federal banking agency will not treat
as confidential the portion of a savings association's application
describing how it plans to meet Community Reinvestment Act (CRA)
objectives. The CRA portion of a savings association's application may
not incorporate by reference information contained in the confidential
portion of the application.
(c) Determination of confidential treatment. The appropriate
Federal banking agency will determine whether confidential information
must be made available to the public under 5 U.S.C. 552 and 12 CFR part
4 or 12 CFR part 309, as appropriate. The appropriate Federal banking
agency will advise the savings association before it makes information
designated as ``confidential'' available to the public.
Sec. 192.165 Amendments to an application for conversion.
To amend its application for conversion, a savings association
must:
(a) File an amendment with an appropriate facing sheet;
(b) Number each amendment consecutively;
(c) Respond to all issues raised by the appropriate Federal banking
agency; and
(d) Demonstrate that the amendment conforms to all applicable
regulations.
Notice of Filing of Application and Comment Process
Sec. 192.180 Public notice of an application for conversion.
(a) In general. A Federal savings association must publish a public
notice of the application in accordance with the procedures in 12 CFR
5.8. The Federal savings association must simultaneously prominently
post the notice in its home office and all branch
[[Page 42649]]
offices and may also make this notice available on its website.
(b) Additional notice. If the appropriate Federal banking agency
does not accept a savings association's application for conversion
under Sec. 192.200 and requires the savings association to file a new
application, the savings association must publish and post a new notice
and allow an additional 30 calendar days for comment.
Sec. 192.185 Public comment on application for conversion.
Commenters may submit comments on a Federal savings association's
application in accordance with the procedures in 12 CFR 5.10.
Agency Review of the Application for Conversion
Sec. 192.200 Review, approval, or denial of application for
conversion.
(a) Standards for review of application. The appropriate Federal
banking agency may approve an application for conversion only if:
(1) The conversion complies with this part;
(2) The savings association will meet its regulatory capital
requirements under 12 CFR part 3 or part 324, as applicable, after the
conversion; and
(3) The conversion will not result in a taxable reorganization
under the Internal Revenue Code of 1986, as amended.
(b) Standards for review of appraisal. The appropriate Federal
banking agency will review the appraisal required by Sec.
192.150(a)(2) in determining whether to approve the application. The
appropriate Federal banking agency will review the appraisal under the
following requirements.
(1) Independent persons experienced and expert in corporate
appraisal, and acceptable to the appropriate Federal banking agency,
must prepare the appraisal report.
(2) An affiliate of the appraiser may serve as an underwriter or
selling agent, if the savings association ensures that the appraiser is
separate from the underwriter or selling agent affiliate and the
underwriter or selling agent affiliate does not make recommendations or
affect the appraisal.
(3) The appraiser may not receive any fee in connection with the
conversion other than for appraisal services.
(4) The appraisal report must include a complete and detailed
description of the elements of the appraisal, a justification for the
appraisal methodology, and sufficient support for the conclusions.
(5) If the appraisal is based on a capitalization of the savings
association's pro forma income, it must indicate the basis for
determining the income to be derived from the sale of shares, and
demonstrate that the earnings multiple used is appropriate, including
future earnings growth assumptions.
(6) If the appraisal is based on a comparison of the savings
association's shares with outstanding shares of existing stock
associations, the existing stock associations must be reasonably
comparable in size, market area, competitive conditions, risk profile,
profit history, and expected future earnings.
(7) The appropriate Federal banking agency may decline to process
the application for conversion and deem it materially deficient or
substantially incomplete if the initial appraisal report is materially
deficient or substantially incomplete.
(8) A savings association may not represent or imply that the
appropriate Federal banking agency approved the appraisal.
(c) Compliance with the Community Reinvestment Act. The appropriate
Federal banking agency will review the savings association's compliance
record under 12 CFR part 195 and its business plan to determine how the
savings association will serve the convenience and needs of its
communities after the conversion.
(1) Based on this review, the appropriate Federal banking agency
may approve the application, deny the application, or approve the
application on the condition that the savings association will improve
its CRA performance or that the savings association will address the
particular credit or lending needs of the communities that it will
serve.
(2) The appropriate Federal banking agency may deny the application
if the savings association's business plan does not demonstrate that
its proposed use of conversion proceeds will help the savings
association to meet the credit and lending needs of the communities
that it will serve.
(d) Additional information. The appropriate Federal banking agency
may request that a savings association amend its application if further
explanation is necessary, material is missing, or material needs
correction.
(e) Denial of application. The appropriate Federal banking agency
will deny an application if the application does not meet the
requirements of this subpart, unless the appropriate Federal banking
agency waives the requirement under Sec. 192.5(c).
Sec. 192.205 Court review of final action on application for
conversion.
(a) In general. Any person aggrieved by the appropriate Federal
banking agency's final action on a savings association's application
for conversion may ask the court of appeals of the United States for
the circuit in which the principal office or residence of such person
is located, or the U.S. Court of Appeals for the District of Columbia
Circuit, to review the action under 12 U.S.C. 1464(i)(2)(B).
(b) Filing procedures. To obtain court review of the action, this
statute requires the aggrieved person to file a written petition
requesting that the court modify, terminate, or set aside the final
appropriate Federal banking agency action. The aggrieved person must
file the petition with the court within the later of 30 calendar days
after the appropriate Federal agency publishes notice of its final
action in the Federal Register or 30 calendar days after the savings
association mails the proxy statement to its members under Sec.
192.235.
Vote by Members
Sec. 192.225 Approval of plan of conversion by members.
(a) In general. After the appropriate Federal banking agency
approves a plan of conversion, the savings association must submit the
plan of conversion to its members for approval. The savings association
must obtain this approval at a meeting of its members, which may be a
special or annual meeting, unless the savings association is State-
chartered and State law requires approval via an annual meeting.
(b) Approval. The savings association's members must approve the
plan of conversion by a majority of the total outstanding votes, unless
the savings association is State-chartered and State law prescribes a
higher percentage.
(c) Voting method. Savings association members may vote in person
or by proxy.
(d) Notification to non-voting members. The savings association may
notify eligible account holders or supplemental eligible account
holders who are not voting members of its proposed conversion. The
savings association may include only the information in Sec. 192.135
in its notice.
Sec. 192.230 Members' voting eligibility.
A savings association determines members' eligibility to vote by
setting a voting record date. The savings association must set a voting
record date that is not more than 60 calendar days nor less than 20
calendar days before its
[[Page 42650]]
meeting, unless the savings association is State-chartered and State
law requires a different voting record date.
Sec. 192.235 Notice of members' meeting.
(a) In general. A savings association must notify its members of
the meeting to consider its conversion by sending the members a proxy
statement cleared by the appropriate Federal banking agency.
(b) Timing of notice. The savings association must notify its
members 20 to 45 calendar days before the meeting, unless the savings
association is State-chartered and State law requires a different
notice period.
(c) Notice to beneficial account holders. The savings association
must also notify each beneficial holder of an account held in a
fiduciary capacity:
(1) If the savings association is a Federal savings association,
and the name of the beneficial holder is disclosed on the savings
association's records; or
(2) If the savings association is a State-chartered savings
association and the beneficial holder possesses voting rights under
State law.
Sec. 192.240 Submission of documents to the appropriate Federal
banking agency after the members' meeting.
(a) Filings after members' meeting. Promptly after the members'
meeting, a savings association must file all of the following
information with the appropriate OCC licensing office, if the savings
association is Federally-chartered, and with the appropriate FDIC
region if the savings association is State-chartered.
(1) A certified copy of each adopted resolution on the conversion.
(2) The total votes eligible to be cast.
(3) The total votes represented in person or by proxy.
(4) The total votes cast in favor of and against each matter.
(5) The percentage of votes necessary to approve each matter.
(6) An opinion of counsel that the savings association conducted
the members' meeting in compliance with all applicable State or Federal
laws and regulations.
(b) Filing after conversion. Promptly after completion of the
conversion, the savings association must submit an opinion of counsel
that it complied with all laws applicable to the conversion.
Proxy Solicitation
Sec. 192.250 Compliance with proxy solicitation provisions.
(a) Savings association compliance. A savings association must
comply with these proxy solicitation provisions when it provides proxy
solicitation material to members for the meeting to vote on the plan of
conversion.
(b) Member compliance. Members of the savings association must
comply with these proxy solicitation provisions when they provide proxy
solicitation materials to members for the meeting to vote on the
conversion, pursuant to Sec. 192.280, except where:
(1) The member solicits 50 people or fewer and does not solicit
proxies on the savings association's behalf; or
(2) The member solicits proxies through newspaper advertisements
after the savings association's board of directors adopts the plan of
conversion. Any newspaper advertisements may include only the following
information:
(i) The name of the savings association;
(ii) The reason for the advertisement;
(iii) The proposal or proposals to be voted upon;
(iv) Where a member may obtain a copy of the proxy solicitation
material; and
(v) A request for the savings association's members to vote at the
meeting.
Sec. 192.255 Form of proxy requirements.
The form of proxy must include all of the following:
(a) A statement in bold face type stating that management is
soliciting the proxy.
(b) Blank spaces where the member must date and sign the proxy.
(c) Clear and impartial identification of each matter or group of
related matters that members will vote upon. The savings association
must include any proposed charitable contribution as an item to be
voted on separately.
(d) The phrase ``Revocable Proxy'' in bold face type (at least 18
point).
(e) A description of any charter or State law requirement that
restricts or conditions votes by proxy.
(f) An acknowledgment that the member received a proxy statement
before he or she signed the form of proxy.
(g) The date, time, and the place of the meeting, when available.
(h) A way for the member to specify by ballot whether he or she
approves or disapproves of each matter that members will vote upon.
(i) A statement that management will vote the proxy in accordance
with the member's specifications.
(j) A statement in bold face type indicating how management will
vote the proxy if the member does not specify a choice for a matter.
Sec. 192.260 Previously executed proxies.
A savings association may not use previously executed proxies for
the plan of conversion vote. If members consider the plan of conversion
at an annual meeting, the savings association may vote proxies obtained
through other proxy solicitations only on matters not related to the
plan of conversion.
Sec. 192.265 Proxies executed under this part.
A savings association may vote a proxy obtained under this part on
matters that are incidental to the conduct of the meeting. The savings
association may not vote a proxy obtained under this subpart at any
meeting other than the meeting (or any adjournment of the meeting) to
vote on the plan of conversion.
Sec. 192.270 Proxy statement requirements.
(a) Content requirements. A savings association must prepare its
proxy statement in compliance with this part and Form PS.
(b) Other requirements. (1) The appropriate Federal banking agency
will review the proxy solicitation material when it reviews the
application for conversion and will clear the proxy solicitation
material.
(2) The savings association must provide a cleared written proxy
statement to its members before or at the same time it provides any
other soliciting material. The savings association must mail cleared
proxy solicitation material to its members within 10 calendar days
after the appropriate Federal banking agency clears the solicitation.
Sec. 192.275 Filing revised proxy materials.
(a) In general. A savings association must file revised proxy
solicitation materials as an amendment to its application for
conversion. The proxy solicitation materials must be in the form in
which it furnished the materials to its members.
(b) Content of filing. To revise its proxy solicitation materials,
the savings association must file:
(1) Its revised proxy materials as required by Form PS;
(2) Its revised form of proxy, if applicable;
(3) Any additional proxy solicitation material subject to Sec.
192.270; and
(4) A copy of the revised proxy solicitation materials marked to
clearly indicate changes from the prior filing.
(c) When to file. The savings association must file no later than
the date that it sends or gives the proxy solicitation material to its
members. The savings association must indicate the date that it will
release the materials.
[[Page 42651]]
(d) Material not required to be filed. Unless requested by the
appropriate Federal banking agency, the savings association does not
have to file copies of replies to inquiries from its members or copies
of communications that merely request members to sign and return proxy
forms.
Sec. 192.280 Mailing member's proxy solicitation materials.
(a) In general. A savings association must mail the member's
cleared proxy solicitation material if:
(1) The savings association's board of directors adopted a plan of
conversion;
(2) A member requests in writing that the savings association mail
the proxy solicitation material;
(3) The appropriate Federal banking agency has cleared the member's
proxy solicitation; and
(4) The member agrees to defray the savings association's
reasonable expenses.
(b) Required information. As soon as practicable after the savings
association receives a request under paragraph (a) of this section, it
must mail or otherwise furnish the following information to the member:
(1) The approximate number of members that the savings association
solicited or will solicit, or the approximate number of members of any
group of account holders that the member designates; and
(2) The estimated cost of mailing the proxy solicitation material
for the member.
(c) Timing. The savings association must mail cleared proxy
solicitation material to the designated members promptly after the
member furnishes the materials, envelopes (or other containers), and
postage (or payment for postage) to the savings association.
(d) Content. The savings association is not responsible for the
content of a member's proxy solicitation material.
(e) Sharing of proxy material. A member may furnish other members
its own proxy solicitation material, cleared by the appropriate Federal
banking agency, subject to the rules in this section.
Sec. 192.285 Prohibited solicitations.
(a) False or misleading statements. (1) No one may use proxy
solicitation material for the members' meeting if the material contains
any statement which, considering the time and the circumstances of the
statement:
(i) Is false or misleading with respect to any material fact;
(ii) Omits any material fact that is necessary to make the
statements not false or misleading; or
(iii) Omits any material fact that is necessary to correct a
statement in an earlier communication that has become false or
misleading.
(2) No one may represent or imply that the appropriate Federal
banking agency determined that the proxy solicitation material is
accurate, complete, not false or not misleading, or passed upon the
merits of or approved any proposal.
(b) Other prohibited solicitations. No person may solicit:
(1) An undated or post-dated proxy;
(2) A proxy that states it will be dated after the date it is
signed by a member;
(3) A proxy that is not revocable at will by the member; or
(4) A proxy that is part of another document or instrument.
Sec. 192.290 Remedial measures for prohibited solicitations.
(a) In general. If a solicitation violates Sec. 192.285, the
appropriate Federal banking agency may require remedial measures,
including:
(1) Correction of the violation by a retraction and a new
solicitation;
(2) Rescheduling the members' meeting; or
(3) Any other actions necessary to ensure a fair vote.
(b) Other action. The appropriate Federal banking agency also may
bring an enforcement action against the violator.
Sec. 192.295 Re-solicitation of proxies.
If a savings association amends its application for conversion, the
appropriate Federal banking agency may require the savings association
to re-solicit proxies for its members' meeting as a condition of
approval of the amendment.
Offering Circular
Sec. 192.300 Offering circular requirements.
(a) Content and filing requirements. A savings association must
prepare and file its offering circular in compliance with this part,
Form OC, and the applicable SEC registration statement form required
under 12 CFR 16.15. A Federal savings association must file its
offering circular with the appropriate OCC licensing office and a State
savings association must file its offering circular with the
appropriate FDIC region. If filing an amendment, the savings
association also must comply with Sec. Sec. 192.155 and 192.165.
(b) Member approval. A savings association must condition its stock
offering upon member approval of its plan of conversion.
(c) Agency review. The appropriate Federal banking agency will
review the offering circular and may comment on the included
disclosures and financial statements. The appropriate Federal banking
agency will not approve the adequacy or accuracy of the offering
circular or the disclosures.
(d) Revised filings. A savings association must file any revised
offering circular, final offering circular, and any post-effective
amendment to the final offering circular in accordance with the
procedures in Sec. Sec. 192.155 and 192.165.
(e) Request for effectiveness. After a savings association
satisfactorily addresses the appropriate Federal banking agency's
comments, the savings association must request that the appropriate
Federal banking agency declare the offering circular effective for a
time period. The time period may not exceed the maximum time period for
the completion of the sale of all of the savings association's shares
under Sec. 192.400.
Sec. 192.305 Distribution of offering circular.
(a) Preliminary offering circular. A savings association may
distribute a preliminary offering circular at the same time as or after
it mails the proxy statement to its members.
(b) Early distribution prohibited. A savings association may not
distribute a final offering circular for stock issued in the
transaction until after the appropriate Federal banking agency declares
the offering circular effective or the Securities and Exchange
Commission declares the registration statement for the offering
circular effective. The savings association must have the offering
circular delivered in accordance with this part.
(c) Effective offering circular. A savings association must
distribute a final offering circular for stock issued in the
transaction to persons listed in its plan of conversion within 10
calendar days after the appropriate Federal banking agency declares the
offering circular effective or the Securities and Exchange Commission
declares the registration statement for the offering circular
effective.
Sec. 192.310 Filing a post-effective amendment to an offering
circular.
(a) In general. A savings association must file a post-effective
amendment to the offering circular with the appropriate Federal banking
agency or have its proposed stock holding company file a post-effective
amendment to its registration statement for the offering circular with
the Securities and Exchange Commission, when a material event or change
of circumstances occurs.
[[Page 42652]]
(b) Timing of delivery. After the appropriate Federal banking
agency or the Securities and Exchange Commission declares the post-
effective amendment effective, the savings association must immediately
have the amendment to the offering circular delivered to each person
who subscribed for or ordered shares in the offering.
(c) Content. The post-effective amendment must indicate that each
person may increase, decrease, or rescind their subscription or order.
(d) Post-effective offering period. The post-effective offering
period must remain open no less than 10 calendar days nor more than 20
calendar days, unless the appropriate Federal banking agency approves a
longer rescission period.
Offers and Sales of Stock
Sec. 192.320 Order of priority to purchase conversion shares.
A savings association must offer to sell its shares in the
following order:
(a) Eligible account holders.
(b) Tax-qualified employee stock ownership plans.
(c) Supplemental eligible account holders.
(d) Other voting members who have subscription rights.
(e) The savings association's community, its community and the
general public, or the general public.
Sec. 192.325 Timing of offer to sell conversion shares.
(a) In general. A savings association may offer to sell its
conversion shares after the appropriate Federal banking agency approves
the conversion, clears the proxy statement, and declares the offering
circular effective.
(b) Timing. The offer may commence at the same time the savings
association starts the proxy solicitation of its members.
Sec. 192.330 Pricing of conversion shares.
(a) In general. A savings association must sell its conversion
shares at a uniform price per share and at a total price that is equal
to the estimated pro forma market value of its shares after the
conversion.
(b) Maximum price. The maximum price must be no more than 15
percent above the midpoint of the estimated price range in the savings
association's offering circular.
(c) Minimum price. The minimum price must be no more than 15
percent below the midpoint of the estimated price range in the savings
association's offering circular.
(d) Increase in price. If the appropriate Federal banking agency
permits, the savings association may increase the maximum price of
conversion shares sold. The maximum price, as adjusted, must be no more
than 15 percent above the maximum price computed under paragraph (b) of
this section.
(e) Price range. The maximum price must be between $5 and $50 per
share.
(f) Inclusion in preliminary offering circular. The savings
association must include the estimated price in any preliminary
offering circular.
Sec. 192.335 Procedures for the sale of conversion shares.
(a) Distribution of order forms. A savings association must
distribute order forms to all eligible account holders, supplemental
eligible account holders, and other voting members to enable them to
subscribe for the conversion shares they are permitted under the plan
of conversion. The savings association may either send the order forms
with its offering circular or after the savings association distributes
its offering circular.
(b) Sale of shares. A savings association may sell its conversion
shares in a community offering, a public offering, or both. The savings
association may begin the community offering, the public offering, or
both at any time during the subscription offering or upon conclusion of
the subscription offering.
(c) Underwriting commissions and fees. A savings association may
pay underwriting commissions (including underwriting discounts). The
appropriate Federal banking agency may object to the payment of
unreasonable commissions. The savings association may reimburse an
underwriter for accountable expenses in a subscription offering if the
public offering is limited. If no public offering occurs, the savings
association may pay an underwriter a consulting fee. The appropriate
Federal banking agency may object to the payment of unreasonable
consulting fees.
(d) Sequence of order fulfillment. If a savings association
conducts the community offering, the public offering, or both at the
same time as the subscription offering, the savings association must
fill all subscription orders first.
(e) Preparation of order form. A savings association must prepare
its order form in compliance with this part and Form OF.
Sec. 192.340 Prohibited sales practices.
(a) Offers, sales, or purchases of conversion shares. In connection
with offers, sales, or purchases of conversion shares under this part,
a savings association and its directors, officers, agents, or employees
may not:
(1) Employ any device, scheme, or artifice to defraud;
(2) Obtain money or property by means of any untrue statement of a
material fact or any omission of a material fact necessary to make the
statements, in light of the circumstances under which they were made,
not misleading; or
(3) Engage in any act, transaction, practice, or course of business
that operates or would operate as a fraud or deceit upon a purchaser or
seller.
(b) Conversion. During the conversion, no person may:
(1) Transfer, or enter into any agreement or understanding to
transfer, the legal or beneficial ownership of subscription rights for
the savings association's conversion shares or the underlying
securities to the account of another;
(2) Make any offer, or any announcement of an offer, to purchase
any of the savings association's conversion shares from anyone but the
savings association; or
(3) Knowingly acquire more than the maximum purchase allowable
under the savings association's plan of conversion.
(c) Exceptions. The restrictions in paragraphs (b)(1) and (2) of
this section do not apply to offers for more than 10 percent of any
class of conversion shares by:
(1) An underwriter or a selling group, acting on the savings
association's behalf, that makes the offer with a view toward public
resale; or
(2) One or more of the savings association's tax-qualified employee
stock ownership plans so long as the plan or plans do not beneficially
own more than 25 percent of any class of the savings association's
equity securities in the aggregate.
(d) Violations. Any person found to have violated the restrictions
in paragraph (a) or (b) of this section may become subject to an
enforcement action, civil money penalties, criminal prosecution, or
other legal action.
Sec. 192.345 Permissible forms of subscriber payment.
(a) In general. A subscriber may purchase conversion shares with
cash, by a withdrawal from a savings account, or a withdrawal from a
certificate of deposit. If a subscriber purchases shares by a
withdrawal from a certificate of deposit, the savings association may
not assess a penalty for the withdrawal.
(b) Prohibition. A savings association may not extend credit to any
person to purchase the savings association's conversion shares.
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Sec. 192.350 Interest on payments for conversion shares.
(a) In general. A savings association must pay interest from the
date the savings association receives a payment for conversion shares
until the date the savings association completes or terminates the
conversion. The savings association must pay interest at no less than
its passbook rate for amounts paid in cash, check, or money order.
(b) Interest on withdrawals from savings accounts. If a subscriber
withdraws money from a savings account to purchase conversion shares,
the savings association must pay interest on the payment until the
savings association completes or terminates the conversion as if the
withdrawn amount remained in the account.
(c) Interest on withdrawals from certificates of deposit. If a
depositor fails to maintain the applicable minimum balance requirement
because he or she withdraws money from a certificate of deposit to
purchase conversion shares, the savings association may cancel the
certificate and pay interest at no less than its passbook rate on any
remaining balance.
Sec. 192.355 Subscription rights for eligible account holders and
supplemental eligible account holders.
(a) Eligible account holders. A savings association must give each
eligible account holder subscription rights to purchase conversion
shares in an amount equal to the greater of:
(1) The maximum purchase limitation established for the community
offering or the public offering under Sec. 192.395;
(2) One-tenth of one percent of the total stock offering; or
(3) Fifteen times the following number: The total number of
conversion shares that the savings association will issue, multiplied
by the following fraction. The numerator is the total qualifying
deposit of the eligible account holder. The denominator is the total
qualifying deposits of all eligible account holders. The savings
association must round down the product of this multiplied fraction to
the next whole number.
(b) Supplemental eligible account holders. The savings association
must give subscription rights to purchase shares to each supplemental
eligible account holder in the same amount as described in paragraph
(a) of this section, except that the savings association must compute
the fraction described in paragraph (a)(3) of this section as follows:
The numerator is the total qualifying deposit of the supplemental
eligible account holder. The denominator is the total qualifying
deposits of all supplemental eligible account holders.
Sec. 192.360 Officers, directors, and associates as eligible account
holders.
A savings association's officers, directors, and their associates
may be eligible account holders. However, if an officer, director, or
his or her associate receives subscription rights based on increased
deposits in the year before the eligibility record date, the savings
association must subordinate subscription rights for these deposits to
subscription rights exercised by other eligible account holders.
Sec. 192.365 Purchase of conversion shares by other voting members.
(a) In general. A savings association must give rights to purchase
its conversion shares in the conversion to voting members who are
neither eligible account holders nor supplemental eligible account
holders. The savings association must allocate rights to each voting
member that are equal to the greater of:
(1) The maximum purchase limitation established for the community
offering and the public offering under Sec. 192.395; or
(2) One-tenth of one percent of the total stock offering.
(b) Subordination of voting rights. The savings association must
subordinate the voting members' rights to the rights of eligible
account holders, tax-qualified employee stock ownership plans, and
supplemental eligible account holders.
Sec. 192.370 Limits on aggregate purchases by officers, directors,
and associates.
(a) In general. When a savings association converts, its officers,
directors, and their associates may not purchase, in the aggregate,
more than the following percentage of the savings association's total
stock offering:
Table 1 to Sec. 192.370(a)
------------------------------------------------------------------------
Officer and
director
Institution size purchases
(percent)
------------------------------------------------------------------------
$50,000,000 or less..................................... 35
$50,000,001-100,000,000................................. 34
$100,000,001-150,000,000................................ 33
$150,000,001-200,000,000................................ 32
$200,000,001-250,000,000................................ 31
$250,000,001-300,000,000................................ 30
$300,000,001-350,000,000................................ 29
$350,000,001-400,000,000................................ 28
$400,000,001-450,000,000................................ 27
$450,000,001-500,000,000................................ 26
Over $500,000,000....................................... 25
------------------------------------------------------------------------
(b) Exception. The purchase limitations in this section do not
apply to shares held in tax-qualified employee stock benefit plans that
are attributable to the savings association's officers, directors, and
their associates.
Sec. 192.375 Allocation of oversubscribed conversion shares.
(a) Eligible account holders. If a savings association's conversion
shares are oversubscribed by its eligible account holders, the savings
association must allocate shares among the eligible account holders so
that each, to the extent possible, may purchase 100 shares.
(b) Supplemental eligible account holders. If a savings
association's conversion shares are oversubscribed by its supplemental
eligible account holders, the savings association must allocate shares
among the supplemental eligible account holders so that each, to the
extent possible, may purchase 100 shares.
(c) Eligible and supplemental eligible account holders. If a person
is an eligible account holder and a supplemental eligible account
holder, the savings association must include the eligible account
holder's allocation in determining the number of conversion shares that
the savings association may allocate to the person as a supplemental
eligible account holder.
(d) Additional allocations. For conversion shares that the savings
association does not allocate under paragraphs (a) and (b) of this
section, the savings association must allocate the shares among the
eligible or supplemental eligible account holders equitably, based on
the amounts of qualifying deposits. The savings association must
describe this method of allocation in its plan of conversion.
(e) Oversubscription. If shares remain after the savings
association has allocated shares as provided in paragraphs (a) and (b)
of this section, and if the savings association's voting members
oversubscribe, the savings association must allocate its conversion
shares among those members equitably. The savings association must
describe the method of allocation in its plan of conversion.
Sec. 192.380 Purchase of conversion shares by employee stock
ownership plan.
(a) In general. A savings association's tax-qualified employee
stock ownership plan may purchase up to 10 percent of the total
offering of the savings association's conversion shares.
(b) Revised stock valuation range. If the appropriate Federal
banking agency approves a revised stock valuation range as described in
Sec. 192.330(e), and the final conversion stock valuation range
[[Page 42654]]
exceeds the former maximum stock offering range, a savings association
may allocate conversion shares to its tax-qualified employee stock
ownership plan, up to the 10 percent limit in paragraph (a) of this
section.
(c) Open market purchase. If a savings association's tax-qualified
employee stock ownership plan is not able to or chooses not to purchase
stock in the offering, it may, with prior appropriate Federal banking
agency approval and appropriate disclosure in the savings association's
offering circular, purchase stock in the open market, or purchase
authorized but unissued conversion shares.
(d) Charitable organizations. A savings association may include
stock contributed to a charitable organization in the conversion in the
calculation of the total offering of conversion shares under paragraphs
(a) and (b) of this section, unless the appropriate Federal banking
agency objects on supervisory grounds.
Sec. 192.385 Purchase limitations.
(a) In general. A savings association may limit the number of
shares that any person, group of associated persons, or persons
otherwise acting in concert, may subscribe to up to five percent of the
total stock sold.
(b) Modification of purchase limit. If a savings association sets a
limit of five percent under paragraph (a) of this section, the savings
association may modify that limit with appropriate Federal banking
agency approval to provide that any person, group of associated
persons, or persons otherwise acting in concert subscribing for five
percent, may purchase between five and 10 percent as long as the
aggregate amount that the subscribers purchase does not exceed 10
percent of the total stock offering.
(c) Minimum purchase. A savings association may require persons
exercising subscription rights to purchase a minimum number of
conversion shares. The minimum number of shares must equal the lesser
of the number of shares obtained by a $500 subscription or 25 shares.
(d) Aggregation. In setting purchase limitations under this
section, a savings association may not aggregate conversion shares
attributed to a person in the savings association's tax-qualified
employee stock ownership plan with shares purchased directly by, or
otherwise attributable to, that person.
Sec. 192.390 Community offering of conversion shares.
(a) Purchase preference in subscription offering. In a subscription
offering, a savings association may give a purchase preference to
eligible account holders, supplemental eligible account holders, and
voting members residing in its local community.
(b) Purchase preference in community offering. In a community
offering, a savings association must give a purchase preference to
natural persons residing in its local community.
Sec. 192.395 Other conditions for community and public offerings.
A savings association must offer and sell its stock to achieve a
widespread distribution of the stock. If a savings association offers
shares in a community offering, a public offering, or both, it must
first fill orders for its stock up to a maximum of two percent of the
conversion stock on a basis that will promote a widespread distribution
of stock. The savings association must allocate any remaining shares on
an equal number of shares per order basis until it fills all orders.
Completion of the Offering
Sec. 192.400 Time period for completion of sale of stock.
A savings association must complete all sales of its stock within
45 calendar days after the last day of the subscription period, unless
the offering is extended under Sec. 192.405.
Sec. 192.405 Extension of the offering period.
(a) In general. A savings association must submit a request in
writing to the appropriate Federal banking agency for an extension of
any offering period. The appropriate Federal banking agency will not
grant any single extension of more than 90 calendar days.
(b) Post-effective amendment to offering circular. If the
appropriate Federal banking agency grants a savings association's
request for an extension of time, the savings association must provide
a post-effective amendment to the offering circular under Sec. 192.310
to each person who subscribed for or ordered stock. The amendment must
indicate that the appropriate Federal banking agency extended the
offering period and that each person who subscribed for or ordered
stock may increase, decrease, or rescind their subscription or order
within the time remaining in the extension period.
Completion of the Conversion
Sec. 192.420 Time period for completion of conversion.
In its plan of conversion, a savings association must set a date by
which the conversion must be completed. This date must not be more than
24 months from the date that the savings association's members approve
the plan of conversion. The date, once set, may not be extended by the
savings association or by the appropriate Federal banking agency. The
savings association must terminate the conversion if it is not
completed by that date. The conversion is complete on the date that the
savings association accepts the offers for its stock.
Sec. 192.425 Termination of conversion.
A conversion may be terminated by:
(a) A savings association's members failing to approve the
conversion at its members' meeting;
(b) A savings association before its members' meeting; or
(c) A savings association after the members' meeting, but only if
the appropriate Federal banking agency concurs.
Sec. 192.430 Charter amendments.
(a) Conversion from Federally-chartered mutual savings association
or savings bank to Federally-chartered stock savings association or
savings bank. If the savings association is a Federally-chartered
mutual savings association or savings bank and it converts to a
Federally-chartered stock savings association or savings bank, it must
apply to the OCC to amend its charter and bylaws consistent with 12 CFR
5.22, as part of the savings association's application for conversion.
The savings association may only include OCC pre-approved anti-takeover
provisions in its amended charter and bylaws. See 12 CFR 5.22(g)(7).
(b) Conversion from Federally-chartered mutual savings association
or savings bank to State-chartered stock savings association or savings
bank. If the savings association is a Federally-chartered mutual
savings association or savings bank and is converting to a State-
chartered stock savings association under this part, the savings
association must surrender its charter to the OCC for cancellation
promptly after the State issues its new State stock charter. The
savings association must promptly file a copy of its new State stock
charter with the FDIC.
(c) Conversion from State-chartered mutual savings association or
savings bank to Federally State-chartered stock savings association or
savings bank. If the savings association is a State-chartered mutual
savings association or savings bank, and is converting to a Federally
chartered stock savings association or savings bank, it must apply to
the OCC for a new charter and bylaws consistent with 12 CFR 5.22. The
savings association may only include OCC pre-approved anti-takeover
[[Page 42655]]
provisions in its charter and bylaws. See 12 CFR 5.22(g)(7).
(d) Priority of accounts. In any conversion described in this
section that involves a mutual holding company, the charter of each
resulting subsidiary savings association of the holding company must
contain the following provision:
In any situation in which the priority of the accounts of the
association is in controversy, all such accounts must, to the extent
of their withdrawable value, 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 subordination) over other general creditors of the
association.
(e) Liquidation account. The savings association's new or amended
charter must require the savings association to establish and maintain
a liquidation account for eligible and supplemental eligible account
holders under Sec. 192.450.
Sec. 192.435 Corporate existence after conversion.
A savings association's corporate existence will continue following
its conversion, unless it converts to a State-chartered stock savings
association and State law prescribes otherwise.
Sec. 192.440 Stockholder voting rights after conversion.
A savings association must provide its stockholders with exclusive
voting rights, except as provided in Sec. 192.445(c).
Sec. 192.445 Savings account holder's account after conversion.
(a) In general. The savings association must provide each savings
account holder, without payment, a withdrawable savings account or
accounts in the same amount and under the same terms and conditions as
their accounts before the conversion.
(b) Liquidation account. The savings association must provide a
liquidation account for each eligible and supplemental eligible account
holder under Sec. 192.450.
(c) Voting rights. If the savings association is State-chartered
and State law requires the savings association to provide voting rights
to savings account holders or borrowers, the charter must:
(1) Limit these voting rights to the minimum required by State law;
and
(2) Require the savings association to solicit proxies from the
savings account holders and borrowers in the same manner that the
savings association solicits proxies from its stockholders.
Liquidation Account
Sec. 192.450 Liquidation accounts.
(a) In general. A liquidation account represents the potential
interest of eligible account holders and supplemental eligible account
holders in the savings association's net worth at the time of
conversion. A savings association must maintain a sub-account to
reflect the interest of each account holder.
(b) Distribution of liquidation. Before a savings association may
provide a liquidation distribution to common stockholders, it must give
a liquidation distribution to those eligible account holders and
supplemental eligible account holders who hold savings accounts from
the time of conversion until liquidation.
(c) Recording of liquidation account in financial statements. A
savings association may not record the liquidation account in its
financial statements. The savings association must disclose the
liquidation account in the footnotes to the savings association's
financial statements.
Sec. 192.455 Initial balance of liquidation account.
The initial balance of the liquidation account is the savings
association's net worth in the statement of financial condition
included in the final offering circular.
Sec. 192.460 Initial balance of liquidation sub-account.
(a) General rule. (1) A savings association must calculate the
initial liquidation sub-account balance of each eligible and
supplemental eligible account holder at the time of the conversion.
(2) The initial liquidation sub-account balance for a savings
account held by an eligible account holder, for a savings account not
held by the eligible account holder on the supplemental eligibility
record date, is calculated by multiplying the initial liquidation
account balance by the following fraction: The numerator is the
qualifying deposit in the savings account on the eligibility record
date and the denominator is the calculation in paragraph (a)(5) of this
section.
(3) The initial liquidation sub-account balance for a savings
account held by a supplemental eligible account holder, for a savings
account not held by the supplemental eligible account holder on the
eligibility record date, is calculated by multiplying the initial
liquidation account balance by the following fraction: The numerator is
the qualifying deposit in the savings account on the supplemental
eligibility record date and the denominator is the calculation in
paragraph (a)(5) of this section.
(4) For a savings account held on both the eligibility record date
and the supplemental eligibility record date, the amount of the
qualifying deposit for calculating the initial liquidation sub-account
is the higher account balance of the savings account on either the
eligibility record date or the supplemental eligibility record date.
The initial liquidation sub-account balance is calculated by
multiplying the liquidation account balance by the following fraction:
The numerator is the higher amount of the qualifying deposit in the
savings account on either the eligibility record date or the
supplemental eligibility record date and the denominator is the
calculation in paragraph (a)(5) of this section.
(5) The denominator for calculating the initial liquidation sub-
account balance of each eligible and supplemental eligible account
holder is the sum of the numerator calculations in paragraphs (a)(2)
through (4) of this section.
(b) Balance increases and decreases. A savings association must not
increase the initial liquidation and sub-account balances. It must
decrease the initial liquidation account and the sub-account balances
under Sec. 192.470 as depositors reduce or close their savings
accounts.
Sec. 192.465 Retention of voting rights based on liquidation sub-
accounts.
Eligible account holders or supplemental eligible account holders
do not retain any voting rights based on their liquidation sub-
accounts.
Sec. 192.470 Required adjustments to liquidation sub-accounts.
(a) Reductions. (1) A savings association must reduce the balance
of an eligible account holder's or supplemental eligible account
holder's liquidation sub-account if the deposit balance in the account
holder's savings account at the close of business on any annual closing
date, which for purposes of this section is the savings association's
fiscal year end, falls below the lesser of:
(i) The deposit balance in the account holder's savings account as
of the relevant eligibility record date; or
(ii) The deposit balance in the account holder's savings account as
of its lowest balance as of any subsequent annual closing date.
(2) The reduction in the account holder's liquidation sub-account
from its balance at the time of conversion must be proportionate to the
reduction in the account holder's savings account
[[Page 42656]]
from its balance at the time of conversion.
(b) Prohibition on increases. If a savings association reduces the
balance of a liquidation sub-account, it may not subsequently increase
it if the deposit balance increases.
(c) Liquidation account adjustments. A savings association is not
required to adjust the liquidation account and sub-account balances at
each annual closing date if the savings association maintains
sufficient records to make the computations if a liquidation
subsequently occurs.
(d) Maintenance of liquidation sub-account. A savings association
must maintain the liquidation sub-account for each account holder as
long as the account holder maintains an account with the same social
security number.
(e) Complete liquidation. If there is a complete liquidation, the
savings association must provide the account holder of a liquidation
sub-account with a liquidation distribution in the amount of the
account holder's remaining liquidation sub-account balance.
Sec. 192.475 Definition of liquidation.
(a) In general. A liquidation is a sale of a savings association's
assets and settlement of its liabilities with the intent to cease
operations and close. Upon liquidation, a savings association must
return its charter to the governmental agency that issued it. The
government agency must cancel the savings association's charter.
(b) Other transactions. A merger, consolidation, or similar
combination or transaction with another depository institution, is not
a liquidation. If a savings association is involved in such a
transaction, the surviving institution must assume the liquidation
account.
Sec. 192.480 Effect of liquidation account on net worth.
The liquidation account does not affect a savings association's net
worth.
Sec. 192.485 Required liquidation account provision in new Federal
charter.
If a savings association converts to Federal stock form, it must
include the following provision in its new charter: ``Liquidation
Account. Under appropriate Federal banking agency regulations, the
association must establish and maintain a liquidation account for the
benefit of its savings account holders as of ___. If the association
undergoes a complete liquidation, it must comply with appropriate
Federal banking agency regulations with respect to the amount and
priorities on liquidation of each of the savings account holder's
interests in the liquidation account. A savings account holder's
interest in the liquidation account does not entitle the savings
account holder to any voting rights.''
Post-Conversion
Sec. 192.500 Permissible management stock benefit plans after
conversion.
(a) In general. During the 12 months after its conversion, a
savings association may implement a stock option plan (Option Plan), an
employee stock ownership plan or other tax-qualified employee stock
benefit plan (collectively, ESOP), and a management recognition plan
(MRP), provided that the savings association meets all of the following
requirements:
(1) The savings association discloses the plans in its proxy
statement and offering circular and indicates in its offering circular
that there will be a separate shareholder vote on the Option Plan and
the MRP at least six months after the conversion. No shareholder vote
is required to implement the ESOP. The savings association's ESOP must
be tax-qualified.
(2) The savings association's Option Plan does not encompass more
than 10 percent of the number of shares that the savings association
issued in the conversion.
(3)(i) The savings association's ESOP and MRP do not encompass, in
the aggregate, more than 10 percent of the number of shares that the
savings association issued in the conversion. If the savings
association has tangible capital of 10 percent or more following the
conversion, the appropriate Federal banking agency may permit the ESOP
and MRP to encompass, in the aggregate, up to 12 percent of the number
of shares issued in the conversion; and
(ii) The savings association's MRP does not encompass more than
three percent of the number of shares that the savings association
issued in the conversion. If the savings association has tangible
capital of 10 percent or more after the conversion, the appropriate
Federal banking agency may permit the MRP to encompass up to four
percent of the number of shares that the savings association issued in
the conversion.
(4) No individual receives more than 25 percent of the shares under
any plan.
(5) The savings association's directors who are not officers of the
savings association do not receive more than five percent of the shares
of the MRP or Option Plan individually, or 30 percent of any such plan
in the aggregate.
(6) The savings association's shareholders approve each of the
Option Plan and the MRP by a majority of the total votes eligible to be
cast at a duly called meeting before the savings association
establishes or implements the plan. The savings association may not
hold this meeting until six months after its conversion.
(7) When the savings association distributes proxies or related
material to shareholders in connection with the vote on a plan, the
savings association states that the plan complies with the appropriate
Federal banking agency's regulations and that the appropriate Federal
banking agency does not endorse or approve the plan in any way. The
savings association may not make any written or oral representations to
the contrary.
(8) The savings association does not grant stock options at less
than the market price at the time of grant.
(9) The savings association does not fund the Option Plan or the
MRP at the time of the conversion.
(10) The savings association's plan does not begin to vest earlier
than one year after shareholders approve the plan, and does not vest at
a rate exceeding 20 percent per year.
(11) The savings association's plan permits accelerated vesting
only for disability or death, or if the savings association undergoes a
change of control.
(12) The savings association's plan provides that its executive
officers or directors must exercise or forfeit their options in the
event the institution becomes critically undercapitalized (as defined
in 12 CFR 6.4 or 324.403, as applicable), is subject to appropriate
Federal banking agency enforcement action, or receives a capital
directive under 12 CFR part 6, subpart B or 12 CFR 308.201, as
applicable.
(13) The savings association files a copy of the proposed Option
Plan or MRP with the appropriate Federal banking agency and certify to
such agency that the plan approved by the shareholders is the same plan
that the savings association filed with, and disclosed in, the proxy
materials distributed to shareholders in connection with the vote on
the plan.
(14) The savings association files the plan and the certification
with the appropriate Federal banking agency within five calendar days
after its shareholders approve the plan.
(b) Stock splits or other adjustments. The savings association may
provide dividend equivalent rights or dividend adjustment rights to
allow for stock splits or other adjustments to its stock in the ESOP,
MRP, and Option Plan.
(c) Plans implemented more than 12 months after conversion. The
[[Page 42657]]
restrictions in paragraph (a) of this section do not apply to plans
implemented more than 12 months after the conversion, provided that
materials pertaining to any shareholder vote regarding such plans are
not distributed within the 12 months after the conversion. If a plan
adopted in conformity with paragraph (a) of this section is amended
more than 12 months following the conversion, shareholders must ratify
any material deviations to the requirements in paragraph (a).
Sec. 192.505 Restrictions on the trading of shares by directors,
officers, and associates.
(a) Sales restriction. Directors and officers who purchase
conversion shares may not sell the shares for one year after the date
of purchase, except that in the event of the death of the officer or
director, the successor in interest may sell the shares.
(b) Notice of sales restriction on stock certificate. The savings
association must include notice of the restriction described in
paragraph (a) of this section on each certificate of stock that a
director or officer purchases during the conversion or receives in
connection with a stock dividend, stock split, or otherwise with
respect to such restricted shares.
(c) Stock purchase restrictions. For three years after the
conversion, the savings association's officers, directors, and their
associates may purchase the savings association's stock only from a
broker or dealer registered with the Securities and Exchange
Commission. However, the savings association's officers, directors, and
their associates may engage in a negotiated transaction involving more
than one percent of the savings association's outstanding stock, and
may purchase stock through any of the savings association's management
or employee stock benefit plans.
(d) Communication of restrictions with transfer agent. The savings
association must instruct its stock transfer agent about the transfer
restrictions in this section.
Sec. 192.510 Repurchase of shares after conversion.
(a) Repurchases during first year after conversion. A savings
association may not repurchase its shares in the first year after the
conversion except:
(1) In extraordinary circumstances, a savings association may make
open market repurchases of up to five percent of its outstanding stock
in the first year after the conversion if the savings association files
a notice under Sec. 192.515(a) and the appropriate Federal banking
agency does not disapprove the repurchase. The appropriate Federal
banking agency will not approve such repurchases unless the repurchase
meets the standards in Sec. 192.515(c), and the repurchase is
consistent with paragraph (c) of this section.
(2) A savings association may repurchase qualifying shares of a
director or conduct an appropriate Federal banking agency-approved
repurchase pursuant to an offer made to all shareholders of the savings
association.
(3) Repurchases to fund management recognition plans that have been
ratified by shareholders do not count toward the repurchase limitations
in this section. Repurchases in the first year to fund such plans
require prior written notification to the appropriate Federal banking
agency.
(4) Purchases to fund tax qualified employee stock benefit plans do
not count toward the repurchase limitations in this section.
(b) Repurchases following first year after conversion. After the
first year, a savings association may repurchase its shares, subject to
all other applicable regulatory and supervisory restrictions and
paragraph (c) of this section.
(c) Restrictions on all repurchases. All stock repurchases are
subject to the following restrictions.
(1) A savings association may not repurchase its shares if the
repurchase will reduce the savings association's regulatory capital
below the amount required for its liquidation account under Sec.
192.450. The savings association must comply with the capital
distribution requirements at 12 CFR 5.55.
(2) The restrictions on share repurchases apply to a charitable
organization under Sec. 192.550. A savings association must aggregate
purchases of shares by the charitable organization with the savings
association's repurchases.
Sec. 192.515 Information to be filed with Federal banking agency
prior to repurchase of shares.
(a) Notice requirement. To repurchase stock in the first year
following conversion, other than repurchases under Sec. 192.510(a)(3)
or (4), a savings association must file a written notice with the
appropriate OCC licensing office if Federally chartered, and with the
appropriate FDIC region if State-chartered. The savings association
must provide the following information:
(1) The proposed repurchase program;
(2) The effect of the repurchases on the savings association's
regulatory capital; and
(3) The purpose of the repurchases and, if applicable, an
explanation of the extraordinary circumstances necessitating the
repurchases.
(b) Filing of notice. A Federal savings association must file its
notice with the appropriate OCC licensing office, and a State savings
association must file its notice with the appropriate regional director
of the FDIC, at least 10 calendar days before the savings association
begins its repurchase program.
(c) Agency review. A savings association may not repurchase its
shares if the appropriate Federal banking agency objects to the
repurchase program. The appropriate Federal banking agency will not
object to a repurchase program if:
(1) The repurchase program will not adversely affect the savings
association's financial condition;
(2) The savings association submits sufficient information to
evaluate the proposed repurchases;
(3) The savings association demonstrates extraordinary
circumstances and a compelling and valid business purpose for the share
repurchases; and
(4) The repurchase program would not be contrary to other
applicable regulations.
Sec. 192.520 Declaring and paying dividends after the conversion.
A savings association may declare or pay a dividend on its shares
after the conversion if:
(a) The dividend will not reduce the savings association's
regulatory capital below the amount required for the liquidation
account under Sec. 192.450;
(b) The savings association complies with all capital requirements
under 12 CFR part 3 after it declares or pays dividends;
(c) The savings association complies with the capital distribution
requirements under 12 CFR 5.55; and
(d) The savings association does not return any capital, other than
ordinary dividends, to purchasers during the term of the business plan
submitted with the conversion.
Sec. 192.525 Restrictions on acquisition of shares after conversion.
(a) Prior agency approval. For three years after conversion, no
person may, directly or indirectly, acquire or offer to acquire the
beneficial ownership of more than 10 percent of any class of the
savings association's equity securities without the appropriate Federal
banking agency's prior written approval. If a person violates this
prohibition, the savings association may not permit the person to vote
shares in excess of 10
[[Page 42658]]
percent, and may not count the shares in excess of 10 percent in any
shareholder vote.
(b) Beneficial ownership. A person acquires beneficial ownership of
more than 10 percent of a class of shares when he or she holds any
combination of the savings association's stock or revocable or
irrevocable proxies under circumstances that give rise to a conclusive
control determination or rebuttable control determination under 12 CFR
5.50. The appropriate Federal banking agency will presume that a person
has acquired shares if the acquiror entered into a binding written
agreement for the transfer of shares. For purposes of this section, an
offer is made when it is communicated. An offer does not include non-
binding expressions of understanding or letters of intent regarding the
terms of a potential acquisition.
(c) Exceptions. Notwithstanding the restrictions in this section:
(1) Paragraphs (a) and (b) of this section do not apply to any
offer with a view toward public resale made exclusively to the savings
association, to the underwriters, or to a selling group acting on the
savings association's behalf.
(2) Unless the appropriate Federal banking agency objects in
writing, any person may offer or announce an offer to acquire up to one
percent of any class of shares. In computing the one percent limit, the
person must include all of his or her acquisitions of the same class of
shares during the prior 12 months.
(3) A corporation whose ownership is, or will be, substantially the
same as the savings association's ownership may acquire or offer to
acquire more than 10 percent of the savings association's common stock,
if it makes the offer or acquisition more than one year after the
savings association's conversion.
(4) One or more of the savings association's tax-qualified employee
stock benefit plans may acquire the savings association's shares, if
the plan or plans do not beneficially own more than 25 percent of any
class of the savings association's shares in the aggregate.
(5) An acquiror does not have to file a separate application to
obtain the appropriate Federal banking agency's approval under
paragraph (a) of this section if the acquiror files an application
under 12 CFR 5.50 that specifically addresses the criteria listed under
paragraph (d) of this section and the savings association does not
oppose the proposed acquisition.
(d) Factors for agency denial. The appropriate Federal banking
agency may deny an application under paragraph (a) of this section if
the proposed acquisition:
(1) Is contrary to the purposes of this part;
(2) Is manipulative or deceptive;
(3) Subverts the fairness of the conversion;
(4) Is likely to injure the savings association;
(5) Is inconsistent with the savings association's plan to meet the
credit and lending needs of its proposed market area;
(6) Otherwise violates laws or regulations; or
(7) Does not prudently deploy the savings association's conversion
proceeds.
Sec. 192.530 Other post-conversion requirements.
After a savings association converts, it must:
(a) Promptly register its shares under the Securities Exchange Act
of 1934 (15 U.S.C. 78a-78jj, as amended). The savings association may
not deregister the shares for three years.
(b) Encourage and assist a market maker to establish and to
maintain a market for its shares. A market maker for a security is a
dealer who:
(1) Regularly publishes bona fide competitive bid and offer
quotations for the security in a recognized inter-dealer quotation
system;
(2) Furnishes bona fide competitive bid and offer quotations for
the security on request; or
(3) May effect transactions for the security in reasonable
quantities at quoted prices with other brokers or dealers.
(c) Use its best efforts to list its shares on a national or
regional securities exchange or on the National Association of
Securities Dealers Automated Quotation system.
(d) File all post-conversion reports that the appropriate Federal
banking agency requires.
Contributions to Charitable Organizations
Sec. 192.550 Donating conversion shares or conversion proceeds to a
charitable organization.
A savings association may contribute some of its conversion shares
or proceeds to a charitable organization if:
(a) The savings association's plan of conversion provides for the
proposed contribution;
(b) The savings association's members approve the proposed
contribution; and
(c) The IRS either has approved, or approves within two years after
formation, the charitable organization as a tax-exempt charitable
organization under the Internal Revenue Code.
Sec. 192.555 Member approval of charitable contributions.
At the meeting to consider the conversion, a savings association's
members must separately approve, by a majority of the total eligible
votes, a charitable contribution of conversion shares or proceeds. If
the savings association is in mutual holding company form and adding a
charitable contribution as part of a second step stock conversion, the
savings association must also have its minority shareholders separately
approve the charitable contribution by a majority of their total
eligible votes.
Sec. 192.560 Limitations on charitable contributions.
A savings association may contribute a reasonable amount of
conversion shares or proceeds to a charitable organization if such
contribution will not exceed limits for charitable deductions under the
Internal Revenue Code and the appropriate Federal banking agency does
not object on supervisory grounds. If the savings association is well-
capitalized, the appropriate Federal banking agency generally will not
object if the savings association contributes an aggregate amount of
eight percent or less of the conversion shares or proceeds.
Sec. 192.565 Contents of organizational documents of charitable
organization.
The charitable organization's charter (or trust agreement) and gift
instrument must provide that:
(a) The charitable organization's primary purpose is to serve and
make grants in the savings association's local community;
(b) As long as the charitable organization controls shares, it must
vote those shares in the same ratio as all other shares voted on each
proposal considered by the savings association's shareholders;
(c) For at least five years after its organization, one seat on the
charitable organization's board of directors (or board of trustees) is
reserved for an independent director (or trustee) from the savings
association's local community. This director may not be an officer,
director, or employee of the savings association or of an affiliate of
the savings association, and should have experience with local
community charitable organizations and grant making; and
(d) For at least five years after its organization, one seat on the
charitable organization's board of directors (or board of trustees) is
reserved for a director from the savings association's board of
directors or the board of
[[Page 42659]]
directors of an acquiror or resulting institution in the event of a
merger or acquisition of the savings association.
Sec. 192.570 Conflicts of interest among directors.
(a) In general. A person is subject to 12 CFR 163.200 if that
person:
(1) Is a director, officer, or employee of the savings association;
has the power to direct the savings association's management or
policies; or otherwise owes a fiduciary duty to the savings association
(for example, holding company directors); and
(2) Will serve as an officer, director, or employee of the
charitable organization. See Form AC for further information on
operating plans and conflict of interest plans.
(b) Identification and recusal of directors. Before the savings
association's board of directors may adopt a plan of conversion that
includes a charitable organization, the savings association must
identify its directors that will serve on the charitable organization's
board. These directors may not participate in the board's discussions
concerning contributions to the charitable organization, and may not
vote on the matter.
Sec. 192.575 Other requirements for charitable organizations.
(a) Charter and gift instrument requirements. The charitable
organization's charter (or trust agreement) and the gift instrument for
the contribution must provide that:
(1) The appropriate Federal banking agency may examine the
charitable organization at the charitable organization's expense;
(2) The charitable organization must comply with all supervisory
directives that the appropriate Federal banking agency imposes;
(3) The charitable organization must operate according to written
policies adopted by its board of directors (or board of trustees),
including a conflict of interest policy;
(4) The charitable organization must not engage in self-dealing;
and
(5) The charitable organization must comply with all laws necessary
to maintain its tax-exempt status under the Internal Revenue Code.
(b) Stock certificate requirement. The savings association must
include the following legend in the stock certificates of shares that
the savings association contributes to the charitable organization or
that the charitable organization otherwise acquires: ``The board of
directors must consider the shares that this stock certificate
represents as voted in the same ratio as all other shares voted on each
proposal considered by the shareholders, as long as the shares are
controlled by the charitable organization.''
(c) Voting ratio. As long as the charitable organization controls
shares, the savings association must consider those shares as voted in
the same ratio as all of the shares voted on each proposal considered
by the savings association's shareholders.
(d) Filing requirement. After the savings association completes its
stock offering, it must submit copies of the following documents to the
appropriate OCC licensing office if it is a Federal savings association
or with the appropriate FDIC region if it is a State savings
association:
(1) The charitable organization's charter and bylaws (or trust
agreement);
(2) The charitable organization's operating plan (within six months
after the savings association's stock offering);
(3) The charitable organization's conflict of interest policy; and
(4) The gift instrument for the contributions of either stock or
cash to the charitable organization.
Subpart B--Voluntary Supervisory Conversions
Sec. 192.600 Voluntary supervisory conversions.
(a) In general. A savings association must comply with this subpart
and part 16 to engage in a voluntary supervisory conversion. This
subpart applies to all voluntary supervisory conversions under sections
5(i)(1), (i)(2), and (p) of HOLA, 12 U.S.C. 1464(i)(1), (i)(2), and
(p).
(b) Application of subpart A. Subpart A of this part also applies
to a voluntary supervisory conversion, unless a requirement is clearly
inapplicable.
Sec. 192.605 Conducting a voluntary supervisory conversion.
A savings association may conduct a voluntary supervisory
conversion through one of the following methods:
(a) A savings association may sell its shares or the shares of a
holding company to the public under the requirements of subpart A of
this part.
(b) A savings association may convert to stock form by merging into
an interim Federal- or State-chartered stock association.
(c) A savings association may sell its shares directly to an
acquiror, who may be a person, company, depository institution, or
depository institution holding company.
(d) A savings association may merge or consolidate with an existing
or newly created depository institution. The merger or consolidation
must be authorized by, and is subject to, other applicable laws and
regulations.
Sec. 192.610 Member rights in a voluntary supervisory conversion.
Savings association members do not have the right to approve or
participate in a voluntary supervisory conversion, and will not have
any legal or beneficial ownership interests in the converted
association, unless the appropriate Federal banking agency provides
otherwise. Savings association members may have interests in a
liquidation account, if one is established.
Eligibility
Sec. 192.625 Eligibility for a voluntary supervisory conversion.
(a) Eligibility. An insured savings association may be eligible to
convert under this subpart B if:
(1) The savings association is significantly undercapitalized (or
undercapitalized and a standard conversion that would make the savings
association adequately capitalized is not feasible) and the savings
association will be a viable entity following the conversion;
(2) Severe financial conditions threaten the savings association's
stability and a conversion is likely to improve its financial
condition;
(3) The FDIC will assist the savings association under section 13
of the Federal Deposit Insurance Act, 12 U.S.C. 1823; or
(4) The savings association is in receivership and a conversion
will assist the savings association.
(b) Requirements for viability after conversion. The savings
association will be a viable entity following the conversion if it
satisfies all of the following:
(1) The savings association will be adequately capitalized as a
result of the conversion;
(2) The savings association, its proposed conversion, and its
acquiror(s) comply with applicable supervisory policies;
(3) The transaction is in the savings association's best interest,
and the best interest of the Deposit Insurance Fund and the public; and
(4) The transaction will not injure or be detrimental to the
savings association, the Deposit Insurance Fund, or the public
interest.
Sec. 192.630 Eligibility of State-chartered savings bank for
voluntary supervisory conversion.
A State-chartered savings bank may be eligible to convert to a
Federal stock savings bank under this subpart if:
[[Page 42660]]
(a) The FDIC certifies under section 5(o)(2)(C) of the HOLA that
severe financial conditions threaten the savings bank's stability and
that the voluntary supervisory conversion is likely to improve its
financial condition; or
(b) The savings bank meets the following conditions:
(1) The savings bank's liabilities exceed its assets, as calculated
under generally accepted accounting principles, assuming the savings
bank is a going concern; and
(2) The savings bank will issue a sufficient amount of permanent
capital stock to meet its applicable FDIC capital requirement
immediately upon completion of the conversion, or the FDIC determines
that the savings bank will achieve an acceptable capital level within
an acceptable time period.
Plan of Supervisory Conversion
Sec. 192.650 Contents of plan of voluntary supervisory conversion.
A majority of the board of directors of the savings association
must adopt a plan of voluntary supervisory conversion. The savings
association must include all of the following information in its plan
of voluntary supervisory conversion.
(a) The savings association's name and address.
(b) A complete description of the proposed voluntary supervisory
conversion transaction that also describes plans for any liquidation
account.
(c) Certified copies of all resolutions relating to the conversion
adopted by the board of directors of the savings association.
Voluntary Supervisory Conversion Application
Sec. 192.660 Contents of voluntary supervisory conversion
application.
A savings association must include all of the following information
and documents in a voluntary supervisory conversion application to the
appropriate OCC licensing office if it is a Federal savings association
and to the appropriate FDIC region if it is a State savings association
under this subpart:
(a) Eligibility. (1) Evidence establishing that the savings
association meets the eligibility requirements under Sec. 192.625 or
Sec. 192.630.
(2) An opinion of qualified, independent counsel or an independent,
certified public accountant regarding the tax consequences of the
conversion, or an IRS ruling indicating that the transaction qualifies
as a tax-free reorganization.
(3) An opinion of independent counsel indicating that applicable
State law authorizes the voluntary supervisory conversion, if the
conversion involves a State-chartered savings association converting to
State stock form.
(b) Plan of conversion. A plan of voluntary supervisory conversion
that complies with Sec. 192.650.
(c) Business plan. A business plan that complies with Sec.
192.105, when required by the appropriate Federal banking agency.
(d) Financial data. (1) The savings association's most recent
audited financial statements and Consolidated Reports of Condition and
Income or Call Report, as appropriate. The savings association must
explain how its current capital levels make the savings association
eligible to engage in a voluntary supervisory conversion under Sec.
192.625 or Sec. 192.630.
(2) A description of the savings association's estimated conversion
expenses.
(3) Evidence supporting the value of any non-cash asset
contributions. Appraisals must be acceptable to the appropriate Federal
banking agency and the non-cash assets must meet all other appropriate
Federal banking agency policy guidelines.
(4) Pro forma financial statements that reflect the effects of the
transaction. The savings association must identify its tangible, core,
and risk-based capital levels and show the adjustments necessary to
compute the capital levels. The savings association must prepare its
pro forma statements in conformance with the appropriate Federal
banking agency's regulations and the applicable accounting
requirements.
(5) A statement describing the aggregate number and percentage of
shares that each director, officer, and any affiliates or associates of
the director or officer will purchase.
(e) Proposed documents. (1) The savings association's proposed
charter and bylaws.
(2) The savings association's proposed stock certificate form.
(3) Any securities offering circular and other securities
disclosure materials to be used in connection with the proposed
voluntary supervisory conversion.
(f) Agreements. (1) A copy of any agreements between the savings
association and proposed purchasers.
(2) A copy and description of all existing and proposed employment
contracts. The savings association must describe the term, salary, and
severance provisions of the contract, the identity and background of
the officer or employee to be employed, and the amount of any
conversion shares to be purchased by the officer or employee or his or
her affiliates or associates.
(g) Related filings and applications. (1) All filings required
under the securities offering rules of 12 CFR parts 16 and 192.
(2) Any required Change in Bank Control Act notice and rebuttal of
control submissions under 12 U.S.C. 1817(j) and 12 CFR 5.50, or copies
of any Holding Company Act applications, including prior-conduct
certifications listed under the appropriate Federal banking agency's
regulatory guidance.
(3) A subordinated debt application, if applicable.
(4) Applications for permission to organize a stock association and
for approval of a merger, if applicable, and a copy of any application
for FDIC insurance of accounts, if applicable.
(5) A statement describing any other applications required under
Federal or State banking laws for all transactions related to the
conversion, copies of all dispositive documents issued by regulatory
authorities relating to the applications, and, if requested by the
appropriate Federal banking agency, copies of the applications and
related documents.
(h) Other information. (1) A statement indicating the role each
director, officer, and affiliate of the savings association or
associate of the director or officer will have after the conversion.
(2) Any additional information requested by the OCC, as authorized
by law.
(i) Waiver request. A description of any of the features of the
savings association's application that do not conform to the
requirements of this subpart, including any request for waiver of these
requirements.
Appropriate Federal Banking Agency Review of the Voluntary Supervisory
Conversion Application
Sec. 192.670 Approval of voluntary supervisory conversion
application.
The appropriate Federal banking agency will generally approve a
savings association's application to engage in a voluntary supervisory
conversion unless it determines:
(a) The savings association does not meet the eligibility
requirements for a voluntary supervisory conversion under Sec. 192.625
or Sec. 192.630 or because the proceeds from the sale of conversion
stock, less the expenses of the conversion, would be insufficient to
satisfy any applicable viability requirement;
(b) The transaction is detrimental to or would cause potential
injury to the savings association or the Deposit
[[Page 42661]]
Insurance Fund or is contrary to the public interest;
(c) The savings association or its acquiror, or the controlling
parties or directors and officers of the savings association or its
acquiror, have engaged in unsafe or unsound practices in connection
with the voluntary supervisory conversion; or
(d) The savings association fails to justify an employment contract
incidental to the conversion, or the employment contract will be an
unsafe or unsound practice or represent a sale of control. In a
voluntary supervisory conversion, the appropriate Federal banking
agency generally will not approve employment contracts of more than one
year for existing management.
Sec. 192.675 Conditions imposed upon approval of voluntary
supervisory conversion application.
(a) Required condition. The appropriate Federal banking agency will
condition approval of a voluntary supervisory conversion application on
all of the following.
(1) The savings association must complete the conversion stock sale
within three months after the appropriate Federal banking agency
approves the application. The appropriate Federal banking agency may
grant an extension for good cause.
(2) The savings association must comply with all filing
requirements of this part, and 12 CFR part 16.
(3) The savings association must submit an opinion of independent
legal counsel indicating that the sale of its shares complies with all
applicable State securities law requirements.
(4) The savings association must comply with all applicable laws,
rules, and regulations.
(5) The savings association must satisfy any other requirements or
conditions the appropriate Federal banking agency may impose.
(b) Discretionary conditions. The appropriate Federal banking
agency may condition approval of a voluntary supervisory application
for conversion on either of the following:
(1) The savings association must satisfy any conditions and
restrictions the appropriate Federal banking agency imposes to prevent
unsafe or unsound practices, to protect the Deposit Insurance Fund and
the public interest, and to prevent potential injury or detriment to
the savings association before and after the conversion. The
appropriate Federal banking agency may impose these conditions and
restrictions on the savings association (before and after the
conversion) or, as appropriate, the savings association's acquiror,
controlling parties, or its directors and officers; or
(2) The savings association must infuse a larger amount of capital,
if necessary, for safety and soundness reasons.
Offers and Sales of Stock
Sec. 192.680 Offer and sale of shares in a voluntary supervisory
conversion.
If a savings association converts under this subpart, it must offer
and sell its shares in accordance with the applicable requirements of
12 CFR parts 16 and 192.
Post-Conversion
Sec. 192.690 Restrictions on acquisition of additional shares after
voluntary supervisory conversion.
For three years after the completion of a voluntary supervisory
conversion, neither the savings association nor its controlling
shareholder(s) may acquire shares from minority shareholders without
the appropriate Federal banking agency's prior approval.
PART 195--COMMUNITY REINVESTMENT
0
54. The authority citation for part 195 continues to read as follows:
Authority: 12 U.S.C. 1462a, 1463, 1464, 1814, 1816, 1828(c),
2901 through 2908, and 5412(b)(2)(B).
0
55. Section 195.11 is amended by revising paragraph (a) to read as
follows:
Sec. 195.11 Authority, purposes, and scope.
(a) Authority. This part is issued under the Community Reinvestment
Act of 1977 (CRA), as amended (12 U.S.C. 2901 et seq.); section 5, as
amended, and sections 3, and 4, as added, of the Home Owners' Loan Act
of 1933 (12 U.S.C. 1462a, 1463, and 1464); sections 4, 6, and 18(c), as
amended of the Federal Deposit Insurance Act (12 U.S.C. 1814, 1816,
1828(c)); and section 312 of the Dodd-Frank Wall Street Reform and
Consumer Protection Act (12 U.S.C. 5412(b)(2)(B)).
* * * * *
Brian P. Brooks,
Acting Comptroller of the Currency.
[FR Doc. 2020-12784 Filed 7-8-20; 4:15 pm]
BILLING CODE 4810-33-P