12 C.F.R. Subpart B—Voluntary Supervisory Conversions
Title 12 - Banks and Banking
(a) You must comply with this subpart to engage in a voluntary supervisory conversion. This subpart applies to all voluntary supervisory conversions under secs. 5(i)(1), (i)(2), and (p) of the Home Owners' Loan Act (HOLA), 12 U.S.C. 1464(i)(1), (i)(2), and (p). (b) Subpart A of this part also applies to a voluntary supervisory conversion, unless a requirement is clearly inapplicable. (a) You may sell your shares or the shares of a holding company to the public under the requirements of subpart A of this part. (b) You may convert to stock form by merging into an interim federal-or state-chartered stock association. (c) You may sell your shares directly to an acquiror, who may be a person, company, depository institution, or depository institution holding company. (d) You 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. Your 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 OTS provides otherwise. Your members may have interests in a liquidation account, if one is established. (a) If you are an insured savings association, you may be eligible to convert under this subpart if: (1) You are significantly undercapitalized (or you are undercapitalized and a standard conversion that would make you adequately capitalized is not feasible) and you will be a viable entity following the conversion; (2) Severe financial conditions threaten your stability and a conversion is likely to improve your financial condition; (3) FDIC will assist you under section 13 of the Federal Deposit Insurance Act, 12 U.S.C. 1823; or (4) You are in receivership and a conversion will assist you. (b) You will be a viable entity following the conversion if you satisfy all of the following: (1) You will be adequately capitalized as a result of the conversion; (2) You, your proposed conversion, and your acquiror(s) comply with applicable supervisory policies; (3) The transaction is in your 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 you, the Deposit Insurance Fund, or the public interest. [67 FR 52020, Aug. 9, 2002, as amended at 71 FR 19811, Apr. 18, 2006] If you are a state-chartered savings bank you may be eligible to convert to a federal stock savings bank under this subpart if: (a) FDIC certifies under section 5(o)(2)(C) of the HOLA that severe financial conditions threaten your stability and that the voluntary supervisory conversion is likely to improve your financial condition, and OTS concurs with this certification; or (b) You meet the following conditions: (1) Your liabilities exceed your assets, as calculated under generally accepted accounting principles, assuming you are a going concern; and (2) You will issue a sufficient amount of permanent capital stock to meet your applicable FDIC capital requirement immediately upon completion of the conversion, or FDIC determines that you will achieve an acceptable capital level within an acceptable time period. [67 FR 52020, Aug. 9, 2002, as amended at 71 FR 19811, Apr. 18, 2006]
Title 12: Banks and Banking
PART 563b—CONVERSIONS FROM MUTUAL TO STOCK FORM
Subpart B—Voluntary Supervisory Conversions
§ 563b.600 What does this subpart do?
§ 563b.605 How may I conduct a voluntary supervisory conversion?
§ 563b.610 Do my members have rights in a voluntary supervisory conversion?
Eligibility
§ 563b.625 When is a savings association eligible for a voluntary supervisory conversion?
§ 563b.630 When is a state-chartered savings bank eligible for a voluntary supervisory conversion?
Plan of Supervisory Conversion
§ 563b.650 What must I include in my plan of voluntary supervisory conversion?
A majority of your board of directors must adopt a plan of voluntary supervisory conversion. You must include all of the following information in your plan of voluntary supervisory conversion.
(a) Your name and address.
(b) The name, address, date and place of birth, and social security number of each proposed purchaser of conversion shares and a description of that purchaser's relationship to you.
(c) The title, per-unit par value, number, and per-unit and aggregate offering price of shares that you will issue.
(d) The number and percentage of shares that each investor will purchase.
(e) The aggregate number and percentage of shares that each director, officer, and any affiliates or associates of the director or officer will purchase.
(f) A description of any liquidation account.
(g) Certified copies of all resolutions of your board of directors relating to the conversion.
Voluntary Supervisory Conversion Application
§ 563b.660 What must I include in my voluntary supervisory conversion application?
You must include all of the following information and documents in a voluntary supervisory conversion application to OTS under this subpart:
(a) Eligibility. (1) Evidence establishing that you meet the eligibility requirements under §§563b.625 or 563b.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 you are a state-chartered savings association converting to state stock form.
(b) Plan of conversion. A plan of voluntary supervisory conversion that complies with §563b.650.
(c) Business plan. A business plan that complies with §563b.105, when required by OTS.
(d) Financial data. (1) Your most recent audited financial statements and Thrift Financial Report. You must explain how your current capital levels make you eligible to engage in a voluntary supervisory conversion under §§563b.625 or 563b.630.
(2) A description of your estimated conversion expenses.
(3) Evidence supporting the value of any non-cash asset contributions. Appraisals must be acceptable to OTS and the non-cash asset must meet all other OTS policy guidelines. See Thrift Activities Handbook Section 110 for guidelines at OTS's website (www.ots.treas.gov).
(4) Pro forma financial statements that reflect the effects of the transaction. You must identify your tangible, core, and risk-based capital levels and show the adjustments necessary to compute the capital levels. You must prepare your pro forma statements in conformance with OTS regulations and policy.
(e) Proposed documents. (1) Your proposed charter and bylaws.
(2) Your proposed stock certificate form.
(f) Agreements. (1) A copy of any agreements between you and proposed purchasers.
(2) A copy and description of all existing and proposed employment contracts. You 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 applications. (1) All filings required under the securities offering rules of parts 563b and 563g of this chapter.
(2) Any required Holding Company Act application, Control Act notice, or rebuttal submission under part 574 of this chapter, including prior-conduct certifications under Regulatory Bulletin 20.
(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 Federal Home Loan Bank membership or 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 your conversion, copies of all dispositive documents issued by regulatory authorities relating to the applications, and, if requested by OTS, copies of the applications and related documents.
(h) Waiver request. A description of any of the features of your application that do not conform to the requirements of this subpart, including any request for waiver of these requirements.
OTS Review of the Voluntary Supervisory Conversion Application
§ 563b.670 Will OTS approve my voluntary supervisory conversion application?
OTS will generally approve your application to engage in a voluntary supervisory conversion unless it determines:
(a) You do not meet the eligibility requirements for a voluntary supervisory conversion under §§563b.625 or 563b.630 or because the proceeds from the sale of your 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 you or the Deposit Insurance Fund or is contrary to the public interest;
(c) You or your acquiror, or the controlling parties or directors and officers of you or your acquiror, have engaged in unsafe or unsound practices in connection with the voluntary supervisory conversion; or
(d) You fail 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, OTS generally will not approve employment contracts of more than one year for your existing management.
[67 FR 52020, Aug. 9, 2002, as amended at 71 FR 19811, Apr. 18, 2006]
§ 563b.675 What conditions will OTS impose on an approval?
(a) OTS will condition approval of a voluntary supervisory conversion application on all of the following.
(1) You must complete the conversion stock sale within three months after OTS approves your application. OTS may grant an extension for good cause.
(2) You must comply with all filing requirements of parts 563b and 563g of this chapter.
(3) You must submit an opinion of independent legal counsel indicating that the sale of your shares complies with all applicable state securities law requirements.
(4) You must comply with all applicable laws, rules, and regulations.
(5) You must satisfy any other requirements or conditions OTS may impose.
(b) OTS may condition approval of a voluntary supervisory conversion application on either of the following:
(1) You must satisfy any conditions and restrictions OTS 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 you before and after the conversion. OTS may impose these conditions and restrictions on you (before and after the conversion), your acquiror, controlling parties, or directors and officers of you or your acquiror; or
(2) You must infuse a larger amount of capital, if necessary, for safety and soundness reasons.
[67 FR 52020, Aug. 9, 2002, as amended at 71 FR 19811, Apr. 18, 2006]
Offers and Sales of Stock
§ 563b.680 How do I sell my shares?
If you convert under this subpart, you must offer and sell your shares under part 563g of this chapter.
Post-Conversion
§ 563b.690 Who may not acquire additional shares after the voluntary supervisory conversion?
For three years after the completion of a voluntary supervisory conversion, neither you nor your controlling shareholder(s) may acquire shares from minority shareholders without OTS's prior approval.
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