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Data is current as of March 6, 2008

Title 12:
Banks and Banking

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PART 563b—CONVERSIONS FROM MUTUAL TO STOCK FORM

Section Contents
§ 563b.5   What
does this part do?
§ 563b.10   May
I form a holding company as part of my conversion?
§ 563b.15   May
I form a charitable organization as part of my
conversion?
§ 563b.20   May
I acquire another insured stock depository institution as part of my
conversion?
§ 563b.25   What
definitions apply to this part?

Subpart
A—Standard Conversions

Prior
to Conversion
§ 563b.100   What
must I do before a conversion?
§ 563b.105   What
information must I include in my business plan?
§ 563b.110   Who
must review my business plan?
§ 563b.115   How
will OTS review my business plan?
§ 563b.120   May
I discuss my plans to convert with others?

Plan
of Conversion
§ 563b.125   Must
my board of directors adopt a plan of conversion?
§ 563b.130   What
must I include in my plan of conversion?
§ 563b.135   How
do I notify my members that my board of directors approved a plan of
conversion?
§ 563b.140   May
I amend my plan of conversion?

Filing
Requirements
§ 563b.150   What
must I include in my application for conversion?
§ 563b.155   How
do I file my application for conversion?
§ 563b.160   May
I keep portions of my application for conversion
confidential?
§ 563b.165   How
do I amend my application for conversion?

Notice
of Filing of Application and Comment Process
§ 563b.180   How
do I notify the public that I filed an application for
conversion?
§ 563b.185   How
may a person comment on my application for conversion?

OTS
Review of the Application for Conversion
§ 563b.200   What
actions may OTS take on my application?
§ 563b.205   May
a court review OTS's final action on my conversion?

Vote
by Members
§ 563b.225   Must
I submit the plan of conversion to my members for
approval?
§ 563b.230   Who
is eligible to vote?
§ 563b.235   How
must I notify my members of the meeting?
§ 563b.240   What
must I submit to OTS after the members' meeting?

Proxy
Solicitation
§ 563b.250   Who
must comply with these proxy solicitation provisions?
§ 563b.255   What
must the form of proxy include?
§ 563b.260   May
I use previously executed proxies?
§ 563b.265   How
may I use proxies executed under this part?
§ 563b.270   What
must I include in my proxy statement?
§ 563b.275   How
do I file revised proxy materials?
§ 563b.280   Must
I mail a member's proxy solicitation material?
§ 563b.285   What
solicitations are prohibited?
§ 563b.290   What
will OTS do if a solicitation violates these
prohibitions?
§ 563b.295   Will
OTS require me to re-solicit proxies?

Offering
Circular
§ 563b.300   What
must happen before OTS declares my offering circular
effective?
§ 563b.305   When
may I distribute the offering circular?
§ 563b.310   When
must I file a post-effective amendment to the offering
circular?

Offers
and Sales of Stock
§ 563b.320   Who
has priority to purchase my conversion shares?
§ 563b.325   When
may I offer to sell my conversion shares?
§ 563b.330   How
do I price my conversion shares?
§ 563b.335   How
do I sell my conversion shares?
§ 563b.340   What
sales practices are prohibited?
§ 563b.345   How
may a subscriber pay for my conversion shares?
§ 563b.350   Must
I pay interest on payments for conversion shares?
§ 563b.355   What
subscription rights must I give to each eligible account holder and each
supplemental eligible account holder?
§ 563b.360   Are
my officers, directors, and their associates eligible account
holders?
§ 563b.365   May
other voting members purchase conversion shares in the
conversion?
§ 563b.370   Does
OTS limit the aggregate purchases by officers, directors, and their
associates?
§ 563b.375   How
do I allocate my conversion shares if my shares are
oversubscribed?
§ 563b.380   May
my employee stock ownership plan purchase conversion
shares?
§ 563b.385   May
I impose any purchase limitations?
§ 563b.390   Must
I provide a purchase preference to persons in my local
community?
§ 563b.395   What
other conditions apply when I offer conversion shares in a community
offering, a public offering, or both?

Completion
of the Offering
§ 563b.400   When
must I complete the sale of my stock?
§ 563b.405   How
do I extend the offering period?

Completion
of the Conversion
§ 563b.420   When
must I complete my conversion?
§ 563b.425   Who
may terminate the conversion?
§ 563b.430   What
happens to my old charter?
§ 563b.435   What
happens to my corporate existence after conversion?
§ 563b.440   What
voting rights must I provide to stockholders after the
conversion?
§ 563b.445   What
must I provide my savings account holders?

Liquidation
Account
§ 563b.450   What
is a liquidation account?
§ 563b.455   What
is the initial balance of the liquidation account?
§ 563b.460   How
do I determine the initial balances of liquidation
sub-accounts?
§ 563b.465   Do
account holders retain any voting rights based on their liquidation
sub-accounts?
§ 563b.470   Must
I adjust liquidation sub-accounts?
§ 563b.475   What
is a liquidation?
§ 563b.480   Does
the liquidation account affect my net worth?
§ 563b.485   What
provision must I include in my new federal charter?

Post-Conversion
§ 563b.500.   What
management stock benefit plans may I implement?
§ 563b.505   May
my directors, officers, and their associates freely trade
shares?
§ 563b.510   May
I repurchase shares after conversion?
§ 563b.515   What
information must I provide to OTS before I repurchase my
shares?
§ 563b.520   May
I declare or pay dividends after I convert?
§ 563b.525   Who
may acquire my shares after I convert?
§ 563b.530   What
other requirements apply after I convert?

Contributions
to Charitable Organizations
§ 563b.550   May
I donate conversion shares or conversion proceeds to a charitable
organization?
§ 563b.555   How
do my members approve a charitable contribution?
§ 563b.560   How
much may I contribute to a charitable organization?
§ 563b.565   What
must the charitable organization include in its organizational
documents?
§ 563b.570   How
do I address conflicts of interest involving my
directors?
§ 563b.575   What
other requirements apply to charitable organizations?

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?

Voluntary
Supervisory Conversion Application
§ 563b.660   What
must I include in my voluntary supervisory conversion
application?

OTS
Review of the Voluntary Supervisory Conversion
Application
§ 563b.670   Will
OTS approve my voluntary supervisory conversion
application?
§ 563b.675   What
conditions will OTS impose on an approval?

Offers
and Sales of Stock
§ 563b.680   How
do I sell my shares?

Post-Conversion
§ 563b.690   Who
may not acquire additional shares after the voluntary supervisory
conversion?

Authority:   12 U.S.C. 1462, 1462a,
1463, 1464, 1467a, 2901; 15 U.S.C. 78c, 78l, 78m, 78n,
78w.

Source:   67 FR 52020, Aug. 9, 2002,
unless otherwise noted.

§ 563b.5   What does this part do?

top

(a) General. This part governs how a savings association (“you”)
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. You must use the forms prescribed under
this part and provide such information as OTS may require under the forms
by regulation or otherwise. The forms required under this part include:
Form AC (Application for Conversion); Form PS (Proxy Statement); Form OC
(Offering Circular); and Form OF (Order Form).

(c) Waivers. OTS may waive any requirement of this part or a
provision in any prescribed form. To obtain a waiver, you must file a
written request with OTS that:

(1) Specifies the requirement(s) or provision(s) you want OTS to
waive;

(2) Demonstrates that the waiver is equitable; is not detrimental to
you, your 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 requirement or provision.

§ 563b.10   May I form a holding company as part
of my conversion?

top

You may convert to the stock form of ownership as part of a transaction
where you organize a holding company to acquire all of your shares upon
their issuance. In such a transaction, your holding company will offer
rights to purchase its shares instead of your shares. All of the
requirements of subpart A generally apply to the holding company as they
apply to the savings association. Section 574.6 of this chapter contains
OTS's holding company application requirements.

§ 563b.15   May I form a charitable organization
as part of my conversion?

top

When you convert to the stock form, you may form a charitable
organization. Your contributions to the charitable organization are
governed by the requirements of §§563b.550 through 563b.575.

§ 563b.20   May I acquire another insured stock
depository institution as part of my conversion?

top

When you convert to stock form, you may acquire for cash or stock
another insured depository institution that is already in the stock form
of ownership.

§ 563b.25   What definitions apply to this
part?

top

The following definitions apply to this part and the forms prescribed
under this part:

Acting in concert has the same meaning as in §574.2(c) of this
chapter. The rebuttable presumptions of §574.4(d) of this chapter, other
than §§574.4(d)(1) and (d)(2) of this chapter, apply to the share purchase
limitations at §§563b.355 through 563b.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.

Associate of a person is:

(1) A corporation or organization (other than you or your
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 §§563b.370, 563b.380, 563b.385, 563b.390,
563b.395 and 563b.505, a person who has a substantial beneficial interest
in your 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 §563b.370, your 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 your director or senior officer, or a director or senior
officer of your holding company or your subsidiary.

Association members or members are persons who, under
applicable law, are eligible to vote at the meeting on conversion.

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 part 574 of this chapter.

Eligibility record date is the date for determining eligible
account holders. The eligibility record date must be at least one year
before the date your board of directors adopts the plan of conversion.

Eligible account holders are any persons holding qualifying
deposits on the eligibility record date.

IRS is the Internal Revenue Service.

Local community includes:

(1) Every county, parish, or similar governmental subdivision in which
you have a home or branch office;

(2) Each county's, parish's, or subdivision's metropolitan statistical
area;

(3) All zip code areas in your Community Reinvestment Act assessment
area; and

(4) Any other area or category you set out in your plan of conversion,
as approved by OTS.

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 you, are not offers, offers to sell, or offers
for sale.

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. Your plan of conversion may provide
that only 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 OTS is not a sale.

Savings account is any withdrawable account as defined in
§561.42 of this chapter, including a demand account as defined in §561.16
of this chapter.

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 your 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.

Subscription offering is the offering of shares through
nontransferable subscription rights to:

(1) Eligible account holders under §563b.355;

(2) Tax-qualified employee stock ownership plans under §563b.380;

(3) Supplemental eligible account holders under §563b.355; and

(4) Other voting members under §563b.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 OTS approves your
conversion and will only occur if OTS has not approved your conversion
within 15 months after the eligibility record date.

Supplemental eligible account holders are any persons, except
your 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 sec. 401 of the Internal Revenue Code (26
U.S.C. 401).

Underwriter is any person who purchases any securities from you
with a view to distributing the securities, offers or sells securities for
you 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.

Subpart A—Standard Conversions

top

Prior to Conversion

top

§ 563b.100   What must I do before a
conversion?

top

(a) Your board, or a subcommittee of your board, must meet with OTS
before you pass your plan of conversion. The meeting may occur at OTS or
your offices at your option. At that meeting you must provide OTS with a
written strategic plan that outlines the objectives of the proposed
conversion and the intended use of the conversion proceeds.

(b) You should also consult with OTS before you file your application
for conversion. OTS will discuss the information that you must include in
the application for conversion, general issues that you may confront in
the conversion process, and any other pertinent issues.

§ 563b.105   What information must I include in my
business plan?

top

(a) Prior to filing an application for conversion, you must adopt a
business plan reflecting your intended plans for deployment of the
proposed conversion proceeds. Your business plan is required, under
§563b.150, to be included in your conversion application. At a minimum,
your business plan must address:

(1) Your projected operations and activities for three years following
the conversion. You must describe how you will deploy the conversion
proceeds at the converted savings association (and holding company, if
applicable), what opportunities are available to reasonably achieve your
planned deployment of conversion proceeds in your proposed market areas,
and how your deployment will provide a reasonable return on investment
commensurate with investment risk, investor expectations, and industry
norms, by the final year of the business plan. You 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. OTS may require that a larger percentage of
proceeds remain in the institution.

(2) Your plan for deploying conversion proceeds to meet credit and
lending needs in your proposed market areas. OTS strongly discourages
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 your plan for deployment of conversion
proceeds, and the effect of this plan on management resources, staffing,
and facilities.

(4) The expertise of your management and board of directors, or that
you have planned for adequate staffing and controls to prudently manage
the growth, expansion, new investment, and other operations and activities
proposed in your business plan.

(b) You may not project returns of capital or special dividends in any
part of the business plan. A newly converted company may not plan on stock
repurchases in the first year of the business plan.

§ 563b.110   Who must review my business
plan?

top

(a) Your chief executive officer and members of the board of directors
must review, and at least two-thirds of your board of directors must
approve, the business plan.

(b) Your 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. You
must submit these certifications with your business plan, as part of your
conversion application under §563b.150.

§ 563b.115   How will OTS review my business
plan?

top

(a) OTS will review your business plan to determine that it
demonstrates a safe and sound deployment of conversion proceeds, as part
of its review of your conversion application. In making its determination,
OTS will consider how you have addressed the applicable factors of
§563b.105. No single factor will be determinative. OTS will review every
case on its merits.

(b) You must file your business plan with the Regional Office. OTS may
request additional information, if necessary, to support its determination
under paragraph (a) of this section. You must file your business plan as a
confidential exhibit to the Form AC.

(c) If OTS approves your application for conversion and you complete
your conversion, you must operate within the parameters of your business
plan. You must obtain the prior written approval of the Regional Director
for any material deviations from your business plan.

§ 563b.120   May I discuss my plans to convert
with others?

top

(a) You may discuss information about your conversion with individuals
that you authorize to prepare documents for your conversion.

(b) Except as permitted under paragraph (a) of this section, you must
keep all information about your conversion confidential until your board
of directors adopts your plan of conversion.

(c) If you violate this section, OTS may require you to take remedial
action. For example, OTS may require you to take any or all of the
following actions:

(1) Publicly announce that you are considering a conversion;

(2) Set an eligibility record date acceptable to OTS;

(3) Limit the subscription rights of any person who violates or aids a
violation of this section; or

(4) Take any other action to assure that your conversion is fair and
equitable.

Plan of Conversion

top

§ 563b.125   Must my board of directors adopt a
plan of conversion?

top

Prior to filing an application for conversion, your board of directors
must adopt a plan of conversion that conforms to §§563b.320 through
563b.485 and 563b.505. Your board of directors must adopt the plan by at
least a two-thirds vote. Your plan of conversion is required, under
§563b.150, to be included in your conversion application.

§ 563b.130   What must I include in my plan of
conversion?

top

You must include the information included in §§563b.320 through
563b.485 and 563b.505 in your plan of conversion. OTS may require you to
delete or revise any provision in your plan of conversion if OTS
determines the provision is inequitable; is detrimental to you, your
account holders, or other savings associations; or is contrary to public
interest.

§ 563b.135   How do I notify my members that my
board of directors approved a plan of conversion?

top

(a) Notice. You must promptly notify your members that your
board of directors adopted a plan of conversion and that a copy of the
plan is available for the members' inspection in your home office and in
your branch offices. You must mail a letter to each member or publish a
notice in the local newspaper in every local community where you have an
office. You may also issue a press release. OTS may require broader
publication, if necessary, to ensure adequate notice to your members.

(b) Contents of notice. You may include any of the following
statements and descriptions in your letter, notice, or press release.

(1) Your board of directors adopted a proposed plan to convert from a
mutual to a stock savings institution.

(2) You will send your members a proxy statement with detailed
information on the proposed conversion before you convene a members'
meeting to vote on the conversion.

(3) Your members will have an opportunity to approve or disapprove the
proposed conversion at a meeting. At least a majority of the eligible
votes must approve the conversion.

(4) You will not vote existing proxies to approve or disapprove the
conversion. You will solicit new proxies for voting on the proposed
conversion.

(5) OTS, and in the case of a state-chartered savings association, the
appropriate state regulator, must approve the conversion before the
conversion will be effective. Your members will have an opportunity to
file written comments, including objections and materials supporting the
objections, with OTS.

(6) The IRS must issue a favorable tax ruling, or a tax expert must
issue an appropriate tax opinion, on the tax consequences of your
conversion before OTS will approve the conversion. The ruling or opinion
must indicate the conversion will be a tax-free reorganization.

(7) OTS, 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. FDIC will continue to
insure the accounts.

(9) Your conversion will not affect borrowers' loans, including the
amount, rate, maturity, security, and other contractual terms.

(10) Your business of accepting deposits and making loans will continue
without interruption.

(11) Your current management and staff will continue to conduct current
services for depositors and borrowers under current policies and in
existing offices.

(12) You may continue to be a member of the Federal Home Loan Bank
System.

(13) You may substantively amend your proposed plan of conversion
before the members' meeting.

(14) You may terminate the proposed conversion.

(15) After OTS, and in the case of a state-chartered savings
association, the appropriate state regulator, approves the proposed
conversion, you will send proxy materials providing additional
information. After you send proxy materials, members may telephone or
write to you with additional questions.

(16) The proposed record date for determining the eligible account
holders who are entitled to receive subscription rights to purchase your
shares.

(17) A brief description of the circumstances under which supplemental
eligible account holders will receive subscription rights to purchase your
shares.

(18) A brief description of how voting members may participate in the
conversion.

(19) A brief description of how directors, officers, and employees will
participate in the conversion.

(20) A brief description of the proposed plan of conversion.

(21) The par value (if any) and approximate number of shares you will
issue and sell in the conversion.

(c) Other requirements. (1) You may not solicit proxies, provide
financial statements, describe the benefits of conversion, or estimate the
value of your shares upon conversion in the letter, notice, or press
release.

(2) If you respond to inquiries about the conversion, you may address
only the matters listed in paragraph (b) of this section.

§ 563b.140   May I amend my plan of
conversion?

top

You may amend your plan of conversion before you solicit proxies. After
you solicit proxies, you may amend your plan of conversion only if OTS
concurs.

Filing Requirements

top

§ 563b.150   What must I include in my application
for conversion?

top

(a) Your application for conversion must include all of the following
information.

(1) Your plan of conversion.

(2) Pricing materials meeting the requirements of §563b.200(b).

(3) Proxy soliciting materials under §563b.270, including:

(i) A preliminary proxy statement with signed financial statements;

(ii) A form of proxy meeting the requirements of §563b.255; and

(iii) Any additional proxy soliciting materials, including press
releases, personal solicitation instructions, radio or television scripts
that you plan to use or furnish to your members, and a legal opinion
indicating that any marketing materials comply with all applicable
securities laws.

(4) An offering circular described in §563b.300.

(5) The documents and information required by Form AC. You may obtain
Form AC from OTS Washington and Regional Offices (see §516.40 of this
chapter) and OTS's website ( www.ots.treas.gov ).

(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, instruction B(7).

(7) Your business plan, submitted as a separately bound, confidential
exhibit. See §563b.160.

(8) Any additional information OTS requests.

(b) OTS will not accept for filing, and will return, any application
for conversion that is improperly executed, materially deficient,
substantially incomplete, or that provides for unreasonable conversion
expenses.

§ 563b.155   How do I file my application for
conversion?

top

You must file seven copies of your application for conversion on Form
AC. You must file the original and three conformed copies with the
Applications Filing Room in Washington, and three conformed copies with
the appropriate Regional Office at the addresses in §516.40 of this
chapter.

§ 563b.160   May I keep portions of my application
for conversion confidential?

top

(a) OTS makes all filings under this part available to the public, but
may keep portions of your application for conversion confidential under
paragraph (b) of this section.

(b) You may request OTS to keep portions of your application
confidential. To do so, you must separately bind and clearly designate as
“confidential” any portion of your application for conversion that you
deem confidential. You must provide a written statement specifying the
grounds supporting your request for confidentiality. OTS will not treat as
confidential the portion of your application describing how you plan to
meet your Community Reinvestment Act (CRA) objectives. The CRA portion of
your application may not incorporate by reference information contained in
the confidential portion of your application.

(c) OTS will determine whether confidential information must be made
available to the public under 5 U.S.C. 552 and part 505 of this chapter.
OTS will advise you before it makes information you designated as
“confidential” available to the public.

§ 563b.165   How do I amend my application for
conversion?

top

To amend your application for conversion, you must:

(a) File an amendment with an appropriate facing sheet;

(b) Number each amendment consecutively;

(c) Respond to all issues raised by OTS; and

(d) Demonstrate that the amendment conforms to all applicable
regulations.

Notice of Filing of Application and Comment Process

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§ 563b.180   How do I notify the public that I
filed an application for conversion?

top

(a) You must publish a public notice of the application in accordance
with the procedures in subpart B of part 516 of this chapter. You must
simultaneously prominently post the notice in your home office and all
branch offices.

(b) Promptly after publication, you must file four copies of any public
notice and an affidavit of publication from each publisher. You must file
the original and one copy with the Applications Filing Room in Washington,
and two copies with the appropriate Regional Office at the addresses in
§516.40 of this chapter.

(c) If OTS does not accept your application for conversion under
§563b.200 and requires you to file a new application, you must publish and
post a new notice and allow an additional 30 days for comment.

[69 FR 68250, Nov. 24, 2004]

§ 563b.185   How may a person comment on my
application for conversion?

top

Commenters may submit comments on your application in accordance with
the procedures in subpart C of part 516 of this chapter. A commenter must
file the original and one copy of any comments with the Applications
Filing Room in Washington and two copies with the appropriate Regional
Office at the addresses in §516.40 of this chapter.

[69 FR 68250, Nov. 24, 2004]

OTS Review of the Application for Conversion

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§ 563b.200   What actions may OTS take on my
application?

top

(a) OTS may approve your application for conversion only if:

(1) Your conversion complies with this part;

(2) You will meet your regulatory capital requirements under part 567
of this chapter after the conversion; and

(3) Your conversion will not result in a taxable reorganization under
the Internal Revenue Code of 1986, as amended.

(b) OTS will review the appraisal required by §563b.150(a)(2) in
determining whether to approve your application. OTS will review the
appraisal under the following requirements.

(1) Independent persons experienced and expert in corporate appraisal,
and acceptable to OTS, must prepare the appraisal report.

(2) An affiliate of the appraiser may serve as an underwriter or
selling agent, if you ensure 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 your 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 your 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) OTS 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) You may not represent or imply that OTS approved the appraisal.

(c) OTS will review your compliance record under part 563e of this
chapter and your business plan to determine how you will serve the
convenience and needs of your communities after the conversion.

(1) Based on this review, OTS may approve your application, deny your
application, or approve your application on the condition that you will
improve your CRA performance or that you will address the particular
credit or lending needs of the communities that you will serve.

(2) OTS may deny your application if your business plan does not
demonstrate that your proposed use of conversion proceeds will help you to
meet the credit and lending needs of the communities that you will
serve.

(d) OTS may request that you amend your application if further
explanation is necessary, material is missing, or material must be
corrected.

(e) OTS will deny your application if the application does not meet the
requirements of this subpart, unless OTS waives the requirement under
§563b.5(c).

§ 563b.205   May a court review OTS's final action
on my conversion?

top

(a) Any person aggrieved by OTS's final action on your 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) 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 OTS action. The aggrieved person
must file the petition with the court within the later of 30 days after
OTS publishes notice of OTS's final action in theFederal
Registeror 30 days after you mail the proxy statement to your members
under §563b.235.

Vote by Members

top

§ 563b.225   Must I submit the plan of conversion
to my members for approval?

top

(a) After OTS approves your plan of conversion, you must submit your
plan of conversion to your members for approval. You must obtain this
approval at a meeting of your members, which may be a special or annual
meeting, unless you are a state-chartered savings association and state
law requires you to obtain approval at an annual meeting.

(b) Your members must approve your plan of conversion by a majority of
the total outstanding votes, unless you are a state-chartered savings
association and state law prescribes a higher percentage.

(c) Your members may vote in person or by proxy.

(d) You may notify eligible account holders or supplemental eligible
account holders who are not voting members of your proposed conversion.
You may include only the information in §563b.135 in your notice.

§ 563b.230   Who is eligible to vote?

top

You determine members' eligibility to vote by setting a voting record
date. You must set a voting record date that is not more than 60 days nor
less than 20 days before your meeting, unless you are a state-chartered
savings association and state law requires a different voting record
date.

§ 563b.235   How must I notify my members of the
meeting?

top

(a) You must notify your members of the meeting to consider your
conversion by sending the members a proxy statement authorized by OTS.

(b) You must notify your members 20 to 45 days before your meeting,
unless you are a state-chartered savings association and state law
requires a different notice period.

(c) You must also notify each beneficial holder of an account held in a
fiduciary capacity:

(1) If you are a federal association and the name of the beneficial
holder is disclosed on your records; or

(2) If you are a state-chartered association and the beneficial holder
possesses voting rights under state law.

§ 563b.240   What must I submit to OTS after the
members' meeting?

top

(a) Promptly after the members' meeting, you must file all of the
following information with OTS:

(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 you conducted the members' meeting in
compliance with all applicable state or federal laws and regulations.

(b) Promptly after completion of the conversion, you must submit an
opinion of counsel that you complied with all laws applicable to the
conversion.

Proxy Solicitation

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§ 563b.250   Who must comply with these proxy
solicitation provisions?

top

(a) You must comply with these proxy solicitation provisions when you
provide proxy solicitation material to members for the meeting to vote on
your plan of conversion.

(b) Your members must comply with these proxy solicitation provisions
when they provide proxy solicitation materials to members for the meeting
to vote on your conversion, pursuant to §563b.280, except where:

(1) The member solicits 50 people or fewer and does not solicit proxies
on your behalf; or

(2) The member solicits proxies through newspaper advertisements after
your board of directors adopts the plan of conversion. Any newspaper
advertisements may include only the following information:

(i) Your name;

(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 your members to vote at the meeting.

§ 563b.255   What must the form of proxy
include?

top

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. You 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.

§ 563b.260   May I use previously executed
proxies?

top

You may not use previously executed proxies for the plan of conversion
vote. If members consider your plan of conversion at an annual meeting,
you may vote proxies obtained through other proxy solicitations only on
matters not related to your plan of conversion.

§ 563b.265   How may I use proxies executed under
this part?

top

You may vote a proxy obtained under this part on matters that are
incidental to the conduct of the meeting. You 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 your plan of conversion.

§ 563b.270   What must I include in my proxy
statement?

top

(a) Content requirements. You must prepare your proxy statement
in compliance with this part and Form PS. You may obtain Form PS from OTS
Washington and Regional Offices (see §516.40 of this chapter) and OTS's
website ( http://www.ots.treas.gov ).

(b) Other requirements. (1) OTS will review your proxy
solicitation material when it reviews the application for conversion and
will authorize the use of proxy solicitation material.

(2) You must provide an authorized written proxy statement to your
members before or at the same time you provide any other soliciting
material. You must mail authorized proxy solicitation material to your
members within ten days after OTS authorizes the solicitation.

§ 563b.275   How do I file revised proxy
materials?

top

(a) You must file revised proxy materials as an amendment to your
application for conversion. See §563b.155 for where to file.

(b) To revise your proxy solicitation materials, you must file:

(1) Seven copies of your revised proxy materials as required by Form
PS;

(2) Seven copies of your revised form of proxy, if applicable; and

(3) Seven copies of any additional proxy solicitation material subject
to §563b.270.

(c) You must mark four of the seven required copies to clearly indicate
changes from the prior filing.

(d) You must file seven definitive copies of all proxy solicitation
material, in the form in which you furnish the material to your members.
You must file no later than the date that you send or give the proxy
solicitation material to your members. You must indicate the date that you
will release the materials.

(e) Unless OTS requests you to do so, you do not have to file copies of
replies to inquiries from your members or copies of communications that
merely request members to sign and return proxy forms.

§ 563b.280   Must I mail a member's proxy
solicitation material?

top

(a) You must mail the member's authorized proxy solicitation material
if:

(1) Your board of directors adopted a plan of conversion;

(2) A member requests in writing that you mail the proxy solicitation
material;

(3) OTS has authorized the member's proxy solicitation; and

(4) The member agrees to defray your reasonable expenses.

(b) As soon as practicable after you receive a request under paragraph
(a) of this section, you must mail or otherwise furnish the following
information to the member:

(1) The approximate number of members that you 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) You must mail authorized 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
you.

(d) You are not responsible for the content of a member's proxy
solicitation material.

(e) A member may furnish other members its own proxy solicitation
material, authorized by OTS, subject to the rules in this section.

§ 563b.285   What solicitations are
prohibited?

top

(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 OTS 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.

§ 563b.290   What will OTS do if a solicitation
violates these prohibitions?

top

(a) If a solicitation violates §563b.285, OTS 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) OTS may also bring an enforcement action against the
violator.

§ 563b.295   Will OTS require me to re-solicit
proxies?

top

If you amend your application for conversion, OTS may require you to
re-solicit proxies for your members' meeting as a condition of approval of
the amendment.

Offering Circular

top

§ 563b.300   What must happen before OTS declares
my offering circular effective?

top

(a) You must prepare and file your offering circular with OTS in
compliance with this part and Form OC and, where applicable, part 563g of
this chapter. Section 563b.155 governs where to file your offering
circular. You may obtain Form OC from OTS Washington and Regional Offices
(see §516.40 of this chapter) and OTS's website (
http://www.ots.treas.gov ).

(b) You must condition your stock offering upon member approval of your
plan of conversion.

(c) OTS will review the Form OC and may comment on the included
disclosures and financial statements.

(d) You must file seven copies of each revised offering circular, final
offering circular, and any post-effective amendment to the final offering
circular.

(e) OTS will not approve the adequacy or accuracy of the offering
circular or the disclosures.

(f) After you satisfactorily address OTS's concerns, you must request
OTS to declare your Form OC effective for a time period. The time period
may not exceed the maximum time period for the completion of the sale of
all of your shares under §563b.400.

§ 563b.305   When may I distribute the offering
circular?

top

(a) You may distribute a preliminary offering circular at the same time
as or after you mail the proxy statement to your members.

(b) You may not distribute an offering circular until OTS declares it
effective. You must distribute the offering circular in accordance with
this part.

(c) You must distribute your offering circular to persons listed in
your plan of conversion within 10 days after OTS declares it
effective.

§ 563b.310   When must I file a post-effective
amendment to the offering circular?

top

(a) You must file a post-effective amendment to the offering circular
with OTS when a material event or change of circumstance occurs.

(b) After OTS declares the post-effective amendment effective, you must
immediately deliver the amendment to each person who subscribed for or
ordered shares in the offering.

(c) Your post-effective amendment must indicate that each person may
increase, decrease, or rescind their subscription or order.

(d) The post-effective offering period must remain open no less than 10
days nor more than 20 days, unless OTS approves a longer rescission
period.

Offers and Sales of Stock

top

§ 563b.320   Who has priority to purchase my
conversion shares?

top

You must offer to sell your 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) Your community, your community and the general public, or the
general public.

§ 563b.325   When may I offer to sell my
conversion shares?

top

(a) You may offer to sell your conversion shares after OTS approves
your conversion, authorizes your proxy statement, and declares your
offering circular effective.

(b) The offer may commence at the same time you start the proxy
solicitation of your members.

§ 563b.330   How do I price my conversion
shares?

top

(a) You must sell your conversion shares at a uniform price per share
and at a total price that is equal to the estimated pro forma market value
of your shares after you convert.

(b) The maximum price must be no more than 15 percent above the
midpoint of the estimated price range in your offering circular.

(c) The minimum price must be no more than 15 percent below the
midpoint of the estimated price range in your offering circular.

(d) If OTS permits, you 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) The maximum price must be between $5 and $50 per share.

(f) You must include the estimated price in any preliminary offering
circular.

§ 563b.335   How do I sell my conversion
shares?

top

(a) You 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. You may either send the order forms with your offering
circular or after you distribute your offering circular.

(b) You may sell your conversion shares in a community offering, a
public offering, or both. You 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) You may pay underwriting commissions (including underwriting
discounts). OTS may object to the payment of unreasonable commissions. You
may reimburse an underwriter for accountable expenses in a subscription
offering if the public offering is limited. If no public offering occurs,
you may pay an underwriter a consulting fee. OTS may object to the payment
of unreasonable consulting fees.

(d) If you conduct the community offering, the public offering, or both
at the same time as the subscription offering, you must fill all
subscription orders first.

(e) You must prepare your order form in compliance with this part and
Form OF. You may obtain Form OF from OTS Washington and Regional Offices
(see §516.40 of this chapter) and OTS's website (
http://www.ots.treas.gov ).

§ 563b.340   What sales practices are
prohibited?

top

(a) In connection with offers, sales, or purchases of conversion shares
under this part, you and your 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) During your conversion, no person may:

(1) Transfer, or enter into any agreement or understanding to transfer,
the legal or beneficial ownership of subscription rights for your
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
your conversion shares from anyone but you; or

(3) Knowingly acquire more than the maximum purchase allowable under
your plan of conversion.

(c) The restrictions in paragraphs (b)(1) and (b)(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 your behalf, that
makes the offer with a view toward public resale; or

(2) One or more of your 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 your equity securities in the aggregate.

(d) If any person is found to have violated the restrictions in
paragraphs (b)(1) and (b)(2) of this section, they may face prosecution or
other legal action.

§ 563b.345   How may a subscriber pay for my
conversion shares?

top

(a) 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, you may not assess a penalty for the
withdrawal.

(b) You may not extend credit to any person to purchase your conversion
shares.

§ 563b.350   Must I pay interest on payments for
conversion shares?

top

(a) You must pay interest from the date you receive a payment for
conversion shares until the date you complete or terminate the conversion.
You must pay interest at no less than your passbook rate for amounts paid
in cash, check, or money order.

(b) If a subscriber withdraws money from a savings account to purchase
conversion shares, you must pay interest on the payment until you complete
or terminate the conversion as if the withdrawn amount remained in the
account.

(c) 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, you may cancel the certificate and
pay interest at no less than your passbook rate on any remaining
balance.

§ 563b.355   What subscription rights must I give
to each eligible account holder and each supplemental eligible account
holder?

top

(a) You 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 §563b.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 you 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. You must round down the product of this multiplied fraction to
the next whole number.

(b) You 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 you 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.

§ 563b.360   Are my officers, directors, and their
associates eligible account holders?

top

Your 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, you must subordinate subscription
rights for these deposits to subscription rights exercised by other
eligible account holders.

§ 563b.365   May other voting members purchase
conversion shares in the conversion?

top

(a) You must give rights to purchase your conversion shares in the
conversion to voting members who are neither eligible account holders nor
supplemental eligible account holders. You 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 §563b.395; or

(2) One-tenth of one percent of the total stock offering.

(b) You must subordinate the voting members' rights to the rights of
eligible account holders, tax-qualified employee stock ownership plans,
and supplemental eligible account holders.

§ 563b.370   Does OTS limit the aggregate
purchases by officers, directors, and their associates?

top

(a) When you convert, your officers, directors, and their associates
may not purchase, in the aggregate, more than the following percentage of
your total stock offering:

Institution size

Officer and director 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) The purchase limitations in this section do not apply to shares
held in tax-qualified employee stock benefit plans that are attributable
to your officers, directors, and their associates.

§ 563b.375   How do I allocate my conversion
shares if my shares are oversubscribed?

top

(a) If your conversion shares are oversubscribed by your eligible
account holders, you must allocate shares among the eligible account
holders so that each, to the extent possible, may purchase 100 shares.

(b) If your conversion shares are oversubscribed by your supplemental
eligible account holders, you must allocate shares among the supplemental
eligible account holders so that each, to the extent possible, may
purchase 100 shares.

(c) If a person is an eligible account holder and a supplemental
eligible account holder, you must include the eligible account holder's
allocation in determining the number of conversion shares that you may
allocate to the person as a supplemental eligible account holder.

(d) For conversion shares that you do not allocate under paragraphs (a)
and (b) of this section, you must allocate the shares among the eligible
or supplemental eligible account holders equitably, based on the amounts
of qualifying deposits. You must describe this method of allocation in
your plan of conversion.

(e) If shares remain after you have allocated shares as provided in
paragraphs (a) and (b) of this section, and if your voting members
oversubscribe, you must allocate your conversion shares among those
members equitably. You must describe the method of allocation in your plan
of conversion.

§ 563b.380   May my employee stock ownership plan
purchase conversion shares?

top

(a) Your tax-qualified employee stock ownership plan may purchase up to
10 percent of the total offering of your conversion shares.

(b) If OTS approves a revised stock valuation range as described in
§563b.330(e), and the final conversion stock valuation range exceeds the
former maximum stock offering range, you may allocate conversion shares to
your tax-qualified employee stock ownership plan, up to the 10 percent
limit in paragraph (a) of this section.

(c) If your tax-qualified employee stock ownership plan is not able to
or chooses not to purchase stock in the offering, it may, with prior OTS
approval and appropriate disclosure in your offering circular, purchase
stock in the open market, or purchase authorized but unissued conversion
shares.

(d) You 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 OTS objects on
supervisory grounds.

§ 563b.385   May I impose any purchase
limitations?

top

(a) You 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) If you set a limit of five percent under paragraph (a) of this
section, you may modify that limit with OTS 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 ten
percent as long as the aggregate amount that the subscribers purchase does
not exceed 10 percent of the total stock offering.

(c) You 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) In setting purchase limitations under this section, you may not
aggregate conversion shares attributed to a person in your tax-qualified
employee stock ownership plan with shares purchased directly by, or
otherwise attributable to, that person.

[67 FR 52020, Aug. 9, 2002, as amended at 72 FR 35149, June 27,
2007]

§ 563b.390   Must I provide a purchase preference
to persons in my local community?

top

(a) In your subscription offering, you may give a purchase preference
to eligible account holders, supplemental eligible account holders, and
voting members residing in your local community.

(b) In your community offering, you must give a purchase preference to
natural persons residing in your local community.

§ 563b.395   What other conditions apply when I
offer conversion shares in a community offering, a public offering, or
both?

top

(a) You must offer and sell your stock to achieve a widespread
distribution of the stock.

(b) If you offer shares in a community offering, a public offering, or
both, you must first fill orders for your stock up to a maximum of two
percent of the conversion stock on a basis that will promote a widespread
distribution of stock. You must allocate any remaining shares on an equal
number of shares per order basis until you fill all orders.

Completion of the Offering

top

§ 563b.400   When must I complete the sale of my
stock?

top

You must complete all sales of your stock within 45 calendar days after
the last day of the subscription period, unless the offering is extended
under §563b.405.

§ 563b.405   How do I extend the offering
period?

top

(a) You must request, in writing, an extension of any offering
period.

(b) OTS may grant extensions of time to sell your shares. OTS will not
grant any single extension of more than 90 days.

(c) If OTS grants your request for an extension of time, you must
provide a post-effective amendment to the offering circular under
§563b.310 to each person who subscribed for or ordered stock. Your
amendment must indicate that OTS 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

top

§ 563b.420   When must I complete my
conversion?

top

(a) In your plan of conversion, you must set a date by which the
conversion must be completed. This date must not be more than 24 months
from the date that your members approve the plan of conversion. The date,
once set, may not be extended by you or by OTS. You must terminate the
conversion if it is not completed by that date.

(b) Your conversion is complete on the date that you accept the offers
for your stock.

§ 563b.425   Who may terminate the
conversion?

top

(a) Your members may terminate the conversion by failing to approve the
conversion at your members' meeting.

(b) You may terminate the conversion before your members' meeting.

(c) You may terminate the conversion after the members' meeting only if
OTS concurs.

§ 563b.430   What happens to my old
charter?

top

(a) If you are a federally chartered mutual savings association or
savings bank, and you convert to a federally chartered stock savings
association or savings bank, you must apply to OTS to amend your charter
and bylaws consistent with part 552 of this chapter, as part of your
application for conversion. You may only include OTS pre-approved
anti-takeover provisions in your amended charter and bylaws. See 12
CFR 552.4(b)(8).

(b) If you are a federally chartered mutual savings association or
savings bank and you convert to a state-chartered stock savings
association under this part, you must surrender your federal charter to
OTS for cancellation promptly after the state issues your charter. You
must promptly file a copy of your new state stock charter with OTS.

(c) If you are a state-chartered mutual savings association or savings
bank, and you convert to a federally chartered stock savings association
or savings bank, you must apply to OTS for a new charter and bylaws
consistent with part 552 of this chapter. You may only include OTS
pre-approved anti-takeover provisions in your charter and bylaws. See 12
CFR 552.4(b)(8).

(d) Your new or amended charter must require you to establish and
maintain a liquidation account for eligible and supplemental eligible
account holders under §563b.450.

§ 563b.435   What happens to my corporate
existence after conversion?

top

Your corporate existence will continue following your conversion,
unless you convert to a state-chartered stock savings association and
state law prescribes otherwise.

§ 563b.440   What voting rights must I provide to
stockholders after the conversion?

top

You must provide your stockholders with exclusive voting rights, except
as provided in §563b.445(c).

§ 563b.445   What must I provide my savings
account holders?

top

(a) You 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 your conversion.

(b) You must provide a liquidation account for each eligible and
supplemental eligible account holder under §563b.450.

(c) If you are a state-chartered savings association and state law
requires you to provide voting rights to savings account holders or
borrowers, your charter must:

(1) Limit these voting rights to the minimum required by state law;
and

(2) Require you to solicit proxies from the savings account holders and
borrowers in the same manner that you solicit proxies from your
stockholders.

Liquidation Account

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§ 563b.450   What is a liquidation
account?

top

(a) A liquidation account represents the potential interest of eligible
account holders and supplemental eligible account holders in your net
worth at the time of conversion. You must maintain a sub-account to
reflect the interest of each account holder.

(b) Before you may provide a liquidation distribution to common
stockholders, you 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) You may not record the liquidation account in your financial
statements. You must disclose the liquidation account in the footnotes to
your financial statements.

§ 563b.455   What is the initial balance of the
liquidation account?

top

The initial balance of the liquidation account is your net worth in the
statement of financial condition included in the final offering
circular.

§ 563b.460   How do I determine the initial
balances of liquidation sub-accounts?

top

(a)(1) You determine the initial sub-account balance for a savings
account held by an eligible account holder by multiplying the initial
balance of the liquidation account by the following fraction: The
numerator is the qualifying deposit in the savings account expressed in
dollars on the eligibility record date. The denominator is total
qualifying deposits of all eligible account holders on that date.

(2) You determine the initial sub-account balance for a savings account
held by a supplemental eligible account holder by multiplying the initial
balance of the liquidation account by the following fraction: The
numerator is the qualifying deposit in the savings account expressed in
dollars on the supplemental eligibility record date. The denominator is
total qualifying deposits of all supplemental eligible account holders on
that date.

(3) If an account holder holds a savings account on the eligibility
record date and a separate savings account on the supplemental eligibility
record date, you must compute separate sub-accounts for the qualifying
deposits in the savings account on each record date.

(b) You may not increase the initial sub-account balances. You must
decrease the initial balance under §563b.470 as depositors reduce or close
their accounts.

§ 563b.465   Do account holders retain any voting
rights based on their liquidation sub-accounts?

top

Eligible account holders or supplemental eligible account holders do
not retain any voting rights based on their liquidation
sub-accounts.

§ 563b.470   Must I adjust liquidation
sub-accounts?

top

(a)(1) You 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, which for purposes of this section is your fiscal
year end, after the relevant eligibility record dates is less than:

(i) The deposit balance in the account holder's savings account at the
close of business on any other annual closing date after the relevant
eligibility record date; or

(ii) The qualifying deposits in the account holder's savings account on
the relevant eligibility record date.

(2) The reduction must be proportionate to the reduction in the deposit
balance.

(b) If you reduce the balance of a liquidation sub-account, you may not
subsequently increase it if the deposit balance increases.

(c) You are not required to adjust the liquidation account and
sub-account balances at each annual closing date if you maintain
sufficient records to make the computations if a liquidation subsequently
occurs.

(d) You 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) If there is a complete liquidation, you must provide each account
holder with a liquidation distribution in the amount of the sub-account
balance.

§ 563b.475   What is a liquidation?

top

(a) A liquidation is a sale of your assets and settlement of your
liabilities with the intent to cease operations and close. Upon
liquidation, you must return your charter to the governmental agency that
issued it. The government agency must cancel your charter.

(b) A merger, consolidation, or similar combination or transaction with
another depository institution, is not a liquidation. If you are involved
in such a transaction, the surviving institution must assume the
liquidation account.

§ 563b.480   Does the liquidation account affect
my net worth?

top

The liquidation account does not affect your net worth.

§ 563b.485   What provision must I include in my
new federal charter?

top

If you convert to federal stock form, you must include the following
provision in your new charter: “Liquidation Account. Under OTS
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 OTS
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

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§ 563b.500.   What management stock benefit plans
may I implement?

top

(a) During the 12 months after your conversion, you 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 you meet all of the following
requirements.

(1) You disclose the plans in your proxy statement and offering
circular and indicate in your 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. Your ESOP must be tax-qualified.

(2) Your Option Plan does not encompass more than ten percent of the
number of shares that you issued in the conversion.

(3)(i) Your ESOP and MRP do not encompass, in the aggregate, more than
ten percent of the number of shares that you issued in the conversion. If
you have tangible capital of ten percent or more following the conversion,
OTS may permit your ESOP and MRP to encompass, in the aggregate, up to 12
percent of the number of shares issued in the conversion; and

(ii) Your MRP does not encompass more than three percent of the number
of shares that you issued in the conversion. If you have tangible capital
of ten percent or more after the conversion, OTS may permit your MRP to
encompass up to four percent of the number of shares that you issued in
the conversion.

(4) No individual receives more than 25 percent of the shares under any
plan.

(5) Your directors who are not your officers do not receive more than
five percent of the shares of your MRP or Option Plan individually, or 30
percent of any such plan in the aggregate.

(6) Your 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 you establish or implement the plan. You may not hold this meeting
until six months after your conversion.

(7) When you distribute proxies or related material to shareholders in
connection with the vote on a plan, you state that the plan complies with
OTS regulations and that OTS does not endorse or approve the plan in any
way. You may not make any written or oral representations to the
contrary.

(8) You do not grant stock options at less than the market price at the
time of grant.

(9) You do not fund the Option Plan or the MRP at the time of the
conversion.

(10) Your 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) Your plan permits accelerated vesting only for disability or
death, or if you undergo a change of control.

(12) Your plan provides that your executive officers or directors must
exercise or forfeit their options in the event the institution becomes
critically undercapitalized (as defined in §565.4 of this chapter), is
subject to OTS enforcement action, or receives a capital directive under
§565.7 of this chapter.

(13) You file a copy of the proposed Option Plan or MRP with OTS and
certify to OTS that the plan approved by the shareholders is the same plan
that you filed with, and disclosed in, the proxy materials distributed to
shareholders in connection with the vote on the plan.

(14) You file the plan and the certification with OTS within five
calendar days after your shareholders approve the plan.

(b) You may provide dividend equivalent rights or dividend adjustment
rights to allow for stock splits or other adjustments to your stock in
your ESOP, MRP, and Option Plan.

(c) The 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 your conversion, your shareholders must ratify any
material deviations to the requirements in paragraph (a).

[72 FR 35149, June 27, 2007]

§ 563b.505   May my directors, officers, and their
associates freely trade shares?

top

(a) 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) You 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) You must instruct your stock transfer agent about the transfer
restrictions in this section.

(d) For three years after you convert, your officers, directors, and
their associates may purchase your stock only from a broker or dealer
registered with the Securities and Exchange Commission. However, your
officers, directors, and their associates may engage in a negotiated
transaction involving more than one percent of your outstanding stock, and
may purchase stock through any of your management or employee stock
benefit plans.

§ 563b.510   May I repurchase shares after
conversion?

top

(a) You may not repurchase your shares in the first year after the
conversion except:

(1) In extraordinary circumstances, you may make open market
repurchases of up to five percent of your outstanding stock in the first
year after the conversion if you file a notice under §563b.515(a) and OTS
does not disapprove your repurchase. OTS will not approve such repurchases
unless the repurchase meets the standards in §563b.515(c), and the
repurchase is consistent with paragraph (c) of this section.

(2) You may repurchase qualifying shares of a director or conduct an
OTS approved repurchase pursuant to an offer made to all shareholders of
your 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 OTS.

(4) Purchases to fund tax qualified employee stock benefit plans do not
count toward the repurchase limitations in this section.

(b) After the first year, you may repurchase your shares, subject to
all other applicable regulatory and supervisory restrictions and paragraph
(c) of this section.

(c) All stock repurchases are subject to the following
restrictions.

(1) You may not repurchase your shares if the repurchase will reduce
your regulatory capital below the amount required for your liquidation
account under §563b.450. You must comply with the capital distribution
requirements at part 563, subpart E of this chapter.

(2) The restrictions on share repurchases apply to a charitable
organization under §563b.550. You must aggregate purchases of shares by
the charitable organization with your repurchases.

§ 563b.515   What information must I provide to
OTS before I repurchase my shares?

top

(a) To repurchase stock in the first year following conversion, other
than repurchases under §563b.510(a)(3) or (a)(4), you must file a written
notice with the OTS. You must provide the following information:

(1) Your proposed repurchase program;

(2) The effect of the repurchases on your regulatory capital; and

(3) The purpose of the repurchases and, if applicable, an explanation
of the extraordinary circumstances necessitating the repurchases.

(b) You must file your notice with your Regional Director, with a copy
to the Applications Filing Room, at least ten days before you begin your
repurchase program.

(c) You may not repurchase your shares if OTS objects to your
repurchase program. OTS will not object to your repurchase program if:

(1) Your repurchase program will not adversely affect your financial
condition;

(2) You submit sufficient information to evaluate your proposed
repurchases;

(3) You demonstrate extraordinary circumstances and a compelling and
valid business purpose for the share repurchases; and

(4) Your repurchase program would not be contrary to other applicable
regulations.

§ 563b.520   May I declare or pay dividends after
I convert?

top

You may declare or pay a dividend on your shares after you convert
if:

(a) The dividend will not reduce your regulatory capital below the
amount required for your liquidation account under §563b.450;

(b) You comply with all capital requirements under part 567 of this
chapter after you declare or pay dividends;

(c) You comply with the capital distribution requirements under part
563, subpart E, of this chapter; and

(d) You do not return any capital, other than ordinary dividends, to
purchasers during the term of the business plan submitted with the
conversion.

§ 563b.525   Who may acquire my shares after I
convert?

top

(a) For three years after you convert, no person may, directly or
indirectly, acquire or offer to acquire the beneficial ownership of more
than ten percent of any class of your equity securities without OTS's
prior written approval. If a person violates this prohibition, you may not
permit the person to vote shares in excess of ten percent, and may not
count the shares in excess of ten percent in any shareholder vote.

(b) A person acquires beneficial ownership of more than ten percent of
a class of shares when he or she holds any combination of your stock or
revocable or irrevocable proxies under circumstances that give rise to a
conclusive control determination or rebuttable control determination under
§§574.4(a) and (b) of this chapter. OTS 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) 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 you, to the
underwriters, or to a selling group acting on your behalf.

(2) Unless OTS 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 your ownership may acquire or offer to acquire more than ten
percent of your common stock, if it makes the offer or acquisition more
than one year after you convert.

(4) One or more of your tax-qualified employee stock benefit plans may
acquire your shares, if the plan or plans do not beneficially own more
than 25 percent of any class of your shares in the aggregate.

(5) An acquiror does not have to file a separate application to obtain
OTS approval under paragraph (a) of this section, if the acquiror files an
application under part 574 of this chapter that specifically addresses the
criteria listed under paragraph (d) of this section and you do not oppose
the proposed acquisition.

(d) OTS 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 you;

(5) Is inconsistent with your plan to meet the credit and lending needs
of your proposed market area;

(6) Otherwise violates laws or regulations; or

(7) Does not prudently deploy your conversion proceeds.

§ 563b.530   What other requirements apply after I
convert?

top

After you convert, you must:

(a) Promptly register your shares under the Securities Exchange Act of
1934 (15 U.S.C. 78a–78jj, as amended). You may not deregister the shares
for three years.

(b) Encourage and assist a market maker to establish and to maintain a
market for your 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 your best efforts to list your 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 OTS requires.

Contributions to Charitable Organizations

top

§ 563b.550   May I donate conversion shares or
conversion proceeds to a charitable organization?

top

You may contribute some of your conversion shares or proceeds to a
charitable organization if:

(a) Your plan of conversion provides for the proposed contribution;

(b) Your 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.

§ 563b.555   How do my members approve a
charitable contribution?

top

At the meeting to consider your conversion, your members must
separately approve by at least a majority of the total eligible votes, a
contribution of conversion shares or proceeds. If you are in mutual
holding company form and adding a charitable contribution as part of a
second step stock conversion, you must also have your minority
shareholders separately approve the charitable contribution by a majority
of their total eligible votes.

§ 563b.560   How much may I contribute to a
charitable organization?

top

You may contribute a reasonable amount of conversion shares or proceeds
to a charitable organization, if your contribution will not exceed limits
for charitable deductions under the Internal Revenue Code and OTS does not
object on supervisory grounds. If you are a well-capitalized savings
association, OTS generally will not object if you contribute an aggregate
amount of eight percent or less of the conversion shares or
proceeds.

§ 563b.565   What must the charitable organization
include in its organizational documents?

top

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 your 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 your 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 your local
community. This director may not be your officer, director, or employee,
or your affiliate's officer, director, or employee, 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 your board of directors or the board of
directors of an acquiror or resulting institution in the event of a merger
or acquisition of your organization.

§ 563b.570   How do I address conflicts of
interest involving my directors?

top

(a) A person who is your director, officer, or employee, or a person
who has the power to direct your management or policies, or otherwise owes
a fiduciary duty to you (for example, holding company directors) and who
will serve as an officer, director, or employee of the charitable
organization, is subject to §563.200 of this chapter. See Form AC
(Exhibit 9) for further information on operating plans and conflict of
interest plans.

(b) Before your board of directors may adopt a plan of conversion that
includes a charitable organization, you must identify your directors that
will serve on the charitable organization's board. These directors may not
participate in your board's discussions concerning contributions to the
charitable organization, and may not vote on the matter.

§ 563b.575   What other requirements apply to
charitable organizations?

top

(a) The charitable organization's charter (or trust agreement) and the
gift instrument for the contribution must provide that:

(1) OTS may examine the charitable organization at the charitable
organization's expense;

(2) The charitable organization must comply with all supervisory
directives that OTS imposes;

(3) The charitable organization must annually provide OTS with a copy
of the annual report that the charitable organization submitted to the
IRS;

(4) 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; and

(5) The charitable organization may not engage in self-dealing, and
must comply with all laws necessary to maintain its tax-exempt status
under the Internal Revenue Code.

(b) You must include the following legend in the stock certificates of
shares that you contribute 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) As long as the charitable organization controls shares, you must
consider those shares as voted in the same ratio as all of the shares
voted on each proposal considered by your shareholders.

(d) After you complete your stock offering, you must submit four
executed copies of the following documents to the OTS Applications Filing
Room in Washington, and three executed copies to the OTS Regional Office:
the charitable organization's charter and bylaws (or trust agreement),
operating plan (within six months after your stock offering), conflict of
interest policy, and the gift instrument for your contributions of either
stock or cash to the charitable organization.

Subpart B—Voluntary Supervisory Conversions

top

§ 563b.600   What does this subpart do?

top

(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.

§ 563b.605   How may I conduct a voluntary
supervisory conversion?

top

(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.

§ 563b.610   Do my members have rights in a
voluntary supervisory conversion?

top

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.

Eligibility

top

§ 563b.625   When is a savings association
eligible for a voluntary supervisory conversion?

top

(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]

§ 563b.630   When is a state-chartered savings
bank eligible for a voluntary supervisory conversion?

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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]

Plan of Supervisory Conversion

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§ 563b.650   What must I include in my plan of
voluntary supervisory conversion?

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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

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§ 563b.660   What must I include in my voluntary
supervisory conversion application?

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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

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§ 563b.670   Will OTS approve my voluntary
supervisory conversion application?

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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 19812, Apr. 18,
2006]

§ 563b.675   What conditions will OTS impose on an
approval?

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(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 19812, Apr. 18,
2006]

Offers and Sales of Stock

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§ 563b.680   How do I sell my shares?

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If you convert under this subpart, you must offer and sell your shares
under part 563g of this chapter.

Post-Conversion

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§ 563b.690   Who may not acquire additional shares
after the voluntary supervisory conversion?

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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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