[Federal Register Volume 65, Number 134 (Wednesday, July 12, 2000)]
[Proposed Rules]
[Pages 43092-43128]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-16347]



Federal Register / Vol. 65, No. 134 / Wednesday, July 12, 2000 / 
Proposed Rules

[[Page 43092]]


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DEPARTMENT OF THE TREASURY

Office of Thrift Supervision

12 CFR Parts 563b and 575

[No. 2000-57]
RIN 1550-AB24


Mutual Savings Associations, Mutual Holding Company 
Reorganizations, and Conversions From Mutual to Stock Form

AGENCY: Office of Thrift Supervision, Treasury.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Office of Thrift Supervision (OTS) proposes to implement a 
comprehensive strategy governing mutual institutions, mutual holding 
company reorganizations, and the mutual to stock conversion process. 
OTS intends to modify its examination and supervisory policies within 
the context of safe and sound operations to address many of the 
concerns mutual institutions have raised about OTS's examination and 
supervision of their business form. OTS is also proposing to amend 
certain provisions in its mutual holding company regulations, and its 
regulations and forms governing mutual to stock conversions of insured 
savings associations. These proposed regulations include new provisions 
addressing business plans and charitable contributions. In addition, 
OTS clarifies certain matters involving conversions from the mutual to 
the stock form, by, among other things, adding demand account holders 
to the definition of savings account holders, allowing accelerated 
vesting in management benefit plans for changes of control, and 
clarifying the policy on the amount of proceeds allowed to be retained 
at the holding company level. Further, OTS is rewriting the conversion 
regulation in a plain language format. In a companion interim final 
regulation published elsewhere in today's Federal Register, OTS is 
amending the regulations on stock repurchases, changing its practices 
regarding mutual holding company dividend waivers, and making certain 
revisions as a result of the Gramm-Leach-Bliley Act of 1999 (GLB Act).

DATES: Written comments must be received on or before October 10, 2000.

ADDRESSES: Send comments to Manager, Dissemination Branch, Information 
Management and Services Division, Office of Thrift Supervision, 1700 G 
Street, NW., Washington, DC 20552, Attention Docket No. 2000-57. Hand-
deliver comments to the Guard's Desk, East Lobby Entrance, 1700 G 
Street, NW., from 9:00 a.m. to 4:00 p.m. on business days. Send 
facsimile transmissions to FAX Number (202) 906-7755 or (202) 906-6956 
(if the comment is over 25 pages). Send e-mails to 
<a href="/cdn-cgi/l/email-protection#556934753d27303368" http: public.info">public.info</a>@ots.treas.gov">public.info@ots.treas.gov</a> and include your name and telephone number. 
Interested persons may inspect comments at the Public Reference Room, 
1700 G Street, NW., from 10:00 a.m. until 4:00 p.m. on Tuesdays and 
Thursdays.

FOR FURTHER INFORMATION CONTACT: David A. Permut, Counsel (Banking and 
Finance), (202) 906-7505, or Gary Jeffers, Counsel (Banking and 
Finance), (202) 906-6457, Business Transactions Division, Chief 
Counsel's Office; or Timothy P. Leary, Counsel (Banking and Finance), 
(202) 906-7170, Regulations and Legislation Division, Chief Counsel's 
Office; or Mary Jo Johnson, Project Manager (202) 906-5739, Supervision 
Policy, Office of Thrift Supervision, 1700 G Street, NW., Washington, 
DC 20552.

SUPPLEMENTARY INFORMATION: OTS has broad authority to regulate mutual 
savings associations, to authorize mutual holding company 
reorganizations, and to regulate mutual to stock conversions of savings 
associations under the Home Owners' Loan Act, as amended (HOLA), 12 
U.S.C. 1464(a), (i) and (p) and 1467a(o). OTS and its predecessor, the 
Federal Home Loan Bank Board, in exercising their supervisory 
responsibilities, periodically refined their regulatory strategies and 
mutual holding company reorganization and conversion regulations, based 
on their experience with mutual institutions, the conversion process, 
and in response to developments in the marketplace. OTS has again 
reviewed its policies, practices, and regulations to assess whether 
additions or revisions are necessary. OTS identifies several areas of 
the regulations that it must revise and update to further clarify the 
standards governing mutual holding company reorganizations and the 
conversion process. Also, OTS is revising part 563b using the plain 
language format.

I. Overview

    Despite the large number of mutual-to-stock conversions over the 
years, there are 422 OTS-regulated mutuals, comprising nearly 40 
percent of all OTS-regulated thrifts. In many respects, mutuals form 
the heart of the thrift industry. Mutuals tend to be community-based, 
community-focused institutions whose sole purpose is to provide a safe 
place for community members to save, and to invest those savings back 
into the community through prudent credit programs. History has 
demonstrated that this community focus is often lost or diluted when 
institutions convert to stock form and must respond to the interests of 
their stockholders.
    OTS is developing a comprehensive regulatory strategy governing 
mutual institutions, mutual holding company reorganizations, and the 
mutual to stock conversion process. This comprehensive strategy will 
include: (1) New policy and examination guidance; (2) proposed 
regulations governing reorganizations into mutual holding companies and 
the mutual to stock conversion process; (3) interim final rules 
addressing share repurchases and mutual holding company dividend 
waivers; and (4) revisions to the application forms used for mutual 
holding company reorganizations and the mutual to stock conversion 
process.

A. Policy Guidance

    Today, OTS is developing new analytical techniques, examination 
procedures, and industry guidance to address, within the context of 
safe and sound operations, many of the concerns mutual institutions 
have raised about their business form and to improve supervision of 
mutual institutions. OTS makes these changes in concert with the 
proposed changes to the mutual holding company and conversion 
regulations and the interim final rules concerning stock repurchases, 
dividend waivers, and GLB Act \1\ revisions published in today's 
Federal Register.
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    \1\ Pub.L. 106-102, 113 Stat. (1999).
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    Specifically, the guidance will focus on capitalization, 
compensation, and on-site examinations and financial analyses of mutual 
institutions. For mutual institutions seeking to augment their capital 
base, OTS is exploring the feasibility and utility of various capital-
raising alternatives, such as the use of subordinated debt instruments, 
mutual capital certificates, non-withdrawable accounts, trust preferred 
securities, and other financing transactions. Conversely, OTS will 
study the issues and, if necessary, provide guidance or regulations 
concerning payment of special dividends by mutual institutions seeking 
to return excess capital to their communities.
    OTS will revise its existing guidance on compensation to clarify 
its position that mutual institutions are subject to and governed by 
the same prudential standards as stock institutions. OTS will also 
explore a methodology by which mutual institutions can choose to have

[[Page 43093]]

their management and board of directors' compensation plans reviewed in 
a manner similar to shareholder review and approval for stock 
institutions. Finally, OTS will inform its examiners on emerging 
compensation issues and programs. This guidance will enhance the 
ability of mutual institutions to provide competitive compensation 
plans to attract and retain qualified management and staff.
    OTS is currently developing enhanced analytical tools that will 
improve supervision of mutual institutions. Revised examination 
procedures, targeted more directly to the quality of operations, risk 
management, and internal controls, will enable examiners to more 
effectively gauge the overall financial condition and the ability of 
mutual institutions to sustain long-term economic viability throughout 
economic cycles, including during periods of prolonged adverse economic 
conditions. OTS also will revise the pre-examination response kit 
(PERK) to streamline information requests prior to the start of 
examinations to ensure information requested is germane to the 
operations of a mutual institution and is essential to the completion 
of the examination. Enhancements to off-site monitoring systems will 
also provide for more appropriate comparative financial analyses among 
similarly situated, community-oriented mutual institutions across 
geographic boundaries.
    For mutuals that elect to convert to stock form, OTS encourages 
consideration of the mutual holding company (MHC) alternative. The MHC 
structure retains the benefits and essential nature of the mutual 
charter, while providing greater access to capital markets. In 
addition, in section 401(b) of the GLB Act, Congress recently expanded 
the investment and activities authority of MHCs to include the 
activities of financial holding companies. More than 40% of the MHCs 
that have been created to date have chosen to remain MHCs; 
nevertheless, OTS is today proposing significant enhancements to the 
MHC form to make it even more attractive as a long-term alternative to 
full conversion, and is seeking comments on still more enhancements. 
Whether a savings association elects the MHC format or full conversion, 
today's rule clarifies various aspects of the conversion process and 
proposes certain new requirements. In a companion interim final 
regulation published elsewhere in today's Federal Register, OTS is 
amending certain aspects of the regulations immediately.

B. Conversion Considerations

    Stock conversion is a major step for mutual institutions. There are 
many parties who provide consulting services to mutual institutions 
concerning the benefits of conversion, and who help institutions 
through the process. Mutual savings associations, their boards of 
directors, and management must carefully consider whether the benefits 
of conversion, and the need for capital, justify the costs and other 
business implications of conversion.
    In considering conversion, mutual boards must carefully examine 
their need for additional capital and the prospects for prudently 
deploying capital at competitive returns for investors. Institutions 
that fail to produce adequate returns on equity will likely face 
pressure from dissatisfied shareholders to improve performance or sell. 
OTS believes such pressure can distract management and the board from 
more fundamental business matters, cost an institution considerable 
sums in legal and management expense, and lead to disruption of normal 
business activities.
    Often, mutual institutions considering conversion are already 
highly capitalized. They do not need to raise additional capital 
through conversion to grow or expand into new markets. Lack of 
opportunity, not capital, constrains the growth of mutual institutions. 
Opportunities may be limited by aggressive competition in the mutual 
institution's market area, lack of economic growth in the market area, 
unwillingness to venture into unfamiliar markets or products, or lack 
of adequate staff or appropriate expertise to manage new business. 
Without a clear need for additional capital, and a clear opportunity 
for prudently deploying it at a competitive shareholder return over the 
long term, mutual boards should consider other alternatives to 
conversion.
    Other implications of conversion include fundamental changes in 
management and operations. Whether conversion brings expansion to new 
markets, introduction of new products or activities, or simply the 
continued growth of current activities, successful management of new 
capital generally requires additional management depth. Conversion also 
may require new management skills and experience, new staff, new 
facilities, new or upgraded data processing systems, expansion or 
refocus of internal audit and compliance management processes, and 
changes in marketing or customer service strategy.
    Finally, the costs of conversion can be significant and often are 
underestimated, particularly the added burden on existing staff and 
systems. Mutual boards should consider the cost of additional staff to 
manage quarterly and annual shareholder reporting, the need for 
additional or more experienced (and more expensive) independent 
accountant and legal services to prepare shareholder reporting, the 
cost of managing shareholder relations, and the cost of annual and 
special shareholder meetings. Also, there may be a cost to the 
community if converted institutions are acquired by out-of-town 
institutions that may not share the same commitment to local community 
service as many mutuals.
    Today's proposed rule includes measures to ensure that mutual 
boards of directors consider all these factors in determining whether 
to convert, and consider alternatives to meet the institution's 
business objectives when conversion may not be an appropriate option. 
The proposed rule confirms OTS practice of requiring pre-filing 
meetings, and proposes a new requirement to obtain prior OTS non-
objection of conversion business plans. It also sets forth the proposed 
business plan standards to be addressed by converting institutions and 
considered in OTS review. OTS requests comment on these proposals.

C. Outline of the Process

    The conversion process is complex. An institution that is 
considering a mutual to stock conversion must first update its business 
plan. Under today's proposed rule, OTS will require each institution 
contemplating a conversion to meet with the appropriate Regional Office 
to discuss the proposed business plan and receive the non-objection of 
the Regional Director to the business plan before submitting either an 
application to convert to stock form or a notice to reorganize to 
mutual holding company form.
    Once the board of directors updates and receives OTS's non-
objection to its business plan, the board must pass a Plan of 
Conversion that includes, among other things, an eligibility record 
date for persons who may subscribe for stock in any stock offering. 
After it approves the plan, the board of directors must publish a 
notice of adoption of the Plan of Conversion.
    In the next stage, the institution must prepare the application for 
conversion or reorganization, write a proxy statement for the members 
to vote on the Plan of Conversion or reorganization, and write an 
offering circular to offer the institution's new stock. This process 
can take several months.

[[Page 43094]]

    The institution must next submit all of these documents to OTS, 
together with an independent appraisal of the institution and current 
financial statements. If the institution is forming a holding company 
to hold its stock, it also must submit the documents to the Securities 
and Exchange Commission (SEC) for concurrent review. OTS and SEC review 
generally takes 5 to 6 weeks.
    After receiving regulatory clearance, an institution prints and 
mails its documents to members and potential subscribers. The mailing 
starts the process of soliciting member votes and selling the 
institution's stock, which generally takes six to twelve weeks.

II. Description of Revisions to the Conversion Regulations

A. Business Plan

    OTS currently requires converting institutions to submit a business 
plan before filing a Plan of Conversion or reorganization. See 12 CFR 
563b.11. The proposed regulation clarifies that submitting a business 
plan is the first step in the conversion process. OTS emphasizes that 
the board of directors and management of converting institutions need 
to carefully consider their future operations and activities and, in 
particular, must have realistic plans regarding how they intend to use 
the conversion proceeds.
    As a preliminary stage in business plan development, the proposed 
rule establishes a new requirement for a pre-filing meeting with the 
Regional Office to discuss initial plans for conversion and related 
implications. Generally, the board of directors, or a committee 
including outside directors, should participate in the meeting. The 
purpose of the meeting is to ensure that the board of directors has 
fully considered the costs and benefits of conversion and the available 
alternatives, and to generally discuss conversion application 
requirements.
    Under the proposed rule, OTS would not formally accept a business 
plan, and the 30-day business plan review period provided in the 
proposed rule would not commence, until after the pre-filing meeting is 
held. The Regional Office may extend the review period as deemed 
necessary to request, receive, and review additional information from 
the institution. OTS will not accept an application for conversion 
until the Regional Office advises an applicant that the Regional Office 
does not object to the business plan.
    Today's proposed rule also establishes written standards for an 
acceptable conversion business plan. The business plan should include a 
complete description of the proposed deployment of capital, demonstrate 
feasibility, discuss the risks, and address managerial and other 
resources required. The business plan should discuss the institution's 
record of success and experience in implementing prior growth or 
expansion initiatives. OTS strongly encourages institutions with 
management that does not have sufficient or favorable experience with 
expansion to consider alternatives to full conversion.
    The business plan should demonstrate the ability to realize a 
reasonable return on equity. OTS recognizes that investor requirements 
vary with time and market conditions, and so has not proposed an 
absolute standard. Generally, returns should be considered in relation 
to trends for publicly-traded thrift and bank stocks, broader equity 
market returns, and the general level of interest rates. At a minimum, 
the projected return on equity should exceed, by a margin reflecting 
relative investment risk, the institution's rates on long-term 
certificates of deposit. The institution should not consider 
speculative short-term stock price appreciation, or the effect of 
returns of capital or repurchases of stock, in assessing the 
reasonableness of projected return on equity, even though these may 
indeed be factors considered by investors. Management must provide for 
consistent, sustainable returns to satisfy long-term investor 
expectations.
    The proposed rule is intended to clarify that OTS expects business 
plans to fully support the business objectives of conversion. By 
requiring prior Regional Office non-objection to the business plan, OTS 
seeks to avoid the delays and unnecessary expense later in the 
conversion process that may arise from the submission of inadequate or 
incomplete business plans. The proposed rule also clarifies that 
institutions, upon completion of conversion, must follow their business 
plans and that any material deviation from an approved business plan 
will require the prior written approval of the Regional Director.
    OTS also seeks to address the problem that many institutions 
converting from mutual to stock form experience when they convert 
without well developed business plans. Generally, institutions quickly 
realize that they cannot earn an acceptable return on equity or 
otherwise prudently deploy the conversion proceeds without resorting to 
large capital distributions (in the form of stock repurchases or 
extraordinary dividends) in the first few years following the 
conversion. This return of capital, so soon after its creation, 
undermines the considerable effort (and expenditures) involved in the 
conversion process and causes OTS to question whether there was a need 
for the capital in the first place. OTS views a return of capital to 
shareholders a material deviation from the business plan that requires 
the prior written approval of the Regional Director.
    OTS encourages institutions considering raising new capital to 
seriously consider the mutual holding company (MHC) form of 
reorganization with a limited stock issuance, rather than a full 
conversion. OTS particularly encourages institutions that have no 
immediate plans for deployment of the new capital to consider this 
option. OTS requests comment on whether there are other capital raising 
techniques for mutual savings associations, short of conversion to 
stock form or MHC reorganization, that might also work. Currently, 
mutual institutions can raise capital in a variety of ways, including 
mutual capital certificates, subordinated debt, trust preferred 
securities, or the formation of real estate insurance trusts (REITs). 
OTS is particularly interested in the advantages and disadvantages of 
one instrument versus another, and why these forms of capital are not 
widely used. OTS is also interested in knowing why an institution would 
prefer the conversion or MHC reorganization over other methods of 
raising capital.

B. Mutual Capital Distributions

    In contrast to situations where mutual institutions are seeking 
ways to raise additional capital, a number of mutual institutions have 
approached OTS for guidance on the distribution of excess capital to 
their communities in situations where the institution has determined it 
is prudent and appropriate. OTS is seeking comment on whether to issue 
guidance or regulations regarding special capital distributions by 
mutual institutions.

C. Stock Repurchases

    In a separate interim final regulation, OTS is revising its 
regulations to eliminate restrictions on stock repurchases by converted 
savings associations after the first year following conversion. See 
Interim Final Rule regarding repurchases of stock, dividend waivers, 
and GLB Act revisions published elsewhere in this issue of the Federal 
Register. The new rule will be codified at proposed Sec. 563b.515(c)(3) 
if this proposed rule is adopted as a final rule. OTS is also enacting 
corresponding amendments to the mutual holding company regulations in 
the interim final regulation.

[[Page 43095]]

D. Charitable Organizations

    The current mutual to stock conversion regulations do not address 
when OTS will approve a charitable organization established as part of 
the mutual to stock conversion process. To date, OTS has not issued a 
regulation or guidance on establishing a charitable organization as 
part of the mutual to stock conversion. \2\ OTS currently imposes, on a 
case-by-case basis, various procedures, requirements, and conditions on 
mutual savings associations contemplating the establishment of a 
foundation in the process of a stock conversion. Savings associations 
wishing to contribute conversion stock to a foundation currently must 
request waivers of a number of requirements in OTS conversion 
regulations.
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    \2\ A 1992 legal opinion concludes that savings associations 
have the authority to establish charitable foundations under the 
``incidental powers doctrine.'' 1992 OTS LEXIS 76 (Nov. 12, 1992). 
The opinion does not address the establishment of charitable 
foundations as part of the mutual-to-stock conversion process.
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    To clarify the standards and procedures for forming a charitable 
organization or contributing stock as part of the conversion process, 
OTS proposes new regulations describing when OTS will approve a 
charitable organization in a conversion. These rules codify the current 
practices, so that waivers routinely requested in a conversion with a 
charitable foundation are no longer necessary. The standards include 
discussing the purpose of the charitable organization, voting 
foundation shares in the same ratio as all other shares voted on 
proposals considered by shareholders, reserving board seats for an 
independent director and a director from the institution, and dealing 
with conflicts of interest. The rules also specify the conditions for 
approval including examination by OTS at foundation expense, submission 
of annual reports, and compliance with all laws necessary to maintain 
the foundation's tax-exempt status.

E. Demand Account Holders

    Current Sec. 563b.3(c) provides that each eligible account holder 
and supplemental eligible account holder will receive the right to 
purchase stock. This right is tied to the amount of the account 
holder's ``qualifying deposit.'' Section 563b.3(e) states that the 
amount of the ``qualifying deposit'' is the total of the deposit 
balances in the eligible or supplemental eligible account holder's 
savings accounts on the close of business on the eligibility or 
supplemental eligibility record date. The term ``savings account'' is 
defined by a cross reference to 12 CFR part 561, and includes ``any 
withdrawable account, except a demand account as defined in 12 CFR 
561.16.'' See 12 CFR 561.42.
    Converting savings associations have requested that both savings 
and demand accounts be eligible to receive subscription rights. OTS 
believes converting savings associations should treat all savings and 
demand account holders the same way. Savings account and demand account 
holders are both members of the savings association and, therefore, 
should be given equal treatment. Accordingly, OTS proposes to clarify 
that the amount of the qualifying deposit is the total of the deposit 
balances in both savings and demand accounts.

F. Revision of Policy Regarding Management Stock Benefit Plans

    In 1994, OTS substantially revised its conversion regulations to 
codify policies regarding the establishment of management recognition 
plans and stock option plans in connection with a conversion.\3\ OTS 
intended these amendments to limit benefits realized by management and 
a few selected individuals in conversions and to give shareholders an 
opportunity to consider management performance before voting on plans.
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    \3\ 59 FR 61247, 61253 (November 30, 1994).
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    Before the 1994 amendment, plans could provide for accelerated 
vesting in case of death, disability, or a change of control. Existing 
Sec. 563b.3(g)(4)(xii), as modified by the 1994 amendment, provides for 
such accelerated vesting only in the case of disability or death.
    Most converting associations object to this restriction. To avoid 
the restriction many converted associations have waited until the first 
year after conversion, amended their plans to allow for vesting in case 
of a change of control, and then had shareholders approve the amended 
plans. Amending plans requires shareholder approval, which entails 
additional expense and effort, and OTS is unaware of any case where 
such an amendment was rejected. The revised regulation rescinds the 
1994 modification and clarifies that a plan may permit accelerated 
vesting for disability or death, or a change of control of the 
converted savings association. OTS will retain the right to object to 
any payments made in connection with a merger or acquisition.
    OTS also is revising its regulation to clarify that it would allow 
dividend equivalent rights, dividend adjustment rights, or other 
similar provisions that permit cash payments, adjustment of the number 
of shares, or exercise price of options as a result of stock dividends 
or splits, in management recognition plans, stock option plans, or 
other stock benefit plans. OTS does not believe these types of 
provisions, which are common in option plans, unduly benefit 
recipients, as long as these provisions do not violate OTS vesting 
requirements or pricing requirements for options. See proposed 
Sec. 563b.500.
    OTS notes that when an institution lists its stock on the National 
Association of Securities Dealers Automated Quotation (NASDAQ) National 
Market System (which many do because it provides for a wider 
opportunity for trading an institution's stock than the over the 
counter market), NASDAQ requires shareholder ratification of stock 
benefit plans. OTS currently requires shareholder ratification of plans 
within the first year following conversion. OTS proposes to revise the 
section on management benefit plans to clarify that an institution must 
present to shareholders for ratification any material amendments to 
management recognition plans, stock option plans, or other benefit 
plans that occur more than one year after conversion and that are 
inconsistent with the regulation.
    OTS also is adding a provision to the proposed rule that clarifies 
a supervisory policy requiring exercise or forfeiture of stock benefits 
in certain circumstances, such as if an institution becomes critically 
undercapitalized. See proposed Sec. 563b.500.

G. Holding Company Formation

    OTS allows a savings association to organize a holding company as 
part of a mutual to stock conversion. OTS, however, never formally 
imposed any limit on the amount of conversion proceeds that the holding 
company may retain. In the past, OTS staff advised institutions that a 
holding company may keep no more than 50 percent of conversion 
proceeds. This limit was based on OTS's belief that the institution 
should get the most proceeds from the conversion. This policy also 
ensures sufficient capital at the savings association. In today's 
proposed rule, OTS codifies this position. Accordingly, proposed 
Sec. 563b.105 will state that the converted savings association must 
retain at least 50% of the gross conversion proceeds. The amount of 
proceeds proposed for the holding company level must also be consistent 
with the business plan.

H. Mutual Holding Company Revisions

    The proposed regulation makes some conforming changes to the MHC

[[Page 43096]]

regulations to reflect OTS' intent to make the MHC a more suitable, 
long-term alternative to full conversion and to incorporate changes 
made to the conversion regulations. OTS is also proposing that 
institutions under the MHC format may have option plans that provide 
more flexibility than currently permitted.
    The proposed regulation allows savings association subsidiaries of 
MHCs, or holding companies inserted in between MHCs and their savings 
association subsidiaries (Mid-tiers) to offer management benefits or 
stock option plans that permit issuance of more shares than currently 
permitted under the regulations. Under the current rule, an institution 
issuing 20 percent of its stock to minority shareholders could 
promulgate a stock option plan including two percent of its outstanding 
shares (i.e., 10 percent of the minority stock issuance). OTS proposes 
that a savings association subsidiary of an MHC (or Mid-tier) may offer 
management benefit plans or stock option plans as if minority 
shareholders held 49 percent of the stock, provided that the MHC 
retains majority control. Using this option, under the proposed rule an 
institution issuing 20 percent of its stock to minority shareholders 
could promulgate a stock option plan including 4.9 percent of the 
outstanding shares (i.e., 10 percent of the maximum shares that could 
be issued to minority shareholders).
    In addition, OTS will allow the savings association or Mid-tier to 
adopt the plans at the time of reorganization. However, purchasers of 
the stock must approve the plan by a separate vote on the stock order 
form. In addition, the savings association or Mid-tier may make no 
grants under the plan until at least six months following the 
reorganization. The delay is designed to allow the stock price to 
settle in the marketplace before the savings association or Mid-tier 
makes grants.
    Finally, OTS will allow the adoption of additional option plans 
without requiring an additional stock issuance to all categories of 
subscribers. Additional plans would be subject to certain restrictions, 
such as retention of majority ownership at the MHC level, and other 
applicable regulatory requirements. OTS notes that listing on the 
NASDAQ and qualification of some plans under IRS rules requires 
shareholder ratification of benefit plans, and of course OTS's 
regulation has no impact on these requirements. Additional plan 
offerings would require notice to OTS, but could be adopted unless OTS 
objects within 30 days of submission. Among the factors OTS will 
consider when reviewing the plans are the purpose for creating 
additional plans, management ratings, or supervisory problems at the 
converted savings association.

I. Revision of Policy Regarding Acquisitions

    Current and proposed rules provide that no person or company may 
acquire more than 10% of any class of equity security of a recently 
converted institution for three years following conversion without OTS 
approval. The primary purposes of this rule are to provide a reasonable 
period of time for the institution to prudently deploy the new capital 
according to the plan described in the offering documents, for it to 
acclimate to operating as a public company, and to do both without the 
distraction of considering takeover proposals. (See approval standards 
at section 563b.3(i)(5) or proposed section 563b.525(d)).
    OTS is aware that shareholder groups have approached management and 
other shareholders of recently converted institutions as soon as the 
first quarter following conversion, asserting that shareholder return 
on equity is inadequate or that management should consider a sale of 
the institution immediately. In certain situations, OTS has approved 
acquisitions of recently converted institutions, but in no event before 
the second year following conversion.
    OTS is reconsidering its application of its approval standards. OTS 
does not believe acquisitions within the first three years following 
conversion are always in the best interest of newly converted 
institutions, the communities the institutions serve, or the 
shareholders. In addition, OTS is concerned that even where the 
acquisition is considered friendly, approval of the acquisition may be 
inconsistent with the purposes of the existing rules.
    Current and proposed regulations provide newly converted 
institutions needed time to implement their business plans as presented 
to OTS and stock purchasers, and fully deploy proceeds according to 
those plans during the first three years after conversion. Therefore, 
OTS is notifying the public that it intends to take a very close look 
at applications under the existing standards to make sure all criteria 
are fully met before it will give written approval of acquisitions 
within the first three years following conversion.

J. Comments

    OTS invites comment on all aspects of these proposed changes. In 
addition, OTS may convene a focus group during the public comment 
period, to ascertain other views on the proposed regulation. OTS will 
publish the views of the focus group in the public comment summary in 
the final regulation. In addition to questions posed throughout this 
preamble, OTS asks:
    <bullet> How can OTS make the MHC form more attractive? The agency 
is interested in other enhancements to the MHC form that commenters 
might suggest.
    <bullet> For institutions that have determined it is necessary to 
convert to stock form, will the proposal increase industry interest in 
converting to MHC form and remaining in that form? OTS asks mutual 
institutions that are considering converting to stock form if the 
proposed changes in OTS examination and supervisory policy, coupled 
with changes to the MHC regulations and the revisions enacted today by 
the interim final rule accompanying this proposal, make the MHC form a 
better choice of business organization than a full conversion to stock 
form.
    <bullet> Should reorganization into MHC or Mid-tier form require a 
vote of the members? OTS is unaware of any reorganization that has 
failed to receive the majority vote of the members. OTS questions the 
necessity for the expenditure of funds by the institution to obtain a 
certain vote, particularly since members retain the same voting rights 
at the MHC that they had before reorganization at the savings 
association. If OTS removes this requirement for a reorganization, 
should it be imposed in the event of a full conversion to stock form, 
when members would lose their voting rights?
    <bullet> Should mutual institutions be permitted to affiliate with 
other mutual institutions to leverage managerial and administrative 
resources while simultaneously retaining their independent community 
focus using means other than conversion to stock form or reorganization 
into MHC form? OTS requests comments on this issue in response to 
inquiries from mutual institutions for ways to affiliate with each 
other that do not involve the issuance of stock.
    <bullet> OTS is also exploring the feasibility of creating bankers' 
banks specifically focused on serving the needs of community-oriented 
mutual institutions. OTS is seeking comment regarding the level of 
interest among mutual institutions in the formation of

[[Page 43097]]

bankers' banks to specifically serve their needs. Additionally, OTS 
would like commenters to identify potential regulatory requirements or 
other obstacles that may impede creation of bankers' banks for mutual 
institutions.
    <bullet> What consideration may MHCs or Mid-tiers use to acquire 
other institutions, such as trust preferred securities, REITs, mutual 
capital certificates, and stock repurchases to issue stock for 
acquisitions? OTS has received a number of inquiries recently from MHCs 
about other currency to accomplish acquisitions.
    <bullet> How can OTS make it more attractive for mutual 
institutions to stay in mutual form, particularly where capital raising 
is not a necessary objective for the institution?
    Elsewhere in this issue of the Federal Register, OTS is amending 
its regulations to clarify another area of concern to MHCs, the ability 
to waive dividends and any attendant consequences.

K. Miscellaneous Revisions

    In addition to the proposed revisions described above, OTS proposes 
a number of miscellaneous revisions to filing and other requirements. 
Among the other changes, the proposed rule will:
    <bullet> Revise the definition section of the regulation to include 
only those definitions that are not defined elsewhere in OTS 
regulations, or to move specific definitions to the appropriate section 
of the regulation. See proposed Sec. 563b.25.
    <bullet> Reduce the number of copies of applications that a savings 
association must file with OTS from ten to seven. See proposed 
Sec. 563b.155.
    <bullet> Revise the filing requirements to coordinate the place of 
filing, and number of copies filed, for the application for conversion 
and any amendments to the application for conversion. See proposed 
Secs. 563b.115, 563b.155, 563b.180 and 563b.185.
    <bullet> Codify the current informal standard requiring a legal 
opinion indicating that any marketing materials comply with all 
applicable securities laws. See proposed Sec. 563b.275.
    <bullet> Delete the requirement for a legal opinion regarding 
insured accounts. See proposed Sec. 563b.100 Exhibit 3(d).

L. Forms

    OTS is proposing to revise all of the forms currently in the 
conversion regulations, and has drafted a new form that facilitates the 
conversion process (Form OF for the Order Form). In drafting these 
forms, OTS moved a number of requirements currently in the regulations 
to the related forms. See proposed Sec. 563b.05(b). To ensure that the 
public will have an opportunity to comment on these forms, OTS has 
appended the forms to this proposed rule and will publish the final 
forms along with the final rule. The forms, however, will not be 
codified in the Code of Federal Regulations. They will continue to be 
available through OTS Washington and Regional Offices and will be 
accessible on OTS's website after issuance of the final rule.

M. Plain Language Format

    OTS redrafted all of part 563b and the related forms using the 
plain language format. Section 722 of the GLB Act requires federal 
banking agencies to use ``plain language'' in all proposed and final 
rules published after January 1, 2000. These proposed revisions do not 
affect the substance of the regulation or forms, but do make them 
easier to understand.
    OTS invites your comments on how to make this proposed rule easier 
to understand. For example:
    <bullet> Did we organize the material to suit your needs? If not, 
how could the material be better organized?
    <bullet> Do we clearly state the requirements in the rule? If not, 
how could the rule be more clearly stated?
    <bullet> Does the rule contain technical language or jargon that 
isn't clear? If so, what language requires clarification?
    <bullet> Would a different format (grouping and order of sections, 
use of headings, paragraphing) make the rule easier to understand? If 
so, what changes to the format would make the rule easier to 
understand?
    <bullet> Would more (but shorter) sections be better? If so, what 
sections should be changed?
    <bullet> What else could we do to make the rule easier to 
understand?

III. Disposition of Existing Rules

------------------------------------------------------------------------
       Original provision         Proposed provision        Comment
------------------------------------------------------------------------
12 CFR 563b.1...................  12 CFR 563b.5.....  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.2(a)................  12 CFR 563b.25....  Substantive
                                                       revisions,
                                                       deletions, and
                                                       moved.
12 CFR 563b.2(b)................  ..................  Deleted.
12 CFR 563b.3(a)................  12 CFR 563b.5(a)..  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.3(b)................  12 CFR 563b.200(a)  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.3(c)(1).............  12 CFR 563b.330(a)  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.3(c)(2).............  12 CFR 563b.355(a)  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.3(c)(2)(i)-(ii).....  12 CFR              Nonsubstantive
                                   563b.375(a), (d).   revision, moved.
12 CFR 563b.3(c)(3).............  12 CFR 563b.360...  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.3(c)(4).............  12 CFR              Nonsubstantive
                                   563b.335(b), (c).   revision, moved.
12 CFR 563b.3(c)(4)(i)..........  12 CFR 563b.320(c)  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.3(c)(4)(ii).........  12 CFR 563b.375(c)  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.3(c)(4)(iii)........  12 CFR 563b.375(b)  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.3(c)(4)(iv).........  12 CFR 563b.375(d)  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.3(c)(5).............  12 CFR              Nonsubstantive
                                   563b.320(d), 365.   revision, moved.
12 CFR 563b.3(c)(6).............  12 CFR              Nonsubstantive
                                   563b.320(e),        revision,
                                   335(b), (d).        deletions and
                                                       moved.
12 CFR 563b.3(c)(6)(i)..........  12 CFR              Substantive
                                   563b.385(a), (c),   revision,
                                   380(a).             deletions and
                                                       moved.
12 CFR 563b.3(c)(6)(ii)-(iii)...  12 CFR 563b.395...  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.3(c)(6)(iv).........  12 CFR 563b.390(b)  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.3(c)(7).............  12 CFR              Nonsubstantive
                                   563b.385(a), (c).   revision, moved.
12 CFR 563b.3(c)(8).............  12 CFR 563b.370...  Nonsubstantive
                                                       revision,
                                                       deletions and
                                                       moved.
12 CFR 563b.3(c)(9).............  12 CFR 563b.505(d)  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.3(c)(10)............  12 CFR              Nonsubstantive
                                   563b.330(a),        revision, moved.
                                   335(b).
12 CFR 563b.3(c)(11)............  12 CFR 563b.420(a)  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.3(c)(12)............  12 CFR 563b.445(a)  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.3(c)(13)............  12 CFR              Nonsubstantive
                                   563b.430(d),        revision, moved.
                                   445(b), 465, 485.
12 CFR 563b.3(c)(14)............  12 CFR 563b.25....  Nonsubstantive
                                                       revision, moved.

[[Page 43098]]

 
12 CFR 563b.3(c)(15)............  12 CFR 563b.440,    Nonsubstantive
                                   445(c).             revision, moved.
12 CFR 563b.3(c)(16)............  12 CFR 563b.140,    Nonsubstantive
                                   425.                revision, moved.
12 CFR 563b.3(c)(17)............  12 CFR 563b.505(a)  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.3(c)(18)............  12 CFR 563b.505(b)- Nonsubstantive
                                   (c).                revision, moved.
12 CFR 563b.3(c)(19)............  12 CFR 563b.530(a)- Nonsubstantive
                                   (c).                revision, moved.
12 CFR 563b.3(c)(20)............  12 CFR 563b.150(b)  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.3(c)(21)............  12 CFR 563b.130...  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.3(c)(22)............  12 CFR 563b.345(b)  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.3(c)(23)............  12 CFR 563b.320(a)- Nonsubstantive
                                   (d), 380 (a)-(c).   revision, moved.
12 CFR 563b.3(c)(24)............  12 CFR 563b.520(a)- Nonsubstantive
                                   (b).                revision, moved.
12 CFR 563b.3(d)(1)-(7).........  ..................  Deleted.
12 CFR 563b.3(d)(8).............  12 CFR 563b.385(a)  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.3(d)(9).............  12 CFR 563b.385(b)  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.3(d)(10)-(11).......  ..................  Deleted.
12 CFR 563b.3(d)(12)............  12 CFR 563b.390(a)  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.3(d)(13)............  ..................  Deleted.
12 CFR 563b.3(e)(1).............  12 CFR 563b.25....  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.3(e)(2).............  ..................  Deleted.
12 CFR 563b.3(f)(1).............  12 CFR              Nonsubstantive
                                   563b.445(b), 450,   revision, moved.
                                   455, 480.
12 CFR 563b.3(f)(2).............  12 CFR              Nonsubstantive
                                   563b.445(b), 450.   revision, moved.
12 CFR 563b.3(f)(3).............  12 CFR              Revision with
                                   563b.470(e), 475.   partial deletion,
                                                       moved.
12 CFR 563b.3(f)(4).............  12 CFR 563b.460...  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.3(f)(5).............  12 CFR 563b.470(a)- Nonsubstantive
                                   (d).                revision, moved.
12 CFR 563b.3(g)(1).............  12 CFR 563b.510...  Revision with
                                                       deletion, moved.
12 CFR 563b.3(g)(2).............  12 CFR 563b.510,    Nonsubstantive
                                   520(a).             revision, moved.
12 CFR 563b.3(g)(3).............  12 CFR 563b.510,    Substantive
                                   515.                revision with
                                                       deletion, moved.
12 CFR 563b.3(g)(4).............  12 CFR 563b.500...  Substantive
                                                       revision, moved.
12 CFR 563b.3(h)................  12 CFR 563b.340(a)  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.3(i)(1)-(2).........  12 CFR              Nonsubstantive
                                   563b.340(b)(1).     revision, moved.
12 CFR 563b.3(i)(3)(i)..........  12 CFR 563b.525...  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.3(i)(3)(ii).........  12 CFR 563b.420(b)  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.3(i)(3)(iii)........  12 CFR 563b.525(b)  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.3(i)(4)(i)..........  ..................  Deleted.
12 CFR 563b.3(i)(4)(ii)-(iv)....  12 CFR              Nonsubstantive
                                   563b.525(c)(1)-(3   revision, moved.
                                   ).
12 CFR 563b.3(i)(4)(v)..........  12 CFR              Nonsubstantive
                                   563b.340(b)(2)(ii   revision, moved.
                                   ), 525(c)(4).
12 CFR 563b.3(i)(4)(vi)-(5).....  12 CFR              Nonsubstantive
                                   563b.525(d)(1)-(2   revision, moved.
                                   ).
12 CFR 563b.3(i)(6).............  12 CFR              Nonsubstantive
                                   563b.430(a), (b).   revision, moved.
12 CFR 563b.3(i)(7)(i)-(ii).....  12 CFR 563b.25,     Nonsubstantive
                                   525(b).             revision, moved.
12 CFR 563b.3(i)(7)(iii)-(iv)...  ..................  Deleted.
12 CFR 563b.3(j)................  12 CFR 563b.5(a)..  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.4(a)(1).............  12 CFR 563b.120...  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.4(a)(2).............  ..................  Deleted.
12 CFR 563b.4(a)(3).............  12 CFR 563b.125...  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.4(a)(3)(i)-(ii),      12 CFR              Nonsubstantive
 (4)(i)-(xviii).                   563b.135(a), (b).   revision, moved.
12 CFR 563b.4(a)(4)(xix)........  ..................  Deleted.
12 CFR 563b.4(a)(5).............  12 CFR 563b.135(c)  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.4(b)(1)(i)..........  12 CFR 563b.180...  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.4(b)(1)(ii).........  12 CFR 563b.185...  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.4(b)(2).............  ..................  Deleted.
12 CFR 563b.4(b)(3).............  12 CFR 563b.180(b)  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.4(c)................  12 CFR 563b.160...  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.5(a)................  12 CFR 563b.250...  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.5 (b)-(c)...........  12 CFR 563b.270(b)  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.5(d)(1).............  12 CFR 563b.255...  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.5(d)(2).............  12 CFR 563b.260,    Nonsubstantive
                                   265.                revision, moved.
12 CFR 563b.5(d)(3).............  12 CFR 563b.255(h)  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.5(d)(4).............  12 CFR 563b.260...  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.5(e)(1)-(2).........  12 CFR 563b.150,    Nonsubstantive
                                   155.                revision,
                                                       deletions, and
                                                       moved.
12 CFR 563b.5(e)(3).............  12 CFR 563b.275(d)  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.5(e)(4).............  ..................  Deleted.
12 CFR 563b.5(e)(5).............  12 CFR 563b.150,    Nonsubstantive
                                   160(a)-(b).         revision, moved.
12 CFR 563b.5(e)(6).............  12 CFR 563b.275(e)  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.5(e)(7).............  12 CFR 563b.275(c)  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.5(f)................  12 CFR 563b.280...  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.5(g)(1)-(2).........  12 CFR 563b.285(a)  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.5(g)(3).............  12 CFR 563b.290...  Substantive
                                                       revision, moved.
12 CFR 563b.5(h)................  12 CFR 563b.285(b)  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.6(a)................  12 CFR 563b.225(a)  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.6(b)................  12 CFR 563b.230...  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.6(c)(1).............  12 CFR 563b.235...  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.6(c)(2).............  ..................  Deleted.
12 CFR 563b.6(d)................  12 CFR 563b.235(d)  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.6(e)................  12 CFR 563b.225(b)- Nonsubstantive
                                   (c).                revision, moved.

[[Page 43099]]

 
12 CFR 563b.7(a)(1).............  12 CFR 563b.325(a)  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.7(a)(2).............  12 CFR 563b.300(a)  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.7(a)(3).............  12 CFR 563b.325(a)  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.7(a)(4).............  ..................  Deleted.
12 CFR 563b.7(b)................  12 CFR              Nonsubstantive
                                   563b.300(e), 305.   revision, moved.
12 CFR 563b.7(c)................  12 CFR 563b.330...  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.7(d)................  12 CFR              Nonsubstantive
                                   563b.200(b)(8),     revision, moved.
                                   300 (c)-(d), Form
                                   OC, Item 3.
12 CFR 563b.7(e)................  12 CFR 563b.335(c)  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.7(f)(1)-(2).........  12 CFR 563b.200(b)  Nonsubstantive
                                                       revision,
                                                       deletion and
                                                       moved.
12 CFR 563b.7(f)(3).............  ..................  Deleted.
12 CFR 563b.7(g)(1)-(2).........  12 CFR              Nonsubstantial
                                   563b.335(a), Form   revisions,
                                   OF, Items (1),      deletions, and
                                   (2).                moved.
12 CFR 563b.7(g)(3), (4), (5)...  Form OF, Items      Nonsubstantive
                                   (3), (4), (5).      revision, moved.
12 CFR 563b.7(h)................  12 CFR              Nonsubstantive
                                   563b.345(a),        revision, moved.
                                   350(c).
12 CFR 563b.7(i)................  12 CFR 563b.400...  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.7(j)................  12 CFR 563b.350(a)  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.7(k)(1)-(2).........  12 CFR 563b.405...  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.7(k)(2)(i)-(ii).....  12 CFR 563b.310(d)  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.7(k)(3).............  ..................  Deleted.
12 CFR 563b.7(k)(4).............  12 CFR 563b.310(a)  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.7(k)(5).............  12 CFR 563b.310(b)- Substantive
                                   (d).                revision, moved.
12 CFR 563b.8(a)................  12 CFR 563b.155...  Substantive
                                                       revision, moved.
12 CFR 563b.8(b)(1)-(2).........  12 CFR 563b.150...  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.8(b)(3).............  ..................  Deleted.
12 CFR 563b.8(c)(1)-(2)(i)-(ii).  12 CFR 563b.240...  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.8(c)(2)(iii)........  12 CFR 563b.260...  Substantive
                                                       revision, moved.
12 CFR 563b.8(c)(3).............  12 CFR              Substantial
                                   563b.300(a), (c).   revisions,
                                                       deletions, and
                                                       moved.
12 CFR 563b.8(d)(1)-(2).........  12 CFR 563b.430...  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.8(d)(3).............  12 CFR 563b.435...  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.8(e)................  12 CFR              Nonsubstantial
                                   563b.115(a), 155,   revisions,
                                   180(b), Form AC,    deletions, and
                                   General             moved.
                                   Instruction B.
12 CFR 563b.8(f)................  ..................  Deleted.
12 CFR 563b.8(g)................  Form AC, General    Nonsubstantive
                                   Instruction B.      revision, moved.
12 CFR 563b.8(h)................  ..................  Deleted.
12 CFR 563b.8(i)-(1)............  Form AC, General    Nonsubstantive
                                   Instruction B.      revision, moved.
12 CFR 563b.8(m)................  ..................  Deleted.
12 CFR 563b.8(n)................  Form AC, General    Nonsubstantive
                                   Instruction B.      revision, moved.
12 CFR 563b.8(o)................  ..................  Deleted.
12 CFR 563b.8(p)................  12 CFR              Nonsubstantive
                                   563b.150(a)(6),     revision, moved.
                                   Form AC, General
                                   Instruction B.
12 CFR 563b.8(q)................  Form AC, General    Nonsubstantive
                                   Instruction B.      revision, moved.
12 CFR 563b.8(r)................  Form AC, General    Substantive
                                   Instruction B.      revision, moved.
12 CFR 563b.8(s)................  Form AC, General    Nonsubstantive
                                   Instruction B.      revision, moved.
12 CFR 563b.8(t)(1).............  12 CFR 563b.100...  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.8(t)(2).............  ..................  Deleted.
12 CFR 563b.8(u)................  12 CFR 563b.205...  Nonsubstantial
                                                       revisions,
                                                       deletions, and
                                                       moved.
12 CFR 563b.8(v)................  12 CFR 563b.530(d)  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.9...................  12 CFR 563b.10....  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.10..................  12 CFR 563b.605(b)- Nonsubstantive
                                   (c).                revision, moved.
12 CFR 563b.11..................  12 CFR 563b.200(c)  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.20..................  12 CFR 563b.600...  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.21(a)...............  12 CFR 563b.605...  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.21(b)...............  12 CFR 563b.650,    Nonsubstantive
                                   610.                revision, moved.
12 CFR 563b.22..................  ..................  Deleted.
12 CFR 563b.23(a)-(c)...........  12 CFR 563b.670,    Nonsubstantive
                                   675.                revision,
                                                       additions and
                                                       moved.
12 CFR 563b.23(d)...............  12 CFR 563b.690...  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.24(a)-(b)(1), (3)...  12 CFR              Nonsubstantive
                                   563b.625(a)(1).     revision, moved.
12 CFR 563b.24(b)(2)............  ..................  Deleted.
12 CFR 563b.24(c)...............  12 CFR 563b.625(b)  Substantive
                                                       addition, moved.
12 CFR 563b.25..................  12 CFR 563b.630...  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.26..................  12 CFR              Nonsubstantive
                                   563b.625(a)(2).     revision, moved.
12 CFR 563b.27(a)...............  12 CFR 563b.650...  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.27(b)...............  12 CFR              Nonsubstantive
                                   563b.660(f)(1).     revision, moved.
12 CFR 563b.27(c)...............  12 CFR              Nonsubstantive
                                   563b.660(a)(2).     revision, moved.
12 CFR 563b.27(d)...............  12 CFR 563b.660(c)  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.27(e)...............  12 CFR              Nonsubstantive
                                   563b.660(g)(2).     revision, moved.
12 CFR 563b.27(f)-(g)...........  12 CFR 563b.660(e)  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.27(h)...............  12 CFR              Nonsubstantive
                                   563b.660(f)(2).     revision, moved.
12 CFR 563b.27(i)...............  12 CFR              Nonsubstantive
                                   563b.660(g)(1).     revision, moved.
12 CFR 563b.27(j)...............  12 CFR              Nonsubstantive
                                   563b.660(g)(3).     revision, moved.
12 CFR 563b.27(k)...............  12 CFR              Nonsubstantive
                                   563b.660(g)(4).     revision, moved.

[[Page 43100]]

 
12 CFR 563b.27(l)...............  12 CFR              Nonsubstantive
                                   563b.660(d)(3).     revision, moved.
12 CFR 563b.27(m)...............  12 CFR              Nonsubstantive
                                   563b.660(d)(2).     revision, moved.
12 CFR 563b.27(n)...............  12 CFR              Nonsubstantive
                                   563b.660(d)(1).     revision, moved.
12 CFR 563b.27(o)...............  12 CFR              Nonsubstantive
                                   563b.660(d)(4).     revision, moved.
12 CFR 563b.27(p)...............  12 CFR              Nonsubstantive
                                   563b.660(a)(3).     revision, moved.
12 CFR 563b.27(q)-(r)...........  12 CFR 563b.660(h)  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.27(s)...............  12 CFR              Nonsubstantive
                                   563b.660(g)(5).     revision, moved.
12 CFR 563b.28..................  12 CFR 563b.610...  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.29(a)...............  12 CFR 563b.660...  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.29(b)...............  ..................  Deleted.
12 CFR 563b.29(d)(1)-(2)........  12 CFR 563b.430...  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.29(d)(3)............  12 CFR 563b.435...  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.30..................  12 CFR 563b.675...  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.31..................  12 CFR 563b.680...  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.32..................  12 CFR 563b.670(c)  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.33..................  12 CFR 563b.670(d)  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.100.................  Form AC-1680......  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.101.................  Form PS-1681......  Nonsubstantive
                                                       revision, moved.
12 CFR 563b.102.................  Form OC-1682......  Nonsubstantive
                                                       revision, moved.
                                  12 CFR 563b.105,    New provisions.
                                   110, 115.
                                  12 CFR 563b.295...  New provision.
                                  12 CFR 563b.550-    New provisions.
                                   575.
                                  Form OF-1683......  New form.
------------------------------------------------------------------------

IV. Executive Order 12866

    The Director of OTS determined that this proposed rule does not 
constitute a ``significant regulatory action'' for the purposes of 
Executive Order 12866.

V. Regulatory Flexibility Act Analysis

    The Regulatory Flexibility Act of 1980 (RFA) requires federal 
agencies to either prepare an initial regulatory flexibility analysis 
(IRFA) with this proposed rule or certify that the rule would not have 
a significant impact on a substantial number of small entities.\4\ OTS 
cannot at this time determine whether the rule would have a significant 
impact on a substantial number of small entities. Therefore, OTS 
includes the following IRFA.\5\
---------------------------------------------------------------------------

    \4\ 5 U.S.C. 605(b).
    \5\ 5 U.S.C. 603(a).
---------------------------------------------------------------------------

    A description of the reasons why OTS is considering this action, 
and a statement of the objectives of, and legal basis for, the proposed 
rule are in the supplementary material above.

1. Small Entities to Which the Proposed Rule Would Apply

    The proposed rule applies to mutual savings associations that 
propose to convert to the stock form of ownership. There are currently 
approximately 422 mutual savings associations and 27 MHCs subject to 
OTS oversight. Of these institutions, approximately 252 have less than 
$100 million in assets. Small depository institutions are generally 
defined, for RFA purposes, as those with assets under $100 million.\6\ 
In the past two years, OTS has processed 45 and 17 applications, 
respectively, to convert from mutual to stock or mutual holding company 
form. Based on this experience, OTS believes that the proposed rule 
affects fewer than 20 savings associations annually.
---------------------------------------------------------------------------

    \6\ 13 CFR 121.201, Division H (1999).
---------------------------------------------------------------------------

2. Requirements of the Proposed Rule

    The proposed rule requires mutual savings associations wishing to 
convert to stock form to prepare a plan of conversion and other 
supporting forms and documents (such as a business plan and an 
independent appraisal) and submit the documents for OTS approval. The 
current mutual to stock conversion regulations require all of these 
documents or information.
    The proposed rule includes a new requirement that a savings 
association that intends to establish a charitable organization as part 
of its conversion must supply certain documents and information 
regarding the charitable organization. Under the current application 
processing policies, OTS often requires a savings association that 
intends to establish a charitable organization as part of its 
conversion to submit the same type of information that the proposed 
rule would require. As a result, this new requirement should not have 
any additional impact on small savings associations.
    The proposed rule also adds demand account holders to the 
definition of savings account holders, allows accelerated vesting in 
management benefit plans for changes of control, and clarifies OTS 
policy regarding the amount of proceeds allowed at the holding company 
level. None of these provisions, however, should add to the reporting, 
recordkeeping, or compliance requirements for small entities.
    Although it is not clear that the RFA requires a quantitative 
analysis of the impact of the proposed regulatory changes, OTS provides 
the following estimate. The proposed rule's primary economic impact on 
small savings associations relates to the expense of preparing the 
application to convert. Savings associations wishing to convert must 
prepare the necessary documents and forms, including a plan of 
conversion, a business plan, and an appraisal. Preparation of these 
documents may require legal or professional help. OTS's experience in 
the conversion process indicates that savings associations generally 
hire legal counsel, accountants, marketing agents, and professional 
appraisers to assist in completion of the necessary documents and 
forms. Savings associations converting under the current regulations 
spend approximately $250,000 to one million dollars each to go through 
the process. We note that the new requirements will add only 10 hours 
of additional paperwork in preparation, and may save institutions that 
decide after preliminary business plan preparation and discussion, not 
to convert, significant time and expense. See discussion infra at 
Section VII. The new requirement for information supporting a proposed 
charitable contribution should not increase these costs appreciably.

3. Significant Alternatives

    Section 603(c) of the RFA requires OTS to describe any significant 
alternatives to the proposed rule that

[[Page 43101]]

accomplish the stated objectives of the rule while minimizing any 
significant economic impact of the rule on small entities. Section 
603(c) lists several examples of significant alternatives, including 
(1) establishing different compliance or reporting requirements or 
timetables that take into account the resources available to small 
entities; (2) clarifying, consolidating, or simplifying compliance and 
reporting requirements for small entities; (3) using performance 
standards rather than design standards; and (4) exempting small 
entities from coverage of the rule or a part of the rule.
    After consideration, OTS does not believe that any of these 
alternatives are feasible. As noted, more than half of the savings 
associations to which the proposed rule could apply meet the RFA 
standard for ``small depository institutions.'' In fact, the conversion 
process is aimed largely at small institutions that want to raise 
capital in the open market by converting to the stock form of 
ownership. Given that the conversion process is designed with small 
institutions in mind, modifying the requirements for such small 
institutions is not necessary. Moreover, given that a conversion cannot 
be measured for performance until it takes place, the use of 
performance standards rather than design standards is impractical.
    To reduce regulatory burden consistent with the goals of this 
regulation, the proposed rule specifically permits OTS to waive any 
requirement under the part where the waiver is equitable and not 
detrimental to the savings association, the accountholders, or the 
public interest. This process will provide substantial flexibility to 
OTS and the savings association to minimize any significant economic 
impact of a provision on a specific institution.
    Nevertheless, OTS requests comments on the burdens associated with 
the proposed rule that particularly affect small savings associations, 
and whether any modifications or exemptions from the rules for small 
savings associations would be appropriate.

VI. Unfunded Mandates Act of 1995

    Section 202 of the Unfunded Mandates Reform Act of 1995, Pub. L. 
104-4 (Unfunded Mandates Act), requires that an agency prepare a 
budgetary impact statement before promulgating a rule that includes a 
federal mandate that may result in expenditure by state, local, and 
tribal governments, in the aggregate, or by the private sector, of $100 
million or more in any one year. If a budgetary impact statement is 
required, section 205 of the Unfunded Mandates Act also requires an 
agency to identify and consider a reasonable number of regulatory 
alternatives before promulgating a rule. OTS determined that the 
proposed rule will not result in expenditures by state, local, or 
tribal governments or by the private sector of $100 million or more in 
any one year. Accordingly, this rulemaking is not subject to section 
202 of the Unfunded Mandates Act.

VII. Paperwork Reduction Act

    OTS invites comment on all of the following issues:
    <bullet> Whether the proposed information collection contained in 
this proposal is necessary for the proper performance of OTS's 
functions, including whether the information has practical utility.
    <bullet> The accuracy of OTS's estimate of the burden of the 
proposed information collection.
    <bullet> Ways to enhance the quality, utility, and clarity of the 
information to be collected.
    <bullet> Ways to minimize the burden of the information collection 
on respondents, including through the use of automated collection 
techniques or other forms of information technology.
    <bullet> Estimates of capital and start-up costs of operation, 
maintenance and purchases of services to provide information.
    Respondents/recordkeepers are not required to respond to this 
collection of information unless it displays a currently valid OMB 
control number.
    OTS submitted the collection of information requirements contained 
in this proposal to the Office of Management and Budget for review in 
accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 
3507(d)). Send comments on the collections of information to the Office 
of Management and Budget, Paperwork Reduction Project (1550-0014), 
Washington, DC 20503, with copies to the Regulations and Legislation 
Division, Chief Counsel's Office, Office of Thrift Supervision, 1700 G 
Street, NW, Washington, DC 20552.
    The collection of information requirements in this proposed rule 
are in 12 CFR part 563b. OTS requires this information for the proper 
supervision of savings associations that convert from mutual to stock 
form under OTS regulations. The likely respondents/recordkeepers are 
federal savings associations.
    Estimated average annual burden hours per respondent/recordkeeper: 
510 hours.
    Estimated number of respondents/recordkeepers: 16 per year.
    Estimated total annual reporting and recordkeeping burden: 8160 
hours.
    Start up costs to respondents: N/A.

List of Subjects

12 CFR Part 563b

    Reporting and recordkeeping requirements, Savings associations, 
Securities.

12 CFR Part 575

    Administrative practice and procedure, Capital, Holding companies, 
Reporting and recordkeeping requirements, Savings associations, 
Securities.
    Accordingly, the Office of Thrift Supervision proposes to amend 
title 12, Chapter V, Code of Federal Regulations as set forth below.
    1. Part 563b is revised to read as follows:

PART 563b--CONVERSIONS FROM MUTUAL TO STOCK FORM

Sec.
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   Under what circumstances will OTS not object to 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?

[[Page 43102]]

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 soliciting 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   How many 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 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 members of 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   May I implement a stock option plan or management or 
employee stock benefit plan?
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 Conversion
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 SAIF-insured savings association eligible for a 
voluntary supervisory conversion?
563b.630   When is a BIF-insured savings association 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.

PART 563b--CONVERSIONS FROM MUTUAL TO STOCK FORM


Sec. 563b.5  What does this part do?

    (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.


[[Page 43103]]


    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 public interest;

and

    (3) If applicable, includes an opinion of counsel demonstrating 
that state law conflicts with the requirement or provision.


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

    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.


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

    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 Secs. 563b.550 through 563b.575.


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

    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.


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

    The following definitions apply to this part and the forms 
prescribed under this part:
    Acting in concert has the same meaning as in Sec. 574.2(c) of this 
chapter. The rebuttable presumptions of Sec. 574.4(d) of this chapter, 
other than Secs. 574.4(d)(1) and (d)(2) of this chapter, apply to the 
share purchase limitations at Secs. 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, or 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 Secs. 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 Sec. 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 at 12 CFR part 574.
    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 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 is a 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 any savings account with total deposit balances of $50 or 
less do not qualify.
    Sale or sell is a 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 
Sec. 561.42 of this chapter, including a demand account as defined in 
Sec. 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 do 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 Sec. 563b.355;
    (2) Tax-qualified employee stock ownership plans under 
Sec. 563b.380;
    (3) Supplemental eligible account holders under Sec. 563b.355; and
    (4) Other voting members under Sec. 563b.365.

[[Page 43104]]

    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 section 401 of the Internal 
Revenue Code.
    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

Prior to Conversion


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

    (a) You must meet with OTS before you may file your business plan. 
You must submit your business plan at least 30 days before you file 
your application for conversion. You may not file your application for 
conversion if the Regional Director objects to your business plan.
    (b) You must 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.


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

    (a) Your business plan must:
    (1) Clearly and completely describe 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), and include three 
years of projected financial statements for the converted institution 
and each holding company, and three years of consolidated financial 
statements for the holding company. The business plan must provide that 
the converted savings association must retain at least 50 percent of 
the gross conversion proceeds.
    (2) Demonstrate that your plan for deployment of conversion 
proceeds will substantially serve to meet credit and lending needs in 
your proposed market areas. OTS will not approve a business plan that 
provides 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 the investment is part of a properly managed leverage strategy.
    (3) Demonstrate that you have a reasonable need for new capital to 
support projected operations and activities. You must show that 
opportunities are reasonably available in your proposed market areas to 
achieve your planned deployment of conversion proceeds.
    (4) Describe your experience with respect to prior growth, 
expansion, or other initiatives similar to the operations and 
activities proposed in your business plan.
    (5) Describe the risks associated with your plan for deployment of 
conversion proceeds, and the effect of this plan on management 
resources, staffing, and facilities.
    (6) Demonstrate that your management and board of directors have 
the expertise, and that you have adequate staffing and controls to 
prudently manage the growth, expansion, new investment, and other 
operations and activities proposed in your business plan.
    (7) Demonstrate that you will achieve a reasonable return on 
equity, commensurate with investment risk, investor expectations, and 
industry norms, without consideration of assumed, speculative stock 
price appreciation.
    (b) You may not project stock repurchases, returns of capital, or 
extraordinary dividends in any part of the business plan. A newly 
converted company should not plan on significant returns of conversion 
proceeds during the business plan period, except in extraordinary 
circumstances.


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

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


Sec. 563b.115  Under what circumstances will OTS not object to my 
business plan?

    (a) You must file your business plan with the Regional Office. OTS 
may request additional information, if necessary. You must file your 
business plan as a confidential exhibit to the Form AC.
    (b) OTS will not object to your business plan if it demonstrates 
prudent deployment of capital and otherwise meets the requirements of 
Sec. 563b.105.
    (c) OTS will review your business plan and will either not object 
to the plan or will disapprove your business plan. You may not submit 
your application for conversion until OTS advises you that it does not 
object to your business plan, except in extraordinary circumstances.
    (d) If OTS approves your application for conversion and you 
complete your conversion, you must operate within the parameters of 
your approved business plan. You must obtain the prior written approval 
of the Regional Director for any material deviations from your business 
plan.


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

    (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.

[[Page 43105]]

Plan of Conversion


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

    Your board of directors must adopt a plan of conversion that 
conforms to Secs. 563b.320 through 563b.395 (``Offers and Sales of 
Stock''). Your board of directors must adopt the plan by at least a 
two-thirds vote.


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

    You must include the information included in Secs. 563b.320 through 
563b.395 (``Offers and Sales of Stock'') 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.


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

    (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.
    (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, approve 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.


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

    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


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

    (a) Your application for conversion must include all of the 
following information.
    (1) Your plan of conversion.
    (2) Pricing materials meeting the requirements of Sec. 563b.200(b).
    (3) Proxy soliciting materials under Sec. 563b.270, including:
    (i) A preliminary proxy statement with signed financial statements;
    (ii) A form of proxy meeting the requirements of Sec. 563b.255; and
    (iii) Any additional proxy soliciting materials.
    (4) An offering circular described in Sec. 563b.300.
    (5) The documents and information required by Form AC. You may 
obtain Form AC from OTS Washington and Regional Offices (see Sec. 516.1 
of this chapter) and OTS's website (www.ots.treas.gov).
    (6) 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.
    (7) 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, or substantially incomplete, or that provides for 
unreasonable conversion expenses.


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

    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 Sec. 516.1 of this 
chapter.

[[Page 43106]]

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

    (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. Your CRA Plan 
is not considered confidential information. 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 
available to the public under 5 U.S.C. 552 and part 505 of this 
chapter. OTS will advise you if it makes available to the public any 
information you designated as ``confidential.''
    (d) If OTS issues a public statement with its decision on the 
application for conversion, OTS may comment on confidential submissions 
in the public statement without notifying you.


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

    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


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

    (a) You must publish a public notice of the application under the 
procedures in subpart B of part 516 of this chapter, except that you 
must publish your notice within three days before or after you file 
your application for conversion. You must simultaneously prominently 
post the notice in your home office and all branch offices. Your notice 
must include the following information.
    (1) You filed an application for conversion with OTS.
    (2) You delivered copies of the application to OTS and to the 
Regional Office, including the addresses of the applicable OTS offices.
    (3) A statement that anyone may file written comments, including 
objections to the plan of conversion and materials supporting the 
objections, within 20 days. You must include instructions regarding how 
a person may file a comment.
    (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 Sec. 516.1 of this chapter.
    (c) If OTS does not accept your application for conversion under 
Sec. 563b.200 and requires you to file a new application, you must 
publish and post a new notice and allow an additional 20 days for 
comment.


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

    Anyone may submit a written comment supporting or opposing your 
application for conversion with OTS. To do so, commenters must file 
within 20 days after you notify the public under Sec. 563b.180. 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 Sec. 516.1 of this 
chapter.

OTS Review of the Application for Conversion


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

    (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 Sec. 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 Sec. 563b.5.


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

    (a) Any person aggrieved by OTS's final action on your application 
for

[[Page 43107]]

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 the Federal 
Register or 30 days after you mail the proxy statement to your members 
under Sec. 563b.235.

Vote by Members


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

    (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 special 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 Sec. 563b.135 in 
your notice.


Sec. 563b.230  Who is eligible to vote?

    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.


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

    (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.


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

    Promptly after the members' meeting, you must file all of the 
following information with OTS:
    (a) A certified copy of each adopted resolution on the conversion.
    (b) The total votes eligible to be cast.
    (c) The total votes represented in person or by proxy.
    (d) The total votes cast in favor of and against each matter.
    (e) The percentage of votes necessary to approve each matter.
    (f) An opinion of counsel that:
    (1) You conducted the members' meeting in compliance with all 
applicable state or federal laws and regulations; and
    (2) You complied with all federal or state laws applicable to the 
conversion.

Proxy Solicitation


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

    (a) You must comply with these proxy solicitation provisions when 
you provide proxy soliciting 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, 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 adopts the plan of conversion. The newspaper 
advertisement 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 soliciting 
material; and
    (v) A request for your members to vote at the meeting.


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

    The form of proxy must include all of the following.
    (a) A statement in bold face type stating whether 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.


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

    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.


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

    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.


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

    (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 Sec. 516.1 of this chapter) and 
OTS's website (www.ots.treas.gov).
    (b) Other requirements. (1) OTS will review your proxy soliciting 
material when it reviews the application for conversion and will 
authorize the use of proxy soliciting material.
    (2) You must provide an authorized written proxy statement to your 
members before you provide any other soliciting material. You must mail 
authorized proxy soliciting material to

[[Page 43108]]

your members within ten days after OTS authorizes the solicitation.


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

    (a) You must file revised proxy materials as an amendment to your 
application for conversion. See Sec. 563b.155 for where to file.
    (b) To revise your proxy soliciting 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 soliciting material 
subject to Sec. 563b.270, 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.
    (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 soliciting 
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 soliciting 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.


Sec. 563b.280  Must I mail a member's proxy soliciting material?

    (a) You must mail the member's authorized proxy soliciting material 
if:
    (1) Your board of directors adopted a plan of conversion;
    (2) A member requests in writing that you mail proxy soliciting 
material; and
    (3) 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 soliciting material for 
the member.
    (c) You must mail authorized proxy soliciting 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 
soliciting material.
    (e) A member may furnish other members its own proxy soliciting 
material, authorized by OTS, subject to these rules.


Sec. 563b.285  What solicitations are prohibited?

    (a) False or misleading statements. (1) No one may use proxy 
soliciting 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 proxy 
soliciting material is accurate, complete, not false or not misleading, 
or passed upon the merits of or approved any proposal.
    (b) Other prohibited solicitations. No person may solicit:
    (1) An undated or post-dated proxy;
    (2) A proxy that states it will be dated after the date it is 
signed by a member;
    (3) A proxy that is not revocable at will by the member; or
    (4) A proxy that is part of another document or instrument.


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

    (a) If a solicitation violates Sec. 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.


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

    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


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

    (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 Sec. 516.1 of this chapter) and OTS's website 
(www.ots.treas.gov).
    (b) You must condition your stock offering upon the members' 
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 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 Sec. 563b.400.


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

    (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 Form OC to persons listed in your plan 
of conversion within 10 days after OTS declares it effective.


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

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

[[Page 43109]]

Offers and Sales of Stock


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

    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.


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

    (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.


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

    (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.


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

    (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.
    (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 Sec. 516.1 of this chapter) and OTS's website 
(www.ots.treas.gov).


Sec. 563b.340  What sales practices are prohibited?

    (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 limitations 
established in 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.


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

    (a) A subscriber may purchase conversion shares with cash, by a 
withdrawal from a savings account, or by 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.


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

    (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 the 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.


Sec. 563b.355  How many subscription rights must I give to each 
eligible account holder and each supplemental eligible account holder?

    (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 Sec. 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

[[Page 43110]]

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.


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

    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.


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

    (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 Sec. 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.


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

    (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:

------------------------------------------------------------------------
                                                            Officer and
                                                             director
                    Institution size                         purchases
                                                             (percent)
------------------------------------------------------------------------
$ 50,000,000 or less....................................              35
$ 50,000,001-100,000,000................................              34
$100,000,001-150,000,000................................              33
$150,000,001-200,000,000................................              32
$200,000,001-250,000,000................................              31
$250,000,001-300,000,000................................              30
$300,000,001-350,000,000................................              29
$350,000,001-400,000,000................................              28
$400,000,001-450,000,000................................              27
$450,000,001-500,000,000................................              26
Over $500,000,000.......................................              25
------------------------------------------------------------------------

    (b) 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.


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

    (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.


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

    (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 
Sec. 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 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.


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

    (a) You may limit the number of shares that any person, group of 
associated persons, or persons otherwise acting in concert, may 
subscribe to between one percent and five percent of the total stock 
sold. If you set a limit of five percent, you may provide that any 
person, group of associated persons, or persons otherwise acting in 
concert subscribing for five percent, may purchase more than five 
percent as long as the total amount that the subscribers purchase over 
five percent does not in the aggregate exceed 10 percent of the total 
stock offering.
    (b) 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.
    (c) 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.


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

    (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.

[[Page 43111]]

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

    (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


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

    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 Sec. 563b.405.


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

    (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 
Sec. 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


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

    (a) You must select a date for the completion of the conversion 
that is within 24 months of the date that your members approve the 
conversion. Once OTS approves the conversion, it will not permit 
extension of the completion date.
    (b) Your conversion is complete on the date that you accept the 
offers for your stock.


Sec. 563b.425  Who may terminate the conversion?

    (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.


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

    (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). OTS will state the effective date of your charter 
amendments in its approval of the conversion.
    (b) 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). OTS will state the effective date of 
your charter amendments with its approval of the conversion.
    (c) 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, your mutual charter terminates when the 
state issues a stock charter. You must promptly file a copy of your new 
state stock charter with OTS. If you were a federally chartered mutual 
savings association or savings bank and you convert to a state-
chartered stock savings association, you must also surrender your 
federal charter to OTS for cancellation promptly after the state issues 
your charter.
    (d) Your new or amended charter must require you to establish and 
maintain a liquidation account for eligible and supplemental eligible 
account holders under Sec. 563b.450.


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

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


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

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


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

    (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 Sec. 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


Sec. 563b.450  What is a liquidation account?

    (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.


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

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


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

    (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 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 on the supplemental eligibility

[[Page 43112]]

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 Sec. 563b.470 as depositors reduce 
or close their accounts.


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

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


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

    (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 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.


Sec. 563b.475  What is a liquidation?

    (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.


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

    No. You may use or apply any of your net worth accounts 
notwithstanding the existence of the liquidation account, except as 
provided in Sec. 563b.520.


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

    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


Sec. 563b.500  May I implement a stock option plan or management or 
employee stock benefit plan?

    (a) You may implement a stock option plan or management or employee 
stock benefit plan within 12 months after your conversion, if you meet 
all of the following requirements.
    (1) You disclose the plans in your proxy statement and offering 
circular and indicate in the offering circular that there will be a 
separate vote on the plans at least six months after the conversion.
    (2) You do not grant stock options under your stock option plan in 
excess of 10 percent of shares that you issued in the conversion.
    (3) You do not permit your management stock benefit plans, in the 
aggregate, to hold more than three percent of the shares that you 
issued in the conversion. However, if you have tangible capital of 10 
percent or more following the conversion, OTS may permit you to 
establish a management stock benefit plan that holds up to four percent 
of the shares that you issued in the conversion.
    (4) You do not permit your tax-qualified employee stock benefit 
plan(s) and your management stock benefit plans, in the aggregate, to 
hold more than 10 percent of the shares that you issued in the 
conversion. However, if you have tangible capital of 10 percent or more 
following the conversion, OTS may permit your tax-qualified employee 
stock benefit plan(s) and your management stock benefit plans, in the 
aggregate, to hold up to 12 percent of the shares that you issued in 
the conversion.
    (5) No individual receives more than 25 percent of the shares under 
any plan.
    (6) Your directors who are not your employees do not receive more 
than five percent of the shares of any plan individually, or 30 percent 
of the shares of any plan in the aggregate.
    (7) Your shareholders approve each plan 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. If you are a subsidiary of a mutual holding 
company, a majority of the total votes eligible to be cast (other than 
your parent mutual holding company) must approve each plan before you 
may establish or implement the plan.
    (8) 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 representation to the 
contrary.
    (9) You do not grant stock options at less than the market price at 
the time of grant.
    (10) You do not use stock issued at the time of conversion to fund 
management or employee stock benefit plans.
    (11) Your plan does not begin to vest earlier than one year after 
your shareholders approve the plan, and does not vest at a rate 
exceeding 20 percent a year.
    (12) Your plan permits accelerated vesting only for disability or 
death, or if you undergo a change of control.
    (13) 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 Sec. 565.4), is 
subject to OTS enforcement action, or receives a capital directive 
under Sec. 565.7.
    (14) You file a copy of the approved stock option plan or 
management or employee stock benefit plan with OTS and certify to OTS 
in writing that the

[[Page 43113]]

plan approved by the shareholders is the same plan that you filed with, 
and disclosed in, the proxy materials.
    (15) 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 stock option plans or management or employee stock 
benefit plans under this section.
    (c) If the plan is adopted more than one year following your 
conversion, any material amendments to the requirements in paragraph 
(a) of this section must be ratified by your shareholders.


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

    (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.


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

    (a) You may not repurchase your shares in the first year after the 
conversion except:
    (1) 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 Sec. 563b.515(a) and OTS does not disapprove your 
repurchase. OTS will not approve such repurchases unless the repurchase 
meets the standards in Sec. 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 made to all shareholders of your 
association.
    (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 Sec. 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 Sec. 563b.550. You must aggregate purchases of 
shares by the charitable organization with your repurchases.


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

    (a) To repurchase stock in the first year following conversion, 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 extraordinary circumstances necessitating the repurchases.
    (b) You must file your notice with your Regional Director, with a 
copy to the Chief Counsel's Office, Business Transactions Division, at 
least ten days before you begin your repurchase program.
    (c) You may not repurchase your shares if OTS disapproves your 
repurchase program. OTS will disapprove your repurchase program if:
    (1) Your repurchase program will adversely affect your financial 
condition;
    (2) You fail to submit sufficient information to evaluate your 
proposed repurchases;
    (3) You do not demonstrate extraordinary circumstances and a 
compelling and valid business purpose for the shares repurchases; or
    (4) Your repurchase program would be contrary to other applicable 
regulations.


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

    (a) You may declare or pay a dividend on your shares after you 
convert, unless the dividend will reduce your regulatory capital below 
the amount required for your liquidation account under Sec. 563b.450.
    (b) You must comply with all capital requirements under part 567 of 
this chapter after you declare or pay dividends.
    (c) You must comply with the capital distribution requirements 
under part 563, subpart E of this chapter.
    (d) You may not return any capital to purchasers in the first year 
following conversion. You may only return capital to purchasers after 
the first year, if the return of capital is consistent with your 
business plan.


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

    (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 these shares 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 Secs. 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

[[Page 43114]]

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 law or regulation; or
    (7) Does not prudently deploy your conversion proceeds.


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

    After you convert, you must:
    (a) Promptly register your shares under the Securities Exchange Act 
of 1934. 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


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

    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 approves the charitable organization as a tax-exempt 
charitable organization under the Internal Revenue Code.


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

    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.


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

    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. Except in 
extraordinary circumstances, OTS will not object on supervisory grounds 
if you contribute an aggregate amount of eight percent or less of the 
conversion shares or proceeds.


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

    The charitable organization's charter and bylaws (or trust 
agreement), gift instrument, and operating plan must provide that:
    (a) The charitable organization's purpose is to serve and make 
grants in your local community;
    (b) As long as the charitable organization controls shares, you 
must consider those shares as voted 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.


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

    (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 Sec. 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.


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

    (a) The charitable organization's charter and bylaws (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 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) OTS may review the compensation paid to charitable organization 
directors

[[Page 43115]]

(or trustees) who are not your directors, employees, or affiliates.
    (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, 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


Sec. 563b.600  What does this subpart do?

    (a) You must comply with this subpart to engage in a voluntary 
supervisory conversion. This subpart applies to all voluntary 
supervisory conversions under sections 5(i)(1), (i)(2), and (p) of 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.


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

    (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 acquirer, 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.


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

    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


Sec. 563b.625  When is a SAIF-insured savings association eligible for 
a voluntary supervisory conversion?

    (a)(1) You may be eligible to convert under this subpart if:
    (i) You are a SAIF-insured savings association;
    (ii)You are significantly undercapitalized (or you are 
undercapitalized and a standard conversion that would make you 
adequately capitalized is not feasible); and
    (iii) You will be a viable entity following the conversion.
    (2) You will be a viable entity following the conversion if you 
satisfy all of the following.
    (i) You will be adequately capitalized as a result of the 
conversion.
    (ii) You, your proposed conversion, and your acquirer(s) comply 
with applicable supervisory policies.
    (iii) The transaction is in your best interest, and the best 
interest of the federal deposit insurance funds, and the public.
    (iv) The transaction will not injure or be detrimental to you, the 
federal deposit insurance funds, or the public interest.
    (b) If you are a SAIF-insured savings association, you may be 
eligible to convert under this subpart and section 5(p) of the Home 
Owners' Loan Act, 12 U.S.C. 1464(p) if one of the following occurs:
    (1) Severe financial conditions threaten your stability and a 
conversion is likely to improve your financial condition;
    (2) FDIC will assist you under section 13 of the Federal Deposit 
Insurance Act, 12 U.S.C. 1823; or
    (3) You are in receivership and a conversion will assist you.


Sec. 563b.630  When is a BIF-insured savings association eligible for a 
voluntary supervisory conversion?

    If you are a BIF-insured savings association you may be eligible to 
convert 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.

Plan of Supervisory Conversion


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

    A majority of your board of directors must adopt a plan of 
voluntary supervisory conversion. You must include all of the following 
information in your plan of voluntary supervisory conversion.
    (a) Your name and address.
    (b) The name, address, date and place of birth, and social security 
number of each proposed purchaser of conversion shares and a 
description of that purchaser's relationship to you.
    (c) The title, per-unit par value, number, and per-unit and 
aggregate offering price of shares that you will issue.
    (d) The number and percentage of shares that each investor will 
purchase.
    (e) The aggregate number and percentage of shares that each 
director, officer, and any affiliates or associates of the director or 
officer will purchase.
    (f) A description of any liquidation account.
    (g) Certified copies of all resolutions of your board of directors 
relating to the conversion.

Voluntary Supervisory Conversion Application


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

    You must submit a voluntary supervisory conversion application to 
OTS under this subpart. You must include all of the following 
information and documents in your conversion application.
    (a) Eligibility. (1) Evidence establishing that you meet the 
eligibility requirements under Secs. 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 Sec. 563b.650.
    (c) Business plan. A business plan that complies with 
Sec. 563b.105, where required by OTS.
    (d) Financial data. (1) Your most recent audited financial 
statements and Thrift Financial Report. You must

[[Page 43116]]

explain how your current capital levels make you eligible to engage in 
a voluntary supervisory conversion under Secs. 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.
    (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 12 CFR parts 563b and 563g.
    (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, and 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


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

    OTS will generally approve your application to engage in a 
voluntary supervisory conversion unless it determines:
    (a) You do not meet the eligibility requirements for a voluntary 
supervisory conversion under Secs. 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 Federal deposit insurance funds or is contrary to 
the public interest;
    (c) You or your acquirer, or the controlling parties or directors 
and officers of you or your acquirer, 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.


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

    (a) OTS will condition approval of a voluntary supervisory 
conversion application on all of the following.
    (1) You must complete the conversion stock sale within three months 
after
    OTS approves your application. OTS may grant an extension for good 
cause.
    (2) You must comply with all filing requirements of Parts 563b and 
563g of this chapter.
    (3) You must submit an opinion of independent legal counsel 
indicating that the sale of your shares complies with all applicable 
state securities law requirements.
    (4) You must comply with all applicable laws, rules, and 
regulations.
    (5) You must satisfy any other requirements or conditions OTS may 
impose.
    (b) OTS may condition approval of a voluntary supervisory 
conversion application on either of the following:
    (1) You must satisfy any conditions and restrictions OTS imposes to 
prevent unsafe or unsound practices, to protect the deposit insurance 
funds 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 acquirer, and controlling parties, directors and officers of you 
or your acquirer; or
    (2) You must infuse a larger amount of capital, if necessary for 
safety and soundness reasons.

Offers and Sales of Stock


Sec. 563b.680  How do I sell my shares?

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

Post-Conversion


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

    For three years after the completion of a voluntary supervisory 
conversion, neither you nor any of your controlling shareholder(s) may 
acquire shares from minority shareholders without OTS's prior approval.

PART 575--MUTUAL HOLDING COMPANIES

    2. The authority citation for part 575 continues to read as 
follows:

    Authority: 12 U.S.C. 1462, 1462a, 1463, 1464, 1467a, 1828, 2901.


Sec. 575.2  [Amended]

    3. Section 575.2(a) is amended by removing the phrase ``12 CFR 
563b.2'', and by adding in lieu thereof the phrase ``563b.25 of this 
chapter''.


Sec. 575.4  [Amended]

    4. Section 575.4(c)(2) is amended by removing the phrase 
``economical home financing'', and by adding in lieu thereof the phrase 
``the credit and lending needs of your proposed market area''.
    5. Section 575.7 is amended by:
    a. Adding a new first sentence to paragraph (a);
    b. Removing, in paragraph (a)(7), the phrase ``Sec. 563b.11 of this 
chapter'', and by adding in lieu thereof the phrase ``Sec. 563b.200(c) 
of this chapter'';
    c. Removing, in paragraph (b)(1), the phrase `` Sec. 563b.7'' where 
it appears in the first and second sentences, and by adding in lieu of 
both phrases the phrase ``part 563b of this chapter'';
    d. Removing, in paragraph (b)(2), the phrase ``Sec. 563b.7(c)'', 
and by adding in lieu thereof the phrase ``Sec. 563b.330''.
    e. Removing, in paragraph (d)(6)(i), the phrase ``12 CFR 
563b.102'', and by adding in lieu thereof the phrase ``Form OC'';

[[Page 43117]]

    f. Adding new paragraphs (d)(7) and (d)(8);
    g. Removing, in paragraph (e), the phrase ``Secs. 563b.3 through 
563b.8 of this chapter'', and adding in lieu thereof the phrase ``12 
CFR part 563b''.
    The additions read as follows:


Sec. 575.7  Issuances of stock by savings association subsidiaries of 
mutual holding companies.

    (a) Approval requirements. Before any stock issuance, a savings 
association subsidiary of a mutual holding company must submit a 
business plan in accordance with the provisions of Secs. 563b.105 
through 563b.115 of this chapter. A savings association subsidiary may 
not submit a notice to reorganize if OTS objects to the business plan.
* * * * *
    (d) * * *
    (7) Notwithstanding the restrictions in paragraph (d)(6)(ii) of 
this section, a savings association subsidiary of a mutual holding 
company may issue stock as part of a stock benefit plan to any insider, 
associate of an insider, tax qualified or non-tax qualified employee 
stock benefit plan of the mutual holding company or subsidiary of the 
mutual holding company, if written notice is made to the OTS at least 
30 days prior to the stock issuance and OTS does not object to the 
subsequent stock issuance.
    (8) You may contribute a reasonable amount of shares or proceeds to 
a charitable organization that complies with Secs. 563b.550 to 563b.575 
of this chapter. In the case of a mutual holding company stock issuance 
no more than two percent of the savings association or subsidiary 
holding company stock may be contributed to the charitable 
organization.
* * * * *
    6. Section 575.8 is amended by:
    a. Removing, in paragraph (a) introductory text, the phrase 
``Sec. 563b.27(a)'', and by adding in lieu thereof the phrase 
``Sec. 563b.650'';
    b. Revising paragraph (a)(7);
    c. Removing paragraph (a)(8);
    d. Redesignating paragraphs (a)(9) through (a)(21) as paragraphs 
(a)(8) through (a)(20), respectively;
    e. Amending newly designated paragraph (a)(8) by removing the 
phrase ``12 CFR 563b.102'', and by adding in lieu thereof the phrase 
``Form OC'';
    f. Adding new paragraph (b)(5); and
    g. Adding a new paragraph (b)(6).
    The additions and revisions read as follows:


Sec. 575.8  Contents of Stock Issuance Plans.

    (a) * * *
    (7)(i) When you issue common or preferred stock, your officers, 
directors, and their associates may not purchase, in the aggregate, 
more than the following percentage of your total common or preferred 
stock offering, respectively, held by persons other than the mutual 
holding company:

------------------------------------------------------------------------
                                                            Officer and
                                                             director
                    Institution size                         purchases
                                                             (percent)
------------------------------------------------------------------------
$50,000,000 or less.....................................              35
$50,000,001-100,000,000.................................              34
$100,000,001-150,000,000................................              33
$150,000,001-200,000,000................................              32
$200,000,001-250,000,000................................              31
$250,000,001-300,000,000................................              30
$300,000,001-350,000,000................................              29
$350,000,001-400,000,000................................              28
$400,000,001-450,000,000................................              27
$450,000,001-500,000,000................................              26
Over $500,000,000.......................................              25
------------------------------------------------------------------------

    (ii) The purchase limitations in this section do not apply to 
shares held in tax-qualified or non-tax-qualified employee stock 
benefit plans that are attributable to your officers, directors, and 
their associates.
* * * * *
    (b) * * *
    (5) Provide that the association may adopt a stock benefit plan at 
the time of issuance if purchasers are given the opportunity to vote 
for or against the plan on the stock order form, and provided no shares 
may be granted for six months after the stock issuance.
    (6) Provide that stock benefit plans for insiders may issue 49 
percent of the amount of stock that is available under a plan subject 
to Sec. 563b.500, provided that the mutual holding company holds more 
than 50 percent of the savings association's total outstanding common 
stock.
    7.Section 575.11 is amended by:
    a. Removing, in paragraphs (c)(1) and (c)(2) the phrases 
``Sec. 563b.3(g)(1)'' or ``Sec. 563b.3(g)(3)'' wherever they appear, 
and by adding in lieu thereof the phrase ``Sec. 563b.510'';
    b. Adding, in paragraph (e), after the phrase ``stock issuance'' 
the phrase ``, and OTS does not object to the subsequent stock 
issuance''; and
    c. Adding new paragraph (i).
    The addition reads as follows:


Sec. 575.11  Operating restrictions.

* * * * *
    (i) Separate vote for charitable organization contribution. In a 
mutual holding company stock issuance, a separate vote of a majority of 
the outstanding shares of common stock held by stockholders other than 
the mutual holding company or subsidiary holding company must approve 
any charitable organization contribution.
    8. Section 575.13 is amended by removing, in paragraph (c)(2), the 
phrase ``Sec. 563b.8 of this chapter'', and by adding in lieu thereof 
the phrase ``Sec. 563b.150 of this chapter'', and by revising paragraph 
(a)(1) to read as follows:


Sec. 575.13  Procedural requirements.

    (a) Proxies and proxy statements--(1) Solicitation of proxies. The 
provisions of Secs. 563b.225 to 563b.290 and 563b.25 to 563b.35 of this 
chapter shall apply to all solicitations of proxies by any person in 
connection with any membership vote required by this part. OTS must 
authorize all proxy materials used in connection with such 
solicitations. Proxy materials must be in the form and contain the 
information specified in Secs. 563b.255 and 563b.270 of this chapter 
and Form PS, to the extent such information is relevant to the action 
that members are being asked to approve, with such additions, 
deletions, and other modifications as are necessary or appropriate 
under the disclosure standard set forth in Sec. 563b.280 of this 
chapter. File proxies and proxy statements in accordance with 
Sec. 563b.155 of this chapter and address them to the Business 
Transactions Division, Chief Counsel's Office, Office of Thrift 
Supervision, at the address set forth in Sec. 516.1(a) of this chapter. 
For purposes of this paragraph (a)(1) the term conversion as it appears 
in the provisions of part 563b of this chapter cited above in this 
paragraph (a)(1) refers to the reorganization or the stock issuance as 
appropriate.
* * * * *

    Dated: June 20, 2000.

    By the Office of Thrift Supervision.
Ellen Seidman,
Director.

Appendix A--Form AC--Application for Conversion

[Not to be codified in the Code of Federal Regulations]

Office of Thrift Supervision

Form AC--Application for Conversion

Paperwork Reduction Act Statement

    The Office of Thrift Supervision will use this information to 
provide OTS with all necessary information to evaluate the 
application for conversion to meet all agency safety and soundness 
requirements. See Part 563b.
    Public reporting burden for this collection of information is 
estimated to average 299 hours if not creating a foundation and 309 
hours if creating a foundation, per response, including the time for 
reviewing instructions and completing and reviewing the collection 
of information. If a valid OMB Control Number does not appear on 
this form, you

[[Page 43118]]

are not required to complete this form. Send comments regarding this 
burden estimate or any other aspect of the collection of 
information, including suggestions for reducing this burden, the 
Business Transactions Division, Office of Thrift Supervision, 1700 G 
Street, NW, Washington, DC 20552; and to the Office of Management 
and Budget, Paperwork Reduction Project (1550-0014), Washington, DC 
20503.

Form AC--Application for Conversion

Office of Thrift Supervision 1700 G Street, NW., Washington, DC 
20552

Application for Conversion

----------------------------------------------------------------------
(Name of Applicant in charter)  (Docket No.)

----------------------------------------------------------------------
(Street address of Applicant)

----------------------------------------------------------------------
(City, State and Zip Code)

Index to Items

Item 1. Form of Application
Item 2. Plan of Conversion
Item 3. Proxy Statement and Offering Circular
Item 4. Form of Proxy
Item 5. Additional Information Required for Conversion with a 
Charitable Contribution
Item 6. Sequence and Timing of the Plan
Item 7. Record Dates
Item 8. Expenses Incident to the Conversion
Item 9. Indemnification
Item 10. Federally Chartered Stock Savings Associations Exhibits

General Instructions

A. Use of Form AC

    You must use Form AC to seek OTS approval of a conversion from 
the mutual to the stock form of organization under 12 CFR part 563b. 
You must indicate on the cover if you are filing using Regulation S-
B.

B. Application of Rules and Regulations

    You should follow the general requirements in this section when 
you prepare and file this Form AC and all other forms required under 
12 CFR part 563b.
    (1) Method of preparation. In your applications, you must 
furnish information in item-and-answer form, and must include the 
captions on the form. You may omit the text of items and 
instructions. In a proxy statement or offering circular, you may 
present the required information in any order and omit the captions 
and text of all items and instruction. You must not present the 
information in a way that obscures any of the required information 
or other information necessary to keep the required information from 
being incomplete or misleading. Where an item requires you to 
provide information in tabular form, you must provide the 
information substantially in the tabular form specified in the item.
    You must set out all information in the plan of conversion, 
proxy statement or offering circular under appropriate headings that 
reasonably indicate the principal subject matter. Except for 
financial statements and other tabular data, you must present all 
information in reasonably short paragraphs or sections. You must set 
out financial statements, including interim financial statements, in 
comparative form, and must include all notes and the accountants' 
certificate or certificates. You must follow 12 CFR 563c.1, which 
governs the certification, form, and content of financial 
statements, including the basis of consolidation.
    In a proxy statement or offering circular, you must present all 
information in a clearly understandable format. The reader should 
not have to refer to the OTS form or 12 CFR part 563b to understand 
the document. You must include a reasonably detailed table of 
contents in each proxy statement and offering circular.
    In every application, you must include a cross-reference sheet 
showing where the responses to each item of the appropriate form are 
located in the proxy statement and offering circular. In the cross-
reference sheet, you must state where any item is inapplicable, or 
where you omitted an answer because it was no.
    (2) Additional information. In addition to the information 
required under 12 CFR part 563b, you must include any material 
information necessary to make the required statements, in the light 
of the circumstances under which you have made them, not misleading.
    (3) Information unknown or not reasonably available. You must 
provide information to the extent you know the information or it is 
reasonably available to you. You may omit any required information 
that you do not know or is not reasonably available to you. You must 
explain why such information is not known or reasonably available to 
you. Information is not reasonably available if obtaining it would 
involve an unreasonable effort or expense, or if it rests peculiarly 
within the knowledge of another person who is not your affiliate. 
You must provide all information on the subject that you possess or 
can acquire without unreasonable effort or expense, together with 
the sources of the information.
    (4) Incorporation by reference. If an item in an application 
calls for certain information and the proxy statement or offering 
circular does not require you to include it, you may incorporate the 
information by reference from any part of the application, including 
exhibits, in the answer, or partial answer, to the item. In a proxy 
statement or offering circular, you may not incorporate information 
by reference unless you attach, summarize, or outline the document 
containing the information. To summarize or outline a document, you 
must make a brief statement of the most important provisions of the 
document. In addition, you may incorporate by reference particular 
items, sections, or paragraphs of any exhibit, and your summary or 
outline may be qualified in its entirety by the reference. In an 
offering circular, you may incorporate by reference information from 
a proxy statement that you have delivered. You do not need to 
summarize or outline the information. If you incorporate material by 
reference you must clearly identify the material in the reference. 
You must expressly state that the specified matter is incorporated 
by reference at the particular place in the application where the 
information is required. You may not incorporate information by 
reference if the incorporation would render the statement 
incomplete, unclear or confusing.
    (5) Signatures Required. The following individuals must manually 
sign at least two copies of every application and every amendment to 
an application that you file with OTS:
    (a) Your duly authorized representative.
    (b) Your principal executive officer.
    (c) Your principal financial officer.
    (d) Your principal accounting officer.
    (e) At least two-thirds of your directors.
    (6) Consents of persons about to become directors. If you 
indicate in a proxy statement or offering circular that a person is 
about to become a director, and that person has not signed your 
application, you must file that person's written consent to the 
application with the appropriate form.
    (7) Consents of experts. If you indicate that an accountant, 
attorney, investment banker, appraiser, or other professional 
prepared, reviewed, passed upon, or certified any part of an 
application, or any report or valuation used in connection with the 
application, you must file the written consent of that person to use 
their name in connection with the stated action with the 
application. If you quote or summarize any portion of a report of an 
expert in any filing under 12 CFR part 563b, you must file a written 
consent of the expert that expressly states that the expert consents 
to the quotation or summarization. All written consents must be 
dated and signed manually by the expert. You must file a list of 
consents with the application. If the expert's report contains his 
or her consent, you must refer to the report containing the consent 
in your list. You must file a new consent for any accounting 
amendment.
    (8) Date of filing. Your documents are filed as of the date the 
last OTS office where they are filed receives them, and you paid any 
applicable fee.
    (9) Amendments. You must file all amendments to any application 
with an appropriate facing sheet. You must number your amendments 
consecutively in the order in which you file them. You must comply 
with all regulations applicable to the original application.

Item 1. Form of Application

    You must include the following form in your application for 
approval of the plan of conversion. You must set out the names and 
titles of the officers and directors below their signatures:
    The undersigned applies for approval to convert into a stock 
association. We have attached a statement of the proposed plan of 
conversion and other information and exhibits as required by 12 CFR 
Part 563b.
    In submitting this application, we understand and agree that, if 
OTS requires further examinations or appraisals, OTS will conduct or 
approve the examination or appraisal at our expense. We will pay the 
costs as computed by OTS.
    At least two-thirds of the board of directors approved the 
application. By filing this application, the undersigned officers 
and directors severally represent that: (1) Each person read this 
application; (2) Each person

[[Page 43119]]

adequately examined and investigated this application and concluded 
that this application complies with 12 CFR Part 563b.

Attest:

----------------------------------------------------------------------
(Duly Authorized Representative) (Principal Executive Officer)

----------------------------------------------------------------------
(Principal Financial Officer)

----------------------------------------------------------------------
(Principal Accounting Officer)

----------------------------------------------------------------------
(Director)

----------------------------------------------------------------------
(Director)

----------------------------------------------------------------------
(Director)

----------------------------------------------------------------------
(Director)

----------------------------------------------------------------------
(Signatures of at least two-thirds of the Board of Directors)

Item 2. Plan of Conversion

    You must furnish the complete written plan that your board of 
directors adopted for the conversion to the stock form. You must 
prepare the plan of conversion in accordance 12 CFR 563b.320 through 
563b.395. OTS will base its approval on the terms of this plan. You 
must distribute the approved plan as an attachment to the proxy 
statement and the offering circular.

Item 3. Proxy Statement and Offering Circular

    You must furnish preliminary copies of the proxy statement and 
offering circular. You must prepare the proxy statement and offering 
circular in accordance with Forms PS and OC, respectively.

Item 4. Form of Proxy

    You must furnish preliminary copies of the form of proxy that 
your management will distribute to your members.

Item 5. Additional Information Required for Conversion With a 
Charitable Contribution

    If your conversion application includes a charitable 
contribution, you must include the following information in your 
application:
    (a) Your reasons for concluding that the proposed contribution 
is reasonable.
    (b) The impact of the proposed contribution on the appraised 
valuation.
    (c) A description of the charitable organization.
    (d) The exhibits required under Exhibit 9.

Item 6. Sequence and Timing of the Plan

    You must describe the expected chronological order of the events 
for your conversion. Begin with the filing of this application and 
end with the sale of all the stock under the plan. Estimate the 
timing of any requisite approvals by state or other regulators other 
than OTS. Indicate the proposed timing of all aspects of the 
subscription offering. If a selling agent will assist in the 
community offering, or if an underwriter will offer shares in the 
public offering, indicate the proposed timing of all aspects of the 
community offering and public offering.

Item 7. Record Dates

    If the eligibility record date in your plan of conversion is 
more than one year before your board of directors adopted the plan 
of conversion, you must state why you selected the earlier date.
    You must indicate what circumstances may require you to use a 
supplemental eligibility record date.

Item 8. Expenses Incident to the Conversion

    You must estimate the expense of your conversion in the tabular 
form indicated below:

Legal...........................................................   $
Postage and Mailing.............................................  ......
Printing........................................................  ......
Escrow or Agent Fees............................................  ......
Underwriting Fees...............................................  ......
Appraisal Fees..................................................  ......
Transfer Agent Fees.............................................  ......
Auditing and Accounting.........................................  ......
Proxy Solicitation Fees.........................................  ......
Advertising.....................................................  ......
Other Expenses..................................................  ......
                                                                 -------
  Total.........................................................  ......
 

    Instructions. 1. Expenses that you incur in the conversion must 
be reasonable.
    2. You may exclude salaries and wages of regular employees and 
officers, if you state that you excluded these items. You must state 
solicitation costs by specially engaged employees or paid solicitors 
under paragraph (b) of item 3 of Form PS under ``Proxy Solicitation 
Fees'' in this item.

    3. You may not include any category of expense exceeding $10,000 
in ``Other Expenses.'' If an expense exceeds $10,000 and is not 
specified above, you must itemize the expense under an appropriate 
category.
    4. If your management does not conduct the solicitation, you 
must provide the information under ``Proxy Solicitation Fees'' for 
the cost of the solicitation.

Item 9. Indemnification

    If you will insure or indemnify any underwriter, appraiser, 
lawyer, accountant or expert, or director or officer against any 
liability which he or she may incur in his or her capacity under any 
charter provisions, bylaw, contract, arrangement, statute, or 
regulation, you must state the general effect of the charter 
provision, bylaw, contract, arrangement or regulation.

Item 10. Federally Chartered Stock Savings Associations

    You must state whether you are applying to amend your charter 
and bylaws to comply with 12 CFR part 552.

Exhibits

    You must attach the following exhibits to this Form.

Exhibit 1. Resolution of Board of Directors

    You must include a certified copy or copies of your board of 
directors' resolution or resolutions: (1) Adopting the plan of 
conversion; and (2) authorizing this application. Two-thirds of your 
board of directors must approve the plan of conversion and authorize 
this application.

Exhibit 2. Copies of Documents, Contracts and Agreements

    You must furnish the following documents, contracts, and 
agreements.
    (a) Proposed certificates for shares.
    (b) Proposed order forms with respect to the subscription 
rights.
    (c) Proposed charter (including a liquidation account provision) 
and bylaws.
    (d) Any proposed stock option plan, form of stock option 
agreement, and management or employee stock benefit plan.
    (e) Any proposed management employment contracts.
    (f) Any contract described in response to item 6 of Form PS.
    (g) Contracts or agreements with paid solicitors described in 
response to item 3(b) of Form PS.
    (h) Any material loan agreements relating to your borrowing 
other than from a Federal Home Loan Bank and other than subordinated 
debt securities approved by OTS.
    (i) Any appraisal agreement or proposed agreement, underwriting 
contract, agreement among underwriters, or selling agent agreement.
    (j) Any required undertaking or affidavits by officers or 
directors purchasing shares in the conversion stating that they are 
acting independently.
    (k) Any documents referred to in the answer to item 9 of Form 
AC.
    (l) Any trustee agreements or indentures.
    (m) Any agreements for the making of markets or the listing on 
exchanges of your conversion stock.
    (n) Proposed marketing materials.
    If you furnish any document, contract, or agreement in draft 
form under this exhibit, you must furnish the final form immediately 
after the meeting of your members to consider the plan of 
conversion. You may provide documents required by subsection (i) 
above, that by their nature cannot be practically expected until a 
later time, in substantially final form.

Exhibit 3. Opinion of Counsel

    You must furnish an opinion of counsel discussing each of the 
following matters:
    (a) The legal sufficiency of your proposed certificates and 
order forms for any shares.
    (b) State law requirements that apply to the plan of conversion. 
The opinion must cite to applicable state law and address whether 
the plan will fulfill the requirements.
    (c) The legal sufficiency of your bylaws.
    (d) The type and extent of each class of voting rights after 
conversion. The opinion must discuss any state law that requires you 
to provide savings account holders or borrowers with voting rights.
    (e) A certification or statement that the proposed charter and 
bylaws conform to 12 CFR part 552 of this chapter.
    (f) The legal sufficiency of your marketing materials.
    You must discuss the matters listed in subdivisions (b), (c) and 
(d) of this Exhibit only if you are converting to a state-chartered 
stock association.

[[Page 43120]]

Exhibit 4. Federal and State Tax Opinions or Ruling

    (a) You must furnish an opinion of your tax advisor or an 
Internal Revenue Service ruling on the federal income tax 
consequences of the plan of conversion. The opinion or ruling must 
address the tax consequences to you and to the various account 
holders who receive nontransferable subscription rights to purchase 
shares.

    Instruction. OTS may require you to obtain a ruling from the 
Internal Revenue Service if the IRS has not issued a favorable 
ruling to plans of conversion that are substantially similar to your 
plan. OTS also may require you to obtain a ruling if your plan of 
conversion contains novel provisions or raises questions with 
federal income tax consequences.

    (b) You must furnish an opinion of your tax advisor or, if 
applicable, a ruling from the appropriate state taxing authority on 
any tax consequences of the plan of conversion under the laws of the 
state where you will be located. The opinion must address the tax 
consequences to you and to your eligible account holders.

Exhibit 5. Valuation Materials

    You must furnish the materials required under 12 CFR 563b.200(b) 
regarding the valuation of your shares. You are not required to file 
the materials if you will not begin to offer shares before your 
members' meeting to vote on the plan of conversion.

Exhibit 6. Notice to Members

    You must furnish evidence that you have notified your members as 
required by 12 CFR 563b.135 and 563b.180.

Exhibit 7. Other Materials

    (a) If you do not provide information required by an appropriate 
form because you do not know the information or the information is 
not reasonably available, you must:
    (1) show that you will incur unreasonable effort or expense to 
obtain the information; or
    (2) indicate that you have no affiliation with the person who 
has the information, state that you have requested the person to 
provide the information, and indicate the result of that request.
    (b) You must furnish all required consents.
    (c) If anyone has signed an application or any amendment to an 
application using a power of attorney, you must furnish four copies 
of the power of attorney. Two copies must be manually signed.
    (d) You must furnish the cross-reference sheet.
    (e) If you request a waiver under 12 CFR 563b.5(c), you must 
furnish the materials required by that section.

Exhibit 8. Business Plans

    (a) You must furnish a consolidated business plan as required by 
12 CFR 563b.105. You must detail how you will use the capital that 
you acquire in the conversion. You should not project stock 
repurchases, returns of capital or payment of extraordinary 
dividends in your business plan. OTS views a return of capital to 
shareholders as a material deviation from the business plan that 
requires the prior written approval of the Regional Director.
    (b) You must follow 12 CFR 563b.160 if you wish OTS to deem any 
portion of your business plan confidential.

Exhibit 9. Conversion Application that Includes a Charitable 
Organization

    If your conversion includes a contribution to a charitable 
organization you must provide:
    (a) The current and proposed charter and bylaws (or trust 
agreement) for the charitable organization.
    (b) The proposed gift instrument.
    (c) A three year operating plan for the charitable organization, 
including the following:
    (1) Pro-forma financial statements, including a balance sheet 
and income statement.
    (2) Plans and expenses for any office space, employees, office 
equipment, supplies, and other items.
    (3) A description and the estimated annual value of any 
contributed office space, personnel, furniture, equipment, and 
supplies and the name of the organization that will make the 
contribution.
    (4) Any director, officer, and employee requirements and job 
descriptions.
    (5) The terms of employment and any expected compensation for 
the directors (or trustees), officers, and employees.
    (6) charitable causes that the charitable organization will 
support, including their location and a description of how the 
activities will aid the local community.
    (7) Plans, policies, and procedures for soliciting and accepting 
grant applications.
    (8) Decision standards for grant approval.
    (9) The anticipated number and dollar amount of grants the 
charitable organization will make each year for the three years 
after it is established.
    (10) Projected sources of revenues, including whether the 
operations and grant activities will be funded by dividends, stock 
sales, or additional contributions.
    (11) An explanation of how the charitable organization will 
select directors (or trustees) and how much experience the directors 
(or trustees) will have with local community charitable 
organizations and grant making.
    (d) A conflicts of interest policy for the charitable 
organization that prohibits grants to your officers, directors, and 
employees, your affiliates' officers, directors, and employees, and 
members of their immediate families.
    (e) A legal opinion from independent counsel discussing whether 
the charitable organization's proposed charter and bylaws (or trust 
agreement), including the required pro-rata voting provision 
discussed in 12 CFR 563b.575, comply with applicable state law.
    (f) A tax opinion from an independent accountant or independent 
tax counsel discussing whether the proposed contribution and any 
other contributions during the same year are deductible under 
federal and state law. The tax opinion must address deductibility 
for the year that you will make the contribution and for a five-year 
carry forward period.

OTS Form 1680, June 2000

Appendix B--Form PS--Proxy Statement

[Not to be codified in the Code of Federal Regulations]

Office of Thrift Supervision

Form PS--Proxy Statement

Paperwork Reduction Act Statement

    The Office of Thrift Supervision will use this information to 
provide mutual members with information necessary for voting on the 
transaction. See Part 563b.
    Public reporting burden for this collection of information is 
estimated to average 50 hours, per response, including the time for 
reviewing instructions and completing and reviewing the collection 
of information. If a valid OMB Control Number does not appear on 
this form, you are not required to complete this form. Send comments 
regarding this burden estimate or any other aspect of the collection 
of information, including suggestions for reducing this burden, the 
Business Transactions Division, Office of Thrift Supervision, 1700 G 
Street, NW., Washington, DC 20552; and to the Office of Management 
and Budget, Paperwork Reduction Project (1550-0014), Washington, DC 
20503.

Form PS--Proxy Statement

    Office of Thrift Supervision 1700 G Street, NW., Washington, DC 
20552

Proxy Statement

----------------------------------------------------------------------
(Name of Applicant in charter)--(Docket No.)

----------------------------------------------------------------------
(Street address of Applicant)

----------------------------------------------------------------------
(City, State and Zip Code)

Index to Items

Item 1. Notice of meeting
Item 2. Revocability of proxy
Item 3. Persons making the solicitation
Item 4. Voting rights and vote required for approval
Item 5. Directors and executive officers
Item 6. Management compensation
Item 7. Business
Item 8. Description of conversion
Item 9. Description of stock
Item 10. Capitalization
Item 11. Use of new capital
Item 12. New charter, bylaws or other documents
Item 13. Other matters
Item 14. Financial statements
Item 15. Consents of experts and reports
Item 16. Attachments

General Information

    If OTS requests information on your directors, officers, or 
other persons holding specified positions or relationships during a 
specified period, you must give the information for every person who 
held the positions or relationships any time during the period. You 
do not have to include information for any portion of the period 
when a person did not hold any position or relationship. You must 
state, however, that you did not include this information.

[[Page 43121]]

Item 1. Notice of Meeting

    You must include the following information on the cover page of 
your proxy statement:
    (a) notice of the members' meeting to vote on the conversion;
    (b) the meeting date, time and place;
    (c) a brief description of each matter that will be voted at the 
meeting;
    (d) the date of record for determining which members are 
entitled to vote at the meeting;
    (e) the date of the proxy statement; and (f) your mailing 
address, zip code, and telephone number.

Item 2. Revocability of Proxy

    (a) You must state that a member may revoke his or her proxy 
before it is exercised.
    (b) You must briefly describe the procedures a member must 
follow to revoke his or her proxy.
    (c) You must describe any charter provision, bylaw, or federal 
or state law that limits voting by proxy.
    (d) You must state that the proxy is solicited for the meeting 
and any adjournment of the meeting, and that you will not vote the 
proxy at any other meeting.

Item 3. Persons Making the Solicitation

    (a) You must state whether your management is soliciting the 
proxy. If any director informs you in writing that he or she intends 
to oppose any action, you must name the director and indicate the 
action he or she intends to oppose.
    (b) You must describe the method that you will use to solicit 
proxies, unless you solicit by mail. If specially engaged employees 
or paid solicitors will solicit proxies, you must state the material 
features of any contract or arrangement and must identify the 
parties.
    (c) If your management is not soliciting the proxies, you must 
name the persons on whose behalf the solicitation is made. You do 
not have to respond to items 5 through 16 for such solicitations, 
but must comply with Sec. 563b.285 on false and misleading 
statements and other prohibited matters.

Item 4. Voting Rights and Vote Required for Approval

    (a) You must describe briefly:
    (1) the voting rights of each class of your members,
    (2) the approximate total number of votes entitled to be cast at 
the meeting,
    (3) the approximate number of votes to which each class is 
entitled, and
    (4) the voting rights of beneficiaries of accounts held in a 
fiduciary capacity, such as IRA accounts.
    (b) You must give the record date for members entitled to vote 
at the meeting.
    (c) You must state the vote required for approval of each matter 
that you will submit to a vote of members.
    (d) You may not use previously executed proxies to vote on the 
conversion.

Item 5. Directors and Executive Officers

    (a) You must furnish the information on directors and executive 
officers and certain relationships and related transactions required 
in items 401 and 404 of Regulation S-K, 17 CFR 229.401 and 404, and 
item 6 of Regulation 14A, 17 CFR 240.14a-101. Unless the context 
otherwise requires, the words ``registrant'' and ``issuer'' in those 
regulations refer to you and the word ``Commission'' refers to OTS.
    (b) If your conversion application includes a charitable 
contribution, you must disclose:
    (1) The proposed number of directors (or trustees) and officers 
of the charitable organization.
    (2) The name and background of each person proposed as a 
director (or trustee) or officer of the charitable organization.
    (3) The position, if any, that each proposed director (or 
trustee) and officer holds with you.
    (c) You must state whether anyone will exercise control through 
the use of proxies and describe the nature of the control.

Item 6. Management Compensation

    You must furnish the information on executive compensation 
required in item 402 of Regulation S-K, 17 CFR 229.402, and item 7 
of Regulation 14A, 17 CFR 240.14a-101. Unless the context otherwise 
requires, the words ``registrant'' and ``issuer'' in those 
regulations refer to you and the word ``Commission'' refers to OTS.

Item 7. Business

    (a) Narrative description of business. (1) You must discuss 
briefly your organizational history, including the year of 
organization, the identity of the chartering authority, and any 
material charter conversions.
    (2) You must describe the business that you and your 
subsidiaries conduct and intend to conduct. You must describe how 
your business and any predecessor(s) business developed over the 
past five years. If you have been engaged in business less than five 
years, you must provide information from when you began operations. 
You must disclose this information for earlier periods if the 
information is material to understand how your business developed. 
You must discuss material changes in the way you conduct business.

    Instruction. If you are filing under Regulation S-B, you must 
include audited comparative balance sheets for the two most recent 
fiscal years.

    (3) You must describe your historical lending practices, 
including the average remaining term to maturity of your portfolio 
of mortgage loans. You must state your plans for lending. You must 
address whether you will offer real estate or other types of loans, 
the nature of security you will receive, the terms of loans you will 
offer, whether the loans will carry fixed or variable interest 
rates, and whether you will retain the loans or resell them in 
secondary mortgage markets. You must identify the magnitude of 
various activities.
    (4) You must explain whether any material acquisitions have had 
or will have significant impact on you, and the nature of the 
impact.
    (b) Selected financial data. You must furnish a summary of your 
selected financial data. You must provide this information in 
columns that permit the comparison of data in each of the last five 
fiscal years. You must provide data for any additional fiscal years, 
if the data is necessary to keep the summary from being misleading.

    Instructions. 1. The purpose of this summary is to supply 
selected data highlighting significant trends in your financial 
condition and results of operations in a convenient and readable 
format.

    2. You must include the following items in the summary: Total 
interest income; total interest expense; income (loss) from 
continuing operations; net income; total loans; total investments; 
total assets; total deposits; total borrowings; total retained 
earnings; total shareholders' equity; total regulatory capital; and 
total number of customer service facilities, indicating the number 
which provide full service. You may vary this data if the variance 
is appropriate to conform to the nature of your business. You may 
include additional items if you believe the items would enhance 
understanding and highlight trends in your financial condition and 
results of operations. You must briefly describe factors that 
materially affect the comparability of the financial data, such as 
accounting changes, business combinations, or dispositions of 
business operations. You may describe such factors by a cross 
reference to other discussions in the proxy statement. You must also 
discuss any material uncertainties that may cause the data not to be 
indicative of your future financial condition or results of 
operations.
    3. If you elect to provide five-year summary information in 
accordance with the Financial Accounting Standards Board's Statement 
of Financial Accounting Standards No. 89 (``SFAS 89'') ``Financial 
Reporting and Changing Prices,'' you may combine this information 
with the selected financial data required in this item.
    4. If you include interim-period financial statements, or you 
are required to include interim-period financial statements under 
item 14, you must update the selected financial data for the interim 
period to reflect any material change in the trends indicated. If 
updating information is necessary, you must provide the information 
on a comparative basis, unless the comparison is not necessary to 
understand the updating information. You must provide a management 
statement of presentation for the required interim-period financial 
data reported.
    5. ``You'' in the summary and in these instructions refers to 
you and your consolidated subsidiaries.
    (c) Management's discussion and analysis of financial condition 
and results of operations. (1) You must discuss your financial 
condition, changes in financial condition, and results of 
operations. You must discuss the information in paragraphs (i), 
(ii), and (iii) of this paragraph (c) with respect to liquidity, 
capital resources, and results of operations. You must also provide 
all other information necessary to understand your financial 
condition, changes in your financial condition, and results of your 
operations. You must discuss significant business combinations. You 
may combine the discussion of liquidity and capital resources, if 
the two topics are interrelated.

[[Page 43122]]

If a discussion of the subdivisions of your business is appropriate 
to understand your business, you must focus your discussion on each 
relevant, reportable segment or other subdivision of the business, 
and on your business as a whole.
    (i) Liquidity. You must identify any known trends or any known 
demands, commitments, events, or uncertainties that are reasonably 
likely to cause your liquidity to materially increase or decrease. 
If you identify a material deficiency, indicate what you have done 
or will do to remedy the deficiency. You must identify and 
separately describe internal and external sources of liquidity, and 
briefly discuss any material unused sources of liquid assets. You 
must comment on maturity imbalances between assets and liabilities, 
and planned activities in the secondary mortgage market.
    (ii) Committed resources. You must describe your material 
commitments for funding loans or other expenditures as of the end of 
the latest fiscal period. You must indicate the general purpose of 
the commitments and the anticipated source of funds to fulfill the 
commitments. You must describe known material trends, favorable or 
unfavorable, in your committed resources. You must indicate any 
expected material changes in the mix and the relative cost of the 
resources. You must discuss changes between deposits, equity, debt, 
and any off-balance-sheet financing arrangements.
    (iii) Results of operations. (A) You must describe any unusual 
or infrequent events or transactions or any significant economic 
changes that materially affected the amount of reported income from 
continuing operations. In each case, you must indicate the extent to 
which these events, transactions, or changes affected income. In 
addition, you must describe any other significant components of 
revenues or expenses necessary to understand your results of 
operations.
    (B) You must describe any known trends or uncertainties that 
have had, or will have, a materially favorable or unfavorable impact 
on net sales or revenues or income from your continuing operations. 
If you know of events which will cause a material change in the 
relationship between costs and revenues you must disclose the change 
in the relationship.
    (C) If your financial statements disclose material increases in 
interest expense, you must discuss the extent to which the increases 
are attributable to increases in rates or to increases in volume.
    (D) For your three most recent fiscal years, or for those fiscal 
years in which you have been engaged in business, whichever period 
is shorter, you must discuss the impact of inflation and changing 
prices on your revenues and on income from continuing operations.
    (E) For the most recent financial statement, you must discuss 
any unusual risk characteristics in your assets, including real 
estate development, significant amounts of commercial real estate 
held as loan collateral, and significant increases in amounts of 
nonaccrual, past due, restructured, and potential problem loans (see 
Securities and Exchange Commission's Securities Act Industry Guide 
3, section III C).
    (iv) You must provide a qualitative and quantitative discussion 
of your market risk analysis.

    Instructions. 1. Your discussion and analysis must address your 
financial statements and other statistical data that will enhance a 
reader's understanding of your financial condition, changes in your 
financial condition, and results of your operations. Generally, you 
must discuss the three-year period covered by the financial 
statements and use year-to-year comparisons or other formats to 
enhance a reader's understanding. However, where trend information 
is relevant, you should refer to the five-year selected financial 
data appearing in item 7(b) above.

    2. Your discussion and analysis should provide investors and 
other users with relevant information to assess your financial 
condition and results of operations, based on the user's evaluation 
of the amounts and certainty of cash flows from operations and from 
outside sources. You must only provide information that you may 
obtain without undue effort or expense, and that does not clearly 
appear in your financial statements.
    3. Your discussion and analysis must specifically focus on 
material events and uncertainties known to you which would cause 
reported financial information not to be indicative of future 
operating results or of future financial condition. You should 
describe (a) matters that would affect future operations, but have 
not affected reported operations, and (b) matters that have affected 
reported operations, but would not affect future operations.
    4. If the consolidated financial statements reveal material 
changes from year to year in one or more line items, you must state 
the causes for the changes if the causes are necessary to understand 
your business as a whole. If the causes for a change in one line 
item also relate to other line items, you do not have to repeat the 
explanation. You do not have to provide a line-by-line analysis of 
the financial statements as a whole. You do not have to recite the 
amounts of changes from year to year, if the reader may readily 
compute these changes from the financial statements. You must not 
merely repeat numerical data contained in the consolidated financial 
statements.
    5. ``Liquidity,'' as used in paragraph (c)(1)(i) of this item 7, 
refers to your ability to generate adequate amounts of cash to meet 
your cash needs. You must identify the balance sheet conditions or 
income or cash flow items that indicate your liquidity condition. 
You must discuss liquidity in the context of your own business or 
businesses. Liquidity means more than ``liquid assets,'' as defined 
in OTS liquidity regulations at 12 CFR Part 566.
    6. OTS encourages you, but does not require you, to supply 
forward-looking information. You must disclose known data that will 
have an impact upon future operating results, such as known future 
increases in rates or other costs. If you provide any forward-
looking information, you may have a safe-harbor from liability for 
the projections under 12 CFR 563d.3b-6.
    7. If you disclose narrative explanations of supplementary 
information in accordance with SFAS 89, you may combine these 
explanations with your discussion and analysis required under this 
provision or you may supply the information separately. If you 
combine the information, you must place it reasonably near the 
discussion and analysis. If you do not combine the information, you 
may omit the required discussion of the impact of inflation and 
cross reference the explanations provided under SFAS 89.
    8. If you do not disclose explanations of supplementary 
information in accordance with SFAS 89, you may discuss the effects 
of inflation and changes in prices in an appropriate manner. OTS 
encourages you to voluntarily comply with SFAS 89. However, you must 
include a brief textual presentation of management's views. You do 
not have to present specific numerical financial data.
    9. ``You'' in the discussion and in these instructions means you 
and your consolidated subsidiaries.
    (2) If you include interim-period financial statements, you must 
provide management's discussion and analysis of the financial 
condition and results of operations. This discussion and analysis 
must enable the reader to assess material changes in your financial 
condition and results of operations between the periods specified in 
subdivisions (i) and (ii) of this paragraph. Your discussion and 
analysis must address material changes in the items specifically 
listed in paragraph (c)(1) of this item 7. However, you do not have 
to address the impact of inflation and changing prices on operations 
for interim periods.
    (i) Material changes in financial condition. You must discuss 
any material changes in financial condition from the end of the 
preceding fiscal year to the date of the most recent interim balance 
sheet that you provide. If you provide an interim balance sheet as 
of the corresponding interim date of the preceding fiscal year, you 
must discuss any material change in financial condition from that 
date to the date of the most recent interim balance sheet that you 
provide. You may combine any discussion of changes from the end, and 
the corresponding interim date, of the preceding fiscal year.
    (ii) Material changes in results of operations. You must discuss 
any material changes in your results of operations from the most 
recent fiscal year-to-date period for which you provide an income 
statement to the corresponding year-to-date period of the preceding 
fiscal year. If you provide an income statement for the most recent 
fiscal year quarter, you must discuss material changes with respect 
to that fiscal quarter and the corresponding fiscal quarter in the 
preceding fiscal year. In addition, if you provide an income 
statement for the 12-month period ended as of the date of the most 
recent interim balance sheet you provide, you must discuss material 
changes with respect to that 12-month period and the 12-month period 
ended as of the corresponding interim balance sheet date of the 
preceding fiscal year.

    Instructions. 1. If you present interim financial statements and 
financial statements for full fiscal years, you must discuss the 
interim financial information under paragraph (c)(2) and the full 
fiscal year

[[Page 43123]]

information under paragraph (c)(1) of this item 7. You may combine 
the discussions.

    2. In your discussion and analysis required by paragraph (c)(2), 
you must focus on material changes. If your interim financial 
statements reveal material change from period to period in one or 
more significant line items, you must describe the causes for the 
changes, unless you have already disclosed these causes. You do not 
have to repeat the description if the causes for a change in one 
line item relate to other line items. You do not have to recite the 
amounts of changes from period to period, if a reader may readily 
compute the amounts from the financial statements. You must not 
merely repeat numerical data from the financial statements. You must 
only provide information that you may obtain without undue effort or 
expense, and that does not clearly appear in your interim financial 
statements.
    3. In your discussion of material changes in results of 
operations, you must identify significant elements of your income or 
loss from continuing operations that do not arise from or are not 
necessarily representative of your ongoing business.
    4. You are encouraged, but not required, to supply forward-
looking information. You must disclose known data that will have an 
impact upon future operating results, such as known future increases 
in rates or other costs. If you provide any forward-looking 
information, you may have a safe-harbor from liability for the 
projections under 12 CFR 563d.3b-6.
    (d) Lending activities. (1) You must briefly describe federal 
and state restrictions on your lending activities and laws affecting 
mortgage lending or other lending. You must also briefly describe 
your general policy on loan-to-value ratios; your customary methods 
of obtaining loan originations, (e.g., the use of loan consultants 
or brokers); your general policy on approval of properties as 
security for loans; your use of a loan committee, if any; and your 
title, fire, and casualty insurance requirements on security 
properties. You must indicate your future plans for secondary 
mortgage market activities, such as transactions with Freddie Mac or 
other secondary mortgage agency. You must identify significant loan 
service fee income as a percentage of net interest income for the 
years required by item 14(b).
    (2) You must describe briefly (i) the areas where you normally 
lend; and (ii) any areas where you have a material concentration of 
loans. You may include maps illustrating these areas. You must 
estimate the housing vacancy rates in areas where you have a 
concentration of loans, if practicable.
    (3) You must describe briefly your long-term investments in 
mortgage loans, and the effect of these investments on your earnings 
spread. You must provide the normal maturity of loans that you made 
on the security of single-family dwellings and estimate the average 
length of time these loans are outstanding.
    (4) For each of the periods required by item 14(b), you must 
provide the following information in tabular form. You may exclude 
fees that are not adjustments of yield.
    (i) Average yield during the period on: (A) your loan portfolio, 
(B) your investment portfolio, (C) other interest-earning assets, 
and (D) all interest-earning assets. You must compute average yield 
at least monthly.
    (ii) Average rate paid during the period on: (A) deposits, (B) 
borrowings and Federal Home Loan Bank advances, (C) other interest-
bearing liabilities, and (D) all interest-bearing liabilities ((A), 
(B), and (C)). You must compute average rate paid at least monthly.
    (iii) Weighted-average yield at end of the latest required 
period, for items (i) and (ii) of paragraph (4).
    (iv) The net yield on average interest-earning assets (i.e., net 
interest earnings divided by average interest-earning assets. Net 
interest earnings is the difference between the amount of interest 
earned and interest paid). You must determine average interest-
earning assets no more frequently than monthly.
    (v) For each of the periods required by item 14(b), you must 
provide in tabular form: (A) The amount of change in interest income 
and (B) the amount of change in interest expense. For each major 
category of interest-earning asset and interest-bearing liability 
(as stated in items (i) and (ii) of paragraph (4)), you must 
attribute the amount of change to: (1) Changes in volume (change in 
volume multiplied by old rate), (2) changes in rates (change in rate 
multiplied by old volume), and (3) changes in rate-volume (change in 
rate multiplied by the change in volume). You must allocate the 
rate/volume variances consistently between rate and volume variance 
and disclose the basis of allocation in a note to the table.
    (5) For each of the periods required by item 14(b), you must 
present the following:
    (i) Return on assets (net income divided by average total 
assets).
    (ii) Return on equity (net income divided by average equity).
    (iii) Equity-to-assets ratio (average equity divided by average 
total assets).

    Instruction. You must supply any additional ratios if the ratios 
are necessary to explain your operations.

    (6) As of the end of the latest reported fiscal year, you must 
present separately the amounts of loans in each category required by 
balance sheet item 7(b), 12 CFR 563c.102, which are due:
    (i) in each of the three years following the balance sheet,
    (ii) after three through five years,
    (iii) after five through ten years,
    (iv) after ten through fifteen years, and
    (v) after fifteen years.
    In addition, you must present separately the total amount of all 
loans due after one year which have predetermined interest rates, 
and floating or adjustable interest rates.

    Instructions. 1. You must report scheduled principal repayments 
in the maturity category in which the payment is due.

    2. You must report demand loans, loans having no stated schedule 
of repayments and no stated maturity, and overdrafts as due in one 
year or less.
    3. You must base your maturities on contract terms. If terms 
vary due to your ``rollover policy,'' you must revise the maturity 
and briefly discuss the rollover policy.
    (7) You must describe briefly the risk elements in your loan and 
investment portfolios, and your procedures for delinquent loans. As 
of the end of each of the periods covered by the statements of 
operation required by item 14(b)(1) and as of the date of the latest 
statement of financial condition required by item 14(a), you must 
set forth in tables the amounts and categories of nonaccrual, past 
due, restructured, and potential problem loans (see Securities and 
Exchange Commission's Securities Act Industry Guide 3, section III. 
C.) and the ratio of such loans to total assets. If the amount of 
real estate that has been in substance foreclosed, or acquired by 
foreclosure or by deed in lieu of foreclosure is significant, you 
must briefly describe the major properties. You must also estimate 
your probable losses, if any, on disposition of the properties.
    (e) Savings activities. (1) You must state that, if you 
liquidate after conversion, you will fully pay savings account 
holders before you pay shareholders. You also must indicate the 
percentage of total savings accounts that are from out-of-state 
sources, if the total is significant.
    (2) You must set forth in a table the amounts of time deposit 
accounts categorized by interest rates on the dates of each balance 
sheet that you filed. You must use interest-rate categories that are 
not more than 200 basis points wide. As of the date of the latest 
balance sheet, you must set forth, in a table for each interest-rate 
category, the amounts of savings that will mature during each of the 
three years following the balance sheet date, and the total amount 
that will mature after three years.

    Instruction. This information is not required for S-B filers.

    (3) You must disclose the weighted-average rate and general 
terms (as well as formal provisions for the extension of the 
maturity) of each category of short-term borrowings required by 
Balance Sheet Caption 14, 12 CFR 563c.102. You must also disclose 
the maximum amount of borrowings in each category that are 
outstanding at any month-end during each period for which an end-of-
period balance sheet is required. You must disclose the approximate 
average short-term borrowings outstanding during the period and the 
approximate weighted-average interest rate for such aggregate short-
term borrowings. You must briefly describe how you computed these 
averages. You do not have to disclose borrowings in each category if 
the aggregate amount of the borrowings at the balance sheet date 
does not exceed one percent of assets at that date. However, if the 
weighted average of your borrowings outstanding during the year 
exceeds one percent of assets at year-end and significantly exceeds 
the amount of your borrowings at year-end, you must furnish this 
disclosure. You are not required to provide this information for any 
category of short-term borrowings if the average balance outstanding 
during the period was less than 30 percent of shareholders equity at 
the end of the period.
    (f) Federal regulation. You must describe briefly, to the extent 
not otherwise covered

[[Page 43124]]

by other items, how federal agencies regulate you and your 
operations. In particular, you must describe briefly how the Federal 
Deposit Insurance Corporation (FDIC) insures your accounts and how 
FDIC and OTS regulate your operations. You must describe federal 
regulatory capital requirements, what will happen to you if you fail 
to meet those capital requirements, and whether your regulatory 
capital position complies with those requirements. You must also 
describe how the FDIC and OTS charge assessments on your operations. 
In addition, you must describe briefly the liquidity requirements 
under section 6 of the Home Owners' Loan Act and OTS liquidity 
regulations, and state law. You must state whether you meet those 
liquidity requirements.
    (g) Federal Home Loan Bank System. You must describe briefly the 
Federal Home Loan Bank (FHLB) System and state whether you are a 
member. If you are a member, you must describe the following:
    (1) Limitations on your borrowings,
    (2) Recent loan policies of your FHLB and the current interest 
rates your FHLB charges, and
    (3) FHLB share purchase requirements and the amount of FHLB 
stock you own.
    (h) State savings association law. If you are converting to a 
state-chartered stock association, you must describe state law 
provisions that materially affect your business.
    (i) Federal and state taxation. (1) You must describe briefly 
applicable federal income tax laws including:
    (i) Permissible bad debt reserves;
    (ii) Your position with respect to the maximum bad debt reserve 
limitations as of the date of the latest statement of financial 
condition required under item 14(a);
    (iii) Future increases in your effective income tax rate;
    (iv) The date through which the Internal Revenue Service audited 
your federal income tax returns; and
    (v) How the payment of cash dividends on your capital stock 
after conversion will affect your federal income taxes.
    (2) You must briefly describe applicable state tax laws.
    (j) Competition. You must describe the material sources of 
competition for savings associations generally. You must indicate, 
to the extent practicable, your position in your principal lending 
and savings markets.
    (k) Office and other material properties. (1) You must furnish 
the location of your home office, branch offices, and other office 
facilities (such as mobile or satellite offices). You must state the 
total net book value of all offices as of the date of the latest 
statement of financial condition required by item 14(a). You must 
state the expiration date of the lease on every leased office.
    (2) You must describe briefly any undeveloped land that you own, 
including its location, net book value, prospective use, and holding 
period.
    (l) Employees. You must state the number of full-time employees, 
including executive officers listed under item 5. You must state 
whether employees are represented by a collective bargaining group, 
and whether you have satisfactory relations with your employees. You 
must summarize briefly any loan, profit sharing, retirement, 
medical, hospitalization or other compensation plans that you 
provide to your employees, unless you have already included this 
information under item 6.
    (m) Subsidiaries. You must describe briefly your investment in 
each subsidiary, and the major lines of the subsidiary's business 
(including any joint ventures) that are material to your operations.
    (n) Legal proceedings. You must furnish the information on legal 
proceedings required by item 103 of Regulation S-K, 17 CFR 229.103. 
Unless the context otherwise requires, ``registrant'' in that 
regulation means you.
    (o) Additional information. You may request permission to omit 
any information required by this item, or to substitute appropriate 
information of comparable character. OTS may permit you to omit or 
substitute information where it is consistent with the protection of 
account holders. OTS may also require you to furnish other 
additional or substitute information if the information is necessary 
or appropriate to adequately describe past and future business.

Item 8. Description of the Plan of Conversion

    (a) You must include the following statement in the proxy 
statement. You must place this statement before the information 
required by this item 8. ``OTS has approved the plan of conversion, 
subject to member approval the plan and certain other conditions. 
OTS approval does not mean that OTS recommends or endorses the 
plan.''
    (b) You must describe your plan of conversion. You must describe 
the information required by paragraphs (c) through (j) of this item. 
You must include any additional information necessary to accurately 
describe the material provisions of the plan.
    (c) You must briefly describe the effects of conversion from a 
mutual to a stock association, including all of the following:
    (1) That your savings account holders will continue to hold 
FDIC-insured accounts in the converted savings association, with the 
same dollar amount, rates of return, and general terms as existing 
accounts;
    (2) That your savings and borrowing members will not have voting 
rights after conversion. In the mutual holding company context, 
however, you must describe what voting rights, if any, your savings 
and borrowing members will have after reorganization;
    (3) That the account holders have liquidation rights. You must 
describe the liquidation account you will establish and maintain, 
including when you will pay the account, the interest of eligible 
account holders and supplemental eligible account holders in the 
account, and the formula that you will use to adjust the account;
    (4) That the conversion will not affect borrowers' loans, 
including the amount, rate, maturity, security, or other contractual 
terms;
    (5) That the FDIC will not insure your stock;
    (6) That you will not distribute any assets other than to pay 
conversion expenses or to make a charitable contribution; and
    (7) The reasons management recommends the conversion, including 
any advantages to the community that you serve.
    (d) You must furnish the following information regarding the 
subscription rights of members:
    (1) The formula that you will use to determine the subscription 
rights of account holders to purchase shares under 12 CFR 563b.320 
through 563b.390;
    (2) The purchase priorities, total purchase limitations, total 
number of shares that members may purchase, and the allocation 
formula in the plan of conversion;
    (3) The allocation formulas that you will use if shares are 
oversubscribed during the sale under the plan of conversion; and
    (4) The use and timing of the order forms for the exercise of 
subscription rights.
    (e)(1) You must estimate the price range per share of the shares 
you will sell in the public offering under your plan of conversion. 
You do not have to estimate the price range if you will not begin 
the offering until after your members' meeting;
    (2) You must indicate that the offering price will be the pro 
forma market value of the shares, as determined by your management 
and the underwriter; and
    (3) You must state that you must sell all of the shares.
    (f) Unless you will not begin the offering until after your 
members' meeting, you must discuss the following for stock you will 
sell:
    (1) the earnings per share on a pro forma basis as of the most 
recent year-end and interim period required by item 14(b); and
    (2) the book value per share on a pro forma basis as of the most 
recent year-end and interim period required by item 14(a).

    Instructions. 1. You must provide earnings and book value per 
share data (a) without giving effect to the estimated net proceeds 
from the sale of the stock and (b) after giving effect to such 
proceeds. You must clearly state all of your assumptions.

    2. In computing pro forma earnings, you must use the average of 
(i) the average yield on all interest-earning assets (item 
7(d)(4)(i)(D)) and (ii) the average rate paid on deposits (item 
7(d)(4)(ii)(A)).
    3. If interest rates have significantly changed during the 
applicable periods, OTS may permit you to use properly supported 
alternative computations.
    4. You must explain that pro forma data may not be indicative of 
your actual financial position or the results of continuing 
operations after the conversion.
    (g) You must state when the proposed subscription period will 
begin and end, and must describe whether the plan of conversion 
permits you to change or extend these dates. You must also state the 
following:
    (1) You will set a maximum subscription price in the offering 
circular that you will use for the offering of subscription rights;
    (2) The actual subscription price will be the public offering 
price;
    (3) The actual subscription price will not exceed the maximum 
subscription price on the order form; and
    (4) You will refund any difference between the maximum and 
actual subscription prices, unless the subscriber affirmatively 
elects to apply the difference to the purchase of additional shares.

[[Page 43125]]

    (h) You must also:
    (1) Describe, to the extent practicable, whether you intend to 
list your shares on an exchange, or how you will otherwise provide a 
market for the purchase and sale of shares in the future;
    (2) Describe briefly the tax effect of the conversion on you and 
on the various classes of account holders receiving nontransferable 
subscription rights in the conversion;
    (3) State that the plan of conversion is attached as an exhibit 
to the proxy statement and that the reader may consult the plan for 
further information.
    (i) You must state whether the plan of conversion permits you to 
offer unsubscribed shares to the public directly or through 
underwriters. If so, you must provide the information, to the extent 
known, required by item 6 of Form OC, and indicate the estimated 
timing of the proposed offering.
    (j) You must furnish the following information on proposed 
purchases of shares by your directors and officers in a table:
    (1) The total proposed number of shares that all officers, 
directors and their associates as a group may purchase.
    (2) The name and position of each officer and director in item 
5(a) and the number of shares each will purchase.
    (3) If any officer, director or his or her associate proposes to 
purchase one percent or more of the total number of shares that will 
be outstanding, the name, position, and the number of shares that 
the officer, director or associate will purchase.
    (4) Indicate separately the number of shares that will be 
purchased in each offering category with respect to the information 
required by items (1), (2) and (3) of paragraph (j).
    (5) If your conversion application includes a charitable 
contribution, you must disclose the following additional 
information:
    (i) The amount and percentage of shares that each proposed 
director (or trustee) and officer of the charitable organization 
will purchase in the conversion.
    (ii) The aggregate number and percentage of shares that the 
charitable organization and its proposed officers and directors (or 
trustees) will hold.
    (iii) The number of shares and value of the contribution at the 
minimum, midpoint, maximum, and maximum as adjusted, of the 
valuation range.
    (iv) The decrease in shares that you will sell in the 
conversion, in number of shares and dollar amounts, at the minimum, 
midpoint, maximum, and maximum as adjusted, of the valuation range.
    (v) The dilution in ownership and book value per share from the 
proposed contribution.
    (vi) Your plans for additional charitable contributions over the 
next three years.

    Instruction. You are only required to furnish information on 
associates of officers and directors to the extent that you know 
this information. If you are unable to confirm the number of shares 
an associate will purchase, you must disclose the number of shares 
the associate is given subscription rights to purchase.

Item 9. Description of Stock

    (a) You must furnish the information required in item 202 of 
Regulation S-K, 17 CFR 229.202. Unless the context otherwise 
requires, ``registrant'' refers to you.
    (b) You must undertake to use your best efforts to encourage and 
assist a professional market maker to establish and maintain a 
market for your shares.
    (c) You must discuss the trading market that you expect will 
exist for your shares. You must estimate the number of market makers 
and shareholders, and describe your plans for listing the stock.

    Instruction. You must describe the basic requirements you must 
meet to list your stock.

    (d) If the rights of your stockholders will be materially 
limited or qualified by the rights of savings account holders or 
borrowers, you must describe these limitations or qualifications so 
that investors can understand their stock rights.

Item 10. Capitalization

    You must set forth the amounts of your capitalization in 
substantially the tabular form indicated below. You may modify the 
captions as appropriate.

----------------------------------------------------------------------------------------------------------------
                                                                                                (C) Pro forma
                                                 (A) Capitalization       (B) Pro forma        capitalization,
                                                   on most recent       adjustments as a     after giving effect
                                                 balance sheet date   result of conversion    to the conversion
----------------------------------------------------------------------------------------------------------------
Deposits......................................
FHLB advances.................................
Other Borrowings..............................
Capital stock.................................
Preferred stock...............................
Paid-in capital...............................
Retained earnings Restricted Unrestricted.....
    Total.....................................
----------------------------------------------------------------------------------------------------------------

    Instructions. 1. You must indicate in the table, or in a 
footnote to the table, the total number of shares you will 
authorize, the par or stated value of the shares, and the number of 
shares you will sell in the conversion.

    2. You must estimate in the table the total amount of funds you 
will receive when you sell your stock. In a footnote, you must state 
the price per share that you used for the estimate. You must clearly 
indicate that the total amount and price per share are estimates.
    3. In Column A, you must use the most recent balance sheet date 
required by item 14.

Item 11. Use of New Capital

    You must explain how you will use the new proceeds of the 
conversion, including the approximate amount that you will use for 
each purpose.

    Instruction. You do not have to detail proposed investments. You 
must, for example, only briefly describe any investment or other 
activity that will be affected materially by availability of the 
proceeds. Examples of such activities include: expanded secondary 
market activities, larger scale lending projects, loan portfolio 
diversification, increased liquidity investments, repayment of debt, 
additional branch offices and other facilities, service corporation 
investments, and acquisitions.

Item 12. New Charter, Bylaws, or Other Documents

    You must describe the material changes to your existing charter, 
bylaws, and other similar documents that will take effect after 
conversion.

    Instruction. You only have to briefly summarize provisions that 
are pertinent from an investment and a voting standpoint. You do not 
have to provide a complete legal description of each provision.

Item 13. Other Matters

    You must state that you will register your stock under section 
12(g) of the Securities Exchange Act of 1934, and that you will not 
deregister the stock for three years after the date of conversion. 
You are subject to the proxy rules, insider trading reporting and 
restrictions, annual and periodic reporting and other requirements 
of that Act when you register your stock.

Item 14. Financial Statements

    Subpart A of 12 CFR Part 563c governs the certification, form, 
and content of the financial statements, including the basis of 
consolidation.
    (a) Consolidated balance sheets. (1) You and your subsidiaries 
must furnish consolidated, audited balance sheets as of the end of 
each of the two most recent fiscal years, even if the applicant is 
filing using the provisions of Regulation S-B.
    (2) If the latest balance sheets you furnish under (1) of this 
paragraph are dated 135 days or more before the date OTS approves 
the conversion, you must furnish an interim balance sheet dated 
within 135 days of OTS approval. This interim balance sheet may be 
unaudited.

[[Page 43126]]

    (3) If the latest balance sheets you furnish under (1) of this 
paragraph are dated 105 days or more before the date OTS approves 
the conversion, you must furnish a Recent Development section of 
selected financial data and a Management's Discussion and Analysis 
section of significant variances.
    (b) Consolidated statements of income and cash flows. (1) You, 
your subsidiaries, and your predecessors must furnish consolidated, 
audited statements of income and cash flows for each of the three 
fiscal years preceding the date of the most recent balance sheet 
furnished.
    (2) In addition, you must furnish statements of income and cash 
flows (i) for any interim period between the latest audited balance 
sheet and the date of the most recent interim balance sheet that you 
file, and (ii) for the corresponding period of the preceding fiscal 
year. The interim financial statements may be unaudited.
    (c) Changes in stockholders' equity. You must analyze the 
changes in each caption of stockholders' equity in the balance 
sheets. You must present this analysis in a note or separate 
statement that reconciles the beginning balance with the ending 
balance for each period for which you are required to furnish an 
income statement. You must describe all significant reconciling 
items with appropriate captions. You must reconcile total generally 
accepted accounting principles (GAAP) capital with actual tangible, 
core, and risk-based capital in the notes to the financial 
statements.
    (d) Financial statements of business acquired or to be acquired. 
You must furnish the information required by 17 CFR 210.3-05 and 
210.11-01 to -03 for any business that you have acquired or will 
acquire.
    (e) Separate financial statements of subsidiaries not 
consolidated and 50-percent-or less-owned persons. You must furnish 
the information required by 17 CFR 210.3-09 on separate financial 
statements of subsidiaries not consolidated and 50-percent-or less-
owned persons.
    (f) Filing of other statements in certain cases. You may request 
permission to omit any of the statements required by this item, or 
to substitute appropriate statements of comparable character. OTS 
may permit you to omit or substitute statements where it is 
consistent with the protection of account holders. OTS may also 
require you to include other additional or substitute statements, if 
the statements are necessary or appropriate to adequately present 
the financial condition of any person whose financial statements are 
required, or whose statements are otherwise necessary for the 
protection of account holders and others.

    Instructions. 1. If you previously used an audit period for your 
certified financial statements and this audit period does not 
coincide with your fiscal year, you may use the audit period instead 
of any required fiscal year. You may use this audit period, however, 
only if it covers a full twelve months' operations and you have used 
this period consistently.

    2. Interim financial statements must be comparative and reported 
in the same format as the audited financial statements.

Item 15. Consents of Experts and Reports

    (a) You must briefly describe all consents of experts filed 
under the instructions in the Form AC.
    (b) You must provide a report of the independent public 
accountants who certified your financial statements and other 
matters in the proxy statement.

    Instruction. You must summarize only the provisions of the 
consents that are pertinent from an investment and a voting 
standpoint. You do not have to provide a complete legal description 
of each consent.

Item 16. Attachments

    You must attach a copy of your plan of conversion as approved by 
OTS to the proxy statement distributed to members and others. 
Alternatively, in a transaction that does not utilize a state-
chartered holding company, you may disclose in the proxy statement 
that you will provide the plan of conversion, if a recipient 
requests it within a specified period by means of a postage-paid 
postcard or other written communication.

OTS Form 1681, June 2000.

Appendix C--Form OC--Offering Circular

[Not To Be Codified in the Code of Federal Regulations]

Office of Thrift Supervision

Form OC--Offering Circular

Paperwork Reduction Act Statement

    The Office of Thrift Supervision will use this information to 
ensure that the public receives adequate information about the 
Applicant and the securities being offered. See Part 563b and Part 
563g.
    Public reporting burden for this collection of information is 
estimated to average 150 hours, per response, including the time for 
reviewing instructions and completing and reviewing the collection 
of information. If a valid OMB Control Number does not appear on 
this form, you are not required to complete this form. Send comments 
regarding this burden estimate or any other aspect of the collection 
of information, including suggestions for reducing this burden, the 
Business Transactions Division, Office of Thrift Supervision, 1700 G 
Street, NW., Washington, DC 20552; and to the Office of Management 
and Budget, Paperwork Reduction Project (1550-0014), Washington, DC 
20503.

FORM OC--Offering Circular

Office of Thrift Supervision
1700 G Street, NW., Washington, DC 20552

Offering Circular

----------------------------------------------------------------------
(Name of Applicant in charter)  (Docket No.)

----------------------------------------------------------------------
(Street address of Applicant)

----------------------------------------------------------------------
(City, State and Zip Code)

Index to Items

Item 1. Information Required by and Use of Form OC
Item 2. Additional Current Information Required
Item 3. Statement Required in Offering Circulars
Item 4. Preliminary Offering Circular
Item 5. Information with Respect to Exercise of Subscription Rights
Item 6. Stock Selling Arrangements

Item 1. Information Required by and Use of Form OC

    You must date the offering circular as of the date that you mail 
it. You must include in your offering circular substantially the 
same information that you must include in the proxy statement that 
you distribute to your members to vote on the conversion. You may 
omit information from the offering circular that you included in the 
proxy statement only to the extent the information is clearly 
inapplicable. The offering circular may be in ``wrap around'' form, 
where the proxy statement is attached.

    Instructions. 1. The ``offering circular'' is the offering 
circular for the subscription offering and the offering circular for 
any community offering or public offering, or both. It may also be 
called a ``prospectus.''

    2. If you previously furnished a copy of the proxy statement to 
your members, you do not need to include the proxy statement as an 
attachment to your offering circular for a subscription offering in 
``wrap around'' form. However, you must state in the offering 
circular that you previously furnished a copy of the proxy statement 
to the members, and that you will furnish an additional copy 
promptly upon request. You also must state your telephone number and 
mailing address.

Item 2. Additional Current Information Required

    You must include the following additional current information in 
your offering circular, if the information is available and you did 
not already include the information in the proxy statement:
    (a) If your members' meeting took place before you mailed the 
Form OC, the result of the vote of your members on the conversion 
and any other proposals considered at the meeting.
    (b) Any recent material developments in your business or 
affairs.
    (c) The trading market that you expect for your conversion 
shares.
    (d) A summary of the results of any separate subscription 
offering. You must include the number of shares that you sold to 
eligible account holders, supplemental eligible account holders, and 
other voting members, the price at which you sold the shares, and 
the number of unsubscribed shares. You must include this summary on 
the outside front cover page.
    (e) The information required by Items 8(e)(1) and 8(f) of Form 
PS.
    (f) Any other information necessary to make the offering 
circular current, including full financial statements dated within 
six months before the date you mail the offering circular. You must 
also include, in your subscription offering circular, any more 
recent financial statements if, at the time you commence your 
subscription offering, you determine that you must include the 
financial statement in an offering circular in the community 
offering or public offering, or both.

[[Page 43127]]

Item 3. Statement Required in Offering Circulars

    You must set out the following statement on the outside front 
cover page of every offering circular. You must set out the 
statement in capital letters printed in bold-face Roman type at 
least as large as ten-point modern type and at least two points 
leaded:

THE OFFICE OF THRIFT SUPERVISION HAS NOT APPROVED OR DISAPPROVED 
THESE SHARES. THE OFFICE HAS NOT PASSED ON THE ACCURACY OR ADEQUACY 
OF THIS OFFERING CIRCULAR. ANY REPRESENTATION TO THE CONTRARY IS 
UNLAWFUL. 

Item 4. Preliminary Offering Circular

    You must include the caption ``Preliminary Offering Circular,'' 
the date you issue the preliminary offering circular, and the 
following statement on the outside front cover page of any 
preliminary offering circular. You must set out the statement in red 
ink, printed in type as large as you use generally in the body of 
the offering circular.
    ``We have filed this offering circular with the Office of Thrift 
Supervision, but it has not been authorized for use in final form. 
We may complete or amend the information in this offering circular. 
We may not sell or accept offers to buy the shares covered by this 
offering circular before the Office of Thrift Supervision declares 
the offering circular effective. The offering circular is not an 
offer to sell or the solicitation of an offer to buy. We will not 
sell these shares in a state that prohibits offers, solicitations or 
sales before registration or qualification under the securities laws 
of that state.''

Item 5. Information with Respect to Exercise of Subscription Rights

    In any offering circular that you will deliver to subscribers, 
you must describe all material terms of the offering relating to the 
exercise of subscription rights. You may exclude this information if 
you have already included this information in the proxy statement. 
Material terms include the expiration date, any subscription agent, 
method of exercising subscription rights, payment for shares, 
delivery of stock certificates for shares purchased, maximum 
subscription price, possible reduction of subscription price, 
relationship of subscription price to public offering price, 
requirement that all unsubscribed shares be sold, and any other 
material conditions relating to the exercise of subscription rights.

Item 6. Stock Selling Arrangements

    In each offering circular you must describe the material terms 
of the plan or plans of distribution for all shares.
    (a) You must include the following information in substantially 
the tabular form set forth below. You must set out this information 
on the outside front cover page of the offering circular.

----------------------------------------------------------------------------------------------------------------
                                                              Selling discounts and
                                      Price to public              commissions           Proceeds to applicant
----------------------------------------------------------------------------------------------------------------
Per share.....................  $                           $                          $
    Total.....................
----------------------------------------------------------------------------------------------------------------

    (b) If there is a community offering or public offering, or 
both, you must provide an offering circular. You may omit the 
description relating to the exercise of subscription rights required 
by item 5, unless you commence your community offering or public 
offering, or both, simultaneously with your subscription offering.
    (c) If you sell any shares through a community offering, you 
must indicate: (1) The timing for the offering, (2) the geographic 
area where you will make the offering, (3) the method you will 
employ to market the shares (including the frequency and nature of 
communications or contracts with potential purchasers), (4) any 
preferences that you will give to any geographic area or to any 
class of potential purchasers, and (5) the limitations on purchases 
by potential purchasers.
    (d) If a selling agent assists in offering shares, you must 
identify the selling agent, disclose how the selling agent will 
offer the shares, and disclose the commissions and fees you will pay 
to the selling agent.
    (e) If you will offer any shares through underwriters, you must 
include in the offering circular for the public offering the names 
of the principal underwriters and the amounts that each will 
underwrite. You may omit this information for principal 
underwriters, other than the managing underwriters, from the 
offering circular for the subscription offering if you include the 
following conditions: (1) that all subscription rights will be 
exercisable by delivery of order forms to the underwriters or 
selling group for the public offering; and (2) that orders of 
persons exercising subscription rights will be filled prior to 
orders for stock in the direct community or public offerings, or 
both. You must identify each principal underwriter that has a 
material relationship with you and describe the relationship. In 
each offering circular, you must state briefly the underwriter's 
obligation to take unsubscribed shares.
    (f) You must briefly disclose in the offering circular the 
discounts and commissions that you may allow or may pay dealers in 
connection with the sale of unsubscribed shares for the community or 
public offering, or both. You may omit this information from the 
offering circular for any subscription offering, unless you use the 
subscription offering circular for the community offering or public 
offering, or both.

    Instructions. 1. Commissions include all cash, securities, 
contracts, or anything else of value, paid, to be set aside, or 
disposed of. Commissions also include understandings made with or 
for the benefit of any persons in which any underwriter or dealer is 
interested, in connection with the sale of the shares.

    2. You must include any cash commissions in the table. You must 
describe other consideration you will make to the underwriters 
following the table with a reference in the second column of the 
table. You also must appropriately disclose any finder's fees or 
similar payments.
    3. You must state whether the selling agents or underwriters are 
or will be committed to take and to pay for all of the shares if any 
are taken, or whether it is merely an agency or ``best efforts'' 
arrangement under which the selling agents or underwriters are 
required to take and pay for only the shares that they sell to the 
public.

OTS Form 1682, June 2000.

Appendix D--Form OF--Order Form

[Not to be codified in the Code of Federal Regulations]

Office of Thrift Supervision

Form OF--Order Form

Paperwork Reduction Act Statement

    The Office of Thrift Supervision will use this information to 
ensure subscribers to Applicant's stock receive adequate disclosures 
regarding the purchase of Applicant's stock. See Part 563b and 
section 563.76.
    Public reporting burden for this collection of information is 
estimated to average one hour, per response, including the time for 
reviewing instructions and completing and reviewing the collection 
of information. If a valid OMB Control Number does not appear on 
this form, you are not required to complete this form. Send comments 
regarding this burden estimate or any other aspect of the collection 
of information, including suggestions for reducing this burden, the 
Business Transactions Division, Office of Thrift Supervision, 1700 G 
Street, NW., Washington, DC 20552; and to the Office of Management 
and Budget, Paperwork Reduction Project (1550-0014), Washington, DC 
20503.

Form OF--Order Form

Office of Thrift Supervision 1700 G Street, NW., Washington, DC 
20552

Order Form for purchase of conversion shares

----------------------------------------------------------------------
(Name of Applicant in charter)  (Docket No.)

----------------------------------------------------------------------
(Street address of Applicant)

----------------------------------------------------------------------
(City, State and Zip Code)


[[Page 43128]]


    (1) After OTS declares your offering circular for the 
subscription offering effective, you must promptly distribute order 
forms for the purchase of shares of stock to: (a) All eligible 
account holders, (b) supplemental eligible account holders, and (c) 
other voting members who may subscribe for shares under the plan of 
conversion.
    (2) You must provide a final offering circular for the 
subscription offering or any community or public offerings with the 
order form (unless you previously provided a final offering 
circular). You must include detailed instructions explaining how to 
complete the order forms.
    (3) You must state the maximum subscription price on each order 
form. This amount is the amount that is payable to you when the 
subscriber returns the order form. You must establish a maximum 
subscription price and an actual subscription price that is within 
the subscription price range stated in OTS's approval and in the 
offering circular. If the maximum subscription price or the actual 
subscription price is not within the subscription price range, you 
must receive OTS approval to amend the range. If appropriate, OTS 
may require you to resolicit proxies and order forms as a condition 
to its approval. If the public offering price is less than the 
maximum subscription price on the order form, you must reduce the 
actual subscription price to correspond to the public offering 
price. You must refund the difference to those subscribers who paid 
the maximum subscription price, unless the subscriber affirmatively 
elects to apply the difference to the purchase of additional shares.
    (4) You must describe in a simple, clear and intelligible manner 
the actions that are required or available to the persons who will 
receive the order form. Specifically, you must provide all of the 
following information:
    (i) Indicate the maximum number of shares that the person may 
purchase under the subscription rights;
    (ii) Indicate the time period during which the person must 
exercise the subscription rights. This period must be at least 20 
days and not more than 45 days after you mail the subscription 
offering order form;
    (iii) State the maximum subscription price per share;
    (iv) Indicate any minimum share purchase requirements;
    (v) Specifically designate blank space or spaces for the person 
to indicate the number of shares he or she wishes to purchase;
    (vi) Indicate how the person must pay. If the person withdraws 
funds from a certificate of deposit, you must indicate that the 
person may withdraw the funds without penalty. If the person pays by 
withdrawing from a savings account or certificate of deposit, you 
must provide for the person to check a box on the order form. If a 
person pays by withdrawing from a savings account or certificate of 
deposit, you may, but need not, withdraw funds from the account when 
you receive the order form. If the person withdraws funds before the 
closing date of the public offering, you must pay interest to the 
account holder as if the amount remained in the account until the 
closing date;
    (vii) Specifically designate blank spaces for the person to date 
and sign the order form;
    (viii) Include an acknowledgment that the person who signed the 
order form received a final offering circular before he or she 
signed the form; and
    (ix) Indicate what will happen if the person does not properly 
complete and return the order form. You must state that the person 
may not transfer the subscription rights to another and state that 
the subscription rights are void at the end of the subscription 
period. You must include in the instructions to the form the address 
where the person must send the order form and the date that you will 
deem the order form received, (for instance, by date and time of 
actual receipt at the indicated address, or by date and time of 
postmark.)
    (5) You may state that no one may modify the order form without 
your consent.
    (6) You must include the following statements in bold print in 
your order form:

(a) ``Federal Regulations prohibit any person from transferring or 
entering into any agreement directly or indirectly to transfer the 
legal or beneficial ownership of conversion subscription rights, or 
the underlying securities to the account of another.'' 

(b) ``Under penalty of perjury, I certify that I,____________, am 
purchasing shares solely for my account and that there is no 
agreement or understanding regarding the sale or transfer of such 
shares, or my right to subscribe for shares.'' 

    (7) You must also include the following separate one page 
certification.

``I ACKNOWLEDGE THAT THIS SECURITY IS NOT A DEPOSIT OR ACCOUNT AND 
IS NOT FEDERALLY INSURED, AND IS NOT GUARANTEED BY [insert name of 
savings association] OR BY THE FEDERAL GOVERNMENT.'' 

    If anyone asserts that this security is federally insured or 
guaranteed, or is as safe as an insured deposit, I should call the 
Office of Thrift Supervision Regional Director [insert Regional 
Director's name and telephone number with area code].
    I further certify that, before purchasing the [description of 
security being offered] of [name of issuer, name of savings 
association and affiliation to issuer (if different)], I received an 
offering circular.
    The offering circular that I received contains disclosure 
concerning the nature of the security being offered and describes 
the risks involved in the investment including: [list briefly the 
principle risks involved and cross reference certain specified pages 
of the offering circular where a more complete description of the 
risks is made.]

Signature--------------------------------------------------------------

Date-------------------------------------------------------------------

OTS Form 1683, June 2000.

[FR Doc. 00-16347 Filed 7-11-00; 8:45 am]
BILLING CODE 6720-01-P


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