43092 Federal Register / Vol. 65, No. 134 / Wednesday, July 12, 2000 / Proposed Rules

1Pub.L. 106–102, 113 Stat. (1999).

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.

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. Handdeliver 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 public.info@ots.treas.gov 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 mutualto-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.

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 capitalraising 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

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

43094 Federal Register / Vol. 65, No. 134 / Wednesday, July 12, 2000 / Proposed Rules

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 prefiling 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 shortterm 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 § 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.

Federal Register / Vol. 65, No. 134 / Wednesday, July 12, 2000 / Proposed Rules 43095

2A 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. 3 59 FR 61247, 61253 (November 30, 1994).

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.

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 § 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.

Before the 1994 amendment, plans

could provide for accelerated vesting in

case of death, disability, or a change of

control. Existing § 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 § 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 § 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 § 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

43096 Federal Register / Vol. 65, No. 134 / Wednesday, July 12, 2000 / Proposed Rules

regulations to reflect OTS’ intent to

make the MHC a more suitable, longterm 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:

• How can OTS make the MHC form

more attractive? The agency is

interested in other enhancements to the

MHC form that commenters might

suggest.

• 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.

• 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?

• 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.

• 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

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

• 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.

• 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:

• 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 § 563b.25.

• Reduce the number of copies of

applications that a savings association

must file with OTS from ten to seven.

See proposed § 563b.155.

• 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 §§ 563b.115,

563b.155, 563b.180 and 563b.185.

• Codify the current informal

standard requiring a legal opinion

indicating that any marketing materials

comply with all applicable securities

laws. See proposed § 563b.275.

• Delete the requirement for a legal

opinion regarding insured accounts. See

proposed § 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 § 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:

• Did we organize the material to suit

your needs? If not, how could the

material be better organized?

• Do we clearly state the

requirements in the rule? If not, how

could the rule be more clearly stated?

• Does the rule contain technical

language or jargon that isn’t clear? If so,

what language requires clarification?

• 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?

• Would more (but shorter) sections

be better? If so, what sections should be

changed?

• 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 563b.375(a), (d) .................................. Nonsubstantive revision, moved.

12 CFR 563b.3(c)(3) .......................................... 12 CFR 563b.360 ............................................. Nonsubstantive revision, moved.

12 CFR 563b.3(c)(4) .......................................... 12 CFR 563b.335(b), (c) .................................. Nonsubstantive 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 563b.320(d), 365 ................................ Nonsubstantive revision, moved.

12 CFR 563b.3(c)(6) .......................................... 12 CFR 563b.320(e), 335(b), (d) ..................... Nonsubstantive revision, deletions and

moved.

12 CFR 563b.3(c)(6)(i) ....................................... 12 CFR 563b.385(a), (c), 380(a) ..................... Substantive revision, 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 563b.385(a), (c) .................................. Nonsubstantive 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 563b.330(a), 335(b) ............................ Nonsubstantive revision, moved.

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 563b.430(d), 445(b), 465, 485 ........... Nonsubstantive revision, moved.

12 CFR 563b.3(c)(14) ........................................ 12 CFR 563b.25 ............................................... Nonsubstantive revision, moved.

43098 Federal Register / Vol. 65, No. 134 / Wednesday, July 12, 2000 / Proposed Rules

Original provision Proposed provision Comment

12 CFR 563b.3(c)(15) ........................................ 12 CFR 563b.440, 445(c) ................................ Nonsubstantive revision, moved.

12 CFR 563b.3(c)(16) ........................................ 12 CFR 563b.140, 425 .................................... Nonsubstantive 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)–(c) .................................. Nonsubstantive revision, moved.

12 CFR 563b.3(c)(19) ........................................ 12 CFR 563b.530(a)–(c) .................................. Nonsubstantive 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)–(d), 380 (a)–(c) .............. Nonsubstantive revision, moved.

12 CFR 563b.3(c)(24) ........................................ 12 CFR 563b.520(a)–(b) .................................. Nonsubstantive 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 563b.445(b), 450, 455, 480 ................ Nonsubstantive revision, moved.

12 CFR 563b.3(f)(2) ........................................... 12 CFR 563b.445(b), 450 ................................ Nonsubstantive revision, moved.

12 CFR 563b.3(f)(3) ........................................... 12 CFR 563b.470(e), 475 ................................ Revision with 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)–(d) .................................. Nonsubstantive 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, 520(a) ................................ Nonsubstantive revision, moved.

12 CFR 563b.3(g)(3) .......................................... 12 CFR 563b.510, 515 .................................... Substantive 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 563b.340(b)(1) .................................... Nonsubstantive 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 563b.525(c)(1)–(3) .............................. Nonsubstantive revision, moved.

12 CFR 563b.3(i)(4)(v) ....................................... 12 CFR 563b.340(b)(2)(ii), 525(c)(4) ............... Nonsubstantive revision, moved.

12 CFR 563b.3(i)(4)(vi)–(5) ............................... 12 CFR 563b.525(d)(1)–(2) ............................. Nonsubstantive revision, moved.

12 CFR 563b.3(i)(6) ........................................... 12 CFR 563b.430(a), (b) .................................. Nonsubstantive revision, moved.

12 CFR 563b.3(i)(7)(i)–(ii) .................................. 12 CFR 563b.25, 525(b) .................................. Nonsubstantive 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), (4)(i)–(xviii) ............ 12 CFR 563b.135(a), (b) .................................. Nonsubstantive 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, 265 .................................... Nonsubstantive 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, 155 .................................... Nonsubstantive 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, 160(a)–(b) .......................... Nonsubstantive 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)–(c) .................................. Nonsubstantive revision, moved.

Federal Register / Vol. 65, No. 134 / Wednesday, July 12, 2000 / Proposed Rules 43099

Original provision Proposed provision Comment

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 563b.300(e), 305 ................................ Nonsubstantive revision, moved.

12 CFR 563b.7(c) .............................................. 12 CFR 563b.330 ............................................. Nonsubstantive revision, moved.

12 CFR 563b.7(d) .............................................. 12 CFR 563b.200(b)(8), 300 (c)–(d), Form

OC, Item 3.

Nonsubstantive revision, moved.

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 563b.335(a), Form OF, Items (1), (2) Nonsubstantial revisions, deletions, and

moved.

12 CFR 563b.7(g)(3), (4), (5) ............................ Form OF, Items (3), (4), (5) ............................. Nonsubstantive revision, moved.

12 CFR 563b.7(h) .............................................. 12 CFR 563b.345(a), 350(c) ............................ Nonsubstantive revision, moved.

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)–(d) .................................. Substantive 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 563b.300(a), (c) .................................. Substantial 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 563b.115(a), 155, 180(b), Form AC,

General Instruction B.

Nonsubstantial revisions, deletions, and

moved.

12 CFR 563b.8(f) ............................................... ........................................................................... Deleted.

12 CFR 563b.8(g) .............................................. Form AC, General Instruction B ...................... Nonsubstantive revision, moved.

12 CFR 563b.8(h) .............................................. ........................................................................... Deleted.

12 CFR 563b.8(i)–(1) ......................................... Form AC, General Instruction B ...................... Nonsubstantive revision, moved.

12 CFR 563b.8(m) ............................................. ........................................................................... Deleted.

12 CFR 563b.8(n) .............................................. Form AC, General Instruction B ...................... Nonsubstantive revision, moved.

12 CFR 563b.8(o) .............................................. ........................................................................... Deleted.

12 CFR 563b.8(p) .............................................. 12 CFR 563b.150(a)(6), Form AC, General Instruction B.Nonsubstantive revision, moved.

12 CFR 563b.8(q) .............................................. Form AC, General Instruction B ...................... Nonsubstantive revision, moved.

12 CFR 563b.8(r) ............................................... Form AC, General Instruction B ...................... Substantive revision, moved.

12 CFR 563b.8(s) .............................................. Form AC, General Instruction B ...................... Nonsubstantive 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)–(c) .................................. Nonsubstantive 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, 610 .................................... Nonsubstantive revision, moved.

12 CFR 563b.22 ................................................ ........................................................................... Deleted.

12 CFR 563b.23(a)–(c) ...................................... 12 CFR 563b.670, 675 .................................... Nonsubstantive 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 563b.625(a)(1) .................................... Nonsubstantive 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 563b.625(a)(2) .................................... Nonsubstantive revision, moved.

12 CFR 563b.27(a) ............................................ 12 CFR 563b.650 ............................................. Nonsubstantive revision, moved.

12 CFR 563b.27(b) ............................................ 12 CFR 563b.660(f)(1) ..................................... Nonsubstantive revision, moved.

12 CFR 563b.27(c) ............................................ 12 CFR 563b.660(a)(2) .................................... Nonsubstantive revision, moved.

12 CFR 563b.27(d) ............................................ 12 CFR 563b.660(c) ........................................ Nonsubstantive revision, moved.

12 CFR 563b.27(e) ............................................ 12 CFR 563b.660(g)(2) .................................... Nonsubstantive revision, moved.

12 CFR 563b.27(f)–(g) ....................................... 12 CFR 563b.660(e) ........................................ Nonsubstantive revision, moved.

12 CFR 563b.27(h) ............................................ 12 CFR 563b.660(f)(2) ..................................... Nonsubstantive revision, moved.

12 CFR 563b.27(i) ............................................. 12 CFR 563b.660(g)(1) .................................... Nonsubstantive revision, moved.

12 CFR 563b.27(j) ............................................. 12 CFR 563b.660(g)(3) .................................... Nonsubstantive revision, moved.

12 CFR 563b.27(k) ............................................ 12 CFR 563b.660(g)(4) .................................... Nonsubstantive revision, moved.

43100 Federal Register / Vol. 65, No. 134 / Wednesday, July 12, 2000 / Proposed Rules

4 5 U.S.C. 605(b).

5 5 U.S.C. 603(a).

6 13 CFR 121.201, Division H (1999).

Original provision Proposed provision Comment

12 CFR 563b.27(l) ............................................. 12 CFR 563b.660(d)(3) .................................... Nonsubstantive revision, moved.

12 CFR 563b.27(m) ........................................... 12 CFR 563b.660(d)(2) .................................... Nonsubstantive revision, moved.

12 CFR 563b.27(n) ............................................ 12 CFR 563b.660(d)(1) .................................... Nonsubstantive revision, moved.

12 CFR 563b.27(o) ............................................ 12 CFR 563b.660(d)(4) .................................... Nonsubstantive revision, moved.

12 CFR 563b.27(p) ............................................ 12 CFR 563b.660(a)(3) .................................... Nonsubstantive revision, moved.

12 CFR 563b.27(q)–(r) ...................................... 12 CFR 563b.660(h) ........................................ Nonsubstantive revision, moved.

12 CFR 563b.27(s) ............................................ 12 CFR 563b.660(g)(5) .................................... Nonsubstantive 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, 110, 115 ............................ New provisions.

12 CFR 563b.295 ............................................. New provision.

12 CFR 563b.550–575 ..................................... New provisions.

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

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.

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

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

• 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.

• The accuracy of OTS’s estimate of

the burden of the proposed information

collection.

• Ways to enhance the quality, utility,

and clarity of the information to be

collected.

• 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.

• 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?

43102 Federal Register / Vol. 65, No. 134 / Wednesday, July 12, 2000 / Proposed Rules

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 subaccounts?

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

§ 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.

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

§ 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.

§ 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 §§ 563b.550 through

563b.575.

§ 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.

§ 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 § 574.2(c) of this chapter.

The rebuttable presumptions of

§ 574.4(d) of this chapter, other than

§§ 574.4(d)(1) and (d)(2) of this chapter,

apply to the share purchase limitations

at §§ 563b.355 through 563b.395.

Affiliate of, or a person affiliated with,

a specified person, is a person that

directly, or indirectly through one or

more intermediaries, controls, 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 §§ 563b.370, 563b.380,

563b.385, 563b.390, 563b.395 and

563b.505, a person who has a

substantial beneficial interest in your

tax-qualified or non-tax-qualified

employee stock benefit plan or who is

a trustee or a fiduciary of the plan is not

an associate of the plan. For the

purposes of § 563b.370, your taxqualified 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 jointstock 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 § 561.42 of this

chapter, including a demand account as

defined in § 561.16 of this chapter.

Solicitation and solicit is a request for

a proxy, whether or not accompanied by

or included in a form of proxy; a request

to execute, not execute, or revoke a

proxy; or the furnishing of a form of

proxy or other communication

reasonably calculated to cause your

members to procure, withhold, or

revoke a proxy. Solicitation or solicit 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

§ 563b.355;

(2) Tax-qualified employee stock

ownership plans under § 563b.380;

(3) Supplemental eligible account

holders under § 563b.355; and

(4) Other voting members under

§ 563b.365.

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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

§ 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.

§ 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.

§ 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.

§ 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 § 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.

§ 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.

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Plan of Conversion

§ 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

§§ 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.

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

of conversion?

You must include the information

included in §§ 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.

§ 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 statechartered 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 statechartered 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.

§ 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

§ 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 § 563b.200(b).

(3) Proxy soliciting materials under

§ 563b.270, including:

(i) A preliminary proxy statement

with signed financial statements;

(ii) A form of proxy meeting the

requirements of § 563b.255; and

(iii) Any additional proxy soliciting

materials.

(4) An offering circular described in

§ 563b.300.

(5) The documents and information

required by Form AC. You may obtain

Form AC from OTS Washington and

Regional Offices (see § 516.1 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.

§ 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

§ 516.1 of this chapter.

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§ 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

§ 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 § 516.1 of this chapter.

(c) If OTS does not accept your

application for conversion under

§ 563b.200 and requires you to file a

new application, you must publish and

post a new notice and allow an

additional 20 days for comment.

§ 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

§ 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 § 516.1 of this chapter.

OTS Review of the Application for

Conversion

§ 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 § 563b.150(a)(2) in

determining whether to approve your

application. OTS will review the

appraisal under the following

requirements.

(1) Independent persons experienced

and expert in corporate appraisal, and

acceptable to OTS, must prepare the

appraisal report.

(2) An affiliate of the appraiser may

serve as an underwriter or selling agent,

if you ensure that the appraiser is

separate from the underwriter or selling

agent affiliate and the underwriter or

selling agent affiliate does not make

recommendations or affect the

appraisal.

(3) The appraiser may not receive any

fee in connection with the conversion

other than for appraisal services.

(4) The appraisal report must include

a complete and detailed description of

the elements of the appraisal, a

justification for the appraisal

methodology, and sufficient support for

the conclusions.

(5) If the appraisal is based on a

capitalization of your pro forma income,

it must indicate the basis for

determining the income to be derived

from the sale of shares, and demonstrate

that the earnings multiple used is

appropriate, including future earnings

growth assumptions.

(6) If the appraisal is based on a

comparison of your shares with

outstanding shares of existing stock

associations, the existing stock

associations must be reasonably

comparable in size, market area,

competitive conditions, risk profile,

profit history, and expected future

earnings.

(7) OTS may decline to process the

application for conversion and deem it

materially deficient or substantially

incomplete if the initial appraisal report

is materially deficient or substantially

incomplete.

(8) You may not represent or imply

that OTS approved the appraisal.

(c) OTS will review your compliance

record under part 563e of this chapter

and your business plan to determine

how you will serve the convenience and

needs of your communities after the

conversion.

(1) Based on this review, OTS may

approve your application, deny your

application, or approve your application

on the condition that you will improve

your CRA performance or that you will

address the particular credit or lending

needs of the communities that you will

serve.

(2) OTS may deny your application if

your business plan does not

demonstrate that your proposed use of

conversion proceeds will help you to

meet the credit and lending needs of the

communities that you will serve.

(d) OTS may request that you amend

your application if further explanation

is necessary, material is missing or

material must be corrected.

(e) OTS will deny your application if

the application does not meet the

requirements of this subpart, unless

OTS waives the requirement under

§ 563b.5.

§ 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

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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 § 563b.235.

Vote by Members

§ 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 § 563b.135 in your notice.

§ 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.

§ 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.

§ 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

§ 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.

§ 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.

§ 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.

§ 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.

§ 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

§ 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

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your members within ten days after OTS

authorizes the solicitation.

§ 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

§ 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

§ 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.

§ 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.

§ 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.

§ 563b.290 What will OTS do if a

solicitation violates these prohibitions?

(a) If a solicitation violates § 563b.285,

OTS may require remedial measures,

including:

(1) Correction of the violation by a

retraction and a new solicitation;

(2) Rescheduling the members’

meeting; or

(3) Any other actions necessary to

ensure a fair vote.

(b) OTS may also bring an

enforcement action against the violator.

§ 563b.295 Will OTS require me to resolicit proxies?

If you amend your application for

conversion, OTS may require you to resolicit proxies for your members’

meeting as a condition of approval of

the amendment.

Offering Circular

§ 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

§ 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 § 563b.400.

§ 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.

§ 563b.310 When must I file a posteffective 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 posteffective 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.

Federal Register / Vol. 65, No. 134 / Wednesday, July 12, 2000 / Proposed Rules 43109

Offers and Sales of Stock

§ 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.

§ 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.

§ 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.

§ 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

§ 516.1 of this chapter) and OTS’s

website (www.ots.treas.gov).

§ 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.

§ 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.

§ 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.

§ 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 § 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

43110 Federal Register / Vol. 65, No. 134 / Wednesday, July 12, 2000 / Proposed Rules

eligible account holder in the same

amount as described in paragraph (a) of

this section, except that you must

compute the fraction described in

paragraph (a)(3) of this section as

follows: The numerator is the total

qualifying deposit of the supplemental

eligible account holder. The

denominator is the total qualifying

deposits of all supplemental eligible

account holders.

§ 563b.360 Are my officers, directors, and

their associates eligible account holders?

Your officers, directors, and their

associates may be eligible account

holders. However, if an officer, director,

or his or her associate receives

subscription rights based on increased

deposits in the year before the eligibility

record date, you must subordinate

subscription rights for these deposits to

subscription rights exercised by other

eligible account holders.

§ 563b.365 May other voting members

purchase conversion shares in the

conversion?

(a) You must give rights to purchase

your conversion shares in the

conversion to voting members who are

neither eligible account holders nor

supplemental eligible account holders.

You must allocate rights to each voting

member that are equal to the greater of:

(1) The maximum purchase limitation

established for the community offering

and the public offering under

§ 563b.395; or

(2) One-tenth of one percent of the

total stock offering.

(b) You must subordinate the voting

members’ rights to the rights of eligible

account holders, tax-qualified employee

stock ownership plans, and

supplemental eligible account holders.

§ 563b.370 Does OTS limit the aggregate

purchases by officers, directors, and their

associates?

(a) When you convert, your officers,

directors, and their associates may not

purchase, in the aggregate, more than

the following percentage of your total

stock offering:

Institution size

Officer and director

purchases

(percent)

$ 50,000,000 or less ............. 35

$ 50,000,001–100,000,000 ... 34

$100,000,001–150,000,000 .. 33

$150,000,001–200,000,000 .. 32

$200,000,001–250,000,000 .. 31

$250,000,001–300,000,000 .. 30

$300,000,001–350,000,000 .. 29

$350,000,001–400,000,000 .. 28

$400,000,001–450,000,000 .. 27

$450,000,001–500,000,000 .. 26

Institution size

Officer and director

purchases

(percent)

Over $500,000,000 ............... 25

(b) The purchase limitations in this

section do not apply to shares held in

tax-qualified employee stock benefit

plans that are attributable to your

officers, directors, and their associates.

§ 563b.375 How do I allocate my

conversion shares if my shares are

oversubscribed?

(a) If your conversion shares are

oversubscribed by your eligible account

holders, you must allocate shares among

the eligible account holders so that

each, to the extent possible, may

purchase 100 shares.

(b) If your conversion shares are

oversubscribed by your supplemental

eligible account holders, you must

allocate shares among the supplemental

eligible account holders so that each, to

the extent possible, may purchase 100

shares.

(c) If a person is an eligible account

holder and a supplemental eligible

account holder, you must include the

eligible account holder’s allocation in

determining the number of conversion

shares that you may allocate to the

person as a supplemental eligible

account holder.

(d) For conversion shares that you do

not allocate under paragraphs (a) and (b)

of this section, you must allocate the

shares among the eligible or

supplemental eligible account holders

equitably, based on the amounts of

qualifying deposits. You must describe

this method of allocation in your plan

of conversion.

(e) If shares remain after you have

allocated shares as provided in

paragraphs (a) and (b) of this section,

and if your voting members

oversubscribe you must allocate your

conversion shares among those

members equitably. You must describe

the method of allocation in your plan of

conversion.

§ 563b.380 May my employee stock

ownership plan purchase conversion

shares?

(a) Your tax-qualified employee stock

ownership plan may purchase up to 10

percent of the total offering of your

conversion shares.

(b) If OTS approves a revised stock

valuation range as described in

§ 563b.330(e), and the final conversion

stock valuation range exceeds the

former maximum stock offering range,

you may allocate conversion shares to

your tax-qualified employee stock

ownership plan, up to the 10 percent

limit in paragraph (a) of this section.

(c) If your tax-qualified employee

stock ownership plan is not able to

purchase stock in the offering, it may,

with prior OTS approval and

appropriate disclosure in your offering

circular, purchase stock in the open

market, or purchase authorized but

unissued conversion shares.

(d) You may include stock

contributed to a charitable organization

in the conversion in the calculation of

the total offering of conversion shares

under paragraphs (a) and (b) of this

section, unless OTS objects on

supervisory grounds.

§ 563b.385 May I impose any purchase

limitations?

(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.

§ 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.

Federal Register / Vol. 65, No. 134 / Wednesday, July 12, 2000 / Proposed Rules 43111

§ 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

§ 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

§ 563b.405.

§ 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 § 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

§ 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.

§ 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.

§ 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 statechartered 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 statechartered 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 § 563b.450.

§ 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.

§ 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 § 563b.445(c).

§ 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 § 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

§ 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.

§ 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.

§ 563b.460 How do I determine the initial

balances of liquidation sub-accounts?

(a)(1) You determine the initial subaccount 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 subaccount 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

43112 Federal Register / Vol. 65, No. 134 / Wednesday, July 12, 2000 / Proposed Rules

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 subaccounts for the qualifying deposits in

the savings account on each record date.

(b) You may not increase the initial

sub-account balances. You must

decrease the initial balance under

§ 563b.470 as depositors reduce or close

their accounts.

§ 563b.465 Do account holders retain any

voting rights based on their liquidation subaccounts?

Eligible account holders or

supplemental eligible account holders

do not retain any voting rights based on

their liquidation sub-accounts.

§ 563b.470 Must I adjust liquidation subaccounts?

(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.

§ 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.

§ 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 § 563b.520.

§ 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 ofllllll. 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

§ 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 taxqualified 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 § 565.4),

is subject to OTS enforcement action, or

receives a capital directive under

§ 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

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

§ 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.

§ 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

§ 563b.515(a) and OTS does not

disapprove your repurchase. OTS will

not approve such repurchases unless the

repurchase meets the standards in

§ 563b.515(c), and the repurchase is

consistent with paragraph (c) of this

section.

(2) You may repurchase qualifying

shares of a director or conduct an OTS

approved repurchase 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 § 563b.450. You must

comply with the capital distribution

requirements at part 563, subpart E of

this chapter.

(2) The restrictions on share

repurchases apply to a charitable

organization under § 563b.550. You

must aggregate purchases of shares by

the charitable organization with your

repurchases.

§ 563b.515 What information must I

provide to OTS before I repurchase my

shares?

(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.

§ 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 § 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.

§ 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

§§ 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

43114 Federal Register / Vol. 65, No. 134 / Wednesday, July 12, 2000 / Proposed Rules

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.

§ 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

§ 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.

§ 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.

§ 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.

§ 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.

§ 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 § 563.200 of

this chapter. See Form AC (Exhibit 9)

for further information on operating

plans and conflict of interest plans.

(b) Before your board of directors may

adopt a plan of conversion that includes

a charitable organization, you must

identify your directors that will serve on

the charitable organization’s board.

These directors may not participate in

your board’s discussions concerning

contributions to the charitable

organization, and may not vote on the

matter.

§ 563b.575 What other requirements apply

to charitable organizations?

(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

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

§ 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.

§ 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 statechartered 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.

§ 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

§ 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.

§ 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

§ 563b.650 What must I include in my plan

of voluntary supervisory conversion?

A majority of your board of directors

must adopt a plan of voluntary

supervisory conversion. You must

include all of the following information

in your plan of voluntary supervisory

conversion.

(a) Your name and address.

(b) The name, address, date and place

of birth, and social security number of

each proposed purchaser of conversion

shares and a description of that

purchaser’s relationship to you.

(c) The title, per-unit par value,

number, and per-unit and aggregate

offering price of shares that you will

issue.

(d) The number and percentage of

shares that each investor will purchase.

(e) The aggregate number and

percentage of shares that each director,

officer, and any affiliates or associates of

the director or officer will purchase.

(f) A description of any liquidation

account.

(g) Certified copies of all resolutions

of your board of directors relating to the

conversion.

Voluntary Supervisory Conversion

Application

§ 563b.660 What must I include in my

voluntary supervisory conversion

application?

You must 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 §§ 563b.625 or

563b.630.

(2) An opinion of qualified,

independent counsel or an independent,

certified public accountant regarding

the tax consequences of the conversion,

or an IRS ruling indicating that the

transaction qualifies as a tax-free

reorganization.

(3) An opinion of independent

counsel indicating that applicable state

law authorizes the voluntary

supervisory conversion, if you are a

state-chartered savings association

converting to state stock form.

(b) Plan of conversion. A plan of

voluntary supervisory conversion that

complies with § 563b.650.

(c) Business plan. A business plan

that complies with § 563b.105, where

required by OTS.

(d) Financial data. (1) Your most

recent audited financial statements and

Thrift Financial Report. You must

43116 Federal Register / Vol. 65, No. 134 / Wednesday, July 12, 2000 / Proposed Rules

explain how your current capital levels

make you eligible to engage in a

voluntary supervisory conversion under

§§ 563b.625 or 563b.630.

(2) A description of your estimated

conversion expenses.

(3) Evidence supporting the value of

any non-cash asset contributions.

Appraisals must be acceptable to OTS

and the non-cash asset must meet all

other OTS policy guidelines. See Thrift

Activities Handbook Section 110 for

guidelines.

(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

§ 563b.670 Will OTS approve my voluntary

supervisory conversion application?

OTS will generally approve your

application to engage in a voluntary

supervisory conversion unless it

determines:

(a) You do not meet the eligibility

requirements for a voluntary

supervisory conversion under

§§ 563b.625 or 563b.630 or because the

proceeds from the sale of your

conversion stock, less the expenses of

the conversion, would be insufficient to

satisfy any applicable viability

requirement;

(b) The transaction is detrimental to

or would cause potential injury to you

or the 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.

§ 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

§ 563b.680 How do I sell my shares?

If you convert under this subpart, you

must offer and sell your shares under

Part 563g of this chapter.

Post-Conversion

§ 563b.690 Who may not acquire

additional shares after the voluntary

supervisory conversion?

For three years after the completion of

a voluntary supervisory conversion,

neither you nor 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.

§ 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’’.

§ 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 ‘‘§ 563b.11 of this chapter’’, and

by adding in lieu thereof the phrase

‘‘§ 563b.200(c) of this chapter’’;

c. Removing, in paragraph (b)(1), the

phrase ‘‘ § 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 ‘‘§ 563b.7(c)’’, and by adding in

lieu thereof the phrase ‘‘§ 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’’;

Federal Register / Vol. 65, No. 134 / Wednesday, July 12, 2000 / Proposed Rules 43117

f. Adding new paragraphs (d)(7) and

(d)(8);

g. Removing, in paragraph (e), the

phrase ‘‘§§ 563b.3 through 563b.8 of this

chapter’’, and adding in lieu thereof the

phrase ‘‘12 CFR part 563b’’.

The additions read as follows:

§ 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

§§ 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 §§ 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

‘‘§ 563b.27(a)’’, and by adding in lieu

thereof the phrase ‘‘§ 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:

§ 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:

Institution size

Officer and

director

purchases

(percent)

$50,000,000 or less .............. 35

$50,000,001–100,000,000 .... 34

$100,000,001–150,000,000 .. 33

$150,000,001–200,000,000 .. 32

$200,000,001–250,000,000 .. 31

$250,000,001–300,000,000 .. 30

$300,000,001–350,000,000 .. 29

$350,000,001–400,000,000 .. 28

$400,000,001–450,000,000 .. 27

$450,000,001–500,000,000 .. 26

Over $500,000,000 ............... 25

(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 § 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 ‘‘§ 563b.3(g)(1)’’ or

‘‘§ 563b.3(g)(3)’’ wherever they appear,

and by adding in lieu thereof the phrase

‘‘§ 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:

§ 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 ‘‘§ 563b.8 of this chapter’’, and

by adding in lieu thereof the phrase

‘‘§ 563b.150 of this chapter’’, and by

revising paragraph (a)(1) to read as

follows:

§ 575.13 Procedural requirements.

(a) Proxies and proxy statements—(1)

Solicitation of proxies. The provisions

of §§ 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

§§ 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 § 563b.280 of this

chapter. File proxies and proxy

statements in accordance with

§ 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 § 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

43118 Federal Register / Vol. 65, No. 134 / Wednesday, July 12, 2000 / Proposed Rules

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

lllllllllllllllllllll

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

lllllllllllllllllllll

(Street address of Applicant)

lllllllllllllllllllll

(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

Federal Register / Vol. 65, No. 134 / Wednesday, July 12, 2000 / Proposed Rules 43119

adequately examined and investigated this

application and concluded that this

application complies with 12 CFR Part 563b.

Attest:

lllllllllllllllllllll

(Duly Authorized Representative) (Principal

Executive Officer)

lllllllllllllllllllll

(Principal Financial Officer)

lllllllllllllllllllll

(Principal Accounting Officer)

lllllllllllllllllllll

(Director)

lllllllllllllllllllll

(Director)

lllllllllllllllllllll

(Director)

lllllllllllllllllllll

(Director)

lllllllllllllllllllll

(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.

43120 Federal Register / Vol. 65, No. 134 / Wednesday, July 12, 2000 / Proposed Rules

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

lllllllllllllllllllll

(Name of Applicant in charter)—(Docket No.)

lllllllllllllllllllll

(Street address of Applicant)

lllllllllllllllllllll

(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.

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

§ 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.

43122 Federal Register / Vol. 65, No. 134 / Wednesday, July 12, 2000 / Proposed Rules

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 offbalance-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

Federal Register / Vol. 65, No. 134 / Wednesday, July 12, 2000 / Proposed Rules 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 loanto-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 longterm 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 interestbearing 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 interestearning 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 interestrate 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 monthend during each period for which an end-ofperiod 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

43124 Federal Register / Vol. 65, No. 134 / Wednesday, July 12, 2000 / Proposed Rules

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.

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

(A) Capitalization on

most recent balance

sheet date

(B) Pro forma adjustments as a result of

conversion

(C) Pro forma capitalization, after giving effect 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.

43126 Federal Register / Vol. 65, No. 134 / Wednesday, July 12, 2000 / Proposed Rules

(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-percentor 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

lllllllllllllllllllll

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

lllllllllllllllllllll

(Street address of Applicant)

lllllllllllllllllllll

(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.

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

Price to public Selling discounts

and 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

lllllllllllllllllllll

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

lllllllllllllllllllll

(Street address of Applicant)

lllllllllllllllllllll

(City, State and Zip Code)

43128 Federal Register / Vol. 65, No. 134 / Wednesday, July 12, 2000 / Proposed Rules

(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,llllll, 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 llllllllllllllll

Date llllllllllllllllll

OTS Form 1683, June 2000.

[FR Doc. 00–16347 Filed 7–11–00; 8:45 am]

BILLING CODE 6720–01–P