# 67 FR 17228: Mutual Savings Associations, Mutual Holding Company Reorganizations, and Conversions From Mutual to Stock Form

> Federal · Regulations · In force

URL: https://www.frixlaw.com/law-library/statutes/FR_PRORULE_02-7979

## Section

- **Citation:** 67 FR 17228
- **Heading:** Mutual Savings Associations, Mutual Holding Company Reorganizations, and Conversions From Mutual to Stock Form
- **Jurisdiction:** Federal
- **Kind:** Regulations
- **Status:** In force
- **Text as of:** August 14, 2026
- **Source:** Compiled text
- **Location:** Federal Register / Vol. 67 / 67 FR 17228

## Text

DEPARTMENT OF THE TREASURY Office of Thrift Supervision 12 CFR Parts 563b, 574, and 575 [No. 2002-11] 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 amend its regulations on the mutual-to-stock conversion process and portions of its regulations on mutual holding company reorganizations. This document is a re-proposal (Re-proposal) of the Notice of Proposed Rulemaking (First Proposal) published July 12, 2000. OTS extensively modified the First Proposal as a result of the public comments it received and seeks public comment on those revisions. As part of a wholesale review of treatment of mutual institutions, OTS separately has modified its examination and supervisory policies to address many of the concerns mutual institutions have raised with OTS over the years.
This Re-proposal includes modifications to the provisions addressing business plans. In addition, it addresses 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, adding rules to establish charitable organizations, and clarifying the policy on the amount of proceeds allowed to be retained at the holding company level. We are also requesting comment regarding certain additional proposed changes to the OTS Mutual Holding Company Regulations.

DATES:
Written comments must be received on or before May 9, 2002.

ADDRESSES:
Mail: Send comments to Regulation Comments, Chief Counsel's Office, Office of Thrift Supervision, 1700 G Street, NW., Washington, DC 20552, Attention Docket No. 2002-11.
Delivery: Hand deliver comments to the Guard's Desk, East Lobby Entrance, 1700 G Street, NW., from 9 a.m. to 4 p.m
ng Company Regulations.

DATES:
Written comments must be received on or before May 9, 2002.

ADDRESSES:
Mail: Send comments to Regulation Comments, Chief Counsel's Office, Office of Thrift Supervision, 1700 G Street, NW., Washington, DC 20552, Attention Docket No. 2002-11.
Delivery: Hand deliver comments to the Guard's Desk, East Lobby Entrance, 1700 G Street, NW., from 9 a.m. to 4 p.m. on business days, Attention Regulation Comments, Chief Counsel's Office, Docket No. 2002-11.
Facsimiles: Send facsimile transmissions to FAX Number (202) 906-6518, Attention Docket No. 2002-11.
E-Mail: Send e-mails to regs.comment@ots.treas.gov, Attention Docket No. 2002-11, and include your name and telephone number.
Public Inspection: Comments and the related index will also be posted on the OTS Internet Site at http://www.ots.treas.gov. In addition, interested persons may inspect comments at the Public Reference Room, 1700 G Street, NW., by appointment. To make an appointment for access, call (202) 906-5922, send an e-mail to public.info@ots.treas.gov, or send a facsimile transmission to (202) 906-7755. (Prior notice identifying the materials you will be requesting will assist us in serving you.) Appointments will be scheduled on business days between 10 a.m. and 4 p.m. In most cases, appointments will be available the next business day following the date a request is received.
FOR FURTHER INFORMATION CONTACT:
David A. Permut, Senior Attorney, (202) 906-7505; Gary Jeffers, Senior Attorney, (202) 906-6457, Business Transactions 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:
I
date a request is received.
FOR FURTHER INFORMATION CONTACT:
David A. Permut, Senior Attorney, (202) 906-7505; Gary Jeffers, Senior Attorney, (202) 906-6457, Business Transactions 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:
I. Background
Pursuant to its broad authority to regulate mutual savings associations, authorize mutual holding company (MHC) reorganizations, and regulate mutual-to-stock conversions of savings associations under the Home Owners' Loan Act (HOLA), 1 on July 12, 2000, OTS published an Interim Final Rule (Interim Rule), revising OTS repurchase restrictions applicable to recently converted institutions, changing OTS policy on waivers of dividends by MHCs and making certain technical changes to the regulations as a result of the passage of the Gramm-Leach-Bliley Act of 1999 (GLB Act). 2 On the same day, OTS published a Notice of Proposed Rulemaking, proposing changes to OTS rules governing stock conversions and MHCs. 3
1 12 U.S.C. 1464(a), (i) and (p) and 1467a(o).
2 65 FR 43088.
3 65 FR 43092.
OTS undertook these actions based on numerous discussions with the management of mutual institutions, its experience with the conversion process, and developments in the marketplace regarding MHC reorganizations and mutual-to-stock conversions. OTS also reviewed its policies, practices, and regulations to assess whether additions or revisions were necessary.
To respond completely to all the suggestions for change, OTS developed a comprehensive regulatory strategy governing mutual institutions, MHC reorganizations, and the mutual-to-stock conversion process
n the marketplace regarding MHC reorganizations and mutual-to-stock conversions. OTS also reviewed its policies, practices, and regulations to assess whether additions or revisions were necessary.
To respond completely to all the suggestions for change, OTS developed a comprehensive regulatory strategy governing mutual institutions, MHC reorganizations, and the mutual-to-stock conversion process. This comprehensive strategy includes: (1) New policy and examination guidance; (2) these re-proposed regulations for the mutual-to-stock conversion process and MHC minority stock offerings; and (3) revisions to the application forms used for the mutual-to-stock conversion process.
Since the First Proposal was published over 18 months ago, OTS has issued guidance covering several areas of concern to commenters. To enable the public to consider the interaction between that guidance and the changes OTS is making to the First Proposal, OTS is publishing this Re-proposal to seek further comment.
II. Policy Guidance
In the First Proposal, OTS indicated it would issue policy guidance in certain areas regarding mutual associations in connection with the changes to the MHC and conversion regulations. OTS has developed new examination guidance to address many of the concerns mutual associations raised, within the context of safe and sound operations. OTS has also enhanced its off-site monitoring systems to provide examiners with comparative peer groups of similarly situated mutual associations.
Accordingly, OTS has separately issued the following new or revised guidance:
• Regulatory Bulletin 27b on Compensation. This revised bulletin clarifies that mutual associations are subject to and governed by the same prudential standards as stock associations. OTS intends this guidance to enhance the ability of mutual associations to provide competitive compensation plans to attract and retain qualified management and staff.
• Thrift Activities Handbook Section 110, Capital Stock and Ownership
7b on Compensation. This revised bulletin clarifies that mutual associations are subject to and governed by the same prudential standards as stock associations. OTS intends this guidance to enhance the ability of mutual associations to provide competitive compensation plans to attract and retain qualified management and staff.
• Thrift Activities Handbook Section 110, Capital Stock and Ownership. This revised handbook section includes a new section on mutual associations that differentiates them from stock associations, particularly by discussing member rights and ownership differences.
• Thrift Activities Handbook Section 430, Operations Analysis. This revised handbook section includes: a new section on the importance of capital for mutual associations; information on
The revised examination procedures will improve supervision of mutual associations. They will be targeted more directly to the quality of operations, risk management, capital needs and formation, and internal controls, enabling examiners to gauge the overall financial condition of mutual associations more effectively. OTS is changing its off-site monitoring systems to allow examiners to conduct financial analyses for mutual institutions by comparing them with mutual institutions instead of stock institutions.
In addition, for mutual associations seeking to augment their capital base, OTS is exploring the feasibility and utility of various capital-raising alternatives, such as the use of subordinated debt instruments, mutual capital certificates, non-withdrawable accounts, trust preferred securities, and other financing transactions.
III. Summary of Comments
OTS received 46 comment letters on the First Proposal and the Interim Rule. Three were requests to extend the comment period. 4 Five individuals, ten law firms, 14 thrifts, 15 trade groups, and the Federal Deposit Insurance Corporation (FDIC) submitted comments
apital certificates, non-withdrawable accounts, trust preferred securities, and other financing transactions.
III. Summary of Comments
OTS received 46 comment letters on the First Proposal and the Interim Rule. Three were requests to extend the comment period. 4 Five individuals, ten law firms, 14 thrifts, 15 trade groups, and the Federal Deposit Insurance Corporation (FDIC) submitted comments. OTS participated in meetings on the regulations sponsored by America's Community Bankers on September 12 (attended by 24 attorneys), September 28 (conference telephone call with representatives from 45 mutual institutions, two outside counsel, representatives of the FDIC and the Board of Governors of the Federal Reserve System (Federal Reserve)), and November 3 (with representatives of the FDIC and the Federal Reserve). OTS also held focus group meetings with executives from mutual savings associations in Washington on January 8, 2001, and in Boston on February 26, 2001, to listen to the views of mutual institutions on specific questions raised in the preamble to the proposed regulation. Issues raised by commenters are discussed in the item-by-item summary below.
4 On October 10, 2000, OTS extended the comment period on the two regulations from October 10, 2000 to November 9, 2000. 65 FR 60123.
IV. Item-by-Item Summary
A. General
The greatest number of comments on the First Proposal and the most substantial concerns expressed by the commenters involved the business plan, Regional Office non-objection to the business plan, and the pre-filing meeting requirements. While the Re-proposal requires pre-filing meetings, in response to the comments, OTS has revised when pre-filing meetings must be held and has eliminated the requirement to obtain OTS non-objection to conversion business plans before filing. Similarly, OTS has revised the business plan standards to be addressed by converting associations and considered in OTS review in response to the comments.
B
hile the Re-proposal requires pre-filing meetings, in response to the comments, OTS has revised when pre-filing meetings must be held and has eliminated the requirement to obtain OTS non-objection to conversion business plans before filing. Similarly, OTS has revised the business plan standards to be addressed by converting associations and considered in OTS review in response to the comments.
B. Pre-filing Meeting
Under the First Proposal, OTS would have required each association contemplating a conversion to meet with the appropriate Regional Office, in a pre-filing meeting, to discuss the proposed business plan. The board of directors, or a committee of the board including outside directors, were encouraged to attend the meeting. The association would then have submitted the proposed business plan at least 30 days prior to submitting its conversion application, and would have needed to 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 MHC form if the reorganization included a stock issuance.
A number of commenters opposed the pre-filing meeting in its entirety, although two commenters, both regulators, supported such meetings. One commenter suggested that depositors, consumer advocates, or other interested parties be invited to the pre-filing meeting. Several commenters opposed both the pre-filing meeting and the pre-approval of the business plan as intrusive and a source of unnecessary delay and expense. A number of commenters thought OTS was requiring the whole board to attend the pre-filing meeting at the Regional Office with all of the costs of attending such a meeting falling on the association.
It has been OTS' normal practice to discuss a savings association's conversion plans with the board of directors. Therefore, a pre-filing meeting does not result in any additional burden
and expense. A number of commenters thought OTS was requiring the whole board to attend the pre-filing meeting at the Regional Office with all of the costs of attending such a meeting falling on the association.
It has been OTS' normal practice to discuss a savings association's conversion plans with the board of directors. Therefore, a pre-filing meeting does not result in any additional burden. In response to the concerns expressed by the commenters about the expense of the meeting, OTS notes that, if the board desires, OTS will send a representative from the Regional Office to the association to meet with the board of directors. To ensure that such a meeting occurs early in the process, however, OTS expects to meet with the board of directors at least ten days prior to the passage of a Plan of Conversion or Plan of Reorganization. At that time, OTS would expect the board of directors to have prepared a short, written strategic plan for OTS to review and discuss with the board at the meeting. OTS reiterates that the purpose of this meeting is not to substitute the agency's judgment for that of the directors. OTS merely proposes to require the board to articulate its plans for the association and the implications of those plans before any process actually begins and before the institution spends significant funds.
C. Prior OTS Non-Objection to Business Plan
The First Proposal provided that applicants could not submit a conversion application until the converting association had submitted, and OTS had advised the association that it had not objected to, the association's business plan. Many commenters objected to this requirement, asserting that the requirement added delay and expense to the conversion process, was unduly burdensome, or gave the Regional Director the ability to prevent a conversion if the Regional Director disagreed with the business plan
association had submitted, and OTS had advised the association that it had not objected to, the association's business plan. Many commenters objected to this requirement, asserting that the requirement added delay and expense to the conversion process, was unduly burdensome, or gave the Regional Director the ability to prevent a conversion if the Regional Director disagreed with the business plan.
Although OTS does not believe the prior non-objection requirement would be as burdensome in practice as anticipated by certain commenters, the Re-proposal does not require OTS non-objection to the business plan prior to an association filing a conversion application. Under the Re-proposal, business plans must be filed at the time a conversion application is submitted, or the application will be rejected as materially deficient. As a practical matter, however, OTS strongly encourages submission of business plans before the application filing to help ensure timely approval of the conversion application.
D. Business Plan Standards
The First Proposal provided that a converting association's business plan must, among other things: (i) Clearly and completely describe projected operations, including the deployment of conversion proceeds; (ii) demonstrate that the plan of conversion will substantially serve to meet credit and
All commenters who discussed the business plan opposed the proposed business plan requirements. Four commenters supported the concept of business plan guidance in the regulations but were opposed to the specific guidance OTS provided
ribe projected operations, including the deployment of conversion proceeds; (ii) demonstrate that the plan of conversion will substantially serve to meet credit and
All commenters who discussed the business plan opposed the proposed business plan requirements. Four commenters supported the concept of business plan guidance in the regulations but were opposed to the specific guidance OTS provided. The various commenters asserted: (i) The creation of a business plan is management's responsibility, and OTS should not second-guess management, further, a limited number of commenters questioned OTS's authority to impose business plan standards; (ii) business plans based on Return On Equity (ROE) are inappropriate and would not work for most associations, and the proposed ROE criterion would have caused 85 percent of conversions prior to 2000 to be disapproved; (iii) it is inappropriate for OTS to determine how much capital must be invested in what type of community development activities; (iv) the business plan standards were seriously flawed, unattainable, arbitrary, unrealistic, or protectionist; (v) the business plan created a “needs” test for conversions; (vi) the First Proposal would chill management decision making; (vii) the First Proposal would create a moratorium on conversions; (viii) the First Proposal would cause unnecessary delays or would be unduly burdensome; (ix) the business plan requirements would penalize associations in slow growth areas, would not work for small thrifts, would prejudice capital raising, or ignore investor needs; (x) the business plan disallows use of stock repurchases as a legitimate business management tool, which is inconsistent with the Interim Rule eliminating restrictions on repurchases during the second and third years after conversion; (xi) the First Proposal penalizes management for lack of experience; and (xii) the First Proposal lacks flexibility
judice capital raising, or ignore investor needs; (x) the business plan disallows use of stock repurchases as a legitimate business management tool, which is inconsistent with the Interim Rule eliminating restrictions on repurchases during the second and third years after conversion; (xi) the First Proposal penalizes management for lack of experience; and (xii) the First Proposal lacks flexibility.
Neither the First Proposal nor the Re-proposal were intended to create a “needs” test or a moratorium on conversions, and in OTS' view, the regulations do not establish such a test or impose a moratorium. As to the comments regarding OTS' conversion authority in general, OTS has for decades had significant regulations governing all aspects of the conversion process, and the HOLA explicitly provides that “conversions shall be subject to such regulations as the Director shall prescribe.” 5
5 12 U.S.C. 1464(i)(1).
OTS, as the safety and soundness regulator of savings associations, believes the specific requirements are appropriate to ensure that an association contemplating such a significant transaction, with considerable ramifications regarding capital, management, and business operations, has considered the consequences of the transaction in its business plan. Accordingly, the Re-proposal continues to include a business plan requirement, and sets forth the factors OTS will consider in evaluating business plans. 6
6 OTS notes that there is no requirement to submit a business plan for an MHC reorganization without a stock issuance.
Several of the comments demonstrate that commenters believed the various factors in the First Proposal were separate standards that had to be satisfied for approval of a conversion. The Re-proposal clarifies that OTS will weigh all of the factors together, and no single factor will determine whether a business plan is acceptable
a business plan for an MHC reorganization without a stock issuance.
Several of the comments demonstrate that commenters believed the various factors in the First Proposal were separate standards that had to be satisfied for approval of a conversion. The Re-proposal clarifies that OTS will weigh all of the factors together, and no single factor will determine whether a business plan is acceptable. For example, lack of management experience with past growth will not be as significant if the business plan demonstrates realistic deployment of the conversion proceeds for new growth, such as enhancing ways to meet increased credit and lending needs in the market.
OTS recognizes that commenters were concerned about reliance on ROE as a test to determine whether to approve a business plan. OTS reiterates that in evaluating ROE as a factor in the business plan, ROE in the first years after conversion will not be given as much weight as the association's ROE near the end of the three-year business plan period, when the association has had time to deploy most, if not all of the conversion proceeds.
As for stock repurchases, today's Re-proposal permits stock repurchases to be included in the business plan. A business plan that contemplates stock repurchases as the primary use of new capital, however, will not be regarded favorably. OTS recognizes that some stock repurchases may occur, although the Re-proposal continues to limit stock repurchases in the first year following conversion. OTS will view a return of capital to shareholders (such as a special dividend) in the first year following conversion to be a material deviation from the business plan that requires the prior written approval of the Regional Director.
E. MHCs and Mutuality
In the preamble to the First Proposal, OTS asked a series of questions about what OTS could do to enhance the attractiveness of the MHC charter
will view a return of capital to shareholders (such as a special dividend) in the first year following conversion to be a material deviation from the business plan that requires the prior written approval of the Regional Director.
E. MHCs and Mutuality
In the preamble to the First Proposal, OTS asked a series of questions about what OTS could do to enhance the attractiveness of the MHC charter. OTS also specifically stated that it encouraged savings associations that were considering conversion to stock form to first carefully consider the choice of an MHC charter as an interim step. In addition, OTS specifically proposed certain changes to the MHC regulations to permit the issuance of additional stock benefit plans, easier voting requirements, and a number of other innovations that OTS thought would enhance the attractiveness of the MHC option. Taken together, these steps appeared to many commenters as expressing an agency bias for the MHC form. Many commenters expressed their disagreement with this perceived agency bias, believed OTS was putting a moratorium on stock conversions, or argued OTS was impinging on the freedom of savings associations to choose their form of charter.
OTS suggestions on enhancing the MHC charter were intended to expand the options available to a mutual association, not to give preference to one form of charter over another.
The MHC is an alternative for mutual associations that are contemplating conversion to stock form. 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, 7 Congress expanded the investment and activities authority of MHCs to include the activities of financial holding companies. OTS amended the MHC regulations to reflect those changes. 8 OTS is re-proposing significant enhancements to the MHC form to make it a long-term alternative to full conversion.
7 Pub. L. 106-102, 113 Stat. 1338 (1999).
8 65 FR 43088, Jul. 12, 2000
401(b) of the GLB Act, 7 Congress expanded the investment and activities authority of MHCs to include the activities of financial holding companies. OTS amended the MHC regulations to reflect those changes. 8 OTS is re-proposing significant enhancements to the MHC form to make it a long-term alternative to full conversion.
7 Pub. L. 106-102, 113 Stat. 1338 (1999).
8 65 FR 43088, Jul. 12, 2000.
OTS also continues to encourage mutual associations seeking new capital to seriously consider the MHC form of reorganization with a limited stock issuance, rather than a full conversion. This is a particularly useful alternative for mutual associations that have no immediate plans for deployment of substantial amounts of new capital.
F. Mutual Capital Questions
OTS asked a number of questions in the preamble to the First Proposal regarding capital for mutual associations. OTS observed that mutual associations could currently raise additional capital in a number of ways that did not involve conversion to stock form. These methods included mutual capital certificates, subordinated debt, trust preferred securities, or the formation of real estate investment trusts (REITs). OTS asked if there were other methods of raising capital and why the methods mentioned were not widely used. While no written comments were received on this issue, attendees at the two focus group meetings indicated these methods of raising additional capital were generally considered too expensive for a mutual association to undertake, particularly for smaller associations. OTS is exploring, among other approaches, the possibility of mutual associations participating with other mutual associations in larger capital offerings to reduce the costs.
The preamble to the First Proposal requested comment on whether OTS should issue guidance regarding capital distributions by mutual associations
for a mutual association to undertake, particularly for smaller associations. OTS is exploring, among other approaches, the possibility of mutual associations participating with other mutual associations in larger capital offerings to reduce the costs.
The preamble to the First Proposal requested comment on whether OTS should issue guidance regarding capital distributions by mutual associations. A number of commenters addressed this issue, all suggesting OTS not issue guidance in this area because they felt this should be a business decision of the association. OTS generally agrees and, therefore, OTS does not propose to issue guidance on capital distributions by mutual associations as part of this proposal. 9
9 Any capital distribution by mutual associations remains subject to the capital distribution regulations at 12 CFR part 563, subpart E.
G. Stock Repurchases
In the Interim Rule, OTS revised its regulations to eliminate restrictions on stock repurchases by converted savings associations after the first year following conversion. The rule change was made in part to bring OTS policy closer to that of the FDIC on this subject. Several commenters expressed appreciation that the rules of the two agencies would now be similar. Almost all the other commenters on this issue supported OTS changes, although one commenter suggested repurchase limitations should be eliminated completely. A number of the commenters suggested that there should be no restrictions on repurchases for associations completing second step stock conversions, because those companies had been public for some period of time prior to full conversion to stock form.
The Re-proposal is consistent with the Interim Rule. See §§ 563b.510 and 563b.515. OTS is also re-proposing corresponding amendments to the MHC regulations at § 575.11(c)
rs suggested that there should be no restrictions on repurchases for associations completing second step stock conversions, because those companies had been public for some period of time prior to full conversion to stock form.
The Re-proposal is consistent with the Interim Rule. See §§ 563b.510 and 563b.515. OTS is also re-proposing corresponding amendments to the MHC regulations at § 575.11(c). In response to the comment that associations that engage in second step stock conversions should receive different treatment, OTS believes that fully converted companies should receive the same treatment whether they reach that status in one step or two. In addition, OTS believes it is in the best interest of applicants to have similar treatment of stock repurchases among the agencies regulating the conversion process.
As a matter of policy, OTS has taken the position that stock repurchases for management benefit plans that have been ratified by shareholders in the first year following conversion do not count toward the repurchase limitations in § 563b.3(g). The Re-proposal, at new § 563b.510, clarifies this point. However, OTS would still require prior notification of any repurchases in the first year following conversion, even if they are not subject to OTS approval under the repurchase limitations. One commenter inquired whether a stock repurchase more than one year after conversion would require Regional Director approval as a material deviation from the business plan. OTS believes that it may constitute a material deviation, depending on what the business plan disclosed. However, current MHC regulations permit purchases of stock in the open market for tax-qualified or non-tax-qualified employee stock benefit plans to be excluded from the repurchase limitations. 10 The Re-proposal will extend this exclusion from the repurchase limitations to fully converted companies
elieves that it may constitute a material deviation, depending on what the business plan disclosed. However, current MHC regulations permit purchases of stock in the open market for tax-qualified or non-tax-qualified employee stock benefit plans to be excluded from the repurchase limitations. 10 The Re-proposal will extend this exclusion from the repurchase limitations to fully converted companies. OTS notes that the FDIC permits purchases for employee stock benefit plans to be excluded from the repurchase limitations for fully converted companies.
10 See 12 CFR 575.11(c)(1)(iv).
H. Dividend Waivers
The Interim Rule revised OTS policy on dividend waivers for MHCs. Prior OTS policy had adjusted exchange ratios for excessive dividends in conversions of MHCs to stock form. No adjustment is now required, and § 575.11(d)(3) was amended to reflect this change in OTS policy. Most commenters supported this change in OTS policy although two opposed the change because of the potential conflict of interest for directors and officers making the decision to waive or not waive dividends. The Re-proposal is unchanged from the Interim Rule. OTS believes there is always a potential conflict of interest for directors and officers who make financial decisions where they may personally benefit. OTS may take enforcement action if it discovers wrongdoing. OTS notes that the waiver of dividends results in more capital at the savings association, enhancing the safety and soundness of the savings association.
I. Charitable Organizations
The First Proposal included provisions regarding the establishment of a charitable organization in connection with a mutual-to-stock conversion. The provisions included 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 association, and dealing with conflicts of interest
ishment of a charitable organization in connection with a mutual-to-stock conversion. The provisions included 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 association, and dealing with conflicts of interest. The Re-proposal also specifies 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.
All commenters on this aspect of the First Proposal were in favor of the proposed regulations, although one commenter thought OTS should require a separate vote of the minority shareholders to establish a foundation in second step conversions. OTS already requires a separate minority shareholder vote in such transactions and has included that requirement in the Re-proposal. One commenter asserted that 10-25% of the proceeds from every mutual-to-stock conversion should be required to be placed in a charitable organization. OTS does not believe it is a regulatory function to determine the amount of proceeds that must be placed in a charitable organization. In response to the comments, OTS has included the charitable organization provisions in the Re-proposal, and proposes several technical amendments suggested by one commenter to clarify that annual reports and the percentage of contributed proceeds must comply with the Internal Revenue Code (IRC). Upon effectiveness of a final regulation, waivers from certain provisions in the current conversion regulations now routinely requested in a conversion with a charitable foundation would no longer be necessary
d proposes several technical amendments suggested by one commenter to clarify that annual reports and the percentage of contributed proceeds must comply with the Internal Revenue Code (IRC). Upon effectiveness of a final regulation, waivers from certain provisions in the current conversion regulations now routinely requested in a conversion with a charitable foundation would no longer be necessary.
OTS takes this opportunity to state that in situations where a foundation becomes a holder of more than 10% of an institution's common stock, e.g., if the institution repurchases stock, causing the foundation's ownership percentage to increase, OTS will
J. Policy on Acquisitions
Current OTS regulation § 563b.3(i)(3) provides that no person or company may acquire more than 10 percent of any class of equity security of a recently converted association for three years following conversion without OTS approval. OTS enacted this rule principally to provide a reasonable period of time for a recently converted association to deploy its new capital prudently according to the plan described in the offering documents, to acclimate to operating as a public company, and to do both without the distraction of considering takeover proposals. ( See approval standards at current § 563b.3(i)(5) or proposed § 563b.525(d).)
In the First Proposal, OTS noted that it intended to closely review applications under the existing standards to make sure all criteria are fully met before approving acquisitions within the first three years following conversion.
A number of commenters suggested that the OTS statement that it intended to implement its current regulation was inappropriate, that these decisions were the responsibility of the board of directors, not the regulator, and that a three-year restriction on acquisitions was too inflexible. Three commenters thought OTS should implement a five-year restriction on acquisitions
s following conversion.
A number of commenters suggested that the OTS statement that it intended to implement its current regulation was inappropriate, that these decisions were the responsibility of the board of directors, not the regulator, and that a three-year restriction on acquisitions was too inflexible. Three commenters thought OTS should implement a five-year restriction on acquisitions. After considering the comments, for the reasons stated above, OTS is re-proposing the regulation as originally proposed.
K. Demand Account Holders
In the First Proposal, OTS proposed to allow demand account holders to be considered eligible account holders for purposes of determining subscription rights in a conversion. Many applicants incorrectly believe that demand account holders are already eligible account holders. Others have requested OTS waivers to allow demand account holders to be included in the subscription. OTS routinely granted the waivers. In order to end the confusion regarding this issue, OTS proposed revising the regulations to include demand account holders in the subscription priorities. None of the commenters objected to this provision. OTS has included the original proposal in this Re-proposal.
L. Management Stock Benefit Plans
In the First Proposal, OTS proposed changing the regulations to allow for accelerated vesting for management stock benefit plans in the event of a change of control. Currently, the regulations only allow acceleration for death or disability. Most commenters in this area agreed with this change, although three suggested OTS add retirement at least one year following conversion as another reason for allowing acceleration.
The Re-proposal is unchanged from the First Proposal. OTS believes that it is appropriate that the bases for acceleration, such as death, disability, or change of control of the savings association, not be within the individual's control. Therefore, the Re-proposal does not provide for accelerated vesting based on retirement
year following conversion as another reason for allowing acceleration.
The Re-proposal is unchanged from the First Proposal. OTS believes that it is appropriate that the bases for acceleration, such as death, disability, or change of control of the savings association, not be within the individual's control. Therefore, the Re-proposal does not provide for accelerated vesting based on retirement.
One commenter suggested that because the National Association of Securities Dealers Automated Quotation system (NASDAQ) requires a vote for certain stock benefit plans, OTS did not need to duplicate that requirement. 11 OTS notes, however, that not all converting associations and MHCs engaging in stock issuances are listed on the NASDAQ. Smaller associations, in particular, cannot meet NASDAQ listing requirements. Therefore, OTS believes it is appropriate to continue to include voting requirements in OTS regulations. Several commenters suggested that OTS should follow NASDAQ voting requirements (a majority of those voting at a legally called meeting) to approve benefit plans. OTS believes, however, that a majority of shareholders (not merely a majority of those voting) must ratify stock benefit plans because issuance of stock to such plans dilutes their ownership interests. OTS notes that while NASD Rule § 4350 requires shareholder ratification of certain stock benefit plans, OTS currently requires shareholder ratification of plans adopted only within the first year following conversion. The First Proposal revised the section on management benefit plans to clarify that an association must present to shareholders for ratification any material amendments to previously approved 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. One commenter objected to this proposed revision as overly intrusive
the section on management benefit plans to clarify that an association must present to shareholders for ratification any material amendments to previously approved 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. One commenter objected to this proposed revision as overly intrusive. However, OTS believes the regulation is an appropriate measure of regulatory oversight and is re-proposing it as proposed.
11 See NASD Manual & Notices to Members, § 4350(i), Qualitative Listing Requirements for Nasdaq National Market and Nasdaq SmallCap Market Issues Except for Limited Partnerships traded on the Nasdaq National Market, Shareholder Approval (2001).
To reduce burden, the First Proposal had proposed a possible check-off box on stock order forms to vote for or against stock benefit plans, when purchasing stock in MHC stock issuances. One of the commenters pointed out that a check-off box would violate NASD rules requiring NASD notification for stock benefit plans. 12 Accordingly, the Re-proposal does not include that feature of the First Proposal.
12 See NASD Manual & Notices to Members, § 4310(c)(17), Qualification Requirements for Domestic and Canadian Securities (2001).
While most commenters supported expansion of option plan opportunities for MHCs, several commenters were opposed to any options for management based on conflicts of interest or a view that benefit plans were a way for management to enrich itself. One commenter suggested management benefit plans should be limited to 2% of the stock issued. In response to those comments, OTS is adding a clarification to the Re-proposal that OTS will not approve management benefit plans that in the aggregate award more than 25% of the number of shares ultimately issued in the public offering to minority shareholders. The 25% restriction does not include ESOP shares allocated to managers
gement benefit plans should be limited to 2% of the stock issued. In response to those comments, OTS is adding a clarification to the Re-proposal that OTS will not approve management benefit plans that in the aggregate award more than 25% of the number of shares ultimately issued in the public offering to minority shareholders. The 25% restriction does not include ESOP shares allocated to managers. OTS believes management benefit plans that are reasonable, present no safety or soundness concerns, and are ratified by the shareholders, are not objectionable. Most companies use such plans to attract qualified executives and to reward management for performing well. Therefore, OTS is re-proposing most of the proposed changes except as noted above. One commenter asked if treasury stock could be used to fund benefit plans. OTS allows treasury stock to be used for this purpose.
OTS received no comments on the First Proposal's revisions to the regulations to clarify that OTS will 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 is including these revisions in the Re-proposal. OTS does not believe these types of provisions, which are common in option plans, unduly See proposed § 563b.500.
OTS also proposes to add a provision that clarifies a supervisory policy requiring exercise or forfeiture of stock benefits in certain circumstances, such as if an association becomes critically undercapitalized. See proposed § 563b.500.
M. Holding Company Proceeds
The First Proposal stated that at least 50% of the gross proceeds in a mutual-to-stock conversion must be infused into the converting savings association, and more must be infused if OTS concludes, for supervisory reasons, that a larger capital infusion is necessary
ircumstances, such as if an association becomes critically undercapitalized. See proposed § 563b.500.
M. Holding Company Proceeds
The First Proposal stated that at least 50% of the gross proceeds in a mutual-to-stock conversion must be infused into the converting savings association, and more must be infused if OTS concludes, for supervisory reasons, that a larger capital infusion is necessary. The First Proposal inadvertently referenced 50% of gross proceeds, instead of net proceeds. The Re-proposal clarifies that 50% of the net proceeds must be infused into the savings association. One commenter suggested that all the proceeds should go to the savings association. Several others suggested OTS should maintain more flexibility and make a determination on an acceptable amount of proceeds retained by the holding company, based upon what the business plan proposed. OTS has determined that the 50% limitation works well, but will examine every conversion on a case-by-case basis to determine if the limitation is appropriate in that case.
N. Mutual Holding Company Revisions
1. General
The Interim Rule revised the MHC regulations in accordance with the GLB Act and revised OTS treatment of MHC dividend waivers. The First Proposal included changes to the MHC regulations conforming to changes made to the conversion regulations. In the First Proposal, OTS also proposed to increase the size of stock benefit plans that associations (or mid-tier holding companies) under the MHC format could enact. Most commenters were in favor of this idea although two opposed any benefit plans for management. OTS is re-proposing the changes as proposed, with certain technical revisions, and with the additional 25% limitation discussed earlier. One commenter asked OTS to clarify that the proposed rules, if finalized, would apply to existing MHCs
mid-tier holding companies) under the MHC format could enact. Most commenters were in favor of this idea although two opposed any benefit plans for management. OTS is re-proposing the changes as proposed, with certain technical revisions, and with the additional 25% limitation discussed earlier. One commenter asked OTS to clarify that the proposed rules, if finalized, would apply to existing MHCs. In response to that comment, OTS takes this opportunity to indicate that the Re-proposal, if finalized, will be applicable to future stock issuances by existing associations or mid-tier holding companies in the MHC format. OTS will also permit the use of repurchased shares to attain the new limits.
In the First Proposal, OTS also proposed allowing the adoption of additional stock option plans without the need to issue stock to all categories of subscribers. The Re-proposal retains this provision. OTS notes that adoption of additional plans still requires filing an application with OTS, registering additional stock where appropriate, and shareholder ratification of additional plans. Among the factors OTS will consider when reviewing additional plans are the purpose for creating the additional plans, management ratings, or supervisory problems at the converted savings association. As noted earlier, commenters were in favor of a check-off approval for benefit plans, but OTS is not re-proposing this item because of the NASD rule restrictions.
Three commenters urged OTS to change its policy on the chartering of savings association subsidiaries of MHCs, or holding companies inserted in between MHCs and their savings association subsidiaries (Mid-tiers). Currently Mid-tiers must be chartered by OTS. The commenters argued that regular holding companies are state-chartered, so Mid-tiers should also be state-chartered. OTS notes, however, that Mid-tiers are MHCs, and MHCs, by statute, must be federally chartered. 13 One commenter asked if OTS would allow Mid-tiers to adopt limited liability bylaws
d their savings association subsidiaries (Mid-tiers). Currently Mid-tiers must be chartered by OTS. The commenters argued that regular holding companies are state-chartered, so Mid-tiers should also be state-chartered. OTS notes, however, that Mid-tiers are MHCs, and MHCs, by statute, must be federally chartered. 13 One commenter asked if OTS would allow Mid-tiers to adopt limited liability bylaws. Although such institutions are federally chartered, OTS has allowed the adoption of limited liability bylaws on a case-by-case basis for other federal associations and, therefore, would consider this for Mid-tiers.
13 See 12 U.S.C. 1467a(o)(7).
OTS also asked for comments on the possibility of not requiring a vote of the members for a simple reorganization to MHC form, without a stock issuance. Nine commenters favored such a change and three opposed it. OTS believes such a change may be beneficial to associations considering a charter change to MHC form, but believes a statutory change is necessary to accomplish this objective. OTS will consider seeking statutory changes in this area.
One commenter asked if OTS would consider an abbreviated application for MHC reorganizations without a stock issuance. OTS already allows abbreviated applications for such reorganizations. These applications, however, are subject to the Bank Merger Act, which contains statutory time frames.
2. Acquisitions of Mutual Holding Company Structures
Recently, companies in several MHC structures have entered into transactions, or have received offers to enter into transactions, in which an unrelated mutual savings association, mutual savings bank, or MHC would acquire the target MHC, mid-tier holding company, and subsidiary association. In these transactions, the mid-tier association's minority shareholders have been offered cash, and the majority mutual interest would become part of the acquiring mutual entity. Some of these transactions have been friendly, and others have been hostile acquisition proposals
ssociation, mutual savings bank, or MHC would acquire the target MHC, mid-tier holding company, and subsidiary association. In these transactions, the mid-tier association's minority shareholders have been offered cash, and the majority mutual interest would become part of the acquiring mutual entity. Some of these transactions have been friendly, and others have been hostile acquisition proposals. In the context of these transactions, MHCs and their subsidiary entities have asked: (i) whether mid-tier holding companies (or, if there is no mid-tier holding company, the subsidiary savings association) may adopt the pre-approved charter provisions set forth at 12 CFR 552.4(b)(8), such as the charter provision prohibiting acquisitions of, and offers to acquire, more than ten percent of any class of equity security of the entity for five years; and (ii) whether OTS applies 12 CFR 563b.3(i)(3) to savings association subsidiaries or mid-tier holding companies that have issued stock within the previous three years.
The purposes of the regulatory post-conversion acquisition restriction at 12 CFR 563b.3(i)(3) and the charter provisions in 12 CFR 552.4(a)(8) are to provide recently converted associations a period of time in which to deploy conversion proceeds into productive assets, to permit management to focus on the task of investing conversion proceeds and managing their institution, and to protect against acquisition efforts that may have the potential to disrupt operations in the critical time period after conversion. 14 In addition, the charter provisions are designed to allow converted associations more discretion in managing their affairs. 15
14 See, e.g. , Federal Home Loan Bank Board (FHLBB) Resolution No. 85-80 (Jan. 31, 1985), Resolution No, 84-400 (Aug. 2, 1984), Resolution No. 84-90 (Feb. 23, 1984), and Resolution No. 76-848 (Nov. 10, 1976).
15 FHLBB Resolution No. 84-90 (Aug. 2, 1984)
conversion. 14 In addition, the charter provisions are designed to allow converted associations more discretion in managing their affairs. 15
14 See, e.g. , Federal Home Loan Bank Board (FHLBB) Resolution No. 85-80 (Jan. 31, 1985), Resolution No, 84-400 (Aug. 2, 1984), Resolution No. 84-90 (Feb. 23, 1984), and Resolution No. 76-848 (Nov. 10, 1976).
15 FHLBB Resolution No. 84-90 (Aug. 2, 1984).
Recently completed or proposed transactions have demonstrated that takeover pressures now exist in the context of MHC structures. Minority stockholders have sought to pressure MHC structures to be acquired by mutual institutions or other MHC structures. In light of recent takeover attempts, and particularly in light of the hostile situations that have developed, OTS has determined to allow the post- 16
16 The MHC regulations provide that the procedural and substantive requirements of 12 CFR 563b.3 through 563b.8 apply to all MHC stock issuances under § 575.7 unless clearly inapplicable. In the past, OTS staff has informally advised certain acquirors that it has not considered § 563b.3(i)(3) to be clearly applicable in the MHC context.
Accordingly, OTS is allowing mid-tier holding companies to include the provisions set forth at 12 CFR 552.4(b)(8) in their charters. In addition, OTS proposes to apply § 563b.3(i)(3) to mid-tier holding companies and subsidiary stock institutions that complete initial stock offerings under § 575.7. OTS requests comment on whether it should apply § 563b.3(i)(3) in the context of Mid-tiers and MHC savings association subsidiaries.
3. “Second Step Conversions” of MHCs
Section 575.12 of the MHC regulations generally governs the conversion of MHCs to stock form (frequently called “second step conversions”). In all such transactions to date, OTS staff has required that the majority of the minority shares of the Mid-tier or savings association subsidiary, as the case may be, vote in favor of the second step conversion, in addition to votes otherwise required
MHCs
Section 575.12 of the MHC regulations generally governs the conversion of MHCs to stock form (frequently called “second step conversions”). In all such transactions to date, OTS staff has required that the majority of the minority shares of the Mid-tier or savings association subsidiary, as the case may be, vote in favor of the second step conversion, in addition to votes otherwise required. OTS staff has imposed this requirement because the minority shareholders received different treatment in the second step conversion than the majority interest. The minority shareholders received stock in an amount to be determined under an “exchange ratio”, while the majority interest (the mutual depositors) received rights to subscribe to the remaining shares to be issued in the transaction, at the offering price. OTS staff concluded that the requirement was appropriate in order to help ensure the fairness of the transaction. OTS proposes to include this requirement, which has been applicable to every second step conversion to date, in the MHC regulations, at 12 CFR 575.12(a)(3).
O. Supervisory Conversions
To conform the language in OTS regulations more closely to sec. 5(o) of the HOLA, the statute governing supervisory conversions, OTS proposed certain changes to the regulatory language regarding Voluntary Supervisory Conversions. The revised language can be found at §§ 563b.625 and 563b.630 of the Re-proposal.
P. Merger Conversions
One commenter requested OTS to address whether there is any change in OTS policy on merger conversions. OTS policy on merger conversions was articulated in the preamble to the OTS conversion regulation of 1994, 59 FR 61247, 61254, Nov. 30, 1994. In that regulation, OTS stated that it would limit merger conversions to cases involving financially weak institutions
proposal.
P. Merger Conversions
One commenter requested OTS to address whether there is any change in OTS policy on merger conversions. OTS policy on merger conversions was articulated in the preamble to the OTS conversion regulation of 1994, 59 FR 61247, 61254, Nov. 30, 1994. In that regulation, OTS stated that it would limit merger conversions to cases involving financially weak institutions. In addition, OTS indicated it would consider allowing merger conversions where a converting institution could demonstrate by clear and convincing evidence that a standard conversion would not be economically feasible, based on the ratio of expenses to gross proceeds, because of the asset size of the institution. 17
17 See 59 FR 61247, at 61255. OTS gave an example of institutions with assets of less than $25 million as more likely to be able to establish a justification for doing a merger conversion.
In the last eight years OTS has approved only one merger conversion. That approval was based on the criteria articulated in the 1994 regulation. OTS reiterates the guidelines it established in the 1994 regulation and wishes to clarify that institutions proposing merger conversions should not propose plans where management of the disappearing institution would receive anything more than they could if they had undertaken a standard conversion. In addition, institutions contemplating a merger conversion must demonstrate a merger conversion is the only viable alternative, and document what other proposed solutions the company pursued, that the proposed distribution of assets is fair to all parties, and that the institution used independent counsel to represent the interests of the institution.
Q. Plain Language
The First Proposal converted OTS rules on mutual-to-stock conversions into a plain language format. All six commenters who addressed this change commented favorably. One commenter asked if OTS intended to make the same changes to the MHC regulations
assets is fair to all parties, and that the institution used independent counsel to represent the interests of the institution.
Q. Plain Language
The First Proposal converted OTS rules on mutual-to-stock conversions into a plain language format. All six commenters who addressed this change commented favorably. One commenter asked if OTS intended to make the same changes to the MHC regulations. OTS intends to make similar changes to the MHC regulations in a future project.
R. Miscellaneous Revisions
In addition to the revisions described above, the First Proposal proposed a number of miscellaneous revisions to filing and other requirements. OTS received no comments on these revisions and is re-proposing them as originally proposed. The miscellaneous changes 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.150.
• Delete the requirement for a legal opinion regarding insured accounts. See proposed § 563b.100, Exhibit 3(d).
One commenter also asked for clarification on whether community offerings must occur in conversions. If all the stock is sold in the subscription phase of a conversion, a community offering is unnecessary. Another commenter asked if transfer restrictions applied in second step stock conversions
the requirement for a legal opinion regarding insured accounts. See proposed § 563b.100, Exhibit 3(d).
One commenter also asked for clarification on whether community offerings must occur in conversions. If all the stock is sold in the subscription phase of a conversion, a community offering is unnecessary. Another commenter asked if transfer restrictions applied in second step stock conversions. Transfer restrictions apply to newly purchased stock in second step stock conversions, but not to exchange shares presuming the appropriate transfer restriction time frames have already expired.
S. Forms
The First Proposal contained revisions to all of the forms currently in the conversion regulations, and 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. OTS received one comment on the forms with some minor technical suggestions for revisions. OTS concurs with some of the technical revisions and has revised the forms accordingly. The forms will continue to be available through OTS Washington and Regional Offices and will be accessible on OTS's website.
V. Disposition of Existing Rules
Original provision Re-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
substantive 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. 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
bstantive revision, moved. 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
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.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
ubstantive 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.225(d) Nonsubstantive revision, moved. 12 CFR 563b.6(e) 12 CFR 563b.225(b)-(c) Nonsubstantive revision, moved. 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
3b.6(c)(2) Deleted. 12 CFR 563b.6(d) 12 CFR 563b.225(d) Nonsubstantive revision, moved. 12 CFR 563b.6(e) 12 CFR 563b.225(b)-(c) Nonsubstantive revision, moved. 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
b.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)-(l) 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
tive 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. 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
60(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.15, 20, 105, 110, 115, 165 12 CFR 563b.295 12 CFR 563b.550-575 Form OF—1683 New provisions. New provision. New provisions. New form. VI. Request for Public Comment
OTS invites comment on all aspects of the Re-proposal. We encourage commenters to suggest modifications to approaches discussed above that could meet OTS's overall goal of improving the conversion process. Because this is a re-proposal, OTS believes the public comment period does not need to be as long as the First Proposal, therefore, OTS is publishing this Re-proposal with a 30-day comment period.
VII. Executive Order 12866
The Director of OTS determined that this Re-proposal does not constitute a “significant regulatory action” for the purposes of Executive Order 12866.
VIII
ersion process. Because this is a re-proposal, OTS believes the public comment period does not need to be as long as the First Proposal, therefore, OTS is publishing this Re-proposal with a 30-day comment period.
VII. Executive Order 12866
The Director of OTS determined that this Re-proposal does not constitute a “significant regulatory action” for the purposes of Executive Order 12866.
VIII. 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 Re-proposal or certify that the rule would not have a significant impact on a substantial number of small entities. 18 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. 19
A description of the reasons why OTS is taking this action, and a statement of the objectives of, and legal basis for, the Re-proposal are in the supplementary material above.
18 5 U.S.C. 605(b).
19 5 U.S.C. 603(a).
1. Small Entities to Which the Re-proposal Would Apply
The Re-proposal applies to mutual savings associations that propose to convert to the stock form of ownership. Under OTS jurisdiction, there are currently approximately 399 mutual 20 In the past two years, OTS has processed 12 and 10 applications, respectively, to convert from mutual to stock or mutual holding company form. Based on this experience, OTS believes that the Re-proposal affects fewer than 15 savings associations annually.
20 13 CFR 121.201, Division H (1999).
2. Requirements of the Re-Proposal
The Re-proposal 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
(1999).
2. Requirements of the Re-Proposal
The Re-proposal 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 Re-proposal 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 Re-proposal would require. As a result, this new requirement should not have any additional impact on small savings associations.
The Re-proposal 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 re-proposed regulatory changes, OTS provides the following estimate. The Re-proposal'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
s, OTS provides the following estimate. The Re-proposal'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 IX. 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 Re-proposal that 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
hat 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 Re-proposal 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 Re-proposal specifically permits OTS to waive any requirement under the part where the waiver is equitable and not detrimental to the savings association, the account holders, 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 Re-proposal that particularly affect small savings associations, and whether any modifications or exemptions from the rules for small savings associations would be appropriate.
IX. Unfunded Mandates Act of 1995
Section 202 of the Unfunded Mandates Reform Act of 1995, Pub. L
impact of a provision on a specific institution.
Nevertheless, OTS requests comments on the burdens associated with the Re-proposal that particularly affect small savings associations, and whether any modifications or exemptions from the rules for small savings associations would be appropriate.
IX. 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, sec. 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 Re-proposal 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 sec. 202 of the Unfunded Mandates Act.
X. Paperwork Reduction Act
The information collection requirements contained in the Re-proposal, 12 CFR part 563b, are virtually identical to those included in the July 2000 Proposed Rule on this subject. OTS has modified the forms in only minor ways, but the burden on respondents remains unchanged from those in the earlier rule, which the Office of Management and Budget (OMB) approved under control number 1550-0014. Respondents/recordkeepers are not required to respond to any collection of information unless it displays a currently valid OMB control number.
As part of its continuing effort to reduce paperwork and respondent burden, however, OTS invites the public to comment on the information collections contained in this rule, including the forms included in this publication as appendices
number 1550-0014. Respondents/recordkeepers are not required to respond to any collection of information unless it displays a currently valid OMB control number.
As part of its continuing effort to reduce paperwork and respondent burden, however, OTS invites the public to comment on the information collections contained in this rule, including the forms included in this publication as appendices.
OTS invites comment on all of the following issues:
• Whether the proposed information collection contained in this Re-proposal is necessary for the proper performance
• 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.
Send comments on these information collections to Information Collection Comments, Attention: 1550-0014, by e-mail to infocollection.comments@ots.treas.gov ; by facsimile transmission to (202) 906-6518; or by mail to Information Collection Comments, Chief Counsel's Office, Office of Thrift Supervision, 1700 G Street, NW., Washington, DC 20552. OTS will post comments and the related index on the OTS Internet Site at www.ots.treas.gov. In addition, interested persons may inspect comments at the Public Reference Room, 1700 G Street, NW., by appointment. To make an appointment, call (202) 906-5922, send an e-mail to publicinfo@ots.treas.gov , or send a facsimile transmission to Public Information at (202) 906-7755.
List of Subjects
12 CFR Part 563b Reporting and recordkeeping requirements, Savings associations, Securities.
12 CFR Part 574 Administrative practice and procedure, Holding companies, Reporting and recordkeeping requirements, Savings associations, Securities
(202) 906-5922, send an e-mail to publicinfo@ots.treas.gov , or send a facsimile transmission to Public Information at (202) 906-7755.
List of Subjects
12 CFR Part 563b Reporting and recordkeeping requirements, Savings associations, Securities.
12 CFR Part 574 Administrative practice and procedure, Holding companies, 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 12 CFR chapter V, 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 How will OTS view my business plan? 563b.120 May I discuss my plans to convert with others? Plan of Conversion
563b.125 Must my board of directors adopt a plan of conversion? 563b.130 What must I include in my plan of conversion? 563b.135 How do I notify my members that my board of directors approved a plan of conversion? 563b.140 May I amend my plan of conversion? Filing Requirements
563b.150 What must I include in my application for conversion? 563b.155 How do I file my application for conversion? 563b.160 May I keep portions of my application for conversion confidential? 563b.165 How do I amend my application for conversion? Notice of Filing of Application and Comment Process
563b.180 How do I notify the public that I filed an application f
onversion? Filing Requirements
563b.150 What must I include in my application for conversion? 563b.155 How do I file my application for conversion? 563b.160 May I keep portions of my application for conversion confidential? 563b.165 How do I amend my application for conversion? Notice of Filing of Application and Comment Process
563b.180 How do I notify the public that I filed an application for conversion? 563b.185 How may a person comment on my application for conversion? OTS Review of the Application for Conversion
563b.200 What actions may OTS take on my application? 563b.205 May a court review OTS's final action on my conversion? Vote by Members
563b.225 Must I submit the plan of conversion to my members for approval? 563b.230 Who is eligible to vote? 563b.235 How must I notify my members of the meeting? 563b.240 What must I submit to OTS after the members' meeting? Proxy Solicitation
563b.250 Who must comply with these proxy solicitation provisions? 563b.255 What must the form of proxy include? 563b.260 May I use previously executed proxies? 563b.265 How may I use proxies executed under this part? 563b.270 What must I include in my proxy statement? 563b.275 How do I file revised proxy materials? 563b.280 Must I mail a member's proxy solicitation material? 563b.285 What solicitations are prohibited? 563b.290 What will OTS do if a solicitation violates these prohibitions? 563b.295 Will OTS require me to re-solicit proxies? Offering Circular
563b.300 What must happen before OTS declares my offering circular effective? 563b.305 When may I distribute the offering circular? 563b.310 When must I file a post-effective amendment to the offering circular? Offers and Sales of Stock
563b.320 Who has priority to purchase my conversion shares? 563b.325 When may I offer to sell my conversion shares? 563b.330 How do I price my conversion shares? 563b.335 How do I sell my conversion shares? 563b.340 What sales practices are prohibited? 563b.345 How may a subscriber pay for my conversion shares? 563b.350 Must I
fective amendment to the offering circular? Offers and Sales of Stock
563b.320 Who has priority to purchase my conversion shares? 563b.325 When may I offer to sell my conversion shares? 563b.330 How do I price my conversion shares? 563b.335 How do I sell my conversion shares? 563b.340 What sales practices are prohibited? 563b.345 How may a subscriber pay for my conversion shares? 563b.350 Must I pay interest on payments for conversion shares? 563b.355 What subscription rights must I give to each eligible account holder and each supplemental eligible account holder? 563b.360 Are my officers, directors, and their associates eligible account holders? 563b.365 May other voting members purchase conversion shares in the conversion? 563b.370 Does OTS limit the aggregate purchases by officers, directors, and their associates? 563b.375 How do I allocate my conversion shares if my shares are oversubscribed? 563b.380 May my employee stock ownership plan purchase conversion shares? 563b.385 May I impose any purchase limitations? 563b.390 Must I provide a purchase preference to persons in my local community? 563b.395 What other conditions apply when I offer conversion shares in a community offering, a public offering, or both? Completion of the Offering
563b.400 When must I complete the sale of my stock? 563b.405 How do I extend the offering period? Completion of the Conversion
563b.420 When must I complete my conversion? 563b.425 Who may terminate the conversion? 563b.430 What happens to my old charter? 563b.435 What happens to my corporate existence after conversion? 563b.440 What voting rights must I provide to stockholders after the conversion? 563b.445 What must I provide my savings account holders? Liquidation Account
563b.450 What is a liquidation account? 563b.455 What is the initial balance of the liquidation account? 563b.460 How do I determine the initial balances of liquidation sub-accounts? 563b.465 Do account holders retain any voting rights based on their liquidation sub-accounts? 563b.470 Must I adjust
after the conversion? 563b.445 What must I provide my savings account holders? Liquidation Account
563b.450 What is a liquidation account? 563b.455 What is the initial balance of the liquidation account? 563b.460 How do I determine the initial balances of liquidation sub-accounts? 563b.465 Do account holders retain any voting rights based on their liquidation sub-accounts? 563b.470 Must I adjust liquidation sub-accounts? 563b.475 What is a liquidation? 563b.480 Does the liquidation account affect my net worth? 563b.485 What provision must I include in my new federal charter? Post-Conversion
563b.500 May I implement a stock option plan or management or employee stock benefit plan? 563b.505 May my directors, officers, and their associates freely trade shares? 563b.510 May I repurchase shares after conversion? 563b.515 What information must I provide to OTS before I repurchase my shares? 563b.520 May I declare or pay dividends after I convert? 563b.525 Who may acquire my shares after I convert? 563b.530 What other requirements apply after I convert? Contributions to Charitable Organizations
563b.550 May I donate conversion shares or conversion proceeds to a charitable organization? 563b.555 How do my members approve a charitable contribution? 563b.560 How much may I contribute to a charitable organization? 563b.565 What must the charitable organization include in its organizational documents? 563b.570 How do I address conflicts of interest involving my directors? 563b.575 What other requirements apply to charitable organizations? Subpart B—Voluntary Supervisory Conversion
563b.600 What does this subpart do? 563b.605 How may I conduct a voluntary supervisory conversion? 563b.610 Do my members have rights in a voluntary supervisory conversion? Eligibility
563b.625 When is a savings association eligible for a voluntary supervisory conversion? 563b.630 When is a BIF-insured state-chartered savings bank eligible for a voluntary supervisory conversion? Plan of Supervisory Conversion
563b.650 What must I includ
How may I conduct a voluntary supervisory conversion? 563b.610 Do my members have rights in a voluntary supervisory conversion? Eligibility
563b.625 When is a savings association eligible for a voluntary supervisory conversion? 563b.630 When is a BIF-insured state-chartered savings bank eligible for a voluntary supervisory conversion? Plan of Supervisory Conversion
563b.650 What must I include in my plan of voluntary supervisory conversion? Voluntary Supervisory Conversion Application
563b.660 What must I include in my voluntary supervisory conversion application? OTS Review of the Voluntary Supervisory Conversion Application
563b.670 Will OTS approve my voluntary supervisory conversion application? 563b.675 What conditions will OTS impose on an approval? Offers and Sales of Stock
563b.680 How do I sell my shares? Post-Conversion
563b.690 Who may not acquire additional shares after the voluntary supervisory conversion? Authority:
12 U.S.C. 1462, 1462a, 1463, 1464, 1467a, 2901; 15 U.S.C. 78c, 78l, 78m,78n,78w.
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. 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).
provisions of federal savings associations converting to stock form.
(b) Prescribed forms. You must use the forms prescribed under this part and provide such information as OTS may require under the forms by regulation or otherwise. The forms required under this part include: Form AC (Application for Conversion); Form PS (Proxy Statement); Form OC (Offering Circular); and Form OF (Order Form).
(c) Waivers. OTS may waive any requirement of this part or a provision in any prescribed form. To obtain a waiver, you must file a written request with OTS that:
(1) Specifies the requirement(s) or provision(s) you want OTS to waive;
(2) Demonstrates that the waiver is equitable, is not detrimental to you, your account holders or other savings associations, and is not contrary to the public interest; and
(3) Includes an opinion of counsel demonstrating that applicable law does not conflict with the requirement or provision.

§ 563b.10 May I form a holding company as part of my conversion? 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
y 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, is controlled by, or is under common control with the specified person.
Associate of a person is:
(1) A corporation or organization (other than you or your majority-owned subsidiaries), if the person is a senior officer or partner, or beneficially owns, directly or indirectly, 10 percent or more of any class of equity securities of the corporation or organization.
(2) A trust or other estate, if the person has a substantial beneficial interest in the trust or estate or is a trustee or fiduciary of the trust or estate. For purposes of §§ 563b.370, 563b.380, 563b.385, 563b.390, 563b.395 and 563b.505, a person who has a substantial beneficial interest in your tax-qualified or non-tax-qualified employee stock benefit plan, or who is a trustee or a fiduciary of the plan, is not an associate of the plan. For the purposes of § 563b.370, your tax-qualified employee stock benefit plan is not an associate of a person.
(3) Any person who is related by blood or marriage to such person and:
563b.505, a person who has a substantial beneficial interest in your tax-qualified or non-tax-qualified employee stock benefit plan, or who is a trustee or a fiduciary of the plan, is not an associate of the plan. For the purposes of § 563b.370, your tax-qualified employee stock benefit plan is not an associate of a person.
(3) Any person who is related by blood or marriage to such person and:
(i) Who lives in the same home as the person; or
(ii) Who is your director or senior officer, or a director or senior officer of your holding company or your subsidiary.
Association members or members are persons who, under applicable law, are eligible to vote at the meeting on conversion.
Control (including controlling , controlled by , and under common control with ) means the direct or indirect power to direct or exercise a controlling influence over the management and policies of a person, whether through the ownership of voting securities, by contract, or otherwise as described 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
rsons holding qualifying deposits on the eligibility record date.
IRS is the Internal Revenue Service.
Local community includes:
(1) Every county, parish, or similar governmental subdivision in which you have a home or branch office;
(2) Each county's, parish's, or subdivision's metropolitan statistical area;
(3) All zip code areas in your Community Reinvestment Act assessment area; and
(4) Any other area or category you set out in your plan of conversion, as approved by OTS.
Offer , offer to sell , or offer for sale is an attempt or offer to dispose of, or a solicitation of an offer to buy, a security or interest in a security for value. Preliminary negotiations or agreements with an underwriter, or among underwriters who are or will be in privity of contract with you, are not offers, offers to sell, or offers for sale.
Person is an individual, a corporation, a partnership, an association, a joint-stock company, a limited liability company, a trust, an unincorporated organization, or a government or political subdivision of a government.
Proxy soliciting material includes a proxy statement, form of proxy, or other written or oral communication regarding the conversion.
Purchase or buy includes every contract to acquire a security or interest in a security for value.
Qualifying deposit is the total balance in an account holder's savings accounts at the close of business on the eligibility or supplemental eligibility record date. Your plan of conversion may provide that only savings accounts with total deposit balances of $50 or more will qualify.
Sale or sell includes every contract to dispose of a security or interest in a security for value. An exchange of securities in a merger or acquisition approved by OTS is not a sale.
Savings account is any withdrawable account as defined in § 561.42 of this chapter, including a demand account as defined in § 561.16 of this chapter
counts with total deposit balances of $50 or more will qualify.
Sale or sell includes every contract to dispose of a security or interest in a security for value. An exchange of securities in a merger or acquisition approved by OTS is not a sale.
Savings account is any withdrawable account as defined in § 561.42 of this chapter, including a demand account as defined in § 561.16 of this chapter.
Solicitation and solicit is a request for a proxy, whether or not accompanied by or included in a form of proxy; a request to execute, not execute, or revoke a proxy; or the furnishing of a form of proxy or other communication reasonably calculated to cause your members to procure, withhold, or revoke a proxy. Solicitation or solicit does not include providing a form of proxy at the unsolicited request of a member, the acts required to mail communications for members, or ministerial acts performed on behalf of a person soliciting a proxy.
Subscription offering is the offering of shares through nontransferable subscription rights to:
(1) Eligible account holders under § 563b.355;
(2) Tax-qualified employee stock ownership plans under § 563b.380;
(3) Supplemental eligible account holders under § 563b.355; and
(4) Other voting members under § 563b.365.
Supplemental eligibility record date is the date for determining supplemental eligible account holders. The supplemental eligibility record date is the last day of the calendar quarter before OTS approves your conversion and will only occur if OTS has not approved your conversion within 15 months after the eligibility record date.
Supplemental eligible account holders are any persons, except your officers, directors, and their associates, holding qualifying deposits on the supplemental eligibility record date
ntal 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 (26 U.S.C. 401).
Underwriter is any person who purchases any securities from you with a view to distributing the securities, offers or sells securities for you in connection with the securities' distribution, or participates or has a direct or indirect participation in the direct or indirect underwriting of any such undertaking. Underwriter does not include a person whose interest is limited to a usual and customary distributor's or seller's commission from an underwriter or dealer.

Subpart A—Standard Conversions
Prior to Conversion
§ 563b.100 What must I do before a conversion? (a) You must meet with OTS at least ten days before you pass your plan of conversion. At that meeting you must provide OTS with a written strategic plan that outlines the objectives of the proposed conversion and the intended use of the conversion proceeds.
sion 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 at least ten days before you pass your plan of conversion. At that meeting you must provide OTS with a written strategic plan that outlines the objectives of the proposed conversion and the intended use of the conversion proceeds.
(b) You should also consult with OTS before you file your application for conversion. OTS will discuss the information that you must include in the application for conversion, general issues that you may confront in the conversion process, and any other pertinent issues.

§ 563b.105 What information must I include in my business plan? (a) Prior to filing an application for conversion, you must adopt a business plan reflecting your intended plans for deployment of the proposed conversion proceeds. Your business plan is required, under § 563b.150, to be included in your conversion application. At a minimum, your business plan must address:
(1) Your projected operations and activities for three years following the conversion. You must describe how you will deploy the conversion proceeds at the converted savings association (and holding company, if applicable), and include three years of projected financial statements. The business plan must provide that the converted savings association must retain at least 50 percent of the net conversion proceeds. OTS may require that a larger percentage of proceeds remain in the institution.
(2) Your plan for deploying conversion proceeds to meet credit and lending needs in your proposed market areas. OTS strongly discourages business plans that provide for a substantial investment in mortgage securities or other securities, except as an interim measure to facilitate orderly, prudent deployment of proceeds during the three years following the conversion, or as part of a properly managed leverage strategy.
oying conversion proceeds to meet credit and lending needs in your proposed market areas. OTS strongly discourages business plans that provide for a substantial investment in mortgage securities or other securities, except as an interim measure to facilitate orderly, prudent deployment of proceeds during the three years following the conversion, or as part of a properly managed leverage strategy.
(3) How the new capital will support projected operations and activities, and what opportunities are available to reasonably achieve your planned deployment of conversion proceeds in your proposed market areas.
(4) The risks associated with your plan for deployment of conversion proceeds, and the effect of this plan on management resources, staffing, and facilities.
(5) The expertise of your management and board of directors, or that you have planned for adequate staffing and controls to prudently manage the growth, expansion, new investment, and other operations and activities proposed in your business plan.
(6) How you will achieve a reasonable return on equity, commensurate with investment risk, investor expectations, and industry norms, by the final year of the business plan.
(b) You may not project returns of capital or extraordinary dividends in any part of the business plan. A newly converted company should not plan on stock repurchases in the first year of the business plan, 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.
aordinary dividends in any part of the business plan. A newly converted company should not plan on stock repurchases in the first year of the business plan, 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, as part of your conversion application under § 563b.150.

§ 563b.115 How will OTS view my business plan? (a) OTS will review your business plan to determine that it demonstrates prudent deployment of conversion proceeds, as part of its review of your conversion application. In making its determination, OTS will consider how you have addressed the requirements of § 563b.105 in the aggregate, and not as individual criteria.
(b) You must file your business plan with the Regional Office. OTS may request additional information, if necessary, to support its determination under paragraph (a) of this section. You must also file your business plan as a confidential exhibit to the Form AC.
(c) If OTS approves your application for conversion and you complete your conversion, you must operate within the parameters of your business plan. You must obtain the prior written approval of the Regional Director for any material deviations from your business plan.

§ 563b.120 May I discuss my plans to convert with others? (a) You may discuss information about your conversion with individuals that you authorize to prepare documents for your conversion.
plete your conversion, you must operate within the parameters of your business plan. You must obtain the prior written approval of the Regional Director for any material deviations from your business plan.

§ 563b.120 May I discuss my plans to convert with others? (a) You may discuss information about your conversion with individuals that you authorize to prepare documents for your conversion.
(b) Except as permitted under paragraph (a) of this section, you must keep all information about your conversion confidential until your board of directors adopts your plan of conversion.
(c) If you violate this section, OTS may require you to take remedial action. For example, OTS may require you to take any or all of the following actions:
(1) Publicly announce that you are considering a conversion;
(2) Set an eligibility record date acceptable to OTS;
(3) Limit the subscription rights of any person who violates or aids a violation of this section; or
(4) Take any other action to assure that your conversion is fair and equitable.
Plan of Conversion

§ 563b.125 Must my board of directors adopt a plan of conversion? Prior to filing an application for 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. Your plan of conversion is required, under § 563b.150, to be included in your conversion application.

§ 563b.130 What must I include in my plan of conversion? 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
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 state-chartered savings association, the appropriate state regulator, must approve the conversion before the conversion will be effective. Your members will have an opportunity to file written comments, including objections and materials supporting the objections, with OTS.
sapprove the conversion. You will solicit new proxies for voting on the proposed conversion.
(5) OTS, and in the case of a state-chartered savings association, the appropriate state regulator, must approve the conversion before the conversion will be effective. Your members will have an opportunity to file written comments, including objections and materials supporting the objections, with OTS.
(6) The IRS must issue a favorable tax ruling, or a tax expert must issue an appropriate tax opinion, on the tax consequences of your conversion before OTS will approve the conversion. The ruling or opinion must indicate the conversion will be a tax-free reorganization.
(7) OTS, and in the case of a state-chartered savings association, the appropriate state regulator, might not approve the conversion, and the IRS or a tax expert might not iss

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- [67 FR 1167 Airworthiness Directives; Boeing Model 747 Series Airplanes Powered by General Electric (GE) CF6-45/50, Pratt & Whitney (P&W) JT9D-70, or JT9D-7 Series Engines](https://www.frixlaw.com/law-library/statutes/FR_PRORULE_02-457.md)
- [67 FR 1325 Groundfish Fisheries of the Bering Sea and Aleutian Islands Area and the Gulf of Alaska, King and Tanner Crab Fisheries in the Bering Sea/Aleutian Islands, Scallop and Salmon Fisheries Off the Coast of Alaska](https://www.frixlaw.com/law-library/statutes/FR_PRORULE_02-644.md)
- [67 FR 1421 Disclosure of Returns and Return Information by Other Agencies; Correction](https://www.frixlaw.com/law-library/statutes/FR_PRORULE_02-660.md)

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Source: Frix Law Library, https://www.frixlaw.com/law-library/statutes/FR_PRORULE_02-7979. Check the current official text before relying on it. Not legal advice.