PART 192—CONVERSIONS FROM MUTUAL TO STOCK FORM Authority: 12 U.S.C. 1462a, 1463, 1464, 1467a, 2901 et seq., l Source: 85 FR 42643, July 14, 2020, unless otherwise noted. § 192.5 Purpose, prescribed forms, waiver. (a) General. (b) Prescribed forms. http://www.occ.gov (c) Waivers. (1) Specifies the requirement(s) or provision(s) the savings association wants the appropriate Federal banking agency to waive; (2) Demonstrates that the waiver is equitable; is not detrimental to the savings association, its 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 waiver of the requirement or provision. (d) Financial statements. § 192.7 Electronic filing. For Federal savings associations, the OCC encourages the electronic filing of all applications, notices, or other documents required by this part through http://www.banknet.gov/ § 192.8 Computation of time. In computing the period of days, the OCC excludes the day of the act or event ( e.g., § 192.10 Forming a holding company upon conversion. A savings association may convert to the stock form of ownership as part of a transaction where the savings association organizes a holding company to acquire all of the savings association's shares upon their issuance. In this transaction, the savings association's holding company will offer rights to purchase its shares instead of the savings association's shares. Regulations of the Board of Governors of the Federal Reserve System address holding company application requirements. § 192.15 Forming a charitable organization upon conversion. When a savings association converts to the stock form, it may form a charitable organization. A savings association's contributions to the charitable organization are governed by the requirements of §§ 192.550 through 192.575. § 192.20 Acquiring another insured depository institution upon conversion. When a savings association converts to stock form, it may acquire for cash or stock another insured depository institution that is already in the stock form of ownership. § 192.25 Definitions. The following definitions apply to this part and the forms prescribed under this part: Acting in concert Affiliate of, affiliated with, Appropriate Federal banking agency Associate (1) A corporation or organization (other than a savings association or its 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 §§ 192.370 through 192.395 and 192.505, a person who has a substantial beneficial interest in a savings association's 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 § 192.370, a savings association's 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 the savings association's director or senior officer, or a director or senior officer of the savings association's holding company or its subsidiary. Association members members Community offering Control controlling, controlled by, under common control with Demand accounts Eligibility record date Eligible account holders Federal savings association IRS Local community (1) Every county, parish, or similar governmental subdivision in which a savings association has a home or branch office; (2) Each county's, parish's, or subdivision's metropolitan statistical area; (3) All zip code areas in a savings association's Community Reinvestment Act assessment area; and (4) Any other area or category that a savings association sets out in its plan of conversion, as approved by the appropriate Federal banking agency. Offer, offer to sell, offer for sale Offering circular Person Proxy soliciting material Purchase buy Qualifying deposit Sale sell Savings account Savings association Solicitation solicit State State savings association Subscription offering (1) Eligible account holders under § 192.355; (2) Tax-qualified employee stock ownership plans under § 192.380; (3) Supplemental eligible account holders under § 192.355; and (4) Other voting members under § 192.365. Supplemental eligibility record date Supplemental eligible account holders Tax-qualified employee stock benefit plan Underwriter Voluntary supervisory conversion Subpart A—Standard Conversions Prior to Conversion § 192.100 Preparing for a conversion. (a) Meeting with appropriate Federal banking agency prior to passing plan. (b) Consultation with appropriate Federal banking agency before filing application. § 192.105 Information required in business plan. (a) Minimum requirements. (1) The savings association's projected operations and activities for three years following the conversion. These projections must include how the savings association will accomplish the following by the final year of the business plan: (i) Deploy the conversion proceeds at the converted savings association (and holding company, if applicable); (ii) What opportunities are available to reasonably achieve its planned deployment of conversion proceeds in the proposed market areas; and (iii) How the deployment will provide a reasonable return on investment commensurate with investment risk, investor expectations, and industry norms. The savings association must include three years of projected financial statements. The business plan must provide that the converted savings association must retain at least 50 percent of the net conversion proceeds. The appropriate Federal banking agency may require that a larger percentage of proceeds remain in the institution. (2) The savings association's plan for deploying conversion proceeds to meet credit and lending needs in the proposed market areas. The appropriate Federal banking agencies strongly discourage business plans that provide for a substantial investment in mortgage securities or other securities, except as an interim measure to facilitate orderly, prudent deployment of proceeds during the three years following the conversion or as part of a properly managed leverage strategy. (3) The risks associated with the savings association's plan for deployment of conversion proceeds, and the effect of this plan on management resources, staffing, and facilities. (4) The expertise of the savings association's management and board of directors, or plans for adequate staffing and controls to prudently manage the growth, expansion, new investment, and other operations and activities proposed in the business plan. (b) Prohibited information. § 192.110 Review of business plan by chief executive officer and board of directors. (a) Review and approval. (b) Certification. § 192.115 Review of business plan by the appropriate Federal banking agency. (a) Agency review. (b) Filing of business plan. (c) Operation within business plan. § 192.120 Confidentiality of conversion information. (a) Permitted disclosure. (b) Confidential information. (c) Violations of confidentiality. (1) Publicly announce that the savings association is considering a conversion; (2) Set an eligibility record date acceptable to the appropriate Federal banking agency; (3) Limit the subscription rights of any person who violates or aids a violation of this section; or (4) Any other action to assure that the conversion is fair and equitable. Plan of Conversion § 192.125 Adoption of plan of conversion by board of directors. Prior to filing an application for conversion, a savings association's board of directors must adopt a plan of conversion that conforms to §§ 192.320 through 192.485 and 192.505. The savings association's board of directors must adopt the plan by at least a two-thirds vote. Pursuant to § 192.150, the savings association must include the plan of conversion in the application for conversion. § 192.130 Information required in plan of conversion. A savings association must include the information included in §§ 192.320 through 192.485 and 192.505 in its plan of conversion. The appropriate Federal banking agency may require the savings association to delete or revise any provision in its plan of conversion if it determines the provision is inequitable; is detrimental to the savings association, its account holders, or other savings associations; or is contrary to public interest. § 192.135 Notifying members of adopted plan of conversion. (a) Notice. (b) Contents of notice. (1) The savings association's board of directors adopted a proposed plan to convert from a mutual to a stock savings institution. (2) The savings association will send its members a proxy statement with detailed information on the proposed conversion before the savings association convenes a members' meeting to vote on the conversion. (3) The savings association's members will have an opportunity to approve or disapprove the proposed conversion at a meeting. A majority of the eligible votes must approve the conversion. (4) The savings association will not vote existing proxies to approve or disapprove the conversion. The savings association will solicit new proxies for voting on the proposed conversion. (5) The appropriate Federal banking agency, and in the case of a State-chartered savings association, the appropriate State regulator, must approve the conversion before the conversion will be effective. The savings association's members will have an opportunity to file written comments, including objections and materials supporting the objections, with the appropriate Federal banking agency. (6) The IRS must issue a favorable tax ruling, or a tax expert must issue an appropriate tax opinion, on the tax consequences of the savings association's conversion before the appropriate Federal banking agency will approve the conversion. The ruling or opinion must indicate the conversion will be a tax-free reorganization. (7) The appropriate Federal banking agency, and in the case of a State-chartered savings association, the appropriate State regulator, might not approve the conversion, and the IRS or a tax expert might not issue a favorable tax ruling or tax opinion. (8) Savings account holders will continue to hold accounts in the converted savings association with the same dollar amounts, rates of return, and general terms as existing deposits. The FDIC will continue to insure the accounts. (9) The savings association's conversion will not affect borrowers' loans, including the amount, rate, maturity, security, and other contractual terms. (10) The savings association's business of accepting deposits and making loans will continue without interruption. (11) The savings association's current management and staff will continue to conduct current services for depositors and borrowers under current policies and in existing offices. (12) The savings association may substantively amend its proposed plan of conversion before the members' meeting. (13) The savings association may terminate the proposed conversion. (14) After the appropriate Federal banking agency, and in the case of a State-chartered savings association, the appropriate State regulator, approves the proposed conversion, the savings association will send proxy materials providing additional information. After the savings association sends proxy materials, members may telephone or write to the savings association with additional questions. (15) The proposed record date for determining the eligible account holders who are entitled to receive subscription rights to purchase the savings association's shares. (16) A brief description of the circumstances under which supplemental eligible account holders will receive subscription rights to purchase the savings association's shares. (17) A brief description of how voting members may participate in the conversion. (18) A brief description of how directors, officers, and employees will participate in the conversion. (19) A brief description of the proposed plan of conversion. (20) The par value (if any) and approximate number of shares the savings association will issue and sell in the conversion. (c) Other requirements. (2) If the savings association responds to inquiries about the conversion, it may address only the matters listed in paragraph (b) of this section. § 192.140 Amendments to plan of conversion. A savings association may amend its plan of conversion before it solicits proxies. After the savings association solicits proxies, it may amend the plan of conversion only if the appropriate Federal banking agency concurs. Filing Requirements § 192.150 Information required in an application for conversion. (a) Required information. (1) The savings association's plan of conversion. (2) Pricing materials meeting the requirements of § 192.200(b). (3) Proxy soliciting materials under § 192.270, including: (i) A preliminary proxy statement with signed financial statements; (ii) A form of proxy meeting the requirements of § 192.255; and (iii) Any additional proxy soliciting materials, including press releases, personal solicitation instructions, radio or television scripts that the savings association plans to use or furnish to its members, and a legal opinion indicating that any marketing materials comply with all applicable securities laws. (4) An offering circular described in § 192.300. (5) The documents and information required by Form AC. The savings association may obtain Form AC from the appropriate Federal banking agency. (6) Where indicated, written consents, signed and dated, of any accountant, attorney, investment banker, appraiser, or other professional who prepared, reviewed, passed upon, or certified any statement, report, or valuation for use. See (7) The savings association's business plan, submitted as a separately bound, confidential exhibit. See (8) Any additional information that the appropriate Federal banking agency requests. (b) Rejection of filing. § 192.155 Filing an application for conversion. A Federal savings association must file Form AC with the appropriate OCC licensing office. A State savings association must file its application with the appropriate FDIC region. § 192.160 Request for confidential treatment. (a) In general. (b) Requests for confidential treatment. (c) Determination of confidential treatment. § 192.165 Amendments to an application for conversion. To amend its application for conversion, a savings association must: (a) File an amendment with an appropriate facing sheet; (b) Number each amendment consecutively; (c) Respond to all issues raised by the appropriate Federal banking agency; and (d) Demonstrate that the amendment conforms to all applicable regulations. Notice of Filing of Application and Comment Process § 192.180 Public notice of an application for conversion. (a) In general. (b) Additional notice. § 192.185 Public comment on application for conversion. Commenters may submit comments on a Federal savings association's application in accordance with the procedures in 12 CFR 5.10. Agency Review of the Application for Conversion § 192.200 Review, approval, or denial of application for conversion. (a) Standards for review of application. (1) The conversion complies with this part; (2) The savings association will meet its regulatory capital requirements under 12 CFR part 3 or part 324, as applicable, after the conversion; and (3) The conversion will not result in a taxable reorganization under the Internal Revenue Code of 1986, as amended. (b) Standards for review of appraisal. (1) Independent persons experienced and expert in corporate appraisal, and acceptable to the appropriate Federal banking agency, must prepare the appraisal report. (2) An affiliate of the appraiser may serve as an underwriter or selling agent, if the savings association ensures that the appraiser is separate from the underwriter or selling agent affiliate and the underwriter or selling agent affiliate does not make recommendations or affect the appraisal. (3) The appraiser may not receive any fee in connection with the conversion other than for appraisal services. (4) The appraisal report must include a complete and detailed description of the elements of the appraisal, a justification for the appraisal methodology, and sufficient support for the conclusions. (5) If the appraisal is based on a capitalization of the savings association's pro forma income, it must indicate the basis for determining the income to be derived from the sale of shares, and demonstrate that the earnings multiple used is appropriate, including future earnings growth assumptions. (6) If the appraisal is based on a comparison of the savings association's shares with outstanding shares of existing stock associations, the existing stock associations must be reasonably comparable in size, market area, competitive conditions, risk profile, profit history, and expected future earnings. (7) The appropriate Federal banking agency may decline to process the application for conversion and deem it materially deficient or substantially incomplete if the initial appraisal report is materially deficient or substantially incomplete. (8) A savings association may not represent or imply that the appropriate Federal banking agency approved the appraisal. (c) Compliance with the Community Reinvestment Act. (1) Based on this review, the appropriate Federal banking agency may approve the application, deny the application, or approve the application on the condition that the savings association will improve its CRA performance or that the savings association will address the particular credit or lending needs of the communities that it will serve. (2) The appropriate Federal banking agency may deny the application if the savings association's business plan does not demonstrate that its proposed use of conversion proceeds will help the savings association to meet the credit and lending needs of the communities that it will serve. (d) Additional information. (e) Denial of application. [85 FR 42643, July 14, 2020, as amended at 89 FR 22068, Mar. 29, 2024] § 192.205 Court review of final action on application for conversion. (a) In general. (b) Filing procedures. Federal Register Vote by Members § 192.225 Approval of plan of conversion by members. (a) In general. (b) Approval. (c) Voting method. (d) Notification to non-voting members. § 192.230 Members' voting eligibility. A savings association determines members' eligibility to vote by setting a voting record date. The savings association must set a voting record date that is not more than 60 calendar days nor less than 20 calendar days before its meeting, unless the savings association is State-chartered and State law requires a different voting record date. § 192.235 Notice of members' meeting. (a) In general. (b) Timing of notice. (c) Notice to beneficial account holders. (1) If the savings association is a Federal savings association, and the name of the beneficial holder is disclosed on the savings association's records; or (2) If the savings association is a State-chartered savings association and the beneficial holder possesses voting rights under State law. § 192.240 Submission of documents to the appropriate Federal banking agency after the members' meeting. (a) Filings after members' meeting. (1) A certified copy of each adopted resolution on the conversion. (2) The total votes eligible to be cast. (3) The total votes represented in person or by proxy. (4) The total votes cast in favor of and against each matter. (5) The percentage of votes necessary to approve each matter. (6) An opinion of counsel that the savings association conducted the members' meeting in compliance with all applicable State or Federal laws and regulations. (b) Filing after conversion. Proxy Solicitation § 192.250 Compliance with proxy solicitation provisions. (a) Savings association compliance. (b) Member compliance. (1) The member solicits 50 people or fewer and does not solicit proxies on the savings association's behalf; or (2) The member solicits proxies through newspaper advertisements after the savings association's board of directors adopts the plan of conversion. Any newspaper advertisements may include only the following information: (i) The name of the savings association; (ii) The reason for the advertisement; (iii) The proposal or proposals to be voted upon; (iv) Where a member may obtain a copy of the proxy solicitation material; and (v) A request for the savings association's members to vote at the meeting. § 192.255 Form of proxy requirements. The form of proxy must include all of the following: (a) A statement in bold face type stating that management is soliciting the proxy. (b) Blank spaces where the member must date and sign the proxy. (c) Clear and impartial identification of each matter or group of related matters that members will vote upon. The savings association must include any proposed charitable contribution as an item to be voted on separately. (d) The phrase “Revocable Proxy” in bold face type (at least 18 point). (e) A description of any charter or State law requirement that restricts or conditions votes by proxy. (f) An acknowledgment that the member received a proxy statement before he or she signed the form of proxy. (g) The date, time, and the place of the meeting, when available. (h) A way for the member to specify by ballot whether he or she approves or disapproves of each matter that members will vote upon. (i) A statement that management will vote the proxy in accordance with the member's specifications. (j) A statement in bold face type indicating how management will vote the proxy if the member does not specify a choice for a matter. § 192.260 Previously executed proxies. A savings association may not use previously executed proxies for the plan of conversion vote. If members consider the plan of conversion at an annual meeting, the savings association may vote proxies obtained through other proxy solicitations only on matters not related to the plan of conversion. § 192.265 Proxies executed under this part. A savings association may vote a proxy obtained under this part on matters that are incidental to the conduct of the meeting. The savings association may not vote a proxy obtained under this subpart at any meeting other than the meeting (or any adjournment of the meeting) to vote on the plan of conversion. § 192.270 Proxy statement requirements. (a) Content requirements. (b) Other requirements. (2) The savings association must provide a cleared written proxy statement to its members before or at the same time it provides any other soliciting material. The savings association must mail cleared proxy solicitation material to its members within 10 calendar days after the appropriate Federal banking agency clears the solicitation. § 192.275 Filing revised proxy materials. (a) In general. (b) Content of filing. (1) Its revised proxy materials as required by Form PS; (2) Its revised form of proxy, if applicable; (3) Any additional proxy solicitation material subject to § 192.270; and (4) A copy of the revised proxy solicitation materials marked to clearly indicate changes from the prior filing. (c) When to file. (d) Material not required to be filed. § 192.280 Mailing member's proxy solicitation materials. (a) In general. (1) The savings association's board of directors adopted a plan of conversion; (2) A member requests in writing that the savings association mail the proxy solicitation material; (3) The appropriate Federal banking agency has cleared the member's proxy solicitation; and (4) The member agrees to defray the savings association's reasonable expenses. (b) Required information. (1) The approximate number of members that the savings association solicited or will solicit, or the approximate number of members of any group of account holders that the member designates; and (2) The estimated cost of mailing the proxy solicitation material for the member. (c) Timing. (d) Content. (e) Sharing of proxy material. § 192.285 Prohibited solicitations. (a) False or misleading statements. (i) Is false or misleading with respect to any material fact; (ii) Omits any material fact that is necessary to make the statements not false or misleading; or (iii) Omits any material fact that is necessary to correct a statement in an earlier communication that has become false or misleading. (2) No one may represent or imply that the appropriate Federal banking agency determined that the proxy solicitation material is accurate, complete, not false or not misleading, or passed upon the merits of or approved any proposal. (b) Other prohibited solicitations. (1) An undated or post-dated proxy; (2) A proxy that states it will be dated after the date it is signed by a member; (3) A proxy that is not revocable at will by the member; or (4) A proxy that is part of another document or instrument. § 192.290 Remedial measures for prohibited solicitations. (a) In general. (1) Correction of the violation by a retraction and a new solicitation; (2) Rescheduling the members' meeting; or (3) Any other actions necessary to ensure a fair vote. (b) Other action. § 192.295 Re-solicitation of proxies. If a savings association amends its application for conversion, the appropriate Federal banking agency may require the savings association to re-solicit proxies for its members' meeting as a condition of approval of the amendment. Offering Circular § 192.300 Offering circular requirements. (a) Content and filing requirements. (b) Member approval. (c) Agency review. (d) Revised filings. (e) Request for effectiveness. § 192.305 Distribution of offering circular. (a) Preliminary offering circular. (b) Early distribution prohibited. (c) Effective offering circular. § 192.310 Filing a post-effective amendment to an offering circular. (a) In general. (b) Timing of delivery. (c) Content. (d) Post-effective offering period. Offers and Sales of Stock § 192.320 Order of priority to purchase conversion shares. A savings association must offer to sell its shares in the following order: (a) Eligible account holders. (b) Tax-qualified employee stock ownership plans. (c) Supplemental eligible account holders. (d) Other voting members who have subscription rights. (e) The savings association's community, its community and the general public, or the general public. § 192.325 Timing of offer to sell conversion shares. (a) In general. (b) Timing. § 192.330 Pricing of conversion shares. (a) In general. (b) Maximum price. (c) Minimum price. (d) Increase in price. (e) Price range. (f) Inclusion in preliminary offering circular. § 192.335 Procedures for the sale of conversion shares. (a) Distribution of order forms. (b) Sale of shares. (c) Underwriting commissions and fees. (d) Sequence of order fulfillment. (e) Preparation of order form. § 192.340 Prohibited sales practices. (a) Offers, sales, or purchases of conversion shares. (1) Employ any device, scheme, or artifice to defraud; (2) Obtain money or property by means of any untrue statement of a material fact or any omission of a material fact necessary to make the statements, in light of the circumstances under which they were made, not misleading; or (3) Engage in any act, transaction, practice, or course of business that operates or would operate as a fraud or deceit upon a purchaser or seller. (b) Conversion. (1) Transfer, or enter into any agreement or understanding to transfer, the legal or beneficial ownership of subscription rights for the savings association's conversion shares or the underlying securities to the account of another; (2) Make any offer, or any announcement of an offer, to purchase any of the savings association's conversion shares from anyone but the savings association; or (3) Knowingly acquire more than the maximum purchase allowable under the savings association's plan of conversion. (c) Exceptions. (1) An underwriter or a selling group, acting on the savings association's behalf, that makes the offer with a view toward public resale; or (2) One or more of the savings association's tax-qualified employee stock ownership plans so long as the plan or plans do not beneficially own more than 25 percent of any class of the savings association's equity securities in the aggregate. (d) Violations. § 192.345 Permissible forms of subscriber payment. (a) In general. (b) Prohibition. § 192.350 Interest on payments for conversion shares. (a) In general. (b) Interest on withdrawals from savings accounts. (c) Interest on withdrawals from certificates of deposit. § 192.355 Subscription rights for eligible account holders and supplemental eligible account holders. (a) Eligible account holders. (1) The maximum purchase limitation established for the community offering or the public offering under § 192.395; (2) One-tenth of one percent of the total stock offering; or (3) Fifteen times the following number: The total number of conversion shares that the savings association will issue, multiplied by the following fraction. The numerator is the total qualifying deposit of the eligible account holder. The denominator is the total qualifying deposits of all eligible account holders. The savings association must round down the product of this multiplied fraction to the next whole number. (b) Supplemental eligible account holders. § 192.360 Officers, directors, and associates as eligible account holders. A savings association's officers, directors, and their associates may be eligible account holders. However, if an officer, director, or his or her associate receives subscription rights based on increased deposits in the year before the eligibility record date, the savings association must subordinate subscription rights for these deposits to subscription rights exercised by other eligible account holders. § 192.365 Purchase of conversion shares by other voting members. (a) In general. (1) The maximum purchase limitation established for the community offering and the public offering under § 192.395; or (2) One-tenth of one percent of the total stock offering. (b) Subordination of voting rights. § 192.370 Limits on aggregate purchases by officers, directors, and associates. (a) In general. Table 1 to § 192.370( a Institution size Officer and $50,000,000 or less 35 $50,000,001-100,000,000 34 $100,000,001-150,000,000 33 $150,000,001-200,000,000 32 $200,000,001-250,000,000 31 $250,000,001-300,000,000 30 $300,000,001-350,000,000 29 $350,000,001-400,000,000 28 $400,000,001-450,000,000 27 $450,000,001-500,000,000 26 Over $500,000,000 25 (b) Exception. § 192.375 Allocation of oversubscribed conversion shares. (a) Eligible account holders. (b) Supplemental eligible account holders. (c) Eligible and supplemental eligible account holders. (d) Additional allocations. (e) Oversubscription. § 192.380 Purchase of conversion shares by employee stock ownership plan. (a) In general. (b) Revised stock valuation range. (c) Open market purchase. (d) Charitable organizations. § 192.385 Purchase limitations. (a) In general. (b) Modification of purchase limit. (c) Minimum purchase. (d) Aggregation. § 192.390 Community offering of conversion shares. (a) Purchase preference in subscription offering. (b) Purchase preference in community offering. § 192.395 Other conditions for community and public offerings. A savings association must offer and sell its stock to achieve a widespread distribution of the stock. If a savings association offers shares in a community offering, a public offering, or both, it must first fill orders for its stock up to a maximum of two percent of the conversion stock on a basis that will promote a widespread distribution of stock. The savings association must allocate any remaining shares on an equal number of shares per order basis until it fills all orders. Completion of the Offering § 192.400 Time period for completion of sale of stock. A savings association must complete all sales of its stock within 45 calendar days after the last day of the subscription period, unless the offering is extended under § 192.405. § 192.405 Extension of the offering period. (a) In general. (b) Post-effective amendment to offering circular. § 192.405 Completion of the Conversion § 192.420 Time period for completion of conversion. In its plan of conversion, a savings association must set a date by which the conversion must be completed. This date must not be more than 24 months from the date that the savings association's members approve the plan of conversion. The date, once set, may not be extended by the savings association or by the appropriate Federal banking agency. The savings association must terminate the conversion if it is not completed by that date. The conversion is complete on the date that the savings association accepts the offers for its stock. § 192.425 Termination of conversion. A conversion may be terminated by: (a) A savings association's members failing to approve the conversion at its members' meeting; (b) A savings association before its members' meeting; or (c) A savings association after the members' meeting, but only if the appropriate Federal banking agency concurs. § 192.430 Charter amendments. (a) Conversion from Federally-chartered mutual savings association or savings bank to Federally-chartered stock savings association or savings bank. See (b) Conversion from Federally-chartered mutual savings association or savings bank to State-chartered stock savings association or savings bank. (c) Conversion from State-chartered mutual savings association or savings bank to Federally State-chartered stock savings association or savings bank. See (d) Priority of accounts. In any situation in which the priority of the accounts of the association is in controversy, all such accounts must, to the extent of their withdrawable value, be debts of the association having the same priority as the claims of general creditors of the association not having priority (other than any priority arising or resulting from consensual subordination) over other general creditors of the association. (e) Liquidation account. § 192.435 Corporate existence after conversion. A savings association's corporate existence will continue following its conversion, unless it converts to a State-chartered stock savings association and State law prescribes otherwise. § 192.440 Stockholder voting rights after conversion. A savings association must provide its stockholders with exclusive voting rights, except as provided in § 192.445(c). § 192.445 Savings account holder's account after conversion. (a) In general. (b) Liquidation account. (c) Voting rights. (1) Limit these voting rights to the minimum required by State law; and (2) Require the savings association to solicit proxies from the savings account holders and borrowers in the same manner that the savings association solicits proxies from its stockholders. Liquidation Account § 192.450 Liquidation accounts. (a) In general. (b) Distribution of liquidation. (c) Recording of liquidation account in financial statements. § 192.455 Initial balance of liquidation account. The initial balance of the liquidation account is the savings association's net worth in the statement of financial condition included in the final offering circular. § 192.460 Initial balance of liquidation sub-account. (a) General rule. (2) The initial liquidation sub-account balance for a savings account held by an eligible account holder, for a savings account not held by the eligible account holder on the supplemental eligibility record date, is calculated by multiplying the initial liquidation account balance by the following fraction: The numerator is the qualifying deposit in the savings account on the eligibility record date and the denominator is the calculation in paragraph (a)(5) of this section. (3) The initial liquidation sub-account balance for a savings account held by a supplemental eligible account holder, for a savings account not held by the supplemental eligible account holder on the eligibility record date, is calculated by multiplying the initial liquidation account balance by the following fraction: The numerator is the qualifying deposit in the savings account on the supplemental eligibility record date and the denominator is the calculation in paragraph (a)(5) of this section. (4) For a savings account held on both the eligibility record date and the supplemental eligibility record date, the amount of the qualifying deposit for calculating the initial liquidation sub-account is the higher account balance of the savings account on either the eligibility record date or the supplemental eligibility record date. The initial liquidation sub-account balance is calculated by multiplying the liquidation account balance by the following fraction: The numerator is the higher amount of the qualifying deposit in the savings account on either the eligibility record date or the supplemental eligibility record date and the denominator is the calculation in paragraph (a)(5) of this section. (5) The denominator for calculating the initial liquidation sub-account balance of each eligible and supplemental eligible account holder is the sum of the numerator calculations in paragraphs (a)(2) through (4) of this section. (b) Balance increases and decreases. § 192.465 Retention of voting rights based on liquidation sub-accounts. Eligible account holders or supplemental eligible account holders do not retain any voting rights based on their liquidation sub-accounts. § 192.470 Required adjustments to liquidation sub-accounts. (a) Reductions. (i) The deposit balance in the account holder's savings account as of the relevant eligibility record date; or (ii) The deposit balance in the account holder's savings account as of its lowest balance as of any subsequent annual closing date. (2) The reduction in the account holder's liquidation sub-account from its balance at the time of conversion must be proportionate to the reduction in the account holder's savings account from its balance at the time of conversion. (b) Prohibition on increases. (c) Liquidation account adjustments. (d) Maintenance of liquidation sub-account. (e) Complete liquidation. § 192.475 Definition of liquidation. (a) In general. (b) Other transactions. § 192.480 Effect of liquidation account on net worth. The liquidation account does not affect a savings association's net worth. § 192.485 Required liquidation account provision in new Federal charter. If a savings association converts to Federal stock form, it must include the following provision in its new charter: “Liquidation Account. Under appropriate Federal banking agency regulations, the association must establish and maintain a liquidation account for the benefit of its savings account holders as of ______. If the association undergoes a complete liquidation, it must comply with appropriate Federal banking agency regulations with respect to the amount and priorities on liquidation of each of the savings account holder's interests in the liquidation account. A savings account holder's interest in the liquidation account does not entitle the savings account holder to any voting rights.” Post-Conversion § 192.500 Permissible management stock benefit plans after conversion. (a) In general. (1) The savings association discloses the plans in its proxy statement and offering circular and indicates in its offering circular that there will be a separate shareholder vote on the Option Plan and the MRP at least six months after the conversion. No shareholder vote is required to implement the ESOP. The savings association's ESOP must be tax-qualified. (2) The savings association's Option Plan does not encompass more than 10 percent of the number of shares that the savings association issued in the conversion. (3)(i) The savings association's ESOP and MRP do not encompass, in the aggregate, more than 10 percent of the number of shares that the savings association issued in the conversion. If the savings association has tangible capital of 10 percent or more following the conversion, the appropriate Federal banking agency may permit the ESOP and MRP to encompass, in the aggregate, up to 12 percent of the number of shares issued in the conversion; and (ii) The savings association's MRP does not encompass more than three percent of the number of shares that the savings association issued in the conversion. If the savings association has tangible capital of 10 percent or more after the conversion, the appropriate Federal banking agency may permit the MRP to encompass up to four percent of the number of shares that the savings association issued in the conversion. (4) No individual receives more than 25 percent of the shares under any plan. (5) The savings association's directors who are not officers of the savings association do not receive more than five percent of the shares of the MRP or Option Plan individually, or 30 percent of any such plan in the aggregate. (6) The savings association's shareholders approve each of the Option Plan and the MRP by a majority of the total votes eligible to be cast at a duly called meeting before the savings association establishes or implements the plan. The savings association may not hold this meeting until six months after its conversion. (7) When the savings association distributes proxies or related material to shareholders in connection with the vote on a plan, the savings association states that the plan complies with the appropriate Federal banking agency's regulations and that the appropriate Federal banking agency does not endorse or approve the plan in any way. The savings association may not make any written or oral representations to the contrary. (8) The savings association does not grant stock options at less than the market price at the time of grant. (9) The savings association does not fund the Option Plan or the MRP at the time of the conversion. (10) The savings association's plan does not begin to vest earlier than one year after shareholders approve the plan, and does not vest at a rate exceeding 20 percent per year. (11) The savings association's plan permits accelerated vesting only for disability or death, or if the savings association undergoes a change of control. (12) The savings association's plan provides that its executive officers or directors must exercise or forfeit their options in the event the institution becomes critically undercapitalized (as defined in 12 CFR 6.4 or 324.403, as applicable), is subject to appropriate Federal banking agency enforcement action, or receives a capital directive under 12 CFR part 6, subpart B or 12 CFR 308.201, as applicable. (13) The savings association files a copy of the proposed Option Plan or MRP with the appropriate Federal banking agency and certify to such agency that the plan approved by the shareholders is the same plan that the savings association filed with, and disclosed in, the proxy materials distributed to shareholders in connection with the vote on the plan. (14) The savings association files the plan and the certification with the appropriate Federal banking agency within five calendar days after its shareholders approve the plan. (b) Stock splits or other adjustments. (c) Plans implemented more than 12 months after conversion. § 192.505 Restrictions on the trading of shares by directors, officers, and associates. (a) Sales restriction. (b) Notice of sales restriction on stock certificate. (c) Stock purchase restrictions. (d) Communication of restrictions with transfer agent. § 192.510 Repurchase of shares after conversion. (a) Repurchases during first year after conversion. (1) In extraordinary circumstances, a savings association may make open market repurchases of up to five percent of its outstanding stock in the first year after the conversion if the savings association files a notice under § 192.515(a) and the appropriate Federal banking agency does not disapprove the repurchase. The appropriate Federal banking agency will not approve such repurchases unless the repurchase meets the standards in § 192.515(c), and the repurchase is consistent with paragraph (c) of this section. (2) A savings association may repurchase qualifying shares of a director or conduct an appropriate Federal banking agency-approved repurchase pursuant to an offer made to all shareholders of the savings association. (3) Repurchases to fund management recognition plans that have been ratified by shareholders do not count toward the repurchase limitations in this section. Repurchases in the first year to fund such plans require prior written notification to the appropriate Federal banking agency. (4) Purchases to fund tax qualified employee stock benefit plans do not count toward the repurchase limitations in this section. (b) Repurchases following first year after conversion. (c) Restrictions on all repurchases. (1) A savings association may not repurchase its shares if the repurchase will reduce the savings association's regulatory capital below the amount required for its liquidation account under § 192.450. The savings association must comply with the capital distribution requirements at 12 CFR 5.55. (2) The restrictions on share repurchases apply to a charitable organization under § 192.550. A savings association must aggregate purchases of shares by the charitable organization with the savings association's repurchases. § 192.515 Information to be filed with Federal banking agency prior to repurchase of shares. (a) Notice requirement. (1) The proposed repurchase program; (2) The effect of the repurchases on the savings association's regulatory capital; and (3) The purpose of the repurchases and, if applicable, an explanation of the extraordinary circumstances necessitating the repurchases. (b) Filing of notice. (c) Agency review. (1) The repurchase program will not adversely affect the savings association's financial condition; (2) The savings association submits sufficient information to evaluate the proposed repurchases; (3) The savings association demonstrates extraordinary circumstances and a compelling and valid business purpose for the share repurchases; and (4) The repurchase program would not be contrary to other applicable regulations. § 192.520 Declaring and paying dividends after the conversion. A savings association may declare or pay a dividend on its shares after the conversion if: (a) The dividend will not reduce the savings association's regulatory capital below the amount required for the liquidation account under § 192.450; (b) The savings association complies with all capital requirements under 12 CFR part 3 after it declares or pays dividends; (c) The savings association complies with the capital distribution requirements under 12 CFR 5.55; and (d) The savings association does not return any capital, other than ordinary dividends, to purchasers during the term of the business plan submitted with the conversion. § 192.525 Restrictions on acquisition of shares after conversion. (a) Prior agency approval. (b) Beneficial ownership. (c) Exceptions. (1) Paragraphs (a) and (b) of this section do not apply to any offer with a view toward public resale made exclusively to the savings association, to the underwriters, or to a selling group acting on the savings association's behalf. (2) Unless the appropriate Federal banking agency objects in writing, any person may offer or announce an offer to acquire up to one percent of any class of shares. In computing the one percent limit, the person must include all of his or her acquisitions of the same class of shares during the prior 12 months. (3) A corporation whose ownership is, or will be, substantially the same as the savings association's ownership may acquire or offer to acquire more than 10 percent of the savings association's common stock, if it makes the offer or acquisition more than one year after the savings association's conversion. (4) One or more of the savings association's tax-qualified employee stock benefit plans may acquire the savings association's shares, if the plan or plans do not beneficially own more than 25 percent of any class of the savings association's shares in the aggregate. (5) An acquiror does not have to file a separate application to obtain the appropriate Federal banking agency's approval under paragraph (a) of this section if the acquiror files an application under 12 CFR 5.50 that specifically addresses the criteria listed under paragraph (d) of this section and the savings association does not oppose the proposed acquisition. (d) Factors for agency denial. (1) Is contrary to the purposes of this part; (2) Is manipulative or deceptive; (3) Subverts the fairness of the conversion; (4) Is likely to injure the savings association; (5) Is inconsistent with the savings association's plan to meet the credit and lending needs of its proposed market area; (6) Otherwise violates laws or regulations; or (7) Does not prudently deploy the savings association's conversion proceeds. § 192.530 Other post-conversion requirements. After a savings association converts, it must: (a) Promptly register its shares under the Securities Exchange Act of 1934 (15 U.S.C. 78a-78jj, as amended). The savings association may not deregister the shares for three years. (b) Encourage and assist a market maker to establish and to maintain a market for its shares. A market maker for a security is a dealer who: (1) Regularly publishes bona fide competitive bid and offer quotations for the security in a recognized inter-dealer quotation system; (2) Furnishes bona fide competitive bid and offer quotations for the security on request; or (3) May effect transactions for the security in reasonable quantities at quoted prices with other brokers or dealers. (c) Use its best efforts to list its shares on a national or regional securities exchange or on the National Association of Securities Dealers Automated Quotation system. (d) File all post-conversion reports that the appropriate Federal banking agency requires. Contributions to Charitable Organizations § 192.550 Donating conversion shares or conversion proceeds to a charitable organization. A savings association may contribute some of its conversion shares or proceeds to a charitable organization if: (a) The savings association's plan of conversion provides for the proposed contribution; (b) The savings association's members approve the proposed contribution; and (c) The IRS either has approved, or approves within two years after formation, the charitable organization as a tax-exempt charitable organization under the Internal Revenue Code. § 192.555 Member approval of charitable contributions. At the meeting to consider the conversion, a savings association's members must separately approve, by a majority of the total eligible votes, a charitable contribution of conversion shares or proceeds. If the savings association is in mutual holding company form and adding a charitable contribution as part of a second step stock conversion, the savings association must also have its minority shareholders separately approve the charitable contribution by a majority of their total eligible votes. § 192.560 Limitations on charitable contributions. A savings association may contribute a reasonable amount of conversion shares or proceeds to a charitable organization if such contribution will not exceed limits for charitable deductions under the Internal Revenue Code and the appropriate Federal banking agency does not object on supervisory grounds. If the savings association is well-capitalized, the appropriate Federal banking agency generally will not object if the savings association contributes an aggregate amount of eight percent or less of the conversion shares or proceeds. § 192.565 Contents of organizational documents of charitable organization. The charitable organization's charter (or trust agreement) and gift instrument must provide that: (a) The charitable organization's primary purpose is to serve and make grants in the savings association's local community; (b) As long as the charitable organization controls shares, it must vote those shares in the same ratio as all other shares voted on each proposal considered by the savings association's shareholders; (c) For at least five years after its organization, one seat on the charitable organization's board of directors (or board of trustees) is reserved for an independent director (or trustee) from the savings association's local community. This director may not be an officer, director, or employee of the savings association or of an affiliate of the savings association, and should have experience with local community charitable organizations and grant making; and (d) For at least five years after its organization, one seat on the charitable organization's board of directors (or board of trustees) is reserved for a director from the savings association's board of directors or the board of directors of an acquiror or resulting institution in the event of a merger or acquisition of the savings association. § 192.570 Conflicts of interest among directors. (a) In general. (1) Is a director, officer, or employee of the savings association; has the power to direct the savings association's management or policies; or otherwise owes a fiduciary duty to the savings association (for example, holding company directors); and (2) Will serve as an officer, director, or employee of the charitable organization. See (b) Identification and recusal of directors. § 192.575 Other requirements for charitable organizations. (a) Charter and gift instrument requirements. (1) The appropriate Federal banking agency may examine the charitable organization at the charitable organization's expense; (2) The charitable organization must comply with all supervisory directives that the appropriate Federal banking agency imposes; (3) The charitable organization must operate according to written policies adopted by its board of directors (or board of trustees), including a conflict of interest policy; (4) The charitable organization must not engage in self-dealing; and (5) The charitable organization must comply with all laws necessary to maintain its tax-exempt status under the Internal Revenue Code. (b) Stock certificate requirement. (c) Voting ratio. (d) Filing requirement. (1) The charitable organization's charter and bylaws (or trust agreement); (2) The charitable organization's operating plan (within six months after the savings association's stock offering); (3) The charitable organization's conflict of interest policy; and (4) The gift instrument for the contributions of either stock or cash to the charitable organization. Subpart B—Voluntary Supervisory Conversions § 192.600 Voluntary supervisory conversions. (a) In general. (b) Application of subpart A. § 192.605 Conducting a voluntary supervisory conversion. A savings association may conduct a voluntary supervisory conversion through one of the following methods: (a) A savings association may sell its shares or the shares of a holding company to the public under the requirements of subpart A of this part. (b) A savings association may convert to stock form by merging into an interim Federal- or State-chartered stock association. (c) A savings association may sell its shares directly to an acquiror, who may be a person, company, depository institution, or depository institution holding company. (d) A savings association may merge or consolidate with an existing or newly created depository institution. The merger or consolidation must be authorized by, and is subject to, other applicable laws and regulations. § 192.610 Member rights in a voluntary supervisory conversion. Savings association members do not have the right to approve or participate in a voluntary supervisory conversion, and will not have any legal or beneficial ownership interests in the converted association, unless the appropriate Federal banking agency provides otherwise. Savings association members may have interests in a liquidation account, if one is established. Eligibility § 192.625 Eligibility for a voluntary supervisory conversion. (a) Eligibility. (1) The savings association is significantly undercapitalized (or undercapitalized and a standard conversion that would make the savings association adequately capitalized is not feasible) and the savings association will be a viable entity following the conversion; (2) Severe financial conditions threaten the savings association's stability and a conversion is likely to improve its financial condition; (3) The FDIC will assist the savings association under section 13 of the Federal Deposit Insurance Act, 12 U.S.C. 1823; or (4) The savings association is in receivership and a conversion will assist the savings association. (b) Requirements for viability after conversion. (1) The savings association will be adequately capitalized as a result of the conversion; (2) The savings association, its proposed conversion, and its acquiror(s) comply with applicable supervisory policies; (3) The transaction is in the savings association's best interest, and the best interest of the Deposit Insurance Fund and the public; and (4) The transaction will not injure or be detrimental to the savings association, the Deposit Insurance Fund, or the public interest. § 192.630 Eligibility of State-chartered savings bank for voluntary supervisory conversion. A State-chartered savings bank may be eligible to convert to a Federal stock savings bank under this subpart if: (a) The FDIC certifies under section 5(o)(2)(C) of the HOLA that severe financial conditions threaten the savings bank's stability and that the voluntary supervisory conversion is likely to improve its financial condition; or (b) The savings bank meets the following conditions: (1) The savings bank's liabilities exceed its assets, as calculated under generally accepted accounting principles, assuming the savings bank is a going concern; and (2) The savings bank will issue a sufficient amount of permanent capital stock to meet its applicable FDIC capital requirement immediately upon completion of the conversion, or the FDIC determines that the savings bank will achieve an acceptable capital level within an acceptable time period. Plan of Supervisory Conversion § 192.650 Contents of plan of voluntary supervisory conversion. A majority of the board of directors of the savings association must adopt a plan of voluntary supervisory conversion. The savings association must include all of the following information in its plan of voluntary supervisory conversion. (a) The savings association's name and address. (b) A complete description of the proposed voluntary supervisory conversion transaction that also describes plans for any liquidation account. (c) Certified copies of all resolutions relating to the conversion adopted by the board of directors of the savings association. Voluntary Supervisory Conversion Application § 192.660 Contents of voluntary supervisory conversion application. A savings association must include all of the following information and documents in a voluntary supervisory conversion application to the appropriate OCC licensing office if it is a Federal savings association and to the appropriate FDIC region if it is a State savings association under this subpart: (a) Eligibility. (2) An opinion of qualified, independent counsel or an independent, certified public accountant regarding the tax consequences of the conversion, or an IRS ruling indicating that the transaction qualifies as a tax-free reorganization. (3) An opinion of independent counsel indicating that applicable State law authorizes the voluntary supervisory conversion, if the conversion involves a State-chartered savings association converting to State stock form. (b) Plan of conversion. (c) Business plan. (d) Financial data. (2) A description of the savings association's estimated conversion expenses. (3) Evidence supporting the value of any non-cash asset contributions. Appraisals must be acceptable to the appropriate Federal banking agency and the non-cash assets must meet all other appropriate Federal banking agency policy guidelines. (4) Pro forma financial statements that reflect the effects of the transaction. The savings association must identify its tangible, core, and risk-based capital levels and show the adjustments necessary to compute the capital levels. The savings association must prepare its pro forma statements in conformance with the appropriate Federal banking agency's regulations and the applicable accounting requirements. (5) A statement describing the aggregate number and percentage of shares that each director, officer, and any affiliates or associates of the director or officer will purchase. (e) Proposed documents. (2) The savings association's proposed stock certificate form. (3) Any securities offering circular and other securities disclosure materials to be used in connection with the proposed voluntary supervisory conversion. (f) Agreements. (2) A copy and description of all existing and proposed employment contracts. The savings association must describe the term, salary, and severance provisions of the contract, the identity and background of the officer or employee to be employed, and the amount of any conversion shares to be purchased by the officer or employee or his or her affiliates or associates. (g) Related filings and applications. (2) Any required Change in Bank Control Act notice and rebuttal of control submissions under 12 U.S.C. 1817(j) and 12 CFR 5.50, or copies of any Holding Company Act applications, including prior-conduct certifications listed under the appropriate Federal banking agency's regulatory guidance. (3) A subordinated debt application, if applicable. (4) Applications for permission to organize a stock association and for approval of a merger, if applicable, and a copy of any application for FDIC insurance of accounts, if applicable. (5) A statement describing any other applications required under Federal or State banking laws for all transactions related to the conversion, copies of all dispositive documents issued by regulatory authorities relating to the applications, and, if requested by the appropriate Federal banking agency, copies of the applications and related documents. (h) Other information. (2) Any additional information requested by the OCC, as authorized by law. (i) Waiver request. Appropriate Federal Banking Agency Review of the Voluntary Supervisory Conversion Application § 192.670 Approval of voluntary supervisory conversion application. The appropriate Federal banking agency will generally approve a savings association's application to engage in a voluntary supervisory conversion unless it determines: (a) The savings association does not meet the eligibility requirements for a voluntary supervisory conversion under § 192.625 or § 192.630 or because the proceeds from the sale of conversion stock, less the expenses of the conversion, would be insufficient to satisfy any applicable viability requirement; (b) The transaction is detrimental to or would cause potential injury to the savings association or the Deposit Insurance Fund or is contrary to the public interest; (c) The savings association or its acquiror, or the controlling parties or directors and officers of the savings association or its acquiror, have engaged in unsafe or unsound practices in connection with the voluntary supervisory conversion; or (d) The savings association fails to justify an employment contract incidental to the conversion, or the employment contract will be an unsafe or unsound practice or represent a sale of control. In a voluntary supervisory conversion, the appropriate Federal banking agency generally will not approve employment contracts of more than one year for existing management. § 192.675 Conditions imposed upon approval of voluntary supervisory conversion application. (a) Required condition. (1) The savings association must complete the conversion stock sale within three months after the appropriate Federal banking agency approves the application. The appropriate Federal banking agency may grant an extension for good cause. (2) The savings association must comply with all filing requirements of this part, and 12 CFR part 16. (3) The savings association must submit an opinion of independent legal counsel indicating that the sale of its shares complies with all applicable State securities law requirements. (4) The savings association must comply with all applicable laws, rules, and regulations. (5) The savings association must satisfy any other requirements or conditions the appropriate Federal banking agency may impose. (b) Discretionary conditions. (1) The savings association must satisfy any conditions and restrictions the appropriate Federal banking agency imposes to prevent unsafe or unsound practices, to protect the Deposit Insurance Fund and the public interest, and to prevent potential injury or detriment to the savings association before and after the conversion. The appropriate Federal banking agency may impose these conditions and restrictions on the savings association (before and after the conversion) or, as appropriate, the savings association's acquiror, controlling parties, or its directors and officers; or (2) The savings association must infuse a larger amount of capital, if necessary, for safety and soundness reasons. Offers and Sales of Stock § 192.680 Offer and sale of shares in a voluntary supervisory conversion. If a savings association converts under this subpart, it must offer and sell its shares in accordance with the applicable requirements of 12 CFR parts 16 and 192. Post-Conversion § 192.690 Restrictions on acquisition of additional shares after voluntary supervisory conversion. For three years after the completion of a voluntary supervisory conversion, neither the savings association nor its controlling shareholder(s) may acquire shares from minority shareholders without the appropriate Federal banking agency's prior approval.