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2000 - Rules and Regulations
{{8-29-03 p.2405}}
PART 333—EXTENSION OF CORPORATE POWERS
Regulations
Sec.
333.1
Classification of general character of business.
333.2
Change in general character of business.
333.3
[Reserved]
333.4
Conversions from mutual to stock form.
Interpretations
333.101
Prior consent not required.
AUTHORITY: 12 U.S.C. 1816, 1818, 1819 ("Seventh",
"Eighth" and "Tenth"), 1828, 1828(m), 1831p--1(c).
SOURCE: The provisions of this Part 333 appear at 15 Fed. Reg.
8644, December 6, 1950, except as otherwise noted.
REGULATIONS
§ 333.1 Classification of general character of business.
State nonmember insured banks are divided into five categories for
the purpose of classifying their general character or type of
business, 2
viz: commercial banks, banks and trust companies, savings banks
(including mutual and stock), industrial banks, and cash depositories.
[Codified to 12 C.F.R.
§ 333.1]
§ 333.2 Change in general character of business.
No state nonmember insured bank (except a District bank) or branch
thereof shall hereafter cause or permit any change to be made in the
general character or type of business exercised by it after the
effective date of this part without the prior written consent of the
Corporation.
[Codified to 12 C.F.R.
§ 333.2]
§ 333.4 Conversions from mutual to stock form.
(a) Scope. This section applies to the conversion of
insured mutual state savings banks to the stock form of ownership. It
supplements the procedural and other requirements for such conversions
in Subpart I of part 303 of this chapter. This section also applies, to
the extent appropriate, to the reorganization of insured mutual state
savings banks to the mutual holding company form of ownership. As
determined by the Board of Directors of the FDIC on a case-by-case
basis, the requirements of paragraphs (d), (e), and (f) of this section
do not apply to mutual-to-stock conversions of insured mutual state
savings banks whose capital category under
§ 325.103 of this
chapter is "undercapitalized", "significantly
undercapitalized" or "critically undercapitalized". As
provided in § 303.162
of this chapter, the Board of Directors of the FDIC may grant a waiver
in writing from any requirement of this section for good cause shown.
(b) Definition of Eligible Depositor. For purposes of
this section, eligible depositors are depositors holding
qualifying deposits at the bank as of a date designated in the bank's
plan of conversion that is not less than one year prior to the date of
adoption of the plan of conversion by the converting bank's board of
directors/trustees.
(c) Requirements. In addition to other requirements that
may be imposed by the applicable state statutes and regulations and
other federal statutes and regulations, including Subpart I of part 303
of this chapter, an insured mutual state savings bank shall not convert
to the stock form of ownership unless the following requirements are
satisfied:
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(1) Eligible depositors shall have higher subscription rights
than employee stock ownership plans;
(2) The proposed conversion shall be approved by a vote of at
least a majority of the bank's depositors and, as reasonably determined
by the bank's directors or trustees, other stakeholders of the bank who
are entitled to vote on the conversion, unless the applicable state law
requires a higher percentage, in which case the higher percentage shall
be used. Voting may be in person or by proxy; and
(3) Management shall not use proxies executed outside the context
of the proposed conversion to satisfy the voting requirement imposed in
the previous paragraph.
(i) A full appraisal report on the value of the converting bank
and the pricing of the stock to be sold in the conversion. The report
must be prepared by an independent appraiser and must include a
complete and detailed description of the elements that make up an
appraisal report, justification for the methodology employed and
sufficient support for the conclusions reached therein, including a
full discussion of the applicability of each peer group member and
documented analytical evidence supporting any variance (above or below)
the institution proposing to convert may have from the peer group
statistics and a complete analysis of the institution's pro forma
earnings which should include its full potential once the
institution fully deploys its new capital pursuant to its business
plan; and
(ii) A business plan which must include, in part, a detailed
discussion of how the capital acquired in the conversion will be used,
expected earnings resulting from the plan and a justification for any
proposed stock repurchases.
(d) Restriction on repurchase of stock. An insured
mutual state savings bank that has converted from the mutual to stock
form of ownership may not repurchase its capital stock within one year
following the date of its conversion to stock form, except that stock
repurchases of no greater than 5% of the bank's outstanding capital
stock may be repurchased during this one-year period where compelling
and valid business reasons are established, to the satisfaction of the
FDIC. Any stock repurchases shall be subject to the requirements of
section 18(i)(1) of the Federal Deposit Insurance Act
(12 U.S.C. 1828(i)(1)).
(e) Stock benefit plan limitations. The FDIC will
presume that a stock option plan or management or employee stock
benefit plan that does not conform with the applicable percentage
limitations of the regulations issued by the Office of Thrift
Supervision constitutes excessive insider benefits and thereby
evidences a breach of the board of directors' or trustees' fiduciary
responsibility. In addition, no converted insured mutual state savings
bank shall, for one year from the date of the conversion, implement a
stock option plan or management or employee stock benefit plan, other
than a tax-qualified employee stock ownership plan, unless each of the
following requirements is met:
(1) Each of the plans was fully disclosed in the proxy
solicitation and conversion stock offering materials;
(2) All such plans are approved by a majority of the bank's
stockholders, or in the case of a recently formed holding company, its
stockholders, prior to implementation at a duly called meeting of
shareholders, either anual or special, to be held no sooner than six
months after the completion of the conversion;
(3) In the case of a savings bank subsidiary of a mutual holding
company, all such plans are approved by a majority of stockholders
other than its parent mutual holding company prior to implementation at
a duly called meeting of shareholders, either annual or special, to be
held no sooner than six months following the stock issuance;
(4) For stock option plans, stock options are granted at no lower
than the market price at which the stock is trading at the time of
grant; and
(5) For management or employee stock benefit plans, no conversion
stock is used to fund the plans.
[Codified to 12 C.F.R. § 333.4]
[Section 333.4 added at 59 Fed. Reg. 61246, November 30,
1994, effective January 1, 1995; amended at 63 Fed. Reg. 44750, August
20, 1998, effective October 1, 1998; 68 Fed. Reg. 50461, August 21,
2003, effective September 22, 2003]
{{10-31-05 p.2407}}
INTERPRETATIONS
§ 333.101 Prior consent not required.
(a) The extension by any state nonmember insured bank of its
business to include personal, character or installment loans, or the
extension by an industrial bank of its business to include the business
of a commerical bank, is not a change in the general character or type
of business requiring the prior written consent of the Corporation.
(b) An insured State nonmember bank, not exercising trust powers,
may act as trustee or custodian of Individual Retirement Accounts
established pursuant to the Employee Retirement Income Security Act of
1974 (26 U.S.C. 408), Self-Employed Retirement Plans established
pursuant to the Self-Employed Individuals Retirement Act of 1962 (26
U.S.C. 401), Roth Individual Retirement Accounts and Coverdell
Education Savings Accounts established pursuant to the Taxpayer Relief
Act of 1997 (26 U.S.C. 408A and 530 respectively), Health Savings
Accounts established pursuant to the Medicare Prescription Drug
Improvement, and Modernization Act of 2003 (26 U.S.C. 223), and other
similar accounts without the prior written consent of the Corporation
provided:
(1) The bank's duties as trustee or custodian are essentially
custodial or ministerial in nature,
(2) The bank is required to invest the funds from such plans only
(i) In its own time or savings deposits, or
(ii) In any other assets at the direction of the customer,
provided the bank does not exercise any investment discretion or
provide any investment advice with respect to such account assets, and
(3) The bank's acceptance of such accounts without trust powers
is not contrary to applicable State law.
[Codified to 12 C.F.R. § 333.101]
[Section 333.101 amended at 19 Fed. Reg. 1667, March 27,
1954, effective March 30, 1954; 41 Fed. Reg. 2375, January 16, 1976; 50
Fed. Reg. 10754, March 18, 1985, effective March 11, 1985; 70 Fed. Reg.
60420 October 18, 2005]
Editor's Note: There is no footnote 1. 2 A
bank's business may include two or more of the general
classifications. Go Back to Text
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