Quick Navigation: Resources by Topic Business
& Economy Education
Environment
Food
& Drugs Grants
& Awards Health
& Safety Military
& Security Science
& Technology Social
Programs Transportation

Site
Search:
advanced

•

Browse

•

Simple
Search

•

Advanced Search

*
Boolean

* Proximity

•

Search
History

•

Search
Tips

•

Corrections

•

Latest
Updates

•

User
Info

•

FAQs

•

Agency
List

•

e-CFR
Main Page

•

Code of Federal
Regulations

•

Federal
Register

•

List of
CFR
Sections Affected

•

Regulations.gov

•

Unified
Agenda

•

All NARA
Publications

Ben's
Guide
to U.S.
Government

Home
Page > Executive
Branch > Code of
Federal Regulations > Electronic Code of Federal
Regulations

e-CFR
Data is current as of January 28, 2008

Title 12:
Banks and Banking

Browse
Previous | Browse
Next

PART 543—FEDERAL MUTUAL SAVINGS ASSOCIATIONS—INCORPORATION,
ORGANIZATION, AND CONVERSION

Section Contents
§ 543.1   Corporate
title.

Organization
§ 543.2   Application
for permission to organize.
§ 543.3   “De
novo” applications for a Federal savings association
charter.
§ 543.5   Issuance
of charter.
§ 543.6   Completion
of organization.
§ 543.7   Limitations
on transaction of business.
§ 543.7-1   Federal
savings association created in connection with an association in default
or in danger of default.

Conversion
§ 543.8   Conversion
of depository institutions to Federal mutual charter.
§ 543.9   Application
for conversion to Federal mutual charter.
§ 543.10   Organization
after conversion.
§ 543.11   Organization
plan for governance during first years after issuance of Federal mutual
savings bank charter.
§ 543.11-1   Grandfathered
authority.
§ 543.14   Continuity
of existence.

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

Source:   54 FR 49482, Nov. 30, 1989,
unless otherwise noted.

§ 543.1   Corporate title.

top

(a) General. A Federal savings association shall not adopt a
title that misrepresents the nature of the institution or the services it
offers.

(b) Title change. Prior to changing its corporate title, an
association must file with the OTS a written notice indicating the
intended change. The OTS, shall provide to the association a timely
written acknowledgment stating when the notice was received. If, within 30
days of receipt of notice, the OTS does not notify the association of its
objection on the grounds set forth in paragraph (a) of this section, the
association may change its title by amending its charter in accordance
with §544.2(b) or §552.4 and the amendment provisions of its charter,
except that an association chartered as a Federal Savings and Loan
Association may change its title to indicate that it is a Federal Savings
Bank, and an association chartered as a Federal Savings Bank may change
its title to indicate that it is a Federal Savings and Loan
Association.

[54 FR 49482, Nov. 30, 1989, as amended at 57 FR 14338, Apr. 20, 1992;
58 FR 4312, Jan. 14, 1993; 61 FR 64015, Dec. 3, 1996]

Organization

top

§ 543.2   Application for permission to
organize.

top

(a) General. Recommendations by employees of the OTS regarding
applications for permission to organize a Federal savings association are
privileged, confidential, and subject to §510.5 (b) and (c) of this
chapter.

(b)–(c) [Reserved]

(d) Public notice and inspection. (1) The applicant must publish
a public notice of the application to organize in accordance with the
procedures specified in subpart B of part 516 of this chapter.

(2) Promptly after publication, the applicant(s) shall transmit copies
of each notice and publisher's affidavit of publication in the same manner
as the original filing.

(3) The OTS shall give notice of the application to the State official
who supervises savings associations in the State in which the new
association is to be located.

(4) Any person may inspect the application and all related
communications at the Regional Office during regular business hours,
unless such information is exempt from public disclosure.

(e) Submission of comments. Commenters may submit comments on
the application in accordance with the procedures specified in subpart C
of part 516 of this chapter.

(f) Meetings. OTS may arrange a meeting in accordance with the
procedures in subpart D of part 516 of this chapter.

(g) Approval. (1) Factors that will be considered are:

(i) Whether the applicants are persons of good character and
responsibility;

(ii) Whether a necessity exists for such association in the community
to be served;

(iii) Whether there is a reasonable probability of the association's
usefulness and success;

(iv) Whether the association can be established without undue injury to
properly conducted existing local thrift and home financing
institutions;

(v) Whether the association will perform a role of providing credit for
housing consistent with safe and sound operation of a Federal savings
association; and

(vi) Whether the factors set forth in §543.3 are met, in the case of an
application that would result in the formation of a de novo
association, as defined in §543.3(a).

(2) Approvals of applications will be conditioned on the following:

(i) Receipt by the Office of written confirmation from the Federal
Deposit Insurance Corporation that the accounts of the Federal savings
association will be insured by the Federal Deposit Insurance
Corporation;

(ii) A minimum amount of capital to be paid into the association's
accounts prior to commencing business;

(iii) The submission of a statement that—

(A) The applicants have complied in all respects with the Act and these
rules and regulations regarding organization of a Federal savings
association;

(B) The applicants have incurred no expense in forming the association
which is chargeable to it, and no such expense will be incurred;

(C) No funds have been collected on account of the association before
the Office's approval;

(D) An organization committee has been created (naming the committee
and its officers);

(E) The committee will organize the association and serve as temporary
officers of the association until officers are elected by the
association's board of directors under §543.6 of this part; and

(F) No funds will be accepted for deposit by the association until
organization has been completed; and

(iv) The satisfaction of any other requirement the Director, or his or
her designee, may impose.

(h) Alternative procedures for interim Federal savings associations.
(1) Applications for permission to organize an interim Federal savings
association are not subject to paragraphs (d), (e), (f) or (g)(2) of this
section.

(2) Approval of an application for permission to organize an interim
Federal savings association shall be conditioned on approval by the Office
of an application to merge the interim Federal savings association and an
existing insured stock association or on approval by the Office of such
other transaction which the interim was chartered to facilitate. In
evaluating the application, the Director or his or her designee will
consider the purpose for which the association will be organized, the form
of any proposed transactions involving the organizing association, the
effect of the transactions on existing associations involved in the
transactions, and the factors specified in section §543.2(g)(1) to the
extent relevant.

[54 FR 49482, Nov. 30, 1989, as amended at 55 FR 13510, Apr. 11, 1990;
57 FR 14338, Apr. 20, 1992; 62 FR 27180, May 19, 1997; 62 FR 64145, Dec.
4, 1997; 69 FR 68247, Nov. 24, 2004]

§ 543.3   “De novo” applications for a Federal
savings association charter.

top

(a) Definitions. For purposes of this section, the term “ de
novo association” means any Federal savings association chartered by
the Office, the business of which has not been conducted previously under
any charter or conducted in the previous three years in substantially the
same form as is proposed by the de novo association. A “ de novo
applicant” means any person or persons who apply to establish a de
novo association.

(b) Minimum initial capitalization. (1) A de novo
association must have at least two million dollars in initial capital
stock (stock institutions) or initial pledged savings or cash (mutual
institutions), except as provided in paragraph (b)(2) of this section. The
minimum initial capitalization is the amount of proceeds net of all
incurred and anticipated securities issuance expenses, organization
expenses, pre-opening expenses, or any expenses paid (or funds advanced)
by organizers that are to be reimbursed from the proceeds of a securities
offering. In securities offerings for a de novo association, all
securities of a particular class in the initial offering shall be sold at
the same price.

(2) On a case by case basis, the Director may, for good cause, approve
a de novo association that has less than two million dollars in
initial capital or may require a de novo association to have more
than two million dollars in initial capital.

(c) Business and investment plans of de novo associations. (1)
To assist the Office in making the determinations required under section
5(e) of the Home Owners' Loan Act, a de novo applicant shall submit
a business plan describing, for the first three years of operation of the
de novo association, the major areas of operation, including:

(i) Lending, leasing and investment activity, including plans for
meeting Qualified Thrift Lender requirements;

(ii) Deposit, savings and borrowing activity;

(iii) Interest-rate risk management;

(iv) Internal controls and procedures;

(v) Plans for meeting the credit needs of the proposed de novo
association's community (including low- and moderate-income
neighborhoods);

(vi) Projected statements of condition;

(vii) Projected statements of operations; and

(viii) Any other information requested by the Office.

(2) The business plan shall:

(i) Provide for the continuation or succession of competent management
subject to the approval of the Regional Director;

(ii) Provide that any material change in, or deviation from, the
business plan must receive the prior approval of the Regional
Director;

(iii) Demonstrate the de novo association's ability to maintain
required minimum regulatory capital under 12 CFR parts 565 and 567 for the
duration of the plan.

(d) Composition of the board of directors. (1) A majority of a
de novo association's board of directors must be representative of
the state in which the savings association is located. The Office
generally will consider a director to be representative of the state if
the director resides, works or maintains a place of business in the state
in which the savings association is located. If the association is located
in a Metropolitan Statistical Area (MSA), Primary Metropolitan Statistical
Area (PMSA) or Consolidated Metropolitan Statistical Area (CMSA) that
incorporates portions of more than one state, a director will be
considered representative of the association's state if he or she resides,
works or maintains a place of business in the MSA, PMSA or CMSA in which
the association is located.

(2) The de novo association's board of directors must be
diversified and composed of individuals with varied business and
professional experience. In addition, except in the case of a de novo
association that is wholly-owned by a holding company, no more than
one-third of a board of directors may be in closely related businesses.
The background of each director must reflect a history of responsibility
and personal integrity, and must show a level of competence and experience
sufficient to demonstrate that such individual has the ability to direct
the policies of the association in a safe and sound manner. Where a de
novo association is owned by a holding company that does not have
substantial independent economic substance, the foregoing standards will
be applied to the board of directors of the holding company.

(e) Management Officials. Proposed stockholders of ten percent
or more of the stock of a de novo association will be considered
management officials of the association for the purpose of the Office's
evaluation of the character and qualifications of the management of the
association. In connection with the Office's consideration of an
application for permission to organize and subsequent to issuance of a
Federal savings association charter to the association by the Office, any
individual or group of individuals acting in concert under 12 CFR part
574, who owns or proposes to acquire, directly or indirectly, ten percent
or more of the stock of an association subject to this section, shall
submit a Biographical and Financial Report, on forms prescribed by the
Office, to the Regional Director.

(f) Supervisory transactions. This section does not apply to any
application for a Federal savings association charter submitted in
connection with a transfer or an acquisition of the business or accounts
of a savings association if the Office determines that such transfer or
acquisition is instituted for supervisory purposes, or in connection with
applications for Federal charters for interim de novo associations
chartered for the purpose of facilitating mergers, holding company
reorganizations, or similar transactions.

[62 FR 27180, May 19, 1997; 62 FR 28983, May 29, 1997]

§ 543.5   Issuance of charter.

top

Approval by the Office of the organization of a Federal savings
association or the conversion of an insured association to Federal savings
association form shall constitute issuance of a charter and shall be
final, provided that the association complies with the procedures set out
at §544.2(a) of this chapter. The charter shall conform with the
requirements of §544.1 of this chapter, the permissible provisions of
§544.2, or other provisions specifically approved by the Office.

§ 543.6   Completion of organization.

top

(a)(1) Temporary officers. When the Office approves an
application for permission to organize a Federal savings association, the
applicants shall constitute the organization committee and elect a
chairperson, vice-chairperson, and a secretary, who shall act as the
temporary officers of the association until their successors are duly
elected and qualified. The temporary officers may effect compliance with
any conditions prescribed by the Office.

(2) Organization meeting. Promptly upon receipt of a charter,
the temporary officers shall call a meeting of the association's capital
subscribers; notice of such meeting shall be mailed to each subscriber at
least 5 days before the meeting day. Subscribers who have subscribed for a
majority of the association's capital, present in person or by proxy,
shall constitute a quorum. At such meeting, directors of the association
shall be elected according to the association's charter and bylaws, and
any other action permitted by such charter and bylaws may be taken; any
such action shall be considered an acceptance by the association of such
charter and of such bylaws, which shall be in the form provided in parts
544 and 552 of this chapter.

(b) First meeting of directors. Upon election, the association's
board of directors shall hold a meeting to elect officers of the
association as provided by its charter and bylaws and to take any other
action necessary to permit operation of the association in accordance with
law, the association's charter and bylaws, and these rules and
regulations. When such officers have been bonded under §563.190 of this
chapter, they shall immediately collect the sums due on subscriptions to
the association's capital.

(c) Membership in Federal Home Loan Bank and insurance of accounts.
When a Federal savings association's charter is issued it must
promptly qualify as a member of a Federal Home Loan Bank and meet all
requirements necessary to obtain insurance of its accounts by the Federal
Deposit Insurance Corporation.

(d) Failure to complete. Organization of a Federal savings
association is completed when the organization meeting and the first
meeting of its directors have been held, permanent officers have been
bonded, the association holds the cash required to be paid on
subscriptions to its capital, if required, Federal Home Loan Bank
membership has been obtained and Federal Deposit Insurance Corporation
insurance of accounts has been confirmed and any conditions imposed by the
Office in connection with approval of the application have been met. If
organization is not so completed within six months after issuance of a
charter, or within such additional period as the Director or his or her
designee may for good cause grant, and in the case of an interim Federal
savings association, if a merger, or other transaction facilitated by the
existence of an interim association, has not been approved, the charter
shall become void and all cash collected on subscriptions shall thereupon
be returned.

§ 543.7   Limitations on transaction of
business.

top

No person may organize a Federal savings association, collect money
from others for such purpose, or represent himself or herself as
authorized to do so, and no Federal savings association shall transact any
business prior to completion of its organization, except as provided in
this part.

§ 543.7-1   Federal savings association created in
connection with an association in default or in danger of
default.

top

The preceding sections of this part do not apply to a Federal savings
association which is proposed by the Federal Deposit Insurance Corporation
or the Resolution Trust Corporation under section 11(c) of the Federal
Deposit Insurance Act (12 U.S.C. 1821(c)) or section 21A of the Federal
Home Loan Bank Act (12 U.S.C. 1441A), or is otherwise chartered by the
Office in connection with an association in default or in danger of
default. Incorporation and organization of such associations are complete
when the Director or his or her designee so determines.

Conversion

top

§ 543.8   Conversion of depository institutions to
Federal mutual charter.

top

(a) With the approval of the OTS, any depository institution, as
defined in §552.13 of this chapter, that is in mutual form, may convert
into a Federal mutual savings association, provided that:

(1) The depository institution, upon conversion, will have its deposits
insured by the Federal Deposit Insurance Corporation;

(2) The depository institution, in accomplishing the conversion,
complies with all applicable state and federal statutes and regulations,
and OTS policies, and obtains all necessary regulatory and member
approvals; and

(3) The resulting Federal mutual association conforms, within the time
prescribed by the OTS, to the requirements of section 5(c) of the Home
Owners' Loan Act.

(b) Recommendations regarding applications for issuance of Federal
charters are privileged, confidential and subject to §510.5 (b) and (c) of
this chapter.

[54 FR 49482, Nov. 30, 1989, as amended at 57 FR 14339, Apr. 20, 1992;
60 FR 66717, Dec. 26, 1995; 62 FR 45309, Aug. 27, 1997]

§ 543.9   Application for conversion to Federal
mutual charter.

top

(a)(1) Filing. Any depository institution that proposes to
convert to a Federal mutual association as provided in §543.8 must, after
approval by its board of directors, file an application on forms obtained
from OTS. The applicant must submit any financial statements or other
information OTS may require.

(2) Procedures. An application for conversion filed under this
section is subject to the procedures for organization of a federal mutual
association at §543.2(d) through (f) of this chapter.

(b) Plan of conversion. The applicant shall submit with its
application a plan of conversion specifying the location of the home
office and any branch offices to be maintained by the Federal savings
association, and providing for:

(1) Appropriate reserves and surplus for the Federal savings
association;

(2) Satisfaction in full or assumption by the Federal savings
association of all creditor obligations of the applicant;

(3) Issuance by the Federal savings association of savings accounts to
current holders of withdrawable accounts in an amount equalling the value
of such accounts; and

(4) If applicable, issuance of additional savings accounts to current
holders of nonwithdrawable capital stock of the applicant in an amount
equalling the value of their nonwithdrawable capital stock, including the
present value of any preference to which such holders are entitled.

(c) Action on application. The OTS will consider such
application and any information submitted with the application, and may
approve the application in accordance with section 5(e) of the Home
Owners' Loan Act and §543.2(g)(1). Converting depository institutions that
have been in existence less than three years will be subject to all
approval criteria and other requirements applicable to de novo
Federal associations. Approval of an application and issuance by the
OTS of a charter will be subject to:

(1) Compliance by the applicant with all conditions prescribed in the
approval;

(2) Receipt by the applicant of approval of the plan of conversion by
such vote as may be required by the laws of the applicant's jurisdiction
to consider such action;

(3) In the case of a converting association the accounts of which are
not insured by the Federal Deposit Insurance Corporation, receipt by the
OTS of written confirmation from the Federal Deposit Insurance Corporation
that the accounts of the converting association will be insured by the
Federal Deposit Insurance Corporation; and

(4) Receipt by the OTS of written confirmation from the appropriate
Federal Home Loan Bank of approval of the converting institution's
application for Federal Home Loan Bank membership, if the institution is
not a member.

[54 FR 49482, Nov. 30, 1989, as amended at 55 FR 13510, Apr. 11, 1990;
57 FR 14339, Apr. 20, 1992; 62 FR 45309, Aug. 27, 1997; 66 FR 13005, Mar.
2, 2001]

§ 543.10   Organization after
conversion.

top

Except as provided in §543.11, after a Federal charter is issued under
§543.9 the association's members shall, after due notice, or upon a valid
adjournment of a previous legal meeting, hold a meeting to elect directors
and take all other action necessary fully to effect the conversion and
operate the association in accordance with law and these rules and
regulations. Immediately thereafter the board of directors shall meet,
elect officers, and transact any other appropriate business.

§ 543.11   Organization plan for governance during
first years after issuance of Federal mutual savings bank
charter.

top

(a) Organizational meeting. Except as provided in paragraph
(c)(1) of this section, promptly upon receipt of a charter, the officers
of a Federal mutual savings bank which, immediately prior to conversion,
was a state chartered mutual savings bank, shall call a meeting of the
members. Notice for, and conduct of, such meeting shall be in accordance
with the bank's Federal charter and bylaws. Business to be conducted at
the organizational meeting shall include the election of trustees (who may
also be known as a board of directors) and any other matters permitted by
the charter and bylaws. Any action taken at such meeting shall be deemed
an acceptance of the charter and bylaws approved by the Office pursuant to
§544.1 of this chapter.

(b) First meeting of trustees. Upon election or appointment, the
board of trustees shall hold a meeting to elect the officers of the bank
in accordance with its Federal charter and bylaws, and to take other
action necessary to permit the operation of the bank in accordance with
the Home Owners' Loan Act of 1933, as amended, the bank's charter and
bylaws, these rules and regulations, and orders of the Office.

(c) Plan for governance of association during first six years after
issuance of Federal charter. (1)(i) An applicant for a Federal mutual
savings bank charter may submit a plan which provides that each member of
its governing board, i.e., board of trustees, managers, or
directors, may continue to serve, provided that within two years of the
issuance of a Federal charter at least one-fifth of the members of such
board shall have been elected by vote, either in person or by proxy, of
the bank's membership as provided in its Federal charter, that within
three years of the issuance of its Federal charter at least two-fifths of
the members of such board shall have been elected by such a membership
vote, that within four years of the issuance of its Federal charter at
least three-fifths of the members of such board shall have been elected by
such a membership vote, that within five years of the issuance of its
Federal charter at least four-fifths of the members of such board shall
have been elected by such a membership vote, and that within six years of
the issuance of its Federal charter all of the members of such board shall
have been elected by such a membership vote.

(ii) The plan:

(A) Shall set forth the names of those persons who are being proposed
for service on the applicant's governing board after conversion to a
Federal charter,

(B) Shall show how trustees not elected by the converted bank's
membership will be appointed or otherwise selected, and

(C) Shall provide that no trustees may be appointed or elected to terms
of more than three years.

(iii) The plan may provide that

(A) After receipt of its Federal charter the bank will be organized by
its existing governing board,

(B) Within the first two years following receipt of its Federal
charter, the bank's charter may be amended without a membership vote,
provided any such amendment is first approved by a two-thirds vote of its
board of trustees and is thereafter approved by the Office, and

(C) The bank's first annua1 membership meeting need not take place
until two years after receipt of its Federal charter.

(2) Except to the extent that the Office approves a plan under this
paragraph (c) which is inconsistent with other provisions of this section,
a Federal mutual savings bank shall in all respects comply with those
other provisions.

[54 FR 49482, Nov. 30, 1989, as amended at 60 FR 66717, Dec. 26,
1995]

§ 543.11-1   Grandfathered authority.

top

(a) A Federal savings bank formerly chartered or designated as a mutual
savings bank under state law may exercise any authority it was authorized
to exercise as a mutual savings bank under state law at the time of its
conversion from a state mutual savings bank to a Federal or other state
charter. Except to the extent such authority may be exercised by Federal
savings associations not enjoying grandfathered rights hereunder, such
authority may be exercised only to the degree authorized under state law
at the time of such conversion. Unless otherwise determined by the
Director, an association, in the exercise of grandfathered authority, may
continue to follow applicable state laws and regulations in effect at the
time of such conversion.

(b) A Federal savings association that acquires, or has acquired, a
Federal savings bank by merger or consolidation may itself exercise any
grandfathered rights enjoyed by the disappearing institution, whether such
rights were obtained directly through conversion or through merger or
consolidation. The extent of the grandfathered rights of a Federal savings
association that disappeared prior to the effective date of this section
shall be determined exclusively pursuant to this section.

(c) This section shall not be construed to prevent the exercise by a
Federal savings association enjoying grandfathered rights hereunder of
authority that is available under the applicable state law only upon the
occurrence of specific preconditions, such as the attainment of a
particular future date or specified level of regulatory capital, which
have not occurred at the time of conversion from a state mutual savings
bank, provided they occur thereafter.

(d) This section shall not be construed to permit the exercise of any
particular authority on a more liberal basis than is allowable under the
most liberal construction of either state or Federal law or
regulation.

§ 543.14   Continuity of existence.

top

The corporate existence of an association converting under this part
shall continue in its successor. Each savings or demand accountholder
shall receive a savings account or accounts in the converted association
equal in amount to the value of accounts held in the former
association.

[54 FR 49482, Nov. 30, 1989, as amended at 61 FR 64015, Dec. 3,
1996]

Browse
Previous | Browse
Next

For questions or comments regarding e-CFR
editorial content, features, or design, email [email-masked].

For questions
concerning e-CFR programming and delivery issues, email [email-masked].

Section
508 / Accessibility