§ 53-17.2. Conversion of savings association to a State bank. - North Carolina Statutes

§53‑17.2.  Conversion of savings association to a State bank.

(a)        Any association, asdefined in G.S. 54B‑4, or any savings bank as defined in G.S. 54C‑4(b),may convert to a State bank as provided in this section. As used in thissection, the term "conversion" includes (i) a transaction in which aState bank assumes all or substantially all of the liabilities and purchasesall or substantially all of the assets of an association or savings bank and(ii) any other transaction that results in a change of identity of anassociation or savings bank to a State bank. A transaction in which theresulting bank is a subsidiary or an affiliate of a bank holding company orbank which has been in existence for at least two years shall not be subject tothe provisions of this section but shall be subject to the approval of theCommissioner of Banks.

(b)        Upon a majorityvote of its board of directors, any association or savings bank may apply tothe Commissioner of Banks for permission to convert to a bank and for certificationof appropriate amendments to its certificate of incorporation to effect theconversion. A mutual association or savings bank must also convert to a stockform of organization before completing conversion to a bank.

(c)        The association orsavings bank shall submit a plan of conversion as a part of the application tothe Commissioner of Banks. The Commissioner of Banks may recommend approval ofthe plan of conversion with or without amendment. The Commissioner of Banksshall recommend approval of the plan of conversion if upon examination andinvestigation the Commissioner finds that:

(1)        The resulting bankwill operate in a safe, sound, and prudent manner with adequate capital,liquidity, and earnings prospects;

(2)        The directors,officers, and other managerial officials of the association or savings bank arequalified by character and financial responsibility to control and operate in alegal and proper manner the bank proposed to be formed as a result of theconversion;

(3)        The interest of thedepositors, the creditors, and the public generally will not be jeopardized bythe proposed conversion; and

(4)        The proposed namewill not mislead the public as to the character or purpose of the resultingbank, and the proposed name is not the same as one already adopted orappropriated by an existing bank in this State or so similar as to be likely tomislead the public.

(d)        Any action taken bythe Commissioner of Banks pursuant to this section shall be subject to reviewby the State Banking Commission which may approve, modify, or disapprove anyaction taken or recommended by the Commissioner of Banks. The State BankingCommission may promulgate rules to govern conversions undertaken pursuant tothis section. The requirements for a converting association or savings bankshall be no more stringent than those provided by rule or regulation applicableto other FDIC‑insured commercial banks. The requirements for a convertingassociation or savings bank shall be no less stringent than those provided byrule or regulation applicable to other FDIC‑insured commercial banks,except as may be allowed during transition periods permitted by subdivisions(e)(4) and (h)(2) of this section.

(e)        In the absence ofthe promulgation of rules under subsection (d), the conditions to be met forapproval of the application for conversion should include the following:

(1)        Condition.Theapplicant's general condition must reflect adequate capital, liquidity,reserves, earnings, and asset composition necessary for safe and soundoperation of the resulting bank.

(2)        Management.Themanagement and the board of directors must be capable of supervising a soundbanking operation and overseeing the changes that must be accomplished in theconversion from an association or savings bank to a bank.

(3)        PublicConvenience.The Commission must determine that the conversion will have apositive impact on the convenience of the public and will not substantiallyreduce the services available to the public in the market area.

(4)        Transition.Within areasonable time after the effective date of the conversion, the resulting bankmust divest itself of all assets and liabilities that do not conform to Statebanking law or rules. The length of this transition period shall be determinedby the Commissioner and shall be specified when the application for conversionis approved.

In evaluating each of theseconditions, the Commission shall consider a comparison of the relevantfinancial ratios of the applicant with the average ratios of North Carolinabanks of similar asset size. The Commission may not approve a conversion wherethe applicant presents an undue supervisory concern or has not been operated ina safe and sound manner.

(f)         If the StateBanking Commission approves the plan of conversion, then the association orsavings bank shall submit the plan to the stockholders or members as providedin subsection (g). After approval of the plan of conversion, the Commissionerof Banks shall supervise and monitor the conversion process and shall ensurethat the conversion is conducted pursuant to law and the association's orsavings bank's approved plan of conversion.

(g)        After lawful noticeto the stockholders or members of the association or savings bank and full andfair disclosure of the plan of conversion, the plan must be approved by amajority of the total votes that stockholders or members of the association orsavings bank are eligible and entitled to cast. The vote by the stockholders ormembers may be in person or by a proxy which has been executed within 45 days priorto the vote. Following the vote of the stockholders or members, the associationor savings bank shall file with the Commissioner of Banks the results of thevote certified by an appropriate officer. The Commissioner of Banks shall thenapprove the requested conversion and the association or savings bank shall filewith the Secretary of State amended articles of incorporation with thecertificate of the Commissioner of Banks attached. The conversion to a bankshall be effective upon this filing.

(h)        The Commissioner ofBanks may authorize the resulting bank to do the following:

(1)        Wind up anyactivities legally engaged in by the association or savings bank at the time ofconversion but not permitted to State banks.

(2)        Retain for atransitional period any assets and deposit liabilities legally held by theassociation or savings bank at the effective date of the conversion that maynot be held by State banks.

The length, terms, and conditionsof the transitional periods under subdivisions (1) and (2) are subject to thediscretion of the Commissioner of Banks.

(i)         Upon conversion ofan association or savings bank to a bank, the legal existence of suchinstitution does not terminate, and the resulting bank is a continuation of theformer institution. The conversion shall be a mere change in identity or formof organization. All rights, liabilities, obligations, interest, and relationsof whatever kind of the association or savings bank shall continue and remainin the resulting bank. Except as may be authorized during a transitional periodby the Commissioner of Banks pursuant to subsection (h), a bank resulting fromthe conversion of an association or savings bank shall have only those rights,powers and duties which are authorized for banks by the laws of this State andthe United States. All actions and legal proceedings to which the associationor savings bank was a party prior to conversion shall be unaffected by theconversion and shall proceed as if the conversion had not taken place. (1989(Reg. Sess., 1990), c. 845, s. 1; 1995, c. 142, s. 1.)