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RULE §15.108Conversion of a Financial Institution into a State Bank

(a) Scope. This section governs the application for conversion of a financial institution into a state bank pursuant to the Finance Code, §32.502.

(b) Form of application. The applicant must submit a fully completed, verified application on a form prescribed by the banking commissioner and simultaneously tender a filing fee in the amount required for the filing of an application for a new bank charter pursuant to §15.2 of this title (relating to Filing and Investigation Fees). The application must, except to the extent waived by the banking commissioner, include:

  (1) a summary of the proposed transaction;

  (2) a statement explaining whether the proposed state bank will be in compliance with each standard detailed in the Finance Code, §32.502(b), certified by the principal executive officer of the applicant;

  (3) a copy of the plan of conversion executed by an authorized representative of the applicant;

  (4) certificate of conversion, including:

    (A) the plan of conversion;

    (B) the certificate of formation of the proposed state bank;

    (C) a provision conditioning the conversion upon the approval of the banking commissioner;

  (5) a certified copy of those portions of the minutes of board meetings and shareholder or participant meetings at which action was taken regarding approval of the conversion, or a certificate of an officer verifying the action taken by the board of directors and the shareholders or participants approving the conversion;

  (6) an assessment of the future prospects, proposed officers and directors, and proposed branches and other locations of the proposed state bank;

  (7) an assessment of the current regulatory and financial condition of the applicant;

  (8) if the conversion changes the existing CRA delineated community, a copy of a map depicting the proposed delineated community of the resulting state bank;

  (9) a copy of the latest annual report for the applicant and, if applicable, its holding company;

  (10) a copy of that portion of the most recent watch list for the applicant that identifies low-quality assets;

  (11) a description of all material legal or administrative proceedings involving the applicant or an officer, director, or principal shareholder of the applicant;

  (12) an opinion of legal counsel that conforms with §15.109 of this title (relating to Opinion of Legal Counsel), concluding:

    (A) the conversion of the applicant has been duly authorized by its board and shareholders in accordance with governing law, and the applicant has in all material respects complied with the procedures prescribed by the federal, state, or foreign laws governing the exit of the applicant from its current regulatory system;

    (B) the conversion will not cause or result in any material violation of the laws of this state concerning the organization and operation of state banks;

    (C) the proposed state bank will not be engaged in a business other than banking or a business incidental to banking; and

    (D) all conditions with respect to the conversion imposed by the banking commissioner have been satisfied or otherwise resolved or, to the best knowledge of legal counsel, no conditions have been imposed;

  (13) a copy of each filing regarding the proposed conversion that is required by another governmental authority, complete with all related attachments, exhibits and related correspondence;

  (14) a current pro forma balance sheet and income statement of the applicant, with adjustments, reflecting the proposed conversion as of the most recent quarter ended immediately prior to the filing of the application;

  (15) a copy of the applicant's current strategic plan with a comparison to the strategic plan requirements contained in the department's Memorandum 1009, including projections of the balance sheet and income statement of the resulting state bank as of the quarter ending one year from the date of the pro forma financial statement required by paragraph (14) of this subsection;

  (16) an explanation of compliance with or nonapplicability of the provisions of governing law relating to rights of dissenting shareholders to the conversion;

  (17) a copy of all securities offering documents, proxy statements, or other disclosure materials delivered or to be delivered to shareholders in connection with the proposed conversion;

  (18) an explanation of the manner and basis of converting any shares or other evidences of ownership of the applicant into shares, obligations, evidences of ownership, rights to purchase securities or other securities of the proposed state bank, into cash or other property, including shares, obligations, evidences of ownership, rights to purchase securities or other securities of another person or entity, or into any combination of these;

  (19) other information that the banking commissioner, in the exercise of discretion, considers necessary to make an informed decision to approve or deny the proposed conversion; and

  (20) in addition to all other requirements of this subsection, with respect to conversion of an out-of-state financial institution into a state bank:

    (A) any additional opinions and information the applicant, by contacting the department, determines the banking commissioner requires; and

    (B) information regarding applicable host state law and evidence of compliance with the law.

(c) Applicant's duty to disclose. The applicant must supply all material information necessary for the banking commissioner to make a fully informed decision on the application.

(d) Public notice. Within 14 days prior to or 14 days after submission of an initial application under this section, the applicant must publish notice in accordance with §15.5 of this title (relating to Public Notice) in the specified communities where the home office of the applicant is located, and where the home office of the proposed state bank will be located, if different. With respect to a conversion of an out-of-state financial institution into a Texas state bank, the applicant must inform the department of the publication requirements in the host state for the banking commissioner to determine, pursuant to §15.5(e) of this title, whether those requirements satisfy the publication requirements of this subsection.

(e) Approval by the banking commissioner. The banking commissioner will approve a conversion only if the application indicates substantial compliance with all conditions of the Finance Code, §32.502(b).

Source Note: The provisions of this §15.108 adopted to be effective September 15, 1997, 22 TexReg 8948; amended to be effective January 7, 2004, 29 TexReg 80; amended to be effective November 8, 2012, 37 TexReg 8779; amended to be effective November 7, 2013, 38 TexReg7687; amended to be effective January 2, 2020, 44 TexReg 8232

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