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formed of the Director's action on the application and will notify promptly the Federal credit union concerned. $ 302.3 Special Reserve for Delinquent

Loans. (a) The Regular Reserve of each Federal credit union shall be supplemented by a special reserve to be known as the Special Reserve for Delinquent Loans, which shall be equal to the excess of the sum of 10 percent of the unpaid balances of loans delinquent more than two months and less than six months, plus 25 percent of the unpaid balances of loans delinquent from 6 months to less than 12 months, and plus 80 percent of the unpaid balances of loans delinquent 12 months or more over the balance in the Regular Reserve. In the event it is necessary to supplement the Regular Reserve by a Special Reserve for Delinquent Loans, the transfer to the Special Reserve for Delinquent Loans shall be made as of December 31 of each year, and as of June 30 of each year if dividends are to be paid semiannually, from Undivided Earnings before any distribution of dividends. The maintenance of a Special Reserve for Delinquent Loans shall not eliminate the necessity for transferring net earnings as of the end of each dividend period to the Regular Reserve as required by paragraph (a) of $ 302.2. In the event the required transfer exceeds the balance of Undivided Earnings, only the balance of Undivided Earnings shall be transferred to the Special Reserve for Delinquent Loans.

(b) When, as of the end of any dividend period, the amount in the Special Reserve for Delinquent Loans exceeds the amount required by the regulations in this part, the board of directors of the Federal credit union may authorize the transfer of the excess to Undivided Earnings.

(c) Upon written application by the board of directors of a Federal credit union, the Director may waive, in whole or in part, the requirement for the maintenance of the Special Reserve for Delinquent Loans contained in paragraph (a) of this section. Such applications shall be addressed to the Regional Representative.

PART 306—CONVERSION FROM

FEDERAL TO STATE Sec. 306.1 Requirements for conversion. 306.2 Meeting of members and notice to

Bureau. 306.3 Notice of meeting of members. 306.4 Notice of meeting to Bureau. 306.5 Report of results of meeting to Bu306.6 Approval by majority of all members

required. 306.7 Compliance with State laws. 306.8 Completion of conversion. 306.9 Assistance by Bureau.

AUTHORITY: The provisions of this Part 306, issued under secs. 21, 26, 73 Stat. 635, 638; 12 U.S.C. 1766, 1771.

SOURCE: The provisions of this Part 306, appear at 26 F.R. 840, Jan. 27, 1961, unless otherwise noted. $ 306.1 Requirements for conversion.

Any Federal credit union may convert into a State credit union by (a) complying with the requirements of the Act and the regulations in this part requisite to enabling it to convert to a State credit union; (b) taking such action as may be necessary under applicable State law for the conversion of Federal credit unions to State credit unions to obtain a State credit union charter; and (c) filing with the Bureau a copy of the State credit union charter issued to it within ten days after receipt thereof. $ 306.2 Meeting of members and notice

to Bureau. Upon approval of the proposition to convert to a State credit union by a majority of the board of directors, it shall set a date for a meeting of the members, at which the individual members shall have the option to vote on the proposttion either in person at the meeting or by written ballot to be filed on or before the date of the meeting. The board of directors promptly shall notify the Regional Representative in writing of its approval of the proposition to convert to a State credit union, and of the date set for the meeting of the members. $ 306.3 Notice of meeting of members.

(a) Written notice of the meeting shall be delivered in person to each member or mailed to each member at the address for such member appearing on the records of the credit union, not more than thirty days nor less than seven days prior to the date set for the meeting.

(b) In addition to setting forth the proposition for conversion and the date, time, and place of the meeting, the written notice of the meeting shall (1) inform the members of the opportunity to vote by written ballot, and when, where and how (on or before the date of the meeting) such written ballots may be filed; (2) contain a form of written ballot for the use of those members who will vote thereby instead of in person at the meeting; and (3) set forth, for the advance consideration of the members, a brief and accurate statement of the reasons for and against the proposed conversion, including the effect, if any, it will have upon shareholdings and obligations of members, and the policies and practices of the credit union. $ 306.4 Notice of meeting to Bureau.

A copy of the written notice of the meeting, verified by the affidavit of the secretary of the credit union, shall be delivered to the Regional Representative, at the same time, in advance of the meeting, that it is delivered to the members. $ 306.5 Report of results of meeting to

Bureau. A statement of the results of the vote, verified by the affidavits of the president or vice president and the secretary, shall be filed with the Regional Representative within ten days after the vote is taken. $ 306.6 Approval by majority of all

members required. In order for the proposition for conversion to be approved and acted upon further by the credit union it must receive the affirmative vote of a majority of all the members. $ 306.7 Compliance with State laws.

If the proposition for conversion is approved by the affirmative vote of a majority of all the members, the board of directors promptly, and in no event later than 90 days after such approval, shall

take such action on behalf of the credit union as may be necessary under the applicable State law for the conversion of Federal credit unions to State credit unions to convert the credit union to a State chartered credit union. In addition, the board of directors promptly shall inform the Regional Representative of the action so taken and, from time to time, of the progress of such action. & 306.8 Completion of conversion.

(a) Within ten days after the credit union receives a State credit union charter it shall file a copy thereof with the Regional Office. The Regional Representative promptly shall notify the credit union in writing of the receipt of the State charter. The credit union shall cease to be a Federal credit union as of the close of the business of the date such copy is received by the Regional Office unless the credit union has been notified in writing or is notified in writing to the contrary pursuant to paragraph (b) of this section. Upon ceasing to be a Federal credit union, such credit union shall no longer be subject to any of the provisions of the Act. The successor State credit union shall be vested with all of the assets and shall continue responsible for all of the obligations of the Federal credit union to the same extent as though the conversion had not taken place.

(b) Notwithstanding the provisions of paragraph (a) of this section, if the requirements of the Act and the regulations in this part have not been satisfied, the attempted conversion shall be ineffective and the credit union shall continue to be a Federal credit union, subject to the provisions of the Act, to the same extent as though the conversion had not been attempted. The Regional Representative promptly shall notify the credit union in writing either before or after the copy of the State charter is filed with the Regional Office, of any findings by the Bureau, including the reasons therefor, which adversely affect the validity of the attempted conversion. § 306.9 Assistance by Bureau.

(a) Upon the request of any credit union which desires to convert, or which

is converting, pursuant to the provisions union may, after approval by its board in this part, the Bureau will furnish of directors and prior to taking the steps information, assistance and advice prescribed in § 307.1 file with the Bureau which, in the discretion of the Director, & preliminary application for converis pertinent to the proposed conversion sion. Such preliminary application shall and consistent with the powers and du- be on a form, copies of which may be ties of the Bureau under the Act.

obtained from any Regional Office of (b) The Bureau will cooperate, to the the Bureau. extent deemed consistent with its powers (b) A preliminary application for and duties under the Act, with State conversion shall be filled with the Bureau agencies and State officials having re- through the Regional Office. It shall sponsibility under applicable State law authorize an examination of its books for the issuance of charters to and the and records by the Bureau and contain supervision of State credit unions, in an undertaking to pay the examination questions and matters relating to the fee therefor in accordance with $ 301.7 conversion of any Federal credit union of this chapter. to State charter pursuant to the Act and $ 307.3 Information required with pre the provisions in this part.

liminary application. PART 307—CONVERSION FROM

(a) A preliminary application shall be

accompanied by a current financial and STATE TO FEDERAL

statistical report, Form FCU 109, as reSec.

vised, or a form substantially equivalent 307.1 Requirements for conversion.

thereto, certified correct by the treasurer 307.2 Preliminary application to convert.

and verified by the affidavit of the presi307.3 Information required with prelimi

dent or vice-president of the credit union nary application, 307.4 Approval of preliminary application

and a statement verified by the affidavits to convert.

of the president or vice-president and 307.5 Compliance with State laws.

treasurer of the credit union which shall 307.6 Application for Federal charter,

contain (1) a statement of its policies 307.7 Completion of conversion.

and procedures with respect to loans to AUTHORITY: The provisions of this Part 307,

members, including interest rates and issued unde secs. 21, 26, 73 Stat. 635, 638; charges incident to making loans, matu12 U.S.C. 1766, 1771.

rities of loans, unsecured loan limit, SOURCE: The provisions of this part 307,

types of security accepted, and requireappear at 26 F.R. 841, Jan. 27, 1961, unless

ments for amortization; (2) a list of all otherwise noted.

outstanding unsecured loans with unpaid

balances in excess of $750; (3) a list of $ 307.1 Requirements for conversion.

all outstanding loans with maturities Any State credit union may convert in excess of 5 years; (4) a schedule of all into a Federal credit union by (a) com- loans which are delinquent two months plying with all the requirements of the or more; (5) a statement of the kinds of State requisite to enabling it to convert accounts (share, savings, deposit, or to a Federal credit union, if any, or to

other) which members are required or cease being a State credit union; (b) permitted to maintain; (6) a description filing with the Bureau proof of such

of its real property holdings; (7) a decompliance, satisfactory to the Director;

scription of investments other than loans (c) filing with the Bureau an organiza

to members, loans to other credit unions,

United States bonds, and shares in tion certificate as required by the Act;

savings and loan associations insured by and (d) filing with the Bureau proof satisfactory to the Director that all other

Federal Savings and Loan Insurance Core

poration; (8) the names and locations requirements of the Act and the regula

of depositaries of its funds; (9) a detions in this part have been complied

scription of any services rendered to or with.

on behalf of members or the public other $ 3072 Preliminary application to con- than accepting and maintaining accounts vert.

of members and making loans to mem(a) Any State credit union that de- bers; (10) a statement of the field of sires to convert into a Federal credit membership.

(b) It shall be accompanied, also, by & preliminary plan of conversion which shall show what the credit union proposes to do about any of its policies, procedures, practices, assets and liabilities which do not comply with the requirements of the Act if its conversion to a Federal credit union should be approved. $ 307.4 Approval of preliminary appli

cation to convert. (a) The Director will consider the preliminary application for conversion, the financial and statistical report, the preliminary plan of conversion, and such other Information or reports of examination or investigation as may have been submitted or required, and will accord such application conditional approval upon his determination that the credit union does or is able to comply with all the requirements of the Act. The Director will disapprove the preliminary application if he determines that the credit union is unable to comply with all the requirements of the Act.

(b) Upon disapproval of a preliminary application for conversion into a Federal credit union, the credit union, if it nevertheless believes that it is able to comply with all the requirements of the Act, may submit promptly additional information, including a new preliminary plan for conversion, for the reconsideration of the Director. § 307.5 Compliance with State laws.

Upon the conditional approval, either initially or upon reconsideration, of a preliminary application for conversion into a Federal credit union, the credit union shall proceed promptly to comply with all the requirements of the State requisite to enabling it to convert to a Federal credit union, if any, or to cease being a credit union of such State. After obtaining the vote of its members required by the laws of such State for the accomplishment of such purpose, the credit union shall proceed promptly to comply with all the conditions prescribed in the conditional approval of the preliminary application. 307.6 Application for Federal charter.

(a) Upon compliance with all the requirements of the State requisite to

enabling it to convert to a Federal credit union, if any, or to cease being a credit union of such State, and upon compliance with all the conditions prescribed in the conditional approval of the preliminary application, the credit union may file with the Regional Representative an organization certificate, together with proposed bylaws, as required by the Act, which shall constitute its formal application for conversion into a Federal credit union.

(b) Such organization certificate and proposed bylaws shall be accompanied by evidence satisfactory to the Directory showing compliance by the credit union with all the requirements of the State requisite to enabling it to convert to a Federal credit union, if any, or to cease being a credit union of such State and compliance by the credit union with all the conditions prescribed in the conditional approval of the preliminary application. 8 307.7 Completion of conversion.

(a) Upon approval of the organization certificate by the Director the credit union shall become a Federal credit union as of the date it ceases to be å State credit union. It shall be vested with all of the assets and shall continue responsible for all of the obligations of the State credit union to the same extent as though the conversion had not taken place.

(b) All directors and credit committee members holding office at the time the credit union becomes a Federal credit union shall hold office until the first annual meeting of the members of the Federal credit union and until the election and qualification of their respective successors, or until the qualification of their respective successors elected at a special meeting of the members as may be required pursuant to the provisions of paragraph (d) of this section.

(c) If a special meeting of the members is not required pursuant to the provisions of paragraph (d) of this section, the board of directors shall hold a legal meeting promptly upon the credit union becoming a Federal credit union. At such meeting the board of directors shall elect such executive officers, appoint such committees, and transact such other business as is necessary to carry

into effect the conversion as approved by the Director and to operate the Federal credit union in accordance with the requirements of the Act.

(d) If required in the conditional approval of the preliminary application or upon approval of the organization certificate and bylaws, a board of directors, or a credit committee, or both, shall be elected at a special meeting of the members to be held promptly upon the credit union becoming a Federal credit union, all to hold office until the first annual meeting of the Federal credit union and until the election and qualification of their respective successors. At such meeting such other action shall be taken as is necessary to carry into effect the conversion as approved by the Director and to operate the Federal credit union in accordance with the requirements of the Act. Immediately after such meeting the board of directors shall meet, elect such executive officers, appoint such committees, and transact such other business as is necessary to carry into effect the conversion as approved by the Director and to operate the Federal credit union in accordance with the requirements of the Act.

to groups within a well-defined neighborhood, community, or rural district, may merge into a single Federal credit union: Provided, That the State credit unions have the power and authority to merge under applicable State laws; or, two or more Federal and State credit unions, the combined membership of which would be eligible for credit union charter under applicable State law, may merge into a single State credit union: Provided, That the State credit unions have the power and authority to merge under the said applicable State law. Any such merger shall take place in accordance with the Regulations in this part, and, with respect to any State credit union involved in such merger, in accordance with the provisions of applicable State law. & 308.2 Preparation of merger plan.

Upon the approval of a proposition for a merger by the boards of directors of the credit unions, they shall prepare, or cause to be prepared for their approval, a plan for the proposed merger. The plan for the proposed merger shall include, but not by way of limitation, a current financial and statistical report of each credit union; an appraisal of the share value with respect to each credit union and the basis for the determination of such share value; whether differences in share values between the credit unions will be absorbed or adjusted, and, if there is to be an adjustment of such differences, how it will be accomplished; any provisions that are made with respect to reserves, undivided earnings and dividends; provisions with respect to notification and payment of creditors; provisions for bringing the assets and liabilities of any merging State credit unions into conformity with the requirements of the Act, if necessary, where it is proposed that the merged credit unions are to continue as a Federal credit union; and which of the merging credit unions is to continue and which will lose identity in the proposed merger. Also, if the merged credit unions are to continue as a Federal credit union, the plan should include any proposed amendments to the charter of the continuing Federal credit union.

PART 308—MERGERS OF FEDERAL

CREDIT UNIONS Sec. 308.1 When permissible. 308.2 Preparation of merger plan. 308.3 Approval of plan by Director. 308.4 Approval by members. 308.5 Completion of merger.

AUTHORITY: The provisions of this part 308 issued under sec. 21, 73 Stat. 635; 12 U.S.C. 1766.

SOURCE: The provisions of this Part 308 appear at 26 F.R. 842, Jan. 27, 1961, unless otherwise noted. & 308.1 When permissible.

Two or more Federal credit unions, the combined membership of which would have a common bond of occupation or association, or would be limited to groups within a well-defined neighborhood, community, or rural district, may merge into a single Federal credit union; or, two or more Federal and State credit unions, the combined membership of which would have a common bond of occupation or association, or would be limited

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