04 NCAC 16G .0314. LIQUIDATION ACCOUNT

(a)  Each converted savings bank shall, at the time of conversion, establish a liquidation account in an amount equal to the amount of net worth of the converting savings bank as of the latest practicable date prior to conversion.  For the purpose of this Rule, the savings bank shall use the net worth figure set forth in its latest statement of financial condition contained in the final offering circular.  The function of the liquidation account is to establish a priority on liquidation and, except as provided in Paragraph (f) of this Rule, the existence of the liquidation account shall not operate to restrict the use or application of any of the net worth of the converted savings bank.

(b)  The liquidation account shall be maintained by the converted savings bank for the benefit of eligible account holders and supplemental eligible account holders who maintain their deposit accounts in the savings bank.  Each eligible account holder and supplemental eligible account holder shall, with respect to each deposit account held, have a related inchoate interest in a portion of the liquidation account balance ("subaccount").

(c)  In the event of a complete liquidation of the converted savings bank and only in such event, each eligible account holder and supplemental eligible account holder shall be entitled to receive a liquidation distribution from the liquidation account, in the amount of the then current adjusted subaccount balances for deposit accounts then held, before any liquidation distribution may be made with respect to capital stock, except with respect to preferred stock issued in exchange for the surrender at the time of the conversion of mutual capital certificates issued by the savings bank prior to conversion.  Preferred stock issued in exchange for mutual capital certificates may receive distributions in liquidation prior to those with respect to the liquidation account to the same extent that the holders of the mutual capital certificates would have been entitled to priority over the residual rights of depositors had the savings bank not been converted as of the date of liquidation.  No merger, consolidation, purchase of bulk assets with assumption of deposit accounts and other liabilities, or similar  transactions in which the converted savings bank is not the surviving depository institution is considered to be a complete liquidation for this purpose.  In such transactions the liquidation account shall be assumed by the surviving depository institution.

(d)  The initial subaccount balance for a deposit account held by an eligible account holder or supplemental eligible account holder shall be determined by multiplying the opening balance in the liquidation account by a fraction of which the numerator is the greater of the amount of qualifying deposits in such deposit account on the eligibility record date and/or the supplemental eligibility record date and the denominator is the total amount of qualifying deposits for all eligible account holders and supplemental eligible account holders in the converted savings bank.  Such initial subaccount balance shall not be increased and shall be subject to downward adjustment as provided in Paragraph (e) of this Rule.

(e)  If the balance in any qualifying deposit account of an eligible account holder or supplemental eligible account holder at the close of business on any annual closing date subsequent to the date of conversion is less than the lesser of the deposit balance in the savings account at the close of business on any other annual closing date subsequent to the conversion date or the amount of qualifying deposit as of the eligibility record date or the supplemental eligibility record date, the subaccount balance for the savings account shall be adjusted by reducing the subaccount balance in an amount appropriate to the reduction in the deposit balance.  In the event of a downward adjustment, the subaccount balance shall not be subsequently increased, notwithstanding any increase in the deposit balance of the related savings account.  The converted savings bank shall not be required to recompute the liquidation account and subaccount balances provided the converted savings bank maintains records sufficient to make necessary computations in the event of a complete liquidation or such other events as may require a computation of the balance of the liquidation account.  The liquidation subaccount of an account holder shall be maintained for as long as the account holder maintains an account with the same Social Security number.

(f)  No converted saving bank shall declare or pay a cash dividend on, or repurchase any of, its capital stock if the effect thereof would cause the net worth of the converted savings bank to be reduced below the amount required for the liquidation account.

 

History Note:        Authority G.S. 54C‑33; 54C‑53;

Eff. February 15, 1992.