America's Mutual Banks Announces Support for Community Mutual Bank Competitive Equality Act

WASHINGTON, March 22, 2012 /PRNewswire-USNewswire/ -- Americas Mutual Banks, a national association of prominent mutual banks, announced today its support of H.R. 4217 the "Community Mutual Bank Competitive Equality Act." The Bill was introduced by Congressman Michael Grimm (R-N.Y.) on March 20, 2012 (http://www.americasmutualbanks.com/releases/pressreleases.html). The Bill would, among other things, authorize mutual national banks, allow mutual banks to issue mutual investment certificates eligible for Tier 1 capital inclusion, authorize certain defensive injunctive actions by mutuals in limited circumstances, authorize an independence bylaw and afford mutual holding companies the same treatment with respect to consolidated capital compliance as commercial banks.

Chairman Marty Neat, CEO of First Shore Federal said that "the flexibility this Bill affords mutual FDIC insured institutions will allow them to compete on a level playing field and remove any unintended statutory bias that would discourage them from remaining as independent community financial institutions." Mr. Neat cited a recent study by Marcus Faust of R.P. Financial which concluded that mutual FDIC insured institutions have exhibited comparable or superior ratios in numerous key measurements of safety and soundness. The study revealed that the total estimated cost to the FDIC of failure of mutual banks was under $300 million as compared with $50 billion for all other banks since 1998. The study did not take into account the billions of dollars that were invested in non mutuals under the TARP program which excluded mutuals until it was too late. Mr. Neat said that "FDIC insured mutual institutions have as a group proven to be the most resilient through the banking crisis resulting in only nominal cost to the FDIC as compared with other bank failures. The minimal FDIC exposure to any losses from the failure of mutual institutions makes plain that mutual institutions had no part in contributing to the crisis in the banking industry and deserve to be nurtured given their extraordinary financial strength and service to their communities. We expect no special legislative competitive advantages nor do we deserve to be at a legislative disadvantage. Congressman Grimm is to be applauded for recognizing the vital role that mutual savings banks and savings and loan association play in our national economy." Vice Chairman Peter Boger, CEO of Ridgewood Savings Bank, Ridgewood N.Y., one of the nation's largest mutual banks, said "our constituency is composed of our customers and the communities the bank serves. We are not tempted to operate our bank to maximize the return to investors while assuming what hindsight has proven to be unacceptable risk. We have no investors and are still able to compete successfully with the largest banks in the country. We take great pride in our commitment to mutuality and our service to the community and welcome any measure that lessens unnecessary statutory bias. We strongly support the passage of H.R. 4217."

About America's Mutual Banks

America's Mutual Banks is a association of like-minded mutuals dedicated to preserving and advancing the mutual banking form. America's Mutual Banks is headquartered at 701 8th Street NW, Suite 700, Washington, D.C. 20001. Please visit www.americasmutualbanks.com or contact Douglas Faucette, Locke Lord LLP, at 202-220-6961 with any questions or requests for additional information on America's Mutual Banks.

Memorandum

Date: March 22, 2012
Subject: Talking Points for America's Mutual Banks

ABOUT AMERICA'S MUTUAL BANKS

• America's Mutual Banks was formed for the purpose of advocating for issues unique to mutual savings institutions.
• AMB is composed of persons and institutions who are committed to the preservation and advancement of mutuality as a viable business model for FDIC depository institutions.
• AMB's goal is to be the voice to promote the mutual agenda among Federal and State legislators, regulators and other policymakers. Another major goal is to educate legislators, regulators and other stakeholders on the unique attributes of the mutual form of ownership.
• AMB strives to preserve mutual institutions' freedom of choice with respect to Federal or State charter and form of corporate charter.
• AMB also works with the national and state trade groups to promote mutuality and will assist those trade groups on other issues, if deemed advisable, to the extent not inconsistent with our purpose.
• Our members, as "mutual institutions", have no shareholders and therefore are not subject to the pressures to maximize gain over the short term. Rather, as a mutual, our members can take a long term approach to their business plans and focus on serving the lending and deposit needs of the communities in which they operates.

Talking Points on the Mutual Community Bank Competitive Equality Act

• AMB strongly supports the Mutual Community Bank Competitive Equality Act (the "Act") as means to preserve and grow the mutual form of organization by enabling mutuals to remain competitive.
• The Act will allow the OCC to charter mutual national banks and will allow an existing mutual institution (including mutual savings institutions and credit unions) to convert to a mutual national bank. This will preserve a mutual's right to choose the form of charter that best suits the needs of the local community. A mutual national bank was authorized in early versions of the 2010 banking legislation, but was omitted in the final Dodd-Frank Act.
• The Act will authorize mutual institutions to raise capital through alternative investment certificates. As non-stock companies, mutuals increase Tier 1 capital primarily through retained earnings. Alternative capital instruments, similar to capital certificates currently authorized by law, will enable mutuals to increase their Tier 1 capital strength. The additional capital can be used to ward off continuing declines in the economy, to support growth or for acquisitions.
• The Act will create a civil action providing equitable relief for a mutual that is threatened by hostile members who violate the prohibition against a company, or any affiliate of a company, from holding, voting or soliciting the proxies of a mutual. This section of the Act is the same as legislation introduced in last Congress and will enable a mutual to preserve its form of organization.
• The Act will authorize a private mutual holding company to contribute stock to a taxqualified charitable foundation. Many savings associations have established community foundations using stock issued in a full mutual to stock conversion. These foundations have distributed millions of dollars for many worthwhile purposes, including housing and education. The Act will authorize a private MHC to likewise establish a community foundation without having to undertake a stock issuance to the public.
• The Act will authorize an MHC with public stockholders to waive a dividend if certain conditions are met. This provisions will continue the viability of the MHC form of organization.
• The Act will permit the board of directors of a mutual institution to adopt bylaws that will better preserve the institution's mutuality. Such bylaw provisions may include: a supermajority member voting provision to adopt a plan of conversion; a prohibition on any person from serving or nominating a person to serve as a director if such person or nominee intends to propose a conversion; a prohibition on any director proposing a conversion for such period of time adopted by the board, not to exceed five years; and a prohibition against any member proposing a conversion at any meeting of members. In addition, a board of directors may adopt a bylaw which provides that any violation of a bylaw adopted to preserve mutuality shall be a basis for termination as a member of the board. In no case however, will any bylaw adopted pursuant to this section have any force and effect in the event the institution is not well-capitalized.
• The Act clarifies that the Board of Governors of the Federal Reserve System shall apply its Small Bank Holding Company Policy Statement to any mutual holding company that would otherwise qualify as a small bank holding company, if it were a bank holding company.

SUMMARY OF THE MUTUAL COMMUNITY BANK COMPETITIVE EQUALITY ACT

SECTION 1. Provides that the Act may be cited as the "Mutual Community Bank Competitive Equality Act."

SECTION 2. Provides the findings of Congress that mutual depository institutions have long played an important role in the development of the U.S. financial landscape and that it is the sense of Congress that such institutions should be preserved and promoted.

SECTION 3. Authorizes the Comptroller of the Currency to charter mutual national banks, either de novo or through a conversion from another mutual depository institution, including mutual savings institutions and credit unions. Under the proposal, members of mutual national banks will have no voting rights.

SECTION 4. Authorizes mutual institutions to issue investment certificates, which shall be included as Tier 1 capital. The mutual investment certificated must be non-voting (except in the event of the non-payment of dividends or upon a merger or other extraordinary corporate action), redeemable at the sole discretion of the board of directors and provide that dividends are to be non-cumulative.

SECTION 5. Provides for a civil action providing equitable relief for mutual savings institutions to prevent a violation of the prohibition against a company, or any affiliate of a company, from holding, voting or soliciting the proxies of a mutual institution.

SECTION 6. Permits a private mutual holding company (an MHC with no public stockholders) or any direct or indirect stock subsidiary of a private mutual holding company to contribute stock to a tax-qualified charitable foundation. Such contribution may not exceed 10% of the insured depository institution's consolidated Tier 1 capital and the mutual holding company and each of its direct or indirect subsidiaries (including the insured depository institution) must remain well-capitalized following the contribution.

SECTION 7. Permits a mutual holding company to waive dividends paid by its stock subsidiary if: (1) a majority of the board of directors of the mutual holding company, or a committee thereof, consists of directors who are not affiliates of any stock subsidiary of the mutual holding company and who do not directly or indirectly own any shares of the stock to which the waiver would apply, vote in favor of the waiver of the dividend, or (2) the MHC forms a committee of independent persons who vote in favor of the waiver of the dividend.

SECTION 8. Permits the board of directors of a mutual institution to adopt bylaws to preserve the institution's mutuality. Such bylaws may include a super-majority member voting provision to adopt a plan of conversion; a prohibition on any person from serving or nominating a person to serve as a director if such person or nominee intends to propose a conversion; a prohibition on any director proposing a conversion for such period of time adopted by the board, not in excess of five years; and a prohibition against any member proposing a conversion at any meeting of members. In addition, a board of directors may adopt a bylaw which provides that any violation of a bylaw adopted to preserve mutuality shall be a basis for termination as a member of the board. In no case however, will any bylaw adopted pursuant to this section have any force and effect in the event the institution is not well-capitalized.

SECTION 9. Clarifies that the Board of Governors of the Federal Reserve System shall apply its Small Bank Holding Company Policy Statement to any mutual holding company that would otherwise qualify as a small bank holding company, if it were a bank holding company.

SOURCE America's Mutual Banks

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