12 C.f.r. 563.22

12 C.F.R 563.22.htm

Purchase of Branch Office(s) and/or Transfer of Assets/ Liabilities

12 C.F.R. 563.22

OMB: 1550-0025

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WAIS Document Retrieval
[Code of Federal Regulations]
[Title 12, Volume 5]
[Revised as of January 1, 2006]
From the U.S. Government Printing Office via GPO Access
[CITE: 12CFR563.22]

[Page 202-206]
 
                       TITLE 12--BANKS AND BANKING
 
   CHAPTER V--OFFICE OF THRIFT SUPERVISION, DEPARTMENT OF THE TREASURY
 
PART 563_SAVINGS ASSOCIATIONS_OPERATIONS--Table of Contents
 
                    Subpart B_Operation and Structure
 
Sec. 563.22  Merger, consolidation, purchase or sale of assets, or 
assumption of liabilities.


    (a) No savings association may, without application to and approval 
by the Office:
    (1) Combine with any insured depository institution, if the 
acquiring or resulting institution is to be a savings association; or
    (2) Assume liability to pay any deposit made in, any insured 
depository institution.
    (b)(1) No savings association may, without notifying the Office, as 
provided in paragraph (h)(1) of this section:
    (i) Combine with another insured depository institution where a 
savings association is not the resulting institution; or
    (ii) In the case of a savings association that meets the conditions 
for expedited treatment under Sec. 516.5 of this chapter, convert, 
directly or indirectly, to a national or state bank.
    (2) A savings association that does not meet the conditions for 
expedited treatment under Sec. 516.5 of this chapter may not, directly 
or indirectly, convert to a national or state bank without prior 
application to and approval of OTS, as provided in paragraph (h)(2)(ii) 
of this section.
    (c) No savings association may make any transfer (excluding 
transfers subject to paragraphs (a) or (b) of this section) without 
notice or application to the Office, as provided in paragraph (h)(2) of 
this section. For purposes of this paragraph, the term ``transfer'' 
means purchases or sales of assets or liabilities in bulk not made in 
the ordinary course of business including, but not limited to, transfers 
of assets or savings account liabilities, purchases

[[Page 203]]

of assets, and assumptions of deposit accounts or other liabilities, and 
combinations with a depository institution other than an insured 
depository institution.
    (d)(1) In determining whether to confer approval for a transaction 
under paragraphs (a), (b)(2), or (c) of this section, the Office shall 
take into account the following:
    (i) The capital level of any resulting savings association;
    (ii) The financial and managerial resources of the constituent 
institutions;
    (iii) The future prospects of the constituent institutions;
    (iv) The convenience and needs of the communities to be served;
    (v) The conformity of the transaction to applicable law, regulation, 
and supervisory policies;
    (vi) Factors relating to the fairness of and disclosure concerning 
the transaction, including, but not limited to:
    (A) Equitable treatment. The transaction should be equitable to all 
concerned--savings account holders, borrowers, creditors and 
stockholders (if any) of each savings association--giving proper 
recognition of and protection to their respective legal rights and 
interests. The transaction will be closely reviewed for fairness where 
the transaction does not appear to be the result of arms' length 
bargaining or, in the case of a stock savings association, where 
controlling stockholders are receiving different consideration from 
other stockholders. No finder's or similar fee should be paid to any 
officer, director, or controlling person of a savings association which 
is a party to the transaction.
    (B) Full disclosure. The filing should make full disclosure of all 
written or oral agreements or understandings by which any person or 
company will receive, directly or indirectly, any money, property, 
service, release of pledges made, or other thing of value, whether 
tangible or intangible, in connection with the transaction.
    (C) Compensation to officers. Compensation, including deferred 
compensation, to officers, directors and controlling persons of the 
disappearing savings association by the resulting institution or an 
affiliate thereof should not be in excess of a reasonable amount, and 
should be commensurate with their duties and responsibilities. The 
filing should fully justify the compensation to be paid to such persons. 
The transaction will be particularly scrutinized where any of such 
persons is to receive a material increase in compensation above that 
paid by the disappearing savings association prior to the commencement 
of negotiations regarding the proposed transaction. An increase in 
compensation in excess of the greater of 15% or $10,000 gives rise to 
presumptions of unreasonableness and sale of control. In the case of 
such an increase, evidence sufficient to rebut such presumptions should 
be submitted.
    (D) Advisory boards. Advisory board members should be elected for a 
term not exceeding one year. No advisory board fees should be paid to 
salaried officers or employees of the resulting savings association. The 
filing should describe and justify the duties and responsibilities and 
any compensation paid to any advisory board of the resulting savings 
association that consists of officers, directors or controlling persons 
of the disappearing institution, particularly if the disappearing 
institution experienced significant supervisory problems prior to the 
transaction. No advisory board fees should exceed the director fees paid 
by the resulting savings association. Advisory board fees that are in 
excess of 115 percent of the director fees paid by the disappearing 
savings association prior to commencement of negotiations regarding the 
transaction give rise to presumptions of unreasonableness and sale of 
control unless sufficient evidence to rebut such presumptions is 
submitted. Rebuttal evidence is not required if:
    (1) The advisory board fees do not exceed the fee that advisory 
board members of the resulting institution receive for each monthly 
meeting attended or $150, whichever is greater; or
    (2) The advisory board fees do not exceed $100 per meeting attended 
for disappearing savings associations with assets greater than 
$10,000,000 or $50 per meeting attended for disappearing savings 
associations with assets of $10,000,000 or less, based on a schedule of 
12 meetings per year.

[[Page 204]]

    (E) The accounting and tax treatment of the transaction; and
    (F) Fees paid and professional services rendered in connection with 
the transaction.
    (2) In conferring approval of a transaction under paragraph (a) of 
this section, the Office also will consider the competitive impact of 
the transaction, including whether:
    (i) The transaction would result in a monopoly, or would be in 
furtherance of any monopoly or conspiracy to monopolize or to attempt to 
monopolize the savings association business in any part of the United 
States; or
    (ii) The effect of the transaction on any section of the country may 
be substantially to lessen competition, or tend to create a monopoly, or 
in any other manner would be in restraint of trade, unless the Office 
finds that the anticompetitive effects of the proposed transaction are 
clearly outweighed in the public interest by the probable effect of the 
transaction in meeting the convenience and needs of the communities to 
be served.
    (3) Applications and notices filed under this section shall be upon 
forms prescribed by the Office.
    (4) Applications filed under section 5(d)(3) of the Federal Deposit 
Insurance Act (12 U.S.C. 1815(d)(3)) and paragraph (a) of this section 
must be processed in accordance with the time frames set forth in 
Sec. Sec. 516.220 through 516.290 of this chapter, provided that the 
period for review may be extended only if the Office determines that the 
applicant has failed to furnish all requested information or that the 
information submitted is substantially inaccurate, in which case the 
review period may be extended for up to 30 days.
    (e)(1) The following procedures apply to applications described in 
paragraph (a) of this section, unless OTS finds that it must act 
immediately to prevent the probable default of one of the depository 
institutions involved:
    (i) The applicant must publish a public notice of the application in 
accordance with the procedures in subpart B of part 516 of this chapter. 
In addition to the initial publication, the applicant must also publish 
on a weekly basis during the public comment period.
    (ii) Commenters may submit comments on an application in accordance 
with the procedures in subpart C of part 516 of this chapter. The public 
comment period is 30 calendar days after the date of publication of the 
initial public notice. However, if OTS has advised the Attorney General 
that an emergency exists requiring expeditious action, the public 
comment period is 10 calendar days after the date of publication of the 
initial public notice.
    (iii) OTS may arrange a meeting in accordance with the procedures in 
subpart D of part 516 of this chapter.
    (iv) OTS will request the Attorney General, the Office of the 
Comptroller of the Currency, the Board of Governors of the Federal 
Reserve System, and the Federal Deposit Insurance Corporation to provide 
reports on the competitive impacts involved in the transaction.
    (v) OTS will immediately notify the Attorney General of the approval 
of the transaction. The applicant may not consummate the transaction 
before the date established under 12 U.S.C. 1828(c)(6).
    (2) For applications described in Sec. 563.22, certain savings 
associations described below must provide affected accountholders with a 
notice of a proposed account transfer and an option of retaining the 
account in the transferring savings association. The notice must allow 
affected accountholders at least 30 days to consider whether to retain 
their accounts in the transferring savings association. The following 
savings associations must provide the notices:
    (i) A savings association transferring account liabilities to an 
institution the accounts of which are not insured by the Savings 
Association Insurance Fund, the Bank Insurance Fund, or the National 
Credit Union Share Insurance Fund; and
    (ii) Any mutual savings association transferring account liabilities 
to a stock form depository institution.
    (f) Automatic approvals by the Office. Applications filed pursuant 
to paragraph (a) of this section shall be deemed to be approved 
automatically by the Office 30 calendar days after the

[[Page 205]]

Office sends written notice to the applicant that the application is 
complete, unless:
    (1) The acquiring savings association does not meet the criteria for 
expedited treatment under Sec. 516.5 of this chapter;
    (2) The OTS recommends the imposition of non-standard conditions 
prior to approving the application;
    (3) The OTS suspends the applicable processing time frames under 
Sec. 516.190 of this chapter;
    (4) The OTS raises objections to the transaction;
    (5) The resulting savings association would be one of the 3 largest 
depository institutions competing in the relevant geographic area where 
before the transaction there were 5 or fewer depository institutions, 
the resulting savings association would have 25 percent or more of the 
total deposits held by depository institutions in the relevant 
geographic area, and the share of total deposits would have increased by 
5 percent or more;
    (6) The resulting savings association would be one of the 2 largest 
depository institutions competing in the relevant geographic area where 
before the transaction there were 6 to 11 depository institutions the 
resulting savings association would have 30 percent or more of the total 
deposits held by depositing institutions in the relevant geographic 
area, and the share of total deposits would have increased by 10 percent 
or more;
    (7) The resulting savings association would be one of the 2 largest 
depository institutions competing in the relevant geographic area where 
before the transaction there were 12 or more depository institutions, 
the resulting savings association would have 35 percent or more of the 
total deposits held by the depository institutions in the relevant 
geographic area, and the share of total deposits would have increased by 
15 percent or more;
    (8) The Herfindahl-Hirschman Index (HHI) in the relevant geographic 
area was more than 1800 before the transaction, and the increase in the 
HHI used by the transaction would be 50 or more;
    (9) In a transaction involving potential competition, the OTS 
determines that the acquiring savings association is one of three or 
fewer potential entrants into the relevant geographic area;
    (10) The acquiring savings association has assets of $1 billion or 
more and proposes to acquire assets of $1 billion or more;
    (11) The savings association that will be the resulting savings 
association in the transaction has a composite Community Reinvestment 
Act rating of less than satisfactory, or is otherwise seriously 
deficient with respect to the Office's nondiscrimination regulations and 
the deficiencies have not been resolved to the satisfaction of the OTS;
    (12) The transaction involves any supervisory or assistance 
agreement with the Office, the Resolution Trust Corporation, or the 
Federal Deposit Insurance Corporation;
    (13) The transaction is part of a conversion under part 563b of this 
chapter;
    (14) The transaction raises a significant issue of law or policy; or
    (15) The transaction is opposed by any constituent institution or 
contested by a competing acquiror.
    (g) Definitions. (1) The terms used in this section shall have the 
same meaning as set forth in Sec. 552.13(b) of this chapter.
    (2) Insured depository institution. Insured depository institution 
has the same meaning as defined in section 3(c)(2) of the Federal 
Deposit Insurance Act.
    (3) With regard to paragraph (f) of this section, the term relevant 
geographic area is used as a substitute for relevant geographic market, 
which means the area within which the competitive effects of a merger or 
other combination may be evaluated. The relevant geographic area shall 
be delineated as a county or similar political subdivision, an area 
smaller than a county, or an aggregation of counties within which the 
merging or combining insured depository institutions compete. In 
addition, the Office may consider commuting patterns, newspaper and 
other advertising activities, or other factors as the Office deems 
relevant.
    (h) Special requirements and procedures for transactions under 
paragraphs (b) and (c) of this section--(1) Certain transactions with no 
surviving savings association. The Office must be notified of any

[[Page 206]]

transaction under paragraph (b)(1) of this section. Such notification 
must be submitted to the OTS at least 30 days prior to the effective 
date of the transaction, but not later than the date on which an 
application relating to the proposed transaction is filed with the 
primary regulator of the resulting institution; the Office may, upon 
request or on its own initiative, shorten the 30-day prior notification 
requirement. Notifications under this paragraph must demonstrate 
compliance with applicable stockholder or accountholder approval 
requirements. Where the savings association submitting the notification 
maintains a liquidation account established pursuant to part 563b of 
this chapter, the notification must state that the resulting institution 
will assume such liquidation account.
    The notification may be in the form of either a letter describing 
the material features of the transaction or a copy of a filing made with 
another Federal or state regulatory agency seeking approval from that 
agency for the transaction under the Bank Merger Act or other applicable 
statute. If the action contemplated by the notification is not completed 
within one year after the Office's receipt of the notification, a new 
notification must be submitted to the Office.
    (2) Other transfer transactions--(i) Expedited treatment. A notice 
in conformity with Sec. 516.25(a) of this chapter may be submitted to 
OTS under Sec. 516.40 of this chapter for any transaction under 
paragraph (c) of this section, provided all constituent savings 
associations meet the conditions for expedited treatment under Sec. 
516.5 of this chapter. Notices submitted under this paragraph must be 
deemed approved automatically by OTS 30 days after receipt, unless OTS 
advises the applicant in writing prior to the expiration of such period 
that the proposed transaction may not be consummated without OTS's 
approval of an application under paragraphs (h)(2)(ii) or (h)(2)(iii) of 
this section.
    (ii) Standard treatment. An application in conformity with Sec. 
516.25(b) of this chapter and paragraph (d) of this section must be 
submitted to OTS under Sec. 516.40 by each savings association 
participating in a transaction under paragraph (b)(2) or (c) of this 
section, where any constituent savings association does not meet the 
conditions for expedited treatment under Sec. 516.5 of this chapter, 
except as provided in paragraph (h)(2)(iii) of this section. 
Applications under this paragraph must be processed in accordance with 
the procedures in part 516, subparts A and E of this chapter.
    (iii) Standard treatment for transactions under section 5(d)(3) of 
the Federal Deposit Insurance Act. An application in conformity with 
Sec. 516.25(b) of this chapter and paragraph (d) of this section must 
be submitted to OTS under Sec. 516.40 by each savings association which 
will survive any transaction under both section 5(d)(3) of the Federal 
Deposit Insurance Act (12 U.S.C. 1815(d)(3)) and paragraph (c) of this 
section, where any constituent savings association does not meet the 
conditions for expedited treatment under Sec. 516.5 of this chapter. 
Applications under this paragraph must be processed in accordance with 
the procedures in part 516, subparts A and E of this chapter, provided 
that the period for review may be extended only if OTS determines that 
the applicant has failed to furnish all requested information or that 
the information submitted is substantially inaccurate, in which case the 
review period may be extended for up to 30 days.

[54 FR 49552, Nov. 30, 1989, as amended at 55 FR 13514, Apr. 11, 1990; 
57 FR 14344, Apr. 20, 1992; 59 FR 44624, Aug. 30, 1994; 59 FR 66159, 
Dec. 23, 1994; 62 FR 64146, Dec. 4, 1997; 66 FR 13007, Mar. 2, 2001; 69 
FR 68250, Nov. 24, 2004]



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