[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
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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.
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(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
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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
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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]