Comptroller's Licensing Manual

Section: Permission to Organize a
Federal Savings Institution

Section 440

This handbook section provides information regarding the filing of new charter applications for a
Federal savings institution. 12 C.F.R. Parts 543 and 552 set forth the regulations, policies and
procedures that govern the submission, review and decision for Permission to Organize (PTO)
applications filed by the organizers of a proposed Federal de novo institution. A “de novo applicant”
means any person, persons, or companies who apply to establish a de novo institution. A “de novo
institution” means any Federal savings institution chartered by OTS [as defined in 12 C.F.R.
543.3(a)] the business of which has not been conducted previously under any charter or conducted in
the previous three years in substantially the same form as is proposed to be conducted by the de novo
institution. These guidelines apply whenever a de novo applicant files an application to charter a
de novo institution.

FILING REQUIREMENTS
Delegated Authority
The application is not eligible for delegated processing. See Delegation Section 040 of the handbook
for information on the delegation process.

Expedited and Standard Procedures
This application is not subject to the expedited processing procedures set forth in 12 C.F.R. Part 516.
Accordingly, the application will be processed utilizing the procedures set forth in 12 C.F.R.
§§ 516.210 – 516.290.

Meetings
The applicant must contact the appropriate Regional Office to schedule meetings related to its
application for a de novo thrift charter. The applicant is required to meet with the Regional Office for
a prefiling meeting in advance of filing the application. Additional meetings may be required by the
Regional Office, which may include a preopening meeting following approval of the application.

Prefiling Meeting Requirement
The applicant must meet with the Regional Office for at least one prefiling meeting prior to filing an
application. It is the applicant’s responsibility to contact the Regional Office in a reasonable time
frame in advance of filing the application to schedule this meeting. The purpose of the meeting is to
permit OTS and the applicant to identify any legal or policy issues before submission of the
application, and enable the applicant to address these issues early in the process. Additional prefiling
meetings may be warranted on a case-by-case basis. The Regional Office will work with the
applicant to determine a schedule and forum for a meeting. The forum for the meeting will usually be
in person at the Regional Office, although the Regional Office may consider meetings by telephone or
video conferencing at its discretion on a case-by-case basis. OTS may decide not to accept a
submitted application as officially filed until the prefiling meeting requirements in 12 C.F.R. Part 516
are met.

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When a meeting is required, the applicant should contact the Regional Office to determine who
should attend the meeting. These individuals will be expected to discuss the salient aspects of the
proposed transaction. The applicant must submit a draft business plan to the Regional Office prior to
the meeting in a time frame in advance of the meeting acceptable to the Regional Office. At a
minimum, the plan should:
•

Describe clearly and completely the projected operations and activities;

•

Provide financial projections for a three-year period;

•

Discuss the associated risks of the proposed activities and operations contemplated in the
plan;

•

Identify all or a majority of the proposed director and key senior executive officers with
documentation to support that these individuals have the required qualifications and
experience to prudently oversee operations; and

•

Demonstrate how the charter will serve the credit and lending needs in its target market.

Preopening Meeting
In most cases, the applicant will meet with the Regional Office for a “preopening” meeting following
approval of the de novo application, but prior to the savings institution opening for business. The
Regional Office will contact the applicant to discuss the forum for the meeting and who should
attend. In most cases, at least the organizers, board of directors, and senior executive management
should attend. Regional Office staff will discuss with the applicant: satisfaction of conditions of
approval; supervision and examination process; responsibility and fiduciary duty of the board of
directors and management; regulatory issues germane to the successful opening of the savings
institution; and, Regional OTS resources and contacts available to the institution.

Information and Form Requirements
The applicant must file the application with the appropriate Regional Office and the Applications
Filing Room (AFR) in OTS-Washington in accordance with 12 C.F.R. Part 516. The applicant is
required to file the original and two copies of this application and the applicable application filing
fee(s) with the appropriate Regional Office, and file three copies of the application with the AFR.
When a transaction requires submission of additional copies, as in the case of a merger transaction
subject to the Bank Merger Act, the additional copies should be sent to the appropriate Regional
Office. The original filing, all copies, and all exhibits and other pertinent documents must be clearly
marked and captioned as to the type of filing. One copy must contain original signatures on all
executed documents. See Application Filing Requirements in Section 010 of this handbook.
The PTO application is filed under the cover of one of two variations of OTS Form 138:
•

440.2

Form 138-E Application for Permission to Organize a Federal Mutual Savings Association or
Savings Bank; or

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Section: Permission to Organize a
Federal Savings Institution
•

Section 440

Form 138-F Application for Permission to Organize a Federal Stock Savings Association or
Savings Bank.

The applicant is required to submit all documents and information set forth in OTS Form 138. The
application form addresses seven categories of information requirements:
•

Overview

•

Management

•

Capital

•

Characteristics of the Community

•

Community Reinvestment Act

•

Premises and Fixed Assets

•

Other Information

Stock institutions must also submit:
•

Sample Stock Certificates, including restrictive legends;

•

For de novo institutions with holding companies, copies of the holding company charter,
bylaws, a description of business operations including background, and the most recent and
past five years’ certified financial statements;

•

Proposed voting trust agreements, if applicable; and

•

Proposed offering materials if applicable.

For transactions where the de novo charter is combined with an existing operating financial
institution, the following information must be submitted for the existing institution:
•

The most recent State and/or Federal banking examinations;

•

Audit reports and annual reports for the past three years; and

•

The most recent published financial statements for the past three years.

Additional forms or filings to supplement OTS Form 138 may be necessary, e.g., forms seeking
approval for subsidiaries, holding companies, trust powers, biographical and financial reports
complete with supporting documentation, and business plan. These forms and/or instructions are
available on the OTS Website.

Confidentiality
The applicant must submit in writing, concurrently with the submission of the application, any
requests to keep specific portions of the application confidential. In accordance with the Freedom of
Information Act, the request should discuss the justification for the requested treatment and should
specifically demonstrate the harm (e.g., to competitive position, invasion of privacy) that would result
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from the public release of information. OTS will not treat as confidential the portion of an
application describing the plan to meet the Community Reinvestment Act objectives.
Information for which confidential treatment is requested should be: (i) specifically identified in the
public portion of the application by reference to the confidential section; (ii) separately bound; and
(iii) labeled “confidential.” The applicant should follow these same procedures when filing
supplemental information to the application. OTS will determine whether information designated as
confidential must be made available to the public under the Freedom of Information Act. OTS will
advise the applicant before it makes information designated as confidential available to the public.

Special Considerations
Publication Requirements
The applicant must publish notice of its intent to organize a Federal savings institution no earlier than
seven days before and no later than the date of filing of the application, in accordance with the
requirements of 12 C.F.R. Part 516 Subpart A. Notice must be published in a newspaper printed in
the English language and having a general circulation in the community in which the home office of
the new savings institution is to be located. If the Regional Office determines that the primary
language of a significant number of adult residents of the community is a language other than
English, the applicant may also be required to publish notice simultaneously in the appropriate
language(s).
OTS may require an applicant to publish a new public notice of the application in circumstances
when an applicant submits a revision to the application, or submits new or additional information, or
when a major issue of law or change in circumstance arises after filing the application. OTS has the
discretion in these circumstances to require republication if it determines that the public has not had
adequate notice and opportunity to comment on the application due to the substantial change. OTS
will notify the applicant if a new public notice of a revised application must be published.
Additional public notice requirements may apply for transactions involving mergers or branch
purchase applications filed pursuant to 12 C.F.R. § 563.22, or change of control applications filed
pursuant to 12 C.F.R. § 574.3. Combined public notice may be published consistent with existing
OTS policy. See Publication Forms Section 020 of the Handbook for examples of publication
language.
•

Comment Procedures
Any person may submit a written comment to the Regional Office supporting or opposing a
de novo application within 25 days after the filing date of the application. OTS will not
consider any late filed comments unless: the commenter demonstrates good cause for why
they could not submit a timely comment, or, OTS concludes that the comment addresses a
significant regulatory concern and will assist in the disposition of the de novo application.
OTS can extend the 25-day comment period with demonstrated good cause for why a
commenter was unable to submit a timely comment. The duration of an extension request is

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subject to the discretion of OTS on a case-by-case basis, after consideration of the unique
circumstances of each extension request.
The comment should recite relevant facts, including any demographic economic or financial
data supporting the commenter's position. If the commenter opposes the application, the
comment should also: 1) address at least one reason for denial based upon regulatory criteria
for denial; 2) support the reason for denial with relevant facts and supporting data; and,
3) address how the approval of the application is harmful to the community or the
commenter. While OTS will accept and consider all comments, including those that do not
meet all of the content criteria, commenters are encouraged to include all relevant
information and arguments.
The commenter may also request an informal meeting pursuant to 12 C.F.R. §§ 516.120 and
516.170 with their comment, along with a description of the issues and facts to be discussed
and justification for why written submissions are insufficient to adequately address those
facts or issues.
If the commenter has filed a written request for a meeting and the request contains the
required information set forth in 12 C.F.R. 516.120(b), OTS will arrange a meeting. If an
informal meeting is requested, the commenter must simultaneously send a copy of the written
request to the applicant. OTS will generally provide an applicant an appropriate opportunity
and period of time to respond to submitted comments.
OTS will facilitate the informal meeting between the applicant, the commenter(s) and any
other interested person(s). OTS has discretion to determine the format of the meeting,
including telephone conference or face-to-face meetings. OTS will inform the applicant and
commenters requesting an informal meeting of its decision on a request for a meeting, or of
its decision to hold an informal meeting on its own initiative. OTS may also invite any other
interested persons to attend. OTS will inform the participants of the date, time, location and
format for the meeting in reasonable time in advance. OTS anticipates that informal meetings
will be sufficient to facilitate the resolution of issues in most cases.
If an informal meeting fails to facilitate the resolution of issues to the satisfaction of any
participant in an informal meeting, OTS may proceed to conduct a formal meeting before a
presiding officer upon the filing of a request. Any participant requesting a formal meeting
pursuant to 12 C.F.R. §§ 516.170 and .180, should submit a request to OTS within three days
after the informal meeting, and provide copies of its request to the other participants of the
informal meeting. The request must describe the nature of the issues or facts to be presented
and must demonstrate that material issues or facts have not been adequately addressed by the
informal meeting, and that a formal meeting is necessary to develop a record sufficient to
support a determination on those facts or issues. OTS will not arrange an informal meeting
where a request is clearly frivolous or clearly lacking a factual basis. OTS may elect to hold
a formal meeting on its own initiative if deemed necessary to assist in the disposition of the
application or issues raised by the application.
OTS will issue a Notice of Formal Meeting if it decides to hold a formal meeting, and send
the notice to the applicant, to any person requesting a formal meeting, and to any interested
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person, in its discretion, it desires to invite. Any person receiving the Notice of Formal
Meeting must notify OTS within ten days of receipt of the notice of their intent to participate
in the meeting. All participants in the formal meeting must provide the names of their
presenters and copies of proposed exhibits to OTS, to the applicant, and to any other person
designated by OTS, no later than five days before the date of the formal meeting. All
presenters of documentary material must furnish copies of the material to OTS and to each
other participant. OTS will arrange for a transcript of the meeting, with each participant
bearing the cost of any copies of the transcript it requests for its use.
OTS anticipates that most formal meetings will follow an informal meeting. Accordingly,
OTS will not grant a request for a formal meeting unless an informal meeting has occurred.
However, OTS has the authority to conduct a formal meeting without holding an informal
meeting if the meeting is beneficial to the review process and will facilitate a resolution of the
issues raised by application.
If OTS has arranged an informal or formal meeting, the processing time frames for the
application are suspended until OTS determines that a sufficient record has been developed to
address the issues raised in the comments.

Interim Institutions
An interim Federal savings institution, as defined in 12 C.F.R. § 541.18, is an institution chartered
under Section 5 of the Home Owners' Loan Act of 1933, as amended (HOLA), to facilitate the
acquisition of 100 percent of the voting shares of an existing Federal stock institution or other insured
institution by a newly formed company or an existing savings and loan stock holding company, or to
facilitate any other transaction OTS may approve. A transaction involving an interim institution
requires the submission of OTS Form 1495 with the PTO application.
The approval of an interim application is conditioned upon OTS approval of an application to merge
the interim institution into an existing insured savings institution or upon OTS approval of a related
transaction. In evaluating the application, OTS considers the following factors:
•

The purpose for which the savings institution will be organized;

•

The form of any proposed transaction involving the organizing savings institution;

•

The effect of the transaction on existing institutions involved in the transactions; and,

•

The factors specified in 12 C.F.R. § 543.2(g)(1) to the extent relevant.

Background Checks
OTS policy requires background investigations of all organizers, proposed senior executive officers,
directors, and any individuals or groups acing in concert who own or control, directly or indirectly,
ten percent or more of the de novo institution’s stock. These individuals are considered management
officials of the savings institution for the purpose of OTS’s evaluation of the character and
qualifications of the savings institution's management. At a minimum, individuals must submit an

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Section 440

Interagency Biographical and Financial form, FBI Fingerprint Card, and a Regulatory Bulletin (RB)
20 Certification Form. RB-20 authorizes OTS to request supplemental information from applicants if
the information is useful in completing a thorough background investigation. Applicants can request
a waiver from filing portions of this information by providing justification stating why this
information is unduly burdensome or unnecessary. Waiver requests will only be granted in limited
circumstances and consistent with current OTS policy. The Regional Office must conduct a
background investigation in compliance with RB-20. Individuals must be fingerprinted by an
independent third party unrelated to the individual or companies affiliated with the individual on
fingerprint cards bearing the OTS identification number. Results of all background checks should be
addressed in the Regional Office's digest.

Eligibility Examinations
PTO applications may involve transactions where the proposed de novo institution is combined with
an existing operating company, or where assets are either acquired by, or contributed to, the proposed
de novo institution. For example, if a transaction contemplates the contribution of a mortgage
banking company, an examination would normally be conducted to review the company’s policies
and procedures, internal controls, and management oversight. If a transaction involves the
contribution of credit card receivables, loans, or other assets to the de novo institution, an
examination would normally be conducted to assess the quality and valuation of such assets. In other
circumstances, OTS may have concerns regarding the qualifications of an acquirer to control a
financial institution, related to existing operations affiliated with the de novo applicant, if issues
involving the treatment of consumers, regulatory compliance, or other matters were identified during
the background review of an acquirer. These types of circumstances may require OTS to perform an
eligibility examination or to perform a review of parent or affiliated organizations. The examination
procedures should be limited to those needed to assess the particular risks posed by the proposed
transaction, or necessary to assess significant or novel issues relevant to the application decision.
The Regional Office should determine the need for an eligibility examination as early in the
application process as possible. The eligibility examination may include on- or off-site activities.
Prior to commencing the on-site work, OTS will forward a Preliminary Examination Response Kit
(PERK) requesting more detailed information that should be made available to the examiners upon
their arrival. OTS does not normally charge a fee for its eligibility examination. However, OTS may
impose an hourly fee if the examination encounters significant problems that require additional
review beyond the scope of a standard eligibility examination.

Organization of a De Novo by a Holding Company
The applicant may organize a de novo institution under a holding company structure that will require
the filing of the appropriate holding company acquisition application (typically, an H-(e)1) in addition
to the PTO application.
Bank holding companies that create de novo savings institutions are not required to submit a holding
company application to OTS due to the passage of the Economic Growth and Regulatory Paperwork
Reduction Act of 1996 (EGRPR). EGRPR amended Section 10(e)(1)(B) of the HOLA to exempt
bank holding companies and companies controlled by bank holding companies from having to seek

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OTS’s approval to acquire a savings institution. The Federal Reserve has the regulatory authority over
a bank holding company's acquisition of a de novo savings institution.

Federal Home Loan Bank Membership
The Gramm-Leach-Bliley Act (Section 603) amended Section 5(f) of HOLA to give a Federal
savings institution the option of becoming a member of the FHLB.

National Historic Preservation Act
If the applicant proposes to establish its home or branch office in any historical district, site, building,
structure, object or archaeological site, included in, or eligible for inclusion in, the National Register
of Historic Places pursuant to the National Historic Preservation Act (NHPA), 16 U.S.C. 470, the
application is subject to the requirements set forth in Section 106 of the NHPA.
Section 106 of the NHPA requires Federal agencies to consider the effects of their actions on historic
properties and provide the Advisory Council on Historic Preservation (Advisory Council) an
opportunity to comment with regard to such actions. To successfully complete a Section 106 review,
OTS must:
•

Determine if Section 106 of NHPA applies to a given project and, if so, initiate the review;

•

Gather information to decide which properties in the project area are listed on or eligible for
the National Register of Historic Places;

•

Determine how historic properties might be affected;

•

Explore alternatives to avoid or reduce harm to historic properties; and

•

Reach agreement with the State Historic Preservation Officer (SHPO) or Tribal Historic
Preservation Officer (THPO) (where tribal lands or historic properties of significance to such
tribes are involved) on measures to deal with any adverse effects or obtain advisory
comments from the Advisory Council, which are sent to the head of the agency.

The SHPO coordinates state participation in the implementation of the NHPA, is a key individual in
the Section 106 process, and should be involved in each step.
In order to facilitate the Section 106 review, the savings institution must indicate in the application if
the proposed main office and/or any branch site affects any district, site, building, or structure listed
in, or eligible for listing in, the National Register of Historic Places, specify how such determination
was made (e.g., National Register, SHPO/THPO or other), and provide documentation of consultation
with SHPO/THPO.
The involvement of Section 106 of NHPA in an application is considered an issue of law or policy.
As a result, the analysis of the application must address the requirements set forth in Section 106 of
the NHPA.

REVIEW GUIDELINES
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Section 440

Processing Procedures and Time Frames
As indicated, this application is not subject to delegated authority and will be processed concurrently
with OTS-Washington staff. As a general matter, correspondence from OTS regarding applications
will be transmitted from OTS-Washington.
Within five business days of receipt of the application and the application fee, the Regional Office
must notify the applicant of the application's receipt. The appropriate application fee must
accompany each application in order for it to be considered filed. The application will not be
considered filed until received by both OTS-Washington and the Regional Office.
Within five business days of receipt of the application, the Regional Office will begin its background
investigations on individuals who were required to submit such information in connection with the
application. Upon receipt of the application, the Regional Office must forward all FBI Fingerprint
Cards to OTS-Washington for processing. The background investigations should include, at a
minimum, a search of the applicants in the Westlaw and CIIS databases. When appropriate, OTS
must contact other regulatory agencies to seek additional comments on the applicants, or to request
examination reports from another agency. For applications involving insurance companies, the
Regional Office should contact the Insurance Risk Management Specialist in OTS-Washington to
conduct a review of the insurer. All issues that are disclosed in the background check must be
addressed directly with the individual. Results of all background checks should be addressed in the
Regional Office's digest.
If the application involves specialty areas, such as trust activities or CRA issues, OTS-Washington
must provide a copy of the application to the corresponding OTS-Washington specialist.
Within 30 calendar days of receipt of a properly submitted application, OTS shall take one of the
following actions.
•

Deem the application complete;

•

Request, in writing, any additional information necessary to deem the application complete;
or

•

Decline to further process the application if it is deemed by OTS to be materially deficient
and/or substantially incomplete.

Failure by OTS to act within 30 calendar days of receipt of the application for processing shall result
in the filed application being deemed complete, commencing the period for review.
OTS must timely review all requests for a waiver of an application requirement that certain
information be supplied. Unless OTS requests, in writing, additional information about the waiver
request, or denies the waiver request, the waiver request shall be deemed granted.
If additional information is requested, a response must be submitted within 30 calendar days of the
letter requesting such information. The applicant may, in writing, request a brief extension of the
30-calendar day period for responding to a request for additional information, prior to the expiration
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of the 30-calendar day time period. OTS, at its option, may grant the applicant a limited extension of
time in writing. Failure to respond to a written request for additional information within 30 calendar
days of such request may be deemed to constitute withdrawal of the application or may be treated as
grounds for denial or disapproval of the application.
After the timely filing of additional information in response to any initial or subsequent request by
OTS for additional information, OTS has 15 calendar days to review the additional information for
completeness or appropriateness and take one of the following actions:
•

Request, in writing, any additional information necessary to deem the application complete;

•

Deem the application complete; or

•

Decline to further process the application if it is deemed by OTS to be materially deficient
and/or substantially incomplete.

The 15-day review period commences when the OTS receives a response that purports to respond to
all questions in the information request. OTS may extend the 15-day review period for an additional
15 calendar days, if OTS requires the additional time to review the response. OTS will notify the
applicant that it has extended the period before the end of the initial 15-day period.
Failure by OTS to act within 15 calendar days of receipt of the additional information shall result in
the filed application being deemed complete, commencing the period for review.
For transactions involving combinations with existing operating institutions or a contribution of assets
(companies, loans, receivables, etc.) to the de novo charter, OTS may elect to conduct an eligibility
examination during the review process. OTS will not deem an application complete until it concludes
the examination. In addition, OTS may request additional information as a result of the eligibility
examination, and the applicant must submit a response in accordance with the time frames set forth in
this section.
Once the application has been deemed complete, there is a 60-calendar day review period during
which time OTS will take into consideration all factors present in the application and render a
decision thereon. If, upon expiration of the 60-day review period, assuming no extension has been
granted, OTS has failed to act, the application is deemed approved automatically, and the applicant
may thereafter consummate the transaction. If multiple applications are submitted in connection with
one transaction, the applicable review period for all applications is the review period for the
application with the longest review period, subject to statutory review periods.
During the review period, OTS may request additional information if the information is necessary to
resolve or clarify the issues presented in the application. OTS may also notify the applicant that the
application is incomplete and require that the applicant submit additional information to complete the
application. The review period can be extended an additional 30 calendar days if OTS determines
that additional time will be required to analyze the proposed transaction. In such cases, OTS must
notify an applicant prior to the expiration of the period for review. In situations in which an
application presents a significant issue of law or policy, OTS may extend the applicable period for

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review of such application beyond the time period for review. In these cases, written notice must be
provided to an applicant no later than the expiration of the time period.
Under 12 C.F.R. § 516.290, if OTS has not acted on a pending application within two calendar years
after the filing date, OTS may deem the application withdrawn unless it determines that the applicant
is actively pursuing a final determination on the application. Applications that are subject to this
withdrawal provision are those that have failed to timely take action such as filing required additional
information, or OTS has suspended processing of an application based on circumstances that are, in
whole or in part, within the applicant’s control and have failed to take reasonable steps to resolve
these circumstances.
For purposes of calculating processing time frames, OTS does not include the day of the act or event,
in determining the date the time period commences. In determining the conclusion of a time period,
when the last day of the time period is a Saturday, Sunday, or a Federal holiday, the last day will
become the next day that is not a Saturday, Sunday, or Federal holiday.

Regulatory Criteria
Section 5(e) of the HOLA sets forth the basic criteria that OTS must consider when acting on an
application for permission to organize a Federal savings institution. Section 5(e) states that OTS may
grant a Federal charter only if, in OTS’s judgment:
•

The organizers are persons of good character and responsibility;

•

A need exists for the savings institution in the community to be served;

•

There is a reasonable probability of the savings institution's usefulness and success; and

•

The savings institution can be established without undue injury to other local thrift and
home-financing institutions.

12 C.F.R. § 552.2-1(b)(1)(v) (12 C.F.R. § 543.2(g)(1)(v) for mutual savings institutions) requires
OTS to consider whether the savings institution will perform a role of providing credit for housing
consistent with safe and sound operations of a Federal savings institution.
12 C.F.R. § 543.3 sets forth certain policy considerations regarding de novo applications for
permission to organize including:
•

Minimum Initial Capitalization
A de novo institution must have at least two million dollars in initial capital stock or initial
pledged savings or cash. The minimal initial capitalization is the amount of proceeds net of
all incurred and anticipated expenses involved in the organization of the savings institution,
as well as securities expenses for stock institutions. On a case-by-case basis, OTS may
approve a de novo application that has less than two million dollars in initial capital or may
require the applicant to have more than two million dollars in initial capital. Charter
applications proposing relatively novel or higher-risk operations, such as substantial Internetbased operations, will require additional capital consistent with current OTS policy.

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Section 440

Business Plan
The applicant must submit a business plan materially consistent with OTS requirements,
describing the major areas of operations for the first three years of operation of the de novo
institution. See Business Plan Guidance Section 625 of the Handbook for information on
business plan requirements. The business plan should address the following areas of
operation:
∗

Lending, leasing and investment activity, including plans to meet the Qualified Thrift
Lender requirements;

∗

Deposit, savings and borrowing activity;

∗

Interest-rate risk management;

∗

Internal controls and procedures;

∗

A discussion of the requirements set forth in the Community Reinvestment Act and plans
for meeting the credit needs of the community, including low- and moderate-income
neighborhoods; and

∗

Comprehensive financial projections for the first three years of operation.

The business plan must provide for the continuation or succession of competent management
subject to the approval of the Regional Office and must further provide that any material
change in, or deviation from, the business plan must receive the prior approval of the
Regional Office. The business plan must also demonstrate the de novo institution's ability to
maintain required minimum regulatory capital pursuant to 12 C.F.R. Parts 565 and 567 for
the duration of the plan.
•

Composition of the Board of Directors
A majority of the de novo institution's board of directors must be representative of the state in
which the savings institution is to be located. The board must be diversified and composed of
individuals with varied business and professional experience. In addition, no more than
one-third of the board of directors may be in closely related businesses, except in the case of
a de novo institution that is wholly owned by a holding company with substantial economic
substance. The background of each director must reflect a history of responsibility, personal
integrity, and competence sufficient to direct the savings institution in a safe and sound
manner.

Pursuant to 12 C.F.R. § 563e.29, OTS must consider the savings institution’s plans for meeting its
objectives under the Community Reinvestment Act. OTS will review the proposed plan for satisfying
the CRA and may deny or condition approval based upon this review.

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Decision Guidelines
The statutory and regulatory requirements are designed to ensure the viability and safe and sound
operation of the de novo charter. In general, the analysis should conclude that management and
ownership satisfies OTS integrity standards, that management has the expertise to implement the
business plan, that the savings institution is viable and will maintain sufficient capital in relationship
to its risk profile, that the community will be served and will support the proposed charter, and that
the proposed transaction is in compliance with applicable rules and regulations. The following
factors should be considered in analyzing the application to determine if the transaction satisfies the
applicable statutory and regulatory criteria for approval:
•

Did the applicant submit the following forms and information:
∗

Appropriate and properly executed application OTS Form 138 for Permission to
Organize to be filed with either: 1) OTS Form 138-E for Permission to Organize a
Federal Mutual Savings Association or Savings Bank; or, 2) OTS Form 138-F for
Permission to Organize a Federal Stock Savings Association or Savings Bank?

∗

OTS Form 1623 (Interagency Biographical and Financial Report); properly executed
RB-20 Certification; and FBI Fingerprint Cards, for each organizer, director, senior
executive officer, and controlling shareholder?

∗

Copies of proposed employment contracts and evidence of regulatory compliance?

∗

Description and copies of any proposed stock option plans?

∗

Discussion of specific policies and actions the institution will institute to ensure
compliance with Sections 23A, 23B, 22(g) and (h) of the Federal Reserve Act, and with
12 C.F.R. §§ 563.41 and .42?

∗

Oaths of Directors?

∗

Proposed Charter and Bylaws?

∗

Copies of all proposed contracts with affiliates, all contracts not in the ordinary course of
business or in excess of 15 percent of the proposed operating budget?

∗

Map of the primary market area? The map should be outlined with a heavy line to
indicate the proposed market area(s); the proposed office location and branch offices
must be clearly identified; and home office locations and branch facilities of competing
savings institutions and commercial banks should be clearly identified. The map must
contain a distance scale.

∗

Description of the proposed market area and economic environment that discusses
population trends, income, industry and housing patterns?

∗

Copies of any economic survey or market feasibility study used to assess the existing and
projected demographic profile of the target market area?

∗

Analysis of anticipated market changes to the proposed market area and factors
influencing the expected changes?

∗

Three-year business plan?

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April 2001

Applications Handbook

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Section: Permission to Organize a
Federal Savings Institution

Section 440

∗

CRA plan?

∗

Notices and/or application forms for related filings, e.g. subsidiaries, trust powers, etc.?

∗

Listing of all subscribers to capital stock that are organizers, directors, senior executive
officers, ten percent shareholders, and other insiders?

∗

Information to demonstrate that the application meets relevant approval standards?

•

Do the organizers appear to be responsible, financially stable, competent, and of good
character and integrity?

•

Did the RB-20 certification or background check (FBI, LEXIS/NEXIS and/or Westlaw, and
CIIS, or other) of the organizers, proposed management, and controlling shareholders,
indicate that they have been the subject of any enforcement, criminal or questionable actions?

•

Was any adverse information found in the background reviews not disclosed by any
individual in their RB-20 Certification or on OTS Form 1623?

•

Do the Interagency Biographical and Financial Reports (OTS Form 1623) disclose any
questionable information? (Any prior employment with a financial institution must be
checked).

•

In applications involving a proposed existing parent company(ies), did the background
review or RB-20 Certification disclose any questionable information on the company(ies) or
any affiliate(ies) of the company(ies)?

•

Was any adverse information found in the background reviews not disclosed by the
company(ies) in its RB-20 Certification Form?

•

For transactions with affiliates, will the transactions and contracts comply with Sections 23A
and 23B of the Federal Reserve Act, and with 12 C.F.R. §§ 563.41 and .42?

•

Will the de novo institution’s board of directors have sufficient independence from its parent
holding company (ies) and affiliates to ensure that the savings institution will continue to
operate without undue influence from these affiliates?

•

Do the board of directors and senior management have the qualifications and experience
necessary to operate the proposed charter in a safe and sound manner?

•

Will the savings institution have sufficient full-time management to ensure safe and sound
operations?

•

Does the proposed salary and bonus structure appear reasonable?

•

Do proposed employment agreements comply with the requirements of 12 C.F.R. § 563.39
and RB 27-a?

•

Will the board of directors meet the composition requirements of 12 C.F.R. §§ 543.3(d) and
563.33(a)?

•

Has the applicant identified the proposed board and management committees, their functions,
and are these committees adequate?

•

Will sufficient fidelity coverage on officers and employees be maintained?

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Section: Permission to Organize a
Federal Savings Institution

Section 440

•

Will the applicant comply with the Management Interlocks Act?

•

Does the business plan satisfy OTS requirements?

•

Are the underlying assumptions of the business plan reasonable?

•

Do the lending activities present unusually high elements of risk, such as a significant volume
of activity or concentrations of activity in subprime lending, speculative lending, or credit
card activity?

•

Do the proposed savings and lending services appear reasonable?

•

Will the proposed balance sheet and business strategy comply with the lending and
investment limitations of Section 5(c) of HOLA and 12 C.F.R. Part 560?

•

In those instances where the office quarters will be purchased or leased from an affiliated
person, as defined in 12 C.F.R. § 561.5, did the applicant follow the procedures as set forth in
12 C.F.R. § 563.41?

•

Does the investment in fixed assets by the savings institution meet current OTS policy for
limitations of initial capital invested in fixed assets?

•

Have organizational expenses been estimated and disclosed and their funding been discussed?

•

Will organizational costs be expensed in accordance with GAAP and has the expense been
recognized in the business plan projections?

•

Does the business plan demonstrate compliance with OTS capital requirements over the
three-year projections?

•

Do the dividend projections in the business plan reconcile with the proposed dividend policy?

•

Does the savings institution have capital reserves to offset potential adverse changes in
market conditions or for operational performance by the savings institution below business
plan projections?

•

Is capital adequate based upon the proposed business philosophy or for proposed charters
with specialized operations or higher risk profiles (e.g. Internet based banking)?

•

Do the business plan projections indicate that QTL compliance will be maintained?

•

Are the business plan assumptions reasonable and consistent with local community needs?

•

Does the application or business plan raise concerns that may preclude the de novo charter
from a favorable decision on its insurance of accounts application?

•

Does the description of the local community adequately demonstrate the community's credit
needs?

•

Does the description of the proposed market area include historical and projected
demographic data and trends (e.g. population, unemployment, income, housing, deposit
account activity, etc.)?

•

Does the proposed market area discussion evaluate each assessment area’s financial needs,
including consumer, business, non-profit, and government sectors?

Office of Thrift Supervision

April 2001

Applications Handbook

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Section: Permission to Organize a
Federal Savings Institution

Section 440

•

Can the de novo institution be established without undue injury to competing savings
institutions and other home financing institutions?

•

Does the savings institution have a reasonable plan to meet its obligations under the CRA?

•

Will the proposed charter meet the identified convenience and needs in the target market,
including the low- and moderate-income needs?

•

Will the de novo institution provide credit for housing consistent with safe and sound banking
principles?

•

Will the employees of the de novo institution participate in a stock option plan, and does the
plan meet current OTS policy limitations?

•

Will all stock subscriptions be sold at a price that is reasonable and equitable to all parties?
Officers, directors, and organizers should not receive the payment of commissions or other
compensation for the subscription to or sale of permanent stock.

•

Will all stock of a particular class be sold at the same price in the initial offering?

•

Will Internet banking activities be conducted in compliance with OTS and Interagency
policy?

•

Will the de novo institution have a transactional web site subject to OTS review pursuant to
12 C.F.R. § 555.310?

•

Will the proposed charter be a Subchapter S Corporation?

•

Do the charter and bylaws comply with regulatory requirements?

Conditions
Standard Conditions
Listed below are the standard conditions of approval for this application type. If OTS imposes any
additional or materially different conditions, they must be justified in the supporting documentation.
•

The applicant must receive all required regulatory and shareholder approvals for the proposed
transaction and submit copies of all such approvals to the Regional Director prior to
consummation of the proposed transaction;

•

The applicant must consummate the proposed transaction within one hundred and twenty
(120) calendar days from the date of the Approval Order;

•

On the business day prior to the date of consummation of the proposed transaction, the chief
financial officers of the proposed holding company(ies) (Applicants) and the de novo
institution must certify in writing to the Regional Director that no material adverse events or
material adverse changes have occurred with respect to the financial condition or operation of
the Applicants and the de novo institution as disclosed in the applications. If additional
information having an adverse bearing on any feature of the applications are brought to the
attention of the Applicants, the de novo institution, or OTS since the date of the financial
statements submitted with the applications, the transaction must not be consummated unless

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Office of Thrift Supervision

Section: Permission to Organize a
Federal Savings Institution

Section 440

the information is presented to the Regional Director, and the Regional Director provides
written non-objection to consummation of the transaction;
•

The applicant must advise the Regional Director in writing within 5 calendar days after the
effective date of the proposed transaction: (a) of the effective date of the proposed
transaction; and (b) that the transaction was consummated in accordance with all applicable
laws and regulations, the applications, and the Approval Order; and

•

The applicant must operate within the parameters of its business plan. The Applicants and
the de novo institution must submit any proposed major deviations or material changes from
the plan (including changes resulting from decisions made by the Applicants), (OPTIONAL
LANGUAGE: and in particular, those pertaining to cross-marketing of products of the
Savings Institution and its affiliates, a change in the role of the independent agents, and any
changes in the proposed delivery system of the de novo institution’s products,) for the prior,
written non-objection of the Regional Director. The request for change must be submitted a
minimum of 60 calendar days before the proposed change is implemented with a copy
provided to the FDIC Regional Office.

Nonstandard Conditions
It is not unusual for the approval order for a PTO application to contain nonstandard conditions of
approval. Additional conditions may be warranted in circumstances where the proposed operations
are integrated with services or activities involving affiliates, where securities affiliates exist, in
structures involving non-shell holding companies, where anti-tying issues are present, or due to
unique characteristics or the risk profile of the proposed charter. All nonstandard conditions of
approval must be supported with justification in the recommendation memorandum related to
approval of the application. Any nonstandard conditions incorporated into the approval order must be
summarized in the National Applications Tracking System record for the application. Listed below
are examples of frequently seen nonstandard conditions:
•

The de novo institution must submit annual independent audit reports to the Regional
Director for its first three fiscal years. These reports must be in compliance with the audit
rules set forth at 12 C.F.R. § 562.4;

•

Any contracts or agreements pertaining to transactions with affiliates, not yet submitted to the
OTS for review, must be provided to the Regional Director at least 30 calendar days prior to
execution for a written non-objection prior to implementation;

•

(Applied on a case-by-case basis, customarily used for holding company structures in which
there is expected to be significant reliance on affiliates for certain services.): At least 40
percent of the de novo institution’s board of directors must be individuals who are not
officers or employees of the applicants or affiliates thereof or have otherwise been
determined by the Regional Director to lack sufficient independence, and at least one member
of the de novo institution’s board of directors must be an individual who is not an officer,
director or employee of the applicants or any affiliate and who is not an officer or employee
of the de novo institution or have otherwise been determined by the Regional Director to lack
sufficient independence;

Office of Thrift Supervision

April 2001

Applications Handbook

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Section: Permission to Organize a
Federal Savings Institution

Section 440

•

(For trust only applicants): At least 50 percent of the audit and investment committees
established by the de novo institution must be directors who are not officers or employees of
the de novo institution, the applicants or any affiliates. If compliance with this condition
involves the selection of additional directors, each director must receive the prior written
approval of the Regional Director;

•

Within the first year of its operation, or a longer period if determined, the proposed
appointment of any permanent executive officers or directors of the de novo institution is
subject to the prior review and non-objection of the Regional Director;

•

The applicants, its affiliates and the de novo institution must comply with the anti-tying
restrictions of 12 U.S.C. §§ 1464(q) and 1467a(n) and must develop written procedures to
effect such compliance. The procedures must be submitted for the review and non-objection
of the Regional Director prior to the opening of the de novo institution for business
(alternative language if not cross marketing at the onset of business: at least 30 calendar days
prior to the commencement of the cross-marketing activity);

•

A majority of the de novo institution’s board of directors must not be individuals who are
officers, directors or employees of any affiliate of the de novo institution that engages in
securities brokerage, securities dealing, investment company, or investment advisor activities
(Securities Affiliate(s)); and

•

The de novo institution is prohibited from sharing common officers with any Securities
Affiliate unless prior written approval is obtained from the Regional Director, which shall be
based on criteria such as regulatory compliance, experience, character, integrity and the
ability to perform both duties.

RECORDKEEPING REQUIREMENTS
All correspondence related to the processing of the notice or application should be consolidated into a
file copy to be sent to a central file. Both the Regional Office and OTS-Washington will maintain a
separate file copy for nondelegated filings. The file copy must include a copy of the original filing
including any exhibits, all amendments, all internal and external correspondence between interested
parties, all documentation associated with the review and analysis of the filing, and all decision,
recommendation memorandum, and compliance material. The file copy must be organized and
separated into public and confidential material, and clearly identified as such. The public and
confidential sections should be arranged in chronological order, or in a similarly organized fashion.

MONITORING AND CONTROL
The Regional Office will monitor compliance with all conditions imposed in connection with an
application’s approval. The applicant must submit evidence of satisfaction of the conditions included
in the approval order to the Regional Office within the stated time frames.
The Regional Office should notify the appropriate staff responsible for the supervision and
examination of the savings institution regarding the action taken on an application, and provide staff
with copies of the approval order. If an application is approved, the first examination of the savings

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Office of Thrift Supervision

Section: Permission to Organize a
Federal Savings Institution

Section 440

institution following the approval should include a review of compliance with all conditions of
approval and any changes in operations as a result of the transaction.
A review of the application file should be made after all compliance material is received to ensure
that the file is complete. Any deficiencies should be corrected before the file is sent to storage.
OTS-Washington may conduct a post audit review of the application in the Regional Office,
including a review of the documentation maintained in the application file.

INFORMATION SOURCES
Statutes
12 U.S.C. § 1464
12 U.S.C. § 1464
12 U.S.C. § 1464
12 U.S.C. § 1464
12 U.S.C. § 1467a
12 U.S.C. § 1467a
12 U.S.C. § 1468
12 U.S.C. §§ 2901, et seq.
12 U.S.C. §§ 3201, et seq.

HOLA Section 5(b); Deposits and Related Powers
HOLA Section 5(c); Loans and Investments
HOLA Section 5(e); Character and Responsibility
HOLA Section 5(q); Tying Arrangements
HOLA Section 10(m); Qualified Thrift Lender Test
HOLA Section 10(n), Tying Arrangements
HOLA Section 11; Transactions with Affiliates
Community Reinvestment Act
Depository Institution Management Interlocks Act

Regulations
12 C.F.R. Part 516
12 C.F.R. § 541.18
12 C.F.R. § 543.2
12 C.F.R. § 543.3
12 C.F.R. § 543.5
12 C.F.R. § 543.6
12 C.F.R. § 545.92
12 C.F.R. § 552.2-1
12 C.F.R. § 552.2-2
12 C.F.R. § 552.3
12 C.F.R. § 552.5 – 552.6-3
12 C.F.R. Part 560
12 C.F.R. § 561.4
12 C.F.R. § 561.5
12 C.F.R. § 561.14
12 C.F.R. § 561.35
12 C.F.R. § 563.33
12 C.F.R. § 563.39
12 C.F.R. § 563.41
12 C.F.R. § 563.42

Office of Thrift Supervision

Applications Processing Guidelines
Interim Federal Institution
Application for Permission to Organize
"De Novo" Applications for a Federal Association Charter
Issuance of a Charter
Completion of Organization
Branch Offices
Procedures for Organization of Federal Stock Association
Procedures for Organization of Interim Federal Stock
Association
Charters for Federal Stock Associations
Bylaws for Federal Stock Associations
Lending and Investment Limitations
Affiliate Definition
Affiliated Person (Definition)
Controlling Person (Definition)
Officer (Definition)
Directors, Officers and Employees
Employment Contracts
Loans and other transactions with affiliates and subsidiaries
Additional standards applicable to transactions with affiliates
and subsidiaries
April 2001

Applications Handbook

440.19

Section: Permission to Organize a
Federal Savings Institution
12 C.F.R. § 563.43
12 C.F.R. Part 563e
12 C.F.R. Part 563f
12 C.F.R. Part 563g
12 C.F.R. Part 565
12 C.F.R. Part 567

Section 440

Restrictions on Loans and Other Investments Involving
Affiliated Persons
Community Reinvestment Act
Management Interlocks Act
Securities Offerings
Prompt Corrective Action
Capital

Other
Regulatory Bulletin 20
Background Investigations
Regulatory Bulletin 27-a
Executive Compensation and Employment Contracts
Regulatory Bulletin 32-5
Qualified Thrift Lender Test
Fees and Assessments Thrift Bulletin
23A and 23B of the Federal
Transactions with Affiliates
Reserve Act
Directors’ Responsibilities Guide

Application Forms
OTS Form 138
OTS Form 138-E
OTS Form 138-F
OTS Form 1495
OTS Form 1623

440.20

Applications Handbook

Permission to Organize
Permission to Organize a Federal Mutual Savings Institution
Permission to Organize a Federal Stock Savings Institution
Interim Institutions
Interagency Biographical and Financial Report

April 2001

Office of Thrift Supervision