[Federal Register Volume 59, Number 167 (Tuesday, August 30, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-21294]


[[Page Unknown]]

[Federal Register: August 30, 1994]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF THE TREASURY

Office of Thrift Supervision

12 CFR Parts 506, 546, 552, 563, 571, 574 and 575

[No. 94-76]
RIN 1550-AA47

 

Mergers, Transfers of Assets and Liabilities, and Other 
Combinations Involving Savings Associations and Other Depository 
Institutions

AGENCY: Office of Thrift Supervision, Treasury.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: The Office of Thrift Supervision (OTS) is amending its 
regulations governing mergers and combinations involving Federal 
savings associations to implement sections 501 and 502 of the Federal 
Deposit Insurance Corporation Improvement Act of 1991 (FDICIA). In 
general, the FDICIA amendments to the Federal Deposit Insurance Act 
(FDIA) and to the Home Owners' Loan Act (HOLA) ease previous 
restrictions on conversion transactions, and authorize Federally-
chartered savings associations to acquire and be acquired by other 
depository institutions insured by the Federal Deposit Insurance 
Corporation (FDIC), subject to specified conditions.
    The OTS is amending and further broadening its regulations to 
authorize combinations involving Federal stock savings associations and 
depository institutions that are not insured by the FDIC. The OTS also 
is amending its regulations to authorize Federal mutual savings 
associations to combine with other types of depository institutions 
provided that the transaction results in a mutual savings association.
    In addition, the OTS is amending its regulations governing mergers 
and application procedures to: specify the types of transactions that 
require only an information filing with the OTS; specify the types of 
transactions that require OTS approval of a notice or application, and 
the related time frames, and further clarify and consolidate OTS 
regulations by incorporating the OTS's merger and transfer of assets 
policy statement into a single regulation.

EFFECTIVE DATE: September 29, 1994.

FOR FURTHER INFORMATION CONTACT: Kevin A. Corcoran, Assistant Chief 
Counsel, (202) 906-6962, Corporate and Securities Division; Therese L. 
Monahan, Project Manager, Supervisory Programs, (202) 906-5740; or Gary 
Masters, Financial Analyst, Corporate Activities Division, (202) 906-
6729; Office of Thrift Supervision, 1700 G Street, NW., Washington, DC 
20552.

SUPPLEMENTARY INFORMATION:

I. Background and Summary of Proposal

    On August 18, 1992, the OTS issued notice of a proposal to amend 
the agency's regulations governing mergers and other combinations to 
permit mergers, consolidations and transfer of asset and assumption of 
liability transactions among savings associations and other FDIC-
insured depository institutions in accordance with sections 501 and 502 
of the FDICIA.\1\ In addition, the OTS proposed changes to its 
regulations to allow Federal savings associations to convert directly 
to state and national banks (while retaining Savings Association 
Insurance Fund (SAIF) deposit insurance) in a so-called ``Sasser 
conversion,''\2\ and to permit any FDIC-insured depository institution 
that qualifies for Federal Home Loan Bank membership to convert to a 
Federal savings association charter. The proposal also specified the 
types of transactions that would require either prior notice or 
application to the OTS, and the time frames governing review of these 
filings. The proposal did not include amendments to the merger 
regulations involving mutual savings associations. However, specific 
comments were requested as to whether mutual savings associations 
should be permitted to merge directly with banks without first 
undergoing a mutual-to stock conversion and what safeguards would be 
necessary for such transactions.
---------------------------------------------------------------------------

    \1\57 FR 37112-37118 (August 18, 1992).
    \2\Section 5(d)(2)(G) of the FDIA, 12 U.S.C. 1815(d)(2)(G).
---------------------------------------------------------------------------

    Finally, the OTS proposed to streamline and consolidate its 
regulations by, among other things, eliminating unnecessary portions of 
the OTS's merger and transfer of assets policy statement and 
incorporating the remainder in a better organized fashion into the 
revised section 563.22.
    The OTS solicited public comments on all aspects of the proposal 
for a 30-day period. Upon consideration of all the comments received 
during the comment period, the OTS is adopting the proposal with some 
modifications, discussed below.

II. Summary of Comments

    The OTS received 10 comment letters in response to the proposal, 
including four from savings banks, two from savings and loan holding 
companies, two from trade associations representing financial 
institutions, one from a law firm representing financial institutions 
and one from the Federal Housing Finance Board (FHFB). The OTS has 
carefully considered all of the comments received during the comment 
period. In addition, the OTS has reviewed the rulemakings of other 
Federal banking agencies on related subjects, and has sought, to the 
maximum extent possible, to adopt consistent provisions. The following 
is a discussion of the issues raised by the commenters.

A. Mandatory Federal Home Loan Bank Membership for Converting Savings 
Associations

    As noted in the proposal, section 5(f) of the HOLA requires Federal 
Home Loan Bank (FHLBank) membership for all Federal savings 
associations, and FHLBank membership was consistently required of 
state-chartered savings associations by the Federal Savings and Loan 
Insurance Corporation as a condition of deposit insurance. In addition, 
after enactment of the FIRREA, the OTS required resulting banks in 
thrift-to-bank charter conversions and Oakar transactions\3\ in which 
no savings association survived the transaction to continue to hold the 
former savings association's FHLBank stock in accordance with the 
requirements of the FHFB. Each commenter that addressed this issue 
objected to any regulation that would continue this requirement.
---------------------------------------------------------------------------

    \3\As used herein, an ``Oakar'' transaction refers to a 
combination between a savings association and a bank that is 
excepted from the moratorium on deposit insurance fund conversion 
set forth at section 5(d)(2)(A)(ii) of the FDIA by virtue of section 
5(d)(3) of the FDIA. See 12 U.S.C. 1815(d)(2)(A)(ii) and 1815(d)(3).
---------------------------------------------------------------------------

    Since publication of the proposal, the FHFB advised the OTS that it 
will not require a savings association that has converted to a bank 
charter to retain membership in the FHLBank system, nor will the FHFB 
require a non-FHLBank system member that has acquired some or all of 
the assets of a savings association to become a member of the FHLBank 
system. In light of the FHFB's views on this issue, the OTS advised the 
FHFB on November 20, 1992 that the OTS was discontinuing its practice 
of imposing the condition that such institutions retain FHLBank stock. 
In addition, the OTS advised the FHFB that in prior cases where the 
FHLBank stock condition was imposed, the OTS would not object if a bank 
seeks to redeem its FHLBank stock and terminate its FHLBank membership. 
In March 1993, the OTS reiterated these positions in promulgating a 
final regulation that will remove, in 1995, the regulatory requirement 
that state-chartered savings associations have and maintain FHLBank 
membership.\4\ Accordingly, the final rule does not require FHLBank 
membership of resulting institutions in the context of thrift-to-bank 
mergers and charter conversions.
---------------------------------------------------------------------------

    \4\58 FR 14510, 14513 (March 18, 1993). See 12 CFR 563.49.
---------------------------------------------------------------------------

B. Issues Regarding Mutual Savings Associations

    Current OTS regulations generally provide that merger transactions 
involving Federal mutual savings associations must result in a mutual 
form of savings association, unless the mutual institution converts to 
a stock savings association as part of the transaction.\5\ The proposal 
did not set forth any amendments to these regulations, but did solicit 
comment as to whether mutual savings associations should be permitted 
to merge with banks or other institutions other than in conjunction 
with a mutual-to-stock conversion, and if permitted, what safeguards 
should be established with respect to these transactions.
---------------------------------------------------------------------------

    \5\12 CFR 552.13(c)(1)(ii).
---------------------------------------------------------------------------

    The comments addressing this issue unanimously opposed any 
regulation that would permit Federal mutual savings associations to be 
acquired by commercial banks or other stock-form institutions without a 
prior or simultaneous mutual-to-stock conversion by the mutual savings 
association. These commenters expressed the view that OTS regulations 
adequately protect the interests of mutual accountholders\6\ and direct 
acquisition resulting in a stock institution may jeopardize those 
protections. They also noted that the FDICIA does not evidence any 
intent to change the current treatment of combinations involving mutual 
associations.
---------------------------------------------------------------------------

    \6\The OTS has recently issued an interim final regulation, with 
a request for comment, revising certain key provisions in its mutual 
to stock conversion regulations. The amendments generally prohibit 
merger conversions (i.e., where a mutual savings association 
converts to stock form and simultaneously merges into another stock 
form depository institution) except in certain supervisory 
situations. In addition, OTS has proposed to add a ``convenience and 
needs'' test to its standards for approving mutual to stock 
conversions. See 59 FR 22725 (May 3, 1994) and 59 FR 22764 (May 3, 
1994).
---------------------------------------------------------------------------

    The OTS agrees with these comments and, accordingly, the final 
regulations continue to prohibit Federal mutual associations from 
combining with stock form institutions where the resulting institution 
is not a mutual savings association, except in the context of a mutual 
to stock conversion, and subject to other limited exceptions. 
Nevertheless, as more fully described below, the OTS has determined 
that Federal mutual savings associations may, in general, combine with 
stock form institutions where the Federal mutual association is the 
resulting association. The final rule includes revisions to 12 CFR 
546.2 and 546.3 to effect these changes.

C. Review Period Under Section 10(s)(2) of the HOLA

    The proposal solicited comment on processing procedures and time 
frames, including whether applications subject to section 10(s)(2) of 
the HOLA should be deemed ``filed'' when deemed complete under the 
OTS's general application processing procedures in 12 CFR Part 516. 
Under the proposal, the 60-day review time for these applications would 
not commence until an application is reviewed by the OTS and deemed 
complete under part 516.
    Some commenters objected to the OTS's interpretation of the term 
``filed'' in section 10(s) of the HOLA. These commenters suggested that 
the review time frames for applications under section 10(s)(2) should 
commence when an application is first submitted to the OTS, not when it 
is deemed complete. One commenter supported the proposal, noting that 
any regulation providing different ``filed'' dates for applications 
under part 516 and section 10(s) of the HOLA would serve no purpose and 
would create confusion.
    As explained in more detail in Section III.D. below, the final rule 
adopts the proposed application review time frames. To ensure uniform 
treatment of all transactional applications, the OTS believes 
applications subject to section 10(s)(2) of the HOLA should be 
processed, to the extent possible, consistently with all applications 
under part 516. Also, the processing time frames in the rule are 
consistent with the procedures established by the Office of the 
Comptroller of the Currency for conversion applications by national 
banks under section 502(b) of the FDICIA.7
---------------------------------------------------------------------------

    \7\ 12 U.S.C. 215c; see Comptroller of the Currency's Manual for 
Corporate Activities, Vol. 1, Policies and Procedures (January 
1992).
---------------------------------------------------------------------------

D. Community Reinvestment Act Issues

    Comments were solicited on whether the OTS should have the ability 
to suspend the processing time frames under section 10(s)(2) of the 
HOLA for applications challenged on Community Reinvestment Act 
(CRA)8 grounds.
---------------------------------------------------------------------------

    \8\ Housing and Community Development Act of 1977, 12 U.S.C. 
2901-2907.
---------------------------------------------------------------------------

    Two commenters opposed any regulation that would permit suspension 
of the review time frames for applications subject to section 10(s)(2) 
of the HOLA.9 One of these commenters asserted that the OTS lacks 
the authority to review an applicant's CRA compliance record where a 
savings association acquires another insured depository institution in 
an Oakar transaction under section 5(d)(3) of the FDIA.
---------------------------------------------------------------------------

    \9\Two other commenters stated that any processing suspension 
should be limited to one or two 30-day periods.
---------------------------------------------------------------------------

    This commenter asserted that although section 5(d)(3) of the FDIA 
requires the OTS to consider the factors set forth in section 18(c) of 
the FDIA (the Bank Merger Act (BMA)) in acting upon an Oakar 
transaction, the BMA is not itself applicable to such transactions. 
Therefore, according to the commenter, an application to engage in an 
Oakar transaction is not an ``application for a deposit facility'' 
within the meaning of the CRA, and the CRA requirement that the OTS 
take an institution's CRA record into account in its evaluation of an 
application for a deposit facility10 is not applicable.
---------------------------------------------------------------------------

    \1\012 U.S.C. 2903.
---------------------------------------------------------------------------

    We find the commenter's assertions to be unpersuasive. Section 
5(d)(3) of the FDIA merely establishes an exception to the general 
moratorium on insurance fund ``conversion transactions'' set forth at 
section 5(d)(2)(A)(ii) of the FDIA. Section 5(d)(3) does not state that 
Oakar transactions are excepted from all otherwise applicable approval 
requirements, and the BMA itself includes no exception from its plain 
language with respect to Oakar transactions. Moreover, the 
authorization provided by section 10(s) of the HOLA is subject to 
section 5(d)(3) of the FDIA and the BMA, and all other applicable laws.
    The OTS, after further consideration of its applications processing 
procedures, observes that the procedures in part 516 of the OTS's 
regulations are intended to ensure that an application will not be 
deemed complete until expiration of the public comment period and 
resolution of any protests or other significant issues raised during 
that period. Accordingly, any challenges to a transaction on CRA 
grounds would be resolved prior to the commencement of the processing 
time frames under section 10(s)(2) of the HOLA. The OTS has amended the 
publication procedures for applications under Sec. 563.22(a) to ensure 
that the public comment period has concluded before the OTS is required 
to make a completeness determination regarding such applications.

E. Application Review Standards and Regulatory Streamlining

    The OTS proposed to incorporate into revised Sec. 563.22 the 
approval standards, definitional provisions and other provisions of the 
OTS's merger and transfer of assets policy statement found at 12 CFR 
571.5. The proposal requested comment on whether any of the standards 
in Sec. 571.5 should be streamlined, clarified or otherwise modified or 
deleted in connection with their incorporation into Sec. 563.22.
    One commenter stated that some of the review criteria in Sec. 571.5 
went beyond the standards applicable to transactions under sections 
5(d)(3) of the FDIA and 10(s) of the HOLA, and therefore should not be 
considered by the OTS in reviewing applications under these statutes.
    Section 571.5 set forth not only the review standards for 
transactions under sections 5(d)(3) and 18(c) of the FDIA and 10(s) of 
the HOLA, but also general safety and soundness considerations 
applicable to all transfer transactions and combinations involving 
savings associations. Thus, the OTS believes it is appropriate to 
retain these review criteria. However, certain of the detailed criteria 
addressed in Sec. 571.5, for example those pertaining to retention of 
attorneys and other professionals, tie-in transactions, and fees paid 
in connection with transactions, are considered by OTS as part of the 
overall evaluation of the managerial and financial resources and future 
prospects of the savings associations involved in a combination or 
transfer transaction. The OTS believes that the detail of certain 
criteria is not necessary and that general standards are more 
appropriate for an evaluation of the safety and soundness of a given 
transaction. Accordingly, Sec. 563.22(d) of the final rule has been 
revised to incorporate streamlined and consolidated review standards 
derived from Sec. 571.5, and Sec. 571.5 has been deleted.

F. Other Issues

    One commenter requested that the OTS clarify whether section 
10(s)(3) of the HOLA (and Sec. 552.13(b)(1) as set forth in the 
proposal) precludes transfer or consolidation transactions where a 
resulting institution would own the shares of one or more constituent 
institutions.
    In OTS's view, section 10(s)(3) of the HOLA does not prohibit a 
Federal savings association from acquiring the stock of another insured 
depository institution and holding the other depository institution as 
a subsidiary. Section 10(s) was designed to cure what had been viewed 
as a statutory impediment to mergers or other combinations between a 
savings association and other types of insured depository 
institutions.11 Section 10(s) was not established to bar 
transactions that are permissible under other, existing authority. 
Moreover, neither the text of section 502 of FDICIA nor its legislative 
history indicate that Congress intended section 10(s)(3) to override 
any separate legal authority for such an acquisition.
---------------------------------------------------------------------------

    \1\1The primary impediment was section 5(d)(3) of the HOLA, 
which, in pertinent part, authorizes the OTS to provide for the 
merger of savings associations with other savings associations, but 
is silent as to whether savings associations could merge with other 
types of depository institutions. For many years, the OTS, and its 
predecessor, the Federal Home Loan Bank Board, viewed the lack of 
express authorization for cross-industry mergers as, in effect, a 
prohibition on such transactions.
---------------------------------------------------------------------------

    Federal savings associations, therefore, may acquire the shares of 
another insured depository institution and hold the acquired entity as 
a subsidiary if the legal authority for the transaction derives from a 
source other than section 10(s) of the HOLA. Such legal authority may 
be found, for example, under the service corporation provisions of the 
HOLA, and the OTS service corporation and operating subsidiary 
regulations.12
---------------------------------------------------------------------------

    \1\2 12 U.S.C. 1464(c)(4)(B); 12 CFR 545.74 and 545.81.
---------------------------------------------------------------------------

    Accordingly, the final regulations provide that a Federal savings 
association may ``combine'' with any depository institution (subject to 
compliance with applicable statutes and regulations and certain other 
provisions), and define the term ``combination'' as a ``merger or 
consolidation with another depository institution, or an acquisition of 
all or substantially all of the assets or assumption of all or 
substantially all of the liabilities of a depository institution by 
another depository institution.''
    One commenter questioned the OTS's authority to require any filing 
from a savings association proposing to convert to a bank charter or 
merge or transfer all of its assets to a bank. This commenter also 
questioned the necessity of any filing with the OTS in view of the 
requirement under the BMA that the OTS be provided with a copy of the 
application filed with the regulatory agency of the resulting 
depository institution. The filing requirements in the regulations as 
adopted enable the OTS, consistent with its broad responsibilities 
under the HOLA and other statutes, to ensure safe and sound operation 
of savings associations, identify any pending or potential supervisory 
concerns or enforcement actions involving the savings associations that 
are parties to the transaction, and, at a minimum, advise the 
appropriate regulatory agency regarding these concerns. The procedures 
are not contrary to any of the provisions of section 5(d) of the FDIA, 
and, in fact, represent a significant simplification of long-standing 
OTS application and approval requirements, which have been upheld by 
the courts. See Home Mortgage Bank v. Ryan, 986 F.2d 372 (10th Cir. 
1993).
    One commenter suggested that the OTS shorten the review period for 
applications submitted by savings associations, where the association 
previously had sought expedited treatment, but the OTS had advised the 
association that it was not eligible for expedited treatment. Under the 
final rule, such applications will be processed under standard time 
frames regardless of prior filings. However, to the extent a previously 
filed notice provides the OTS with useful information regarding a 
proposed transaction, it is likely that the OTS will be able to act on 
a subsequent, properly filed application prior to expiration of the 
full 60-day review period.
    This same commenter inquired how the OTS would treat applications 
filed under Sec. 563.22 that are awaiting OTS action at the effective 
date of the amended regulation, and whether such applications would 
need to be re-filed in accordance with the procedures adopted in the 
final rule. The commenter also inquired about the treatment that would 
be accorded applications that were approved but not consummated prior 
to adoption of this rule.
    Both pending applications and proposed transactions that are now 
solely within the scope of new Sec. 563.22(b)(1) will be subject to the 
new procedures upon the effective date of the amendments. Other 
applications currently awaiting OTS action will continue to be subject 
to the standards and procedures in effect at the time the applications 
were filed. Previously approved transactions must be consummated in 
accordance with the terms and conditions set forth in the OTS's 
approval order.
    Some commenters expressed confusion about the proposed application 
and notice procedures. Many of these concerns are addressed in 
technical and clarifying changes made throughout the final rule.

III. Summary of Revisions

    As more fully discussed below, the final regulations implement 
section 502 of the FDICIA by authorizing Federal stock associations to 
combine with any FDIC-insured depository institution, and by 
authorizing Federal mutual associations to combine with any FDIC-
insured depository institution, provided that a mutual association is 
the resulting institution. In addition, the final regulations authorize 
certain combinations involving Federal associations and depository 
institutions not insured by the FDIC. The final regulations 
specifically authorize Federal stock savings associations to convert to 
state or national banks, and permit any stock-form depository 
institution that is, or is eligible to become, a member of a Federal 
Home Loan Bank, to convert to a Federal stock savings association 
charter. Finally, the OTS is amending its regulations governing the 
procedures regarding applications to engage in the above-described 
actions, and has made various technical and conforming amendments.

A. Expansion of Permissible Combinations for Federal Stock Savings 
Associations

    The final rule revises 12 CFR 552.13(c) to permit Federal stock 
savings associations to combine with any depository institution, upon 
compliance with appropriate application or notice requirements, 
described in Section III.D. below. The rule also establishes standards 
for combinations, including standards that address compliance with the 
asset composition requirements of section 5(c) of the HOLA and the 
qualified thrift lender requirements of section 10(m) of the HOLA, when 
a thrift acquires a bank. In addition, the regulation modifies and adds 
definitions for terms used throughout amended sections 552.13 and 
563.22 to implement the new provisions of the HOLA and the FDIA.
    The final regulation differs from the proposal in certain respects. 
The term ``acquire'' has been changed to ``combination,'' and expanded 
to include combinations involving depository institutions not insured 
by the FDIC. Also, the term ``combination'' has been clarified to 
include purchase and assumption transactions that involve all or 
substantially all of a depository institution's assets or liabilities, 
rather than transactions of a lesser scope, such as branch sale 
transactions. The definition of the term ``combination'' reflects the 
OTS's position that the definition of the term ``acquire'' at section 
10(s)(3) does not preclude a Federal savings association from holding 
another insured depository institution as a subsidiary, pursuant to a 
separate source of authority to do so.
    Section 10(s)(1) of the HOLA states that Federal savings 
associations may acquire or be acquired by any insured depository 
institution, subject to sections 5(d)(3) and 18(c) of the FDIA, and all 
other applicable laws. The OTS has concluded that the reference to 
section 5(d)(3) of the FDIA does not mean that section 5(d)(3) must be 
applicable in order for a combination transaction to be permissible. 
The grant of authority in section 10(s)(1) of the HOLA to Federal 
savings associations to acquire or be acquired by another insured 
depository institution simply requires that any Federal savings 
association that proposes such a transaction comply with all applicable 
laws. Section 10(s)(1) was not intended to withhold from Federal 
associations the authority to engage in transactions exempted from the 
FIRREA moratorium on conversion transactions under other provisions of 
the FDIA,\3\ or in transactions that are not subject to the moratorium 
in the first place (for example, because the transaction involves two 
SAIF-insured savings associations, or occurs after expiration of the 
moratorium). The OTS has clarified the final regulation accordingly.
---------------------------------------------------------------------------

    \13\See, e.g., Section 5(d)(2)(C) (ii) and (iii) of the FDIA, 12 
U.S.C. 1815(d)(2)(C) (ii) and (iii).
---------------------------------------------------------------------------

    The final regulation expands the categories of depository 
institutions with which Federal stock associations have the power to 
merge from only FDIC-insured depository institutions to any depository 
institution. Federal stock associations have been authorized to acquire 
or be acquired by non-FDIC insured depository institutions in purchase 
and assumption transactions since 1985.\14\ The OTS has concluded that 
continuing to require such transactions to be accomplished through 
purchase and assumption transactions, rather than through merger 
transactions elevates form over substance, and may impose unnecessary 
expenses and complications on Federal stock associations that propose 
to engage in transactions with uninsured depository institutions.
---------------------------------------------------------------------------

    \14\See 50 FR 16071 (April 24, 1985).
---------------------------------------------------------------------------

    Where a Federal stock association proposes to merge with an 
uninsured depository institution, and the Federal stock association 
would survive the transaction, the Federal stock association would be 
required to seek approval from the FDIC under section 18(c)(1) of the 
FDIA, as well as from the OTS under the transfer of assets regulations 
at 12 CFR 563.22(c). If the Federal stock association is not the 
resulting institution, the association must obtain OTS approval under 
12 CFR 563.22(c), and provide any required notices to depositors, and 
to the FDIC.

B. Combinations Involving Federal Mutual Associations

    The OTS has retained the prohibition against Federal mutual 
associations combining with stock form institutions where the resulting 
institution is not a mutual savings association, except where the 
mutual savings association converts to the stock form of organization 
pursuant to 12 CFR Part 563b, and subject to other, limited, 
exceptions.\15\
---------------------------------------------------------------------------

    \15\The OTS's recent amendments to the conversion regulations 
generally prohibit merger conversion transactions except in certain 
supervisory situations. See 59 FR 22725, 22729-22730 (May 3, 1994).
---------------------------------------------------------------------------

    The OTS notes, however, that the concerns regarding the protection 
of mutual accountholders' interests in the acquisitions of Federal 
mutual associations do not arise when the Federal mutual association is 
the acquiring/surviving entity. Accordingly, the OTS is amending 12 CFR 
546.2, governing mergers involving Federal mutual associations, to 
permit Federal mutual associations to merge with FDIC-insured 
depository institutions, as well as non-FDIC insured depository 
institutions, where a mutual savings association is the resulting 
entity. This treatment parallels the treatment of Federal stock 
associations. These combinations also would be subject to the same 
statutory and regulatory approval standards as apply to stock form 
associations engaging in a comparable transaction, described above.
    Section 546.2 has not previously addressed the ability of Federal 
mutual associations to combine with other institutions in purchase and 
assumption transactions. The OTS has amended Sec. 546.2 to provide 
specific authority for Federal mutual associations to combine with 
other entities in purchase and assumption transactions, subject to the 
same limitations that apply in the case of merger transactions 
involving Federal mutual associations.
    The OTS has made technical and conforming amendments to 12 CFR part 
546 in order to implement these revisions to Sec. 546.2.

C. Charter Conversions by and to Federal Savings Associations

    The OTS is adding 12 CFR 552.2-7 to the Federal stock savings 
association regulations, which specifically permits Federal stock 
savings associations to convert to state or national banks in so-called 
``Sasser'' conversions.\16\ New Sec. 552.2-7 provides that converting 
savings associations must comply with the procedures set forth in new 
Sec. 563.22(h)(1) or (h)(2)(ii) of the amended merger regulation, which 
requires prior notification to or approval of the OTS in the manner 
described in Section III.D. below.
---------------------------------------------------------------------------

    \1\6The OTS regulations for Federal mutual savings associations 
have not been amended to authorize specifically the conversion of 
Federal mutual savings associations to state mutual savings banks, 
because such conversions are specifically authorized under section 
5(i)(3) of the HOLA. Federal mutual savings associations proposing 
to convert to state mutual savings banks are required to notify the 
OTS or obtain OTS approval as described in section III.D., below.
---------------------------------------------------------------------------

    The OTS is amending 12 CFR 552.2-6 to permit, with prior OTS 
approval, any stock-form depository institution that is, or is eligible 
to become, a member of a Federal Home Loan Bank, to convert to a 
Federal stock savings association charter. The depository institution, 
at the time of the conversion, must have deposits insured by the FDIC. 
In addition, the depository institution, in accomplishing the 
conversion, must comply with all applicable statutes and regulations, 
including, without limitation, the insurance fund conversion moratorium 
provisions set forth at section 5(d) of the FDIA.
    The OTS has broad legal authority with respect to Federal savings 
associations under section 5(a) of the HOLA, which authorizes the 
Director of the OTS, under such regulations as the Director may 
prescribe, to, inter alia, provide for the organization, incorporation, 
examination, operation, and regulation of Federal savings associations. 
Section 5(a) of the HOLA provides the OTS with plenary authority over 
Federal savings associations, and, as the Supreme Court has noted, it 
would be difficult for Congress to give a broader mandate.17
---------------------------------------------------------------------------

    \1\7See Fidelity Federal Savings and Loan Association v. de la 
Cuesta, 458 U.S. 141, 161 (1982) (scope of authority of the Federal 
Home Loan Bank Board, the predecessor agency to the OTS).
---------------------------------------------------------------------------

    The OTS notes that section 5(i)(1) of the HOLA provides specific 
authorization for ``[a]ny savings association which is, or is eligible 
to become, a member of a Federal home loan bank'' to ``convert into a 
Federal savings association,'' subject to such regulations as the 
Director may prescribe. Immediately prior to the enactment of FIRREA, 
section 5(i)(1) of the HOLA permitted any ``institution'' which is, or 
is eligible to become, a member of a Federal home loan bank to convert 
to a Federal savings and loan association or Federal savings bank, 
subject to the regulations of the FHLBB.
    FIRREA revised the language of section 5(i)(1) of the HOLA from any 
``institution'' which is, or is eligible to become, a member of a 
Federal home loan bank, to any ``savings association'' that met such 
criteria. However, the OTS's review of the legislative history of 
FIRREA has revealed no intent on the part of Congress in the FIRREA to 
limit the types of depository institutions that may convert to a 
Federal savings association charter. Instead, it appears that the 
change in the ``institution'' terminology in section 5(i)(1) of the 
HOLA was inadvertent, and occurred when the term ``insured 
institution,'' occurring throughout the HOLA, was changed in FIRREA to 
``savings association.'' Accordingly, the use of the OTS's authority 
under section 5(a) of the HOLA to broaden the class of depository 
institutions that are eligible for a Federal charter is not 
inconsistent with the FIRREA amendments to section 5(i)(1) of the HOLA.
    New section 552.2-6 enables commercial banks and other depository 
institutions to accomplish directly what they have previously been able 
to accomplish indirectly. For example, in many cases, a state bank or 
other depository institution may, under state law, convert to a state-
chartered savings bank, or a state-chartered savings association, which 
may, consistent with state law and section 5(i) of the HOLA (or, in 
some cases, section 5(o) of the HOLA), convert to a Federal savings 
association or a Federal savings bank. Similarly, a commercial bank or 
other depository institution may cause the chartering of a Federal 
association, and then transfer its assets and liabilities to the 
savings association.
    The OTS believes that federal statutes should be interpreted and 
applied in a manner consistent with their purpose. In so doing, the 
substance, not merely the form of a transaction, is key. It is clear 
that no federal statutory barrier exists to the ultimate accomplishment 
of conversions of depository institutions to Federal thrift charters, 
provided that all applicable chartering and insurance requirements are 
met. Thus, absent compelling reasons to the contrary, to read the HOLA 
as implicitly requiring a multi-step process to accomplish these types 
of charter conversions would impose unnecessary expenses and 
complications upon depository institutions that wish to operate as 
Federal savings associations.
    The classes of depository institutions that are permitted to 
convert to a Federal stock association charter under Sec. 552.2-6 is 
broader than set forth in the proposed version of the regulation, which 
addressed only conversions by FDIC-insured depository institutions. The 
OTS believes that there are no compelling legal or policy reasons why 
stock-form depository institutions not insured by the FDIC should not 
be permitted to convert directly to a Federal savings association.\18\ 
However, these institutions must meet the requirements for Federal Home 
Loan Bank membership, receive FDIC insurance of accounts prior to 
consummation of the conversion, and otherwise comply with all 
applicable statutes and regulations.
---------------------------------------------------------------------------

    \18\The OTS is not, at this time, adopting a corresponding 
regulation that would authorize mutual-form depository institutions 
to convert to Federal mutual savings associations. The OTS may, in 
the future, consider promulgating a regulation authorizing such 
conversions. The OTS notes, however, that mutual-form state 
chartered savings banks that are insured by the Bank Insurance Fund 
are authorized to convert to Federal mutual savings banks, pursuant 
to section 5(o) of the HOLA.
---------------------------------------------------------------------------

    Applications filed under revised Sec. 552.2-6 must comply with 
Sec. 552.2-1 and other sections in part 552 regarding establishment of 
a Federal thrift charter.

D. Application Processing

    As noted, the FDIA requires prior OTS approval of combinations 
between savings associations and other types of FDIC-insured depository 
institutions where the acquiring, assuming, or resulting institution is 
a savings association. In such transactions, the OTS will continue to 
require an application under amended Sec. 563.22(a).
    Under previous regulations, any savings association that proposed 
to convert to a bank in a Sasser transaction or be acquired by a bank 
in an Oakar transaction was required to file a transfer of assets 
application with the OTS.\19\ The OTS continues to believe that an 
application process requiring prior written approval is necessary in 
certain situations, discussed below. However, with respect to Oakar 
transactions and other combinations between a thrift and a bank in 
which no savings association survives, the OTS's experience has 
indicated that a notification requirement would be sufficient. The OTS 
will advise the appropriate Federal banking agency of any supervisory 
concerns, enforcement actions and other relevant information regarding 
the institution.
---------------------------------------------------------------------------

    \19\12 CFR 563.22(b) (1993).
---------------------------------------------------------------------------

    Any savings association that proposes to convert to a bank charter 
in a Sasser conversion must file a notification or application with the 
OTS, depending on whether the savings association meets the 
requirements for expedited treatment under Sec. 516.3(a). Specifically, 
savings associations that qualify for expedited treatment under 
Sec. 516.3(a)(1) will be eligible to use the notification procedure set 
forth at Sec. 563.22(h)(1) in order to engage in a Sasser conversion. 
Savings associations that do not qualify for such treatment will be 
required to file an application in order to engage in a Sasser 
conversion. Such applications will be subject to the general 
application processing timeframes.\20\ The OTS notes that this 
procedure represents a significant reduction in burden from the prior 
procedures, under which every savings association that proposed to 
undertake a Sasser conversion was required to file a detailed 
application.
---------------------------------------------------------------------------

    \20\The proposal included a notification requirement for all 
savings associations undertaking a Sasser transaction. Based on 
additional experience, the OTS is requiring an application from 
savings associations that fail to qualify for expedited processing 
and propose to undertake a Sasser transaction, because such 
associations may, in certain cases, present compliance or safety and 
soundness concerns that may warrant denial or conditioning of the 
application.
---------------------------------------------------------------------------

    In evaluating applications proposing Sasser conversions, the OTS 
will assess the applicable factors set forth in Sec. 563.22(d)(1), and 
whether the conversion may have a negative effect on the safety and 
soundness of the association or present a risk to the appropriate 
deposit insurance fund.
    Sections 563.22(b) and (c) have been amended and a new 
Sec. 563.22(h) has been added to the regulations setting forth special 
requirements and procedures for transactions subject to Secs. 563.22 
(b) and (c).
    Specifically, amended Sec. 563.22(b)(1) of the final rule requires 
prior notification to the OTS in accordance with new Sec. 563.22(h)(1) 
of Sasser conversions of savings associations that meet the criteria 
for expedited treatment under Sec. 516.3(a), and combinations between 
savings associations and FDIC-insured depository institutions (such as 
Oakar transactions) where no savings association will survive 
consummation of the transaction. The notification must be submitted at 
least 30 days prior to the effective date of the conversion or 
combination, but not later than the date on which an application 
relating to the proposed transaction is filed with the primary 
regulator of the resulting association. The rule also provides that, 
upon request or on its own initiative, the OTS may shorten the 30-day 
prior notification period.
    New Sec. 563.22(h)(1) requires the submission of either a letter 
describing material information regarding the transaction or a copy of 
a filing submitted to the regulatory agency of the resulting 
institution that must approve the transaction. The rule does not 
require OTS approval or clearance of such transactions prior to their 
consummation.
    Given the amendments to Sec. 563.22(b), the OTS has determined that 
it is appropriate to revise its application requirements for voluntary 
dissolutions of Federal associations set forth at 12 CFR 546.4. Amended 
Sec. 546.4 provides that Federal associations that combine with a bank 
in a purchase and assumption transaction will not be required to file a 
voluntary dissolution application where the transaction involves the 
transfer of all of the Federal association's assets and liabilities. 
The OTS has determined that requiring a voluntary dissolution 
application would have eliminated any streamlining arising from the 
notification process in those circumstances. The Federal stock 
association will still be required under Sec. 552.13 to surrender its 
charter upon completion of the transaction.
    Amended Sec. 563.22(c) requires prior notice or application to the 
OTS in accordance with new Sec. 563.22(h)(2) for the following 
categories of transactions:
    (1) Purchases of assets by a savings association that do not 
require OTS approval under the BMA and Sec. 563.22(a);
    (2) Bulk sales of less than all or substantially all of the assets 
of a savings association;
    (3) Transactions in which a savings association transfers less than 
all or substantially all of its deposit liabilities to a bank or other 
depository institution;
    (4) Bulk assumptions or transfers of non-deposit liabilities by a 
savings association; and
    (5) Combinations involving savings associations and depository 
institutions other than insured depository institutions.
    The OTS believes that an abbreviated procedure is appropriate for 
these types of transactions, provided that the savings association is 
well capitalized, and otherwise qualifies for ``expedited treatment'' 
under part 516. Accordingly, under new Sec. 563.22(h)(2)(i), an 
expedited notice procedure is available for all five of the foregoing 
categories of transactions where all constituent savings associations 
meet the conditions for ``expedited treatment'' under 12 CFR 516.3(a). 
Notices under this provision of the rule would be deemed approved 
automatically 30 days after receipt, unless the OTS determines that an 
application is required.\21\
---------------------------------------------------------------------------

    \21\As is the case with respect to any notice receiving 
expedited treatment under Sec. 516.3(a), the OTS may impose 
appropriate conditions in connection with acceptance of a notice 
under new Sec. 563.22(h)(2)(i).
---------------------------------------------------------------------------

    Under new Secs. 563.22(h)(2)(ii) and 563.22(h)(2)(iii), a standard 
application procedure must be followed where any constituent savings 
association does not meet the criteria for ``expedited treatment'' 
under Sec. 516.3(a), or where a notice filed under Sec. 563.22(h)(2)(i) 
is incomplete or otherwise does not satisfy the notice requirements. 
These applications will be subject to the ``standard'' review periods 
set forth in part 516, with certain exceptions. As with other 
applications, the OTS is required to notify an applicant within 30 
calendar days after proper submission of an application whether it is 
``sufficient'' or ``complete,'' and what additional information is 
required, if any, in order to render the submission sufficient, or that 
the submission is materially deficient and will not be processed.\22\ 
In addition, the 60-day period for review for an application under 
these provisions commences on the date the OTS determines the 
application to be sufficient.\23\
---------------------------------------------------------------------------

    \22\12 CFR 516.2(c).
    \23\12 CFR 516.2(d).
---------------------------------------------------------------------------

    Under part 516, the OTS may extend the application review period 
for an additional 30-day period upon notice to the applicant.24 
Part 516 also permits the OTS to extend the review period in cases 
involving a significant issue of law or policy or where a protest has 
been filed under the CRA.25 However, consistent with new section 
10(s)(2) of the HOLA, new Sec. 563.22(d)(4) and (h)(2)(iii) of the rule 
specifically provide that the 60-day review period for an Oakar 
application may be extended for up to 30 days only if the OTS 
determines that the applicant has failed to furnish information 
requested by the OTS, or if the information furnished is substantially 
inaccurate.
---------------------------------------------------------------------------

    \2\412 CFR 516.2(e).
    \2\512 CFR 516.2(f).
---------------------------------------------------------------------------

E. Technical Amendments

    The final rule amends the definitional provisions of Secs. 552.13 
and 563.22 of the regulations to reflect the expanded authority 
conferred by new section 10(s) of the HOLA. In addition, as noted 
above, the final rule makes additional technical and conforming changes 
throughout these sections to simplify and clarify the application and 
notice procedures applicable to all mergers and other combinations 
involving savings associations.

Regulatory Flexibility Act

    Pursuant to Section 605(b) of the Regulatory Flexibility Act, it is 
certified that this rule will not have a significant economic impact on 
a substantial number of small entities. Accordingly, a final Regulatory 
Flexibility Analysis is not required.

Executive Order 12866

    The OTS has determined that this rule does not constitute a 
``significant regulatory action'' for purposes of Executive Order 
12866.

Paperwork Reduction Act

    The collection of information contained in Sec. 563.22(a) has been 
submitted to and approved by the Office of Management and Budget (OMB) 
under OMB Control No. 1550-0016 in accordance with the requirements of 
the Paperwork Reduction Act (PRA) (44 U.S.C. 3504(h)).

Estimated burden for OMB Control No. 1550-0016:
Estimated number of respondents: 90
Estimated number of annual responses per respondent: 1
Estimated number of hours per response: 36
Estimated total annual reporting burden: 3240

    The collections of information contained in Sec. 563.22 (b) and (c) 
have changed since being submitted to and approved by OMB, in 
connection with the proposal, under OMB Control No. 1550-0025 in 
accordance with the requirements of the PRA. Accordingly, the 
collections of information at Sec. 563.22 (b) and (c) have been 
resubmitted and approved by OMB under 44 U.S.C. 3507.

Estimated burden for OMB Control No. 1550-0025:
Estimated number of respondents: 135
Estimated number of annual responses per respondent: 1
Estimated number of hours per response: 4.04
Estimated total annual reporting burden: 545

    The collections of information are needed by OTS to determine 
whether proposed transactions regarding mergers and transfer of asset 
and liability transactions involving banks and thrifts comply with 
applicable state and Federal laws and OTS regulations and policies, and 
whether these transactions will have an adverse affect on the risk 
exposure of the Savings Association Insurance Fund.
    Comments concerning the accuracy of these estimates and suggestions 
for reducing this burden should be directed to Office Management and 
Budget, Paperwork Reduction Project (1550), Washington, DC 20503.

List of Subjects

12 CFR Part 506

    Reporting and recordkeeping requirements.

12 CFR Part 546

    Reporting and recordkeeping requirements, Savings associations.

12 CFR Part 552

    Reporting and recordkeeping requirements, Savings associations, 
Securities.

12 CFR Part 563

    Accounting, Crime, Currency, Investments, Mortgages, Reporting and 
recordkeeping requirements, Savings associations, Securities, Surety 
bonds.

12 CFR Part 571

    Accounting, Conflicts of interest, Investments, Reporting and 
recordkeeping requirements, Savings associations.

12 CFR Part 574

    Administrative practice and procedure, Holding companies, Reporting 
and recordkeeping requirements, Savings associations, Securities.

12 CFR Part 575

    Capital, Holding companies, Reporting and recordkeeping 
requirements, Savings associations, Securities.

    Accordingly, the Director of the OTS hereby amends parts 506, 546, 
552, 563, 571, 574, and 575, chapter V, title 12, Code of Federal 
Regulations, as set forth below:

Subchapter A--Organization and Procedures

PART 506--INFORMATION COLLECTION REQUIREMENTS UNDER THE PAPERWORK 
REDUCTION ACT

    1. The authority citation for part 506 continues to read as 
follows:

    Authority: 44 U.S.C. 3501 et seq.

    2. Section 506.1 is amended by removing three entries from the 
table in paragraph (b) to read as follows:


Sec. 506.1  OMB control numbers assigned pursuant to the Paperwork 
Reduction Act.

* * * * *
    (b) Display. 

------------------------------------------------------------------------
                                                             Current OMB
   12 CFR part or section where identified and described     control No.
------------------------------------------------------------------------
                                                                        
                                  *****                                 
Delete                                                                  
516.1(b)...................................................    1550-0056
                                                                        
                                  *****                                 
563.100....................................................    1550-0078
563.101....................................................    1550-0078
                                                                        
                                 *****                                  
------------------------------------------------------------------------


Subchapter C--Regulations for Federal Savings Associations

PART 546--MERGER, DISSOLUTION, REORGANIZATION AND CONVERSION

    3. The authority citation for part 546 is revised to read as 
follows:

    Authority: 12 U.S.C. 1462, 1462a, 1463, 1464, 1467a, 2901 et 
seq.

    4. Section 546.1 is revised to read as follows:


Sec. 546.1  Definitions.

    The terms used in Secs. 546.2 and 546.3 shall have the same meaning 
as set forth in Secs. 552.13(b) and 563.22(g) of this chapter.
    5. Section 546.2 is revised to read as follows:


Sec. 546.2  Procedure; effective date.

    (a) A Federal mutual savings association may combine with any 
depository institution, provided that:
    (1) The combination is in compliance with, and receives all 
approvals required under, any applicable statutes and regulations;
    (2) Any resulting Federal savings association meets the 
requirements for Federal Home Loan Bank membership and insurance of 
accounts;
    (3) In the case of a combination with a bank that is a member of 
the Bank Insurance Fund, any resulting Federal savings association 
conforms to the requirements of sections 5(c) and 10(m) of the Home 
Owners' Loan Act under the standards set forth in section 5(c)(5) of 
the Home Owners' Loan Act, and in the case of a combination with any 
other depository institution, any resulting Federal savings association 
conforms within the time prescribed by the OTS, to the requirements of 
section 5(c) of the Home Owners' Loan Act; and
    (4) The resulting institution shall be a mutually held savings 
association, unless:
    (i) The transaction involves a supervisory merger;
    (ii) The transaction is approved under part 563b of this chapter; 
or
    (iii) The transaction involves a transfer in the context of a 
mutual holding company reorganization under section 10(o) of the Home 
Owners' Loan Act.
    (b) Each Federal mutual savings association, by a two-thirds vote 
of its board of directors, shall approve a plan of combination 
evidenced by a combination agreement. The agreement shall state:
    (1) That the combination shall not be effective unless and until 
the combination receives any necessary approval from the Office 
pursuant to Sec. 563.22 (a) or (c), or in the case of a transaction 
requiring a notice pursuant to Sec. 563.22(c), the notice has been 
filed, and the appropriate period of time has passed or the OTS has 
advised the parties that it will not disapprove the transaction;
    (2) Which constituent institution is to be the resulting 
institution;
    (3) The name of the resulting institution;
    (4) The location of the home office and any other offices of the 
resulting institution;
    (5) The terms and conditions of the combination and the method of 
effectuation;
    (6) Any charter amendments, or the new charter in the combination;
    (7) The basis upon which the resulting institution's savings 
accounts will be issued;
    (8) If the Federal mutual savings association is the resulting 
institution, the number, names, residence addresses, and terms of 
directors;
    (9) The effect upon and assumption of any liquidation account of a 
disappearing institution by the resulting institution; and
    (10) Such other provisions, agreements, or understandings as relate 
to the combination.
    (c) Prior written notification to, notice to, or prior written 
approval of, the Office pursuant to Sec. 563.22 of this chapter is 
required for every combination. In the case of applications and notices 
pursuant to 563.22 (a) or (c), the Office shall apply the criteria set 
out in Sec. 563.22 of this chapter and shall impose any conditions it 
deems necessary or appropriate to ensure compliance with those criteria 
and the requirements of this chapter.
    (d) Where the resulting institution is a Federal mutual savings 
association, the Office may approve a temporary increase in the number 
of directors of the resulting institution provided that the association 
submits a plan for bringing the board of directors into compliance with 
the requirements of Sec. 544.1 of this chapter within a reasonable 
period of time.
    (e) Notwithstanding any other provision of this part, the Office 
may require that a plan of combination be submitted to the voting 
members of any of the mutual savings associations that are constituent 
institutions at a duly called meeting(s), and that the plan, to be 
effective, be approved by such voting members.
    (f) A conservator or receiver for a Federal mutual savings 
association may combine the association with another insured depository 
institution without submitting the plan to the association's board of 
directors or members for their approval.
    (g) If a plan of combination provides for a resulting Federal 
mutual savings association's name or location to be changed, its 
charter shall be amended accordingly. If the resulting institution is a 
Federal mutual savings association, the effective date of the 
combination shall be the date specified in the approval; if the 
resulting institution is not a Federal savings association, the 
effective date shall be that prescribed under applicable law. Approval 
of a merger automatically cancels the Federal charter of a Federal 
association that is a disappearing institution as of the effective date 
of merger, and the association shall, on that date, surrender its 
charter to the Office.
    6. Section 546.3 is revised to read as follows:


Sec. 546.3  Transfer of assets upon merger or consolidation.

    On the effective date of a merger or consolidation in which the 
resulting institution is a Federal association, all assets and property 
of the disappearing institutions shall immediately, without any further 
act, become the property of the resulting institution to the same 
extent as they were the property of the disappearing institutions, and 
the resulting institution shall be a continuation of the entity which 
absorbed the disappearing institutions. All rights and obligations of 
the disappearing institutions shall remain unimpaired, and the 
resulting institution shall, on the effective date of the merger or 
consolidation, succeed to all those rights and obligations, subject to 
the Home Owners' Loan Act and other applicable statutes.
    7. Section 546.4 is amended by adding a sentence to the end of the 
concluding text of the section to read as follows:


Sec. 546.4  Voluntary dissolution.

* * * * *
    * * * A Federal savings association is not required to obtain 
approval under this section where the Federal savings association 
transfers all of its assets and liabilities to a bank in a transaction 
that is subject to Sec. 563.22(b) of this chapter.

PART 552--INCORPORATION, ORGANIZATION, AND CONVERSION OF FEDERAL 
STOCK SAVINGS ASSOCIATIONS

    8. The authority citation for part 552 continues to read as 
follows:

    Authority: 12 U.S.C. 1462, 1462a, 1463, 1464, 1467a.

    9. Section 552.2-6 is revised to read as follows:


Sec. 552.2-6  Conversion from stock form depository institution to 
Federal stock association.

    With the approval of the Office, any stock depository institution 
that is, or is eligible to become, a member of a Federal Home Loan 
Bank, may convert to a Federal stock association, provided that the 
depository institution, at the time of the conversion, has deposits 
insured by the Federal Deposit Insurance Corporation, and provided 
further, that the depository institution, in accomplishing the 
conversion, complies with all applicable statutes and regulations, 
including, without limitation, section 5(d) of the Federal Deposit 
Insurance Act. The resulting Federal stock association must conform 
within the time prescribed by the OTS to the requirements of section 
5(c) of the Home Owners' Loan Act. For purposes of this section, the 
term ``depository institution'' shall have the meaning set forth at 12 
CFR 552.13(b).
    10. Section 552.2-7 is added to read as follows:


Sec. 552.2-7  Conversion to National banking association or State bank.

    A Federal stock association may convert to a National banking 
association or a State bank after filing a notification or application, 
as appropriate, with the Office in accordance with the applicable 
provisions of Sec. 563.22(b) of this chapter.
    11. Section 552.13 is amended by revising paragraphs (a) through 
(f), (h)(1), (h)(2) introductory text, (h)(2)(iii), (h)(2)(iv), and (j) 
through (l); and by removing and reserving paragraph (g), to read as 
follows:


Sec. 552.13  Combinations involving Federal stock associations.

    (a) Scope and authority. Federal stock associations may enter into 
combinations only in accordance with the provisions of this section, 
sections 5(d) and 18(c) of the Federal Deposit Insurance Act, sections 
5(d)(3)(A) and 10(s) of the Home Owners' Loan Act, and Sec. 563.22 of 
this chapter.
    (b) Definitions. The following definitions apply to Secs. 552.13 
and 552.14 of this part:
    (1) Combination. A merger or consolidation with another depository 
institution, or an acquisition of all or substantially all of the 
assets or assumption of all or substantially all of the liabilities of 
a depository institution by another depository institution. Combine 
means to be a constituent institution in a combination.
    (2) Consolidation. Fusion of two or more depository institutions 
into a newly-created depository institution.
    (3) Constituent institution. Resulting, disappearing, acquiring, or 
transferring depository institution in a combination.
    (4) Depository institution means any commercial bank (including a 
private bank), a savings bank, a trust company, a savings and loan 
association, a building and loan association, a homestead association, 
a cooperative bank, an industrial bank or a credit union, chartered in 
the United States and having its principal office located in the United 
States.
    (5) Disappearing institution. A depository institution whose 
corporate existence does not continue after a combination.
    (6) Merger. Uniting two or more depository institutions by the 
transfer of all property rights and franchises to the resulting 
depository institution, which retains its corporate identity.
    (7) Mutual savings association. Any savings association organized 
in a form not requiring non-withdrawable stock under Federal or State 
law.
    (8) Resulting institution. The depository institution whose 
corporate existence continues after a combination.
    (9) Savings association has the same meaning as defined in 
Sec. 561.43 of this chapter.
    (10) State. Includes the District of Columbia, Commonwealth of 
Puerto Rico, and States, territories, and possessions of the United 
States.
    (11) Stock association. Any savings association organized in a form 
requiring non-withdrawable stock.
    (c) Forms of combination. A Federal stock association may combine 
with any depository institution, provided that:
    (1) The combination is in compliance with, and receives all 
approvals required under, any applicable statutes and regulations;
    (2) Any resulting Federal savings association meets the 
requirements for Federal Home Loan Bank membership and insurance of 
accounts;
    (3) In the case of a combination with a bank that is a member of 
the Bank Insurance Fund, any resulting Federal savings association 
conforms to the requirements of sections 5(c) and 10(m) of the Home 
Owners' Loan Act under the standards set forth in section 5(c)(5) of 
the Home Owners' Loan Act, and in the case of a combination with any 
other depository institution, any resulting Federal savings association 
conforms within the time prescribed by the OTS to the requirements of 
section 5(c) of the Home Owners' Loan Act; and
    (4) If any constituent savings association is a mutual savings 
association, the resulting institution shall be mutually held, unless:
    (i) The transaction involves a supervisory merger;
    (ii) The transaction is approved under part 563b of this chapter;
    (iii) The transaction involves an interim Federal stock association 
or an interim State stock savings association; or
    (iv) The transaction involves a transfer in the context of a mutual 
holding company reorganization under section 10(o) of the Home Owners' 
Loan Act.
    (d) Combinations. Prior written notification to, notice to, or 
prior written approval of, the Office pursuant to Sec. 563.22 of this 
chapter is required for every combination. In the case of applications 
and notices pursuant to Sec. 563.22 (a) or (c), the Office shall apply 
the criteria set out in Sec. 563.22 of this chapter and shall impose 
any conditions it deems necessary or appropriate to ensure compliance 
with those criteria and the requirements of this chapter.
    (e) Approval of the board of directors. Before filing a notice or 
application for any combination involving a Federal stock association, 
the combination shall be approved:
    (1) By a two-thirds vote of the entire board of each constituent 
Federal savings association; and
    (2) As required by other applicable Federal or state law, for other 
constituent institutions.
    (f) Combination agreement. All terms, conditions, agreements or 
understandings, or other provisions with respect to a combination 
involving a Federal savings association shall be set forth fully in a 
written combination agreement. The combination agreement shall state:
    (1) That the combination shall not be effective unless and until:
    (i) The combination receives any necessary approval from the Office 
pursuant to Sec. 563.22 (a) or (c);
    (ii) In the case of a transaction requiring a notification pursuant 
to Sec. 563.22(b), notification has been provided to the OTS; or
    (iii) In the case of a transaction requiring a notice pursuant to 
Sec. 563.22(c), the notice has been filed, and the appropriate period 
of time has passed or the OTS has advised the parties that it will not 
disapprove the transaction;
    (2) Which constituent institution is to be the resulting 
institution;
    (3) The name of the resulting institution;
    (4) The location of the home office and any other offices of the 
resulting institution;
    (5) The terms and conditions of the combination and the method of 
effectuation;
    (6) Any charter amendments, or the new charter in the combination;
    (7) The basis upon which the savings accounts of the resulting 
institution shall be issued;
    (8) If a Federal association is the resulting institution, the 
number, names, residence addresses, and terms of directors;
    (9) The effect upon and assumption of any liquidation account of a 
disappearing institution by the resulting institution; and
    (10) Such other provisions, agreements, or understandings as relate 
to the combination.
    (g) [Reserved]
    (h) Approval by stockholders--(1) General rule. Except as otherwise 
provided in this section, an affirmative vote of two-thirds of the 
outstanding voting stock of any constituent Federal savings association 
shall be required for approval of the combination agreement. If any 
class of shares is entitled to vote as a class pursuant to Sec. 552.4 
of this part, an affirmative vote of a majority of the shares of each 
voting class and two-thirds of the total voting shares shall be 
required. The required vote shall be taken at a meeting of the savings 
association.
    (2) General exception. Stockholders of the resulting Federal stock 
association need not authorize a combination agreement if:
* * * * *
    (iii) Each share of stock outstanding immediately prior to the 
effective date of the combination is to be an identical outstanding 
share or a treasury share of the resulting Federal stock association 
after such effective date; and
    (iv) Either:
    (A) No shares of voting stock of the resulting Federal stock 
association and no securities convertible into such stock are to be 
issued or delivered under the plan of combination, or
    (B) The authorized unissued shares or the treasury shares of voting 
stock of the resulting Federal stock association to be issued or 
delivered under the plan of combination, plus those initially issuable 
upon conversion of any securities to be issued or delivered under such 
plan, do not exceed 15% of the total shares of voting stock of such 
association outstanding immediately prior to the effective date of the 
combination.
* * * * *
    (j) Articles of combination. (1) Following stockholder approval of 
any combination in which a Federal savings association is the resulting 
institution, articles of combination shall be executed in duplicate by 
each constituent institution, by its chief executive officer or 
executive vice president and by its secretary or an assistant 
secretary, and verified by one of the officers of each institution 
signing such articles, and shall set forth:
    (i) The plan of combination;
    (ii) The number of shares outstanding in each depository 
institution; and
    (iii) The number of shares in each depository institution voted for 
and against such plan.
    (2) Both sets of articles of combination shall be filed with the 
Office. If the Office determines that such articles conform to the 
requirements of this section, the Office shall endorse the articles and 
return one set to the resulting institution.
    (k) Effective date. No combination under this section shall be 
effective until receipt of any approvals required by the Office. The 
effective date of a combination in which the resulting institution is a 
Federal stock association shall be the date of consummation of the 
transaction or such other later date specified on the endorsement of 
the articles of combination by the Office. If a disappearing 
institution combining under this section is a Federal stock 
association, its charter shall be deemed to be cancelled as of the 
effective date of the combination and such charter must be surrendered 
to the Office as soon as practicable after the effective date.
    (l) Mergers and consolidations: transfer of assets and liabilities 
to the resulting institution. Upon the effective date of a merger or 
consolidation under this section, if the resulting institution is a 
Federal savings association, all assets and property (real, personal 
and mixed, tangible and intangible, choses in action, rights, and 
credits) then owned by each constituent institution or which would 
inure to any of them, shall, immediately by operation of law and 
without any conveyance, transfer, or further action, become the 
property of the resulting Federal savings association. The resulting 
Federal savings association shall be deemed to be a continuation of the 
entity of each constituent institution, the rights and obligations of 
which shall succeed to such rights and obligations and the duties and 
liabilities connected therewith, subject to the Home Owners' Loan Act 
and other applicable statutes.

Subchapter D--Regulations Applicable to All Savings Associations

PART 563--OPERATIONS

    12. The authority citation for part 563 continues to read as 
follows:

    Authority: 12 U.S.C. 1462, 1462a, 1463, 1464, 1467a, 1468, 1817, 
1828, 3806; Pub. L. 102-242, sec. 306, 105 Stat. 2236, 2355 (1991).

    13. Section 563.22 is amended by:
    a. revising paragraphs (a) and (b);
    b. redesignating paragraphs (c) through (e) as paragraphs (d) 
through (f), respectively;
    c. adding a new paragraph (c);
    d. revising newly designated paragraph (d);
    e. removing the introductory text of newly designated paragraph (e) 
and paragraph (e)(1);
    f. redesignating newly designated paragraph (e)(2) as paragraph 
(e)(1) and revising it;
    g. and h. redesignating newly designated paragraphs (e)(3) and 
(e)(4) as paragraphs (e)(2) and (e)(3), respectively, and revising new 
paragraph (e)(2);
    i. adding new paragraphs (e)(4) and (e)(5);
    j. redesignating the introductory text of newly designated 
paragraph (f)(1) as the introductory text to paragraph (f) and revising 
it;
    k. redesignating newly designated paragraphs (f)(1)(i) through 
(f)(1)(xi) as paragraphs (f)(1) through (f)(11), (f)(1)(xiv) and 
(f)(1)(xv) as (f)(12) and (f)(13), (f)(1)(xvii) and (f)(1)(xviii) as 
(f)(14) and (f)(15), respectively, removing paragraphs (f)(1)(xii), 
(f)(1)(xiii) and (f)(1)(xvi), and revising newly designated paragraphs 
(f)(1), (f)(9) and (f)(14);
    l. revising paragraph (g); and
    m. adding a new paragraph (h).


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. 516.3(a) of this chapter, convert, 
directly or indirectly, to a national or state bank.
    (2) No savings association that does not meet the conditions for 
expedited treatment under Sec. 516.3(a) of this chapter may, directly 
or indirectly, convert to a national or state bank without prior 
application to and approval of the Office, 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 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.
    (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 
shall be processed in accordance with the time frames set forth in 
Sec. 516.2 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) Notice of any proposed transaction under paragraph (a) of 
this section shall, unless the Office finds that it must act 
immediately in order to prevent the probable default of one of the 
savings associations involved, be published--
    (i) No earlier than three calendar days before and no later than 
the date of filing an application under paragraph (a) of this section, 
and thereafter on a weekly basis during the period allowed for 
furnishing reports under paragraph (e)(2) of this section;
    (ii) In the business section of a newspaper printed in the English 
language in the community in which the home offices of the constituent 
institutions are located. If it is determined that the primary language 
of a significant number of adult residents of any community is a 
language other than English, the applicant shall publish the 
notification simultaneously in the appropriate language(s).
    (2) Unless the Office determines that action must be taken 
immediately in order to prevent the probable default of one of the 
savings associations involved, the Office shall request reports from 
the Attorney General, the Comptroller of the Currency, the Board of 
Governors of the Federal Reserve System and the Federal Deposit 
Insurance Corporation on the competitive factors involved in the 
transaction. The reports shall be furnished within thirty calendar days 
of the date on which they are requested, or within ten calendar days of 
such date if the Office advised the Attorney General and the other 
three banking agencies that an emergency exists requiring expeditious 
action. The Office shall immediately notify the Attorney General of any 
approval of a transaction pursuant to this section.
* * * * *
    (4) Applications filed pursuant to paragraph (a) of this section 
shall be subject to the protest and oral argument procedures set forth 
in Secs. 543.2 (e) and (f), except that protests may be submitted at 
any time during the period provided for in paragraph (e)(2) of this 
section.
    (5) Notice of a proposed account transfer and the option of 
retaining the account in the transferring savings association shall be 
furnished to an affected accountholder:
    (i) By 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) By any mutual savings association transferring account 
liabilities to a stock form depository institution. The required notice 
shall allow affected accountholders at least 30 days to consider 
whether to retain their accounts in the transferring savings 
association.
    (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 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. 516.3(a)(1) of this chapter;
* * * * *
    (9) The acquiring savings association has assets of $1 billion or 
more and proposes to acquire assets of $1 billion or more;
* * * * *
    (14) 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 
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. 516.3(a)(2) of this chapter may be submitted to 
the Office for any transaction under paragraph (c) of this section, 
provided all constituent savings associations meet the conditions for 
expedited treatment under Sec. 516.3(a) of this chapter. Notices 
submitted under this paragraph shall be deemed approved automatically 
by the Office 30 calendar days after receipt, unless the Office advises 
the applicant in writing prior to the expiration of such period that 
the proposed transaction may not be consummated without the Office'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. 516.3(b)(2) of this chapter and paragraph (d) of this section must 
be submitted to and approved by the Office 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. 516.3(a) of this chapter, 
except as provided in paragraph (h)(2)(iii) of this section. 
Applications under this paragraph shall be processed in accordance with 
the time frames set forth in Sec. 516.2 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. 516.3(b)(2) of this chapter and paragraph (d) of this section must 
be submitted to and approved by the Office by each savings association 
which will survive any transaction under both Sec. 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. 516.3(a) of this 
chapter. Applications under this paragraph shall be processed in 
accordance with the time frames set forth in Sec. 516.2 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.

PART 571--STATEMENTS OF POLICY

    14. The authority citation for part 571 continues to read as 
follows:

    Authority: 5 U.S.C. 552, 559; 12 U.S.C. 1462a, 1463, 1464.


Sec. 571.5  [Removed and Reserved]

    15. Section 571.5 is removed and reserved.

PART 574--ACQUISITION OF CONTROL OF SAVINGS ASSOCIATIONS

    16. The authority citation for part 574 continues to read as 
follows:

    Authority: 12 U.S.C. 1467a, 1817, 1831i.

    17. Section 574.7 is amended by revising the last sentence of 
paragraph (a)(1) and the last sentence of paragraph (b) to read as 
follows:


Sec. 574.7  Determination by the OTS.

    (a) * * *
    (1) * * * Acquisitions involving mergers with an interim 
association shall also be subject to Secs. 546.2, 552.13, and 563.22 of 
this chapter.
* * * * *
    (b) * * * Acquisitions involving mergers (including mergers with an 
interim association) shall also be subject to Secs. 546.2, 552.13, and 
563.22 of this chapter.
* * * * *

PART 575--MUTUAL SAVINGS AND LOAN HOLDING COMPANIES

    18. The authority citation for part 575 continues to read as 
follows:

    Authority: 12 U.S.C. 1462, 1462a, 1463, 1464, 1467a, 1828.

    19. Section 575.13 is amended by revising paragraph (c)(3)(i) to 
read as follows:


Sec. 575.13  Procedural requirements.

    (c) * * *
    (3) * * *
    (i) Sections 563.22(e)(1), (e)(2), (e)(3), and (e)(4) of this 
subchapter shall apply to all mutual holding company reorganizations.
* * * * *
    Dated: April 29, 1994.

    By the Office of Thrift Supervision.
Jonathan L. Fiechter,
Acting Director.
[FR Doc. 94-21294 Filed 8-29-94; 8:45 am]
BILLING CODE 6720-01-P