[Federal Register Volume 63, Number 33 (Thursday, February 19, 1998)]
[Proposed Rules]
[Pages 8364-8369]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-4069]


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FEDERAL HOUSING FINANCE BOARD

12 CFR Part 933

[No. 98-05]
RIN 3069-AA67


Membership Approval

AGENCY: Federal Housing Finance Board.

ACTION: Proposed rule.

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SUMMARY: The Federal Housing Finance Board (Finance Board) is proposing 
to amend its regulation on membership in the Federal Home Loan Banks 
(Banks) (Membership Regulation) to make certain technical and 
substantive revisions to the regulation that would improve the 
operation of the membership application process, as well as further 
streamline application processing for certain types of applicants for 
Bank membership.

DATES: Comments on this proposed rule must be received in writing on or 
before March 23, 1998.

ADDRESSES: Comments should be mailed to: Elaine L. Baker, Secretary to 
the Board, Federal Housing Finance Board, 1777 F Street, N.W., 
Washington, D.C. 20006. Comments will be available for public 
inspection at this address.

FOR FURTHER INFORMATION CONTACT: Richard Tucker, Deputy Director, 
Compliance Assistance Division, Office of Policy, (202) 408-2848, or 
Sharon B. Like, Senior Attorney-Adviser, Office of General Counsel, 
(202) 408-2930, Federal Housing Finance Board, 1777 F Street, N.W., 
Washington, D.C. 20006.

SUPPLEMENTARY INFORMATION:

I. Statutory and Regulatory Background

    Under the Federal Home Loan Bank Act (Act), the Finance Board is 
responsible for the supervision and regulation of the 12 Banks, which 
provide advances and other financial services to their member 
institutions. See 12 U.S.C. 1422a(a). Institutions may become members 
of a Bank if they meet certain membership eligibility and minimum stock 
purchase criteria set forth in the Act and the Finance Board's 
implementing Membership Regulation. See id. sections 1424, 1426, 
1430(e)(3); 12 CFR part 933.
    On August 16, 1996, the Finance Board published a final rule 
amending the Membership Regulation to authorize the 12 Banks, rather 
than the Finance Board, to approve or deny all applications for Bank 
membership, subject to certain criteria for determining compliance with 
the statutory eligibility requirements for Bank membership formerly 
contained in policy guidelines used by the Finance Board in approving 
membership applications. See 61 FR 42531 (Aug. 16, 1996) (codified at 
12 CFR part 933); Federal Home Loan Bank System Membership Application 
Guidelines, Finance Board Res. No. 93-88 (Nov. 17, 1993) (Guidelines). 
The final rule also provided for streamlined application processing for 
certain types of membership applications. See 12 CFR part 933.
    In the course of processing and approving membership applications 
under the Membership Regulation, the Banks have raised a number of 
technical and substantive issues with the Regulation whose resolution 
would improve operation of the membership application process and 
streamline membership application processing for certain types of 
institutions. These issues and proposed amendments for addressing these 
issues are discussed below in the Analysis of Proposed Rule section. 
The Finance Board requests comment on all aspects of the proposed 
amendments.

[[Page 8365]]

II. Analysis of Proposed Rule

A. Definitions Section 933.1

1. Definition of ``Primary Regulator''--Section 933.1(y)
    Section 933.1(y) of the current Membership Regulation defines the 
term ``primary regulator'' as the chartering authority for federally-
chartered applicants, the insuring authority for federally-insured 
applicants that are not federally-chartered, or the appropriate state 
regulator for all other applicants. See id. Sec. 933.1(y). This 
definition does not include the Federal Reserve Board (FRB) for state-
chartered applicants that are members of the Federal Reserve System 
(FRS). Under Sec. 933.11(a)(3), a Bank is required to obtain as part of 
the membership application the applicant's most recent available 
regulatory examination report prepared by its primary regulator or 
appropriate state regulator. See id. Sec. 933.11(a)(3). Section 
933.11(b)(1) provides that an applicant must have received a composite 
regulatory examination rating from its primary regulator or appropriate 
state regulator within two years preceding the date the Bank receives 
the application for membership. See id. Sec. 933.11(b)(1).
    One Bank has identified a potential problem with meeting these 
financial condition requirements where the FRB and a state financial 
institution regulator alternate examinations of a state-chartered 
applicant that is an FRS member. When the state financial institution 
regulator performs the examination, it provides a copy of the 
regulatory examination report to the FRB. According to the Bank, 
certain state financial institution regulators in its district cannot 
or will not release to the Bank copies of the regulatory examination 
reports they have prepared, nor will the FRB release to the Bank copies 
of the state regulatory examination reports. Thus, regulatory 
examination reports prepared under such circumstances are not available 
in order for the Bank to obtain a regulatory examination rating for the 
applicant. Nor may the Bank obtain and rely on a copy of the regulatory 
examination report and rating of the FRB when the FRB has examined the 
applicant, because the definition of ``primary regulator'' in 
Sec. 933.1(y) does not include the FRB. Thus, in such situations, the 
Bank may not be able to obtain any examination report and rating for 
the applicant and, therefore, the applicant cannot be deemed to satisfy 
the financial condition requirements of Sec. Sec. 933.11(a)(3) and 
(b)(1). The presumption of noncompliance with the financial condition 
requirements would have to be rebutted under Sec. 933.17(d)(1) by 
preparing a written justification providing substantial evidence 
acceptable to the Bank that the applicant is in the financial condition 
required by Sec. 933.6(a)(4), notwithstanding the lack of a regulatory 
examination rating. See id. Sec. 933.17(d)(1).
    The exclusion of the FRB from the definition of ``primary 
regulator'' in Sec. 933.1(y) was an oversight. The Banks should be able 
to rely on regulatory examination reports and examination ratings from 
the FRB to determine an applicant's financial condition under 
Sec. 933.11. An applicant should not have to go through the additional 
burden of establishing its satisfactory financial condition through the 
rebuttal process if an FRB regulatory examination report and rating are 
available. Accordingly, the proposed rule revises the definition of 
``primary regulator'' in Sec. 933.1(y), as further described below, to 
include the FRB.
    Another limitation of the current definition of primary regulator 
in Sec. 933.1(y) is that it requires a Bank to obtain the regulatory 
examination report and rating only from the ``primary'' regulator 
listed, even though a regulatory examination report and rating from an 
alternate regulator also may be available. For example, many potential 
members are examined by more than one regulator. However, under the 
regulation, the Bank is required to obtain the regulatory examination 
report and rating prepared by the Federal Deposit Insurance Corporation 
(FDIC) for a state-chartered, FDIC-insured institution, even though 
there may be a more recent state regulatory examination report and 
rating available for such institution. A Bank should not be limited to 
using only the ``primary'' regulator's regulatory examination report 
and rating when more current information is available.
    Accordingly, the proposed rule amends Sec. 933.1(y) by changing the 
term ``primary regulator'' to the broader term ``appropriate 
regulator,'' and defining it to mean a regulatory entity listed in 
Sec. 933.8, as applicable. The regulatory entities listed in Sec. 933.8 
are: for depository institution applicants, the FDIC, FRB, National 
Credit Union Administration, Office of the Comptroller of the Currency 
(OCC), Office of Thrift Supervision (OTS), or other appropriate state 
regulator; and for insurance company applicants, an appropriate state 
regulator accredited by the National Association of Insurance 
Commissioners. See id. Sec. 933.8. The proposed rule replaces the terms 
``primary regulator'' and ``primary regulator or appropriate state 
regulator'' wherever they appear throughout the Membership Regulation 
with the term ``appropriate regulator.''
2. Nonperforming Assets Performance Trend Criterion; Definitions of 
``Nonperforming Loans, Leases and Securities;'' ``Performing Loans, 
Leases and Securities''--Sections 933.11(b)(3)(i)(B); 933.1 (u), (x).
    Section 933.11(b)(3)(i)(B) of the current Membership Regulation 
provides that if an applicant's most recent composite regulatory 
examination rating within the past two years was ``2'' or ``3,'' the 
applicant's nonperforming loans, leases and securities plus foreclosed 
and repossessed real estate may not have exceeded 10 percent of its 
performing loans, leases and securities plus foreclosed and repossessed 
real estate, in the most recent calendar quarter. See id. 
Sec. 933.11(b)(3)(i)(B). This nonperforming assets performance trend 
criterion was intended to be the same criterion as that required in the 
former Finance Board Guidelines, but was described incorrectly in the 
Membership Regulation.
    The proposed rule revises Sec. 933.11(b)(3)(i)(B) to state the 
criterion correctly, as follows: the applicant's nonperforming loans 
and leases plus other real estate owned, did not exceed 10 percent of 
its total loans and leases plus other real estate owned, in the most 
recent calendar quarter. The proposed rule makes a conforming change to 
the definition of ``nonperforming loans, leases and securities'' in 
Sec. 933.1(u) by deleting the references to securities. The proposed 
rule also makes a conforming change to Sec. 933.1(x) by replacing the 
definition of ``performing loans, leases and securities'' with a new 
definition of ``other real estate owned.''
3. Definition of ``Consolidation''--Section 933.1(ee)
    Sections 933.24 and 933.25 of the current Membership Regulation set 
forth certain requirements and procedures in the event of the 
``consolidation'' of members with other members or members with 
nonmembers. See id. Secs. 933.24, 933.25. Questions have been raised as 
to whether the term ``consolidation'' applies only to transactions 
falling within the narrow meaning of the term, i.e., combinations where 
a new company is formed to acquire the net assets of the combining 
companies. The term ``consolidation'' was not intended to apply solely 
to such combinations of entities. Accordingly, the proposed rule 
clarifies this issue by

[[Page 8366]]

adding a new definition of ``consolidation'' in Sec. 933.1(ee) to 
include a consolidation, a merger, or a purchase of all of the assets 
and assumption of all of the liabilities of an entity by another 
entity.

B. Action on Applications--Section 933.3(c)

    Section 933.3(c) of the current Membership Regulation requires a 
Bank to notify an applicant when its application is deemed by the Bank 
to be complete. See id. Sec. 933.3(c). Section 933.3(c) also requires a 
Bank to notify an applicant if the 60-day period for acting on a 
membership application is stopped, and when the period for acting on 
the application is resumed. See id. The proposed rule requires the Bank 
to provide such notices to the applicant in writing. This will ensure 
that there is a written record of the Banks' actions during the 
application processing period, which may be relevant in the event of an 
appeal of a Bank's denial of an application for membership.

C. Automatic Membership for Certain Consolidations--Section 933.4(d)

    Sections 933.4 (a) and (b) of the current Membership Regulation 
provide for automatic Bank membership only for institutions required by 
law to become Bank members, and for institutions that have undergone 
certain charter conversions, respectively. See id. Sec. Sec. 933.4 (a), 
(b). Several Banks have suggested that the regulation also should allow 
for automatic Bank membership where a member consolidates with a 
nonmember, the nonmember is the surviving entity, and a significant 
percentage of the surviving entity's total assets are derived from the 
assets of the disappearing member. Where the surviving entity has 
substantially the same assets as the disappearing member, the surviving 
entity arguably should not have to go through the membership 
application process. The Finance Board believes this argument has merit 
where 90 percent or more of the total assets of the surviving entity 
are derived from the assets of the disappearing member, and where the 
surviving entity provides written notice to the Bank that it desires to 
be a member of the Bank. These proposed requirements are set forth in 
proposed new Sec. 933.4(d).
    The Finance Board specifically requests comment on the arguments 
for or against this proposal, including whether the 90 percent 
calculation or some other number or approach is an appropriate method 
for determining the similarity of the disappearing and surviving 
entities. One Bank has suggested that the chief executive officer (CEO) 
of the surviving entity should be required to submit a letter stating 
that the surviving entity continues to meet the membership eligibility 
requirements. The Finance Board specifically requests comment on 
whether such a letter, or a certification from the CEO, should be 
required.

D. Allowance for Loan and Lease Losses Performance Trend Criterion--
Section 933.11(b)(3)(i)(C)

    Section 933.11(b)(3)(i)(C) of the current Membership Regulation 
provides that if an applicant's most recent composite regulatory 
examination rating within the past two years was ``2'' or ``3,'' the 
applicant's ratio of its allowance for loan and lease losses to 
nonperforming loans, leases and securities must have been 60 percent or 
greater during 4 of the 6 most recent calendar quarters. This allowance 
for loan and lease losses performance trend criterion was intended to 
be the same criterion as that required in the former Finance Board 
Guidelines, but was described incorrectly in the Membership Regulation. 
The proposed rule revises this section to state the criterion 
correctly, as follows: The applicant's ratio of its allowance for loan 
and lease losses plus the allocated transfer risk reserve to 
nonperforming loans and leases was 60 percent or greater during 4 of 
the 6 most recent calendar quarters.

E. De Novo Insured Depository Institution Applicants--Section 933.14

    Section 933.14 of the current Membership Regulation sets forth the 
requirements for processing and approving membership applications from 
de novo insured depository institution applicants. See id. Sec. 933.14. 
Section 933.14(a) provides for streamlined processing for newly-
chartered applicants that have not yet commenced operations, which are 
deemed to meet the duly organized, inspection and regulation, financial 
condition, and character of management eligibility requirements. See 
id. Sec. 933.14(a)(1). Section 933.14(b) requires newly-chartered 
applicants that have commenced operations to meet all of the 
eligibility requirements, subject to certain exceptions provided in 
paragraph (b). In particular, if such applicants have not yet filed 
regulatory financial reports for the last six calendar quarters 
preceding the date the Bank receives the membership application, the 
applicant need not meet the performance trend criteria in 
Sec. 933.11(b)(3)(i) (A) through (C) if the applicant has filed 
regulatory financial reports for at least three calendar quarters of 
operation. See id. Sec. 933.14(b)(2)(iii)(A).
    A number of Banks have stated that the requirement for having filed 
three calendar quarters of regulatory financial reports should not be 
necessary for institutions that have recently commenced operations. The 
financial condition and character of management of such institutions 
already will have been recently reviewed and approved by their 
chartering and insuring regulators (see, e.g., 12 U.S.C. 1816, 12 CFR 
303.7(d)(ii) (FDIC); 12 U.S.C. 26, 12 CFR 5.20 (OCC)), will have been 
based on a forward looking business plan, and should not have changed 
significantly since the commencement of operations. The Banks should 
not have to duplicate the review performed by the prospective member's 
appropriate regulator. Further, de novo insured depository institution 
applicants should be treated similarly to mandatory de novo thrift 
institutions, which do not have to satisfy any specific Bank membership 
eligibility requirements since they are required by law to be Bank 
members.
    The Finance Board believes there is merit in these arguments. 
Accordingly, proposed Sec. 933.14(a)(1) extends the streamlined 
application processing currently applicable to newly-chartered insured 
depository institutions that have not yet commenced operations to 
newly-chartered insured depository institutions that have commenced 
operations. Such applicants would be deemed to meet the duly organized, 
inspection and regulation, financial condition, and character of 
management eligibility requirements. In order to be considered newly-
chartered and subject to the streamlined application processing 
procedures of Sec. 933.14(a)(1), applicants would have to have been 
chartered within three years prior to the date the Bank receives the 
application for membership. Three years is consistent with the time 
period for de novo treatment applied by other financial institution 
regulators. See, e.g., 12 CFR 543.3(a) (OTS).
    The Finance Board specifically requests comment on the arguments 
for or against this proposal.

F. Recent Merger or Acquisition Applicants--Section 933.15

    Sections 933.9 and 933.10 of the current Membership Regulation 
require applicants to show satisfaction of the ``makes long-term home 
mortgage loans'' and ``10 percent residential mortgage loans'' 
requirements, respectively, based on the applicant's most recent 
regulatory financial report. See id. Secs. 933.9, 933.10. An applicant

[[Page 8367]]

that recently has merged with or acquired another institution prior to 
applying for Bank membership must show satisfaction of these 
eligibility requirements based on the most recent regulatory financial 
report filed by the consolidated entity. See id. However, a newly 
consolidated entity may not be able to show compliance with these 
requirements as it may be several months before the next quarterly 
regulatory financial report is due to be filed with the appropriate 
regulator.
    One Bank has suggested that in order to allow the applicant to be 
approved for membership immediately, the applicant should be allowed to 
provide the most recent regulatory financial report filed prior to the 
merger or acquisition by each of the institutions that entered into the 
merger or acquisition. The Bank then would consolidate the relevant 
data from both reports for purposes of determining compliance with 
Secs. 933.9 and 933.10. The Finance Board believes this suggestion has 
merit, provided that in the case of showing satisfaction of the 10 
percent residential mortgage loans requirement, the Bank obtains a 
certification from the applicant that there has been no material 
decrease in the ratio of consolidated residential mortgage loans to 
consolidated total assets derived from the reports since the reports 
were filed with the appropriate regulator. These proposed requirements 
are set forth in proposed new Secs. 933.15 (a) and (b).

III. Regulatory Flexibility Act

    The proposed rule implements statutory requirements binding on all 
Banks and on all applicants for Bank membership, regardless of their 
size. The Finance Board is not at liberty to make adjustments to those 
requirements to accommodate small entities. The proposed rule does not 
impose any additional regulatory requirements that will have a 
disproportionate impact on small entities. Therefore, in accordance 
with section 605(b) of the Regulatory Flexibility Act, see 5 U.S.C. 
605(b), the Finance Board hereby certifies that this proposed rule, if 
promulgated as a final rule, will not have a significant economic 
impact on a substantial number of small entities.

IV. Paperwork Reduction Act

    The current information collection has been approved by the Office 
of Management and Budget (OMB) and assigned OMB control number 3069-
0004. The Finance Board has submitted to the OMB an analysis of the 
proposed changes to the collection of information contained in 
Secs. 933.15 (a) and (b) of the proposed rule, described more fully in 
part II. of the SUPPLEMENTARY INFORMATION. The Banks and, where 
appropriate, the Finance Board, will use the proposed changes to the 
information collection to determine whether a recent merger or 
acquisition applicant meets certain membership eligibility 
requirements. See 12 U.S.C. 1424(a)(1)(C), (a)(2)(A); 12 CFR 933.9, 
933.10. Only applicants meeting such requirements may become Bank 
members. See id.; id. Responses are required to obtain or retain a 
benefit. See 12 U.S.C. 1424. The Finance Board and the Banks will 
maintain the confidentiality of information obtained from respondents 
pursuant to the proposed changes to the collection of information as 
required by applicable statute, regulation, and agency policy. Books or 
records relating to this proposed collection of information must be 
retained as provided in the regulation.
    Likely respondents and/or recordkeepers will be the Finance Board, 
Banks, and financial institutions that have recently undergone a merger 
or acquisition and are eligible to become Bank members under the Act, 
see id. section 1424(a)(1), including any building and loan 
association, savings and loan association, cooperative bank, homestead 
association, insurance company, savings bank, or insured depository 
institution. Potential respondents are not required to respond to the 
proposed changes to the collection of information unless the regulation 
collecting the information displays a currently valid control number 
assigned by the OMB. See 44 U.S.C. 3512(a).
    The proposed changes to the information collection will not impose 
any additional costs on the Finance Board or the Banks. The estimated 
annual reporting and recordkeeping hour burden on respondents is:
    a. Number of respondents--15.
    b. Total annual responses--15; Percentage of these responses 
collected electronically--0%.
     c. Total annual hours requested--60.
    d. Current OMB inventory--59,152.
    e. Difference--(59,092).
    The estimated annual reporting and recordkeeping cost burden on 
respondents is:
    a. Total annualized capital/startup costs--$0.
    b. Total annual costs (O&M)--$0.
    c. Total annualized cost requested--$1,800.
    d. Current OMB inventory--$1,684,000.
    e. Difference--($1,682,200).
    Comments concerning the accuracy of the burden estimates and 
suggestions for reducing the burden may be submitted to the Finance 
Board in writing at the address listed above.
    The Finance Board has submitted the proposed collection of 
information to the OMB for review in accordance with the Paperwork 
Reduction Act of 1995. See id. section 3501 et seq. Comments regarding 
the proposed changes to the collection of information may be submitted 
in writing to the Office of Information and Regulatory Affairs of the 
Office of Management and Budget, Attention: Desk Officer for Federal 
Housing Finance Board, Washington, D.C. 20503, by April 20, 1998.

List of Subjects in 12 CFR Part 933

    Credit, Federal home loan banks, Reporting and recordkeeping 
requirements.
    Accordingly, the Finance Board hereby proposes to amend title 12, 
chapter IX, part 933, Code of Federal Regulations, as follows:

PART 933--MEMBERS OF THE BANKS

    1. The authority citation for part 933 continues to read as 
follows:

    Authority: 12 U.S.C. 1422, 1422a, 1422b, 1423, 1424, 1426, 1430, 
1442.

    2. Part 933 is amended by removing the term ``primary regulator or 
appropriate state regulator'' wherever it appears and adding the term 
``appropriate regulator'' in its place in the following locations:
    a. Sec. 933.1(l);
    b. Sec. 933.1(z);
    c. Sec. 933.2(c)(2);
    d. Sec. 933.11(a)(3);
    e. Sec. 933.11(a)(4);
    f. Sec. 933.11(b)(1);
    g. Sec. 933.12(a);
    h. Sec. 933.17(e)(1) introductory text;
    i. Sec. 933.17(e)(1)(i);
    j. Sec. 933.17(e)(2)(i); and
    k. Sec. 933.17(e)(3)(i).


Sec. 933.11  [Amended]

    3. Section 933.11(b)(3)(i) introductory text is amended by removing 
the term ``primary regulatory or appropriate state regulator'' and 
adding the term ``appropriate regulator'' in its place.


Secs. 933.11 and 933.17  [Amended]

    4. Sections 933.11(a)(4) and 933.17(e)(1)(i) are amended by 
removing the phrase ``, whichever is applicable,'' wherever it appears.
    5. Part 933 is amended by removing the term ``primary regulator'' 
wherever it appears and adding the term ``appropriate regulator'' in 
its place in the following locations:

[[Page 8368]]

    a. Sec. 933.1(aa);
    b. Sec. 933.9;
    c. Sec. 933.10;
    d. Sec. 933.11(a)(1);
    e. Sec. 933.11(b)(2);
    f. Sec. 933.11(b)(3)(i) introductory text;
    g. Sec. 933.16; and
    h. Sec. 933.17(f)(1).
    6. Section 933.1 is amended by revising paragraphs (u), (x), and 
(y), and adding paragraph (ee) to read as follows:


Sec. 933.1  Definitions.

* * * * *
    (u) Nonperforming loans and leases means the sum of the following, 
reported on a regulatory financial report: Loans and leases that have 
been past due for 90 days (60 days in the case of credit union 
applicants) or longer but are still accruing; loans and leases on a 
nonaccrual basis; and restructured loans and leases (not already 
reported as nonperforming).
* * * * *
    (x) Other real estate owned means all other real estate owned 
(i.e., foreclosed and repossessed real estate), reported on a 
regulatory financial report, and does not include direct and indirect 
investments in real estate ventures.
    (y) Appropriate regulator means a regulatory entity listed in 
Sec. 933.8, as applicable.
* * * * *
    (ee) Consolidation includes a consolidation, a merger, or a 
purchase of all of the assets and assumption of all of the liabilities 
of an entity by another entity.
    7. Section 933.3 is amended by revising the fourth and fifth 
sentences of paragraph (c) to read as follows:


Sec. 933.3  Decision on application.

* * * * *
    (c) * * * The Bank shall notify an applicant in writing when its 
application is deemed by the Bank to be complete. The Bank also shall 
notify an applicant in writing if the 60-day clock is stopped, and when 
the clock is resumed. * * *
* * * * *
    8. Section 933.4 is amended by adding paragraph (d) to read as 
follows:


Sec. 933.4  Automatic membership.

* * * * *
    (d) Automatic membership for certain consolidations. If a member 
institution and nonmember institution are consolidated and the 
consolidated institution will operate under the charter of the 
nonmember institution, on the effective date of the consolidation, the 
consolidated institution automatically shall become a member of the 
Bank of which the disappearing institution was a member immediately 
prior to the effective date of the consolidation, provided that:
    (1) 90 percent or more of the total assets of the consolidated 
institution are derived from the assets of the disappearing member 
institution; and
    (2) The consolidated institution provides written notice to such 
Bank that it desires to be a member of the Bank.
    9. Section 933.11 is amended by revising paragraphs (b)(3)(i)(B) 
and (b)(3)(i)(C) to read as follows:


Sec. 933.11  Financial condition requirement for applicants other than 
insurance companies.

* * * * *
    (b) * * *
    (3) * * *
    (i) * * *
    (B) Nonperforming assets. The applicant's nonperforming loans and 
leases plus other real estate owned, did not exceed 10 percent of its 
total loans and leases plus other real estate owned, in the most recent 
calendar quarter; and
    (C) Allowance for loan and lease losses. The applicant's ratio of 
its allowance for loan and lease losses plus the allocated transfer 
risk reserve to nonperforming loans and leases was 60 percent or 
greater during 4 of the 6 most recent calendar quarters.
* * * * *
    10. Section 933.14 is amended by removing the heading for paragraph 
(a), revising paragraph (a)(1), and removing and reserving paragraph 
(b), to read as follows:


Sec. 933.14  De novo insured depository institution applicants.

    (a)(1) Duly organized, subject to inspection and regulation, 
financial condition and character of management requirements. An 
insured depository institution applicant that is chartered within three 
years prior to the date the Bank receives the applicant's application 
for membership in the Bank, is deemed to meet the requirements of 
Secs. 933.7, 933.8, 933.11 and 933.12.
* * * * *
    11. Section 933.15 is amended by redesignating paragraphs (a) and 
(b) as paragraphs (c) and (d), respectively, further redesignating 
newly designated paragraphs (c)(i) and (c)(ii) as paragraphs (c)(1) and 
(c)(2), respectively, revising ``primary regulator'' to read 
``appropriate regulator'' in newly designated paragraphs (c)(1) and 
(c)(2), and adding new paragraphs (a) and (b), to read as follows:


Sec. 933.15  Recent merger or acquisition applicants.

* * * * *
    (a) Makes long-term home mortgage loans requirement--Regulatory 
financial reports. For purposes of Sec. 933.9, an applicant that, as a 
result of a merger or acquisition preceding the date the Bank receives 
its application for membership, has not yet filed a regulatory 
financial report for the combined entity with its appropriate 
regulator, shall provide the most recent regulatory financial report 
filed with the appropriate regulator prior to the merger or acquisition 
by each of the institutions that entered into the merger or 
acquisition, and the Bank shall consolidate the long-term home mortgage 
loans data in such reports for purposes of determining the applicant's 
compliance with Sec. 933.9.
    (b) 10 percent requirement for insured depository institution 
applicants--Regulatory financial reports. For purposes of Sec. 933.10, 
an applicant that, as a result of a merger or acquisition preceding the 
date the Bank receives its application for membership, has not yet 
filed a regulatory financial report for the combined entity with its 
appropriate regulator, shall provide the most recent regulatory 
financial report filed with the appropriate regulator prior to the 
merger or acquisition by each of the institutions that entered into the 
merger or acquisition, and the Bank shall consolidate the residential 
mortgage loans and total assets data in such reports for purposes of 
determining the applicant's compliance with Sec. 933.10, provided the 
Bank obtains a certification from the applicant that there has been no 
material decrease in the ratio of consolidated residential mortgage 
loans to consolidated total assets derived from such reports since the 
reports were filed with the appropriate regulator.
* * * * *
    12. Section 933.25 is amended by revising paragraph (a) to read as 
follows:


Sec. 933.25  Consolidations involving nonmembers.

    (a) Termination of membership. Except as provided in Sec. 933.4(d), 
if a member is consolidated into an institution that is not a member, 
its membership in the Bank terminates upon cancellation of its charter.
* * * * *
    Dated: February 12, 1998.


[[Page 8369]]


    By the Board of Directors of the Federal Housing Finance Board.
Bruce A. Morrison,
Chairman.
[FR Doc. 98-4069 Filed 2-18-98; 8:45 am]
BILLING CODE 6725-01-P