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2000 - Rules and Regulations


PART 390—REGULATIONS TRANSFERRED FROM
THE OFFICE OF THRIFT SUPERVISION

The following Derivation Table is provided for reader reference:

OTS Regulation Transfer
Existing Section Existing Title New Section New Title
Part 390
Part 507 Restrictions on post-employment activities of senior examiners Subpart A Restrictions on post-employment activities of senior examiners
507.1 What does this part do? 390.1 What does this subpart do?
507.2 Who is a senior examiner? 390.2 Who is a senior examiner?
507.3 What post-employment restrictions apply to senior examiners? 390.3 What post-employment restrictions apply to senior examiners?
507.4 When will OTS waive the post-employment restrictions? 390.4 When will the FDIC waive the post-employment restrictions?
507.5 What are the penalties for violating the post-employment restrictions? 390.5 What are the penalties for violating the post-employment restrictions?
Part 508 Removals, suspensions, and prohibitions where a crime is charged or proven Subpart B Removals, suspensions, and prohibitions where a crime is charged or proven
508.1 Scope. 390.10 Scope.
508.2 Definitions. 390.11 Definitions.
508.3 Issuance of Notice or Order. 390.12 Issuance of Notice or Order.
508.4 Contents and service of the Notice or Order. 390.13 Contents and service of the Notice or Order.
508.5 Petition for hearing. 390.14 Petition for hearing.
508.6 Initiation of hearing. 390.15 Initiation of hearing.
508.7 Conduct of hearings. 390.16 Conduct of hearings.
508.8 Default. 390.17 Default.
508.9 Rules of evidence. 390.18 Rules of evidence.
508.10 Burden of persuasion. 390.19 Burden of persuasion.
508.11 Relevant considerations. 390.20 Relevant considerations.
508.12 Proposed findings and conclusions and recommended decision. 390.21 Proposed findings and conclusions and recommended decision.
508.13 Decision of the Office. 390.22 Decision of the FDIC Board of Directors.
508.14 Miscellaneous. 390.23 Miscellaneous.
Part 509 Rules of Practice and Procedure in adjudicatory proceedings Subpart C Rules of Practice and Procedure in adjudicatory proceedings
Subpart A Uniform rules of Practice and Procedure
509.1 Scope. 390.30 Scope.
509.2 Rules of construction. 390.31 Rules of construction.
509.3 Definitions. 390.32 Definitions.
509.4 Authority of Director. 390.33 Authority of the Board of Directors.
509.5 Authority of the administrative law judge. 390.34 Authority of the administrative law judge.
509.6 Appearance and practice in adjudicatory proceedings. 390.35 Appearance and practice in adjudicatory proceedings.
509.7 Good faith certification. 390.36 Good faith certification.
509.8 Conflicts of interest. 390.37 Conflicts of interest.
509.9 Ex parte communications. 390.38 Ex parte communications.
509.10 Filing of papers. 390.39 Filing of papers.
509.11 Service of papers. 390.40 Service of papers.
509.12 Construction of time limits. 390.41 Construction of time limits.
509.13 Change of time limits. 390.42 Change of time limits.
509.14 Witness fees and expenses. 390.43 Witness fees and expenses.
509.15 Opportunity for informal settlement. 390.44 Opportunity for informal settlement.
509.16 Office's right to conduct examination. 390.45 The FDIC's right to conduct examination.
509.17 Collateral attacks on adjudicatory proceeding. 390.46 Collateral attacks on adjudicatory proceeding.
509.18 Commencement of proceeding and contents of notice. 390.47 Commencement of proceeding and contents of notice.
509.19 Answer. 390.48 Answer.
509.20 Amended pleadings. 390.49 Amended pleadings.
509.21 Failure to appear. 390.50 Failure to appear.
509.22 Consolidation and severance of actions. 390.51 Consolidation and severance of actions.
509.23 Motions. 390.52 Motions.
509.24 Scope of document discovery. 390.53 Scope of document discovery.
509.25 Request for document discovery from parties. 390.54 Request for document discovery from parties.
509.26 Document subpoenas to nonparties. 390.55 Document subpoenas to nonparties.
509.27 Deposition of witness unavailable for hearing. 390.56 Deposition of witness unavailable for hearing.
509.28 Interlocutory review. 390.57 Interlocutory review.
509.29 Summary disposition. 390.58 Summary disposition.
509.30 Partial summary disposition. 390.59 Partial summary disposition.
509.31 Scheduling and prehearing conferences. 390.60 Scheduling and prehearing conferences.
509.32 Prehearing submissions. 390.61 Prehearing submissions.
509.33 Public hearings. 390.62 Public hearings.
509.34 Hearing subpoenas. 390.63 Hearing subpoenas.
509.35 Conduct of hearings. 390.64 Conduct of hearings.
509.36 Evidence. 390.65 Evidence.
509.37 Post-hearing filings. 390.66 Post-hearing filings.
509.38 Recommended decision and filing of record. 390.67 Recommended decision and filing of record.
509.39 Exceptions to recommended decision. 390.68 Exceptions to recommended decision.
509.40 Review by the Director. 390.69 Review by the Board of Directors.
509.41 Stays pending judicial review. 390.70 Stays pending judicial review.
Subpart B Local Rules
509.100 Scope. 390.71 Scope.
509.101 Appointment of Office of Financial Institution Adjudication. 390.72 Appointment of Office of Financial Institution Adjudication.
509.102 Discovery. 390.73 Discovery.
509.103 Civil money penalties. 390.74 Civil money penalties.
509.104 Additional procedures. 390.75 Additional procedures.
Part 512 Rules for investigative proceedings and formal examination proceedings Subpart D Rules for investigative proceedings and formal examination proceedings
512.1 Scope of part. 390.80 Scope of subpart.
512.2 Definitions. 390.81 Definitions.
512.3 Confidentiality of proceedings. 390.82 Confidentiality of proceedings.
512.4 Transcripts. 390.83 Transcripts.
512.5 Rights of witnesses. 390.84 Rights of witnesses.
512.6 Obstruction of the proceedings. 390.85 Obstruction of the proceedings.
512.7 Subpoenas. 390.86 Subpoenas.
Part 513 Practice before the office Subpart E Practice before the FDIC
513.1 Scope of part. 390.90 Scope of subpart.
513.2 Definitions. 390.91 Definitions.
513.3 Who may practice. 390.92 Who may practice.
513.4 Suspension and debarment. 390.93 Suspension and debarment.
513.5 Reinstatement. 390.94 Reinstatement.
513.6 Duty to file information concerning adverse judicial or administrative action. 390.95 Duty to file information concerning adverse judicial or administrative action.
513.7 Proceeding under this part. 390.96 Proceeding under this subpart.
513.8 Removal, suspension, or debarment of independent public accountants and accounting firms performing audit services. 390.97 Removal, suspension, or debarment of independent public accountants and accounting firms performing audit services.
Part 516 Application processing procedures Subpart F Application processing procedures
Pre-filing and filing procedures
516.1 What does this part do? 390.100 What does this subpart do?
516.5 Do the same procedures apply to all applications under this part? 390.101 Do the same procedures apply to all applications under this subpart?
516.10 How does OTS compute time periods under this part? 390.102 How does the FDIC compute time periods under this subpart?
Subpart A Pre-Filing Procedures
516.15 Must I meet with OTS before I file my application? 390.103 Must I meet with the FDIC before I file my application?
516.20 What information must I include in my draft business plan? 390.104 What information must I include in my draft business plan?
516.25 What type of application must I file? 390.105 What type of application must I file?
516.30 What information must I provide with my application? 390.106 What information must I provide with my application?
516.35 May I keep portions of my application confidential? 390.107 May I keep portions of my application confidential?
516.40 Where do I file my application? 390.108 Where do I file my application?
516.45 What is the filing date of my application? 390.109 What is the filing date of my application?
516.47 How do I amend or supplement my application? 390.110 How do I amend or supplement my application?
Subpart B Publication Requirements
516.50 Who must publish a public notice of an application? 390.111 Who must publish a public notice of an application?
516.55 What information must I include in my public notice? 390.112 What information must I include in my public notice?
516.60 When must I publish the public notice? 390.113 When must I publish the public notice?
516.70 Where must I publish the public notice? 390.114 Where must I publish the public notice?
516.80 What language must I use in my publication? 390.115 What language must I use in my publication?
Subpart C Comment Procedures
516.100 What does this subpart do? 390.116 Comment procedures.
516.110 Who may submit a written comment? 390.117 Who may submit a written comment?
516.120 What information should a comment include? 390.118 What information should a comment include?
516.130 Where are comments filed? 390.119 Where are comments filed?
516.140 How long is the comment period? 390.120 How long is the comment period?
Subpart D Meeting Procedures
516.160 What does this subpart do? 390.121 Meeting procedures.
516.170 When will OTS conduct a meeting on an application? 390.122 When will the FDIC conduct a meeting on an application?
516.180 What procedures govern the conduct of the meeting? 390.123 What procedures govern the conduct of the meeting?
516.185 Will OTS approve or disapprove an application at a meeting? 390.124 Will the FDIC approve or disapprove an application at a meeting?
516.190 Will a meeting affect application processing time frames? 390.125 Will a meeting affect application processing time frames?
Subpart E OTS Review
Expedited Treatment
516.200 If I file a notice under expedited treatment, when may I engage in the proposed activities? 390.126 If I file a notice under expedited treatment, when may I engage in the proposed activities?
Standard Treatment
516.210 What will OTS do after I file my application? 390.127 What will the FDIC do after I file my application?
516.220 If OTS requests additional information to complete my application, how will it process my application? 390.128 If the FDIC requests additional information to complete my application, how will it process my application?
516.230 Will OTS conduct an eligibility examination? 390.129 Will the FDIC conduct an eligibility examination?
516.240 What may OTS require me to do after my application is deemed complete? 390.130 What may the FDIC require me to do after my application is deemed complete?
516.250 Will OTS require me to publish a new public notice? 390.131 Will the FDIC require me to publish a new public notice?
516.260 May OTS suspend processing of my application? 390.132 May the FDIC suspend processing of my application?
516.270 How long is the OTS review period? 390.133 How long is the FDIC review period?
516.280 How will I know if my application has been approved? 390.134 How will I know if my application has been approved?
516.290 What will happen if OTS does not approve or disapprove my application within two calendar years after the filing date? 390.135 What will happen if the FDIC does not approve or disapprove my application within two calendar years after the filing date?
Part 528 Nondiscrimination requirements Subpart G Nondiscrimination requirements
528.1 Definitions. 390.140 Definitions.
528.1a Supplementary guidelines. 390.141 Supplementary guidelines.
528.2 Nondiscrimination in lending and other services. 390.142 Nondiscrimination in lending and other services.
528.2a Nondiscriminatory appraisal and underwriting. 390.143 Nondiscriminatory appraisal and underwriting.
528.3 Nondiscrimination in applications. 390.144 Nondiscrimination in applications.
528.4 Nondiscriminatory advertising. 390.145 Nondiscriminatory advertising.
528.5 Equal Housing Lender Poster. 390.146 Equal Housing Lender Poster.
528.6 Loan application register. 390.147 Loan application register.
528.7 Nondiscrimination in employment. 390.148 Nondiscrimination in employment.
528.8 Complaints. 390.149 Complaints.
528.9 Guidelines relating to nondiscrimination in lending. 390.150 Guidelines relating to nondiscrimination in lending.
Part 533 Disclosure and reporting of CRA-related agreements Subpart H Disclosure and reporting of CRA-related agreements
533.1 Purpose and scope of this part. 390.160 Purpose and scope of this subpart.
533.2 Definition of covered agreement. 390.161 Definition of covered agreement.
533.3 CRA communications. 390.162 CRA communications.
533.4 Fulfillment of the CRA 390.163 Fulfillment of the CRA
533.5 Related agreements considered a single agreement. 390.164 Related agreements considered a single agreement.
533.6 Disclosure of covered agreements. 390.165 Disclosure of covered agreements.
533.7 Annual reports. 390.166 Annual reports.
533.8 Release of information under FOIA. 390.167 Release of information under FOIA.
533.9 Compliance provisions. 390.168 Compliance provisions.
533.10 Transition provisions. 390.169 [Reserved].
533.11 Other definitions and rules of construction used in this part. 390.170 Other definitions and rules of construction used in this subpart.
Part 536 Consumer protection in sales of insurance Subpart I Consumer protection in sales of insurance
536.10 Purpose and scope. 390.180 Purpose and scope.
536.20 Definitions. 390.181 Definitions.
536.30 Prohibited practices. 390.182 Prohibited practices.
536.40 What you must disclose. 390.183 What you must disclose.
536.50 Where insurance activities may take place. 390.184 Where insurance activities may take place.
536.60 Qualification and licensing requirements for insurance sales personnel. 390.185 Qualification and licensing requirements for insurance sales personnel.
Appendix Appendix A to Part 536—Consumer Grievance Process Appendix A to Part 390, Subpart I—Consumer Grievance Process
Part 550 Fiduciary powers of Savings Associations Subpart J Fiduciary powers of State Savings Associations
550.10 What regulations govern the fiduciary operations of savings associations? 390.190 What regulations govern the fiduciary operations of State savings associations?
Part 551 Recordkeeping and confirmation requirements for securities transactions Subpart K Recordkeeping and confirmation requirements for securities transactions
551.10 What does this part do? 390.200 What does this subpart do?
551.20 Must I comply with this part? 390.201 Must I comply with this subpart?
551.30 What requirements apply to all transactions? 390.202 What requirements apply to all transactions?
551.40 What definitions apply to this part? 390.203 What definitions apply to this subpart?
Subpart A Recordkeeping requirements
551.50 What records must I maintain for securities transactions? 390.204 What records must I maintain for securities transactions?
551.60 How must I maintain my records? 390.205 How must I maintain my records?
Subpart B Content and timing of notice
551.70 What type of notice must I provide when I effect a securities transaction for a customer? 390.206 What type of notice must I provide when I effect a securities transaction for a customer?
551.80 How do I provide a registered broker-dealer confirmation? 390.207 How do I provide a registered broker-dealer confirmation?
551.90 How do I provide a written notice? 390.208 How do I provide a written notice?
551.100 What are the alternate notice requirements? 390.209 What are the alternate notice requirements?
551.110 May I provide a notice electronically? 390.210 May I provide a notice electronically?
551.120 May I charge a fee for a notice? 390.211 May I charge a fee for a notice?
Subpart C Settlement of securities transactions
551.130 When must I settle a securities transaction? 390.212 When must I settle a securities transaction?
Subpart D Securities trading policies and procedures
551.140 What policies and procedures must I maintain and follow for securities transactions? 390.213 What policies and procedures must I maintain and follow for securities transactions?
551.150 How do my officers and employees file reports of personal securities trading transactions? 390.214 How do my officers and employees file reports of personal securities trading transactions?
Part 555 Electronic operations Subpart L Electronic operations
555.100 What does this part do? 390.220 What does this subpart do?
Subpart B Requirements applicable to all Savings Associations
555.300 Must I inform OTS before I use electronic means or facilities? 390.221 Must I inform the FDIC before I use electronic means or facilities?
555.310 How do I notify OTS? 390.222 How do I notify the FDIC?
Part 557 Deposits Subpart M Deposits
Subpart A General
557.1 What does this part do? 390.230 What does this subpart do?
Subpart C Deposit activities of all Savings Associations
557.20 What records should I maintain on deposit activities? 390.231 What records should I maintain on deposit activities?
Part 558 Possession by conservators and receivers for Federal and State Savings Associations Subpart N Possession by conservators and receivers for Federal and State Savings Associations
558.1 Procedure upon taking possession. 390.240 Procedure upon taking possession.
558.2 Notice of appointment. 390.241 Notice of appointment.
Part 559 Subordinate organizations Subpart O Subordinate organizations
559.1 What does this part cover? 390.250 What does this subpart cover?
559.2 Definitions. 390.251 Definitions.
Subpart B Regulations applicable to all Savings Associations
559.10 How must separate corporate identities be maintained? 390.252 How must separate corporate identities be maintained?
559.11 What notices are required to establish or acquire a new subsidiary or engage in new activities through an existing subsidiary? 390.253 What notices are required to establish or acquire a new subsidiary or engage in new activities through an existing subsidiary?
559.12 How may a subsidiary of a savings association issue securities? 390.254 How may a subsidiary of a State savings association issue securities?
559.13 How may a savings association exercise its salvage power in connection with a service corporation or lower-tier entities? 390.255 How may a State savings association exercise its salvage power in connection with a service corporation or lower-tier entities?
Part 560 Lending and investment Subpart P Lending and investment
560.1 General. 390.260 General.
560.2 Applicability of law. 390.261 [Reserved].
560.3 Definitions. 390.262 Definitions.
Subpart B Lending and investment provisions applicable to all Savings Associations
560.93 Lending limitations. 390.263 [Reserved].
560.100 Real estate lending standards; purpose and scope. 390.264 Real estate lending standards; purpose and scope.
560.101 Real estate lending standards. 390.265 Real estate lending standards.
560.110 Most favored lender usury preemption. 390.266 [Reserved].
560.120 Letters of credit and other independent undertakings to pay against documents. 390.267 Letters of credit and other independent undertakings to pay against documents.
560.121 Investment in State housing corporations. 390.268 Investment in State housing corporations.
560.130 Prohibition on loan procurement fees. 390.269 Prohibition on loan procurement fees.
560.160 Asset classification. 390.270 Asset classification.
560.170 Records for lending transactions. 390.271 Records for lending transactions.
560.172 Re-evaluation of real estate owned. 390.272 Re-evaluation of real estate owned.
Part 561 Definitions for regulations affecting all Savings Associations Subpart Q Definitions for regulations affecting all State Savings Associations
561.1 When do the definitions in this part apply? 390.280 When do the definitions in this subpart apply?
561.2 Account. 390.281 Account.
561.3 Accountholder. 390.282 Accountholder.
561.4 Affiliate. 390.283 Affiliate.
561.5 Affiliated person. 390.284 Affiliated person.
561.6 Audit period. 390.285 Audit period.
561.7--561.8 [Reserved]
561.9 Certificate account. 390.286 Certificate account.
561.12 Consumer credit. 390.287 Consumer credit.
561.14 Controlling person. 390.288 Controlling person.
561.15 Corporation. 390.289 Corporation.
561.16 Demand accounts. 390.290 Demand accounts.
561.18 Director. 390.291 Director.
561.19 Financial institution. 390.292 Financial institution.
561.24 Immediate family. 390.293 Immediate family.
561.26 Land loan. 390.294 Land loan.
561.27 Low-rent housing. 390.295 Low-rent housing.
561.28 Money Market Deposit Accounts. 390.296 Money Market Deposit Accounts.
561.29 Negotiable Order of Withdrawal Accounts. 390.297 Negotiable Order of Withdrawal Accounts.
561.30 Nonresidential construction loan. 390.298 Nonresidential construction loan.
561.31 Nonwithdrawable account. 390.299 Nonwithdrawable account.
561.33 Note account. 390.300 Note account.
561.34 Office. 390.301 [Reserved].
561.35 Officer. 390.302 Officer.
561.37 Parent company; subsidiary. 390.303 Parent company; subsidiary.
561.38 Political subdivision. 390.304 Political subdivision.
561.39 Principal office. 390.305 Principal office.
561.40 Public unit. 390.306 Public unit.
561.41 [Reserved]
561.42 Savings account. 390.307 Savings account.
561.43 Savings association. 390.308 State savings association.
561.44 Security. 390.309 Security.
561.45 Service corporation. 390.310 Service corporation.
561.50 State. 390.311 State.
561.51 Subordinated debt security. 390.312 Subordinated debt security.
561.52 Tax and loan account. 390.313 Tax and loan account.
561.53 United States Treasury General Account. 390.314 United States Treasury General Account.
561.54 United States Treasury Time Deposit Open Account. 390.315 United States Treasury Time Deposit Open Account.
561.55 With recourse. 390.316 With recourse.
Part 562 Regulatory reporting standards Subpart R Regulatory reporting standards
562.1 Regulatory reporting requirements. 390.320 Regulatory reporting requirements.
562.2 Regulatory reports. 390.321 Regulatory reports.
562.4 Audit of savings associations and savings association holding companies. 390.322 Audit of State savings associations.
Part 563 Savings Associations—Operations Subpart S State Savings Associations—Operations
Subpart A Accounts
563.1 Chartering documents. 390.330 Chartering documents.
563.4 [Reserved]
563.5 Securities: Statement of non-insurance. 390.331 Securities: Statement of non-insurance.
Subpart B Operation and structure
563.22 Merger, consolidation, purchase or sale of assets, or assumption of liabilities. 390.332 Merger, consolidation, purchase or sale of assets, or assumption of liabilities.
563.27 Advertising. 390.333 Advertising.
563.33 Directors, officers, and employees. 390.334 Directors, officers, and employees.
563.36 Tying restriction exception. 390.335 Tying restriction exception.
563.39 Employment contracts. 390.336 Employment contracts.
563.41 Transactions with affiliates. 390.337 Transactions with affiliates.
563.43 Loans by savings associations to their executive officers, directors and principal shareholders. 390.338 Loans by savings associations to their executive officers, directors and principal shareholders.
563.47 Pension plans. 390.339 Pension plans.
Subpart C Securities and borrowings
563.76 Offers and sales of securities at an office of a savings association. 390.340 Offers and sales of securities at an office of a savings association.
563.81 Inclusion of subordinated debt securities and mandatorily redeemable preferred stock as supplementary capital. 390.341 Inclusion of subordinated debt securities and mandatorily redeemable preferred stock as supplementary capital.
Subpart E Capital distributions
563.140 What does this subpart cover? 390.342 Capital distributions by State savings associations.
563.141 What is a capital distribution? 390.343 What is a capital distribution?
563.142 What other definitions apply to this subpart? 390.344 Definitions applicable to capital distributions.
563.143 Must I file with OTS? 390.345 Must I file with the FDIC?
563.144 How do I file with the OTS? 390.346 How do I file with the FDIC?
563.145 May I combine my notice or application with other notices or applications? 390.347 May I combine my notice or application with other notices or applications?
563.146 Will the OTS permit my capital distribution? 390.348 Will the FDIC permit my capital distribution?
Subpart F Financial management policies
563.161 Management and financial policies. 390.349 Management and financial policies.
563.170 Examinations and audits; appraisals; establishment and maintenance of records. 390.350 Examinations and audits; appraisals; establishment and maintenance of records.
563.171 Frequency of safety and soundness examination. 390.351 Frequency of safety and soundness examination.
563.172 Financial derivatives. 390.352 Financial derivatives.
563.176 Interest-rate-risk-management procedures. 390.353 Interest-rate-risk-management procedures.
563.177 Procedures for monitoring Bank Secrecy Act (BSA) compliance. 390.354 Procedures for monitoring Bank Secrecy Act (BSA) compliance.
Subpart G Reporting and bonding
563.180 Suspicious Activity Reports and other reports and statements. 390.355 Suspicious Activity Reports and other reports and statements.
563.190 Bonds for directors, officers, employees, and agents; form of and amount of bonds. 390.356 Bonds for directors, officers, employees, and agents; form of and amount of bonds.
563.191 Bonds for agents. 390.357 Bonds for agents.
563.200 Conflicts of interest. 390.358 Conflicts of interest.
563.201 Corporate opportunity. 390.359 Corporate opportunity.
Subpart H Notice of change of Director or Senior Executive Officer
563.550 What does this subpart do? 390.360 Change of director or senior executive officer.
563.555 What definitions apply to this subpart? 390.361 Applicable definitions.
563.560 Who must give prior notice? 390.362 Who must give prior notice?
563.565 What procedures govern the filing of my notice? 390.363 What procedures govern the filing of my notice?
563.570 What information must I include in my notice? 390.364 What information must I include in my notice?
563.575 What procedures govern OTS review of my notice for completeness? 390.365 What procedures govern the FDIC review of my notice for completeness?
563.580 What standards and procedures will govern OTS review of the substance of my notice? 390.366 What standards and procedures will govern the FDIC review of the substance of my notice?
563.585 When may a proposed director or senior executive officer begin service? 390.367 When may a proposed director or senior executive officer begin service?
563.590 When will the OTS waive the prior notice requirement? 390.368 When will the FDIC waive the prior notice requirement?
Part 563c Accounting requirements Subpart T Accounting requirements
Subpart A Form and content of financial statements.
563c.1 Form and content of financial statements. 390.380 Form and content of financial statements.
563c.2 Definitions. 390.381 Definitions.
563c.3 Qualification of public accountant. 390.382 Qualification of public accountant.
563c.4 Condensed financial information [Parent only]. 390.383 Condensed financial information [Parent only].
Subpart B [Reserved]
Subpart C Financial statement presentation.
563c.101 Application of this subpart. 390.384 Financial statements for conversions, SEC filings, and offering circulars.
563c.102 Financial statement presentation. 390.384 appendix Financial statement presentation appendix to 390.384.
Part 563d Securities of Savings Associations Subpart U Securities of State Savings Associations
Subpart A Regulations
563d.1 Requirements under certain sections of the Securities Exchange Act of 1934. 390.390 Requirements under certain sections of the Securities Exchange Act of 1934.
563d.2 Mailing requirements for securities filings. 390.391 [Reserved].
563d.3b-6 Liability for certain statements by savings associations. 390.392 Liability for certain statements by State savings associations.
563d.210 Form and content of financial statements. 390.393 Form and content of financial statements.
Subpart B Interpretations.
563d.801 Application of this subpart. 390.394 Interpretations related to SEC filings.
563d.802 Description of business. 390.395 Description of business.
Part 563f Management official interlocks Subpart V Management official interlocks
563f.1 Authority, purpose, and scope. 390.400 Authority, purpose, and scope.
563f.2 Definitions. 390.401 Definitions.
563f.3 Prohibitions. 390.402 Prohibitions.
563f.4 Interlocking relationships permitted by statute. 390.403 Interlocking relationships permitted by statute.
563f.5 Small market share exemption. 390.404 Small market share exemption.
563f.6 General exemption. 390.405 General exemption.
563f.7 Change in circumstances. 390.406 Change in circumstances.
563f.8 Enforcement. 390.407 Enforcement.
563f.9 Interlocking relationships permitted pursuant to Federal Deposit Insurance Act. 390.408 Interlocking relationships permitted pursuant to Federal Deposit Insurance Act.
Part 563g Securities offerings Subpart W Securities offerings
563g.1 Definitions. 390.410 Definitions.
563g.2 Offering circular requirement. 390.411 Offering circular requirement.
563g.3 Exemptions. 390.412 Exemptions.
563g.4 Non-public offering. 390.413 Non-public offering.
563g.5 Filing and signature requirements. 390.414 Filing and signature requirements.
563g.6 Effective date. 390.415 Effective date.
563g.7 Form, content, and accounting. 390.416 Form, content, and accounting.
563g.8 Use of the offering circular. 390.417 Use of the offering circular.
563g.9 Escrow requirement. 390.418 Escrow requirement.
563g.10 Unsafe or unsound practices. 390.419 Unsafe or unsound practices.
563g.11 Withdrawal or abandonment. 390.420 Withdrawal or abandonment.
563g.12 Securities sale report. 390.421 Securities sale report.
563g.13 Public disclosure and confidential treatment. 390.422 Public disclosure and confidential treatment.
563g.14 Waiver. 390.423 Waiver.
563g.15 Requests for interpretive advice or waiver. 390.424 Requests for interpretive advice or waiver.
563g.16 Delayed or continuous offering and sale of securities. 390.425 Delayed or continuous offering and sale of securities.
563g.17 Sales of securities at an office of a savings association. 390.426 Sales of securities at an office of a State savings association.
563g.18 Current and periodic reports. 390.427 Current and periodic reports.
563g.19 Approval of the security. 390.428 Approval of the security.
563g.20 Form for securities sale report. 390.429 Form for securities sale report.
563g.21 Filing of copies of offering circulars in certain exempt offerings. 390.430 Filing of copies of offering circulars in certain exempt offerings.
Part 564 Appraisals Subpart X Appraisals
564.1 Authority, purpose, and scope. 390.440 Authority, purpose, and scope.
564.2 Definitions. 390.441 Definitions.
564.3 Appraisals required; transactions requiring a State certified or licensed appraiser. 390.442 Appraisals required; transactions requiring a State certified or licensed appraiser.
564.4 Minimum appraisal standards. 390.443 Minimum appraisal standards.
564.5 Appraiser independence. 390.444 Appraiser independence.
564.6 Professional association membership; competency. 390.445 Professional association membership; competency.
564.7 Enforcement. 390.446 Enforcement.
564.8 Appraisal policies and practices of savings associations and subsidiaries. 390.447 Appraisal policies and practices of State savings associations and subsidiaries.
Part 565 Prompt corrective action Subpart Y Prompt corrective action
565.1 Authority, purpose, scope, other supervisory authority, and disclosure of capital categories. 390.450 Authority, purpose, scope, other supervisory authority, and disclosure of capital categories.
565.2 Definitions. 390.451 Definitions.
565.3 Notice of capital category. 390.452 Notice of capital category.
565.4 Capital measures and capital category definitions. 390.453 Capital measures and capital category definitions.
565.5 Capital restoration plans. 390.454 Capital restoration plans.
565.6 Mandatory and discretionary supervisory actions under section 38. 390.455 Mandatory and discretionary supervisory actions under section 38.
565.7 Directives to take prompt corrective action. 390.456 Directives to take prompt corrective action.
565.8 Procedures for reclassifying a savings association based on criteria other than capital. 390.457 Procedures for reclassifying a State savings association based on criteria other than capital.
565.9 Order to dismiss a director or senior executive officer. 390.458 Order to dismiss a director or senior executive officer.
565.10 Enforcement of directives. 390.459 Enforcement of directives.
Part 567 Capital Subpart Z Capital
Subpart A Scope
567.0 Scope. 390.460 Scope.
Subpart B Regulatory capital requirements
567.1 Definitions. 390.461 Definitions.
567.2 Minimum regulatory capital requirement. 390.462 Minimum regulatory capital requirement.
567.3 Individual minimum capital requirements. 390.463 Individual minimum capital requirements.
567.4 Capital directives. 390.464 Capital directives.
567.5 Components of capital. 390.465 Components of capital.
567.6 Risk-based capital credit risk-weight categories. 390.466 Risk-based capital credit risk-weight categories.
567.8 Leverage ratio. 390.467 Leverage ratio.
567.9 Tangible capital requirement. 390.468 Tangible capital requirement.
567.10 Consequences of failure to meet capital requirements. 390.469 Consequences of failure to meet capital requirements.
567.11 Reservation of authority. 390.470 Reservation of authority.
567.12 Purchased credit card relationships, servicing assets, intangible assets (other than purchased credit card relationships and servicing assets), credit-enhancing interest-only strips, and deferred tax assets. 390.471 Purchased credit card relationships, servicing assets, intangible assets (other than purchased credit card relationships and servicing assets), credit-enhancing interest-only strips, and deferred tax assets.
Appendixes A--B [Reserved]
Appendix C--Risk-Based Capital Requirements--Internal Ratings Based and Advanced Measurement Approaches Appendix A--Risk-Based Capital Requirements--Internal Ratings Based and Advanced Measurement Approaches
Part 391
Part 568 Security procedures Subpart A Security procedures
568.1 Authority, purpose, and scope. 391.1 Authority, purpose, and scope.
568.2 Designation of security officer. 391.2 Designation of security officer.
568.3 Security program. 391.3 Security program.
568.4 Report. 391.4 Report.
568.5 Protection of customer information. 391.5 Protection of customer information.
Part 570 Safety and soundness guidelines and compliance procedures Subpart B Safety and soundness guidelines and compliance procedures
570.1 Authority, purpose, scope and preservation of existing authority. 391.10 Authority, purpose, scope and preservation of existing authority.
570.2 Determination and notification of failure to meet safety and soundness standards and request for compliance plan. 391.11 Determination and notification of failure to meet safety and soundness standards and request for compliance plan.
570.3 Filing of safety and soundness compliance plan. 391.12 Filing of safety and soundness compliance plan.
570.4 Issuance of orders to correct deficiencies and to take or refrain from taking other actions. 391.13 Issuance of orders to correct deficiencies and to take or refrain from taking other actions.
570.5 Enforcement of orders. 391.14 Enforcement of orders.
Appendix Appendix A to Part 570--Interagency Guidelines Establishing Standards for Safety and Soundness Appendix A to Subpart B of Part 391--Interagency Guidelines Establishing Standards for Safety and Soundness
Appendix Appendix B to Part 570--Interagency Guidelines Establishing Information Security Standards Appendix B to Subpart B of Part 391--Interagency Guidelines Establishing Information Security Standards
Part 571 Fair credit reporting Subpart C Fair credit reporting
Subpart A General provisions
571.2 Examples. 391.20 Examples.
571.83 Disposal of consumer information. 391.21 Disposal of consumer information.
Subpart J Identity theft red flags
571.90 Duties regarding the detection, prevention, and mitigation of identity theft. 391.22 Duties regarding the detection, prevention, and mitigation of identity theft.
571.91 Duties of card issuers regarding changes of address. 391.23 Duties of card issuers regarding changes of address.
Appendix Appendix J to Part 571--Interagency Guidelines on Identity Theft Detection, Prevention, and Mitigation Appendix to Section 391.90--Interagency Guidelines on Identity Theft Detection, Prevention, and Mitigation
Part 572 Loans in areas having special flood hazards Subpart D Loans in areas having special flood hazards
572.1 Authority, purpose, and scope. 391.30 Authority, purpose, and scope.
572.2 Definitions. 391.31 Definitions.
572.3 Requirement to purchase flood insurance where available. 391.32 Requirement to purchase flood insurance where available.
572.4 Exemptions. 391.33 Exemptions.
572.5 Escrow requirement. 391.34 Escrow requirement.
572.6 Required use of standard flood hazard determination form. 391.35 Required use of standard flood hazard determination form.
572.7 Forced placement of flood insurance. 391.36 Forced placement of flood insurance.
572.8 Determination fees. 391.37 Determination fees.
572.9 Notice of special flood hazards and availability of Federal disaster relief assistance. 391.38 Notice of special flood hazards and availability of Federal disaster relief assistance.
572.10 Notice of servicer's identity. 391.39 Notice of servicer's identity.
Appendix Appendix A to Part 572--Sample Form of Notice of Special Flood Hazards and Availability of Federal Disaster Relief Assistance Appendix D to Part 391--Sample Form of Notice of Special Flood Hazards and Availability of Federal Disaster Relief Assistance
Part 574 Acquisition of control of savings associations. Subpart E Acquisition of control of State savings associations.
574.1 Scope of part. 391.40 Scope of subpart.
574.2 Definitions. 391.41 Definitions.
574.3 Acquisition of control of savings associations. 391.42 Acquisition of control of State savings associations.
574.4 Control. 391.43 Control.
574.5 Certifications of ownership. 391.44 Certifications of ownership.
574.6 Procedural requirements. 391.45 Procedural requirements.
574.7 Determination by the OTS. 391.46 Determination by the FDIC.
574.8 Qualified stock issuances by undercapitalized savings associations or holding companies. 391.47 Qualified stock issuances by undercapitalized savings associations or holding companies.
574.100 Rebuttal of control agreement. 391.48 Rebuttal of control agreement.

Subpart A Restrictions on Post-Employment Activities of Senior Examiners

Sec.

390.1 What does this subpart do?
390.2 Who is a senior examiner?
390.3 What post-employment restrictions apply to senior examiners?
390.4 When will the FDIC waive the post-employment restrictions?
390.5 What are the penalties for violating the post-employment restrictions?

Subpart B Removals, Suspensions, and Prohibitions
Where a Crime is Charged or Proven

390.10 Scope.
390.11 Definitions.
390.12 Issuance of Notice or Order.
390.13 Contents and service of the Notice or Order.
390.14 Petition for hearing.
390.15 Initiation of hearing.
390.16 Conduct of hearings.
390.17 Default.
390.18 Rules of evidence.
390.19 Burden of persuasion.
390.20 Relevant considerations.
390.21 Proposed findings and conclusions and recommended decision.
390.22 Decision of the FDIC Board of Directors.
390.23 Miscellaneous.

Subpart C Rules of Practice and Procedure in Adjudicatory Proceedings

390.30 Scope.
390.31 Rules of construction.
390.32 Definitions.
390.33 Authority of the Board of Directors.
390.34 Authority of the administrative law judge.
390.35 Appearance and practice in adjudicatory proceedings.
390.36 Good faith certification.
390.37 Conflicts of interest.
390.38 Ex parte communications.
390.39 Filing of papers.
390.40 Service of papers.
390.41 Construction of time limits.
390.42 Change of time limits.
390.43 Witness fees and expenses.
390.44 Opportunity for informal settlement.
390.45 The FDIC's right to conduct examination.
390.46 Collateral attacks on adjudicatory proceeding.
390.47 Commencement of proceeding and contents of notice.
390.48 Answer.
390.49 Amended pleadings.
390.50 Failure to appear.
390.51 Consolidation and severance of actions.
390.52 Motions.
390.53 Scope of document discovery.
390.54 Request for document discovery from parties.
390.55 Document subpoenas to nonparties.
390.56 Deposition of witness unavailable for hearing.
390.57 Interlocutory review.
390.58 Summary disposition.
390.59 Partial summary disposition.
390.60 Scheduling and prehearing conferences.
390.61 Prehearing submissions.
390.62 Public hearings.
390.63 Hearing subpoenas.
390.64 Conduct of hearings.
390.65 Evidence.
390.66 Post-hearing filings.
390.67 Recommended decision and filing of record.
390.68 Exceptions to recommended decision.
390.69 Review by the Board of Directors.
390.70 Stays pending judicial review.
390.71 Scope.
390.72 Appointment of Office of Financial Institution Adjudication.
390.73 Discovery.
390.74 Civil money penalties.
390.75 Additional procedures.

Subpart D Rules for Investigative Proceedings and Formal Examination Proceedings

390.80 Scope of subpart.
390.81 Definitions.
390.82 Confidentiality of proceedings.
390.83 Transcripts.
390.84 Rights of witnesses.
390.85 Obstruction of the proceedings.
390.86 Subpoenas.

Subpart E Practice before the FDIC

390.90 Scope of subpart.
390.91 Definitions.
390.92 Who may practice.
390.93 Suspension and debarment.
390.94 Reinstatement.
390.95 Duty to file information concerning adverse judicial or administrative action.
390.96 Proceeding under this subpart.
390.97 Removal, suspension, or debarment of independent public accountants and accounting firms performing audit services.

Subpart F Application Processing Procedures

390.100 What does this subpart do?
390.101 Do the same procedures apply to all applications under this subpart?
390.102 How does the FDIC compute time periods under this subpart?
390.103 Must I meet with the FDIC before I file my application?
390.104 What information must I include in my draft business plan?
390.105 What type of application must I file?
390.106 What information must I provide with my application?
390.107 May I keep portions of my application confidential?
390.108 Where do I file my application?
390.109 What is the filing date of my application?
390.110 How do I amend or supplement my application?
390.111 Who must publish a public notice of an application?
390.112 What information must I include in my public notice?
390.113 When must I publish the public notice?
390.114 Where must I publish the public notice?
390.115 What language must I use in my publication?
390.116 Comment procedures.
390.117 Who may submit a written comment?
390.118 What information should a comment include?
390.119 Where are comments filed?
390.120 How long is the comment period?
390.121 Meeting procedures.
390.122 When will the FDIC conduct a meeting on an application?
390.123 What procedures govern the conduct of the meeting?
390.124 Will the FDIC approve or disapprove an application at a meeting?
390.125 Will a meeting affect application processing time frames?
390.126 If I file a notice under expedited treatment, when may I engage in the proposed activities?
390.127 What will the FDIC do after I file my application?
390.128 If the FDIC requests additional information to complete my application, how will it process my application?
390.129 Will the FDIC conduct an eligibility examination?
390.130 What may the FDIC require me to do after my application is deemed complete?
390.131 Will the FDIC require me to publish a new public notice?
390.132 May the FDIC suspend processing of my application?
390.133 How long is the FDIC review period?
390.134 How will I know if my application has been approved?
390.135 What will happen if the FDIC does not approve or disapprove my application within two calendar years after the filing date?

Subpart G Nondiscrimination Requirements

390.140 Definitions.
390.141 Supplementary guidelines.
390.142 Nondiscrimination in lending and other services.
390.143 Nondiscriminatory appraisal and underwriting.
390.144 Nondiscrimination in applications.
390.145 Nondiscriminatory advertising.
390.146 Equal Housing Lender Poster.
390.147 Loan application register.
390.148 Nondiscrimination in employment.
390.149 Complaints.
390.150 Guidelines relating to nondiscrimination in lending.

Subpart H Disclosure and Reporting of CRA-Related Agreements

390.160 Purpose and scope of this subpart.
390.161 Definition of covered agreement.
390.162 CRA communications.
390.163 Fulfillment of the CRA
390.164 Related agreements considered a single agreement.
390.165 Disclosure of covered agreements.
390.166 Annual reports.
390.167 Release of information under FOIA.
390.168 Compliance provisions.
390.169 [Reserved].
390.170 Other definitions and rules of construction used in this subpart.

Subpart I Consumer Protection in Sales of Insurance

390.180 Purpose and scope.
390.181 Definitions.
390.182 Prohibited practices.
390.183 What you must disclose.
390.184 Where insurance activities may take place.
390.185 Qualification and licensing requirements for insurance sales personnel.

Appendix A to Subpart I of Part 390—Consumer Grievance Process

Subpart J Fiduciary Powers of State Savings Associations

390.190 What regulations govern the fiduciary operations of State savings associations?

Subpart K Recordkeeping and Confirmation Requirements for Securities Transactions

390.200 What does this subpart do?
390.201 Must I comply with this subpart?
390.202 What requirements apply to all transactions?
390.203 What definitions apply to this subpart?
390.204 What records must I maintain for securities transactions?
390.205 How must I maintain my records?
390.206 What type of notice must I provide when I effect a securities transaction for a customer?
390.207 How do I provide a registered broker-dealer confirmation?
390.208 How do I provide a written notice?
390.209 What are the alternate notice requirements?
390.210 May I provide a notice electronically?
390.211 May I charge a fee for a notice?
390.212 When must I settle a securities transaction?
390.213 What policies and procedures must I maintain and follow for securities transactions?
390.214 How do my officers and employees file reports of personal securities trading transactions?

Subpart L Electronic Operations

390.220 What does this subpart do?
390.221 Must I inform the FDIC before I use electronic means or facilities?
390.222 How do I notify the FDIC?

Subpart M Deposits

390.230 What does this subpart do?
390.231 What records should I maintain on deposit activities?

Subpart N Possession by Conservators and Receivers for Federal and State Savings Associations

390.240 Procedure upon taking possession.
390.241 Notice of appointment.

Subpart O Subordinate Organizations

390.250 What does this subpart cover?
390.251 Definitions.
390.252 How must separate corporate identities be maintained?
390.253 What notices are required to establish or acquire a new subsidiary or engage in new activities through an existing subsidiary?
390.254 How may a subsidiary of a State savings association issue securities?
390.255 How may a State savings association exercise its salvage power in connection with a service corporation or lower-tier entities?

Subpart P Lending and Investment

390.260 General.
390.261 [Reserved].
390.262 Definitions.
390.263 [Reserved].
390.264 Real estate lending standards; purpose and scope.
390.265 Real estate lending standards.
390.266 [Reserved].
390.267 Letters of credit and other independent undertakings to pay against documents.
390.268 Investment in State housing corporations.
390.269 Prohibition on loan procurement fees.
390.270 Asset classification.
390.271 Records for lending transactions.
390.272 Re-evaluation of real estate owned.

Subpart Q Definitions for Regulations Affecting all State Savings Associations

390.280 When do the definitions in this subpart apply?
390.281 Account.
390.282 Accountholder.
390.283 Affiliate.
390.284 Affiliated person.
390.285 Audit period.
390.286 Certificate account.
390.287 Consumer credit.
390.288 Controlling person.
390.289 Corporation.
390.290 Demand accounts.
390.291 Director.
390.292 Financial institution.
390.293 Immediate family.
390.294 Land loan.
390.295 Low-rent housing.
390.296 Money Market Deposit Accounts.
390.297 Negotiable Order of Withdrawal Accounts.
390.298 Nonresidential construction loan.
390.299 Nonwithdrawable account.
390.300 Note account.
390.301 [Reserved].
390.302 Officer.
390.303 Parent company; subsidiary.
390.304 Political subdivision.
390.305 Principal office.
390.306 Public unit.
390.307 Savings account.
390.308 State savings association.
390.309 Security.
390.310 Service corporation.
390.311 State.
390.312 Subordinated debt security.
390.313 Tax and loan account.
390.314 United States Treasury General Account.
390.315 United States Treasury Time Deposit Open Account.
390.316 With recourse.

Subpart R Regulatory Reporting Standards

390.320 Regulatory reporting requirements.
390.321 Regulatory reports.
390.322 Audit of State savings associations.

Subpart S State Savings Associations—Operations

390.330 Chartering documents.
390.331 Securities: Statement of non-insurance.
390.332 Merger, consolidation, purchase or sale of assets, or assumption of liabilities.
390.333 Advertising.
390.334 Directors, officers, and employees.
390.335 Tying restriction exception.
390.336 Employment contracts.
390.337 Transactions with affiliates.
390.338 Loans by savings associations to their executive officers, directors and principal shareholders.
390.339 Pension plans.
390.340 Offers and sales of securities at an office of a State savings association.
390.341 Inclusion of subordinated debt securities and mandatorily redeemable preferred stock as supplementary capital.
390.342 Capital distributions by State savings associations.
390.343 What is a capital distribution?
390.344 Definitions applicable to capital distributions.
390.345 Must I file with the FDIC?
390.346 How do I file with the FDIC?
390.347 May I combine my notice or application with other notices or applications?
390.348 Will the FDIC permit my capital distribution?
390.349 Management and financial policies.
390.350 Examinations and audits; appraisals; establishment and maintenance of records.
390.351 Frequency of safety and soundness examination.
390.352 Financial derivatives.
390.353 Interest-rate-risk-management procedures.
390.354 Procedures for monitoring Bank Secrecy Act (BSA) compliance.
390.355 Suspicious Activity Reports and other reports and statements.
390.356 Bonds for directors, officers, employees, and agents; form of and amount of bonds.
390.357 Bonds for agents.
390.358 Conflicts of interest.
390.359 Corporate opportunity.
390.360 Change of director or senior executive officer.
390.361 Applicable definitions.
390.362 Who must give prior notice?
390.363 What procedures govern the filing of my notice?
390.364 What information must I include in my notice?
390.365 What procedures govern the FDIC review of my notice for completeness?
390.366 What standards and procedures will govern the FDIC review of the substance of my notice?
390.367 When may a proposed director or senior executive officer begin service?
390.368 When will the FDIC waive the prior notice requirement?

Subpart T Accounting Requirements

390.380 Form and content of financial statements.
390.381 Definitions.
390.382 Qualification of public accountant.
390.383 Condensed financial information [Parent only].
390.384 Financial statements for conversions, SEC filings, and offering circulars.

Subpart U Securities of State Savings Associations

390.390 Requirements under certain sections of the Securities Exchange Act of 1934.
390.391 [Reserved].
390.392 Liability for certain statements by State savings associations.
390.393 Form and content of financial statements.
390.394 Interpretations related to SEC filings.
390.395 Description of business.

Subpart V Management Official Interlocks

390.400 Authority, purpose, and scope.
390.401 Definitions.
390.402 Prohibitions.
390.403 Interlocking relationships permitted by statute.
390.404 Small market share exemption.
390.405 General exemption.
390.406 Change in circumstances.
390.407 Enforcement.
390.408 Interlocking relationships permitted pursuant to Federal Deposit Insurance Act.

Subpart W Securities Offerings

390.410 Definitions.
390.411 Offering circular requirement.
390.412 Exemptions.
390.413 Non-public offering.
390.414 Filing and signature requirements.
390.415 Effective date.
390.416 Form, content, and accounting.
390.417 Use of the offering circular.
390.418 Escrow requirement.
390.419 Unsafe or unsound practices.
390.420 Withdrawal or abandonment.
390.421 Securities sale report.
390.422 Public disclosure and confidential treatment.
390.423 Waiver.
390.424 Requests for interpretive advice or waiver.
390.425 Delayed or continuous offering and sale of securities.
390.426 Sales of securities at an office of a State savings association.
390.427 Current and periodic reports.
390.428 Approval of the security.
390.429 Form for securities sale report.
390.430 Filing of copies of offering circulars in certain exempt offerings.

Subpart X Appraisals

390.440 Authority, purpose, and scope.
390.441 Definitions.
390.442 Appraisals required; transactions requiring a State certified or licensed appraiser.
390.443 Minimum appraisal standards.
390.444 Appraiser independence.
390.445 Professional association membership; competency.
390.446 Enforcement.
390.447 Appraisal policies and practices of State savings associations and subsidiaries.

Subpart Y Prompt Corrective Action

390.450 Authority, purpose, scope, other supervisory authority, and disclosure of capital categories.
390.451 Definitions.
390.452 Notice of capital category.
390.453 Capital measures and capital category definitions.
390.454 Capital restoration plans.
390.455 Mandatory and discretionary supervisory actions under section 38.
390.456 Directives to take prompt corrective action.
390.457 Procedures for reclassifying a State savings association based on criteria other than capital.
390.458 Order to dismiss a director or senior executive officer.
390.459 Enforcement of directives.

Subpart Z Capital

390.460 Scope.
390.461 Definitions.
390.462 Minimum regulatory capital requirement.
390.463 Individual minimum capital requirements.
390.464 Capital directives.
390.465 Components of capital.
390.466 Risk-based capital credit risk-weight categories.
390.467 Leverage ratio.
390.468 Tangible capital requirement.
390.469 Consequences of failure to meet capital requirements.
390.470 Reservation of authority.
390.471 Purchased credit card relationships, servicing assets, intangible assets (other than purchased credit card relationships and servicing assets), credit-enhancing interest-only strips, and deferred tax assets.
Appendix A to Subpart Z of Part 390—Risk-Based Capital Requirements—Internal-Ratings- Based and Advanced Measurement Approaches

Authority:  12 U.S.C. 1819. Subpart A also issued under 12 U.S.C. 1820. Subpart B also issued under 12 U.S.C. 1818. Subpart C also issued under 5 U.S.C. 504; 554--557; 12 U.S.C. 1464; 1467; 1468; 1817; 1818; 1820; 1829; 3349, 4717; 15 U.S.C. 78l; 78o--5; 78u--2; 28 U.S.C. 2461 note; 31 U.S.C. 5321; 42 U.S.C. 4012a. Subpart D also issued under 12 U.S.C. 1817; 1818; 1820; 15 U.S.C. 78l. Subpart E also issued under 12 U.S.C. 1813; 1831m; 15 U.S.C. 78. Subpart F also issued under 5 U.S.C. 552; 559; 12 U.S.C. 2901 et seq. Subpart G also issued under 12 U.S.C. 2810 et seq., 2901 et seq.; 15 U.S.C. 1691; 42 U.S.C. 1981, 1982, 3601--3619. Subpart H also issued under 12 U.S.C. 1464; 1831y. Subpart I also issued under 12 U.S.C. 1831x. Subpart J also issued under 12 U.S.C. 1831p-1. Subpart K also issued under 12 U.S.C. 1817; 1818; 15 U.S.C. 78c; 78l. Subpart L also issued under 12 U.S.C. 1831p-1. Subpart M also issued under 12 U.S.C. 1818. Subpart N also issued under 12 U.S.C. 1821. Subpart O also issued under 12 U.S.C. 1828. Subpart P also issued under 12 U.S.C. 1470; 1831e; 1831n; 1831p-1; 3339. Subpart Q also issued under 12 U.S.C. 1462; 1462a; 1463; 1464. Subpart R also issued under 12 U.S.C. 1463; 1464; 1831m; 1831n; 1831p-1. Subpart S also issued under 12 U.S.C. 1462; 1462a; 1463; 1464; 1468a; 1817; 1820; 1828; 1831e; 1831o; 1831p-1; 1881--1884; 3207; 3339; 15 U.S.C. 78b; 78l; 78m; 78n; 78p; 78q; 78w; 31 U.S.C. 5318; 42 U.S.C. 4106. Subpart T also issued under 12 U.S.C. 1462a; 1463; 1464; 15 U.S.C. 78c; 78l; 78m; 78n; 78w. Subpart U also issued under 12 U.S.C. 1462a; 1463; 1464; 15 U.S.C. 78c; 78l; 78m; 78n; 78p; 78w; 78d--1; 7241; 7242; 7243; 7244; 7261; 7264; 7265. Subpart V also issued under 12 U.S.C. 3201--3208. Subpart W also issued under 12 U.S.C. 1462a; 1463; 1464; 15 U.S.C. 78c; 78l; 78m; 78n; 78p; 78w. Subpart X also issued under 12 U.S.C. 1462; 1462a; 1463; 1464; 1828; 3331 et seq. Subpart Y also issued under 12 U.S.C.1831o. Subpart Z also issued under 12 U.S.C. 1462; 1462a; 1463; 1464; 1828 (note).

SOURCE:  The provisions of this Part 390 appear at 76 Fed. Reg. 47665, August 5, 2011, effective July 22, 2011.

Subpart A—Restrictions on Post-Employment Activities of Senior Examiners

§ 390.1 What does this subpart part do?

This subpart implements section 10(k) of the Federal Deposit Insurance Act (FDIA), (12 U.S.C. 1820(k)), which prohibits senior examiners from accepting compensation from certain companies following the termination of their employment. Except where otherwise provided, the terms used in this subpart have the meanings given in section 3 of the FDIA (12 U.S.C. 1813).

[Codified to 12 C.F.R. § 390.1]

§ 390.2 Who is a senior examiner?

An individual is a senior examiner for a particular savings association or savings and loan holding company if--

(a)  The individual was an officer or employee of the Office of Thrift Supervision (OTS) (including a special government employee) who was authorized by the OTS to conduct examinations or inspections of savings associations or savings and loan holding companies;

(b)  The individual was assigned continuing, broad and lead responsibility for the examination or inspection of that savings association or savings and loan holding company; and

(c)  The individual's responsibilities for examining, inspecting, or supervising that savings association or savings and loan holding company:

(1)  Represented a substantial portion of the individual's assigned responsibilities at the OTS; and

(2)  Required the individual to interact on a routine basis with officers and employees of the savings association, savings and loan holding company, or its affiliates.

[Codified to 12 C.F.R. § 390.2]

§ 390.3 What post-employment restrictions apply to senior examiners?

(a)  Prohibition. (1) Senior examiner of savings association. An individual who served as a senior examiner of a savings association for two or more of the last 12 months of his or her employment with OTS may not, within one year after the termination date of his or her employment with OTS, knowingly accept compensation as an employee, officer, director, or consultant from--

(i)  The savings association; or

(ii)  A savings and loan holding company, bank holding company, or any other company that controls the savings association.

(2)  Senior examiner of a savings and loan holding company. An individual who served as a senior examiner of a savings and loan holding company for two or more of the last 12 months of his or her employment with OTS may not, within one year after the termination date of his or her employment with OTS, knowingly accept compensation as an employee, officer, director, or consultant from--

(i)  The savings and loan holding company; or

(ii)  Any depository institution that is controlled by the savings and loan holding company.

(b)  [Reserved].

(c)  Definitions. For the purposes of this section--

Consultant. An individual acts as a consultant for a savings association or other company only if he or she directly works on matters for, or on behalf of, the savings association or company.

Control. Control has the same meaning given in 12 CFR part 391, subpart E.

[Codified to 12 C.F.R. § 390.3]

§ 390.4 When will the FDIC waive the post-employment restrictions?

The post-employment restriction in § 390.3 will not apply to a senior examiner if the Chairperson, or his or her designee, certifies in writing and on a case-by-case basis that a waiver of the restriction will not affect the integrity of the FDIC's supervisory program.

[Codified to 12 C.F.R. § 390.4]

§ 390.5 What are the penalties for violating the post-employment restrictions?

(a)  Penalties. A senior examiner who violates § 390.3 shall, in accordance with 12 U.S.C. 1820(k)(6), be subject to one or both of the following penalties:

(1)  An order--

(i)  Removing the person from office or prohibiting the person from further participating in the conduct of the affairs of the relevant depository institution, savings and loan holding company, bank holding company or other company for up to five years, and

(ii)  Prohibiting the person from participating in the affairs of any insured depository institution for up to five years.

(2)  A civil money penalty not to exceed $250,000.

(b)  Scope of prohibition orders. Any senior examiner who is subject to an order issued under paragraph (a)(1) of this section shall be subject to 12 U.S.C. 1818(e)(6) and (7) in the same manner and to the same extent as a person subject to an order issued under 12 U.S.C. 1818(e).

(c)  Procedures. 12 U.S.C. 1820(k) describes the procedures that are applicable to actions under paragraph (a) of this section and the appropriate Federal banking agency authorized to take the action, which may be an agency other than the FDIC. Where the FDIC is the appropriate Federal banking agency, it will conduct administrative proceedings under subpart C of this part.

(d)  Other penalties. The penalties under this section are not exclusive. A senior examiner who violates the restriction in § 390.3 may also be subject to other administrative, civil, or criminal remedy or penalty as provided by law.

[Codified to 12 C.F.R. § 390.5]

Subpart B—Removals, Suspensions, and Prohibitions
Where A Crime is Charged or Proven

§ 390.10 Scope.

The rules in this subpart apply to hearings, which are exempt from the adjudicative provisions of the Administrative Procedure Act, afforded to any officer, director, or other person participating in the conduct of the affairs of a State savings association, where such person has been suspended or removed from office or prohibited from further participation in the conduct of the affairs of the State savings association by a Notice or Order served by the Board of Directors upon the grounds set forth in section 8(g) of the Federal Deposit Insurance Act (FDIA), (12 U.S.C. 1818(g)).

[Codified to 12 C.F.R. § 390.10]

§ 390.11 Definitions.

As used in this subpart--

(a)  The term Board of Directors means the Board of Directors of the FDIC or its designee.

(b)  The term Notice means a Notice of Suspension or Notice of Prohibition issued by the Board of Directors pursuant to section 8(g) of the FDIA.

(c)  The term Order means an Order of Removal or Order of Prohibition issued by the Board of Directors pursuant to section 8(g) of the FDIA.

(d)  The term association means a State savings association within the meaning of section 3(b)(3) of the FDIA, (12 U.S.C. 1813(b)(3)).

(e)  The term subject individual means a person served with a Notice or Order.

(f)  The term petitioner means a subject individual who has filed a petition for informal hearing under this part.

[Codified to 12 C.F.R. § 390.11]

§ 390.12 Issuance of Notice or Order.

(a)  The Board of Directors may issue and serve a Notice upon an officer, director, or other person participating in the conduct of the affairs of an association, where the individual is charged in any information, indictment, or complaint with the commission of or participation in a crime involving dishonesty or breach of trust that is punishable by imprisonment for a term exceeding one year under State or Federal law, if the Board of Directors, upon due deliberation, determines that continued service or participation by the individual may pose a threat to the interests of the association's depositors or may threaten to impair public confidence in the association. The Notice shall remain in effect until the information, indictment, or complaint is finally disposed of or until terminated by the Board of Directors.

(b)  The Board of Directors may issue and serve an Order upon a subject individual against whom a judgment of conviction, or an agreement to enter a pretrial diversion or other similar program has been rendered, where such judgment is not subject to further appellate review, and the Board of Directors, upon the deliberation, has determined that continued service or participation by the subject individual may pose a threat to the interests of the association's depositors or may threaten to impair public confidence in the association.

[Codified to 12 C.F.R. § 390.12]

§ 390.13 Contents and service of the Notice or Order.

(a)  The Notice or Order shall set forth the basis and facts in support of the Board of Directors' issuance of such Notice or Order, and shall inform the subject individual of his right to a hearing, in accordance with this part, for the purpose of determining whether the Notice or Order should be continued, terminated, or otherwise modified.

(b)  The Executive Secretary shall serve a copy of the Notice or Order upon the subject individual and the related association in the manner set forth in § 390.40.

(c)  Upon receipt of the Notice or Order, the subject individual shall immediately comply with the requirements thereof.

[Codified to 12 C.F.R. § 390.13]

§ 390.14 Petition for hearing.

(a)  To obtain a hearing, the subject individual must file two copies of a petition with the Executive Secretary within 30 days of being served with the Notice or Order.

(b)  The petition filed under this section shall admit or deny specifically each allegation in the Notice or Order, unless the petitioner is without knowledge or information, in which case the petition shall so state and the statement shall have the effect of a denial. Any allegation not denied shall be deemed to be admitted. When a petitioner intends in good faith to deny only a part of or to qualify an allegation, he shall specify so much of it as is true and shall deny only the remainder.

(c)  The petition shall state whether the petitioner is requesting termination or modification of the Notice or Order, and shall state with particularity how the petitioner intends to show that his continued service to or participation in the conduct of the affairs of the association would not, or is not likely to, pose a threat to the interests of the association's depositors or to impair public confidence in the association.

[Codified to 12 C.F.R. § 390.14]

§ 390.15 Initiation of hearing.

(a)  Within 10 days of the filing of a petition for hearing, the Board of Directors shall notify the petitioner of the time and place fixed for hearing, and it shall designate one or more Board of Directors employees to serve as presiding officer.

(b)  The hearing shall be scheduled to be held no later than 30 days from the date the petition was filed, unless the time is extended at the request of the petitioner.

(c)  A petitioner may appear personally or through counsel, but if represented by counsel, said counsel is required to comply with § 390.35.

(d)  A representative(s) of the FDIC enforcement staff also may attend the hearing and participate therein as a party.

[Codified to 12 C.F.R. § 390.15]

§ 390.16 Conduct of hearings.

(a)  Hearings provided by this section are not subject to the adjudicative provisions of the Administrative Procedure Act (5 U.S.C. 554--557). The presiding officer is, however, authorized to exercise all of the powers enumerated in § 390.34.

(b)  Witnesses may be presented, within time limits specified by the presiding officer, provided that at least 10 days prior to the hearing date, the party presenting the witnesses furnishes the presiding officer and the opposing party with a list of such witnesses and a summary of the proposed testimony. However, the requirement for furnishing such a witness list and summary of testimony shall not apply to the presentation of rebuttal witnesses. The presiding officer may ask questions of any witness, and each party shall have an opportunity to cross-examine any witness presented by an opposing party.

(c)  Upon the request of either the petitioner or a representative of the FDIC enforcement staff, the record shall remain open for a period of 5 business days following the hearing, during which time the parties may make any additional submissions for the record. Thereafter, the record shall be closed.

(d)  Following the introduction of all evidence, the petitioner and the representative of the FDIC enforcement staff shall have an opportunity for oral argument; however, the parties may jointly waive the right to oral argument, and, in lieu thereof, elect to submit written argument.

(e)  All oral testimony and oral argument shall be recorded, and transcripts made available to the petitioner upon payment of the cost thereof. A copy of the transcript shall be sent directly to the presiding officer, who shall have authority to correct the record sua sponte or upon the motion of any party.

(f)  The parties may, in writing, jointly waive an oral hearing and instead elect a hearing upon a written record in which all evidence and argument would be submitted to the presiding officer in documentary form and statements of individuals would be made by affidavit.

[Codified to 12 C.F.R. § 390.16]

§ 390.17 Default.

If the subject individual fails to file a petition for a hearing, or fails to appear at a hearing, either in person or by attorney, or fails to submit a written argument where oral argument has been waived pursuant to § 390.16(d) or (f), the Notice shall remain in effect until the information, indictment, or complaint is finally disposed of and the Order shall remain in effect until terminated by the Board of Directors.

[Codified to 12 C.F.R. § 390.17]

§ 390.18 Rules of evidence.

(a)  Formal rules of evidence shall not apply to a hearing, but the presiding officer may limit the introduction of irrelevant, immaterial, or unduly repetitious evidence.

(b)  All matters officially noticed by the presiding officer shall appear on the record.

[Codified to 12 C.F.R. § 390.18]

§ 390.19 Burden of persuasion.

The petitioner has the burden of showing, by a preponderance of the evidence, that his or her continued service to or participation in the conduct of the affairs of the association does not, or is not likely to, pose a threat to the interests of the association's depositors or threaten to impair public confidence in the association.

[Codified to 12 C.F.R. § 390.19]

§ 390.20 Relevant considerations.

(a)  In determining whether the petitioner has shown that his or her continued service to or participation in the conduct of the affairs of the association would not, or is not likely to, pose a threat to the interests of the association's depositors or threaten to impair public confidence in the association, in order to decide whether the Notice or Order should be continued, terminated, or otherwise modified, the Board of Directors will consider:

(1)  The nature and extent of the petitioner's participation in the affairs of the association;

(2)  The nature of the offense with which the petitioner has been charged;

(3)  The extent of the publicity accorded the indictment and trial; and

(4)  Such other relevant factors as may be entered on the record.

(b)  When considering a request for the termination or modification of a Notice, the Board of Directors will not consider the ultimate guilt or innocence of the petitioner with respect to the criminal charge that is outstanding.

(c)  When considering a request for the termination or modification of an Order which has been issued following a final judgment of conviction against a subject individual, the Board of Directors will not collaterally review such final judgment of conviction.

[Codified to 12 C.F.R. § 390.20]

§ 390.21 Proposed findings and conclusions and recommended decision.

(a)  Within 30 days after completion of oral argument or the submission of written argument where oral argument has been waived, the presiding officer shall file with the Executive Secretary and certify to the Board of Directors for decision the entire record of the hearing, which shall include a recommended decision, the Notice or Order, and all other documents filed in connection with the hearing.

(b)  The recommended decision shall contain:

(1)  A statement of the issue(s) presented,

(2)  A statement of findings and conclusions, and the reasons or basis therefor, on all material issues of fact, law, or discretion presented on the record, and

(3)  An appropriate recommendation as to whether the suspension, removal, or prohibition should be continued, modified, or terminated.

[Codified to 12 C.F.R. § 390.21]

§ 390.22 Decision of the FDIC Board of Directors.

(a)  Within 30 days after the recommended decision has been certified to the Board of Directors, the Board of Directors shall issue a final decision.

(b)  The Board of Director's final decision shall contain a statement of the basis therefor. The Board of Directors may satisfy this requirement where it adopts the recommended decision of the presiding officer upon finding that the recommended decision satisfies the requirements of § 390.67.

(c)  The Executive Secretary shall serve upon the petitioner and the representative of the FDIC enforcement staff a copy of the Board of Director's final decision and the related recommended decision.

[Codified to 12 C.F.R. § 390.22]

§ 390.23 Miscellaneous.

The provisions of §§ 390.39--390.41 shall apply to proceedings under this subpart.

[Codified to 12 C.F.R. § 390.23]

Subpart C—Rules of Practice and Procedure in Adjudicatory Proceedings

§ 390.30 Scope.

Sections 390.30--390.70 prescribe Uniform Rules of practice and procedure applicable to adjudicatory proceedings as to which hearings on the record are provided for by the following statutory provisions:

(a)  Cease-and-desist proceedings under section 8(b) of the Federal Deposit Insurance Act (FDIA) (12 U.S.C. 1818(b));

(b)  Removal and prohibition proceedings under section 8(e) of the FDIA (12 U.S.C. 1818(e));

(c)  Change-in-control proceedings under section 7(j)(4) of the FDIA (12 U.S.C. 1817(j)(4)) to determine whether the FDIC should issue an order to approve or disapprove a person's proposed acquisition of an institution and/or institution holding company;

(d)  Proceedings under section 15C(c)(2) of the Securities Exchange Act of 1934 (Exchange Act) (15 U.S.C. 78o--5), to impose sanctions upon any government securities broker or dealer or upon any person associated or seeking to become associated with a government securities broker or dealer for which the FDIC is the appropriate regulatory agency;

(e)  Assessment of civil money penalties by the FDIC against institutions, institution-affiliated parties, and certain other persons for which it is the appropriate regulatory agency for any violation of:

(1)  Section 5 of the Home Owners' Loan Act (HOLA) or any regulation or order issued thereunder, pursuant to 12 U.S.C. 1464(d), (s) and (v);

(2)  Section 9 of the HOLA or any regulation or order issued thereunder, pursuant to 12 U.S.C. 1467(d);

(3)  Section 10 of HOLA, pursuant to 12 U.S.C. 1467a(i) and (r);

(4)  Any provisions of the Change in Bank Control Act, any regulation or order issued thereunder or certain unsafe or unsound practices or breaches of fiduciary duty, pursuant to 12 U.S.C. 1817(j)(16);

(5)  Sections 22(h) and 23 of the Federal Reserve Act, or any regulation issued thereunder or certain unsafe or unsound practices or breaches of fiduciary duty, pursuant to 12 U.S.C. 1468;

(6)  Certain provisions of the Exchange Act, pursuant to section 21B of the Exchange Act (15 U.S.C. 78u--2);

(7)  Section 1120 of Financial Institutions Reform, Recovery and Enforcement Act of 1989 (12 U.S.C. 3349), or any order or regulation issued thereunder;

(8)  The terms of any final or temporary order issued or enforceable pursuant to section 8 of the FDIA or of any written agreement executed by the FDIC, the terms of any conditions imposed in writing by the FDIC in connection with the grant of an application or request, certain unsafe or unsound practices or breaches of fiduciary duty, or any law or regulation not otherwise provided herein pursuant to 12 U.S.C. 1818(i)(2);

(9)  Any provision of law referenced in section 102 of the Flood Disaster Protection Act of 1973 (42 U.S.C. 4012a(f)) or any order or regulation issued thereunder; and

(10)  Any provision of law referenced in 31 U.S.C. 5321 or any order or regulation issued thereunder;

(f)  Remedial action under section 102 of the Flood Disaster Protection Act of 1973 (42 U.S.C. 4012a(g));

(g)  Proceedings under section 10(k) of the FDIA (12 U.S.C. 1820(k)) to impose penalties on senior examiners for violation of post-employment prohibitions; and

(h)  Sections 390.30 through 390.70 of this part also apply to all other adjudications required by statute to be determined on the record after opportunity for an agency hearing, unless otherwise specifically provided for in the Local Rules.

[Codified to 12 C.F.R. § 390.30]

§ 390.31 Rules of construction.

For purposes of §§ 390.30 through 390.70 of this part:

(a)  Any term in the singular includes the plural, and the plural includes the singular, if such use would be appropriate;

(b)  Any use of a masculine, feminine, or neuter gender encompasses all three, if such use would be appropriate;

(c)  The term counsel includes a non-attorney representative; and

(d)  Unless the context requires otherwise, a party's counsel of record, if any, may, on behalf of that party, take any action required to be taken by the party.

[Codified to 12 C.F.R. § 390.31]

§ 390.32 Definitions.

For purposes of §§ 390.30 through 390.70 of this part, unless explicitly stated to the contrary:

Administrative law judge means one who presides at an administrative hearing under authority set forth at 5 U.S.C. 556.

Adjudicatory proceeding means a proceeding conducted pursuant to these rules and leading to the formulation of a final order other than a regulation.

Board of Directors means the Board of Directors of the Federal Deposit Insurance Corporation or its designee.

Decisional employee means any member of the FDIC's or administrative law judge's staff who has not engaged in an investigative or prosecutorial role in a proceeding and who may assist the Board of Directors or the administrative law judge, respectively, in preparing orders, recommended decisions, decisions, and other documents under the Uniform Rules.

Enforcement Counsel means any individual who files a notice of appearance as counsel on behalf of the FDIC in an adjudicatory proceeding.

FDIC means the Federal Deposit Insurance Corporation.

Final order means an order issued by the FDIC with or without the consent of the affected institution or the institution-affiliated party, that has become final, without regard to the pendency of any petition for reconsideration or review.

Institution includes any State savings association as that term is defined in section 3(b) of the FDIA, (12 U.S.C. 1813(b)), any savings and loan holding company or any subsidiary thereof whether wholly or partly owned (other than a bank) as those terms are defined in section 10(a) of the HOLA, (12 U.S.C. 1467(a)).

Institution-affiliated party means any institution-affiliated party as that term is defined in section 3(u) of the FDIA, (12 U.S.C. 1813(u)).

Local Rules means those rules found in §§ 390.71 through 390.75 of this part.

Office of Financial Institution Adjudication or OFIA means the executive body charged with overseeing the administration of administrative enforcement proceedings for the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve Board, the National Credit Union Administration, and the FDIC.

Party means the FDIC and any person named as a party in any notice.

Person means an individual, sole proprietor, partnership, corporation, unincorporated association, trust, joint venture, pool, syndicate, agency or other entity or organization, including an institution as defined in paragraph (g) of this section.

Respondent means any party other than the FDIC.

Uniform Rules means those rules in §§ 390.30 through 390.70 of this part.

Violation includes any action (alone or with another or others) for or toward causing, bringing about, participating in, counseling, or aiding or abetting a violation.

[Codified to 12 C.F.R. § 390.32]

§ 390.33 Authority of the Board of Directors.

The Board of Directors may, at any time during the pendency of a proceeding perform, direct the performance of, or waive performance of, any act which could be done or ordered by the administrative law judge.

[Codified to 12 C.F.R. § 390.33]

§ 390.34 Authority of the administrative law judge.

(a)  General rule. All proceedings governed by this part shall be conducted in accordance with the provisions of chapter 5 of title 5 of the United States Code. The administrative law judge shall have all powers necessary to conduct a proceeding in a fair and impartial manner and to avoid unnecessary delay.

(b)  Powers. The administrative law judge shall have all powers necessary to conduct the proceeding in accordance with paragraph (a) of this section, including the following powers:

(1)  To administer oaths and affirmations;

(2)  To issue subpoenas, subpoenas duces tecum, and protective orders, as authorized by this part, and to quash or modify any such subpoenas and orders;

(3)  To receive relevant evidence and to rule upon the admission of evidence and offers of proof;

(4)  To take or cause depositions to be taken as authorized by this subpart;

(5)  To regulate the course of the hearing and the conduct of the parties and their counsel;

(6)  To hold scheduling and/or pre-hearing conferences as set forth in § 390.60;

(7)  To consider and rule upon all procedural and other motions appropriate in an adjudicatory proceeding, provided that only the Board of Directors shall have the power to grant any motion to dismiss the proceeding or to decide any other motion that results in a final determination of the merits of the proceeding;

(8)  To prepare and present to the Board of Directors a recommended decision as provided herein;

(9)  To recuse himself or herself by motion made by a party or on his or her own motion;

(10)  To establish time, place and manner limitations on the attendance of the public and the media for any public hearing; and

(11)  To do all other things necessary and appropriate to discharge the duties of a presiding officer.

[Codified to 12 C.F.R. § 390.34]

§ 390.35 Appearance and practice in adjudicatory proceedings.

(a)  Appearance before an FDIC or an administrative law judge--(1) By attorneys. Any member in good standing of the bar of the highest court of any state, commonwealth, possession, territory of the United States, or the District of Columbia may represent others before the FDIC if such attorney is not currently suspended or debarred from practice before the FDIC.

(2)  By non-attorneys. An individual may appear on his or her own behalf; a member of a partnership may represent the partnership; a duly authorized officer, director, or employee of any government unit, agency, institution, corporation or authority may represent that unit, agency, institution, corporation or authority if such officer, director, or employee is not currently suspended or debarred from practice before the FDIC.

(3)  Notice of appearance. Any individual acting as counsel on behalf of a party, including the FDIC, shall file a notice of appearance with OFIA at or before the time that individual submits papers or otherwise appears on behalf of a party in the adjudicatory proceeding. The notice of appearance must include a written declaration that the individual is currently qualified as provided in paragraph (a)(1) or (2) of this section and is authorized to represent the particular party. By filing a notice of appearance on behalf of a party in an adjudicatory proceeding, the counsel agrees and represents that he or she is authorized to accept service on behalf of the represented party and that, in the event of withdrawal from representation, he or she will, if required by the administrative law judge, continue to accept service until new counsel has filed a notice of appearance or until the represented party indicates that he or she will proceed on a pro se basis.

(b)  Sanctions. Dilatory, obstructionist, egregious, contemptuous or contumacious conduct at any phase of any adjudicatory proceeding may be grounds for exclusion or suspension of counsel from the proceeding.

[Codified to 12 C.F.R. § 390.35]

§ 390.36 Good faith certification.

(a)  General requirement. Every filing or submission of record following the issuance of a notice shall be signed by at least one counsel of record in his or her individual name and shall state that counsel's address and telephone number. A party who acts as his or her own counsel shall sign his or her individual name and state his or her address and telephone number on every filing or submission of record.

(b)  Effect of signature. (1) The signature of counsel or a party shall constitute a certification that: the counsel or party has read the filing or submission of record; to the best of his or her knowledge, information, and belief formed after reasonable inquiry, the filing or submission of record is well-grounded in fact and is warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law; and the filing or submission of record is not made for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation.

(2)  If a filing or submission of record is not signed, the administrative law judge shall strike the filing or submission of record, unless it is signed promptly after the omission is called to the attention of the pleader or movant.

(c)  Effect of making oral motion or argument. The act of making any oral motion or oral argument by any counsel or party constitutes a certification that to the best of his or her knowledge, information, and belief formed after reasonable inquiry, his or her statements are well-grounded in fact and are warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law, and are not made for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation.

[Codified to 12 C.F.R. § 390.36]

§ 390.37 Conflicts of interest.

(a)  Conflict of interest in representation. No person shall appear as counsel for another person in an adjudicatory proceeding if it reasonably appears that such representation may be materially limited by that counsel's responsibilities to a third person or by the counsel's own interests. The administrative law judge may take corrective measures at any stage of a proceeding to cure a conflict of interest in representation, including the issuance of an order limiting the scope of representation or disqualifying an individual from appearing in a representative capacity for the duration of the proceeding.

(b)  Certification and waiver. If any person appearing as counsel represents two or more parties to an adjudicatory proceeding or also represents a non-party on a matter relevant to an issue in the proceeding, counsel must certify in writing at the time of filing the notice of appearance required by § 390.35(a):

(1)  That the counsel has personally and fully discussed the possibility of conflicts of interest with each such party and non-party; and

(2)  That each such party and non-party waives any right it might otherwise have had to assert any known conflicts of interest or to assert any non-material conflicts of interest during the course of the proceeding.

[Codified to 12 C.F.R. § 390.37]

§ 390.38 Ex parte communications.

(a)  Definition--(1) Ex parte communication means any material oral or written communication relevant to the merits of an adjudicatory proceeding that was neither on the record nor on reasonable prior notice to all parties that takes place between:

(i)  An interested person outside the FDIC (including such person's counsel); and

(ii)  The administrative law judge handling that proceeding, the Board of Directors, or a decisional employee.

(2)  Exception. A request for status of the proceeding does not constitute an ex parte communication.

(b)  Prohibition of ex parte communications. From the time the notice is issued by the Board of Directors until the date that the Board of Directors issues the final decision pursuant to § 390.69(c):

(1)  No interested person outside the FDIC shall make or knowingly cause to be made an ex parte communication to the Board of Directors, the administrative law judge, or a decisional employee; and

(2)  The Board of Directors, administrative law judge, or decisional employee shall not make or knowingly cause to be made to any interested person outside the FDIC any ex parte communication.

(c)  Procedure upon occurrence of ex parte communication. If an ex parte communication is received by the administrative law judge, the Board of Directors or other person identified in paragraph (a) of this section, that person shall cause all such written communications (or, if the communication is oral, a memorandum stating the substance of the communication) to be placed on the record of the proceeding and served on all parties. All other parties to the proceeding shall have an opportunity, within ten days of receipt of service of the ex parte communication to file responses thereto and to recommend any sanctions, in accordance with paragraph (d) of this section, that they believe to be appropriate under the circumstances.

(d)  Sanctions. Any party or his or her counsel who makes a prohibited ex parte communication, or who encourages or solicits another to make any such communication, may be subject to any appropriate sanction or sanctions imposed by the Board of Directors or the administrative law judge including, but not limited to, exclusion from the proceedings and an adverse ruling on the issue which is the subject of the prohibited communication.

(e)  Separation-of-functions. Except to the extent required for the disposition of ex parte matters as authorized by law, the administrative law judge may not consult a person or party on any matter relevant to the merits of the adjudication, unless on notice and opportunity for all parties to participate. An employee or agent engaged in the performance of investigative or prosecuting functions for the FDIC in a case may not, in that or a factually related case, participate or advise in the decision, recommended decision, or agency review of the recommended decision under § 390.69, except as witness or counsel in public proceedings.

[Codified to 12 C.F.R. § 390.38]

§ 390.39 Filing of papers.

(a)  Filing. Any papers required to be filed, excluding documents produced in response to a discovery request pursuant to §§ 390.54 and 390.55, shall be filed with the OFIA, except as otherwise provided.

(b)  Manner of filing. Unless otherwise specified by the Board of Directors or the administrative law judge, filing may be accomplished by:

(1)  Personal service;

(2)  Delivering the papers to a reliable commercial courier service, overnight delivery service, or to the U.S. Post Office for Express Mail delivery;

(3)  Mailing the papers by first class, registered, or certified mail; or

(4)  Transmission by electronic media, only if expressly authorized, and upon any conditions specified, by the Board of Directors or the administrative law judge. All papers filed by electronic media shall also concurrently be filed in accordance with paragraph (c) of this section as to form.

(c)  Formal requirements as to papers filed--(1) Form. All papers filed must set forth the name, address, and telephone number of the counsel or party making the filing and must be accompanied by a certification setting forth when and how service has been made on all other parties. All papers filed must be double-spaced and printed or typewritten on 81/2×11 inch paper, and must be clear and legible.

(2)  Signature. All papers must be dated and signed as provided in § 390.36.

(3)  Caption. All papers filed must include at the head thereof, or on a title page, the name of the FDIC and of the filing party, the title and docket number of the proceeding, and the subject of the particular paper.

(4)  Number of copies. Unless otherwise specified by the Board of Directors, or the administrative law judge, an original and one copy of all documents and papers shall be filed, except that only one copy of transcripts of testimony and exhibits shall be filed.

[Codified to 12 C.F.R. § 390.39]

§ 390.40  Service of papers.

(a)  By the parties. Except as otherwise provided, a party filing papers shall serve a copy upon the counsel of record for all other parties to the proceeding so represented, and upon any party not so represented.

(b)  Method of service. Except as provided in paragraphs (c)(2) and (d) of this section, a serving party shall use one or more of the following methods of service:

(1)  Personal service;

(2)  Delivering the papers to a reliable commercial courier service, overnight delivery service, or to the U.S. Post Office for Express Mail delivery;

(3)  Mailing the papers by first class, registered, or certified mail; or

(4)  Transmission by electronic media, only if the parties mutually agree. Any papers served by electronic media shall also concurrently be served in accordance with the requirements of § 390.39(c) as to form.

(c)  By the Board of Directors or the administrative law judge. (1) All papers required to be served by the Board of Directors or the administrative law judge upon a party who has appeared in the proceeding through a counsel of record, shall be served by any means specified in paragraph (b) of this section.

(2)  If a party has not appeared in the proceeding in accordance with § 390.35, the Board of Directors or the administrative law judge shall make service by any of the following methods:

(i)  By personal service;

(ii)  If the person to be served is an individual, by delivery to a person of suitable age and discretion at the physical location where the individual resides or works;

(iii)  If the person to be served is a corporation or other association, by delivery to an officer, managing or general agent, or to any other agent authorized by appointment or by law to receive service and, if the agent is one authorized by statute to receive service and the statute so requires, by also mailing a copy to the party;

(iv)  By registered or certified mail addressed to the person's last known address; or

(v)  By any other method reasonably calculated to give actual notice.

(d)  Subpoenas. Service of a subpoena may be made:

(1)  By personal service;

(2)  If the person to be served is an individual, by delivery to a person of suitable age and discretion at the physical location where the individual resides or works;

(3)  By delivery to an agent, which in the case of a corporation or other association, is delivery to an officer, managing or general agent, or to any other agent authorized by appointment or by law to receive service and, if the agent is one authorized by statute to receive service and the statute so requires, by also mailing a copy to the party;

(4)  By registered or certified mail addressed to the person's last known address; or

(5)  By any other method reasonably calculated to give actual notice.

(e)  Area of service. Service in any state, territory, possession of the United States, or the District of Columbia, on any person or company doing business in any state, territory, possession of the United States, or the District of Columbia, or on any person as otherwise provided by law, is effective without regard to the place where the hearing is held, provided that if service is made on a foreign bank in connection with an action or proceeding involving one or more of its branches or agencies located in any state, territory, possession of the United States, or the District of Columbia, service shall be made on at least one branch or agency so involved.

[Codified to 12 C.F.R. § 390.40]

§ 390.41 Construction of time limits.

(a)  General rule. In computing any period of time prescribed by this subpart, the date of the act or event that commences the designated period of time is not included. The last day so computed is included unless it is a Saturday, Sunday, or Federal holiday. When the last day is a Saturday, Sunday, or Federal holiday, the period runs until the end of the next day that is not a Saturday, Sunday, or Federal holiday. Intermediate Saturdays, Sundays, and Federal holidays are included in the computation of time. However, when the time period within which an act is to be performed is ten days or less, not including any additional time allowed for in paragraph (c) of this section, intermediate Saturdays, Sundays, and Federal holidays are not included.

(b)  When papers are deemed to be filed or served. (1) Filing and service are deemed to be effective:

(i)  In the case of personal service or same day commercial courier delivery, upon actual service;

(ii)  In the case of overnight commercial delivery service, U.S. Express mail delivery, or first class, registered, or certified mail, upon deposit in or delivery to an appropriate point of collection; or

(iii)  In the case of transmission by electronic media, as specified by the authority receiving the filing, in the case of filing, and as agreed among the parties, in the case of service.

(2)  The effective filing and service dates specified in paragraph (b)(1) of this section may be modified by the Board of Directors or administrative law judge in the case of filing or by agreement of the parties in the case of service.

(c)  Calculation of time for service and filing of responsive papers. Whenever a time limit is measured by a prescribed period from the service of any notice or paper, the applicable time limits are calculated as follows:

(1)  If service is made by first class, registered, or certified mail, add three calendar days to the prescribed period;

(2)  If service is made by express mail or overnight delivery service, add one calendar day to the prescribed period; or

(3)  If service is made by electronic media transmission, add one calendar day to the prescribed period, unless otherwise determined by the Board of Directors or the administrative law judge in the case of filing, or by agreement among the parties in the case of service.

[Codified to 12 C.F.R. § 390.41]

§ 390.42 Change of time limits.

Except as otherwise provided by law, the administrative law judge may, for good cause shown, extend the time limits prescribed by the Uniform Rules or any notice or order issued in the proceedings. After the referral of the case to the Board of Directors pursuant to § 390.67, the Board of Directors may grant extensions of the time limits for good cause shown. Extensions may be granted at the motion of a party or on the Board of Director's or the administrative law judge's own motion after notice and opportunity to respond is afforded all non-moving parties.

[Codified to 12 C.F.R. § 390.42]

§ 390.43 Witness fees and expenses.

Witnesses subpoenaed for testimony or deposition shall be paid the same fees for attendance and mileage as are paid in the United States district courts in proceedings in which the United States is a party, provided that, in the case of a discovery subpoena addressed to a party, no witness fees or mileage need be paid. Fees for witnesses shall be tendered in advance by the party requesting the subpoena, except that fees and mileage need not be tendered in advance where the FDIC is the party requesting the subpoena. The FDIC shall not be required to pay any fees to, or expenses of, any witness not subpoenaed by the FDIC.

[Codified to 12 C.F.R. § 390.43]

§ 390.44 Opportunity for informal settlement.

Any respondent may, at any time in the proceeding, unilaterally submit to Enforcement Counsel written offers or proposals for settlement of a proceeding, without prejudice to the rights of any of the parties. No such offer or proposal shall be made to any FDIC representative other than Enforcement Counsel. Submission of a written settlement offer does not provide a basis for adjourning or otherwise delaying all or any portion of a proceeding under this part. No settlement offer or proposal, or any subsequent negotiation or resolution, is admissible as evidence in any proceeding.

[Codified to 12 C.F.R. § 390.44]

§ 390.45 The FDIC's right to conduct examination.

Nothing contained in this subpart limits in any manner the right of the FDIC to conduct any examination, inspection, or visitation of any institution or institution-affiliated party, or the right of the FDIC to conduct or continue any form of investigation authorized by law.

[Codified to 12 C.F.R. § 390.45]

§ 390.46 Collateral attacks on adjudicatory proceeding.

If an interlocutory appeal or collateral attack is brought in any court concerning all or any part of an adjudicatory proceeding, the challenged adjudicatory proceeding shall continue without regard to the pendency of that court proceeding. No default or other failure to act as directed in the adjudicatory proceeding within the times prescribed in this subpart shall be excused based on the pendency before any court of any interlocutory appeal or collateral attack.

[Codified to 12 C.F.R. § 390.46]

§ 390.47 Commencement of proceeding and contents of notice.

(a)  Commencement of proceeding. (1)(i) Except for change-in-control proceedings under section 7(j)(4) of the FDIA (12 U.S.C. 1817(j)(4)), a proceeding governed by this subpart is commenced by issuance of a notice by the FDIC.

(ii)  The notice must be served by the Executive Secretary upon the respondent and given to any other appropriate financial institution supervisory authority where required by law.

(iii)  The notice must be filed with the OFIA.

(2)  Change-in control proceedings under section 7(j)(4) of the FDIA (12 U.S.C. 1817(j)(4)) commence with the issuance of an order by the Board of Directors.

(b)  Contents of notice. The notice must set forth:

(1)  The legal authority for the proceeding and for the FDIC's jurisdiction over the proceeding;

(2)  A statement of the matters of fact or law showing that the FDIC is entitled to relief;

(3)  A proposed order or prayer for an order granting the requested relief;

(4)  The time, place, and nature of the hearing as required by law or regulation;

(5)  The time within which to file an answer as required by law or regulation;

(6)  The time within which to request a hearing as required by law or regulation; and

(7)  The answer and/or request for a hearing shall be filed with OFIA.

[Codified to 12 C.F.R. § 390.47]

§ 390.48 Answer.

(a)  When. Within 20 days of service of the notice, respondent shall file an answer as designated in the notice. In a civil money penalty proceeding, respondent shall also file a request for a hearing within 20 days of service of the notice.

(b)  Content of answer. An answer must specifically respond to each paragraph or allegation of fact contained in the notice and must admit, deny, or state that the party lacks sufficient information to admit or deny each allegation of fact. A statement of lack of information has the effect of a denial. Denials must fairly meet the substance of each allegation of fact denied; general denials are not permitted. When a respondent denies part of an allegation, that part must be denied and the remainder specifically admitted. Any allegation of fact in the notice which is not denied in the answer must be deemed admitted for purposes of the proceeding. A respondent is not required to respond to the portion of a notice that constitutes the prayer for relief or proposed order. The answer must set forth affirmative defenses, if any, asserted by the respondent.

(c)  Default--(1) Effect of failure to answer. Failure of a respondent to file an answer required by this section within the time provided constitutes a waiver of his or her right to appear and contest the allegations in the notice. If no timely answer is filed, Enforcement Counsel may file a motion for entry of an order of default. Upon a finding that no good cause has been shown for the failure to file a timely answer, the administrative law judge shall file with the Board of Directors a recommended decision containing the findings and the relief sought in the notice. Any final order issued by the Board of Directors based upon a respondent's failure to answer is deemed to be an order issued upon consent.

(2)  Effect of failure to request a hearing in civil money penalty proceedings. If respondent fails to request a hearing as required by law within the time provided, the notice of assessment constitutes a final and unappealable order.

[Codified to 12 C.F.R. § 390.48]

§ 390.49 Amended pleadings.

(a)  Amendments. The notice or answer may be amended or supplemented at any stage of the proceeding. The respondent must answer an amended notice within the time remaining for the respondent's answer to the original notice, or within ten days after service of the amended notice, whichever period is longer, unless the Board of Directors or administrative law judge orders otherwise for good cause.

(b)  Amendments to conform to the evidence. When issues not raised in the notice or answer are tried at the hearing by express or implied consent of the parties, they will be treated in all respects as if they had been raised in the notice or answer, and no formal amendments are required. If evidence is objected to at the hearing on the ground that it is not within the issues raised by the notice or answer, the administrative law judge may admit the evidence when admission is likely to assist in adjudicating the merits of the action and the objecting party fails to satisfy the administrative law judge that the admission of such evidence would unfairly prejudice that party's action or defense upon the merits. The administrative law judge may grant a continuance to enable the objecting party to meet such evidence.

[Codified to 12 C.F.R. § 390.49]

§ 390.50 Failure to appear.

Failure of a respondent to appear in person at the hearing or by a duly authorized counsel constitutes a waiver of respondent's right to a hearing and is deemed an admission of the facts as alleged and consent to the relief sought in the notice. Without further proceedings or notice to the respondent, the administrative law judge shall file with the Board of Directors a recommended decision containing the findings and the relief sought in the notice.

[Codified to 12 C.F.R. § 390.50]

§ 390.51 Consolidation and severance of actions.

(a)  Consolidation. (1) On the motion of any party, or on the administrative law judge's own motion, the administrative law judge may consolidate, for some or all purposes, any two or more proceedings, if each such proceeding involves or arises out of the same transaction, occurrence or series of transactions or occurrences, or involves at least one common respondent or a material common question of law or fact, unless such consolidation would cause unreasonable delay or injustice.

(2)  In the event of consolidation under paragraph (a)(1) of this section, appropriate adjustment to the prehearing schedule must be made to avoid unnecessary expense, inconvenience, or delay.

(b)  Severance. The administrative law judge may, upon the motion of any party, sever the proceeding for separate resolution of the matter as to any respondent only if the administrative law judge finds that:

(1)  Undue prejudice or injustice to the moving party would result from not severing the proceeding; and

(2)  Such undue prejudice or injustice would outweigh the interests of judicial economy and expedition in the complete and final resolution of the proceeding.

[Codified to 12 C.F.R. § 390.51]

§ 390.52 Motions.

(a)  In writing. (1) Except as otherwise provided herein, an application or request for an order or ruling must be made by written motion.

(2)  All written motions must state with particularity the relief sought and must be accompanied by a proposed order.

(3)  No oral argument may be held on written motions except as otherwise directed by the administrative law judge. Written memoranda, briefs, affidavits or other relevant material or documents may be filed in support of or in opposition to a motion.

(b)  Oral motions. A motion may be made orally on the record unless the administrative law judge directs that such motion be reduced to writing.

(c)  Filing of motions. Motions must be filed with the administrative law judge, but upon the filing of the recommended decision, motions must be filed with the Executive Secretary for disposition by the Board of Directors.

(d)  Responses. (1) Except as otherwise provided herein, within ten days after service of any written motion, or within such other period of time as may be established by the administrative law judge or the Executive Secretary, any party may file a written response to a motion. The administrative law judge shall not rule on any oral or written motion before each party has had an opportunity to file a response.

(2)  The failure of a party to oppose a written motion or an oral motion made on the record is deemed a consent by that party to the entry of an order substantially in the form of the order accompanying the motion.

(e)  Dilatory motions. Frivolous, dilatory or repetitive motions are prohibited. The filing of such motions may form the basis for sanctions.

(f)  Dispositive motions. Dispositive motions are governed by §§ 390.58 and 390.59.

[Codified to 12 C.F.R. § 390.52]

§ 390.53 Scope of document discovery.

(a)  Limits on discovery. (1) Subject to the limitations set out in paragraphs (b), (c), and (d) of this section, a party to a proceeding under this subpart may obtain document discovery by serving a written request to produce documents. For purposes of a request to produce documents, the term "documents" may be defined to include drawings, graphs, charts, photographs, recordings, data stored in electronic form, and other data compilations from which information can be obtained, or translated, if necessary, by the parties through detection devices into reasonably usable form, as well as written material of all kinds.

(2)  Discovery by use of deposition is governed by § 390.73.

(3)  Discovery by use of interrogatories is not permitted.

(b)  Relevance. A party may obtain document discovery regarding any matter, not privileged, that has material relevance to the merits of the pending action. Any request to produce documents that calls for irrelevant material, that is unreasonable, oppressive, excessive in scope, unduly burdensome, or repetitive of previous requests, or that seeks to obtain privileged documents will be denied or modified. A request is unreasonable, oppressive, excessive in scope or unduly burdensome if, among other things, it fails to include justifiable limitations on the time period covered and the geographic locations to be searched, the time provided to respond in the request is inadequate, or the request calls for copies of documents to be delivered to the requesting party and fails to include the requestor's written agreement to pay in advance for the copying, in accordance with § 390.54.

(c)  Privileged matter. Privileged documents are not discoverable. Privileges include the attorney-client privilege, work-product privilege, any government's or government agency's deliberative-process privilege, and any other privileges the Constitution, any applicable act of Congress, or the principles of common law provide.

(d)  Time limits. All discovery, including all responses to discovery requests, shall be completed at least 20 days prior to the date scheduled for the commencement of the hearing, except as provided in the Local Rules. No exceptions to this time limit shall be permitted, unless the administrative law judge finds on the record that good cause exists for waiving the requirements of this paragraph (d).

[Codified to 12 C.F.R. § 390.53]

§ 390.54 Request for document discovery from parties.

(a)  General rule. Any party may serve on any other party a request to produce for inspection any discoverable documents that are in the possession, custody, or control of the party upon whom the request is served. The request must identify the documents to be produced either by individual item or by category, and must describe each item and category with reasonable particularity. Documents must be produced as they are kept in the usual course of business or must be organized to correspond with the categories in the request.

(b)  Production or copying. The request must specify a reasonable time, place, and manner for production and performing any related acts. In lieu of inspecting the documents, the requesting party may specify that all or some of the responsive documents be copied and the copies delivered to the requesting party. If copying of fewer than 250 pages is requested, the party to whom the request is addressed shall bear the cost of copying and shipping charges. If a party requests 250 pages or more of copying, the requesting party shall pay for the copying and shipping charges. Copying charges are the current per-page copying rate imposed under part 309 for requests under the Freedom of Information Act (5 U.S.C. 552). The party to whom the request is addressed may require payment in advance before producing the documents.

(c)  Obligation to update responses. A party who has responded to a discovery request with a response that was complete when made is not required to supplement the response to include documents thereafter acquired, unless the responding party learns that:

(1)  The response was materially incorrect when made; or

(2)  The response, though correct when made, is no longer true and a failure to amend the response is, in substance, a knowing concealment.

(d)  Motions to limit discovery. (1) Any party that objects to a discovery request may, within ten days of being served with such request, file a motion in accordance with the provisions of § 390.52 to revoke or otherwise limit the request. If an objection is made to only a portion of an item or category in a request, the portion objected to shall be specified. Any objections not made in accordance with this paragraph and § 390.52 are waived.

(2)  The party who served the request that is the subject of a motion to revoke or limit may file a written response within five days of service of the motion. No other party may file a response.

(e)  Privilege. At the time other documents are produced, the producing party must reasonably identify all documents withheld on the grounds of privilege and must produce a statement of the basis for the assertion of privilege. When similar documents that are protected by deliberative process, attorney-work-product, or attorney-client privilege are voluminous, these documents may be identified by category instead of by individual document. The administrative law judge retains discretion to determine when the identification by category is insufficient.

(f)  Motions to compel production. (1) If a party withholds any documents as privileged or fails to comply fully with a discovery request, the requesting party may, within ten days of the assertion of privilege or of the time the failure to comply becomes known to the requesting party, file a motion in accordance with the provisions of § 390.52 for the issuance of a subpoena compelling production.

(2)  The party who asserted the privilege or failed to comply with the request may file a written response to a motion to compel within five days of service of the motion. No other party may file a response.

(g)  Ruling on motions. After the time for filing responses pursuant to this section has expired, the administrative law judge shall rule promptly on all motions filed pursuant to this section. If the administrative law judge determines that a discovery request, or any of its terms, calls for irrelevant material, is unreasonable, oppressive, excessive in scope, unduly burdensome, or repetitive of previous requests, or seeks to obtain privileged documents, he or she may deny or modify the request, and may issue appropriate protective orders, upon such conditions as justice may require. The pendency of a motion to strike or limit discovery or to compel production is not a basis for staying or continuing the proceeding, unless otherwise ordered by the administrative law judge. Notwithstanding any other provision in this subpart, the administrative law judge may not release, or order a party to produce, documents withheld on grounds of privilege if the party has stated to the administrative law judge its intention to file a timely motion for interlocutory review of the administrative law judge's order to produce the documents, and until the motion for interlocutory review has been decided.

(h)  Enforcing discovery subpoenas. If the administrative law judge issues a subpoena compelling production of documents by a party, the subpoenaing party may, in the event of noncompliance and to the extent authorized by applicable law, apply to any appropriate United States district court for an order requiring compliance with the subpoena. A party's right to seek court enforcement of a subpoena shall not in any manner limit the sanctions that may be imposed by the administrative law judge against a party who fails to produce subpoenaed documents.

[Codified to 12 C.F.R. § 390.54]

§ 390.55 Document subpoenas to nonparties.

(a)  General rules. (1) Any party may apply to the administrative law judge for the issuance of a document discovery subpoena addressed to any person who is not a party to the proceeding. The application must contain a proposed document subpoena and a brief statement showing the general relevance and reasonableness of the scope of documents sought. The subpoenaing party shall specify a reasonable time, place, and manner for making production in response to the document subpoena.

(2)  A party shall only apply for a document subpoena under this section within the time period during which such party could serve a discovery request under § 390.53(d). The party obtaining the document subpoena is responsible for serving it on the subpoenaed person and for serving copies on all parties. Document subpoenas may be served in any state, territory, or possession of the United States, the District of Columbia, or as otherwise provided by law.

(3)  The administrative law judge shall promptly issue any document subpoena requested pursuant to this section. If the administrative law judge determines that the application does not set forth a valid basis for the issuance of the subpoena, or that any of its terms are unreasonable, oppressive, excessive in scope, or unduly burdensome, he or she may refuse to issue the subpoena or may issue it in a modified form upon such conditions as may be consistent with the Uniform Rules.

(b)  Motion to quash or modify. (1) Any person to whom a document subpoena is directed may file a motion to quash or modify such subpoena, accompanied by a statement of the basis for quashing or modifying the subpoena. The movant shall serve the motion on all parties, and any party may respond to such motion within ten days of service of the motion.

(2)  Any motion to quash or modify a document subpoena must be filed on the same basis, including the assertion of privilege, upon which a party could object to a discovery request under § 390.54(d), and during the same time limits during which such an objection could be filed.

(c)  Enforcing document subpoenas. If a subpoenaed person fails to comply with any subpoena issued pursuant to this section or any order of the administrative law judge which directs compliance with all or any portion of a document subpoena, the subpoenaing party or any other aggrieved party may, to the extent authorized by applicable law, apply to an appropriate United States district court for an order requiring compliance with so much of the document subpoena as the administrative law judge has not quashed or modified. A party's right to seek court enforcement of a document subpoena shall in no way limit the sanctions that may be imposed by the administrative law judge on a party who induces a failure to comply with subpoenas issued under this section.

[Codified to 12 C.F.R. § 390.55]

§ 390.56 Deposition of witness unavailable for hearing.

(a)  General rules. (1) If a witness will not be available for the hearing, a party may apply in accordance with the procedures set forth in paragraph (a)(2) of this section, to the administrative law judge for the issuance of a subpoena, including a subpoena duces tecum, requiring the attendance of the witness at a deposition. The administrative law judge may issue a deposition subpoena under this section upon showing that:

(i)  The witness will be unable to attend or may be prevented from attending the hearing because of age, sickness or infirmity, or will otherwise be unavailable;

(ii)  The witness' unavailability was not procured or caused by the subpoenaing party;

(iii)  The testimony is reasonably expected to be material; and

(iv)  Taking the deposition will not result in any undue burden to any other party and will not cause undue delay of the proceeding.

(2)  The application must contain a proposed deposition subpoena and a brief statement of the reasons for the issuance of the subpoena. The subpoena must name the witness whose deposition is to be taken and specify the time and place for taking the deposition. A deposition subpoena may require the witness to be deposed at any place within the country in which that witness resides or has a regular place of employment or such other convenient place as the administrative law judge shall fix.

(3)  Any requested subpoena that sets forth a valid basis for its issuance must be promptly issued, unless the administrative law judge on his or her own motion, requires a written response or requires attendance at a conference concerning whether the requested subpoena should be issued.

(4)  The party obtaining a deposition subpoena is responsible for serving it on the witness and for serving copies on all parties. Unless the administrative law judge orders otherwise, no deposition under this section shall be taken on fewer than ten days' notice to the witness and all parties. Deposition subpoenas may be served in any state, territory, possession of the United States, or the District of Columbia, on any person or company doing business in any state, territory, possession of the United States, or the District of Columbia, or as otherwise permitted by law.

(b)  Objections to deposition subpoenas. (1) The witness and any party who has not had an opportunity to oppose a deposition subpoena issued under this section may file a motion with the administrative law judge to quash or modify the subpoena prior to the time for compliance specified in the subpoena, but not more than ten days after service of the subpoena.

(2)  A statement of the basis for the motion to quash or modify a subpoena issued under this section must accompany the motion. The motion must be served on all parties.

(c)  Procedure upon deposition. (1) Each witness testifying pursuant to a deposition subpoena must be duly sworn, and each party shall have the right to examine the witness. Objections to questions or documents must be in short form, stating the grounds for the objection. Failure to object to questions or documents is not deemed a waiver except where the ground for the objection might have been avoided if the objection had been timely presented. All questions, answers, and objections must be recorded.

(2)  Any party may move before the administrative law judge for an order compelling the witness to answer any questions the witness has refused to answer or submit any evidence the witness has refused to submit during the deposition.

(3)  The deposition must be subscribed by the witness, unless the parties and the witness, by stipulation, have waived the signing, or the witness is ill, cannot be found, or has refused to sign. If the deposition is not subscribed by the witness, the court reporter taking the deposition shall certify that the transcript is a true and complete transcript of the deposition.

(d)  Enforcing subpoenas. If a subpoenaed person fails to comply with any order of the administrative law judge which directs compliance with all or any portion of a deposition subpoena under paragraph (b) or (c)(2) of this section, the subpoenaing party or other aggrieved party may, to the extent authorized by applicable law, apply to an appropriate United States district court for an order requiring compliance with the portions of the subpoena that the administrative law judge has ordered enforced. A party's right to seek court enforcement of a deposition subpoena in no way limits the sanctions that may be imposed by the administrative law judge on a party who fails to comply with or procures a failure to comply with, a subpoena issued under this section.

[Codified to 12 C.F.R. § 390.56]

§ 390.57 Interlocutory review.

(a)  General rule. The Board of Directors may review a ruling of the administrative law judge prior to the certification of the record to the Board of Directors only in accordance with the procedures set forth in this section and § 390.52.

(b)  Scope of review. The Board of Directors may exercise interlocutory review of a ruling of the administrative law judge if the Board of Directors finds that:

(1)  The ruling involves a controlling question of law or policy as to which substantial grounds exist for a difference of opinion;

(2)  Immediate review of the ruling may materially advance the ultimate termination of the proceeding;

(3)  Subsequent modification of the ruling at the conclusion of the proceeding would be an inadequate remedy; or

(4)  Subsequent modification of the ruling would cause unusual delay or expense.

(c)  Procedure. Any request for interlocutory review shall be filed by a party with the administrative law judge within ten days of his or her ruling and shall otherwise comply with § 390.52. Any party may file a response to a request for interlocutory review in accordance with § 390.52(d). Upon the expiration of the time for filing all responses, the administrative law judge shall refer the matter to the Board of Directors for final disposition.

(d)  Suspension of proceeding. Neither a request for interlocutory review nor any disposition of such a request by the Board of Directors under this section suspends or stays the proceeding unless otherwise ordered by the administrative law judge or the Board of Directors.

[Codified to 12 C.F.R. § 390.57]

§ 390.58 Summary disposition.

(a)  In general. The administrative law judge shall recommend that the Board of Directors issue a final order granting a motion for summary disposition if the undisputed pleaded facts, admissions, affidavits, stipulations, documentary evidence, matters as to which official notice may be taken, and any other evidentiary materials properly submitted in connection with a motion for summary disposition show that:

(1)  There is no genuine issue as to any material fact; and

(2)  The moving party is entitled to a decision in its favor as a matter of law.

(b)  Filing of motions and responses. (1) Any party who believes that there is no genuine issue of material fact to be determined and that he or she is entitled to a decision as a matter of law may move at any time for summary disposition in its favor of all or any part of the proceeding. Any party, within 20 days after service of such a motion, or within such time period as allowed by the administrative law judge, may file a response to such motion.

(2)  A motion for summary disposition must be accompanied by a statement of the material facts as to which the moving party contends there is no genuine issue. Such motion must be supported by documentary evidence, which may take the form of admissions in pleadings, stipulations, depositions, investigatory depositions, transcripts, affidavits and any other evidentiary materials that the moving party contends support his or her position. The motion must also be accompanied by a brief containing the points and authorities in support of the contention of the moving party. Any party opposing a motion for summary disposition must file a statement setting forth those material facts as to which he or she contends a genuine dispute exists. Such opposition must be supported by evidence of the same type as that submitted with the motion for summary disposition and a brief containing the points and authorities in support of the contention that summary disposition would be inappropriate.

(c)  Hearing on motion. At the request of any party or on his or her own motion, the administrative law judge may hear oral argument on the motion for summary disposition.

(d)  Decision on motion. Following receipt of a motion for summary disposition and all responses thereto, the administrative law judge shall determine whether the moving party is entitled to summary disposition. If the administrative law judge determines that summary disposition is warranted, the administrative law judge shall submit a recommended decision to that effect to the Board of Directors. If the administrative law judge finds that no party is entitled to summary disposition, he or she shall make a ruling denying the motion.

[Codified to 12 C.F.R. § 390.59]

§ 390.59 Partial summary disposition.

If the administrative law judge determines that a party is entitled to summary disposition as to certain claims only, he or she shall defer submitting a recommended decision as to those claims. A hearing on the remaining issues must be ordered. Those claims for which the administrative law judge has determined that summary disposition is warranted will be addressed in the recommended decision filed at the conclusion of the hearing.

[Codified to 12 C.F.R. § 390.59]

§ 390.60 Scheduling and prehearing conferences.

(a)  Scheduling conference. Within 30 days of service of the notice or order commencing a proceeding or such other time as parties may agree, the administrative law judge shall direct counsel for all parties to meet with him or her in person at a specified time and place prior to the hearing or to confer by telephone for the purpose of scheduling the course and conduct of the proceeding. This meeting or telephone conference is called a "scheduling conference." The identification of potential witnesses, the time for and manner of discovery, and the exchange of any prehearing materials including witness lists, statements of issues, stipulations, exhibits and any other materials may also be determined at the scheduling conference.

(b)  Prehearing conferences. The administrative law judge may, in addition to the scheduling conference, on his or her own motion or at the request of any party, direct counsel for the parties to meet with him or her (in person or by telephone) at a prehearing conference to address any or all of the following:

(1)  Simplification and clarification of the issues;

(2)  Stipulations, admissions of fact, and the contents, authenticity and admissibility into evidence of documents;

(3)  Matters of which official notice may be taken;

(4)  Limitation of the number of witnesses;

(5)  Summary disposition of any or all issues;

(6)  Resolution of discovery issues or disputes;

(7)  Amendments to pleadings; and

(8)  Such other matters as may aid in the orderly disposition of the proceeding.

(c)  Transcript. The administrative law judge, in his or her discretion, may require that a scheduling or prehearing conference be recorded by a court reporter. A transcript of the conference and any materials filed, including orders, becomes part of the record of the proceeding. A party may obtain a copy of the transcript at its expense.

(d)  Scheduling or prehearing orders. At or within a reasonable time following the conclusion of the scheduling conference or any prehearing conference, the administrative law judge shall serve on each party an order setting forth any agreements reached and any procedural determinations made.

[Codified to 12 C.F.R. § 390.60]

§ 390.61 Prehearing submissions.

(a)  Within the time set by the administrative law judge, but in no case later than 14 days before the start of the hearing, each party shall serve on every other party, his or her:

(1)  Prehearing statement;

(2)  Final list of witnesses to be called to testify at the hearing, including name and address of each witness and a short summary of the expected testimony of each witness;

(3)  List of the exhibits to be introduced at the hearing along with a copy of each exhibit; and

(4)  Stipulations of fact, if any.

(b)  Effect of failure to comply. No witness may testify and no exhibits may be introduced at the hearing if such witness or exhibit is not listed in the prehearing submissions pursuant to paragraph (a) of this section, except for good cause shown.

[Codified to 12 C.F.R. § 390.61]

§ 390.62 Public hearings.

(a)  General rule. All hearings shall be open to the public, unless the FDIC, in its discretion, determines that holding an open hearing would be contrary to the public interest. Within 20 days of service of the notice or, in the case of change-in-control proceedings under section 7(j)(4) of the FDIA (12 U.S.C. 1817(j)(4)), within 20 days from service of the hearing order, any respondent may file with the Executive Secretary a request for a private hearing, and any party may file a reply to such a request. A party must serve on the administrative law judge a copy of any request or reply the party files with the Executive Secretary. The form of, and procedure for, these requests and replies are governed by § 390.52. A party's failure to file a request or a reply constitutes a waiver of any objections regarding whether the hearing will be public or private.

(b)  Filing document under seal. Enforcement Counsel, in his or her discretion, may file any document or part of a document under seal if disclosure of the document would be contrary to the public interest. The administrative law judge shall take all appropriate steps to preserve the confidentiality of such documents or parts thereof, including closing portions of the hearing to the public.

[Codified to 12 C.F.R. § 390.62]

§ 390.63 Hearing subpoenas.

(a)  Issuance. (1) Upon application of a party showing general relevance and reasonableness of scope of the testimony or other evidence sought, the administrative law judge may issue a subpoena or a subpoena duces tecum requiring the attendance of a witness at the hearing or the production of documentary or physical evidence at the hearing. The application for a hearing subpoena must also contain a proposed subpoena specifying the attendance of a witness or the production of evidence from any state, territory, or possession of the United States, the District of Columbia, or as otherwise provided by law at any designated place where the hearing is being conducted. The party making the application shall serve a copy of the application and the proposed subpoena on every other party.

(2)  A party may apply for a hearing subpoena at any time before the commencement of a hearing. During a hearing, a party may make an application for a subpoena orally on the record before the administrative law judge.

(3)  The administrative law judge shall promptly issue any hearing subpoena requested pursuant to this section. If the administrative law judge determines that the application does not set forth a valid basis for the issuance of the subpoena, or that any of its terms are unreasonable, oppressive, excessive in scope, or unduly burdensome, he or she may refuse to issue the subpoena or may issue it in a modified form upon any conditions consistent with this subpart. Upon issuance by the administrative law judge, the party making the application shall serve the subpoena on the person named in the subpoena and on each party.

(b)  Motion to quash or modify. (1) Any person to whom a hearing subpoena is directed or any party may file a motion to quash or modify the subpoena, accompanied by a statement of the basis for quashing or modifying the subpoena. The movant must serve the motion on each party and on the person named in the subpoena. Any party may respond to the motion within ten days of service of the motion.

(2)  Any motion to quash or modify a hearing subpoena must be filed prior to the time specified in the subpoena for compliance, but not more than ten days after the date of service of the subpoena upon the movant.

(c)  Enforcing subpoenas. If a subpoenaed person fails to comply with any subpoena issued pursuant to this section or any order of the administrative law judge which directs compliance with all or any portion of a document subpoena, the subpoenaing party or any other aggrieved party may seek enforcement of the subpoena pursuant to section § 390.55(c).

[Codified to 12 C.F.R. § 390.63]

§ 390.64 Conduct of hearings.

(a)  General rules. (1) Hearings shall be conducted so as to provide a fair and expeditious presentation of the relevant disputed issues. Each party has the right to present its case or defense by oral and documentary evidence and to conduct such cross examination as may be required for full disclosure of the facts.

(2)  Order of hearing. Enforcement Counsel shall present its case-in-chief first, unless otherwise ordered by the administrative law judge, or unless otherwise expressly specified by law or regulation. Enforcement Counsel shall be the first party to present an opening statement and a closing statement, and may make a rebuttal statement after the respondent's closing statement. If there are multiple respondents, respondents may agree among themselves as to their order of presentation of their cases, but if they do not agree the administrative law judge shall fix the order.

(3)  Examination of witnesses. Only one counsel for each party may conduct an examination of a witness, except that in the case of extensive direct examination, the administrative law judge may permit more than one counsel for the party presenting the witness to conduct the examination. A party may have one counsel conduct the direct examination and another counsel conduct re-direct examination of a witness, or may have one counsel conduct the cross examination of a witness and another counsel conduct the re-cross examination of a witness.

(4)  Stipulations. Unless the administrative law judge directs otherwise, all stipulations of fact and law previously agreed upon by the parties, and all documents, the admissibility of which have been previously stipulated, will be admitted into evidence upon commencement of the hearing.

(b)  Transcript. The hearing must be recorded and transcribed. The reporter will make the transcript available to any party upon payment by that party to the reporter of the cost of the transcript. The administrative law judge may order the record corrected, either upon motion to correct, upon stipulation of the parties, or following notice to the parties upon the administrative law judge's own motion.

[Codified to 12 C.F.R. § 390.64]

§ 390.65 Evidence.

(a)  Admissibility. (1) Except as is otherwise set forth in this section, relevant, material, and reliable evidence that is not unduly repetitive is admissible to the fullest extent authorized by the Administrative Procedure Act and other applicable law.

(2)  Evidence that would be admissible under the Federal Rules of Evidence is admissible in a proceeding conducted pursuant to this subpart.

(3)  Evidence that would be inadmissible under the Federal Rules of Evidence may not deemed or ruled to be inadmissible in a proceeding conducted pursuant to this subpart if such evidence is relevant, material, reliable and not unduly repetitive.

(b)  Official notice. (1) Official notice may be taken of any material fact which may be judicially noticed by a United States district court and any material information in the official public records of any Federal or state government agency.

(2)  All matters officially noticed by the administrative law judge or Board of Directors shall appear on the record.

(3)  If official notice is requested or taken of any material fact, the parties, upon timely request, shall be afforded an opportunity to object.

(c)  Documents. (1) A duplicate copy of a document is admissible to the same extent as the original, unless a genuine issue is raised as to whether the copy is in some material respect not a true and legible copy of the original.

(2)  Subject to the requirements of paragraph (a) of this section, any document, including a report of examination, supervisory activity, inspection or visitation, prepared by the appropriate Federal financial institution regulatory agency or state regulatory agency, is admissible either with or without a sponsoring witness.

(3)  Witnesses may use existing or newly created charts, exhibits, calendars, calculations, outlines or other graphic material to summarize, illustrate, or simplify the presentation of testimony. Such materials may, subject to the administrative law judge's discretion, be used with or without being admitted into evidence.

(d)  Objections. (1) Objections to the admissibility of evidence must be timely made and rulings on all objections must appear on the record.

(2)  When an objection to a question or line of questioning propounded to a witness is sustained, the examining counsel may make a specific proffer on the record of what he or she expected to prove by the expected testimony of the witness, either by representation of counsel or by direct interrogation of the witness.

(3)  The administrative law judge shall retain rejected exhibits, adequately marked for identification, for the record, and transmit such exhibits to the Board of Directors.

(4)  Failure to object to admission of evidence or to any ruling constitutes a waiver of the objection.

(e)  Stipulations. The parties may stipulate as to any relevant matters of fact or the authentication of any relevant documents. Such stipulations must be received in evidence at a hearing, and are binding on the parties with respect to the matters therein stipulated.

(f)  Depositions of unavailable witnesses. (1) If a witness is unavailable to testify at a hearing, and that witness has testified in a deposition to which all parties in a proceeding had notice and an opportunity to participate, a party may offer as evidence all or any part of the transcript of the deposition, including deposition exhibits, if any.

(2)  Such deposition transcript is admissible to the same extent that testimony would have been admissible had that person testified at the hearing, provided that if a witness refused to answer proper questions during the depositions, the administrative law judge may, on that basis, limit the admissibility of the deposition in any manner that justice requires.

(3)  Only those portions of a deposition received in evidence at the hearing constitute a part of the record.

[Codified to 12 C.F.R. § 390.65]

§ 390.66 Post-hearing filings.

(a)  Proposed findings and conclusions and supporting briefs. (1) Using the same method of service for each party, the administrative law judge shall serve notice upon each party, that the certified transcript, together with all hearing exhibits and exhibits introduced but not admitted into evidence at the hearing, has been filed. Any party may file with the administrative law judge proposed findings of fact, proposed conclusions of law, and a proposed order within 30 days following service of this notice by the administrative law judge or within such longer period as may be ordered by the administrative law judge.

(2)  Proposed findings and conclusions must be supported by citation to any relevant authorities and by page references to any relevant portions of the record. A post-hearing brief may be filed in support of proposed findings and conclusions, either as part of the same document or in a separate document. Any party who fails to file timely with the administrative law judge any proposed finding or conclusion is deemed to have waived the right to raise in any subsequent filing or submission any issue not addressed in such party's proposed finding or conclusion.

(b)  Reply briefs. Reply briefs may be filed within 15 days after the date on which the parties' proposed findings, conclusions, and order are due. Reply briefs must be strictly limited to responding to new matters, issues, or arguments raised in another party's papers. A party who has not filed proposed findings of fact and conclusions of law or a post-hearing brief may not file a reply brief.

(c)  Simultaneous filing required. The administrative law judge shall not order the filing by any party of any brief or reply brief in advance of the other party's filing of its brief.

[Codified to 12 C.F.R. § 390.66]

§ 390.67 Recommended decision and filing of record.

(a)  Filing of recommended decision and record. Within 45 days after expiration of the time allowed for filing reply briefs under § 390.66(b) , the administrative law judge shall file with and certify to the Executive Secretary, for decision, the record of the proceeding. The record must include the administrative law judge's recommended decision, recommended findings of fact, recommended conclusions of law, and proposed order; all prehearing and hearing transcripts, exhibits, and rulings; and the motions, briefs, memoranda, and other supporting papers filed in connection with the hearing. The administrative law judge shall serve upon each party the recommended decision, findings, conclusions, and proposed order.

(b)  Filing of index. At the same time the administrative law judge files with and certifies to the Board of Directors for final determination the record of the proceeding, the administrative law judge shall furnish to the Executive Secretary a certified index of the entire record of the proceeding. The certified index shall include, at a minimum, an entry for each paper, document or motion filed with the administrative law judge in the proceeding, the date of the filing, and the identity of the filer. The certified index shall also include an exhibit index containing, at a minimum, an entry consisting of exhibit number and title or description for: Each exhibit introduced and admitted into evidence at the hearing; each exhibit introduced but not admitted into evidence at the hearing; each exhibit introduced and admitted into evidence after the completion of the hearing; and each exhibit introduced but not admitted into evidence after the completion of the hearing.

[Codified to 12 C.F.R. § 390.67]

§ 390.68 Exceptions to recommended decision.

(a)  Filing exceptions. Within 30 days after service of the recommended decision, findings, conclusions, and proposed order under § 390.67, a party may file with the Executive Secretary written exceptions to the administrative law judge's recommended decision, findings, conclusions or proposed order, to the admission or exclusion of evidence, or to the failure of the administrative law judge to make a ruling proposed by a party. A supporting brief may be filed at the time the exceptions are filed, either as part of the same document or in a separate document.

(b)  Effect of failure to file or raise exceptions. (1) Failure of a party to file exceptions to those matters specified in paragraph (a) of this section within the time prescribed is deemed a waiver of objection thereto.

(2)  No exception need be considered by the Board of Directors if the party taking exception had an opportunity to raise the same objection, issue, or argument before the administrative law judge and failed to do so.

(c)  Contents. (1) All exceptions and briefs in support of such exceptions must be confined to the particular matters in, or omissions from, the administrative law judge's recommendations to which that party takes exception.

(2)  All exceptions and briefs in support of exceptions must set forth page or paragraph references to the specific parts of the administrative law judge's recommendations to which exception is taken, the page or paragraph references to those portions of the record relied upon to support each exception, and the legal authority relied upon to support each exception.

[Codified to 12 C.F.R. § 390.68]

§ 390.69 Review by the Board of Directors.

(a)  Notice of submission to the Board of Directors. When the Executive Secretary determines that the record in the proceeding is complete, the Board of Directors shall serve notice upon the parties that the proceeding has been submitted to the Board of Directors for final decision.

(b)  Oral argument before the Board of Directors. Upon the initiative of the Board of Directors or on the written request of any party filed with the Executive Secretary within the time for filing exceptions, the Board of Directors may order and hear oral argument on the recommended findings, conclusions, decision, and order of the administrative law judge. A written request by a party must show good cause for oral argument and state reasons why arguments cannot be presented adequately in writing. A denial of a request for oral argument may be set forth in the Board of Director's final decision. Oral argument before the Board of Directors must be on the record.

(c)  Board of Director's final decision. (1) Decisional employees may advise and assist the Board of Directors in the consideration and disposition of the case. The final decision of the Board of Directors will be based upon review of the entire record of the proceeding, except that the director may limit the issues to be reviewed to those findings and conclusions to which opposing arguments or exceptions have been filed by the parties.

(2)  The Board of Directors shall render a final decision within 90 days after notification of the parties that the case has been submitted for final decision, or 90 days after oral argument, whichever is later, unless the Board of Directors orders that the action or any aspect thereof be remanded to the administrative law judge for further proceedings. Copies of the final decision and order of the Board of Directors shall be served upon each party to the proceeding, upon other persons required by statute, and, if directed by the Board of Directors or required by statute, upon any appropriate state or Federal supervisory authority.

[Codified to 12 C.F.R. § 390.69]

§ 390.70 Stays pending judicial review.

The commencement of proceedings for judicial review of a final decision and order of the FDIC may not, unless specifically ordered by the Board of Directors or a reviewing court, operate as a stay of any order issued by the Board of Directors. The Board of Directors may, in its discretion, and on such terms as it finds just, stay the effectiveness of all or any part of its order pending a final decision on a petition for review of the order.

[Codified to 12 C.F.R. § 390.70]

§ 390.71 Scope.

The rules and procedures in §§ 390.71 through 390.75 shall apply to those proceedings covered by §§ 390.30 through 390.70. In addition, §§ 390.30 through 390.75 shall apply to adjudicatory proceedings for which hearings on the record are provided for by the following statutory provisions:

(a)  Proceedings under section 10(a)(2)(D) of the HOLA (12 U.S.C. 1467a(a)(2)(D)) to determine whether any person directly or indirectly exercises a controlling influence over the management or policies of a State savings association or any other company;

(b)  [Reserved]; and

(c)  Proceedings under section 15(c)(4) of the Securities and Exchange Act of 1934 (15 U.S.C. 78o(c)(4)) (Exchange Act) to determine whether any association or person subject to the jurisdiction of the FDIC pursuant to section 12(i) of the Exchange Act (15 U.S.C. 78l (i)) has failed to comply with the provisions of sections 12, 13, 14(a), 14(c), 14(d) or 14(f) of the Exchange Act.

[Codified to 12 C.F.R. § 390.71]

§ 390.72 Appointment of Office of Financial Institution Adjudication.

Unless otherwise directed by the FDIC, all hearings under sections 390.30--390.75 shall be conducted by administrative law judges under the direction of the Office of Financial Institution Adjudication, 1700 G Street NW., Washington, DC 20552.

[Codified to 12 C.F.R. § 390.72]

§ 390.73 Discovery.

(a)  In general. A party may take the deposition of an expert, or of a person, including another party, who has direct knowledge of matters that are non-privileged, relevant and material to the proceeding and where there is a need for the deposition. The deposition of experts shall be limited to those experts who are expected to testify at the hearing.

(b)  Notice. A party desiring to take a deposition shall give reasonable notice in writing to the deponent and to every other party to the proceeding. The notice must state the time and place for taking the deposition and the name and address of the person to be deposed.

(c)  Time limits. A party may take depositions at any time after the commencement of the proceeding, but no later than ten days before the scheduled hearing date, except with permission of the administrative law judge for good cause shown.

(d)  Conduct of the deposition. The witness must be duly sworn, and each party shall have the right to examine the witness with respect to all non-privileged, relevant and material matters of which the witness has factual, direct and personal knowledge. Objections to questions or exhibits shall be in short form, stating the grounds for objection. Failure to object to questions or exhibits is not a waiver except where the grounds for the objection might have been avoided if the objection had been timely presented. The court reporter shall transcribe or otherwise record the witness's testimony, as agreed among the parties.

(e)  Protective orders. At any time after notice of a deposition has been given, a party may file a motion for the issuance of a protective order. Such protective order may prohibit, terminate, or limit the scope or manner of the taking of a deposition. The administrative law judge shall grant such protective order upon a showing of sufficient grounds, including that the deposition:

(1)  Is unreasonable, oppressive, excessive in scope, or unduly burdensome;

(2)  Involves privileged, investigative, trial preparation, irrelevant or immaterial matters; or

(3)  Is being conducted in bad faith or in such manner as to unreasonably annoy, embarrass, or oppress the deponent.

(f)  Fees. Deposition witnesses, including expert witnesses, shall be paid the same expenses in the same manner as are paid witnesses in the district courts of the United States in proceedings in which the United States Government is a party. Expenses in accordance with this paragraph shall be paid by the party seeking to take the deposition.

(g)  Deposition subpoenas. (1) Issuance. At the request of a party, the administrative law judge shall issue a subpoena requiring the attendance of a witness at a deposition. The attendance of a witness may be required from any place in any state or territory that is subject to the jurisdiction of the United States or as otherwise permitted by law.

(2)  Service. The party requesting the subpoena must serve it on the person named therein or upon that person's counsel, by any of the methods identified in § 390.40(d). The party serving the subpoena must file proof of service with the administrative law judge.

(3)  Motion to quash. A person named in the subpoena or a party may file a motion to quash or modify the subpoena. A statement of the reasons for the motion must accompany it and a copy of the motion must be served on the party that requested the subpoena. The motion must be made prior to the time for compliance specified in the subpoena and not more than ten days after the date of service of the subpoena, or if the subpoena is served within 15 days of the hearing, within five days after the date of service.

(4)  Enforcement of deposition subpoena. Enforcement of a deposition subpoena shall be in accordance with the procedures of § 390.56(d).

[Codified to 12 C.F.R. § 390.73]

§ 390.74 Civil money penalties.

(a)  Assessment. In the event of consent, or if upon the record developed at the hearing the Board of Directors finds that any of the grounds specified in the notice issued pursuant to § 390.47 have been established, the Executive Secretary may serve an order of assessment of civil money penalty upon the party concerned. The assessment order shall be effective immediately upon service or upon such other date as may be specified therein and shall remain effective and enforceable until it is stayed, modified, terminated, or set aside by the Board of Directors or by a reviewing court.

(b)  Payment. (1) Civil penalties assessed pursuant to §§ 390.30 through 390.75 are payable and to be collected within 60 days after the issuance of the notice of assessment, unless the Board of Directors fixes a different time for payment where it determines that the purpose of the civil money penalty would be better served thereby; however, if a party has made a timely request for a hearing to challenge the assessment of the penalty, the party may not be required to pay such penalty until the Board of Directors has issued a final order of assessment following the hearing. In such instances, the penalty shall be paid within 60 days of service of such order unless the Board of Directors fixes a different time for payment. Notwithstanding the foregoing, the FDIC may seek to attach the party's assets or to have a receiver appointed to secure payment of the potential civil money penalty or other obligation in advance of the hearing in accordance with section 8(i)(4) of the FDIA (12 U.S.C. 1818(i)(4)).

(2)  [Reserved].

[Codified to 12 C.F.R. § 390.74]

[Section 390.74 amended at 77 Fed. Reg. 74579, December 18, 2012, effective December 31, 2012

§ 390.75 Additional procedures.

(a)  Replies to exceptions. Replies to written exceptions to the administrative law judge's recommended decision, findings, conclusions or proposed order pursuant to § 390.68 shall be filed within 10 days of the date such written exceptions were required to be filed.

(b)  Motions. All motions shall be filed with the administrative law judge and an additional copy shall be filed with the Executive Secretary, who receives adjudicatory filings; provided, however, that once the administrative law judge has certified the record to the Executive Secretary pursuant to § 390.67, all motions must be filed with the Board of Directors, to the attention of the Executive Secretary, within the 10-day period following the filing of exceptions allowed for the filing of replies to exceptions. Responses to such motions filed in a timely manner with the Board of Directors, other than motions for oral argument before the Board of Directors, shall be allowed pursuant to the procedures at § 390.52(d). No response is required for the Board of Directors to make a determination on a motion for oral argument.

(c)  Authority of administrative law judge. In addition to the powers listed in § 390.34, the administrative law judge shall have the authority to deny any dispositive motion and shall follow the procedures set forth for motions for summary disposition at § 390.58 and partial summary disposition at § 390.59 in making determinations on such motions.

(d)  Notification of submission of proceeding to the Board of Directors. Upon the expiration of the time for filing any exceptions, any replies to such exceptions or any motions and any ruling thereon, and after receipt of certified record, the Executive Secretary shall notify the parties within ten days of the submission of the proceeding to the Board of Directors for final determination.

(e)  Extensions of time for final determination. The Board of Directors may, sua sponte, extend the time for final determination by signing an order of extension of time within the 90-day time period and notifying the parties of such extension thereafter.

(f)  Service upon the FDIC. Service of any document upon the FDIC shall be made by filing with the Executive Secretary, in addition to the individuals and/or offices designated by the FDIC in its Notice issued pursuant to § 390.47, or such other means reasonably suited to provide notice of the person and/or office designated to receive filings.

(g)  Filings with the Board of Directors. An additional copy of all materials required or permitted to be filed with or referred to the administrative law judge pursuant to this subpart shall be filed with the Executive Secretary. This rule shall not apply to the transcript of testimony and exhibits adduced at the hearing or to proposed exhibits submitted in advance of the hearing pursuant to an order of the administrative law judge under § 390.61. Materials required or permitted to be filed with or referred to the Board of Directors pursuant to this part shall be filed with the Executive Secretary, to the attention of the Board of Directors.

(h)  Presence of cameras and other recording devices. The use of cameras and other recording devices, other than those used by the court reporter, shall be prohibited and excluded from the proceedings.

[Codified to 12 C.F.R. § 390.75]

Subpart D—Rules for Investigative Proceedings and Formal Examination Proceedings

§ 390.80  Scope of subpart.

This subpart prescribes rules of practice and procedure applicable to the conduct of investigative proceedings under section 7(j)(15) of the Federal Deposit Insurance Act, as amended, 12 U.S.C. 1817(j)(15) ("FDIA"), section 8(n) of the FDIA, 12 U.S.C. 1818(n), or section 10(c) of the FDIA, 12 U.S.C. 1820(c). This subpart does not apply to adjudicatory proceedings as to which hearings are required by statute, the rules for which are contained in subpart C.

[Codified to 12 C.F.R. § 390.80]

§ 390.81  Definitions.

As used in this subpart:

Board of Directors means the Board of Directors of the Federal Deposit Insurance Corporation or its designee;

Designated representative means the person or persons empowered by the Board of Directors to conduct an investigative proceeding or a formal examination proceeding;

FDIC means the Federal Deposit Insurance Corporation;

Formal examination proceeding means the administration of oaths and affirmations, taking and preserving of testimony, requiring the production of books, papers, correspondence, memoranda, and all other records, the issuance of subpoenas, and all related activities in connection with examination of State savings associations and their affiliates conducted pursuant to section 7(j)(15) of the FDIA, section 8(n) of the FDIA or section 10(c) of the FDIA;

General Counsel means the General Counsel of the Federal Deposit Insurance Corporation; and

Investigative proceeding means an investigation conducted under section 10(c) of the FDIA.

[Codified to 12 C.F.R. § 390.81]

§ 390.82  Confidentiality of proceedings.

All formal examination proceedings shall be private and, unless otherwise ordered by the FDIC, all investigative proceedings shall also be private. Unless otherwise ordered or permitted by the FDIC, or required by law, and except as provided in §§ 390.83 and 390.84, the entire record of any investigative proceeding or formal examination proceeding, including the order initiating the proceeding, the transcript of such proceeding, and all documents and information obtained by the designated representative(s) during the course of said proceedings shall be confidential.

[Codified to 12 C.F.R. § 390.82]

§ 390.83 Transcripts.

Transcripts or other recordings, if any, of investigative proceedings or formal examination proceedings shall be prepared solely by an official reporter or by any other person or means authorized by the designated representative. A person who has submitted documentary evidence or given testimony in an investigative proceeding or formal examination proceeding may procure a copy of his own documentary evidence or transcript of his own testimony upon payment of the cost thereof; provided, that a person seeking a transcript of his own testimony must file a written request with the designated representative stating the reason he desires to procure such transcript, and said persons may for good cause deny such request. In any event, any witness (or his counsel) shall have the right to inspect the transcript of the witness' own testimony.

[Codified to 12 C.F.R. § 390.83]

§ 390.84 Rights of witnesses.

(a)  Any person who is compelled or requested to furnish documentary evidence or give testimony at an investigative proceeding or formal examination proceeding shall have the right to examine, upon request, the order authorizing such proceeding. Copies of such resolution shall be furnished, for their retention, to such persons only with the written approval of the designated representative.

(b)  Any witness at an investigative proceeding or formal examination proceeding may be accompanied and advised by an attorney personally representing that witness.

(1)  Such attorney shall be a member in good standing of the bar of the highest court of any state, Commonwealth, possession, territory, or the District of Columbia, who has not been suspended or debarred from practice by the bar of any such political entity or before the FDIC in accordance with the provisions of subpart E and has not been excluded from the particular investigative proceeding or formal examination proceeding in accordance with paragraph (b)(3) of this section.

(2)  Such attorney may advise the witness before, during, and after the taking of his testimony and may briefly question the witness, on the record, at the conclusion of his testimony, for the sole purpose of clarifying any of the answers the witness has given. During the taking of the testimony of a witness, such attorney may make summary notes solely for his use in representing his client. All witnesses shall be sequestered, and, unless permitted in the discretion of the designated representative, no witness or accompanying attorney may be permitted to be present during the taking of testimony of any other witness called in such proceeding. Neither attorney(s) for the association(s) that are the subjects of the investigative proceedings or formal examination proceedings, nor attorneys for any other interested persons, shall have any right to be present during the testimony of any witness not personally being represented by such attorney.

(3)  The Board of Directors, for good cause, may exclude a particular attorney from further participation in any investigation in which the Board of Directors has found the attorney to have engaged in dilatory, obstructionist, egregious, contemptuous or contumacious conduct. The person conducting an investigation may report to the Board of Directors instances of apparently dilatory, obstructionist, egregious, contemptuous or contumacious conduct on the part of an attorney. After due notice to the attorney, the FDIC may take such action as the circumstances warrant based upon a written record evidencing the conduct of the attorney in that investigation or such other or additional written or oral presentation as the Board of Directors may permit or direct.

[Codified to 12 C.F.R. § 390.84]

§ 390.85  Obstruction of the proceedings.

The designated representative shall report to the Board of Directors any instances where any witness or counsel has engaged in dilatory, obstructionist, or contumacious conduct or has otherwise violated any provision of this part during the course of an investigative proceeding or formal examination proceeding; and the Board of Directors may take such action as the circumstances warrant, including the exclusion of counsel from further participation in such proceeding.

§ 390.86 Subpoenas.

(a)  Service. Service of a subpoena in connection with any investigative proceeding or formal examination proceeding shall be effected in the following manner:

(1)  Service upon a natural person. Service of a subpoena upon a natural person may be effected by handing it to such person; by leaving it at his office with the person in charge thereof, or, if there is no one in charge, by leaving it in a conspicuous place therein; by leaving it at his dwelling place or usual place of abode with some person of suitable age and discretion then residing therein; by mailing it to him by registered or certified mail or by an express delivery service at his last known address; or by any method whereby actual notice is given to him.

(2)  Service upon other persons. When the person to be served is not a natural person, service of the subpoena may be effected by handing the subpoena to a registered agent for service, or to any officer, director, or agent in charge of any office of such person; by mailing it to any such representative by registered or certified mail or by an express delivery service at his last known address; or by any method whereby actual notice is given to such person.

(b)  Motions to quash. Any person to whom a subpoena is directed may, prior to the time specified therein for compliance, but in no event more than 10 days after the date of service of such subpoena, apply to the General Counsel or his designee to quash or modify such subpoena, accompanying such application with a statement of the reasons therefor. The General Counsel or his designee, as appropriate, may:

(1)  Deny the application;

(2)  Quash or revoke the subpoena;

(3)  Modify the subpoena; or

(4)  Condition the granting of the application on such terms as the General Counsel or his designee determines to be just, reasonable, and proper.

(c)  Attendance of witnesses. Subpoenas issued in connection with an investigative proceeding or formal examination proceeding may require the attendance and/or testimony of witnesses from any State or territory of the United States and the production by such witnesses of documentary or other tangible evidence at any designated place where the proceeding is being (or is to be) conducted. Foreign nationals are subject to such subpoenas if such service is made upon a duly authorized agent located in the United States.

(d)  Witness fees and mileage. Witnesses summoned in any proceeding under this part shall be paid the same fees and mileage that are paid witnesses in the district courts of the United States. Such fees and mileage need not be tendered when the subpoena is issued on behalf of the FDIC by any of its designated representatives.

[Codified to 12 C.F.R. § 390.86]

Subpart E—Practice Before the FDIC

§ 390.90 Scope of subpart.

This subpart prescribes rules with regard to general practice before the FDIC on one's own behalf or in a representative capacity and prescribes rules describing the circumstances under which attorneys, accountants, appraisers, or other persons may be suspended or debarred, either temporarily or permanently, from practicing before the FDIC. In connection with any particular matter, reference also should be made to any special requirements of procedure and practice that may be contained in the particular statute involved or the rules and forms adopted by the FDIC thereunder, which special requirements are controlling. In addition to any suspension hereunder, a person may be excluded from further participation under parts 390 and 391 from an adjudicatory proceeding in accordance with § 390.35(a)(1), from a removal hearing in accordance with § 390.12, or from an investigatory proceeding in accordance with § 390.84(b)(2). Furthermore, no person who has been suspended or debarred from practice before the FDIC in accordance with the provisions of this subpart may submit to the FDIC, either directly or on behalf of an interested party, any written documents or petitions otherwise permitted under the Administrative Procedure Act.

[Codified to 12 C.F.R. § 390.90]

§ 390.91  Definitions.

As used in this subpart:

Attorney means any person who is a member in good standing of the bar of the highest court of any State, possession, territory, Commonwealth or the District of Columbia;

Executive Secretary means the Executive Secretary of the FDIC;

FDIC means the Federal Deposit Insurance Corporation;

OTS means the Office of Thrift Supervision;

Practice means transacting any business with the FDIC, including:

(1)  The representation of another person at any adjudicatory, investigatory, removal or rulemaking proceeding conducted before the FDIC, a presiding officer or the FDIC's staff, including those proceedings covered in subparts B, C, and D;

(2)  The preparation of any statement, opinion, financial statement, appraisal report, audit report, or other document or report by any attorney, accountant, appraiser or other licensed expert which is filed with or submitted to the FDIC, with such expert's consent or knowledge in connection with any application or other filing with the FDIC;

(3)  A presentation to the FDIC, a presiding officer or the FDIC's staff at a conference or meeting relating to an association's or other person's rights, privileges or liabilities under the laws administered by the FDIC and rules and regulations promulgated thereunder;

(4)  Any business correspondence or communication with the FDIC, a presiding officer or the FDIC's staff;

(5)  The transaction of any other formal business with the FDIC on behalf of another, in the capacity of an attorney, accountant, appraiser or other licensed expert; and

Presiding officer includes the Board of Directors or an administrative law judge appointed under section 3105 or detailed pursuant to section 3344 of title 5 of the U.S. Code and, as used in this subpart, the term shall be construed to refer to whichever of the above-identified individuals presides at a hearing or other proceeding, except as otherwise specified in the text.

§ 390.92  Who may practice.

(a)  By non-attorneys. (1) An individual may appear on his own behalf (pro se); a member of a partnership may represent the partnership; a bona fide and duly authorized officer of a corporation, trust or association may represent the corporation, trust or association; and an officer or employee of a commission, department or political subdivision may represent that commission, department or political subdivision before the FDIC.

(2)  Any accountant, appraiser or other licensed expert may practice before the FDIC in a professional capacity.

(b)  By attorneys. Any association or other person may be represented in any proceeding or other matter before the FDIC by an attorney.

(c)  Authority to act as representative. Any licensed expert or professional transacting business with the FDIC in a representative capacity may be required to show his authority to act in such capacity.

[Codified to 12 C.F.R. § 390.92]

§ 390.93 Suspension and debarment.

(a)  The FDIC may censure any person practicing before it or may deny, temporarily or permanently, the privilege of any person to practice before it if such person is found by the FDIC, after notice of and opportunity for hearing in the matter,

(1)  Not to possess the requisite qualifications to represent others,

(2)  To be lacking in character or professional integrity,

(3)  To have engaged in any dilatory, obstructionist, egregious, contemptuous, contumacious or other unethical or improper professional conduct before the OTS or FDIC, or

(4)  To have willfully violated, or willfully aided and abetted the violation of, any provision of the laws administered by the OTS or FDIC or the rules and regulations promulgated thereunder.

(b)  Automatic suspension. (1) Any person who, after being licensed as a professional or expert by any competent authority, has been convicted of a felony, or of a misdemeanor involving moral turpitude, personal dishonesty or breach of trust, shall be suspended forthwith from practicing before the FDIC.

(2)  Any accountant, appraiser or other licensed expert whose license to practice has been revoked in any State, possession, territory, Commonwealth or the District of Co1umbia, shall be suspended forthwith from practice before the FDIC.

(3)  Any attorney who has been suspended or disbarred by a court of the United States or in any State, possession, territory, Commonwealth or the District of Columbia, shall be suspended forthwith from practicing before the FDIC.

(4)  A conviction (including a judgment or order on a plea of nolo contendere), revocation, suspension or disbarment under paragraphs (b)(1), (b)(2) and (b)(3) of this section shall be deemed to have occurred when the convicting, revoking, suspending or disbarring agency or tribunal enters its judgment or order, regardless of whether an appeal is pending or could be taken.

(5)  For purposes of this part, it shall be irrelevant that any attorney, accountant, appraiser or other licensed expert who has been suspended, disbarred or otherwise disqualified from practice before a court or in a jurisdiction continues in professional good standing before other courts or in other jurisdictions.

(c)  Temporary suspension. (1) The FDIC, with due regard to the public interest and without preliminary hearing, by order, may temporarily suspend any person from appearing or practicing before it who, by name, has been:

(i)  Permanently enjoined (whether by consent, default or summary judgment or after trial) by any court of competent jurisdiction or by the OTS or FDIC itself in a final administrative order, by reason of his misconduct in any action brought by the OTS or FDIC based upon violations of, or aiding and abetting the violation of, the Home Owners' Loan Act of 1933, as amended, 12 U.S.C. 1461 et seq., the Federal Deposit Insurance Act, as amended, 12 U.S.C. 1811 et seq. or any provision of the Securities Exchange Act of 1934, as amended, 15 U.S.C. 78a, et seq., which is administered by the FDIC, or of any rule or regulation promulgated thereunder; or

(ii)  Found by any court of competent jurisdiction (whether by consent, default, or summary judgment, or after trial) in any action brought by the OTS or FDIC to which he is a party or found by the OTS or FDIC (whether by consent, default, upon summary judgment or after hearing) in any administrative proceeding in which the OTS or FDIC is a complainant and he is a party, to have willfully committed, caused or aided or abetted a violation of any provision of the Home Owners' Loan Act of 1933, as amended, 12 U.S.C. 1461 et seq., the Federal Deposit Insurance Act, as amended, 12 U.S.C. 1811 et seq. or any provision of the Securities Exchange Act of 1934, as amended, 15 U.S.C. 78a, et seq., which is administered by the OTS or FDIC, or of any rule or regulation promulgated thereunder.

(2)  An order of temporary suspension shall become effective when served by certified or registered mail directed to the last known business or residential address of the person involved. No order of temporary suspension shall be entered by the FDIC pursuant to paragraph (c)(1) of this section more than three months after the final judgment or order entered in a judicial or administrative proceeding described in paragraphs (c)(1)(i) or (ii) of this section has become effective and all review or appeal procedures have been completed or are no longer available.

(3)  Any person temporarily suspended from appearing and practicing before the OTS or FDIC in accordance with paragraph (c)(1) of this section may, within 30 days after service upon him of the order of temporary suspension, petition the FDIC to lift such suspension. If no petition is received by the FDIC within those 30 days, the suspension shall become permanent.

(4)  Within 30 days after the filing of a petition in accordance with paragraph (c)(3) of this section, the FDIC shall either lift the temporary suspension or set the matter down for hearing at a time and place to be designated by the FDIC, or both. After opportunity for hearing, the FDIC may censure the petitioner or may suspend the petitioner from appearing or practicing before the FDIC temporarily or permanently. In every case in which the temporary suspension has not been lifted, the hearing and any other action taken pursuant to this paragraph (c)(4) shall be expedited by the FDIC in order to ensure the petitioner's right to address the allegations against him.

(5)  In any hearing held on a petition filed in accordance with paragraph (c)(3) of this section, a showing that the petitioner has been enjoined or has been found to have committed, caused or aided or abetted violations as described in paragraph (c)(1) of this section, without more, may be a basis for suspension or debarment; that showing having been made, the burden shall then be on the petitioner to show why he should not be censured or be temporarily or permanently suspended or debarred. A petitioner will not be permitted to contest any findings against him or any admissions made by him in the judicial or administrative proceedings upon which the proposed censure, suspension or debarment is based. A petitioner who has consented to the entry of a permanent injunction or order as described in paragraph (c)(1)(i) of this section, without admitting the facts set forth in the complaint, shall nevertheless be presumed for all purposes under this section to have been enjoined or ordered by reason of the misconduct alleged in the complaint.

[Codified to 12 C.F.R. § 390.93]

§ 390.94 Reinstatement.

(a)  Any person who is suspended from practicing before the OTS or FDIC under § 390.93 (a) or (c) may file an application for reinstatement at any time. Denial of the privilege of practicing before the FDIC shall continue unless and until the applicant has been reinstated by order of the FDIC for good cause shown.

(b)  Any person suspended under paragraph § 390.93(b) shall be reinstated by the FDIC, upon appropriate application, if all of the grounds for application of the provisions of § 390.93(b) subsequently are removed by a reversal of the conviction or termination of the suspension, disbarment or revocation. An application for reinstatement on any other grounds by any person suspended under § 390.93(b) may be filed at any time. Such application shall state with particularity the relief desired and the grounds therefor and shall include supporting evidence, when available. The applicant shall be accorded an opportunity for an informal hearing in the matter, unless the applicant has waived a hearing in the application and, instead, has elected to have the matter determined on the basis of written submissions. Such hearing shall utilize the procedures established in §§ 390.12 and 390.16(a). However, such suspension shall continue unless and until the applicant has been reinstated by order of the FDIC for good cause shown.

[Codified to 12 C.F.R. § 390.94]

§ 390.95  Duty to file information concerning adverse judicial or administrative action.

Any person appearing or practicing before the FDIC who has been or is the subject of a conviction, suspension, debarment, license revocation, injunction or other finding of the kind described in § 390.93(b) or (c) in an action not instituted by the OTS or FDIC shall promptly file a copy of the relevant order, judgment or decree with the Executive Secretary together with any related opinion or statement of the agency or tribunal involved. Any person who fails to so file a copy of the order, judgment or decree within 30 days after the entry of the order, judgment or decree, or the date such person initiates practice before the FDIC, for that reason alone may be disqualified from practicing before the FDIC until such time as the appropriate filing shall be made, but neither the filing of these documents nor the failure of a person to file them shall in any way impair the operation of any other provision of this subpart.

[Codified to 12 C.F.R. § 390.95]

§ 390.96 Proceeding under this subpart.

(a)  All hearings required or permitted to be held under § 390.93(a) and (c) of this subpart shall be held before a presiding officer utilizing the procedures established in the rules of practice and procedure in adjudicatory proceedings under subpart C of this part.

(b)  All hearings held under this subpart shall be closed to the public unless the FDIC on its own motion or upon the request of a party otherwise directs.

(c)  Any proceeding brought under any section of this subpart shall not preclude a proceeding under any other section of this subpart or any other part of the FDIC's regulations.

[Codified to 12 C.F.R. § 390.96]

§ 390.97 Removal, suspension, or debarment of independent public accountants and accounting firms performing audit services.

(a)  Scope. This subpart, which implements section 36(g)(4) of the Federal Deposit Insurance Act (FDIA), (12 U.S.C. 1831m(g)(4)), provides rules and procedures for the removal, suspension, or debarment of independent public accountants and their accounting firms from performing independent audit and attestation services required by section 36 of the FDIA for insured State savings associations.

(b)  Definitions. As used in this section, the following terms have the meaning given below unless the context requires otherwise:

Accounting firm. The term accounting firm means a corporation, proprietorship, partnership, or other business firm providing audit services.

Audit services. The term audit services means any service required to be performed by an independent public accountant by section 36 of the FDIA and part 363, including attestation services. Audit services include any service performed with respect to a savings and loan holding company of a State savings association that is used to satisfy requirements imposed by section 36 of the FDIA or part 363 on that State savings association.

Independent public accountant. The term independent public accountant means any individual who performs or participates in providing audit services.

(c)  Removal, suspension, or debarment of independent public accountants. The FDIC may remove, suspend, or debar an independent public accountant from performing audit services for State savings associations that are subject to section 36 of the FDIA if, after service of a notice of intention and opportunity for hearing in the matter, the FDIC finds that the independent public accountant:

(1)  Lacks the requisite qualifications to perform audit services;

(2)  Has knowingly or recklessly engaged in conduct that results in a violation of applicable professional standards, including those standards and conflicts of interest provisions applicable to independent public accountants through the Sarbanes-Oxley Act of 2002, Pub. L. 107--204, 116 Stat. 745 (2002) (Sarbanes-Oxley Act), and developed by the Public Company Accounting Oversight Board and the Securities and Exchange Commission;

(3)  Has engaged in negligent conduct in the form of:

(i)  A single instance of highly unreasonable conduct that results in a violation of applicable professional standards in circumstances in which an independent public accountant knows, or should know, that heightened scrutiny is warranted; or

(ii)  Repeated instances of unreasonable conduct, each resulting in a violation of applicable professional standards, that indicate a lack of competence to perform audit services;

(4)  Has knowingly or recklessly given false or misleading information or knowingly or recklessly participated in any way in the giving of false or misleading information to the FDIC or any officer or employee of the FDIC;

(5)  Has engaged in, or aided and abetted, a material and knowing or reckless violation of any provision of the Federal banking or securities laws or the rules and regulations thereunder, or any other law;

(6)  Has been removed, suspended, or debarred from practice before any federal or state agency regulating the banking, insurance, or securities industries, other than by action listed in paragraph (j) of this section, on grounds relevant to the provision of audit services; or

(7)  Is suspended or debarred for cause from practice as an accountant by any duly constituted licensing authority of any state, possession, commonwealth, or the District of Columbia.

(d)  Removal, suspension or debarment of an accounting firm. If the FDIC determines that there is good cause for the removal, suspension, or debarment of a member or employee of an accounting firm under paragraph (c) of this section, the FDIC also may remove, suspend, or debar such firm or one or more offices of such firm. In considering whether to remove, suspend, or debar an accounting firm or office thereof, and the term of any sanction against an accounting firm under this section, the FDIC may consider, for example:

(1)  The gravity, scope, or repetition of the act or failure to act that constitutes good cause for the removal, suspension, or debarment;

(2)  The adequacy of, and adherence to, applicable policies, practices, or procedures for the accounting firm's conduct of its business and the performance of audit services;

(3)  The selection, training, supervision, and conduct of members or employees of the accounting firm involved in the performance of audit services;

(4)  The extent to which managing partners or senior officers of the accounting firm have participated, directly or indirectly through oversight or review, in the act or failure to act; and

(5)  The extent to which the accounting firm has, since the occurrence of the act or failure to act, implemented corrective internal controls to prevent its recurrence.

(e)  Remedies. The remedies provided in this section are in addition to any other remedies the FDIC may have under any other applicable provisions of law, rule, or regulation.

(f)  Proceedings to remove, suspend, or debar. (1) The FDIC may initiate a proceeding to remove, suspend, or debar an independent public accountant or accounting firm from performing audit services by issuing a written notice of intention to take such action that names the individual or firm as a respondent and describes the nature of the conduct that constitutes good cause for such action.

(2)  An independent public accountant or accounting firm named as a respondent in the notice issued under paragraph (f)(1) of this section may request a hearing on the allegations in the notice. Hearings conducted under this paragraph shall be conducted in the same manner as other hearings under the Uniform Rules of Practice and Procedure contained in subpart C.

(g)  Immediate suspension from performing audit services. (1) If the FDIC serves written notice of intention to remove, suspend, or debar an independent public accountant or accounting firm from performing audit services, the FDIC may, with due regard for the public interest and without preliminary hearing, immediately suspend an independent public accountant or accounting firm from performing audit services for savings associations, if the FDIC:

(i)  Has a reasonable basis to believe that the independent public accountant or accounting firm engaged in conduct (specified in the notice served upon the independent public accountant or accounting firm under paragraph (f) of this section) that would constitute grounds for removal, suspension, or debarment under paragraph (c) or (d) of this section;

(ii)  Determines that immediate suspension is necessary to avoid immediate harm to an insured depository institution or its depositors or to the depository system as a whole; and

(iii)  Serves such independent public accountant or accounting firm with written notice of the immediate suspension.

(2)  An immediate suspension notice issued under this paragraph will become effective upon service. Such suspension will remain in effect until the date the FDIC dismisses the charges contained in the notice of intention, or the effective date of a final order of removal, suspension, or debarment issued by the FDIC to the independent public accountant or accounting firm.

(h)  Petition to stay. (1) Any independent public accountant or accounting firm immediately suspended from performing audit services in accordance with paragraph (g) of this section may, within 10 calendar days after service of the notice of immediate suspension, file a petition with the FDIC for a stay of such suspension. If no petition is filed within 10 calendar days, the immediate suspension shall remain in effect.

(2)  Upon receipt of a stay petition, the FDIC will designate a presiding officer who shall fix a place and time (not more than 10 calendar days after receipt of such petition, unless extended at the request of the petitioner), at which the immediately suspended party may appear, personally or through counsel, to submit written materials and oral argument. Any FDIC employee engaged in investigative or prosecuting functions for the FDIC in a case may not, in that or a factually related case, serve as a presiding officer or participate or advise in the decision of the presiding officer or of the FDIC, except as witness or counsel in the proceeding. In the sole discretion of the presiding officer, upon a specific showing of compelling need, oral testimony of witnesses may also be presented. In hearings held pursuant to this paragraph, there will be no discovery and the provisions of §§ 390.35 through 390.41, 390.45, and 390.50 of the Uniform Rules will apply.

(3)  Within 30 calendar days after the hearing, the presiding officer shall issue a decision. The presiding officer will grant a stay upon a demonstration that a substantial likelihood exists of the respondent's success on the issues raised by the notice of intention and that, absent such relief, the respondent will suffer immediate and irreparable injury, loss, or damage. In the absence of such a demonstration, the presiding officer will notify the parties that the immediate suspension will be continued pending the completion of the administrative proceedings pursuant to the notice.

(4)  The parties may seek review of the presiding officer's decision by filing a petition for review with the presiding officer within 10 calendar days after service of the decision. Replies must be filed within 10 calendar days after the petition filing date. Upon receipt of a petition for review and any reply, the presiding officer must promptly certify the entire record to the Board of Directors. Within 60 calendar days of the presiding officer's certification, the Board of Directors shall issue an order notifying the affected party whether or not the immediate suspension should be continued or reinstated. The order shall state the basis of the Board of Director's decision.

(i)  Scope of any order of removal, suspension, or debarment. (1) Except as provided in paragraph (i)(2) of this section, any independent public accountant or accounting firm that has been removed, suspended (including an immediate suspension), or debarred from performing audit services by the FDIC may not, while such order is in effect, perform audit services for any State savings association.

(2)  An order of removal, suspension (including an immediate suspension), or debarment may, at the discretion of the FDIC, be made applicable to a limited number of State savings associations. (limited scope order).

(j)  Automatic removal, suspension, and debarment. (1) An independent public accountant or accounting firm may not perform audit services for a State savings association if the independent public accountant or accounting firm:

(i)  Is subject to a final order of removal, suspension, or debarment (other than a limited scope order) issued by the Board of Governors of the Federal Reserve System, the Comptroller of the Currency, or the FDIC of the under section 36 of the FDIA;

(ii)  Is subject to a temporary suspension or permanent revocation of registration or a temporary or permanent suspension or bar from further association with any registered public accounting firm issued by the Public Company Accounting Oversight Board or the Securities and Exchange Commission under sections 105(c)(4)(A) or (B) of the Sarbanes-Oxley Act (15 U.S.C. 7215(c)(4)(A) or (B)); or

(iii)  Is subject to an order of suspension or denial of the privilege of appearing or practicing before the Securities and Exchange Commission.

(2)  Upon written request, the FDIC, for good cause shown, may grant written permission to an independent public accountant or accounting firm to perform audit services for State savings associations. The request must contain a concise statement of action requested. The FDIC may require the applicant to submit additional information.

(k)  Notice of removal, suspension, or debarment. (1) Upon issuance of a final order for removal, suspension, or debarment of an independent public accountant or accounting firm from providing audit services, the FDIC shall make the order publicly available and provide notice of the order to the other Federal banking agencies.

(2)  An independent public accountant or accounting firm that provides audit services to a State savings association must provide the FDIC with written notice of:

(i)  Any currently effective order or other action described in paragraphs (c)(6) through (c)(7) or paragraphs (j)(1)(ii) through (iii) of this section; and

(ii)  Any currently effective action by the Public Company Accounting Oversight Board under sections 105(c)(4)(C) or (G) of the Sarbanes-Oxley Act (15 U.S.C. 7215(c)(4)(C) or (G)).

(3)  Written notice required by this paragraph shall be given no later than 15 calendar days following the effective date of an order or action or 15 calendar days before an independent public accountant or accounting firm accepts an engagement to provide audit services, whichever date is earlier.

(l)  Application for reinstatement. (1) Unless otherwise ordered by the FDIC, an independent public accountant, accounting firm, or office of a firm that was removed, suspended or debarred under this section may apply for reinstatement in writing at any time. The request shall contain a concise statement of action requested. The FDIC may require the applicant to submit additional information.

(2)  An applicant for reinstatement under paragraph (l)(1) of this section may, in the FDIC's sole discretion, be afforded a hearing. The independent public accountant or accounting firm shall bear the burden of going forward with an application and the burden of proving the grounds supporting the application. The FDIC may, in its sole discretion, direct that any reinstatement proceeding be limited to written submissions. The removal, suspension, or debarment shall continue until the FDIC, for good cause shown, has reinstated the applicant or until, in the case of a suspension, the suspension period has expired. The filing of a petition for reinstatement shall not stay the effectiveness of the removal, suspension, or debarment of an independent public accountant or accounting firm.

[Codified to 12 C.F.R. § 390.98]

Subpart F—Application Processing Procedures

§ 390.100  What does this subpart do?

(a)  This subpart explains the FDIC's procedures for processing applications, notices, or filings (applications) under parts 390 and 391 for State savings associations. Except as provided in paragraph (b) of this section, §§ 390.103 through 390.110 and §§ 390.126 through 390.135 apply whenever an FDIC regulation requires any person (you) to file an application with the FDIC. Sections 390.111 through 390.125, however, only apply when a FDIC regulation incorporates the procedures in those sections or where otherwise required by the FDIC.

(b)  This subpart does not apply to any of the following:

(1)  An application related to a transaction under section 13(c) or (k) of the Federal Deposit Insurance Act, 12 U.S.C. 1823(c) or (k).

(2)  A request for reconsideration, modification, or appeal of a final FDIC action.

(3)  A request related to litigation, an enforcement proceeding, a supervisory directive or supervisory agreement. Such requests include a request seeking approval under, modification of, or termination of an order issued under subparts C or D, a supervisory agreement, a supervisory directive, a consent merger agreement or a document negotiated in settlement of an enforcement matter or other litigation, unless an applicable FDIC regulation specifically requires an application under this subpart.

(4)  An application filed under a FDIC regulation that prescribes other application processing procedures and time frames for the approval of applications.

(c)  If a FDIC regulation for a specific type of application prescribes some application processing procedures, or time frames, the FDIC will apply this subpart to the extent necessary to process the application. For example, if a FDIC regulation for a specific type of application does not identify time periods for the processing of an application, the time periods in this subpart apply.

[Codified to 12 C.F.R. § 390.100]

§ 390.101  Do the same procedures apply to all applications under this subpart?

The FDIC processes applications for State savings associations under this subpart using two procedures, expedited treatment and standard treatment. To determine which treatment applies, you may use the following chart:

If . . . Then the FDIC will process your application under . . .
  (a)  The applicable regulation does not specifically state that expedited treatment is available. Standard treatment.
  (b)  You are not a State savings association. Standard treatment.
  (c)  Your composite rating is 3, 4, or 5. The composite rating is the composite numeric rating that the FDIC or the other federal banking regulator assigned to you under the Uniform Financial Institutions Rating System or under a comparable rating system. The composite rating refers to the rating assigned and provided to you, in writing, as a result of the most recent examination. Standard treatment.
  (d)  Your Community Reinvestment Act (CRA) rating is Needs to Improve or Substantial Noncompliance. The CRA rating is the Community Reinvestment Act performance rating that the FDIC or the other federal banking regulator assigned and provided to you, in writing, as a result of the most recent compliance examination. See, for example, 12 CFR 195.28. Standard treatment.
  (e)  Your compliance rating is 3, 4, or 5. The compliance rating is the numeric rating that the FDIC or the other federal banking regulator assigned to you under the FDIC compliance rating system, or a comparable rating system used by the other federal banking regulator. The compliance rating refers to the rating assigned and provided to you, in writing, as a result of the most recent compliance examination. Standard treatment.
  (f)  You fail any one of your capital requirements under subpart Z. Standard treatment.
  (g)  The FDIC has notified you that you are an association in troubled condition. Standard treatment.
  (h)  Neither the FDIC nor any other federal banking regulator has assigned you a composite rating, a CRA rating or a compliance rating. Standard treatment.
  (i)  You do not meet any of the criteria listed in paragraphs (a) through (h) of this section. Expedited treatment.

[Codified to 12 C.F.R. § 390.101]

§ 390.102  How does the FDIC compute time periods under this subpart?

In computing time periods under this subpart, the FDIC does not include the day of the act or event that commences the time period. When the last day of a time period is a Saturday, Sunday, or Federal holiday, the time period runs until the end of the next day that is not a Saturday, Sunday, or Federal holiday.

[Codified to 12 C.F.R. § 390.102]

§ 390.103 Must I meet with the FDIC before I file my application?

(a)  Chart. To determine whether you must attend a pre-filing meeting before you file an application, please consult the following chart:

If you file . . . Then . . .
An application to acquire control of a State savings association. The FDIC may require you to meet with the FDIC before filing your application and may require you to submit a draft business plan or other relevant information before this meeting.

(b)  Contacting the appropriate FDIC region. (1) You must contact the appropriate FDIC region a reasonable time before you file an application described in paragraph (a) of this section. Unless paragraph (a) already requires a pre-filing meeting or a draft business plan, the appropriate FDIC region will determine whether it will require a pre-filing meeting, and whether you must submit a business plan or other relevant information before the meeting. The appropriate FDIC region will also establish a schedule for any meeting and the submission of any information.

(2)  All other applicants are encouraged to contact the appropriate FDIC region to determine whether a pre-filing meeting or the submission of a draft business plan or other relevant information would expedite the application review process.

[Codified to 12 C.F.R. § 390.103]

§ 390.104 What information must I include in my draft business plan?

If you are required to submit a draft business plan under § 309.103, your plan must:

(a)  Clearly and completely describe the State savings association's projected operations and activities;

(b)  Describe the risks associated with the transaction and the impact of this transaction on any existing activities and operations of the State savings association, including financial projections for a minimum of three years;

(c)  Identify the majority of the proposed board of directors and the key senior executive officers (as defined in § 390.361) of the State savings association and demonstrate that these individuals have the expertise to prudently manage the activities and operations described in the savings association's draft business plan; and

(d)  Demonstrate how applicable requirements regarding serving the credit and lending needs in the market areas served by the State savings association will be met.

[Codified to 12 C.F.R. § 390.104]

§ 390.105 What type of application must I file?

(a)  Expedited treatment. If you are eligible for expedited treatment under § 390.101, you may file your application in the form of a notice that includes all information required by the applicable substantive regulation. If the FDIC has designated a form for your notice, you must file that form. Your notice is an application for the purposes of all statutory and regulatory references to "applications."

(b)  Standard treatment. If you are subject to standard treatment under § 390.101, you must file your application following all applicable substantive regulations and guidelines governing the filing of applications. If the FDIC has a designated form for your application, you must file that form.

(c)  Waiver requests. If you want the FDIC to waive a requirement that you provide certain information with the notice or application, you must include a written waiver request:

(1)  Describing the requirement to be waived and

(2)  Explaining why the information is not needed to enable the FDIC to evaluate your notice or application under applicable standards.

[Codified to 12 C.F.R. § 390.105]

§ 390.106 What information must I provide with my application?

(a)  Required information. You may obtain information about required certifications, other regulations and guidelines affecting particular notices and applications, appropriate forms, and instructions from the appropriate FDIC region.

(b)  Captions and exhibits. You must caption the original application and required copies with the type of filing, and must include all exhibits and other pertinent documents with the original application and all required copies. You are not required to include original signatures on copies if you include a copy of the signed signature page or the copy otherwise indicates that the original was signed.

[Codified to 12 C.F.R. § 390.106]

§ 390.107 May I keep portions of my application confidential?

(a)  Confidentiality. The FDIC makes submissions under this subpart available to the public, but may keep portions of your application confidential based on the rules in this section.

(b)  Confidentiality request. (1) You may request the FDIC to keep portions of your application confidential. You must submit your request in writing with your application and must explain in detail how your request is consistent with the standards under the Freedom of Information Act (5 U.S.C. 552) and part 309 of this chapter. For example, you should explain how you will be substantially harmed by pubic disclosure of the information. You must separately bind and mark the portions of the application you consider confidential and the portions you consider non-confidential.

(2)  The FDIC will not treat as confidential the portion of your application describing how you plan to meet your Community Reinvestment Act (CRA) objectives. The FDIC will make information in your CRA plan, including any information incorporated by reference from other parts of your application, available to the public upon request.

(c)  FDIC determination on confidentiality. The FDIC will determine whether information that you designate as confidential may be withheld from the public under the Freedom of Information Act (5 U.S.C. 552) and part 309 of this chapter. The FDIC will advise you before it makes information you designate as confidential available to the public.

[Codified to 12 C.F.R. § 390.107]

§ 390.108 Where do I file my application?

(a)  Appropriate FDIC region. (1) You must file the original application and the number of copies indicated on the applicable form with the appropriate FDIC region. The appropriate FDIC region addresses are listed in paragraph (a)(2) of this section. If the form does not indicate the number of copies you must file or if FDIC has not prescribed a form for your application, you must file the original application and two copies.

(2)  The addresses of appropriate FDIC region and the states covered by each office are:

Region Office address States served
New York 350 Fifth Avenue, Suite 1200, New York, NY 10118 Connecticut, Delaware, District of Columbia, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Puerto Rico, Rhode Island, Vermont, Virgin Islands.
Atlanta 10 Tenth Street, NE Suite 800 Atlanta, GA 30309-3906 Alabama, Florida, Georgia, North Carolina, South Carolina, Virginia, West Virginia.
Chicago 300 South Riverside Plaza, Suite 1700 Chicago, Illinois 60606 Illinois, Indiana, Kentucky, Ohio, Michigan, Ohio, Wisconsin.
Kansas 1100 Walnut St., Suite 2100 Kansas City, MO 64106 Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota.
Dallas 1601 Bryan Street, Dallas, TX 75201 Arkansas, Colorado, Louisiana, Mississippi, New Mexico, Oklahoma, Tennessee, Texas.
San Francisco 25 Jessie Street at Ecker Square Suite 2300 San Francisco, CA 94105-2780 Alaska, Arizona, California, Guam, Hawaii, Idaho, Montana, Nevada, Northern Mariana Islands, Oregon, Utah, Washington, Wyoming.

(b)  Additional filings with FDIC headquarters. (1) In addition to filing in the appropriate FDIC region, if your application involves a significant issue of law or policy or if an applicable regulation or form directs you to file with FDIC Headquarters, you must also file copies of your application with the Risk Management and Applications Section at FDIC headquarters, 550 17th Street, NW., Washington, DC 20429. You must file the number of copies indicated on the applicable form. If the form does not indicate the number of copies you must file or if FDIC has not prescribed a form for your application, you must file three copies.

(2)(i)  You may request a list of applications involving significant issues of law or policy by contacting appropriate FDIC region.

(ii)  The FDIC reserves the right to identify significant issues of law or policy in a particular application. The FDIC will advise you, in writing, if it makes this determination.

[Codified to 12 C.F.R. § 390.108]

§ 390.109 What is the filing date of my application?

(a)  Your application's filing date is the date that you complete all of the following requirements.

(1)  You attend a pre-filing meeting and submit a draft business plan or relevant information, if the FDIC requires you to do so under § 390.103.

(2)  You file your application and all required copies with the FDIC, as described under § 390.108.

(i)  If you are required to file with an appropriate FDIC region and with the FDIC headquarters, you have not filed with the FDIC until you file with both offices.

(ii)  You have not filed with the appropriate FDIC region or the FDIC headquarters until you file the application and the required number of copies with that office.

(iii)  If you file after the close of business established by appropriate FDIC region or the FDIC headquarters, you have filed with that office on the next business day.

(3)  [Reserved].

(b)  The FDIC may notify you that it has adjusted your application filing date if you fail to meet any applicable publication requirements.

(c)  If, after you properly file your application with the appropriate FDIC region, the FDIC determines that a significant issue of law or policy exists under § 390.108(b)(2)(ii), the filing date of your application is the day you filed with the appropriate FDIC region. The 30-day review period under § 390.126 or § 390.127 will restart in its entirety when the appropriate FDIC region forwards the appropriate number of copies of your application to the FDIC headquarters.

[Codified to 12 C.F.R. § 390.109]

§ 390.110 How do I amend or supplement my application?

To amend or supplement your application, you must file the amendment or supplemental information at the appropriate FDIC region along with the number of copies required under § 390.108. Your amendment or supplemental information also must meet the caption and exhibit requirements at § 390.106(b).

[Codified to 12 C.F.R. § 390.110]

§ 390.111 Who must publish a public notice of an application?

Sections 390.111 through 390.115 apply whenever a FDIC regulation requires an applicant ("you") to follow the public notice procedures in this subpart.

[Codified to 12 C.F.R. § 390.111]

§ 390.112 What information must I include in my public notice?

Your public notice must include the following:

(a)  Your name and address.

(b)  The type of application.

(c)  The name of the depository institution(s) that is the subject matter of the application.

(d)  A statement indicating that the public may submit comments to the appropriate FDIC region.

(e)  The address of the appropriate FDIC region where the public may submit comments.

(f)  The date that the comment period closes.

(g)  A statement indicating that the nonconfidential portions of the application are on file in the appropriate FDIC region, and are available for public inspection during regular business hours.

(h)  Any other information that the FDIC requires you to publish. You may find the format for various publication notices in the appendix to the FDIC application processing handbook.

[Codified to 12 C.F.R. § 390.112]

§ 390.113 When must I publish the public notice?

You must publish a public notice of the application no earlier than seven days before and no later than the date of filing of the application.

[Codified to 12 C.F.R. § 390.113]

§ 390.114 Where must I publish the public notice?

You must publish the notice in a newspaper having a general circulation in the communities indicated in the following chart:

If you file . . . You must publish in the following communities . . .
  (a)  Bank Merger Act application under 390.332(a), or an application for a mutual to stock conversion under 12 CFR part 192. The community in which your home office is located.
  (b)  A change of control notice under part 391, subpart E. The community in which the home office of the State savings association whose stock is to be acquired is located and, if applicable, the community in which the home office of the acquiror's largest subsidiary State savings association is located.

[Codified to 12 C.F.R. § 390.114]

§ 390.115 What language must I use in my publication?

(a)  English. You must publish the notice in a newspaper printed in the English language.

(b)  Other than English. If the FDIC determines that the primary language of a significant number of adult residents of the community is a language other than English, the FDIC may require that you simultaneously publish additional notice(s) in the community in the appropriate language(s).

[Codified to 12 C.F.R. § 390.115]

§ 390.116 Comment procedures.

Sections 390.116 though 390.120 contain the procedures governing the submission of public comments on certain types of applications or notices ("applications") pending before the FDIC. It applies whenever a regulation incorporates the procedures in §§ 390.116 through 390.120, or where otherwise required by the FDIC.

[Codified to 12 C.F.R. § 390.116]

§ 390.117 Who may submit a written comment?

Any person may submit a written comment supporting or opposing an application.

[Codified to 12 C.F.R. § 390.117]

§ 390.118 What information should a comment include?

(a)  A comment should recite relevant facts, including any demographic, economic, or financial data, supporting the commenter's position. A comment opposing an application should also:

(1)  Address at least one of the reasons why the FDIC may deny the application under the relevant statute or regulation;

(2)  Recite any relevant facts and supporting data addressing these reasons; and;

(3)  Address how the approval of the application could harm the commenter or any community.

(b)  A commenter must include any request for a meeting under § 390.122 in its comment. The commenter must describe the nature of the issues or facts to be discussed and the reasons why written submissions are insufficient to adequately address these facts or issues.

[Codified to 12 C.F.R. § 390.118]

§ 390.119 Where are comments filed?

A commenter must file with the appropriate FDIC region (See table at § 390.108(a)(2)). The commenter must simultaneously send a copy of the comment to the applicant.

[Codified to 12 C.F.R. § 390.119]

§ 390.120 How long is the comment period?

(a)  General. Except as provided in paragraph (b) of this section, a commenter must file a written comment with the FDIC within 30 calendar days after the date of publication of the initial public notice.

(b)  Late-filed comments. The FDIC may consider late-filed comments if the FDIC determines that the comment will assist in the disposition of the application.

[Codified to 12 C.F.R. § 390.120]

§ 390.121 Meeting procedures.

Sections 390.121 through 390.125 contain meeting procedures. They apply whenever a regulation incorporates the procedures in §§ 390.121 through 390.125, or when otherwise required by the FDIC.

[Codified to 12 C.F.R. § 390.121]

§ 390.122 When will the FDIC conduct a meeting on an application?

(a)  The FDIC will grant a meeting request or conduct a meeting on its own initiative, if it finds that written submissions are insufficient to address facts or issues raised in an application, or otherwise determines that a meeting will benefit the decision-making process. The FDIC may limit the issues considered at the meeting to issues that the FDIC decides are relevant or material.

(b)  The FDIC will inform the applicant and all commenters requesting a meeting of its decision to grant or deny a meeting request, or of its decision to conduct a meeting on its own initiative.

(c)  If the FDIC decides to conduct a meeting, the FDIC will invite the applicant and any commenters requesting a meeting and raising an issue that FDIC intends to consider at the meeting. The FDIC may also invite other interested persons to attend. The FDIC will inform the participants of the date, time, location, issues to be considered, and format for the meeting a reasonable time before the meeting.

[Codified to 12 C.F.R. § 390.122]

§ 390.123 What procedures govern the conduct of the meeting?

(a)  The FDIC may conduct meetings in any format including, but not limited to, a telephone conference, a face-to-face meeting, or a more formal meeting.

(b)  The Administrative Procedure Act (5 U.S.C. 551 et seq.), the Federal Rules of Evidence (28 U.S.C. Appendix), the Federal Rules of Civil Procedure (28 U.S.C. Rule 1 et seq.) and the FDIC Rules of Practice and Procedure in Adjudicatory Proceedings (subpart C) do not apply to meetings under this section.

[Codified to 12 C.F.R. § 390.123]

§ 390.124 Will FDIC approve or disapprove an application at a meeting?

The FDIC will not approve or deny an application at a meeting under §§ 390.121 through 390.125.

[Codified to 12 C.F.R. § 390.124]

§ 390.125 Will a meeting affect application processing time frames?

If the FDIC decides to conduct a meeting, it may suspend applicable application processing time frames, including the time frames for deeming an application complete and the applicable approval time frames in §§ 390.126 through 390.135. If the FDIC suspends applicable application processing time frames, the time period will resume when the FDIC determines that a record has been developed that sufficiently supports a determination on the issues considered at the meeting.

[Codified to 12 C.F.R. § 390.125]

§ 390.126 If I file a notice under expedited treatment, when may I engage in the proposed activities?

If you are eligible for expedited treatment and you have appropriately filed your notice with the FDIC, you may engage in the proposed activities upon the expiration of 30 days after the filing date of your notice, unless the FDIC takes one of the following actions before the expiration of that time period:

(a)  The FDIC notifies you in writing that you must file additional information supplementing your notice. If you are required to file additional information, you may engage in the proposed activities upon the expiration of 30 calendar days after the date you file the additional information, unless the FDIC takes one of the actions described in paragraphs (b) through (d) of this section before the expiration of that time period;

(b)  The FDIC notifies you in writing that your notice is subject to standard treatment under §§ 390.126 through 390.135. The FDIC will subject your notice to standard treatment if it raises a supervisory concern, raises a significant issue of law or policy, or requires significant additional information;

(c)  The FDIC notifies you in writing that it is suspending the applicable time frames under § 390.125; or

(d)  The FDIC notifies you that it disapproves your notice.

[Codified to 12 C.F.R. § 390.126]

§ 390.127 What will the FDIC do after I file my application?

(a)  FDIC action. Within 30 calendar days after the filing date of your application, the FDIC will take one of the following actions:

If the FDIC . . . Then . . .
  (1)  Notifies you, in writing, that your application is complete . . . The applicable review period will begin on the date that the FDIC deems your application complete.
  (2)  Notifies you, in writing, that you must submit addition information to complete your application . . . You must submit the required additional information under § 390.128.
  (3)  Notifies you, in writing, that your application is materially deficient . . . The FDIC will not process your application.
(4)  Takes no action . . . Your application is deemed complete. The applicable review period will begin on the day the 30-day time period expires.

(b)  Waiver requests. If your application includes a request for waiver of an information requirement under § 390.105(b), and the FDIC has not notified you that you must submit additional information under paragraph (a)(2) of this section, your request for waiver is granted.

[Codified to 12 C.F.R. § 390.127]

§ 390.128  If the FDIC requests additional information to complete my application, how will it process my application?

(a)  You may use the following chart to determine the procedure that applies to your submission of additional information under § 390.127(a)(1):

If, within 30 calendar days after the date of FDIC's request for additional information . . . Then, FDIC may . . . And . . .
 (1) You file a response to all information requests . . .   (i)  Notify you in writing within 15 days after the filing date of your response that your application is complete . . . applicable to all response that your application is complete  . . . The applicable review period will begin on the date that the FDIC deems your application complete.
    (ii)  Notify you in writing within 15 calendar days after the filing date of your response that you must submit additional information regarding matters derived from or prompted by information already furnished or any additional information necessary to resolve the issues presented in your application . . . You must respond to the additional information request within the time period required by the FDIC. The FDIC will review your response under the procedures described in this section.
  (iii)  Notify you in writing within 15 calendar days after the filing date of your response that your application is materially deficient . . . The FDIC will not process your application.
 (iv) Take no action within 15 calendar days after the filing date of your response . . . Your application is deemed complete. The applicable review period will begin on the day that the 15-day time period expires.
 (2) You request an extension of time to file additional information . . .   (i)  Grant an extension, in writing, specifying the number of days for the extension  . . . You must fully respond within the extended time period specified by the FDIC. The FDIC will review your response under the procedures described under this section.
 (ii) Notify you in writing that your extension request is disapproved . . . The FDIC will not process your application further. You may resubmit the application for processing as a new filing under the applicable regulation.
 (3) You fail to respond completely . . .   (i)  Notify you in writing that your application is deemed withdrawn . . . The FDIC will not process your application further. You may resubmit the application for processing as a new filing under the applicable regulation.
  (ii)  Notify you, in writing, that your response is incomplete and extend the response period, specifying the number of days for the respond extension . . . You must fully respond within the extended time period specified by the FDIC. The FDIC will review your response under the procedures described under this section.

(b)  The FDIC may extend the 15-day period referenced in paragraph (a)(1) of this section by up to 15 calendar days, if the FDIC requires the additional time to review your response. The FDIC will notify you that it has extended the period before the end of the initial 15-day period and will briefly explain why the extension is necessary.

(c)  If your response filed under paragraph (a)(1) of this section includes a request for a waiver of an informational requirement, your request for a waiver is granted if the FDIC fails to act on it within 15 calendar days after the filing of your response, unless the FDIC extends the review period under paragraph (b) of this section. If the FDIC extends the review period under paragraph (b), your request is granted if the FDIC fails to act on it by the end of the extended review period.

[Codified to 12 C.F.R. § 390.128]

§ 390.129 Will the FDIC conduct an eligibility examination?

(a)  Eligibility examination. The FDIC may notify you at any time before it deems your application complete that it will conduct an eligibility examination. If the FDIC decides to conduct an eligibility examination, it will not deem your application complete until it concludes the examination.

(b)  Additional information. The FDIC may, as a result of the eligibility examination, notify you that you must submit additional information to complete your application. If so, you must respond to the additional information request within the time period required by the FDIC. The FDIC will review your response under the procedures described in § 390.128.

[Codified to 12 C.F.R. § 390.129]

§ 390.130 What may the FDIC require me to do after my application is deemed complete?

After your application is deemed complete, but before the end of the applicable review period,

(a)  The FDIC may require you to provide additional information if the information is necessary to resolve or clarify the issues presented by your application.

(b)  The FDIC may determine that a major issue of law or a change in circumstances arose after you filed your application, and that the issue or changed circumstances will substantially affect your application. If the FDIC identifies such an issue or changed circumstances, it may:

(1)  Notify you, in writing, that your application is now incomplete and require you to submit additional information to complete the application under the procedures described at § 390.128; and

(2)  Require you to publish a new public notice of your application under § 390.131.

[Codified to 12 C.F.R. § 390.130]

§ 390.131 Will the FDIC require me to publish a new public notice?

(a)  If your application was subject to a publication requirement, the FDIC may require you to publish a new public notice of your application if:

(1)  You submitted a revision to the application, you submitted new or additional information, or a major issue of law or a change in circumstances arose after the filing of your application; and

(2)  The FDIC determines that additional comment on these matters is appropriate because of the significance of the new information or circumstances.

(b)  The FDIC will notify you in writing if you must publish a new public notice of your revised application.

(c)  If you are required to publish a new public notice of your revised application, you must notify the FDIC after you publish the new public notice.

[Codified to 12 C.F.R. § 390.131]

§ 390.132 May the FDIC suspend processing of my application?

(a)  Suspension. The FDIC may, at any time, indefinitely suspend processing of your application if:

(1)  The FDIC, another governmental entity, or a self-regulatory trade or professional organization initiates an investigation, examination, or administrative proceeding that is relevant to the FDIC's evaluation of your application;

(2)  You request the suspension or there are other extraordinary circumstances that have a significant impact on the processing of your application.

(b)  Notice. The FDIC will promptly notify you, in writing, if it suspends your application.

[Codified to 12 C.F.R. § 390.132]

§ 390.133 How long is the FDIC review period?

(a)  General. The applicable FDIC review period is 60 calendar days after the date that your application is deemed complete, unless an applicable FDIC regulation specifies a different review period.

(b)  Multiple applications. If you submit more than one application in connection with a proposed action or if two or more applicants submit related applications, the applicable review period for all applications is the review period for the application with the longest review period, subject to statutory review periods.

(c)  Extensions. (1)  The FDIC may extend the review period for up to 30 calendar days beyond the period described in paragraph (a) or (b) of this section. The FDIC must notify you in writing of the extension and the duration of the extension. The FDIC must issue the written extension before the end of the review period.

(2)  The FDIC may also extend the review period as needed until it acts on the application, if the application presents a significant issue of law or policy that requires additional time to resolve. The FDIC must notify you in writing of the extension and the general reasons for the extension. The FDIC must issue the written extension before the end of the review period, including any extension of that period under paragraph (c)(1) of this section.

[Codified to 12 C.F.R. § 390.133]

§ 390.134 How will I know if my application has been approved?

(a)  FDIC approval or denial. (1) The FDIC will approve or deny your application before the expiration of the applicable review period, including any extensions of the review period.

(2)  The FDIC will promptly notify you in writing of its decision to approve or deny your application.

(b)  No FDIC action. If the FDIC fails to act under paragraph (a)(1) of this section, your application is approved.

[Codified to 12 C.F.R. § 390.134]

§ 390.135 What will happen if the FDIC does not approve or disapprove my application within two calendar years after the filing date?

(a)  Withdrawal. If the FDIC has not approved or denied your pending application within two calendar years after the filing date under § 390.109, the FDIC will notify you, in writing, that your application is deemed withdrawn unless the FDIC determines that you are actively pursuing a final FDIC determination on your application. You are not actively pursuing a final FDIC determination if you have failed to timely take an action required under this part, including filing required additional information, or the FDIC has suspended processing of your application under § 390.132 based on circumstances that are, in whole or in part, within your control and you have failed to take reasonable steps to resolve these circumstances.

(b)  [Reserved].

[Codified to 12 C.F.R. § 390.135]

Subpart G—Nondiscrimination Requirements

§ 390.140 Definitions.

As used in this subpart--

Application. For purposes of this part, an application for a loan or other service is as defined in Regulation C, 12 CFR 203.2(b).

Dwelling. The term "dwelling" means a residential structure (whether or not it is attached to real property) located in a state of the United States of America, the District of Colombia, or the Commonwealth of Puerto Rico. The term includes an individual condominium unit, cooperative unit, or mobile or manufactured home.

State savings association. The term "State savings association" means any State savings association as defined in 12 U.S.C. 1813(b).

[Codified to 12 C.F.R. § 390.140]

§ 390.141 Supplementary guidelines.

The FDIC's policy statement found at 12 CFR 390.150 supplements this subpart and should be read together with this subpart. Refer also to the HUD Fair Housing regulations at 24 CFR parts 100 et seq., Federal Reserve Regulation B at 12 CFR part 202, and Federal Reserve Regulation C at 12 CFR part 203.

[Codified to 12 C.F.R. § 390.141]

§ 390.142 Nondiscrimination in lending and other services.

(a)  No State savings association may deny a loan or other service, or discriminate in the purchase of loans or securities or discriminate in fixing the amount, interest rate, duration, application procedures, collection or enforcement procedures, or other terms or conditions of such loan or other service on the basis of the age or location of the dwelling, or on the basis of the race, color, religion, sex, handicap, familial status (having one or more children under the age of 18), marital status, age (provided the person has the capacity to contract) or national origin of:

(1)  An applicant or joint applicant;

(2)  Any person associated with an applicant or joint applicant regarding such loan or other service, or with the purposes of such loan or other service;

(3)  The present or prospective owners, lessees, tenants, or occupants of the dwelling(s) for which such loan or other service is to be made or given;

(4)  The present or prospective owners, lessees, tenants, or occupants of other dwellings in the vicinity of the dwelling(s) for which such loan or other service is to be made or given.

(b)  A State savings association shall consider without prejudice the combined income of joint applicants for a loan or other service.

(c)  No State savings association may discriminate against an applicant for a loan or other service on any prohibited basis (as defined in 12 CFR 202.2(z) and 24 CFR part 100).

[Codified to 12 C.F.R. § 390.142]

§ 390.143 Nondiscriminatory appraisal and underwriting.

(a)  Appraisal. No State savings association may use or rely upon an appraisal of a dwelling which the State savings association knows, or reasonably should know, is discriminatory on the basis of the age or location of the dwelling, or is discriminatory per se or in effect under the Fair Housing Act of 1968 or the Equal Credit Opportunity Act.

(b)  Underwriting. Each State savings association shall have clearly written, non-discriminatory loan underwriting standards, available to the public upon request, at each of its offices. Each association shall, at least annually, review its standards, and business practices implementing them, to ensure equal opportunity in lending

[Codified to 12 C.F.R. § 390.143]

§ 390.144 Nondiscrimination in applications.

(a)  No State savings association may discourage, or refuse to allow, receive, or consider, any application, request, or inquiry regarding a loan or other service, or discriminate in imposing conditions upon, or in processing, any such application, request, or inquiry on the basis of the age or location of the dwelling, or on the basis of the race, color, religion, sex, handicap, familial status (having one or more children under the age of 18), marital status, age (provided the person has the capacity to contract), national origin, or other characteristics prohibited from consideration in § 390.142(c), of the prospective borrower or other person, who:

(1)  Makes application for any such loan or other service;

(2)  Requests forms or papers to be used to make application for any such loan or other service; or

(3)  Inquires about the availability of such loan or other service.

(b)  A State savings association shall inform each inquirer of his or her right to file a written loan application, and to receive a copy of the association's underwriting standards.

[Codified to 12 C.F.R. § 390.144]

§ 390.145 Nondiscriminatory advertising.

No State savings association may directly or indirectly engage in any form of advertising that implies or suggests a policy of discrimination or exclusion in violation of title VIII of the Civil Rights Acts of 1968, the Equal Credit Opportunity Act, or this subpart. Advertisements for any loan for the purpose of purchasing, constructing, improving, repairing, or maintaining a dwelling or any loan secured by a dwelling shall include a facsimile of the following logotype and legend:

[Codified to 12 C.F.R. § 390.145]

§ 390.146 Equal Housing Lender Poster.

(a)  Each State savings association shall post and maintain one or more Equal Housing Lender Posters, the text of which is prescribed in paragraph (b) of this section, in the lobby of each of its offices in a prominent place or places readily apparent to all persons seeking

loans. The poster shall be at least 11 by 14 inches in size, and the text shall be easily legible. It is recommended that savings associations post a Spanish language version of the poster in offices serving areas with a substantial Spanish-speaking population.

(b)  The text of the Equal Housing Lender Poster shall be as follows:

We Do Business In Accordance With Federal Fair Lending Laws.

UNDER THE FEDERAL FAIR HOUSING ACT, IT IS ILLEGAL, ON THE BASIS OF RACE, COLOR, NATIONAL ORIGIN, RELIGION, SEX, HANDICAP, OR FAMILIAL STATUS (HAVING CHILDREN UNDER THE AGE OF 18) TO:

[ ] Deny a loan for the purpose of purchasing, constructing, improving, repairing or maintaining a dwelling or to deny any loan secured by a dwelling; or

[ ] Discriminate in fixing the amount, interest rate, duration, application procedures, or other terms or conditions of such a loan or in appraising property.

IF YOU BELIEVE YOU HAVE BEEN DISCRIMINATED AGAINST, YOU SHOULD:

SEND A COMPLAINT TO:

Assistant Secretary for Fair Housing and Equal Opportunity, Department of Housing and Urban Development, Washington, DC 20410.

For processing under the Federal Fair Housing Act

AND TO:

Federal Deposit Insurance Corporation, Consumer Response Center, 1100 Walnut St, Box #11, Kansas City, MO 64106

For processing under FDIC Regulations.

UNDER THE EQUAL CREDIT OPPORTUNITY ACT, IT IS ILLEGAL TO DISCRIMINATE IN ANY CREDIT TRANSACTION:

[ ] On the basis of race, color, national origin, religion, sex, marital status, or age;

[ ] Because income is from public assistance; or

[ ] Because a right has been exercised under the Consumer Credit Protection Act.

IF YOU BELIEVE YOU HAVE BEEN DISCRIMINATED AGAINST, YOU SHOULD SEND A COMPLAINT TO:

Federal Deposit Insurance Corporation, Consumer Response Center, 1100 Walnut St, Box #11, Kansas City, MO 64106

[Codified to 12 C.F.R. § 390.146]

§ 390.147 Loan application register.

State savings associations and other lenders required to file Home Mortgage Disclosure Act Loan Application Registers with the FDIC in accordance with 12 CFR part 203 must enter the reason for denial, using the codes provided in 12 CFR part 203, with respect to all loan denials.

[Codified to 12 C.F.R. § 390.147]

§ 390.148 Nondiscrimination in employment.

(a)  No State savings association shall, because of an individual's race, color, religion, sex, or national origin:

(1)  Fail or refuse to hire such individual;

(2)  Discharge such individual;

(3)  Otherwise discriminate against such individual with respect to such individual's compensation, promotion, or the terms, conditions, or privileges of such individual's employment; or

(4)  Discriminate in admission to, or employment in, any program of apprenticeship, training, or retraining, including on-the-job training.

(b)  No State savings association shall limit, segregate, or classify its employees in any way which would deprive or tend to deprive any individual of employment opportunities or otherwise adversely affect such individual's status as an employee because of such individual's race, color, religion, sex, or national origin.

(c)  No State savings association shall discriminate against any employee or applicant for employment because such employee or applicant has opposed any employment practice made unlawful by Federal, State, or local law or regulation or because he has in good faith made a charge of such practice or testified, assisted, or participated in any manner in an investigation, proceeding, or hearing of such practice by any lawfully constituted authority.

(d)  No State savings association shall print or publish or cause to be printed or published any notice or advertisement relating to employment by such savings association indicating any preference, limitation, specification, or discrimination based on race, color, religion, sex, or national origin.

(e)  This regulation shall not apply in any case in which the Federal Equal Employment Opportunities law is made inapplicable by the provisions of section 2000e--1 or sections 2000e--2 (e) through (j) of title 42, United States Code.

(f)  Any violation of the following laws or regulations by a State savings association shall be deemed to be a violation of this subpart:

(1)  The Equal Employment Opportunity Act, as amended, 42 U.S.C. 2000e--2000h--2, and Equal Employment Opportunity Commission (EEOC) regulations at 29 CFR part 1600;

(2)  The Age Discrimination in Employment Act, 29 U.S.C. 621--633, and EEOC and Department of Labor regulations;

(3)  Department of the Treasury regulations at 31 CFR part 12 and Office of Federal Contract Compliance Programs (OFCCP) regulations at 41 CFR part 60;

(4)  The Veterans Employment and Readjustment Act of 1972, 38 U.S.C. 2011--2012, and the Vietnam Era Veterans Readjustment Adjustment Assistance Act of 1974, 38 U.S.C. 2021--2026;

(5)  The Rehabilitation Act of 1973, 29 U.S.C. 701 et al.; and

(6)  The Immigration and Nationality Act, 8 U.S.C. 1324b, and INS regulations at 8 CFR part 274a.

[Codified to 12 C.F.R. § 390.148]

§ 390.149 Complaints.

Complaints regarding discrimination in lending by a State savings association shall be referred to the Assistant Secretary for Fair Housing and Equal Opportunity, U.S. Department of Housing and Urban Development, Washington, DC 20410 for processing under the Fair Housing Act, and to the Director, Division of Depositor and Consumer Protection, Federal Deposit Insurance Corporation, 550 17th Street, N.W., Washington, DC 20249 for processing under FDIC regulations. Complaints regarding discrimination in employment by a State savings association should be referred to the Equal Employment Opportunity Commission, Washington, DC 20506 and a copy, for information only, sent to the Director, Division of Depositor and Consumer Protection, Federal Deposit Insurance Corporation, 550 17th Street, N.W., Washington, DC 20249.

[Codified to 12 C.F.R. § 390.149]

§ 390.150 Guidelines relating to nondiscrimination in lending.

(a)  General. Fair housing and equal opportunity in home financing is a policy of the United States established by Federal statutes and Presidential orders and proclamations. In furtherance of the Federal civil rights laws and the economical home financing purposes of the statutes administered by the FDIC, the FDIC has adopted, in this subpart, nondiscrimination regulations that, among other things, prohibit arbitrary refusals to consider loan applications on the basis of the age or location of a dwelling, and prohibit discrimination based on race, color, religion, sex, handicap, familial status (having one or more children under the age of 18), marital status, age (provided the person has the capacity to contract), or national origin in fixing the amount, interest rate, duration, application procedures, collection or enforcement procedures, or other terms or conditions of housing related loans. Such discrimination is also prohibited in the purchase of loans and securities. This section provides supplementary guidelines to aid savings associations in developing and implementing nondiscriminatory lending policies. Each State savings association should reexamine its underwriting standards at least annually in order to ensure equal opportunity.

(b)  Loan underwriting standards. The basic purpose of the FDIC's nondiscrimination regulations is to require that every applicant be given an equal opportunity to obtain a loan. Each loan applicant's creditworthiness should be evaluated on an individual basis without reference to presumed characteristics of a group. The use of lending standards which have no economic basis and which are discriminatory in effect is a violation of law even in the absence of an actual intent to discriminate. However, a standard which has a discriminatory effect is not necessarily improper if its use achieves a genuine business need which cannot be achieved by means which are not discriminatory in effect or less discriminatory in effect.

(c)  Discriminatory practices--(1) Discrimination on the basis of sex or marital status. The Civil Rights Act of 1968 and the National Housing Act prohibit discrimination in lending on the basis of sex. The Equal Credit Opportunity Act, in addition to this prohibition, forbids discrimination on the basis of marital status. Refusing to lend to, requiring higher standards of creditworthiness of, or imposing different requirements on, members of one sex or individuals of one marital status, is discrimination based on sex or marital status. Loan underwriting decisions must be based on an applicant's credit history and present and reasonably foreseeable economic prospects, rather than on the basis of assumptions regarding comparative differences in creditworthiness between married and unmarried individuals, or between men and women.

(2)  Discrimination on the basis of language. Requiring fluency in the English language as a prerequisite for obtaining a loan may be a discriminatory practice based on national origin.

(3)  Income of husbands and wives. A practice of discounting all or part of either spouse's income where spouses apply jointly is a violation of section 527 of the National Housing Act. As with other income, when spouses apply jointly for a loan, the determination as to whether a spouse's income qualifies for credit purposes should depend upon a reasonable evaluation of his or her past, present, and reasonably foreseeable economic circumstances. Information relating to child-bearing intentions of a couple or an individual may not be requested.

(4)  Supplementary income. Lending standards which consider as effective only the non-overtime income of the primary wage-earner may result in discrimination because they do not take account of variations in employment patterns among individuals and families. The FDIC favors loan underwriting which reasonably evaluates the credit worthiness of each applicant based on a realistic appraisal of his or her own past, present, and foreseeable economic circumstances. The determination as to whether primary income or additional income qualifies as effective for credit purposes should depend upon whether such income may reasonably be expected to continue through the early period of the mortgage risk. Automatically discounting other income from bonuses, overtime, or part-time employment, will cause some applicants to be denied financing without a realistic analysis of their credit worthiness. Since statistics show that minority group members and low- and moderate-income families rely more often on such supplemental income, the practice may be racially discriminatory in effect, as well as artificially restrictive of opportunities for home financing.

(5)  Applicant's prior history. Loan decisions should be based upon a realistic evaluation of all pertinent factors respecting an individual's creditworthiness, without giving undue weight to any one factor. The State savings association should, among other things, take into consideration that:

(i)  In some instances, past credit difficulties may have resulted from discriminatory practices;

(ii)  A policy favoring applicants who previously owned homes may perpetuate prior discrimination;

(iii)  A current, stable earnings record may be the most reliable indicator of credit-worthiness, and entitled to more weight than factors such as educational level attained;

(iv)  Job or residential changes may indicate upward mobility; and

(v)  Preferring applicants who have done business with the lender can perpetuate previous discriminatory policies.

(6)  Income level or racial composition of area. Refusing to lend or lending on less favorable terms in particular areas because of their racial composition is unlawful. Refusing to lend, or offering less favorable terms (such as interest rate, downpayment, or maturity) to applicants because of the income level in an area can discriminate against minority group persons.

(7)  Age and location factors. Sections 390.142--390.144 prohibit loan denials based upon the age or location of a dwelling. These restrictions are intended to prohibit use of unfounded or unsubstantiated assumptions regarding the effect upon loan risk of the age of a dwelling or the physical or economic characteristics of an area. Loan decisions should be based on the present market value of the property offered as security (including consideration of specific improvements to be made by the borrower) and the likelihood that the property will retain an adequate value over the term of the loan. Specific factors which may negatively affect its short-range future value (up to 3-5 years) should be clearly documented. Factors which in some cases may cause the market value of a property to decline are recent zoning changes or a significant number of abandoned homes in the immediate vicinity of the property. However, not all zoning changes will cause a decline in property values, and proximity to abandoned buildings may not affect the market value of a property because of rehabilitation programs or affirmative lending programs, or because the cause of abandonment is unrelated to high risk. Proper underwriting considerations include the condition and utility of the improvements, and various physical factors such as street conditions, amenities such as parks and recreation areas, availability of public utilities and municipal services, and exposure to flooding and land faults. However, arbitrary decisions based on age or location are prohibited, since many older, soundly constructed homes provide housing opportunities which may be precluded by an arbitrary lending policy.

(8)  Fair Housing Act (title VIII, Civil Rights Act of 1968, as amended). State savings associations, must comply with all regulations promulgated by the Department of Housing and Urban Development to implement the Fair Housing Act, found at 24 CFR part 100 et seq., except that they shall use the Equal Housing Lender logo and poster prescribed by FDIC regulations at §§ 390.145 and 390.146 rather than the Equal Housing Opportunity logo and poster required by 24 CFR parts 109 and 110.

(d)  Marketing practices. State savings associations should review their advertising and marketing practices to ensure that their services are available without discrimination to the community they serve. Discrimination in lending is not limited to loan decisions and underwriting standards; a State savings association does not meet its obligations to the community or implement its equal lending responsibility if its marketing practices and business relationships with developers and real estate brokers improperly restrict its clientele to segments of the community. A review of marketing practices could begin with an examination of an association's loan portfolio and applications to ascertain whether, in view of the demographic characteristics and credit demands of the community in which the institution is located, it is adequately serving the community on a nondiscriminatory basis. The FDIC will systematically review marketing practices where evidence of discrimination in lending is discovered.

[Codified to 12 C.F.R. § 390.150]

Subpart H—Disclosure and Reporting of CRA-Related Agreements

§ 390.160 Purpose and scope of this subpart.

(a)  General. This subpart implements section 711 of the Gramm-Leach-Bliley Act (12 U.S.C. 1831y). That section requires any nongovernmental entity or person (NGEP), insured depository institution, or affiliate of an insured depository institution that enters into a covered agreement to--

(1)  Make the covered agreement available to the public and the appropriate Federal banking agency; and

(2)  File an annual report with the appropriate Federal banking agency concerning the covered agreement.

(b)  Scope of this subpart. The provisions of this subpart apply to-

(1)  State savings associations, as defined in section 3(b) of the Federal Deposit Insurance Act (FDIA), (12 U.S.C. 1813(b)) and their subsidiaries;

(2)  [Reserved]

(3)  Affiliates of State savings associations and savings and loan holding companies, other than bank holding companies, banks, and subsidiaries of bank holding companies and banks; and

(4)  NGEPs that enter into covered agreements with any company listed in paragraphs (b)(1) through (b)(3) of this section.

(c)  Relation to Community Reinvestment Act. This subpart does not affect in any way the Community Reinvestment Act of 1977 (CRA) (12 U.S.C. 2901 et seq.), 12 CFR Part 345, 12 CFR part 195 issued by the Office of the Comptroller of the Currency and applicable to State savings associations, or FDIC's interpretations or administration of the CRA or Community Reinvestment rule.

(d)  Examples. (1) The examples in this subpart are not exclusive. Compliance with an example, to the extent applicable, constitutes compliance with this subpart.

(2)  Examples in a paragraph illustrate only the issue described in the paragraph and do not illustrate any other issues that may arise in this subpart.

[Codified to 12 C.F.R. § 390.160]

§ 390.161 Definition of covered agreement.

(a)  General definition of covered agreement. A covered agreement is any contract, arrangement, or understanding that meets all of the following criteria-

(1)  The agreement is in writing.

(2)  The parties to the agreement include--

(i)  One or more insured depository institutions or affiliates of an insured depository institution; and

(ii)  One or more NGEPs.

(3)  The agreement provides for the insured depository institution or any affiliate to--

(i)  Provide to one or more individuals or entities (whether or not parties to the agreement) cash payments, grants, or other consideration (except loans) that have an aggregate value of more than $10,000 in any calendar year; or

(ii)  Make to one or more individuals or entities (whether or not parties to the agreement) loans that have an aggregate principal amount of more than $50,000 in any calendar year.

(4)  The agreement is made pursuant to, or in connection with, the fulfillment of the CRA, as defined in § 390.163.

(5)  The agreement is with a NGEP that has had a CRA communication as described in § 390.162 prior to entering into the agreement.

(b)  Examples concerning written arrangements or understandings--(1) Example 1. A NGEP meets with an insured depository institution and states that the institution needs to make more community development investments in the NGEP's community. The NGEP and insured depository institution do not reach an agreement concerning the community development investments the institution should make in the community, and the parties do not reach any mutual arrangement or understanding. Two weeks later, the institution unilaterally issues a press release announcing that it has established a general goal of making $100 million of community development grants in low- and moderate-income neighborhoods served by the insured depository institution over the next 5 years. The NGEP is not identified in the press release. The press release is not a written arrangement or understanding.

(2)  Example 2. A NGEP meets with an insured depository institution and states that the institution needs to offer new loan programs in the NGEP's community. The NGEP and the insured depository institution reach a mutual arrangement or understanding that the institution will provide additional loans in the NGEP's community. The institution tells the NGEP that it will issue a press release announcing the program. Later, the insured depository institution issues a press release announcing the loan program. The press release incorporates the key terms of the understanding reached between the NGEP and the insured depository institution. The written press release reflects the mutual arrangement or understanding of the NGEP and the insured depository institution and is, therefore, a written arrangement or understanding.

(3)  Example 3. An NGEP sends a letter to an insured depository institution requesting that the institution provide a $15,000 grant to the NGEP. The insured depository institution responds in writing and agrees to provide the grant in connection with its annual grant program. The exchange of letters constitutes a written arrangement or understanding.

(c)  Loan agreements that are not covered agreements. A covered agreement does not include--

(1)  Any individual loan that is secured by real estate; or

(2)  Any specific contract or commitment for a loan or extension of credit to an individual, business, farm, or other entity, or group of such individuals or entities, if--

(i)  The funds are loaned at rates that are not substantially below market rates; and

(ii)  The loan application or other loan documentation does not indicate that the borrower intends or is authorized to use the borrowed funds to make a loan or extension of credit to one or more third parties.

(d)  Examples concerning loan agreements--(1) Example 1. An insured depository institution provides an organization with a $1 million loan that is documented in writing and is secured by real estate owned or to-be-acquired by the organization. The agreement is an individual mortgage loan and is exempt from coverage under paragraph (c)(1) of this section, regardless of the interest rate on the loan or whether the organization intends or is authorized to re-loan the funds to a third party.

(2)  Example 2. An insured depository institution commits to provide a $500,000 line of credit to a small business that is documented by a written agreement. The loan is made at rates that are within the range of rates offered by the institution to similarly situated small businesses in the market and the loan documentation does not indicate that the small business intends or is authorized to re-lend the borrowed funds. The agreement is exempt from coverage under paragraph (c)(2) of this section.

(3)  Example 3. An insured depository institution offers small business loans that are guaranteed by the Small Business Administration (SBA). A small business obtains a $75,000 loan, documented in writing, from the institution under the institution's SBA loan program. The loan documentation does not indicate that the borrower intends or is authorized to re-lend the funds. Although the rate charged on the loan is well below that charged by the institution on commercial loans, the rate is within the range of rates that the institution would charge a similarly situated small business for a similar loan under the SBA loan program. Accordingly, the loan is not made at substantially below market rates and is exempt from coverage under paragraph (c)(2) of this section.

(4)  Example 4. A bank holding company enters into a written agreement with a community development organization that provides that insured depository institutions owned by the bank holding company will make $250 million in small business loans in the community over the next 5 years. The written agreement is not a specific contract or commitment for a loan or an extension of credit and, thus, is not exempt from coverage under paragraph (c)(2) of this section. Each small business loan made by the insured depository institution pursuant to this general commitment would, however, be exempt from coverage if the loan is made at rates that are not substantially below market rates and the loan documentation does not indicate that the borrower intended or was authorized to re-lend the funds.

(e)  Agreements that include exempt loan agreements. If an agreement includes a loan, extension of credit or loan commitment that, if documented separately, would be exempt under paragraph (c) of this section, the exempt loan, extension of credit or loan commitment may be excluded for purposes of determining whether the agreement is a covered agreement.

(f)  Determining annual value of agreements that lack schedule of disbursements. For purposes of paragraph (a)(3) of this section, a multi-year agreement that does not include a schedule for the disbursement of payments, grants, loans or other consideration by the insured depository institution or affiliate, is considered to have a value in the first year of the agreement equal to all payments, grants, loans and other consideration to be provided at any time under the agreement.

[Codified to 12 C.F.R. § 390.161]

§ 390.162 CRA communications.

(a)  Definition of CRA communication. A CRA communication is any of the following--

(1)  Any written or oral comment or testimony provided to a Federal banking agency concerning the adequacy of the performance under the CRA of the insured depository institution, any affiliated insured depository institution, or any CRA affiliate.

(2)  Any written comment submitted to the insured depository institution that discusses the adequacy of the performance under the CRA of the institution and must be included in the institution's CRA public file.

(3)  Any discussion or other contact with the insured depository institution or any affiliate about--

(i)  Providing (or refraining from providing) written or oral comments or testimony to any Federal banking agency concerning the adequacy of the performance under the CRA of the insured depository institution, any affiliated insured depository institution, or any CRA affiliate;

(ii)  Providing (or refraining from providing) written comments to the insured depository institution that concern the adequacy of the institution's performance under the CRA and must be included in the institution's CRA public file; or

(iii)  The adequacy of the performance under the CRA of the insured depository institution, any affiliated insured depository institution, or any CRA affiliate.

(b)  Discussions or contacts that are not CRA communications. (1) Timing of contacts with a Federal banking agency. An oral or written communication with a Federal banking agency is not a CRA communication if it occurred more than 3 years before the parties entered into the agreement.

(2)  Timing of contacts with insured depository institutions and affiliates. A communication with an insured depository institution or affiliate is not a CRA communication if the communication occurred--

(i)  More than 3 years before the parties entered into the agreement, in the case of any written communication;

(ii)  More than 3 years before the parties entered into the agreement, in the case of any oral communication in which the NGEP discusses providing (or refraining from providing) comments or testimony to a Federal banking agency or written comments that must be included in the institution's CRA public file in connection with a request to, or agreement by, the institution or affiliate to take (or refrain from taking) any action that is in fulfillment of the CRA; or

(iii)  More than 1 year before the parties entered into the agreement, in the case of any other oral communication not described in paragraph (b)(2)(ii) of this section.

(3)  Knowledge of communication by insured depository institution or affiliate.

(i)  A communication is only a CRA communication under paragraph (a) of this section if the insured depository institution or its affiliate has knowledge of the communication under paragraph (b)(3)(ii) or (iii) of this section.

(ii)  Communication with insured depository institution or affiliate. An insured depository institution or affiliate has knowledge of a communication by the NGEP to the institution or its affiliate under this paragraph only if one of the following representatives of the insured depository institution or any affiliate has knowledge of the communication--

(A)  An employee who approves, directs, authorizes, or negotiates the agreement with the NGEP; or

(B)  An employee designated with responsibility for compliance with the CRA or executive officer if the employee or executive officer knows that the institution or affiliate is negotiating, intends to negotiate, or has been informed by the NGEP that it expects to request that the institution or affiliate negotiate an agreement with the NGEP.

(iii)  Other communications. An insured depository institution or affiliate is deemed to have knowledge of--

(A)  Any testimony provided to a Federal banking agency at a public meeting or hearing;

(B)  Any comment submitted to a Federal banking agency that is conveyed in writing by the agency to the insured depository institution or affiliate; and

(C)  Any written comment submitted to the insured depository institution that must be and is included in the institution's CRA public file.

(4)  Communication where NGEP has knowledge. A NGEP has a CRA communication with an insured depository institution or affiliate only if any of the following individuals has knowledge of the communication--

(i)  A director, employee, or member of the NGEP who approves, directs, authorizes, or negotiates the agreement with the insured depository institution or affiliate;

(ii)  A person who functions as an executive officer of the NGEP and who knows that the NGEP is negotiating or intends to negotiate an agreement with the insured depository institution or affiliate; or

(iii)  Where the NGEP is an individual, the NGEP.

(c)  Examples of CRA communications. (1) Examples of actions that are CRA communications. The following are examples of CRA communications. These examples are not exclusive and assume that the communication occurs within the relevant time period as described in paragraph (b)(1) or (2) of this section and the appropriate representatives have knowledge of the communication as specified in paragraphs (b)(3) and (4) of this section.

(i)  Example 1. A NGEP files a written comment with a Federal banking agency that states than an insured depository institution successfully addresses the credit needs of its community. The written comment is in response to a general request from the agency for comments on an application of the insured depository institution to open a new branch and a copy of the comment is provided to the institution.

(ii)  Example 2. A NGEP meets with an executive officer of an insured depository institution and states that the institution must improve its CRA performance.

(iii)  Example 3. A NGEP meets with an executive officer of an insured depository institution and states that the institution needs to make more mortgage loans in low- and moderate-income neighborhoods in its community.

(iv)  Example 4. A bank holding company files an application with a Federal banking agency to acquire an insured depository institution. Two weeks later, the NGEP meets with an executive officer of the bank holding company to discuss the adequacy of the performance under the CRA of the target insured depository institution. The insured depository institution was an affiliate of the bank holding company at the time the NGEP met with the target institution. ( See § 390.170(a)) Accordingly, the NGEP had a CRA communication with an affiliate of the bank holding company.

(2)  Examples of actions that are not CRA communications. The following are examples of actions that are not by themselves CRA communications. These examples are not exclusive.

(i)  Example 1. A NGEP provides to a Federal banking agency comments or testimony concerning an insured depository institution or affiliate in response to a direct request by the agency for comments or testimony from that NGEP. Direct requests for comments or testimony do not include a general invitation by a Federal banking agency for comments or testimony from the public in connection with a CRA performance evaluation of, or application for a deposit facility (as defined in section 803 of the CRA (12 U.S.C. 2902(3)) by, an insured depository institution or an application by a company to acquire an insured depository institution.

(ii)  Example 2. A NGEP makes a statement concerning an insured depository institution or affiliate at a widely attended conference or seminar regarding a general topic. A public or private meeting, public hearing, or other meeting regarding one or more specific institutions, affiliates or transactions involving an application for a deposit facility is not considered a widely attended conference or seminar.

(iii)  Example 3. A NGEP, such as a civil rights group, community group providing housing and other services in low- and moderate-income neighborhoods, veterans organization, community theater group, or youth organization, sends a fundraising letter to insured depository institutions and to other businesses in its community. The letter encourages all businesses in the community to meet their obligation to assist in making the local community a better place to live and work by supporting the fundraising efforts of the NGEP.

(iv)  Example 4. A NGEP discusses with an insured depository institution or affiliate whether particular loans, services, investments, community development activities, or other activities are generally eligible for consideration by a Federal banking agency under the CRA. The NGEP and insured depository institution or affiliate do not discuss the adequacy of the CRA performance of the insured depository institution or affiliate.

(v)  Example 5. A NGEP engaged in the sale or purchase of loans in the secondary market sends a general offering circular to financial institutions offering to sell or purchase a portfolio of loans. An insured depository institution that receives the offering circular discusses with the NGEP the types of loans included in the loan pool, whether such loans are generally eligible for consideration under the CRA, and which loans are made to borrowers in the institution's local community. The NGEP and insured depository institution do not discuss the adequacy of the institution's CRA performance.

(d)  Multiparty covered agreements. (1) A NGEP that is a party to a covered agreement that involves multiple NGEPs is not required to comply with the requirements of this part if--

(i)  The NGEP has not had a CRA communication; and

(ii)  No representative of the NGEP identified in paragraph (b)(4) of this section has knowledge at the time of the agreement that another NGEP that is a party to the agreement has had a CRA communication.

(2)  An insured depository institution or affiliate that is a party to a covered agreement that involves multiple insured depository institutions or affiliates is not required to comply with the requirements in §§ 390.165 and 390.166 if--

(i)  No NGEP that is a party to the agreement has had a CRA communication concerning the insured depository institution or any affiliate; and

(ii)  No representative of the insured depository institution or any affiliate identified in paragraph (b)(3) of this section has knowledge at the time of the agreement that an NGEP that is a party to the agreement has had a CRA communication concerning any other insured depository institution or affiliate that is a party to the agreement.

[Codified to 12 C.F.R. § 390.162]

§ 390.163 Fulfillment of the CRA

(a)  List of factors that are in fulfillment of the CRA. Fulfillment of the CRA, for purposes of this subpart, means the following list of factors--

(1)  Comments to a Federal banking agency or included in CRA public file. Providing or refraining from providing written or oral comments or testimony to any Federal banking agency concerning the performance under the CRA of an insured depository institution or CRA affiliate that is a party to the agreement or an affiliate of a party to the agreement or written comments that are required to be included in the CRA public file of any such insured depository institution; or

(2)  Activities given favorable CRA consideration. Performing any of the following activities if the activity is of the type that is likely to receive favorable consideration by a Federal banking agency in evaluating the performance under the CRA of the insured depository institution that is a party to the agreement or an affiliate of a party to the agreement--

(i)  Home-purchase, home-improvement, small business, small farm, community development, and consumer lending, as described in 12 CFR 195.22, including loan purchases, loan commitments, and letters of credit;

(ii)  Making investments, deposits, or grants, or acquiring membership shares, that have as their primary purpose community development, as described in 12 CFR 195.23;

(iii)  Delivering retail banking services, as described in 12 CFR 195.24(d);

(iv)  Providing community development services, as described in 12 CFR 195.24(e);

(v)  In the case of a wholesale or limited-purpose insured depository institution, community development lending, including originating and purchasing loans and making loan commitments and letters of credit, making qualified investments, or providing community development services, as described in 12 CFR 195.25(c);

(vi)  In the case of a small insured depository institution, any lending or other activity described in 12 CFR 195.26(a); or

(vii)  In the case of an insured depository institution that is evaluated on the basis of a strategic plan, any element of the strategic plan, as described in 12 CFR 195.27(f).

(b)  Agreements relating to activities of CRA affiliates. An insured depository institution or affiliate that is a party to a covered agreement that concerns any activity described in paragraph (a) of this section of a CRA affiliate must, prior to the time the agreement is entered into, notify each NGEP that is a party to the agreement that the agreement concerns a CRA affiliate.

[Codified to 12 C.F.R. § 390.163]

§ 390.164 Related agreements considered a single agreement.

The following rules must be applied in determining whether an agreement is a covered agreement under § 390.161.

(a)  Agreements entered into by same parties. All written agreements to which an insured depository institution or an affiliate of the insured depository institution is a party shall be considered to be a single agreement if the agreements--

(1)  Are entered into with the same NGEP;

(2)  Were entered into within the same 12-month period; and

(3)  Are each in fulfillment of the CRA.

(b)  Substantively related contracts. All written contracts to which an insured depository institution or an affiliate of the insured depository institution is a party shall be considered to be a single agreement, without regard to whether the other parties to the contracts are the same or whether each such contract is in fulfillment of the CRA, if the contracts were negotiated in a coordinated fashion and a NGEP is a party to each contract.

[Codified to 12 C.F.R. § 390.164]

§ 390.165 Disclosure of covered agreements.

(a)  Applicability date. This section applies only to covered agreements entered into after November 12, 1999.

(b)  Disclosure of covered agreements to the public--(1) Disclosure required. Each NGEP and each insured depository institution or affiliate that enters into a covered agreement must make a copy of the covered agreement available to any individual or entity upon request.

(2)  Nondisclosure of confidential and proprietary information permitted. In responding to a request for a covered agreement from any individual or entity under paragraph (b)(1) of this section, a NGEP, insured depository institution, or affiliate may withhold from public disclosure confidential or proprietary information that the party believes the relevant supervisory agency could withhold from disclosure under the Freedom of Information Act (5 U.S.C. 552 et seq.) (FOIA).

(3)  Information that must be disclosed. Notwithstanding paragraph (b)(2) of this section, a party must disclose any of the following information that is contained in a covered agreement--

(i)  The names and addresses of the parties to the agreement;

(ii)  The amount of any payments, fees, loans, or other consideration to be made or provided by any party to the agreement;

(iii)  Any description of how the funds or other resources provided under the agreement are to be used;

(iv)  The term of the agreement (if the agreement establishes a term); and

(v)  Any other information that the relevant supervisory agency determines is not properly exempt from public disclosure.

(4)  Request for review of withheld information. Any individual or entity may request that the relevant supervisory agency review whether any information in a covered agreement withheld by a party must be disclosed. Any requests for agency review of withheld information must be filed, and will be processed in accordance with, the relevant supervisory agency's rules concerning the availability of information (see part 309).

(5)  Duration of obligation. The obligation to disclose a covered agreement to the public terminates 12 months after the end of the term of the agreement.

(6)  Reasonable copy and mailing fees. Each NGEP and each insured depository institution or affiliate may charge an individual or entity that requests a copy of a covered agreement a reasonable fee not to exceed the cost of copying and mailing the agreement.

(7)  Use of CRA public file by insured depository institution or affiliate. An insured depository institution and any affiliate of an insured depository institution may fulfill its obligation under this paragraph (b) by placing a copy of the covered agreement in the insured depository institution's CRA public file if the institution makes the agreement available in accordance with the procedures set forth in 12 CFR 195.43.

(c)  Disclosure by NGEPs of covered agreements to the relevant supervisory agency.

(1)  Each NGEP that is a party to a covered agreement must provide the following within 30 days of receiving a request from the relevant supervisory agency--

(i)  A complete copy of the agreement; and

(ii)  In the event the NGEP proposes the withholding of any information contained in the agreement in accordance with paragraph (b)(2) of this section, a public version of the agreement that excludes such information and an explanation justifying the exclusions. Any public version must include the information described in paragraph (b)(3) of this section.

(2)  The obligation to provide a covered agreement to the relevant supervisory agency terminates 12 months after the end of the term of the covered agreement.

(d)  Disclosure by insured depository institution or affiliate of covered agreements to the relevant supervisory agency--(1) In general. Within 60 days of the end of each calendar quarter, each insured depository institution and affiliate must provide each relevant supervisory agency with--

(i)(A)  A complete copy of each covered agreement entered into by the insured depository institution or affiliate during the calendar quarter; and

(B)  In the event the institution or affiliate proposes the withholding of any information contained in the agreement in accordance with paragraph (b)(2) of this section, a public version of the agreement that excludes such information (other than any information described in paragraph (b)(3) of this section) and an explanation justifying the exclusions; or

(ii)  A list of all covered agreements entered into by the insured depository institution or affiliate during the calendar quarter that contains--

(A)  The name and address of each insured depository institution or affiliate that is a party to the agreement;

(B)  The name and address of each NGEP that is a party to the agreement;

(C)  The date the agreement was entered into;

(D)  The estimated total value of all payments, fees, loans and other consideration to be provided by the institution or any affiliate of the institution under the agreement; and

(E)  The date the agreement terminates.

(2)  Prompt filing of covered agreements contained in list required. (i) If an insured depository institution or affiliate files a list of the covered agreements entered into by the institution or affiliate pursuant to paragraph (d)(1)(ii) of this section, the institution or affiliate must provide any relevant supervisory agency a complete copy and public version of any covered agreement referenced in the list within 7 calendar days of receiving a request from the agency for a copy of the agreement.

(ii)  The obligation of an insured depository institution or affiliate to provide a covered agreement to the relevant supervisory agency under this paragraph (d)(2) terminates 36 months after the end of the term of the covered agreement.

(3)  Joint filings. In the event that 2 or more insured depository institutions or affiliates are parties to a covered agreement, the insured depository institution(s) and affiliate(s) may jointly file the documents required by this paragraph (d) of this section. Any joint filing must identify the insured depository institution(s) and affiliate(s) for whom the filings are being made.

[Codified to 12 C.F.R. § 390.165]

§ 390.166 Annual reports.

(a)  Applicability date. This section applies only to covered agreements entered into on or after May 12, 2000.

(b)  Annual report required. Each NGEP and each insured depository institution or affiliate that is a party to a covered agreement must file an annual report with each relevant supervisory agency concerning the disbursement, receipt, and uses of funds or other resources under the covered agreement.

(c)  Duration of reporting requirement--(1) NGEPs. A NGEP must file an annual report for a covered agreement for any fiscal year in which the NGEP receives or uses funds or other resources under the agreement.

(2)  Insured depository institutions and affiliates. An insured depository institution or affiliate must file an annual report for a covered agreement for any fiscal year in which the institution or affiliate--

(i)  Provides or receives any payments, fees, or loans under the covered agreement that must be reported under paragraphs (e)(1)(iii) and (iv) of this section; or

(ii)  Has data to report on loans, investments, and services provided by a party to the covered agreement under the covered agreement under paragraph (e)(1)(vi) of this section.

(d)  Annual reports filed by NGEP--(1) Contents of report. The annual report filed by a NGEP under this section must include the following--

(i)  The name and mailing address of the NGEP filing the report;

(ii)  Information sufficient to identify the covered agreement for which the annual report is being filed, such as by providing the names of the parties to the agreement and the date the agreement was entered into or by providing a copy of the agreement;

(iii)  The amount of funds or resources received under the covered agreement during the fiscal year; and

(iv)  A detailed, itemized list of how the funds or resources received by the NGEP under the covered agreement were used during the fiscal year, including the total amount used for--

(A)  Compensation of officers, directors, and employees;

(B)  Administrative expenses;

(C)  Travel expenses;

(D)  Entertainment expenses;

(E)  Payment of consulting and professional fees; and

(F)  Other expenses and uses (specify expense or use).

(2)  More detailed reporting of uses of funds or resources permitted--(i) In general. If a NGEP allocated and used funds received under a covered agreement for a specific purpose, the NGEP may fulfill the requirements of paragraph (d)(1)(iv) of this section with respect to such funds by providing--

(A)  A brief description of each specific purpose for which the funds or other resources were used; and

(B)  The amount of funds or resources used during the fiscal year for each specific purpose.

(ii)  Specific purpose defined. A NGEP allocates and uses funds for a specific purpose if the NGEP receives and uses the funds for a purpose that is more specific and limited than the categories listed in paragraph (d)(1)(iv) of this section.

(3)  Use of other reports. The annual report filed by a NGEP may consist of or incorporate a report prepared for any other purpose, such as the Internal Revenue Service Return of Organization Exempt From Income Tax on Form 990, or any other Internal Revenue Service form, state tax form, report to members or shareholders, audited or unaudited financial statements, audit report, or other report, so long as the annual report filed by the NGEP contains all of the information required by this paragraph (d).

(4)  Consolidated reports permitted. A NGEP that is a party to 2 or more covered agreements may file with each relevant supervisory agency a single consolidated annual report covering all the covered agreements. Any consolidated report must contain all the information required by this paragraph (d). The information reported under paragraphs (d)(1)(iv) and (d)(2) of this section may be reported on an aggregate basis for all covered agreements.

(5)  Examples of annual report requirements for NGEPs--(i) Example 1. A NGEP receives an unrestricted grant of $15,000 under a covered agreement, includes the funds in its general operating budget and uses the funds during its fiscal year. The NGEP's annual report for the fiscal year must provide the name and mailing address of the NGEP, information sufficient to identify the covered agreement, and state that the NGEP received $15,000 during the fiscal year. The report must also indicate the total expenditures made by the NGEP during the fiscal year for compensation, administrative expenses, travel expenses, entertainment expenses, consulting and professional fees, and other expenses and uses. The NGEP's annual report may provide this information by submitting an Internal Revenue Service Form 990 that includes the required information. If the Internal Revenue Service Form does not include information for all of the required categories listed in this part, the NGEP must report the total expenditures in the remaining categories either by providing that information directly or by providing another form or report that includes the required information.

(ii)  Example 2. An organization receives $15,000 from an insured depository institution under a covered agreement and allocates and uses the $15,000 during the fiscal year to purchase computer equipment to support its functions. The organization's annual report must include the name and address of the organization, information sufficient to identify the agreement, and a statement that the organization received $15,000 during the year. In addition, since the organization allocated and used the funds for a specific purpose that is more narrow and limited than the categories of expenses included in the detailed, itemized list of expenses, the organization would have the option of providing either the total amount it used during the year for each category of expenses included in paragraph (d)(1)(iv) of this section, or a statement that it used the $15,000 to purchase computer equipment and a brief description of the equipment purchased.

(iii)  Example 3. A community group receives $50,000 from an insured depository institution under a covered agreement. During its fiscal year, the community group specifically allocates and uses $5,000 of the funds to pay for a particular business trip and uses the remaining $45,000 for general operating expenses. The group's annual report for the fiscal year must include the name and address of the group, information sufficient to identify the agreement, and a statement that the group received $50,000. Because the group did not allocate and use all of the funds for a specific purpose, the group's annual report must provide the total amount of funds it used during the year for each category of expenses included in paragraph (d)(1)(iv) of this section. The group's annual report also could state that it used $5,000 for a particular business trip and include a brief description of the trip.

(iv)  Example 4. A community development organization is a party to two separate covered agreements with two unaffiliated insured depository institutions. Under each agreement, the organization receives $15,000 during its fiscal year and uses the funds to support its activities during that year. If the organization elects to file a consolidated annual report, the consolidated report must identify the organization and the two covered agreements, state that the organization received $15,000 during the fiscal year under each agreement, and provide the total amount that the organization used during the year for each category of expenses included in paragraph (d)(1)(iv) of this section.

(e)  Annual report filed by insured depository institution or affiliate--(1) General. The annual report filed by an insured depository institution or affiliate must include the following--

(i)  The name and principal place of business of the insured depository institution or affiliate filing the report;

(ii)  Information sufficient to identify the covered agreement for which the annual report is being filed, such as by providing the names of the parties to the agreement and the date the agreement was entered into or by providing a copy of the agreement;

(iii)  The aggregate amount of payments, aggregate amount of fees, and aggregate amount of loans provided by the insured depository institution or affiliate under the covered agreement to any other party to the agreement during the fiscal year;

(iv)  The aggregate amount of payments, aggregate amount of fees, and aggregate amount of loans received by the insured depository institution or affiliate under the covered agreement from any other party to the agreement during the fiscal year;

(v)  A general description of the terms and conditions of any payments, fees, or loans reported under paragraphs (e)(1)(iii) and (iv) of this section, or, in the event such terms and conditions are set forth--

(A)  In the covered agreement, a statement identifying the covered agreement and the date the agreement (or a list identifying the agreement) was filed with the relevant supervisory agency; or

(B)  In a previous annual report filed by the insured depository institution or affiliate, a statement identifying the date the report was filed with the relevant supervisory agency; and

(vi)  The aggregate amount and number of loans, aggregate amount and number of investments, and aggregate amount of services provided under the covered agreement to any individual or entity not a party to the agreement--

(A)  By the insured depository institution or affiliate during its fiscal year; and

(B)  By any other party to the agreement, unless such information is not known to the insured depository institution or affiliate filing the report or such information is or will be contained in the annual report filed by another party under this section.

(2)  Consolidated reports permitted--(i) Party to multiple agreements. An insured depository institution or affiliate that is a party to 2 or more covered agreements may file a single consolidated annual report with each relevant supervisory agency concerning all the covered agreements.

(ii)  Affiliated entities party to the same agreement. An insured depository institution and its affiliates that are parties to the same covered agreement may file a single consolidated annual report relating to the agreement with each relevant supervisory agency for the covered agreement.

(iii)  Content of report. Any consolidated annual report must contain all the information required by this paragraph (e). The amounts and data required to be reported under paragraphs (e)(1)(iv) and (vi) of this section may be reported on an aggregate basis for all covered agreements.

(f)  Time and place of filing--(1) General. Each party must file its annual report with each relevant supervisory agency for the covered agreement no later than six months following the end of the fiscal year covered by the report.

(2)  Alternative method of fulfilling annual reporting requirement for a NGEP. (i) A NGEP may fulfill the filing requirements of this section by providing the following materials to an insured depository institution or affiliate that is a party to the agreement no later than six months following the end of the NGEP's fiscal year--

(A)  A copy of the NGEP's annual report required under paragraph (d) of this section for the fiscal year; and

(B)  Written instructions that the insured depository institution or affiliate promptly forward the annual report to the relevant supervisory agency or agencies on behalf of the NGEP.

(ii)  An insured depository institution or affiliate that receives an annual report from a NGEP pursuant to paragraph (f)(2)(i) of this section must file the report with the relevant supervisory agency or agencies on behalf of the NGEP within 30 days.

[Codified to 12 C.F.R. § 390.166]

§ 390.167 Release of information under FOIA.

FDIC will make covered agreements and annual reports available to the public in accordance with the Freedom of Information Act (5 U.S.C. 552 et seq.) and the FDIC's rules (part 309). A party to a covered agreement may request confidential treatment of proprietary and confidential information in a covered agreement or an annual report under those procedures.

[Codified to 12 C.F.R. § 390.167]

§ 390.168 Compliance provisions.

(a)  Willful failure to comply with disclosure and reporting obligations. (1) If FDIC determines that a NGEP has willfully failed to comply in a material way with § 390.165 or § 390.166, FDIC will notify the NGEP in writing of that determination and provide the NGEP a period of 90 days (or such longer period as FDIC finds to be reasonable under the circumstances) to comply.

(2)  If the NGEP does not comply within the time period established by FDIC, the agreement shall thereafter be unenforceable by that NGEP by operation of section 48 of the Federal Deposit Insurance Act (12 U.S.C. 1831y).

(3)  FDIC may assist any insured depository institution or affiliate that is a party to a covered agreement that is unenforceable by a NGEP by operation of section 48 of the Federal Deposit Insurance Act (12 U.S.C. 1831y) in identifying a successor to assume the NGEP's responsibilities under the agreement.

(b)  Diversion of funds. If a court or other body of competent jurisdiction determines that funds or resources received under a covered agreement have been diverted contrary to the purposes of the covered agreement for an individual's personal financial gain, FDIC may take either or both of the following actions--

(1)  Order the individual to disgorge the diverted funds or resources received under the agreement;

(2)  Prohibit the individual from being a party to any covered agreement for a period not to exceed 10 years.

(c)  Notice and opportunity to respond. Before making a determination under paragraph (a)(1) of this section, or taking any action under paragraph (b) of this section, FDIC will provide written notice and an opportunity to present information to FDIC concerning any relevant facts or circumstances relating to the matter.

(d)  Inadvertent or de minimis errors. Inadvertent or de minimis errors in annual reports or other documents filed with FDIC under §§ 390.165 or 390.166 will not subject the reporting party to any penalty.

(e)  Enforcement of provisions in covered agreements. No provision of this subpart shall be construed as authorizing FDIC to enforce the provisions of any covered agreement.

[Codified to 12 C.F.R. § 390.168]

§ 390.169 [Reserved].

§ 390.170  Other definitions and rules of construction used in this subpart.

(a)  Affiliate. Affiliate means--

(1)  Any company that controls, is controlled by, or is under common control with another company; and

(2)  For the purpose of determining whether an agreement is a covered agreement under § 390.161, an affiliate includes any company that would be under common control or merged with another company on consummation of any transaction pending before a Federal banking agency at the time--

(i)  The parties enter into the agreement; and

(ii)  The NGEP that is a party to the agreement makes a CRA communication, as described in § 390.162.

(b)  Control. Control is defined in section 2(a) of the Bank Holding Company Act (12 U.S.C. 1841(a)).

(c)  CRA affiliate. A CRA affiliate of an insured depository institution is any company that is an affiliate of an insured depository institution to the extent, and only to the extent, that the activities of the affiliate were considered by the appropriate Federal banking agency when evaluating the CRA performance of the institution at its most recent CRA examination prior to the agreement. An insured depository institution or affiliate also may designate any company as a CRA affiliate at any time prior to the time a covered agreement is entered into by informing the NGEP that is a party to the agreement of such designation.

(d)  CRA public file. CRA public file means the public file maintained by an insured depository institution and described in 12 CFR 195.43.

(e)  Executive officer. The term executive officer has the same meaning as in § 215.2(e)(1) of the Board of Governors of the Federal Reserve's Regulation O (12 CFR 215.2(e)(1)). In applying this definition under this subpart, the term State savings association shall be used in place of the term bank.

(f)  Federal banking agency; appropriate Federal banking agency. The terms Federal banking agency and appropriate Federal banking agency have the same meanings as in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813).

(g)  Fiscal year. (1) The fiscal year for a NGEP that does not have a fiscal year shall be the calendar year.

(2)  Any NGEP, insured depository institution, or affiliate that has a fiscal year may elect to have the calendar year be its fiscal year for purposes of this part.

(h)  Insured depository institution. Insured depository institution has the same meaning as in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813).

(i)  Nongovernmental entity or person or NGEP--(1) General. A nongovernmental entity or person or NGEP is any partnership, association, trust, joint venture, joint stock company, corporation, limited liability corporation, company, firm, society, other organization, or individual.

(2)  Exclusions. A nongovernmental entity or person does not include--

(i)  The United States government, a state government, a unit of local government (including a county, city, town, township, parish, village, or other general-purpose subdivision of a state) or an Indian tribe or tribal organization established under Federal, state or Indian tribal law (including the Department of Hawaiian Home Lands), or a department, agency, or instrumentality of any such entity;

(ii)  A federally-chartered public corporation that receives Federal funds appropriated specifically for that corporation;

(iii)  An insured depository institution or affiliate of an insured depository institution; or

(iv)  An officer, director, employee, or representative (acting in his or her capacity as an officer, director, employee, or representative) of an entity listed in paragraphs (i)(2)(i), (ii), or (iii) of this section.

(j)  Party. The term party with respect to a covered agreement means each NGEP and each insured depository institution or affiliate that entered into the agreement.

(k)  Relevant supervisory agency. The relevant supervisory agency for a covered agreement means the appropriate Federal banking agency for--

(1)  Each insured depository institution (or subsidiary thereof) that is a party to the covered agreement;

(2)  Each insured depository institution (or subsidiary thereof) or CRA affiliate that makes payments or loans or provides services that are subject to the covered agreement; and

(3)  Any company (other than an insured depository institution or subsidiary thereof) that is a party to the covered agreement.

(l)  Term of agreement. An agreement that does not have a fixed termination date is considered to terminate on the last date on which any party to the agreement makes any payment or provides any loan or other resources under the agreement, unless the relevant supervisory agency for the agreement otherwise notifies each party in writing.

[Codified to 12 C.F.R. § 390.170]

Subpart I—Consumer Protection in Sales of Insurance

§ 390.180  Purpose and scope.

(a)  General rule. This subpart establishes consumer protections in connection with retail sales practices, solicitations, advertising, or offers of any insurance product or annuity to a consumer by:

(1)  Any State savings association, as defined in section 3 of the Federal Deposit Insurance Act (FDIA), (12 U.S.C. 1813(b)); or

(2)  Any other person that is engaged in such activities at an office of a State savings association or on behalf of a State savings association.

(b)  Application to subsidiaries. An subsidiary is subject to this subpart only to the extent that it sells, solicits, advertises, or offers insurance products or annuities at an office of a State savings association or on behalf of a State savings association.

[Codified to 12 C.F.R. § 390.180]

§ 390.181  Definitions.

As used in this subpart:

Affiliate means a company that controls, is controlled by, or is under common control with another company.

Company means any corporation, partnership, business trust, association or similar organization, or any other trust (unless by its terms the trust must terminate within twenty-five years or not later than twenty-one years and ten months after the death of individuals living on the effective date of the trust). It does not include any corporation the majority of the shares of which are owned by the United States or by any State, or a qualified family partnership, as defined in section 2(o)(10) of the Bank Holding Company Act of 1956, as amended (12 U.S.C. 1841(o)(10)).

Consumer means an individual who purchases, applies to purchase, or is solicited to purchase from a covered person insurance products or annuities primarily for personal, family, or household purposes.

Control of a company has the same meaning as in section 3(w)(5) of the FDIA, (12 U.S.C. 1813(w)(5)).

Domestic violence means the occurrence of one or more of the following acts by a current or former family member, household member, intimate partner, or caretaker:

(1)  Attempting to cause or causing or threatening another person physical harm, severe emotional distress, psychological trauma, rape, or sexual assault;

(2)  Engaging in a course of conduct or repeatedly committing acts toward another person, including following the person without proper authority, under circumstances that place the person in reasonable fear of bodily injury or physical harm;

(3)  Subjecting another person to false imprisonment; or

(4)  Attempting to cause or causing damage to property so as to intimidate or attempt to control the behavior of another person.

Electronic media includes any means for transmitting messages electronically between a covered person and a consumer in a format that allows visual text to be displayed on equipment, for example, a personal computer monitor.

Office means the premises of a State savings association where retail deposits are accepted from the public.

Subsidiary has the same meaning as in section 3(w)(4) of the FDIA, (12 U.S.C. 1813(w)(4)).

You means:

(1)  A State savings association, as defined in § 390.308; or

(2)  Any other person only when the person sells, solicits, advertises, or offers an insurance product or annuity to a consumer at an office of a State savings association, or on behalf of a State savings association. For purposes of this definition, activities on behalf of a State savings association include activities where a person, whether at an office of the State savings association or at another location, sells, solicits, advertises, or offers an insurance product or annuity and at least one of the following applies:

(i)  The person represents to a consumer that the sale, solicitation, advertisement, or offer of any insurance product or annuity is by or on behalf of the State savings association;

(ii)  The State savings association refers a consumer to a seller of insurance products and annuities and the State savings association has a contractual arrangement to receive commissions or fees derived from a sale of an insurance product or annuity resulting from that referral; or

(iii)  Documents evidencing the sale, solicitation, advertising, or offer of an insurance product or annuity identify or refer to the State savings association.

[Codified to 12 C.F.R. § 390.181]

§ 390.182  Prohibited practices.

(a)  Anti-coercion and anti-tying rules. You may not engage in any practice that would lead a consumer to believe that an extension of credit, in violation of section 5(q) of the Home Owners' Loan Act (12 U.S.C. 1464(q)), is conditional upon either:

(1)  The purchase of an insurance product or annuity from a State savings association or any of its affiliates; or

(2)  An agreement by the consumer not to obtain, or a prohibition on the consumer from obtaining, an insurance product or annuity from an unaffiliated entity.

(b)  Prohibition on misrepresentations generally. You may not engage in any practice or use any advertisement at any office of, or on behalf of, a State savings association or a subsidiary of a State savings association that could mislead any person or otherwise cause a reasonable person to reach an erroneous belief with respect to:

(1)  The fact that an insurance product or annuity you or any subsidiary of a State savings association sell or offer for sale is not backed by the Federal government or a State savings association, or the fact that the insurance product or annuity is not insured by the Federal Deposit Insurance Corporation;

(2)  In the case of an insurance product or annuity that involves investment risk, the fact that there is an investment risk, including the potential that principal may be lost and that the product may decline in value; or

(3)  In the case of a State savings association or subsidiary of a State savings association at which insurance products or annuities are sold or offered for sale, the fact that:

(i)  The approval of an extension of credit to a consumer by the State savings association or subsidiary may not be conditioned on the purchase of an insurance product or annuity by the consumer from the State savings association or a subsidiary of a State savings association; and

(ii)  The consumer is free to purchase the insurance product or annuity from another source.

(c)  Prohibition on domestic violence discrimination. You may not sell or offer for sale, as principal, agent, or broker, any life or health insurance product if the status of the applicant or insured as a victim of domestic violence or as a provider of services to victims of domestic violence is considered as a criterion in any decision with regard to insurance underwriting, pricing, renewal, or scope of coverage of such product, or with regard to the payment of insurance claims on such product, except as required or expressly permitted under State law.

[Codified to 12 C.F.R. § 390.182]

§ 390.183   What you must disclose.

(a)  Insurance disclosures. In connection with the initial purchase of an insurance product or annuity by a consumer from you, you must disclose to the consumer, except to the extent the disclosure would not be accurate, that:

(1)  The insurance product or annuity is not a deposit or other obligation of, or guaranteed by, a State savings association or an affiliate of a State savings association;

(2)  The insurance product or annuity is not insured by the Federal Deposit Insurance Corporation (FDIC) or any other agency of the United States, a State savings association, or (if applicable) an affiliate of a State savings association; and

(3)  In the case of an insurance product or annuity that involves an investment risk, there is investment risk associated with the product, including the possible loss of value.

(b)  Credit disclosures. In the case of an application for credit in connection with which an insurance product or annuity is solicited, offered, or sold, you must disclose that a State savings association may not condition an extension of credit on either:

(1)  The consumer's purchase of an insurance product or annuity from the State savings association or any of its affiliates; or

(2)  The consumer's agreement not to obtain, or a prohibition on the consumer from obtaining, an insurance product or annuity from an unaffiliated entity.

(c)  Timing and method of disclosures--(1) In general. The disclosures required by paragraph (a) of this section must be provided orally and in writing before the completion of the initial sale of an insurance product or annuity to a consumer. The disclosure required by paragraph (b) of this section must be made orally and in writing at the time the consumer applies for an extension of credit in connection with which an insurance product or annuity is solicited, offered, or sold.

(2)  Exception for transactions by mail. If you conduct an insurance product or annuity sale by mail, you are not required to make the oral disclosures required by paragraph (a) of this section. If you take an application for credit by mail, you are not required to make the oral disclosure required by paragraph (b) of this section.

(3)  Exception for transactions by telephone. If a sale of an insurance product or annuity is conducted by telephone, you may provide the written disclosures required by paragraph (a) of this section by mail within 3 business days beginning on the first business day after the sale, solicitation, or offer, excluding Sundays and the legal public holidays specified in 5 U.S.C. 6103(a). If you take an application for credit by telephone, you may provide the written disclosure required by paragraph (b) of this section by mail, provided you mail it to the consumer within three days beginning the first business day after the application is taken, excluding Sundays and the legal public holidays specified in 5 U.S.C. 6103(a).

(4)  Electronic form of disclosures. (i) Subject to the requirements of section 101(c) of the Electronic Signatures in Global and National Commerce Act (12 U.S.C. 7001(c)), you may provide the written disclosures required by paragraph (a) and (b) of this section through electronic media instead of on paper, if the consumer affirmatively consents to receiving the disclosures electronically and if the disclosures are provided in a format that the consumer may retain or obtain later, for example, by printing or storing electronically (such as by downloading).

(ii)  You are not required to provide orally any disclosures required by paragraphs (a) or (b) of this section that you provide by electronic media.

(5)  Disclosures must be readily understandable. The disclosures provided shall be conspicuous, simple, direct, readily understandable, and designed to call attention to the nature and significance of the information provided. For instance, you may use the following disclosures in visual media, such as television broadcasting, ATM screens, billboards, signs, posters and written advertisements and promotional materials, as appropriate and consistent with paragraphs (a) and (b) of this section:

•  NOT A DEPOSIT

•  NOT FDIC-INSURED

•  NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY

•  NOT GUARANTEED BY THE STATE SAVINGS ASSOCIATION

•  MAY GO DOWN IN VALUE

(6)  Disclosures must be meaningful. (i) You must provide the disclosures required by paragraphs (a) and (b) of this section in a meaningful form. Examples of the types of methods that could call attention to the nature and significance of the information provided include:

(A)  A plain-language heading to call attention to the disclosures;

(B)  A typeface and type size that are easy to read;

(C)  Wide margins and ample line spacing;

(D)  Boldface or italics for key words; and

(E)  Distinctive type size, style, and graphic devices, such as shading or sidebars, when the disclosures are combined with other information.

(ii)  You have not provided the disclosures in a meaningful form if you merely state to the consumer that the required disclosures are available in printed material, but do not provide the printed material when required and do not orally disclose the information to the consumer when required.

(iii)  With respect to those disclosures made through electronic media for which paper or oral disclosures are not required, the disclosures are not meaningfully provided if the consumer may bypass the visual text of the disclosures before purchasing an insurance product or annuity.

(7)  Consumer acknowledgment. You must obtain from the consumer, at the time a consumer receives the disclosures required under paragraphs (a) or (b) of this section, or at the time of the initial purchase by the consumer of an insurance product or annuity, a written acknowledgment by the consumer that the consumer received the disclosures. You may permit a consumer to acknowledge receipt of the disclosures electronically or in paper form. If the disclosures required under paragraphs (a) or (b) of this section are provided in connection with a transaction that is conducted by telephone, you must:

(i)  Obtain an oral acknowledgment of receipt of the disclosures and maintain sufficient documentation to show that the acknowledgment was given; and

(ii)  Make reasonable efforts to obtain a written acknowledgment from the consumer.

(d)  Advertisements and other promotional material for insurance products or annuities. The disclosures described in paragraph (a) of this section are required in advertisements and promotional material for insurance products or annuities unless the advertisements and promotional material are of a general nature describing or listing the services or products offered by a State savings association.

[Codified to 12 C.F.R. § 390.183]

§ 390.184  Where insurance activities may take place.

(a)  General rule. A State savings association must, to the extent practicable:

(1)  Keep the area where the State savings association conducts transactions involving insurance products or annuities physically segregated from areas where retail deposits are routinely accepted from the general public;

(2)  Identify the areas where insurance product or annuity sales activities occur; and

(3)  Clearly delineate and distinguish those areas from the areas where the State savings association's retail deposit-taking activities occur.

(b)  Referrals. Any person who accepts deposits from the public in an area where such transactions are routinely conducted in a State savings association may refer a consumer who seeks to purchase an insurance product or annuity to a qualified person who sells that product only if the person making the referral receives no more than a one-time, nominal fee of a fixed dollar amount for each referral that does not depend on whether the referral results in a transaction.

[Codified to 12 C.F.R. § 390.184]

§ 390.185  Qualification and licensing requirements for insurance sales personnel.

A State savings association may not permit any person to sell or offer for sale any insurance product or annuity in any part of the State savings association's office or on its behalf, unless the person is at all times appropriately qualified and licensed under applicable State insurance licensing standards with regard to the specific products being sold or recommended.

[Codified to 12 C.F.R. § 390.185]

Appendix A to Subpart I of Part 390—Consumer Grievance Process

Any consumer who believes that any State savings association or any other person selling, soliciting, advertising, or offering insurance products or annuities to the consumer at an office of the State savings association or on behalf of the State savings association has violated the requirements of this subpart should contact the FDIC at the following address:Federal Deposit Insurance Corporation, Consumer Response Center, 1100 Walnut St, Box #11, Kansas City, MO 64106, or telephone 1-877-275-3342 (1-877-ASK FDIC), or e-mail http://www.fdic.gov/consumers/consumer/ccc/contact.html.

[Codified to 12 C.F.R. Part 390, Appendix, A]


Subpart J—Fiduciary Powers of State Savings Associations

§ 390.190  What regulations govern the fiduciary operations of State savings associations?

A State savings association must conduct its fiduciary operations in accordance with applicable State law, and must exercise its fiduciary powers in a safe and sound manner.

[Codified to 12 C.F.R. § 390.190]

Subpart K—Recordkeeping and Confirmation Requirements for Securities Transactions

§ 390.200  What does this subpart do?

This subpart establishes recordkeeping and confirmation requirements that apply when a State savings association ("you") effects certain securities transactions for customers.

[Codified to 12 C.F.R. § 390.200]

§ 390.201  Must I comply with this subpart?

(a)  General. Except as provided under paragraph (b) of this section, you must comply with this subpart when:

(1)  You effect a securities transaction for a customer.

(2)  You effect a transaction in government securities.

(3)  You effect a transaction in municipal securities and are not registered as a municipal securities dealer with the SEC.

(4)  You effect a securities transaction as fiduciary. If you are a State savings association, you must comply with applicable law when you effect such a transaction.

(b)  Exceptions--(1) Small number of transactions. You are not required to comply with § 390.204(b) through (d) (recordkeeping) and § 390.213(a) through (c) (policies and procedures), if you effected an average of fewer than 500 securities transactions per year for customers over the three prior calendar years. You may exclude transactions in government securities when you calculate this average.

(2)  Government securities. If you effect fewer than 500 government securities brokerage transactions per year, you are not required to comply with § 390.204 (recordkeeping) for those transactions. This exception does not apply to government securities dealer transactions. See 17 CFR 404.4(a).

(3)  Municipal securities. If you are registered with the SEC as a "municipal securities dealer," as defined in 15 U.S.C. 78c(a)(30) (see 15 U.S.C. 78o-4), you are not required to comply with this subpart when you conduct municipal securities transactions.

(4)  Foreign branches. You are not required to comply with this subpart when you conduct a transaction at your foreign branch.

(5)  Transactions by registered broker-dealers. You are not required to comply with this subpart for securities transactions effected by a registered broker-dealer, if the registered broker-dealer directly provides the customer with a confirmation. These transactions include a transaction effected by your employee who also acts as an employee of a registered broker-dealer ("dual employee").

[Codified to 12 C.F.R. § 390.201]

§ 390.202  What requirements apply to all transactions?

You must effect all transactions, including transactions excepted under § 390.201, in a safe and sound manner. You must maintain effective systems of records and controls regarding your customers' securities transactions. These systems must clearly and accurately reflect all appropriate information and provide an adequate basis for an audit.

[Codified to 12 C.F.R. § 390.202]

§ 390.203  What definitions apply to this subpart?

Asset-backed security means a security that is primarily serviced by the cash flows of a discrete pool of receivables or other financial assets, either fixed or revolving, that by their terms convert into cash within a finite time period. Asset-backed security includes any rights or other assets designed to ensure the servicing or timely distribution of proceeds to the security holders.

Common or collective investment fund means with respect to a fiduciary account, a fund established and administered by you in compliance with 12 CFR 9.18 or any fund established under 12 CFR 9.18.

Completion of the transaction means:

(1)  If the customer purchases a security through or from you, except as provided in paragraph (2) of this definition, the time the customer pays you any part of the purchase price. If payment is made by a bookkeeping entry, the time you make the bookkeeping entry for any part of the purchase price.

(2)  If the customer purchases a security through or from you and pays for the security before you request payment or notify the customer that payment is due, the time you deliver the security to or into the account of the customer.

(3)  If the customer sells a security through or to you, except as provided in paragraph (4) of this definition, the time the customer delivers the security to you. If you have custody of the security at the time of sale, the time you transfer the security from the customer's account.

(4)  If the customer sells a security through or to you and delivers the security to you before you request delivery or notify the customer that delivery is due, the time you pay the customer or pay into the customer's account.

Customer means a person or account, including an agency, trust, estate, guardianship, or other fiduciary account for which you effect a securities transaction. Customer does not include a broker or dealer, or you when you: act as a broker or dealer; act as a fiduciary with investment discretion over an account; are a trustee that acts as the shareholder of record for the purchase or sale of securities; or are the issuer of securities that are the subject of the transaction.

Debt security means any security, such as a bond, debenture, note, or any other similar instrument that evidences a liability of the issuer (including any security of this type that is convertible into stock or a similar security). Debt security also includes a fractional or participation interest in these debt securities. Debt security does not include securities issued by an investment company registered under the Investment Company Act of 1940, 15 U.S.C. 80a-1, et seq.

Government security means:

(1)  A security that is a direct obligation of, or an obligation that is guaranteed as to principal and interest by, the United States;

(2)  A security that is issued or guaranteed by a corporation in which the United States has a direct or indirect interest if the Secretary of the Treasury has designated the security for exemption as necessary or appropriate in the public interest or for the protection of investors;

(3)  A security issued or guaranteed as to principal and interest by a corporation if a statute specifically designates, by name, the corporation's securities as exempt securities within the meaning of the laws administered by the SEC; or

(4)  Any put, call, straddle, option, or privilege on a government security described in this definition, other than a put, call, straddle, option, or privilege:

(i)  That is traded on one or more national securities exchanges; or

(ii)  For which quotations are disseminated through an automated quotation system operated by a registered securities association.

Investment discretion means with respect to a fiduciary account, the sole or shared authority to determine what securities or other assets to purchase or sell on behalf of the account, regardless of whether this authority has been exercised.

Investment company plan means any plan under which:

(1)  A customer purchases securities issued by an open-end investment company or unit investment trust registered under the Investment Company Act of 1940, making the payments directly to, or made payable to, the registered investment company, or the principal underwriter, custodian, trustee, or other designated agent of the registered investment company; or

(2)  A customer sells securities issued by an open-end investment company or unit investment trust registered under the Investment Company Act of 1940 under:

(i)  An individual retirement or individual pension plan qualified under the Internal Revenue Code; or

(ii)  A contractual or systematic agreement under which the customer purchases at the applicable public offering price, or redeems at the applicable redemption price, securities in specified amounts (calculated in security units or dollars) at specified time intervals, and stating the commissions or charges (or the means of calculating them) that the customer will pay in connection with the purchase.

Municipal security means:

(1)  A security that is a direct obligation of, or an obligation guaranteed as to principal or interest by, a State or any political subdivision, or any agency or instrumentality of a State or any political subdivision.

(2)  A security that is a direct obligation of, or an obligation guaranteed as to principal or interest by, any municipal corporate instrumentality of one or more States; or

(3)  A security that is an industrial development bond, the interest on which is excludable from gross income under section 103(a) of the Code (26 U.S.C. 103(a)).

Periodic plan means a written document that authorizes you to act as agent to purchase or sell for a customer a specific security or securities (other than securities issued by an open end investment company or unit investment trust registered under the Investment Company Act of 1940). The written document must authorize you to purchase or sell in specific amounts (calculated in security units or dollars) or to the extent of dividends and funds available, at specific time intervals, and must set forth the commission or charges to be paid by the customer or the manner of calculating them.

SEC means the Securities and Exchange Commission.

Security means any note, stock, treasury stock, bond, debenture, certificate of interest or participation in any profit-sharing agreement or in any oil, gas, or other mineral royalty or lease, any collateral-trust certificate, preorganization certificate or subscription, transferable share, investment contract, voting-trust certificate, and any put, call, straddle, option, or privilege on any security or group or index of securities (including any interest therein or based on the value thereof), or, in general, any instrument commonly known as a "security'; or any certificate of interest or participation in, temporary or interim certificate for, receipt for, or warrant or right to subscribe to or purchase, any of the foregoing. Security does not include currency; any note, draft, bill of exchange, or banker's acceptance which has a maturity at the time of issuance of less than nine months, exclusive of days of grace, or any renewal thereof, the maturity of which is likewise limited; a deposit or share account in a Federal or State chartered depository institution; a loan participation; a letter of credit or other form of bank indebtedness incurred in the ordinary course of business; units of a collective investment fund; interests in a variable amount (master) note of a borrower of prime credit; U.S. Savings Bonds; or any other instrument FDIC determines does not constitute a security for purposes of this subpart.

Sweep account means any prearranged, automatic transfer or sweep of funds above a certain dollar level from a deposit account to purchase a security or securities, or any prearranged, automatic redemption or sale of a security or securities when a deposit account drops below a certain level with the proceeds being transferred into a deposit account.

[Codified to 12 C.F.R. § 390.203]

§ 390.204  What records must I maintain for securities transactions?

If you effect securities transactions for customers, you must maintain all of the following records for at least three years:

(a)  Chronological records. You must maintain an itemized daily record of each purchase and sale of securities in chronological order, including:

(1)  The account or customer name for which you effected each transaction;

(2)  The name and amount of the securities;

(3)  The unit and aggregate purchase or sale price;

(4)  The trade date; and

(5)  The name or other designation of the registered broker-dealer or other person from whom you purchased the securities or to whom you sold the securities.

(b)  Account records. You must maintain account records for each customer reflecting:

(1)  Purchases and sales of securities;

(2)  Receipts and deliveries of securities;

(3)  Receipts and disbursements of cash; and

(4)  Other debits and credits pertaining to transactions in securities.

(c)  Memorandum (order ticket). You must make and keep current a memorandum (order ticket) of each order or any other instruction given or received for the purchase or sale of securities (whether executed or not), including:

(1)  The account or customer name for which you effected each transaction;

(2)  Whether the transaction was a market order, limit order, or subject to special instructions;

(3)  The time the trader received the order;

(4)  The time the trader placed the order with the registered broker-dealer, or if there was no registered broker-dealer, the time the trader executed or cancelled the order;

(5)  The price at which the trader executed the order;

(6)  The name of the registered broker-dealer you used.

(d)  Record of registered broker-dealers. You must maintain a record of all registered broker-dealers that you selected to effect securities transactions and the amount of commissions that you paid or allocated to each registered broker-dealer during each calendar year.

(e)  Notices. You must maintain a copy of the written notice required under sections 390.206-390.211.

[Codified to 12 C.F.R. § 390.204]

§ 390.205  How must I maintain my records?

(a)  You may maintain the records required under § 390.204 in any manner, form, or format that you deem appropriate. However, your records must clearly and accurately reflect the required information and provide an adequate basis for an audit of the information.

(b)  You, or the person that maintains and preserves records on your behalf, must:

(1)  Arrange and index the records in a way that permits easy location, access, and retrieval of a particular record;

(2)  Separately store, for the time required for preservation of the original record, a duplicate copy of the record on any medium allowed by this section;

(3)  Provide promptly any of the following that FDIC examiners or your directors may request:

(i)  A legible, true, and complete copy of the record in the medium and format in which it is stored;

(ii)  A legible, true, and complete printout of the record; and

(iii)  Means to access, view, and print the records.

(4)  In the case of records on electronic storage media, you, or the person that maintains and preserves records for you, must establish procedures:

(i)  To maintain, preserve, and reasonably safeguard the records from loss, alteration, or destruction;

(ii)  To limit access to the records to properly authorized personnel, your directors, and FDIC examiners; and

(iii)  To reasonably ensure that any reproduction of a non-electronic original record on electronic storage media is complete, true, and legible when retrieved.

(c)  You may contract with third party service providers to maintain the records.

[Codified to 12 C.F.R. § 390.205]

§ 390.206  What type of notice must I provide when I effect a securities transaction for a customer?

If you effect a securities transaction for a customer, you must give or send the customer the registered broker-dealer confirmation described at § 390.207, or the written notice described at § 390.208. For certain types of transactions, you may elect to provide the alternate notices described in § 390.209.

[Codified to 12 C.F.R. § 390.206]

§ 390.207  How do I provide a registered broker-dealer confirmation?

(a)  If you elect to satisfy § 390.206 by providing the customer with a registered broker-dealer confirmation, you must provide the confirmation by having the registered broker-dealer send the confirmation directly to the customer or by sending a copy of the registered broker-dealer's confirmation to the customer within one business day after you receive it.

(b)  If you have received or will receive remuneration from any source, including the customer, in connection with the transaction, you must provide a statement of the source and amount of the remuneration in addition to the registered broker-dealer confirmation described in paragraph (a) of this section.

[Codified to 12 C.F.R. § 390.207]

§ 390.208  How do I provide a written notice?

If you elect to satisfy § 390.206 by providing the customer a written notice, you must give or send the written notice at or before the completion of the securities transaction. You must include all of the following information in a written notice:

(a)  Your name and the customer's name.

(b)  The capacity in which you acted (for example, as agent).

(c)  The date and time of execution of the securities transaction (or a statement that you will furnish this information within a reasonable time after the customer's written request), and the identity, price, and number of shares or units (or principal amount in the case of debt securities) of the security the customer purchased or sold.

(d)  The name of the person from whom you purchased or to whom you sold the security, or a statement that you will furnish this information within a reasonable time after the customer's written request.

(e)  The amount of any remuneration that you have received or will receive from the customer in connection with the transaction unless the remuneration paid by the customer is determined under a written agreement, other than on a transaction basis.

(f)  The source and amount of any other remuneration you have received or will receive in connection with the transaction. If, in the case of a purchase, you were not participating in a distribution, or in the case of a sale, were not participating in a tender offer, the written notice may state whether you have or will receive any other remuneration and state that you will furnish the source and amount of the other remuneration within a reasonable time after the customer's written request.

(g)  That you are not a member of the Securities Investor Protection Corporation, if that is the case. This does not apply to a transaction in shares of a registered open-end investment company or unit investment trust if the customer sends funds or securities directly to, or receives funds or securities directly from, the registered open-end investment company or unit investment trust, its transfer agent, its custodian, or a designated broker or dealer who sends the customer either a confirmation or the written notice in this section.

(h)  Additional disclosures. You must provide all of the additional disclosures described in the following chart for transactions involving certain debt securities:

If you effect a transaction involving . . . You must provide the following additional information in your written notice . . .
(1) A debt security subject to redemption before maturity A statement that the issuer may redeem the debt security in whole or in part before maturity, that the redemption could affect the represented yield, and that additional redemption information is available upon request.
(2) A debt security that you effected exclusively on the basis of a dollar price (i)  The dollar price at which you effected the transaction; and (ii)  The yield to maturity calculated from the dollar price. You do not have to disclose the yield to maturity if:
(A) The issuer may extend the maturity date of the security with a variable interest rate; or
(B)  The security is an asset-backed security that represents an interest in, or is secured by, a pool of receivables or other financial assets that are subject continuously to prepayment.
(3) A debt security that you effected on basis of yield (i)  The yield at which the transaction, including the percentage amount and its characterization (e.g., current yield, yield to maturity, or yield to call). If you effected the transaction at yield to call, you must indicate the type of call, the call date, and the call price;
(ii)  The dollar price calculated from that yield; and
(iii)  The yield to maturity and the represented yield, if you effected the transaction on a basis other than yield to maturity and the yield to maturity is lower than the represented yield. You are not required to disclose this information if:
(A)  The issuer may extend the maturity date of the security with a variable interest rate; or
(B)  The security is an asset-backed security that represents an interest in, or is secured by, a pool of receivables or other financial assets that are subject continuously to prepayment.
(4)  A debt security that is an asset-backed security that represents an interest in, or is secured by, a pool of receivables or other financial assets that are subject continuously to prepayment (i)  A statement that the actual yield of the asset-backed security may vary according to the rate at which the underlying receivables or other financial assets are prepaid; and (ii)  A statement that you will furnish information concerning the factors that affect yield (including at a minimum estimated yield, weighted average life, and the prepayment assumptions underlying yield) upon the customer's written request.
(5) A debt security, other than a government security A statement that the security is unrated by a nationally recognized statistical rating organization, if that is the case.

[Codified to 12 C.F.R. § 390.208]

§ 390.209  What are the alternate notice requirements?

You may elect to satisfy § 390.206 by providing the alternate notices described in the following chart for certain types of transactions.

If you effect a securities transaction . . . Then you may elect to . . .
(a)  For or with the account of a customer under a periodic plan, sweep account, or investment company plan Give or send to the customer within five business days after the end of each quarterly period a written statement disclosing: (1)  Each purchase and redemption that you effected for or with, and each dividend or distribution that you credited to or reinvested for, the customer's account during the period;
(2)  The date of each transaction;
(3)  The identity, number, and price of any securities that the customer purchased or redeemed in each transaction;
(4)  The total number of shares of the securities in the customer's account;
(5)  Any remuneration that you received or will receive in connection with the transaction; and
(6)  That you will give or send the registered broker-dealer confirmation described in § 390.207 or the written notice described in § 390.208 within a reasonable time after the customer's written request.
(b)  For or with the account of a customer in shares of an open-ended management company registered under the Investment Company Act of 1940 that holds itself out as a money market fund and attempts to maintain a stable net asset value per share Give or send to the customer the written statement described at paragraph (a) of this section on a monthly basis. You may not use the alternate notice, however, if you deduct sales loads upon the purchase or redemption of shares in the money market fund.
(c)  For an account for which you do not exercise investment discretion, and for which you and the customer have agreed in writing to an arrangement concerning the time and content of the written notice Give or send to the customer a written notice at the agreed-upon time and with the agreed-upon content, and include a statement that you will furnish the registered broker-dealer confirmation described in § 390.207 or the written notice described in § 390.208 within a reasonable time after the customer's written request.
(d)  For an account for which you exercise investment discretion other than in an agency capacity, excluding common or collective investment funds Give or send the registered broker-dealer confirmation described in § 390.207 or the written notice described in § 390.208 within a reasonable time after a written request by the person with the power to terminate the account or, if there is no such person, any person holding a vested beneficial interest in the account.
(e) For an account in which you exercise investment discretion in an agency capacity Give or send each customer a written itemized statement specifying the funds and securities in your custody or possession and all debits, credits, and transactions in the customer's account. You must provide this information to the customer not less than once every three months. You must give or send the registered broker-dealer confirmation described in § 390.207 or the written notice described in § 390.208 within a reasonable time after a customer's written request.
(f) For a common or collective investment fund (1)  Give or send to a customer who invests in the fund a copy of the annual financial report of the fund, or (2)  Notify the customer that a copy of the report is available and that you will furnish the report within a reasonable time after a written request by a person to whom a regular periodic accounting would ordinarily be rendered with respect to each participating account.

[Codified to 12 C.F.R. § 390.209]

§ 390.210  May I provide a notice electronically?

You may provide any written notice required under §§ 390.206 through 390.211 electronically. If a customer has a facsimile machine, you may send the notice by facsimile transmission. You may use other electronic communications if:

(a)  The parties agree to use electronic instead of hard copy notices;

(b)  The parties are able to print or download the notice;

(c)  Your electronic communications system cannot automatically delete the electronic notice; and

(d)  Both parties are able to receive electronic messages.

[Codified to 12 C.F.R. § 390.210]

§ 390.211  May I charge a fee for a notice?

You may not charge a fee for providing a notice required under §§ 390.206 through 390.211, except that you may charge a reasonable fee for the notices provided under § 390.209(a), (d), and (e).

[Codified to 12 C.F.R. § 390.211]

§ 390.212  When must I settle a securities transaction?

(a)  You may not effect or enter into a contract for the purchase or sale of a security that provides for payment of funds and delivery of securities later than the latest of:

(1)  The third business day after the date of the contract. This deadline is no later than the fourth business day after the contract for contracts involving the sale for cash of securities that are priced after 4:30 p.m. Eastern Standard Time on the date the securities are priced and are sold by an issuer to an underwriter under a firm commitment underwritten offering registered under the Securities Act of 1933, 15 U.S.C. 77a, et seq., or are sold by you to an initial purchaser participating in the offering;

(2)  Such other time as the SEC specifies by rule (see SEC Rule 15c6--1, 17 CFR 240.15c6--1); or

(3)  Such time as the parties expressly agree at the time of the transaction. The parties to a contract are deemed to have expressly agreed to an alternate date for payment of funds and delivery of securities at the time of the transaction for a contract for the sale for cash of securities under a firm commitment offering, if the managing underwriter and the issuer have agreed to the date for all securities sold under the offering and the parties to the contract have not expressly agreed to another date for payment of funds and delivery of securities at the time of the transaction.

(b)  The deadlines in paragraph (a) of this section do not apply to the purchase or sale of limited partnership interests that are not listed on an exchange or for which quotations are not disseminated through an automated quotation system of a registered securities association.

[Codified to 12 C.F.R. § 390.212]

§ 390.213  What policies and procedures must I maintain and follow for securities transactions?

If you effect securities transactions for customers, you must maintain and follow policies and procedures that meet all of the following requirements:

(a)  Your policies and procedures must assign responsibility for the supervision of all officers or employees who:

(1)  Transmit orders to, or place orders with, registered broker-dealers;

(2)  Execute transactions in securities for customers; or

(3)  Process orders for notice or settlement purposes, or perform other back office functions for securities transactions that you effect for customers. Policies and procedures for personnel described in this paragraph (a)(3) must provide supervision and reporting lines that are separate from supervision and reporting lines for personnel described in paragraphs (a)(1) and (2) of this section.

(b)  Your policies and procedures must provide for the fair and equitable allocation of securities and prices to accounts when you receive orders for the same security at approximately the same time and you place the orders for execution either individually or in combination.

(c)  Your policies and procedures must provide for securities transactions in which you act as agent for the buyer and seller (crossing of buy and sell orders) on a fair and equitable basis to the parties to the transaction, where permissible under applicable law.

(d)  Your policies and procedures must require your officers and employees to file the personal securities trading reports described at § 390.214, if the officer or employee:

(1)  Makes investment recommendations or decisions for the accounts of customers;

(2)  Participates in the determination of these recommendations or decisions; or

(3)  In connection with their duties, obtains information concerning which securities you intend to purchase, sell, or recommend for purchase or sale.

[Codified to 12 C.F.R. § 390.213]

§ 390.214  How do my officers and employees file reports of personal securities trading transactions?

An officer or employee described in § 390.213(d) must report all personal transactions in securities made by or on behalf of the officer or employee if he or she has a beneficial interest in the security.

(a)  Contents and filing of report. The officer or employee must file the report with you no later than 30 calendar days after the end of each calendar quarter. The report must include the following information:

(1)  The date of each transaction, the title and number of shares, the interest rate and maturity date (if applicable), and the principal amount of each security involved.

(2)  The nature of each transaction (i.e., purchase, sale, or other type of acquisition or disposition).

(3)  The price at which each transaction was effected.

(4)  The name of the broker, dealer, or other intermediary effecting the transaction.

(5)  The date the officer or employee submitted the report.

(b)  Report not required for certain transactions. Your officer or employee is not required to report a transaction if:

(1)  He or she has no direct or indirect influence or control over the account for which the transaction was effected or over the securities held in that account;

(2)  The transaction was in shares issued by an open-end investment company registered under the Investment Company Act of 1940;

(3)  The transaction was in direct obligations of the government of the United States;

(4)  The transaction was in bankers' acceptances, bank certificates of deposit, commercial paper or high quality short term debt instruments, including repurchase agreements; or

(5)  The officer or employee had an aggregate amount of purchases and sales of $10,000 or less during the calendar quarter.

(c)  Alternate report. When you act as an investment adviser to an investment company registered under the Investment Company Act of 1940, an officer or employee that is an "access person" may fulfill his or her reporting requirements under this section by filing with you the "access person" personal securities trading report required by SEC Rule 17j--1(d), 17 CFR 270.17j--1(d).

[Codified to 12 C.F.R. § 390.214]

Subpart L—Electronic Operations

§ 390.220  What does this subpart do?

This subpart addresses notification of the FDIC by State savings associations who intend to establish a transactional web site.

[Codified to 12 C.F.R. § 390.220]

§ 390.221  Must I inform FDIC before I use electronic means or facilities?

(a)  General. A State savings association ("you") are not required to inform FDIC before you use electronic means or facilities, except as provided in paragraphs (b) and (c) of this section. However, FDIC encourages you to consult with your appropriate FDIC region before you engage in any activities using electronic means or facilities.

(b)  Activities requiring advance notice. You must file a written notice as described in § 390.222 before you establish a transactional web site. A transactional web site is an Internet site that enables users to conduct financial transactions such as accessing an account, obtaining an account balance, transferring funds, processing bill payments, opening an account, applying for or obtaining a loan, or purchasing other authorized products or services.

(c)  Other procedures. If the appropriate FDIC region informs you of any supervisory or compliance concerns that may affect your use of electronic means or facilities, you must follow any procedures it imposes in writing.

[Codified to 12 C.F.R. § 390.221]

§ 390.222  How do I notify FDIC?

(a)  Notice requirement. You must file a written notice with the appropriate FDIC region at least 30 days before you establish a transactional website. The notice must do three things:

(1)  Describe the transactional web site.

(2)  Indicate the date the transactional web site will become operational.

(3)  List a contact familiar with the deployment, operation, and security of the transactional web site.

(b)  [Reserved].

[Codified to 12 C.F.R. § 390.222]

Subpart M—Deposits

§ 390.230  What does this subpart do?

This subpart applies to the deposit activities of State savings associations.

[Codified to 12 C.F.R. § 390.230]

§ 390.231  What records should I maintain on deposit activities?

All State savings associations ("you") should establish and maintain deposit documentation practices and records that demonstrate that you appropriately administer and monitor deposit-related activities. Your records should adequately evidence ownership, balances, and all transactions involving each account. You may maintain records on deposit activities in any format that is consistent with standard business practices.

[Codified to 12 C.F.R. § 390.231]

Subpart N—Possession by Conservators and Receivers for
Federal and State Savings Associations

§ 390.240  Procedure upon taking possession.

(a)  The conservator or receiver for a Federal or State savings association shall take possession of the savings association by taking possession of the principal office of the Federal or State savings association in accordance with the terms of the OCC's or State bank supervisor's, as appropriate, appointment.

(b)  Upon taking possession, the conservator or receiver shall immediately:

(1)  Take possession of the savings association's books, records and assets.

(2)  Notify in writing, served personally or by registered mail or telegraph, all persons and entities that the conservator or receiver knows to be holding or in possession of assets of the savings association, that the conservator or receiver has succeeded to all rights, titles, powers and privileges of the savings associations.

(3)  File with the Executive Secretary a statement that possession was taken, including the time of the taking, which statement shall be conclusive evidence thereof.

(4)  Post a notice on the door of the principal and other offices of the savings association in the form, if any, prescribed by the OCC or State bank supervisor, as appropriate.

(5)  By operation of law and without any conveyance or other instrument, act or deed, succeed to the rights, titles, powers and privileges of the savings association, and to the rights, powers, and privileges of its stockholders, members, accountholders, depositors, officers, and directors. No stockholder, member, accountholder, depositor, officer or director shall thereafter have or exercise any right, power, or privilege, or act in connection with any of the savings association's assets or property.

[Codified to 12 C.F.R. § 390.240]

§ 390.241  Notice of appointment.

(a)  When the OCC or State bank supervisor, as appropriate, issues an order for the appointment of a conservator or receiver, the FDIC will designate the persons or entities whose employees or agents must, before the conservator or receiver takes possession of the savings association:

(1)  Give notice of the appointment to any officer or employee who is present in and appears to be in charge at the principal office of the savings association as determined by the FDIC.

(2)  Serve a copy of the order for the appointment upon the savings association or upon the conservator by:

(i)  Leaving a certified copy of the order of appointment at the principal office of the savings association as determined by the FDIC; or

(ii)  Handing a certified copy of the order of appointment to the previous conservator of the savings association, or to the officer or employee of the savings association, or to the previous conservator who is present in and appears to be in charge at the principal office of the savings association as determined by the FDIC.

(3)  File with the Executive Secretary of the FDIC a statement that includes the date and time that notice of the appointment was given and service of the order of appointment was made.

(b)  If the OCC or State bank supervisor, as appropriate, appoints a conservator or receiver under this subpart, the FDIC will immediately file a notice of the appointment for publication in the Federal Register.

[Codified to 12 C.F.R. § 390.241]

Subpart O—Subordinate Organizations

§ 390.250  What does this subpart cover?

(a)  The FDIC is issuing this subpart O pursuant to its general rulemaking and supervisory authority under the Federal Deposit Insurance Act, 12 U.S.C. 1811 et seq., and its specific authority under section 18(m) of the Federal Deposit Insurance Act, 12 U.S.C. 1828(m). This subpart applies to subordinate organizations of State savings associations. The FDIC may, at any time, limit a State savings association's investment in any of these entities, or may limit or refuse to permit any activities of any of these entities for supervisory, legal, or safety and soundness reasons.

(b)  Notices under this subpart are applications for purposes of statutory and regulatory references to "applications." Any conditions that the FDIC imposes in approving any application are enforceable as a condition imposed in writing by the FDIC in connection with the granting of a request by a State savings association within the meaning of 12 U.S.C. 1818(b) or 1818(i).

[Codified to 12 C.F.R. § 390.250]

§ 390.251  Definitions.

For purposes of this subpart:

Control has the same meaning as in part 391, subpart E.

GAAP-consolidated subsidiary means an entity in which a State savings association has a direct or indirect ownership interest and whose assets are consolidated with those of the savings association for purposes of reporting under Generally Accepted Accounting Principles (GAAP). Generally, these are entities in which a State savings association has a majority ownership interest.

Lower-tier entity includes any company in which a subsidiary has a direct or indirect ownership interest.

Ownership interest means any equity interest in a business organization, including stock, limited or general partnership interests, or shares in a limited liability company.

Subordinate organization means any corporation, partnership, business trust, association, joint venture, pool, syndicate, or other similar business organization in which a State savings association has a direct or indirect ownership interest, unless that ownership interest qualifies as a pass-through investment and is so designated by the investing State savings association.

Subsidiary means any subordinate organization directly or indirectly controlled by a State savings association.

[Codified to 12 C.F.R. § 390.251]

§ 390.252  How must separate corporate identities be maintained?

(a)  Each State savings association and subordinate organization thereof must be operated in a manner that demonstrates to the public that each maintains a separate corporate existence. Each must operate so that:

(1)  Their respective business transactions, accounts, and records are not intermingled;

(2)  Each observes the formalities of their separate corporate procedures;

(3)  Each is adequately financed as a separate unit in light of normal obligations reasonably foreseeable in a business of its size and character;

(4)  Each is held out to the public as a separate enterprise; and

(5)  Unless the parent State savings association has guaranteed a loan to the subordinate organization, all borrowings by the subordinate organization indicate that the parent is not liable.

(b)  The FDIC regulations that apply both to State savings associations and subordinate organizations shall not be construed as requiring a State savings association and its subordinate organizations to operate as a single entity.

[Codified to 12 C.F.R. § 390.252]

§ 390.253  What notices are required to establish or acquire a new subsidiary or engage in new activities through an existing subsidiary?

When required by section 18(m) of the Federal Deposit Insurance Act, a State savings association ("you") must file a notice ("Notice") with the FDIC before establishing or acquiring a subsidiary or engaging in new activities in a subsidiary. The Notice must contain all of the information the required under 12 CFR 362.15. If the FDIC notifies you within 30 days that the Notice presents supervisory concerns, or raises significant issues of law or policy, you must apply for and receive the FDIC's prior written approval before establishing or acquiring the subsidiary or engaging in new activities in the subsidiary.

[Codified to 12 C.F.R. § 390.253]

§ 390.254  How may a subsidiary of a State savings association issue securities?

(a)  A subsidiary may issue, either directly or through a third party intermediary, any securities that its parent State savings association ("you") may issue. The subsidiary must not state or imply that the securities it issues are covered by federal deposit insurance. A subsidiary may not issue any security the payment, maturity, or redemption of which may be accelerated upon the condition that you are insolvent or have been placed into receivership.

(b)  You must file a notice with the FDIC in accordance with § 390.253 at least 30 days before your first issuance of any securities through an existing subsidiary or in conjunction with establishing or acquiring a new subsidiary. If the FDIC notifies you within 30 days that the notice presents supervisory concerns or raises significant issues of law or policy, you must receive the FDIC's prior written approval before issuing securities through your subsidiary.

(c)  For as long as any securities are outstanding, you must maintain all records generated through each securities issuance in the ordinary course of business, including a copy of any prospectus, offering circular, or similar document concerning such issuance, and make such records available for examination by the FDIC. Such records must include, but are not limited to:

(1)  The amount of your assets or liabilities (including any guarantees you make with respect to the securities issuance) that have been transferred or made available to the subsidiary; the percentage that such amount represents of the current book value of your assets on an unconsolidated basis; and the current book value of all such assets of the subsidiary;

(2)  The terms of any guarantee(s) issued by you or any third party;

(3)  A description of the securities the subsidiary issued;

(4)  The net proceeds from the issuance of securities (or the pro rata portion of the net proceeds from securities issued through a jointly owned subsidiary); the gross proceeds of the securities issuance; and the market value of assets collateralizing the securities issuance (any assets of the subsidiary, including any guarantees of its securities issuance you have made);

(5)  The interest or dividend rates and yields, or the range thereof, and the frequency of payments on the subsidiary's securities;

(6)  The minimum denomination of the subsidiary's securities; and

(7)  Where the subsidiary marketed or intends to market the securities.

[Codified to 12 C.F.R. § 390.254]

§ 390.255  How may a State savings association exercise its salvage power in connection with a service corporation or lower-tier entities?

(a)  In accordance with this section, a State savings association ("you") may exercise your salvage power to make a contribution or a loan (including a guarantee of a loan made by any other person) to a lower-tier entity ("salvage investment") that exceeds the maximum amount otherwise permitted under law or regulation. You must notify the FDIC at least 30 days before making such a salvage investment. This notice must demonstrate that:

(1)  The salvage investment protects your interest in the lower-tier entity;

(2)  The salvage investment is consistent with safety and soundness; and

(3)  You considered alternatives to the salvage investment and determined that such alternatives would not adequately satisfy paragraphs (a)(1) and (2) of this section.

(b)  If the FDIC notifies you within 30 days that the Notice presents supervisory concerns, or raises significant issues of law or policy, you must apply for and receive the FDIC's prior written approval before making a salvage investment.

(c)  If your lower-tier entity is a GAAP-consolidated subsidiary, your salvage invest- ment under this section will be considered an investment in a subsidiary for purposes of subpart Z.

[Codified to 12 C.F.R. § 390.255]

Subpart P—Lending and Investment

§ 390.260  General.

(a)  Authority and scope. This subpart is being issued by the FDIC under its general rulemaking and supervisory authority under the Federal Deposit Insurance Act (FDIA), 12 U.S.C. 1811 et seq. Sections 390.264, 390.265, and 390.267 through 390.272 contain safety-and-soundness based lending and investment provisions applicable to State savings associations.

(b)  General lending standards. Each State savings association is expected to conduct its lending and investment activities prudently. Each State savings association should use lending and investment standards that are consistent with safety and soundness, ensure adequate portfolio diversification and are appropriate for the size and condition of the institution, the nature and scope of its operations, and conditions in its lending market. Each State savings association should adequately monitor the condition of its portfolio and the adequacy of any collateral securing its loans.

[Codified to 12 C.F.R. § 390.260]

§ 390.261  [Reserved].

§ 390.262  Definitions.

For purposes of this subpart:

Consumer loans include loans for personal, family, or household purposes and loans reasonably incident thereto, and may be made as either open-end or closed-end consumer credit (as defined at 12 CFR 226.2(a)(10) and (20)). Consumer loans do not include credit extended in connection with credit card loans, bona fide overdraft loans, and other loans that the State savings association has designated as made under investment or lending authority other than section 5(c)(2)(D) of the HOLA.

Credit card is any card, plate, coupon book, or other single credit device that may be used from time to time to obtain credit.

Credit card account is a credit account established in conjunction with the issuance of, or the extension of credit through, a credit card. This term includes loans made to consolidate credit card debt, including credit card debt held by other lenders, and participation certificates, securities and similar instruments secured by credit card receivables.

Home loans include any loans made on the security of a home (including a dwelling unit in a multi-family residential property such as a condominium or a cooperative), combinations of homes and business property (i.e., a home used in part for business), farm residences, and combinations of farm residences and commercial farm real estate.

Loan commitment includes a loan in process, a letter of credit, or any other commitment to extend credit.

Real estate loan is a loan for which the State savings association substantially relies upon a security interest in real estate given by the borrower as a condition of making the loan. A loan is made on the security of real estate if:

(1)  The security property is real estate pursuant to the law of the state in which the property is located;

(2)  The security interest of the State savings association may be enforced as a real estate mortgage or its equivalent pursuant to the law of the state in which the property is located;

(3)  The security property is capable of separate appraisal; and

(4)  With regard to a security property that is a leasehold or other interest for a period of years, the term of the interest extends, or is subject to extension or renewal at the option of the State savings association for a term of at least five years following the maturity of the loan.

Small business includes a small business concern or entity as defined by section 3(a) of the Small Business Act, 15 U.S.C. 632(a), and implemented by the regulations of the Small Business Administration at 13 CFR part 121.

Small business loans and loans to small businesses include any loan to a small business as defined in this section; or a loan that does not exceed $2 million (including a group of loans to one borrower) and is for commercial, corporate, business, or agricultural purposes.

[Codified to 12 C.F.R. § 390.262]

§ 390.263  [Reserved].

§ 390.264  Real estate lending standards; purpose and scope.

This section, and § 390.265, issued pursuant to section 18(o) of the Federal Deposit Insurance Act, (12 U.S.C. 1828(o)), prescribe standards for real estate lending to be used by State savings associations and all their includable subsidiaries, as defined in § 390.461, over which the State savings associations exercise control, in adopting internal real estate lending policies.

§ 390.265  Real estate lending standards.

(a)  Each State savings association shall adopt and maintain written policies that establish appropriate limits and standards for extensions of credit that are secured by liens on or interests in real estate, or that are made for the purpose of financing permanent improvements to real estate.

(b)(1)  Real estate lending policies adopted pursuant to this section must:

(i)  Be consistent with safe and sound banking practices;

(ii)  Be appropriate to the size of the institution and the nature and scope of its operations; and

(iii)  Be reviewed and approved by the State savings association's board of directors at least annually.

(2)  The lending policies must establish:

(i)  Loan portfolio diversification standards;

(ii)  Prudent underwriting standards, including loan-to-value limits, that are clear and measurable;

(iii)  Loan administration procedures for the State savings association's real estate portfolio; and

(iv)  Documentation, approval, and reporting requirements to monitor compliance with the State savings association's real estate lending policies.

(c)  Each State savings association must monitor conditions in the real estate market in its lending area to ensure that its real estate lending policies continue to be appropriate for current market conditions.

(d)  The real estate lending policies adopted pursuant to this section should reflect consideration of the Interagency Guidelines for Real Estate Lending Policies established by the Federal banking agencies.

[Codified to 12 C.F.R. § 390.265]


Appendix to § 390.265—Interagency Guidelines for Real Estate Lending Policies

The agencies' regulations require that each insured depository institution adopt and maintain a written policy that establishes appropriate limits and standards for all extensions of credit that are secured by liens on or interests in real estate or made for the purpose of financing the construction of a building or other improvements.1 These guidelines are intended to assist institutions in the formulation and maintenance of a real estate lending policy that is appropriate to the size of the institution and the nature and scope of its individual operations, as well as satisfies the requirements of the regulation.

Each institution's policies must be comprehensive, and consistent with safe and sound lending practices, and must ensure that the institution operates within limits and according to standards that are reviewed and approved at least annually by the board of directors. Real estate lending is an integral part of many institutions' business plans and, when undertaken in a prudent manner, will not be subject to examiner criticism.

Loan Portfolio Management Considerations

The lending policy should contain a general outline of the scope and distribution of the institution's credit facilities and the manner in which real estate loans are made, serviced, and collected. In particular, the institution's policies on real estate lending should:

•  Identify the geographic areas in which the institution will consider lending.

•  Establish a loan portfolio diversification policy and set limits for real estate loans by type and geographic market (e.g., limits on higher risk loans).

•  Identify appropriate terms and conditions by type of real estate loan.

•  Establish loan origination and approval procedures, both generally and by size and type of loan.

•  Establish prudent underwriting standards that are clear and measurable, including loan-to-value limits, that are consistent with these supervisory guidelines.

•  Establish review and approval procedures for exception loans, including loans with loan-to-value percentages in excess of supervisory limits.

•  Establish loan administration procedures, including documentation, disbursement, collateral inspection, collection, and loan review.

•  Establish real estate appraisal and evaluation programs.

•  Require that management monitor the loan portfolio and provide timely and adequate reports to the board of directors.

The institution should consider both internal and external factors in the formulation of its loan policies and strategic plan. Factors that should be considered include:

•  The size and financial condition of the institution.

•  The expertise and size of the lending staff.

•  The need to avoid undue concentrations of risk.

•  Compliance with all real estate related laws and regulations, including the Community Reinvestment Act, anti-discrimination laws, and for State savings associations, the Qualified Thrift Lender test.

•  Market conditions.

The institution should monitor conditions in the real estate markets in its lending area so that it can react quickly to changes in market conditions that are relevant to its lending decisions. Market supply and demand factors that should be considered include:

•  Demographic indicators, including population and employment trends.

•  Zoning requirements.

•  Current and projected vacancy, construction, and absorption rates.

•  Current and projected lease terms, rental rates, and sales prices, including concessions.

•  Current and projected operating expenses for different types of projects.

•  Economic indicators, including trends and diversification of the lending area.

•  Valuation trends, including discount and direct capitalization rates.

Underwriting Standards

Prudently underwritten real estate loans should reflect all relevant credit factors, including:

•  The capacity of the borrower, or income from the underlying property, to adequately service the debt.

•  The value of the mortgaged property.

•  The overall creditworthiness of the borrower.

•  The level of equity invested in the property.

•  Any secondary sources of repayment.

•  Any additional collateral or credit enhancements (such as guarantees, mortgage insurance or takeout commitments).

The lending policies should reflect the level of risk that is acceptable to the board of directors and provide clear and measurable underwriting standards that enable the institution's lending staff to evaluate these credit factors. The underwriting standards should address:

•  The maximum loan amount by type of property.

•  Maximum loan maturities by type of property.

•  Amortization schedules.

•  Pricing structure for different types of real estate loans.

•  Loan-to-value limits by type of property.

For development and construction projects, and completed commercial properties, the policy should also establish, commensurate with the size and type of the project or property:

•  Requirements for feasibility studies and sensitivity and risk analyses (e.g., sensitivity of income projections to changes in economic variables such as interest rates, vacancy rates, or operating expenses).

•  Minimum requirements for initial investment and maintenance of hard equity by the borrower (e.g., cash or unencumbered investment in the underlying property).

•  Minimum standards for net worth, cash flow, and debt service coverage of the borrower or underlying property.

•  Standards for the acceptability of and limits on non-amortizing loans.

•  Standards for the acceptability of and limits on the use of interest reserves.

•  Pre-leasing and pre-sale requirements for income-producing property.

•  Pre-sale and minimum unit release requirements for non-income-producing property loans.

•  Limits on partial recourse or nonrecourse loans and requirements for guarantor support.

•  Requirements for takeout commitments.

•  Minimum covenants for loan agreements.

Loan Administration

The institution should also establish loan administration procedures for its real estate portfolio that address:

•  Documentation, including:

Type and frequency of financial statements, including requirements for verification of information provided by the borrower;

Type and frequency of collateral evaluations (appraisals and other estimates of value).

•  Loan closing and disbursement.

•  Payment processing.

•  Escrow administration.

•  Collateral administration.

•  Loan payoffs.

•  Collections and foreclosure, including:

Delinquency follow-up procedures;

Foreclosure timing;

Extensions and other forms of forbearance;

Acceptance of deeds in lieu of foreclosure.

•  Claims processing (e.g., seeking recovery on a defaulted loan covered by a government guaranty or insurance program).

•  Servicing and participation agreements.

Supervisory Loan-to-Value Limits

Institutions should establish their own internal loan-to-value limits for real estate loans. These internal limits should not exceed the following supervisory limits:

Loan category Loan-to-value limit (percent)
Raw land 65
Land development 75
Construction:
  Commercial, multifamily,2 and other nonresidential 80
  1- to 4-family residential 85
Improved property 85
Owner-occupied 1- to 4-family and home equity
  3A loan-to-value limit has not been established for permanent mortgage or home equity loans on owner-occupied, 1- to 4-family residential property. However, for any such loan with a loan-to-value ratio that equals or exceeds 90 percent at origination, an institution should require appropriate credit enhancement in the form of either mortgage insurance or readily marketable collateral.

The supervisory loan-to-value limits should be applied to the underlying property that collateralizes the loan. For loans that fund multiple phases of the same real estate project (e.g., a loan for both land development and construction of an office building), the appropriate loan-to-value limit is the limit applicable to the final phase of the project funded by the loan; however, loan disbursements should not exceed actual development or construction outlays. In situations where a loan is fully cross-collateralized by two or more properties or is secured by a collateral pool of two or more properties, the appropriate maximum loan amount under supervisory loan-to-value limits is the sum of the value of each property, less senior liens, multiplied by the appropriate loan-to-value limit for each property. To ensure that collateral margins remain within the supervisory limits, lenders should redetermine conformity whenever collateral substitutions are made to the collateral pool.

In establishing internal loan-to-value limits, each lender is expected to carefully consider the institution-specific and market factors listed under "Loan Portfolio Management Considerations," as well as any other relevant factors, such as the particular subcategory or type of loan. For any subcategory of loans that exhibits greater credit risk than the overall category, a lender should consider the establishment of an internal loan-to-value limit for that subcategory that is lower than the limit for the overall category.

The loan-to-value ratio is only one of several pertinent credit factors to be considered when underwriting a real estate loan. Other credit factors to be taken into account are highlighted in the "Underwriting Standards" section above. Because of these other factors, the establishment of these supervisory limits should not be interpreted to mean that loans at these levels will automatically be considered sound.

Loans in Excess of the Supervisory Loan-to-Value Limits

The agencies recognize that appropriate loan-to-value limits vary not only among categories of real estate loans but also among individual loans. Therefore, it may be appropriate in individual cases to originate or purchase loans with loan-to-value ratios in excess of the supervisory loan-to-value limits, based on the support provided by other credit factors. Such loans should be identified in the institutions' records, and their aggregate amount reported at least quarterly to the institution's board of directors. (See additional reporting requirements described under "Exceptions to the General Policy.") The aggregate amount of all loans in excess of the supervisory loan-to-value limits should not exceed 100 percent of total capital.4 Moreover, within the aggregate limit, total loans for all commercial, agricultural, multifamily or other non-1-to-4 family residential properties should not exceed 30 percent of total capital. An institution will come under increased supervisory scrutiny as the total of such loans approaches these levels.

In determining the aggregate amount of such loans, institutions should: (a) Include all loans secured by the same property if any one of those loans exceeds the supervisory loan-to-value limits; and (b) include the recourse obligation of any such loan sold with recourse. Conversely, a loan should no longer be reported to the directors as part of aggregate totals when reduction in principal or senior liens, or additional contribution of collateral or equity (e.g., improvements to the real property securing the loan), bring the loan-to-value ratio into compliance with supervisory limits.

Excluded Transactions

The agencies also recognize that there are a number of lending situations in which other factors significantly outweigh the need to apply the supervisory loan-to-value limits.

These include:

•  Loans guaranteed or insured by the U.S. government or its agencies, provided that the amount of the guaranty or insurance is at least equal to the portion of the loan that exceeds the supervisory loan-to-value limit.

•  Loans backed by the full faith and credit of a state government, provided that the amount of the assurance is at least equal to the portion of the loan that exceeds the supervisory loan-to-value limit.

•  Loans guaranteed or insured by a state, municipal or local government, or an agency thereof, provided that the amount of the guaranty or insurance is at least equal to the portion of the loan that exceeds the supervisory loan-to-value limit, and provided that the lender has determined that the guarantor or insurer has the financial capacity and willingness to perform under the terms of the guaranty or insurance agreement.

•  Loans that are to be sold promptly after origination, without recourse, to a financially responsible third party.

•  Loans that are renewed, refinanced, or restructured without the advancement of new funds or an increase in the line of credit (except for reasonable closing costs), or loans that are renewed, refinanced, or restructured in connection with a workout situation, either with or without the advancement of new funds, where consistent with safe and sound banking practices and part of a clearly defined and well-documented program to achieve orderly liquidation of the debt, reduce risk of loss, or maximize recovery on the loan.

•  Loans that facilitate the sale of real estate acquired by the lender in the ordinary course of collecting a debt previously contracted in good faith.

•  Loans for which a lien on or interest in real property is taken as additional collateral through an abundance of caution by the lender (e.g., the institution takes a blanket lien on all or substantially all of the assets of the borrower, and the value of the real property is low relative to the aggregate value of all other collateral).

•  Loans, such as working capital loans, where the lender does not rely principally on real estate as security and the extension of credit is not used to acquire, develop, or construct permanent improvements on real property.

•  Loans for the purpose of financing permanent improvements to real property, but not secured by the property, if such security interest is not required by prudent underwriting practice.

Exceptions to the General Lending Policy

Some provision should be made for the consideration of loan requests from creditworthy borrowers whose credit needs do not fit within the institution's general lending policy. An institution may provide for prudently underwritten exceptions to its lending policies, including loan-to-value limits, on a loan-by-loan basis. However, any exceptions from the supervisory loan-to-value limits should conform to the aggregate limits on such loans discussed above.

The board of directors is responsible for establishing standards for the review and approval of exception loans. Each institution should establish an appropriate internal process for the review and approval of loans that do not conform to its own internal policy standards. The approval of any such loan should be supported by a written justification that clearly sets forth all of the relevant credit factors that support the underwriting decision. The justification and approval documents for such loans should be maintained as a part of the permanent loan file. Each institution should monitor compliance with its real estate lending policy and individually report exception loans of a significant size to its board of directors.

Supervisory Review of Real Estate Lending Policies and Practices

The real estate lending policies of institutions will be evaluated by examiners during the course of their examinations to determine if the policies are consistent with safe and sound lending practices, these guidelines, and the requirements of the regulation. In evaluating the adequacy of the institution's real estate lending policies and practices, examiners will take into consideration the following factors:

•  The nature and scope of the institution's real estate lending activities.

•  The size and financial condition of the institution.

•  The quality of the institution's management and internal controls.

•  The expertise and size of the lending and loan administration staff.

•  Market conditions.

Lending policy exception reports will also be reviewed by examiners during the course of their examinations to determine whether the institution's exceptions are adequately documented and appropriate in light of all of the relevant credit considerations. An excessive volume of exceptions to an institution's real estate lending policy may signal a weakening of its underwriting practices, or may suggest a need to revise the loan policy.

Definitions

For the purposes of these Guidelines:

Construction loan means an extension of credit for the purpose of erecting or rehabilitating buildings or other structures, including any infrastructure necessary for development.

Extension of credit or loan means:

(1)  The total amount of any loan, line of credit, or other legally binding lending commitment with respect to real property; and

(2)  The total amount, based on the amount of consideration paid, of any loan, line of credit, or other legally binding lending commitment acquired by a lender by purchase, assignment, or otherwise.

Improved property loan means an extension of credit secured by one of the following types of real property:

(1)  Farmland, ranchland or timberland committed to ongoing management and agricultural production;

(2)  1- to 4-family residential property that is not owner-occupied;

(3)  Residential property containing five or more individual dwelling units;

(4)  Completed commercial property; or

(5)  Other income-producing property that has been completed and is available for occupancy and use, except income-producing owner-occupied 1- to 4-family residential property.

Land development loan means an extension of credit for the purpose of improving unimproved real property prior to the erection of structures. The improvement of unimproved real property may include the laying or placement of sewers, water pipes, utility cables, streets, and other infrastructure necessary for future development.

Loan origination means the time of inception of the obligation to extend credit (i.e., when the last event or prerequisite, controllable by the lender, occurs causing the lender to become legally bound to fund an extension of credit).

Loan-to-value or loan-to-value ratio means the percentage or ratio that is derived at the time of loan origination by dividing an extension of credit by the total value of the property(ies) securing or being improved by the extension of credit plus the amount of any readily marketable collateral and other acceptable collateral that secures the extension of credit. The total amount of all senior liens on or interests in such property(ies) should be included in determining the loan-to-value ratio. When mortgage insurance or collateral is used in the calculation of the loan-to-value ratio, and such credit enhancement is later released or replaced, the loan-to-value ratio should be recalculated.

Other acceptable collateral means any collateral in which the lender has a perfected security interest, that has a quantifiable value, and is accepted by the lender in accordance with safe and sound lending practices. Other acceptable collateral should be appropriately discounted by the lender consistent with the lender's usual practices for making loans secured by such collateral. Other acceptable collateral includes, among other items, unconditional irrevocable standby letters of credit for the benefit of the lender.

Owner-occupied, when used in conjunction with the term 1- to 4-family residential property means that the owner of the underlying real property occupies at least one unit of the real property as a principal residence of the owner.

Readily marketable collateral means insured deposits, financial instruments, and bullion in which the lender has a perfected interest. Financial instruments and bullion must be salable under ordinary circumstances with reasonable promptness at a fair market value determined by quotations based on actual transactions, on an auction or similarly available daily bid and ask price market. Readily marketable collateral should be appropriately discounted by the lender consistent with the lender's usual practices for making loans secured by such collateral.

Value means an opinion or estimate, set forth in an appraisal or evaluation, whichever may be appropriate, of the market value of real property, prepared in accordance with the agency's appraisal regulations and guidance. For loans to purchase an existing property, the term "value" means the lesser of the actual acquisition cost or the estimate of value.

1- to 4-family residential property means property containing fewer than five individual dwelling units, including manufactured homes permanently affixed to the underlying property (when deemed to be real property under state law).

§ 390.266  [Reserved].

§ 390.267  Letters of credit and other independent undertakings to pay against documents.

(a)  General authority. A State savings association may issue and commit to issue letters of credit within the scope of applicable laws or rules of practice recognized by law. It may also issue other independent undertakings within the scope of such laws or rules of practice recognized by law, that have been approved by the FDIC (approved undertaking).1 Under such letters of credit and approved undertakings, the State savings association's obligation to honor depends upon the presentation of specified documents and not upon nondocumentary conditions or resolution of questions of fact or law at issue between the account party and the beneficiary. A State savings association may also confirm or otherwise undertake to honor or purchase specified documents upon their presentation under another person's independent undertaking within the scope of such laws or rules.

(b)  Safety and soundness considerations--(1)  Terms. As a matter of safe and sound banking practice, State savings associations that issue letters of credit or approved undertakings should not be exposed to undue risk. At a minimum, State savings associations should consider the following:

(i)  The independent character of the letter of credit or approved undertaking should be apparent from its terms (such as terms that subject it to laws or rules providing for its independent character);

(ii)  The letter of credit or approved undertaking should be limited in amount;

(iii)  The letter of credit or approved undertaking should:

(A)  Be limited in duration; or

(B)  Permit the State savings association to terminate the letter of credit or approved undertaking, either on a periodic basis (consistent with the State savings association's ability to make any necessary credit assessments) or at will upon either notice or payment to the beneficiary; or

(C)  Entitle the State savings association to cash collateral from the account party on demand (with a right to accelerate the customer's obligations, as appropriate); and

(iv)  The State savings association either should be fully collateralized or have a post-honor right of reimbursement from its customer or from another issuer of a letter of credit or an independent undertaking. Alternatively, if the State savings association's undertaking is to purchase documents of title, securities, or other valuable documents, it should obtain a first priority right to realize on the documents if the State savings association is not otherwise to be reimbursed.

(2)  Additional considerations in special circumstances. Certain letters of credit and approved undertakings require particular protections against credit, operational, and market risk:

(i)  In the event that the undertaking is to honor by delivery of an item of value other than money, the State savings association should ensure that market fluctuations that affect the value of the item will not cause the State savings association to assume undue market risk;

(ii)  In the event that the undertaking provides for automatic renewal, the terms for renewal should allow the State savings association to make any necessary credit assessment prior to renewal;

(iii)  In the event that a State savings association issues an undertaking for its own account, the underlying transaction for which it is issued must be within the State savings association's authority and comply with any safety and soundness requirements applicable to that transaction.

(3)  Operational expertise. The State savings association should possess operational expertise that is commensurate with the sophistication of its letter of credit or independent undertaking activities.

(4)  Documentation. The State savings association must accurately reflect its letters of credit or approved undertakings in its records, including any acceptance or deferred payment or other absolute obligation arising out of its contingent undertaking.

[Codified to 12 C.F.R. § 390.267]

§ 390.268  Investment in State housing corporations.

(a)  Any State savings association to the extent it has legal authority to do so, may make investments in, commitments to invest in, loans to, or commitments to lend to any state housing corporation; provided, that such obligations or loans are secured directly, or indirectly through a fiduciary, by a first lien on improved real estate which is insured under the National Housing Act, as amended, and that in the event of default, the holder of such obligations or loans has the right directly, or indirectly through a fiduciary, to subject to the satisfaction of such obligations or loans the real estate described in the first lien, or the insurance proceeds.

(b)  Any State savings association that is adequately capitalized may, to the extent it has legal authority to do so, invest in obligations (including loans) of, or issued by, any state housing corporation incorporated in the state in which such State savings association has its home or a branch office; provided (except with respect to loans), that:

(1)  The obligations are rated in one of the four highest grades as shown by the most recently published rating made of such obligations by a nationally recognized rating service; or

(2)  The obligations, if not rated, are approved by the FDIC. The aggregate outstanding direct investment in obligations under paragraph (b) of this section shall not exceed the amount of the State savings association's total capital.

(c)  Each state housing corporation in which a State savings association invests under the authority of paragraph (b) of this section shall agree, before accepting any such investment (including any loan or loan commitment), to make available at any time to the FDIC such information as the FDIC may consider to be necessary to ensure that investments are properly made under this section.

[Codified to 12 C.F.R. § 390.268]

§ 390.269  Prohibition on loan procurement fees.

If you are a director, officer, or other natural person having the power to direct the management or policies of a State savings association, you must not receive, directly or indirectly, any commission, fee, or other compensation in connection with the procurement of any loan made by the State savings association or a subsidiary of the State savings association.

[Codified to 12 C.F.R. § 390.269]

§ 390.270  Asset classification.

(a)(1)  Each State savings association must evaluate and classify its assets on a regular basis in a manner consistent with, or reconcilable to, the asset classification system used by the FDIC.

(2)  In connection with the examination of a State savings association or its affiliates, the FDIC examiners may identify problem assets and classify them, if appropriate. The association must recognize such examiner classifications in its subsequent reports to the FDIC.

(b)  Based on the evaluation and classification of its assets, each State savings association shall establish adequate valuation allowances or charge-offs, as appropriate, consistent with generally accepted accounting principles and the practices of the federal banking agencies.

[Codified to 12 C.F.R. § 390.270]

§ 390.271  Records for lending transactions.

In establishing and maintaining its records pursuant to § 390.350, each State savings association should establish and maintain loan documentation practices that:

(a)  Ensure that the institution can make an informed lending decision and can assess risk on an ongoing basis;

(b)  Identify the purpose and all sources of repayment for each loan, and assess the ability of the borrower(s) and any guarantor(s) to repay the indebtedness in a timely manner;

(c)  Ensure that any claims against a borrower, guarantor, security holders, and collateral are legally enforceable;

(d)  Demonstrate appropriate administration and monitoring of its loans; and

(e)  Take into account the size and complexity of its loans.

[Codified to 12 C.F.R. § 390.271]

§ 390.272  Re-evaluation of real estate owned.

A State savings association shall appraise each parcel of real estate owned at the earlier of in-substance foreclosure or at the time of the State savings association's acquisition of such property, and at such times thereafter as dictated by prudent management policy; such appraisals shall be consistent with the requirements of subpart X of this part. The appropriate regional director or his or her designee may require subsequent appraisals if, in his or her discretion, such subsequent appraisal is necessary under the particular circumstances. The foregoing requirement shall not apply to any parcel of real estate that is sold and reacquired less than 12 months subsequent to the most recent appraisal made pursuant to this subpart. A dated, signed copy of each report of appraisal made pursuant to any provisions of this subpart shall be retained in the State savings association's records.

[Codified to 12 C.F.R. § 390.272]

Subpart Q—Definitions for Regulations Affecting all State Savings Associations

§ 390.280  When do the definitions in this subpart apply?

The definitions in this subpart apply throughout parts 390 and 391, unless another definition is specifically provided.

[Codified to 12 C.F.R. § 390.280]

§ 390.281  Account.

The term account means any savings account, demand account, certificate account, tax and loan account, note account, United States Treasury general account or United States Treasury time deposit-open account, whether in the form of a deposit or a share, held by an accountholder in a State savings association.

[Codified to 12 C.F.R. § 390.281]

§ 390.282  Accountholder.

The term accountholder means the holder of an account or accounts in a State savings association insured by the Deposit Insurance Fund. The term does not include the holder of any subordinated debt security or any mortgage-backed bond issued by the State savings association.

[Codified to 12 C.F.R. § 390.282]

§ 390.283 Affiliate.

The term affiliate of a State savings association, unless otherwise defined, means any corporation, business trust, association, or other similar organization:

(a)  Of which a State savings association, directly or indirectly, owns or controls either a majority of the voting shares or more than 50 per centum of the number of shares voted for the election of its directors, trustees, or other persons exercising similar functions at the preceding election, or controls in any manner the election of a majority of its directors, trustees, or other persons exercising similar functions; or

(b)  Of which control is held, directly or indirectly through stock ownership or in any other manner, by the shareholders of a State savings association who own or control either a majority of the shares of such State savings association or more than 50 per centum of the number of shares voted for the election of directors of such State savings association at the preceding election, or by trustees for the benefit of the shareholders of any such State savings association; or

(c)  Of which a majority of its directors, trustees, or other persons exercising similar functions are directors of any one State savings association.

[Codified to 12 C.F.R. § 390.283]

§ 390.284  Affiliated person.

The term affiliated person of a State savings association means the following:

(a)  A director, officer, or controlling person of such association;

(b)  A spouse of a director, officer, or controlling person of such association;

(c)  A member of the immediate family of a director, officer, or controlling person of such association, who has the same home as such person or who is a director or officer of any subsidiary of such association or of any holding company affiliate of such association;

(d)  Any corporation or organization (other than the State savings association or a corporation or organization through which the State savings association operates) of which a director, officer or the controlling person of such association:

(1)  Is chief executive officer, chief financial officer, or a person performing similar functions;

(2)  Is a general partner;

(3)  Is a limited partner who, directly or indirectly either alone or with his or her spouse and the members of his or her immediate family who are also affiliated persons of the association, owns an interest of 10 percent or more in the partnership (based on the value of his or her contribution) or who, directly or indirectly with other directors, officers, and controlling persons of such association and their spouses and their immediate family members who are also affiliated persons of the association, owns an interest of 25 percent or more in the partnership; or

(4)  Directly or indirectly either alone or with his or her spouse and the members of his or her immediate family who are also affiliated persons of the association, owns or controls 10 percent or more of any class of equity securities or owns or controls, with other directors, officers, and controlling persons of such association and their spouses and their immediate family members who are also affiliated persons of the association, 25 percent or more of any class of equity securities; and

(5)  Any trust or other estate in which a director, officer, or controlling person of such association or the spouse of such person has a substantial beneficial interest or as to which such person or his or her spouse serves as trustee or in a similar fiduciary capacity.

[Codified to 12 C.F.R. § 390.284]

§ 390.285  Audit period.

The audit period of a State savings association means the twelve-month period (or other period in the case of a change in audit period) covered by the annual audit conducted to satisfy § 390.350.

[Codified to 12 C.F.R. § 390.285]

§ 390.286  Certificate account.

The term certificate account means a savings account evidenced by a certificate that must be held for a fixed or minimum term.

[Codified to 12 C.F.R. § 390.286]

§ 390.287  Consumer credit.

The term consumer credit means credit extended to a natural person for personal, family, or household purposes, including loans secured by liens on real estate and chattel liens secured by mobile homes and leases of personal property to consumers that may be considered the functional equivalent of loans on personal security: Provided, the State savings association relies substantially upon other factors, such as the general credit standing of the borrower, guaranties, or security other than the real estate or mobile home, as the primary security for the loan. Appropriate evidence to demonstrate justification for such reliance should be retained in a State savings association's files. Among the types of credit included within this term are consumer loans; educational loans; unsecured loans for real property alteration, repair or improvement, or for the equipping of real property; loans in the nature of overdraft protection; and credit extended in connection with credit cards.

[Codified to 12 C.F.R. § 390.287]

§ 390.288  Controlling person.

The term controlling person of a State savings association means any person or entity which, either directly or indirectly, or acting in concert with one or more other persons or entities, owns, controls, or holds with power to vote, or holds proxies representing, ten percent or more of the voting shares or rights of such State savings association; or controls in any manner the election or appointment of a majority of the directors of such State savings association. However, a director of a State savings association will not be deemed to be a controlling person of such State savings association based upon his or her voting, or acting in concert with other directors in voting, proxies:

(a)  Obtained in connection with an annual solicitation of proxies, or

(b)  Obtained from savings account holders and borrowers if such proxies are voted as directed by a majority vote of the entire board of directors of such association, or of a committee of such directors if such committee's composition and authority are controlled by a majority vote of the entire board and if its authority is revocable by such a majority.

[Codified to 12 C.F.R. § 390.288]

§ 390.289  Corporation.

The terms Corporation and FDIC mean the Federal Deposit Insurance Corporation.

[Codified to 12 C.F.R. § 390.289]

§ 390.290  Demand accounts.

The term demand accounts means non-interest-bearing demand deposits that are subject to check or to withdrawal or transfer on negotiable or transferable order to the State savings association and that are permitted to be issued by statute, regulation, or otherwise and are payable on demand.

[Codified to 12 C.F.R. § 390.290]

§ 390.291  Director.

The term director means any director, trustee, or other person performing similar functions with respect to any organization whether incorporated or unincorporated. Such term does not include an advisory director, honorary director, director emeritus, or similar person, unless the person is otherwise performing functions similar to those of a director.

[Codified to 12 C.F.R. § 390.291]

§ 390.292  Financial institution.

The term financial institution has the same meaning as the term depository institution set forth in 12 U.S.C. 1813(c)(1).

[Codified to 12 C.F.R. § 390.292]

§ 390.293  Immediate family.

The term immediate family of any natural person means the following (whether by the full or half blood or by adoption):

(a)  Such person's spouse, father, mother, children, brothers, sisters, and grandchildren;

(b)  The father, mother, brothers, and sisters of such person's spouse; and

(c)  The spouse of a child, brother, or sister of such person.

[Codified to 12 C.F.R. § 390.293]

§ 390.294  Land loan.

The term land loan means a loan:

(a)  Secured by real estate upon which all facilities and improvements have been completely installed, as required by local regulations and practices, so that it is entirely prepared for the erection of structures;

(b)  To finance the purchase of land and the accomplishment of all improvements required to convert it to developed building lots; or

(c)  Secured by land upon which there is no structure.

[Codified to 12 C.F.R. § 390.294]

§ 390.295  Low-rent housing.

The term low-rent housing means real estate which is, or which is being constructed, remodeled, rehabilitated, modernized, or renovated to be, the subject of an annual contributions contract for low-rent housing under the provisions of the United States Housing Act of 1937, as amended.

[Codified to 12 C.F.R. § 390.295]

§ 390.296  Money Market Deposit Accounts.

(a)  Money Market Deposit Accounts (MMDAs) offered by State savings associations in accordance with applicable state law are savings accounts on which interest may be paid if issued subject to the following limitations:

(1)  The State savings association shall reserve the right to require at least seven days' notice prior to withdrawal or transfer of any funds in the account; and

(2)(i)  The depositor is authorized by the State savings association to make no more than six transfers per calendar month or statement cycle (or similar period) of at least four weeks by means of preauthorized, automatic, telephonic, or data transmission agreement, order, or instruction to another account of the depositor at the same State savings association to the State savings association itself, or to a third party.

(ii)  State savings associations may permit holders of MMDAs to make unlimited transfers for the purpose of repaying loans (except overdraft loans on the depositor's demand account) and associated expenses at the same State savings association (as originator or servicer), to make unlimited transfers of funds from this account to another account of the same depositor at the same State savings association or to make unlimited payments directly to the depositor from the account when such transfers or payments are made by mail, messenger, automated teller machine, or in person, or when such payments are made by telephone (via check mailed to the depositor).

(3)  In order to ensure that no more than the number of transfers specified in paragraph (a)(2)(i) of this section are made, a State savings association must either:

(i)  Prevent transfers of funds in excess of the limitations; or

(ii)  Adopt procedures to monitor those transfers on an after-the-fact basis and contact customers who exceed the limits on more than an occasional basis. For customers who continue to violate those limits after being contacted by the depository State savings association the depository State savings association must either place funds in another account that the depositor is eligible to maintain or take away the account's transfer and draft capacities.

(iii)  Insured State savings association at their option, may use on a consistent basis either the date on a check or the date it is paid in determining whether the transfer limitations within the specified interval are exceeded.

(b)  State savings associations may offer MMDAs to any depositor not inconsistent with applicable state law.

[Codified to 12 C.F.R. § 390.296]

§ 390.297  Negotiable Order of Withdrawal Accounts.

(a)  Negotiable Order of Withdrawal ( NOW ) accounts are savings accounts authorized by 12 U.S.C. 1832 on which the State savings association reserves the right to require at least seven days' notice prior to withdrawal or transfer of any funds in the account.

(b)  For purposes of 12 U.S.C. 1832:

(1)  An organization shall be deemed "operated primarily for religious, philanthropic, charitable, educational, or other similar purposes and . . . not . . . for profit" if it is described in sections 501(c)(3) through (13), 501(c)(19), or 528 of the Internal Revenue Code; and

(2)  The funds of a sole proprietorship or unincorporated business owned by a husband and wife shall be deemed beneficially owned by "one or more individuals."

[Codified to 12 C.F.R. § 390.297]

§ 390.298  Nonresidential construction loan.

The term nonresidential construction loan means a loan for construction of other than one or more dwelling units.

[Codified to 12 C.F.R. § 390.298]

§ 390.299  Nonwithdrawable account.

The term nonwithdrawable account means an account which by the terms of the contract of the accountholder with the State savings association or by provisions of state law cannot be paid to the accountholder until all liabilities, including other classes of share liability of the State savings association have been fully liquidated and paid upon the winding up of the State savings association is referred to as a nonwithdrawable account.

[Codified to 12 C.F.R. § 390.300]

§ 390.300  Note account.

The term note account means a note, subject to the right of immediate call, evidencing funds held by depositories electing the note option under applicable United States Treasury Department regulations. Note accounts are not savings accounts or savings deposits.

§ 390.301  [Reserved]

§ 390.302  Officer.

The term Officer means the president, any vice-president (but not an assistant vice-president, second vice-president, or other vice president having authority similar to an assistant or second vice-president), the secretary, the treasurer, the comptroller, and any other person performing similar functions with respect to any organization whether incorporated or unincorporated. The term officer also includes the chairman of the board of directors if the chairman is authorized by the charter or by-laws of the organization to participate in its operating management or if the chairman in fact participates in such management.

[Codified to 12 C.F.R. § 390.302]

§ 390.303  Parent company; subsidiary.

The term parent company means any company which directly or indirectly controls any other company or companies. The term subsidiary means any company which is owned or controlled directly or indirectly by a person, and includes a subsidiary owned in whole or in part by a State savings association, or a subsidiary of that subsidiary.

[Codified to 12 C.F.R. § 390.303]

§ 390.304  Political subdivision.

The term political subdivision includes any subdivision of a public unit, any principal department of such public unit:

(a)  The creation of which subdivision or department has been expressly authorized by state statute,

(b)  To which some functions of government have been delegated by state statute, and

(c)  To which funds have been allocated by statute or ordinance for its exclusive use and control. It also includes drainage, irrigation, navigation, improvement, levee, sanitary, school or power districts and bridge or port authorities and other special districts created by state statute or compacts between the states. Excluded from the term are subordinate or nonautonomous divisions, agencies or boards within principal departments.

[Codified to 12 C.F.R. § 390.304]

§ 390.305  Principal office.

The term principal office means the home office of a State savings association established as such in conformity with the laws under which the State savings association is organized.

[Codified to 12 C.F.R. § 390.305]

§ 390.306  Public unit.

The term public unit means the United States, any state of the United States, the District of Columbia, any territory of the United States, Puerto Rico, the Virgin Islands, any county, any municipality or any political subdivision thereof.

[Codified to 12 C.F.R. § 390.306]

§ 390.307  Savings account.

The term savings account means any withdrawable account, except a demand account as defined in § 390.290, a tax and loan account, a note account, a United States Treasury general account, or a United States Treasury time deposit-open account.

§ 390.308  State savings association.

The term State savings association means a State savings association as defined in section 3 of the Federal Deposit Insurance Act, the deposits of which are insured by the Corporation. It includes a building and loan, savings and loan, or homestead association, or a cooperative bank (other than a cooperative bank which is a State bank as defined in section 3(a)(2) of the Federal Deposit Insurance Act) organized and operating according to the laws of the State in which it is chartered or organized, or a corporation (other than a bank as defined in section 3(a)(1) of the Federal Deposit Insurance Act) that the Board of Directors of the Federal Deposit Insurance Corporation determine to be operating substantially in the same manner as a State savings association.

[Codified to 12 C.F.R. § 390.308]

§ 390.309  Security.

The term security means any non-withdrawable account, note, stock, treasury stock, bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, collateral-trust certificate, preorganization certificate or subscription, transferable share, investment contract, voting-trust certificate, or, in general, any interest or instrument commonly known as a security, or any certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase, any of the foregoing, except that a security shall not include an account or deposit insured by the Federal Deposit Insurance Corporation.

[Codified to 12 C.F.R. § 390.309]

§ 390.310  Service corporation.

The term service corporation means any corporation, the majority of the capital stock of which is owned by one or more savings associations and which engages, directly or indirectly, in any activities similar to activities which may be engaged in by a service corporation in which a Federal savings association may invest.

[Codified to 12 C.F.R. § 390.310]

§ 390.311  State.

The term State means a State, the District of Columbia, Guam, Puerto Rico, and the Virgin Islands of the United States.

[Codified to 12 C.F.R. § 390.311]

§ 390.312  Subordinated debt security.

The term subordinated debt security means any unsecured note, debenture, or other debt security issued by a State savings association and subordinated on liquidation to all claims having the same priority as account holders or any higher priority.

[Codified to 12 C.F.R. § 390.312]

§ 390.313  Tax and loan account.

The term tax and loan account means an account, the balance of which is subject to the right of immediate withdrawal, established for receipt of payments of Federal taxes and certain United States obligations. Such accounts are not savings accounts or savings deposits.

[Codified to 12 C.F.R. § 390.313]

§ 390.314  United States Treasury General Account.

The term United States Treasury General Account means an account maintained in the name of the United States Treasury the balance of which is subject to the right of immediate withdrawal, except in the case of the closure of the member, and in which a zero balance may be maintained. Such accounts are not savings accounts or savings deposits.

[Codified to 12 C.F.R. § 390.314]

§ 390.315  United States Treasury Time Deposit Open Account.

The term United States Treasury Time Deposit Open Account means a non-interest-bearing account maintained in the name of the United States Treasury which may not be withdrawn prior to the expiration of 30 days' written notice from the United States Treasury, or such other period of notice as the Treasury may require. Such accounts are not savings accounts or savings deposits.

[Codified to 12 C.F.R. § 390.315]

§ 390.316  With recourse.

(a)  The term with recourse means, in connection with the sale of a loan or a participation interest in a loan, an agreement or arrangement under which the purchaser is to be entitled to receive from the seller a sum of money or thing of value, whether tangible or intangible (including any substitution), upon default in payment of any loan involved or any part thereof or to withhold or to have withheld from the seller a sum of money or anything of value by way of security against default. The recourse liability resulting from a sale with recourse shall be the total book value of any loan sold with recourse less:

(1)  The amount of any insurance or guarantee against loss in the event of default provided by a third party,

(2)  The amount of any loss to be borne by the purchaser in the event of default, and

(3)  The amount of any loss resulting from a recourse obligation entered on the books and records of the State savings association.

(b)  The term with recourse does not include loans or interests therein where the agreement of sale provides for the State savings association directly or indirectly

(1)  To hold or retain a subordinate interest in a specified percentage of the loans or interests; or

(2)  To guarantee against loss up to a specified percentage of the loans or interests, which specified percentage shall not exceed ten percent of the outstanding balance of the loans or interests at the time of sale: Provided, that the State savings association designates adequate reserves for the subordinate interest or guarantee.

(c)  This definition does not apply for purposes of determining the capital adequacy requirements under subpart Z.

[Codified to 12 C.F.R. § 390.316]

Subpart R—Regulatory Reporting Standards

§ 390.320  Regulatory reporting requirements.

(a)  Authority and scope. This subpart is issued by the FDIC pursuant to 12 U.S.C. sections 1831m; 1831n(a)(2); 1831p-1; 1464(v)(1). It applies to all State savings associations regulated by the FDIC.

(b)  Records and reports--general--(1)  Records. Each State savings association and its affiliates shall maintain accurate and complete records of all business transactions. Such records shall support and be readily reconcilable to any regulatory reports submitted to the FDIC and financial reports prepared in accordance with GAAP. The records shall be maintained in the United States and be readily accessible for examination and other supervisory purposes within 5 business days upon request by the FDIC, at a location acceptable to the FDIC.

(2)  Reports. For purposes of examination by and regulatory reports to the FDIC and compliance with this section, all State savings associations shall use such forms and follow such regulatory reporting requirements as the FDIC may require by regulation or otherwise.

[Codified to 12 C.F.R. § 390.320]

§ 390.321  Regulatory reports.

(a)  Definition and scope. This section applies to all regulatory reports, as defined herein. A regulatory report is any report that the FDIC prepares, or is submitted to, or is used by the FDIC, to determine compliance with its rules and regulations, and to evaluate the safe and sound condition and operation of State savings associations. Regulatory reports are regulatory documents, not accounting documents.

(b)  Regulatory reporting requirements--(1)  General. The instructions to regulatory reports are referred to as "regulatory reporting requirements." Regulatory reporting requirements include, but are not limited to, the accounting instructions, guidance contained in FDIC regulations, financial institution letters, manuals, bulletins, examination handbooks, and safe and sound practices. Regulatory reporting requirements are not limited to the minimum requirements under generally accepted accounting principles (GAAP) because of the special supervisory, regulatory, and economic policy needs served by such reports. Regulatory reporting by State savings associations that purports to comply with GAAP shall incorporate the GAAP that best reflects the underlying economic substance of the transaction at issue. Regulatory reporting requirements shall, at a minimum:

(i)  Incorporate GAAP whenever GAAP is the referenced accounting instruction for regulatory reports to the Federal banking agencies;

(ii)  Incorporate safe and sound practices contained in FDIC regulations, financial institution letters, bulletins, examination handbooks, manuals, and instructions to regulatory reports; and

(iii)  Incorporate additional safety and soundness requirements more stringent than GAAP, as the FDIC may prescribe.

(2)  Exceptions. Regulatory reporting requirements that are not consistent with GAAP, if any, are not required to be reflected in audited financial statements, including financial statements contained in securities filings submitted to the FDIC pursuant to the Securities and Exchange Act of 1934 or subparts U and W and 12 CFR part 192.

(3)  Compliance. When the FDIC determines that a State savings association's regulatory reports did not conform to regulatory reporting requirements in previous reporting periods, the association shall correct its regulatory reports in accordance with the directions of the FDIC.

[Codified to 12 C.F.R. § 390.321]

§ 390.322  Audit of State savings associations.

(a)  General. The FDIC may require, at any time, an independent audit of the financial statements of, or the application of procedures agreed upon by the FDIC to a State savings association, by qualified independent public accountants when needed for any safety and soundness reason identified by the FDIC.

(b)  Audits required for safety and soundness purposes. The FDIC requires an independent audit for safety and soundness purposes:

(1)  If a State savings association has received a composite rating of 3, 4 or 5, as defined at § 390.101(c).

(2)  [Reserved]

(c)  Procedures. (1)  When the FDIC requires an independent audit because such an audit is needed for safety and soundness purposes, the FDIC shall determine whether the audit was conducted and filed in a manner satisfactory to the FDIC.

(2)  The FDIC may waive the independent audit requirement described at paragraph (b)(1) of this section, if the FDIC determines that an audit would not provide further information on safety and soundness issues relevant to the examination rating.

(3)  When the FDIC requires the application of procedures agreed upon by the FDIC for safety and soundness purposes, the FDIC shall identify the procedures to be performed. The FDIC shall also determine whether the agreed upon procedures were conducted and filed in a manner satisfactory to the FDIC.

(d)  Qualifications for independent public accountants. The audit shall be conducted by an independent public accountant who:

(1)  Is registered or licensed to practice as a public accountant, and is in good standing, under the laws of the state or other political subdivision of the United States in which the State savings association's or holding company's principal office is located;

(2)  Agrees in the engagement letter to provide the FDIC with access to and copies of any work papers, policies, and procedures relating to the services performed;

(3)(i)  Is in compliance with the American Institute of Certified Public Accountants' (AICPA) Code of Professional Conduct; and

(ii)  Meets the independence requirements and interpretations of the Securities and Exchange Commission and its staff; and

(4)  Has received, or is enrolled in, a peer review program that meets guidelines acceptable to the FDIC.

(e)  Voluntary audits. When a State savings association obtains an independent audit voluntarily, it must be performed by an independent public accountant who satisfies the requirements of paragraphs (d)(1), (2), and (3)(i) of this section.

[Codified to 12 C.F.R. § 390.322]

Subpart S—State Savings Associations—Operations

§ 390.330  Chartering documents.

(a)  Submission for approval. Any de novo State savings association prior to commencing operations shall file its charter and bylaws with the FDIC for approval, together with a certification that such charter and bylaws are permissible under all applicable laws, rules and regulations.

(b)  Availability of chartering documents. Each State savings association shall cause a true copy of its charter and bylaws and all amendments thereto to be available to accountholders at all times in each office of the State savings association, and shall upon request deliver to any accountholders a copy of such charter and bylaws or amendments thereto.

§ 390.331  Securities: Statement of non-insurance.

Every security issued by a State savings association must include in its provisions a clear statement that the security is not insured by the Federal Deposit Insurance Corporation.

[Codified to 12 C.F.R. § 390.331]

§ 390.332  Merger, consolidation, purchase or sale of assets, or assumption of liabilities.

(a)  No State savings association may, without application to and approval by the FDIC:

(1)  Combine with any insured depository institution, if the acquiring or resulting institution is to be a State savings association; or

(2)  Assume liability to pay any deposit made in, any insured depository institution.

(b)(1)  No State savings association may, without notifying the FDIC, as provided in paragraph (h)(1) of this section:

(i)  Combine with another insured depository institution where a State savings association is not the resulting institution; or

(ii)  In the case of a State savings association that meets the conditions for expedited treatment under § 390.101, convert, directly or indirectly, to a national or state bank.

(2)  A State savings association that does not meet the conditions for expedited treatment under § 390.101 may not, directly or indirectly, convert to a national or state bank without prior application to and approval of FDIC, as provided in paragraph (h)(2)(ii) of this section.

(c)  No State savings association may make any transfer (excluding transfers subject to paragraphs (a) or (b) of this section) without notice or application to the FDIC, 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 FDIC shall take into account the following:

(i)  The capital level of any resulting State 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 State 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 State 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 State 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 State 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 State 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 State savings association. The filing should describe and justify the duties and responsibilities and any compensation paid to any advisory board of the resulting State 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 State savings association. Advisory board fees that are in excess of 115 percent of the director fees paid by the disappearing State 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 State savings associations with assets greater than $10,000,000 or $50 per meeting attended for disappearing State 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 FDIC 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 State 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 FDIC 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 FDIC.

(4)  Applications filed under paragraph (a) of this section must be processed in accordance with the time frames set forth in §§ 390.127 through 390.135, provided that the period for review may be extended only if the FDIC determines that the applicant has failed to furnish all requested information or that the information submitted is substantially inaccurate, in which case the review period may be extended for up to 30 days.

(e)(1)  The following procedures apply to applications described in paragraph (a) of this section, unless the FDIC finds that it must act immediately to prevent the probable default of one of the depository institutions involved:

(i)  The applicant must publish a public notice of the application in accordance with the procedures in §§ 390.111 through 390.115. In addition to the initial publication, the applicant must also publish on a weekly basis during the public comment period.

(ii)  Commenters may submit comments on an application in accordance with the procedures in §§ 390.116 through 390.120. The public comment period is 30 calendar days after the date of publication of the initial public notice. However, if the FDIC has advised the Attorney General that an emergency exists requiring expeditious action, the public comment period is 10 calendar days after the date of publication of the initial public notice.

(iii)  The FDIC may arrange a meeting in accordance with the procedures in §§ 390.121 through 390.125.

(iv)  The FDIC will request the Attorney General, the Office of the Comptroller of the Currency, and the Board of Governors of the Federal Reserve System to provide reports on the competitive impacts involved in the transaction.

(v)  The FDIC will immediately notify the Attorney General of the approval of the transaction. The applicant may not consummate the transaction before the date established under 12 U.S.C. 1828(c)(6).

(2)  For applications described in § 390.332, certain State savings associations described below must provide affected accountholders with a notice of a proposed account transfer and an option of retaining the account in the transferring State savings association. The notice must allow affected accountholders at least 30 days to consider whether to retain their accounts in the transferring State savings association. The following State savings associations must provide the notices:

(i)  A State savings association transferring account liabilities to an institution the accounts of which are not insured by the Deposit Insurance Fund or the National Credit Union Share Insurance Fund; and

(ii)  Any mutual State savings association transferring account liabilities to a stock form depository institution.

(f)  Automatic approvals by the FDIC. Applications filed pursuant to paragraph (a) of this section shall be deemed to be approved automatically by the FDIC 30 calendar days after the FDIC sends written notice to the applicant that the application is complete, unless:

(1)  The acquiring State savings association does not meet the criteria for expedited treatment under § 390.101;

(2)  The FDIC recommends the imposition of non-standard conditions prior to approving the application;

(3)  The FDIC suspends the applicable processing time frames under § 390.125;

(4)  The FDIC raises objections to the transaction;

(5)  The resulting State savings association would be one of the 3 largest depository institutions competing in the relevant geographic area where before the transaction there were 5 or fewer depository institutions, the resulting State savings association would have 25 percent or more of the total deposits held by depository institutions in the relevant geographic area, and the share of total deposits would have increased by 5 percent or more;

(6)  The resulting State savings association would be one of the 2 largest depository institutions competing in the relevant geographic area where before the transaction there were 6 to 11 depository institutions the resulting State savings association would have 30 percent or more of the total deposits held by depository institutions in the relevant geographic area, and the share of total deposits would have increased by 10 percent or more;

(7)  The resulting State savings association would be one of the 2 largest depository institutions competing in the relevant geographic area where before the transaction there were 12 or more depository institutions, the resulting State savings association would have 35 percent or more of the total deposits held by the depository institutions in the relevant geographic area, and the share of total deposits would have increased by 15 percent or more;

(8)  The Herfindahl-Hirschman Index (HHI) in the relevant geographic area was more than 1800 before the transaction, and the increase in the HHI used by the transaction would be 50 or more;

(9)  In a transaction involving potential competition, the FDIC determines that the acquiring State savings association is one of three or fewer potential entrants into the relevant geographic area;

(10)  The acquiring State savings association has assets of $1 billion or more and proposes to acquire assets of $1 billion or more;

(11)  The State savings association that will be the resulting State savings association in the transaction has a composite Community Reinvestment Act rating of less than satisfactory, or is otherwise seriously deficient with respect to the FDIC's nondiscrimination regulations and the deficiencies have not been resolved to the satisfaction of the FDIC;

(12)  The transaction involves any supervisory or assistance agreement with the FDIC;

(13)  The transaction is part of a conversion under 12 CFR part 192;

(14)  The transaction raises a significant issue of law or policy; or

(15)  The transaction is opposed by any constituent institution or contested by a competing acquiror.

(g)  Definitions. (1)  The terms used in this subpart shall have the same meaning as set forth in 12 CFR 152.13(b).

(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 FDIC may consider commuting patterns, newspaper and other advertising activities, or other factors as the FDIC deems relevant.

(h)  Special requirements and procedures for transactions under paragraphs (b) and (c) of this section--(1)(i)  Certain transactions with no surviving State savings association. The FDIC must be notified of any transaction under paragraph (b)(1) of this section. Such notification must be submitted to the appropriate FDIC region, as defined in § 303.2 of this chapter, 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 FDIC 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 State savings association submitting the notification maintains a liquidation account established pursuant to 12 CFR part 192, the notification must state that the resulting institution will assume such liquidation account.

(ii)  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 FDIC's receipt of the notification, a new notification must be submitted to the FDIC.

(2)  Other transfer transactions--(i)  Expedited treatment. A notice in conformity with § 390.105(a) may be submitted to the appropriate FDIC region, as defined in § 303.2 of this chapter, under § 390.108 for any transaction under paragraph (c) of this section, provided all constituent State savings associations meet the conditions for expedited treatment under § 390.101. Notices submitted under this paragraph must be deemed approved automatically by the FDIC 30 days after receipt, unless the FDIC advises the applicant in writing prior to the expiration of such period that the proposed transaction may not be consummated without the FDIC'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 § 390.105(b) and paragraph (d) of this section must be submitted to the appropriate FDIC region, as defined in § 303.2 of this chapter, under § 390.108 by each State savings association participating in a transaction under paragraph (b)(2) or (c) of this section, where any constituent State savings association does not meet the conditions for expedited treatment under § 390.101. Applications under this paragraph must be processed in accordance with §§ 390.103 through 390.110 and §§ 390.126 through 390.135.

[Codified to 12 C.F.R. § 390.332]

§ 390.333  Advertising.

No State savings association shall use advertising (which includes print or broadcast media, displays or signs, stationery, and all other promotional materials), or make any representation which is inaccurate in any particular or which in any way misrepresents its services, contracts, investments, or financial condition.

[Codified to 12 C.F.R. § 390.333]

§ 390.334  Directors, officers, and employees.

(a)  Directors--(1)  Requirements. The composition of the board of directors of a State savings association must be in accordance with the following requirements:

(i)  A majority of the directors must not be salaried officers or employees of the State savings association or of any subsidiary or (except in the case of a State savings association having 80% or more of any class of voting shares owned by a holding company) any holding company affiliate thereof.

(ii)  Not more than two of the directors may be members of the same immediate family.

(iii)  Not more than one director may be an attorney with a particular law firm.

(2)  Prospective application. In the case of an association whose board of directors does not conform with any requirement set forth in paragraph (a)(1) of this section as of October 5, 1983, this paragraph (a) shall not prohibit the uninterrupted service, including re-election and re-appointment, of any person serving on the board of directors at that date.

(b)  [Reserved]

[Codified to 12 C.F.R. § 390.334]

§ 390.335  Tying restriction exception.

For applicable rules, see the regulations issued by the Board of Governors of the Federal Reserve System.

[Codified to 12 C.F.R. § 390.335]

§ 390.336  Employment contracts.

(a)  General. A State savings association may enter into an employment contract with its officers and other employees only in accordance with the requirements of this section. All employment contracts shall be in writing and shall be approved specifically by a State savings association's board of directors. A State savings association shall not enter into an employment contract with any of its officers or other employees if such contract would constitute an unsafe or unsound practice. The making of such an employment contract would be an unsafe or unsound practice if such contract could lead to material financial loss or damage to the State savings association or could interfere materially with the exercise by the members of its board of directors of their duty or discretion provided by law, charter, bylaw or regulation as to the employment or termination of employment of an officer or employee of the State savings association. This may occur, depending upon the circumstances of the case, where an employment contract provides for an excessive term.

(b)  Required provisions. Each employment contract shall provide that:

(1)  The State savings association's board of directors may terminate the officer or employee's employment at any time, but any termination by the State savings association's board of directors other than termination for cause, shall not prejudice the officer or employee's right to compensation or other benefits under the contract. The officer or employee shall have no right to receive compensation or other benefits for any period after termination for cause. Termination for cause shall include termination because of the officer or employee's personal dishonesty, incompetence, willful misconduct, breach of fiduciary duty involving personal profit, intentional failure to perform stated duties, willful violation of any law, rule, or regulation (other than traffic violations or similar offenses) or final cease-and-desist order, or material breach of any provision of the contract.

(2)  If the officer or employee is suspended and/or temporarily prohibited from participating in the conduct of the State savings association's affairs by a notice served under section 8(e)(3) or (g)(1) of Federal Deposit Insurance Act (12 U.S.C. 1818(e)(3) and (g)(1)), the State savings association's obligations under the contract shall be suspended as of the date of service unless stayed by appropriate proceedings. If the charges in the notice are dismissed, the State savings association may in its discretion:

(i)  Pay the officer or employee all or part of the compensation withheld while its contract obligations were suspended; and

(ii)  Reinstate (in whole or in part) any of its obligations which were suspended.

(3)  If the officer or employee is removed and/or permanently prohibited from participating in the conduct of the State savings association's affairs by an order issued under section 8 (e)(4) or (g)(1) of the Federal Deposit Insurance Act (12 U.S.C. 1818 (e)(4) or (g)(1)), all obligations of the State savings association under the contract shall terminate as of the effective date of the order, but vested rights of the contracting parties shall not be affected.

(4)  If the State savings association is in default (as defined in section 3(x)(1) of the Federal Deposit Insurance Act), all obligations under the contract shall terminate as of the date of default, but this paragraph (b)(4) shall not affect any vested rights of the contracting parties: Provided, that this paragraph (b)(4) need not be included in an employment contract if prior written approval is secured from the FDIC.

(5)(i)  All obligations under the contract shall be terminated, except to the extent determined that continuation of the contract is necessary of the continued operation of the State savings association

(A)  By the FDIC, at the time the FDIC enters into an agreement to provide assistance to or on behalf of the State savings association under the authority contained in 13(c) of the Federal Deposit Insurance Act; or

(B)  By the FDIC, at the time the FDIC approves a supervisory merger to resolve problems related to operation of the State savings association or when the State savings association is determined by the FDIC to be in an unsafe or unsound condition.

(ii)  Any rights of the parties that have already vested, however, shall not be affected by such action.

[Codified to 12 C.F.R. § 390.336]

§ 390.337  Transactions with affiliates.

For applicable rules, see the regulations issued by the Board of Governors of the Federal Reserve System.

[Codified to 12 C.F.R. § 390.337]

§ 390.338  Loans by State savings associations to their executive officers, directors, and principal shareholders.

For applicable rules, see the regulations issued by the Board of Governors of the Federal Reserve System.

[Codified to 12 C.F.R. § 390.338]

§ 390.339  Pension plans.

(a)  General. No State savings association shall sponsor an employee pension plan which, because of unreasonable costs or any other reason, could lead to material financial loss or damage to the sponsor. For purposes of this section, an employee pension plan is defined in section 3(2) of the Employee Retirement Income Security Act of 1974, as amended. The prospective obligation or liability of a plan sponsor to each plan participant shall be stated in or determinable from the plan, and, for a defined benefit plan, shall also be based upon an actuarial estimate of future experience under the plan.

(b)  Funding. Actuarial cost methods permitted under the Employee Retirement Income Security Act of 1974 and the Internal Revenue Code of 1954, as amended, shall be used to determine plan funding.

(c)  Plan amendment. A plan may be amended to provide reasonable annual cost-of-living increases to retired participants: Provided, That

(1)  Any such increase shall be for a period and amount determined by the sponsor's board of directors, but in no event shall it exceed the annual increase in the Consumer Price Index published by the Bureau of Labor Statistics; and

(2)  No increase shall be granted unless:

(i)  Anticipated charges to net income for future periods have first been found by such board of directors to be reasonable and are documented by appropriate resolution and supporting analysis; and

(ii)  The increase will not reduce the State savings association's regulatory capital below its regulatory capital requirement.

(d)  Termination. The plan shall permit the sponsor's board of directors and its successors to terminate such plan. Notice of intent to terminate shall be filed with the FDIC at least 60 days prior to the proposed termination date.

(e)  Records. Each State savings association maintaining a plan not subject to recordkeeping and reporting requirements of the Employee Retirement Income Security Act of 1974, and the Internal Revenue Code of 1954, as amended, shall establish and maintain records containing the following:

(1)  Plan description;

(2)  Schedule of participants and beneficiaries;

(3)  Schedule of participants and beneficiaries' rights and obligations;

(4)  Plan's financial statements; and

(5)  Except for defined contribution plans, an opinion signed by an enrolled actuary (as defined by the Employee Retirement Income Security Act of 1974) affirming that actuarial assumptions in the aggregate are reasonable, take into account the plan's experience and expectations, and represent the actuary's best estimate of the plan's projected experiences.

[Codified to 12 C.F.R. § 390.339]

§ 390.340  Offers and sales of securities at an office of a State savings association.

(a)  A State saving association may not offer or sell debt or equity securities issued by the State savings association or an affiliate of the State savings association at an office of the State savings association; except that equity securities issued by the State savings association or an affiliate in connection with the State savings association's conversion from the mutual to stock form of organization in a conversion approved pursuant to 12 CFR part 192 may be offered and sold at the State savings association's offices: Provided, That:

(1)  The FDIC does not object on supervisory grounds that the offer and sale of the securities at the offices of the State savings association;

(2)  No commissions, bonuses, or comparable payments are paid to any employee of the State savings association or its affiliates or to any other person in connection with the sale of securities at an office of a State savings association; except that compensation and commissions consistent with industry norms may be paid to securities personnel of registered broker-dealers;

(3)  No offers or sales are made by tellers or at the teller counter, or by comparable persons at comparable locations;

(4)  Sales activity is conducted in a segregated or separately identifiable area of the State savings association's offices apart from the area accessible to the general public for the purposes of making or withdrawing deposits;

(5)  Offers and sales are made only by regular, full-time employees of the State savings association or by securities personnel who are subject to supervision by a registered broker-dealer;

(6)  An acknowledgment, in the form set forth in paragraph (c) of this section, is signed by any customer to whom the security is sold in the State savings association's offices prior to the sale of any such securities;

(7)  A legend that the security is not a deposit or account and is not federally insured or guaranteed appears conspicuously on the security and in all offering documents and advertisements for the securities; the legend must state in bold or other prominent type at least as large as other textual type in the document that "This security is not a deposit or account and is not federally insured or guaranteed"; and

(8)  The State savings association will be in compliance with its current capital requirements upon completion of the conversion stock offering.

(b)  Securities sales practices, advertisements, and other sales literature used in connection with offers and sales of securities by State savings associations shall be subject to § 390.419.

(c)  Offers and sales of securities of a State savings association or its affiliates in any office of the State savings association must use a one-page, unambiguous, certification in substantially the following form:

FORM OF CERTIFICATION

I ACKNOWLEDGE THAT THIS SECURITY IS NOT A DEPOSIT OR ACCOUNT AND IS NOT FEDERALLY INSURED, AND IS NOT GUARANTEED BY [insert name of State savings association] OR BY THE FEDERAL GOVERNMENT.

If anyone asserts that this security is federally insured or guaranteed, or is as safe as an insured deposit, I should call the FDIC's appropriate regional director [insert name and telephone number with area code of the appropriate regional director, as defined in section 303.2 of this chapter].

I further certify that, before purchasing the [description of security being offered] of [name of issuer, name of State savings association and affiliation to issuer (if different)], I received an offering circular.

The offering circular that I received contains disclosure concerning the nature of the security being offered and describes the risks involved in the investment, including:

[List briefly the principal risks involved and cross reference certain specified pages of the offering circular where a more complete description of the risks is made.]

Signature: _______

Date: _______

(d)  For purposes of this section, an "office" of a State savings association means any premises used by the State savings association that are identified to the public through advertising or signage using the State savings association's name, trade name, or logo.

[Codified to 12 C.F.R. § 390.340]

§ 390.341  Inclusion of subordinated debt securities and mandatorily redeemable preferred stock as supplementary capital.

(a)  Scope. A State savings association must comply with this section in order to include subordinated debt securities or mandatorily redeemable preferred stock ("covered securities") in supplementary capital (tier 2 capital) under subpart Z. If a State savings association does not include covered securities in supplementary capital, it is not required to comply with this section.

(b)  Application and notice procedures. (1) A State savings association must file an application or notice under §§ 390.103 through 390.110 seeking FDIC approval of, or non-objection to, the inclusion of covered securities in supplementary capital. The State savings association may file its application or notice before or after it issues covered securities, but may not include covered securities in supplementary capital until the FDIC approves the application or does not object to the notice.

(2)  A State savings association must also comply with the securities offering rules at subpart W by filing an offering circular for a proposed issuance of covered securities, unless the offering qualifies for an exemption under that subpart.

(c)  Securities requirements. To be included in supplementary capital, covered securities must meet the following requirements:

(1)  Form. (i)  Each certificate evidencing a covered security must:

(A)  Bear the following legend on its face, in bold type: "This security is not a savings account or deposit and it is not insured by the United States or any agency or fund of the United States;"

(B)  State that the security is subordinated on liquidation, as to principal, interest, and premium, to all claims against the State savings association that have the same priority as savings accounts or a higher priority;

(C)  State that the security is not secured by the State savings association's assets or the assets of any affiliate of the State savings association. For purposes of this subpart, the term affiliate means any person or company which controls, is controlled by, or is under common control with such State savings association.

(D)  State that the security is not eligible collateral for a loan by the State savings association;

(E)  State the prohibition on the payment of dividends or interest at 12 U.S.C. 1828(b) and, in the case of subordinated debt securities, state the prohibition on the payment of principal and interest at 12 U.S.C. 1831o(h);

(F)  For subordinated debt securities, state or refer to a document stating the terms under which the State savings association may prepay the obligation; and

(G)  State or refer to a document stating that the State savings association must obtain FDIC approval before the voluntarily prepayment of principal on subordinated debt securities, the acceleration of payment of principal on subordinated debt securities, or the voluntarily redemption of mandatorily redeemable preferred stock (other than scheduled redemptions), if the State savings association is undercapitalized, significantly undercapitalized, or critically undercapitalized as described in § 390.453(4)(b), fails to meet the regulatory capital requirements at subpart Z , or would fail to meet any of these standards following the payment.

(ii)  A State savings association must include such additional statements as the FDIC may prescribe for certificates, purchase agreements, indentures, and other related documents.

(2)  Maturity requirements. Covered securities must have an original weighted average maturity or original weighted average period to required redemption of at least five years.

(3)  Mandatory prepayment. Subordinated debt securities and related documents may not provide events of default or contain other provisions that could result in a mandatory prepayment of principal, other than events of default that:

(i)  Arise from the State savings association's failure to make timely payment of interest or principal;

(ii)  Arise from its failure to comply with reasonable financial, operating, and maintenance covenants of a type that are customarily included in indentures for publicly offered debt securities; or

(iii)  Relate to bankruptcy, insolvency, receivership, or similar events.

(4)  Indenture. (i)  Except as provided in paragraph (c)(4)(ii) of this section, a State savings association must use an indenture for subordinated debt securities. If the aggregate amount of subordinated debt securities publicly offered (excluding sales in a non-public offering as defined in § 390.413 and sold in any consecutive 12-month or 36-month period exceeds $5,000,000 or $10,000,000 respectively (or such lesser amount that the Securities and Exchange Commission shall establish by rule or regulation under 15 U.S.C. 77ddd), the indenture must provide for the appointment of a trustee other than the State savings association or an affiliate of the State savings association (as defined at § 390.283) and for collective enforcement of the security holders' rights and remedies.

(ii)  A State savings association is not required to use an indenture if the subordinated debt securities are sold only to accredited investors, as that term is defined in 15 U.S.C. 77d(6). A State savings association must have an indenture that meets the requirements of paragraph (c)(4)(i) of this section in place before any debt securities for which an exemption from the indenture requirement is claimed, are transferred any non-accredited investor. If a State savings association relies on this exemption from the indenture requirement, it must place a legend on the debt securities indicating that an indenture must be in place before the debt securities are transferred to any non-accredited investor.

(d)  FDIC review. (1)  The FDIC will review notices and applications under §§ 390.126 through 390.135.

(2)  In reviewing notices and applications under this section, the FDIC will consider whether:

(i)  The issuance of the covered securities is authorized under applicable laws and regulations and is consistent with the State savings association's charter and bylaws.

(ii)  The State savings association is at least adequately capitalized under § 390.453(4)(b) and meets the regulatory capital requirements at subpart Z.

(iii)  The State savings association is or will be able to service the covered securities.

(iv)  The covered securities are consistent with the requirements of this section.

(v)  The covered securities and related transactions sufficiently transfer risk from the Deposit Insurance Fund.

(vi)  The FDIC has no objection to the issuance based on the State savings association's overall policies, condition, and operations.

(3)  The FDIC approval or non-objection is conditioned upon no material changes to the information disclosed in the application or notice submitted to the FDIC. The FDIC may impose such additional requirements or conditions as it may deem necessary to protect purchasers, the State savings association, or the Deposit Insurance Fund.

(e)  Amendments. If a State savings association amends the covered securities or related documents following the completion of the FDIC's review, it must obtain the FDIC's approval or non-objection under this section before it may include the amended securities in supplementary capital.

(f)  Sale of covered securities. The State savings association must complete the sale of covered securities within one year after the FDIC's approval or non-objection under this section. A State savings association may request an extension of the offering period by filing a written request with the FDIC. The State savings association must demonstrate good cause for the extension and file the request at least 30 days before the expiration of the offering period or any extension of the offering period.

(g)  Reports. A State savings association must file the following information with the FDIC within 30 days after the State savings association completes the sale of covered securities includable as supplementary capital. If the State savings association filed its application or notice following the completion of the sale, it must submit this information with its application or notice:

(1)  A written report indicating the number of purchasers, the total dollar amount of securities sold, the net proceeds received by the State savings association from the issuance, and the amount of covered securities, net of all expenses, to be included as supplementary capital;

(2)  Three copies of an executed form of the securities and a copy of any related documents governing the issuance or administration of the securities; and

(3)  A certification by the appropriate executive officer indicating that the State savings association complied with all applicable laws and regulations in connection with the offering, issuance, and sale of the securities.

[Codified to 12 C.F.R. § 390.341]

§ 390.342   Capital distributions by State savings associations.

Sections 390.342 through 390.348 apply to all capital distributions by a State savings association ("you").

[Codified to 12 C.F.R. § 390.342]

§ 390.343  What is a capital distribution?

A capital distribution is:

(a)  A distribution of cash or other property to your owners made on account of their ownership, but excludes:

(1)  Any dividend consisting only of your shares or rights to purchase your shares; or

(2)  If you are a mutual State savings association, any payment that you are required to make under the terms of a deposit instrument and any other amount paid on deposits that the FDIC determines is not a distribution for the purposes of this section;

(b)  Your payment to repurchase, redeem, retire or otherwise acquire any of your shares or other ownership interests, any payment to repurchase, redeem, retire, or otherwise acquire debt instruments included in your total capital under subpart Z, and any extension of credit to finance an affiliate's acquisition of your shares or interests;

(c)  Any direct or indirect payment of cash or other property to owners or affiliates made in connection with a corporate restructuring. This includes your payment of cash or property to shareholders of another savings association or to shareholders of its holding company to acquire ownership in that savings association, other than by a distribution of shares;

(d)  Any other distribution charged against your capital accounts if you would not be well capitalized, as set forth in § 390.453(b)(1), following the distribution; and

(e)  Any transaction that the FDIC determines, by order or regulation, to be in substance a distribution of capital.

[Codified to 12 C.F.R. § 390.343]

§ 390.344  Definitions applicable to capital distributions.

The following definitions apply to sections 390.342 through 390.348:

Affiliate means an affiliate, as defined in regulations governing transactions with affiliates as issued by the Board of Governors of the Federal Reserve System.

Capital means total capital, as computed under subpart Z.

Net income means your net income computed in accordance with generally accepted accounting principles.

Retained net income means your net income for a specified period less total capital distributions declared in that period.

Shares means common and preferred stock, and any options, warrants, or other rights for the acquisition of such stock. The term "share" also includes convertible securities upon their conversion into common or preferred stock. The term does not include convertible debt securities prior to their conversion into common or preferred stock or other securities that are not equity securities at the time of a capital distribution.

[Codified to 12 C.F.R. § 390.344]

§ 390.345  Must I file with the FDIC?

Whether and what you must file with the FDIC depends on whether you and your proposed capital distribution fall within certain criteria.

(a)  Application required.

If: Then you:
(1)  You are not eligible for expedited treatment under § 390.101. Must file an application with the FDIC.
(2)  The total amount of all of your capital distributions (including the proposed capital distribution) for the applicable calendar year exceeds your net income for that year to date plus your retained net income for the preceding two years Must file an application with the FDIC.
(3)  You would not be at least adequately capitalized, as set forth in § 390.453(b)(2), following the distribution Must file an application with the FDIC.
(4)  Your proposed capital distribution would violate a prohibition contained in any applicable statute, regulation, or agreement between you and the FDIC, or violate a condition imposed on you in an FDIC-approved application or notice Must file an application with the FDIC.

(b)  Notice required.

If you are not required to file an application under paragraph (a) of this section, but: Then you:
(1)  You would not be well capitalized, as set forth under § 390.453(b)(1), following the distribution Must file a notice with the FDIC.
(2)  Your proposed capital distribution would reduce the amount of or retire any part of your common or preferred stock or retire any part of debt instruments such as notes or debentures included in capital under subpart Z (other than regular payments required under a debt instrument approved under § 390.341) Must file a notice with the FDIC.

(c)  No prior notice required.

If neither you nor your proposed capital distribution meet any of the criteria listed in paragraphs (a) and (b) of this section Then you do not need to file a notice or an application with the FDIC before making a capital distribution.

[Codified to 12 C.F.R. § 390.345]

§ 390.346 How do I file with the FDIC?

(a)  Contents. Your notice or application must:

(1)  Be in narrative form.

(2)  Include all relevant information concerning the proposed capital distribution, including the amount, timing, and type of distribution.

(3)  Demonstrate compliance with § 390.348.

(b)  Schedules. Your notice or application may include a schedule proposing capital distributions over a specified period, not to exceed 12 months.

(c)  Timing. You must file your notice or application at least 30 days before the proposed declaration of dividend or approval of the proposed capital distribution by your board of directors.

[Codified to 12 C.F.R. § 390.346]

§ 390.347  May I combine my notice or application with other notices or applications?

You may combine the notice or application required under § 390.345 with any other notice or application, if the capital distribution is a part of, or is proposed in connection with, another transaction requiring a notice or application under Parts 390 and 391. If you submit a combined filing, you must:

(a)  State that the related notice or application is intended to serve as a notice or application under §§ 390.342 through 390.348; and

(b)  Submit the notice or application in a timely manner.

[Codified to 12 C.F.R. § 390.347]

§ 390.348  Will the FDIC permit my capital distribution?

The FDIC will review your notice or application under the review procedures in §§ 390.126 through 390.135. The FDIC may disapprove your notice or deny your application filed under § 390.345 in whole or in part, if the FDIC makes any of the following determinations.

(a)  You will be undercapitalized, significantly undercapitalized, or critically undercapitalized as set forth in § 390.453(b), following the capital distribution. If so, the FDIC will determine if your capital distribution is permitted under 12 U.S.C. 1831o(d)(1)(B).

(b)  Your proposed capital distribution raises safety or soundness concerns.

(c)  Your proposed capital distribution violates a prohibition contained in any statute, regulation, agreement between you and the FDIC or a condition imposed on you in an FDIC-approved application or notice. If so, the FDIC will determine whether it may permit your capital distribution notwithstanding the prohibition or condition.

[Codified to 12 C.F.R. § 390.348]

§ 390.349  Management and financial policies.

(a)(1)  For the protection of depositors and other State savings associations, each State savings association must be well managed and operate safely and soundly. Each also must pursue financial policies that are safe and consistent with economical home financing and the purposes of State savings associations.

(2)  As part of meeting its requirements under paragraph (a)(1) of this section, each State savings association must maintain sufficient liquidity to ensure its safe and sound operation.

(b)  Compensation to officers, directors, and employees of each State savings association shall not be in excess of that which is reasonable and commensurate with their duties and responsibilities. Former officers, directors, and employees of State savings association who regularly perform services therefor under consulting contracts are employees thereof for purposes of this paragraph (b).

[Codified to 12 C.F.R. § 390.349]

§ 390.350  Examinations and audits; appraisals; establishment and maintenance of records.

(a)  Examinations and audits. Each State savings association and affiliate thereof shall be examined periodically, and may be examined at any time, by the FDIC, with appraisals when deemed advisable, in accordance with general policies from time to time established by the FDIC.

(b)  Appraisals. (1)  Unless otherwise ordered by the FDIC, appraisal of real estate by the FDIC in connection with any examination or audit of a State savings association or its affiliate shall be made by an appraiser, or by appraisers, selected by the appropriate FDIC region, as that term is defined in § 303.2 of this chapter, in which such State savings association is located. The cost of such appraisal shall promptly be paid by such State savings association or its affiliate direct to such appraiser or appraisers upon receipt by the State savings association or its affiliate of a statement of such cost as approved by the appropriate regional director. A copy of the report of each appraisal made by the FDIC pursuant to any of the foregoing provisions of this section shall be furnished to the State savings association or its affiliate, as appropriate within a reasonable time, not to exceed 90 days, following the completion of such appraisals and the filing of a report thereof by the appraiser, or appraisers, with the appropriate FDIC office.

(2)  The FDIC may obtain at any time, at its expense, such appraisals of any of the assets, including the security therefor, of a State savings association or its affiliate as the FDIC deems appropriate.

(c)  Establishment and maintenance of records. To enable the FDIC to examine State savings associations and affiliates and audit State savings associations and its affiliates, pursuant to the provisions of paragraph (a) of this section, each State savings association, and its affiliate shall establish and maintain such accounting and other records as will provide an accurate and complete record of all business it transacts. This includes, without limitation, establishing and maintaining such other records as are required by statute or any other regulation to which the State savings association and its affiliate is subject. The documents, files, and other material or property comprising said records shall at all times be available for such examination and audit wherever any of said records, documents, files, material, or property may be.

(d)  Change in location of records. A State savings association shall not transfer the location of any of its general accounting or control records, or the maintenance thereof, from its home office to a branch or service office, or from a branch or service office to its home office or to another branch or service office unless prior to the date of transfer its board of directors has:

(1)  By resolution authorized the transfer or maintenance and;

(2)  Sent a certified copy of the resolution to the appropriate regional director for the region in which the principal office of the State savings association is located.

(e)  Use of data processing services for maintenance of records. A State savings association which determines to maintain any of its records by means of data processing services shall so notify the appropriate regional director for the region in which the principal office of such State savings association is located, in writing, at least 90 days prior to the date on which such maintenance of records will begin. Such notification shall include identification of the records to be maintained by data processing services and a statement as to the location at which such records will be maintained. Any contract, agreement, or arrangement made by a State savings association pursuant to which data processing services are to be performed for such State savings association shall be in writing and shall expressly provide that the records to be maintained by such services shall at all times be available for examination and audit.

[Codified to 12 C.F.R. § 390.350]

§ 390.351  Frequency of safety and soundness examination.

(a)  General. The FDIC examines State savings associations pursuant to authority conferred by 12 U.S.C. 1463 and the requirements of 12 U.S.C. 1820(d). The FDIC is required to conduct a full-scope, on-site examination of every State savings association at least once during each 12-month period.

(b)  18-month rule for certain small institutions. The FDIC may conduct a full-scope, on-site examination of a State savings association at least once during each 18-month period, rather than each 12-month period as provided in paragraph (a) of this section, if the following conditions are satisfied:

(1)  The State savings association has total assets of less than $500 million;

(2)  The State savings association is well capitalized as defined in § 390.453;

(3)  At its most recent examination, the FDIC--

(i)  Assigned the State savings association a rating of 1 or 2 for management as part of the State savings association's composite rating under the Uniform Financial Institutions Rating System (commonly referred to as CAMELS), and

(ii)  Determined that the State savings association was in outstanding or good condition, that is, it received a composite rating, as defined in § 390.101(c), of 1 or 2;

(4)  The State savings association currently is not subject to a formal enforcement proceeding or order by the FDIC; and

(5)  No person acquired control of the State savings association during the preceding 12-month period in which a full-scope, on-site examination would have been required but for this section.

(c)  Authority to conduct more frequent examinations. This section does not limit the authority of the FDIC to examine any State savings association as frequently as the agency deems necessary.

[Codified to 12 C.F.R. § 390.351]

§ 390.352  Financial derivatives.

(a)  What is a financial derivative? A financial derivative is a financial contract whose value depends on the value of one or more underlying assets, indices, or reference rates. The most common types of financial derivatives are futures, forward commitments, options, and swaps. A mortgage derivative security, such as a collateralized mortgage obligation or a real estate mortgage investment conduit, is not a financial derivative under this section.

(b)  May I engage in transactions involving financial derivatives? (1)  [Reserved]

(2)  If you are a State savings association, you may engage in a transaction involving a financial derivative if your charter or applicable State law authorizes you to engage in such transactions, the transaction is safe and sound, and you otherwise meet the requirements in this section.

(3)  In general, if you engage in a transaction involving a financial derivative, you should do so to reduce your risk exposure.

(c)  What are my board of directors' responsibilities with respect to financial derivatives? (1)  Your board of directors is responsible for effective oversight of financial derivatives activities.

(2)  Before you may engage in any transaction involving a financial derivative, your board of directors must establish written policies and procedures governing authorized financial derivatives. Your board of directors should review Thrift Bulletin 13a, "Management of Interest Rate Risk, Investment Securities, and Derivatives Activities," and other applicable agency guidance on establishing a sound risk management program.

(3)  Your board of directors must periodically review:

(i)  Compliance with the policies and procedures established under paragraph (c)(2) of this section; and

(ii)  The adequacy of these policies and procedures to ensure that they continue to be appropriate to the nature and scope of your operations and existing market conditions.

(4)  Your board of directors must ensure that management establishes an adequate system of internal controls for transactions involving financial derivatives.

(d)  What are management's responsibilities with respect to financial derivatives? (1)  Management is responsible for daily oversight and management of financial derivatives activities. Management must implement the policies and procedures established by the board of directors and must establish a system of internal controls. This system of internal controls should, at a minimum, provide for periodic reporting to the board of directors and management, segregation of duties, and internal review procedures.

(2)  Management must ensure that financial derivatives activities are conducted in a safe and sound manner and should review Thrift Bulletin 13a, "Management of Interest Rate Risk, Investment Securities, and Derivatives Activities," and other applicable agency guidance on implementing a sound risk management program.

(e)  What records must I keep on financial derivative transactions? You must maintain records adequate to demonstrate compliance with this section and with your board of directors' policies and procedures on financial derivatives.

[Codified to 12 C.F.R. § 390.352]

§ 390.353  Interest-rate-risk-management procedures.

State savings associations shall take the following actions:

(a)  The board of directors or a committee thereof shall review the State savings association's interest-rate-risk exposure and devise a policy for the State savings association's management of that risk.

(b)  The board of directors shall formerly adopt a policy for the management of interest-rate risk. The management of the State savings association shall establish guidelines and procedures to ensure that the board's policy is successfully implemented.

(c)  The management of the State savings association shall periodically report to the board of directors regarding implementation of the State savings association's policy for interest-rate-risk management and shall make that information available upon request to the FDIC.

(d)  The State savings association's board of directors shall review the results of operations at least quarterly and shall make such adjustments as it considers necessary and appropriate to the policy for interest-rate-risk management, including adjustments to the authorized acceptable level of interest-rate risk.

[Codified to 12 C.F.R. § 390.353]

§ 390.354  Procedures for monitoring Bank Secrecy Act (BSA) compliance.

(a)  Purpose. The purpose of this regulation is to require State savings associations (as defined by § 390.308 to establish and maintain procedures reasonably designed to assure and monitor compliance with the requirements of subchapter II of chapter 53 of title 31, United States Code, and the implementing regulations promulgated thereunder by the U.S. Department of Treasury, 31 CFR part 103.

(b)  Establishment of a BSA compliance program--(1)  Program requirement. Each State savings association shall develop and provide for the continued administration of a program reasonably designed to assure and monitor compliance with the recordkeeping and reporting requirements set forth in subchapter II of chapter 53 of title 31, United States Code and the implementing regulations issued by the Department of the Treasury at 31 CFR part 103. The compliance program must be written, approved by the State savings association's board of directors, and reflected in the minutes of the State savings association.

(2)  Customer identification program. Each State savings association is subject to the requirements of 31 U.S.C. 5318(l) and the implementing regulation promulgated at 31 CFR 103.121, which require a customer identification program to be implemented as part of the BSA compliance program required under this section.

(c)  Contents of compliance program. The compliance program shall, at a minimum:

(1)  Provide for a system of internal controls to assure ongoing compliance;

(2)  Provide for independent testing for compliance to be conducted by a savings association's in-house personnel or by an outside party;

(3)  Designate individual(s) responsible for coordinating and monitoring day-to-day compliance; and

(4)  Provide training for appropriate personnel.

[Codified to 12 C.F.R. § 390.354]

§ 390.355  Suspicious Activity Reports and other reports and statements.

(a)  Periodic reports. Each State savings association shall make such periodic or other reports of its affairs in such manner and on such forms as the FDIC may prescribe. The FDIC may provide that reports filed by State savings associations to meet the requirements of other regulations also satisfy requirements imposed under this section.

(b)  False or misleading statements or omissions. No State savings association or director, officer, agent, employee, affiliated person, or other person participating in the conduct of the affairs of such State savings association nor any person filing or seeking approval of any application shall knowingly:

(1)  Make any written or oral statement to the FDIC or to an agent, representative or employee of the FDIC that is false or misleading with respect to any material fact or omits to state a material fact concerning any matter within the jurisdiction of the FDIC; or

(2)  Make any such statement or omission to a person or organization auditing a State savings association or otherwise preparing or reviewing its financial statements concerning the accounts, assets, management condition, ownership, safety, or soundness, or other affairs of the State savings association.

(c)  Notifications of loss and reports of increase in deductible amount of bond. A State savings association maintaining bond coverage as required by § 390.356 shall promptly notify its bond company and file a proof of loss under the procedures provided by its bond, concerning any covered losses greater than twice the deductible amount.

(d)  Suspicious Activity Reports--(1)  Purpose and scope. This paragraph (d) ensures that State savings associations and service corporations file a Suspicious Activity Report when they detect a known or suspected violation of Federal law or a suspicious transaction related to a money laundering activity or a violation of the Bank Secrecy Act.

(2)  Definitions. For the purposes of this paragraph (d):

(i)  FinCEN means the Financial Crimes Enforcement Network of the Department of the Treasury.

(ii)  Institution-affiliated party means any institution-affiliated party as that term is defined in sections 3(u) and 8(b)(9) of the Federal Deposit Insurance Act (12 U.S.C. 1813(u) and 1818(b)(9)).

(iii)  SAR means a Suspicious Activity Report on the form prescribed by the FDIC.

(3)  SARs required. A State savings association shall file a SAR with the appropriate Federal law enforcement agencies and the Department of the Treasury in accordance with the form's instructions, by sending a completed SAR to FinCEN in the following circumstances:

(i)  Insider abuse involving any amount. Whenever the State savings association detects any known or suspected Federal criminal violation, or pattern of criminal violations, committed or attempted against the State savings association or involving a transaction or transactions conducted through the State savings association where the State savings association believes that it was either an actual or potential victim of a criminal violation, or series of criminal violations, or that it was used to facilitate a criminal transaction, and it has a substantial basis for identifying one of its directors, officers, employees, agents or other institution-affiliated parties as having committed or aided in the commission of a criminal act, regardless of the amount involved in the violation.

(ii)  Violations aggregating $5,000 or more where a suspect can be identified. Whenever the State savings association detects any known or suspected Federal criminal violation, or pattern of criminal violations, committed or attempted against the State savings association involving a transaction or transactions conducted through the State savings association and involving or aggregating $5,000 or more in funds or other assets, where the State savings association believes that it was either an actual or potential victim of a criminal violation or series of criminal violations, or that it was used to facilitate a criminal transaction, and it has a substantial basis for identifying a possible suspect or group of suspects. If it is determined prior to filing this report that the identified suspect or group of suspects has used an alias, then information regarding the true identity of the suspect or group of suspects, as well as alias identifiers, such as drivers' license or social security numbers, addresses and telephone numbers, must be reported.

(iii)  Violations aggregating $25,000 or more regardless of potential suspects. Whenever the State savings association detects any known or suspected Federal criminal violation, or pattern of criminal violations, committed or attempted against the State savings association involving a transaction or transactions conducted through the State savings association and involving or aggregating $25,000 or more in funds or other assets, where the State savings association believes that it was either an actual or potential victim of a criminal violation or series of criminal violations, or that it was used to facilitate a criminal transaction, even though there is no substantial basis for identifying a possible suspect or group of suspects.

(iv)  Transactions aggregating $5,000 or more that involve potential money laundering or violations of the Bank Secrecy Act. Any transaction (which for purposes of this paragraph (d)(3)(iv) means a deposit, withdrawal, transfer between accounts, exchange of currency, loan, extension of credit, purchase or sale of any stock, bond, certificate of deposit, or other monetary instrument or investment security, or any other payment, transfer, or delivery by, through, or to a financial institution, by whatever means effected) conducted or attempted by, at or through the State savings association involving or aggregating $5,000 or more in funds or other assets, if the State savings association knows, suspects, or has reason to suspect that:

(A)  The transaction involves funds derived from illegal activities or is intended or conducted in order to hide or disguise funds or assets derived from illegal activities (including, without limitation, the ownership, nature, source, location, or control of such funds or assets) as part of a plan to violate or evade any law or regulation or to avoid any transaction reporting requirement under Federal law;

(B)  The transaction is designed to evade any regulations promulgated under the Bank Secrecy Act; or

(C)  The transaction has no business or apparent lawful purpose or is not the sort in which the particular customer would normally be expected to engage, and the institution knows of no reasonable explanation for the transaction after examining the available facts, including the background and possible purpose of the transaction.

(4)  [Reserved].

(5)  Time for reporting. A State savings association is required to file a SAR no later than 30 calendar days after the date of initial detection of facts that may constitute a basis for filing a SAR. If no suspect was identified on the date of detection of the incident requiring the filing, a State savings association may delay filing a SAR for an additional 30 calendar days to identify a suspect. In no case shall reporting be delayed more than 60 calendar days after the date of initial detection of a reportable transaction. In situations involving violations requiring immediate attention, such as when a reportable violation is ongoing, the State savings association shall immediately notify, by telephone, an appropriate law enforcement authority and the FDIC in addition to filing a timely SAR.

(6)  Reports to state and local authorities. A State savings association is encouraged to file a copy of the SAR with state and local law enforcement agencies where appropriate.

(7)  Exception. A State savings association need not file a SAR for a robbery or burglary committed or attempted that is reported to appropriate law enforcement authorities.

(8)  Retention of records. A State savings association shall maintain a copy of any SAR filed and the original or business record equivalent of any supporting documentation for a period of five years from the date of the filing of the SAR. Supporting documentation shall be identified and maintained by the State savings association as such, and shall be deemed to have been filed with the SAR. A State savings association shall make all supporting documentation available to appropriate law enforcement agencies upon request.

(9)  Notification to board of directors--(i)  Generally. Whenever a State savings association files a SAR pursuant to this paragraph (d), the management of the State savings association shall promptly notify its board of directors, or a committee of directors or executive officers designated by the board of directors to receive notice.

(ii)  Suspect is a director or executive officer. If the State savings association files a SAR pursuant to this paragraph (d) and the suspect is a director or executive officer, the State savings association may not notify the suspect, pursuant to 31 U.S.C. 5318(g)(2), but shall notify all directors who are not suspects.

(10)  Compliance. Failure to file a SAR in accordance with this section and the instructions may subject the State savings association, its directors, officers, employees, agents, or other institution-affiliated parties to supervisory action.

(11)  Obtaining SARs. A State savings association may obtain SARs and the instructions from the appropriate FDIC region as defined in § 303.2 of this chapter.

(12)  Confidentiality of SARs. SARs are confidential. Any institution or person subpoenaed or otherwise requested to disclose a SAR or the information contained in a SAR shall decline to produce the SAR or to provide any information that would disclose that a SAR has been prepared or filed, citing this paragraph (d), applicable law ( e.g., 31 U.S.C. 5318(g)), or both, and shall notify the FDIC.

(13)  Safe harbor. The safe harbor provision of 31 U.S.C. 5318(g), which exempts any financial institution that makes a disclosure of any possible violation of law or regulation from liability under any law or regulation of the United States, or any constitution, law or regulation of any state or political subdivision, covers all reports of suspected or known criminal violations and suspicious activities to law enforcement and financial institution supervisory authorities, including supporting documentation, regardless of whether such reports are filed pursuant to this paragraph (d), or are filed on a voluntary basis.

(e)  Adjustable-rate mortgage indices--(1)  Reporting obligation. Upon the request of a Federal Home Loan Bank, all State savings associations within the jurisdiction of that Federal Home Loan Bank shall report the data items set forth in paragraph (e)(2) of this section for the Federal Home Loan Bank to use in calculating and publishing an adjustable-rate mortgage index.

(2)  Data to be reported. For purposes of paragraph (e)(1) of this section, the term "data items" means the data items previously collected from the monthly Thrift Financial Report or Consolidated Reports of Condition or Income ("Call Report"), as applicable, and such data items as may be altered, amended, or substituted by the requesting Federal Home Loan Bank.

(3)  Applicable indices. For the purpose of this reporting requirement, the term "adjustable-rate mortgage index" means any of the adjustable-rate mortgage indices calculated and published by a Federal Home Loan Bank or the Federal Home Loan Bank Board on or before August 9, 1989.

[Codified to 12 C.F.R. § 390.355]

§ 390.356  Bonds for directors, officers, employees, and agents; form of and amount of bonds.

(a)  Each State savings association shall maintain fidelity bond coverage. The bond shall cover each director, officer, employee, and agent who has control over or access to cash, securities, or other property of the State savings association.

(b)  The amount of coverage to be required for each State savings association shall be determined by the association's management, based on its assessment of the level that would be safe and sound in view of the association's potential exposure to risk; provided, such determination shall be subject to approval by the association's board of directors.

(c)  Each State savings association may maintain bond coverage in addition to that provided by the insurance underwriter industry's standard forms, through the use of endorsements, riders, or other forms of supplemental coverage, if, in the judgment of the State savings association's board of directors, additional coverage is warranted.

(d)  The board of directors of each State savings association shall formally approve the State savings association's bond coverage. In deciding whether to approve the bond coverage, the board shall review the adequacy of the standard coverage and the need for supplemental coverage. Documentation of the board's approval shall be included as a part of the minutes of the meeting at which the board approves coverage. Additionally, the board of directors shall review the State savings association's bond coverage at least annually to assess the continuing adequacy of coverage.

[Codified to 12 C.F.R. § 390.356]

§ 390.357  Bonds for agents.

In lieu of the bond provided in § 390.356 in the case of agents appointed by a State savings association, a fidelity bond may be provided in an amount at least twice the average monthly collections of such agents, provided such agents shall be required to make settlement with the State savings association at least monthly, and provided such bond is approved by the board of directors of the State savings association. No bond need be obtained for any agent that is a financial institution insured by the FDIC.

[Codified to 12 C.F.R. § 390.357]

§ 390.358  Conflicts of interest.

If you are a director, officer, or employee of a State savings association, or have the power to direct its management or policies, or otherwise owe a fiduciary duty to a State savings association:

(a)  You must not advance your own personal or business interests, or those of others with whom you have a personal or business relationship, at the expense of the State savings association; and

(b)  You must, if you have an interest in a matter or transaction before the board of directors:

(1)  Disclose to the board all material nonprivileged information relevant to the board's decision on the matter or transaction, including:

(i)  The existence, nature and extent of your interests; and

(ii)  The facts known to you as to the matter or transaction under consideration;

(2) Refrain from participating in the board's discussion of the matter or transaction; and

(3) Recuse yourself from voting on the matter or transaction (if you are a director).

[Codified to 12 C.F.R. § 390.358]

§ 390.359  Corporate opportunity.

(a)  If you are a director or officer of a State savings association, or have the power to direct its management or policies, or otherwise owe a fiduciary duty to a State savings association, you must not take advantage of corporate opportunities belonging to the State savings association.

(b)  A corporate opportunity belongs to a State savings association if:

(1)  The opportunity is within the corporate powers of the State savings association or a subsidiary of the State savings association; and

(2)  The opportunity is of present or potential practical advantage to the State savings association, either directly or through its subsidiary.

(c)  The FDIC will not deem you to have taken advantage of a corporate opportunity belonging to the State savings association if a disinterested and independent majority of the State savings association's board of directors, after receiving a full and fair presentation of the matter, rejected the opportunity as a matter of sound business judgment.

[Codified to 12 C.F.R. § 390.359]

§ 390.360  Change of director or senior executive officer.

Sections 390.360 through 390.368 implement 12 U.S.C. 1831i, which requires certain State savings associations to notify the FDIC before appointing or employing directors and senior executive officers.

[Codified to 12 C.F.R. § 390.360]

§ 390.361  Applicable definitions.

The following definitions apply to §§ 390.360 through 390.368:

Director means an individual who serves on the board of directors of a State savings association. This term does not include an advisory director who:

(1)  Is not elected by the shareholders;

(2)  Is not authorized to vote on any matters before the board of directors or any committee of the board of directors;

(3)  Provides only general policy advice to the board of directors or any committee of the board of directors; and

(4)  Has not been identified by the FDIC in writing as an individual who performs the functions of a director, or who exercises significant influence over, or participates in, major policymaking decisions of the board of directors.

Senior executive officer means an individual who holds the title or performs the function of one or more of the following positions (without regard to title, salary, or compensation): president, chief executive officer, chief operating officer, chief financial officer, chief lending officer, or chief investment officer. Senior executive officer also includes any other person identified by the FDIC in writing as an individual who exercises significant influence over, or participates in, major policymaking decisions, whether or not hired as an employee.

Troubled condition means:

(1)  A State savings association that has a composite rating of 4 or 5, as composite rating is defined in § 390.101(c).

(2)  [Reserved].

(3)  A State savings association that is subject to a capital directive, a cease-and-desist order, a consent order, a formal written agreement, or a prompt corrective action directive relating to the safety and soundness or financial viability of the State savings association, unless otherwise informed in writing by the FDIC; or

(4)  A State savings association that is informed in writing by the FDIC that it is in troubled condition based on information available to the FDIC.

[Codified to 12 C.F.R. § 390.361]

§ 390.362  Who must give prior notice?

(a)  State savings association. Except as provided under § 390.368, you must notify the FDIC at least 30 days before adding or replacing any member of your board of directors, employing any person as a senior executive officer, or changing the responsibilities of any senior executive officer so that the person would assume a different senior executive position if:

(1)  You are a State savings association and at least one of the following circumstances apply:

(i)  You do not comply with all minimum capital requirements under subpart Z;

(ii)  You are in troubled condition; or

(iii)  The FDIC has notified you, in connection with its review of a capital restoration plan required under section 38 of the Federal Deposit Insurance Act or subpart Y or otherwise, that a notice is required under §§ 390.360 through 390.368; or

(2)  [Reserved].

(b)  Notice by individual. If you are an individual seeking election to the board of directors of a State savings association described in paragraph (a) of this section, and have not been nominated by management, you must either provide the prior notice required under paragraph (a) of this section or follow the process under § 390.368(b).

[Codified to 12 C.F.R. § 390.362]

§ 390.363  What procedures govern the filing of my notice?

The procedures found in §§ 390.103 through 390.110 govern the filing of your notice under § 390.362.

[Codified to 12 C.F.R. § 390.363]

§ 390.364  What information must I include in my notice?

(a)  Content requirements. Your notice must include:

(1)  The information required under 12 U.S.C. 1817(j)(6)(A), and the information prescribed in the Interagency Notice of Change in Director or Senior Executive Officer and the Interagency Biographical and Financial Report which are available from the appropriate FDIC regions as defined in § 303.2 of this chapter;

(2)  Legible fingerprints of the proposed director or senior executive officer. You are not required to file fingerprints if, within three years prior to the date of submission of the notice, the proposed director or senior executive officer provided legible fingerprints as part of a notice filed with the FDIC under 12 U.S.C. 1831i; and

(3)  Such other information required by the FDIC.

(b)  Modification of content requirements. The FDIC may require or accept other information in place of the content requirements in paragraph (a) of this section.

[Codified to 12 C.F.R. § 390.364]

§ 390.365  What procedures govern the FDIC's review of my notice for completeness?

The FDIC will first review your notice to determine whether it is complete.

(a)  If your notice is complete, the FDIC will notify you in writing of the date that the FDIC received the complete notice.

(b)  If your notice is not complete, the FDIC will notify you in writing what additional information you need to submit, why we need the information, and when you must submit it. You must, within the specified time period, provide additional information or request that the FDIC suspend processing of the notice. If you fail to act within the specified time period, the FDIC may treat the notice as withdrawn or may review the application based on the information provided.

[Codified to 12 C.F.R. § 390.365]

§ 390.366  What standards and procedures will govern the FDIC review of the substance of my notice?

The FDIC will disapprove a notice if, pursuant to the standard set forth in 12 U.S.C. 1831i(e), the FDIC finds that the competence, experience, character, or integrity of the proposed director or senior executive officer indicates that it would not be in the best interests of the depositors of the State savings association or of the public to permit the individual to be employed by, or associated with, the State savings association. If the FDIC disapproves a notice, it will issue a written notice that explains why the FDIC disapproved the notice. The FDIC will send the notice to the State savings association and the individual.

[Codified to 12 C.F.R. § 390.366]

§ 390.367  When may a proposed director or senior executive officer begin service?

(a)  A proposed director or senior executive officer may begin service 30 days after the date the FDIC receives all required information, unless:

(1)  The FDIC notifies you that it has disapproved the notice; or

(2)  The FDIC extends the 30-day period for an additional period not to exceed 60 days. If the FDIC extends the 30-day period, it will notify you in writing that the period has been extended, and will state the reason for the extension. The proposed director or senior executive officer may begin service upon expiration of the extended period, unless the FDIC notifies you that it has disapproved the notice during the extended period.

(b)  Notwithstanding paragraph (a) of this section, a proposed director or senior executive officer may begin service after the FDIC notifies you, in writing, of its intention not to disapprove the notice.

[Codified to 12 C.F.R. § 390.367]

§ 390.368  When will the FDIC waive the prior notice requirement?

(a)  Waiver request. (1) An individual may serve as a director or senior executive officer before filing a notice as described in §§ 390.360 through 390.368 if the FDIC issues a written finding that:

(i)  Delay would threaten the safety or soundness of the State savings association;

(ii)  Delay would not be in the public interest; or

(iii)  Other extraordinary circumstances exist that justify waiver of prior notice.

(2)  If the FDIC grants a waiver, you must file a notice as described in §§ 390.360-390.368 within the time period specified by the FDIC.

(b)  Automatic waiver. An individual may serve as a director before filing a notice as described in §§ 390.360 through 390.368, if the individual was not nominated by management and the individual submits a notice as described in §§ 390.360 through 390.368 within seven days after election as a director.

(c)  Subsequent FDIC action. The FDIC may disapprove a notice within 30 days after the FDIC issues a waiver under paragraph (a) of this section or within 30 days after the election of an individual who has filed a notice and is serving pursuant to an automatic waiver under paragraph (b) of this section.

[Codified to 12 C.F.R. § 390.368]

Subpart T—Accounting Requirements

§ 390.380  Form and content of financial statements.

(a)  This section states the requirements as to form and content of financial statements included by a State savings association in the following documents. However, the FDIC's regulations governing the applicable documents specify the actual financial statements that are to be included in that document.

(1)  Any proxy statement or offering circular required to be used in connection with a conversion under 12 CFR part 192.

(2)  Any offering circular or nonpublic offering materials required to be used in connection with an offer or sale of securities under subpart W.

(3)  Any filing under the Securities Exchange Act of 1934, 15 U.S.C. 78a et seq., made pursuant to the requirements of subpart U.

(b)  Except as otherwise provided by the FDIC by rule, regulation, or order made specifically applicable to financial statements governed by this section, financial statements shall:

(1)  Be prepared and presented in accordance with generally accepted accounting principles;

(2)  Comply with § 390.384;

(3)  Consistent with the provisions of this subpart, comply with articles 1, 2, 3, 4, 10, and 11 of Regulation S-X adopted by the Securities and Exchange Commission (17 CFR 210.l through 210.4, 210.10, and 210.11).

(4)  Be audited, when required, by an independent auditor in accordance with the standards imposed by the American Institute of Certified Public Accountants.

(c)  The term "financial statements" includes all notes to the statements and related schedules.

[Codified to 12 C.F.R. § 390.380]

§ 390.381  Definitions.

(See also 17 CFR 210.1-02.)

(a)  Registrant. The term "registrant" means an applicant, a State savings association, or any other person required to prepare financial statements in accordance with this subpart.

(b)  Significant subsidiary. The term "significant subsidiary" means a subsidiary, including its subsidiaries, which meets any of the following conditions:

(1)  The State savings association's and its other subsidiaries' investments in and advances to the subsidiary exceed 10 percent of the total assets of the association and its subsidiaries consolidated as of the end of the most recently completed fiscal year (for purposes of determining whether financial statements of a business acquired or to be acquired in a business combination accounted for as a pooling of interests are required pursuant to 17 CFR 210.3-05, this condition is also met when the number of common shares exchanged by the State savings association exceeds 10 percent of its total common shares outstanding at the date the combination is initiated); or

(2)  The State savings association's and its other subsidiaries' proportionate share of the total assets (after intercompany eliminations) of the subsidiary exceeds 10 percent of the total assets of the State savings association and its subsidiaries consolidated as of the end of the most recently completed fiscal year; or

(3)  The State savings association's and its other subsidiaries' equity in the income from continuing operations before income taxes, extraordinary items, and cumulative effect of a change in accounting principle of the subsidiary exceeds 10 percent of such income of the State savings association and its subsidiaries consolidated for the most recently completed fiscal year.

(4)  Computational note: For purposes of making the prescribed income test the following guidance should be applied:

(i)  When a loss has been incurred by either the parent or its consolidated subsidiaries or the tested subsidiary, but not both, the equity in the income or loss of the tested subsidiary should be excluded from the income of the State savings association and its subsidiaries consolidated for purposes of the computation.

(ii)  If income of the State savings association and its subsidiaries consolidated for the most recent fiscal year is at least 10 percent lower than the average of the income for the last five fiscal years, such average income should be substituted for purposes of the computation. Any loss years should be omitted for purposes of computing average income.

[Codified to 12 C.F.R. § 390.381]

§ 390.382  Qualification of public accountant.

(See also 17 CFR 210.2-01.)

The term "qualified public accountant" means a certified public accountant or licensed public accountant certified or licensed by a regulatory authority of a State or other political subdivision of the United States who is in good standing as such under the laws of the jurisdiction where the home office of the registrant to be audited is located. Any person or firm who is suspended from practice before the Securities and Exchange Commission or other governmental agency is not a "qualified public accountant" for purposes of this section.

[Codified to 12 C.F.R. § 390.382]

§ 390.383  Condensed financial information [Parent only].

(a)  The information prescribed by Schedule III required by section IV of the appendix to § 390.384 shall be presented in a note to the financial statements when the restricted net assets (17 CFR 210.4--08(e)(3)) of consolidated subsidiaries exceed 25 percent of consolidated net assets as of the end of the most recently completed fiscal year. The investment in and indebtedness of and to State savings association subsidiaries shall be stated separately in the condensed balance sheet from amounts for other subsidiaries; and the amount of cash dividends paid to the parent State savings association for each of the last three years by the State savings association subsidiaries shall be stated separately in the condensed income statement from amounts for other subsidiaries.

(b)  For purposes of the above test, restricted net assets of consolidated subsidiaries shall mean that amount of the State savings association's proportionate share of net assets of consolidated subsidiaries (after intercompany eliminations) which as of the end of the most recent year may not be transferred to the parent company by subsidiaries in the form of loans, advances, or cash dividends without the consent of a third party ( i.e., lender, regulatory agency, foreign government, etc.).

(c)  Where restrictions on the amount of funds which may be loaned or advanced differ from the amount restricted as to transfer in the form of cash dividends, the amount least restrictive to the subsidiary shall be used. Redeemable preferred stocks (See item I (22) in the appendix to § 390.384) and minority interest (See item I (21) in the appendix to § 390.384) shall be deducted in computing net assets for purposes of this test.

[Codified to 12 C.F.R. § 390.383]

§ 390.384  Financial statements for conversions, SEC filings, and offering circulars.

This section and its appendix pertain to the form and content of financial statements included as part of:

(a)  A conversion application under 12 CFR part 192 including financial statements in proxy statements and offering circulars,

(b)  A filing under the Securities Exchange Act of 1934, 15 U.S.C. 78a et seq., and

(c)  Any offering circular required to be used in connection with the issuance of mutual capital certificates under 12 CFR 163.74 and debt securities under § 390.341.

[Codified to 12 C.F.R. § 390.384]

Appendix to § 390.384--Financial statement presentation.

This appendix specifies the various line items which should appear on the face of the financial statements governed by § 390.384 and additional disclosures which should be included with the financial statements in related notes.

I.  Balance Sheet

Balance sheets shall comply with the following provisions:

Assets

1.  Cash and amounts due from depository institutions. (a) The amounts in this caption should include noninterest-bearing deposits with depository institutions.

(b)  State in a note the amount and terms of any deposits in depository institutions held as compensating balances against long- or short-term borrowing arrangements. This disclosure should include the provisions of any restrictions as to withdrawal or usage. Restrictions may include legally restricted deposits held as compensating balances against short-term borrowing arrangements, contracts entered into with others, or company statements of intention with regard to particular deposits; however, time deposits and short-term certificates of deposits are not generally included in legally restricted deposits. In cases where compensating balance arrangements exist but are not agreements which legally restrict the use of cash amounts shown on the balance sheet, describe in the notes to the financial statements these arrangements and the amount involved, if determinable, for the most recent audited balance sheet required and for any subsequent unaudited balance sheet required. Compensating balances that are maintained under an agreement to ensure future credit availability shall be disclosed in the notes to the financial statements along with the amount and terms of the agreement.

(c)  Checks outstanding in excess of an applicant's book balance in a demand deposit account shall be shown as a liability.

2.  Interest-bearing deposits in other banks.

3.  Federal funds sold and securities purchased under resale agreements or similar arrangements. These amounts should be presented, i.e., gross and not netted against Federal funds purchased and securities sold under agreement to repurchase, as reported in caption 15.

4.  Trading account assets. Include securities considered to be held for trading purposes.

5.  Other short-term investments.

6.  Investment securities. (a) Include securities considered to be held for investment purposes. Disclose the aggregate book value of investment securities as the line item on the balance sheet; and also show on the face of the balance sheet the aggregate market value at the balance sheet date. The aggregate amounts should include securities pledged, loaned, or sold under repurchase agreements and similar arrangements. Borrowed securities and securities purchased under resale agreements or similar arrangements should be excluded.

(b)  Disclose in a note the carrying value and market value of securities of (i) the U.S. Treasury and other U.S. Government agencies and corporations; (ii) states of the U.S. and political subdivisions thereof; and (iii) other securities.

7.  Assets held for sale. Investments in assets considered to be held for sale purposes should be reported separately in the statement of financial condition.

8.  Loans. (a) Disclose separately: (i) Total loans (including financing type leases), (ii) allowance for loan losses, (iii) unearned income on installment loans, (iv) discount on loans purchased, and (v) loans in process.

(b)  State on the balance sheet or in a note the amount of loans in each of the following categories: (i) Real estate mortgage; (ii) real estate construction; (iii) installment; and (iv) commercial, financial, and agricultural.

(c)(i)  Include under the real estate mortgage category loans payable in monthly, quarterly, or other periodic installments and secured by developed income property and/or personal residences.

(ii)  Include under the real estate construction category loans secured by real estate which are made for the purpose of financing construction of real estate and land development projects.

(iii)  Include under the installment category loans to individuals generally repayable in monthly installments. This category shall include, but not be limited to, credit card and related activities, individual automobile loans, other installment loans, mobile home loans, and residential repair and modernization loans.

(iv)  Include under the commercial, financial, and agricultural category all loans not included in another category. This category shall include, but not be limited to, loans to real estate investment trusts, mortgage companies, banks, and other financial institutions; loans for carrying securities; and loans for agricultural purposes. Do not include loans secured primarily by developed real estate.

(d)  State separately any other loan category regardless of relative size if necessary to reflect any unusual risk concentration.

(e)  Unearned income on installment loans shall be shown and deducted separately from total loans.

(f)  Unamortized discounts on purchased loans shall be deducted separately from total loans.

(g)  Loans in process shall be deducted separately from total loans.

(h)  A series of categories other than those specified in item (b) of paragraph 8. may be used to present details of loans if considered a more appropriate presentation. The categories specified in item (b) of paragraph 8. should be considered the minimum categories that may be presented.

(i)  For each period for which an income statement is presented, disclose in a note the total dollar amount of loans being serviced by the State savings association for the benefit of others.

(j)(i)(A)  As of each balance sheet date, disclose in a note the aggregate dollar amount of loans (exclusive of loans to any such persons which in the aggregate do not exceed $60,000 during the last year) made by the State savings association or any of its subsidiaries to directors, executive officers, or principal holders of equity securities (17 CFR 210.1--02) of the State savings association or any of its significant subsidiaries (17 CFR 210.1--02) or to any associate of such persons. For the latest fiscal year, an analysis of activity with respect to such aggregate loans to related parties should be provided. The analysis should include at the beginning of the period new loans, repayments, and other changes. (Other changes, if significant, should be explained.)

(B)  This disclosure need not be furnished when the aggregate amount of such loans at the balance sheet date (or with respect to the latest fiscal year, the maximum amount outstanding during the period) does not exceed 5 percent of stockholders' equity at the balance sheet date.

(ii)  If a significant portion of the aggregate amount of loans outstanding at the end of the fiscal year disclosed pursuant to item (i)(A) of this paragraph (j) relates to nonaccrual, past due, restructured, and potential problem loans ( see Securities and Exchange Commission's Securities Act Industry Guide 3, section III.C.), so state and disclose the aggregate amount of such loans along with such other information necessary to an understanding of the effects of the transactions on the financial statements.

(iii)  Notwithstanding the aggregate disclosure called for by paragraph (j)(i) of this balance sheet caption 8, if any loans were not made in the ordinary course of business during any period for which an income statement is required to be filed, provide an appropriate description of each such loan (see 17 CFR 210.9--03.7(e)(3)).

(iv)  For purposes only of Balance Sheet item 8(j), the following definitions shall apply:

(A)  Associate used to indicate a relationship with any person means (1) any corporation, venture, or organization of which such person is a general partner or is, directly or indirectly, the beneficial owner of 10 percent or more of any class of equity securities; (2) any trust or other estate in which such person has a substantial beneficial interest or for which such person serves as trustee or in a similar capacity; and (3) any member of the immediate family of any of the foregoing persons.

(B)  Executive officer means the president, any vice president in charge of a principal business unit, division, or function (such as loans, investments, operations, administration, or finance), and any other officer or person who performs similar policy-making functions.

(C)  Immediate family with regard to a person means such person's spouse, parents, children, siblings, mother- and father-in-law, sons- and daughters-in-law, and brothers- and sisters-in-law.

(D)  Ordinary course of business with regard to loans means those loans which were made on substantially the same terms, including interest rate and collateral, as those prevailing at the same time for comparable transactions with unrelated persons and did not involve more than the normal risk of collectibility or present other unfavorable features.

(k) For each period for which an income statement is presented, furnish in a note a statement of changes in the allowance for loan losses, showing balances at beginning and end of the period, provision charged to income, recoveries of amounts previously charged off, and losses charged to the allowance.

9.  Premises and equipment.

10.  Real estate owned. State, parenthetically or otherwise:

(a)  The amount of real estate owned by class as described in item (b) of paragraph 10. and the basis for determining that amount; and

(b)  A description of each class of real estate owned (i) acquired by foreclosure or by deed in lieu of foreclosure, (ii) in judgment and subject to redemption, or (iii) acquired for development or resale. Show separately any accumulated depreciation or valuation allowances. Disclose the policies regarding, and amounts of, capitalized costs, including interest.

11.  Investment in joint ventures. In a note, present summarized aggregate financial statements for investments in real estate or other joint ventures which individually (a) are 20 percent or more owned by the State savings association or any of its subsidiaries, or (b) have liabilities (including contingent liabilities) to the parent exceeding 10 percent of the parent's regulatory capital. If an allowance for real estate losses subsequent to acquisition is maintained, the amount shall be disclosed, deducted from the other real estate owned, and a statement of changes in the allowance showing balances at beginning and end of period should be included. Provision charged to income and losses charged to the allowance account shall be furnished for each period for which an income statement is filed.

12. Other assets. (a) Disclose separately on the balance sheet or in a note thereto any of the following assets or any other asset the amount of which exceeds 30 percent of stockholders' equity. The remaining assets may be shown as one amount.

(i) Accrued interest receivable. State separately those amounts relating to loans and those amounts relating to investments.

(ii)  Excess of cost over assets acquired (net of amortization).

(b)  State in a note (i) amounts representing investments in affiliates and investments in other persons which are accounted for by the equity method, and (ii) indebtedness of affiliates and other persons, the investments in which are accounted for by the equity method. State the basis of determining the amounts reported under paragraph (b)(i).

13.  Total assets.

Liabilities, and Stockholders' Equity

14.  Deposits. (a) Disclose separately on the balance sheet or in a note the amounts in the following categories of interest-bearing and noninterest-bearing deposits: (i) NOW account and MMDA deposits, (ii) savings deposits, and (iii) time deposits.

(b)  Include under the savings-deposits category interest-bearing deposits without specified maturity or contractual provisions requiring advance notice of intention to withdraw funds. Include deposits for which an State savings association may require at its option written notice of intended withdrawal not less than 14 days in advance.

(c)  Include under the time-deposits category deposits subject to provisions specifying maturity or other withdrawal conditions such as time certificates of deposits, open account time deposits, and deposits accumulated for the payment of personal loans.

(d)  Include accrued interest or dividends, if appropriate.

15.  Short-term borrowings. (a) State separately, here or in a note, the amounts payable for (i) Federal funds purchased and securities sold under agreements to repurchase, (ii) commercial paper, and (iii) other short-term borrowings.

(b)  Federal funds purchased and sales of securities under repurchase agreements shall be reported gross and not netted against sales of Federal funds and purchase of securities under resale agreements.

(c)  Include as securities sold under agreements to repurchase all transactions of this type regardless of (i) whether they are called simultaneous purchases and sales, buy-backs, turnarounds, overnight transactions, delayed deliveries, or other terms signifying the same substantive transaction, and (ii) whether the transactions are with the same or different institutions, if the purpose of the transactions is to repurchase identical or similar securities.

(d)  The amount and terms (including commitment fees and the conditions under which lines may be withdrawn) of unused lines of credit for short-term financing shall be disclosed, if significant, in the notes to the financial statements. The amount of these lines of credit which support a commercial paper borrowing arrangement or similar arrangements shall be separately identified.

16.  Advance payments by borrowers for taxes and insurance.

17.  Other liabilities. Disclose separately on the balance sheet or in a note any of the following liabilities or any other items which are individually in excess of 30 percent of stockholders' equity (except that amounts in excess of 5 percent of stockholders' equity should be disclosed with respect to item (d)). The remaining items may be shown as one amount.

(a)  Income taxes payable.

(b)  Deferred income taxes.

(c)  Indebtedness to affiliate and other persons the investment in which is accounted for by the equity method.

(d)  Indebtedness to directors, executive officers, and principal holders of equity securities of the registrant or any of its significant subsidiaries. (The guidance in balance sheet caption "8(j)" shall be used to identify related parties for purposes of this disclosure.)

18.  Bonds, mortgages, and similar debt. (a) Include bonds, Federal Home Loan Bank advances, capital notes, debentures, mortgages, and similar debt.

(b)  For each issue or type of obligation state in a note:

(i)  The general character of each type of debt, including: (A) The rate of interest, (B) the date of maturity, or, if maturing serially, a brief indication of the serial maturities, such as "maturing serially from 1980 to 1990," (C) if the payment of principal or interest is contingent, an appropriate indication of such contingency, (D) a brief indication of priority, and (E) if convertible, the basis. For amounts owed to related parties see 17 CFR 210.4--08(k).

(ii)  The amount and terms (including commitment fees and the conditions under which commitments may be withdrawn) of unused commitments for long-term financing arrangements that, if used, would be disclosed under this caption shall be disclosed in the notes to the financial statements, if significant.

(c)  State in the notes with appropriate explanations (i) the title and amount of each issue of debt of a subsidiary included in item (a) of paragraph 18 which has not been assumed or guaranteed by the State savings association, and (ii) any liens on premises of a subsidiary or its consolidated subsidiaries which have not been assumed by the subsidiary or its consolidated subsidiaries.

19.  Deferred credits. State separately those items which exceed 30 percent of stockholders' equity.

20.  Commitments and contingent liabilities. Total commitments to fund loans should be disclosed. The dollar amounts and terms of other than floating market-rate commitments should also be disclosed.

21.  Minority interest in consolidated subsidiaries.

22.  Preferred stock subject to mandatory redemption requirements or the redemption of which is outside the control of the issuer. (a) Include under this caption amounts applicable to any class of stock which has any of the following characteristics: (i) it is redeemable at a fixed or determinable price on a fixed or determinable date or dates, whether by operation of a sinking fund or otherwise; (ii) it is redeemable at the option of the holder; or (iii) it has conditions for redemption which are not solely within the control of the issuer, such as stock which must be redeemed out of future earnings. Amounts attributable to preferred stock which is not redeemable or is redeemable solely at the option of the issuer shall be included under caption 23 unless it meets one or more of the above criteria.

(b)  State on the face of the balance sheet the title, carrying amount, and redemption amount of each issue. (If there is more than one issue, these amounts may be aggregated on the face of the balance sheet and details concerning each issue may be presented in the note required by item (c) of paragraph 22.) Show also the dollar amount of any shares subscribed for but unissued, and show the deduction of subscriptions receivable therefrom. If the carrying value is different from the redemption amount, describe the accounting treatment for such difference in the note required by item (c) of paragraph 22. Also state in this note or on the face of the balance sheet, for each issue, the number of shares authorized and the number of shares issued or outstanding, as appropriate. (See 17 CFR 210.4--07.)

(c)  State in a separate note captioned "Redeemable Preferred Stock" (i) a general description of each issue, including its redemption features ( e.g., sinking fund, at option of holders, out of future earnings) and the rights, if any, of holders in the event of default, including the effect, if any, on junior securities in the event a required dividend, sinking fund, or other redemption payment(s) is not made, (ii) the combined aggregate amount of redemption requirements for all issues each year for the five years following the date of the latest balance sheet, and (iii) the changes in each issue for each period for which an income statement is required to be presented. (See also 17 CFR 210.4--08(d).

(d)  Securities reported under this caption are not to be included under a general heading "stockholders' equity" or combined in a total with items described in captions 23, 24 or 25, which follow.

23.  Preferred stock which is not redeemable or is redeemed solely at the option of the issuer. State on the face of the balance sheet, or, if more than one issue is outstanding, state in a note, the title of each issue and the dollar amount thereof. Show also the dollar amount of any shares subscribed for but unissued, and show the deduction of subscriptions receivable. State on the face of the balance sheet or in a note, for each issue, the number of shares authorized and the number of shares issued or outstanding, as appropriate. (See 17 CFR 210.4--07.) Show in a note or separate statement the changes in each class of preferred shares reported under this caption for each period for which an income statement is required to be presented. (See also 17 CFR 210.4--08(d)).

24.  Common stock. For each class of common shares state, on the face of the balance sheet, the number of shares issued or outstanding, as appropriate (see 17 CFR 210.4--07), and the dollar amount thereof. If convertible, this fact should be indicated on the face of the balance sheet. For each class of common stock state, on the face of the balance sheet or in a note, the title of the issue, the number of shares authorized, and, if convertible, the basis for conversion (see also 17 CFR 210.4--08(d).) Show also the dollar amount of any common stock subscribed for but unissued, and show the deduction of subscriptions receivable. Show in a note or statement the changes in each class of common stock for each period for which an income statement is required to be presented.

25.  Other stockholders' equity. (a) Separate captions shall be shown on the face of the balance sheet for (i) additional paid-in capital, (ii) other additional capital, and (iii) retained earnings, both (A) restricted and (B) unrestricted. (See 17 CFR 210.4--08(e).) Additional paid-in capital and other additional capital may be combined with the stock caption to which it applies, if appropriate. State whether or not the State savings association is in compliance with the Federal regulatory capital requirements (and state requirements where applicable). Also include the dollar amount of those regulatory capital requirements and the amount by which the State savings association exceeds or fails to meet those requirements.

(b)  For a period of at least 10 years subsequent to the effective date of a quasi-reorganization, any description of retained earnings shall indicate the point in time from which the new retained earnings dates, and for a period of at least three years shall indicate, on the face of the balance sheet, the total amount of the deficit eliminated.

(c)  Changes in stockholders' equity shall be disclosed in accordance with the requirements of 17 CFR 210.3--04.

26.  Total liabilities and stockholders' equity.

II.  Income Statement

Income statements shall comply with the following provisions:

1.  Interest and fees on loans. (a) Include interest, service charges, and fees which are related to or are an adjustment of the loan interest yield.

(b)  Current amortization of premiums on mortgages or other loans shall be deducted from interest on loans, and current accretion of discount on such items shall be added to interest on loans.

(c)  Discounts and other deferred amounts which are related to or are an adjustment of the loan interest yield shall be amortized into income using the interest (level yield) method.

2.  Interest and dividends on investment securities. Include accretion of discount on securities and deduct amortization of premiums on securities.

3.  Trading account interest. Include interest from securities carried in a dealer trading account or accounts that are held principally for resale to customers.

4.  Other interest income. Include interest on short-term investments (Federal funds sold and securities purchased under agreements to resell) and interest on bank deposits.

5.  Total interest income.

6.  Interest on deposits. Include interest on all deposits. On the income statement or in a note, state separately, in the same categories as those specified for deposits at balance sheet caption 14(a), the interest on those deposits. Early withdrawal penalties should be netted against interest on deposits and, if material, disclosed on the income statement.

7.  Interest on short-term borrowings. Include interest on borrowed funds, including Federal funds purchased, securities sold under agreements to repurchase, commercial paper, and other short-term borrowings.

8.  Interest on long-term borrowings. Include interest on bonds, capital notes, debentures, mortgages on State savings association premises, capitalized leases, and similar debt.

9.  Total interest expense.

10.  Net interest income.

11.  Provision for loan losses.

12.  Net interest income after provision for loan losses.

13.  Other income. Disclose separately any of the following amounts, or any other item of other income, which exceeds 1 percent of the aggregate of total interest income and other income. The remaining amount may be shown as one amount, except for investment securities gains or losses which shall be shown separately regardless of size.

(a)  Commissions and fees from fiduciary activities.

(b)  Fees for other services to customers.

(c)  Commissions, fees, and markups on securities underwriting and other securities activities.

(d)  Profit or loss on transactions in investment securities.

(e)  Equity in earnings of unconsolidated subsidiaries and 50-percent- or less-owned persons.

(f)  Gains or losses on disposition of investments in securities of subsidiaries and 50-percent- or less-owned persons.

(g)  Profit or loss from real estate operations.

(h)  Other fees related to loan originations or commitments not included in income statement caption 1.

The remaining other income may be shown in one amount.

(i)  Investment securities gains or losses. The method followed in determining the cost of investments sold (e.g., "average cost," "first-in, first-out," or "identified certificate") and related income taxes shall be disclosed.

14.  Other expenses. Disclose separately any of the following amounts, or any other item of other expense, which exceeds 1 percent of the aggregate of total interest income and other income. The remaining amounts may be shown as one amount.

(a)  Salaries and employee benefits.

(b)  Net occupancy expense of premises.

(c)  Net cost of operations of other real estate (including provisions for real estate losses, rental income, and gains and losses on sales of real estate).

(d)  Minority interest in income of consolidated subsidiaries.

(e)  Goodwill amortization.

15.  Other income and expenses. State separately material events or transactions that are unusual in nature or occur infrequently, but not both, and therefore do not meet both criteria for classification as an extraordinary item. Examples of items which would be reported separately are gain or loss from the sale of premises and equipment, provision for loss on real estate owned, or provision for gain or loss on the sale of loans.

16.  Income or losses before income tax expense.

17.  Income tax expense. The information required by 17 CFR 210.4-08(h) should be disclosed.

18.  Income or loss before extraordinary items effects of changes in accounting principles.

19.  Extraordinary items, less applicable tax.

20.  Cumulative effects of changes in accounting principles.

21.  Net income or loss.

22.  Earnings-per-share data.

23.  Conversion footnote. If the State savings association is an applicant for conversion from a mutual to a stock association or has converted within the last three years, describe in a note the general terms of the conversion and restrictions on the operations of the State savings association imposed by the conversion. Also, state the amount of net proceeds received from the conversion and costs associated with the conversion.

24.  Mergers and acquisitions. For the period in which a business combination occurs and is accounted for by the purchase method of accounting, in addition to those disclosures required by Accounting Principles Board Opinion No. 16, the State savings association shall make those disclosures as noted below for all combinations involving significant acquisitions. (A significant acquisition is defined for this purpose to be one in which the assets of the acquired State savings association, or group of State savings associations, exceed 10 percent of the assets of the consolidated State savings association at the end of the most recent period being reported upon.)

(a)  Amounts and descriptions of discounts and premiums related to recording the aggregate interest-bearing assets and liabilities at their fair market value. The disclosure should also include the methods of amortization or accretion and the estimated remaining lives.

(b)  The net effect on net income before taxes of the amortization and accretion of discounts, premiums, and intangible assets related to the purchase accounting transaction(s). For subsequent periods, the State savings association shall disclose the remaining total unamortized or unaccreted amounts of discounts, premiums, and intangible assets as of the date of the most recent balance sheet presented. In addition, the State savings association shall disclose the net effect on net income before taxes of the amortization and accretion of discounts, premiums, and intangible assets related to prior business combinations accounted for by the purchase method of accounting. Such disclosures need not be made if the total amounts of discounts, premiums, or intangible assets do not exceed 30 percent of stockholders' equity as of the date of the most recent balance sheet presented.

III.  Statement of Cash Flows

The amounts shown in this statement should be those items which materially enhance the reader's understanding of the State savings association's business. For example, gains from sales of loans should be segregated from sales of mortgage-backed securities and other securities, if material, proceeds from principal repayments and maturities from loans and mortgage-backed securities should be segregated from proceeds from sales of loans and mortgage-backed securities, purchases of loans, mortgage-backed securities and other securities should be segregated, if material. Additional guidance may be found in the FASB's Statement of Financial Accounting Standards No. 95 Statement of Cash Flows.

IV.  Schedules Required to be Filed

The following schedules, which should be examined by an independent accountant, shall be filed unless the required information is not applicable or is presented in the related financial statements:

(1)  Schedule I--Indebtedness of and to related parties--Not Current. For each period for which an income statement is required, the following schedule should be filed in support of the amounts required to be reported by balance sheet items 8(j) and 17(c) unless such aggregate amount does not exceed 5 percent of stockholders' equity at either the beginning or the end of the period:

Indebtedness of and to Related Parties—Not Current

Indebtedness of--
Name of person1 Balance at beginning Additions2 Deductions3 Balance at end
A B C D E

Indebtedness of and to Related Parties—Not Current

Indebtedness to--
Name of person1 Balance at beginning Additions2 Deductions3 Balance at end
A F G H I

(2)  Schedule II--Guarantees of securities of other issuers. The following schedule should be filed as of the date of the most recently audited balance sheet with respect to any guarantees of securities of other issuers by the person for which the statements are being filed:

Guarantees of Securities of Other Issuers 4

Col. A. Name of issuer of securities guaranteed by person for which statement is filed Col. B. Title of issue of each class of securities guaranteed Col. C. Total amount guaranteed and outstanding5 Col. D. Amount owned by person or persons for which statement is filed

Guarantees of Securities of Other Issuers

4
Col. A. Name of issuer of securities guaranteed by person for which statement is filed Col. E. Amount in treasury of issuer of securities guaranteed Col. F. Nature of guarantee6 Col. G. Nature of any default by issue of securities guaranteed in principal, interest, sinking fund or redemption provisions, or payment of dividends7

(3)  Schedule III--Condensed financial information. The following schedule shall be filed as of the dates and for the periods specified in the schedule.

Condensed Financial Information

[Parent only]

[The State savings association may determine disclosure based on information provided in footnotes below]

(a)  Provide condensed financial information as to financial position, changes in financial position, and results of operations of the State savings association as of the same dates and for the same periods for which audited consolidated financial statements are required. The financial information required need not be presented in greater detail than is required for condensed statement by 17 CFR 210.10--01(a) (2), (3), (4). Detailed footnote disclosure which would normally be included with complete financial statements may be omitted with the exception of disclosure regarding material contingencies, long-term obligations, and guarantees. Description of significant provisions of the state savings association's long-term obligations, mandatory dividend, or redemption requirements of redeemable stocks, and guarantees of the State savings association shall be provided along with a 5-year schedule of maturities of debt. If the material contingencies, long-term obligations, redeemable stock requirements, and guarantees of the State savings association have been separately disclosed in the consolidated statements, they need not be repeated in this schedule.

(b)  Disclose separately the amount of cash dividends paid to the State savings association for each of the last three fiscal years by consolidated subsidiaries, unconsolidated subsidiaries, and 50-percent- or less-owned persons accounted for by the equity method, respectively.

Subpart U—Securities of State Savings Associations

§ 390.390  Requirements under certain sections of the Securities Exchange Act of 1934.

In respect to any securities issued by State savings associations, the powers, functions, and duties vested in the Securities and Exchange Commission (the "Commission") to administer and enforce sections 10A(m), 12, 13, 14(a), 14(c), 14(d), 14(f), and 16 of the Securities Exchange Act of 1934, as amended (the "Act") (15 U.S.C. 78l, 78m, 78n(a), 78n(c), 78n(d), 78n(f), and 78p), and sections 302, 303, 304, 306, 401(b), 404, 406, and 407 of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7241, 7242, 7243, 7244, 7261, 7262, 7264, and 7265) are vested in the FDIC. The rules, regulations and forms prescribed by the Commission pursuant to those sections or applicable in connection with obligations imposed by those sections, shall apply to securities issued by State savings associations, except as otherwise provided. The term "Commission" as used in those rules and regulations shall, with respect to securities issued by State savings associations, be deemed to refer to the FDIC unless the context otherwise requires. All filings with respect to securities issued by State savings associations required by those rules and regulations to be made with the Commission shall be made with the FDIC, ATTN: Accounting and Securities Disclosure Section, 550 17th Street, NW, Washington, DC 20429, by submitting such filings to the above address, except as noted in § 390.391.

[Codified to 12 C.F.R. § 390.390]

§ 390.391  [Reserved].

§ 390.392  Liability for certain statements by State savings associations.

This section replaces adherence to 17 CFR 240.3b--6 and applies as follows:

(a)  A statement within the coverage of paragraph (b) of this section which is made by or on behalf of an issuer or by an outside reviewer retained by the issuer shall be deemed not to be a fraudulent statement (as defined in paragraph (d) of this section), unless it is shown that such statement was made or reaffirmed without a reasonable basis or was disclosed other than in good faith.

(b)  This section applies to the following statements:

(1)  A forward-looking statement (as defined in paragraph (c) of this section) made in a proxy statement or offering circular filed with the OCC under 12 CFR part 192; in a registration statement filed with the FDIC under the Act on Form 10 (17 CFR 249.210); in part I of a quarterly report filed with the FDIC on Form 10--Q (17 CFR 249.308a); in an annual report to shareholders meeting the requirements of § 390.390, particularly 17 CFR 240.14a--3 (b) and (c) or 17 CFR 240.14c--3 (a) and (b) under the Act; in a statement reaffirming such forward-looking statement subsequent to the date the document was filed or the annual report was made publicly available; or a forward-looking statement made prior to the date the document was filed or the date the annual report was made publicly available if such statement is reaffirmed in a filed document or annual report made publicly available within a reasonable time after the making of such forward-looking statement: Provided, that

(i)  At the time such statements are made or reaffirmed, either:

(A)  The issuer is subject to the reporting requirements of section 13(a) or 15(d) of the Act and has complied with the requirements of 17 CFR 240.13a--1 or 240.15d--1 thereunder, if applicable, to file its most recent annual report on Form 10--K; or

(B)  If the issuer is not subject to the reporting requirements of section 13(a) or 15(d) of the Act, the statements are made either in a registration statement filed under the Securities Act of 1933 or pursuant to section 12 (b) or (g) of the Act, or in a proxy statement or offering circular filed with the OCC under 12 CFR Part 192 if such statements are reaffirmed in a registration statement under the Act on Form 10, filed with the FDIC within 180 days of the State savings association's conversion, and

(ii) The statements are not made by or on behalf of an issuer that is an investment company registered under the Investment Company Act of 1940;

(2)  Information--

(i)  Relating to the effects of changing prices on the business enterprise presented voluntarily or pursuant to item 303 of Regulation S-K (17 CFR 229.303), management's discussion and analysis of financial condition and results of operations, or item 302 of Regulation S-K (17 CFR 229.302), supplementary financial information; and

(ii)  Disclosed in a document filed with the FDIC or in an annual report to shareholders meeting the requirements of 17 CFR 240.14a--3 (b) and (c) or 17 CFR 240.14c--3 (a) and (b) under the Act: Provided, that such information included in a proxy statement or offering circular filed pursuant to 12 CFR Part 192 shall be reaffirmed in a registration statement under the Act on Form 10 filed with the OCC within 180 days of the association's conversion.

(c)  For purposes of this section, the term "forward-looking statement" shall mean and shall be limited to:

(1)  A statement containing a projection of revenues, income (loss), earnings (loss) per share, capital expenditures, dividends, capital structure, or other financial items;

(2)  A statement of management's plans and objectives for future operations;

(3)  A statement of future economic performance contained in management's discussion and analysis of financial condition and results of operations pursuant to item 303 of Regulation S-K; or

(4)  A statement of the assumptions underlying or relating to any of the statements described in paragraph (c)(1), (2), or (3) of this section.

(d)  For purposes of this section, the term "fraudulent statement" shall mean a statement which is an untrue statement of a material fact, a statement false or misleading with respect to any material fact, an omission to state a material fact necessary to make a statement not misleading, or which constitutes the employment of a manipulative, deceptive, or fraudulent device, contrivance, scheme, transaction, act, practice, course of business, or an artifice to defraud, as those terms are used in the Securities Act of 1933 or the rules or regulations promulgated thereunder.

[Codified to 12 C.F.R. § 390.392]

§ 390.393  Form and content of financial statements.

The financial statements required to be contained in filings with the FDIC under the Act are as set out in the applicable form and Regulation S-X, 17 CFR part 210. Those financial statements, however, shall conform as to form and content to the requirements of § 390.380.

[Codified to 12 C.F.R. § 390.393]

§ 390.394  Interpretations related to SEC filings.

Sections 390.394 and 390.395 contain interpretations pertaining to the requirements of the Act and the rules and regulations thereunder as applied to State savings associations by the FDIC.

[Codified to 12 C.F.R. § 390.394]

§ 390.395  Description of business.

(a)  This section applies to the description-of-business portion of:

(1)  Registration statements filed on Form 10 (item 1) (17 CFR 249.210),

(2)  Proxy and information statements relating to mergers, consolidations, acquisitions, and similar matters (item 14 of Schedule 14A and item 1 of Schedule 14C) (17 CFR 240.14a--101 and 240.14c--101), and

(3)  Annual reports filed on Form 10--K (item 7) (17 CFR 249.310).

(b)  The description of business should conform to the description of business required by item 7 of Form PS under 12 CFR part 192.

(c)  No repetitive disclosure is required by virtue of similar requirements in item 7 of Form PS and items 301 and 303 of Regulation S-K (17 CFR 229.301, 303). However, there should be included appropriate disclosure which arises by virtue of the registrant being a State savings association that is organized in stock form. For example, the table regarding return on equity and assets, item 7(d)(5), should include a line item for "dividend payout ratio (dividends declared per share divided by net income per share)."

[Codified to 12 C.F.R. § 390.95]

Subpart V—Management Official Interlocks

§ 390.400  Authority, purpose, and scope.

(a)  Authority. This subpart is issued under the provisions of the Federal Deposit Insurance Act, 12 U.S.C. 1819 (Tenth) and the Depository Institution Management Interlocks Act (Interlocks Act) (12 U.S.C. 3201 et seq.), as amended.

(b)  Purpose. The purpose of the Interlocks Act and this subpart is to foster competition by generally prohibiting a management official from serving two nonaffiliated depository organizations in situations where the management interlock likely would have an anticompetitive effect.

(c)  Scope. This part applies to management officials of State savings associations and their affiliates.

[Codified to 12 C.F.R. § 390.400]

§ 390.401  Definitions.

For purposes of this subpart, the following definitions apply:

(a)  Affiliate. (1) The term affiliate has the meaning given in section 202 of the Interlocks Act (12 U.S.C. 3201). For purposes of that section 202, shares held by an individual include shares held by members of his or her immediate family. "Immediate family" means spouse, mother, father, child, grandchild, sister, brother, or any of their spouses, whether or not any of their shares are held in trust.

(2)  For purposes of section 202(3)(B) of the Interlocks Act (12 U.S.C. 3201(3)(B)), an affiliate relationship involving a State savings association based on common ownership does not exist if the FDIC determines, after giving the affected persons the opportunity to respond, that the asserted affiliation was established in order to avoid the prohibitions of the Interlocks Act and does not represent a true commonality of interest between the depository organizations. In making this determination, the FDIC considers, among other things, whether a person, including members of his or her immediate family, whose shares are necessary to constitute the group owns a nominal percentage of the shares of one of the organizations and the percentage is substantially disproportionate to that person's ownership of shares in the other organization.

(b)  Area median income means:

(1)  The median family income for the metropolitan statistical area (MSA), if a depository organization is located in an MSA; or

(2)  The statewide nonmetropolitan median family income, if a depository organization is located outside an MSA.

(c)  Community means a city, town, or village, and contiguous or adjacent cities, towns, or villages.

(d)  Contiguous or adjacent cities, towns, or villages means cities, towns, or villages whose borders touch each other or whose borders are within 10 road miles of each other at their closest points. The property line of an office located in an unincorporated city, town, or village is the boundary line of that city, town, or village for the purpose of this definition.

(e)  Depository holding company means a bank holding company or a savings and loan holding company (as more fully defined in section 202 of the Interlocks Act (12 U.S.C. 3201)) having its principal office located in the United States.

(f)  Depository institution means a commercial bank (including a private bank), a savings bank, a trust company, a State savings association, a building and loan association, a homestead association, a cooperative bank, an industrial bank, or a credit union, chartered under the laws of the United States and having a principal office located in the United States. Additionally, a United States office, including a branch or agency, of a foreign commercial bank is a depository institution.

(g)  Depository institution affiliate means a depository institution that is an affiliate of a depository organization.

(h)  Depository organization means a depository institution or a depository holding company.

(i)  Low- and moderate-income areas means census tracts (or, if an area is not in a census tract, block numbering areas delineated by the United States Bureau of the Census) where the median family income is less than 100 percent of the area median income.

(j)  Management official. (1) The term management official means:

(i)  A director;

(ii)  An advisory or honorary director of a depository institution with total assets of $100 million or more;

(iii)  A senior executive officer as that term is defined in § 390.361;

(iv)  A branch manager;

(v)  A trustee of a depository organization under the control of trustees; and

(vi)  Any person who has a representative or nominee serving in any of the capacities in this paragraph (j)(1).

(2)  The term management official does not include:

(i)  A person whose management functions relate exclusively to the business of retail merchandising or manufacturing;

(ii)  A person whose management functions relate principally to the business outside the United States of a foreign commercial bank; or

(iii)  A person described in the provisos of section 202(4) of the Interlocks Act (12 U.S.C. 3201(4)) (referring to an officer of a State-chartered savings bank, cooperative bank, or trust company that neither makes real estate mortgage loans nor accepts savings).

(k)  Office means a principal or branch office of a depository institution located in the United States. Office does not include a representative office of a foreign commercial bank, an electronic terminal, or a loan production office.

(l)  Person means a natural person, corporation, or other business entity.

(m)  Relevant metropolitan statistical area (RMSA) means an MSA, a primary MSA, or a consolidated MSA that is not comprised of designated Primary MSAs to the extent that these terms are defined and applied by the Office of Management and Budget.

(n)  Representative or nominee means a natural person who serves as a management official and has an obligation to act on behalf of another person with respect to management responsibilities. The FDIC will find that a person has an obligation to act on behalf of another person only if the first person has an agreement, express or implied, to act on behalf of the second person with respect to management responsibilities. The FDIC will determine, after giving the affected persons an opportunity to respond, whether a person is a representative or nominee.

(o)  State savings association means:

(1)  [Reserved]

(2)  Any State savings association (as defined in section 3(b)(3) of the Federal Deposit Insurance Act (12 U.S.C. 1813(b)(3)) the deposits of which are insured by the Federal Deposit Insurance Corporation; and

(3)  Any corporation (other than a bank as defined in section 3(a)(1) of the Federal Deposit Insurance Act (12 U.S.C. 1813(a)(1)) the deposits of which are insured by the Federal Deposit Insurance Corporation, that the Board of Directors of the Federal Deposit Insurance Corporation determines to be operating in substantially the same manner as a State savings association.

(p)  Total assets. (1) The term total assets means assets measured on a consolidated basis and reported in the most recent fiscal year-end Consolidated Report of Condition and Income.

(2)  The term total assets does not include:

(i)  Assets of a diversified savings and loan holding company as defined by section 10(a)(1)(F) of the Home Owners' Loan Act (12 U.S.C. 1467a(a)(1)(F)) other than the assets of its depository institution affiliate;

(ii)  Assets of a bank holding company that is exempt from the prohibitions of section 4 of the Bank Holding Company Act of 1956 pursuant to an order issued under section 4(d) of that Act (12 U.S.C. 1843(d)) other than the assets of its depository institution affiliate; or

(iii)  Assets of offices of a foreign commercial bank other than the assets of its United States branch or agency.

(q)  United States means the United States of America, any State or territory of the United States of America, the District of Columbia, Puerto Rico, Guam, American Samoa, and the Virgin Islands.

[Codified to 12 C.F.R. § 390.401]

§ 390.402  Prohibitions.

(a)  Community. A management official of a depository organization may not serve at the same time as a management official of an unaffiliated depository organization if the depository organizations in question (or a depository institution affiliate thereof) have offices in the same community.

(b)  RMSA. A management official of a depository organization may not serve at the same time as a management official of an unaffiliated depository organization if the depository organizations in question (or a depository institution affiliate thereof) have offices in the same RMSA and each depository organization has total assets of $50 million or more.

(c)  Major assets. A management official of a depository organization with total assets exceeding $2.5 billion (or any affiliate of such an organization) may not serve at the same time as a management official of an unaffiliated depository organization with total assets exceeding $1.5 billion (or any affiliate of such an organization), regardless of the location of the two depository organizations. The FDIC will adjust these thresholds, as necessary, based on the year-to-year change in the average of the Consumer Price Index for the Urban Wage Earners and Clerical Workers, not seasonally adjusted, with rounding to the nearest $100 million. The FDIC will announce the revised thresholds by publishing a final rule without notice and comment in the Federal Register.

[Codified to 12 C.F.R. § 390.402]

§ 390.403  Interlocking relationships permitted by statute.

The prohibitions of § 390.402 do not apply in the case of any one or more of the following organizations or to a subsidiary thereof:

(a)  A depository organization that has been placed formally in liquidation, or which is in the hands of a receiver, conservator, or other official exercising a similar function;

(b)  A corporation operating under section 25 or section 25A of the Federal Reserve Act (12 U.S.C. 601 et seq. and 12 U.S.C. 611 et seq., respectively) (Edge Corporations and Agreement Corporations);

(c)  A credit union being served by a management official of another credit union;

(d)  A depository organization that does not do business within the United States except as an incident to its activities outside the United States;

(e)  A State-chartered savings and loan guaranty corporation;

(f)  A Federal Home Loan Bank or any other bank organized solely to serve depository institutions (a bankers' bank) or solely for the purpose of providing securities clearing services and services related thereto for depository institutions and securities companies;

(g)  A depository organization that is closed or is in danger of closing as determined by the appropriate Federal depository institutions regulatory agency and is acquired by another depository organization. This exemption lasts for five years, beginning on the date the depository organization is acquired;

(h)(1)  A diversified savings and loan holding company (as defined in section 10(a)(1)(F) of the Home Owners' Loan Act (12 U.S.C. 1467a(a)(1)(F)) with respect to the service of a director of such company who also is a director of an unaffiliated depository organization if:

(i)  Both the diversified savings and loan holding company and the unaffiliated depository organization notify their appropriate Federal depository institutions regulatory agency at least 60 days before the dual service is proposed to begin; and

(ii)  The appropriate regulatory agency does not disapprove the dual service before the end of the 60-day period.

(2)  The FDIC may disapprove a notice of proposed service if it finds that:

(i)  The service cannot be structured or limited so as to preclude an anticompetitive effect in financial services in any part of the United States;

(ii)  The service would lead to substantial conflicts of interest or unsafe or unsound practices; or

(iii)  The notificant failed to furnish all the information required by the FDIC.

(3)  The FDIC may require that any interlock permitted under this paragraph (h) be terminated if a change in circumstances occurs with respect to one of the interlocked depository organizations that would have provided a basis for disapproval of the interlock during the notice period; and

(i)  Any State savings association which has issued stock in connection with a qualified stock issuance pursuant to section 10(q) of the Home Owners' Loan Act, except that this paragraph (i) shall apply only with regard to service as a single management official of such State savings association or any subsidiary of such State savings association by a single management official of a savings and loan holding company which purchased the stock issued in connection with such qualified stock issuance, and shall apply only when the FDIC has determined that such service is consistent with the purposes of the Interlocks Act and the Home Owners' Loan Act.

[Codified to 12 C.F.R. § 390.403]

§ 390.404  Small market share exemption.

(a)  Exemption. A management interlock that is prohibited by § 390.402 is permissible, if:

(1)  The interlock is not prohibited by § 390.402(c); and

(2)  The depository organizations (and their depository institution affiliates) hold, in the aggregate, no more than 20 percent of the deposits in each RMSA or community in which both depository organizations (or their depository institution affiliates) have offices. The amount of deposits shall be determined by reference to the most recent annual Summary of Deposits published by the FDIC for the RMSA or community.

(b)  Confirmation and records. Each depository organization must maintain records sufficient to support its determination of eligibility for the exemption under paragraph (a) of this section, and must reconfirm that determination on an annual basis.

[Codified to 12 C.F.R. § 390.404]

§ 390.405  General exemption.

(a)  Exemption. The FDIC may exempt an interlock from the prohibitions in § 390.402 if the FDIC finds that the interlock would not result in a monopoly or substantial lessening of competition and would not present safety and soundness concerns. A depository organization may apply to FDIC for an exemption under §§ 390.126 through 390.135.

(b)  Presumptions. In reviewing an application for an exemption under this section, the FDIC will apply a rebuttable presumption that an interlock will not result in a monopoly or substantial lessening of competition if the depository organization seeking to add a management official:

(1)  Primarily serves low- and moderate-income areas;

(2)  Is controlled or managed by persons who are members of a minority group, or women;

(3)  Is a depository institution that or has been chartered for less than two years; or

(4)  Is deemed to be in "troubled condition" as defined in § 390.361.

(c)  Duration. Unless a shorter expiration period is provided in the FDIC approval, an exemption permitted by paragraph (a) of this section may continue so long as it does not result in a monopoly or substantial lessening of competition, or is unsafe or unsound. If the FDIC grants an interlock exemption in reliance upon a presumption under paragraph (b) of this section, the interlock may continue for three years, unless otherwise provided by the FDIC in writing.

[Codified to 12 C.F.R. § 390.405]

§ 390.406  Change in circumstances.

(a)  Termination. A management official shall terminate his or her service or apply for an exemption if a change in circumstances causes the service to become prohibited. A change in circumstances may include an increase in asset size of an organization, a change in the delineation of the RMSA or community, the establishment of an office, an increase in the aggregate deposits of the depository organization, or an acquisition, merger, consolidation, or reorganization of the ownership structure of a depository organization that causes a previously permissible interlock to become prohibited.

(b)  Transition period. A management official described in paragraph (a) of this section may continue to serve the depository organization involved in the interlock for 15 months following the date of the change in circumstances. The FDIC may shorten this period under appropriate circumstances.

[Codified to 12 C.F.R. § 390.406]

§ 390.407  Enforcement.

Except as provided in this section, the FDIC administers and enforces the Interlocks Act with respect to State savings associations and its affiliates, and may refer any case of a prohibited interlocking relationship involving these entities to the Attorney General of the United States to enforce compliance with the Interlocks Act and this subpart. If an affiliate of a State savings association is subject to the primary regulation of another Federal depository organization supervisory agency, then the FDIC does not administer and enforce the Interlocks Act with respect to that affiliate.

[Codified to 12 C.F.R. § 390.407]

§ 390.408  Interlocking relationships permitted pursuant to Federal Deposit Insurance Act.

A management official or prospective management official of a depository organization may enter into an otherwise prohibited interlocking relationship with another depository organization for a period of up to 10 years if such relationship is approved by the Federal Deposit Insurance Corporation pursuant to section 13(k)(1)(A)(v) of the Federal Deposit Insurance Act, as amended (12 U.S.C. 1823(k)(1)(A)(v)).

[Codified to 12 C.F.R. § 390.408]

Subpart W—Securities Offerings

§ 390.410  Definitions.

(a)  For purposes of this subpart, the following definitions apply:

(1)  Accredited investor means the same as in Commission Rule 501(a) (17 CFR 230.501(a)) under the Securities Act, and includes any State savings association.

(2)  Commission means the Securities and Exchange Commission.

(3)  Dividend or interest reinvestment plan means a plan which is offered solely to existing security holders of the State savings association which allows such persons to reinvest dividends or interest paid to them on securities issued by the State savings association, and which also may allow additional cash amounts to be contributed by the participants in the plan, provided that the securities to be issued are newly issued, or are purchased for the account of plan participants, at prices not in excess of current market prices at the time of purchase, or at prices not in excess of an amount determined in accordance with a pricing formula specified in the plan and based upon average or current market prices at the time of purchase.

(4)  Employee benefit plan means any purchase, savings, option, rights, bonus, ownership, appreciation, profit sharing, thrift, incentive, pension or similar plan solely for officers, directors or employees.

(5)  Exchange Act means the Securities Exchange Act of 1934 (15 U.S.C. 78a--78jj).

(6)  Filing date means the date on which a document is actually received during business hours, 9 a.m. to 5 p.m. Eastern Standard Time, by the FDIC, 550 17th Street, NW, Washington, DC 20429. However if the last date on which a document can be accepted falls on a Saturday, Sunday, or holiday, such document may be filed on the next business day.

(7)  Issuer means a State savings association which issues or proposes to issue any security.

(8)  Offer; Sale or sell. For purposes of this subpart, the term offer, offer to sell, or offer for sale shall include every attempt or offer to dispose of, or solicitation of an offer to buy, a security or interest in a security, for value. However, these terms shall not include preliminary negotiations or agreements between an issuer and any underwriter or among underwriters who are or are to be in privity of contract with the issuer. Sale and sell includes every contract to sell or otherwise dispose of a security or interest in a security for value. Every offer or sale of a warrant or right to purchase or subscribe to another security of the same or another issuer, as well as every sale or offer of a security which gives the holder a present or future right or privilege to convert the security into another security of the same or another issuer, includes an offer and sale of the other security only at the time of the offer or sale of the warrant or right or convertible security; but neither the exercise of the right to purchase or subscribe or to convert nor the issuance of securities pursuant thereto is an offer or sale.

(9)  Person means the same as in 12 CFR § 192.25, and includes a State savings association.

(10)  Purchase and buy mean the same as in 12 CFR § 192.25.

(11)  State savings association means the same as in section 3(b) of the Federal Deposit Insurance Act (12 U.S.C. 1813(b)), and includes a state-chartered savings association in organization which is granted conditional approval of insurance of accounts by the Federal Deposit Insurance Corporation. In addition, for purposes of § 390.411, State savings association includes any underwriter participating in the distribution of securities of a State savings association.

(12)  Securities Act means the Securities Act of 1933 (15 U.S.C. 77a--77aa).

(13)  Security means any non-withdrawable account, note, stock, treasury stock, bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, collateral-trust certificate, preorganization or subscription, transferable share, investment contract, voting trust certificate or, in general, any interest or instrument commonly known as a security, or any certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase any of the foregoing, except that a security shall not include an account insured, in whole or in part, by the Federal Deposit Insurance Corporation.

(14)  Underwriter means any person who has purchased from an issuer with a view to, or offers or sells for an issuer in connection with, the distribution of any security, or participates or has a participation in the direct or indirect underwriting of any such undertaking; but such term shall not include a person whose interest is limited to a commission from an underwriter or dealer not in excess of the usual and customary distributors' or sellers' commission and such term shall also not include any person who has continually held the securities being transferred for a period of two (2) consecutive years provided that the securities sold in any one (1) transaction shall be less than ten percent (10%) of the issued and outstanding securities of the same class. The following shall apply for the purpose of determining the period securities have been held:

(i)  Stock dividends, splits and recapitalizations. Securities acquired from the issuer as a dividend or pursuant to a stock split, reverse split or recapitalization shall be deemed to have been acquired at the same time as the securities on which the dividend or, if more than one, the initial dividend was paid, the securities involved in the split or reverse split, or the securities surrendered in connection with the recapitalization.

(ii)  Conversions. If the securities sold were acquired from the issuer for consideration consisting solely of other securities of the same issuer surrendered for conversion, the securities so acquired shall be deemed to have been acquired at the same time as the securities surrendered for conversion.

(iii)  Contingent issuance of securities. Securities acquired as a contingent payment of the purchase price of an equity interest in a business, or the assets of a business, sold to the issuer or an affiliate of the issuer shall be deemed to have been acquired at the time of such sale if the issuer was then committed to issue the securities subject only to conditions other than the payment of further consideration for such securities. An agreement entered into in connection with any such purchase to remain in the employment of, or not to compete with, the issuer or affiliate or the rendering of services pursuant to such agreement shall not be deemed to be the payment of further consideration for such securities.

(iv)  Pledged securities. Securities which are bona fide pledged by any person other than the issuer when sold by the pledgee, or by a purchaser, after a default in the obligation secured by the pledge, shall be deemed to have been acquired when they were acquired by the pledgor, except that if the securities were pledged without recourse they shall be deemed to have been acquired by the pledgee at the time of the pledge or by the purchaser at the time of purchase.

(v)  Gifts of securities. Securities acquired from any person, other than the issuer, by gift shall be deemed to have been acquired by the donee when they were acquired by the donor.

(vi)  Trusts. Securities acquired from the settler of a trust by the trust or acquired from the trust by the beneficiaries thereof shall be deemed to have been acquired when they were acquired by the settler.

(vii)  Estates. Securities held by the estate of a deceased person or acquired from such an estate by the beneficiaries thereof shall be deemed to have been acquired when they were acquired by the deceased person, except that no holding period is required if the estate is not an affiliate of the issuer or if the securities are sold by a beneficiary of the estate who is not such an affiliate.

(viii)  Exchange transactions. A person receiving securities in a transaction involving an exchange of the securities of one issuer for securities of another issuer shall be deemed to have acquired the securities received when such person acquired the securities exchanged.

(b)  A term not defined in this subpart but defined elsewhere in this part, when used in subpart, shall have the meanings given elsewhere in this part, unless the context otherwise requires.

(c)  When used in the rules, regulations, or forms of the Commission referred to in this subpart, the term Commission shall be deemed to refer to the FDIC, the term registrant shall be deemed to refer to an issuer defined in this subpart, and the term registration statement or prospectus shall be deemed to refer to an offering circular filed under this subpart, unless the context otherwise requires.

[Codified to 12 C.F.R. § 390.410]

§ 390.411  Offering circular requirement.

(a)  General. No State savings association shall offer or sell, directly or indirectly, any security issued by it unless:

(1)  The offer or sale is accompanied or preceded by an offering circular which includes the information required by this subpart and which has been filed and declared effective pursuant to this subpart; or

(2)  An exemption is available under this subpart.

(b)  Communications not deemed an offer. The following communications shall not be deemed an offer under this subpart:

(1)  Prior to filing an offering circular, any notice of a proposed offering which satisfies the requirements of Commission Rule 135 (17 CFR 230.135) under the Securities Act;

(2)  Subsequent to filing an offering circular, any notice circular, advertisement, letter, or other communication published or transmitted to any person which satisfies the requirements of Commission Rule 134 (17 CFR 230.134) under the Securities Act; and

(3)  Oral offers of securities covered by an offering circular made after filing the offering circular with the FDIC.

(c)  Preliminary offering circular. Notwithstanding paragraph (a) of this section, a preliminary offering circular may be used for an offer of any security prior to the effective date of the offering circular if:

(1)  The preliminary offering circular has been filed pursuant to this subpart;

(2)  The preliminary offering circular includes the information required by this subpart, except for the omission of information relating to offering price, discounts or commissions, amount of proceeds, conversion rates, call prices, or other matters dependent on the offering price; and

(3)  The offering circular declared effective by the FDIC is furnished to the purchaser prior to, or simultaneously with, the sale of any such security.

[Codified to 12 C.F.R. § 390.411]

§ 390.412  Exemptions.

The offering circular requirement of § 390.411 shall not apply to an issuer's offer or sale of securities:

(a)  [Reserved]

(b)  Exempt from registration under either section 3(a) or section 4 of the Securities Act, but only by reason of an exemption other than section 3(a)(5) (for regulated State savings associations), and section 3(a)(11) (for intrastate offerings) of the Securities Act;

(c)  In a conversion from the mutual to the stock form of organization pursuant to12 CFR part 192, except for a supervisory conversion undertaken pursuant to subpart C of 12 CFR part 192;

(d)  In a non-public offering which satisfies the requirements of § 390.413;

(e)  That are debt securities issued in denominations of $100,000 or more, which are fully collateralized by cash, any security issued, or guaranteed as to principal and interest, by the United States, the Federal Home Loan Mortgage Corporation, Federal National Mortgage Association, Government National Mortgage Association or by interests in mortgage notes secured by real property;

(f)  Distributed exclusively abroad to foreign nationals: Provided, That--

(1)  The offering is made subject to safeguards reasonably designed to preclude distribution or redistribution of the securities within, or to nationals of, the United States; and

(2)  Such safeguards include, without limitation, measures that would be sufficient to ensure that registration of the securities would not be required if the securities were not exempt under the Securities Act; or

(g)  To its officers, directors or employees pursuant to an employee benefit plan or a dividend or interest reinvestment plan, and provided that any such plan has been approved by the majority of shareholders present in person or by proxy at an annual or special meeting of the shareholders of the State savings association.

[Codified to 12 C.F.R. § 390.412]

§ 390.413  Non-public offering.

Offers and sales of securities by an issuer that satisfy the conditions of paragraph (a) or (b) of this section and the requirements of paragraphs (c) and (d) of this section shall be deemed to be transactions not involving any public offering within the meaning of section 4(2) of the Securities Act and §§ 390.412(b) and 390.412(d). However, an issuer shall not be deemed to be not in compliance with the provisions of this subpart solely by reason of making an untimely filing of the notice required to be filed by paragraph (c) of this section so long as the notice is actually filed and all other conditions and requirements of this subpart are satisfied.

(a)  Regulation D. The offer and sale of all securities in the transaction satisfies the Commission's Regulation D (17 CFR 230.501--230.506), except for the notice requirements of Commission Rule 503 (17 CFR 230.503) and the limitations on resale in Commission Rule 502(d) (17 CFR 230.502(d)).

(b)  Sales to 35 persons. The offer and sale of all securities in the transaction satisfies each of the following conditions:

(1)  Sales of the security are not made to more than 35 persons during the offering period, as determined under the integration provisions of Commission Rule 502(a) (17 CFR 230.502(a)). The number of purchasers referred to above is exclusive of any accredited investor, officer, director or affiliate of the issuer. For purposes of paragraph (b) of this section, a husband and wife (together with any custodian or trustee acting for the account of their minor children) are counted as one person and a partnership, corporation or other organization which was not specifically formed for the purpose of purchasing the security offered in reliance upon this exemption, is counted as one person.

(2)  All purchasers either have a preexisting personal or business relationship with the issuer or any of its officers, directors or controlling persons, or by reason of their business or financial experience or the business or financial experience of their professional advisors who are unaffiliated with and who are not compensated by the issuer or any affiliate or selling agent of the issuer, directly or indirectly, could reasonably be assumed to have the capacity to protect their own interests in connection with the transaction.

(3)  Each purchaser represents that the purchaser is purchasing for the purchaser's own account (or a trust account if the purchaser is a trustee) and not with a view to or for sale in connection with any distribution of the security.

(4)  The offer and sale of the security is not accomplished by the publication of any advertisement.

(c)  Filing of notice of sales. Within 30 days after the first sale of the securities, every six months after the first sale of the securities and not later than 30 days after the last sale of securities in an offering pursuant to this subpart, the issuer, shall file with the FDIC a report describing the results of the sale of securities as required by § 390.421(b).

(d)  Limitation on resale. The issuer shall exercise reasonable care to assure that the purchasers of the securities are not underwriters within the meaning of § 390.410(a)(14), which reasonable care shall include, but not be limited to, the following:

(1)  Reasonable inquiry to determine if the purchaser is acquiring the securities for the purchaser or for other persons;

(2)  Written disclosure to each purchaser prior to the sale that the securities are not offered by an offering circular filed with, and declared effective by, the FDIC pursuant to § 390.411, but instead are being sold in reliance upon the exemption from the offering circular requirement provided for by this subpart; and

(3)  Placement of a legend on the certificate, or other document evidencing the securities, indicating that the securities have not been offered by an offering circular filed with, and declared effective by, the FDIC and that due care should be taken to ensure that the seller of the securities is not an underwriter within the meaning of § 390.410(a)(14).

[Codified to 12 C.F.R. § 390.413]

§ 390.414  Filing and signature requirements.

(a)  Procedures. An offering circular, amendment, notice, report, or other document required by this subpart shall, unless otherwise indicated, be filed in accordance with the requirements of 12 CFR 192.115(a), 192.150(a)(6), 192.155, 192.180(b), and Form AC, General Instruction B, of this subpart.

(b)  Number of copies. (1) Unless otherwise required, any filing under this subpart shall include nine copies of the document to be filed with the FDIC, as follows:

(i)  Seven copies, which shall include one manually signed copy with exhibits, three conformed copies with exhibits, and three conformed copies without exhibits, to the FDIC, ATTN: Accounting and Securities Disclosure Section, 550 17th Street NW, Washington, DC 20429; and

(ii)  Two copies, which shall include one manually signed copy with exhibits and one conformed copy, without exhibits, to the appropriate regional director.

(2)  Within five days after the effective date of an offering circular or the commencement of a public offering after the effective date, whichever occurs later, nine copies of the offering circular used shall be filed with the FDIC as follows: seven copies to the FDIC, 550 17th Street NW, ATTN: Accounting and Securities Disclosure Section, Washington, DC, and two copies to the appropriate Regional Director.

(3)  After the effective date of an offering circular, an offering circular which varies from the form previously filed shall not be used, unless it includes only non-material supplemental or additional information and until 10 copies have been filed with the FDIC in the manner required.

(c)  Signature. (1) Any offering circular, amendment, or consent filed with the FDIC pursuant to this subpart shall include an attached manually signed signature page which authorizes the filing and has been signed by:

(i)  The issuer, by its duly authorized representative;

(ii)  The issuer's principal executive officer;

(iii)  The issuer's principal financial officer;

(iv)  The issuer's principal accounting officer; and

(v)  At least a majority of the issuer's directors.

(2)  Any other document filed pursuant to this subpart shall be signed by a person authorized to do so.

(3)  At least one copy of every document filed pursuant to this subpart shall be manually signed, and every copy of a document filed shall:

(i)  Have the name of each person who signs typed or printed beneath the signature;

(ii)  State the capacity or capacities in which the signature is provided;

(iii)  Provide the name of each director of the issuer, if a majority of directors is required to sign the document; and

(iv)  With regard to any copies not manually signed, bear typed or printed signatures.

[Codified to 12 C.F.R. § 390.414]

§ 390.415  Effective date.

(a)  Except as provided for in paragraph (d) of this section, an offering circular filed by a State savings association shall be deemed to be automatically declared effective by the FDIC on the twentieth day after filing or on such earlier date as the FDIC may determine for good cause shown.

(b)  If any amendment is filed prior to the effective date, the offering circular shall be deemed to have been filed when such amendment was filed.

(c)  The period until automatic effectiveness under this subpart shall be stated at the bottom of the facing page of the Form OC or any amendment.

(d)  The effectiveness will be delayed if a duly authorized amendment, telegram confirmed in writing, or letter states that the effective date is delayed until a further amendment is filed specifically stating that the offering circular will become effective in accordance with this subpart.

(e)  An amendment filed after the effective date of the offering circular shall become effective on such date as the FDIC may determine.

(f)  If it appears to the FDIC at any time that the offering circular includes any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading, then the FDIC may pursue any remedy it is authorized to pursue under section 8 of the Federal Deposit Insurance Act, as amended (12 U.S.C. 1818), including, but not limited to, institution of cease-and-desist proceedings.

[Codified to 12 C.F.R. § 390.415]

§ 390.416  Form, content, and accounting.

(a)  Form and content. Any offering circular or amendment filed pursuant to this subpart shall:

(1)  Be filed under cover of Form OC, which is under 12 CFR part 192;

(2)  Comply with the requirements of Items 3 and 4 of Form OC and the requirements of all items of the form for registration (17 CFR part 239) that the issuer would be eligible to use were it required to register the securities under the Securities Act;

(3)  Comply with all item requirements of the Form S-1 (17 CFR part 239) for registration under the Securities Act, if the association issuing the securities is not in compliance with the FDIC's regulatory capital requirements during the time the offering is made;

(4)  Where a form specifies that the information required by an item in the Commission's Regulation S-K (17 CFR part 229) should be furnished, include such information and all of the information required by Item 7 of Form PS, which is under 12 CFR part 192;

(5)  Include after the facing page of the Form OC a cross-reference sheet listing each item requirement of the form for registration under the Securities Act and indicate for each item the applicable heading or subheading in the offering circular under which the required information is disclosed;

(6)  Include in part II of the Form OC the applicable undertakings required by the form for registration under the Securities Act;

(7)  If the issuer has not previously been required to file reports pursuant to section 13(a) of the Exchange Act or § 390.427, include in part II of Form OC the following undertaking: "The issuer hereby undertakes, in connection with any distribution of the offering circular, to have a preliminary or effective offering circular including the information required by this subpart distributed to all persons expected to be mailed confirmations of sale not less than 48 hours prior to the time such confirmations are expected to be mailed;"

(8)  In offerings involving the issuance of options, warrants, subscription rights or conversion rights within the meaning of § 390.410(a)(8), include in part II of Form OC an undertaking to provide a copy of the issuer's most recent audited financial statements to persons exercising such options, warrants or rights promptly upon receiving written notification of the exercise thereof;

(9)  Include as supplemental information and not as part of the Form OC and only with respect to de novo offerings, a copy of the application for insurance of accounts as submitted to the Federal Deposit Insurance Corporation for state-chartered savings associations; and

(10)  In addition to the information expressly required to be included by this subpart, there shall be added such further material information, if any, as may be necessary to make the required statements, in light of the circumstances under which they are made, not misleading.

(b)  Accounting requirements. To be declared effective an offering circular or amendment shall satisfy the accounting requirements in subpart T.

[Codified to 12 C.F.R. § 390.416]

§ 390.417  Use of the offering circular.

(a)  An offering circular or amendment declared effective by the FDIC shall not be used more than nine months after the effective date, unless the information contained therein is as of a date not more than 16 months prior to such use.

(b)  An offering circular filed under § 390.414(b)(3) shall not extend the period for which an effective offering circular or amendment may be used under paragraph (c) of this section.

(c)  If any event arises, or change in fact occurs, after the effective date and such event or change in fact, individually or in the aggregate, results in the offering circular containing any untrue statement of material fact, or omitting to state a material fact necessary in order to make statements made in the offering circular not misleading under the circumstances, then no offering circular, which has been declared effective under this subpart, shall be used until an amendment reflecting such event or change in fact has been filed with, and declared effective by, the FDIC.

[Codified to 12 C.F.R. § 390.417]

§ 390.418  Escrow requirement.

(a)  Any funds received in an offering which is offered and sold on a best efforts all-or-none condition or with a minimum-maximum amount to be sold shall be held in an escrow or similar separate account until such time as all of the securities are sold with respect to a best efforts all-or-none offering or the stated minimum amount of securities are sold in a minimum-maximum offering.

(b)  If the amount of securities required to be sold under escrow conditions in paragraph (a) of this section are not sold within the time period for the offering as disclosed in the offering circular, all funds in the escrow account shall be promptly refunded unless the FDIC otherwise approves an extension of the offering period upon a showing of good cause and provided that the extension is consistent with the public interest and the protection of investors.

[Codified to 12 C.F.R. § 390.418]

§ 390.419  Unsafe or unsound practices.

(a)  No person shall directly or indirectly,

(1)  Employ any device, scheme or artifice to defraud,

(2)  Make any untrue statement of a material fact or omit to state a material fact necessary in order to make statements made, in light of the circumstances under which they were made, not misleading, or

(3)  Engage in any act, practice, or course of business which operates as a fraud or deceit upon any person, in connection with the purchase or sale of any security of a State savings association.

(b)  Violations of this subpart shall constitute an unsafe or unsound practice within the meaning of section 8 of the Federal Deposit Insurance Act, as amended, 12 U.S.C. 1818.

(c)  Nothing in this subpart shall be construed as a limitation on the applicability of section 10(b) of the Exchange Act (15 U.S.C. 78j(b)) or Rule 10b--5 promulgated thereunder (17 CFR 240.10b--5).

[Codified to 12 C.F.R. § 390.419]

§ 390.420  Withdrawal or abandonment.

(a)  Any offering circular, amendment, or exhibit may be withdrawn prior to the effective date. A withdrawal shall be signed and state the grounds upon which it is made. Any document withdrawn will not be removed from the files of the FDIC, but will be marked "Withdrawn upon the request of the issuer on (date)."

(b)  When an offering circular or amendment has been on file with the FDIC for a period of nine months and has not become effective, the FDIC may, in its discretion, determine whether the filing has been abandoned, after notifying the issuer that the filing is out of date and must either be amended to comply with the applicable requirements of this subpart or be withdrawn within 30 days after the date of such notice. When a filing is abandoned, the filing will not be removed from the files of the FDIC, but will be marked "Declared abandoned by the FDIC on (date)."

[Codified to 12 C.F.R. § 390.420]

§ 390.421  Securities sale report.

(a)  Within 30 days after the first sale of the securities, every six months after such 30 day period and not later than 30 days after the later of the last sale of securities in an offering pursuant to § 390.411 or the application of the proceeds therefrom, the issuer shall file with the FDIC a report describing the results of the sale of the securities and the application of the proceeds, which shall include all of the information required by Form G--12 set forth at § 390.429 and shall also include the following:

(1)  The name, address, and docket number of the issuer;

(2)  The title, number, aggregate and per-unit offering price of the securities sold;

(3)  The aggregate and per-unit dollar amounts of actual itemized expenses, discounts or commissions, and other fees;

(4)  The aggregate and per-unit dollar amounts of the net proceeds raised, and the use of proceeds therefrom; and

(5)  The number of purchasers of each class of securities sold and the number of owners of record of each class of the issuer's equity securities after the issuance of the securities or termination of the offer.

(b)  Within 30 days after the first sale of the securities, every six months after the first sale of the securities and not later than 30 days after the last sale of securities in an offering pursuant to § 390.413, the issuer shall file with the FDIC a report describing the results of the sale of securities, which shall include all of the information required by Form G--12 set forth at § 390.429, and shall also include the following:

(1)  All of the information required by paragraph (a) of this section; and

(2)  A detailed statement of the factual and legal grounds for the exemption claimed.

[Codified to 12 C.F.R. § 390.421]

§ 390.422  Public disclosure and confidential treatment.

(a)  Any offering circular, amendment, exhibit, notice, or report filed pursuant to this subpart will be publicly available. Any other related documents will be treated in accordance with the provisions of the Freedom of Information Act (5 U.S.C. 552), the Privacy Act of 1974 (5 U.S.C. 552a), and parts 309 and 310 of this chapter.

(b)  Any requests for confidential treatment of information in a document required to be filed under this subpart shall be made as required under Commission Rule 24b--2 (17 CFR 240.24b--2) under the Exchange Act.

[Codified to 12 C.F.R. § 390.422]

§ 390.423  Waiver.

(a)  The FDIC may waive any requirement of this subpart, or any required information:

(1)  Determined to be unnecessary by the FDIC;

(2)  In connection with a transaction approved by the FDIC for supervisory reasons, or

(3)  Where a provision of this subpart conflicts with a requirement of applicable state law.

(b)  Any condition, stipulation or provision binding any person acquiring a security issued by a State savings association which seeks to waive compliance with any provision of this subpart shall be void, unless approved by the FDIC.

[Codified to 12 C.F.R. § 390.423]

§ 390.424  Requests for interpretive advice or waiver.

Any requests to the FDIC for interpretive advice or a waiver with respect to any provision of this subpart shall satisfy the following requirements: (a) A copy of the request, including any attachments, shall be filed with the FDIC;

(b)  The provisions of this subpart to which the request relates, the participants in the proposed transaction, and the reasons for the request, shall be specifically identified or described; and

(c)  The request shall include a legal opinion as to each legal issue raised and an accounting opinion as to each accounting issue raised.

[Codified to 12 C.F.R. § 390.424]

§ 390.425  Delayed or continuous offering and sale of securities.

Any offer or sale of securities under § 390.411 may be made on a continuous or delayed basis in the future, if:

(a)  The securities would satisfy all of the eligibility requirements of the Commission's Rule 415, 17 CFR 230.415; and

(b)  The association issuing the securities is in compliance with the FDIC's regulatory capital requirements during the time the offering is made.

[Codified to 12 C.F.R. § 390.425]

§ 390.426  Sales of securities at an office of a State savings association.

Sales of securities of a State savings association or its affiliates at an office of a State savings association may only be made in accordance with the provisions of § 390.340.

[Codified to 12 C.F.R. § 390.426]

§ 390.427  Current and periodic reports.

(a)  Each State savings association which files an offering circular which becomes effective pursuant to this subpart, after such effective date, shall file with the FDIC periodic and current reports on Forms 8--K, 10--Q and 10--K as may be required by section 13 of the Exchange Act (15 U.S.C. 78m) as if the securities sold by such offering circular were securities registered pursuant to section 12 of the Exchange Act (15 U.S.C. 78l). The duty to file periodic and current reports under this subpart shall be automatically suspended if and so long as any issue of securities of the State savings association is registered pursuant to section 12 of the Exchange Act (15 U.S.C. 78l). The duty to file under this subpart shall also be automatically suspended as to any fiscal year, other than the fiscal year within which such offering circular became effective, if, at the beginning of such fiscal year, the securities of each class to which the offering circular relates are held of record by less than three hundred persons and upon the filing of a Form 15.

(b)  For purposes of registering securities under section 12(b) or 12(g) of the Exchange Act, an issuer subject to the reporting requirements of paragraph (a) of this section may use the Commission's registration statement on Form 10 or Form 8--A or 8--B as applicable.

[Codified to 12 C.F.R. § 390.427]

§ 390.428  Approval of the security.

Any securities of a State savings association which are not exempt under this subpart and are offered or sold pursuant to an offering circular which becomes effective under this subpart, are deemed to be approved as to form and terms for purposes of this subpart.

[Codified to 12 C.F.R. § 390.428]

§ 390.429  Form for securities sale report.

FDIC, 550 17th Street, NW, Washington, DC 20429

[Form G--12]

Securities Sale Report Pursuant to § 390.12

FDIC No. _______

Issuer's Name: _______

Address: _______

If in organization, state the date of FDIC certification of insurance of accounts: _______

State the title, number, aggregate and per-unit offering price of the securities sold: _______

State the aggregate and per-unit dollar amounts of actual itemized offering expenses, discounts, commissions, and other fees: _______

State the aggregate and per-unit dollar amounts of the net proceeds raised: _______

Describe the use of proceeds. If unknown, provide reasonable estimates of the dollar amount allocated to each purpose for which the proceeds will be used: _______

State the number of purchasers of each class of securities sold and the number of owners of record of each class of the issuer's equity securities at the close or termination of the offering: _______

For a non-public offering, also state the factual and legal grounds for the exemption claimed (attach additional pages if necessary): _______

For a non-public offering, all offering materials used should be listed: _______

Person to Contact: _______

Telephone No.: _______

This issuer has duly caused this securities sale report to be signed on its behalf by the undersigned person.

Date of securities sale report _______

Issuer: _______

Signature: _______

Name: _______

Title: _______

Instruction:  Print the name and title of the signing representative under his or her signature. Ten copies of the securities sale report should be filed, including one copy manually signed, as required under 12 CFR 390.414.

Attention

Intentional misstatements or omissions of fact constitute violations of Federal law (See 18 U.S.C. 1001 and § 390.355(b)).

[Codified to 12 C.F.R. § 390.429]

§ 390.430  Filing of copies of offering circulars in certain exempt offerings.

A copy of the offering circular, or similar document, if any, used in connection with an offering exempt from the offering circular requirement of § 390.411 by reason of § 390.412(e) or § 390.413 shall be mailed to the FDIC within 30 days after the first sale of such securities. Such copy of the offering circular, or similar document, is solely for the information of the FDIC and shall not be deemed to be "filed" with the FDIC pursuant to § 390.411. The mailing to the FDIC of such offering circular, or similar document, shall not be a pre-condition of the applicable exemption from the offering circular requirements of § 390.411.

[Codified to 12 C.F.R. § 390.430]

Subpart X—Appraisals

§ 390.440  Authority, purpose, and scope.

(a)  Authority. This subpart is issued by the FDIC under title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 ("FIRREA") (Pub. L. 101--73, 103 Stat. 183, 511 (1989)), 12 U.S.C. 3301 et seq., and portions of the Home Owners' Loan Act ("HOLA"), 12 U.S.C. 1461 et seq., as amended by FIRREA.

(b)  Purpose and scope. (1) Title XI provides protection for federal financial and public policy interests in real estate related transactions by requiring real estate appraisals used in connection with federally related transactions to be performed in writing, in accordance with uniform standards, by appraisers whose competency has been demonstrated and whose professional conduct will be subject to effective supervision. This subpart implements the requirements of title XI and applies to all federally related transactions entered into by the FDIC or by institutions regulated by the FDIC ("regulated institutions").

(2)  This subpart:

(i)  Identifies which real estate-related financial transactions require the services of an appraiser;

(ii)  Prescribes which categories of federally related transactions shall be appraised by a State certified appraiser and which by a State licensed appraiser; and

(iii)  Prescribes minimum standards for the performance of real estate appraisals in connection with federally related transactions under the jurisdiction of the FDIC.

[Codified to 12 C.F.R. § 390.440]

§ 390.441  Definitions.

Appraisal means a written statement independently and impartially prepared by a qualified appraiser setting forth an opinion as to the market value of an adequately described property as of a specific date(s), supported by the presentation and analysis of relevant market information.

Appraisal Foundation means the Appraisal Foundation established on November 30, 1987, as a not-for-profit corporation under the laws of Illinois.

Appraisal Subcommittee means the Appraisal Subcommittee of the Federal Financial Institution Examination Council.

Business loan means a loan or extension of credit to any corporation, general or limited partnership, business trust, joint venture, pool, syndicate, sole proprietorship, or other business entity.

Complex 1-to-4 family residential property appraisal means one in which the property to be appraised, the form of ownership, or market conditions are atypical.

Federally related transaction means any real estate-related financial transaction entered into on or after August 9, 1990, that:

(1)  The FDIC or any regulated institution engages in or contracts for; and

(2)  Requires the services of an appraiser.

Market value means the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:

(1)  Buyer and seller are typically motivated;

(2)  Both parties are well informed or well advised, and acting in what they consider their own best interests;

(3)  A reasonable time is allowed for exposure in the open market;

(4)  Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and

(5)  The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.

Real estate or real property means an identified parcel or tract of land, with improvements, and includes easements, rights of way, undivided or future interests, or similar rights in a tract of land, but does not include mineral rights, timber rights, growing crops, water rights, or similar interests severable from the land when the transaction does not involve the associated parcel or tract of land.

Real estate-related financial transaction means any transaction involving:

(1)  The sale, lease, purchase, investment in or exchange of real property, including interests in property, or the financing thereof; or

(2)  The refinancing of real property or interests in real property; or

(3)  The use of real property or interests in property as security for a loan or investment, including mortgage-backed securities.

State certified appraiser means any individual who has satisfied the requirements for certification in a State or territory whose criteria for certification as a real estate appraiser currently meet the minimum criteria for certification issued by the Appraiser Qualifications Board of the Appraisal Foundation. No individual shall be a State certified appraiser unless such individual has achieved a passing grade upon a suitable examination administered by a State or territory that is consistent with and equivalent to the Uniform State Certification Examination issued or endorsed by the Appraiser Qualifications Board of the National Foundation. In addition, the Appraisal Subcommittee must not have issued a finding that the policies, practices, or procedures of the State or territory are inconsistent with title XI of FIRREA. The FDIC may, from time to time, impose additional qualification criteria for certified appraisers performing appraisals in connection with federally related transactions within its jurisdiction.

State licensed appraiser means any individual who has satisfied the requirements for licensing in a State or territory where the licensing procedures comply with title XI of FIRREA and where the Appraisal Subcommittee has not issued a finding that the policies, practices, or procedures of the State or territory are inconsistent with title XI. The FDIC may, from time to time, impose additional qualification criteria for licensed appraisers performing appraisals in connection with federally related transactions within its jurisdiction.

Tract development means a project of five units or more that is constructed or is to be constructed as a single development.

Transaction value means:

(1)  For loans or other extensions of credit, the amount of the loan or extension of credit;

(2)  For sales, leases, purchases, and investments in or exchanges of real property, the market value of the real property interest involved; and

(3)  For the pooling of loans or interests in real property for resale or purchase, the amount of the loan or market value of the real property calculated with respect to each such loan or interest in real property.

[Codified to 12 C.F.R. § 390.441]

§ 390.442  Appraisals required; transactions requiring a State certified or licensed appraiser.

(a)  Appraisals required. An appraisal performed by a State certified or licensed appraiser is required for all real estate-related financial transactions except those in which:

(1)  The transaction value is $250,000 or less;

(2)  A lien on real estate has been taken as collateral in an abundance of caution;

(3)  The transaction is not secured by real estate;

(4)   A lien on real estate has been taken for purposes other than the real estate's value;

(5)  The transaction is a business loan that:

(i)  Has a transaction value of $1 million or less; and

(ii)  Is not dependent on the sale of, or rental income derived from, real estate as the primary source of repayment;

(6)  A lease of real estate is entered into, unless the lease is the economic equivalent of a purchase or sale of the leased real estate;

(7)  The transaction involves an existing extension of credit at the lending institution, provided that:

(i)  There has been no obvious and material change in market conditions or physical aspects of the property that threatens the adequacy of the institution's real estate collateral protection after the transaction, even with the advancement of new monies; or

(ii)  There is no advancement of new monies, other than funds necessary to cover reasonable closing costs;

(8)  The transaction involves the purchase, sale, investment in, exchange of, or extension of credit secured by, a loan or interest in a loan, pooled loans, or interests in real property, including mortgaged-backed securities, and each loan or interest in a loan, pooled loan, or real property interest met the FDIC's regulatory requirements for appraisals at the time of origination;

(9)  The transaction is wholly or partially insured or guaranteed by a United States government agency or United States government sponsored agency;

(10)  The transaction either:

(i)  Qualifies for sale to a United States government agency or United States government sponsored agency; or

(ii)  Involves a residential real estate transaction in which the appraisal conforms to the Federal National Mortgage Association or Federal Home Loan Mortgage Corporation appraisal standards applicable to that category of real estate;

(11)  The regulated institution is acting in a fiduciary capacity and is not required to obtain an appraisal under other law; or

(12)  The FDIC determines that the services of an appraiser are not necessary in order to protect Federal financial and public policy interests in real estate-related financial transactions or to protect the safety and soundness of the institution.

(b)  Evaluations required. For a transaction that does not require the services of a State certified or licensed appraiser under paragraph (a)(1), (5), or (7) of this section, the institution shall obtain an appropriate evaluation of real property collateral that is consistent with safe and sound banking practices.

(c)  Appraisals to address safety and soundness concerns. The FDIC reserves the right to require an appraisal under this subpart whenever the agency believes it is necessary to address safety and soundness concerns.

(d)  Transactions requiring a State certified appraiser--(1) All transactions of $1,000,000 or more. All federally related transactions having a transaction value of $1,000,000 or more shall require an appraisal prepared by a State certified appraiser.

(2)  Nonresidential and residential (other than 1-to-4 family) transactions of $250,000 or more. All federally related transactions having a transaction value of $250,000 or more, other than those involving appraisals of 1-to-4 family residential properties, shall require an appraisal prepared by a State certified appraiser.

(3)  Complex residential transactions of $250,000 or more. All complex 1-to-4 family residential property appraisals rendered in connection with federally related transactions shall require a State certified appraiser if the transaction value is $250,000 or more. A regulated institution may presume that appraisals of 1-to-4 family residential properties are not complex, unless the institution has readily available information that a given appraisal will be complex. The regulated institution shall be responsible for making the final determination of whether the appraisal is complex. If during the course of the appraisal a licensed appraiser identifies factors that would result in the property, form of ownership, or market conditions being considered atypical, then either: (i) The regulated institution may ask the licensed appraiser to complete the appraisal and have a certified appraiser approve and co-sign the appraisal; or

(ii)  The institution may engage a certified appraiser to complete the appraisal.

(e)  Transactions requiring either a State certified or licensed appraiser. All appraisals for federally related transactions not requiring the services of a State certified appraiser shall be prepared by either a State certified appraiser or a State licensed appraiser.

(f)  Effective date. State savings associations are required to use State certified or licensed appraisers as set forth in this subpart no later than December 31, 1992.

[Codified to 12 C.F.R. § 390.442]

§ 390.443  Minimum appraisal standards.

For federally related transactions, all appraisals shall, at a minimum:

(a)  Conform to generally accepted appraisal standards as evidenced by the Uniform Standards of Professional Appraisal Practice (USPAP) promulgated by the Appraisal Standards Board of the Appraisal Foundation, 1029 Vermont Ave., NW., Washington, DC 20005, unless principles of safe and sound banking require compliance with stricter standards;

(b)  Be written and contain sufficient information and analysis to support the institution's decision to engage in the transaction;

(c)  Analyze and report appropriate deductions and discounts for proposed construction or renovation, partially leased buildings, non-market lease terms, and tract developments with unsold units;

(d)  Be based upon the definition of market value as set forth in this subpart; and

(e)  Be performed by State licensed or certified appraisers in accordance with requirements set forth in this subpart.

[Codified to 12 C.F.R. § 390.443]

§ 390.444  Appraiser independence.

(a)  Staff appraisers. If an appraisal is prepared by a staff appraiser, that appraiser must be independent of the lending, investment, and collection functions and not involved, except as an appraiser, in the federally related transaction, and have no direct or indirect interest, financial or otherwise, in the property. If the only qualified persons available to perform an appraisal are involved in the lending, investment, or collection functions of the regulated institution, the regulated institution shall take appropriate steps to ensure that the appraisers exercise independent judgment and that the appraisal is adequate. Such steps include, but are not limited to, prohibiting an individual from performing an appraisal in connection with federally related transactions in which the appraiser is otherwise involved and prohibiting directors and officers from participating in any vote or approval involving assets on which they performed an appraisal.

(b)  Fee appraisers. (1) If an appraisal is prepared by a fee appraiser, the appraiser shall be engaged directly by the regulated institution or its agent, and have no direct or indirect interest, financial or otherwise, in the property or the transaction.

(2)  A regulated institution also may accept an appraisal that was prepared by an appraiser engaged directly by another financial services institution, if:

(i)  The appraiser has no direct or indirect interest, financial or otherwise, in the property or the transaction; and

(ii)  The regulated institution determines that the appraisal conforms to the requirements of this subpart and is otherwise acceptable.

[Codified to 12 C.F.R. § 390.444]

§ 390.445  Professional association membership; competency.

(a)  Membership in appraisal organizations. A State certified appraiser or a State licensed appraiser may not be excluded from consideration for an assignment for a federally related transaction solely by virtue of membership or lack of membership in any particular appraisal organization.

(b)  Competency. All staff and fee appraisers performing appraisals in connection with federally related transactions must be State certified or licensed, as appropriate. However, a State certified or licensed appraiser may not be considered competent solely by virtue of being certified or licensed. Any determination of competency shall be based upon the individual's experience and educational background as they relate to the particular appraisal assignment for which he or she is being considered.

[Codified to 12 C.F.R. § 390.445]

§ 390.446  Enforcement.

Institutions and institution-affiliated parties, including staff appraisers and fee appraisers, who violate this subpart may be subject to removal and/or prohibition orders, cease and desist orders, and the imposition of civil money penalties pursuant to the Federal Deposit Insurance Act, 12 U.S.C. 1811 et seq., as amended, or other applicable law.

[Codified to 12 C.F.R. § 390.446]

§ 390.447  Appraisal policies and practices of State savings associations and subsidiaries.

(a)  Introduction. The soundness of a State savings association's mortgage loans and real estate investments, and those of its subsidiary(ies), depends to a great extent upon the adequacy of the loan underwriting used to support these transactions. An appraisal standard is one of several critical components of a sound underwriting policy because appraisal reports contain estimates of the value of collateral held or assets owned. This section sets forth the responsibilities of management to develop, implement, and maintain appraisal standards in determining compliance with the appraisal requirements of § 390.350.

(b)  Definition. For purposes of this section, management means: the directors and officers of a State savings association or subsidiary(ies) of such State savings association as those terms are defined in §§ 390.291 and 390.302, respectively.

(c)  Responsibilities of management. An appraisal is a critical component of the loan underwriting or real estate investment decision. Therefore, management shall develop, implement, and maintain appraisal policies to ensure that appraisals reflect professional competence and to facilitate the reporting of estimates of market value upon which State savings associations may rely to make lending decisions. To achieve these results:

(1)  Management shall develop written appraisal policies, subject to formal adoption by the State savings association's board of directors, that it shall implement in consultation with other appropriate personnel. These policies shall ensure that adequate appraisals are obtained and proper appraisal procedures are followed consistent with the requirements of this subpart.

(2)  Management shall develop and adopt guidelines and institute procedures pertaining to the hiring of appraisers to perform appraisal services for the State savings association consistent with the requirements of this subpart. These guidelines shall set forth specific factors to be considered by management including, but not limited to, an appraiser's State certification or licensing, professional education, and type of experience. An appraiser's membership in professional appraisal organizations may be considered consistent with the requirements of subpart X.

(3)  Management shall review on an annual basis the performance of all approved appraisers used within the preceding 12-month period for compliance with:

(i)  The State savings association's appraisal policies and procedures; and

(ii)  The reasonableness of the value estimates reported.

(d)  Exemptions. The requirements of § 390.443(b) through (d) shall not apply with respect to appraisals on nonresidential properties prepared on form reports approved by the FDIC and completed in accordance with the applicable instructional booklet.

[Codified to 12 C.F.R. § 390.447]

Subpart Y—Prompt Corrective Action

§ 390.450  Authority, purpose, scope, other supervisory authority, and disclosure of capital categories.

(a)  Authority. This subpart is issued by the FDIC pursuant to section 38 of the Federal Deposit Insurance Act (FDI Act) as added by section 131 of the Federal Deposit Insurance Corporation Improvement Act of 1991 (Pub. L. 102--242, 105 Stat. 2236 (1991)) (12 U.S.C. 1831o).

(b)  Purpose. Section 38 of the FDI Act establishes a framework of supervisory actions for insured depository institutions that are not adequately capitalized. The principal purpose of this subpart is to define, for State savings associations, the capital measures and capital levels that are used for determining the supervisory actions authorized under section 38 of the FDI Act. This subpart also establishes procedures for submission and review of capital restoration plans and for issuance and review of directives and orders pursuant to section 38.

(c)  Scope. This subpart implements the provisions of section 38 of the FDI Act as they apply to State savings associations. Certain of these provisions also apply to officers, directors and employees of State savings associations.

(d)  Other supervisory authority. Neither section 38 nor this subpart in any way limits the authority of the FDIC under any other provision of law to take supervisory actions to address unsafe or unsound practices, deficient capital levels, violations of law, unsafe or unsound conditions, or other practices. Action under section 38 of the FDI Act and this subpart may be taken independently of, in conjunction with, or in addition to any other enforcement action available to the FDIC, including issuance of cease and desist orders, capital directives, approval or denial of applications or notices, assessment of civil money penalties, or any other actions authorized by law.

(e)  Disclosure of capital categories. The assignment of a State savings association under this subpart within a particular capital category is for purposes of implementing and applying the provisions of section 38. Unless permitted by the FDIC or otherwise required by law, no State savings association may state in any advertisement or promotional material its capital category under this subpart or that the FDIC or any other federal banking agency has assigned the State savings association to a particular category.

[Codified to 12 C.F.R. § 390.450]

§ 390.451  Definitions.

For purposes of this subpart, except as modified in this section or unless the context otherwise requires, the terms used in this subpart have the same meanings as set forth in sections 38 and 3 of the FDI Act.

(a)(1)  Control has the same meaning assigned to it in section 2 of the Bank Holding Company Act (12 U.S.C. 1841), and the term "controlled" shall be construed consistently with the term "control."

(2)  Exclusion for fiduciary ownership. No insured depository institution or company controls another insured depository institution or company by virtue of its ownership or control of shares in a fiduciary capacity. Shares shall not be deemed to have been acquired in a fiduciary capacity if the acquiring insured depository institution or company has sole discretionary authority to exercise voting rights with respect thereto.

(3)  Exclusion for debts previously contracted. No insured depository institution or company controls another insured depository institution or company by virtue of its ownership or control of shares acquired in securing or collecting a debt previously contracted in good faith, until two years after the date of acquisition. The two-year period may be extended at the discretion of the appropriate federal banking agency for up to three one-year periods.

(b)  Controlling person means any person having control of an insured depository institution and any company controlled by that person.

(c)  Leverage ratio means the ratio of Tier 1 capital to adjusted total assets, as calculated in accordance with subpart Z.

(d)  Management fee means any payment of money or provision of any other thing of value to a company or individual for the provision of management services or advice to the State savings association or related overhead expenses, including payments related to supervisory, executive, managerial or policymaking functions, other than compensation to an individual in the individual's capacity as an officer or employee of the State savings association.

(e)  Risk-weighted assets means total risk-weighted assets, as calculated in accordance with subpart Z.

(f)  Tangible equity means the amount of a State savings association's core capital as computed in subpart Z plus the amount of its outstanding cumulative perpetual preferred stock (including related surplus), minus intangible assets as defined in § 390.461, except mortgage servicing assets to the extent they are includable under § 390.471. Non-mortgage servicing assets that have not been previously deducted in calculating core capital are deducted.

(g)  Tier 1 capital means the amount of core capital as defined in subpart Z.

(h)  Tier 1 risk-based capital ratio means the ratio of Tier 1 capital to risk-weighted assets, as calculated in accordance with subpart Z.

(i)  Total assets, for purposes of § 390.453(b)(5), means adjusted total assets as calculated in accordance with subpart Z, minus intangible assets as provided in the definition of tangible equity.

(j)  Total risk-based capital ratio means the ratio of total capital to risk-weighted assets, as calculated in accordance with subpart Z.

[Codified to 12 C.F.R. § 390.451]

§ 390.452  Notice of capital category.

(a)  Effective date of determination of capital category. A State savings association shall be deemed to be within a given capital category for purposes of section 38 of the FDI Act and this subpart as of the date the State savings association is notified of, or is deemed to have notice of, its capital category, pursuant to paragraph (b) of this section.

(b)  Notice of capital category. A State savings association shall be deemed to have been notified of its capital levels and its capital category as of the most recent date:

(1)  A Thrift Financial Report (TFR) or Consolidated Reports of Condition or Income ("Call Report"), as applicable, is required to be filed with the FDIC;

(2)  A final report of examination is delivered to the State savings association; or

(3)  Written notice is provided by the FDIC to the State savings association of its capital category for purposes of section 38 of the FDI Act and this subpart or that the State savings association's capital category has changed as provided in paragraph (c) of this section or § 390.453(c).

(c)  Adjustments to reported capital levels and category--(1) Notice of adjustment by State savings association. A State savings association shall provide the FDIC with written notice that an adjustment to the State savings association's capital category may have occurred no later than 15 calendar days following the date that any material event has occurred that would cause the State savings association to be placed in a lower capital category from the category assigned to the State savings association for purposes of section 38 and this section on the basis of the State savings association's most recent report of examination.

(2)  Determination by the FDIC to change capital category. After receiving notice pursuant to paragraph (c)(1) of this section, the FDIC shall determine whether to change the capital category of the State savings association and shall notify the State savings association of the FDIC's determination.

[Codified to 12 C.F.R. § 390.452]

§ 390.453  Capital measures and capital category definitions.

(a)  Capital measures. For purposes of section 38 and this subpart, the relevant capital measures shall be:

(1)  The total risk-based capital ratio;

(2)  The Tier 1 risk-based capital ratio; and

(3)  The leverage ratio.

(b)  Capital categories. For purposes of section 38 and this subpart, a State savings association shall be deemed to be:

(1)  Well capitalized if the State savings association:

(i)  Has a total risk-based capital ratio of 10.0 percent or greater; and

(ii)  Has a Tier 1 risk-based capital ratio of 6.0 percent or greater; and

(iii)  Has a leverage ratio of 5.0 percent or greater; and

(iv)  Is not subject to any written agreement, order, capital directive, or prompt corrective action directive issued by FDIC under section 8 of the FDI Act, the International Lending Supervision Act of 1983 (12 U.S.C. 3907), the Home Owners' Loan Act (12 U.S.C. 1464(t)(6)), or section 38 of the FDI Act, or any regulation thereunder, to meet and maintain a specific capital level for any capital measure.

(2)  Adequately capitalized if the State savings association:

(i)  Has a total risk-based capital ratio of 8.0 percent or greater; and

(ii)  Has a Tier 1 risk-based capital ratio of 4.0 percent or greater; and

(iii)  Has:

(A)  A leverage ratio of 4.0 percent or greater; or

(B)  A leverage ratio of 3.0 percent or greater if the State savings association is assigned a composite rating of 1, as composite rating is defined in § 390.101(c); and

(iv)  Does not meet the definition of a well capitalized State savings association.

(3)  Undercapitalized if the State savings association:

(i)  Has a total risk-based capital ratio that is less than 8.0 percent; or

(ii)  Has a Tier 1 risk-based capital ratio that is less than 4.0 percent; or

(iii) (A)  Except as provided in paragraph (b)(3)(iii) (B) of this section, has a leverage ratio that is less than 4.0 percent; or

(B)  Has a leverage ratio that is less than 3.0 percent if the State savings association is assigned a composite rating of 1, as composite rating is defined in § 390.101(c).

(4)  Significantly undercapitalized if the State savings association has:

(i)  A total risk-based capital ratio that is less than 6.0 percent; or

(ii)  A Tier 1 risk-based capital ratio that is less than 3.0 percent; or

(iii)  A leverage ratio that is less than 3.0 percent.

(5)  Critically undercapitalized if the State savings association has a ratio of tangible equity to total assets that is equal to or less than 2.0 percent.

(c)  Reclassification based on supervisory criteria other than capital. The FDIC may reclassify a well capitalized State savings association as adequately capitalized and may require an adequately capitalized or undercapitalized State savings association to comply with certain mandatory or discretionary supervisory actions as if the State savings association were in the next lower capital category (except that the FDIC may not reclassify a significantly undercapitalized State savings association as critically undercapitalized) (each of these actions are hereinafter referred to generally as "reclassifications") in the following circumstances:

(1)  Unsafe or unsound condition. The FDIC has determined, after notice and opportunity for hearing pursuant to § 390.457(a), that the State savings association is in an unsafe or unsound condition; or

(2)  Unsafe or unsound practice. The FDIC has determined, after notice and an opportunity for hearing pursuant to § 390.457(a) that the State savings association received a less-than-satisfactory rating for any rating category (other than in a rating category specifically addressing capital adequacy) under the Uniform Financial Institutions Rating System,1 or an equivalent rating under a comparable rating system adopted by the FDIC; and has not corrected the conditions that served as the basis for the less than satisfactory rating. Ratings under this paragraph (c)(2) refer to the most recent ratings (as determined either on-site or off-site by the most recent examination) of which the State savings association has been notified in writing.

[Codified to 12 C.F.R. § 390.453]

§ 390.454  Capital restoration plans.

(a)  Schedule for filing plan--(1) In general. A State savings association shall file a written capital restoration plan with the appropriate Regional Office within 45 days of the date that the State savings association receives notice or is deemed to have notice that the State savings association is undercapitalized, significantly undercapitalized, or critically undercapitalized, unless the FDIC notifies the State savings association in writing that the plan is to be filed within a different period. An adequately capitalized State savings association that has been required pursuant to § 390.453(c) to comply with supervisory actions as if the State savings association were undercapitalized is not required to submit a capital restoration plan solely by virtue of the reclassification.

(2)  Additional capital restoration plans. Notwithstanding paragraph (a)(1) of this section, a State savings association that has already submitted and is operating under a capital restoration plan approved under section 38 and this subpart is not required to submit an additional capital restoration plan based on a revised calculation of its capital measures or a reclassification of the institution under § 390.453(c) unless the FDIC notifies the State savings association that it must submit a new or revised capital plan. A State savings association that is notified that it must submit a new or revised capital restoration plan shall file the plan in writing with the appropriate Regional Office within 45 days of receiving such notice, unless the FDIC notifies the State savings association in writing that the plan is to be filed within a different period.

(b)  Contents of plan. All financial data submitted in connection with a capital restoration plan shall be prepared in accordance with the instructions provided on the TFR, or Consolidated Reports of Condition or Income ("Call Report"), as applicable, unless the FDIC instructs otherwise. The capital restoration plan shall include all of the information required to be filed under section 38(e)(2) of the FDI Act. A State savings association that is required to submit a capital restoration plan as the result of a reclassification of the State savings association pursuant to § 390.453(c) shall include a description of the steps the State savings association will take to correct the unsafe or unsound condition or practice. No plan shall be accepted unless it includes any performance guarantee described in section 38(e)(2)(C) of the FDI Act by each company that controls the State savings association.

(c)  Review of capital restoration plans. Within 60 days after receiving a capital restoration plan under this subpart, the FDIC shall provide written notice to the State savings association of whether the plan has been approved. The FDIC may extend the time within which notice regarding approval of a plan shall be provided.

(d)  Disapproval of capital plan. If a capital restoration plan is not approved by the FDIC, the State savings association shall submit a revised capital restoration plan, when directed to do so, within the time specified by the FDIC. Upon receiving notice that its capital restoration plan has not been approved, any undercapitalized State savings association (as defined in § 390.453(b)(3)) shall be subject to all of the provisions of section 38 and this section applicable to significantly undercapitalized institutions. These provisions shall be applicable until such time as a new or revised capital restoration plan submitted by the State savings association has been approved by the FDIC.

(e)  Failure to submit a capital restoration plan. A State savings association that is undercapitalized (as defined in § 390.453(b)(3)) and that fails to submit a written capital restoration plan within the period provided in this section shall, upon the expiration of that period, be subject to all of the provisions of section 38 and this subpart applicable to significantly undercapitalized institutions.

(f)  Failure to implement a capital restoration plan. Any undercapitalized State savings association that fails in any material respect to implement a capital restoration plan shall be subject to all of the provisions of section 38 and this subpart applicable to significantly undercapitalized institutions.

(g)  Amendment of capital plan. A State savings association that has filed an approved capital restoration plan may, after prior written notice to and approval by the FDIC, amend the plan to reflect a change in circumstance. Until such time as a proposed amendment has been approved, the State savings association shall implement the capital restoration plan as approved prior to the proposed amendment.

(h)  [Reserved]

(i)  Performance guarantee by companies that control a State savings association-- (1) Limitation on liability--(i) Amount limitation. The aggregate liability under the guarantee provided under section 38 and this subpart for all companies that control a specific State savings association that is required to submit a capital restoration plan under this subpart shall be limited to the lesser of:

(A)  An amount equal to 5.0 percent of the State savings association's total assets at the time the State savings association was notified or deemed to have notice that the State savings association was undercapitalized; or

(B)  The amount necessary to restore the relevant capital measures of the State savings association to the levels required for the State savings association to be classified as adequately capitalized, as those capital measures and levels are defined at the time that the State savings association initially fails to comply with a capital restoration plan under this subpart.

(ii)  Limit on duration. The guarantee and limit of liability under section 38 and this subpart shall expire after the FDIC notifies the State savings association that it has remained adequately capitalized for each of four consecutive calendar quarters. The expiration or fulfillment by a company of a guarantee of a capital restoration plan shall not limit the liability of the company under any guarantee required or provided in connection with any capital restoration plan filed by the same State savings association after expiration of the first guarantee.

(iii)  Collection on guarantee. Each company that controls a given State savings association shall be jointly and severally liable for the guarantee for such State savings association as required under section 38 and this subpart, and the FDIC may require and collect payment of the full amount of that guarantee from any or all of the companies issuing the guarantee.

(2)  Failure to provide guarantee. In the event that a State savings association that is controlled by any company submits a capital restoration plan that does not contain the guarantee required under section 38(e)(2) of the FDI Act, the State savings association shall, upon submission of the plan, be subject to the provisions of section 38 and this subpart are applicable to State savings associations that have not submitted an acceptable capital restoration plan.

(3)  Failure to perform guarantee. Failure by any company that controls a State savings association to perform fully its guarantee of any capital plan shall constitute a material failure to implement the plan for purposes of section 38(f) of the FDI Act. Upon such failure, the State savings association shall be subject to the provisions of section 38 and this subpart that are applicable to State savings associations that have failed in a material respect to implement a capital restoration plan.

[Codified to 12 C.F.R. § 390.454]

§ 390.455  Mandatory and discretionary supervisory actions under section 38.

(a)  Mandatory supervisory actions--(1) Provisions applicable to all State savings associations. All State savings associations are subject to the restrictions contained in section 38(d) of the FDI Act on payment of capital distributions and management fees.

(2)  Provisions applicable to undercapitalized, significantly undercapitalized, and critically undercapitalized State savings associations. Immediately upon receiving notice or being deemed to have notice, as provided in § 390.452 or § 390.454, that the State savings association is undercapitalized, significantly undercapitalized, or critically undercapitalized, the State savings association shall become subject to the provisions of section 38 of the FDI Act:

(i)  Restricting payment of capital distributions and management fees (section 38(d));

(ii)  Requiring that the FDIC monitor the condition of the State savings association (section 38(e)(1));

(iii)  Requiring submission of a capital restoration plan within the schedule established in this subpart (section 38(e)(2));

(iv)  Restricting the growth of the State savings association's assets (section 38(e)(3)); and

(v)  Requiring prior approval of certain expansion proposals (section 38(e)(4)).

(3)  Additional provisions applicable to significantly undercapitalized, and critically undercapitalized State savings associations. In addition to the provisions of section 38 of the FDI Act described in paragraph (a)(2) of this section, immediately upon receiving notice or being deemed to have notice, as provided in § 390.452 or § 390.454, that the State savings association is significantly undercapitalized, or critically undercapitalized, or that the State savings association is subject to the provisions applicable to institutions that are significantly undercapitalized because the State savings association failed to submit or implement in any material respect an acceptable capital restoration plan, the State savings association shall become subject to the provisions of section 38 of the FDI Act that restrict compensation paid to senior executive officers of the institution (section 38(f)(4)).

(4)  Additional provisions applicable to critically undercapitalized State savings associations. In addition to the provisions of section 38 of the FDI Act described in paragraphs (a)(2) and (a)(3) of this section, immediately upon receiving notice or being deemed to have notice, as provided in § 390.452 that the State savings association is critically undercapitalized, the State savings association shall become subject to the provisions of section 38 of the FDI Act:

(i)  Restricting the activities of the State savings association (section 38(h)(1)); and

(ii)  Restricting payments on subordinated debt of the State savings association (section 38(h)(2)).

(b)  Discretionary supervisory actions. In taking any action under section 38 that is within the FDIC's discretion to take in connection with: A State savings association that is deemed to be undercapitalized, significantly undercapitalized or critically undercapitalized, or has been reclassified as undercapitalized, or significantly undercapitalized; an officer or director of such State savings association; or a company that controls such State savings association, the FDIC shall follow the procedures for issuing directives under §§ 390.456 and 390.458 unless otherwise provided in section 38 or this subpart.

[Codified to 12 C.F.R. § 390.455]

§ 390.456  Directives to take prompt corrective action.

(a)  Notice of intent to issue a directive--(1) In general. The FDIC shall provide an undercapitalized, significantly undercapitalized, or critically undercapitalized State savings association or, where appropriate, any company that controls the State savings association, prior written notice of the FDIC's intention to issue a directive requiring such State savings association or company to take actions or to follow proscriptions described in section 38 that are within the FDIC's discretion to require or impose under section 38 of the FDI Act, including sections 38(e)(5), (f)(2), (f)(3), or (f)(5). The State savings association shall have such time to respond to a proposed directive as provided by the FDIC under paragraph (c) of this section.

(2)  Immediate issuance of final directive. If the FDIC finds it necessary in order to carry out the purposes of section 38 of the FDI Act, the FDIC may, without providing the notice prescribed in paragraph (a)(1) of this section, issue a directive requiring a State savings association or any company that controls a State savings association immediately to take actions or to follow proscriptions described in section 38 that are within the FDIC's discretion to require or impose under section 38 of the FDI Act, including section 38(e)(5), (f)(2), (f)(3), or (f)(5). A State savings association or company that is subject to such an immediately effective directive may submit a written appeal of the directive to the FDIC. Such an appeal must be received by the FDIC within 14 calendar days of the issuance of the directive, unless the FDIC permits a longer period. The FDIC shall consider any such appeal, if filed in a timely matter, within 60 days of receiving the appeal. During such period of review, the directive shall remain in effect unless the FDIC, in its sole discretion, stays the effectiveness of the directive.

(b)  Contents of notice. A notice of intention to issue a directive shall include:

(1)  A statement of the State savings association's capital measures and capital levels;

(2)  A description of the restrictions, prohibitions or affirmative actions that the FDIC proposes to impose or require;

(3)  The proposed date when such restrictions or prohibitions would be effective or the proposed date for completion of such affirmative actions; and

(4)  The date by which the State savings association or company subject to the directive may file with the FDIC a written response to the notice.

(c)  Response to notice--(1) Time for response. A State savings association or company may file a written response to a notice of intent to issue a directive within the time period set by the FDIC. The date shall be at least 14 calendar days from the date of the notice unless the FDIC determines that a shorter period is appropriate in light of the financial condition of the State savings association or other relevant circumstances.

(2)  Content of response. The response should include:

(i)  An explanation why the action proposed by the FDIC is not an appropriate exercise of discretion under section 38;

(ii)  Any recommended modification of the proposed directive; and

(iii)  Any other relevant information, mitigating circumstances, documentation, or other evidence in support of the position of the State savings association or company regarding the proposed directive.

(d)  FDIC consideration of response. After considering the response, the FDIC may:

(1)  Issue the directive as proposed or in modified form;

(2)  Determine not to issue the directive and so notify the State savings association or company; or

(3)  Seek additional information or clarification of the response from the State savings association or company, or any other relevant source.

(e)  Failure to file response. Failure by a State savings association or company to file with the FDIC, within the specified time period, a written response to a proposed directive shall constitute a waiver of the opportunity to respond and shall constitute consent to the issuance of the directive.

(f)  Request for modification or rescission of directive. Any State savings association or company that is subject to a directive under this subpart, upon a change in circumstances, request in writing that the FDIC reconsider the terms of the directive, and may propose that the directive be rescinded or modified. Unless otherwise ordered by the FDIC, the directive shall continue in place while such request is pending before the FDIC.

[Codified to 12 C.F.R. § 390.456]

§ 390.457  Procedures for reclassifying a State savings association based on criteria other than capital.

(a)  Reclassification based on unsafe or unsound condition or practice--(1) Issuance of notice of proposed reclassification--(i) Grounds for reclassification. (A) Pursuant to § 390.453(c), the FDIC may reclassify a well capitalized State savings association as adequately capitalized or subject an adequately capitalized or undercapitalized institution to the supervisory actions applicable to the next lower capital category if:

(1)  The FDIC determines that the State savings association is in unsafe or unsound condition; or

(2)  The FDIC deems the State savings association to be engaged in an unsafe or unsound practice and not to have corrected the deficiency.

(B)  Any action pursuant to this paragraph (a)(1)(i) shall hereinafter be referred to as "reclassification."

(ii)  Prior notice to institution. Prior to taking action pursuant to § 390.453(c)(1), the FDIC shall issue and serve on the State savings association a written notice of the FDIC's intention to reclassify the State savings association.

(2)  Contents of notice. A notice of intention to reclassify a State savings association based on unsafe or unsound condition shall include:

(i)  A statement of the State savings association's capital measures and capital levels and the category to which the State savings association would be reclassified;

(ii)  The reasons for reclassification of the State savings association;

(iii)  The date by which the State savings association subject to the notice of reclassification may file with the FDIC a written appeal of the proposed reclassification and a request for a hearing, which shall be at least 14 calendar days from the date of service of the notice unless the FDIC determines that a shorter period is appropriate in light of the financial condition of the State savings association or other relevant circumstances.

(3)  Response to notice of proposed reclassification. A State savings association may file a written response to a notice of proposed reclassification within the time period set by the FDIC. The response should include:

(i)  An explanation of why the State savings association is not in unsafe or unsound condition or otherwise should not be reclassified; and

(ii)  Any other relevant information, mitigating circumstances, documentation, or other evidence in support of the position of the State savings association or company regarding the reclassification.

(4)  Failure to file response. Failure by a State savings association to file, within the specified time period, a written response with the FDIC to a notice of proposed reclassification shall constitute a waiver of the opportunity to respond and shall constitute consent to the reclassification.

(5)  Request for hearing and presentation of oral testimony or witnesses. The response may include a request for an informal hearing before the FDIC or its designee under this section. If the State savings association desires to present oral testimony or witnesses at the hearing, the State savings association shall include a request to do so with the request for an informal hearing. A request to present oral testimony or witnesses shall specify the names of the witnesses and the general nature of their expected testimony. Failure to request a hearing shall constitute a waiver of any right to a hearing, and failure to request the opportunity to present oral testimony or witnesses shall constitute a waiver of any right to present oral testimony or witnesses.

(6)  Order for informal hearing. Upon receipt of a timely written request that includes a request for a hearing, the FDIC shall issue an order directing an informal hearing to commence no later than 30 days after receipt of the request, unless the FDIC allows further time at the request of the State savings association. The hearing shall be held in Washington, DC or at such other place as may be designated by the FDIC, before a presiding officer(s) designated by the FDIC to conduct the hearing.

(7)  Hearing procedures. (i) The State savings association shall have the right to introduce relevant written materials and to present oral argument at the hearing. The State savings association may introduce oral testimony and present witnesses only if expressly authorized by the FDIC or the presiding officer(s). Neither the provisions of the Administrative Procedure Act (5 U.S.C. 554--557) governing adjudications required by statute to be determined on the record nor subpart C apply to an informal hearing under this section unless the FDIC orders that such procedures shall apply.

(ii)  The informal hearing shall be recorded and a transcript furnished to the State savings association upon request and payment of the cost thereof. Witnesses need not be sworn, unless specifically requested by a party or the presiding officer(s). The presiding officer(s) may ask questions of any witness. (iii) The presiding officer(s) may order that the hearing be continued for a reasonable period (normally five business days) following completion of oral testimony or argument to allow additional written submissions to the hearing record.

(8)  Recommendation of presiding officers. Within 20 calendar days following the date the hearing and the record on the proceeding are closed, the presiding officer(s) shall make a recommendation to the FDIC on the reclassification.

(9)  Time for decision. Not later than 60 calendar days after the date the record is closed or the date of the response in a case where no hearing was requested, the FDIC will decide whether to reclassify the State savings association and notify the State savings association of the FDIC's decision.

(b)  Request for rescission of reclassification. Any State savings association that has been reclassified under this section, may, upon a change in circumstances, request in writing that the FDIC reconsider the reclassification, and may propose that the reclassification be rescinded and that any directives issued in connection with the reclassification be modified, rescinded, or removed. Unless otherwise ordered by the FDIC, the State savings association shall remain subject to the reclassification and to any directives issued in connection with that reclassification while such request is pending before the FDIC.

[Codified to 12 C.F.R. § 390.457]

§ 390.458  Order to dismiss a director or senior executive officer.

(a)  Service of notice. When the FDIC issues and serves a directive on a State savings association pursuant to § 390.456 requiring the State savings association to dismiss any director or senior executive officer under section 38(f)(2)(F)(ii) of the FDI Act, the FDIC shall also serve a copy of the directive, or the relevant portions of the directive where appropriate, upon the person to be dismissed.

(b)  Response to directive--(1) Request for reinstatement. A director or senior executive officer who has been served with a directive under paragraph (a) of this section (Respondent) may file a written request for reinstatement. The request for reinstatement shall be filed within 10 calendar days of the receipt of the directive by the Respondent, unless further time is allowed by the FDIC at the request of the Respondent.

(2)  Contents of request; informal hearing. The request for reinstatement should include reasons why the Respondent should be reinstated, and may include a request for an informal hearing before the FDIC or its designee under this section. If the Respondent desires to present oral testimony or witnesses at the hearing, the Respondent shall include a request to do so with the request for an informal hearing. The request to present oral testimony or witnesses shall specify the names of the witnesses and the general nature of their expected testimony. Failure to request a hearing shall constitute a waiver of any right to a hearing and failure to request the opportunity to present oral testimony or witnesses shall constitute a waiver of any right or opportunity to present oral testimony or witnesses.

(3)  Effective date. Unless otherwise ordered by the FDIC, the dismissal shall remain in effect while a request for reinstatement is pending.

(c)  Order for informal hearing. Upon receipt of a timely written request from a Respondent for an informal hearing on the portion of a directive requiring a State savings association to dismiss from office any director or senior executive officer, the FDIC shall issue an order directing an informal hearing to commence no later than 30 days after receipt of the request, unless the Respondent requests a later date. The hearing shall be held in Washington, DC, or at such other place as may be designated by the FDIC, before a presiding officer(s) designated by the FDIC to conduct the hearing.

(d)  Hearing procedures. (1) A Respondent may appear at the hearing personally or through counsel. A Respondent shall have the right to introduce relevant written materials and to present oral argument. A Respondent may introduce oral testimony and present witnesses only if expressly authorized by the FDIC or the presiding officer(s). Neither the provisions of the Administrative Procedure Act governing adjudications required by statute to be determined on the record nor subpart C apply to an informal hearing under this section unless the FDIC orders that such procedures shall apply.

(2)  The informal hearing shall be recorded and a transcript furnished to the Respondent upon request and payment of the cost thereof. Witnesses need not be sworn, unless specifically requested by a party or the presiding officer(s). The presiding officer(s) may ask questions of any witness.

(3)  The presiding officer(s) may order that the hearing be continued for a reasonable period (normally five business days) following completion of oral testimony or argument to allow additional written submissions to the hearing record.

(e)  Standard for review. A Respondent shall bear the burden of demonstrating that his or her continued employment by or service with the State savings association would materially strengthen the State savings association's ability:

(1)  To become adequately capitalized, to the extent that the directive was issued as a result of the State savings association's capital level or failure to submit or implement a capital restoration plan; and

(2)  To correct the unsafe or unsound condition or unsafe or unsound practice, to the extent that the directive was issued as a result of classification of the State savings association based on supervisory criteria other than capital, pursuant to section 38(g) of the FDI Act.

(f)  Recommendation of presiding officers. Within 20 calendar days following the date the hearing and the record on the proceeding are closed, the presiding officer(s) shall make a recommendation to the FDIC concerning the Respondent's request for reinstatement with the State savings association.

(g)  Time for decision. Not later than 60 calendar days after the date the record is closed or the date of the response in a case where no hearing has been requested, the FDIC shall grant or deny the request for reinstatement and notify the Respondent of the FDIC's decision. If the FDIC denies the request for reinstatement, the FDIC shall set forth in the notification the reasons for the FDIC's action.

[Codified to 12 C.F.R. § 390.458]

§ 390.459  Enforcement of directives.

(a)  Judicial remedies. Whenever a State savings association or company that controls a State savings association fails to comply with a directive issued under section 38, the FDIC may seek enforcement of the directive in the appropriate United States district court pursuant to section 8(i)(1) of the FDI Act.

(b)  Administrative remedies--(1) Failure to comply with directive. Pursuant to section 8(i)(2)(A) of the FDI Act, the FDIC may assess a civil money penalty against any State savings association or company that controls a State savings association that violates or otherwise fails to comply with any final directive issued under section 38 and against any institution-affiliated party who participates in such violation or noncompliance.

(2)  Failure to implement capital restoration plan. The failure of a State savings association to implement a capital restoration plan required under section 38, or this subpart, or the failure of a company having control of a State savings association to fulfill a guarantee of a capital restoration plan made pursuant to section 38(e)(2) of the FDI Act shall subject the State savings association or company to the assessment of civil money penalties pursuant to section 8(i)(2)(A) of the FDI Act.

(c)  Other enforcement action. In addition to the actions described in paragraphs (a) and (b) of this section, the FDIC may seek enforcement of the provisions of section 38 or this subpart through any other judicial or administrative proceeding authorized by law.

[Codified to 12 C.F.R. § 390.459]


Subpart Z—Capital

§ 390.460  Scope.

(a)  This subpart prescribes the minimum regulatory capital requirements for State savings associations. The subpart applies to State savings associations, except as described in paragraph (b) of this section.

(b)(1)  A State savings association that uses Appendix A must comply with the minimum qualifying criteria for internal risk measurement and management processes for calculating risk-based capital requirements, utilize the methodologies for calculating risk-based capital requirements, and make the required disclosures described in that appendix.

(2)  Sections 390.461 through 390.471 do not apply to the computation of risk-based capital requirements by a State savings association that uses Appendix A of this subpart. However, these State savings associations:

(i)  Must compute the components of capital under § 390.465, subject to the modifications in sections 11 and 12 of Appendix A of this subpart.

(ii)  Must meet the leverage ratio requirement at §§ 390.462(a)(2) and 390.467 with tier 1 capital, as computed under sections 11 and 12 of Appendix A of this subpart.

(iii)  Must meet the tangible capital requirement described at §§ 390.462(a)(3) and 390.468.

(iv)  Are subject to §§ 390.463 (individual minimum capital requirement), 390.464 (capital directives); and 390.469 (consequences of failure to meet capital requirements).

(v)  Are subject to the reservations of authority at § 390.470, which supplement the reservations of authority at section 1 of Appendix A of this subpart.

[Codified to 12 C.F.R. § 390.460]

§ 390.461  Definitions.

For the purposes of this subpart:

Adjusted total assets. The term adjusted total assets means:

(1)  A State savings association's total assets as that term is defined in this section;

(2)  Plus

(i)  The prorated assets of any includable subsidiary in which the State savings association has a minority ownership interest that is not consolidated under generally accepted accounting principles; and

(ii)  The remaining goodwill (FSLIC Capital Contributions) resulting from prior regulatory accounting practices as provided in the definition of qualifying supervisory goodwill in this section;

(3)  Minus

(i)  Assets not included in the applicable capital standard except for those subject to paragraphs (3)(ii) and (3)(iii) of this definition;

(ii)  Investments in any includable subsidiary in which a State savings association has a minority interest;

(iii)  Investments in any subsidiary subject to consolidation under paragraph (2)(ii) of this definition; and

(iv)  For purposes of determining core capital, qualifying supervisory goodwill.

Asset-backed commercial paper program. The term asset-backed commercial paper program (ABCP program) means a program that primarily issues commercial paper that has received a credit rating from an NRSRO and that is backed by assets or other exposures held in a bankruptcy-remote special purpose entity. The term sponsor of an ABCP program means a State savings association that:

(1)  Establishes an ABCP program;

(2)  Approves the sellers permitted to participate in an ABCP program;

(3)  Approves the asset pools to be purchased by an ABCP program; or

(4)  Administers the ABCP program by monitoring the assets, arranging for debt placement, compiling monthly reports, or ensuring compliance with the program documents and with the program's credit and investment policy.

Cash items in the process of collection. The term cash items in the process of collection means checks or drafts in the process of collection that are drawn on another depository institution, including a central bank, and that are payable immediately upon presentation; U.S. Government checks that are drawn on the United States Treasury or any other U.S. Government or Government-sponsored agency and that are payable immediately upon presentation; broker's security drafts and commodity or bill-of-lading drafts payable immediately upon presentation; and unposted debits.

Commitment. The term commitment means any arrangement that obligates a State savings association to:

(1)  Purchase loans or securities;

(2)  Extend credit in the form of loans or leases, participations in loans or leases, overdraft facilities, revolving credit facilities, home equity lines of credit, eligible ABCP liquidity facilities, or similar transactions.

Common stockholders' equity. The term common stockholders' equity means common stock, common stock surplus, retained earnings, and adjustments for the cumulative effect of foreign currency translation, less net unrealized losses on available-for-sale equity securities with readily determinable fair values.

Conditional guarantee. The term conditional guarantee means a contingent obligation of the United States Government or its agencies, the validity of which to the beneficiary is dependent upon some affirmative action--e.g., servicing requirements--on the part of the beneficiary of the guarantee or a third party.

Credit derivative. The term credit derivative means a contract that allows one party (the protection purchaser) to transfer the credit risk of an asset or off-balance sheet credit exposure to another party (the protection provider). The value of a credit derivative is dependent, at least in part, on the credit performance of a "referenced asset."

Credit-enhancing interest-only strip. (1) The term credit-enhancing interest-only strip means an on-balance sheet asset that, in form or in substance:

(i)  Represents the contractual right to receive some or all of the interest due on transferred assets; and

(ii)  Exposes the State savings association to credit risk directly or indirectly associated with the transferred assets that exceeds its pro rata share of the State savings association's claim on the assets whether through subordination provisions or other credit enhancement techniques.

(2)  The FDIC reserves the right to identify other cash flows or related interests as a credit-enhancing interest-only strip. In determining whether a particular interest cash flow functions as a credit-enhancing interest-only strip, the FDIC will consider the economic substance of the transaction.

Credit-enhancing representations and warranties. (1) The term credit-enhancing representations and warranties means representations and warranties that are made or assumed in connection with a transfer of assets (including loan servicing assets) and that obligate a State savings association to protect investors from losses arising from credit risk in the assets transferred or loans serviced.

(2)  Credit-enhancing representations and warranties include promises to protect a party from losses resulting from the default or nonperformance of another party or from an insufficiency in the value of the collateral.

(3)  Credit-enhancing representations and warranties do not include:

(i)  Early-default clauses and similar warranties that permit the return of, or premium refund clauses covering, qualifying mortgage loans for a period not to exceed 120 days from the date of transfer. These warranties may cover only those loans that were originated within one year of the date of the transfer;

(ii)  Premium refund clauses covering assets guaranteed, in whole or in part, by the United States government, a United States government agency, or a United States government-sponsored enterprise, provided the premium refund clause is for a period not to exceed 120 days from the date of transfer; or

(iii)  Warranties that permit the return of assets in instances of fraud, misrepresentation or incomplete documentation.

Depository institution. The term domestic depository institution means a financial institution that engages in the business of banking; that is recognized as a bank by the bank supervisory or monetary authorities of the country of its incorporation and the country of its principal banking operations; that receives deposits to a substantial extent in the regular course of business; and that has the power to accept demand deposits. In the United States, this definition encompasses all federally insured offices of commercial banks, mutual and stock savings banks, savings or building and loan associations (stock and mutual), cooperative banks, credit unions, and international banking facilities of domestic depository institutions. Bank holding companies and savings and loan holding companies are excluded from this definition. For the purposes of assigning risk weights, the differentiation between OECD depository institutions and non-OECD depository institutions is based on the country of incorporation. Claims on branches and agencies of foreign banks located in the United States are to be categorized on the basis of the parent bank's country of incorporation.

Direct credit substitute. The term direct credit substitute means an arrangement in which a State savings association assumes, in form or in substance, credit risk associated with an on-or off-balance sheet asset or exposure that was not previously owned by the State savings association (third-party asset) and the risk assumed by the State savings association exceeds the pro rata share of the State savings association's interest in the third-party asset. If a State savings association has no claim on the third-party asset, then the State savings association's assumption of any credit risk is a direct credit substitute. Direct credit substitutes include:

(1)  Financial standby letters of credit that support financial claims on a third party that exceed a State savings association's pro rata share in the financial claim;

(2)  Guarantees, surety arrangements, credit derivatives, and similar instruments backing financial claims that exceed a State savings association's pro rata share in the financial claim;

(3)  Purchased subordinated interests that absorb more than their pro rata share of losses from the underlying assets;

(4)  Credit derivative contracts under which the State savings association assumes more than its pro rata share of credit risk on a third-party asset or exposure;

(5)  Loans or lines of credit that provide credit enhancement for the financial obligations of a third party;

(6)  Purchased loan servicing assets if the servicer is responsible for credit losses or if the servicer makes or assumes credit-enhancing representations and warranties with respect to the loans serviced. Servicer cash advances as defined in this section are not direct credit substitutes;

(7)  Clean-up calls on third party assets. However, clean-up calls that are 10 percent or less of the original pool balance and that are exercisable at the option of the State savings association are not direct credit substitutes; and

(8)  Liquidity facilities that provide support to asset-backed commercial paper (other than eligible ABCP liquidity facilities).

Eligible ABCP liquidity facility. The term eligible ABCP liquidity facility means a liquidity facility that supports asset-backed commercial paper, in form or in substance, and that meets the following criteria:

(1)(i)  At the time of the draw, the liquidity facility must be subject to an asset quality test that precludes funding against assets that are 90 days or more past due or in default; and

(ii)  If the assets that the liquidity facility is required to fund against are assets or exposures that have received a credit rating by a NRSRO at the time the inception of the facility, the facility can be used to fund only those assets or exposures that are rated investment grade by an NRSRO at the time of funding; or

(2)  If the assets that are funded under the liquidity facility do not meet the criteria described in paragraph (1) of this definition, the assets must be guaranteed, conditionally or unconditionally, by the United States Government, its agencies, or the central government of an OECD country.

Eligible State savings association. (1) The term eligible State savings association means a State savings association with respect to which the FDIC has determined, on the basis of information available at the time, that:

(i)  The State savings association's management appears to be competent;

(ii)  The State savings association, as certified by its Board of Directors, is in substantial compliance with all applicable statutes, regulations, orders and written agreements and directives; and

(iii)  The State savings association's management, as certified by its Board of Directors, has not engaged in insider dealing, speculative practices, or any other activities that have or may jeopardize the association's safety and soundness or contributed to impairing the association's capital.

(2)  State savings associations, for purposes of this paragraph, will be deemed to be eligible unless the FDIC makes a determination otherwise or notifies the State savings association of its intent to conduct either an informal or formal examination to determine eligibility and provides written notification thereof to the State savings association.

Equity investments. (1) The term equity investments includes investments in equity securities and real property that would be considered an equity investment under generally accepted accounting principles.

(2)(i)  The term equity securities means any:

(A)  Stock, certificate of interest of participation in any profit-sharing agreement, collateral trust certificate or subscription, preorganization certificate or subscription, transferable share, investment contract, or voting trust certificate; or

(B)  In general, any interest or instrument commonly known as an equity security; or

(C)  Loans having profit sharing features which generally accepted accounting principles would reclassify as equity securities; or

(D)  Any security immediately convertible at the option of the holder without payment of substantial additional consideration into such a security; or

(E)  Any security carrying any warrant or right to subscribe to or purchase such a security; or

(F)  Any certificate of interest or participation in, temporary or Interim certificate for, or receipt for any of the foregoing or any partnership interest; or

(G)  Investments in equity securities and loans or advances to and guarantees issued on behalf of partnerships or joint ventures in which a State savings association holds an interest in real property under generally accepted accounting principles.

(ii)  he term equity securities does not include investments in a subsidiary as that term is defined in this section, equity investments that are permissible for national banks, ownership interests in pools of assets that are risk-weighted in accordance with § 390.466(a)(1)(vi), or the stock of Federal Home Loan Banks or Federal Reserve Banks.

(3)  For purposes of this subpart, the term equity investments in real property does not include interests in real property that are primarily used or intended to be used by the State savings association, its subsidiaries, or its affiliates as offices or related facilities for the conduct of its business.

(4)  In addition, for purposes of this part, the term equity investments in real property does not include interests in real property that are acquired in satisfaction of a debt previously contracted in good faith or acquired in sales under judgments, decrees, or mortgages held by the State savings association, provided that the property is not intended to be held for real estate investment purposes but is expected to be disposed of within five years or a longer period approved by the FDIC.

Exchange rate contracts. The term exchange rate contracts includes cross-currency interest rate swaps; forward foreign exchange rate contracts; currency options purchased; and any similar instrument that, in the opinion of the FDIC, may give rise to similar risks.

Face amount. The term face amount means the notational principal, or face value, amount of an off-balance sheet item or the amortized cost of an on-balance sheet asset.

Financial asset. The term financial asset means cash or other monetary instrument, evidence of debt, evidence of an ownership interest in an entity, or a contract that conveys a right to receive or exchange cash or another financial instrument from another party.

Financial standby letter of credit. The term financial standby letter of credit means a letter of credit or similar arrangement that represents an irrevocable obligation to a third-party beneficiary:

(1)  To repay money borrowed by, or advanced to, or for the account of, a second party (the account party); or

(2)  To make payment on behalf of the account party, in the event that the account party fails to fulfill its obligation to the beneficiary.

Includable subsidiary. The term includable subsidiary means a subsidiary of a State savings association that is:

(1)  Engaged solely in activities not impermissible for a national bank;

(2)  Engaged in activities not permissible for a national bank, but only if acting solely as agent for its customers and such agency position is clearly documented in the State savings association's files;

(3)  Engaged solely in mortgage-banking activities;

(4)(i)  Itself an insured depository institution or a company the sole investment of which is an insured depository institution, and

(ii)  Was acquired by the parent State savings association prior to May 1, 1989; or

(5)  A subsidiary of any Federal savings association existing as a Federal savings association on August 9, 1989 that

(i)  Was chartered prior to October 15, 1982, as a savings bank or a cooperative bank under State law, or

(ii)  Acquired its principal assets from an association that was chartered prior to October 15, 1982, as a savings bank or a cooperative bank under State law.

Intangible assets. The term intangible assets means assets considered to be intangible assets under generally accepted accounting principles. These assets include, but are not limited to, goodwill, core deposit premiums, purchased credit card relationships, favorable leaseholds, and servicing assets (mortgage and non-mortgage). Interest-only strips receivable and other nonsecurity financial instruments are not intangible assets under this definition.

Interest-rate contracts. The term interest-rate contracts includes single currency interest-rate swaps; basis swaps; forward rate agreements; interest-rate options purchased; forward deposits accepted; and any other instrument that, in the opinion of the FDIC, may give rise to similar risks, including when-issued securities.

Liquidity facility. The term liquidity facility means a legally binding commitment to provide liquidity support to asset-backed commercial paper by lending to, or purchasing assets from any structure, program or conduit in the event that funds are required to repay maturing asset-backed commercial paper.

Mortgage-related securities. The term mortgage-related securities means any mortgage-related qualifying securities under section 3(a)(41) of the Securities Exchange Act of 1934, 15 U.S.C. 78c(a)(41), Provided, That the rating requirements of that section shall not be considered for purposes of this definition.

Nationally recognized statistical rating organization (NRSRO). The term nationally recognized statistical rating organization means an entity recognized by the Division of Market Regulation of the Securities and Exchange Commission (Commission) as a nationally recognized statistical rating organization for various purposes, including the Commission's uniform net capital requirements for brokers and dealers.

OECD-based country. The term OECD-based country means a member of that grouping of countries that are full members of the Organization for Economic Cooperation and Development (OECD) plus countries that have concluded special lending arrangements with the International Monetary Fund (IMF) associated with the IMF's General Arrangements to Borrow. This term excludes any country that has rescheduled its external sovereign debt within the previous five years. A rescheduling of external sovereign debt generally would include any renegotiation of terms arising from a country's inability or unwillingness to meet its external debt service obligations, but generally would not include renegotiations of debt in the normal course of business, such as a renegotiation to allow the borrower to take advantage of a decline in interest rates or other change in market conditions.

Original maturity. The term original maturity means, with respect to a commitment, the earliest date after a commitment is made on which the commitment is scheduled to expire ( i.e., it will reach its stated maturity and cease to be binding on either party), Provided, That either:

(i)  The commitment is not subject to extension or renewal and will actually expire on its stated expiration date; or

(ii)  If the commitment is subject to extension or renewal beyond its stated expiration date, the stated expiration date will be deemed the original maturity only if the extension or renewal must be based upon terms and conditions independently negotiated in good faith with the customer at the time of the extension or renewal and upon a new, bona fide credit analysis utilizing current information on financial condition and trends.

Performance-based standby letter of credit. The term performance-based standby letter of credit means any letter of credit, or similar arrangement, however named or described, which represents an irrevocable obligation to the beneficiary on the part of the issuer to make payment on account of any default by a third party in the performance of a nonfinancial or commercial obligation. Such letters of credit include arrangements backing subcontractors' and suppliers' performance, labor and materials contracts, and construction bids.

Perpetual preferred stock. The term perpetual preferred stock means preferred stock without a fixed maturity date that cannot be redeemed at the option of the holder, and that has no other provisions that will require future redemption of the issue. For purposes of these instruments, preferred stock that can be redeemed at the option of the holder is deemed to have an "original maturity" of the earliest possible date on which it may be so redeemed. Cumulative perpetual preferred stock is preferred stock where the dividends accumulate from one period to the next. Noncumulative perpetual preferred stock is preferred stock where the unpaid dividends are not carried over to subsequent dividend periods.

Problem institution. The term problem institution means a State savings association that, at the time of its acquisition, merger, purchase of assets or other business combination with or by another State savings association:

(1)  Was subject to special regulatory controls by its primary Federal or state regulatory authority;

(2)  Posed particular supervisory concerns to its primary Federal or state regulatory authority; or

(3)  Failed to meet its regulatory capital requirement immediately before the transaction.

Prorated assets. The term prorated assets means the total assets (as determined in the most recently available GAAP report but in no event more than one year old) of a subsidiary (including those subsidiaries where the State savings association has a minority interest) multiplied by the State savings association's percentage of ownership of that subsidiary.

Qualifying mortgage loan. (1) The term qualifying mortgage loan means a loan that:

(i)  Is fully secured by a first lien on a one-to four-family residential property;

(ii)  Is underwritten in accordance with prudent underwriting standards, including standards relating the ratio of the loan amount to the value of the property (LTV ratio). See Appendix to 12 CFR 390.265. A nonqualifying mortgage loan that is paid down to an appropriate LTV ratio (calculated using value at origination) may become a qualifying loan if it meets all other requirements of this definition;

(iii)  Maintains an appropriate LTV ratio based on the amortized principal balance of the loan; and

(iv)  Is performing and is not more than 90 days past due.

(2)  If a State savings association holds the first and junior lien(s) on a residential property and no other party holds an intervening lien, the transaction is treated as a single loan secured by a first lien for the purposes of determining the LTV ratio and the appropriate risk weight under § 390.466(a).

(3)  A loan to an individual borrower for the construction of the borrower's home may be included as a qualifying mortgage loan.

(4)  A loan that meets the requirements of this section prior to modification on a permanent or trial basis under the U.S. Department of Treasury's Home Affordable Mortgage Program may be included as a qualifying mortgage loan, so long as the loan is not 90 days or more past due.

Qualifying multifamily mortgage loan. (1) The term qualifying multifamily mortgage loan means a loan secured by a first lien on multifamily residential properties consisting of 5 or more dwelling units, provided that:

(i)  The amortization of principal and interest occurs over a period of not more than 30 years;

(ii)  The original minimum maturity for repayment of principal on the loan is not less than seven years;

(iii)  When considering the loan for placement in a lower risk-weight category, all principal and interest payments have been made on a timely basis in accordance with its terms for the preceding year;

(iv)  The loan is performing and not 90 days or more past due;

(v)  The loan is made by the State savings association in accordance with prudent underwriting standards; and

(vi)  If the interest rate on the loan does not change over the term of the loan:

(A)  The current loan balance amount does not exceed 80 percent of the value of the property securing the loan; and

(B)  For the property's most recent fiscal year, the ratio of annual net operating income generated by the property (before payment of any debt service on the loan) to annual debt service on the loan is not less than 120 percent, or in the case of cooperative or other not-for-profit housing projects, the property generates sufficient cash flows to provide comparable protection to the institution; or

(vii)  If the interest rate on the loan changes over the term of the loan:

(A)  The current loan balance amount does not exceed 75 percent of the value of the property securing the loan; and

(B)  For the property's most recent fiscal year, the ratio of annual net operating income generated by the property (before payment of any debt service on the loan) to annual debt service on the loan is not less than 115 percent, or in the case of cooperative or other not-for-profit housing projects, the property generates sufficient cash flows to provide comparable protection to the institution.

(2)  The term qualifying multifamily mortgage loan also includes a multifamily mortgage loan that on March 18, 1994 was a first mortgage loan on an existing property consisting of 5--36 dwelling units with an initial loan-to-value ratio of not more than 80% where an average annual occupancy rate of 80% or more of total units had existed for at least one year, and continues to meet these criteria.

(3)  For purposes of paragraphs (1) (vi) and (vii) of this definition, the term value of the property means, at origination of a loan to purchase a multifamily property: the lower of the purchase price or the amount of the initial appraisal, or if appropriate, the initial evaluation. In cases not involving the purchase of a multifamily loan, the value of the property is determined by the most current appraisal, or if appropriate, the most current evaluation.

(4)  In cases where a borrower refinances a loan on an existing property, as an alternative to paragraphs (1)(iii), (vi), and (vii) of this definition:

(i)  All principal and interest payments on the loan being refinanced have been made on a timely basis in accordance with the terms of that loan for the preceding year; and

(ii)  The net income on the property for the preceding year would support timely principal and interest payments on the new loan in accordance with the applicable debt service requirement.

Qualifying residential construction loan. (1) The term qualifying residential construction loan, also referred to as a residential bridge loan, means a loan made in accordance with sound lending principles satisfying the following criteria:

(i)  The builder must have substantial project equity in the home construction project;

(ii)  The residence being constructed must be a 1--4 family residence sold to a home purchaser;

(iii)  The lending State savings association must obtain sufficient documentation from a permanent lender (which may be the construction lender) demonstrating that:

(A)  The home buyer intends to purchase the residence; and

(B)  Has the ability to obtain a permanent qualifying mortgage loan sufficient to purchase the residence;

(iv)  The home purchaser must have made a substantial earnest money deposit;

(v)  The construction loan must not exceed 80 percent of the sales price of the residence;

(vi)  The construction loan must be secured by a first lien on the lot, residence under construction, and other improvements;

(vii)  The lending State savings association must retain sufficient undisbursed loan funds throughout the construction period to ensure project completion;

(viii)  The builder must incur a significant percentage of direct costs (i.e., the actual costs of land, labor, and material) before any drawdown on the loan;

(ix)  If at any time during the life of the construction loan any of the criteria of this rule are no longer satisfied, the State savings association must immediately recategorize the loan at a 100 percent risk-weight and must accurately report the loan in the State savings association's next quarterly Thrift Financial Report or Consolidated Reports of Condition or Income ("Call Report"), as applicable;

(x)  The home purchaser must intend that the home will be owner-occupied;

(xi)  The home purchaser(s) must be an individual(s), not a partnership, joint venture, trust corporation, or any other entity (including an entity acting as a sole proprietorship) that is purchasing the home(s) for speculative purposes; and

(xii)  The loan must be performing and not more than 90 days past due.

(2)  The documentation for each loan and home sale must be sufficient to demonstrate compliance with the criteria in paragraph (1) of this definition. The FDIC retains the discretion to determine that any loans not meeting sound lending principles must be placed in a higher risk-weight category. The FDIC also reserves the discretion to modify these criteria on a case-by-case basis provided that any such modifications are not inconsistent with the safety and soundness objectives of this definition.

Qualifying securities firm. The term qualifying securities firm means:

(1)  A securities firm incorporated in the United States that is a broker-dealer that is registered with the Securities and Exchange Commission (SEC) and that complies with the SEC's net capital regulations (17 CFR 240.15c3(1)); and

(2)  A securities firm incorporated in any other OECD-based country, if the State savings association is able to demonstrate that the securities firm is subject to consolidated supervision and regulation (covering its subsidiaries, but not necessarily its parent organizations) comparable to that imposed on depository institutions in OECD countries. Such regulation must include risk-based capital requirements comparable to those imposed on depository institutions under the Accord on International Convergence of Capital Measurement and Capital Standards (1988, as amended in 1998).

Reciprocal holdings of depository institution instruments. The term reciprocal holdings of depository institution instruments means cross-holdings or other formal or informal arrangements in which two or more depository institutions swap, exchange, or otherwise agree to hold each other's capital instruments. This definition does not include holdings of capital instruments issued by other depository institutions that were taken in satisfaction of debts previously contracted, provided that the reporting State savings association has not held such instruments for more than five years or a longer period approved by the FDIC.

Recourse. The term recourse means a State savings association's retention, in form or in substance, of any credit risk directly or indirectly associated with an asset it has sold (in accordance with generally accepted accounting principles) that exceeds a pro rata share of that State savings association's claim on the asset. If a State savings association has no claim on an asset it has sold, then the retention of any credit risk is recourse. A recourse obligation typically arises when a State savings association transfers assets in a sale and retains an explicit obligation to repurchase assets or to absorb losses due to a default on the payment of principal or interest or any other deficiency in the performance of the underlying obligor or some other party. Recourse may also exist implicitly if a State savings association provides credit enhancement beyond any contractual obligation to support assets it has sold. Recourse obligations include:

(1)  Credit-enhancing representations and warranties made on transferred assets;

(2)  Loan servicing assets retained pursuant to an agreement under which the State savings association will be responsible for losses associated with the loans serviced. Servicer cash advances as defined in this section are not recourse obligations;

(3)  Retained subordinated interests that absorb more than their pro rata share of losses from the underlying assets;

(4)  Assets sold under an agreement to repurchase, if the assets are not already included on the balance sheet;

(5)  Loan strips sold without contractual recourse where the maturity of the transferred portion of the loan is shorter than the maturity of the commitment under which the loan is drawn;

(6)  Credit derivatives that absorb more than the State savings association's pro rata share of losses from the transferred assets;

(7)  Clean-up calls on assets the State savings association has sold. However, clean-up calls that are 10 percent or less of the original pool balance and that are exercisable at the option of the State savings association are not recourse arrangements; and

(8)  Liquidity facilities that provide support to asset-backed commercial paper (other than eligible ABCP liquidity facilities).

Replacement cost. The term replacement cost means, with respect to interest rate and exchange-rate contracts, the loss that would be incurred in the event of a counterparty default, as measured by the net cost of replacing the contract at the current market value. If default would result in a theoretical profit, the replacement value is considered to be zero. This mark-to-market process must incorporate changes in both interest rates and counterparty credit quality.

Residential properties. The term residential properties means houses, condominiums, cooperative units, and manufactured homes. This definition does not include boats or motor homes, even if used as a primary residence, or timeshare properties.

Residual characteristics. The term residual characteristics means interests similar to a multi-class pay-through obligation representing the excess cash flow generated from mortgage collateral over the amount required for the issue's debt service and ongoing administrative expenses or interests presenting similar degrees of interest-rate/prepayment risk and principal loss risks.

Residual interest. (1) The term residual interest means any on-balance sheet asset that:

(i)  Represents an interest (including a beneficial interest) created by a transfer that qualifies as a sale (in accordance with generally accepted accounting principles) of financial assets, whether through a securitization or otherwise; and

(ii)  Exposes a State savings association to credit risk directly or indirectly associated with the transferred asset that exceeds a pro rata share of that State savings association's claim on the asset, whether through subordination provisions or other credit enhancement techniques.

(2)  Residual interests generally include credit-enhancing interest-only strips, spread accounts, cash collateral accounts, retained subordinated interests (and other forms of overcollateralization), and similar assets that function as a credit enhancement.

(3)  Residual interests further include those exposures that, in substance, cause the State savings association to retain the credit risk of an asset or exposure that had qualified as a residual interest before it was sold.

(4)  Residual interests generally do not include assets purchased from a third party. However, a credit-enhancing interest-only strip that is acquired in any asset transfer is a residual interest.

Risk participation. The term risk participation means a participation in which the originating party remains liable to the beneficiary for the full amount of an obligation (e.g., a direct credit substitute), notwithstanding that another party has acquired a participation in that obligation.

Risk-weighted assets. The term risk-weighted assets means the sum total of risk-weighted on-balance sheet assets and the total of risk-weighted off-balance sheet credit equivalent amounts. These assets are calculated in accordance with § 390.466.

Securitization. The term securitization means the pooling and repackaging by a special purpose entity of assets or other credit exposures that can be sold to investors. Securitization includes transactions that create stratified credit risk positions whose performance is dependent upon an underlying pool of credit exposures, including loans and commitments.

Servicer cash advance. The term servicer cash advance means funds that a residential mortgage servicer advances to ensure an uninterrupted flow of payments, including advances made to cover foreclosure costs or other expenses to facilitate the timely collection of the loan. A servicer cash advance is not a recourse obligation or a direct credit substitute if:

(1)  The servicer is entitled to full reimbursement and this right is not subordinated to other claims on the cash flows from the underlying asset pool; or

(2)  For any one loan, the servicer's obligation to make nonreimbursable advances is contractually limited to an insignificant amount of the outstanding principal amount on that loan.

State. The term State means any one of the several states of the United States of America, the District of Columbia, Puerto Rico, and the territories and possessions of the United States.

Structured financing program. The term structured financing program means a program where receivable interests and asset-or mortgage-backed securities issued by multiple participants are purchased by a special purpose entity that repackages those exposures into securities that can be sold to investors. Structured financing programs allocate credit risk, generally, between the participants and credit enhancement provided to the program.

Subsidiary. The term subsidiary means any corporation, partnership, business trust, joint venture, association or similar organization in which a State savings association directly or indirectly holds an ownership interest and the assets of which are consolidated with those of the State savings association for purposes of reporting under Generally Accepted Accounting Principles (GAAP). Generally, these are majority-owned subsidiaries.1 This definition does not include ownership interests that were taken in satisfaction of debts previously contracted, provided that the reporting State savings association has not held the interest for more than five years or a longer period approved by the FDIC.

Tier 1 capital. The term Tier 1 capital means core capital as computed in accordance with § 390.465(a).

Tier 2 capital. The term Tier 2 capital means supplementary capital as computed in accordance with § 390.465.

Total assets. The term total assets means total assets as would be required to be reported for consolidated entities on period-end reports filed with the FDIC in accordance with generally accepted accounting principles.

Traded position. The term traded position means a position retained, assumed, or issued in connection with a securitization that is rated by a NRSRO, where there is a reasonable expectation that, in the near future, the rating will be relied upon by:

(1)  Unaffiliated investors to purchase the security; or

(2)  An unaffiliated third party to enter into a transaction involving the position, such as a purchase, loan, or repurchase agreement.

Unconditionally cancelable. The term unconditionally cancelable means, with respect to a commitment-type lending arrangement, that the State savings association may, at any time, with or without cause, refuse to advance funds or extend credit under the facility. In the case of home equity lines of credit, the State savings association is deemed able to unconditionally cancel the commitment if it can, at its option, prohibit additional extensions of credit, reduce the line, and terminate the commitment to the full extent permitted by relevant Federal law.

United States Government or its agencies. The term United States Government or its agencies means an instrumentality of the U.S. Government whose debt obligations are fully and explicitly guaranteed as to the timely payment of principal and interest by the full faith and credit of the United States Government.

United States Government-sponsored agency or corporation. The term United States Government-sponsored agency or corporation means an agency or corporation originally established or chartered to serve public purposes specified by the United States Congress but whose obligations are not explicitly guaranteed by the full faith and credit of the United States Government.

[Codified to 12 C.F.R. § 390.461]

§ 390.462  Minimum regulatory capital requirement.

(a)  To meet its regulatory capital requirement a State savings association must satisfy each of the following capital standards:

(1)  Risk-based capital requirement. (i) A State savings association's minimum risk-based capital requirement shall be an amount equal to 8% of its risk-weighted assets as measured under § 390.466.

(ii)  A State savings association may not use supplementary capital to satisfy this requirement in an amount greater than 100% of its core capital as defined in § 390.465.

(2)  Leverage ratio requirement. (i) A State savings association's minimum leverage ratio requirement shall be the amount set forth in § 390.467 (ii) A State savings association must satisfy this requirement with core capital as defined in § 390.465(a).

(3)  Tangible capital requirement. (i) A State savings association's minimum tangible capital requirement shall be the amount set forth in § 390.468.

(ii)  A State savings association must satisfy this requirement with tangible capital as defined in § 390.468 in an amount not less than 1.5% of its adjusted total assets.

(b)  [Reserved]

(c)  State savings associations are expected to maintain compliance with all of these standards at all times.

[Codified to 12 C.F.R. § 390.462]

§ 390.463  Individual minimum capital requirements.

(a)  Purpose and scope. The rules and procedures specified in this section apply to the establishment of an individual minimum capital requirement for a State savings association that varies from the risk-based capital requirement, the leverage ratio requirement or the tangible capital requirement that would otherwise apply to the State savings association under this subpart.

(b)Appropriate considerations for establishing individual minimum capital requirements. Minimum capital levels higher than the risk-based capital requirement, the leverage ratio requirement or the tangible capital requirement required under this subpart may be appropriate for individual State savings associations. Increased individual minimum capital requirements may be established upon a determination that the State savings association's capital is or may become inadequate in view of its circumstances. For example, higher capital levels may be appropriate for:

(1)  A State savings association receiving special supervisory attention;

(2)  A State savings association that has or is expected to have losses resulting in capital inadequacy;

(3)  A State savings association that has a high degree of exposure to interest rate risk, prepayment risk, credit risk, concentration of credit risk, certain risks arising from nontraditional activities, or similar risks; or a high proportion of off-balance sheet risk, especially standby letters of credit;

(4)  A State savings association that has poor liquidity or cash flow;

(5)  A State savings association growing, either internally or through acquisitions, at such a rate that supervisory problems are presented that are not dealt with adequately by other FDIC regulations or other guidance;

(6)  A State savings association that may be adversely affected by the activities or condition of its holding company, affiliate(s), subsidiaries, or other persons or State savings associations with which it has significant business relationships, including concentrations of credit;

(7)  A State savings association with a portfolio reflecting weak credit quality or a significant likelihood of financial loss, or that has loans in nonperforming status or on which borrowers fail to comply with repayment terms;

(8)  A State savings association that has inadequate underwriting policies, standards, or procedures for its loans and investments; or

(9)  A State savings association that has a record of operational losses that exceeds the average of other, similarly situated State savings associations; has management deficiencies, including failure to adequately monitor and control financial and operating risks, particularly the risks presented by concentrations of credit and nontraditional activities; or has a poor record of supervisory compliance.

(c)  Standards for determination of appropriate individual minimum capital requirements. The appropriate minimum capital level for an individual State savings association cannot be determined solely through the application of a rigid mathematical formula or wholly objective criteria. The decision is necessarily based, in part, on subjective judgment grounded in agency expertise. The factors to be considered in the determination will vary in each case and may include, for example:

(1)  The conditions or circumstances leading to the determination that a higher minimum capital requirement is appropriate or necessary for the State savings association;

(2)  The exigency of those circumstances or potential problems;

(3)  The overall condition, management strength, and future prospects of the State savings association and, if applicable, its holding company, subsidiaries, and affiliates;

(4)  The State savings association's liquidity, capital and other indicators of financial stability, particularly as compared with those of similarly situated State savings associations; and

(5)  The policies and practices of the State savings association's directors, officers, and senior management as well as the internal control and internal audit systems for implementation of such adopted policies and practices.

(d)  Procedures--(1) Notification. When the FDIC determines that a minimum capital requirement is necessary or appropriate for a particular State savings association, it shall notify the State savings association in writing of its proposed individual minimum capital requirement; the schedule for compliance with the new requirement; and the specific causes for determining that the higher individual minimum capital requirement is necessary or appropriate for the State savings association. The FDIC shall forward the notifying letter to the appropriate state supervisor if a state-chartered savings association would be subject to an individual minimum capital requirement.

(2)  Response. (i) The response shall include any information that the State savings association wants the FDIC to consider in deciding whether to establish or to amend an individual minimum capital requirement for the State savings association, what the individual capital requirement should be, and, if applicable, what compliance schedule is appropriate for achieving the required capital level. The responses of the State savings association and appropriate state supervisor must be in writing and must be delivered to the FDIC within 30 days after the date on which the notification was received. Such response must be filed in accordance with §§ 390.106 and 390.108. The FDIC may extend the time period for good cause. The time period for response by the insured State savings association may be shortened for good cause:

(A)  When, in the opinion of the FDIC, the condition of the State savings association so requires, and the FDIC informs the State savings association of the shortened response period in the notice;

(B)  With the consent of the State savings association; or

(C)  When the State savings association already has advised the FDIC that it cannot or will not achieve its applicable minimum capital requirement.

(ii)  Failure to respond within 30 days, or such other time period as may be specified by the FDIC, may constitute a waiver of any objections to the proposed individual minimum capital requirement or to the schedule for complying with it, unless the FDIC has provided an extension of the response period for good cause.

(3)  Decision. After expiration of the response period, the FDIC shall decide whether or not it believes the proposed individual minimum capital requirement should be established for the State savings association, or whether that proposed requirement should be adopted in modified form, based on a review of the State savings association's response and other relevant information. The FDIC's decision shall address comments received within the response period from the State savings association and the appropriate state supervisor and shall state the level of capital required, the schedule for compliance with this requirement, and any specific remedial action the State savings association could take to eliminate the need for continued applicability of the individual minimum capital requirement. The FDIC shall provide the State savings association and the appropriate state supervisor with a written decision on the individual minimum capital requirement, addressing the substantive comments made by the State savings association and setting forth the decision and the basis for that decision. Upon receipt of this decision by the State savings association, the individual minimum capital requirement becomes effective and binding upon the State savings association. This decision represents final agency action.

(4)  Failure to comply. Failure to satisfy an individual minimum capital requirement, or to meet any required incremental additions to capital under a schedule for compliance with such an individual minimum capital requirement, shall constitute a legal basis for issuing a capital directive pursuant to § 390.464.

(5)  Change in circumstances. If, after a decision is made under paragraph (d)(3) of this section, there is a change in the circumstances affecting the State savings association's capital adequacy or its ability to reach its required minimum capital level by the specified date, FDIC may amend the individual minimum capital requirement or the State savings association's schedule for such compliance. The FDIC may decline to consider a State savings association's request for such changes that are not based on a significant change in circumstances or that are repetitive or frivolous. Pending the FDIC's reexamination of the original decision, that original decision and any compliance schedule established thereunder shall continue in full force and effect.

[Codified to 12 C.F.R. § 390.463]

§ 390.464  Capital directives.

(a)  Issuance of a Capital Directive--(1) Purpose. In addition to any other action authorized by law, the FDIC, may issue a capital directive to a State savings association that does not have an amount of capital satisfying its minimum capital requirement. Issuance of such a capital directive may be based on a State savings association's noncompliance with the risk-based capital requirement, the leverage ratio requirement, the tangible capital requirement, or individual minimum capital requirement established under this subpart, by a written agreement under 12 U.S.C. 1464(s), or as a condition for approval of an application. A capital directive may order a State savings association to:

(i)  Achieve its minimum capital requirement by a specified date;

(ii)  Adhere to the compliance schedule for achieving its individual minimum capital requirement;

(iii)  Submit and adhere to a capital plan acceptable to the FDIC describing the means and a time schedule by which the State savings association shall reach its required capital level;

(iv)  Take other action, including but not limited to, reducing the State savings association's assets or its rate of liability growth, or imposing restrictions on the State savings association's payment of dividends, in order to cause the State savings association to reach its required capital level;

(v)  Take any action authorized under § 390.469(e); or

(vi)  Take a combination of any of these actions.

(2)  Enforcement of capital directive. A capital directive issued under this section, including a plan submitted pursuant to a capital directive, is enforceable under 12 U.S.C. 1818 in the same manner and to the same extent as an effective and outstanding cease and desist order which has become final under 12 U.S.C. 1818.

(3)  Notice of intent to issue capital directive. The FDIC will determine whether to initiate the process of issuing a capital directive. The FDIC will notify a State savings association in writing by registered mail of its intention to issue a capital directive. Since a state-chartered savings association is involved, the FDIC will also notify and solicit comment from the appropriate state supervisor. The notice will state:

(i)  The reasons for issuance of the capital directive and

(ii)  The proposed contents of the capital directive.

(3)  Response to notice of intent. (i) A State savings association may respond to the notice of intent by submitting its own compliance plan, or may propose an alternative plan. The response should also include any information that the State savings association wishes the FDIC to consider in deciding whether to issue a capital directive. The appropriate state supervisor may also submit a response. These responses must be in writing and be delivered within 30 days after the receipt of the notices. Such responses must be filed in accordance with §§ 390.106 and 390.108. In its discretion, the FDIC may extend the time period for the response for good cause. The FDIC may, for good cause, shorten the 30-day time period for response by the insured State savings association:

(A)  When, in the opinion of the FDIC, the condition of the State savings association so requires, and the FDIC informs the State savings association of the shortened response period in the notice;

(B)  With the consent of the State savings association; or

(C)  When the State savings association already has advised the FDIC that it cannot or will not achieve its applicable minimum capital requirement.

(ii)  Failure to respond within 30 days of receipt, or such other time period as may be specified by the FDIC, may constitute a waiver of any objections to the capital directive unless the FDIC grants an extension of the time period for good cause.

(4)  Decision. After the closing date of the State savings association's response period, or upon receipt of the State savings association's response, if earlier, the FDIC shall consider the State savings association's response and may seek