[Title 12 CFR ]
[Code of Federal Regulations (annual edition) - January 1, 2004 Edition]
[From the U.S. Government Printing Office]



[[Page i]]

   

                    12


          Parts 500 to 599

                         Revised as of January 1, 2004

Banks and Banking





          Containing a codification of documents of general 
          applicability and future effect
          As of January 1, 2004
          With Ancillaries
          Published by
          Office of the Federal Register
          National Archives and Records
          Administration

A Special Edition of the Federal Register

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                     U.S. GOVERNMENT PRINTING OFFICE
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                            Table of Contents



                                                                    Page
  Explanation.................................................       v

  Title 12:
          Chapter V--Office of Thrift Supervision, Department 
          of the Treasury                                            3
  Finding Aids:
      Table of CFR Titles and Chapters........................     453
      Alphabetical List of Agencies Appearing in the CFR......     471
      List of CFR Sections Affected...........................     481

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

                     Cite this Code: CFR
                     To cite the regulations in 
                       this volume use title, 
                       part and section number. 
                       Thus,  12 CFR 500.1 refers 
                       to title 12, part 500, 
                       section 1.

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

[[Page v]]



                               EXPLANATION

    The Code of Federal Regulations is a codification of the general and 
permanent rules published in the Federal Register by the Executive 
departments and agencies of the Federal Government. The Code is divided 
into 50 titles which represent broad areas subject to Federal 
regulation. Each title is divided into chapters which usually bear the 
name of the issuing agency. Each chapter is further subdivided into 
parts covering specific regulatory areas.
    Each volume of the Code is revised at least once each calendar year 
and issued on a quarterly basis approximately as follows:

Title 1 through Title 16.................................as of January 1
Title 17 through Title 27..................................as of April 1
Title 28 through Title 41...................................as of July 1
Title 42 through Title 50................................as of October 1

    The appropriate revision date is printed on the cover of each 
volume.

LEGAL STATUS

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HOW TO USE THE CODE OF FEDERAL REGULATIONS

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EFFECTIVE AND EXPIRATION DATES

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OMB CONTROL NUMBERS

    The Paperwork Reduction Act of 1980 (Pub. L. 96-511) requires 
Federal agencies to display an OMB control number with their information 
collection request.

[[Page vi]]

Many agencies have begun publishing numerous OMB control numbers as 
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OBSOLETE PROVISIONS

    Provisions that become obsolete before the revision date stated on 
the cover of each volume are not carried. Code users may find the text 
of provisions in effect on a given date in the past by using the 
appropriate numerical list of sections affected. For the period before 
January 1, 2001, consult either the List of CFR Sections Affected, 1949-
1963, 1964-1972, 1973-1985, or 1986-2000, published in 11 separate 
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CFR INDEXES AND TABULAR GUIDES

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the revision dates of the 50 CFR titles.

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in the Code of Federal Regulations.

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[[Page vii]]

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                              Raymond A. Mosley,
                                    Director,
                          Office of the Federal Register.

January 1, 2004.

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                               THIS TITLE

    Title 12--Banks and Banking is composed of seven volumes. The parts 
in these volumes are arranged in the following order: parts 1-199, 200-
219, 220-299, 300-499, 500-599, part 600-899, and 900-end. The first 
volume containing parts 1-199 is comprised of chapter I--Comptroller of 
the Currency, Department of the Treasury. The second and third volumes 
containing parts 200-299 are comprised of chapter II--Federal Reserve 
System. The fourth volume containing parts 300-499 is comprised of 
chapter III--Federal Deposit Insurance Corporation and chapter IV--
Export-Import Bank of the United States. The fifth volume containing 
parts 500-599 is comprised of chapter V--Office of Thrift Supervision, 
Department of the Treasury. The sixth volume containing parts 600-899 is 
comprised of chapter VI--Farm Credit Administration, chapter VII--
National Credit Union Administration, chapter VIII--Federal Financing 
Bank. The seventh volume containing part 900-end is comprised of chapter 
IX--Federal Housing Finance Board, chapter XI--Federal Financial 
Institutions Examination Council, chapter XIV--Farm Credit System 
Insurance Corporation, chapter XV--Department of the Treasury, chapter 
XVII--Office of Federal Housing Enterprise Oversight, Department of 
Housing and Urban Development and chapter XVIII--Community Development 
Financial Institutions Fund, Department of the Treasury. The contents of 
these volumes represent all of the current regulations codified under 
this title of the CFR as of January 1, 2004.

[[Page x]]




[[Page 1]]



                       TITLE 12--BANKS AND BANKING




                  (This book contains parts 500 to 599)

  --------------------------------------------------------------------
                                                                    Part

chapter v--Office of Thrift Supervision, Department of the 
  Treasury..................................................         500

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   CHAPTER V--OFFICE OF THRIFT SUPERVISION, DEPARTMENT OF THE TREASURY




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


  Editorial Note: Nomenclature changes to Chapter V appear at 59 FR 
18475, Apr. 19, 1994, and at 60 FR 66715, Dec. 26, 1995.
Part                                                                Page
500             Agency organization and functions...........           5
502             Assessments and fees........................           6
503             Privacy Act.................................          10
505             Freedom of Information Act..................          12
506             Information collection requirements under 
                    the Paperwork Reduction Act.............          13
508             Removals, suspensions, and prohibitions 
                    where a crime is charged or proven......          14
509             Rules of practice and procedure in 
                    adjudicatory proceedings................          17
510             Miscellaneous organizational regulations....          40
512             Rules for investigative proceedings and 
                    formal examination proceedings..........          45
513             Practice before the Office..................          47
516             Application processing procedures...........          54
517             Contracting outreach programs...............          65
528             Nondiscrimination requirements..............          67
533             Disclosure and reporting of CRA-related 
                    agreements..............................          72
535             Prohibited consumer credit practices........          85
536             Consumer protection in sales of insurance...          87
541             Definitions for regulations affecting 
                    federal savings associations............          91
543             Federal mutual savings associations--
                    Incorporation, organization, and 
                    conversion..............................          93
544             Federal mutual savings associations--Charter 
                    and bylaws..............................         100
545             Federal savings associations--Operations....         107
546             Federal mutual savings associations--Merger, 
                    dissolution, reorganization, and 
                    conversion..............................         114
550             Fiduciary powers of savings associations....         116
551             Recordkeeping and confirmation requirements 
                    for securities transactions.............         127

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552             Federal stock associations--Incorporation, 
                    organization, and conversion............         135
555             Electronic operations.......................         154
557             Deposits....................................         155
558             Possession by conservators and receivers for 
                    Federal and State savings associations..         156
559             Subordinate organizations...................         157
560             Lending and investment......................         168
561             Definitions for regulations affecting all 
                    savings associations....................         191
562             Regulatory reporting standards..............         197
563             Savings associations--Operations............         199
563b            Conversions from mutual to stock form.......         233
563c            Accounting requirements.....................         260
563d            Securities of savings associations..........         269
563e            Community reinvestment......................         271
563f            Management official interlocks..............         291
563g            Securities offerings........................         296
564             Appraisals..................................         305
565             Prompt corrective action....................         311
567             Capital.....................................         320
568             Security procedures under the Bank 
                    Protection Act..........................         355
569             Proxies.....................................         357
570             Safety and soundness guidelines and 
                    compliance procedures...................         358
572             Loans in areas having special flood hazards.         366
573             Privacy of consumer financial information...         370
574             Acquisition of control of savings 
                    associations............................         387
575             Mutual holding companies....................         409
583             Definitions for regulations affecting 
                    savings and loan holding companies......         432
584             Regulated activities........................         434
590             Preemption of State usury laws..............         441
591             Preemption of State due-on-sale laws........         446
592--599        [Reserved]

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PART 500_AGENCY ORGANIZATION AND FUNCTIONS--Table of Contents




 Subpart A_Functions and Responsibilities of the Director of the Office 
                          of Thrift Supervision

Sec.
500.1 General statement and statutory authority.
500.2-500.5 [Reserved]
500.6 General statement concerning gender-related terminology.

                     Subpart B_General Organization

500.10 The OTS or The Office.

                          Subpart C_Procedures

500.30 General statement concerning procedures and forms.

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

    Source: 54 FR 49440, Nov. 30, 1989, unless otherwise noted.



 Subpart A_Functions and Responsibilities of the Director of the Office 
                          of Thrift Supervision



Sec. 500.1  General statement and statutory authority.

    (a) The Director of the Office of Thrift Supervision (referred to in 
this chapter as ``Director'' or ``Office'') is responsible for the 
administration and enforcement of the Home Owners' Loan Act of 1933, 
(``HOLA''), and applicable portions of the Federal Deposit Insurance Act 
and with respect to savings associations subject to provisions of the 
foregoing acts and title, the Bank Protection Act of 1968, the Truth in 
Lending Act, and the Fair Credit Reporting Act.
    (b) The Office is authorized under such rules and regulations as it 
may prescribe to provide for the organization, incorporation, 
examination, operation, and regulation of Federal savings associations. 
Under this authority, the Office's functions include, but are not 
limited to, regulation of the corporate structure of such associations, 
regulation of the distribution of their earnings, regulation of their 
lending and other investment powers, acting upon their applications for 
facility offices (including branch offices, limited facilities, mobile 
facilities and satellite offices), the regulation of mergers, 
conversions, and dissolutions involving such associations, the 
appointment of conservators and receivers for such associations, and the 
enforcement of laws, regulations, or conditions against such 
associations or the officers or directors thereof by proceedings under 
section 5 of the Home Owners' Loan Act of 1933, as amended.
    (c) The Office regulates and examines savings associations within 
the authority conferred by the HOLA and the FDIA and is authorized to 
enforce applicable laws, regulations, or conditions against savings 
associations or the officers or directors thereof by proceedings under 
section 5 of the HOLA and section 8 of the FDIA as amended. The Office 
also regulates and supervises savings and loan holding companies 
pursuant to the provisions of section 10 of the HOLA, as amended, and 
section 8 of the FDIA.
    (d) The Office exercises supervisory and regulatory authority over 
all building and loan or savings and loan associations and similar 
institutions of or doing business in or maintaining offices in the 
District of Columbia.

[54 FR 49440, Nov. 30, 1989, as amended at 60 FR 66868, Dec. 27, 1995]



Sec. 500.2-500.5  [Reserved]



Sec. 500.6  General statement concerning gender-related terminology.

    The statutes administered by the Office and the rules, regulations, 
policies, practices, publications, directives, and guidelines 
promulgated pursuant to such statutes that prescribe the course and 
methods to be followed by the Office that inadvertently use or contain 
gender-related terminology are to be interpreted as equally applicable 
to either sex.



                     Subpart B_General Organization



Sec. 500.10  The OTS or The Office.

    The Office of Thrift Supervision (referred to as ``OTS'' or 
``Office'') is an office of the Department of the Treasury. Its 
functions are to charter, supervise, regulate and examine Federal 
savings associations and to supervise, regulate and examine all savings 
associations. It is directed by a Director, who

[[Page 6]]

is appointed by the President and confirmed by the Senate to a five-year 
term. The Director directs and carries out the mission of the OTS with 
the assistance of offices reporting directly to him. One of these 
offices oversees the direct examination and supervision of savings 
associations by regulatory staff to ensure the safety and soundness of 
the industry.

[57 FR 14335, Apr. 20, 1992, as amended at 60 FR 66869, Dec. 27, 1995]



                          Subpart C_Procedures



Sec. 500.30  General statement concerning procedures and forms.

    (a) Rules and procedures of the Office are published in chapter V of 
title 12 of the Code of Federal Regulations and in supplementary 
material published in the Federal Register. The statutes administered by 
the Office and the rules and regulations promulgated pursuant to such 
statutes prescribe the course and method of the formal procedures to be 
followed in proceedings of the Office. These are supplemented where 
practicable by informal procedures designed to aid the public and 
facilitate the execution of the Office's functions. The informal 
procedures of the Office consist principally in the rendering of advice 
and assistance to members of the public dealing with the Office. 
Opinions expressed by members of the staff do not constitute an official 
expression of the views of the Office, but do represent views of persons 
working with the provisions of the statute or regulation involved. The 
Director may, for good cause and to the extent permitted by statute, 
waive the applicability of any provision of this chapter.
    (b) Information with respect to procedures, forms, and instructions 
of the Office is available to the public at the headquarters of the 
Office. Forms of concern to the public consist principally of periodic 
financial reports and of applications to the Office. The Office may from 
time to time require the completion by individuals or savings 
associations of miscellaneous forms, questionnaires, reports, or other 
papers. In each instance, the individual or savings association is given 
actual and timely notice of the scope and contents of the papers in 
question.

[54 FR 49440, Nov. 30, 1989, as amended at 59 FR 53570, Oct. 25, 1994]



PART 502_ASSESSMENTS AND FEES--Table of Contents




Sec.
502.5 Who must pay assessments and fees?

                          Subpart A_Assessments

502.10 How does OTS calculate my assessment?
502.15 How does OTS determine my size component?
502.20 How does OTS determine my condition component?
502.25 How does OTS determine my complexity component?
502.30 When must I pay my assessment?
502.35 How must I pay my assessment?
502.40 Can I get a refund or proration of my assessment?
502.45 What if I do not pay my assessment on time?

                             Subpart B_Fees

502.50 What fees does OTS charge?
502.55 Where can I find OTS's fee schedule?
502.60 When will OTS adjust, add, waive, or eliminate a fee?
502.65 When is an application fee due?
502.70 How must I pay an application fee?
502.75 What if I do not pay my fees on time?

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

    Source: 63 FR 65670, Nov. 30, 1998, unless otherwise noted.



Sec. 502.5  Who must pay assessments and fees?

    (a) Authority. Section 9 of the HOLA, 12 U.S.C. 1467, authorizes the 
Director to charge assessments to recover the costs of examining savings 
associations and their affiliates, to charge fees to recover the costs 
of processing applications and other filings, and to charge fees to 
cover OTS's direct and indirect expenses in regulating savings 
associations and their affiliates.
    (b) Assessments. If you are a savings association that OTS regulates 
on the last day of January or on the last day of July of each year, you 
must pay a semi-annual assessment due on that day. Subpart A of this 
part describes OTS's assessment procedures and requirements.
    (c) Fees. Whether or not you are a savings association, if you make 
any

[[Page 7]]

filings with OTS or use OTS services, the Director may require you to 
pay a fee to cover the costs of processing your submission or providing 
those services. The filings for which the Director may charge a fee 
include notices, applications, and securities filings. Among the 
services for which the Director may charge a fee are publications, 
seminars, certifications for official copies of agency documents, and 
records or services requested by other agencies. The Director also 
assesses fees for examining and investigating savings associations that 
administer trust assets of $1 billion or less, and affiliates of savings 
associations. If you are a savings association and you or any of your 
affiliates cause OTS to incur extraordinary expenses related to your 
examination, investigation, regulation, or supervision, the Director may 
charge you a fee to fund those expenses. Subpart B of this part 
describes OTS's fee procedures and requirements.

[63 FR 65670, Nov. 30, 1998, as amended at 67 FR 78151, Dec. 23, 2002]



                          Subpart A_Assessments



Sec. 502.10  How does OTS calculate my assessment?

    OTS determines your semi-annual assessment by totaling three 
components: your size, your condition, and the complexity of your 
business. For the size and complexity components, OTS uses the September 
30 Thrift Financial Report to determine amounts due at the January 31 
assessment; and the March 31 Thrift Financial Report to determine 
amounts due at the July 31 assessment. For purposes of this subpart, 
total assets are your total assets as reported on Thrift Financial 
Reports filed with OTS. For the condition component, OTS uses the most 
recent composite rating, as defined in 12 CFR part 516, of which you 
have been notified in writing before an assessment's due date.



Sec. 502.15  How does OTS determine my size component?

    (a) General. (1) Unless you are a qualifying savings association 
under paragraph (b) of this section, OTS uses the following chart to 
calculate your size component:

----------------------------------------------------------------------------------------------------------------
           If your total assets are:                                  Your size component is:
----------------------------------------------------------------------------------------------------------------
                                                      This amount--
           Over--                 But not over--     Base assessment    Plus--  Marginal      Of assets over--
                                                         amount               rate              Class floor
----------------------------------------------------------------------------------------------------------------
Column A                        Column B.........                   Column C            ColColumn E
0.............................  $67 million......                   C1                D1   0.
$67 million...................  215 million......                   C2                D2   $67 million.
215 million...................  1 billion........                   C3                D3   215 million.
1 billion.....................  6.03 billion.....                   C4                D4   1 billion.
6.03 billion..................  18 billion.......                   C5                D5   6.03 billion.
18 billion....................  35 billion.......                   C6                D6   18 billion.
35 billion....................  .................                   C7                D7   35 billion.

    (2) To calculate your size component, find the row in Columns A and 
B that describes your total assets. Reading across in that same row, 
find your base assessment amount in Column C, your marginal rate in 
Column D, and your class floor in Column E. Calculate how much your 
total assets exceed your Column E class floor. Multiply this number by 
your Column D marginal rate. Add this number to your Column C base 
assessment amount. The total is your size component. OTS will establish 
the base assessment amounts and the marginal rates in columns C and D in 
a Thrift Bulletin.
    (b) Special size component calculation for qualifying savings 
associations. If you meet all of the criteria set forth in paragraph 
(b)(1) of this section, you are a qualifying savings association and OTS 
will calculate your size component in accordance with paragraph (b)(2) 
of this section.
    (1) Criteria for qualifying savings association status. (i) You were 
a savings association as of January 1, 1999.

[[Page 8]]

    (ii) Your total assets have never exceeded $100 million at the end 
of any quarter.
    (2) Size component for qualifying savings associations. If you are a 
qualifying savings association, your size component is the lesser of:
    (i) Your size component calculated under paragraph (a) of this 
section; or
    (ii) Your assessment calculated using the general assessment table 
at 12 CFR 502.1(c) as contained in the 12 CFR, parts 500 to 599, edition 
revised as of January 1, 1998, as implemented in Thrift Bulletin 48-9, 
dated December 21, 1992.



Sec. 502.20  How does OTS determine my condition component?

    OTS uses the following chart to determine your condition component.

------------------------------------------------------------------------
                                                 Then your condition
       If your component  rating is:                component is:
------------------------------------------------------------------------
1 or 2....................................  Zero.
3.........................................  50 percent of your size
                                             component.
4 or 5....................................  100 percent of your size
                                             component.
------------------------------------------------------------------------


[66 FR 33159, June 21, 2001]



Sec. 502.25  How does OTS determine my complexity component?

    If your portfolio exceeds any of the thresholds in paragraph (a) of 
this section, OTS will calculate your complexity component according to 
paragraph (c) of this section. If your portfolio does not exceed any of 
the thresholds in paragraph (a) of this section, your complexity 
component is zero.
    (a) Thresholds for complexity component. OTS uses three separate 
thresholds in calculating your complexity component. You exceed a 
threshold if you have more than $1 billion in any of the following:
    (1) Trust assets you administer.
    (2) The outstanding principal balance of assets covered, fully or 
partially, by your recourse obligations or direct credit substitutes.
    (3) The principal amount of loans that you service for others.
    (b) Assessment rates. OTS will establish one or more assessment 
rates for each of the types of activities listed in paragraph (a) of 
this section. OTS will publish those assessment rates in a Thrift 
Bulletin.
    (c) Calculation of complexity component. OTS separately considers 
each of the thresholds in paragraph (a) of this section in calculating 
your complexity component. OTS first calculates the amount by which you 
exceed any of those thresholds. OTS multiplies the amount by which you 
exceed any threshold in paragraph (a) of this section by the applicable 
assessment rate(s) under paragraph (b) of this section. OTS then totals 
the results. This total is your complexity component.



Sec. 502.30  When must I pay my assessment?

    OTS will bill you semiannually for your assessments. Assessments are 
due January 31 and July 31 of each year. At least seven days before your 
assessment is due, the Director will mail you a notice that indicates 
the amount of your assessment, explains how OTS calculated the amount, 
and specifies when payment is due.



Sec. 502.35  How must I pay my assessment?

    (a) Debit at Federal Home Loan Banks. If you are a member of a 
Federal Home Loan Bank, you must maintain a demand deposit account at 
your Federal Home Loan Bank with sufficient funds to pay your assessment 
when due. OTS will notify your Federal Home Loan Bank of the amount of 
your assessment. OTS will debit your account for your assessments.
    (b) Direct billing. If you are not a member of a Federal Home Loan 
Bank, OTS will directly debit an account you must maintain at your 
association.



Sec. 502.40  Can I get a refund or proration of my assessment?

    OTS will not refund or prorate your assessment, even if you cease to 
be a savings association. If you are a savings association for whom a 
conservator or receiver has been appointed, you must continue to pay 
assessments in accordance with this part. OTS will not increase or 
decrease your assessment based on events that occur after the date of 
the Thrift Financial Report upon which your assessment is based.

[[Page 9]]



Sec. 502.45  What if I do not pay my assessment on time?

    The Director will charge interest on delinquent assessments. 
Interest will accrue at a rate (that OTS will determine quarterly) equal 
to 150 percent of the average of the bond-equivalent rates of 13-week 
Treasury bills auctioned during the preceding calendar quarter. 
Assessments under this subpart A are delinquent if you do not pay them 
when required by Sec. 502.30.



                             Subpart B_Fees



Sec. 502.50  What fees does OTS charge?

    (a) The Director assesses fees for examining or investigating 
savings associations that administer trust assets of $1 billion or less, 
and savings association affiliates. ``Affiliate'' has the meaning in 12 
U.S.C. 1462(9), except that, for this part only, ``affiliate'' does not 
include any entity that is consolidated with a savings association on 
the Consolidated Statement of the Thrift Financial Report.
    (b) The Director assesses fees for processing notices, applications, 
securities filings, and requests, and for providing other services.



Sec. 502.55  Where can I find OTS's fee schedule?

    OTS will periodically publish a schedule of its fees in a Thrift 
Bulletin. OTS will publish these fees at least 30 days before they are 
effective.



Sec. 502.60  When will OTS adjust, add, waive, or eliminate a fee?

    Under unusual circumstances, the Director may deem it necessary or 
appropriate to adjust, add, waive, or eliminate a fee. For example, the 
Director may:
    (a) Reduce any fee to adjust for any inequities, efficiencies, or 
changed procedures that OTS projects will reduce its applications 
processing costs but that OTS did not consider in determining its fees;
    (b) Reduce or waive any fee if OTS determines that the fee would 
unduly or unjustifiably discourage particular types of applications or 
applications for particular categories of transactions;
    (c) Add a fee for a new type of application;
    (d) Increase a fee for an application that presents unusual or 
particularly complex issues of law or policy or otherwise causes the 
agency to incur unusually high processing costs; or
    (e) Charge a fee to recover extraordinary expenses related to 
examination, investigation, regulation, or supervision of savings 
associations or their affiliates.



Sec. 502.65  When is an application fee due?

    (a) You must pay the application fee when you file an application. 
OTS will not process your application if you do not include the required 
fee.
    (b) If OTS cannot complete its review of your application because 
the application is materially deficient and it refuses to accept your 
application for processing, you must pay a new application fee upon 
filing a revised application.
    (c) If a transaction involves multiple applications, you must pay 
the appropriate fee for each application, unless OTS specifies otherwise 
by Thrift Bulletin.



Sec. 502.70  How must I pay an application fee?

    You must pay an application fee to the Office of Thrift Supervision. 
You must include a statement of the fee and how you calculated the fee.



Sec. 502.75  What if I do not pay my fees on time?

    (a) Interest. An examination or investigation fee is delinquent if 
OTS does not receive the fee within 30 days of the date specified in a 
bill. The Director will charge interest on a delinquent examination or 
investigation fee. Interest will accrue at a rate (that OTS will 
determine quarterly) equal to 150 percent of the average of the bond-
equivalent rates of 13-week Treasury bills auctioned during the 
preceding calendar quarter.
    (b) Failure to pay. If your holding company, affiliate, or 
subsidiary fails to pay any examination or investigation fee within 60 
days of the date specified in a bill, the Director may assess that fee, 
with interest, against you and

[[Page 10]]

collect it from you. If any such entity is a holding company, affiliate, 
or subsidiary of more than one savings association, the Director may 
assess the fee against and collect it from each savings association as 
the Director may prescribe.



PART 503_PRIVACY ACT--Table of Contents




Sec.
503.1 Scope and procedures.
503.2 Exemptions of records containing investigatory material compiled 
          for law enforcement purposes.

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

    Cross Reference: See 31 CFR part 1, subpart C.



Sec. 503.1  Scope and procedures.

    (a) In general. The Privacy Act regulations of the Department of the 
Treasury, 31 CFR part 1, subpart C, apply to the Office as a component 
part of the Department of the Treasury. This part 503 sets forth, for 
the Office, specific notification and access procedures with respect to 
particular systems of records, and identifies the officials designated 
to make the initial determinations with respect to notification and 
access to records and accountings of disclosures of records. This part 
503 also sets forth the specific procedures for requesting amendment of 
records and identifies the officials designated to make the initial and 
appellate determinations with respect to requests for amendment of 
records. It identifies the officials designated to grant extensions of 
time on appeal, the officials with whom ``Statements of Disagreement'' 
may be filed, the official designated to receive service of process and 
the addresses for delivery of requests, appeals, and service of process. 
In addition, it references the notice of systems of records and notices 
of the routine uses of the information in the system required by 5 
U.S.C. 552a(e) (4) and (11) and published annually by the Office of the 
Federal Register in ``Privacy Act Issuances.''
    (b) Requests for notification and access to records and accountings 
of disclosures. Initial determinations under 31 CFR 1.26, whether to 
grant requests for notification and access to records and accountings of 
disclosures for the Office, will be made by the head of the 
organizational unit having immediate custody of the records requested or 
an official designated by this official. This is indicated in the 
appropriate system notice in ``Privacy Act Issuances'' published 
annually by the Office of the Federal Register. Requests for information 
and specific guidance on where to send requests for records may be 
mailed or delivered personally to: Privacy Act Request, Manager, 
Dissemination Branch, Information Management & Services Division, Office 
of Thrift Supervision, 1700 G Street, NW., Washington, DC 20552.
    (c) Requests for amendment of records. Initial determinations under 
31 CFR 1.27(a) through (d), whether to grant requests to amend records 
will be made by the head of the organizational unit having immediate 
custody of the records or the delegate of such official. Requests for 
amendment should be addressed to: Privacy Act Amendment Request, 
Manager, Dissemination Branch, Information Management & Services 
Division, Office of Thrift Supervision, 1700 G Street, NW., Washington, 
DC 20552.
    (d) Administrative appeal of initial determinations refusing 
amendment of records. Appellate determinations refusing amendment of 
records under 31 CFR 1.27(e) including extensions of time on appeal, 
with respect to records of the Office will be made by the Director of 
the Office of Thrift Supervision (``Director'') or Chief Counsel or the 
delegate of the Director or Chief Counsel. Appeals made by mail should 
be addressed to, or delivered personally to: Privacy Act Amendment 
Appeal, Deputy Chief Counsel for General Law, Office of Thrift 
Supervision, 1700 G Street, NW., Washington, DC 20552.
    (e) Statements of disagreement. ``Statements of Disagreement'' under 
31 CFR 1.27(e)(4)(i) shall be filed with the Deputy Director for 
Washington Operations at the address indicated in the letter of 
notification within 35 days of the date of such notification and should 
be limited to one page.

[[Page 11]]

    (f) Service of process. Service of process will be received by the 
Chief Counsel's Office or the delegate of such official and shall be 
delivered to the following location: Chief Counsel's Office, Office of 
Thrift Supervision, 1700 G Street, NW., Washington, DC 20552.
    (g) Annual notice of systems of records. The annual notice of 
systems of records is published by the Office of the Federal Register, 
as specified in 5 U.S.C. 552a(f). The publication is entitled ``Privacy 
Act Issuance.'' Any specific requirements for access, including 
identification requirements, in addition to the requirements set forth 
in 31 CFR 1.26 and 1.27 are indicated in the notice for the pertinent 
system.

[54 FR 49443, Nov. 30, 1989, as amended at 59 FR 18475, Apr. 19, 1994; 
64 FR 69184, Dec. 10, 1999]



Sec. 503.2  Exemptions of records containing investigatory material 
compiled for law enforcement purposes.

    (a) Scope. The Office has established a system of records, entitled 
the ``Confidential Individual Information System.'' The purpose of this 
system is to assist the Office in the accomplishment of its statutory 
and regulatory responsibilities in connection with supervision of 
savings associations. This system will be exempt from certain provisions 
of the Privacy Act of 1974 for the reasons set forth in paragraph (c) of 
this section.
    (b) Exemptions Under 5 U.S.C. 552a(k)(2). (1) Pursuant to 5 U.S.C. 
552a(k)(2), the head of an agency may issue rules to exempt any system 
of records within the agency from certain provisions of the Privacy Act 
of 1974 if the system contains investigatory material compiled for law 
enforcement purposes.
    (2) Provisions of the Privacy Act of 1974 from which exemptions will 
be made under 5 U.S.C. 552a(k)(2) are as follows:
    (i) 5 U.S.C. 552a(c)(3);
    (ii) 5 U.S.C. 552a(d)(1), (d)(2), (d)(3), and (d)(4);
    (iii) 5 U.S.C. 552a(e)(1);
    (iv) 5 U.S.C. 552a(e)(4)(G), (e)(4)(H), and (e)(4)(I); and
    (v) 5 U.S.C. 552a(f).
    (c) Reasons for exemptions under 5 U.S.C. 552a(k)(2). (1) 5 U.S.C. 
552a(c)(3) requires that an agency make accountings of disclosures of 
records available to individuals named in the records at their request. 
These accountings must state the date, nature, and purpose of each 
disclosure of a record and the name and address of the recipient. The 
application of this provision would make known to subjects of an 
investigation that an investigation is taking place and that they are 
the subjects of it. Release of such information could result in the 
alteration or destruction of documentary evidence, improper influencing 
of witnesses, and reluctance of witnesses to offer information, and 
could otherwise impede or compromise an investigation.
    (2) 5 U.S.C. 552a(d)(1), (d)(2), (d)(3), and (d)(4), (e)(4)(G) and 
(e)(4)(H), and (f), relate to an individual's right to be notified of 
the existence of, and the right to examine, records pertaining to such 
individual. Notifying an individual at the individual's request of the 
existence of records and allowing the individual to examine an 
investigative file pertaining to such individual, or granting access to 
an investigative file, could:
    (i) Interfere with investigations and enforcement proceedings;
    (ii) Constitute an unwarranted invasion of the personal privacy of 
others;
    (iii) Disclose the identity of confidential sources and reveal 
confidential information supplied by those sources; or
    (iv) Disclose investigative techniques and procedures.
    (3) 5 U.S.C. 552a(e)(4)(I) requires the publication of the 
categories of sources of records in each system. Application of this 
provision could disclose investigative techniques and procedures and 
cause sources to refrain from giving such information because of fear of 
reprisal, or fear of breach of promises of anonymity and 
confidentiality, thus compromising the agency's ability to conduct 
investigations and to identify, detect, and apprehend violators.
    (4) 5 U.S.C. 552a(e)(1) requires each agency to maintain in its 
records only information about an individual that is relevant and 
necessary to accomplish a purpose of the agency required by statute or 
Executive Order. Limiting the system as described would impede 
enforcement activities because:

[[Page 12]]

    (i) It is not always possible to determine the relevance or 
necessity of specific information in the early stages of an 
investigation; and
    (ii) In any investigation the Office may obtain information 
concerning violations of laws other than those within the scope of its 
jurisdiction. In the interest of effective law enforcement, the Office 
should retain this information to aid in establishing patterns of 
criminal activity, and to provide leads for those law enforcement 
agencies charged with enforcing criminal or civil laws.
    (d) Documents exempted. Exemptions will be applied only when 
appropriate under 5 U.S.C. 552a(k).

[55 FR 31371, Aug. 2, 1990]



PART 505_FREEDOM OF INFORMATION ACT--Table of Contents




Sec.
505.1 Basis and scope.
505.2 Public Reading Room.
505.3 Requests for records.
505.4 Administrative appeal of initial determination to deny records.
505.5 Delivery of process.

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

    Cross Reference: See 31 CFR part 1, subpart A.



Sec. 505.1  Basis and scope.

    (a) This part is issued by the Office of Thrift Supervision 
(``OTS'') as a supplement to the Freedom of Information Act regulations 
of the Department of the Treasury, 31 CFR part 1, subpart A, which apply 
to the OTS as a component part of the Department of the Treasury.
    (b) This part is issued by the OTS pursuant to the requirement of 
section 552 of title 5 of the United States Code, which requires every 
federal agency to publish in the Federal Register the established places 
at which, the employees from whom, and the methods whereby, the public 
may obtain information, make submittals on requests, or obtain 
decisions, and the forms available or the places at which forms and 
instructions as to the scope and contents of all papers, reports, or 
examinations may be found. Information about the Public Reading Room is 
set forth in Sec. 505.2 of this part. Procedures for requests for 
records are set forth in Sec. 505.3 of this part. Information about 
administrative appeals is set forth in Sec. 505.4 of this part. 
Provisions relating to delivery of process upon the OTS are set forth in 
Sec. 505.5 of this part.

[54 FR 49444, Nov. 30, 1989, as amended at 60 FR 66716, Dec. 26, 1995; 
66 FR 65819, Dec. 21, 2001]



Sec. 505.2  Public Reading Room.

    OTS will make materials available for review on an ad hoc basis when 
necessary. Contact the FOIA Office, Office of Thrift Supervision, 1700 G 
Street, NW., Washington, DC 20552, or you may visit the Public Reading 
Room at 1700 G Street, NW., by appointment only. (Please identify the 
materials you would like to inspect, to assist us in serving you.) We 
schedule appointments on business days between 10 a.m. and 4 p.m. In 
most cases, appointments will be available the next business day 
following the date we receive your request.

[66 FR 65819, Dec. 21, 2001, as amended at 67 FR 78151, Dec. 23, 2002]



Sec. 505.3  Requests for records.

    A designated official will make the initial determination under 31 
CFR 1.5(g) whether to grant a request for OTS records. Requests may be 
mailed to: Freedom of Information Act Request, FOIA Office, Office of 
Thrift Supervision, 1700 G Street, NW., Washington, DC 20552, or marked 
``FOIA'' and delivered in person to the FOIA Office, 1700 G Street, NW., 
Washington, DC 20552. Requests may also be sent by e-mail or facsimile 
to the e-mail address and facsimile number in Sec. 505.2 of this part.

[67 FR 78151, Dec. 23, 2002]



Sec. 505.4  Administrative appeal of initial determination to deny records.

    A designated official will make appellate determinations under 31 
CFR 1.5(h) with respect to OTS records. Appeals by mail should be 
addressed to: FOIA Appeals, 1700 G Street, NW., Washington, DC 20552. 
Appeals may be delivered personally to FOIA Appeals, Office of Thrift 
Supervision, 1700 G

[[Page 13]]

Street, NW., Washington, DC 20552. Appeals may also be sent by e-mail or 
facsimile to the e-mail address and facsimile number in Sec. 505.2 of 
this part.

[67 FR 78151, Dec. 23, 2002]



Sec. 505.5  Delivery of process.

    Service of process will be received as set forth in Sec. 510.4 of 
this chapter.

[54 FR 49444, Nov. 30, 1989]



PART 506_INFORMATION COLLECTION REQUIREMENTS UNDER THE PAPERWORK 
REDUCTION ACT--Table of Contents




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



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

    (a) Purpose. This part collects and displays the control numbers 
assigned to information collection requirements contained in regulations 
of the Office of Thrift Supervision by the Office of Management and 
Budget (OMB) pursuant to the Paperwork Reduction Act of 1995, Pub. L. 
104-13, 109 Stat. 163, and is adopted in compliance with the 
requirements of 5 CFR 1320.8. Information collection requirements that 
are not mandated by statute must be assigned control numbers by OMB in 
order to be enforceable. Respondents/recordkeepers are not required to 
comply with any collection of information unless it displays a currently 
valid OMB control number.
    (b) Display.

------------------------------------------------------------------------
  12 CFR part or section where identified
               and described                   Current OMB control No.
------------------------------------------------------------------------
502.70....................................  1550-0053.
510.......................................  1550-0081.
Part 516..................................  1550-0056.
Part 528..................................  1550-0021.
533.4.....................................  1550-0105.
533.6.....................................  1550-0105.
533.7.....................................  1550-0105.
536.40....................................  1550-0106.
543.2.....................................  1550-0005.
543.3.....................................  1550-0005
543.9.....................................  1550-0007.
544.2.....................................  1550-0017.
544.5.....................................  1550-0018.
544.8.....................................  1550-0011.
545.74....................................  1550-0013.
545.92....................................  1550-0004 and 1550-0006.
545.95....................................  1550-0006.
545.96(c).................................  1550-0011.
546.2.....................................  1550-0016.
546.4.....................................  1550-0066.
Part 550..................................  1550-0037.
Part 551..................................  1550-0109.
551.50....................................  1550-0109.
551.70 through 551.100....................  1550-0109.
551.140...................................  1550-0109.
551.150...................................  1550-0109.
552.2-1...................................  1550-0005.
552.2-6...................................  1550-0007.
552.4.....................................  1550-0017.
552.5.....................................  1550-0018.
552.11....................................  1550-0011.
552.13....................................  1550-0016, 1550-0025.
555.300...................................  1550-0095.
555.310...................................  1550-0095.
557.20....................................  1550-0092.
559.3.....................................  1550-0077.
559.11....................................  1550-0067.
559.12....................................  1550-0013.
559.13....................................  1550-0065.
560.1.....................................  1550-0078.
560.2.....................................  1550-0078.
560.32....................................  1550-0078.
560.35....................................  1550-0078.
560.93(f).................................  1550-0078.
560.101...................................  1550-0078.
560.170(c)................................  1550-0078.
560.172...................................  1550-0078.
560.210...................................  1550-0078.
562.1.....................................  1550-0011.
562.1(b)..................................  1550-0078.
562.4.....................................  1550-0011.
563.1(b)..................................  1550-0011.
563.3.....................................  1550-0027.
563.22....................................  1550-0016, 1550-0025.
563.41(c)(3) and (4)......................  1550-0078
563.43....................................  1550-0075.
563.47(e).................................  1550-0011.
563.74....................................  1550-0050.
563.76(c).................................  1550-0011.
563.81....................................  1550-0030.
563.143 through 563.146...................  1550-0059.
563.170...................................  1550-0078.
563.177...................................  1550-0041.
563.180...................................  1550-0084.
563.180(d)................................  1550-0003.
563.180(e)................................  1550-0079.
563.181...................................  1550-0032.
563.183...................................  1550-0032.
Part 563b.................................  1550-0014.
Part 563d.................................  1550-0019.
Part 563e.................................  1550-0012.
Part 563f.................................  1550-0051.
Part 563g.................................  1550-0035.
Part 564..................................  1550-0078.
Part 568..................................  1550-0062.
572.6.....................................  1550-0088.
572.7.....................................  1550-0088.
572.9.....................................  1550-0088.
572.10....................................  1550-0088.
Part 573..................................  1550-0103.
574.3(b)..................................  1550-0032.
574.4.....................................  1550-0032.
574.5.....................................  1550-0032.
574.6.....................................  1550-0015.
Part 575..................................  1550-0072.
584.1(f)..................................  1550-0011.
584.2-1...................................  1550-0063.
584.2-2...................................  1550-0063.
584.9.....................................  1550-0063.
590.4(h)..................................  1550-0078.
------------------------------------------------------------------------


[[Page 14]]


[60 FR 66716, Dec. 26, 1995, as amended by 61 FR 65178, Dec. 11, 1996; 
62 FR 54764, Oct. 22, 1997; 62 FR 66261, Dec. 18, 1997; 63 FR 71211, 
Dec. 24, 1998; 65 FR 78901, Dec. 18, 2000; 66 FR 15017, Mar. 15, 2001; 
66 FR 65819, Dec. 21, 2001; 67 FR 76298, Dec. 12, 2002; 67 FR 77916, 
Dec. 20, 2002; 67 FR 78151, Dec. 23, 2002; 68 FR 75109, Dec. 30, 2003]



PART 508_REMOVALS, SUSPENSIONS, AND PROHIBITIONS WHERE A CRIME IS 
CHARGED OR PROVEN--Table of Contents




Sec.
508.1 Scope.
508.2 Definitions.
508.3 Issuance of Notice or Order.
508.4 Contents and service of the Notice or Order.
508.5 Petition for hearing.
508.6 Initiation of hearing.
508.7 Conduct of hearings.
508.8 Default.
508.9 Rules of evidence.
508.10 Burden of persuasion.
508.11 Relevant considerations.
508.12 Proposed findings and conclusions and recommended decision.
508.13 Decision of the Office.
508.14 Miscellaneous.

    Authority: 12 U.S.C. 1464, 1818.

    Source: 54 FR 49444, Nov. 30, 1989, unless otherwise noted.



Sec. 508.1  Scope.

    The rules in this part 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 savings association, affiliate service corporation, 
savings and loan holding company, or subsidiary of such a holding 
company, where such person has been suspended or removed from office or 
prohibited from further participation in the conduct of the affairs of 
one of the aforementioned entities by a Notice or Order served by the 
Office upon the grounds set forth in section 8(g) of the Federal Deposit 
Insurance Act, (12 U.S.C. 1818(g)).



Sec. 508.2  Definitions.

    As used in this part--
    (a) The term Office means the Office of Thrift Supervision.
    (b) The term Secretary means the Secretary to the Office and any 
Assistant or Acting Secretary to the Office.
    (c) The term Notice means a Notice of Suspension or Notice of 
Prohibition issued by the Office pursuant to section 8(g) of the Federal 
Deposit Insurance Act.
    (d) The term Order means an Order of Removal or Order of Prohibition 
issued by the Office pursuant to section 8(g) of the Federal Deposit 
Insurance Act.
    (e) The term association means a savings association within the 
meaning of section 2(4) of the Home Owners' Loan Act of 1933, as 
amended, 12 U.S.C. 1462(4) (``HOLA''), an affiliate service corporation 
within the meaning of section 8(b)(8) of the Federal Deposit Insurance 
Act, as amended, 12 U.S.C. 1818(b)(8) (``FDIA''), a savings and loan 
holding company within the meaning of section 10(a)(1)(D) of the HOLA, 
12 U.S.C. 1467a(a)(1)(D) and a subsidiary of a savings and loan holding 
company (other than a savings association) within the meaning of section 
10(a)(1)(G) of the Home Owners' Loan Act of 1933.
    (f) The term subject individual means a person served with a Notice 
or Order.
    (g) The term petitioner means a subject individual who has filed a 
petition for informal hearing under this part.



Sec. 508.3  Issuance of Notice or Order.

    (a) The Office 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 Office, 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 Office.
    (b) The Office may issue and serve an Order upon a subject 
individual against

[[Page 15]]

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 Office, 
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.



Sec. 508.4  Contents and service of the Notice or Order.

    (a) The Notice or Order shall set forth the basis and facts in 
support of the Office's 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 Secretary shall serve a copy of the Notice or Order upon the 
subject individual and the related association in the manner set forth 
in Sec. 509.11 of this chapter.
    (c) Upon receipt of the Notice or Order, the subject individual 
shall immediately comply with the requirements thereof.

[54 FR 49444, Nov. 30, 1989, as amended at 56 FR 38306, Aug. 12, 1991]



Sec. 508.5  Petition for hearing.

    (a) To obtain a hearing, the subject individual must file two copies 
of a petition with the 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.



Sec. 508.6  Initiation of hearing.

    (a) Within 10 days of the filing of a petition for hearing, the 
Office shall notify the petitioner of the time and place fixed for 
hearing, and it shall designate one or more Office 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 Sec. 
509.6 of this chapter.
    (d) A representative(s) of the Office's Office of Enforcement also 
may attend the hearing and participate therein as a party.

[54 FR 49444, Nov. 30, 1989, as amended at 56 FR 38306, Aug. 12, 1991]



Sec. 508.7  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 Sec. 509.5 of this chapter.
    (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.

[[Page 16]]

    (c) Upon the request of either the petitioner or a representative of 
the Office of Enforcement, 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 Office of Enforcement 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.

[54 FR 49444, Nov. 30, 1989, as amended at 56 FR 38306, Aug. 12, 1991]



Sec. 508.8  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 Sec. 508.7(d) or (f) of this part, 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 
Office.



Sec. 508.9  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.



Sec. 508.10  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.



Sec. 508.11  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 Office 
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 Office 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 Office will not 
collaterally review such final judgment of conviction.



Sec. 508.12  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 Secretary and certify to the 
Office 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.

[[Page 17]]

    (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.



Sec. 508.13  Decision of the Office.

    (a) Within 30 days after the recommended decision has been certified 
to the Office, the Office shall issue a final decision.
    (b) The Office's final decision shall contain a statement of the 
basis therefor. The Office may satisfy this requirement where it adopts 
the recommended decision of the presiding officer upon finding that the 
recommended decision satisfies the requirements of Sec. 509.38 of this 
chapter.
    (c) The Secretary shall serve upon the petitioner and the 
representative of the Office of Enforcement a copy of the Office's final 
decision and the related recommended decision.

[54 FR 49444, Nov. 30, 1989, as amended at 56 FR 38306, Aug. 12, 1991; 
59 FR 53570, Oct. 25, 1994]



Sec. 508.14  Miscellaneous.

    The provisions of Sec. Sec. 509.10, 509.11, and 509.12 of this 
chapter shall apply to proceedings under this part.

[54 FR 49444, Nov. 30, 1989, as amended at 56 FR 38306, Aug. 12, 1991]



PART 509_RULES OF PRACTICE AND PROCEDURE IN ADJUDICATORY 
PROCEEDINGS--Table of Contents




            Subpart A_Uniform Rules of Practice and Procedure

Sec.
509.1 Scope.
509.2 Rules of construction.
509.3 Definitions.
509.4 Authority of Director.
509.5 Authority of the administrative law judge.
509.6 Appearance and practice in adjudicatory proceedings.
509.7 Good faith certification.
509.8 Conflicts of interest.
509.9 Ex parte communications.
509.10 Filing of papers.
509.11 Service of papers.
509.12 Construction of time limits.
509.13 Change of time limits.
509.14 Witness fees and expenses.
509.15 Opportunity for informal settlement.
509.16 Office's right to conduct examination.
509.17 Collateral attacks on adjudicatory proceeding.
509.18 Commencement of proceeding and contents of notice.
509.19 Answer.
509.20 Amended pleadings.
509.21 Failure to appear.
509.22 Consolidation and severance of actions.
509.23 Motions.
509.24 Scope of document discovery.
509.25 Request for document discovery from parties.
509.26 Document subpoenas to nonparties.
509.27 Deposition of witness unavailable for hearing.
509.28 Interlocutory review.
509.29 Summary disposition.
509.30 Partial summary disposition.
509.31 Scheduling and prehearing conferences.
509.32 Prehearing submissions.
509.33 Public hearings.
509.34 Hearing subpoenas.
509.35 Conduct of hearings.
509.36 Evidence.
509.37 Post-hearing filings.
509.38 Recommended decision and filing of record.
509.39 Exceptions to recommended decision.
509.40 Review by the Director.
509.41 Stays pending judicial review.

                          Subpart B_Local Rules

509.100 Scope.
509.101 Appointment of Office of Financial Institution Adjudication.
509.102 Discovery.
509.103 Civil money penalties.
509.104 Additional procedures.

    Authority: 5 U.S.C. 504, 554-557; 12 U.S.C. 1464, 1467, 1467a, 1468, 
1817(j), 1818, 3349, 4717; 15 U.S.C. 78(l), 78o-5, 78u-2; 28 U.S.C. 2461 
note; 31 U.S.C. 5321; 42 U.S.C. 4012a.

    Source: 56 FR 38306, Aug. 12, 1991, unless otherwise noted.



            Subpart A_Uniform Rules of Practice and Procedure



Sec. 509.1  Scope.

    This subpart prescribes Uniform Rules of practice and procedure 
applicable to adjudicatory proceedings as to

[[Page 18]]

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 Office 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 Office is the appropriate Office;
    (e) Assessment of civil money penalties by the Office against 
institutions, institution-affiliated parties, and certain other persons 
for which it is the appropriate Office 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 the 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 Office, the terms of any conditions imposed in writing by the 
Office 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)); and
    (g) This subpart also applies 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.

[56 FR 38306, Aug. 12, 1991, as amended at 56 FR 59866, Nov. 26, 1991; 
61 FR 20353, May 6, 1996]



Sec. 509.2  Rules of construction.

    For purposes of this subpart:
    (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.



Sec. 509.3  Definitions.

    For purposes of this subpart, unless explicitly stated to the 
contrary:
    (a) Administrative law judge means one who presides at an 
administrative hearing under authority set forth at 5 U.S.C. 556.

[[Page 19]]

    (b) Adjudicatory proceeding means a proceeding conducted pursuant to 
these rules and leading to the formulation of a final order other than a 
regulation.
    (c) Decisional employee means any member of the Office'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 Office or 
the administrative law judge, respectively, in preparing orders, 
recommended decisions, decisions, and other documents under the Uniform 
Rules.
    (d) Director means the Director of the Office of Thrift Supervision 
or his or her designee.
    (e) Enforcement Counsel means any individual who files a notice of 
appearance as counsel on behalf of the Office in an adjudicatory 
proceeding.
    (f) Final order means an order issued by the Office 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.
    (g) Institution includes any 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)).
    (h) 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)).
    (i) Local Rules means those rules found in subpart B of this part.
    (j) Office means the Office of Thrift Supervision in the case of any 
savings association or any savings and loan holding company, and 
subsidiary (other than a bank or subsidiary of that bank) of a savings 
and loan holding company, any service corporation of a savings 
association, and any subsidiary of such service corporation, whether 
wholly or partly owned.
    (k) Office of Financial Institution Adjudication (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 Federal Deposit Insurance Corporation, the National Credit Union 
Administration and the Office.
    (l) Party means the Office and any person named as a party in any 
notice.
    (m) 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.
    (n) Respondent means any party other than the Office.
    (o) Uniform Rules means those rules in subpart A of this part.
    (p) 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.



Sec. 509.4  Authority of Director.

    The Director 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.



Sec. 509.5  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;

[[Page 20]]

    (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 Sec. 509.31 of this subpart;
    (7) To consider and rule upon all procedural and other motions 
appropriate in an adjudicatory proceeding, provided that only the 
Director 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 Director 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.



Sec. 509.6  Appearance and practice in adjudicatory proceedings.

    (a) Appearance before an Office 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 
Office if such attorney is not currently suspended or debarred from 
practice before the Office.
    (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 Office.
    (3) Notice of appearance. Any individual acting as counsel on behalf 
of a party, including the Director, 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 
(a)(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.

[56 FR 38306, Aug. 12, 1991, as amended at 61 FR 20354, May 6, 1996]



Sec. 509.7  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

[[Page 21]]

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.



Sec. 509.8  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 Sec. 509.6(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.

[56 FR 38306, Aug. 12, 1991, as amended at 61 FR 20354, May 6, 1996]



Sec. 509.9  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 Office (including such person's 
counsel); and
    (ii) The administrative law judge handling that proceeding, the 
Director, 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 Director until the date that the Director issues the 
final decision pursuant to Sec. 509.40(c) of this subpart:
    (1) No interested person outside the Office shall make or knowingly 
cause to be made an ex parte communication to the Director, the 
administrative law judge, or a decisional employee; and
    (2) The Director, administrative law judge, or decisional employee 
shall not make or knowingly cause to be made to any interested person 
outside the Office 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 
Director 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.

[[Page 22]]

    (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 Director 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 Office 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 Sec. 509.40 of this subpart, except as witness or 
counsel in public proceedings.

[56 FR 38306, Aug. 12, 1991, as amended at 60 FR 28035, May 30, 1995]



Sec. 509.10  Filing of papers.

    (a) Filing. Any papers required to be filed, excluding documents 
produced in response to a discovery request pursuant to Sec. Sec. 
509.25 and 509.26 of this subpart, shall be filed with the OFIA, except 
as otherwise provided.
    (b) Manner of filing. Unless otherwise specified by the Director 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 Director 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 8\1/2\x11 inch paper, and must be clear and legible.
    (2) Signature. All papers must be dated and signed as provided in 
Sec. 509.7 of this subpart.
    (3) Caption. All papers filed must include at the head thereof, or 
on a title page, the name of the Office 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 Director, 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.



Sec. 509.11  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 Sec. 509.10(c) of this 
subpart as to form.
    (c) By the Director or the administrative law judge. (1) All papers 
required to be served by the Director or the administrative law judge 
upon a party who has appeared in the proceeding through a counsel of 
record, shall be served by

[[Page 23]]

any means specified in paragraph (b) of this section.
    (2) If a party has not appeared in the proceeding in accordance with 
Sec. 509.6 of this subpart, the Director 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.

[56 FR 38306, Aug. 12, 1991, as amended at 61 FR 20354, May 6, 1996]



Sec. 509.12  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 Director 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

[[Page 24]]

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 Director or the administrative law judge in the case of filing, or 
by agreement among the parties in the case of service.

[56 FR 38306, Aug. 12, 1991, as amended at 61 FR 20354, May 6, 1996]



Sec. 509.13  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 Director pursuant to Sec. 509.38 of 
this subpart, the Director may grant extensions of the time limits for 
good cause shown. Extensions may be granted at the motion of a party or 
on the Director's or the administrative law judge's own motion after 
notice and opportunity to respond is afforded all non-moving parties.



Sec. 509.14  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 Office is the 
party requesting the subpoena. The Office shall not be required to pay 
any fees to, or expenses of, any witness not subpoenaed by the Office.



Sec. 509.15  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 Office 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.



Sec. 509.16  Office's right to conduct examination.

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



Sec. 509.17  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.



Sec. 509.18  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 Director.
    (ii) The notice must be served by the Director upon the respondent 
and given to any other appropriate financial institution supervisory 
authority where required by law.

[[Page 25]]

    (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 
Director.
    (b) Contents of notice. The notice must set forth:
    (1) The legal authority for the proceeding and for the Office's 
jurisdiction over the proceeding;
    (2) A statement of the matters of fact or law showing that the 
Office 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.



Sec. 509.19  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 Director 
a recommended decision containing the findings and the relief sought in 
the notice. Any final order issued by the Director 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.

[56 FR 38306, Aug. 12, 1991, as amended at 65 FR 78901, Dec. 18, 2000]



Sec. 509.20  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 Director 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

[[Page 26]]

continuance to enable the objecting party to meet such evidence.

[61 FR 20354, May 6, 1996]



Sec. 509.21  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 Director a recommended decision containing the findings and the 
relief sought in the notice.



Sec. 509.22  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.



Sec. 509.23  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 Director.
    (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 
Director, 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 
Sec. Sec. 509.29 and 509.30 of this subpart.



Sec. 509.24  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

[[Page 27]]

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 Sec. 509.102 of 
this part.
    (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 Sec. 509.25 of 
this subpart.
    (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.

[56 FR 38306, Aug. 12, 1991, as amended at 61 FR 20354, May 6, 1996]



Sec. 509.25  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 12 CFR 502.7 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 Sec. 509.23 
of this subpart 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

[[Page 28]]

this paragraph and Sec. 509.23 of this subpart 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 
Sec. 509.23 of this subpart 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 
part, 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.

[56 FR 38306, Aug. 12, 1991, as amended at 61 FR 20355, May 6, 1996]



Sec. 509.26  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 Sec. 509.24(d) of this subpart. 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

[[Page 29]]

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 Sec. 509.25(d) of this 
subpart, 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.



Sec. 509.27  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

[[Page 30]]

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.



Sec. 509.28  Interlocutory review.

    (a) General rule. The Director may review a ruling of the 
administrative law judge prior to the certification of the record to the 
Director only in accordance with the procedures set forth in this 
section and Sec. 509.23 of this subpart.
    (b) Scope of review. The Director may exercise interlocutory review 
of a ruling of the administrative law judge if the Director 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 Sec. 509.23 of this subpart. 
Any party may file a response to a request for interlocutory review in 
accordance with Sec. 509.23(d) of this subpart. Upon the expiration of 
the time for filing all responses, the administrative law judge shall 
refer the matter to the Director for final disposition.
    (d) Suspension of proceeding. Neither a request for interlocutory 
review nor any disposition of such a request by the Director under this 
section suspends or stays the proceeding unless otherwise ordered by the 
administrative law judge or the Director.

[[Page 31]]



Sec. 509.29  Summary disposition.

    (a) In general. The administrative law judge shall recommend that 
the Director 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) Biling 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 Director. If the 
administrative law judge finds that no party is entitled to summary 
disposition, he or she shall make a ruling denying the motion.



Sec. 509.30  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.



Sec. 509.31  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

[[Page 32]]

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.

[56 FR 38306, Aug. 12, 1991, as amended at 65 FR 78901, Dec. 18, 2000]



Sec. 509.32  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.



Sec. 509.33  Public hearings.

    (a) General rule. All hearings shall be open to the public, unless 
the Director, in the Director's 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 
Director 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 Director. The form 
of, and procedure for, these requests and replies are governed by Sec. 
509.23 of this subpart. 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.

[56 FR 38306, Aug. 12, 1991, as amended at 61 FR 20355, May 6, 1996]



Sec. 509.34  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

[[Page 33]]

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 
Sec. 509.26(c) of this subpart.

[56 FR 38306, Aug. 12, 1991, as amended at 61 FR 20355, May 6, 1996]



Sec. 509.35  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

[[Page 34]]

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.

[56 FR 38306, Aug. 12, 1991, as amended at 61 FR 20356, May 6, 1996]



Sec. 509.36  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 APA 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 Director 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 Office 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 Director.
    (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.

[[Page 35]]



Sec. 509.37  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.

[56 FR 38306, Aug. 12, 1991, as amended at 61 FR 20356, May 6, 1996]



Sec. 509.38  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 Sec. 
509.37(b) of this subpart, the administrative law judge shall file with 
and certify to the Director, 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 Director for final determination the 
record of the proceeding, the administrative law judge shall furnish to 
the Director 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.

[61 FR 20356, May 6, 1996]



Sec. 509.39  Exceptions to recommended decision.

    (a) Filing exceptions. Within 30 days after service of the 
recommended decision, findings, conclusions, and proposed order under 
Sec. 509.38 of this subpart, a party may file with the Director 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

[[Page 36]]

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 Director 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.



Sec. 509.40  Review by the Director.

    (a) Notice of submission to the Director. When the Director 
determines that the record in the proceeding is complete, the Director 
shall serve notice upon the parties that the proceeding has been 
submitted to the Director for final decision.
    (b) Oral argument before the Director. Upon the initiative of the 
Director or on the written request of any party filed with the Director 
within the time for filing exceptions, the Director 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 Director's final decision. Oral 
argument before the Director must be on the record.
    (c) Director's final decision. (1) Decisional employees may advise 
and assist the Director in the consideration and disposition of the 
case. The final decision of the Director 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 Director 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 
Director 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 Director shall be served upon each party to 
the proceeding, upon other persons required by statute, and, if directed 
by the Director or required by statute, upon any appropriate state or 
Federal supervisory authority.



Sec. 509.41  Stays pending judicial review.

    The commencement of proceedings for judicial review of a final 
decision and order of the Office may not, unless specifically ordered by 
the Director or a reviewing court, operate as a stay of any order issued 
by the Director. The Director 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.



                          Subpart B_Local Rules



Sec. 509.100  Scope.

    The rules and procedures in this subpart B shall apply to those 
proceedings covered by subpart A of this part. In addition, subpart A of 
this part and this subpart 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 
savings association or any other company;

[[Page 37]]

    (b) Proceedings under section 10(g)(5)(A) of the HOLA (12 U.S.C. 
1467a(g)(5)(A)) to determine whether to terminate certain activities by 
savings and loan holding companies or to terminate ownership or control 
of a non-insured savings and loan holding company subsidiary; 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 
Office 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.



Sec. 509.101  Appointment of Office of Financial Institution Adjudication.

    Unless otherwise directed by the Office, all hearings under subpart 
A of this part and this subpart shall be conducted by administrative law 
judges under the direction of the Office of Financial Institution 
Adjudication, 1700 G Street NW., Washington, DC 20552.



Sec. 509.102  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 Sec. 509.11(d) of this part. The party serving 
the subpoena must file proof of

[[Page 38]]

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 Sec. 509.27(d) 
of this part.

[56 FR 38306, Aug. 12, 1991, as amended at 61 FR 20356, May 6, 1996]



Sec. 509.103  Civil money penalties.

    (a) Assessment. In the event of consent, or if upon the record 
developed at the hearing the Office finds that any of the grounds 
specified in the notice issued pursuant to Sec. 509.18 of this part 
have been established, the Office 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 Office or by a 
reviewing court.
    (b) Payment. (1) Civil penalties assessed pursuant to subpart A of 
this part and this subpart B are payable and to be collected within 60 
days after the issuance of the notice of assessment, unless the Office 
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 Office 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 Office fixes a 
different time for payment. Notwithstanding the foregoing, the Office 
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) Checks in payment of civil penalties shall be made payable to 
the Treasurer of the United States and sent to the Controller's Division 
of the Office. Upon receipt, the Office shall forward the check to the 
Treasury of the United States.
    (c) Inflation adjustment. Under the Federal Civil Monetary Penalties 
Inflation Adjustment Act of 1990 (28 U.S.C. 2461 note), OTS must adjust 
for inflation the civil monetary penalties in statutes that it 
administers. The following chart displays the adjusted civil money 
penalties. The amounts in this chart apply to violations that occur 
after October 17, 2000:

------------------------------------------------------------------------
                                                           New maximum
         U.S. Code citation            CMP description        amount
------------------------------------------------------------------------
12 U.S.C. 1464(v)(4)...............  Reports of                   $2,200
                                      Condition--1st
                                      Tier.
12 U.S.C. 1464(v)(5)...............  Reports of                   22,000
                                      Condition--2nd
                                      Tier.
12 U.S.C. 1464(v)(6)...............  Reports of                1,175,000
                                      Condition--3rd
                                      Tier.
12 U.S.C. 1467(d)..................  Refusal to                    5,500
                                      Cooperate in Exam.
12 U.S.C. 1467a(i)(2)..............  Holding Company              27,500
                                      Act Violation.
12 U.S.C. 1467a(i)(3)..............  Holding Company              27,500
                                      Act Violation.
12 U.S.C. 1467a(r)(1)..............  Late/Inaccurate               2,200
                                      Reports--1st Tier.
12 U.S.C. 1467a(r)(2)..............  Late/Inaccurate              22,000
                                      Reports--2nd Tier.
12 U.S.C. 1467a(r)(3)..............  Late/Inaccurate           1,175,000
                                      Reports--3rd Tier.
12 U.S.C. 1817(j)(16)(A)...........  Change in Control--           5,500
                                      1st Tier.
12 U.S.C. 1817(j)(16)(B)...........  Change in Control--          27,500
                                      2nd Tier.
12 U.S.C. 1817(j)(16)(C)...........  Change in Control--       1,175,000
                                      3rd Tier.
12 U.S.C. 1818(i)(2)(A)............  Violation of Law              5,500
                                      or Unsafe or
                                      Unsound Practice--
                                      1st Tier.
12 U.S.C. 1818(i)(2)(B)............  Violation of Law             27,500
                                      or Unsafe or
                                      Unsound Practice--
                                      2nd Tier.
12 U.S.C. 1818(i)(2)(C)............  Violation of Law          1,175,000
                                      or Unsafe or
                                      Unsound Practice--
                                      3rd Tier.
12 U.S.C. 1884.....................  Violation of                    110
                                      Security Rules.
12 U.S.C. 3349(b)..................  Appraisals                    5,500
                                      Violation--1st
                                      Tier.
12 U.S.C. 3349(b)..................  Appraisals                   27,500
                                      Violation--2nd
                                      Tier.
12 U.S.C. 3349(b)..................  Appraisals                1,175,000
                                      Violation--3rd
                                      Tier.

[[Page 39]]

 
42 U.S.C. 4012a(f).................  Flood Insurance...      350/115,000
------------------------------------------------------------------------


[56 FR 38306, Aug. 12, 1991, as amended at 65 FR 61262, Oct. 17, 2000]



Sec. 509.104  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 Sec. 509.39 of this part 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 Secretary to the 
Office, who receives adjudicatory filings, (``Secretary''); provided, 
however, that once the administrative law judge has certified the record 
to the Director pursuant to Sec. 509.38 of this part, all motions must 
be filed with the Director, to the attention of the 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 Director, other than motions for oral argument 
before the Director, shall be allowed pursuant to the procedures at 
Sec. 509.23(d) of this part. No response is required for the Director 
to make a determination on a motion for oral argument.
    (c) Authority of administrative law judge. In addition to the powers 
listed in Sec. 509.5 of this part, 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 Sec. 509.29 
of this part and partial summary disposition at Sec. 509.30 of this 
part in making determinations on such motions.
    (d) Notification of submission of proceeding to the Director. 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 Office shall notify the parties within ten days 
of the submission of the proceeding to the Director for final 
determination.
    (e) Extensions of time for final determination. The Director 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 Office. Service of any document upon the Office 
shall be made by filing with the Secretary, in addition to the 
individuals and/or offices designated by the Office in its Notice issued 
pursuant to Sec. 509.18 of this part, or such other means reasonably 
suited to provide notice of the person and/or office designated to 
receive filings.
    (g) Filings with the Director. An additional copy of all materials 
required or permitted to be filed with or referred to the administrative 
law judge pursuant to subpart A and B of this part shall be filed with 
the 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 Sec. 509.32 of this part. Materials required or permitted 
to be filed with or referred to the Director pursuant to subparts A and 
B of this part shall be filed with the Director, to the attention of the 
Secretary.
    (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.

[56 FR 38306, Aug. 12, 1991, as amended at 58 FR 4311, Jan. 14, 1993; 61 
FR 20356, May 6, 1996]

[[Page 40]]



PART 510_MISCELLANEOUS ORGANIZATIONAL REGULATIONS--Table of Contents




Sec.
510.2 Provisions related to regulations of the Office.
510.4 Service of process.
510.5 Release of unpublished OTS information.

    Authority: 12 U.S.C. 1462a, 1463, 1464; Pub. L. 101-410, 104 Stat. 
890; Pub. L. 104-134, 110 Stat. 1321-358.

    Source: 54 FR 49456, Nov. 30, 1989, unless otherwise noted.



Sec. 510.2  Provisions related to regulations of the Office.

    (a) Amendments. The Office expressly reserves the right to amend 
(including the right to alter or repeal) the regulations set forth in 
this chapter.
    (b) Waiver or relaxation of regulatory provisions with respect to 
disaster or emergency areas. Whenever the President of the United States 
determines that a major disaster or emergency exists, or declares an 
area a major disaster or emergency area, the Office may, to the extent 
not inconsistent with law, by resolution waive or relax any limitations 
pertaining to the operations of Federal savings associations and savings 
associations in any area or areas affected by such disaster or emergency 
so declared.
    (c) Bar on participation in notice and comment rulemaking by 
suspended or disbarred persons. No person who has been suspended or 
debarred from practice before the Office in accordance with the 
provisions of part 513 of this chapter may submit to the Office, either 
directly or on behalf of an interested party, any written documents or 
petitions otherwise permitted by the Administrative Procedures Act.

[54 FR 49456, Nov. 30, 1989, as amended at 60 FR 66716, Dec. 26, 1995]



Sec. 510.4  Service of process.

    (a) Service of Process. Service of process may be made upon the 
Office by delivering a copy of the summons and complaint to the U.S. 
Attorney for the district in which the action is brought or to an 
assistant U.S. Attorney or clerical employee designated by the U.S. 
Attorney in a writing filed with the clerk of the court, and by sending 
copies of the summons and of the complaint by registered or certified 
mail to the Attorney General of the United States,Washington, DC, and to 
the Secretary of the Office.
    (b) Subpoenas. Any subpoena to obtain information maintained by 
Office shall be duly issued and served upon the Secretary of the Office 
of Thrift Supervision, 1700 G Street, NW., Washington, DC, 20552.



Sec. 510.5  Release of unpublished OTS information.

    (a) Scope. (1) This section applies to requests by the public for 
unpublished OTS information, such as requests for records or testimony 
from parties to lawsuits in which the OTS is not a party.
    (2) Unpublished OTS information includes records created or obtained 
in connection with the OTS's performance of its responsibilities, such 
as records concerning supervision, regulation, and examination of 
savings associations, their holding companies, and affiliates, and 
records compiled in connection with the OTS's enforcement 
responsibilities. Unpublished OTS information also includes information 
that current and former employees, officers, and agents obtained in 
their official capacities. Examples of unpublished information include:
    (i) Information in the memory of a current or former employee, 
officer, or agent of the OTS (or the Federal Home Loan Bank Board, the 
predecessor agency of the OTS), by testimony or informal interview, that 
was acquired in the course of performing official duties or because of 
the employee's, officer's or agent's official status;
    (ii) Reports of examination, supervisory correspondence, internal 
agency memoranda and investigatory files compiled in connection with an 
investigation, whether such records are in the possession of the OTS or 
some other individual or entity; and
    (iii) Unpublished OTS records obtained by or in the possession of 
third parties, including other government agencies.
    (3) This section does not apply to:
    (i) Requests for records or testimony in proceedings in which the 
OTS is a party;

[[Page 41]]

    (ii) Requests for information by other government agencies, except 
when specifically provided; and
    (iii) Requests for records that are required to be disclosed under 
the Freedom of Information Act, see 5 U.S.C. 552, and 31 CFR 1.1-1.6.
    (b) Purpose. The purposes of this section are:
    (1) To afford an orderly mechanism for the OTS to expeditiously 
process requests for unpublished OTS information and, where appropriate, 
for the OTS to assert evidentiary privileges in litigation;
    (2) To balance the need for confidentiality of unpublished OTS 
information with the private party's interest in obtaining disclosure of 
that information;
    (3) To ensure that the time of OTS employees is utilized in the most 
efficient manner consistent with the OTS's statutory mission;
    (4) To prevent undue burdens on the OTS;
    (5) To limit the expenditure of the OTS's funds for private 
purposes; and
    (6) To maintain the impartiality of the OTS among private litigants.
    (c) Procedure--(1) Requests for records and testimony in general. A 
request for unpublished OTS information must be in writing, furnish the 
caption of the lawsuit if the request arises in the course of 
litigation, and support the requester's claim that the information 
sought is highly relevant to the purpose for which it is sought. In 
demonstrating that the information is highly relevant, the requester 
must explain in detail how the requested OTS information relates to the 
issues in the case or the matter.
    (i) For requests arising in lawsuits, the submission also must 
include:
    (A) A copy of the complaint or equivalent document in the case and 
any other pleadings necessary to show relevance;
    (B) A description of any prior decisions or pending motions in the 
case that may bear on the asserted relevance of the information being 
sought from the OTS; and
    (C) The names, addresses and phone numbers of counsel to all other 
parties in the case.
    (ii) In all instances, in addition to demonstrating that the 
information sought is highly relevant to the purpose for which it is 
sought, the requester must:
    (A) Demonstrate that the information sought is not available from 
any other source; and
    (B) Demonstrate that the need for the information clearly outweighs 
the need to maintain the confidentiality of the OTS information and the 
burden on the OTS to produce the information.
    (iii) If a request seeks a response in fewer than 30 days, it must 
include an explanation of why the requester was unable to submit the 
request earlier and why expediting the request is required.
    (2) Additional provisions relating to requests for records. In 
addition to the requirements of paragraph (c)(1) of this section, the 
provisions in paragraphs (c)(2)(i) and (c)(2)(ii) of this section apply 
to requests for disclosure of records.
    (i) A request for records must list the categories of records sought 
and describe the specific information sought, including the relevant 
time period.
    (ii) When the OTS believes that another person has a claim of 
privilege regarding the information in the records and the records are 
in the possession or control of that person, such as reports prepared by 
a savings association's attorneys that are shared with the OTS, the OTS 
may respond to the request by authorizing that person to release the 
records pursuant to an appropriate confidentiality order rather than by 
the OTS releasing the records directly to the requesting party. This 
will enable the person possessing or controlling the records to argue 
any issues of privilege to the appropriate court.
    (3) Additional provisions relating to requests for testimony from 
OTS employees. In addition to the requirements of paragraph (c)(1) of 
this section, the provisions in paragraphs (c)(3)(i) through (c)(3)(iv) 
of this section apply to requests that current or former OTS employees 
be authorized to give testimony.
    (i) The request must specifically describe the substance of the 
testimony sought and show a compelling need for

[[Page 42]]

the testimony. A showing of compelling need should include a 
demonstration that the requested information is not available from any 
other source, such as the books and records of other persons or 
entities, OTS records that have been or might be released, or the 
testimony of other non-OTS persons, including retained experts.
    (ii) OTS employees will not be authorized to provide expert or 
opinion testimony for private parties.
    (iii) The OTS expects litigants to anticipate their need for OTS 
testimony in sufficient time to request and obtain that testimony in 
deposition form. A request for testimony at a trial or hearing may not 
be granted unless the requester shows that properly developed deposition 
testimony could not be used or would not be adequate at the trial or 
hearing.
    (iv) The OTS shall specify the scope of any authorized testimony and 
may take steps to ensure that the scope of testimony taken adheres to 
the scope authorized. Parties to the case who did not join in the 
request and who wish to question the witness beyond the authorized scope 
should request expanded authorization pursuant to this regulation. The 
OTS will attempt to render decisions on such requests in an expedited 
manner.
    (4) Information available to savings associations, holding 
companies, state and Federal agencies and requesters. (i) The regular 
report of examination of a savings association, savings and loan holding 
company, or other affiliate of a savings association is made available 
by the appropriate Regional Office to the entity examined.
    (ii) A subsidiary savings association of a savings and loan holding 
company may reproduce and furnish a copy of its report of examination 
and related supervisory correspondence of the savings association to its 
parent holding company(ies) without prior approval of the OTS. A savings 
and loan holding company may reproduce and furnish a copy of its report 
of examination and related supervisory correspondence to another 
affiliated savings and loan holding company that controls the same 
savings association or its subsidiary savings association(s) without 
prior approval of the OTS. This paragraph does not require such 
disclosure by a parent savings and loan holding company or subsidiary 
savings association.
    (iii) Reports of examination and other information relating to 
state-chartered savings associations and affiliates are made available, 
upon request, by the OTS to the state governmental authority having 
general supervision of such state-chartered savings associations.
    (iv) Reports of examination and other information may be made 
available by the OTS to other agencies of the United States, a state 
agency, or to the Federal Home Loan Banks, for use where necessary in 
the performance of their official duties.
    (v) All reports or other information made available to savings 
associations, holding companies, affiliates, other governmental agencies 
or requesters shall remain the property of the OTS and, except as 
permitted by this section or otherwise by the Director or his delegate, 
no person, company, agency, or authority to whom the information is made 
available, or any officer, director, employee or agent thereof, shall 
disclose any such information except published statistical material that 
would not disclose the identity of any individual or corporation.
    (5) Where to submit requests. In all matters covered by this 
section, notification of the issuance of subpoenas or compulsory process 
and requests for records or testimony covered by this section must be 
sent to the OTS at 1700 G Street NW., Washington, DC 20552, to the 
attention of the Corporate Secretary, and should be labelled ``Request 
for Release of Unpublished Information Under Section 510.5.'' Requesters 
may furnish copies of the request or subpoenas simultaneously to the 
appropriate OTS Regional Office, but the furnishing of such copies does 
not constitute service on the OTS.
    (d) Consideration of requests--(1) In general. The OTS will 
generally process requests in the order in which they are received. The 
OTS will endeavor to respond to requests within 30 days, but this may 
vary depending on the scope and precision of the request. The OTS will 
weigh requests for processing in less than 30 days against the burden to

[[Page 43]]

the OTS of expedited processing and the unfairness to other parties 
whose pending requests may be delayed.
    (2) Consultation with requester. The OTS may consult with the 
requester to:
    (i) Refine and limit the scope of the request so as to reduce the 
burden and expense on the OTS; or
    (ii) Obtain additional information necessary for the OTS to make an 
informed determination on the request. To the extent necessary to reach 
an informed determination on the request, the OTS may inquire into the 
circumstances of the underlying matter and rely on sources of 
information beyond the requester, including other interested parties.
    (3) Final determinations. Final determinations on requests will be 
made by the Director or his delegate. All such determinations are the 
sole discretion of the Director or his delegate. Requesters will be 
notified in writing of the disposition of the request.
    (4) Denial of requests. (i) The OTS may deny requests for records or 
testimony that seek information that the OTS deems to be:
    (A) Not highly relevant;
    (B) Privileged;
    (C) Available from other sources; or
    (D) Information that should not be disclosed for reasons that 
warrant restriction of discovery under the Federal Rules of Civil 
Procedure (28 U.S.C. appendix).
    (ii) The OTS may also deny a records or testimony request when it 
considers production of the information to be overly burdensome or 
contrary to the public interest, or where OTS determines that the need 
for the information does not clearly outweigh the need to maintain the 
confidentiality of the information, or where the requester seeks 
testimony and has not shown a compelling need for the testimony.
    (5) Confidentiality Orders and Agreements. As is set forth in 
paragraph (f) of this section, the OTS may condition release of 
information on the entry by the relevant tribunal of an order 
satisfactory to the OTS or, in a non-litigated matter, the execution of 
a confidentiality agreement that limits access of third parties to the 
unpublished OTS information. It shall be the duty of the requesting 
party to obtain such an order or to execute a confidentiality agreement.
    (e) Parties with access to OTS information; restriction on 
dissemination--(1) Current and former employees. Except as authorized by 
this section or as otherwise authorized by the Director or his delegate, 
no current or former employee, officer or agent of the OTS or a 
predecessor agency shall disclose or permit the disclosure of any 
unpublished information of the OTS to anyone (other than an employee, 
officer or agent of the OTS properly entitled to such information for 
the performance of their official duties), whether by giving out or 
furnishing such information or a copy thereof or by allowing any person 
to inspect, examine, or copy such information or copy thereof, or 
otherwise.
    (2) Duty of person served. If any person, whether or not a current 
or former employee, officer or agent of the OTS, has information of the 
OTS that may not be disclosed under the regulations of the OTS or other 
applicable law, and in connection therewith is served with a subpoena, 
order, or other process requiring personal attendance as a witness or 
production of records or information in any proceeding, that person 
shall promptly advise the OTS of such service or request for 
information. Upon such notice the OTS will take appropriate action to 
advise the court or tribunal that issued the process and the attorney 
for the party at whose instance the process was issued, if known, of the 
substance of this section. Such notice to the OTS shall be made by 
contacting the Litigation Division, Office of Chief Counsel, Office of 
Thrift Supervision, 1700 G Street NW., Washington, DC 20552. As provided 
in paragraph (e)(3) of this section, a person so served with process may 
not disclose OTS information without OTS authorization. To obtain OTS 
authorization, a request must be sent to the OTS in Washington, DC, in 
accordance with paragraph (c) of this section.
    (3) Appearance by person served. Except as the OTS has authorized 
disclosure of the relevant information, or except as authorized by law, 
any person who has information of the OTS that may not be disclosed 
under this section

[[Page 44]]

and is required to respond to a subpoena or other legal process shall 
attend at the time and place therein mentioned and respectfully decline 
to produce such records or give any testimony with respect thereto, 
basing such refusal on this part. If, notwithstanding, the court or 
other body orders the disclosure of such records or the giving of such 
testimony, the person having such information of the OTS shall continue 
respectfully to decline to produce such information and shall promptly 
advise the Litigation Division of the Chief Counsel's Office, Office of 
Thrift Supervision. Upon such notice the OTS will take appropriate 
action to advise the court or tribunal which issued the order, of the 
substance of this section.
    (4) Non-waiver of privilege. The possession by any entity or 
individual described in paragraph (c)(4) of this section of OTS records 
covered by this section shall not waive any privilege of the OTS or the 
OTS's right to supervise the further dissemination of these records.
    (f) Orders and agreements protecting the confidentiality of 
unpublished OTS information--(1) Records. Unless otherwise permitted by 
the OTS, release of records authorized pursuant to this section will be 
conditioned by the OTS upon entry of an acceptable protective order by 
the court or administrative tribunal presiding in the particular case, 
or, in non-litigated matters, upon execution of an acceptable 
confidentiality agreement. In cases where protective orders have already 
been entered, the OTS reserves the right to condition approval for 
release of information upon the inclusion of additional or amended 
provisions.
    (2) Testimony. The OTS may condition its authorization of deposition 
testimony on an agreement of the parties that the transcript of the 
testimony will be kept under seal, or will be made available only to the 
parties, the court and the jury, except to the extent that the OTS may 
allow use of the transcript in related litigation. The party who 
requested the testimony shall, at its expense, furnish to the OTS a copy 
of the transcript of testimony of the OTS employee or former employee.
    (g) Limitation of burden on the OTS in connection with released 
records--(1) Authentication for use as evidence. The OTS will 
authenticate released records to facilitate their use as evidence. 
Requesters who require authenticated records should request certified 
copies at least 30 days prior to the date they will be needed. The 
request should be sent to the OTS Public Disclosure Branch and shall 
identify the records, giving the office or record depository where they 
are located (if known) and include copies of the records and payment of 
the certification fee.
    (2) Responsibility of litigants to share released records. The party 
who has sought and obtained OTS records has the responsibility of:
    (i) Notifying other parties to the case of the release and, after 
entry of a protective order, providing copies of the records to the 
other parties who are subject to the protective order; and
    (ii) Retrieving any records from the court's file as soon as the 
records are no longer required by the court and returning them to the 
OTS. Where a party may be involved in related litigation, the OTS may, 
upon a request made to it pursuant to this section, authorize such party 
to transfer the records for use in that related case.
    (h) Fees--(1) Fees for records searches, copying and certifications. 
Requesters shall be charged fees in accordance with Treasury Department 
regulations, 31 CFR 1.7. With certain exceptions, the regulations in 31 
CFR 1.7 provide for recovery of the full direct costs of searching, 
reviewing, certifying and duplicating the records sought. An estimate of 
the statement of charges will be sent to requesters, and fees shall be 
remitted by check payable to the OTS prior to release of the requested 
records. Where it deems appropriate, the OTS may contract with 
commercial copying concerns to copy the records, with the cost billed to 
the requester.
    (2) Witness fees and allowances. (i) Litigants whose requests for 
testimony of current OTS employees are approved shall, upon completion 
of the testimonial appearance, promptly tender a check payable to the 
OTS for witness fees and allowances in accordance with 28 U.S.C. 1821.

[[Page 45]]

    (ii) All litigants whose requests for testimony of former OTS 
employees are approved, shall also promptly tender witness fees and 
allowances to the witness in accordance with 28 U.S.C. 1821.

[54 FR 49456, Nov. 30, 1989, as amended at 60 FR 28031, May 30, 1995]



PART 512_RULES FOR INVESTIGATIVE PROCEEDINGS AND FORMAL EXAMINATION 
PROCEEDINGS--Table of Contents




Sec.
512.1 Scope of part.
512.2 Definitions.
512.3 Confidentiality of proceedings.
512.4 Transcripts.
512.5 Rights of witnesses.
512.6 Obstruction of the proceedings.
512.7 Subpoenas.

    Authority: 12 U.S.C. 1462a, 1463, 1464, 1467, 1467a, 1813; 15 U.S.C. 
78 l.

    Source: 54 FR 49457, Nov. 30, 1989, unless otherwise noted.



Sec. 512.1  Scope of part.

    This part prescribes rules of practice and procedure applicable to 
the conduct of investigative proceedings under section 10(g)(2) of the 
Home Owners' Loan Act, as amended, 12 U.S.C. 1467a(g)(2) (``HOLA'') and 
to the conduct of formal examination proceedings with respect to savings 
associations and their affiliates under section 5(d)(1)(B) of the HOLA, 
as amended, 12 U.S.C. 1464(d)(1)(B) or 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 part does not apply to adjudicatory 
proceedings as to which hearings are required by statute, the rules for 
which are contained in part 509 of this chapter.



Sec. 512.2  Definitions.

    As used in this part:
    (a) Office means the Office of Thrift Supervision;
    (b) Investigative proceeding means an investigation conducted under 
section 10(g)(2) of the HOLA;
    (c) 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 savings associations and their affiliates 
conducted pursuant to section 5(d)(1)(B) of the HOLA, section 7(j)(15) 
of the FDIA, section 8(n) of the FDIA or section 10(c) of the FDIA; and
    (d) Designated representative means the person or persons empowered 
by the Office to conduct an investigative proceeding or a formal 
examination proceeding.



Sec. 512.3  Confidentiality of proceedings.

    All formal examination proceedings shall be private and, unless 
otherwise ordered by the Office, all investigative proceedings shall 
also be private. Unless otherwise ordered or permitted by the Office, or 
required by law, and except as provided in Sec. Sec. 512.4 and 512.5, 
the entire record of any investigative proceeding or formal examination 
proceeding, including the resolution of the Office or its delegate(s) 
authorizing 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.



Sec. 512.4  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 Deputy Chief Counsel for 
Enforcement or the appropriate Regional Counsel for Enforcement 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

[[Page 46]]

his counsel) shall have the right to inspect the transcript of the 
witness' own testimony.

[54 FR 49457, Nov. 30, 1989, as amended at 60 FR 66717, Dec. 26, 1995]



Sec. 512.5  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 Office resolution authorizing such proceeding. Copies of such 
resolution shall be furnished, for their retention, to such persons only 
with the written approval of the Deputy Chief Counsel for Enforcement or 
the appropriate Regional Counsel for Enforcement.
    (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 Office in 
accordance with the provisions of part 513 of this chapter 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 Office, for good cause, may exclude a particular attorney 
from further participation in any investigation in which the Office has 
found the attorney to have engaged in dilatory, obstructionist, 
egregious, contemptuous or contumacious conduct. The person conducting 
an investigation may report to the Office instances of apparently 
dilatory, obstructionist, egregious, contemptuous or contumacious 
conduct on the part of an attorney. After due notice to the attorney, 
the Office 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 Office may permit or direct.

[54 FR 49457, Nov. 30, 1989, as amended at 60 FR 66717, Dec. 26, 1995]



Sec. 512.6  Obstruction of the proceedings.

    The designated representative shall report to the Office 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 Office may take such action as 
the circumstances warrant, including the exclusion of counsel from 
further participation in such proceeding.



Sec. 512.7  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

[[Page 47]]

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 
Chief Counsel or his designee to quash or modify such subpoena, 
accompanying such application with a statement of the reasons therefor. 
The Chief 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 
Chief 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 Office by any of its designated representatives.

[54 FR 49457, Nov. 30, 1989, as amended at 56 FR 38317, Aug. 12, 1991]



PART 513_PRACTICE BEFORE THE OFFICE--Table of Contents




Sec.
513.1 Scope of part.
513.2 Definitions.
513.3 Who may practice.
513.4 Suspension and debarment.
513.5 Reinstatement.
513.6 Duty to file information concerning adverse judicial or 
          administrative action.
513.7 Proceeding under this part.
513.8 Removal, suspension, or debarment of independent public 
          accountants and accounting firms performing audit services.

    Authority: 12 U.S.C. 1462a, 1463, 1464, 1467a, 1813, 1831m, and 15 
U.S.C. 78.

    Source: 54 FR 49459, Nov. 30, 1989, unless otherwise noted.



Sec. 513.1  Scope of part.

    This part prescribes rules with regard to general practice before 
the Office 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 Office. 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 
Office thereunder, which special requirements are controlling. In 
addition to any suspension hereunder, a person may be excluded from 
further participation under this chapter from a rulemaking hearing in 
accordance with Sec. 510.2, from an adjudicatory proceeding in 
accordance with Sec. 509.6(a)(1), from a removal hearing in accordance 
with Sec. 508.3, or from an investigatory proceeding in accordance with 
Sec. 512.5(b)(2) of this chapter.

[54 FR 49459, Nov. 30, 1989, as amended at 56 FR 38317, Aug. 12, 1991]



Sec. 513.2  Definitions.

    As used in this part:

[[Page 48]]

    (a) Office means the Office;
    (b) The term Secretary means the Secretary and any Assistant or 
Acting Secretary to the Office;
    (c) The term presiding officer includes the Office, his delegatee 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 part, 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;
    (d) The term 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; and
    (e) The term practice means transacting any business with the 
Office, including:
    (1) The representation of another person at any adjudicatory, 
investigatory, removal or rulemaking proceeding conducted before the 
Office, a presiding officer or the Office's staff, including those 
proceedings covered in parts 508, 509, 510, and 512 of this chapter;
    (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 Office, with such expert's consent or knowledge 
in connection with any application or other filing with the Office;
    (3) A presentation to the Office, a presiding officer or the 
Office'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 Office and rules and regulations promulgated 
thereunder;
    (4) Any business correspondence or communication with the Office, a 
presiding officer or the Office's staff; and
    (5) The transaction of any other formal business with the Office on 
behalf of another, in the capacity of an attorney, accountant, appraiser 
or other licensed expert.



Sec. 513.3  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 Office.
    (2) Any accountant, appraiser or other licensed expert may practice 
before the Office in a professional capacity.
    (b) By attorneys. Any association or other person may be represented 
in any proceeding or other matter before the Office by an attorney.
    (c) Any licensed expert or professional transacting business with 
the Office in a representative capacity may be required to show his 
authority to act in such capacity.



Sec. 513.4  Suspension and debarment.

    (a) The Office 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 Office, 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 Office, or
    (4) To have willfully violated, or willfully aided and abetted the 
violation of, any provision of the laws administered by the Office 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 Office.
    (2) Any accountant, appraiser or other licensed expert whose license 
to practice has been revoked in any State, possession, territory, 
Commonwealth

[[Page 49]]

or the District of Co1umbia, shall be suspended forthwith from practice 
before the Office.
    (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 Office.
    (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 section, 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 Office, 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, on or after June 20, 1984, 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 Office itself in a final administrative order, by reason of his 
misconduct in any action brought by the Office 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 Office, 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 Office to which he is a party or found by the Office 
(whether by consent, default, upon summary judgment or after hearing) in 
any administrative proceeding in which the Office 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 Office, 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 Office 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 (c)(1)(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 Office 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 Office to lift such suspension. If no petition 
is received by the Office 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 Office shall either lift the 
temporary suspension or set the matter down for hearing at a time and 
place to be designated by the Office, or both. After opportunity for 
hearing, the Office may censure the petitioner or may suspend the 
petitioner from appearing or practicing before the Office 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 Office in order to ensure the 
petitioner's right to address the allegations against him.

[[Page 50]]

    (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.



Sec. 513.5  Reinstatement.

    (a) Any person who is suspended from practicing before the Office 
under paragraph (a) or (c) of Sec. 513.4 of this part may file an 
application for reinstatement at any time. Denial of the privilege of 
practicing before the Office shall continue unless and until the 
applicant has been reinstated by order of the Office for good cause 
shown.
    (b) Any person suspended under paragraph (b) of Sec. 513.4 shall be 
reinstated by the Office, upon appropriate application, if all of the 
grounds for application of the provisions of paragraph (b) of Sec. 
513.4 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 
paragraph (b) of Sec. 513.4 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 Sec. 508.3 and paragraph (a) of Sec. 508.7 of this 
chapter. However, such suspension shall continue unless and until the 
applicant has been reinstated by order of the Office for good cause 
shown.

[54 FR 49459, Nov. 30, 1989, as amended at 56 FR 38318, Aug. 12, 1991]



Sec. 513.6  Duty to file information concerning adverse judicial or 
administrative action.

    Any person appearing or practicing before the Office who has been or 
is the subject of a conviction, suspension, debarment, license 
revocation, injunction or other finding of the kind described in Sec. 
513.4 (b) or (c) of this part in an action not instituted by the Office 
shall promptly file a copy of the relevant order, judgment or decree 
with the Secretary to the Office 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 
later of June 15, 1984, the entry of the order, judgment or decree, or 
the date such person initiates practice before the Office, for that 
reason alone may be disqualified from practicing before the Office 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 part.



Sec. 513.7  Proceeding under this part.

    (a) All hearings required or permitted to be held under paragraphs 
(a) and (c) of Sec. 513.4 of this part shall be held before a presiding 
officer utilizing the procedures established in the rules of practice 
and procedure in adjudicatory proceedings under part 509 of this 
chapter.
    (b) All hearings held under this part shall be closed to the public 
unless the Office on its own motion or upon the request of a party 
otherwise directs.
    (c) Any proceeding brought under any section of this part 513 shall 
not preclude a proceeding under any other

[[Page 51]]

section of this part or any other part of the Office's regulations.



Sec. 513.8  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 (12 U.S.C. 1831m) for insured savings 
associations and savings and loan holding companies.
    (b) Definitions. As used in this section, the following terms have 
the meaning given below unless the context requires otherwise:
    (1) Accounting firm. The term accounting firm means a corporation, 
proprietorship, partnership, or other business firm providing audit 
services.
    (2) Audit services. The term audit services means any service 
required to be performed by an independent public accountant by section 
36 of the FDIA Act and 12 CFR part 363, including attestation services. 
Audit services include any service performed with respect to a savings 
and loan holding company of a savings association that is used to 
satisfy requirements imposed by section 36 or part 363 on that savings 
association.
    (3) 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 Office may remove, suspend, or debar an independent 
public accountant from performing audit services for 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 Office 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 Office or any officer 
or employee of the Office;
    (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 
Office 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 Office 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

[[Page 52]]

office thereof, and the term of any sanction against an accounting firm 
under this section, the Office 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 Office may have under any other applicable 
provisions of law, rule, or regulation.
    (f) Proceedings to remove, suspend, or debar. (1) The Office 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 (12 CFR 
part 509).
    (g) Immediate suspension from performing audit services. (1) If the 
Office serves written notice of intention to remove, suspend, or debar 
an independent public accountant or accounting firm from performing 
audit services, the Office 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 Office:
    (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 Office 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 Office 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 Office 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 Office 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 OTS

[[Page 53]]

employee engaged in investigative or prosecuting functions for the OTS 
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 OTS, 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 Sec. Sec. 509.6 through 
509.12, 509.16, and 509.21 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 Director. Within 60 calendar days of 
the presiding officer's certification, the Director 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 Director's decision.
    (i) Scope of any order of removal, suspension, or debarment. (1) 
Except as provided in paragraph (i)(2), any independent public 
accountant or accounting firm that has been removed, suspended 
(including an immediate suspension), or debarred from performing audit 
services by the Office may not, while such order is in effect, perform 
audit services for any savings association.
    (2) An order of removal, suspension (including an immediate 
suspension), or debarment may, at the discretion of the Office, be made 
applicable to a limited number of savings associations or savings and 
loan holding companies (limited scope order).
    (j) Automatic removal, suspension, and debarment. (1) An independent 
public accountant or accounting firm may not perform audit services for 
a 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 Federal Deposit Insurance Corporation, 
or the Office of the Comptroller of the Currency 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 Office, for good cause shown, may 
grant written permission to an independent public accountant or 
accounting firm to perform audit services for savings associations. The 
request must contain a concise statement of action requested. The Office 
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 
Office 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 savings association must

[[Page 54]]

provide the Office 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 
(j)(1)(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 Office, 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 Office may require 
the applicant to submit additional information.
    (2) An applicant for reinstatement under paragraph (l)(1) of this 
section may, in the Office'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 Office may, in its sole 
discretion, direct that any reinstatement proceeding be limited to 
written submissions. The removal, suspension, or debarment shall 
continue until the Office, 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.

[68 FR 48272, Aug. 13, 2003]



PART 516_APPLICATION PROCESSING PROCEDURES--Table of Contents




Sec.
516.1 What does this part do?
516.5 Do the same procedures apply to all applications under this part?
516.10 How does OTS compute time periods under this part?

               Subpart A_Pre-Filing and Filing Procedures

                          Pre-Filing Procedures

516.15 Must I meet with OTS before I file my application?
516.20 What information must I include in my draft business plan?

                            Filing Procedures

516.25 What type of application must I file?
516.30 What information must I provide with my application?
516.35 May I keep portions of my application confidential?
516.40 Where do I file my application?
516.45 What is the filing date of my application?
516.47 How do I amend or supplement my application?

                   Subpart B_Publication Requirements

516.50 Who must publish a public notice of an application?
516.55 What information must I include in my public notice?
516.60 When must I publish the public notice?
516.70 Where must I publish the public notice?
516.80 What language must I use in my publication?

                      Subpart C_Comment Procedures

516.100 What does this subpart do?
516.110 Who may submit a written comment?
516.120 What information should a comment include?
516.130 Where are comments filed?
516.140 How long is the comment period?
516.150 Will there be additional opportunities to discuss the 
          application?

                      Subpart D_Meeting Procedures

516.160 What does this subpart do?
516.170 What procedures govern informal meetings on applications?
516.180 What procedures govern formal meetings on applications?

[[Page 55]]

516.185 Will OTS approve or disapprove an application at a meeting?
516.190 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?

                           Standard Treatment

516.210 What will OTS do after I file my application?
516.220 If OTS requests additional information to complete my 
          application, how will it process my application?
516.230 Will OTS conduct an eligibility examination?
516.240 What may OTS require me to do after my application is deemed 
          complete?
516.250 Will OTS require me to publish a new public notice?
516.260 May OTS suspend processing of my application?
516.270 How long is the OTS review period?
516.280 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?

    Authority: 5 U.S.C. 552, 559; 12 U.S.C. 1462a, 1463, 1464, 2901 et 
seq.

    Source: 57 FR 14336, Apr. 20, 1992, unless otherwise noted.



Sec. 516.1  What does this part do?

    (a) This part explains OTS procedures for processing applications, 
notices, or filings (applications). Except as provided in paragraph (b) 
of this section, subparts A and E of this part apply whenever an OTS 
regulation requires any person (you) to file an application with OTS. 
Subparts B, C, and D, however, only apply when an OTS regulation 
incorporates the procedures in the subpart or where otherwise required 
by OTS.
    (b) This part 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 OTS 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 part 508 or 509 of this chapter, 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 OTS regulation specifically requires an 
application under this part.
    (4) An application filed under an OTS regulation that prescribes 
other application processing procedures and time frames for the approval 
of applications.
    (c) If an OTS regulation for a specific type of application 
prescribes some application processing procedures, or time frames, OTS 
will apply this part to the extent necessary to process the application. 
For example, if an OTS regulation for a specific type of application 
does not identify time periods for the processing of an application, the 
time periods in this part apply.

[66 FR 13000, Mar. 2, 2001]



Sec. 516.5  Do the same procedures apply to all applications under this part?

    OTS processes applications under this part using two procedures, 
expedited treatment and standard treatment. To determine which treatment 
applies, you may use the following chart:

----------------------------------------------------------------------------------------------------------------
                        If * * *                           Then OTS will process your  application under * * *
----------------------------------------------------------------------------------------------------------------
(a) The applicable regulation does not specifically      Standard treatment.
 state that expedited treatment is available.
(b) You are not a savings association..................  Standard treatment.
(c) Your composite rating is 3, 4, or 5. The composite   Standard treatment.
 rating is the composite numeric rating that OTS or the
 other federal banking regulator assigned to you under
 the Uniform Financial Institutions Rating System \1\
 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.

[[Page 56]]

 
(d) Your Community Reinvestment Act (CRA) rating is      Standard treatment.
 Needs to Improve or Substantial Noncompliance. The CRA
 rating is the Community Reinvestment Act performance
 rating that OTS 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, Sec.  563e.28 of this chapter.
(e) Your compliance rating is 3, 4, or 5. The            Standard treatment.
 compliance rating is the numeric rating that OTS or
 the other federal banking regulator assigned to you
 under OTS 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.
(f) You fail any one of your capital requirements under  Standard treatment.
 part 567 of this chapter.
(g) OTS has notified you that you are an association in  Standard treatment.
 troubled condition.
(h) Neither OTS nor any other federal banking regulator  Standard treatment.
 has assigned you a composite rating, a CRA rating or a
 compliance rating.
(i) You do not meet any of the criteria listed in        Expedited treatment.
 paragraphs (a) through (h) of this section.
----------------------------------------------------------------------------------------------------------------
\1\ A savings association may obtain a copy of its composite rating from the appropriate Regional Office.


[66 FR 13000, Mar. 2, 2001]



Sec. 516.10  How does OTS compute time periods under this part?

    In computing time periods under this part, OTS 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.

[66 FR 13000, Mar. 2, 2001]



               Subpart A_Pre-Filing and Filing Procedures

    Source: 66 FR 13000, Mar. 2, 2001, unless otherwise noted.

                          Pre-Filing Procedures



Sec. 516.15  Must I meet with OTS 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 * * *
------------------------------------------------------------------------
(1) An application for permission to     You must meet with OTS before
 organize a de novo federal savings       filing your application. You
 association.                             must submit a draft business
                                          plan before this meeting.
(2) An application to convert an         You must meet with OTS before
 existing insured depository              filing your application. OTS
 institution (other than a state-         may require you to submit a
 chartered savings association or a       draft business plan or other
 state-chartered savings bank) or a       relevant information before
 credit union to a federal savings        this meeting.
 association.
(3) An application to acquire control    OTS may require you to meet
 of a savings association.                with OTS before filing your
                                          application and may require
                                          you to submit a draft business
                                          plan or other relevant
                                          information before this
                                          meeting.
------------------------------------------------------------------------

    (b) Contacting the Regional Office. (1) You must contact the 
appropriate Regional Office 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 
Regional Office 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 Regional Office will also establish 
a schedule for any meeting and the submission of any information.
    (2) All other applicants are encouraged to contact the appropriate 
Regional Office 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.

[[Page 57]]



Sec. 516.20  What information must I include in my draft business plan?

    If you must submit a draft business plan under Sec. 516.15, your 
plan must:
    (a) Clearly and completely describe the 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 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 Sec. 563.555 of this 
chapter) of the 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 savings 
association will be met.

                            Filing Procedures



Sec. 516.25  What type of application must I file?

    (a) Expedited treatment. If you are eligible for expedited treatment 
under Sec. 516.5, you may file your application in the form of a notice 
that includes all information required by the applicable substantive 
regulation. If OTS 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 Sec. 516.5, you must file your application following all 
applicable substantive regulations and guidelines governing the filing 
of applications. If OTS has a designated form for your application, you 
must file that form.
    (c) Waiver requests. If you want OTS 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 OTS to 
evaluate your notice or application under applicable standards.



Sec. 516.30  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 any 
OTS Regional Office. You may also obtain forms and instructions on OTS's 
web page at www.ots.treas.gov.
    (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.



Sec. 516.35  May I keep portions of my application confidential?

    (a) Confidentiality. OTS makes submissions under this part 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 OTS 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 505 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) OTS will not treat as confidential the portion of your 
application describing how you plan to meet your Community Reinvestment 
Act (CRA) objectives. OTS will make information in your CRA plan, 
including any information incorporated by reference from

[[Page 58]]

other parts of your application, available to the public upon request.
    (c) OTS determination on confidentiality. OTS 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 505 
of this chapter. OTS will advise you before it makes information you 
designate as confidential available to the public.



Sec. 516.40  Where do I file my application?

    (a) Regional Office. (1) You must file the original application and 
the number of copies indicated on the applicable form with the 
applications filing division of the appropriate OTS Regional Office. You 
should address the filings to ``Attn: Applications Filing Room'' at the 
Regional address listed in paragraph (a)(2) of this section. If the form 
does not indicate the number of copies you must file or if OTS has not 
prescribed a form for your application, you must file the original 
application and two copies.
    (2) The addresses of each Regional Office and the states covered by 
each office are:

----------------------------------------------------------------------------------------------------------------
                    Region                              Office address                    States served
----------------------------------------------------------------------------------------------------------------
Northeast....................................  Office of Thrift Supervision, 10  Connecticut, Delaware, Maine,
                                                Exchange Place, 18th Floor,       Massachusetts, New Hampshire,
                                                Jersey City, New Jersey 07302.    New Jersey, New York, Ohio,
                                                                                  Pennsylvania, Rhode Island,
                                                                                  Vermont, West Virginia
Southeast....................................  Office of Thrift Supervision,     Alabama, District of Columnbia,
                                                1475 Peachtree Street, N.E.,      Florida, Georgia, Illinois,
                                                Atlanta, Georgia 30309 (Mail      Indiana, Kentucky, Maryland,
                                                to: P.O. Box 105217, Atlanta,     Michigan, North Carolina,
                                                Georgia 30348-5217).              Puerto Rico, South Carolina,
                                                                                  Virginia, the Virgin Islands.
Midwest......................................  Office of Thrift Supervision,     Arkansas, Iowa, Kansas,
                                                225 E. John Carpenter Freeway,    Louisiana, Mississippi,
                                                Suite 500, Irving, Texas 75062-   Missouri, Nebraska, Oklahoma,
                                                2326 (Mail to: P.O. Box 619027)   Tennessee, Texas, Wisconsin.
                                                Dallas/Ft. Worth, Texas 75261-
                                                9027).
West.........................................  Office of Thrift Supervision,     Alaska, Arizona, California,
                                                Pacific Plaza, 2001 Junipero      Colorado, Guam, Hawaii, Idaho,
                                                Serra Boulevard, Suite 650,       Montana, Nevada, New Mexico,
                                                Daly City, California 94014-      North Dakota, Northern Mariana
                                                1976 (Mail to: P.O. Box 7165      Islands, Oregon, South Dakota,
                                                San Francisco, California 94120-  Utah, Washington, Wyoming.
                                                7165).
----------------------------------------------------------------------------------------------------------------

    (b) Additional filings with OTS Headquarters. (1) In addition to 
filing in the Regional Office, if your application involves a 
significant issue of law or policy or if an applicable regulation or 
form directs you to file with OTS Headquarters, you must also file 
copies of your application with the Applications Filing Room at OTS 
headquarters, 1700 G Street, NW., Washington, DC 20552. 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 OTS has not 
prescribed a form for your application, you must file three copies.
    (2)(i) You may obtain a list of applications involving significant 
issues of law or policy at the OTS website at www.ots.treas.gov or by 
contacting a Regional Office.
    (ii) OTS reserves the right to identify significant issues of law or 
policy in a particular application. OTS will advise you, in writing, if 
it makes this determination.

[66 FR 13000, Mar. 2, 2001, as amended at 66 FR 65820, Dec. 21, 2001; 67 
FR 78152, Dec. 23, 2002]



Sec. 516.45  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 OTS requires you to do so under Sec. 
516.15.
    (2) You file your application and all required copies with OTS, as 
described under Sec. 516.40.

[[Page 59]]

    (i) If you are required to file with a Regional Office and with OTS 
Headquarters, you have not filed with OTS until you file with both 
offices.
    (ii) You have not filed with a Regional Office or OTS 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 a 
Regional Office or OTS Headquarters, you have filed with that office on 
the next business day.
    (3) You pay the applicable fee. You have not paid the fee until you 
submit the fee to the appropriate Regional Office, or OTS waives the 
fee. You may pay by check, money order, cashier's check or wire transfer 
payable to OTS.
    (b) OTS 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 Regional 
Office, OTS determines that a significant issue of law or policy exists 
under Sec. 516.40(b)(2)(ii), the filing date of your application is the 
day you filed with the Regional Office. The 30-day review period under 
Sec. Sec. 516.200 or 516.210 of this part will restart in its entirety 
when the Regional Office forwards the appropriate number of copies of 
your application to OTS Headquarters.



Sec. 516.47  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 OTS office(s) along with 
the number of copies required under Sec. 516.40. Your amendment or 
supplemental information also must meet the caption and exhibit 
requirements at Sec. 516.30(b).



                   Subpart B_Publication Requirements

    Source: 62 FR 64143, Dec. 4, 1997, unless otherwise noted.



Sec. 516.50  Who must publish a public notice of an application?

    This subpart applies whenever an OTS regulation requires an 
applicant (``you'') to follow the public notice procedures in this 
subpart.



Sec. 516.55  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 OTS office(s).
    (e) The address of the appropriate OTS offices 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 Regional Office, and are available for 
public inspection during regular business hours.
    (h) Any other information that OTS requires you to publish. You may 
find the format for various publication notices in the appendix to OTS 
application processing handbook.

[66 FR 13002, Mar. 2, 2001]



Sec. 516.60  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.



Sec. 516.70  Where must I publish the public notice?

    You must publish the notice in a newspaper having a general 
circulation in the following communities:
    (a) The community in which your home office(s) are located, or if 
you are filing an application for permission to organize, the community 
in which your home office will be located; and
    (b) If you are filing a branch application, the community to be 
served by the branch office.



Sec. 516.80  What language must I use in my publication?

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

[[Page 60]]

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



                      Subpart C_Comment Procedures

    Source: 62 FR 64144, Dec. 4, 1997, unless otherwise noted.



Sec. 516.100  What does this subpart do?

    This subpart contains the procedures governing the submission of 
public comments on certain types of applications or notices 
(``applications'') pending before the OTS. It applies whenever a 
regulation incorporates the procedures in this subpart, or where 
otherwise required by the OTS.



Sec. 516.110  Who may submit a written comment?

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

[62 FR 64144, Dec. 4, 1997, as amended at 66 FR 13003, Mar. 2, 2001]



Sec. 516.120  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 OTS 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) If a commenter wishes to request an informal meeting under Sec. 
516.170, the commenter must file a request with the comment. The 
commenter should 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.

[66 FR 13003, Mar. 2, 2001]



Sec. 516.130  Where are comments filed?

    A commenter must file with the appropriate OTS Regional Office (See 
table at Sec. 516.40(a)(2)). The commenter must simultaneously send a 
copy of the comment to the applicant.

[66 FR 13003, Mar. 2, 2001]



Sec. 516.140  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 OTS within 25 calendar days 
after the application is filed with OTS.
    (b) Late-filed comments. OTS will consider a late-filed comment if:
    (1) Within the comment period, the commenter demonstrates to OTS 
good cause why the commenter could not submit a timely comment; or
    (2) OTS concludes that the comment addresses a significant 
regulatory concern and will assist in the disposition of the 
application.

[66 FR 13003, Mar. 2, 2001]



Sec. 516.150  Will there be additional opportunities to discuss the 
application?

    OTS may provide the commenter with additional opportunities to 
discuss the application in informal or formal meetings under subpart D 
of this part.

[66 FR 13003, Mar. 2, 2001]



                      Subpart D_Meeting Procedures

    Source: 62 FR 64144, Dec. 4, 1997, unless otherwise noted.



Sec. 516.160  What does this subpart do?

    This subpart contains informal and formal meeting procedures. It 
applies whenever a regulation incorporates the procedures in this 
subpart, or when otherwise required by the OTS.



Sec. 516.170  What procedures govern informal meetings on applications?

    (a) When will the OTS arrange an informal meeting? The OTS may 
arrange

[[Page 61]]

an informal meeting with the applicant, commenters, or any other 
interested persons to clarify and narrow the issues and to facilitate 
the resolution of the issues. If a commenter has filed a written request 
for an informal meeting containing the information described at Sec. 
516.120(b), the OTS will arrange an informal meeting. The OTS also may 
arrange an informal meeting on its own initiative.
    (b) What action will the OTS take on an informal meeting request? 
The OTS will inform the applicant and commenters requesting an informal 
meeting of the OTS decision on a request for an informal meeting, or of 
its decision to hold an informal meeting on its own initiative.
    (c) How will the OTS inform the informal meeting participants of the 
date, time, location and format for the informal meeting? The OTS will 
invite the applicant and the commenter filing the request for the 
informal meeting. The OTS may also invite any other interested persons 
to attend. The OTS will inform the participants of the date, time, 
location, and format for the informal meeting a reasonable time in 
advance of the informal meeting.
    (d) What procedures will govern the conduct of the informal meeting? 
The OTS may hold informal meetings in any format, including a telephone 
conference or face-to-face meeting.
    (e) Will there be an additional opportunity to discuss the 
application? Within three days after the informal meeting, any 
participant in the informal meeting may request the OTS to hold a formal 
meeting under Sec. 516.180. The participant should describe the nature 
of the issues or facts to be presented and the reasons why a formal 
meeting is necessary to make an adequate presentation of the facts or 
issues. The participant must file the request with the OTS and send 
copies of the request to other participants in the informal meeting.



Sec. 516.180  What procedures govern formal meetings on applications?

    (a) When will the OTS hold a formal meeting? The OTS will not grant 
a request for a formal meeting unless an informal meeting has been 
conducted under Sec. 516.170. The OTS will grant all requests for a 
formal meeting filed under Sec. 516.170(e). The OTS may also hold a 
formal meeting on its own initiative, if it determines that written 
submissions and informal meetings are insufficient to adequately present 
issues or facts to the OTS, or that a formal meeting would otherwise 
benefit the decisionmaking process. The OTS may limit the issues 
considered at the formal meeting to issues that the OTS deems relevant 
or material.
    (b) How will the OTS announce the formal meeting? The OTS will issue 
a Notice of Formal Meeting that will state the subject and date of the 
filing, the time and place of the formal meeting and the issues to be 
addressed. The OTS will send the Notice to the applicant and any person 
requesting a formal meeting under Sec. 516.170(e). The OTS may also 
invite other interested persons to participate in the formal meeting by 
sending the Notice to such persons.
    (c) Who may participate in the formal meeting? A person receiving a 
Notice must notify the OTS of its intent to participate within ten days 
after the OTS issues the Notice. At least five days before the formal 
meeting, all participants in the formal meeting must provide the names 
of their witnesses and copies of proposed exhibits to the OTS, the 
applicant, and any other person designated by the OTS.
    (d) Will the formal meeting be transcribed? The OTS will arrange for 
a transcript. Each participant must bear the cost of any copies of the 
transcript it requests for its use.
    (e) What procedures govern the conduct of the formal meeting? (1) 
The OTS will appoint a presiding officer to conduct the formal meeting. 
The presiding officer is responsible for all procedural questions not 
governed by this section. Subject to the rulings of the presiding 
officer, a participant may make opening statements and present 
witnesses, material and data. If a participant presents documentary 
material, it must furnish copies of the material to the OTS and to each 
other participant. The OTS may keep the formal meeting record open for 
additional information for up to 14 days following the receipt of the 
transcript.

[[Page 62]]

    (2) 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 OTS Rules of Practice 
and Procedure in Adjudicatory Proceedings (12 CFR part 509) do not apply 
to formal meetings under this section.



Sec. 516.185  Will OTS approve or disapprove an application at a meeting?

    OTS will not approve or deny an application at a formal or informal 
meeting under this subpart.

[66 FR 13003, Mar. 2, 2001]



Sec. 516.190  Will a meeting affect application processing time frames?

    If OTS has arranged a meeting, it will suspend applicable 
application processing time frames, including the time frames for 
deeming an application complete and the applicable approval time frames 
specified in subpart E of this part. The time period will resume when 
OTS determines that a record has been developed that sufficiently 
supports a determination on the issues raised in the comments.

[66 FR 13003, Mar. 2, 2001]



                          Subpart E_OTS Review

    Source: 66 FR 13003, Mar. 2, 2001, unless otherwise noted.

                           Expedited Treatment



Sec. 516.200  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 OTS, you may engage in the proposed 
activities upon the expiration of 30 days after the filing date of your 
notice, unless OTS takes one of the following actions before the 
expiration of that time period:
    (a) OTS 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 OTS takes one of the actions described in 
paragraphs (b) through (d) of this section before the expiration of that 
time period;
    (b) OTS notifies you in writing that your notice is subject to 
standard treatment under this subpart. OTS 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) OTS notifies you in writing that it is suspending the applicable 
time frames under Sec. 516.190; or
    (d) OTS notifies you that it disapproves your notice.

                           Standard Treatment



Sec. 516.210  What will OTS do after I file my application?

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

------------------------------------------------------------------------
              If OTS * * *                          Then * * *
------------------------------------------------------------------------
(1) Notifies you, in writing, that your  The applicable review period
 application is complete * * *.           will begin on the date that
                                          OTS deems your application
                                          complete.
(2) Notifies you, in writing, that you   You must submit the required
 must submit addition information to      additional information under
 complete your application * * *.         Sec.  516.220.
(3) Notifies you, in writing, that your  OTS will not process your
 application is materially deficient *    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 Sec. 516.25(b), and OTS has 
not notified

[[Page 63]]

you that you must submit additional information under paragraph (a)(2) 
of this section, your request for waiver is granted.



Sec. 516.220  If OTS 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 Sec. 
516.210(a)(1):

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

    (b) OTS may extend the 15-day period referenced in paragraph (a)(1) 
of this section by up to 15 calendar days, if OTS requires the 
additional time to review your response. OTS 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 OTS fails to act on it within 15 
calendar days after the filing of your response, unless OTS extends the 
review period under paragraph (b). If OTS extends the review period 
under paragraph (b), your request is granted if OTS fails to act on it 
by the end of the extended review period.

[66 FR 13003, Mar. 2, 2001; 67 FR 3264, Jan. 23, 2002]

[[Page 64]]



Sec. 516.230  Will OTS conduct an eligibility examination?

    (a) Eligibility examination. OTS may notify you at any time before 
it deems your application complete that it will conduct an eligibility 
examination. If OTS decides to conduct an eligibility examination, it 
will not deem your application complete until it concludes the 
examination.
    (b) Additional information. OTS 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 OTS. OTS will 
review your response under the procedures described in Sec. 516.220.



Sec. 516.240  What may OTS 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) OTS may require you to provide additional information if the 
information is necessary to resolve or clarify the issues presented by 
your application.
    (b) OTS 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 effect your application. If 
OTS 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 Sec. 516.220; and
    (2) Require you to publish a new public notice of your application 
under Sec. 516.250.



Sec. 516.250  Will OTS require me to publish a new public notice?

    (a) If your application was subject to a publication requirement, 
OTS 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) OTS determines that additional comment on these matters is 
appropriate because of the significance of the new information or 
circumstances.
    (b) OTS 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 OTS after you publish the new 
public notice.



Sec. 516.260  May OTS suspend processing of my application?

    (a) Suspension. OTS may, at any time, indefinitely suspend 
processing of your application if:
    (1) OTS, another governmental entity, or a self-regulatory trade or 
professional organization initiates an investigation, examination, or 
administrative proceeding that is relevant to OTS'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. OTS will promptly notify you, in writing, if it suspends 
your application.



Sec. 516.270  How long is the OTS review period?

    (a) General. The applicable OTS review period is 60 calendar days 
after the date that your application is deemed complete, unless an 
applicable OTS 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) OTS may extend the review period for up to 30 
calendar days beyond the period described in paragraph (a) or (b) of 
this section. OTS must notify you in writing of the extension and the 
duration of the extension. OTS must issue the written

[[Page 65]]

extension before the end of the review period.
    (2) OTS 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. OTS must notify you 
in writing of the extension and the general reasons for the extension. 
OTS 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. This section applies to applications and notices filed 
under Sec. 575.3(b) and part 574 of this chapter.



Sec. 516.280  How will I know if my application has been approved?

    (a) OTS approval or denial. (1) OTS will approve or deny your 
application before the expiration of the applicable review period, 
including any extensions of the review period.
    (2) OTS will promptly notify you in writing of its decision to 
approve or deny your application.
    (b) No OTS action. If OTS fails to act under paragraph (a)(1) of 
this section, your application is approved.



Sec. 516.290  What will happen if OTS does not approve or disapprove 
my application within two calendar years after the filing date?

    (a) Withdrawal. If OTS has not approved or denied your pending 
application within two calendar years after the filing date under Sec. 
516.45, OTS will notify you, in writing, that your application is deemed 
withdrawn unless OTS determines that you are actively pursuing a final 
OTS determination on your application. You are not actively pursuing a 
final OTS determination if you have failed to timely take an action 
required under this part, including filing required additional 
information, or OTS has suspended processing of your application under 
Sec. 516.260 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) Effective date. This section is effective July 1, 2001.



PART 517_CONTRACTING OUTREACH PROGRAMS--Table of Contents




Sec.
517.1 Purpose and scope.
517.2 Definitions.
517.3 Policy.
517.4 Oversight and monitoring.
517.5 Outreach.
517.6 Certification.
517.7 Contract award guidelines.

    Authority: 12 U.S.C. 1833(e); 42 U.S.C. 12101 et seq.

    Source: 58 FR 33324, June 17, 1993, unless otherwise noted.



Sec. 517.1  Purpose and scope.

    The purpose of the OTS Minority-, Women- and Individuals with 
Disabilities-Owned Businesses Outreach Program (Outreach Program) is to 
ensure that firms owned and operated by minorities, women and 
individuals with disabilities are given the opportunity to participate 
to the maximum extent possible in all contracts entered into by the OTS. 
Sections 517.5 through 517.7 of this part apply to all contracting 
activities, with the exception of contracting for legal services, 
engaged in by OTS in any of its capacities, for all OTS functions 
authorized by law. These contracts will typically pertain to services in 
support of OTS's business operations, such as consulting, programming, 
auditing, expert witnesses, customized training, relocation services, 
information systems technology (computer systems, database management, 
software and office automation), or micrographic services; or in support 
of its day-to-day operations, such as facilities management, mail and 
printing services, or procurement of office supplies, furniture and 
office equipment.



Sec. 517.2  Definitions.

    The definitions included in this part are derived from common usage 
of these terms. A term in this part includes all those who are commonly 
understood to be included within that term.
    (a) Minority- and/or women-owned (small and large) businesses and 
entities owned by minorities and women means firms at least fifty-one 
(51) percent owned by individuals who are members

[[Page 66]]

of the minority group or women and who are citizens of the United 
States. In the case of publicly-owned companies, at least fifty-one (51) 
percent of each class of voting stock must be owned by one or more 
members of the minority group or by one or more women, who are citizens 
of the United States. In the case of partnerships, at least fifty-one 
(51) percent of the partnership interest must be owned by one or more 
members of the minority group or by one or more women, who are citizens 
of the United States. Additionally, the management and daily business 
operations of the firm must be controlled by one or more such 
individuals.
    (b) Minority means any Black/African-American; Native American 
(American Indians, Eskimos, Aleuts and Native Hawaiians); Hispanic 
American; Asian-Pacific American; or Subcontinent-Asian American.
    (c) Small and large businesses and entities owned by individuals 
with disabilities means firms at least fifty-one (51) percent owned by 
individuals with disabilities who are citizens of the United States. In 
the case of publicly-owned companies, at least fifty-one (51) percent of 
each class of voting stock must be owned by individuals with 
disabilities who are citizens of the United States. In the case of 
partnerships, at least fifty-one (51) percent of the partnership 
interest must be owned by individuals with disabilities who are citizens 
of the United States. Additionally, the management and daily business 
operations must be controlled by one or more such individuals.
    (d) Disability, as used in this part, has the same meaning as the 
term used in section 3 of the Americans With Disabilities Act of 1990, 
Public Law 101-336, 104 Stat. 327 (42 U.S.C. 12101 et seq).



Sec. 517.3  Policy.

    It is the policy of the OTS that minorities, women and individuals 
with disabilities and entities owned by minorities, women and 
individuals with disabilities are given the opportunity to participate 
to the maximum extent possible in all contracts entered into by the OTS.



Sec. 517.4  Oversight and monitoring.

    The Director of OTS shall appoint an Outreach Program Advocate, who 
shall have primary responsibility for furthering the purposes of the 
Outreach Program.



Sec. 517.5  Outreach.

    (a) The outreach program advocate shall perform outreach activities 
and act as liaison between the OTS and the public on outreach program 
issues.
    (b) Outreach activities include the identification and registration 
of minority-, women-owned (small and large) businesses and entities 
owned by individuals with disabilities who can provide goods and 
services utilized by the OTS. This includes distributing information 
concerning the Outreach Program and providing appropriate registration 
materials for use by vendors and contractors. Identification will 
primarily be accomplished by:
    (1) Obtaining various lists and directories maintained by other 
federal, state and local governmental agencies of Outreach Program 
businesses;
    (2) Participating in conventions, seminars and professional meetings 
oriented towards Outreach Programs;
    (3) Conducting seminars, meetings, workshops and various other 
functions; and
    (4) Monitoring proposed purchases and contracts to assure that OTS 
contracting staff understand and actively promote the Outreach Program.



Sec. 517.6  Certification.

    In order to qualify as an Outreach Program participant, each 
business or contractor must either:
    (a) Self-certify ownership status by filing with the OTS Outreach 
Program Advocate a completed and signed Solicitation Mailing List 
Application, Standard Form 129 (SF-129), as prescribed by the Federal 
Acquisition Regulation (48 CFR part 53);
    (b) Self-certify ownership status by filing with the OTS Outreach 
Program Advocate a completed and signed ABELS Registration/Certification 
Form, as prescribed by the U.S. Department of Commerce's Minority 
Business Development Agency and available from the Outreach Program 
Advocate at the headquarters address

[[Page 67]]

of the OTS listed in Sec. 516.40(b) of this chapter.
    (c) Submit a valid Outreach Program certification received from a 
Federal agency, or a designated state or authorized local agency.

[58 FR 33324, June 17, 1993, as amended at 66 FR 13005, Mar. 2, 2001]



Sec. 517.7  Contract award guidelines.

    Contracts for goods or services shall be awarded in accordance with 
OTS procurement rules and policies (48 CFR chapter 1 and FIRMR, 41 CFR 
chapter 201). The OTS Outreach Program Advocate shall work to facilitate 
the maximum participation of minority-, women-owned (small and large) 
businesses and entities owned by individuals with disabilities in the 
OTS procurement of goods or services.



PART 528_NONDISCRIMINATION REQUIREMENTS--Table of Contents




Sec.
528.1 Definitions.
528.1a Supplementary guidelines.
528.2 Nondiscrimination in lending and other services.
528.2a Nondiscriminatory appraisal and underwriting.
528.3 Nondiscrimination in applications.
528.4 Nondiscriminatory advertising.
528.5 Equal Housing Lender Poster.
528.6 Loan application register.
528.7 Nondiscrimination in employment.
528.8 Complaints.
528.9 Guidelines relating to nondiscrimination in lending.

    Authority: 12 U.S.C. 1464, 2810 et seq., 2901 et seq.; 15 U.S.C. 
1691; 42 U.S.C. 1981, 1982, 3601-3619.

    Source: 55 FR 1388, Jan. 16, 1990, unless otherwise noted.



Sec. 528.1  Definitions.

    As used in this part 528--
    (a) 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).
    (b) Savings association. The term ``savings association'' means any 
savings association as defined in Sec. 561.43 of this chapter other 
than a State-chartered savings bank whose deposits are insured by the 
Bank Insurance Fund.
    (c) 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.

[55 FR 1388, Jan. 16, 1990, as amended at 58 FR 4312, Jan. 14, 1993; 63 
FR 71212, Dec. 24, 1998]



Sec. 528.1a  Supplementary guidelines.

    The Office's policy statement found at 12 CFR 528.9 supplements this 
part and should be read together with this part. 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.

[63 FR 71212, Dec. 24, 1998]



Sec. 528.2  Nondiscrimination in lending and other services.

    (a) No 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 savings association shall consider without prejudice the 
combined income of joint applicants for a loan or other service.

[[Page 68]]

    (c) No 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).

    Note: See also, Sec. 528.9 (b) and (c).

[55 FR 1388, Jan. 16, 1990, as amended at 63 FR 71212, Dec. 24, 1998]



Sec. 528.2a  Nondiscriminatory appraisal and underwriting.

    (a) Appraisal. No savings association may use or rely upon an 
appraisal of a dwelling which the 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 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

    Note: See also, Sec. 528.9(b), (c)(6), and (c)(7).

[55 FR 1388, Jan. 16, 1990, as amended at 63 FR 71212, Dec. 24, 1998]



Sec. 528.3  Nondiscrimination in applications.

    (a) No 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 Sec. 528.2(c) of this part, 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 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.

    Note: See also, Sec. 528.9(a) through (d).

[55 FR 1388, Jan. 16, 1990, as amended at 63 FR 71212, Dec. 24, 1998]



Sec. 528.4  Nondiscriminatory advertising.

    No savings association may directly or indirectly engage in any form 
of advertising which 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 part 528. Advertisements, 
other than for savings, shall include a facsimile of the following 
logotype and legend:
[GRAPHIC] [TIFF OMITTED] TC07SE91.000



Sec. 528.5  Equal Housing Lender Poster.

    (a) Each 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:

[[Page 69]]

[GRAPHIC] [TIFF OMITTED] TC07SE91.001

    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:
    Director, Consumer Affairs, Office of Thrift Supervision, 
Washington, DC 20552.
    For processing under Office of Thrift Supervision 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:
    Director, Consumer Affairs, Office of Thrift Supervision, 
Washington, DC 20552.



Sec. 528.6  Loan application register.

    Savings associations and other lenders required to file Home 
Mortgage Disclosure Act Loan Application Registers with the Office of 
Thrift Supervision 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.

[58 FR 4312, Jan. 14, 1993]



Sec. 528.7  Nondiscrimination in employment.

    (a) No 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 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 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 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)

[[Page 70]]

through (j) of title 42, United States Code.
    (f) Any violation of the following laws or regulations by a savings 
association shall be deemed to be a violation of this part 528:
    (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.



Sec. 528.8  Complaints.

    Complaints regarding discrimination in lending by a 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, Consumer Affairs, Office of Thrift 
Supervision, Washington, DC 20552 for processing under Office 
regulations. Complaints regarding discrimination in employment by a 
savings association should be referred to the Equal Employment 
Opportunity Commission, Washington, DC 20506 and a copy, for information 
only, sent to the Director, Consumer Affairs, Office of Thrift 
Supervision, Washington, DC 20552.



Sec. 528.9  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 Office, the Office has adopted, in part 528 
of this chapter, 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 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 Office'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

[[Page 71]]

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 Office 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 
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 528.2, 528.2a, and 528.3 of 
this chapter 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

[[Page 72]]

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). 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 Office regulations at 12 CFR 528.4 and 528.5 rather than the Equal 
Housing Opportunity logo and poster required by 24 CFR parts 109 and 
110.
    (d) Marketing practices. 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 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 Office will systematically review marketing 
practices where evidence of discrimination in lending is discovered.

[54 FR 49666, Nov. 30, 1989, as amended at 60 FR 66870, Dec. 27, 1995. 
Redesignated at 63 FR 71212, Dec. 24, 1998]



PART 533_DISCLOSURE AND REPORTING OF CRA-RELATED AGREEMENTS--Table 
of Contents




Sec.
533.1 Purpose and scope of this part.
533.2 Definition of covered agreement.
533.3 CRA communications.
533.4 Fulfillment of the CRA.
533.5 Related agreements considered a single agreement.
533.6 Disclosure of covered agreements.
533.7 Annual reports.
533.8 Release of information under FOIA.
533.9 Compliance provisions.
533.10 Transition provisions.
533.11 Other definitions and rules of construction used in this part.

    Authority: 12 U.S.C. 1462a, 1463, 1464, 1467a, and 1831y.

    Source: 66 FR 2106, Jan. 10, 2001, unless otherwise noted.



Sec. 533.1  Purpose and scope of this part.

    (a) General. This part 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 part. The provisions of this part apply to--
    (1) Savings associations and their subsidiaries;
    (2) Savings and loan holding companies;

[[Page 73]]

    (3) Affiliates of 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 part does not 
affect in any way the Community Reinvestment Act of 1977 (CRA) (12 
U.S.C. 2901 et seq.), OTS's Community Reinvestment rule (12 CFR Part 
563e), or OTS's interpretations or administration of the CRA or 
Community Reinvestment rule.
    (d) Examples. (1) The examples in this part are not exclusive. 
Compliance with an example, to the extent applicable, constitutes 
compliance with this part.
    (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 part.



Sec. 533.2  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 Sec. 533.4 of this part.
    (5) The agreement is with a NGEP that has had a CRA communication as 
described in Sec. 533.3 of this part 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

[[Page 74]]

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

[[Page 75]]

consideration to be provided at any time under the agreement.



Sec. 533.3  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).
    (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 (b)(3)(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;

[[Page 76]]

    (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 (b)(2) of this section and the appropriate representatives have 
knowledge of the communication as specified in paragraphs (b)(3) and 
(b)(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 Sec. 533.11(a) of this 
part.) 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

[[Page 77]]

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 Sec. Sec. 533.6 and 533.7 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.



Sec. 533.4  Fulfillment of the CRA

    (a) List of factors that are in fulfillment of the CRA. Fulfillment 
of the CRA, for purposes of this part, 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 Sec. 
563e.22 of this chapter, 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 Sec. 563e.23 of this chapter;
    (iii) Delivering retail banking services, as described in Sec. 
563.24(d) of this chapter;
    (iv) Providing community development services, as described in Sec. 
563e.24(e) of this chapter;

[[Page 78]]

    (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 Sec. 563e.25(c) of this chapter;
    (vi) In the case of a small insured depository institution, any 
lending or other activity described in Sec. 563e.26(a) of this chapter; 
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 Sec. 563e.27(f) of this chapter.
    (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.



Sec. 533.5  Related agreements considered a single agreement.

    The following rules must be applied in determining whether an 
agreement is a covered agreement under Sec. 533.2 of this part.
    (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.



Sec. 533.6  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

[[Page 79]]

(see part 505 of this chapter and the Department of Treasury's rules (31 
CFR part 1)).
    (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 Sec. 
563e.43 of this chapter.
    (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

[[Page 80]]

filing must identify the insured depository institution(s) and 
affiliate(s) for whom the filings are being made.



Sec. 533.7  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 
(e)(1)(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.

[[Page 81]]

    (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

[[Page 82]]

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 
(e)(1)(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 (e)(1)(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.



Sec. 533.8  Release of information under FOIA.

    OTS 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.), OTS's rules (part 505 of this chapter), and the Department of 
Treasury's rules (31 CFR part 1). 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.



Sec. 533.9  Compliance provisions.

    (a) Willful failure to comply with disclosure and reporting 
obligations. (1) If OTS

[[Page 83]]

determines that a NGEP has willfully failed to comply in a material way 
with Sec. Sec. 533.6 or 533.7 of this part, OTS will notify the NGEP in 
writing of that determination and provide the NGEP a period of 90 days 
(or such longer period as OTS finds to be reasonable under the 
circumstances) to comply.
    (2) If the NGEP does not comply within the time period established 
by OTS, 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) OTS 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, OTS 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, OTS will provide written notice and an 
opportunity to present information to OTS 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 OTS under 
Sec. Sec. 533.6 or 533.7 of this part will not subject the reporting 
party to any penalty.
    (e) Enforcement of provisions in covered agreements. No provision of 
this part shall be construed as authorizing OTS to enforce the 
provisions of any covered agreement.



Sec. 533.10  Transition provisions.

    (a) Disclosure of covered agreements entered into before the 
effective date of this part. The following disclosure requirements apply 
to covered agreements that were entered into after November 12, 1999, 
and that terminated before April 1, 2001.
    (1) Disclosure to the public. Each NGEP and each insured depository 
institution or affiliate that was a party to the agreement must make the 
agreement available to the public under Sec. 533.6 of this part until 
at least April 1, 2002.
    (2) Disclosure to the relevant supervisory agency. (i) Each NGEP 
that was a party to the agreement must make the agreement available to 
the relevant supervisory agency under Sec. 533.6 of this part until at 
least April 1, 2002.
    (ii) Each insured depository institution or affiliate that was a 
party to the agreement must, by June 30, 2001, provide each relevant 
supervisory agency either--
    (A) A copy of the agreement under Sec. 533.6(d)(1)(i) of this part; 
or
    (B) The information described in Sec. 533.6(d)(1)(ii) of this part 
for each agreement.
    (b) Filing of annual reports that relate to fiscal years ending on 
or before December 31, 2000. In the event that a NGEP, insured 
depository institution or affiliate has any information to report under 
Sec. 533.7 of this part for a fiscal that ends on or before December 
31, 2000, and that concerns a covered agreement entered into between May 
12, 2000, and December 31, 2000, the annual report for that fiscal year 
must be provided, no later than June 30, 2001, to--
    (1) Each relevant supervisory agency; or
    (2) In the case of a NGEP, to an insured depository institution or 
affiliate that is a party to the agreement in accordance with Sec. 
533.7(f)(2) of this part.



Sec. 533.11  Other definitions and rules of construction used in this part.

    (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

[[Page 84]]

agreement under Sec. 533.2, 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 Sec. 533.3 of this part.
    (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 Sec. 
563.43 of this chapter.
    (e) Executive officer. The term executive officer has the same 
meaning as in Sec. 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 part, the term 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), (i)(2)(ii), 
or (i)(2)(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

[[Page 85]]

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.



PART 535_PROHIBITED CONSUMER CREDIT PRACTICES--Table of Contents




Sec.
535.1 Definitions.
535.2 Unfair credit practices.
535.3 Unfair or deceptive cosigner practices.
535.4 Late charges.
535.5 State exemptions.

    Authority: Sec. 18, as added by sec. 202, 88 Stat. 2193, as amended 
(15 U.S.C. 57a).

    Source: 54 FR 49479, Nov. 30, 1989, unless otherwise noted.



Sec. 535.1  Definitions.

    (a) Act. For the purposes of this part, ``Act'' means the Federal 
Trade Commission Act, 15 U.S.C. 41 et seq.
    (b) Consumer. The term ``consumer'' means a natural person who seeks 
or acquires goods, services, or money for personal, family, or household 
purposes, and who applies for or is extended ``consumer credit'' as 
defined in Sec. 561.12 of this chapter.
    (c) Cosigner. The term ``cosigner'' means a natural person who 
assumes liability for the obligation of a consumer without receiving 
goods, services, or money in return for the obligation, or in the case 
of an open-end credit obligation, without receiving the contractual 
right to obtain extensions of credit under the account. The term shall 
include any person whose signature is requested as a condition to 
granting credit to a consumer, or as a condition for forbearance on 
collection of a consumer's obligation that is in default. The term shall 
not include a spouse or other person whose signature is required on a 
credit obligation to perfect a security interest pursuant to state law. 
A person is a cosigner within the meaning of this definition whether or 
not he or she is designated as such on a credit obligation.
    (d) Creditor. The term ``creditor'' means a savings association.
    (e) Debt. The term ``debt'' means money that is due or alleged to be 
due from one to another.
    (f) Earnings. The term ``earnings'' means compensation paid or 
payable to an individual or for his or her account for personal services 
rendered or to be rendered by him or her, whether denominated as wages, 
salary, commission, bonus, or otherwise, including periodic payments 
pursuant to a pension, retirement, or disability program.
    (g) Household goods. The term ``household goods'' means clothing, 
furniture, appliances, linens, china, crockery, kitchenware, and 
personal effects of the consumer and his or her dependents, provided 
that the following are not included within the scope of the term 
``household goods'':
    (1) Works of art;
    (2) Electronic entertainment equipment (except one television and 
one radio);
    (3) Antiques, i.e., any item over one hundred years of age, 
including such items that have been repaired or renovated without 
changing their original form or character, and
    (4) Jewelry (other than wedding rings).
    (h) Savings association. For purposes of this part, the term 
``savings association'' includes any savings association, and any 
service corporation that is wholly owned by one or more savings 
association, that engages in the business of providing credit to 
consumers.
    (i) Obligation. The term ``obligation'' means an agreement between a 
consumer and a creditor.
    (j) Person. The term ``person'' means an individual, corporation, or 
other business organization.



Sec. 535.2  Unfair credit practices.

    (a) In connection with the extension of credit to consumers after 
January 1, 1986, it is an unfair act or practice within the meaning of 
section 5 of the Act for a savings association directly or indirectly to 
enter into a consumer credit obligation that constitutes or contains, or 
to enforce in a consumer credit obligation purchased by a savings 
association, any of the following provisions:

[[Page 86]]

    (1) A cognovit or confession of judgment (for purposes other than 
executory process in the State of Louisiana), warrant of attorney, or 
other waiver of the right to notice and the opportunity to be heard in 
the event of suit or process thereon;
    (2) An executory waiver or a limitation of exemption from 
attachment, execution, or other process on real or personal property 
held, owned by, or due to the consumer, unless the waiver applies solely 
to property subject to a security interest executed in connection with 
the obligation;
    (3) An assignment of wages or other earnings, unless:
    (i) The assignment by its terms is revocable at the will of the 
debtor,
    (ii) The assignment is a payroll deduction plan or preauthorized 
payment plan, commencing at the time of the transaction, in which the 
consumer authorizes a series of wage deductions as a method of making 
each payment, or
    (iii) The assignment applies only to wages or other earnings already 
earned at the time of the assignment.
    (4) A nonpossessory security interest in household goods other than 
a purchase-money security interest.



Sec. 535.3  Unfair or deceptive cosigner practices.

    (a) General. In connection with the extension of credit to consumers 
after January 1, 1986, it is:
    (1) A deceptive act or practice within the meaning of section 5 of 
the Act for a savings association, directly or indirectly, to 
misrepresent the nature or extent of cosigner liability to any person.
    (2) An unfair act or practice within the meaning of section 5 of the 
Act for a savings association, directly or indirectly, to obligate a 
cosigner unless the cosigner is informed, prior to becoming obligated, 
of the nature of his or her liability as cosigner.
    (b) Disclosure requirement. (1) A clear and conspicuous document 
that shall contain the following statement or one which is substantially 
equivalent, shall be given to the consigner prior to becoming obligated 
(which, in the case of open-end credit, shall mean prior to the time 
that the cosigner becomes obligated for any fees or transaction on the 
account):

                           Notice of Cosigner

    You are being asked to guarantee this debt. Think carefully before 
you do. If the borrower doesn't pay the debt, you will have to. Be sure 
you can afford to pay if you have to, and that you want to accept this 
responsibility.
    You may have to pay up to the full amount of the debt if the 
borrower does not pay. You may also have to pay late fees or collection 
costs, which increase this amount.
    The creditor can collect this debt from you without first trying to 
collect from the borrower. The creditor can use the same collection 
methods against you that can be used against the borrower, such as suing 
you, garnishing your wages, etc. If this debt is ever in default, that 
fact may become a part of your credit record.

    (2) Compliance with the disclosure requirement under paragraph 
(b)(1) of this section shall constitute compliance with the consumer 
information requirement of paragraph (a)(2) of this section.
    (3) If the notice is a separate document, nothing other than the 
following times may appear with the notice:
    (i) The name and address of the savings association;
    (ii) An identification of the debt to be cosigned (e.g., a loan 
identification number);
    (iii) The date; and
    (iv) The statement, ``This notice is not the contract that makes you 
liable for the debt.''



Sec. 535.4  Late charges.

    (a) In connection with collecting a debt arising out of an extension 
of credit to a consumer after January 1, 1986, it is an unfair act or 
practice within the meaning of section 5 of the Act for a savings 
association, directly or indirectly, to levy or collect any delinquency 
charge on a payment, which payment is otherwise a full payment for the 
applicable period and is paid on its due date or within an applicable 
grace period, when the only delinquency is attributable to late fee(s) 
or delinquency charge(s) assessed on earlier installment(s).
    (b) For the purposes of this part, ``collecting a debt'' means any 
activity, other than the use of judicial process, that is intended to 
bring about or

[[Page 87]]

does bring about repayment of all or part of a consumer debt.



Sec. 535.5  State exemptions.

    (a) Upon application to the Office by an appropriate state agency, 
the Office shall determine if:
    (1) There is a state requirement or prohibition in effect that 
applies to any transaction to which a provision of this rule applies; 
and
    (2) The state requirement or prohibition affords a level of 
protection to consumers that is substantially equivalent to, or greater 
than, the protection afforded by this rule.
    (b) If the Office makes a determination as specified under paragraph 
(a) of this section, then that provision of this section will not be in 
effect in that state to the extent specified by the Office in its 
determination, for as long as the state administers and enforces the 
state requirement or prohibition effectively, as determined by the 
Office.
    (c) The Director of Consumer Affairs in consultation with the Chief 
Counsel shall have delegated authority to make such determinations as 
are required under this part 535.



PART 536_CONSUMER PROTECTION IN SALES OF INSURANCE--Table of Contents




Sec.
536.10 Purpose and scope.
536.20 Definitions.
536.30 Prohibited practices.
536.40 What you must disclose.
536.50 Where insurance activities may take place.
536.60 Qualification and licensing requirements for insurance sales 
          personnel.

Appendix A to Part 536--Consumer Grievance Process.

    Authority: 12 U.S.C. 1462a, 1463, 1464, 1467a, and 1831x.

    Source: 65 FR 75845, Dec. 4, 2000, unless otherwise noted.



Sec. 536.10  Purpose and scope.

    (a) General rule. This part 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 savings association; or
    (2) Any other person that is engaged in such activities at an office 
of a savings association or on behalf of a savings association.
    (b) Application to operating subsidiaries. For purposes of Sec. 
559.3(h) of this chapter, an operating subsidiary is subject to this 
part only to the extent that it sells, solicits, advertises, or offers 
insurance products or annuities at an office of a savings association or 
on behalf of a savings association.



Sec. 536.20  Definitions.

    As used in this part:
    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 Federal Deposit Insurance Act (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

[[Page 88]]

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 savings association where retail 
deposits are accepted from the public.
    Subsidiary has the same meaning as in section 3(w)(4) of the Federal 
Deposit Insurance Act (12 U.S.C. 1813(w)(4)).
    You means:
    (1) A savings association, as defined in Sec. 561.43 of this 
chapter; 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 savings association, or on behalf of a savings 
association. For purposes of this definition, activities on behalf of a 
savings association include activities where a person, whether at an 
office of the 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 savings association;
    (ii) The savings association refers a consumer to a seller of 
insurance products and annuities and the 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 
savings association.



Sec. 536.30  Prohibited practices.

    (a) Anticoercion and antitying 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 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 savings association or a subsidiary of a 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 savings association sell or offer for sale is not backed 
by the Federal government or a 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 savings association or subsidiary of a 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 
savings association or subsidiary may not be conditioned on the purchase 
of an insurance product or annuity by the consumer from the savings 
association or a subsidiary of a 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

[[Page 89]]

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.



Sec. 536.40  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 savings association or an affiliate 
of a 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 savings association, or (if applicable) an affiliate of a 
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 savings association may not 
condition an extension of credit on either:
    (1) The consumer's purchase of an insurance product or annuity from 
the 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

[[Page 90]]

screens, billboards, signs, posters and written advertisements and 
promotional materials, as appropriate and consistent with paragraphs (a) 
and (b) of this section:

[sbull] NOT A DEPOSIT
[sbull] NOT FDIC-INSURED
[sbull] NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
[sbull] NOT GUARANTEED BY THE SAVINGS ASSOCIATION
[sbull] 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 savings association.



Sec. 536.50  Where insurance activities may take place.

    (a) General rule. A savings association must, to the extent 
practicable:
    (1) Keep the area where the 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 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 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.

[[Page 91]]



Sec. 536.60  Qualification and licensing requirements for insurance 
sales personnel.

    A savings association may not permit any person to sell or offer for 
sale any insurance product or annuity in any part of the 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.

           Appendix A to Part 536--Consumer Grievance Process

    Any consumer who believes that any savings association or any other 
person selling, soliciting, advertising, or offering insurance products 
or annuities to the consumer at an office of the savings association or 
on behalf of the savings association has violated the requirements of 
this part should contact the Director, Consumer Programs, Office of 
Thrift Supervision, at the following address: 1700 G Street, NW., 
Washington, DC 20552, or telephone 202-906-6237 or 800-842-6929, or e-
mail consumer.complaint@ots.treas.gov.



PART 541_DEFINITIONS FOR REGULATIONS AFFECTING FEDERAL SAVINGS 
ASSOCIATIONS--Table of Contents




Sec.
541.1 When do the definitions in this part apply?
541.2 Act.
541.5 Commercial paper.
541.7 Corporate debt security.
541.8 Debit card.
541.10 Dwelling unit.
541.11 Federal savings association.
541.14 Home.
541.15 Improved nonresidential real estate.
541.16 Improved residential real estate.
541.18 Interim Federal savings association.
541.19 Interim state savings association.
541.20 Loans.
541.21 Nonresidential real estate.
541.22 [Reserved]
541.23 Residential real estate.
541.25 Single-family dwelling.
541.26 Surplus.
541.27 Unimproved real estate.
541.28 Withdrawal value of a savings account.

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

    Source: 54 FR 49480, Nov. 30, 1989, unless otherwise noted.



Sec. 541.1  When do the definitions in this part apply?

    The definitions in this part and in 12 CFR part 561 apply throughout 
this chapter, unless another definition is specifically provided.

[67 FR 78152, Dec. 23, 2002]



Sec. 541.2  Act.

    The term Act means the Home Owners' Loan Act of 1933, as amended.



Sec. 541.5  Commercial paper.

    The term commercial paper means any note, draft, or bill of exchange 
which arises out of a current transaction or the proceeds of which have 
been or are to be used for current transactions, and which has a 
maturity at the time of issuance of not exceeding nine months, exclusive 
of days of grace, or any renewal thereof the maturity of which is 
likewise limited.



Sec. 541.7  Corporate debt security.

    The term corporate debt security means a marketable obligation, 
evidencing the indebtedness of any corporation in the form of a bond, 
note and/or debenture which is commonly regarded as a debt security and 
is not predominantly speculative in nature. A security is marketable if 
it may be sold with reasonable promptness at a price which corresponds 
reasonably to its fair value.



Sec. 541.8  Debit card.

    The term debit card means a card that enables an accountholder to 
obtain access to a savings account for the purpose of making withdrawals 
or of transferring funds to a third party by non-transferable order or 
authorization.



Sec. 541.10  Dwelling unit.

    The term dwelling unit means the unified combination of rooms 
designed for residential use by one family, other than a single-family 
dwelling.



Sec. 541.11  Federal savings association.

    The term Federal savings association means a Federal savings 
association or Federal savings bank chartered under section 5(o) of the 
Act.

[[Page 92]]



Sec. 541.14  Home.

    The term home means real estate comprising a single-family 
dwelling(s) or a dwelling unit(s) for four or fewer families in the 
aggregate.



Sec. 541.15  Improved nonresidential real estate.

    The term improved nonresidential real estate means nonresidential 
real estate:
    (a) Containing a permanent structure(s) constituting at least 25 
percent of its value; or
    (b) Containing improvements which make it usable by a business or 
industrial enterprise; or
    (c) Used, or to be used within a reasonable time, for commercial 
farming, excluding hobby and vacation property.



Sec. 541.16  Improved residential real estate.

    The term improved residential real estate means residential real 
estate containing offsite or other improvements sufficient to make the 
property ready for primarily residential construction, and real estate 
in the process of being improved by a building or buildings to be 
constructed or in the process of construction for primarily residential 
use.



Sec. 541.18  Interim Federal savings association.

    The term interim Federal savings association means a Federal savings 
association chartered by the Office under section 5 of the Act to 
facilitate the acquisition of 100 percent of the voting shares of an 
existing Federal stock savings association or other insured stock 
savings association by a newly formed company or an existing savings and 
loan holding company or to facilitate any other transaction the Office 
may approve.



Sec. 541.19  Interim state savings association.

    The term interim state savings association means a savings 
association, other than a Federal savings association, the accounts of 
which are insured by the FDIC to facilitate the acquisition of 100 
percent of the voting shares of an existing Federal stock savings 
association or other insured stock savings association by a newly formed 
company or an existing savings and loan holding company or to facilitate 
any other transaction the Office may approve.



Sec. 541.20  Loans.

    The term loans means obligations and extensions or advances of 
credit; and any reference to a loan or investment includes an interest 
in such a loan or investment.



Sec. 541.21  Nonresidential real estate.

    The terms nonresidential real estate or nonresidential real property 
mean real estate that is not residential real estate, as that term is 
defined in Sec. 541.23 of this part.



Sec. 541.22  [Reserved]



Sec. 541.23  Residential real estate.

    The terms residential real estate or residential real property mean:
    (a) Homes (including a dwelling unit in a multi-family residential 
property such as a condominium or a cooperative);
    (b) Combinations of homes and business property (i.e., a home used 
in part for business);
    (c) Other real estate used for primarily residential purposes other 
than a home (but which may include homes);
    (d) Combinations of such real estate and business property involving 
only minor business use (i.e., where no more than 20 percent of the 
total appraised value of the real estate is attributable to the business 
use);
    (e) Farm residences and combinations of farm residences and 
commercial farm real estate;
    (f) Property to be improved by the construction of such structures; 
or
    (g) Leasehold interests in the above real estate.

[64 FR 46564, Aug. 26, 1999]



Sec. 541.25  Single-family dwelling.

    A structure designed for residential use by one family, or a unit so 
designed, whose owner owns, directly or through a non-profit cooperative 
housing organization, an undivided interest in the underling real 
estate, including property owned in common with others which contributes 
to the use and enjoyment of the structure or unit.

[[Page 93]]



Sec. 541.26  Surplus.

    The term surplus means undistributed earnings held as unallocated 
reserves for general corporate use.



Sec. 541.27  Unimproved real estate.

    The term unimproved real estate means real estate that will be 
improved, as defined in Sec. 541.15 or Sec. 541.16 of this part.



Sec. 541.28  Withdrawal value of a savings account.

    The term withdrawal value of a savings account means the amount 
invested in a savings account plus earnings credited thereto, less 
lawful deductions therefrom.



PART 543_FEDERAL MUTUAL SAVINGS ASSOCIATIONS_INCORPORATION, 
ORGANIZATION, AND CONVERSION--Table of Contents




Sec.
543.1 Corporate title.

                              Organization

543.2 Application for permission to organize.
543.3 ``De novo'' applications for a Federal savings association 
          charter.
543.5 Issuance of charter.
543.6 Completion of organization.
543.7 Limitations on transaction of business.
543.7-1 Federal savings association created in connection with an 
          association in default or in danger of default.

                               Conversion

543.8 Conversion of depository institutions to Federal mutual charter.
543.9 Application for conversion to Federal mutual charter.
543.10 Organization after conversion.
543.11 Organization plan for governance during first years after 
          issuance of Federal mutual savings bank charter.
543.11-1 Grandfathered authority.
543.14 Continuity of existence.

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

    Source: 54 FR 49482, Nov. 30, 1989, unless otherwise noted.



Sec. 543.1  Corporate title.

    (a) General. A Federal savings association shall not adopt a title 
that misrepresents the nature of the institution or the services it 
offers.
    (b) Title change. Prior to changing its corporate title, an 
association must file with the OTS a written notice indicating the 
intended change. The OTS, shall provide to the association a timely 
written acknowledgment stating when the notice was received. If, within 
30 days of receipt of notice, the OTS does not notify the association of 
its objection on the grounds set forth in paragraph (a) of this section, 
the association may change its title by amending its charter in 
accordance with Sec. 544.2(b) or Sec. 552.4 and the amendment 
provisions of its charter, except that an association chartered as a 
Federal Savings and Loan Association may change its title to indicate 
that it is a Federal Savings Bank, and an association chartered as a 
Federal Savings Bank may change its title to indicate that it is a 
Federal Savings and Loan Association.

[54 FR 49482, Nov. 30, 1989, as amended at 57 FR 14338, Apr. 20, 1992; 
58 FR 4312, Jan. 14, 1993; 61 FR 64015, Dec. 3, 1996]

                              Organization



Sec. 543.2  Application for permission to organize.

    (a) General. Recommendations by employees of the OTS regarding 
applications for permission to organize a Federal savings association 
are privileged, confidential, and subject to Sec. 510.5 (b) and (c) of 
this chapter.
    (b)-(c) [Reserved]
    (d) Public notice and inspection. (1) The applicant must publish a 
public notice of the application to organize in accordance with the 
procedures specified in subpart B of part 516 of this chapter.
    (2) Promptly after publication, the applicant(s) shall transmit 
copies of each notice and publisher's affidavit of publication in the 
same manner as the original filing.
    (3) The OTS shall give notice of the application to the State 
official who supervises savings associations in the State in which the 
new association is to be located.
    (4) Any person may inspect the application and all related 
communications at the Regional Office during regular

[[Page 94]]

business hours, unless such information is exempt from public 
disclosure.
    (e) Submission of comments. Commenters may submit comments on the 
application in accordance with the procedures specified in subpart C of 
part 516 of this chapter.
    (f) Meetings. The OTS may arrange informal or formal meetings in 
accordance with the procedures specified in subpart D of part 516 of 
this chapter.
    (g) Approval. (1) Factors that will be considered are:
    (i) Whether the applicants are persons of good character and 
responsibility;
    (ii) Whether a necessity exists for such association in the 
community to be served;
    (iii) Whether there is a reasonable probability of the association's 
usefulness and success;
    (iv) Whether the association can be established without undue injury 
to properly conducted existing local thrift and home financing 
institutions;
    (v) Whether the association will perform a role of providing credit 
for housing consistent with safe and sound operation of a Federal 
savings association; and
    (vi) Whether the factors set forth in Sec. 543.3 are met, in the 
case of an application that would result in the formation of a de novo 
association, as defined in Sec. 543.3(a).
    (2) Approvals of applications will be conditioned on the following:
    (i) Receipt by the Office of written confirmation from the Federal 
Deposit Insurance Corporation that the accounts of the Federal savings 
association will be insured by the Federal Deposit Insurance 
Corporation;
    (ii) A minimum amount of capital to be paid into the association's 
accounts prior to commencing business;
    (iii) The submission of a statement that--
    (A) The applicants have complied in all respects with the Act and 
these rules and regulations regarding organization of a Federal savings 
association;
    (B) The applicants have incurred no expense in forming the 
association which is chargeable to it, and no such expense will be 
incurred;
    (C) No funds have been collected on account of the association 
before the Office's approval;
    (D) An organization committee has been created (naming the committee 
and its officers);
    (E) The committee will organize the association and serve as 
temporary officers of the association until officers are elected by the 
association's board of directors under Sec. 543.6 of this part; and
    (F) No funds will be accepted for deposit by the association until 
organization has been completed; and
    (iv) The satisfaction of any other requirement the Director, or his 
or her designee, may impose.
    (h) Alternative procedures for interim Federal savings associations. 
(1) Applications for permission to organize an interim Federal savings 
association are not subject to paragraphs (d), (e), (f) or (g)(2) of 
this section.
    (2) Approval of an application for permission to organize an interim 
Federal savings association shall be conditioned on approval by the 
Office of an application to merge the interim Federal savings 
association and an existing insured stock association or on approval by 
the Office of such other transaction which the interim was chartered to 
facilitate. In evaluating the application, the Director or his or her 
designee will consider the purpose for which the association will be 
organized, the form of any proposed transactions involving the 
organizing association, the effect of the transactions on existing 
associations involved in the transactions, and the factors specified in 
section Sec. 543.2(g)(1) to the extent relevant.

[54 FR 49482, Nov. 30, 1989, as amended at 55 FR 13510, Apr. 11, 1990; 
57 FR 14338, Apr. 20, 1992; 62 FR 27180, May 19, 1997; 62 FR 64145, Dec. 
4, 1997]



Sec. 543.3  ``De novo'' applications for a Federal savings association 
charter.

    (a) Definitions. For purposes of this section, the term ``de novo 
association'' means any Federal savings association chartered by the 
Office, the business of which has not been conducted previously under 
any charter or conducted in the previous three years in substantially 
the same form as is proposed by

[[Page 95]]

the de novo association. A ``de novo applicant'' means any person or 
persons who apply to establish a de novo association.
    (b) Minimum initial capitalization. (1) A de novo association must 
have at least two million dollars in initial capital stock (stock 
institutions) or initial pledged savings or cash (mutual institutions), 
except as provided in paragraph (b)(2) of this section. The minimum 
initial capitalization is the amount of proceeds net of all incurred and 
anticipated securities issuance expenses, organization expenses, pre-
opening expenses, or any expenses paid (or funds advanced) by organizers 
that are to be reimbursed from the proceeds of a securities offering. In 
securities offerings for a de novo association, all securities of a 
particular class in the initial offering shall be sold at the same 
price.
    (2) On a case by case basis, the Director may, for good cause, 
approve a de novo association that has less than two million dollars in 
initial capital or may require a de novo association to have more than 
two million dollars in initial capital.
    (c) Business and investment plans of de novo associations. (1) To 
assist the Office in making the determinations required under section 
5(e) of the Home Owners' Loan Act, a de novo applicant shall submit a 
business plan describing, for the first three years of operation of the 
de novo association, the major areas of operation, including:
    (i) Lending, leasing and investment activity, including plans for 
meeting Qualified Thrift Lender requirements;
    (ii) Deposit, savings and borrowing activity;
    (iii) Interest-rate risk management;
    (iv) Internal controls and procedures;
    (v) Plans for meeting the credit needs of the proposed de novo 
association's community (including low- and moderate-income 
neighborhoods);
    (vi) Projected statements of condition;
    (vii) Projected statements of operations; and
    (viii) Any other information requested by the Office.
    (2) The business plan shall:
    (i) Provide for the continuation or succession of competent 
management subject to the approval of the Regional Director;
    (ii) Provide that any material change in, or deviation from, the 
business plan must receive the prior approval of the Regional Director;
    (iii) Demonstrate the de novo association's ability to maintain 
required minimum regulatory capital under 12 CFR parts 565 and 567 for 
the duration of the plan.
    (d) Composition of the board of directors. (1) A majority of a de 
novo association's board of directors must be representative of the 
state in which the savings association is located. The Office generally 
will consider a director to be representative of the state if the 
director resides, works or maintains a place of business in the state in 
which the savings association is located. If the association is located 
in a Metropolitan Statistical Area (MSA), Primary Metropolitan 
Statistical Area (PMSA) or Consolidated Metropolitan Statistical Area 
(CMSA) that incorporates portions of more than one state, a director 
will be considered representative of the association's state if he or 
she resides, works or maintains a place of business in the MSA, PMSA or 
CMSA in which the association is located.
    (2) The de novo association's board of directors must be diversified 
and composed of individuals with varied business and professional 
experience. In addition, except in the case of a de novo association 
that is wholly-owned by a holding company, no more than one-third of a 
board of directors may be in closely related businesses. The background 
of each director must reflect a history of responsibility and personal 
integrity, and must show a level of competence and experience sufficient 
to demonstrate that such individual has the ability to direct the 
policies of the association in a safe and sound manner. Where a de novo 
association is owned by a holding company that does not have substantial 
independent economic substance, the foregoing standards will be applied 
to the board of directors of the holding company.
    (e) Management Officials. Proposed stockholders of ten percent or 
more of the stock of a de novo association will be considered management 
officials of

[[Page 96]]

the association for the purpose of the Office's evaluation of the 
character and qualifications of the management of the association. In 
connection with the Office's consideration of an application for 
permission to organize and subsequent to issuance of a Federal savings 
association charter to the association by the Office, any individual or 
group of individuals acting in concert under 12 CFR part 574, who owns 
or proposes to acquire, directly or indirectly, ten percent or more of 
the stock of an association subject to this section, shall submit a 
Biographical and Financial Report, on forms prescribed by the Office, to 
the Regional Director.
    (f) Supervisory transactions. This section does not apply to any 
application for a Federal savings association charter submitted in 
connection with a transfer or an acquisition of the business or accounts 
of a savings association if the Office determines that such transfer or 
acquisition is instituted for supervisory purposes, or in connection 
with applications for Federal charters for interim de novo associations 
chartered for the purpose of facilitating mergers, holding company 
reorganizations, or similar transactions.

[62 FR 27180, May 19, 1997; 62 FR 28983, May 29, 1997]



Sec. 543.5  Issuance of charter.

    Approval by the Office of the organization of a Federal savings 
association or the conversion of an insured association to Federal 
savings association form shall constitute issuance of a charter and 
shall be final, provided that the association complies with the 
procedures set out at Sec. 544.2(a) of this chapter. The charter shall 
conform with the requirements of Sec. 544.1 of this chapter, the 
permissible provisions of Sec. 544.2, or other provisions specifically 
approved by the Office.



Sec. 543.6  Completion of organization.

    (a)(1) Temporary officers. When the Office approves an application 
for permission to organize a Federal savings association, the applicants 
shall constitute the organization committee and elect a chairperson, 
vice-chairperson, and a secretary, who shall act as the temporary 
officers of the association until their successors are duly elected and 
qualified. The temporary officers may effect compliance with any 
conditions prescribed by the Office.
    (2) Organization meeting. Promptly upon receipt of a charter, the 
temporary officers shall call a meeting of the association's capital 
subscribers; notice of such meeting shall be mailed to each subscriber 
at least 5 days before the meeting day. Subscribers who have subscribed 
for a majority of the association's capital, present in person or by 
proxy, shall constitute a quorum. At such meeting, directors of the 
association shall be elected according to the association's charter and 
bylaws, and any other action permitted by such charter and bylaws may be 
taken; any such action shall be considered an acceptance by the 
association of such charter and of such bylaws, which shall be in the 
form provided in parts 544 and 552 of this chapter.
    (b) First meeting of directors. Upon election, the association's 
board of directors shall hold a meeting to elect officers of the 
association as provided by its charter and bylaws and to take any other 
action necessary to permit operation of the association in accordance 
with law, the association's charter and bylaws, and these rules and 
regulations. When such officers have been bonded under Sec. 563.190 of 
this chapter, they shall immediately collect the sums due on 
subscriptions to the association's capital.
    (c) Membership in Federal Home Loan Bank and insurance of accounts. 
When a Federal savings association's charter is issued it must promptly 
qualify as a member of a Federal Home Loan Bank and meet all 
requirements necessary to obtain insurance of its accounts by the 
Federal Deposit Insurance Corporation.
    (d) Failure to complete. Organization of a Federal savings 
association is completed when the organization meeting and the first 
meeting of its directors have been held, permanent officers have been 
bonded, the association holds the cash required to be paid on 
subscriptions to its capital, if required, Federal Home Loan Bank 
membership has been obtained and Federal Deposit Insurance Corporation 
insurance of accounts has been confirmed and any conditions imposed by 
the Office in

[[Page 97]]

connection with approval of the application have been met. If 
organization is not so completed within six months after issuance of a 
charter, or within such additional period as the Director or his or her 
designee may for good cause grant, and in the case of an interim Federal 
savings association, if a merger, or other transaction facilitated by 
the existence of an interim association, has not been approved, the 
charter shall become void and all cash collected on subscriptions shall 
thereupon be returned.



Sec. 543.7  Limitations on transaction of business.

    No person may organize a Federal savings association, collect money 
from others for such purpose, or represent himself or herself as 
authorized to do so, and no Federal savings association shall transact 
any business prior to completion of its organization, except as provided 
in this part.



Sec. 543.7-1  Federal savings association created in connection with 
an association in default or in danger of default.

    The preceding sections of this part do not apply to a Federal 
savings association which is proposed by the Federal Deposit Insurance 
Corporation or the Resolution Trust Corporation under section 11(c) of 
the Federal Deposit Insurance Act (12 U.S.C. 1821(c)) or section 21A of 
the Federal Home Loan Bank Act (12 U.S.C. 1441A), or is otherwise 
chartered by the Office in connection with an association in default or 
in danger of default. Incorporation and organization of such 
associations are complete when the Director or his or her designee so 
determines.

                               Conversion



Sec. 543.8  Conversion of depository institutions to Federal mutual charter.

    (a) With the approval of the OTS, any depository institution, as 
defined in Sec. 552.13 of this chapter, that is in mutual form, may 
convert into a Federal mutual savings association, provided that:
    (1) The depository institution, upon conversion, will have its 
deposits insured by the Federal Deposit Insurance Corporation;
    (2) The depository institution, in accomplishing the conversion, 
complies with all applicable state and federal statutes and regulations, 
and OTS policies, and obtains all necessary regulatory and member 
approvals; and
    (3) The resulting Federal mutual association conforms, within the 
time prescribed by the OTS, to the requirements of section 5(c) of the 
Home Owners' Loan Act.
    (b) Recommendations regarding applications for issuance of Federal 
charters are privileged, confidential and subject to Sec. 510.5 (b) and 
(c) of this chapter.

[54 FR 49482, Nov. 30, 1989, as amended at 57 FR 14339, Apr. 20, 1992; 
60 FR 66717, Dec. 26, 1995; 62 FR 45309, Aug. 27, 1997]



Sec. 543.9  Application for conversion to Federal mutual charter.

    (a)(1) Filing. Any depository institution that proposes to convert 
to a Federal mutual association as provided in Sec. 543.8 must, after 
approval by its board of directors, file an application on forms 
obtained from OTS. The applicant must submit any financial statements or 
other information OTS may require.
    (2) Procedures. An application for conversion filed under this 
section is subject to the procedures for organization of a federal 
mutual association at Sec. 543.2(d) through (f) of this chapter.
    (b) Plan of conversion. The applicant shall submit with its 
application a plan of conversion specifying the location of the home 
office and any branch offices to be maintained by the Federal savings 
association, and providing for:
    (1) Appropriate reserves and surplus for the Federal savings 
association;
    (2) Satisfaction in full or assumption by the Federal savings 
association of all creditor obligations of the applicant;
    (3) Issuance by the Federal savings association of savings accounts 
to current holders of withdrawable accounts in an amount equalling the 
value of such accounts; and
    (4) If applicable, issuance of additional savings accounts to 
current holders of nonwithdrawable capital stock of the applicant in an 
amount equalling the value of their

[[Page 98]]

nonwithdrawable capital stock, including the present value of any 
preference to which such holders are entitled.
    (c) Action on application. The OTS will consider such application 
and any information submitted with the application, and may approve the 
application in accordance with section 5(e) of the Home Owners' Loan Act 
and Sec. 543.2(g)(1). Converting depository institutions that have been 
in existence less than three years will be subject to all approval 
criteria and other requirements applicable to de novo Federal 
associations. Approval of an application and issuance by the OTS of a 
charter will be subject to:
    (1) Compliance by the applicant with all conditions prescribed in 
the approval;
    (2) Receipt by the applicant of approval of the plan of conversion 
by such vote as may be required by the laws of the applicant's 
jurisdiction to consider such action;
    (3) In the case of a converting association the accounts of which 
are not insured by the Federal Deposit Insurance Corporation, receipt by 
the OTS of written confirmation from the Federal Deposit Insurance 
Corporation that the accounts of the converting association will be 
insured by the Federal Deposit Insurance Corporation; and
    (4) Receipt by the OTS of written confirmation from the appropriate 
Federal Home Loan Bank of approval of the converting institution's 
application for Federal Home Loan Bank membership, if the institution is 
not a member.

[54 FR 49482, Nov. 30, 1989, as amended at 55 FR 13510, Apr. 11, 1990; 
57 FR 14339, Apr. 20, 1992; 62 FR 45309, Aug. 27, 1997; 66 FR 13005, 
Mar. 2, 2001]



Sec. 543.10  Organization after conversion.

    Except as provided in Sec. 543.11, after a Federal charter is 
issued under Sec. 543.9 the association's members shall, after due 
notice, or upon a valid adjournment of a previous legal meeting, hold a 
meeting to elect directors and take all other action necessary fully to 
effect the conversion and operate the association in accordance with law 
and these rules and regulations. Immediately thereafter the board of 
directors shall meet, elect officers, and transact any other appropriate 
business.



Sec. 543.11  Organization plan for governance during first years after 
issuance of Federal mutual savings bank charter.

    (a) Organizational meeting. Except as provided in paragraph (c)(1) 
of this section, promptly upon receipt of a charter, the officers of a 
Federal mutual savings bank which, immediately prior to conversion, was 
a state chartered mutual savings bank, shall call a meeting of the 
members. Notice for, and conduct of, such meeting shall be in accordance 
with the bank's Federal charter and bylaws. Business to be conducted at 
the organizational meeting shall include the election of trustees (who 
may also be known as a board of directors) and any other matters 
permitted by the charter and bylaws. Any action taken at such meeting 
shall be deemed an acceptance of the charter and bylaws approved by the 
Office pursuant to Sec. 544.1 of this chapter.
    (b) First meeting of trustees. Upon election or appointment, the 
board of trustees shall hold a meeting to elect the officers of the bank 
in accordance with its Federal charter and bylaws, and to take other 
action necessary to permit the operation of the bank in accordance with 
the Home Owners' Loan Act of 1933, as amended, the bank's charter and 
bylaws, these rules and regulations, and orders of the Office.
    (c) Plan for governance of association during first six years after 
issuance of Federal charter. (1)(i) An applicant for a Federal mutual 
savings bank charter may submit a plan which provides that each member 
of its governing board, i.e., board of trustees, managers, or directors, 
may continue to serve, provided that within two years of the issuance of 
a Federal charter at least one-fifth of the members of such board shall 
have been elected by vote, either in person or by proxy, of the bank's 
membership as provided in its Federal charter, that within three years 
of the issuance of its Federal charter at least two-fifths of the 
members of such board shall have been elected by such a membership vote, 
that within four years of the issuance of its Federal charter at least 
three-fifths of the

[[Page 99]]

members of such board shall have been elected by such a membership vote, 
that within five years of the issuance of its Federal charter at least 
four-fifths of the members of such board shall have been elected by such 
a membership vote, and that within six years of the issuance of its 
Federal charter all of the members of such board shall have been elected 
by such a membership vote.
    (ii) The plan:
    (A) Shall set forth the names of those persons who are being 
proposed for service on the applicant's governing board after conversion 
to a Federal charter,
    (B) Shall show how trustees not elected by the converted bank's 
membership will be appointed or otherwise selected, and
    (C) Shall provide that no trustees may be appointed or elected to 
terms of more than three years.
    (iii) The plan may provide that
    (A) After receipt of its Federal charter the bank will be organized 
by its existing governing board,
    (B) Within the first two years following receipt of its Federal 
charter, the bank's charter may be amended without a membership vote, 
provided any such amendment is first approved by a two-thirds vote of 
its board of trustees and is thereafter approved by the Office, and
    (C) The bank's first annua1 membership meeting need not take place 
until two years after receipt of its Federal charter.
    (2) Except to the extent that the Office approves a plan under this 
paragraph (c) which is inconsistent with other provisions of this 
section, a Federal mutual savings bank shall in all respects comply with 
those other provisions.

[54 FR 49482, Nov. 30, 1989, as amended at 60 FR 66717, Dec. 26, 1995]



Sec. 543.11-1  Grandfathered authority.

    (a) A Federal savings bank formerly chartered or designated as a 
mutual savings bank under state law may exercise any authority it was 
authorized to exercise as a mutual savings bank under state law at the 
time of its conversion from a state mutual savings bank to a Federal or 
other state charter. Except to the extent such authority may be 
exercised by Federal savings associations not enjoying grandfathered 
rights hereunder, such authority may be exercised only to the degree 
authorized under state law at the time of such conversion. Unless 
otherwise determined by the Director, an association, in the exercise of 
grandfathered authority, may continue to follow applicable state laws 
and regulations in effect at the time of such conversion.
    (b) A Federal savings association that acquires, or has acquired, a 
Federal savings bank by merger or consolidation may itself exercise any 
grandfathered rights enjoyed by the disappearing institution, whether 
such rights were obtained directly through conversion or through merger 
or consolidation. The extent of the grandfathered rights of a Federal 
savings association that disappeared prior to the effective date of this 
section shall be determined exclusively pursuant to this section.
    (c) This section shall not be construed to prevent the exercise by a 
Federal savings association enjoying grandfathered rights hereunder of 
authority that is available under the applicable state law only upon the 
occurrence of specific preconditions, such as the attainment of a 
particular future date or specified level of regulatory capital, which 
have not occurred at the time of conversion from a state mutual savings 
bank, provided they occur thereafter.
    (d) This section shall not be construed to permit the exercise of 
any particular authority on a more liberal basis than is allowable under 
the most liberal construction of either state or Federal law or 
regulation.



Sec. 543.14  Continuity of existence.

    The corporate existence of an association converting under this part 
shall continue in its successor. Each savings or demand accountholder 
shall receive a savings account or accounts in the converted association 
equal in amount to the value of accounts held in the former association.

[54 FR 49482, Nov. 30, 1989, as amended at 61 FR 64015, Dec. 3, 1996]

[[Page 100]]



PART 544_FEDERAL MUTUAL SAVINGS ASSOCIATIONS_CHARTER AND BYLAWS--Table 
of Contents




                                 Charter

Sec.
544.1 Federal mutual charter.
544.2 Charter amendments.
544.4 Issuance of charter.

                                 Bylaws

544.5 Federal mutual savings association bylaws.
544.6 Effect of subsequent charter or bylaw change.

                              Availability

544.7 In association offices.
544.8 Communication between members of a Federal mutual savings 
          association.

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

    Source: 54 FR 49486, Nov. 30, 1989, unless otherwise noted.

                                 Charter



Sec. 544.1  Federal mutual charter.

    A Federal mutual savings association shall have a charter in the 
following form, which may include any of the additional provisions set 
forth in Sec. 544.2 of this Part, if such provisions are specifically 
requested. A charter for a Federal mutual savings bank shall substitute 
the term ``savings bank'' for ``association.'' The term ``trustee'' may 
be substituted for the term ``director.'' Associations adopting this 
charter with existing borrower members must grandfather those borrower 
members who were members as of the date of issuance of the new charter 
by the Office. Such borrowers shall have one vote for the period of time 
such borrowings are in existence.

                         Federal Mutual Charter

    Section 1. Corporate title. The full corporate title of the Federal 
savings association is ------.
    Section 2. Office. The home office shall be located in ------ [city, 
state].
    Section 3. Duration. The duration of the association is perpetual.
    Section 4. Purpose and powers. The purpose of the association is to 
pursue any or all of the lawful objectives of a Federal mutual savings 
association chartered under section 5 of the Home Owners' Loan Act and 
to exercise all the express, implied, and incidental powers conferred 
thereby and by all acts amendatory thereof and supplemental thereto, 
subject to the Constitution and laws of the United States as they are 
now in effect, or as they may hereafter be amended, and subject to all 
lawful and applicable rules, regulations, and orders of the Office of 
Thrift Supervision (``Office'').
    Section 5. Capital. The association may raise capital by accepting 
payments on savings and demand accounts and by any other means 
authorized by the Office.
    Section 6. Members. All holders of the association's savings, 
demand, or other authorized accounts are members of the association. In 
the consideration of all questions requiring action by the members of 
the association, each holder of an account shall be permitted to cast 
one vote for each $100, or fraction thereof, of the withdrawal value of 
the member's account. No member, however, shall cast more than 1000 
votes. All accounts shall be nonassessable.
    Section 7. Directors. The association shall be under the direction 
of a board of directors. The authorized number of directors shall not be 
fewer than five nor more than fifteen persons, as fixed in the 
association's bylaws, except that the number of directors may be 
decreased to a number less than five or increased to a number greater 
than fifteen with the prior approval of the Director of the Office or 
his or her delegate.
    Section 8. Capital, surplus, and distribution of earnings. The 
association shall maintain for the purpose of meeting losses the amount 
of capital required by section 5 of the Home Owners' Loan Act and by 
regulations of the Office. The association shall distribute net earnings 
on its accounts on such basis and in accordance with such terms and 
conditions as may from time to time be authorized by the Director of the 
Office: Provided, That the association may establish minimum-balance 
requirements for accounts to be eligible for distribution of earnings.
    All holders of accounts of the association shall be entitled to 
equal distribution of assets, pro rata to the value of their accounts, 
in the event of voluntary or involuntary liquidation, dissolution, or 
winding up of the association. Moreover, in any such event, or in any 
other situation in which the priority of such accounts is in 
controversy, all such accounts shall, to the extent of their withdrawal 
value, be debts of the association having the same priority as the 
claims of general creditors of the association not having priority 
(other than any priority arising or resulting from consensual 
subordination) over other general creditors of the association.
    Section 9. Amendment of charter. Adoption of any preapproved charter 
amendment shall be effective after such preapproved amendment has been 
approved by the members at a legal meeting. Any other amendment, 
addition,

[[Page 101]]

change, or repeal of this charter must be approved by the Office prior 
to approval by the members at a legal meeting, and shall be effective 
upon filing with the Office in accordance with regulatory procedures.

Attest:_________________________________________________________________
 Secretary of the Association

By:_____________________________________________________________________
 President or Chief Executive Officer of the Association

Attest:_________________________________________________________________
 Secretary of the Office of Thrift Supervision

By:_____________________________________________________________________
 Director of the Office of Thrift Supervision

Effective Date:_________________________________________________________

[54 FR 49486, Nov. 30, 1989, as amended at 61 FR 64015, Dec. 3, 1996]



Sec. 544.2  Charter amendments.

    (a) General. In order to adopt a charter amendment, a Federal mutual 
savings association must comply with the following requirements:
    (1) Board of directors approval. The board of directors of the 
association must adopt a resolution proposing the charter amendment that 
states the text of such amendment;
    (2) Form of filing--(i) Application requirement. If the proposed 
charter amendment would: render more difficult or discourage a merger, 
proxy contest, the assumption of control by a mutual account holder of 
the association, or the removal of incumbent management; or involve a 
significant issue of law or policy; then, the association shall file the 
proposed amendment and obtain the prior approval of the OTS.
    (ii) Notice requirement. If the proposed charter amendment does not 
involve a provision that would be covered by paragraph (a)(2)(i) of this 
section and is permissible under all applicable laws, rules and 
regulations, then the association shall submit the proposed amendment to 
the OTS, at least 30 days prior to the effective date of the proposed 
charter amendment.
    (b) Approval. Any charter amendment filed pursuant to paragraph 
(a)(2)(ii) of this section shall automatically be approved 30 days from 
the date of filing of such amendment, provided that the association 
follows the requirements of its charter in adopting such amendment. This 
automatic approval does not apply if, prior to the expiration of such 
30-day period, the OTS notifies the association that such amendment is 
rejected or that such amendment is deemed to be filed under the 
provisions of paragraph (a)(2)(i) of this section. In addition, 
notwithstanding anything in paragraph (a) of this section to the 
contrary, the following charter amendments, including the adoption of 
the Federal mutual charter as set forth in Sec. 544.1 of this part, 
shall be effective and deemed approved at the time of adoption, if 
adopted without change and filed with OTS, within 30 days after 
adoption, provided the association follows the requirements of its 
charter in adopting such amendments:
    (1) Purpose and powers. Add a second paragraph to section 4, as 
follows:

    Section 4. Purpose and powers. * * * The association shall have the 
express power: (i) To act as fiscal agent of the United States when 
designated for that purpose by the Secretary of the Treasury, under such 
regulations as the Secretary may prescribe, to perform all such 
reasonable duties as fiscal agent of the United States as may be 
required, and to act as agent for any other instrumentality of the 
United States when designated for that purpose by any such 
instrumentality; (ii) To sue and be sued, complain and defend in any 
court of law or equity; (iii) To have a corporate seal, affixed by 
imprint, facsimile or otherwise; (iv) To appoint officers and agents as 
its business shall require and allow them suitable compensation; (v) To 
adopt bylaws not inconsistent with the Constitution or laws of the 
United States and rules and regulations adopted thereunder and under 
this Charter; (vi) To raise capital, which shall be unlimited, by 
accepting payments on savings, demand, or other accounts, as are 
authorized by rules and regulations made by the Office, and the holders 
of all such accounts or other accounts as shall, to such extent as may 
be provided by such rules and regulations, be members of the association 
and shall have such voting rights and such other rights as are thereby 
provided; (vii) To issue notes, bonds, debentures, or other obligations, 
or securities, provided by or under any provision of Federal statute as 
from time to time is in effect; (viii) To provide for redemption of 
insured accounts; (ix) To borrow money without limitation and pledge and 
otherwise encumber any of its assets to secure its debts; (x) To lend 
and otherwise invest its funds as authorized by statute and the rules 
and regulations of the Office; (xi) To wind up and dissolve, merge, 
consolidate, convert, or reorganize; (xii) To purchase, hold, and convey 
real estate and personalty consistent with its objects, purposes, and

[[Page 102]]

powers; (xiii) To mortgage or lease any real estate and personalty and 
take such property by gift, devise, or bequest; and (xiv) To exercise 
all powers conferred by law. In addition to the foregoing powers 
expressly enumerated, this association shall have power to do all things 
reasonably incident to the accomplishment of its express objects and the 
performance of its express powers.

    (2) Title change. A Federal mutual savings association that has 
complied with Sec. 543.1(b) of this chapter may amend its charter by 
substituting a new corporate title in section 1.
    (3) Home office. A Federal mutual savings association that has 
complied with Sec. 545.95 of this chapter may amend its charter by 
substituting a new home office in section 2.
    (4) Maximum number of votes. A Federal mutual savings association 
may amend its charter by substituting ------ votes per member in section 
6. [Fill in a number from 1 to 1000.]
    (c) Reissuance of charter. A Federal mutual savings association that 
has amended its charter may apply to have its charter, including the 
amendments, reissued by the Office. Such request for reissuance should 
be filed with the Corporate Secretary at the Washington Headquarters 
Office at the address listed at Sec. 516.40(b) of this chapter and 
contain signatures required under Sec. 544.1 of this part, together 
with such supporting documents as may be needed to demonstrate that the 
amendments were properly adopted.

[54 FR 49486, Nov. 30, 1989, as amended at 55 FR 13510, Apr. 11, 1990; 
57 FR 14339, Apr. 20, 1992; 61 FR 64016, Dec. 3, 1996; 63 FR 46160, Aug. 
31, 1998; 66 FR 13005, Mar. 2, 2001]



Sec. 544.4  Issuance of charter.

    Issuance by the Office of a charter to a Federal mutual savings 
association within the meaning of Sec. 543.5 of this chapter 
constitutes the incorporation of that association by the Office.

                                 Bylaws



Sec. 544.5  Federal mutual savings association bylaws.

    (a) General. A Federal mutual savings association shall operate 
under bylaws that contain provisions that comply with all requirements 
specified by the OTS in this section and that are not otherwise 
inconsistent with the provisions of this section, the association's 
charter, and all other applicable laws, rules, and regulations provided 
that, a bylaw provision inconsistent with the provisions of this section 
may be adopted with the approval of the OTS. Bylaws may be adopted, 
amended or repealed by a majority of the votes cast by the members at a 
legal meeting or a majority of the association's board of directors. The 
bylaws for a Federal mutual savings bank shall substitute the term 
``savings bank'' for ``association''. The term ``trustee'' may be 
substituted for the term ``director''.
    (b) The following requirements are applicable to Federal mutual 
savings associations:
    (1) Annual meetings of members. An association shall provide for and 
conduct an annual meeting of its members for the election of directors 
and at which any other business of the association may be conducted. 
Such meeting shall be held, as designated by its board of directors, at 
a location within the state that constitutes the principal place of 
business of the association, or at any other convenient place the board 
of directors may designate, and at a date and time within 150 days after 
the end of the association's fiscal year. At each annual meeting, the 
officers shall make a full report of the financial condition of the 
association and of its progress for the preceding year and shall outline 
a program for the succeeding year.
    (2) Special meetings of members. Procedures for calling any special 
meeting of the members and for conducting such a meeting shall be set 
forth in the bylaws. The subject matter of such special meeting must be 
established in the notice for such meeting. The board of directors of 
the association or the holders of 10 percent or more of the voting 
capital shall be entitled to call a special meeting. For purposes of 
this section, ``voting capital'' means FDIC-insured deposits as of the 
voting record date.
    (3) Notice of meeting of members. Notice specifying the date, time, 
and place of the annual or any special meeting and adequately describing 
any business to be conducted shall be published for two successive weeks 
immediately prior to the week in which such meeting shall

[[Page 103]]

convene in a newspaper of general circulation in the city or county in 
which the principal place of business of the association is located, or 
mailed postage prepaid at least 15 days and not more than 45 days prior 
to the date on which such meeting shall convene to each of its members 
of record at the last address appearing on the books of the association. 
A similar notice shall be posted in a conspicuous place in each of the 
offices of the association during the 14 days immediately preceding the 
date on which such meeting shall convene. The bylaws may permit a member 
to waive in writing any right to receive personal delivery of the 
notice. When any meeting is adjourned for 30 days or more, notice of the 
adjournment and reconvening of the meeting shall be given as in the case 
of the original meeting.
    (4) Fixing of record date. For the purpose of determining members 
entitled to notice of or to vote at any meeting of members or any 
adjournment thereof, or in order to make a determination of members for 
any other proper purpose, the bylaws shall provide for the fixing of a 
record date and a method for determining from the books of the 
association the members entitled to vote. Such date shall be not more 
than 60 days nor fewer than 10 days prior to the date on which the 
action, requiring such determination of members, is to be taken. The 
same determination shall apply to any adjourned meeting.
    (5) Member quorum. Any number of members present and voting, 
represented in person or by proxy, at a regular or special meeting of 
the members shall constitute a quorum. A majority of all votes cast at 
any meeting of the members shall determine any question, unless 
otherwise required by regulation. At any adjourned meeting, any business 
may be transacted that might have been transacted at the meeting as 
originally called. Members present at a duly constituted meeting may 
continue to transact business until adjournment.
    (6) Voting by proxy. Procedures shall be established for voting at 
any annual or special meeting of the members by proxy pursuant to the 
rules and regulations of the Office, including the placing of such 
proxies on file with the secretary of the association, for verification, 
prior to the convening of such meeting. Proxies may be given 
telephonically or electronically as long as the holder uses a procedure 
for verifying the identity of the member. All proxies with a term 
greater than eleven months or solicited at the expense of the 
association must run to the board of directors as a whole, or to a 
committee appointed by a majority of such board.
    (7) Communications between members. Provisions relating to 
communications between members shall be consistent with Sec. 544.8 of 
this part. No member, however, shall have the right to inspect or copy 
any portion of any books or records of a Federal mutual savings 
association containing:
    (i) A list of depositors in or borrowers from such association;
    (ii) Their addresses;
    (iii) Individual deposit or loan balances or records; or
    (iv) Any data from which such information could be reasonably 
constructed.
    (8) Number of directors, membership. The bylaws shall set forth a 
specific number of directors, not a range. The number of directors shall 
be not fewer than five nor more than fifteen, unless a higher or lower 
number has been authorized by the Director of the Office or his or her 
designee. Each director of the association shall be a member of the 
association. Directors may be elected for periods of one to three years 
and until their successors are elected and qualified, but if a staggered 
board is chosen, provision shall be made for the election of 
approximately one-third or one-half of the board each year, as 
appropriate. State-chartered savings banks converting to Federal savings 
banks may include alternative provisions for the election and term of 
office of directors so long as such provisions are authorized by the 
Office, and provide for compliance with the standard provisions of this 
section no later than six years after the conversion to a Federal 
savings association.
    (9) Meetings of the board. The board of directors shall determine 
the place, frequency, time, procedure for notice, which shall be at 
least 24 hours unless waived by the directors, and waiver of

[[Page 104]]

notice for all regular and special meetings. The meetings shall be under 
the direction of a chairman, appointed annually by the board; or in the 
absence of the chairman, the meetings shall be under the direction of 
the president. The board also may permit telephonic participation at 
meetings. The bylaws may provide for action to be taken without a 
meeting if unanimous written consent is obtained for such action. A 
majority of the authorized directors shall constitute a quorum for the 
transaction of business. The act of a majority of the directors present 
at any meeting at which there is a quorum shall be the act of the board.
    (10) Officers, employees. and agents. (i) The bylaws shall contain 
provisions regarding the officers of the association, their functions, 
duties, and powers. The officers of the association shall consist of a 
president, one or more vice presidents, a secretary, and a treasurer or 
comptroller, each of whom shall be elected annually by the board of 
directors. Such other officers and assistant officers and agents as may 
be deemed necessary may be elected or appointed by the board of 
directors or chosen in such other manner as may be prescribed in the 
bylaws. Any two or more offices may be held by the same person, except 
the offices of president and secretary.
    (ii) All officers and agents of the association, as between 
themselves and the association, shall have such authority and perform 
such duties in the management of the association as may be provided in 
the bylaws, or as may be determined by resolution of the board of 
directors not inconsistent with the bylaws. In the absence of any such 
provision, officers shall have such powers and duties as generally 
pertain to their respective offices. Any officer may be removed by the 
board of directors with or without cause, but such removal, other than 
for cause, shall be without prejudice to the contractual rights, if any, 
of the person so removed.
    (iii) Any indemnification provision must provide that any 
indemnification is subject to applicable Federal law, rules, and 
regulations.
    (11) Vacancies, resignation or removal of directors. Members of the 
association shall elect directors by ballot: Provided, that in the event 
of a vacancy on the board, the board of directors may, by their 
affirmative vote, fill such vacancy, even if the remaining directors 
constitute less than a quorum. A director elected to fill a vacancy 
shall be elected to serve only until the next election of directors by 
the members. The bylaws shall set out the procedure for the resignation 
of a director, which shall be by written notice or by any other 
procedure established in the bylaws. Directors may be removed only for 
cause as defined in Sec. 563.39 of this chapter, by a vote of the 
holders of a majority of the shares then entitled to vote at an election 
of directors.
    (12) Powers of the board. The board of directors shall have the 
power:
    (i) By resolution, to appoint from among its members and remove an 
executive committee and one or more other committees, which committee[s] 
shall have and may exercise all the powers of the board between the 
meetings or the board; but no such committee shall have the authority of 
the board to amend the charter or bylaws, adopt a plan of merger, 
consolidation, dissolution, or provide for the disposition of all or 
substantially all the property and assets of the association. Such 
committee shall not operate to relieve the board, or any member thereof, 
of any responsibility imposed by law;
    (ii) To fix the compensation of directors, officers, and employees; 
and to remove any officer or employee at any time with or without cause;
    (iii) To exercise any and all of the powers of the association not 
expressly reserved by the charter to the members.
    (13) Nominations for directors. The bylaws shall provide that 
nominations for directors may be made at the annual meeting by any 
member and shall be voted upon, except, however, the bylaws may require 
that nominations by a member must be submitted to the secretary and then 
prominently posted in the principal place of business, at least 10 days 
prior to the date of the annual meeting. However, if such provision is 
made for prior submission of nominations by a member, then the bylaws 
must provide for a nominating committee, which, except in the case of a 
nominee substituted as a result of

[[Page 105]]

death or other incapacity, must submit nominations to the secretary and 
have such nominations similarly posted at least 15 days prior to the 
date of the annual meeting.
    (14) New business. The bylaws shall provide procedures for the 
introduction of new business at the annual meeting. Those provisions may 
require that such new business be stated in writing and filed with the 
secretary prior to the annual meeting at least 30 days prior to the date 
of the annual meeting.
    (15) Amendment. Bylaws may include any provision for their amendment 
that would be consistent with applicable law, rules, and regulations and 
adequately addresses its subject and purpose.
    (i) Amendments shall be effective:
    (A) After approval by a majority vote of the authorized board, or by 
a majority of the vote cast by the members of the association at a legal 
meeting; and
    (B) After receipt of any applicable regulatory approval.
    (ii) When an association fails to meet its quorum requirement, 
solely due to vacancies on the board, the bylaws may be amended by an 
affirmative vote of a majority of the sitting board.
    (16) Miscellaneous. The bylaws may also address the subject of age 
limitations for directors or officers as long as they are consistent 
with applicable Federal law, rules or regulations, and any other 
subjects necessary or appropriate for effective operation of the 
association.
    (c) Form of filing--(1) Application requirement. (i) Any bylaw 
amendment shall be submitted to the OTS if it would:
    (A) Render more difficult or discourage a merger, proxy contest, the 
assumption of control by a mutual account holder of the association, or 
the removal of incumbent management;
    (B) Involve a significant issue of law or policy, including 
indemnification, conflicts of interest, and limitations on director or 
officer liability; or
    (C) Be inconsistent with the requirements of this section or with 
applicable laws, rules, regulations, or the association's charter.
    (ii) Applications submitted under paragraph (c)(1)(i) of this 
section are subject to standard treatment processing procedures at part 
516, subparts A and E of this chapter.
    (iii) For purposes of this paragraph (c), bylaw provisions that 
adopt the language of the model or optional bylaws in OTS's Application 
Processing Handbook, if adopted without change, and filed with OTS 
within 30 days after adoption, are effective upon adoption.
    (2) Filing requirement. If the proposed bylaw amendment does not 
involve a provision that would be covered by paragraph (c)(1) or (c)(3) 
of this section, then the association shall submit the amendment to the 
OTS at least 30 days prior to the date the bylaw amendment is to be 
adopted by the association.
    (3) Corporate governance procedures. A Federal mutual association 
may elect to follow the corporate governance procedures of the laws of 
the state where the main office of the institution is located, provided 
that such procedures may be elected only to the extent not inconsistent 
with applicable Federal statutes, regulations, and safety and soundness, 
and such procedures are not of the type described in paragraph (c)(1) of 
this section. If this election is selected, a Federal mutual association 
shall designate in its bylaws the provision or provisions from the body 
of law selected for its corporate governance procedures, and shall file 
a copy of such bylaws, which are effective upon adoption, within 30 days 
after adoption. The submission shall indicate, where not obvious, why 
the bylaw provisions meet the requirements stated in paragraph (c)(1) of 
this section.
    (d) Effectiveness. Any bylaw amendment filed pursuant to paragraph 
(c)(2) of this section shall automatically be effective 30 days from the 
date of filing of such amendment, provided that the association follows 
the requirements of its charter and bylaws in adopting such amendment. 
This automatic effective date does not apply if, prior to the expiration 
of such 30-day period, the OTS notifies the association that such 
amendment is rejected or that such amendment requires an application to

[[Page 106]]

be filed pursuant to paragraph (c)(1) of this section.

[54 FR 49486, Nov. 30, 1989, as amended at 55 FR 13511, Apr. 11, 1990; 
57 FR 14339, Apr. 20, 1992; 61 FR 64016, Dec. 3, 1996; 62 FR 66262, Dec. 
18, 1997; 66 FR 13006, Mar. 2, 2001; 66 FR 15020, Mar. 15, 2001]



Sec. 544.6  Effect of subsequent charter or bylaw change.

    Notwithstanding any subsequent change to its charter or bylaws, the 
authority of a Federal mutual savings association to engage in any 
transaction shall be determined only by the association's charter or 
bylaws then in effect.

                              Availability



Sec. 544.7  In association offices.

    A Federal mutual savings association shall make available to its 
members at all times in its offices a true copy of its charter and 
bylaws, including any amendments, and shall deliver such a copy to any 
member on request.



Sec. 544.8  Communication between members of a Federal mutual savings 
association.

    (a) Right of communication with other members. A member of a Federal 
mutual savings association has the right to communicate, as prescribed 
in paragraph (b) of this section, with other members of the Federal 
savings association regarding any matter related to the Federal savings 
association's affairs, except for ``improper'' communications, as 
defined in paragraph (c) of this section. The association may not defeat 
that right by redeeming a savings member's savings account in the 
Federal mutual savings association.
    (b) Member communication procedures. If a member of a Federal mutual 
savings association desires to communicate with other members, the 
following procedures shall be followed:
    (1) The member shall give the Federal mutual savings association a 
written request to communicate;
    (2) If the proposed communication is in connection with a meeting of 
the Federal savings association's members, the request shall be given at 
least thirty days before the annual meeting or 10 days before a special 
meeting;
    (3) The request shall contain--
    (i) The member's full name and address;
    (ii) The nature and extent of the member's interest in the Federal 
savings association at the time the information is given;
    (iii) A copy of the proposed communication; and
    (iv) If the communication is in connection with a meeting of the 
members, the date of the meeting;
    (4) The Federal savings association shall reply to the request 
within either--
    (i) Fourteen days;
    (ii) Ten days, if the communication is in connection with the annual 
meeting; or
    (iii) Three days, if the communication is in connection with a 
special meeting;
    (5) The reply shall provide either--
    (i) The number of the Federal savings association's members and the 
estimated reasonable cost to the Federal savings association of mailing 
to them the proposed communication; or
    (ii) Notification that the Federal savings association has 
determined not to mail the communication because it is ``improper'', as 
defined in paragraph (c) of this section;
    (6) After receiving the amount of the estimated costs of mailing and 
sufficient copies of the communication, the Federal savings association 
shall mail the communication to all members, by a class of mail 
specified by the requesting member, either--
    (i) Within fourteen days;
    (ii) Within seven days, if the communication is in connection with 
the annual meeting;
    (iii) As soon as practicable before the meeting, if the 
communication is in connection with a special meeting; or
    (iv) On a later date specified by the member;
    (7) If the Federal savings association refuses to mail the proposed 
communication, it shall return the requesting member's materials 
together with a written statement of the specific reasons for refusal, 
and shall simultaneously send to the Regional Director two copies each 
of the requesting member's materials, the Federal savings association's 
written statement, and any

[[Page 107]]

other relevant material. The materials shall be sent within:
    (i) Fourteen days,
    (ii) Ten days if the communication is in connection with the annual 
meeting, or
    (iii) Three days, if the communication is in connection with a 
special meeting,

after the Federal savings association receives the request for 
communication.
    (c) Improper communication. A communication is an ``improper 
communication'' if it contains material which:
    (1) At the time and in the light of the circumstances under which it 
is made:
    (i) Is false or misleading with respect to any material fact; or
    (ii) Omits a material fact necessary to make the statements therein 
not false or misleading, or necessary to correct a statement in an 
earlier communication on the same subject which has become false or 
misleading;
    (2) Relates to a personal claim or a personal grievance, or is 
solicitous of personal gain or business advantage by or on behalf of any 
party;
    (3) Relates to any matter, including a general economic, political, 
racial, religious, social, or similar cause, that is not significantly 
related to the business of the Federal savings association or is not 
within the control of the Federal savings association; or
    (4) Directly or indirectly and without expressed factual foundation:
    (i) Impugns character, integrity, or personal reputation,
    (ii) Makes charges concerning improper, illegal, or immoral conduct, 
or
    (iii) Makes statements impugning the stability and soundness of the 
Federal savings association.

[54 FR 49492, Nov. 30, 1989, as amended at 60 FR 66717, Dec. 26, 1995. 
Redesignated at 61 FR 64018, Dec. 3, 1996.]



PART 545_FEDERAL SAVINGS ASSOCIATIONS_OPERATIONS--Table of Contents




Sec.
545.1 General authority.
545.2 Federal preemption.
545.16 Public deposits, depositaries, and fiscal agents.
545.17 Funds transfer services.
545.74 Securities brokerage.
545.91 Home office.
545.92 Branch offices.
545.93 Branching by Federal savings associations.
545.95 Change of office location and redesignation of offices.
545.96 Agency office.
545.101 Fiscal agency.
545.121 Indemnification of directors, officers and employees.

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

    Source: 54 FR 49492, Nov. 30, 1989, unless otherwise noted.



Sec. 545.1  General authority.

    A Federal savings association may exercise all authority granted it 
by the Home Owners' Loan Act of 1933 (``Act''), 12 U.S.C. 1464, as 
amended, and its charter and bylaws, whether or not implemented 
specifically by Office regulations, subject to the limitations and 
interpretations contained in this part.



Sec. 545.2  Federal preemption.

    The regulations in this part 545 are promulgated pursuant to the 
plenary and exclusive authority of the Office to regulate all aspects of 
the operations of Federal savings associations, as set forth in section 
5(a) of the Act. This exercise of the Office's authority is preemptive 
of any state law purporting to address the subject of the operations of 
a Federal savings association.



Sec. 545.16  Public deposits, depositaries, and fiscal agents.

    (a) Definitions. As used in this section--
    (1) Moneys includes monies and has the meaning it has in applicable 
state law;
    (2) State law includes actions by a governmental body which has a 
charter adopted under the constitution of the state with provisions 
respecting deposits of public money of that body;
    (3) Surety means surety under real and/or personal suretyship, and 
includes guarantor; and
    (4) Terms in paragraph (b) of this section have the meanings they 
have under applicable state law.
    (b) Authority to act as surety for public deposits. (1) A Federal 
savings association that is a deposit association may give bond or 
security for deposit in it of public moneys or investment in it by a 
governmental unit if required to do

[[Page 108]]

so by state law, either as an alternative condition or otherwise, 
regardless of the amount required. Any bond or security may be given and 
any substitution or increase thereof may be made under this section at 
any time.
    (2) If state law requires as a condition of such deposit or 
investment that the Federal savings association or its bond or security, 
or any combination thereof, be surety for or with respect to other 
deposits or instruments, whether of that depositor or investor or of any 
other(s), and whether in the Federal savings association or in any other 
institution(s) having, when the investments or deposits were made, 
insurance by the Federal Deposit Insurance Corporation, the same shall 
become, or if the state law is self-executing shall be, such surety.
    (c) Depositaries and fiscal agents. Subject to regulation of the 
United States Treasury Department, a Federal savings association may 
serve as a depositary for Federal taxes, as a Treasury tax and loan 
depositary, or as a depositary of public money and fiscal agent of the 
Government or any other instrumentality thereof when designated for that 
purpose by such instrumentality and approved by the Office, and may 
satisfy any requirement in connection therewith, including maintaining 
accounts described in Sec. Sec. 561.33, 561.52, 561.53, and 561.54 of 
this chapter; pledging collateral; and performing the services outlined 
in 31 CFR 202.3(b) or any section that supersedes or amends Sec. 
202.3(b).



Sec. 545.17  Funds transfer services.

    A Federal savings association is authorized to transfer, with or 
without fee, its customers' funds from any account (including a line of 
credit) of the customer at the Federal savings association or at another 
financial intermediary to third parties or other accounts of the 
customer on the customer's order or authorization by any mechanism or 
device, including cashier's checks, conforming with applicable laws and 
established commercial practices.



Sec. 545.74  Securities brokerage.

    (a) A service corporation may execute securities transactions on an 
agency or riskless principal basis solely upon the order of and for the 
account of customers, and may provide standardized and individualized 
investment advice to individuals or entities, provided that the service 
corporation:
    (1) Conducts securities brokerage and investment advisory activities 
in an area that is clearly identified and distinguished from the areas 
where the association's depository functions are performed;
    (2) Distinguishes advertising by the service corporation from that 
of the association, such that advertising does not confuse securities 
transactions executed, securities purchased, or investment advice 
provided by the service corporation with federally-insured deposits; 
that the advertising indicates that the service corporation and broker-
dealer, and not the association, is providing the securities brokerage 
or investment advisory services, identifies the broker-dealer in 
advertising, and does not use the logo of the parent association in the 
text of any advertisement prepared or distributed by the service 
corporation or the broker-dealer or in the text of any advertisement for 
specific securities products;
    (3) Where the service corporation contracts with a third-party 
broker-dealer, has a written contract with the broker-dealer that 
provides that the broker-dealer agrees to indemnify fully the service 
corporation and the association for any liability arising from the 
negligence, recklessness, or intentional conduct of the broker-dealer or 
its employees, and that sets forth operating, marketing, compensation, 
and other relevant terms;
    (4) Provides to the OTS an initial opinion of counsel or an opinion 
from the senior securities principal responsible for overseeing the 
subject brokerage program that the program has been established pursuant 
to operational procedures that are intended to ensure that the program 
is conducted in conformity with applicable securities laws and 
regulations and that such procedures include internal controls and 
supervisory systems that have been established and are to be applied to 
detect and prevent violations of federal securities statutes, the rules 
adopted

[[Page 109]]

thereunder, and the rules of self-regulatory organizations applicable to 
broker-dealers, including but not limited to those provisions designed 
to prevent churning, unsuitable recommendations, charging excessive 
prices, and the making of fraudulent representations in connection with 
the offer, sale, or purchase of securities (``the regulations''); and on 
an annual basis thereunder provides a certification by the senior 
securities principal responsible for supervising and overseeing the 
subject brokerage program that he or she has discharged the obligations 
incumbent upon him or her by reason of such procedures and systems 
previously described and has no reasonable belief or cause to believe 
that such procedures and systems have not been and are not being 
complied with or that a violation of the regulations has occurred;
    (5) Does not condition the provision of securities services to a 
customer on the customer's utilizing services of any affiliate of the 
association, the service corporation, or a broker-dealer.
    (b) Service corporation activities authorized under this paragraph 
(b) may not include the following activities:
    (1) Execution of securities transactions on a principal basis, 
including market-making and underwriting, except on a riskless principal 
basis, and except as permitted under Sec. 559.4 of this chapter;
    (2) Payment to any employee of the association of a referral fee, 
bonus, or any incentive compensation, in cash or in kind, for referring 
any customer to the service corporation except as may be consistent with 
a ``no-action'' letter received by the association from the U.S. 
Securities and Exchange Commission (``SEC''), stating that the SEC will 
not recommend enforcement action if association employees receive the 
planned referral fee but do not register with a broker-dealer and the 
association does not register as a broker-dealer;
    (3) Solicitation of a person to execute a transaction in a specific 
security by any registered representative;
    (4) Indemnification by the service corporation to a degree greater 
than the indemnification provided to it by the third-party broker-
dealer; and the association is prohibited from indemnifying a third 
party broker-dealer;
    (5) Extension of margin credit by the association to customers of 
the service corporation or broker-dealer;
    (6) Non-registered representatives who are dual or sole employees of 
the association performing tasks other than clerical for ministerial 
tasks; prohibited activities include accepting or delivering money or 
securities and taking orders to execute securities transactions.
    (c) Any association that intends to acquire or establish a service 
corporation to engage in preapproved securities brokerage activities 
shall furnish to the OTS at least 30 days prior to the commencement of 
operations, written notice containing a full description of the 
brokerage services to be provided and a certification from the board of 
directors of such association that such services will be in compliance 
with all of the requirements of this section. In addition, the 
association shall retain complete records of all executed contractual 
agreements and memoranda between the service corporation and broker-
dealers, investment advisors, the parent savings association, and their 
affiliates, pro forma income statements for a three year period, any 
required professional opinions, and a reasoned legal opinion from 
counsel that the securities brokerage services qualify as preapproved 
under this section.
    (d) The Regional Director may request additional information at any 
time regarding the operations of the service corporation if there are 
supervisory concerns about the activity, has evidence that the activity 
may not be in the best interest of the association or service 
corporation, or has questions as to whether the activities are being 
conducted in a manner that is preapproved.

[54 FR 49492, Nov. 30, 1989, as amended at 55 FR 13511, Apr. 11, 1990; 
57 FR 14340, Apr. 20, 1992; 57 FR 33437, July 29, 1992; 57 FR 48949, 
Oct. 29, 1992; 57 FR 62474, Dec. 31, 1992; 59 FR 53570, Oct. 25, 1994; 
60 FR 66717, Dec. 26, 1995; 61 FR 66570, Dec. 18, 1996; 67 FR 78152, 
Dec. 23, 2002]

[[Page 110]]



Sec. 545.91  Home office.

    All operations of a Federal savings association shall be subject to 
direction from the home office.



Sec. 545.92  Branch offices.

    (a) General. A branch office of a Federal savings association is any 
office other than its home office, agency office, administrative office, 
data processing office, or an electronic means or facility under part 
555 of this chapter.
    (b) Eligibility. Federal savings associations eligible for expedited 
treatment under Sec. 516.5 of this chapter may establish a branch 
office subject to the procedures in paragraph (f) of this section. A 
Federal savings association subject to standard treatment under Sec. 
516.5 of this chapter must not establish a branch office without prior 
approval subject to the procedures in paragraph (e) of this section.
    (c) Application form; filing; completion; supervisory objection. 
Applicants shall obtain application and notice forms and related 
instructions from the OTS.
    (d) Processing of applications/notices. Processing of applications 
and notices shall be subject to the following procedures:
    (1) Publication. (i) A federal savings association must publish a 
public notice of the branch application or notice in accordance with the 
procedures specified in subpart B of part 516 of this chapter.
    (ii) Promptly after publication of the public notice, the savings 
association shall transmit copies of the public notice and publisher's 
affidavit of publication to the OTS.
    (iii) The application or notice and all related communications may 
be inspected by any person at the Regional Office during regular 
business hours, unless such information is exempt from public 
disclosure.
    (2) Submission of application or notice. A Federal savings 
association must comply with Sec. 545.93 of this part and must file its 
application or notice within the time frame in Sec. 516.60 of this 
chapter.
    (3) Submission of comments. Commenters may submit comments on the 
application or notice in accordance with the procedures specified in 
subpart C of part 516 of this chapter.
    (4) Meetings. The OTS may arrange informal or formal meetings in 
accordance with the procedures specified in subpart D of part 516 of 
this chapter.
    (e) Approval of branch application. (1) The OTS shall approve an 
application only if the overall policies, condition, and operation of 
the applicant afford no basis for supervisory objection and the proposed 
branch will open within twelve months of approval unless otherwise 
allowed by the OTS. In considering whether to approve an application, 
the OTS will assess and take into account an association's record of 
helping to meet the credit needs of its entire community, including low- 
and moderate-income neighborhoods, pursuant to part 563e of this 
chapter; assessment of an association's record of performance may be the 
basis for denying an application.
    (2) An application shall be deemed to be approved 30 days after 
notification that the application is complete, unless the OTS suspends 
the applicable processing time frames under Sec. 516.190 of this 
chapter, or the OTS objects to the application on the grounds set forth 
under paragraph (e)(1) of this section.
    (f) Approval of branch notice. A notice filed by a Federal savings 
association that qualifies for expedited treatment must be deemed to be 
approved 30 days after its filing with OTS, unless OTS takes one of the 
actions described at Sec. 516.200 of this chapter. OTS will apply the 
review standards set forth in paragraph (e)(1) of this section; or OTS 
determines to process the filing as an application under Sec. 
516.200(b) of this chapter. If the OTS suspends the applicable 
processing time frames, the savings association may not open a branch 
until the OTS provides a notification of its approval.
    (g) Offices not requiring prior written approval. A Federal savings 
association may establish without prior approval a drive-in and/or 
pedestrian office opened in conjunction with an approved branch or home 
office of the association, located within 500 feet of a public entrance 
of that office and closer to that entrance than to a public entrance of 
any other SAIF-insured association, and the functions of which are 
limited to the ordinary functions performed at a teller-window.

[[Page 111]]

    (h) Maintenance of branch office after conversion, consolidation, 
purchase of bulk assets, merger or purchase from receiver. (1) An 
existing association which converts to a Federal savings association may 
maintain an existing office, and a Federal savings association that 
acquires offices through consolidation, purchase of bulk assets, merger 
or purchase from the receiver of an association may maintain any 
acquired office, except to the extent the approval by the OTS of the 
conversion, consolidation, merger, or purchase specifies otherwise.
    (2) A Federal savings association may not file a branch application 
after having filed an application to merge or otherwise surrender its 
Federal charter, unless the merger or conversion application has been 
pending for at least six months.

[54 FR 49492, Nov. 30, 1989, as amended at 55 FR 13512, Apr. 11, 1990; 
57 FR 14341, Apr. 20, 1992; 57 FR 37084, Aug. 18, 1992; 62 FR 64145, 
Dec. 4, 1997; 63 FR 65682, Nov. 30, 1998; 66 FR 13006, Mar. 2, 2001; 66 
FR 65820, Dec. 21, 2001]



Sec. 545.93  Branching by Federal savings associations.

    (a) General. A Federal association may branch in any state or states 
of the United States and its territories, except as provided in 
paragraph (b) of this section, subject to the requirements of paragraph 
(c) of this section.
    (b) Limitations. No branching will be permitted under paragraph (a) 
of this section that will result in the following:
    (1) Establishment or operation of a branch outside the state in 
which the association has its home office in violation of section 5(r) 
of the Home Owners' Loan Act;
    (2) Formation by any company of a multiple savings and loan holding 
company controlling savings associations in more than one state in 
violation of section 10(e)(3) of the Home Owners' Loan Act; or
    (3) Acquisition of a savings association and the establishment and 
operation of new branches by such savings association in violation of 
section 13(k)(4) of the Federal Deposit Insurance Act.
    (c) Branching applications--(1) General. Prior to opening a branch, 
an association must obtain approval of a branching application pursuant 
to Sec. 545.92 of this chapter. The Office may approve or deny an 
application based on information available from any source and 
supervisory objection may be interposed at any point during the 
processing of the application. In granting supervisory clearance to an 
applicant, the Office will consider whether the policies, condition, and 
operation of the applicant are satisfactory and afford no basis for 
supervisory objection.
    (2) Regulatory capital. For supervisory clearance, an association's 
regulatory capital should meet or exceed the minimum requirements 
established by law and applicable regulations of the Office upon 
acquisition or establishment of the proposed branch or branches, except 
as otherwise permitted under section 38(e)(4) of the Federal Deposit 
Insurance Act.
    (3) Community reinvestment. Pursuant to the Community Reinvestment 
Act of 1977 (12 U.S.C. 2901), the Office encourages savings associations 
to help meet in an affirmative and continuing manner the credit needs of 
all communities in which they do business, including low- and moderate-
income neighborhoods, consistent with safe and sound operation. The 
Office will evaluate an applicant's record under part 563e of this 
chapter, may deny an application based on the assessment of the 
association's CRA record, and may approve a branch application on the 
condition that the association improve specific aspects of its community 
investment-related practices and performance to the satisfaction of the 
Office. However, in most cases, commitments by an applicant to improve 
its record of compliance with the CRA shall not be regarded as 
sufficient to overcome a seriously deficient CRA record at the time of 
application.
    (4) Comment procedures. Comments on applications for branches must 
be submitted in writing and factually documented. Comment procedures are 
set forth in subpart C of part 516 of this chapter, Sec. 563e.29 (c) 
and (d) of this chapter, the OTS Application Processing Handbook, and 
other supervisory guidance issued by the OTS.

[[Page 112]]

    (5) Expiration of approvals. If an association does not open a 
branch within the time specified in the approval, and the Director or 
his or her designee finds that the association is not making a good-
faith effort to open the branch promptly, the approval will be deemed to 
have expired and the association will be required to reapply if it wants 
to branch in that location.
    (d) Federal preemption. This exercise of the OTS's authority is 
preemptive of any state law purporting to address the subject of 
branching by a Federal savings association.

[57 FR 12207, Apr. 9, 1992, as amended at 60 FR 66718, Dec. 26, 1995; 62 
FR 64146, Dec. 4, 1997. Redesignated at 66 FR 65820, Dec. 21, 2001]



Sec. 545.95  Change of office location and redesignation of offices.

    (a) Eligibility. A Federal savings association may change the 
permanent location of its home office or any approved branch office, or 
redesignate a home or branch office subject to the appropriate expedited 
or standard treatment procedures for establishing a branch office set 
forth in Sec. 545.92 of this part.
    (b) Processing of application. (1) Processing of an application for 
a change of office location or redesignation of a home or branch office 
shall follow the procedures set forth in Sec. 545.92 of this part, 
except that:
    (i) The applicant shall publish the required newspaper notice of 
application in the applicant's home office community, the community to 
be served by the new office, and the community where the office is to be 
closed or the home office is to be redesignated as a branch; and
    (ii) The applicant shall post notice of the application for 25 days 
from the date of first publication in a prominent location in the office 
to be closed or redesignated.
    (2) The OTS may approve an amendment to an association's charter in 
connection with approval of a home office relocation or redesignation 
under this section.
    (c) Short-distance relocations. (1) Notwithstanding paragraph (a) of 
this section, an association may change the permanent location of a home 
or branch office, without applying for approval by the OTS, to a site 
within the market area and short-distance relocation area of the office 
site that has been approved in accordance with Sec. 545.92 of this part 
or paragraph (a) of this section. The short-distance relocation area of 
an office site is:
    (i) The area within a 1,000-foot radius of the site if it is located 
within a central city of a Metropolitan Statistical Area (``MSA'') 
designated by the U.S. Department of Commerce;
    (ii) The area within a one-mile radius of the site if it is located 
within an MSA designated by the U.S. Department of Commerce but not 
within a central city; or
    (iii) The area within a two-mile radius of the site if it is not 
located within a MSA.
    (2) An association shall notify the OTS in writing at least 30 days 
before such an office relocation and may proceed with the relocation 
unless, within 30 days of receipt of the notice, the OTS notifies the 
association that the relocation does not satisfy the criteria set forth 
in the first sentence of paragraph (c)(1) of this section, in which case 
the association must file an application and obtain approval by the OTS 
in accordance with paragraph (b) of this section.

[57 FR 14341, Apr. 20, 1992, as amended at 62 FR 64146, Dec. 4, 1997]



Sec. 545.96  Agency office.

    (a) General. A Federal savings association may establish or maintain 
an agency office that engages only in one or more of the following 
activities: (1) Servicing or originating (but not approving) loans and 
contracts; (2) managing or selling real estate owned by the Federal 
savings association; or (3) conducting fiduciary activities or 
activities ancillary to the association's fiduciary business in 
compliance with subpart A of part 550 of this chapter.
    (b) Additional services. Except for payment on savings accounts, 
offering of any services not listed in paragraph (a) of this section may 
be approved by the OTS.
    (c) Records. An agency office shall maintain records of all business 
it transacts and transmit copies to a

[[Page 113]]

branch or home office of the Federal savings association.

[54 FR 49492, Nov. 30, 1989, as amended at 54 FR 50614, Dec. 8, 1989; 55 
FR 13512, Apr. 11, 1990; 57 FR 14342, Apr. 20, 1992; 68 FR 53025, Sept. 
9, 2003]



Sec. 545.101  Fiscal agency.

    A Federal savings association designated fiscal agent by the 
Secretary of the Treasury or with Office approval by another 
instrumentality of the United States, shall, as such, perform such 
reasonable duties and exercise only such powers and privileges as the 
Secretary of the Treasury or such instrumentality may prescribe.



Sec. 545.121  Indemnification of directors, officers and employees.

    A Federal savings association shall indemnify its directors, 
officers, and employees in accordance with the following requirements:
    (a) Definitions and rules of construction. (1) Definitions for 
purposes of this section.
    (i) Action. The term ``action'' means any judicial or administrative 
proceeding, or threatened proceeding, whether civil, criminal, or 
otherwise, including any appeal or other proceeding for review;
    (ii) Court. The term ``court'' includes, without limitation, any 
court to which or in which any appeal or any proceeding for review is 
brought.
    (iii) Final judgment. The term ``final judgment'' means a judgment, 
decree, or order which is not appealable or as to which the period for 
appeal has expired with no appeal taken.
    (iv) Settlement. The term ``settlement'' includes entry of a 
judgment by consent or confession or a plea of guilty or nolo 
contendere.
    (2) References in this section to any individual or other person, 
including any association, shall include legal representatives, 
successors, and assigns thereof.
    (b) General. Subject to paragraphs (c) and (g) of this section, a 
savings association shall indemnify any person against whom an action is 
brought or threatened because that person is or was a director, officer, 
or employee of the association, for:
    (1) Any amount for which that person becomes liable under a judgment 
if such action; and
    (2) Reasonable costs and expenses, including reasonable attorney's 
fees, actually paid or incurred by that person in defending or settling 
such action, or in enforcing his or her rights under this section if he 
or she attains a favorable judgment in such enforcement action.
    (c) Requirements. Indemnification shall be made to such period under 
paragraph (b) of this section only if:
    (1) Final judgment on the merits is in his or her favor; or
    (2) In case of:
    (i) Settlement,
    (ii) Final judgment against him or her, or
    (iii) Final judgment in his or her favor, other than on the merits, 
if a majority of the disinterested directors of the savings association 
determine that he or she was acting in good faith within the scope of 
his or her employment or authority as he or she could reasonably have 
perceived it under the circumstances and for a purpose he or she could 
reasonably have believed under the circumstances was in the best 
interests of the savings association or its members.

However, no indemnification shall be made unless the association gives 
the Office at least 60 days' notice of its intention to make such 
indemnification. Such notice shall state the facts on which the action 
arose, the terms of any settlement, and any disposition of the action by 
a court. Such notice, a copy thereof, and a certified copy of the 
resolution containing the required determination by the board of 
directors shall be sent to the Regional Director, who shall promptly 
acknowledge receipt thereof. The notice period shall run from the date 
of such receipt. No such indemnification shall be made if the OTS 
advises the association in writing, within such notice period, of his or 
her objection thereto.
    (d) Insurance. A savings association may obtain insurance to protect 
it and its directors, officers, and employees from potential losses 
arising from claims against any of them for alleged wrongful acts, or 
wrongful acts, committed in their capacity as directors,

[[Page 114]]

officers, or employees. However, no savings association may obtain 
insurance which provides for payment of losses of any person incurred as 
a consequence of his or her willful or criminal misconduct.
    (e) Payment of expenses. If a majority of the directors of a savings 
association concludes that, in connection with an action, any person 
ultimately may become entitled to indemnification under this section, 
the directors may authorize payment of reasonable costs and expenses, 
including reasonable attorneys' fees, arising from the defense or 
settlement of such action. Nothing in this paragraph (e) shall prevent 
the directors of a savings association from imposing such conditions on 
a payment of expenses as they deem warranted and in the interests of the 
savings association. Before making advance payment of expenses under 
this paragraph (e), the savings association shall obtain an agreement 
that the savings association will be repaid if the person on whose 
behalf payment is made is later determined not to be entitled to such 
indemnification.
    (f) Exclusiveness of provisions. No savings association shall 
indemnify any person referred to in paragraph (b) of this section or 
obtain insurance referred to in paragraph (d) of the section other than 
in accordance with this section. However, an association which has a 
bylaw in effect relating to indemnification of its personnel shall be 
governed solely by that bylaw, except that its authority to obtain 
insurance shall be governed by paragraph (d) of this section.
    (g) The indemnification provided for in paragraph (b) of this 
section is subject to and qualified by 12 U.S.C. 1821(k).

[54 FR 49492, Nov. 30, 1989, as amended at 56 FR 59866, Nov. 26, 1991; 
60 FR 66717, Dec. 26, 1995]



PART 546_FEDERAL MUTUAL SAVINGS ASSOCIATIONS_MERGER, DISSOLUTION, 
REORGANIZATION, AND CONVERSION--Table of Contents




Sec.
546.1 Definitions.
546.2 Procedure; effective date.
546.3 Transfer of assets upon merger or consolidation.
546.4 Voluntary dissolution.

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

    Source: 54 FR 49517, Nov. 30, 1989, unless otherwise noted.



Sec. 546.1  Definitions.

    The terms used in Sec. Sec. 546.2 and 546.3 shall have the same 
meaning as set forth in Sec. Sec. 552.13(b) and 563.22(g) of this 
chapter.

[59 FR 44622, Aug. 30, 1994]



Sec. 546.2  Procedure; effective date.

    (a) A Federal mutual savings association may combine with any 
depository institution, provided that:
    (1) The combination is in compliance with, and receives all 
approvals required under, any applicable statutes and regulations;
    (2) Any resulting Federal savings association meets the requirements 
for Federal Home Loan Bank membership and insurance of accounts;
    (3) In the case of a combination with a bank that is a member of the 
Bank Insurance Fund, any resulting Federal savings association conforms 
to the requirements of sections 5(c) and 10(m) of the Home Owners' Loan 
Act under the standards set forth in section 5(c)(5) of the Home Owners' 
Loan Act, and in the case of a combination with any other depository 
institution, any resulting Federal savings association conforms within 
the time prescribed by the OTS, to the requirements of section 5(c) of 
the Home Owners' Loan Act; and
    (4) The resulting institution shall be a mutually held savings 
association, unless:
    (i) The transaction involves a supervisory merger;
    (ii) The transaction is approved under part 563b of this chapter; or
    (iii) The transaction involves a transfer in the context of a mutual 
holding company reorganization under section 10(o) of the Home Owners' 
Loan Act.
    (b) Each Federal mutual savings association, by a two-thirds vote of 
its board of directors, shall approve a plan of combination evidenced by 
a combination agreement. The agreement shall state:

[[Page 115]]

    (1) That the combination shall not be effective unless and until the 
combination receives any necessary approval from the Office pursuant to 
Sec. 563.22 (a) or (c), or in the case of a transaction requiring a 
notice pursuant to Sec. 563.22(c), the notice has been filed, and the 
appropriate period of time has passed or the OTS has advised the parties 
that it will not disapprove the transaction;
    (2) Which constituent institution is to be the resulting 
institution;
    (3) The name of the resulting institution;
    (4) The location of the home office and any other offices of the 
resulting institution;
    (5) The terms and conditions of the combination and the method of 
effectuation;
    (6) Any charter amendments, or the new charter in the combination;
    (7) The basis upon which the resulting institution's savings 
accounts will be issued;
    (8) If the Federal mutual savings association is the resulting 
institution, the number, names, residence addresses, and terms of 
directors;
    (9) The effect upon and assumption of any liquidation account of a 
disappearing institution by the resulting institution; and
    (10) Such other provisions, agreements, or understandings as relate 
to the combination.
    (c) Prior written notification to, notice to, or prior written 
approval of, the Office pursuant to Sec. 563.22 of this chapter is 
required for every combination. In the case of applications and notices 
pursuant to 563.22 (a) or (c), the Office shall apply the criteria set 
out in Sec. 563.22 of this chapter and shall impose any conditions it 
deems necessary or appropriate to ensure compliance with those criteria 
and the requirements of this chapter.
    (d) Where the resulting institution is a Federal mutual savings 
association, the Office may approve a temporary increase in the number 
of directors of the resulting institution provided that the association 
submits a plan for bringing the board of directors into compliance with 
the requirements of Sec. 544.1 of this chapter within a reasonable 
period of time.
    (e) Notwithstanding any other provision of this part, the Office may 
require that a plan of combination be submitted to the voting members of 
any of the mutual savings associations that are constituent institutions 
at a duly called meeting(s), and that the plan, to be effective, be 
approved by such voting members.
    (f) A conservator or receiver for a Federal mutual savings 
association may combine the association with another insured depository 
institution without submitting the plan to the association's board of 
directors or members for their approval.
    (g) If a plan of combination provides for a resulting Federal mutual 
savings association's name or location to be changed, its charter shall 
be amended accordingly. If the resulting institution is a Federal mutual 
savings association, the effective date of the combination shall be the 
date specified in the approval; if the resulting institution is not a 
Federal savings association, the effective date shall be that prescribed 
under applicable law. Approval of a merger automatically cancels the 
Federal charter of a Federal association that is a disappearing 
institution as of the effective date of merger, and the association 
shall, on that date, surrender its charter to the Office.

[59 FR 44622, Aug. 30, 1994]



Sec. 546.3  Transfer of assets upon merger or consolidation.

    On the effective date of a merger or consolidation in which the 
resulting institution is a Federal association, all assets and property 
of the disappearing institutions shall immediately, without any further 
act, become the property of the resulting institution to the same extent 
as they were the property of the disappearing institutions, and the 
resulting institution shall be a continuation of the entity which 
absorbed the disappearing institutions. All rights and obligations of 
the disappearing institutions shall remain unimpaired, and the resulting 
institution shall, on the effective date of the merger or consolidation, 
succeed to all those rights and obligations, subject to

[[Page 116]]

the Home Owners' Loan Act and other applicable statutes.

[59 FR 44623, Aug. 30, 1994]



Sec. 546.4  Voluntary dissolution.

    A Federal savings association's board of directors may propose a 
plan for dissolution of the association. The plan may provide for 
either:
    (a) Appointment of the Federal Deposit Insurance Corporation or the 
Resolution Trust Corporation (under section 5 of the Act and section 11 
of the Federal Deposit Insurance Act, as amended or section 21A of the 
Federal Home Loan Bank Act, as amended) as receiver for the purpose of 
liquidation;
    (b) Transfer of all the association's assets to another association 
and home-financing institution under Federal or State charter either for 
cash sufficient to pay all obligations of the association and retire all 
outstanding accounts or in exchange for that association's payment of 
all the association's outstanding obligations and issuance of share 
accounts or other evidence of interest to the association's members on a 
pro rata basis; or
    (c) Dissolution in a manner proposed by the directors which they 
consider best for all concerned.

The plan, and a statement of reasons for proposing dissolution and for 
proposing the plan, shall be submitted to the OTS for approval. The OTS 
will approve the plan if the OTS believes dissolution is advisable and 
the plan best for all concerned, but if the OTS considers the plan 
inadvisable, the OTS may either make recommendations to the association 
concerning the plan or disapprove it. When the plan is approved by the 
association's board of directors and by the OTS, it shall be submitted 
to the association's members at a duly called meeting and, when approved 
by a majority of votes cast at that meeting, shall become effective. 
After dissolution in accordance with the plan, a certificate evidencing 
dissolution, supported by such evidence as the OTS may require, shall 
immediately be filed with the OTS. When the OTS receives such evidence 
satisfactory to the OTS, it will terminate the corporate existence of 
the dissolved association and the association's charter shall thereby be 
canceled. A Federal savings association is not required to obtain 
approval under this section where the Federal savings association 
transfers all of its assets and liabilities to a bank in a transaction 
that is subject to Sec. 563.22(b) of this chapter.

[54 FR 49517, Nov. 30, 1989, as amended at 55 FR 13512, Apr. 11, 1990; 
57 FR 14342, Apr. 20, 1992; 59 FR 44623, Aug. 30, 1994]



PART 550_FIDUCIARY POWERS OF SAVINGS ASSOCIATIONS--Table of Contents




Sec.
550.10 What regulations govern the fiduciary operations of savings 
          associations?
550.20 What are fiduciary powers?
550.30 What fiduciary capacities does this part cover?
550.40 When do I have investment discretion?
550.50 What is a fiduciary account?
550.60 What other definitions apply to this part?

                  Subpart A_Obtaining Fiduciary Powers

550.70 Must I obtain OTS approval or file a notice before I exercise 
          fiduciary powers?
550.80 How do I obtain OTS approval?
550.90 What information must I include in my application?
550.100 What factors may the OTS consider in its review of my 
          application?
550.110 Who will act on my application?
550.120 What action will the OTS take on my application?
550.125 How do I file the notice under Sec. 550.70(c)?

                  Subpart B_Exercising Fiduciary Powers

550.130 How may I conduct multi-state operations?
550.135 How do I determine which State's laws apply to my operations?
550.136 To what extent do State laws apply to my fiduciary operations?
550.140 Must I adopt and follow written policies and procedures in 
          exercising fiduciary powers?

                   Fiduciary Personnel and Facilities

550.150 Who is responsible for the exercise of fiduciary powers?
550.160 What personnel and facilities may I use to perform fiduciary 
          services?
550.170 May my other departments or affiliates use fiduciary personnel 
          and facilities to perform other services?
550.180 May I perform fiduciary services for, or purchase fiduciary 
          services from, another association or entity?

[[Page 117]]

550.190 Must fiduciary officers and employees be bonded?

                      Review of a Fiduciary Account

550.200 Must I review a prospective account before I accept it?
550.210 Must I conduct another review of an account after I accept it?
550.220 Are any other account reviews required?

                      Custody and Control of Assets

550.230 Who must maintain custody or control of assets in a fiduciary 
          account?
550.240 May I hold investments of a fiduciary account off-premises?
550.250 Must I keep fiduciary assets separate from other assets?

                 Investing Funds of a Fiduciary Account

550.260 How may I invest funds of a fiduciary account?

                Funds Awaiting Investment or Distribution

550.290 What must I do with fiduciary funds awaiting investment or 
          distribution?
550.300 Where may I deposit fiduciary funds awaiting investment or 
          distribution?
550.310 What if the FDIC does not insure the deposits?
550.320 What is acceptable collateral for uninsured deposits?

                      Restrictions on Self Dealing

550.330 Are there investments in which I may not invest funds of a 
          fiduciary account?
550.340 May I exercise rights to purchase additional stock or fractional 
          shares of my stock or obligations or the stock or obligations 
          of my affiliates?
550.350 May I lend, sell, or transfer assets of a fiduciary account if I 
          have an interest in the transaction?
550.360 May I make a loan to a fiduciary account that is secured by an 
          interest in the assets in the account?
550.370 May I sell assets or lend money between fiduciary accounts?

                    Compensation, Gifts, and Bequests

550.380 May I earn compensation for acting in a fiduciary capacity?
550.390 May my officer or employee retain compensation for acting as a 
          co-fiduciary?
550.400 May my fiduciary officer or employee accept a gift or bequest?

                       Recordkeeping Requirements

550.410 What records must I keep?
550.420 How long must I keep these records?
550.430 Must I keep fiduciary records separate and distinct from other 
          records?

                           Audit Requirements

550.440 When do I have to audit my fiduciary activities?
550.450 What standards govern the conduct of the audit?
550.460 Who may conduct an audit?
550.470 Who directs the conduct of the audit?
550.480 How do I report the results of the audit?

         Subpart C_Depositing Securities With State Authorities

550.490 When must I deposit securities with State authorities?
550.500 How much must I deposit if I administer fiduciary assets in more 
          than one State?
550.510 What must I do if State authorities refuse my deposit?

               Subpart D_Terminating Fiduciary Activities

                       Receivership or Liquidation

550.520 What happens if I am placed in receivership or voluntary 
          liquidation?

                      Surrender of Fiduciary Powers

550.530 How do I surrender fiduciary powers?
550.540 When will the OTS terminate my fiduciary powers?
550.550 May I recover my deposit from State authorities?

                     Revocation of Fiduciary Powers

550.560 When may the OTS revoke my fiduciary powers?
550.570 What procedures govern the revocation?

               Subpart E_Activities Exempt From This Part

550.580 When may I conduct fiduciary activities without obtaining OTS 
          approval?
550.590 What standards must I observe when acting in exempt fiduciary 
          capacities?
550.600 How may funds be invested when I act in an exempt fiduciary 
          capacity?
550.610 What disclosures must I make when acting in exempt fiduciary 
          capacities?
550.620 May I receive compensation for acting in exempt fiduciary 
          capacities?

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

    Source: 62 FR 67703, Dec. 30, 1997, unless otherwise noted.



Sec. 550.10  What regulations govern the fiduciary operations of savings 
associations?

    (a) Federal savings associations. A Federal savings association 
(``you'') must

[[Page 118]]

conduct its fiduciary operations in accordance with 12 U.S.C. 1464(n) 
and this part.
    (b) State-chartered savings associations. (1) A State-chartered 
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. To ensure safe and sound operations, State-
chartered savings associations and their subsidiaries should follow the 
standards for the exercise of fiduciary powers in this part.
    (2) The OTS will monitor the fiduciary operations of State-chartered 
savings associations and their subsidiaries to ensure that those 
operations are conducted in a safe and sound manner. The OTS may object 
to practices that deviate materially from the practices described in 
this part, and may restrict or prohibit activities that threaten the 
safety and soundness of a State-chartered savings association.



Sec. 550.20  What are fiduciary powers?

    Fiduciary powers are the authority that OTS permits you to exercise 
under 12 U.S.C. 1464(n).

[67 FR 76298, Dec. 12, 2002]



Sec. 550.30  What fiduciary capacities does this part cover?

    You are subject to this part if you act in a fiduciary capacity, 
except as described in subpart E of this part. You act in a fiduciary 
capacity when you act in any of the following capacities:
    (a) Trustee.
    (b) Executor.
    (c) Administrator.
    (d) Registrar of stocks and bonds.
    (e) Transfer agent.
    (f) Assignee.
    (g) Receiver.
    (h) Guardian or conservator of the estate of a minor, an incompetent 
person, an absent person, or a person over whose estate a court has 
taken jurisdiction, other than under bankruptcy or insolvency laws.
    (i) A fiduciary in a relationship established under a State law that 
is substantially similar to the Uniform Gifts to Minors Act or the 
Uniform Transfers to Minors Act as published by the American Law 
Institute.
    (j) Investment adviser, if you receive a fee for your investment 
advice.
    (k) Any capacity in which you have investment discretion on behalf 
of another.
    (l) Any other similar capacity that the OTS may authorize under 12 
U.S.C. 1464(n).



Sec. 550.40  When do I have investment discretion?

    (a) General. You have investment discretion when you have, 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 that account. It does not matter whether you have exercised this 
authority.
    (b) Delegations. You retain investment discretion if you delegate 
investment discretion to another. You also have investment discretion if 
you receive delegated authority to exercise investment discretion from 
another.



Sec. 550.50  What is a fiduciary account?

    A fiduciary account is an account that you administer acting in a 
fiduciary capacity.



Sec. 550.60  What other definitions apply to this part?

    Activities ancillary to your fiduciary business include advertising, 
marketing, or soliciting fiduciary business, contacting existing or 
potential customers, answering questions and providing information to 
customers related to their accounts, acting as liaison between you and 
your customer (for example, forwarding requests for distribution, 
changes in investment objectives, forms, or funds received from the 
customer), and inspecting or maintaining custody of fiduciary assets or 
holding title to real property. This list is illustrative and not 
comprehensive. Other activities may also be ``ancillary activities'' for 
purposes of this definition.
    Affiliate has the same meaning as in 12 U.S.C. 221a(b). For purposes 
of this part, substitute the term ``Federal savings association'' for 
the term ``member bank'' whenever it appears in 12 U.S.C. 221a(b).
    Applicable law means the law of a State or other jurisdiction 
governing

[[Page 119]]

your fiduciary relationships, any Federal law governing those 
relationships, the terms of the instrument governing a fiduciary 
relationship, and any court order pertaining to the relationship.
    Fiduciary activities include accepting a fiduciary appointment, 
executing fiduciary-related documents, providing investment advice for a 
fee regarding fiduciary assets, or making discretionary decisions 
regarding investment or distribution of assets.
    Fiduciary officers and employees means the officers and employees of 
a Federal savings association to whom the board of directors or its 
designee has assigned functions involving the exercise of the 
association's fiduciary powers.

[62 FR 67703, Dec. 30, 1997, as amended at 67 FR 76298, Dec. 12, 2002]



                  Subpart A_Obtaining Fiduciary Powers



Sec. 550.70  Must I obtain OTS approval or file a notice before I 
exercise fiduciary powers?

    You should refer to the following chart to determine if you must 
obtain OTS approval or file a notice with OTS before you exercise 
fiduciary powers. This chart does not apply to activities that are 
exempt under subpart E of this part.

------------------------------------------------------------------------
       If you will conduct . . .                    Then . . .
------------------------------------------------------------------------
(a) Fiduciary activities for the first   You must obtain prior approval
 time and OTS has not previously          from OTS under Sec. Sec.
 approved an application that you         550.80 through 550.120 before
 submitted under this part.               you conduct the activities
(b) Fiduciary activities that are        You must obtain prior approval
 materially different from the            from OTS under Sec. Sec.
 activities that OTS has previously       550.80 through 550.120 before
 approved for you, including fiduciary    you conduct the activities
 activities that OTS has previously
 approved for you that you have not
 exercised for at least five years.
(c) Fiduciary activities that are not    You must file a written notice
 materially different from the            described at Sec.  550.125 if
 activities that OTS has previously       you commence the activities in
 approved for you.                        a new State. You do not need
                                          to file a written notice if
                                          you commence the activities at
                                          a new location in a State
                                          where you already conduct
                                          these activities.
(d) Activities that are ancillary to     You do not have to obtain prior
 your fiduciary business.                 OTS approval or file a notice
                                          with OTS.
------------------------------------------------------------------------


[67 FR 76298, Dec. 12, 2002; 68 FR 2108, Jan. 15, 2003, as amended at 68 
FR 75109, Dec. 30, 2003]



Sec. 550.80  How do I obtain OTS approval?

    You must file an application under part 516, subparts A and E of 
this chapter.

[66 FR 13006, Mar. 2, 2001]



Sec. 550.90  What information must I include in my application?

    You must describe the fiduciary powers that you or your affiliate 
will exercise. You must also include information necessary to enable the 
OTS to make the determinations described in Sec. 550.100.



Sec. 550.100  What factors may the OTS consider in its review of my application?

    The OTS may consider the following factors when reviewing your 
application:
    (a) Your financial condition.
    (b) Your capital and whether that capital is sufficient under the 
circumstances.
    (c) Your overall performance.
    (d) The fiduciary powers you propose to exercise.
    (e) Your proposed supervision of those powers.
    (f) The availability of legal counsel.
    (g) The needs of the community to be served.
    (h) Any other facts or circumstances that the OTS considers proper.



Sec. 550.110  Who will act on my application?

    The Director of OTS may act on any application. The Regional 
Director may act on an application if it does not raise any significant 
issues of law or policy on which the OTS has not taken a formal 
position.

[[Page 120]]



Sec. 550.120  What action will the OTS take on my application?

    The OTS may approve or deny your application. If your application is 
approved, the OTS may impose conditions to ensure that the requirements 
of this part are met.



Sec. 550.125  How do I file the notice under Sec. 550.70(c)?

    (a) If you are required to file a notice under Sec. 550.70(c), 
within ten days after you commence the fiduciary activities in a new 
State, you must file a written notice that identifies each new State in 
which you conduct or will conduct fiduciary activities, describe the 
fiduciary activities that you conduct or will conduct in each new State, 
and provide sufficient information supporting a conclusion that the 
activities are permissible in the State.
    (b) You must file the notice with the appropriate OTS Regional 
Office at the address in Sec. 516.40(a) of this chapter.

[67 FR 76299, Dec. 12, 2002]



                  Subpart B_Exercising Fiduciary Powers



Sec. 550.130  How may I conduct multi-state operations?

    (a) Conducting fiduciary activities in more than one State. You may 
conduct fiduciary activities in any State, subject to the application 
and notice requirements in subpart A of this part.
    (b) Serving customers in more than one State. When you conduct 
fiduciary activities in a State:
    (1) You may market your fiduciary services to, and act as a 
fiduciary for, customers located in any State, may act as a fiduciary 
for relationships that include property located in other States, and may 
act as a testamentary trustee for a testator located in other States.
    (2) You may establish or utilize an office in any State to perform 
activities that are ancillary to your fiduciary business.

[67 FR 76299, Dec. 12, 2002]



Sec. 550.135  How do I determine which State's laws apply to my operations?

    (a) The State laws that apply to you by virtue of 12 U.S.C. 1464(n) 
are the laws of the States in which you conduct fiduciary activities. 
For each individual State, you may conduct fiduciary activities in the 
capacity of trustee, executor, administrator, guardian, or in any other 
fiduciary capacity the State permits for its State banks, trust 
companies, or other corporations that compete with Federal savings 
associations in the State.
    (b) For each fiduciary relationship, the State referred to in 12 
U.S.C. 1464(n) is the State in which you conduct fiduciary activities 
for that relationship.

[67 FR 76299, Dec. 12, 2002]



Sec. 550.136  To what extent do State laws apply to my fiduciary operations?

    (a) Occupation of field. To enhance safety and soundness and to 
enable Federal savings associations to conduct their fiduciary 
activities in accordance with the best practices of thrift institutions 
in the United States (by efficiently delivering fiduciary services to 
the public free from undue regulatory duplication and burden), OTS 
occupies the field of the regulation of the fiduciary activities of 
Federal savings associations. In so doing, OTS intends to give Federal 
savings associations maximum flexibility to exercise their fiduciary 
powers in accordance with a uniform scheme of Federal regulation. 
Accordingly, Federal savings associations may exercise fiduciary powers 
as authorized under Federal law, including this part, without regard to 
State laws that purport to regulate or otherwise affect their fiduciary 
activities, except to the extent provided in 12 U.S.C. 1464(n) (State 
laws regarding scope of fiduciary powers, access to examination reports 
regarding trust activities, deposits of securities, oaths and 
affidavits, and capital) or in paragraph (c) of this section. For 
purposes of this section, ``State law'' includes any State statute, 
regulation, ruling, order, or judicial decision.

[[Page 121]]

    (b) Illustrative examples. Examples of State laws that are preempted 
by the HOLA and this section include those regarding:
    (1) Registration and licensing;
    (2) Recordkeeping;
    (3) Advertising and marketing;
    (4) The ability of a federal savings association conducting 
fiduciary activities to maintain an action or proceeding in State court; 
and
    (5) Fiduciary-related fees.
    (c) State laws that are not preempted. State laws of the following 
types are not preempted to the extent that they only incidentally affect 
the fiduciary operations of Federal savings associations or are 
otherwise consistent with the purposes of paragraph (a) of this section:
    (1) Contract and commercial law;
    (2) Real property law;
    (3) Tort law;
    (4) Criminal law;
    (5) Probate law; and
    (6) Any other law that OTS, upon review, finds:
    (i) Furthers a vital State interest; and
    (ii) Either has only an incidental effect on fiduciary operations or 
is not otherwise contrary to the purposes expressed in paragraph (a) of 
this section.

[67 FR 76299, Dec. 12, 2002, as amended at 68 FR 53026, Sept. 9, 2003]



Sec. 550.140  Must I adopt and follow written policies and procedures 
in exercising fiduciary powers?

    You must adopt and follow written policies and procedures adequate 
to maintain your fiduciary activities in compliance with applicable law. 
Among other relevant matters, the policies and procedures should 
address, where appropriate, the following areas:
    (a) Your brokerage placement practices.
    (b) Your methods for ensuring that your fiduciary officers and 
employees do not use material inside information in connection with any 
decision or recommendation to purchase or sell any security.
    (c) Your methods for preventing self-dealing and conflicts of 
interest.
    (d) Your selection and retention of legal counsel who is ready and 
available to advise you and your fiduciary officers and employees on 
fiduciary matters.
    (e) Your investment of funds held as fiduciary, including short-term 
investments and the treatment of fiduciary funds awaiting investment or 
distribution.

                   Fiduciary Personnel and Facilities



Sec. 550.150  Who is responsible for the exercise of fiduciary powers?

    The exercise of your fiduciary powers must be managed by or under 
the direction of your board of directors. In discharging its 
responsibilities, the board may assign any function related to the 
exercise of fiduciary powers to any director, officer, employee, or 
committee of directors, officers, or employees.



Sec. 550.160  What personnel and facilities may I use to perform 
fiduciary services?

    You may use your qualified personnel and facilities or an 
affiliate's qualified personnel and facilities to perform services 
related to the exercise of fiduciary powers.



Sec. 550.170  May my other departments or affiliates use fiduciary 
personnel and facilities to perform other services?

    Your other departments or affiliates may use fiduciary officers, 
employees, and facilities to perform services unrelated to the exercise 
of fiduciary powers, to the extent not prohibited by applicable law.



Sec. 550.180  May I perform fiduciary services for, or purchase 
fiduciary services from, another association or entity?

    You may perform services related to the exercise of fiduciary powers 
for another association or other entity under a written agreement. You 
may also purchase services related to the exercise of fiduciary powers 
from another association or other entity under a written agreement.



Sec. 550.190  Must fiduciary officers and employees be bonded?

    You must obtain an adequate bond for all fiduciary officers and 
employees.

[[Page 122]]

                      Review of a Fiduciary Account



Sec. 550.200  Must I review a prospective account before I accept it?

    Before accepting a prospective fiduciary account, you must review it 
to determine whether you can properly administer the account.



Sec. 550.210  Must I conduct another review of an account after I accept it?

    After you accept a fiduciary account for which you have investment 
discretion, you must conduct a prompt review of all assets of the 
account to evaluate whether they are appropriate, individually and 
collectively, for the account.



Sec. 550.220  Are any other account reviews required?

    At least once every calendar year, you must conduct a review of all 
assets of each fiduciary account for which you have investment 
discretion. In this review, you must evaluate whether the assets are 
appropriate, individually and collectively, for the account.

                      Custody and Control of Assets



Sec. 550.230  Who must maintain custody or control of assets in a 
fiduciary account?

    You must place assets of fiduciary accounts in the joint custody or 
control of not fewer than two fiduciary officers or employees designated 
for that purpose by the board of directors.



Sec. 550.240  May I hold investments of a fiduciary account off-premises?

    You may hold the investments of a fiduciary account off-premises, if 
this practice is consistent with applicable law, and you maintain 
adequate safeguards and controls.



Sec. 550.250  Must I keep fiduciary assets separate from other assets?

    You must keep the assets of fiduciary accounts separate from your 
other assets. You must also keep the assets of each fiduciary account 
separate from all other accounts, or you must identify the investments 
as the property of a particular account, except as provided in 
Sec. Sec. 550.260.

                 Investing Funds of a Fiduciary Account



Sec. 550.260  How may I invest funds of a fiduciary account?

    (a) General. You must invest funds of a fiduciary account in a 
manner consistent with applicable law.
    (b) Collective investment funds. (1) You may invest funds of a 
fiduciary account in a collective investment fund, including a 
collective investment fund that you have established. In establishing 
and administering such funds, you must comply with 12 CFR 9.18.
    (2) If you must file a document with the Comptroller of the Currency 
under 12 CFR 9.18, you must also file that document with the appropriate 
Regional Office at Sec. 516.40(a) of this chapter. The OTS may review 
such documents for compliance with this part and other laws and 
regulations.
    (3) ``Bank'' and ``national bank'' as used in 12 CFR 9.18 shall be 
deemed to include a Federal savings association.

[62 FR 67703, Dec. 30, 1997, as amended at 66 FR 13006, Mar. 2, 2001]

                Funds Awaiting Investment or Distribution



Sec. 550.290  What must I do with fiduciary funds awaiting investment 
or distribution?

    If you have investment discretion or discretion over distributions 
for a fiduciary account which contains funds awaiting investment or 
distribution, you must ensure that those funds do not remain uninvested 
and undistributed any longer than is reasonable for the proper 
management of the account and consistent with applicable law. You also 
must obtain a rate of return for those funds that is consistent with 
applicable law.



Sec. 550.300  Where may I deposit fiduciary funds awaiting investment 
or distribution?

    (a) Self deposits. You may deposit funds of a fiduciary account that 
are awaiting investment or distribution in your other departments, 
unless prohibited by applicable law.
    (b) Affiliate deposits. You may also deposit funds of a fiduciary 
account that

[[Page 123]]

are awaiting investment or distribution with an affiliated insured 
depository institution, unless prohibited by applicable law.



Sec. 550.310  What if the FDIC does not insure the deposits?

    If the FDIC does not insure the entire amount of a self deposit, you 
must set aside collateral as security. If the FDIC does not insure the 
entire amount of an affiliate deposit, you or your affiliate must set 
aside collateral as security. The market value of the collateral must at 
all times equal or exceed the amount of the uninsured fiduciary funds. 
You must place the collateral under the control of appropriate fiduciary 
officers and employees.

[62 FR 67703, Dec. 30, 1997, as amended at 67 FR 76299, Dec. 12, 2002]



Sec. 550.320  What is acceptable collateral for uninsured deposits?

    Any of the following is acceptable collateral for self deposits or 
affiliate deposits under Sec. 550.310:
    (a) Direct obligations of the United States, or other obligations 
fully guaranteed by the United States as to principal and interest.
    (b) Readily marketable securities of the classes in which State-
chartered corporate fiduciaries are permitted to invest fiduciary funds 
under applicable State law.
    (c) Other readily marketable securities as the OTS may determine.
    (d) Surety bonds, to the extent they provide adequate security, 
unless prohibited by applicable law.
    (e) Any other assets that qualify under applicable State law as 
appropriate security for deposits of fiduciary funds.

                      Restrictions on Self Dealing



Sec. 550.330  Are there investments in which I may not invest funds 
of a fiduciary account?

    You may not invest funds of a fiduciary account for which you have 
investment discretion in the following assets, unless authorized by 
applicable law:
    (a) The stock or obligations of, or assets acquired from, you or any 
of your directors, officers, or employees.
    (b) The stock or obligations of, or assets acquired from, your 
affiliates or any of their directors, officers, or employees.
    (c) The stock or obligations of, or assets acquired from, other 
individuals or organizations if you have an interest in the individual 
or organization that might affect the exercise of your best judgment.



Sec. 550.340  May I exercise rights to purchase additional stock or 

fractional shares of my stock or obligations or the stock or obligations 
of my affiliates?

    If the retention of investments in your stock or obligations or the 
stock or obligations of an affiliate in fiduciary accounts is consistent 
with applicable law, you may do either of the following:
    (a) Exercise rights to purchase additional stock (or securities 
convertible into additional stock) when these rights are offered pro 
rata to stockholders.
    (b) Purchase fractional shares to complement fractional shares 
acquired through the exercise of rights or through the receipt of a 
stock dividend resulting in fractional share holdings.



Sec. 550.350  May I lend, sell, or transfer assets of a fiduciary 
account if I have an interest in the transaction?

    (a) General restriction. Except as provided in paragraph (b) of this 
section, you may not lend, sell, or otherwise transfer assets of a 
fiduciary account for which you have investment discretion to yourself 
or any of your directors, officers, or employees; to your affiliates or 
any of their directors, officers, or employees; or to other individuals 
or organizations with whom you have an interest that might affect the 
exercise of your best judgment.
    (b) Exceptions--(1) Funds for which you have investment discretion. 
You may lend, sell or otherwise transfer assets of a fiduciary account 
for which you have investment discretion to yourself or any of your 
directors, officers, or employees; to your affiliates or any of their 
directors, officers, or employees; or to other individuals or 
organizations with whom you have an interest that might affect the 
exercise of your best

[[Page 124]]

judgment, if you meet one of the following conditions:
    (i) The transaction is authorized by applicable law.
    (ii) Legal counsel advises you in writing that you have incurred, in 
your fiduciary capacity, a contingent or potential liability. Upon the 
sale or transfer of assets, you must reimburse the fiduciary account in 
cash in an amount equal to the greater of book or market value of the 
assets.
    (iii) The transaction is permitted under 12 CFR 9.18(b)(8)(iii) for 
defaulted fixed-income investments.
    (iv) The OTS requires you to do so.
    (2) Funds held as trustee. You may make loans of funds held in trust 
to any of your directors, officers, or employees if the funds are held 
in an employee benefit plan and the loan is made in accordance with the 
exemptions found at section 408 of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1108).



Sec. 550.360  May I make a loan to a fiduciary account that is secured 
by an interest in the assets of the account?

    You may make a loan to a fiduciary account that is secured by an 
interest in the assets of the account, if the transaction is fair to the 
account and is not prohibited by applicable law.



Sec. 550.370  May I sell assets or lend money between fiduciary accounts?

    You may sell assets or lend money between fiduciary accounts, if the 
transaction is fair to both accounts and is not prohibited by applicable 
law.

                    Compensation, Gifts, and Bequests



Sec. 550.380  May I earn compensation for acting in a fiduciary capacity?

    If the amount of your compensation for acting in a fiduciary 
capacity is not set or governed by applicable law, you may charge a 
reasonable fee for your services.



Sec. 550.390  May my officer or employee retain compensation for acting 
as a co-fiduciary?

    You may not permit your officers or employees to retain any 
compensation for acting as a co-fiduciary with you in the administration 
of a fiduciary account, except with the specific approval of your board 
of directors.



Sec. 550.400  May my fiduciary officer or employee accept a gift or bequest?

    You may not permit any fiduciary officer or employee to accept a 
bequest or gift of fiduciary assets, unless the bequest or gift is 
directed or made by a relative of the officer or employee or is 
specifically approved by your board of directors.

                       Recordkeeping Requirements



Sec. 550.410  What records must I keep?

    You must keep adequate records for all fiduciary accounts. For 
example, you must keep documents on the establishment and termination of 
each fiduciary account.



Sec. 550.420  How long must I keep these records?

    You must keep fiduciary records for three years after the 
termination of the account or the termination of any litigation relating 
to the account, whichever is later.



Sec. 550.430  Must I keep fiduciary records separate and distinct 
from other records?

    You must keep fiduciary records separate and distinct from your 
other records.

                           Audit Requirements



Sec. 550.440  When do I have to audit my fiduciary activities?

    (a) Annual Audit. If you do not use a continuous audit system 
described in paragraph (b) of this section, then you must arrange for a 
suitable audit of all significant fiduciary activities at least once 
during each calendar year.
    (b) Continuous audit. Instead of an annual audit, you may adopt a 
continuous audit system. Under a continuous audit system, you must 
arrange for a discrete audit of each significant fiduciary activity 
(i.e., on an activity-by-activity basis) at an interval commensurate 
with the nature and risk of that activity. Some fiduciary activities may 
receive audits at intervals greater or less than one year, as 
appropriate.

[[Page 125]]



Sec. 550.450  What standards govern the conduct of the audit?

    Auditors must follow generally accepted standards for attestation 
engagements and other standards established by the OTS. An audit must 
ascertain whether your internal control policies and procedures provide 
reasonable assurance of three things:
    (a) You are administering fiduciary activities in accordance with 
applicable law.
    (b) You are properly safeguarding fiduciary assets.
    (c) You are accurately recording transactions in appropriate 
accounts in a timely manner.



Sec. 550.460  Who may conduct an audit?

    Internal auditors, external auditors, or other qualified persons who 
are responsible only to the board of directors, may conduct an audit.



Sec. 550.470  Who directs the conduct of the audit?

    Your fiduciary audit committee directs the conduct of the audit. 
Your fiduciary audit committee may consist of a committee of your 
directors or an audit committee of an affiliate. There are two 
restrictions on who may serve on the committee:
    (a) Your officers and officers of an affiliate who participate 
significantly in administering your fiduciary activities may not serve 
on the audit committee.
    (b) A majority of the members of the audit committee may not serve 
on any committee to which the board of directors has delegated power to 
manage and control your fiduciary activities.



Sec. 550.480  How do I report the results of the audit?

    (a) Annual audit. If you conduct an annual audit, you must note the 
results of the audit (including significant actions taken as a result of 
the audit) in the minutes of the board of directors.
    (b) Continuous audit. If you adopt a continuous audit system, you 
must note the results of all discrete audits conducted since the last 
audit report (including significant actions taken as a result of the 
audits) in the minutes of the board of directors at least once during 
each calendar year.



         Subpart C_Depositing Securities With State Authorities



Sec. 550.490  When must I deposit securities with State authorities?

    You must deposit securities with a State's authorities or, if 
applicable, a Federal Home Loan Bank under Sec. 550.510, if you meet 
all of the following:
    (a) You are located in the State.
    (b) You act as a private or court-appointed trustee.
    (c) The law of the State requires corporations acting in a fiduciary 
capacity to deposit securities with State authorities for the protection 
of private or court trusts.



Sec. 550.500  How much must I deposit if I administer fiduciary assets 
in more than one State?

    If you administer fiduciary assets in more than one State, you must 
compute the amount of deposit required for each State on the basis of 
fiduciary assets that you administer primarily from offices located in 
that State.



Sec. 550.510  What must I do if State authorities refuse my deposit?

    If State authorities refuse to accept your deposit under Sec. 
550.490, you must deposit the securities with the Federal Home Loan Bank 
of which you are a member. The Federal Home Loan Bank will hold the 
securities for the protection of private or court trusts to the same 
extent as if the securities had been deposited with State authorities.



               Subpart D_Terminating Fiduciary Activities

                       Receivership or Liquidation



Sec. 550.520  What happens if I am placed in receivership or voluntary 
liquidation?

    If the OTS appoints a conservator or receiver for you under part 558 
of this chapter, or if you place yourself in voluntary liquidation, the 
receiver, conservator, or liquidating agent must promptly close or 
transfer all fiduciary accounts to a substitute fiduciary, in accordance 
with OTS instructions and the orders of the court having jurisdiction.

[[Page 126]]

                      Surrender of Fiduciary Powers



Sec. 550.530  How do I surrender fiduciary powers?

    If you want to surrender your fiduciary powers, you must file a 
certified copy of a resolution of your board of directors evidencing 
that intent. You must file the resolution with the appropriate Regional 
Office at the address listed in Sec. 516.40(a) of this chapter.

[62 FR 66703, Dec. 30, 1997, as amended at 66 FR 13006, Mar. 2, 2001]



Sec. 550.540  When will the OTS terminate my fiduciary powers?

    If, after appropriate investigation, the Regional Director is 
satisfied that you have been discharged from all fiduciary duties, the 
Regional Director will issue a written notice indicating that you are no 
longer authorized to exercise fiduciary powers.



Sec. 550.550  May I recover my deposit from State authorities?

    Upon issuance of the OTS written notice under Sec. 550.540, you may 
recover any securities deposited with State authorities, or a Federal 
Home Loan Bank, under subpart C of this part.

                     Revocation of Fiduciary Powers



Sec. 550.560  When may the OTS revoke my fiduciary powers?

    The OTS may revoke your fiduciary powers if it determines that you 
have done any of the following:
    (a) Exercised those fiduciary powers unlawfully or unsoundly.
    (b) Failed to exercise those fiduciary powers for five consecutive 
years.
    (c) Otherwise failed to follow the requirements of this part.



Sec. 550.570  What procedures govern the revocation?

    The procedures for revocation of fiduciary powers are set forth in 
12 U.S.C. 1464(n)(10). The OTS will conduct the hearing required under 
12 U.S.C. 1464(n)(10)(B) under part 509 of this chapter.



               Subpart E_Activities Exempt From This Part



Sec. 550.580  When may I conduct fiduciary activities without obtaining 
OTS approval?

    Subject to the requirements of this subpart E, you do not need OTS 
approval under subpart B if you conduct fiduciary activities in the 
following fiduciary capacities:
    (a) Trustee of a trust created or organized in the United States and 
forming part of a stock bonus, pension, or profit-sharing plan 
qualifying for specific tax treatment under section 401(d) of the 
Internal Revenue Code of 1954 (26 U.S.C. 401(d)).
    (b) Trustee or custodian of a Individual Retirement Account within 
the meaning of section 408(a) of the Internal Revenue Code of 1954 (26 
U.S.C. 408(a)).

[62 FR 67703, Dec. 30, 1997, as amended at 67 FR 76299, Dec. 12, 2002]



Sec. 550.590  What standards must I observe when acting in exempt 
fiduciary capacities?

    You must observe principles of sound fiduciary administration, 
including those related to recordkeeping and segregation of assets.



Sec. 550.600  How may funds be invested when I act in an exempt 
fiduciary capacity?

    If you act in an exempt fiduciary capacity under Sec. 550.580, the 
funds of the fiduciary account may be invested only in the following:
    (a) Your accounts, deposits, obligations, or securities.
    (b) Other assets as the customer may direct, provided you do not 
exercise any investment discretion and do not directly or indirectly 
provide any investment advice for the fiduciary account.

[62 FR 67703, Dec. 30, 1997, as amended at 67 FR 76299, Dec. 12, 2002]



Sec. 550.610  What disclosures must I make when acting in exempt 
fiduciary capacities?

    If you act in an exempt fiduciary capacity under Sec. 550.580 and 
fiduciary investments are not limited to accounts or deposits insured by 
the FDIC, you

[[Page 127]]

must include the following language in bold type on the first page of 
any contract documents:

    Funds invested pursuant to this agreement are not insured by the 
Federal Deposit Insurance Corporation (``FDIC'') merely because the 
trustee or custodian is a Federal savings association the accounts of 
which are covered by such insurance. Only investments in the accounts of 
a Federal savings association are insured by the FDIC, subject to its 
rules and regulations.



Sec. 550.620  May I receive compensation for acting in exempt 
fiduciary capacities?

    You may receive reasonable compensation.



PART 551_RECORDKEEPING AND CONFIRMATION REQUIREMENTS FOR SECURITIES 
TRANSACTIONS--Table of Contents




Sec.
551.10 What does this part do?
551.20 Must I comply with this part?
551.30 What requirements apply to all transactions?
551.40 What definitions apply to this part?

                  Subpart A_Recordkeeping Requirements

551.50 What records must I maintain for securities transactions?
551.60 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?
551.80 How do I provide a registered broker-dealer confirmation?
551.90 How do I provide a written notice?
551.100 What are the alternate notice requirements?
551.110 May I provide a notice electronically?
551.120 May I charge a fee for a notice?

             Subpart C_Settlement of Securities Transactions

551.130 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?
551.150 How do my officers and employees file reports of personal 
          securities trading transactions?

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

    Source: 67 FR 76299, Dec. 12, 2002, unless otherwise noted.



Sec. 551.10  What does this part do?

    This part establishes recordkeeping and confirmation requirements 
that apply when a savings association (``you'') effects certain 
securities transactions for customers.



Sec. 551.20  Must I comply with this part?

    (a) General. Except as provided under paragraph (b) of this section, 
you must comply with this part 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 
Federal savings association, you also must comply with 12 CFR part 550 
when you effect such a transaction. 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 Sec. 551.50(b) through (d) (recordkeeping) and 
Sec. 551.140(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 Sec. 551.50 (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 part when you 
conduct municipal securities transactions.
    (4) Foreign branches. You are not required to comply with this part 
when

[[Page 128]]

you conduct a transaction at your foreign branch.
    (5) Transactions by registered broker-dealers. You are not required 
to comply with this part 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'').



Sec. 551.30  What requirements apply to all transactions?

    You must effect all transactions, including transactions excepted 
under Sec. 551.20, 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.



Sec. 551.40  What definitions apply to this part?

    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 any fund established 
under 12 CFR 550.260(b) or 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;

[[Page 129]]

    (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 the same as under 12 CFR 550.40(a).
    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

[[Page 130]]

amount (master) note of a borrower of prime credit; U.S. Savings Bonds; 
or any other instrument OTS determines does not constitute a security 
for purposes of this part.
    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.



                  Subpart A_Recordkeeping Requirements



Sec. 551.50  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 subpart B of this part.



Sec. 551.60  How must I maintain my records?

    (a) You may maintain the records required under Sec. 551.50 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 OTS 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

[[Page 131]]

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 OTS 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.



                 Subpart B_Content and Timing of Notice



Sec. 551.70  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 Sec. 551.80, or the written notice described at Sec. 551.90. For 
certain types of transactions, you may elect to provide the alternate 
notices described in Sec. 551.100.



Sec. 551.80  How do I provide a registered broker-dealer confirmation?

    (a) If you elect to satisfy Sec. 551.70 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.



Sec. 551.90  How do I provide a written notice?

    If you elect to satisfy Sec. 551.70 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.

[[Page 132]]

    (h) Additional disclosures. You must provide all of the additional 
disclosures described in the following chart for transactions involving 
certain debt securities:

------------------------------------------------------------------------
                                      You must provide the following
   If you effect a transaction    additional information in your written
         involving . . .                       notice . . .
------------------------------------------------------------------------
(1) A debt security subject to    A statement that the issuer may redeem
 redemption before maturity.       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      (i) The dollar price at which you
 effected exclusively on the       effected the transaction; and
 basis of a dollar price.         (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      (i) The yield at which the
 effected on basis of yield.       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    (i) A statement that the actual yield
 asset-backed security that        of the asset-backed security may vary
 represents an interest in, or     according to the rate at which the
 is secured by, a pool of          underlying receivables or other
 receivables or other financial    financial assets are prepaid; and
 assets that are subject          (ii) A statement that you will furnish
 continuously to prepayment.       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 statement that the security is
 a government security.            unrated by a nationally recognized
                                   statistical rating organization, if
                                   that is the case.
------------------------------------------------------------------------



Sec. 551.100  What are the alternate notice requirements?

    You may elect to satisfy Sec. 551.70 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         Give or send to the customer
 customer under a periodic plan, sweep    within five business days
 account, or investment company plan.     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 Sec.  551.80
                                             or the written notice
                                             described in Sec.  551.90
                                             within a reasonable time
                                             after the customer's
                                             written request.
(b) For or with the account of a         Give or send to the customer
 customer in shares of an open-ended      the written statement
 management company registered under      described at paragraph (a) of
 the Investment Company Act of 1940       this section on a monthly
 that holds itself out as a money         basis. You may not use the
 market fund and attempts to maintain a   alternate notice, however, if
 stable net asset value per share.        you deduct sales loads upon
                                          the purchase or redemption of
                                          shares in the money market
                                          fund.

[[Page 133]]

 
(c) For an account for which you do not  Give or send to the customer a
 exercise investment discretion, and      written notice at the agreed-
 for which you and the customer have      upon time and with the agreed-
 agreed in writing to an arrangement      upon content, and include a
 concerning the time and content of the   statement that you will
 written notice.                          furnish the registered broker-
                                          dealer confirmation described
                                          in Sec.  551.80 or the
                                          written notice described in
                                          Sec.  551.90 within a
                                          reasonable time after the
                                          customer's written request.
(d) For an account for which you         Give or send the registered
 exercise investment discretion other     broker-dealer confirmation
 than in an agency capacity, excluding    described in Sec.  551.80 or
 common or collective investment funds.   the written notice described
                                          in Sec.  551.90 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          Give or send each customer a
 exercise investment discretion in an     written itemized statement
 agency capacity.                         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 Sec.
                                            551.80 or the written notice
                                          described in Sec.  551.90
                                          within a reasonable time after
                                          a customer's written request.
(f) For a common or collective           (1) Give or send to a customer
 investment fund.                         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.
------------------------------------------------------------------------



Sec. 551.110  May I provide a notice electronically?

    You may provide any written notice required under this subpart B 
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.



Sec. 551.120  May I charge a fee for a notice?

    You may not charge a fee for providing a notice required under this 
subpart B, except that you may charge a reasonable fee for the notices 
provided under Sec. Sec. 551.100(a), (d), and (e).



             Subpart C_Settlement of Securities Transactions



Sec. 551.130  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

[[Page 134]]

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.



          Subpart D_Securities Trading Policies and Procedures



Sec. 551.140  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 
Sec. 551.150, 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.



Sec. 551.150  How do my officers and employees file reports of 
personal securities trading transactions?

    An officer or employee described in Sec. 551.140(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 within ten business 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;

[[Page 135]]

    (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).



PART 552_FEDERAL STOCK ASSOCIATIONS_INCORPORATION, ORGANIZATION, 
AND CONVERSION--Table of Contents




Sec.
552.2-1 Procedure for organization of Federal stock association.
552.2-2 Procedures for organization of interim Federal stock 
          association.
552.2-3 Federal stock association created in connection with an 
          association in default or in danger of default.
552.2-6 Conversion from stock form depository institution to Federal 
          stock association.
552.2-7 Conversion to National banking association or State bank.
552.3 Charters for Federal stock associations.
552.4 Charter amendments.
552.5 Bylaws.
552.6 Shareholders.
552.6-1 Board of directors.
552.6-2 Officers.
552.6-3 Certificates for shares and their transfer.
552.6-4 [Reserved]
552.9 [Reserved]
552.10 Annual reports to stockholders.
552.11 Books and records.
552.12 [Reserved]
552.13 Combinations involving Federal stock associations.
552.14 Dissenter and appraisal rights.
552.15 Supervisory combinations.
552.16 Effect of subsequent charter or bylaw change.

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

    Source: 54 FR 49523, Nov. 30, 1989, unless otherwise noted.



Sec. 552.2-1  Procedure for organization of Federal stock association.

    (a) Application for permission to organize. Applications for 
permission to organize a Federal stock association are subject to this 
section and to Sec. 543.3 of this chapter. Recommendations by employees 
of the OTS regarding applications for permission to organize are 
privileged, confidential, and subject to Sec. 510.5 (b) and (c) of this 
chapter. The processing of an application under this section shall be 
subject to the following procedures:
    (1) Publication. (i) The applicant shall publish a public notice of 
the application to organize in accordance with the procedures specified 
in subpart B of part 516 of this chapter.
    (ii) Promptly after publication of the public notice, the applicant 
shall transmit copies of the public notice and publisher's affidavit of 
publication to the OTS in the same manner as the original filing.
    (iii) Any person may inspect the application and all related 
communications at the Regional Office during regular business hours, 
unless such information is exempt from public disclosure.
    (2) Notification to interested parties. The OTS shall give notice of 
the application to the State official who supervises savings 
associations in the State in which the new association is to be located.
    (3) Submission of comments. Commenters may submit comments on the 
application in accordance with the procedures specified in subpart C of 
part 516 of this chapter.
    (4) Meetings. The OTS may arrange informal or formal meetings in 
accordance with the procedures specified in subpart D of part 516 of 
this chapter.
    (b) Conditions of approval. The OTS will decide all applications for 
permission to organize a Federal stock association.

[[Page 136]]

    (1) Factors that will be considered on all applications for 
permission to organize a Federal stock association are:
    (i) Whether the applicants are persons of good character and 
responsibility;
    (ii) Whether a necessity exists for such association in the 
community to be served;
    (iii) Whether there is a reasonable probability of the association's 
usefulness and success;
    (iv) Whether the association can be established without undue injury 
to properly conducted existing local thrift and home financing 
institutions; and
    (v) Whether the association will perform a role of providing credit 
for housing consistent with safe and sound operation of a Federal 
savings association.
    (2) [Reserved]
    (3) Approvals of applications will be conditioned on the following:
    (i) Receipt by the Office of written confirmation from the Federal 
Deposit Insurance Corporation that the accounts of the association will 
be insured by the Federal Deposit Insurance Corporation;
    (ii) The sale of a minimum amount of fully-paid capital stock of the 
association prior to commencing business;
    (iii) The submission of a statement that:
    (A) The applicants have incurred no expense in organization which is 
chargeable to the association, and that no such expense will be 
incurred, and
    (B) No funds will be accepted for deposit by the association until 
organization has been completed;
    (iv) Compliance with all applicable laws, rules, and regulations; 
and
    (v) The satisfaction of any other requirement or condition the 
Director or his or her designee may impose.
    (c) Issuance of charter. Upon approval of an application, the Office 
shall issue to the association a charter for a Federal stock savings 
association or for a Federal stock savings bank, as requested by the 
applicants, which shall be in the form provided in this part. Issuance 
of the charter shall be subject to the condition subsequent that the 
organization of the association is completed pursuant to this section.
    (d) Interim board of directors and officers. Upon approval of the 
application and the issuance of the charter, the applicants shall 
constitute the interim board of directors of the association until the 
board of directors of the association are elected by its stockholders at 
the organizational meeting required by paragraph (g) of this section, 
and the interim officers of the association shall be those persons set 
forth in the application for permission to organize.
    (e) Sale of capital stock. Upon the issuance of the charter, the 
association shall proceed to offer and sell its capital stock pursuant 
to the requirements of part 563g of this chapter.
    (f) Bank membership and insurance of accounts. Promptly upon the 
issuance of the charter, a Federal stock association must qualify as a 
member of the appropriate Federal Home Loan Bank and meet all 
requirements necessary to obtain insurance of accounts by the Federal 
Deposit Insurance Corporation.
    (g) Organizational meeting. Promptly upon the completion of the sale 
of its capital stock, the association shall provide notice, pursuant to 
Sec. 552.6(b), of a meeting of its stockholders to elect a board of 
directors. Immediately following such election, the directors shall meet 
to elect the officers of the association and to undertake any other 
action necessary under the charter or bylaws to complete corporate 
organization.
    (h) Completion of organization. Organization of a Federal stock 
association shall be deemed complete for the purposes of this part when:
    (1) The association has obtained Federal Home Loan Bank membership 
and insurance of its accounts from the Federal Deposit Insurance 
Corporation;
    (2) It has completed the sale of and received full payment for its 
capital stock;
    (3) It has complied with all requirements of part 563g of this 
chapter;
    (4) It has held its organizational meeting for the election of 
directors and all directors have been elected;
    (5) Its officers have been elected and bonded; and
    (6) It has met the requirements and conditions imposed by the Office 
in connection with approval of the application.

[[Page 137]]

    (i) Failure of completion. If organization of a Federal stock 
association is not completed within six months after the OTS approves 
the application, or within such additional period as the OTS for good 
cause may grant, the charter shall become null and void and all 
subscriptions to capital stock shall be returned.

[54 FR 49523, Nov. 30, 1989, as amended at 57 FR 14342, Apr. 20, 1992; 
62 FR 27181, May 19, 1997; 62 FR 64146, Dec. 4, 1997]



Sec. 552.2-2  Procedures for organization of interim Federal stock 
association.

    (a) Applications for permission to organize an interim Federal 
savings association are not subject to subparts B, C and D of part 516 
of this chapter or Sec. 552.2-1(b)(3) of this part.
    (b) Approval of an application for permission to organize an interim 
Federal stock association shall be conditioned upon approval by the 
Office of an application to merge the interim Federal stock association, 
or upon approval by the Office of other transaction which the interim 
was chartered to facilitate. Applications for permission to organize an 
interim Federal stock association shall be submitted in the same manner 
as the related filing(s). In evaluating the application, the Office will 
consider the purpose for which the association will be organized, the 
form of any proposed transactions involving the association, the effect 
of the transactions on existing associations involved in the 
transactions, and the factors specified in Sec. 552.1(b)(1) to the 
extent relevant.
    (c) If a merger or other transaction facilitated by the existence of 
the interim Federal stock association has not been approved within six 
months of the approval of the application for permission to organize, 
unless extended by OTS for good cause shown, the charter shall be void 
and all subscriptions for capital stock shall be returned.

[54 FR 49523, Nov. 30, 1989, as amended at 55 FR 13513, Apr. 11, 1990; 
57 FR 14342, Apr. 20, 1992; 62 FR 64146, Dec. 4, 1997]



Sec. 552.2-3  Federal stock association created in connection with an 
association in default or in danger of default.

    Sections 552.2-1 and 552.2-2 of this part do not apply to a Federal 
stock association which is proposed by the Federal Deposit Insurance 
Corporation, or the Resolution Trust Corporation under section 5(p) of 
the Home Owner's Loan Act of 1933, section 11(c) of the Federal Deposit 
Insurance Act, or section 21A of the Federal Home Loan Bank Act, or is 
otherwise chartered by the Office in connection with an association in 
default or in danger of default. Incorporation and organization of such 
associations are complete when and under such conditions as the Director 
or his or her designee so determines.



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

    (a) With the approval of the Office, any stock depository 
institution that is, or is eligible to become, a member of a Federal 
Home Loan Bank, may convert to a Federal stock association, provided 
that the depository institution, at the time of the conversion, has 
deposits insured by the Federal Deposit Insurance Corporation, and 
provided further, that the depository institution, in accomplishing the 
conversion, complies with all applicable statutes and regulations, 
including, without limitation, section 5(d) of the Federal Deposit 
Insurance Act. The resulting Federal stock association must conform 
within the time prescribed by the OTS to the requirements of section 
5(c) of the Home Owners' Loan Act. For purposes of this section, the 
term ``depository institution'' shall have the meaning set forth at 12 
CFR 552.13(b). An application for conversion filed under this section is 
subject to the procedures for organization of a federal stock 
organization at Sec. 552.2-1.
    (b) Any and all of the assets and other property (whether real, 
personal, mixed, tangible or intangible, including choses in action, 
rights, and credits) of the former stock form depository institution 
become assets and

[[Page 138]]

property of the Federal stock association when the conversion occurs. 
Similarly, any and all of the obligations and debts of or claims against 
the former stock form depository institution become obligations and 
debts of and claims against the Federal stock association when the 
conversion occurs. In effect, the Federal stock association is the same 
as the former stock form depository institution with respect to any and 
all assets, property, claims and debts of or claims against the former 
stock form depository institution.

[59 FR 44623, Aug. 30, 1994, as amended at 66 FR 13006, Mar. 2, 2001; 66 
FR 23154, May 8, 2001]



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

    A Federal stock association may convert to a National banking 
association or a State bank after filing a notification or application, 
as appropriate, with the Office in accordance with the applicable 
provisions of Sec. 563.22(b) of this chapter.

[59 FR 44623, Aug. 30, 1994]



Sec. 552.3  Charters for Federal stock associations.

    The charter of a Federal stock association shall be in the following 
form, except that an association that has converted from the mutual form 
pursuant to part 563b of this chapter shall include in its charter a 
section establishing a liquidation account as required by Sec. 
563b.3(c)(13) of this chapter. A charter for a Federal stock savings 
bank shall substitute the term ``savings bank'' for ``association.'' 
Charters may also include any preapproved optional provision contained 
in Sec. 552.4 of this part.

                          Federal Stock Charter

    Section 1. Corporate title. The full corporate title of the 
association is ------.
    Section 2. Office. The home office shall be located in ------ [city, 
state].
    Section 3. Duration. The duration of the association is perpetual.
    Section 4. Purpose and powers. The purpose of the association is to 
pursue any or all of the lawful objectives of a Federal savings 
association chartered under section 5 of the Home Owners' Loan Act and 
to exercise all of the express, implied, and incidental powers conferred 
thereby and by all acts amendatory thereof and supplemental thereto, 
subject to the Constitution and laws of the United States as they are 
now in effect, or as they may hereafter be amended, and subject to all 
lawful and applicable rules, regulations, and orders of the Office of 
Thrift Supervision (``Office'').
    Section 5. Capital stock. The total number of shares of all classes 
of the capital stock that the association has the authority to issue is 
------, all of which shall be common stock of par [or if no par is 
specified then shares shall have a stated] value of ------ per share. 
The shares may be issued from time to time as authorized by the board of 
directors without the approval of its shareholders, except as otherwise 
provided in this Section 5 or to the extent that such approval is 
required by governing law, rule, or regulation. The consideration for 
the issuance of the shares shall be paid in full before their issuance 
and shall not be less than the par [or stated] value. Neither promissory 
notes nor future services shall constitute payment or part payment for 
the issuance of shares of the association. The consideration for the 
shares shall be cash, tangible or intangible property (to the extent 
direct investment in such property would be permitted to the 
association), labor, or services actually performed for the association, 
or any combination of the foregoing. In the absence of actual fraud in 
the transaction, the value of such property, labor, or services, as 
determined by the board of directors of the association, shall be 
conclusive. Upon payment of such consideration, such shares shall be 
deemed to be fully paid and nonassessable. In the case of a stock 
dividend, that part of the retained earnings of the association that is 
transferred to common stock or paid-in capital accounts upon the 
issuance of shares as a stock dividend shall be deemed to be the 
consideration for their issuance.
    Except for shares issued in the initial organization of the 
association or in connection with the conversion of the association from 
the mutual to stock form of capitalization, no shares of capital stock 
(including shares issuable upon conversion, exchange, or exercise of 
other securities) shall be issued, directly or indirectly, to officers, 
directors, or controlling persons of the association other than as part 
of a general public offering or as qualifying shares to a director, 
unless the issuance or the plan under which they would be issued has 
been approved by a majority of the total votes eligible to be cast at a 
legal meeting.
    The holders of the common stock shall exclusively possess all voting 
power. Each holder of shares of common stock shall be entitled to one 
vote for each share held by such holder, except as to the cumulation of 
votes for the election of directors, unless the charter provides that 
there shall be no such

[[Page 139]]

cumulative voting. Subject to any provision for a liquidation account, 
in the event of any liquidation, dissolution, or winding up of the 
association, the holders of the common stock shall be entitled, after 
payment or provision for payment of all debts and liabilities of the 
association, to receive the remaining assets of the association 
available for distribution, in cash or in kind. Each share of common 
stock shall have the same relative rights as and be identical in all 
respects with all the other shares of common stock.
    Section 6. Preemptive rights. Holders of the capital stock of the 
association shall not be entitled to preemptive rights with respect to 
any shares of the association which may be issued.
    Section 7. Directors. The association shall be under the direction 
of a board of directors. The authorized number of directors, as stated 
in the association's bylaws, shall not be fewer than five nor more than 
fifteen except when a greater or lesser number is approved by the 
Director of the Office, or his or her delegate.
    Section 8. Amendment of charter. Except as provided in Section 5, no 
amendment, addition, alteration, change or repeal of this charter shall 
be made, unless such is proposed by the board of directors of the 
association, approved by the shareholders by a majority of the votes 
eligible to be cast at a legal meeting, unless a higher vote is 
otherwise required, and approved or preapproved by the Office.
Attest:_________________________________________________________________
 Secretary of the Association

By:_____________________________________________________________________
 President or Chief Executive Officer of the Association

Attest:_________________________________________________________________
 Secretary of the Office of Thrift Supervision

By:_____________________________________________________________________
 Director of the Office of Thrift Supervision

Effective Date:_________________________________________________________

[54 FR 49523, Nov. 30, 1989, as amended at 59 FR 53571, Oct. 25, 1994; 
61 FR 64018, Dec. 3, 1996]



Sec. 552.4  Charter amendments.

    (a) General. In order to adopt a charter amendment, a Federal stock 
association must comply with the following requirements:
    (1) Board of directors approval. The board of directors of the 
association must adopt a resolution proposing the charter amendment that 
states the text of such amendment.
    (2) Form of filing--(i) Application requirement. If the proposed 
charter amendment would render more difficult or discourage a merger, 
tender offer, or proxy contest, the assumption of control by a holder of 
a block of the association's stock, the removal of incumbent management, 
or involve a significant issue of law or policy, the association shall 
file the proposed amendment and shall obtain the prior approval of the 
OTS; and
    (ii) Notice requirement. If the proposed charter amendment does not 
involve a provision that would be covered by paragraph (a)(2)(i) of this 
section and such amendment is permissible under all applicable laws, 
rules or regulations, then the association shall submit the proposed 
amendments to the OTS, at least 30 days prior to the date the proposed 
charter amendment is to be mailed for consideration by the association's 
shareholders.
    (b) Approval. Any charter amendment filed pursuant to paragraph 
(a)(2)(ii) of this section shall automatically be approved 30 days from 
the date of filing of such amendment, provided that the association 
follows the requirements of its charter in adopting such amendment, 
unless prior to the expiration of such 30-day period the OTS notifies 
the association that such amendment is rejected or that such amendment 
is deemed to be filed under the provisions of paragraph (a)(2)(i) of 
this section. In addition, the following charter amendments, including 
the adoption of the Federal stock charter as set forth in Sec. 552.3 of 
this part, shall be approved at the time of adoption, if adopted without 
change and filed with OTS within 30 days after adoption, provided the 
association follows the requirements of its charter in adopting such 
amendments:
    (1) Title change. A Federal stock association that has complied with 
Sec. 543.1(b) of this chapter may amend its charter by substituting a 
new corporate title in section 1.
    (2) Home office. A Federal stock association that has complied with 
Sec. 545.95 of this chapter may amend its charter by substituting a new 
home office in section 2.
    (3) Number of shares of stock and par value. A Federal stock 
association may amend Section 5 of its charter to change the number of 
authorized

[[Page 140]]

shares of stock, the number of shares within each class of stock, and 
the par or stated value of such shares.
    (4) Capital stock. A Federal stock association may amend its charter 
by revising Section 5 to read as follows:

    Section 5. Capital stock. The total number of shares of all classes 
of capital stock that the association has the authority to issue is ----
--, of which ------ shall be common stock of par [or if no par value is 
specified the stated] value of ------ per share and of which [list the 
number of each class of preferred and the par or if no par value is 
specified the stated value per share of each such class]. The shares may 
be issued from time to time as authorized by the board of directors 
without further approval of shareholders, except as otherwise provided 
in this Section 5 or to the extent that such approval is required by 
governing law, rule, or regulation. The consideration for the issuance 
of the shares shall be paid in full before their issuance and shall not 
be less than the par [or stated] value. Neither promissory notes nor 
future services shall constitute payment or part payment for the 
issuance of shares of the association. The consideration for the shares 
shall be cash, tangible or intangible property (to the extent direct 
investment in such property would be permitted), labor, or services 
actually performed for the association, or any combination of the 
foregoing. In the absence of actual fraud in the transaction, the value 
of such property, labor, or services, as determined by the board of 
directors of the association, shall be conclusive. Upon payment of such 
consideration, such shares shall be deemed to be fully paid and 
nonassessable. In the case of a stock dividend, that part of the 
retained earnings of the association that is transferred to common stock 
or paid-in capital accounts upon the issuance of shares as a stock 
dividend shall be deemed to be the consideration for their issuance.
    Except for shares issued in the initial organization of the 
association or in connection with the conversion of the association from 
the mutual to the stock form of capitalization, no shares of capital 
stock (including shares issuable upon conversion, exchange, or exercise 
of other securities) shall be issued, directly or indirectly, to 
officers, directors, or controlling persons of the association other 
than as part of a general public offering or as qualifying shares to a 
director, unless their issuance or the plan under which they would be 
issued has been approved by a majority of the total votes eligible to be 
cast at a legal meeting.
    Nothing contained in this Section 5 (or in any supplementary 
sections hereto) shall entitle the holders of any class of a series of 
capital stock to vote as a separate class or series or to more than one 
vote per share, except as to the cumulation of votes for the election of 
directors, unless the charter otherwise provides that there shall be no 
such cumulative voting: Provided, That this restriction on voting 
separately by class or series shall not apply:
    (i) To any provision which would authorize the holders of preferred 
stock, voting as a class or series, to elect some members of the board 
of directors, less than a majority thereof, in the event of default in 
the payment of dividends on any class or series of preferred stock;
    (ii) To any provision that would require the holders of preferred 
stock, voting as a class or series, to approve the merger or 
consolidation of the association with another corporation or the sale, 
lease, or conveyance (other than by mortgage or pledge) of properties or 
business in exchange for securities of a corporation other than the 
association if the preferred stock is exchanged for securities of such 
other corporation: Provided, That no provision may require such approval 
for transactions undertaken with the assistance or pursuant to the 
direction of the Office or the Federal Deposit Insurance Corporation;
    (iii) To any amendment which would adversely change the specific 
terms of any class or series of capital stock as set forth in this 
Section 5 (or in any supplementary sections hereto), including any 
amendment which would create or enlarge any class or series ranking 
prior thereto in rights and preferences. An amendment which increases 
the number of authorized shares of any class or series of capital stock, 
or substitutes the surviving association in a merger or consolidation 
for the association, shall not be considered to be such an adverse 
change.
    A description of the different classes and series (if any) of the 
association's capital stock and a statement of the designations, and the 
relative rights, preferences, and limitations of the shares of each 
class of and series (if any) of capital stock are as follows:
    A. Common stock. Except as provided in this Section 5 (or in any 
supplementary sections thereto) the holders of the common stock shall 
exclusively possess all voting power. Each holder of shares of the 
common stock shall be entitled to one vote for each share held by each 
holder, except as to the cumulation of votes for the election of 
directors, unless the charter otherwise provides that there shall be no 
such cumulative voting.
    Whenever there shall have been paid, or declared and set aside for 
payment, to the holders of the outstanding shares of any class of stock 
having preference over the common stock as to the payment of dividends, 
the full amount of dividends and of sinking fund, retirement fund, or 
other retirement payments, if any, to which such holders are 
respectively entitled in preference to the common stock, then dividends

[[Page 141]]

may be paid on the common stock and on any class or series of stock 
entitled to participate therewith as to dividends out of any assets 
legally available for the payment of dividends.
    In the event of any liquidation, dissolution, or winding up of the 
association, the holders of the common stock (and the holders of any 
class or series of stock entitled to participate with the common stock 
in the distribution of assets) shall be entitled to receive, in cash or 
in kind, the assets of the association available for distribution 
remaining after: (i) Payment or provision for payment of the 
association's debts and liabilities; (ii) distributions or provision for 
distributions in settlement of its liquidation account; and (iii) 
distributions or provision for distributions to holders of any class or 
series of stock having preference over the common stock in the 
liquidation, dissolution, or winding up of the association. Each share 
of common stock shall have the same relative rights as and be identical 
in all respects with all the other shares of common stock.
    B. Preferred stock. The association may provide in supplementary 
sections to its charter for one or more classes of preferred stock, 
which shall be separately identified. The shares of any class may be 
divided into and issued in series, with each series separately 
designated so as to distinguish the shares thereof from the shares of 
all other series and classes. The terms of each series shall be set 
forth in a supplementary section to the charter. All shares of the same 
class shall be identical except as to the following relative rights and 
preferences, as to which there may be variations between different 
series:
    (a) The distinctive serial designation and the number of shares 
constituting such series;
    (b) The dividend rate or the amount of dividends to be paid on the 
shares of such series, whether dividends shall be cumulative and, if so, 
from which date(s), the payment date(s) for dividends, and the 
participating or other special rights, if any, with respect to 
dividends;
    (c) The voting powers, full or limited, if any, of shares of such 
series;
    (d) Whether the shares of such series shall be redeemable and, if 
so, the price(s) at which, and the terms and conditions on which, such 
shares may be redeemed;
    (e) The amount(s) payable upon the shares of such series in the 
event of voluntary or involuntary liquidation, dissolution, or winding 
up of the association;
    (f) Whether the shares of such series shall be entitled to the 
benefit of a sinking or retirement fund to be applied to the purchase or 
redemption of such shares, and if so entitled, the amount of such fund 
and the manner of its application, including the price(s) at which such 
shares may be redeemed or purchased through the application of such 
fund;
    (g) Whether the shares of such series shall be convertible into, or 
exchangeable for, shares of any other class or classes of stock of the 
association and, if so, the conversion price(s) or the rate(s) of 
exchange, and the adjustments thereof, if any, at which such conversion 
or exchange may be made, and any other terms and conditions of such 
conversion or exchange.
    (h) The price or other consideration for which the shares of such 
series shall be issued; and
    (i) Whether the shares of such series which are redeemed or 
converted shall have the status of authorized but unissued shares of 
serial preferred stock and whether such shares may be reissued as shares 
of the same or any other series of serial preferred stock.
    Each share of each series of serial preferred stock shall have the 
same relative rights as and be identical in all respects with all the 
other shares of the same series.
    The board of directors shall have authority to divide, by the 
adoption of supplementary charter sections, any authorized class of 
preferred stock into series, and, within the limitations set forth in 
this section and the remainder of this charter, fix and determine the 
relative rights and preferences of the shares of any series so 
established.
    Prior to the issuance of any preferred shares of a series 
established by a supplementary charter section adopted by the board of 
directors, the association shall file with the Secretary to the Office a 
dated copy of that supplementary section of this charter established and 
designating the series and fixing and determining the relative rights 
and preferences thereof.

    (5) Limitations on subsequent issuances. A Federal stock association 
may amend its charter to require shareholder approval of the issuance or 
reservation of common stock or securities convertible into common stock 
under circumstances which would require shareholder approval under the 
rules of the New York or American Stock Exchange if the shares were then 
listed on the New York or American Stock Exchange.
    (6) Cumulative voting. A Federal stock association may amend its 
charter by substituting the following sentence for the second sentence 
in the third paragraph of Section 5: ``Each holder of shares of common 
stock shall be entitled to one vote for each share held by such holder 
and there shall be no right to cumulate votes in an election of 
directors.''

[[Page 142]]

    (7) [Reserved]
    (8) Anti-takeover provisions following mutual to stock conversion. 
Notwithstanding the law of the state in which the association is 
located, a Federal stock association may amend its charter by 
renumbering existing sections as appropriate and adding a new section 8 
as follows:

    Section 8. Certain Provisions Applicable for Five Years. 
Notwithstanding anything contained in the Association's charter or 
bylaws to the contrary, for a period of [specify number of years up to 
five] years from the date of completion of the conversion of the 
Association from mutual to stock form, the following provisions shall 
apply:
    A. Beneficial Ownership Limitation. No person shall directly or 
indirectly offer to acquire or acquire the beneficial ownership of more 
than 10 percent of any class of an equity security of the association. 
This limitation shall not apply to a transaction in which the 
association forms a holding company without change in the respective 
beneficial ownership interests of its stockholders other than pursuant 
to the exercise of any dissenter and appraisal rights, the purchase of 
shares by underwriters in connection with a public offering, or the 
purchase of shares by a tax-qualified employee stock benefit plan which 
is exempt from the approval requirements under Sec. 574.3(c)(1)(vi) of 
the Office's regulations.
    In the event shares are acquired in violation of this section 8, all 
shares beneficially owned by any person in excess of 10% shall be 
considered ``excess shares'' and shall not be counted as shares entitled 
to vote and shall not be voted by any person or counted as voting shares 
in connection with any matters submitted to the stockholders for a vote.
    For purposes of this section 8, the following definitions apply:
    (1) The term ``person'' includes an individual, a group acting in 
concert, a corporation, a partnership, an association, a joint stock 
company, a trust, an unincorporated organization or similar company, a 
syndicate or any other group formed for the purpose of acquiring, 
holding or disposing of the equity securities of the association.
    (2) The term ``offer'' includes every offer to buy or otherwise 
acquire, solicitation of an offer to sell, tender offer for, or request 
or invitation for tenders of, a security or interest in a security for 
value.
    (3) The term ``acquire'' includes every type of acquisition, whether 
effected by purchase, exchange, operation of law or otherwise.
    (4) The term ``acting in concert'' means (a) knowing participation 
in a joint activity or conscious parallel action towards a common goal 
whether or not pursuant to an express agreement, or (b) a combination or 
pooling of voting or other interests in the securities of an issuer for 
a common purpose pursuant to any contract, understanding, relationship, 
agreement or other arrangements, whether written or otherwise.
    B. Cumulative Voting Limitation. Stockholders shall not be permitted 
to cumulate their votes for election of directors.
    C. Call for Special Meetings. Special meetings of stockholders 
relating to changes in control of the association or amendments to its 
charter shall be called only upon direction of the board of directors.

    (c) Anti-takeover provisions. The Office may grant approval to a 
charter amendment not listed in paragraph (b) of this section regarding 
the acquisition by any person or persons of its equity securities 
provided that the association shall file as part of its application for 
approval an opinion, acceptable to the OTS, of counsel independent from 
the association that the proposed charter provision would be permitted 
to be adopted by a corporation chartered by the state in which the 
principal office of the association is located. Any such provision must 
be consistent with applicable statutes, regulations, and OTS policies. 
Further, any such provision that would have the effect of rendering more 
difficult a change in control of the association and would require for 
any corporate action (other than the removal of directors) the 
affirmative vote of a larger percentage of shareholders than is required 
by this Part, shall not be effective unless adopted by a percentage of 
shareholder vote at least equal to the highest percentage that would be 
required to take any action under such provision.
    (d) Reissuance of charter. A Federal stock association that has 
amended its charter may apply to have its charter, including the 
amendments, reissued by the Office. Such requests for reissuance should 
be filed with the Corporate Secretary at Washington Headquarters Office 
at the address listed in Sec. 516.40(b) of this chapter, and contain 
signatures required under Sec. 552.3 of this part, together with such 
supporting documents

[[Page 143]]

as needed to demonstrate that the amendments were properly adopted.

[54 FR 49523, Nov. 30, 1989, as amended at 55 FR 13513, Apr. 11, 1990; 
57 FR 14343, Apr. 20, 1992; 59 FR 18476, Apr. 19, 1994; 61 FR 64018, 
Dec. 3, 1996; 62 FR 66262, Dec. 18, 1997; 66 FR 13006, Mar. 2, 2001]



Sec. 552.5  Bylaws.

    (a) General. At its first organizational meeting, the board of 
directors of a Federal stock association shall adopt a set of bylaws for 
the administration and regulation of its affairs. Bylaws may be adopted, 
amended or repealed by either a majority of the votes cast by the 
shareholders at a legal meeting or a majority of the board of directors. 
The bylaws shall contain sufficient provisions to govern the association 
in accordance with the requirements of Sec. Sec. 552.6, 552.6-1, 552.6-
2, and 552.6-3 of this part and shall not contain any provision that is 
inconsistent with those sections or with applicable laws, rules, 
regulations or the association's charter, except that a bylaw provision 
inconsistent with Sec. Sec. 552.6, 552.6-1, 552.6-3, and 552.6-4 of 
this part may be adopted with the approval of the OTS.
    (b) Form of Filing--(1) Application requirement. (i) Any bylaw 
amendment shall be submitted to the OTS for approval if it would:
    (A) Render more difficult or discourage a merger, tender offer, or 
proxy contest, the assumption of control by a holder of a large block of 
the association's stock, or the removal of incumbent management; or
    (B) Be inconsistent with Sec. Sec. 552.6, 552.6-1, 552.6-2, and 
552.6-3 of this part, with applicable laws, rules, regulations or the 
association's charter or involve a significant issue of law or policy, 
including indemnification, conflicts of interest, and limitations on 
director or officer liability.
    (ii) Applications submitted under paragraph (b)(1)(i) of this 
section are subject to standard treatment processing procedures at part 
516, subparts A and E of this chapter.
    (iii) Bylaw provisions that adopt the language of the model or 
optional bylaws in OTS's Application Processing Handbook, if adopted 
without change, and filed with OTS within 30 days after adoption, are 
effective upon adoption.
    (2) Filing requirement. If the proposed bylaw amendment does not 
involve a provision that would be covered by paragraph (b)(1) or (b)(3) 
of this section and is permissible under all applicable laws, rules, or 
regulations, then the association shall submit the amendment to the OTS 
at least 30 days prior to the date the bylaw amendment is to be adopted 
by the association.
    (3) Corporate governance procedures. A Federal stock association may 
elect to follow the corporate governance procedures of: The laws of the 
state where the main office of the association is located; the laws of 
the state where the association's holding company, if any, is 
incorporated or chartered; Delaware General Corporation law; or The 
Model Business Corporation Act, provided that such procedures may be 
elected to the extent not inconsistent with applicable Federal statutes 
and regulations and safety and soundness, and such procedures are not of 
the type described in paragraph (b)(1) of this section. If this election 
is selected, a Federal stock association shall designate in its bylaws 
the provision or provisions from the body or bodies of law selected for 
its corporate governance procedures, and shall file a copy of such 
bylaws, which are effective upon adoption, within 30 days after 
adoption. The submission shall indicate, where not obvious, why the 
bylaw provisions meet the requirements stated in paragraph (b)(1) of 
this section.
    (c) Effectiveness. Any bylaw amendment filed pursuant to paragraph 
(b)(2) of this section shall automatically be effective 30 days from the 
date of filing of such amendment, provided that the association follows 
the requirements of its charter and bylaws in adopting such amendment, 
unless prior to the expiration of such 30-day period the OTS notifies 
the association that such amendment is rejected or that such amendment 
requires an application to be filed pursuant to paragraph (b)(1) of this 
section.
    (d) Effect of subsequent charter or bylaw change. Notwithstanding 
any subsequent change to its charter or bylaws, the authority of a 
Federal stock association to engage in any transaction shall be 
determined only by the association's charter or bylaws then in

[[Page 144]]

effect, unless otherwise provided by Federal law or regulation.

[57 FR 14343, Apr. 20, 1992, as amended at 60 FR 66718, Dec. 26, 1995; 
61 FR 64019, Dec. 3, 1996; 66 FR 13006, Mar. 2, 2001; 66 FR 15020, Mar. 
15, 2001]



Sec. 552.6  Shareholders.

    (a) Shareholder meetings. An annual meeting of the shareholders of 
the association for the election of directors and for the transaction of 
any other business of the association shall be held annually within 150 
days after the end of the association's fiscal year. Unless otherwise 
provided in the association's charter, special meetings of the 
shareholders may be called by the board of directors or on the request 
of the holders of 10 percent or more of the shares entitled to vote at 
the meeting, or by such other persons as may be specified in the bylaws 
of the association. All annual and special meetings of shareholders 
shall be held at such place as the board of directors may determine in 
the state in which the association has its principal place of business, 
or at any other convenient place the board of directors may designate.
    (b) Notice of shareholder meetings. Written notice stating the 
place, day, and hour of the meeting and the purpose or purposes for 
which the meeting is called shall be delivered not fewer than 20 nor 
more than 50 days before the date of the meeting, either personally or 
by mail, by or at the direction of the chairman of the board, the 
president, the secretary, or the directors, or other persons calling the 
meeting, to each shareholder of record entitled to vote at such meeting. 
If mailed, such notice shall be deemed to be delivered when deposited in 
the mail, addressed to the shareholder at the address appearing on the 
stock transfer books or records of the association as of the record date 
prescribed in paragraph (c) of this section, with postage thereon 
prepaid. When any shareholders' meeting, either annual or special, is 
adjourned for 30 days or more, notice of the adjourned meeting shall be 
given as in the case of an original meeting. Notwithstanding anything in 
this section, however, a Federal stock association that is wholly owned 
shall not be subject to the shareholder notice requirement.
    (c) Fixing of record date. For the purpose of determining 
shareholders entitled to notice of or to vote at any meeting of 
shareholders or any adjournment thereof, or shareholders entitled to 
receive payment of any dividend, or in order to make a determination of 
shareholders for any other proper purpose, the board of directors shall 
fix in advance a date as the record date for any such determination of 
shareholders. Such date in any case shall be not more than 60 days and, 
in case of a meeting of shareholders, not less than 10 days prior to the 
date on which the particular action, requiring such determination of 
shareholders, is to be taken. When a determination of shareholders 
entitled to vote at any meeting of shareholders has been made as 
provided in this section, such determination shall apply to any 
adjournment thereof.
    (d) Voting lists. (1) At least 20 days before each meeting of the 
shareholders, the officer or agent having charge of the stock transfer 
books for the shares of the association shall make a complete list of 
the stockholders of record entitled to vote at such meeting, or any 
adjournments thereof, arranged in alphabetical order, with the address 
and the number of shares held by each. This list of shareholders shall 
be kept on file at the home office of the association and shall be 
subject to inspection by any shareholder of record or the stockholder's 
agent during the entire time of the meeting. The original stock transfer 
book shall constitute prima facie evidence of the stockholders entitled 
to examine such list or transfer books or to vote at any meeting of 
stockholders. Notwithstanding anything in this section, however, a 
Federal stock association that is wholly owned shall not be subject to 
the voting list requirements.
    (2) In lieu of making the shareholders list available for inspection 
by any shareholders as provided in paragraph (d)(1) of this section, the 
board of directors may perform such acts as required by paragraphs (a) 
and (b) of Rule 14a-7 of the General Rules and Regulations under the 
Securities and Exchange Act of 1934 (17 CFR 240.14a-7) as may be

[[Page 145]]

duly requested in writing, with respect to any matter which may be 
properly considered at a meeting of shareholders, by any shareholder who 
is entitled to vote on such matter and who shall defray the reasonable 
expenses to be incurred by the association in performance of the act or 
acts required.
    (e) Shareholder quorum. A majority of the outstanding shares of the 
association entitled to vote, represented in person or by proxy, shall 
constitute a quorum at a meeting of shareholders. The shareholders 
present at a duly organized meeting may continue to transact business 
until adjournment, notwithstanding the withdrawal of enough shareholders 
to leave less than a quorum. If a quorum is present, the affirmative 
vote of the majority of the shares represented at the meeting and 
entitled to vote on the subject matter shall be the act of the 
stockholders, unless the vote of a greater number of stockholders voting 
together or voting by classes is required by law or the charter. 
Directors, however, are elected by a plurality of the votes cast at an 
election of directors.
    (f) Shareholder voting--(1) Proxies. Unless otherwise provided in 
the association's charter, at all meetings of shareholders, a 
shareholder may vote in person or by proxy executed in writing by the 
shareholder or by a duly authorized attorney in fact. Proxies may be 
given telephonically or electronically as long as the holder uses a 
procedure for verifying the identity of the shareholder. A proxy may 
designate as holder a corporation, partnership or company as defined in 
Part 574 of this chapter, or other person. Proxies solicited on behalf 
of the management shall be voted as directed by the shareholder or, in 
the absence of such direction, as determined by a majority of the board 
of directors. No proxy shall be valid more than eleven months from the 
date of its execution except for a proxy coupled with an interest.
    (2) Shares controlled by association. Neither treasury shares of its 
own stock held by the association nor shares held by another 
corporation, if a majority of the shares entitled to vote for the 
election of directors of such other corporation are held by the 
association, shall be voted at any meeting or counted in determining the 
total number of outstanding shares at any given time for purposes of any 
meeting.
    (g) Nominations and new business submitted by shareholders. 
Nominations for directors and new business submitted by shareholders 
shall be voted upon at the annual meeting if such nominations or new 
business are submitted in writing and delivered to the secretary of the 
association at least five days prior to the date of the annual meeting. 
Ballots bearing the names of all the persons nominated shall be provided 
for use at the annual meeting.
    (h) Informal action by stockholders. If the bylaws of the 
association so provide, any action required to be taken at a meeting of 
the stockholders, or any other action that may be taken at a meeting of 
the stockholders, may be taken without a meeting if consent in writing 
has been given by all the stockholders entitled to vote with respect to 
the subject matter.

[54 FR 49523, Nov. 30, 1989, as amended at 59 FR 18476, Apr. 19, 1994; 
61 FR 64019, Dec. 3, 1996]



Sec. 552.6-1  Board of directors.

    (a) General powers and duties. The business and affairs of the 
association shall be under the direction of its board of directors. The 
board of directors shall annually elect a chairman of the board from 
among its members and shall designate the chairman of the board, when 
present, to preside at its meeting. Directors need not be stockholders 
unless the bylaws so require.
    (b) Number and term. The bylaws shall set forth a specific number of 
directors, not a range. The number of directors shall be not fewer than 
five nor more than fifteen, unless a higher or lower number has been 
authorized by the Director of the Office or his or her delegate. 
Directors shall be elected for a term of one to three years and until 
their successors are elected and qualified. If a staggered board is 
chosen, the directors shall be divided into two or three classes as 
nearly equal in number as possible and one class shall be elected by 
ballot annually. In the case of a converting or newly chartered 
association where all directors shall be elected at the first election 
of directors, if a staggered board is chosen, the terms

[[Page 146]]

shall be staggered in length from one to three years.
    (c) Regular meetings. A regular meeting of the board of directors 
shall be held immediately after, and at the same place as, the annual 
meeting of shareholders. The board of directors shall determine the 
place, frequency, time and procedure for notice of regular meetings.
    (d) Quorum. A majority of the number of directors shall constitute a 
quorum for the transaction of business at any meeting of the board of 
directors. The act of the majority of the directors present at a meeting 
at which a quorum is present shall be the act of the board of directors, 
unless a greater number is prescribed by regulation of the Office.
    (e) Vacancies. Any vacancy occurring in the board of directors may 
be filled by the affirmative vote of a majority of the remaining 
directors although less than a quorum of the board of directors. A 
director elected to fill a vacancy shall be elected to serve only until 
the next election of directors by the shareholders. Any directorship to 
be filled by reason of an increase in the number of directors may be 
filled by election by the board of directors for a term of office 
continuing only until the next election of directors by the 
shareholders.
    (f) Removal or resignation of directors. (1) At a meeting of 
shareholders called expressly for that purpose, any director may be 
removed only for cause, as defined in Sec. 563.39 of this chapter, by a 
vote of the holders of a majority of the shares then entitled to vote at 
an election of directors. Associations may provide for procedures 
regarding resignations in the bylaws.
    (2) If less than the entire board is to be removed, no one of the 
directors may be removed if the votes cast against the removal would be 
sufficient to elect a director if then cumulatively voted at an election 
of the class of directors of which such director is a part.
    (3) Whenever the holders of the shares of any class are entitled to 
elect one or more directors by the provisions of the charter or 
supplemental sections thereto, the provisions of this section shall 
apply, in respect to the removal of a director or directors so elected, 
to the vote of the holders of the outstanding shares of that class and 
not to the vote of the outstanding shares as a whole.
    (g) Executive and other committees. The board of directors, by 
resolution adopted by a majority of the full board, may designate from 
among its members an executive committee and one or more other 
committees each of which, to the extent provided in the resolution or 
bylaws of the association, shall have and may exercise all of the 
authority of the board of directors, except no committee shall have the 
authority of the board of directors with reference to: the declaration 
of dividends; the amendment of the charter or bylaws of the association; 
recommending to the stockholders a plan of merger, consolidation, or 
conversion; the sale, lease, or other disposition of all, or 
substantially all, of the property and assets of the association 
otherwise than in the usual and regular course of its business; a 
voluntary dissolution of the association; a revocation of any of the 
foregoing; or the approval of a transaction in which any member of the 
executive committee, directly or indirectly, has any material beneficial 
interest. The designation of any committee and the delegation of 
authority thereto shall not operate to relieve the board of directors, 
or any director, of any responsibility imposed by law or regulation.
    (h) Notice of special meetings. Written notice of at least 24 hours 
regarding any special meeting of the board of directors or of any 
committee designated thereby shall be given to each director in 
accordance with the bylaws, although such notice may be waived by the 
director. The attendance of a director at a meeting shall constitute a 
waiver of notice of such meeting, except where a director attends a 
meeting for the express purpose of objecting to the transaction of any 
business because the meeting is not lawfully called or convened. Neither 
the business to be transacted at, nor the purpose of, any meeting need 
be specified in the notice or waiver of notice of such meeting. The 
bylaws may provide for telephonic participation at a meeting.

[[Page 147]]

    (i) Action without a meeting. Any action required or permitted to be 
taken by the board of directors at a meeting may be taken without a 
meeting if a consent in writing, setting forth the actions so taken, 
shall be signed by all of the directors.
    (j) Presumption of assent. A director of the association who is 
present at a meeting of the board of directors at which action on any 
association matter is taken shall be presumed to have assented to the 
action taken unless his or her dissent or abstention shall be entered in 
the minutes of the meeting or unless a written dissent to such action 
shall be filed with the person acting as the secretary of the meeting 
before the adjournment thereof or shall be forwarded by registered mail 
to the secretary of the association within five days after the date on 
which a copy of the minutes of the meeting is received. Such right to 
dissent shall not apply to a director who voted in favor of such action.
    (k) Age limitation on directors. A Federal association may provide a 
bylaw on age limitation for directors. Bylaws on age limitations must 
comply with all Federal laws, rules and regulations.

[54 FR 49523, Nov. 30, 1989, as amended at 58 FR 4312, Jan. 14, 1993; 61 
FR 64020, Dec. 3, 1996; 62 FR 66262, Dec. 18, 1997]



Sec. 552.6-2  Officers.

    (a) Positions. The officers of the association shall be a president, 
one or more vice presidents, a secretary, and a treasurer or 
comptroller, each of whom shall be elected by the board of directors. 
The board of directors may also designate the chairman of the board as 
an officer. The offices of the secretary and treasurer or comptroller 
may be held by the same person and the vice president may also be either 
the secretary or the treasurer or comptroller. The board of directors 
may designate one or more vice presidents as executive vice president or 
senior vice president. The board of directors may also elect or 
authorize the appointment of such other officers as the business of the 
association may require. The officers shall have such authority and 
perform such duties as the board of directors may from time to time 
authorize or determine. In the absence of action by the board of 
directors, the officers shall have such powers and duties as generally 
pertain to their respective offices.
    (b) Removal. Any officer may be removed by the board of directors 
whenever in its judgment the best interests of the association will be 
served thereby; but such removal, other than for cause, shall be without 
prejudice to the contractual rights, if any, of the person so removed. 
Employment contracts shall conform with Sec. 563.39 of this chapter.
    (c) Age limitation on officers. A Federal association may provide a 
bylaw on age limitation for officers. Bylaws on age limitations must 
comply with all Federal laws, rules, and regulations.

[54 FR 49523, Nov. 30, 1989, as amended at 56 FR 59866, Nov. 26, 1991; 
60 FR 66869, Dec. 27, 1995; 61 FR 64020, Dec. 3, 1996]



Sec. 552.6-3  Certificates for shares and their transfer.

    (a) Certificates for shares. Certificates representing shares of 
capital stock of the association shall be in such form as shall be 
determined by the board of directors and approved by the OTS. The 
certificates shall be signed by the chief executive officer or by any 
other officer of the association authorized by the board of directors, 
attested by the secretary or an assistant secretary, and sealed with the 
corporate seal or a facsimile thereof. The signatures of such officers 
upon a certificate may be facsimiles if the certificate is manually 
signed on behalf of a transfer agent or a registrar other than the 
association itself or one of its employees. Each certificate for shares 
of capital stock shall be consecutively numbered or otherwise 
identified. The name and address of the person to whom the shares are 
issued, with the number of shares and date of issue, shall be entered on 
the stock transfer books of the association. All certificates 
surrendered to the association for transfer shall be cancelled and no 
new certificate shall be issued until the former certificate for a like 
number of shares shall have been surrendered and cancelled, except that 
in the case of a lost or destroyed certificate a new certificate may be 
issued upon such terms and indemnity to the

[[Page 148]]

association as the board of directors may prescribe.
    (b) Transfer of shares. Transfer of shares of capital stock of the 
association shall be made only on its stock transfer books. Authority 
for such transfer shall be given only by the holder of record or by a 
legal representative, who shall furnish proper evidence of such 
authority, or by an attorney authorized by a duly executed power of 
attorney and filed with the association. The transfer shall be made only 
on surrender for cancellation of the certificate for the shares. The 
person in whose name shares of capital stock stand on the books of the 
association shall be deemed by the association to be the owner for all 
purposes.

[54 FR 49523, Nov. 30, 1989, as amended at 55 FR 13514, Apr. 11, 1990; 
57 FR 14343, Apr. 20, 1992]



Sec. 552.6-4  [Reserved]



Sec. 552.9  [Reserved]



Sec. 552.10  Annual reports to stockholders.

    A Federal stock association not wholly-owned by a holding company 
shall, within 130 days after the end of its fiscal year, mail to each of 
its stockholders entitled to vote at its annual meeting an annual report 
containing financial statements that satisfy the requirements of rule 
14a-3 under the Securities Exchange Act of 1934. (17 CFR 240.14a-3). 
Concurrently with such mailing a certification of such mailing signed by 
the chairman of the board, the president or a vice president of the 
association, together with copies of the report, shall be transmitted by 
the association to the OTS.

[57 FR 14343, Apr. 20, 1992, as amended at 62 FR 66262, Dec. 18, 1997]



Sec. 552.11  Books and records.

    (a) Each Federal stock association shall keep correct and complete 
books and records of account; shall keep minutes of the proceedings of 
its stockholders, board of directors, and committees of directors; and 
shall keep at its home office or at the office of its transfer agent or 
registrar, a record of its stockholders, giving the names and addresses 
of all stockholders, and the number, class and series, if any, of the 
shares held by each.
    (b) Any stockholder or group of stockholders of a Federal stock 
association, holding of record the number of voting shares of such 
association specified below, upon making written demand stating a proper 
purpose, shall have the right to examine, in person or by agent or 
attorney, at any reasonable time or times, nonconfidential portions of 
its books and records of account, minutes and record of stockholders and 
to make extracts therefrom. Such right of examination is limited to a 
stockholder or group of stockholders holding of record:
    (1) Voting shares having a cost of not less than $100,000 or 
constituting not less than one percent of the total outstanding voting 
shares, provided in either case such stockholder or group of 
stockholders have held of record such voting shares for a period of at 
least six months before making such written demand, or
    (2) Not less than five percent of the total outstanding voting 
shares.

No stockholder or group of stockholders of a Federal stock association 
shall have any other right under this section or common law to examine 
its books and records of account, minutes and record of stockholders, 
except as provided in its bylaws with respect to inspection of a list of 
stockholders.
    (c) The right to examination authorized by paragraph (b) of this 
section and the right to inspect the list of stockholders provided by a 
Federal stock association's bylaws may be denied to any stockholder or 
group of stockholders upon the refusal of any such stockholder or group 
of stockholders to furnish such association, its transfer agent or 
registrar an affidavit that such examination or inspection is not 
desired for any purpose which is in the interest of a business or object 
other than the business of the association, that such stockholder has 
not within the five years preceding the date of the affidavit sold or 
offered for sale, and does not now intend to sell or offer for sale, any 
list of stockholders of the association or of any other corporation, and 
that such stockholder has not within said five-year period aided or 
abetted any other person in

[[Page 149]]

procuring any list of stockholders for purposes of selling or offering 
for sale such list.
    (d) Notwithstanding any provision of this section or common law, no 
stockholder or group of stockholders shall have the right to obtain, 
inspect or copy any portion of any books or records of a Federal stock 
association containing:
    (1) A list of depositors in or borrowers from such association;
    (2) Their addresses;
    (3) Individual deposit or loan balances or records; or
    (4) Any data from which such information could be reasonably 
constructed.

[54 FR 49523, Nov. 30, 1989, as amended at 61 FR 64020, Dec. 3, 1996]



Sec. 552.12  [Reserved]



Sec. 552.13  Combinations involving Federal stock associations.

    (a) Scope and authority. Federal stock associations may enter into 
combinations only in accordance with the provisions of this section, 
sections 5(d) and 18(c) of the Federal Deposit Insurance Act, sections 
5(d)(3)(A) and 10(s) of the Home Owners' Loan Act, and Sec. 563.22 of 
this chapter.
    (b) Definitions. The following definitions apply to Sec. Sec. 
552.13 and 552.14 of this part:
    (1) Combination. A merger or consolidation with another depository 
institution, or an acquisition of all or substantially all of the assets 
or assumption of all or substantially all of the liabilities of a 
depository institution by another depository institution. Combine means 
to be a constituent institution in a combination.
    (2) Consolidation. Fusion of two or more depository institutions 
into a newly-created depository institution.
    (3) Constituent institution. Resulting, disappearing, acquiring, or 
transferring depository institution in a combination.
    (4) Depository institution means any commercial bank (including a 
private bank), a savings bank, a trust company, a savings and loan 
association, a building and loan association, a homestead association, a 
cooperative bank, an industrial bank or a credit union, chartered in the 
United States and having its principal office located in the United 
States.
    (5) Disappearing institution. A depository institution whose 
corporate existence does not continue after a combination.
    (6) Merger. Uniting two or more depository institutions by the 
transfer of all property rights and franchises to the resulting 
depository institution, which retains its corporate identity.
    (7) Mutual savings association. Any savings association organized in 
a form not requiring non-withdrawable stock under Federal or State law.
    (8) Resulting institution. The depository institution whose 
corporate existence continues after a combination.
    (9) Savings association has the same meaning as defined in Sec. 
561.43 of this chapter.
    (10) State. Includes the District of Columbia, Commonwealth of 
Puerto Rico, and States, territories, and possessions of the United 
States.
    (11) Stock association. Any savings association organized in a form 
requiring non-withdrawable stock.
    (c) Forms of combination. A Federal stock association may combine 
with any depository institution, provided that:
    (1) The combination is in compliance with, and receives all 
approvals required under, any applicable statutes and regulations;
    (2) Any resulting Federal savings association meets the requirements 
for Federal Home Loan Bank membership and insurance of accounts;
    (3) In the case of a combination with a bank that is a member of the 
Bank Insurance Fund, any resulting Federal savings association conforms 
to the requirements of sections 5(c) and 10(m) of the Home Owners' Loan 
Act under the standards set forth in section 5(c)(5) of the Home Owners' 
Loan Act, and in the case of a combination with any other depository 
institution, any resulting Federal savings association conforms within 
the time prescribed by the OTS to the requirements of section 5(c) of 
the Home Owners' Loan Act; and
    (4) If any constituent savings association is a mutual savings 
association, the resulting institution shall be mutually held, unless:

[[Page 150]]

    (i) The transaction involves a supervisory merger;
    (ii) The transaction is approved under part 563b of this chapter;
    (iii) The transaction involves an interim Federal stock association 
or an interim State stock savings association; or
    (iv) The transaction involves a transfer in the context of a mutual 
holding company reorganization under section 10(o) of the Home Owners' 
Loan Act.
    (d) Combinations. Prior written notification to, notice to, or prior 
written approval of, the Office pursuant to Sec. 563.22 of this chapter 
is required for every combination. In the case of applications and 
notices pursuant to Sec. 563.22 (a) or (c), the Office shall apply the 
criteria set out in Sec. 563.22 of this chapter and shall impose any 
conditions it deems necessary or appropriate to ensure compliance with 
those criteria and the requirements of this chapter.
    (e) Approval of the board of directors. Before filing a notice or 
application for any combination involving a Federal stock association, 
the combination shall be approved:
    (1) By a two-thirds vote of the entire board of each constituent 
Federal savings association; and
    (2) As required by other applicable Federal or state law, for other 
constituent institutions.
    (f) Combination agreement. All terms, conditions, agreements or 
understandings, or other provisions with respect to a combination 
involving a Federal savings association shall be set forth fully in a 
written combination agreement. The combination agreement shall state:
    (1) That the combination shall not be effective unless and until:
    (i) The combination receives any necessary approval from the Office 
pursuant to Sec. 563.22 (a) or (c);
    (ii) In the case of a transaction requiring a notification pursuant 
to Sec. 563.22(b), notification has been provided to the OTS; or
    (iii) In the case of a transaction requiring a notice pursuant to 
Sec. 563.22(c), the notice has been filed, and the appropriate period 
of time has passed or the OTS has advised the parties that it will not 
disapprove the transaction;
    (2) Which constituent institution is to be the resulting 
institution;
    (3) The name of the resulting institution;
    (4) The location of the home office and any other offices of the 
resulting institution;
    (5) The terms and conditions of the combination and the method of 
effectuation;
    (6) Any charter amendments, or the new charter in the combination;
    (7) The basis upon which the savings accounts of the resulting 
institution shall be issued;
    (8) If a Federal association is the resulting institution, the 
number, names, residence addresses, and terms of directors;
    (9) The effect upon and assumption of any liquidation account of a 
disappearing institution by the resulting institution; and
    (10) Such other provisions, agreements, or understandings as relate 
to the combination.
    (g) [Reserved]
    (h) Approval by stockholders--(1) General rule. Except as otherwise 
provided in this section, an affirmative vote of two-thirds of the 
outstanding voting stock of any constituent Federal savings association 
shall be required for approval of the combination agreement. If any 
class of shares is entitled to vote as a class pursuant to Sec. 552.4 
of this part, an affirmative vote of a majority of the shares of each 
voting class and two-thirds of the total voting shares shall be 
required. The required vote shall be taken at a meeting of the savings 
association.
    (2) General exception. Stockholders of the resulting Federal stock 
association need not authorize a combination agreement if:
    (i) It does not involve an interim Federal savings association or an 
interim state savings association;
    (ii) The association's charter is not changed;
    (iii) Each share of stock outstanding immediately prior to the 
effective date of the combination is to be an identical outstanding 
share or a treasury share of the resulting Federal stock association 
after such effective date; and
    (iv) Either:

[[Page 151]]

    (A) No shares of voting stock of the resulting Federal stock 
association and no securities convertible into such stock are to be 
issued or delivered under the plan of combination, or
    (B) The authorized unissued shares or the treasury shares of voting 
stock of the resulting Federal stock association to be issued or 
delivered under the plan of combination, plus those initially issuable 
upon conversion of any securities to be issued or delivered under such 
plan, do not exceed 15% of the total shares of voting stock of such 
association outstanding immediately prior to the effective date of the 
combination.
    (3) Exceptions for certain combinations involving an interim 
association. Stockholders of a Federal stock association need not 
authorize by a two-thirds affirmative vote combinations involving an 
interim Federal savings association or interim state savings association 
when the resulting Federal stock association is acquired pursuant to 
Sec. 574.7(a)(2) of this chapter. In those cases, an affirmative vote 
of 50 percent of the shares of the outstanding voting stock of the 
Federal stock association plus one affirmative vote shall be required. 
If any class of shares is entitled to vote as a class pursuant to Sec. 
552.4 of this part, an affirmative vote of 50 percent of the shares of 
each voting class plus one affirmative vote shall be required. The 
required votes shall be taken at a meeting of the association.
    (i) Disclosure. The OTS may require, in connection with a 
combination under this section, such disclosure of information as the 
OTS deems necessary or desirable for the protection of investors in any 
of the constituent associations.
    (j) Articles of combination. (1) Following stockholder approval of 
any combination in which a Federal savings association is the resulting 
institution, articles of combination shall be executed in duplicate by 
each constituent institution, by its chief executive officer or 
executive vice president and by its secretary or an assistant secretary, 
and verified by one of the officers of each institution signing such 
articles, and shall set forth:
    (i) The plan of combination;
    (ii) The number of shares outstanding in each depository 
institution; and
    (iii) The number of shares in each depository institution voted for 
and against such plan.
    (2) Both sets of articles of combination shall be filed with the 
Office. If the Office determines that such articles conform to the 
requirements of this section, the Office shall endorse the articles and 
return one set to the resulting institution.
    (k) Effective date. No combination under this section shall be 
effective until receipt of any approvals required by the Office. The 
effective date of a combination in which the resulting institution is a 
Federal stock association shall be the date of consummation of the 
transaction or such other later date specified on the endorsement of the 
articles of combination by the Office. If a disappearing institution 
combining under this section is a Federal stock association, its charter 
shall be deemed to be cancelled as of the effective date of the 
combination and such charter must be surrendered to the Office as soon 
as practicable after the effective date.
    (l) Mergers and consolidations: transfer of assets and liabilities 
to the resulting institution. Upon the effective date of a merger or 
consolidation under this section, if the resulting institution is a 
Federal savings association, all assets and property (real, personal and 
mixed, tangible and intangible, choses in action, rights, and credits) 
then owned by each constituent institution or which would inure to any 
of them, shall, immediately by operation of law and without any 
conveyance, transfer, or further action, become the property of the 
resulting Federal savings association. The resulting Federal savings 
association shall be deemed to be a continuation of the entity of each 
constituent institution, the rights and obligations of which shall 
succeed to such rights and obligations and the duties and liabilities 
connected therewith, subject to the Home Owners' Loan Act and other 
applicable statutes.

[54 FR 49523, Nov. 30, 1989, as amended at 57 FR 14343, Apr. 20, 1992; 
59 FR 44623, Aug. 30, 1994]

[[Page 152]]



Sec. 552.14  Dissenter and appraisal rights.

    (a) Right to demand payment of fair or appraised value. Except as 
provided in paragraph (b) of this section, any stockholder of a Federal 
stock association combining in accordance with Sec. 552.13 of this part 
shall have the right to demand payment of the fair or appraised value of 
his stock: Provided, That such stockholder has not voted in favor of the 
combination and complies with the provisions of paragraph (c) of this 
section.
    (b) Exceptions. No stockholder required to accept only qualified 
consideration for his or her stock shall have the right under this 
section to demand payment of the stock's fair or appraised value, if 
such stock was listed on a national securities exchange or quoted on the 
National Association of Securities Dealers' Automated Quotation System 
(``NASDAQ'') on the date of the meeting at which the combination was 
acted upon or stockholder action is not required for a combination made 
pursuant to Sec. 552.13(h)(2) of this part. ``Qualified consideration'' 
means cash, shares of stock of any association or corporation which at 
the effective date of the combination will be listed on a national 
securities exchange or quoted on NASDAQ, or any combination of such 
shares of stock and cash.
    (c) Procedure--(1) Notice. Each constituent Federal stock 
association shall notify all stockholders entitled to rights under this 
section, not less than twenty days prior to the meeting at which the 
combination agreement is to be submitted for stockholder approval, of 
the right to demand payment of appraised value of shares, and shall 
include in such notice a copy of this section. Such written notice shall 
be mailed to stockholders of record and may be part of management's 
proxy solicitation for such meeting.
    (2) Demand for appraisal and payment. Each stockholder electing to 
make a demand under this section shall deliver to the Federal stock 
association, before voting on the combination, a writing identifying 
himself or herself and stating his or her intention thereby to demand 
appraisal of and payment for his or her shares. Such demand must be in 
addition to and separate from any proxy or vote against the combination 
by the stockholder.
    (3) Notification of effective date and written offer. Within ten 
days after the effective date of the combination, the resulting 
association shall:
    (i) Give written notice by mail to stockholders of constituent 
Federal stock associations who have complied with the provisions of 
paragraph (c)(2) of this section and have not voted in favor of the 
combination, of the effective date of the combination;
    (ii) Make a written offer to each stockholder to pay for dissenting 
shares at a specified price deemed by the resulting association to be 
the fair value thereof; and
    (iii) Inform them that, within sixty days of such date, the 
respective requirements of paragraphs (c)(5) and (c)(6) of this section 
(set out in the notice) must be satisfied.

The notice and offer shall be accompanied by a balance sheet and 
statement of income of the association the shares of which the 
dissenting stockholder holds, for a fiscal year ending not more than 
sixteen months before the date of notice and offer, together with the 
latest available interim financial statements.
    (4) Acceptance of offer. If within sixty days of the effective date 
of the combination the fair value is agreed upon between the resulting 
association and any stockholder who has complied with the provisions of 
paragraph (c)(2) of this section, payment therefor shall be made within 
ninety days of the effective date of the combination.
    (5) Petition to be filed if offer not accepted. If within sixty days 
of the effective date of the combination the resulting association and 
any stockholder who has complied with the provisions of paragraph (c)(2) 
of this section do not agree as to the fair value, then any such 
stockholder may file a petition with the Office, with a copy by 
registered or certified mail to the resulting association, demanding a 
determination of the fair market value of the stock of all such 
stockholders. A stockholder entitled to file a petition under this 
section who fails to file such petition within sixty days of the 
effective date of the combination shall be

[[Page 153]]

deemed to have accepted the terms offered under the combination.
    (6) Stock certificates to be noted. Within sixty days of the 
effective date of the combination, each stockholder demanding appraisal 
and payment under this section shall submit to the transfer agent his 
certificates of stock for notation thereon that an appraisal and payment 
have been demanded with respect to such stock and that appraisal 
proceedings are pending. Any stockholder who fails to submit his or her 
stock certificates for such notation shall no longer be entitled to 
appraisal rights under this section and shall be deemed to have accepted 
the terms offered under the combination.
    (7) Withdrawal of demand. Notwithstanding the foregoing, at any time 
within sixty days after the effective date of the combination, any 
stockholder shall have the right to withdraw his or her demand for 
appraisal and to accept the terms offered upon the combination.
    (8) Valuation and payment. The Director shall, as he or she may 
elect, either appoint one or more independent persons or direct 
appropriate staff of the Office to appraise the shares to determine 
their fair market value, as of the effective date of the combination, 
exclusive of any element of value arising from the accomplishment or 
expectation of the combination. Appropriate staff of the Office shall 
review and provide an opinion on appraisals prepared by independent 
persons as to the suitability of the appraisal methodology and the 
adequacy of the analysis and supportive data. The Director after 
consideration of the appraisal report and the advice of the appropriate 
staff shall, if he or she concurs in the valuation of the shares, direct 
payment by the resulting association of the appraised fair market value 
of the shares, upon surrender of the certificates representing such 
stock. Payment shall be made, together with interest from the effective 
date of the combination, at a rate deemed equitable by the Director.
    (9) Costs and expenses. The costs and expenses of any proceeding 
under this section may be apportioned and assessed by the Director as he 
or she may deem equitable against all or some of the parties. In making 
this determination the Director shall consider whether any party has 
acted arbitrarily, vexatiously, or not in good faith in respect to the 
rights provided by this section.
    (10) Voting and distribution. Any stockholder who has demanded 
appraisal rights as provided in paragraph (c)(2) of this section shall 
thereafter neither be entitled to vote such stock for any purpose nor be 
entitled to the payment of dividends or other distributions on the stock 
(except dividends or other distribution payable to, or a vote to be 
taken by stockholders of record at a date which is on or prior to, the 
effective date of the combination): Provided, That if any stockholder 
becomes unentitled to appraisal and payment of appraised value with 
respect to such stock and accepts or is deemed to have accepted the 
terms offered upon the combination, such stockholder shall thereupon be 
entitled to vote and receive the distributions described above.
    (11) Status. Shares of the resulting association into which shares 
of the stockholders demanding appraisal rights would have been converted 
or exchanged, had they assented to the combination, shall have the 
status of authorized and unissued shares of the resulting association.



Sec. 552.15  Supervisory combinations.

    Notwithstanding the foregoing provisions of this part, the Director 
of the Office may waive or deem inapplicable any provision of Sec. 
552.13 or Sec. 552.14 of this part if he or she determines that grounds 
exist, or may imminently exist, for appointment of a conservator or 
receiver for an association under subsection 5(d) of the Home Owners' 
Loan Act.



Sec. 552.16  Effect of subsequent charter or bylaw change.

    Notwithstanding any subsequent change to its charter or bylaws, the 
authority of a Federal stock association to engage in any transaction 
shall be determined only by the association's charter or bylaws then in 
effect.

[[Page 154]]



PART 555_ELECTRONIC OPERATIONS--Table of Contents




Sec.
555.100 What does this part do?

     Subpart A_Authority of Federal Savings Associations to Conduct 
                          Electronic Operations

555.200 How may I use or participate with others to use electronic means 
          and facilities?
555.210 What precautions must I take?

      Subpart B_Requirements Applicable to All Savings Associations

555.300 Must I inform OTS before I use electronic means or facilities?
555.310 How do I notify OTS?

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

    Source: 63 FR 65682, Nov. 30, 1998, unless otherwise noted.



Sec. 555.100  What does this part do?

    Subpart A of this part describes how a Federal savings association 
may provide products and services through electronic means and 
facilities. Subpart B of this part contains requirements applicable to 
all savings associations.



     Subpart A_Authority of Federal Savings Associations to Conduct 
                          Electronic Operations



Sec. 555.200  How may I use or participate with others to use electronic 
means and facilities?

    (a) General. A Federal savings association (``you'') may use, or 
participate with others to use, electronic means or facilities to 
perform any function, or provide any product or service, as part of an 
authorized activity. Electronic means or facilities include, but are not 
limited to, automated teller machines, automated loan machines, personal 
computers, the Internet, the World Wide Web, telephones, and other 
similar electronic devices.
    (b) Other. To optimize the use of your resources, you may market and 
sell, or participate with others to market and sell, electronic 
capacities and by-products to third-parties, if you acquired or 
developed these capacities and by-products in good faith as part of 
providing financial services.



Sec. 555.210  What precautions must I take?

    If you use electronic means and facilities under this subpart, your 
management must:
    (a) Identify, assess, and mitigate potential risks and establish 
prudent internal controls; and
    (b) Implement security measures designed to ensure secure 
operations. Such measures must be adequate to:
    (1) Prevent unauthorized access to your records and your customers' 
records;
    (2) Prevent financial fraud through the use of electronic means or 
facilities; and
    (3) Comply with applicable security devices requirements of part 568 
of this chapter.



      Subpart B_Requirements Applicable to All Savings Associations



Sec. 555.300  Must I inform OTS before I use electronic means or facilities?

    (a) General. A savings association (``you'') are not required to 
inform OTS before you use electronic means or facilities, except as 
provided in paragraphs (b) and (c) of this section. However, OTS 
encourages you to consult with your Regional Office 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 Sec. 555.310 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 OTS Regional Office 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.

[[Page 155]]



Sec. 555.310  How do I notify OTS?

    (a) Notice requirement. You must file a written notice with the 
appropriate Regional Office listed at Sec. 516.40(a) of this chapter 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) Transition provision. If you established a transactional web 
site after the date of your last regular onsite OTS safety and soundness 
examination but before January 1, 1999, you must file a notice 
describing your activity by February 1, 1999.

[63 FR 65682, Nov. 30, 1998, as amended at 66 FR 13006, Mar. 2, 2001]



PART 557_DEPOSITS--Table of Contents




                            Subpart A_General

Sec.
557.1 What does this part do?

      Subpart B_Deposit Activities of Federal Savings Associations

557.10 What authorities govern the issuance of deposit accounts by a 
          federal savings association?
557.11 To what extent does Federal law preempt deposit-related State 
          laws?
557.12 What are some examples of preempted state laws affecting 
          deposits?
557.13 What State laws affecting deposits are not preempted?
557.14 What interest rate may I pay on savings accounts?
557.15 Who owns a deposit account?

        Subpart C_Deposit Activities of All Savings Associations

557.20 What records should I maintain on deposit activities?

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

    Source: 62 FR 54764, Oct. 22, 1997, unless otherwise noted.



                            Subpart A_General



Sec. 557.1  What does this part do?

    This part applies to the deposit activities of savings associations. 
If you are a federal savings association, subpart B of this part applies 
to your deposit activities. Subpart C of this part applies to the 
deposit activities of all federal and state-chartered savings 
associations.



      Subpart B_Deposit Activities of Federal Savings Associations



Sec. 557.10  What authorities govern the issuance of deposit accounts 
by a federal savings association?

    A federal savings association (``you'') may raise funds through 
accounts and may issue evidence of accounts under section 5(b)(1) of the 
HOLA (12 U.S.C. 1464(b)(1)), your charter, and this part. Additionally, 
12 CFR parts 204 and 230 apply to your deposit activities.



Sec. 557.11  To what extent does Federal law preempt deposit-related 
State laws?

    (a) Under sections 4(a), 5(a), and 5(b) of the HOLA, 12 U.S.C. 
1463(a), 1464(a), and 1464(b), OTS is authorized to promulgate 
regulations that preempt state laws affecting the operations of federal 
savings associations when appropriate to:
    (1) Facilitate the safe and sound operations of federal savings 
associations;
    (2) Enable federal savings associations to operate according to the 
best thrift institutions practices in the United States; or
    (3) Further other purposes of HOLA.
    (b) To further these purposes without undue regulatory duplication 
and burden, OTS hereby occupies the entire field of federal savings 
associations' deposit-related regulations. OTS intends to give federal 
savings associations maximum flexibility to exercise deposit-related 
powers according to a uniform federal scheme of regulation. Federal 
savings associations may exercise deposit-related powers as authorized 
under federal law, including this part, without regard to state laws 
purporting to regulate or otherwise affect deposit activities, except to 
the extent

[[Page 156]]

provided in Sec. 557.13. State law includes any statute, regulation, 
ruling, order, or judicial decision.

[62 FR 54764, Oct. 22, 1997, as amended at 63 FR 71212, Dec. 24, 1998; 
64 FR 69184, Dec. 10, 1999; 67 FR 78152, Dec. 23, 2002]



Sec. 557.12  What are some examples of preempted state laws affecting 
deposits?

    The OTS preempts state laws that purport to impose requirements 
governing the following:
    (a) Abandoned and dormant accounts;
    (b) Checking accounts;
    (c) Disclosure requirements;
    (d) Funds availability;
    (e) Savings account orders of withdrawal;
    (f) Service charges and fees;
    (g) State licensing or registration requirements; and
    (h) Special purpose savings services.



Sec. 557.13  What State laws affecting deposits are not preempted?

    (a) The OTS has not preempted the following types of state law, to 
the extent that the law only incidentally affects your deposit-related 
activities or is otherwise consistent with the purposes of Sec. 557.11:
    (1) Contract and commercial law;
    (2) Tort law; and
    (3) Criminal law.
    (b) The OTS will not preempt any other state law if the OTS, upon 
review, finds that the law:
    (1) Furthers a vital state interest; and
    (2) Either only incidentally affects your deposit-related activities 
or is not otherwise contrary to the purposes expressed in Sec. 557.11.



Sec. 557.14  What interest rate may I pay on savings accounts?

    (a) You may pay interest at any rate or anticipated rate of return 
on savings accounts, either in deposit or in share form, as provided in 
your charter and the account's terms.
    (b) You may pay fixed or variable rates. If you pay a variable rate, 
you must base it on a schedule, index, or formula that you specify in 
the account's terms.



Sec. 557.15  Who owns a deposit account?

    You may treat the holder of record as the account owner, even if you 
receive contrary notice, until you transfer the account on your records.



        Subpart C_Deposit Activities of All Savings Associations



Sec. 557.20  What records should I maintain on deposit activities?

    All federal and state chartered 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.



PART 558_POSSESSION BY CONSERVATORS AND RECEIVERS FOR FEDERAL AND STATE 
SAVINGS ASSOCIATIONS--Table of Contents




Sec.
558.1 Procedure upon taking possession.
558.2 Notice of appointment.

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



Sec. 558.1  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 Director's appointment.
    (b) Upon taking possession, the conservator or receiver shall 
immediately:
    (1) Give notice of the appointment to any officer or employee in the 
principal office who appears to be in charge of that office.
    (2) Serve a copy of the order of appointment upon the savings 
association or upon its conservator or receiver by:

[[Page 157]]

    (i) Leaving a certified copy of the order of appointment at the 
principal office of the savings association; or
    (ii) Handing a certified copy of the order of appointment to the 
previous conservator, receiver or other legal custodian of the savings 
association, or to the officer or employee of the savings association or 
of the previous conservator, receiver or other legal custodian in the 
principal office of the savings association who appears to be in charge.
    (3) Take possession of the savings association's books, records and 
assets.
    (4) 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.
    (5) File with the Corporate Secretary a statement that possession 
was taken, including the time of the taking, which statement shall be 
conclusive evidence thereof.
    (6) Post a notice on the door of the principal and other offices of 
the savings association in the form prescribed by the Director of the 
OTS.
    (7) 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.

[58 FR 4312, Jan. 14, 1993, as amended at 59 FR 53571, Oct. 25, 1994]



Sec. 558.2  Notice of appointment.

    If the Director of the OTS appoints a conservator or receiver under 
this part, notice of the appointment shall be filed immediately for 
publication in the Federal Register.

[59 FR 53571, Oct. 25, 1994]



PART 559_SUBORDINATE ORGANIZATIONS--Table of Contents




Sec.
559.1 What does this part cover?
559.2 Definitions.

    Subpart A_Regulations Applicable to Federal Savings Associations

559.3 What are the characteristics of, and what requirements apply to, 
          subordinate organizations of Federal savings associations?
559.4 What activities are preapproved for service corporations?
559.5 How much may a savings association invest in service corporations 
          or lower-tier entities?

      Subpart B_Regulations Applicable to All Savings Associations

559.10 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?
559.12 How may a subsidiary of a savings association issue securities?
559.13 How may a savings association exercise its salvage power in 
          connection with its service corporation or lower-tier 
          entities?

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

    Source: 61 FR 66571, Dec. 18, 1996, unless otherwise noted.



Sec. 559.1  What does this part cover?

    (a) OTS is issuing this part 559 pursuant to its general rulemaking 
and supervisory authority under the Home Owners' Loan Act, 12 U.S.C. 
1462 et seq., and its specific authority under section 18(m) of the 
Federal Deposit Insurance Act, 12 U.S.C. 1828(m). Subpart A of this part 
559 applies to subordinate organizations of federal savings 
associations. Subpart B of this part applies to subordinate 
organizations of all savings associations. OTS may, at any time, limit a 
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 part are applications for purposes of 
statutory and

[[Page 158]]

regulatory references to ``applications.'' Any conditions that OTS 
imposes in approving any application are enforceable as a condition 
imposed in writing by the OTS in connection with the granting of a 
request by a savings association within the meaning of 12 U.S.C. 1818(b) 
or 1818(i).



Sec. 559.2  Definitions.

    For purposes of this part:
    Control has the same meaning as in part 574 of this chapter.
    GAAP-consolidated subsidiary means an entity in which a 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 savings association has a 
majority ownership interest.
    Lower-tier entity includes any company in which an operating 
subsidiary or a service corporation has a direct or indirect ownership 
interest.
    Operating subsidiary means any entity that satisfies all of the 
requirements for an operating subsidiary set forth in Sec. 559.3 of 
this part and that is designated by the parent savings association as an 
operating subsidiary pursuant to Sec. 559.3 of this part. More than 50% 
of the voting shares of an operating subsidiary must be owned, directly 
or indirectly, by a federal savings association and no other person or 
entity may exercise effective operating control. An operating subsidiary 
may only engage in activities permissible for a federal savings 
association.
    Ownership interest means any equity interest in a business 
organization, including stock, limited or general partnership interests, 
or shares in a limited liability company.
    Service corporation means any entity that satisfies all of the 
requirements for service corporations in 12 U.S.C. 1464(c)(4)(B) and 
Sec. 559.3 of this part and that is designated by the investing savings 
association as a service corporation pursuant to Sec. 559.3 of this 
part. A service corporation must be organized under the laws of the 
state where the federal savings association's home office is located, 
may only be owned by savings associations with home offices in that 
state, and may engage in the activities identified in Sec. Sec. 
559.3(e)(2) and 559.4 of this part.
    Subordinate organization means any corporation, partnership, 
business trust, association, joint venture, pool, syndicate, or other 
similar business organization in which a savings association has a 
direct or indirect ownership interest, unless that ownership interest 
qualifies as a pass-through investment pursuant to Sec. 560.32 of this 
chapter and is so designated by the investing savings association.
    Subsidiary means any subordinate organization directly or indirectly 
controlled by a savings association.



    Subpart A_Regulations Applicable to Federal Savings Associations



Sec. 559.3  What are the characteristics of, and what requirements apply 
to, subordinate organizations of Federal savings associations?

    A federal savings association (``you'') that meets the requirements 
of this section, as detailed in the following chart, may establish, or 
obtain an interest in an operating subsidiary or a service corporation. 
For ease of reference, this section cross-references other regulations 
in this chapter affecting operating subsidiaries and service 
corporations. You should refer to those regulations for the details of 
how they apply. The chart also discusses the regulations that may apply 
to lower-tier entities in which you have an indirect ownership interest 
through your operating subsidiary or service corporation. The chart 
follows:

[[Page 159]]



----------------------------------------------------------------------------------------------------------------
                                              Operating subsidiary                   Service corporation
----------------------------------------------------------------------------------------------------------------
(a) How may a federal savings         (1) You must file a notice            (2) You must file a notice
 association (``you'') establish an    satisfying Sec.  559.11. Any         satisfying Sec.  559.11. Depending
 operating subsidiary or a service     finance subsidiary that existed on    upon your condition and the
 corporation?                          January 1, 1997 is deemed an          activities in which the service
                                       operating subsidiary without          corporation will engage, Sec.
                                       further action on your part.          559.3(e)(2) may require you to file
                                                                             an application.
----------------------------------------------------------------------------------------------------------------
(b) Who may be an owner?              (1) Anyone may have an ownership      (2) Only savings associations with
                                       interest in an operating              home offices in the state where you
                                       subsidiary.                           have your home office may have an
                                                                             ownership interest in any service
                                                                             corporation in which you invest.
----------------------------------------------------------------------------------------------------------------
(c) What ownership requirements       (1) You must own, directly or         (2) You are not required to have any
 apply?                                indirectly, more than 50% of the      particular percentage ownership
                                       voting shares of the operating        interest and need not have control
                                       subsidiary. No one else may           of the service corporation.
                                       exercise effective operating
                                       control.
----------------------------------------------------------------------------------------------------------------
(d) What geographic restrictions      (1) An operating subsidiary may be    (2) A service corporation must be
 apply?                                organized in any geographic           organized in the state where your
                                       location.                             home office is located.
----------------------------------------------------------------------------------------------------------------
(e) What activities are permissible?  (1) After you have notified OTS in    (2)(i) If you are eligible for
                                       accordance with Sec.  559.11, an     expedited treatment under Sec.
                                       operating subsidiary may engage in    516.5 of this chapter, and notify
                                       any activity that you may conduct     OTS as required by Sec.  559.11,
                                       directly. You may hold another        your service corporation may engage
                                       insured depository institution as     in the preapproved activities
                                       an operating subsidiary.              listed in Sec.  559.4. You may
                                                                             request OTS approval for your
                                                                             service corporation to engage in
                                                                             any other activity reasonably
                                                                             related to the activities of
                                                                             financial institutions by filing an
                                                                             application in accordance with
                                                                             standard treatment processing
                                                                             procedures at part 516, subparts A
                                                                             and E of this chapter.

[[Page 160]]

 
                                                                            (ii) If you are subject to standard
                                                                             treatment under Sec.  516.5 of
                                                                             this chapter, and notify OTS as
                                                                             required by Sec.  559.11, your
                                                                             service corporation may engage in
                                                                             any activity that you may conduct
                                                                             directly except taking deposits.
                                                                             You may request OTS approval for
                                                                             your service corporation to engage
                                                                             in any other activity reasonably
                                                                             related to the activities of
                                                                             financial institutions, including
                                                                             the activities set forth in Sec.
                                                                             559.4(b)-(j), by filing an
                                                                             application in accordance with
                                                                             standard treatment processing
                                                                             procedures at part 516, subparts A
                                                                             and E of this chapter.
----------------------------------------------------------------------------------------------------------------
(f) May the operating subsidiary or   (1)(i) An operating subsidiary may    (2) A service corporation may invest
 service corporation invest in lower-  itself hold an operating              in all types of lower-tier entities
 tier entities?                        subsidiary. Part 559 applies          as long as the lower-tier entity is
                                       equally to a lower-tier operating     engaged solely in activities that
                                       subsidiary. In applying the           are permissible for a service
                                       regulations in this part, the         corporation. All of the
                                       investing operating subsidiary        requirements of this part apply to
                                       should substitute ``investing         such entities except for paragraphs
                                       operating subsidiary'' wherever the   (b)(2) and (d)(2) of this section.
                                       part uses ``you'' or ``savings
                                       association.''
 
                                      (ii) An operating subsidiary may
                                       also invest in other types of lower-
                                       tier entities. These entities must
                                       comply with all of the requirements
                                       of this part 559 that apply to
                                       service corporations except for
                                       paragraphs (b)(2) and (d)(2) of
                                       this section.
----------------------------------------------------------------------------------------------------------------
(g) How much may a federal savings    (1) There are no limits on the        (2) Section 559.5 limits your
 association invest?                   amount you may invest in your         aggregate investments in service
                                       operating subsidiaries, either        corporations and indicates when
                                       separately or in the aggregate.       your investments (both debt and
                                                                             equity) in lower-tier entities must
                                                                             be aggregated with your investments
                                                                             in service corporations.
----------------------------------------------------------------------------------------------------------------

[[Page 161]]

 
(h) Do federal statutes and           (1) Unless otherwise specifically     (2) (i) If the federal statute or
 regulations that apply to the         provided by statute, regulation, or   regulation specifically refers to
 savings association apply?            OTS policy, all federal statutes      ``service corporation,'' it applies
                                       and regulations apply to operating    to all service corporations, even
                                       subsidiaries in the same manner as    if you do not control the service
                                       they apply to you. You and your       corporation or it is not a GAAP-
                                       operating subsidiary are generally    consolidated subsidiary.
                                       consolidated and treated as a unit   (ii) If the federal statute or
                                       for statutory and regulatory          regulation refers to
                                       purposes.                             ``subsidiary,'' it applies only to
                                                                             service corporations that you
                                                                             directly or indirectly control.
----------------------------------------------------------------------------------------------------------------
(i) Do the investment limits that     (1) Your assets and those of your     (2) Your service corporation's
 apply to federal savings              operating subsidiary are aggregated   assets are not subject to the same
 associations (HOLA section 5(c) and   when calculating investment           investment limitations that apply
 part 560 of this chapter) apply?      limitations.                          to you. The investment activities
                                                                             of your service corporation are
                                                                             governed by paragraph (e)(2) of
                                                                             this section and Sec.  559.4.
----------------------------------------------------------------------------------------------------------------
(j) How does the capital regulation   (1) Your assets and those of your     (2) The capital treatment of a
 (part 567 of this chapter) apply?     operating subsidiary are              service corporation depends upon
                                       consolidated for all capital          whether it is an includable
                                       purposes.                             subsidiary. That determination is
                                                                             based upon factors set forth in
                                                                             part 567 of this chapter, including
                                                                             your percentage ownership of the
                                                                             service corporation and the
                                                                             activities in which the service
                                                                             corporation engages. Both debt and
                                                                             equity investments in service
                                                                             corporations that are GAAP-
                                                                             consolidated subsidiaries are
                                                                             considered investments in
                                                                             subsidiaries for purposes of the
                                                                             capital regulation, regardless of
                                                                             the authority under which they are
                                                                             made.
----------------------------------------------------------------------------------------------------------------

[[Page 162]]

 
(k) How does the loans-to-one-        (1) The LTOB regulation does not      (2) The LTOB regulation does not
 borrower (LTOB) regulation (Sec.     apply to loans from you to your       apply to loans from you to your
 560.93 of this chapter) apply?        operating subsidiary or loans from    service corporation or from your
                                       your operating subsidiary to you.     service corporation to you.
                                       Other loans made by your operating    However, Sec.  559.5 imposes
                                       subsidiary are aggregated with your   restrictions on the amount of loans
                                       loans for LTOB purposes.              you may make to certain service
                                                                             corporations. Loans made by a
                                                                             service corporation that you
                                                                             control to entities other than you
                                                                             or your subordinate organizations
                                                                             are aggregated with your loans for
                                                                             LTOB purposes.
----------------------------------------------------------------------------------------------------------------
(l) How do the transactions with      (1) Section 563.41 of this chapter    (2) Section 563.41 of this chapter
 affiliates (TWA) regulations (Sec.   explains how TWA applies.             explains how TWA applies.
  563.41 of this chapter) apply?       Generally, an operating subsidiary    Generally, a service corporation is
                                       is not an affiliate, unless it is a   not an affiliate, unless it is a
                                       depository institution; is directly   depository institution; is directly
                                       controlled by another affiliate of    controlled by another affiliate of
                                       the savings association or by         the savings association or by
                                       shareholders that control the         shareholders that control the
                                       savings association; or is an         savings association; or is an
                                       employee stock option plan, trust,    employee stock option plan, trust,
                                       or similar organization that exists   or similar organization that exists
                                       for the benefit of shareholders,      for the benefit of shareholders,
                                       partners, members, or employees of    partners, members, or employees of
                                       the savings association or an         the savings association or an
                                       affiliate. A non-affiliate            affiliate. If a savings association
                                       operating subsidiary is treated as    directly or indirectly controls a
                                       a part of the savings association     service corporation and the service
                                       and its transactions with             corporation is not otherwise an
                                       affiliates of the savings             affiliate under Sec.  563.41 of
                                       association are aggregated with       this chapter, the service
                                       those of the savings association      corporation is treated as a part of
                                                                             the savings association and its
                                                                             transactions with affiliates of the
                                                                             savings association are aggregated
                                                                             with those of the savings
                                                                             association.
----------------------------------------------------------------------------------------------------------------

[[Page 163]]

 
(m) How does the Qualified Thrift     (1) Under 12 U.S.C. 1467a(m)(5), you  (2) Under 12 U.S.C. 1467a(m)(5), you
 Lender (QTL) (12 U.S.C. 1467a(m))     may determine whether to              may determine whether to
 test apply?                           consolidate the assets of a           consolidate the assets of a
                                       particular operating subsidiary for   particular service corporation for
                                       purposes of calculating your          purposes of calculating your
                                       qualified thrift investments. If      qualified thrift investments. If a
                                       the operating subsidiary's assets     service corporation's assets are
                                       are not consolidated with yours for   not consolidated with yours for
                                       that purpose, your investment in      that purpose, your investment in
                                       the operating subsidiary will be      the service corporation will be
                                       considered in calculating your        considered in calculating your
                                       qualified thrift investments.         qualified thrift investments.
----------------------------------------------------------------------------------------------------------------
(n) Does state law apply?             (1) State law applies to operating    (2) State law applies to service
                                       subsidiaries only to the extent it    corporations regardless of whether
                                       applies to you.                       it applies to you, except where
                                                                             there is a conflict with federal
                                                                             law.
----------------------------------------------------------------------------------------------------------------
(o) May OTS conduct examinations?     (1) An operating subsidiary is        (2) A service corporation is subject
                                       subject to examination by OTS.        to examination by OTS.
----------------------------------------------------------------------------------------------------------------
(p) What must be done to redesignate  (1) Before redesignating an           (2) Before redesignating a service
 an operating subsidiary as a          operating subsidiary as a service     corporation as an operating
 service corporation or a service      corporation, you should consult       subsidiary, you should consult with
 corporation as an operating           with the OTS Regional Director for    the OTS Regional Director for the
 subsidiary?                           the Region in which your home         Region in which your home office is
                                       office is located. You must           located. You must maintain adequate
                                       maintain adequate internal records,   internal records, available for
                                       available for examination by OTS,     examination by OTS, demonstrating
                                       demonstrating that the redesignated   that the redesignated operating
                                       service corporation meets all of      subsidiary meets all of the
                                       the applicable requirements of this   applicable requirements of this
                                       part and that your board of           part and that your board of
                                       directors has approved the            directors has approved the
                                       redesignation.                        redesignation.
----------------------------------------------------------------------------------------------------------------

[[Page 164]]

 
(q) What are the consequences of      (1) If an operating subsidiary, or    (2) If a service corporation, or any
 failing to comply with the            any lower-tier entity in which the    lower-tier entity in which the
 requirements of this part?            operating subsidiary invests          service corporation invests
                                       pursuant to paragraph (f)(1) of       pursuant to paragraph (f)(2) of
                                       this section fails to meet any of     this section, fails to meet any of
                                       the requirements of this section,     the requirements of this section,
                                       you must notify OTS. Unless           you must notify OTS. Unless
                                       otherwise advised by OTS, if the      otherwise advised by OTS, if the
                                       company cannot comply within 90       company cannot comply within 90
                                       days with all of the requirements     days with all of the requirements
                                       for either an operating subsidiary    for either an operating subsidiary
                                       or a service corporation under this   or a service corporation under this
                                       section, or any other investment      section, or any other investment
                                       authorized by 12 U.S.C. 1464(c) or    authorized by 12 U.S.C. 1464(c) or
                                       part 560 of this chapter, you must    part 560 of this chapter, you must
                                       promptly dispose of your              promptly dispose of your
                                       investment.                           investment.
----------------------------------------------------------------------------------------------------------------


[61 FR 66571, Dec. 18, 1996, as amended at 62 FR 66262, Dec. 18, 1997; 
63 FR 65683, Nov. 30, 1998; 66 FR 13006, Mar. 2, 2001; 67 FR 77916, Dec. 
20, 2002; 67 FR 78152, Dec. 23, 2002; 68 FR 57796, Oct. 7, 2003]



Sec. 559.4  What activities are preapproved for service corporations?

    This section sets forth the activities that have been preapproved 
for service corporations. Section 559.3(e)(2) of this part sets forth 
the procedures for engaging in a broader scope of activities on a case-
by-case basis. You should read these two sections together to determine 
whether you must file a notice with OTS under Sec. 559.11 of this part, 
or whether you must file an application under part 516 of this chapter 
and receive prior written OTS approval for your service corporation to 
engage in a particular activity. To the extent permitted by Sec. 
559.3(e)(2) of this part, a service corporation may engage in the 
following activities:
    (a) Any activity that all federal savings associations may conduct 
directly, except taking deposits.
    (b) Business and professional services. The following services are 
preapproved for service corporations only when they are limited to 
financial documents or financial clients or are generally finance-
related:
    (1) Accounting or internal audit;
    (2) Advertising, marketing research and other marketing;
    (3) Clerical;
    (4) Consulting;
    (5) Courier;
    (6) Data processing;
    (7) Data storage facilities operation and related services;
    (8) Office supplies, furniture, and equipment purchasing and 
distribution;
    (9) Personnel benefit program development or administration;
    (10) Printing and selling forms that require Magnetic Ink Character 
Recognition (MICR) encoding;
    (11) Relocation of personnel;
    (12) Research studies and surveys;
    (13) Software development and systems integration; and
    (14) Remote service unit operation, leasing, ownership or 
establishment.
    (c) Credit-related activities.
    (1) Abstracting;
    (2) Acquiring and leasing personal property;
    (3) Appraising;
    (4) Collection agency;
    (5) Credit analysis;
    (6) Check or credit card guaranty and verification;

[[Page 165]]

    (7) Escrow agent or trustee (under deeds of trust, including 
executing and deliverance of conveyances, reconveyances and transfers of 
title); and
    (8) Loan inspection.
    (d) Consumer services.
    (1) Financial advice or consulting;
    (2) Foreign currency exchange;
    (3) Home ownership counseling;
    (4) Income tax return preparation;
    (5) Postal services;
    (6) Stored value instrument sales;
    (7) Welfare benefit distribution;
    (8) Check printing and related services; and
    (9) Remote service unit operation, leasing, ownership, or 
establishment.
    (e) Real estate related services.
    (1) Acquiring real estate for prompt development or subdivision, for 
construction of improvements, for resale or leasing to others for such 
construction, or for use as manufactured home sites, in accordance with 
a prudent program of property development;
    (2) Acquiring improved real estate or manufactured homes to be held 
for rental or resale, for remodeling, renovating, or demolishing and 
rebuilding for sale or rental, or to be used for offices and related 
facilities of a stockholder of the service corporation;
    (3) Maintaining and managing real estate; and
    (4) Real estate brokerage for property owned by a savings 
association that owns capital stock of the service corporation, the 
service corporation, or a lower-tier entity in which the service 
corporation invests.
    (f) Securities brokerage, insurance and related services.
    (1) Execution of transactions in securities or other nondeposit 
investment products on an agency or riskless principal basis solely upon 
the order of and for the account of customers, provided that the service 
corporation complies with the provisions of Sec. 545.74 of this 
chapter;
    (2) Investment advice, provided that the service corporation 
complies with the provisions of Sec. 545.74 of this chapter;
    (3) Insurance brokerage or agency for liability, casualty, 
automobile, life, health, accident or title insurance;
    (4) Liquidity management;
    (5) Issuing notes, bonds, debentures or other obligations or 
securities; and
    (6) Purchase or sale of coins issued by the U.S. Treasury.
    (g) Investments.
    (1) Tax-exempt bonds used to finance residential real property for 
family units;
    (2) Tax-exempt obligations of public housing agencies used to 
finance housing projects with rental assistance subsidies;
    (3) Small business investment companies and new markets venture 
capital companies licensed by the U.S. Small Business Administration; 
and
    (4) Investing in savings accounts of an investing thrift.
    (h) Community development and charitable activities:
    (1) Investments in governmentally insured, guaranteed, subsidized or 
otherwise sponsored programs for housing, small farms, or businesses 
that are local in character;
    (2) Investments designed primarily to promote the public welfare, 
including the welfare of low- and moderate-income communities or 
families (such as providing housing, services, or jobs);
    (3) Investments in low-income housing tax credit and new markets tax 
credit projects and entities authorized by statute (e.g., community 
development financial institutions) to promote community, inner city, 
and community development purposes; and
    (4) Establishing a corporation that is recognized by the Internal 
Revenue Service as organized for charitable purposes under 26 U.S.C. 
501(c)(3) of the Internal Revenue Code and making a reasonable 
contribution to capitalize it, provided that the corporation engages 
exclusively in activities designed to promote the well-being of 
communities in which the owners of the service corporation operate.
    (i) Activities conducted on behalf of a customer on an other than 
``as principal'' basis.
    (j) Activities reasonably incident to those listed in paragraphs (a) 
through (i) of this section if the service corporation engages in those 
activities.

[61 FR 66571, Dec. 18, 1996, as amended by 66 FR 13007, Mar. 2, 2001; 66 
FR 65824, Dec. 21, 2001]

[[Page 166]]



Sec. 559.5  How much may a savings association invest in service 
corporations or lower-tier entities?

    The amount that a federal savings association (``you'') may invest 
in a service corporation or any lower-tier entity depends upon several 
factors. These include your total assets, your capital, the purpose of 
the investment, and your ownership interest in the service corporation 
or entity.
    (a) Under section 5(c)(4)(B) of the HOLA, you may invest up to 3% of 
your assets in the capital stock, obligations, and other securities of 
service corporations. Any investment you make under this paragraph that 
would cause your investment, in the aggregate, to exceed 2% of your 
assets must serve primarily community, inner city, or community 
development purposes. You must designate the investments serving those 
purposes, which include:
    (1) Investments in governmentally insured, guaranteed, subsidized or 
otherwise sponsored programs for housing, small farms, or businesses 
that are local in character;
    (2) Investments for the preservation or revitalization of either 
urban or rural communities;
    (3) Investments designed to meet the community development needs of, 
and primarily benefit, low- and moderate-income communities; or
    (4) Other community, inner city, or community development-related 
investments approved by OTS.
    (b) In addition to the amounts you may invest under paragraph (a) of 
this section, and to the extent that you have authority under other 
provisions of section 5(c) of the HOLA and part 560 of this chapter, and 
available capacity within any applicable investment limits, you may make 
loans to any service corporation and any lower-tier entity, subject to 
the following conditions:
    (1) You and your GAAP-consolidated subsidiaries may, in the 
aggregate, make loans of up to 15% of your capital as defined in Sec. 
567.5(c) of this chapter to each subordinate organization that does not 
qualify as a GAAP-consolidated subsidiary. All loans made under this 
paragraph (b)(1) may not, in the aggregate, exceed 50% of your total 
capital, as defined in Sec. 567.5(c) of this chapter.
    (2) The Regional Director may limit the amount of loans to a GAAP-
consolidated subsidiary, or may adjust the limits set forth in paragraph 
(b)(1) of this section where safety and soundness considerations warrant 
such action.
    (c) For purposes of this section, the terms ``loans'' and 
``obligations'' include all loans and other debt instruments (except 
accounts payable incurred in the ordinary course of business and paid 
within 60 days) and all guarantees or take-out commitments of such loans 
or debt instruments.



      Subpart B_Regulations Applicable to All Savings Associations



Sec. 559.10  How must separate corporate identities be maintained?

    (a) Each 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 savings association has guaranteed a loan to 
the subordinate organization, all borrowings by the subordinate 
organization indicate that the parent is not liable.
    (b) OTS regulations that apply both to savings associations and 
subordinate organizations shall not be construed as requiring a savings 
association and its subordinate organizations to operate as a single 
entity.



Sec. 559.11  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 savings association (``you'') must file a notice (``Notice'') under 
part 516, subpart A of this chapter at least 30 days before

[[Page 167]]

establishing or acquiring a subsidiary or engaging in new activities in 
a subsidiary. The Notice must contain all of the information the Federal 
Deposit Insurance Corporation (FDIC) requires under 12 CFR 362.15. 
Providing OTS with a copy of the notice you file with the FDIC will 
satisfy this requirement. If OTS 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 OTS's prior written 
approval under the standard treatment processing procedures at part 516, 
subpart A and E of this chapter before establishing or acquiring the 
subsidiary or engaging in new activities in the subsidiary.

[61 FR 66571, Dec. 18, 1996, as amended at 64 FR 69185, Dec. 10, 1999; 
66 FR 13007, Mar. 2, 2001]



Sec. 559.12  How may a subsidiary of a savings association issue securities?

    (a) A subsidiary may issue, either directly or through a third party 
intermediary, any securities that its parent 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 OTS in accordance with Sec. 559.11 
of this part 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 OTS notifies you within 
30 days that the notice presents supervisory concerns or raises 
significant issues of law or policy, you must receive OTS'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 OTS. 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.
    (d) Sales of the subsidiary's securities to retail customers must 
comply with Sec. 545.74 of this chapter.



Sec. 559.13  How may a savings association exercise its salvage power 
in connection with a service corporation or lower-tier entities?

    (a) In accordance with this section, a 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 your 
service corporation or lower-tier entity (``salvage investment'') that 
exceeds the maximum amount otherwise permitted under law or regulation. 
You must notify OTS at least 30 days before making such a salvage 
investment. This notice must demonstrate that:
    (1) The salvage investment protects your interest in the service 
corporation or lower-tier entity;
    (2) The salvage investment is consistent with safety and soundness; 
and

[[Page 168]]

    (3) You considered alternatives to the salvage investment and 
determined that such alternatives would not adequately satisfy 
paragraphs (a)(1) and (a)(2) of this section.
    (b) If OTS 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 OTS's prior written approval under the 
standard treatment processing procedures at part 516, subparts A and E 
of this chapter before making a salvage investment.
    (c) If your service corporation or lower-tier entity is a GAAP-
consolidated subsidiary, your salvage investment under this section will 
be considered an investment in a subsidiary for purposes of part 567 of 
this chapter.

[61 FR 66571, Dec. 18, 1996, as amended at 66 FR 13007, Mar. 2, 2001]



PART 560_LENDING AND INVESTMENT--Table of Contents




Sec.
560.1 General.
560.2 Applicability of law.
560.3 Definitions.

Subpart A_Lending and Investment Powers for Federal Savings Associations

560.30 General lending and investment powers of Federal savings 
          associations.
560.31 Election regarding categorization of loans or investments and 
          related calculations.
560.32 Pass-through investments.
560.33 Late charges.
560.34 Prepayments.
560.35 Adjustments to home loans.
560.36 De minimis investments.
560.37 Real estate for office and related facilities.
560.40 Commercial paper and corporate debt securities.
560.41 Leasing.
560.42 State and local government obligations.
560.43 Foreign assistance investments.
560.50 Letters of credit and other independent undertakings--authority.
560.60 Suretyship and guaranty.

 Subpart B_Lending and Investment Provisions Applicable to all Savings 
                              Associations

560.93 Lending limitations.
560.100 Real estate lending standards; purpose and scope.
560.101 Real estate lending standards.
560.110 Most favored lender usury preemption.
560.120 Letters of credit and other independent undertakings to pay 
          against documents.
560.121 Investment in State housing corporations.
560.130 Prohibition on loan procurement fees.
560.160 Asset classification.
560.170 Records for lending transactions.
560.172 Re-evaluation of real estate owned.

               Subpart C_Alternative Mortgage Transactions

560.210 Disclosures for variable rate transactions.
560.220 Alternative Mortgage Transaction Parity Act.

    Authority: 12 U.S.C. 1462, 1462a, 1463, 1464, 1467a, 1701j-3, 1828, 
3803, 3806; 42 U.S.C. 4106.

    Source: 61 FR 50971, Sept. 30, 1996, unless otherwise noted.



Sec. 560.1  General.

    (a) Authority and scope. This part is being issued by OTS under its 
general rulemaking and supervisory authority under the Home Owners' Loan 
Act (HOLA), 12 U.S.C. 1462 et seq. Subpart A of this part sets forth the 
lending and investment powers of Federal savings associations. Subpart B 
of this part contains safety-and-soundness based lending and investment 
provisions applicable to all savings associations. Subpart C of this 
part addresses alternative mortgages and applies to all savings 
associations.
    (b) General lending standards. Each savings association is expected 
to conduct its lending and investment activities prudently. Each 
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 association should adequately monitor the 
condition of its portfolio and the adequacy of any collateral securing 
its loans.



Sec. 560.2  Applicability of law.

    (a) Occupation of field. Pursuant to sections 4(a) and 5(a) of the 
HOLA, 12

[[Page 169]]

U.S.C. 1463(a), 1464(a), OTS is authorized to promulgate regulations 
that preempt state laws affecting the operations of federal savings 
associations when deemed appropriate to facilitate the safe and sound 
operation of federal savings associations, to enable federal savings 
associations to conduct their operations in accordance with the best 
practices of thrift institutions in the United States, or to further 
other purposes of the HOLA. To enhance safety and soundness and to 
enable federal savings associations to conduct their operations in 
accordance with best practices (by efficiently delivering low-cost 
credit to the public free from undue regulatory duplication and burden), 
OTS hereby occupies the entire field of lending regulation for federal 
savings associations. OTS intends to give federal savings associations 
maximum flexibility to exercise their lending powers in accordance with 
a uniform federal scheme of regulation. Accordingly, federal savings 
associations may extend credit as authorized under federal law, 
including this part, without regard to state laws purporting to regulate 
or otherwise affect their credit activities, except to the extent 
provided in paragraph (c) of this section or Sec. 560.110 of this part. 
For purposes of this section, ``state law'' includes any state statute, 
regulation, ruling, order or judicial decision.
    (b) Illustrative examples. Except as provided in Sec. 560.110 of 
this part, the types of state laws preempted by paragraph (a) of this 
section include, without limitation, state laws purporting to impose 
requirements regarding:
    (1) Licensing, registration, filings, or reports by creditors;
    (2) The ability of a creditor to require or obtain private mortgage 
insurance, insurance for other collateral, or other credit enhancements;
    (3) Loan-to-value ratios;
    (4) The terms of credit, including amortization of loans and the 
deferral and capitalization of interest and adjustments to the interest 
rate, balance, payments due, or term to maturity of the loan, including 
the circumstances under which a loan may be called due and payable upon 
the passage of time or a specified event external to the loan;
    (5) Loan-related fees, including without limitation, initial 
charges, late charges, prepayment penalties, servicing fees, and 
overlimit fees;
    (6) Escrow accounts, impound accounts, and similar accounts;
    (7) Security property, including leaseholds;
    (8) Access to and use of credit reports;
    (9) Disclosure and advertising, including laws requiring specific 
statements, information, or other content to be included in credit 
application forms, credit solicitations, billing statements, credit 
contracts, or other credit-related documents and laws requiring 
creditors to supply copies of credit reports to borrowers or applicants;
    (10) Processing, origination, servicing, sale or purchase of, or 
investment or participation in, mortgages;
    (11) Disbursements and repayments;
    (12) Usury and interest rate ceilings to the extent provided in 12 
U.S.C. 1735f-7a and part 590 of this chapter and 12 U.S.C. 1463(g) and 
Sec. 560.110 of this part; and
    (13) Due-on-sale clauses to the extent provided in 12 U.S.C. 1701j-3 
and part 591 of this chapter.
    (c) State laws that are not preempted. State laws of the following 
types are not preempted to the extent that they only incidentally affect 
the lending operations of Federal savings associations or are otherwise 
consistent with the purposes of paragraph (a) of this section:
    (1) Contract and commercial law;
    (2) Real property law;
    (3) Homestead laws specified in 12 U.S.C. 1462a(f);
    (4) Tort law;
    (5) Criminal law; and
    (6) Any other law that OTS, upon review, finds:
    (i) Furthers a vital state interest; and
    (ii) Either has only an incidental effect on lending operations or 
is not otherwise contrary to the purposes expressed in paragraph (a) of 
this section.



Sec. 560.3  Definitions.

    For purposes of this part and any determination under 12 U.S.C. 
1467a(m):

[[Page 170]]

    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 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, for purposes of this part, is a loan for which the 
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 Federal 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 Federal 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.

[61 FR 50971, Sept. 30, 1996, as amended at 61 FR 60184, Nov. 27, 1996; 
62 FR 15825, Apr. 3, 1997; 64 FR 46565, Aug. 26, 1999; 66 FR 65825, Dec. 
21, 2001]



Subpart A_Lending and Investment Powers for Federal Savings Associations



Sec. 560.30  General lending and investment powers of Federal savings associations.

    Pursuant to section 5(c) of the Home Owners' Loan Act (``HOLA''), 12 
U.S.C. 1464(c), a Federal savings association may make, invest in, 
purchase, sell, participate in, or otherwise deal in (including 
brokerage or warehousing) all loans and investments allowed under 
section 5(c) of the HOLA including, without limitation, the following 
loans, extensions of credit, and investments, subject to the limitations 
indicated and any such terms, conditions, or limitations as may be 
prescribed from time to time by OTS by policy directive, order, or 
regulation:

[[Page 171]]



                   Lending and Investment Powers Chart
------------------------------------------------------------------------
                                                    Statutory investment
                                                   limitations (Endnotes
           Category                 Statutory       contain  applicable
                                authorization \1\        regulatory
                                                        limitations)
------------------------------------------------------------------------
Bankers' bank stock...........  5(c)(4)(E).......  Same terms as
                                                    applicable to
                                                    national banks.
Business development credit     5(c)(4)(A).......  The lesser of .5% of
 corporations.                                      total outstanding
                                                    loans or $250,000.
Commercial loans..............  5(c)(2)(A).......  20% of total assets,
                                                    provided that
                                                    amounts in excess of
                                                    10% of total assets
                                                    may be used only for
                                                    small business
                                                    loans.
Commercial paper and corporate  5(c)(2)(D).......  Up to 35% of total
 debt securities.                                   assets.2 3
Community development loans     5(c)(3)(A).......  5% of total assets,
 and equity investments.                            provided equity
                                                    investments do not
                                                    exceed 2% of total
                                                    assets.\4\
Construction loans without      5(c)(3)(C).......  In the aggregate, the
 security.                                          greater of total
                                                    capital or 5% of
                                                    total assets.
Consumer loans................  5(c)(2)(D).......  Up to 35% of total
                                                    assets.2 5
Credit card loans or loans      5(c)(1)(T).......  None.\6\
 made through credit card
 accounts.
Deposits in insured depository  5(c)(1)(G).......  None.\6\
 institutions.
Education loans...............  5(c)(1)(U).......  None.\6\
Federal government and          5(c)(1)(C),        None.\6\
 government-sponsored            5(c)(1)(D),
 enterprise securities and       5(c)(1)(E),
 instruments.                    5(c)(1)(F).
Finance leasing...............  5(c)(1)(B),        Based on purpose and
                                 5(c)(2)(A),        property
                                 5(c)(2)(B),        financed.\7\
                                 5(c)(2)(D).
Foreign assistance investments  5(c)(4)(C).......  1% of total
                                                    assets.\8\
General leasing...............  5(c)(2)(C).......  10% of assets.\7\
Home improvement loans........  5(c)(1)(J).......  None.\6\
Home (residential) loans \9\..  5(c)(1)(B).......  None.6 10
HUD-insured or guaranteed       5(c)(1)(O).......  None.\6\
 investments.
Insured loans.................  5(c)(1)(I),        None\6\
                                 5(c)(1)(K).
Liquidity investments.........  5(c)(1)(M).......  None.\6\
Loans secured by deposit        5(c)(1)(A).......  None.6 11
 accounts.
Loans to financial              5(c)(1)(L).......  None.6 12
 institutions, brokers, and
 dealers.
Manufactured home loans.......  5(c)(1)(J).......  None.6 13
Mortgage-backed securities....  5(c)(1)(R).......  None.\6\
National Housing Partnership    5(c)(1)(N).......  None.\6\
 Corporation and related
 partnerships and joint
 ventures.
New markets venture capital     5(c)(4)(F).......  5% of total capital.
 companies.
Nonconforming loans...........  5(c)(3)(B).......  5% of total assets.
Nonresidential real property    5(c)(2)(B).......  400% of total
 loans.                                             capital.\14\
Open-end management investment  5(c)(1)(Q).......  None.\6\
 companies \15\.
Service corporations..........  5(c)(4)(B).......  3% of total assets,
                                                    as long as any
                                                    amounts in excess of
                                                    2% of total assets
                                                    further community,
                                                    inner city, or
                                                    community
                                                    development
                                                    purposes.\16\
Small business investment       15 U.S.C.          5% of total capital.
 companies.                      682(b)(2).
Small-business-related          5(c)(1)(S).......  None.\6\
 securities.
State and local government      5(c)(1)(H).......  None for general
 obligations.                                       obligations. Per
                                                    issuer limitation of
                                                    10% of capital for
                                                    other
                                                    obligations.\6\ \17\
State housing corporations....  5(c)(1)(P).......  None.\6\ \18\
Transaction account loans,      5(c)(1)(A).......  None.\6\ \19\
 including overdrafts.
------------------------------------------------------------------------

                                Endnotes

    1. All references are to section 5 of the Home Owners' Loan Act (12 
U.S.C. 1464) unless otherwise indicated.
    2. For purposes of determining a Federal savings association's 
percentage of assets limitation, investment in commercial paper and 
corporate debt securities must be aggregated with the Federal savings 
association's investment in consumer loans.
    3. A Federal savings association may invest in commercial paper and 
corporate debt securities, which includes corporate debt securities 
convertible into stock, subject to the provisions of Sec. 560.40 of 
this part. Amounts in excess of 30% of assets, in the aggregate, may be 
invested only in obligations purchased by the association directly from 
the original obligor and for which no finder's or referral fees have 
been paid.
    4. The 2% of assets limitation is a sublimit for investments within 
the overall 5% of assets limitation on community development loans and 
investments. The qualitative standards for such loans and investments 
are set forth in HOLA section 5(c)(3)(A) (formerly 5(c)(3)(B), as 
explained in an opinion of the OTS Chief Counsel dated May 10, 1995 
(available at www.ots.treas.gov)).
    5. Amounts in excess of 30% of assets, in the aggregate, may be 
invested only in loans made by the association directly to the

[[Page 172]]

original obligor and for which no finder's or referral fees have been 
paid. A Federal savings association may include loans to dealers in 
consumer goods to finance inventory and floor planning in the total 
investment made under this section.
    6. While there is no statutory limit on certain categories of loans 
and investments, including credit card loans, home improvement loans, 
education loans, and deposit account loans, OTS may establish an 
individual limit on such loans or investments if the association's 
concentration in such loans or investments presents a safety and 
soundness concern.
    7. A Federal savings association may engage in leasing activities 
subject to the provisions of Sec. 560.41 of this part.
    8. This 1% of assets limitation applies to the aggregate outstanding 
investments made under the Foreign Assistance Act and in the capital of 
the Inter-American Savings and Loan Bank. Such investments may be made 
subject to the provisions of Sec. 560.43 of this part.
    9. A home (or residential) loan includes loans secured by one-to-
four family dwellings, multi-family residential property, and loans 
secured by a unit or units of a condominium or housing cooperative.
    10. A Federal savings association may make home loans subject to the 
provisions of Sec. Sec. 560.33, 560.34, and 560.35 of this part.
    11. Loans secured by savings accounts and other time deposits may be 
made without limitation, provided the Federal savings association 
obtains a lien on, or a pledge of, such accounts. Such loans may not 
exceed the withdrawable amount of the account.
    12. A Federal savings association may only invest in these loans if 
they are secured by obligations of, or by obligations fully guaranteed 
as to principal and interest by, the United States or any of its 
agencies or instrumentalities, the borrower is a financial institution 
insured by the Federal Deposit Insurance Corporation or is a broker or 
dealer registered with the Securities and Exchange Commission, and the 
market value of the securities for each loan at least equals the amount 
of the loan at the time it is made.
    13. If the wheels and axles of the manufactured home have been 
removed and it is permanently affixed to a foundation, a loan secured by 
a combination of a manufactured home and developed residential lot on 
which it sits may be treated as a home loan.
    14. Without regard to any limitations of this part, a Federal 
savings association may make or invest in the fully insured or 
guaranteed portion of nonresidential real estate loans insured or 
guaranteed by the Economic Development Administration, the Farmers Home 
Administration, or the Small Business Administration. Unguaranteed 
portions of guaranteed loans must be aggregated with uninsured loans 
when determining an association's compliance with the 400% of capital 
limitation for other real estate loans.
    15. This authority is limited to investments in open-end management 
investment companies that are registered with the Securities and 
Exchange Commission under the Investment Company Act of 1940. The 
portfolio of the investment company must be restricted by the company's 
investment policy (changeable only if authorized by shareholder vote) 
solely to investments that a Federal savings association may, without 
limitation as to percentage of assets, invest in, sell, redeem, hold, or 
otherwise deal in. Separate and apart from this authority, a Federal 
savings association may make pass-through investments to the extent 
authorized by Sec. 560.32 of this part.
    16. A Federal savings association may invest in service corporations 
subject to the provisions of part 559 of this chapter.
    17. This category includes obligations issued by any state, 
territory, or possession of the United States or political subdivision 
thereof (including any agency, corporation, or instrumentality of a 
state or political subdivision), subject to Sec. 560.42 of this part.
    18. A Federal savings association may invest in state housing 
corporations subject to the provisions of Sec. 560.121 of this part.
    19. Payments on accounts in excess of the account balance 
(overdrafts) on commercial deposit or transaction accounts shall be 
considered commercial loans for purposes of determining the 
association's percentage of assets limitation.

[66 FR 65825, Dec. 21, 2001, as amended at 68 FR 75109, Dec. 30, 2003]



Sec. 560.31  Election regarding categorization of loans or investments 
and related calculations.

    (a) If a loan or other investment is authorized under more than one 
section of the HOLA, as amended, or this part, a Federal savings 
association may designate under which section the loan or investment has 
been made. Such a loan or investment may be apportioned among 
appropriate categories, and may be moved, in whole or part, from one 
category to another. A loan commitment shall be counted as an investment 
and included in total assets of a Federal savings association for 
purposes of calculating compliance with HOLA section 5(c)'s investment 
limitations only to the extent that funds have been advanced and not 
repaid pursuant to the commitment.
    (b) Loans or portions of loans sold to a third party shall be 
included in the

[[Page 173]]

calculation of a percentage-of-assets or percentage-of-capital 
investment limitation only to the extent they are sold with recourse.
    (c) A Federal savings association may make a loan secured by an 
assignment of loans to the extent that it could, under applicable law 
and regulations, make or purchase the underlying assigned loans.



Sec. 560.32  Pass-through investments.

    (a) A federal savings association (``you'') may make pass-through 
investments. A pass-through investment occurs when you invest in an 
entity (``company'') that engages only in activities that you may 
conduct directly and the investment meets the requirements of this 
section. If an investment is authorized under both this section and some 
other provision of law, you may designate under which authority or 
authorities the investment is made. When making a pass-through 
investment, you must comply with all the statutes and regulations that 
would apply if you were engaging in the activity directly. For example, 
your proportionate share of the company's assets will be aggregated with 
the assets you hold directly in calculating investment limits (e.g., no 
more than 400% of total capital may be invested in nonresidential real 
property loans).
    (b) You may make a pass-through investment without prior notice to 
OTS if all of the following conditions are met:
    (1) You do not invest more than 15% of your total capital in one 
company;
    (2) The book value of your aggregate pass-through investments does 
not exceed 50% of your total capital after making the investment;
    (3) Your investment would not give you direct or indirect control of 
the company;
    (4) Your liability is limited to the amount of your investment; and
    (5) The company falls into one of the following categories:
    (i) A limited partnership;
    (ii) An open-end mutual fund;
    (iii) A closed-end investment trust;
    (iv) A limited liability company; or
    (v) An entity in which you are investing primarily to use the 
company's services (e.g., data processing).
    (c) If you want to make other pass-through investments, you must 
provide OTS with 30 days' advance notice. If within that 30-day period 
OTS notifies you that an investment presents supervisory, legal, or 
safety and soundness concerns, you must apply for and receive OTS prior 
written approval under the standard treatment processing procedures at 
part 516, subparts A and E of this chapter before making the investment. 
Notices under this section are deemed to be applications for purposes of 
statutory and regulatory references to ``applications.'' Any conditions 
that OTS imposes on any pass-through investment shall be enforceable as 
a condition imposed in writing by the OTS in connection with the 
granting of a request by a savings association within the meaning of 12 
U.S.C. 1818(b) or 1818(i).

[61 FR 66578, Dec. 18, 1996, as amended at 66 FR 13007, Mar. 2, 2001]



Sec. 560.33  Late charges.

    A Federal savings association may include in a home loan contract a 
provision authorizing the imposition of a late charge with respect to 
the payment of any delinquent periodic payment. With respect to any loan 
made after July 31, 1976, on the security of a home occupied or to be 
occupied by the borrower, no late charge, regardless of form, shall be 
assessed or collected by a Federal savings association, unless any 
billing, coupon, or notice the Federal savings association may provide 
regarding installment payments due on the loan discloses the date after 
which the charge may be assessed. A Federal savings association may not 
impose a late charge more than one time for late payment of the same 
installment, and any installment payment made by the borrower shall be 
applied to the longest outstanding installment due. A Federal savings 
association shall not assess a late charge as to any payment received by 
it within fifteen days after the due date of such payment. No form of 
such late charge permitted by this paragraph shall be considered as 
interest to the Federal savings association and the Federal savings 
association shall not deduct late charges from the regular periodic 
installment payments on the

[[Page 174]]

loan, but must collect them as such from the borrower.



Sec. 560.34  Prepayments.

    Any prepayment on a real estate loan must be applied directly to 
reduce the principal balance on the loan unless the loan contract or the 
borrower specifies otherwise. Subject to the terms of the loan contract, 
a Federal savings association may impose a fee for any prepayment of a 
loan.



Sec. 560.35  Adjustments to home loans.

    (a) For any home loan secured by borrower-occupied property, or 
property to be occupied by the borrower, adjustments to the interest 
rate, payment, balance, or term to maturity must comply with the 
limitations of this section and the disclosure and notice requirements 
of Sec. 560.210 of this part.
    (b) Adjustments to the interest rate shall correspond directly to 
the movement of an index satisfying the requirements of paragraph (d) of 
this section. A Federal savings association also may increase the 
interest rate pursuant to a formula or schedule that specifies the 
amount of the increase, the time at which it may be made, and which is 
set forth in the loan contract. A Federal savings association may 
decrease the interest rate at any time.
    (c) Adjustments to the payment and the loan balance that do not 
reflect an interest-rate adjustment may be made if:
    (1) The adjustments reflect a change in an index that may be used 
pursuant to paragraph (d) of this section;
    (2) In the case of a payment adjustment, the adjustment reflects a 
change in the loan balance or is made pursuant to a formula, or to a 
schedule specifying the percentage or dollar change in the payment as 
set forth in the loan contract; or
    (3) In the case of an open-end line-of-credit loan, the adjustment 
reflects an advance taken by the borrower under the line-of-credit and 
is permitted by the loan contract.
    (d)(1) Any index used must be readily available and independently 
verifiable. If set forth in the loan contract, an association may use 
any combination of indices, a moving average of index values, or more 
than one index during the term of a loan.
    (2) Except as provided in paragraph (d)(3) of this section, any 
index used must be a national or regional index.
    (3) A Federal savings association may use an index not satisfying 
the requirements of paragraph (d)(2) of this section 30 days after 
filing a notice unless, within that 30-day period, OTS has notified the 
association that the notice presents supervisory concerns or raises 
significant issues of law or policy. If OTS notifies the association of 
such concerns or issues, the Federal savings association may not use 
such an index unless it applies for and receives OTS's prior written 
approval under the standard treatment processing procedures at part 516, 
subparts A and E of this chapter.

[61 FR 50971, Sept. 30, 1996, as amended at 66 FR 13007, Mar. 2, 2001]



Sec. 560.36  De minimis investments.

    A Federal savings association may invest in the aggregate up to the 
greater of 1% of its total capital or $250,000 in community development 
investments of the type permitted for a national bank under 12 CFR part 
24.

[66 FR 65826, Dec. 21, 2001]



Sec. 560.37  Real estate for office and related facilities.

    A federal savings association may invest in real estate (improved or 
unimproved) to be used for office and related facilities of the 
association, or for such office and related facilities and for rental or 
sale, if such investment is made and maintained under a prudent program 
of property acquisition to meet the federal savings association's 
present needs or its reasonable future needs for office and related 
facilities. A federal savings association may not make an investment 
that would cause the outstanding book value of all such investments 
(including investments under Sec. 559.4(e)(2) of this chapter) to 
exceed its total capital.

[61 FR 66579, Dec. 18, 1996]

[[Page 175]]



Sec. 560.40  Commercial paper and corporate debt securities.

    Pursuant to HOLA section 5(c)(2)(D), a Federal savings association 
may invest in, sell, or hold commercial paper and corporate debt 
securities subject to the provisions of this section.
    (a) Limitations. (1) Commercial paper must be:
    (i) As of the date of purchase, rated in either one of the two 
highest categories by at least two nationally recognized investment 
ratings services as shown by the most recently published rating made of 
such investments; or
    (ii) If unrated, guaranteed by a company having outstanding paper 
that is rated as provided in paragraph (a)(1)(i) of this section.
    (2) Corporate debt securities must be:
    (i) Securities that may be sold with reasonable promptness at a 
price that corresponds reasonably to their fair value; and
    (ii) Rated in one of the four highest categories as to the portion 
of the security in which the association is investing by a nationally 
recognized investment ratings service at its most recently published 
rating before the date of purchase of the security.
    (3) A Federal savings association's total investment in the 
commercial paper and corporate debt securities of any one issuer, or 
issued by any one person or entity affiliated with such issuer, together 
with other loans, shall not exceed the general lending limitations 
contained in Sec. 560.93(c) of this part.
    (4) Investments in corporate debt securities convertible into stock 
are subject to the following additional limitations:
    (i) The purchase of securities convertible into stock at the option 
of the issuer is prohibited;
    (ii) At the time of purchase, the cost of such securities must be 
written down to an amount that represents the investment value of the 
securities considered independently of the conversion feature; and
    (iii) Federal savings associations are prohibited from exercising 
the conversion feature.
    (5) A Federal savings association shall maintain information in its 
files adequate to demonstrate that it has exercised prudent judgment in 
making investments under this section.
    (b) Notwithstanding the limitations contained in this section, the 
Office may permit investment in corporate debt securities of another 
savings association in connection with the purchase or sale of a branch 
office or in connection with a supervisory merger or acquisition.
    (c) Underwriting. Before committing to acquire any investment 
security, a Federal savings association must determine whether the 
investment is safe and sound and suitable for the association. The 
Federal savings association must consider, as appropriate, the interest 
rate, credit, liquidity, price, transaction, and other risks associated 
with the investment activity. The Federal savings association must also 
determine that the issuer has adequate resources and the willingness to 
provide for all required payments on its obligations in a timely manner.

[61 FR 50971, Sept. 30, 1996, as amended at 66 FR 65826, Dec. 21, 2001]



Sec. 560.41  Leasing.

    (a) Permissible activities. Subject to the limitations of this 
section, a Federal savings association may engage in leasing activities. 
These activities include becoming the legal or beneficial owner of 
tangible personal property or real property for the purpose of leasing 
such property, obtaining an assignment of a lessor's interest in a lease 
of such property, and incurring obligations incidental to its position 
as the legal or beneficial owner and lessor of the leased property.
    (b) Definitions. For the purposes of this section:
    (1) The term net lease means a lease under which the Federal savings 
association will not, directly or indirectly, provide or be obligated to 
provide for:
    (i) The servicing, repair or maintenance of the leased property 
during the lease term;
    (ii) The purchasing of parts and accessories for the leased 
property, except that improvements and additions to the leased property 
may be leased to the lessee upon its request in accordance with the 
full-payout requirements of paragraph (c)(2)(i) of this section;

[[Page 176]]

    (iii) The loan of replacement or substitute property while the 
leased property is being serviced;
    (iv) The purchasing of insurance for the lessee, except where the 
lessee has failed to discharge a contractual obligation to purchase or 
maintain insurance; or
    (v) The renewal of any license, registration, or filing for the 
property unless such action by the Federal savings association is 
necessary to protect its interest as an owner or financier of the 
property.
    (2) The term full-payout lease means a lease transaction in which 
any unguaranteed portion of the estimated residual value relied on by 
the association to yield the return of its full investment in the leased 
property, plus the estimated cost of financing the property over the 
term of the lease, does not exceed 25% of the original cost of the 
property to the lessor. In general, a lease will qualify as a full-
payout lease if the scheduled payments provide at least 75% of the 
principal and interest payments that a lessor would receive if the 
finance lease were structured as a market-rate loan.
    (3) The term realization of investment means that a Federal savings 
association that enters into a lease financing transaction must 
reasonably expect to realize the return of its full investment in the 
leased property, plus the estimated cost of financing the property over 
the term of the lease from:
    (i) Rentals;
    (ii) Estimated tax benefits, if any; and
    (iii) The estimated residual value of the property at the expiration 
of the term of the lease.
    (c) Finance leasing--(1) Investment limits. A Federal savings 
association may exercise its authority under HOLA sections 5(c)(1)(B) 
(residential real estate loans), 5(c)(2)(A) (commercial, business, 
corporate or agricultural loans), 5(c)(2)(B) (nonresidential real estate 
loans), and 5(c)(2)(D) (consumer loans) by conducting leasing activities 
that are the functional equivalent of loans made under those HOLA 
sections. These activities are commonly referred to as financing leases. 
Such financing leases are subject to the same investment limits that 
apply to loans made under those sections. For example, a financing lease 
of tangible personal property made to a natural person for personal, 
family or household purposes is subject to all limitations applicable to 
the amount of a Federal savings association's investment in consumer 
loans. A financing lease made for commercial, corporate, business, or 
agricultural purposes is subject to all limitations applicable to the 
amount of a Federal savings association's investment in commercial 
loans. A financing lease of residential or nonresidential real property 
is subject to all limitations applicable to the amount of a Federal 
savings association's investment in these types of real estate loans.
    (2) Functional equivalent of lending. To qualify as the functional 
equivalent of a loan:
    (i) The lease must be a net, full-payout lease representing a non-
cancelable obligation of the lessee, notwithstanding the possible early 
termination of the lease;
    (ii) The portion of the estimated residual value of the property 
relied upon by the lessor to satisfy the requirements of a full-payout 
lease must be reasonable in light of the nature of the leased property 
and all relevant circumstances so that realization of the lessor's full 
investment plus the cost of financing the property depends primarily on 
the creditworthiness of the lessee, and not on the residual market value 
of the leased property; and
    (iii) At the termination of a financing lease, either by expiration 
or default, property acquired must be liquidated or released on a net 
basis as soon as practicable. Any property held in anticipation of re-
leasing must be reevaluated and recorded at the lower of fair market 
value or book value.
    (d) General leasing. Pursuant to section 5(c)(2)(C) of the HOLA, a 
Federal savings association may invest in tangible personal property, 
including vehicles, manufactured homes, machinery, equipment, or 
furniture, for the purpose of leasing that property. In contrast to 
financing leases, lease investments made under this authority need not 
be the functional equivalent of loans.

[[Page 177]]

    (e) Leasing salvage powers. If, in good faith, a Federal savings 
association believes that there has been an unanticipated change in 
conditions that threatens its financial position by significantly 
increasing its exposure to loss, it may:
    (1) As the owner and lessor, take reasonable and appropriate action 
to salvage or protect the value of the property or its interest arising 
under the lease;
    (2) As the assignee of a lessor's interest in a lease, become the 
owner and lessor of the leased property pursuant to its contractual 
right, or take any reasonable and appropriate action to salvage or 
protect the value of the property or its interest arising under the 
lease; or
    (3) Include any provisions in a lease, or make any additional 
agreements, to protect its financial position or investment in the 
circumstances set forth in paragraphs (e)(1) and (e)(2) of this section.



Sec. 560.42  State and local government obligations.

    (a) What limitations apply? Pursuant to HOLA section 5(c)(1)(H), a 
Federal savings association (``you'') may invest in obligations issued 
by any state, territory, possession, or political subdivision thereof 
(``governmental entity''), subject to appropriate underwriting and the 
following conditions:

------------------------------------------------------------------------
                                       Aggregate          Per-issuer
                                      limitation          limitation
------------------------------------------------------------------------
(1) General obligations.........  None..............  None.
(2) Other obligations of a        None..............  10% of total
 governmental entity (e.g.,                            capital.
 revenue bonds) that hold one of
 the four highest investment
 grade ratings by a nationally
 recognized rating agency or
 that are nonrated but of
 investment quality.
(3) Obligations of a              As approved by      10% of total
 governmental entity that do not   your Regional       capital.
 qualify under any other           Director
 paragraph but are approved by
 your Regional Director.
------------------------------------------------------------------------

    (b) What is a political subdivision? Political subdivision means a 
county, city, town, or other municipal corporation, a public authority, 
or a publicly-owned entity that is an instrumentality of a state or a 
municipal corporation.
    (c) What is a general obligation of a state or political 
subdivision? A general obligation is an obligation that is guaranteed by 
the full faith and credit of a state or political subdivision that has 
the power to tax. Indirect payments, such as through a special fund, may 
qualify as general obligations if a state or political subdivision with 
taxing authority has unconditionally agreed to provide funds to cover 
payments.
    (d) What is appropriate underwriting for this type of investment? In 
the case of a security rated in one of the four highest investment 
grades by a nationally recognized rating agency, your assessment of the 
obligor's credit quality may be based, in part, on reliable rating 
agency estimates of the obligor's performance. For all other securities, 
you must perform your own detailed analysis of credit quality. In doing 
so, you must consider, as appropriate, the interest rate, credit, 
liquidity, price, transaction, and other risks associated with the 
investment activity and determine that such investment is appropriate 
for your institution. You must also determine that the obligor has 
adequate resources and willingness to provide for all required payments 
on its obligations in a timely manner.

[66 FR 65826, Dec. 21, 2001]



Sec. 560.43  Foreign assistance investments.

    Pursuant to HOLA section 5(c)(4)(C), a Federal savings association 
may make foreign assistance investments in an aggregate amount not to 
exceed one percent of its assets, subject to the following conditions:
    (a) For any investment made under the Foreign Assistance Act, the 
loan agreement shall specify what constitutes an event of default, and 
provide that upon default in payment of principal or interest under such 
agreement, the entire amount of outstanding indebtedness thereunder 
shall become immediately due and payable, at the lender's option. 
Additionally,

[[Page 178]]

the contract of guarantee shall cover 100% of any loss of investment 
thereunder, except for any portion of the loan arising out of fraud or 
misrepresentation for which the party seeking payment is responsible, 
and provide that the guarantor shall pay for any such loss in U.S. 
dollars within a specified reasonable time after the date of application 
for payment.
    (b) To make any investments in the share capital and capital reserve 
of the Inter-American Savings and Loan Bank, a Federal savings 
association must be adequately capitalized and have adequate allowances 
for loan and lease losses. The Federal savings association's aggregate 
investment in such capital or capital reserve, including the amount of 
any obligations undertaken to provide said Bank with reserve capital in 
the future (call-able capital), must not, as a result of such 
investment, exceed the lesser of one-quarter of 1% of its assets or 
$100,000.



Sec. 560.50  Letters of credit and other independent undertakings--authority.

    A Federal savings association may issue letters of credit and may 
issue such other independent undertakings as are approved by OTS, 
subject to the restrictions in Sec. 560.120.

[64 FR 46565, Aug. 26, 1999]



Sec. 560.60  Suretyship and guaranty.

    Pursuant to section 5(b)(2) of the HOLA, a Federal savings 
association may enter into a repayable suretyship or guaranty agreement, 
subject to the conditions in this section.
    (a) What is a suretyship or guaranty agreement? Under a suretyship, 
a Federal savings association is bound with its principal to pay or 
perform an obligation to a third person. Under a guaranty agreement, a 
Federal savings association agrees to satisfy the obligation of the 
principal only if the principal fails to pay or perform.
    (b) What requirements apply to suretyship and guaranty agreements 
under this section? A Federal savings association may enter into a 
suretyship or guaranty agreement under this section, subject to each of 
the following requirements:
    (1) The Federal savings association must limit its obligations under 
the agreement to a fixed dollar amount and a specified duration.
    (2) The Federal savings association's performance under the 
agreement must create an authorized loan or other investment.
    (3) The Federal savings association must treat its obligation under 
the agreement as a loan to the principal for purposes of Sec. Sec. 
560.93 and 563.43 of this chapter.
    (4) The Federal savings association must take and maintain a 
perfected security interest in collateral sufficient to cover its total 
obligation under the agreement.
    (c) What collateral is sufficient? (1) The Federal savings 
association must take and maintain a perfected security interest in real 
estate or marketable securities equal to at least 110 percent of its 
obligation under the agreement, except as provided in paragraph (c)(2) 
of this section.
    (i) If the collateral is real estate, the Federal savings 
association must establish the value by a signed appraisal or evaluation 
in accordance with part 564 of this chapter. In determining the value of 
the collateral, the Federal savings association must factor in the value 
of any existing senior mortgages, liens or other encumbrances on the 
property, except those held by the principal to the suretyship or 
guaranty agreement.
    (ii) If the collateral is marketable securities, the Federal savings 
association must be authorized to invest in that security taken as 
collateral. The Federal savings association must ensure that the value 
of the security is 110 percent of the obligation at all times during the 
term of agreement.
    (2) The Federal savings association may take and maintain a 
perfected security interest in collateral which is at all times equal to 
at least 100 percent of its obligation, if the collateral is:
    (i) Cash;
    (ii) Obligations of the United States or its agencies;
    (iii) Obligations fully guarantied by the United States or its 
agencies as to principal and interest; or

[[Page 179]]

    (iv) Notes, drafts, or bills of exchange or bankers' acceptances 
that are eligible for rediscount or purchase by a Federal Reserve Bank.

[64 FR 46565, Aug. 26, 1999]



 Subpart B_Lending and Investment Provisions Applicable to all Savings 
                              Associations



Sec. 560.93  Lending limitations.

    (a) Scope. This section applies to all loans and extensions of 
credit to third parties made by a savings association and its 
subsidiaries. This section does not apply to loans made by a savings 
association or a GAAP-consolidated subsidiary to subordinate 
organizations or affiliates of the savings association. The terms 
subsidiary, GAAP-consolidated subsidiary, and subordinate organization 
have the same meanings as specified in Sec. 559.2 of this chapter. The 
term affiliate has the same meaning as specified in Sec. 563.41 of this 
chapter.
    (b) Definitions. In applying these lending limitations, savings 
associations shall apply the definitions and interpretations promulgated 
by the Office of the Comptroller of the Currency consistent with 12 
U.S.C. 84. See 12 CFR part 32. In applying these definitions, pursuant 
to 12 U.S.C. 1464, savings associations shall use the terms savings 
association, savings associations, and savings association's in place of 
the terms national bank and bank, banks, and bank's, respectively. For 
purposes of this section:
    (1) The term one borrower has the same meaning as the term person 
set forth at 12 CFR part 32. It also includes, in addition to the 
definition cited therein, a financial institution as defined at Sec. 
561.19 of this chapter.
    (2) The term company means a corporation, partnership, business 
trust, association, or similar organization and, unless specifically 
excluded, the term company includes a savings association and a bank.
    (3) Contractual commitment to advance funds has the meaning set 
forth in 12 CFR part 32.
    (4) Loans and extensions of credit has the meaning set forth in 12 
CFR part 32, and includes investments in commercial paper and corporate 
debt securities. The Office expressly reserves its authority to deem 
other arrangements that are, in substance, loans and extensions of 
credit to be encompassed by this term.
    (5) The term loans as used in the phrase Loans to one borrower to 
finance the sale of real property acquired in satisfaction of debts 
previously contracted for in good faith does not include an 
association's taking of a purchase money mortgage note from the 
purchaser provided that:
    (i) No new funds are advanced by the association to the borrower; 
and
    (ii) The association is not placed in a more detrimental position as 
a result of the sale.
    (6) [Reserved]
    (7) Readily marketable collateral has the meaning set forth in 12 
CFR part 32.
    (8) Residential housing units has the same meaning as the term 
residential real estate set forth in Sec. 541.23 of this chapter. The 
term to develop includes the various phases necessary to produce housing 
units as an end product, to include: acquisition, development and 
construction; development and construction; construction; 
rehabilitation; or conversion. The term domestic includes units within 
the fifty states, the District of Columbia, Puerto Rico, the Virgin 
Islands, Guam, and the Pacific Islands.
    (9) Single family dwelling unit has the meaning set forth in Sec. 
541.20 of this chapter.
    (10) A standby letter of credit has the meaning set forth in 12 CFR 
part 32.
    (11) Unimpaired capital and unimpaired surplus means--
    (i) A savings association's core capital and supplementary capital 
included in its total capital under part 567 of this chapter; plus
    (ii) The balance of a savings association's allowance for loan and 
lease losses not included in supplementary capital under part 567 of 
this chapter; plus
    (iii) The amount of a savings association's loans to, investments 
in, and advances to subsidiaries not included in calculating core 
capital under part 567 of this chapter.
    (c) General limitation. Section 5200 of the Revised Statutes (12 
U.S.C. 84)

[[Page 180]]

shall apply to savings associations in the same manner and to the same 
extent as it applies to national banks. This statutory provision and 
lending limit regulations and interpretations promulgated by the Office 
of the Comptroller of the Currency pursuant to a rulemaking conducted in 
accordance with the provisions of the Administrative Procedure Act, 5 
U.S.C. 553 et seq. (including the regulations appearing at 12 CFR part 
32) shall apply to savings associations in the same manner and to the 
same extent as these provisions apply to national banks:
    (1) The total loans and extensions of credit by a savings 
association to one borrower outstanding at one time and not fully 
secured, as determined in the same manner as determined under 12 U.S.C. 
84(a)(2), by collateral having a market value at least equal to the 
amount of the loan or extension of credit shall not exceed 15 percent of 
the unimpaired capital and unimpaired surplus of the association.
    (2) The total loans and extensions of credit by a savings 
association to one borrower outstanding at one time and fully secured by 
readily marketable collateral having a market value, as determined by 
reliable and continuously available price quotations, at least equal to 
the amount of the funds outstanding shall not exceed 10 per centum of 
the unimpaired capital and unimpaired surplus of the association. This 
limitation shall be separate from and in addition to the limitation 
contained in paragraph (c)(1) of this section.
    (d) Exceptions to the general limitation--(1) $500,000 exception. If 
a savings association's aggregate lending limitation calculated under 
paragraphs (c)(1) and (c)(2) of this section is less than $500,000, 
notwithstanding this aggregate limitation in paragraphs (c)(1) and 
(c)(2) of this section, such savings association may have total loans 
and extensions of credit, for any purpose, to one borrower outstanding 
at one time not to exceed $500,000.
    (2) Statutory exceptions. The exceptions to the lending limits set 
forth in 12 U.S.C. 84 and 12 CFR part 32 are applicable to savings 
associations in the same manner and to the extent as they apply to 
national banks.
    (3) Loans to develop domestic residential housing units. Subject to 
paragraph (d)(4) of this section, a savings association may make loans 
to one borrower to develop domestic residential housing units, not to 
exceed the lesser of $30,000,000 or 30 percent of the savings 
association's unimpaired capital and unimpaired surplus, including all 
amounts loaned under the authority of the General Limitation set forth 
under paragraphs (c)(1) and (c)(2) of this section, provided that:
    (i) The final purchase price of each single family dwelling unit the 
development of which is financed under this paragraph (d)(3) does not 
exceed $500,000;
    (ii) The savings association is, and continues to be, in compliance 
with its capital requirements under part 567 of this chapter.
    (iii) OTS permits, subject to conditions it may impose, the savings 
association to use the higher limit set forth under this paragraph 
(d)(3). A savings association that meets the requirements of paragraphs 
(d)(3)(i), (ii), (iv) and (v) of this section and that meets the 
requirements for ``expedited treatment'' under Sec. 516.5 of this 
chapter may use the higher limit set forth under this paragraph (d)(3) 
if the savings association has filed a notice with OTS that it intends 
to use the higher limit at least 30 days prior to the proposed use. A 
savings association that meets the requirements of paragraphs (d)(3)(i), 
(ii), (iv), and (v) of this section and that meets the requirements for 
``standard treatment'' under Sec. 516.5 of this chapter may use the 
higher limit set forth under this paragraph (d)(3) if the savings 
association has filed an application with OTS and OTS has approved the 
use the higher limit;
    (iv) Loans made under this paragraph (d)(3) to all borrowers do not, 
in aggregate, exceed 150 percent of the savings association's unimpaired 
capital and unimpaired surplus; and
    (v) Such loans comply with the applicable loan-to-value requirements 
that apply to Federal savings associations.
    (4) The authority of a savings association to make a loan or 
extension of

[[Page 181]]

credit under the exception in paragraph (d)(3) of this section ceases 
immediately upon the association's failure to comply with any one of the 
requirements set forth in paragraph (d)(3) of this section or any 
condition(s) set forth in a Director's order under paragraph (d)(3)(iii) 
of this section.
    (5) Notwithstanding the limit set forth in paragraphs (c)(1) and 
(c)(2) of this section, a savings association may invest up to 10 
percent of unimpaired capital and unimpaired surplus in the obligations 
of one issuer evidenced by:
    (i) Commercial paper rated, as of the date of purchase, as shown by 
the most recently published rating by at least two nationally recognized 
investment rating services in the highest category; or
    (ii) Corporate debt securities that may be sold with reasonable 
promptness at a price that corresponds reasonably to their fair value, 
and that are rated in one of the two highest categories by a nationally 
recognized investment rating service in its most recently published 
ratings before the date of purchase of the security.
    (e) Loans to finance the sale of REO. A savings association's loans 
to one borrower to finance the sale of real property acquired in 
satisfaction of debts previously contracted for in good faith shall not, 
when aggregated with all other loans to such borrower, exceed the 
General Limitation in paragraph (c)(1) of this section.
    (f) Calculating compliance and recordkeeping. (1) The amount of an 
association's unimpaired capital and unimpaired surplus pursuant to 
paragraph (b)(11) of this section shall be calculated as of the 
association's most recent periodic report required to be filed with OTS 
prior to the date of granting or purchasing the loan or otherwise 
creating the obligation to repay funds, unless the association knows, or 
has reason to know, based on transactions or events actually completed, 
that such level has changed significantly, upward or downward, 
subsequent to filing of such report.
    (2) If a savings association or subsidiary thereof makes a loan or 
extension of credit to any one borrower, as defined in paragraph (b)(1) 
of this section, in an amount that, when added to the total balances of 
all outstanding loans owed to such association and its subsidiary by 
such borrower, exceeds the greater of $500,000 or 5 percent of 
unimpaired capital and unimpaired surplus, the records of such 
association or its subsidiary with respect to such loan shall include 
documentation showing that such loan was made within the limitations of 
paragraphs (c) and (d) of this section; for the purpose of such 
documentation such association or subsidiary may require, and may accept 
in good faith, a certification by the borrower identifying the persons, 
entities, and interests described in the definition of one borrower in 
paragraph (b)(1) of this section.
    (g) [Reserved]
    (h) More stringent restrictions. The Director may impose more 
stringent restrictions on a savings association's loans to one borrower 
if the Director determines that such restrictions are necessary to 
protect the safety and soundness of the savings association.

                Appendix to Sec. 560.93--Interpretations

 Section 560.93-100 Interrelation of General Limitation With Exception 
         for Loans To Develop Domestic Residential Housing Units

    1. The Sec. 560.93(d)(3) exception for loans to one person to 
develop domestic residential housing units is characterized in the 
regulation as an ``alternative'' limit. This exceptional $30,000,000 or 
30 percent limitation does not operate in addition to the 15 percent 
General Limitation or the 10 percent additional amount an association 
may loan to one borrower secured by readily marketable collateral, but 
serves as the uppermost limitation on a savings association's lending to 
any one person once an association employs this exception. An example 
will illustrate the Office's interpretation of the application of this 
rule:
    Example: Savings Associations A's lending limitation as calculated 
under the 15 percent General Limitation is $800,000. If Association A 
lends Y $800,000 for commercial purposes, Association A cannot lend Y an 
additional $1,600,000, or 30 percent of capital and surplus, to develop 
residential housing units under the paragraph (d)(3) exception. The 
(d)(3) exception operates as the uppermost limitation on all lending to 
one borrower (for associations that may employ this exception) and 
includes any amounts loaned to the same borrower under the General 
Limitation. Association A, therefore, may lend only an additional 
$800,000 to Y, provided the paragraph (d)(3) prerequisites have been 
met. The

[[Page 182]]

amount loaned under the authority of the General Limitation ($800,000), 
when added to the amount loaned under the exception ($800,000), yields a 
sum that does not exceed the 30 percent uppermost limitation 
($1,600,000).
    2. This result does not change even if the facts are altered to 
assume that some or all of the $800,000 amount of lending permissible 
under the General Limitation's 15 percent basket is not used, or is 
devoted to the development of domestic residential housing units.
    In other words, using the above example, if Association A lends Y 
$400,000 for commercial purposes and $300,000 for residential purposes--
both of which would be permitted under the Association's $800,000 
General Limitation--Association A's remaining permissible lending to Y 
would be: first, an additional $100,000 under the General Limitation, 
and then another $800,000 to develop domestic residential housing units 
if the Association meets the paragraph (d)(3) prerequisites. (The latter 
is $800,000 because in no event may the total lending to Y exceed 30 
percent of unimpaired capital and unimpaired surplus). If Association A 
did not lend Y the remaining $100,000 permissible under the General 
Limitation, its permissible loans to develop domestic residential 
housing units under paragraph (d)(3) would be $900,000 instead of 
$800,000 (the total loans to Y would still equal $1,600,000).
    3. In short, under the paragraph (d)(3) exception, the 30 percent or 
$30,000,000 limit will always operate as the uppermost limitation, 
unless of course the association does not avail itself of the exception 
and merely relies upon its General Limitation.

Section 560.93-101 Interrelationship Between the General Limitation and 
  the 150 Percent Aggregate Limit on Loans to all Borrowers To Develop 
                   Domestic Residential Housing Units

    1. The Office has already received numerous questions regarding the 
allocation of loans between the different lending limit ``baskets,'' 
i.e., the 15 percent General Limitation basket and the 30 percent 
Residential Development basket. In general, the inquiries concern the 
manner in which an association may ``move'' a loan from the General 
Limitation basket to the Residential Development basket. The following 
example is intended to provide guidance:
    Example: Association A's General Limitation under section 5(u)(1) is 
$15 million. In January, Association A makes a $10 million loan to 
Borrower to develop domestic residential housing units. At the time the 
loan was made, Association A had not received approval under a Director 
order to avail itself of the residential development exception to 
lending limits. Therefore, the $10 million loan is made under 
Association A's General Limitation.
    2. In June, Association A receives authorization to lend under the 
Residential Development exception. In July, Association A lends $3 
million to Borrower to develop domestic residential housing units. In 
August, Borrower seeks an additional $12 million commercial loan from 
Association A. Association A cannot make the loan to Borrower, however, 
because it already has an outstanding $10 million loan to Borrower that 
counts against Association A's General Limitation of $15 million. Thus, 
Association A may lend only up to an additional $5 million to Borrower 
under the General Limitation.
    3. However, Association A may be able to reallocate the $10 million 
loan it made to Borrower in January to its Residential Development 
basket provided that: (1) Association A has obtained authority under a 
Director's order to avail itself of the additional lending authority for 
residential development and maintains compliance with all prerequisites 
to such lending authority; (2) the original $10 million loan made in 
January constitutes a loan to develop domestic residential housing units 
as defined; and (3) the housing unit(s) constructed with the funds from 
the January loan remain in a stage of ``development'' at the time 
Association A reallocates the loan to the domestic residential housing 
basket. The project must be in a stage of acquisition, development, 
construction, rehabilitation, or conversion in order for the loan to be 
reallocated.
    4. If Association A is able to reallocate the $10 million loan made 
to Borrower in January to its Residential Development basket, it may 
make the $12 million commercial loan requested by Borrower in August. 
Once the January loan is reallocated to the Residential Development 
basket, however, the $10 million loan counts towards Association's 150 
percent aggregate limitation on loans to all borrowers under the 
residential development basket (section 5(u)(2)(A)(ii)(IV)).
    5. If Association A reallocates the January loan to its domestic 
residential housing basket and makes an additional $12 million 
commercial loan to Borrower, Association A's totals under the respective 
limitations would be: $12 million under the General Limitation; and $13 
million under the Residential Development limitation. The full $13 
million residential development loan counts toward Association A's 
aggregate 150 percent limitation.

[61 FR 50976, Sept. 30, 1996, as amended at 61 FR 66579, Dec. 18, 1996; 
62 FR 66262, Dec. 18, 1997; 66 FR 13007, Mar. 2, 2001]



Sec. 560.100  Real estate lending standards; purpose and scope.

    This section, and Sec. 560.101 of this subpart, issued pursuant to 
section 304 of

[[Page 183]]

the Federal Deposit Insurance Corporation Improvement Act of 1991, 12 
U.S.C. 1828(o), prescribe standards for real estate lending to be used 
by savings associations and all their includable subsidiaries, as 
defined in 12 CFR 567.1, over which the savings associations exercise 
control, in adopting internal real estate lending policies.

[61 FR 50971, Sept. 30, 1996, as amended at 62 FR 66262, Dec. 18, 1997]



Sec. 560.101  Real estate lending standards.

    (a) Each 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 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 savings association's 
real estate portfolio; and
    (iv) Documentation, approval, and reporting requirements to monitor 
compliance with the savings association's real estate lending policies.
    (c) Each 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 bank and thrift 
supervisory agencies.

   Appendix to Sec. 560.101--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.
---------------------------------------------------------------------------

    \1\ The agencies have adopted a uniform rule on real estate lending. 
See 12 CFR Part 365 (FDIC); 12 CFR Part 208, Subpart C (FRB); 12 CFR 
Part 34, Subpart D (OCC); and 12 CFR 560.100-560.101 (OTS).
---------------------------------------------------------------------------

    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:
    [sbull] Identify the geographic areas in which the institution will 
consider lending.
    [sbull] 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).
    [sbull] Identify appropriate terms and conditions by type of real 
estate loan.
    [sbull] Establish loan origination and approval procedures, both 
generally and by size and type of loan.
    [sbull] Establish prudent underwriting standards that are clear and 
measurable, including loan-to-value limits, that are consistent with 
these supervisory guidelines.
    [sbull] Establish review and approval procedures for exception 
loans, including loans with loan-to-value percentages in excess of 
supervisory limits.
    [sbull] Establish loan administration procedures, including 
documentation, disbursement, collateral inspection, collection, and loan 
review.

[[Page 184]]

    [sbull] Establish real estate appraisal and evaluation programs.
    [sbull] 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:
    [sbull] The size and financial condition of the institution.
    [sbull] The expertise and size of the lending staff.
    [sbull] The need to avoid undue concentrations of risk.
    [sbull] Compliance with all real estate related laws and 
regulations, including the Community Reinvestment Act, anti-
discrimination laws, and for savings associations, the Qualified Thrift 
Lender test.
    [sbull] 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:
    [sbull] Demographic indicators, including population and employment 
trends.
    [sbull] Zoning requirements.
    [sbull] Current and projected vacancy, construction, and absorption 
rates.
    [sbull] Current and projected lease terms, rental rates, and sales 
prices, including concessions.
    [sbull] Current and projected operating expenses for different types 
of projects.
    [sbull] Economic indicators, including trends and diversification of 
the lending area.
    [sbull] Valuation trends, including discount and direct 
capitalization rates.

                         Underwriting Standards

    Prudently underwritten real estate loans should reflect all relevant 
credit factors, including:
    [sbull] The capacity of the borrower, or income from the underlying 
property, to adequately service the debt.
    [sbull] The value of the mortgaged property.
    [sbull] The overall creditworthiness of the borrower.
    [sbull] The level of equity invested in the property.
    [sbull] Any secondary sources of repayment.
    [sbull] 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:
    [sbull] The maximum loan amount by type of property.
    [sbull] Maximum loan maturities by type of property.
    [sbull] Amortization schedules.
    [sbull] Pricing structure for different types of real estate loans.
    [sbull] 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:
    [sbull] 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).
    [sbull] Minimum requirements for initial investment and maintenance 
of hard equity by the borrower (e.g., cash or unencumbered investment in 
the underlying property).
    [sbull] Minimum standards for net worth, cash flow, and debt service 
coverage of the borrower or underlying property.
    [sbull] Standards for the acceptability of and limits on non-
amortizing loans.
    [sbull] Standards for the acceptability of and limits on the use of 
interest reserves.
    [sbull] Pre-leasing and pre-sale requirements for income-producing 
property.
    [sbull] Pre-sale and minimum unit release requirements for non-
income-producing property loans.
    [sbull] Limits on partial recourse or nonrecourse loans and 
requirements for guarantor support.
    [sbull] Requirements for takeout commitments.
    [sbull] Minimum covenants for loan agreements.

                           Loan Administration

    The institution should also establish loan administration procedures 
for its real estate portfolio that address:
    [sbull] 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).
    [sbull] Loan closing and disbursement.
    [sbull] Payment processing.
    [sbull] Escrow administration.
    [sbull] Collateral administration.
    [sbull] Loan payoffs.
    [sbull] Collections and foreclosure, including:
    Delinquency follow-up procedures;
    Foreclosure timing;
    Extensions and other forms of forbearance;
    Acceptance of deeds in lieu of foreclosure.
    [sbull] Claims processing (e.g., seeking recovery on a defaulted 
loan covered by a government guaranty or insurance program).
    [sbull] Servicing and participation agreements.

[[Page 185]]

                    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-to-
                       Loan category                         value limit
                                                               (percent)
------------------------------------------------------------------------
Raw land...................................................           65
Land development...........................................           75
Construction:
    Commercial, multifamily,\1\ and other nonresidential...           80
    1- to 4-family residential.............................           85
Improved property..........................................           85
Owner-occupied 1- to 4-family and home equity..............       (\2\)
------------------------------------------------------------------------
\1\ Multifamily construction includes condominiums and cooperatives.
\2\ A 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.\2\ 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.
---------------------------------------------------------------------------

    \2\ For the state member banks, the term ``total capital'' means 
``total risk-based capital'' as defined in Appendix A to 12 CFR Part 
208. For insured state non-member banks, ``total capital'' refers to 
that term described in table I of Appendix A to 12 CFR Part 325. For 
national banks, the term ``total capital'' is defined at 12 CFR 3.2(e). 
For savings associations, the term ``total capital'' is defined at 12 
CFR 567.5(c).
---------------------------------------------------------------------------

    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.

[[Page 186]]

    These include:
    [sbull] 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.
    [sbull] 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.
    [sbull] 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.
    [sbull] Loans that are to be sold promptly after origination, 
without recourse, to a financially responsible third party.
    [sbull] 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.
    [sbull] 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.
    [sbull] 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).
    [sbull] 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.
    [sbull] 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:
    [sbull] The nature and scope of the institution's real estate 
lending activities.
    [sbull] The size and financial condition of the institution.
    [sbull] The quality of the institution's management and internal 
controls.
    [sbull] The expertise and size of the lending and loan 
administration staff.
    [sbull] Market conditions.
    Lending policy exception reports will also be reviewed by examiners 
during the course of their examinations to determine whether the 
institutions' 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:

[[Page 187]]

    (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).

[61 FR 50971, Sept. 30, 1996, as amended at 66 FR 65821, Dec. 21, 2001]



Sec. 560.110  Most favored lender usury preemption.

    (a) Definition. The term ``interest'' as used in 12 U.S.C. 1463(g) 
includes any payment compensating a creditor or prospective creditor for 
an extension of credit, making available of a line of credit, or any 
default or breach by a borrower of a condition upon which credit was 
extended. It includes, among other things, the following fees connected 
with credit extension or availability: numerical periodic rates, late 
fees, not sufficient funds (NSF) fees, overlimit fees, annual fees, cash 
advance fees, and membership fees. It does not ordinarily include 
appraisal fees, premiums and commissions attributable to insurance 
guaranteeing repayment of any extension of credit, finders' fees, fees 
for document preparation or notarization, or fees incurred to obtain 
credit reports.
    (b) Authority. A savings association located in a state may charge 
interest at the maximum rate permitted to any

[[Page 188]]

state-chartered or licensed lending institution by the law of that 
state. If state law permits different interest charges on specified 
classes of loans, a federal savings association making such loans is 
subject only to the provisions of state law relating to that class of 
loans that are material to the determination of the permitted interest. 
For example, a federal savings association may lawfully charge the 
highest rate permitted to be charged by a state-licensed small loan 
company, without being so licensed, but subject to state law limitations 
on the size of loans made by small loan companies. Except as provided in 
this paragraph, the applicability of state law to Federal savings 
associations shall be determined in accordance with Sec. 560.2 of this 
part. State supervisors determine the degree to which state-chartered 
savings associations must comply with state laws other than those 
imposing restrictions on interest, as defined in paragraph (a) of this 
section.
    (c) Effect on state definitions of interest. The Federal definition 
of the term ``interest'' in paragraph (a) of this section does not 
change how interest is defined by the individual states (nor how the 
state definition of interest is used) solely for purposes of state law. 
For example, if late fees are not ``interest'' under state law where a 
savings association is located but state law permits its most favored 
lender to charge late fees, then a savings association located in that 
state may charge late fees to its intrastate customers. The savings 
association may also charge late fees to its interstate customers 
because the fees are interest under the Federal definition of interest 
and an allowable charge under state law where the savings association is 
located. However, the late fees would not be treated as interest for 
purposes of evaluating compliance with state usury limitations because 
state law excludes late fees when calculating the maximum interest that 
lending institutions may charge under those limitations.



Sec. 560.120  Letters of credit and other independent undertakings to 
pay against documents.

    (a) General authority. A 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 OTS (approved 
undertaking).\1\ Under such letters of credit and approved undertakings, 
the 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 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.
---------------------------------------------------------------------------

    \1\ Samples of laws or rules of practice applicable to letters of 
credit and other independent undertakings include, but are not limited 
to: the applicable version of Article 5 of the Uniform Commercial Code 
(UCC) (1962, as amended 1990) or revised Article 5 of the UCC (as 
amended 1995) (available from West Publishing Co., 1/800/328-4880); the 
Uniform Customs and Practice for Documentary Credits (International 
Chamber of Commerce (ICC) Publication No. 500) (available from ICC 
Publishing, Inc., 212/206-1150; the United Nations Convention on 
Independent Guarantees and Standby Letters of Credit (adopted by the 
U.N. General Assembly in 1995 and signed by the U.S. in 1997) (available 
from the U.N. Commission on International Trade Law, 212/963-5353); and 
the Uniform Rules for Bank-to-Bank Reimbursements Under Documentary 
Credits (ICC Publication No. 525) (available from ICC Publishing, Inc., 
212/206-1150).
---------------------------------------------------------------------------

    (b) Safety and soundness considerations--(1) Terms. As a matter of 
safe and sound banking practice, savings associations that issue letters 
of credit or approved undertakings should not be exposed to undue risk. 
At a minimum, savings associations should consider the following:

[[Page 189]]

    (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 savings association to terminate the letter of credit 
or approved undertaking, either on a periodic basis (consistent with the 
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 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 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 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 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 savings association should ensure 
that market fluctuations that affect the value of the item will not 
cause the 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 savings association to 
make any necessary credit assessment prior to renewal;
    (iii) In the event that a savings association issues an undertaking 
for its own account, the underlying transaction for which it is issued 
must be within the savings association's authority and comply with any 
safety and soundness requirements applicable to that transaction.
    (3) Operational expertise. The savings association should possess 
operational expertise that is commensurate with the sophistication of 
its letter of credit or independent undertaking activities.
    (4) Documentation. The 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.

[61 FR 50971, Sept. 30, 1996, as amended at 64 FR 46565, Aug. 26, 1999]



Sec. 560.121  Investment in State housing corporations.

    (a) Any 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 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 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 Office. The 
aggregate

[[Page 190]]

outstanding direct investment in obligations under paragraph (b) of this 
section shall not exceed the amount of the savings association's total 
capital.
    (c) Each state housing corporation in which a 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 Office such 
information as the Office may consider to be necessary to ensure that 
investments are properly made under this section.



Sec. 560.130  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 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 
savings association or a subsidiary of the savings association.

[61 FR 60178, Nov. 27, 1996]



Sec. 560.160  Asset classification.

    (a)(1) Each 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 OTS in its Thrift Activities 
Handbook (Available at the address of Washington Headquarters Office at 
Sec. 516.40(b) of this chapter).
    (2) In connection with the examination of a savings association or 
its affiliates, OTS examiners may identify problem assets and classify 
them, if appropriate. The association must recognize such examiner 
classifications in its subsequent reports to OTS.
    (b) Based on the evaluation and classification of its assets, each 
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.

[61 FR 50971, Sept. 30, 1996, as amended at 66 FR 13007, Mar. 2, 2001]



Sec. 560.170  Records for lending transactions.

    In establishing and maintaining its records pursuant to Sec. 
563.170 of this chapter, each savings association and service 
corporation 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.



Sec. 560.172  Re-evaluation of real estate owned.

    A savings association shall appraise each parcel of real estate 
owned at the earlier of in-substance foreclosure or at the time of the 
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 part 564 of this chapter. 
The 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 part. A dated, signed copy of each report of appraisal 
made pursuant to any provisions of this part shall be retained in the 
savings association's records.



               Subpart C_Alternative Mortgage Transactions



Sec. 560.210  Disclosures for variable rate transactions.

    A savings association must provide the initial disclosures described 
at 12

[[Page 191]]

CFR 226.19(b) and the adjustment notices described at 12 CFR 226.20(c) 
for variable rate transactions, as described in those regulations. The 
OTS administers and enforces those provisions for savings associations.

[63 FR 38463, July 17, 1998]



Sec. 560.220  Alternative Mortgage Transaction Parity Act.

    (a) Applicable housing creditors. A housing creditor that is not a 
commercial bank, a credit union, or a federal savings association, may 
make an alternative mortgage transaction as defined at 12 U.S.C. 
3802(1), by following the regulations identified in paragraph (b) of 
this section, notwithstanding any state constitution, law, or 
regulation. See 12 U.S.C. 3803.
    (b) Applicable regulations. OTS identifies Sec. Sec. 560.35 and 
560.210 as appropriate and applicable for state housing creditors. All 
other OTS regulations are not identified, and are inappropriate and 
inapplicable for state housing creditors. State housing creditors 
engaged in credit sales should read the term ``loan'' as ``credit sale'' 
wherever applicable in applying these regulations.

[67 FR 60554, Sept. 26, 2002]



PART 561_DEFINITIONS FOR REGULATIONS AFFECTING ALL SAVINGS 
ASSOCIATIONS--Table of Contents




Sec.
561.1 General.
561.2 Account.
561.3 Accountholder.
561.4 Affiliate.
561.5 Affiliated person.
561.6 Audit period.
561.7 BIF.
561.8 [Reserved]
561.9 Certificate account.
561.12 Consumer credit.
561.14 Controlling person.
561.15 Corporation.
561.16 Demand accounts.
561.18 Director.
561.19 Financial institution.
561.24 Immediate family.
561.26 Land loan.
561.27 Low-rent housing.
561.28 Money Market Deposit Accounts.
561.29 Negotiable Order of Withdrawal Accounts.
561.30 Nonresidential construction loan.
561.31 Nonwithdrawable account.
561.33 Note account.
561.34 Office.
561.35 Officer.
561.37 Parent company; subsidiary.
561.38 Political subdivision.
561.39 Principal office.
561.40 Public unit.
561.41 SAIF.
561.42 Savings account.
561.43 Savings association.
561.44 Security.
561.45 Service corporation.
561.49 [Reserved]
561.50 State.
561.51 Subordinated debt security.
561.52 Tax and loan account.
561.53 United States Treasury General Account.
561.54 United States Treasury Time Deposit Open Account.
561.55 With recourse.

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

    Source: 54 FR 49545, Nov. 30, 1989, unless otherwise noted.



Sec. 561.1  When do the definitions in this part apply?

    The definitions in this part and in 12 CFR part 541 apply throughout 
this chapter, unless another definition is specifically provided.

[67 FR 78152, Dec. 23, 2002]



Sec. 561.2  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 savings association.



Sec. 561.3  Accountholder.

    The term accountholder means the holder of an account or accounts in 
a savings association insured by the SAIF. The term does not include the 
holder of any subordinated debt security or any mortgage-backed bond 
issued by the savings association.



Sec. 561.4  Affiliate.

    The term affiliate of a savings association, unless otherwise 
defined, means any corporation, business trust, association, or other 
similar organization:

[[Page 192]]

    (a) Of which a savings association, directly or indirectly, owns or 
controls either a majority of the voting shares or more than 50 
percentum 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 savings 
association who own or control either a majority of the shares of such 
savings association or more than 50 per centum of the number of shares 
voted for the election of directors of such savings association at the 
preceding election, or by trustees for the benefit of the shareholders 
of any such savings association; or
    (c) Of which a majority of its directors, trustees, or other persons 
exercising similar functions are directors of any one savings 
association.



Sec. 561.5  Affiliated person.

    The term affiliated person of a 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 savings 
association or a corporation or organization through which the 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.

[59 FR 18476, Apr. 19, 1994]



Sec. 561.6  Audit period.

    The audit period of a 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 Sec. 563.170.



Sec. 561.7  BIF.

    The term BIF means the Bank Insurance Fund established by the 
Federal Deposit Insurance Act. (12 U.S.C. 1821 et seq.)



Sec. 561.8  [Reserved]



Sec. 561.9  Certificate account.

    The term certificate account means a savings account evidenced by a 
certificate that must be held for a fixed or minimum term.



Sec. 561.12  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

[[Page 193]]

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 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 
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.



Sec. 561.14  Controlling person.

    The term controlling person of a 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 savings association; or 
controls in any manner the election or appointment of a majority of the 
directors of such savings association. However, a director of a savings 
association will not be deemed to be a controlling person of such 
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.



Sec. 561.15  Corporation.

    The terms Corporation and FDIC mean the Federal Deposit Insurance 
Corporation.



Sec. 561.16  Demand accounts.

    (a) The term demand accounts means non-interest-bearing demand 
deposits which are subject to check or to withdrawal or transfer on 
negotiable or transferable order to the savings association and which 
are permitted to be issued by statute, regulation, or otherwise and are 
payable on demand.
    (b) A fee paid by a savings association to a person who introduces a 
depositor to the savings association shall not be deemed a payment of 
interest to the depositor if the fee:
    (1) Consists of bonuses in cash or merchandise to the savings 
association's employees for participation in an account drive, contest 
or other incentive plan: Provided, That such bonuses are tied to the 
total amount of deposits solicited; or
    (2) Is paid to a bona fide broker if:
    (i) The broker is principally engaged in the business of acting as a 
broker or dealer in regard to deposits, securities, or money market 
instruments;
    (ii) The relationship between the broker and savings association is 
memorialized in a written agreement, a copy of which is retained by the 
savings association and made available to examiners; and
    (iii) An officer of the broker certifies that no portion of the fee 
paid to the broker is directly or indirectly passed on to the depositor, 
and a copy of the certification is given to the savings association to 
be retained on file with the agreement.

[54 FR 49545, Nov. 30, 1989, as amended at 58 FR 4313, Jan. 14, 1993; 62 
FR 54765, Oct. 22, 1997]



Sec. 561.18  Director.

    (a) 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.
    (b) The term Director means the Director of the Office of Thrift 
Supervision as established in section 3 of the Act.

[[Page 194]]



Sec. 561.19  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).



Sec. 561.24  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.



Sec. 561.26  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.



Sec. 561.27  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.



Sec. 561.28  Money Market Deposit Accounts.

    (a) Money Market Deposit Accounts (MMDAs) offered by Federal savings 
associations in accordance with 12 U.S.C. 1464(b)(1) and by state-
chartered 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 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 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 savings 
association to the savings association itself, or to a third party: 
Provided, That no more than three of the six transfers provided for in 
this paragraph (a)(2)(i) may be by check, draft, debit card, or similar 
order made by the depositor and payable to third parties.
    (ii) 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 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 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 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 savings association the 
depository 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 savings association at their option, may use on a 
consistent basis either the date on a check or the

[[Page 195]]

date it is paid in determining whether the transfer limitations within 
the specified interval are exceeded.
    (b) Federal savings associations may offer MMDAs to any depositor, 
and state-chartered savings associations may offer MMDAs to any 
depositor not inconsistent with applicable state law.



Sec. 561.29  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 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.''



Sec. 561.30  Nonresidential construction loan.

    The term nonresidential construction loan means a loan for 
construction of other than one or more dwelling units.



Sec. 561.31  Nonwithdrawable account.

    The term nonwithdrawable account means an account which by the terms 
of the contract of the accountholder with the 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 savings 
association have been fully liquidated and paid upon the winding up of 
the savings association is referred to as a nonwithdrawable account.



Sec. 561.33  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.



Sec. 561.34  Office.

    The term Office means the Office as established in section 3 of the 
Act or any official duly authorized to act on its behalf. Where 
appropriate in context, it also refers to the Federal Home Loan Bank 
Board and the Federal Savings and Loan Insurance Corporation as 
predecessor agencies to the Office.



Sec. 561.35  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.



Sec. 561.37  Parent company; subsidiary.

    The terms parent company and subsidiary have the meanings given to 
them by Sec. Sec. 583.15 and 583.23 of this chapter, respectively.



Sec. 561.38  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

[[Page 196]]

term are subordinate or nonautonomous divisions, agencies or boards 
within principal departments.



Sec. 561.39  Principal office.

    The term principal office means the home office of a savings 
association established as such in conformity with the laws under which 
the savings association is organized.



Sec. 561.40  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.



Sec. 561.41  SAIF.

    The term SAIF means the Savings Association Insurance Fund, 
established by the Federal Deposit Insurance Act. (12 U.S.C. 1811 et 
seq.).



Sec. 561.42  Savings account.

    The term savings account means any withdrawable account, except a 
demand account as defined in Sec. 561.16 of this chapter, a tax and 
loan account, a note account, a United States Treasury general account, 
or a United States Treasury time deposit-open account.

[54 FR 49545, Nov. 30, 1989, as amended at 62 FR 54765, Oct. 22, 1997]



Sec. 561.43  Savings association.

    The term savings association means a 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 Federal savings 
association or Federal savings bank, chartered under section 5 of the 
Act, or 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 and 
the Director of the Office of Thrift Supervision jointly determine to be 
operating substantially in the same manner as a savings association.



Sec. 561.44  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.



Sec. 561.45  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 under part 559 of this chapter.

[54 FR 49545, Nov. 30, 1989, as amended at 62 FR 66262, Dec. 18, 1997]



Sec. 561.50  State.

    The term State means a State, the District of Columbia, Guam, Puerto 
Rico, and the Virgin Islands of the United States.



Sec. 561.51  Subordinated debt security.

    The term subordinated debt security means any unsecured note, 
debenture, or other debt security issued by a savings association and 
subordinated on liquidation to all claims having the same priority as 
account holders or any higher priority.



Sec. 561.52  Tax and loan account.

    The term tax and loan account means an account, the balance of which 
is

[[Page 197]]

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.



Sec. 561.53  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.



Sec. 561.54  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.



Sec. 561.55  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 savings association.
    (b) The term with recourse does not include loans or interests 
therein where the agreement of sale provides for the 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 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 part 567 of this chapter.

[54 FR 49545, Nov. 30, 1989, as amended at 57 FR 33437, July 29, 1992]



PART 562_REGULATORY REPORTING STANDARDS--Table of Contents




Sec.
562.1 Regulatory reporting requirements.
562.2 Regulatory reports.
562.4 Audit of savings associations and savings association holding 
          companies.

    Authority: 12 U.S.C. 1463.

    Source: 57 FR 40090, Sept. 2, 1992, unless otherwise noted.



Sec. 562.1  Regulatory reporting requirements.

    (a) Authority and scope. This part is issued by the Office of Thrift 
Supervision (OTS) pursuant to section 4(b) and 4(c) of the Home Owners' 
Loan Act (HOLA). It applies to all savings associations regulated by the 
OTS.
    (b) Records and reports--general--(1) Records. Each 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 OTS and 
financial reports prepared in accordance with GAAP. The records shall be 
maintained in the United

[[Page 198]]

States and be readily accessible for examination and other supervisory 
purposes within 5 business days upon request by the OTS, at a location 
acceptable to the OTS.
    (2) Reports. For purposes of examination by and regulatory reports 
to the OTS and compliance with this chapter, all savings associations 
shall use such forms and follow such regulatory reporting requirements 
as the OTS may require by regulation or otherwise.



Sec. 562.2  Regulatory reports.

    (a) Definition and scope. This section applies to all regulatory 
reports, as defined herein. A regulatory report is any report that the 
OTS prepares, or is submitted to, or is used by the OTS, to determine 
compliance with its rules and regulations, and to evaluate the safe and 
sound condition and operation of savings associations. The Report of 
Examination and the Thrift Financial Report (TFR) are examples of 
regulatory reports. 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 provided in the TFR, guidance 
contained in OTS regulations, bulletins, and 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 
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 OTS 
regulations, bulletins, examination handbooks and instructions to 
regulatory reports. Such safety and soundness requirements shall be no 
less stringent than those applied by the Comptroller of the Currency for 
national banks; and
    (iii) Incorporate additional safety and soundness requirements more 
stringent than GAAP, as the Director 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 OTS pursuant to the Securities 
and Exchange Act of 1934 or parts 563b, 563d, or 563g of this chapter.
    (3) Compliance. When the OTS determines that a 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 OTS.



Sec. 562.4  Audit of savings associations and savings association 
holding companies.

    (a) General. The OTS may require, at any time, an independent audit 
of the financial statements of, or the application of procedures agreed 
upon by the OTS to a savings association, savings and loan holding 
company, or affiliate (as defined by 12 CFR 563.41) by qualified 
independent public accountants when needed for any safety and soundness 
reason identified by the Director.
    (b) Audits required for safety and soundness purposes. The OTS 
requires an independent audit for safety and soundness purposes:
    (1) If a savings association has received a composite rating of 3, 4 
or 5, as defined at Sec. 516.5(c) of this chapter; or
    (2) If, as of the beginning of its fiscal year, a savings and loan 
holding company controls savings association subsidiary(ies) with 
aggregate consolidated assets of $500 million or more.
    (c) Procedures. (1) When the OTS requires an independent audit 
because such an audit is needed for safety and soundness purposes, the 
Director shall determine whether the audit was conducted and filed in a 
manner satisfactory to the OTS.

[[Page 199]]

    (2) The Director may waive the independent audit requirement 
described at paragraph (b)(1) of this section, if the Director 
determines that an audit would not provide further information on safety 
and soundness issues relevant to the examination rating.
    (3) When the OTS requires the application of procedures agreed upon 
by the OTS for safety and soundness purposes, the Director shall 
identify the procedures to be performed. The Director shall also 
determine whether the agreed upon procedures were conducted and filed in 
a manner satisfactory to the OTS.
    (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 savings association's or 
holding company's principal office is located;
    (2) Agrees in the engagement letter to provide the OTS 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 OTS.
    (e) Voluntary audits. When a savings association, savings and loan 
holding company, or affiliate (as defined by 12 CFR 563.41) obtains an 
independent audit voluntarily, it must be performed by an independent 
public accountant who satisfies the requirements of paragraphs (d)(1), 
(d)(2), and (d)(3)(i) of this section.

[59 FR 60304, Nov. 23, 1994, as amended at 62 FR 3780, Jan. 27, 1997; 66 
FR 13007, Mar. 2, 2001; 67 FR 70531, Nov. 25, 2002; 67 FR 77917, 
December 20, 2002]



PART 563_SAVINGS ASSOCIATIONS_OPERATIONS--Table of Contents




                           Subpart A_Accounts

Sec.
563.1 Chartering documents.
563.4 [Reserved]
563.5 Securities: Statement of non-insurance.

                    Subpart B_Operation and Structure

563.22 Merger, consolidation, purchase or sale of assets, or assumption 
          of liabilities.
563.27 Advertising.
563.33 Directors, officers, and employees.
563.36 Tying restriction exception.
563.39 Employment contracts.
563.41 Transactions with affiliates.
563.43 Loans by savings associations to their executive officers, 
          directors and principal shareholders.
563.47 Pension plans.

                   Subpart C_Securities and Borrowings

563.74 Mutual capital certificates.
563.76 Offers and sales of securities at an office of a savings 
          association.
563.80 Borrowing limitations.
563.81 Issuance of subordinated debt securities and mandatorily 
          redeemable preferred stock.

Subpart D [Reserved]

                     Subpart E_Capital Distributions

563.140 What does this subpart cover?
563.141 What is a capital distribution?
563.142 What other definitions apply to this subpart?
563.143 Must I file with OTS?
563.144 How do I file with the OTS?
563.145 May I combine my notice or application with other notices or 
          applications?
563.146 Will the OTS permit my capital distribution?

                 Subpart F_Financial Management Policies

563.161 Management and financial policies.
563.170 Examinations and audits; appraisals; establishment and 
          maintenance of records.
563.171 Frequency of safety and soundness examination.
563.172 Financial derivatives.
563.176 Interest-rate-risk-management procedures.
563.177 Procedures for monitoring Bank Secrecy Act (BSA) compliance.

[[Page 200]]

                     Subpart G_Reporting and Bonding

563.180 Suspicious Activity Reports and other reports and statements.
563.181 Reports of change in control of mutual savings associations.
563.183 Reports of change in chief executive officer or director; other 
          reports; form and filing of such reports.
563.190 Bonds for directors, officers, employees, and agents; form of 
          and amount of bonds.
563.191 Bonds for agents.
563.200 Conflicts of interest.
563.201 Corporate opportunity.

   Subpart H_Notice of Change of Director or Senior Executive Officer

563.550 What does this subpart do?
563.555 What definitions apply to this subpart?
563.560 Who must give prior notice?
563.565 What procedures govern the filing of my notice?
563.570 What information must I include in my notice?
563.575 What procedures govern OTS review of my notice for completeness?
563.580 What standards and procedures will govern OTS review of the 
          substance of my notice?
563.585 When may a proposed director or senior executive officer begin 
          service?
563.590 When will the OTS waive the prior notice requirement?

    Authority: 12 U.S.C. 375b, 1462, 1462a, 1463, 1464, 1467a, 1468, 
1817, 1820, 1828, 1831o, 3806; 31 U.S.C. 5318; 42 U.S.C. 4106.

    Source: 54 FR 49552, Nov. 30, 1989, unless otherwise noted.



                           Subpart A_Accounts



Sec. 563.1  Chartering documents.

    (a) Submission for approval. Any de novo savings association prior 
to commencing operations shall file its charter and bylaws with the OTS 
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 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 savings association, and shall upon request deliver to any 
accountholders a copy of such charter and bylaws or amendments thereto.

[57 FR 14344, Apr. 20, 1992]



Sec. 563.4  [Reserved]



Sec. 563.5  Securities: Statement of non-insurance.

    Every security issued by a savings association must include in its 
provisions a clear statement that the security is not insured by the 
Federal Deposit Insurance Corporation.



                    Subpart B_Operation and Structure



Sec. 563.22  Merger, consolidation, purchase or sale of assets, or 
assumption of liabilities.

    (a) No savings association may, without application to and approval 
by the Office:
    (1) Combine with any insured depository institution, if the 
acquiring or resulting institution is to be a savings association; or
    (2) Assume liability to pay any deposit made in, any insured 
depository institution.
    (b)(1) No savings association may, without notifying the Office, as 
provided in paragraph (h)(1) of this section:
    (i) Combine with another insured depository institution where a 
savings association is not the resulting institution; or
    (ii) In the case of a savings association that meets the conditions 
for expedited treatment under Sec. 516.5 of this chapter, convert, 
directly or indirectly, to a national or state bank.
    (2) A savings association that does not meet the conditions for 
expedited treatment under Sec. 516.5 of this chapter may not, directly 
or indirectly, convert to a national or state bank without prior 
application to and approval of OTS, as provided in paragraph (h)(2)(ii) 
of this section.
    (c) No savings association may make any transfer (excluding 
transfers subject to paragraphs (a) or (b) of this section) without 
notice or application to the Office, as provided in paragraph (h)(2) of 
this section. For purposes of this paragraph, the term ``transfer'' 
means purchases or sales of assets or

[[Page 201]]

liabilities in bulk not made in the ordinary course of business 
including, but not limited to, transfers of assets or savings account 
liabilities, purchases of assets, and assumptions of deposit accounts or 
other liabilities, and combinations with a depository institution other 
than an insured depository institution.
    (d)(1) In determining whether to confer approval for a transaction 
under paragraphs (a), (b)(2), or (c) of this section, the Office shall 
take into account the following:
    (i) The capital level of any resulting savings association;
    (ii) The financial and managerial resources of the constituent 
institutions;
    (iii) The future prospects of the constituent institutions;
    (iv) The convenience and needs of the communities to be served;
    (v) The conformity of the transaction to applicable law, regulation, 
and supervisory policies;
    (vi) Factors relating to the fairness of and disclosure concerning 
the transaction, including, but not limited to:
    (A) Equitable treatment. The transaction should be equitable to all 
concerned--savings account holders, borrowers, creditors and 
stockholders (if any) of each savings association--giving proper 
recognition of and protection to their respective legal rights and 
interests. The transaction will be closely reviewed for fairness where 
the transaction does not appear to be the result of arms' length 
bargaining or, in the case of a stock savings association, where 
controlling stockholders are receiving different consideration from 
other stockholders. No finder's or similar fee should be paid to any 
officer, director, or controlling person of a savings association which 
is a party to the transaction.
    (B) Full disclosure. The filing should make full disclosure of all 
written or oral agreements or understandings by which any person or 
company will receive, directly or indirectly, any money, property, 
service, release of pledges made, or other thing of value, whether 
tangible or intangible, in connection with the transaction.
    (C) Compensation to officers. Compensation, including deferred 
compensation, to officers, directors and controlling persons of the 
disappearing savings association by the resulting institution or an 
affiliate thereof should not be in excess of a reasonable amount, and 
should be commensurate with their duties and responsibilities. The 
filing should fully justify the compensation to be paid to such persons. 
The transaction will be particularly scrutinized where any of such 
persons is to receive a material increase in compensation above that 
paid by the disappearing savings association prior to the commencement 
of negotiations regarding the proposed transaction. An increase in 
compensation in excess of the greater of 15% or $10,000 gives rise to 
presumptions of unreasonableness and sale of control. In the case of 
such an increase, evidence sufficient to rebut such presumptions should 
be submitted.
    (D) Advisory boards. Advisory board members should be elected for a 
term not exceeding one year. No advisory board fees should be paid to 
salaried officers or employees of the resulting savings association. The 
filing should describe and justify the duties and responsibilities and 
any compensation paid to any advisory board of the resulting savings 
association that consists of officers, directors or controlling persons 
of the disappearing institution, particularly if the disappearing 
institution experienced significant supervisory problems prior to the 
transaction. No advisory board fees should exceed the director fees paid 
by the resulting savings association. Advisory board fees that are in 
excess of 115 percent of the director fees paid by the disappearing 
savings association prior to commencement of negotiations regarding the 
transaction give rise to presumptions of unreasonableness and sale of 
control unless sufficient evidence to rebut such presumptions is 
submitted. Rebuttal evidence is not required if:
    (1) The advisory board fees do not exceed the fee that advisory 
board members of the resulting institution receive for each monthly 
meeting attended or $150, whichever is greater; or
    (2) The advisory board fees do not exceed $100 per meeting attended 
for disappearing savings associations with assets greater than 
$10,000,000 or $50 per

[[Page 202]]

meeting attended for disappearing savings associations with assets of 
$10,000,000 or less, based on a schedule of 12 meetings per year.
    (E) The accounting and tax treatment of the transaction; and
    (F) Fees paid and professional services rendered in connection with 
the transaction.
    (2) In conferring approval of a transaction under paragraph (a) of 
this section, the Office also will consider the competitive impact of 
the transaction, including whether:
    (i) The transaction would result in a monopoly, or would be in 
furtherance of any monopoly or conspiracy to monopolize or to attempt to 
monopolize the savings association business in any part of the United 
States; or
    (ii) The effect of the transaction on any section of the country may 
be substantially to lessen competition, or tend to create a monopoly, or 
in any other manner would be in restraint of trade, unless the Office 
finds that the anticompetitive effects of the proposed transaction are 
clearly outweighed in the public interest by the probable effect of the 
transaction in meeting the convenience and needs of the communities to 
be served.
    (3) Applications and notices filed under this section shall be upon 
forms prescribed by the Office.
    (4) Applications filed under section 5(d)(3) of the Federal Deposit 
Insurance Act (12 U.S.C. 1815(d)(3)) and paragraph (a) of this section 
must be processed in accordance with the time frames set forth in 
Sec. Sec. 516.220 through 516.290 of this chapter, provided that the 
period for review may be extended only if the Office determines that the 
applicant has failed to furnish all requested information or that the 
information submitted is substantially inaccurate, in which case the 
review period may be extended for up to 30 days.
    (e)(1) Unless the OTS finds that it must act immediately in order to 
prevent the probable default of one of the savings associations 
involved, the applicant must publish a public notice of the application 
in accordance with the procedures specified in subpart B of part 516 of 
this chapter. In addition to initial publication, the applicant must 
publish on a weekly basis during the period allowed for furnishing 
reports under paragraph (e)(2) of this section.
    (2) Unless the Office determines that action must be taken 
immediately in order to prevent the probable default of one of the 
savings associations involved, the Office shall request reports from the 
Attorney General, the Comptroller of the Currency, the Board of 
Governors of the Federal Reserve System and the Federal Deposit 
Insurance Corporation on the competitive factors involved in the 
transaction. The reports shall be furnished within thirty calendar days 
of the date on which they are requested, or within ten calendar days of 
such date if the Office advised the Attorney General and the other three 
banking agencies that an emergency exists requiring expeditious action. 
The Office shall immediately notify the Attorney General of any approval 
of a transaction pursuant to this section.
    (3) If the Office has found that it must act immediately to prevent 
the probable default of one of the savings associations involved and the 
reports on the competitive factors have been dispensed with, the 
transaction may be consummated immediately upon approval by the Office 
and any applicable state regulatory authorities. If the Office has 
advised the Attorney General and the other three banking agencies of the 
existence of an emergency requiring expeditious action and has requested 
reports on the competitive factors within ten days, the transaction may 
not be consummated before the fifth calendar day after the date of 
approval by the Office. In all other cases, the transaction may not be 
consummated before the thirtieth calendar day after the date of approval 
by the Office.
    (4) Commenters may submit comments on the application in accordance 
with the procedures set forth in subpart C of part 516 of this chapter, 
except that comments may be submitted at any time during the period 
described in paragraph (e)(2) of this section. The OTS may arrange 
informal or formal meetings in accordance with the procedures set forth 
in subpart D of part 516 of this chapter.
    (5) Notice of a proposed account transfer and the option of 
retaining the

[[Page 203]]

account in the transferring savings association shall be furnished to an 
affected accountholder:
    (i) By a savings association transferring account liabilities to an 
institution the accounts of which are not insured by the Savings 
Association Insurance Fund, the Bank Insurance Fund, or the National 
Credit Union Share Insurance Fund; and
    (ii) By any mutual savings association transferring account 
liabilities to a stock form depository institution. The required notice 
shall allow affected accountholders at least 30 days to consider whether 
to retain their accounts in the transferring savings association.
    (f) Automatic approvals by the Office. Applications filed pursuant 
to paragraph (a) of this section shall be deemed to be approved 
automatically by the Office 30 calendar days after the Office sends 
written notice to the applicant that the application is complete, 
unless:
    (1) The acquiring savings association does not meet the criteria for 
expedited treatment under Sec. 516.5 of this chapter;
    (2) The OTS recommends the imposition of non-standard conditions 
prior to approving the application;
    (3) The OTS suspends the applicable processing time frames under 
Sec. 516.190 of this chapter;
    (4) The OTS raises objections to the transaction;
    (5) The resulting savings association would be one of the 3 largest 
depository institutions competing in the relevant geographic area where 
before the transaction there were 5 or fewer depository institutions, 
the resulting savings association would have 25 percent or more of the 
total deposits held by depository institutions in the relevant 
geographic area, and the share of total deposits would have increased by 
5 percent or more;
    (6) The resulting savings association would be one of the 2 largest 
depository institutions competing in the relevant geographic area where 
before the transaction there were 6 to 11 depository institutions the 
resulting savings association would have 30 percent or more of the total 
deposits held by depositing institutions in the relevant geographic 
area, and the share of total deposits would have increased by 10 percent 
or more;
    (7) The resulting savings association would be one of the 2 largest 
depository institutions competing in the relevant geographic area where 
before the transaction there were 12 or more depository institutions, 
the resulting savings association would have 35 percent or more of the 
total deposits held by the depository institutions in the relevant 
geographic area, and the share of total deposits would have increased by 
15 percent or more;
    (8) The Herfindahl-Hirschman Index (HHI) in the relevant geographic 
area was more than 1800 before the transaction, and the increase in the 
HHI used by the transaction would be 50 or more;
    (9) In a transaction involving potential competition, the OTS 
determines that the acquiring savings association is one of three or 
fewer potential entrants into the relevant geographic area;
    (10) The acquiring savings association has assets of $1 billion or 
more and proposes to acquire assets of $1 billion or more;
    (11) The savings association that will be the resulting savings 
association in the transaction has a composite Community Reinvestment 
Act rating of less than satisfactory, or is otherwise seriously 
deficient with respect to the Office's nondiscrimination regulations and 
the deficiencies have not been resolved to the satisfaction of the OTS;
    (12) The transaction involves any supervisory or assistance 
agreement with the Office, the Resolution Trust Corporation, or the 
Federal Deposit Insurance Corporation;
    (13) The transaction is part of a conversion under part 563b of this 
chapter;
    (14) The transaction raises a significant issue of law or policy; or
    (15) The transaction is opposed by any constituent institution or 
contested by a competing acquiror.
    (g) Definitions. (1) The terms used in this section shall have the 
same meaning as set forth in Sec. 552.13(b) of this chapter.
    (2) Insured depository institution. Insured depository institution 
has the same

[[Page 204]]

meaning as defined in section 3(c)(2) of the Federal Deposit Insurance 
Act.
    (3) With regard to paragraph (f) of this section, the term relevant 
geographic area is used as a substitute for relevant geographic market, 
which means the area within which the competitive effects of a merger or 
other combination may be evaluated. The relevant geographic area shall 
be delineated as a county or similar political subdivision, an area 
smaller than a county, or an aggregation of counties within which the 
merging or combining insured depository institutions compete. In 
addition, the Office may consider commuting patterns, newspaper and 
other advertising activities, or other factors as the Office deems 
relevant.
    (h) Special requirements and procedures for transactions under 
paragraphs (b) and (c) of this section--(1) Certain transactions with no 
surviving savings association. The Office must be notified of any 
transaction under paragraph (b)(1) of this section. Such notification 
must be submitted to the OTS at least 30 days prior to the effective 
date of the transaction, but not later than the date on which an 
application relating to the proposed transaction is filed with the 
primary regulator of the resulting institution; the Office may, upon 
request or on its own initiative, shorten the 30-day prior notification 
requirement. Notifications under this paragraph must demonstrate 
compliance with applicable stockholder or accountholder approval 
requirements. Where the savings association submitting the notification 
maintains a liquidation account established pursuant to part 563b of 
this chapter, the notification must state that the resulting institution 
will assume such liquidation account.
    The notification may be in the form of either a letter describing 
the material features of the transaction or a copy of a filing made with 
another Federal or state regulatory agency seeking approval from that 
agency for the transaction under the Bank Merger Act or other applicable 
statute. If the action contemplated by the notification is not completed 
within one year after the Office's receipt of the notification, a new 
notification must be submitted to the Office.
    (2) Other transfer transactions--(i) Expedited treatment. A notice 
in conformity with Sec. 516.25(a) of this chapter may be submitted to 
OTS under Sec. 516.40 of this chapter for any transaction under 
paragraph (c) of this section, provided all constituent savings 
associations meet the conditions for expedited treatment under Sec. 
516.5 of this chapter. Notices submitted under this paragraph must be 
deemed approved automatically by OTS 30 days after receipt, unless OTS 
advises the applicant in writing prior to the expiration of such period 
that the proposed transaction may not be consummated without OTS's 
approval of an application under paragraphs (h)(2)(ii) or (h)(2)(iii) of 
this section.
    (ii) Standard treatment. An application in conformity with Sec. 
516.25(b) of this chapter and paragraph (d) of this section must be 
submitted to OTS under Sec. 516.40 by each savings association 
participating in a transaction under paragraph (b)(2) or (c) of this 
section, where any constituent savings association does not meet the 
conditions for expedited treatment under Sec. 516.5 of this chapter, 
except as provided in paragraph (h)(2)(iii) of this section. 
Applications under this paragraph must be processed in accordance with 
the procedures in part 516, subparts A and E of this chapter.
    (iii) Standard treatment for transactions under section 5(d)(3) of 
the Federal Deposit Insurance Act. An application in conformity with 
Sec. 516.25(b) of this chapter and paragraph (d) of this section must 
be submitted to OTS under Sec. 516.40 by each savings association which 
will survive any transaction under both section 5(d)(3) of the Federal 
Deposit Insurance Act (12 U.S.C. 1815(d)(3)) and paragraph (c) of this 
section, where any constituent savings association does not meet the 
conditions for expedited treatment under Sec. 516.5 of this chapter. 
Applications under this paragraph must be processed in accordance with 
the procedures in part 516, subparts A and E of this chapter, provided 
that the period for review may be extended only if OTS determines that 
the applicant has failed to furnish all requested information or that 
the information submitted is substantially inaccurate, in which case the 
review

[[Page 205]]

period may be extended for up to 30 days.

[54 FR 49552, Nov. 30, 1989, as amended at 55 FR 13514, Apr. 11, 1990; 
57 FR 14344, Apr. 20, 1992; 59 FR 44624, Aug. 30, 1994; 59 FR 66159, 
Dec. 23, 1994; 62 FR 64146, Dec. 4, 1997; 66 FR 13007, Mar. 2, 2001]



Sec. 563.27  Advertising.

    No 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.

[54 FR 49552, Nov. 30, 1989, as amended at 58 FR 4313, Jan. 14, 1993]



Sec. 563.33  Directors, officers, and employees.

    (a) Directors--(1) Requirements. The composition of the board of 
directors of a 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 savings association or of any subsidiary or (except in 
the case of a 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]

[54 FR 49552, Nov. 30, 1989, as amended at 58 FR 4313, Jan. 14, 1993]



Sec. 563.36  Tying restriction exception.

    (a) Safe harbor for combined-balance discounts. A savings and loan 
holding company or any savings association or any affiliate of either 
may vary the consideration for any product or package of products based 
on a customer's maintaining a combined minimum balance in certain 
products specified by the company varying the consideration (eligible 
products), if:
    (1) That company (if it is a savings association) or a savings 
association affiliate of that company (if it is not a savings 
association) offers deposits, and all such deposits are eligible 
products; and
    (2) Balances in deposits count at least as much as non-deposit 
products toward the minimum balance.
    (b) Limitations on exception. This exception shall terminate upon a 
finding by the OTS that the arrangement is resulting in anti-competitive 
practices. The eligibility of a savings and loan holding company or 
savings association or affiliate of either to operate under this 
exception shall terminate upon a finding by the OTS that its exercise of 
this authority is resulting in anti-competitive practices.

[61 FR 60184, Nov. 27, 1996]



Sec. 563.39  Employment contracts.

    (a) General. A 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 an association's board of 
directors. An 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 
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 association. This may

[[Page 206]]

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 association's board of directors may terminate the officer 
or employee's employment at any time, but any termination by the 
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 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 
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 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 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 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 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 
Director or his or her designee.
    (5) 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 association
    (i) By the Director or his or her designee, at the time the Federal 
Deposit Insurance Corporation or Resolution Trust Corporation enters 
into an agreement to provide assistance to or on behalf of the 
association under the authority contained in 13(c) of the Federal 
Deposit Insurance Act; or
    (ii) By the Director or his or her designee, at the time the 
Director or his or her designee approves a supervisory merger to resolve 
problems related to operation of the association or when the association 
is determined by the Director to be in an unsafe or unsound condition.

Any rights of the parties that have already vested, however, shall not 
be affected by such action.



Sec. 563.41  Transactions with affiliates.

    (a) Scope. (1) This section implements section 11(a) of the Home 
Owners' Loan Act (12 U.S.C. 1468(a)). Section 11(a) applies sections 23A 
and 23B of the FRA (12 U.S.C. 371c and 371c1) to every savings 
association in the same manner and to the same extent as if the 
association were a member bank; prohibits certain types of transactions 
with affiliates; and authorizes OTS to impose additional restrictions on 
a savings association's transactions with affiliates.
    (2) For the purposes of this section, ``savings association'' is 
defined at section 3 of the Federal Deposit Insurance Act (12 U.S.C. 
1813), and also includes any savings bank or any cooperative bank that 
is a savings association under 12 U.S.C. 1467a(l). A non-affiliate 
subsidiary of a savings association as described in paragraph (b)(11) of 
this

[[Page 207]]

section is treated as part of the savings association.
    (b) Sections 23A and 23B of the FRA/Regulation W. A savings 
association must comply with sections 23A and 23B of the Federal Reserve 
Act and the implementing regulations at 12 CFR part 223 (Regulation W) 
as if it were a member bank, except as described in the following chart. 
In addition, a savings association should read all references to ``the 
Board'' or ``appropriate federal banking agency'' to refer only to 
``OTS,'' except for references at 12 CFR 223.2(a)(9)(iv), 223.3(h), 
223.3(z), 223.14(c)(4), 223.43, and 223.55.

------------------------------------------------------------------------
       Provision of Regulation W                   Application
------------------------------------------------------------------------
(1) 12 CFR 223.1--Authority, purpose,    Does not apply. Section
 and scope.                               563.41(a) addresses these
                                          matters.
(2) 12 CFR 223.2(a)(8)--``Affiliate''    Does not apply. Savings
 includes a financial subsidiary.         association subsidiaries do
                                          not meet the statutory
                                          definition of financial
                                          subsidiary.
(3) 12 CFR 223.2(a)(12)--Determination   Read to include the following
 that ``affiliate'' includes other        statement: ``Affiliate also
 types of companies.                      includes any company that OTS
                                          determines, by order or
                                          regulation, to present a risk
                                          to the safety and soundness of
                                          the savings association.''
(4) 12 CFR 223.2(b)(1)(ii)--             Does not apply. Savings
 ``Affiliate'' includes a subsidiary      association subsidiaries do
 that is a financial subsidiary.          not meet the statutory
                                          definition of financial
                                          subsidiary.
(5) 12 CFR 223.3(d)--Definition of       Does not apply. Capital stock
 ``capital stock and surplus.''.          and surplus means ``unimpaired
                                          capital and unimpaired
                                          surplus,'' as defined in 12
                                          CFR 560.93(b)(11).
(6) 12 CFR 223.3(h)(1)--Section 23A      Read to incorporate Sec.
 covered transactions include an          563.41(c)(1), which prohibits
 extension of credit to the affiliate.    loans or extensions of credit
                                          to an affiliate, unless the
                                          affiliate is engaged only in
                                          the activities described at 12
                                          U.S.C. 1467a(c)(2)(F)(i), as
                                          defined in Sec.  584.2-2 of
                                          this chapter.
(7) 12 CFR 223.3(h)(2)--Section 23A      Read to incorporate Sec.
 covered transactions include a           563.41(c)(2), which prohibits
 purchase of or investment in             purchases and investments in
 securities issued by an affiliate.       securities issued by an
                                          affiliate, other than with
                                          respect to shares of a
                                          subsidiary.
(8) 12 CFR 223.3(k)--Definition of       Read to include the following
 ``depository institution.''.             statement: ``For the purposes
                                          of this definition, a non-
                                          affiliate subsidiary of a
                                          savings association is treated
                                          as part of the depository
                                          institution.''
(9) 12 CFR 223.3(p)--Definition of       Does not apply. Savings
 ``financial subsidiary.''.               association subsidiaries do
                                          not meet the statutory
                                          definition of financial
                                          subsidiary.
(10) 12 CFR 223.3(w)--Definition of      Read to include the following
 ``member bank.''.                        statement: ``Member bank also
                                          includes a savings
                                          association. For purposes of
                                          this definition, a non-
                                          affiliate subsidiary of a
                                          savings association is treated
                                          as part of the savings
                                          association.''
(11) 12 CFR 223.3(aa)--Definition of     Does not apply. Other OTS
 ``operating subsidiary.''.               regulations include a
                                          conflicting definition of this
                                          same term. Instead, OTS uses
                                          the phrase ``non-affiliate
                                          subsidiary.'' A non-affiliate
                                          subsidiary is a subsidiary of
                                          a savings association other
                                          than a subsidiary described at
                                          12 CFR 223.2(b)(1)(i), (iii)
                                          through (v).
(12) 12 CFR 223.3(ii)--Definition of     Read to include the following
 ``subsidiary.''.                         statement: ``A subsidiary of a
                                          savings association means a
                                          company that is controlled by
                                          the savings association.''
(13) 12 CFR 223.3(kk)--Definition of     Read to include the following
 ``well capitalized.''.                   statement: ``For a savings and
                                          loan holding company, however,
                                          well-capitalized means that
                                          the holding company
                                          significantly exceeds OTS
                                          expectations for the amount of
                                          capital needed to adequately
                                          support the holding company's
                                          risk profile, as determined by
                                          OTS on a case-by-case basis.''
(14) 12 CFR 223.31--Application of       Read to refer to ``a non-
 section 23A to an acquisition of an      affiliate subsidiary'' instead
 affiliate that becomes an operating      of ``operating subsidiary.''
 subsidiary.
(15) 12 CFR 223.32--Rules that apply to  Does not apply. Savings
 financial subsidiaries of a bank.        association subsidiaries do
                                          not meet the statutory
                                          definition of financial
                                          subsidiary.
(16) 12 CFR 223.42(f)(2)--Exemption for  Read to refer to ``Thrift
 purchasing certain marketable            Financial Report'' instead of
 securities.                              ``Call Report.'' References to
                                          ``state member bank'' are
                                          unchanged.
(17) 12 CFR 223.42(g)(2)--Exemption for  Read to refer to ``Thrift
 purchasing municipal securities.         Financial Report'' instead of
                                          ``Call Report.'' References to
                                          ``state member bank'' are
                                          unchanged.
(18) 12 CFR 223.61--Application of       Does not apply to savings
 sections 23A and 23B to U.S. branches    associations or their
 and agencies of foreign banks.           subsidiaries.
------------------------------------------------------------------------

    (c) Additional prohibitions and restrictions. A savings association 
must comply with the additional prohibitions and restrictions in this 
paragraph. Except as described in paragraph (b) of this section, the 
definitions in 12 CFR part 223 apply to these additional prohibitions 
and restrictions.
    (1) Loans and extensions of credit. (i) A savings association may 
not make a

[[Page 208]]

loan or other extension of credit to an affiliate, unless the affiliate 
is solely engaged in the activities described at 12 U.S.C. 
1467a(c)(2)(F)(i), as defined in Sec. 584.2-2 of this chapter. A loan 
or extension of credit to a third party is not prohibited merely because 
proceeds of the transaction are used for the benefit of, or are 
transferred to, an affiliate.
    (ii) If OTS determines that a particular transaction is, in 
substance, a loan or extension of credit to an affiliate that is engaged 
in activities other than those described at 12 U.S.C. 1467a(c)(2)(F)(i), 
as defined in Sec. 584.2-2 of this chapter, or OTS has other 
supervisory concerns concerning the transaction, OTS may inform the 
savings association that the transaction is prohibited under this 
paragraph (c)(1), and require the savings association to divest the 
loan, unwind the transaction, or take other appropriate action.
    (2) Purchases or investments in securities. A savings association 
may not purchase or invest in securities issued by any affiliate other 
than with respect to shares of a subsidiary. For the purposes of this 
paragraph (c)(2), subsidiary includes a bank and a savings association.
    (3) Recordkeeping. A savings association must make and retain 
records that reflect, in reasonable detail, all transactions between the 
savings association and its affiliates and any other person to the 
extent that the proceeds of a transaction are used for the benefit of, 
or transferred to, an affiliate. At a minimum, these records must:
    (i) Identify the affiliate;
    (ii) Specify the dollar amount of the transaction and demonstrate 
that this amount is within the quantitative limits in 12 CFR 223.11 and 
223.12, or that the transaction is not subject to those limits;
    (iii) Indicate whether the transaction involves a low-quality asset;
    (iv) Identify the type and amount of any collateral involved in the 
transaction and demonstrate that this collateral meets the requirements 
in 12 CFR 223.14 or that the transaction is not subject to those 
requirements;
    (v) Demonstrate that the transaction complies with 12 CFR part 223, 
subpart F or that the transaction is not subject to those requirements;
    (vi) Demonstrate that all loans and extensions of credit to 
affiliates comply with paragraph (c)(1) of this section; and
    (vii) Be readily accessible for examination and supervisory 
purposes.
    (4) Notice requirement. (i) OTS may require a savings association to 
notify the agency before the savings association may engage in a 
transaction with an affiliate or a subsidiary (other than exempt 
transactions under 12 CFR part 223). OTS may impose this requirement if:
    (A) The savings association is in troubled condition as defined at 
Sec. 563.555 of this part;
    (B) The savings association does not meet its regulatory capital 
requirements;
    (C) The savings association commenced de novo operations within the 
past two years;
    (D) OTS approved an application or notice under 12 CFR part 574 
involving the savings association or its holding company within the past 
two years;
    (E) The savings association entered into a consent to merge or a 
supervisory agreement within the past two years; or
    (F) OTS or another banking agency initiated a formal enforcement 
proceeding against the savings association and the proceeding is 
pending.
    (ii) OTS must notify the savings association in writing that it has 
imposed the notice requirement and must identify the circumstance listed 
in paragraph (c)(4)(i) of this section that supports the imposition of 
the notice requirement.
    (iii) If OTS has imposed the notice requirement under this 
paragraph, a savings association must provide a written notice to OTS at 
least 30 days before the savings association may enter into a 
transaction with an affiliate or a subsidiary. The written notice must 
include a full description of the transaction. If OTS does not object 
during the 30-day period, the savings association may proceed with the 
proposed transaction.

[68 FR 57797, Oct. 7, 2003, as amended at 68 FR 75110, Dec. 30, 2003]

[[Page 209]]



Sec. 563.43  Loans by savings associations to their executive officers, 
directors and principal shareholders.

    Pursuant to 12 U.S.C. 1463(a) and 1468, a savings association, its 
subsidiaries and its insiders (as defined) shall be subject to the 
restrictions contained in 12 CFR Part 215, subparts A and B of the 
Federal Reserve Board's Regulation O, with the exception of 12 CFR 
215.13, in the same manner and to the same extent as if the association 
were a bank and a member bank of the Federal Reserve System, except 
that:
    (a) Such provisions shall be administered and enforced by the OTS;
    (b) References to the term ``bank holding company'' shall be deemed 
to refer to ``savings and loan holding company'';
    (c) References to ``report of condition filed under 12 U.S.C. 
1817(a)(3)'' shall be deemed to refer to ``Thrift Financial Report'';
    (d) The term subsidiary includes a savings association that is 
controlled by a company (including for this purpose an insured 
depository institution) that is a savings and loan holding company. A 
company has control over a saving association if it: directly or 
indirectly, or acting through one or more other persons owns, controls, 
or has the power to vote 25 percent or more of any class of voting 
securities; or would be deemed to control the company under Sec. 
574.4(a) of this chapter or presumed to control the company under Sec. 
574.4(b) of this chapter, and in the latter case, control has not been 
rebutted. Notwithstanding any other provision of this section, no 
company shall be deemed to own or control another by virtue of its 
ownership or control of shares in a fiduciary capacity. When used to 
refer to a subsidiary of a savings association, the term subsidiary 
means a ``subsidiary'' that is controlled by the savings association 
within the meaning of 12 CFR part 574 of this chapter.
    (e) References to the Reserve Bank or the Comptroller shall be 
deemed to include the Director of OTS; and
    (f) References to the term ``unimpaired capital and unimpaired 
surplus'' shall be deemed to refer to ``unimpaired capital and 
unimpaired surplus'' as defined at Sec. 563.93(b)(11) of this part.

[57 FR 45980, Oct. 6, 1992, as amended at 59 FR 53571, Oct. 25, 1994; 60 
FR 66869, Dec. 27, 1995; 67 FR 77918, Dec. 20, 2002; 68 FR 57798, Oct. 
7, 2003]



Sec. 563.47  Pension plans.

    (a) General. No savings association or service corporation thereof 
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 
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 OTS at least 60 days prior to the 
proposed termination date.

[[Page 210]]

    (e) Records. Each savings association or service corporation 
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.

[59 FR 66159, Dec. 23, 1994]



                   Subpart C_Securities and Borrowings



Sec. 563.74  Mutual capital certificates.

    (a) General. No savings association that is in the mutual form shall 
issue mutual capital certificates pursuant to this section or amend the 
terms of such certificates unless it has obtained written approval of 
the Office. No approval shall be granted unless the proposed issuance of 
the mutual capital certificates and the form and manner of filing of the 
application are in accordance with the provisions of this section.
    (b) Eligibility Requirements. The Office will consider and process 
an application for approval of the issuance of mutual capital 
certificates pursuant to this section only if the issuance is authorized 
by applicable law and regulation and is not inconsistent with any 
provision of the applicant's charter, constitution or bylaws.
    (c) Application form; supporting information. An application for 
approval of the issuance of mutual capital certificates pursuant to this 
section shall be in the form prescribed by the Office. Such application 
and instructions may be obtained from the OTS. Information and exhibits 
shall be furnished in support of the application in accordance with such 
instructions, setting forth all of the terms and provisions relating to 
the proposed issue and showing that all of the requirements of this 
section have been or will be met.
    (d) Charter amendment. No application for approval of the issuance 
of mutual capital certificates pursuant to this section may be filed 
unless the amendment to the mutual association's charter, constitution 
or bylaws or other actions conferring such authority shall have been 
approved pursuant to the procedures and requirements set forth in the 
mutual association's charter, constitution or bylaws, or as may 
otherwise be required by applicable law.
    (e) Filing requirements. The application for issuance of mutual 
capital certificates shall be publicly filed with the OTS.
    (f) Supervisory objection. No application or approval of the 
issuance of mutual capital certificates pursuant to this section shall 
be approved if, in the opinion of the Office, the policies, condition, 
or operation of the applicant afford a basis for supervisory objection 
to the application.
    (g) Limitation on offering period. Following the date of the 
approval of the application by the Office, the association shall have an 
offering period of not more than one year in which to complete the sale 
of the mutual capital certificates issued pursuant to this section. The 
Office may in its discretion extend such offering period if a written 
request showing good cause for such extension is filed with it not later 
than 30 days before the expiration of such offering period or any 
extension thereof.
    (h) Reports. Within 30 days after completion of the sale of mutual 
capital certificates issued pursuant to this section, the association 
shall transmit to the OTS a written report stating the total dollar 
amount of securities sold, and the amount of net proceeds received by 
the association, and within 90 days it shall transmit a written report 
stating the number of purchasers.
    (i) Requirements as to mutual capital certificates--(1) Form of 
certificate. Each mutual capital certificate and any governing agreement 
evidencing a mutual

[[Page 211]]

capital certificate issued by an association pursuant to this section:
    (i) Shall bear on its face, in bold-face type, the following legend: 
``This security is not a savings account or a deposit and it is not 
insured by the United States or any agency or fund of the United 
States''; and
    (ii) Shall clearly state that the certificate is subject to the 
requirements of Sec. 563.74(i)(2).
    (2) Legal requirements. Mutual capital certificates issued pursuant 
to this section shall:
    (i) Be subordinate to all claims against the association having the 
same priority as savings accounts, savings certificates, debt 
obligations or any higher priority;
    (ii) Not be eligible for use as collateral for any loan made by the 
issuing association;
    (iii) Constitute a claim in liquidation not exceeding the face value 
plus accrued dividends of the certificates, on the general reserves, 
surplus and undivided profits of the association remaining after the 
payment in full of all savings accounts, savings certificates and debt 
obligations;
    (iv) Be entitled to the payment of dividends, which may be fixed, 
variable, participating, or cumulative, or any combination thereof, only 
if, when and as declared by the association's board of directors out of 
funds legally available for that purpose, provided that no dividend may 
be declared or paid without the approval of the Office if such payment 
would cause the association to fail to meet its regulatory capital 
requirement under Sec. 567.2 of this chapter, and provided further that 
no dividend may be paid if such payment would constitute a violation of 
12 U.S.C. 1828(b);
    (v) Not be redeemable, except: (A) Where the dollar weighted average 
term of each issue of mutual capital certificates to be redeemed is 
seven years or more and redemption is to be made pursuant to a 
redemption schedule; (B) in the event of a merger, consolidation or 
reorganization approved by the Office; or (C) where the funds for 
redemption are raised by the issuance of mutual capital certificates 
approved pursuant to this section, or in conjunction with the issuance 
of capital stock pursuant to part 563b of this chapter: Provided, that 
mandatory redemption shall not be required; that mutual capital 
certificates shall not be redeemable on the demand or at the option of 
the holder; and that mutual capital certificates shall not receive, 
benefit from, be credited with or otherwise be entitled to or due 
payments in or for redemption if such payments would cause the 
association to fail to meet its regulatory capital requirement under 
Sec. 567.2 of this chapter; And Provided further, for the purposes of 
this paragraph (i)(2)(v), the ``dollar weighted average term'' of an 
issue of mutual capital certificates shall be the sum of the products 
calculated for each year that the mutual capital certificates in the 
issue have been redeemed or are scheduled to be redeemed. Each product 
shall be calculated by multiplying the number of years of each mutual 
capital certificate of a given term by a fraction, the numerator of 
which shall be the total dollar amount of each mutual capital 
certificate in the issue with the same term and the denominator of which 
shall be the total dollar amount of mutual capital certificates in the 
entire issue;
    (vi) Not have preemptive rights;
    (vii) Not have voting rights, except that an association may provide 
for voting rights if:
    (A) The savings association fails to pay dividends for a minimum of 
three consecutive dividend periods, and then the holders of the class or 
classes of mutual capital certificates granted such voting rights, and 
voting as a single class, with one vote for each outstanding 
certificate, may elect by a majority vote a maximum of one-third of the 
association's board of directors, the directors so elected to serve 
until the next annual meeting of the association succeeding the payment 
of all current and past dividends;
    (B) Any merger, consolidation, or reorganization (except in a 
supervisory case) is sought to be authorized, where the issuing 
association is not the survivor, provided that the regulatory capital of 
the resulting association available for payment of any class of mutual 
capital certificate on liquidation is less than the regulatory capital 
available for such class prior to the

[[Page 212]]

merger, consolidation, or reorganization;
    (C) Action is sought to be authorized which would create any class 
of mutual capital certificates having a preference or priority over an 
outstanding class or classes of mutual capital certificates;
    (D) Any action is sought to be authorized which would adversely 
change the specific terms of any class of mutual capital certificates;
    (E) Action is sought to be authorized which would increase the 
number of a class of mutual capital certificates, or the number of a 
class of mutual capital certificates ranking prior to or on parity with 
another class of mutual capital certificates; or
    (F) Action is sought which would authorize the issuance of an 
additional class or classes of mutual capital certificates without the 
association having met specific financial standards;
    (viii) Not constitute an obligation of the association and shall 
confer no rights which would give rise to any claim of or action for 
default;
    (ix) Not be convertible into any account, security, or interest, 
except that mutual capital certificates may be surrendered in exchange 
for preferred stock issued in connection with the conversion of the 
issuing savings association to the stock form pursuant to part 563b of 
this chapter, provided that the preferred stock shall have substantially 
the same voting rights, designations, preferences and relative, 
participating optional, or other special rights, and qualifications, 
limitations, and restrictions, as the mutual capital certificates 
exchanged for the preferred stock.
    (x) Provide for charging of losses after the exhaustion of all other 
items in the regulatory capital account.

[54 FR 49552, Nov. 30, 1989, as amended at 55 FR 13515, Apr. 11, 1990; 
57 FR 14345, Apr. 20, 1992; 59 FR 66159, Dec. 23, 1994]



Sec. 563.76  Offers and sales of securities at an office of a savings 
association.

    (a) A saving association may not offer or sell debt or equity 
securities issued by the association or an affiliate of the association 
at an office of the association; except that equity securities issued by 
the association or an affiliate in connection with the association's 
conversion from the mutual to stock form of organization in a conversion 
approved pursuant to part 563b of this chapter may be offered and sold 
at the association's offices: Provided, That:
    (1) The Regional Director does not object on supervisory grounds 
that the offer and sale of the securities at the offices of the 
association;
    (2) No commissions, bonuses, or comparable payments are paid to any 
employee of the savings association or its affiliates or to any other 
person in connection with the sale of securities at an office of a 
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 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 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 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 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

[[Page 213]]

sales of securities by savings associations shall be subject to Sec. 
563g.10 of this chapter.
    (c) Offers and sales of securities of a savings association or its 
affiliates in any office of the 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 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 
Office of Thrift Supervision Regional Director [insert Regional 
Director's name and telephone number with area code].
    I further certify that, before purchasing the [description of 
security being offered] of [name of issuer, name of 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 an association 
means any premises used by the association that are identified to the 
public through advertising or signage using the association's name, 
trade name, or logo.

[57 FR 46088, Oct. 7, 1992]



Sec. 563.80  Borrowing limitations.

    (a) General. Except as the Office otherwise may permit by advice in 
writing, a savings association may borrow only in accordance with the 
provisions of this section.
    (b) Amount of borrowing. A savings association may borrow up to the 
amount authorized by the laws under which the savings association 
operates.
    (c) Security. An association may give security for borrowings 
subject to any requirements imposed by the Office or the FDIC regarding 
notice of default on borrowings and any FDIC right of first refusal to 
purchase collateral.
    (d) Required statement for all securities evidencing outside 
borrowings. Each security shall bear on its face, in a prominent place, 
the following legend:

    This security is not a savings account or a deposit and it is not 
insured by the United States or any agency or fund of the United States.

    (e) Filing requirements for outside borrowings with maturities in 
excess of one year. (1) Unless the savings association meets its capital 
requirement under part 567 of this chapter, it shall, at least ten 
business days prior to issuance, file with the Regional Director or his 
or her designee a notice of intent to issue securities evidencing such 
borrowings. Such notice shall contain a summary of the items of the 
security, including:
    (i) Principal amount of the securities;
    (ii) Anticipated interest rate range and price range at which the 
securities are to be sold;
    (iii) Minimum denomination;
    (iv) Stated and average effective maturity;
    (v) Mandatory and optional prepayment provisions;
    (vi) Description, amount, and maintenance of collateral if any;
    (vii) Trustee provisions if any;
    (viii) Events of default and remedies of default;
    (ix) Any provisions which restrict, conditionally or otherwise, the 
operations of the association.
    (2) The OTS shall have 10 business days after receipt of such filing 
to object to the issuance of such securities. The OTS shall object if 
the terms or covenants of the proposed issue place unreasonable burdens 
on, or control over, the operations of the association. If no objection 
is taken, the savings association shall have 120 calendar days within 
which to issue such securities.
    (f) Note accounts. For purposes of this section, note accounts are 
not borrowings.

[54 FR 49552, Nov. 30, 1989, as amended at 55 FR 7300, Mar. 1, 1990; 55 
FR 13515, Apr. 11, 1990; 57 FR 14345, Apr. 20, 1992; 57 FR 33438, July 
29, 1992]

[[Page 214]]



Sec. 563.81  Issuance of subordinated debt securities and mandatorily 
redeemable preferred stock.

    (a) General--(1) Savings associations receiving standard treatment. 
No savings association subject to standard treatment of its applications 
under Sec. 516.5 of this chapter may issue subordinated debt securities 
or mandatorily redeemable preferred stock includable in regulatory 
capital pursuant to this section or amend the terms of such securities 
unless it has obtained the written approval of OTS. Approval of the 
issuance under this section, in order to meet the requirements of Sec. 
567.5 of this chapter, may be obtained either before or after the 
securities are issued. No approval shall be granted unless issuance of 
the securities and the form and manner of filing of the application are 
in accordance with the provisions of this section.
    (2) Savings associations receiving expedited treatment. No savings 
association eligible for expedited treatment under Sec. 516.5 of this 
chapter may issue subordinated debt securities or mandatorily redeemable 
preferred stock pursuant to this section for inclusion in regulatory 
capital or amend the terms of such securities unless it provides notice 
to OTS, and such notice contains a statement of the association's intent 
to include such securities in regulatory capital. Notice should be made 
30 days in advance of an issuance of subordinated debt securities or 
mandatorily redeemable preferred stock under this section, if the 
association intends to qualify such securities or stock as supplementary 
capital under Sec. 567.5(b)(2) of this chapter. Notice may be made 
either before or after such securities are issued, but will only be 
includable in regulatory capital (to the extent permitted by Sec. 
567.5(b) of this chapter) if the issuance of the securities and the 
filing of the notice are in accordance with the provisions of this 
section and the savings association certifies, in writing, to the Office 
that all regulatory requirements have been met. The Office reserves the 
right to determine after the 30-day notice period has expired that the 
issuance does not comply with the requirements of this section or those 
of Part 567 for inclusion in capital.
    (b) Eligibility requirements. In determining whether an issuance of 
subordinated debt securities or mandatorily redeemable preferred stock 
is includable in the regulatory capital of a savings association 
pursuant to this section, the OTS will consider the following factors:
    (1) Whether the issuance of such securities by the savings 
association is authorized by applicable law and regulation and is not 
inconsistent with any provision of the savings association's charter or 
bylaws. Proof of such provision shall be submitted with the notice or 
application;
    (2)(i) Whether, in the opinion of the OTS the overall policies, 
condition and operation of the savings association do not afford a basis 
for supervisory objection to the application or notice. The OTS shall 
establish guidelines that shall identify supervisory bases that may be 
used to object to the inclusion of specific subordinated debt and 
preferred stock issuances as regulatory capital. Such guidelines shall 
constitute illustrative but not exclusive bases for supervisory 
objection to subordinated debt and mandatorily redeemable preferred 
stock applications and notices. Such bases for supervisory objection may 
include, but are not limited to instances where:
    (A) Regulatory capital, without regard to the amount of any 
subordinated debt and mandatorily redeemable preferred stock to be 
included in regulatory capital, does not meet the requirements of Sec. 
567.2 of this chapter;
    (B) Actual and expected losses have not been offset by specific and 
general valuation allowances to the extent required pursuant to Sec. 
563.160 and Sec. 563.172 of this part; and
    (C) Actual and anticipated income from operations, after 
distribution of earnings to the holders of savings accounts, payment of 
dividends on outstanding equity securities and payment of interest on 
borrowings but before income taxes, is not demonstrably sufficient for 
payment of dividends and redemption price, discount and related expenses 
of the proposed issuance.
    (ii) The OTS may modify the guidelines in paragraph (b)(2)(i) of 
this section from time to time, as appropriate, and any such changes 
shall be effective

[[Page 215]]

for those applications and notices filed after the date of the changes 
to the guidelines and for those applications and notices submitted to 
the OTS but not yet deemed ``complete.''
    (3) Whether the issuance of such securities by the savings 
association in the transaction and any related transactions will result 
in a transfer of risk from the Savings Association Insurance Fund or the 
Bank Insurance Fund, as the case may be, to parties other than savings 
associations. In this connection, the issuance of subordinated debt 
securities shall not be deemed to result in a sufficient transfer of 
risk if such securities or any indenture or related agreement pursuant 
to which they are issued provides for events of default or includes 
other provisions that could result in a mandatory prepayment of 
principle by declaration or otherwise, other than events of default 
arising out of the obligor's failure to make timely payment of interest 
and principal, its failure to comply with reasonable financial, 
operating and maintenance covenants of a type that are customarily 
included in indentures relating to publicly offered issues of debt 
securities, and events of default relating to certain events of 
bankruptcy or insolvency, receivership and similar events.
    (c) Form of application or notice; supporting information. 
Applications subject to standard treatment or notices eligible for 
expedited treatment under Sec. 516.5 of this chapter must be in the 
form prescribed by OTS. The form of application and instructions for a 
savings association subject to standard treatment, and instructions for 
a notice by a savings association subject to expedited treatment, may be 
obtained from the OTS. Information and exhibits shall be furnished in 
support of an application or notice in accordance with the applicable 
instructions, setting forth all of the terms and provisions relating to 
the proposed issuance and showing that all of the requirements of this 
section have been or will be met.
    (d) Requirements as to securities. Subordinated debt securities and 
mandatorily redeemable preferred stock issued pursuant to this section 
shall meet all of the following requirements unless one or more of such 
requirements, not including paragraphs (d)(1)(i)(A) and (d)(1)(ii) of 
this section which are not eligible for waiver, are waived by the OTS:
    (1) Form of certificate. Each certificate evidencing subordinated 
debt or mandatorily redeemable preferred stock issued by a savings 
association pursuant to this section shall:
    (i) Bear on its face, in bold-face type, the following legends:
    (A) ``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''; and
    (B) ``Absent prior written approval by the Office, this security is 
not eligible for purchase by any savings association or a corporate 
affiliate thereof, except that this security may be purchased by a 
corporate affiliate of the issuer or by any diversified savings and loan 
holding company and any non-savings association subsidiary thereof.''
    (ii) Clearly state that the security--
    (A) Is subordinated on liquidation, as to principal, interest, and 
premium, if any, to all claims (including post-default interest) against 
the savings association having the same priority as savings account 
holders or any higher priority;
    (B) Is unsecured by the assets of the issuing association, or any of 
its affiliates; and
    (C) Is not eligible as collateral for any loan by the issuing 
association.
    (iii) In connection only with a certificate evidencing subordinated 
debt, state or refer to a document stating the terms under which the 
issuing savings association may prepay the obligation, which shall 
include at least the right to prepay without premium or other penalty 
during the fifteen months immediately prior to the maturity date;
    (iv) State or refer to a document stating that, in connection with a 
certificate evidencing subordinated debt, no voluntary prepayment of 
principal shall be made and that no payment of principal shall be 
accelerated and, in connection with a certificate evidencing mandatorily 
redeemable preferred stock, no voluntary redemption, other than 
scheduled redemptions, shall be made without the approval of the OTS

[[Page 216]]

if the savings association is failing to meet its regulatory capital 
requirements under part 567 of this chapter or, if after giving effect 
to such payment, the association would fail to meet such regulatory 
capital requirements;
    (v) State the limitations upon payment of interest or dividends, as 
appropriate imposed by 12 U.S.C. 1828(b); and
    (vi) In connection only with a certificate evidencing subordinated 
debt, set forth, in the certificate and the purchase agreement or 
indenture, precisely the following statement:

    Notwithstanding anything to the contrary in this certificate (or in 
any related document); (A) if the FDIC shall be appointed receiver for 
the issuer of this certificate (the ``issuer'') and in its capacity as 
such shall cause the issuer to merge with or into another financial 
institution, or in such capacity shall sell or otherwise convey part or 
all of the assets of the issuer to another financial institution or 
shall arrange for the assumption of less than all of the liabilities of 
the issuer by one or more other financial institutions, the FDIC shall 
have no obligation, either in its capacity as receiver or in its 
corporate capacity, to contract for or to otherwise arrange for the 
assumption of the obligation represented by this certificate in whole or 
in part by any financial institution or institutions which results from 
any such merger or which has purchased or otherwise acquired from the 
FDIC as receiver for the issuer, any of the assets of the issuer, or 
which, pursuant to any arrangement with the FDIC, has assumed less than 
all of the liabilities of the issuer. To the extent that obligations 
represented by this certificate have not been assumed in full by a 
financial institution with or into which the issuer may have been 
merged, as described in this paragraph (A), and/or by one or more 
financial institutions which have succeeded to all or a portion of the 
assets of the issuer, or which have assumed a portion but not all of the 
liabilities of the issuer as a result of one or more transactions 
entered into by the FDIC as receiver for the issuer, then the holder of 
this certificate shall be entitled to payments on this obligation in 
accordance with the procedures and priorities set forth in any 
applicable receivership regulations or in orders of the FDIC relating to 
such receivership.
    (B) In the event that the obligation represented by this certificate 
is assumed in full by another financial institution, which shall succeed 
by merger or otherwise to substantially all of the assets and the 
business of the issuer, or which shall by arrangement with the FDIC 
assume all or a portion of the liabilities of the issuer, and payment or 
provision for payment shall have been made in respect of all matured 
installments of interests upon the certificates together with all 
matured installments of principal on such certificates which shall have 
become due otherwise than by acceleration, then any default caused by 
the appointment of a receiver for the issuer shall be deemed to have 
been cured, and any declaration consequent upon such default declaring 
the principal and interest on the certificate to be immediately due and 
payable shall be deemed to have been rescinded.
    (C) This security is not eligible to be purchased or held by any 
savings association or corporate affiliate thereof except that this 
security may be purchased or held by a corporate affiliate of the issuer 
or by a diversified savings and loan holding company and its non-savings 
association subsidiaries. The issuer of this security may not recognize 
on its transfer books any transfer made to a savings association or any 
corporate affiliate thereof (except as provided in the preceding 
sentence) and will not be obligated to make any payments of principal or 
interest on this security if the owner of this security is a savings 
association or any corporate affiliate thereof (except as provided in 
the preceding sentence).

    (2) Limitation as to term. No subordinated debt security or 
mandatorily redeemable preferred stock issued by a savings association 
pursuant to this section shall have an original period to maturity or 
required redemption of less than seven years. During the first six years 
that such a security is outstanding, the total of all required sinking 
fund payments, other required prepayments, required purchase-fund 
payments, required reserve allocations and required redemptions with 
respect to the portion of such six years as have elapsed shall at no 
time exceed the original principal amount or original redemption price, 
thereof multiplied by a fraction, the numerator of which is the number 
of years that have elapsed since the issuance of the security and the 
denominator of which is the number of years covered by the original 
period to maturity or required redemption.
    (3) Limitations on sale to certain associations. (i) No savings 
association may sell any subordinated debt securities issued pursuant to 
this section to a Federal Home Loan Bank or, except with prior written 
approval of the Office in a supervisory case, to the FDIC; and

[[Page 217]]

    (ii) Without the prior written approval of the Office, no savings 
association may sell, either directly or indirectly through an 
underwriter or otherwise, any subordinated debt securities issued 
pursuant to this section to a savings association or any corporate 
affiliate thereof, except that a savings association may sell such 
securities to its corporate affiliates or to a diversified savings and 
loan holding company and its non-savings association subsidiaries.
    (4) Indenture. An issuer must use an indenture, as described herein, 
for subordinated debt securities offered pursuant to this section. Such 
an indenture must provide for the appointment of a trustee other than 
the obligor or an affiliate of the obligor (as defined in 12 CFR 583.2) 
and provide for the collective enforcement of the rights and remedies of 
the security holders, if the aggregate amount of debt securities 
``publicly offered'' (sales in a private non-public offering as defined 
in 12 CFR 563g.4 are excluded) and sold by a single obligor in any 
consecutive twelve month period exceeds $2,000,000 and/or $5,000,000 in 
any consecutive thirty-six month period.
    (e) [Reserved]
    (f) Additional requirements. The Office may impose on the savings 
association such requirements or conditions with regard to the 
securities or the offering or issuance thereof as it may deem necessary 
or desirable for the protection of purchasers, the savings association, 
the Office, or the Savings Association Insurance Fund or the Bank 
Insurance Fund, as the case may be.
    (g) Limitation on offering period. Following the date of approval of 
an application by a savings association subject to standard treatment by 
the OTS, or the earlier of the date of non-objection by the OTS of a 
notice by a savings association eligible for expedited treatment or 30 
days after submission of a notice by such a savings association, unless 
the OTS has rejected such notice or issued a request for additional 
information on such notice, the association shall have an offering 
period of not more than one year in which to complete the sale of the 
subordinated debt securities or mandatorily redeemable preferred stock 
issued pursuant to this section. The Office may in its discretion extend 
such offering period if a written request showing good cause for such 
extension is filed with it not later than 30 days before the expiration 
of such offering period or any previous extension thereof.
    (h) Reports. Within 30 days after completion of the sale of the 
subordinated debt securities or mandatorily redeemable preferred stock 
issued pursuant to this section, the savings association shall transmit 
a written report to the OTS stating the number of purchases, the total 
dollar amount of securities sold, and the amount of net proceeds 
received by the savings association. The association's report shall 
clearly state the amount of subordinated debt or mandatorily redeemable 
preferred stock, net of all expenses, that the association intends to be 
counted as regulatory capital.
    (i)-(j) [Reserved]
    (k) Conditions of approval and acceptance for subordinated debt and 
mandatorily redeemable preferred stock applications and notices. 
Issuance of subordinated debt and mandatorily redeemable preferred stock 
applications and notices shall be subject to the following conditions:
    (1) Where securities are to be sold pursuant to an offering circular 
required to be filed with the OTS pursuant to 12 CFR 563g.2, and where 
such offering circular has not yet been declared effective prior to the 
date of approval of or nonobjection to the subordinated debt or 
preferred stock application or notice, the offering circular in the form 
declared effective shall not disclose any material adverse information 
concerning the savings association's business, operations, prospects, or 
financial condition not disclosed in the latest form of offering 
circular filed as an exhibit to the application or notice;
    (2) The savings association shall submit to the OTS no later than 30 
days from the completion of the sale of the securities, certification of 
compliance with all applicable laws and regulations in connection with 
the offering, issuance, and sale of the securities;
    (3) The savings association shall submit to the OTS no later than 30 
days from the completion of the sale of the

[[Page 218]]

securities, the report(s) required by paragraph (h) of this section and 
the following additional items:
    (i) Three copies of an executed form of the securities issued 
pursuant to the subject application or notice and a copy of any related 
agreement or indenture governing the issuance of securities; and
    (ii) A certificate from the principal executive officer of the 
savings association that states that to the best of his or her 
knowledge, none of the securities issued pursuant to the subject 
application or notice were sold to any association whose accounts are 
insured by the Savings Association Insurance Fund, or a corporate 
affiliate thereof, except as permitted by 12 CFR 563.81;
    (4) That as of the date of approval or nonobjection, there have been 
no material changes with respect to the information disclosed in the 
application or notice as submitted to the OTS;
    (5) The savings association receives prior written approval or 
nonobjection from the OTS for any post-approval amendment to the 
securities or any related indenture if:
    (i) The proposed amendment modifies or is inconsistent with any 
provision of the securities, or the indenture that is required to be 
included therein by the OTS's regulations as may then be in effect or 
would result in a transfer of risk to the savings association or the 
Savings Association Insurance Fund or the Bank Insurance Fund, as 
appropriate; and
    (ii) All or a portion of the proceeds from the issuance and sale of 
the securities would continue to be included in the regulatory capital 
of the savings association following adoption of the amendment;
    (6) The savings association shall submit to the OTS promptly after 
execution, one copy of each amendment to the securities or the related 
indenture, made after approval or nonobjection, and if prior approval of 
or nonobjection to such amendment was not obtained, shall also state the 
reason(s) such prior approval or nonobjection was not required; and
    (7) Before any offers or sales of the securities are made on the 
premises of the association or its affiliates, the savings association 
shall submit to the OTS a set of policies and procedures for such sale 
of the securities satisfactory to the OTS.

[54 FR 49552, Nov. 30, 1989, as amended at 55 FR 13515, Apr. 11, 1990; 
57 FR 14345, Apr. 20, 1992; 62 FR 66262, Dec. 18, 1997; 66 FR 13008, 
Mar. 2, 2001]

Subpart D [Reserved]



                     Subpart E_Capital Distributions

    Source: 64 FR 2809, Jan. 19, 1999, unless otherwise noted.



Sec. 563.140  What does this subpart cover?

    This subpart applies to all capital distributions by a savings 
association (``you'').



Sec. 563.141  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 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 OTS 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 Sec. 567.5 of this chapter, 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 association or to shareholders of its holding company to acquire 
ownership in that association, other than by a distribution of shares;
    (d) Any other distribution charged against your capital accounts if 
you

[[Page 219]]

would not be well capitalized, as set forth in Sec. 565.4(b)(1) of this 
chapter, following the distribution; and
    (e) Any transaction that the OTS or the Corporation determines, by 
order or regulation, to be in substance a distribution of capital.



Sec. 563.142  What other definitions apply to this subpart?

    The following definitions apply to this subpart:
    Affiliate means an affiliate, as defined under Sec. 563.41(b) of 
this part.
    Capital means total capital, as defined under Sec. 567.5(c) of this 
chapter.
    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.



Sec. 563.143  Must I file with OTS?

    Whether and what you must file with the OTS 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  Must file an application with the OTS.
 treatment under Sec.  516.5 of this
 chapter.
----------------------------------------------------------------------------------------------------------------
(2) The total amount of all of your     Must file an application with the OTS.
 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.
----------------------------------------------------------------------------------------------------------------
(3) You would not be at least           Must file an application with the OTS.
 adequately capitalized, as set forth
 in Sec.  565.4(b)(2) of this
 chapter, following the distribution.
----------------------------------------------------------------------------------------------------------------
(4) Your proposed capital distribution  Must file an application with the OTS.
 would violate a prohibition contained
 in any applicable statute,
 regulation, or agreement between you
 and the OTS (or the Corporation), or
 violate a condition imposed on you in
 an OTS-approved application or notice.
----------------------------------------------------------------------------------------------------------------

    (b) Notice required.

----------------------------------------------------------------------------------------------------------------
  If you are not required to file an
  application under paragraph (a) of                                    Then you:
          this section, but:
----------------------------------------------------------------------------------------------------------------
(1) You would not be well capitalized,  Must file a notice with the OTS.
 as set forth under Sec.
 565.4(b)(1), following the
 distribution.
----------------------------------------------------------------------------------------------------------------
(2) Your proposed capital distribution  Must file a notice with the OTS.
 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
 part 567 of this chapter (other than
 regular payments required under a
 debt instrument approved under Sec.
 563.81).
----------------------------------------------------------------------------------------------------------------
(3) You are a subsidiary of a savings   Must file a notice with the OTS.
 and loan holding company.
----------------------------------------------------------------------------------------------------------------


[[Page 220]]

    (c) No prior notice required.

----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
If neither you nor your proposed        Then you do not need to file a notice or an application with the OTS
 capital distribution meet any of the    before making a capital distribution.
 criteria listed in paragraphs (a) and
 (b) of this section.
----------------------------------------------------------------------------------------------------------------


[64 FR 2809, Jan. 19, 1999, as amended at 66 FR 13008, Mar. 2, 2001]



Sec. 563.144  How do I file with the OTS?

    (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 Sec. 563.146.
    (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.



Sec. 563.145  May I combine my notice or application with other 
notices or applications?

    You may combine the notice or application required under Sec. 
563.143 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 this chapter. 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 this subpart; and
    (b) Submit the notice or application in a timely manner.



Sec. 563.146  Will the OTS permit my capital distribution?

    The OTS will review your notice or application under the review 
procedures in 12 CFR part 516, subpart E. The OTS may disapprove your 
notice or deny your application filed under Sec. 563.143, in whole or 
in part, if the OTS makes any of the following determinations.
    (a) You will be undercapitalized, significantly undercapitalized, or 
critically undercapitalized as set forth in Sec. 565.4(b) of this 
chapter, following the capital distribution. If so, the OTS 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 OTS 
(or the Corporation), or a condition imposed on you in an OTS-approved 
application or notice. If so, the OTS will determine whether it may 
permit your capital distribution notwithstanding the prohibition or 
condition.

[64 FR 2809, Jan. 19, 1999, as amended at 67 FR 78152, Dec. 23, 2002]



                 Subpart F_Financial Management Policies



Sec. 563.161  Management and financial policies.

    (a)(1) For the protection of depositors and other savings 
associations, each savings association and each service corporation 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 savings associations. In implementing this 
section, OTS will consider that service corporations may be authorized 
to engage in activities that involve a higher degree of risk than 
activities permitted to savings associations.
    (2) As part of meeting its requirements under paragraph (a)(1) of 
this section, each savings association and service corporation must 
maintain sufficient liquidity to ensure its safe and sound operation.

[[Page 221]]

    (b) Compensation to officers, directors, and employees of each 
savings association and its service corporations shall not be in excess 
of that which is reasonable and commensurate with their duties and 
responsibilities. Former officers, directors, and employees of savings 
association or its service corporation who regularly perform services 
therefor under consulting contracts are employees thereof for purposes 
of this paragraph (b).

[54 FR 49552, Nov. 30, 1989, as amended at 66 FR 15017, Mar. 15, 2001]



Sec. 563.170  Examinations and audits; appraisals; establishment and 
maintenance of records.

    (a) Examinations and audits. Each savings association and affiliate 
thereof shall be examined periodically, and may be examined at any time, 
by the Office, with appraisals when deemed advisable, in accordance with 
general policies from time to time established by the Office. The costs, 
as computed by the Office, of any examinations made by it, including 
office analysis, overhead, per diem, travel expense, other supervision 
by the Office, and other indirect costs, shall be paid by the savings 
associations examined, except that in the case of service corporations 
of Federal savings associations the cost of examinations, as determined 
by the Office, shall be paid by the service corporations. Payments shall 
be made in accordance with a schedule of annual assessments based upon 
each savings association's total assets and of rates for examiner time 
in amounts determined by the Office.
    (b) Appraisals. (1) Unless otherwise ordered by the Office, 
appraisal of real estate by the Office in connection with any 
examination or audit of a savings association, affiliate, or service 
corporation shall be made by an appraiser, or by appraisers, selected by 
the Office's Regional Director of the Region in which such savings 
association is located. The cost of such appraisal shall promptly be 
paid by such savings association, affiliate, or service corporation 
direct to such appraiser or appraisers upon receipt by the savings 
association, affiliate, or service corporation of a statement of such 
cost as approved by such Regional Director. A copy of the report of each 
appraisal made by the Office pursuant to any of the foregoing provisions 
of this section shall be furnished to the savings association, 
affiliate, or service corporation, 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 
such Regional Director.
    (2) The Office may obtain at any time, at its expense, such 
appraisals of any of the assets, including the security therefor, of a 
savings association, affiliate, or service corporation as the Office 
deems appropriate.
    (c) Establishment and maintenance of records. To enable the Office 
to examine savings associations and affiliates and audit savings 
associations, affiliates, and service corporations pursuant to the 
provisions of paragraph (a) of this section, each savings association, 
affiliate, and service corporation 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 savings association, 
affiliate, or service corporation 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 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 Regional Director 
of the OTS Region in which the principal office of the savings 
association is located.

[[Page 222]]

    (e) Use of data processing services for maintenance of records. A 
savings association which determines to maintain any of its records by 
means of data processing services shall so notify the Regional Director 
of the Region in which the principal office of such 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 savings 
association pursuant to which data processing services are to be 
performed for such 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.

[54 FR 49552, Nov. 30, 1989, as amended at 55 FR 34547, Aug. 23, 1990; 
57 FR 14335, Apr. 20, 1992; 57 FR 40092, Sept. 2, 1992; 58 FR 28348, May 
13, 1993; 59 FR 29502, June 7, 1994; 59 FR 53571, Oct. 25, 1994; 59 FR 
60304, Nov. 23, 1994; 60 FR 66718, Dec. 26, 1995; 61 FR 50984, Sept. 30, 
1996]



Sec. 563.171  Frequency of safety and soundness examination.

    (a) General. The OTS examines savings associations pursuant to 
authority conferred by 12 U.S.C. 1463 and the requirements of 12 U.S.C. 
1820(d). The OTS is required to conduct a full-scope, on-site 
examination of every savings association at least once during each 12-
month period.
    (b) 18-month rule for certain small institutions. The OTS may 
conduct a full-scope, on-site examination of a 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 savings association has total assets of $250 million or 
less;
    (2) The savings association is well capitalized as defined in Sec. 
565.4 of this chapter;
    (3) At its most recent examination, the OTS found the savings 
association to be well managed;
    (4) At its most recent examination, OTS determined that the savings 
association was in outstanding or good condition, that is, it received a 
composite rating of 1 or 2, as composite rating defined in Sec. 
516.5(c) of this chapter;
    (5) The savings association currently is not subject to a formal 
enforcement proceeding or order; and
    (6) No person acquired control of the 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 OTS to examine any savings 
association as frequently as the agency deems necessary.

[63 FR 16381, Apr. 2, 1998, as amended at 64 FR 69185, Dec. 10, 1999; 66 
FR 13008, Mar. 2, 2001]



Sec. 563.172  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) If you are a Federal savings association, you may engage in a 
transaction involving a financial derivative if you are authorized to 
invest in the assets underlying the financial derivative, the 
transaction is safe and sound, and you otherwise meet the requirements 
in this section.
    (2) If you are a state-chartered 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.

[[Page 223]]

    (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'' (available at the address listed at Sec. 516.1 
of this chapter), 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.

[63 FR 66349, Dec. 1, 1998]



Sec. 563.176  Interest-rate-risk-management procedures.

    Savings associations shall take the following actions:
    (a) The board of directors or a committee thereof shall review the 
savings association's interest-rate-risk exposure and devise a policy 
for the 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 savings 
association shall establish guidelines and procedures to ensure that the 
board's policy is successfully implemented.
    (c) The management of the savings association shall periodically 
report to the board of directors regarding implementation of the savings 
association's policy for interest-rate-risk management and shall make 
that information available upon request to the Office.
    (d) The 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.

[54 FR 49552, Nov. 30, 1989, as amended at 58 FR 45813, Aug. 31, 1993; 
59 FR 53571, Oct. 25, 1994]



Sec. 563.177  Procedures for monitoring Bank Secrecy Act (BSA) compliance.

    (a) Purpose. The purpose of this regulation is to require savings 
associations (as defined by Sec. 561.43 of this chapter) 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 savings association shall develop and

[[Page 224]]

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 savings association's board of 
directors, and reflected in the minutes of the savings association.
    (2) Customer identification program. Each savings association is 
subject to the requirements of 31 U.S.C. 5318(l) and the implementing 
regulation jointly promulgated by the OTS and the Department of the 
Treasury 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.

(Approved by the Office of Management and Budget under control number 
3068-0530)

[54 FR 49552, Nov. 30, 1989, as amended at 68 FR 25112, May 9, 2003]



                     Subpart G_Reporting and Bonding



Sec. 563.180  Suspicious Activity Reports and other reports and 
statements.

    (a) Periodic reports. Each savings association and service 
corporation thereof shall make such periodic or other reports of its 
affairs in such manner and on such forms as the Office may prescribe. 
The Office may provide that reports filed by savings associations or 
service corporations to meet the requirements of other regulations also 
satisfy requirements imposed under this section.
    (b) False or misleading statements or omissions. No savings 
association or director, officer, agent, employee, affiliated person, or 
other person participating in the conduct of the affairs of such 
association nor any person filing or seeking approval of any application 
shall knowingly:
    (1) Make any written or oral statement to the Office or to an agent, 
representative or employee of the Office 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 Office; or
    (2) Make any such statement or omission to a person or organization 
auditing a 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 
association.
    (c) Notifications of loss and reports of increase in deductible 
amount of bond. A savings association maintaining bond coverage as 
required by Sec. 563.190 of this part 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 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 OTS.
    (3) SARs required. A savings association or service corporation 
shall file a SAR with the appropriate Federal law enforcement agencies 
and the Department of the Treasury in accordance

[[Page 225]]

with the form's instructions, by sending a completed SAR to FinCEN in 
the following circumstances:
    (i) Insider abuse involving any amount. Whenever the savings 
association or service corporation detects any known or suspected 
Federal criminal violation, or pattern of criminal violations, committed 
or attempted against the savings association or service corporation or 
involving a transaction or transactions conducted through the savings 
association or service corporation, where the savings association or 
service corporation 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 savings association or service corporation 
detects any known or suspected Federal criminal violation, or pattern of 
criminal violations, committed or attempted against the savings 
association or service corporation or involving a transaction or 
transactions conducted through the savings association or service 
corporation and involving or aggregating $5,000 or more in funds or 
other assets, where the savings association or service corporation 
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 savings association or service corporation 
detects any known or suspected Federal criminal violation, or pattern of 
criminal violations, committed or attempted against the savings 
association or service corporation or involving a transaction or 
transactions conducted through the savings association or service 
corporation and involving or aggregating $25,000 or more in funds or 
other assets, where the savings association or service corporation 
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 savings association or service corporation and involving 
or aggregating $5,000 or more in funds or other assets, if the savings 
association or service corporation 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

[[Page 226]]

no reasonable explanation for the transaction after examining the 
available facts, including the background and possible purpose of the 
transaction.
    (4) Service corporations. When a service corporation is required to 
file a SAR under paragraph (d)(3) of this section, either the service 
corporation or a savings association that wholly or partially owns the 
service corporation may file the SAR.
    (5) Time for reporting. A savings association or service corporation 
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 savings association or service 
corporation 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 savings 
association or service corporation shall immediately notify, by 
telephone, an appropriate law enforcement authority and the OTS in 
addition to filing a timely SAR.
    (6) Reports to state and local authorities. A savings association or 
service corporation is encouraged to file a copy of the SAR with state 
and local law enforcement agencies where appropriate.
    (7) Exception. A savings association or service corporation 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 savings association or service 
corporation 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 savings 
association or service corporation as such, and shall be deemed to have 
been filed with the SAR. A savings association or service corporation 
shall make all supporting documentation available to appropriate law 
enforcement agencies upon request.
    (9) Notification to board of directors--(i) Generally. Whenever a 
savings association (or a service corporation in which the savings 
association has an ownership interest) files a SAR pursuant to this 
paragraph (d), the management of the savings association or service 
corporation 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 savings 
association or service corporation files a SAR pursuant to this 
paragraph (d) and the suspect is a director or executive officer, the 
savings association or service corporation 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 savings association or 
service corporation, its directors, officers, employees, agents, or 
other institution-affiliated parties to supervisory action.
    (11) Obtaining SARs. A savings association or service corporation 
may obtain SARs and the instructions from the appropriate OTS Regional 
Office listed in Sec. 516.40(a) 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 OTS.
    (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

[[Page 227]]

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 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 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.

[54 FR 49552, Nov. 30, 1989, as amended at 56 FR 29566, June 28, 1991; 
56 FR 32474, July 16, 1991; 57 FR 61251, Dec. 24, 1992; 59 FR 66159, 
Dec. 23, 1994; 61 FR 6105, Feb. 16, 1996; 66 FR 13008, Mar. 2, 2001; 68 
FR 75110, Dec. 30, 2003]



Sec. 563.181  Reports of change in control of mutual savings associations.

    (a) Reports of change in control--(1) When reports are required. 
Reports are required under this paragraph (a) whenever any change occurs 
in the control of savings association and no report is required under 
any other paragraph of this section. As used in this section, the term 
``control'' means power, directly or indirectly, to direct or cause the 
direction of the management or policies of the savings association, and 
the term ``savings association'' means a mutual savings association. 
Reports shall be made to the Office by the president or other chief 
executive officer of the savings association involved within 15 days 
after he or she obtains knowledge of such change. If there is any doubt 
as to whether a change in control has occurred, such doubt shall be 
resolved in favor of reporting to the Office.
    (2) Contents of reports. Reports of change in the control of a 
savings association, as required under this paragraph (a), shall contain 
the following information to the extent that such information is known 
by the person making the report:
    (i) The name or names of the person or persons who acquired such 
control;
    (ii) The basis of such control; and
    (iii) The date and a description of the transaction or transactions 
by which such control was acquired.
    (b) Reports of changes in voting stock or voting rights--(1) When 
reports are required. (i) Reports are required under this paragraph (b) 
whenever a change occurs in the outstanding voting stock or voting 
rights of a savings association resulting in control or a change in the 
control of such savings association. Reports shall be made to the Office 
by the president or other chief executive officer of the savings 
association involved within 15 days after he or she obtains knowledge of 
such change. If there is any doubt as to whether such a change has 
resulted in control or a change in control, such doubt shall be resolved 
in favor of reporting to the Office.
    (ii) Without any limitation on the foregoing, a report is required 
under this paragraph (b) whenever any person, partnership, corporation, 
trust or group of associated persons acquires, receives, or becomes the 
holder of:
    (A) Ten percent or more of the outstanding shares of any class of 
the voting stock of the savings association or of the voting rights 
thereto;
    (B) Ten percent or more of the outstanding voting rights of the 
savings association; or
    (C) Any appointment, designation or right of substitution with 
respect to 10 percent or more of the outstanding voting rights of the 
savings association.
    (2) Contents of reports--(i) General. The reports required under 
this paragraph (b) shall contain the items of information set forth 
below to the extent that such information is known by the person making 
the report. In addition, such reports shall contain such other

[[Page 228]]

information as may be available to inform the Office of the effect of 
the transaction upon control of the savings association.
    (ii) Reports of changes in voting stock or voting rights with 
respect to such stock. Reports of changes in ownership of voting stock 
or holdings of voting rights with respect to such stock, resulting in 
control or a change in the control of a savings association, shall 
contain the following information:
    (A) The number of shares of each class of voting stock and the 
number of voting rights with respect thereto involved in the 
transaction;
    (B) The names of the purchasers (or transferees) of such stock or 
such voting rights;
    (C) The names of the sellers (or transferors) of such stock or 
voting rights;
    (D) The amount of consideration received by the sellers (or 
transferors) in connection with the transaction;
    (E) The names of the beneficial owners if the shares or voting 
rights are of record in another name or other names;
    (F) The total number of shares of each class of voting stock owned 
by the sellers (or transferors), the purchasers (or transferees), and 
the beneficial owners both immediately before and after the transaction;
    (G) The total number of shares of each class of voting stock 
outstanding both immediately before and after the transaction;
    (H) The total number of voting rights (with respect to voting stock) 
held by the sellers (or transferors), the purchasers (or transferees), 
and the beneficial owners both immediately before and after the 
transaction;
    (I) The total number of such voting rights outstanding both 
immediately before and after the transaction; and
    (J) In the case of any appointment, designation, or substitution of 
a holder or holders of such voting rights, the name or names of the 
holder or holders both immediately before and after the transaction.
    (iii) Reports of changes in voting rights with respect to 
withdrawable accounts. Reports of changes in holding of voting rights 
with respect to withdrawable accounts, resulting in control or a change 
in the control of a savings association, shall contain the following 
information:
    (A) In the case of a transfer or transfers of such voting rights 
from one holder or group of holders to another holder or group of 
holders;
    (1) The date of each such transfer; and
    (2) The name or names of the acquiring holder or holders and of the 
transferor or transferors (unless such transferors are the original 
owners of the accounts to which such voting rights attach);
    (B) In the case of any appointment, designation, or substitution of 
a holder or holders of voting rights, with respect to a holder or group 
of holders already having control:
    (1) The date of such appointment, designation or substitution; and
    (2) The names of each of the holders both immediately before and 
after such change; and
    (C) In the case of any other acquisition of or change in control 
(without regard to the number of voting rights involved):
    (1) The name or names of the person or persons acquiring such 
control;
    (2) The basis of such control; and
    (3) The date and a description of such acquisition or change.
    (c) Reports of solicitation of voting rights--(1) When reports are 
required. Reports are required under this paragraph (c) whenever any 
person, partnership, corporation, trust, or group of associated persons:
    (i) Solicits voting rights with respect to 10 percent or more of the 
outstanding shares of any class of voting stock of a savings 
association.
    (ii) Solicits 10 percent or more of the outstanding voting rights in 
a savings association; or
    (iii) Solicits any voting rights in a savings association when such 
solicitor already holds either:
    (A) Voting rights with respect to 10 percent or more of the 
outstanding shares of any class of the voting stock of such savings 
association; or
    (B) Ten percent or more of the outstanding voting rights in such 
savings association.
    (2) Content of reports--(i) General. The reports required under this 
paragraph

[[Page 229]]

(c) shall contain the items of information set forth below to the extent 
that such information is known by the person making the report. In 
addition, such reports shall contain such other information as may be 
available to inform the Office of the possible impact of the 
solicitation upon control of the savings association.
    (ii) Voting rights with respect to stock. Reports of solicitation of 
voting rights with respect to any class of voting stock of a savings 
association shall contain the following information:
    (A) The name or names of the person or persons making the 
solicitation;
    (B) The extent of such solicitation (including relevant dates) and 
the class or classes of such voting stock with respect to which the 
solicitation of voting rights is made;
    (C) The number of shares of such class or classes of voting stock 
which the solicitor already owns and the total number of voting rights 
with respect thereto which he or she holds at the time of such 
solicitation; and
    (D) The total number of shares of such class or classes of voting 
stock outstanding at the time of such solicitation.
    (iii) Voting rights with respect to withdrawable accounts. Reports 
of solicitation of voting rights with respect to withdrawable accounts 
of a savings association shall contain the following information:
    (A) The name or names of the person or persons making the 
solicitation;
    (B) The extent of such solicitation (including relevant dates); and
    (C) The approximate percentage of the outstanding voting rights 
which the solicitor already holds at the time of such solicitation.
    (d) Definitions. As used in this section--
    (1) The term stock means rights, interest, or powers with respect to 
a mutual savings association.
    (2) The term voting rights means stock which carries voting rights.
    (3) The term voting rights means proxies, consents, or 
authorizations which give the holder or holders the right to vote with 
respect to shares of voting stock, or with respect to withdrawable 
accounts, in a savings association.



Sec. 563.183  Reports of change in chief executive officer or director; 
other reports; form and filing of such reports.

    (a) Definitions used in this section--(1) Control. The term 
``control'' means power, directly or indirectly, to direct the 
management or policies of a savings association or to vote 25 percent or 
more of any class of the voting stock or voting rights in a savings 
association.
    (2) Savings association. The term ``savings association'' means a 
savings association, whether in mutual or stock form, and any savings 
and loan holding company as defined in section 10 of the Home Owners' 
Loan Act.
    (3) Stock. The term ``stock'' means any permanent or guaranty stock 
or other nonwithdrawable account, share, or equity security in a savings 
association.
    (4) Voting stock. The term ``voting stock'' means any stock which 
carries voting rights.
    (5) Voting rights. The term ``voting rights'' means any proxies, 
consents, or authorizations which give the holder(s) the right to vote 
with respect to shares of voting stock or withdrawable accounts in a 
savings association.
    (b) Reports of change in chief executive officer or director. 
Whenever a change resulting in control or a change in control of a 
savings association has occurred concurrently with or within 60 days 
after or 12 months before a change or replacement of the chief executive 
officer or any director of the savings association, a report shall be 
filed containing the following:
    (1) The name of the new chief executive officer or director;
    (2) The effective date of the person's appointment or election; and
    (3) A statement of the person's past and current business and 
professional affiliations.
    (c) Form and filing of reports. (1) Unless otherwise specified by 
OTS, a report required by Sec. 563.181 of this part or this Sec. 
563.183 must comply with Sec. 516.30 and must be submitted to the 
appropriate Regional Office listed in Sec. 516.40(a) of this chapter.
    (2) Such a report shall be made by the president or other chief 
executive officer of the savings association.

[[Page 230]]

    (3) Such a report shall be filed within 15 days after the person 
making it learns of the change in control or the activity which 
necessitates filing the report, except that a report required under 
paragraph (b) of this section shall be filed within 15 days after the 
effective date of the change or replacement of the chief executive 
officer or director, or within 15 days after the officer making the 
report obtains knowledge of the change or replacement, whichever occurs 
later.
    (d) Other reports. The Office may also require savings associations 
and individuals or other persons who have or have had any connection 
with the management of any savings association, including any present or 
former director, officer, controlling person, or agent of a savings 
association, to provide such periodic or other reports as it may 
determine to be necessary or appropriate for protection of investors or 
the Office.

[54 FR 49552, Nov. 30, 1989, as amended at 60 FR 66718, Dec. 26, 1995; 
66 FR 13008, Mar. 2, 2001]



Sec. 563.190  Bonds for directors, officers, employees, and agents; form 
of and amount of bonds.

    (a) Each 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 
savings association.
    (b) The amount of coverage to be required for each 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 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 association's board of directors, 
additional coverage is warranted.
    (d) The board of directors of each savings association shall 
formally approve the 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 association's bond coverage at least 
annually to assess the continuing adequacy of coverage.

[57 FR 12698, Apr. 13, 1992]



Sec. 563.191  Bonds for agents.

    In lieu of the bond provided in Sec. 563.190 of this part in the 
case of agents appointed by a 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 savings association at least monthly, and provided 
such bond is approved by the board of directors of the savings 
association. No bond need be obtained for any agent that is a financial 
institution insured by the Federal Deposit Insurance Corporation.



Sec. 563.200  Conflicts of interest.

    If you are a director, officer, or employee of a savings 
association, or have the power to direct its management or policies, or 
otherwise owe a fiduciary duty to a 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 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;

[[Page 231]]

    (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).

[61 FR 60178, Nov. 27, 1996]



Sec. 563.201  Corporate opportunity.

    (a) If you are a director or officer of a savings association, or 
have the power to direct its management or policies, or otherwise owe a 
fiduciary duty to a savings association, you must not take advantage of 
corporate opportunities belonging to the savings association.
    (b) A corporate opportunity belongs to a savings association if:
    (1) The opportunity is within the corporate powers of the savings 
association or a subsidiary of the savings association; and
    (2) The opportunity is of present or potential practical advantage 
to the savings association, either directly or through its subsidiary.
    (c) OTS will not deem you to have taken advantage of a corporate 
opportunity belonging to the savings association if a disinterested and 
independent majority of the 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.

[61 FR 60179, Nov. 27, 1996]



   Subpart H_Notice of Change of Director or Senior Executive Officer

    Source: 63 FR 51274, Sept. 25, 1998, unless otherwise noted.



Sec. 563.550  What does this subpart do?

    This subpart implements 12 U.S.C. 1831i, which requires certain 
savings associations and savings and loan holding companies to notify 
the OTS before appointing or employing directors and senior executive 
officers.



Sec. 563.555  What definitions apply to this subpart?

    The following definitions apply to this subpart:
    Director means an individual who serves on the board of directors of 
a savings association or savings and loan holding company. 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 OTS 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 OTS 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 savings association that has a composite rating of 4 or 5, as 
composite rating is defined in Sec. 516.5(c) of this chapter.
    (2) A savings and loan holding company that has an unsatisfactory 
rating under the OTS's holding company rating system, or that is 
informed in writing by the OTS that it has an adverse effect on its 
subsidiary savings association;
    (3) A savings association or savings and loan holding company 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 savings association, unless otherwise informed in writing by the 
OTS; or

[[Page 232]]

    (4) A savings association or savings and loan holding company that 
is informed in writing by the OTS that it is in troubled condition based 
on information available to the OTS.

[63 FR 51274, Sept. 25, 1998, as amended by 66 FR 13008, Mar. 2, 2001]



Sec. 563.560  Who must give prior notice?

    (a) Savings association or savings and loan holding company. Except 
as provided under Sec. 563.590, you must notify the OTS 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 savings association and at least one of the following 
circumstances apply:
    (i) You do not comply with all minimum capital requirements under 
part 567 of this chapter;
    (ii) You are in troubled condition; or
    (iii) The OTS has notified you, in connection with its review of a 
capital restoration plan required under section 38 of the Federal 
Deposit Insurance Act or part 565 of this chapter or otherwise, that a 
notice is required under this subpart; or
    (2) You are a savings and loan holding company and you are in 
troubled condition.
    (b) Notice by individual. If you are an individual seeking election 
to the board of directors of a savings association or savings and loan 
holding company 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 
Sec. 563.590(b).



Sec. 563.565  What procedures govern the filing of my notice?

    The procedures found in part 516, subpart A of this chapter govern 
the filing of your notice under Sec. 563.560.

[66 FR 13009, Mar. 2, 2001]



Sec. 563.570  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 OTS headquarters at the 
address in part 516 of this chapter; or from any OTS regional office;
    (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 OTS under 12 U.S.C. 1831i; and
    (3) Such other information required by the OTS.
    (b) Modification of content requirements. The OTS may require or 
accept other information in place of the content requirements in 
paragraph (a) of this section.



Sec. 563.575  What procedures govern OTS review of my notice for 
completeness?

    The OTS will first review your notice to determine whether it is 
complete.
    (a) If your notice is complete, the OTS will notify you in writing 
of the date that the OTS received the complete notice.
    (b) If your notice is not complete, the OTS 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 OTS 
suspend processing of the notice. If you fail to act within the 
specified time period, the OTS may treat the notice as withdrawn or may 
review the application based on the information provided.

[[Page 233]]



Sec. 563.580  What standards and procedures will govern OTS review of 
the substance of my notice?

    The OTS will disapprove a notice if, pursuant to the standard set 
forth in 12 U.S.C. 1831i(e), the OTS 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 savings association or of the public to permit 
the individual to be employed by, or associated with, the savings 
association or savings and loan holding company. If the OTS disapproves 
a notice, it will issue a written notice that explains why the OTS 
disapproved the notice. The OTS will send the notice to the savings 
association or savings and loan holding company and the individual.



Sec. 563.585  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 OTS receives all required 
information, unless:
    (1) The OTS notifies you that it has disapproved the notice; or
    (2) The OTS extends the 30-day period for an additional period not 
to exceed 60 days. If the OTS 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 OTS 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 OTS 
notifies you, in writing, of its intention not to disapprove the notice.



Sec. 563.590  When will the OTS waive the prior notice requirement?

    (a) Waiver request. (1) An individual may serve as a director or 
senior executive officer before filing a notice under this subpart if 
the OTS issues a written finding that:
    (i) Delay would threaten the safety or soundness of the 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 OTS grants a waiver, you must file a notice under this 
subpart within the time period specified by the OTS.
    (b) Automatic waiver. An individual may serve as a director before 
filing a notice under this subpart, if the individual was not nominated 
by management and the individual submits a notice under this subpart 
within seven days after election as a director.
    (c) Subsequent OTS action. The OTS may disapprove a notice within 30 
days after the OTS 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.



PART 563b_CONVERSIONS FROM MUTUAL TO STOCK FORM--Table of Contents




Sec.
563b.5 What does this part do?
563b.10 May I form a holding company as part of my conversion?
563b.15 May I form a charitable organization as part of my conversion?
563b.20 May I acquire another insured stock depository institution as 
          part of my conversion?
563b.25 What definitions apply to this part?

                     Subpart A_Standard Conversions

                           Prior to Conversion

563b.100 What must I do before a conversion?
563b.105 What information must I include in my business plan?
563b.110 Who must review my business plan?
563b.115 How will OTS review my business plan?
563b.120 May I discuss my plans to convert with others?

                           Plan of Conversion

563b.125 Must my board of directors adopt a plan of conversion?
563b.130 What must I include in my plan of conversion?

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563b.135 How do I notify my members that my board of directors approved 
          a plan of conversion?
563b.140 May I amend my plan of conversion?

                           Filing Requirements

563b.150 What must I include in my application for conversion?
563b.155 How do I file my application for conversion?
563b.160 May I keep portions of my application for conversion 
          confidential?
563b.165 How do I amend my application for conversion?

           Notice of Filing of Application and Comment Process

563b.180 How do I notify the public that I filed an application for 
          conversion?
563b.185 How may a person comment on my application for conversion?

              OTS Review of the Application for Conversion

563b.200 What actions may OTS take on my application?
563b.205 May a court review OTS's final action on my conversion?

                             Vote by Members

563b.225 Must I submit the plan of conversion to my members for 
          approval?
563b.230 Who is eligible to vote?
563b.235 How must I notify my members of the meeting?
563b.240 What must I submit to OTS after the members' meeting?

                           Proxy Solicitation

563b.250 Who must comply with these proxy solicitation provisions?
563b.255 What must the form of proxy include?
563b.260 May I use previously executed proxies?
563b.265 How may I use proxies executed under this part?
563b.270 What must I include in my proxy statement?
563b.275 How do I file revised proxy materials?
563b.280 Must I mail a member's proxy solicitation material?
563b.285 What solicitations are prohibited?
563b.290 What will OTS do if a solicitation violates these prohibitions?
563b.295 Will OTS require me to re-solicit proxies?

                            Offering Circular

563b.300 What must happen before OTS declares my offering circular 
          effective?
563b.305 When may I distribute the offering circular?
563b.310 When must I file a post-effective amendment to the offering 
          circular?

                        Offers and Sales of Stock

563b.320 Who has priority to purchase my conversion shares?
563b.325 When may I offer to sell my conversion shares?
563b.330 How do I price my conversion shares?
563b.335 How do I sell my conversion shares?
563b.340 What sales practices are prohibited?
563b.345 How may a subscriber pay for my conversion shares?
563b.350 Must I pay interest on payments for conversion shares?
563b.355 What subscription rights must I give to each eligible account 
          holder and each supplemental eligible account holder?
563b.360 Are my officers, directors, and their associates eligible 
          account holders?
563b.365 May other voting members purchase conversion shares in the 
          conversion?
563b.370 Does OTS limit the aggregate purchases by officers, directors, 
          and their associates?
563b.375 How do I allocate my conversion shares if my shares are 
          oversubscribed?
563b.380 May my employee stock ownership plan purchase conversion 
          shares?
563b.385 May I impose any purchase limitations?
563b.390 Must I provide a purchase preference to persons in my local 
          community?
563b.395 What other conditions apply when I offer conversion shares in a 
          community offering, a public offering, or both?

                       Completion of the Offering

563b.400 When must I complete the sale of my stock?
563b.405 How do I extend the offering period?

                      Completion of the Conversion

563b.420 When must I complete my conversion?
563b.425 Who may terminate the conversion?
563b.430 What happens to my old charter?
563b.435 What happens to my corporate existence after conversion?
563b.440 What voting rights must I provide to stockholders after the 
          conversion?
563b.445 What must I provide my savings account holders?

                           Liquidation Account

563b.450 What is a liquidation account?
563b.455 What is the initial balance of the liquidation account?

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563b.460 How do I determine the initial balances of liquidation sub-
          accounts?
563b.465 Do account holders retain any voting rights based on their 
          liquidation sub-accounts?
563b.470 Must I adjust liquidation sub-accounts?
563b.475 What is a liquidation?
563b.480 Does the liquidation account affect my net worth?
563b.485 What provision must I include in my new federal charter?

                             Post-Conversion

563b.500 May I implement a stock option plan or management or employee 
          stock benefit plan?
563b.505 May my directors, officers, and their associates freely trade 
          shares?
563b.510 May I repurchase shares after conversion?
563b.515 What information must I provide to OTS before I repurchase my 
          shares?
563b.520 May I declare or pay dividends after I convert?
563b.525 Who may acquire my shares after I convert?
563b.530 What other requirements apply after I convert?

                Contributions to Charitable Organizations

563b.550 May I donate conversion shares or conversion proceeds to a 
          charitable organization?
563b.555 How do my members approve a charitable contribution?
563b.560 How much may I contribute to a charitable organization?
563b.565 What must the charitable organization include in its 
          organizational documents?
563b.570 How do I address conflicts of interest involving my directors?
563b.575 What other requirements apply to charitable organizations?

              Subpart B--Voluntary Supervisory Conversions

563b.600 What does this subpart do?
563b.605 How may I conduct a voluntary supervisory conversion?
563b.610 Do my members have rights in a voluntary supervisory 
          conversion?

                               Eligibility

563b.625 When is a savings association eligible for a voluntary 
          supervisory conversion?
563b.630 When is a BIF-insured state-chartered savings bank eligible for 
          a voluntary supervisory conversion?

                     Plan of Supervisory Conversion

563b.650 What must I include in my plan of voluntary supervisory 
          conversion?

              Voluntary Supervisory Conversion Application

563b.660 What must I include in my voluntary supervisory conversion 
          application?

     OTS Review of the Voluntary Supervisory Conversion Application

563b.670 Will OTS approve my voluntary supervisory conversion 
          application?
563b.675 What conditions will OTS impose on an approval?

                        Offers and Sales of Stock

563b.680 How do I sell my shares?

                             Post-Conversion

563b.690 Who may not acquire additional shares after the voluntary 
          supervisory conversion?

    Authority: 12 U.S.C. 1462, 1462a, 1463, 1464, 1467a, 2901; 15 U.S.C. 
78c, 78l, 78m, 78n, 78w.

    Source: 67 FR 52020, Aug. 9, 2002, unless otherwise noted.



Sec. 563b.5  What does this part do?

    (a) General. This part governs how a savings association (``you'') 
may convert from the mutual to the stock form of ownership. Subpart A of 
this part governs standard mutual-to-stock conversions. Subpart B of 
this part governs voluntary supervisory mutual-to-stock conversions. 
This part supersedes all inconsistent charter and bylaw provisions of 
federal savings associations converting to stock form.
    (b) Prescribed forms. You must use the forms prescribed under this 
part and provide such information as OTS may require under the forms by 
regulation or otherwise. The forms required under this part include: 
Form AC (Application for Conversion); Form PS (Proxy Statement); Form OC 
(Offering Circular); and Form OF (Order Form).
    (c) Waivers. OTS may waive any requirement of this part or a 
provision in any prescribed form. To obtain a waiver, you must file a 
written request with OTS that:
    (1) Specifies the requirement(s) or provision(s) you want OTS to 
waive;
    (2) Demonstrates that the waiver is equitable; is not detrimental to 
you, your account holders, or other savings associations; and is not 
contrary to the public interest; and
    (3) Includes an opinion of counsel demonstrating that applicable law 
does

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not conflict with the requirement or provision.



Sec. 563b.10  May I form a holding company as part of my conversion?

    You may convert to the stock form of ownership as part of a 
transaction where you organize a holding company to acquire all of your 
shares upon their issuance. In such a transaction, your holding company 
will offer rights to purchase its shares instead of your shares. All of 
the requirements of subpart A generally apply to the holding company as 
they apply to the savings association. Section 574.6 of this chapter 
contains OTS's holding company application requirements.



Sec. 563b.15  May I form a charitable organization as part of my conversion?

    When you convert to the stock form, you may form a charitable 
organization. Your contributions to the charitable organization are 
governed by the requirements of Sec. Sec. 563b.550 through 563b.575.



Sec. 563b.20  May I acquire another insured stock depository institution 
as part of my conversion?

    When you convert to stock form, you may acquire for cash or stock 
another insured depository institution that is already in the stock form 
of ownership.



Sec. 563b.25  What definitions apply to this part?

    The following definitions apply to this part and the forms 
prescribed under this part:
    Acting in concert has the same meaning as in Sec. 574.2(c) of this 
chapter. The rebuttable presumptions of Sec. 574.4(d) of this chapter, 
other than Sec. Sec. 574.4(d)(1) and (d)(2) of this chapter, apply to 
the share purchase limitations at Sec. Sec. 563b.355 through 563b.395.
    Affiliate of, or a person affiliated with, a specified person is a 
person that directly or indirectly, through one or more intermediaries, 
controls, is controlled by, or is under common control with the 
specified person.
    Associate of a person is:
    (1) A corporation or organization (other than you or your majority-
owned subsidiaries), if the person is a senior officer or partner, or 
beneficially owns, directly or indirectly, 10 percent or more of any 
class of equity securities of the corporation or organization.
    (2) A trust or other estate, if the person has a substantial 
beneficial interest in the trust or estate or is a trustee or fiduciary 
of the trust or estate. For purposes of Sec. Sec. 563b.370, 563b.380, 
563b.385, 563b.390, 563b.395 and 563b.505, a person who has a 
substantial beneficial interest in your tax-qualified or non-tax-
qualified employee stock benefit plan, or who is a trustee or a 
fiduciary of the plan, is not an associate of the plan. For the purposes 
of Sec. 563b.370, your tax-qualified employee stock benefit plan is not 
an associate of a person.
    (3) Any person who is related by blood or marriage to such person 
and:
    (i) Who lives in the same home as the person; or
    (ii) Who is your director or senior officer, or a director or senior 
officer of your holding company or your subsidiary.
    Association members or members are persons who, under applicable 
law, are eligible to vote at the meeting on conversion.
    Control (including controlling, controlled by, and under common 
control with) means the direct or indirect power to direct or exercise a 
controlling influence over the management and policies of a person, 
whether through the ownership of voting securities, by contract, or 
otherwise as described in part 574 of this chapter.
    Eligibility record date is the date for determining eligible account 
holders. The eligibility record date must be at least one year before 
the date your board of directors adopts the plan of conversion.
    Eligible account holders are any persons holding qualifying deposits 
on the eligibility record date.
    IRS is the Internal Revenue Service.
    Local community includes:
    (1) Every county, parish, or similar governmental subdivision in 
which you have a home or branch office;
    (2) Each county's, parish's, or subdivision's metropolitan 
statistical area;
    (3) All zip code areas in your Community Reinvestment Act assessment 
area; and

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    (4) Any other area or category you set out in your plan of 
conversion, as approved by OTS.
    Offer, offer to sell, or offer for sale is an attempt or offer to 
dispose of, or a solicitation of an offer to buy, a security or interest 
in a security for value. Preliminary negotiations or agreements with an 
underwriter, or among underwriters who are or will be in privity of 
contract with you, are not offers, offers to sell, or offers for sale.
    Person is an individual, a corporation, a partnership, an 
association, a joint-stock company, a limited liability company, a 
trust, an unincorporated organization, or a government or political 
subdivision of a government.
    Proxy soliciting material includes a proxy statement, form of proxy, 
or other written or oral communication regarding the conversion.
    Purchase or buy includes every contract to acquire a security or 
interest in a security for value.
    Qualifying deposit is the total balance in an account holder's 
savings accounts at the close of business on the eligibility or 
supplemental eligibility record date. Your plan of conversion may 
provide that only savings accounts with total deposit balances of $50 or 
more will qualify.
    Sale or sell includes every contract to dispose of a security or 
interest in a security for value. An exchange of securities in a merger 
or acquisition approved by OTS is not a sale.
    Savings account is any withdrawable account as defined in Sec. 
561.42 of this chapter, including a demand account as defined in Sec. 
561.16 of this chapter.
    Solicitation and solicit is a request for a proxy, whether or not 
accompanied by or included in a form of proxy; a request to execute, not 
execute, or revoke a proxy; or the furnishing of a form of proxy or 
other communication reasonably calculated to cause your members to 
procure, withhold, or revoke a proxy. Solicitation or solicit does not 
include providing a form of proxy at the unsolicited request of a 
member, the acts required to mail communications for members, or 
ministerial acts performed on behalf of a person soliciting a proxy.
    Subscription offering is the offering of shares through 
nontransferable subscription rights to:
    (1) Eligible account holders under Sec. 563b.355;
    (2) Tax-qualified employee stock ownership plans under Sec. 
563b.380;
    (3) Supplemental eligible account holders under Sec. 563b.355; and
    (4) Other voting members under Sec. 563b.365.
    Supplemental eligibility record date is the date for determining 
supplemental eligible account holders. The supplemental eligibility 
record date is the last day of the calendar quarter before OTS approves 
your conversion and will only occur if OTS has not approved your 
conversion within 15 months after the eligibility record date.
    Supplemental eligible account holders are any persons, except your 
officers, directors, and their associates, holding qualifying deposits 
on the supplemental eligibility record date.
    Tax-qualified employee stock benefit plan is any defined benefit 
plan or defined contribution plan, such as an employee stock ownership 
plan, stock bonus plan, profit-sharing plan, or other plan, and a 
related trust, that is qualified under sec. 401 of the Internal Revenue 
Code (26 U.S.C. 401).
    Underwriter is any person who purchases any securities from you with 
a view to distributing the securities, offers or sells securities for 
you in connection with the securities' distribution, or participates or 
has a direct or indirect participation in the direct or indirect 
underwriting of any such undertaking. Underwriter does not include a 
person whose interest is limited to a usual and customary distributor's 
or seller's commission from an underwriter or dealer.



                     Subpart A_Standard Conversions

                           Prior to Conversion



Sec. 563b.100  What must I do before a conversion?

    (a) Your board, or a subcommittee of your board, must meet with OTS 
before you pass your plan of conversion. The meeting may occur at OTS or 
your offices at your option. At that meeting you must provide OTS with a 
written

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strategic plan that outlines the objectives of the proposed conversion 
and the intended use of the conversion proceeds.
    (b) You should also consult with OTS before you file your 
application for conversion. OTS will discuss the information that you 
must include in the application for conversion, general issues that you 
may confront in the conversion process, and any other pertinent issues.



Sec. 563b.105  What information must I include in my business plan?

    (a) Prior to filing an application for conversion, you must adopt a 
business plan reflecting your intended plans for deployment of the 
proposed conversion proceeds. Your business plan is required, under 
Sec. 563b.150, to be included in your conversion application. At a 
minimum, your business plan must address:
    (1) Your projected operations and activities for three years 
following the conversion. You must describe how you will deploy the 
conversion proceeds at the converted savings association (and holding 
company, if applicable), what opportunities are available to reasonably 
achieve your planned deployment of conversion proceeds in your proposed 
market areas, and how your deployment will provide a reasonable return 
on investment commensurate with investment risk, investor expectations, 
and industry norms, by the final year of the business plan. You must 
include three years of projected financial statements. The business plan 
must provide that the converted savings association must retain at least 
50 percent of the net conversion proceeds. OTS may require that a larger 
percentage of proceeds remain in the institution.
    (2) Your plan for deploying conversion proceeds to meet credit and 
lending needs in your proposed market areas. OTS strongly discourages 
business plans that provide for a substantial investment in mortgage 
securities or other securities, except as an interim measure to 
facilitate orderly, prudent deployment of proceeds during the three 
years following the conversion, or as part of a properly managed 
leverage strategy.
    (3) The risks associated with your plan for deployment of conversion 
proceeds, and the effect of this plan on management resources, staffing, 
and facilities.
    (4) The expertise of your management and board of directors, or that 
you have planned for adequate staffing and controls to prudently manage 
the growth, expansion, new investment, and other operations and 
activities proposed in your business plan.
    (b) You may not project returns of capital or special dividends in 
any part of the business plan. A newly converted company may not plan on 
stock repurchases in the first year of the business plan.



Sec. 563b.110  Who must review my business plan?

    (a) Your chief executive officer and members of the board of 
directors must review, and at least two-thirds of your board of 
directors must approve, the business plan.
    (b) Your chief executive officer and at least two-thirds of the 
board of directors must certify that the business plan accurately 
reflects the intended plans for deployment of conversion proceeds, and 
that any new initiatives reflected in the business plan are reasonably 
achievable. You must submit these certifications with your business 
plan, as part of your conversion application under Sec. 563b.150.



Sec. 563b.115  How will OTS review my business plan?

    (a) OTS will review your business plan to determine that it 
demonstrates a safe and sound deployment of conversion proceeds, as part 
of its review of your conversion application. In making its 
determination, OTS will consider how you have addressed the applicable 
factors of Sec. 563b.105. No single factor will be determinative. OTS 
will review every case on its merits.
    (b) You must file your business plan with the Regional Office. OTS 
may request additional information, if necessary, to support its 
determination under paragraph (a) of this section. You must file your 
business plan as a confidential exhibit to the Form AC.
    (c) If OTS approves your application for conversion and you complete 
your

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conversion, you must operate within the parameters of your business 
plan. You must obtain the prior written approval of the Regional 
Director for any material deviations from your business plan.



Sec. 563b.120  May I discuss my plans to convert with others?

    (a) You may discuss information about your conversion with 
individuals that you authorize to prepare documents for your conversion.
    (b) Except as permitted under paragraph (a) of this section, you 
must keep all information about your conversion confidential until your 
board of directors adopts your plan of conversion.
    (c) If you violate this section, OTS may require you to take 
remedial action. For example, OTS may require you to take any or all of 
the following actions:
    (1) Publicly announce that you are considering a conversion;
    (2) Set an eligibility record date acceptable to OTS;
    (3) Limit the subscription rights of any person who violates or aids 
a violation of this section; or
    (4) Take any other action to assure that your conversion is fair and 
equitable.

                           Plan of Conversion



Sec. 563b.125  Must my board of directors adopt a plan of conversion?

    Prior to filing an application for conversion, your board of 
directors must adopt a plan of conversion that conforms to Sec. Sec. 
563b.320 through 563b.485 and 563b.505. Your board of directors must 
adopt the plan by at least a two-thirds vote. Your plan of conversion is 
required, under Sec. 563b.150, to be included in your conversion 
application.



Sec. 563b.130  What must I include in my plan of conversion?

    You must include the information included in Sec. Sec. 563b.320 
through 563b.485 and 563b.505 in your plan of conversion. OTS may 
require you to delete or revise any provision in your plan of conversion 
if OTS determines the provision is inequitable; is detrimental to you, 
your account holders, or other savings associations; or is contrary to 
public interest.



Sec. 563b.135  How do I notify my members that my board of directors 
approved a plan of conversion?

    (a) Notice. You must promptly notify your members that your board of 
directors adopted a plan of conversion and that a copy of the plan is 
available for the members' inspection in your home office and in your 
branch offices. You must mail a letter to each member or publish a 
notice in the local newspaper in every local community where you have an 
office. You may also issue a press release. OTS may require broader 
publication, if necessary, to ensure adequate notice to your members.
    (b) Contents of notice. You may include any of the following 
statements and descriptions in your letter, notice, or press release.
    (1) Your board of directors adopted a proposed plan to convert from 
a mutual to a stock savings institution.
    (2) You will send your members a proxy statement with detailed 
information on the proposed conversion before you convene a members' 
meeting to vote on the conversion.
    (3) Your members will have an opportunity to approve or disapprove 
the proposed conversion at a meeting. At least a majority of the 
eligible votes must approve the conversion.
    (4) You will not vote existing proxies to approve or disapprove the 
conversion. You will solicit new proxies for voting on the proposed 
conversion.
    (5) OTS, and in the case of a state-chartered savings association, 
the appropriate state regulator, must approve the conversion before the 
conversion will be effective. Your members will have an opportunity to 
file written comments, including objections and materials supporting the 
objections, with OTS.
    (6) The IRS must issue a favorable tax ruling, or a tax expert must 
issue an appropriate tax opinion, on the tax consequences of your 
conversion before OTS will approve the conversion. The ruling or opinion 
must indicate the conversion will be a tax-free reorganization.

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    (7) OTS, and in the case of a state-chartered savings association, 
the appropriate state regulator, might not approve the conversion, and 
the IRS or a tax expert might not issue a favorable tax ruling or tax 
opinion.
    (8) Savings account holders will continue to hold accounts in the 
converted savings association with the same dollar amounts, rates of 
return, and general terms as existing deposits. FDIC will continue to 
insure the accounts.
    (9) Your conversion will not affect borrowers' loans, including the 
amount, rate, maturity, security, and other contractual terms.
    (10) Your business of accepting deposits and making loans will 
continue without interruption.
    (11) Your current management and staff will continue to conduct 
current services for depositors and borrowers under current policies and 
in existing offices.
    (12) You may continue to be a member of the Federal Home Loan Bank 
System.
    (13) You may substantively amend your proposed plan of conversion 
before the members' meeting.
    (14) You may terminate the proposed conversion.
    (15) After OTS, and in the case of a state-chartered savings 
association, the appropriate state regulator, approves the proposed 
conversion, you will send proxy materials providing additional 
information. After you send proxy materials, members may telephone or 
write to you with additional questions.
    (16) The proposed record date for determining the eligible account 
holders who are entitled to receive subscription rights to purchase your 
shares.
    (17) A brief description of the circumstances under which 
supplemental eligible account holders will receive subscription rights 
to purchase your shares.
    (18) A brief description of how voting members may participate in 
the conversion.
    (19) A brief description of how directors, officers, and employees 
will participate in the conversion.
    (20) A brief description of the proposed plan of conversion.
    (21) The par value (if any) and approximate number of shares you 
will issue and sell in the conversion.
    (c) Other requirements. (1) You may not solicit proxies, provide 
financial statements, describe the benefits of conversion, or estimate 
the value of your shares upon conversion in the letter, notice, or press 
release.
    (2) If you respond to inquiries about the conversion, you may 
address only the matters listed in paragraph (b) of this section.



Sec. 563b.140  May I amend my plan of conversion?

    You may amend your plan of conversion before you solicit proxies. 
After you solicit proxies, you may amend your plan of conversion only if 
OTS concurs.

                           Filing Requirements



Sec. 563b.150  What must I include in my application for conversion?

    (a) Your application for conversion must include all of the 
following information.
    (1) Your plan of conversion.
    (2) Pricing materials meeting the requirements of Sec. 563b.200(b).
    (3) Proxy soliciting materials under Sec. 563b.270, including:
    (i) A preliminary proxy statement with signed financial statements;
    (ii) A form of proxy meeting the requirements of Sec. 563b.255; and
    (iii) Any additional proxy soliciting materials, including press 
releases, personal solicitation instructions, radio or television 
scripts that you plan to use or furnish to your members, and a legal 
opinion indicating that any marketing materials comply with all 
applicable securities laws.
    (4) An offering circular described in Sec. 563b.300.
    (5) The documents and information required by Form AC. You may 
obtain Form AC from OTS Washington and Regional Offices (see Sec. 
516.40 of this chapter) and OTS's website (www.ots.treas.gov).
    (6) Where indicated, written consents, signed and dated, of any 
accountant, attorney, investment banker, appraiser, or other 
professional who

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prepared, reviewed, passed upon, or certified any statement, report, or 
valuation for use. See Form AC, instruction B(7).
    (7) Your business plan, submitted as a separately bound, 
confidential exhibit. See Sec. 563b.160.
    (8) Any additional information OTS requests.
    (b) OTS will not accept for filing, and will return, any application 
for conversion that is improperly executed, materially deficient, 
substantially incomplete, or that provides for unreasonable conversion 
expenses.



Sec. 563b.155  How do I file my application for conversion?

    You must file seven copies of your application for conversion on 
Form AC. You must file the original and three conformed copies with the 
Applications Filing Room in Washington, and three conformed copies with 
the appropriate Regional Office at the addresses in Sec. 516.40 of this 
chapter.



Sec. 563b.160  May I keep portions of my application for conversion 
confidential?

    (a) OTS makes all filings under this part available to the public, 
but may keep portions of your application for conversion confidential 
under paragraph (b) of this section.
    (b) You may request OTS to keep portions of your application 
confidential. To do so, you must separately bind and clearly designate 
as ``confidential'' any portion of your application for conversion that 
you deem confidential. You must provide a written statement specifying 
the grounds supporting your request for confidentiality. OTS will not 
treat as confidential the portion of your application describing how you 
plan to meet your Community Reinvestment Act (CRA) objectives. The CRA 
portion of your application may not incorporate by reference information 
contained in the confidential portion of your application.
    (c) OTS will determine whether confidential information must be made 
available to the public under 5 U.S.C. 552 and part 505 of this chapter. 
OTS will advise you before it makes information you designated as 
``confidential'' available to the public.



Sec. 563b.165  How do I amend my application for conversion?

    To amend your application for conversion, you must:
    (a) File an amendment with an appropriate facing sheet;
    (b) Number each amendment consecutively;
    (c) Respond to all issues raised by OTS; and
    (d) Demonstrate that the amendment conforms to all applicable 
regulations.

           Notice of Filing of Application and Comment Process



Sec. 563b.180  How do I notify the public that I filed an application 
for conversion?

    (a) You must publish a public notice of the application under the 
procedures in Sec. 516.55 of this chapter, except that you must publish 
your notice within three days before or after you file your application 
for conversion. You must simultaneously prominently post the notice in 
your home office and all branch offices. Your notice must include the 
following information:
    (1) You filed an application for conversion with OTS;
    (2) You delivered copies of the application to OTS and to the 
Regional Office, including the addresses of the applicable OTS offices; 
and
    (3) A statement that anyone may file written comments, including 
objections to the plan of conversion and materials supporting the 
objections, within 20 days. You must include instructions regarding how 
a person may file a comment.
    (b) Promptly after publication, you must file four copies of any 
public notice and an affidavit of publication from each publisher. You 
must file the original and one copy with the Applications Filing Room in 
Washington, and two copies with the appropriate Regional Office at the 
addresses in Sec. 516.40 of this chapter.
    (c) If OTS does not accept your application for conversion under 
Sec. 563b.200 and requires you to file a new application, you must 
publish and post a new notice and allow an additional 20 days for 
comment.

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Sec. 563b.185  How may a person comment on my application for conversion?

    Anyone may submit a written comment supporting or opposing your 
application for conversion with OTS. To do so, commenters must file 
within 20 days after you notify the public under Sec. 563b.180. A 
commenter must file the original and one copy of any comments with the 
Applications Filing Room in Washington, and two copies with the 
appropriate Regional Office at the addresses in Sec. 516.40 of this 
chapter.

              OTS Review of the Application for Conversion



Sec. 563b.200  What actions may OTS take on my application?

    (a) OTS may approve your application for conversion only if:
    (1) Your conversion complies with this part;
    (2) You will meet your regulatory capital requirements under part 
567 of this chapter after the conversion; and
    (3) Your conversion will not result in a taxable reorganization 
under the Internal Revenue Code of 1986, as amended.
    (b) OTS will review the appraisal required by Sec. 563b.150(a)(2) 
in determining whether to approve your application. OTS will review the 
appraisal under the following requirements.
    (1) Independent persons experienced and expert in corporate 
appraisal, and acceptable to OTS, must prepare the appraisal report.
    (2) An affiliate of the appraiser may serve as an underwriter or 
selling agent, if you ensure that the appraiser is separate from the 
underwriter or selling agent affiliate and the underwriter or selling 
agent affiliate does not make recommendations or affect the appraisal.
    (3) The appraiser may not receive any fee in connection with the 
conversion other than for appraisal services.
    (4) The appraisal report must include a complete and detailed 
description of the elements of the appraisal, a justification for the 
appraisal methodology, and sufficient support for the conclusions.
    (5) If the appraisal is based on a capitalization of your pro forma 
income, it must indicate the basis for determining the income to be 
derived from the sale of shares, and demonstrate that the earnings 
multiple used is appropriate, including future earnings growth 
assumptions.
    (6) If the appraisal is based on a comparison of your shares with 
outstanding shares of existing stock associations, the existing stock 
associations must be reasonably comparable in size, market area, 
competitive conditions, risk profile, profit history, and expected 
future earnings.
    (7) OTS may decline to process the application for conversion and 
deem it materially deficient or substantially incomplete if the initial 
appraisal report is materially deficient or substantially incomplete.
    (8) You may not represent or imply that OTS approved the appraisal.
    (c) OTS will review your compliance record under part 563e of this 
chapter and your business plan to determine how you will serve the 
convenience and needs of your communities after the conversion.
    (1) Based on this review, OTS may approve your application, deny 
your application, or approve your application on the condition that you 
will improve your CRA performance or that you will address the 
particular credit or lending needs of the communities that you will 
serve.
    (2) OTS may deny your application if your business plan does not 
demonstrate that your proposed use of conversion proceeds will help you 
to meet the credit and lending needs of the communities that you will 
serve.
    (d) OTS may request that you amend your application if further 
explanation is necessary, material is missing, or material must be 
corrected.
    (e) OTS will deny your application if the application does not meet 
the requirements of this subpart, unless OTS waives the requirement 
under Sec. 563b.5(c).



Sec. 563b.205  May a court review OTS's final action on my conversion?

    (a) Any person aggrieved by OTS's final action on your application 
for conversion may ask the court of appeals of the United States for the 
circuit in which the principal office or residence of such person is 
located, or

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the U.S. Court of Appeals for the District of Columbia Circuit, to 
review the action under 12 U.S.C. 1464(i)(2)(B).
    (b) To obtain court review of the action, this statute requires the 
aggrieved person to file a written petition requesting that the court 
modify, terminate, or set aside the final OTS action. The aggrieved 
person must file the petition with the court within the later of 30 days 
after OTS publishes notice of OTS's final action in the Federal Register 
or 30 days after you mail the proxy statement to your members under 
Sec. 563b.235.

                             Vote by Members



Sec. 563b.225  Must I submit the plan of conversion to my members for 
approval?

    (a) After OTS approves your plan of conversion, you must submit your 
plan of conversion to your members for approval. You must obtain this 
approval at a meeting of your members, which may be a special or annual 
meeting, unless you are a state-chartered savings association and state 
law requires you to obtain approval at an annual meeting.
    (b) Your members must approve your plan of conversion by a majority 
of the total outstanding votes, unless you are a state-chartered savings 
association and state law prescribes a higher percentage.
    (c) Your members may vote in person or by proxy.
    (d) You may notify eligible account holders or supplemental eligible 
account holders who are not voting members of your proposed conversion. 
You may include only the information in Sec. 563b.135 in your notice.



Sec. 563b.230  Who is eligible to vote?

    You determine members' eligibility to vote by setting a voting 
record date. You must set a voting record date that is not more than 60 
days nor less than 20 days before your meeting, unless you are a state-
chartered savings association and state law requires a different voting 
record date.



Sec. 563b.235  How must I notify my members of the meeting?

    (a) You must notify your members of the meeting to consider your 
conversion by sending the members a proxy statement authorized by OTS.
    (b) You must notify your members 20 to 45 days before your meeting, 
unless you are a state-chartered savings association and state law 
requires a different notice period.
    (c) You must also notify each beneficial holder of an account held 
in a fiduciary capacity:
    (1) If you are a federal association and the name of the beneficial 
holder is disclosed on your records; or
    (2) If you are a state-chartered association and the beneficial 
holder possesses voting rights under state law.



Sec. 563b.240  What must I submit to OTS after the members' meeting?

    (a) Promptly after the members' meeting, you must file all of the 
following information with OTS:
    (1) A certified copy of each adopted resolution on the conversion.
    (2) The total votes eligible to be cast.
    (3) The total votes represented in person or by proxy.
    (4) The total votes cast in favor of and against each matter.
    (5) The percentage of votes necessary to approve each matter.
    (6) An opinion of counsel that you conducted the members' meeting in 
compliance with all applicable state or federal laws and regulations.
    (b) Promptly after completion of the conversion, you must submit an 
opinion of counsel that you complied with all laws applicable to the 
conversion.

                           Proxy Solicitation



Sec. 563b.250  Who must comply with these proxy solicitation provisions?

    (a) You must comply w