§ 574.7 - Determination by the OTS.

§ 574.7 Determination by the OTS.

(a) Acquisition by a company.

(1) The Office shall approve an application by any company other than a savings and loan holding company to acquire control of one savings association unless it determines that the criteria set forth in paragraph (c) of this section are not met. Acquisitions involving mergers with an interim association shall also be subject to §§ 546.2, 552.13, and 563.22 of this chapter.

(2) Subject to compliance with the requirements of §§ 546.2, 552.13 and 563.22, as applicable, an application filed pursuant to § 574.6(a)(2) by a savings association solely for the purpose of obtaining approval for the creation of a savings and loan holding company by such savings association, and related applications for permission to organize an interim federal association, and for merger with such interim association, shall be deemed to be approved 45 calendar days after such applications are properly filed in accordance with the procedures set forth herein, unless, prior to such date:

(i) The Office has requested additional information of the applicant in writing;

(ii) Notified the applicant that the application is materially deficient and will not be processed; or

(iii) Denied the application prior to that time; provided that to be eligible for approval under this paragraph (a)(2):

(A) The holding company shall not be capitalized initially in an amount exceeding the amount the savings association is permitted to pay in dividends to its holding company as of the date of the reorganization pursuant to applicable regulations or, in the absence thereof, pursuant to the then current policy guidelines issued by the OTS;

(B) The creation of the savings and loan holding company by the association is the sole transaction contained in the application, and there are no other transactions requiring Office approval incident to the creation of the holding company (other than the creation of an interim association that will disappear upon consummation of the reorganization and the merger of the savings association with such interim association to effect the reorganization), and the holding company is not also seeking any regulatory waivers, regulatory forbearances, or resolution of legal or supervisory issues;

(C) The board of directors and executive officers of the holding company are composed of persons who, at the time of acquisition, are executive officers and directors of the association;

(D) The acquisition raises no significant issues of law or policy under then current Office policy;

(E) Prior to consummation of the reorganization transaction, the holding company shall enter into any dividend limitation, regulatory capital maintenance, or prenuptial agreement required by Office regulations, or in the absence thereof, required pursuant to policy guidelines issued by the OTS;

(F) The holding company shall furnish the following information in accordance with the specified time frames:

(1) On the business day prior to the date of consummation of the acquisition, the chief financial officers of the holding company and the savings association shall certify to the OTS in writing that no material adverse events or material adverse changes have occurred with respect to the financial condition or operations of the holding company or the savings association since the date of the financial statements submitted with the application;

(2) No later than thirty days from the date of consummation of the acquisition, the holding company shall file with the OTS a certification by legal counsel stating the effective date of the acquisition, the exact number of shares of stock of the savings association acquired by the holding company, and that the acquisition has been consummated in accordance with the provisions of all applicable laws and regulations and the application;

(3) No later than thirty days from the date of consummation of the acquisition, the holding company shall file with the OTS an opinion from its independent auditors certifying that the transaction was consummated in accordance with generally accepted accounting principles; and

(4) No later than thirty days from the date of consummation of the acquisition, the holding company shall file with the OTS a certification stating that the holding company will not cause the savings association to deviate materially from the business plan submitted in connection with the application, unless prior written approval from the OTS is obtained;

(G) In the event an interim association is utilized to facilitate the reorganization transaction, the resulting association shall, no later than 30 days from the date of consummation of the reorganization transaction, furnish a certification by legal counsel stating:

(1) The effective date of the merger involving the interim association and that the merger has been consummated in accordance with the Agreement and Plan of Reorganization or similar document pursuant to which the transaction was accomplished;

(2) The interim association has not opened for business;

(3) The merger was consummated within 120 calendar days of the date of approval: and

(4) After completion of the organization of the interim association, the board of directors of the interim association ratified the Agreement and Plan of Reorganization or similar document; and

(H) The proposed acquisition shall be consummated within 120 days after the application is automatically approved under this § 574.7(a)(2).

(3) To the extent that an association reorganizing into holding company form is subject to provisions relating to its mutual to stock conversion imposed by l2 CFR 563b.3(c)(9), (c)(17), (c)(18), (c)(19), (g)(1) or (i), such provisions shall be applicable to any holding company approved automatically pursuant to paragraph (a)(2) of this section.

(b) Acquisition by a savings and loan holding company. The Office shall not approve an acquisition by a savings and loan holding company to acquire control of a savings association, by any other company to acquire control of more than one savings association, by any director or officer of a savings and loan holding company, or any individual who owns, controls, or holds with power to vote (or holds proxies representing) more than 25 percent of the voting stock of a savings and loan holding company to acquire control of a savings association, or by a savings and loan holding company to acquire a qualified stock issuance by a savings association pursuant to § 574.8 of this part, except in accordance with paragraph (c) of this section. Before approving any such acquisition, except a transaction under section 13(k) of the Federal Deposit Insurance Act, the Office shall request from the Attorney General and consider any report rendered within 30 days of such request on the competitive factors involved. Acquisitions involving mergers (including mergers with an interim association) shall also be subject to §§ 546.2, 552.13, and 563.22 of this chapter.

(c) Application criteria.

(1) The OTS may deny an application by a company or certain persons, described in paragraph (b) of this section, affiliated with a savings and loan holding company, to acquire control of a savings association, or by a savings and loan holding company to acquire a qualified stock issuance pursuant to § 574.8 of this part:

(i) If the OTS finds that the financial and managerial resources and future prospects of the acquiror and association involved would be detrimental to the association or the insurance risk of the Deposit Insurance Fund; or

(ii) If the acquiror fails or refuses to furnish information requested by the OTS.

(2) Consideration of the managerial resources of a company or savings association shall include consideration of the competence, experience, and integrity of the officers, directors, and controlling shareholders of the company or association. In connection with the applications filed pursuant to §§ 574.6 (a)(3) and 574.8 of this part, the OTS will also consider the convenience and needs of the community to be served. Moreover, the OTS shall not approve any proposed acquisition:

(i) Which would result in a monopoly, or which would be in furtherance of any combination or conspiracy to monopolize or to attempt to monopolize the savings and loan business in any part of the United States;

(ii) The effect of which on any section of the country may be substantially to lessen competition, or tend to create a monopoly, or which in any other manner would be in restraint of trade, unless the OTS finds that the anticompetitive effects of the proposed acquisition are clearly outweighed in the public interest by the probable effect of the acquisition in meeting the convenience and needs of the community to be served;

(iii) If the company fails to provide adequate assurances to the OTS that the company will make available to the OTS such information on the operations or activities of the company, and any affiliate of the company, as the OTS determines to be appropriate to determine and enforce compliance with the Home Owners' Loan Act; or

(iv) In the case of an application by a foreign bank, if the foreign bank is not subject to comprehensive supervision or regulation on a consolidated basis by the appropriate authorities in the home country of the foreign bank. For purposes of this paragraph (c)(2)(iv), “comprehensive supervision or regulation on a consolidated basis by the appropriate authorities” shall be determined using the standards set forth at 12 CFR 211.24(c)(1)(ii).

(d) Notice criteria. In making its determination whether to disapprove a notice, the Office may disapprove any proposed acquisition, if the Office determines that:

(1) The proposed acquisition of control would result in a monopoly or would be in furtherance of any combination or conspiracy to monopolize or to attempt to monopolize the banking business in any part of the United States;

(2) The effect of the proposed acquisition of control in any section of the country may be substantially to lessen competition or to tend to create a monopoly or the proposed acquisition of control would in any other manner be in restraint of trade, and the anticompetitive effects of the proposed acquisition of control are not clearly outweighed in the public interest by the probable effect of the transaction in meeting the convenience and needs of the community to be served;

(3) The financial condition of the acquiring person is such as might jeopardize the financial stability of the association or prejudice the interests of the depositors of the association;

(4) The competence, experience, or integrity of the acquiring person or any of the proposed management personnel indicates that it would not be in the interests of the depositors of the association, the Office, or the public to permit such person to control the association;

(5) The acquiring person fails or refuses to furnish information requested by the Office; or

(6) The Office determines that the proposed acquisition would have an adverse effect on the Deposit Insurance Fund.

(e) Failure to disapprove a notice. If, upon expiration of the 60-day review period of any notice deemed to be sufficient filed pursuant to § 574.6(c), or extension thereof, the Office has failed to disapprove such notice, the proposed acquisition may take place: Provided, That it is consummated within one year and in accordance with the terms and representations in the notice and that there is no material change in circumstances prior to the acquisition.

(f) [Reserved]

(g) Presumptive disqualifiers -

(1) Integrity factors. The following factors shall give rise to a rebuttable presumption that an acquiror may fail to satisfy the managerial resources and future prospects tests of paragraph (c) of this section or the integrity test of paragraph (d)(4) of this section:

(i) During the 10-year period immediately preceding filing of the application or notice, criminal, civil or administrative judgments, consents or orders, and any indictments, formal investigations, examinations, or civil or administrative proceedings (excluding routine or customary audits, inspections and investigations) that terminated in any agreements, undertakings, consents or orders, issued against, entered into by, or involving the acquiror or affiliates of the acquiror by any federal or state court, any department, agency, or commission of the U.S. Government, any state or municipality, any Federal Home Loan Bank, any self-regulatory trade or professional organization, or any foreign government or governmental entity, which involve:

(A) Fraud, moral turpitude, dishonesty, breach of trust or fiduciary duties, organized crime or racketeering;

(B) Violation of securities or commodities laws or regulations;

(C) Violation of depository institution laws or regulations;

(D) Violation of housing authority laws or regulations; or

(E) Violation of the rules, regulations, codes of conduct or ethics of a self-regulatory trade or professional organization;

(ii) Denial, or withdrawal after receipt of formal or informal notice of an intent to deny, by the acquiror or affiliates of the acquiror, of

(A) Any application relating to the organization of a financial institution,

(B) An application to acquire any financial institution or holding company thereof under the Holding Company Act or the Bank Holding Company Act or otherwise,

(C) A notice relating to a change in control of any of the foregoing under the Control Act or the Repealed Control Act; or

(D) An application or notice under a state holding company or change in control statute;

(iii) The acquiror or affiliates of the acquiror were placed in receivership or conservatorship during the preceding 10 years, or any management official of the acquiror was a management official or director (other than an official or director serving at the request of the Office, the Federal Deposit Insurance Corporation, the Resolution Trust Corporation, or the former Federal Savings and Loan Insurance Corporation) or controlling shareholder of a company or savings association that was placed into receivership, conservatorship, or a management consignment program, or was liquidated during his or her tenure or control or within two years thereafter;

(iv) Felony conviction of the acquiror, an affiliate of the acquiror or a management official of the acquiror or an affiliate of the acquiror;

(v) Knowingly making any written or oral statement to the Office or any predecessor agency (or its delegate) in connection with an application, notice or other filing under this part that is false or misleading with respect to a material fact or omits to state a material fact with respect to information furnished or requested in connection with such an application, notice or other filing;

(vi) Acquisition and retention at the time of submission of an application or notice, of stock in the savings association by the acquiror in violation of § 574.3 or its predecessor sections.

(2) Financial factors. The following shall give rise to a rebuttable presumption that an acquiror may fail to satisfy the financial-resources and future-prospects tests of paragraph (c) of this section, or the financial condition test of paragraph (d)(3) of this section:

(i) Liability for amounts of debt which, in the opinion of the Office, create excessive risks of default and pressure on the savings association to be acquired; or

(ii) Failure to furnish a business plan or furnishing a business plan projecting activities which are inconsistent with economical home financing.

[54 FR 49690, Nov. 30, 1989, as amended at 57 FR 14349, Apr. 20, 1992; 59 FR 28471, June 2, 1994; 59 FR 44627, Aug. 30, 1994; 60 FR 66720, Dec. 26, 1995; 71 FR 19812, Apr. 18, 2006]