Federal Deposit Insurance Corporation 

550 17th Street NW, Washington, D.C. 20429-9990 Division of Supervision and Consumer Protection 

 

TO: Board of Directors 

FROM: Sandra L. Thompson 

 Director 

SUBJECT: Amendments to Statement of Policy on Bank Merger Transactions

EXECUTIVE SUMMARY 

The Division of Supervision and Consumer Protection (DSC) recommends that the Board of 

Directors (Board) amend the Statement of Policy on Bank Merger Transactions (Statement of 

Policy) to (i) reflect recent changes to the Bank Merger Act made by the Financial Services 

Regulatory Relief Act of 2006 (FSRRA); (ii) reflect the consolidation of the two former deposit 

insurance funds into one Deposit Insurance Fund by the Federal Deposit Insurance Reform Act 

of 2005 (FDIRA); (iii) conform the description of the factors to be considered in evaluating a 

merger more closely to the language of the Bank Merger Act; and (iv) revise the discussion of 

the evaluation of certain anticompetitive mergers involving failing banks. 

The recommended amendments are incorporated into the revised Statement of Policy, attached 

as Exhibit A (redline format) and Exhibit B (clean format), and are described more fully below. 

In addition, DSC recommends that the Board authorize the Executive Secretary to publish in the 

Federal Register the notice, attached as Exhibit C, which describes the amendments in detail. 

The Legal Division has determined that solicitation of public comment is not necessary because 

the Administrative Procedure Act does not generally require public comment regarding 

statements of policy1

 and because the proposed revisions merely conform the Statement of 

Policy to the Federal statutes. 

The FSRRA eliminated the need for the FDIC to obtain a competitive factors report from the 

other three Federal banking agencies in processing a merger application, and eliminated both the 

post-approval waiting period and the need to obtain any competitive factors reports when the 

merger solely involves an insured depository institution and one or more of its affiliates. These 

changes require conforming amendments to the Statement of Policy. 

Concur: 

_________________________ 

Sara A. Kelsey 

General Counsel 

 

1

 5 U.S.C. § 553(b)(A). 

Attachments 
Conforming Amendments to FDIC Statement of Policy on Bank Merger Transactions 

The FDIRA consolidated the former Savings Association Insurance Fund (SAIF) and the former 

Bank Insurance Fund (BIF) into the Deposit Insurance Fund. Among the many consequences of 

this legislative action, it obviated the need for special rules governing merger transactions that 

involved a member of the BIF and a member of the SAIF. As a result, the discussion in the 

Statement of Policy addressing these transactions is no longer necessary. 

Technical amendments are also recommended to conform the description of the factors to be 

considered in evaluating a merger more closely to the language of the Bank Merger Act, to insert 

a reference to the anti-money laundering factor omitted from the Introduction section of the 

Statement of Policy, and to revise the discussion of the evaluation of certain anticompetitive 

mergers involving failing banks. 

Finally, an additional technical amendment is proposed to reflect the FDIC Public Information 

Center’s change of location and street address to the Virginia Square office. 

The Statement of Policy serves as guidance to the public and the industry on bank merger 

applications. The Board originally adopted the Statement of Policy and two subsequent 

amendments, and the Board has not delegated the authority to amend this Statement of Policy. 

Therefore, DSC and the Legal Division are recommending that the Board adopt and approve 

these amendments, and authorize their publication in the Federal Register. 

SECTION 606 OF THE FSRRA 

Section 606 of the FSRRA amended section 18(c)(4) of the Federal Deposit Insurance Act (FDI 

Act) to eliminate the requirement that the Federal banking agency responsible for processing a 

particular merger application request and obtain a competitive factors report from each of the 

other three Federal banking agencies. Section 606 of the FSRRA did not, however, eliminate the 

requirement that the responsible agency obtain a competitive factors report from the Attorney 

General of the United States. In addition, section 606 also added the requirement that in 

processing a merger application, the Federal Reserve Board, the Office of the Comptroller of the 

Currency, or the Office of Thrift Supervision, as the case may be, must submit a copy of each 

request for a competitive factors report to the FDIC. 

Section 606 of the FSRRA also made two changes to the Bank Merger Act that apply to mergers 

solely involving an insured depository institution and one or more of its affiliates (Affiliate 

Mergers). First, Section 606 eliminated the need for the responsible Federal banking agency to 

request any competitive factors reports for Affiliate Mergers. Second, Section 606 revised 

Section 18(c)(6) of the FDI Act to eliminate the post-approval waiting period for Affiliate 

Mergers. Prior to the FSRRA, the applicant in an Affiliate Merger had to wait up to thirty days 

after approval before it could consummate the transaction. 

After incorporating the recommended amendments, paragraphs 4 and 5 of Section II of the 

Statement of Policy read as follows: 

2
Conforming Amendments to FDIC Statement of Policy on Bank Merger Transactions 

 II. Application Procedures 

. . . . 

4. Reports on competitive factors. As required by law, the FDIC will request a 

report on the competitive factors involved in a proposed merger transaction from 

the Attorney General. This report must ordinarily be furnished within 30 days, 

and the applicant upon request will be given an opportunity to submit comments 

to the FDIC on the contents of the competitive factors report. 

5. Notification of the Attorney General. After the FDIC approves any merger 

transaction, the FDIC will immediately notify the Attorney General. Generally, 

unless it involves a probable failure, an emergency exists requiring expeditious 

action, or it is solely between an insured depository institution and one or more of 

its affiliates, a merger transaction may not be consummated until 30 calendar days 

after the date of the FDIC's approval. However, the FDIC may prescribe a 15-day 

period, provided the Attorney General concurs with the shorter period. 

FEDERAL DEPOSIT INSURANCE REFORM ACT OF 2005 

Section 2102(a) of the FDIRA merged the BIF and the SAIF into a new fund, the Deposit 

Insurance Fund. Among the many consequences of this legislative action, it obviated the need 

for special rules governing merger transactions that involved a member of the BIF and a member 

of the SAIF, commonly known as “Oakar” transactions. As a result, the discussion in the 

Statement of Policy addressing Oakar transactions is no longer necessary. Therefore, paragraph 

3 Optional Conversion of Section IV Related Considerations is deleted and the subsequent 

paragraphs are renumbered. 

The deleted text read as follows: 

Optional conversion. Section 5(d)(3) of the Federal Deposit Insurance Act, 12 

U.S.C. 1815(d)(3), provides for "optional conversions" (commonly known as 

Oakar transactions) which, in general, are merger transactions that involve a 

member of the Bank Insurance Fund and a member of the Savings Association 

Insurance Fund. These transactions are subject to specific rules regarding deposit 

insurance coverage and premiums. Applicants may find additional guidance in 

§ 327.31 of the FDIC rules and regulations (12 CFR 327.31). 

TECHNCIAL AMENDMENTS 

Technical amendments are recommended to conform the description of the antitrust factor to be 

considered in evaluating a merger more closely to the language of the Bank Merger Act. In 

addition, staff recommends an amendment to insert a reference to the anti-money laundering 

factor omitted from the description of the factors to be considered in the Introduction section of 

the Statement of Policy. Accordingly, the third and fourth unnumbered paragraphs of Section I

3
Conforming Amendments to FDIC Statement of Policy on Bank Merger Transactions 

Introduction and paragraph 4 of Section III Evaluation of Merger Applications are amended to 

read as follows. The changes are underlined. 

I. Introduction 

. . . . 

The Bank Merger Act prohibits the FDIC from approving any proposed merger 

transaction that would result in a monopoly, or would further a combination or 

conspiracy to monopolize or to attempt to monopolize the business of banking in 

any part of the United States. Similarly, the Bank Merger Act prohibits the FDIC 

from approving a proposed merger transaction whose effect in any section of the 

country may be substantially to lessen competition, or to tend to create a 

monopoly, or which in any other manner would be in restraint of trade. An 

exception may be made in the case of a merger transaction whose effect would be 

to substantially lessen competition, tend to create a monopoly, or otherwise 

restrain trade, if the FDIC finds that the anticompetitive effects of the proposed 

transaction are clearly outweighed in the public interest by the probable effect of 

the transaction in meeting the convenience and needs of the community to be 

served. For example, the FDIC may approve a merger transaction to prevent the 

probable failure of one of the institutions involved. 

In every proposed merger transaction, the FDIC must also consider the financial 

and managerial resources and future prospects of the existing and proposed 

institutions, the convenience and needs of the community to be served, and the 

effectiveness of each insured depository institution involved in the proposed 

merger transaction in combating money-laundering activities, including in 

overseas branches. 

. . . . 

III. Evaluation of Merger Applications. 

. . . . 

4. Consideration of the public interest. The FDIC will deny any proposed merger 

transaction whose overall effect likely would be to reduce existing competition 

substantially by limiting the service and price options available to the public in 

the relevant geographic market(s), unless the anticompetitive effects of the 

proposed merger transaction are 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. For this purpose, the applicant must show by clear and 

convincing evidence that any claimed public benefits would be both substantial 

and incremental and generally available to seekers of banking services in the 

relevant geographic market(s) and that the expected benefits cannot reasonably be 

achieved through other, less anticompetitive means. 

4
Conforming Amendments to FDIC Statement of Policy on Bank Merger Transactions 

Technical amendments are also recommended to Section III Evaluation of Merger Applications

to make the discussion of the evaluation of certain anticompetitive mergers involving failing 

banks more consistent with the least-cost resolution requirements of the FDIC Improvement Act 

of 1991. The second paragraph of subsection 4 Consideration of the public interest of Section 

III Evaluation of Merger Applications currently reads as follows. 

. . . . 

III. Evaluation of Merger Applications. 

. . . . 

Where a proposed merger transaction is the only reasonable alternative to the probable 

failure of an insured depository institution, the FDIC may approve an otherwise 

anticompetitive merger transaction. The FDIC usually will not consider a less 

anticompetitive alternative that is substantially more costly to the FDIC to be a 

reasonable alternative, unless the potential costs to the public of approving the 

anticompetitive merger transaction are clearly greater than those costs likely to be saved 

by the FDIC. 

This paragraph can be read to indicate that the FDIC may approve a merger involving a failing 

bank contrary to its statutory duty to resolve an institution in the manner that results in the least 

cost to the Deposit Insurance Fund. Accordingly, the paragraph is amended to read as follows. 

Where a proposed merger transaction is the least-costly alternative to the probable failure 

of an insured depository institution, the FDIC may approve the merger transaction even if 

it is anticompetitive. 

A final technical amendment is proposed to reflect the FDIC Public Information Center’s change 

of location and address to the Virginia Square building. As such, paragraph 6 of Section II. 

Application Procedures is amended to read as follows. The change is underlined. 

FDIC Statement of Policy on Bank Merger Transactions 

. . . . 

II. Application Procedures 

. . . . 

6. Merger decisions available. Applicants for consent to engage in a merger 

transaction may find additional guidance in the reported bases for FDIC approval 

or denial in prior merger transaction cases compiled in the FDIC’s annual 

“Merger Decisions” report. Reports may be obtained from the FDIC Public 

5
Conforming Amendments to FDIC Statement of Policy on Bank Merger Transactions 

Information Center, 3501 North Fairfax Drive, Room E-1002, Arlington, VA 

22226. Reports may also be viewed at http//www.fdic.gov. 

Staff Contacts

Division of Supervision and Consumer Protection: Brett A. McCallister 

 Review Examiner 

 (816) 234-8099 Ext. 4223 

Legal Division: Robert C. Fick 

 Counsel 

 (202) 898-8962 

 Julia E. Paris 

 Senior Attorney 

 (202) 898-3821 

6
Exhibit B 

FDIC Statement of Policy on Bank Merger Transactions 

I. Introduction 

Section 18(c) of the Federal Deposit Insurance Act (12 U.S.C. 1828(c)), popularly 

known as the "Bank Merger Act," requires the prior written approval of the FDIC before 

any insured depository institution may: 

(1) Merge or consolidate with, purchase or otherwise acquire the assets of, or assume 

any deposit liabilities of, another insured depository institution if the resulting institution is to be 

a state nonmember bank, or 

(2) Merge or consolidate with, assume liability to pay any deposits or similar liabilities 

of, or transfer assets and deposits to, a noninsured bank or institution. 

Institutions undertaking one of the above described "merger transactions" must file an 

application with the FDIC. Transactions that do not involve a transfer of deposit liabilities 

typically do not require prior FDIC approval under the Bank Merger Act, unless the transaction 

involves the acquisition of all or substantially all of an institution's assets. 

The Bank Merger Act prohibits the FDIC from approving any proposed merger 

transaction that would result in a monopoly, or would further a combination or conspiracy to 

monopolize or to attempt to monopolize the business of banking in any part of the United States. 

Similarly, the Bank Merger Act prohibits the FDIC from approving a proposed merger 

transaction whose effect in any section of the country may be substantially to lessen competition, 

or to tend to create a monopoly, or which in any other manner would be in restraint of trade. An 

exception may be made in the case of a merger transaction whose effect would be to 

substantially lessen competition, tend to create a monopoly, or otherwise restrain trade, if the 

FDIC finds that the anticompetitive effects of the proposed transaction are clearly outweighed in 

the public interest by the probable effect of the transaction in meeting the convenience and needs 

of the community to be served. For example, the FDIC may approve a merger transaction to 

prevent the probable failure of one of the institutions involved. 

In every proposed merger transaction, the FDIC must also consider the financial and 

managerial resources and future prospects of the existing and proposed institutions, the 

convenience and needs of the community to be served, and the effectiveness of each insured 

depository institution involved in the proposed merger transaction in combating moneylaundering activities, including in overseas branches. 

II. Application Procedures 

1. Application filing. Application forms and instructions may be obtained from the 

appropriate FDIC office. Completed applications and any other pertinent materials should be 

filed with the appropriate FDIC office. The application and related materials will be reviewed by 

the FDIC for compliance with applicable laws and FDIC rules and regulations. When all 
Exhibit B 

necessary information has been received, the application will be processed and a decision 

rendered by the FDIC. 

2. Expedited processing. Section 303.64 of the FDIC rules and regulations (12 CFR 

303.64) provides for expedited processing, which the FDIC will grant to eligible applicants. In 

addition to the eligible institution criteria provided for in § 303.2 (12 CFR 303.2), § 303.64 

provides expedited processing criteria specifically applicable to proposed merger transactions. 

3. Publication of notice. The FDIC will not take final action on a merger application 

until notice of the proposed merger transaction is published in a newspaper or newspapers of 

general circulation in accordance with the requirements of section 18(c)(3) of the Federal 

Deposit Insurance Act. See § 303.65 of the FDIC rules and regulations (12 CFR 303.65). The 

applicant must furnish evidence of publication of the notice to the appropriate FDIC office 

following compliance with the publication requirement. See § 303.7(b) of the FDIC rules and 

regulations (12 CFR 303.7(b)). 

4. Reports on competitive factors. As required by law, the FDIC will request a report on 

the competitive factors involved in a proposed merger transaction from the Attorney General. 

This report must ordinarily be furnished within 30 days, and the applicant upon request will be 

given an opportunity to submit comments to the FDIC on the contents of the competitive factors 

report. 

5. Notification of the Attorney General. After the FDIC approves any merger 

transaction, the FDIC will immediately notify the Attorney General. Generally, unless it 

involves a probable failure, an emergency exists requiring expeditious action, or it is solely 

between an insured depository institution and one or more of its affiliates, a merger transaction 

may not be consummated until 30 calendar days after the date of the FDIC's approval. However, 

the FDIC may prescribe a 15-day period, provided the Attorney General concurs with the shorter 

period. 

6. Merger decisions available. Applicants for consent to engage in a merger transaction 

may find additional guidance in the reported bases for FDIC approval or denial in prior merger 

transaction cases compiled in the FDIC's annual "Merger Decisions" report. Reports may be 

obtained from the FDIC Public Information Center, 3501 North Fairfax Drive, Room E-1002, 

Arlington, VA 22226. Reports may also be viewed at http://www.fdic.gov. 

III. Evaluation of Merger Applications 

The FDIC's intent and purpose is to foster and maintain a safe, efficient, and competitive 

banking system that meets the needs of the communities served. With these broad goals in mind, 

the FDIC will apply the specific standards outlined in this Statement of Policy when evaluating 

and acting on proposed merger transactions. 

Competitive Factors 

2
Exhibit B 

In deciding the competitive effects of a proposed merger transaction, the FDIC will 

consider the extent of existing competition between and among the merging institutions, other 

depository institutions, and other providers of similar or equivalent services in the relevant 

product market(s) within the relevant geographic market(s). 

1. Relevant geographic market. The relevant geographic market(s) includes the areas in 

which the offices to be acquired are located and the areas from which those offices derive the 

predominant portion of their loans, deposits, or other business. The relevant geographic market 

also includes the areas where existing and potential customers impacted by the proposed merger 

transaction may practically turn for alternative sources of banking services. In delineating the 

relevant geographic market, the FDIC will also consider the location of the acquiring institution's 

offices in relation to the offices to be acquired. 

2. Relevant product market. The relevant product market(s) includes the banking 

services currently offered by the merging institutions and to be offered by the resulting 

institution. In addition, the product market may also include the functional equivalent of such 

services offered by other types of competitors, including other depository institutions, securities 

firms, or finance companies. For example, share draft accounts offered by credit unions may be 

the functional equivalent of demand deposit accounts. Similarly, captive finance companies of 

automobile manufacturers may compete directly with depository institutions for automobile 

loans, and mortgage bankers may complete directly with depository institutions for real estate 

loans. 

3. Analysis of competitive effects. In its analysis of the competitive effects of a proposed 

merger transaction, the FDIC will focus particularly on the type and extent of competition that 

exists and that will be eliminated, reduced, or enhanced by the proposed merger transaction. The 

FDIC will also consider the competitive impact of providers located outside a relevant 

geographic market where it is shown that such providers individually or collectively influence 

materially the nature, pricing, or quality of services offered by the providers currently operating 

within the geographic market. 

The FDIC's analysis will focus primarily on those services that constitute the largest part 

of the businesses of the merging institutions. In its analysis, the FDIC will use whatever 

analytical proxies are available that reasonably reflect the dynamics of the market, including 

deposit and loan totals, the number and volume of transactions, contributions to net income, or 

other measures. Initially, the FDIC will focus on the respective shares of total deposits1

 held by 

the merging institutions and the various other participants with offices in the relevant geographic 

market(s), unless the other participants' loan, deposit, or other business varies markedly from that 

of the merging institutions. Where it is clear, based on market share considerations alone, that 

the proposed merger transaction would not significantly increase concentration in an 

unconcentrated market, a favorable finding will be made on the competitive factor. 

 

1

 In many cases, total deposits will adequately serve as a proxy for overall share of the banking business in 

the relevant geographic market(s); however, the FDIC may also consider other analytical proxies. 

3
Exhibit B 

Where the market shares of the merging institutions are not clearly insignificant, the 

FDIC will also consider the degree of concentration within the relevant geographic market(s) 

using the Herfindahl-Hirschman Index (HHI)2

 as a primary measure of market concentration. 

For purposes of this test, a reasonable approximation for the relevant geographic market(s) 

consisting of one or more predefined areas may be used. Examples of such predefined areas 

include counties, the Bureau of the Census Metropolitan-Statistical Areas (MSAs), or RandMcNally Ranally Metro Areas (RMAs). 

The FDIC normally will not deny a proposed merger transaction on antitrust grounds 

(absent objection from the Department of Justice) where the post-merger HHI in the relevant 

geographic market(s) is 1,800 points or less or, if it is more than 1,800, it reflects an increase of 

less than 200 points from the pre-merger HHI. Where a proposed merger transaction fails this 

initial concentration test, the FDIC will consider more closely the various competitive dynamics 

at work in the market, taking into account a variety of factors that may be especially relevant and 

important in a particular proposal, including: 

• The number, size, financial strength, quality of management, and aggressiveness of the 

various participants in the market; 

• The likelihood of new participants entering the market based on its attractiveness in 

terms of population, income levels, economic growth, and other features; 

• Any legal impediments to entry or expansion; and 

• Definite entry plans by specifically identified entities. 

In addition, the FDIC will consider the likelihood that new entrants might enter the 

market by less direct means; for example, electronic banking with local advertisement of the 

availability of such services. This consideration will be particularly important where there is 

evidence that the mere possibility of such entry tends to encourage competitive pricing and to 

maintain the quality of services offered by the existing competitors in the market. 

The FDIC will also consider the extent to which the proposed merger transaction likely 

would create a stronger, more efficient institution able to compete more vigorously in the 

relevant geographic markets. 

4. Consideration of the public interest. The FDIC will deny any proposed merger 

transaction whose overall effect likely would be to reduce existing competition substantially by 

limiting the service and price options available to the public in the relevant geographic market(s), 

unless the anticompetitive effects of the proposed merger transaction are clearly outweighed in 

 

2

 The HHI is a statistical measure of market concentration and is also used as the principal measure of 

market concentration in the Department of Justice's Merger Guidelines. The HHI for a given market is 

calculated by squaring each individual competitor's share of total deposits within the market and then 

summing the squared market share products. For example, the HHI for a market with a single competitor 

would be: 1002

 = 10,000: for a market with five competitors with equal market shares, the HHI would be: 

202

 + 202 + 202 + 202 + 202 = 2,000. 

4
Exhibit B 

the public interest by the probable effect of the transaction in meeting the convenience and needs 

of the community to be served. For this purpose, the applicant must show by clear and 

convincing evidence that any claimed public benefits would be both substantial and incremental 

and generally available to seekers of banking services in the relevant geographic market(s) and 

that the expected benefits cannot reasonably be achieved through other, less anticompetitive 

means. 

Where a proposed merger transaction is the least-costly alternative to the probable failure 

of an insured depository institution, the FDIC may approve the merger transaction even if it is 

anticompetitive. 

Prudential Factors 

The FDIC does not wish to create larger weak institutions or to debilitate existing 

institutions whose overall condition, including capital, management, and earnings, is generally 

satisfactory. Consequently, apart from competitive considerations, the FDIC normally will not 

approve a proposed merger transaction where the resulting institution would fail to meet existing 

capital standards, continue with weak or unsatisfactory management, or whose earnings 

prospects, both in terms of quantity and quality, are weak, suspect, or doubtful. In assessing 

capital adequacy and earnings prospects, particular attention will be paid to the adequacy of the 

allowance for loan and lease losses. In evaluating management, the FDIC will rely to a great 

extent on the supervisory histories of the institutions involved and of the executive officers and 

directors that are proposed for the resultant institution. In addition, the FDIC may review the 

adequacy of management's disclosure to shareholders of the material aspects of the merger 

transaction to ensure that management has properly fulfilled its fiduciary duties. 

Convenience and Needs Factor 

In assessing the convenience and needs of the community to be served, the FDIC will 

consider such elements as the extent to which the proposed merger transaction is likely to benefit 

the general public through higher lending limits, new or expanded services, reduced prices, 

increased convenience in utilizing the services and facilities of the resulting institution, or other 

means. The FDIC, as required by the Community Reinvestment Act, will also note and consider 

each institution's Community Reinvestment Act performance evaluation record. An 

unsatisfactory record may form the basis for denial or conditional approval of an application. 

Anti-Money Laundering Record 

In every case, the FDIC will take into consideration the effectiveness of each insured 

depository institution involved in the proposed merger transaction in combating moneylaundering activities, including in overseas branches. In this regard, the FDIC will consider the 

adequacy of each institution's programs, policies, and procedures relating to anti-money 

laundering activities; the relevant supervisory history of each participating institution, including 

their compliance with anti-money laundering laws and regulations; and the effectiveness of any 

corrective program outstanding. The FDIC's assessment may also incorporate information made 

available to the FDIC by the Department of the Treasury, other Federal or State authorities, 

5
Exhibit B 

and/or foreign governments. Adverse findings may warrant correction of identified problems 

before consent is granted, or the imposition of conditions. Significantly adverse findings in this 

area may form the basis for denial of the application. 

Special Information requirement if applicant is affiliated with or will be affiliated with an 

insurance company. 

If the institution that is the subject of the application is, or will be, affiliated with a 

company engaged in insurance activities that is subject to supervision by a state insurance 

regulator, the applicant must submit the following information as part of its application: (1) The 

name of insurance company; (2) a description of the insurance activities that the company is 

engaged in and has plans to conduct; and (3) a list of each state and the lines of business in that 

state which the company holds, or will hold, an insurance license. Applicant must also indicate 

the state where the company holds a resident license or charter, as applicable. 

IV. Related Considerations 

1. Interstate bank merger transactions. Where a proposed transaction is an interstate 

merger transaction between insured banks, the FDIC will consider the additional factors 

provided for in section 44 of the Federal Deposit Insurance Act, 12 U.S.C. 1831u. 

2. Interim merger transactions. An interim institution is a state- or federally-chartered 

institution that does not operate independently, but exists, normally for a very short period of 

time, solely as a vehicle to accomplish a merger transaction. In cases where the establishment of 

a new or interim institution is contemplated in connection with a proposed merger transaction, 

the applicant should contact the FDIC to discuss any relevant deposit insurance requirements. In 

general, a merger transaction (other than a purchase and assumption) involving an insured 

depository institution and a federal interim depository institution will not require an application 

for deposit insurance, even if the federal interim depository institution will be the surviving 

institution. 

3. Branch closings. Where banking offices are to be closed in connection with the 

proposed merger transaction, the FDIC will review the merging institutions' conformance to any 

applicable requirements of section 42 of the Federal Deposit Insurance Act concerning notice of 

branch closings as reflected in the Interagency Policy Statement Concerning Branch Closing 

Notices and Policies. See 2 FDIC Law, Regulations, Related Acts 5391. 

4. Legal fees and other expenses. The commitment to pay or payment of unreasonable 

or excessive fees and other expenses incident to an application reflects adversely upon the 

management of the applicant institution. The FDIC will closely review expenses for professional 

or other services rendered by present or prospective board members, major shareholders, or other 

insiders for any indication of self-dealing to the detriment of the institution. As a matter of 

practice, the FDIC expects full disclosure to all directors and shareholders of any arrangement 

with an insider. In no case will the FDIC approve an application where the payment of a fee, in 

whole or in part, is contingent upon any act or forbearance by the FDIC or by any other federal 

or state agency or official. 

6
Exhibit B 

5. Trade names. Where an acquired bank or branch is to be operated under a different 

trade name than the acquiring bank, the FDIC will review the adequacy of the steps taken to 

minimize the potential for customer confusion about deposit insurance coverage. Applicants 

may refer to the Interagency Statement on Branch Names for additional guidance. See FDIC, 

Financial Institution Letter, 46--98 (May 1, 1998). 

7