PART 1278—VOLUNTARY MERGERS OF FEDERAL HOME LOAN BANKS Authority: 12 U.S.C. 1432(a), 1446, 4511. Source: 76 FR 72833, Nov. 28, 2011, unless otherwise noted. § 1278.1 Definitions. Constituent Bank Continuing Bank Disclosure Statement Effective Date Financial Statements Merge Merger (1) A merger of one or more Banks into another Bank; (2) A consolidation of two or more Banks resulting in a new Bank; (3) A purchase of substantially all of the assets, and assumption of substantially all of the liabilities, of one or more Banks by another Bank or Banks; or (4) Any other business combination of two or more Banks into one or more resulting Banks. Record Date [76 FR 72833, Nov. 28, 2011, as amended at 78 FR 2328, Jan. 11, 2013; 81 FR 76300, Nov. 2, 2016] § 1278.2 Authority. Any two or more Banks may merge voluntarily under authority of section 26(b) of the Bank Act, provided that each of the following requirements has been satisfied: (a) The Constituent Banks have executed a written merger agreement that satisfies all requirements of § 1278.3; (b) The Constituent Banks have jointly filed a merger application with FHFA that satisfies all requirements of § 1278.4; (c) The Director has approved the merger application in accordance with the requirements of § 1278.5; (d) The members of each Constituent Bank have ratified the merger agreement as provided under § 1278.6; and (e) The Director has determined that the Constituent Banks have satisfied all conditions imposed in connection with the approval of the merger application, and has accepted the properly executed organization certificate of the Continuing Bank, as provided under § 1278.7. § 1278.3 Merger agreement. A merger of Banks under the authority of § 1278.2 shall require a written merger agreement that: (a) Has been authorized by the affirmative vote of a majority of a quorum of the board of directors of each Constituent Bank at a meeting on the record and has been executed by authorized signing officers of each Constituent Bank; and (b) Sets forth all material terms and conditions of the merger, including, without limitation, provisions addressing each of the following matters— (1) The proposed Effective Date and the proposed acquisition date for purposes of accounting for the transaction under GAAP, if that date is to be different from the Effective Date; (2) The proposed organization certificate and bylaws of the Continuing Bank; (3) The proposed capital structure plan for the Continuing Bank; (4) The proposed size and structure of the board of directors for the Continuing Bank; (5) The formula to be used to exchange the stock of the Constituent Banks for the stock of the Continuing Bank, and a provision prohibiting the issuance of fractional shares of stock; (6) Any conditions that must be satisfied prior to the Effective Date, which must include approval by the Director and ratification by the members of the Constituent Banks; (7) A statement of the representations or warranties, if any, made or to be made by any Constituent Bank; (8) A description of the legal or accounting opinions or rulings, if any, that are required to be obtained or furnished by any party in connection with the proposed merger; and (9) A statement that the board of directors of a Constituent Bank may terminate the merger agreement before the Effective Date upon a determination that: (i) The information disclosed to members contained material errors or omissions; (ii) Material misrepresentations were made to members regarding the impact of the merger; (iii) Fraudulent activities were used to obtain members' approval; or (iv) An event occurred subsequent to the members' vote that would have a significant adverse impact on the future viability of the Continuing Bank. § 1278.4 Merger application. (a) Contents of application. (1) A written statement that includes— (i) A summary of the material features of the proposed merger; (ii) The reasons for the proposed merger; (iii) The effect of the proposed merger on the Constituent Banks and their members; (iv) The proposed Effective Date, the proposed acquisition date for purposes of accounting for the transaction under GAAP, if that date is to be different from the Effective Date (including the reasons for designating a different acquisition date), and the Record Date established by each Constituent Bank's board of directors; (v) If the Constituent Banks contemplate that the proposed merger will be one of two or more related transactions, a summary of the material features of any related transactions and the bearing that the consummation of, or failure to consummate, the related transactions is expected to have upon the proposed merger; (vi) If not addressed by the merger agreement, the Banks' proposal for the ultimate size and composition of the board of directors for the Continuing Bank and their plan for reducing the board to its ultimate size and composition, as well as the names of the persons proposed to serve as directors and senior executive officers of the Continuing Bank immediately after the merger; (vii) A description of all proposed material operational changes including, but not limited to, reductions in the existing staffs of the Constituent Banks (to the extent such information is known), whether and how Bank operations will be combined, and whether any Constituent Bank will continue to operate as a branch of the Continuing Bank; (viii) Information demonstrating that the Continuing Bank will comply with all applicable capital requirements after the Effective Date; (ix) A statement explaining all officer and director indemnification provisions; and (x) An undertaking that the Constituent Banks will continue to disclose all material information, and update all items of the application, as appropriate; (2) A copy of the executed merger agreement and a certified copy of the resolution of the board of directors of each Constituent Bank authorizing the merger agreement; (3) A copy of the proposed organization certificate of the Continuing Bank; (4) A copy of the proposed bylaws of the Continuing Bank; (5) A copy of the proposed capital structure plan of the Continuing Bank; (6) The most recent annual audited Financial Statements, and any interim quarterly financial statements for the year-to-date, for each Constituent Bank; and (7) Pro forma Financial Statements for the Continuing Bank as of the date of the most recent statement of condition supplied under paragraph (a)(6) of this section, and forecasted pro forma Financial Statements for each of at least two years following such date. (b) Additional information. (c) Completion of application. (1) If FHFA determines that the application is complete and that it has all information necessary to evaluate the proposed merger, it shall so inform the Constituent Banks in writing. (2) If FHFA determines that the application is incomplete, or that it requires additional information in order to evaluate the application, it shall so inform the Constituent Banks in writing, and shall specify the number of days within which the Constituent Banks must provide any additional information or materials. Within 15 days of receipt of the additional information or materials, FHFA shall inform the Constituent Banks in writing whether the merger application is complete. § 1278.5 Approval by Director. (a) Standards. (b) Determination by Director. (1) A certified copy of the members' resolution ratifying the merger agreement, on which the members cast their votes; and (2) A certification of the member vote from the Bank's corporate secretary or from an independent third party. (c) Notice. § 1278.6 Ratification by Bank Members. (a) Requirements for member vote. (1) Notice of vote. (i) A ballot that permits the member to vote for or against the ratification of the merger agreement, or to abstain from such vote; and (ii) A Disclosure Statement that establishes a closing date for the Bank's receipt of completed ballots that is no earlier than 30 days after the date that the ballot and Disclosure Statement are delivered to its members. (2) Voting rights and requirements. (3) Determination of result. (4) Notice of result. (i) The total number of eligible votes; (ii) The number of members voting in the election; and (iii) The total number of votes cast both for and against ratification of the merger agreement, as well as those that were eligible to be cast by members that abstained and by members who failed to return completed ballots. (b) False and misleading statements. § 1278.7 Consummation of the merger. (a) Post-approval submissions. (1) Evidence acceptable to the Director that all conditions imposed in connection with the approval of the merger application under § 1278.5 have been satisfied, including the items specified in §§ 1278.5(b)(1) and (2); and (2) An organization certificate for the Continuing Bank, in such form as FHFA may specify, that has been executed by the individuals who will constitute the board of directors of the Continuing Bank. (b) Acceptance of organization certificate. (1) The proposed Effective Date set forth in the merger agreement or, if the merger agreement expresses the proposed Effective Date in terms of a range of dates, a date within the applicable range of dates; or (2) If the proposed Effective Date set forth in the merger agreement has passed, the earlier of: (i) The 10th business day following the date of acceptance of the organization certificate by the Director; or (ii) The last business day preceding any date specified in the merger agreement by which the merger agreement will terminate if the merger has not become effective. (c) Effectiveness of merger. (1) The Continuing Bank shall become or remain a body corporate (depending on the type of transaction) operating under such organization certificate with all powers granted to a Bank under the Bank Act; (2) The Continuing Bank shall succeed to all rights, titles, powers, privileges, books, records, assets, and liabilities of the Constituent Banks, as provided in the merger agreement; and (3) The corporate existence of any Constituent Bank that is not a Continuing Bank shall cease, unless otherwise provided in the merger agreement. (d) Notice.