I. INTRODUCTION A joint inter-agency policy statement regarding branch closings by insured depository institutions, provides guidance regarding the requirement under Section 42 of FDICIA that insured depository institutions adopt policies for branch closings and provide notices prior to closing any branch.
The policy statement generally requires each insured institution (with branches) to: (1) develop a policy with respect to branch closings; (2) provide 90 days prior written notice of any branch closing to its primary federal regulator (notice must include a detailed statement of the reasons for the decision to close the branch and information in support of those reasons); (3) mail written notice to branch customers at least 90 days before the scheduled closing; and (4) place a conspicuous notice at the branch at least 30 days prior to the scheduled closing.
For purposes of this policy statement, the term “branch” is defined as a traditional brick-and-mortar branch, and any similar banking facility, at which deposits are received or checks paid or money lent. As a result, the branch closing notices will not apply to the closing of an ATM or temporary branch.
The required notice to the federal banking agency must include the following:
1. identification of the branch to be closed;
2. the proposed date of closing;
3. a detailed statement of the reasons for the decision to close the branch; and
4. statistical or other information in support of such reasons consistent with the institution’s written policy for branch closings.
If an institution believes certain information included in the notice is confidential in nature, the institution should prepare such information separately and request confidential treatment by the federal banking agency.
III. NOTICE OF BRANCH CLOSING TO CUSTOMERS Institutions are also required to provide notice of a proposed branch closing to the “customers” of the branch. The customer notice must be provided at least 90 days in advance of the proposed closing in at least one of the regular account statements mailed to customers, or in a separate mailing. If the branch closing occurs after the proposed date of closing, no additional notice is required to be mailed to customers (or provided to the appropriate federal banking agency) if the institution acted in good faith in projecting the date for closing and in subsequently delaying the closing.
The mailed customer notice must state (a) the location of the branch to be closed; (b) the proposed date of closing; and (c) either identify where customers may obtain service following the closing date or provide a telephone number for customers to call to determine such alternative sites. An institution must also post notice to branch customers in a conspicuous manner on the branch premises at least 30 days prior to the proposed closing. This notice must state (a) the proposed date of closing; and (b) identify where customers may obtain service following that date or provide a telephone number of customers to call to determine such alternative sites. An institution may revise the notice to extend the projected date of closing without triggering a new 30-day notice period.
In order to expedite branch closing transactions, an institution may mail and post notices to customers of a proposed branch closing that is contingent upon an event. For example, in the case of a proposed merger or acquisition, an institution may notify customers of its intent to close a branch upon approval by the appropriate federal banking agency of the proposed merger or acquisition.
For purposes of the required customer notification, a customer of a branch is defined as a patron of an institution who has been identified with a particular branch by such institution through use, in good faith, of a reasonable method for allocating customers to specific branches. An institution that allocates customers to its branches based on where a customer opened his or her deposit or loan account will be presumed to have reasonably identified each customer of a branch. Although this particular means of allocation could result in certain branches not being assigned any customers, the agencies recognize that this result is permissible as long as the means of allocation are reasonable. In cases where a branch has not been assigned any customers, if such a branch is closed, notification to the appropriate agency and posting of a notice on the branch premises will suffice.
IV. BRANCH CLOSING POLICIES
The policy statement requires all institutions to adopt policies for branch closings. Each institution with one or more branches must adopt such a policy. If an institution currently has no branches, it must adopt a policy for branch closing prior to establishing its first branch. The policy must be in writing and meet the size and needs of the institution. The policy statement further requires each branch closing policy to include factors for determining which branch to close and which customers to notify, and procedures for providing the required notices.
V. BRANCH RELOCATION
The advance notice requirements will not apply to a branch relocation, as it is clear that a relocation does not constitute a branch closing. Under the policy statement, a relocation will be deemed to have occurred if the new branch and the closed branch are within the same immediate neighborhood and the nature of the business and the customers served by the branch are substantially unaffected by the move.
Generally, relocations will be found to have occurred only when short distances are involved (e.g., moves across the street, around the corner, or a block or two away). Moves of less than 1,000 feet will generally be considered to be relocations. In less densely populated areas, where “neighborhoods” extend farther, and a longer move would not substantially affect the nature of the business or the customers served by the branch, a relocation may occur over significantly longer distances. Institutions in doubt over whether a relocation or branch closing will occur should consult with the appropriate federal regulator.
The agencies have also concluded that a consolidation of branches can be treated as a relocation, rather than a closing, if a consolidation of branches meets the test for relocation outlined above. Consolidation of branches can occur after a merger, where the acquiring institution and the institution being acquired maintain branches a short distance apart.
VI. OCCUPATION OF BRANCH DURING AN “OPTION PERIOD”