with generally accepted auditing standards for the purpose of expressing an opinion thereon.

(3) Fifty-percent-owner person. The term "50-percent-owned person", in relation to a specified person, means a person approximately 50 percent of whose outstanding voting shares is owned by the specified person either directly, or indirectly through one or more intermediaries.

(4) Fiscal year. The term "fiscal year" means the annual accounting period or if the applicant has previously used an audit period in connection with its certified financial statements which does not coincide with its fiscal year, such audit period may be used in place of any fiscal year requirement provided it covers a full twelve months' operations and is used consistently.

(5) Majority-owned subsidiary. The term "majority-owned subsidiary" means a subsidiary more than 50 percent of whose outstanding voting shares is owned by its parent and/or the parent's other majority-owned subsidiaries.

(6) Parent. A "parent" of a specified person is an affiliate controlling such person directly, or indirectly through one or more intermediaries.

(7) Principal holder of equity securities. The term "principal holder of equity securities", used in respect of an applicant or other person named in a particular statement or report, means a holder of record or a known beneficial owner of more than 10 percent of any class of equity securities of the applicant or other person, respectively, as of the date of the related balance sheet filed.

(8) Share. The term "share" means a share of stock in a corporation or unit of interest in an unincorporated person.

(9) Significant subsidiary. The term “significant subsidiary” means a subsidiary or a subsidiary and its subsidiaries, which meet either of the conditions described below based on the most recent annual financial statements, including consolidated financial statements, of such subsidiary which would be required to be filed if such subsidiary were an applicant and the most recent annual consolidated financial statements of the applicant being filed:

(1) The parent's and the parent's other subsidiaries' proportionate share of the total assets (after intercompany eliminations) of the subsidiary, or their investments in and advances to the sub

sidiary exceed 10 percent of the total assets of the parent and consolidated subsidiaries.

(ii) The parent's and the parent's other subsidiaries' proportionate share of the total sales and revenues (after intercompany eliminations) of the subsidiary exceed 10 percent of the total sales and revenues of the parent and consolidated subsidiaries.

(10) Totally-held subsidiary. The term "totally-held subsidiary" means a subsidiary (1) substantially all of whose outstanding equity securities are owned by its parent and/or the parent's other totally-held subsidiaries, and (ii) which is not indebted to any person other than its parent and/or the parent's other totally-held subsidiaries, excepting indebtedness incurred in the ordinary course of business which is not overdue and which matures within one year from the date of its creation, whether evidenced by securities or not. Indebtedness of a subsidiary which is secured by its parent by guarantee, pledge, assignment or otherwise is to be excluded for purposes of (ii) above.

(11) Wholly-owned subsidiary. The term "wholly-owned subsidiary" means a subsidiary substantially all of whose outstanding voting shares are owned by its parent and/or the parent's other wholly-owned subsidiaries.

(c) Qualifications of accountants. (1) For the purpose of this part, the Corporation will not recognize any person as a certified public accountant who is not duly registered and in good standing as such under the laws of the place of his residence or principal office. For the purposes of this part, the Corporation will not recognize any person as a public accountant who is not in good standing and entitled to practice as such under the laws of the place of his residence or principal office.

(2) For the purposes of this part, the Corporation will not recognize any certified public accountant or public accountant as independent who is not in fact independent. For example, an accountant will be considered not independent with respect to any person or any of its parents, its subsidiaries, or other affiliates (i) in which, during the period of his professional engagement to examine the financial statements being reported on or at the date of his report he or his firm or a member thereof had, or was committed to acquire, any direct financial interest or any material in

direct financial interest or (ii) with which, during the period of his professional engagement to examine the financial statements being reported on, at the date of his report or during the period covered by the financial statements, he or his firm or a member thereof was connected as a promoter, underwriter, voting trustee, director, officer, or employee, except that a firm will not be deemed not independent in regard to a particular person if a former officer or employee of such person is employed by the firm and such individual has completely dissociated himself from the person and its affiliates and does not participate in auditing financial statements of the person or its affiliates covering any period of his employment by the person. For the purposes of this section the term "member" means all partners in the firm and all professional employees participating in the audit or located in an office of the firm participating in a significant portion of the audit, and the term "financial interest" shall not include any savings account of $20,000 or less in an insured institution.

(3) In determining whether an accountant may in fact be not independent with respect to a particular person, the Corporation will give appropriate consideration to all relevant circumstances, including evidence bearing on all relationships between the accountant and that person or any affiliate thereof, and will not confine itself to the relationships existing in connection with the filing of reports with the Corporation.

(d) Accountants' reports.-(1) Technical requirements. The accountant's report (i) shall be dated; (ii) shall be signed manually; (iii) shall indicate the city and state where issued; and (iv) shall identify without detailed enumeration the financial statements covered by the report.

(2) Representations as to the audit. The accountant's report (i) shall state whether the audit was made in accordance with generally accepted auditing standards; and (ii) shall designate any auditing procedures deemed necessary by the accountant under the circumstances of the particular case, which have been omitted, and the reasons for their omission. Nothing in this subparagraph shall be construed to imply authority for the omission of any procedure which independent accountants would ordinarily employ in the course of

an audit made for the purpose of expressing the opinions required by subparagraph (3) of this paragraph.

(3) Opinion to be expressed. The accountant's report shall state clearly: (i) The opinion of the accountant in respect of the financial statements covered by the report and the accounting principles and practices reflected therein; and (ii) the opinion of the accountant as to the consistency of the application of the accounting principles, or as to any changes in such principles which have a material effect on the financial statements covered by the opinion.

(4) Exceptions. Any matters to which the accountant takes exception shall be clearly identified, the exception thereto specifically and clearly stated, and, to the extent practicable, the effect of each such exception on the related financial statments given.

(e) Examination of financial statements of persons other than the applicant. If an applicant is required to file financial statements of any other person, such statements need not be examined if examination of such statements would not be required if such person were itself an applicant.

(f) Examination of financial statements by more than one accountant. If, with respect to the examination of the financial statements of the applicant, the principal accountant relies on an audit made by another accountant of certain of the accounts of such applicant or its subsidiaries, the report of such other accountant shall be filed (and the provisions of paragraphs (c) and (d) shall be applicable thereto); however, the report of such other accountant need not be filed (1) if no reference is made directly or indirectly to such other accountant's audit in the principal accountant's report, or (2) if, having referred to such other accountant's audit, the principal accountant states in his report that he assumes responsibility for such other accountant's audit in the same manner as if it had been made by him.

(g) Form, order, and terminology. (1) Financial statements may be filed in such form and order, and may use generally accepted terminology, as will best indicate their significance and character in the light of the provisions applicable thereto.

(2) All money amounts required to be shown in financial statements may be expressed in whole dollars, in thousands

of dollars or in hundred thousands of dollars, as appropriate: Provided, That, when stated in other than whole dollars, an indication to that effect is inserted immediately beneath the caption of the statement or schedule, or at the top of the money columns, or at an appropriate point in narrative material.

(3) Negative amounts (red figures) shall be shown in brackets or parentheses and so described in the related caption, columnar heading or a note to the statement or schedule, as appropriate.

(h) Items not material. If the amount which would otherwise be required to be shown with respect to any item is not material, it need not be separately set forth.

(i) Inapplicable captions and omission of unrequired or inapplicable financial statements. (1) No caption need be shown in any financial statements as to which the items and conditions are not present.

(2) Financial statements not required or inapplicable because the required matter is not present need not be filed.

(3) Financial statements omitted and the reasons for their omission shall be indicated in the list of financial statements required by the applicable form. (j) Omission of substantially identical notes. If a note covering substantially the same subject matter is required with respect to two or more financial statements relating to the same or affiliated persons, for which separate sets of notes are presented, the required information may be shown in a note to only one of such statements, provided that a clear and specific reference thereto is made in each of the other statements with respect to which the note is required.

(k) Additional information. The information required with respect to any statement shall be furnished as a minimum requirement to which shall be added such further material information as is necessary to make the required statements, in the light of the circumstances under which they are made, not misleading.

(1) Changes in accounting principles and practices and retroactive adjustments of accounts. (1) Any change in an accounting principle or practice, or in the method of applying any accounting principle or practice, made during any period for which financial statements are being filed which materially affects comparability of such financial statements with those of prior periods,

and the effect thereof upon the net income of the period in which such change is made and, if practicable, of the prior periods for which financial statements are being filed, shall be disclosed in appropriate manner.

(2) Any material retroactive adjustment made in income statements during any period for which financial statements are being filed, and the effect thereof upon net income of prior periods shall be disclosed in a note to the appropriate financial statements.

(m) Summary of accounting principles and practices. Information required in notes as to accounting principles and practices reflected in the financial statements may be presented in the form of a single statement. In such case, specific references shall be made in the appropriate financial statements to the applicable portion of such single statement.

(n) Valuation and qualifying accounts. Valuation and qualifying accounts shall be shown separately in the financial statements as deductions from the specific assets to which they apply.

(0) Basis of determining amountsbook value. If an instruction requires a statement as to "the basis of determining the amount," the basis shall be stated specifically. The term "book value" will not be sufficiently explanatory unless, in a particular instruction, it is stated to be acceptable with respect to a particular item.

(p) General notes to financial statements. If present in regard to the applicant for which the financial statements are filed, the following shall be set forth on the face of the appropriate statement or in notes appropriately captioned and referred to in such statement. The information shall be provided for each statement required to be filed, except that the information required by paragraph (p) (3), (5), (6) and (7) of this section shall be provided as of the most recent audited statement of financial condition and any subsequent unaudited balance sheet being filed. When specific statements are presented separately the pertinent notes shall be attached unless cross-referencing is appropriate.

(1) Principles of consolidation or combination. With regard to consolidation or combined financial statements, refer to paragraph (q) of this section for requirements for supplemental information in notes to the financial statements.

(2) Principles of translation of items in foreign currencies. When items in

foreign currencies are included in the financial statements being presented, there shall be stated (i) a brief description of the principles followed in translating the foreign currencies into United States currency and (ii) the amount and disposition of the unrealized gain or loss.

(3) Assets subject to lien. Assets mortgaged, pledged, or otherwise subject to lien, and the approximate amounts thereof, shall be designated and the obligations collateralized briefly identified.

(4) Intercompany profits and losses. The amount, and the effect upon any balance sheet item, of profits or losses resulting from transactions with affiliated companies and not eliminated shall be stated. If impracticable of accurate determination without unreasonable effort or expense, give an estimate or explain.

(5) Defaults. The facts and amounts concerning any default in principal, interest, sinking fund, or redemption provisions with respect to any issue of securities or credit agreements, or any breach of covenant of a related indenture or agreement, which default or breach existed at the date of the most recent balance sheet being filed and which has not been subsequently cured, shall be stated. Notation of such default or breach of covenant shall be made in the financial statements and the entire amount of obligations to which the default or breach relates shall be classified as a current liability if said default or breach accelerates the maturity of the obligations and makes it current under the terms of the related indenture or agreement. If a default or breach exists, but acceleration of the obligation has been waived for a stated period of time beyond the date of the most recent balance sheet being filed, state the amount of the obligation and the period of the waiver.

(6) Pension and retirement plans. A brief description of the essential provisions of any employee pension or retirement plan and of the accounting and funding policies related thereto shall be given. The estimated cost of the plan for each period for which an income statement is presented shall be stated.

(7) Restrictions which limit the availability of reserves and undivided profits for dividend purposes. Describe the most restrictive of any such restrictions, indicating briefly its source, its pertinent provisions, and, where appropriate and determinable, the amount of reserves and undivided profits (i) so restricted

or (ii) free of such restrictions. These restrictions would include absolute restrictions, such as those imposed by State laws or credit agreements as well as those restrictions resulting from any additional income tax requirements before payment of dividends and disclose the amount of income tax which would become payable.

(8) Commitments and contingent liabilities. (1) If material in amount, there shall be disclosed the pertinent facts relative to firm commitments for the acquisition of permanent or long-term investments (excluding normal commitments made during the ordinary course of business) and property, plant, and equipment and for the purchase, repurchase, construction, or rental of assets under material leases.

(ii) Where the annual rentals or obligations under noncancelable leases which have not been recorded as assets and liabilities are in excess of one percent of total sales and revenues of the most recent fiscal year, there shall be shown (A) the minimum annual rentals for the current and each of the five succeeding years; (B) the nature and effect of any provisions that would cause the annual rentals to vary from the minimum rentals; and (C) a description of the types of property leased, important obligations assumed or guarantees made, and any other significant provisions of such leases.

(iii) A brief statement as to contingent liabilities not reflected in the balance sheet shall be made.

(9) Bonus, profit sharing, and other similar plans. Describe the essential provisions of any such plans in which only directors, officers or key employees may participate, and state, for each of the fiscal periods for which income statements are required to be filed, the aggregate amount provided for all plans by charges to expense.

(10) Significant changes in bonds, mortgages, and similar debt. Any significant changes in the authorized or issued amounts of bonds, mortgages and similar debt since the date of the latest balance sheet being filed for a particular person or group shall be stated.

(11) Depreciation, depletion, obsolescence and amortization. State the policy followed with respect to:

(i) The provision for depreciation, depletion, obsolescence and amortization of physical properties and capitalized leases, including the methods and, if

practicable, the rates used in computing the annual amounts;

(ii) The provision for depreciation and amortization of intangible assets or the lack of such provision, including the methods and, if practicable, the rates used in computing the annual amounts;

(iii) The accounting treatment for maintenance, repairs, renewals and betterments; and

(iv) The adjustment of accumulated depreciation, depletion, obsolescence and amortization at the time the properties are retired or otherwise disposed of, including the disposition of any gain or loss on sale of such properties.

(12) Capital stock optioned, sold or offered for sale to directors, officers and key employees. (i) A brief description of the terms of each option arrangement shall be given including (A) the title and - amount of securities subject to option; (B) the year or years during which the options were granted; and (C) the year or years during which the optionees became, or will become, entitled to exercise the options.

(ii) State (A) the number of shares under option at the balance sheet date, and the option price and the fair value thereof, per share and in total, at the dates the options were granted; (B) the number of shares with respect to which options became exercisable during each period presented, and the option price and the fair value thereof, per share and in total, at the dates the options became exercisable; (C) the number of shares with respect to which options were exercised during each period, and the option price and the fair value thereof, per share and in total, at the dates the options were exercised; and (D) the number of unoptioned shares available, at the beginning and at the close of the latest period presented, for the granting of options under an option plan.

(iii) A brief description of the terms of each other arrangement covering shares sold or offered for sale to only directors, officers and key employees shall be given, including the number of shares, and the offered price and the fair value thereof per share and in total, at the dates of sale or offer to sell, as appropriate.

(iv) The required information should be summarized and tabulated, as appropriate, with respect to all option plans as a group and other plans for shares sold or offered for sale as a group.

(v) State the basis of accounting for such arrangements and the amount of charges, if any, reflected in income with respect thereto.

(13) Plan of conversion. If the financial statements are to be furnished with a proxy statement or offering circular in connection with a conversion, a brief description of the plan of conversion and the financial statement implications thereof, including any subsequent dividend restrictions, shall be given. Such description may incorporate by reference any material contained in the proxy statement or offering circular.

(14) Preconversion accountholders' net worth. An institution that is required to maintain financial records for a liquidation account to be paid out to preconversion eligible accountholders in the event of complete liquidation shall state in a note to the stockholders' equity section of its statement of financial condition: (i) The actual or estimated current adjusted balance of the account; (ii) the purpose and general character of the account; (iii) the accounting method or principle used to adjust the account; and (iv) a summary of the adjustments or estimated adjustments to the account since its inception. This note will not be required whenever the actual or estimated current adjusted balance of the liquidation account is less than 5 percent of the institution's then current net worth.

(15) Income tax expense. Disclosure shall be made, in the income statement or a note thereto, of the components of income tax expense, including (i) taxes currently payable; (ii) the net tax effects, as applicable, of (A) timing differences and (B) operating losses; and (iii) the net deferred investment tax credits. The applicant's status as a "savings and loan association" as defined in Section 593 of the Internal Revenue Code, as amended, shall be stated in a note referred to in the appropriate statements. Such note shall also indicate briefly the principal present assumptions on which the applicant has relied in making or not making provisions for such taxes. Amounts applicable to Federal income taxes and to other income taxes shall be stated separately for each component, unless the amounts applicable to other income taxes do not exceed 5 percent of the total for the component and a statement to that effect is made.

(16) Warrants or rights outstanding. Information with respect to warrants or