The court of appeals reversed a district court judgment. The court held that a bank that acquired failing thrifts as part of the savings and loan crisis had a cost basis in branching rights and regulatory accounting rights which equaled some part of the total amount of the thrifts’ excess liabilities over the value of their assets.
In 1981, Home Savings of America, FSB, agreed to acquire three failing savings and loan associations, or thrifts: Security Federal Savings and Loan Association, Hamiltonian Federal Savings and Loan Association, and Southern Federal Savings and Loan Association. The acquisition was structured as two mergers, with Hamiltonian and Security being merged into Southern, and Southern then merged into Home Savings. In exchange, in an Assistance Agreement the Federal Savings and Loan Insurance Corporation (FSLIC) gave Home Savings a generous package of incentives that included, among other items, the right to maintain branches in other states (branching rights) and the right to use the purchase method of accounting for regulatory capital reserve purposes (RAP rights) (collectively the Rights).
