As reported by Independence Federal Savings Bank in its annual report on Form 10-K for the year ended December 31, 2009, the regulatory approvals needed for the merger had been delayed indefinitely because of cease and desist orders imposed by the OTS against both Independence Federal and Colombo Bank and due to Independence Federal’s ‘undercapitalized’ status under regulatory capital guidelines.

As of December 31, 2009, the Independence Federal Savings Bank failed to met the required regulatory guidelines, in maintaining the ratios of Tier 1 capital to risk-weighted assets and Tier 1 capital to adjusted total assets.

Moreover, Independence Federal plans to review all options available to it, which may include terminating the merger agreement; attempting to raise additional capital, regardless of whether the merger agreement is terminated; and/or pursuing a sale to, or a merger with, a third party.

Independence Federal Savings Bank has said that no assurance can be given, however, as to whether it would be successful in any efforts to raise additional capital or to negotiate a definitive agreement with a third party for a merger or sale of the institution.

Moreover, as discussed in its 2009 Form 10-K, Independence Federal has been taking steps to improve its regulatory capital ratios by reducing the size of its balance sheet, primarily through the disposition of assets and corresponding reduction in liabilities. These measures resulted in the improvements in Independence Federal’s regulatory capital ratios from December 31, 2009 to March 31, 2010.

Independence further reduced it investment securities and deposits by approximately $10m in April 2010. However, the bank has added that no assurance can be given as to whether the improvements in Independence Federal’s regulatory capital ratios will continue.