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Banking Interpretations

NYSBL Sec. 222 & 223

February 14, 2002

[ ]

Dear [ ]:

This is in response to your December 20, 2001 letter regarding your client [ ] ("Buyer"). The Buyer, a national bank headquartered in [ ] California would like to acquire the Syracuse, NY branch office (the "Branch") (located at [ ] of [ ] National Bank, a national bank headquartered in [ ] Rhode Island ("Seller"). You stated that Buyer wishes to establish a branch in New York in order to provide more effective banking services to its customers, many of whom live or work in both California and New York.

With regard to the acquisition, you state that Buyer plans to purchase the assets, deposits, properties, working capital and business of every kind, including the deposit liabilities associated with the deposit accounts at the Branch (the aggregate value of such accounts is $4.6 million as of 9/30/01); the license for the Branch; and certain furniture, office supplies and related material. After execution of a purchase agreement with Seller, Buyer will apply to the OCC to acquire the Branch location and its business pursuant to the Bank Merger Act.

Buyer intends to maintain its newly acquired branch facility in Syracuse for only a short period of time. Subsequent to the proposed acquisition, Buyer will apply to the OCC to move the newly acquired Branch location and business to New York City to a location not affiliated with any [ ] location.

As discussed below, the Banking Department would not object to the above- described transaction under New York's Interstate Branching Act ("NYIBA") (New York Banking Law §§ 222 et. seq.). Section 223 permits entry by an out-of-state bank into New York by means of an "acquisition transaction" which is defined in § 222(7) of the NYIBA as "any merger, consolidation or purchase of assets and assumption of liabilities of all or part of a banking institution."

Buyer meets the definition of "out-of-state bank" for purposes of Section 223, as that term includes an "out-of-state national bank." The term "banking institution" as used in Section 223 is not defined in the NYIBA, but could be interpreted to include the Syracuse, NY Branch of Seller. The Department has on at least one prior occasion allowed a transaction involving the acquisition of a New York branch of an out-of-state bank.

While the New York legislature declined to permit "de novo" branching into New York, initial entry by means of an "acquisition transaction" involving the acquisition of all or part of a banking institution (which would include acquisition of a single branch or branches of an institution) was deemed permissible. (See Memorandum in Support, New York State Assembly, 1996 McKinney's Session Law of New York; Governor's Approval Memorandum #2, 1996 New York State Legislative Annual). The Department has found that initial entry into New York by acquisition of merely a New York branch "location" (i.e. without acquiring the branch's banking business) would be inconsistent with the spirit of the NYIBA. However, Buyer's proposed acquisition, which would involve acquisition of all assets, deposits, properties, working capital and business of every kind, would be deemed acceptable under the NYIBA. In this regard, we would point out that the Department does not typically view a "license" of a New York branch location as being for sale. In view of this fact, it might be appropriate, if practicable, to amend the wording of your client's underlying purchase agreement.

For the reasons discussed above, the Department would interpose no objection to your client's proposed transaction.

Sincerely,

Sharon A. Cherry 
Associate Attorney

cc: Deputy Conlon, U.S. Financial Services Division

Madonna Starr, Esq. 
Office of the Comptroller of the Currency - NY Office

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