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Banking Interpretations

NYSBL Sections 222 and 223

February 13, 2004

[ ]

Re: [ ] Branch Purchase [ ]

Dear [ ]:

Reference is made to your February 3, 2004 letter to the New York State Banking Department (the "Department") regarding the proposal by your client, [ ]. a Federal savings bank based in Connecticut [ ], to acquire a branch in New York State of [ ] "BT". You seek the Department's confirmation that this proposal would be consistent with New York Law.

As we understand it, [ ] Bank has filed an application with the Comptroller the Currency (the "OCC") to convert to a national banking association, [ ] ([ ] National"). The main office of [ ] and all branch offices of the institution, with one exception, are located in Connecticut. The one exception is a branch in Scarsdale New York. [ ]BT is a New York chartered savings bank. It has a free-standing branch in [ ] 'New York (known as the [ ] 787 Branch") for which it has given closing notice to its customers and the Department. We also understand that the OCC will not permit [ ] Bank, as a federal savings bank, to retain its offices outside of New York upon its conversion to a national bank. We also understand that a converting out-of- state state commercial bank would be permitted to maintain its offices outside of Connecticut.

To resolve this problem, [ ] Bank proposes to purchase a branch of ([ ]BT known as its [ ]787 Branch upon [ ] Bank's conversion to federal charter. Specifically, [ ] National, [ ] Bank (solely to stand behind the obligations of [ ]National until [ ] National is authorized and formed and [ ]BT entered into a Purchase and Assumption Agreement for [ ] National to purchase certain assets and assume the deposit liabilities of the [ ] 787 branch (the "Branch Purchase Agreement"). The terms of the branch purchase (the "Branch Purchase") are summarized as follows:

  1. [ ]

  2. Until the Branch Purchase is consummated, the on-premises ATM at the [ ] 787 branch will remain available to customers. [ ]BT has committed to maintain the facility and open it as necessary to meet any customer demand. It has also agreed to maintain open phone lines.

  3. [ ] Financial Corporation, the [ ] Bank, opened an account and deposited $1.0 million in the [ ] 787 branch. Also on that date, [ ] an affiliate to [ ]BT, opened an account and transferred $10 million of deposits to the [ ] 787 branch.

  4. As previously scheduled, and in accordance with notice already provided to customers of the [ ]787 branch, as of the close of business on Friday, January 30, [ ]BT transferred customer accounts other than those referred to in paragraph 3 above to a [ ]BT branch approximately one-half block from the [ ] 787 branch. The amount of deposits at the [ ] 787 branch before the transfer (excluding the deposits being assumed by [ ] National) was approximately $6.3 million.

  5. Pursuant to the Branch Purchase Agreement, [ ] National will assume all the deposits at the [ ] 787 branch on the date of the Branch Purchase. This is expected to include at a minimum the $11 million of deposits referred to in paragraph 3 above.

  6. [ ] also will purchase fixed assets of the [ ] 787 branch, including a sorting machine and the on-premises ATM, and will purchase eight loans. Each of the loans is made to individuals, and is secured by real estate in [ ]BT's local market. At December 31, 2003, the loans had an aggregate outstanding balance of just over $800,000.

  7. [ ] National also has agreed to lease from [ ]BT the [ ] 787 branch premises. These premises are subject to sale by [ ]BT.

  8. Following the receipt of all required regulatory approvals for the conversion transaction, [ ] Bank will convert to [ ] National Immediately thereafter, [ ] National and [ ]BT will complete the Branch Purchase. All the deposit liabilities in the [ ] 787 branch at the time of the Branch Purchase will be assumed by[ ] National. In addition, [ ] National will purchase the above-referenced assets and take a leasehold interest in the branch premises.

We also understand that immediately following the Branch Purchase, subject to OCC approval, [ ] National plans to relocate the [ ] 787 branch to the site of its [ ] Bank's [ ]branch. The charter conversion, Branch Purchase, and branch relocation will likely occur over a weekend or otherwise while the [ ] branch is not open to the public to avoid any disruption of service to the [ ] customers.

Turning to our analysis of whether this transaction as described above complies with Article V-C of the New York Banking Law (the "Banking Law"), we would note initially that[ ]National, the acquiring institution in this transaction, would meet the definition of an "out-of-state bank" under Section 222 of the Banking Law. That term includes both an "out-of-state state bank" and an "out-of-state national bank." An "acquisition transaction" for purposes of Article V-C is defined in the Banking Law to mean "any merger, consolidation, or purchase of assets and assumption of liabilities of all or part of a banking institution." (Banking Law § 222(7).)

We would note that the age restriction provisions of Section 223-a of the Banking Law would not apply in this situation, because that provision of the statute only applies when a "New York bank" is eliminated. That is not the case in this situation.

We also have compared the terms of the Branch Purchase to our understanding of the meaning of the phrase "of all or part of" a bank in the defined term "acquisition transaction." After review, we are of the opinion that the asset and Iiabilities described above and included in the Branch Purchase by[ ]National would constitute the sale of "all or part of" a bank within the meaning of the term "acquisition transaction" used in the Banking Law.

Accordingly, the Department would interpose no objection to the proposed transaction under the Banking Law.

We trust this is helpful.

Very truly yours,

Gene C. Brooks
Acting First Assistant Counsel

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