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Banking Interpretations

NYSBL 223

New York State Banking Department
Memorandum

To:        Economist Kupfer -Research &Technical Assistance Division 

From:    Sharon Cherry, Associate Attorney -Legal Division
 
Date:     March 5, 2007

Subject: [---] Proposed interstate acquisition transaction


Issue

Does the proposed acquisition by [---]bank, Philadelphia, Pennsylvania of certain assets and assumption of certain liabilities of the Flushing, New York branch office of [---]Bank, Los Angeles, California comply with New York's Interstate Branching Act("NYIBA") (New York Banking Law §§ 222 et. seq.)?

Recommendation

As noted below, in order for the Legal Division to make a determination regarding the proposed acquisition, additional information is needed regarding the deposits to be acquired.

In addition, the bank must provide a copy of the application it has filed with the Pennsylvania Department of Banking.

Background/Reasoning

The Flushing branch being purchased will become a branch of [---] Bank. Section 223 of the Banking Law 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." We note in this case that [---] Bank, the acquiring institution in this transaction, meets the definition of "out-of-state-bank" under Section 222. While the term "banking institution" as used in BL 222(7) is not defined, the Department has in the past interpreted that term broadly to include both New York state-chartered banking institutions as well as non-New York state-chartered banking institutions, so that the meaning of "acquisition transaction" may be interpreted to allow a wide variety of interstate acquisitions.

We have reviewed the Bank Merger Act Application (which includes a copy of the Branch Purchase and Deposit Assumption Agreement between [---] Bank and [---] Bank). Among other things, certain deposit liabilities will be assumed. According to Schedule D of the Agreement, the deposit liabilities shall consist exclusively of certificates of deposit which mature on or after February 28, 2007 and before July 31, 2007 and have an aggregate outstanding balance of principal and interest of approximately One Million Dollars. However, the bank has not provided a list specifically identifying the certificates of deposit to be purchased. In addition, the bank should provide some information regarding the deposit related loans to be purchased. The bank will also assume the lease for the branch premises, purchase the furniture, fixtures and equipment located at the branch, as well as the safe deposit business located at the branch.

Banking Law Section 225 sets forth the filing requirements for various types of acquisition transactions. When a New York banking institution is the surviving entity, that section requires certain information under Banking Law Section 601 or 601-a. Banking Law Section 225(2) provides that in the case of any other acquisition transaction authorized by this article, the out-of-state bank shall file with the superintendent a copy of any application filed with the appropriate state supervisor and appropriate federal banking agency. The Bank has provided the Superintendent with a copy of the application that was filed with the FDIC. The bank should also provide the Superintendent with a copy of the application that it filed with the Pennsylvania Department of Banking.

Noted:  RN