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Banking Interpretations

NYSBL 235(31)

February 15, 1989

Stephen B. Wilson, Esq.
Thacher Proffitt & Wood
Two World Trade Center
New York, NY 10048

Dear Mr. Wilson:

I am writing in reply to your letter of November 21, 1988 addressed to Superintendent Jill M. Considine concerning the acquisition by a mutual savings bank of the stock of stock-form banking institutions.

You correctly interpret General Regulation Part 16 as permitting a mutual savings bank to be the surviving institution in a merger with a stock-form banking institution located in New York. (The acquisition of a mutual thrift institution by a stock-form banking institution is permissible only if the mutual institution is in dire financial straits.) Such transactions are authorized by state law whether the stock-form institution is state or federally chartered, a commercial bank or a thrift institution. Federal law may, of course, present impediments to some such transactions. A preliminary step in any such merger may be the acquisition by the mutual savings bank of stock of the other institution.In the case of a thrift institution, the mutual savings bank may make a 'toe-hold' acquisition of up to ten percent of the target's stock using the 'leeway' investment authority (B.L. §235(31)), keeping in mind the various investment limits contained in that provision. No such investments may be made in the stock of a bank, trust company or national bank because of the prohibition contained in B.L. §235(31) against investments in the stock of a 'commercial bank'. The brief holding of stock in excess of the leeway limit, or any stock at all if the acquired institution is a commercial bank, as one step in an approved acquisition of control, is permitted. The Banking Department would view each of the series of steps as part of one integrated transaction.

As a bare matter of New York Banking Law, ignoring federal law and the interplay between the reciprocal interstate provisions of the Banking Law and those of other states, your analysis of interstate acquisitions is accurate. The leeway provision is available as the investment authority, whatever the charter of the target; the bank holding company (B.L. §142) or bank change-of-control (B.L. §143-b) provisions are inapplicable to acquisitions of institutions located outside New York; the limited actions required of the Superintendent in the case of the interstate expansion of a bank holding company or a savings and loan holding company (B.L. §§142-b and 413, respectively) are likewise inapplicable.

Very truly yours,

Michael Schussler
Assistant Counsel