Banking Interpretations

NYSBL 7005
Superintendents Regulations Part 306

Memorandum

TO: Senior Bank Examiner Weisman — Community and Regional Banks Division

FROM: Sharon Cherry, Associate Attorney - Legal Division

Subject: [ ] — Director Vacancy

DATE: March 17, 2005

Issue

May the Bank [ ](the "Bank")have an unfilled vacancy on its board of directors beyond the shareholders meeting that was held in February 2005?

Recommendation

The Bank is in violation of Section 7005 and Part 306 of the Superintendent's Regulations. Therefore, the Bank must fill the vacancy immediately.

Background

 The President of the Bank advised the Department that one of its directors resigned on January 3, 2005. The Bank's by-laws provide that the number of directors is not less than 7, nor more than 12. Therefore, with the resignation of [ ] the number of directors fell to 6. The Bank indicated that its search for a new director would not be completed by its next shareholder's meeting in February 2005.

Reasoning

Section 7005 of the Banking Law provides that all vacancies in the office of director shall be filled by election by the stockholders except as otherwise provided. This section further provides that the Superintendent has the power by regulation to determine the conditions under which vacancies in the office of director may be left unfilled until the next annual election.

Section 306.2(b) of the Superintendent's Regulations provides that unless the Superintendent, in his/her discretion provides otherwise, a bank where the board of directors is comprised of less than ten members, no more than one vacancy on the board may be left unfilled until the next annual election by the stockholders provided that the institution: (1) is adequately capitalized, (within the meaning of 12 CFR Section 325.103[b][2]); (2) is well managed (within the meaning of 12 CFR 362.17[e]); and (3) has been in existence for more than five years.

The Superintendent has the discretion to require that a vacancy be filled before the next annual election. However, the statutory language makes it clear that the vacancy must be filled by the next annual election. In this case, the vacancy occurred in January 2005 and the next annual election was in February of 2005. Therefore, the Bank was required to fill the vacancy at the February meeting. Accordingly, the vacancy must be filled immediately.

Noted S.A.K.