Banking Interpretations

NYSBL Section 105(1) and 105(5)

July 24, 2006

[ ]

Re: Home Office Protection

Dear [ ]:

This letter is in response to your June 7, 2006, e-mail inquiry to the New York State Banking Department (“the Department”) and follow up memo, dated July 11, 2006. In your e-mail and in further communications, you explained that you represent a nationally chartered bank (“national bank”) headquartered in New York State. The national bank has entered into a merger agreement to acquire a federally chartered savings and loan bank (“federal thrift”). The federal thrift has its main office in Elmira, a location where another institution enjoys the benefit of home office protection. You have asked whether the national bank may operate the main office of the federal thrift as a branch of the national bank after the acquisition is complete.

Banking Law Section 105 must be examined in order to answer this question. Section 105(1) prohibits a bank from opening and occupying a branch office in any community with a population of less than fifty thousand in which is located the principal office of any bank, trust company or national bank which is not a subsidiary of a bank holding company. Subdivision one’s prohibition on branching in home office protected areas extends only to branches “opened and occupied pursuant to this subdivision” (emphasis added). The branch at issue here will not be “opened and occupied” but instead will be “maintained” after an acquisition through a legitimate transaction. Since this branch will not be “opened and occupied”, it is not subject to prohibitions of subdivision one of Section 105. The
restriction in this subdivision is directed at the establishment of a de novo branch which is not the case here.

Subdivision five allows a bank or trust company to maintain a branch of any bank, trust company, safe deposit company, national banking association, out-of-state state bank, savings bank, or savings and loan association if purchased by merger or acquisition. Federal thrifts are not specifically included in this subdivision, nor are they mentioned in any subdivision of Section 105, since federal thrifts are not subject to home office protection restrictions. However, generally, the acquisition of a branch already in existence in a home office protected area is contemplated and allowed by subdivision five of the statute. Accordingly, the acquisition may take place and the national bank may retain the federal thrift office as a branch in Elmira.

I trust that this has been responsive to your inquiry.

Very truly yours,
Megan Prendergast
Associate Attorney