Banking Interpretations

NYSBL 143-b

September 29, 1992

[ ]

Dear [ ]:

I am writing with respect to one feature of the proposed supervisory conversion of [ ] from mutual to stock form. As described in the preliminary material supplied to the Banking Department, three investors will each acquire more than ten percent of the stock to be issued by the converted institution. Two of these, [ ], will each acquire nearly 25% of the stock; the third, [ ], will acquire approximately 14% of the stock. It has been represented that the investors are not acting in concert.

The federal Change in Bank Control Act (Title 12 USC §1817(j)) requires that any person seeking to acquire control of a savings association obtain the approval of the Office of Thrift Supervision. The implementing regulation (12 CFR Part 574) creates a rebuttable presumption of control whenever any person acquires ten percent or more of the stock of a savings association and is subject to any "control factor". [ ]are presumptively control parties but are willing to enter into the rebuttal of control agreement prescribed by the regulation; the [ ] are not presumed to be control parties.

The analogous New York Banking Law provision, Section 143-b, provides that the ownership of ten percent or more of the voting stock of a banking institution creates a rebuttable presumption of control. There is no regulation providing a gloss on the statute but the Banking Department has had occasion previously to address questions that have arisen under that section.

Upon reviewing the material you supplied, the Department has concluded that [ ] must apply to the Banking Board for permission to acquire control of [ ]. The mere ownership of such large blocks of the association's stock, the representations of passivity and independence notwithstanding, is sufficient as a matter of State law to require applications. You should consult with the Thrift Institutions Division on the contents of the application.

The Department has also concluded that the [ ], although they too will be purchasing more than ten percent of [ ] stock, may be able to successfully rebut the presumption of control. In order to do so they must certify that (i) they are not acting in concert with any other person in the acquisition of their stock, (ii) they will remain passive investors, and (iii) they will not seek or accept any representation on the association's board of directors. Any determination by the Superintendent of Banks that the presumption of control has been successfully rebutted is, of course, limited to the precise facts presented. Any change in circumstances, such as the acquisition by the [ ] of additional stock or a reduction in the stock holdings of [ ] would require at the least a determination from the Superintendent that the [ ] would not thereby become control persons and perhaps receipt of approval as control persons.

I am sorry if anything I said during our conversation prior to the submission to the Banking Department of any material on the proposed transaction misled you to conclude that the Banking Department would not require control applications from any of the investors.

Very truly yours,

Michael Schussler
Assistant Counsel