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Dear [                      ]:

This responds to your letters of May 22, June 20, and July 27, 2000, regarding a community financing initiative (the "Initiative") of [                 ] and its subsidiaries (collectively [        ], under which [    ] makes investments in, and establishes certain business relationships with, minority-owned or women-owned banks ("Banks"). You have indicated that, under the Initiative, [    ] has invested in two banks, [                         ] and currently is proposing to invest in an additional bank, [            ].¹ You have requested confirmation that the Board would not conclude that [     ] exercises a controlling influence over the Banks for purposes of the Bank Holding Company Act ("BHC Act") and the Board's Regulation Y as a result of the Initiative.

Under the Initiative, [     ] will purchase up to $250,000 of nonvoting, nonconvertible preferred stock in each Bank. [     ] has committed that it will not purchase any voting securities of any Bank and that its investment will not equal or exceed 10 percent of the stockholders' equity of any Bank.

Under the Initiative, [     ] also may purchase participations in or guarantee certain loans extended by the Banks. [     ] states that its participations and guarantees will be limited to loans extended to: (i) minority and women-owned businesses; (ii) minority and women business owners involved in building or renovating housing; (iii) minority and women-owned developers of commercial real estate; and (iv) non-profit organizations involved in minority and women-related community economic development activities. [     ] has committed that the aggregate amount of such participations and guarantees with respect to each Bank will not exceed the lesser of 10 percent of the Bank's assets or $7.5 million. [     ] represents that its participation in or guarantee of any single loan will not exceed 40 percent of the amount of that loan. [     ] is not required to purchase any minimum amount of participations from any Bank.

[     ] may make deposits in the Banks as part of the Initiative. To the extent it makes such deposits, [     ] has committed that it will not withdraw or threaten to withdraw deposits as a condition of specific action or non-action by a Bank. [     ] also has committed that the amount of such deposits with respect to each Bank will not exceed the lesser of $1 million plus interest or 5 percent of Bank deposits.

[     ] further represents that it may on occasion refer [     ]  [       ] or other business owners seeking loans to a Bank. [     ] states that it will not enter into agreements with a Bank to govern such referrals, and that no fee or other compensation will be paid by the Bank to [     ] for the referrals. [     ] represents that it does not and will not attempt to influence the credit decision of any Bank with respect to any potential loan.

[     ] also states that it and the Banks may publicize the Initiative through joint appearances and through brochures describing the Initiative that are made available on the premises of the Banks. The Banks also may include promotional materials for [     ] credit cards (which are issued by other banks) in monthly customer account statements. The Banks will receive no revenue in connection with any of these promotional activities. [     ] has agreed to consult with the Board prior to engaging in any additional joint marketing activities with any Bank.

[     ] has made commitments to ensure that its investments in the Banks remain passive. These commitments are described in the attached Appendix and confirm that [     ] will have no director, officer, or employee interlock with any Bank, will not seek to exercise a controlling influence over any Bank's management or policies, and, except as discussed above, will not maintain business relationships with any Bank.

Staff has reviewed the existing and proposed investments and relationships between [     ] and the Banks in light of the Board's precedents. Based on all the facts of this case, including the representations and commitments made by [     ], staff would not recommend that the Board initiate a control proceeding if [     ] continues with the Initiative on the terms outlined in this letter and your correspondence.

This decision is limited to the specific facts as you have presented them to Board staff. Any change in circumstances may result in a different opinion. Accordingly, you should notify staff promptly if any facts presented by you change, including any expansion of the number of banks participating in the Initiative. In addition, this decision is without prejudice to the Board's right to initiate a control proceeding under the BHC Act and Regulation Y in the event that facts presented in the future indicate that [     ] controls any bank or bank holding company.

Sincerely,

(Signed) Virgil J. Mattingly, Jr.

1. [     ] also proposes, as part of the Initiative, to make a similar investment in a federal savings bank. Under the Home Owners' Loan Act, 12 U.S.C. § 1461 et seq. ("HOLA"), the Director of the Office of Thrift Supervision is empowered to determine whether a company controls a savings association (including a federal savings bank) and therefore is a savings and loan holding company. 12 U.S.C. § 1467a(a)(2)(D). Accordingly, Board staff expresses no opinion as to whether the Initiative would cause [     ] to be a savings and loan holding company for purposes of HOLA. Return to text

[     ], through counsel, on behalf of itself and its affiliates (collectively [     ], makes the following commitments with respect to banks (collectively "Banks") participating in [     ] proposed community development initiative ("Initiative"):

1. [     ] will not exercise or attempt to exercise a controlling influence over the management or policies of any Bank or any of a Bank's affiliates.
2. [     ] will not take any action to cause any Bank, or any of the Bank's affiliates, to become a subsidiary of [     ].
3. [     ] and its officers and directors will not acquire or retain: (i) any voting securities of any Bank or its affiliates; or (ii) shares that would cause the combined interests of [     ] and its officers and directors to equal or exceed 10 percent of the stockholders' equity of any Bank or any of its affiliates.
4. [     ] will not propose a director or slate of directors in opposition to a nominee or slate of nominees proposed by the management or board of directors of any Bank or any of its affiliates
5. [     ] will not permit any representative of [     ] to seek or accept representation on the board of directors of any Bank or any of its affiliates.
6. [     ] will not attempt to influence the dividend policies; loan, credit, or investment decisions or policies; pricing of services; personnel decisions; operations activities, including the location of any offices or branches or their hours of operation, etc.; or any similar activities or decisions of any Bank or any of its affiliates.
7. [     ] will not solicit or participate in soliciting proxies with respect to any matter presented to the shareholders of any Bank or any of its affiliates.
8. [     ] will not have or seek to have any employee or representative serve as an officer, agent, or employee of any Bank or any of its affiliates.
9. [     ] will not dispose or threaten to dispose of shares of any Bank in any manner as a condition of specific action or non-action by the Bank or any of its affiliates. It is understood that if any Bank ceases to be a minority- or woman-owned bank, [     ] may dispose of its shares in such Bank.
10. [     ] will not enter into any banking or nonbanking transactions with any Bank or any of its affiliates, except that:
    1. [     ] may establish and maintain deposit accounts with each Bank, provided that the aggregate balance of all such deposit accounts with any Bank does not exceed the lesser of $1 million plus interest earned on such $1 million deposit, or 5 percent of the Bank's total deposits, and provided that the accounts are maintained on substantially the same terms as those prevailing for comparable accounts of persons unaffiliated with the Bank;
    2. [     ] may participate in and guarantee loans originated by each Bank, provided that the sum of the amount of loan participations purchased by [     ] from a Bank plus the amount of guarantees issued by [     ] with respect to loans made by the Bank does not exceed the lesser of 10 percent of the Bank's assets, as publicly reported in such Bank's quarterly call reports, or $7.5 million;
    3. [     ] may refer [     ] or other business owners seeking loans to a Bank, provided that no fee or other compensation would be paid by the Bank to [     ] for the referrals; and
    4. [     ] and the Banks may publicize the Initiative through joint appearances and through brochures describing the Initiative that are made available on the premises of the Banks, and the Banks may include promotional materials for [     ] credit cards in monthly customer account statements, provided that the Banks would receive no revenue in connection with any of these promotional activities.
11. [     ] will not withdraw or threaten to withdraw any deposit it maintains with any Bank as a condition of specific action or non-action by that Bank. It is understood that if any Bank ceases to be a minority- or woman-owned bank, [     ] may withdraw any deposit it maintains with that Bank.