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December 22, 2003

Ira L. Tannenbaum, Esq.
Kirkpatrick & Lockhart, LLP
1800 Massachusetts Avenue, N.W.
Suite 200
Washington, D.C. 20036-1221

Dear Mr. Tannenbaum:

This is in response to the request by First Alliance Bank, Jacksonville, Florida, for an exemption from section 23A of the Federal Reserve Act to acquire AMC Acquisition, Inc., also in Jacksonville. First Alliance Bank and AMC Acquisition, Inc. are subsidiaries of Alliance Capital Partnership L.P., Wilmington, Delaware ("ACP"), and thus AMC Acquisition is an affiliate of First Alliance Bank for purposes of section 23A.1 ACP proposes to contribute AMC Acquisition to First Alliance Bank as part of a corporate reorganization.

Section 23A limits the amount of "covered transactions," which include loans and purchases of assets, between a bank (and its subsidiaries) and any single affiliate to 10 percent of the bank's capital stock and surplus. Covered transactions include a bank's loans to an affiliate, investments in the securities of an affiliate, purchases of assets from an affiliate, and certain other transactions. The contribution of AMC Acquisition to First Alliance Bank is a covered transaction under section 23A. The proposed transaction would exceed the quantitative limits of section 23A inasmuch as First Alliance Bank's capital stock and surplus totaled approximately $111.1 million, as of September 30, 2003.

Section 23A specifically authorizes the Board to exempt purchases of real or personal property and to exempt "at its discretion [other]. . . transactions or relationships from the requirements of this section if it finds such exemptions to be in the public interest and consistent with the purposes of this section."2 The Board has approved exemptions in similar cases for one-time transfers that are part of a corporate reorganization and that are structured to ensure the quality of the transferred assets.3 As in previous cases reviewed by the Board, the proposed transaction in this case is the result of a one-time corporate reorganization. First Alliance Bank states that the proposed consolidation would allow it to better serve its customers by providing a dependable source of funds for AMC Acquisition's growing operations and by increasing efficiencies by eliminating state licensing requirements.

First Alliance Bank and ACP have made the following commitments, accepted by the Board in previous exemption requests:

  1. None of the assets of AMC Acquisition or its subsidiaries acquired by First Alliance Bank will be "low-quality" within the meaning of subsection (b)(10) of section 23A. Immediately prior to the contribution of AMC Acquisition shares to First Alliance Bank, ACP will acquire any low-quality assets then existing on the books of AMC Acquisition or its subsidiaries.
  2. Prior to the reorganization, First Alliance Bank will review the assets to ensure that the reorganization is consistent with safe and sound banking practices. The reorganization will be approved by a majority of First Alliance Bank's directors that are not affiliated with ACP (except by virtue of their membership on First Alliance Bank's board of directors).
  3. ACP commits for a two-year period following the completion date of the reorganization, to make either (i) quarterly cash payments to First Alliance Bank equal to the book value plus write-downs by First Alliance Bank of any transferred assets that become low-quality assets; or (ii) quarterly repurchases from First Alliance Bank of any transferred assets that become low-quality assets during any quarter at a price equal to the book value plus write-downs by First Alliance Bank of any such transferred assets that become low-quality assets.
In light of these considerations and all the facts presented, the transaction appears to be consistent with safe and sound banking practices and on terms that would ensure the quality of the assets transferred. In addition, the Office of Thrift Supervision and the Federal Deposit Insurance Corporation have informed the Board that they have no objection to this proposal. Accordingly, the transaction appears to be consistent with the purposes of section 23A, and the Director of the Division of Banking Supervision and Regulation, pursuant to authority delegated by the Board, and with the concurrence of the General Counsel, hereby grants the requested exemption.

This determination is specifically conditioned on compliance by ACP and First Alliance Bank with all the commitments and representations made in connection with the request. These commitments and representations are deemed to be conditions imposed in writing in connection with this action and, as such, may be enforced in proceedings under applicable law. This determination is based on the specific circumstances surrounding this transaction and may be revoked in the event of any material change in those circumstances or any failure by ACP or its subsidiaries to observe their commitments. Granting this exemption does not represent a determination on the permissibility of any other transactions that are subject to section 23A or concerning any other affiliate of First Alliance Bank.

Sincerely yours,

(Signed) Jennifer J. Johnson

Jennifer J. Johnson
Secretary of the Board

cc: Rebecca Laird
  Office of Thrift Supervision
 Federal Deposit Insurance Corporation


1. 12 U.S.C. 371c(b)(1)(A). First Alliance Bank is a savings association, and the Home Owners' Loan Act applies section 23A to insured savings associations in the same manner and to the same extent as if they were member banks. 12 U.S.C. 1468(a) & 12 C.F.R. 223.1(c). Return to text

2. 12 U.S.C. 371c(b)(7)(C) and 371c(e)(2) (emphasis added). Return to text

3. See Travelers Group Inc., 84 Federal Reserve Bulletin 985, 1013-14 (1998); Letter dated November 14, 1996, from William W. Wiles to John Byam; Letter dated April 19, 1988, from James McAfee to Timothy C. Roach; Letter dated August 6, 1987, from William W. Wiles to Timothy McGinnis. Return to text

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