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Opinion 97007




DATE: January 13, 1997




SUBJECT: Nebraska Bank Holding Company Act of 1995; De Novo Formation of a National Bank by an Out-of-State Bank Holding Company




REQUESTED BY: James A. Hansen, Director

Department of Banking and Finance




WRITTEN BY: Don Stenberg, Attorney General

Fredrick F. Neid, Assistant Attorney General




This is in response to the request of the Department of

Banking and Finance for an opinion of the Attorney General

regarding application of provisions of the Nebraska Bank Holding

Company Act of 1995, Neb. Rev. Stat. §§ 8-908 - 8-917 (Cum. Supp.

1996) ("Nebraska Act") to formation and acquisition of banks by

out-of-state bank holding companies. Two specific questions are

asked. First, whether the Nebraska Act prohibits an out-of-state

bank holding company from forming and acquiring a new bank in this

state. The second question consists of a request for a "ruling"

that prior informal opinions issued by this Office "are no longer

applicable as a result of the repeal of the laws" which were

addressed by the opinions.




It is our opinion that the "charter age requirements" of Neb.

Rev. Stat. § 8-911 (Cum. Supp. 1996) do not prohibit the formation

of a de novo national bank in Nebraska by an out-of-state bank

holding company. We further conclude that the application of prior

opinions of this Office, Op. Att'y General No. 87102 (October 7,

1987) and Inf. Op. Att'y General (September 12, 1988) is limited to

the provisions of the Nebraska Banking Holding Company Act of

1963.




BACKGROUND




You have related that an out-of-state bank holding company has

made application to federal banking authorities, the Comptroller of

the Currency and the Board of Governors of the Federal Reserve

System, to establish a newly chartered national bank in Nebraska.

The Federal Reserve Board is the approving authority for expansion

by bank holding companies into another state under the Bank Holding

Act of 1956, §§ 2-105, 12 U.S.C.A. §§ 1841-1850 ("Federal Act").

The Federal Act, administered by the Federal Reserve Board,

requires a bank holding company to apply for approval for certain

expansion activities across state lines. 12 U.S.C.A. §§ 1842

(d)(1)(A) and (B) and 1842 (d)(2)(A) and (B).




The question whether provisions of the Nebraska Bank Holding

Act of 1963 prohibited out-of-state bank holding companies from

forming or establishing a newly chartered national bank was

previously addressed by this Office. In Op. Att'y General, No.

87102 (October 7, 1987) and Inf. Op. Att'y General (September 12,

1988) this Office concluded that charter age requirements set forth

in Neb. Rev. Stat. § 8-903 applied only to the acquisition of an

existing bank and did not prohibit the formation of a new bank by

an out-of-state bank holding company. Section 8-903 prohibited

a bank holding company from acquiring any bank which has been

chartered for less than five years. The requests for the opinions

were in part due to application by Norwest Corporation, an out-of-

state bank holding company, to establish a de novo bank in

Nebraska. The application of Norwest Corporation was approved by

the Federal Reserve Board in 1988. Reportedly, other de novo banks

have been formed by bank holding companies under the Nebraska Bank

Holding Company Act of 1963 prior to its appeal.




The Federal Act was amended by passage of the Riegle-Neal

Banking and Branching Efficiency Act of 1994. (Pub. L. No. 103-

328, 108 Stat. 2338 (1994) (effective date Sept. 29, 1995).

Following amendment, the Federal Act authorizes the Federal Reserve

Board to approve an application by a bank holding company to expand

into another state without regard to whether the transaction is

prohibited by state law. 12 U.S.C.A. § 1842(d)(1)(A) (1996).

However, the Federal Act as amended further provides:




Notwithstanding subparagraph (A), the Board may not

approve an application pursuant to such sub-paragraph

that would have the effect of permitting an out-of-State

bank holding company to acquire a bank in a host State

that has not been in existence for the minimum period of

time, if any, specified in the statutory law of the host

state.




12 U.S.C. A § 1842(d)(1)(D)(i). (emphasis added).




The Nebraska Act was enacted in 1995 by passage of LB 384 in

response to amendment of the Federal Act by the Riegle-Neal Act of

1994. Provisions of the new Nebraska Act establish "charter age

requirements" for acquisition of banks in this state by an out-of-

state bank holding company. Neb. Rev. Stat. § 8-910 (Cum. Supp.

1996) in pertinent part states:




(1) It shall be unlawful, except as provided in this

section, for:




(a) Any action to be taken that causes any company

to become a bank holding company;




(b) Any action to be taken that causes a bank to

become a subsidiary of a bank holding company;




(c) Any bank holding company to acquire direct or

indirect ownership or control of any voting shares

of any bank if, after such acquisition, such

company will directly or indirectly own or control

more than twenty-five percent of the voting shares

of such bank;




(d) Any bank holding company or subsidiary thereof,

other than a bank, to acquire all or substantially

all of the assets of a bank; or




(e) Any bank holding company to merge or

consolidate with any other bank holding company.




(2) The prohibition set forth in subsection (1) of this

section shall not apply if:




(f) The bank holding company, if an out-of-state

bank holding company, complies with the limitations

of section 8-911. . . .




(Emphasis added). Neb. Rev. Stat. § 8-911 (Cum. Supp. 1996)

states:




Upon compliance with all other provisions of the Nebraska

Bank Holding Company Act of 1995 and any other applicable

law, an out-of-state bank holding company may acquire a

bank or banks under the act only if the bank or banks to

be acquired have been chartered for five years or more.

In determining whether a bank has been chartered for five

years or more, a bank that has been chartered solely for

the purpose of, and does not open for business prior to,

acquiring all or substantially all the assets of an

existing bank shall be deemed to have been in existence

for the same period of time as the bank to be acquired.




ANALYSIS




At the outset, it is important to acknowledge that the de novo

bank to be formed by the out-of-state bank holding company is a

national bank. National Banks are quasi-public institutions

established by, and subject to, regulatory laws of Congress.

Anderson v. Cronkleton, 32 F.2d 170 (8th Cir. 1929). And, national

banks are subject to the paramount authority of the United States.

Dovey v. State, 116 Neb. 533, 218 N.W. 390 (1928). The parameters

of state action or authority over national banks have been

described by the U.S. Supreme Court. In Mercantile Nat. Bank v.

Langdeau, 371 U.S. 551, 83 S.Ct. 520, 9 L.Ed.2d 523 (1962), the

Supreme Court stated:




National banks are federal instrumentalities, and the

power of Congress over them is extensive. National Banks

are quasi-public institutions, and for the purposes for

which they are instituted are national in their

character, and, within constitutional limits, are subject

to the control of Congress and are not to be interfered

by state legislative or judicial action, except so far as

the law-making power of the Government may permit. Van

Reed v. People's Nat. Bank, 198 U.S. 554, 557, 25 S.Ct.

775, 49 L.Ed. 1161, 1162.




Id. 83 S.Ct. at 558-559, 83 S.Ct. at 522 (emphasis added).




Further, it is well established that the Board of Governors of

the Federal Reserve System has exclusive jurisdiction to interpret

and apply the Federal Act. American Ins. Ass'n v. Clarke, 865 F.2d

278 (D.C. Cir. 1988). See generally Whitney Nat'l Bank v. Bank of

New Orleans & Trust Co., 379 U.S. 411, 419, 85 S.Ct. 551, 556-57,

13 L.Ed.2d 386 (1965). Thus, State law has application to

formation of a de novo national bank by an out-of-state bank

holding company only to the extent deference is accorded by the

Federal Act. The Federal Act defers to state laws that require

that an acquired institution be in existence for a specified period

of time before an out-of-state bank holding company may acquire it.

12 U.S.C.A. § 1842(d) (as amended). Accordingly, the charter age

requirements of the Nebraska Act are appropriately looked to in

acquisition transactions by out-of-state bank holding companies.




There is sufficient similarity between the provisions of the

repealed statutes and the new provisions of the Nebraska Act that

our conclusion remains the same. That is, that "charter age

requirements" of section 8-911 prohibit the acquisition of a bank

that has been in existence for a period of less than five years but

do not include any specific or express prohibition that prevents a

bank holding company from forming a new bank unless the new bank is

formed only for the purpose of acquiring all the assets of an

existing bank.




The similarity of the repealed and new provisions is reflected

in the statutory provisions set forth below:




1. Act of 1963: A bank holding company, including an

out-of-state bank holding company,

may not acquire any bank which has

been chartered by this state or the

Comptroller of the Currency of the

United States for less than five

years . . . .Section 8-903.




2. Act of 1995: [a]n out-of-state bank holding company

may acquire a bank or banks under the act

only if the bank or banks to be acquired

have been chartered for five years or

more. Section 8-911.




3. Act of 1963: A bank holding company acquires an

institution or which forms a bank which

acquires an institution. . . . Section 8-

903.




4. Act of 1995: A bank holding company which acquired an

institution or which formed a bank which

acquired an institution. . . . Section 8-

910(5).




As we previously pointed out, the statutory language reflects

that the Legislature recognized the difference between the

formation and acquisition of a bank. Accordingly, the meaning of

the term acquisition is limited to the act of acquiring an existing

bank rather than also to the formation of a new bank to accord

legislative deference to the distinction between formation and

acquisition. Further, Neb. Rev. Stat. § 8-910(5) (Cum. Supp. 1996)

provides that a bank holding company which acquired an institution

or which formed a bank which acquired an institution shall not have

the acquisition count against deposit limitations set forth in the

statute. This statutory language is further indicia that the

terms, acquisition and formation or variations thereof, are not

interchangeable.




Further, it is clear that the charter age requirements of

section 8-911 are applicable to the formation of a de novo bank if

the new bank is established only for the purpose of acquiring the

assets of an existing bank. In relevant part, section 8-911

states:




. . . In determining whether a bank has been chartered

for five years or more, a bank that has been chartered

solely for the purpose, and does not open for business

prior to, acquiring all or substantially all of the

assets of an existing bank shall have been deemed to have

been in existence for the same period of time as the bank

to be acquired.




(emphasis added).




It is a well established tenet of statutory construction that

it is not within the province of a court to read a meaning into a

statute that is not warranted by the statutory language. Wendt v.

Cavalier Ins. Corp., 197 Neb. 622, 250 N.W.2d 243 (1977); Ledwith

v. Bankers Life Ins. Co., 156 Neb. 107, 54 N.W.2d 409 (1952).

Further, a court may not add language to plain terms of statutes to

restrict or extend their meaning. Wittler v. Baumgartner, 180 Neb.

446, 144 N.W.2d 62 (1966). In application of these principles, we

believe the charter age restrictions of section 8-911 have limited

application to de novo bank formations only if the new bank is

chartered for the purpose of acquiring all the assets of an

existing bank.




LEGISLATIVE HISTORIES




To the extent there is any ambiguity or lack of clarity in the

provisions of an act, legislative history may be resorted to for

purposes of ascertaining legislative intent. Legislative intent is

the cardinal rule in statutory construction to ascertain the

meaning of the provisions of an act. County of Lancaster v. Maser,

224 Neb. 566, 400 N.W.2d 238 (1987); Iske v. Papio Nat. Resources

Dist., 218 Neb. 39, 352 N.W.2d 172 (1984). And, a statute is open

to construction where the language used requires interpretation or

may reasonably be considered ambiguous. Omaha P.P. Dist. v.

Nebraska State Tax Commissioner, 210 Neb. 309, 314 N.W.2d 246

(1982).




The legislative history of the Riegle-Neal Act of 1994

reflects that its purposes include reducing interstate banking

barriers to loosen geographical constraints on banking. By

mandating that all states allow interstate banking, the Riegle-Neal

Act would:




[g]ive banks an opportunity to structure themselves more

efficiently, eliminate duplicative functions and reduce

purposes. Second, it will tend to promote a safer and

sounder banking system. Third, it will promote customer

convenience. Fourth, it will encourage competition by

making it easier for institutions to enter markets that

are not now fully competitive.




H.R. 448, 103rd Cong., 2nd Sess. (1994).




Another important aspect of the Riegle-Neal Act is its intent

to preempt any state laws which have the effect of discriminating

against out-of-state bank, out-of-state bank holding companies, or

their subsidiaries. While the applicability of state anti-trust

law is preserved, the legislative history indicates that other

state laws which discriminate against out-of-state bank holding

companies are overridden. Id.




The legislative history of LB 384 reflects that the Nebraska

Act was enacted as a direct response to passage of the Riegle-Neal

Act and to conform Nebraska law with provisions of the Federal Act

as amended by Riegle-Neal. The Committee Report reflects that the

charter age requirements of existing law were to be retained. The

Summary of purpose and/or changes of LB 615 includes the following

comment:




LB 615 would (with section numbers in parentheses): . .

.(4) provide that an out-of-state BHC may acquire a bank

or banks only if the bank or banks to be acquired have

been chartered for at least five years (similar to

current provisions in section 8-903).




Committee Statement, p. 2, LB 615 (Hr'g Date February 6, 1995)

(emphasis added).




Further, the testimony and statements of record at the

committee hearing generally reflect that a purpose of the bill is

to retain existing structure requirements except those

discriminatory to out-of-state bank holding companies. Committee

Hearing on LB 615, 94 Session Legis. 1995, (Feb. 6, 1995)

(Statements of Senator David Landis, Principal Introducer, and

James A. Hansen, Director of the Department of Banking and

Finance).




It is noted that the legislative history of the Nebraska Act

includes information and comment that the charter age restrictions

are intended to preclude de novo entry by out-of-state bank holding

companies. However, this effect is not clearly reflected in the

legislative record nor expressly stated in the provisions of the

Nebraska Act. We believe the legislative intent expressed in the

legislative record is more supportive of the conclusion that the

charter age restrictions do not apply to de novo bank formations

unless the new bank is formed solely to acquire assets of existing

institutions. To conclude otherwise would be anomalous in view of

the fact that an important purpose of the Bill was to preserve

existing law.




Sincerely yours,




DON STENBERG

Attorney General










Fredrick F. Neid

Assistant Attorney General






Approved By:









Attorney General






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