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AGO Opinion 97054

Application of Deposit Limitation Provisions of the Nebraska Bank Holding Company Act to Formation of De Novo National Banks in this State by Bank Holding Companies
Opinion 97054

DATE: October 10, 1997

SUBJECT: Application of Deposit Limitation Provisions of the Nebraska Bank Holding Company Act to Formation of De Novo National Banks in this State by Bank Holding Companies

REQUESTED BY: James A. Hansen

Director of Banking and Finance

WRITTEN BY: Don Stenberg, Attorney General

Fredrick F. Neid, Assistant Attorney General




This is in response to your request 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

to 8-917 (Cum. Supp. 1996) (the "Nebraska Act") to the organization

of newly-chartered national banks in this state by an out-of-state

bank holding company and its parent company, a Nebraska bank

holding company.




The specific question you ask is whether the Nebraska Act

prohibits the formation and acquisition of a Nebraska bank by an

out-of-state bank holding company, that is owned or controlled by

a Nebraska bank holding company. Under the facts you present, the

Nebraska Bank holding company and its affiliated companies have

deposits greater than fourteen percent of the total deposits of

certain Nebraska financial institutions as described in Neb. Rev.

Stat. § 8-910(2)(c) (Cum. Supp. 1996). It is the opinion of this

office that the deposit limit provisions of the Nebraska Act are

applicable and prohibit the formation of de novo national banks by

the bank holding companies under the facts you describe.


BACKGROUND




A Nebraska bank holding company and its wholly-owned

subsidiary, an out-of-state bank holding company, have made

application to the Comptroller of the Currency and the Board of

Governors of the Federal Reserve System for approval to establish

newly-chartered national banks in two cities in Nebraska. It is

related that the applicant Nebraska bank holding company, together

with its affiliated companies, presently have deposits exceeding

the fourteen percent deposit limitation set forth in the Nebraska

Act. It is in the context of these facts that we respond to your

question.




Section 3(d) of the federal Bank Holding Company Act of 1956,

as amended by § 101 of the Riegle-Neal Interstate Banking and

Efficiency Act of 1994, 12 U.S.C. §§ 1842 (d)(1)(A) and (B) and

1842 (d)(2)(A) and (B), allows the Federal Reserve Board to approve

an application by a bank holding company to acquire control of a

bank in a state other than the home state if certain conditions are

met. The federal Bank Holding Company Act, as amended, among other

things, expressly preserves state deposit limits and provides in

particular part:




(C) Effectiveness of State deposit caps




No provision of this subsection shall be construed

as affecting the authority of any State to limit, by

statute, regulation, or order, the percentage of the

total amount of deposits of insured depository

institutions in the State which may be held or controlled

by any bank or bank holding company (including all

insured depository institutions which are affiliates of

the bank or bank holding company) to the extent the

application of such limitation does not discriminate

against out-of-State banks, out-of-State bank holding

companies, or subsidiaries of such banks or holding

companies.




12 U.S.C. § 1842(d)(2) (emphasis added).




Provisions of the Nebraska Act make it unlawful for certain

actions to be taken by banks and bank holding companies unless the

banks owned or controlled would have deposits no greater than

fourteen percent of the total deposits of certain financial

institutions in Nebraska as determined by the Director of the

Department of Department of Banking and Finance. Neb. Rev. Stat.

§ 8-910 (Cum. Supp. 1996) in its entirety states:




Unlawful acts; authorized ownership or control of banks;

limitation. (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:




(a)(i) The bank holding company is registered with

the department as of September 29, 1995, as a bank

holding company for any bank or banks; or (ii) the bank

holding company registers with the department in

accordance with the provisions of section 8-913 as a bank

holding company;




(b) The bank holding company does not have a name

deceptively similar to an existing unaffiliated bank or

bank holding company located in Nebraska;




(c) Upon any action referred to in subsection (1)

of this section and subject to subsection (3) of this

section, the bank or banks so owned or controlled would

have deposits in Nebraska in an amount no greater than

fourteen percent of the total deposits of all banks in

Nebraska plus the total deposits, saving accounts,

passbook accounts, and shares in savings and loan

associations and building and loan associations in

Nebraska as determined by the director on the basis of

the most recent calendar-year-end reports, except as

provided in subsection (4) and (5) of this section;




(d) The bank holding company is adequately

capitalized and adequately managed;




(e) The bank holding company complies with sections

8-1501 to 8-1505 if the bank or banks to be acquired are

chartered in this state under sections 8-101 to 8-1,139;

and




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

bank holding company, complies with the limitations of

section 8-911.




(3) If any person, association, partnership,

limited liability company, or corporation owns or

controls twenty-five percent or more of the voting stock

of any bank holding company acquiring a bank and any such

person, association, partnership, limited liability

company, or corporation owns or controls twenty-five

percent or more of the voting stock of any other bank or

bank holding company in Nebraska, then the total deposits

of such other bank or banks and of all banks in Nebraska

owned or controlled by such bank holding company shall be

included in the computation of the total deposits of a

bank holding company acquiring a bank.




(4) A bank or bank holding company which acquires

and holds all or substantially all of the voting stock of

one newly established bank under sections 8-1512 and 8-

1513 shall not have such acquisition count against the

limitations set forth in subdivision (2)(c) of this

section.




(5) A bank holding company which acquired an

institution or which formed a bank which acquired an

institution under sections 8-1506 to 8-1510 or which

acquired any assets and liabilities from the Resolution

Trust Corporation or the Federal Deposit Insurance

Corporation prior to January 1, 1994, shall not have such

acquisition or formation count against the limitations

set forth in subdivision (2)(c) of this section.




(Emphasis added).




ANALYSIS




It is the province of the Board of Governors of the Federal

Reserve System to apply provisions of the federal Bank Holding

Company Act and to give effect to valid state law. The federal

Bank Holding Company Act defers to state law with respect to

deposit limitations which may be held or controlled by a bank

holding company to the extent the limitations do not discriminate

against out-of-state banks or out-of-state bank holding companies.

12 U.S.C. § 1842(d)(2). And, it has been held that the Federal

Reserve Board could not approve a bank holding arrangement

involving the organization and opening of a new bank if the opening

of the new bank, by virtue of its ownership by a bank holding

company, would be prohibited by state law. See Whitney Nat. Bank

in Jefferson Parish v. Bank of New Orleans & Tr. Co., 379 U.S. 411

85 S.Ct. 551, 13 L.Ed.2d 386 (1965). Thus, the deposit limitation

provisions of the Nebraska Act are necessarily considered for

purposes of determining the validity of a proposal for the

organization of newly-chartered banks in Nebraska by bank holding

companies.




DEPOSIT LIMITATION PROVISIONS




The question you ask regarding the formation of de novo

national banks by an out-of-state-bank holding company that is a

subsidiary of a Nebraska Bank holding company raises two primary

issues. The first issue is whether provisions of the Nebraska Act

apply to the organization and formation of newly-chartered banks by

a bank holding company. It is clear that the deposit limit

provisions are intended to apply to newly-chartered banks by bank

holding companies. Section 8-910(1)(b) prohibits "[a]ny action to

be taken that causes a bank to become a subsidiary of a bank

holding company." The language "any action" is broad in its scope

and would include the formation of newly-chartered banks that would

become subsidiaries of a bank holding company. The prohibition

does not apply if certain conditions set forth in the statute are

complied with. Section 8-910(2)(c) establishes a limitation that

the bank or banks owned or controlled would have deposits in

Nebraska in an amount no greater than fourteen percent of the total

deposits of certain financial institutions in Nebraska as

determined by the Director of the Department of Banking and

Finance.




This office previously concluded that the "charter age"

provisions of § 8-911 of the Nebraska Act are not applicable to the

organization of de novo banks. See Op. Att'y General No. 97007

(Jan. 15, 1997) and Op. Att'y General No. 87102 (Oct. 7, 1987). In

those opinions, it was concluded that the charter age provisions of

the Nebraska Act do not prohibit the establishment of a de novo

national bank in Nebraska by an out-of-state bank holding company

since Nebraska statutes recognize a distinction between the

formation of a de novo bank and the acquisition of an existing

bank. Section 8-910 provides that an out-of-state bank holding

company may "acquire" a bank or banks under the Nebraska Act if the

bank or banks to be acquired have been chartered for five years or

more.




It is noteworthy that the deposit limit provisions of § 8-

910(2)(c) do not limit application of its deposit cap requirements

to the acquisition of existing banks. Rather, the statute employs

the language with respect to the bank or banks "so owned or

controlled." We think the language is clear and unambiguous. The

general rule governing statutory construction and interpretation

provides that, in the absence of anything to the contrary,

statutory language is to be given its plain and ordinary meaning.

State ex rel. Wieland v Beerman, 246 Neb. 808, 523 N.W.2d 518

(1994); In re Application of Jantzen, 245 Neb. 81, 511 N.W.2d 504

(1994). Thus, the statutory language employed in § 8-910(c)(2),

taken in its plain and ordinary meaning, includes the formation of

newly-chartered banks within the scope of its application.




The aggregation provisions of § 8-910(3) also apply to

formation of newly-established banks by bank holding companies.

This section provides for the aggregation of the deposits of

affiliated banks, bank holding companies, and other entities for

purposes of determining the total deposits of a bank holding

company acquiring a bank. It is apparent that the aggregation

provisions apply because § 8-910(4) provides an express exception

to the deposit limitations if the newly-organized bank is

established under the provisions of §§ 8-1512 and 8-1513. Sections

8-1512 and 8-1513 authorize the formation of a new bank for the

limited purpose of conducting credit card operations. Thus, the

deposit limit provisions apply to the establishment of a newly-

chartered bank unless the newly-formed bank is established for the

limited purpose of conducting credit card operations.




The provisions of § 8-910 are appropriately construed together

since they are in pari materia. The interpretation of a statute

requires the court to determine and give effect to the purpose and

intent of the legislature as ascertained from the entire language

of the statute considered in its plain, ordinary, and popular

sense. Omaha Public Power Dist. v. Dep't of Revenue, 248 Neb. 518,

537 N.W.2d 312 (1995); Chrysler Corp. v. Lee Janssen Motor Co., 248

Neb. 281, 534 N.W.2d 568 (1995). Similarly, a fundamental rule in

construing statutes is that they shall be considered in pari

materia and from their language as a whole to determine the intent

of the legislature. Malone v. Benson, 219 Neb. 28, 361 N.W.2d 184

(1985). And, it is well established that the courts will construe

provisions of a statute relating to the same subject matter

together so that the provisions of a statute are consistent,

harmonious, and sensible. McCook Nat. Bank v. Bennet, 248 Neb.

567, 537 N.W.2d 353 (1995). In application of these principles, we

conclude that the deposit limitation and deposit aggregation

provisions of § 8-910 are applicable to the formation of newly-

chartered banks by a bank holding company.




AFFILIATE AND SUBSIDIARY RELATIONSHIPS




The second key issue raised by your inquiry is whether the

deposit limitations apply to a proposal for formation of de novo

banks by an out-of-state bank holding company that is a wholly-

owned subsidiary of Nebraska bank holding company. We believe the

deposit limitation provisions of § 8-910 apply to both the Nebraska

bank holding company as well as the out-of-state bank holding

company by virtue of the fact that the out-of-state bank holding

company is a wholly-owned subsidiary of the Nebraska bank holding

company. To conclude otherwise would defeat clear legislative

intent expressed in the statutory provisions.




The language employed in § 8-910 does not include language to

the effect that the subsidiary be directly owned or controlled by

the parent holding company. If the legislature intended that the

subsidiary be directly owned or controlled by the parent holding

company, that intention would be expressed in the statute.

Qualifying words cannot be added to the statute to require that the

subsidiary bank or banks be directly owned or controlled. It is a

well recognized 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).




Further, § 8-909(3)(a) of the Nebraska Act defines the term,

bank holding company, to include any company, including an out-of-

state bank holding company, which ". . . (i) Directly or indirectly

owns or controls twenty-five percent or more of the voting shares

of any bank; . . ." (emphasis added). This definition of bank

holding company is applicable to the organizational proposal under

review and necessitates that the de novo banks be viewed as

subsidiaries of the Nebraska bank holding company. The federal

Bank Holding Company Act also recognizes that state deposit

limitations apply to insured depositary institutions which are

"affiliates" of the bank holding company. The term, "affiliate" is

defined in 12 U.S.C. § 1841(k) "as any company that controls, is

controlled by, or is under common control with another company."




The widely accepted definition of the term, holding company,

also supports the conclusion that the banks to be organized would

be appropriately viewed as subsidiaries of the Nebraska holding

company. The term, holding company, has been defined as a

corporation which owns or at least controls such a dominant

interest in one or more other corporations that it is enabled to

dictate their policies through voting power, or which is in a

position to control or materially to influence the management of

one or more companies by virtue, in part, at least, of its

ownership of securities in the other company or companies. North

American Co. v. SEC, 327 U.S. 686, 90 L.Ed. 945, 66 S.Ct. 785

(1946); Kelley, Glover & Vale v. Heitman, 220 Ind. 625, 44 N.E.2d

981, cert. denied 319 U.S. 762, 87 L.Ed. 1713, 63 S.Ct. 379 (1943).

Utilizing this definition of the term, holding company, the

proposed de novo banks would be subsidiaries of the Nebraska

holding company through its ownership of the out-of-state bank

holding company. Through ownership of the out-of-state bank

holding company, the Nebraska bank holding company would be in a

position to control or materially influence the management of the

new banks to be organized.




In summary, it is our opinion that the deposit limitation

provisions of the Nebraska Act are applicable and prohibit the

formation of de novo national banks in this state by an out-of-

state bank holding company that is a wholly-owned subsidiary of a

Nebraska bank holding company, when the Nebraska bank holding

company already has deposits in Nebraska in excess of the fourteen

percent limitation set forth in Neb. Rev. Stat. § 8-910(2)(c) (Cum.

Supp. 1996) ("the deposit cap").




Sincerely yours,




DON STENBERG

Attorney General




Fredrick F. Neid

Assistant Attorney General