99-2

May 21, 1999

Dear M ________:

I.                  INTRODUCTION.

This responds to your letter of January 15, 1999, which requested a determination pursuant to Financial Code Section 700(b) as to whether, for purposes of Article 7 (commencing with Section 700), Chapter 5, Division 1 of the Financial Code, ________ control ________, ________, (collectively, the “Banks”).

As discussed below, we decline to determine that ________ or ________ controls the Banks.

II.                 CIRCUMSTANCES.

The request for determination arises from the following circumstances, which you described in your letter and our various telephone conversations:

As discussed in greater detail below, ________, a limited liability company organized under the laws of the State of Delaware, indirectly owns more than 10 percent of the voting securities of each of the Banks. Prior to June 30, 1998, ________, through his wholly owned corporation, ________, owned 50% of the voting interest in ________, and ________, through his wholly owned corporation, ________, owned 5% of the voting interest in ________. As a result of a redistribution of the ownership interest in ________ that occurred on June 30, 1998 (the “Redistribution”), ________ received an additional 17.96% of the voting interest in ________, thereby increasing its voting interest to 22.96%. In connection with the Redistribution, the voting interest of ________ in ________ declined to 45.92%.

The question presented here is whether, as a result of the Redistribution, ________ and ________ acquired control of the Banks.

There are eight owners of ________. The following chains of ownership lead from ________ and Mr. ________ through ________ to the Banks: ________ owns all of the outstanding shares of ________. ________ owns 22.96% of the voting ownership units (“Units”) of ________. Mr. ________ owns all of the outstanding shares of ________. ________ owns 45.92% of the Units. The next largest owner of ________ owns 8% of the Units. ________ is a 1% equity owner and the sole general partner in three limited partnerships, ________ (“Fund I”), ________ (“Fund II(a)”), and ________ (“Fund II(b)”) (collectively, the “Funds”). Pursuant to the partnership agreements governing the Funds, the general partner of the Funds controls the voting of all securities owned by the Funds. Limited partners have the power to influence only very limited categories of decisions made by the Funds. Accordingly, ________ controls each of the Funds by virtue of its position as general partner.

The Funds directly or indirectly own common stock of the Banks as follows:

1. Outstanding shares of ________ (the sole owner of ________ and      ________) are owned in the following percentages by the Funds: 12.72%      by Fund I, .97% by Fund II(a), and .37% by Fund II(b). In other words, ________ controls a total of 14.06% of ________ outstanding shares through the Funds.

2.Fund I owns 18.97% of the outstanding shares of ________, the sole owner of    ________.

3.Fund I owns 12.22% of the outstanding shares of ________.

In addition, ________ owns individually or through ________ .15% of the outstanding shares of ________, 1.49% of the outstanding shares of ________, and 1.38% of the outstanding shares of ________.

________ is Senior Vice President of ________ while Mr. ________ is President. You stated that Mr. ________ is the dominant influence in the management of ________, and that ________’s influence in the company is subordinate to that of Mr. ________.

III.              DISCUSSION.

“Control” is defined in Financial Code Section 700(b) as follows:

“(b) ‘Control’ means possession, direct or indirect, of the power:

(1) To vote 25 percent or more of any class of the voting securities issued by a       person; or

(2)To direct or cause the direction of the management and policies of a person,      whether through the ownership of voting securities, by contract (other than a      commercial contract for goods or nonmanagement services), or otherwise;      provided, however, that no individual shall be deemed to control a person      solely on account of being a director, officer, or employee of such person.

For purposes of paragraph (2) of this subdivision, a person who, directly or indirectly, owns, controls, holds with the power to vote, or holds proxies representing, 10 percent or more of the then outstanding voting securities issued by another person is presumed to control such other person.

For purposes of this article, the superintendent may determine whether a person in fact controls another person.”

In accordance with the second paragraph of Paragraph (2) of Subdivision (b) of Section 700, a person (a “presumptive control person”) who owns between 10% and 25% of any class of voting securities of a bank or other person is presumed to have the power to control the bank or person. As the owner of 10% or more of the outstanding shares of each of the Banks or their holding companies, ________ is presumed to directly or indirectly control each of the Banks. Likewise anyone who directly or indirectly owns 10% or more of the voting interests in ________ is presumed to control the Banks.

The Redistribution, in which ________ acquired 17.96% of ________ outstanding Units, increasing its interest from 5% to 22.96%, triggered the presumption that ________ and its owner, ________, acquired control of ________, and, thus, acquired control of the Banks.

However, the presumption is rebuttable. We generally consider the presumption to be rebutted if another person (a “larger owner”) owns a greater percentage of the voting interests in the institution in question than is owned by the presumptive control person, and the larger owner exercises the power to control the institution conferred by his or her larger ownership position.

 In this case, Mr. ________ is the larger owner of ________, which is the control person of the Banks. His ownership interest in ________ is nearly twice as large as ________’s. Furthermore, by virtue of his dominant position in the management of ________, it appears that he exercises the control conferred by his larger ownership position.

Accordingly, it does not appear that ________ or ________ acquired control of the Bank as a result of the Redistribution, or otherwise.

IV.               CONCLUSION.

In view of the foregoing, we decline to determine that ________ or ________ controls the Banks.

This action is based on the circumstances described above. Should those circumstances be different than as stated or should the circumstances change, our action regarding the determination of control might be different.

If you have any questions regarding this matter, please feel free to call me at (415) 263-8512.

Very truly yours,

JAN LYNN OWEN
Acting Commissioner of Financial Institutions

By

THOMAS M. LOUGHRAN
Senior Counsel

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