Exhibit 99.2
OFFICE OF THRIFT SUPERVISION
APPROVAL OF ACQUISITION AND RETENTION OF A NON-CONTROLLING
INVESTMENT IN THE VOTING STOCK OF
INDEPENDENCE FEDERAL SAVINGS BANK, WASHINGTON, D.C.
ORDER NO.: 200449
DATE: OCTOBER 18, 2004
RE: OTS NOS. H-2732, 05273, 07173
Carver Bancorp, Inc., New York, New York (Applicant) has requested
(Application), pursuant to 12 U.S.C. ss. 1467a(e)(1)(A)(iii) (Statute), that the
Office of Thrift Supervision (OTS) approve its acquisition and retention of 9.66
percent of the outstanding common stock of Independence Federal Savings Bank,
Washington, D.C. (Association). (1)
BACKGROUND
The Applicant is a unitary savings and loan holding company that owns
all of the stock of Carver Federal Savings Bank, New York, New York (Bank). The
Bank is a Savings Association Insurance Fund (SAIF)-insured federal stock
savings bank. The Association is a publicly traded SAIF-insured federal stock
savings bank.
The Applicant currently holds 150,000 shares (9.66 percent) of the
Association's common stock. The Applicant did not obtain written prior OTS
approval to acquire the shares it holds in excess of five percent of the
Association's common stock (4.66 percent, or 72,375 shares), as required by the
Statute.
ANALYSIS
Section 10 (e)(1)(A)(iii) of the Home Owners' Loan Act (HOLA), in
relevant part, generally prohibits a savings and loan holding company from
acquiring, directly or indirectly, more than five percent of any class of voting
shares of any other savings and loan holding company or savings association not
a subsidiary of the acquiring savings and loan holding company, without prior
OTS approval.
In considering an application under the Statute, OTS considers the
factors set forth at ss. I ss.10(e)(2)(A)-(D) of the HOLA. OTS also considers
such acquisitions under the Community Reinvestment Act (CRA), and the OTS CRA
regulations.
The Statute was intended to provide savings and loan holding companies
acquiring noncontrolling interests in savings associations, comparability to
bank holding companies' acquisitions of noncontrolling interests in banks.
Therefore, in considering applications under the Statute, OTS also considers the
managerial and financial resources and future prospects of the
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(1) The Applicant filed the Application in conjunction with several related
applications seeking OTS approval to acquire all of the stock of the Association
and to merge the Association into the Applicant's wholly owned savings
association subsidiary (Holding Company Applications). On October 15, 2004, OTS
denied the Holding Company Applications. See, OTS Order No. 2004-47 (Oct. 15,
2004).
ORDER NO. 2004-49
PAGE 2
acquiring savings and loan holding company and any subsidiary savings
association, and those of the savings association whose stock is to be acquired,
as well as the risks to the SAIF and the convenience and needs of the community.
OTS concludes that approval of the transaction is consistent with the
standards relating to competition, set forth at sections 10(e)(2)(A) and (B) of
the HOLA, because the Bank and the Association operate in separate geographic
markets. OTS concludes that approval of the transaction is consistent with
section 10(e)(2)(C) of the HOLA, pertaining to provision of information to OTS,
in light of OTS' past experience with the Applicant, a registered savings and
loan holding company. OTS had determined that HOLA section 10(e)(2)(D) is by its
terms inapplicable to the instant application because there is no foreign
institution involved in the transaction.
OTS has reviewed the managerial and financial resources and future
prospects of the Applicant and the Bank, as well as those of the Association,
the effect of the transaction on the savings associations involved, and the risk
to the SAIF, and has concluded that these factors are consistent with approval.
The proposed acquisition, a minority investment in the Association, will have no
effect on the Association's managerial and financial resources and future
prospects. OTS, based on its examination and other experience with the Applicant
and the Bank, considers both entities to be well-managed. The Bank is "well
capitalized" as that term is defined under the OTS Prompt Corrective Action
regulation. As of June 30, 2004, the Applicant had stockholders' equity, on a
consolidated basis, of $44.4 million, or 8.04 percent of total assets.
In the Application, the Applicant does not propose to merge the
Association into the Bank, so the Bank's capital and earnings will not be
affected. In addition, in connection with the Application, the Applicant will
not directly or indirectly control the Association, and therefore, the
management of the Applicant and the Bank will not expend their time or resources
attempting to improve the Association's profitability.
With respect to the financial resources and future prospects of the
Applicant, the Applicant's holdings of the Association's stock will be only an
investment (as opposed to being part of the operations of the Applicant's
subsidiary thrift). The 4.66 percent of the Association's stock at issue in the
Application is minor in relation to the Applicant's consolidated equity.
With respect to the CRA and the convenience and needs of the community,
the Bank currently has an "Outstanding" CRA rating, and the Association has a
"Satisfactory" CRA rating. The Applicant's proposed retention of the
Association's shares will not affect the operations of either the Bank or the
Association, and the Bank and the Association have an adequate record in
addressing the convenience and needs of their communities. Accordingly, approval
of the Application is consistent with the CRA and with the convenience and needs
approval criterion.
The Applicant acquired 4.66 percent of the Association's outstanding
shares in violation of the Statute. Pursuant to an Amended Share Voting
Stipulation and Undertaking, dated April 22, 2004 (Undertaking), the Applicant
agreed to place the shares in excess of the 5 percent limitation in a trust
administered by an independent trustee, and to instruct the trustee not to vote
ORDER NO. 2004-49
PAGE 3
on any matters to be considered by the Association's shareholders. The
Undertaking, by its terms, expires upon OTS approval of the Application.
OTS is conditioning approval of the Application on the Applicant not
voting the 4.66 percent of the Association's shares that it acquired in
violation of the Statute (Excess Shares) with respect to any acquisition of
control of the Association by the Applicant or any affiliate of the Applicant.
At the time the Applicant acquired the Excess Shares it was seeking to acquire
the Association and merge its operations into the Bank. At that time, at least
one shareholder was actively opposed to such an acquisition, and was purchasing
shares that it intended to vote against the acquisition. If the Applicant had
obeyed the Statute, parties opposed to the acquisition might have purchased some
or all of the Excess Shares. The Applicant's acquisition of the Excess Shares,
in violation of the Statute, ensured that hostile parties did not acquire those
shares. It is impossible to determine the number of shares that would have been
purchased by hostile parties. Therefore, OTS is imposing the condition in order
to ensure that the violation of the Statute does not result in a benefit to the
Applicant, should the Applicant again seek to acquire the Association.
CONCLUSIONS
Based on the foregoing analysis, OTS concludes that the Application
meets the applicable approval criteria, provided that the following condition is
imposed. Accordingly, the Application is hereby approved, provided the Applicant
complies with the following condition:
The Applicant must not vote any shares of the Association's common stock in
excess of 5 percent with respect to any acquisition of control of the
Association by the Applicant or any affiliate of the Applicant.
By order of the Director of the Office of Thrift Supervision, or his
designee,
Effective _________________________________
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Scott M. Albinson
Managing Director
Office of Examinations, Supervision and
Consumer Protection