## Facts

- Chase Manhattan Bank, a national bank, applied to the Comptroller of the Currency for permission to open a new branch in Locust Valley, New York.
- Hempstead Bank, a New York state-chartered commercial bank, and another local bank protested the application.
- The proposed service area had about 10,150 residents (about 2,200 families), relatively high average income, and limited anticipated residential growth.
- Existing institutions already served the same community, including Hempstead Bank, Nassau Trust, and a savings bank branch.
- The Comptroller approved the application based largely on regional recommendations, citing increased competition, expanded services, and an expectation that the branch could be supported without adverse local effects.
- Federal branching authority for national banks under 12 U.S.C. § 36(c) permits branching only to the extent state law would authorize branching by state banks.
- New York Banking Law § 29 requires an investigation and a finding that “public convenience and advantage” will be promoted before a branch is authorized.
- Hempstead sued to set aside the approval as arbitrary and capricious; the district court upheld the Comptroller’s decision on summary judgment.

## Issues

1. Whether the Comptroller’s approval complied with 12 U.S.C. § 36(c) by adequately considering and applying New York’s “public convenience and advantage” requirement for branch authorization.
2. Whether the Comptroller’s findings and explanation were sufficiently reasoned and supported by the administrative record to permit judicial review under arbitrary-and-capricious standards.
3. Whether the district court erred in granting summary judgment upholding the approval.

## Decision

- The Second Circuit vacated the district court’s judgment.
- The court held there was a substantial likelihood the Comptroller failed to consider and apply the relevant New York branching standard incorporated into federal law.
- The court remanded with instructions that the matter be returned to the Comptroller for further findings.
- The court did not decide that the branch approval was invalid on the merits; it required a decision grounded in the proper legal standard with adequate findings.

## Legal Principles

- Under 12 U.S.C. § 36(c), the Comptroller may approve a national bank branch only if branching is authorized to state banks by the host state’s law; the Comptroller must apply the state’s substantive branching criteria.
- New York’s branching statute requires an investigation and a determination that establishing the branch will promote “public convenience and advantage.”
- Agency action must reflect reasoned decisionmaking: findings must disclose the determinative basis for the decision and be sufficient to allow meaningful judicial review.
- Conclusory statements (e.g., competition, affluence, service expansion) are inadequate if they do not demonstrate application of the controlling state-law standard.
- When an agency applies an incorrect legal standard or fails to make reviewable findings, the proper remedy is typically vacatur and remand for additional findings rather than a court-imposed substantive outcome.

## Conclusion

The Second Circuit required the Comptroller to make reviewable findings demonstrating application of New York’s “public convenience and advantage” standard, vacating the judgment that upheld the approval and remanding for further administrative findings under the correct legal framework.


Hempstead Bank v. Smith, 540 F.2d 57 (2d Cir. 1976)