J. Paul Compton, Esq.
Bradley Arant Rose & White LLP
420 North 20th Street, Suite 2000
Birmingham, Alabama 35203-3208

Dear Mr. Compton:

This is in response to your recent letters requesting, on behalf of Financial Investors of the South, Inc., Birmingham, Alabama ("Financial"), an opinion on whether certain activities that Financial proposes to conduct would be within the scope of community development activities as defined in section 225.28(b)(12) of Regulation Y (12 C.F.R. 225.28(b)(12)). Financial proposes to establish one or more wholly owned limited liability companies (the "Bank Companies") that will engage in the business of hiring, training, and leasing out the services of persons (the "Employees") who are members of "targeted groups," as defined in section 51(d) of the Internal Revenue Code of 1986, as amended (the "Code").¹   Individuals belonging to these "targeted groups" generally are low- to moderate-income persons, persons receiving governmental welfare benefits, or persons residing in a low- to moderate-income community. The Bank Companies will assist the Employees in obtaining general equivalency diplomas, general business skills, and functional skills in the clerical, receptionist, food service, janitorial, grounds maintenance, and building maintenance areas; and will lease the Employees' services primarily to nonprofit, educational, and municipal institutions. Financial also proposes to assist other, non-affiliated entities in establishing limited liability companies similar to the Bank Companies and to establish a wholly owned limited liability company ("Management Company") to serve as the manager for such non-affiliated companies.

The Board has determined, in section 225.28(b)(12) of Regulation Y, that it is permissible for bank holding companies to engage in "[m]aking equity and debt investments in corporations or projects designed primarily to promote community welfare, such as the economic rehabilitation and development of low-income areas by providing housing, services, or jobs for residents" and "[p]roviding advisory and related services for programs designed primarily to promote community welfare."²   The Board's interpretation relating to community development investments encourages bank holding companies to "provide new and creative approaches to the promotion of employment opportunities for low-income persons" and authorizes holding companies to invest in "projects designed explicitly to create improved job opportunities for low- or moderate-income groups."³   The interpretation further authorizes bank holding companies to "[i]nvest in, provide financing to, develop, and otherwise assist job training or placement facilities or programs designed primarily for low- and moderate-income persons."⁴

You have stated that the proposed Bank Companies are intended and designed to promote community welfare by providing job training services and employment opportunities for certain disadvantaged classes of people. In addition, you have stated that the proposed Management Company would provide advisory and administrative services to other, non-affiliated companies engaging in the same community development activities as the Bank Companies. In light of all the facts of record, we believe that the proposed activities described in this letter are within the scope of permissible community development activities under section 225.28(b)(12) of Regulation Y and the Board's interpretation relating to community development activities.

This opinion is limited solely to the proposed activities described above, and does not address the treatment of any other activities or authorize Financial, the Bank Companies, or the Management Company to engage in any other activities. Any material change in the proposed activities described above may require this opinion to be reconsidered and should be communicated immediately to Board staff.

Sincerely,

(Signed) Scott G. Alvarez

Scott G. Alvarez

cc: Federal Reserve Bank of Atlanta

1. Financial has indicated that the Bank Companies will generate federal work opportunity income tax credits under sections 38 and 51 of the Code. Return to text

2. 12 C.F.R. 225.28(b)(12).Return to text

3. 12 C.F.R. 225.127.Return to text

4. Id.Return to text