FEDERAL DEPOSIT INSURANCE CORPORATION

IN RE: Apple Bank for Savings
North Hempstead, New York

Application Pursuant to Section 24 of the Federal Deposit Insurance Act for Consent to Acquire and Retain Stocks of Savings Associations, Savings and Loan Holding Companies, and Bank Holding Companies and for Consent to Engage as Principal Through a Majority- Owned Subsidiary in Investment Activities That May Not Be Permissible for a Subsidiary of a National Bank

ORDER

The Board of Directors ("Board") of the Federal Deposit Insurance Corporation ("FDIC") has fully considered all available facts and information relevant to section 24 of the Federal Deposit Insurance Act, 12 U.S.C. section 1831a, and Part 362 of the FDIC'S Rules and Regulations, relating to the application by Apple Bank for Savings, North Hempstead, New York ("Apple Savings"), for consent to indirectly acquire and retain through a wholly-owned subsidiary the stock of savings associations, savings and loan holding companies, and bank holding companies. These are activities that may not be permissible for a subsidiary of a national bank. Apple Savings also intends to make bank stock investments as permitted by section 362.4(c)(3)(iv)(B) of the FDIC's Rules and Regulations. Under Apple Savings' proposal, its total investment in all these securities would never exceed the lesser of 1 percent of Apple Savings' assets or 15 percent of its Tier 1 capital, with total investment in either the preferred or common category never exceeding 10 percent of its Tier 1 capital. The Board has concluded that the application should be approved, subject to certain conditions.

Accordingly, it is hereby ORDERED, for the reasons set forth in the attached Statement, that the application submitted by Apple Savings for consent to retain and acquire stock of savings associations, savings and loan holding companies, and bank holding companies, through a wholly-owned subsidiary, be and hereby is approved, subject to the following conditions:

1. That the investment in the stock of a savings association, savings and loan holding company, or bank holding company as well as any bank stock permissible under section 362.4(c)(3)(iv)(B) will be held indirectly through a majority-owned subsidiary organized for the purpose of holding such stock;

2. That Apple Savings will not make any additional investment in the stock of a savings and loan holding company at any time Apple Savings does not meet the definition of a "well capitalized" bank pursuant to section 325.103(b)(1) of the FDIC's Rules and Regulations, unless the savings and loan holding company is also a bank holding company or an affiliate of a bank holding company; and

3. That the consent granted herein is based on the facts and circumstances presented or otherwise known to the FDIC in connection with these requests. Apple Savings shall notify the FDIC of any significant change in facts or circumstances. If the facts and circumstances change significantly, the FDIC shall have the right to alter, suspend, or withdraw its approval.

Dated at Washington, D.C., this 11th day of March, 1997.

BY ORDER OF THE BOARD OF DIRECTORS Robert E. Feldman Deputy Executive Secretary

FEDERAL DEPOSIT INSURANCE CORPORATION

IN RE: Apple Bank for Savings
North Hempstead, New York

STATEMENT

Pursuant to the provisions of section 24 of the Federal Deposit Insurance Act, Apple Bank for Savings, North Hempstead, New York ("Apple Savings"), has filed an application with the Federal Deposit Insurance Corporation ("FDIC"). Apple Savings requests the FDIC's consent to acquire and retain indirectly through a wholly-owned subsidiary the preferred and common stock of savings associations, savings and loan holding companies, and bank holding companies

Apple Savings has requested approval of a proposal under which its aggregate investment in the stock of such entities (as well as investments in bank stock pursuant to section 362.4(c)(3)(iv)(B) of the FDIC's Rules and Regulations) will be limited to the lesser of 1 percent of Apple Savings' assets or 15 percent of Apple Savings' Tier 1 capital. Total investment in either the preferred or common category will be limited to 10 percent of its Tier 1 capital.

The activity of making investments in the stock of a savings association, saving and loan holding company, and bank holding company may not be a permissible activity for a national bank or a subsidiary of a national bank. Insured state banks may not engage as principal in an activity prohibited to nationally-chartered banks unless consent has been obtained from the FDIC. Consent may not be granted unless the bank is in compliance with applicable capital standards and the FDIC determines that the activity poses no significant risk to the deposit insurance funds.

Section 235.26 of the New York State Banking Law ("Banking Law") provides for the investment by savings banks in the common and preferred stock of any U. S. corporation, including U. S. banks, trust companies, national banks, and banking corporations up to a limit of 1 percent of the total assets of the savings bank, provided that the investment does not exceed 2 percent of the total issued and outstanding shares of stock of such bank or corporation. Section 235.26(c) of the Banking Law requires the common stock to be listed on a national securities exchange, and the issuer must meet other requirements with respect to its earnings and dividend history. Section 235.31 of the Banking Law, also known as the Leeway Provision, authorizes investments that do not qualify under any other provision, hut limits any single investment to 1 percent of the total assets of the bank and limits the aggregate of such investments to 5 percent of total assets. Section 235.31 may not be utilized to invest in common stock of any commercial bank. Accordingly, Apple Savings' proposal to acquire stock is permissible under section 235.26 of the Banking Law, assuming the issuer of the stock meets the qualifying conditions. Also, Apple Savings may acquire stock under section 235.31 of the Banking Law.

As of December 31, 1996, Apple Savings had total assets of $4.3 billion. Its financial condition and management are regarded as satisfactory. Apple Savings has proposed a set of investment policies in order to manage the portfolio prudently. These investments will be made through Apple Savings' wholly-owned subsidiary.

The purchase of any equity stock entails risks related to the loss of investment, price volatility, and market liquidity. However, where the entities in which Apple Savings seeks to invest are concerned, certain factors lessen these risks.

The activities in which bank holding companies engage are not identical to those of banks, but are closely related to banking. The activities of savings associations are generally similar to, but in some respects narrower than, those of banks, with the exception of a savings association's ability to invest up to 3 percent of its assets in service corporations pursuant to 12 C.F.R.section 545.74(c). These entities are subject to a comprehensive and stringent regulatory structure. As such, they are required to obtain government approval to operate; to maintain regulatory minimum capitalization; are also subject to periodic supervisory examination; and are subject to enforcement jurisdiction.

In similar circumstances, the Board of Directors ("Board") of the FDIC has found that investment through a bank subsidiary in up to 10 percent of the outstanding stock of other insured banks does not pose a significant risk to the deposit insurance funds. A bank's management is likely to be well-suited to evaluating the condition of other banks in which it decides to invest.

However, the activities of savings and loan holding companies may not be similar to those of banks. A savings and loan holding company meeting certain statutory and regulatory criteria is permitted to engage, directly or through its non-thrift subsidiaries, in any activities that do not threaten the safety and soundness of its subsidiary savings associations, including industrial and commercial operations. While savings and loan holding companies are subject to regulatory supervision, Congress has not mandated that they be as stringently controlled as bank holding companies.

Any savings and loan holding company which is also a bank holding company is subject to the activities limitations and regulatory structure applicable to a bank holding company. As such, it may not conduct industrial or commercial operation other wise authorized for as savings and loan holding company.

Stock investment, while it may be somewhat riskier than lending, involves an application of financial analysis, economic assessment, and business judgment similar to lending expertise. The activity, subject to prudent supervision and judgment, may not prove to be unduly risky. The maximum investment, the conservative nature of the investment policy, and the restrictions under state law reduce the risk associated with the investment activity in this instance.

Nevertheless, because investment in the stock of savings and loan holding companies may be of greater risk than other, more traditional bank activities, the FDIC is imposing a condition prohibiting Apple Savings from making any additional investments in the stock of any savings and loan holding company at any time it does not meet the definition of a "well capitalized" bank pursuant to section 325.103(b)(1) of the FDIC's Rules and Regulations, unless the savings and loan holding company is also a bank holding company or an affiliate of a bank holding company.

For these reasons, including the investment limits under Apple Savings' proposal, the Board has concluded that the proposed investments in stocks of savings associations, savings and loan holding companies, and bank holding companies, through a wholly-owned subsidiary, does not pose a significant risk to the Bank Insurance Fund, and therefore, approval of the application, subject to the conditions in the Order, is warranted.

THE BOARD OF DIRECTORS
FEDERAL DEPOSIT INSURANCE CORPORATION