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Northwest Savings Bank

FEDERAL DEPOSIT INSURANCE CORPORATION

IN RE: Northwest Savings Bank Warren, Pennsylvania

Application Pursuant to Section 24 of the Federal Deposit Insurance Act for Consent to Indirectly Engage as Principal Through a Wholly-Owned Subsidiary in Investment Activities Which May Not Be Permissible for a Subsidiary of a National Bank

ORDER

The Board of Directors 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 rules and regulations, 12 C.F.R. section 362.4, relating to an application by Northwest Savings Bank, Warren, Warren County, Pennsylvania ("Northwest"), for consent to indirectly engage as principal through a wholly-owned subsidiary in equity investment activities that may not be permissible for a subsidiary of a national bank, and has concluded 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 Northwest for consent to engage as principal through wholly-owned subsidiaries in equity investment activities that may not be permissible for a subsidiary of a national bank be and the same hereby is approved, subject to the following conditions:

1. That the investment in the unlisted stock of any single bank or bank holding company be limited to the lesser of the amount prescribed by state regulations or 10 percent of Northwest's Tier 1 capital, as defined in Part 325 of the FDIC rules and regulations;

2. That the aggregate investment in unlisted holding company stock, any bank stock authorized under section 362.4(c)(3)(iv)(B), and any "grandfathered" stock under section 362.3(b)(4) be limited to the lesser of the amount prescribed by state regulations or 100 percent of Northwest's Tier 1 capital;

3. That the investment in the unlisted holding company stock, any bank stock authorized under section 362.4 (c) (3) (iv) (B) , and any "grandfathered" stock under section 362.3(b)(4) will be held indirectly through a majority-owned subsidiary organized for the purpose of holding such stock; and

4. That the consent granted herein is based on the facts and circumstances presented or otherwise known to the FDIC in connection with these requests. Northwest 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 9th day of April, 1996.

BY ORDER OF THE BOARD OF DIRECTORS


FEDERAL DEPOSIT INSURANCE CORPORATION

IN RE: Northwest Savings Bank Warren, Pennsylvania

Application Pursuant to Section 24 of the Federal Deposit Insurance Act for Consent to Indirectly Engage as Principal Through a Wholly-Owned Subsidiary in Investment Activities Which May Not Be Permissible for a Subsidiary of a National Bank

STATEMENT

Pursuant to the provisions of section 24 of the Federal Deposit Insurance ("FDI") Act, Northwest Savings Bank, Warren, Warren County, Pennsylvania ("Northwest"), has filed an application with the Federal Deposit Insurance Corporation ("FDIC"). The applicant requests the FDIC's consent to continue to engage in the acquisition and retention of unlisted bank holding company stocks indirectly through one or more wholly-owned subsidiaries.

The activity of making investments in listed and unlisted bank stock and bank holding company stock may not be a permissible activity for a national bank or a subsidiary of a national bank. State-chartered FDIC-insured 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 fund.

Pennsylvania statutes empower state savings banks to, directly or indirectly, invest in the shares of preferred stock, guaranteed stock or common stock of a corporation or similar entity existing under the laws of the United States, any state or the District of Columbia, as long as the investments are limited, in the aggregate, to the lesser of 7.5 percent of the savings bank's total assets, or 75 percent of the savings bank's capital. In addition, the statute prohibits investments in excess of 5 percent of the outstanding shares of the issuer, and the cost of the shares of any particular issuer may not exceed 0.2 percent of the savings bank's total assets. Northwest has received approval from the Department of Banking for the Commonwealth of Pennsylvania to invest in accordance with these restrictions in the common stock of certain unlisted bank holding companies. The Department of Banking for the Commonwealth of Pennsylvania requires that each purchase of stock be submitted for individual approval.

The purchase of any equity stock entails risks related to the loss of investment, price volatility, and lack of market liquidity. However, intrinsic to the corporate charter of a bank holding company are factors that lessen investment risk. Bank holding companies are subject to a comprehensive and stringent regulatory structure. As such, they are required to obtain government approval to operate, and to maintain regulatory minimum capitalization. They are also subject to periodic supervisory examination and are subject to enforcement jurisdiction.

The primary, and frequently only, asset of a single or multiple bank holding company is the subsidiary bank or banks. In such cases the risk inherent from investing in the bank holding company stock is directly reliant on the financial condition of the subsidiary bank. However, bank holding companies may be invested in entities other than banks, which are authorized to engage in activities not permissible for a bank. The potential for additional risk from those other activities warrants the limitation of the bank's investment in any single unlisted bank holding company stock to 10 percent of Tier 1 capital (or any lesser amount under state law) to preclude a concentration represented by the investment in relation to Northwest's Tier 1 capital. Northwest has also agreed to apply this limitation to its investment in bank stock under section 362.4(c) (3) (iv) (B).

Liquidity risk, in this instance the ability to convert the stock to cash, may be greater for an unlisted bank holding company stock than for a listed holding company stock since an unlisted stock presumably does not have the benefit of a readily accessible, active and organized market in which to sell the unlisted stock. The risk presented by the absence of-an established market to liquidate such stock can be mitigated by limiting to a nominal amount the investment in any one unlisted bank holding company and for all unlisted bank holding companies in the aggregate.

As of September 30, 1995, Northwest had total assets of $1.6 billion. Its financial condition and management are regarded as satisfactory. Northwest has committed to restrict its investments in the stock of any unlisted bank holding company to the investment limits of applicable state law. Pursuant to he applicable law, the investment in any particular bank holding company is limited to no more 0.2 percent of Northwest's assets and provides acceptable diversification. Northwest has also agreed that its aggregate investment in unlisted holding company stock, any unlisted bank stock authorized under section 362.4(c) (3) (iv) (B), and any "grandfathered" stock under section 362.3(b) (4) will not exceed the lesser of that permitted by state law or 100 percent of its Tier 1 capital, and that all such stock will be held in a separate subsidiary.

For the reasons outlined above, including the imposition of conditions, the Board of Directors has concluded that Northwest's indirect investments in unlisted bank holding company stocks does not, under the terms and arrangements proposed by Northwest, pose a significant risk to the Bank Insurance Fund, and therefore approval of the application is warranted.

THE BOARD OF DIRECTORS
FEDERAL DEPOSIT INSURANCE CORPORATION



Last Updated 03/24/2011 Legal@fdic.gov