FEDERAL DEPOSIT INSURANCE CORPORATION

IN RE: PFC Bank Ford City, Pennsylvania

Notice and Application Pursuant to Section 24 of the Federal Deposit Insurance Act for Consent to Retain and Acquire Listed Stocks and 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 a notice and application by PFC Bank, Ford City, Pennsylvania ("PFC") , for consent to retain and acquire listed stocks, and for consent to engage as principal through a wholly-owned subsidiary in investments in the stock of nonlisted bank holding companies. These are activities that may not be permissible for a subsidiary of a national bank. PFC has requested approval of a proposal under which PFC's investment in the stock of any single bank or holding company will be limited to the lesser of the amount prescribed by state law or 10 percent of PFC's Tier 1 capital, and PFC's aggregate investment in the stock of banks and bank holding companies (including investments pursuant to the authority of section 362.4(c)(3)(iv)(B) of the FDIC's Rules and Regulations) will be limited to the lesser of the amount prescribed by state law or 100 percent of PFC's Tier 1 capital. The Board has concluded the notice and application should be approved subject to certain conditions.

Accordingly, it is hereby ORDERED, for the reasons set forth in the attached Statement, that the notice and application submitted by PFC is approved subject to the following conditions:

1. That the investment in the nonlisted holding company stock, as well as any bank stock permissible under section 362.4(c)(3)(iv)(B) without prior written approval by the FDIC, will be held indirectly through a majority-owned subsidiary organized for the purpose of holding such stock; and

2. That the consent granted herein is based on the facts and circumstances presented or otherwise known to the FDIC in connection with these requests. PFC 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 26th day of November, 1996.

BY ORDER OF THE BOARD OF DIRECTORS

Jerry L. Langley
Executive Secretary

FEDERAL DEPOSIT INSURANCE CORPORATION

IN RE: PFC Bank Ford City, Pennsylvania

Notice and Application Pursuant to Section 24 of the Federal Deposit Insurance Act for Consent to Retain and Acquire Listed Stocks and 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

STATEMENT

Pursuant to the provisions of section 24 of the Federal Deposit Insurance Act, PFC Bank, Pennsylvania ("PFC") , has filed a notice and application with the Federal Deposit Insurance Corporation ("FDIC"). PFC requests the FDIC's consent to continue to retain and acquire listed stocks of insured banks and bank holding companies. PFC also requests the FDIC's consent to continue to retain and acquire nonlisted bank holding company stocks indirectly through a wholly-owned subsidiary. PFC has requested approval of a proposal under which PFC's investment in the stock of any single bank or holding company will be limited to the lesser of the amount prescribed by state law or 10 percent of PFC's Tier 1 capital, and PFC's aggregate investment in the stock of banks and bank holding companies (including investments pursuant to the authority of section 362.4(c)(3)(iv)(B) of the FDIC's Rules and Regulations) will be limited to the lesser of the amount prescribed by state law or 100 percent of PFC's Tier 1 capital.

The activity of making investments in insured bank and bank holding company stocks may not be a permissible activity for a national bank or a subsidiary of a national bank. Insured state banks that were authorized under state law as of September 30, 1991, to invest in listed stock, and that actually held stock pursuant to such authority between September 30, 1990 and November 26, 1991, may continue to retain or acquire listed stock up to 100 percent of Tier 1 capital, provided the FDIC determines such investment does not pose a significant risk of loss to the appropriate deposit insurance fund. Otherwise, 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 fund.

Pennsylvania State law, pursuant to section 311(d) of the state Banking Code of 1965, provides that a state-chartered bank may invest in the "shares of stock of a bank, a bank and trust company subject to this act, a national bank located in Pennsylvania, or a Pennsylvania bank holding company - to the extent of ten percent of the sum of the par value of the issued and outstanding shares of any such issuer, and for purposes of this limitation, the shares owned by all affiliates of a Pennsylvania bank holding company shall be aggregated to determine whether the ten percent limitation is reached." Section 311(d) further provides that a subsidiary of a bank may engage in any activity and make any investments permissible for a bank. PFC has received the State's conditional approval to make investments in accordance with these statutes.

As of June 30, 1996, PFC had total assets of $193 million. Its financial condition and management are regarded as satisfactory. PFC has proposed to restrict its investment in the stock of any one issuer to the lesser of 10 percent of Tier 1 capital or the amount permitted by state law. PFC has also proposed to restrict its aggregate investment in all listed and nonlisted bank and bank holding company stock to the lesser of 100 percent of Tier 1 capital or the amount permitted by state law. These investment limits will cover and include PFC's holdings of nonlisted bank stock through a wholly-owned subsidiary, which is permissible under section 362.4(c)(3)(iv)(B) of the FDIC's Rules and Regulations without the FDIC's prior consent. PFC will hold its nonlisted bank holding company stock in the same subsidiary.

The purchase of any equity stock entails risks related to the loss of investment, price volatility, and market liquidity. Based upon the Board's review of PFC's notice materials concerning retention and acquisition of listed stock, and in accordance with sections 362.3(b)(4) and 326.3(d) of the FDIC's Rules and Regulations, PFC's retention and acquisition of the listed stocks of banks and bank holding companies does not pose any significant risk to the deposit insurance fund.

In the case of nonlisted bank holding company stock, there are several factors intrinsic to a bank holding company that lessens the risk of holding its stock. Bank holding companies are subject to a comprehensive and stringent regulatory structure. As such, they are required to obtain government approval to operate and are required 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 its subsidiary banks. In such cases the risk inherent in investing in the bank holding company stock is directly related to the financial condition of the subsidiary bank. However, bank holding companies may invest 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 is in this case mitigated by PFC's proposal to limit the bank's investment in any single nonlisted 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 PFC's Tier I capital.

Liquidity risk, in this instance the ability to convert the stock to cash, may be greater for a nonlisted bank holding company stock than for a listed holding company stock since a nonlisted stock presumably does not have the benefit of a readily accessible, active and organized market in which to sell the nonlisted stock. The risk presented by the absence of an established market to liquidate such stock is in this case mitigated by PFC's proposal to limit the amount invested in any one nonlisted bank holding company and for all nonlisted bank holding companies in the aggregate.

For these reasons, including the investment limits under PFC's proposal, the Board has concluded that the proposed investments in nonlisted bank holding company stocks 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