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People's Bank

FEDERAL DEPOSIT INSURANCE CORPORATION

IN RE: People's Bank Bridgeport, Connecticut

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 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. 1831a, and Part 362 of the FDIC's Rules and Regulations, relating to the application by People's Bank, Bridgeport, Connecticut (the Bank), for consent to indirectly invest through a wholly-owned subsidiary in the stock of a bank holding company that is not listed on national securities exchanges. This is an activity that may not be permissible for a subsidiary of a national bank. The Bank seeks permission to invest, through its wholly owned subsidiary, Glamis Investment Corporation (Subsidiary), up to $250,000 in the shares of common stock of Urban Financial Group, Inc. (UFG), a Delaware incorporated bank holding company. UFG was formed for the purpose of owning all of the capital stock of The Community's Bank, a proposed new state-chartered bank in organization. The Bank's proposed investment is authorized by the Banking Law of Connecticut. The FDIC 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 the Bank for consent to invest in the stock of UFG, through a wholly-owned Subsidiary, be and hereby is approved, subject to the following conditions:

(1) That the investment in the stock be held indirectly through a single, wholly-owned subsidiary;

(2) That neither the Bank nor the Subsidiary may enter into any transaction with the Bank's executive officers, directors, principal shareholders, or related interests of such persons which relate to the Subsidiary's activities unless the transactions are on terms and conditions that are substantially the same as those prevailing at the at the time for comparable transactions with persons not affiliated with the Bank; and

(3) That in the event the facts and circumstances presented or otherwise known to the FDIC in connection with this request change significantly, the FDIC retains the ability to alter, suspend, or withdraw its approval.

Dated at Washington, D.C., this 20th day of February, 2001.

FEDERAL DEPOSIT INSURANCE CORPORATION
John M. Lane
Associate Director
Division of Supervision


FEDERAL DEPOSIT INSURANCE CORPORATION

IN RE: People's Bank Bridgeport, Connecticut 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 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, People's Bank, Bridgeport, Connecticut (the Bank), has filed an application with the Federal Deposit Insurance Corporation (FDIC). The Bank requests the FDIC's consent to invest indirectly through a wholly owned subsidiary, Glamis Investment Corporation (Subsidiary), in shares of common stock of a bank holding company that is not listed on a national securities exchange. The indirect investment will be in an amount of not more than $250,000 in shares of common stock of Urban Financial Group, Inc. (UFG), a Delaware incorporated bank holding company. UFG was formed for the purpose of owning all of the capital stock of The Community's Bank, a proposed new state-chartered bank in organization. The Bank's investment represents less than one percent of its Tier 1 Capital and approximately four percent of the total capitalization of UFG.

The activity of making investments in the stock of bank holding companies not listed on a national securities exchange may not be a permissible activity for a national bank or a subsidiary of a national bank. Neither insured state banks nor their subsidiaries may engage as principal in an activity prohibited to national 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.

Connecticut General Statutes, Section 36a-276(b), states that banks may purchase or hold equity securities provided: (1) that the total amount of equity securities of any one issuer may not exceed, at any time, 25 percent of its total equity capital and reserves for loan and lease losses; and (2) that the total amount of any equity securities and any equity mutual funds purchased and held by a Connecticut bank, or for a Connecticut bank's account pursuant to this subsection may not exceed, at any time, 25 percent of its assets. The Bank's investment will be in compliance with the Connecticut Statutes.

The purchase of any equity stock entails risks related to the loss of investment and price volatility. However, certain factors may lessen these risks.

As of September 30, 2000, the Bank had total assets of $11 billion. Its financial condition, future earnings prospects, and management are regarded as strong. The Bank has a set of investment guidelines to manage prudently the investment through its Subsidiary. The Bank meets the definition of "well-capitalized" within the meaning of Part 325 of the FDIC's Rules and Regulations.

Equity investing may be somewhat riskier than lending, but it requires the application of financial analysis, economic assessment, and business judgment similar to that required for lending. Subject to prudent supervision and judgment, investing in equity securities may not be unduly risky. The Bank has successfully demonstrated its ability to manage its investment in other equities, as well as its overall investment portfolio. The Bank's investment is small at approximately 0.03 percent of Tier 1 Capital. The Bank's application is limited to its investment in the stock of UFG, with no further purchases of UFG stock or other bank holding company stock contemplated.

Management of the Bank has indicated that there will be no insider involvement with the bank holding company. However, the FDIC is imposing a condition requiring that for any transactions of the Bank and the Subsidiary entered into with the Bank's executive officers, directors, principal shareholders, or related interests of such persons which relate to the Subsidiary, the terms and conditions of such transactions must be substantially the same as those prevailing at the time for comparable transactions with persons not affiliated with the Bank.

Based on a careful review of all available facts and information, including the stated intent of the Bank, the FDIC has concluded that the proposed investment through its Subsidiary in the common stock of LTFG 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.

ASSOCIATE DIRECTOR
DIVISION OF SUPERVISION
FEDERAL DEPOSIT INSURANCE CORPORATION



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