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Community State Bank

FEDERAL DEPOSIT INSURANCE CORPORATION

In Re: Community State Bank Austin, Travis County, Texas

Application Pursuant to Section 24 of the Federal Deposit Insurance Act for Consent to Engage through a Wholly-Owned Subsidiary in a Joint Venture That is Not Permissible for a Subsidiary of a National Bank

ORDER

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 an application by Community State Bank, Austin, Texas (Bank), for consent to engage through a wholly-owned subsidiary, Cen-Tex Cemetery Investment Corporation, (Subsidiary), in an activity that is not permissible for the subsidiary of a national bank. The FDIC, having found that the Bank is in compliance with applicable capital standards and that the activities do not appear to pose a significant risk, with certain conditions imposed, to the applicable deposit insurance fund, has concluded the application should be approved subject to certain conditions.

Accordingly, it is hereby ORDERED, that the application submitted by the Bank for consent to engage through the Subsidiary in an activity that is not permissible for a subsidiary of a national bank be, and the same is hereby approved, subject to the following conditions:

1. That investment be held indirectly through a single, wholly-owned subsidiary organized for the purpose of holding such investment;

2. That the Bank shall submit to the Regional Director the Articles of Incorporation for the wholly-owned subsidiary as filed with and approved by the State of Texas;

3. The Bank shall take the necessary actions to establish, and the Subsidiary shall operate in a manner so as to ensure, a separate corporate existence as a wholly-owned subsidiary which:

(a) is adequately capitalized;

(b) is physically separate and distinct in its operations from the operations of the Bank, maintains separate accounting and other corporate records, observes separate formalities such as separate board of directors' meetings;

(c) maintains a board of directors with one or more independent, knowledgeable directors who are neither directors, officers, nor employees of the Bank or its parent holding company(s) and who possess management expertise capable of conducting activities in a safe and sound manner;

(d) conducts business pursuant to separate policies and procedures designed to inform customers and prospective customers of the real estate investment subsidiary that the real estate investment subsidiary is a separate organization from the Bank, including the placement of specific language on any debt instrument or contract with a third party disclosing that the Bank itself is not responsible for payment or performance;

4. That the Bank and Subsidiary shall conduct operations within the parameters and limit the activities to those established in the Joint Venture Agreement and Mausoleum Development and Sales Agreement and Assignment of Installment Contracts, and provide the Regional Director 60 days prior notification of any proposed major deviation or material change from the proposed activities and responsibilities;

5. That the activities of the Subsidiary are limited to those disclosed in the application;

6. That the Bank shall obtain the prior written consent of the Regional Director of the FDIC's Division of Supervision and Consumer Protection prior to making any additional investment in the Subsidiary and shall obtain any applicable approval of the Banking Commissioner for the State of Texas;

7. That the Bank shall maintain a "Well Capitalized" status pursuant to Part 325 of the FDIC's Rules and Regulations after deducting from its Tier 1 capital the appropriate capital charge for equity investments in nonfinancial companies (as defined in Appendix A to Part 325), as reflected in the table shown in Section II.B. of Appendix A to Part 325, for its investment in the wholly-owned subsidiary;

8. That the Bank shall, on a quarterly basis, perform the capital adequacy calculations described in paragraph 7 for the purpose of ascertaining its capital level, and that, in the event the Bank falls below the level required by paragraph 7 for a "well capitalized" institution pursuant to Part 325 of the FDIC's Rules and Regulations, the Bank shall notify the FDIC within 15 days and shall submit to the FDIC an acceptable plan for restoring capital to a level required for a "well capitalized" institution;

9. That neither the Bank nor the wholly-owned 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 wholly-owned subsidiary's activities unless the transactions are on terms and conditions that are substantially the same as those prevailing at the time for comparable transactions with persons not affiliated with the Bank;

10. That neither the Bank nor the Subsidiary shall require a customer to either buy any product or use any service from the other as a condition of entering into a transaction; and

11. The consent granted herein is based on the facts and circumstances presented or otherwise known to the FDIC in connection with this request. The Bank 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 27th day of June, 2005.

FEDERAL DEPOSIT INSURANCE CORPORATION

_____________________________________
Lisa K. Roy
Associate Director
Division of Supervision and Consumer Protection


FEDERAL DEPOSIT INSURANCE CORPORATION

In Re: Community State Bank Austin, Travis County, Texas

Application Pursuant to Section 24 of the Federal Deposit Insurance Act for Consent to Engage through a Wholly-Owned Subsidiary in a Joint Venture That is Not Permissible for a Subsidiary of a National Bank

STATEMENT

Pursuant to the provisions of Section 24 of the Federal Deposit Insurance Act, Community State Bank, Austin, Travis County, Texas (the Bank), has filed an application with the Federal Deposit Insurance Corporation (FDIC) seeking permission to indirectly engage in an activity not permissible for a national bank through Cen-Tex Cemetery Investment Corporation, a wholly-owned subsidiary (Subsidiary).

The Bank is seeking permission to form a joint venture, OCMP/CTCIC Joint Venture, between the Subsidiary and Onion Creek Memorial Park, Inc., to construct two mausoleums, sell crypts and niches, and service consumer installment contracts. This proposal is an attempt to work out of a troubled loan relationship. This activity does not appear to be permissible for a subsidiary of a national bank and thus requires an application pursuant to Section 24 of the Federal Deposit Insurance Act (FDI Act) and Section 362.4(b) of the FDIC's Rules and Regulations.

State of Texas law allows the Bank and Subsidiary to conduct this activity to avoid or minimize a loss on a loan or investment previously made in good faith.

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 fund.

Based on a careful review of all available facts and information, the Division of Supervision and Consumer Protection has concluded that the proposed activity, conducted through a wholly-owned subsidiary and in accordance with certain prescribed conditions, 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 AND CONSUMER PROTECTION
FEDERAL DEPOSIT INSURANCE CORPORATION



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