Decisions on Bank Applications
RidgeStone Bank
FEDERAL DEPOSIT INSURANCE CORPORATION
IN RE: RidgeStone Bank
Brookfield, Wisconsin
Application Pursuant to Section 24 of the Federal Deposit Insurance Act for Consent to Indirectly 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 undersigned, acting under delegated authority, 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 RidgeStone Bank, Brookfield, Wisconsin ("the Bank"), for consent to indirectly engage in activities through a proposed, wholly-owned subsidiary, RidgeStone Real Estate Divestitures, Inc., a real estate investment company. This activity may not be permissible for a subsidiary of a national bank. The Bank seeks permission to continue this activity until all lots are sold. This investment is permissible under state of Wisconsin laws. The Division of Supervision has approved the application, 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 engage in activities through the ownership of RidgeStone Real Estate Divestitures, Incorporated, be and hereby is approved, subject to the following conditions:
(1) The Bank and the subsidiary take the necessary actions to operate in a manner so as to ensure a separate corporate existence to include maintenance of separate accounting and business records;
(2) The Bank's investment in the subsidiary be limited to 2% of Tier 1 capital and the Bank's total investment does not include any extensions of credit from the bank to the subsidiary;
(3) The investment in subsidiary will be excluded from the bank's Tier 1 capital in accordance with Section 362.4(e);
(4) The subsidiary must meet the requirements of Section 362.4(c)(2), except for those exempted by Section 362.4(b)(5)(i);
(5) The subsidiary may carry only one model home at a time;
(6) The subsidiary will carry adequate insurance and will require the builder to carry adequate insurance;
(7) The activity of building and holding model homes will be discontinued once the last lot is sold;
(8) The bank must provide quarterly reports to the Regional Office detailing the activity of the Subsidiary; and
(9) 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 4th day of October, 2000.
BY ORDER OF THE ASSOCIATE DIRECTOR OF THE DIVISION OF SUPERVISION
___________________________________
John M. Lane
Associate Director
FEDERAL DEPOSIT INSURANCE CORPORATION
IN RE: RidgeStone Bank
Brookfield, Wisconsin
Application Pursuant to Section 24 of the Federal Deposit Insurance Act for Consent to Indirectly 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, the RidgeStone Bank of Brookfield, Wisconsin ("the Bank"), has filed an application with the Federal Deposit Insurance Corporation ("FDIC"). The Bank requests the FDIC's consent to indirectly engage in activities through a proposed, wholly-owned subsidiary ("subsidiary"), to be named RidgeStone Real Estate Divestitures, Incorporated. The bank plans to establish the subsidiary by contributing 2% of Tier 1 capital ($120,000 as of June 30, 2000), to the subsidiary in exchange for 100% of the subsidiary's stock. RidgeStone Financial Services, Inc., the bank's parent holding company, will lend $110,000 to the subsidiary. The subsidiary will use the funds to purchase the model home from the bank. If, and when, the existing model home is purchased by a member of the public, the funds from that sale will be used to buy an additional lot from the bank and to build another model home.
The bank's application estimated the entire subdivision will be sold out by the end of the second quarter of 2001. Management's track record of reducing the bank's inventory from 24 to 10 lots and one model home, without suffering any notable loss, provides a basis to believe that the subsidiary will be operated successfully, and will not have an adverse effect on the bank. Other than as possible purchasers of lots or model homes, no insiders will be personally involved in the subsidiary's activities. The bank has developed a policy for itself and the subsidiary requiring full disclosure to, and approval of, the respective board of directors for any purchase of a lot or home by an insider.
The bank does not need approval from the Wisconsin Department of Financial Institutions (DFI) to build model homes, but does need the DFI's permission to establish a subsidiary. The bank has applied for such permission and the DFI is holding the application until the FDIC takes action on this application.
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.
Based on a careful review of all available facts and information, including the stated intent of the Bank, the Division of Supervision has concluded that the proposed investments, through a wholly-owned subsidiary, do 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 ASSOCIATE DIRECTOR OF THE DIVISION OF SUPERVISION
FEDERAL DEPOSIT INSURANCE CORPORATION