Decisions on Bank Applications
Cottonport Bank
FEDERAL DEPOSIT INSURANCE CORPORATION
In Re: Cottonport Bank Cottonport, Avoyelles Parish, Louisiana
Application Pursuant to Section 24 of the Federal Deposit Insurance Act for Consent to Engage as Principal through a Wholly-Owned Subsidiary in Real Estate Investment Activities that May Not Be 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 Cottonport Bank, Cottonport, Louisiana (Bank), for consent to indirectly engage as principal through The Cottonport Real Estate Properties, L.L.C. (Subsidiary), a wholly-owned subsidiary, in real estate investment activities that may not be permissible for a 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, for the reasons set forth in the attached Statement, that the application submitted by the Bank for consent to indirectly engage as principal through the Subsidiary in activities that may not be 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 Louisiana;
3. That the Bank and Subsidiary 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 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 activities of the Subsidiary shall be limited to holding real estate and mineral rights acquired for debts previously contracted;
5. That any future acquisitions of mineral rights are limited to assets acquired for debts previously contracted;
6. 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 reflected in the table shown in Section II.B. of Appendix A to Part 325, for its investment in the Subsidiary;
7. That the exploration of mineral interests or the extraction of minerals, including any related leasing activity, is a separate activity not covered by this approval, as such, the Bank must submit a separate application and obtain separate FDIC approval prior to undertaking such activities;
8. 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;
9. 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
10. That 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 20th 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: Cottonport Bank Cottonport, Avoyelles Parish, Louisiana
Application Pursuant to Section 24 of the Federal Deposit Insurance Act for Consent to Engage as Principal through a Wholly-Owned Subsidiary in Real Estate 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, Cottonport Bank, Cottonport, Avoyelles Parish, Louisiana (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 The Cottonport Real Estate Properties, L.L.C., a wholly-owned subsidiary (Subsidiary).
The Bank is seeking permission to continue to hold through the Subsidiary, 41 mineral interests that were retained from the sale of real estate acquired for debts previously contracted. 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 Louisiana law allows mineral interests to be held if the interests are written down to a nominal value, if the Bank does not operate the interests as an ongoing business, and if the interest are held in a subsidiary. The Bank has written down each of these investments to one dollar in compliance with State law, none of the interests is leased or producing, and the Bank will transfer the interests to the Subsidiary.
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, 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