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Abington Savings Bank


RE: Abington Savings Bank Abington, Massachusetts

Application Pursuant to Section 24(d) of the Federal Deposit Insurance Act to Indirectly Continue Activity That May Not Be Permissible for a National Bank


Pursuant to the provisions of section 24 of the Federal Deposit Insurance Act, an application has been filed with the Federal Deposit Insurance Corporation by Abington Savings Bank, Abington, Massachusetts ("the Bank"). The Bank requests the FDIC's consent for its wholly-owned Subsidiary, ABBK Corporation ("the Subsidiary"), to retain its investment in a low-income housing project.

In general, real estate investment may not be a permissible activity for a national bank or a subsidiary of a national bank. Subsidiaries of state chartered, FDIC-insured banks may not engage as principal in an activity prohibited to subsidiaries of nationally chartered banks unless they obtain consent 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. The Massachusetts General Code permits holding of limited volumes of low-income "leeway" real estate investments, and the subject investment qualifies for such state exemption.

Whitney Carriage Associates Limited Partnership ("Whitney") is a low-income housing project purchased in March 1987. Whitney owns and operates a residential rental and rehabilitation project of 175 units in Leominister, Massachusetts. The Subsidiary is a 2.5% limited partner in Whitney, and there are no current plans to market the property. The project appears to meet the general definition of a qualified housing project, and as such would not necessitate an application if the asset were held directly by the Bank. To limit the Bank's liability, and also to maximize tax credit benefits, the Bank has selected to own this asset through its wholly-owned subsidiary. Due to limited marketability, any attempt to divest of the property would likely result in some loss to the Bank.

The Bank, which meets the definition of "well capitalized" within the meaning of Part 325 of the FDIC's Rules and Regulations, is in compliance with applicable capital standards. The book value of the real estate investment is negligible, representing less than 1% of the bank's Tier 1 capital, and the Bank would continue to be "well capitalized" in the event the entire investment were deducted. In connection with this application, the FDIC has also taken into consideration the favorable financial and managerial resources and future earnings prospects of the institution, along with the fact that the Subsidiary has held this ownership interest for several years with no adverse effect to the Bank.

Having found that the activity in question involves the retention of an investment that did not require FDIC review or consent at inception, but does so now because of statutory revision; that the property is now and is expected in the future to represent a negligible portion of the Bank's capital; that the Bank's financial condition and management are satisfactory; that the State authority authorizes the activity; and that the Bank is in compliance with applicable capital standards -- the FDIC concludes that the retention of the real estate investment does not pose a significant risk to the Bank Insurance Fund, and therefore may be and hereby is approved subject to the following restrictions.

The Bank's indirect real estate investment activities in connection with the property that is the subject of this application shall be limited to a maximum investment of 1% of the Bank's Tier 1 capital. The Bank shall continue to meet applicable capital standards. The Subsidiary shall take necessary actions to operate in a manner so as to ensure a separate corporate existence in order to insulate the Bank from potential liabilities. Any contract for services between the Bank and the Subsidiary shall be on terms and conditions comparable to those available from or to independent entities. The Bank shall not permit insider involvement in the real estate investment activity, without the prior approval of the FDIC. In addition, the transactions between the Bank and the Subsidiary will be subject to the limitations and restrictions of Section 23A and 23B of the Federal Reserve Act, 12 U.S.C. §371c and §371c-1, to the same extent as through the Subsidiary was an affiliate of the Bank. The Bank shall notify the FDIC of any significant change in facts or circumstances, and the FDIC shall have the right to alter, suspend, or withdraw its approval upon receiving such notification. As prudential limitations and restrictions addressing the risks posed by real estate investment activities, will be imposed, the Bank's real estate investment activities will not pose significant risks to the fund or present material safety or soundness concerns.

Finally, the FDIC notes that the foregoing approval is unique to this application, that it was significantly influenced by the Bank's acquisition of the investment interest prior to the effective date of Section 24(d), and that its view of de novo acquisition of such property might well be different.