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Federal Deposit
Insurance Corporation

Each depositor insured to at least $250,000 per insured bank

Decisions on Bank Applications

Cape Cod Cooperative Bank

FEDERAL DEPOSIT INSURANCE CORPORATION

RE: Cape Cod Cooperative Bank Yarmouth Port, Massachusetts

Application Pursuant to Section 24(d) of the Federal Deposit Insurance Act For Consent to Indirectly Engage as Principal in Real Estate Activities Which may Not Be Permissible for a National Bank

STATEMENT

Pursuant to the provisions of Section 24 of the Federal Deposit Insurance Act, the Cape Cod Cooperative Bank, Yarmouth Port, Massachusetts (the "Bank"), has filed an application with the Federal Deposit Insurance Corporation ("FDIC"). The Bank requests the FDIC's consent to continue to hold indirectly through a wholly-owned subsidiary three properties known as the Post Office Building, the Main Post and Beam Building and the Krook Building.

The activity of indirectly holding real estate investment properties may not be permissible for a national bank or for a subsidiary of a national bank. State-chartered FDIC-insured banks may not engage as principal in an activity prohibited to 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 three properties are located in close proximity to one of the Bank's branch offices. The Post Office Building is adjacent to the branch banking office and shares architectural design and a parking lot with the branch. Due to the close proximity and affinity between the branch banking office and the Post Office Building, the Bank wishes to retain ownership of the Post Office Building indefinitely. The other two properties will be divested by the Bank within a reasonable period of time. The Bank's investment in the three properties totals $513,100, which represented 3.7% of the Bank's Tier 1 capital as of December 31, 1995. The Bank does not intend to make any additional direct or indirect investment in real estate.

In connection with this application, the FDIC has reviewed available information and has also taken into consideration the financial and managerial resources and future earnings prospects of the Bank.

Real estate investment is subject to a high degree of market risk and other specialized risks specific to real estate ownership, and may also be of questionable benefit in the diversification of a financial institution's portfolio of assets. Due to these risks, real estate investment activities appear suitable to a financial institution only on a very limited scale and under restrictive conditions designed to control the various risks posed to the financial institution and the deposit insurance fund.

As limitations and restrictions will be imposed to address the risks of owning a subsidiary that engages in real estate investment activities, the Bank's continued holding of the three properties will not pose significant risks to the Bank Insurance Fund or present material safety and soundness concerns. The Bank is in compliance with applicable capital standards.

Based upon careful evaluation of all available facts and information, the FDIC has concluded that approval of the application is warranted subject to the conditions discussed below. These conditions are imposed for prudential reasons due to the volatility and other risks which are inherent in real estate investment activities in general and thus ameliorate any risk to the deposit insurance fund.

The conditions imposed will require:

ASSOCIATE DIRECTOR
DIVISION OF SUPERVISION

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