RE: GreenPoint Bank
New York City, Kings County, New York
Application Pursuant to Section 24 of the Federal Deposit Insurance Act for Consent to Indirectly Engage as Principal in Real Estate Activities Which May Not Be Permissible for a Subsidiary of a National Bank
Pursuant to the provisions of Section 24 of the Federal Deposit Insurance Act, GreenPoint Bank, New York City, New York ("GreenPoint") has filed two applications with the Federal Deposit Insurance Corporation ("FDIC"). The applicant requests the FDIC's consent to continue to engage as principal indirectly in real estate investment activities through two wholly-owned subsidiaries ("Subsidiaries") to-be-established for the sole purpose of managing and leasing real estate properties held for investment purposes.
The activity of holding real estate investment properties may not be a permissible activity for a National bank or 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. New York State law permits the holding of real estate "...for the convenient transaction of the business of the savings bank, from portions of which not required for its own use a revenue may be derived." The aggregate investment of savings bank in such real estate is limited to five percent of the savings bank's total assets, unless a higher investment is approved by the New York Superintendent of Banks.
In 1978, Green Point Savings Bank (predecessor of GreenPoint), acquired a shopping center located in Rocky Point, New York, in a foreclosure transaction. In March 1986, GreenPoint opened a branch office occupying a portion of the shopping center. In 1989, GreenPoint also acquired a shopping center located in Sheepshead Bay, Brooklyn, New York, in a purchase transaction. The Bank has operated a branch office occupying part of the property since 1974. The remaining available space of both shopping centers is leased to unaffiliated commercial enterprises.
As GreenPoint does not wish to divest of the portions of real estate property not used by it for banking purposes, GreenPoint requests consent from the FDIC to continue to engage as principal in the activity of holding the real estate properties for investment purposes. GreenPoint proposes to transfer the subject real estate properties to two separate wholly-owned subsidiaries, which are to be formed for the specific purpose of holding and managing the Rocky Point and Sheepshead Bay shopping center properties. GreenPoint does not intend to acquire additional real estate investment properties.
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 institution associated with the continued holding of these real estate properties and the risks associated with owning and leasing these particular properties.
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 prudential limitations and restrictions addressing the risks posed by real estate investment activities will be imposed, GreenPoint's real estate investment activities will not pose significant risks to the Bank Insurance Fund or present material safety and soundness concerns. As of March 31, 1995, GreenPoint's investment in real estate investment property represented approximately 0.5% of the bank's Tier 1 capital and 0.08% of the bank's total assets. GreenPoint is in compliance with applicable capital standards.
Based upon careful evaluation of all available facts and information, the Associate Director, acting under delegated authority, has concluded that approval of the applications is warranted subject to the restrictions discussed below. These conditions are imposed for prudential reasons due to the volatility and other risks which are inherent in the subject real estate activity, as well as to mitigate any potential insider conflicts of interests.
GreenPoint 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. GreenPoint shall not acquire any additional real estate investment property. GreenPoint's indirect real estate investment activities (including equity, debt, or extensions of credit) in the wholly-owned Subsidiaries shall be limited to those which are currently held, and GreenPoint shall not engage in any additional real estate investment activity or make any additional investment in the Subsidiaries without the prior written consent of the FDIC. GreenPoint shall continue to meet the applicable capital standards. The Subsidiaries shall take necessary actions to obtain one or more independent outside directors and to establish, and operate in a manner so as to ensure, separate-corporate existences in order to insulate GreenPoint from potential liabilities. GreenPoint shall not engage directly or indirectly in real estate investments with insiders or their related interest without the prior written consent of the FDIC. In addition, the transactions between the Bank and the Subsidiaries 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 though the Subsidiaries were affiliates of the Bank as defined under Sections 23A and 23B.