Decisions on Bank Applications
Iberia Savings Bank
FEDERAL DEPOSIT INSURANCE CORPORATION
RE: Iberia Savings Bank New Iberia, Louisiana
Application Pursuant to Section 24(d) of the Federal Deposit Insurance Act to Indirectly Continue an Activity That May Not Be Permissible for a National Bank
Pursuant to the provisions of section 24(d) of the Federal Deposit Insurance Act, an application has been filed with the FDIC by Iberia Savings Bank, New Iberia, Louisiana (Iberia). Iberia requests the FDIC's consent to continue to hold, via a wholly-owned subsidiary, Iberia Financial Services, Inc., 13 undeveloped residential lots.
In general, real estate investments 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. The FDIC may not grant its consent unless the bank is in compliance with applicable capital standards and the FDIC determines that the activity poses no significant risk to the appropriate deposit insurance fund. State law authorizes the activity.
Iberia converted to a state-chartered mutual savings bank from a thrift charter effective July 30, 1992. Iberia Financial Services, Inc. was created to acquire and develop real estate, an activity permitted by its thrift charter. The primary business of the subsidiary is related to the sale of non-deposit products via agreements with third parties. The subsidiary continues to hold 13 undeveloped lots with sales being handled internally. Marketing efforts are ongoing and Iberia anticipates complete sell out by 12-31-97 which will end the subsidiary's activities in this area.
Iberia meets the definition of "well capitalized" within the meaning of Part 325 of the FDIC's Rules and Regulations, and is in compliance with applicable capital standards. Iberia's investment in the subsidiary is less than 1% of its Tier 1 capital, and the bank would continue to be well capitalized in the event the entire investment were lost. The investment will be limited to those parcels currently held, and Iberia will discontinue this type of activity upon sale of the parcels. Iberia is in overall sound condition and is satisfactorily managed. Based on the foregoing, the FDIC has determined that retention of the investment, with the intent to divest, does not present a significant risk to the deposit insurance fund.
Having found that the activity in question did not require FDIC review or consent at inception but does now because of statutory revision; that the Bank's interest in real estate is now and is expected in the future to represent a nominal portion of the Bank's capital; that the Bank's financial condition and management are adequate; 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 interest in real estate, with the intent to divest, does not pose a significant risk to the Bank Insurance Fund and therefore may be and hereby is approved subject to the following restrictions. These restrictions are imposed for prudential reasons due to the volatility and other risks which are inherent in the real estate activity. Such risks include the potential for improper transactions with insiders or their related interests.
The Bank's real estate investments shall be limited to its current investment; the Bank shall continue to meet all applicable capital standards; the Bank shall obtain the FDIC's approval to continue to hold its interest in the real estate if it has not divested itself of all its interests by 12-31-97; the Bank's board of directors shall prohibit direct or indirect transactions involving insiders or their related interests in the real estate activity without the FDIC's prior written consent; and the FDIC shall have the right to alter, suspend or withdraw its approval if circumstances change significantly. In addition, transactions between Iberia and Iberia Financial Services Inc. would be subject to Sections 23A and 23B of the Federal Reserve Act, 12 U.S.C. S 371c and § 371c-1, as if Iberia Financial Services, Inc. were an affiliate of the Bank as defined under Section 23A and 23B.
Finally, the FDIC notes that the foregoing approval is unique to this application, that it was significantly influenced by the fact that the real estate acquisition by Iberia Financial Services Inc. was prior to the effective date of Section 24 (d) , and that its view of de novo acquisition of such interest might well be different.
DIVISION OF SUPERVISION