Decisions on Bank Applications
Weymouth Savings Bank
FEDERAL DEPOSIT INSURANCE CORPORATION
RE: Weymouth Savings Bank Weymouth, Massachusetts
Application Pursuant to Section 24(d) of the Federal Deposit Insurance Act to Indirectly Continue to Engage in an Activity Which 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 Weymouth Savings Bank, Weymouth, Massachusetts ("Bank"). The Bank requests the FDIC's consent for its wholly-owned subsidiary, First Weymouth Corporation ("First Weymouth"), to retain its investment in several real estate parcels until it is able to divest itself of these investments.
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 real estate investments.
The Bank and First Weymouth have engaged in this activity since 1978; the activity is currently limited to two parcels of real estate. Both are currently for sale.
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 Bank's interest in the investments is 5.5% of the Bank's Tier 1 capital, and the Bank would continue to be "well capitalized" in the event its 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 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 now because of statutory revision; that the Bank's investment is now and is expected in the future to represent a small portion of the Bank's capital; that the Bank's financial condition and management are adequate; that the State authority authorizes the activity; if the Bank were forced to divest under current market conditions, the Bank would likely suffer a loss; and that the Bank is in compliance with applicable capital standards -- the FDIC concludes that the retention of the investment does not pose a significant risk to the Bank Insurance Fund at present, and therefore may be and hereby is approved subject to the following restrictions. These restrictions are imposed for prudential reasons in consideration of the volatility and other risks associated with the real estate activity, including the potential for improper transactions with insiders or their related interests.
The Bank's real estate investments shall be limited to its current investments; the Bank shall continue to meet all applicable capital standards; the Bank shall divest itself of all interest in the investment within five years, and if the Bank has not divested itself of all of its interest within three years, then the Bank shall submit to the FDIC a written divestiture plan describing the means by which the Bank shall comply; the Bank shall prohibit any insider involvement in the real estate activity, unless the prior written approval of the FDIC is obtained; and the FDIC shall have the right to alter, suspend or withdraw its approval if circumstances change significantly. In addition, transactions between the Bank and First Weymouth shall be made in accordance with the restrictions of sections 23A and 23B of the Federal Reserve Act, 12 U.S.C. §§ 371c and 371c-1, to the same extent as though First Weymouth were an affiliate as defined under sections 23A and 23B.
Finally, the FDIC notes that the foregoing approval is unique to this application, that it was significantly influenced by First Weymouth's investment activity prior to the effective date of section 24(d), and that its view of de novo acquisition of such interests might well be different.
DIVISION OF SUPERVISION