ORDERS ISSUED UNDER BANK HOLDING COMPANY ACT.

Orders Issued Under Section 3 of the Bank Holding Company Act

Countrywide Credit Industries, Inc. Calabasas, California

Countrywide Financial Holding Company, Inc. Calabasas, California

Effinity Financial Corporation Alexandria, Virginia

Order Approving Formation of Bank Holding Companies and Determination on Financial Holding Company Elections

Countrywide Credit Industries, Inc. and two of its subsidiaries, Countrywide Financial Holding Company, Inc. ("CFHC") and Effinity Financial Corporation ("Effinity Financial") (collectively, "Applicants"), have requested the Board's approval under section 3(a)(1) of the Bank Holding Company Act ("BHC Act") (12 U.S.C. [sections] 1842(a)(1)) to become bank holding companies by acquiring control of Treasury Bank, Ltd., Washington, D.C. ("Bank").(1) As part of their proposal to become bank holding companies, Applicants have filed with the Board elections to become financial holding companies pursuant to section 4(l) of the BHC Act (12 U.S.C. [sections] 1843(l)) and section 225.82 of the Board's Regulation Y (12 C.F.R. 225.82).

Notice of the proposal, affording interested persons an opportunity to comment, has been published (65 Federal Register 51,618 (2000)). The time for filing comments has expired, and the Board has considered the proposal and all comments received in light of the factors set forth in section 3 of the BHC Act.

Countrywide Credit Industries, Inc. (together with its subsidiaries "Countrywide") engages primarily in the business of making and purchasing mortgage loans in the United States. Countrywide also conducts other activities that are related to mortgage lending, such as servicing loans, acting as a broker-dealer for mortgage-backed securities, and underwriting and selling homeowners' and other types of insurance. In addition, Countrywide is engaged abroad in mortgage lending and data processing through several foreign subsidiaries and joint ventures with foreign companies.(2)

Competition and Convenience and Needs

Section 3 of the BHC Act prohibits the Board from approving a proposal that would result in a monopoly or would be in furtherance of any attempt to monopolize the business of banking. The BHC Act also prohibits the Board from approving a proposed acquisition that substantially would lessen competition or tend to create a monopoly in any relevant banking market, unless the anticompetitive effects clearly are outweighed in the public interest by the probable effect of the proposal in meeting the convenience and needs of the community to be served.(3)

Applicants currently do not own or control a bank, as that term is defined in the BHC Act, and propose to acquire an existing bank and expand the scope of its operations. Applicants propose that Bank would focus on providing a full range of banking products and services through the Internet. Based on the facts of record, the Board concludes that consummation of the proposal would not have a significantly adverse effect on competition or on the concentration of banking resources in any relevant banking market, and that competitive considerations are consistent with approval.

Section 3 of the BHC Act also requires the Board to consider the effect of the transaction on the convenience and needs of the community to be served.(4) In evaluating this factor, the Board places particular emphasis on the ratings the banks involved in a proposal received at their most recent examinations under the Community Reinvestment Act (12 U.S.C. [sections] 2901 et seq.) ("CRA"). As of February 1998, Bank received a satisfactory CRA rating from the Office of the Comptroller of the Currency ("OCC"). On consummation of the proposal, Bank would be located in Alexandria, Virginia, and would offer its products and services primarily through the Internet.(5) As a result of the proposed acquisition, current customers of the bank to be acquired would have access to products and services offered by Countrywide that the bank currently does not offer.(6) Moreover, customers of Countrywide would have access to an additional source of financial services, including mortgage loan products. The Board has reviewed all information submitted by Applicants related to the convenience and needs factor and concludes, based on all the facts of record, that considerations relating to convenience and needs are consistent with approval.

Financial and Managerial Considerations

Section 3 of the BHC Act requires the Board to consider the financial and managerial resources and future prospects of the companies and banks involved in a bank acquisition proposal.(7) As part of this analysis, the Board has reviewed Applicants' operating plan and notes that Bank has hired management officials with significant banking experience.(8) In addition, the Board has taken into account Countrywide's financial resources, including its capital levels, cash reserves, and ability to serve as a source of strength to Bank. The Board also has reviewed confidential supervisory and examination information on Bank and publicly reported financial and other information on both Bank and Countrywide. Moreover, the Board has consulted with the OCC concerning the financial and managerial resources and operating plan of Bank, particularly on Bank's proposed relocation, Internet focus, and business plan.

After considering all the facts of record, the Board concludes that the financial and managerial resources and future prospects of Countrywide and Bank are consistent with approval, as are other supervisory factors the Board is required to consider under section 3 of the BHC Act.

Conclusion Regarding Section 3 Application

Based on the foregoing and in light of all the facts of record, the Board has determined that the application should be, and hereby is, approved. The Board's approval specifically is conditioned on compliance by Countrywide with all the commitments made in connection with the application. For purposes of this action, the commitments and conditions on which the Board relied in reaching its decision are deemed to be conditions imposed in writing by the Board in connection with its findings and decision and, as such, may be enforced in proceedings under applicable law.

The acquisition of Bank shall not be consummated before the fifteenth calendar day after the effective date of this order, and the proposal shall not be consummated later than three months after the effective date of this order, unless such period is extended for good cause by the Board or the Federal Reserve Bank of Richmond, acting pursuant to delegated authority.

Financial Holding Company Declaration

Applicants also have filed with the Board elections to become financial holding companies pursuant to section 4(1) of the BHC Act and section 225.82 of Regulation Y. Applicants have certified that Bank, the only depository institution that Applicants would control, will be well capitalized and well managed on consummation of the proposal. Applicants have provided all other information required by section 225.82(f) of Regulation Y.

The Board has reviewed the CRA rating of Bank. As discussed above, Bank received a satisfactory rating at its most recent examination under the CRA. Based on all the facts of record, the Board has determined that, on the date Applicants consummate the proposed acquisition of Bank, the financial holding company elections by Applicants will be complete for purposes of section 225.82 of Regulation Y. Unless the Board notifies Applicants otherwise before consummation of the proposal, the declaration to become financial holding companies also will become effective for purposes of section 4(1) of the BHC Act and sections 225.81 and 225.82 of Regulation Y on consummation of the acquisition of Bank.

By order of the Board of Governors, effective April 11, 2001.

Voting for this action: Chairman Greenspan, Vice Chairman Ferguson, and Governors Kelley, Meyer, and Gramlich.

ROBERT DEV. FRIERSON
Associate Secretary of the Board

(1.) Applicants intend to convert Bank from a District of Columbia corporation with banking powers to a national banking association. Applicants then propose to merge Bank with an interim subsidiary national bank controlled by Effinity Financial, rename the merger survivor Effinity Bank, National Association, and move Bank's headquarters to Alexandria, Virginia. On consummation of the proposal, Countrywide Credit Industries would own 100 percent of CFHC. CFHC would own 79 percent of Effinity Financial, which in turn would own 100 percent of Bank.

(2.) Countrywide has informed the Board that it intends to retain its existing nonbanking activities under section 4(k) of the BHC Act (12 U.S.C. [sections] 1843(k)) in accordance with the post-transaction notice procedure described in section 225.87 of Regulation Y (12 C.F.R. 225.87).

(3.) 12 U.S.C. [sections] 1842(c)(1).

(4.) 12 U.S.C. [sections] 1842(c)(2).

(5.) The Board received comments on the proposal from one organization, which expressed concern that Bank's proposed assessment area under the CRA was inappropriate in light of its proposed operation as an Internet bank. The Board notes that Bank's primary federal banking supervisor, the OCC, has reviewed Bank's proposed CRA plan, including the proposed assessment area, and determined that the CRA plan is appropriate in light of the proposed changes in Bank's location and current business.

(6.) Commenter also alleged without providing supporting data that Countrywide's subprime lending subsidiaries focused on minority individuals for high-interest loans and that Countrywide lacked adequate fair lending procedures. Countrywide has stated that its subprime lending subsidiaries provide financing to customers who might not otherwise qualify for Credit and has provided information about steps taken by these subsidiaries to ensure that individuals who qualify for conventional loans are informed about prime credit products. The Board has forwarded the commenter's allegations to the Department of Housing and Urban Development, the Department of Justice, and the Federal Trade Commission, the federal agencies that have responsibility for enforcing fair lending laws for nondepository lending companies.

(7.) 12 U.S.C. [sections] 1842(c)(2).

(8.) Bank plans to have a contractual arrangement with Countrywide's primary operating subsidiary, Countrywide Home Loans, Inc. ("CHL"), regarding the origination of mortgage loans. Under this arrangement, CHL would include Bank's mortgage loan products among the more than 200 products it offers to CHL customers. If a customer chooses a Bank product, CHL would take credit and other information from customers and transmit a detailed summary of that information to Bank. A Bank official independently would review the information about the potential borrower and decide whether to approve the loan. Bank would fund the loan, and all mortgage loans originated using this procedure would be booked as assets of Bank.

Amplicon, Inc. Santa Ana, California

Order Approving Formation of a Bank Holding Company and Acquisition of a Bank

Amplicon, Inc. ("Amplicon") has requested the Board's approval under section 3(a)(1) of the Bank Holding Company Act ("BHC Act") (12 U.S.C. [sections] 1842(a)(1)) to become a bank holding company by acquiring all the voting shares of California First National Bank, Santa Ana, California ("Bank"), a de novo bank. Amplicon also has requested the Board's approval under sections 4(c)(8) and 4(j) of the BHC Act (12 U.S.C. [subsections] 1843(c)(8) and 1843(j)) and section 225.24 of the Board's Regulation Y (12 C.F.R. 225.24) to retain certain nonbanking businesses and thereby engage in leasing personal property and acting as agent, broker, and adviser in leasing such property in accordance with section 225.28(b)(3) of the Board's Regulation Y (12 C.F.R. 225.28(b)(3)).

Notice of the proposal, affording interested persons an opportunity to comment, has been published (65 Federal Register 26,206 (2000)). The time for filing comments has expired, and the Board has considered the proposal and all comments received in light of the factors set forth in sections 3 and 4 of the BHC Act.

Amplicon is an operating company that provides personal property leases, concentrating on leasing computer networks and computer equipment to small businesses. Amplicon offers its products nationally through the Internet and by traditional means. This proposal involves the acquisition of a de novo bank by Amplicon, which currently does not own a commercial bank.

Competition and Convenience and Needs Considerations

Section 3 of the BHC Act prohibits the Board from approving a proposal that would result in a monopoly or would be in furtherance of any attempt to monopolize the business of banking. The BHC Act also prohibits the Board from approving a proposed acquisition that substantially would lessen competition or tend to create a monopoly in any relevant banking market, unless the anticompetitive effects clearly are outweighed in the public interest by the probable effect of the proposal in meeting the convenience and needs of the community to be served.(1)

As noted above, consummation of the proposal would result in the establishment of a de novo bank, which would increase the number of alternative sources of banking products and services available to consumers. Accordingly, the Board concludes that consummation of the proposal would not have a significantly adverse effect on competition or on the concentration of banking resources in any relevant banking market, and that competitive considerations are consistent with approval.

Section 3 of the BHC Act also requires the Board to consider the effect of the transaction on the convenience and needs of the communities to be served. The Board has reviewed information presented by Amplicon related to the convenience and needs factor and other information and concludes, based on all the facts of record, that considerations relating to convenience and needs are consistent with approval.(2)

Financial and Managerial Considerations

Section 3 of the BHC Act requires the Board to consider the financial and managerial resources and future prospects of the companies and banks involved in a bank acquisition proposal. As part of this analysis, the Board has reviewed Amplicon's operating plan for Bank and notes that Bank has hired experienced management that possesses significant leasing experience acquired independently of Amplicon. In addition, the Board has taken into account Amplicon's record of offering lease financing and other products and services through the Internet and related technologies, and Amplicon's capital level, cash reserves, and ability to serve as a source of strength to Bank. The Board also has reviewed confidential supervisory and examination information and publicly reported financial and other information. Moreover, the Board has consulted with the OCC on the financial and managerial resources and operating plan of Bank, particularly with respect to Bank's proposal to purchase a significant volume of leases from Amplicon during the first several years of Bank's operation.

In reliance on a Board interpretation and related interpretive letters identifying certain transactions that are not covered transactions for purposes of section 23A of the Federal Reserve Act, Amplicon has proposed that Bank would acquire leases originated by Amplicon that national banks are permitted to originate and hold.(3) Amplicon has committed that these lease purchases will conform in all respects to the limitations set forth in the Board's interpretation.

The Board notes that one of the foundations of the interpretation describing transactions that are not covered by the limitations in section 23A of the Federal Reserve Act is that each transaction must be reviewed by bank personnel with authority to make a credit judgment that is independent of the credit judgment of the affiliate that originates the transaction. This policy was adopted in the context of allowing an existing bank with multiple sources of earning assets to take advantage of an investment opportunity presented by an affiliate that is relatively small when compared with the bank. It is more difficult to ensure that the bank's credit judgment will be independent of its affiliate's when the affiliate originating the transaction is much larger than the bank, and the bank has limited independent sources from which to acquire or generate assets.

The Board has weighed these concerns carefully in reviewing the facts of this case. To address these concerns, Amplicon has made certain commitments to ensure that Bank's purchases of leases from Amplicon are conducted in accordance with the relevant interpretations, and that such transactions are conducted in a safe and sound manner. In particular, these commitments are designed to ensure that Bank will exercise independent credit judgment when purchasing leases from its affiliate, to limit the amount of assets it can acquire from Amplicon, and to ensure that Amplicon will not rely on Bank to meet its working capital needs.

In the future, the Board may review the policy in 12 C.F.R. 250.250 to ensure that the safeguards in that interpretation are not impaired when a bank generates a significant amount of its assets from transactions that involve its affiliate. Accordingly, Amplicon also has committed that it will conform the operations of Bank to any amendments the Board may make concerning the policy in 12 C.F.R. 250.250.

In addition to the commitments described above, Amplicon has committed that Amplicon and Bank will remain well capitalized, and that Amplicon will provide any additional capital necessary to enable Bank to meet its liquidity demands. Moreover, Bank has hired experienced staff to review and determine the creditworthiness of lessees before Bank's agreement to acquire and Amplicon's commitment to enter into a lease.

Based on the foregoing and after consulting with the OCC, Bank's primary federal supervisor, the Board has determined not to object to the proposed lease purchase transactions between Bank and Amplicon.

After considering all the facts of record, including commitments made by Amplicon, the Board concludes that the financial and managerial resources and future prospects of Amplicon and Bank are consistent with approval, as are the other supervisory factors the Board must consider under section 3 of the BHC Act.

Nonbanking Activities

Amplicon also has filed a notice under sections 4(c)(8) and 4(j) of the BHC Act to engage in leasing personal property and acting as agent, broker, and advisor in leasing personal property. The Board has determined by regulation that personal property leasing activities are closely related to banking for purposes of the BHC Act.(4) Amplicon has committed to conduct all its nonbanking activities in accordance with the limitations set forth in Regulation Y and all relevant Board orders and interpretations.

In order to approve this notice, the Board is required by section 4(j)(2)(A) of the BHC Act to determine that the retention and continuation by Amplicon of its nonbanking activities "can reasonably be expected to produce benefits to the public ... that outweigh possible adverse effects, such as undue concentration of resources, decreased or unfair competition, conflicts of interests, or unsound banking practices."(5)

As part of its evaluation of these factors, the Board has carefully reviewed the financial and managerial resources of Amplicon and Bank and the effect the transaction would have on such resources. For the reasons discussed above, and based on all the facts of record, including the commitments made in this case, the Board concludes that the financial and managerial resources of the organizations involved in the proposal are consistent with approval. The Board also expects that the proposed transaction would increase Amplicon's ability to serve its customers. As noted above, the Board will monitor carefully lease purchase transactions between Amplicon and Bank.

The Board concludes that the conduct of the proposed nonbanking activities within the framework established under Regulation Y is not likely to result in adverse effects, such as undue concentration of resources, decreased or unfair competition, conflicts of interests, or unsound banking practices, that would outweigh the public benefits of the proposal, such as increased customer convenience and gains in efficiency. Accordingly, based on all the facts of record, the Board has determined that the balance of public benefits that the Board must consider under section 4 of the BHC Act is favorable and consistent with approval of the notice.

Conclusion

Based on the foregoing, and in light of all the facts of record, the Board has determined that the application and notice should be, and hereby are, approved. The Board's approval is specifically conditioned on compliance by Amplicon with all the commitments made in connection with the application and notice and the conditions in this order. The Board's determination on the nonbanking activities also is subject to all the conditions set forth in this order and in Regulation Y, including those in sections 225.7 and 225.25(c) (12 C.F.R. 225.7 and 225.25(c)), and to the Board's authority to require such modification or termination of the activities of a bank holding company or any of its subsidiaries as the Board finds necessary to ensure compliance with, and prevent, evasion of, the provisions of the BHC Act and the Board's regulations and order thereunder. For the purpose of this action, the commitments and conditions relied on by the Board in reaching its decision are deemed to be conditions imposed in writing by the Board in connection with its findings and decision and, as such, may be enforced in proceedings under applicable law.

The acquisition of Bank shall not be consummated before the fifteenth calendar day after the effective date of this order, and the proposal shall not be consummated later than three months after the effective date of this order, unless such period is extended for good cause by the Board or the Federal Reserve Bank of San Francisco, acting pursuant to delegated authority.

By order of the Board of Governors, effective April 23, 2001.

Voting for this action Chairman Greenspan, Vice Chairman Ferguson, and Governors Kelley and Gramlich. Absent and not voting: Governor Meyer.

ROBERT DEV. FRIERSON
Associate Secretary of the Board

(1.) 12 U.S.C. [sections] 1842(c)(1).

(2.) Amplicon has requested that Bank be treated as a wholesale bank for purposes of the Community Reinvestment Act (12 U.S.C. [sections] 2901 et seq.). The Bank's primary federal supervisor, the Office of the Comptroller of the Currency (the "OCC"), has approved that request.

(3.) See 12 U.S.C. [sections] 371c. See also 12 C.F.R. 250.250 and Letter dated April 24, 1995, from the Board's General Counsel to the General Counsel of the Federal Deposit Insurance Corporation.

(4.) See 12 C.F.R. 225.28(b)(3).

(5.) 12 U.S.C. [sections] 1843(j)(2)(A).