FEDERAL DEPOSIT INSURANCE CORPORATION

IN RE: McFarland State Bank McFarland, Wisconsin

Application Pursuant to Section 24 of the Federal Deposit Insurance Act for Consent to Indirectly Engage as Principal Through a Wholly-Owned Subsidiary in Investment Activities That May Not Be Permissible  for a Subsidiary of a National Bank

ORDER

The undersigned, acting under delegated authority, has fully considered all available facts and information relevant to Section 24 of the Federal Deposit Insurance Act, 12 U.S.C. § 1831 a, and Part 362 of the FDIC's Rules and Regulations, relating to the application by McFarland State Bank, McFarland, Wisconsin ("the Bank"), for consent to indirectly acquire through a wholly owned subsidiay, ORE, Inc. ("the Subsidiary"), an equity investment in T. Wall Properties Master Limited Partnership. The limited partnership intends to purchase, hold, develop, and sell office, retail, and industrial real estate; it also holds and may invest in residential properties. The partnership develops real estate in the Madison, Wisconsin area. This is an activity that may not be permissible for a subsidiary of a national bank. This investment is allowed by the laws of the State of Wisconsin. The Division of Supervision has concluded that the application should be approved subject to certain conditions.

Accordingly, it is hereby ORDERED, for the reasons set forth in the attached Statement, that the application submitted by the Bank for consent to invest in T. Wall Properties Master Limited Partnership, be and hereby is approved, subject to the following conditions:

(1) That the Bank's investment be held indirectly through its wholly-owned subsidiary, ORE, Inc.;

(2) That the Bank shall conduct the activity in a wholly-owned subsidiary that:

i. Meets applicable statutory or regulatory capital requirements and has sufficient operating capital in light of the normal obligations that are reasonably foreseeable fora business of its size and character within the industry;

ii. Maintains separate accounting and other business records;

iii. Observes separate business entity formalities such as separate board of directors' meetings;

iv. Conducts business pursuant to independent policies and procedures designed to inform customers and prospective customers of the Subsidiary that the Subsidiary is a separate organization from the Bank, and that the Bank is not responsible for and does not guarantee the obligations of the Subsidiary;

(3) The Bank shall limit its indirect equity investment activity through the Subsidiary to the $100,000 investment in T. Wall Properties Master Limited Partnership;

(4) That, without the prior written approval of the FDIC's Regional Director of the Chicago Region, neither the Bank nor any of its subsidiaries may extend credit to the Subsidiary, purchase any debt instruments issued by the Subsidiary, or originate any other transaction that is used to benefit the Subsidiary; this does not prohibit the bank from extending credit to a third party who may do business with the partnership so long as the transactions are carried out on terms and conditions that are substantially similar to those prevailing at the time for comparable transactions with parties not doing business with the partnership;

(5) That neither the Bank nor the Subsidiary may enter into any transaction with the limited partnership in which the Subsidiary has invested or any transaction with the Bank's executive officers, directors, principal shareholders, or related interests of such persons which relate to the Subsidiary's activities or the activities of the limited partnership in which the Subsidiary has invested unless the transactions are on terms and conditions that are substantially the same as those prevailing at the time for comparable transactions with entities other than the limited partnership; and

(6) That, in the event the facts and circumstances presented or otherwise known to the FDIC in connection with this request change significantly, the FDIC retains the ability to alter, suspend, or withdraw its approval.

Dated at Washington, D.C., this 14th day of March, 2001.

BY ORDER OF THE ASSOCIATE DIRECTOR OF THE DIVISION OF SUPERVISION

John M. Lane
Associate Director

FEDERAL DEPOSIT INSURANCE CORPORATION

IN RE: McFarland State Bank McFarland, Wisconsin

Application Pursuant to Section 24 of the Federal Deposit Insurance Act for Consent to Indirectly Engage as Principal Through a Wholly-Owned Subsidiary in Investment Activities That May Not Be Permissible for a Subsidiary of a National Bank

STATEMENT

Pursuant to the provisions of Section 24 of the Federal Deposit Insurance Act, McFarland State Bank, McFarland, Wisconsin ("the Bank"), has filed an application with the Federal Deposit Insurance Corporation ("FDIC"). The Bank requests the FDIC's consent to invest $100,000 in T. Wall Properties Master Limited Partnership through a wholly-owned subsidiary ("Subsidiary"), ORE, Inc. The limited partnership intends to purchase, hold, develop, and sell office, retail, and industrial real estate; it also holds and may invest in residential properties. The partnership develops real estate in the Madison, Wisconsin area. This investment will represent approximately 1 % of the Bank's Tier 1 capital. The only assets currently owned by the Subsidiary are $222,000 in cash or cash equivalents, and it has no liabilities.

Sections 221.0321(2) and (3) (formerly section. 221.295) of Wisconsin Statutes generally provide that a state bank may invest up to 20% of its capital in equity positions, as long as the Wisconsin Department of Financial Institutions (DFI) approves the aggregate percentage. The Bank provided the FDIC with a copy of the DFI's approval, dated August 1, 1988, for the Bank's maximum aggregate investment percentage to be 20% of capital and surplus for equity loans and 10% for equity investments.

Neither insured state banks nor their subsidiaries may engage as principal in an activity prohibited to national banks unless consent has been obtained 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 funds.

Equity investing may be somewhat riskier than lending, but it requires the application of financial analysis, economic assessment, and business judgment similar to that required for lending. Subject to prudent supervision and judgment, investing inequity securities may not be unduly risky.

The FDIC is imposing a condition that neither the Bank nor any of its subsidiaries may extend credit to the Subsidiary, purchase any debt instruments issued by the Subsidiary, or s originate any other transaction that is used to benefit the Subsidiary without the prior written approval of the FDIC's Regional Director of the Chicago Region. This does not prohibit the bank from extending credit to a third party who may do business with the partnership so long as the transactions are carried out on terms and conditions that are substantially similar to those prevailing at the time for comparable transactions with parties not doing business with the partnership.

In order to ensure prudent operational safeguards, the Subsidiary should be operated in a manner to ensure corporate separation between it and the Bank. This is to provide reasonable assurance that the assets of the Bank will be protected from a party seeking to hold the Bank responsible for the liabilities of the Subsidiary. Accordingly, the FDIC finds it appropriate to impose separateness conditions. The FDIC is imposing separateness conditions that are similar to those followed in the case of small real estate investments made by banks through majority-owned subsidiaries after filing notice with the FDIC.

Finally, in order to prevent potential abuses should the Bank establish a business relationship with the limited partnership, the FDIC is imposing a condition that transactions between the Bank or the Subsidiary and the limited partnership as well as any transactions with Bank insiders and their related interests that relate to activities of the limited partnership must be on an arm's length basis.

The final order does not require that the Bank deduct its investment in the Subsidiary from Tier 1 capital. It is the FDIC's opinion that given the overall circumstances including the amount of the investment, the passive nature of the investment, and the fact that the investment takes the form of a limited partnership interest that is indirectly held by a subsidiary that will maintain corporate separateness from the Bank that it is not necessary to impose a capital deduction in this instance to protect the deposit insurance funds from significant risk.

Based on a careful review of all available facts and information, including the stated intent of the Bank, the FDIC has concluded that the proposed investment through a wholly-owned subsidiary does not pose a significant risk to the Bank Insurance Fund, and, therefore, approval of the application subject to the conditions in the Order is warranted.

THE ASSOCIATE DIRECTOR OF THE DIVISION OF SUPERVISION
FEDERAL DEPOSIT INSURANCE CORPORATION