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Poweshiek County Savings Bank


RE: Poweshiek County Savings Bank Brooklyn, Iowa

Application Pursuant to Section 24(a) of the Federal Deposit Insurance Act to Directly Continue an Activity That 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 Poweshiek County Savings Bank, Brooklyn, Iowa (the "Bank"). The application requests the FDIC's consent to continue to hold an annuity in connection with an employment contract of a former chairman of the board and president. The Bank purchased the annuity in 1985 and is the sole owner and beneficiary. The annuity was purchased to fund retirement benefits associated with an employment contract dated July 14, 1980 with the former chairman of the board and president. The contract provides for retirement payments for ten years. The Bank also holds one life insurance policy in addition to the annuity. The life insurance policy meets the requirements of Test B of OCC Banking Circular 249 and is not subject to the application.

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.

OCC guidelines indicate that national banks are not permitted to invest in annuities for their own account. Accordingly, the Bank has filed an application pursuant to Section 24 of the FDI Act for approval to continue to hold the annuity. The State Authority has not objected to the Bank's retention of the annuity. The value of the annuity represents less than 1 percent of the Bank's March 31, 1996 Tier 1 Capital. The annuity is issued by an insurance company which is, currently highly rated by a nationally recognized rating service. The Bank is well capitalized as of March 31, 1996. The Bank monitors the financial condition of the insurance company on a periodic basis.

The Bank's management is satisfactory, and the Bank is overall fundamentally sound.

Based on the foregoing, the FDIC has determined that retention of the annuity does not present a significant risk to the deposit insurance fund.

Having found that the State Authority does not object to the activity; that the Bank is in compliance with applicable capital standards; that the purchase of the annuity was made to assist in funding retirement benefits; and that the retention of the annuity does not pose a significant risk to the deposit insurance fund; the FDIC concludes that approval of the Bank's request to continue to hold the annuity is warranted.

The FDIC has conditioned its action in this case upon its future ability to alter, suspend, or withdraw its approval should the facts and circumstances present in the application change significantly. The Bank shall notify the FDIC of any significant change in facts or circumstances. In addition, the Bank shall continue to meet applicable capital standards.