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Ruthven State Bank


RE: Ruthven State Bank Ruthven, 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 Ruthven State Bank, Ruthven, Iowa (the "Bank"). The application requests the FDIC's consent to continue to hold an annuity in connection with a deferred compensation agreement with an executive officer.

The Bank purchased the annuity in 1994 and is the sole owner and beneficiary. The Bank states that the annuity was purchased to provide funding for a deferred compensation agreement with its President. The Bank 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 cash surrender value of the annuity represents 5.58% 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, and would incur a substantial penalty for surrendering the annuity prematurely. The Bank monitors the financial condition of the insurance company on a periodic basis. The Bank's management is satisfactory, and the Bank is in overall superior condition.

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 solely for the purpose of funding a deferred compensation agreement; 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.