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Central Bank of the Ozarks


RE: Central Bank of the Ozarks Osage Beach, Missouri

Application Pursuant to Section 24(d) of the Federal Deposit Insurance Act to Indirectly Continue 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 Central Bank of the Ozarks, Osage Beach, Missouri ("the Bank"). The Bank requests the FDIC's consent for its wholly-owned subsidiary, Pleasant View Properties, Inc. ("PVP"), to retain its ownership in a condominium development ("development") located in Lake of the Ozarks, Missouri, until it is able to develop and sell off the remaining units.

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 Missouri Division of Finance does not object to the bank's continued engagement in the activity and the investment is authorized by state law.

The Bank, through its wholly-owned subsidiary, PVP, has been engaged in this activity since 1992, when the property was acquired in satisfaction of debts previously contracted. The Bank has extended credit to FOL, a development company, chosen PVP to construct and sell the development. PVP's sole activity has been to develop and sell the condominium complex. As of October 19, 1995, fifty-four units remain to be sold requiring the construction of six additional buildings and the sale of six units in one building. Sales have averaged ten units per year for the last three years. Bank management projects completion of the development and sellout in approximately five years.

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. Including the construction credits, the Bank's interest in PVP could rise to 6.81% of Tier 1 capital, but the Bank would continue to be "well capitalized" in the event its entire interest in the venture were deducted.

In connection with this application, the FDIC taken into consideration the favorable financial and resources and future earnings prospects of the Bank.

For purposes of this application, the FDIC has considered the funds lent by the Bank to FOL in determining the Bank's total exposure to this activity which must be considered when assessing whether there is a significant risk to the deposit insurance fund. In connection with this application, the FDIC has also taken into consideration the favorable financial and managerial resources and future earning 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 real estate investment is now and is expected in the future to represent a nominal portion of the Bank's capital; that the Bank's financial condition and management are adequate; that the State authority does not object to the activity; and that the Bank is in compliance with applicable capital standards -- the FDIC concludes that the retention of the interest in the General Partnership does not pose a significant risk to the Bank Insurance Fund, and therefore may be and hereby is approved subject to the following restrictions.

The Bank shall limit its real estate activities related to PVP to the planned completion and sale of the Falls Condominium project; the Bank shall continue to meet all applicable capital standards; the Bank shall divest itself of all of its interest in the subsidiary within five years of the date of the approval letter; if the Bank has not divested itself of all of its interest in the subsidiary within three years, then the Bank shall submit to the FDIC a written divestiture plan describing the means by which the Bank shall comply with the divestiture time period; the Bank shall prohibit the involvement of insiders or their related interest, either directly or indirectly, in the real estate activity or any other activity conducted by the subsidiary without the prior written approval of the FDIC; transactions between the Bank and the subsidiary will be subject to the same restrictions under Sections 23A and 23B of the Federal Reserve Act that would otherwise apply if the subsidiary was considered an affiliate of the Bank (the collateral margin requirements will not apply unless the total of the Bank's real estate investment exceeds at any one time $1,100,000); and, the FDIC shall have the right to alter, suspend or withdraw its approval if circumstances change significantly.

Finally, the FDIC notes that the foregoing approval is unique to this application, that it was significantly influenced by the subsidiary's acquisition of the real estate investment prior to the effective date of Section 24(d), and that its view of de novo acquisition of such interest might well be different.


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