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Mutual Savings Bank


RE: Mutual Savings Bank Milwaukee, Wisconsin

Application Pursuant to Section 24(a) of the Federal Deposit Insurance Act to Indirectly 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 Mutual Savings Bank, Milwaukee, Wisconsin ("Mutual"). The application requests the Corporation's consent to continue engaging, through a wholly-owned subsidiary, in real estate development activity. Mutual has been operating under an approved divestiture plan involving a parcel of real estate which was purchased in 1986. Real estate activity will be conducted through a wholly-owned subsidiary and will require only nominal financial and managerial resources.

National banks and their subsidiaries are not expressly authorized to make these kinds of investments. State chartered, FDIC-insured banks may not engage as principal in an activity prohibited to nationally chartered banks unless they obtain the consent of 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.

A divestiture plan for the subject parcel was approved in 1991 pursuant to Section 303.13(d)(1) under Mutual's prior charter. Currently remaining are four lots which are zoned for office buildings; one lot has been set aside for future retail expansion. The lots are adjacent to the executive and administrative office and were purchased as part of the office site. The institution has been marketing the lots since 1990 but due to unfavorable market conditions has been unable to consummate a sale. Therefore, it has now applied to hold the property within an established wholly-owned subsidiary pursuant to Section 362.4(d)(4)(iii) and to dispose of the property in an orderly fashion.

Mutual, which meets the definition of "well capitalized" within the meaning of Part 325 of The Federal Deposit Insurance Corporation's Rules and Regulations, is in compliance with applicable capital standards. The real estate investment represents 1.10 of the bank's Tier 1 leverage capital and the limited amount of this investment does not appear to pose a significant risk to the Savings Association Insurance Fund. Furthermore, the State Authority has not objected to the retention of this investment. For these reasons, the FDIC concludes that it should not automatically impose a prohibition for national banks on a state bank but instead should look at the specifics of the case.

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 so now because of statutory revision; that the real estate investment is nominal in relation to capital and will be limited to that parcel currently held; that the institution's financial condition and management are satisfactory; that the State authority does not object to the investment; that retention of the investment does not pose any significant safety or soundness risks; and that the bank is in compliance with applicable capital standards -- the FDIC concludes that the subsidiary's retention of the property for a period not to exceed five years does not pose a significant risk to the Savings Association Insurance Fund and therefore may be and hereby is approved subject to the following restrictions.

The applicant shall notify the FDIC of any significant change in facts or circumstances, and the FDIC shall have the right to alter, suspend, or withdraw its approval upon receiving such notification. In addition, transactions between the applicant and its subsidiary that would be covered transactions for purposes of Sections 23A and 23B of the Federal Reserve Act, 12 U.S.C. § 371c and 371-c, if the subsidiary were an affiliate of the applicant under Sections 23A and 23B, shall not exceed the amount limitations and shall be made in accordance with the other restrictions of Section 23A and 23B to the same extent as though the subsidiary were an affiliate of the applicant.

Finally, the FDIC specifically notes that its consent action is unique to this case, that it was significantly influenced by acquisition pre-section 24 and that its view of a de-novo request for such activity might well be different.