FEDERAL DEPOSIT INSURANCE CORPORATION
IN RE: The First Citizens State Bank of Whitewater, Wisconsin
Whitewater, Wisconsin
Application Pursuant to Section 24 of the Federal Deposit Insurance
Act for Consent to Indirectly Engage as Principal Through a Majority-Owned
Subsidiary in Investment Activities That May Not Be Permissible for a
Subsidiary of a National Bank
ORDER
The Board of Directors ("Board") of the Federal Deposit Insurance Corporation ("FDIC") has fully
considered all available facts and information relevant to section 24 of the Federal
Deposit Insurance Act, 12 U.S.C. Sect. 1831a, and Part 362 of the FDIC's Rules and Regulations,
relating to an application by The First Citizens State Bank of Whitewater, Wisconsin, Whitewater,
Wisconsin ("FCSB"), for consent to indirectly engage as principal through a wholly-owned
subsidiary in an equity investment activity that may not be permissible for a subsidiary of a
national bank. FCSB has requested approval to purchase, through its wholly-owned subsidiary,
4.99 percent of the total outstanding shares of a particular bank holding company stock. The
application is approved subject to certain conditions.
Accordingly, it is hereby ORDERED, for the reasons set forth in the attached Statement,
that the application submitted by FCSB is approved subject to the following conditions:
l. That the investment in the unlisted bank holding company stock will be
held indirectly through a majority-owned subsidiary; namely, Banco
Services, Inc.
2. That this investment activity is only allowed as long as FCSB maintains and
continues to meet all applicable minimum capital standards as defined in
section 38 of the Federal Deposit Insurance Act.
3. That the consent granted herein is based on the facts and circumstances
presented or otherwise known to the FDIC in connection with this request.
FCSB shall notify the FDIC of any significant change in facts or
circumstances. If the facts and circumstances change significantly, the
FDIC shall have the right to alter, suspend, or withdraw its approval.
Dated at Washington, D.C., this 3rd day of December, 1996.
BY ORDER OF THE BOARD OF DIRECTORS
Jerry L. Langley
Executive Secretary
FEDERAL DEPOSIT INSURANCE CORPORATION
IN RE: The First Citizens State Bank of Whitewater, Wisconsin
Whitewater, Wisconsin
Application Pursuant to Section 24 of the Federal Deposit Insurance
Act for Consent to Indirectly Engage as Principal Through a Majority-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 ("FDI
Act"), The First Citizens State Bank of Whitewater, Wisconsin, Whitewater, Wisconsin
("FCSB"), has filed an application with the Federal Deposit Insurance Corporation ("FDIC").
FCSB requests the FDIC's consent to engage in the acquisition and retention of unlisted bank
holding company stock indirectly through a wholly-owned subsidiary.
The activity of making investments in unlisted bank holding company stock may not be a
permissible activity for a national bank or a subsidiary of a national bank. State-chartered FDIC-
insured banks may not engage as principal in an activity prohibited to nationally-chartered 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 fund.
The Wisconsin State Statute providing general authority for the proposed activity is
contained in section 221.0321(2) (prior to July 1, 1996, section 221.295). On June 26, 1996,
FCSB received approval from the State to invest in equity securities pursuant to section
221.0321(2).
The purchase of any equity stock entails risks related to the loss of investment, price
volatility, and lack of market liquidity. However, intrinsic to the corporate charter of a bank
holding company are factors that lessen investment risk. Bank holding companies are subject to a
comprehensive and stringent regulatory structure. As such, they are required to obtain
government approval to operate and to maintain regulatory minimum capitalization. They are
also subject to periodic supervisory examination and are subject to enforcement jurisdiction.
The primary, and frequently only, asset of a single or multiple-bank holding company is
the subsidiary bank or banks. In such cases the risk inherent from investing in the bank holding
company stock is directly reliant on the financial condition of the subsidiary bank. However, bank
holding companies may be invested in entities other than banks, which are authorized to engage in
activities not permissible for a bank. The potential for additional risk from those other activities
warrants the limitation of the bank's investment in any single unlisted bank holding company, or
related entities, to preclude a concentration represented by the investment in relation to FCSB's
Tier 1 capital.
Liquidity risk, in this instance the ability to convert the stock to cash, may be greater for a
unlisted bank holding company stock than for a listed holding company stock since a unlisted
stock presumably does not have the benefit of a readily accessible, active and organized market in
which to sell the unlisted stock. The risk presented by the absence of an established market to
liquidate such stock can be mitigated by limiting to a nominal amount the investment in any one
unlisted bank holding company and, if applicable, for all unlisted bank holding companies in the
aggregate.
As of June 30, 1996, FCSB had total assets of $83,867,000. FCSB is well-capitalized. Its
financial condition and management are well regarded. FCSB's Investment Policy is generally
conservative and adequately addresses guidelines for investment strategies. The investment
activity being proposed provides for acceptable diversification.
Approval to purchase the specific requested amount of the stock of one bank holding
company is granted subject to certain limiting conditions. The stock will be held indirectly by a
majority-owned subsidiary and FCSB will continue to meet all applicable minimum capital
standards as defined in section 38 of the FDI Act.
For the reasons outlined above, including the imposition of conditions, the Board
of Directors has concluded that FCSB's indirect investments in unlisted bank holding
company stocks does not, under the terms and arrangements proposed by FCSB, pose a
significant risk to the Bank Insurance Fund and, therefore, approval of the application is
warranted.
THE BOARD OF DIRECTORS
FEDERAL DEPOSIT INSURANCE CORPORATION
