Ms. Athena Skaleris
Boardman, Suhr, Curry & Field, LLP
Fourth Floor
1 South Pinckney Street
P.O. Box 927
Madison, Wisconsin 53701-0927

Dear Ms. Skaleris:

This is in response to the request by Bank of Wausau, Wausau, Wisconsin ("Bank"), for an exemption from section 23A of the Federal Reserve Act (12 U.S.C. § 371c) to permit Bank to purchase its premises, which are owned by an affiliated limited liability partnership, 2010 Stewart Avenue LLP, also in Wausau ("Stewart LLP"). Bank proposes a cash purchase of the premises from Stewart LLP for $1.9 million. Bank has provided an independent appraisal which states that the fair market value of the premises is approximately [amount deleted].

Under section 23A, a bank may engage in "covered transactions," as defined by the statute, with a single affiliate up to 10 percent of the bank's capital and surplus; transactions with all affiliates are limited to 20 percent of the bank's capital and surplus.¹ In addition, a bank's purchase of assets from its affiliate is subject to a prohibition against the purchase of low-quality assets and must be on terms and conditions that are consistent with safe and sound banking practices.² Bank's purchase of its premises is a covered transaction and, based on the bank's existing capital and surplus, would be limited to a purchase of approximately $900,000.³

Section 23A specifically authorizes the Board, by order or regulation, to exempt from the definition of "purchase of assets" a bank's purchase of real or personal property from its affiliate.⁴ The legislative history of this section indicates that Congress gave the Board the authority to permit a bank to purchase from an affiliate certain expensive properties such as a building because "such transactions are not the type of transactions that section 23A is designed to cover.⁵

Section 23B of the Federal Reserve Act requires that any covered transaction with an affiliate be on terms and under circumstances, including credit standards, that are substantially the same, or at least as favorable to such bank or its subsidiary as those prevailing at the time for comparable transactions with nonaffiliated companies. In light of the appraisal provided by Bank, it appears that the transaction is consistent with the requirements of section 23B. In addition, the Federal Deposit Insurance Corporation and the Sate of Wisconsin Department of Financial Institutions reviewed Bank's plans to purchase the premises, and both agencies approved the purchase.

In light of these considerations, including Bank's decreased operating expenses, the transaction appears to be consistent with safe and sound banking practices and on terms that would ensure the quality of the assets transferred. Accordingly, the transaction appears to be consistent with the purposes of section 23A, and the Director of the Division of Banking Supervision and Regulation, pursuant to authority delegated by the Board, and with the concurrence of the General Counsel, hereby grants the requested exemption.

This determination is specifically conditioned on Bank's compliance with all the commitments and representations made in connection with the exemption request. These commitments and representations are deemed to be conditions imposed in writing in connection with granting this request and, as such, may be enforced in proceedings under applicable law. This determination is based on the specific circumstances surrounding this transaction and may be revoked in the event of any material change in those circumstances or failure by Bank to continue to observe its commitments. This grant of exemption does not represent a determination concerning the permissibility of any other transactions that are subject to section 23A or concerning any other affiliates of Bank.

Very truly yours,

(Signed) Robert deV. Frierson

1. 12 U.S.C. § 371c(b)(7)(C). Return to text

2. 12 U.S.C. § 371c(a)(3) and (4). Return to text

3. For section 23A purposes, Bank's capital and surplus totaled approximately $9 million, as of June 30, 2003. Return to text

4. 12 U.S.C. § 371c(b)(7)(C). Return to text

5. S. Rep. No. 536, 97th Cong., 2d Sess. 32 (1982). Return to text