Orders Issued Under Section 4 of the Bank Holding Company Act.

First Security Corporation Salt Lake City, Utah

Order Approving Notice to Engage in Underwriting and Dealing in All Types of Debt and Equity Securities on a Limited Basis

First Security Corporation ("First Security"), a bank holding company within the meaning of the Bank Holding Company Act ("BHC Act"), has requested the Board's approval under section 4(c)(8) of the BHC Act (12 U.S.C. [sections] 1843(c)(8)) and section 225.24 of the Board's Regulation Y (12 C.F.R. 225.24) to acquire Van Kasper & Company, San Francisco, California ("Company"), and thereby acquire control of Company's wholly owned subsidiaries(1) and a 24.5-percent voting interest in Redwood Securities Group, Inc. ("Redwood"), also of San Francisco. First Security would thereby engage in the following nonbanking activities:

   (1) Extending credit and servicing loans, in accordance with section
   225.28(b)(1) of Regulation Y (12 C.F.R. 225.28(b)(1));

   (2) Engaging in activities related to extending credit, in accordance with
   section 225.28(b)(2) of Regulation Y (12 C.F.R. 225.28(b)(2));

   (3) Providing financial and investment advisory services, in accordance
   with section 225.28(b)(6) of Regulation Y (12 C.F.R. 225.28(b)(6));

   (4) Providing securities brokerage, riskless principal, and private
   placement services, in accordance with section 225.28(b)(7)(i), (ii), and
   (iii) of Regulation Y (12 C.F.R. 225.28(b)(7)(i), (ii), and (iii));

   (5) Underwriting and dealing in government obligations and money market
   instruments in which state member banks may underwrite and deal under 12
   U.S.C. [subsections]335 and 24(7) ("bank-eligible securities"), and
   engaging in investing and trading activities, in accordance with section
   225.28(b)(8)(i) and (ii) of Regulation Y (12 C.F.R. 225.28(b)(8)(i) and
   (ii));

   (6) Engaging in insurance agency activities, in accordance with section
   4(c)(8)(G) of the BHC Act and section 225.28(b)(11)(vii) of Regulation Y
   (12 C.F.R. 225.28(b)(11)(vii));(2)

   (7) Underwriting and dealing in, to a limited extent, all types of debt and
   equity securities other than interests in open-end investment companies
   ("bank-ineligible securities"); and

   (8) Acting as the general partner of private investment limited
   partnerships that invest in assets in which a bank holding company is
   permitted to invest.

Notice of the proposal, affording interested persons an opportunity to submit comments, has been published (63 Federal Register 67,692 (1998)). The time for filing comments has expired, and the Board has considered the notice and all comments received in light of the factors set forth in section 4(c)(8) of the BHC Act.

First Security, with total consolidated assets of approximately $19.4 billion, is the 44th largest banking organization in the United States.(3) First Security operates subsidiary banks with branches in Utah, California, Nevada, New Mexico, Idaho, Oregon, and Wyoming, and engages through other subsidiaries in a broad range of permissible nonbanking activities. Company, with total consolidated assets of $22.1 million, engages directly and indirectly in a broad range of securities underwriting and dealing, securities brokerage, investment advisory, and other activities. Redwood, with total consolidated assets of $946 thousand, underwrites and deals in limited types of securities, including municipal and government agency securities, and provides securities brokerage services.(4)

After consummation of the proposal, Company would be renamed First Security Van Kasper. First Security anticipates merging its existing section 20 subsidiary, First Security Capital Markets, Inc., Salt Lake City, Utah ("FSCMI"), with and into Company in May 1999, with Company surviving the merger.(5) Company would continue to own 24.5 percent of the voting shares of and control Redwood after these transactions.(6) Company and Redwood are, and after consummation of the proposal will continue to be, registered as broker-dealers with the Securities and Exchange Commission ("SEC") under the Securities Exchange Act of 1934 (15 U.S.C. [sections] 78a et seq.) and members of the National Association of Securities Dealers, Inc. ("NASD"). Accordingly, Company and Redwood are, and will continue to be, subject to the record-keeping and reporting obligations, fiduciary standards, and other requirements of the Securities Exchange Act of 1934, the SEC, and the NASD.

Underwriting and Dealing in Bank-Ineligible Securities

The Board has determined that, subject to the framework of prudential limitations established in previous decisions to address the potential for conflicts of interests, unsound banking practices, or other adverse effects, underwriting and dealing in bank-ineligible securities is so closely related to banking as to be a proper incident thereto within the meaning of section 4(c)(8) of the BHC Act.(7) The Board also has determined that underwriting and dealing in bank-ineligible securities is consistent with section 20 of the Glass-Steagall Act (12 U.S.C. [sections] 377), provided that the company engaged in the activity derives no more than 25 percent of its gross revenues from underwriting and dealing in bank-ineligible securities.(8)

First Security has committed that Company and Redwood each will conduct its underwriting and dealing activities using the methods and procedures and subject to the prudential limitations established by the Board in the Section 20 Orders. First Security also has committed that Company and Redwood each will conduct its bank-ineligible securities underwriting and dealing activities subject to the Board's revenue restriction.(9) As a condition of this order, First Security is required to conduct the bank-ineligible securities activities of Company and Redwood subject to the revenue restrictions and Operating Standards established for section 20 subsidiaries ("Operating Standards").(10)

Other Activities Approved by Regulation or Order

The Board previously has determined that credit and credit-related activities; financial and investment advisory activities; securities brokerage, riskless principal, and private placement activities; bank-eligible securities underwriting and dealing; investing and trading activities; and certain insurance agency activities are closely related to banking within the meaning of section 4(c)(8) of the BHC Act.(11) In addition, the Board previously has determined by order that private investment limited partnership activities are permissible for bank holding companies when conducted within certain limits.(12) First Security has committed that it will conform the activities of Company and Redwood to the requirements of, and will conduct the activities of Company and Redwood in accordance with the limitations set forth in, Regulation Y and the Board's orders and interpretations relating to each of the activities.

Other Considerations

In order to approve this notice, the Board also must determine that performance of the proposed activities is a proper incident to banking; that is, that the proposed activities "can reasonably be expected to produce benefits to the public, such as greater convenience, increased competition, or gains in efficiency, that outweigh possible adverse effects, such as undue concentration of resources, decreased or unfair competition, conflicts of interests, or unsound banking practices."(13) As part of its review of these factors, the Board considers the financial and managerial resources of the notificant and its subsidiaries and the effect the transaction would have on such resources.(14)

In considering the financial resources of the notificant, the Board has reviewed the capitalization of, and funding arrangements among, First Security, Company, and Redwood in accordance with the standards set forth in the Section 20 Orders and has found the capitalization and the funding arrangements of each to be consistent with approval. This determination is based on all the facts of record, including First Security's projections of the volume of the bank-ineligible underwriting and dealing activities of Company and Redwood.

The Board also has reviewed the managerial resources of each of the entities involved in this proposal in light of examination reports and other supervisory information. In connection with the proposal, the Federal Reserve Bank of San Francisco ("Reserve Bank") has reviewed the policies and procedures of Company and Redwood to ensure compliance with this order and the Section 20 Orders, including Company's and Redwood's operational and managerial infrastructure; computer, audit, and accounting systems; and internal risk management procedures and controls. The Board also has considered the ability of First Security to monitor Redwood's activities and compliance with this order and the Section 20 Orders. First Security has stated that Company has the ability to monitor Redwood's financial condition and securities transactions on a daily basis. A senior officer of Company serves as a director on Redwood's three-member board of directors, and Company's controller also serves as Redwood's controller.(15) In addition, Redwood operates on Company's premises in space leased from Company, and Company provides accounting and administrative support for Redwood's securities activities. On the basis of the Reserve Bank's review and all other facts of record, including the commitments provided in this case, the proposed managerial and risk management systems of Company and Redwood, the relationships between Company and Redwood, and the limited nature of Redwood's activities, the Board has concluded that financial and managerial considerations are consistent with approval of the notice.

The Board has carefully considered the competitive effects of the proposal. First Security has stated that FSCMI, Company, and Redwood offer largely complementary services with few significant overlaps. To the extent that Company or Redwood offers different types of products and services than FSCMI, the proposed acquisition would result in no loss of competition. In those markets where the product offerings of First Security's nonbanking subsidiaries overlap with the product offerings of Company or Redwood, such as securities brokerage, investment advisory, and insurance agency activities, there are numerous existing and potential competitors. Consummation of the proposal, therefore, would have a de minimis effect on competition in the markets for these services, and the Board has concluded that the proposal would not have significantly adverse competitive effects in any relevant market.

The Board also expects that consummation of the proposal would provide added convenience to the customers of First Security and Company. First Security has indicated that consummation of the proposal would expand the range of products and services available to its customers and those of Company. In addition, there are public benefits to be derived from permitting capital markets to operate so that bank holding companies can make potentially profitable investments in nonbanking companies and from permitting banking organizations to allocate their resources in the manner they consider to be most efficient when such investments and actions are consistent, as in this case, with the relevant considerations under the BHC Act.

Based on all the facts of record, the Board has determined that performance of the proposed activities by First Security, under the framework established in this and prior decisions, can reasonably be expected to produce public benefits that outweigh any reasonably expected adverse effects of the proposal. Accordingly, the Board has determined that the performance of the proposed activities by First Security is a proper incident to banking for purposes of section 4(c)(8) of the BHC Act.

Conclusion

On the basis of all the facts of record, the Board has determined that the notice should be, and hereby is, approved, subject to all the terms and conditions described in this order and the Section 20 Orders, as modified by the Modification Orders. The Board's approval of the proposal extends only to activities conducted within the limitations of this order, including the Board's reservation of authority to establish additional limitations to ensure that the activities of Company and Redwood are consistent with safety and soundness, avoidance of conflicts of interests, and other relevant considerations under the BHC Act. Underwriting and dealing in any manner other than as approved in this order is not within the scope of the Board's approval and is not authorized for Company or Redwood.

The Board's determination also is subject to all the terms and conditions set forth in Regulation Y, including those in sections 225.7 and 225.25(c) (12 C.F.R. 225.7 and 225.25(c)), and to the Board's authority to require modification or termination of the activities of a bank holding company or any of its subsidiaries as the Board finds necessary to ensure compliance with, or to prevent evasion of, the provisions and purposes of the BHC Act and the Board's regulations and orders issued thereunder. The Board's decision is specifically conditioned on compliance with all the commitments made in connection with this notice, including the commitments discussed in this order and the conditions set forth in this order and the Board regulations and orders noted above. The commitments and conditions are deemed to be conditions imposed in writing by the Board in connection with its findings and decision, and, as such, may be enforced in proceedings under applicable law.

This proposal shall not be consummated later than three months after the effective date of this order, unless such period is extended for good cause by the Board or the Reserve Bank, acting pursuant to delegated authority.

By order of the Board of Governors, effective January 25, 1999.

Voting for this action: Chairman Greenspan, Vice Chair Rivlin, and Governors Kelley, Meyer, Ferguson, and Gramlich.

ROBERT DEV. FRIERSON

Associate Secretary of the Board

(1.) Company's principal wholly owned subsidiaries are Van Kasper Advisers, Inc., Van Kasper Capital, and Van Kasper Ventures.

(2.) First Security is authorized to engage in insurance agency activities under section 4(c)(8)(G) of the BHC Act, which authorizes those bank holding companies that engaged with Board approval in insurance agency activities prior to 1971 to engage in insurance agency activities.

(3.) Asset and ranking data are as of June 30, 1998.

(4.) Company currently holds certain investments in securities that exceed the levels permissible for bank holding companies. First Security has committed to conform, within two years of consummation of the proposal, all investments held by Company and its subsidiaries to the requirements of section 4 of the BHC Act and the Board's regulations and interpretations thereunder.

(5.) FSCMI currently underwrites and deals in, to a limited extent, certain types of bank-ineligible securities and engages in other permissible nonbanking activities. See, Letter dated December 18, 1997, from Jennifer J. Johnson, Deputy Secretary of the Board, to David R. Wilson.

(6.) First Security has committed, among other things, that Redwood will be treated as an affiliate of First Security's subsidiary banks for purposes of sections 23A and 23B of the Federal Reserve Act and as a subsidiary of First Security within the meaning of the BHC Act. See SR Letter No. 96-39 (APP) (December 26, 1996).

(7.) See J.P. Morgan & Co. Inc., et al., 75 Federal Reserve Bulletin 192 (1989), aff'd sub nom. Securities Industry Ass'n v. Board of Governors of the Federal Reserve System, 900 F.2d 360 (D.C. Cir. 1990); Citicorp, 73 Federal Reserve Bulletin 473 (1987), aff'd sub nom. Securities Industry Ass'n v. Board of Governors of the Federal Reserve System, 839 F.2d 47 (2d Cir.), cert. denied, 486 U.S. 1059 (1988), as modified by Review of Restrictions on Director, Officer and Employee Interlocks, Cross-Marketing Activities, and the Purchase and Sale of Financial Assets Between a Section 20 Subsidiary and an Affiliated Bank or Thrift, 61 Federal Register 57,679 (1996); Amendments to Restrictions in the Board's Section 20 Orders, 62 Federal Register 45,295 (1997); and Clarification to the Board's Section 20 Orders, 63 Federal Register 14,803 (1998) (collectively, "Section 20 Orders").

(8.) Compliance with the revenue limitation shall be calculated in accordance with the method stated in the Section 20 Orders, as modified by the Order Approving Modifications to the Section 20 Orders, 75 Federal Reserve Bulletin 751 (1989); 10 Percent Revenue Limit on Bank-Ineligible Activities of Subsidiaries of Bank Holding Companies Engaged in Underwriting and Dealing in Securities, 61 Federal Register 48,953 (1996); and Revenue Limit on Bank-Ineligible Activities of Subsidiaries of Bank Holding Companies Engaged in Underwriting and Dealing in Securities, 61 Federal Register 68,750 (1996) (collectively, "Modification Orders"). In light of the fact that First Security proposes to acquire Company and Redwood as going concerns, the Board concludes that allowing Company and Redwood each to calculate compliance with the revenue limitation on an annualized basis during the first year after consummation, and thereafter on a rolling quarterly average basis, would be consistent with the Section 20 Orders. See U.S. Bancorp, 84 Federal Reserve Bulletin 483 (1998); Dauphin Deposit Corporation, 77 Federal Reserve Bulletin 672 (1991).

(9.) As noted above, First Security intends to merge FSCMI with and into Company in May 1999. Until that merger occurs, First Security will operate Company and FSCMI as separate corporate entities and FSCMI and Company will be independently subject to the 25-percent revenue limitation on underwriting and dealing in bank-ineligible securities. In addition, because Redwood will remain at all times a separate corporate entity, Redwood also will be independently subject to the 25-percent revenue limitation. See Citicorp, 73 Federal Reserve Bulletin 473, 486 n.45 (1987), aff'd sub nom. Securities Industry Ass'n v. Board of Governors of the Federal Reserve System, 839 F. 2d 47 (2d Cir.), cert. denied, 486 U.S. 1059 (1988). The Board concludes, based on all the aspects of this proposal, including the fact that Company is significantly larger than FSCMI and will survive the merger with FSCMI, the management structure of the proposed merged company, and the activities of the merging companies and the proposed merged company, that the merger of FSCMI and Company would not disqualify Company from calculating compliance with the revenue test in conformance with the annualized treatment described in this order. See KeyCorp, 84 Federal Reserve Bulletin 1075 (1998).

(10.) 12 C.F.R. 225.200. Company and Redwood each may provide services that are necessary incidents to the proposed underwriting and dealing activities. Unless Company or Redwood receives specific approval under section 4(c)(8) of the BHC Act to conduct the incidental activities independently, any revenues from such activities must be treated as ineligible revenues subject to the Board's revenue limitation.

(11.) See 12 C.F.R. 225.28(b)(1), (2), (6), (7)(i), (ii), and (iii), (8)(i) and (ii), and (11)(vii).

(12.) See Dresdner Bank AG, 84 Federal Reserve Bulletin 361 (1998); Meridian Bancorp, Inc., 80 Federal Reserve Bulletin 736 (1994).

(13.) 12 U.S.C. [sections] 1843(c)(8).

(14.) See 12 C.F.R. 225.26.

(15.) Company's controller also is designated as Redwood's financial and operations principal for NASD purposes and, as such, is responsible for preparing and ensuring the accuracy of all financial reports submitted by Redwood to the SEC and NASD; supervising all individuals who assist in the preparation of such reports, individuals who maintain Redwood's books and records, and individuals who are involved in the administration of Redwood's back office operations; and ensuring Redwood's compliance with all financial responsibility rules promulgated pursuant to the Securities Exchange Act of 1934. See NASD Rule 1022(b).