WASHINGTON - The Federal Reserve Board on Monday denied the application by Northern Star Financial Inc. of Mankato, Minn., to acquire First Federal Savings Bank of Morris, Minn.

The Fed ruled that Northern Star, the 417th-largest depository institution in Minnesota, with $6.9 million of deposits, has neither the financial nor the managerial resources to successfully acquire First Federal, the 174th-largest depository institution in the sate, with $48.3 million of deposits.

The Fed's ruling said Northern Star "began operations in January 1999, has had poor earnings, and has never met its earnings projections." The acquisition of a much larger institution "would divert Northern Star's management from effectively attending to the management of the bank," the ruling said.

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