Orders Issued Under Sections 3 and 4 of the Bank Holding Company Act

Federal Reserve Bulletin, Nov, 1999

Firstar Corporation Milwaukee, Wisconsin

Order Approving the Merger of Bank Holding Companies

Firstar Corporation ("Firstar"), a bank holding company within the meaning of the Bank Holding Company Act ("BHC Act"), has requested the Board's approval under section 3 of the BHC Act (12 U.S.C. [sections] 1842) to merge with Mercantile Bancorporation Inc. ("Mercantile"), and thereby acquire Mercantile's wholly owned registered bank holding company, Ameribanc, Inc. ("Ameribanc"), its lead subsidiary bank, Mercantile Bank National Association, all in St. Louis, Missouri, and Mercantile's other subsidiary banks.(1) Firstar also 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 the nonbanking subsidiaries of Mercantile.(2)

Notice of the proposal, affording interested persons an opportunity to submit comments, has been published (64 Federal Register 32,497 and 38,909 (1999)). The time for filing comments has expired, and the Board has considered the proposal and all comments received in light of the factors set forth in sections 3 and 4 of the BHC Act.

Firstar, with consolidated assets of approximately $38.5 billion, is the 23rd largest commercial banking organization in the United States.(3) Firstar is the fifth largest depository institution in Ohio and the second largest depository institution in Wisconsin, controlling deposits of $8.5 billion in Ohio and $8.4 billion in Wisconsin.(4) Firstar also operates subsidiary banks in Arizona, Illinois, Indiana, Iowa, Kentucky, Minnesota, and Tennessee, and engages in a number of permissible nonbanking activities nationwide.

Mercantile, with total consolidated assets of approximately $36 billion, is the 27th largest commercial banking organization in the United States. Mercantile is the largest depository institution in Missouri, controlling deposits of $15 billion in the state. Mercantile also operates subsidiary banks in Arkansas, Illinois, Iowa, Kansas, and Kentucky, and engages in a number of permissible nonbanking activities nationwide.

After consummation of the proposal, Firstar would become the 15th largest commercial banking organization in the United States, with consolidated assets of approximately $74.5 billion. Firstar would operate subsidiary banks in twelve states.

Interstate Analysis

Section 3(d) of the BHC Act allows the Board to approve an application by a bank holding company to acquire control of a bank located in a state other than the home state of such bank holding company if certain conditions are met.(5) For purposes of the BHC Act, the home state of Firstar is Wisconsin, and Firstar proposes to acquire banks that are located in Arkansas, Illinois, Iowa, Kansas, Kentucky, and Missouri.(6)

Section 3(d) of the BHC Act provides that the Board may not approve a proposal if, on consummation of the proposal, the applicant would control 30 percent or more of the total deposits of insured depository institutions in any state in which both the applicant and the organization to be acquired operate an insured depository institution, or such higher or lower percentage established by state law.(7) Firstar and Mercantile both operate insured depository institutions in Illinois, Kentucky, and Iowa. On consummation of the proposal, Firstar would control less than 30 percent of total deposits held by insured depository institutions in Illinois and Kentucky, which is the appropriate percentage established by applicable state law.(8)

Iowa law prohibits any bank holding company from acquiring a depository institution in the state if, as a result of the acquisition, the bank holding company would control more than 10 percent of the total deposits held by insured depository institutions in the state, as determined by the Iowa Superintendent of Banking on the basis of the most recent reports of insured depository institutions available at the time of the acquisition.(9) Based on call report data, as of June 30, 1999, filed by insured depository institutions in Iowa, supplemented by the most recently available summary of deposit data, Firstar would not exceed the Iowa deposit cap on consummation of the proposal and the Iowa Superintendent has advised the Board in writing that the proposal is consistent with Iowa law.(10) Based on all the facts of record, including the interpretation of the Iowa deposit cap provided by the Iowa Superintendent, the Board concludes that it is authorized to approve the proposal under section 3(d) of the BHC Act.(11) All other conditions for an interstate acquisition enumerated in section 3(d) of the BHC Act also are met in this case.(12) In view of all the facts of record, and for the reasons discussed above, the Board is permitted to approve this proposal under section 3(d) of the BHC Act.

Competitive Factors

Section 3 of the BHC Act prohibits the Board from approving a proposal that would result in a monopoly or would be in furtherance of any attempt to monopolize the business of banking. The BHC Act also prohibits the Board from approving a proposal that would substantially lessen competition in any relevant banking market unless the Board finds that the anticompetitive effects of the proposal in that banking market are clearly outweighed in the public interest by the probable effect of the proposal in meeting the convenience and needs of the community to be served.(13)